Coyote Blog

A lot of bad legislation has been passed to protect consumers from the "scourge" of monopoly.  The most common fear is that some company will lock up the market and then start raising prices.  This never happens in real life, because entry in most markets is far easier than most people imagine, particularly in modern America where there are so many accumulations of capital looking for a way to be spent.  In fact, the only time such price-gouging monopolies are ever sustainable is when they are backed by the coercive power of government.

The milk market, for decades one of the most egregious examples of government price-fixing for the benefit of producers over consumers, provides us with a perfect example of this phenomena:  A cartel charging too high of prices that is taken on by a maverick price-cutting outsider, who was on a path to success until the feds slapped him down.

In the summer of 2003, shoppers in Southern California began getting a break on the price of milk.

A
maverick dairyman named Hein Hettinga started bottling his own milk and
selling it for as much as 20 cents a gallon less than the competition,
exercising his right to work outside the rigid system that has
controlled U.S. milk production for almost 70 years. Soon the effects
were rippling through the state, helping to hold down retail prices at
supermarkets and warehouse stores.

That was when a coalition of giant milk companies and dairies, along
with their congressional allies, decided to crush Hettinga's
initiative. For three years, the milk lobby spent millions of dollars
on lobbying and campaign contributions and made deals with lawmakers,
including incoming Senate Majority Leader Harry M. Reid (D-Nev.).

Last
March, Congress passed a law reshaping the Western milk market and
essentially ending Hettinga's experiment -- all without a single
congressional hearing.

The most hilarious (or disgusting, depending on my mood) part is listening to the statements of other milk producers complaining about the new competition and price-cutting, something the rest of us in business face as a matter of routine, but from which the privileged few in the dairy business are shielded:

Hettinga's operation was "damaging to the marketplace," said Elvin
Hollon, director of economic analysis for Dairy Farmers of America.
"Nobody ever envisioned there would be such large handlers" outside the
pool.

"So," Hollon said, "the regulations had to change."

and this:

In an interview later, Nunes called the milk legislation a victory for
"every dairy farmer in America except those who were gaming the
system." He added, "People out there were making millions of dollars a
year off the backs of America's dairy farmers . . . that was a wrong
that was finally righted.

That last paragraph is so brazen you may not even get it ... he is referring to competitors that are charging lower prices.  They are "making millions of dollars off the backs of America's dairy farmers" the same way the Honda Civic made millions of dollars off the back of the Yugo.  Under the new law passed by the dairy industry's cronies, Hettinga can still operate like he has been, as long as he pays $400,000 each year to his competitors to make up for the fact that he is out-competing them.

I will say I probably would like this guy -- he is able to look on the bright side:

"I still think this is a great country," Hettinga said. "In Mexico, they would have just shot me."

Yeah, we're much better here.  The government only rapes rather than kills you.