Antimonopoly and American Democracy 0197744672, 9780197744673

Citation preview

Antimonopoly and American Democracy

Antimonopoly and American Democracy Edited by

DA N I E L A . C R A N E A N D W I L L IA M J. N OVA K

Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and certain other countries. Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America. © The Tobin Project 2024 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by license, or under terms agreed with the appropriate reproduction rights organization. Inquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above. You must not circulate this work in any other form and you must impose this same condition on any acquirer. CIP data is on file at the Library of Congress ISBN 978–​0–​19–​774467–​3 (pbk.) ISBN 978–​0–​19–​774466–​6 (hbk.) DOI: 10.1093/​oso/​9780197744666.001.0001 Paperback printed by Marquis Book Printing, Canada Hardback printed by Bridgeport National Bindery, Inc., United States of America

Contents List of Contributors 

vii

PA RT I :   T H E L O N G H I ST O RY O F A N T I M O N O P O LY A N D A M E R IC A N D E M O C R AC Y 1. Introduction: Democracy and the American Antimonopoly Tradition  Daniel A. Crane and William J. Novak

3

2. Reframing the Monopoly Question: Commerce, Land, Industry  Richard R. John

35

3. From Antimonopoly to Antitrust  Richard White

83

PA RT I I :   R E T H I N K I N G T H E P R O G R E S SI V E A N D N EW D E A L A N T I M O N O P O LY T R A D I T IO N S 4. Antimonopoly and State Regulation of Corporations in the Gilded Age and Progressive Era  Naomi R. Lamoreaux

119

5. American Antimonopoly and the Rise of Regulated Industries Law  William J. Novak

168

6. Banking and the Antimonopoly Tradition: The Long Road to the Bank Holding Company Act  Jamie Grischkan

204

PA RT I I I :   R E M A K I N G A N T I M O N O P O LY I N A N EW G L O BA L AG E 7. De-​Nazifying by De-​Cartelizing: The Legacy of the American Decartelization Project in Germany  Daniel A. Crane

249

vi Contents

8. Jurisdiction beyond Our Borders: United States v. Alcoa and the Extraterritorial Reach of American Antitrust, 1909–​1945  278 Laura Phillips-​Sawyer 9. From Market Power to State Capture: The Fateful Shift in Postwar Antimonopoly  James T. Sparrow

319

PA RT I V:   A N T I M O N O P O LY A N D A M E R IC A N D E M O C R AC Y: SE L E C T C A SE ST U D I E S 10. Antitrust and the Corporate Tax, 1909–​1928  Reuven Avi-​Yonah 11. Beyond the Labor Exemption: Labor’s Antimonopoly Vision and the Fight for Greater Democracy  Kate Andrias

359

384

12. Anti-​Monopoly in the Media Industries: A History  Sam Lebovic

432

Index 

475

Contributors Kate Andrias, Patricia D. and Paul R. Yetter Professor of Law, Columbia University Reuven Avi-​Yonah, Irwin I. Cohn Professor of Law, University of Michigan Daniel A. Crane, Frederick Paul Furth Sr. Professor of Law, University of Michigan Jamie Grischkan, Associate Professor of Law, Arizona State University Richard R. John, Professor of History, Communications, and Journalism, Columbia University Naomi R. Lamoreaux, Stanley B. Resor Professor Emeritus of Economics and History, Yale University; Senior Research Scholar, University of Michigan Law School; and Research Associate, National Bureau of Economic Research Sam Lebovic, Associate Professor of History, George Mason University William J. Novak, Charles F. and Edith J. Clyne Professor of Law, University of Michigan Laura Phillips-​Sawyer, Jane F. Wilson Associate Professor of Business Law, University of Georgia James T. Sparrow, Associate Professor of History, the Conceptual and Historical Studies of Science, and the College, University of Chicago Richard White, Margaret Byrne Professor of American History, Emeritus at Stanford University

PART I

THE LONG HISTORY OF A N T IMONOPOLY A ND AM E R IC A N DE MO C R AC Y

1 Introduction Democracy and the American Antimonopoly Tradition Daniel A. Crane and William J. Novak

This book was written at an important generational moment in the American politics of monopoly, market power, and economic dominance. For the first time in decades, antitrust law and policymaking has again achieved political saliency among political and cultural elites as well as ordinary citizens. Some of this state of affairs is driven by the growing power that specifically Big Tech companies now wield in American society. But other concerns include a more general tide of economic concentration across many sectors of the economy, the widening spread of wealth inequality, and increasing monopsony power held by employers in labor markets. In consequence, a new generation of monopoly critics has emerged, arguing that economic concentration leads to increased prices, diminished innovation, depressed wages, economic stagnation, and misallocation of social resources.1 One of the most worrisome charges currently laid at the feet of monopoly is that it undermines democracy.2 This is certainly not a new claim,3 but it is one that has largely been suppressed by the prevailing Chicago School paradigm that has focused antitrust and competition policy on economic efficiency and consumer welfare. But now voices across the spectrum, from right to left, again are complaining that monopoly power erodes democracy itself. Political antagonists Donald Trump and Elizabeth Warren agree on very little, but both have cited the preservation of democracy as reasons to enforce the antitrust laws.4 The Open Markets Institute argues that popular obsession with the Supreme Court’s Citizens United decision—​the subject of an earlier book on which we collaborated5—​ignores the equally antidemocratic effects of corporate consolidation brought about by lax antitrust enforcement.6 The congressional Democrats assert that “concentrated market power leads to concentrated political power,”7 while centrist policy groups like the Brookings Institution argue that stronger antitrust is necessary to Daniel A. Crane and William J. Novak, Introduction In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0001

4  Antimonopoly and American Democracy prevent Big Tech from “wield[ing] excessive influence in our democracy.”8 The House Judiciary Committee’s 2020 report on digital markets asserts that the effect of Google, Facebook, Amazon, and Apple’s enduring market power is “a weakened democracy.”9 President Biden’s Executive Order on Competition begins with the premise that “excessive market concentration threatens . . . democratic accountability.”10 The leadership of the Justice Department’s Antitrust Division and the Federal Trade Commission have pledged to reorient antitrust toward preserving democracy.11 This concurrence of rhetoric presents a challenge in analyzing the democracy-​reinforcing nature of the antimonopoly tradition. When people with such widely different understandings about democratic values converge in opposing monopoly because of its corrosive effects on democracy, one has to suspect that they have very different understandings about how monopoly corrodes democracy and what is to be done about it. Despite considerable public interest in the emergence of new monopolies and their implications for American democracy, the dominant intellectual framework for concentrated economic power has focused narrowly on antitrust policy as a tool and on consumer welfare as a goal. This approach overlooks not only the broader democratic significance of monopolies, but also the fact that antitrust law is just one part of a highly contested American antimonopoly tradition concerned with managing concentrations of private and public power. For centuries, Americans have championed competing views about “bigness” and its democratic implications. Jeffersonian-​era antimonopolists were averse to large scale in both business and government. To them, preventing the emergence of democracy-​distorting monopolies entailed restraining the power of the state to dispense commercial favors, which they believed corrupted both industry and government. In contrast, some subsequent antimonopoly regimes were based on the notion that a stronger government was necessary to control aggrandizing private power. Theodore Roosevelt, for example, believed that the rise of trusts was economically inevitable and that the goal of policy should be to constitute government agencies with sufficient countervailing authority. Since then, others, such as influential jurist and scholar Robert Bork, have argued that the development of a government strong enough to control private power would itself pose an existential threat to free markets and personal liberty.12 Historians, economists, and legal scholars have examined aspects of American antimonopoly law and policy, but understanding of the historical relationship between the antimonopoly tradition and American democracy

Introduction  5 remains limited. To address this gap, we launched this initiative with the Tobin Project to synthesize analyses of how Americans have institutionalized the broader antimonopoly tradition to control both business and government power for the benefit of democracy, and how these actions have shaped democratic outcomes. The fruit of that initiative—​this volume—​endeavors to ground ascendant debates in the historical record and contribute to better informed decision-​making and policy. Recovering this history requires careful attention to the many competing approaches to the monopoly problem across time and close examination of the antimonopoly tradition through judicial opinions; federal, state, and local laws; strategic business behavior; and political culture. This volume on democracy and the antimonopoly tradition represents a collaboration among a group of distinguished social scientists working in history, economics, law, and political thought. Our authors tackle a range of angles in the American antimonopoly tradition from the late eighteenth century to the present day. Their contributions address a variety of industries—​ such as news media, banking, manufacturing, defense, and Big Tech—​and the perspectives of a variety of stakeholders—​such as labor organizers, public intellectuals, military officials, bureaucratic regulators, and state and national political leaders. Collectively, their chapters weave together the story of an American antimonopoly tradition deeply, but complexly, concerned with problems of democracy. To set the stage, this Introduction offers some background perspective on the antimonopoly tradition and its relationship to democratic values. We begin with a presentation of the key themes and tensions regarding the relationship between democracy and antimonopoly that our chapters consider. We then offer a brief historical account of the antimonopoly tradition from its oldest roots into the nineteenth century, when our authors pick up the story in greater detail. Finally, we provide a brief roadmap to the chapters to come.

Central Themes and Tensions in the American Antimonopoly Tradition Together, the chapters in this volume make the case for a new history of antimonopoly and antitrust. They are part of a historiographical revision pushing beyond conventional and received wisdom, generating a new

6  Antimonopoly and American Democracy narrative arc within which to interpret the American antimonopoly tradition. These chapters articulate a much longer and deeper history of antimonopoly in the United States, decentering conventional narratives that usually hover somewhere around 1890 and 1914 and feature an almost exclusive focus on things like the Sherman Act, New Nationalism vs. New Freedom, Roosevelt vs. Brandeis, and the Federal Trade Commission and Clayton Antitrust Acts. In contrast, the histories in this volume range broadly from the divergent antimonopoly perspectives of John Adams and Henry George to the rise of the Chicago School and America’s current “Curse of Bigness.”13 Relatedly, this volume also puts on display a more variegated and diverse history of antimonopoly. There is no single or sacred or unbroken American antimonopoly tradition. Rather, American antimonopoly is a history marked by complexity, contest, contingency, and change over time—​populated by a wide variety of shifting constituencies, coalitions, and beneficiaries. Perhaps most refreshingly, this historical revision attempts to challenge the main components of prevailing antitrust orthodoxies of both right and left. The chapters that follow push well beyond preoccupation with some kind of fixed consumer welfare or single economic efficiency standard, and they challenge an older and outmoded political history consumed by demarcating the historic limits of American regulation and statecraft. But these essays also press beyond the strict confines of a recently revitalized “New Brandeisian” project dedicated primarily to smallness through a simple strategy of “break ’em up.”14 Finally, this more socio-​legal history of American antimonopoly attempts to methodologically transcend doctrinal histories of antitrust law per se that focus almost exclusively on high courts, canonical cases, and comparatively infrequent incidences of judicial review.

Democracy and Antimonopoly Thematically, this substantive revision begins with a recentering of the history of American democracy. This volume highlights antimonopoly policymaking as an institution of democratic politics—​that is, as a political rather than a solely economic or legal institution. The chapters in this book all take issue with approaching American antitrust through an exclusively law and economics lens and attempt instead to re-​establish priority for what Robert Pitofsky called the “political content” of antitrust. Rather than see economic consumer welfare or a timeless quest for “smallness” as sole

Introduction  7 measures of the American antimonopoly tradition, these essays begin to recover a somewhat lost or forgotten history of antimonopoly’s diverse democratic origins and aspirations. Here, questions of politics, power, and inequality return front and center to the history of American antimonopoly and antitrust. And antimonopoly reappears as a political movement for increasing democratic control over a constantly changing economy and society. In these histories, antimonopoly emerges as a key battleground where larger issues of political power and socioeconomic inequality were joined and fought. These chapters reveal a long-​standing American tradition wherein concentrations of unregulated power were perceived as threats to democracy and the project of collective self-​government. The systemic problem of the concentration of private economic power in a democracy was a driving question of the long history of American antimonopoly, highlighting a special concern for the way in which private concentrations of unchecked power could undermine democratic political processes and exacerbate socioeconomic inequality. Pitofsky himself claimed that “excessive concentration of economic power” fostered “anti-​democratic political pressures,” and thus one of the goals of antitrust was “reducing the range within which private discretion by a few in the economic sphere controls the welfare of all.”15 In their pioneering text on The Modern Corporation and Private Property, Berle and Means argued similarly that “economic power in the hands of a few persons who control a giant corporation is a tremendous force which can harm or benefit a multitude of individuals, affect whole districts, shift the currents of trade, bring ruin to one community and prosperity to another. The organizations which they control have passed far beyond the realm of private enterprise—​they have become more nearly social institutions.”16 From Southern slaveocracy to nineteenth-​century land monopoly to the first American industrial trusts and beyond, concentrations of socioeconomic power were seen as the equivalent of private governments or sovereignties threatening to the foundations of America’s public democracy. Now, of course, concerns about oligopoly and oligarchy—​inequality and aristocracy—​distorting processes of self-​government have an ancient pedigree. Aristotle famously worried about the potentially corrupting effects of private interest on commonwealth: “The true forms of government, therefore, are those in which the one, or the few, or the many, govern with a view to the common interest; but governments which rule with a view to the private interest . . . are perversions.”17 In the American antimonopoly tradition,

8  Antimonopoly and American Democracy such concerns reached something of a fever pitch as reformers like Henry Demarest Lloyd decried “Wealth against Commonwealth” in a series of historic crusades against private enterprises corrupting democratic politics.18 Over and over again in this long American tradition, antimonopolists asserted the primacy of democracy over and against economic concentration, economic corruption, and economic inequality. Concerned with both unequal power relations in society as well as potential economic distortion of the political process, American antimonopolists advocated the priority of politics over economics, the priority of public democracy over private economy. Oliver Wendell Holmes Jr. implicated the case famously in dissent in Lochner v. New York: “This case is decided upon an economic theory which a large part of the country does not entertain. If it were a question whether I agreed with that theory I should desire to study it further and longer before making up my mind. But I do not conceive that to be my duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law.”19 Here Holmes tapped directly into the anti-​formalism and critical realism of his time, scrutinizing legal-​economic policies and theories with an emphasis on experience over logic and pragmatic policy outcomes over abstract principles. Holmes was also in tune with a longer antimonopoly commitment to the priority of democracy—​a preference for the many over the few; an equal rather than unequal demos, and the basic, historic, and fundamental right of a self-​governing people to embody their opinions and remedies in laws and legislation.20 The priority of democracy over economy bequeathed the American antimonopoly tradition another focus as well—​an ongoing concern with the distribution or disaggregation of power and the establishment of alternative sites and legal-​political levers of countervailing democratic power and authority. The problem of unchecked and unaccountable concentrations of power was the problem of American antimonopoly, and a focus on a more equitable redistribution and dispersal of accountable authority and countervailing power was often the American antimonopoly response. Legal historian Willard Hurst placed this particular value at the very heart of American democratic constitutionalism: “Any kind of organized power ought to be measured against criteria of ends and means which are not defined or enforced by the immediate power holders themselves. It is as simple as that: We don’t want to trust any group of power holders to be their own judges upon the ends for which they use the power or the ways in which they use it.” “All forms

Introduction  9 of organized power,” Hurst contended, “should in some way be accountable to serve ends of broader concern than the purpose of the power holders.”21 From early battles over commercial and land monopolies to the long struggle of the American labor movement for a seat at the table to Thurman Arnold’s indictment of a “dictatorial industrial power” against democracy, the quest for new mechanisms to check and countervail concentrations of power and authority has long been a central part of the American antimonopoly tradition.22

The Deep and Diverse Roots of American Antimonopoly The second interpretive theme that unites these essays is an awareness that the antimonopoly tradition runs both deeper and wider in American history than is commonly thought. In contrast to various attempts to distill an original, uniform, permanent, and consistent set of principles and goals that have governed American antitrust since inception, these essays cast a broader net in search of historic American antimonopoly. In terms of depth, beyond the common-​law, English, and colonial origins explored in this Introduction, we also begin early as Richard John and Richard White explore the “small-​d” democratic antimonopoly traditions that sprung up as early as the late eighteenth century to do battle with ancient “land monopolies” and, later, more modern “industrial monopolies.”23 Here, new behemoth concentrations of economic power were seen as explicit threats to the republic and its earliest expectations of independent production, free labor, financial independence, and access to capital. These attributes were seen as central to early American conceptions of citizenship and as preconditions to successful democratic participation by householders, producers, and proprietors. Early American antimonopoly, in other words, was suffused with “political content,” and democratic aspirations fueled early antimonopoly rhetoric as well as action from the first days of the republic. It is simply impossible to fully understand the historical trajectory and general import of the American antimonopoly tradition devoid of these early democratic vistas.24 In terms of the breadth of American antimonopoly, we feel the contribution of this volume is even more original and significant. All our authors focus their inquiries through the lens of an American antimonopoly tradition, broadly construed, and not just through the doctrines of antitrust law per se. As already suggested, the historic American antimonopoly tradition,

10  Antimonopoly and American Democracy from the late eighteenth century through the New Deal and postwar periods, consisted of a wide range of different legal technologies and policy orientations, from an early producerist and free labor perspective aimed at preserving a self-​governing republic to the massive legal and regulatory innovations of progressive reformers concerned with unfair competition, public utility regulation, labor administration, and tax reform25 to a similarly sprawling New Deal and postwar antimonopoly synthesis that predominated until the ascendancy of the Chicago School.26 The historical recovery of the full scale and scope of the democratic American antimonopoly tradition requires moving well beyond the tried-​and-​true canon of great Supreme Court antitrust case law. Consequently, the essays in this volume produce fuller histories of the role of the common law and antimonopoly legislation before the Sherman Act as well as the continuing importance of state and local antimonopoly policies that remained important sites of democratic action and policymaking from the late nineteenth century to the present. We also get a more complete historical account of the interrelationship of local, state, national, and even international policymaking.27 In place of ideologically charged narratives that primarily aim to make normative arguments about the proper scale and scope of antitrust action, the essays in this volume are more pragmatically geared toward revealing the actual historical mechanics of the American antimonopoly tradition across all of its diverse manifestations. We are interested in demonstrating effects—​ that is, in actually showing how antimonopoly has differently worked across American history and to what ends. Accordingly, the essays that follow reveal an antimonopoly tradition defined by what at first might look like an unwieldy assemblage of divergent legal technologies, and policies. But our goal is to emphasize just how broad and diverse the American antimonopoly toolkit actually was. In contrast to conventional narratives highlighting patchwork, ineffectiveness, and a seemingly endemic American state incapacity,28 these essays together document the robust legal and institutional accomplishments of the long American antimonopoly movement in developing new techniques and tools of control that yielded by the mid-​twentieth century a more mixed economy and a more organized and regulated form of corporate capitalism. Beyond the doctrinal confines of antitrust law per se (and its supposed original intent or telos), the historical American antimonopoly tradition has boasted a wide array of sources and methods (as well as constituencies and coalitions). In these pages, we unpack a diverse antimonopoly toolkit beyond antitrust that still brims with future

Introduction  11 possibilities: tax policy, regulated industries, common carriage, public utility, quo warranto suits, corporation commission regulation, state constitutional amendment, corporate governance, entry restrictions, holding company reorganization, unfair competition, universal service, structural separations, procurement policy, small business policy, interconnection mandates, public options, public provision, and even public ownership. Beyond well-​ worn themes of “consumer welfare,” “economies of scale,” or the “curse of bigness” lies an actual American historical tradition of antimonopoly embracing a staggering variety of techniques of legislation, regulation, and administration.

Change over Time—​Toward a Developmental History of American Antimonopoly The first two central themes of this volume thus underscore a certain continuity in the American antimonopoly tradition in terms of (a) the priority of democracy and (b) the proliferation of legal-​political techniques and technologies of antimonopoly policymaking. But the third central theme of this book emphasizes discontinuity, or what historians talk about as change over time. Indeed, together, the essays in this volume bring into stark relief a new periodization of American antimonopoly divided into three distinct historical periods or phases. The first essays in this book delineate some of the earliest origins of American antimonopoly in an original political movement wherein economic democracy was seen as an essential prerequisite to political democracy. For much of the nineteenth century, the earliest incidence of monopoly threat was viewed in terms of a threat to producerist citizenship and the control of households and proprietors over their own work and employment. Antimonopolists in the early part of the century fought to protect small producers, whom they saw as crucial to cultivating the independent citizens central to democracy. From early critics of land monopoly to the earliest instantiations of the American labor movement in the Knights of Labor, this democratic vision of a smaller-​scale producerist-​controlled political economy fueled radical crusades against economic inequality and concentrated power in general. A crusading and moralistic spirit accompanied this first wave of antimonopoly sentiment as producers, agrarians, and populists aimed a “visceral revulsion” at the strange new commingling of

12  Antimonopoly and American Democracy “progress” with “poverty” in the earliest stages of capital accumulation and industrialization. The second group of essays in this book, however, highlight a different set of voices and priorities that captured the American antimonopoly tradition from the Gilded Age to the Progressive Era. As American political economy transformed away from a republic of independent producers and small-​ holders into a nation of consumers and wage laborers, the American antimonopoly tradition again adjusted its primary objectives and technologies. Here, antimonopoly reformers shifted their energies from policing all forms of incorporated consolidation via state charters and common law categories to a more regulated industries model, focused on controlling private concentrations of new industrial powers according to certain characteristics (size and structure) or nature (public necessity, public utility, or infrastructure) or behavior (unfair or illegal economic practices). In sync with what historian Samuel Hays once called a general “upward shift in decision-​ making power,” the locus of antimonopoly action laddered slowly but surely from lower to higher levels of government authority over time, from state to municipal to federal to international regulation. Though local and state action would remain crucial parts of any antimonopoly project throughout, the legal-​political technologies of antimonopoly increasingly migrated from the local regulatory world of common law categories and state charters to the distinctively modern forms of legislative, administrative, and regulatory power that reached something of a peak in the dramatic reconstructions that accompanied the Great Depression and World War II. Finally, in producing the main categories of debate that preoccupy our own current antimonopoly moment, the New Deal and postwar settlement itself began to unravel in the wake of a new set of concerns (hailing from both right and left) about things like regulatory capture, interest-​group politics, inflation, and the limits of American statism. The rise of the Chicago School and the onset of a more neoliberal political economy seemed to call into question much of the American antimonopoly tradition, reversing the priority of democracy over economy, and depoliticizing American antitrust.29 So thoroughgoing was some of the evisceration of Progressive and New Deal antimonopoly presumptions and categories, that the most recent entrants to contemporary antimonopoly debate have returned to Louis Brandeis in the hopes of resuscitating a vital American historical tradition. While the ultimate outcome of this last stage in the development of our current American antimonopoly tradition remains the subject of intense

Introduction  13 debate, this volume offers a less tentative conclusion about the relationship of the nineteenth-​century and Progressive–​New Deal legacies. The volume endorses the need for a developmental history of the American antimonopoly tradition. That is, this collective history foregoes common narrative tropes of either whiggish progress or decline and fall from some earlier era, by attempting to trace and identify points of specific change as well as general continuities. The history is complex and does not lend itself readily to easy conjecture about which version of the American antimonopoly regime is original, superior, or permanent. The shift from nineteenth-​century antimonopoly to Progressive–​New Deal legislation and regulation is marked by dramatic changes in objectives and orientation. But there is one clear continuity. Both versions of the tradition defended their initiatives in the name of economic and political democracy. The meaning and import of American democracy changed substantially from the nineteenth to the twentieth century—​as John Dewey reminded us, democracy is a history rather than a concept or ideal. Dewey also understood the importance of substantive economic democracy to anything resembling political democracy: “the problem of democracy was seen to be not solved, hardly more than externally touched, by the establishment of universal suffrage and representative government.”30 The recent attempts of current American antimonopolists—​ in the brave new age of Amazon, Facebook, Apple, and Google—​to revisit the entirety of the early American antimonopoly tradition in a quest for new democratic solutions to the age-​old problem of concentrations of private economic power suggests something of the versatility, dexterity, and adaptability of the American antimonopoly tradition. That tradition has ancient legal-​historical roots.

The Antimonopoly Tradition in Historical Perspective Ancient Roots Ever since the Emperor Tiberius apologetically coined the word “monopolium” before the Roman Senate,31 the word “monopoly” has been one of opprobrium. Indeed, the idea that it is not fair for a single person to control an entire segment of the economy, or for a group of people to agree not to compete with each other, has ancient roots, stretching back to the earliest recorded legal codes. Some accounts find a prohibition on monopolistic

14  Antimonopoly and American Democracy practices in the Code of Hammurabi (c. 1754 bce).32 Aristotle wrote in his Politics of Thales cornering the market for oil presses and iron, and then selling olive oil at high prices at times of urgent demand.33 A price-​fixing case against grain dealers appears in fourth-​century bce Athens, with the death penalty possibly imposed.34 An antimonopoly sentiment finds expression in ninth-​century bce Chinese thought,35 early Islamic law,36 and in a fifth-​ century decree of the Byzantine emperor Zeno and the Justinian Code.37 From Thomas Aquinas riffing on Aristotelian just price theory to Martin Luther’s jeremiads against price-​fixing cartels and predatory pricing,38 an antimonopoly thread runs through the scholastic and reformed Christian traditions as well. The antimonopoly tradition is ancient, but not uncontested. For every example of a law prohibiting monopolies or cartels, there are many examples of kings, legislative councils, and judges doing just the opposite—​creating exclusive commercial rights to raise revenue for the Crown, requiring participation in self-​regulatory guilds, creating barriers to competition by outsiders, and limiting competitive freedom. From ancient roots until the present day, the antimonopoly tradition has had to contend with an equal and opposite tradition that has viewed the dispensation of monopolistic privilege as the prerogative of the sovereign and preferred markets to be organized by fiat or coordination rather than competition. To trace an antimonopoly tradition to early human civilization is also to recognize that antimonopoly exists apart from democracy. The tradition precedes democratic stirrings in Ionian civilization and finds expression in many decidedly undemocratic or anti-​liberal regimes. Thus, while this book narrates a linkage between democracy and antimonopoly and excavates lines of argument that vibrant democracy necessarily entails vigorous antimonopoly, it is also important to acknowledge the separate lineage of the two traditions.

The English Common Law The framers of the Sherman Act of 1890 insisted that they were merely codifying the common law on restraints of trade and monopoly.39 Although jurists would later contest the relevance of the common law to Sherman Act interpretation,40 the English common law on the virtues of competition and evils of monopoly undoubtedly exerted a considerable influence on attitudes

Introduction  15 in the colonies and early American Republic. It is through the common law that Americans inherited antimonopoly. The English tradition on competition has venerable roots. Sir Edward Coke argued that all monopolies—​understood as special privileges granted by the Crown—​were against Magna Carta because they stood against liberty and freedom.41 William Blackstone found the common law’s abhorrence of monopoly to be grounded in older Roman and Byzantine principles.42 From at least the fifteenth century forward, English cases expressed a policy in favor of free competition and against agreements in restraint of trade. Two early fifteenth-​century cases expressed the bookend principles that competition is not a wrong, and that restraining competition is. In the “Schoolmasters case,”43 the Court of Common Pleas held a schoolmaster who opened a new grammar school at Gloucester and caused tuition prices to fall by two thirds had not caused legal injury to the incumbent grammar school monopolist. The idea that competition is a good rather than a wrong may not have been obvious, as evidenced by the dissenting opinions in the Schoolmasters case, but it was essential to social and economic progress. As the US Supreme Court held much later in the Charles River Bridge case, if the law implied a right to exclusivity as against competition, we would “be thrown back to the improvements of the last century, and obliged to stand still.”44 The flip side of the Schoolmasters case—​the recognition that restraining competition is a wrong—​also had entered the common law by the fifteenth century. In the Dyer case of 1415, the court held that an agreement to discharge a debt if the debtor refrained from competing with the creditor was not only void as against common law, but also an offense against the Crown.45 Treating collusive agreements as of interest to the Crown marked an important realization that the public has an interest in private anticompetitive agreements. Still, the question of whether agreements in restraint of trade were merely unenforceable or capable of subjecting the parties to liability or even criminal responsibility remained unresolved for a long time. As late as 1889—​the year before the passage of the Sherman Act making antitrust offenses federal crimes—​an English court held that a price-​fixing agreement among steamship companies was void as against common law, but not actionable for damages by persons not parties to the contract, nor creating criminal liability.46 In this view, competition among parties was mostly a private contractual matter, not one in which outsiders to the contract had any say.

16  Antimonopoly and American Democracy The ambiguity of the common law with respect to competition and monopoly is best framed in a landmark seventeenth-​ century case, Darcy 47 v. Allein, nicknamed “The Case of Monopolies.” Darcy had received from Queen Elizabeth an exclusive privilege via a “letter patent” to buy playing cards overseas and import them into England. In exchange for this privilege, Darcy remitted 100 marks to the Queen annually, thus sharing his monopoly profits with the Crown in an arrangement typical of many sovereign grants of exclusivity. When Allein started importing playing cards, Darcy complained that he was doing so in violation of Darcy’s patent and that this competition was making it impossible for him to remit the contracted payments to the Crown. The King’s Bench struck down the exclusive privilege as “utterly void.” In a classic statement of the harms attendant to monopoly the court identified “three inseparable incidents to every monopoly”: (1) That the price will be raised. (2) After the monopoly grant, the commodity is not so good as it was before. (3) It tends to the impoverishment of divers artificers and others who before by their labour had maintained themselves and their families, who now will of necessity be constrained to live in idleness and beggary. However, it would be a mistake to read Darcy v. Allein as a broad holding that monopolies were illegal as against the common law. Understood in context, the case is more about who could grant a monopoly—​the Crown or Parliament—​rather than whether monopolies could be granted at all. In the late sixteenth century, Parliament had begun to inveigh against the grant of royal monopolies as an abuse of the Crown’s privileges.48 Darcy v. Allein was an important landmark in the continuing jurisdictional struggle between the Crown and Parliament. The playing card monopoly may have been unlawful since “[t]‌he Queen was deceived in her grant,” but Parliament had every right to—​and did—​grant many such monopolies. Indeed, a few years after the King’s Bench struck down Queen Elizabeth’s playing card monopoly, Parliament granted a playing card monopoly of its own. There is indubitably an antimonopoly strand in the English common law, but one always in tension with a tradition fiercely protective of the sovereign’s

Introduction  17 grant of monopoly rights. Adam Smith described the punishment for violating royal monopolies in violent terms: Like the laws of Draco, these laws may be said to be all written in blood. . . . [T]‌he exporter of sheep, lambs or rams, was for the first offence to forfeit all his goods for ever, to suffer a year’s imprisonment, and then to have his left hand cut off in a market town upon a market day, to be there nailed up; and for the second offence to be adjudged a felon, and to suffer death accordingly.49

Despite its ambiguities, the English common law indubitably exerted an important influence on the formation of US attitudes and law. For example, Mitchel v. Reynolds, decided in 1711,50 laid the groundwork for a “rule of reason” to adjudge agreements in restraint of trade—​a framework that the US Supreme Court controversially adopted two hundred years later in Standard Oil.51 Yet, as the antimonopoly tradition took root in the New World, it also assumed a distinctively American flavor.

The American Colonies and Early Republic To the early colonial ear, the term “monopoly” connoted exclusive royal privilege of the kind Queen Elizabeth accorded to the British East India Company for trading privileges east of the Cape of Good Hope and the Straits of Magellan.52 Largely through Coke, who wrote the only published report on Darcy v. Allein, the American colonists inherited a belief that monopoly was contrary to Magna Carta and hence contrary to their ancient rights as Englishmen. Thus, William Penn wrote in his The Excellent Priviledge of Liberty & Property Being the Birth-​Right of the Free-​Born Subjects of England that “[g]‌enerally all Monopolies are against the great charter because they are against the Liberty and Freedom of the Subject, and against the Law of the Land.”53 By the middle of the seventeenth century, the American colonists unhappily began to internalize the burden of English mercantilist policy with its guarantees to English merchants of exclusive trading rights in the colonies.54 Things were to get worse. In the eighteenth century, Parliament intensified its restrictions on colonial trade, which showed that monopoly was not merely a corruption of royal prerogative, but of any sovereign ill-​disposed to

18  Antimonopoly and American Democracy commercial freedom. Parliament’s mercantilist policies sowed bitter resentment in the colonies. As one historian has noted, “the efforts of the English government, backed by English merchants and manufacturers, to deny to the Americans the right to compete in foreign markets and to secure the benefits of foreign competition was one of the most potent causes of the American Revolution.”55 The fledgling republic would soon learn that monopoly was not solely the province of either the British Crown or Parliament. During the Revolutionary period, rampant inflation and fluctuating commodity prices led to political agitation against domestic “forestallers and engrossers.”56 These pressures led to recommendations from the Continental Congress, passed by legislatures in New Jersey and Massachusetts, to “prevent monopoly and oppression” by fixing maximum prices for commodities.57 The new state constitutions embedded an antimonopoly principle as fundamental law. Maryland proclaimed “[t]‌hat monopolies are odious, contrary to the spirit of a free government, and the principles of commerce, and ought not to be suffered”; North Carolina that “perpetuities and monopolies are contrary to the genius of a free state and ought not be allowed”; and Massachusetts that “[n]o man, or corporation, or association of men, have any other title to obtain advantages, or particular and exclusive privileges, distinct from those of the community, than what arises from the consideration of services rendered to the public.” But, as always, the indigenous American antimonopoly tradition was not without its counterweights. Debates around the framing and ratification of the Constitution set off new rounds of antimonopoly discourse that would play out in domestic politics and constitutional law for at least half a century. During the Philadelphia constitutional convention, James Madison introduced a proposal to grant Congress the power to “[t]‌o grant charters of incorporation in cases where the Public good may require them, and the authority of a single State may be incompetent.”58 When Benjamin Franklin later moved to grant Congress the power to cut canals, Madison reintroduced his own proposal to give Congress an even wider power to incorporate, and one not limited to common carriers or other lines of business affected with the public interest.59 This proposal led to a sharp exchange between Federalist and Anti-​Federalist delegates, with Federalists like James Wilson arguing that an explicit power to incorporate might be unnecessary because it was already inherent in the proposed commerce clause of what became Article I, Section 8, and Anti-​Federalists like George Mason expressing horror of

Introduction  19 “monopolies of every sort, which he did not think were by any means already implied by the Constitution as supposed by Mr. Wilson.”60 Madison’s chartering proposal did not carry, but that was of cold comfort to the Anti-​Federalists who had heard Wilson loud and clear on the Federalist interpretation of the commerce clause. George Mason and Elbridge Gerry refused to sign the proposed Constitution because “[u]‌nder their own Construction of the general Clause at the End of the enumerated Powers, the Congress may grant Monopolies in Trade & Commerce.”61 A slew of Antifederalist writers attacked the proposed Constitution on the ground that it permitted Congress to grant monopolies, and a number of state ratifying conventions, including Massachusetts, New Hampshire, North Carolina, and New York, sent instructions requesting that Congress include a antimonopoly provision in a Bill of Rights. In private correspondence to Madison, Jefferson endorsed the idea of an antimonopoly amendment.62 And then came Hamilton’s proposal for a national bank—​the embodiment of corrosive monopoly to Jefferson, Madison, and their newly minted opposition party. Hamilton prevailed with Washington and got his “monster bank,” which the vacillating President Madison granted a second term following the War of 1812. The Supreme Court endorsed Hamilton’s vision for muscular federal economic powers in McCulloch v. Maryland, upholding the constitutionality of the bank. Andrew Jackson then vetoed the bank’s second renewal charter, complaining of its “exclusive privilege under the authority of the General Government, a monopoly of its favor and support.”63 The Jacksonian movement against special charters and for general laws reacted to a particular pedigree of monopolism—​the crony capitalist system of legislatures dispensing special economic privileges to favored citizens.64 In the early nineteenth century, antimonopoly “was an expression of the producerist-​republican tradition that emphasized the dangers of government in the private economy and critiqued the power of large aggregations of capital and banks.”65 Over the course of that century, antimonopoly would diverge into two separate threads—​one concerned with governmental economic intervention and the other with private economic power. The first strand of antimonopoly concerned constitutional limitations on the states’ power to legislate on a class basis or in favor of narrowly defined interest groups.66 These arguments met with some success in state courts over the course of the nineteenth century. For example, an 1855 decision of the Indiana Supreme Court invalidated a state statute prohibiting the sale of liquors except by certain authorized county agents

20  Antimonopoly and American Democracy as an unconstitutional enactment of monopoly.67 Such anti-​ regulatory deployments of the antimonopoly principle continued to have some traction in state courts through the end of the nineteenth century, but ultimately lost traction under the federal constitution’s Reconstruction Amendments. In the Slaughter-​House Cases of 1872,68 the Supreme Court rejected a group of Louisiana butchers’ Thirteenth and Fourteenth Amendment challenge to a state statute that granted a twenty-​five-​year monopoly to the Crescent City Live-​ Stock Landing and Slaughter-​ House Company to maintain slaughterhouses in certain state parishes. The butchers explicitly positioned their argument on antimonopoly grounds, reading Coke’s report of Darcy v. Allein to the Court.69 Justice Field’s dissenting opinion expressed sympathy to their assertion of a constitutional antimonopoly tradition. However, the majority rejected the butchers’ interpretation of the Reconstruction Amendment, reading down the privileges and immunities clause of the Fourteenth Amendment to a narrow scope incapable of carrying the weight of the antimonopoly tradition. After the Slaughter-​House cases, the constitutional antimonopoly narrative concerned with the limits of the state police power and economic regulation is largely subsumed within the familiar story of economic substantive due process, which passes through opinions like Munn v. Illinois70 upholding the states’ police power to regulate businesses affected with the public interest; Lochner v. New York,71 striking down maximum hour legislation for bakers; and the New Deal settlement cases rejecting active scrutiny of state economic legislation by the federal judiciary. But just as the constitutional antimonopoly tradition was fading, a second strand of the antimonopoly tradition, concerned more with private than with public power, was re-​emerging. This concern with economic power obtained without any special grant from the state certainly was not new. We have already seen that concerns with private economic power are traceable back to the earliest roots of the antimonopoly tradition, and nineteenth-​century cases did sometimes police monopolies or restraint of trade of a private character. But throughout much of the nineteenth century, the dominant social understanding of what constituted a “monopoly” was a grant of exclusive privilege from the state. As late as 1878, the Michigan Law School dean, eminent treatise writer, and jurist Thomas Cooley would devote 90 percent of his essay on monopolies to state-​granted exclusive rights, before turning almost as an afterthought to “monopolies not created by the legislature.”72 Similarly, as late as 1886, Christopher Tiedeman would assert in his Treatise

Introduction  21 on the Limitations of Police Power in the United States that “[it] is only in extraordinarily abnormal cases that any one man can acquire this power over his fellowmen, unless he is the recipient of a privilege from the government or is guilty of dishonest practices.”73 But social and political changes brought about by Reconstruction and economic and technological changes brought about by the Second Industrial Revolution were beginning to challenge the predominant understanding of monopoly as a creature of state dispensation. As business and legal entrepreneurs began to stretch the boundaries of state corporate law to create massive aggregations of capital, antimonopolists rediscovered or recreated the strands of their tradition concerned with undue economic power, whatever its source. Over time, the predominant meaning of monopoly shifted from the state grant of privilege to privately obtained power. By 1890 and the passage of the Sherman Act, Congress could prohibit agreements in restraint and monopolization without having to specify that it meant the private rather than public variety. This brief sketch of the antimonopoly tradition sets the stage for the stories our chapter authors will narrate beginning in the mid-​nineteenth century. Thus far, we have said little about the place of democracy in the arc of antimonopoly, and even less about antitrust. This is because, in historical perspective, antimonopoly is not always tied to democracy, which is an old idea, nor antitrust, which is a new idea. Nonetheless, from the founding era on, Americans linked the success of democracy to the fight against monopoly, and with the rise of the trusts as a powerful form of business consolidation in the Gilded Age, the thematic linkage of democracy, antimonopoly, and antitrust becomes unavoidable.

Contributions and Contributors Part I of this book is devoted to establishing the deep roots of an antimonopoly tradition in American history. Paired with this Introduction, the chapters by Richard John and Richard White reconstruct the main lineaments of this democratic tradition from the American Revolution through the Gilded Age. Richard John’s “Reframing the Monopoly Question: Commerce, Land, Industry” uncovers the main pillars of antimonopoly thought in the United States from the 1773 Boston Tea Party to the establishment of the Federal Trade Commission in 1914. John’s history challenges a conventional

22  Antimonopoly and American Democracy historiography of American antimonopolism centered on a movement from nineteenth-​ century producerism to twentieth-​ century consumerism. Instead, John unearths a more continuous tradition in the policy pronouncements of four antimonopoly visionaries—​ John Adams, who contested British commercial monopoly as an obstacle to national independence; Henry George, who opposed the private ownership of natural resources as a violation of natural rights; William Leggett, who attacked legislatively mandated special privilege; and Walter Lippmann, who deplored the wastefulness of the industrial corporation. Through the analysis of these four figures, John captures both the breadth and radicalism of historical antimonopolism, to which the ideals of national independence, natural rights, and public utility acted as a fulcrum. Richard White’s “From Antimonopoly to Antitrust” reinforces this theme of the original radicalness of the original nineteenth-​century American antimonopoly tradition. White specifically addresses the emergence of antitrust law from within this broader American antimonopoly tradition. He posits that US antimonopoly and antitrust were distinct traditions, with the latter as a more technocratic synthesis emanating from the legal-​political difficulties of the Gilded Age. Orienting his chapter particularly around the Interstate Commerce Act and Sherman Antitrust Act, White argues that the narrow, empirical focus on the economic consequences of antitrust undercut broader antimonopolist messaging about the threat of monopoly to the values of equality and democratic producerism in a democratic republic. The resulting antitrust laws, he concludes, were not so much the embodiment of American antimonopoly as blunting instruments deployed against more radical proposals. Together, the chapters in Part II of this volume attempt a revisionist reframing of the much-​discussed Progressive and New Deal antimonopoly traditions. Naomi R. Lamoreaux’s “Antimonopoly and State Regulation of Corporations in the Gilded Age and Progressive Era” revises conventional ideas about (a) the role of state governments in regulating the economy in the late nineteenth-​century; (b) the effect of New Jersey’s charter mongering in other states’ efforts to counter the “trusts”; and (c) the shift in the arena of antitrust policy from the states to the federal government in the early twentieth century. Lamoreaux counters the idea that the laws enacted during this period evidence some kind of triumph of laissez-​faire and instead argues that these laws were highly regulatory and surprisingly effective. Overall, antimonopolist activity at the state level was considerably heterogeneous and

Introduction  23 context-​dependent. The strong antitrust agenda pursued by state attorneys general in the West, particularly in the Plains states, was encouraged by the presence of strong antitrust groups in the area, while the entrenchment of big business in the East provided less fertile ground to state attorneys general to pursue vigorous antitrust action. Picking up where Lamoreaux leaves off, William J. Novak’s “American Antimonopoly and the Rise of Regulated Industries Law” traces the development of this distinctly regulatory antimonopoly tradition from the late nineteenth century to the New Deal. Novak investigates the important role of antimonopoly and antitrust in the larger Progressive Era effort to develop new techniques and technologies of control over American business in the immediate wake of the declining efficacy of nineteenth-​century common-​law and state charter-​based mechanisms for regulating corporations. From the perspective of legal history, Novak emphasizes the crucial role of American antimonopoly and antitrust in the long, steady, and momentous expansion and nationalization of American police power in the early twentieth century. Beyond the specific problem of monopoly per se, Novak’s chapter probes the role of the Sherman Act, the Clayton Act, and the creation of the FTC in the larger expansion of federal police power control over corporations and economic activities formerly dealt with by states through charters and more local police regulations. As was the case for public utility, exactly at the point when an earlier regulatory regime began to falter, the American antimonopoly tradition galvanized a new set of federal initiatives aimed at expanding public control over a rapidly transforming American economy, ultimately giving rise to a new and potent law of regulated industries. In “Banking and the Antimonopoly Tradition: The Long Road to the Bank Holding Company Act,” Jamie Grischkan traverses the themes introduced by Lamoreaux and Novak in tracing the continued legal-​economic problem of the holding company in American democracy. Specifically, Grischkan’s chapter follows the history of the US bank holding companies and the movement to prevent the monopolistic expansion in American finance that led to the Bank Holding Company Act in 1956. The antimonopoly movement in the banking industry, Grischkan argues, was a wide umbrella of divergent interests that encompassed small bankers, commercial businesses, agrarians, Southern and Western Jacksonian Democrats, and Northeast Progressive Republicans. The shape of antimonopoly reform was as much molded by the clashes between these groups as by the general struggle between the big banks and those who wished to regulate them. Grischkan’s history of bank holding

24  Antimonopoly and American Democracy companies refutes the narrative that antimonopoly reform ended with World War II and the New Deal. Instead, the compromises and disagreements of that age continued to inform the meaning of antimonopoly activity into the postwar period—​a theme that takes center stage in Part III of this volume. Chapters by Daniel A. Crane, Laura Phillips-​Sawyer, and James T. Sparrow document the transformations in the American antimonopoly tradition as the United States navigated war, postwar, and the rise of a new global era in political economy. In “De-​Nazifying by De-​Cartelizing: The Legacy of the American Decartelization Project in Germany,” Crane addresses the legacy of the post–​World War II Decartelization Branch, a US military–​affiliated antitrust team tasked with uncovering the role that highly concentrated economic power played in the rise and atrocities of the Third Reich. The work of the Decartelization Branch, while not wholly successful according to Crane, worked to forever link the themes of political democracy to economic democracy in the postwar era. Indeed, Crane credits the initiative with fostering a formidable anti-​cartel ethos in the United States galvanizing a complex web of interests behind antimonopoly reform, with political consequences both at home and abroad. Laura Phillips-​Sawyer’s “Jurisdiction beyond Our Borders: United States v. Alcoa and the Extraterritorial Reach of American Antitrust, 1909–​1945,” continues this exploration of an emerging international context to the development of modern American antitrust. In particular, Phillips-​Sawyer explores the motivating factors behind the watershed US Supreme Court opinion in United States v. Alcoa (1945). The decision reversed the preceding decade’s suspension of antitrust enforcement, establishing the extraterritorial reach of US antitrust laws and providing greater judicial leeway to antimonopoly activism by the federal government. The chapter paints the moment as something of a culmination of both internal and external pressures. The preceding decades had witnessed the erosion of a strict territoriality doctrine for antitrust in both judicial decisions and congressional policies. Simultaneously, there was a growing popular concern with the well-​ documented connection between fascism and cartelization in Europe that revived demands for enhanced antitrust in the United States. In “From Market Power to State Capture: The Fateful Shift in Postwar Antimonopoly,” James T. Sparrow catalogs the fate of antimonopolism after the shift of domestic alliances within the antimonopoly coalition following World War II. Sparrow argues that the war changed who the antimonopolists were and what they were fighting against. The coalition transformed from a

Introduction  25 populist-​progressive coalition of farmers and unions to a liberal one of independent businesses, trade associations, and consumer welfare advocates confronted with expanded global markets and a cartelistic defense industry. While this new coalition notched major wins, particularly against corporate mergers into the 1960s, it failed to withstand an anti-​establishment assault on antitrust. Using the consumer welfare language of the antimonopoly in conjunction with established fears of state capture and Vietnam Era paranoia about the machinations of big government, critics of antimonopoly were able to capture the future of American antitrust policy. The final section of this volume, Part IV, highlights some crucial issues and sectors in the development of contemporary American antimonopoly policymaking: tax, labor, and mass media. In “Antitrust and the Corporate Tax, 1909–​1928,” Reuven Avi-​Yonah examines a twentieth-​century antitrust measure that lay outside the Sherman Act per se—​the corporate tax act of 1909. After the enactment of the Clayton Act and the creation of the FTC in 1914, the corporate tax’s antimonopoly reputation faded somewhat. Between 1919 and 1928 most of its antitrust features were eliminated, and were not revived during the New Deal. Nevertheless, Avi-​Yonah argues that the corporate tax still retains some potential to contribute to limiting the power of monopolies, especially if the progressive corporate tax rate structure adopted in the 1930s and abolished in 2017 is revived. Kate Andrias’s “Beyond the Labor Exemption: Labor’s Antimonopoly Vision and the Fight for Greater Democracy” traces the relationship between labor and antimonopolism from the late nineteenth century to the decades after World War II. These two activist traditions, Andrias posits, were neither distinct from nor fundamentally incompatible with each other. Throughout the period, left-​leaning industrial unions repeatedly and insistently used the language of antimonopoly to argue that private concentrations of economic power posed a grave threat to workers and to democracy. In labor’s view, however, the cure for monopoly power was not necessarily decentralization or smaller business organization. Rather, antimonopolism demanded that firms’ autonomy and power be democratically constrained by the firm’s workers and by a more democratic state. Ultimately, a commitment to antimonopolism meant a commitment to a more democratic political economy. Finally, Sam Lebovic’s “Anti-​ Monopoly in the Media Industries: A History” narrates the history of antimonopolism in the media industries of newspaper, radio, and television since the late nineteenth century. Lebovic

26  Antimonopoly and American Democracy argues that, while concerns about media consolidation arose repeatedly across the century, efforts to address it were always partial and inadequate. The media industry’s convoluted economy made regulation difficult, and the industry fiercely resisted regulation, alleging statist censorship of the public sphere. As a result, while the middle decades of the twentieth century did see some experimentation with antimonopolistic regulation in the media industries, these were never very effective or widespread. Media consolidation continued, largely unchecked, across the twentieth century and into the twenty-​first.

Conclusion We suggest, then, that the time is more than ripe for a thorough re-​ examination of American antimonopoly and antitrust from the perspective of American democracy, broadly construed. Such a perspective recovers the broadest contours of a historic American antimonopoly tradition focused on the underlying problem of concentrations of private and public power in a self-​governing democracy. And it simultaneously guards against the tendency to depoliticize American antitrust or competition policy as mere technical matters of law or economics. In recent years, voices across American public life have suggested with increasing urgency that current policy has failed to sufficiently control economic concentration and has permitted the rise of powerful private firms that threaten to undermine American democracy. The essays in this volume make clear that such claims are anything but new. Throughout history, Americans have worried about the problems monopoly might pose for democracy and debated how best to regulate concentrations of economic power in order to protect and enable self-​rule. At some points, antimonopoly pressures have produced measures designed to strengthen government’s ability to limit or control private monopolies. At other times, they have reflected fears that a government strong enough to actually control such businesses might pose similar threats to democratic institutions and values. Across this history there are several through-​lines connecting democratic institutions, concentrated market power, and popular mobilizations. In this final section of the Introduction, we offer some tentative hypotheses about these relationships in hopes that future scholarship might investigate them as part of the important scholarly work that remains to be done on the

Introduction  27 antimonopoly tradition in the political and economic development of the United States. One through-​ line concerns the relationship between federalism and antimonopoly activism. As we have noted above, antimonopoly regulation has, at one time or another, been undertaken at every level of government: municipal, state, and federal. This broad and varied terrain has meant that even when antimonopoly action is stymied within one level of government or jurisdiction, it has often been possible in another. Further, the success of an antimonopoly technique in one domain can encourage emulation in others. For example, as Lamoreaux recounts in her chapter on antimonopoly amendments to state constitutions, actions in one state have at times become templates for actions elsewhere. Another pattern related to variations across local, state, and national scales is that the reduction of market concentration at one level has at times failed to address concentration, or even exacerbated it, at others. Similarly to how the possibilities for antimonopoly activity have varied across jurisdictions, the impacts of anti-​concentration actions have been disparate as well. For example, as Grischkan’s chapter suggests, state and federal prohibitions on branch banking (aimed at reducing concentration in banking) generally made it easier for unit banks to gain municipal-​level monopolies on lending.74 Throughout the volume, we see economic concentration as a hydra-​headed problem—​forcing decisions for prioritization of democratic pushback, as well as creating different ripple effects across jurisdictions. Another thread running through this volume is that amid the near omnipresence of antimonopoly activity in American democracy, the coalitions that have organized to resist concentration have been dynamic and constantly shifting. Across the history surveyed in this book, we see groups unite against concentrated economic power but split over their diagnoses of the problems concentration creates and the policies they imagine to address them. Key players have included large businesses (big banks, plantation owners, conglomerates, Big Tech); small proprietors (including yeoman farmers, shopkeepers, unit bankers); and labor (individual workers and, eventually, organized labor).75 Consumer groups, too, become important actors, especially in recent decades.76 Understanding better when and why different interest groups have made common cause, why they’ve broken apart, and when individuals have acted on some of these identities over others—​ as consumers rather than as workers, for example—​would be an important step forward in understanding the history (and imagining the future) of

28  Antimonopoly and American Democracy antimonopoly. As a starting point, it seems plausible that big business, small business, and labor have often been the most important coalitional elements and that when two of these groups have agreed, their coalitions have tended to carry the day. Lastly, this history suggests that antimonopolism may have been a crucially important contributor to both prosperity and democracy in America. By creating countervailing forces against monopolies and concentrated economic power, antimonopolists may have helped to ensure that the American markets remained relatively free and fair, and that the wealth generated by them was distributed widely enough to enable greater innovation in the long run. To be sure, much work remains to be done to demonstrate whether and when this is so. But the stories in this volume suggest that antimonopoly politics, which have countered anticompetitive concentration and expanded access to economic agency for long periods of American history, may have contributed to the exceptional long-​term health of the American economy.77 We hope future work will investigate this possibility. Perhaps even more important, the histories in this book suggest that the influence of the antimonopoly tradition has protected American self-​ government and democracy. From the founding era78 through the Cold War,79 antimonopoly movements mobilized against the threats that economic concentrations posed to self-​government. Across time, perceptions of how and why concentrations jeopardized democracy have varied—​from diminishing the independence of individual citizens as political actors to directly abetting fascist coups. Absent this long tradition, American democratic institutions would certainly be different, and could quite plausibly be less effective, than they are today. The time is more than ripe for this comprehensive and historical re-​ examination of the fraught relationship between democracy and American antimonopoly. This volume attempts to provide a much-​needed historical reassessment of the development of the American antimonopoly tradition from its earliest incarnations to its most pressing present problems. It attempts to move beyond the interpretive boundaries of one particular school or another just as it attempts to broaden the range of antimonopoly inquiry beyond a concern with antitrust law per se. The host of different legal technologies and substantive policy orientations cataloged in this volume transcend the tried-​and-​true canon of great Supreme Court cases and mythic American trust-​busters. With chapters organized along both periodic and thematic lines, this volume attempts to create an overall account

Introduction  29 that is both historically comprehensive and topically and institutionally inclusive. It provides an alternative synthesized analysis of how Americans have instantiated the broader antimonopoly tradition in attempts to control both business and government power for the benefit of democracy and how these actions have shaped subsequent democratic outcomes. The chapters below detail the story and context of antimonopoly’s many successes as well as its failures and inadequacies as a resource for those reassessing the costs of “bigness” today. We hope this collaborative endeavor can help ground ascendant policy debates in a more diverse and reflective historical record and contribute to better informed decision-​and policy-​making going forward.

Notes 1. Some of the most recent antimonopoly voices include Matt Stoller, Goliath: The 100-​Year War between Monopoly Power and Democracy (New York: Simon & Schuster, 2020); Barry Lynn, Cornered: The New Monopoly Capitalism and the Economics of Destruction (Hoboken, NJ: Wiley, 2011); Zephyr Teachout, Break ’Em Up: Recovering Our Freedom from Big Ag, Big Tech, and Big Money (New York: St. Martin’s Publishing, 2020); Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age (New York: Columbia Global Reports, 2018); and Lina Khan, “Amazon’s Antitrust Paradox,” Yale Law Journal 126 (2017): 710–​805. 2. Joseph E. Stiglitz, “America Has a Monopoly Problem—​and It’s Huge,” The Nation, October 23, 2017; Elizabeth Kolbert, “Who Owns the Internet?” New Yorker, August 28, 2017; Franklin Foer, World without Mind: The Existential Threat of Big Tech (New York: Penguin Press, 2017). 3. See, e.g., Robert Pitofsky, “The Political Content of Antitrust,” University of Pennsylvania Law Review 127 (1979): 1051. 4. Editorial, “Trump’s Comments Create a Lose-​Lose Position for Justice,” Washington Post, November 13, 2017, https://​www.was​hing​tonp​ost.com/​opini​ons/​tru​mps-​comme​ nts-​cre​ate-​a-​lose-​lose-​posit​ion-​for-​just​ice/​2017/​11/​13/​6fd7b​28e-​c596-​11e7-​aae0-​cb1​ 8a8c​29c6​5_​st​ory.html; “Senator Elizabeth Warren Delivers Remarks on Reigniting Competition in the American Economy,” June 29, 2016, https://​www.war​ren.sen​ate. gov/​?p=​press_​rele​ase&id=​1169. 5. Naomi R. Lamoreaux and William J. Novak, eds., Corporations and American Democracy (Cambridge, MA: Harvard University Press, 2017). 6. “Democracy & Monopoly,” Open Markets, https://​openm​arke​tsin​stit​ute.org/​explai​ ner/​democr​acy-​and-​monop​oly/​. 7. U.S. House of Representatives Democratic Leadership, “Crack Down on Corporate Monopolies & the Abuse of Economic and Political Power,” Better Deal, https://​ abet​terd​eal.democ​rati​clea​der.gov/​the-​propos​als/​crack-​down-​on-​abuse-​of-​power/​ [https://​perma.cc/​G8LJ-​TVHB].

30  Antimonopoly and American Democracy 8. Clara Hendrickson and William A. Galston, Big Technology Firms Challenge Traditional Assumptions about Antitrust Enforcement, Brookings Institution: Techtank (December 6, 2017), https://​www.brooki​ngs.edu/​blog/​techt​ank/​2017/​12/​06/​big-​tec​ hnol​ogy-​firms-​challe​nge-​trad​itio​nal-​assu​mpti​ons-​about-​antitr​ust-​enfo​rcem​ent/​. 9. Investigation of Competition in Digital Markets, Majority Staff Report and Recommendations, Subcommittee on Antitrust, Commercial and Administrative Law of the Committee of the Judiciary (2020), https://​int.nyt.com/​data/​docume​ntto​ ols/​house-​antitr​ust-​rep​ort-​on-​big-​tech/​b2ec2​2cf3​40e1​af1/​full.pdf. 10. Executive Order on Promoting Competition in the American Economy, July 9, 2021, https://​www.whi​teho​use.gov/​brief​i ng-​room/​presi​dent​ial-​acti​ons/​2021/​07/​09/​execut​ ive-​order-​on-​promot​ing-​comp​etit​ion-​in-​the-​ameri​can-​econ​omy/​. 11. Assistant Attorney General Jonathan Kanter Delivers Remarks on Modernizing Merger Guidelines, January 18, 2022 (“The FTC and DOJ are fighting on the front lines to preserve competitive markets, which are essential to a vibrant and healthy democracy”); https://​www.just​ice.gov/​opa/​spe​ech/​assist​ant-​attor​ney-​gene​ral-​jonat​ han-​kan​ter-​deliv​ers-​rema​rks-​mode​rniz​ing-​mer​ger-​gui​deli​nes. 12. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978), 50. 13. Richard R. John, “Reframing the Monopoly Question: Commerce, Land, Industry,” in this volume, Chapter 2; Wu, The Curse of Bigness. 14. Teachout, Break ’Em Up; Gerald Berk, “The New Brandeisians in Retrospect and Prospect: Possibilities for Redressing Economic Domination in the US.” See also Stoller, Goliath; Lynn, Cornered. 15. Pitofsky, “The Political Content of Antitrust,” 1051. 16. Adolf A. Berle and Gardiner C. Means, The Modern Corporation and Private Property, rev. ed. (New York: Harcourt, Brace & World, 1967), 46. 17. Aristotle, The Politics and the Constitution of Athens (New York: Cambridge University Press, 1996), Book III, 71. Socrates too decried “the corruption of society” where “the guardians of the laws and the government are only seemingly and not real guardians” who “turn the State upside down” and destroy it. Plato, The Republic (New York: Vintage Books, 1991), Book IV, 129–​30. 18. Henry Demarest Lloyd, Wealth against Commonwealth (New York: Harper & Brothers, 1894); Richard L. McCormick, “The Discovery That Business Corrupts Politics: A Reappraisal of the Origins of Progressivism,” American Historical Review 86 (1981): 247–​74. 19. Lochner v. New York, 198 U.S. 45 (1905), 75. 20. For a recent history of this overarching progressive commitment, see William J. Novak, New Democracy: The Creation of the Modern American State (Cambridge, MA: Harvard University Press, 2022). 21. James Willard Hurst, “Legal History: A Research Program,” Wisconsin Law Review (1942), 331–​32. 22. Kate Andrias and Benjamin I. Sachs, “Constructing Countervailing Power: Law and Organizing in an Era of Political Inequality,” Yale Law Journal 130 (2021): 546–​777; Thurman Arnold, “An Inquiry into the Monopoly Issue,” New York Times, August 21, 1938. See also Elizabeth Anderson, Private Government: How Employers Rule Our Lives

Introduction  31 (and Why We Don’t Talk about It) (Princeton, NJ: Princeton University Press, 2017); Joshua Cohen and Joel Rogers, Associations and Democracy (New York: Verso, 1995). 23. John, “Reframing the Monopoly Question”; Richard White, “From Antimonopoly to Antitrust,” in this volume, Chapters 2 and 3. 24. For an examination of the pitfalls of ignoring historical context, see the controversy over Robert H. Bork, “Legislative Intent and the Policy of the Sherman Act,” Journal of Law & Economics 9 (1966): 7–​48; Herbert Hovenkamp, “Antitrust’s Protected Classes,” Michigan Law Review 88 (1989): 1–​48; Daniel A. Crane, “The Tempting of Antitrust: Robert Bork and the Goals of Antitrust Policy,” Antitrust Law Journal 79 (2014): 835–​53. 25. See the chapters by Novak, Andrias, and Avi-​Yonah in Parts II and IV of this volume. 26. See the chapters by Grischkan, Crane, and Sparrow in Parts II and III of this volume. 27. See the chapters by Lamoreaux and Phillips-​Sawyer in Parts II and III of this volume. 28. For some of the more negative assessments of the efficacy of regulation in the antimonopoly field and the most narrow understanding of the purview of antitrust, see Robert H. Bork, “Legislative Intent and the Policy of the Sherman Act,” Journal of Law & Economics 9 (1966): 7–​48; William Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (Chicago: University of Chicago Press, 1956); Frank H. Easterbrook, “Antitrust and the Economics of Federalism,” Journal of Law and Economics 25 (1983): 23–​50; Stephen Skowronek, Building a New American State: The Expansion of National Administrative Capacities, 1877–​1920 (New York: Cambridge University Press, 1982). 29. For two of the best statements of this early and self-​conscious reprioritization of the market over government and economy over democracy within the so-​called Chicago School, see Gary S. Becker, “Competition and Democracy,” Journal of Law and Economics 1 (1958): 105–​9, 109; and Friedrich A. von Hayek, Freedom and the Economic System (Chicago, 1939). Both Hayek and Becker contended that government imperfections were a greater threat than market imperfections. As Becker viewed the problem of monopoly, “It may be preferable not to regulate economic monopolies and to suffer their bad effects, rather than to regulate them and suffer the effects of political imperfections.” 30. John Dewey, “Liberalism and Social Action,” in John Dewey: The Later Works, 1925–​ 1953, ed. Jo Ann Boydston (Carbondale: University of Southern Illinois Press, 1987), 11:1–​65, 25. 31. Suetonius, The Lives of the Twelve Caesars: An English Translation, Augmented with the Biographies of Contemporary Statesmen, Orators, Poets, and Other Associates (J. Eugene Reed & Alexander Thomson, eds., Gebbie & Co. 1889). 32. Fritz Machlup, The Political Economy of Monopoly (1952), 185. 33. The Politics of Aristotle, trans. B. Jowett, 2 vols. (Oxford: Clarendon Press, 1885), 1:21–​22. 34. Lambros E. Kotsiris, “An Antitrust Case in Ancient Greek Law,” International Law 22 (1988): 451, 454–​55. 35. Chen Huan-​Chang, The Economic Principles of Confucius and His School, 2 vols. (New York: Longmans, 1911), 2:534.

32  Antimonopoly and American Democracy 36. Arvie Johan, “Monopoly Prohibition According to Islamic Law: A Law and Economics Approach,” Mimbar Hukum 27 (2015): 166, 167, https://‌​‌‌jur​nal.ugm.‌ac. id/​jmh/‌​‌arti​cle/‌​‌view‌F​ile/‌​‌15904/‌​‌10513 (“Whoever withholds food (in order to raise its price), has certainly erred” (citation omitted)). 37. Code of Justinian, Book 4, Title 59, in The Civil Law, trans. S. P. Scott, 17 vols. (Cincinnati: Central Trust Company, 1932), 13:120 (prohibiting monopolies and cartels upon pain of confiscation and banishment). 38. See Kenneth Elzinga and Daniel A. Crane, “Christianity and Antitrust,” in Christianity and Market Regulation, ed. Daniel A. Crane and Samuel Gregg (Cambridge: Cambridge University Press, 2021). 39. 21 Cong. Rec. 2456 (1890) (remarks of Sen. Sherman). 40. Compare Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 899 (2007) (“We reaffirm that the state of the common law 400 or even 100 years ago is irrelevant to the issue before us: the effect of the antitrust laws upon vertical distributional restraints in the American economy today”) with Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 731 (1988) (“[W]‌e do not ignore common-​law precedent concerning what constituted ‘restraint of trade’ at the time the Sherman Act was adopted”). 41. Edward Coke, The Third Part of the Institutes of the Laws of England (1669), 181. 42. Blackstone, Commentaries on the Laws of England, 4:426. 43. “Schoolmaster Case,” Court of Common Pleas, Hilary Term, 1410, Y.B., 11 Hen, IV, f. 47, pl. 21. 44. Charles River Bridge v. Warren Bridge, 36 U.S. (11 Pet.) 420, 552-​53 (1837). 45. “Dyer Case,” Y.B., 2 Hen. V, vol. 5, pl 26 (1415). 46. Mogul Steamship Co. v. McGregor, Gow & Co., (1889) 23 Q.B.D. 598. 47. Court of King’s Bench, 1602, 11 Coke 84, 77 Eng. Rep. 1260. 48. Steven G. Calabresi and Larissa C. Liebowitz, “Monopolies and the Constitution: A History of Crony Capitalism,” Harvard Journal of Law and Public Policy 36 (2013): 983, 990. 49. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations 700–​1 (Edwin Cannan ed., Modern Library 1994) (1776). 50. 1 P.Wms. 181, 24 Eng. Rep. 347 (K.B. 1711). 51. Standard Oil Co. v. U.S., 221 U.S. 1 (1911). 52. John Micklethwait and Andrew Wooldridge, The Company: A Short History of a Revolutionary Idea (New York: Modern Library, 2003), 22; William Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (Chicago: University of Chicago Press, 1965), 62–​63; James Willard Hurst, The Legitimacy of the Business Corporation in the Law of the United States: 1780–​1970 (Charlottesville: University Press of Virginia, 1970). 53. William Penn, The Excellent Priviledge of Liberty & Property (1687), as reprinted in A. E. Dick Howard, The Road from Runnymede: Magna Carta and Constitutionalism in America (Charlottesville: University Press of Virginia, 1968), 421. 54. Franklin D. Jones, “Historical Development of the Law of Business Competition,” Yale Law Journal 36 (1926): 42, 49–​50.

Introduction  33 55. Ibid., 52. 56. Ibid., 52–​53. 57. Ibid. 58. James Madison, Notes on the Constitutional Convention (August 18, 1787) (proposal of James Madison), in The Records of the Federal Convention of 1787, 4 vols., ed. Max Farrand (New Haven, CT: Yale University Press, 1966), 2:324, 2:325. 59. Daniel A. Crane, “Antitrust Antifederalism,” California Law Review 96 (2008): 1, 8. 60. Farrand’s Records at 616. 61. The Documentary History of the Ratification of the Constitution of the United States of America, 36 vols., ed. John P. Kaminski et al (Madison, WI: State Historical Society of Wisconsin, 1976), 8:45. 62. Thomas Jefferson to James Madison, 28 August 1789, in The Papers of Thomas Jefferson, 46 vols., ed. Julian P. Boyd et al (Princeton: Princeton University Press, 1958), 15:368 (proposing a provision that “[m]‌onopolies may be allowed to persons for their own productions in literature and their own inventions in the arts for a term not exceeding –​years but for no longer term and for no other purpose”). 63. Andrew Jackson, Bank Veto Message (July 10, 1832). 64. See Naomi R. Lamoreaux and John Joseph Wallis, General Laws and the Mid-​ Nineteenth Century Transformation of American Political Economy, https://​ccl.yale. edu/​sites/​defa​ult/​files/​files/​L amore​aux%20and%20Wal​lis%2C%20Gene​ral%20L​ aws%2C%202​019-​10-​04.pdf. 65. Kenneth Lipartito, “The Antimonopoly Tradition,” University of St. Thomas Law Journal 10 (2013): 991, 994. 66. Calabresi and Leibowitz, “Monopolies and the Constitution,” 1028–​42. 67. Beebe v. State, 6 Ind. 501 (1955). 68. Slaughter-​House Cases, 83 U.S. (16 Wall.) 36 (1872). 69. Calabresi and Leibowitz, “Monopolies and the Constitution,” 1042–​43. 70. 94 U.S. 113 (1877). 71. 198 U.S. 45 (1905). 72. Thomas M. Cooley, “Limits to State Control of Private Business,” Princeton Review 1 (1878): 233–​71. 73. Christopher G. Tiedeman, A Treatise on the Limitations of Police Power in the United States (1886), Section 95, 242. 74. Jamie Grischkan, “Banking and the Antimonopoly Tradition,” in this volume at p. 210. 75. See Andrias, “Beyond the Labor Exemption,” and White, “From Antimonopoly to Antitrust,” Chapters 3 and 11 76. See especially Sparrow, “From Market Power to State Capture,” Chapter 9 77. See Luigi Zingales, “Towards a Political Theory of the Firm,” Journal of Economic Perspectives 31, no. 3 (2017): 113–​30. Zingales argues that as firms amass economic resources rivaling those of national governments, they inevitably channel their wealth toward affecting political change to promote their further enrichment; thus results a “Medici vicious cycle” wherein firms’ economic and political power reinforce each other until neither economic nor political structures are competitive.

