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The Monopoly Enigma, the Reagan Administration's Antitrust Experiment, and the Global Economy

Louis Galambos

in Constructing Corporate America: History, Politics, Culture

In the 1980s, the Reagan Administration drastically altered American antitrust policy, virtually eliminating Section 2 cases involving monopolies. This chapter provides a context for that decision by ... More

In the 1980s, the Reagan Administration drastically altered American antitrust policy, virtually eliminating Section 2 cases involving monopolies. This chapter provides a context for that decision by tracing the efforts that the federal government made since 1890 to reconcile an opposition to highly concentrated economic power with the even stronger enthusiasm Americans have always had for the economic success they associated with the nation's largest enterprises. In this setting, judges and government lawyers struggled over the years to come up with a clear concept of monopoly. In the global economy of the late 20th century, the Reagan policy innovation solved that problem and proved to be timely and significant. The new policy allowed American firms to get up to global scale, either through strategic alliances or through mergers that would not have been allowed under previous administrations.Less

The Curious Case of Dual Federal Enforcement

Daniel A. Crane

in The Institutional Structure of Antitrust Enforcement

The debates between two competing conceptualizations of antitrust led to the creation of two federal antitrust agencies: the Federal Trade Commission (FTC) and the Justice Department's Antitrust ... More

The debates between two competing conceptualizations of antitrust led to the creation of two federal antitrust agencies: the Federal Trade Commission (FTC) and the Justice Department's Antitrust Division. There is something curious about the dual-agency structure of federal antitrust enforcement, despite the fact that the two agencies are not purely redundant and that overlapping agency jurisdiction is not unusual. This chapter shows that the design of the antitrust agencies was not the product of a unified draftsman but that the structure itself was inelegant, redundant, and often problematic. Efforts to change this structure have repeatedly failed. Whether this sentiment is practical common sense or just timidity, the time will come when political forces transpire to bring the American dual-agency structure into the public spotlight.Less

Introduction

Nathaniel Grow

in Baseball on Trial: The Origin of Baseball's Antitrust Exemption

This book examines the history of the Federal Baseball litigation and explains how Major League Baseball first came to be exempt from antitrust law. In a unanimous ruling, penned by Justice Oliver ... More

This book examines the history of the Federal Baseball litigation and explains how Major League Baseball first came to be exempt from antitrust law. In a unanimous ruling, penned by Justice Oliver Wendell Holmes Jr., in the 1922 case of Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, the United States Supreme Court held that the “business of base ball” was not subject to the Sherman Antitrust Act because it did not constitute interstate commerce. The Court has affirmed Federal Baseball on two separate occasions, first in 1953 and then again in 1972, giving Major League Baseball antitrust immunity. This book examines how baseball came to enjoy its unique antitrust status, and more specifically why Justice Holmes concluded that the sport was not interstate commerce and thus not subject to federal antitrust law. It argues that the decision was consistent with the prevailing judicial precedents of the day and highlights several critical tactical mistakes committed by the Baltimore Federals's counsel throughout the litigation.Less

Machines for Selling

Shane Hamilton

in Supermarket USA: Food and Power in the Cold War Farms Race

The first chapter maps out the power structures of midcentury American supermarketing, exposing the essential lie of the notion that supermarkets were mere products of “free enterprise.” The focus is ... More

The first chapter maps out the power structures of midcentury American supermarketing, exposing the essential lie of the notion that supermarkets were mere products of “free enterprise.” The focus is on the world’s largest supermarket chain at the time, the Great Atlantic & Pacific Tea Company (A&P). After a brief summary of the rise of the supermarket business model—a model at first rejected by A&P’s executives but then fully embraced by the end of the 1930s—the chapter illustrates the ways in which consolidated food retailers relied upon government support of industrialized agriculture to transform the nation’s food economy by the late 1940s.Less

