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Oil CrooksDangerous criminals conspire baldly in Vienna.

By Michael KinsleyPosted Tuesday, March 28, 2000, at 3:00 AM ET

Here in Redmond, Wash., we are under the impression that the U.S. government takes the principles of antitrust rather seriously. In places like Riyadh and Moscow and Oslo and Mexico City and Vienna—where OPEC and other oil producers are meeting to set oil prices—the very notion of U.S. antitrust principles must be good for a horse laugh.

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Of the major categories of behavior covered by the antitrust laws, alleged misuse of a legally acquired monopoly (the issue in the Microsoft case) is the murkiest area. Right and wrong are only somewhat clearer when the issue is corporate mergers. On the one hand, when competitors merge it reduces competition. On the other hand, there may be genuine efficiencies from the combination that will benefit consumers. The one clear form of misbehavior is price-fixing. When competitors get together to fix prices or limit supply, you get the stifled competition with no compensating efficiency. The Sherman Antitrust Act forbids "every contract, combination … or conspiracy in restraint of trade among the several States or with foreign nations." Price-fixing is illegal "per se," meaning there's no need to prove harm or any other complication. Violators can and do go to prison.

The Justice Department's big price-fixing case of the moment involves Sotheby's and Christie's, the two big art auction houses. The case seems to rest mainly on a suspicious pattern of one company raising its commissions and the other following a few weeks later. (It's not even clear what's so suspicious about this. Even in competitive markets, rivals end up charging the same price when they sell the same products or services.) The investigation has been going on since 1997, and no charges have been brought, but the heads of both firms have been forced to resign. Thank you, Uncle Sam, for your vigilance in protecting rich art collectors from excessive fees.

Meanwhile in Vienna, a price-fixing conspiracy of textbook purity, involving a commodity that affects everyone, goes on unmolested. Strolling in and out of meetings, the conspirators talk to reporters like coaches at halftime of a sports event. The oil minister of the United Arab Emirates tells the New York Times, "We have not discussed all the possibilities and all the options." The Algerian oil minister says, "I worry about a decline in demand," but adds, "If there is a consensus, we will support it."

What is going on in Vienna is flatly felonious behavior that is lifting billions of dollars from the pockets of American citizens. It may be beyond the reach of conventional antitrust enforcement, but it is not beyond all American discipline. If these oil ministers were bank robbers ("No, we haven't yet decided whether to go for Chase Manhattan or Commerce Bank of Kansas City …"), the government would do more than send a Cabinet secretary like Energy Secretary Bill Richardson to plead for moderation. ("Look, why not just take out a couple of suburban branches?")

Under the law, it makes no difference if a price-fixing conspiracy attempts to raise prices or lower them and whether it succeeds or fails. Raising prices too high can be self-defeating: You get more per barrel, but you sell fewer barrels. If OPEC lowers prices, it does so in search of the "sweet spot" where long-term revenue is maximized. There is no win-win here: The interests of the price-fixers and the interests of consumers are directly opposite.

So, Republicans are right to criticize the Clinton administration for being lackadaisical in its response to the latest oil heist. But it's pretty comical to hear House Majority Whip Tom DeLay declare that "this administration has no credibility" in pressuring OPEC to lower prices. No one could have less credibility on this issue than a Republican politician from Texas. During the 1980s, when oil prices were dropping, Texas oil producers screamed and two Republican administrations not-too-subtly begged OPEC to get its act together and charge more. A young oil man named George W. Bush was quoted in the Times hoping for a bit of "stability" (code word then for higher prices, as it is now for lower prices). George W.'s father took this nation to war to save Saudi Arabia and Kuwait from Saddam Hussein, and didn't make any effort to use that fairly impressive bit of leverage to break up OPEC.

