…And the Prices Came Tumbling Down
WASHINGTON–A successful way to fight inflation is for the government to enforce the old anti-monopoly laws against price-fixing, concentrated corporate power in the marketplace, and other anti-competitive practices.
Consider the recent case of falling General Electric light bulb prices in New York City as an illustration.
On April 3, General Electric announced the dismantling of its 62 year old system of requiring retailers to sell its bulbs under certain conditions as to prices and terms. GE’s move was prompted by a federal court ruling in 1973 holding GE in violation of the Sherman Antitrust Act for setting such restrictions and keeping prices artificially high.
Almost immediately, several supermarkets announced that they would drop the price of a package of four GE 100 watt light bulbs from a range of $1.39 down to 99 cents. Times Square stores went further down, selling a similar package of GE bulbs for 69 cents.
Such price declines have occurred after other antitrust enforcement.
In 1964, the Federal Trade Commission stopped a bread pricefixing conspiracy in the Seattle-Takoma area which cost consumers there about $35 million during the ten year periodof that lawlessness. The price of bread dropped over the next two years, reaching the lower national average for bread prices in 1966.
The price of the antibiotic tetracycline was retailing for about $51 per 100 tablets between 1953 and 1961. After exposure by a Congressional committee and an anti-monopoly suit by the federal government, the price had declined in 1971 to $5 for the same quantity.
Presently, the Federal Trade Commission is locked in battle with the giant food and oil companies to break up monopoly power in those two industries and save consumers billions of dollars a year.
But there is very little recognition by either political party of the role that anti-competitive practices and monopoly market power play in feeding the inflationary spiral. This is not because economists have neglected to tell them. Rather it is because neither party has the public courage to make the concentrated market power of giant corporations into a reasoned campaign issue.
In recent years, economic studies have developed an explanation of much contemporary inflationary trends which is called the “seller-push inflation,” where prices are pushed up without the spur of excess demand. Traditionally, inflation was explained by the phenomenon of too much money chasing too few goods. But in these times of contrived shortages, price increases by companies with excess capacity, and big companies amplifying their vast market power with their political power over government economic policies, seller-push inflation needs the attention of a broader public audience from the grass roots to Washington.
President Johnson’s Cabinet Committee on Price Stability issued a report in December 1968 which saw the need to develop more vigorous pro-competition policies. But then Mr. Nixon took over with other ideas more indentured to the preferences of big business for corporate socialism.
In an unpublished paper arguing for a “competitions policy” to combat inflation, Professor Willard F. Mueller of the University of Wisconsin concluded that “America is at one of those unique crossroads in history when, by inaction or action, it must decide which road to travel–the road of more controls or more competition–in pursuing our national objective of full employment with reasonable price stability.”
Meanwhile, back at the Justice Department’s Antitrust Division, unique stirring are observable. The lawyers are actually preparing for the first time a pamphlet explaining to the citizen what antitrust laws do for the consumer, the cost of living, and economic democracy. Hopefully, the pamphlet will also suggest ways that small business and consumers can help the Division do its job more effectively and comprehensively.
You can put your name on the waiting list for this pamphlet by writing to Assistant Attorney General Thomas E. Kauper, Antitrust Division, Justice Department, Washington, D.C. 20530.