Framing the Anti-Trust Debate

[Narkos]

This may be dumb, but bear with me. I have an uncle who used to be an executive for Dreyer's Ice Cream until Nestle came in several years ago and bought them out. He cashed in his chips and is doing extremely well financially. He's a typical right wing nut case (love him though), total market fundamentalist at the extreme. Anyways, I recall that there was some concern by the FTC about competition issues related to the superpremium ice cream market. In case you don't know, Nestle and Unilever have pretty much cornered the market of superpremium ice cream. Anyways, this is an area I'm not comfortable in (anti-trust law, and the rationale for it), and would like some easy ways to communicate why it is essential that we avoid monopolies and actually work to create competitive conditions (where it should apply, like ice cream, NOT HEALTH CARE INSURANCE!). The other point too, is that shouldn't it drive a right winger crazy that a foreign company came in and bought out an American one? Isn't this the antithesis of "home bias" that Adam Smith was talking about? The righties never read the Wealth of Nations, but can only remember the "invisible hand". Any light anyone can shed on this would be awesome!

[Hydra]

1. It's easy

If he's a real capitalist, he would hate monopolies. Monopolies remove competition, and competition is the only thing that keeps a product worth using- look at windows!

[Captain Angry]

2. There are several kinds of monopolies.

There are monopolies that are created to stifle competition. Putting a huge grocery store in a city, dropping prices to a level that kills all local competitors, and then putting prices back to a profitable level is an example.

There are monopolies that are created by the massive barriers to entry. There's a reason there is only one power or cable company in a given area. The infrastructure investment is so high that no new companies can enter that market.

And then there are monopolies created by consumer choice. If somebody is the best, and potential competitors can't offer a better product or at least a similar one for a lower price, the company will end up as a monopoly. Not by their choice, but others. As much a people don't want to hear it, Microsoft (in its original incarnation) is in this category. They created a product in a market with competitors. Those competitors didn't have a superior product, or didn't market correctly. The Microsoft of the last few years has moved into category one where they are using their size to influence other companies. They've been locking out competition, and are being smacked on a regular basis for it.


Monopolies should not be supported or promoted by the government. That means if I'm a business owner, my taxes are being used in a small part to help my competition. The tax breaks given to Wal-Mart, Exxon and others are not necessary. They are sustainable on their own. Seeding money to small businesses in order to create jobs in an area is a great use of tax dollars. Seeding money or forgiving taxes to multinational corporations is not a valid use of tax dollars since they have the resources to compete where they choose to compete.


On foreign ownership, it's in our interest for foreign entities to buy businesses in the United States. It keeps or creates jobs here, and if US firms are not willing to invest locally, others are showing interest. Our low dollar is causing US companies to be bought due to the relatively cheap cost of doing so. That means the foreign firms are seeing enough promise in the US firm that it's worth their investment. They see the potential of a higher return on the investment in the US company than one in their home country (or a 3rd country).


Investment moves to the highest return. Right now, the USA has assets that are seeing foreign investment. Not too long ago, it was US companies putting their money into other countries. It will continue to bounce back and forth.

[Narkos]

3. Thanks for your time on that one

definitely food for thought!

[screwballz]

4. well said

Krugman couldn't have said it better.