[DRAFT] On Monopolies

[AH Untecna]

On Monopolies
Category: Free Trade | Strength: Mild

The World Assembly,

Understanding the want by many people to end government intervention in business,

Knowing that monopolies in the world of business can and do exist, and

Understanding that these monopolies hurt many businesses and our economies,

HEREBY

§1: Defines, for the purposes of this law:
1.1: A "Monopoly" as a business that attains a large enough amount of the market they are in to give them control in the
entire business.
1.2: An "Antitrust breakup" as the breaking up of a corporation into smaller subset companies to remove the monopoly that
the corporation had over the market they were in.
1.3: "Antitrust hearings" as trials to decide the fate of the company.

§2: All corporations with 60% of the market share in the market they are in, or with more than the decided number of companies merged or owned by the company that constitutes a monopoly in the nation they have their headquarters in, shall be broken up into smaller subsets under an antitrust breakup carried out by the government of the nation that the company has it's headquarters in, and will sell some of it's assets to other companies.

§3: If a corporation is found to be a monopoly under §2, some representatives of the company will represent the company in antitrust hearings to decide whether or not the company shall be declared a monopoly and be split, along with any lawyers from the company.

§4: All companies are mandated to report their earnings and market share every quarter to the government of the nation their headquarters is in. They are also mandated to report any acquisitions they have made in the last financial year.

§5: If a company already has subsets due to international expansion, i.e: of [insert nation name here], they will be treated as separate companies and will be tried as underlined in §3.

§6: Encourages member nations to enforce the policies outlined here.

Feedback is appreciated.

[Untecna]

I will take feedback on both accounts as well.

And I will explain if needed. I see you, Separatist and Sierra.

[Ardiveds]

OOC: In clause 2, why 20?
Probably shouldn't name nations in the proposal (clause 5), branding illegality iirc (except co-authors ofcourse)

[Untecna]

OOC: In clause 2, why 20?
Probably shouldn't name nations in the proposal (clause 5), branding illegality iirc

Clause 2 represents a somewhat good number, at least for me. You?

Clause 5 is perfectly in line with the rules, on the fact that I didn't name any specific country, now did I?

[Untecna]

Explanations:

On Monopolies
Category: Free Trade | Strength: Mild

The World Assembly,

Understanding the want by many people to end government intervention in business,

Knowing that monopolies in the world of business can and do exist, and

Understanding that these monopolies hurt many businesses and our economies,

HEREBY

§1: Defines, for the purposes of this law:
1.1: A "Monopoly" as a business that attains a large enough amount of the market they are in to give them control in the
entire business.
1.2: An "Antitrust breakup" as the breaking up of a corporation into smaller subset companies to remove the monopoly that
the corporation had over the market they were in.
1.3: "Antitrust hearings" as trials to decide the fate of the company.

§2: All corporations with 60% of the market share in the market they are in, or with more than 20 companies merged or owned by them, shall be broken up into smaller subsets under an antitrust breakup carried out by the government of the nation that the company has it's headquarters in, and will sell some of it's assets to other companies. This area requires Sections 3 to work.

§3: If a corporation is found to be a monopoly under §2, some representatives of the company will represent the company in antitrust hearings to decide whether or not the company shall be declared a monopoly and be split, along with any lawyers from the company.

§4: All companies are mandated to report their earnings and market share every quarter to the government of the nation their headquarters is in. They are also mandated to report any acquisitions they have made in the last financial year. To see if a monopoly exists.

§5: If a company already has subsets due to international expansion, i.e: of [insert nation name here], they will be treated as separate companies and will be tried as underlined in §3. Makes it easier.

§6: Encourages member nations to enforce the policies outlined here.

Feedback is appreciated.

[Ardiveds]

OOC: In clause 2, why 20?
Probably shouldn't name nations in the proposal (clause 5), branding illegality iirc

Clause 2 represents a somewhat good number, at least for me. You?

Clause 5 is perfectly in line with the rules, on the fact that I didn't name any specific country, now did I?

OOC: Not a fan of arbitrary numbers in proposals
Fair enough on clause 5, thought you were going to insert some name there. Though [insert name here] does look rather unprofessional in a proposal, just saying.

