Antitrust is high on the reform agenda at present, associated with calls to “break up big tech.” Proponents of reform have invoked history with regularity in making their case. They say reform is essential to reverse the baleful influence of the Chicago School of antitrust, which, in their telling, disastrously and abruptly ended in the 1980s a “golden” era of beneficially lively antitrust enforcement. In fact, antitrust enforcement was, at best, uneven, from the early 20th century through to the end of the 1970s. As for the antitrust “counter-revolution” of the late 20th century, this was fostered as much by fears of foreign competition and skepticism of government regulation as Chicago School theorizing. The pattern helped to ensure that the counter-revolution was largely sustained through the opening decades of the 21st century. This article, in addition to getting antitrust and history in tune by drawing attention to the foregoing points, provides insights regarding antitrust’s future direction.
Antitrust is a venerable feature of business regulation in the United States, with the first federal law being the Sherman Act of 1890. In 1964, William Orrick, then head of the Department of Justice’s Antitrust Division, remarked, “Antitrust is like the Mississippi. It just keeps rolling along.” Law professor Daniel Sokol observed similarly in 2020 “In a world of continuous change, antitrust is what remains constant.” Nevertheless, historically there have been major bends in the antitrust river. Amidst calls to “break up big tech”, one of those major bends could be in prospect. This could be “antitrust’s moment, with Big Tech in the crosshairs,” with that “moment” possibly translating into an “antimonopoly movement” that permanently reconfigures antitrust.
With the latest potential bend in the antitrust river, as would be expected, perceptions of present-day market conditions play a key role. There is a growing sense that market forces are incapable of reining in powerful firms, particularly with giant tech firms apparently “creating a rather extreme version of global economic monopoly.” The invocation of antitrust law, with its focus on maintaining competition, seems to be an obvious solution.
Current debates about antitrust have by no means focused exclusively on the present. Instead, given the venerable nature of antitrust, history has, not surprisingly, been invoked with some regularity. History has thus been providing the mood music for potentially major change on the antitrust front. As this article shows, commentators have struck a considerable number of false notes as part of this process. This article seeks to get antitrust and history in tune. In so doing, the article provides insights regarding whether antitrust’s current “moment” is likely to translate into meaningful lasting change, indicating in so doing this seems quite likely.
Antitrust is high on the reform agenda at present. Numerous antitrust-related bills have been proposed in Congress recently, including Senator Amy Klobuchar’s “sweeping” 56-page Competition and Antitrust Law Enforcement Act. In July 2021, President Biden signed a 72-point executive order encouraging federal agencies to promote competitive markets. This followed on from Lina Khan, a leading advocate for antitrust reform and “a potentially transformative figure” being appointed as chair of the Federal Trade Commission (FTC), which enforces federal antitrust laws in tandem with the Department of Justice’s Antitrust Division. Khan caught the eye of the White House because of scholarship of hers advocating the break-up of Amazon and other tech giants. The Wall Street Journal has warned “American business should get ready. The Khan FTC is coming after you.” Jonathan Kanter, President Biden’s choice to head the Department of Justice’s Antitrust Division, has said “we and our law enforcement partners are committed to using every tool available to promote competition.” Such trends have prompted speculation that President Biden is charting a “transformational course with regard to antitrust” that could “prove to be one of the defining achievements of his tenure as president.” Tim Wu, special assistant to the president for technology and competition policy, indeed suggested in a November 2021 speech that the Biden administration “is just getting started” on the antitrust front.
But what will the legacy of antitrust’s current moment actually be? Orchestrating meaningful change likely will mean having to overcome substantial potential inertia in Congress, the FTC and the courts, reinforced by business lobbying in favor of the status quo. According to GovTrack, a website that tracks bills in the U.S. Congress, as of early 2022 only one bill it categorized as dealing with “competition and antitrust” had a better than 50:50 chance of being enacted, this being a measure on drug pricing. With the FTC, a commissioner complained a few months after Khan became chair that the current leadership had “sidelined and disdained our staff.”
If a major bend in the antitrust river is going to occur, this will likely be associated with the displacement of what Khan referred to in a 2020 law review article as “the relative stability of (an) antitrust consensus.” For her it is about time. She claims, “Highly concentrated markets in the contemporary United States are not the product of impersonal economic forces – rather they are the product of conscious legal and political decisions in the late 1970s and early 1980s. These decisions severely undermined the antitrust laws, crippling what had been a major congressional safeguard against monopoly and oligopoly.”
President Biden agrees. When signing the July 2021 executive order concerning competitive markets he said “Forty years ago, we chose the wrong path, in my view, following the misguided philosophy of people like Robert Bork, and pulled back on enforcing laws to promote competition.” Bork, a University of Chicago law graduate prior to becoming a law professor at Yale, solicitor general and federal judge, was a pivotal figure in what is known as the Chicago School of antitrust. This market-friendly school of thought associated with the University of Chicago achieved intellectual pre-eminence in the closing decades of the 20th century and helped to foster a late 20th century reinvention of antitrust that has been sustained to the present day.
Currently, the case for antitrust reform is to a substantial extent data focused. Those advocating an antitrust overhaul have drawn heavily upon “evidence from economic studies … pouring in like a flood” reputedly conveying an “unmistakable” message: “the U.S. has become a lot less competitive.” History, however, is doing much to set the tone for reform. All the talk of change means that antitrust is not just “cool”. Instead, a “musty corner of American jurisprudence aimed at curtailing monopoly power” is “cool again.” Hence, the brewing revolution in the antitrust field “is a blast from antitrust’s past in many ways.”
The nickname of the most vocal advocates for change betrays the influence history is having on antitrust debates. They like to be known as “New Brandeisians,” harkening back to a distinguished jurist, Louis Brandeis, who was warning of “the curse of bigness” more than a century ago. Critics of the New Brandeisian camp also invoke a historical moniker when making their points. They reference a 1940s jazz sub-culture, labelling the proposals for reform “hipster antitrust” to underscore the backward looking logic reputedly afflicting antirust “progressives” advocating an overhaul. “Hipster Antitrust,” in other words, is dismissed as “old wine in new bottles.”
Not surprisingly, given their historical moniker, New Brandeisians have themselves regularly invoked past trends to defend their arguments for present-day reform. They harken back to an era when antitrust enforcement ostensibly posed a real threat to powerful corporations. When Lina Khan was appointed FTC chair law professor David Singh Grewal maintained, “What she’s doing is really just returning antitrust and market policy to the status quo ante, of the 20s through the 60s, even the 70s.” Senator Amy Klobuchar, the proponent of the recent “sweeping” antitrust enforcement bill, has fortified her case for reform with a 624-page book on antitrust where a majority of the chapters focus on history. The White House likewise has drawn on the past to push the case for reform. A briefing accompanying President Biden’s July 2021 executive order encouraging agencies to promote competitive markets said “When past presidents faced similar threats from growing corporate power, they took bold action” and cited antitrust enforcement his predecessors Theodore Roosevelt and Franklin Delano Roosevelt (FDR) pursued.
For the New Brandeisians history revolves around the Chicago School’s alleged corruption of an American anti-monopoly tradition. Under Chicago School logic, antitrust should forsake trying to protect competitors from dominant rivals and seeking to safeguard democracy from concentrated private power. The focus instead should be on what the Chicago School treats as closely related goals, enhancing consumer welfare and increasing economic efficiency.
According to the New Brandeisians, in the 1980s the market-friendly administration of Ronald Reagan drew heavily on Chicago School reasoning while greatly downscaling antitrust enforcement. Fast forward to today and antitrust ostensibly “hasn’t been enforced in decades.” And the consequences have reputedly been disastrous: “Starting in the Reagan administration, the Chicago school’s capture of antitrust theory has brought us to a period of market concentration unrivaled since the Gilded Age.” Now “a group of antimonopoly” academics and policymakers – primarily the New Brandiesians – are seeking to revamp antitrust and in the process are “rediscovering our traditions and updating them for the age in which we live today.”
The New Brandeisians have not yet won the day intellectually. Conservative-minded descendants of the Chicago School maintain talk of a monopolization crisis is overhyped, and dismiss the “big is bad” logic underpinning “hipster” antitrust as the recycling of discredited ideas. Middle-of-the-roaders recoil at what they contend would be an unadministrable “wild west” approach to antitrust. Despite disagreement on the right path for antitrust, however, the New Brandeisians’ invocation of history has gone largely unchallenged. The Chicago School, as they maintain, is widely thought of as providing the catalyst for the antitrust makeover that has thus far been sustained through to the present day.
While history has done much to set the tone of current debates about antitrust, the mood music has been out of tune in various ways. At least three facets of the historical account underpinning hipster antitrust are of doubtful provenance. The first is the state of play prior to Chicago School adherents ostensibly declaring “their intent to overthrow our antitrust laws.” The New Brandeisians are nostalgic for a mid-20th century era of beneficially lively antitrust enforcement Bork and the Chicago School brought to an unfortunate halt. Market power, this version of events implies, did not have the baleful influence during this enlightened era it has currently. But was antitrust really as potent (and beneficial) as advertised?
The second difficulty with the version of history the New Brandeisians rely on is that it fails to account adequately for the economic and political context accompanying the antitrust counter-revolution of the 1970s and 1980s. The New Brandeisians treat that change of direction with antitrust purely as a battle of ideas that went awry, as “Bork led an intellectual revolution that sacrificed citizens at the altar of efficiency and cheap goods.” Sometimes a difficult economic environment is referenced, as is the popularity of deregulation in the late 1970s and 1980s. Much is left unexplained, however. Most crucially, why did the Chicago School’s critique of antitrust find a receptive audience amongst policymakers, especially for a set of ideas that New Brandeisians now condemn as totally misguided?
The third difficulty relates to the post-Reagan era. Why, despite Reagan’s departure from office in 1989, did the antitrust counter-revolution his administration did much to foster evolve into a stable antitrust consensus? It is true that U.S. Supreme Court jurisprudence citing Bork and other Chicago School theorizing served as binding case law precedents. Surely more is required, however, to set the scene for what appeared until recently to be “the end of antitrust history,” supposedly oriented around the forsaking of meaningful enforcement. By addressing these three facets of antitrust history and related points this article offers the historical context thus far lacking and thereby gets history and antitrust in tune. Insights as to whether a new age of antitrust is in prospect follow in turn.
While antitrust enforcement may have been more robust in the mid-20th century than it was before or after, the fact that oligopolies comprised of domestic firms featured prominently in corporate America at the time casts doubt on whether this was the golden era of antitrust New Brandeisians assume. In contrast with widespread mid-20th century assumptions that the corporate economy was oligopolistic, as the 20th century drew to a close various observers remarked upon the intensity of market forces. This could hardly have been due to antitrust, given the ostensible Chicago School/Reagan era retreat. Fears American businesses were losing ground to foreign competitors instead was the primary driver.
