Antitrust enforcement goes global … As one of the world's top cops on the antitrust beat, the U.S. has long led the fight to curtail price-fixing, collusion, and other anticompetitive behavior in global commerce. And the Justice Department's antitrust division has wielded an especially big club of late. In each of the past two years, criminal penalties in antitrust cases have exceeded more than $1 billion, thanks to groundbreaking settlements with DOJ following investigations into collusion in interbank lending rates among banks as well as price-fixing in the global auto parts industry. The $1.4 billion in fines collected in fiscal year 2012 was the largest recovery ever for the antitrust enforcement division in a 12-month span. Fiscal 2013 wasn't far behind, hitting $1.02 billion. Now that sequester-mandated budget cuts have taken hold, it may be tough for Justice to score another billion-dollar bounty in the year ahead. With fewer staff and tighter resources, trying existing cases and getting new investigations in the pipeline could be a challenge for U.S. antitrust enforcers. That said, companies engaged in international commerce should by no means slacken up on competition compliance, given all the new watchdogs on the beat worldwide. – Reuters
Dominant Social Theme: Hurray! Another global regulatory regime is emplaced. Thank goodness the bureaucrats are on the job.
Free-Market Analysis: This Reuters article is positively gleeful that antitrust enforcement is going worldwide. There is something about threatening people with physical violence that excites many in the media. They simply cannot get enough expansionist government and its results.
But at the same time, having been at this a while, we can easily spot a flawed premise. Large multinationals need large regulatory enforcement bodies … sure. But what if multinationals were the product of other flawed government decisions emplaced by force?
In this case, it is corporate personhood that does the damage. If multinationals were subject to market forces, the kinds of regulatory enthusiasm described above would be considerably abated.
That's not even considered in the Reuters article. But shouldn't it be?
Why do those who own corporations have immunity from corporate actions? Why are corporations people, from the point of view of Western courts?
We've written about this before, of course. We've noted that the drift toward personifying corporations was desperately opposed in England and later in the US. The Constitution was written in such a way to preclude it, if possible. Nonetheless, late in the 1800s it happened.
The corporation became a person and multinational power became – eventually – a reality. And now multinationals, having been empowered by the state, need to be reined in. Here's more from the article:
In recent years the number of anti-cartel and fair competition authorities globally has soared as a host of new countries — including China, Mexico, India, and South Korea, to name a few — have joined the U.S., EU and other established players in going after violators of antitrust laws.
In all, more than 115 countries now have antitrust regimes in place. Roughly a third of those are aggressively targeting cartel activity, with nearly a dozen state actors pursuing price-fixing and other anti-competitive activity beyond their own borders.
Obviously that takes teamwork. In recent years antitrust authorities have stepped up inter-agency coordination on everything from search warrants to pre-dawn raids, while promoting far greater information-sharing of evidence of wrongdoing.
The list of countries engaged in extra-territorial anti-cartel prosecutions continues to grow. Take China's National Development and Reform Commission. Though the NDRC has traditionally stuck to domestic targets, it has recently expanded its sights to include companies headquartered outside of mainland China.
This past January, the NDRC announced criminal penalties of nearly $56 million against Korean and Taiwanese makers of liquid crystal display panels for televisions and computer screens, in what was not only the agency's first ever prosecution of foreign-based price-fixing affecting China, but the largest sanctions that the NRDC has ever imposed.
The NRDC isn't the only overseas antitrust authority breaking records. The European Commission has been on a tear, hitting new highs in total penalties collected (including €2.9 billion in sanctions in 2010 alone) as well as the largest single antitrust sanction ever (€1.47 billion) in a 2012 settlement with sellers of cathode ray tubes for televisions and computer screens.
Meanwhile, other foreign competition enforcement agencies in Brazil, Japan and South Africa are on track to have their own banner years. As of October, Brazil and Japan had each levied more than $200 million in fines against antitrust violators in 2013. And South Africa, a relative newcomer to competition enforcement, has leveled nearly $150 million in fines in 2013.
Not a bad payoff, especially at a time when anemic global economic growth has kept tax revenues down, and left governments with steep budget shortfalls. As more countries find that there's significant revenue to be had, it's a good bet that enforcement actions will continue to climb, and already sky-high penalties could easily go up even more.
Someone reading the above with an "open mind," would no doubt find it reasonable: Corporations are too big and government better control them. But we are not entirely open-minded. We are amateur students of directed history and anti-trust is certainly that if nothing else.
First, create the problem of gigantic multinational corporations via judicial fiat and then seek to cure the problem of gigantism via the ever-expanding democratic Leviathan. If one wanted to expand the power and breadth of government worldwide, this sort of strategy is surely feasible and utile.
And, of course, we think there ARE forces that wanted to obsessively expand globalism and its regulatory reach. The best way to do that is to figure out ways that corporations can grow to monstrous sizes, until only an equally monstrous government can confront them with any hope of efficacy.
The mainstream media is then employed to survey the battlefield and report on the war. It does so with a cheery tone, treating the current paradigm as inevitable though of course it's not.
It always helps forget about history. Regulation doesn't work, but that's not supposed to be mentioned. After every cyclical Western crash, further regulation is first proposed and then implemented. And then, after the next serial disaster, those who imposed the previous regulation inspect it, find it wanting and produce more of it.
The article does have the grace to admit that pounding on multinational corporations from every angle in multiple jurisdictions is probably not the wisest way to enforce antitrust. But in the very next breath the author informs us, "The age of 'multiple' jeopardy for antitrust defendants isn't about to end anytime soon, which is why companies that are potential targets need to fortify their defenses."
How does one do that? Why, by strengthening compliance programs. "Prosecutors typically go much easier on companies that self-report questionable behavior." You see? If you impose these failed police regimes on your company instead of waiting for the "authorities" to do it, then you will be better off.
But here is an even simpler solution. Get rid of the laws that make it difficult to sue the owners of corporations and allow corporations to function as they ought to. If they do wrong things, their owners are liable.
Think we're exaggerating? Here's how Wikipedia puts it:
1 U.S.C. §1 (United States Code) … [This] federal statute has many consequences. For example, a corporation is allowed to own property and enter contracts. It can also sue and be sued and held liable under both civil and criminal law. As well, because the corporation is legally considered the "person," individual shareholders are not legally responsible for the corporation's debts and damages beyond their investment in the corporation.
Similarly, individual employees, managers, and directors are liable for their own malfeasance or lawbreaking while acting on behalf of the corporation, but are not generally liable for the corporation's actions. Among the most frequently discussed and controversial consequences of corporate personhood in the United States is the extension of a limited subset of the same constitutional rights.
Get rid of laws that radically expand corporations by using the force of law. Reduce the size of corporations by allowing the market to operate. Instead of vast international shops, corporations should be built naturally out of multifaceted limited partnerships that expand and collapse as necessary.
Sounds reasonable, right?
But if multinationals were reduced in size by the free market itself, then what would happen to the vast regulatory apparatus that has sprung up around these corporations?
And what if once business was properly rationalized it became clear that there was no such thing as private monopolies unwanted by consumers?
What if it turned out that the unwanted monopoly was also the unfortunate outcome of corporate personhood?
What would the regulators do then?
Ayn Rand famously said, "Check your premises."
Makes sense to us …