Results of Antitrust

September 21, 1964

For three-quarters of a century the great majority of lawyers, politicians, and economists have praised our antitrust laws. But in recent years these laws, and especially Federal prosecutions under them, have greatly increased in number. Their ambiguities, vagueness, contradictions, and possibly sweeping application have become clearer, and responsible commentators have begun to question their wisdom and probable effects.

The August Survey of the Morgan Guaranty Trust Co. of New York bluntly asks whether the present jumble of antitrust laws, and particularly recent Supreme Court decisions, will in fact promote free competitive enterprise in the United States. “In one momentous year,” it declared—“from June 17, 1963, to June 22, 1964—the Supreme Court of the United States rewrote the rule book governing mergers and acquisitions in American business. Six key decisions were handed down. . . . They either invalidated or cast a shadow of illegality upon mergers that previously had been approved by lower courts and, in some instances, by regulatory agencies as well.”

A FLAT GAMBLE

After analyzing these six key decisions, and the five leading antitrust acts under which they were made, the bank concludes: “The ‘do’s’ and ‘don’ts’ of antitrust are largely what the Supreme Court says they are. The latitude the Court assumes in interpreting and applying the antitrust laws is immense. The provisions of the Sherman Act, for example, have been characterized as having the breadth and generality of the Constitution itself. Oversimplified, this means that the law can be applied or interpreted in different ways as the Court’s rationale in a given case may demand.”

As a result, any decision “to proceed with a significant merger involves a flat gamble on whether the government will sue. In weighing the odds, a company’s owners or directors will hardly fail to recognize an implication inherent in recent antitrust history. This is that really sound mergers from the businessman’s point of view—those that will strengthen his company in its competitive struggle and enlarge its base of operations—are the very ones most likely to be contested by the Justice Department and outlawed by the courts. In consequence, it is likely that fewer and fewer major mergers will be undertaken.”

Sylvester Petro, professor of law at New York University School of Law, discussed the problem in an article in the July Freeman magazine (published at Irvington, N.Y.). He showed that, if current antitrust policies had been applied consistently in the past 75 years, such firms as General Motors, Chrysler, U.S. Steel, and General Electric would probably not be in existence today.

DOUBLE STANDARD

What struck him was the contrast between the way the Federal government treats businessmen under the antitrust laws and the way it treats other groups for doing the same thing: “While sending some people to jail for agreeing on prices, it considers nationwide price-fixing agreements laudable if exacted by trade unions; it visits penalties on farmers for departing from the prodigious price-fixing schemes known as our agricultural policy; it forces uniform prices on airlines and other participants in the transport industry; and finally, as we have seen, it forbids individual businesses to vary their prices downward at will.” He might have added: it conspires in international price-boosting through fixation of export quotas on coffee.

It is hardly necessary to point out that if the antitrust laws and decisions were strictly applied to the labor unions they could not function. Collective bargaining itself would have to be considered unlawful as a combination in restraint of trade. It involves “collective” price-setting.

Professor Petro believes in the equal application of the same law to all. But rather than apply the anti trust laws to unions, which he thinks both impractical and undesirable, he suggests that our antitrust laws themselves need to be seriously re-examined to see whether they are not, in fact, an actual threat to the vigorous growth of a free competitive enterprise system.