FTC Hurts Monopoly to Help Monopoly

by S.M. Oliva, Mises Economics Blog
Jul. 28, 2010

The Federal Trade Commission’s time machine worked its magic again, restoring the market for a particular group of herbicides to its pre-2008 condition:

Australian chemical company Nufarm Limited has agreed to sell certain assets and modify some of its business agreements to settle Federal Trade Commission charges that its 2008 acquisition of rival A.H. Marks Holding Limited hurt competition in the U.S. market for three herbicides that are relied upon by farmers, landscapers, and consumers.

Under a proposed FTC settlement, Nufarm will sell rights and assets associated with two of the herbicides to competitors and will modify agreements with two other companies to allow them to fully compete in the market for the other herbicide.

Nufarm's acquisition of United Kingdom-based A.H. Marks gave Nufarm monopolies in the U.S. markets for two herbicides called MCPA and MCPP-P, which also are known as phenoxy herbicides. The transaction also left only two competitors in the market for a third phenoxy herbicide, called 2,4DB. The three herbicides are widely used in the turf, lawn care, and agriculture industries to eliminate certain weeds safely and cheaply.

The FTC said absent intervention, a new competitor won’t rise to challenge Nufarm’s monopoly. That’s because previous government interventions have made entry unprofitable. Don’t take my word for it--here’s what the FTC’s own complaint said:

In order to enter the MCPA, MCPP-p or 2,4DB markets, a new entrant would need, among other things, access to supply of the herbicides and the requisite regulatory approvals from federal and state agencies to market the products in the United States. To obtain the necessary regulatory approvals, the entrant would have to submit and periodically update extensive environmental and toxicological testing data. The costs of entering the relevant markets for MCPA, MCPP-p, and 2,4DB are high compared to the limited potential sales revenues available to an entrant. As a result, entry into each of the relevant markets would require substantial sunk costs that would likely make entry unprofitable. New entry into the relevant markets sufficient to achieve significant market impact within two years is therefore unlikely to occur.

So antitrust doesn’t protect consumers from the harmful effects of monopoly--i.e., government control of the market--but it does assault private property owners who somehow manage to function in spite of the government’s efforts to choke competition. The FTC is offering a placebo that ignores the causes while pretending to treat a mild symptom. It’s also increasing regulatory costs by adding another set of bureaucrats to those already interfering with the herbicide industry. That means more money for lawyers, less for improving products, serving customers, and actually, er, competing.

Far from opposing “monopolies,” the FTC champions them--so long as the monopolies are fellow bureaucracies like the Environmental Protection Agency or the Food and Drug Administration. In an ideal world, all industries are organized cartels that maintain the pretense of competition while reporting to a single agency that determines the “public interest.”