34  Antimonopoly and American Democracy Might the existence of robust antimonopoly organizing serve to counterbalance such tendencies in healthy political economies? See also ongoing debates among business scholars about the “Theory of the Firm,” exploring the contradiction that seems to emerge from Milton Freidman’s suggestion that shareholder value should be the sole goal of firms and the Stiglerian capture thesis. These are clearly articulated in Healy, Henderson, Moss, and Ramanna, “A Crisis in the Theory of the Firm,” October 13, 2015, available at https://​www.hbs.edu/​facu​lty/​Sha​red%20Do​cume​nts/​conf​eren​ces/​ 2015-​cri​sis-​in-​the​ory-​of-​firm/​Cri​sis%20in%20the%20The​ory%20N​ovem​ber%202​ 015.pdf. Including a democracy’s antimonopoly activity in the model may help to resolve this apparent paradox while adding another important dynamic to consider: approaches to firm governance that seem benign in periods where countervailing power (through antimonopoly activism, among other potential mechanisms) is great may become pernicious when that power is attenuated. 78. See John, Chapter 3 . 79. See Crane, Chapter 7 ; Sparrow, Chapter 9

2 Reframing the Monopoly Question Commerce, Land, Industry Richard R. John

In a trenchant letter that he wrote from Paris in December 1787, Thomas Jefferson urged James Madison to revise the recently drafted federal Constitution to help ensure that the federal government would not overstep its proper bounds. In particular, Jefferson recommended that the final document include a formal enumeration of the rights that the people retained. Such a “bill of rights,” as Jefferson termed it, would define the limits of the legitimate power of the federal government, “clearly & without the aid of sophisms.” Among the rights that Jefferson specified were the freedom of religion, the freedom of the press, habeas corpus, and trial by jury. Several of these rights would find their way into the first ten amendments to the Constitution, which Congress enacted in 1791. Yet one did not. For Jefferson’s list included a “restriction against monopolies,” a provision that he defined expansively to ban not only the granting by the federal government of a corporate charter, but also the issuance of patents for inventions and copyrights for publications.1 Jefferson and Madison each had a vested interest in the success of the new regime. Jefferson was in France negotiating a commercial treaty between the United States and its wartime ally, a project that had been frustrated by the limitations on the existing government’s power, while Madison had been a delegate to the convention that had drafted the document that Jefferson hoped to amend. Yet each had misgivings about monopoly grants, a common tool of statecraft not only in Europe, but also in many American states, cities, and towns. Jefferson did not get his blanket monopoly ban. In the absence of a constitutional ban on federally chartered corporations, the Washington administration would soon incorporate a bank. And although the federal Constitution included no specific reference to the words “patents” or “copyrights,” it did Richard R. John, Reframing the Monopoly Question In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0002

36  Antimonopoly and American Democracy grant authors and inventors the “exclusive right” for a limited period of time to their “respective writings and discoveries.” Yet it was hardly surprising that Jefferson had tried. None of Jefferson’s contemporaries unambiguously endorsed the bestowal by the federal government of open-​ended legislative grants. Even in the case of authors and inventors, their rights were carefully delimited.2 Equally circumscribed was the authority of the federally chartered bank, and even the post office, the only commercial organization whose administration by the federal government had been specifically enumerated in the Constitution.3 Expansive monopoly grants at the state and municipal level, in contrast, were common, though even they were often contentious. With the exception of authors and inventors, anti-​monopoly was, at the federal level, the universal default. This essay surveys the main currents of anti-​monopoly thought in the period between the American Revolution and World War I, a timespan that has come to be known as the long nineteenth century. It makes three arguments. First, anti-​monopoly is best understood as a mode of inquiry, rather than a reflexive grievance. Like republicanism, liberalism, or socialism, it denotes a political idiom that could be deployed to shape the course of events.4 Second, anti-​monopoly did not pertain solely, or even primarily, to the enactment of a legislative ban on exclusive charters of the kind that Jefferson sought. Rather, it denoted a much more capacious reform agenda to channel for the common good, using tools that ranged from diplomacy and legislation to moral suasion and social pressure, every pursuit that could be classified under the rubric of commerce, land, or industry. Third, because anti-​monopoly typically looked forward rather than backward, it is best understood not as a tradition originating in a remembered past, but as a vision of an imagined future. It has long been common to associate anti-​monopoly with policy proposals to regulate the enterprises euphemistically known as “big business”—​including, most recently, Amazon, Facebook, Google, and the other major “Big Tech” digital platforms. Yet if anti-​monopoly is taken seriously as a mode of inquiry, then it becomes evident that, for much of American history, its primarily target was not a particular enterprise, however large or powerful that enterprise might be, but, rather, the institutional rules of the game. For the anti-​monopolists surveyed in this essay, organizational power—​or “bigness,” as it is sometimes called—​was but one of the multiple dangers that monopoly posed. To understand how anti-​monopoly evolved, it is useful to recall how radically different the United States was on the eve of World War I than it had

Reframing the Monopoly Question  37 been before the American Revolution. The intervening decades witnessed the epochal transformation of the United States from an upstart commercial republic on the margins of Europe into one of the world’s largest industrial nations. The Treaty of Paris in 1783 granted the United States the status of a sovereign power, yet it would take many years for the fledging republic to earn the respect of lawmakers in Great Britain, France, Spain, and the other European powers. The inhabitants of the newly established United States may have enjoyed one of the world’s highest standards of living, yet they would long remain dependent on British merchants to facilitate the export of their crops. Domestic manufacturing was hardly unknown, yet for many decades after 1783 vast quantities of consumer goods still arrived from overseas—​mostly from Britain—​just as they had when the colonies had been under the Crown. By World War I, in contrast, the United States had become a major exporter not only of cotton, wheat, and timber, but also of oil, coal, copper, and a small but growing number of industrial products. Though the American military remained small, its army had prevailed in numerous military engagements in North America, the Caribbean, and East Asia, while its navy had established a presence in both the Atlantic and the Pacific. Just as the country had been transformed, so, too, was anti-​monopoly. For the revolutionary generation, the anti-​monopolists’ most menacing protagonist was the British state, and, in particular, the union of interests linking British lawmakers, British merchants, British financiers, and the British navy. For the mid-​ nineteenth century anti-​ monopolist, a multitude of enemies had emerged that were closer to home: bankers, landlords, and railroad and telegraph moguls. By World War I, industrialists would be added to the mix. To help give form to a sprawling topic, this essay places special emphasis on four anti-​monopoly visionaries: John Adams, William Leggett, Henry George, and Walter Lippmann. Each is a stand-​in for a different mode of anti-​monopoly inquiry. For Adams, monopoly was a form of commercial domination that artful diplomacy could countermand. For Leggett, it was a legislatively mandated special privilege that a vigilant citizenry had an obligation to confront. For George, it was a social injustice that legislation could contain. And for Lippmann, it was an economic colossus that social movements could be mobilized to control. *** In December 1773, protesters boarded a ship in Boston Harbor and threw overboard a shipment of tea that had been sent to the port by the British East

38  Antimonopoly and American Democracy India Company in the expectation that it would be sold. For a conscientious lawyer like John Adams, this act of civil disobedience—​the Boston Tea Party, as it would later come to be known—​posed a conundrum. Adams shared the protesters’ indignation at the attempted sale of merchandise on which Parliament, in defiance of precedent, had leveled a tax. Yet valuable property had been destroyed. To explain why the protest was justified, Adams published a multipart disquisition in a Boston newspaper under the pseudonym of “Novanglus,” a Latin term for New England. Adams’s Novanglus essays are a touchstone in the history of American anti-​monopoly thought. That monopoly imperiled New England Adams had no doubt. Yet in justifying the protest, Adams rejected two lines of argument that he might have been expected to pursue. First, Adams dismissed any objections rooted in what economists today might call consumer welfare. This was perhaps to be expected. Everyone knew that, even if the East India Company’s tea had been priced to cover the cost of the tax, the price that its agents were asking was lower than the price of any comparable tea on the market, despite the legal monopoly that the company had been granted on its importation. Second, Adams denied that the destruction of property could be justified by the fact that the East India Company was the beneficiary of a monopoly grant. In justifying the protesters’ “oblation to Neptune,” Adams stipulated, “I take no notice of the idea of a monopoly”: “If it had been only a monopoly, (tho’ in this light it would have been a very great grievance) it would not have excited, nor in the opinion of any one justified the step that was taken.”5 To justify the destruction of property, Adams shifted the burden of proof from the protesters to the provincial elite. Why, Adams asked, had the governor of Massachusetts refused to permit the Boston merchants to whom the tea had been consigned return it to Britain unsold? The only conceivable explanation, in Adams’s view, lay in the complicity of the governor with a “junto” of like-​minded friends and relatives in a nefarious conspiracy to undermine the special relationship that New England had long enjoyed with the Crown. By secretly colluding with like-​minded merchants and sympathetic members of Parliament, the junto had transformed a routine—​and, in ordinarily circumstances, easily diffused—​disagreement over British commercial policy into a tyrannical power grab.6 Though Adams refrained from labeling the junto a monopoly, once the fighting began in April 1775 he would quickly find occasion to stretch the meaning of this emotion-​laden concept to include dimensions of British

Reframing the Monopoly Question  39 commercial policy to which it previously had been only infrequently applied. The real injustice of Britain’s commercial policy, Adams now contended—​ first in the “Plan of Treaties” that he prepared in 1776 for the Second Continental Congress, and then in a series of letters for a London newspaper in 1780 that ran under the pseudonym “A Distinguished American”—​ originated not in the machinations of a clique of provincial officials but, rather, in the Navigation Acts: that is, the regulatory framework that had structured Britain’s overseas trade since the seventeenth century. The Navigation Acts had been designed to ensure that Britain’s overseas colonies remained dependent on the mother country in their commercial dealings with the outside world. To ensure that the colonies remained subordinate, this legislation obliged them to specialize in the production for export to Great Britain of staple crops such as tobacco and rice. Great Britain, for its part, was to specialize in the manufacture for export to its colonies of finished goods such as crockery and textiles. In the run-​up to the war, this division of labor troubled few colonists who commented on economic issues in print. In large measure, this is because colonial leaders presumed the Navigation Acts to be mutually beneficial. In the aftermath of the Boston tea protest, critics of Britain’s tea tax warned that, unless restrained, the East India Company might abuse its monopoly power to tyrannize Britain’s North American colonists just as it had lorded it over its subjects in Bengal.7 Fifteen million Bengalis had died in a famine in a single year, one critic warned, not because the crops had failed, but because the East India Company had “engrossed all the Necessaries of Life” and grossly inflated their price, putting life-​saving foodstuffs out of reach of the poor.8 These attacks on the East India Company had a radical edge. Yet they rarely if ever took the form of a frontal assault on the regulatory framework in which the company operated. Though the Navigation Acts had, in effect, granted Great Britain monopoly power over its colonies, this restriction seemed like a small price to pay for the protection that the British navy provided colonial merchants from the depredations on the high seas of the Spanish and the French. The colonies “cheerfully consent” to Parliament’s “regulation” of “our external commerce”—​or so resolved a committee of the First Continental Congress in 1774, in affirming their support for the status quo—​in the conviction that the Navigation Acts had been designed to benefit the “whole empire” by securing “commercial advantages” to both the “mother country” and its “respective members.”9

40  Antimonopoly and American Democracy The presumption that the Navigation Acts had, in fact, become a potentially harmful monopoly would be debated in Britain in 1774, when the issue would be raised not by a colonist—​but, rather, by Edmund Burke, a British MP broadly sympathetic to the American cause. Like all well-​informed observers of Britain’s overseas trade, Burke took it for granted that the British Parliament had imposed a welter of restrictions on its colonial possessions in order to increase Britain’s wealth, creditworthiness, and political power. Burke freely conceded that the enforcement of these regulations had in certain circumstances been lax, in keeping with the prudential calculus that Burke felicitously termed “salutary neglect.”10 Even so, the Navigation Acts remained the “corner-​stone” of a colonial commercial policy that had been from its inception “wholly restrictive”: “It was the system of a monopoly. No trade was let loose from that constraint, but merely to enable the Colonists to dispose of what, in the course of your trade, you could not take, or to enable of them to dispose of such articles as we forced upon them.”11 Burke’s willingness to disparage the Navigation Acts as a burdensome constraint put him in the vanguard of anti-​monopoly thought. Even after the war had begun in 1775, few colonists saw fit to follow his lead. The Declaration of Independence that the continental congress ratified in July 1776 held the Crown responsible for a multitude of crimes, including the “cutting off ” of the colonists’ commerce with “all parts of the world.” Yet nowhere did it explicitly denounce as a monopoly the restrictions that the Navigation Acts had imposed for over century on overseas trade.12 Adams’s “Plan of Treaties” put the not-​yet-​independent United States on record in opposition to commercial monopolies of all kinds without once using the term “monopoly” to denote the institutional arrangements that it rejected. It did so by championing what was, at the time, the relatively new concept of commercial reciprocity. In all of the future commercial treaties that it would enter into with foreign powers, Adams declared, the United States would grant foreign governments the same privileges that foreign governments would grant the United States.13 Reciprocity, rather than exclusivity, would henceforth be the norm. Or so Adams hoped. In an age in which the philosopher David Hume had floated the optimistic notion that overseas trade might become an alternative to rather than an instrument of war, Adams’s “Model Treaty”—​as his plan would come to be known—​held out the promise that the future new world order would not only guarantee the independence of the United States as a sovereign power, but also foster world peace.14

Reframing the Monopoly Question  41 Adams would elaborate on his novel vision of global commerce in a series of anonymous letters that he planted in a British newspaper late in the war. Here, for the first time, Adams articulated an explicit critique of Britain’s monopoly power. “The Americans have as good a claim to the use of the earth, air, and seas, as the Britons,” Adams declaimed: “What right has Britain to shut them up in the prison of a monopoly, and prevent them from giving and receiving happiness from the rest of mankind?” Should Great Britain and the United States at some future time reunite, Adams elaborated, in a pointed rejoinder to the still-​current contention that the Navigation Acts had been mutually beneficial, the results would be disastrous not only for the United States, but also for every country engaged in foreign trade: “All the commerce and navigation of the world would be swallowed up in one frightful despotism.”15 If the still-​ongoing war with Britain had revealed anything, it was that the Navigation Acts must never be revived: “Every body now throughout the world sees, that a renewal of the English monopoly of the American trade, would establish an absolute tyranny upon the ocean, and that every other ship that sails would hold its liberty at the mercy of these Lordly Islanders.” Should France or Spain try to emulate Great Britain, the results would be equally harmful: “It is obviously then the interest and duty of all the maritime powers to keep the American trade open and free to all, and to be sure to prevent its being monopolized by any one nation whatever.”16 Adams’s model treaty remained just that, a model. Diplomats in France, Spain, and the Netherlands saw little reason to open their markets to a potentially destabilizing rival whose fleet, at the time, did not command a single frigate. British diplomats were similarly unimpressed. For many decades thereafter, the United States would remain in a neocolonial state of dependency toward its former imperial master. The enactment of tariff barriers to protect American manufactures against their British rivals—​a pillar of Whig and Republican Party orthodoxy and a precondition for the 1890 anti-​monopoly law known today as the Sherman Act—​would remain in the future. So too would the implementation of an “open door” policy in Latin America and East Asia. Yet, for the moment, the articulation by an American diplomat of a norm that, over two centuries later, would become central to the neo-​liberal “Washington Consensus” was accomplishment enough. The continuing vulnerability of the United States to British commercial domination tormented even a statesman as level-​headed as James Madison. That the British government was collaborating with British merchants to launch an insidious disinformation campaign aimed at manipulating public

42  Antimonopoly and American Democracy opinion in the United States, Madison had no doubt, or so he warned in an anonymous editorial on “Foreign Influence” that ran in a Philadelphia newspaper in 1799. The purpose of the campaign was as plain as it was pernicious: to persuade influential Americans to back legislative measures that would promote the grasping designs of the British government and its merchants, with whom the British government was joined at the hip, at the expense of the legitimate interests of United States. The United States was ostensibly a sovereign power, having won its war of independence. Yet its former overlord resented having lost the “rigid and compulsive monopoly” that it had once “held by authority” under the Navigation Acts and was bent on revenge: “Her spirit, and system of monopoly, must make her particularly dread the policy and prosperity of the United States, in the three great articles of which she is most jealous—​to wit, manufactures, commerce, navigation.”17 Particularly alarming to Madison were the substantial sums that British merchants had surreptitiously paid to American editors, ostensibly for newspaper advertisements, to elicit favorable coverage of Britain’s “monied institutions.” He who paid the piper called the tune: “In this manner British influence steals into our newspapers, and circulates under their passport. Every printer, whether an exception to the remark or not, knows the fact to be as here stated. There are presses whose original independence, subsequent apostasies, occasional conversions, speedy relapses, and final prostration to advertising customers, point them out as conspicuous examples.”18 Contemporary observers echoed Madison’s concerns. No one could fault Great Britain for defending itself against a foreign aggressor, conceded a group of Baltimore merchants in an 1806 memorial to Congress. Yet the measures the British navy had taken to protect its overseas trade far exceeded its legitimate purpose as a “weapon of hostility.” By establishing an “unbounded monopoly” over the channels of trade, the navy had obliged every “enterprize” that might conceivably promote its “national wealth, and power” to “begin and end” in Great Britain.19 Even Thomas Jefferson would eventually come around to the view that the British navy could imperil the republic through its command of overseas trade. This was true even though Jefferson had long relied as a planter on British merchants to market his crops, and had been reluctant as president to expand the country’s naval fleet. The “object of England,” Jefferson explained to a French friend in 1813, in explaining why the United States had gone to war in the previous year with Great Britain, was “the permanent dominion

Reframing the Monopoly Question  43 of the ocean, and the monopoly of the trade of the world. [T]‌o secure this, she must keep a larger fleet than her own resources will maintain . . . and, finally, that her views may no longer rest on inference, in a recent debate, her minister has declared in open parliament, that the object of the present war is a monopoly of commerce.”20 The lingering suspicion that certain elements within the British elite had a master plan to dominate their former North American colonies lived on even after the United States had successfully defended itself against British interference on the high seas in the War of 1812. When President Andrew Jackson vetoed the rechartering of the Bank of the United States in 1832, for example, he justified his decision as a principled assault upon British meddling in the electoral process. British investors, Jackson alleged, had not only the means, but also the motivation, to oppose Jackson’s reelection. The recent publication of an early version of Jackson’s bank veto message reveals the preoccupation of its drafters with the continuing dependence of American finance on British credit. For example, the draft invidiously compared the large holdings of bank stock by British investors with the more modest holdings of investors based in the various states, and even called out one aristocratic British investor by name.21 By slaying the monster, Jackson protected the sanctity of US elections from foreign interference, while prefiguring the general incorporation legislation that would become a pillar of nineteenth-​century laissez-​faire. The Old World–​ New World dichotomy between a monopoly-​ mad Great Britain and a monopoly-​phobic United States would long shape not only statecraft but also historical writing. For George Bancroft, whose multivolume History of the United States would appear in numerous editions following the initial publication of its first volume in 1834, the Navigation Acts provided a master key to the Revolution that absolved the colonists of responsibility for chattel slavery. Had British diplomats not lobbied successfully in 1713 to obtain the exclusive legal right to transport enslaved Africans to Spain’s American colonies—​a privilege known as the assiento—​or so Bancroft speculated in his chapter on the Treaty of Utrecht, slavery might never have become firmly entrenched in the United States. Bancroft’s conviction that the existence of slavery in the United States could be best explained as a tragic byproduct of Britain’s relentless quest for commercial domination found expression even in the running heads that accompanied the opening pages of his chapter on the treaty: “England Seeks a Monopoly of the Slave Trade.”22 However implausible Bancroft’s counterfactual may have

44  Antimonopoly and American Democracy been as a historical explanation, it underscores the seriousness with which mid-​nineteenth-​century intellectuals regarded the threats posed by monopoly power. Bancroft refrained from blaming the assiento for the War of Independence. Other historians were less circumspect. By disrupting the delicate balance of power between Great Britain, France, and Spain, opined Washington M’Cartney in his 1847 Origin and Progress of the United States, the slave trade monopoly that the British government had obtained in the Treaty of Utrecht exacerbated not only the “grievous evils” of slavery, but also the “ruin of the colonial system” that had been made inevitable by decades of imperial warfare: “A Chinese lady, with her foot squeezed to the dimensions of a proper sized toe, or a papoose with his head shingled into an oblong shape, are not subjected to more unnatural pressure than were the colonies by these restrictive regulations.” American independence was the result: “The commercial monopoly and the restrictions which we have now detailed, contained the seeds of our independence; for, being a system of oppression, its natural effect was to produce a spirit of deep-​rooted dissatisfaction.”23 By characterizing the eighteenth-​century assiento as a cursed monopoly, Bancroft and M’Cartney salved the conscience of nineteenth-​ century Americans who harbored qualms about the continued existence of chattel slavery in the United States. By blaming the British, they absolved themselves and their countrymen of responsibility for a monumental injustice. It was a dodge that seemed especially compelling following the rebellion of the slaveholding states, which threw the economic imperatives of slavery into sharp relief. The profits generated for British merchants by the colonial slave trade were so enormous, posited one upstate New York minister in an 1861 Fourth of July address, that “even crowned heads did not think it beneath them to become partners in a monopoly of this unholy business of stealing men and selling them.” The complicity of the British nobility in forbidding the colonists from “passing any law unfriendly to the slave trade” only compounded the evil: “Thus the powerful patronage broke down the opposition of the enlightened and the humane in both England and the Colonies, and allowed a few unscrupulous planters to pollute the land with the vilest tyranny under the sun.”24 “The British throne”—​ declared Postmaster General Montgomery Blair in 1864, in glossing Bancroft in a public speech in which he made the case for the compensated emancipation of Missouri’s unionist slaveholders—​“although its occupant did not appropriate the mercenary products of the slave trade ASSIENTO to herself, but gave them to her

Reframing the Monopoly Question  45 great trading companies, fostered through the gains of their monopolies the conquest they were destined to achieve for England in India, Africa, and the South Seas.”25 *** For John Adams, the greatest monopoly threat originated outside of the United States. For journalist William Leggett, in contrast, the most menacing danger lay within. In vivid and often histrionic prose, Leggett revived for a new age the blanket condemnation of special privilege that lay behind Thomas Jefferson’s monopoly ban. Jefferson’s critique never entirely disappeared. Yet for it to remain compelling, it had to be reinterpreted in each generation. Among its most dedicated interpreters in the opening decades of the nineteenth century was John Taylor, a reactionary Virginia proslavery slaveholder who published a series of ponderous anti-​monopoly tomes that included his 1814 Inquiry into the Principles and Policy of the Government of the United States. If “national indigence” was “gradually produced” by a “subjection to a foreign monopoly,” Taylor reasoned in his Inquiry, then the “indigence” of the “mass of a nation” will follow the establishment of a “domestick monopoly, profitable, but unproductive”: “and that if a nation has a moral right to liberate itself from an indirect tribute to another nation, it has also a moral right to liberate itself from a similar tribute to a domestick combination.”26 By comparing Britain’s commercial monopoly with the recently lapsed federal bank charter, Taylor cracked open the door through which Leggett would self-​assuredly stride. The influence of Taylor’s prose on Leggett’s was incontrovertible and, for Leggett, a point of pride. This was in one respect surprising. The Virginian’s hyperbolic denunciation of the federal government concealed a fanatical defense of chattel slavery, making him an unlikely source of inspiration for a journalist who prided himself on his defiance of the slave power. Yet Leggett found Taylor’s anti-​monopolism so compelling that he discounted Taylor’s political agenda. Taylor’s Inquiry, Leggett gushed in 1837, two years after he had broken with the New York Democratic Party over its refusal to defend the free speech rights of radical abolitionists, was “one of the most democratick and at the same time most eloquent books ever written in this country.”27 Among the objects of Leggett’s invective were federal government–​ chartered corporations, the target of Jefferson’s monopoly ban. The “power of regulating” that the federal government had arrogated to itself by establishing in 1816 a second Bank of the United States, Leggett warned in

46  Antimonopoly and American Democracy 1834, in defending Jackson’s veto of the bank’s rechartering, was highly pernicious, and would inevitably undermine the “essential object” of “all civil compacts.”28 By supporting the recharter, Jackson’s opponents were imposing on the republic a “new species of despotism” that overturned the victory that the founders of the republic had won over the tyranny of kings, aristocrats, and an established church.29 If Jackson was a “despot” for vetoing the rechartering bill, as his critics had charged, then the “true character” of his despotism was revealed by his laudable determination to defend the equal rights of the “people at large” by confronting the bank’s opportunistic supporters in the Senate and its “bribed tools” in the press: “If we comprehend the nature and principles of a free government, it consists in the guaranty of EQUAL RIGHTS to all free citizens. We know of no other definition of liberty than this. Liberty is, in short, nothing more than the total absence of all MONOPOLIES of all kinds, whether of rank, wealth, or privilege.”30 Leggett’s hostility toward special privilege was so extreme that he is perhaps best remembered as an apostle not only of equal rights, limited government, and personal liberty, but also of the mythical vision of an unregulated political economy that has come to be known as laissez-​faire. “Let the banks perish!” Leggett declared, in a characteristically effusive declaration of his creed: “Let the monopolists be swept from the board! Let the whole brood of privileged money-​changers give place to the hardy offsprings of commercial freedom, who ask for no protection but equal laws, and no exemption from the shocks of boundless competition.”31 Leggett’s editorials borrowed freely not only from Jefferson and Taylor, but also from the highly stylized conventions of early nineteenth-​century melodrama, a theatrical genre for which Leggett had written and in which he had himself performed.32 Every legislative grant was a moral abomination, whether it took the form of a corporate charter, an occupational license, or even a prohibition on the private delivery of the mail. Most insidious of all were bank charters, a perquisite that rewarded politically connected insiders while flooding the country with worthless banknotes, a special burden for journeymen obliged to accept as payment for their services whatever currency their employers proffered. If lawmakers stopped chartering banks, Leggett confidently, if implausibly, asserted, the country would soon return to the specie-​based currency that he regarded as the only legitimate medium of exchange. Leggett died in 1839 at the comparatively young age of thirty-​eight. Had he lived, he would almost certainly have recognized a kindred spirit

Reframing the Monopoly Question  47 in Arthur Condorcet O’Connor. A radical Irish political activist for whom anti-​monopoly was a family tradition—​O’Connor was the son-​in-​law of the Enlightenment philosophe the Marquis de Condorcet—​O’Connor published in 1848 a hefty three-​volume anti-​monopoly treatise whose title said it all: Monopoly the Cause of All Evil. “[W]‌hat we ask,” Leggett implored, in a sentence that O’Connor might have penned, was the total eradication of a mighty power against which the people not only of the United States, but also of “almost all Europe,” had been called upon to resist: “Is it not emphatically, the power of monopoly, and the encroachments of corporate privileges of every kind, which the cupidity of the rich engenders to the injury of the poor?”33 Leggett never published a book or even a bravura pamphlet. His reputation rests, instead, on the hundreds of unsigned editorials that he wrote in the 1830s for three New York newspapers. Though newspaper editorials are ordinarily among the most transitory of literary genres, Leggett’s would live on as a result of the dutiful curatorship of a youthful admirer, Theodore Sedgwick Jr. Sedgwick, an 1829 graduate of Columbia College, published a two-​ volume compilation of Leggett’s editorials shortly after Leggett’s untimely death. Sedgwick’s compilation helped ensure that Leggett’s exuberant anti-​ monopolism would remain a resource for generations of future journalists, Democratic Party leaders, and, eventually, libertarians, all of whom, if not always for the same reasons, shared Leggett’s faith in limited government, competition, free speech, and free trade.34 While it would be hard to trace the influence of Leggett’s prose on specific pieces of legislation, his eloquent denunciation of special privilege would furnish a rationale for the spate of state-​level general incorporation laws that found their way into law in the mid-​nineteenth century. Among the most important were the New York Banking Act of 1838, which made it easier to charter a bank, and the New York Telegraph Act of 1848, which facilitated the construction of telegraph lines. Similar general incorporation laws would be enacted in the following decades throughout the United States. General incorporation translated into practice the pro-​market values that Leggett had annunciated in his journalism by establishing what one might call an anti-​monopoly regulatory regime. No longer could lawmakers protect incumbents from insurgents by deploying state law to block the establishment of a rival bank, telegraph operating company, or commercial establishment. Few policy innovations have been more widely admired. For legal historians, general incorporation hastened the “release of energy”; for social

48  Antimonopoly and American Democracy historians, it marked the triumph of “free private enterprise”; and for economic historians, it cleared the ground for an “open access order” that was programmatically hostile to impediments to trade.35 These paeans to general incorporation capture an important reality. By making it easier for new entrants to challenge incumbents, the anti-​monopoly regulatory regime did foster competition. Yet its long-​term results could sometimes be perverse. In banking, general incorporation led not only to the proliferation of banks, but also to an avalanche of counterfeit banknotes, precisely the outcome that Leggett, an ardent defender of a specie-​based currency, had confidently predicted it would prevent. And in telegraphy, general incorporation backfired spectacularly, hastening the takeover of telegraph giant Western Union in 1881 by the notorious financier Jay Gould, an event that was so unsettling to bankers, merchants, and the political elite—​who feared, not implausibly, that Gould’s control over the telegraph network would give him privileged access to time-​specific inside information about market trends—​that it would forever undermine public confidence in the efficacy of general incorporation as an anti-​monopoly tool.36 The unintended outcomes of general incorporation—​including, in particular, Gould’s takeover of Western Union—​left little doubt in the mind of well-​informed contemporaries that the much-​vaunted anti-​monopoly regulatory regime might well prove to be less of a herald of progress than a handmaid of corruption, extortion, and waste. In large part for this reason, anti-​monopoly never swept the field: in many realms, the “boundless competition” that Leggett so effusively praised remained less of a lived reality than a utopian ideal. Price-​and-​entry regulations limited market competition in transportation, communications, and energy, while a thicket of federal, state, and municipal laws continued to specify how goods were made, workers paid, and real estate conveyed. Yet for Leggett, his acolytes, and the historians who have followed their lead, only market competition mattered. As a consequence, even historians who reject outright the laissez-​faire myth have sometimes discounted how pervasively the political-​economic rules of the game—​including tariffs on foreign imports, legislative restrictions on out-​ of-​state economic activity, and government regulations on money, credit, and debt—​would continue to shape the conduct of even those corporations that had been chartered under the most latitudinarian of general incorporation laws. ***

Reframing the Monopoly Question  49 “The right of property in land, like the right to breathe the vital air of heaven, is, by nature, common to all mankind.” So declared Leggett in an editorial that praised the widespread distribution of the public domain.37 Like the labor activist George Henry Evans, whose National Reform Association would become in the 1840s the primary forum for the country’s first anti-​ monopoly mass movement, Leggett denounced as unjust the monopolization of land.38 Britain’s commercial monopoly had imperiled American independence; land monopoly violated natural rights. Radical anti-​monopolists like Thomas Skidmore opposed the right to inheritance and endorsed legislation to socialize land. Moderates like Evans built on the proposal that Thomas Paine had set forth in his 1797 tract on “agrarian justice” for the enactment of compensatory social welfare legislation for the poor.39 Among the legislative measures that Evans endorsed were free public education, the widespread distribution of government-​owned land at low cost to settlers, a homestead exemption to block creditors from foreclosing on mortgages, and an upward limit on the amount of land that any one individual could possess.40 The invocation of natural rights to justify limitations on private land ownership received a powerful impetus from the evangelical revivals known as the Second Great Awakening. By affirming the sacredness of the widespread distribution of land, the renowned Protestant minister Lyman Beecher looked to land reform as a precursor to the much anticipated “renovation” that would precede the second coming of Christ. The “possession of the earth in fee simple by the cultivator,” Beecher explained in an oft-​reprinted 1827 sermon, was the “great principle of action in the moral world,” making it analogous to the “attraction of gravity,” the “great principal of motion” in the “material world”: “Nearly all the political evils which have afflicted mankind, have resulted from the unrighteous monopoly of the earth; and the predicted renovation can never be accomplished, until, to some extent, this monopoly has passed away, and the earth is extensively tilled by the independent owners of the soil.”41 While support for land reform cut across party lines, many early reformers identified with the Democratic Party. As the slavery issue became more insistent and the Democratic Party increasingly beholden to the proslavery agenda of its southern wing, land reformers shifted their allegiance to political parties that, unlike the Democrats, favored the rapid disbursement of government land. The egalitarian promise of land reform would galvanize support for the Republican Party of Abraham Lincoln. The centrality of land reform to the new party’s rationale is nicely illustrated by the lineage of the

50  Antimonopoly and American Democracy phrase “free soil.” Long before this catchphrase would become identified with the Republican Party, it had been deployed by Evans to mobilize support for land reform.42 While land reform had a partisan cast—​ first Democratic, then Republican—​contemporaries came to regard it, rather like general incorporation, as a panacea for a multitude of problems that included the curse of chattel slavery. The contention that slaveholders owed not just their wealth, but also their political power, to their ownership of the land on which their laborers worked would become a common refrain in the antislavery press during the 1850s. “The subject of land reform is intimately connected with the subject of Slavery,” opined one Michigan anti-​slavery activist in 1854: “indeed, Slavery can only successfully exist . . . through a monopoly of the soil.”43 Had the tillable soil been more equitably distributed, the planter elite would have found itself unable to generate profits high enough to sustain its enslaved work force. Chattel slavery was indubitably a “great evil,” warned New York abolitionist Gerrit Smith three years later, yet “land monopoly,” which had “more victims”, w ​ as a “far greater evil.” Should slaveholders be deprived of their monopoly over the soil, slavery would collapse.44 “All we need is a land limitation law,” declared African American abolitionist Frederick Douglass in 1856: “Estates too large for the good of society will, in a few generations, be reduced to moderate dimensions, and none of the violent consequences predicted by the enemies of land limitation be experienced. We believe that with land limitation Slavery would be impossible. Your slaveholder is ever a land monopolist.”45 The conflation of slavery, monopoly, and land ownership extended well beyond the antislavery vanguard. The “curse of Land Monopoly,” warned a group of New York “working men” on the eve of the 1860 presidential election, was as “blighting as that of African Slavery, and more dangerous to the perpetuity of the great principle of Free Government.”46 The promised land that Evans yearned for was a commercial republic in which land-​owning farmers sold their surplus crops in regional markets and self-​employed artisans produced basic goods for local consumption. To help equip the rising generation with the mindset they would need to thrive in such a world, Benjamin Franklin drafted a few years before his death in 1790 the memoir that is known today as his Autobiography. Franklin’s Autobiography was a how-​to guide for men of modest means who sought not great wealth but a modest competency, or what today we might call autonomy. Self-​discipline, hard work, and delayed gratification, Franklin

Reframing the Monopoly Question  51 preached, were the keys to success. To an extent that is often forgotten, a plausible approximation of Franklin’s yeoman republic would come into existence in the pre–​Civil War North. Though some urban artisans suffered a relative decline in wealth and status as they lost control of the means of production, wage workers remained a tiny minority. Far more representative was the multitude of farmers who owned the land on which they toiled.47 Land reformers achieved a stunning triumph in 1862 when a wartime Congress enacted a homestead act to facilitate the settlement of the trans-​ Mississippi West and a land-​grant act to create a mechanism for the funding of higher education. The homestead act disbursed 50 million acres to settlers, while the land-​grant act provided financial support, in the form of salable tracts of government-​owned land, to a multitude of “land grant” colleges and universities, including Berkeley, the University of Michigan, and MIT. Just as the Northwest Ordinance of 1787 had hastened the settlement of the trans-​Appalachian hinterland, so the homestead act transformed the lives of millions of people in the trans-​Mississippi West. The vast storehouse of knowledge—​technical, agricultural, and social-​scientific—​that the land-​ grant act unleashed would become the common currency of the teachers and students who taught and studied at the burgeoning archipelago of land grant colleges and universities. In the absence of this unprecedented government investment in higher education, which nurtured expertise in engineering, underwrote advances in agricultural chemistry, and jump-​started the rise of the modern social science disciplines, it is hard to imagine how the United States could have become by World War I one of the world’s largest industrial nations. In the four decades between 1860 and 1900 the United States would become an economic powerhouse on the global stage.48 During the same period, the total number of acres under cultivation would also increase. The simultaneous expansion of industry and agriculture was, in world-​historical terms, highly unusual, if not unique. The homestead act and the land-​grant-​ college act—​anti-​monopoly in action—​cannot fully explain why American economic development took such an unusual path, but, in conjunction with mass immigration, tight credit, high tariffs, and the deliberate repression of organized labor, they were among the most consequential. The 50 million acres that the homestead act allocated to settlers is sometimes compared unfavorably with the 200 million acres that Congress earmarked at roughly the same time for the transcontinental railroads. While the size of the railroads’ windfall is staggering, 50 million acres is hardly

52  Antimonopoly and American Democracy trivial, and much of the railroad’s land would eventually be sold to settlers at affordable prices.49 The most troubling legacy of the land reform movement was not its cooption by railroad barons—​as critics often charge—​but, rather, its devastating impact on the original inhabitants of the land, as well as on the land itself. By opening up millions of acres to settlement, the federal government deprived the indigenous Indian tribes of their ancestral homes. In addition, since much of this land was located in arid regions unsuited to agriculture, it created the preconditions for the ecological disaster of the 1930s Dust Bowl. The subdivision of tribal lands into fee-​simple parcels so appalled Thomas A. Bland—​a prolific journalist whose 1881 Reign of Monopoly remains a milestone in American anti-​monopoly thought—​that he founded the National Indian Defense Association to oppose it.50 Hostility to the rapid privatization of government land would become a pressing public issue during the presidency of Theodore Roosevelt. Among the land-​use reforms that the Roosevelt administration supported was land conservation, the transfer to the federal government of control over a major waterway in Alabama that could be used to generate hydroelectric power, and the reclassification of vast tracts of land in the trans-​Mississippi West as national parks. The legacy of the homestead act for the formerly enslaved was more ambiguous. Some freedmen obtained land under the act; most did not.51 How harshly the Republican Party should be condemned for failing to make African American land ownership a higher priority is a matter of judgment.52 Yet one thing is certain. For most freedmen, the promise of “forty acres and a mule” would go unredeemed.53 The limitations of land reform troubled thoughtful contemporaries and haunt us today. Yet they, too, were a legacy of the anti-​monopoly vision of Lyman Beecher, William Leggett, and George Henry Evans—​a vision that vilified special privilege and sacralized natural rights. *** In a land of such remarkable material abundance, why were so many people so desperately poor? This insistent question informed every page of Henry George’s justifiably famous Progress and Poverty (1879). Like Mark Twain’s The Gilded Age (1873), Progress and Poverty took its primary inspiration from the momentous transformation of the American political economy in the years immediately following the Civil War, a period that witnessed the laying of the Atlantic cable, the completion of the transcontinental railroad, and the

Reframing the Monopoly Question  53 Panic of 1873. In explaining what had gone so terribly wrong, George shifted the spotlight from the industrialist and the financier to the landlord, and, in particular, to the windfall gains that landlords reaped on underutilized land. The monopoly that most troubled George—​and Twain—​was in real estate. Progress and Poverty was not only the most widely read book about political economy in the nineteenth-​century United States; it was also one of the most widely discussed. For Karl Marx, it was the first sustained assault on the political economy of Adam Smith, Thomas Malthus, and John Stuart Mill. For Leo Tolstoy, it held a key to Russia’s future. For John Dewey, it was the masterpiece of one of the world’s greatest philosophers. Like John Adams and William Leggett, George deplored monopoly. Unlike Adams and Leggett, George located its origin not in commerce but in land, a domain that embraced not only city lots and tillable plots, but also “all natural opportunities or forces,” including timber stands and mineral deposits.54 The phrase “natural resources” would not become widely used until after 1900, yet this was precisely what George meant by land in 1879. Unlike labor or capital, land was limited. More than a decade before Frederick Jackson Turner announced the end of the frontier, George had reached the ominous conclusion that, for millions of Americans, the promise of land ownership had already been lost.55 George’s analysis of landholding, like the pre–​Civil War land reform movement to which it was indebted, drew much of its moral authority from his abiding faith in natural rights. Like Lyman Beecher, George Henry Evans, and John Adams, George regarded land less as a fungible commodity than as a gift from God. In certain ways, however, George’s conception of the proper valuation of land would mark a new departure. Unlike John Locke, George did not believe that laborers had a right to own the land on which they toiled, and in contrast to David Ricardo, he did not believe that land value was proportional to the fertility of its soil. For George, instead, the value of land derived from the creativity of the people who lived in its immediate environs. Underutilized parcels of land in big cities that had been hoarded by landlords to reap a speculative gain earned George’s particular scorn. Propinquity, rather than productivity, explained why a weed-​strewn vacant lot in Manhattan could command a higher price than a thriving 160-​ acre wheat farm in Kansas. Why not put the vacant lots up for auction—​so that “in the heart of the city no one can afford to keep land from its most profitable use”?56 If the government taxed its “unearned increment,” a bit of nomenclature that George borrowed from John Stuart Mill, its owners could

54  Antimonopoly and American Democracy be expected to sell their underutilized lots to buyers willing to capitalize on their potential. George’s faith in natural rights led him to disparage poverty as unjust, demeaning, and wasteful.57 By encouraging a narrow-​minded covetousness, poverty crushed the human spirit. Eliminate poverty—​the “open-​mouthed, relentless hell which yawns beneath civilized society”—​and inventive activity would be “enormously increased.”58 Nurture and not nature held the key. Devil-​take-​the-​hindmost self-​interest was not the quintessence of social psychology, as Thomas Malthus and Charles Darwin had gloomily presumed, and to pretend as much was to be “blind to facts” of which the “world is full.”59 Some men who preached, wrote books, or held “chairs of universities” never dreamed of a better world.60 George knew better: “How infinitesimal are the forces that concur to the advance of civilization, as compared to the forces that lie latent!”61 The key to reform for George followed logically from the myriad harms that had been caused by the private ownership of land. Should lawmakers restructure the tax code to eliminate taxes on labor and capital, while levying assessments on the land itself—​without reference to the labor that had been spent on it, or to any of the improvements on the land that its owners might have made—​the injustice of monopoly could be successfully contained. While even a radical overhaul of the tax code might seem disproportionate to the magnitude of the evils that George described, it highlighted a basic truth. Technical advance did not automatically hasten moral progress: “The wonderful discoveries and inventions of our century have neither increased wages nor lightened toil. The effect has simply been to make the few richer; the many more helpless!”62 And in the absence of progressive legislation—​ including, in particular, a reformed tax code—​technical advance might well hurtle the country on to disaster: “With steam and electricity, and the new powers born of progress, forces have entered the world that will either compel us to a higher plane or overwhelm us, as nation after nation, as civilization after civilization, have been overwhelmed before.”63 George’s ambivalence toward technical advance shaped his attitude toward large-​scale enterprise. Like Adam Smith, George took it for granted that corporations—​like every “special organization” in religion, law, medicine, science, and commerce—​were, in the main, hostile to change: “A close corporation has always an instinctive dislike of innovation and innovators, which is but the expression of an instinctive fear that change may tend to throw down the barriers which hedge it in from the common herd, and so

Reframing the Monopoly Question  55 rob it of importance and power; and it is always disposed to guard carefully its special knowledge or skill.”64 That economic power was ultimately derived from government-​granted special privilege was for George axiomatic. For the Central Pacific Railroad, the perquisite was government-​owned land; for Western Union, eminent domain. In the absence of tax reform, corporations would grow ever more domineering, thrusting the country backward by perpetuating an unjust “system of inequality” in which the increasingly intense application of “mental power” would be perversely misallocated to impoverish the many, while maximizing “ostentation, luxury, and warfare” for the few.65 In such a world, the best one could expect from the most creative minds of the rising generation would be mere “refinements in luxury” for the few rather than the more enduring inventions designed to “relieve toil” and improve the lives of the many.66 George’s admirers dubbed his tax proposal the “single tax,” a term George himself disliked and rarely used. Its primary rationale was ethical. The abolition of taxes on labor and capital was intended not to legitimate private property—​as, for example, George’s libertarian admirer Albert Jay Nock would later contend—​but, instead, to generate the necessary revenue to fund a safety net for the poor.67 The property-​less, and not the propertied, was George’s main concern. Poor people were too preoccupied with their day-​to-​day affairs to contribute effectively to the common good: “To make people industrious, prudent, skillful, and intelligent, they must be relieved from want.”68 By guaranteeing every head of household a minimum income, lawmakers could free the rising generation to choose occupations that would increase their opportunities for leisure, empowering millions to embark on worthy outside projects that they would otherwise have found it impossible to pursue: “The fact is that the work which improves the condition of mankind, the work which extends knowledge and increases power, and enriches literature, and elevates thought, is not done to secure a living.”69 The heads of household that George most hoped to empower were, like George himself, adult, white, and male. Though George rejected the racialist essentialism of the post–​Civil War Democratic Party, he wrote little about women and children, rarely emphasized the special burdens confronting African Americans, and backed the 1882 federal ban on the immigration of Chinese workers, whom he regarded as a tool of monopoly capital.70 By casting a certain class of Americans—​William Graham Sumner’s “forgotten man”—​as the victims of forces outside of their control, George had

56  Antimonopoly and American Democracy inadvertently sown the seeds for the anti-​statist white male grievance politics that would persist long after the particulars of his tax reform proposals had been forgotten. *** George’s critique of private land ownership won him few admirers among university-​trained economists, a tiny and intellectually insecure group of newly minted PhDs who, with a few exceptions, lacked George’s capacious understanding of the pernicious consequences of monopoly power. Yet it would receive a generous hearing from journalists, theologians, and reform-​ minded academics. The baleful consequences of private land ownership for formerly enslaved African Americans underlay the mordant analysis of the economic and political prospects of emancipation that the New York City–​ based African American journalist T. Thomas Fortune put forth in his 1884 Black and White: Land, Labor, and Politics in the South. “I maintain, with other writers upon this land question,” Fortune declared—​with the “other writers” including George—​“that land is common property, the property of the whole people, and that it cannot be alienated from the people without producing the most fearful consequences”: “monopoly in land is the death note of free institutions.”71 The adverse political consequences of private land ownership for democratic governance informed theologian Walter Rauschenbusch’s Christianity and the Social Crisis—​a searing indictment of late-​nineteenth century industrialization first published in 1907 that, as the subtitle to a recent mass-​ market reprint proclaimed, was the “classic that woke up the church.” From an “economic point of view,” Rauschenbusch explained, in an homage to George, “all human history has turned on the possession of the land and its privileges”: “No nation can allow its natural sources of wealth to be owned by a limited and diminishing class without suffering political enslavement and poverty.”72 The disastrous consequences of private land ownership for migrant farm workers furnished a theme for radical journalist Carey McWilliams’s Factories in the Fields, a blistering 1939 exposé of labor conditions in one of the country’s largest agricultural regions: “If anyone thinks the problem of migratory farm labor in California is a new problem, let him consult Henry George.”73 In recent years, even a few academic economists have come to find merit in George’s critique of monopoly power. The “best way” to keep George’s ideas “alive and effective,” reflected Nobel Prize–​winning economist Robert

Reframing the Monopoly Question  57 Solow in 1997, in affirming the continuing value of Georgist land-​use economics for social science, was to “extend their range of relevance to issues of land use, urban form, and taxation, including many aspects that could never have crossed George’s mind. The range of possible activities is very broad.”74 Among the best known of the many academics to find George’s political economy compelling was Columbia University philosophy professor John Dewey.75 In envisioning the future of pedagogy in his 1916 Democracy and Education, Dewey built on insights he had gleaned during a visit to a Georgist school in Fairhope, Alabama.76 George’s faith in the democratic potential of land socialization informed Dewey’s 1935 Liberalism and Social Action and received a detailed explication in a PhD dissertation that Dewey supervised on George’s philosophy. Though Dewey had by this time jettisoned any lingering faith in natural rights, he eulogized George in the foreword to the book that grew out of his student’s dissertation as “one of the world’s great social philosophers” and “certainly the greatest which this country has produced.”77 Dewey’s admiration for George’s egalitarian vision of human potentiality was echoed by Nicholas Murray Butler, a longtime president of Columbia University and a lifelong Republican. “It may be said at once,” Butler declared in his 1931 commencement address, “that so far as Henry George pointed to privilege as an unbecoming, unfair, and indeed disastrous accompaniment of progress, his teaching has passed into economic theory everywhere. Sound economists in every land accept and support economic equality and economic opportunity as fundamental.”78 The influence of George’s ideas extended far beyond the printed page. Nowhere was George’s legacy more direct than in the realm of popular politics. To foster democratic civic engagement, George, in conjunction with a legion of Georgist admirers, promoted a raft of electoral reforms—​ including the initiative, the referendum, and the recall. The secret ballot was popularized by George following a visit to Australia, where he had seen it in action. By encouraging voters to make their own decisions, rather than merely to vote the straight party “ticket,” it discouraged the kind of election fraud that may well have cost George the 1886 New York City mayoral election.79 Yet it was in the realm of land-​use planning—​the heart of George’s anti-​ monopoly vision—​that Georgist ideas cast the longest shadow. The presumption that urban transit systems should be government-​owned built on Georgist orthodoxy, as did the increasing reliance of municipalities on tax revenue generated from urban real estate.80 Tom Johnson restructured

58  Antimonopoly and American Democracy Cleveland’s urban-​transmit network along Georgist lines during his tenure as mayor of Cleveland in the 1900s, an achievement that helped earn Johnson high marks from historians as one of the greatest mayors in American history. George’s relationship to Tom Johnson would be memorialized not only in Brooklyn’s Green-​Wood Cemetery, where, by mutual agreement, the two reformers were buried in adjoining plots, but also in a massive bronze statue of Johnson in downtown Cleveland in which the much-​admired mayor holds in his right hand a clearly identified copy of George’s Progress and Poverty. Perhaps the most enduring legacy of Georgist land-​use planning was in the management of the millions of acres of non-​arable land that the federal government owned in the trans-​Mississippi West. To forestall the monopolization of the natural resources that this land contained, lawmakers invoked George’s opposition to private land ownership to mandate that this land be leased rather than sold, a policy choice that prevented the sale to private investors of government-​owned coal deposits in Alaska and oil fields in Teapot Dome, Wyoming. The construction of massive hydroelectric power plants by the Tennessee Valley Authority, a government agency, also had a Georgist pedigree. Here, too, anti-​monopoly pointed away from market fundamentalism and toward the regulatory state.81 *** For Adams, monopoly was a political-​economic threat to be countermanded. For Leggett, it was a legislative scourge to be confronted. For George, it was a legal perversion of a God-​given natural order, rooted literally in the soil, that wise legislation could successfully contain. For Walter Lippmann, in contrast, monopoly was simultaneously a conjuring trick for grandstanding journalists and a wasteful behemoth that an engaged citizenry had an obligation to control. Lippmann set forth his distinctive approach to monopoly in Drift and Mastery, a prescient conspectus of the leading issues of the day that appeared to great acclaim in 1914. Drift and Mastery won Lippmann an enviable reputation as one of the country’s most incisive cultural commentators, a position he would retain for the next half century. Repeatedly rediscovered, it has been reprinted as recently as 2015 with a foreword by a law professor who served as a policy advisor to Massachusetts senator Elizabeth Warren.82 Lippmann’s anti-​monopolism owed much to an emerging social-​scientific consensus. John Adams and Henry George each presumed that monopoly had a political origin and a political solution. So too, though in a different

Reframing the Monopoly Question  59 register, had William Leggett. For the sociologist William Graham Sumner, in contrast, this presumption was naive. In a series of provocative essays that he first published as newspaper articles in the late 1880s and that shortly after Sumner’s death would be collected in a book entitled Earth-​Hunger, Sumner reconsidered the monopoly question not as a problem to be contained but, instead, as a challenge to the human imagination. Whether or not Lippmann read Earth-​Hunger is an open question.83 What is incontestable is Lippmann’s adoption of an analogous, tough-​minded approach to the challenge that monopoly posed. The origins of monopoly for Sumner were not confined to the recent past. On the contrary, they were coeval with the “order of the universe.” From time immemorial, monopoly has structured the “most fundamental relations” of humanity to the “earth on which he lives.”84 To regard land monopoly as a curse, as had Henry George, was to radically oversimplify the historical record. Neither hunting bands nor pastoral tribes had parceled out the land, yet they faced almost constant scarcity and want: “In fact, there has never been a time when the natural monopoly of land pressed harder on men than when there was no private property in land at all.” The son who inherited a trade from his father was the beneficiary of a monopoly, as was the family in which the son had been born: “The grandest and most powerful monopoly in the world is the family, in its monogamic form.”85 The “real and only escape” from monopoly lay in “the arts of civilization and in science.”86 In no sense, therefore, was monopoly a late-​blooming “product of civilization” or a result of a recently emergent “capitalistic organization of society,” or even—​as had been “so often asserted,” Sumner sneered, in a dig at the socialists—​an “invention of the bourgeoisie”: “If then any one desires to declaim against it, he must understand that he is at war, not with human institutions, but with facts in the order of the universe.”87 Far from being a modern invention, monopoly had in fact had been “interwoven” in “all its forms and from the earliest times” with the “whole life of man.”88 Its taproot was neither greed nor self-​ interest, but scarcity: “Perhaps the most fundamental fact which makes this world a world of toil and self-​denial is that two men cannot eat the same loaf of bread.” This “pitiless and hopeless monopoly”—​that is, the non-​fungibility of food—​was, in the “last analysis,” the “reason for capital and rent, for property and rights, for law and the state, for poverty and inequality.”89 Just as monopoly was inescapable, so too was its entanglement with market competition. It would be a mistake, Sumner contended—​in a pointed rebuke to the rising generation of academic economists who had posited a

60  Antimonopoly and American Democracy rigid opposition between monopoly and competition—​to locate monopoly and tyranny at “one pole” of society and competition and liberty at the other. In fact, monopoly and competition were complements that “meet and shade off into each other” at a “common boundary.”90 Monopoly, in short, was not the exception but the norm, while its “relaxation,” the happy result of human ingenuity, was “one of the triumphs of civilization.”91 The thirty-​five years that separated Progress and Poverty from Drift and Mastery witnessed the emergence of the United States as the one of the world’s largest industrial nations, an unforeseen and in many ways astonishing event that would forever transform American business, politics, and law. In the decade between 1895 and 1904, a “great merger movement” consolidated thousands of owner-​owed proprietorships into a relatively small number of shareholder-​owned corporations and “trusts,” a legal instrument that had been invented to pool the shares of the units that they combined.92 No longer did the sale of railroad stocks dwarf the sale of industrial securities on the New York Stock Exchange, as they had as recently as 1896.93 No longer was it plausible to confine the monopoly question to commerce and land. How and why the great merger movement took the form that it did furnished the occasion for a vast outpouring of commentary. For the Populist Ignatius Donnelly and the Democrat William Jennings Bryan, low tariffs promoted competition and lowered consumer prices, while high tariffs emboldened large and powerful manufacturers to dominate their rivals at home and abroad. In the jargon of the anti-​monopolist, this made the tariff the “mother of trusts.” Donnelly is best known today as the author of the Populist Party’s 1892 party platform. Less often remembered is the fact that, by 1892, he had been active in anti-​monopoly politics for decades. Between 1874 and 1878, for example, Donnelly chronicled the long fight that midwestern shippers waged against discriminatory railroad rates in the Anti-​ Monopolist, a weekly newspaper based in St. Paul, Minnesota. Bryan, the thrice-​nominated, thrice-​defeated Democratic presidential candidate, eloquently decried the political, economic, and moral perils of monopoly power on the hustings and in the Commoner, a weekly newspaper based in Lincoln, Nebraska, that Bryan founded in 1901. No matter how economically efficient it might be, every “private monopoly” was for Bryan unequivocally bad. “We do not say men shall only steal a little bit”—​Bryan declared in 1906, in a characteristic statement of his economic philosophy—​“or in some particular way, but that they shall not steal at all. It is so of private monopolies. It is not sufficient to control or regulate them—​they must be absolutely and

Reframing the Monopoly Question  61 totally destroyed. Corporations should be controlled and regulated, but private monopolies must be exterminated, root and branch.”94 The anti-​monopolism of Donnelly and Bryan took aim at a central plank, if not the central plank, of Republican Party orthodoxy, namely, the imposition of high tariffs on foreign imports to “protect” American industry from foreign competition. To rebut the Democratic truism that high tariffs fostered monopoly, Republican lawmakers threw their support behind the anti-​monopoly law that posterity would label the Sherman Act. Though the final version of the Sherman Act sailed through the House and the Senate with virtually no opposition, its rationale was more convoluted than is often supposed. Like so much economic legislation in this period, its origins could be traced back to a Republican proposal to increase the tariff on foreign manufacturers, which, in the public mind, was a shorthand for goods manufactured in Great Britain. One such proposal led in 1890 to the enactment of a steep increase in import duties that would become known as the McKinley Tariff, after its sponsor, Ohio congressman William McKinley. To justify the new tariff schedules, McKinley’s Ohio colleague, John Sherman, played up the unfairness for American manufacturers of the wage differential between American and foreign factory workers. Foreign manufacturers, Sherman contended, paid their factory workers starvation wages and often skimped on workplace safety. American factory workers, in contrast, or so Sherman contended, were better paid and better looked after, putting American manufacturers at a competitive disadvantage. Critics derided the Sherman Act as little more than a fig leaf for a tariff schedule that had been designed to shield American manufacturers from foreign competition. Sherman demurred. The new tariffs had been exquisitely calibrated, Sherman explained, to enable manufacturers to compete against their foreign rivals without having to reduce their workers’ wages or debase their working conditions. The policy goal, in short, was not to eliminate foreign competition—​an outcome Sherman opposed—​but to maintain a level playing field. Whether or not the McKinley Tariff did in fact balance the interests of manufacturers and workers was a highly contentious issue that would be vigorously debated by politicians, journalists, and economists. Yet on one point consensus prevailed: Republican tariff policy was a targeted industry-​ specific government subsidy for a special interest—​ namely, American manufacturers—​the antithesis of laissez-​faire. Laissez-​faire had always been a myth; with the McKinley Tariff it became a fantasy. Yet the tariff was not without a political rationale. By protecting

62  Antimonopoly and American Democracy American-​made manufactured goods against low-​cost imports, it simultaneously protected American manufacturers and American factory workers. To rebuke critics who attacked the new tariff schedules for giving large-​scale manufacturers an unfair advantage over their small-​scale rivals, Sherman proposed a second law to prevent large manufacturers from underselling their smaller rivals in the domestic market. That large manufacturers might take advantage of their market power to drive small manufacturers out of business no one denied: Sherman’s goal was to prevent the tariff from unfairly tipping the scales. This second law would eventually become known as the Sherman Act—​in tacit recognition of Sherman’s long-​standing support for small business—​even though, in its final form, it had been stripped of almost every provision that Sherman himself had drafted.95 The Sherman Act grandly outlawed every state-​spanning contract that was “in restraint” of trade or commerce. While this blanket prohibition might appear overbroad, for legal insiders it was relatively uncontroversial. Analogous intra-​state business practices had long been illegal under common law. In addition, the law mandated criminal penalties for anyone who tried to monopolize trade or commerce in multiple states or with a foreign nation. Had these high-​sounding phrases been taken literally, they might well have curtailed a great deal of economic activity; in practice, however, they conspicuously failed to slow the merger movement that began shortly after its enactment. In fact, by declaring cartels illegal, the Sherman Act may even have inadvertently hastened economic consolidation, since corporate lawyers discovered that it was easier to prosecute a cartel for violating the Sherman Act than a corporation for having bought out its rivals.96 With the notable exceptions of the dissolution of a railroad holding company in 1904 and the breakup of Standard Oil and American Tobacco in 1911, the Sherman Act before 1914 was mobilized primarily to cripple labor unions: the most ambitious antitrust suit against a manufacturer failed in 1895 when the Supreme Court ruled that a sugar refinery with a dominant position in the American market could not be prosecuted under the Sherman Act since its manufacturing facilities were located entirely within the domain of a single state.97 The breakup of Standard Oil and American Tobacco thrust the monopoly question onto the national political agenda with such éclat that no presidential candidate in 1912 could safely avoid it. All of the candidates that received electoral votes in the general election—​ namely, William Howard Taft, Theodore Roosevelt, and Woodrow Wilson—​campaigned as an anti-​monopolist. Even the Socialist Party candidate, Eugene Debs, ran

Reframing the Monopoly Question  63 on a platform that demanded the “abolition of the monopoly ownership of patents,” notwithstanding his party’s endorsement of economic consolidation as a steppingstone to a collectivist future.98 While Taft, Roosevelt, and Wilson each attacked monopoly, they did so in distinctive ways. Taft, the Republican standard-​bearer, ran on the anti-​trust record that he had compiled during his presidency. Roosevelt, as the head of the Progressive Party ticket, basked in his much-​ballyhooed reputation as a trustbuster, which he had burnished during his own presidency. Roosevelt publicly denounced the 1895 sugar-​refinery decision, yet he rejected Taft’s antitrust activism, contending that, on balance, the regulation of industrial combines was preferable to their dissolution.99 To offset his skepticism regarding anti-​trust, Roosevelt took a leaf out of the Georgists’ book and vigorously denounced the privatization of natural resources on government-​ owned land. Roosevelt laid out the tenets of his public philosophy, which he would call the “New Nationalism,” in a series of speeches that he delivered during a westward swing in 1910. In addition to repeatedly denouncing corporate greed, mismanagement, and waste, Roosevelt affirmed the long-​term benefits that the country could expect to reap from the prudent regulation of its natural resources, including, in particular, mineral deposits on government-​owned land: “I do not believe that a single acre of our public lands should hereafter pass into private ownership, except for the single purpose of homestead settlement.” For the federal government to permit government lands to pass into private hands for any other reason would be a “calamity” whose “baleful effect on the average citizen we can scarcely exaggerate.” It would be particularly disastrous, Roosevelt added, in a pointed reference to a Taft-​era dispute over land-​use policy, for the “great stores” of coal and the other “mineral fuels” that remained on government land in Alaska to pass into the “unregulated ownership” of “monopolistic corporations.”100 While Roosevelt and Taft each took a stand on the monopoly question, Democratic standard-​bearer Woodrow Wilson declared war on the trusts. The rise of the trusts, Wilson reminded his audience in a series of campaign speeches that would be collected after the election in a book entitled The New Freedom, was a betrayal of the country’s foundational ideals. Once victory had been assured, or so Wilson portentously proclaimed, in a spread-​eagle affirmation of his anti-​monopoly creed, the Democratic Party had “fulfilled our promise to mankind”: “We had said to all the world, ‘America was created to break every kind of monopoly, and to set men free, upon a footing

64  Antimonopoly and American Democracy of equality, upon a footing of opportunity, to match their brains and their energies,’ and now we have proved that we meant it.”101 Wilson’s 1912 campaign speeches disparaged government regulation and denounced government expertise, making it hard to get a clear impression of just how he proposed to put matters right. “I am for big business,” Wilson evasively declared, “and I am against the trusts.”102 The relationship between government and business was “upside down,” Wilson enigmatically mused: thankfully, the Democratic Party had embarked on a “silent revolution” to defend the “general interest” against the “special interests.”103 Like the nineteenth-​century British statesmen whom Wilson greatly admired, Wilson preferred soaring oratory to policy briefs, leaving it up to the electorate to envision precisely how his incoming administration would take on the trusts should it prevail at the polls. Lippmann followed the 1912 election closely and in Drift and Mastery he articulated a novel answer to the monopoly question that would remain influential in policy circles for decades to come. Though Lippmann found much to admire in both Wilson and Roosevelt, he regarded Roosevelt’s critique of economic consolidation to be the more compelling. Lippmann’s anti-​ monopolism was less evident in Drift and Mastery than in his Good Society, a magisterial critique of economic planning, published in 1937, that was so unremittingly skeptical of concentrated power that it would prompt one German sociologist to invoke the recently coined neologism “neoliberal” to describe it.104 Yet Lippmann had been mindful of the perils of economic concentration ever since he had begun his journalistic career in the early 1910s, and in Drift and Mastery he would dissect the monopoly question with the studied detachment of a public intellectual. The most damning problem with Wilsonian anti-​ monopoly, in Lippmann’s view, was to be found in its formulaic embrace of long-​ exploded platitudes about the relationship of liberty and tyranny. The age had long vanished, Lippmann contended, when the mere renunciation of social control could effectively promote the common good. The eighteenth-​century revolt against the Crown had revealed more about the “evils of the kingly system” than it did about the possibilities of self-​ government.105 Genuine liberty, like self-​government, was a “searching challenge” rather than a providential deliverance: “What nonsense it is, then, to talk of liberty as if it were a happy-​go-​lucky breaking of chains.”106 Independence had plunged the United States into unchartered waters: now it was time to learn to swim.

Reframing the Monopoly Question  65 Lippmann’s critique of Wilson’s anti-​monopolism honed in on Wilson’s paean to the proprietary capitalist. Wilson’s beau ideal, Lippmann sardonically observed, was neither the civic-​minded citizen of democratic theory nor Henry George’s independent householder. Rather, he was merely the “little profiteer”—​that is, the kind of businessman who dominated the ranks of anti-​union business lobbies such as the National Association of Manufacturers.107 There existed no “real relation”—​Lippmann reminded his readers, in echoing one of Henry George’s most celebrated talking points—​ between money-​making and “useful work.”108 And in the absence of the structural adjustments necessary to bring the economy under “democratic control,” it would remain an “unworthy dream” to presume that the ordinary pursuit of self-​interest might somehow promote the common good. Industry was “inconceivably wasteful,” workers’ wages too low, and consumer prices too high.109 Given the seriousness of the problems the country confronted, Lippmann regarded it as the height of foolishness to hail the Sherman Act as a panacea. For lawyers to applaud the court-​mandated breakup of industrial combines merely because they were big only confirmed their “stupid hostility” to the irreversible changes that the merger movement had wrought: “How much they have perverted the constructive genius of this country it is impossible to estimate.”110 By relying on a cosmetic policy fix to solve the county’s problems, the “anti-​trust people” had identified themselves with the “wasteful” and “planless scramble” of the “little profiteers,” enshrining commercialism as the “undisputed master of our lives,” while forestalling the orderly deployment of the country’s natural resources for “deliberate and constructive use.”111 Part of the problem with the Sherman Act could be found in the wording of the law itself. To determine its original intent, the Department of Justice had recruited a dream team of elite, high-​paid lawyers. Yet even they had come up short. It was simply impossible to criminalize every unfair business practice, as the language of the act seemed to imply. Only “madmen” could fathom how the law’s interpretation had evolved in the fourteen years since its enactment: it was as if “some imp” had been “playing pranks.” Little wonder corporations had run afoul of the law: “If you build up foolish laws and insist that invention is a crime, well—​then it is a crime.”112 How, then, was the challenge of economic consolidation to be met? One option was the scaling-​up of not-​for-​profit workers’ cooperatives. Though promising in theory, projects of this kind rarely succeeded in practice. Another option was government ownership. The day would eventually come,

66  Antimonopoly and American Democracy Lippmann confidently predicted, when the government would operate all of the country’s “basic industries”: railroads, mines, and “so forth.”113 Yet for the moment government ownership remained out of reach. As an interim step, lawmakers might reconfigure the country’s largest corporations as public utilities. Yet here, too, the historical record was mixed. Though public utilities had long existed in many cities, they had only rarely been hailed as true “business propositions.”114 Having rejected workers’ cooperatives, government ownership, and the public utility model as solutions to the problems posed by economic consolidation, Lippmann turned to society rather than the state. The best way forward, in Lippmann’s view, lay in the mobilization of social groups—​ including, in particular, labor unions and consumer lobbies—​to counterbalance monopoly power. If for John Adams anti-​monopoly conjured up a model treaty, and for Henry George a tax code, for Lippmann it culminated, just as it had for George Henry Evans, in a social movement. It was a mistake, Lippmann believed, to mindlessly repeat the old canard that plutocracy was destroying the republic. Far more troubling was the “faltering method,” the “distracted soul,” and the “murky vision” that stand-​ pat politicians and unreflective journalists called the “will of the people” and that Lippmann derided as “drift.”115 To counterbalance the enervating apathy and sanctimonious irresoluteness of the status quo, Lippmann lauded mastery. But what was mastery? At its most basic, mastery involved the administrative coordination of large-​scale economic units for the common good. Like Wilson’s campaign advisor Louis Brandeis, Lippmann hoped that business might become a “profession.” Yet Lippmann took care to distinguish sound business management from top-​down expert rule: “Mastery, whether we like it or not, is an immense collaboration, in which all the promises of to-​day will have their vote.”116 To meet the challenge of the age, Lippmann envisioned, and hoped Drift and Mastery might help inspire, a three-​pronged social movement to hold the country’s most powerful economic institutions to account. That such a social movement was conceivable, Lippmann had no doubt. To be successful, Lippmann fixed his sights not on politics—​in the tradition of, say, William Leggett or Henry George—​but on society. Unpersuaded that the solution to the country’s ills could be found in its “supposedly democratic constitution,” Lippmann rested his faith instead in a fundamental social reality: namely, the “great treasure” that past generations of Americans had amassed in lifting the country out of “primitive hardship” and the incalculable wealth that wasteful business practices had

Reframing the Monopoly Question  67 left untapped: “And that is why America still offers the greatest promise to democracy.”117 The first prong of Lippmann’s anticipated social movement had its origins in a “silent revolution” quite different from the restorationist political crusade that Wilson had commended.118 The “swan-​song” of the little profiteer had been sounded, and a new day was aborning.119 The “intelligent men” of our generation—​and here, though Lippmann held advanced views on women and gender, he was writing specifically about men—​could unquestionably find a “better outlet for their energies” than by aspiring merely to be the “masters of little businesses.”120 On the vanguard of this social revolution was the promise of “industrial statesmanship,” a new vision of business leadership that Theodore Roosevelt had proclaimed in his 1912 Progressive Party acceptance speech.121 Industrial statesmen were salaried managers with little ownership stake in the enterprises over which they presided, predisposing them, or so Lippmann assumed, to prioritize as the summum bonum of economic activity the long-​term minimization of waste over the short-​term maximization of profit.122 Should such a new class of professionals emerge, Lippmann—​revealingly, if, in retrospect, somewhat overoptimistically—​ predicted, there would henceforth be “no higgling of the market” by corrupt insiders chasing after mere speculative gain.123 Economic traditionalists held out hope that shareholders might somehow mobilize collectively to reassert control over the country’s most powerful corporations. Lippmann did not: “The modern shareholder as a person is of no account whatever.”124 Nothing could transform the shareholder’s all-​ consuming quest for short-​term economic gain into a “high sense of social responsibility.”125 Almost two decades before Adolph Berle and Gardiner Means had published The Modern Corporation and Private Property, Lippmann had alerted his readers to the ethical implications of the separation of ownership from control. To explain why the social transformation of American business that he was describing remained so little known, Lippmann pointed his finger at the press. Innuendo and gossip were a poor substitute for sober-​minded analysis. Instead of carefully documenting the emerging economic order, too many journalists had cast themselves as prophetic muckrakers. In so doing, they had obscured the fact that, by attacking economic consolidation, they merely “gave an utterance” to the parochial self-​interest of the “small business men” and the poorly informed “larger public.”126 Even a journalist as tough-​minded as Lincoln Steffens—​whom Lippmann had known personally,

68  Antimonopoly and American Democracy having worked for him on an internship just out of college—​found troubling the “frightened literalness” with which some of Steffens’s journalistic pieces on economic issues had been received.127 While Lippmann faulted the muckrakers for amplifying the voices of the “beaten” and the “bewildered,” he admired the courageousness of their critique.128 Had a lawyer in the 1870s enunciated the failings of a prominent merchant with the same unwavering determination with which Louis Brandeis in the 1900s had publicized the misconduct of financiers, the merchant would have “spluttered and imploded at the impudence of such a suggestion.” Yet the times had changed and Brandeis was to be commended for having risen to the challenge.129 That doomed-​to-​fail “inflated monopolies” existed no one could deny.130 What was new was the willingness of crusading lawyers like Brandeis to hold them to account. Moral suasion, however, could only do so much. And this was why Lippmann played up the other two prongs of his social movement: strong labor unions and activist-​oriented consumer lobbies. Labor unions empowered by legal safeguards to encourage good-​faith collective bargaining fostered “industrial democracy” by cultivating the laudable habits of self-​reliance that could hasten the peaceful resolution of workplace disputes.131 Activist-​ minded consumer lobbies exposed shady business practices and encouraged sensible buying habits. Too often, Lippmann reflected, the “disastrous incompetence” of the consumer precluded her—​for when Lippmann wrote about consumers, he assumed she was a woman—​ from making an intelligent purchasing decision.132 If a consumer purchased a product that a bloated manufacturer had hyped in the press, she would be at the manufacturers’ mercy. Yet if she boycotted the wasteful behemoth in favor of a more nimble rival, she would remain in thrall to the blandishments of advertisers—​in the absence, that is, of activist-​minded consumer lobbies that could provide her with authoritative product information. Lippmann’s anti-​ monopolism built on his personal experiences as a sensitive young person who had come of age amid the rapid transformation of the United States into an industrial giant. His pluralism echoed the anti-​foundationalist pragmatism of his undergraduate mentor, Harvard philosophy professor William James.133 His admiration for labor unions and consumer lobbies reflected sentiments common among his peers in Greenwich Village, a hotbed not only of Freudian psychology—​upon which Lippmann had drawn in his Preface to Politics, a book he had published in 1913—​but also of the democratic socialism of the American Socialist

Reframing the Monopoly Question  69 Party.134 The “profit-​system,” Lippmann confidently declared in Drift and Mastery, with the calm self-​assurance of an author who knew his audience, had “never commanded the wholehearted assent of the people who lived under it.”135 Sweatshops and company stores predated the great merger movement, while labor unions had been hobbled by the very anti-​monopoly legislation that Wilson applauded. While Drift and Mastery retains enduring value for its wide-​angle overview of the anti-​monopoly issue in 1914, it unfortunately advanced three misleading arguments that would have a long afterlife. The first of these concerned Lippmann’s unqualified confidence in the managerial elite. Though mid-​ twentieth-​ century corporate managers would identify closely with the enterprises over which they presided—​in contrast to the short-​term-​ oriented investor-​led consortia so influential today—​they were neither as farsighted nor as magnanimous as Lippmann had hoped. Lippmann’s second misstep concerned his characterization of Wilson’s 1912 campaign speeches. To defeat the “plutocracy,” Lippmann sardonically observed, Wilson had taken a page out of Bryan’s anti-​monopoly playbook.136 In fact, Wilson’s war on the trusts lacked the moral urgency of Bryan’s critique, at least in part because Wilson had followed the advice of anti-​monopoly moderate Louis Brandeis, whose faith in the social-​scientific concept of economic efficiency blunted the urgency of Wilson’s appeal. Lippmann’s third misstep involved his characterization of the Populist Party. Echoing what had become by 1914 a stock anti-​Populist talking point, Lippmann faulted the Populists as backward-​looking reactionaries hostile to the “larger scale of human life.”137 In fact, the opposite was closer to the truth. Few prominent late nineteenth-​century Populists yearned to restore a lost pastoral idyll. On the contrary, the Populists’ primary problem with the railroad and the telegraph was not that they were too big, but, rather, that they were too small. Like the East Coast shippers who had beaten the drum for “cheap freight,” Ignatius Donnelly lobbied not for a return ticket to a long-​ lost pastoral arcadia but, instead, for fast, non-​discriminatory, and low-​cost access to the channels of trade.138 No political commentator can get everything right, and Lippmann was no exception. Yet in at least one important respect Lippmann did point the way forward. For anti-​monopoly to remain effective in the industrial age, it was best envisioned as a social process and not a moral absolute. Democracy, science, liberty—​and, though Lippmann did not say so explicitly, what environmental activists would today call ecological sustainability—​all presumed the

70  Antimonopoly and American Democracy mobilization of what a later generation of social theorists would call countervailing power. To try to control the environment might well have been a fool’s errand. Yet it was the only game in town. *** The recent rise of large and politically powerful tech platforms—​Amazon, Facebook, and Google—​ has galvanized a twenty-​ first century anti-​ monopoly movement that is encouraging a long overdue reconsideration of the history of anti-​monopoly in the long nineteenth century. Political domination is once again on the political agenda. So too is a search for solutions. Anti-​monopoly is not the same thing as anti-​trust. Anti-​monopoly is older, less economistic, and more firmly rooted in the Enlightenment critique of concentrated power. It looks expansively to the common good, rather than narrowly—​as in the case of recent anti-​trust jurisprudence—​to the maximization of individual consumer welfare. For John Adams, monopoly was domineering; for William Leggett, it was unjust; for Henry George, it was inegalitarian; and for Walter Lippmann, it was wasteful. What to do? For Adams, the solution was commercial reciprocity; for Leggett, state-​level general incorporation legislation; for George, the taxation of natural resources; and for Lippmann, the mobilization of countervailing power. Twice in the early republic—​first during the War of Independence and again during the War of 1812—​the United States confronted Britain’s monopoly power, and twice it prevailed. While the specter of Britain’s commercial monopoly would never again preoccupy the public mind quite as emphatically as it had during the War of 1812, the bogey of unfair competition would haunt American manufacturers and their allies in the labor movement for the remainder of the century. The unfair advantages in global markets that British manufacturers had realized from their reliance on underpaid and poorly treated factory workers became following the Civil War a Republican Party mantra that would provide John Sherman with a plausible rationale not only for the imposition of high tariffs on imported goods but also for the 1890 anti-​monopoly law that today bears his name. The emergence of the first anti-​monopoly mass movement in the 1840s marked a watershed in anti-​monopoly thought. Emboldened by a principled commitment to natural rights, land reformer George Henry Evans galvanized a popular campaign to expand access to public education while disbursing to ordinary people millions of acres of government land. With the publication of Henry George’s Progress and Poverty in 1879, the center of gravity for the

Reframing the Monopoly Question  71 land monopoly issue shifted from the country to the city, where it would remain until the 1910s, when it would return once again to the country—​with a primary focus this time not on homestead principle, but, rather, on the equitable disposition of the public domain. With the emergence in the late nineteenth century of the United States as one of the world’s largest industrial nations, the monopoly question would be transformed once again by the discovery that the republic could be imperiled by the monopolization not only of commerce and land, but also of industry. To control monopoly power in the country’s burgeoning urban centers, state and municipal lawmakers enacted a raft of laws to better regulate municipal franchise corporations; to control monopoly power in finance, commerce, and industry, federal lawmakers enacted the Federal Reserve Act (1913), the Federal Trade Commission Act (1914), and the Clayton Anti-​Trust Act (1914). Similar anti-​monopoly laws had been enacted during Roosevelt’s presidency to protect federally owned land from would-​be monopolists, with land being understood to embrace—​ channeling Henry George—​not only tillable soil, but also mineral deposits, flowing water suitable for conversion into electric power, and even the electromagnetic spectrum.139 For much of the twentieth century, anti-​monopoly remained a potent political force.140 Yet it would lose much of its critical edge in the 1970s when, in a startling departure from precedent, lawmakers, jurists, journalists, and even many academics re-​envisioned it through the lens of a single mode of inquiry—​ neoclassical economics—​ whose arcane, highly mathematized models could be fully grasped only by a self-​appointed, self-​perpetuating, technocratic elite. Today’s anti-​ monopolists reject as anti-​ democratic, politically dangerous, and environmentally unsound the conflation of anti-​monopoly with highly speculative performance-​based metrics such as the maximization of individual consumer welfare. In their place, they recommend a return to the structure-​and-​conduct standard that jurists upheld during the mid-​twentieth century.141 While today’s anti-​ monopoly movement remains highly variegated, its leading lights support a broad and inclusive policy agenda that melds the realism of James Madison—​evident not only in Madison’s Federalist 10, but also in his pointed 1799 warnings about foreign media manipulation, or what might today be called “fake news”—​with the twentieth-​century pluralism of Walter Lippmann and Louis Brandeis. By thrusting the monopoly question back onto the public agenda, they are introducing a new generation of lawmakers, journalists, labor leaders, and

72  Antimonopoly and American Democracy environmental activists to the promise of creative statecraft in the digital age, opening a new chapter in the annals of anti-​monopoly thought.

Notes 1. Thomas Jefferson to James Madison, December 20, 1787, in The Papers of James Madison, ed. Robert A. Rutland et al. (Chicago: University of Chicago Press, 1977), 10:336. Earlier versions of this essay were presented at the Tobin Project’s anti-​monopoly working group, the Early American History and Culture Seminar at Columbia University, and the 2021 annual meeting of the Society for Historians of the Early American Republic. I am grateful for all the advice and suggestions that I received on these occasions. Special thanks to John Cisternino, Christopher England, Eliga H. Gould, Nancy R. John, Naomi Lamoreaux, Barry Lynn, Stephen Mihm, Peter S. Onuf, Laura Phillips-​Sawyer, Ganesh Sitaraman, Jeffrey Sklansky, James T. Sparrow, Michael Stamm, Matt Stoller, Richard White, and to my research assistants Cole Cahill, Iris Chen, Neely McGee, Erin O’Bannon, and Timothy Vanable. 2. Lewis Hyde, Common as Air: Revolution, Art, and Ownership (New York: Farrar, Straus & Giroux, 2010). 3. Richard R. John, “Private Enterprise, Public Good? Communications Deregulation as a National Political Issue, 1839–​1851,” in Beyond the Founders: New Approaches to the Political History of the Early American Republic, ed. Jeffrey L. Pasley, Andrew W. Robertson, and David Waldstreicher (Chapel Hill: University of North Carolina Press, 2004), 328–​54. 4. Though historical writing on anti-​monopoly thought remains fragmented and formless, historians have long recognized that anti-​monopoly was far more than a reflexive grievance. In the words of Daniel T. Rodgers, antimonopolism (without a hyphen) was one of the three “clusters of ideas” or “social languages” that articulated the discontents and “social visions” of early twentieth-​ century progressives. For Gary Gerstle, antimonopolism (also without a hyphen) “may well be the single most important political impulse in American history.” In a review essay on American anti-​monopoly thought, Kenneth Lipartito has declared antimonopoly (no hyphen again) to be “one of the most powerful words in the lexicon of nineteenth-​century America.” In this essay, I retain the hyphen between “anti” and “monopoly” to reflect contemporary usage and emphasize its oppositional cast. Though not all anti-​monopolists viewed the world through the same lens, they all regarded themselves as engaged in a confrontation with a domineering protagonist. Daniel T. Rodgers, “In Search of Progressivism,” Reviews in American History 10 (December 1982): 123; Gary Gerstle, review of Steven L. Piott, “The Anti-​Monopoly Persuasion,” Labor History 27 (Spring 1986): 289; Kenneth Lipartito, “The Antimonopoly Tradition,” University of St. Thomas Law Journal 10 (Spring 2013): 991.

Reframing the Monopoly Question  73 5. Novanglus, “To the Inhabitants of the Colony of Massachusetts-​Bay,” Boston Gazette, February 27, 1775, in The Papers of John Adams, ed. Robert J. Taylor, Mary-​Jo Kline, and Gregg L. Lint (Cambridge, MA: Harvard University Press, 1977), 2:296. 6. Novanglus, “To the Inhabitants,” 296. 7. Hampden, The Alarm: Number III (New York: n.p.: 1773); Rusticus, A Letter from the Country, to a Gentleman in Philadelphia (n.p., 1773), in The Writings of John Dickinson, ed. Paul Leicester Ford (Philadelphia: Historical Society of Pennsylvania, 1895), 1:459–​63. 8. Rusticus, Letter from the Country, 460. 9. “Resolution,” October 14, 1774, in Worthington Chauncey Ford, ed., Journals of the Continental Congress, 1774–​1789 (Washington, DC: Government Printing Office, 1904), 1:68–​69. 10. Edmund Burke, “Speech on Conciliation with America,” March 22, 1775, in The Writings and Speeches of Edmund Burke, Vol. 3: Party. Parliament, and the American War, 1774–​1780, ed. W. M. Elofson with John A. Woods (Oxford: Clarendon Press of Oxford University Press, 1996), 3:118. 11. Edmund Burke, “Speech on American Taxation,” April 19, 1774, in The Writings and Speeches of Edmund Burke, Vol. 2: Party, Parliament, and the American War, 1766–​ 1774, ed. Paul Langford and William B. Todd (Oxford: Clarendon Press of Oxford University Press, 1981), 2:426. “This principle of commercial monopoly,” Burke elaborated, “runs through no less than twenty-​nine Acts of Parliament, from the year 1660 to the unfortunate period of 1764” (427). 12. There is, for example, no index entry for “navigation acts” in Danielle Allen’s Our Declaration: A Reading of the Declaration of Independence in Defense of Equality (New York: W. W. Norton, 2014), or in Pauline Maier, American Scripture: Making the Declaration of Independence (New York: Alfred A. Knopf, 1997). To open up global markets, as Steve Pincus has written, the “Patriots” recognized the indispensability of “activist government”: “In other words, the Patriots very much wanted unfettered access to markets, but they had no interest in unregulated or unprotected markets. . . . In foreign trade the post-​1760 British imperial regime had both done too much to suppress American smuggling and too little to create the facilities and provide the protection necessary for a profitable commerce.” Steve Pincus, The Heart of the Declaration: The Founders’ Case for an Activist Government (New Haven, CT: Yale University Press, 2016), 117. For an even more expansive interpretation of the role of the Navigation Acts as a catalyst for the War of Independence, see Staughton Lynd and David Waldstreicher, “Free Trade, Sovereignty, and Slavery: Toward an Economic Interpretation of American Independence,” William and Mary Quarterly 68 (October 2011): 597–​630. 13. Eliga H. Gould, Among the Powers of the Earth: The American Revolution and the Making a New World Empire (Cambridge, MA: Harvard University Press, 2012), 1–​13. 14. István Hont, Jealousy of Trade: International Competition and the Nation-​State in Historical Perspective (Cambridge, MA: Harvard University Press, 2005), 1–​156.

