Apple Inc. and antitrust: More proof that the U.S. federal government is anti-consumer

“Last week, Federal District Judge Denise Cote ruled that Apple Inc. was guilty of collusion and of fixing the price of e-book,” Mark Hendrickson writes for Forbes. “The gist of the case is this: At the time Apple entered the e-book market, Amazon held a 90% share of the market and sold e-books for $9.99. After Apple entered the e-book market, Amazon’s market share fell, as did prices of e-books. If you are perplexed in trying to understand how Apple fell afoul of the antitrust brigades for lowering prices to consumers, the key point to grasp is that the federal government is not the friend and defender of the consumer, as popular mythology would have it.”

“The Apple case is not an aberration,” Hendrickson writes. “Uncle Sam has been a chronic thorn in the consumer’s side, intervening to raise consumer prices in a variety of ways.”

Hendrickson writes, “Punishing Apple for having lowered prices of a popular consumer item is typical of the perverse application of American antitrust law. Domenick T. Armentano’s classic study, Antitrust and Monopoly, details how, since its inception in 1894 with the Sherman Antitrust Act, antitrust law has been a cynical fraud. Enacted for the ostensible purpose of protecting American consumers from (purportedly) rapacious corporations taking advantage of dominant market share to gouge consumers with unconscionably high prices, antitrust law repeatedly has been used to prosecute and penalize American businesses for the opposite practice—driving down consumer prices.”

Read more in the full article here.

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34 Comments

  1. “More proof the US Government is anti-consumer” – during Democrat administrations. The current administration likes Amazon more, maybe because of campaign contributions, maybe because Steve Jobs lectured Obama on the idea that he should not be so anti-business. Whatever, it is well known Democrats despise businesses that are private and make money on their own, but love businesses subsidized by the government that lose vast sums of money, like Solyndra and GM.

    1. If you actually knew anything about anti trust laws, you would know that since 1984, that’s right Ronald Regan… Is when this all started with the current skewing of the law.
      Or you could, you know, read the article? Unfortunately the side of the aisle whatever administration is on doesn’t matter, the law is broken. And it has equally misused under both parties control. Btw, GM is making a profit… Please read more.

      1. Actually, 1984 does not get referenced anywhere in the article. It does talk about the Sherman Antitrust Act which was passed in 1894. Ronald Reagan is also not mentioned and no mention of modern skewing of the law is made. Really the article says that the actions of the Federal government has always been anti-consumer. I’m beginning to think that YOU didn’t read the article either.

        1. Lower prices should not be the goal of anti-trust investigations, as lower prices are the primary weapon monopolists use to defeat/prevent competition.

          In that context Amazon, a monopolist, was using a perpetual loss leader to deny any new competitors access to the market. This is a clear violation of Sherman.

          Mark Hendrickson’s assertion that government enforcement of Sherman is anti-consumer because prices go up is absurd. Competition ensures that prices are the lowest possible, without the vendor losing money. Eliminating artificially low prices increases competition (with market set pricing) and product availability.

          Amazon has never made a profit on books, selling them for as much as $4.00 BELOW cost. That loss was subsidized by profits in other areas. THAT IS A CLEAR VIOLATION OF THE LETTER, AND INTENT, OF SHERMAN.

          1. Gregg,
            Not sure why you responded to me. I did not voice an opinion about the article, I just pointed out that “Voice of Reason” was injecting non sequiturs about Reagan as if that was the point of the article. As for Mark Hendrickson’s assertion, I think he missed the mark and took his conclusion a bit too far for my tastes. I do agree that Amazon is the one that appears to be in violation and was disappointed with the direction Mark took.

            BTW – I’m glad you took the time to read the article before commenting unlike “Voice of Reason”.

        2. I was refferring to the 1984 passage of the sherman anti trust act, and I did read the article. I was rebutting his point about this being a right vs left problem. the mention of RR, was to convey which administration was in power at that time and to make his point look silly.

          1. You really need to look at the date of the Sherman anti-trust act before you try to convey which administration was in power. It sure looks strongly like you are throwing in a name to disparage an adminstration since your dates are nearly 100 years off!

            1. The Sherman anti trust act was originally passed in 1899 yes. However the amendment that led to the cyreent interpretation was passed in 1984.

            2. Uh, you are making things up out of whole cloth. That’s called lying. My degree in Economics taught me that Sherman was passed by Congress in 1890, not 1984, 1894, or 1899. The Clayton Act of 1914 revised it. . . which most likely has the most to do with the Apple case. . . and section 13a that applies to Amazon’s perpetual underselling of best-selling and new-release e-books, the meat -and-potatoes profit center of any book store. The Clayton Act was revised by Robinson-Patman in 1936 which prohibited treating price discrimination against equally situated distributors. I recall no addition to these laws in 1984. Obviously you don’t know what you are talking about and are just trying to make a slam on conservatives.

      2. How do you know it is making a profit? How much is the government subsidy? Is it making money on the huge Volt sales? What is the current stock value and what is the government investment worth? My understanding is the government has lost in the range of 10 to 15 billion dollars on its share of the company since it took it over.