During the concluding decades of the 20th century overseas firms made substantial headway in the United States. This trend simultaneously compromised market power of America’s corporate titans that otherwise might have attracted antitrust scrutiny and prompted concerns that antitrust enforcement was imposing a counterproductive burden on American business. A belief that market forces tempered substantially the sway of incumbents would remain pervasive until major U.S. tech companies began to fall out of favor in the late 2010s. These global leaders went from admired to feared as they came to dominate a corporate America much less troubled by direct challenges by foreign rivals.
At the same time that pressure from foreign rivals came to the fore, doubts about the efficacy of regulation – including antitrust – mushroomed in the United States due to political scandals and perceived government mismanagement of the economy. Misgivings about regulation were sustained from the late 20th century through to the early 21st century, which fortified the antitrust consensus the Chicago School had helped to usher in. Skepticism of regulation appears, however, to be on the wane currently. Given this, and given growing fears regarding the market dominance America’s largest firms enjoy, antitrust has emerged – perhaps more accurately re-emerged – as a theoretically desirable check on corporate power.
This article is organized as follows. Part I focuses on what has been described as the golden age of antitrust, the mid-20th century, and more precisely the 1950s through to the 1970s. This era features in the New Brandeisian narrative because it is from this ostensible antitrust peak that the Chicago School laid low a proud anti-monopoly tradition. Parts II and III cast doubt on the golden age account. Part II indicates that antitrust enforcement was uneven in the 1950s and 1960s, which likely contributed to large corporations being able to exercise substantial market power akin to that which New Brandeisians chastise today. Part III explains why 1960s Supreme Court jurisprudence provided an easy target for antitrust skeptics as the late 20th century antitrust counter-revolution began to take shape. Parts IV and V identify additional reasons why this counter-revolution that New Brandeisians abhor occurred. Part IV draws attention to growing concerns about the efficacy of government regulation, focusing on the impact on antitrust. Part V highlights how increasingly robust foreign competition shaped antitrust discourse. Part VI explains why the late 20th century antitrust counterrevolution associated with the Chicago School would provide the basis for an enduring consensus. Part VII draws attention to insights history can provide regarding the outcome of the current antitrust moment. Part VIII concludes.
2 The Golden Age of Antitrust
In June 2016, Elizabeth Warren headlined an event organized by the Open Markets Institute, a pioneering advocate of antitrust reform with which current FTC chair Lina Khan was affiliated. Senator Warren declared in her speech “today, in America, competition is dying. Consolidation and concentration are on the rise in sector after sector. Concentration threatens our markets, threatens our economy, and threatens our democracy.” Warren’s 2016 speech “gave a prominent voice” to those then advocating antitrust reform, and has been described as “famous” and “a watershed.”
Senator Warren’s Open Markets Institute speech is instructive for present purposes because it indicates neatly how history informs the New Brandeisian narrative. In particular, her remarks underscore the crucial role a supposed mid-20th century antitrust golden age plays in that narrative. To provide necessary context, we begin with a summary of the New Brandeisian analysis of what went wrong with antitrust after that golden age.
2.1 The Chicago School’s Supposedly Woeful Legacy
Senator Warren, in her 2016 speech, argued that antitrust, as it had developed in the closing decades of the 20th century, deserved much of the blame for dismal present-day market conditions. Warren, as President Biden later did, attributed a decisive role to Robert Bork. In 1978, Bork published The Antitrust Paradox, which has been described as a “far-ranging”, “acerbic” and ultimately “path-breaking” critique of antitrust law. According to Warren’s 2016 speech, “Bork’s framework limits antitrust thinking even today. When coupled with the deregulatory ideology of the Reagan era, the Bork approach to antitrust law meant that government largely stepped out of the way and let companies grow larger and larger.” For Warren there was an unfortunate legacy: “Now the country needs more competition – and more competitors.” She posed the logical follow up question – “So how do we get more competition?” And she provided the answer: “reinvigorate antitrust law.”
New Brandeisians concur fully with Warren’s diagnosis of what went wrong with the corporate landscape. The culprit, according to the New Brandeisians, was the Chicago School’s radical antitrust philosophy that Robert Bork did much to influence. Antitrust, Chicagoans said, should keep consumer prices low, not seek to protect competitors from successful dominant firms or try to constrain economic and political power large corporations wield. 
How did the Chicago School sweep all before it? The answer, according to the New Brandeisians: the presidency of Ronald Reagan. Reagan “appointed Chicago School apostles and acolytes to key courts of appeals, and installed another to head the antitrust division at Justice.” A reinterpretation of antitrust law quickly ensued, prompting courts and regulators to adopt a counterproductively restrained approach when applying the rules. Hence, in 1980 “Ronald Reagan would win election and put Bork’s theories into practice. And the rest was history.”
Lina Khan summarizes the history as follows: there was a “counterrevolution in antitrust-originating as an intellectual movement led by the Chicago School, stamped into policy by the Reagan administration.” And the outcome was disastrous:
Highly concentrated markets in the contemporary United States are not the product of impersonal economic forces – rather they are the product of conscious legal and political decisions in the late 1970s and early 1980s. These decisions severely undermined the antitrust laws, crippling what had been a major congressional safeguard against monopoly and oligopoly.
Senator Amy Klobuchar has argued similarly “The Chicago School rose to prominence in the courts – and in the country’s antitrust enforcement agencies – in the 1980s after the publication of Bork’s Antitrust Paradox and Ronald Reagan’s election.” The legacy: “Given how American courts have narrowly interpreted the country’s antitrust laws in an ahistorical, Borkian manner, competitive harms are occurring more and more frequently in America’s economy.” And the cure, echoing Warren’s: “What the U.S. needs now is a renewed antitrust movement.”
2.2 The Golden Age of Antitrust as Part of the New Brandeisian Narrative
Elizabeth Warren cites with antitrust the need to “reinvigorate.” Amy Klobuchar talks of “renewed.” Similarly, Lina Khan has argued, “antitrust laws can be restored to promote competitive markets once again.” All of these advocates of reform are thus looking backward in time for the appropriate reference point. More precisely, underpinning the New Brandeisians’ historically oriented logic is the assumption that pre-Chicago School antitrust was robust and competitive vigor correspondingly featured prominently in the American economy. As an analysis of the New Brandeis movement says, its adherents “believe there once was a golden age of antitrust enforcement in which the U.S. government’s expert regulators had the wisdom” to address “unfair, anticompetitive practices that harmed not just consumers but society as well.” Amy Klobuchar indeed refers in her 2021 book on antitrust to “(t)he golden age of antitrust enforcement.”
When was this era when antitrust ostensibly fulfilled its potential? The answer is the period immediately prior to the ostensibly Bork-inspired antitrust counter-revolution – the mid-20th century. Elizabeth Warren made the point in her speech. She referred nostalgically to an era when “(a)ntitrust law was real—and American corporations knew it.” This era began, according to Warren, with a dramatic escalation of antitrust enforcement by the Department of Justice (DOJ) between 1938 and 1943 under the leadership of Thurman Arnold, Assistant Attorney General in charge of the Antitrust Division. At that point “antitrust enforcement took off,” and “the Justice Department’s Antitrust Division grew from 18 lawyers to 500 and ramped up litigation.” The White House drew attention to the same chronology when putting into context President Biden’s July 2021 order regarding promoting competition in the American economy. According to the White House, “In the late 1930s, FDR’s Administration supercharged antitrust enforcement, increasing more than eightfold the number of cases brought in just two years—enforcement actions that saved consumers billions in today’s dollars and helped unleash decades of sustained, inclusive economic growth.”
New Brandeisians concur. Khan, in a 2017 Yale Law Journal article described as the manifesto of hipster antitrust, says in mid-20th century America there was “recognition that excessive concentrations of private power posed a public threat, empowering the interests of a few to steer collective outcomes” and courts and antitrust enforcers applied the law accordingly. Wu, the White House adviser on technology and competition policy, wrote in his 2018 book The Curse of Bigness, “the postwar era was characterized by bold efforts to tame capitalism” as part of “a deliberate attempt to limit private power.” According to Wu “(t)he American enforcement of anti-monopoly laws reached its zenith in the 1960s” and “(t)he peak of anti-monopoly enforcement coincided with a period of extraordinary gains in prosperity.”
2.3 What About Before the Golden Age?
The antitrust river had been flowing for quite some time prior to the mid-20th century golden age, with the Sherman Act being 60 years old in 1950. Did the glory years for antitrust extend further back? While Warren singled out Thurman Arnold’s late 1930s contribution, she acknowledged in her 2016 speech that there were some earlier antitrust highlights. She drew attention to the beginning of the 20th century, saying of the three presidents who served from late 1901 to early 1921 “reformers like Teddy Roosevelt, William Howard Taft, and Woodrow Wilson were trust-busters, people who fought the power that monopolies wield in the economy and in politics.”
The White House invoked the same early 20th century era when putting into context the July 2021 executive order regarding promoting competition in the American economy. According to the White House, “In the early 1900s, Teddy Roosevelt’s Administration broke up the trusts controlling the economy—Standard Oil, J.P. Morgan’s railroads, and others—giving the little guy a fighting chance.” President Biden, for his part, linked Teddy Roosevelt with Franklin Roosevelt, president from 1933 to 1945, in his remarks on the July 2021 executive order, saying “Between them, the two Roosevelts established an American tradition — an antitrust tradition.” The Economist concurred pithily with the president’s assessment of his antitrust idols when reporting on the executive order, saying, “Teddy and Franklin enjoyed a trust bust.”
Even if there were some antitrust highlights prior to the ostensible mid-20th century golden age of antitrust enforcement, the golden age did not extend back to the opening decades of the century. Herbert Hovenkamp, a leading expert on antitrust, maintains that while “The early decades of federal antitrust enforcement were characterized by popular outcries against monopoly and big business,” “(t)he fervor” yielded “a stunning lack of visible achievement.” A whirlwind tour of early 20th century antitrust history bears out this assessment.
While the Sherman Act became law in 1890, “Prior to World War I, no substantial progress was made in breaking up great industrial combinations.” Antitrust prosecutions were, at best, sporadic, which is not surprising given that the Antitrust Division of the Department of Justice was not established until 1903 and then was modestly funded. As president, Theodore Roosevelt used forceful antitrust rhetoric but did not back systematic, vigorous antitrust enforcement. Antitrust proceedings were brought against corporate giants such as Standard Oil and American Tobacco but the overall economic impact of the litigation was modest.
Antitrust was a high-profile issue in the 1912 presidential election, which Woodrow Wilson won. The enactment of the Clayton and Federal Trade Commission Acts in 1914 was the primary legacy, with these measures expanding the range of anti-competitive conduct deemed unlawful and providing for the creation of the Federal Trade Commission as an antitrust enforcer. Antitrust, however, had a low profile thereafter during the Wilson administration, partly due to close relations between industry and government during World War I.