74  Antimonopoly and American Democracy 15. Letters from a Distinguished American: Twelve Essays by John Adams on American Foreign Policy, 1780, ed. James H. Hutson (Washington, DC: Library of Congress, 1978), 29–​30. 16. Letters from a Distinguished American, 4–​5. 17. Enemy to Foreign Influence, “Foreign Influence,” Philadelphia Aurora General Advertiser, January 23, 1799, in The Papers of James Madison, ed. David B. Mattern et al. (Charlottesville: University Press of Virginia, 1991), 7:215. 18. “Foreign Influence,” 219, 220. 19. The Memorial of the Merchants and Traders of the City of Baltimore (Baltimore: Warner & Hanna, 1806), 28. 20. Thomas Jefferson to Madame de Staël Holstein, May 28, 1813, in The Papers of Thomas Jefferson, Retirement Series, ed. J. Jefferson Looney (Princeton, NJ: Princeton University Press, 2009), 6:141–​42. The idea of an ocean-​spanning commercial monopoly was itself quite new. The oceans were so vast, explained William John Duane in an 1809 primer on international law, that, prior to the seventeenth century, an “attempt at universal monopoly” by any of the European powers was “not dared to be avowed.” The British navigation acts undermined this time-​honored convention, having been “founded” on the “contemplation” of “such an unsocial usurpation.” William John Duane, The Law of Nations, Investigated in a Popular Manner: Addressed to the Farmers of the United States (Philadelphia: William Duane, 1809), 19. 21. The author of the virulently anglophobic early draft of Jackson’s bank veto address was journalist Amos Kendall—​the Steve Bannon of the 1830s. Amos Kendall, “Draft,” July 1832, in The Papers of Andrew Jackson, ed. Daniel Feller, Thomas Coens, and Laura Eve-​Moss (Knoxville: University of Tennessee Press, 2016), 10:379–​410. 22. George Bancroft, History of the Colonization of the United States (Boston: Charles C. Little and James Brown, 1840), 3:400–​16. “England, France, and Spain,” Bancroft wrote, “occupied all the continent, nearly all the islands, of North America; each established over its colonies an oppressive metropolitan monopoly” (400). The presumption that slavery had been foisted on the colonists by a foreign power troubled jurist James Kent, who, in the flyleaf to the first edition of Bancroft’s history that can be found in the rare books room at Columbia Library, sardonically observed: “See a Detail of the Slave Trade from p. 402 to 416. The Historian by a series of selected acts and sayings endeavors to throw on England the Crime—​not only the encouragement of the Trade but of counteracting all the Efforts of the Colonies to Suppress it.” 23. Washington M’Cartney, The Origin and Progress of the United States (Philadelphia: E. H. Butler & Co., 1847), 173, 175. 24. J. W. Armstrong, Oration Delivered by Rev. J. W. Armstrong, at Lowville, N. Y., July 4th 1861 (Lowville, NY: Journal & Republican Book and Job Office [1861]), 9-​10. 25. Montgomery Blair, Speech of the Hon. Montgomery Blair, on the Causes of the Rebellion, and in Support of the President’s Plan of Pacification (Baltimore: Sherwood & Co., 1864), 7–​8. Blair was glossing Bancroft’s chapter on “English Encroachments on the Colonial Monopolies of Spain Prepare American Independence” in volume 3 of Bancroft’s History of the United States. Bancroft, History of the United States, 3:397–​416.

Reframing the Monopoly Question  75 26. John Taylor, An Inquiry into the Principles and Policy of the Government of the United States (New Haven, CT: Yale University Press, 1950 [1814]), 73. 27. “Banking,” Plaindealer, August 26, 1837. Though Leggett’s editorials were unsigned, his authorship was an open secret among political insiders. For a convenient sampling, see William Leggett, Democratick Editorials: Essays in Jacksonian Political Economy, ed. Leonard H. White (Indianapolis: Liberty Press, 1984). White’s edition of Leggett’s writings includes all the editorials cited in this essay. 28. Evening Post, November 21, 1834. 29. “The Reserved Rights of the People,” Evening Post, December 13, 1834. 30. “Despotism of Andrew Jackson,” Evening Post, May 22, 1834. 31. “The Crisis,” Plaindealer, May 13, 1837. 32. Jeffrey Sklansky, Sovereign of the Market: The Money Question in Early America (Chicago: University of Chicago Press 2017), chap. 3. 33. “Rich and Poor,” Evening Post, November 4, 1834. 34. William Leggett, A Collection of the Political Writings of William Leggett, Selected and Arranged with a Preface, by Theodore Sedgwick, Jr., 2 vols., ed. Theodore Sedgwick Jr. (New York: Taylor & Dodd, 1840). 35. James Willard Hurst, Law and the Conditions of Freedom in the Nineteenth Century United States (Madison: University of Wisconsin Press, 1956); Oscar Handlin and Mary Handlin, The Dimensions of Liberty (Cambridge, MA: Belknap Press of Harvard University Press, 1961), 87; Douglass C. North, John Joseph Wallis, and Barry R. Weingast, Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cambridge, MA: Cambridge University Press, 2009). The highly charged, and often avowedly polemical, anti-​monopoly rallying cry of “laissez-​faire” is often used to characterize the entire nineteenth-​century American political economy. This is unfortunate, since the phrase “laissez-​faire” conceals far more than it reveals about how this political economy actually worked. If the concept is to be salvaged from the historiographical dustbin, it is best restricted to the adoption of general incorporation laws, especially in banking. “The passage of a free banking statute [that is, the New York Banking Act of 1838] by the nation’s leading commercial state,” as historian of corporate law Ronald Seavoy explained, “was the ultimate expression of laissez-​faire policy, because it opened the politically sensitive business of creating credit to general entrepreneurial participation. . . . Laissez-​faire policy fitted the industrial needs of state and regional markets but lost its rationale when the national market came into existence. . . . The utility of laissez-​faire business policy ended about 1880. But it survived as a revealed religion that guided judicial opinions well into the twentieth century.” Ronald E. Seavoy, “Laissez-​Faire: Business Policy, Corporations, and Capital Investment in the Early National Period,” in Encyclopedia of American Political History: Studies of the Principal Movements and Ideas, ed. Jack P. Greene (New York: Charles Scribner’s Sons, 1984), 2:734, 736. 36. Richard R. John, Network Nation: Inventing American Telecommunications (Cambridge, MA: Belknap Press of Harvard University Press, 2010), chaps. 3–​5. 37. “Rights of Authors,” Plaindealer, January 27, 1837.

76  Antimonopoly and American Democracy 38. Whether or not pre–​Civil War land reform deserves pride of place in the annals of anti-​monopoly is a matter of interpretation. For Richard White, it did not. In his view, the “rise of antimonopolism” followed the emancipation of slavery, when the “first antimonopolists” rose up to protest the financial chicanery that accompanied the construction of the transcontinental railroads, a wasteful and unnecessary government project that anti-​monopolists derided as “an aberration spawned by corruption in the political system itself.” Richard White, “Utopian Capitalism,” in American Capitalism: New Histories, ed. Sven Beckert and Christine Desan (New York: Columbia University Press, 2018), 119–​20. White expanded on his point in The Republic for Which It Stands: The United States during Reconstruction and the Gilded Age, 1865–​1896 (New York: Oxford University Press, 2016), in which he characterized “antimonopoly broadly construed” as the “most significant political movement of the Gilded Age” (898). The land reform movement also raises questions about regionalism. White’s anti-​monopolists originated in the trans-​Mississippi West. Evans’s National Reform Association, in contrast, was based in New York City. The relationship of Atlantic seaboard anti-​ monopolists to trans-​ Mississippi anti-​monopolists was probed in 1944 by Chester McArthur Destler in an essay on “western radicalism.” The “revival” in the immediate post–​Civil War era of a “democratic movement” to limit special privilege in the West, Destler observed, offered the “first clear illustration in this period” of the “effect of intercourse and co-​operation between eastern and western, urban-​born and agrarian movements upon the development of western radical thought and action. This is notably true of the antimonopoly sentiment that flourished in the Western states in the half-​dozen years before the Panic of 1873 . . . the continuing antimonopoly movement of these years cannot be fully understood without reference to mercantile interests, the National Labor Union, and the activities of several propaganda organizations that operated from central offices on the eastern seaboard. . . . It is not surprising to find in 1867 a National Anti-​Monopoly Cheap Freight Railroad League with headquarters in New York City.” Charles McArthur Destler, “Western Radicalism, 1865–​1901: Concepts and Origins,” Mississippi Valley Historical Review 31 (December 1944): 338–​39. The prominence of Atlantic seaboard shippers in post–​ Civil War anti-​ monopoly politics is documented in Lee Benson, Merchants, Farmers, & Railroads: Railroad Regulation and New York Politics, 1850–​ 1887 (Cambridge, MA: Harvard University Press, 1955). For the anti-​monopoly political agenda of one post–​Civil War New York City–​based wholesaler, see Richard R. John, “Proprietary Interest: Merchants, Journalists, and Antimonopoly in the 1880s,” in Media Nation: The Political History of News in Modern America, ed. Bruce J. Schulman and Julian E. Zelizer (Philadelphia: University of Pennsylvania Press, 2017), 10–​35. The post–​ Civil War anti-​ monopoly movement is sometimes conflated with “producerism,” a construct that Walter T. K. Nugent floated in 1968 in his Money and American Society. While producerism has by now become squarely entrenched in the secondary literature, it is not without its problems. To begin with, producerism was not a concept that anti-​monopolists used. To complicate matters still further, the

Reframing the Monopoly Question  77 protectionist Henry C. Carey did use the related term “producerite” to justify high tariffs, a policy that many anti-​monopolists opposed. As Nugent explained: “Flabby in its economics and diverse in its roots, producerism was so common a rhetorical theme in America during the latter two-​thirds of the nineteenth century that its significance as a guidepost to the American mind at that time cannot be questioned. On the other hand, its usefulness, if indeed it ever had any, as a device for understanding the structure of American society, had largely disappeared by 1865.” Walter T. K. Nugent, Money and American Society, 1865–​1880 (New York: Free Press, 1968), 30, 28. 39. Thomas Paine, Agrarian Justice, Opposed to Agrarian Law, and to Agrarian Monopoly (Philadelphia: R. Folwell, 1797). 40. Mark A. Lause, Young America: Land, Labor, and the Republican Community (Urbana: University of Illinois Press, 2005); Jonathan Earle, Jacksonian Antislavery and the Politics of Free Soil, 1824–​1854 (Chapel Hill: University of North Carolina Press, 2004), chap. 1. 41. Lyman Beecher, The Memory of our Fathers (Boston: T. R. Marvin, 1828), 9. 42. Earle, Jacksonian Antislavery, 59. 43. J. C. W. Whitefield, “Land Reform—​Its Connection with American Agriculture,” National Era, February 23, 1854. 44. Gerrit Smith, “Compensated Emancipation,” Liberator, October 9, 1857. 45. “Frederick Douglass, “The Land Reformer,” Frederick Douglass’s Paper, August 15, 1856, reprinted in the online magazine Jacobin, February 20, 2020. Though Douglass is not widely known for his opposition to land monopoly, this editorial highlights a dimension of his social thought that his present-​day libertarian admirers neglect. On this point, see Ramsay Eyre, “Land Hunger in the Abolitionist Imagination, 1865–​ 1872” (BA thesis, Columbia University, 2021), 19 fn 26. 46. “Mass Meeting in Bowling Green,” New-​York Daily Tribune, June 15, 1860. 47. Ariel Ron, Grassroots Leviathan: Agricultural Reform and the Rural North in the Slaveholding Republic (Baltimore: Johns Hopkins University Press, 2020); James L. Huston, The British Gentry, the Southern Planter, and the Northern Family Farmer: Agriculture and Sectional Antagonism in North America (Baton Rouge: Louisiana State University Press, 2015). 48. Sven Beckert, “American Danger: United States Empire, Eurafrica, and the Territorialization of Industrial Capitalism, 1870–​1950,” American Historical Review 122 (October 2017): 1137–​70. 49. Richard Edwards, Jacob K. Friefeld, and Rebecca S. Wingo, Homesteading the Plains: Toward a New History (Lincoln: University of Nebraska Press, 2017). 50. C. Joseph Genetin-​Pilawa, Crooked Paths to Allotment: The Fight over Federal Indian Policy after the Civil War (Chapel Hill: University of North Carolina Press, 2012), chap. 6. 51. Richard Edwards, “African Americans and the Southern Homestead Act,” Great Plains Quarterly 39 (Spring 2019): 103–​29; Claude F. Oubre, Forty Acres and a Mule: The Freedman’s Bureau and Black Land Ownership (Baton Rouge: Louisiana State University Press, 1978).

78  Antimonopoly and American Democracy 52. Brooks D. Simpson, “Land and the Ballot: Securing the Fruits of Emancipation?” Pennsylvania History 60 (April 1993): 176–​88. 53. Steven Hahn, A Nation under our Feet: Black Political Struggles in the Rural South from Slavery to the Great Migration (Cambridge, MA: Belknap Press of Harvard University Press, 2003), chap. 3. 54. Henry George, Progress and Poverty, ed. William S. Pierce with Alexandra Lough (Madison, NJ: Fairleigh Dickinson University Press, 2017 [1879]), 169. 55. Alex Wagner Lough, “Henry George, Frederick Jackson Turner, and the ‘Closing’ of the American Frontier,” California History 89, no. 2 (2012): 4–​23, 52–​54. 56. George, Progress and Poverty, 376. 57. This discussion is indebted to Christopher William England, Land and Liberty: Henry George and the Crafting of Modern Liberalism (Baltimore: Johns Hopkins University Press, 2023). 58. George, Progress and Poverty, 393. 59. Ibid., 396. 60. Ibid., 397. 61. Ibid., 400. 62. Ibid., 461. 63. Ibid., 462. 64. Ibid., 437. 65. Ibid., 437. 66. Ibid., 437. 67. Albert Jay Nock, Henry George: An Essay by Albert Jay Nock (New York: William Morrow, 1930), 215–​16. 68. George, Progress and Poverty, 280. 69. Ibid., 399. 70. Tamara Venit Shelton, A Squatter’s Republic: Land and the Politics of Monopoly in California, 1850–​1900 (San Marino: Huntington Library, 2013), chap. 3. 71. T. Thomas Fortune, Black and White: Land, Labor, and Politics in the South (New York: Washington Square Press, 2007 [1884]), 137, 142. 72. Walter Rauschenbusch, Christianity and the Social Crisis in the Twenty First Century: The Classic That Woke Up the Church, ed. Paul Raushenbush (New York: HarperCollins, 2007 [1907]), 190. 73. Carey McWilliams, Factories in the Fields: The Story of Migratory Labor in California (Berkeley: University of California Press, 1999 [1939]), 25. 74. Robert M. Solow, “How to Treat Intellectual Ancestors,” in Land Use & Taxation: Applying the Insights of Henry George, ed. H. James Brown (Cambridge, MA: Lincoln Institute of Land Policy, 1997), p. 14. 75. Christopher England, “John Dewey and Henry George: The Socialization of Land as a Prerequisite for a Democratic Public,” American Journal of Economics and Sociology 77 (January 2018): 172–​77. 76. Ibid., 178–​79. 77. John Dewey, “Foreword” to George Raymond Geiger, The Philosophy of Henry George (New York: Macmillan, 1933), xiii.

Reframing the Monopoly Question  79 78. Nicholas Murray Butler, Progress and Poverty (New York: Columbia University, 1931), 1. 79. Thomas Goebel, A Government by the People: Direct Democracy in America, 1890–​ 1940 (Chapel Hill: University of North Carolina Press, 2002), chap. 6. 80. Alexandra W. Lough, “Tom L. Johnson and Cleveland Traction Wars, 1901–​1909,” American Journal of Economics and Sociology 75 (January 2016): 149–​92. 81. This discussion is indebted to England, Land and Liberty. 82. Ganesh Sitaraman, “Foreword: Drift and Mastery in the Twenty-​First Century,” in Walter Lippmann, Drift and Mastery: An Attempt to Diagnose the Current Unrest (Madison: University of Wisconsin Press, 2015 [1914]), xiii–​ xxiii. Sitaraman emphasizes the relevance of Drift and Mastery today; for its place in early twentieth-​ century social thought, see David A. Hollinger, “Science and Anarchy: Walter Lippmann’s Drift and Mastery,” American Quarterly 29 (Winter 1977): 463–​75. 83. Lippmann specialist Tom Arnold-​Forster has found no evidence in Lippmann’s voluminous papers at Yale University that Lippmann read Sumner. Tom Arnold-​ Foster to Richard R. John, personal communication, November 2, 2022. 84. William G. Sumner, “Another Chapter on Monopoly,” Independent, March 15, 1888. Sumner’s Independent articles on monopoly would be collected after his death by his student Albert Galloway Keller. William Graham Sumner, Earth-​Hunger and Other Essays, ed. Keller (New Haven, CT: Yale University Press, 1913). 85. Sumner, “The Family Monopoly,” Independent, May 10, 1888. 86. Sumner, “Land Monopoly,” Independent, January 12, 1888. 87. Sumner, “Another Chapter on Monopoly.” 88. Sumner, “A Group of Natural Monopolies,” Independent, February 16, 1888. 89. Sumner, “The Boon of Nature,” Independent, October 27, 1887. 90. Sumner, “Group of Natural Monopolies.” 91. Sumner, “Boon of Nature.” 92. Naomi Lamoreaux, The Great Merger Movement, 1895–​1904 (Cambridge: Cambridge University Press, 1985). 93. Mary A. O’Sullivan, Dividends of Development: Securities Markets in the History of U. S. Capitalism, 1866–​1922 (Cambridge: Cambridge University Press, 2016), 29, 36. 94. “Exterminate Them,” Nashville American, June 22, 1906, p. 1. 95. Sherman was notorious for advancing positions in interviews with journalists that he would quietly vote against in Congress. Even so, his public pronouncements leave little doubt that he regarded the anti-​monopoly law that would bear his name as a counterweight to the market power of big business and a boon for workers and small business. Had no federal anti-​monopoly law been on the books, large US-​based manufacturers might have been tempted to take advantage of the protection that the McKinley Tariff afforded them against foreign competition to undersell their smaller US-​based rivals, a much-​disparaged business strategy that would later come to be known as “predatory pricing.” New York Times, April 7, 1890; “Sinuous Statesmanship,” St. Louis Post-​Dispatch, October 18, 1890; “Senator Sherman and the Tariff,” New York Times, January 22, 1894; “Senator Sherman’s Views,” New York Times, November 12, 1894; “The Republican Party and the Tariff,”

80  Antimonopoly and American Democracy Chicago Daily Tribune, November 17, 1894. On the relationship of the Sherman Act to the McKinley Tariff, see White, Republic for Which It Stands, 633; and Elizabeth Sanders, Roots of Reform: Farmers, Workers, and the American State, 1877–​1917 (Chicago: University of Chicago Press 1999), 269–​73. 96. Alfred D. Chandler Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, MA: Belknap Press of Harvard University Press, 1977), 319–​ 20, 331, 375–​76. 97. Charles K. McCurdy, “The Knight Sugar Decision of 1895 and the Modernization of American Corporation Law, 1869–​1903,” Business History Review 53 (Autumn 1979): 304–​42. 98. “Socialist Platform of 1912,” in National Party Platforms, 1840–​1960, ed. Kirk H. Porter and Donald Bruce Johnson (Urbana: University of Illinois Press, 1960), 190. 99. Sidney M. Milkis, Theodore Roosevelt, the Progressive Party, and the Transformation of American Democracy (Lawrence: University Press of Kansas, 2009), chap. 5. Milkis’s analysis of the relationship between Roosevelt, Wilson, and Brandeis helps to contextualize Brandeis’s ideas about economic consolidation. See also Melvin L. Urofsky, Louis D. Brandeis: A Life (New York: Schocken, 2012), chaps. 13–​14. “New Brandeisians” sometimes play up the differences in the economic philosophy of Brandeis and Lippmann by emphasizing the divergent positions they took on the trust issue in 1912. In fact, these differences owed more to the transitory circumstances of an unusually cerebral election campaign than to any fundamental disagreement over public policy. From the standpoint of hindsight, the two had much in common. Both hailed from well-​to-​do German-​Jewish families that resented Prussian militarism; both were pluralists skeptical of conventional understandings of natural rights; and both were fervent admirers of liberalism, science, and industrial democracy. When Wilson nominated Brandeis to the Supreme Court, Lippmann enthusiastically supported his decision. In economic matters, Brandeis was more skeptical than Lippmann of finance and more sympathetic to then-​current social-​scientific theories about shop floor efficiency. In litigating law cases involving labor disputes, for example, Brandeis invoked Frederick Winslow Taylor’s time-​motion studies, a gambit that Lippmann would almost certainly have viewed with suspicion, given Lippmann’s close ties to the socialist movement. And while both would come in the 1910s to admire Bryan, they were, in the main, too skeptical of majoritarian appeals to fully embrace Bryan’s manichaean condemnation of private monopoly. 100. Theodore Roosevelt, “Speech at Denver before the Colorado Life Stock Association,” August 29, 1910, in Theodore Roosevelt and the New Nationalism, ed. William E. Leuchtenburg (Englewood Cliffs, NJ: Prentice-​Hall, 1961), 61. 101. Woodrow Wilson, The New Freedom: A Call for the Emancipation of the Generous Energies of a People, ed. William E. Leuchtenburg (Englewood Cliffs, NJ: Prentice-​ Hall, 1961), 45. 102. Ibid., 109. 103. Ibid., 32, 29. Perhaps the most judicious assessment of Wilson’s critique of economic concentration can be found in Leuchtenburg’s introduction: “He [Wilson]

Reframing the Monopoly Question  81 gave to the trust question in 1912 a spirt of elevated thought and action men had rarely heard before, but he left both many of his contemporaries and two generations of historians bewildered about precisely what he did propose to do about the trusts” (7). 104. Angus Burgin, The Great Persuasion: Reinventing Free Markets since the Depression (Cambridge, MA: Harvard University Press, 2012), 55, 72–​ 76; Lawrence B. Glickman, Free Enterprise: An American History (New Haven, CT: Yale University Press, 2019), 146. 105. Lippmann, Drift and Mastery, 176. 106. Ibid., 112. 107. Ibid., 84. 108. Ibid., 73. 109. Ibid., 85, 75. 110. Ibid., 79. 111. Ibid., 78. 112. Ibid., 77. 113. Ibid., 70. 114. Ibid., 38. 115. Ibid., 16. 116. Ibid., 175. 117. Ibid., 141. 118. Ibid., 38. 119. Ibid., 33. 120. Ibid., 85. 121. Theodore Roosevelt, Address of Theodore Roosevelt before the Convention of the National Progressive Party in Chicago August, Nineteen Twelve (Chicago: Mail and Express Job Print, 1912), 11. 122. Lippmann, Drift and Mastery, 85. The crispness of Lippmann’s prose lent authority to his prognosis. His repeated use of memorable catchphrases such as “industrial statesman” and “little profiteer,” for example, helped to fix in the popular imagination the otherwise arcane distinction between bad business and good industry that Thorstein Veblen had floated in 1904 in his Theory of Business Enterprise. 123. Ibid., 43. 124. Ibid., 47. 125. Ibid., 48. 126. Ibid., 104. 127. Ibid., 24. 128. Ibid., 34. 129. Ibid., 33. 130. Ibid., 41. 131. Ibid., 59, 67, 175. 132. Ibid., 53. 133. Ronald Steel, Walter Lippmann and the American Century (Boston: Little, Brown, 1980), 17–​22.

82  Antimonopoly and American Democracy 134. Ibid., 23–​44, 82. 135. Lippmann, Drift and Mastery, p. 37. 136. Ibid., 81. 137. Ibid., 81. 138. Charles Postel, The Populist Vision (New York: Oxford University Press, 2007); Postel, Equality: An American Dilemma, 1866–​1896 (New York: Farrar, Straus & Giroux, 2019). In his Pulitzer Prize–​winning Age of Reform (1955), Richard Hofstadter echoed Lippmann’s characterization of Populist anti-​monopolism as a restorationist small-​is-​beautiful quest. Recent historians, in contrast—​led by Charles Postel—​have emphasized the pro-​commercial, pro-​modern, pro-​bigness strain in Populist thought. Postel’s anti-​monopolists harbored few illusions about the past. On the contrary, like Destler’s shippers and Benson’s merchants, they faulted giant organizations—​including, in particular, the railroad and the telegraph—​for being not too big but too small. 139. David Goodman, “Anti-​Monopolism and American Broadcasting,” manuscript in the author’s possession. 140. Matt Stoller, Goliath: The Hundred Year War between Monopoly Power and Democracy (New York: Simon & Schuster, 2019). 141. Lina M. Khan, “The End of Antitrust History Revisited,” Harvard Law Review 133 (March 2020): 1655–​82; Khan, “The New Brandeis Movement: America’s Antimonopoly Debate,” Journal of European Competition Law & Practice 9 (March 2018): 131–​32. For a bracing overview of anti-​monopoly thought that demonstrates the enduring relevance of the Enlightenment critique of monopoly power, see Barry C. Lynn, Liberty from All Masters: The New American Autocracy vs. the Will of the People (New York: Macmillan, 2020). For a historical perspective on the “New Brandeisian” critique of monopoly power that has been developed by Barry Lynn, Matt Stoller, and Lina Khan, see Naomi R. Lamoreaux, “The Problem of Bigness: From Standard Oil to Google,” Journal of Economic Perspectives 33 (Summer 2019): 94–​117.

3 From Antimonopoly to Antitrust Richard White

As he died to make men holy Let us die to make things cheap —​Leonard Cohen, “Steer Your Way”

Monopoly and antimonopoly tracked each other across the nineteenth​century United States, but their trajectory was not simple nor the meanings reducible to current understandings of the terms. Antimonopoly appeared to be the antithesis chasing down monopoly, but it was really the thesis—​the ideal and the norm. It reflected ideas held since the early republic, which had only grown in strength during the Jacksonian era.1 Monopoly threatened all that antimonopolists held dear: democracy, the equality of white men, free and fair competition, and the “competency” they believed should be achieved by anyone who worked in the republic. Americans used the term “monopoly” during the late nineteenth and early twentieth century so promiscuously that they sometimes nearly stripped it of meaning, but Gilded Age antimonopolists focused on a particular kind of monopoly. They made the individual the core unit of analysis. In the early republic, Americans had worried about commercial monopolies and their impact on the nation as a whole.2 The core idea of Gilded Age antimonopoly remained fairly constant: a monopoly did harm by depriving others of opportunity. Any person or group that had the ability to deny others reasonable access to something that was necessary for their life or enterprise qualified as a monopolist.3 Monopolies discriminated; they chose winners and losers; they determined economic, social, and political outcomes. In doing so they threatened the American republic and its values of equality and democracy. By the end of the nineteenth century, antimonopolists had divided. Some continued to seek to break up monopolies through the courts, state Richard White, From Antimonopoly to Antitrust In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0003

84  Antimonopoly and American Democracy and federal laws, and regulatory commissions. Other antimonopolists accepted the inevitability of monopoly, while claiming that the old values of antimonopoly could paradoxically be grafted upon them if they came under public control. The split among antimonopolists opened the way for a third group, which embraced antitrust. Where antimonopolists regarded all privately held monopolies as dangerous—​and advocated state control of those that could not be prevented—​many advocates of antitrust marked off some “trusts” as inevitable, even necessary and benign. They focused far more on the economic dangers of monopoly than on political, social, and moral dangers.4 The differences between antimonopolists and antitrust intellectuals can seem more differences of degree than kind. Like early antimonopolists, antitrust intellectuals and reformers initially idealized small producers. John Bates Clark, the period’s leading economist and the author of The Control of Trusts (1901), wrote in the book’s first edition that “With a fair field and no favor the independent producer is the protector of the public and of the wage-​earner; but with an unfair field and much favor he is the first and most unfortunate victim. Save him, and you save the great interests of the public.”5 Clark continued to make independent producers the great concern and bastion of antitrust, but by the second edition of his book in 1912, who counted as an independent producer was not so clear. Clark abandoned any hope of restoring small-​scale production. The old world of shops was gone, not to return.6 The economy had become, in part, a world of trusts; the question was what to do about them. “Trust” had become a term of convenience, serving both as a metaphor for monopoly and as a synonym for centralized big business, but it also had a literal meaning. At the end of the nineteenth century, Standard Oil was a trust. The oil company chartered separate corporations in multiple states and then the stockholders of each put their stock in trust, receiving trust certificates in return. The constituent corporations remained legally separate but control was centralized in the trustees.7 Trusts had a history that it will be necessary to double back to, but for the moment it is enough to know that by 1899 holding companies and corporations chartered under the generous laws of New Jersey—​the “traitor state”—​had rendered trusts largely obsolete. Like the antimonopolists, John Bates Clark regarded private monopolies as intolerable, but he initially thought them difficult to establish and maintain. Trusts and large corporations could be tolerated as long as there was

From Antimonopoly to Antitrust  85 room for potential competitors to appear. The elimination of the possibility of competition was for Clark the sole criterion of monopoly. “Can the rival safely appear or can he not? is the test question.” Clark thought measures meant to control monopolies were as dangerous as monopolies themselves. He seemed willing to see trusts crush competitors as long as they did it “fairly” through “natural” competition and left open the prospect of new rivals emerging.8 Distinguishing the different strains of antimonopoly and then differentiating antimonopoly from antitrust is the first step in understanding the change in antimonopoly politics and its relationship to democratic governance as the United States moved from the Gilded Age into the Progressive Era. A convenient time and place to do so is Chicago in 1899. Fin-​de-​siècle America had just emerged from what Americans called—​with characteristic Gilded Age grandiosity—​the Great Depression and were in the midst of what Naomi Lamoreaux has labeled the great merger movement. When in 1899 the first Chicago Conference on Trusts, hosted by the Civic Federation of Chicago, convened, the emergence of “trusts” and the expansion of monopoly had become matters of great public and political concern. A wave of mergers was quickly extending centralization beyond the railroads and a few industries such as oil to newer manufacturing industries. Floundering in the face of the depression of the 1890s, these manufacturers had consolidated from necessity. The conference, and those that followed, were multiday affairs designed as an impartial examination of trusts “embracing every shade of opinion.”9 The 1899 conference was ecumenical. William Jennings Bryan was there. Corporate lawyers were there, and so was the country’s leading socialist intellectual, Laurence Gronlund. Samuel Gompers attended, as did other union leaders as well as advocates of trusts. Businessmen of all stripes spoke. But the key attendees in regard to articulating antimonopoly and antitrust and the differences between them belonged to two distinct groups. The first were antimonopolists, who had dominated the mass politics of the Gilded Age. Academic economists, some of whom held positions in the new government agencies or private and professional organization that arose from the nineteenth-​ century contest over monopoly, composed the second group. Henry C. Adams of the Interstate Commerce Commission, Edward Bemis of the Bureau of Economic Research, J. W. Jenks of the US Industrial Commission, and John Bates Clark of Columbia University were men of reputation, but they did not command popular followings.

86  Antimonopoly and American Democracy The conference exposed the degree to which antimonopolists and the antitrust academics disagreed over what counted as monopoly. For antimonopolists, judgments about monopolies did not turn on whether prices of the commodity or service they produced rose or fell. It was their effect on society as a whole that mattered. Antimonopolists deployed a familiar rhetoric of democracy and equality—​at least for white people—​that reached back beyond the Jacksonian era and the battle against the Bank of the United States. The representative of antitrust spoke the emerging empirical language of the academy, the professions, and the bureaucracy. They were intent on measuring market share, the movement of prices, changes in wages, in short, on establishing the economic effects of monopolies. The consequences of monopoly went beyond the economy, but this was not their main concern. They differentiated among trusts, judging them by their effects.10 Dudley G. Wooten, a member of the Texas legislature who gave a stemwinding speech at the opening of the Chicago Conference, and William Jennings Bryan, whose talk was a centerpiece of the meeting, typified the Gilded Age antimonopolists. Wooten—​a Catholic, educated at Princeton and later a law school professor—​and Bryan, an evangelical and nominee of both the Democrats and Populists for president in 1896—​were quite different men, but they deployed common rhetoric and appealed to a long history. The galleries erupted in repeated and rapturous cheers for both. Wooten went straight to the political and moral core of antimonopoly, dismissing the potential economic utility of monopolies: We believe that there are some things more valuable, more to be desired and more worthy to be contended for by a free people than mere industrial activity, commercial progress or the accumulation of worldly wealth. We do not believe in that school of political philosophy that . . . at the behest of modern monopoly . . . salves the wounds of freedom with the oil of avarice, and condones a constitutional crime with the argument of pelf and greed.

At stake in the struggle to contain monopolies, Wooten insisted, were “higher values” of equality, freedom, and democratic government.11 The language of antimonopoly Wooten used was a particular strain of a reaction to the centralization of economic and political power taking place across the Western world; the responses differed according to political culture, which varied considerably between industrializing nations. In the United States, as in Great Britain, political ideology and institutions

From Antimonopoly to Antitrust  87 “reinforced political and individual sovereignty” and feared the concentration of both political power and economic power.12 This dual fear of political and economic centralization remained, but the fear of economic centralization had dwarfed its twin. Antimonopoly had once been an expression of strict constitutionalism and small government, but men like Wooten had become convinced that federal power would have to be enhanced to contain the monopolies it had helped to create. He was willing to change the Constitution to do so.13 The role of government in the creation and prevention of monopoly formed the refrain of William Jennings Bryan. Bryan could hold an audience even while reading a banker’s letter or summarizing a Delaware incorporation law; at Chicago he did both. He rooted his ideas on government regulation in a Protestant sense of original sin and American agrarianism. His solutions relied on democratic governance.14 Bryan did not waste time on fine distinctions. He defined a trust as synonymous with a monopoly, and he dismissed any distinction between good and bad monopolies. They were all bad. They arose from a confusion of the relationship between men and money. “Man is a creature of God and money is the creature of man.” Money, he said, was the root of all evil including the evil of monopoly. God had made men selfish. “We are all hoggish.” And just as hogs had to have rings put in their nose to stop them from rooting up crops, so men “in their sober moments” recognized that they had to “put rings in their own noses to protect others from themselves and themselves from others in their hours of temptation.”15 Bryan walked his audience through the supposed causes of monopoly. The tariff contributed and so did railroad discrimination, which favored some customers over others. Stock watering allowed corporations to reap dividends on imaginary capital. These helped monopoly, but tariff reform, financial regulation, and railroad regulation were insufficient for restraining it since its core was the inordinate love of money and the desire for great wealth.16 Antimonopolists believed that in a democracy the purpose of an economy was not to insure maximum national wealth but rather to provide citizens with what they called a competency—​an amount sufficient to support a family, a home, give children a start in the world, and provide for old age—​ and thus the independence the republic demanded of its citizens. Bryan wanted “to see every person secure for himself a competency,” but he did not want them in their attempt to achieve it strive for monopoly that denied others opportunity.17

88  Antimonopoly and American Democracy Bryan proposed legislative and constitutional solutions. He would not allow any corporation chartered in one state to operate in another state without that state’s permission. In addition, Congress could place “restrictions and limitations even to the point of prohibition” on corporations and their actions. He defended the constitutionality of this by referencing his distinction between corporate and human personhood and arguing that the Constitution protected only human persons. If the courts ruled such measures unconstitutional, then the states should amend the Constitution giving the federal government the power “to destroy every trust in the country.”18 Bryan’s “concurrent” solutions were rooted in a distinction between human personhood and corporate personhood. God created man as the epitome of his creation, but all men were roughly equal, and all were fated to die. The corporate person was different, “a creature of law . . . a man-​made man,” more powerful than a million men and potentially possessed of “perpetual life.” The government created corporations and gave them artificial privileges for a public good, and they should exist for only as long as they served that good. When a corporation harmed the public, the government should withdraw its privileges. Monopoly threatened “government of the people, by the people and for the people” because when a few men controlled the sources of production and doled out the daily bread to all, the republic would become a government “of the syndicates, by the syndicates and for the syndicates.”19 What was at stake was the republic itself. In between Bryan’s rhetoric and his legislative remedies lay treacherous political ground. Laws had to translate into governance, and experience had taught antimonopolists to distrust government commissions, which could be corrupted and captured, and the courts, which had repeatedly disappointed them. Bryan did not say if there would be new bureaucracies to implement new federal powers, let alone what they would look like, but without enforcement, Bryan’s laws would be meaningless. The insistence that the broad social, political, and moral goals of antimonopoly should supersede the narrow economic benefits became a general refrain of antimonopolists at the conference. J. G. Schonfarber of the Executive Committee of the Knights of Labor emphasized that the Knights’ goals were “moral as well as economic, fostering independence, pride of character, dignity and manhood.”20 John W. Hayes, the general secretary and treasurer of the Knights, stressed that the issue of monopoly and trusts “involves more than the trivial matter of production and prices. It . . . involves

From Antimonopoly to Antitrust  89 the question of human rights, of individual liberty, of the status of the citizen, of the dignity of citizenship, the right of defense, a limit to the power of wealth, a point at which the encroachment of mercenary greed must stop, and a barrier created that will enable us to defend our liberties, our manhood, and our independence.”21 The Republican Party, too, had its antimonopolist wing. Hazen Pingree, the Republican governor of Michigan, who had wait several minutes for the applause to subside before he could speak, pointed out that the questions sent out by the Civic Federation had steered the conference away from the social questions central to antimonopoly. There had been “no indication that any thought whatever has been given to their effect upon our national life, upon our citizenship, and upon the lives and characters of the men and women who are the real strength of our republic.” He complained that the only idea nowadays seems to be to find out how business or commerce will be affected by trusts. The “ ‘Almighty Dollar’ is the sole consideration.”22 When Edward Bemis praised Professor Jenks’s definition of a monopoly as a corporation that “so controls the business, whatever it may be, as practically to regulate competition and to fix the price of its products on the whole with little reference to competitors, or to the cost of production, but mainly with reference to securing the greatest net results,” he emphasized the purely economic definition of antitrust to which Pingree objected.23 No rapturous applause greeted Bemis and the academic economists, but in a real sense the future was theirs. The economists considered themselves empiricists, but it was a qualified and ideological empiricism. They wanted, in Henry C. Adams’s words, to assess if “the combinations commonly called trusts” were “advantageous or disadvantageous.” They were willing to entertain the possibility that concentration and centralization of business and industry were not only inevitable—​ the product of “industrial evolution”—​but also potentially beneficial. Bemis approvingly quoted the muckraker Henry D. Lloyd that “monopoly is business at the end of its journey.”24 Adams advanced three criteria for evaluating the utility of trusts. The first two relied on purely economic data. He wanted to know, first, if trusts lowered costs to consumers and, second, whether they protected against panics and depressions. When antitrust academics determined whether a corporation was a monopoly by assessing the relation of the price of its products to the cost of their production and determining whether a trust could impose prices without worrying about competition, they tried to make the question

90  Antimonopoly and American Democracy empirical and technical. The focus on price as the measure of monopoly skipped backward past nineteenth-​century antimonopoly to Adam Smith, whose concern with monopoly revolved around a “necessary, ornament, or conveniency of life” and the lessening of its price as the ultimate measure of social good.25 When John Bates Clark distinguished between centralization and monopoly, he revealed the criteria were also ideological. Monopoly was “evil” because it distorted the allocation of resources and the public needed protection from its “extortions,” but centralization was “natural.”26 Natural was one of John Bates Clark’s favorite words; when applied to society, it was perhaps the most ideologically loaded word in the language. Clark appealed to higher laws as readily as Wooten or Bryan, but his laws were economic and chief among them was the necessity of competition.27 The antimonopolist accusation that toleration of trusts sprang from crass materialism and worship of the almighty dollar stung. Clark and other academic economists insisted that they, too, looked to a public interest that was more than crude abundance, and included “contentment, harmony, and even fraternity.”28 Henry C. Adams’s last criterion for evaluating trusts was social and political: “is this new organization of industry in harmony with a democratic organization of society?” Adams was not ready to claim “that the trust organization of society destroys reasonable equality, closes the door of industrial opportunity, or tends to disarrange that fine balance essential to the successful workings of an automatic society.” He did think the issues were worthy of debate and that the “burden of proof lies with the advocates of this new form of business organization.”29 When John Bates Clark said the key to curtailing the trusts—​ the bad kind—​ was preventing discrimination, he acknowledged the moral imperatives of the antimonopoly tradition. Guarantee all customers of a trust equal treatment without discrimination: equal rates, equal prices, no rebates—​and prices and wages would go to their “natural levels.” Eliminate discrimination “and you will secure for our country a happy union of productive power, that will give us the command of the markets of the world, and justice, that will develop the manhood and insure the contentment of our citizens.”30 The condemnation of discrimination, the demand for equal treatment, the focus on independent producers and the “interests of the public”—​all of this indicated that antitrust was scaling the same ladder as antimonopoly,

From Antimonopoly to Antitrust  91 but justice, manhood, and contentment stopped at a lower rung than antimonopoly’s demands for democracy, equality, and independence. Antimonopoly had grown radical, while Clark’s goal—​“a happy union of productive power”—​was fundamentally conservative. As he phrased it a little later, it embraced “freedom of individual action . . . the right of contract—​in short, . . . the things that have made our civilization what it is.” He asserted a harmony of labor and capital rather than an inevitable conflict between producers and non-​producers that became a hallmark of antimonopoly. In 1899 he was not ready to abandon laissez-​faire completely.31 *** Antimonopoly’s early focus on discrimination, and its resort to the common law and market competition as a remedy for monopoly, prefigured much of Clark’s antitrust agenda. The problem was that when Clark published The Control of Trusts in 1901 several decades had passed and antimonopolism had evolved. Understanding how Clark and other antitrust intellectuals could simultaneously echo antimonopolism and differentiate themselves from antimonopolists involves a brief history of antimonopolism and the attack on discrimination. Attacks on discrimination had entered American political discourse in the late nineteenth century not in regard to race or gender, but rather in regard to the prices railroads charged their customers. Antimonopolists focused on the railroads because railroads depended on state and federal aid, because as common carriers railroads had an obligation to offer equal access to all, and because virtually all enterprises depended on railroads. That railroads offered clear benefits and that overall railroad rates were falling was not the issue. The Senate Select Committee on Interstate Commerce concluded in 1886 that the “essence of the complaints” against railroads was “the practice of discrimination in one form or another.” Nineteenth-​century antimonopolists paired discrimination with equality. The “great desideratum is to secure equality.”32 These advocates of equality were not radicals. They believed in private ownership and the primacy of the market, but they thought that monopoly in the name of the first had subverted the second. There were by the 1870s two major schools of antimonopolists. The first represented a coalition of merchants and farmers. George Miller and Lee Benson have long ago traced the origins of antimonopoly attacks on the railroads to merchants in New York and the Midwest who found themselves at the mercy of these new corporations. Because railroad corporations possessed both state charters

92  Antimonopoly and American Democracy and special privileges, they fit into older ideas of monopolies as unnatural creatures of state privilege.33 Merchants and farmers, particularly those who organized in the Grange following the Civil War, believed that the natural tendency of markets was to promote competition, but when monopolists perverted markets they had to be restored by state regulation. The Grange supported laws that created state railroad commissions that barred free passes, made discriminatory rates a matter of criminal extortion, and gave states the power to set rates.34 The wedding of free markets and state regulation made antimonopoly seem paradoxical and confusing. Early antimonopolists were not yet ready to allow that all markets were always and everywhere socially constructed and that none were “natural.” The second strain of antimonopolism centered on Henry George, the most prominent antimonopolist of the period. George brought antimonopolism into the industrial era by using land as a bridge between Jacksonian antimonopoly and Gilded Age antimonopoly. His first book—​Our Land and Land Policy—​resurrected and modernized an old liberal hostility to a landed aristocracy. He expanded the definition of land in a way well-​suited to industrialism. Land included “all natural opportunities or forces,” including coal, minerals, petroleum, and any other natural resources existing separate from human labor. Land was “the source of all wealth and . . . the field of all labor.”35 George did not oppose capitalism; his single tax did not touch capital—​ as he defined it. Instead he taxed land, by which he meant all “natural opportunities and forces” such as coal, minerals, oil, or any other natural resource that existed independent of human labor. His tax was unusual, but its goal was conventional: fair competition between individual producers. He did not divide the world between labor and capital, but instead between land and labor. Labor included “all human exertion.” Capital was but the preserved manifestations of labor, and capital and labor were but “different forms of the same thing—​human exertion.” Both were social, flowing from relations of exchange and consumption.36 George thought that large conglomerations of capital presented dangers, which he framed in moral terms. Capital in large masses was “frequently wielded to corrupt, to rob, and to destroy.” But “land” was his primary target. Unlike capital, “land” was not a product of human labor, and it did not depreciate or lose its utility. Increases in population made it rise in value without any labor invested by its owners. Such gains amounted to unearned rents derived from the labor of others. George’s single tax aimed to remove the tax on

From Antimonopoly to Antitrust  93 labor and the working capital needed for enterprise—​houses and factories, domestic livestock, machinery—​while heavily taxing land to prevent monopoly control. His aim was to break up the monopolization of resources that punished “nominally free laborers . . . forced by their competition with each other to pay as rent all their earning above a bare living, or to sell their labor for wages which give them a bare living.”37 George won over Terence Powderly, the leader of the Knights of Labor in the 1880s, who agreed with George that the land question was “the one great question of the hour.”38 Powderly argued that since the government had enriched railroads in the name of the public good, it should now act on behalf of the working poor, providing them not only with land they could claim under the Homestead Act but with the means to set up farms. The government should also limit the size of farms to only what an owner could cultivate with his and his family’s labor.39 George became the nominee of the United Labor Party in the 1886 New York mayoral election with the support of the Knights in an election that focused on inequality and high rents in New York City. He proposed his single tax as a means to break up the city’s speculative landholdings and expand housing. George intellectually dominated antimonopoly with his attack on inequality, but the merchants and farmers remained the prime movers in terms of legislation. Their attacks were two-​pronged. They demanded regulation of the railroads, and they wanted tariff reform. Creating railroad commissions proved far easier than making them effective. When the Supreme Court upheld state railroad commissions in the so-​ called Granger cases in 1877, it marked the railroads as the leading example of a specific class of property “clothed with a public interest” and holding monopoly power, in the sense that the public had no choice but to make use of their services. The court echoed reformers in justifying railroad commissions as legitimate tools for restraining the anti-​competitive practices of railroads, which were “a restraint on individual freedom.”40 Railroads found various ways—​including corruption—​to subvert these commissions, but the state commissions failed largely because scale mattered. Large railroad corporations dwarfed many states in size and resources and extended well beyond their borders. It was hard to regulate corporations that crossed multiple state borders when the state lacked jurisdiction beyond its own boundaries.41 The failure to achieve effective reform only added fuel to antimonopoly’s fire, but in the 1870s and early 1880s heated rhetoric still paired with

94  Antimonopoly and American Democracy relatively modest remedies. When the antimonopolist journalist James Hudson enumerated the consequences of discrimination by the railroads, he saw the fate of the republic at stake. “When railroads charged more to some shippers than to others and more per mile from one place to another,” then, as Hudson argued, “the equality of all persons is denied by the discriminations of the corporations which the government has created.” Wealth was “not distributed among all classes, according to their industry or prudence, but is concentrated among those who enjoy the favor of the railway power; and general independence and self-​respect are made impossible.” When such influences undercut “the establishment of a nation, of intelligent, self-​respecting and self-​governing freemen,” the result was “little better than national suicide.”42 Hudson denounced discrimination among things as “prescriptive and unreasonable,” discrimination among places as “burdensome and dangerous,” and discrimination among persons as “corrupt and criminal.”43 Yet antimonopolists like Hudson did not so much offer new remedies as increase their scale. Hudson continued to believe that commissions could outlaw discrimination, insure market competition, and destroy monopoly by forbidding the railroads from colluding to fix prices through rebates and pooling—​a practice that became identified with precursors of the trusts.44 But the reach of the railroads across state lines and the failure of state railroad commissions had already led to demands for federal measures. In 1878, Congressman John H. Reagan of Texas, who had worked to attract railroads to his district in the early 1870s, introduced a bill in the House of Representatives “to regulate interstate commerce.” Reagan, formerly the postmaster general of the Confederacy, was as thoroughgoing a racist as other white men of his time and place. He was, however, an eloquent antimonopolist whose bills were aimed at “the unjust discriminations of common carriers,” although he consistently defended the presumably just right of these common carriers to discriminate on the basis of race.45 Reagan became a driving force behind the eventual creation of the Interstate Commerce Commission. He denounced the railroads and those protecting them for seeking to reduce the people “to serfdom, poverty and vassalage.” The rise of an “aristocracy of wealth with monopolies and perpetuities which are forbidden and denounced by all our constitutions” endangered the republic, “breaking down . . . all the bulwarks of civil liberty.” Monopoly would destroy American manhood itself and with it “that

From Antimonopoly to Antitrust  95 personal freedom and independence which is the pride of every American citizen.” Americans would cease to be citizens and become subjects.46 The differences between Reagan and his most formidable congressional opponents had by 1886 boiled down to how precisely the prohibitions against collusion and anti-​competitive measures in the bill were to be worded, and how they would be enforced. The rival Cullom bill contained the commission that Reagan so distrusted because he was convinced from past experience in the states that the railroads could quickly and easily control the commissioners. When in October 1886 the Supreme Court in Wabash, St. Louis & Pacific Ry. Co. v. Illinois ruled that the states could not regulate interstate commerce, it created a vacuum that Congress filled with the Interstate Commerce Act.47 The Interstate Commerce Act of 1887 was as much a product of the conference committee put together by the Democratic leadership as its ostensible parents: Reagan and Senator Shelby Cullom of Illinois. Much of what Reagan advocated—​the public posting of tariffs, outlawing of pools, and fines against guilty railroad officials—​would eventually end up in the conference version, but the act took Reagan’s specific prohibitions of rebates and short haul/​long haul distinctions and either attached conditions or made the requirements vague. They must be “reasonable” and not “undue or unreasonable.” Prohibitions that antimonopolists wanted etched in stone and enforced by the courts, the law made a matter of the commission’s and courts’ discretion.48 The ICC represented a compromise between classic antimonopoly and what some railroad leaders and economists had come to call natural monopolies. Charles Francis Adams, the patrician railroad reformer who became president of the Union Pacific, thought antimonopolists like James Hudson had conflated the moral meaning of competition as a sign of liberty and antidote for discrimination with a newer sense of competition as simply a technical factor that helped establish “a relationship between prices and costs.”49 Everything Charles Francis Adams had learned about railroads in his years as a reformer and executive could be encapsulated in the idea that “[c]‌ompetition and the cheapest possible transportation are wholly incompatible.”50 Adams admitted that the defense of monopoly was counterintuitive. Most Americans regarded competition as “a nostrum at once universal and infallible.” Competition, however, helped neither railroads nor their customers.51 By 1885, Adams was promoting a book by Arthur Hadley, then

96  Antimonopoly and American Democracy a young professor at Yale. Hadley’s Railroad Transportation was not particularly original, but it was wonderfully clear and succinct. Adams believed even congressmen could understand it, and he liked to send them copies. “All our education and habit of mind,” Hadley wrote, “make us believe in competition.” Competition in a free market theoretically made the price of goods “proportional to their cost of production.” When the price fell below the cost of production, producers would cease to produce and prices would rise to a point that stimulated renewed production. When any endeavor proved profitable, new producers would arise and the competition among them would lower or stabilize prices. But, Hadley argued, competition among railroads did not work this way. A railroad was a natural monopoly because competition made it less rather than more efficient. When prices fell, railroads continued to solicit traffic, even when they had to carry it at a loss, because their high fixed costs meant they lost even more if their equipment lay idle. “Business at any price rather than no business at all” was their motto.52 Eventually, of course, some would fail. Followed to its logical conclusion, competition would leave only one road standing, thus creating the monopoly it was supposed to prevent.53 Cheap, efficient, and fair transportation would come from “directing the largest possible volume of movement through the fewest possible channels” and not from encouraging the duplication that created competition.54 Although historians sometime conflate telegraph monopoly with railroad monopoly, the consolidation of monopoly power in Western Union resulted from “a deliberate, creative act, forged through years of aggressive maneuvering and maintained against fierce opposition.”55 Western Union later embraced the ICC, seeking to use it to deflect the quite real threat of the creation of a national postal telegraph. This was not just a measure advocated by antimonopolists. The National Board of Trade and Transportation, which included the New York Chamber of Commerce, also endorsed it.56 The compromise between antimonopolists and advocates of natural monopoly eliminated what each regarded as the essential element for successful regulation. The law’s embrace of a commission gutted Reagan’s conviction that state courts and local institutions were the best remedy for railroad abuses.57 But Reagan succeeded in inserting language specifically banning railroad pools, and government-​enforced pools were the key prescription of railroad intellectuals for curing excessive competition.58 It was never entirely clear whether the Interstate Commerce Act was an antimonopoly measure or a way to weaken the thrust of antimonopoly. In the

From Antimonopoly to Antitrust  97 phrase “under substantially similar circumstances and conditions,” a cynical Adams thought, “there is much labor cut out for the commission, and they are big with litigation for the courts and fees for the lawyers.”59 Until the courts made the law’s meaning clear, “every company must construe it for itself.” Collis P. Huntington of the Southern Pacific conceded that pools could no longer be called pools “but there is, I suppose, a way of dividing up the traffic that is just as good as a pool.”60 For a time, Adams placed considerable hope in the ICC for restraining competition.61 The railroads formed the Interstate-​ Commerce Railway Association to exploit, with the ICC’s approval, loopholes in the act. In banning pools, the act prohibited the payment of money by one railroad to another to maintain prices, but the Association contended it did not ban the fixing of prices per se. The Association would set standard rates and divide up traffic and would inform the ICC of violations that also violated the Interstate Commerce Act. The ICC would act as the Association’s enforcement arm. But the railroads were no more able to arbitrate and regulate themselves through the Interstate-​Commerce Railway Association than they had through pools, and the Association collapsed.62 The compromises necessary to produce the ICC produced a weak commission, and the vagueness of the legislative language put it at the mercy of the courts. During the 1890s, courts refused to accept its rulings on rates cases as binding, denying it enforcement powers. As Morton Keller noted, the courts had by the turn of the century reversed more than half of the ICC decisions brought to them for review.63 The ICC targeted railroads, the poster child of monopoly, but tariff reform represented a broader attack on what Democrats in particular regarded as a root cause of the distorted markets and government favoritism that bred monopolies. The tariff, which penalized consumers of manufactured products by curtailing foreign competition, became the nation’s leading political issue between 1888 and 1892. Reform Democrats dressed tariff reduction in the clothes of antimonopoly, economic equality, workers’ rights, and the dangers of economic concentration. Saul Lanham of Texas proclaimed that “no man or set of men has the right in this country to be legislated into wealth.” The tariff was the “mother of trusts,” a triumph of avarice over liberty; it concentrated wealth while the people were “sinking lower and lower in want, wretchedness, degradation and squalor.” It created conditions where “the millions own nothing and the few own millions.”64 Even John Bates Clark, who opposed free trade and wholesale

98  Antimonopoly and American Democracy tariff reform, admitted that tariffs amounted to a state subsidy on exports for manufacturers.65 There is no understanding the second major antimonopoly measure of the period—​the Sherman Antitrust Act (1890)—​without reference to the tariff. The Sherman Antitrust Act makes sense largely as a Republican antidote to Democratic demands for tariff reform. The act may have been a “revolutionary” attack on price fixing, but a sign of the feebleness of the revolution was the lack of any opposition to the uprising.66 Tallying the House and Senate votes together, there was only a single vote against it. Senator James Z. George, Democrat from Mississippi, who both denounced the act and voted for it, indicated why: I have shown that this bill is utterly unconstitutional, and, even if constitutional, utterly worthless. If we pass it we do not only a vain and useless thing; we do a wicked thing. We give to a suffering people, as a remedy for a great wrong, that which will prove utterly inefficient, but will prove an aggravation of the evils. There is, however, a power we can exercise: the power to reduce or abolish duties on the foreign competing articles.67

Men like Senator George voted for it because they were vulnerable to accusations that if they reduced the tariff without legislating against American monopolists they were not only refusing to act against the most egregious domestic monopolies, they were giving European monopolists access to American markets. Tariff reformers argued that giving foreign producers access would increase competition and lower prices, but this would not be true in those industries most liable to monopoly such as the railroads and telegraph. The Sherman Act placed tariff reformers between a rock and a hard place. They might think it toothless and a diversion, but they had to protect themselves from accusations of being soft on monopoly. They had no choice but to act against monopolists in general and vote for the Sherman Act. As its critics predicted, the Sherman Act’s vague and ambiguous language left its meaning, like the ICC’s, putty in the hands of the courts. Worse, the courts turned it against antimonopolists themselves. In 1893 during the Pullman Strike the government deployed both it and the Interstate Commerce Act against the American Railway Union and not against railroad monopolies.68

From Antimonopoly to Antitrust  99 Taken together, the ICC and the Sherman Antitrust Act created near incoherence in regard to the railroads. When Benjamin Harrison’s administration used the Sherman Antitrust Act against the Trans-​Missouri Freight Association for fixing prices, the lower courts ruled against the government, agreeing that the ICC had exclusive jurisdiction. In 1897 the Supreme Court overturned the lower courts and said the railroads were subject to the Sherman Antitrust Act.69 John Bates Clark and the antitrust intellectuals of the turn of the century were the heirs to this tangled history of antimonopoly. Initially, they disavowed much of their inheritance. Many of the cures antimonopolists advocated—​legal restraints on corporate activities, elimination of the tariff, attacks on the size of corporations and other trusts, tax policies, and regulation of prices—​were, Clark thought, worse than the disease. Clark spoke for “a body of conservative and intelligent citizens” and distanced himself from antimonopolists who desired “laws that cannot be enforced and . . . would do harm if they were enforced.”70 Clark also made what on the surface seems a startling claim. He said only two small groups favored trusts. Neither group included organized capital. Socialists, communists, and other members of the “revolutionary class” composed the first group. Highly organized workers who would ally with the trusts “against the public” to raise prices and wages made up the second.71 Clark’s claims, as simplistic and unnuanced as they were, did possess a semblance of truth. He referenced a vanguard antimonopolism that, as he did, regarded centralization as inevitable, but which sought quite different ways to adapt to it.72 The Knights of Labor along with the Farmers’ Alliance, and the Bellamyites, became the vanguard of antimonopoly in the 1880s and 1890s. They broke from the older emphasis on competition as the antidote for monopoly and advocated cooperation. This paradoxically brought them closer to their enemies: the monopolists. Cooperation was a favorite word of both Charles Francis Adams and of John D. Rockefeller. Rockefeller went much further than Adams and other advocates of natural monopoly; he attacked competition itself. Rockefeller and Standard Oil preached cooperation. His cooperation did not include labor and was hardly democratic, but Rockefeller had no patience with the liberal pieties of free markets. He saw the problem of the age as excessive competition. The economy needed order: pools to regulate production and

100  Antimonopoly and American Democracy prices and consolidation to yield larger and more efficient companies. He defined cooperation in the oil industry as joining Standard Oil, which he founded in 1870. Standard Oil had a knack for absorbing the most able of its rivals; the corporation was ruthless, efficient, and only as scrupulous as it needed to be.73 Vanguard antimonopolists advocated a different strain of cooperation. They believed that cooperation, if democratically controlled, could rather than producing oligarchies create a more equal and prosperous society. The Farmers’ Alliance and Knights of Labor argued that cooperative endeavors by independent producers and workers that restricted rather than enhanced competition could make monopoly a tool of those it threatened. Both attempted to put cooperation into practice. Powderly’s collaboration with Henry George was of the moment; a world of independent producers was not his ultimate goal.74 The Knights dreamed of moving beyond wage labor, and beyond competition, to a cooperative society. They were willing to act in restraint of trade if necessary. The Knights started cooperative enterprises, but less noticed is their participation in cooperative agreements with business that tried to use the power of labor to mitigate the intense competition that drove business toward consolidation and monopoly. The abundance of coal made coal mining one of the most competitive industries in the United States, and the mines of the Midwest were the most competitive of all. The so-​called Central Competitive Field was a creation of the railway network that knit the cities, bituminous coal mines, and industries of the Midwest into a shared market for coal. The Joint Convention sought to govern that market. Branden Adams has examined the tenuous—​and briefly and precariously successful—​Joint Convention and shown what democratic governance of industry might look like. Coal miners and mine owners negotiated agreements that sustained independent mines, maintained wages, and limited competition and strikes. Ownership remained dispersed and labor had an equal voice with management. It was the kind of cooperation between labor and capital that Clark denounced.75 The Joint Convention that first met in 1886 relied on the power of labor to enforce agreements that clearly acted in restraint of trade. The participants—​both mine owners and miners—​came from the mines on the rail lines centered on Chicago that served the major coal markets from western Pennsylvania to Minneapolis. Miners and mine owners had an equal number of votes. Although miners and owners were grouped by states, the

From Antimonopoly to Antitrust  101 convention set wages and working conditions by sixteen separate districts, each with its own peculiar conditions of production. Each district had to consent to the rules governing it. Disputes were to be settled by boards of conciliation, but the ultimate club was the threat of labor stoppages if the terms of the agreements were violated.76 The Convention worked, but it also proved vulnerable to the railroads, which could manipulate the price of coal by changing freight rates and thus destroy the convention’s carefully crafted agreements. The railroads, which also owned mines, both gave a price advantage to outside coal—​West Virginia—​and used reduced rates, as they did in southern Illinois, to entice coal owners to abandon the Convention. The railroads’ pressure was exacerbated by new fuels—​oil and natural gas—​that competed with some mine owners in their local markets. The Joint Convention increased prices for consumers, but it fulfilled the antimonopolists’ demand that workers and other producers have control over their labor and secure just returns on it. It looked toward an alternate arrangement of industry even as it demonstrated the difficulty of securing such control within a single industry since no industry in the late nineteenth and early twentieth centuries existed apart from the railroads. As common carriers, the railroads were legally obligated to provide fair and neutral rates. When they did not, the doom of the Joint Convention became a matter of time. It weathered a bitter strike in the northern Illinois fields in 1888 and the defection of mines in southern Illinois and Indiana. It survived until the beginning of the Great Depression in 1893 when the collapse of coal markets and declining wages triggered a general strike in the region’s coal mines. The strike, and the convention, failed.77 The Joint Convention with its emphasis on cooperation and its willingness to act in restraint of trade became a flip side to antimonopoly’s older reliance on competition as the antidote to monopoly. It was part of a much broader movement inclined to see monopoly not as a problem but as an ultimate solution. The Farmers’ Alliance, which organized farmers from “the business standpoint,” embraced a similar perspective. Charles Macune, the leading figure in the Texas Farmers’ Alliance, argued that farmers organized “for the same reason that our enemies do: for ‘individual benefits through combined effort.’ ” Once organized, farmers would act pragmatically, opposing some corporations and allying with others.78 In California, citrus growers embraced the Southern Pacific Railroad when it encouraged their

102  Antimonopoly and American Democracy cooperatives.79 Similarly, the Farmers’ Alliance and the National Cordage Company would in the 1890s form the ill-​fated National Union Company to monopolize the jute bagging industry and secure guaranteed low prices to Alliance members.80 The Farmers’ Alliance, recognizing the capacity of railroads to subvert attempts at cooperative endeavors between producers, pushed for government ownership of the railroads and telegraph. They used the Post Office—​and this may be impossible for modern Americans to imagine—​ as their model of efficiency, expertise, and dependable service.81 The St. Louis Convention of the Populists, which grew out of the Farmers’ Alliance, endorsed nationalization in 1891, and with Marion Todd’s Railways of Europe and America, the Populists added their own analysis to a large library on what was wrong with the railroads and how to fix them. According to Todd, the question had become “Whether the Railways shall own the people or the people own the Railways.”82 The popular expression of cooperation as the solution to monopoly and inequality was Looking Backward, a novel by Edward Bellamy. With its wooden dialogue and didactic plot, it is easy to dismiss Looking Backward (1888) as merely an execrably bad book, but it was an important cultural phenomenon that created Bellamy clubs and attracted reformers. Bellamy blended the monopolist and antimonopolist versions of cooperation into a future utopia, where society had become a single monopoly. Dr. Leete, speaking at the dawn of the twenty-​first century, explained that the misery of the late nineteenth century arose from “that incapacity for cooperation which followed from the individualism on which your social system was founded.” Bellamy adopted the Knights of Labor’s insistence on the abolition of wage labor and their conviction that the rights of American citizens extended to the workplace. He echoed both vanguard antimonopolists and industrialists such as John D. Rockefeller and Charles Francis Adams in claiming that large-​scale organizations were more efficient and more productive and that cooperation would inevitably triumph over competition. The result was a society that had finally completed the American Revolution by democratizing and socializing industry. The trusts had been consolidated in one “Great Trust” controlled by the people. No revolutionary violence had been necessary. Every person had a competency; no one was rich.83 These were the developments Clark denounced. He would have heard expressions of them at the Chicago meeting in 1899. Laurence Gronlund split with antimonopolists who still embraced competition. William Jennings

From Antimonopoly to Antitrust  103 Bryan had argued that trusts were the creation of laws and government; they were neither natural nor inevitable, but Gronlund argued the opposite. The issue was not preventing them but controlling them. Like Bellamy, he thought that they would inevitably come under government ownership and be democratically controlled.84 *** Between 1900 and 1914, which saw the passage of the Clayton Act and the creation of the Federal Trade Commission, antitrust intellectuals such as John Bates Clark and Louis Brandeis replaced antimonopolists in shaping national debates and national legislation. The evolution of antitrust—​which can only be crudely sketched here—​seemed a case of ontogeny recapitulating phylogeny. Antitrust replicated the development of antimonopoly, focusing on similar issues but in a narrowed frame as it shed the wider social and political concerns of antimonopoly and its vision of a democratic economy. Louis Brandeis’s critics have dismissed him as nostalgic and too devoted to tradition, but Gerald Berk has sought to redeem him as modern and scientific.85 Both Brandeis and Clark were modernists, but Berk differentiates between them because unlike Clark and his allies, Brandeis recognized that “the antitrust impasse was not a technical problem with moral implications. It was a moral and political problem for which reformers ought to imagine technical possibilities.”86 In Berk’s formulation Brandeis sought to retain “republican ends (equality, citizenship, and democracy) . . . through scientific means (experimentation, measurement).”87 Brandeis certainly deployed the moral language of antimonopoly. The “money trust” he opposed produced “the suppression of industrial liberty, of manhood itself.” But, contrary to assertions by current hipster antitrusters, Brandeis’s moral concerns only superficially resembled those of the antimonopolists. He did not so much disavow the individual’s pursuit of wealth as the point of the economy as distinguish between the right way and wrong way of pursuing it.88 Brandeis and Clark remained closer to each other than either was to the antimonopolists. They grappled with problems familiar to antimonopolists: the size and reach of new corporations, the threat to independent producers, the role of railroads and natural monopolies, and the tariff as a seedbed of monopoly. But they also came to grips with new problems such as the financialization of the new trusts and their novel forms of organization following the great merger movement.89

104  Antimonopoly and American Democracy Trusts consolidated existing factories and networks to control production and prices, but the main product of the consolidation was less industrial efficiency than financial excess. Louis Brandeis regarded a small set of New York bankers, particularly J. P. Morgan, as a Money Trust whose activities threatened the entire economy. These bankers merged companies in order to issue stock in the new company whose high valuations enriched both the bankers and the owners of the companies being acquired. All involved benefited from pushing a company’s capitalization as high as possible.90 In the early twentieth century, Clark regarded trusts as the central problem in the economy, but he did not consider their size as the real issue. He believed their increased scale did create new efficiencies, and he was initially sanguine about the ability of competition to control the new trusts. He became far more critical of the holding companies organized under New Jersey’s and Delaware’s laws. They produced only evil consequences and needed to be stripped of their weapons and power.91 The activities of the bankers were real and important, but they were also easy to oversimplify and overstate. Morgan and the New York bankers did assemble old companies into new industrial corporations, but these bankers were neither as influential nor as ubiquitous as they seemed. A much wider cast of players strolled the new stage. Watered stock and the profits of organizers grabbed headlines, but the headlines exaggerated the extent of change in the stock market. Until the end of World War I, railroads, not the new industrial corporations, still dominated activity on Wall Street. The key players in the day-​to-​day workings of the stock market remained brokers trading on the call market with loans from commercial banks. Trust companies—​not trusts in the old antimonopoly sense—​enlarged their role in the stock market. They were fiduciary agents that managed assets entrusted to them, and they rather than small investors provided the bulk of the funds flowing into the market.92 The evolution of Brandeis, and more particularly Clark, between 1900 and 1914 illustrates the emergence of a mature antitrust movement that adjusted to new conditions. Both men moved away from a celebration of independent producers and a belief that guaranteeing “fair” competition within the market and enforcing the common law’s prohibition of monopoly would be sufficient to prevent abuses by the trusts. They still appealed to the precedents set by the two major, if badly flawed, antimonopolist measures—​ the Interstate Commerce Commission and the Sherman Antitrust Act—​but

From Antimonopoly to Antitrust  105 neither thought them sufficient. By 1914 they both supported the Wilson administration’s program of regulated competition through the creation of the Federal Trade Commission and the passage of the Clayton Act.93 The differences in the two editions of John Bates Clark’s Control of Trusts can illustrate these changes in antitrust politics. The first edition came out in 1901 in the wake of the Chicago Conference. The second, coauthored with his son, appeared in 1912. The 1901 edition of Control of Trusts resembled the antimonopolism of the 1870s in its reliance on competition and its faith in natural laws; it also paralleled the thinking of Charles Francis Adams in his days on the Massachusetts Railroad Commission in believing that publicity and transparency, a reliance on the courts and common law, and the mere plausible threat of competition were enough to prevent monopoly’s abuses. Clark embraced a largely free-​market stance, making an exception only in regard to the railroads, where, now following Charles Francis Adams of the 1880s, he advocated allowing the railroads to create pools under government supervision.94 The second edition was a different book. The little more than a decade between the two editions had not proven kind to Clark’s belief in markets, common law, and competition. The 1912 edition came out in the wake of the Supreme Court’s decisions in the Standard Oil and American Tobacco cases. The court overthrew the Harlan construction that had vitiated the Sherman Antitrust Act by confining it to cartels and rendering it largely useless against corporate consolidation. The court now interpreted the Sherman Antitrust Act according to a “rule of reason” that focused on consequences. It prohibited unfair business practices whose intent was to exclude others from a trade or industry, but did not equate mere restriction of competition with restraint of trade. Restraint of trade demanded a violation of the public interest. It was a no harm, no foul, rule.95 Clark and economists close to him responded warily. They, too, thought restriction of competition did not constitute restraint of trade, but they believed that by leaving so much discretion to judges, the decisions increased the uncertainty over what practices were permissible and which were not. The court’s remedies could potentially hurt efficiency without restoring competition. He thought the common law and a liberated Sherman Antitrust Act alone were insufficient for the control of monopoly. The protections amounted to too little, too late.96 Striking down monopolies after they had done their destructive work was inadequate. Antitrust laws had to be

106  Antimonopoly and American Democracy proactive, eliminating unfair competition as soon as it appeared. Law had to “disarm the trusts.”97 Disarming the trust meant regulated competition. By 1912, Clark admitted that a trust’s willingness to use unfair means of competition was often enough to scare off potential competitors.98 He admitted, too, that his conviction in the first edition that no forcible dissolution of trusts would be necessary had been too sanguine.99 He repudiated laissez-​faire. To advocate it was “to convict oneself of being a hopeless lunatic or a reactionary.” Clark retained his faith in natural law and in the “natural” forces guiding the economy, but he also admitted that competition was “social. It is a game played under rules fixed by the state.”100 Competition as it currently existed eliminated the fit rather than the unfit. He wanted robust measures not to kill all new consolidations but to make them “tolerable.”101 Clark’s new antitrust of “constructive competition” hearkened back to the antimonopoly debates of the 1880s in the sense that it relied on the expert commissions, regulated common carriers, and supervised market mechanisms advocated in that era. He wanted specific practices banned; he admitted that in the modern industrial economy competition had to be regulated to be effective.102 Clark also endorsed a federal incorporation bill similar to what Bryan had advocated in Chicago in 1899.103 The bill failed, but Clark insisted that Delaware’s and New Jersey’s state incorporation laws amounted to a “letter of marque” allowing holding companies to prey on other states. The Senate Committee on Interstate Commerce in 1913 reflected Clark’s testimony in holding that the federal government should not just set the rules of competition but should “prescribe the conditions upon which persons and corporations shall be permitted to engage in commerce.”104 Clark had earlier been willing to allow restraints on competition in regard to the railroads as long as they did not amount to a restraint on trade; by 1912 he broadened this willingness to other industries.105 These reforms went much farther than Clark had been willing to go in 1901, but he did not approach vanguard antimonopolism. He continued to oppose government regulation of prices and wages and government ownership of natural monopolies. His goal of regulating competition to prevent monopolies was Wilsonian rather than Theodore Roosevelt’s attempt in the Hepburn Act to accept and regulate monopolies.106 Clark—​like Brandeis—​tried to refine technical definitions to identify when size indicated that businesses had become monopolies, but he did not share Brandeis’s identification of monopoly with bigness. Although

From Antimonopoly to Antitrust  107 he wanted to track the percentage of capital that any one firm invested in an industry, Clark stressed there could be no fixed rule. An expert commission modeled on the ICC would decide when the percentage became dangerous.107 Determining capital investment given the combination of inept and creative bookkeeping employed by corporations and stock watering, which Clark now took seriously, involved him in contradictions. He paradoxically wanted a strict accounting of the capital invested in corporations even as he argued the inability to do so made price regulation impossible.108 Determining capital investment became a kind of holy grail of antitrust. The National Archives still contains one of the ICC’s more quixotic enterprises during this period: a mile-​by-​mile examination of railroad infrastructure. The ICC inventoried track, roadbed, building, bridges, wells, and more for every American railroad in the early twentieth century to provide a reference point for rates of return on capital and thus permissible rates for railroads. It yielded only stunningly detailed maps and reams of paper.109 As antitrust evolved into expert regulation of the economy to preserve competition, vanguard antimonopolism largely disappeared from national politics and retreated to the local and state levels. Municipal ownership of utilities and transportation networks—​“natural monopolies”—​were vestiges of grander antimonopolist plans for nationalizing railroad and telegraph corporations. State public utility commissions also descended from more ambitious antimonopolist plans for regulation of monopolies.110 The old antimonopolist coalition had fractured. In the early twentieth century, organized labor, once in the vanguard of antimonopoly, largely withdrew. The courts’ interpretation of the Sherman Antitrust Act had badly hurt unions, and Samuel Gompers’s immediate goal was to lift the burden of antitrust from labor. He embraced a Bellamyite future, but it was a distant future. In the present he was willing to exchange labor’s demand for control over production for a living wage—​sufficient remuneration to allow high levels of consumption.111 Clark did support the Clayton Act, which nominally relieved labor of the burden of the Sherman Act, but the courts vitiated the measure by reverting back to common law rationales for regarding unions as acting in restraint of trade. It remained hard to imagine a coalition that included both Clark and union labor.112 Clark championed non-​union workers as victims of monopoly, and he continued to regard union labor as allies of the trusts against the public.113

108  Antimonopoly and American Democracy Clark intended his reforms to benefit farmers, consumers, stockholders, and non-​union wage workers. He imagined a world of wage workers who became capitalists not by starting their own shops but by investing their wages in stocks and bonds. This, in unexplained ways, would achieve “a steady upward trend of the level of political life.” Clark’s vision was a far cry from the world antimonopolists imagined where everyone enjoyed a competency and producers controlled the conditions of their labor.114 As the old antimonopolists had feared, antitrust narrowed the dangers of monopoly to its threat to an efficient economy. Antitrust reformers still used rhetorical appeals to politics, society, and morality, but the same words now had different referents. At the turn of the century, Clark had condemned monopoly as contrary to the public interest, which he defined as abundance and “an equity of distribution.”115 Clark’s public interest now largely reduced to efficiency and, although the term is anachronistic, a high GNP: “a fruitful industry yielding a large general income.” The antimonopolist goal of equality changed to distributing the national income “according to an honest principle.”116 Clark made a general abundance and “economic leadership” in a competition for world markets the goal of reform.117 Louis Brandeis sounded more like an antimonopolist in connecting “industrial liberty” with “political liberty,” but the connection remained vague.118 Brandeis’s focus remained on “the Almighty dollar.” He regarded the damage monopoly did as primarily economic: suppression of competition, excessive profits, retarded innovation, and reduced efficiency. Monopoly victimized consumers, shareholders, and independent producers who bore the burden of heavy charges on the cost of capital, which in turn produced the suppression of competition that allowed monopolies to extort excessive profits.119 As Berk summarized his position, “Brandeis asked judges, politicians, and economists to consider the facts in antitrust cases according to three criteria: the process of business development in the industry in question, the distribution of economic power in the industry, and the effects of business arrangements on economic performance.”120 His solutions—​“cultivational regulation”—​aimed at regulatory and accounting reforms to bring pricing and profit into balance.121 Brandeis did promise that his technical solutions—​ sliding scale rate making and performance benchmarking—​would nurture civic development as well as economic growth and scientific learning, but it was unclear how civic development would be a result.122

From Antimonopoly to Antitrust  109 When Brandeis stressed cooperation, what he meant was much closer to the natural monopoly and business cooperation threads of the Gilded Age than to the cooperative ideals of the Alliance and Knights.123 Cooperation began to look like a modern corporation, and shareholders took an increasingly prominent place among the beneficiaries of antitrust. When Brandeis attacked the “money trust,” the victims he sought to rescue were small investors, who, compared to their numbers, assumed an outsized role as keys to the well-​being of the republic. This stress on shareholders brought Brandeis closer to Clark than to the antimonopolists. When Clark complained of the current situation of “minorities controlling majorities to an appalling extent,” he meant minority shareholders controlling corporations. His proposed changes “would be one step in advance toward a more democratic condition.”124 This was not the democratic control of society and politics the antimonopolists had in mind. And yet, for all their differences, there is no imagining antitrust and figures like Clark and Brandeis—​as well as Roosevelt and Wilson—​without antimonopoly. Antitrust built on the cracked legislative foundations—​the Sherman Antitrust Act and the ICC—​that antimonopoly bequeathed it and created something stronger, more effective, and far more constrained. The larger social, political, and moral goals of antimonopoly faded at the national level, surviving in cities, and to a lesser extent, in states. Antitrust embraced democracy but only to the extent that its bureaucratic authority derived from democratic governance. The conclusion is not that antitrust sold out antimonopoly. Both antitrust and antimonopoly sought a fairer, more efficient, and more competitive economy. In terms of regulation, antitrust created something stronger and more effective than what had come before. But the effectiveness of antitrust involved a narrowing of its focus. The threat of monopoly became economic. Antimonopolists certainly had economic concerns, but it was never their main focus. Monopoly endangered more than the economy: it targeted American society, American democracy, and American values. Monopolies threatened Americans as citizens and producers and not just as consumers and shareholders. Antimonopoly had spanned all levels of governance, but antitrust proved most consequential and influential on the national level. And on the national stage, antitrust inevitably became a creature of experts and bureaucracy. It embraced democracy largely to the extent that its bureaucratic authority derived from democratic governance. The larger social, political, and

110  Antimonopoly and American Democracy moral goals of antimonopoly—​and the reliance on an engaged citizenry—​ retreated into the cities and to a lesser extent, in states. Tom Johnson’s Cleveland, Hazen Pingree’s Detroit and Michigan, the Nonpartisan League in North Dakota, even some of Hiram Johnson’s California kept portions of antimonopoly alive. The focus of antitrust on the “Almighty dollar” and Americans as consumers betrayed them, as the antimonopolists predicted it would. Once a conservative judiciary succeeded in making efficiency the criteria of economic worth and lower prices the chief measure of the common good, then monopoly had entered its promised land. This was a perversion of antitrust, but the advocates of antitrust had enabled it. They bet that Americans would settle for prosperity, relatively full employment, and a piece of the pie. The antimonopolists had desired more. That bet is once again on the table.