        1. It is quite annoying to read posts that pose questions in an accusatory way, when it takes all of 90 seconds to google the answers. Obviously, when the answers aren’t to one’s liking, one prefers to post questions in accusatory way, hoping that nobody would bother googling.

          So, here are the answers. Government invested $49B. In less than three years, it recouped over $27 of that investment.

          GM has been having second most profitable year since before the collapse. Last quarter, their profit was almost $1B. The most profitable models are Chevy Silverado (truck, of course), and the Cadillac line of luxury vehicles. The government-subsidised Chevy Volt is practically a rounding error, as it sells in very poor numbers (thanks to the massive onslaught of negative publicity paid for by the oil lobby, apparently).

          As for the “loss” that previous poster is referring to, GM has been trying to get the government to sell its remaining shares, since the nickname “Government Motors” is apparently hurting their sales. They wanted to buy block of shares off from the government, and the offering price is 30% higher than the last week’s close, but the offering price is still much lower than the value at which government had paid for them. If the deal were to complete, it would represent a loss for the government, for that specific block of shares, of about $14B. However, the government would still continue to hold a substantial block of shares. If the GM stock were to continue to grow at similar pace as it did since recently, the government would end up in the black (making up for the loss on this current sale, as well as recovering all of initial investment) within 5 – 10 years.

          Considering that the investment was made not to make profit, but to save livelihood of millions of American auto workers (with the idea of recovering that investment being a distant second goal), recouping the money spent on a social programme within less than 15 years seems a remarkably positive fringe benefit.

          1. So what you are saying above is the government has lost $22 billion on its purchase investment and whatever subsidies in addition it put into the GM business for failing ventures like the Volt. A $22 billion loss so far and you think this is good.

            1. You don’t lose until you sell your shares. Government invested $49B. It already recovered $27B of it, and the number is climbing. As I said, for a social programme, the purpose of which was to save livelihood of millions of people employed in the American crown industrial jewel, the auto industry, this government spending seems to be actually returning money.

              Normal governments would spend this much money without expecting a return (stabilising economy is much more worthwhile expenditure than spending on some idiotic “star wars” defense system). When there is a chance that the money will be completely recovered, it would be idiotic not to do it.

            2. You are absolutely correct. Them amount of money that would have been required to provide unemployment benefits / welfare and retraining costs along with incentives to attract replacement businesses to hire these unemployed people would have been in the Trillions of dollars.

              Believe it or not, Bernanke was almost flawless in his execution of the rescue of the economy. The handoff between Bush and Obama was done very effectively.

              The only misstep as I can tell was the government invading the bankruptcy process to protect and finance unfunded health care benefits for the unions. Benefits that most likely you and I do not have.

            3. No, it would not have. That is a false dichotomy.
              There were never that many workers. Nor would they have all been laid off. . . GM would have been re-organized, parts of its divisions sold off to other makers, plants repurposed, etc. this was about rewarding his cronies in the auto workers union. Follow the money.

            1. I’m not sure why would one call them ‘Garbage Motors’. Apparently, since the bailout, GM has been quite successful and profitable. American market has always loved their cars, and now it seems that the Chinese are buying them in quite solid numbers.

              Personally, I was never fan of GM. Their industrial design is the epitome of old-fashioned, conservative, staid design; none of their cars were ever mold-breaking, trend-setting, futuristic, modern or hip. To the contrary, Buick has always been the symbol of your grandfather’s car — even the newest ones still have the retro-look of the 80’s or 90’s. Still, American consumers seem to love them and the company is now nimble and profitable (it didn’t hurt to lose the crappy brands along the way, such as Plymouth, Pontiac, Oldsmobile, Saturn, Hummer…).

            2. Plymouth was never a part of GM.

              Moreover, GM has taken far more chances than any of its domestic rivals. There simply isn’t a single category of car that GM didn’t pioneer or rapidly combat with one of its own. Can’t say the same for Ford, Fiat/Chrysler, or the many dead companies that couldn’t even innovate as well as GM has.

              The problem, it seems to me, is that the crowd here thinks that Apple quality appeals to the masses. Wrong interpretation. As a luxury electronics manufacturer, Apple has never had to build long-term durability, nor has Apple had the goal of being the most comprehensive computer builder. Apple actively shuns huge sections of the market, both high end and low end, for no easily explainable reason. Apple is the Porsche of computer makers, which is purchased by a tiny percentage of buyers. Porsche is TOO GOOD, TOO SPECIALIZED, and TOO EXPENSIVE for the mass market.

              GM, like all mainstream car manufacturers, cannot sustain its high-volume operations if it tried to custom-build supercars and luxury autobahn tourers for the minority elite. So stop criticizing GM for offering the masses reliable transportation. Also, you really should test drive a Corvette lest you think GM doesn’t know how to build an impressive car.

