Government’s War on Pianos
|December 25, 2013||Posted by Fred Foldvary under Editorials|
The US and state governments seem to be at war with everything. Much of what we do or own is prohibited, restricted, taxed, or mandated. It is puzzling why a country whose motto and creed are “liberty,” as inscribed in American coins, would be so restrictive. Part of the answer may be that people don’t understand freedom, and also that deep down, they don’t want it. The creed of liberty may itself be destructive of freedom, because Americans are seemingly satisfied with the slogan rather than the substance. There is always a seemingly good reason for restricting and penalizing acts that do not harm others, and that seems to be good enough for government officials, and presumably the public.
Now the government has extended its long list of wars to include teaching to play the piano. In the “Potomac Watch” article in the 28 November Wall Street Journal, Kimberly Strassel described the “Piano Sonata in FTC Minor.” In March 2013, the Federal Trade Commission sent a complaint to the Music Teachers National Association. The crime of this association was anticompetitive practices. It is the job of the FTC to prevent monopolies and collusion, no matter how tiny and insignificant.
The MTNA was founded in 1876 to promote learning and teaching music. The French writer Alexis de Tocqueville observed in his 1835 book De la démocratie en Amérique that Americans loved to form clubs. That was long before the US government officials regarded clubs as inherent collusion. When people organize, they cooperate, and evidently the US government regards cooperation and organization as illegal collusion.
The Music Teachers National Association is a 501(c)(3) non-profit organization with 22,000 members, nine-tenths of them piano teachers. Its crime was to have a politically incorrect code of ethics. Ethics evidently makes people do similar things, which is collusion, and illegal.
Specifically, the FTC was concerned with the ethics rule prescribing that music teachers honor their colleagues’ studios and students. Members are not supposed to recruit or solicit students from other teachers. The FTC regards this ethical rule as anticompetitive. They want piano teachers to try to grab away the students from other teachers. Perhaps negative advertising would make the FTC chiefs happy.
Economic theory tells us that when there are only a few firms in an industry, they have more pricing power. But there are thousands of music teachers, and students who seek music teachers can check the prices asked, so there is competition even if the teachers avoid engaging in fierce price wars.
The attorneys of the MTNA explained to the FTC chiefs that this ethical rule was never actually enforced. It is a matter of voluntarily honoring one another rather than expelling a member. Moreover, the FTC does not have explicit legal authority over nonprofit organizations. Nevertheless, the MTNA deleted this offending ethical rule. But the FTC responded that because the piano teachers had been dissonant in the past, they had to be investigated, evidently no matter how trivial the offense, and no matter how costly the compliance. It does not matter to the government officials if they bankrupt a business, destroy an organization, and eliminate jobs. They are at war on pianos, and war implies destruction.
The dozen staff members of the MTNA were forced to spend many months assembling thousands of documents for the FTC, anything relating to the ethics code. On October 2013, MTNA signed a consent decree. It must announce a statement at each national meeting and send the statement to all its members. The MTNA is also ordered to avoid affiliating with other associations which restrict “solicitation, advertising, or price-related competition.” The association must also submit reports to the FTC and appoint an antitrust compliance officer.
On December 16, 2013, the FTC published the settlement orders on its web site under the title “Professional Associations Settle FTC Charges by Eliminating Rules That Restricted Competition Among Their Members.” A final ruling will be made after 15 January 2014.
The whole concept of antitrust policy or government action against collusion is misguided. It is true that competition among firms keeps prices low, but all that is needed for competition is the ability of firms and individuals to enter and leave an industry. If prices are higher than what is needed for a normal profit, this is an opportunity for entrepreneurs to enter that industry to obtain those profits. There is always rivalry among sellers, even if they do not explicitly recruit customers away from other sellers.
The federal government has attacked firms such as Whole Foods for not being sufficiently competitive. The economic cost of attacking companies for cooperating or being too big has been more damaging than the social cost of possibly higher prices (see, for example, Dominick Armentano, Antitrust and Monopoly: Anatomy of a Policy Failure, 1982). A truly free market and free society avoids any governmental interference in human action other than to prohibit and penalize coercive harm to others. Coercive harm means a forceful trespass and invasion. That’s what we should understand about freedom.