“Nothing much happened” with antitrust from the early 1920s through until Thurman Arnold’s appointment as Assistant Attorney-General for antitrust in 1938. The Supreme Court interpreted statutory antitrust laws restrictively during this period and the executive branch evinced little enthusiasm for antitrust enforcement. Indeed, the administrations of Calvin Coolidge, Herbert Hoover and FDR each took steps to help businesses escape from competition, with the motive under Roosevelt being to give industry a boost to end the Depression. Hence, during the 1920s “the antitrust laws were barely enforced, if at all,” and were “all but abandoned” during the opening years of Roosevelt’s presidency.
In the late 1930s, the Roosevelt administration changed tack and abandoned explicitly trying to temper market forces. Litigation forced the federal government’s hand with the U.S. Supreme Court striking down in 1935 a federal law that exempted from antitrust scrutiny federally approved codes of fair competition. Roosevelt himself remained ambivalent about antitrust. Nevertheless, Arnold, consistent with praise Senator Warren bestowed, capitalized on his appointment as head of the Antitrust Division to publicize its work, to lobby successfully for increased funding and to step up enforcement activity.
Arnold has been described as “the very model of the aggressive antitrust enforcer.” Indeed, according to a 2004 study of his antitrust legacy, without him “there would be no modern antitrust law or government antitrust enforcement.” However, “(j)ust as Arnold’s program was producing dramatic results, he was effectively undermined.” As early as 1940, it seemed likely there would “be practical nullification of antitrust in the face of the war planning and production leading up to the United States entry into World War II.” The antitrust program was, in effect, suspended in 1942 and in early 1943 Arnold accepted an appointment to the United States Court of Appeals for the District of Columbia.
2.4 The Golden Age – A Precis
While systematic antitrust enforcement was very much the exception to the rule until the brief Thurman Arnold interlude, various observers concur with the New Brandeisian view that antitrust was an important force during the mid-20th century. This era has been indeed been described outside New Brandeisian circles as “golden” and “antitrust’s most interventionist period,” implementing “the most expansive antitrust agenda in the history of the antitrust laws.” Whatever momentum there was, private lawsuits reinforced it. Private antitrust actions were essentially unknown prior to 1940 but by the mid-1950s such lawsuits outnumbered those government trustbusters brought.
The mid-20th century business community certainly did not think it could or should ignore antitrust. While before the 1950s law firms rarely had a separate antitrust practice, by 1958 the Christian Science Monitor was telling readers “These are good years for corporation lawyers whose clients are distressed by antitrust jitters.” Economist Jesse Markham, having hailed in 1965 the “vigor and vigilance that has been injected into antitrust policy,” noted that antitrust “received considerable attention from the business community.” In 1968, law professor Thomas Kauper said “Businessmen now commonly talk about antitrust; internal compliance programs have been initiated and carried out.”
To the extent that the mid-20th century was a golden era for antitrust, the Supreme Court was a key contributor. During the 1960s, the Supreme Court adopted in relation to a wide range of conduct antitrust law regulated an inflexible “per se” standard where a court was to presume conclusively a practice or type of agreement was unreasonable and therefore illegal. According to Kauper, “the rulings…rested on concerns over the straits of small entrepreneurs” and were “more consistent with civil rights thinking than economic analysis.” Whatever the precise ideological underpinnings, with cases that came before the Supreme Court there was “a common belief….the result is preordained. Defense lawyers expect to lose.” With justification; when Earl Warren was chief justice of the U.S. Supreme Court (1953–1969) the Department of Justice and the FTC won virtually all of the antitrust cases they brought. Justice Potter Stewart confirmed this via an “acid comment” in his dissent in a 1966 case, United States v. Von’s Grocery Co., saying that in merger appeals coming before the court “(t)he sole consistency” he could find was that “the Government always wins.”
In United States v. Arnold, Schwinn & Co., a 1967 case, the U.S. Supreme Court applied a per se rule to declare illegal non-price restraints Schwinn, a bicycle manufacturer, imposed on distributors to whom Schwinn had sold bicycles. Within a decade, the case had “already achieved the dubious distinction of being probably the most harshly criticized decision in the history of the antitrust laws.” Nevertheless, the most striking and publicized line of antitrust case law authority the mid-20th century Supreme Court marked out related to mergers. Law professor Milton Handler, a leading antitrust academic, remarked, for instance, on “the Court’s proclivity to find illegality in every merger that the ebb and tide of litigation brings before it.”
In Brown Shoe Co. v. United States, a 1962 ruling, the Supreme Court struck down a merger under the Clayton Act, as amended in 1950, between a shoe manufacturer with a 4% national market share and a small retail network and a shoe retailer which accounted for just 1.2% of U.S. retail shoe sales. Chief Justice Warren, delivering the judgment of the court, acknowledged that the intention underlying the relevant statutory measure was to protect competition rather than competitors. He also said, however, that the Clayton Act, as revised, gave the courts the power to stop mergers when the lessening of completion “was still in its incipiency” and acknowledged “Congress’ desire to promote competition through the protection of viable, small, locally owned business.” The Washington Post praised the ruling in a 1962 editorial, saying the court had “accurately and expertly read the mind of Congress” and had interpreted the law “with deft consideration of economic realities.”
The populist emphasis on the desirability of fragmentation of the corporate sector and preservation of small business that was evident in Brown Shoe would prevail in the Supreme Court through the remainder of the 1960s. The court correspondingly vetoed in 1963 a 1958 acquisition of the 18th largest brewery in the United States by the 10th largest. It did the same in 1966 with a 1960 merger between large Philadelphia banks the defendants maintained would foster greater competition nationally. Ditto with Von’s Grocery Co., which involved a 1960 merger of two Los Angeles supermarket chains that together had a modest 7.5% of the relevant market share but reputedly constituted a “threatening trend toward concentration.”
The Warren Court merger jurisprudence apparently supplied antitrusters with “the leverage to stop any and all horizontal mergers.” This was known at the time. The New York Times observed just after Von’s Grocery was decided, “These court opinions, if acted upon fully, would practically eliminate from the American business scene the horizontal merger.” The relevant antitrust laws in fact were administered with considerable caution, an important point to bear in mind in putting into perspective the ostensibly golden mid-20th century antitrust era. We pick up on this point next.
3 How “Real” was Antitrust in the Mid-Twentieth Century?
We now have in place the New Brandeisian narrative. There were early antitrust heroes such as Theodore Roosevelt. Antitrust only began to hit its stride, however, once Franklin Roosevelt appointed Thurman Arnold. A post-World War II golden era for antitrust ensued – antitrust, as Elizabeth Warren said in her 2016 speech, was “real”. But then the Chicago School, enabled by the Reagan administration, disastrously intervened.
The New Brandeisian account seems to tie together the relevant history tidily and thereby provides the mood music for a reversal of the ill-judged Chicago School + Reagan antitrust counter-revolution. The New Brandeisian narrative presumes, as Thomas Kauper said of Chicago School critics in 2008, the Chicago School was akin to the villain in a well-known children’s book, “the ‘Grinch Who Stole Christmas,’ rejecting tradition and stealing away decades of antitrust development with a kind of single swoop down the mountain.” Monopoly – or at least oligopoly – duly thrived. As Lina Khan has said, “It is important to trace contemporary antitrust enforcement and the philosophy underpinning it to the Chicago School intellectual revolution of the 1970s and 1980s, codified into policy by President Reagan.”
The New Brandeisian account, while neat, is out of tune with historical reality in important ways. The Chicago School and the Reagan administration did have a major impact on antitrust. There is, however, much more to the story. For instance, the assumption New Brandeisians and various other commentators make that the mid-20th century was a golden era for antitrust is questionable. A well-known 1964 article on antitrust by historian Richard Hofstadter indicates this. He maintained that with the “growing public acceptance of the large corporation,” antitrust was “a faded passion” that had become “specialized, and bureaucratized.” Hofstadter was hardly the lone antitrust pessimist at the time. The well-known economist John Kenneth Galbraith acknowledged in 1967 that antitrust enforcement curbed “on occasion, the rapacity of individuals and firms who survive in the entrepreneurial mode” but maintained that absent special circumstances “to the large firm the antitrust laws are harmless.”
Other features of the New Brandeisian antitrust history narrative merit a closer look. It might have been thought, for instance, that drawing the curtain on the golden age of antitrust, such as it was, would have been controversial, wracked by partisan bickering. Not so. Serious doubts had arisen regarding the veracity of antitrust by the time Ronald Reagan was elected in 1980. This vulnerability meant changes the Reagan administration made were accepted with relative equanimity. Moreover, the basic direction of travel with antitrust remained undisturbed for more than a quarter-century after Reagan, a Republican, left office, despite Democrats Bill Clinton and Barack Obama both serving two full terms as president.
At least three factors worked in tandem with Chicago School analysis to foster the late 20th century antitrust counter-revolution and contribute to its durability. These were: 1) concerns about the nature of mid-20th century antitrust law jurisprudence 2) doubts about the efficacy of government regulation 3) a belief that even the largest American corporations were facing considerable, often foreign, competitive pressure, which implied antitrust was superfluous and perhaps counterproductive as a check on market power. We will consider these factors in Parts III to V after we assess just how “real” antitrust was during its ostensible mid-20th century golden age.
3.1 Mid-20th Century Market Conditions
To the extent that the mid-20th century was the golden age of antitrust, a logical supposition would be that market forces operated in a robust manner that is foreign today, given the market power supposedly on display currently is due to the antitrust counter-revolution the Chicago School and the Reagan administration launched. Indeed, Matt Stoller, in his 2019 book Goliath, says after describing the antitrust culture Thurman Arnold initiated as “entrenched” during the 1950s and 1960s, “There was more competition, and increasing competition, in the economy at large.” In fact, it is open to question how potent market forces actually were during the mid-20th century.
Herbert Hovenkamp maintains many mid-20th century “antitrust economists and lawyers had come to believe that, given expansion in firm size and growing market concentration, oligopoly performance was inevitable.” Victor Hansen, one of Arnold’s successors as head of the Antitrust Division in the DOJ, indeed said in 1957 “Economic concentration is increasing,” a claim substantiated at least to some degree by empirical evidence. Barron’s acknowledged in 1965 a “widely held view today that a few sellers will inevitably conspire to act like a coercive monopoly.” A.D. Neale, in the 1969 edition of a monograph on American antitrust law, suggested “(t)he typical market structure in which big business operates is oligopoly.” Humorist Art Buchwald made the point in a whimsical way in his Washington Post column in 1966. He said that by 1978 all corporations west of the Mississippi River would have merged into a single corporation, that the same would have happened east of the Mississippi and that the two companies would soon be looking to merge so there would be only one corporation in the United States.