Notes 1. Thank you to Richard John for pointing this out. See his essay in this volume: “Reframing the Antimonopoly Question: Commerce, Land, Industry,” in Antimonopoly and American Democracy, ed. Daniel A. Crane and William J. Novak. 2. Ibid. 3. This is close Charles Postel’s argument in Equality: An American Dilemma, 1866–​ 1896 (New York: Farrar, Straus & Giroux, 2019), 50. 4. The best synopsis of this view is John Bates Clark, The Control of Trusts; An Argument in Favor of Curbing the Power of Monopoly by a Natural Method (New York: Macmillan, 1901). 5. Clark, Control of Trusts, 58. Quote, John Bates Clark, in Civic Federation of Chicago, Chicago Conference on Trusts. Speeches, Debates, Resolutions, Lists of the Delegates, Committees, Etc., Held September 13th, 14th, 15th, 16th, 1899 (Chicago, Civic Federation, 1900), 409, https://​hdl.han​dle.net/​2027/​uiuo.ark:/​13960/​t10p10​90c; John Bates Clark and John Maurice Clark. The Control of Trusts (New York: Macmillan, 1912), 22–​23. 6. Clark and Clark, Control of Trusts (1912), 23–​24, 82. 7. Lawrence E. Mitchell, The Speculation Economy: How Finance Triumphed over Industry (San Francisco: Berrett-​Koehler, 2007), 28–​29 8. Clark, Control of Trusts, 22–​28, 31, 51–​55, 72–​73. 9. Mitchell, The Speculation Economy, 117–​ 19. Mary A. O’Sullivan, Dividends of Development: Securities Markets in the History of US Capitalism, 1866–​ 1922 (New York: Oxford University Press, 2016), 36, 43, 50–​51, 53, emphasizes how

From Antimonopoly to Antitrust  111 important the railroads remained. Naomi Lamoreaux, The Great Merger Movement in American Business, 1895–​1904 (New York: Cambridge University Press, 1985). 10. Clark, Control of Trusts, 3, 8. 11. Dudley G. Wooten, Proceedings of Chicago Conference on Trusts, 1899, 42–​53. 12. Frank Dobbin, Forging Industrial Policy: The United States, Britain, and France in the Railway Age (Cambridge: Cambridge University Press, 1994), 20. 13. Wooten, Proceedings of Chicago Conference on Trusts, 1899, 42–​53. 14. William Jennings Bryan, Proceedings of Chicago Conference on Trusts, 1899, 496–​514. 15. Ibid., 497, 498, 500–​01. 16. Ibid., 501–​2, 507–​8. 17. Richard White, The Republic for Which It Stands: The United States During Reconstruction and the Gilded Age, 1865–​96 (New York: Oxford University Press, 2017), 137–​38. Bryan, Proceedings of Chicago Conference, 1899, 501. 18. Bryan, Proceedings of Chicago Conference, 1899, 503, 506. 19. Ibid., 508, 510–​11, 512. 20. J. G. Schonfarber, Proceedings of Chicago Conference, 1899, 343–​49. 21. John W. Hayes, Proceedings of Chicago Conference, 1899, 331–​40. 22. Hazen Pingree, Proceedings of Chicago Conference, 1899, 263–​64. 23. Edward Bemis, Proceedings of Chicago Conference, 1899, 394–​95. 24. Ibid., 400; Henry C. Adams, Proceedings of Chicago Conference, 1899, 35–​42. 25. Neri Salvadori and Rodolfo Signorino, “Adam Smith on Monopoly Theory. Making Good a Lacuna,” Scottish Journal of Political Economy 61, no. 2 (May 2014): 178–​195, https://​doi-​org.stanf​ord.idm.oclc.org/​10.1111/​sjpe.12040, quote on 191; Henry C. Adams, Proceedings of Chicago Conference, 1899, 35–​42; Gerald Berk, Louis D. Brandeis and the Making of Regulated Competition, 1900–​ 1932 (New York: Cambridge University Press, 2009), 38–​39. 26. Clark developed these ideas more fully in Control of Trusts, 1–​6. 27. For Wooten, Proceedings of Chicago Conference, 1899, 44, 48; Clark, Proceedings of Chicago Conference, 1899, 405. Clark, Control of Trusts, 12. 28. Clark, Control of Trusts, 82. 29. Henry C. Adams, Proceedings of Chicago Conference on Trusts, 1899, 35–​42. 30. Clark, Proceedings of Chicago Conference, 1899, 409. 31. Ibid., 409; Clark, Control of Trusts, 10, 56, 84, 86. 32. Report of the Senate Select Committee on Interstate Commerce . . ., Forty-​Ninth Congress, First Session, Submitted to the Senate, Jan. 18, 1886 (Washington: GPO, 1886), 182, 215-​16. See also John Lauritz Larson, Bonds of Enterprise: John Murray Forbes and Western Development in America’s Railway Age, exp. ed. (Iowa City: University of Iowa Press, 2001), 135–​43. 33. George H. Miller, Railroads and the Granger Laws (Madison: University of Wisconsin Press, 1971); and Lee Benson, Merchants, Farmers, and Railroads: Railroad Regulation and New York Politics, 1850–​1887 (Cambridge, MA: Harvard University Press, 1955). Postel, Equality, 24, 48–​55. 34. Postel, Equality, 65–​69.

112  Antimonopoly and American Democracy 35. Christopher William England, Land and Liberty: Henry George and the Crafting of Modern Liberalism (Johns Hopkins University Press, 2023), 1–​22; Edward J. Rose, Henry George (New York: Twayne, 1968), 75; Henry George, Progress and Poverty (New York: Robert Schalkenbach Foundation, 1942; orig. ed. 1879), 188–​89; Tamara Venit Shelton, A Squatter’s Republic: Land and the Politics of Monopoly in California and the Nation, 1850–​1900 (Berkeley: University of California Press, 2013), 75–​76, 88–​96; for two recent accounts of George, see England, Land and Liberty, and Edward T. O’Donnell, Henry George and the Crisis of Inequality: Progress and Poverty in the Gilded Age (New York: Columbia University Press, 2015), particularly 42–​63. 36. George, Progress and Poverty, 162, 198. 37. Jeffrey P. Sklansky, The Soul’s Economy: Market Society and Selfhood in American Thought, 1820–​1920 (Chapel Hill: University of North Carolina Press, 2002), 115–​16; George, Progress and Poverty, 190, 328–​29, 347, 405–​6, 413–​14, 425, 438–​40. Clark denied that the unearned increment on land posed a problem, believing it widely distributed. Clark and Clark, Control of Trusts (1912), 7–​8. 38. Terence Vincent Powderly, Thirty Years of Labor, 1859–​1889 (Columbus: Excelsior, 1889; New York: A. M. Kelley ed., 1967), 173–​86. 39. Powderly, Thirty Years of Labor, 174-​86. 40. George H. Miller, Railroads and the Granger Laws (Madison: University of Wisconsin Press, 1971), 172–​93, particularly 188–​89. Herbert Hovenkamp, Enterprise and American Law, 1836–​1937 (Cambridge, MA: Harvard University Press, 1991), 274. 41. William R. Childs, The Texas Railroad Commission: Understanding Regulation in America to the Mid-​Twentieth Century (College Station: Texas A&M University Press, 2005), 33–​34. Wabash, St. Louis, and Pacific Railroad Company v. Illinois, 118 U. S. 557 (1886), 563–​77. 42. Hudson, The Railways and the Republic (New York: Harper & Brothers, 1886), 9. 43. Hudson, The Railways and the Republic, 55. William W. Sharkey, The Theory of Natural Monopoly (New York: Cambridge University Press, 1982), 14, 26. Richard A. Posner, “Natural Monopoly and Its Regulation,” Stanford Law Review 21, no. 3 (February 1969): 570. 44. Richard White, Railroaded: The Transcontinentals and the Making of Modern America (New York: W. W. Norton, 2011), 327–​29. 45. Ben H. Proctor, Not without Honor: The Life of John Reagan (Austin: University of Texas Press, 1962), 196–​98, 218, 255. 46. White, Railroaded, 357. 47. Childs, Texas Railroad Commission, 33–​34. 48. M. Elizabeth Sanders, Roots of Reform: Farmers, Workers, and the American State, 1877–​1917 (Chicago: University of Chicago Press, 1999), 187–​94. 49. Hovenkamp, Enterprise and American Law, 274. Sharkey, Theory of Natural Monopoly, vii–​27. 50. Charles Francis Adams, “Which Will Quickest Solve the Railroad Question: Force Bills or Public Opinion?” Oshkosh, Wisconsin, Sept. 3, 1875, in Charles Francis Adams, Railway Pamphlets, Stanford University Library, 7–​11, quote on 9.

From Antimonopoly to Antitrust  113 51. Ibid.Thomas K. McCraw, Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, and Alfred E. Kahn (Cambridge, MA: Harvard University Press, 1984) , 9–​10. Adams, Railroads: Their Origin and Problems, 116–​17, quote on 130. 52. Arthur T. Hadley, Railroad Transportation: Its History and Its Laws (New York: G. P. Putnam’s Sons, 1895; orig. ed., 1885), 67–​74, quote on 69. This discussion taken from White, Railroaded, 329–​30. 53. Hadley, Railroad Transportation, 67-​74. 54. McCraw, Prophets of Regulation, 9–​10. Charles Francis Adams, “Which Will Quickest Solve the Railroad Question,” in Adams, Railway Pamphlets, Stanford University Library, 7–​11, quote on 9. Hovenkamp, Enterprise and American Law, 139–​48. 55. Joshua D. Wolff, Western Union and the Creation of the American Corporate Order, 1845–​1893 (New York: Cambridge University Press, 2013), 5–​6; Richard R. John, Spreading the News: The American Postal System from Franklin to Morse (Cambridge, MA: Harvard University Press, 1995), revealed how the United States nearly nationalized the telegraph system. 56. Wolff, Western Union, 279–​81. Richard R. John, Network Nation: Inventing American Telecommunications (Cambridge, MA: Belknap Press of Harvard University Press, 2010), 175. 57. Scott C. James, Presidents, Parties, and the State: A Party System Perspective on Democratic Regulatory Choice, 1884–​1936 (Cambridge: Cambridge University Press, 2003), 103. 58. Ibid., 115–​ 17; Sanders, Roots of Reform, 194; Childs, Texas Railroad Commission, 36–​40. 59. Travelers Official Railway Guide for the United States and Canada, 19th Year, no. XI (April 1887), 1½.Gerald G. Eggert, Richard Olney: Evolution of a Statesman (University Park: Pennsylvania State University Press, 1974), 26. 60. Collis P. Huntington to A. Hutchison, Feb. 3, 1887, CPH to A. Towne, Feb. 17, 1887, CPH Papers, ser. 2, r. 27. 61. Ari and Olive Hoogenboom, A History of the ICC: From Panacea to Palliative (New York: W. W. Norton, 1976), 15–​16. White, Railroaded, 359–​65. 62. White, Railroaded, 362–​65, 393. White, Republic for Which It Stands, 585. 63. White, Railroaded, 362–​65, 393. White, Republic for Which It Stands, 585, see notes. Morton Keller, Regulating a New Economy: Public Policy and Economic Change in America, 1900–​1933 (Cambridge, MA: Harvard University Press, 1990), 45. 64. Joanne R. Reitano, The Tariff Question in the Gilded Age: The Great Debate of 1888 (University Park: Pennsylvania State University Press, 1994), 69–​76. 65. Clark and Clark, Control of Trusts (1912), 60–​61, 66–​67. 66. Hovenkamp, Enterprise and American Law, 283, 286–​91. White, Railroaded, 384–​85. 67. Senator James Z. George (Congressional Record, February 27, 1890, p. 1772), quoted in Peter R. Dickson and Philippa K. Wells, “The Dubious Origins of the Sherman Antitrust Act: The Mouse That Roared,” Journal of Public Policy & Marketing 20, no. 1 Competition Policy and Antitrust Law (Spring 2001): 3–​14.

114  Antimonopoly and American Democracy 68. White, Railroaded, 436, 441; Keller, Regulating a New Economy, 30. 69. White, Railroaded, 385. 70. Clark, Control of Trusts, v–​vi, 3. 71. Ibid., 4–​5, 7. 72. Ibid., 4–​5, 7. 73. Ron Chernow, Titan: The Life of John D. Rockefeller, Sr. (New York: Random House, 1998), 78–​80, 109–​17, 131, 223–​24. 74. John L. Thomas, Alternative America: Henry George, Edward Bellamy, Henry Demarest Lloyd and the Adversary Tradition (Cambridge, MA: Belknap Press of Harvard University Press, 1983), 117–​23; White, Railroaded, 332–​34. 75. Branden Adams, “Dark, Dreary Mine: Bituminous Coal in Late Nineteenth Century America” (PhD diss., Stanford University, 2020), 73–​74. 76. Adams, “Dark, Dreary Mine,” 73–​78. 77. Ibid., 79–​96. 78. Charles Postel, The Populist Vision (New York: Oxford University Press, 2007), 15, 33. 79. Ibid., 115. 80. Ibid., 128–​30. 81. Ibid., 18–​19. 82. Ibid., 148–​ 49; Marion Todd, Railways of Europe and America (Boston: Arena Publishing Company, 1893), iii. Thomas Frank, “The Leviathan with Tentacles of Steel: Railroads in the Minds of Kansas Populists,” Western Historical Quarterly 20 (February 1989): 42–​43, 47–​48. For conservative “developer Populists,” Peter H. Argersinger, “Populists in Power: Public Policy and Legislative Behavior,” Journal of Interdisciplinary History 18 (Summer 1987): 101. 83. Edward Bellamy, Looking Backward (Boston: Houghton Mifflin, 1888; Riverside ed., 1966), 34–​35, 56, quote on 73. Gronlund, Proceedings of Chicago Conference on Trusts, 1899, 569–​74. 84. Gronlund, Proceedings of Chicago Conference on Trusts, 1899, 569–​74. 85. Gerald Berk, Louis D. Brandeis and the Making of Regulated Competition, 1900– 1932 (Cambridge: Cambridge University Press, 2009), 45–47, 252. 86. Ibid., quote on 44, 38–​39, 46–​47. 87. Ibid., 37–​43. 88. Louis D. Brandeis, Other People’s Money: And How the Bankers Use It (New York: F. A. Stokes, c1914), 46–​50, 63, 94. 89. Mitchell, The Speculation Economy, 56. Brandeis, Other People’s Money, 51–​68, 128 90. Mitchell, The Speculation Economy, 45–​48. For failed attempts by the courts to limit and mitigate this law see 48–54; Berk, 66​. 91. Luca Fiorito, “When Economics Faces the Economy: John Bates Clark and the 1914 Antitrust Legislation,” Working Paper No: 2012-​01, Month February, University of Utah, Department of Economics Working Paper Series, http://​www.econ.utah.edu, 18-​19. Clark and Clark, Control of Trusts (1912), 74–​77, letters of marque, 75. Joseph Dorfman, The Economic Mind in American Civilization, Vol. 3, 203–​4. 92. O’Sullivan, Dividends of Development, railroads and industrials, 6, 36–​41, 63–​68, bankers, 41–​43, institutional investors, banks, call market, 51–​53.

From Antimonopoly to Antitrust  115 93. Berk, Brandeis, 20, 67, 92, 101, 103. 94. Clark, Control of Trusts, 60–​63; Fiorito, “When Economics Faces the Economy,” 8. Clark retained his belief in publicity, 21. 95. Martin Sklar, The Corporate Reconstruction of American Capitalism (New York: Cambridge University Press, 1988), 147, 146–​54, 381–​82. American Tobacco Co v. United States, 221 U.S.; Standard Oil v. United States, 221 U.S. For antitrust law during the Progressive Era, see Daniel A. Crane, “The Dissociation of Incorporation and Regulation in the Progressive Era and New Deal,” in Corporations and American Democracy, ed. Naomi Lamoreaux and William J. Novak (Cambridge, MA: Harvard University Press, 2017), 109–​24. 96. Clark and Clark, Control of Trusts, 29–​30, 83–​84, 99–​100. 97. Fiorito, “When Economics Faces the Economy,” 11. Clark and Clark, Control of Trusts, 96–​127, especially 110, 123, 125. 98. Fiorito, “When Economics Faces the Economy,” 12–​ 13, 21–​ 23, 31–​ 35. Clark and Clark, Control of Trusts, 26–​29, 123. For evaluation of who got what, Berk, Brandeis , 107. 99. Clark and Clark, Control of Trusts, 128. 100. Ibid., 24–​25, 70, 201. For faith in Natural Law see Joseph Dorfman, The Economic Mind in American Civilization, 3:203–​4. 101. Clark and Clark, Control of Trusts, 104 102. Fiorito, “When Economics Faces the Economy,” 12–​14. 103. Ibid., 20–​21. Crane, “Dissociation,” 119–​23. 104. Fiorito, “When Economics Faces the Economy,” 16. 105. Ibid., Clark and Clark, Control of Trusts, 140, 168–​69, 190. 106. Crane, “Dissociation,” 12–​22. 107. Fiorito, “When Economics Faces the Economy,” 14–​15, 24–​26. Clark and Clark, Control of Trusts, 194–​95. 108. Fiorito, “When Economics Faces the Economy,” 6. Clark and Clark, Control of Trusts, 79–​80, 132, 135, 160, 167. 109. These records are in National Archives, Part IIIB III.48–​III.89 Record Group 134 Records of the Interstate Commerce Commission. For a guide to railroad records in the National Archives, Records Relating to North American Railroads, Compiled by David Pfeiffer, Reference Information Paper 91, National Archives and Records Administration, Washington, DC, 2001. Dorfman, The Economic Mind in American Civilization, 3:203. 110. Clark recognized this trend as the triumph of natural monopolies rather than vanguard antimonopolists. Clark and Clark, Control of Trusts, 141–​43. 111. Lawrence Glickman, A Living Wage: American Workers and the Making of Consumer Society (Ithaca, NY: Cornell University Press, 1997); Glickman, Buying Power: A History of Consumer Activism in America (Chicago: University of Chicago Press, 2009); Roseanne Currarino, The Labor Question in America: Economic Democracy in the Gilded Age (Urbana: University of Illinois Press, 2010); Dana Frank, Purchasing Power: Consumer Organizing, Gender, and the Seattle Labor Movement, 1919–​1929 (New York: Cambridge University Press, 1994).

116  Antimonopoly and American Democracy 112. Samuel Gompers, “The Progress and Reaction in the Age of Reform, 1909–​13,” in Samuel Gompers, The Samuel Gompers Papers, ed. Peter J. Albert, Stuart Bruce, and Grace Palladino (Urbana: University of Illinois Press, 2000), 12:479–​81; Robert K. Murray, “Public Opinion, Labor, and the Clayton Act,” The Historian 21, no. 3 (1959): 255–​70. 113. Clark and Clark, Control of Trusts, 19, 44. 114. Ibid., 23–​24, 82, 137–​38. 115. Clark, Control of Trusts, 82. 116. Clark and Clark, Control of Trusts, 134. 117. Clark, Control of Trusts, 82. 118. Brandeis, Other People’s Money, 62 119. Ibid., 46–​50, 63, 94, 150–​52, 201–​223. 120. Berk, Brandeis, 66. 121. Ibid., 69. 122. Ibid., 69. 123. Ibid., 253–​56. 124. Clark and Clark, Control of Trusts, 153.

PART II

R ET HIN KING T H E PRO G R E SSIV E A N D NEW DE A L AN T IMONOP OLY TR A DI T IONS

4 Antimonopoly and State Regulation of Corporations in the Gilded Age and Progressive Era Naomi R. Lamoreaux

“The anti-​trust law, which has been a harmless threat for 18 years, is suddenly being enforced,” the prominent journalist Herbert N. Casson announced excitedly in 1908. Casson was not, as most current readers might suppose, talking about the Sherman Act or trumpeting the trust-​busting activities of President Theodore Roosevelt. Rather he was extolling the antitrust laws of states like Texas, Missouri, Kansas, Arkansas, and Kentucky and the lawsuits their attorneys general were bringing against industrial behemoths like Standard Oil and International Harvester. These Southwestern states, Casson asserted, had trusts on the run. Their laws had not only made the giant combine “an outlaw, but an outlaw with a bounty upon its head.”1 Most histories of the period tell a very different story. According to the standard view, states responded aggressively to the rise of Standard Oil and other trusts in the 1880s, but by the early twentieth century had largely ceded the terrain to the federal government. Scholars have offered two main explanations for this shift, both of which turn on the limits of the United States’ federal system of government. First, they claim, New Jersey’s move in 1888 to amend its general incorporation law in the interests of big business set off a chartermongering competition for corporate tax revenues that induced other states to weaken their laws. Second, they argue, combinations that operated in national and international markets could punish states that pursued tough antitrust agendas by shifting their operations elsewhere. In an environment where capital could move easily across state boundaries, only the federal government could be an effective regulator of large-​scale enterprises.2

Naomi R. Lamoreaux, Antimonopoly and State Regulation of Corporations in the Gilded Age and Progressive Era In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0004

120  Antimonopoly and American Democracy This essay challenges this familiar account of antitrust history. I show, first of all, that the literature greatly exaggerates the extent to which there was a regulatory race to the bottom. Although some states responded to New Jersey’s liberalization by quickly copying its innovations, most only gradually modernized their general incorporation laws, and when they did, their statutes retained considerable regulatory content. At the same time, most states took steps to assert their power over foreign corporations (corporations chartered by other states or governments) by insisting that they adhere to the same laws as domestic corporations. They also imposed new taxes on these outside companies. Indeed, rather than a race for chartering fees, New Jersey’s amendments encouraged states to enact a host of new corporate tax statutes that opened to them previously untapped sources of revenue. If there was no regulatory race to bottom, then what happened to the states’ antimonopoly efforts? The answer to that question varied from one state to the next. Some states played an important role in prosecuting Standard Oil and other trusts in the late nineteenth century, but then abandoned these efforts in the early twentieth. In other states, however, antitrust activity gathered steam over the same period. This variation, I show, is not consistent with the idea that states were helpless against combines that could shift their operations elsewhere. To the contrary, the states that were most likely to pare back their prosecutions were precisely those where large-​scale enterprises had the largest sunk investments. Instead, what mattered most for the pattern of enforcement was the internal political economy of each state. Although there were always business groups lined up on both sides of the trust issue, it was mainly in the East, where most of the combines were headquartered, that state governments became more quiescent over time. By contrast, in the West, where agrarian groups were stronger, antimonopoly fervor had a greater and more long-​lasting effect on policy. Although by the 1920s, governments in the West, like those elsewhere, had generally accommodated themselves to the increased scale of industry, their vigorous prosecutions over the preceding decades had significantly reshaped the competitive environment. Federal trust busting was only part of a larger story.

General Incorporation as Antimonopoly One cannot understand the states’ response to the rise of giant business corporations without appreciating the extent to which antimonopoly was

Antimonopoly and State Regulation of Corporations  121 baked into the general incorporation laws that states began to enact in the middle decades of the nineteenth century. Before the rise of Standard Oil in the late nineteenth century, the monopolies that most aroused public outrage were government creations. For centuries, political elites had endeavored to entrench themselves in power by awarding special privileges, especially grants of monopolies, to their allies. Such practices had been common in England in the eighteenth century, and protests against them (for example, against the special tax breaks that gave the East India Company an effective monopoly on tea in the American colonies) were at the heart of the colonists’ revolt against British rule.3 But the practice of rewarding cronies with economically valuable privileges did not end with the Revolution. To the contrary, most of what state legislatures did in the half century following the creation of the United States was to enact bills that granted special favors to their supporters. Among the most important of these favors were corporate charters that bestowed advantages like limited liability that were not available to other businesses.4 This system of special legislation generated enormous discontent, but it was nonetheless remarkably persistent. Elites in power benefited from the ability to dispense charters to members of their coalitions. Those out of power complained bitterly about this “corruption,” but they behaved in exactly the same way when they were in office, handing out charters to supporters and freezing out opponents. Indeed, as the electoral franchise spread and American politics became more competitive in the early nineteenth century, political elites increasingly resorted to these favors. To do otherwise was to risk losing control of the government and, with that, access to corporate privileges and other special advantages. What finally made reform possible was a crisis in public finance in the early 1840s that led eight states and one territory to default on their bonded debt and a number of other states to teeter on the brink of default. In the wake of the crisis, five of the defaulting states wrote new constitutions, as did three of the states that narrowly avoided default. Delegates to the conventions that drafted these documents aimed to prevent future crises by limiting their governments’ ability to borrow. But they also took advantage of the political upheaval caused by the defaults to curb legislators’ power to hand out privileges. As a result, all of the new constitutions included provisions that prohibited special charters of incorporation, stipulating that corporations could only be formed under general laws that gave everyone access to the same privileges. Although other states did not similarly

122  Antimonopoly and American Democracy amend their constitutions during this period, most responded to the clamor for reform by enacting general incorporation statutes. These statutes were of only limited consequence, however. Without constitutional bans on special charters, legislatures continued to dole out privileges to supporters that were not available under the general laws. Hence relatively few companies organized under them. Pennsylvania is a good example. Five years after the enactment of its 1849 general incorporation law for manufacturing, fewer than a dozen companies had actually used it to incorporate, although in 1855 alone the legislature passed 196 special bills to charter or amend the charters of for-​profit business corporations.5 Discontent thus continued to mount until another wave of constitutional revisions after the Civil War spread the prohibition on special charters to most of the remaining states, including Pennsylvania. By 1880, twenty-​four of thirty-​eight states had such prohibitions in their constitutions, and almost all the rest would adopt them over the next couple of decades.6 Because the constitutional revisions of mid-​ nineteenth century restricted the powers of state legislatures, scholars have often viewed them as marking a shift toward laissez-​faire.7 This is a mischaracterization, however. Shaped by resentment of the privileges that legislators had conferred on political favorites, the reforms were anti-​government in the sense that they aimed to stop legislators from manipulating the economy for their own ends. But they also reflected real fears that the same wealthy and powerful businesses that had benefited from legislative largess would reap disproportionate gains from the general laws. As a result, when the states revised their constitutions to ban special charters, they took pains to assert their ongoing regulatory authority over corporations. In the wake of the Supreme Court’s decision in Dartmouth College v. Woodward (1819) that corporate charters were contracts that governments could not unilaterally abrogate, states had learned to insert clauses into charters in which they reserved the right to alter or even revoke them. Now that corporations were to be chartered under general laws, the new constitutions declared, these laws had to be conditional on the states’ absolute power to revise their terms.8 Responding to the same concerns about concentrated economic power as the constitutional conventions, legislatures enacted general incorporation statutes in the 1840s and 1850s that aimed to level the economic playing field and keep it as flat as possible. As Table 4.1 documents for seven important industrial states, many aimed to limit the size to which any individual corporation could grow by imposing ceilings on the amount of capital a

1849

1846

Pennsylvania

Ohio

Three times capital stock

40 years

20 years

Capital stock 50 years

Minimum $5,000; None maximum $200,000

Minimum $20,000

Minimum $10,000

1849

New Jersey

Capital stock None

None

1846

New Jersey

Yes

Yes

Yes

Yes

Yes

Yes

Shareholders personally liable to workers; officers personally liable if fail to follow law

Liability rules

(continued)

One vote per Shareholders personally liable to workers; share directors personally liable if fail to follow law None Shareholders personally liable if reduce capital or company fails to publish annual statement of condition; officers personally liable if fail to follow law None Shareholders liable for amount of any reduction of capital or excess dividend they receive; officers personally liable if fail to follow law One vote per Directors personally liable if fail to follow law share up to maximum one third of total One vote per Shareholders personally liable to workers; share directors personally liable if fail to follow the law

None

Restrictions Annual Voting rule on duration filing required

1848

Ceiling on borrowing

New York

Restrictions on capital stock

Minimum $5,000; Capital stock None maximum $200,000 None Capital stock 50 years

Year of statute

Massachusetts 1851

State

Table 4.1  Restrictions on manufacturing companies in early general incorporation statutes

1852 1849

1857

1850

1853

Ohio Illinois

Illinois

California

California

None

Minimum $10,000; Maximum $500,000 None

None None

Restrictions on capital stock

Capital stock 50 years

Capital stock 50 years

Capital stock 50 years

No

Yes

No

Yes Yes

Liability rules

One vote per Shareholders have unlimited liability share One vote per Shareholders have unlimited liability share

None Shareholders have unlimited liability One vote per Shareholders personally liable to workers; share trustees personally liable if fail to follow the law One vote per Directors personally liable if fail to follow the share law.

Restrictions Annual Voting rule on duration filing required

None None Capital stock None

Ceiling on borrowing

Sources: Unless otherwise noted, all statutes are from the session laws library in HeinOnline, https://​hei​nonl​ine.org/​HOL/​Index?index=​ssl​usst​ate&col​lect​ion=​ssl. Massachusetts: “An Act relating to joint stock companies,” approved May 15, 1851; and “Manufacturing Corporations,” Revised Statutes (Boston: Dutton & Wentworth, 1836), ch. 38. New York: “An Act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes,” passed Feb. 17, 1848. New Jersey: “An Act to authorize the establishment, and to prescribe the duties of manufacturing companies,” approved Feb. 25, 1846; “An Act to authorize the establishment, and to prescribe the duties of companies for manufacturing and other purposes,” approved March 2, 1849. Pennsylvania: “An Act to encourage manufacturing operations in this commonwealth,” approved April 7, 1849. Ohio: “An Act Relative to incorporations for manufacturing, and other purposes,” Feb. 9, 1846; “An Act to provide for the creating and regulation of incorporated companies in the State of Ohio,” May 1, 1852. Illinois: “An Act to authorize the formation of corporations for manufacturing, agricultural, mining or mechanical purposes,” approved Feb. 10, 1849; “An Act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes,” approved Feb. 18, 1857. California: “An Act concerning Corporations,” passed April 22, 1850; “An Act to provide for the formation of corporations for certain purposes,” approved April 14, 1853.

Year of statute

State

Table 4.1 Continued

Antimonopoly and State Regulation of Corporations  125 company could raise or the amount of money it could borrow.9 Some made shareholders doubly or even unlimitedly liable for corporate debts, and all imposed extra liabilities on them in at least some circumstances, usually to ensure that workers got paid when corporations failed. Officers and directors were also personally liable if they failed to follow the law, for example by paying out dividends in excess of earnings. All the statutes also mandated specific governance structures, with some imposing voting rules that curbed the power of the wealthiest shareholders. Most denied corporations perpetual life but insisted instead that they periodically secure the approval of their shareholders to extend their existence. And most required corporations to submit regular financial reports. Many states revised their first-​wave general incorporation statutes in the 1870s, at the height of what scholars have seen as the laissez-​faire policies of the Gilded Age. Although, in some ways, the second-​wave statutes were less regulatory than their predecessors, in other respects they were stricter. As Table 4.2 shows, ceilings on capital and duration tended to be relaxed, but most states still had them, and most states continued to limit corporate borrowing, require annual financial reports, and impose additional liabilities on shareholders under specific circumstances. Most states now mandated specific voting rules for electing directors, with an increasing number requiring that shareholders be allowed to cumulate their votes (a measure that aimed to increase the power of small shareholders).10 Most also imposed detailed procedures that corporations had to follow to declare dividends and increase or decrease their capital, typically making directors personally liable if they did not follow the rules. In the decades following the Civil War, moreover, many states added provisions to their constitutions that regulated corporations. During this period, it became more and more common for the constitutions to include separate articles devoted to corporations. This practice had begun during the 1840s and 1850s, when states began to ban special charters.11 Although the early articles focused for the most part on banks and other special types of corporations, they sometimes included regulatory measures that applied more generally. For example, Michigan’s 1850 constitution forbade corporations from acquiring real estate beyond what was needed for their business purpose and made stockholders individually liable for workers’ wages.12 Ohio’s 1851 constitution mandated that stockholders be subject at least to double liability.13 California’s 1849 was went further and made all

1874

1879

Pennsylvania

Ohio

None

Maximum $5,000,000

Minimum $2,000

1875

New Jersey

Capital stock

Capital stock

One half the value of corporate property None

Maximum $2,000,000

1875

New York

Ceiling on borrowing

Minimum $5,000; Capital stock maximum $500,000

Year Restrictions on of capital stock statute

Massachusetts 1870

State

None

None

50 years

50 years

None

Yes

Yes

No

Yes

Yes

One vote per share; cumulative voting One vote per share; cumulative voting

One vote per share; cumulative voting None

None

Restrictions Annual Voting rule on duration filing required

Shareholders liable for amount of any reduction of capital they receive; directors personally liable if fail to follow law Shareholders personally liable to workers, if they reduce capital, and if they issue special stock; directors personally liable if fail to follow law Shareholders have double liability

Shareholders personally liable to workers and liable to all if reduce capital; officers personally liable if fail to follow law Directors personally liable if fail to follow law

Liability rules

Table 4.2  Restrictions on manufacturing companies in 1870s wave of general incorporation statutes

1870

California

None

None

Capital stock

Capital stock

50 years

99 years

Yes

No

One vote per share; cumulative voting One vote per person Shareholders have unlimited liability

Directors personally liable if fail to follow law

Sources: Unless otherwise noted, all statutes are from the session laws library in HeinOnline. Massachusetts: “An Act concerning manufacturing and other corporations,” approved May 9, 1870. New York: “An Act to provide for the organization and regulation of certain business corporations,” approved June 21, 1875. New Jersey: “An Act concerning corporations,” approved April 7, 1875. Pennsylvania: “An Act to provide for the incorporation and regulation of certain corporations,” approved April 29, 1874. Ohio: The Revised Statutes and Other Acts of a General Nature in Force January 1, 1880 (Columbus, OH: H. W. Derby & Co., 1879), Vol. I, Title II, “Corporations,” 836–​978. Illinois: “An Act concerning corporations,” approved April 18, 1872. California: “An Act to provide for the formation of corporations for certain purposes,” approved April 4, 1870.

1872

Illinois

128  Antimonopoly and American Democracy corporate shareholders unlimitedly liable for corporate debts according to their proportion of total capital.14 Not only did most of these provisions persist, but as more states added articles on corporations to their constitutions, they also added more regulatory content. Thus Article 16 of Pennsylvania’s 1874 constitution (“Private Corporations”) contained thirteen sections that, among other things, mandated that corporations adopt cumulative voting in elections for directors, limited corporations to the lines of business “expressly authorized” by their charters, prohibited corporations from issuing stocks or bonds except in exchange “for money, labor done, or money or property actually received,” declared fictitious capital void, and specified the procedures that corporations had to follow to increase their capital or indebtedness.15 California’s 1879 constitution included essentially the same set of regulations. In addition, it targeted speculation in corporate shares by declaring void “[a]‌ll contracts for the sale of shares of the capital stock of any corporation or association, on margin, or to be delivered at a future day.” It also ordered the legislature “to regulate or prohibit the buying and selling of the shares of the capital stock of corporations in any stock board, stock exchange, or stock market under the control of any association.”16 Wyoming’s 1889 constitution required corporations to limit their operations to a single line of business: “No Corporation shall have power to engage in more than one general line or department of business, which shall be distinctly specified in its charter of incorporation.”17 The continued—​actually increasing—​regulatory content of many state constitutions and general incorporation statutes attests to the ongoing determination of political leaders in these jurisdictions to keep the corporate playing field level. Perhaps the most significant restrictions on big business resulted, however, from what was missing from these instruments: any provisions that allowed corporations to invest in the stocks or bonds of other corporations or that set up procedures for two or more corporations to merge. Under the common law, corporations could only exercise powers that they were explicitly granted or that were required to carry out their primary purpose. Purchasing stock in other companies was not considered a necessary ancillary power, and as a result, without specific legal authorization, corporations could not do it.18 Similarly, mergers were governed by the common-​law rule that any change in the fundamental nature of the firm had to receive the unanimous approval of the shareholders. Thus even a single dissenting shareholder could dramatically raise the cost of what otherwise would have been a profitable combination.19

Antimonopoly and State Regulation of Corporations  129

Regulation during the Chartermongering Era Although the general incorporation laws that states enacted in the mid-​ nineteenth century contained numerous regulatory provisions, states did not initially create administrative structures tasked with ensuring that corporations adhered to them. For the most part, applications for charters received little or no review. In some states, local officials simply filed them along with deeds in county record books. In others, state officials ostensibly checked them for conformity with the law, but even in those cases there was little real oversight.20 Indeed, none was thought to be necessary, for the penalties that could be assessed for violations were thought to be a sufficient deterrent: corporations faced the threat of dissolution, and their officers risked being held personally liable for corporate debts. Firms found ways to evade the law legally, however, and the workarounds they devised forced states to enact new laws and to invest in building the capacity to enforce them. The most important workaround was the trust contract, whose use for the purpose of horizontal combination was pioneered by the Standard Oil Company in the 1870s and early 1880s. Standard accounted for only about 4 percent of the nation’s refining capacity in 1870, but by 1873 it had taken over the competing petroleum refineries in its home city of Cleveland and was on its way toward controlling most of the other firms in the industry.21 As an Ohio corporation, chartered under that state’s general incorporation statute, Standard had no easy way to assert managerial authority over these acquisitions. Ohio law barred corporations from holding stock in other corporations and also made it difficult for two or more corporations to merge, especially with out-​of-​state companies. To solve this problem, Standard’s lawyers made novel use of the voting trust, a type of private contractual arrangement generally accepted by the courts as a legitimate way of stabilizing a corporation’s management. Stockholders in the firms that Standard acquired transferred their shares to a board of trustees dominated by Standard’s officers, receiving in exchange certificates from the trust. In this way, Standard was able to assert control over about 90 percent of the nation’s refiners by the early 1880s.22 The ease with which Standard circumvented Ohio’s corporation law set off a political counterreaction that grew stronger when it became apparent that other combinations were copying Standard’s example. A number of states, then the federal government, and then still more states, enacted antitrust

130  Antimonopoly and American Democracy laws that aimed, in the language of Kansas’s 1889 statute, to make unlawful “all arrangements, contracts, agreements, trusts or combinations between persons or corporations made with a view or which tend to prevent full and free competition.”23 At the same time, state attorneys general began to file quo warranto suits to revoke the charters of corporations that participated in trusts. All that prosecutors had to do to win these cases was document the ultra vires character of the agreement—​that is, how it violated the terms of the charter, not the extent to which it restrained trade—​and, as a result, these suits were usually successful.24 Standard itself came close to being dissolved by the Ohio Supreme Court in 1892, but the justices instead required it to sever its ties to the trust, a condition that Standard successfully evaded.25 Clearly the trusts needed another workaround, and New Jersey came to their rescue by amending its general incorporation law to legalize holding companies and facilitate mergers.26 Gradually, most of the combines took advantage of these provisions and reorganized as New Jersey corporations. As New Jersey’s revenues from chartering out-​of-​state corporations increased, several other states (most notably Delaware, but also West Virginia, Maryland, Maine, and New York) revised their statutes to attract (or retain) corporate charters.27 Many scholars have argued that the result of this chartermongering competition was a race to the bottom that undermined states’ ability to regulate large-​scale corporations.28 As Roberta Romano has pointed out, however, only small states stood to gain enough revenue relative to their budgets to make chartermongering worthwhile.29 Following up on that insight, Harwell Wells advanced the view that states were less intent on competing with New Jersey and Delaware for charters than they were with modernizing their statutes. The scale of enterprise had increased over the last third of the nineteenth century, so in part this modernization effort required states to remove the limits they had imposed on corporate size. It also required them to modify their rules governing capital structure, with most states first allowing the creation of multiple classes of shares and then later jettisoning the idea that shares had to have a par value.30 As Table 4.3 suggests, the evidence from state statutes is more consistent with Wells’s modernization argument than with the race-​to-​the-​ bottom argument. In the first place, most states were quite slow to write modern third-​ wave general incorporation statutes in response to New Jersey’s amendments, with four of the seven states in the table waiting as long as three to four decades to enact comprehensive new laws. A couple of these lagging states amended their second-​wave statutes in the interim

No No

1892

1895 1890 No Yes, greater of capital stock or two-​thirds of value of corporate property Yes, 50 years Yes

1894

1903

1903

No

No

No

No

1896

1904

1873

1888

1890

1903

1888

New Jersey

1890

New York

1903

Modern statute imposed limit No on duration? Modern statute required Yes annual filing?

Year changed law to facilitate mergers Year changed law to enable corporations to hold stock in other corporations Year required foreign corporations to obey laws restricting what domestic corporations could do Year began to tax foreign corporations Year of first modern general incorporation statute Modern statute imposed ceiling on capital stock? Modern statute imposed ceiling on borrowing?

Massachusetts

Yes

No

No

No

1933

1889

1891

1901

1901

Pennsylvania

Table 4.3  Changes in state incorporation laws in response to the mobility of charters

No

No

No

No

1929

1894

1893

1902

1929

Ohio

Yes

No

Yes, capital stock

No

1919

1897

1897

1919

1919

Illinois

(continued)

Yes

No

No

No

1931

1905

1879

1931

1929

California

Shareholders personally liable to workers and to all if reduce capital; directors personally liable if fail to follow law

No

Modern statute imposed liability rule?

Modern statute included antimonopoly language?

Yes

Shareholders personally liable to workers; directors personally liable if fail to follow law

Yes, one vote per share

New York

Shareholders personally liable for reductions in capital if fail to follow the law; directors personally liable if fail to follow law No

No

New Jersey

No

Shareholders personally liable to workers up to the value of stock; directors personally liable if fail to follow law

Yes, one vote per share; cumulative voting

Pennsylvania

No

Yes, one vote per share; cumulative voting Directors personally liable if fail to follow law

Ohio

Yes

Yes, one vote per share; cumulative voting Directors personally liable if fail to follow law

Illinois

No

Yes, one vote per share; cumulative voting Directors personally liable if fail to follow law

California

Sources: Unless otherwise noted, all state statutes are from the session laws library in HeinOnline. Massachusetts: “An Act relative to the admission of certain foreign corporations . . .” approved May 12, 1894; “An Act relative to business corporations,” approved June 17, 1903. New York: “An Act in relation to corporations,” approved June 1, 1890; “An Act in relation to stock corporations,” approved June 7, 1890; “An Act in relation to business corporations,” approved June 7, 1890; “An Act to amend the general corporation law,” approved May 18, 1892; “An Act to provide for licensing foreign stock corporations,” approved April 4, 1895.

Yes, one vote per share

Massachusetts

Modern statute imposed voting rule?

Table 4.3 Continued

New Jersey: “A Supplement to an act . . . to authorize the establishment, and to prescribe the duties of companies for manufacturing and other purposes,” approved March 28, 1873; “An Act relating to the consolidation of corporations . . .,” approved April 17, 1888; “An Act to authorize corporations . . . to purchase and hold stock in any one or more of said corporations in certain cases,” approved April 17, 1888; “An Act concerning corporations,” approved April 21, 1896. Pennsylvania: “A Further Supplement to ‘An act . . . to provide revenue by taxation’ . . .,” approved June 1, 1889; “A Supplement to an act . . . authorizing companies incorporated under the laws of any other state . . .,” approved April 30, 1891; Pennsylvania Legislature, “An Act supplementary to an act, entitled ‘An Act to provide for the incorporation and regulation of certain corporations,’ ” approved May 29, 1901; and “An Act authorizing corporations, organized for profit, to purchase . . . capital stock of . . . any other corporation,” approved July 2, 1901; “An Act relating to business corporations,” approved May 5, 1933. Ohio: “An Act to regulate foreign stock corporations . . .,” approved April 25, 1893; “An Act to amend section . . . 3256 of the Revised Statutes of Ohio,” approved May 6, 1902; “An Act to amend section 1504 of the Revised Statutes . . .,” approved May 16, 1894; “An Act to revise the general corporation act,” approved April 24, 1929. Illinois: “An Act to require every foreign corporation . . . to file . . . and pay certain taxes . . .,” approved May 26, 1897; “An Act in relation to corporations for pecuniary profit,” approved June 28, 1919. California: 1879 Constitution, Article 12, Section 15; “An Act . . . providing for a license tax upon corporations . . .,” approved March 20, 1905; “An act to amend . . . the Civil Code . . .,” approved June 6, 1929; “An act substituting for the existing title . . . relating to corporations,” approved June 12, 1931.

134  Antimonopoly and American Democracy to facilitate mergers (Pennsylvania in 1901) or allow corporations to own shares in other companies (Pennsylvania in 1901 and Ohio in 1902).31 All told, however, relatively few states rushed to follow New Jersey’s lead. As late as 1903—​that is, fifteen years after New Jersey threw down the gauntlet—​ nationwide only thirteen had revised their laws to enable mergers and a mere six allowed corporations to hold other corporations’ stock. By way of contrast, twenty-​two states still limited the duration of corporate charters, twenty-​one regulated corporate borrowing, and seven retained ceilings on capitalization.32 Second, even the modernized statutes retained significant regulatory content. As Table 4.3 indicates, most of the laws continued to mandate specific voting rules, with stockholders in four of the seven states retaining the right to cumulate their shares. Corporations in most places still had to file annual statements, and the statutes mandated new elaborate procedures for increasing and decreasing capital, creating new classes of shares, and other similar changes. About half the states still imposed some liabilities on shareholders beyond the amounts they had originally invested, and directors who failed to follow mandated procedures still risked being held personally liable for corporate debts. The race-​ to-​ the-​ bottom argument is also not consistent with other actions that the states took during this period. As growing numbers of big businesses moved their corporate domiciles to New Jersey and then to Delaware, legislatures elsewhere stepped up their regulation of “foreign corporations”—​that is, corporations that obtained their charters in other states or in foreign countries. The US Supreme Court had upheld the states’ powers over foreign corporations in Paul v. Virginia (1869), and it reiterated that decision two decades later in Pembina Consolidated Silver Mining v. Pennsylvania. Writing for the court in both cases, Justice Stephen J. Field ruled that the privileges and immunities guaranteed by Article Four of the US Constitution did not extend to the “special privileges” that states granted in the form of corporate charters. The framers had never intended “to give to the laws of one State any operation in other States.” Hence a corporation, “being the mere creation of local law,” could have “no legal existence beyond the limits of the sovereignty” that created it. States might allow foreign corporations to do business in their jurisdictions “upon such terms and conditions” as they thought “proper to impose.” They could even, if they wished, exclude them altogether. “The whole matter rest[ed] in their discretion.”33

Antimonopoly and State Regulation of Corporations  135 In the late nineteenth century, some states began to write these principles into their constitutions. Arkansas’s 1874 constitution allowed foreign corporations to “do business in this State, under such limitations and restrictions as may be prescribed by law,” specifying further that “they shall be subject to the same regulation, limitations, and liabilities as like corporations of this State, and shall exercise no other or greater powers, privileges, or franchises than may be exercised by like corporations of this State.”34 This limitation could also be found in constitutions adopted by California in 1879, Montana in 1889, Idaho in 1890, Kentucky in 1891, Utah in 1895, and Arizona in 1912.35 Other states wrote statutes that accomplished the same ends. Starting in 1884, for example, Massachusetts required each foreign corporation to register with the state commissioner of corporations and name that official as its lawful attorney “upon whom all lawful processes in any action or proceeding against it may be served.” In 1894 it prohibited foreign corporations from engaging “in any kind of business the transaction of which by domestic corporations is not permitted by the laws of the Commonwealth.” When Massachusetts modernized its corporation statutes in 1903 in response to New Jersey’s chartermongering, it reiterated and expanded these principles.36 All of the states included in Table 4.3 had similar rules in place by the turn of the century.37 The requirement that foreign corporations conform to the same regulations as domestic firms meant that they had to obey the antitrust laws.38 Some states reinforced the point by adding provisions to their general incorporation laws that barred corporations from merging with, or holding stock in, other corporations if the result was to restrain competition or tend to create a monopoly. When New York enacted a new law in 1892 that copied New Jersey’s liberalized merger provisions, it added the proviso, “No stock corporation shall combine with any other corporation or person for the creation of monopoly or the unlawful restraint of trade or for the prevention of competition in any necessary of life.”39 Ohio amended its statute in 1902 to allow corporations to acquire stock in other corporations, but it stipulated that the corporations could be “kindred but not competing” and that the amendment “shall not authorize the formation of any trust or combination for the purpose of restricting trade or competition.”40 Even New Jersey followed suit when it enacted its so-​called Seven Sisters antitrust laws in 1913, though fear of losing chartering revenues to Delaware caused it quickly to backtrack.41 A number of states went further and embedded these restrictions in their constitutions. Georgia’s 1877 constitution declared,

136  Antimonopoly and American Democracy “The General Assembly of this State shall have no power to authorize any corporation to buy shares, or stock, in any other corporation in this State, or elsewhere, or to make any contract, or agreement whatever, with any such corporation, which may have the effect, or be intended to have the effect, to defeat or lessen competition in their respective businesses, or to encourage monopoly; and all such contracts and agreements shall be illegal and void.”42 Wyoming’s 1889 constitution prohibited all combinations in restraint of trade, declaring, “There shall be no consolidation or combination of corporations of any kinds whatever to prevent competition, to control or influence productions or prices thereof, or in any other manner to interfere with the public good and general welfare.”43 Arizona’s 1912 constitution flatly stated, “Monopolies and trusts shall never be allowed in this state.”44 Other states had similar prohibitions, and Arkansas, Illinois, Missouri, Texas, and Wisconsin required foreign corporations to file affidavits as a condition of doing business in the state attesting that they were not involved in such combinations.45 States also began to create regulatory bodies tasked with enforcing their incorporation laws. Most of the new states that entered the union in the early twentieth century included provisions in their constitutions mandating new oversight boards called corporation commissions. Dozens of states had already formed similar commissions to regulate railroads and other public service corporations, and the new corporation commissions took on similar duties. But they were also responsible for ensuring that all corporations, foreign as well as domestic, conformed to state law.46 Oklahoma, for example, insisted in its 1907 constitution that “[t]‌he records, books, and files of all corporations shall be, at all times, liable and subject to the full visitarial and inquisitorial powers of the State, notwithstanding the immunities and privileges in this Bill of Rights secured to the persons, inhabitants and citizens thereof.” It vested oversight authority in a corporation commission that had the power “of a court of record, to administer oaths, to compel the attendance of witnesses, and the production of papers, . . . and to enforce compliance with any of its lawful orders.”47 Out-​of-​state corporations that failed to make the requisite filings faced financial penalties. More important, they risked having all contracts with citizens of the state be declared void and could not “maintain any suit or action, either legal or equitable, in any of the courts of this State.”48 Older states took similar steps to enforce their laws on foreign corporations. Massachusetts made the officers of foreign corporations

Antimonopoly and State Regulation of Corporations  137 personally liable for corporate debts and contracts if they knowingly made false statements on their filings.49 Illinois barred foreign corporations that failed to obtain the requisite licenses from filing lawsuits in its courts.50 In Pennsylvania, agents who did business on behalf of corporations that did not conform to the state’s registration requirements risked imprisonment and/​ or fines, and the corporations involved could not enforce their contracts in state courts until they rectified the situation and paid a fine.51 Although the Supreme Court ruled in 1914 that a similar South Dakota statute (denying foreign corporations that did not conform to its registration law access to state courts) unconstitutionally impeded interstate commerce, it upheld absolute states’ right to exclude foreign corporations.52 Thus, Kansas created a “charter board” in 1898 to determine which foreign corporations satisfied the state’s legal and licensing requirements. During the 1920s, the board famously refused to grant the Ku Klux Klan, a Georgia corporation, permission to operate in the state.53 The race-​to-​the-​bottom argument needs correcting in another important way as well. According to the literature, states weakened their general incorporation laws in order to attract (or retain) chartering revenues. But states whose corporations shifted their domiciles to New Jersey, Delaware, or other chartermongering states generally did not suffer revenue losses. Corporations whose chartering homes were elsewhere still had to pay taxes on the property they owned in the state. Before the 1890s, moreover, most states did not in fact charge much in the way of fees for corporate charters. Only after New Jersey’s amendments did they learn that charters could be an important revenue source, but at the same time they also learned that they could charge foreign corporations similar fees for the privilege of doing business in the state. In addition, they discovered they could levy taxes on foreign corporations in the form of annual licensing fees in order to keep those privileges alive. Vermont, for example, countered Maine’s chartermongering by taxing foreign corporations on the full value of their capital stock, so that Vermont companies that moved their corporate domiciles to Maine were taxed twice each year on their capital, once by Maine and a second time by Vermont.54 By 1915, when the US Commissioner of Corporations published a survey of these taxes, thirty-​three states had adopted them, with some taxing the entire capital of the foreign corporation, some an amount adjusted by the proportion of the corporation’s business in the state, and some a flat rate.55 More important—​and in direct contradiction to the literature’s claim that states were primarily motivated by the fear of driving corporations to

138  Antimonopoly and American Democracy other jurisdictions—​most states increased their taxes and fees on domestic corporations as well.56 How these changes affected revenues can be seen from the case of Illinois. In the 1880s, the state charged very little for corporate charters—​ so little that the total fees the secretary of state collected from all sources (not just corporations) in 1887 and 1888 amounted to just over $21,000.57 In the wake of New Jersey’s amendments, the state raised its fees for domestic corporations and also imposed them for the first time on foreign corporations. As a result, in 1905 and 1906, the secretary was able to collect about $613,000 from domestic corporations. Although the amount he raised from foreign corporations was substantially less (about $90,000), that was still more than four times the amount his office had garnered from all sources in 1887 and 1888. Intriguingly, of the 581 companies that paid foreign-​ corporation fees in 1905–​1906, only 92 (16%) were chartered in New Jersey. The rest were sprinkled across the country (a few were in Canada), and it is doubtful that many of them would ever have been chartered in Illinois, even in the absence of chartermongering. Yet Illinois was now able to levy a tax them all.58 States could still, of course, benefit financially from watering down their general incorporation laws to attract corporate charters. But the increasing amounts of revenue they were earning from the taxes they had learned to impose on both domestic and foreign corporations is good evidence that there were other ways besides chartermongering to compensate for the losses of chartering fees. Moreover, the content of the new general incorporation laws they enacted in the wake of New Jersey’s liberalization suggests that the extent of any race to the bottom has been greatly exaggerated by the literature.

Patterns of Enforcement If states did not all race to the bottom in response to New Jersey’s liberalization of its general incorporation laws, they also did not react in any uniform way to the growing market power of large-​scale business organizations. Attorneys general were elected officials, and in a number of states they responded to popular agitation against monopolies by stepping up their enforcement activities, but in other states they were relatively quiescent.59 In general, the pattern of the responses followed an East-​West gradient. Although business groups lined up on both sides of the issue, antimonopoly

Antimonopoly and State Regulation of Corporations  139 activity was strongest and persisted longest where agrarian groups were most powerful.60 In the Northeast, antitrust enforcement largely faded by the early twentieth century, to the extent that it ever existed. In Western states, however, it often continued for decades. The Midwest was more of a battleground, and in some ways what happened there best illuminates how the history of antitrust policy might be rewritten as a political economic story rather than simply as a tale of superior federal authority. This section uses case studies of three states—​New York, Illinois, and Kansas—​to illustrate the basic pattern.

New York Even in the heyday of the antimonopoly movement in the late nineteenth century, attorneys general in the leading industrial states of the Northeast were reluctant to prosecute trusts. Massachusetts’ top lawyer resisted a concerted newspaper campaign to push him to take action. Pennsylvania’s attorney general was similarly apathetic; aside from an early quo warranto suit against Standard Oil financed by a producers’ organization, the state made little effort to break up large-​scale combinations. Although New York’s attorney general filed suit against the American Sugar Refining Company when it sought to close down a refinery in the state, he did not challenge any of the other trusts that, like Standard Oil and the Cotton Oil Trust, had their headquarters in New York City.61 Indeed, compared to other states, the annual reports of the New York attorneys general are remarkable for their absence of references to anti-​trust initiatives. Charles F. Tabor, the Democrat who held the office from 1888 to 1891, did not even use his report to showcase his win against the sugar trust.62 New York’s elected officials were not completely immune to the kinds of political pressures that spurred antimonopoly activity in other states. In response to popular agitation, the state senate directed that body’s Committee on General Laws to hold hearings on the trust problem in 1888. The committee called John D. Rockefeller and other heads of trusts to testify and induced them to make public for the first time the agreements that governed their combinations.63 That in itself was an important achievement because the revelations spurred action in other states. When, for example, Ohio attorney general David K. Watson read the Standard Oil trust agreement, he immediately concluded that the Standard Oil Company’s participation was ultra vires and filed a lawsuit charging that the company had “forfeited its

140  Antimonopoly and American Democracy corporate rights, powers and franchises” and should be dissolved by the court.64 In other states there were a rash of similar, mostly successful, quo warranto suits, but in New York the response was more muted.65 The senate investigating committee “respectfully” called the attorney general’s attention to the evidence it had compiled of violations of the common-​law prohibitions against restraints of trade.66 Tabor took action against the sugar trust, as already noted, and later filed suit to dissolve the Milk Exchange on the grounds that it had formed an illegal combination, but he does not seem to have followed up on the evidence the committee collected about combinations in the rubber, cottonseed oil, envelope, elevator, oil cloth, meatpacking, glass, and furniture industries.67 His successors, regardless of party, were similarly reticent. Not until 1907, when William Schuyler Jackson, another Democrat, took office, did any New York attorney general make anti-​trust enforcement a priority.68 Nor was the state legislature much more proactive. Concluding that “the end, if not the purpose of every combination, is to destroy competition and leave the people subject to the rule of a monopoly,” the senate committee forwarded a bill to the assembly in 1888 that it thought would “modify, if it does not prevent, the great evils complained of.” But the legislation did not even make it to a final vote.69 In 1890, antimonopolists succeeded in embedding in the state’s New Jersey–​style stock corporation law a provision that prohibited corporations from combining “for the prevention of competition.” As noted above, that provision was retained and even expanded when the legislature further liberalized the merger rules in 1892.70 The assembly also enacted weak antitrust bills in 1893 and 1896.71 Pressures mounted for stronger measures, however, and the legislature held another set of hearings on the trust question in 1897. The joint committee that conducted the investigation embraced the moderate idea that bigness was not in itself bad, that it often resulted from technological superiority rather than the suppression of competition, and that the job of the state was to encourage the former and prevent the latter.72 This conclusion provoked two minority reports from opposite ends of the political spectrum. The first, from the right, asserted that trusts had been good for the state, “developing our commerce, increasing our taxable property and benefiting our people.”73 The second, from the left, proposed a number of measures to restrain corporate power, including absolute limits on the amount of capital that could by employed by a corporation and on the number of corporations an individual or group could organize, in order that “the term ‘equality before the law’ [would not be], as it is now, an

Antimonopoly and State Regulation of Corporations  141 antiquated figure of speech.”74 Its author, in other words, sought to return to the original purpose of general incorporation laws—​that is, to open access to the corporate form in a way that kept the playing field level and prevented vast accumulations of capital. The legislature followed up on the committee’s report by enacting an antitrust bill that declared contracts, agreements, and combinations that restrained competition or created a monopoly “illegal and void.”75 The statute authorized the attorney general to bring actions against violators, but it placed obstacles in his way by requiring him, among other things, to secure the permission of a court to interrogate witnesses. Attorney General Theodore E. Handcock, a Republican, immediately ran into roadblocks when he attempted to apply the law and concluded that the court’s interpretation of the statute rendered it “entirely ineffectual.”76 The legislature revised the act in 1899 to remove some of the procedural obstacles, but the attorney general still had to seek court permission to examine witnesses.77 In the first decade of the twentieth century, New York’s attorneys general were marginally more active than they had been in the 1890s, but the need for court permission remained a significant hurdle. In 1900, for example, Attorney General John C. Davies, a Republican, followed up on a complaint (submitted by William Randolph Hearst) charging that the American Ice Company had monopolized the ice trade in the City of New York. He obtained a court order allowing him to depose a set of witnesses, but the company challenged the order. After a long series of appeals, reversals, and more appeals, New York’s high court finally declared the state’s antitrust statute constitutional and allowed the case to proceed. The company made a final appeal to the US Supreme Court, which dismissed its complaint in 1902, ratifying the New York court’s determination that the 1899 statute should stand.78 The company then tried to delay the litigation in other ways, including pleading that the statute of limitations had been exceeded, but it was finally convicted of a criminal violation of the antitrust law in 1909. After additional appeals and negotiations, the company was ousted from the state in 1911 and its illegal contracts annulled.79 Davies may have had political reasons for acting on Hearst’s complaint about American Ice. A number of top New York City officials associated with the Democratic Tammany Hall machine had invested in the company, and the Republican governor, Theodore Roosevelt, was making political hay by linking Tammany Hall to the trust.80 In the absence of such motives, Davies proved much more reluctant to take action. He and his successor, Democrat

142  Antimonopoly and American Democracy John Cunneen, denied petitions from complainants (including Hearst) to proceed against a combination of gas producers in New York City, against a conspiracy of railroads in the coal regions of Pennsylvania who were alleged to have fixed the price of coal in New York, and against the Associated Press.81 Cunneen did agree to investigate a complaint from a dealer in photographers’ supplies charging that Eastman Kodak “and several other corporations have conspired together and formed ‘a monopoly’ ” in these products.82 Apparently, he decided not to proceed against these companies because two years later Attorney General Julius M. Mayer, a Republican, rejected the petition, quoting Cunneen’s finding that the Eastman Kodak did not have a monopoly and that its market dominance owed to the superiority of its product—​even though the evidence showed that Kodak offered dealers discounts conditional on agreeing not to handle competitors’ products.83 Mayer also denied petitions asking him to take action against a combination of transit companies in New York City and an association of fire insurers in the Buffalo region.84 This reluctance to proceed against corporations accused of restraining trade was temporarily reversed during Jackson’s two-​year term of office. Jackson began his first annual report as attorney general with the announcement that he had asked the legislature to provide him with extra funds to “investigate violations of the Anti-​Monopoly Law,” and then proceeded to boast about the enforcement activities he had already undertaken. The legislature provided him with at least some of the resources he had requested, and the next year he again touted his accomplishments and requested $15,000 more.85 By his own account, Jackson not only revived the investigation of the American Ice Company, but proactively prevented the consolidation of the telephone industry in the state, blocked a merger of electric and gas companies in the city of Lockport, moved against price-​fixing in the telegraph industry, and challenged gas and transit combinations in the City of New York.86 He still ran into significant trouble with the courts, however. Although a judge granted him permission to proceed with his investigation of price-​fixing by the Western Union Telegraph Company and the Postal Telegraph-​Cable Company, the order was countermanded by a second judge. Jackson appealed, only to have a higher court rule that the antitrust law did not apply to telegraph companies. In the meantime, he had commenced an action against the companies to vacate their charters, but lost that case too on the grounds that the court’s recent ruling on the scope of the antitrust law meant that the companies had not done anything illegal.87 Similarly, his

Antimonopoly and State Regulation of Corporations  143 petitions to annul the charters of New York City’s Consolidated Gas Company and the Interborough-​Metropolitan (transit) Company were denied. Jackson appealed but got nowhere, in large part because the combinations had been approved by the City of New York.88 The attorneys general who followed Jackson reverted to inactivity, but New Yorkers were not completely dependent on their state officials to enforce competition policy. The strictures that antimonopolists had succeeded in inserting into the stock corporation law meant that private parties had standing to challenge anticompetitive mergers on their own. I have found nine appellate-​level cases decided before 1920 that turned on this provision of the law. Two were the failed actions filed by Jackson to revoke the charters of the gas and transit companies, and four others were brought against the same combinations by private shareholders. Three of those four shareholder suits also failed, but these cases were special in the sense that they involved combinations that had been ratified by city ordinances.89 Two very different cases succeeded. One was brought by a company punished by the National Harrow Company for breaking a price-​fixing agreement, and another by a newsdealer squeezed by a combination of publishers.90 These successful uses of the stock-​company statute were important signals that corporations that violated its antimonopoly provisions could face threats from private lawsuits, even if state attorneys general were quiescent. Although the balance of economic and political interests in New York meant that official antitrust enforcement was relatively weak, antimonopoly forces in the legislature had succeeded in empowering shareholders to act. Most shareholders, of course, stood to benefit from whatever monopoly profits their companies obtained. But statutes like New York’s encouraged action by a new breed of opportunistic investors who bought shares in corporations that violated the law solely with the aim of profiting from suing them.91 Monopolies could face threats from private actors as well as public officials.

Illinois Illinois attorney general George Hunt oversaw a tiny office in the mid-​1880s. His staff consisted of a single clerk at a salary of $1,800 and a porter/​messenger (who also worked for the Supreme Court Reporter) at a salary of $700. In addition, he had an allocation of just $2,000 to spend on supplies, telegraph, postage, and other operating costs.92 As he noted laconically in

144  Antimonopoly and American Democracy his biennial report for 1886, the “general law of this State for the formation of corporations is a source of frequent controversy between the State department and persons desiring to form corporations under said law,” but his role seems to have been limited to providing occasional advice, when requested, to the secretary of state about the legality of particular charters.93 He was thus taken by surprise when members of the Chicago Civic Association (CAC) asked him to take action against the Chicago Gas Trust Company, which had been incorporated in 1887 for the illegal purpose of buying up the stock of all the competing gas companies in the city of Chicago. Hunt later claimed that the secretary of state did not submit the filing to him for review but that, if his advice had “been asked and followed, no such charter would have been issued.”94 Regardless, with financial assistance from the CAC, he brought a quo warranto suit against the trust in 1888 and won an important victory in the Illinois Supreme Court.95 Hunt, a Republican, did not file any additional suits against combinations during the remainder of his term in office, but the Democrat who replaced him in 1893, Maurice T. Moloney, was more active, even though he was equally strapped for funds. When Moloney left office in 1897, his budget for staff and office expense still barely exceeded $9,000 (he groused that the attorney for the city of Chicago had an appropriation of $30,000 for incidental expenses, compared to his own $2,000), so he was forced to piggyback on others’ work wherever possible.96 For example, his quo warranto suit against the United States School Furniture Company depended on evidence turned up by a legislative investigation of the company, and his effort to dissolve the National Linseed Oil Company drew almost verbatim on a shareholder’s action that had been dismissed for lack of standing by the Illinois Supreme Court.97 Despite his want of financial resources and staff, he also brought quo warranto suits against the Distilling and Cattle Feeding Company (otherwise known as the Whiskey Trust), the American Tobacco Company, and the Western White Sand Company, and he claimed to have half a dozen other antimonopoly suits in preparation.98 The Republican attorneys general who followed Moloney in office seem to have shared his interest in trustbusting, but they were increasingly hamstrung by lawsuits challenging the state’s antitrust statutes. The Illinois legislature had enacted an antitrust law in 1891 that outlawed combinations to fix the price or quantity of goods sold in the state and prohibited corporations from issuing trust certificates or participating in trusts.99 It amended the law in 1893 to require corporations to file affidavits about their involvement in

Antimonopoly and State Regulation of Corporations  145 anticompetitive combinations. Also in 1893, it enacted a second, somewhat overlapping, statute. The new law included a clause, reflecting the strength of agricultural interests in the legislature, that exempted from its provisions “agricultural products or live stock while in the hands of the producer or raiser.”100 Moloney warned in 1896 that this exemption was likely “to render the entire act unconstitutional,” and that is what ultimately happened.101 In the meantime, however, rather than remedy the situation, the legislature further qualified the 1891 act in 1897 in response to labor demands for relief from antitrust prosecutions. The new amendment, which exempted arrangements “the principal object or effect of which is to maintain or increase wages,” raised fears that the 1891 law would be ruled unconstitutional as well and that the state would be left without an antitrust law.102 The 1893 amendment to the 1891 act had made it the “duty” of the secretary of state to send out a questionnaire annually to each corporation, whose officers had to declare under oath whether they were participating in any combination “with the intent to limit or fix the price or lessen the production and sales of any article of commerce.”103 Many corporations ignored the query, and Moloney did not follow up, perhaps for lack of time and resources. But his successor did. Attorney General Edward C. Akin sent the names of corporations that were not in compliance to the state attorneys in each county to collect penalties, and he threatened to nullify the charters of those that still failed to respond. The cases ran into problems, however, when judges in Cook County decided in 1900 that the 1897 amendment rendered the 1891 law unconstitutional.104 Shortly thereafter the US Supreme Court ruled that the provision of the 1893 law exempting agriculturalists unconstitutionally discriminated among different groups of producers. That decision invalidated the entire 1893 statute because, as Justice John Marshall Harlan explained in the accompanying opinion, “the legislature would not have entered upon or continued the policy indicated by the statute unless agriculturalists and livestock dealers were excluded from its operation, and thereby protected from prosecution.”105 Whether the 1891 statute was unconstitutional as well remained uncertain until the Illinois Supreme Court finally decided the issue in 1903. The court struck down the 1897 amendment on the grounds that it was discriminatory, but left the original statute in place because it had been enacted separately by the legislature, without the discriminatory provision.106 After the 1893 antitrust act was declared unconstitutional, Howland J. Hamlin, a Republican who served as attorney general from 1901 to 1905,

146  Antimonopoly and American Democracy repeatedly yet unsuccessfully recommended that the legislature take steps to bolster the 1891 law, most importantly by giving his office direct authority to enjoin anticompetitive behavior.107 A number of bills seeking to amend the antitrust law were introduced in each legislative session, but they faced opposition from business interests and most either died in committee or were never brought to a final vote. In 1905 two such measures finally made it to the floor of the House of Representatives, where they passed by large margins. One of these secured a vote in the Senate, where it received unanimous support, but the governor (a Republican) did not sign it into law.108 In 1907 the legislature amended the 1891 act to reduce the burden of the affidavit requirement on small business, but that was all. Not until 1965 would Illinois enact a revised antitrust law.109 The uncertainty that hung over the Illinois statutes encouraged Hamlin to defer to federal prosecutors. Although almost immediately on taking office he had launched a major investigation of the Chicago meatpackers, when the federal government began its own suit in 1902 he decided that “the public interests could be best subserved by co-​operating with the federal authorities” and turned over the evidence he had collected to them.110 The uncertainty also encouraged him to look for ways to bolster his own powers against combinations. For example, in a case against an insurance combine, he turned to the common law rather than rely on the state’s weakened antitrust laws. That way he thought he could secure an injunction against the companies, something that would not have been possible under state law, even if the 1893 act had been held constitutional. Indeed, Hamlin’s broader ambition in this case was to free his office from the limitations of the antitrust statutes: “If the contention of the Attorney General shall be sustained,” he strategized, “such combinations . . . can be restrained at common law in any character of business or commerce which affects the interests of the public.”111 He did not succeed in this goal either. The case went on for years and was finally brought to a close by Hamlin’s successor in 1908. The defendant companies had challenged Hamlin’s demand for information and, when they were finally ordered by an appellate court to respond, they refused. The state thus won the case by default. Although the companies were enjoined not to participate in the insurance combination, the general principal under which Hamlin had brought his suit—​and that he hoped would improve on the state’s antitrust statutes—​was consequently never established by the court as law.112 Hamlin and his successor, William H. Stead, complained vociferously in their biennial reports to the governor about the attorney general’s growing

Antimonopoly and State Regulation of Corporations  147 workload and inadequate funding. Although their budgets increased steadily over time, quadrupling over the period 1897–​1907, the legislature also piled on additional duties.113 Stead’s 1908 biennial report was more than double the length of the last one Moloney submitted, but he did not pursue any new antitrust initiatives. Indeed, a search of the report for the word “anti” turns up no references whatsoever to “anti-​trust” but nearly one hundred references to a word that had not shown up in previous reports, “anti-​ saloon.”114 Reformers had turned to state government in the late nineteenth century in the hopes that it would protect them from monopolies, but in the early twentieth century they were increasingly preoccupied with prohibition. Attorneys general were elected officials, and not surprisingly alcohol-​related matters absorbed more and more of their attention.115 It would not, however, be correct to conclude from this shift in focus that antimonopoly was dead in Illinois—​that the state had completely ceded the terrain to the federal government. To the contrary, when the state revised its general incorporation law belatedly in 1919 to adopt New Jersey–​style merger and holding company provisions, as the price of their support progressive legislators were able to embed antimonopoly language in the text: Section 7 (1). No corporation shall acquire, directly or indirectly, the whole or any part of the stock or other share capital of another corporation, where the effect of such acquisition may be substantially to lessen competition between the corporation whose stock is so acquired and the corporation making the acquisition, or to restrain trade in this State or in any section or community thereof, or tend to create a monopoly. . . . Section 66 (2). It shall be unlawful for two or more corporations to merge or consolidate where the effect of such consolidation or merger would be illegally to regulate or control the price of, or illegally to limit the quantity of, or illegally to establish a monopoly in any article, commodity or merchandise manufactured, mined, produced or sold in this State.116

Not only did these provisions give the attorney general license to block anticompetitive combinations, but they gave shareholders and other stakeholders standing to challenge them in court.117 The language in Section 7 came verbatim from the Clayton Antitrust Act that Congress had enacted in 1914 and that made federal antitrust decisions relevant for interpreting the Illinois law. Thus in Moody & Waters Company v. Case-​Moody Pie Corporation (1933), Illinois’s high court used the US Supreme Court’s decision in International

148  Antimonopoly and American Democracy Shoe Co. v. Federal Trade Commission to define what it meant “substantially to lessen competition.”118 In this way, federal antitrust law fed back into state incorporation and antitrust law rather than simply superseding it.

