A Hidden Tax That’s Paid by You, The Consumer
Every day, you, the consumer, are paying a hidden tax to corporations that regulate the marketplace by illegally fixing the prices of their goods and services.
Price-fixing has been a federal crime for the past 87 years and most state laws also ban the practice. Yet price-fixing at national, regional and local levels remains rampant. Past enforcement of the anti-monopoly laws has documented corporate price-fixing conspiracies in bread, drugs, plumbing fixtures, electrical equipment, building materials, lawyers’ fees and medical laboratories — to list a few examples. Billions of dollars each year are siphoned from consumers to corporation and other businesses in this way.
Other industries such as oil, automobiles and steel have learned other ways to avoid price competition through common understandings.
The oligopolies (industries dominated by a few large corporations) engage in what economists call “price leadership,” or administered pricing.
In recent months, the public has witnessed announcements by General Motors and U.S. Steel of higher prices, only to be followed by almost identical price increases of their so -called competitors. In the upside-down world of oligopoly, prices are raised to meet the “competition.”
The oil industry is even more sophisticated; it has used techniques like joint ventures, international pricing, understandings with foreign governments, the State Department, and other instruments to fix prices over the years. The giant oil companies — Exxon, Texaco, Shell, Mobil, etc. — are formally in joint ventures with themselves to produce oil or to pipe it to market.
More than price gouging and inflation result from these conspiracies or shared monopolies. Small business is unfairly driven out; better technologies that challenge vested technologies are suppressed; and inefficiencies are rampant.
The economy loses production in other economic sectors deprived of consumer purchasing power that is drained away to pay illegally high prices in the price-fixing or otherwise anti-competitive industries. These consequences have been described in numerous economic studies but policy is implemented not in journals but in Washington.
If we are to judge them by their words, President Carter, Attorney General Griffin Bell, and Chairman Michael Pertschuk of the Federal Trade Commission, are strong believers in breaking up unlawful monopolies, prosecuting price-fixing, and, given Mr. Bell’s statements, even asking Congress to restructure concentrated industries directly.
The time is rapidly approaching for the new administration to prove itself by action. Senator Edward Kennedy, Chairman of the Senate Subcommittee on Anti-Monopoly, conducted detailed hearings this year to both examine and to spur the Antitrust Division of the Justice Department to stronger law and order for anti-trust crimes.
But the linchpin in the Carter Administration’s anti-monopoly drive, unfortunately, is a big question mark. He is John Shenefield, the Antitrust Division head, fresh from a conservative corporate law firm in Richmond, Va., and a former protege of Justice Lewis Powell. In his law practice, Shenefield aggressively defended corporations and bar associations against charges of price-fixing or other anti-competitive behavior.
He also wrote several lengthy law review articles which my associate, Mark Green, described in recent Senate testimony as revealing a “serious lack of sympathy for the antitrust efforts of the agency Mr. Shenefield has been nominated to head.”
“He has almost nothing good to say,” continued Green, “about Antitrust Division efforts and Supreme Court decisions which pushed forward the antitrust frontiers.”
In an article written less than a year ago for the Washington and Lee Law Review, Shenefield disparaged the new Hart-Rodino law that gives state attorneys general the right to file class action suits and recover for consumers up to treble the amount they were defrauded by corporate price-fixers.
New environments sometimes change people. As the chief enforcement officer for the antitrust laws, Shenefield now has a new hat and he has been seeing the world of monopoly more through prosecutorial lenses. In addition, he told senators at his confirmation hearing that he would vote “yes” if he were a senator to prohibit the oil industry from owning or controlling other energy sources such as coal, uranium or geothermal.
He also intends to bring before the courts what is known as a “shared monopoly” case. The steel, auto and copper industries are examples of “shared monopolies” where, in the view of some antitrust specialists, a few dominant companies behave as one in pricing or other market factors.
Mr. Green provided Mr. Shenefield and the Senate Anti -Monopoly Subcommittee with a checklist of ten areas for action which could be a measure of the new antitrust chief’s performance.
Interested readers may wish to obtain a copy of a pamphlet explaining the importance of the antitrust laws and how citizens can assist in their enforcement by writing to Mr. Shenefield, Antitrust Division, Justice Department, Washington, D.C. 20530. Ask him if he also can send you the aforementioned ten-point checklist.