It's a bit hard to believe that Bush the younger, DeLay, Majority Leader Dick Armey (also from Texas), and J.C. Watts of Oklahoma (who completes the House leadership triumvirate) are really so unhappy about the tripling of oil costs in the past year. Certainly their most influential constituents are not. All they have actually done about it, except to criticize President Clinton for not doing enough, is to produce one of those empty bills with a Canute-like title. This one's called the Oil Price Reduction Act. It operates like the Chocolate Cake Has No Calories Act and the Dick Morris Goes Away for Good Act. That is, it allows you to say you've voted for it—next problem? The Republicans even bagged their silly effort to repeal the 4.3-cents-a-gallon gasoline tax enacted in 1993, possibly because it dawned on them that this was Part 2 of an increase started by President Bush Sr.

Are we serious about our antitrust principles or are we not? Do we care that a price-fixing conspiracy is draining tens of billions of dollars from our economy, or are we quietly just as pleased since members of a powerful political interest group—domestic oil producers—are ancillary beneficiaries? If we do care, we should make clear that we regard OPEC as a criminal conspiracy, even if there are limits to what we can do about it. We should find someone meaner than Bill Richardson to deliver the message—Louis Freeh perhaps. We should tell Norway this is not what friends are for. We should tell Russia we don't give aid to nations that are ripping us off. We should tell Kuwait and Saudi Arabia that they get the Nobel Prize for ingratitude and don't come crying to us the next time a local bully starts picking on them. We should tell all these oil ministers they're subject to arrest the next time they land in America and think they're heading for the nearest Hotel Inter-Continental.

If we're serious.

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Michael Kinsley is a columnist for the Washington Post and the founding editor of Slate.

COMMENTS

Reader Response from The Fray:

Throwing down the gauntlet on anti-trust laws on the eve of Penfield Jackson's rendering of judgement in the Microsoft case is editorial timing at its best.

--Doug George

(To reply, click here.)

Perhaps the Clinton-Gore administration is secretly happy that OPEC is bailing out the Western world by raising prices and, in the unlikely event OPEC can sustain it's momentum, encourage greater fuel efficiency by American companies and in cars sold in the US. However, there are really no such defenses possible for Microsoft's monopolistic behavior.

--Jeff

(To reply, click here.)

Mr Kinsley has forgotten the First Law of Political Group Interaction: Never attribute to conspiracy that which can more accurately be attributed to incompetence. That there has been no coherent response to OPEC policies--for over 25 years now--has more to do with the inability of the players than with the complexity of the rules. The total lack of vision on the part of political leaders in the U.S., not their supposed self-interest and that of their financial contributors, is the main obstacle to getting past OPEC.

--Karl Mindeman

(To reply, click here.)

We just completed a $20 billion sale of F-16 fighter jets to the United Arab Emirates: could the oil price increase be a pay-off for this purchase from our defense industry? Or could it be a way of slowing down the economy without our leaders having to look like the bad guys by increasing interest rates even higher?

--tom beesting

(To reply, click here.)

As an American Veteran who served months of duty of in Saudi Arabia, it does not surprise me at all to see the pathetic reaction to oil/gasoline costs. Wake up America! You are not entitled to Middle Eastern oil! For the most part, these countries do not at all believe in freedom and democracy. Yet our troops are in harm's way because too many of us Americans believe we have a right (albeit twisted), to drive Chevy Suburbans. Many think me odd to have made fuel economy my main priority in the purchase of my own car.

--NinaLCF-B

(To reply, click here.)

From the perspective of Riyadh, there's little difference between the collusion of OPEC states and the daily regulatory activities of the U.S. Government. When it comes to antitrust laws, American governments at all levels--the feds, the states, and local communities--are not just repeat offenders, but perpetual offenders. Cartels can attempt to fix prices (and often fail), but governments fix prices all the time and with devastating effectiveness. In the U.S. today, the federal government continues to fix many prices in the agricultural sector, while nearly all states fix prices for milk, in-state telephone service and electricity. When it comes to the federal government's interaction with foreign sovereigns, Uncle Sam's behavior is nearly as felonious. Consider, for example, U.S. anti-dumping law, which is used to block imports simply because they are priced below domestic producers' costs.

--Peter Scheer

(To reply, click here.)

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