Kansas Illinois, of course, was just one state, but its experience was similar to that of Ohio and other states in the Midwestern part of the manufacturing belt, where once strong antimonopoly forces ran into increasing political opposition in the early twentieth century. As activity was declining in that region, however, it was increasing further west. Texas, for example, embarked upon an antimonopoly crusade against Standard Oil after the discovery of the Spindletop oil field in 1901, and its antitrust suits, which continued for decades, were arguably of greater consequence in shaping the oligopolistic structure of the petroleum refining industry than the US Supreme Court’s decision breaking up the Standard Oil trust.119 Texas’s activism was driven in large measure by its political economy—​by local producers’ determination to keep Standard out of the state’s oil fields—​and its vast reserves gave its efforts a clout that other states did not have. Nonetheless, Texas did not face Standard Oil alone. Kansas, another oil-​producing state, launched a multi-​pronged attack on the combine in 1904. When Standard responded by threatening to boycott Kansas oil, the state doubled down on its legal assault and other states piled on. The Illinois House of Representatives resolved in 1905 to lend Kansas $100,000 to build a state-​owned refinery (it was later in the same session that the House passed the two antitrust bills). At the same time, anti-​trust and anti-​Standard legislation gained momentum in Indiana, Missouri, Iowa, Colorado, and Texas. Perhaps more important, Missouri and Ohio joined Kansas and Texas in filing quo warranto suits against the combine. Prosecutors from states taking action against Standard met in St. Louis in the summer of 1906 to coordinate their legal strategy, founding for this purpose the National Attorneys General Conference, which held its first annual meeting in St. Louis the following year. Standard’s bullying also helped to spur a federal investigation by the Bureau of Corporations, as well as the federal antitrust suit that ultimately resulted in the US Supreme Court’s 1911 decision to break the company up.120 Kansas’s action against Standard Oil was provoked by a sharp fall in the price of crude oil that the state’s hard-​hit producers blamed on the company’s

Antimonopoly and State Regulation of Corporations  149 monopsony power.121 But the state had a long history of antimonopoly activism on which it could build. As already noted, the Kansas legislature had enacted an antitrust law as early as 1889, and it reinforced that act with a second in 1897.122 Populist Attorney General John Thomas Little got the prosecution ball rolling in 1894, pushing for action against the “paper trust,” and the attorneys general who succeeded Little over the next three decades (all Republicans) were with but one exception vigilant enforcers of the antitrust laws. In 1905, Chiles Crittendon Coleman, the attorney general who launched the quo warranto suit to oust Standard Oil, successfully defended Kansas’s antitrust law before the US Supreme Court against the charge (made by wheat dealers accused of conspiring to fix the price of grain) that it unconstitutionally infringed on the Fourteenth Amendment’s guarantee of freedom of contract.123 That same year he won another suit before the Supreme Court involving a Fifth Amendment challenge. He had charged a local combination of coal mine operators with price-​fixing and had jailed one of the operators for contempt for refusing to answer questions in response to a subpoena. Justice David Brewer noted in his opinion that the Court had recently upheld the constitutionality of the Kansas statute and affirmed the state high court’s ruling that the man had to answer the attorney general’s questions.124 As these two cases suggest, Kansas officials actively pursued local violators of the antitrust laws as well as big national combines like Standard Oil. The reports submitted by attorneys general during the first decade of the twentieth century detail actions against combinations ranging from International Harvester to the Kansas City Live Stock Exchange to local millers’ associations and fire insurance companies.125 These prosecutions were costly, and the attorneys general complained continuously about their lack of funds. The state tackled the problem of its limited enforcement capacity by making it “the duty of county attorneys to diligently prosecute” violations, and it imposed penalties (fine, imprisonment, and loss of office) on any county attorney who should “fail, neglect or refuse to faithfully perform” this obligation.126 Thus the case against International Harvester began with local investigations in Topeka and Hutchinson, and legal action against the company took the form of a criminal indictment in Shawnee County’s district court, as well as a quo warranto suit in Kansas’s supreme court to oust the company from the state.127 Attorney General John S. Dawson followed up the state’s big win in its quo warranto suit against Standard Oil in 1911 by organizing all the county attorneys to file civil antitrust suits against the combine. As a consequence, Standard had to pay fines in fifty counties—​$500

150  Antimonopoly and American Democracy per county, totaling $25,000, all paid into the school fund.128 Scholars have viewed such fines as trivial from the standpoint of the company, but they do not look so trivial from the standpoint of the state. In 1920, the Charter Board was collecting about $40,000 a year in corporate taxes and fees (also paid into the school fund), so the fines represented a substantial addition in percentage terms.129 The entire budget for the attorney general’s office in 1920 was just about $25,000.130 Clearly the state had a financial incentive to pursue trusts, and it continued to do. Prohibition was a major political issue in Kansas, and the state’s attorneys general were deeply involved in alcohol-​related prosecutions—​ probably more than their counterparts in Illinois—​but those activities do not seem to have crowded out antitrust pursuits. Coleman, for instance, aggressively enforced Kansas’s strict liquor laws, even to the extent of filing ouster and contempt suits against local officials he regarded as lax. But it was also Coleman who responded to popular agitation about Standard Oil by starting quo warranto proceedings.131 Similarly, Dawson worked vigilantly to enforce the liquor laws, cracking down on rural areas where violations were especially rampant.132 Yet he never slacked on the antitrust front. As he crowed in 1912, after bringing the ouster case against Standard Oil to a successful conclusion, “I believe that the fact that it was well known that the state was on the alert and ready and willing to prosecute offenses under the antitrust law has had a wholesome and moral influence in checking and restraining the tendency to such unlawful gain in this state in violation of the antitrust law.”133 He was at that time involved in prosecutions of “trusts” in the insurance, ice, plumbing, gas, and cement industries, and over the next decade and a half he and his successors would take on combinations (mostly successfully and often with the aid of county attorneys) in these and other industries, including bridge building, coal dealing, bricks, and wholesale groceries.134 During this period Kansas’s attorneys general repeatedly recommended strengthening the antitrust laws. Dawson noted in 1914 that Kansas producers were victimized by a number of what he called “unfair” trading practices, and he urged the legislature enact a new law that would be modeled on the Clayton and Federal Trade Commission Acts that Congress had just passed but that would go farther and ban, for example, the operation of “bogus” independent concerns and “all forms of coercion, blacklisting, use of detectives and intimidations” for anticompetitive purposes.135 Subsequent attorneys general continued to ask for more protection against unfair trade practices, and, alert to changes in the anticompetitive toolkit in the 1920s,

Antimonopoly and State Regulation of Corporations  151 they also asked for measures that would combat the growing use of open-​ price associations for the purpose of price-​fixing.136 Although Kansas’s legislature did not give the attorney general everything he wanted, it continued throughout the first two decades of the twentieth century to pass new legislation banning particular types of unfair competition and enhancing the attorney general’s enforcement powers. The last of these acts, passed in 1919, gave the attorney general greater power to issue and enforce subpoenas to investigate “trusts, monopolies, combinations in restraint of trade, unlawful discrimination, unfair trade or the unlawful buying, selling and dealing in commodities without the intention of delivering the same.”137 Again, Kansas is only one state. In an argument that resonates strongly with Richard White’s in this volume, Steven Piott has contended that the antimonopoly impulse in neighboring states like Missouri was “co-​opted” by the second decade of the twentieth century. Focusing in particular on the change by 1908 in the views held by Missouri Attorney General Herbert S. Hadley, Piott claims that, rather than oust monopolistic combinations, states increasingly sought to regulate their behavior—​to turn bad trusts into good ones.138 Even if Piott is correct, this interpretation is very different from the standard narrative. It suggests that states had not abandoned the field to the federal government, but rather had simply changed their tactics. It is not clear, however, that Piott’s account of Missouri applies more generally. As he admits, other state attorneys general refused to hop on Hadley’s bandwagon. He quotes Texas’s Robert V. Davidson as denying that there was any difference between “good” trusts and “bad” trusts: “A white horse is the same as a black horse; they both kick.” Similarly, Kansas Attorney General Fred C. Jackson avowed, there was “no such thing as a good combination,” continuing “[a]‌s well might you refer to a ‘good’ burglar! Every combination was ‘conceived in sin and born in iniquity.’ ”139 The antimonopoly impulse was not only alive and well in these states but still shaping policy.

Conclusion The evidence on state antitrust activity presented in this chapter is not consistent with the view that states raced to the bottom in response to New Jersey’s liberalization of its general incorporation laws. Nor is it consistent with the idea that states ceded the regulatory ground to the federal government in the early twentieth century because they lacked the economic

152  Antimonopoly and American Democracy power needed to confront large-​scale businesses. Although many states followed New Jersey in amending their general incorporation laws to facilitate mergers and legalize holding companies, as a general rule these statutes remained highly regulatory and often included provisions that prohibited combinations for the purpose of monopoly. States also enacted new laws regulating foreign corporations, requiring them to register with a state authority and obey the same rules as domestically chartered corporations. Some even created new commissions tasked with monitoring both domestic and foreign corporations to ensure conformity with the law. Although states lost some revenues from chartering corporations to New Jersey, Delaware, and a few other chartermongering states, they compensated for those losses by imposing new taxes on foreign corporations that did business in their jurisdictions. Rather than cut taxes on domestic corporations out of fear of driving them to other domiciles, they often increased those levies at the same time. States responded to the rise of big businesses and the resulting fears of monopoly power in a variety of ways. Some states did little or nothing; others repeatedly challenged the legality of large-​scale enterprises. Some of the states that were the most vociferous challengers in the 1890s abandoned their antimonopoly activities in the early twentieth century; others were only just then taking up the gauntlet. These differences across states were not a simple function of their administrative capacity—​of the resources they had available to fight the trusts. New York’s attorneys general had more funds at their disposal than did their counterparts in Illinois or Kansas, but prosecuted fewer trusts. Kansas’s attorneys general were the most underfunded of the three but the most active. The budget of Illinois’s top lawyer increased quite substantially over time, but prosecutions of monopolies nonetheless fell off. Nor can the pattern of enforcement be explained by party politics. Kansas’s attorneys general were mainly Republicans and so were New York’s, but they could not have been more different in their stances on trusts. Illinois’s attorneys general took strong antimonopoly positions in the 1890s regardless of party, and regardless of party they all backed off in the twentieth century. Whether they were Democrats or Republicans, well-​funded or not, the attorneys general in these three states seem to have been responding more than anything else to the relative strength in their jurisdictions of big business versus oppositional groups. The stronger the former, the less antitrust activity; the stronger the latter, the more. Although there were certainly business groups that supported action against the trusts, the general pattern

Antimonopoly and State Regulation of Corporations  153 suggests that the strength of agrarian organizations mattered more than anything else. As a result, the states’ response to trusts can be arrayed on a rough East-​West gradient. In the East, where big-​business interests were strongest politically, attorneys general were least active in fighting monopolistic combinations. In the West, where agrarian interests were strongest, the opposite was the case. The Midwestern part of the manufacturing belt was more of a battleground, with the antimonopoly movement losing ground over time, along with agrarian interests. Although, on the surface, the experience of Midwestern states like Illinois might seem to fit the standard narrative of states giving up on antitrust and looking to the federal government to take charge, the change was less a matter of the state’s lack of economic power than of its internal political economy. Illinois’s attorney general handed over the evidence he had collected about collusion among giant meatpackers to the federal government because he could not get the legislature to fix the problems with the state’s antitrust law. Moreover, even though the legislature failed to revise its antitrust laws after significant parts of them were declared unconstitutional, in 1919 progressive legislators were able to embed antimonopoly language into the new general incorporation law as a price of their support for its New Jersey–​style merger and holding company provisions. That achievement meant that, even if state officials neglected to take action against an anticompetitive merger, stockholders and other private parties still had standing to file a lawsuit to block it. One trend that the standard antitrust narrative overlooks is the extent to which Americans in the early twentieth century were looking to government at all levels to solve a broad array of social as well as economic problems. For many, the most pressing concern was the abuse of alcohol. State governments responded to popular agitation for prohibition with new legislation to curb the sale of alcohol, and of course the Eighteenth Amendment made prohibition a federal matter as well. At the national level, enforcing prohibition took up the lion’s share of the government’s enforcement resources and energies in the 1920s, and it is not surprising that it had a similar effect at the state level. As late as 1911 the president of the National Attorneys General Conference, Charles West of Oklahoma, gave a rousing antimonopoly address to the assembled state officials declaring that “it is the states which must solve . . . the trust problems” and calling for more joint action to that end: “Is there anyone amongst us who does not realize that co-​operation is the secret of our success . . .?”140 Over the next few years, however, concerns about

154  Antimonopoly and American Democracy monopoly power mostly disappeared from the conference’s agenda as the organization shifted its focus to cooperating on other issues, particularly alcohol restriction.141 In some places, like Illinois, attorneys general reduced their activity on the antitrust front at the same time as they upped it on the prohibition front. However, there were other states, like Kansas and Texas, where enforcement of the liquor laws does not seem to have crowded out antitrust enforcement, perhaps because the anti-​alcohol movement in some places had an important antimonopoly side.142 How much the Western states’ ongoing antimonopoly activities ultimately mattered is an important question but one that is difficult to answer. The journalist Herbert Casson, with whose words I began this essay, certainly thought they did. One reason to believe he was correct is that businesses kept challenging the constitutionality of state actions in federal court.143 They mostly lost these cases (Connelly v. Union Sewer Pipe was a notable exception), but they nonetheless kept trying—​to the frustration of the justices on the Supreme Court. Writing with unconcealed irritation, Justice Joseph McKenna demolished a challenge to a Missouri prosecution that International Harvester brought in 1914 on Fourteenth Amendment grounds, pointing out sarcastically that the corporation was implying that a “combination of all the great industrial enterprises . . . could not be condemned unless the law applied as well to a combination of maidservants or to infants’ nurses.”144 Moreover, these losses forced Standard Oil, International Harvester, and other large firms to fold up their operations in a number of Western states, creating space for competitors to take root and thrive. Cyrus McCormick, grandson of the famous inventor, later recalled that as a Western branch manager for International Harvester he “used to stand by the border of forbidden Texas and long to explore it.”145 During the 1920s this stream of challenges petered out, in part because the states reached accommodations with firms like International Harvester that allowed them to return and in part because the Court gained control of its caseload and could now refuse to hear them. Whether the accommodations were evidence that antimonopoly fervor was declining in the West—​giving way, as it already had elsewhere and at the federal level, to a more pragmatic antitrust agenda—​is beyond the scope of this paper to determine. However, the accommodations were only possible because businesses were changing their behavior. Large-​scale enterprises were learning how to compete effectively in oligopolistically structured industries. They were also learning how to live within the constraints of the antitrust laws and refrain from doing

Antimonopoly and State Regulation of Corporations  155 the kinds of things that would get them prosecuted: soliciting rebates from railroads; forcing downstream firms to agree to tying contracts; or engaging in discriminatory pricing to force competitors out of business. Antitrust scholars have recognized the importance of these adjustments, but they have attributed them to the increased effectiveness of federal antitrust enforcement. As the evidence presented in this chapter shows, however, it is impossible to disentangle the effects of state and federal action in reshaping businesses’ behavior. We can no longer simply assume that all that mattered was the federal government.146

Acknowledgments I am grateful for the helpful comments and suggestions about sources I have received from Ruth Bloch, John Cisternino, Sally Clarke, Daniel Crane, Mark Dincecco, Louis Galambos, Richard John, Joel Michaels, David Moss, William Novak, Laura Phillips-​ Sawyer, Paul Rhode, Steven Usselman, Andrew Verstein, John Wallis, and Mira Wilkins, and from participants in the series of Tobin Project conferences on “Antimonopoly and American Democracy,” the Economic History Workshop at the University of Michigan, and the Business History Seminar at the Harvard Business School. Thanks too to the students in Daniel Crane’s Fall 2022 class at the University of Michigan Law School, “Antitrust and Democracy.”

Notes 1. Herbert Casson, “Driving the Trusts Out of the Southwest,” reprinted from Broadway Magazine by the St. Louis Post-​Dispatch (April 5, 1908), B6. 2. See, e.g., Hans B. Thorelli, The Federal Antitrust Policy: Origination of an American Tradition (Baltimore: Johns Hopkins Press, 1954); Herbert Hovenkamp, Enterprise and American Law, 1836–​1937 (Cambridge, MA: Harvard University Press, 1991); William G. Roy, Socializing Capital: The Rise of the Large Industrial Corporation in America (Princeton, NJ: Princeton University Press, 1997). I shared this view when I wrote The Great Merger Movement in American Business, 1895–​ 1904 (New York: Cambridge University Press, 1985). The great exception to this generalization about the literature is the pathbreaking work of James May on state antitrust initiatives, especially his “Antitrust Practice and Procedure in the Formative Era: The Constitutional and Conceptual Reach of State Antitrust Law, 1880–​1918,” University of Pennsylvania Law Review 135 (March 1987): 495–​593; and “Antitrust

156  Antimonopoly and American Democracy in the Formative Era: Political and Economic Theory in Constitutional and Antitrust Analysis, 1880–​1918,” Ohio State Law Journal 50, no. 2 (1989): 257–​395. See also Steven L. Piott, The Anti-​Monopoly Persuasion: Popular Resistance to the Rise of Big Business in the Midwest (Westport, CT: Greenwood Press, 1985). 3. Bernard Bailyn, The Ideological Origins of the American Revolution (Cambridge, MA: Harvard University Press, 1967); Arthur M. Schlesinger, The Colonial Merchants and the American Revolution, 1763–​1776 (New York: Columbia University, 1918). See also Richard John’s essay in this volume. 4. This argument, which is continued in the next several paragraphs, is from Naomi R. Lamoreaux and John Joseph Wallis, “Economic Crisis, General Laws, and the Mid-​ Nineteenth-​Century Transformation of American Political Economy,” Journal of the Early Republic 41, no. 3 (Fall 2021): 403–​33. 5. Louis Hartz, Economic Policy and Democratic Thought: Pennsylvania, 1776–​1860 (Cambridge, MA: Harvard University Press, 1948), 39–​41; Naomi R. Lamoreaux, “Revisiting American Exceptionalism: Democracy and the Regulation of Corporate Governance: The Case of Nineteenth-​ Century Pennsylvania in Comparative Context,” in Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, ed. William J. Collins and Robert A. Margo (Chicago: University of Chicago Press, 2015), 25–​71 at 40. 6. The laggards were in New England and the South. Connecticut, Massachusetts, New Hampshire, and Rhode Island would never prohibit the practice, but all the other states adopted the ban by the early twentieth century. 7. This is the implication of Hartz’s Economic Policy and Democratic Thought. See also James Willard Hurst, The Legitimacy of the Business Corporation in the Law of the United States, 1780–​1970 (Charlottesville: University of Press of Virginia, 1970); and Ronald E. Seavoy, “Laissez-​Faire: Business Policy, Corporations, and Capital Investment in the Early National Period,” in Encyclopedia of American Political History, ed. Jack P. Greene (New York: Charles Scribner’s Sons, 1984), 2:728–​37. 8. Dartmouth College v. Woodward, 17 U.S. 518 (1819). See Naomi R. Lamoreaux, “The Dartmouth College Decision as a Pillar of the Regulatory State,” HistPhil, https://​ histp​hil.org/​2019/​07/​11/​the-​dartmo​uth-​coll​ege-​decis​ion-​as-​a-​pil​lar-​of-​the-​reg​ulat​ ory-​state/​. An important exception was Illinois, whose 1848 constitution omitted this clause. 9. Delaware, which in the twentieth century would become the corporate home of most of the nation’s largest corporations, is not included in the table because, for all practical purposes, it did not have a general incorporation statute until the state’s 1897 constitution banned special charters, at which point it simply enacted New Jersey’s law. S. Samuel Arsht, “A History of Delaware Corporation Law,” Delaware Journal of Corporate Law 1, no. 1 (1976): 1–​22; Russell Carpenter Larcom, The Delaware Corporation (Baltimore: Johns Hopkins University Press, 1937). 10. Under cumulative voting rules, shareholders received as many votes as there were directors being elected and had the option of spreading them over an equal number of candidates, casting all of them for one candidate, or anything in between. By 1900, seventeen states had such rules. Charles M. Williams, Cumulative Voting for Directors

Antimonopoly and State Regulation of Corporations  157 (Boston, MA: Graduate School of Business Administration, Harvard University, 1951), 20. 11. See Illinois, 1848 Constitution, Article 10; Indiana, 1851 Constitution, Article 11; Iowa, 1846 Constitution, Article 8; Kansas, 1859 Constitution, Article 12; Michigan, 1850 Constitution, Article 15; Minnesota, 1857 Constitution, Article 10; New York, 1846 Constitution, Article 8; Ohio, 1851 Constitution, Article 13; Oregon, 1857 Constitution, Article 11; and Wisconsin, 1847 Constitution, Article 12. Unless otherwise noted, all references to state constitutions in this chapter are from the NBER/​ Maryland State Constitutions Project, http://​www.sta​teco​nsti​tuti​ons.umd.edu/​index. aspx. The Oregon 1857 constitution is from Oregon State Archives: Transcribed 1857 Oregon Constitution, http://​reco​rds.sos.state.or.us/​ORS​OSWe​bDra​wer/​Rec​ordh​ tml/​9479​967. The Wisconsin 1848 constitution is from “Constitution of the State of Wisconsin,” Wisconsin Historical Society, https://​cont​ent.wisco​nsin​hist​ory.org/​digi​ tal/​col​lect​ion/​tp/​id/​71777. 12. Michigan, 1850 Constitution, Article 15, Sections 7 and 12. 13. This provision was repealed only in 1903. In 1913 it was reinstated for banks and then repealed again during the Great Depression. Ohio, 1851 Constitution, Art. 13, Sec. 3, Amend. 12 (1903), Amend. 65 (1913), and Amend. 109 (1937). 14. This provision was reiterated in California’s 1879 constitution and then repealed in 1930. California, 1849 Constitution, Art. 4, Sec. 36, 1879 Constitution, Art. 12, Sec. 3 and Amend. 203 (1930). 15. Pennsylvania, Constitution of 1874, Article 16, Sections 4, 6, and 7. 16. California, 1879 Constitution, Art. 4, Sec. 26; Art. 12, Sec. 3, 9, 11, and 12. 17. Wyoming, 1889 Constitution, Art. 10, Sec. 5. 18. For a discussion of the common-​law rule, see People v. Chicago Gas Trust, 130 Ill. 268 (1889), where the Illinois Supreme Court dissolved the Chicago Gas Trust on the grounds that holding stock in other companies was not a legal business purpose. 19. Controlling shareholders in one corporation could personally buy enough shares in another to secure control, but that method of consolidating two companies required the principals to devote a considerable proportion of their own wealth to the project. During the late nineteenth century, courts in some jurisdictions moved away from the strict unanimity rule, especially for transportation mergers that received state blessings, but considerable uncertainty remained until New Jersey amended its general incorporation law in 1888 to permit holding companies and facilitate mergers. William J. Carney, “Fundamental Corporate Changes, Minority Shareholders, and Business Purposes,” American Bar Foundation Research Journal 1980 (Winter 1980): 69–​132. 20. For example, Massachusetts’ 1870 general incorporation act created the office of Commissioner of Corporations, but this official seems to have been primarily concerned with collecting taxes from active corporations, and the office was merged with that of the Commission of Taxes in 1890. See Massachusetts General Court, “An Act concerning manufacturing and other corporations,” approved May 9, 1870; and “An Act relative to the offices of tax commissioner and commissioner of corporations . . .,” approved April 2, 1890. Unless otherwise noted, all statutes are from the session laws

158  Antimonopoly and American Democracy library in HeinOnline, https://​hei​nonl​ine.org/​HOL/​Index?index=​ssl​usst​ate&col​lect​ ion=​ssl. 21. Elizabeth Granitz and Benjamin Klein, “Monopolization by ‘Raising Rivals’ Costs’: The Standard Oil Case,” Journal of Law and Economics 39, no. 1 (1996): 1–​47. 22. For the development of the agreement, see Allan Nevins, Study in Power: John D. Rockefeller, Industrialist and Philanthropist (New York: Charles Scribner’s Sons, 1953), Vol. I, Ch. 21; Harold F. Williamson and Arnold R. Daum, The American Petroleum Industry: The Age of Illumination, 1859–​1899 (Evanston, IL: Northwestern University Press, 1959), 466–​70; and Ralph W. Hidy and Muriel E. Hidy, Pioneering in Big Business, 1882–​1911 (New York: Harper & Brothers, 1955), 40–​49. For the text of “The Standard Oil Trust Agreement,” see William W. Cook, “Trusts”: The Recent Combinations in Trade, Their Character, Legality and Mode of Organization . . . (New York: L. K. Strouse & Co., 1888), 78–​89. 23. Kansas Legislature, “An Act to declare unlawful trusts and combinations in restraint of trade and products, and to provide penalties therefor,” approved March 2, 1889. For an overview of state antitrust laws, see Morris D. Forkosch, Antitrust and the Consumer (Enforcement) (Buffalo, NY: Dennis, 1956), 220–​31, 412–​32; Henry R. Seager and Charles A. Gulick Jr. Trust and Corporation Problems (New York: Harper, 1929), 51, 339–​66. 24. For an overview of state quo warranto suits, see May, “Antitrust Practice and Procedure”; and Paul Nolette, “Litigating the ‘Public Interest’ in the Gilded Age: Common Law Business Regulation by Nineteenth-​Century State Attorneys General,” Polity 44 (July 2012): 373–​99. 25. State v. Standard Oil Co., 49 Ohio St. 137 (1892); Bruce Bringhurst, Antitrust and the Oil Monopoly: The Standard Oil Cases, 1890–​1911 (Westport, CT: Greenwood Press, 1979), ch. 1. 26. New Jersey’s 1875 general incorporation statute was more liberal than that of neighboring states and already in the 1880s a growing trickle of companies located elsewhere were taking out charters in the state. The influx attracted legislators’ notice and, seeking new sources of tax revenue, the state moved consciously in 1888 to increase New Jersey’s attractiveness as a corporate domicile for large out-​of-​state businesses. Charles M. Yablon, “The Historical Race: Competition for Corporate Charters and the Rise and Decline of New Jersey, 1880–​1910,” Journal of Corporation Law 32, no. 2 (2007): 323–​80; Christopher Grandy, “New Jersey Corporate Chartermongering,” Journal of Economic History 49, no 3 (1989): 677–​92. 27. Grandy, “New Jersey Corporate Chartermongering”; Henry N. Butler, “Nineteenth-​ Century Jurisdictional Competition in the Granting of Corporate Privileges,” Journal of Legal Studies 14 no. 1 (1985): 129–​66. 28. See, e.g., US Commissioner of Corporations, “Report,” House Doc. 165, 58th Cong., 3rd Sess. (Washington, DC: Government Printing Office, 1904), 40; William L. Cary, “Federalism and Corporate Law: Reflections upon Delaware,” Yale Law Journal 83, no. 4 (1974): 663–​705; Daniel A. Crane, “Antitrust Antifederalism,” California Law Review 96, no. 1 (February 2008): 1–​62. There is also a literature arguing that the chartermongering competition sparked a race to the top that improved regulatory

Antimonopoly and State Regulation of Corporations  159 efficiency. See especially Ralph K. Winter Jr., “State Law, Shareholder Protection, and the Theory of the Corporation,” Journal of Legal Studies 6, no. 2 (1977): 251–​92; and Roberta Romano, The Genius of American Corporate Law (Washington, DC: AEI Press, 1993). 29. Roberta Romano, “Law as a Product: Some Pieces of the Incorporation Puzzle,” Journal of Law, Economics, and Organization 1, no. 2 (1985): 225–​83. 30. Harwell Wells, “The Modernization of Corporation Law, 1920–​1940,” University of Pennsylvania Journal of Business Law 11 (2009): 573–​629. 31. Pennsylvania Legislature, “An Act supplementary to an act, entitled ‘An Act to provide for the incorporation and regulation of certain corporations,’ ” approved May 29, 1901; and “An Act authorizing corporations, organized for profit, to purchase . . . capital stock of . . . any other corporation,” approved July 2, 1901; Ohio Legislature, “An Act to amend section . . . 3256 of the Revised Statutes of Ohio,” approved May 6, 1902. 32. The counts are from Massachusetts, Report of the Committee on Corporation Laws (Boston: Wright & Potter, 1903), 157–​204. According to the report, the thirteen states that made mergers easier (at least for manufacturing corporations) were Alabama, Colorado, Connecticut, Delaware, Kentucky, Louisiana, Maryland, Missouri, Nevada, New York, Ohio, Pennsylvania, and Utah. The six that allowed corporate stockholding were Connecticut, Delaware, Maine, New York, Pennsylvania, and Wyoming. Ohio seems to have been categorized incorrectly. At the time of the report, it permitted corporate stockholding but had not revised its merger rules. 33. Paul v. Virginia, 75 U.S. 168 (1869) at 180–​82. See also Pembina Consolidated Silver Mining v. Pennsylvania, 125 U.S. 181 (1888) at 187–​88. States could not use their powers over corporations to interfere with interstate commerce, but that limitation was interpreted narrowly during this period. See Ruth H. Bloch and Naomi R. Lamoreaux, “Corporations and the Fourteenth Amendment,” in Corporations and American Democracy, ed. Lamoreaux and William Novak (Cambridge, MA: Harvard University Press, 2017), 268–​325 at 295–​96. 34. Arkansas, 1874 Constitution, Art. 12, Sec. 11. 35. California, 1879 Constitution, Art. 12, Sec. 15; Montana, 1889 Constitution, Art. 15, Sec. 11; Idaho, 1890 Constitution, Art. 11, Sec. 10; Kentucky, 1891 Constitution, Sec. 202; Utah, 1895 Constitution, Art. 12, Sect. 6; Arizona, 1912 Constitution, Art. 14, Sec. 5. 36. Massachusetts General Court, “An Act concerning foreign corporations having a usual place of business in this Commonwealth,” approved June 4, 1884; “An Act relative to the admission of certain foreign corporations to do business in this Commonwealth,” approved May 12, 1894; and “An Act Relative to Business Corporations,” approved June 17, 1903. 37. As did most other states. For a comprehensive summary of such provisions, see US Commissioner of Corporations, Report on State Laws concerning Foreign Corporations (Washington, DC: Government Printing Office, 1915), 49–​54. New Jersey, Delaware, and Nevada enacted retaliatory statutes that imposed the same constraints on other states’ corporations that were imposed on theirs (54–​56).

160  Antimonopoly and American Democracy 38. Most states made this point explicit. See US Commissioner of Corporations, Report on State Laws concerning Foreign Corporations, 145–​47. 39. New York Legislature, “An Act to amend the stock corporation law,” approved May 18, 1892. A version of this clause first appeared in “An Act in relation to stock corporations . . .,” approved June 7, 1890. The provision was explicitly applied to foreign corporations in “An Act to amend the stock corporation law . . .,” approved May 7, 1897. The same language would be repeated in the stock corporation act of 1909. See Thomas Gold Frost, A Treatise on the Business Corporation Law of the State of New York (Albany: Mathew Bender & Co., 1909), 568. 40. Ohio Legislature, “An Act to amend section . . . 3256 of the Revised Statutes of Ohio,” approved May 6, 1902. 41. F. A. Updyke, “New Jersey Corporation Laws,” American Political Science Review 7, no. 4 (1913): 650–​52; Seager and Gulick, Trust and Corporation Problems, 361–​65. 42. Georgia, 1877 Constitution, Art. 4, Sec. 2, Par. 4., https://​www.geor​giaa​rchi​ves.org/​ ass​ets/​docume​nts/​resea​rch/​1877_​G​eorg​ia_​C​onst​itut​ion.pdf. 43. Wyoming, 1889 Constitution, Art. 10, Sec. 8. 44. Arizona, 1912 Constitution, Art. 14, Sec. 15. 45. Washington, 1889 Constitution, Art. 12, Sec. 22; South Dakota, 1889 Constitution, Art. 17, Sec. 20, Amend. 4 (1896); Alabama, 1901 Constitution, Art. 4, Sec. 103; Oklahoma, 1907 Constitution, Art. 5, Sec. 44; New Mexico, 1911 Constitution, Art. 4, Sec. 38; Louisiana, 1913 Constitution, Sec. 190; and Louisiana, 1921 Constitution, Art. 19, Sec. 14. On the affidavits, see US Commissioner of Corporations, Report on State Laws concerning Foreign Corporations, 45, 93, 100. 46. Oklahoma, 1907 Constitution, Art. 9, Sec. 15 and 43; New Mexico, 1911 Constitution, Art. 11, Sec. 1, 6 and 11; Arizona, 1912 Constitution, Art. 14, Sec. 8 and 17. 47. Oklahoma, 1907 Constitution, Art. 2, Sec. 28, Art. 9, Sec. 19. 48. Oklahoma Corporation Commission, Corporation Commission Laws of Oklahoma, 1917 (Oklahoma City: Warden Co., 1918), 202–​3. 49. Massachusetts General Court, “An Act Relative to Business Corporations,” approved June 17, 1903, Sec. 70. 50. Illinois General Assembly, “An Act to require every foreign corporation doing business in this State to have a public office . . .,” approved May 26, 1897. This provision was later written into the state’s revised general incorporation act: “An Act in relation to corporations for pecuniary profit,” approved June 28, 1919, Sec. 94. 51. Pennsylvania General Assembly, “An Act Relating to business corporations,” approved May 5, 1933, Sec. 1014. 52. Sioux Remedy Co. v. Cope, 235 U.S. 197 (1914). In upholding the states’ right to exclude foreign corporations, the Court went back and forth on whether states could impose discriminatory licensing fees on foreign corporations. Compare, e.g., Lincoln Nat’l Life Ins. Co. v. Read, 325 U.S. 673 (1945); and Wheeling Steel Corp. v. Glander, 337 U.S. 562 (1949). 53. On the creation and purpose of the Charter Board, see Kansas Attorney General, Biennial Report (1899–​1900), 13–​14. On the Charter Board and the Klan, see Charles William Sloan Jr., “Kansas Battles the Invisible Empire: The Legal Ouster of the KKK from Kansas, 1922–​1927,” Kansas Historical Quarterly 40 no. 3 (1974): 393–​409.

Antimonopoly and State Regulation of Corporations  161 54. Vermont’s revenues from this tax were significantly less than Maine’s, but the point is that both states’ corporate tax revenues grew steeply over time. US Commissioner of Corporations, Taxation of Corporations, Part I—​ New England (Washington, DC: Government Printing Office, 1909), 35–​36, 41–​43, 46–​47, 77–​79, 81–​82. 55. US Commissioner of Corporations, Report on State Laws concerning Foreign Corporations, 16. 56. For an overview, see the six-​part study of the US Commissioner of Corporations, Taxation of Corporations, published over the years 1909–​1915. 57. Illinois Secretary of State, Biennial Report (1887–​1888), 1. 58. Illinois Secretary of State, Biennial Report (1905–​1906), 3, 134–​44. Illinois secured much greater revenues from its taxes on railroads and other franchise corporations, but these fees were large relative to the property taxes it secured from corporations more generally. In 1909, for example, they were almost three times as large, even though property taxes on corporations had also increased over time. US Commissioner of Corporations, Taxation of Corporations: Part III—​Eastern Central States (Washington, DC: Government Printing Office, 1911), 59. 59. On the importance of elected state attorneys general in the antitrust arena, see Nolette, “Litigating the Public Interest.” 60. My argument runs parallel to that of Elizabeth Sanders in Roots of Reform: Farmers, Workers, and the American State, 1877–​1917 (Chicago: University of Chicago Press, 1999). Sanders sees Western radicalism as driving reform at the federal level. On antimonopoly business groups, see Richard R. John, “Proprietary Interest: Merchants, Journalists, and Antimonopoly in the 1880s,” in Media Nation: The Political History of News in Modern America, ed. Bruce J. Schulman and Julian E. Zelizer (Philadelphia: University of Pennsylvania Press, 2017), 10–​35. 61. Nolette, “Litigating the ‘Public Interest,’ ” 395; Wayne D. Collins, “Trusts and the Origins of Antitrust Legislation,” Fordham Law Review 81, no. 5 (2013): 2279–​348 at 2327–​328. On the Pennsylvania suit, see Chester M. Destler, Roger Sherman and the Independent Oil Men (Ithaca, NY: Cornell University Press, 1967), 83–​193. 62. New York Attorney General, Annual Report (1889), 29; and (1891), 8–​9. All dates cited for the reports of state attorneys general and secretaries of state are for the year covered, not the year of publication. 63. New York Senate, Report of the Committee on General Laws on the Investigation Relative to Trusts (New York: Troy Press, 1888). 64. As noted above, the trust agreements obtained by the New York senate committee were republished in an appendix to Cook’s treatise on Trusts, and that apparently is where Watson read them. See Bringhurst, Antitrust and the Oil Monopoly, 12–​15. Watson’s “Amended Petition” is reprinted in William M. McKinney, The American and English Corporation Cases (Northport, NY: Edward Thompson Co., 1892), 36:2–​ 15. See also State v. Standard Oil Co., 49 Ohio St. 137 (1892). 65. May, “Antitrust Practice,” 510–​17; Nolette, “Litigating the Public Interest,” 384–​93; Collins, “Trusts and the Origins of Antitrust Legislation,” 2327–​328. 66. New York Senate, Report of the Committee on General Laws, 14. 67. New York Attorney General, Annual Report (1889), 29; and (1891), 8–​9, 26.

162  Antimonopoly and American Democracy 68. See the annual reports of the New York attorneys general for these years. 69. New York Senate, Report of the Committee on General Laws, 13; New York Senate, Journal (1888). 70. New York Legislature, “An Act in relation to stock corporations . . .,” approved June 7, 1890; and “An Act to amend the stock corporation law,” approved May 18, 1892. 71. New York Legislature, “An Act to prevent monopolies in articles of general necessity,” approved May 17, 1893; and “An Act to amend . . . ‘An Act to prevent monopolies . . .,’ ” approved April 15, 1896. For an overview of New York’s antitrust laws, see New York State Bar Association, Report of the Special Committee to Study the New York Antitrust Laws (1957), Appendix I, 1a–​14a. 72. New York Legislature, “Report of the Joint Committee of the Senate and Assembly Appointed to Investigate Trusts,” Report and Proceedings of the Joint Committee . . . (New York: Wynkoop Hallenbeck Crawford, 1897), 3–​39. 73. P. H. McCarren, “Minority Report,” in New York Legislature, Report and Proceedings, 40–​43. 74. Thomas J. Barry, “Minority Report,” in New York Legislature, Report and Proceedings, 45–​51. 75. New York Legislature, “An Act to prevent monopolies . . .,” approved May 7, 1897. 76. New York Attorney General, Report (1897), 23–​24, 29. 77. New York Legislature, “An Act to prevent monopolies . . .,” approved May 25, 1899. The bill passed the Senate with only two dissenting votes, observers reported, because it was unlikely to make a difference. See New York State Bar Association, Report of the Special Committee, Appendix I, 14a. 78. New York Attorney General, Annual Report (1900), 6–​7; (1901), 7–​8; (1902), 7–​8. 79. New York Attorney General, Annual Report (1909), 21–​22; (1911), 17–​18. 80. See “Van Wyck’s Reply Ready for Davies,” Atlanta Constitution, October 1, 1900, 1 81. The coal case was complicated by with a miners’ strike in Pennsylvania, by Roosevelt’s move (now as president) to create a commission to mediate the situation, and by the intervention of the Interstate Commerce Commission. The attorney general did not reject Hearst’s petition to proceed against the companies but rather postponed his response until the federal investigations were completed. Jackson revived the investigation in 1908 but another federal investigation again took precedence. New York Attorney General, Annual Report (1902), 6, 143, 445–​46; (1903), 42–​44, 198; (1904), 181, 531–​36; (1908), 92. 82. New York Attorney General, Annual Report (1904), 556–​60. 83. New York Attorney General, Annual Report (1906), 228–​32. 84. Ibid., 191–​95, 199–​204. 85. New York Attorney General, Annual Report (1907), 7–​8; (1908), 149. 86. New York Attorney General, Annual Report (1907), 44–​50. The ice prosecution was derailed by a nasty dispute between Jackson and William Travers Jerome, the district attorney for New York County, who did not want the case to proceed. Jackson details his side of the dispute in his Annual Report (1908), 52–​91, 155–​56, 715–​16. 87. New York Attorney General, Annual Report (1907), 51–​53; (1908), 92–​94.

Antimonopoly and State Regulation of Corporations  163 88. Jackson did, however, succeed in getting the US Supreme Court to uphold the constitutionality of a New York statute regulating the price of gas in New York City. These cases seem to have been part of a larger political fight between state officials the New York City machine that also disrupted the ice investigation. New York Attorney General, Annual Report (1907), 40–​41, 44–​47; (1908), 16–​23, 113. 89. Burrows v. Interborough Metropolitan Co., 156 F. 389 (1907); Attorney General of New York v. Consolidated Gas Co., 108 N.Y.S. 823 (1908); In re Attorney General, 110 N.Y.S. 186 (1908); Continental Securities Co. v. Interborough Rapid Transit Co., 165 F. 845 (1908); Continental Securities Co. v. Interborough Rapid Transit Co., 203 F. 521 (1913); and Continental Securities Co. v. Interborough Rapid Transit Co., 221 F. 44 (1915). 90. National Harrow Co. v. E. Bement & Sons, 47 N.Y.S. 462 (1897); and Sultan v. Star Co., 174 N.Y.S. 52 (1919). In another case, Alexandria Bay Steamboat Co. v. New York Cent. & H.R.R. Co, the plaintiff lost because the court decided the company involved did not have a monopoly. 45 N.Y.S. 1091 (1897). 91. The most notorious of these professional litigants was Clarence H. Venner, who repeatedly took on combinations organized by J. P. Morgan and other major financiers. For more on Venner, see J. A. Livingston, The American Stockholder (Philadelphia: J. B. Lippincott, 1958), 49–​55; John C. Coffee Jr., Entrepreneurial Litigation: Its Rise, Fall, and Future (Cambridge, MA: Harvard University Press, 2015), 34–​36; and Naomi R. Lamoreaux and Laura Phillips-​Sawyer, “Voting Trusts and Antitrust: Rethinking the Role of Shareholder Litigation in Public Regulation, from the 1880s to the 1930s,” Law and History Review 39, no. 3 (2021): 569–​600 at 582–​83, 589–​91. 92. Information on the attorney general’s budget comes from the annual appropriation bills enacted by the Illinois state legislature, available in the state’s session laws through HeinOnline. 93. Illinois Attorney General, Biennial Report (1885–​1886), 3. 94. Illinois Attorney General, Biennial Report (1889–​1890), 93. 95. Ibid., 34–​41; People ex. Rel. Peabody v. Chicago Gas Trust, 130 Ill. 268 (1889). See Laura Philips Sawyer, “Democratic Protest in an Age of Market Consolidation: A Case Study on the Chicago Gas Trust and the Illinois Antitrust Act of 1891,” unpublished conference paper (June 2017). 96. Illinois Attorney General, Biennial Report (1895–​ 1896), 26–​ 27. By contrast, New York’s relatively inactive attorney general already in 1890 had a budget of over $28,000. See the appropriations detailed in the New York session laws for 1890. 97. Illinois Attorney General, Biennial Report (1893–​1894), 94–​101; and (1895–​1896), 182–​95; Coquard v. National Linseed Oil Co., 171 Ill. 480 (1898); “Illinois Corporations in Court,” Paint, Oil and Drug Review 21 (January 15, 1896): 11. 98. See Moloney’s Biennial Reports for 1893–​1894 and 1895–​1896. 99. Note that the act applied to corporations “organized under the laws of this or any other State or country.” Illinois Legislature, “An Act to provide for the punishment of persons, copartnerships or corporations forming pools, trusts or combines . . .,” approved June 11, 1891.

164  Antimonopoly and American Democracy 100. Illinois Legislature, “An Act to amend . . . ‘An act to provide for the punishment of persons, copartnerships or corporations forming pools, trusts and combines . . .,’ ” approved June 20, 1893; and “An Act to define trusts and conspiracies against trade . . .,” approved June 20, 1893. 101. Illinois Attorney General, Biennial Report (1895–​1896), 19–​20. 102. Illinois Legislature, “An Act to amend . . . ‘An act to provide for the punishment of persons, copartnerships or corporations forming pools, trusts and combines . . .,’ ” approved June 10, 1897; Illinois Attorney General, Biennial Report (1901–​1902), 15–​18. 103. Illinois Legislature, “An Act to amend . . . An act to provide for the punishment of persons, copartnerships or corporations forming pools, trusts and combines . . .,” approved June 20, 1893. 104. Illinois Attorney General, Biennial Report (1897–​1898), 4–​5; and (1899–​1900), 4. 105. Connolly v. Union Sewer Pipe Co., 184 U.S. 540 (1902) at 565. This decision seems to have had much to do with the particular circumstances of the case because the Court upheld or declined to invalidate other state antitrust statutes with similar provisions. See May, “Antitrust Practice,” 527–​30. 106. People ex re. Akin v. Butler St. Foundry & Iron Co., 201 Ill. 236 (1903). 107. Illinois Attorney General, Biennial Report (1901–​ 1902), 15–​ 18; and (1903–​ 1904), 8–​9. 108. Illinois House of Representatives, Journal (1901), 258, 345–​46, 615; (1903), 124, 142, 172, 399, 505, 722–​23, 798, 801; and (1905), 316–​17, 482, 579–​80, 626–​27, 643, 680, 682, 691–​92, 775, 1082, 1119–​20, 1277; Illinois Senate, Journal (1905), 502, 652, 948, 953, 1014, 1058. 109. Illinois Legislature, “An Act to amend section 7a . . .,” approved May 25, 1907; John T. Soma, “Enforcement under the Illinois Antitrust Act,” Loyola University of Chicago Law Journal 5 (Winter 1974): 25–​44. 110. Illinois Attorney General, Biennial Report (1901–​1902), 19. 111. Ibid., 18–​19 112. Illinois Attorney General, Biennial Report (1903–​1904), 10; (1905–​1906), x; and (1907–​1908), xxxiii. 113. These amounts, again from the session laws, do not include additional appropriations that the legislature earmarked for specific purposes and therefore could not be used for antitrust prosecutions. 114. Illinois Attorney General, Biennial Report (1907–​1908). 115. Although the anti-​alcohol movement had an antimonopoly dimension, in Illinois attention to the former seems to have distracted from the latter. As will be discussed below, however, this effect was much less present in Kansas. 116. Illinois General Assembly, “An Act in relation to corporations for pecuniary profit,” approved June 28, 1919. 117. It is impossible to know the extent to which private parties took advantage of the act, but two cases reached the Illinois Supreme Court during the next two decades: Hall v. Woods, 325 Ill. 114 (1927); and Moody & Waters Co. v. Case-​Moody Pie Corp., 354 Ill. 82 (1933). Shareholders also challenged combinations on other grounds. For

Antimonopoly and State Regulation of Corporations  165 a discussion of the importance of private enforcement for competition policy, see Lamoreaux and Phillips-​Sawyer, “Voting Trusts and Antitrust.” 118. In that particular case the merger did not meet the standard. Moody & Waters Co. v. Case-​Moody Pie Corp., 354 Ill. 82 (1933) at 96–​97; International Shoe Co. v. FTC, 280 U.S. 291 (1930). 119. According to Jonathan W. Singer, Texas brought at least fourteen antitrust-​ related actions against oil companies over the decades before 1940. See Broken Trusts: The Texas Attorney General versus the Oil Industry, 1889–​1909 (College Station: Texas A&M University Press, 2002), 5. See also Joseph A. Pratt, “The Petroleum Industry in Transition: Antitrust and the Decline of Monopoly Control in Oil,” Journal of Economic History 40, no. 4 (1980): 815–​37; Pratt and Mark E. Steiner, “‘An Intent to Terrify’: State Antitrust in the Formative Years of the Modern Oil Industry,” Washburn Law Journal 29, no. 2 (1990): 270–​89; William R. Childs, The Texas Railroad Commission: Understanding Regulation in America to the Mid-​Twentieth Century (College Station: Texas A&M University Press, 2005). 120. Piott, Anti-​Monopoly Persuasion, ch. 6; Nollette, “Litigating the ‘Public Interest,’ ” 392–​93. 121. Piott, Anti-​Monopoly Persuasion, 110–​11. 122. Kansas Legislature, “An Act to declare unlawful trusts and combinations in restraint of trade and products . . .,” approved March 2, 1889; and “An Act defining and prohibiting trusts . . .,” approved March 8, 1897. 123. Smiley v. Kansas, 196 U.S. 447 (1905). 124. Jack v. Kansas, 199 U.S. 372 (1905); Kansas Attorney General, Biennial Report (1905–​ 1906), 4–​5. 125. Kansas Attorney General, Biennial Report (1901–​1902 through 1909–​1910). 126. The act imposed analogous obligations on sheriffs, deputy sheriffs, constables, mayors, marshals, police judges, and police officers, and enabled private parties to sue for damages under the law. See also Kansas Legislature, “An Act to declare unlawful trusts and combinations in restraint of trade and products . . .,” approved March 2, 1889; and “An Act Defining and Prohibiting Trusts,” approved March 8, 1897. 127. Kansas Attorney General, Biennial Report (1905–​1906), 27. 128. Kansas Attorney General, Biennial Report (1911–​1912), 12. 129. Kansas Attorney General, Biennial Report (1919–​1920), 3. 130. Kansas Attorney General, Biennial Report (1917–​1918), 3. 131. “Chiles Crittendon Coleman,” https://​ag.ks.gov/​about-​the-​off​i ce/​hist​ory; Kansas Attorney General, Biennial Report (1905–​1906). 132. “John Shaw Dawson,” https://​ag.ks.gov/​about-​the-​off​i ce/​hist​ory; Kansas Attorney General, Biennial Report (1911–​1912). 133. Kansas Attorney General, Biennial Report (1911–​1912), 12. 134. See Kansas Attorney General, Biennial Report (1911–​1912 through 1925–​1926). 135. Kansas Attorney General, Biennial Report (1913–​1914), 37–​39. 136. Kansas Attorney General, Biennial Report (1919–​1920), 6–​7; and (1921–​1922), 6–​7.

166  Antimonopoly and American Democracy 137. Kansas Legislature, “An Act relating to trusts, monopolies, unlawful combinations . . .,” approved February 24, 1919. See also “An Act to prohibit discriminations between different sections, communities, or localities . . .,” approved March 4, 1905; “An Act relating to unlawful monopolies, trusts and combinations in restraint of trade . . .,” approved March 12, 1909; and “An Act relating to trade, and to prevent unfair discriminations and unfair trade . . .,” approved March 22, 1915. The legislature also amended the state’s general incorporation laws to bolster the charter board’s enforcement powers and often to raise fees: “An Act relating to private corporations . . .,” approved March 5, 1901; “An Act concerning private corporations,” approved March 7, 1903; “An Act relating to private corporations . . .,” approved March 10, 1907; “An Act to amend section 23 of ­chapter 140 . . . ,” approved February 2, 1911; “An Act providing for the forfeiture of the charters of dormant and delinquent corporations . . .,” approved March 10, 1911; “An Act prescribing a penalty against corporations . . .,” approved March 13, 1911; and “An Act to require corporations to file annual reports . . .,” approved February 24, 1913. 138. Piott, Anti-​Monopoly Persuasion, ch. 7. 139. Ibid., 148. 140. Charles West, “President’s Annual Address,” Annual Meeting of the National Association of Attorneys General (1911), 3–​4. 141. See the Annual Meeting of the National Association of Attorneys General (1913 and 1915). 142. See Mark Lawrence Schrad, Smashing the Liquor Machine: A Global History of Prohibition (New York: Oxford University Press, 2021). 143. A number of these cases reached the US Supreme Court. See, e.g., Waters-​Pierce Oil Co. v. Texas, 177 U.S. 28 (1900); Connolly v. Union Sewer Pipe Co., 184 U.S. 540 (1902); National Cotton Oil Co. v. Texas, 197 U.S. 115 (1905); Smiley v. Kansas, 196 U.S. 447 (1905); Waters-​Pierce Oil Co. v. Texas, 212 U.S. 86 (1909) and 212 U.S. 112 (1909); Hammond Packing Co. v. Arkansas, 212 U.S. 322 (1909); Standard Oil Co. of Kentucky v. Tennessee, 217 U.S. 413 (1910); Standard Oil Co. of Indiana v. Missouri, 224 U.S. 270 (1912); International Harvester Co. of America v. Kentucky, 234 U.S. 216 (1914); International Harvester Co. v. Missouri, 234 U.S. 199 (1914). 144. International Harvester Co. v. State of Missouri, 234 U.S. 199 (1914) at 213. 145. In addition to Texas, International Harvester had to quit Arkansas and Kentucky for a number of years and fought lengthy legal battles to avoid ouster in Kansas and Missouri. Cyrus McCormick, The Century of the Reaper (Boston: Houghton Mifflin, 1931), 166–​67. 146. A final example to underscore the point: Kansas’s high court conditioned International Harvester’s continued presence in the state on its abandonment of anticompetitive practices like exclusive-​dealing contracts and price discrimination. Missouri’s settlement was similar. In several other states, litigation led either to ouster or to the company’s withdrawal from the state, leaving local markets open to competitors. These developments occurred three to four years before International Harvester entered into a consent decree with the federal government in 1918 that forbade the company from contracting with more than one dealer in each town.

Antimonopoly and State Regulation of Corporations  167 International Harvester’s share of the market for harvesting machines fell from 77 percent in 1911 to 67 percent in 1919 to 64 percent in 1923. In other words, most of the decline occurred before the federal consent decree could have had any effect. These details are from Simon N. Whitney, Antitrust Policies: American Experience in Twenty Industries (New York: Twentieth Century Fund, 1958), vol. II, ch. 17. Whitney nonetheless paid little attention to the states’ efforts.

5 American Antimonopoly and the Rise of Regulated Industries Law William J. Novak

Introduction Between the end of Reconstruction and the start of the New Deal, the American system of public regulation was transformed, with major implications for the modern American economy.1 The triggering mechanism for this modern transformation of law and economics was an age-​old American preoccupation—​antimonopoly. Amid a wave of unprecedented industrial consolidation and corporate concentration, a resurgent American antimonopoly tradition galvanized a broader movement for the “social control” of corporations, trusts, and American business writ large. The subsequent emergence of regulated industries law aimed to create a more public, accountable, and democratic American political economy. The entering wedge of this regulatory revolution was the invention of public utility law—​a history recounted in an earlier Tobin Project volume on Corporations and American Democracy.2 The achievements of the progressive public utility movement were real and significant. A burgeoning law of public service corporations generalized concepts of public interest, public necessity, duty-​to-​serve, and non-​discrimination, filling the gap in corporate regulation created after the decline of nineteenth-​century common-​law and state charter controls.3 The public utility idea inaugurated a series of bold experiments in corporate and industrial regulation that culminated in comprehensive, commission-​based oversight and control. Public utilities law was antimonopoly law. As Alfred Chandler argued, railroads were “the nation’s first big business,” ushering in a large-​scale transformation in corporate organization, finance, and management.4 In turn, railroad and utility regulation cast the die for the subsequent control of monopolies both natural as well as unnatural. William J. Novak, American Antimonopoly and the Rise of Regulated Industries Law In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0005

American Antimonopoly and Regulated Industries Law  169 But as popular concern about corporate power, economic coercion, and industrial injustice moved beyond the particular cases of common carriers and public utilities like railroads and grain elevators, the antimonopoly tradition expanded again to engage an even wider swath of American business, commerce, and industry. When the original innovations of public utility merged with this broadened antimonopoly impulse, a modern law of regulated industries was born. From the state railroad commissions to the Interstate Commerce Commission; from the US Industrial Commission to the Bureau of Corporations; from the Sherman Antitrust Act to the Federal Trade Commission; from state public utility commissions to the Federal Radio Commission and the Federal Power Commission, the period between Reconstruction and the New Deal witnessed the rise of a new political-​ economic agenda centered on the administrative and regulatory control of an ascendant monopoly capitalism. Arthur T. Hadley was among the first to build out from the special case of Railroad Transportation (1885) to the more general problem of corporate concentration in what he termed “industrial monopolies.” Hadley’s baseline was the original public, state-​created regime of “legal” or “natural” monopolies, including transportation service, postal service, and municipal utilities—​all of which generated “most fruitful experiments in legislative control.”5 But by 1886, he noted with alarm the new problem of “private monopolies” where “business interests . . . made competition practically impossible,” endangering “public rights.” “There is nothing which the average citizen distrusts and fears so much as the power of great corporations,” Hadley claimed, especially those corporations with “a virtual monopoly in their own line of business” at odds with “our theories of industrial freedom.”6 Hadley acknowledged the proliferation of late nineteenth-​century exposés of monopolistic practices beyond traditional categories of legal, natural, or utility monopolies, citing John C. Welch’s “Standard Oil Company” (1883), Henry Demarest Lloyd’s “The Story of a Great Monopoly” (1881) and “Lords of Industry” (1884), and Henry George’s writings on land monopoly.7 To reckon with such worrisome new monopolies and monstrosities, Welch resorted to the image of the devil himself—​Monster and Fiend—​from Milton’s Paradise Lost: “Whence and what art thou execrable shape?”8 Henry Demarest Lloyd and Henry George concentrated on the more secular and ancient problem of wealth against commonwealth and the threat that private monopolies posed to historic public rights.9

170  Antimonopoly and American Democracy As corporate concentration and combination became a pattern beyond railroads, in the economy at large, Hadley advocated extending the “public use” and “right to regulate” rationales of public utilities law to new industrial and factory monopolies.10 One of the more original economic thinkers of the era, Henry Carter Adams, joined Hadley in that quest. Adams was brought to the Interstate Commerce Commission by its first chairman Thomas Cooley to produce important statistical and accounting reports on railways and public utilities. From that formative transportation and utilities experience, Adams extracted a comprehensive critique of the “evils” of laissez-​faire as well as a commitment to what he termed “industrial responsibility” in a “truly democratic industry.” In his classic essay, “The Relation of the State to Industrial Action,” Adams zeroed in on the pressing problem of “private” and “industrial monopoly,” which he defined as “a business superior to the regulating control of competition.” Like Hadley, Adams noted the deep roots of antimonopoly sentiment: “The existence of monopolies . . . has always been regarded as an infringement of personal rights, [and] free people have always revolted against the assumption of peculiar privileges” as “odious, grasping, and tyrannous.” But while traditional monopolies flowed mainly from royal prerogative and charter privileges, new private and industrial monopolies seemed to be emerging from the very “conditions of modern business activity” itself, especially “the law of increasing return which gives the large producer the advantage.” But such modern industrial monopolies now fueled the same pervasive, popular “distrust.” “The public is deprived of its ordinary guarantee of fair treatment,” Adams argued, and monopoly privileges are “perverted from their high purpose to serve private ends.”11 Adams’s solution—​hewn from his hands-​on ICC experience—​was to restore social harmony by “extending the duties of the state.” The question of the era was “whether society shall support an irresponsible, extralegal monopoly, or a monopoly established by law and managed in the interests of the public.”12 Of course, Hadley and Adams were only two voices, albeit important ones, in the massive antimonopoly regulatory sentiment that engulfed the late nineteenth century. By 1901, Fanny Borden had compiled a remarkable bibliography on “Monopolies and Trusts in America,” which contained over five hundred entries covering everything from Conferences, Legislation, Public Ownership, and Interstate Commerce to Coal, Coffee, Flour, Milk, Mining, Nails, Newspapers, Oil, Railways, Sugar, Telegraph, and Tobacco.13 By 1908, Chicago’s John Lewson had compiled a digest of over 450 cases on

American Antimonopoly and Regulated Industries Law  171 “monopolies and restraints of trade,” with a further listing of over a hundred state constitutional and statutory provisions with regard to monopoly and antitrust. As Lewson described this prodigious output, “The investigator of the trust problem finds himself in a maze of Legislation, Case-​Law and Trust literature. About thirty states have legislated directly on the subject of monopolies, [and] almost seven hundred authors have made important contributions on various phases of the trust problem.”14 This veritable legal and political obsession with the so-​called monopoly problem hastened the case for regulation beyond transportation and utilities to the whole of American political economy. Two things are especially noteworthy about this resurgence of regulatory antimonopoly. First, in keeping with the deepest roots of American antimonopoly in the revolutionary traditions described by Richard John and Richard White in earlier chapters in this volume, late nineteenth-​century antimonopoly resonated with distinctly political and democratic themes. American antimonopoly was first and foremost a question of the democratic distribution of power and authority in a supposedly self-​governing republic. Monopolies and new concentrations of private and industrial economic power were seen as potential threats to democracy itself—​threats to self-​rule and the democratic control over life, liberty, and happiness as exercised by citizens, households, producers, and proprietors.15 Agglomerations of private economic authority in a rapidly industrializing economy were viewed as new sources of private coercion and economic domination—​a “new feudalism”—​that upended the existing balance of socioeconomic power, exacerbated inequality, and distorted and corrupted democratic political processes.16 Senator John Sherman introduced the Sherman Antitrust Act in 1890 in just these terms as nothing less than a new political “bill of rights” and a democratic “charter of liberty.” Alluding to “the monopolies and mortmains of old,” Sherman drew attention to the new “inequality of condition, of wealth and opportunity, that has grown within a single generation out of the concentration of capital,” wherein “these combinations . . . reach out their Briarean arms to every part of the country.” Sherman conjured threats of general social disorder and “kingly prerogative”: “If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade, with power to prevent competition and to fix the price of any commodity.”17

172  Antimonopoly and American Democracy This broad political and social-​democratic perspective on antitrust continued to drive antimonopoly policymaking through the long progressive period. The Sherman Act was a super-​statute. “A charter of freedom,” Charles Evans Hughes called it, “The act has a generality and adaptability comparable to that found . . . in constitutional provisions.”18 Louis Brandeis continued to endorse such a broad interpretation even after the Standard Oil and Tobacco Cases in 1912: “What does democracy involve? What does liberty involve? Not merely political and civil and religious liberty, but industrial liberty also.” Brandeis contended that “The will of the American people as expressed in the Sherman Law” was aimed precisely at the anti-​democratic character of “private monopoly”—​a “power in this country of a few men so great as to be supreme over the law.”19 As Lina Khan has observed, “Brandeis and many of his contemporaries feared that concentration of economic power aids the concentration of political power, and that such private power can itself undermine and overwhelm public government.”20 Second, as should be obvious given the direct links with public utility and railroad regulation, this antimonopoly moment was about much more than antitrust enforcement or “break ’em up” trust-​busting.21 Rather, beyond the economics of monopoly or “the curse of bigness” per se, it is important to view this modern antimonopoly movement in broader historical context as part of a more omnibus economic reform effort to extend democratic regulatory control over a larger swath of American business and industry. Original American antitrust was thus of a piece with other expanding techniques, tools, and technologies of police power, administrative regulation, public utility law, and an emerging law of unfair competition and fair trade. Indeed, it was the way police power, public utility, unfair competition, and antitrust converged that generated the template for a modern law of regulated industries. American antitrust and competition policy, properly construed, was confined neither to negative economic dialectics nor to narrow common-​law limitations. Rather, it was a crucial component in a larger and more positive public policy agenda—​the movement for the social control of business. As Edward Adler put it in one of the pioneering articles in this tradition, “The law of railroads, shipping, banking, corporations, partnership, brokerage, trade marks, ‘unfair competition,’ ‘restraint of trade,’ ‘monopoly,’ and related subjects has been much discussed, but little attention has been devoted in this country to a study of the things of which all these particular subjects are commonly but phases,—​the doing of business.”22 Fueled by a re-​energized American antimonopoly tradition, the economic regulatory

American Antimonopoly and Regulated Industries Law  173 agenda of the long Progressive Era was devoted to this more omnibus and encompassing cause—​the social control of business writ large.

Public Utility and Antimonopoly Richard T. Ely, an early and impassioned advocate of institutional economics, first started writing seriously about monopoly and the trust problem in the 1880s.23 Indeed, monopoly was the predominant topic in a series of Baltimore Sun articles that he compiled for his 1888 Problems of To-​Day: A Discussion of Protective Tariffs, Taxation, and Monopolies. Ely’s presentation described three original features of the late nineteenth-​century version of the American antimonopoly. First, the topic of monopoly was understood as of “tremendous practical importance,” or, as Ely put it, “No problem of to-​day is so pressing.” Second, the problem of monopoly was presented not as an isolated, technical problem of law and economics, but as a social problem entangled in the entirety of American political economy. Ely viewed “the general growth of monopoly,” for example, as both “a cause and a consequence” of renewed attention to protectionism as well as the labor question.24 Finally, for Ely, antimonopoly was part and parcel of the historic development of the modern public utility idea. Indeed, Ely introduced his examination of monopoly with a discussion of Western Union and the possibility of a “government telegraph,” and elaborated it further with chapters on the gas supply, street railroads, water supply, electric lights, railroad consolidation, and public roads and canals.25 Ely grounded his approach in America’s long antimonopoly tradition. Ely first broached the trust question per se—​“monopoly in its most concentrated form”—​through a rumination on Henry George and land monopoly, highlighting “the way in which our public domains and empires of valuable lands have been conferred on private corporations.” He endorsed “more vigorous efforts . . . to guard the interests of the public against land plunderers.”26 Here he drew on the age-​old theme of the private corruption of the public interest. Ely decried “government by special interests” and the private “lobbies that exist everywhere,” concluding, “government is created to promote the general welfare, and when it is used to advance special interests . . . it is perverted from its original purpose.”27 Ely amplified this traditional antimonopoly and anti-​corruption framework, however, by incorporating developments in the emerging law of

174  Antimonopoly and American Democracy public utilities. Before distinguishing between so-​called natural from artificial monopolies, Ely introduced the prior significance and normative implications of the all-​important public-​private distinction: “The post-​office is a public monopoly and is a national blessing. The telegraph is a private monopoly, and the fact that it is so is nothing less than a national calamity. Private monopolies are odious.” While Ely viewed public monopolies as key to civilization and “productive of vast benefits,” private monopolies were “contrary to the spirit of the common law and of American institutions”—​ “a perpetual source of annoyance and irritation.”28 Concerns about public utility preoccupied Ely: “A correct course of action” was predicated upon that “public spirit that leads people to reflect on the public welfare”: considering “measures from the standpoint of the greatest good to the greatest number,” wherein “public goods and public property are watched with jealous care” and where “public enemies are exposed.”29 Ely’s solutions and remedies to the problem of monopolies both natural and artificial followed the state interventions and public regulations endorsed by public utility reformers. For natural monopolies, Ely recommended government ownership and in some cases government operation. For other monopolies, Ely urged (in addition to the reform of tariff law and patent law) the reform of the law of private corporations and the establishment of state and federal bureaus of corporations. And for the effects of monopoly on the larger distribution of wealth in America, Ely proposed the regulation of bequests and inheritances, through taxation and other measures, so that the “vast fortunes may gradually be broken up and wealth more widely diffused.”30 The close connection between public utility regulation and antimonopoly and antitrust was even more pronounced in some of the distinctly legal texts that addressed the antimonopoly problem at the turn of the century. Two of the great innovators in the American law of public utility were Joseph Henry Beale (whose work on the law of hotels, innkeepers, and railroad rate regulation was formative) and Bruce Wyman (Beale’s frequent coauthor and one of the founders of modern American administrative law). In a pioneering article entry on “Monopolies” in the Cyclopedia of Law and Procedure, Beale and Wyman together established the conceptual and practical continuity between early corporate charter regulation, the public utility idea, and modern antimonopoly and antitrust.31 After a general introduction on medieval franchises and patents of monopoly, Beale and Wyman divided the modern monopoly problem into two categories: monopolies created by franchises and monopolies created by combinations. Like Ely’s

American Antimonopoly and Regulated Industries Law  175 original classification of public and private monopolies, Beale and Wyman’s first category—​monopoly by state or legislative franchise—​acknowledged the deep historical roots of antimonopoly in an established law of public service corporations and public utilities. Beale and Wyman canvassed about one thousand cases across various jurisdictions dealing with such franchise monopolies classified according to four public concerns: (1) Public Health (e.g., noxious waste removal, slaughterhouses); (2) Public Safety (e.g., skilled employments, fiduciary businesses, the sale of liquor); (3) Public Institutions (e.g., schools and public works); and (4) Public Services (e.g., transportation and public utilities per se). Here they underscored the earlier state regulatory and administrative traditions that still animated public policy concern about the “trust” problem and the concentration of industry in the late nineteenth century. In contrast to conventional wisdom about a common-​ law or free-​ market baseline, turn-​ of-​ the-​ century lawyers, judges, and economists situated new trusts, monopolies, and holding companies directly within the well-​established frameworks of earlier American regulatory and antimonopoly traditions. As Beale and Wyman concluded about monopolies created by private combination rather than public franchise: “Any scheme to corner the market by getting control of the available supply is illegal; and so all contracts made in promotion of such a scheme are unenforceable. Whatever device may be used to get control of supplies, whether by option or by lease may be held to have the taint of monopolization if the intent is to regain control of the market thereby.”32 While the distinction between natural and artificial (or public and private) monopolies remained crucial to antimonopoly thought and policymaking in this period, there was also a simultaneous movement to apply public utility models and remedies to the entire range of monopoly and trust problems. Bruce Wyman was once again in this avant-​garde. In his important treatise Control of the Market: A Legal Solution of the Trust Problem (1911), Wyman made the case for explicitly extending the public utility solution to monopolies and trusts. Favoring the robust regulation of the trusts by law rather than their destruction through the disaggregation of capital, Wyman turned to historic examples from the law of public service corporations, public employment, and public utility. “I have come to believe in the control by the State of all businesses which have outgrown the regulation of competition,” Wyman argued, and “all businesses which have a virtual monopoly . . . are so affected with a public interest as to be within the class of callings which are considered public employments.”33 Wyman

176  Antimonopoly and American Democracy accused trusts and monopolies of pursuing predatory competition under cover of a law of private business. In response, he advocated extending to such companies and corporations the substantive regulatory standards of public utility law: “One must serve all that apply without exclusive conditions, provide adequate facilities to meet all the demands of the consumer, exact only reasonable charges for the services that are rendered, and between customers under similar circumstances make no discriminations.” Wyman saw in these hard-​fought public utility standards of equal access, adequate services, reasonable charges, and non-​discrimination powerful legal and regulatory tools to bring to bear anew on the problem of the trusts. He argued for the “immediate extension” of the “law of public employment” to cover the industrial trusts.” If public utility law were enforced against monopolies and trusts, Wyman predicted, “a solution to the problem would be found.”34 While Wyman’s approach to trusts as wholesale public utilities was never fully adopted, the public utility model remained a powerful weapon in the fight against monopoly. The most important manifestation of this influence was the rapid and widespread appearance of state public utility commissions, which moved well beyond the confines of the original railroad commissions to more vigorously police utility monopolies. By the beginning of the twentieth century, public utilities—​providing cities and individuals with water, gas, electricity, streetcars, and other public services—​proliferated across the United States. Given the lessons learned about discriminatory rates and inadequate services in railroading, these new utilities also came under increasingly public scrutiny for monopolistic and unfair trade practices. In response, by 1928, every state (excluding Delaware and the District of Columbia) created a public utility commission. These commissions were vested with considerable administrative and regulatory power. They could hire staff, conduct valuations of utility property, fix rates of service, establish standards for the quality of service, impose uniform accounting standards, require reports from the utilities at regular intervals, issue certificates of convenience and necessity that controlled the construction or expansion of utilities, and investigate unjust and discriminatory rates either on the complaint of the public or on its own initiative. The proliferation of state public utility commissions was a powerful example of the pervasive progressive assumption that government needed to be deeply involved in the management of a large segment of the economy—​especially in the case of natural monopolies.

American Antimonopoly and Regulated Industries Law  177 By the beginning of the twentieth century, the need to hold utilities accountable and to ensure that their actions reflected public preferences and furthered the public interest was unquestioned. Privately owned public utilities, which typically operated under the terms of municipally or state-​ granted franchises, were considered quintessential natural monopolies. With tremendous fixed costs and little competition, reformers worried that, left unregulated, such utilities would undermine the public interest by charging exorbitant and discriminatory prices (like the railroads on which they were modeled). In consequence, nearly every single state established public utility commissions to regulate virtually every aspect of such natural monopolies. As one commentator noted in 1906, “No one now, conservative or radical, stands for unregulated monopoly, while all thinkers and writers on the subject recognize public services as necessary and natural monopolies.”35 The variety and comprehensiveness of public utility regulation is aptly illustrated by something called the Bonbright Utility Regulation Chart.36 Too large and unwieldy to be reproduced in this volume, the chart compiled by Bonbright & Company in 1928 provided more than forty data points on each state utility commission then existing in the United States. The chart described the structure of each commission—​the number of members, whether elected or appointed, the length of tenure, salaries, procedures for removal from office, and the specific courts to which aggrieved parties might appeal decisions of the commission. It identified the specific kinds of utilities under each commission’s jurisdiction, listing no fewer than nine categories (electric light, heat and power, gas, street railway, inter-​urban railway, motor vehicles, water, telephone and telegraph, pipeline, railroad). It evaluated each commission’s powers over electric and gas companies on nineteen different criteria, including utility property valuation, ratemaking, discriminatory rates, terminable or indeterminate permits, investigations initiated either by complaint or by the commission itself, certificates of convenience and necessity, accounting, capitalization and securities, and consolidations and mergers. The chart also detailed the specific reporting requirements for electric and gas companies and the commissions’ authority over municipal electric plants. But whatever might be said for the Bonbright Utility Regulation Chart’s individual data points, the most striking fact about it was its mere existence. It was indicative of a political economy fundamentally committed to the extension of public control over monopolistic enterprises. Laws imposing statewide control over at least part of the public utility industry were the product,

178  Antimonopoly and American Democracy not of a small group of radicals operating at a particular moment in a single legislature, but of the considered decisions of nearly every American state legislature over a period of decades. The debate over the need to subject monopolistic utilities to government regulation and the best means of doing so was had over and over again in this period, and each time the debate ended with the creation of a statewide administrative commission with expansive regulatory powers.