If mid-20th century antitrust was, as Elizabeth Warren suggested, “real”, why was there a widespread belief that oligopoly was “typical” and perhaps “inevitable”? The pessimism about market forces may have been overdone. In 1957, Barron’s labelled monopoly in the American economy as one of the “myths of socialism” and asserted that “every enterprise, no matter how big or affluent, must meet the continual test of consumer choice.” Another possibility is that the 1950s and 1960s were not the golden era of antitrust that has been supposed. Art Buchwald’s punchline in the 1966 column where he speculated that America might, due to a merger, have only one corporation by 1978 lends credence to this conjecture. He suggested that the Antitrust Division not only would have cleared that merger but that its response if that corporation sought to buy the United States would have been nothing more than to “study this merger to see if it violates our strong anti-trust laws.” We correspondingly will assess now how “real” antitrust enforcement actually was during the mid-20th century, adopting a chronological approach in so doing. We will see enforcement was considerably patchier than the New Brandeisian account implies.
3.2 The Truman Administration
With antitrust the administration of Democrat Harry Truman had “at best…an uneven enforcement program.” After Truman won the 1948 presidential election, momentum built in favor of reviving antitrust activity from a post-Thurman Arnold World War II lull. Business Week referred in 1950, for instance, to federal antitrusters’ “drive to break up big business.” The primary legacy, however, was legislative. In 1950, Congress passed the Celler-Kefauver amendment of the 1914 Clayton Act, thereby strengthening the scope for regulation of mergers. Truman said when signing the Celler-Kefauver law that it was a priority of his administration “to prevent the growth of monopoly and greater concentration of economic power.”
During the rest of the Truman administration, antitrust was “relatively quiescent.” Cases launched during Thurman Arnold’s energetic tenure often remained active but the Korean War, which ran from 1950 to 1953, hindered the development of a coherent approach to enforcement. For instance, an economy drive the conflict prompted resulted in the slashing of appropriations to the Antitrust Division. One by-product was that antitrust enforcers did not launch proceedings based on the 1950 Celler-Kefauver amendments when Truman was president.
3.3 The Eisenhower Administration
While the Truman administration’s approach to antitrust was “relatively quiescent”, Business Week told readers in 1959 “from the beginning of the Eisenhower Administration, Republican antitrusters have acted as though they believed in competition and the antitrust laws.” Theodore Kovaleff, in a 1980 study of business/government relations during the Eisenhower presidency (1953–61), concurred: “The Eisenhower administration incontrovertibly oversaw a period of vigorous and innovative enforcement of the antitrust laws….”
The Eisenhower administration’s approach to antitrust cut against conventional political wisdom. As the Economist explained in the final full year of Eisenhower’s presidency:
A surprising aspect of the Eisenhower Administration from the very beginning has been its anti-trust policy. As the ‘party of big business’ the Republicans were expected to deal gently with monopoly and anti-competitive practices. The dis- appointment of businessmen at the way things have turned out has been manifest. The Anti-trust Division of the Justice Department – the agency chiefly responsible for the enforcement of the anti-trust laws – has been tougher and more aggressive than its immediate predecessors under a Democratic Administration. Even the congressional Democrats most concerned with anti-trust matters have found little to criticise.
The primary antitrust emphasis during the Eisenhower years was on mergers, with the greatest contribution being energetic enforcement of the revised Clayton Act. When the U.S. Supreme Court interpreted the legislation liberally in its judgments in the 1960s, the roots of many of the cases could be traced back to the Eisenhower antitrust program.
3.4 The Kennedy Administration
It initially appeared the Eisenhower antitrust momentum would be sustained when Democrat John F. Kennedy became president. Lee Loevinger told Attorney General Robert Kennedy in his successful interview to become chief of the DOJ’s Antitrust Division that he believed “in antitrust almost as a secular religion.” The Wall Street Journal said in 1961 that “(s)urgeons of the Kennedy administration are sharpening their antitrust scalpels” and were itching “to swing into offensive action to assault more existing corporate structures.”
In fact, “antitrust enforcement lagged” under Kennedy. The Kennedy Antitrust Division brought cases challenging price-fixing schemes of modest economic import (e.g. Venetian blinds, kosher hot dogs and touring ice shows) in lieu of cracking down on large corporations seemingly exercising quasi-monopoly power. Robert Kennedy’s close monitoring of the Antitrust Division, motivated by concerns his brother’s administration was thought of as unjustifiably “antibusiness”, helps to explain the caution.
3.5 The Johnson Administration
The Kennedy administration’s cautious approach to antitrust enforcement was sustained under his Democrat successor Lyndon Johnson. The Wall Street Journal indeed suggested in 1965 that it was impossible Johnson’s “consensus brand of politics would welcome a spirited campaign to break up big business.” The appointment of Donald Turner, a Harvard law professor, as Assistant Attorney General in charge of antitrust that year, implied differently. He reputedly “grew apoplectic at the sight of big business getting bigger” as a professor and referred to himself as a “renegade economist” when he was appointed to run the Antitrust Division. The Johnson administration, however, circumscribed Turner’s room to maneuver.
The Wall Street Journal said when Turner became head of the Antitrust Division that “if he grows bold and attempts to expand the antitrust range, he can expect a lasso from the White House.” By 1967, “traditional, crusading trustbusters” had concluded, “Turner’s brand of antitrust is namby pamby.” The Wall Street Journal was even referring to “gentle trustbusters”, saying that despite the misgivings of “old-time Washington liberals, gray haired survivors of the New Deal era when trustbusting was in vogue and business bigness was all bad….antitrust enforcement is becoming an anachronism in this era of the Great Society….”
The juxtaposition between the Supreme Court’s 1960s antipathy toward mergers and the Johnson administration’s cautious stance was particularly striking. Antitrust proponents could not understand why the Johnson Antitrust Division “let some of the biggest mergers in history slip by unchallenged— especially in an age when the Supreme Court has struck down nearly every merger it has got its hands on.” There was no appetite, however, for a thoroughgoing assault on mergers. Attorney General Nicholas deB. Katzenbach, commenting in 1965 on the jurisprudence, acknowledged “we could block five times the mergers we do”, meaning “(w)e have quite tremendous power” but cautioned “we have to think through how we are going to use it.” To the ire of antitrust proponents, Turner concurred, acknowledging he would “not necessarily file every case he knows he could win.”
The Johnson administration’s lukewarm approach to antitrust continued after Donald Turner stepped down in 1967. An antitrust task force Johnson set up secretly in December 1967 handed him in July 1968 a report on reform that recommended numerous changes to the law, most notably increasing the scope to address market concentration and oligopolies. Johnson declined even to release what was known as the Neal Report, named for Phil Neal, the head of the task force and Dean of the University of Chicago law school. The Wall Street Journal explained why in 1969 when the Nixon administration made the Neal Report public, saying “The recommendations apparently weren’t to the liking of Johnson, whose Administration displayed little enthusiasm for vigorous enforcement of antitrust statutes and none for new antitrust laws.”
Bearing in mind the antitrust record of the Kennedy and Johnson administrations, Theodore Kovaleff’s verdict on antitrust in his 1980 study of business/government relations during the Eisenhower administration seems fair: “the Democratic record pales when compared to that of the preceding administration.” Kovaleff added “(i)n the 1960s, antitrust was all but forgotten.” That hardly sounds like the golden era to which the New Brandeisians harken. Here, however, Kovaleff overstates matters, as his assessment insufficiently credits the key role U.S. Supreme Court jurisprudence played in shaping the understanding of antitrust. After all, “(t)he Warren Court era was the zenith of the socio-political model of antitrust.” This did much to ensure antitrust was “real” during the mid-20th century even if enforcement was uneven. Indeed, it seems likely that in the 1960s the business community was “chafing more at the Supreme Court than at administrative trustbusters.” As we will see next, however, judicial enthusiasm for antitrust would provide one of the departure points for the antitrust counter-revolution that occurred as the 20th century drew to a close.
4 The Jurisprudential Vulnerability of Antitrust Law
While enforcement in the 1950s and the 1960s was patchier than might have been expected in the “golden era” of antitrust, the antitrust stance of the Warren Court helped to ensure antitrust operated on a different plane than its late 20th century Chicago School-influenced counterpart. As we will see now, trends in the 1970s were mixed. On one hand, the Warren Court’s antitrust stance took a substantial jurisprudential battering, with Chicago School reasoning ultimately playing an important role. At the same time, antitrust enforcement was perhaps never more robust and a toughening of applicable laws seemed likely before the Chicago School + Reagan antitrust counter-revolution gained full momentum in the 1980s.
4.1 Criticism of 1960s Supreme Court Antitrust Jurisprudence
Thomas Kauper, having summarized the consensus view of the late 20th century antitrust counter-revolution by invoking the children’s story villain the Grinch, suggested, “(t)he antitrust of the fifties and sixties…was simply waiting for the Grinch to take and never to be returned.” He had in mind here primarily mid-20th century Supreme Court antitrust jurisprudence. Kauper suggests that for the Chicago School the Supreme Court’s approach to antitrust “was its immediate target” and maintains the case law “was a target that was not hard to hit.”
Bork was a strong critic of the Warren Court antitrust jurisprudence, which is hardly surprising given his much-heralded role in the antitrust counter-revolution of the late 20th century. He led off an 1967 American Economic Review article where he argued that consumer welfare should be antitrust law’s benchmark by arguing “The life of the antitrust law…is, in contrast to (Oliver Wendell) Holmes’s dictum about the common law, neither logic nor experience but bad economics and worse jurisprudence.” Bork had plenty of company as a critic. For instance, Harvard’s Phillip Areeda, an antitrust giant not associated with the Chicago School subsequently chided 1960s Supreme Court merger cases for “phony market definitions, mistaking increased efficiency for anticompetitive effect, and loose reasoning about potential anticompetitive effects.” Even New Brandeisians have acknowledged mid-20th century Supreme Court antitrust jurisprudence had flaws. Jonathan Tepper and Denise Hearn say
Like any revolution, the movement against monopolies and oligopolies went too far at times. The two landmark cases that became rallying cries against antitrust regulation were the Brown Shoe case and Von’s (the Los Angeles supermarket case). Both stood out as poor decisions that then justified the counter-revolution to come.
Bork remarked in the early 1980s “When I first started teaching and writing, people thought I was a crackpot.” In fact, 1960s Supreme Court antitrust jurisprudence was drawing criticism from various quarters at the time. Donald Turner believed when he was head of the Antitrust Division that “(i)n some cases…the courts were jeopardizing efficiency— even hurting the economy— by overzealously protecting small competitors.” The Wall Street Journal said of a 1966 Supreme Court decision that expanded the Federal Trade Commission’s scope to regulate franchising arrangements that “the most regrettable effect of the decision is the new confusion it injects into antitrust law, an area that was already baffling enough.” Milton Handler, who had initially “applauded the rationale of Brown Shoe,” had adopted a strikingly different tone by 1967. He maintained that in antitrust cases the Supreme Court tended to start with “the answer rather than with a question, thus placing its own policy predilections above statutory language and legislative history.” Hence, recent rulings advanced “extreme views against which I cavil – all restraints are unlawful; all reciprocity is evil; all horizontal mergers are improper; all consignments with price agreements are anticompetitive; all exclusive dealing arrangements are unfair.” Supreme Court antitrust jurisprudence thus was indeed proving to be a vulnerable target for those with antitrust misgivings.
