The Political Economy of the Sherman Act: The First One Hundred Years PDF
Preview The Political Economy of the Sherman Act: The First One Hundred Years
The Political Economy of the Sherman Act This page intentionally left blank THE POLITICAL ECONOMY OF THE SHERMAN ACT The First One Hundred Years Edited by E. THOMAS SULLIVAN DEAN AND PROFESSOR OF LAW UNIVERSITY OF ARIZONA New York Oxford OXFORD UNIVERSITY PRESS 1991 Oxford University Press Oxford New York Toronto Delhi Bombay Calcutta Madras Karachi Petaling Jaya Singapore Hong Kong Tokyo Nairobi Dar es Salaam Cape Town Melbourne Auckland and associated companies in Berlin Ibadan Copyright © 1991 by Oxford University Press, Inc. Published by Oxford University Press, Inc., 200 Madison Avenue, New York, New York 10016 Oxford is a registered trademark of Oxford University Press All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior permission of Oxford University Press. Library of Congress Cataloging-in-Publication Data The Political economy of the Sherman Act : the first one hundred years / [edited by] E. Thomas Sullivan. p. cm. Includes bibliographical references and index. ISBN 0-19-506642-1 1. Antitrust law—United States—History. I. Sullivan, E. Thomas (Edward Thomas) KF1649.P65 1991 343.73'0721--dc2() [347.303721] 90-36227 9 8 7 6 5 4 3 21 Printed in the United States of America on acid-free paper To Susan My partner in life This page intentionally left blank Preface On the occasion of the one hundredth anniversary of the Sherman Antitrust Act, it seems appropriate to take stock and review the history of the act. This book is an examination of the legislative intent of the Act and the political economy that informed the legislation. It also reviews and analyzes the contemporary debates concerning the goals and values that underlie the Sherman Act. The first principle of antitrust is that our economic system should operate through market forces and that American markets should be competitive. As a body of law, antitrust attempts to regulate the relationship between buyers and sellers in individual markets when there is a breakdown of the natural market forces. When the market deviates from this competitive ideal, antitrust inter- vention is an accepted norm. But care must be exercised in the case of intervention so that the costs of government enforcement do not exceed the costs of the market imperfection. The study of antitrust, then, is also the study of the role of government in regulating markets, and the balance that must be struck between the idea of limited government and the protection of free, open, and competitive markets. To say that antitrust is designed to maintain and promote com- petition is only the starting point. The Sherman Act did not ex- plicitly define the term "competition"; the debate on that issue continues today. That issue, to be sure, is central to the entirety of antitrust law and policy. We know that antitrust has a procom- petitive foundation, but the history of antitrust demonstrates that viii Preface the idea of competition has had various meanings in the last one hundred years. Economic and political ideologies have shaped that meaning over time. This volume is an attempt to capture the mean- ing of the antitrust movement. It focuses on the relationship be- tween the political economy and the legislative history of the act, and the current debates. If antitrust is to have a future in the twenty-first century, we must learn from the course of its history in the twentieth century. A current reexamination of antitrust is relevant also because of the increased international nature of markets. Few students of antitrust doubt that we live in a globalized economy. The changing face of our markets reveals that the globalization of the economy dictates that we rethink market definitions and how the American viewpoint of competition affects both domestic and international business. A case in point is the European Economic Community (EEC), which plans to create by 1992 a single market. The magnitude of this undertaking is enormous. It may require the adoption of hundreds of pieces of legislation to remove intracommunity bar- riers to trade. And with the fall of Eastern Europe and the move toward market economies throughout all Europe, we can expect the EEC's competition policy to be even broader than originally planned. This portends even greater importance for U.S. competition policy. It is likely that the global competition movement will find as highly relevant the American experience with competition and open markets. As other countries turn to an examination of our competition policy we, too, can reflect on our own market defi- nitions and how they shape our conclusions about market power, economies of scale, and barriers to entry. But all students of an- titrust and competition policy must consider, in the final analysis, that the influence of culture and human experience may dictate the preferred definition of competition. Hence, the American def- initions of competition, as explored in this volume, may not be transferable to other countries and cultures. Thus as we compare various models of competition from that of a "process of rivalry" to "allocative efficiency," we suggest that the American experience with competition has changed over time and continues to change Preface ix in light of the dynamics of the market, political ideologies, and, now, international developments. The stakes are high in this debate. In the United States we believe that society is better off if markets behave competitively. Whether competition is defined broadly or narrowly as a regulatory limitation on business has important economic consequences here and abroad. When governments regulate markets and intervene in the marketplace to correct market failures, winners and losers emerge. Consumers win when markets are competitive through the interaction of sellers and buyers in the dynamic process of exchange. When competitive markets break down through collu- sion or the exercise of monopoly power, consumers lose through higher prices and fewer goods. As this volume suggests, we are all affected, individually and society as a whole, by the model of competition that our government selects. Ultimately, that decision is shaped by political, economic, and cultural ideologies. A number of dedicated individuals assisted in this project and deserve recognition. A special thank you goes to Jane Bettlach, Bobbi Miller, Ellen Beerdsen, and Barbara Clelland and their staffs for their patience and indispensable secretarial skills. The research assistance of Wendell Sherk, Washington University law class of 1989, Steve Tully, University of Arizona law class of 1991, and Robert Brown, University of Arizona law class of 1992, is gratefully acknowledged. For permission to reprint the articles included in this book, a special thanks is extended to the authors and publishers. The es- says, which were published earlier in substantially longer form, are, I believe, some of the most thoughtful and provocative articles written on antitrust policy. They represent some of the very best research and analysis that have been contributed to this genre. In addition, these essays cover a broad range of antitrust philosophy. Together they strike a balanced, diversified approach in presenting a wide spectrum of ideas regarding the goals and values of antitrust policy. Tucson E. T. S. June 1990
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