Unfair Competition and Antimonopoly The link between the public utility movement and the antimonopoly movement’s focus on new “artificial” combinations and concentrations was clear. The public utility idea stood opposed to such unregulated private agglomerations of power and authority. But turn-​of-​the-​century American antimonopoly had another important dimension beyond the utility tradition that was just as central to the development of modern regulated industries law. That was the law of unfair competition. As early as the original formation of the Interstate Commerce Commission—​something of a national culmination of the first wave of public utility regulation—​there existed a curious mixture of traditional antimonopoly sentiment together with a growing concern with general corporate corruption and trade practices long recognized as “unfair.” As Laura Phillips-​Sawyer has most recently reminded us, a concern with “fair trade” was at the center of early twentieth-​century debates over antimonopoly and antitrust.37 Even at the first stages of public utility regulation—​with the invention of state railroad commissions—​the idea of railroads as common carriers and publicly regulated utilities was entangled with both antimonopoly and unfair trade rhetoric and policymaking. New York formed the Hepburn Committee in 1879 as a response to popular agitation ranging from the Chamber of Commerce to the Anti-​Monopoly League to Tammany Hall, which joined forces to attack “Alleged Abuses in the Management of Railroads Chartered by the State of New York.” The “alleged abuses” highlighted not just problems of scale or concentration, but many other worrisome corporate practices, including discriminatory rates, special privileges, stock manipulation, secrecy, public injury, and even workers’ injuries on New York’s public highways.38 Nationally, the movement for the establishment of the ICC in 1887 began with a similar litany of eighteen railroad corporate abuses that fostered

American Antimonopoly and Regulated Industries Law  179 monopoly, enriched favorites, and obstructed free competition: high rates, discriminatory rates, secret special rates, rebates, drawbacks, concessions, favoritism, secrecy, speculation, dishonest agents, privileged passes, watered stock, extravagant and wasteful management, among other evils.39 Corrupt trade practices and unfair competition played key roles in the pioneering development of regulatory and administrative control over America’s emergent monopolies. The Sherman Antitrust Act, of course, was passed a mere three years after the Interstate Commerce Act by a nearly unanimous Congress, famously declaring illegal “every contract, combination in the form or trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.” It also sweepingly imposed penalties on “every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States.” And the same mixture of concern over trusts, corruption, inequality, economic concentration, corporate control, public utility, and unfair competition dominated the original legislative history. Senator John Sherman introduced the bill by explicitly citing the broad powers of an early American state regulatory regime in which antimonopoly was about much more than the common-​law restraints of trade (to say nothing of business efficiency). Sherman introduced a range of state case law that illustrated the scope of the current problem as well as the feverish efforts of state officials to respond. He cited at length Michigan Supreme Court chief justice Champlin Sherwood in a recent case involving the Diamond Match Company. Sherwood deemed the enterprise of Diamond Match in Michigan to be “an unlawful one” and the contract at issue in this case as void “against public policy.” But it was Sherwood’s broad perspective on antimonopoly that animated Sherman’s efforts to now bring to the national level some version of the common-​law and police powers used by states to regulate and control excessive corporate powers of “the cotton trust, the whisky trust, the sugar-​refiners’ trust, the cotton-​bagging trust, the copper trust, the salt trust, and many others”: Monopoly in trade, or in any kind of business in this country, is odious to our form of government. It is sometimes permitted to aid the Government in carrying on a great public enterprise or public work under governmental control in the interest of the public. The tendency is, however, destructive of free institutions and repugnant to the instincts of a free people, and contrary

180  Antimonopoly and American Democracy to the whole scope and spirit of the Federal Constitution, and is not allowed to exist, under express provision in several of our State constitutions. Indeed, it is doubtful if free government can long exist in a country where such enormous amounts of money are allowed to be accumulated in the vaults of corporations, to be used at discretion in controlling the property and business of the country against the interests of the public and that of the people for the personal gain and aggrandizement of a few individuals. . . . It revives and perpetuates one of the great evils which it was the object of the framers of our form of government and prevent.40

Neither wealth maximization nor an exclusive concern with size or bigness animated the original American debate about trusts and monopolies. Rather the legal, legislative, and administrative record was replete with concern about politico-​ economic corruption and corporate misdeeds that threatened the public. “Corners, rings, patents of monopoly, pools, cartels, trusts, holding companies, ‘Gary dinners,’ interlocking directorates, ‘communities of interest,’ ‘gentlemen’s agreements,’ closed shops’ ”—​with this motley array of terms, Walton Hamilton introduced the “hydra-​headed” monopoly problem as one intimately tied up with issues of corrupt and unfair business practices.41 While the Sherman Act did not expressly condemn “unfair competition,” it was clearly aimed at what Milton Handler called “the brutal and oppressive practices” of large enterprises. “The dominant economic position of these combines,” Handler noted, “made their methods particularly venomous.”42 Indeed, the Sherman Act, together with continued concern about unscrupulous business practices in rapidly consolidating industries, soon generated two additional federal administrative interventions—​ the US Industrial Commission and the Bureau of Corporations. The Industrial Commission was created by Congress in 1898 to undertake a comprehensive investigation of “the industrial life of the nation” and “the important changes in business methods” so as to diagnose the “economic problems” that riled the nation.43 Of the Commission’s nineteen volumes, the first two were dedicated to Trusts, Corporations, and Industrial Combinations—​the consolidating establishments that created so much public “apprehension of monopoly.” The Commission took note of the recent “progress of legislation aimed to prevent trusts or avert their evils and dangers” as well as the government’s desire “to protect the public from all the dangers of conspiracy and extortion.”44 The Commission’s highly detailed reports on business conduct and industry

American Antimonopoly and Regulated Industries Law  181 practice renewed attention to the problem of corporate excess, especially with respect to price discrimination, stock watering, promotion profits, and unfair trade practices.45 In 1903, Congress created the Bureau of Corporations in the Department of Commerce and Labor—​a direct forerunner of the Federal Trade Commission—​to make further “diligent investigation into the organization, conduct, and management of the business of any corporation, joint stock company or corporate combination engaged in commerce among the several States.”46 The Bureau conducted exhaustive investigations into some of the country’s most conspicuous monopolies and trusts. Indeed, the Bureau’s reports on the petroleum and tobacco industries formed a basis for the Department of Justice’s subsequent antitrust prosecutions that famously dissolved Standard Oil and American Tobacco in 1911.47 The Bureau’s uncovering of Standard Oil’s railroad rebates also played a key role in the passage of the Hepburn Act (1906), extending the ICC’s regulatory powers over the interstate transportation industry.48 From the Interstate Commerce Commission and Sherman Antitrust Act to the Industrial Commission and Bureau of Corporations, concern about economic concentration and corporate consolidation mixed constantly with overarching worries about corruption and unfair modes and methods of competition. For many, what made the rise of trusts and monopolies so especially dangerous was the introduction and proliferation of business practices that came to be seen as unfair or illegal in thousands of pages of subsequent antitrust actions. These practices included intimidation by threats of spurious lawsuits or a ruinous price war, the operation of bogus independents, the use of fighting brands, exclusive dealer arrangements, and tying contracts and rate discrimination.49 The Standard Oil Company was accused of local price cutting, espionage, bogus independents, and preferential rebates. American Tobacco utilized bogus independents, fighting brands, and exclusive dealer arrangements. National Cash Register was cited for a slew of offenses, including espionage, enticement of competitors’ employees, shadowing competitors’ salesmen, inducing breach of contract, and circulating false reports. International Harvester was accused of exclusive dealing contracts, while American Can cut off competitors’ sources of supply.50 The list of corporate abuses detailed in antitrust litigation went on and on. As the National Industrial Conference Board put it, “The Whiskey Trust, the American Sugar Refining Company, the Eastman Kodak Company, the du Pont de Nemours Powder Company, the Corn Products Refining Company, and numerous others . . . were charged with using one or another of the kinds

182  Antimonopoly and American Democracy of competitive practices of the monopolistic type, which are now regarded as unfair.”51 The original federal antitrust prosecutions, in other words, marked the beginning of the development of a more robust law of unfair competition that ultimately formed the basis for the Federal Trade Commission and Clayton Acts. Beneath this new wave of federal action against unfair monopolistic competition, the common law and state antimonopoly legislation also remained active in policing unfair trade. Common-​law case law was chock full of competitive torts: fraud, misrepresentation, misappropriation of trade secrets, inducement of breach of contract, substitution of goods, malicious interference, infringement of trade designation, defamation, and attacks upon competitors and competitors’ goods. Milton Handler noted, however, that the common law “reached only the crudest competitive excesses,” and the private, case-​by-​case regulation of unfair competition via common-​law judges was really no match for the expansive new trade practices of Standard Oil, American Tobacco, and National Cash Register.52 State regulatory legislation quickly tried to make up for the common law’s limitations. By the time of the Industrial Commission’s reports on trusts, corporations, and industrial combinations, twenty-​seven states and territories had passed statutes to “prevent the formation of monopolies by fit regulations and penalties” and fifteen added explicit constitutional provisions.53 And a host of other state police power regulations took aim at unfair and anti-​competitive practices in general. These included restraint-​of-​trade and price-​discrimination statutes, false advertising laws, bribery laws, trademark statutes, food and drug legislation, labeling laws, prohibitory laws, chain store laws, statutes prohibiting sales below cost, trading stamps laws, state fair trade acts, acts prohibiting the appropriation of customer lists, advertising regulations, and proration laws.54 This mass of legal and legislative regulatory activity concerning monopoly and unfair competition came to a head in the creation of the Federal Trade Commission. Joseph E. Davies was Woodrow Wilson’s Commissioner of Corporations. Hailing from Robert La Follette’s progressive Wisconsin, Davies was steeped in both institutional political economy and the “Wisconsin Idea’s” multiple experiments with commission regulation in the democratic public interest.55 Under his leadership, the Bureau of Corporations produced one of the first comprehensive analyses of the relationship of the antimonopoly movement to the underlying problem of competitive methods—​Trust Laws and Unfair Competition (1916).56 More

American Antimonopoly and Regulated Industries Law  183 importantly, as Commissioner, Davies began to push the Wilson administration to strengthen the Sherman Act, develop additional legislation on unfair competition, and establish a powerful independent “Interstate Trade Commission” to now do for American trade, in general, what the Interstate Commerce Commission did for the railroad problem. Davies’s “Memorandum of Recommendations as to Trust Legislation” proposed aggressive “administrative control to prevent monopoly from using its most potent weapon, unfair competition.”57 Davies endorsed Justice John Marshall Harlan’s broad defense of administrative regulation in Interstate Commerce Commission v. Brimson: “Nor can the rules established for the regulation of [interstate] commerce be efficiently enforced, otherwise than through the instrumentality of an administrative body representing the whole country, always watchful of the general interests, and charged with the duty, not only of obtaining the required information, but of compelling, by all lawful methods, obedience to the rules.”58 Davies recommended new federal legislation to regulate noxious trade practices ranging from interlocking directorates, holding companies, and stock watering to price-​fixing, full-​line forcing, special privileges or rebates, espionage, and bogus independents. Davies even cited the New Jersey “Seven Sisters” laws, urging that “holding companies and mergers should be prohibited” and subject to review “by a commission analogous to the Public Utilities Commission.” The Bureau of Corporations’ “Survey of the Trust Question” thus did much to anticipate the content of the Federal Trade Commission and Clayton Acts, and an emerging synthesis of the law of trade regulation. With the formation of the FTC and the passage of the Clayton Act, the movement for the regulation of trade and competition entered a new phase. In September 1914, the Federal Trade Commission Act declared unlawful “unfair methods of competition in commerce” and empowered the new independent regulatory agency not only to investigate business and corporate practices but also to prevent persons and corporations from using such “unfair methods” as “the most important means of preventing the development of monopolies.”59 In October, the Clayton Antitrust Act added a more detailed list of proscribed anti-​competitive practices, including price discrimination, tying contracts, holding companies, and interlocking directorates. It also famously exempted certain labor and agricultural organizations and activities from antitrust laws.60 In 1935, the FTC took stock of a seemingly ever-​ growing list of twenty-​five unfair methods of competition condemned in its cease and desist orders: 1. false or misleading advertising; 2. misbranding of

184  Antimonopoly and American Democracy quality, purity, origin, source; 3. bribing buyers and customers; 4. procuring trade secrets of competitors by espionage or bribery; 5. inducing employees or competitors to violate contracts; 6. making false and disparaging statements about competitors; 7. intimidating suits for patent infringement; 8. trade boycotts or combinations to prevent the procurement of goods; 9. falsifying products as competitors’ products; 10. selling old as new; 11. paying excessive prices for supplies so as to buy up all; 12. concealed subsidiaries; 13. merchandising schemes on lot or chance; 14. agreeing to maintain resale price; 15. combining to control price, divide territory, or eliminate competition; 16. misleading techniques, deception; 17. imitating standard containers but with less content; 18. concealing business identity; 19. making false claims as to location, size, authorization, and government endorsement; 20. forming trade associations for uniform prices; 21. coercing or entrapping customers; 22. naming products misleadingly; 23. selling below cost; 24. dealing unfairly or dishonestly with foreign purchasers; and 25. engaging in monopolistic reciprocal dealing.61 By 1938, the FTC had taken under advisement some 27,060 requests for action against “unfair competition,” including 12,726 complaints. It had also completed well over a hundred studies and investigations into corporate practices ranging from an eleven-​page report on Southern Livestock Prices (1920) to a 101-​volume survey of Gas and Electric Utility Corporations (1928–1935). FTC investigations led to significant subsequent legislation and administrative regulation, including passage of the Packers and Stockyards Act of 1921, the establishment of the Federal Oil Conservation Board in 1924, and the Robinson-​Patman Act in 1936. The Commission’s Trade Practice Conferences covered almost two hundred separate industries from the Anti-​Hog-​Cholera Serum and Virus Industry in 1925 to the Warm Air Furnace Industry in 1932.62 By the early 1930s, the massive regulatory and antimonopoly interventions of the progressive movement for the social control of business had begun to mature into a modern law of regulated industries.

Regulated Industries Law “We are living in the midst of a revolution,” John Maurice Clark noted in 1926, “a revolution that is transforming the character of business, the economic life and economic relations of every citizen, the powers and responsibilities of the

American Antimonopoly and Regulated Industries Law  185 community toward business and of business toward the community.”63 By the time Clark completed his “Materials for the Study of Business” in the School of Commerce and Administration of the University of Chicago, the Social Control of Business had indeed brought tremendous changes to the regulation of corporations, business, and industry. The various strands of economic regulatory innovation—​public utility, fair competition, and antimonopoly—​ had produced a whole more than the sum of its parts. That whole was a rather staggering pattern of comprehensive regulation that included common-​ law, statutory, and administrative supervision of American economic life. Corporation regulation through state charter controls no longer dominated economic policymaking. Rather, an extraordinary range of legislative and administrative regulations was now directed at substantive economic, corporate, and industrial conduct that ran the gamut. Clark compiled a suggestive list of legislative and regulatory achievements of the new movement for social and democratic control: “the effective control of railroads and of public utilities,” land reclamation and flood prevention, radio and aerial navigation laws, the trust movement and anti-​trust laws, conservation, the Federal Reserve system, labor legislation, social insurance, minimum-​wage laws, industrial labor arbitration, pure food laws, public health regulation, and city planning and zoning. On the frontier, Clark suggested, were health insurance, control of the business cycle and unemployment, the control of large fortunes and the distribution of wealth, and the “social control of the structure of industry itself, through the ‘democratization of business” itself.64 Clark’s policy agendas merely hinted at the full scale and scope of the progressive achievement in the regulatory control of business, industry, and the market that culminated in a modern law of regulated industries. In 1937, Milton Handler dedicated his pioneering casebook in trade regulation and competition policy to Louis Brandeis, with a nod to the “Sisyphean task” of simply trying to keep pace with “the accelerated tempo of change” in the field of economic regulation.65 In attempting to get his head around the increasingly unwieldy topic of “the progressive penetration of government in business,” Handler began with a quick and illuminating survey of New York statutes brought to bear on an individual who wanted to pursue any kind of economic enterprise in the state. McKinney’s Consolidated Laws of New York (1931) comprised sixty-​seven separate volumes with titles ranging from Arbitration, Banking, Benevolent Orders, and Business Corporations to Salt Springs, State Charities, Tenement Houses, and Workmen’s Compensation.66 Even before organizing an economic venture, Handler noted, one had to

186  Antimonopoly and American Democracy consult the statutory provisions regarding “Business Corporations, General Corporation, Stock Corporation, General Associations, Membership Corporations, and Partnership laws.” Beyond such general regulations for initiating a New York private enterprise, Handler noted a host of more specific statutes concerning business names, methods of raising capital (blue sky and usury regulations), zoning restrictions, construction rules and permitting and inspection processes, and equipment standards. Wrote Handler, “The entrepreneur constructing his own plant will find himself in a maze of fire control, illumination, safety, and sanitary requirements.”67 An equally complex maze of special licensing restrictions governed whole classes of New York professions and businesses: physicians, surgeons, dentists, optometrists, pharmacists and druggists, nurses, midwives, chiropodists, veterinarians, certified public accountants, lawyers, architects, engineers and surveyors, shorthand reporters, master plumbers, undertakers and embalmers, real estate brokers, junk dealers, pawnbrokers, ticket agents, liquor dealers, private detectives, auctioneers, milk dealers, peddlers, master pilots and steamship engineers, weighmasters, forest guides, motion picture operators, itinerant retailers on boats, employment agencies, commission merchants of farm produce, and manufacturers of foreign desserts, concentrated feeds, and commercial fertilizers. Factories, canneries, places of public assembly, laundries, cold storage, shooting galleries, bowling alleys, billiard parlors, and storage sites for explosives all required special licenses. So did the sale of minnows, and the operation of educational institutions, motor vehicles, and filling stations.68 Even these fairly elaborate provisions paled in comparison to the detailed state regulations that sentried the business of banking or insurance, or the provision of gas, electricity, and communications—​with additional obstacles and restrictions for foreign corporations. If a business required employees, then a law library of labor relations controls affected the operation—​controls dealing with industrial accidents; workers’ compensation; limits on child labor; maximum work hours parsed according to sex, age, and occupation; and factory and wage regulations. If a business involved the production of food, commodities, or household goods then it faced equally extensive restrictions, ranging from adulteration, advertising, and trademark restrictions to minimum standards to weights and measures and inspection regimes. With regard to certain industries (as was the case earlier with railroads and public utilities), states like New York developed separate codes with commission oversight and detailed price and production controls. In New York, that

American Antimonopoly and Regulated Industries Law  187 was the case with liquor control as well as with the Milk Control Act of 1933 made famous in Nebbia v. New York (1934).69 The Division of Milk Control of the New York Department of Agriculture and Markets was charged with regulating the entire statewide milk industry: “production, storage, distribution, manufacture, delivery, and sale of milk and milk products.”70 An elaborate license regime was the gateway to comprehensive administration and regulation. Licensees had to satisfy the commissioner that they were “qualified by character, experience, financial responsibility and equipment to properly conduct the business, that the issuance of the license will not tend to a destructive competition in a market already adequately served, and that the issuance of the license is in the public interest.”71 Licenses were revocable for a whole range of offenses against public health, public welfare, or the public economy of milk. And commissioners were given select powers to fix prices and establish quotas as well as to undertake an advertising campaign on milk consumption, public health, and child nutrition.72 As Handler noted about these comprehensive powers, “This mandate coupled with the broad rule-​ making powers of the department permit of . . . an almost unlimited degree of control.”73 As Handler himself concluded, “Impressive as these summaries may be, they present but a partial picture of modern business regulation. A much larger canvass would be needed for the legislation enacted before the New Deal, the regulations of state and federal administrative agencies, the statutes of the forty-​eight states, the ordinances of our countless municipalities, and the substantive rules formulated by our courts.”74 Business historian Alfred Chandler highlighted the transformation in business-​government relations inaugurated by three pioneering federal interventions alone: the Interstate Commerce Commission (1887), the Sherman Antitrust Act (1890), and the Federal Trade Commission and Clayton Acts (1914). But already by 1917 and 1918, John A. Lapp could compile an ambitious and comprehensive two-​ volume listing of federal economic regulations (a primitive forerunner to the Federal Register). Contending that “scarcely any business can be done involving shipments across state lines without consulting” the vast number of rules, regulations, and “restrictions in the interest of the common welfare which the federal government has thrown about business,” Lapp summarized and reproduced a range of pioneering federal initiatives, including: 1. Federal banking legislation (including the establishment of the Federal Reserve System)

188  Antimonopoly and American Democracy



2. The Income Tax Act, the Corporation Tax Act, and other federal revenue regulations 3. Federal food, drug, meat, and narcotics acts 4. Federal labor regulations, including the Employers’ Liability Acts, child labor legislation, and assorted public works, safety, and inspection acts 5. New trademark, copyright, and bankruptcy legislation 6. Establishment of the Public Health Service 7. Federal regulations of horticulture and agriculture 8. Federal regulations of immoral commerce 9. The Shipping Board Act 10. The Federal Good Roads Act.75

As Dexter Merriam Keezer and Stacy May noted in The Public Control of Business (1930): “The free working of free private enterprise in a competitive system is an American ideal that has never existed except in theory. The country started with certain established governmental regulations as a heritage of common law, and there has been a definite tendency to add to rather than to subtract from the amount of such regulation ever since. Today our government touches our economic system at so many points that a mere cataloguing of the economic concerns of the various branches of American government would be a lengthy undertaking”: 1. Government “promotion of privately owned business through such mechanisms as the tariff, land grants, loans and subsidies, the gathering and dissemination of statistics, . . . the promotion and protection of foreign trade, and through the . . . patent laws.” 2. General exercise of the state police power “to take action necessary for the protection of the public health, welfare, safety, and morals.” 3. Emergency measures including “the government operation of railways” and “such peace-​time measures as the Adamson Act.” 4. “Permanent regulatory measures” in specific areas like those involving products harmful to public health, e.g., the Pure Food and Drug Act or those bound up in the labor question, e.g., “compulsory social insurance and minimum wage, hours of labor, and child labor legislation.” 5. Direct federal and state provision of goods and services including the activities of federal arsenals, “highway building and maintenance, the

American Antimonopoly and Regulated Industries Law  189 issuing of currency, the postal service, police service, the Coast Guard, Geological Survey, weather bureau,” etc.76 These were just some of the policy consequences of the long progressive crusade for the social control of business and the economy launched by the American antimonopoly tradition. “Our legislation thus runs the gamut of our economic problems,” Handler concluded, “and a list of all the varied objectives of these laws would encompass most of the aims of our economic order.”77 This modern American regulatory and administrative state would leave few aspects of economic life untouched through the first half of the twentieth century.

Conclusion: Beyond the Myth of Regulatory Failure At the turn of the twentieth century, American movements for antimonopoly, public utility, and fair competition came together to produce a new legal-​ political architecture for modern American economic regulation at both the state and federal levels. The legal, legislative, and administrative tools forged in epic battles over railroads, monopolies, and corrupt business practices together moved the primary site of regulatory control beyond the limited case-​by-​case adjudications of the common law as well as special state corporate charters. The formal policing of the charter of incorporation itself would no longer be a singular focus of policymaking vis-​à-​vis corporations and monopolies. Rather, movements for the social control of business created a thousand new sites of countervailing state power and new, cross-​cutting regulatory criteria and technologies. State legislative power continued to police economic activities deemed harmful or prejudicial to public health, safety, and welfare. Public utility law brought heightened scrutiny to businesses especially affected with public interest and held them to higher standards in terms of pricing, service, discrimination, and public convenience and necessity. Antimonopoly contributed an additional overarching concern with corporate structure, concentration, scale, and the democratic balance of politico-​economic power. And unfair competition law greatly expanded administrative jurisdiction concerning unlawful business practices and corruption, from issues of fraud and secrecy to a vast array of new methods for restraining competition. Taken together—​and these areas

190  Antimonopoly and American Democracy of policymaking and concern were almost always closely intertwined at the turn of the century—​these legal, regulatory, and ultimately administrative policy innovations illuminated an expansive horizon for the future democratic control of American capitalism. Shining a bright light on the informal and legal mechanisms of economic control that pervaded the industrial economy, progressive antimonopolists drew renewed attention to the problem of organized private coercion: the sudden ascendance of new forms of private power wielded by massive corporations and trusts. The economic power of business was no longer justified as a natural outcome of the choices of rational individuals, voluntary cooperation, or the laws of supply and demand. Instead, reformers increasingly considered monopoly and the concentration of economic interests as a problem in and of itself, with grave implications for what legal historian Willard Hurst called “the balance of power.” Hurst understood the “balance of power” as a first-​order principle of American constitutionalism: “Any kind of organized power ought to be measured against criteria of ends and means which are not defined or enforced by the immediate power holders themselves. It is as simple as that: We don’t want to trust any group of power holders to be their own judges upon the ends for which they use the power or the ways in which they use it.”78 For Hurst, American antitrust policy provided “an example unique in our legal history for a long-​continued, broadly accepted, peacetime attempt to use law direction to affect the balance of power within the community.”79 In the first half of the twentieth century, an increasing number of commentators came to see monopoly and big business as a constitutional problem in this sense, creating a distinctive imbalance of power and control in American democracy. In Freedom through Law: Public Control of Private Governing Power (1952), Robert Lee Hale synthesized a generation of institutionalist and realist scholarship in arguing that new concentrations of private economic power were slowly acquiring many of the attributes formerly thought of as the exclusive prerogative of public sovereignty. Hale held that these new forms of “private government” were just as capable of exercising social coercion and destroying liberty as “public government itself.”80 But whereas public power had been the subject of developing constitutional protections since the seventeenth century at least, these new forms of private economic domination were increasingly escaping traditional mechanisms of control (competition, common law, charter, and state statute). The problem of industrial monopoly and increasing private governing power galvanized

American Antimonopoly and Regulated Industries Law  191 a broad search for new legal, legislative, and administrative restraints. The new surfeit of rules and regulations enacted in response marked a new era in government-​business relations in the United States and a reconfiguration of the relationship of law and American capitalism—​a revolution, if you will, in political economy. State and regulation assumed prominent new roles in an increasingly mixed and regulated American economy.81 Despite the vast scale and scope of this general regulatory revolution, however, classic accounts of American antimonopoly and antitrust have still too frequently ignored it. Indeed, leading authorities have continued to emphasize primarily the internal economics of antitrust shorn of sociopolitical context, while isolating antitrust as a discrete and independent arena of policymaking.82 Classic business and economic history accounts of antitrust, for example, have emphasized vertical integration, managerial hierarchy, allocative efficiency, consumer welfare, and a relatively weak, limited, and backward-​looking state. For Thomas McCraw, adversarial legalism, “the tiny size of the United States government,” and the “illogical,” “aesthetic” nature of critiques of “bigness,” combined to make modern American antimonopoly something of a misguided political-​economic anachronism. As McCraw strangely concluded about Louis Brandeis, “Brandeis misunderstood the forces underlying the rise of big business and consistently advocated economic policies that were certain to reduce consumer welfare.”83 McCraw thus closely followed the new antitrust orthodoxy of Robert Bork, who claimed to “conclusively” and “exclusively” establish the original legislative intent of the Sherman Act as “consumer welfare,” and the neoclassical economic criteria implied thereby; namely, maximization of wealth and allocative efficiency.84 As business histories de-​emphasized and de-​politicized the power and effect of the American antimonopoly tradition, conventional political histories tended to cabin and isolate the juristic, common-​law underpinnings of antitrust policymaking with equally underwhelming assessments. William Letwin’s classic history of the Sherman Act assumed fundamentally that “American economic policy has always rested on two principles: 1) government should play a fairly confined role in economic life, and 2) private economic activities should be controlled largely by competition.”85 Ellis Hawley’s famously “ambivalent” account of antimonopoly policy similarly emphasized America’s “libertarian” and “liberal individualistic traditions,” wherein “long devotion to a philosophy of laissez-​faire, local rights, and individual liberty” made Americans “reluctant to use the federal government as a positive instrument of reform.”86

192  Antimonopoly and American Democracy Such priors about the supposed limits of American antimonopoly and antitrust were only reinforced by equally enervated accounts of the inherently weak and corruptible nature of the nascent American regulatory state. Samuel Huntington reached for the diseased metaphor of “marasmus” in one of the first accounts of regulatory failure and capture at the ICC.87 Hewing closely to George Stigler’s influential economic theory of regulation (where “as a rule, regulation is acquired by the industry”), Frank Easterbrook conjured up a law and economics vision of antitrust aimed precisely against or “versus” regulation—​wherein regulatory laws were viewed as owing “more to interest group politics than to legislators’ concern for the welfare of society.”88 Stephen Skowronek imported this dismissive perspective into the heart of American political development in an especially ferocious critique of American efforts at railroad regulation. For Skowronek, state legislative experiments like the so-​called Granger Laws inaugurated “a regulatory posture that had not worked in the past and could not possibly work in the future.” At the national level, Skowronek branded the Interstate Commerce Commission simply “ridiculous”: “In 1887, the ICC seemed an unpredictable institutional anomaly in the state of courts and parties; by 1900 it had become a mere irrelevance. . . . For all practical purposes, the commission had effected no change in the established mode of governmental operations or in the business conditions of the country.”89 On the basis of just such assessments of the inherent limits of American law, statecraft, and economics, historians of corporation law, economic concentration, and antimonopoly have painted a composite account of regulatory failure fit for a Gilded Age. Its common features range from the rise of general incorporation laws to the decline of the regulatory “artificial entity” theory to the triumph of a modicum of corporate personhood in Santa Clara v. Southern Pacific Railroad (1886).90 Gaining momentum through decline of common-​law corporate controls like the ultra vires doctrine and a state’s ability to regulate “foreign” (i.e., out-​of-​state) corporations,91 the conventional narrative reaches something of a climax in the race-​to-​the-​bottom chartermongering that culminated in New Jersey’s corporation act of 1889 and the re-​incorporation of the Standard Oil Company in that “traitor state.” Ultimately, Delaware’s General Corporation Law of 1899 completed the revolution that “turned corporate law inside out.” For a hundred years, Joel Seligman argued, the business corporation could “exercise powers or seek capital” only in ways dictated by state and charter. With the New Jersey and Delaware “self-​determination provisions,” the “corporation could be a

American Antimonopoly and Regulated Industries Law  193 lawmaker itself.”92 The resultant triumph of the corporation as a natural and normal business unit, in the words of Morton Horwitz, worked to “legitimate large-​scale enterprise and to destroy any special basis for state regulation of the corporation that derived from its creation by the state.”93 No doubt, the late nineteenth century did witness an internal transformation of corporate law with regard to the general regulatory effects of the original rules that formed a corporation qua corporation in the first place. What is missing from the conventional story, however, is a comparable account of the almost simultaneous creation of brand-​new sites and creative new rationales for the continued regulation of corporate power in America. For wholly coincident with the corporate rush to New Jersey and Delaware was a concerted effort by reformers to exercise new legal and political controls over corporate capitalism. While not discouraging the formation of many new corporations through radical changes in general incorporation law, reformers built a new regulatory regime aimed precisely at those industries, monopolies, and corporate practices that posed the greatest threats to democracy. Here, a whole host of factors from the nature of certain industries (dealing with necessities or public provisions) to the characteristics of certain monopolies (in terms of scale, scope, and structure) to a new set of corporate practices and behaviors (like corruption, coercion, and unfair competition) triggered new rounds of regulatory innovation, expansion, and enforcement. In just this way, a revolution in corporate governance law led to an equally efficacious revolution in regulated industries law. A full account of the nature and effects of American antimonopoly and antitrust thus requires a healthy skepticism with regard to some faulty historical presuppositions about laissez-​faire, a “race-​to-​the-​bottom,” regulatory capture and failure, and the historic limits of American statecraft. It also requires a more holistic contextualization of antimonopoly and antitrust within many highly interdependent regulatory technologies and strategies involving laws as disparate as police power, public utility, and unfair competition. And one should not underestimate the continued effectiveness in some states of common-​law controls, charter restrictions, ultra vires, the law of foreign corporations, and state antimonopoly enforcement.94 From remarkably robust common-​law doctrines to continued state legislation to general state police powers to the rise of public utility and trade regulation to the construction of de facto federal regulatory and administrative authority, turn-​of-​ the-​century American law provided a broad regulatory environment for the further development of antimonopoly and antitrust policymaking. Beyond

194  Antimonopoly and American Democracy the problem of monopoly or “bigness” per se, it is important to understand the Sherman Act, the Clayton Act, and the creation of the FTC within this larger framework of the expansion of state and federal police power control over corporations, businesses, and economic activities, formerly dealt with through common-​law and charter restrictions. At exactly the point in history when that earlier regulatory regime began to falter beneath the weight of new monopoly powers, the American regulatory tradition launched a bold new slate of state and federal initiatives aimed at maintaining and expanding democratic control over American corporate capitalism.

Notes 1. For a full history of this transformation, see William J. Novak, New Democracy: The Creation of the Modern American State (Cambridge, MA: Harvard University Press, 2022). 2. William J. Novak, “The Public Utility Idea and the Origins of Modern Business Regulation,” in The Corporation and American Democracy, ed. Naomi Lamoreaux and William J. Novak (Cambridge, MA: Harvard University Press, 2017), 139–​76. 3. For a quick indicator of the vast purview of the early twentieth-​century public utility concept, see Bruce Wyman’s 2-​volume, 1,500-​page, 5,000-​case treatise. Wyman, The Special Law Governing Public Service Corporations and All Others Engaged in Public Employment, 2 vols. (New York: Baker, Voorhis & Co., 1911). On special charters and the long road to more general laws, see Eric Hilt, “Early American Corporations and the State,” and Jessica Hennessey and John Wallis, “Corporations and Organizations in the United States after 1840,” in Lamoreaux and Novak, Corporations and American Democracy, 37–​73, 74–​108. Also see Naomi R. Lamoreaux and John Joseph Wallis, “Economic Crisis, General Laws, and the Mid-​Nineteenth-​Century Transformation of American Political Economy,” Journal of the Early Republic 41, no. 3 (2021): 403–​33. 4. Alfred D. Chandler, ed., The Railroads: The Nation’s First Big Business (New York: Harcourt, Brace & World, 1965). 5. The original practice of publicly created monopoly grants dates back to earliest colonial experience. Shaw Livermore’s indispensable history of the early American land companies noted the twenty-​one-​year monopoly (as well as assorted other special privileges) granted by the Massachusetts General Court to the Lynn Iron Works, organized by John Winthrop Jr. as early as 1645. As Shaw concluded, “The project illustrates the Colonial attitude in the first half of the seventeenth century toward development schemes, much more suggestive of the monopoly-​grant concept than of the voluntary association.” Shaw Livermore, Early American Land Companies: Their Influence on Corporate Development (New York: The Commonwealth Fund, 1939), 43. 6. Arthur T. Hadley, Railroad Transportation: Its History and Laws (New York: G. P. Putnam’s Sons, 1886), 65; Hadley, “Private Monopolies and Public Rights,” Quarterly

American Antimonopoly and Regulated Industries Law  195 Journal of Economics 1 (1886): 28–​44, 28; Hadley, “The Good and Evil of Industrial Combinations,” Atlantic Monthly (1897): 377–​85 (emphasis added). 7. John C. Welch, “The Standard Oil Company,” North American Review 136 (1883): 191–​200. Lloyd’s essays were ultimately compiled in Henry Demarest Lloyd, Lords of Industry (New York: G. P. Putnam’s Sons, 1910), also including “Servitudes Not Contracts” (1889), and “The Sugar Trust” (1897). 8. Welch, “Standard Oil Company,” 191. 9. Henry Demarest Lloyd, Wealth against Commonwealth (New York: Harper & Brothers, 1894). Henry George, Progress and Poverty: An Inquiry into the Cause of Industrial Depression (New York: D. Appleton & Co., 1879). For an excellent historical contextualization of George’s concern with land monopoly, see Tamara Venit Shelton, A Squatter’s Republic: Land and the Politics of Monopoly in California, 1850–​1900 (Berkeley: University of California Press, 2013). 10. Hadley, “Private Monopolies and Public Rights,” 42. 11. Henry Carter Adams, “The Relation of the State to Industrial Action,” Publications of the American Economic Association 1 (1887): 7–​85, 47–​48; Adams, Description of Industry: An Introduction to Economics (New York: Henry Holt & Co., 1918), 264; Hadley, “Private Monopolies,” 40. 12. Adams, “Relation of the State,” 64. Morton Horwitz, The Transformation of American Law: The Crisis of Legal Orthodoxy, 1870–​1960 (New York: Oxford University Press, 1992), 80–​83. 13. Fanny Borden, “Monopolies and Trusts in America, 1895–​1899,” Bulletin of the New York State Library 67 (1901): 1–​33. 14. John Lewson, Monopoly and Trade Restraint Cases: Including Conspiracy, Injunction, Quo Warranto, Pleading and Practice and Evidence, 2 vols. (Chicago: T. H. Flood & Co., 1908), I:vii. 15. Richard John, “Reframing the Monopoly Question: Commerce, Land, Industry,” in Antimonopoly and American Democracy, ed. Daniel A. Crane and William J. Novak (­chapter 2 of this volume); Richard White, “From Antimonopoly to Antitrust,” in Antimonopoly and American Democracy (­chapter 3 of this volume). 16. Roscoe Pound, “The New Feudalism,” American Bar Association Journal 16 (1930): 553–​58. Of course, this theme is also pronounced in the work of the so-​called New Brandeisians in American antitrust law. Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age (New York: Columbia Global Reports, 2018); Lina Khan, “Amazon’s Antitrust Paradox,” Yale Law Journal 126 (2017): 710–​805. 17. 21 Congressional Record (1890), 2456–​57. 18. Appalachian Coals v. United States, 288 U.S. 344 (1933), 359. On the Sherman Act as a superstatute, see William N. Eskridge Jr. and John Ferejohn, “Super-​Statutes,” Duke Law Journal 50 (2001): 1215–​76. 19. Louis D. Brandeis, “The Regulation of Competition versus the Regulation of Monopoly,” Yearbook of the Economic Club of New York (New York: G. P. Putnam’s Sons, 1913), 3:7–​20, 17, 19. 20. Lina Khan, “The New Brandeis Movement: America’s Antimonopoly Debate,” Journal of European Competition Law & Practice 9 (2018): 131–​32, 131.

196  Antimonopoly and American Democracy 21. Zephyr Teachout, Break ’Em Up: Recovering Our Freedom from Big Ag, Big Tech, and Big Money (New York: All Points Books, 2020); Matt Stoller, Goliath: The 100-​ Year War between Monopoly Power and Democracy (New York: Simon & Schuster, 2020); Barry C. Lynn, Cornered: The New Monopoly Capitalism and the Economics of Destruction (Hoboken, NJ: John Wiley & Sons, 2010). 22. Edward A. Adler, “Business Jurisprudence,” Harvard Law Review 28 (1914): 135–​62; see also Adler, “Labor, Capital, and Business at Common Law,” Harvard Law Review 29 (1916): 241–​76. 23. For further discussion of the crucial role of “institutional economics” in the developing social control of American business and industry, see William J. Novak, “Institutional Economics and the Progressive Movement for the Social Control of Business,” Business History Review 93 (2019): 665–​96. 24. Richard T. Ely, Problems of To-​Day: A Discussion of Protective Tariffs, Taxation, and Monopolies (New York: Thomas Y. Crowell & Co., 1888), 112. 25. The so-​called natural monopolies, Ely argued, consisted of “gas supply, street-​ car service, highways and streets, electric lighting, all railways, canals, bridges, lighthouses, ferries, docks, harbors, natural navigations, postal service, telegraphs and telephones.” Ely, Problems, 117. 26. Ibid., 111–​13. 27. Ibid., 210. For more on this ubiquitous progressive concern with the private capture of the public sphere, see Richard L. McCormick, “The Discovery That Business Corrupts Politics: A Reappraisal of the Origins of Progressivism,” American Historical Review 86 (1981): 247–​74; William J. Novak, “A Revisionist History of Regulatory Capture,” in Preventing Capture: Special Interest Influence and How to Limit It, ed. Daniel Carpenter and David Moss (New York: Cambridge University Press, 2013), 25–​48. 28. Ely, Problems, 108. 29. Ibid., 181. 30. Richard T. Ely, Monopolies and Trusts (New York: Macmillan, 1900), 264–​68. Notably, Ely considered this work (among many others) as merely a part of his imagined opus on The Distribution of Wealth, consisting of five books. Book 1 alone was imagined as having nine parts: Public and Private Property, Contract and Its Conditions; Vested Interests; Personal Conditions; Custom; Competition; Monopoly; Public Authority; Benevolence. 31. Joseph Henry Beale and Bruce Wyman, “Monopolies,” in Cyclopedia of Law and Procedure, ed. William Mack and Howard P. Nash, 40 vols. (New York: American Law Book Co., 1901–​1912), 27:888–​915. 32. Beale and Wyman, “Monopolies,” 898. 33. Bruce Wyman, Control of the Market: A Legal Solution of the Trust Problem (New York: Moffat, Yard & Co., 1911), v (emphasis added). 34. Wyman, Control of the Market, v–​vi. 35. George Stewart Brown, “Municipal Ownership of Public Utilities,” North American Review 182 (1906): 701–​8, 707. 36. A Survey of State Laws on Public Utility Commission Regulation in the United States: Analyzing the Principal Powers and Jurisdiction of State Public Utility Regulatory

American Antimonopoly and Regulated Industries Law  197 Commissions, Including the Bonbright Utility Regulation Chart (New York: Bonbright & Co., 1928). 37. Laura Phillips-​Sawyer, American Fair Trade: Proprietary Capitalism, Corporatism, and the New Competition, 1890–​1940 (New York: Cambridge University Press, 2018). 38. Proceedings of the Special Committee on Railroads Appointed under a Resolution of the Assembly to Investigate Alleged Abuses in the Management of the Railroads Chartered by the State of New York (New York: Evening Post Steam Presses, 1879). 39. Report of the Senate Select Committee on Interstate Commerce as to the Regulation of Interstate Commerce, 49th Congress, Session 1 (Washington, DC: Government Printing Office, 1886). 40. 21 Congressional Record (1890), 2458; Richardson v. Buhl, 77 Mich. 632 (1889). Sherman’s other cited cases included Handy v. Cleveland & M.R. Co., 31 Fed. 689 (C.C. Ohio, 1887); Craft v. McConoughy, 79 Ill. 346 (1875); Chicago Gas Light Co. v. People’s Gase and Coke Co., 121 Ill. 530 (1887); People v. North River Sugar Refining Co., 22 Abb. N.C. 164 (1889); Commonwealth v. Carlisle, Brightly N.P. 32 (Pa., 1821). 41. Walton Hamilton, “The Problem of Capitalistic Monopoly,” in Hamilton, Current Economic Problems, 429. 42. Milton Handler, “Unfair Competition,” in Readings in the Social Control of Industry, ed. American Economic Association (Philadelphia: Blakiston Co., 1942), 76–​ 180, 134. 43. “An Act Authorizing the Appointment of a Nonpartisan Commssion to Collate Information and to Consider and Recommend Legislation to Meet the Problems Presented by Labor, Agriculture, and Capital,” U.S. Statutes at Large 30 (1898): 476–​77; U.S. Industrial Commission, Final Report of the Industrial Commission (Washington, DC: Government Printing Office, 1902), ix. 44. Final Report of the Industrial Commission, 595. 45. The Industrial Commission’s reports also had an important impact on institutional economics, as both Thorstein Veblen and John Commons drew on the wealth of new information now available on Business Enterprise. David Hamilton, “Veblen, Commons, and the Industrial Commission,” in The Founding of Institutional Economics: The Leisure Class and Sovereignty, ed. Warren J. Samuels (London: Routledge, 1998), 3–​13. Laura Weinrib has argued that the Industrial Commission’s report on labor “helped shape the agenda for labor reform in the Progressive Era.” Weinrib, The Taming of Free Speech: America’s Civil Liberties Compromise (Cambridge, MA: Harvard University Press, 2016), 23. 46. “An Act to Establish the Department of Commerce and Labor,” U.S. Statutes at Large 32 (1903): 825–​30, 828. 47. United States Commissioner of Corporations, Report on the Petroleum Industry (Washington, DC: Government Printing Office, 1907); Industrial Commission, Preliminary Report on Trusts and Industrial Combinations (Washington, DC: Government Printing Office, 1900): 719–​ 26. United States Commissioner of Corporations, Report on the Tobacco Industry (Washington, DC: Government Printing Office, 1909). See also Civic Federation of Chicago, Chicago Conference on Trusts (Chicago: Civic Federation, 1900).

198  Antimonopoly and American Democracy 48. “An Act to Amend an Act Entitled ‘An Act to Regulate Commerce,’” U.S. Statutes at Large 34 (1906): 584–​96. 49. Myron Watkins, Public Regulation of Competitive Practices in Business Enterprise (New York: National Industrial Conference Board, 1940), 15. 50. Standard Oil v. United States, 221 U.S. 1 (1910); United States v. American Tobacco Co., 221 U.S. 106 (1911); United States v. Patterson, 201 Fed. 697 (1912); 205 Fed. 292 (1913); 222 Fed. 599 (1915); United States v. International Harvester Co., 214 Fed. 987 (1917); United States v. American Can Co., 230 Fed. 859 (1916). 51. Watkins, Public Regulation of Competitive Practices, 17–​18. Numerous other unfair practices were restrained via consent decrees: threats to competitors’ customers, inducing breach of contract, fighting brands, flying squadrons, disparagement, local price cutting, bogus independents, commercial bribery, espionage, harassing litigation, exclusive dealing arrangements, etc. For an exhaustive list of further offenses, cases, and decrees, see Handler, “Unfair Competition,” 125–​30. 52. Bruce Wyman, “Competition and the Law,” Harvard Law Review 15 (1902): 427–​ 45; Handler, “Unfair Competition,” 121–​22; Watkins, “Failure of Common Law Doctrine to Reach New Types of Unfair Competition,” in Regulation of Competitive Practices, 28–​32. 53. U.S. Industrial Commission, Trusts and Industrial Combinations (Washington, DC: Government Printing Office, 1900), 3. 54. Handler, “Unfair Competition,” 142–​49. 55. Elizabeth Kimball MacLean, “Joseph E. Davies: The Wisconsin Idea and the Origins of the Federal Trade Commission,” Journal of the Gilded Age and Progressive Era 6 (2007): 248–​84; Charles McCarthy, The Wisconsin Idea (New York: Macmillan, 1912). 56. Joseph E. Davies, Trust Laws and Unfair Competition (Washington, DC: Government Printing Office, 1916). 57. Joseph E. Davies, “Memorandum of Recommendations as to Trust Legislation,” in Papers of Woodrow Wilson, ed. Arthur S. Link (Princeton, NJ: Princeton University Press, 1979), 29:78–​85; 30:420. 58. Interstate Commerce Commission v. Brimson, 154 U.S. 447 (1897). 59. “An Act to Create a Federal Trade Commission,” U.S. Statutes at Large 38 (1914): 717–​ 24; Davies, Trust Laws, 22. 60. “An Act to Supplement Existing Laws Against Unlawful Restraints and Monopolies,” U.S. Statutes at Large 38 (1914): 730–​40. 61. The list excludes specifically sanctioned Clayton Act violations. “Types of Unfair Competition: Practices Condemned in Orders to Cease and Desist,” in Annual Report of the Federal Trade Commission for the Fiscal Year Ended June 30, 1935 (Washington, DC: Government Printing Office, 1935), 67–​71; Milton Handler, “Unfair Competition,” 159–​64. 62. Myron W. Watkins, Public Regulation of Competitive Practices in Business Enterprise (New York: National Industrial Conference Board, 1940), 275, 300–​17. 63. Clark, Social Control of Business, 4. 64. Ibid., 4–​5. 65. Milton Handler, Cases and Other Materials on Trade Regulation (Chicago: Foundation Press, 1937), vii.

American Antimonopoly and Regulated Industries Law  199 66. McKinney’s Consolidated Laws of New York, Annotated, 67 vols. (New York, 1931). 1. Report of Consolidators; 2. Constitution; 3a. Arbitration; 4. Banking; 5. Benevolent Orders; 6. Business Corporations; 7. Canal; 7a. City Home Rule; 8. Civil Rights; 9. Civil Service; 9a. Condemnation; 10. Conservation; 10a. Cooperative Corporations; 10b. Correction; 11. County; 12. Debtor and Creditor; 13. Decedent Estate; 14. Domestic Relations; 16. Education; 17. Election; 17a. Employers’ Liability; 18. Executive; 18a. Farms and Markets; 19. General Business; 20. General City; 21. General Construction; 22. General Corporation; 23. General Municipal; 24. Highway; 25. Indian; 27. Insurance; 28. Joint-​Stock Association; 29. Judiciary; 30. Labor; 31. Legislative; 32. Lien; 34. Membership Corporations; 34a. Mental Hygiene; 35. Military; 35a. Multiple Dwelling; 36. Navigation; 37. Negotiable Instruments; 38. Partnership; 39. Penal; 40. Personal Property; 43. Public Buildings; 44. Public Health; 45. Public Lands; 46. Public Officers; 47. Public Service Commission; 47a. Public Works; 47b. Public Welfare; 48 Railroad; 49. Real Property; 50. Religious Corporations; 51. Salt Springs; 52. Second Class Cities; 53. State Boards and Commissions; 54. State Charities; 54a. State Departments; 55. State Finance; 56. State; 57. State Printing; 58. Stock Corporation; 59. Tax; 60. Tenement House; 61. Town; 62. Transportation Corporations; 62a. Vehicle and Traffic; 63. Village; 64. Workmen’s Compensation; 65. Unconsolidated Laws; 66. Table of Laws Repealed; 67. General Index. A few things worth noting c. 1931: first, the large number of titles dealing with Corporations, Partnerships, and Associations; second, the new progression in Book 47 from Public Service Commission to Public Works to Public Welfare; and third, the changes made to Book 26 formerly Insanity now Mental Hygiene, Book 41 formerly Poor now Public Welfare, and Book 42 formerly Prison now Correction. 67. Handler, Trade Regulation, 2. 68. Ibid., 3–​4. 69. Nebbia v. New York, 291 U.S. 502 (1934); Hegeman Farms Corp v. Baldwin, 293 U.S. 502 (1934); Borden’s Farm Products v. Baldwin, 293 U.S. 194 (1934); G. Seelig, Inc. v. Baldwin, 294 U.S. 511 (1935); Borden’s Farm Products v. Ten Eyck, 297 U.S. 251 (1936); Mayflower Farms, Inc. v. Ten Eyck, 297 U.S. 266 (1936). 70. Handler, Trade Regulation, 9–​10. 71. Ibid. 72. The statute directed coverage of the following topics: (a) milk and its importance in preserving the public health, its economy in the diet of people, and its importance in the nutrition of children; (b) the manner, method, and means used and employed in the production of milk pursuant to the laws of the state regulating and safeguarding such production; (c) the added cost to the producer and milk dealer in producing and handling milk to meet the high standards imposed by the state that ensure a pure and wholesome product; (d) the effect upon the public health that would result from a breakdown of the dairy industry; (e) the reasons why producers and milk dealers should receive a reasonable rate of return on their labor and investment; (f) the problem of furnishing the consumer at all times with an abundant supply of pure and wholesome milk at reasonable prices; (g) the instability peculiar to the milk industry, such as unbalanced production, effect of the weather on the demand, etc.; (h) the possibilities with particular reference to increased consumption of milk;

200  Antimonopoly and American Democracy (i) the beneficial effect of sanitary laws and regulations enacted by the state; (j) further and additional information as shall tend to promote the increased consumption of milk and as may foster a better understanding and more efficient cooperation between producers, milk dealers, and the consuming public. McKinney’s Consolidated Laws of New York, Agriculture & Markets, Article 21, Sec. 328. 73. Ibid., 10. 74. Ibid., 13–​14 (emphasis added). 75. John A. Lapp, Important Federal Laws (Indianapolis: B. F. Bowen & Co., 1917); John A. Lapp, Federal Rules and Regulations (Indianapolis: B. F. Bowen & Co., 1918). Stuart Chase went further, highlighting the even more rapid proliferation of federal economic regulations in the aftermath of World War I and also during what he termed “Mr. Hoover’s New Deal.” Chase’s incomplete list of new federal institutions post-​ 1912 included (sans the War Boards of 1917/​18): 1913 The Federal Income Tax; 1914 The Federal Reserve Board, Federal Trade Commission, The Alaska Railroad; 1915 Bureau of Efficiency; 1916 US Shipping Board and Merchant Fleet Corporation, Federal Farm Loan Bureau, US Tariff Commission; 1917 Inland Waterways Corporation, US Employment Service, Federal Board for Vocational Education; 1920 Federal Power Commission; 1921 Bureau of the Budget; 1922 Grain Futures Administration; 1923 Personnel Classification Board; 1924 Federal Oil Conservation Board; 1926 Aeronautics Branch; 1927 Federal Radio Commission; 1928 Federal Farm Board. Chase, Government in Business, 28–​29. 76. Dexter Merriam Keezer and Stacy May, The Public Control of Business: A Study of Antitrust Law Enforcement, Public Interest Regulation, and Government Participation in Business (New York: Harper & Brothers, 1930), 3–​4. 77. Handler, Trade Regulation, 18. 78. James Willard Hurst, “Problems of Legitimacy in the Contemporary Legal Order,” Oklahoma Law Review 24 (1971): 224–​38, 225. For a more complete discussion of Hurst’s perspective, see William J. Novak, “Law, Capitalism, and the Liberal State: The Historical Sociology of James Willard Hurst,” Law and History Review 18 (2000): 97–​145. 79. James Willard Hurst, “Law and the Balance of Power: The Federal Anti-​Trust Laws,” unpublished manuscript, 2. 80. Robert L. Hale, Freedom through Law: Public Control of Private Governing Power (New York: Columbia University Press, 1952); Hale, “Coercion and Distribution,” 470. 81. Claudia Goldin and Gary D. Libecap, eds., The Regulated Economy: A Historical Approach to Political Economy (Chicago: University of Chicago Press, 1994); Morton Keller, Regulating a New Economy: Public Policy and Economic Change in America, 1900–​1933 (Cambridge, MA: Harvard University Press, 1996); Howard Brick, Transcending Capitalism: Visions of a New Society in Modern American Thought (Ithaca, NY: Cornell University Press, 2006); William J. Novak, “Law and the Social Control of American Capitalism,” Emory Law Journal 60 (2010): 377–​405. 82. Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (New York: Basic Books, 1978), 61–​63; Richard A. Posner, Antitrust Law: An Economic Perspective (Chicago: University of Chicago Press, 1976); Aaron Director and Edward H. Levi,

American Antimonopoly and Regulated Industries Law  201 “Law and the Future: Trade Regulation,” Northwestern Law Review 51 (1956–​1957), 281–​96. 83. Thomas K. McCraw, “Rethinking the Trust Question,” in Regulation in Perspective, 1–​ 55, 5; McCraw, “Louis D. Brandeis Reappraised,” The American Scholar, 54 (1985): 525–​36, 525, 527. For an excellent overview of McCraw’s position, see Richard R. John, “Prophet of Perspective: Thomas K. McCraw,” Business History Review 89 (2015): 129–​53. 84. Robert H. Bork, “Legislative Intent and the Policy of the Sherman Act,” Journal of Law & Economics 9 (1966): 7–​48, 11–​12. Lest the point be missed, Bork used the term “efficiency” fifty-​one times in his forty-​one-​page article, concluding “Congress was very concerned that the law should not interfere with business efficiency.” Bork’s historical research on the Sherman Act has been vigorously challenged by Robert Lande and Herbert Hovenkamp, among others, with Hovenkamp arguing that “not a single statement in the legislative history comes close to stating the conclusions that Bork drew.” Robert Lande, “Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged,” Hastings Law Journal 34 (1982): 65–​151; Herbert Hovenkamp, “Antitrust’s Protected Classes,” Michigan Law Review 88 (1989): 1–​48, 22. Daniel Crane has a judicious account, noting Bork’s most significant contribution to antitrust law as “his identification of economic efficiency, disguised as consumer welfare, as the sole normative objective of U.S. antitrust law . . . this singular normative vision proved foundational to the reorientation of antitrust law away from an interventionist, populist, Brandeisian, and vaguely Jeffersonian conception of antitrust law as a constraint on large-​scale business power and toward a conception of antitrust law as a mild constraint on a relatively small set of practices that pose a threat to allocative efficiency.” Daniel A. Crane, “The Tempting of Antitrust: Robert Bork and the Goals of Antitrust Policy,” Antitrust Law Journal 79 (2014): 835–​53, 835. 85. William Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (Chicago: University of Chicago Press, 1956), 7. Notably, Letwin’s study was a direct product of Edward Levi’s and Aaron Director’s Antitrust Research Project at the University of Chicago Law School. Dan Ernst nicely captured Letwin’s ideological priors: “In Letwin’s telling, the Rule of Reason cases of 1911 and the Clayton and Federal Trade Commission Acts of 1914 saddled federal antitrust policy with mutually inconsistent goals and a fragmented scheme of enforcement. By stressing the irremediably conflicted and incoherent nature of the antitrust tradition, Letwin’s book . . . joined a far-​ranging attack on the pluralist model of the regulatory state mounted by economists, political scientists, and professors of administrative law.” Daniel R. Ernst, “The New Antitrust History,” New York Law School Law Review 35 (1990): 879–​92. 86. Ellis W. Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (Princeton, NJ: Princeton University Press, 1966), vii, 4–​5. Martin Sklar also caricatured America’s common law traditions: “The concepts themselves embodied principles enunciated in common-​law precedents and strictures. These, in turn were rooted in the dogma of natural liberty”—​“liberty of private contract and the

202  Antimonopoly and American Democracy rights of private property.” Martin J. Sklar, The Corporate Reconstruction of American Capitalism: The Market, the Law, and Politics (New York: Cambridge University Press, 1988), 100–​1. Rudolph Peritz’s Competition Policy in America similarly positions the Sherman Act and antitrust policymaking squarely in the shadow of “the era of Lochner” and “the Supreme Court’s ‘economic due process’ regime founded on the major premise that the Fifth and Fourteenth Amendments protect individuals’ natural rights by safeguarding private transactions from legislative impairment. Judges tended to write in a deductive style, beginning with the assumption that private property rights, exercised through ‘liberty of contract,’ reflect the ‘due process’ clauses’ protection of ‘life, liberty, and property.’ ” Rudolph Peritz, Competition Policy in America: History, Rhetoric, Law (New York: Oxford University Press, 2001), 11–​12. For a broader analysis of this interpretive problem, see William J. Novak, “The Myth of the ‘Weak’ American State,” American Historical Review 113 (2008), 752–​72. 87. Samuel P. Huntington, “The Marasmus of the ICC: The Commission, the Railroads, and the Public Interest,” Yale Law Journal 61 (1952): 467. In Regulating Business by Independent Commission, Marver H. Bernstein applied Huntington’s analysis and capture perspective to six additional agencies: the Federal Trade Commission, Federal Power Commission, Civil Aeronautics Board, Federal Communications Commission, National Labor Relations Board, and the Securities and Exchange Commission. Marver H. Bernstein, Regulating Business by Independent Commission (Westport, CT: Greenwood Press, 1955); Bernstein, “Independent Regulatory Agencies: A Perspective on Their Reform,” Annals of the American Academy of Political and Social Science 400 (1972): 14. 88. Frank H. Easterbrook, “Antitrust and the Economics of Federalism,” Journal of Law and Economics 25 (1983): 23–​50, 23; George J. Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science 2 (1971): 3–​21. As Easterbrook transparently admitted, one could find articulations of this economic theory of regulation in “almost any issue of this Journal or the Bell Journal of Economics.” 89. Stephen Skowronek, Building a New American State: The Expansion of National Administrative Capacities, 1877–​1920 (New York: Cambridge University Press, 1982), 138–​60, 287-​89. For Skowronek, one of the main reasons for “the limits of America’s achievement in regenerating the state through political reform” at the turn of the twentieth century was still the “outmoded judicial discipline” created by “the constancy of the Constitution of 1789.” 90. Santa Clara v. Southern Pacific Railroad, 118 U.S. 394 (1886). 91. Morton Horwitz, “Santa Clara Revisited: The Development of Corporate Theory,” in The Transformation of American Law, 1870–​1960 (New York: Oxford University Press, 1992), 65–​107; Gerard Carl Henderson, The Position of Foreign Corporations in American Constitutional Law (Cambridge, MA: Harvard University Press, 1918). 92. Joel Seligman, “A Brief History of Delaware’s Corporation Law of 1899,” Delaware Journal of Corporate Law 1 (1976): 249–​86, 273. Also see Adam Winkler, We the Corporations: How American Businesses Won Their Civil Rights (New York: W. W.

American Antimonopoly and Regulated Industries Law  203 Norton, 2018). For an alternative portrait of the complexities of corporation law in this period, see Naomi Lamoreaux and William J. Novak, eds., Corporations and American Democracy (Cambridge, MA: Harvard University Press, 2017). 93. Horwitz, “Corporate Theory,” 104. 94. Naomi Lamoreaux, “Antimonopoly and State Regulation of Corporations in the Gilded Age and Progressive Era,” in Antimonopoly and American Democracy (­chapter 4 of this volume).

6 Banking and the Antimonopoly Tradition The Long Road to the Bank Holding Company Act Jamie Grischkan

In the wake of a new challenge to the reigning antitrust paradigm of efficiency and consumer welfare, the relationship between monopoly power and democratic governance is once again a focus of political and scholarly discourse. The extent to which private institutions with market power may distort the political process and the role antitrust law should play in combating those distortions is at the center of these new debates.1 This chapter focuses on one such institution, the bank holding company, and the movement to prevent its monopolistic expansion in the decades surrounding World War II. Staked on constitutional grounds that emphasized the inextricable ties between economic and political power, monopoly and fascism, the movement to regulate bank holding companies that culminated in the Bank Holding Company Act of 1956 (the “BHCA”) represents a pivotal, yet virtually unacknowledged, chapter in the history of the American antimonopoly tradition.2 As scholars look to relight the torch of Louis Brandeis and others who advocated for an antitrust jurisprudence that accounts for the political, as well as economic, ramifications of market power, the story of the rise and regulation of bank holding companies deserves re-​examination. Rooted in Progressive antimonopoly ideals, the enactment of the BHCA in 1956 challenges long-​standing and entrenched accounts of American political economy that depict World War II as the “end of reform” and the antitrust movement as a faded passion.3 Retracing the long road to the BHCA ultimately reveals the enduring potency of the antimonopoly tradition long after its supposed demise, and contributes to a deeper historical understanding of the foundational goals and evolving role of the American antitrust regime. Banking has occupied a central place within American antimonopoly thought and policy from the very outset of the nation. Disputes over the role of financial power in a democracy divided the nation’s first political Jamie Grischkan, Banking and the Antimonopoly Tradition In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0006

Banking and the Antimonopoly Tradition  205 parties, catalyzed Jacksonian politics, and animated some of the most important populist, Progressive, and New Deal reforms of the late nineteenth and twentieth centuries. While the nature of the threat monopoly posed to liberal democracy shifted over time, the animus toward financiers remained constant. For Thomas Jefferson and other antimonopolists of the early republican period, special government privilege and centralized state power represented the gravest dangers to the fledgling nation. Economic concentration mattered because it reflected government favor and such economic power could in turn further corrupt the political system. The Jeffersonian vision of democracy thus relied on a decentralized agrarian society and local political rule as a safeguard against government tyranny. Bankers not only represented the antithesis of the productive yeoman farmer, whose independence and self-​sufficiency rendered him the proper guardian of republican virtue, but embodied the kind of political favoritism that imperiled democratic governance. Granted particularly valuable privileges through special legislative charters, bankers served as liminal figures whose function as keepers of credit and currency gave them vast control over the economy and, thereby, the polity.4 Jefferson and the Anti-​Federalists thus bitterly opposed the congressional chartering of the first Bank of the United States in 1791 and Alexander Hamilton’s plans to intertwine the financial interests of a mercantile elite with the power of the federal government. Similarly, Andrew Jackson attacked the Second Bank of the United States on the grounds that it embodied the kind of monopoly born of government privilege that enriched a “monied aristocracy” at the expense of the common man.5 By the 1840s, free banking, and general incorporation more broadly, emerged as a solution to the corruption of state power by an economic elite. By granting a corporate or bank charter to anyone who met certain basic requirements through an administrative process, Jacksonian Democrats intended to remove the exclusivity of state privilege from economic enterprise and eradicate existing monopolies.6 By the Gilded Age, however, the rise of behemoth corporations and financial oligarchs had created new sources of concern for antimonopolists who now turned toward the state, rather than away from it, in an effort to curb the ever-​expanding reach of private economic power. Typified in populist and Progressive initiatives ranging from railroad and public utility regulation to antitrust law and the establishment of the Federal Reserve, sweeping expansions in state and federal power reflected a commitment to an incredibly capacious notion of the “social control” of business.7 Yet even

206  Antimonopoly and American Democracy as the antimonopoly movement evolved to address the challenges of a new industrial age, finance remained its beating heart. Throughout the tumultuous transformations of the late nineteenth century, debates over money and banking dominated American politics. As Greenbackers and Silverites waged battle against the gold standard and agrarian populists lambasted the concentration of capital and credit in New York, financial reform functioned as a sieve through which competing visions of American democracy poured. For antimonopolists, the financial system remained the central arbiter of economic opportunity. To democratize control over credit and currency, albeit through new mechanisms of state and federal power, was to ensure a nation of independent producers and preserve political liberty.8 By 1907, a devastating financial panic that necessitated the intervention of J. P. Morgan to stabilize the banking system further channeled public outrage toward a Wall Street “money trust” accused of determining the fate of the entire economy.9 The absence of a central bank that could step in to manage the crisis, leaving Morgan to fill such a role, spurred a public reckoning with the role of private financial power in the economic and political life of the nation.10 The Panic of 1907 thus prompted wide-​ranging government inquiries and reform efforts, including the creation of the National Monetary Commission in 1908 and the Pujo investigation, a series of congressional hearings in 1912 and 1913 that publicized the enormous influence wielded by a handful of investment banking houses in New York City. Despite the detailed reports of the National Monetary Commission indicting structural defects in the banking system as the primary catalyst for the frequency and severity of American financial panics, it was the Pujo hearings that captivated the nation.11 Exposing the extensive role a small group of investment bankers, and their networks of commercial banks and trust companies, played in organizing, financing, and managing many of the largest corporations in the nation, the Pujo Committee underscored the unique dangers of concentrated financial power.12 Control over money and credit, the “life blood of business,” endangered not only the stability of the financial system but the welfare of the broader economy as well.13 The Committee’s final report explained that bankers’ ability to direct “other people’s money” toward favored ventures could extinguish competition in industry, thereby magnifying the impacts of monopoly in banking far beyond the financial sphere.14 By underwriting and distributing the securities of the most important corporations and establishing interlocking boards of directors, the Committee argued that a small and insular network of bankers had gained

Banking and the Antimonopoly Tradition  207 vast control over both finance and commerce, threatening equality of opportunity, independent enterprise, and ultimately democracy.15 Though scholars have cast doubt on the extent of control J. P. Morgan and other prominent banking houses actually exerted in practice, the Pujo Committee’s work influenced some of the most consequential expansions of federal power in the Progressive Era, including the creation of the Federal Reserve and the enactment of the Clayton Antitrust Act, which prohibited interlocking directorates and anticompetitive stock mergers.16 Nevertheless, the old Jeffersonian and Jacksonian fears of centralized state power coursed through Progressive Era debates over financial regulation and competition policy. As Brandeis epitomized in his excoriation of the “money monopoly,” big banks and big government presented twin perils to the individual liberty necessary for democracy.17 Thus, while Progressives like Theodore Roosevelt championed robust government power to match the efficiency and productivity of large-​scale corporations and financial titans, Woodrow Wilson and Brandeis advocated a diffusion of economic power through competition and the primacy of state and local governance to preserve American democracy. These divisions, laid bare in the 1912 presidential debates over the proper role of antitrust law in countering financial-​industrial monopolies, were never definitively resolved.18 Rather, antitrust remained an unsettled enterprise, the remnant of a deeper and broader antimonopoly tradition that historians argue ultimately withered in the face of World War II.19 Yet far from diminishing in the wake of the war, the antitrust movement lived on, structuring national policymaking well into the postwar decades. Moreover, finance remained a centripetal force in its enduring influence. As the battle to enact the BHCA epitomizes, postwar political economy continued to reflect the complexity and contradictions, inherent tensions and lasting power of the antimonopoly tradition. Though the BHCA has often been attributed to the outsized influence of small bankers opposed to the growth of larger, more efficient rivals, the bank holding company movement ultimately reflected a broader Progressive vision, one that understood concentrated financial power as a dire threat not only to economic prosperity, but to constitutional democracy itself.20 The bank holding company emerged at the turn of the twentieth century as a means of circumventing restrictions on bank expansion. The American banking system had favored unit banking, single office banks with no branches, over branch banking, one chartered bank with multiple branch

208  Antimonopoly and American Democracy offices, since the Civil War, which established a dual banking regime of federal and state regulators.21 Prohibitions on branch banking resulted in the creation of thousands of small, local banks rather than a handful of large, interstate branch banks. Despite the advantages of branch banking, including greater stability and credit diversification, a late nineteenth-​century alliance of agrarian populists and unit bankers effectively maintained limitations on branching at the federal level and in many states.22 In the early twentieth century, bankers looking to expand thus turned to the newly available holding company device. Because the bank holding company was chartered under general incorporation laws, it was not subject to federal or state banking authorities. Bank holding companies could therefore acquire unit banks within and even across state lines despite branching restrictions.23 Many states initially failed to address the issue of bank holding companies as they remained generally small, centered on rural banks, and a minor force within the banking landscape.24 However, the number of bank holding companies, as well as the size and sophistication of banking groups, grew dramatically in the late 1920s amid the speculative boom of the decade and competition for regional control. While some states did respond with efforts to regulate bank holding companies to varying degrees, the 1929 stock market crash and the onset of the Great Depression largely halted bank holding company expansion as well as reform efforts.25 Moreover, just as states had faced territorial limitations on their regulatory reach amid the rise of the holding company in the industrial realm, the bank holding company highlighted the inability of states to control activity beyond their borders. When bank holding company groups crossed state lines, or consisted of both state and national banks, comprehensive regulation at the state level was virtually impossible.26 Federal regulators also tried to extend jurisdiction to holding companies that owned national banks on several occasions, but to no avail. Though the Pujo Committee had recommended a prohibition on corporate ownership of national bank stock, the reforms that followed ultimately focused on interlocking directorates for large, urban national banks and trust companies, the primary form of control exercised by the most powerful Wall Street banks.27 Even the establishment of the Federal Reserve did not fundamentally alter the structural deficiencies of the unit banking system that spurred the development of bank holding companies, as the political compromises required to ensure its creation limited the scope of reform.28

Banking and the Antimonopoly Tradition  209 The bank holding company thus endured as an effective, though less preferable, substitute for branch banking, and unit bankers similarly opposed this competitive threat to their existence.29 Even as the weaknesses of unit banking were laid bare in the unprecedented bank failures of the Great Depression, the powerful unit banking lobby succeeded in preventing branching liberalization. Rather, the Banking Act of 1933 established deposit insurance as the solution to the banking crisis, which propped up weaker unit banks rather than restructuring the banking system to allow for larger, more stable branch banks.30 In doing so, Congress set the stage for a much longer battle for control over the primary device used to evade the unusual constraints of the American banking system.31 In the late 1930s, a cadre of veteran Progressives, populists, and New Dealers took up this battle and redrew its terms in the shadow of fascism, shifting the movement from one dominated by unit banking interests to one reflecting broader structural concerns about American democracy. Undoubtedly, the unit banking lobby played a sizable role in the origins and eventual success of bank holding company legislation. From the Independent Bankers Association (the “IBA”), formed in Minnesota in 1930 to combat the expansion of two formidable bank holding company systems in the Northwest, to the American Bankers Association, unit bankers across the nation mobilized against holding company groups.32 They argued that independent banks could not survive against massive, centrally managed systems that had greater resources and could shift funds across regions. Emphasizing the importance of local banks that kept deposits and loans circulating within and for the benefit of the community, unit bankers warned that average citizens would lose access to credit should distant holding companies secure banking monopolies.33 Like the anti-​branch banking movement, a broader coalition of agrarian populists and small merchants supported their grassroots campaign.34 The IBA, for example, joined the Minnesota Farmer-​Labor Party in 1930, which opposed the acquisition of independent banks by bank holding companies. Indeed, the 1936 platform of the Farmer-​ Labor Party explicitly connected unit banking with the plight of struggling farmers and retailers in pressing for “government ownership of monopolistic industries and banking, except independent banks whose stock is locally owned and who are financing independent merchants and farmers.”35 And in 1938, Wright Patman, the Texas populist who championed the interests of farmers, small business, and unit bankers alike, introduced a bill calling for the outright liquidation of all bank holding companies within two years.36

210  Antimonopoly and American Democracy While scholars have generally attributed the opposition of unit bankers and their allies to unabashed self-​interest, their efforts also speak to deeply rooted conceptions of the threat concentrated financial power posed to democratic governance.37 By advocating for a decentralized banking structure to preserve local economic and political autonomy, unit bankers channeled an antimonopoly tradition tracing back to Thomas Jefferson and Andrew Jackson. Yet, in turning toward state power to prohibit bank holding company expansion and embracing federal privileges, including deposit insurance, unit bankers tapped into a distinctly Progressive antimonopoly spirit. While unit banking certainly contained brashly anticompetitive features, as unit banks themselves often constituted local monopolies due to branching restrictions, its supporters articulated their cause in more Brandeisian terms. They sought regulatory protections for community enterprises and portrayed them not as anticompetitive, but as a means of ensuring the individual autonomy necessary for democracy. Like the anti–​chain store crusade and other movements of small proprietors in the early twentieth century, unit banking signified more than a reactionary yearning for a bygone era.38 Rather, it represented a different vision of political economy, one whose potency and lasting influence has been underestimated in traditional narratives of the development of American capitalism.39 While a unit banking coalition thus helped catalyze federal legislative efforts, old Progressives as well as New Dealers concerned about public control of private power also turned their attention toward bank holding companies in the late 1930s. For the battle to curb bank holding company expansion revolved not only around the survival of independent banking, but around the holding company itself as an instrument of regulatory evasion. Like their Progressive Era forebears, leading figures in the campaign to bring bank holding companies under federal supervision emphasized the holding company as a dangerous device utilized to escape government oversight of economic power. Chartered under state general incorporation laws that no longer sought to control corporate exploits, bank holding companies represented a perilous loophole in the otherwise strict regulatory regime of the commercial banking sector. Moreover, just as Progressives had turned to federal antitrust legislation in the face of states’ inability to regulate beyond their borders, these advocates of bank holding company reform demanded congressional action to address the interstate nature of group banking.40 Thus, Senators William Gibbs McAdoo and Carter Glass, two former secretaries of the treasury under Woodrow Wilson, introduced bank holding

Banking and the Antimonopoly Tradition  211 company bills in 1937 and 1938.41 Importantly, both McAdoo and Glass were staunch proponents of branch banking who abhorred the anticompetitive motivations of the unit banking lobby. Their support for a freeze on bank holding company expansion rested on apprehension over the lawless nature of the device, which allowed potentially vast interstate bank groups to escape comprehensive and effective regulation. Thus, the movement for bank holding company reform was rooted not merely in special interest protectionism or localist ideology, but in a deeper, Progressive concern with the holding company as a mechanism for amassing concentrated power beyond the reach of government supervision.42 Moreover, Franklin D. Roosevelt himself began to champion bank holding company reform in the winter of 1938. In a January press conference, FDR linked the public utility holding company, widely synonymous in the American public with monopoly, greed, and corruption, to the bank holding company. Noting that some public utility holding companies exercised outsized control compared to the “very little equity” they held, FDR boldly asserted that he favored “eliminating holding companies entirely.” When pressed whether he in fact meant “all holding companies” even in “other lines of industry,” FDR reiterated his indictment by using the bank holding company as “another very good illustration” of the problem. “You find a situation in a good many parts of the country,” he explained, “where in a very large geographical area practically all of the banks are controlled by some holding company.” Like Glass and McAdoo, however, FDR separated the bank holding company issue from branch banking, helping to transform the campaign from one rooted in the long history of anti-​branching sentiment to one focused on holding company power and abuse more broadly.43 FDR’s support for the elimination of all holding companies quickly made national headlines, and placed the bank holding company squarely in public view as an object of scorn in the same family as the condemned public utility holding company.44 By the spring of 1938, FDR had tasked an interdepartmental committee with furthering legislative reform and included the bank holding company in his formal message to Congress on the strengthening of antitrust law. Invoking old Progressive tropes, FDR warned of the dangers concentrated private power posed to the “liberty of a democratic people.”45 Connecting monopolistic economies to the rise of fascism abroad, FDR identified bank holding companies as a particular threat to the body politic. “It is hardly necessary,” he declared, “to point out the great economic power that might be wielded by a group which may

212  Antimonopoly and American Democracy succeed in acquiring domination over banking resources in any considerable area of the country.” FDR implored Congress to enact legislation that would “prevent holding companies from acquiring control of any more banks” and eventually provide for their abolition.46 In the wake of FDR’s congressional address, the bank holding company thus became one battlefield in a larger war that pitted monopoly power against the very soul of American democracy. That bank holding company reform would have a moment in the spotlight in the waning years of the 1930s is not entirely surprising, as many scholars have recognized the ascendancy of the antimonopolists within New Deal policymaking following the failed experiments with government planning and the 1937–​1938 recession.47 What is remarkable is that the seeds planted by those old Progressives would be tended to even in the midst of a world war, and bloom in the years to follow. For historians generally mark the late 1930s as the twilight of Progressive economic reform, contending that Keynesian fiscal policy and the promotion of mass purchasing power became the primary tools for managing the postwar economy.48 Moreover, scholars argue that despite vigorous antitrust enforcement, the postwar antitrust regime transformed the American antimonopoly tradition from a political movement into a technocratic enterprise shrouded in legal and economic expertise.49 However, the long road to the BHCA reveals an antimonopoly movement built upon Progressive ideals that reached its zenith in the postwar years on a congressional stage. Far from conservatizing forces that muted Progressive Era and New Deal reforms, World War II and the Cold War revitalized an old Brandeisian understanding of the threat monopoly power posed to political liberty and nurtured a renewed faith in antitrust as a powerful bulwark against the decay of democracy. Like their predecessors, the leading figures of this postwar movement spanned partisan divides and reflected the contingency and malleability of American antitrust law. From populist Democrats from the traditional southern and western strongholds to eastern Republicans and New Deal officials, the campaign against bank holding companies wrought unlikely alliances in the service of antimonopoly ideals. Thus, it was Marriner Eccles, the former head of a multistate bank holding company turned Federal Reserve chairman, who would play a vital role in carrying the torch of bank holding company reform from the New Deal era to the postwar years. Indeed, Eccles, and his own transformation from bank holding company advocate to antitrust crusader, personifies the multifaceted and inchoate nature of the

Banking and the Antimonopoly Tradition  213 bank holding company movement as it bridged the antimonopoly tradition across the seismic chasm of World War II. Best known for his long tenure at the helm of the Federal Reserve from 1934 to 1948, Eccles was born in Utah to a devout Mormon father who preached a philosophy of laissez-​faire and self-​reliance as he rose from utter poverty to astounding wealth.50 A man who could read and write no more than his own name until the age of twenty-​one, David Eccles instilled in his son Marriner the fierce work ethic and rugged individualism that he believed characterized not only his own success but that of the American West itself. Marriner ultimately carried forward his father’s legacy, forming one of the most prominent early bank holding companies in the western United States by 1928 as his devotion to his father’s faith flourished alongside his business ventures.51 Yet, only six years later, Eccles would find himself governor of the Federal Reserve Board and advocating federal intervention through countercyclical spending long before Keynesianism garnered a consensus. Moreover, Eccles would go on to personally spearhead the campaign for greater federal control over bank holding companies throughout the 1940s. How did the former head of a major bank holding company and evangelist of laissez-​faire principles come to lead the charge for bank holding company regulation in the postwar years? As Eccles himself described it, he experienced a profound conversion amid the unprecedented devastation of the Great Depression. “On the morning of the awakening,” he recalled in his autobiography, “I saw for the first time that though I’d been active in the world of finance and production for seventeen years and knew its techniques, I knew less than nothing about its economic and social effects.” Stripped of his prior belief in self-​help and nonintervention, Eccles came to see that the “job of warding off trouble . . . is . . . everybody’s collective responsibility, acting through the organs of our government.”52 Upon FDR’s election in 1932, Eccles became a pious New Dealer and early spokesman for Keynesian spending in the face of a deflationary depression. Advocating quietly behind the scenes for sweeping deficit financing and changes in the Federal Reserve System, Eccles’s name soon emerged as a possible replacement for governor of the Federal Reserve Board in 1934. Meeting with FDR in November, Eccles made clear his intention to overhaul the Federal Reserve. Emphasizing the beliefs that would characterize his later views of the bank holding company problem, Eccles criticized the disparity between private and public power, noting that while the “System had

214  Antimonopoly and American Democracy originally been designed to represent a blend of private and public interests and of decentralized and centralized authorities . . . this arrangement had become unbalanced” as “[p]‌rivate interests, acting through the Reserve banks, had made the System an effective instrument by which private interests alone could be served.”53 He suggested restructuring and strengthening the Federal Reserve Board in Washington, among other solutions that would eventually comprise the Banking Act of 1935. Though FDR warned Eccles of “formidable opposition” to his appointment, six days later he announced Eccles as governor of the Federal Reserve Board.54 After his appointment in 1934, Eccles moved swiftly to put into motion his plans to reduce reserve bankers’ control over the system, particularly that of the New York Federal Reserve Bank, and centralize authority in the Washington-​based Board of Governors. Despite bitter opposition to the Banking Act of 1935, the bill passed in August that year and bore the mark of Eccles’s faith in serving the public interest through strong federal oversight and action.55 Thus, despite his former role as a wildly successful banker running a sizable bank holding company, Eccles’s own reflections on the transformation of his views during the Depression and his record of service in FDR’s administration evince a genuine commitment to bringing public control to bear on private economic power.56 And it would be Eccles, proselytizing from the newly fortified pulpit of the Federal Reserve following the Banking Act of 1935, who would play a central role in carrying forward those ideals as he challenged the most powerful bank holding company in the nation during and after World War II. For it was Eccles who went searching for an old Progressive weapon, the Clayton Antitrust Act, and used it for the very first time in the history of the Federal Reserve against the Transamerica Corporation in 1948, long after the dusts of war had settled. Eccles’s role in bank holding company regulation has often been reduced to a power grab for the Federal Reserve or a singular obsession with bringing down Transamerica.57 However, his deeply rooted faith in the New Deal, in collective action via federal regulation as a salve for economic instability, reveals a far more nuanced story of the movement for bank holding company reform and of American liberalism. By 1938, having reorganized the Federal Reserve Board, Eccles continued his quest to strengthen the supervisory capacity of the Federal Reserve and unify the banking system.58 For Eccles, the bank holding company now represented an obstacle, rather than a means, toward that end. For bank holding companies had long evaded meaningful oversight by the Federal

Banking and the Antimonopoly Tradition  215 Reserve, and every other banking agency, thereby challenging Eccles’s goal of striking a new balance between federal regulatory control and private financial power. Armed only with the authority to grant voting permits for bank holding companies to vote their shares in subsidiary member banks, the Federal Reserve had no way of halting the actual expansion of bank holding company syndicates.59 Yet Eccles was no Wilsonian in the mold of Glass or McAdoo, no populist romanticizing small, unit banks. Rather, Eccles was a pragmatic reformer, a New Dealer helping to adapt an older republican antimonopoly tradition into a modern one that would rely on federal regulation rather than an antiquated faith in trustbusting.60 Thus, even as Secretary of the Treasury Henry Morgenthau, Jr. and an Interdepartmental Banking Committee mounted a campaign for the dissolution of all bank holding companies in the early months of 1938, and Carter Glass led the charge in the Senate, Eccles defended their utility and advised Glass not to proceed with his bill.61 Recognizing holding companies as the only alternative means of branch banking, which he supported as a method of strengthening and stabilizing the banking system, Eccles did not view these corporations as anticompetitive devices. Instead, he focused on the lack of coherent federal authority over bank holding companies and their affiliates as the primary issue.62 In the wake of another attempt by Glass and Morgenthau to enact a bank holding company bill in 1941 that would eliminate the device, Eccles responded to FDR’s personal request that “all four agencies work together” on the legislation with a pointed defense of bank holding companies.63 By 1948, however, Eccles would attempt to force the breakup of the largest bank holding company in the nation and transform the Federal Reserve into an antitrust prosecutor in the postwar period. What accounts for the dramatic shift in Eccles’s role, and that of the Federal Reserve, in bank holding company reform and the postwar antitrust regime? Ultimately the breakdown of Eccles’s relationship with and view of the Transamerica Corporation, and its fiery steward A. P. Giannini, contributed significantly to his pioneering efforts to throw the Federal Reserve’s hat into the antitrust ring. The owner of the largest bank in the world by 1945, Giannini had utilized the bank holding company device to blatantly defy federal authority, crafting a massive interstate empire of national and state banks as well as commercial businesses in the face of repeated directives to halt all expansion. The struggle to rein in the unbridled power of Giannini’s bank holding company thus transformed Eccles from regulator to trustbuster and rekindled a broader Progressive commitment to breaking up monopoly power.