4.2 The Judicial Counter-Reaction
In the mid- and late-1970s, the U.S. Supreme Court went a considerable distance toward reversing what Areeda would refer to as “(t)he worst excesses” of its 1960s jurisprudence. Continental Television v. GTE Sylvania, a 1977 case, “is widely considered a turning point in modern antitrust,” primarily due to the Supreme Court invoking explicitly for the first time Chicago School commentary. The Supreme Court, however, had begun to forsake the Warren Court’s approach to antitrust a few years beforehand.
The scene was set for the Supreme Court to pivot away from the Warren Court approach to antitrust when Warren E. Burger became Chief Justice in 1969 and other Richard Nixon Supreme Court nominees began replacing antitrust “hawks” who had set the tone in the 1960s. A 1973 ruling telegraphed the shift when a split court failed to uphold the government’s lawsuit against a merger of two Colorado banks. In the wake of United States v. General Dynamics, a 1974 case where the U.S. Supreme Court rejected the government’s challenge to a merger of two coal producing companies, Thomas Kauper, who was then the Justice Department’s antitrust chief, acknowledged “we’re dealing with a different court.” The following year, the Wall Street Journal suggested, “Business appears to be just about unbeatable in disputes with government antitrusters on mergers,” explaining this partly in terms of “pure, pro-business conservatism among the majority.”
It is possible that the Supreme Court justices were aware of and were taking on board Chicago School antitrust literature on an unattributed basis prior to Sylvania. Robert Bork wrote the pieces of his the Supreme Court cited in Sylvania a decade or so before that judgment was handed down. Richard Posner, another prominent Chicago School antitrust commentator the Supreme Court cited in Sylvania, began publishing in the antitrust field in 1969. Still, given the citation pattern, contrary to the Chicago School as Grinch antitrust narrative, the Supreme Court seemingly had done much to forsake the Warren Court approach to antitrust before drawing explicitly on Chicago School logic.
Even though the Supreme Court started to forsake its populist antitrust posture prior to 1977, Sylvania was a landmark ruling. The Supreme Court did not turn around in the case and overrule a host of the Warren Court’s case law precedents. The Supreme Court, explicitly abandoned, however, the egalitarian impulse that had been guiding its antitrust jurisprudence. As Posner wrote in 1979 “The underlying notion, that the antitrust laws express the political values of Jeffersonian democracy rather than economic values rooted in efficiency, also is gone, rejected in the Sylvania decision.” The case also set the stage for what would become a “successful effort to refocus antitrust on purely economic concerns,” which in turn compelled antitrust lawyers to examine in detail the economic aspects of the cases they brought.
4.3 1970s Antitrust Enforcement as a Counter-Balance to Judicial Trends
Robert Bork acknowledged in the early 1990s “Sylvania presaged a new economic sophistication in antitrust.” He was initially considerably more cautious about the Supreme Court’s 1970s change of heart. In the 1978 edition of The Antitrust Paradox he acknowledged that the Supreme Court had “recently taken a significant step toward reforming a part of antitrust.” He characterized General Dynamics, however, as a fact-specific ruling that did “not reform existing doctrine.” As for Sylvania, he cautiously endorsed it as “a hopeful development” that “may presage a general reformulation of a policy gone astray.”
Trends outside the courtroom explain Bork’s caution. As he noted in The Antitrust Paradox “the courts are of course not the sole generators of antitrust policy,” and on other counts he was pessimistic. He said “the machinery of antitrust enforcement grinds steadily on”, a situation that seemed unlikely to change because “there is some intellectual but almost no political opposition to (antitrust’s) main features.” Bork even expressed concern that “A new era of antitrust expansion seems likely to begin in Congress.”
Given that Ronald Reagan was elected very shortly after the publication of The Antitrust Paradox Bork’s pessimism seems quixotic. However, Charles Geisst, in his 2000 book Monopolies in America, said “(t)he 1970s were a period of intense antitrust activity.” Amy Klobuchar similarly characterized the decade as the “heyday” of antitrust enforcement, citing DOJ case filing data to make the point.
Politicians in the 1970s indeed were favorably disposed towards antitrust. Shortly after replacing Richard Nixon as president, Gerald Ford pledged “a return to the vigorous enforcement of antitrust law.” To that end, Ford signed into law in 1974 the Antitrust Procedures and Penalties Act, which changed the status of criminal violations of the antitrust laws from misdemeanors to felonies and stiffened fines and jail sentences that could be meted out. Two years later Congress enacted the Hart-Scott-Rodino Antitrust Improvements Act, which required with sizeable corporate acquisitions the filing of premerger notifications with the FTC and the DOJ to give them time to assess the antitrust ramifications. The Ford administration also increased the Antitrust Division’s budget and staff levels markedly.
Ford’s antitrust vigour was not lost on contemporaries. Mark Green, who assailed the weakness of antitrust enforcement in a lengthy 1972 study, said as 1974 drew to a close “I’m sort of encouraged.” Louis Kohlmeier, a Boston Globe columnist, christened the president “trustbuster Ford.” Business Week reported in 1975 that “As the federal government gets tougher on corporations and corporate executives caught up in antitrust cases….(a)ntitrust compliance is just about the most important responsibility that a corporate law department has to discharge.”
When Democrat Jimmy Carter became president in 1977 Forbes warned the business community it could “be in for a rough time on the antitrust front,” quoting Mark Green as saying “one of the most aggressive antitrust administrations in decades” could be in prospect. Geisst’s verdict that “Antitrust activity hit its stride during Jimmy Carter’s presidency” implies the potential was fulfilled. The Antitrust Division’s budget and staff levels indeed continued to increase. President Carter nevertheless saw room for further bolstering, declaring in 1978 that “there is a great need for reform” of federal antitrust laws as he established a national commission to study possible beneficial changes to the law.
When Carter’s national antitrust commission reported in 1979, one high-profile recommendation was that Congress should amend the Sherman Act to deal more effectively with persistent monopoly power. The commission suggested to that end introducing by statute a “no fault” approach where violations could be established without proof of culpable conduct. There also were numerous substantial antitrust bills making the rounds in Congress, often generated by the Senate Judiciary Committee prominent liberal Democratic Senator Edward Kennedy was chairing. Given such trends, it is understandable that when Bork published The Antitrust Paradox in 1978 he was cautious about the direction of travel with antitrust even though the antitrust counter-revolution that he influenced was just around the corner. What were the additional ingredients that set the scene for that counter-revolution? We consider these in Parts IV and V.
5 “Government is the Problem”
For New Brandeisians explaining how Bork’s cautiously “hopeful” 1970s trends were translated into an antitrust counter-revolution is easy – Ronald Reagan was elected president in 1980. In fact, there were non-Chicago School variables evident prior to the Reagan presidency that put antitrust as it then operated on shaky ground that became more potent in the 1980s, thereby fortifying the counter-revolution that would ensue. Diminished faith in government was one of these. Indeed, noted economist F. M. Scherer has suggested that a belief that “government is the problem” was a more important root cause of late 20th century antitrust counter-revolution than Chicago School theorizing.
University of Chicago law professor Frank Easterbrook formalized the ramifications of regulation skepticism in an antitrust context in a widely cited 1984 law review article. Easterbrook argued that antitrust enforcement errors did much to explain why “the history of antitrust is filled with decisions that now seem blunders.” To elaborate, Easterbrook “famously adopt(ed) an error-cost framework” that put regulatory mistakes in the spotlight and favored non-enforcement of antitrust law. Easterbrook downplayed the adverse effects of governmental failures to take action against potentially deleterious anticompetitive conduct, reasoning that market forces would marginalize such practices over time. He emphasized instead the hazards of wrongful condemnation of procompetitive behavior on the basis that the forsaking of such beneficial conduct would generate a significant social cost. Such anti-regulation logic had in fact gained substantial traction in the antitrust context before Easterbrook formalized it, and did so in a way that contributed to the antitrust counter-revolution New Brandeisians attribute to the Chicago School and the Reagan administration.
The 1970s were a dismal decade for government. America’s troubles in Vietnam, the Watergate political scandal, chronic federal budget deficits and bungled efforts to control inflation and unemployment all helped to drive anti-government sentiment from 32% in 1964 to 50% in 1972 and 67% in 1980. Influential 1970s politicians who, as Democrats, might have been expected to favor increased state involvement in the economy responded to the cue. Jimmy Carter acknowledged in his 1978 State of Union address that “(g)overnment cannot solve our problems.” Ted Kennedy said in a 1979 interview “there is no reason we can’t get the government off the back of American industry in the area of economic regulation.” Such sentiments yielded a substantial reform legacy. In the mid- and late-1970s, route and rate restrictions were relaxed for airlines, trucking and railways and controls on natural gas prices were loosened. Joe Biden, then a Democrat Senate colleague of Kennedy, voted in favor of the relevant legislative measures.
Various accounts of the late 20th century antitrust counterrevolution acknowledge deregulatory sentiment was a contributory factor. Antitrust, however, initially seemed to be a beneficiary of the “government is the problem” impulse, given that unlike with other forms of regulation a key goal is to foster market-based competition. As Howard Metzenbaum, a Democrat senator, suggested in a 1987 speech, “If you are for free enterprise, then you must be for antitrust. You just can’t be for one and against the other.” This logic was accepted in Washington D.C. in the 1970s. As president, Gerald Ford denounced “the dead hand of government” while calling for “an antitrust policy that validates our commitment to competitive markets.” Kennedy pressed in the late 1970s for stronger antitrust laws in tandem with deregulation, arguing for the abolition of antitrust immunities permitting anticompetitive activity in heavily regulated sectors such as transportation. Similarly, when Carter announced in 1978 the launch of the national antitrust commission to bolster antitrust law John H. Shenefield, the chair of the commission and chief of the Antitrust Division, said a major objective of the study would be to “lighten the hand of government” on business and consumers.
In the 1980s, the pattern changed for antitrust, with antipathy toward government regulation helping to foster the counter-revolution for which the Regan administration is credited (or blamed). The Economist noted in a 1981 article entitled “Trustbusters Busted” that American antitrust statutes “supposed to underwrite competition have perversely become confused by conservatives with government regulation.” The Washington Post noted the same year that politicians who thought deregulation should be accompanied by a tough antitrust policy were “starting to express their fears” that antitrust was in retreat as compared to “(w)ay back in 1979.” The Post indicated, however, that “(t)he hullabaloo…should come as no surprise since candidate Reagan…criticized big antitrust cases and big government in the same breath.”