The United States The Competition Law System and the Country’s Norms

Harry First, Eleanor Fox, and Daniel E. Hemli

in The Design of Competition Law Institutions: Global Norms, Local Choices

This chapter discusses the history, institutional structure, mandate, procedural characteristics, and agency performance of the competition law system of the United States. The US enforcement system ... More

This chapter discusses the history, institutional structure, mandate, procedural characteristics, and agency performance of the competition law system of the United States. The US enforcement system is complex. There are two major federal enforcement agencies and fifty state enforcement agencies, plus five federal districts or territories, and enforcement through private litigation. The state attorneys general can enforce federal antitrust law as well as state antitrust law when state residents are injured. The two US federal agencies are the Department of Justice Antitrust Division and the Federal Trade Commission. The former is a division of the executive branch; the latter is an independent regulatory agency. The Antitrust Division of the Department of Justice follows the bifurcated judicial model, investigating cases and bringing enforcement actions in federal courts of general jurisdiction. The Federal Trade Commission, consisting of five commissioners, follows the integrated agency model, with power to investigate and adjudicate cases internally, subject to subsequent appellate court review.Less

Who Needs Antitrust?: Or, Is Developing-Country Antitrust Different? A Historical-Comparative Analysis

Aditya Bhattacharjea

in Competition Law and Development

This chapter questions the recent trend toward adoption of antitrust laws in developing countries. It first undertakes a historical review to show that today's advanced countries enacted and ... More

This chapter questions the recent trend toward adoption of antitrust laws in developing countries. It first undertakes a historical review to show that today's advanced countries enacted and implemented such laws at a relatively late stage in their development, motivated by a variety of economic and non-economic reasons. Transplantation of such laws into very different institutional settings is inadvisable. The chapter argues that recent changes in antitrust economics as well as development studies require a more nuanced approach to antitrust in developing countries. It should be based on robust and easily enforceable principles, and focused on addressing anticompetitive conduct that impinges on the basic needs of the poor, especially with regard to essential consumer goods, agriculture, and health care. The chapter concludes by making a case for greater antitrust cooperation between developing countries.Less

The NFL’s Role in American History (Somebody’s Gotta Be Kidding)

Jesse Berrett

in Pigskin Nation: How the NFL Remade American Politics

This chapter explores crucial contradictions that went unremarked in the NFL’s crusade to make itself a bulwark of Americanism. From its image as a ruggedly capitalist enterprise (even as its ... More

This chapter explores crucial contradictions that went unremarked in the NFL’s crusade to make itself a bulwark of Americanism. From its image as a ruggedly capitalist enterprise (even as its commissioner and owners reiterated the need for collectivization) to its sending players to Vietnam to support the war effort (while simultaneously flexing political muscle to prevent those players from serving) to its feverishly jingoistic public spectacles —extending to its bid for official sanction as part of the Bicentennial—the NFL’s patriotic efforts were at once its most contested and its most emblematic. By 1976, that position had been accepted at multiple levels of government and officially sanctioned by the Bicentennial Administration, which allowed the NFL to promote the Super Bowl as a sanctioned event.Less

American and European Perspectives on Antitrust

Daniel J. Gifford and Robert T. Kudrle

in The Atlantic Divide in Antitrust: An Examination of US and EU Competition Policy

This chapter presents a broad overview of the current similarities and differences between the competition policies of the two jurisdictions and of the factors that have shaped these policies and ... More

This chapter presents a broad overview of the current similarities and differences between the competition policies of the two jurisdictions and of the factors that have shaped these policies and their administration. These can be best understood in historical context by comparing competition policy developments on both sides of the Atlantic in terms of the interactions of three sets of considerations across time: ideology, institutions, and interests. Many of these themes are further examined in subsequent chapters when individual competition policy issues are examined. The roles of the enforcement agencies: the Antitrust Division of the Department of Justice, the Federal Trade Commission, and the European Commission are explained.Less

