Magazine article American Banker

Antitrust Law Slowly Rides Down a Road into the Sunset

Magazine article American Banker

Antitrust Law Slowly Rides Down a Road into the Sunset

Article excerpt

THE POWER OF ANTITRUST law reached its peak on a day in 1911 when the Supreme Court declared Standard Oil Co. and American Tobacco Co. -- industrial titans of their era -- illegal restraints of trade. Ever since, it's been a spansmodie slide into obscurity, if not irrelevance. The Regan administration's recent anti-trust proposals confirm the eclipse: They are neither as vital as the administration contends, nor as calamitous as critics allege.

Commerce Secretary Malcolm Baldridge says the proposals would significantly improve U.S. international competitiveness. It's hard to see how. The inability of U.S. companies to merge or cooperate is not a major cause of the trade deficit. And, even if Congress approves the proposals, the main effect would be to put into law the Justice Department's existing merger guidelines. But likewise, the package is not a monstrous surrender to business.

Antitrust enforcement is not disappearing. Nor should it. Business executives like high prices and, at times, will try to fix them. In the last five years, the Justice Department has brought hundreds of price-fixing cases against road builders, electrical construction firms, and government contractors. Merger restrictions are needed for the same reason. although standards are looser than 10 years ago, mergers that dramatically concentrate power in specific markets are -- and would remain -- illegal.

But the important of antitrust has been domed by changing economic conditions and, ironically, the triumph of its central political premise: the subordination of private business to public purpose. The major antitrust laws -- the 1890 Sherman Act and the 1914 Clayton Act -- straddled an era of huge change. Between 1880 and 1920, America's urban population quadrupled, and the industrial empires that this process produced were, in a nation of farmers and small businesses, awesome and alien.

The economic consequences of these vast firms have always been unclear. Monopoly power was often tempered by economies of scale. Although Standard Oil controlled more than 90% of all oil refining, it often lowered prices. But these firms raised other anxieties. The antitrust laws reflected, says Robert Katzmann of the Brookings Institution, the "American fear that concentrated private power could undermine democratic government." President Wilson said in 1913: "America was created to break every kind of monopoly and to set men free upon a footing of equality."

This debate has now been settled. When the antitrust laws were enacted, Big Business was dominant. Government checks were narrow and weak. Now, the opposite is true. Government regulation is powerful and pervasive, extending from pollution to pensions. Debates rage over whether particular regulations are effective or needed. But the "public interest" is the ultimate point of reference. Even those who favor deregulation concede that point.

Diminished Relevance

Meanwhile, the economic relevance of antitrust law has diminished. …

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