The mentality remained similar throughout the Reagan presidency. In the 1980s, antitrust enforcers typically assumed that “traditional antitrust law” – antitrust as enforced during the mid-20th century “golden era” – imposed substantial efficiency costs. As David Blato, a senior FTC official, explained in 1999: “A major part of that administration’s economic program was to reduce government regulation. Antitrust enforcement was perceived as being overly intrusive, out of control, and highly regulatory.”
Sufficiently deep skepticism regarding government intervention implies not just deemphasizing antitrust but mothballing it. In 1986 Ralph Nader, a veteran consumer activist, suggested indeed that “(t)he rise of Ronald Reagan meant the demise of antitrust enforcement.” The Economist maintained likewise in 1991 that “President Reagan virtually suspended the nation’s antitrust laws by cheerfully failing to enforce them.”
The idea that with antitrust “(e)nforcement ceased” in the 1980s quickly took hold as the conventional wisdom and would remain highly influential. In fact, “(c)ontrary to popular wisdom, Reagan did not kill off antitrust enforcement.” Charles Rule, head of the Antitrust Division during the final years of the Reagan administration, maintained “the Reagan Administration’s overall enforcement record has been as vigorous as any in the past, and in the area of criminal enforcement – the heart and soul of effective enforcement – no other Administration was able to put together a record that even comes close to ours.” The DOJ indeed launched more antitrust criminal prosecutions between 1981 and 1988 than had been brought between 1890 and 1980, and, at least as measured by the number of DOJ antitrust cases summarized in the CCH Trade Regulation Reporter, more cases were on the go during the Reagan presidency than during the 1950s, 1960s, and 1970s (Figure 1). Nevertheless, concerns about governmental error costs with which Rule, as a recent University of Chicago law school graduate, no doubt would have been familiar, did mute antitrust enforcement at least to some degree.
Rule said the Reagan Antitrust Division was “exceedingly careful to ensure that we prosecute only conduct that is unambiguously anticompetitive and clearly illegal”, primarily horizontal restraints such as such as price-fixing, bid rigging and market allocation among competitors. Rule maintained there were “strong economic reasons” for refraining from attacking other classes of commercial conduct, namely the chilling of “some legitimate, efficient business practices.” Concomitantly, it would have been “irresponsible in the extreme….to bring the misguided cases that passed for civil antitrust fifteen years ago.”
Rule, in making the case against the “know-nothing, attack-everything” antitrust policy that had prevailed previously, had in mind not only governmental error costs but a factor that did as much, if not more, to reshape late 20th century antitrust policy. This was foreign competition that had revealed, according to Rule, “(t)he price society had to pay for misguided, at times silly, antitrust policy.” We consider foreign competition’s impact on late 20th century antitrust policy next, beginning with an explanation how and why foreign competition grew in prominence in the American context.
6 Foreign Competition
6.1 The Rise of Foreign Competition
In 1991, the Economist explained why America’s trustbusters were “timid” with nary a reference to the Chicago School. The key variable instead was foreign competition:
America’s economy is more open today, exposing many big firms to foreign competition. This does not make it impossible for a domestic market to be dominated and then abused, but it is far less likely to happen. If General Motors, Ford and Chrysler were foolish enough to conspire to fix prices, they would quickly lose market share to Toyota, Volkswagen and Hyundai, at home as well as abroad.
The Chicago School did have a considerable impact on antitrust as the 20th century concluded despite the Economist failing to mention it. The rise of foreign competition powerfully reinforced intellectual trends, however. As law professor Daniel Crane has said “The Chicago School arose at a time when foreign competition was flooding the U.S. market as never before. Its generally laissez faire policy recommendations for antitrust resonated with realities that many markets were becoming intensely more competitive as a result of foreign entry.”
The Wall Street Journal, in a 1962 editorial criticizing the Supreme Court antitrust ruling in Brown Shoe Co. v. United States  on the basis the court had given “over-eager enforcers a still bigger bludgeon,” noted “(t)he challenge of foreign competition…may well require attitudes toward industrial organization and size that are far removed from the horse-and-buggy attitudes of 1914.” The basic logic was sound; there is empirical data indicating that foreign competition makes an industry more difficult to monopolize. However, with approximately 95% of steel, automobiles, televisions, radios and other consumer products Americans bought being domestically sourced as the 1960s got underway, foreign competition hardly seemed to constitute a serious check on the market power leading American firms were thought to exercise. Vigorously enforced antitrust law appeared to be the logical corrective. Or, from a more skeptical perspective, as Thomas Kauper argued in 2008, “highly interventionist antitrust policy was a luxury we could afford.”
In the 1970s and the 1980s, foreign competition moved from the periphery of American corporate life to center stage. Reasons included the full recovery of countries devastated economically by World War II and a drastic reduction in the costs of moving things around due to widespread deployment of shipping containers and other transportation innovations. Trade policy was also important. Motivated in large measure by a desire to aid economies potentially vulnerable to Soviet expansionism, the United States agreed to cut tariffs that had sheltered domestic industries from an average of 32.2 percent ad valorem on dutiable goods in 1947 to 8.5 percent in 1972. A by-product of these trends was that the percentage of goods that Americans used that were imported increased from 8% in 1969 to 21.2% in 1979, a figure that likely would have been higher if there had not been restrictive trade policies in place curtailing imports in industries such as apparel, consumer electronic products, footwear and steel. By the end of the 1970s, over 70% of goods produced in the United States were actively competing with foreign-made goods. In turn, “(c)ompetition from overseas was undercutting many of the country’s largest, most important businesses.”
With Europe and Asia rebounding from World War II and with transportation costs and tariffs falling, it was foreseeable that for American companies foreign competition would intensify. As the 1970s drew to a close, however, concerns were growing that American business was falling short badly in responding to the foreign challenge. The United States suffered substantial competitive declines in various major industries, including automobiles, footwear, shipbuilding, steel, televisions and textiles. The Washington Post told readers in 1978 that “From boardroom to research lab, there is a deepening sense that something has happened to the once unchallengeable Yankee ingenuity.” Likewise, according to a 1979 US News & World Report article focusing on American companies losing ground to international rivals,“(o)nce a giant among pygmies in world trade, the US now looks like an aging champion whose dominance is threatened by a growing field of shrewd competitors.”
6.2 Impact on Antitrust
The rapid rise of foreign competition in the 1970s prompted concerns that antitrust was playing a counterproductively outsize role in regulating American corporations. In 1971, the Wall Street Journal argued in an editorial on antitrust that “the United States government, in trying to prevent large corporations from gaining monopoly power…can no longer think in purely national terms.” Instead, “(w)hat is relevant so far as antitrust policy is concerned is not bigness but whether there is sufficient competition in the United States market.” The same newspaper cited the rise of foreign rivals in arguing against enactment of the Antitrust Improvements Act of 1976, saying “There is less concentration of industry today than when the Sherman Act was passed. The U.S. market is more fully integrated with foreign markets than ever before.”
The Washington Post advanced similar reasoning more forcefully in 1978 via an op-ed column. According to the Post, “the American fear of concentrated power” that underpinned antitrust law seemed “outmoded in today’s world.”  Correspondingly, “(w)hat is called for is a new policy that reflects the reality of a U.S. market open to foreign competition.” Time struck a similar chord. In a 1979 article discussing a major conference on antitrust the magazine had organized, it posed the question “Is the function of antitrust to enhance economic efficiency or to ensure the dispersal of economic power into many hands?” Its answer: “At a time when the U.S. is struggling to curb inflation, create jobs and sharpen its competitiveness in world markets, the purpose of antitrust policy should be to enhance efficiency.”
While foreign competition surged in the 1970s and while there was support for concomitant adjustments to antitrust, antitrust enforcement was perhaps never more robust than it was then. As Time noted in its 1979 article, “the American Captain of Industry” was “under fresh attack from trustbusters in the Justice Department, the Federal Trade Commission and the Congress.” Matters changed as the 1980s got underway. Time observed in 1981 that for trustbusters the fact “bigness can boost U.S. competitiveness abroad” was “sinking in.”
Foreign competition clearly was a factor influencing antitrust enforcement during the Reagan administration. When J. Paul McGrath took over as head of the Antitrust Division in 1983 he acknowledged “there has been a rather broad shift in thinking about antitrust law over the past decade” and elaborated in a 1984 speech, saying “faced with increasing competition from abroad, the same public and bar, joined by antitrust enforcers, started to ask hard questions….What should be the appropriate role of antitrust?” In 1986, Commerce Secretary Malcolm Baldrige defended a proposal to relax antitrust restrictions on mergers on the basis that “We are living in an era of intense worldwide competition, and we think American companies should merge if it is going to increase their competitiveness.”
As McGrath’s reference to a “broad shift in thinking” implied, foreign competition-driven antitrust skepticism extended well beyond the Reagan administration in the 1980s. This was a decade where there was a sense antitrust was “fading away” because “increased international trade has eroded the power of companies in concentrated industries” and it was “the fashion in Washington…to attack the nation’s antitrust laws as stultifying, outmoded, and unfair.” Democrats as well as Republicans thought of foreign competition as an antitrust game-changer. Robert Katzmann, in a 1984 study of “The Attenuation of Antitrust,” identified “concerns about the increasing rigors of international competition” as an important cause of the rollback of antitrust, acknowledging in so doing the bipartisan nature of those concerns:
The Reagan administration has been peppered with a generous sprinkling of Chicago-style academics and has therefore probably been more receptive to those changes than some other administration might have been, but the new perspectives on antitrust that are evident in this administration are by no means confined to the Republican party or to the conservative portion of the political spectrum.
Others picked up on the same bipartisan theme with foreign competition and antitrust. Economists Walter Adams and James Brock wrote in 1986 “American antitrust is under renewed fire. Cast as an economic anachronism in the ‘new’ age of global competition, it is attacked by critics all along the political spectrum-left and right, liberal and conservative, neoliberal and neoconservative.” Business Week, in making the case that it would not make much difference to antitrust policy if the Democrats or the Republicans won the presidency in 1988, said, “The Reaganites have won the battle. Even many Democrats, concerned about America’s ability to compete internationally with Japan Inc., are having second thoughts about the restrictive merger policies they espoused in the 1970s.” Thus, as a Washington Post columnist argued in 1987, antitrust enforcement under Reagan seemed to be “geared for the times,” noting that while in the 1960s the U.S. “could tolerate a merger policy that frustrated more efficient use of industrial resources….the growing internationalization of world markets eliminated the competitive cocoon.”