Bundled Discounts

Daniel J. Gifford and Robert T. Kudrle

in The Atlantic Divide in Antitrust: An Examination of US and EU Competition Policy

This chapter explores the U.S. approaches to bundled discounts as illustrated by the LePage’s decision, the earlier Ortho decision and the disapproval of the LePage’s decision by the Antitrust ... More

This chapter explores the U.S. approaches to bundled discounts as illustrated by the LePage’s decision, the earlier Ortho decision and the disapproval of the LePage’s decision by the Antitrust Modernization Commission. It also examines the European Commission’s approach as manifested in its Guidance and the application of the “suction effect” to bundled discounts. It compares the usage of the equally efficient competitor test in both jurisdictions and discusses the derivation of that test from predatory pricing analysis. In addition, the chapter relates the discount attribution rule of the Antitrust Modernization Commission to the EC’s Guidance. Finally, the chapter examines bundled discounts in the light of their welfare effects.Less

Public Policy in an AI Economy

Austan Goolsbee

in The Economics of Artificial Intelligence: An Agenda

Much public discussion about an economy dominated by artificial intelligence has focused on robots and the future of work, particularly the destruction of jobs. On the other hand, economists have ... More

Much public discussion about an economy dominated by artificial intelligence has focused on robots and the future of work, particularly the destruction of jobs. On the other hand, economists have highlighted the historical record of job creation despite job displacement, and documented the way technological advances have eliminated jobs in some sectors but expanded jobs and increased wages in the economy overall. This chapter considers the role of policy in an artificial-intelligence-intensive economy (interpreting artificial intelligence broadly). It emphasizes the speed of adoption of the technology for the impact on the job market and the implications for inequality across people and across places. It also discusses the challenges of enacting a Universal Basic Income as a response to widespread adoption of artificial intelligence, and discusses pricing, privacy and competition policy, as well as the question of whether artificial intelligence could affect policy making itself.Less

The Limits of Antitrust and the Chicago School Tradition

George L. Priest

in The Global Limits of Competition Law

This chapter provides historical context for Judge Frank Easterbrook's writing. It places Easterbrook's article within the Chicago School antitrust tradition. In particular, it suggests that two ... More

This chapter provides historical context for Judge Frank Easterbrook's writing. It places Easterbrook's article within the Chicago School antitrust tradition. In particular, it suggests that two Chicago School thinkers, Aaron Director and Ronald Coase, laid the intellectual foundations for Easterbrook in two critical areas. The first was in the emphasis on conceptualizing the market, rather than more active antitrust enforcement, as a default mechanism for economic organization. That is, the market could self-correct for monopolistic behavior. The second foundation regarded the expectation of judicial error. The concern with judicial error focused on the fact that judges were more likely to make errors based on false positives “Type I” errors of mistaken prosecution) than false negatives (“Type II” errors of insufficient prosecution). The complexity of competition law and the prospective nature of some of the analysis performed create some uncertainty over the extent of Type I and II errors.Less

Origins

in The Microsoft Case: Antitrust, High Technology, and Consumer Welfare

This chapter explores the ideological origins of the monopolization law and reports the century-long history of the government's efforts to enforce it. It then addresses the convergence of political, ... More

This chapter explores the ideological origins of the monopolization law and reports the century-long history of the government's efforts to enforce it. It then addresses the convergence of political, theoretical, and competitive trends that persuaded the Antitrust Division to revive the tradition of the public monopolization enforcement by filing the Microsoft case. United States v. Microsoft is part of a long tradition of public monopolization enforcement that began in the late nineteenth century and gained a renewed urgency in the latter years of the New Deal. Ideology played a crucial role in the origins of antitrust. The repeated failures of public monopolization enforcement show the shortcomings of the law's definition of monopolization. The Chicago School's analysis influenced both antitrust law and enforcement policy. The Microsoft case rested on a new and exciting economic theory that was the height of fashion in legal scholarship.Less

Retail Securities Regulation in the Aftermath of the Bubble

Nancy L. Rose

in Economic Regulation and Its Reform: What Have We Learned?

