Saturday, June 14, 2003

Antitrust News: Black Friday, Part II

The Senate confirmed R. Hewitt Pate as the new assistant attorney general for antitrust yesterday by a 77-0 vote. Pate had been the acting head of the Antitrust Division, and there was unfortunately never any serious scrutiny by the Senate of Pate's nomination.

As Pate was being confirmed, he announced the DOJ's latest antitrust attack, this time on a private trade association:
The Department of Justice today reached a settlement with the National Council on Problem Gambling, Inc. (NCPG) that will free NCPG state affiliates to sell problem gambling products or services outside of their home states.

The Department filed a civil antitrust complaint in the U.S. District Court for the District of Columbia alleging that the NCPG violated Section 1 of the Sherman Act by facilitating an unlawful territorial allocation to prevent its state affiliates from selling problem gambling products or services outside of their home states. At the same time, the Department filed a consent decree that, if approved by the court, would resolve the lawsuit.

"Consumers—the governmental and individual entities—purchasing problem gambling services, as well as those who use these services, will benefit from the competition that this decree will restore," said R. Hewitt Pate, Acting Assistant Attorney General in charge of the Antitrust Division.

The NCPG, a national trade association whose membership includes 34 state affiliates, assists compulsive gamblers and their families through education, advocacy, information and referrals to self-help groups and lobbies Congress for funding of problem gambling programs. The NCPG's board of directors is controlled by the state affiliates, which as a group have a majority of the seats. The NCPG does not create the services offered by its affiliates, but rather each of the NCPG state affiliates independently creates and markets problem gambling services, such as training and certification programs workshops and telephone help-lines.

The Department noted that while many associations have legitimate, pro-competitive territorial allocations, in this case, the NCPG was not designing a distribution system to enhance economic efficiency.

According to the Department's complaint, since 1995, the NCPG facilitated a territorial allocation agreement on behalf of its state affiliates to prevent problem gambling service providers from crossing state lines to compete. The Complaint alleges that problem gambling service providers were threatened with sanctions or loss of their NCPG membership for bidding outside of their territory. As a result, competition among the state affiliates was curtailed, and consumers were deprived of the benefits of free and open competition.
Nothing in the Sherman Act requires a private association to "enhance economic efficiency." That's simply a DOJ policy mandate which permits government lawyers to second-guess private business decisions. NCPG enjoyed no cartel or political power—i.e. the power to use force—to compel acceptance of its policies. Like all associations, members are presumed to act together for their mutual self-benefit. If any state affiliate felt their interests weren't being served, they presumably were free to leave. Likewise, the association was free not to associate with individuals not amenable to their policies.

Frankly, I'm getting tired of repeating these arguments, but I'll continue to do so until the government gets it right. Unfortunately the members of the U.S. Senate are under the illusion that capitalism can't exist without antitrust. It makes you wonder how the Founding Fathers drove the English tyrants out. After all, America's revolutionary leaders didn't enjoy the enlightened wisdom of antitrust lawyers to guide them.

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