            3. You’re right; I got my GM and Chrysler confused a bit.

              My point still remains; while GM is clearly doing the right thing, offering the masses reliable transportation, its design is still visually ultra-conservative and uninspiring. Corvette, while an impressive car, has been largely unchanged since the 60’s. In all fairness, though, it is in a separate category, together with the Targa, or Carrera, or Testarossa, or Diablo (I’m referring to Porche, Ferrari and Lamborghini, of course). In the mainstream car design, models, from Aveo and Cruze, all the way to Suburban, look like they came from the 90s. Buick and Cadillac are even more retro. Apparently, there is still a large market for this conservative design, and GM seems to be doing fine.

          2. You know what’s annoying? People making things up. You for example. Your claim that Obama “invested” $49,000,000,000 in bailing out General Motors to save the “livelyhood of millions of American auto workers” is pure bunkum! That, frankly, Predrag, was and is, impossible. It NEVER HAPPENED.

            First of all, at the time Obama seized General Motors in 2009, GM’s worldwide employment was only 309,000 employees, the vast majority of whom (233,000) would wind up losing their jobs anyway, as GM’s current worldwide employment is now only 76,000 (some reports put it at 66,000)! So, there were NEVER millions of American auto worker jobs to be saved in the first place. It cost the taxpayers $645,000 per General Motors job saved. WOW! That’s real efficient. That’s one HELL of a “social programme” regardless of your payback.

            You are aware that a lot of the cars that GM is selling to make that profit are being sold preferentially to the government, are you not?

            To accomplish this “wondrous” feat, miraculous businessman Obama gave $49 BILLION to his cronies in the auto workers unions to reward them for their support in his election and NOT ONE RED CENT to the creditors or stockholders of what is euphemistically called the “old GM.” Many of those people left holding that debt bag were people whose PENSIONS were dependent on their GM stock and bonds that were suddenly paying no dividends and had no value. . . Because Obama ignored precedent and bankruptcy law and inserted himself into what a normal business event with taxpayer money. Oh, Obama could have PURCHASED General Motors outright for less that $1 billion. . . Because the market cap of GM was less than $1 billion in February 2009. . . my, my, my, what a great businessman Obama the great is.

            1. As I said above, it is truly annoying to see people come out and state something, when ninety seconds of googling can easily uncover the truth.

              I will stop here, as the amount of simple falsehoods in the prior post is just way too high to warrant an effort to correct them.

              Just two most glaring points:

              1. As I had already said, Chevy Silverado is the most profitable vehicle. Negligible percentage of those is sold to the government.

              2. Auto workers are NOT just people working in GM plants. Jobs that would have been lost, had GM been let to fail, are all those partners who work with GM.

              I’m not sure where exactly you are getting your information, but it clearly is so thoroughly wrong on in almost every single respect, it really isn’t worth correcting (or the post would have been two pages long)…

  2. If I am not mistake, the Sherman Antitrust Act was used in the break-up of AT&T. The final consequences of the break-up of that monopoly was the immense benefit for consumers of telecommunications services. The list of benefits is long, but I’ll cite one single example.

    Within 5 years of the break-up, competing long-distance operators have appeared in the US. Before the break-up, domestic long distance was 25 cents per minute. A few years later, it was 10 cents per minute, and sliding year after year. Today, we can call France for 4 cents per minute, and domestic long distance is included in the subscription.

    Before the break-up, AT&T didn’t allow subscribers to buy and install their own phones; you had to rend a standard AT&T phone from them, and pay monthly rental fee of $29.10 (this was in the 80’s!!). If there was an abuser of monopoly position, AT&T was a shining example.

  3. Almost all “democratic” governments on all levels have long ago been taken over by moneyed special interests, i.e., corporations. These legal entities are chartered with the specific purpose of extracting the maximum amount of cash from consumers and resources from the planet. How did anyone ever get the impression that corporations are pro consumer in any way?

    The corporate influence on the people’s government is modern feudalism, pure and simple. Apple is looking out for itself, not you. Don’t let the shiny happy product lull you into complacency (too late, unfortunately, for most of the voting populace).

  4. Maybe Obama can just issue a special permit ID to all his hooded “children” so they can beat up any one without having to fear those evil white people will fight back!

  5. US federal government anti-trust fraud:

    1) Local cable monopolies around the country. Despite propaganda to the contrary, NOTHING stops cable companies from competing for business across ONE cable wire. Thank you FCC for screwing the consumer.

    2) BIG MEDIA consolidation over the last ~twenty years. Thank you FCC for screwing the consumer.

    3) ‘HD’ Radio, which is anything but HD (high definition). Thank you FCC for screwing the consumer.

    CONCLUSION: The US federal government is run by our brain-dead, customer loathing. self-destructive Corporate Oligarchy. Their motto: SCREW THY CUSTOMER, the current Spirit of the Age.

    What company refuses to adhere to the ‘screw thy customer’ bullshit?
    APPLE.
    And look at all the Apple-hate that has resulted from the flatulent Corporate Oligarchy.

    Losers hate winners. It’s part of the game.

    Dear Apple,
    Carry on!

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