The Year in Antitrust
By S. M. Oliva
In many respects, 2003 was the Year of Antitrust: the Bush administration continued its aggressive expansion of antitrust into previously-unknown areas of the economy; the European Union continued to stamp out free markets through its egalitarian approach to antitrust; and civil antitrust suits continued to run amok without any interference from Congress or feckless federal courts. While CAC has reported on the major attacks, 2003 also produced its share of truly laughable antitrust matters. Here’s our “Top Ten” list of the truly surreal antitrust cases of the past year:
10.) Touchdown! College football took its battles into the courtroom this year when litigation arose from the University of Miami’s defection from the Big East Conference to the Atlantic Coast Conference. Several Big East schools, led by the University of Connecticut and state attorney general Dick Blumenthal, sued Miami and the ACC, arguing, among other things, the defection violated antitrust laws. Blumenthal viewed Miami’s action as an effort to destroy the Big East and harm UConn, which had spent millions in state funds to upgrade football facilities. Like other antitrust cases, Blumenthal wanted Miami to pay for the Connecticut government’s mistakes, despite the fact Miami had an unequivocal right under the Big East constitution to leave the conference at-will.
9.) Hauling garbage. The Department of Justice and the state of New Jersey sued Waste Management, Inc., demanding the company divest certain assets to prevent reduced competition for residential garbage competition in three states. Like the Dairy Farmers of America, Waste Management was the scapegoat for the government’s own decision to create a monopoly—in most areas, residential garbage collection exists as a municipal franchise. New Jersey, antitrust, and garbage—now there are three things that deserve each other.
8.) Interior design ethics. The FTC considers industry ethics codes a breeding ground for antitrust violations. Among the most egregious violators was the Institute of Store Planners, a small professional society composed of retail interior (i.e. department store) designers. Since the 1960s, ISP has maintained an ethics code that serves as a guide for members. Although the code has never been enforced or used to prevent a member from competing, the FTC claimed a few sentences in the code encouraged members not to compete with each other. While this was not the case, ISP settled and removed the provisions rather than waste thousands of dollars defending an ethics code its wasn’t enforcing in the first place.
7.) Gambling addiction. This year the Justice Department forced a settlement with the National Council on Problem Gambling, a nonprofit organization that oversees various state groups that provide treatment for compulsive gamblers. NCPG got in trouble with the Antitrust Division for trying to enforce territorial limits among its own members. The DOJ said this denied NCPG customers—mostly state governments—competition for “problem gambling services”. Unfortunately there’s no organization for treating antitrust addicts.
6.) Electricity regulation. California’s love of regulation is infamous and well-documented. It should come as no surprise, then, that the state’s efforts to mandate the use of a particular formula of gasoline exploded up in its face. California regulators adopted a formula that incorporated patents held by Unocal, a California energy company. The regulators essentially made Unocal’s gasoline the only acceptable for sale under California law. Rather than blame the regulators for their restraining trade, the FTC decided to blame Unocal for “defrauding” California into adopting its patented gasoline as the standard. So far the FTC’s case hasn’t gotten very far; in November 2003, an administrative law judge ruled Unocal’s actions were protected forms of political lobbying (a little something we constitutional scholars call the First Amendment).
5.) School milk. Most Americans refuse to challenge any government action when it’s taken “for the children” and this case was no exception. The Justice Department sued the Dairy Farmers of America to undue the cooperative’s purchase of Southern Belle Dairy. The reason, according to the Antitrust Division, was that the deal eliminated or reduced competition in several markets for “school milk contracts” in Kentucky and Tennessee. The fact that schools themselves act as monopoly purchasers of “school milk” apparently never concerned the DOJ. DFA is currently fighting the DOJ allegations in federal court, and the case will likely be tried this year.
4.) Spanish-language television. Univision’s purchase of its Spanish-language media rival, Hispanic Broadcasting, spurred 2003’s nastiest antitrust debate. Liberal opponents of the merger resorted to accusations of racism against company leaders, arguing Hispanic audiences were being denied “diversity” in Spanish-language media. For months, a Democratic front group, the National Hispanic Policy Institute, ran full-page newspaper ads saying the merger should be stopped. Although antitrust regulators did impose some minor conditions on the deal, the merger went through largely unscathed. This produced more race-baiting, as a member of the Federal Communications Commission accused Chairman Michael Powell, an African-American, of racism for refusing to treat the “Spanish-language” media market as a separate entity from English-language media.
3.) The Three Tenors. If the suprepremium ice cream case isn’t trivial enough, consider the FTC's market definition concerning opera recordings. The FTC convicted PolyGram, Decca, and Universal, of conspiring to increase the profits for a single album of the “Three Tenors”—opera singers Jose Carreras, Placido Domingo, and Luciano Pavoratti. Several concert albums featuring the three have been released since 1994, and the FTC found that the record companies illegally reduced discounts on older Three Tenors albums as new ones were released. This, according to the FTC, denied Americans their God-given constitutional right to pay less than $20 for a recording of three men hitting high notes in a soccer stadium.
2.) “Superpremium” ice cream. In the spring, Nestle acquired Dreyer’s, a competitor in the ice cream market. Nestle has long been a target of FTC Chairman Tim Muris, who acks as if consolidation in the food industry a greater threat to America than al-Qaeda. It was thus no surprise when the FTC challenged the Dreyer’s purchase, arguing it would illegally reduce competition in the—cough—“superpremium" ice cream market. This may be the FTC’s most absurd market definition ever, since it requires the separation of a small subset of ice cream from all other ice creams for no reason other than the FTC needed to manufacture a case. When challenged by a Wall Street Journal columnist, however, FTC officials threw a fit, claiming its opponents were defenders of “the oppressed cartel classes” and showed an “indifference to consumer welfare”.
1.) The un-fought case. While all the aforementioned cases are all outrageous, the most outrageous and unforgivable case for 2003 is the one that remains to be decided: the case against the antitrust laws themselves. The FTC and DOJ may enforce the antitrust laws and the courts may interpret them, but the final responsibility for antitrust’s continued existence rests with the American people and their elected representatives in Congress. That the American people, including businessmen, continue to tolerate a regimen of laws that make producers criminals for acts of everyday commerce is a grave injustice. That this injustice has not been corrected after more than 100 years of antitrust reflects poorly on America’s understanding of the principle of individual rights and its place in our society.
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