216  Antimonopoly and American Democracy A. P. Giannini had a long history of antagonizing banking regulators as he pushed the outer limits of branch and interstate banking throughout the first half of the twentieth century.64 Transamerica, the holding company that owned the majority interest in Bank of America, as well as other banks and business ventures ranging from insurance and real estate to manufacturing, concerned regulators who viewed it as a monopolistic giant in the banking realm and beyond. From conflicts with the Treasury, the Comptroller of the Currency, and the SEC, key members of FDR’s administration wrangled with old questions about the “curse of bigness” as Transamerica’s sheer size and tenacity challenged federal control.65 As Leo Crowley, chairman of the FDIC, warned of Transamerica in a memorandum to Henry Morgenthau on January 31, 1938, “[a]‌t the present time the Bank of America has 490 branches. This represents a large concentration of credit in one group, or in fact, in the hands of one man.”66 Morgenthau’s private notes on Bank of America similarly reveal a concern over its size, and it was Morgenthau who corralled the troops against Giannini. While known for his obsession with a balanced budget, Morgenthau approached the issue of bank holding companies, and Transamerica specifically, with a similar doggedness.67 Eccles, however, remained on good terms with Giannini throughout the early 1940s. Both western bankers who resented Wall Street control of the financial system, Eccles and Giannini saw eye to eye on several matters as the Depression gave way to the New Deal. Giannini had built his success off of providing smaller loans to laborers, immigrants, and others often excluded by traditional banking standards. Moreover, Giannini had helped rescue the Nevada banking system by purchasing and stabilizing numerous failing banks at the invitation of the Nevada State Banking Examiner in 1933.68 Epitomizing the old Progressive disputes over distinguishing good from bad trusts, Transamerica reaffirmed, at least for reformers like Eccles, that the problem of bigness was rarely simplistic or one-​dimensional. Indeed, in contrast to popular depictions of Giannini lassoing defenseless little community banks, Giannini considered himself a monopoly buster fracturing New York’s control of the financial system by accruing his own power in the west. Moreover, he was an outspoken supporter of FDR and the New Deal at a time when “nearly all other big bankers were against it,” working closely with the administration and supporting Eccles in his reorganization of the Federal Reserve System in the Banking Act of 1935.69 Thus, even as the SEC under William O. Douglas waged a very public war against Transamerica over misrepresentations regarding its distribution of stock in 1937, and

Banking and the Antimonopoly Tradition  217 the Comptroller of the Currency deemed Bank of America’s banking practices unsound, Eccles helped Giannini negotiate an agreement with the Comptroller in the spring of 1940 and praised his leadership in a congratulatory letter.70 Thus, as late as 1941, Eccles defended Giannini’s interests to FDR himself by stating frankly that Morgenthau and Glass’s bank holding company bill was intolerably discriminatory toward Transamerica.71 By 1942, however, Giannini’s defiance of the truce Eccles helped broker with the Comptroller changed Eccles’s views of the danger Transamerica posed. Between 1940 and 1942, Transamerica continued its bank expansion by purchasing the stock of various banks without meeting the requirements of its deal with the Comptroller, who denied permission for new branches within branching states. Eccles cautioned Giannini regarding his actions but to no avail.72 Rather, Giannini reaffirmed his determination to thwart what he deemed brazen discrimination against Transamerica by attempting to play state and federal banking regulators against each other. Having been denied permission for new branches in California by the Comptroller, Giannini attempted to condition his purchase of the First Trust and Savings Bank of Pasadena upon its securing approval for new branches from the Federal Reserve. When the Pasadena bank made informal inquiries regarding additional branches, it prompted a private conference among the banking agencies in which the Federal Reserve, the Comptroller, and the FDIC agreed to present a united front in denying any requests for expansion by Transamerica.73 The Board then followed up with a sharp rebuke in a February 14, 1942, letter to Transamerica, denying the Pasadena bank’s proposed branches and stating plainly that there was unanimous agreement “that the Federal bank supervisory agencies should . . . decline permission for the acquisition directly or indirectly of any additional banking offices . . . by Transamerica Corporation.”74 Transamerica responded with equal parts outrage and defiance. In a letter sent one month later, its vice president insisted that the “acquisition of interests in banks” was a matter “within the responsibility and discretion of the directors and management of the corporation.” Moreover, Transamerica refused to accede to the federal bank supervisory agencies’ policy, stating that it could not “accept such a ruling on behalf of itself or any bank in which it owns any interest.”75 As Giannini brazenly forged ahead with his plan to control more banks in the five-​state area of California, Nevada, Oregon, Washington, and Arizona, Eccles began to see Transamerica in a different light. For Eccles had devoted the last decade of his life to stabilizing the banking system and

218  Antimonopoly and American Democracy strengthening the Federal Reserve’s role and supremacy in that process. A. P. Giannini’s refusal to bow to that authority presented a substantial threat to the very legitimacy of the Federal Reserve’s power at a time when the arteries of administrative governance were still clogged with resistance.76 The notion that one corporation, ever growing in size, controlled largely by one man, could operate beyond the reach of the federal banking agencies challenged the very principles that had driven Eccles into public service. Thus, even as America’s entrance into World War II necessitated the Federal Reserve’s attention to war financing, Eccles, alongside the Comptroller and the FDIC, continued his quest to bring Transamerica to heel. Eccles turned first to the privilege of membership in the Federal Reserve System as a mechanism of control. In early 1942, Giannini had attempted to acquire control of a bank in Lakewood Village, California, where he had previously been denied a branch, by indirectly financing the individuals who purchased the majority of stock in the bank. The Board had already been warned of Giannini’s backing when the Peoples Bank of Lakewood Village applied for membership in the Federal Reserve System. In a letter from Leo Crowley at the FDIC to the Board in January, Crowley alerted the Board to the Transamerica connections and warned that “for some time” the FDIC had been “greatly concerned over rumors that Transamerica intends to establish an additional State bank group in California.” Reiterating to the Board that the FDIC was “unalterably opposed to further expansion by this group,” Crowley went so far as to admit that the agency was not “concerned whether Lakewood Village” was “in need of additional banking facilities.” “In our judgement,” he declared, “this is not the question. The primary question is one of principle.” Though paying lip service to the concentration of risk in California as the FDIC insured “the Transamerica System to the extent of $1,190,000,000,” Crowley made clear that the problem Transamerica posed was not merely to the solvency of the deposit insurance program, but to the “principle” of democratic authority itself.77 Indeed, the scope of the Board’s power became a subject of judicial analysis when the Federal Reserve conditioned the Lakewood Village bank’s membership on a promise not to be acquired by or affiliate with Transamerica in May 1942. When Transamerica subsequently purchased 10 percent of the Peoples Bank stock without its knowledge, and the Board refused to revoke the condition, the Peoples Bank filed suit in federal court. The District Court for the District of Columbia found that the bank’s acceptance of membership barred it from bringing the claim and that regardless the condition was valid,

Banking and the Antimonopoly Tradition  219 but the judgment was reversed on appeal. The Court of Appeals focused on whether the “Board’s assumption of the power to check the expansion of bank holding companies” amounted to “an invasion of the legislative field” and determined that the Board’s condition as a “mere device to check the growth of a holding company” had no foundation in the Federal Reserve’s authorizing statute.78 Eccles v. Peoples Bank of Lakewood Village would eventually reach the Supreme Court, where Justice Felix Frankfurter held that the declaratory judgment sought by the bank was an inappropriate remedy for administrative action that had yet to come to fruition, thus avoiding ruling on the merits.79 Meanwhile, as the Peoples Bank case wound its way through the courts presenting novel questions about the boundaries of administrative authority, Eccles focused on how best to confront a banking empire that managed to continuously evade regulatory control. The answers Eccles came up with involved a two-​front assault, with the pursuit of a legislative solution to prevent the unrestrained development of bank holding company systems in the future and a turn to antitrust law to deal with the problem of Transamerica in the present. Thus, in the Federal Reserve’s 1943 Annual Report, Eccles offered an impassioned plea for congressional action on a bank holding company bill that would provide the Board with the authority to control the expansion of holding company groups. Invoking Progressive tropes in describing the dangers of the holding company, a “device” that “lends itself readily to the amassing of vast resources obtained largely from the public which can be controlled and used by a few people . . . in carrying out an unlimited program of expansion,” Eccles nevertheless made clear that it was only “the exceptional case” that concerned the Board as he detailed the ways that the corporate device had been used to “escape the supervisory powers of the various bank supervisory agencies.”80 The man who had once stood up to the likes of Henry Morgenthau, Carter Glass, and others for designing discriminatory legislation aimed specifically at Transamerica had certainly come a long way in a short time. Importantly, both private and public Board communications also began to emphasize Transamerica’s growing acquisitions of nonbanking businesses in its case for holding company legislation.81 Unlike many other countries in which banks had large ownership stakes in industrial enterprises, American banking practice had long regarded the separation of banking and commerce as “axiomatic,” though the policy had never been perfectly enforced.82 Initially intended to prevent government-​chartered banks that acted as quasi-​public institutions from monopolizing other lines of business, activity

220  Antimonopoly and American Democracy restrictions later reflected liquidity and solvency concerns as well. Thus, even as the general incorporation revolution unleashed corporate activity for any lawful purpose, the notion that bank ventures into risky commercial endeavors jeopardized depositor funds and public confidence in the financial system preserved limitations on bank conduct.83 Additional economic issues reinforced the division over time. The Panic of 1907 and the Pujo investigation had publicized the vast control investment bankers and their networks of commercial banks and trust companies had exerted over the industrial economy and prompted legislative reform focused on interlocking directorates. By the early 1930s, the perception of conflicts of interest and corruption among banks and their securities affiliates in the wake of the Great Depression led to the Glass-​Steagall Act, which separated commercial from investment banking.84 Yet even under the Glass-​Steagall Act, holding companies could still acquire both banks and purely commercial businesses. Similar concerns over conflicts of interest thus emerged as the possibility of a bank holding company favoring its own nonbanking businesses through preferential loans and suppressing opportunities for other enterprises threatened competition.85 Moreover, the old antimonopoly fears of government privilege corrupting economic enterprise endured, as the benefits of federal deposit insurance could be passed on to nonbanking businesses under the holding company structure.86 By the late 1930s, political concerns became paramount as well. Against the backdrop of the development of extensive combinations of banking and industry in the German and Japanese contexts, the American emphasis on separating the banking sector from the commercial business realm became increasingly pertinent to democratic policy goals. Not only would it prevent a bank from discriminating against rival businesses in allocating credit, it would further the commitment to a decentralized economic landscape. Disallowing combinations of financial and industrial entities would prevent the accrual of vast power in a handful of enormous conglomerates, and thereby ensure not only the competitive provision of credit but the integrity of the political system. As faith in the policy of divorcing banking and commerce grew sacrosanct with the rise of fascism abroad, the bank holding company device became a graver threat to American liberty.87 For though bank holding companies initially developed to evade branching limitations rather than restrictions on mixing banking and commerce, Transamerica had begun increasingly acquiring industrial and manufacturing businesses under the umbrella of the holding company device. Thus, a confidential

Banking and the Antimonopoly Tradition  221 memorandum on the Board’s policy regarding Transamerica in March 1943 listed Transamerica’s acquisition of “substantial investments in unrelated businesses and industries” as one of the primary causes for concern. An attached exhibit catalogued all of the nonbank investments, from a fire insurance company in 1928 to engine and aircraft businesses acquired in 1942.88 And in the 1943 Annual Report, Eccles detailed the perils of bank holding company investments in the industrial sphere.89 Maintaining his position that dissolution of all existing bank holding companies would be technically complex and negatively impact controlled banks and depositors, Eccles advocated in the Annual Report for preventative legislation that still left the problem of Transamerica’s present state unresolved.90 Thus, Eccles also began to gather information regarding the Federal Reserve’s power to combat banking monopolies via the antitrust laws. After being advised that a preliminary inquiry into Transamerica by the Antitrust Division of the Department of Justice had led to “no specific conclusion,” Eccles initiated a probe into whether the Board could bring suit under the Clayton Antitrust Act.91 Though the Federal Reserve had been granted authority under Section 11 of the Act to enforce the provisions related to banking, it had never utilized its statutory power to bring a Section 7 case involving acquisitions of bank stock.92 Eccles nevertheless instructed the Board’s legal counsel to investigate the potential of turning this weapon on Transamerica’s seemingly impenetrable defenses.93 Records of the Board of Governors indicate that discussion of the possibility of an antitrust case against Transamerica began in earnest by the summer of 1944, with J. P. Dreibelbis, an assistant general counsel for the Federal Reserve, authoring a memorandum on the issue and continued discussion in Board meetings regarding Section 7 penalties in the months to follow.94 By 1945, Eccles had arranged to meet with Attorney General Tom Clark to discuss the evidence he had gathered during the Antitrust Division’s investigation of Transamerica. Writing to Eccles in advance of the conference, Clark outlined the challenges of bringing a case against Transamerica under the Sherman Antitrust Act for conspiracy to monopolize commercial banking and credit facilities. Despite Transamerica controlling “approximately 40% of banking offices and . . . 36% of the commercial banking deposits” of a five-​state area, the DOJ had not been able to “develop substantial evidence either that Transamerica achieved its present dominating position in the commercial banking field through illegal trade practice . . . or that it abused its dominant position once it was achieved.” Clark advised that

222  Antimonopoly and American Democracy while he had discovered instances of Transamerica using coercive tactics, it had been “impossible . . . to pin down a sufficient number of them to make a prima facie case on the theory suggested.”95 In light of the DOJ standing down, and Transamerica’s flagrant persistence in its plans for expansion, Eccles decided to proceed with the first antitrust case in the history of the Federal Reserve and break up the Transamerica empire.96 Thus, by the end of World War II, Transamerica had become the octopus driving a resurgent postwar antimonopoly crusade against bank holding companies. Eccles, the man who once advocated for a regulatory, rather than trustbusting, solution to the bank holding company problem, had pioneered a new kind of Section 7 case designed to break up the most formidable bank holding company in the nation. Unable to be controlled, too big to fail, a moneyed monopoly invading the industrial landscape, Transamerica embodied the democracy eroding colossus of the Progressive imagination. Opposition to the behemoth holding company thus unfolded in the postwar years on Brandeisian terms, with its size a proxy for its threat to competition, opportunity, and above all, democracy. Yet, unlike the broader “antimonopoly moment” of the late New Deal, sacrificed to the war along with Progressive liberalism itself as canonical histories would have it, the antimonopoly case against bank holding companies not only survived but finally succeeded a decade after World War II.97 For out of the ashes of a war against fascism, an antitrust movement centered upon the political dangers of concentrated financial power rose like a phoenix. Indeed, Eccles did not make his groundbreaking decision to bring suit under the Clayton Act in a vacuum, as the belief that economic concentration endangered democracy pervaded legal discourse and national policymaking in the aftermath of World War II.98 The growing faith in antitrust as an antidote to fascism was so potent that American antitrust law was exported to Germany and Japan by delegations sent to oversee the rehabilitation of democracy in the war-​torn nations.99 Internal Federal Reserve memos show that the Board actively tracked these policy developments and changes in antitrust jurisprudence as it developed its own theory for its case against Transamerica. In a 1946 memo suggestively titled “Giannini Empire,” the Board detailed Transamerica’s ever-​rising control of banking resources in western states, as well as its forays into nonbanking business ventures. Emphasizing its refusal to respect federal orders, the Board echoed the fears of concentrated economic power leading to fascism then dominating policy debate:

Banking and the Antimonopoly Tradition  223 The control of such vast resources, in itself, creates the gravest sort of economic problems. . . . Likewise, the mere possession of such power, even if it were not used (and there is plenty of evidence that it has been) has far-​reaching political implications, particularly when the power is in the hands of a management which is openly hostile to the policies of this Administration and is defiant of all Federal authority as is this one. . . . This management recognizes no truce. Indeed, it takes advantage of the times to get its hands on more and more economic resources with the result that, if nothing is done, we may find that a Fascist economic empire has been built within our own borders.100

Furthermore, in 1947, Eccles wrote again to Attorney General Clark in light of the Supreme Court’s decision in the American Tobacco case, which seemed to “eliminate the need in certain cases for the kind or extent of proof which had previously been thought necessary in antitrust proceedings,” inquiring as to “whether the decision . . . might not lessen to a considerable extent the doubt which heretofore it has entertained as to the ultimate success of an antitrust proceeding against Transamerica.”101 Eccles received no response to his letter, however, as a changing of the guard in the Treasury signaled the end of a consensus among the federal agencies on resisting Transamerica’s expansionary designs. With the appointment of John Snyder as secretary of the treasury in 1946, who clashed with the Federal Reserve on key policy matters, the Treasury began to utilize its influence to promote, rather than oppose, the Giannini interests.102 Supported by the legal opinion of the Board’s general counsel regarding the Federal Reserve’s authority under the Clayton Antitrust Act, Eccles formally notified the attorney general, the chairman of the FDIC, and the comptroller of the Board’s antitrust investigation into Transamerica in November 1947.103 Barely two months later, President Truman informed Eccles that he would not reappoint him as chairman of the Board of Governors, though he requested he remain on as vice-​chairman, leading Eccles to believe the Gianninis had orchestrated his removal. While no records reveal such a motivation definitively, the chairman of the Senate Banking and Currency Committee gave such assertions credence during congressional hearings on the confirmation of Thomas McCabe as chairman of the Board of Governors in March 1948.104 While some blamed Eccles’s battle with the White House over inflation for his removal, Eccles remained convinced that the Gianninis bore responsibility for his demotion.105

224  Antimonopoly and American Democracy Even with Eccles replaced as chairman by Thomas McCabe, and A. P. Giannini’s death in 1949, the battle against Transamerica raged on, buoyed by the apparent substantiation of the Progressive fear of outsized economic concentration leading to the corruption of democratic governance. For here was a private corporation so powerful that it had seemingly been able to remove a government official who had dared to challenge its defiance of federal regulatory authority. Indeed, as hearings officially got underway in 1948 on Transamerica’s alleged violations of the Clayton Antitrust Act, lawyers for the bank holding company attempted to smear Eccles as vindictive and self-​ interested as part of their defense.106 Ultimately, Transamerica’s efforts to portray the Board’s charges as nothing more than a personal vendetta failed. The Board presented statistical evidence of Transamerica’s dominant position in a five-​state area over the course of two years, arguing that Transamerica’s control of 41 percent of all commercial banking offices, 39 percent of all commercial bank deposits, and 50 percent of all commercial bank loans constituted a tendency toward monopoly. Relying only on those figures, without an examination of actual competitive effects in the areas served by the acquired banks, as proof of Transamerica’s violation of Section 7 ultimately led the Board’s order that Transamerica divest its capital stock in forty-​seven banks to be overturned on appeal by the Third Circuit.107 The court noted, however, that the quantitative analysis the Board presented disclosed “a tremendous concentration of banking capital, and thereby of economic power, in the hands of the Transamerica group” and urged that “it may well be in the public interest to curb the growth of this banking colossus by appropriate legislative or administrative action.”108 Members of Congress who had long sought bank holding company legislation heeded the Third Circuit’s advice. Though several hearings in both the Senate and the House had been held on multiple different bank holding company bills in 1947, 1950, and 1952, the Board’s failed attempt to corral Transamerica’s defiant expansion via Clayton Act proceedings propelled more urgent congressional attention and ultimately legislative action. Thus, by 1953, hearings once again got underway.109 Moreover, anticipation of restrictive federal legislation led to further expansion of bank holding company groups beginning in 1954, prompting additional hearings and debates throughout 1955 and early 1956 to work through numerous differing bill versions and finally reach a compromise.110 Taken together, congressional records reveal several key aspects of the movement for bank holding company reform as it entered the final leg of the

Banking and the Antimonopoly Tradition  225 race that had begun nearly two decades prior. First, the exhaustive hearings show a broader coalition of policymakers and bankers who had mobilized on a national scale in support of bank holding company legislation. Though initial opposition to bank holding companies had originated in the early twentieth century with unit bankers at the state level, it was Progressive and New Deal policymakers opposed to such protectionism who ignited the movement for federal control over the device in the late 1930s. By the late 1940s, however, after a decade of failed attempts at legislation, Eccles reached out to Democratic proponents of unit banking and Republican politicians alike, including Representative Brent Spence of Kentucky, who introduced a Board-​drafted bill in 1945, and Republican senator Charles Tobey of New Hampshire, who introduced and held hearings on a Board-​drafted bill in 1947.111 While the numerous bank holding company bills that came before the House and Senate Banking and Currency Committees between 1945 and 1956 drew bipartisan support for the larger objective of enacting some measure of control over bank holding companies, conflict emerged over the extent of that control and the proper means of attaining it.112 On a grassroots level, a widening coalition of unit bankers across the country worked together toward a clearer goal of protecting unit banking. As one member of the House noted in 1955, “Twenty five years ago the [Independent Bankers Association] was founded in Minnesota with 28 member banks. Today over 5,200 banks have joined the fight to preserve the democratic ideal of banking.”113 Correspondence of bankers’ associations expose the arteries of a nationwide movement dedicated to opposing bank holding companies, and the issue garnered national news coverage throughout the 1940s and 1950s.114 So effective were the independent bankers in mobilizing a cohesive and coherent national movement that they succeeded in having their own version of a bank holding company bill introduced in 1950 and 1953 by Senators A. Willis Robertson and Homer Capehart respectively.115 Moreover, a broader small business constituency voiced its support for bank holding company reform, linking small community banks to the survival of independent merchants and local economies. The National Association of Retail Druggists lobbied in favor of restrictive bank holding company legislation, for example, arguing that bank holding companies could not “possibly know local conditions similar to the hometown independent banker” and warning that “[i]‌f these companies are permitted to continually circumvent the law . . . another monopolistic practice becomes

226  Antimonopoly and American Democracy rooted in our economy.”116 The secretary-​treasurer of the Wisconsin Retail Hardware Association made similar assertions, writing to Senator J. W. Fulbright that “[e]xperience has clearly indicated that local bankers are familiar with local conditions and the needs of local merchants.”117 In his own letter to Senator Fulbright, the vice president of the National Federation of Independent Business reiterated that “more is at stake than the welfare of the independent banker.” Rather, he cautioned, “the future of our whole free enterprise system may be at stake in view of the fact that we are headed straight for a concentration of finance and credit.” “May you be guided,” he concluded, “not by the pleas of the merger holding company mob, but by the philosophy of Jefferson, who would never have permitted such a power to grow up as that which we see in the bank-​holding company.”118 Thus, far from one of the “faded passions of American reform,” the antitrust movement remained alive and well long after its supposed death in 1938.119 Indeed, the failure of antitrust law to adequately combat one of the most powerful bank holding companies in the country ultimately led to new antimonopoly legislation in the form of the BHCA. Moreover, that victory occurred not in the shrouded realm of administrative technocracy or judicial enforcement of complex antitrust concepts, but on a congressional stage in clear declarations of policy linking a competitive banking system with American democracy itself. Nevertheless, fundamental issues revolving around federalism and the rights of states in a new regime of federal bank holding company regulation, the extent of administrative power, and the very meanings of monopoly and competition in the banking sector remained contested throughout the congressional debates. By the early 1950s, however, the movement for reform had coalesced around two central concerns: the danger of undue concentration of economic power and the combination of banking and nonbanking business under a holding company structure.120 Both concerns echoed the old Progressive focus on financial monopolies as particularly perilous to the body politic, as bankers’ control over credit carried the potential to corrupt not only economic but political democracy as well.121 While the two issues remained rooted in Progressive antimonopoly ideals, it was ultimately the potent antitotalitarian sentiment of the postwar period that furthered, rather than stymied, those principles and finally led to the enactment of the BHCA in the spring of 1956. The fear that undue concentration of economic power would result from continued bank holding company expansion ran throughout the congressional hearings and debates. Advocates of reform argued that because

Banking and the Antimonopoly Tradition  227 credit served as the “very lifeblood of all commerce,” banking concentration threatened the entire economy in a way that few other industries did.122 As Senator Paul Douglas stated plainly, “[b]‌ig banks” preferred “big business” over “little business” and thus “monopoly and quasi-​monopoly in industry” followed from banking concentration.123 Indeed, the contention that independent, local banks were the bedrock of competitive, free enterprise and critical to the survival of small business appeared frequently in the bank holding company hearings. Congressmen, especially those from populist southern and western regions, echoed unit bankers and small merchants in arguing that the centralization of credit in distant holding companies threatened local prosperity and autonomy. As Speaker of the House Sam Rayburn, the storied Texas representative who helped enact some of the most important Progressive and New Deal legislation, typified in 1955: The local independent bank is an ideal small business enterprise. Local people get together, invest their own capital . . . and solicit the deposits of the community. . . . They then take those deposits and put them out to work for the benefit of the people living in that community. I am certain I do not exaggerate when I state that the importance of the economic and social role of the independent banker in a democratic society ranks second to none.124

Those Brandeisian tenets, and the faith in decentralization as key to democratic governance, took on newfound significance in the postwar years as the nation reeled from a world war against fascism and faced an ongoing battle against socialism. For the preservation of local economic autonomy appeared more important than ever as the monopolistic economies of Nazi Germany and Japan became linked with the rise of totalitarian control. As Senator Douglas admonished the Senate in a 1956 debate on a bill that had been reported out of committee: Prior to Hitler there were only three banks in Germany. . . . These played ball with and helped the cartels and monopolies . . . which financed Hitler’s final drive to power. Thus, concentration of financial power helped on the concentration of economic power, and then the two forces joined hands to aid in creating a dictatorship of political power . . . 125

Not only looking backward at the case study of Germany, but forward as the specter of socialism seemed to inch ever closer to American shores,

228  Antimonopoly and American Democracy reformers argued that banking concentration facilitated the socialization of finance. Reasoning that it was easier to nationalize a few massive banks than thousands of small, independent banks, Congressmen and unit bankers pointed to nations like England in the aftermath of the Labour Party’s victory as warnings to be heeded. As Emanuel Celler, who had helped amend the Clayton Antitrust Act in 1950, advised in a June 1955 debate in the House, “[i]‌n England, where you had large concentrations particularly of financial power, it was a very simple matter for the Government to step in and nationalize the banks. I warn the bankers of this country that unless this trend is stopped, we are going the way that England went.”126 Likewise, a House report submitted by Representative Brent Spence in May 1955 cautioned that “monopolistic control of credit could entirely remold our fundamental political and social institutions. . . . We dare wait no longer, for already we are rapidly following the example of England whose many banks became the Big Five.”127 Senator Douglas shared a similar message in 1956, though he accurately depicted the mere concentration of the British banking system, which had not in fact been nationalized.128 The issue of bank holding companies combining both banking and nonbanking businesses in defiance of the separation of banking and commerce unfolded along much the same lines. In a powerful statement in the 1950 Senate hearings, Thomas McCabe, Eccles’s successor as chairman of the Board, dispelled any notion that the effort to include such a provision in bank holding company legislation derived merely from Eccles’s personal battle against A. P. Giannini. Rather, he articulated the deeper foundations of the policy, emphasizing the public character of banking and the risk of anticompetitive credit provision to the broader economy: [O]‌f this fundamental truth I have become convinced: That the business of banking is a sacred public trust. . . . The moment you mix private business with banking . . . you thereby create the possibilities of favoritism of one business over another. Just so soon, in my judgment, will the strength of the private enterprise system as we know it become impaired. . . . [T]he mixing of vast nonbanking organizations with equally vast banking operations is ethically and basically wrong and should be prevented.

Invoking Progressive Era precedents, McCabe likened the separation of banking and commerce to other moral reforms of the era, reminding the Committee that “[t]‌oday, none of us would question the wisdom of . . . labor

Banking and the Antimonopoly Tradition  229 laws, workmen’s compensation statutes and other similar legislation. The record of opposition to such regulation on the business leaders of an earlier day, however, is a lesson in history we should not quickly or easily forget.”129 Similarly, Representative Brent Spence encapsulated the Progressive fear of banking and commercial conglomerates accruing power so vast as to dominate democratic governance, warning in the 1952 hearings that “if there is a monopoly of money and credit in the country, and they also control the means of production and distribution, then you have a perfect monopoly, one which cannot be overthrown.”130 “Just imagine,” he later argued in a 1955 House debate, “what chance you would have if you were a small-​business man in a community where a bank holding company controlled the bank and also a competing business.” Underscoring the political implications of financial-​industrial monopolies, Spence concluded that “the holding companies are a dangerous thing to our economy, that the centralized concentration of economic power is just as dangerous as the concentration of political power. It is more lasting. It is harder to break.”131 Repurposing those Progressive Era precepts in the postwar political context of antifascism and anticommunism, advocates of reform similarly raised the specter of tyranny abroad to support the separation scheme.132 So potent was the fear of authoritarianism in the years following World War II that preventing the mere possibility of such monopolistic power was enough to justify the codification of the policy, despite a lack of evidence of actual transgressions.133 While the objectives of bank holding company legislation garnered widespread agreement due in large part to the political climate of the postwar period, vigorous debate erupted over the proper medicine to treat the disease of monopoly. Some Congressmen declared themselves the heirs of Thomas Jefferson and Andrew Jackson in favoring the decentralization of federal authority over bank holding companies. Senators Burnet Maybank and A. Willis Robertson thus articulated a suspicion of administrative power and fought to reserve for the states a measure of authority to regulate bank holding companies within their borders. Proclaiming himself “a Jeffersonian Democrat” in the 1950 Senate hearings, Robertson vowed to “keep a close eye on the Federal Reserve Board.”134 As Senator Maybank echoed in the same hearings, “[i]‌f this thing interferes with any States’ rights whatsoever . . . I will never vote for it, because we have too much concentration of power in Washington now.”135 The House Committee on Banking and Currency also sought to diffuse federal power among multiple agencies rather than unify it in the Federal Reserve.136 Senator Paul Douglas, who

230  Antimonopoly and American Democracy claimed the legacy of Andrew Jackson in opposing centralized federal control over interstate bank holding company groups, ultimately ensured that the legislation would not displace states’ regulatory authority by introducing a floor amendment to prohibit any additional interstate expansion of bank holding companies without permission from the states involved.137 Congressmen and unit bankers channeling the Jeffersonian and Jacksonian suspicion of federal control of a concentrated financial system thus exerted a profound influence over bank holding company legislation, and the hearings and debates certainly feature conspiratorial moments and exaggerated warnings of impending tyranny. Opponents of the legislation, including bank holding company executives, were not wholly above the “paranoid style” either and offered their own warnings of government despotism.138 However, the movement for bank holding company reform also consisted of policymakers who considered themselves the heirs of Theodore Roosevelt and adherents to the Progressive and New Deal faith in elite expertise. Thus, by 1947, death sentence and freeze legislation for bank holding companies had been abandoned in favor of regulating future expansion under the auspices of federal administrative supervision.139 Moreover, the July 1955 Senate report made clear that the Committee did not consider bank holding companies “evil of themselves.”140 Between the late 1930s and the mid-​1950s, three different Federal Reserve chairmen supported bills providing for greater federal administrative authority over bank holding companies, even if not centered in the Board, and staff members reiterated the distinction between “mere size and . . . dangerous size.”141 And individuals like Carter Glass and Marriner Eccles, who played central roles in the movement for bank holding company reform, decried the protectionist regulations that shielded the less efficient unit banking system from larger rivals and provided small bankers with their own credit monopolies in states prohibiting branch banking. Ultimately, the Federal Reserve gained sweeping new power to regulate bank holding company expansion under the final bank holding company bill, enacted into law on May 9, 1956.142 The BHCA in many ways then laid the foundation for the Federal Reserve to become the “most powerful among US banking regulators,” as the importance of bank holding companies continued to grow in the second half of the twentieth century.143 The BHCA nevertheless evinced the compromises brokered over the course of two decades, and the uneasy amalgam of populist and Progressive ideals that characterized the formation of the first federal antitrust regime in the early twentieth century.

Banking and the Antimonopoly Tradition  231 The legislation prohibited the mixing of banking and commerce under a holding company structure, and bank holding companies thus had to divest all ownership interests greater than 5 percent in any nonbanking organization within five years, a nod to structural separation and the trustbusting impulse. The Douglas Amendment reinforced the dual banking system by reserving for the states some control over bank holding company regulation within their borders and restricted the growth of interstate banking for years to come. And perhaps most important, the BHCA exempted bank holding companies that owned only one bank from regulation.144 By defining a bank holding company as a corporation that controlled at least 25 percent of two or more banks, the BHCA paved the way for a continuing battle over the boundaries of its antimonopoly foundations. Indeed, Congress would amend the BHCA in 1966 and again in 1970 to close the loopholes banks took advantage of throughout the 1950s and 1960s.145 The battle for bank holding company legislation ultimately illustrates the enduring tensions within the American antimonopoly tradition and the unsettled foundations of the antitrust regime. As congressional debate stretched from the 1940s into the 1950s and the first antitrust proceeding against a bank holding company commenced, as small bankers demanded protection and financial regulators negotiated the meaning of monopoly, the search for answers to the unresolved questions of the Progressive Era continued on unabated.146 The role of antitrust in calibrating the proper balance between private and public power remained contested throughout the postwar period as the memory of fascism and the specter of the Cold War revived the Brandeisian concern with ensuring a democratic economy so as to safeguard political freedom. The enactment in 1956 of the BHCA, rooted in Progressive ideals and granting wide-​ranging federal control over the structure of American banking, epitomizes the significance of the antitrust movement well beyond the late New Deal. The long road to the BHCA thus offers an important corrective to static historical narratives that paint the postwar era as the “end of reform,” an age of compensatory liberalism focused on Keynesian fiscal management and civil liberties rather than monopoly power and the relationship of economic structure to American democracy.147 The BHCA placed political objectives at the heart of its antimonopoly measures, rather than merely statistical analyses and mathematical algorithms of market dominance. What was gained, and what was lost, in doing so is worth excavating not only to shine a light on a forgotten chapter of the American antimonopoly tradition, but to illuminate the way forward.

232  Antimonopoly and American Democracy

Notes 1. See Lina M. Khan, “Amazon’s Antitrust Paradox,” Yale Law Journal 126 (January 2017): 710–​805; Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age (New York: Columbia Global Reports, 2018); Daniel A. Crane, “Antitrust’s Unconventional Politics,” Virginia Law Review Online 104 (September 2018): 118. 2. Bank Holding Company Act of 1956, Pub. L. No. 84-​511, 70 Stat. 133 (1956). 3. Alan Brinkley, The End of Reform: New Deal Liberalism in Recession and War (New York: Vintage Books, 1995); Richard Hofstadter, “What Happened to the Antitrust Movement?,” in The Paranoid Style in American Politics and Other Essays (New York: Alfred Knopf, 1965). 4. See Bray Hammond, Banks and Politics in America: From the Revolution to the Civil War (Princeton, NJ: Princeton University Press, 1957) 35–​39, 114–​22; William Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (Chicago: University of Chicago Press, 1954), 59–​63; Gretchen Ritter, Goldbugs and Greenbacks: The Antimonopoly Tradition and the Politics of Finance in America, 1865–​1896 (Cambridge: Cambridge University Press, 1997), 2–​4; Susan Hoffmann, Politics and Banking: Ideas, Public Policy, and the Creation of Financial Institutions (Baltimore: Johns Hopkins University Press, 2001), 21–​43; Richard T. McCulley, Banks and Politics during the Progressive Era: The Origins of the Federal Reserve System 1897–​1913 (New York: Routledge, 1992), 3–​6; Charles Calomiris and Stephen Haber, Fragile by Design: The Political Origins of Banking Crises and Scarce Credit (Princeton, NJ: Princeton University Press, 2015), 153–​ 95; Daniel A. Crane, “Antitrust Antifederalism,” California Law Review 96 (February 2008): 1–​12. 5. See Hammond, Banks and Politics in America, 114–​22; Letwin, Law and Economic Policy in America, 60–​62; McCulley, Banks and Politics during the Progressive Era, 3–​9; William Savin Fulton and Andrew Jackson, Andrew Jackson to William Savin Fulton, July 4, July 4, 1824. Manuscript/​Mixed Materials. http://​www.loc.gov/​item/​ maj010​566. 6. See Letwin, Law and Economic Policy in America, 62–​66; Eric Hilt, “Early American Corporations and the State,” in Corporations and American Democracy, ed. William J. Novak and Naomi R. Lamoreaux (Cambridge, MA: Harvard University Press, 2017). 7. See William J. Novak, “Law and the Social Control of American Capitalism,” Emory Law Journal 60 (2010): 377–​405; Letwin, Law and Economic Policy in America, 67–​70. 8. See Ritter, Goldbugs and Greenbacks, 1–​9, 190–​94. 9. Mary A. O’Sullivan, Dividends of Development: Securities Markets in the History of US Capitalism, 1866–​1922 (Oxford: Oxford University Press, 2016), 203–​30, 257. 10. Vincent Carosso, Investment Banking in America: A History (Cambridge, MA: Harvard University Press, 1970), 127–​32. 11. The National Monetary Commission concluded that unit banking had led to a weak and unstable banking structure that funneled interbank deposits to New York banks, whose speculative activities and reliance on the call loan market then exposed the entire financial system to runs and collapse. See Carosso, Investment Banking, 242–​46.

Banking and the Antimonopoly Tradition  233 12. The final report of the Pujo Committee revealed that J. P. Morgan, National City, First National, Guaranty Trust Co. and the Bankers’ Trust Co. held 341 directorships in 112 corporations with a total market capitalization of $22.45 billion. U.S. Congress, House, Report of the Committee Appointed Pursuant to House Resolutions 429 and 504 to Investigate the Concentration of Control of Money and Credit, 62nd Congress, 3rd Sess. (Washington, DC, 1913) (hereinafter, Pujo Report), 89. 13. Louis D. Brandeis, Other People’s Money and How the Bankers Use It (New York: Frederic A. Stokes Co., 1914), 5. 14. Pujo Report, 130. 15. Ibid., 129–​35; Brandeis, Other People’s Money, 62. 16. See O’Sullivan, Dividends of Development, 273–​310. 17. Brandeis, Other People’s Money, 1; see Jeffrey Rosen, Louis D. Brandeis: American Prophet (New Haven, CT: Yale University Press, 2016). 18. See Ellis W. Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (Princeton, NJ: Princeton University Press, 1966); Daniel A. Crane, “All I Really Need to Know about Antitrust I Learned in 1912,” Iowa Law Review 100 (May 2015): 2025–​38. 19. See Brinkley, End of Reform, 135–​36; Hofstadter, “What Happened to the Antitrust Movement?,” 188-​190; Hawley, The New Deal and the Problem of Monopoly, 456–​71. 20. See Benjamin Klebaner, “The Bank Holding Company Act of 1956,” Southern Economic Journal 24 (January 1958): 313–​26; George S. Eccles, “Registered Bank Holding Companies,” in The One Bank Holding Company, ed. Herbert V. Prochnow (Chicago: Rand McNally & Co., 1969); Daniel R. Fischel, Andrew M. Rosenfield, and Robert S. Stillman, “The Regulation of Banks and Bank Holding Companies,” Virginia Law Review 73 (March 1987): 331–​38; Charles Calomiris, U.S. Bank Deregulation in Historical Perspective (New York: Cambridge University Press, 2000), 52–​69 (generally ascribing restrictions on bank consolidation and bank branching to special interest lobbying). 21. While northern states had generally adopted unit banking prior to the Civil War, early interpretations of the National Bank Act of 1863 mandated unit banking for all national banks and branching in southern states dissipated in the wake of the war. Calomiris and Haber, Fragile by Design, 162–​67; Ray B. Westerfield, Historical Survey of Branch Banking in the United States (New York: American Economists Council for the Study of Branch Banking, 1939), 10–​11. 22. See Calomiris and Haber, Fragile by Design, 181–​82; Eugene White, The Regulation and Reform of the American Banking System, 1900–​1929 (Princeton, NJ: Princeton University Press, 1983), 10–​15. 23. See Gaines Thomson Cartinhour, Branch, Group, and Chain Banking (New York: Macmillan, 1931), 199. 24. Notable exceptions included two prominent bank holding systems in the Northwest and the early development of Transamerica in California. See Gerald C. Fischer, Bank Holding Companies (New York: Columbia University Press, 1961), 6–​8, 10: “In most states . . . except for the rule that one state bank could not buy the stock of another

234  Antimonopoly and American Democracy bank, there were no legal provisions whatsoever regarding the ownership of bank shares.” 25. See Fischer, Bank Holding Companies, 10 (pointing to Wisconsin and Missouri as states that regulated bank holding companies, and West Virginia and New Jersey as states that prohibited group banking); Ward Ralph Lamb, Group Banking: A Form of Banking Concentration and Control in the United States (New Brunswick, NJ: Rutgers University Press, 1961), 80–​102. 26. Lamb, Group Banking, 171–​72. 27. Pujo Report, 163. Section 8 of the Clayton Antitrust Act outlawed interlocking bank directorates for national banks or trust companies with deposits or capital greater than $5 million, or located in a city of more than two hundred thousand inhabitants. Additionally, though Section 7 of the Clayton Act prohibited corporate stock acquisitions that would substantially lessen competition or tend to create a monopoly, and in Section 11 authorized the Federal Reserve Board to enforce relevant provisions, doubt remained as to the general applicability of antitrust law within the uniquely regulated sphere of banking. See Fischer, Bank Holding Companies, 15; Adolf A. Berle Jr., “Banking under the Antitrust Laws,” Columbia Law Review 49 (May 1949): 589–​606. 28. See Elizabeth Sanders, Roots of Reform: Farmers, Workers, and the American State, 1877–​1917 (Chicago: University of Chicago Press, 1999), 235–​59. 29. Calomiris and Haber, Fragile by Design, 182: “laws specified that a freestanding unit bank owned by a holding company . . . could not share back-​office operations . . . and thus had to forgo the advantages of scale economies in administration.” While the bank holding company emerged primarily as a consequence of restrictions on branch banking, it was not the only factor contributing to its development and evolution over time. The agricultural depression, the speculative frenzy of the 1920s merger movement that increased the marketability of bank holding company stock, efforts to forge regional independence through bank holding company groups, and the desire to compete with newly established bank holding companies were also motivating factors. See Lamb, Group Banking, 86. 30. While prohibitions on interstate bank branching endured, a number of states did move to allow some form of intrastate branching following the bank failures of the Great Depression. See Lamb, Group Banking, 34; Charles W. Calomiris and Eugene N. White, “The Origins of Federal Deposit Insurance,” in The Regulated Economy: A Historical Approach to Political Economy, ed. Claudia Goldin and Gary D. Libecap (Chicago: University of Chicago Press, 1994). 31. While the Banking Act of 1933 did include provisions related to bank holding companies, they were ultimately feeble, requiring approval of voting permits for registered bank holding companies that could be easily avoided. See Fischer, Bank Holding Companies, 61–​63. 32. See Lamb, Group Banking, 40; Charles Sterling Popple, Development of Two Bank Groups in the Central Northwest: A Study in Bank Policy and Organization (Cambridge, MA: Harvard University Press, 1945).

Banking and the Antimonopoly Tradition  235 33. Providing for Control and Regulation of Bank Holding Companies: Hearings on S.829 before the Senate Committee on Banking and Currency, 80th Cong., 1st Sess. (1947) (Statement of Ben Dubois, Secretary of the IBA) (hereinafter 1947 Hearings), 44–​ 45: “Big banks and big business naturally work hand in glove with one another. The concentration of economic power becomes, of course, political power. Our democracy receives a jolt. We cannot maintain a true democracy without a true democratic economy. If this country is to prosper, we must have numerous types of independent businesses. People must own and manage their own enterprises.” See also 72 Cong. Rec. 9372 (1930) (Statement of Rep. Browne): “Instead of your bank, where the community and surrounding farming country deposits its money, being owned and directed by your friends and neighbors, the officers of the chain banks will never be seen on your streets, and you will have no acquaintance with them. . . . If the branch is of a New York bank, it will be a New York point of view . . . loans will be made primarily on the basis of collateral, and the collateral in small local enterprise or farm mortgages is automatically excluded on account of the cost and time involved in an investigation sufficient to satisfy the New York bank officials who pass upon it. Therefore you will not have the opportunity to borrow that your banker neighbor formally gave you.” 34. Calomiris and Haber, Fragile by Design, 171: “The populist support for unit banking reflected, in part, the advantages that some classes of local borrowers received from limiting bank entry through unit banking. Because unit banking tied local banks to the local economy, it made bankers more willing to continue to provide credit to their existing borrowers during lean times, unlike a branch bank that might move funds to other locations in pursuit of greener pastures.” 35. 80 Cong. Rec. 9695 (1936); Richard M. Valelly, Radicalism in the States: The Minnesota Farmer-​Labor Party and the American Political Economy (Chicago: University of Chicago Press, 1989), 82. 36. See H.R. 8890, 75th Congress (1938); “Glass Drafts Bill to Liquidate All Bank Holding Companies; Senator’s Plan Would Allow Five Year Process—​Program Differs from Patman Measure Chiefly in Time Element,” New York Times, January 25, 1938. 37. A vast literature on the political economy of banking regulation portrays the movements and legislation opposing bank branching and other forms of bank consolidation as the product of pressure group influence and the protectionist motivations of unit bankers. See Klebaner, “The Bank Holding Company Act,” 314–​15; Calomiris and Haber, Fragile by Design, 153–​95; Eugene White, “The Political Economy of Banking Regulation: 1864–​1933,” Journal of Economic History 42, no. 1 (March 1982): 33–​40; Burton A. Abrams and Russell F. Settle, “Pressure Group Influence and Institutional Change: Branch Banking Legislation during the Great Depression,” Public Choice 77, no. 4 (1993): 687–​705; Calomiris, U.S. Bank Deregulation in Historical Perspective, 43–​69. Where antimonopoly ideals are referenced in the context of bank holding company reform, they are generally cited only briefly or portrayed as the vestige of a rearward populism rather than the subject of sustained investigation. See Saule T. Omarova and Margaret E. Tahyar, “That Which We Call a

236  Antimonopoly and American Democracy Bank: Revisiting the History of Bank Holding Company Regulations in the United States,” Review of Banking and Financial Law 31 (2011): 120; Carl Felsenfeld, “The Bank Holding Company Act: Has It Lived Its Life?,” Villanova Law Review 1 (1993): 6–​ 13; Mark J. Roe, “A Political Theory of American Corporate Finance,” Columbia Law Review 91 (1991). 38. See Richard Schragger, “The Anti–​Chain Store Movement, Localist Ideology, and the Remnants of the Progressive Constitution,” Iowa Law Review 90 (2005). Policymakers in the 1920s and 1930s often connected the anti–​chain store movement to the unit banking movement. See 72 Cong. Rec. 9373 (1930) (Statement of Rep. Browne): “I firmly believe that the chain bank and chain store system is a very great menace to our free institutions.” 39. See Daniel Scroop, “The Anti–​Chain Store Movement and the Politics of Consumption,” American Quarterly 60 (December 2008): 932; Schragger, The Anti–​Chain Store Movement, 108; Laura Phillips-​Sawyer, American Fair Trade: Proprietary Capitalism, Corporatism, and the “New Competition,” 1890–​ 1940 (Cambridge: Cambridge University Press, 2018), 22–​23; Gerald Berk, Louis D. Brandeis and the Making of Regulated Competition, 1900–​1930 (New York: Cambridge University Press, 2009). 40. See Fischer, Bank Holding Companies, 10; “The Bank Holding Company Act of 1956,” Duke Law Journal 7 (1957): 4–​5. 41. See S. 2348, S. 3060, 75th Cong. (1937); S. 3575, 75th Cong. (1938). 42. As Glass declared in 1932,“the little banker is the ‘monopolist.’ He wants to exclude credit facilities from any other source than from his bank,” 75 Cong. Rec. 9892 (1932); see William G. McAdoo, Crowded Years: The Reminiscences of William G. McAdoo (Cambridge: The Riverside Press, 1931), 111–​12. Though McAdoo had a reputation for patronage by the end of his Senate career, and a relationship with A. P. Giannini, the head of a powerful bank holding company, he had a long record of advocating greater federal control over the banking system and supported bank holding company legislation even when it no longer appeared a path to branch banking, which Giannini favored. See Douglas B. Craig, Progressives at War: William G. McAdoo and Newton D. Baker, 1863–​1941 (Baltimore: Johns Hopkins University Press, 2013). 43. Press Conferences of Franklin D. Roosevelt, 1933–​1945, Franklin D. Roosevelt Presidential Library & Museum, January 14, 1938, Series 1, 425-​12,13. 44. See “All Holding Companies?” New York Times, January 15, 1938; “All Holding Companies Must Go—​Roosevelt,” Washington Post, January 15, 1938. 45. Message from President Franklin D. Roosevelt to Congress Transmitting Recommendations Relative to the Strengthening and Enforcement of Antitrust Laws, April 29, 1938, S. Doc. No. 173, 75th Cong., 3d. Sess. (1938), 1: “The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in essence, is fascism—​ownership of government by an individual, by a group, or by any other controlling private power.” 46. Message from President Franklin D. Roosevelt, 8–​9. 47. See, e.g., Brinkley, The End of Reform, 106–​36; Hawley, The New Deal and the Problem of Monopoly, 383–​419.

Banking and the Antimonopoly Tradition  237 48. See Brinkley, The End of Reform, 135–​39: “To most liberals wrestling with economic policy at the close of the 1930s . . . confronting economic concentration was rapidly becoming secondary to stimulating consumption. . . . Within a few years, concern about monopoly and commitment to expanding the regulatory and administrative functions of the state had largely disappeared from liberal rhetoric. . . . On issues of political economy, at least, something resembling a consensus had begun to emerge behind a new kind of liberalism: a liberalism less inclined to challenge corporate behavior than some of the reform ideas of the 1930s had done . . . more reconciled to the existing structure of the economy, and . . . strongly committed to the use of more ‘compensatory’ tools—​a combination of Keynesian fiscal measures and enhanced welfare-​state mechanisms—​in the struggle to ensure prosperity”; Michael Sandel, Democracy’s Discontent: America in Search of a Public Philosophy (Cambridge, MA: The Belknap Press of Harvard University Press, 1983), 261–​62: “By the end of World War II the central issues of economic policy had little to do with the debates that had preoccupied Americans from the Progressive era to the New Deal. . . . The old questions about what economic arrangements are hospitable to self-​government ceased to be the subject of national debate.” 49. See Hoftsadter, “What Happened to the Antitrust Movement?,” 188–​90; Sandel, Democracy’s Discontent, 240–​42. 50. Marriner Eccles, Beckoning Frontiers: Public and Personal Recollections, ed. Sidney Hyman (New York: Alfred Knopf, 1966), 51. 51. Ibid., 3-​5, 53. 52. Ibid., 54, 38. 53. Ibid., 128–​35, 166. 54. Ibid., 175. 55. See Allan Meltzer, A History of the Federal Reserve, Vol. I: 1913–​1951 (Chicago: University of Chicago Press, 2010), 415–​87. 56. That record also included the architecture of the Federal Housing Authority in 1934. Rooted in the shortcomings of private mortgage financing and housing construction, the FHA reflected Eccles’s belief that the federal government should mediate citizens’ access to credit in order to ensure basic standards of living. Eccles, Beckoning Frontiers, 144–​76; see Mark Wayne Nelson, Jumping the Abyss: Marriner S. Eccles and the New Deal, 1933–​1940 (Salt Lake City: University of Utah Press, 2017). 57. See Omarova and Tahyar, That Which We Call a Bank, 133: “A big part of what motivated the Federal Reserve’s interest in bank holding company legislation was its desire to protect its administrative turf and further consolidate its own power”; Pauline Heller and Melanie Fein, Federal Bank Holding Company Law, 3rd ed. (New York: Law Journal Press, 2011), 4.07. 58. Eccles, Beckoning Frontiers, 266–​76. 59. Banking Act of 1933, Pub. L. No. 73-​66, § 5144, 48 Stat. 162 (1933); Board of Governors of the Federal Reserve System, Annual Report of the Board of Governors of the Federal Reserve System (1943), 3435. 60. Brinkley, The End of Reform, 58–​62.

238  Antimonopoly and American Democracy 61. See Diaries of Henry Morgenthau Jr., Franklin D. Roosevelt Presidential Library & Museum, Series 1, Vol. 105, January 5, 1938, 77–​78 (recounting a discussion with Carter Glass in which he advocated eliminating all bank holding companies); “Glass Plans Bill Dooming Bank Holding Company Firms,” Washington Post, January 25, 1938; Marriner Eccles to Franklin D. Roosevelt, January 3, 1941, Marriner S. Eccles Papers, University of Utah J. Willard Marriott Library Special Collections, Box 17, Folder 5, Item 1: “[T]‌he Board advised Senator Glass” that the 1938 bill “did not, in its opinion, offer a satisfactory solution of the matter.” 62. Eccles to FDR, January 23, 1941, Eccles Papers, Box 17, Folder 5, Item 1; Board of Governors of the Federal Reserve System, Annual Report of the Board of Governors of the Federal Reserve System (1938), 13 (highlighting that a confusing array of agencies charged with overseeing different individual affiliates within holding company structures had created “conflicts, and gaps in authority,” necessitating further legislation). 63. Eccles to FDR, January 23, 1941, Eccles Papers, Box 17, Folder 5, Item 1: “[t]‌he new bill . . . is not a practicable solution of the problem . . . and would be unfair to every holding company . . . now rendering a service to the public.” 64. See Marquis James and Bessie Rowland James, Biography of a Bank: The Story of Bank of America (New York: Harper & Brothers, 1954), 72–​80, 268–​304, 435–​57. 65. Louis Brandeis, A Curse of Bigness, Harper’s Weekly, January 10, 1914, 18. 66. Leo Crowley to Henry Morgenthau Jr., January 31, 1938, Diaries of Henry Morgenthau Jr., Franklin D. Roosevelt Presidential Library & Museum, Series 1, Vol. 354, Index Tab No. 7, 2. 67. See, e.g., Diaries of Henry Morgenthau Jr., Franklin D. Roosevelt Presidential Library & Museum, Series 1, Vol. 354, “Bank of America,” October 22, 1937–​May 11, 1939; see also Brinkley, End of Reform, 33–​34; James and James, Biography of a Bank, 435–​ 57; Felice A. Bonadio, A. P. Giannini: Banker of America (Berkeley: University of California Press, 1994), 242–​57. 68. See James and James, Biography of a Bank, 1–​4; Bonadio, A. P. Giannini, 29–​38; Charles H. Russell, Governor of Nevada, to Hon. J. Allen Frear, July 5, 1955, Control of Bank Holding Companies: Hearings on S.880, S. 2350, and H.R. 2667 before a Subcommittee of the Senate Committee on Banking and Currency, 84th Cong., 1st Sess. (1955), 380 [hereinafter 1955 Senate Hearings]. 69. See James and James, Biography of a Bank, 277; see also “Bank Law an Issue in Giannini Dispute,” New York Times, December 4, 1938; Bonadio, A. P. Giannini, 224–​30. 70. Eccles to A. P. Giannini, November 2, 1940, Eccles Papers, Box 19, Folder 1, Item 15 (writing that he wished “banking leaders in the various parts of the country had an equally vigorous and progressive attitude toward the mission of banking in contributing to the solution of our economic problems.”); see Bonadio, A. P. Giannini, 261–​73. 71. Eccles to FDR, January 23, 1941, Eccles Papers, Box 17, Folder 5, Item 1: “We feel that the proposed bill is punitive in that it is directed against one particular banking group.”

Banking and the Antimonopoly Tradition  239 72. Board of Governors of the Federal Reserve System, Chronological Summary of Events Pertaining to Transamerica and Bank of America, Box 19, Folder 6, Item 38, 3–​4. 73. Extract from Minutes of the Board, Meeting of February 6, 1942, Eccles Papers, Box 19, Folder 2, Item 2. 74. Chester Morrill to Transamerica Corporation, February 14, 1942, Eccles Papers, Box 19, Folder 4, Item 7. 75. W. L. Andrews to Board of Governors of the Federal Reserve System, March 17, 1942, Eccles Papers, Box 19, Folder 4, Item 7. 76. See Anne Kornhauser, Debating the American State: Liberal Anxieties and the New Leviathan, 1930–​1970 (Philadelphia: University of Pennsylvania Press, 2015). 77. Leo Crowley to Board of Governors of the Federal Reserve System, January 18, 1942, Eccles Papers, Box 19, Folder 2, Item 1 (having made clear the FDIC’s belief that there was “grave danger” that Transamerica would “seek to establish uninsured State units should the Federal authorities refuse to cooperate with their program,” Crowley’s focus on “principle” rather than the economic need for additional banking facilities reflected deeper concerns regarding regulatory authority and the balance of public and private power in democratic governance). 78. Peoples Bank v. Eccles, 161 F.2d 636, 636–​43 (D.C. Cir. 1947), rev.’d on other grounds, 333 U.S. 426 (1948). 79. 333 U.S. 426 (1948). 80. Board of Governors of the Federal Reserve System, Annual Report (1943), 36–​37. On the Progressive tropes reflected in the report, see Brandeis, Other People’s Money, 20: “it is the investment bankers’ access to other people’s money in controlled banks and trust companies which alone enables any individual banking concern to take so large part of the annual output of bonds and stocks.” 81. Board of Governors, Annual Report (1943), 36: “Accepted rules of law confine the business of banks to banking and prohibit them from engaging in extraneous businesses such as owning or operating industrial and manufacturing concerns. It is axiomatic that the lender and borrower or potential borrower should not be dominated or controlled by the same management. In the exceptional case, the corporate device has been used to gather under one management many different and varied enterprises wholly unallied and wholly unrelated to the conduct of the banking business.” See also Arguments in Support of Board of Governors Policy in Matter of Bank of America and Transamerica Corporation, March 1943, Eccles Papers, Box 20, Folder 7, Item 34, Exhibit 3 (detailing the “principal acquisitions by Transamerica Corporation of nonbanking units within recent years”). 82. Board of Governors, Annual Report (1943), 36; see Saule T. Omarova, “The Merchants of Wall Street: Banking, Commerce, and Commodities,” Minnesota Law Review 98 (2013): 277–​78; Bernard Shull, “The Separation of Banking and Commerce: Origin, Development, and Implications for Antitrust,” Antitrust Bulletin 28 (1983); but see Carl Felsenfeld, “The Bank Holding Company Act: Has It Lived Its Life?,” Villanova Law Review 38 (1993): 5, 34–​52 (emphasizing combinations of banking and commercial enterprise in American history, and

240  Antimonopoly and American Democracy arguing that the tradition of separation has been overstated); Mehrsa Baradaran, “Reconsidering the Separation of Banking and Commerce,” George Washington Law Review 80 (2012) (highlighting the difference between the separation of banking and commerce in banking, rooted in tradition, and the separation of banking and commerce in commerce). 83. Early American bank charters were modeled explicitly on the Bank of England’s 1694 charter, which prohibited the bank from dealing in goods or merchandise in order to prevent unfair competition. Later policy justifications included the belief that some activities, including equity and real estate investment, were too risky for commercial banks. See Shull, “The Separation of Banking and Commerce,” 259; see also Bernard Shull, “The Separation of Banking and Commerce in the United States: An Examination of Principle Issues,” Financial Markets, Institutions, & Instruments 8 (2002): 20–​21. 84. See Pujo Report, 129–​30, 142; Shull, “The Separation of Banking and Commerce in the United States,” 10. 85. Omarova and Tahyar, “That Which We Call a Bank,” 130; Shull, “The Separation of Banking and Commerce in the United States,” 34–​35. 86. See Christine E. Blair, “The Mixing of Banking and Commerce: Current Policy Issue,” FDIC Banking Review 16 (2004): 102–​7; Shull, “The Separation of Banking and Commerce in the United States,” 35 (noting additional concerns related to the relationship between large banking organizations and government: “[w]‌ill their size and importance compel government to protect them when, and if, they confront difficulties?”). 87. See Message from President Franklin D. Roosevelt to Congress Transmitting Recommendations Relative to the Strengthening and Enforcement of Antitrust Laws, April 29, 1938, S. Doc. No. 173, 75th Cong., 3d. Sess. (1938); Shull, “The Separation of Banking and Commerce in the United States,” 40–​41. 88. Board of Governors of the Federal Reserve System and Lawrence Clayton, Arguments in Support of Board of Governors Policy in Matter of Bank of America and Transamerica Corporation, March 1943, Eccles Papers, Box 20, Folder 7, Item 34. 89. Board of Governors, Annual Report (1943), 36. 90. Ibid., 37: “Such legislation should be so designed as to prevent any such company from using the corporate device to circumvent and evade sound banking principles, regulatory statutes, and declared legislative policy.” 91. Eccles, Beckoning Frontiers, 444–​45. 92. J. Leonard Townsend, Memorandum to Board of Governors, October 31, 1947, Box 19, Folder 4, Item 15. 93. Eccles’s investigation thus signified a pathbreaking effort as the applicability of antitrust law to banking, a regulated industry subject to its own unique forms of government oversight, was still uncertain in the early 1940s. See Berle, “Banking under the Antitrust Laws,” 589–​90: “Application of the antitrust laws to banking is a relatively new field of study. . . . Until relatively recent times, many lawyers would have

Banking and the Antimonopoly Tradition  241 considered antitrust attack on practices and agreements with respect to banking operations as prima facie impossible.” 94. George B. Vest, Memorandum to Chairman Eccles, August 19, 1944, Eccles Papers, Box 19, Folder 3, Item 1 (referencing discussion of Clayton Act proceedings against Transamerica in a Board meeting); see also J. P. Dreibelbis, Four Courses Open to Board, January 31, 1945, Eccles Papers, Box 19, Folder 3, Item 6. 95. Tom C. Clark, Letter to Marriner Eccles, October 31, 1945, Eccles Papers, Box 19, Folder 3, Item 8. 96. Expansion of Transamerica Corporation’s Banking Interests 1942–​1946, March 20, 1947, Eccles Papers, Box 19, Folder 4, Item 5 (showing Transamerica’s control over banks in a four-​state area increasing from 6.9 percent to 13.5 percent between 1942 and 1946); Eccles, Beckoning Frontiers, 450. 97. Brinkley, End of Reform, 106, 265–​68. 98. Brinkley, 160–​64. Debates over amending the antitrust laws began shortly after World War II, for example, and revolved around forthrightly political goals of preserving democracy through a decentralized economic structure. They culminated in the enactment of the Celler-​Kefauver Act of 1950, which strengthened Section 7 and closed the asset acquisition loophole. See Daniel A. Crane, “Fascism and Monopoly,” Michigan Law Review 118 (2020): 1323–​25. 99. See Wyatt Wells, Antitrust and the Formation of the Postwar World (New York: Columbia University Press, 2002), 137, 152–​53 (noting the preoccupation with finance in particular: “The Americans led the way in striking against concentration in German finance. . . . As General Clay described it, ‘six of the largest banks in Germany were dissolved and their branches authorized to operate only as separate institutions.’ ”) 100. Board of Governors of the Federal Reserve System, Giannini Empire, January 28, 1946, Eccles Papers, Box 17, Folder 8, Item 5 (detailing Transamerica’s control of 426 banks and 1,045 branches in a five-​state area, amounting to 50.4 percent of all banking offices and 41.4 percent of all deposits in California, and 60.9 percent of all offices and nearly 79.7 percent of deposits in Nevada, among other statistics, though Transamerica had acquired many failing banks in Nevada at the behest of state banking authorities in the early 1930s). 101. Eccles to Tom C. Clark, February 26, 1947, Eccles Papers, Box 19, Folder 4, Item 2; American Tobacco Co. v. United States, 328 U.S. 781 (1946). 102. Eccles, Beckoning Frontiers, 446–​53; Meltzer, A History of the Federal Reserve, 656. Snyder was also accused of favoring Transamerica due to his friendship with the Gianninis and Sam Husbands, with whom he had worked at the Reconstruction Finance Corporation and who had gone on to a high-​ranking position in Transamerica. See Confirmation of Thomas B. McCabe: Hearings before the Committee on Banking and Currency, 80th Cong., 2nd Sess. (1948), 180–​81 [hereinafter McCabe Confirmation Hearings]; Bonadio, A. P. Giannini, 289–​91. 103. Eccles, Beckoning Frontiers, 450. 104. McCabe Confirmation Hearings, 188.

242  Antimonopoly and American Democracy 105. Eccles, Beckoning Frontiers, 441-​443; Meltzer, A History of the Federal Reserve, 656. 106. Eccles, Beckoning Frontiers, 454. 107. Transamerica Corp. v. Board of Governors of the Federal Reserve System, 206 F.2d 163 (3d. Cir. 1953), 169: “The Board’s conclusion of a tendency to monopoly in the five-​state area, therefore fails for want of a supporting finding that the five states constitute a single area of effective competition among commercial banks and flies in the face of its own finding that the local community is the true competitive banking area.” 108. Ibid. 109. Bank Holding Legislation: Hearings on S. 76 and S. 1118 Before the Committee on Banking and Currency, 83rd Cong., 1st Sess., Part 2 (1953), 238–​44 (inserting into the Congressional Record the entire opinion in Transamerica Corp. v. Board of Governors of the Federal Reserve System). 110. Gerald C. Fischer, The Modern Bank Holding Company: Development Regulation, and Performance (Philadelphia: Temple University Press, 1986), 22. 111. Eccles to Rep. Brent Spence, April 23, 1946, Eccles Papers, Box 17, Folder 9, Item 6; Eccles to Sen. Charles Tobey, March 10, 1947, Eccles Papers, Box 17, Folder 11, Item 11; Eccles to Sen. Charles Tobey, June 13, 1947, Eccles Papers, Box 19, Folder 4, Item 11. 112. See S. Rep. No. 84-​1095 (1955), 3–​4, for legislative history of bills introduced. 113. 101 Cong. Rec. 8034 (1955) (Statement of Rep. Marshall). 114. See Carroll F. Byrd to Marriner Eccles, April 15, 1946, Eccles Papers, Box 17, Folder 9, Item 4: “I wish to . . . call your attention . . . to the urgency, as far as the Independent Bankers Association of the Twelfth District is concerned, of your introduction of the proposed anti-​bank holding company legislation prior to the meetings of the Executive Counsel . . . representatives from all seven Western states will be in attendance . . . and they are planning to lay the groundwork for submitting the proposed bill to be so introduced to the consideration of the various Conventions of State Bankers Associations throughout the United States.” For newspaper coverage, see, e.g., “Bill Would Break Banking Monopoly,” New York Times, January 15, 1941; “Giannini Empire Declared Illegal,” New York Times, June 14, 1951. 115. Control of Bank Holding Companies, Transcript of Proceedings before the Subcommittee of the Senate Committee on Banking and Currency, Executive Session, 84th Cong., July 19th (1955), 2; S. Rep. No. 84-​1095 (1955), 3–​4. 116. George F. Frates, Washington Representative, National Association of Retail Druggists to Sen. J. W. Fulbright, June 29, 1955, National Archives, R.G. 46, 84th Cong., Committee on Banking and Currency, Sen. 84A-​F4, Box 729, Folder 3. 117. H. A. Lewis, Secretary-​Treasurer, Wisconsin Retail Hardware Association to Sen. J. W. Fulbright, May 25, 1955, National Archives, R.G. 46, 84th Cong., Committee on Banking and Currency, Sen. 84A-​F4, Box 728. 118. Ed. Wimmer, Vice President, National Federation of Independent Business to Sen. J. W. Fulbright, July 8, 1955, National Archives, R.G. 46, 84th Cong., Committee on Banking and Currency, Sen. 84A-​F4, Box 729, Folder 3.

Banking and the Antimonopoly Tradition  243 119. Hofstadter, “What Happened to the Antitrust Movement?,” 188-​189: “Presumably the historians drop the subject of antitrust at or around 1938 not because they imagine that it has lost its role in our society but because after that point it is no longer the subject of much public agitation—​in short, because there is no longer an antitrust movement.” 120. See Control and Regulation of Bank Holding Companies: Hearings on H.R. 6504 before the House Committee on Banking and Currency, 82nd Cong., 2nd Sess. (1952), 1 [hereinafter 1952 Hearings]. 121. See Brandeis, Other People’s Money, 6: “The development of our financial oligarchy followed, in this respect, lines with which the history of political despotism has familiarized us: usurpation—​proceeding by gradual encroachment rather than by violent acts; subtle and often long concealed concentration of distinct functions, which are beneficent when separately administered, and dangerous only when combined in the same persons. . . . The makers of our own Constitution had in mind like dangers to our political liberty when they provided so carefully for the separation of governmental powers.” 122. Bank Holding Bill: Hearings on S. 2318 before a Subcommittee of the Senate Committee on Banking and Currency, 81st Cong., 2nd Sess. (1950), 99 (Statement of Sen. Cain) [hereinafter 1950 Hearings]; see also S. Rep. No. 84-​1095 (1955), 1: “The dangers accompanying monopoly in this field are particularly undesirable in view of the significant part played by banking in our present national economy.” 123. 102 Cong. Rec. 6857 (1956) (Statement of Sen. Douglas). 124. 101 Cong. Rec. 3821–​ 22 (1955) (Statement of Rep. Rayburn reprinted in Congressional record). 125. 102 Cong. Rec. 6857 (1956) (Statement of Sen. Douglas) 126. 101 Cong. Rec. 7960 (1955) (Statement of Rep. Celler) 127. H. Rep. 84-​609 (1955), 2. 128. 102 Cong. Rec. 6857 (1956) (Statement of Sen. Douglas): (“for many years now there have been virtually only five banks that mattered in England and Wales”). While England’s banks were cartelized and dominated by the Big Five, which facilitated its nationalization of certain industries, only the Bank of England was formally nationalized. See Calomiris and Haber, Fragile by Design, 137–​39. 129. 1950 Hearings, 216. 130. 1952 Hearings, 32. 131. 101 Cong. Rec. 8021 (1955). 132. In the 1955 Senate hearings, for example, Hitler’s rise to power was again linked to German financial-​ industrial monopolies, with the representative of the Independent Bankers Association of America stating, “Germany . . . had got down to 3 banks. . . . Not only had the banking resources been concentrated into those few hands but they had gone out . . . and purchased control of various types of industries in Germany. . . . So it was a very easy matter for Mr. Hitler to gain control, as a former German banker told me several years ago. All he had to do was arrest 3 bank presidents and put his men in and he had control over practically all the banking and the

244  Antimonopoly and American Democracy finance and the industry of Germany. The same is true in Italy, Japan, France.” 1955 Senate Hearings, 109 (Statement of W. J. Bryan, Independent Bankers Association of America). 133. “Even though you may point to some bank holding companies that have done a moderately good business, it is the opportunity, it is the power that is given, that is dangerous.” 101 Cong. Rec. 8021 (1955) (Statement of Rep. Spence). When questioned in the 1955 Senate hearings on whether banks controlled by bank holding companies had favored commercial affiliates, J. L. Robertson of the Federal Reserve asserted that he could not “vouch for” a particular instance, but urged Congress to “take into consideration the potentialities involved.” 1955 Senate Hearings, 64–​65 (Statement of J. L. Robertson). 134. 1950 Hearings, 61–​62, 67. 135. Ibid., 63. 136. H. Rep. 84-​609 (1955), 14–​15. 137. As Douglas declared in the 1956 Senate debates, “We who are struggling to prevent the concentration of financial power from becoming greater are carrying on the fighting tradition of Andrew Jackson who wanted a competitive and a free America, and not one dominated by a relatively small group of financiers and industrialists,” 102 Cong. Rec. 6857 (1956) (Statement of Sen. Douglas). See Bank Holding Company Act of 1956, Pub. L. No. 84-​511, § 3(d), 70 Stat. 134, 135 (1956). 138. Hofstadter, The Paranoid Style, 3; see 1947 Hearings, 65 (Statement of Ellery C. Huntington Jr.) (likening the bank holding company legislation to the totalitarian actions of Tito, which he witnessed in his service during World War II in Yugoslavia: “The bill I think is authoritarian in character, more so as I have stated than any measure I ever saw prepared by Tito and his lieutenants”); see also A. P. Giannini to Marriner Eccles, 1942, Eccles Papers, Box 20, Folder 7, Item 7 (denouncing the efforts of the Federal Reserve to curb bank holding company expansion through administrative discretion: “It seems inappropriate that governmental agencies should at this time be reaching out to usurp the legislative prerogatives. . . . If you do not like the existing laws, let us try to change them by constitutional means. We should not in these times resort to Nazi-​Fascist methods of dictatorship”). 139. See 1947 Hearings, 21 (Statement of Marriner Eccles): “we are not proposing here . . . and see no use for proposing the death sentence or what may be known as the freeze. So we are treating this on a regulatory basis just like banks.” 140. S. Rep. No. 84-​1095 (1955), 1. 141. 1950 Hearings, 224 (Statement of J. Leonard Townsend). 142. The BHCA required all bank holding companies to register with the Federal Reserve and to seek approval for any future bank acquisitions. In approving bank acquisitions, the Board was to take into consideration five factors, including the competitive effects of the acquisition, with little direction beyond the vague guidelines of the statute. The Board also gained the power to examine bank holding companies and each of their subsidiaries, and to oversee the separation of banking and commerce by determining what activities of holding companies were closely related to banking. See Bank Holding Company Act of 1956, Pub. L. No. 84-​511, 70 Stat. 133 (1956). 143. Heller and Fein, Federal Bank Holding Company Law, 4.07.

