Libya's oil cut threat sends out jitters

first step towards complete repeal of immoral antitrust laws by Ivo Cerckel - 28-Jun-08
Perhaps it’s not Libya’s menace, but the US menace, which is more hype than reality.

The bill would make it illegal for foreign states "to act collectively" to limit the production or distribution of oil. This would allow the US Department of Justice to charge Opec members with violating antitrust laws.

Collusive agreements are usually reached in secret, with only the participants having knowledge of the scheme, says the US government. http://www.justice.gov/atr/public/guidelines/211578.htm
There is no collusion on prices.
There is agreement on output in the open.

Price-fixing agreements […] are illegal “PER SE”: no defence resting on the claims that the prices fixed are reasonable, or on evidence that price competition in an industry is excessive and ruinous, will succeed. Agreements directed to controlling the flow of SURPLUS [emphasis mine] supplies into the market so as to stabilize prices will be regarded as ‘tampering’ with free price movements and hence as equivalent to price fixing. These basic rules cover the bulk of cases; and straightforward changes of price fixing probably account for the majority of all antitrust cases every year.
(A.D. Neale and D.G. Goyder, “The Antitrust Laws of the U.S.A - A Study of Competition Enforced by Law”, Cambridge University Press, 1980, reprinted 1982, 3rd ed., p. 42)
There are no surplus supplies.
Those supplies must be produced first, but they cannot be produced.
Opec is not hoarding.

The general antitrust thinking on horizontal agreements is that most mergers and joint agreements should be judged by an economic RULE OF REASON, while price collusion and division-of-market agreements should remain illegal PER SE.
(D.T. Armentano, “Antitrust Policy – The Case for Repeal’, Washington, D.C., Cato Institute, 1986, p. 55)

The Bill, numbered HR 6074, would in part amend the Sherman Antitrust Act of 1890 and would make price collusion by Opec illegal “when such action, combination, or collective action has a direct, substantial, and REASONABLY FORESEEABLE EFFECT [emphasis mine] on the market, supply, price, or distribution of oil, natural gas, or other petroleum product in the United States”.

Do we get the RULE OF REASON for oil-price-fixing?

The rule of reason, replacing the “per se”-approach, in oil-price-fixing cases is the first step towards the complete repeal of the immoral antitrust laws.

As Alan Greenspan said more than 45 years ago:
http://www.polyconomics.com/searchbase/06-12-98.html
The world of antitrust is reminiscent of Alice’s Wonderland: everything seemingly is, yet apparently isn’t, simultaneously. It is a world in which competition is lauded as the basic axiom and guiding principle, yet “too much” competition is condemned as “cutthroat.” It is a world in which actions designed to limit competition are branded as criminal when taken by businessmen, yet praised as “enlightened” when initiated by the government. It is a world in which the law is so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge’s verdict — after the fact.

Ivo Cerckel
http://bphouse.com/blaze/honest_money/2008/05/22/in-defense-of-opec/ Report Abuse | Email to a Friend | Reply to this Comment