Tag Archives: Collusion

Illegal Organizations Operate Legally, But Why?

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

I wish to lay out some hypothetical arguments to consider before identifying my point in making them—please don’t jump ahead.

  • Let’s imagine that Walmart, K-Mart, Kohl’s, et al. decided they weren’t making enough profit. The companies met and agreed to hike their prices by 10% across the board to address the issue. If they unite together, they can all raise their prices equally, make more money, and the consumer is left no choice but to pay the increased costs. It’s a genius idea for the stores of course, but there is one problem. There’s a name for such shenanigans—it’s called collusion. It is highly illegal because it violates the competitive principle of free-market capitalism.
  • In the world of contract law, in order for a contract to be valid, it must have a quid pro quo. Meaning that if I write a contract that simply said I’d give you a million dollars with nothing in the contract I get in return, that contract is unenforceable—a contract must be beneficial to both parties. Why? Because there’s no logical reason for a person to sign a contract where only the other party benefits. It either implies something illegal that is unwritten,  or someone who is mentally disadvantaged in such a way that they cannot fully understand what they are agreeing to.
  • Standard Oil Common Stock
    Standard Oil Common Stock

    In the 1800’s, as Standard Oil rose to be arguably the most powerful company the world has ever seen, they kept buying up all the smaller oil companies who dared compete with them, making it so no one could get oil unless they got it from Standard. As a result, Standard could charge whatever they wanted, they could treat employees like dirt, and they didn’t have to concern themselves with the quality of their product. Why? Because there was no competition for consumers or employees to force Standard to be better. This is called a monopoly, and is also highly illegal—now. Mostly because of Standard Oil.

  • If I owned an automotive chassis manufacturing business but needed to find an engine builder to help me produce a car I want to bring to market, I would meet with several and begin to work on deciding who best suits my needs. After picking a few who show promise, I’d choose the one I liked best from the group and enter into contract negotiations with them. If none of them were to my liking, no contract would be agreed upon. I’d be back to square one and they’d be out of a job, but at least neither of us entered into an agreement we didn’t want—that’s how contract negotiations work. But more importantly, the option for both parties to walk away is the one and only thing that ensures contract negotiations are fair and mutually beneficial.
  • John Gotti - Famous Racketeer
    John Gotti – Famous Racketeer

    In an illegal tactic known as a protection racket, if I were to say, “You pay me to protect your business or else…” you would either do it, or you risk me destroying your business’ property or physically attacking you. It’s a tactic made famous by organized crime. Such a contract would be a contract signed under duress, also highly illegal and unenforceable. It is similar to the quid pro quo issue, but the people doing the threatening present the act of not harming you as the thing they are giving you in return.

So now that we’ve covered these tactics, why do I mention all of them? Because labor unions violate each one.

How is this possible?

Government officials over time, courting the unions and the powers they possess to help them get elected, have carved out laws to allow these otherwise illegal practices to be employed by unions. In doing so, it gives the impression they are helping the populace, even though the large majority of Americans are actually non-union.

There was a quid pro quo here, but it wasn’t between the unions and the employers who have a contract with each other, it was between the unions and the politicians. The people and the employers merely got the shaft.Bribe

So how do they violate these rules?

Collusion, protection racket, and contracts signed under duress: Union employees unite together to force employers to pay them more instead of competing with each other in a free employment market. They don’t ask for a raise on their individual merits, they demand them as a collective “or else.”

No quid pro quo: They force companies to sign contracts that are beneficial to the union at the detriment of the employer. They insinuate that their quid pro quo is that they provide a good work force to the employer, but if you asked any employer if they wanted a union versus a non-union workforce off the record, I defy you to find employers who would prefer union-workers. Let there be no doubt that if any unionized business was given the option to get out of a union contract and peacefully hire a new non-union workforce, they’d do it without hesitation. The idea that unions provide a service to the employer is a myth perpetuated by unions to overcome the fact that there is not a proper quid pro quo in their contracts. There is no logical argument one can make whereby a contract between an employer and a labor union is mutually beneficial.

Monopoly: No business or employee gets to choose between which union it deals with, nor are there multiple unions competing with each other in an industry. The applicable union a business is compelled to do business with merely dictate they are the ones to be dealt with whether you like it or not. In non-right to work states, they don’t even have a choice as to whether or not to participate as a condition of employment.

Contracts signed under duress: A business owner has no option to just walk away. This is called union-busting, and there are actually laws to prevent it, which effectively strong-arm business into making a deal by legislative force, also a form of duress. Union workers don’t just threaten to quit and find employment elsewhere if their demands aren’t met, they stand outside your business and prevent, deter, and/or interfere with customers and other workers from going in and doing business there. It’s not a Let’s-Do-Business-Together contract, it’s a Do-Business-With-Us-Or-Else contact. 

The list of companies that were made healthier and more profitable by the addition of a unionized work force is so minimal as to be non-existent. Much like socialism, it’s sold as a system designed to serve the greater good, but also much like socialism, I have yet to see an effective example where the greater good has truly been served. Until labor unions are forced to operate under the same rules as everyone else, they continue to be illegal enterprises only made legal by selective legislation—our economy will suffer until American’s elect honorable politicians who care more about the moral high ground than election results and put an end to this.