This chapter discusses regulation of the retail securities and investments industry, written for and from the perspective of an industrial organization economist. It describes the economic size and ... More

This chapter discusses regulation of the retail securities and investments industry, written for and from the perspective of an industrial organization economist. It describes the economic size and scope of this industry, and reviews the sources of market failure that create an economic rationale for regulation, focusing on information imperfections that cause agency conflicts, and potential limits on investor processing, monitoring and oversight. After reviewing the laws and regulatory institutions that comprise the core of modern securities regulation, the chapter examines four regulatory issues with parallels in other industries. First is the question of price regulation versus disclosure of investment management fees, an ongoing debate particularly for the mutual fund sector. Next is the role of antitrust policy and agency regulation in disciplining firm behaviour, especially when regulatory capture may be a concern. Third is the interplay between firm boundaries and conflicts of interest, which were scrutinized in the creation and repeal of the Glass-Steagall Act. Fourth is the effects of competition when quality is not observed, and the potential role for minimum quality standards and regulatory oversight in this setting. The conclusion highlights the recurring role that the market and regulatory failures it describes play in financial market failures.Less

The Decline of the Chicago Studios

Michael Glover Smith and Adam Selzer

in Flickering Empire: How Chicago Invented the U.S. Film Industry

This chapter focuses on the decline of film studios in Chicago during the early twentieth century. The story of the decline of the major Chicago studios such as Essanay Film Manufacturing Company and ... More

This chapter focuses on the decline of film studios in Chicago during the early twentieth century. The story of the decline of the major Chicago studios such as Essanay Film Manufacturing Company and Selig Polyscope is inextricably tied to that of the decline of Thomas Edison's Motion Picture Patents Company (MPPC), also known as the Edison Trust. The MPPC first ran into serious trouble in February 1911 when Eastman Kodak, exploiting a loophole in its contract, began selling film stock to unlicensed independent companies. By this time, the independents had started to fight back in earnest against the Trust by organizing themselves into something called the Motion Picture Distribution and Sales Company. The next blow to the Trust came in August 1912 when the Supreme Court reversed its decision to uphold the Biograph Company's patent on the Latham film loop. The Trust became increasingly embattled as more lawsuits were filed against it. The final nail in the coffin came on October 1, 1915 when a federal court decided that the MPPC had violated the Sherman Antitrust Act.Less

Economics of Antitrust

David George Surdam

in The Big Leagues Go to Washington: Congress and Sports Antitrust, 1951-1989

This chapter examines the economics of antitrust, with particular emphasis on how antitrust law affects professional team sports. In the late 1800s, Americans worried about the growing concentration ... More

This chapter examines the economics of antitrust, with particular emphasis on how antitrust law affects professional team sports. In the late 1800s, Americans worried about the growing concentration of power in the hands of a few producers such as Standard Oil, American Tobacco, and other large firms that consolidated their holds over industries by merging and acquiring other companies. Other industrial leaders sought to fix prices above those obtained under competition. The Sherman Antitrust Act, enacted in 1890, contains provisions addressing “contract,” “conspiracy,” and “trade and commerce.” This chapter first considers how courts applied the Sherman Act to cases involving professional team sports before discussing the characteristics of professional sports leagues, how owners of professional sports teams reported profits and losses, the issue of player salaries and exploitation, and competitive balance and revenue sharing in professional leagues. It also describes franchise relocation and expansion and how television created demand in sports.Less

Introduction

David George Surdam

in The Big Leagues Go to Washington: Congress and Sports Antitrust, 1951-1989

This book examines the economics of the antitrust aspects of the three professional sports leagues—Major League Baseball (MLB), the National Football League (NFL), and the National Basketball ... More

