Conservation Cartels: Competition Policy Can Conflict with Environmental Protection

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IN THE 1930s, FRANK MANAKA SOUGHT WORK as a fisherman off the coast of Monterey. California. He chartered a boat but was unable to market his catch. Local canneries would not purchase fish from him. In 1940, he filed suit against the Monterey Sardine Industries, Inc., a cooperative association of fishing boat owners, and the Del Mar Canning Company for allegedly conspiring to set prices and restrict entry into the California sardine fishery. Under an agreement between the association, the local canneries, and the local fishermen's union, fine association set the price for which its members' fish were sold to canneries and reduction plants. The canneries, in turn, agreed to purchase fish exclusively from members of Monterey Sardine who were assigned to it by the association. Manaka was not a member, so he could not sell his fish and so he sued.

Although Monterey Sardine may have operated like the typical collusive cartel, it served both pecuniary and conservation purposes. On the one hand, it increased members' profits by increasing fish prices and restricting entry by non-local fishers. On the other, it helped to conserve fish stocks by limiting the harvest. Challenged by Manaka, Monterey Sardine Industries was found guilty of conspiracy in restraint of trade under the Sherman Act. The federal district court held that the association was "not freed from the restrictive provisions of the anti-trust act" merely because it sought "the conservation of important food fish." In other words, the association's conduct was no less exclusionary because it served, in part, to conserve fish stocks.

In the 1930s, the California sardine fishery was at its peak, yielding over 500,000 tons of fish per year. By the early 1950s, the annual catch had dropped to under 20,000 tons as the fishery began to collapse. It is possible that the sardine fishery's decline was unavoidable. Commercial harvesting might have depleted the fishery even if Monterey Sardine Industries' collusive arrangement had been permitted to survive. Changing environmental conditions might have made the collapse inevitable. Then again, perhaps if it were not for antitrust enforcement, this tragedy of the marine commons might have been avoided. The existence of a private association capable of ensuring the local fish catch was maintained at a sustainable level might have saved the fishery. Busting up this "conservation cartel" might have made the fishery more "competitive" in a narrow sense, while at the same time undermining the equally important goal of resource conservation.

Off the California coast and elsewhere, fishermen who sought to organize such "conservation cartels" to manage fisheries and control catches were prosecuted for antitrust violations. At the same time, the depletion of ocean fisheries continued apace, to the point where fishery depletion has become one of the greatest environmental problems on the planet. Antitrust law, though well-intentioned, may have discouraged--if not in some cases actually prohibited--private arrangements that could ensure the sustainable utilization of marine resources.

THE MARINE COMMONS

Conservation of marine fisheries presents the archetypal "commons" problem, most famously depicted by ecologist Garrett Hardin in "The Tragedy of the Commons." Hardin described the fate of a common pasture, unowned and available to all. In such a situation, it is in each herder's self-interest to maximize his use of the commons at the expense of the community at large. Each herder captures all of the benefit from adding one more animal to his herd; the costs of over grazing the pasture, however, are distributed amongst every pasture user. When all the herders respond to the incentives created by the open-access nature of the commons, the pasture is overgrazed. "Each man is locked into a system that compels him to increase his herd without limit--in a world that is limited," Hardin wrote. The pursuit of self-interest in an open-access commons results in a tragedy; "Freedom in a commons brings ruin to all."

This analysis applies well to most marine fisheries; indeed, it was described and documented by fishery economists over a decade before Hardin's influential essay. So long as there is open-access to the fishery, each fisher has an incentive to catch as much as possible, even beyond the point of sustainability. The incentives for such behavior are strong in the fishery context because the marginal cost of an active fisherman increasing his effort is often quite small compared to the potential economic reward. Fishers do not benefit from self-restraint because none have any assurance that other participants in the fishery will follow suit.

Open-access fisheries have suffered from the tragedy of the commons just as Hardin would have predicted. On the open seas, overcapacity--what many describe as "too many boats chasing too few fish"--is the norm, resulting in substantial depletion of fishery stocks worldwide. Approximately 65 percent of fisheries are fully exploited or overexploited, according to the United Nations Food and Agriculture Organization, and that number continues to climb. An additional 10 percent of fisheries are "significantly depleted."

The plight of domestic fisheries is no less grave despite several decades of federal regulation. In 2003, the National Marine Fisheries Service (NMFS) reported that 66 fish stocks were subject to overfishing and another 86 species were already overfished. In the same report, the NMFS acknowledged that out of the 932 fish stocks under federal management, the status of nearly 700 is unknown. While the NMFS reports the number of healthy fish species has increased in recent years, such gains have come at tremendous cost to local fishing communities faced with fishery closings and other stringent conservation measures. Populations of …