7 The Counter-Revolution Sustained
The title of the Business Week article that argued that the results of the 1988 presidential election would not have a material impact on antitrust policy was “The Reagan Revolution in Antitrust Won’t Fade Away.” This would prove to be prescient. The antitrust counter-revolution of the 1970s and the 1980s would indeed evolve into “the relative stability of (an) antitrust consensus”, a consensus the New Brandeisians are now seeking to disrupt. After considering antitrust continuity post-Reagan, we will assess the extent to which the factors that fostered the 1970s/80s counter-revolution – the Chicago School, doubts about the efficacy of regulation and foreign competition – helped to sustain the enduring antitrust consensus. We will see that each did play a role, even if their importance evolved over time.
The idea of an antitrust consensus operating from the present day uninterrupted back to the Reagan era implies cross-party continuity. But what about Democratic administrations that might have been expected to depart from the Republican Reagan playbook? Some current advocates of reform suggest post-Reagan Democratic presidents pursued antirust with greater vigor than their Republican counterparts did. Tim Wu maintains in his 2018 book Curse of Bigness that the application of “Bork-Chicago thinking…ran into a speed bump during the years in which Bill Clinton was president (1993–2001)” but this was “just a delay” because “during the (George W.) Bush years (2001–09), the anti-monopoly provisions of the Sherman Act went into a deep freeze from which they have never really recovered.” Likewise, Amy Klobuchar says in her 2021 Antitrust book “During the Clinton administration there was an effort to reverse the lax antitrust enforcement of the Reagan and George H.W. Bush administrations (1981–89, 1989–93)” and maintains that “antitrust enforcement once again emerged as a priority during Barack Obama’s administration (2009–17).”
Other advocates of antitrust reform offer a more caustic verdict on the Clinton and Obama administrations. Lina Khan has said, “The Reagan-initiated antitrust counterrevolution – perpetuated by subsequent Republican administrations and never seriously questioned by Democratic ones – has permitted powerful firms across sectors to control markets.” Jonathan Tepper and Denise Hearn maintain in their 2019 Myth of Capitalism book that “Since Reagan no president has enforced the spirit or letter of the Sherman and Clayton Acts” and said that with “George W. Bush and Barack Obama….there was absolutely no difference in policy when it came to monopolies and oligopolies.” Likewise, according to Matt Stoller, during the Clinton presidency “(t)he Democratic Party embraced…the ideology of the Chicago School” and the Clinton administration oversaw “nonenforcement of antitrust laws.” Similarly, “Obama’s antitrust officials,” influenced by Chicago thinking, “helped to engineer another merger boom.”
Regardless of whether antitrust had a higher profile during the Clinton and Obama administrations than it did during the Bush presidencies, there was no full-scale reversal of the Reagan counter-revolution. NYU business school professor Lawrence White acknowledged in a 2003 analysis of antitrust during the Clinton years that the Antitrust Division brought cases that likely would not have been launched in the 1980s. He emphasized, though, there “was no revolutionary overturning of major direction of the previous regimes, and there was no return to the populism and enthusiasm for protecting small business that had sometimes colored antitrust policy before the 1980s.” Likewise, Bill Baer, who headed up the FTC between 1995 and 1999 and the Antitrust Division between 2013 and 2016, said in 2017 of the Obama years, “There was not a fundamental change in enforcement philosophy. For the past 20 years or so there has been a rough consensus among antitrust enforcers about what is problematic….” This meant that “since the Reagan era…antitrust fights were mainly waged over a relatively narrow range of options, far from the broader political arena.” Antitrust thus became a technocratic affair left to lawyers and economists thoroughly versed in antitrust nuance.
The apolitical, technocratic orientation of antitrust substantially influenced antitrust enforcement. Daniel Crane, a leading proponent of the technocratic characterization of late-20th and early 21st century antitrust, observed in 2011 “(f)ederal antitrust enforcement remains well supported and active despite its low political profile.” This was because “political elites have accepted that antitrust is an important but largely technical matter that should be administered vigorously but without great public fanfare.” He illustrated the point by drawing attention to an antitrust lawsuit the DOJ brought against Microsoft in the late 1990s alleging abuse of monopoly power where the courts ultimately upheld partially the case the DOJ advanced. This was “the most celebrated antitrust action in decades,” dominating headlines in the manner that would be expected for a case involving the most valuable company in the world. President Clinton nevertheless “expressed complete neutrality.” He said in a 2000 interview “because it is a legal proceeding, I had nothing to do with what the Antitrust Division did, and I certainly can’t have anything to do with what the judge does.”
7.2 The Chicago School Endures (Partially)
The Chicago School’s emergence as the pre-eminent school of thought in antitrust in the 1980s contributed substantially to the demise of the supposed mid-century golden age of antitrust, even if mistrust of regulation and the challenges foreign competitors posed for large domestic firms also played a significant role. The Chicago School would subsequently remain influential, if not as dominant. This helped to sustain the 1970s/80s antitrust counterrevolution, with its ultimately technocratic flavor.
Richard Schmalensee, Dean of MIT’s business school, argued in a 2008 collection of essays on the Chicago School’s antitrust legacy “Chicago has decisively carried the day as regards the objective of antitrust.” Thomas Kauper maintained in the same volume that “Chicago’s influence is virtually conceded”, with most in the antitrust community identifying with “an antitrust policy based on ‘consumer welfare,’ a phrase…that has generally come to mean allocative and productive efficiency.” Hence, the Chicago School did much to define antitrust well after its tenets initially disrupted the status quo.
While the Chicago School would influence antitrust for decades after it helped to end what the New Brandeisians think of as the golden age of antitrust, as early as 1990 there were signs Chicago School dominance was subject to qualification. The Washington Post reported, “Justice Department and FTC officials have taken pains to publicly and explicitly reject the free-market theories of the Chicago School that had informed the Reagan era policy.” Before the decade ended, the media was citing the substantial influence of a “post-Chicago School” on antitrust thinking, including amongst government trustbusters. The judiciary proved to be somewhat reticent regarding adoption of post-Chicago insights. However, by the late 2000s, according to law professor Daniel Crane, “much of the antitrust scholarship in the academy over the last decade ha(d) taken a post-Chicago tilt.”
The growing influence of post-Chicago thinking reflected to some degree uneasiness with the efficiency-driven model of antitrust the Chicago School advocated. Nevertheless, as the New York Times said in 1998, “the post-Chicago thinkers are firm believers in market forces,” even if “they say the market doesn’t always come to the rescue and therefore government intervention may be needed.” The “Post-Chicago literature generally define(d) a broader zone for antitrust intervention” than the Chicago School. Still, the rise of post-Chicago reasoning did not herald “a return to the pre-Chicago days when bigness itself was deemed to be an evil.”  Hence, “so-called post-Chicago scholarship ha(d) far more in common with traditional Chicago School scholarship than with present-day populism” that underpins New Brandeisian thinking. Certainly, there was too much intellectual continuity to suit the New Brandeisians. According to Lina Khan, “Where the Post-Chicago School absorbed the Chicago School’s ideological commitments, the New Brandeisians reject them – holding that the major problem we face today is not just a lack of enforcement, but the current theory of antitrust.”
7.3 The Efficacy of Regulation
President Bill Clinton, as a Democrat, might have been expected to favor activist government. Indeed, the New York Times said in a 1997 article that characterized Clinton as “temperamentally adjustable,” “he actually does believe in something: Government.” Nevertheless, Clinton proclaimed in his 1996 State of the Union address “the era of big government is over.” This matched the mood of the times. America experienced in the 1990s a “nearly complete evacuation of trust and confidence in virtually every part of the federal government.” According to polling data, as of 1995 nearly three-quarters of Americans believed the federal government created more problems than it solved. Congress enacted deregulatory legislation at an energetic pace throughout much of the 1990s, with areas affected including energy, banking, transportation and telecommunications.
In the 2000s, antipathy toward government waned somewhat. Still, President Bush was referred to as an “arch-de-regulator” and the Wall Street Journal noted in 2008 that “(t)he idea that less regulation is better for the economy has held sway in Washington since the Reagan administration.” As for Barack Obama, he was labelled the “regulator-in-chief” just before leaving office because of a large volume of executive orders his administration issued. He did not displace, however, the Reaganite free-market orthodoxy as an influence on debates regarding the role of government. Instead, he expressed his admiration for Ronald Reagan’s political gifts and declared in his 2013 State of the Union address that “(i)t is not a bigger government we need, but a smarter government.” This all made good political sense when, as of 2015, only 19% of Americans trusted the government in Washington always or most of the time, as compared to 77% in 1964. In sum, then, continued antipathy toward government helped to sustain the antitrust consensus that took hold in the 1980s.
7.4 Foreign Competition
Foreign competition, which influenced substantially the way Americans thought about market forces and antitrust in the 1970s and 1980s, continued to shape perceptions in the 1990s and the opening years of the 21st century. Michael Mandel, editor of Business Week, wrote in 1996 that “Americans are angry and worried”, citing growing economic insecurity, and observed “In an era of intense international competition no one can foretell which countries will dominate.” Barack Obama, in a 2006 speech as a Senator, said, “The forces of globalization have changed the rules of the game,” including “how we compete with the rest of the world.” Awareness of the challenges foreign rivals posed for American companies in turn tempered enthusiasm for antitrust. The Christian Science Monitor said, for instance, in a 1997 article on a massive 1990s merger wave America was experiencing, “Globalization of the US economy means more American companies face foreign as well as domestic rivals. Seeing the new competition, antitrust officials do not challenge as many mergers and acquisitions.”
Pessimism was a hallmark of discussions of foreign competition in the 1970s and 1980s, with concerns being expressed that American corporations were losing out to international rivals. From this vantage point, encumbering corporate America with rigorous antitrust enforcement seemed unwise. Pessimistic foreign competition sentiment continued to exist as the 2000s got underway. For instance, noted economist Luigi Zingales bemoaned in a 2012 book “the lost genius of American prosperity” in circumstances where “(g)lobal progress has shrunk America’s comparative advantage.” However, the 1970s and 1980s gloom did pass to a considerable extent. By the mid-1990s there was a growing sense “American companies are enjoying a huge comeback,” with the New York Times labelling “(t)he United States as No. 1 and soaring” in 1997.
To the extent that large American corporations were taking on global competitors and winning, antitrust enforcement plausibly began to look increasingly appealing. According to a 1998 Wall Street Journal article on possible antitrust targets, a by-product of American corporate success was said to be that “(g)lobal brands that carry with them at least a modicum of pricing power now have a distinctly American flavor.” A Time columnist suggested in 2014 “We need a rethink of antitrust logic that takes into consideration a more complex, global landscape in which megamergers have unpredictable ripple effects.” American corporate success failed, however, to re-ignite support for antirust in any meaningful way in the 1990s or the early years of the 21st century. The fact robust domestically-based competition was thought to be a key corrective against excessive accumulation of market power does much to explain this.
