Sherman, Clayton, and FTC Acts
The antitrust laws were originally designed precisely to prevent, along with conspiracies and monopolies against the consuming public, such unfair practices against smaller competitors. Below-cost pricing to kill competitors, for example, was one of the "monopolizing" acts that were banned by the original Sherman Antitrust Act of 1890.
Congress expanded that list of condemned practices in the Clayton Act of 1914 to include price discrimination, exclusive dealing, and mergers, along with a general ban on "unfair" acts, practices, and methods of competition in the Federal Trade Commission Act of that same year.
This enforcement program became increasingly effective... As a result, the U.S. economy was becoming less concentrated in its major industrial sectors and thus more competitive. The country's larger firms, however, were not happy with these developments and launched a carefully planned--and handsomely financed--political counter- attack, the core of which centered around a capture of the federal judiciary.
I. ANTITRUST OVERVIEW
LAISSEZ-FAIRE, MONOPOLY, AND GLOBAL INCOME INEQUALITY:
LAW, ECONOMICS, HISTORY, AND POLITICS OF ANTITRUST
Charles E. Mueller, Editor
The anti trust and anti monopoly rules were working.
Antitrust Law & Economics Review
'Political Counterattack'
The country's larger firms, however, were not happy with these developments and launched a carefully planned--and handsomely financed--political counter- attack, the core of which centered around a capture of the federal judiciary. Since the judges get the last word in antitrust enforcement--and since the federal judges are relatively few in number (around 1,000)--a plan was developed to run them all through an indoctrination program in which they would be taught that the antitrust laws were, as a matter of "economics," misguided--were in fact harmful to the consuming public.
'Repealed by the Judges'
It worked. As recounted in the two articles by Aron et al below (Vol. 24:4 and 25:2), a number of major corporations and corporate foundations were persuaded to finance a "law and economics" movement that includes a series of 2-week economic "seminars" for the federal judges (at over $5,000 per judge, all-expenses paid at Florida luxury resorts) taught by a group of hand-picked economics professors from the University of Chicago and similarly "conservative" campuses, with no opportunity for economists of opposing views to participate. In the 20 years since this judicial teach-in began (1976), over 2/3rds of the entire federal bench has attended these indoctrination programs. Over that same period, those judges have transformed American antitrust law, in effect legalizing anticompetitive mergers and the various monopolization techniques Congress had legislated against. Today, only a handful of antitrust cases are filed each year and a recent study found no victories for the plaintiffs involved. On the books, the laws still read the same as they did in 1976; in practice, they've been repealed by the judges.
'Constitution Was Wrong'
How did the judges do it? First they took away the right to a jury trial. Under the U.S. Constitution (7th Amendment), "the right of trial by jury shall be preserved," but the judges decided on their own--after their new "economic" training--that, in antitrust cases, the Constitution was wrong. So they began to either dismiss antitrust complaints as insufficient on their face or (again before trial) by simply deciding they didn't believe the plaintiffs could prove what they were alleging (granting "summary judgment" for the defendant). In the handful of cases that were actually allowed to go to trial, the judges have either granted a "directed verdict" for the defendant at the end of the plaintiff's case or, after the jury had returned its verdict for the plaintiff, set it aside ("judgment notwithstanding the verdict") on the ground that they didn't think it was "reasonably" supported by the evidence presented. In the rare case where an antitrust plaintiff has been allowed to go before a jury and hasn't had his jury verdict set aside by the trial judge, the court of appeals has almost uniformly overturned it (for alleged flaws in either the law as applied by the trial judge or in the evidence).
'Consolidation' by Judicial Fiat
What had happened was that the U.S. judges, "educated" to believe that the bigger the firm the more efficient it must be, had reached the logical conclusion that the ultimate in efficiency is an industry or market with only 1 or 2 firms. From this it followed that, if the largest firm in the industry either bought up or bankrupted the others, that industry's total (and unit) costs would be lowered and the price to the consumer would therefore fall. "Consolidation" of U.S. industry had thus become the implicit goal of the federal judiciary. To reach that goal, the antitrust laws (being still on the books) simply had to be "bent." New standards of proof were provided for them by their laissez-faire tutors: Make the plaintiff prove not just that the defendant has committed the anticompetitive act but that the act's results are going to be higher prices for the consumer.