This book examines the economics of the antitrust aspects of the three professional sports leagues—Major League Baseball (MLB), the National Football League (NFL), and the National Basketball Association (NBA)—based on the information presented at the hearings conducted by Congress during the 1950s. In the late 1800s, Americans worried about the growing concentration of economic power in the hands of large corporations and big trusts such as oil, railroads, steel, meat packing, and tobacco. In response, Congress passed the Sherman Antitrust Act of 1890. While owners of professional sports teams may not have resembled industrialists, they labored under the same antitrust statutes. This book explores some of the major issues tackled in the Congressional hearings, including mergers between rival football and basketball leagues, player rights, general antitrust exemptions, territorial rights, franchise relocation and sales, franchise expansion, and television policies.Less

The Rivalry Begins: 1913

Nathaniel Grow

in Baseball on Trial: The Origin of Baseball's Antitrust Exemption

This chapter examines the history of the rivalry between the Federal League and the American and National leagues and how it culminated in a legal battle. The Federal League of Professional Base Ball ... More

This chapter examines the history of the rivalry between the Federal League and the American and National leagues and how it culminated in a legal battle. The Federal League of Professional Base Ball Clubs was established in 1913, with the goal of challenging the supremacy of the two established major leagues. It was formed from the remnants of two failed 1912 ventures, the Columbian League and the United States League, through the initiative of John Powers, William McCullough, and Otto Stifel. This chapter first traces the beginnings of the Federal League, from its inception to its creation of franchises, recruitment of players, and team owners' efforts to elevate the stature of their fledgling circuit. It then discusses the origins of the Federal League's legal tussle with organized baseball, focusing on its use of the Sherman Antitrust Act to challenge the latter's blacklisting practices and the reserve clause and to convince the federal government to launch an antitrust probe of both leagues.Less

Epilogue

Nathaniel Grow

in Baseball on Trial: The Origin of Baseball's Antitrust Exemption

This epilogue explores issues arising from Justice Oliver Wendell Holmes Jr.'s opinion in Federal Baseball Club of Baltimore, Inc. v. National League. It begins with a discussion of criticisms ... More

This epilogue explores issues arising from Justice Oliver Wendell Holmes Jr.'s opinion in Federal Baseball Club of Baltimore, Inc. v. National League. It begins with a discussion of criticisms against the decision, including the notion that Holmes simply does not consider the business of professional baseball to be sufficiently interstate in nature to fall within the ambit of the Sherman Antitrust Act. It then offers arguments supporting Holmes, first by insisting that at the time he wrote the opinion it actually “represented a fairly orthodox application of then prevalent constitutional doctrine.” This is followed by an analysis of several mistakes made by the Baltimore Federals's legal counsel in the suit. The epilogue also looks at two other cases in which the Court has affirmed Federal Baseball: Toolson v. New York Yankees in 1953 and Flood v. Kuhn in 1972. Finally, it comments on recent attempts to limit the scope of baseball's antitrust exemption to just the reserve clause, contending that they are contrary to the actual history of the Federal Baseball case.Less

Bloodying the Sport

Troy Rondinone

in Friday Night Fighter: Gaspar "Indio" Ortega and the Golden Age of Television Boxing

This chapter details the events leading up to the end of Friday Night Fights. The reasons for the end read like the ingredients for disaster: some greed, some overexposure, some crime, some death, ... More

This chapter details the events leading up to the end of Friday Night Fights. The reasons for the end read like the ingredients for disaster: some greed, some overexposure, some crime, some death, some changes in audience taste. By the time Indio fought Griffith for the title, the writing was on the wall. Before charting the final lurches into the abyss for both TV boxing and Gaspar's career, some ominous developments are examined, including the Justice Department's filing of a civil antitrust suit in 1955 claiming that the International Boxing Club violated the Sherman Antitrust Act, and the Justice Department's operation to take down the “underworld commissioner” of boxing, Mr. Gray himself.Less