A 1994 Newsweek column on “Reinventing Corporate America” noted “(p)opular rhetoric dwells upon foreign threats: Toyota menacing General Motors. In truth, the more common threats are homegrown. Microsoft and Compaq menace IBM. Southwest Air menaces American. MCI and Sprint menace AT&T.” A 1998 study of corporate governance likewise hailed the robustness of domestic market forces, suggesting “Business analysts will likely come to view 1980–1995 as a turning point in the history of American enterprise. The days when firms could develop a competitive advantage that they could then maintain for years are long gone.” Gary Hamel, an influential management thinker, echoed the same sentiment in a 1996 Harvard Business Review essay, saying “Never has the world been more hospitable to industry revolutionaries and more hostile to industry incumbents.”
Globalization, which can put downward pressure on profit margins of domestic firms where it is a driving force, was one explanation Hamel provided for the crumbling of the “fortifications that protected the industrial oligarchy.” Deregulation was another. He also cited “technological upheaval.” In making this point, he did not mention the Internet. Harvard Business School’s William Sahlman picked up the story in a 1999 article, also in the Harvard Business Review.
Sahlman used as his historical departure point “the old days…about 25 years ago” (i.e. the mid-1970s), when “the U.S. economy was characterized by relatively inefficient bloated companies that were protected by carefully constructed entry barriers.” He noted that “(f)oreign competition poured cold water on the party” and said that deregulation “made it possible for newcomers…to enter the field” in “several large markets.” Technological advances, such as the microprocessor, and improved access to finance (e.g. venture capital) also fostered “a virtuous circle of entrepreneurship and investment.” Finally, “Enter the Internet, circa 1994. This advance continued to fuel the trend toward a more entrepreneurial economy. If new companies were working assiduously to cut out inefficiencies before, the Internet made the cuts deeper and faster. It also lowered or eliminated entry barriers in dozens of industries.”
New Brandiesian proponents of antitrust reform and more recently Biden administration officials have cited in support of their case for antitrust reform “a torrent of recent studies” implying that from 2000 onward competition waned substantially. These studies indicate there was in the early 21st century a growing concentration of the market share of leading firms within industries, rising markups (companies charging prices above their own costs) and persistently high returns on equity capital in publicly traded firms. To the extent that such data accurately reflected the actual operation of market forces, the scene appeared to be set for an antitrust rethink. Under such circumstances, antitrust plausibly could have been thought of as a beneficial counterweight to the increased risk of counterproductive accumulation of market power. No such reasoning gained traction, however. Instead, the consensus remained that market forces were robust for the most part.
Robert Reich, a well-known economist and Secretary of Labor from 1993 to 1997, suggested in 2007 that “supercapitalism” had taken hold in the U.S., characterized by “ever more intensifying competition among businessmen.” A 2008 survey of “hypercompetition” observed, “A growing number of organizations and industries are faced with intense competition.” As late as 2016, analysts from the influential management consultancy McKinsey were noting that “(i)ncumbents that have long focused on perfecting their industry value chains are often stunned to find new entrants introducing completely different ways to make money”, which meant “many business leaders live in a heightened state of alert.”
In this “state of alert” competitive milieu, where pressure from rivals appeared to be holding in check the accumulation of problematic market power, antitrust seemed to be something of an anachronism. Forbes indeed invoked such logic in 2011: “(t)he thought behind antitrust is that if a company gains dominance in a field it will keep that dominance forever, and do so at the expense of the consumer. Experience demonstrates just how preposterous this idea is…. Competition and far-reaching innovation always undercut any entity’s dominance.” This all meant, according to Forbes, that antitrust should be consigned to the Smithsonian Museum. As we will see next, the fate of antitrust was looking much different a decade later.
8 The Counter-Revolution Under Threat
Given that in the late 2000s it was assumed there was nothing left of pre-Chicago antitrust thinking, the potential arrival of a new antitrust movement that harkens back to a pre-Chicago past has been a striking turn of events. Antitrust crusaders alarmed that America is afflicted with what Louis Brandeis called a “curse of bigness” more than a century ago have been turning the intellectual tide in their favor, perhaps presaging “a new, progressive era in antitrust.” Lina Khan, the prominent New Brandeisian, argued in 2020 “the relative stability of the antitrust consensus has yielded to a sharp rupture” and her appointment as FTC chair has been interpreted “as a victory for progressive activists who want Mr. Biden to take a hard line against big companies.” Barry Lynn, executive director of the Open Markets Institute, an early advocate of antitrust reform, said in 2021 “people were laughing at me” regarding antitrust as recently as 2017 but was vowing that with respect to judges “We’re going to get them into the 21st century. We’re going to get them out of Bork’s garage.”
What has changed? What is undermining the consensus arising from the 1970s/80s antitrust counter-revolution? A “flood” of economic studies implying the market power of dominant firms has increased markedly is one factor contributing to an antitrust moment that could yet translate into a fully-fledged antitrust movement. Data has not been decisive in isolation, however. After all, there was empirical evidence available at the start of the 2010s indicating an accelerating trend in favor of oligopoly that was “not commonly acknowledged” and failed to change the tenor of debate. Instead, other factors that historical trends highlight have enhanced receptivity to arguments that there is a present-day monopoly problem in America antitrust can do much to fix.
Evolving attitudes regarding regulation are one such factor. Antipathy toward government intervention contributed to the Reagan era antitrust counter-revolution. Such misgivings currently are on the wane, perhaps presaging a new era of big government. In 2018, 58% of those responding to a poll asking whether government should “do more” said “yes”, an all-time high to that point. The Biden administration has picked up on the cue. With the president’s 2021 State of the Union address in “virtually every section of his speech there was an idea recasting the long-standing taboos of American political debate as virtuous opportunities for government reform.” Hence, the Biden administration may be aiming to reverse Reaganite preconceptions of counterproductive state intervention to foster a revival of faith in government. History suggests that to the extent the Biden administration succeeds, the odds of an antitrust revival along New Brandeisian lines would improve considerably.
The situation is similar with foreign competition. The fact that large American corporations were confronting major challenges from abroad in the 1970s and 1980s fostered misgivings about antitrust enforcement. Between 1992 and 2012 in U.S. manufacturing industries there was increased concentration amongst domestic firms but a significant increase in the number of foreign firms operating in the American market meant once the sales of foreign exporters was accounted for market concentration was stable overall. By the mid-2010s, however, foreign firms that had formerly piled into the United States had reputedly “lost their mojo,” with “many foreign firms” having fallen “out of love with America years ago.” Sustained becalming of foreign competitors might well help to set the scene for a present-day reinvigoration of antitrust.
To the extent that foreign firms are a sideshow at present, in contrast with the 1980s and 1990s, Americans wary of corporate power may well conclude, “it’s our own giants that we have to fear.” Whereas the number of American companies ranked among the world’s 20 largest by revenue fell from 17 in 1962 to six in 1994, there were eight such firms in 2019 (Walmart, Amazon, Exxon, Apple, CVS, Berkshire Hathaway, United Health and McKesson). Partly because the Chinese government owned outright three of the four largest corporations ranked by revenue for 2019, American dominance of the list of world’s largest publicly traded firms is even more extensive. Currently, 13 of the top 20 companies ranked by stock market capitalization are American. With American firms dominating the global corporate spotlight, bolstering antitrust could well be thought of as an increasingly essential mechanism for containing the market power such firms have at their disposal.
Changing public perceptions of major tech companies are highly salient as foreign challenges recede. American tech giants have rapidly evolved from public relations heroes to zeroes, and have done so in a manner relevant to an antitrust rethink. Through to the mid-2010s, leading tech firms were “portrayed in the news media as forces of innovation and delight, as the best that American capitalism had to offer.” In 2015, President Obama implied that European Union regulators were jealously hounding American technology companies because European firms could not keep up.
By the end of the 2010s, the circumstances were much different. “Big Tech” had become “a pejorative term….And the men who run these companies (were) viewed as the robber barons of a new capitalist age.” As a former Alphabet (a.k.a. Google) lobbyist said in 2021, “In the last four or five years, the pendulum has swung in an overly dramatic fashion from ‘tech can do no wrong’ to ‘tech can do no right.’” Increasingly, those who follow the fortunes of powerful tech firms are “unable to perceive the possibility of viable substitutes or competitors to the firms at a similar scale either now or in the future.” Support may correspondingly grow for “restructuring mandated by traditional antitrust policy.” Amy Klobuchar, for instance, says “the sheer size and dominance” of the Big Tech companies allows them to “scare away their closest or nascent competitors.” That means, she reasons, that “(n)owhere do the modern-day competition issues come into sharper focus.” Big Tech skepticism thus could be a key catalyst for an antitrust rethink.
A late 20th century eclipsing of reputedly “real” mid-20th century antitrust was one of the most dramatic historical bends in the lengthy antitrust river. Currently, a cohort of “New Brandeisians” are aiming to reverse that late 20th century antitrust counter-revolution. History has featured prominently in this latest attempt to change the direction of the antitrust current. The New Brandeisians focus on a supposed mid-20th century antitrust golden era and the Chicago School critique of that era to explain what went wrong with antitrust and to outline how to correct things. As this article shows, the historical account on offer is misleadingly partial, both with respect to the nature of that golden era and the Chicago School’s influence. History thus may be providing the mood music for antitrust reform, but various false notes have been struck. This article has sought to get history and antitrust in tune.
One point this article has made in aligning history and antitrust is that antitrust’s mid-20th century golden era may not have been as golden as many suppose. Oligopoly featured prominently amidst uneven antitrust enforcement and U.S. Supreme Court rulings invoked problematic logic while ruling in favor of antitrust enforcers with unnerving regularity. As for the Chicago School, it became influential in the courts but a pro-antitrust jurisprudential pattern was unravelling in the U.S. Supreme Court before that court began citing Chicago School reasoning. Moreover, antitrust enforcement continued in earnest in the 1970s despite Chicago School logic gaining a foothold in the Supreme Court. During the 1980s, antitrust enforcement changed but did not cease in the way some critics alleged. Moreover, skepticism regarding the efficacy of government and a potent dose of foreign competition meant there was reasonably broad and sustained support for the basic contours of the late 20th century antitrust counter-revolution that occurred even as post-Chicago thinking gained influence at the expense of Chicago School theorizing.
The additional contextualization this article offers regarding antitrust history provides insights regarding progress the New Brandeisians have made recently. Continuing doubts about regulation and ongoing awareness of corporate America’s foreign rivals meant any sort of fundamental antitrust rethink was unlikely until recently. Over the past few years, however, increased faith in government and the becalming of foreign competition have combined with empirical evidence implying market power is on the rise to set the scene for robust debate on the future of antitrust. Luigi Zingales has argued, “If the world around you changes, you should change your prescriptions.” To the extent that those who set the tone with antitrust in the United States think along these lines, a significant and sustained new bend in the antitrust river is in prospect.
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