Competition was never about protecting consumers.

I became suspect of the “competition protects consumer” narrative way back in 1987. In the spring of that year I started work part-time at a gas station. On the first day my manager explained to me how the gas station determined its gas prices. I told him I was under the impression that the station used some type of mathematical pricing formula ala what I learned in college as an economics major. “Bless” his heart. I can still see the look on his face when I laid that “what I learned in the classroom” nonsense on him. “No”, he said. “That’s not how you do it. What you do is each morning look across the street and see what the other station is charging and then change our prices to reflect theirs.”

It was a rude awakening for a 23-year old: that the theoretical stuff you learned as an undergrad was so much nonsense. That consumers of gas station fuel were being taken on a roller coaster ride of gas pricing based on what the gas station across the street was charging.

Of course, there are other factors that contribute to the changes in gasoline prices at the pump; the supply of oil, the price of a barrel of oil, decisions by oil supplying cartels, i.e. OPEC, the barriers to entering the local retail gas market, and regulations against price gouging. If local regulations allowed more retail gas operations to enter the market, in theory prices should fall. And if antitrust rules are enforced, retailers would be prohibited from acting in concert to raise prices. For the past 130 years this alleged consumer centric view of competition has dominated economic and legal thinking. As Americans left the farm and moved to the city, their self-reliance values were replaced by consumerist values. Americans became targets for a progressive philosophy that replaced self-reliance with the narrative of government protection. Trusts, large monopoly firms, had to be broken up to ensure that the emerging consumer class was not taken advantage of via high prices or low quality of services. “Competition” was to be the rallying cry.

But is competition as we know it today realistic or just a coopting of a term for political gain? What are firms really competing for and who does the promotion of competition actually benefit? In a corporate-capitalist system, analysis of any economic issue should begin with a question concerning the preferences of those holding capital. The entrepreneur and investor choose an activity that may result in increasing the amount of capital they hold at the end of the day. For the investor in particular she is concerned not primarily with consumer choice but with the ability of her capital to be placed and optimized in as many markets via as many opportunities as possible.

For the holder of capital, real competition is synonymous to the wealthy person in the Book of Matthew who gave his serfs a certain amount of talents and required that each one of them maximize returns on those talents. He wanted them to compete with each other like an episode from “The Highlander” with the victor receiving a portion of the returns in exchange for the labor they expended in generating those returns.

And the consumer’s role in this vendor competition? Simply, the consumer’s role is to be “coined.” Once the consumer gave up their willingness to be self-reliant, he put himself at the mercy of the entrepreneur and the investor. The consumer protection narrative is designed to ensure his comfort with exchanging personal and economic liberty with the convenience of having his needs provided by the capitalist. The illusion of choice makes him available for exploitation in the vendor competition scenario. The greater the number of consumers available for exploitation, the greater the opportunity for the entrepreneur to demonstrate to capital that it has the ability to maximize returns on and to capital. For the investor, this means that the larger the number of consumers, the more the market can be segmented and greater segmentation creates greater opportunities for creating monopolies within sub-markets. A monopoly structure leads, per microeconomic theory, to opportunities to increase prices. Contrary to the progressive narrative that a competitive market structure is the most desirable, a monopoly market structure is the ideal for entrepreneur and investor.

Consumer protection is valid only to the extent that it makes a buyer available for entrepreneur and investor exploitation. To limit the level of exploitation, the consumer should pursue self-reliance in as many areas of economic life as possible. It will require embracing more inconvenience in return for more peace and liberty.

The court in AT&T-Time Warner produces a rule that is overall positive for Caribbean media consumers

Tom Wheeler, former chairman of the Federal Communications Commission, told C-SPAN’s Peter Slen on last Monday’s segment of The Communicators that the absence of open internet rules tells content providing internet service providers that they can discriminate and favor their own content.  Mr Wheeler also opined that on 11 June 2018, major local monopolies will be told that it is fair to discriminate. Over time we will see internet services discriminate in a way that benefits their bottom line. Mr Wheeler believed that an AT&T-Time Warner tie-up would present consumers that type of anti-competitive dilemma.

The United States District Court for the District of Columbia disagreed with the former Commission chairman, issuing an opinion yesterday in United States of America v. AT&T, Inc., that says that AT&T Inc.’s acquisition of the media giant did not violate anti-trust law.  Vertical mergers rarely get denied by the courts. Given that AT&T and Time Warner do not play in each other’s space, in my opinion, finding the acquisition to be harmful to consumers would have been a bit much. What I always find fascinating is the expression of entitlement by consumers of media services; as if media consumption and the digital means by which content is consumed is a right.

Take for example the reaction to the merger by a leading member of the Fake Left, Senator Ed Markey, Democrat of Massachusetts:

“This ruling is an assault on consumers, choice, and innovation,” said Senator Markey.  “The telecommunications market needs more competition, not more consolidation. We need a telecommunications market where pay-TV gatekeepers don’t favor their own content providers, but allow minority, diverse, and independent programmers to reach Americans’ screens. I fear this decision will only further fuel merger mania in the telecommunications and other markets.” 

“Today’s decision underscores the need to restore robust net neutrality rules, so broadband providers like AT&T cannot use their gatekeeper role to harm competing services and content. Without net neutrality protections in place, AT&T will be free to block, slowdown, or charge fees to competitors like Netflix and Hulu to favor their own DirecTV Now streaming service and HBO content. Speaker Ryan should schedule an immediate vote on my CRA resolution to restore the FCC’s net neutrality rules.”

