Libertarians and capitalists rightfully despise regulations in a free market since it erodes, thwarts, and deincentivizes innovation. But one thing that has always caused me to wrestle with my non-regulation-is-king beliefs is the concept of regulating involuntary collusion. I’m coining the phrase mind you, so don’t bother Googling it.
Companies are supposed to compete with one another by either lowering prices, increasing quality, or both—each one taking a unique approach to the same end. If they are free to innovate, the consumers win as companies go to war on the gridiron of commerce. Anyone who has ever ran faster than the person next to them, solely because that person was running faster than them, knows that competition yields greater performance.
Now let’s talk about collusion. It is illegal for business heads to get together and agree to cooperate in some way as to benefit themselves at the expense of the consumer or worker.
For instance, NFL team owners could not collectively decide that they are paying the players too much and all agree to cut payroll across the board. Nor could they decide they don’t consider game jersey profits high enough and agree to bump the price 10% across the board. I’m not going to go into the history of collusion, but suffice it to say that it violates the concept of free market capitalism because it’s the opposite of competition; it’s cooperation.
The astute of you will notice I used the word collectively that last paragraph. So you might ask why it’s OK for employees to collectively bargain? It is certainly legalized collusion after all. Short answer—I have no %$#&ing idea why it’s allowed. I covered this in my article Why is this even legal? so I won’t go into it here.
Now that we understand what a free market is supposed to be and what collusion is, what do I mean by involuntary collusion?
Free market capitalism allows for consumers who don’t like what one company is doing, to find another that doesn’t engage in that practice. However, in industry there exists the term Industry Standards which threaten this principle. Sometimes it just refers to a best practice where years of competing have brought all companies to a similar ultimate conclusion. For instance: tool companies like Mac or Snap-On who give a lifetime warranty on their tools because their competition is doing it and they need to keep up. Since you can’t “one-up” a lifetime warranty, it just becomes an industry standard best practice. But other times it involves companies doing something that the public despises, yet because all companies do it, consumers can no longer avoid the practice.
A perfect example of government regulating this is the National Do-Not-Call List. Companies found that automated telemarketing was cheap, easy, and effective. Even though consumers hated these robo-calls, many corporations adopted this practice leaving consumers without the ability to avoid it. So we the people had to look to government to make them stop.
In these situations, companies all do the same thing, just as they would be if they were colluding against the consumer, but they never agreed to it—it just happened involuntarily through corporate evolution.
Let me give a non-government example of how such legislation can be effective and important. In auto racing, weight is the enemy; therefore nothing is needlessly added to a car that would add weight, unless that thing generates more speed that overcomes the loss of speed from the added weight.
However, safety equipment doesn’t make a car go faster, the weight is a hindrance; it exists solely to protect the driver in an accident. So race series directors often must enact regulations that require such safety equipment be on the cars of all participants. Race teams are paid to win, so if you don’t force them all to comply, the ones who do, always lose to the teams who throw caution to the wind. The only way to get one team to comply and make life safe for their drivers is to require they all comply—leaving no one with a competitive advantage. Think of it as the governing body of racing protecting the rights to life of the driver.
So in the same vein, I do believe that because our country is based on free market capitalist principles, it’s important our government ensure the market is indeed free. It isn’t enough to know there are multiple companies in the marketplace—we must insure they are indeed competing with each other.
With this in mind, I feel it important to say that even as a libertarian and free market guy, I am 100% behind the new laws in six states prohibiting employers from requiring employees to disclose personal online passwords and data. Companies are hiring you for your ability to work. Whether you like to bathe in peanut oil and play with Barbies while watching Big Bang Theory reruns on your own time has no consequence on your ability to enter data into a computer. What you do in the privacy of your own home or amongst friends is none of their business.
My right to privacy is directly linked to my right to pursue happiness, something our Declaration of Independence says I was born with, and my government has a duty to protect.
Businesses are supposed to succeed by appealing to consumers, not by collectively taking advantage of them. We’ve seen what happens when we allow companies to collude by watching business tycoons past. It was anything but good for the people, the workers, or the economy—it becomes, in effect, a conglomerate monopoly.
So while I want us to deregulate on a massive scale that would cause Republicans and Democrats alike to shiver from the cold harshness of liberty, I do think lawmakers would be well served to find instances where companies have adopted an industry standard where by which businesses are no longer competing; unwittingly or not, against the consumer, and then quash it accordingly. The strength of our economy and our liberty depend on it.