Mises Daily

A
A
Home | Library | Antitrust Meets Women's Rights

Antitrust Meets Women's Rights

March 8, 2000

Ladies, if you wear shoes from Nine West—maker of 1 out of 5 women’s shoes sold in the US—the government is here to tell you that you have been ripped off, exploited, and victimized by a price-fixing conspiracy hatched at the highest levels of the corporate elite. To defend your rights, the government has extracted $34 million from the company’s stockholders, which the company paid just to avoid footing the bill for litigation. Take that, you rapacious, chauvinist, shoe-selling creeps!

Wait a minute: it turns out that Nine West has been bought by Jones Apparel, sometime between the great shoe conspiracy and this settlement with the FTC. It now trades under a different stock symbol and operates under a different management. Why should the new management be held responsible for the alleged crimes of the old? But since antitrust is not a real crime, like theft or fraud, the acquiring company was left holding the legal liabilities. Doesn't seem like justice at all.

But that’s only the beginning of the absurdities that surround this case. For example: who gets the money? Government bureaucracies that promote causes supposedly dear to women: female health, education, and safety programs. The idea is that if a woman has been duped into paying 10 percent more than she should for a pair of pumps, she gets some satisfaction from the fact that the government offers a nice job training program she can use at her leisure, perhaps while sporting a comfortable tassel loafer she was also tricked into buying.

What precisely was the Nine West company accused of doing? It is said to have violated the standards of fair competition. The company offered shoes for department stores to sell, but on condition that they didn’t undercut others offering the same shoes. So far, so good: this turns out to be legal under antitrust law (else the FTC might have to charge discounters with predatory pricing).

The trouble is that Nine West also told the stores when and under what conditions they could put the shoes on sale. The idea was to prevent Macy’s from doing a pre-Christmas sale that would take away the competitive prospects of Lord & Taylor down the street. This worked to the advantage of Nine West, and also, apparently, to the stores themselves, else they would not have agreed to the conditions.

But those government watchdogs at the FTC are too smart to be tricked into overlooking such a heinous crime as sales-season contracting, so they issued a complaint on behalf of shoe-buying women everywhere. "The combination of an injunction and a $34 million payment sends a strong signal to companies that fixing resale prices violates the law," said Richard G. Parker, director of the FTC's Bureau of Competition.

Bureau of Competition? Sounds like the Soviet Union under Gorbachev. Besides, what about the fact that everyone involved in the shoe deals was making voluntary contracts? Nine West didn’t force anyone to carry its shoes. Department stores were free to carry others instead. Consumers weren’t forced to pay high prices. They were free to wait for sales, or to choose other brands that were cheaper. Or they were free not to buy at all. That everyone agreed to the terms and that Nine West was a successful company suggests the terms worked out well for everyone.

Isn't that reasonable? Perhaps, but, as the FTC said, "We do not know what conclusion we might have reached had Nine West's behavior been analyzed under the rule of reason, because that question did not arise. Nevertheless, one can easily posit instances of minimum RPM [Retail Price Maintenance] that involve a mixture of procompetitive and anticompetitive effects, like any other vertical restraint, and undercut the continuing validity of the per se rule against the practice."

That’s another way of saying that the central planners are going to do what they damn well want to do, and no amount of fact or logic is going to get in their way. Their argument is not with "anti-competitive pricing practices" but with the right to enter into voluntary contracts in a market.

Most husbands, for example, believe that they, not women, are exploited by high shoe prices. At any one time, men need no more than three or four pairs: one for work, one for exercise, one for the weekend, and perhaps a pair of slippers. But women like to own a closet-full in every color, heel height, and style. Moreover, while men’s shoe fashions hardly ever change, women’s change every season. And many women seem to like keeping up with fashions. (Note to the PC police: I said "many," not "all.")

Yet men are often required to pay for the extravagant habit of amassing huge quantities of shoes. Is this exploitation? Women respond that it is the price men pay for having wives content with their lot in life. And so it is: the right of contract doesn’t create ideal conditions for all parties, only conditions that appear to be better (ex ante) than any alternative. Evidently, Macy’s and Lord & Taylor, like a husband faced with high credit-card debt from his wife's shoe purchases, preferred harsh contractual terms rather than no terms at all.

But the Nine West case is only one of a long string of outrageous prosecutions by the government since the Microsoft case inaugurated the new era of draconian antitrust enforcement. The ink was barely dry on the shoe settlement when the FTC announced the breakup of another exploitive conspiracy to fix prices, this one afflicting those who use chiropractic services in Wisconsin.

The Wisconsin Chiropractic Association was accused of sending out price sheets that specified charges on a variety of treatments, figuring that if they all raised prices together, third-party payers wouldn’t suspect anything was up. But there’s another way of looking at the problem: chiropractic services desperately needed to raise prices but were facing the usual bureaucratic hurdles from third-party payers. They only way to get around the bureaucratic red tape was to do it together.

Here again, consumers were free to balk. They could have gone to chiropractors who are not members of the association, or to the multitude of other specialists who work with back troubles. They could have taken aspirin or simply offered it up. Instead, they were willing to pay the price, so where’s the harm?

You see, it’s all in the way you examine the problem. If you look closely enough at any antitrust case, you will find that there was a good reason for the demonized business practice to take place. In any case, it is the nature of the free market to turn plans for price-fixing conspiracies to dust. But since bureaucrats don’t know or don’t care how markets work, their automatic assumption is that businesses are engaged in evil and must be punished. And this assumption is precisely why antitrust regulators should be stripped of all their power.

Consider a final case involving the auction industry. Christie’s and Sotheby’s are famous rivals in a world driven by the most competitive market setting. And yet for three years, the government has been harassing them to no end, trying to find some infraction in their business dealings that would justify busting the companies up and giving their tiny competitors a boost. But as any auction maven knows, there are no more sophisticated customers in the world than these bidders and consignors. They spot even the smallest infraction of the rules, rules which the auction houses themselves are best able to establish.

Antitrust regulation is one of the hardest areas of economics for people to understand. It is promoted under the guise of protecting competition and insuring fairness. But strip away the rhetoric and you are left with a bureaucratic boondoggle that resembles everything else the government does: the looting of private property at the behest of special interests to enhance the power of the state. (The best short introduction to the subject is Antitrust: The Case for Repeal by Dominick Armentano).

Antitrust is no more valid in women’s shoes, chiropractic services, or auction houses than it is in software. It is just another regulatory excuse to intervene. And notice how real monopolies–the post office, the military, and the justice department itself–are actually guilty of everything the government accuses private companies of doing: gouging, price fixing, and exploiting. It is not women’s shoe companies we should fear and curb, but those who would take away our liberties in the name of restraining free enterprise.

* * * * *

Llewellyn H. Rockwell, Jr., is president of the Ludwig von Mises Institute and editor of LewRockwell.com. Send him mail.

See also, Mises.org on Microsoft and Trustbusters Target the Auction House.


Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

Follow Mises Institute