Both Mr Wheeler and Mr Markey come around and paint yesterday’s court ruling with the net neutrality brush while at the same time, unwittingly, making the court’s argument: that there should be a showing that this vertical merger would substantially erode competition. Bear in mind that United States of America v. AT&T, Inc. has nothing to do with net neutrality per se, but Mr Wheeler and Mr Markey have opened the conflation door by arguing that application of Title II-based net neutrality rules would mitigate AT&T’s gatekeeper role. This is speculation and fades further when you compare their speculation with the court’s description of how the industry works.

While I found the first 30 or so pages of the opinion to read like a script proposal for a Netflix docu-drama, the court’s description of how the video distribution industry works makes Mr Wheeler and Mr Markey’s assessments sound like paranoia. AT&T has no incentive to hoard content. On the contrary, part of the company’s reason for acquiring Time Warner is to create another stream of revenue: advertising fees. As more consumers cut or shave the cord at home and go mobile, AT&T’s lost subscriber fees must be recovered from other sources. AT&T decided to chase advertisement revenue. Time Warner’s content is traction for advertisement revenue. It is more efficient to get this new content on to as many distributor platforms as possible in order to maximize revenues. This means licensing content to a Netflix or Hulu or even using Time Warner’s production capacity to create content for these other platforms. Blocking or slowing down access to Netflix or Hulu would make no sense because AT&T would risk degrading the value of the content it provides to these platforms as a result of licensing or sales agreements.

Would Title II-based net neutrality rules increase competition in the production and delivery of content? No. Netflix and Hulu were spawned in a light touch, Title II free regulatory zone. They didn’t need permission to create the applications necessary for accessing content. They didn’t need permission to place those applications on the internet. The demand for content comes from consumers and the data on consumer tastes allows Netflix and Hulu to create even better more engaging content. A socialist-style, government approach to dictating how consumers access content and transmit their preferences about content is not what the consumer needs.

This is why the decision in United States of America v. AT&T, Inc., costs me nothing. I am not being compelled to buy content I don’t need because the light touch environment that went back into effect on Monday means that over the top platforms like Hulu and Netflix and the new AT&T will provide me with even more enticing offers to view the edgier content I suspect that will be spawned from competition. Consumers have put content providers and distribution platforms on notice that they can choose providers and distributors at the swipe of a smart phone screen and by allowing vertical mergers and the convergence it spawns, those screens will carry more interesting and diverse content.

The individual should aim to make competition law inconsequential

This morning between games of racquetball, a conversation among the racquetball posse came up regarding parsing out trophies for non-winners. We expressed our concern that giving trophies to children that finish dead last may be creating a society of slackers; a community of individuals that see no rewards from winning.  In the 21st century, Millennials is the group that has been taking much heat for expressing a value of entitlement based on just showing up. “Your mommy got you to the soccer game. Yeah me!” “We’re giving you an award for good citizenship because you tell everyone good morning while your grades are shitty. Yeah, me!” “You got an award for fourth place because the other guys in your bracket forfeited. Yeah, me!” Where does this attitude come from and should Millennials take the brunt of the criticism?

To the latter part of the question, I would argue that Millennials should not bear any part of the criticism. They are only reacting to a world that older grumps created and playing by the rules the older generation promulgated for getting along in this society.  I see this as a world created by the State and those who control the majority of private capital.  The attitude of these monopolists is that there is only so much of the spoils to share and if society is to maintain any validity, then the masses must believe that their participation in traditions and institutions and compliance with the rules will result in some type of reward, even if that reward cannot be tied to winning the actual prize.

It goes back to the “Logan’s Run Paradox” where if you want to continue life past age 30, you have to grab the crystal ball before being disintegrated by multi-colored lasers. Your aspirations must be encouraged, delusions fed, and your eye distracted from the reality that there is, at least under this current paradigm, only so much spoils to share. For over a century now, America’s paradigm of competition has been built on this lie and it is increasingly reflected in our political economy.

Americans argue that a competitive market structure is good for the economy; good for growth in jobs; good for the spread of economic opportunity. The United States over the past 120 years has crafted a regulatory framework that favors multiple participants in an industry driven by the premise that multiple providers are good for consumer choice and where prices are regulated by the ability of multiple firms to participate, the better. Actions by firms designed to keep other firms out of a market, whether those actions involve predatory pricing, vertical or horizontal mergers, or agreements between firms i.e. collusion, are prohibited by anti-trust law.  American government tries to regulate and create competition but is government’s attempt organic or an ill-fated effort to replace real competition with an artificial construct? In other words, is the State simply trying to make all soccer moms and their kids happy?

What the State refers to as anti-trust law is simply trade regulation law; regulating otherwise voluntary agreements between individuals to combine as an association that extracts and organizes resources for the purpose and creating and distributing goods and services. The State exercises its monopoly over a jurisdiction by regulating trade thus hoping to ensure that currency flowing through its payment system and the activities that generate tax revenue are left unimpeded. “Protection of the consumer” is a narrative expressed to the masses in order to garner their support for legislation that is onerous to trade.

The individual doesn’t need these laws once he understands self-reliance. The individual producing their own electricity with today’s technology need not worry about a utility’s monopoly. She does need to worry about the State’s invalid argument for helping to maintain it.  The individual using 3-D printing- technology to design and create tools and clothing need not worry about price gouging unless a so- called consumer protection agency extends its jurisdiction by promulgating rules that prohibits said production. The individual that generates valuable information and data for sale and transmits the value of that data via her own cryptocurrency need not worry about fiat currency created and issued by a central bank, unless that central bank and her ally, the treasury, promulgate rules that challenges the issue of an individual’s currency.

The individual, recognizing how inorganic consumer law is, should pursue personal policy that makes that public policy inconsequential.