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Let’s not play Monopoly!

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

Most people know that monopolies are illegal, but not everyone understands the history of antitrust and collusion laws or why they exist at all.

As a libertarian, I basically support free market capitalism and laissez-faire, but why do we libertarians and other liberty minded people support this? Because free people who run free enterprise are free to innovate and this innovation brings us a superior product. Competition among innovators also drives down the price as they seek to gain market-share. It’s why you can get a miracle of modern technology like the iPhone or Droid for a mere pittance—with a 2-year contract anyway.

U.S. Steel - Youngstown Ohio
U.S. Steel – Youngstown Ohio

But if we look at the history of monopolies here in America, Standard Oil and U.S. Steel were the most popular in our history, and what transpired was not good. Thus making the case for some semblance of government oversight.

I am often berated by anarchist-like libertarians for championing even the most minor government regulations in our marketplace, ensuring they compete and that they don’t violate our rights, but these people are ignoring historical evidence to promote an ideal I agree with, yet know doesn’t work if left unchecked. History has already proven it. Just because none of us were alive during that era, doesn’t mean we don’t have the documentation to know what happened when we had market-anarchy.

Standard Oil Common Stock
Standard Oil Common Stock

Prior to antitrust and collusion regulations, the quality of goods from these trusts was poor, the working conditions were so atrocious that workplace deaths and injuries were quite common, and the cost of what came off the production lines wasn’t cheap. Why would it be? If you’re the only game in town, providing a quality product, safe work environment, and competitive pricing and wages, simply aren’t needed. Just as absolute power in government corrupts, absolute power in business corrupts too. The moment a business owner needn’t fear people buying from his/her competitor because no competitor exists, corruption can, and likely will, be born.

Anarchists argue that if workers don’t like it, they can go work somewhere else. But where do you propose people go work? The very definition of a monopoly is that it’s the only business in an industry. Thus, there is nowhere else to work. If an enterprising person attempts to go into business for themselves, they’re either forced to sell to the monopoly, or crushed by it if they don’t. These are not wild conspiracy theories I’m floating, it’s historically documented evidence.

The design of free-market capitalism, is not dissimilar to socialism or anarchy. In a perfect world, they would work as intended and yield the desired positive result. History has proven however, that they also have the same flaw. There will always be sociopaths among us who don’t have the power of empathy or value the benefits of being societal. The only decent way mankind has ever dealt with these people is via rule of law. Such people have no qualms about taking advantage of others and doing them harm for personal gain. Our Constitution is designed to prevent these people from corrupting our government, and competition should prevent them from corrupting our markets. So ensuring competition is vital to our society, our rights, and our economy.

Andrew Carnegie, Cornelius Vanderbilt, John D Rockefeller
Andrew Carnegie, Cornelius Vanderbilt, John D Rockefeller

John D. Rockefeller, J.P. Morgan, and Andrew Carnegie proved that there’s a point at which if you do something right, you can control an industry to such an extent that no one else can compete. These men were likely decent people who considered themselves altruistic and good, but the unfettered power they eventually wielded corrupted them in such a way that they became consumed with winning and had little issue engaging in immoral practices to accomplish this goal.

So aside from protecting our rights to life, liberty, and property, in my opinion, government should justly be ensuring our markets stay competitive and uncorrupted.

So now that we understand, and hopefully agree with regulations preventing monopolies, I’d like to point something out:

Government is a monopoly!

The federal government competes with no one. State and local governments may seem to compete with each other, but if you live in Ohio and don’t like the service the Ohio government provides you, you can’t choose to do business with the Virginia government unless you move to Virginia. It’s quasi-competition at best where states compete to lure residents and businesses, but it’s certainly nothing like Apple versus Microsoft or Ford versus Chevrolet.

So when people like me beg and plead voters to elect more libertarian-like officials, it’s because we know that they’re the only politicians who intend to rebuke and regulate away power bestowed to their predecessors once they inherit it. In doing so, lowering the possibility of corruption, because the smaller government is, the less opportunity for corruption to occur. In the face of the IRS, Benghazi, and press scandals committed against the AP and Fox News, I sincerely hope you understand why we libertarians have been right all along, and are starting to feel vindicated for making these arguments so many seem to laugh away not long ago.

Do you remember Barack Obama making this commencement address speech at my beloved Ohio State University about a month ago?

The irony of this speech that occurred as all three conspiracies started to break into the mainstream media is chilling. It is exactly why we must only trust a politician who tells us not to trust him/her, not to grant them authority, and not to give up your freedom to their ideas of how we should be ruled.

“Experience has shown, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.”
― Thomas Jefferson

Involuntary Collusion: A Regulation Even This Libertarian Can Embrace

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

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.Foot Race

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.Rally Held To Stand In Solidarity With Union Workers Across The Country

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.070812_dd_ww_IMG_6162[1]

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.

Andrew Carnegie, Cornelius Vanderbilt, John D Rockefeller
Andrew Carnegie, Cornelius Vanderbilt, John D Rockefeller

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.