Chaotic Anti-Trust

August 16, 1965

On July 23 a Federal judge fined eight of the nation’s largest steel companies $50,000 each on charges of conspiring to fix prices of carbon-sheet steel between 1955 and 1961. The judge also set Sept. 21 as the date of sentencing two of the steel executives—with possible penalties running up to a year in prison and $50,000 personal fine. A few days later four steel companies and a trade association were fined a total of $150,000 on charges of conspiring to fix prices on steel forgings.

Both cases were uneasy reminders of the fines and jail sentences imposed in 1961 on some officers of the biggest electrical-equipment companies in the nation.

These men were treated as common criminals. And for doing what? For doing precisely what millions of workers are not only permitted but sometimes compelled to do under the law—for setting noncompetitive prices on what they have to sell.

Let us suppose that the charges against the steel companies are true. (They pleaded “no contest”—which means that they were willing to accept punishment without admitting guilt.) How can the government or anyone else prove that on net balance economic damage was done? And how can anyone determine the extent of the excess costs to the steel companies’ customers? (This is legally important, because any firm that felt it had paid too much for steel because of the alleged price-fixing could bring suit, and, if it won, would be entitled under the antitrust laws to treble damages.) But how can anyone determine how much the fixed price exceeded, if at all, what a “competitive” price would have been?

‘RESTRAINT OF TRADE’

Opening a broader issue, how can the amateur economists who sit as judges in the courts—or, for that matter, how can professional economists—determine whether there has been “restraint of trade,” not to speak of determining how much restraint, when there has been no physical coercion or intimidation?

An extremely efficient firm, perhaps by discovering some improved product or cost-cutting method, may undersell all its competitors and drive them out of business, thus substituting at least a temporary monopoly for previous competition. Has it “restrained” trade? Has it made conditions worse—by offering consumers a better product at a cheaper price or better?

Such questions apply particularly to recent court decisions against mergers. Thus a Federal district court a few months ago ordered the dissolution of the three-and-a-half-year-old merger of the Manufacturers and Hanover banks as a “combination in unreasonable restraint of trade.” Yet the merger had reduced the number of competing banks in New York City only from 72 to 71. The merged bank had only one-eighth of the assets of all New York City banks; and it was presumably able to compete more effectively than before with its two larger rivals, the Chase Manhattan and the First National City banks.

DOUBLE STANDARD

The antitrust laws as at present interpreted are questionable both on economic and on legal grounds. No big business firm today knows exactly when or why it will be held to be violating them.

But if we hold that monopoly is always bad in itself and that government should promote the maximum of competition, how can we justify the policy we follow elsewhere? In the field of labor, our laws not only permit but in many cases enforce monopolistic wage-fixing. Employers are compelled to bargain exclusively with monopolistic union wage-setters. Compulsory non-unionism is illegal; but compulsory unionism is explicitly legal.

Our laws not only permit but enforce acreage restriction and hence price-raising in cotton, wheat, tobacco. Our international agreements permit export quotas and hence price-raising in coffee; and import quotas and hence price-raising in oil; and tariffs to hold up domestic prices.

Do our present antitrust laws rest on farsighted reasoning, or does our treatment of big business reflect a discriminatory vindictiveness? Isn’t it time we reexamined our glaring double standard and contradictions of policy?