[Imperium Anglorum]

Market share is a poor way to judge whether an industry is competitive or not. This is coupled with the proposal's seeming inability to consider the possibility of natural monopolies or of large supply elasticities. The proposal says:

All corporations with 60% of the market share in the market they are in, or with more than the decided number of companies merged or owned by the company that constitutes a monopoly in the nation they have their headquarters in, shall be broken up into smaller subsets under an antitrust breakup

The idea of a natural monopoly comes up in your Econ 101 textbook. In the first book I have at hand, an admittedly older copy of Stiglitz's Principles of Microeconomics, it's covered about half way through the book. Joseph E Stiglitz, Principles of Microeconomics (2nd edn, 1997) 351–3. Excerpting directly:

A natural monopoly occurs whenever the average costs of production for a single firm are declining up to levels of output beyond those likely to emerge in the market... a natural monopolist is protected by the knowledge that it can undercut its rivals should they enter. Since entrants typically are smaller and average costs decline with size, their average costs are higher.

This effect here emerges entirely out of the structure of the specific market. The market for water, piped to every home, is extremely difficult to enter: the cost of laying pipe is massively restrictive, as is the cost of laying the sewerages needed to return wastewater. The market for advanced semiconductor manufacturing also is likely a natural monopoly. Development of new semiconductor fabrication technologies is so expensive that extremely large firms with enormous research and development resources cannot crack the market. Eg Intel and AMD/TSMC's current showdown. In many of these cases, the only ways to have a market is to abide with a monopolist: trade secrets are jealously protected or the costs to entry or innovation are so enormous as to make it impossible or implausible. Failing to recognise this should doom this effort immediately.

Furthermore, a simple thought experiment also shows the folly of using market share alone. Consider firms with a production function

Code: Select all

Q = L^{\alpha} K^{1 - \alpha}

Compile with Latex for the full equation experience. For such firms, there does not exist an optimal production point. Due to the lack of any economies of scale, small firms are no more efficient than large ones. In such a condition, all firms blend into each other. A competitive market can exist in such situations, where a large firm dominates, with small firms playing a peripheral role. But also due to there not being any economies to scale, any attempt by the large firm to exploit its market share dominance leads directly to the other firms expanding production to under cut any such attempt. For a more concrete explanation, see Richard A Posner and William M Landes, 'Market Power in Antitrust Cases' (2008) 94 Harv L Rev 937, 945–6.

That said, the other provisions of this proposal are similarly unworkable.

§3: If a corporation is found to be a monopoly under §2, some representatives of the company will represent the company in antitrust hearings to decide whether or not the company shall be declared a monopoly and be split, along with any lawyers from the company.

§4: All companies are mandated to report their earnings and market share every quarter to the government of the nation their headquarters is in. They are also mandated to report any acquisitions they have made in the last financial year.

Section 3 introduces an implicit contradiction: Do antitrust hearings (before whom?) determine a monopoly? Or does section 2? Section 4 has greater problems. First, companies broadly, especially small ones, have reporting costs. Small firms have a lower ability to absorb fixed costs than larger ones. I discussed this topic earlier this week at viewtopic.php?p=38019439#p38019439. The second portion, however, is more problematic.

What is a market? If I have a monopoly on the sale of saran wrap, is this a monopoly? Or is it just my being clever in the production of food wrap? This question came up in United States v EI du Pont de Nemours & Co (1956) 351 US 377, with the US Supreme Court finding for DuPont's argument that the market for food wrap exceeds just that of saran wrap. There has been some debate on whether that decision was correct, but mostly on whether DuPont was abusing market power rather than on differing definitions as to the market itself. It also has the problem with geography. A small shop only existing in one location may have a monopoly on the sale of goods there; it changes if you look both at the sustainability of multiple stores in that area and at also at a wider geographical radius. The ability to determine the size of that market is highly subjective.

Section 6, that member nations enforce the law, is entirely superfluous. The title needs work. See eg https://imperiumanglorum.wordpress.com/ ... g-with-on/.