Regulation's Influence on the Necessity of Antitrust Measures

Posted on Sun 13 February 2022 in The Good Fight

Regulation has a profound impact on the marketplace, sometimes in subtle ways, and at other times more overtly. It often leaves us grappling with unforeseen consequences. It's frequently assumed that Consumer Law is designed to empower consumers, as many believe that large corporations hold an excessive amount of power. But is this really the case?


In a truly free market, every trade is a voluntary exchange, devoid of any legal means to initiate coercion. Not even the government possesses this power. Advocates of free markets often argue that there's no need for antitrust laws or consumer protection legislation.


Consider, for instance, a scenario where a dominant market player, such as Intel, leverages its size to force other competitors out of a specific market by reducing its prices to a point where it sometimes sells below cost.


How does this negatively impact consumers? In the long run, Intel could raise its prices significantly and exploit consumers with monopolistic pricing. This fear has spurred numerous antitrust cases. In mixed markets, commencing a new business or competing in a fresh market frequently entails navigating through various obstacles. India, for example, encountered this issue for an extended period, with new ventures often taking years to navigate bureaucratic hurdles.


In a free market, one completely devoid of regulations, nothing hinders competitors from entering the market once prices inevitably rise again. Would a free market tolerate the practice of lowering retail prices below cost to achieve market dominance? Indeed, but only as long as prices remain low.


Unlike mixed markets, which necessitate measures to combat "unfair" practices such as price reductions, a free market lets price dynamics dictate market behavior. Charge excessively, and competitors will enter, driving prices back down. Charge too little, and you'll eventually struggle to meet payroll obligations.


In either scenario, the consumer benefits in a free market. In a society governed by a free market, it's less likely that we'll witness pricing manipulation as a means to eliminate competitors, because such tactics are more prone to failure compared to mixed-market environments.


Mixed-market systems create a demand for antitrust and consumer protection laws. In contrast, the free market doesn't impose regulations on the marketplace and prohibits the government from introducing new rules, rendering antitrust and consumer protection laws unnecessary.