Microsoft-Yahoo!
 Alex Epstein, an analyst at the Ayn Rand Institute, has published an op-ed explaining why antitrust regulators should not get in the way of any potential combinations of Microsoft, Google and Yahoo! Esptein notes, "What we are observing in the battle over Yahoo! is not genuine, merit-based competition, but competition based on political pull." You can read Epstein's article, "Set Yahoo! Free," at this link.
PATENT HOLD UP
 Bruce Kobayashi and Joshua Wright of George Mason University recently posted an article examining "restraint when applying the antitrust laws to conduct that is normally regulated by state and other federal laws," specifcially the use of antitrust "to regulate the problem of patent hold up of members of standard setting organizations." You can download their paper at this link.
Mises.org
 S.M. Oliva, president of the Voluntary Trade Council, authored an article for the Ludwig von Mises Institute on Mark and Marianne Hershiser's landmark First Amendment lawsuit against the Federal Trade Commission. You can read the article, "Consumer Protection or Legal Extortion?" at this link.
IP & Antitrust
 Damien Geradin, a professor at Tilburg University and a partner at Howrey LLP, recently presented a paper entitled, "What's Wrong with Royalties in High Technology Industries?" which focuses on royalties paid by companies seeking to implement industry standards, such as those at issue in the FTC's case against Rambus. You can dowload the paper at this link.
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DOJ, FBI Tackle "Big Ice" |
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Written by Skip Oliva
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Wednesday, 18 June 2008 18:58 |
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Ice is more then frozen water. It’s the centerpiece of the antitrust community’s latest assault on the market. The Department of Justice announced today that one of the largest sellers of packaged ice has pleaded guilty to “conspiracy” in connection with a criminal antitrust investigation of the industry. Class action lawyers are not far behind, using earlier reports of the DOJ and FBI’s investigation to file civil complaints against a number of packaged ice companies.
Last November, the DOJ filed a criminal information, under seal, with the U.S. District Court in Cincinnati, accusing Home City Ice Company and a number of unidentified competitors of violating Section 1 of the Sherman Act, which broadly prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade.” The DOJ said Home City and its competitors held “meetings and conversations to discuss packaed-ice customers and territories in southeastern Michigan and the Detroit metropolitan area,” and that as a result of these meetings, the companies “allocated” customers and territories and agreed not to compete directly against one another in the allocated areas. The DOJ said this constituted an illegal agreement under Section 1.
In a press release issued today, the DOJ said Home Ice would plead guilty to a single count of violating Section 1, which carries a maximum possible fine of the greater of $100 million or “twice the gain derived from the crime or twice the loss suffered by the victims of the crime.” Typically, however, the DOJ does not provide restitution for the alleged victims of Sherman Act conspiracies, leaving that task to private law firms that file civil class actions.
Indeed, several class actions were filed against Home Ice and other packaged ice companies even before today’s announcement. In March 2008, a number of class action complaints were filed in the U.S. District Court in Minnesota. One such complaint, filed by lawyers representing Ridge Plaza, a Milwaukee convenience store, names Home City along with the two largest North American ice distributors, Dallas-based Reddy Ice and Winnipeg-based Arctic Glacier.
Ridge Plaza’s complaint alleges few specific facts beyond knowledge of the DOJ’s investigation and a complaint lodged by a Canadian ice distributor against Arctic Glacier before the Canadian government.
The DOJ said Home City would cooperate with the government’s investigation as part of the plea agreement. In many antitrust investigations, the DOJ grants an extra-constitutional pardon to one company in exchange for its cooperation. It’s possible Reddy Ice, Arctic Glacier or another Home City competitor received such a pardon. The DOJ never publicly identifies pardon recipients and discourages firms from announcing their pardons until other defendants have been identified and charged.
In addition to the DOJ and civil class actions, Reddy Ice told the Securities and Exchange Commission that the attorneys general of Florida and Arizona have issued “civil investigative demands” for documents “as part of a multi-state antitrust investigation of the packaged ice industry.”
A securities class action law firm, Dyer & Berens LLP, also issued a press release on Monday announcing “an investigation concerning losses suffered by certain purchasers of Reddy Ice Holdings, Inc.,” due to the DOJ’s antitrust investigation and related antitrust class actions.
It’s clear that these investigations will ultimately transfer millions in capital from the marketplace to the federal and state governments, not to mention the still-gathering armada of civil class action lawyers. What’s less clear is how the alleged “price fixing” actually injured consumers. Thomas Barnett, the head of the DOJ’s Antitrust Division, argued in his press release that “[t]his type of conduct deprives consumers of the benefits of free and open competition.” Similarly, Ridge Plaza’s class action complaint maintains retailers “have sustained damage by paying supra-competitive prices that they would not have to incur but for the unlawful conduct” of the packaged ice distributors.
But there’s no way to know what prices would have been absent the alleged “price fixing.” Likewise, there’s no such thing as “supra-competitive” prices. There are only the prices voluntarily agreed to between a buyer and seller at the time of sale. “Price fixing” is not akin to fraud. No buyer was deprived of his or her property without consent. What the governments and civil lawyers claim here is that prices should have been lower during the alleged period of the conspiracy – from 2001 to 2007 – but this amounts to an argument for price controls.
And it’s unlikely that the ultimate consumers of ice were harmed at all. Packaged ice is relatively inexpensive – often selling for a dollar or two per bag – and any change in price due to the distributors’ “collusion” would have been insignificant. (And, if there were exorbitantly high prices for ice, people could simply make their own using a plastic or metal tray and a freezer.)
It’s also noteworthy that despite the Antitrust Division’s frequent boasting that criminal antitrust enforcement deters future instances of collusion among competing firms, the alleged “Big Ice” cartel operated for at least six-and-a-half years before the DOJ commenced its investigation. That’s not exactly a textbook case of “deterrence.”
Finally, even if “Big Ice” temporarily raised prices, the use of federal (and state) resources here is wasteful at best. The DOJ said four FBI field offices were involved in the Home City case along with the Antitrust Division’s Cleveland office. That’s a lot of manpower to throw up against actual criminals, to say nothing of a bunch of companies that provide a last-minute item for parties. * * * You can download Ridge Plaza's class action complaint against "Big Ice" at this link. If you enjoyed this article please consider making a contribution to the Voluntary Trade Council. |
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Last Updated ( Wednesday, 18 June 2008 19:02 )
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Suggested Reading
Antitrust: The Case for Repeal
Dominick T. Armentano
2nd ed. 1999
Purchase from Mises.org ...................................... 
Markets Don't Fail!
Brian P. Simpson
2005
Purchase from Amazon
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The Antitrust Religion
Edwin S. Rockefeller
2007
Purchase from Cato.org
Read the review ...................................... 
Winners, Losers & Microsoft
Liebowitz & Margolis
1999
Purchase from Independent Institute
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