Is The IRS Guilty of Violating Antitrust Laws?
From The Legal Intelligencer:
The fees charged by H&R Block and other tax preparers for electronic filing of federal tax returns are not illegal and the IRS’s agreement with the preparers didn’t violate antitrust laws, the 3rd U.S. Circuit Court of Appeals has ruled.
In its 27-page opinion in Byers v. Intuit Inc., a unanimous three-judge panel refused to revive a proposed nationwide class action against H&R Block, Intuit Inc. and the Internal Revenue Service brought by taxpayers who claim the IRS effectively “outsourced” its statutory responsibility for accepting and processing electronically filed tax returns to private companies.
Plaintiffs attorneys Thomas Martin, Alan M. Feldman and Thomas More Marrone of Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig complained in the suit that the IRS agreed to prohibit individual taxpayers from filing electronically, instead requiring that all e-filing be handled by registered tax preparers that had joined the “Free File Alliance.”
In 2005, the suit alleged, the IRS agreed to modify the deal to limit the number of taxpayers who would be allowed to e-file for free in order to guarantee that the program would remain lucrative to the tax preparers.
The agreement, the suit alleged, amounted to “an illegal horizontal agreement” among the FFA members to restrict output, which had the effect of causing the plaintiffs to pay “supracompetitive prices” for e-filing and related services.
In the first round of the litigation, Senior U.S. District Judge Thomas N. O’Neill Jr. dismissed the suit after finding that the tax preparers were entitled to “implied antitrust immunity” and were therefore shielded from antitrust liability, since their anti-competitive behavior was required by the IRS.
There are, of course, two sides to every story and certainly more factors than just “implied antitrust immunity” at work in this case. As I am not a legal scholar, I will not attempt to delve into these concerns and provide my opinion. However, to subject private firms to antitrust regulations but exempt government from such restrictions is an affront to justice. Antitrust laws, in and of themselves, have no place in a free society. We must first recognize that there are two types of monopolies: non-coercive monopolies and coercive monopolies. If a given firm can offer goods or services that have such a combination of superior price and quality that all competitors are driven out of the marketplace, then that firm deserves to have a monopoly on the market. There is nothing wrong with this, as all of the transactions necessary to create this monopoly were done by mutual consent and to mutual advantage. A coercive monopoly, on the other hand, arises when a given firm eliminates competition not through its own ability, but by force. The government-sanctioned monopolies of utility companies are an example. The government has intervened (through force, as that is the only way in which government can intervene) and created a monopoly where otherwise one probably would not exist. If a given non-coercive monopolist takes advantage of his position and raises prices to high, some entrepreneur will undercut the monopolist and restore the balance.
But even if the above were not true. If non-coercive monopolies were actually harmful and were created without government intervention (which I’m sure that, given the breadth of history, this has happened at some point), it would still be wrong for government to intervene and destroy a non-coercive monopoly. It is wrong for the simple reason that unless force is used, no one possesses the right to intervene and infringe on an individual’s property. A corporation is the property of the shareholders, not the public. If the shareholders choose to engage in monopoly practices, so be it. It is their property to use or dispose of as they see fit. Provided they do not use force against another individual, they cannot be subject to punitive action. As Ayn Rand once said:
“Free competition enforced by law” is a grotesque contradiction in terms.
I can almost hear someone asking “Couldn’t a monopolist cause harm by raising the price of an essential good or service to the point where it is not accessible?” The answer is “Yes, the monopolist could cause harm.” But the harm is not a result of the monopolists refusal to provide access to an essential good or service. The root cause of the problem is would-be consumer’s inability to provide that product for himself. Altruism cannot be morally mandated by government.
Even if antitrust laws were justified, however, there is certainly no justification for exempting a government agency from such laws. In fact, the government should be all the more subject to scrutiny in this area. As it, unlike private firms, can legally use force to achieve its objectives. No matter what barriers new firms may face when entering a given market dominated by established competitors, it is nothing compared to an entry barrier imposed by government at the point of a gun!
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