Footnotes

 

1. “A public sale in which property or items of merchandise are sold to the highest bidder. [from Latin auctio, from auctus, past participle of augere, to increase]” - American Heritage Dictionary; 4th Edition, 2000. Or: “A public sale of property to the highest bidder, as where successive increased bids are made, esp. such a sale by a person licensed and authorized for the purpose.” - Webster’s New International Dictionary; 2nd Edition, 1955.

2. According to a Cato Institute study (Briefing Paper No. 58, July 25, 2000, by Solveig Singleton), there are car-dealer franchise laws in 40 states requiring that all car sales go through dealers. Manufacturers are not generally allowed to own dealerships that would sell only the manufacturer’s cars. This has so far blocked most direct sales from manufacturer to consumers, including those at single prices. Similarly, stock exchanges have historically been required to be membership organizations, with members required to be professional intermediaries. Investors were not allowed to own membership firms, which effectively outlawed any stock trading except through intermediaries.
3. Here is what they were saying about Amazon last September in DVDTALK.COM’s forum:
• “I find this extremely sneaky and unethical. If you walk into a store, you aren’t charged more based on how many times you pick up the dvd to look at the cover are you?”
• “Sounds like illegal price discrimination.”
• “Pretty crooked if you ask me.”
• “This is ridiculous. Who should we email to expose this bs?”
• “How do you know you are getting the best price for your purchase?”
• “These pricing practices are nothing less than opportunistic and deceitful.”
• “For a company like Amazon that’s built its reputation on honesty and excellent customer service...this is a very dangerous game to play.”
• “Previously all that they had going for them was their perceived honesty because they chose to opt out of the [Inter]net pricing war. Now they don’t even have their good name.”
• “I think someone needs to press Amazon hard with this matter. They can’t get away with this. Absolutely unforgivable.”
4. Technically, Robinson-Patman, passed in 1936, is an amendment to Section 2 of the Clayton Act of 1914, which concerns price differences. Although these are now antitrust’s principal price discrimination statutes, use of discrimination to monopolize was already covered by the Sherman Act of 1890, causing some to claim that the newer laws are superfluous at best.
5. Examples include discounts offered for “predatory pricing” purposes (i.e., to block potential new competitors), as airlines are often accused of doing.
6. For example, in his 1978 book, The Antitrust Paradox, famed legal scholar Robert Bork called Robinson-Patman “the misshapen progeny of intolerable draftsmanship coupled to wholly mistaken economic theory.” Bork further lamented what “...every antitrust practitioner knows, that tens of thousands, probably hundreds of thousands, of pricing decisions every year are altered through fear of Robinson-Patman. Quantity discounts, promotional discounts, discounts to recognize the purchaser’s assumption of tasks that would otherwise fall to the seller, discounts because of the purchaser’s stage in the distribution chain, promotional allowances – all these and many more are foregone or changed by the law. If that law is mistaken in its assumptions and further deformed in its application, as almost all respectable scholarship finds [Robinson-Patman] to be, the needless deformation of market processes and the destruction of national wealth is enormous.”
7. While these busts came at different times (fixed commissions in the ‘Seventies and fixed increments/spreads in the ‘Nineties) best execution has been a constant of reform since before either of them. Nonetheless, it is accurate, if perhaps oversimplified, to characterize best execution all along as the Government’s version of what the private exchanges were providing improperly (according to the Government). All of the “National Market System” reforms fall within this best execution initiative, from automation and transparency, through intermarket linkage, order handling rules, and decimalization.
8. Wall Street Journal, September 8, 2000. In a subsequent update to the study, Professor Wood noted that trades are often occurring too quickly to be comprehended with the naked eye, and suggested that those who want to avoid financing the opportunities of others will need to deploy computers and perhaps artificial intelligence software to monitor prices.