The Antitrust Attorney Blog
Author: Steven Cernak
Most antitrust practitioners, even members of the general public, have a good intuitive sense of what Sherman Act Section 1 is aimed at. Whether you follow the common law’s ancient voiding of “combinations in restraint of trade,” as does Greg Werden for example, or your kindergarten teacher’s instruction to avoid “ganging up,” as explained by Dick Steuer, even beginning antitrust students understand that certain agreements are bad for competition and, so, should be illegal.
But what about Sherman Act Section 2’s prohibition of monopolization? Is there anything in America’s history that might illuminate what legislators were thinking in 1890 or how courts should approach the issue today?
Those are the questions tackled by long-time practitioner and academic Barry Hawk in his 2022 book Monopoly in America. In just under 200 pages, Hawk covers over 400 years of American usage of “monopoly” to find, well, it’s complicated. Americans have hated monopolies for centuries, except for the ones that at least some of them liked, and their understanding of the term has varied over the years. Hawk succinctly explains the twists and turns and draws helpful lessons for today’s practitioners and policymakers.
Anti-Monopoly Tradition? Yes, but…
Hawk divides his survey into chapters covering four distinct American periods: colonial era; Revolution and founding; antebellum; and modern, that is, post-Civil War. In each chapter, Hawk walks through the laws, court opinions, and public statements of the period to illustrate America’s thinking about monopolies at that time. Like other authors, Hawk finds that America does have an anti-monopoly tradition; however, Hawk’s survey shows that that tradition does not take a consistent, linear path. Below, I summarize some of the inconsistencies highlighted by Hawk.
Yes, Americans were against monopolies but what they mean by the term “monopoly” has changed over the centuries. In colonial and early America, “engrossing” and “forestalling” were two of the major concerns captured by the “monopoly” term. Engrossing is roughly “cornering the market,” buying up all the goods so as to increase prices or otherwise control distribution. Forestalling is usually defined as buying goods from the producer or importer before the goods arrived at the designated public market. Concern about both issues waned after the Civil War, especially as American markets grew and demonized forestallers gradually became helpful facilitators or middlemen.
Similarly, pre-Civil War monopoly concerns included government grants of exclusivity to particular private actors. Famous examples include the British East India Company and the Second Bank of the United States. Again, concerns about these “monopolists” faded after the Civil War as worries about large private companies that we now know as “monopolists” grew.
Yes, Americans and their English predecessors were against “monopolies” but sometimes a monopoly was in the eye of the beholder. As Hawk describes, the English principle outlawed monopolies but made exceptions for local grants of exclusive privileges. Sometimes, laws and public opinion only condemned monopolies that served no public purpose, which was determined under a shifting reasonableness standard. In Colonial times, laws and constitutions sometimes made exceptions for local exclusive licenses, patents, and copyrights. Engrossing was a monopoly when it was “hoarding” but not when it was merely “storage,” and the dividing line was far from clear. Now, antitrust law allows state “monopolies” if expressly granted by the legislature and actively supervised. So, Americans definitely have been against monopolies except when they have been for them.
Yes, Americans are against monopolies, but the strength of that opposition has varied over time. Hawk focuses on the cycles since the 1890 Sherman Act: success in the early period with breakups in Northern Securities and Standard Oil; hibernation in the Roaring “20’s and Franklin D. Roosevelt’s first term; then more successes, like Alcoa and AT&T, into the “70’s; followed by more hibernation, with a Microsoft exception, until the 2020 election. So, while the anti-monopoly orientation never goes away, sometimes it remains dormant for quite some time.
Why the Cyclicality?
While Hawk’s fact reporting is interesting, the book probably is at its best when this long-time antitrust guru then offers up his explanation for why some of those facts occurred. At the end of the book, Hawk discusses some factors that he thinks best explain the cycles of monopoly challenges since 1890: political support; popular demand for action; changes in facts and economic conditions; changes in economic theory; legal process concerns; and the predominance of the consumer welfare standard. I will comment on three of them.
Interestingly, Hawk found that “popular support less clearly correlates with aggressive enforcement” than do some of the other elements. He sees no large anti-monopoly groundswell post World War II to accompany aggressive Section 2 enforcement. Today, despite the anti-monopoly push, “the general population appears happy to get ‘free’ platforms and relatively low-cost apps.” I would add the anecdote that at least one ranking of the most admired companies in 2022 was headed by Apple, Amazon, and Microsoft, three companies often accused of being monopolists. As Hawk puts it, popular support is helpful but not necessary to generate aggressive enforcement by the “politicians, academics, and antitrust industry generally.” As another long-time antitrust practitioner described it more than fifteen years ago, it is the true believers in the antitrust religion who often drive enforcement trends.