Banking and the Antimonopoly Tradition  245 144. Bank Holding Company Act of 1956, Pub. L. No. 84-​511, 70 Stat. 133 (1956). The exception for one-​bank holding companies was controversial and influenced by several factors, including congressional preoccupation with large bank holding company systems, the difficulty of enacting legislation that would encompass a vast number of bank holding companies, and the influence of the unit banker, small business constituency that wanted to preserve the ability to combine banking and commerce in their localities. See Omarova and Tahyar, “That Which We Call a Bank,” 137–​38. 145. An Act to Amend the Bank Holding Company Act of 1966, Pub. L. No. 89-​485, 80 Stat. 236 (1966); Bank Holding Company Amendments of 1970, Pub. L. No. 91-​607, 84 Stat. 1760 (1970). 146. See Crane, “All I Really Need to Know about Antitrust,” 2038; Hawley, The New Deal and the Problem of Monopoly, 494. 147. Brinkley, End of Reform, 10–​11.

PART III

REMA KING A N T IMONOP OLY I N A N EW GLOBA L AG E

7 De-​Nazifying by De-​Cartelizing The Legacy of the American Decartelization Project in Germany Daniel A. Crane

In 1945, a group of zealous American trustbusters, freshly groomed in the Brandeisian tradition of “anti-​Bigness,” descended on the smoldering ruins of Germany, eager to identify and then nullify the culprits behind Hitler’s rise to power. Their eyes were fixed on the enormous industrial combines and cartel organizations that had sprung up in the German economy since the time of Bismarck, grown exponentially during the Weimar era, and then served as the economic infrastructure of the Third Reich. To the trustbusters in the Office of Military Government US (“OMGUS”) Decartelization Branch, the monopolies and trusts were the prime culprits and their elimination was of paramount importance to Germany’s peaceable future. The trustbusters understood their mission as not just economic reordering, but as training in democracy. According to their mission statement, the Decartelization Branch must “teach the German people that political democracy cannot long survive the disappearance of economic democracy.” The Decartelization project lasted until 1949, at which time it was shuttered amid recriminations and political intrigue. Functionally, it could claim only one major success—​the dismemberment of the IG Farben chemical cartel. Scores of other industrial titans remained untouched on the project’s hit list, protected from dismantling by American generals and industrialists hostile to a radical trustbusting project for Germany. Nonetheless, it would be a mistake to count the Decartelization project an unmitigated failure. Although its immediate payoff in Germany may have been quite limited, its findings exerted a considerable effect in domestic American politics, including influencing the course of the Celler-​Kefauver reforms of 1950 and the era of aggressive antitrust that followed. More generally, the Decartelization project created a rich store of information and Daniel A. Crane, De-​Nazifying by De-​Cartelizing In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0007

250  Antimonopoly and American Democracy analysis concerning the role that monopolies and cartels played in the rise of the Third Reich, and thus provides fertile information for ongoing inquiry into the relationship between extreme industrial concentration and the extreme concentration of political power.

The Work and Shuttering of the Decartelization Branch The Road to Berlin Already before American entry into World War II, American political leaders argued that cartels and monopolies were propelling the rise of fascism. In a 1938 address, President Roosevelt asserted that essence of fascism was “the growth of private power to a point where it becomes stronger than their democratic state itself.”1 With the advent of war, American political rhetoric linking fascism to industrial monopolization and cartelization increased. In the winter of 1943–​1944, the US Senate Subcommittee on War Mobilization of the Committee of Military Affairs held hearings on the influence of German cartels and monopolies in Hitler’s rise to power and cooption of American industry.2 Senator Harley Kilgore, who chaired the committee, would later write that “the cartel system, in great measure, was responsible” for Hitler’s dictatorship as the cartels’ “funds and influence made possible Nazi seizure of power.”3 In September 1944, President Roosevelt characterized Germany’s cartels as “weapons of economic warfare” that would have to be eradicated along with the Wehrmacht.4 Simultaneously, the Justice Department’s Antitrust Division announced a four-​prong decartelization agenda for a future occupation of Germany: (1) German patents and know-​how must be made available to the American people; (2) German laboratories must operate in full view of the rest of the world; (3) German firms, such as I.G. Farben, must at the very least be split up into separate companies; (4) some German firms probably ought to be removed from Germany and their laboratories internationalized.5

As victory neared in Europe, the US military prepared to carry out the president’s directive to decartelize Germany. In April 1945, General Eisenhower issued an order to the US Army to “prohibit all cartels or other private business arrangements and cartel-​like organizations.”6 The Potsdam

De-Nazifying by De-Cartelizing  251 Agreement of August 1945 provided that “[a]‌t the earliest possible date, the German economy shall be decentralized for the purpose of eliminating the present excessive concentration of economic power as exemplified in particular by cartels, syndicates, trusts and other monopolistic arrangements.”7

The Decartelization Branch at Work: 1945–​1949 A US Decartelization Branch was established on December 15, 1945, under the authority of Section IV of the Potsdam Agreement as a branch of the Economics Division of the US Office of Military Government (“OMGUS”).8 Its internal documents described the Branch’s background and mission as follows: Following World War I, the German economy became more and more concentrated in the hands of a few individuals and financial institutions. This concentration had gone far beyond mere ownership or possession of the means of production; it had become tantamount to economic empire and private business government. The extent of this power and control remains enormous and constitutes a menace both to the peace of the world and to the reconstruction of Germany on a democratic basis. The primary objective is the elimination of giganticism in German industry, the number and size of the residual industrial units of production being conditioned by factors of technological efficiency and economic need. The number of producing units will not be multiplied necessarily. Some plants which are technically inefficient may fail. The number of actual independent companies, however, may be increased to a slight extent. Pastoralization of Germany is not the goal, since it is intended that industrial units of substantial size will survive. The deconcentration program will be correlated, of course, with the overall Military Government plan to establish levels of industry, select plants for reparation, and destroy Germany’s war potential.

The contradictions in this final sentence—​the objectives of destroying Germany’s war potential and of doing so in concert with the plans of a Military Government not at all interested in neutering West Germany’s potential to serve as a buffer against Stalin—​would ultimately spell the Decartelization Branch’s demise. But antitrusters at the Branch always viewed their mission

252  Antimonopoly and American Democracy as critical to creating long-​term democratic conditions in Germany, and explicitly linked their economic and political goals: The Decartelization Branch, acting with and through other Military Government activities should, therefore, make every effort to teach the German people that political democracy cannot long survive the disappearance of economic democracy, and that the freedom of the individual consumer to buy and sell in freely competitive markets is the economic philosophy most suitable to their needs.9

The Decartelization Branch was well-​staffed, with ninety-​four lawyers and investigators at its peak.10 It was largely responsible for the breakup of the I.G. Farben chemical combine in 1945.11 Thereafter, it identified an additional seventy firms or cartel organizations as potential targets for breakup or dissolution.12 A February 12, 1947, decartelization law promulgated by OMGUS gave further legal status to the Decartelization unit’s efforts.13 Nonetheless, the Farben breakup proved to be the program’s one substantial achievement, and it was effectively disbanded in 1949. Among the surviving records from the Decartelization Branch, the most important work product was a three-​volume Report on German Cartels and Combines released internally in March 1947. The first volume, entitled German Economic Decentralization: An Analysis of the German Cartel and Combine Problem, focused principally on the cartel problem. It documented the structure and nature of German cartels, their legality and encouragement under German law, the use of cartel agreements to limit competition in patented technologies, and the participation of German companies in international cartels. Volume I ended with a series of recommendations, including prohibiting holding companies past “the second or third generation,” presuming family holdings to be common economic enterprises until they could be conclusively proven independent, and that common stock ownership and voting by financial institutions be eliminated and interlocking directorships abolished. Volume II, Survey of Germany’s Major Industries, contained a detailed analysis of Germany’s major industries and firms, including the relationship of major firms to the Nazi regime and participation in rearmament and war. Volume III, Germany’s Major Industrial Combines, chronicled Germany’s leading monopoly firms and the path they took to achieve domination, often in concert with the Nazi regime.

De-Nazifying by De-Cartelizing  253

Shuttering the Decartelization Branch The Decartelization Branch was largely shuttered in 1949, depleted of personnel and demoralized.14 Two comprehensive accounts offer different perspectives on the reasons for the program’s failure and effective termination. An internal monograph produced in 1953 by the Historical Division of the US High Commissioner for Germany offers a blunt political assessment of Decartelization Branch’s demise in 1949.15 As early as December 1945, Senator Kilgore had charged that OMGUS economic officials, many of whom were drawn from leading US industrial or financial firms, were corrupted by their relationships with German enterprises: “They are still sympathetic to their old cartel partners and they look forward to resuming commercial relationships with a rehabilitated German industry whose leading figures are well-​known to them, rather than to striking out on new paths of economic enterprise.”16 In 1947, James Martin resigned as chief of the Decartelization Branch and took his frustrations to the New York Times, which published the interview under the title “U.S. Soviet Difficulties Laid to Monopolists” on July 26, 1947. Martin charged that “monopolistic American corporations” were exercising influence over OMGUS leadership to prevent the breakup of their crony business partners in Germany.17 General Lucius Clay, US Military Governor, immediately denied the charges of crony corruption, but there seemed little doubt that, from the Decartelization project, there had been a fundamental conflict of views between the trustbusters manning the Decartelization Branch and the US business leaders and generals running other portions of OMGUS. In an interview with a committee appointed in 1949 by the secretary of the army to review the Decartelization Program, one of the leading businessmen staffing OMGUS—​Lawrence Wilkinson—​ testified about early meetings in which he had told the trustbusters that various economic policies called for in the Potsdam Agreement, including decartelization, “could not fail to have a most disruptive effect on other policies of Military Government which were directed toward the economic reconstruction of Germany,” and that that “blanket application of the anti-​ trust doctrines of the U.S. to the German economy would not only be futile but would retard German recovery.”18 General Clay repeatedly sided with the businessmen over the trustbusters, leading to a flurry of political infighting within OMGUS. When Martin’s successor, Richard Bronson, brought Clay proposals to break up ball bearing and locomotive firms, Clay told him

254  Antimonopoly and American Democracy that he would have to employ a “rule of reason” aimed at “getting Germany on her feet and off the back of the American taxpayer,” which precluded deconcentration efforts in the industries proposed.19 This interview caused “all Hell [to break] loose,” with further stories in the New York Times about Clay ordering a halt to decartelization, Clay denying it, Decartelization staff nonetheless being cut, a letter of protest to Clay from nineteen members of the Decartelization Branch, further promises by Clay that the program was not being shuttered, and the total reorganization of the Decartelization Branch to eliminate the growing conflict in 1949, and Senators introducing the paper trail into the Congressional Record under cover of harsh indictments of the army’s refusal to carry out the Decartelization mandate.20 Another account on the demise of the Decartelization Branch, focusing less overtly on politics and more broadly on structural reasons, was published in 1950 in the University of Chicago Law Review by John Stedman, the secretary of the “Ferguson Committee” appointed to investigate the causes of the program’s failure.21 Stedman identified four reasons for the program’s failure. The first was “confusion over purposes and objectives.”22 Different players in OMGUS had different objective for decartelization, ranging from vengeance on the Germans to destroying Germany’s war-​making capacity to retaining it as a bulwark against the Russians. Stedman argued that the only proper objective for the decartelization program was a different one altogether, one embraced by the Branch’s leadership: democratizing Germany.23 Alas, General Clay never understood this long-​run policy as the objective, and hence reduced all decisions to the immediately strategic. The second reason identified by Stedman was “nonsupport of the program by the Germans themselves.”24 The problem was that the Germans had no tradition of a free and competitive economy, and its values and traditions were never adequately explained to them. “It is disconcerting, to say the least,” wrote Stedman, “to have German lawyers, in 1949, plaintively writing to persons in the United States asking where and how they can find out something about the anti-​trust laws, what they mean, what they stand for, and how they operate.”25 Third, Stedman noted that the US allies in the occupation did not adequately support the Decartelization program.26 The Russians were soon a lost cause, of course, but the British and French did not support the program much either. The British, in particular, were not too interested in supporting a program that would lead to a loss of governmental control over industry, since their principal economic objective was to preserve and maintain their

De-Nazifying by De-Cartelizing  255 own trade advantages, in part by socializing and controlling the German economy. Finally, Stedman faulted lack of enthusiasm for decartelization among US officials, many of whom were businessmen and industrialists who did not have much appetite for antitrust law back at home either: “[W]‌hen a group of American businessmen took an active interest in the German situation, they came back and reported that the decartelization program should be toned down.”27 What is perhaps most interesting for purposes of this volume is that the difficulty in obtaining military government support for creating a competitive economy in the name of democracy seems, with hindsight, entirely inevitable. OMGUS was not a democratic government—​it was a military government, which means it was centralized, hierarchical, and authoritarian. Armies are not democratic because democracy is messy and inefficient in the short run, just as markets can be. Hence, the story of the demise of the Decartelization Branch in many ways mirrors (much more venially) the story of fascism and monopoly itself: OMGUS preferred economic concentration to economic democracy, because that is the way OMGUS itself was run. Fortunately, of course, OMGUS was ultimately accountable to a democratic government, and the military government was temporary and transitional. If the Decartelization program failed to achieve significant remedial results in the German economy, it nonetheless provided a useful service by thoroughly researching and reporting on the concentrated and cartelized state of the German economy and the role of that concentration and cartelization in the rise and perpetuation of the Nazi regime. The program’s reports on specific firms and industries and on the history and nature of German industrial concentration and cartelization more generally became focal points for subsequent political discourse and reforms concerning concentration in the American economy, most particularly with respect to the Celler-​Kefauver Act of 1950.

The Record on German Industrial Concentration and the Nazi Regime The Decartelization Branch left a voluminous record of information regarding the role that large industrial firms and cartels played in the rise and dominance of the Third Reich. Those findings were almost immediately

256  Antimonopoly and American Democracy

Figure 7.1  Military Government for Germany (US), Decartelization Branch, Berlin, April 13, 1946. From left to right: P. V. Martin, Tom Hawkins, Allen Barth, C. R. Coleman, Frank Garnett, Malcolm Muir. Credit: Bentley Historical Library, University of Michigan (reproduced with permission).

influential in US domestic policy, with important implications for antitrust enforcement in the following three decades. However, some contemporary business historians urge caution in relying on rhetorical characterizations in the Decartelization Branch reports, which were allegedly made “for prosecutorial purposes by persons who were also trustbusters,” and often were not well-​steeped in German economic history.28 Despite such objections, there is much useful information in the Decartelization Branch archives, including information drawn from proprietary records seized directly from German businesses by the occupation forces.29

The Cartelization and Consolidation of German Industry from Bismarck to the Third Reich The roots of German industrial consolidation leading up to the monopolization and cartelization of industry under the Third Reich run back to the unification of Germany under Otto von Bismarck. Professor Wilhelm

De-Nazifying by De-Cartelizing  257 Roepke identified 1879 as the year when Germany began a transformation from free trade to cartelization (control of an industry through orchestration by a number of firms) and monopolization (dominance of an industry by one or two leading firms) as Bismarck pushed an industrial policy supporting “hierarchical organization and centralization” of all aspects of economic life.30 Cartelization began to grow rapidly in the German economy, with German courts upholding and enforcing cartel agreements in the last decades of the nineteenth century.31 Cartelization was not only tolerated, but actively encouraged by state policy. An 1888 Bavarian Supreme Court decision declared that “it is incumbent on prudent businessmen belonging to a branch of industry which is suffering from depression to get together and enter into agreements regulating the ways and means of operating their industry with a view to promoting recovery.”32 In 1897, just as the US Supreme Court was interpreting the Sherman Act to foreclose the argument that cartel agreements were necessary to prevent “ruinous competition” and establish “reasonable prices,”33 the German Supreme Court was accepting just such assertions.34 Despite occasional political contestation over the benefits of cartelization, the number of cartels continued to grow during the imperial period, expanding from raw materials to manufactured goods.35 During World War I, the German government moved from tolerance of cartels to active compulsion, enforcing and managing price-​fixing agreements and production quotas as part of the government’s industrial policy.36 Following the war, cartelization continued to grow rapidly, leading to some political backlash (mostly arising out of Bavaria) concerning the effects of cartels on consumers.37 The government did little to arrest the growing tide of cartelization until 1923, when it passed a Cartel Decree that, if anything, reinforced the legal status and protection of cartels.38 Although providing for the terminability of cartel agreements by parties to the contract upon a showing of good cause and subjecting the agreements to the control and supervision of the government, cartels were now given explicit statutory recognition.39 Further, the regulatory provisions were generally not enforced by the government, which showed little interest in arresting the spread of cartelization.40 German courts continued to show little interest in reining in cartels and monopolies.41 Unfettered by a government ranging from complacent to affirmatively enthusiastic for cartels, cartelization progressively swept through the German economy from the time of Bismarck to the Third Reich. One

258  Antimonopoly and American Democracy German historian estimated the following numbers of cartel agreements in Germany by year: 4 in 1865, 70 in 1887, 300 in 1900, 600 in 1911, 1,000 in 1922, 2,100 in 1930, and 2,500 by 1943.42 These included most significant industries: coal, iron and steel, steel processing, wire and cable, machinery, vehicles, non-​ferrous metals, building materials, chemicals, rubber, textiles, paper, printing, wood, electrochemical, optics, porcelain and stoneware, glass, leather, sugar, food, and brewing and distilling.43 Germany has been called “the fatherland of the cartel movement.”44 In the economic distress and disorganization that followed World War I, many of Germany’s cartels and syndicates found themselves in a state of decay, which paved the way for the second stage of concentration—​outright monopolization in many industries—​facilitated by German bankers.45 Many industries transitioned from tight cartelization to merger to monopoly, as for example the chemical industry, which merged from two cartels into a single integrated firm in 1925. The steel industry also moved through mergers and acquisitions in the direction of large, vertically integrated conglomerates.46 By the time the Nazis came to power, significant swaths of the German economy were subject to monopolies or near monopolies. In sum, before Hitler came to power, the German economy had been thoroughly cartelized and monopolized. A 1946 report of the Decartelization Branch summed up the situation as follows: [D]‌ espite war, defeat, inflation, and depression, the concentration of German industry proceeded without interruption as merger succeeded merger. By 1928 the officers and directors of the principal combines were in a position to dictate national economic policy, sometimes but not always in consultation with state officials. In fact, companies such as Vereinigte Stahlwerke and I.G. Farben, producing a wide range of raw materials, semi-​ finished products and commodities themselves, and a vastly wider range through their numerous affiliates and subsidiaries, were in effect an industrial dictatorship capable (should it suit their purposes) of reorganizing the German state.47

German Heavy Industry’s Support for the Nazi Regime The historical record on heavy industry’s support for the Nazi regime is hotly contested. Marxist-​leaning historians have consistently taken the

De-Nazifying by De-Cartelizing  259 view that capitalist monopolies supported Hitler’s ascent.48 For instance, Dietrich Eichholtz, writing in East Germany in 1969, faulted the “leading German monopolies” “for their initiative and leading role” in propelling the Nazi march toward war.49 By contrast, among non-​Marxists there has been no such consensus, with many taking the position that the captains of industry were largely not supportive of Hitler until he was already in power, at which point they had no choice but to fall in line with the Nazi regime.50 Much of the dispute over the characterization of the historical record turns on questions of timing. Adherents to the view that big business pushed Hitler’s ascent point to early support from Fritz Thyssen of the steel combine, who began to contribute funds to Hitler’s coffers in 1923,51 and Hjalmar Schacht of the Reichsbank.52 On January 27, 1932, a year before Hitler became chancellor, Thyssen organized a meeting at the Industry Club of Düsseldorf to introduce Hitler to leading industrialists. According to Thyssen’s first-​person account (published after he fell out with Hitler), the meeting resulted in “a number of large contributions flow[ing] from the resources of heavy industry into the treasuries of the National Socialist party.”53 Similarly, OMGUS’s Decartelization Report claimed that, in the final years of the Weimar Republic, industrialist Emil Kirdorf used his influence in the domestic coal cartel to levy assessments on every ton of coal mined or sold to raise money for the Nazis,54 although historians have questioned the extent of Kirdorf ’s support for the Nazis before 1934.55 Despite early support for Hitler by a few industrialists, the historical record does not bear out claims that Germany’s monopolies and cartels were pining for Hitler’s rise or providing material support to his ascension during most of the years of the Nazi party ascent from 1919 forward. Yale historian Henry Turner observed that “most of the political money of big business went, throughout the last years of the republic, to the conservative opponents of the Nazis” and that most of the business community backed Paul von Hindenburg against Hitler in the 1932 presidential campaign.56 Similarly, George Hallgarten observed that “[d]‌own to 1929 [the Nazi party] appears to have lived, in the main, on membership dues and individual gifts, mainly from local South German producers. A donation by Fritz Thyssen in 1923 remained an isolated fact.”57 The situation changed with Hitler’s ascension as chancellor on January 30, 1933. Leading industrialists, who were often more motivated by profits than political ideology, began to bet on Hitler’s political future and its

260  Antimonopoly and American Democracy implications for their businesses. On February 20, 1933, Hjalmar Schacht of the Reichsbank organized a meeting among Hitler, Hermann Göring, and several dozen leading industrialists, including executives from the Krupp, Bosch, Farben, and United Steel Works firms, during which Hitler promised to destroy the Marxists and rearm Germany.58 The industrialists responded with enthusiasm, and Schacht collected three million Reichsmarks in donations to the Nazis.59 On February 27, 1933—​perhaps not coincidentally the day of the Reichstag fire—​the I.G. Farben chemical monopoly deposited RM 400,000 in the Nazi Party’s coffers.60 A succession of further donations followed, providing Hitler with a source of extra-​ governmental funding even while he struggled to consolidate his power over the state. As discussed further below, the Krupp armaments monopoly led a fundraising effort among twenty other leading industrial firms a month later, raising millions of Reichsmarks for the Nazis. That these donations may have been made through “political extortion” and without enthusiasm by the industrial donors does not diminish the fact that they were made and that, through them, “big business was helping consolidate Hitler’s rule.”61 Although the best reading of the historical record suggests that most of the Weimar monopolies and cartelists were not generally disposed to support Hitler and did not do so until he was already grabbing the reins of power, that finding is not inconsistent with the thesis that the concentrated economic structure of industry may facilitate the rise of totalitarian government. The observation that extremely concentrated economic power facilitated Hitler’s rise to power is distinct from the controversy that has occupied historians since the end of World War II about whether the Nazi regime was an outgrowth of capitalism. In German Big Business and the Rise of Hitler, Turner systematically debunked the claim that the captains of heavy industry deliberately boosted Hitler to power, which Turner saw as an inaccurate interpretation of history for anti-​capitalist ideological purposes.62 Turner argued that support for Hitler was much more concentrated among small businessmen, who felt trapped between the powerful and rapacious monopolies and cartels, on the one hand, and the labor unions, on the other.63 But that small business may have supported Hitler’s rise while big business largely did not does prevent the concentrated structure of German industry from having contributed significantly to the Third Reich’s ascent, just as other structures of German society may have facilitated the Nazis without being designed to do so.

De-Nazifying by De-Cartelizing  261

Mechanisms of Corruption: How Industrial Concentration Enabled Nazism The Decartelization Branch, and its supporters in US domestic politics, was convinced that the extreme concentration of the German economy during the Weimar period enabled Hitler to come to power. As noted, however, the thesis that monopoly firms deliberately brought Hitler to power by supporting him financially and logistically during his long ascent from 1919 to 1933 is historically contested. A question that has received less attention is the concentrated structure of the German economy—​regardless of the interests or initial intentions of the captains of industry—​played in facilitating the consolidation of fascist political power. The historical record suggests five mechanisms by which extremely concentrated economic power contributed to the corruption of German democracy and the rise of totalitarian extremism. Monopoly Profits and the Faustian Bargain Historians who debate the extent to which big business support was important to Hitler’s rise to power often focus on financial donations to the Nazi party. A US Senate report charged that “Krupp, Thyssen and other powerful figures on the German industrial scene provided the Nazis with indispensable financial and political support.”64 On the other hand, many historians argue that most of the pre-​1933 donations from big business were token amounts given on the same basis as donations to political parties across the spectrum and did little to aid Hitler’s ascent to power.65 As previously noted, donations from big industry picked up significantly in 1933 after Hitler became chancellor and arguably helped to “consolidate Hitler’s rule.”66 In judging the importance of big industry’s financial donations and other forms of material support to the Nazis, it is important to bear in mind that Hitler did not achieve the full consolidation of political power immediately upon his appointment as chancellor on January 30, 1933. The Nazis controlled only three out of eleven cabinet posts and continued to require the legislative support of the Center Party and the Conservatives for the passage of the Enabling Act of March 23, 1933, which granted the Reich cabinet “temporary” ruling powers for an ostensible period of four years.67 Even after the abolition of political parties other than the Nazis on July 14, 1933, and the Reichstag’s effective abdication, Hindenburg, as president, remained commander-​in-​chief of the military and held the power to negotiate foreign

262  Antimonopoly and American Democracy treaties until his death in August 1934. It was not until soldiers were required to swear an oath of allegiance to Hitler on August 20, 1934, over a year and half after his ascension as chancellor, that Hitler achieved full dictatorial power over Germany.68 Hitler’s plenary control over industry arguably preceded his plenary control over the army. Moreover, as Hallgarten observes, the significance of big industry’s financial contributions to the Nazis in the critical years of his ascension lies in much more than the immediate impact on filling the party’s coffers: While Hitler was strongly assisted by the industrialist’s funds, one cannot say that industry “made” his movement. A movement of such enormous size as his which in 1932 controlled 230 seats in the Reichstag, is not made by any individual or group. It might be more correct to state that heavy industry by its very existence and social nature caused the movement, or, at least, helped to cause it and once it was given birth tried to use it for the industrialists’ purposes. Mechanization and economic concentration, maintenance of monopoly prices and monopoly agreements, with the resulting pressure on small competitors, were the fertile ground on which mass fascism grew.69

The significance of financial contributions by the monopolists and cartelists from 1933 forward cannot be measured solely in terms of enabling the Nazi Party’s financial activities. More important, the donations evidence big industry’s willingness to strike a Faustian bargain with the Nazi regime, in which the captains of industry would support the regime not only with their pocketbooks but also through a variety of other organizational, political, and economic mechanisms in exchange for the party’s favor and furtherance of their market dominance through the regime’s industrial policy. That big industry may have come into the Nazi fold grudgingly does not negate the fact that, when the political winds turned and Hitler’s long-​term political dominance seemed likely, the concentrated structure of German industry produced the Faustian bargain—​the exchange of continued monopoly rents for the support of a political regime that big industry was not otherwise inclined to favor. The case of German fascism may be a vivid illustration of what economist Luigi Zingales has called a “Medici vicious circle” (based on a case study of the Medici dynasty in medieval Florence), in which “money [derived from monopoly profits] is used to gain political power and political power

De-Nazifying by De-Cartelizing  263 is then used to make more money.”70 Zingales argues that monopolists have a unique ability to capture politics over the long term based on (1) their ability to make credible long-​term promises; (2) their grip on the market for specific human capital; (3) their ability to wrap their self-​interest in “a bigger, noble idea”; and (4) the social control they acquire through their image in society as it affects employment, data ownership, media ownership, advertising, research funding, and other methods.71 In 1933, German heavy industry had already accumulated significant economic and political power through consolidation and cartelization. Hitler’s rise simultaneously threatened the persistence of the industrialists’ monopoly rents and created an opportunity to retain and even grow those rents in the future through increased state patronage and national rearmament. By casting their lot with Hitler in 1933, the monopolies and cartels were spending some of the income earned from their existing monopoly status to buy political power in the rising regime. In coming years, the monopolies and cartels would spend their political capital to earn even greater monopoly rents—​an outcome clearly evidenced by their soaring profits in the later years of the Nazi regime. To understand the significance of monopoly power to this Faustian bargain, it may be helpful to imagine a counterfactual situation in which the German economy was significantly less concentrated at the time of Hitler’s ascension to power. Smaller individual firms in unconcentrated markets might still have been willing to make the Faustian bargain—​support for the regime in exchange for economic privileges—​but the bargain would have been much harder to strike or enforce because the mutual gains would have been significantly more difficult to assure. A small business firm in an unconcentrated market would not have the financial or other economic resources to offer the regime in its quest to centralize power. Nor could the regime as easily promise smaller firms long-​run monopoly profits, which would require suppressing many competitor firms capable of mounting robust political and economic opposition. As previously noted, Hitler’s initial political support was far deeper among small-​scale businesspeople who felt threatened by the power of the cartels and monopolies, but it was to those cartels and monopolies that Hitler turned to consolidate his power and arm for war. The exchange of material support from monopolies for the promise of continued and deepened monopoly power depends on the preexistence of monopoly power and the regime’s ability credibly to promise its continuation. Those were the circumstances of Germany in 1933.

264  Antimonopoly and American Democracy Organizational Structure, Industry-​Wide Mobilization, and Dissemination of Propaganda Beyond cash payments to finance the Nazis directly, which may nor may not have been critical to the Nazis in the years of their ascendance, the Faustian bargain manifested itself in forms of organizational, industrial, and political support that were of immense help to Hitler as he worked to consolidate power after his ascension as chancellor. Monopoly business firms were ideally positioned to facilitate the rapid consolidation of political power by lending the Nazi Party an organizational and bureaucratic structure at a time when the party was not yet in full control of either the political or military bureaucracy. For instance, once Farben’s senior managers had made a bet that alliance with Hitler was critical to the firm’s long-​run profitability (particularly given the immense commercial benefits that would come to a chemical monopoly from a program of rearmament and industrial-​military independence), they effectively put the firm and its resources at Hitler’s disposal—​with the understanding, of course, that the firm would be allowed to cash in financially by serving as a military-​economic arm of the state. Thus developed a codependent relationship between the firm and the regime. Over time, the firm became ever more organizationally intermeshed with the Wehrmacht and took on many of economy-​wide planning functions characteristic of governmental bureaucracies. With fewer internal checks and balances to overcome than in the political and military spheres, a massive organization that already, by virtue of its monopoly position, controlled large swaths of the German economy was a prime vehicle for a rising political force eager to centralize power. More generally, once the Faustian bargain had been struck, the great industrial monopolies were well positioned to begin carrying out the Nazi regime’s economic, political, and social policies, with immediate and far-​ reaching effect. These policies included such measures as purging Jews from senior management positions, reorienting industries toward rearmament, achieving German industrial independence, and spreading Nazi propaganda. Having signed on to the Nazi regime, the monopolies were able to begin advancing these policies across hundreds of thousands of employees and entire industries spread throughout Germany. In many cases, the Nazis allowed the bureaucratic and managerial functions assigned to the monopolies and cartels during the early days of the regime to continue even after the Nazis had secured plenary political power. A US War Department study submitted to Congress found that the

De-Nazifying by De-Cartelizing  265 Nazi apparatus never achieved an economic organizational superstructure independent of the dominant business firms assigned to run the major sectors of the German economy and that the Nazis were economically “helpless” without the bureaucratic structure of the firms themselves.72 The Nazis built up their own “army, police, and spy system” but relied heavily on the centralized power of their corporate partners to administer the regime’s economic policies.73 “[T]‌he bureaucratic structure itself was controlled by an oligarchy consisting of the chief stockholders of the great combines, the political hierarchy, and the military High Command.”74 Often the captains of industry were given official governmental titles so that they could run economic functions officially from within their own firm structures. The head of I.G. Farben held the position of national deputy for chemicals and the chairman of the coordinating organization of coal cartels was also given the title national deputy and ran the coal industry through the offices of the Ruhr coal syndicate.75 The role of big industry in propagating Nazi propaganda and coercing allegiance to the Nazi cause was also important to the regime. Farben played a significant role as an incubator and disseminator of Nazi propaganda. The firm employed 120,000 people76 and owned a number of newspapers,77 which allowed the firm to spread Nazi propaganda in Germany and around the world.78 Although senior Farben managers continued to have private qualms about the Nazi regime, the firm sprang into action to ensure ideological purity and adherence to the regime among its workforce. On May Day—​May 1—​1933, Farben lined up its plant workers to hear Nazi speeches and give “Sieg Heil” chants.79 Similarly, as of August 1933, all workers in Krupp factories were required to give the Nazi salute; any who refused were terminated.80 Once the dominant firms had bet on Hitler, they were able to serve as channels of his policies and ideology with greater alacrity than many other institutions of German society. Cartelization and Political Control As made clear in its name, the Decartelization Branch was focused particularly on dismantling the cartel structure that had dominated German industry since the early twentieth century. Even before the end of the war, American authorities had drawn a linkage between the cartels and Nazi political control. In a September 1944 letter to Secretary of State Cordell Hull, President Roosevelt observed that German “cartels were utilized by the Nazis as governmental instrumentalities to achieve political ends.”81

266  Antimonopoly and American Democracy Thurman Arnold, a Yale law professor and assistant attorney general for the Justice Department’s Antitrust Division, echoed similar themes in his 1943 introduction to a book by two federal officials on Hitler’s use of Germany’s cartels, observing that “the vast centralized organization of Germany became a tool in the hands of a dictator who no longer operated for private profit but solely to serve a ruthless ambition.”82 Although some of this rhetoric was directed at drumming up domestic opposition to the cartelization of the US economy rather than providing a sober assessment of Germany, the basic point was correct: the existence of German cartels greatly facilitated Hitler’s goal of achieving plenary political control over the German economy and reorienting it for war.83 As noted above, the German economy was subject to an increasing pattern of cartelization from the Imperial period up through the Weimar period, to the point that, with the Nazi ascendancy, cartels permeated the German economy. The Nazis quickly turned the cartelized structure of the German economy to their own ends. A decree of July 15, 1933, amended the 1923 permit decree to centralize power over cancellation of cartel agreements in the minister of economics, which “made possible a more effective integration of state control over cartels and general economic policy.”84 A second decree the same day authorized the minister of economics to create compulsory cartels—​essentially allowing the Reich government to force firms to participate in cartels.85 Little by little, the government employed these powers to bring industry firmly under state control and transform the cartels into “agents of a totalitarian government.”86 The Nazis used the reinforced cartel structure pervading the German economy as means to achieve total control over every aspect of German industry. A decree of November 12, 1936, integrated the cartels into the state’s administrative hierarchy and charged administrative groups with regulating the German markets through the means of the cartels.87 This administrative structure also served as one of the Nazis’ chief means of orchestrating business surveillance. The groups were charged with maintaining non-​public registers of the cartels’ existence, composition, area, membership, and duties and reporting any market-​regulating activities contemplated by the cartels.88 The Decartelization Branch observed that “[i]‌n a war economy, the ability to deal with a few large organizations in possession of detailed information concerning all of the various aspects of production and distribution is of inestimable advantage—​as the Nazis were quick to realize.”89 Similarly, writing

De-Nazifying by De-Cartelizing  267 in 1957, German scholar Ivo Schwartz summarized the Nazi appropriation of Germany’s highly cartelized economy as follows:90 Cartels proved themselves a very appropriate device to increase the power of the totalitarian system. By law the Reich Minister of Economics was authorized to establish compulsory cartels in any branch of industry or, by executive decree, to compel outsiders to join cartels already existing. Compulsory and free cartels were used to establish and maintain price, raw material and production controls as introduced by the government. Finally, they were used to strengthen the government-​planned war industry. At the beginning of World War II, German industry was highly cartelized and concentrated, and completely in the hands of the Nazi administration.

The Nazis succeeded in centralizing political power over German industry by appropriating a decades-​long tradition of industrial cartelization as the launchpad of a state-​directed and state-​controlled economy.91 Although the Nazis possibly could have achieved economy-​wide cartelization on their own initiative from scratch, the existing cartel structure greatly expedited their campaign to achieve total control over the German economy. Significantly, this power-​consolidating effect arose not so much from corporate “bigness” as from a culture of business collusion rather than competition. Many of the cartels included scores of smaller or medium-​sized firms.92 The Nazis effectively used their mutual interdependence through the medium of anticompetitive agreements as a lever to exert political control over entire industries. National Champions and the Military-​Industrial Complex As applied to German fascism, the classic version of the “military-​industrial complex” of which President Eisenhower would warn in his valedictory address in 1961,93 holds that German industrial monopolies that would profit from rearmament and war propelled Hitler to power. As previously discussed, this characterization of heavy industry’s support for Hitler during the Weimar period is doubtful. Still, that big industry was initially reluctant to support the Führer does not mean that the highly concentrated structure of German industry critical to rearmament played no role in Hitler’s rise. The previously described Faustian bargain does not depend on industry’s having been enthusiastic for Hitler’s rise, but on its having the incentive to pledge loyalty to a regime whose consolidation of power seemed imminent and that could promise war profits in exchange for the monopolies’ support. Once

268  Antimonopoly and American Democracy convinced that Hitler was in power for the long term and that this meant an opportunity to grow monopoly profits, firms like Farben had the capacity to “creat[e]‌an infrastructure that would allow it to respond directly to the government’s demands for strategic autarky—​in effect, taking a leading role in getting Germany ready for war.”94 Moreover, the monopolies were in a unique position to play the role of “national champions” neutralizing or pacifying foreign rivals’ efforts at developing products critical for war. Farben, Siemens, and Krupp were each involved in market allocation agreements with US firms that the Nazi regime used to impede American development in war-​critical product lines: Farben with Standard Oil as to buna rubber, Siemens with Bendix as to automatic pilots and as to beryllium with Beryllium Corp., and Krupp with General Electric as to carboloy. A 1941 Congressional Research Service report on foreign control of US patents found numerous other instances in which German firms were able to limit the availability of defense-​related materials in the United States because of market division agreements under color of patent law with US firms.95 Although some of the market division agreements predated the Nazis, the Nazi regime made strategic use of them to prevent US firms from developing indigenous technologies that could replace German-​made products during wartime. The regime’s capacity to use its national champion firms in this way to centralize its global political and military power was only possible because Germany had national champion firms—​that is, firms with a position of domestic dominance tolerated and encouraged by the regime as instruments of foreign policy. Decline of Democracy within the Firm A final potential mechanism by which the concentration of economic power facilitated the concentration of political power in Nazi Germany concerns the decline of democracy within the firms themselves in parallel with the decline of democracy in the surrounding political sphere. As firms that once replicated forms of democracy—​or at least the dispersion of authority—​ internally began to serve the regime’s goals of concentrating political power, it was not long until power within the firm had to be centralized as well. Once the firms became intermeshed with the hierarchical and centralized power structure of the state, democracy within the firm could not long survive. The decline of democracy within the firm, in turn, furthered the regime’s power-​ centralizing goals in society generally.

De-Nazifying by De-Cartelizing  269 Consider the symbiotic effects of the relationship between I.G. Farben and the Nazi regime and the resulting loss of checks and balances—​of democratic features—​within the Farben organization itself. In 1937–​1938, as Farben was becoming increasingly an arm of the regime, the company reorganized to centralize power in a few senior managers: forty-​ six once distinct subsidiaries were absorbed into the main enterprise, the number of managing and supervising board members was reduced, the governing powers of the firm’s Central Committee were largely transferred to the company’s president, company minutes and records ceased to be widely circulated, and board members were denied access to financial reports.96 In short, the firm organizationally replicated many of the democracy-​quashing changes occurring in the political regime, with the effect of extending totalitarian control from the political to the business realm. Similarly, the Krupp firm also underwent a structural transition under the Nazis in the direction of increasing centralization of power in the Krupp family. Although the Krupp family largely controlled the firm, its corporate form allowed for some degree of influence by external directors. After managerial conflicts arose during the war, Alfried Krupp made a personal appeal to Hitler for the Krupp firm to be reorganized by state decree, arguing that “the concentration of responsibility in a single head, especially in critical times . . . cannot be valued highly enough.”97 On November 12, 1943, a Führer decree that became known as “Lex Krupp” specified that “the owner of the Krupp family wealth is empowered to create a family enterprise with a particular regulation of succession.”98 The decree resulted in a complete centralization of corporate power in the Krupp family.99 The Nazi regime favored centralization of power within its partner monopoly firms, just as it favored the centralization of power throughout the economy and society more generally. As the regime worked to centralize its own political power, the concentration of economic power in a few dominant firms was congenial to its purposes.

Celler-​Kefauver and the Domestic Legacy of the Decartelization Project The Decartelization program bore fruit on American soil almost immediately after it died on German soil. In 1950, Congress enacted the Celler-​Kefauver Act, substantially expanding Section 7 of the Clayton Act of 1914, which

270  Antimonopoly and American Democracy prohibits anticompetitive mergers. At a technical level, Celler-​Kefauver accomplished three things: (1) closing the “asset loophole,” which had allowed merging firms to escape Section 7’s coverage through asset rather than stock acquisitions; (2) deleting “acquiring-​acquired” language in the original text of Section 7 that could be read to limit Section 7 to horizontal mergers and exclude coverage of vertical and conglomerate mergers; and (3) clarifying that Section 7 reached “incipient” trends toward increasing concentration levels that might threaten competition. In a more general sense, Celler-​ Kefauver served up a congressional mandate for a postwar program of intensive anti-​merger enforcement by the Justice Department and Federal Trade Commission from the 1950s through the early 1970s to stem the perceived “rising tide of concentration” in the American economy.100 As the Supreme Court acknowledged in Brown Shoe, the Act’s legislative history reveals “Congress’ fear not only of accelerated concentration of economic power on economic grounds, but also of the threat to other values a trend toward concentration was thought to pose.”101 Although the Supreme Court did not specify what “other values” Congress perceived to be at stake, floor statements by the bill’s two primary sponsors—​and New York congressman Emanuel Celler and Tennessee senator Estes Kefauver—​reveal a preoccupation with the political consequences of concentrated economic power, particularly in the correlation between industrial cartelization and monopoly and the rise of fascism in prewar Germany, and totalitarianism more broadly. Celler and Kefauver relied heavily on work generated from the findings of the Decartelization Branch. Celler warned: I want to point out the danger of this trend toward more and better combines. I read from a report filed with former Secretary of War Royall as to the history of the cartelization and concentration of industry in Germany: Germany under the Nazi set-​up built up a great series of industrial monopolies in steel, rubber, coal and other materials. The monopolies soon got control of Germany, brought Hitler to power and forced virtually the whole world into war.

The report continues: A high degree of concentration throughout industry fosters the formation of cartels and readily enables a war-​minded government to mobilize for

De-Nazifying by De-Cartelizing  271 hostilities. Such was the history of war preparations in Germany in both World War I and World War II.102

Senator Kefauver seconded Celler’s anti-​totalitarian themes. The rising tide of concentration would lead to totalitarianism of either the fascist or Stalinist variety: I am not an alarmist, but the history of what has taken place in other nations where mergers and concentrations have placed economic control in the hands of a very few people is too clear to pass over easily. A point is eventually reached, and we are rapidly reaching that point in this country, where the public steps in to take over when concentration and monopoly gain too much power. The taking over by the public through its government always follows one or two methods and has one or two political results. It either results in a Fascist state or the nationalization of industries and thereafter a Socialist or Communist state. Most businessmen realize this inevitable result. Certain monopolistic interests are being very short-​sighted in not appreciating the plight to which they are forcing their Government.103

Celler’s and Kefauver’s floor speeches reflected a broader concern of the US Congress and other national institutions that industrial concentration facilitated the incubation of totalitarianism and threatened democracy.104 Congressman Charles Kersten of Wisconsin linked the dangers of “big government” and “business so big that it is monopolized in the hands of a few.”105 Senator William Langer of North Dakota introduced into the record a March 26, 1947, Christian Science Monitor article warning of the “danger . . . for any democracy which allows economic concentration of power to spread at the expense of small business.”106 For its part, the Federal Trade Commission—​ whose chairman had recently chaired the Ferguson Committee on the demise of the Decartelization Branch—​warned that “[i]‌f nothing is done to check the growth in concentration, either the giant corporations will ultimately take over the Country or the Government will be impelled to step in and impose some form of direct regulation . . . in either event, collectivism will have triumphed over free enterprise.”107 The period of postwar anti-​merger enthusiasm, which lasted roughly from 1950 to the mid-​1970s, thus reflected, at its core, a deep concern that industrial concentration threatened the democratic order, as evidenced by the recent experience with Nazism. That epoch of aggressive antitrust enforcement

272  Antimonopoly and American Democracy came to a crashing end with the rise of the Chicago School in the late 1970s—​ a pivot in the law discussed further in Chapter 9 of this book. The US military’s German decartelization project failed on its own terms—​ it did not achieve the significant deconcentration of the German economy its champions had thought necessary to set Germany back on the road to liberal democracy. However, the information it uncovered and the political currents it unleashed had lasting implications for both US antitrust policy and the development of competition law ideas in Europe.

Acknowledgment Some of this chapter draws from a longer article published as “Fascism and Democracy,” Michigan Law Review 118 (2020): 1315.

Notes 1. Message from the President of the United States Transmitting Recommendations Relative to the Strengthening and Enforcement of Anti-​trust Laws, https://​www.jstor. org/​sta​ble/​1805​350?seq=​1#pag​e_​sc​an_​t​ab_​c​onte​nts. 2. J. F. J. Gillen, Deconcentration and Decartelization in West Germany 1945–​1953, Historical Division Office of the Executive Secretary, Office of the U.S. High Commissioner for Germany 6 (1953) (preliminary draft in files of Creighton R. Coleman). 3. Senator Harley M. Kilgore, “Introduction” to Darel McConkey, Out of YOUR Pocket, the Story of Cartels, 3rd ed. (New York: Pamphlet Press, 1947). 4. John C. Stedman, “The German Decartelization Program—​The Law in Repose,” University of Chicago Law Review 17 (1950): 441. 5. Extension of Remarks, Hon. Harley M. Kilgore, Senate of the United States, Sept. 12, 1944, Appendix to Congressional Record A3990. 6. Jonathan Tepper with Denise Hearn, The Myth of Capitalism: Monopolies and the Death of Competition (Hoboken, NJ: John Wiley & Sons, 2019), 151. 7. Sen. Foreign Rel. Comm. Staff, A Decade of American Foreign Policy: Basic Documents, 1941–​49 (1950), https://​babel.hat​hitr​ust.org/​cgi/​pt?id=​mdp.390​1501​9162​257;view=​ 1up;seq=​56; see also J. F. J. Gillen, Deconcentration and Decartelization in West Germany 1945–​1953, Historical Division Office of the Executive Secretary, Office of the U.S. High Commissioner for Germany (1953) (preliminary draft in files of Creighton R. Coleman). 8. Decartelization in the U.S. Zone of Germany 1 (December 1948) (Creighton papers). 9. Program and Aims of the Decartelization Branch, March 28, 1946, at 6.

De-Nazifying by De-Cartelizing  273 10. Stedman, “The German Decartelization Program,” 443. 11. Ibid., 442. 12. Ibid., 445. 13. Ibid., 441. 14. Ibid., 445. Technically, the program was not shuttered by reorganized by an order of High Commissioner McCloy. In fact, the reorganization effectively terminated the program. 15. Decartelization in the U.S. Zone, 48. 16. Ibid., 49. 17. Ibid., 49. 18. Ibid., 51. 19. Ibid., 52. Clay’s invocation of a “rule of reason” is ironic. Antitrust law recognizes a “rule of reason,” but one that is focused on market competitiveness and precludes inquiry into the sort of political factors that Clay had in mind. 20. Ibid., 52–​63. 21. Ibid., 448–​56. 22. Stedman, “The German Decartelization Program,” 448. 23. Ibid., 449. 24. Ibid., 450. 25. Ibid., 451. 26. Ibid., 452. 27. Ibid., 455. 28. Gerald D. Feldman, Financial Institutions in Nazi Germany: Reluctant or Willing Collaborators?, in Business and Industry in Nazi Germany, ed. Francis R. Nicosia and Jonathan Huener (2004), 15; see also Wilfried Feldenkirchen, Siemens: 1918–​1945 (Columbus: Ohio State University Press, 1995), 8 (criticizing the Siemens report’s assessments as “very much the product of their time” and inconsistent with the “current state of research”). 29. In examining the record of the relationship between German industrial concentration and the Third Reich, the pages that follow draw extensively on information contained in OMGUS reports and working files. To the extent possible, that information is corroborated and supplemented with information from scholarly business histories and other reliable sources. Where OMGUS reports made characterizations of dubious historical validity—​as particularly with respect to support given to the Nazi Party by large business firms prior to 1933—​alternative historical readings are presented. 30. Wilhelm Roepke, The Solution of the German Problem 1; see also John O. Haley, Antitrust in Germany and Japan: The First Fifty Years, 1947–​1998 (Seattle: University of Washington Press, 2001), 7–​8 (summarizing Germany’s abandonment of free trade in 1870s and movement toward cartelization). 31. Decartelization Branch, Office of Military Government for Germany (U.S.), Report on German Cartels and Combines, Vol. 1: German Economic Decentralization, March 1, 1947, at I-​28-​29 (hereafter “Decartelization Vol. 1”). 32. Edward S. Mason, Controlling World Trade: Cartels and Commodity Agreements (New York: McGraw-​Hill, 1946), 129.

274  Antimonopoly and American Democracy 33. U.S. v. Trans-​Missouri Freight Ass’n, 166 U.S. 290 (1897) (rejecting claim that railroad pooling agreement was lawful under Section 1 of Sherman Act because prices charged were reasonable in light of effects of excessive competition); see also U.S. v. Addyston Pipe & Steel Co., 85 F. 271, aff ’d 175 U.S. 211 (1899) (rejecting arguments that “ruinous competition” justifies cartel agreements). 34. B. v. den Sächsischen Holzstoff-​ Fabrikanten-​ Verband, Reichsgericht (VI. Zivilsenat), Feb. 4, 1897, 38 R.G.Z. 155 (B. v. Saxon Woodpulps Manufacturers Ass’n); see also Decartelization Branch, Office of Military Government for Germany, Report on German Cartels and Combines, Vol. 3: Germany’s Major Industrial Combines (U.S.), March 1, 1947, I-​28-​29 (hereafter “Decartelization Vol. 3”); Ivo E. Schwartz, “Antitrust Legislation and Policy in Germany: A Comparative Study,” University of Pennsylvania Law Review 105 (1957): 617, 626 (discussing holding in Woodpulps case). 35. Decartelization Vol. 1, I-​29-​31. 36. Ibid., I-​31. 37. Ibid., I-​30-​35. 38. Schwartz, “Antitrust Legislation and Policy in Germany,” 636–​ 39; Peter D. Schapiro, “The German Law against Restraints of Competition—​Comparative and International Aspects,” Columbia Law Review 62 (1962): 1, 7 n. 38; Decartelization Vol. 1, I-​35. 39. Schwartz, “Antitrust Legislation and Policy in Germany,” 636–​39; Decartelization Vol. 3, I-​35. 40. Decartelization Vol. 1, I-​36. 41. See Decision of the Hanseatisches Oberlandesgericht, Jan. 14, 1925, 23 Kartellrundschau 256, aff ’d by the Reichsgericht (IV. Zivilsenat), Dec. 12, 1925, 24 Kartellrundschau 18 (“For business men to obtain a monopoly is not, under general principles of civil law, unlawful even if such monopoly should in effect be at variance with the interests of national economy.”); translated in Schwartz, “Antitrust Legislation and Policy in Germany,” 634. 42. Decartelization Vol. 3, I-​17; see also Henry Ashby Turner, German Big Business and the Rise of Hitler (New York: Oxford University Press, 1987), xix (reporting “in excess of fifteen hundred [cartels] in industry alone by 1925”); Hendrich Kronstein, “The Dyamics of German Cartels and Patents,” University of Chicago Law Review 9 (1942): 643, 647 (reporting the existence of 450 German cartels in 1901); Schwartz, “Antitrust Legislation and Policy in Germany,” 635 (reporting the existence of 3,000 German cartels in 1925). 43. Decartelization Vol. 1, I-​17-​18. 44. Haley, Antitrust in Germany and Japan, 8; John C. Stedman, “The German Decartelization Program—​The Law in Repose,” University of Chicago Law Review 17 (1949–​1950): 441; Heinrich Kronstein, “The Dynamics of German Cartels and Patents. II,” University of Chicago Law Review 10 (1942): 46; Heinrich Kronstein, “The Dynamics of German Cartels and Patents. I,” University of Chicago Law Review 9 (1942): 643. 45. Decartelization Vol. 3, III-​1.

De-Nazifying by De-Cartelizing  275 46. Haley, Antitrust in Germany and Japan, 8; Turner, German Big Business and the Rise of Hitler, at xvii. 47. Decartelization Vol. 3, III-​2. 48. Henry Ashby Turner Jr., “Big Business and the Rise of Hitler,” American Historical Review 75 (1969): 56 (“For Marxists, or at least those who adhere to the Marxist line, the answer to this question has never been a problem. From the outset, they have viewed Naziism as a manifestation of ‘monopoly capitalism’ and the Nazis as the tool of big business”); George W. F. Hallgarten, “Adolf Hitler and German Heavy Industry, 1931–​1933,” Journal of Economic History 12 (1952): 222, 222–​23 (“The Marxist and leftist view . . . sees in the Führer one of the most outstanding servants of German monopoly capitalism”). 49. Dietrich Eichholtz, Geschichte der deutschen Kriegswirtschaft, 1939–​ 1945, 3 vols. (Berlin: De Gruyter Saur, 1969), 1:90 (quoted in translation in Feldenkirchen, Siemens, 3). 50. Turner, German Big Business, 56; see also Wyatt Wells, Antitrust & the Formation of the Postwar World (New York: Columbia University Press, 2002), 140 (“Although Germany’s business community certainly harbored a substantial number of Nazis, many historians have argued that industry as a whole contributed no more to Hitler’s rise to power than other segments of German society and may have contributed less than some”). 51. Ernest S. Griffith, Facism in Action, H.R. Doc. No. 80-​401, at 89 (1947) 52. Decartelization Vol. 3, III-​2 53. Fritz Thyssen, I Paid Hitler (New York: Farrar & Rinehart, 1941), 16. 54. Decartelization Vol. 3, III-​2. 55. Turner, Big Business and the Rise of Hitler, 60–​61; Turner, German Big Business, 350 (dismissing coal levy as a “myth”). 56. Turner, Big Business and the Rise of Hitler, 62. 57. Hallgarten, “Adolf Hitler and German Heavy Industry,” 224. 58. William L. Shirer, The Rise and Fall of the Third Reich: A History of Nazi Germany (New York: Simon & Schuster, 1959), 190. 59. Ibid. 60. Diarmuid Jeffreys, Hell’s Cartel: IG Farben and the Making of Hitler’s War Machine (London: Bloomsbury, 2008), 170. 61. Thomas Childers, The Third Reich: A History of Nazi Germany (New York: Simon & Schuster, 2018), 269. 62. Turner, German Big Business. 63. Ibid., 344. 64. U.S. Senate, Subcommittee on War Mobilization to the Committee on Military Affairs, Cartels and National Security, 79th Cong., 2d Sess. 1944, 6–​7. 65. Alec Stapp, “In ‘The Curse of Bigness’ Tim Wu Makes His Case That Big Business Ushered in the Nazis,” Salon (March 14, 2019), https://​www.salon.com/​2019/​03/​14/​ in-​the-​curse-​of-​bign​ess-​tim-​wu-​makes-​his-​case-​that-​big-​busin​ess-​ushe​red-​in-​the-​ nazis/​(collecting sources). 66. Childers, The Third Reich, 269.

276  Antimonopoly and American Democracy 67. Shirer, The Rise and Fall of the Third Reich, 184, 198. 68. Jeffreys, Hell’s Cartel, 202 (observing that army’s August 1934 oath of allegiance removed “the last remaining barrier to the Nazi revolution” and made Hitler “the unchallenged master of Germany”); Shirer, The Rise and Fall of the Third Reich, 226 (noting that, with Hidenburg’s death, the consolidation of the positions of president and chancellor, and the army’s oath of allegiance to Hitler, “[h]‌is dictatorship had become complete”); Karl Dietrich Bracher, The German Dictatorship: The Origins Structure and Consequences of National Socialism (London: Penguin, 1970), 281–​87 (chronicling Hitler’s steps toward total dictatorship in year and a half following his elevation as chancellor). 69. Hallgarten, “Adolf Hitler and German Heavy Industry,” 246. 70. Luigi Zingales, “Towards a Political Theory of the Firm,” https://​resea​rch.chica​gobo​ oth.edu/​~/​media/​5D8A9​BE2E​FB84​35B9​1D23​E6BB​1859​B2E.pdf. 71. Ibid., 19–​20. 72. Elimination of German Resources for War: Hearings before a Subcomm. of the S. Comm. on Military Affairs, 79th Cong. 943 (1945) 73. Ibid. 74. Ibid., 505. 75. Ibid., 506. 76. Jeffreys, Hell’s Cartel, 124. 77. Ibid., 146. 78. Elimination of German Resources, 90–​92. 79. Jeffreys, Hell’s Cartel, 180. 80. William Manchester, The Arms of Krupp, 1587–​1968 (Boston: Little, Brown, 2003), 413. 81. Tepper, The Myth of Capitalism, 150. 82. Thurman Arnold, Introduction, in Joseph Borkin and Charles A. Welsh, Germany’s Master Plan: The Story of the Industrial Offensive (New York: Duell, Sloan & Pearce, 1943). 83. See Hans B. Thorelli, “Antitrust in Europe: National Policies after 1945,” University of Chicago Law Review 29 (1959): 222 (summarizing research concerning importance of cartels to the Nazi regime). 84. Decartelization Vol. 3, III-​41. 85. Ibid., III-​42. 86. Ibid., III-​43. 87. Philip C. Newman, “Key German Cartels under the Nazi Regime,” Quarterly Journal of Economics 62 (1948): 576; Decartelization Vol. 3, III-​47. 88. Decartelization Vol. 3, III-​47. 89. Ibid., III-​43. 90. Schwartz, “Antitrust Legislation and Policy in Germany,” 641–​42. 91. Newman, “Key German Cartels under the Nazi Regime,” 576 (observing that Nazis appropriated and transformed existing cartel structures in order to bring industry under total state control). 92. Decartelization Vol. 3, III-​17. 93. President Dwight D. Eisenhower, Farewell Address to the Nation (January 17, 1961). 94. Jeffreys, Hell’s Cartel, 206.

De-Nazifying by De-Cartelizing  277 95. Buel W. Patch, Foreign Control of American Patents (July 17, 1941), https://​libr​ary. cqpr​ess.com/​cqres​earc​her/​docum​ent.php?id=​cqr​esrr​e194​1071​700; see also Wells, Antitrust & the Formation of the Postwar World, 43–​52. 96. Peter Hayes, Industry and Ideology: IG Farben in the Nazi Era, 2nd ed. (Cambridge: Cambridge University Press, 2001), 203–​5. 97. Harold James, Krupp: A History of the Legendary German Firm (Princeton, NJ: Princeton University Press, 2012), 207. 98. Ibid.; Telford Taylor, “The Krupp Trial: Fact v. Fiction,” Columbia Law Review 53 (1953): 197, 209 n.85. 99. James, Krupp, 207–​8. 100. Brown Shoe Co. v. U.S., 370 U.S. 294, 316 (1962). 101. Ibid. 102. 95 Cong. Rec. 11, 486 (1949). Celler continued by quoting Walter Lippmann of Fortune magazine as follows: “The development of combinations in business, which are able to dominate markets in which they sell their goods, and in which they buy their labor and materials, must lead irresistibly to some form of state collectivism. So much power will never for long be allowed to rest in private hands, and those who do not wish to take the road to the politically administered economy of socialism, must be prepared to take the steps back toward the restoration of the market economy of private competitive enterprise.” 103. 96 Cong. Rec. 16,452 (1950). 104. See generally Robert Pitofsky, “The Political Content of Antitrust,” University of Pennsylvania Law Review 127 (1979): 1051; Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age 81 (New York: Columbia Global Reportgs, 2018) (noting that Celler-​Kefauver Act “was explicitly styled as a reaction to the German and Soviet examples”); Lina M. Khan, “The Ideological Roots of America’s Market Power Problem,” Yale Law Journal Forum 127 (2018): 960, 966 (“The Celler-​ Kefauver Act, a supplementary antitrust law, was passed in 1950 due to fears that excessive consolidation could deliver fascism”); but see Robert H. Lande, “Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged,” Hastings Law Journal 50 (1999): 871, 956 (“The dramatic statements in the legislative history of the Celler-​Kefauver Antimerger Act probably reflect less a fear of imminent fascism than a desire to curb increases in industrial concentration for a large number of social and political reasons”). 105. Remarks by Mr. Kersten in the House on H.R. 7024, August 7, 1948, 94 Cong. Rec. 10241–​42 (1948) Debate: 94 Congressional Record (Bound Edition)—​80th Congress, 2nd Session—​1948: Document No. 59. 106. Extensionary Remarks by Mr. Langer on Mergers through a Loophole, June 4, 1948, 94 Cong. Rec. A3552 (1948) Debate: 94 Congressional Record (Bound Edition)—​ 80th Congress, 2nd Session—​1948: Document No. 56, page A352. 107. “Washington: FTC Asks Congress to Curb Corporations,” Detroit Free Press, July 26, 1948, 4.

8 Jurisdiction beyond Our Borders United States v. Alcoa and the Extraterritorial Reach of American Antitrust, 1909–​1945 Laura Phillips-​Sawyer

Introduction In 1945 the Second Circuit Court of Appeals handed down one of the most important decisions in modern American antitrust law—​a case that is famous not only for expanding the Sherman Act’s antimonopoly provision but also for its length, unique procedural posture, and extraordinary cast of characters. Because the US Supreme Court had been unable to reach a quorum of justices to hear the case, the US Senate had intervened to allow the Second Circuit to sit as the court of last resort. Writing for that court, Judge Learned Hand found himself in the unenviable position of having to sort through years of litigation records and to rule on one of the most contentious cases of the era: United States v. Aluminum Company of America.1 Reams of legal briefs, testimony, and exhibits were accompanied by an ever-​ changing team of attorneys at the Department of Justice. Attorney General Homer Cummings had brought the original indictment in 1937; he later handed over the reins to Solicitor General Robert H. Jackson and Assistant Attorney General Thurman Arnold, who charged the Aluminum Company of America (Alcoa) with violating both the Sherman Antitrust Act’s prohibition on monopolization (Section 2) and combinations, contracts, and conspiracies in restraint of trade (Section 1). The case was then frozen throughout the duration of World War II, until Attorney General Francis Biddle revived prosecution in 1944.2 And so it happened that in the early 1940s Judges Hand, Thomas W. Swan, and Augustus Noble Hand (Learned Hand’s cousin) confronted tens of thousands of pages of documents that recounted how Alcoa had come to dominate the domestic aluminum market and how the company had participated in a global conspiracy to control Laura Phillips-​Sawyer, Jurisdiction beyond Our Borders In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0008

Jurisdiction beyond Our Borders  279 the worldwide aluminum market. What prosecutors were asking for was nothing less than a revolution in American antitrust at home and abroad—​ and they won. The Alcoa ruling is well known in two regards. First, it expanded the Sherman Act’s prohibition on monopolization. Although Judge Hand3 was careful to say that monopoly in and of itself is not illegal under the antitrust laws, he held that in this case Alcoa had achieved and maintained its monopoly power by foreclosing new entry into the market for virgin aluminum production. Defining the relevant market within which the defendant operates has always been a contentious first step in Section 2 litigation.4 Hand decided to limit the relevant market to virgin aluminum only, where Alcoa controlled over 90 percent of production, and to disregard the secondary market for recycled aluminum, where more competitors existed. Next, he asked how Alcoa had achieved this monopoly and if its tactics fell within the meaning of Section 2. Answering this question, he held that Alcoa had continuously increased its production ahead of demand and thereby illegally monopolized the market. Secondly, the case established extraterritorial jurisdiction for US antitrust law, establishing the general rule that US antitrust liability could be applied to foreign firms’ conduct abroad.5 Hand held that Alcoa had maintained its dominance, in part, through its participation in an international cartel, which it had helped orchestrate through the Canadian firm Aluminum Limited.6 This part of the holding became known as the “intended effects doctrine.” Alcoa both expanded the Sherman Act’s prohibition on monopolization and reoriented the reach of the act’s anticartel policies to include anticompetitive agreements made by foreign firms that were intended to and did effect the US market—​and Hand was careful to link both of these elements in his opinion.7 Judge Hand was also careful to distinguish this new intended effects test from the existing “strict territoriality” doctrine, which had explicitly limited American antitrust jurisdiction to disputes within US territorial borders. Writing in 1909, Justice Oliver Wendell Holmes Jr. had famously declared that the lawfulness of an act must be determined according to the laws of the country where the act was committed; however, a key piece of that case concerned an act of state.8 Thus, the liberal principles espoused in antitrust law were constrained by how the Court understood territorial sovereignty. Despite that certainty in law, disputes continued to arise through the 1920s that challenged strict territoriality. And, by 1945, World War II had provoked the rethinking of the association of sovereignty and liberalism;

280  Antimonopoly and American Democracy while the older doctrine remained intact, the Alcoa case insisted that international cartels threatened American territorial sovereignty as well as its popular sovereignty, which the antitrust laws had been designed to protect.9 American jurists were willing to apply US antitrust regulations to acts carried out abroad if that anticompetitive conduct was intentional and the consequences were proven—​foreign cartels operating abroad were unlawful under the Sherman Act if “they were intended to affect imports, and did affect them.”10 And so, on March 12, 1945, as Allied troops prepared for the final offensive in Germany and as Congress prepared to ratify the Bretton Woods agreement, Judge Hand seemed to resolve the mounting tension in international law between market capitalism and state sovereignty by rethinking the association between the two. Not only did Hand revive the American antimonopoly tradition but he also helped foist it onto global trade partners, projecting an emergent liberal international order. Americanist historians (myself included) have explained the shift in US antitrust jurisprudence that began around 1937, when the original indictment against Alcoa was issued, largely in terms of domestic economic changes and shifting political coalitions. However, an alternative explanation might emphasize—​as I do here—​a concomitant concern with both foreign and international cartels as a threat to mobilizing US wartime production, to establishing postwar international trade and peaceable relations, and to maintaining US democratic processes untainted by illegal agglomerations of market power. Cartels and the monopoly power they might control have always been an antitrust concern in the United States, yet the question of how to handle foreign and international cartels proved increasingly problematic during the first half of the twentieth century. During the early 1900s, American antitrust law and policy embraced strict territoriality. Yet, the United States remained alone in its anticartel policies and judicial enforcement; other developed countries instead embraced a more flexible approach to various cartel or cartel-​like business activities.11 US businesspeople complained that they operated at a disadvantage in international markets and, in turn, Congress promoted export-​oriented trade associations by exempting them from antitrust laws through the Webb-​ Pomerene Act of 1918.12 International cartels expanded, but, especially in the inflationary wake of World War I, many European commentators and policymakers began to question their efficacy in managing business cycles, tampering currency inflation, and protecting consumer welfare.13 Through the interwar years, American antitrust doctrine began to shift away from

Jurisdiction beyond Our Borders  281 strict territoriality by distinguishing the American Banana holding. By the mid-​1930s, many US legislators and regulators embraced more stringent rules against monopolization and cartel behavior, both at home and abroad. Very real concerns about European fascism and national socialism revitalized antimonopoly’s original link between promoting a decentralized economic order and safeguarding liberal democracy.14 At the turn of the twentieth century, American antitrust policies had focused on newly formed domestic monopolies and cartels (e.g., in railroads and oil production) that had threatened to overtake rickety democratic, representative institutions. By 1940, however, it had become clear to DOJ prosecutors that if antitrust prosecution could not be used to ensure competitive international markets and prevent cartelization and monopolization, then the now-​powerful state would be required to intervene through heightened regulation. In the wake of World War II, with the example of Germany acutely in mind and the fear of a resurgent Soviet Union, it was not hard to imagine such a scenario. The United States became actively engaged in constructing international institutions, a posture it had previously forsaken, and in exporting (i.e., imposing) American competition policies on the rest of the world.15 The Alcoa decision of 1945 played an important role in solidifying this shift. This chapter is organized into three sections. The first examines the shift in US antitrust law and policy between 1909 and 1929. This early era was characterized by strict territoriality and antitrust exemptions for firms operating abroad. The Alcoa case was a major reversal of existing Supreme Court precedent; however, a series of distinguishing cases had significantly weakened that precedent, demonstrating how a process of accommodation had unfolded over the course of four decades. And, by the mid-​1930s, those older approaches seemed increasingly untenable. The following section focuses on the public speeches of Robert Jackson and Thurman Arnold, in which they explained their revived antitrust agenda as necessary to enforce market competition and to instill democratic accountability. Increasingly, they—​and President Franklin D. Roosevelt—​contrasted American markets and democracy with those of fascist regimes, pinpointing antitrust as a necessary backstop against the rise of powerful fascist states. More specifically, Alcoa had long been of interest to the Justice Department, and just as it had become representative of wildly successful industrial firms, it had also attracted concerns about its involvement in an international cartel. Alcoa, it seems, was the low-​hanging fruit that would allow Jackson and Arnold to accomplish a long-​standing liberal goal to fight both monopoly and cartel

282  Antimonopoly and American Democracy activity. The final section further explores Judge Hand’s economic analysis and legal reasoning, linking his ruling to a coterie of intellectuals who had puzzled over this problem of extraterritoriality through the early 1940s, when international cartels played an ever-​present role in wartime preparedness. Those international and foreign cartels were lambasted as intruding on American territorial and popular sovereignty by interfering with wartime preparedness and supporting illiberal organizations of capital (i.e., cartels). The world wars had run roughshod over the flows of global trade and finance, but with the end of World War II now in sight and with the ink still drying on the Bretton Woods agreement, the time seemed ripe to reconfigure American antimonopolism, both at home and abroad.

Regulating International Cartels and Monopolies: Strict Territoriality at Home and Exemptions Abroad, 1890–​1929 Passage of the Sherman Antitrust Act of 1890 coincided with the first era of globalization, which brought with it a massive expansion in the mobility of goods and services, capital, and people. Although the United States maintained high import tariffs on manufactured goods, Congress recognized the challenges that both foreign, state-​sanctioned cartels and international private cartels might pose to the US domestic political economy.16 Senator George Hoar, whose revisions to Senator John Sherman’s original act were adopted by the Judiciary Committee, explained: The great thing that this bill does, except affording a remedy, is to extend the common law principles, which protected fair competition and trade in old times England, to international and interstate commerce in the United States.17

Congressional debate regarding the application of the Sherman Act to international actors received far less discussion than that concerning the problem of domestic combinations and monopolies. Nevertheless, both Sections 1 and 2 of the Sherman Act extended to commerce “with foreign nations.”18 Nineteenth-​ century customary international law limited the reach of a sovereign state’s laws to private actors within its territorial jurisdiction and typically did not extend into another state’s sovereign sphere.19

Jurisdiction beyond Our Borders  283 In other words, state sovereignty preempted antitrust extraterritoriality; and yet the Alien Torts Statute of 1789 had provided standing for “private causes of action for certain torts in violation of the law of nations,” keeping alive private suits for extraterritorial claims (discussed further below).20 In the early twentieth century, transnational combinations and anticompetitive acts committed abroad challenged the presumption against extraterritoriality as business contracts and supply chains increasingly transcended state borders and came into conflict with US antitrust law. American antitrust policy, it must be remembered, remained unique in its construction of competition policy especially against cartels—​it was far stricter in its prohibition of “contracts, conspiracy, and combinations in restraint of trade” than any other nation. In turn, novel challenges arose regarding both how US law would apply to international cartels and monopolies doing business in the United States as well as how US law would apply to American firms operating abroad. This era of American antitrust law was characterized by two competing frameworks that were not entirely consistent—​on the one hand, the US Supreme Court adopted “strict territoriality” that seemed to limit the reach of antitrust liability to anticompetitive conduct taking place on American soil; on the other hand, Congress passed legislation exempting American export associations from antitrust liability when doing business abroad. This section of the chapter does three things: it begins with the doctrine of strict territoriality that Holmes articulated in American Banana Co. v. United Fruit Co. (1909);21 it shows how that doctrine influenced US policy on international cartels throughout the Wilsonian era—​ in part through US policies exempting American export associations from antitrust review while also insisting that foreign firms abide US antitrust laws while on US soil; and it also demonstrates how the American Banana doctrine of strict territoriality eroded over time through distinguishing cases, which created a doctrinal opening for the Alcoa decision establishing antitrust extraterritoriality. Eventually, the doctrine of strict territoriality enunciated in American Banana would be narrowed so as to only prohibit US interventions against an act of state, but even then, exceptions could be found. In American Banana, Supreme Court Justice Oliver Wendell Holmes Jr. applied a strict application of state sovereignty—​an interpretation that he based on nineteenth-​century jurisdictional norms—​to a private antitrust suit between two competing banana plantation owners operating abroad and importing into the United States. In that case the Court distinguished

284  Antimonopoly and American Democracy between two types of sovereignty—​external and internal—​and ruled that American antitrust regulation touched only the internal regulation of the US market. The ruling established what has become known as “strict territoriality” and thereby refused to apply US antitrust liability to clearly anticompetitive acts instigated by a US citizen against another US citizen for the purposes of monopolizing an industry. The fact that a sovereign nation—​ Costa Rica—​had facilitated one part of the anticompetitive behavior had solidified Holmes’s position, and the Court embraced a strict limitation against employing American antitrust rules to extraterritorial disputes, and especially those involving sovereign states. Admittedly, the American Banana case was a complicated one. In 1903, Herbert McConnell had started a banana plantation in Colombia and built a railroad to connect the plantation to the coast.22 The United Fruit Company (the defendant) told him that he should either combine with United Fruit or stop his business.23 Instead, McConnell sold his plantation to American Banana Company in June 1904. United Fruit—​a corporation domiciled in New Jersey and headquartered in Boston—​allegedly had monopolized and restrained the banana trade and, in turn, had maintained unreasonable prices in the US market.24 Those acts were alleged to be unlawful under the Sherman Act and the plaintiff sought antitrust relief.25 Amid this intense competition to corner the trade in bananas, geopolitical skirmishes redrew territorial boundaries in the region.26 Also in 1903 the Republic of Panama seceded from Colombia with the aid of the US Navy. Shortly thereafter, the United States secured rights to the canal zone. The following year, “Costa Rican soldiers, instigated by the United Fruit Company, seized a part of the supplies of American Banana and stopped the construction and operation of both the plantation and railway” to the port.27 The American Banana plantation, once part of Panama, then fell under the de facto jurisdiction of the Costa Rican government. Although US secretary of state Elihu Root attempted to persuade Costa Rica to “preserve the property, not to destroy it, and hand it over to her owner,” the Costa Rican government transferred title to the properties to a citizen of Costa Rica, Astua.28 Eventually, United Fruit bought the plantation and the railroad from that individual, who appears to have been the minister of foreign relations for Costa Rica.29 The US government declined to intervene on behalf of American Banana, preferring instead to allow the Costa Rican courts to settle the dispute.30 Justice Holmes, writing for the Court, leaned hard on a presumption against extraterritoriality and grounded that understanding in his

Jurisdiction beyond Our Borders  285 interpretation that “sovereignty is pure fact.”31 He argued that “it is a contradiction in terms to say that, within its jurisdiction, it is unlawful to persuade a sovereign power to bring about a result that it declares by its conduct to be desirable and proper. . . . The very meaning of sovereignty is that the decree of the sovereign makes law.”32 Holmes went further, declaring that US antitrust law could not be applied to extraterritorial conduct by American citizens and firms: “The general and almost universal rule is that the character of an act as lawful or unlawful must be determined wholly by the law of the country where the act was done.”33 Moreover, it did not matter that United Fruit seemed to influence, or control, that sovereign government. Concurrent or competing sovereignties were simply an impossibility for Holmes, except “in regions subject to no sovereign, like the high seas, or to no law that civilized countries would recognize as adequate.”34 But, Holmes concluded, that was not the case here and the Court would not grant that the Costa Rica government was a “mere tool of the defendant.”35 In this way, American Banana was an easy case—​the US Supreme Court scarcely considered intervening due to the state action of the Costa Rican government. (Indeed, the “act of state doctrine” bars an antitrust claim today when it would require a court to declare invalid an official act of a foreign nation.)36 Yet, while this doctrine reflected the long-​standing Eurocentric idea of the Peace of Westphalia, which enshrined state sovereignty as an organizing principle of international law in the seventeenth century, the Court’s legal formalism combined the act of state doctrine with strict territoriality in antitrust law so as to unleash—​and protect—​American multinational firms seeking to monopolize entire industries abroad and import those products in the US market.37 To acknowledge that American Banana played a pivotal role in the creation of “banana republics” in Latin America is not to say that the United States should intervene against acts of foreign states, but rather it draws attention to how American antitrust law played a role in facilitating economic imperialism—​whether intended or not.38 Moreover, the case illustrates in bold relief how an economically powerful firm might insinuate itself into—​or perhaps even “instigate,” as the petitioners charged—​political acts for anticompetitive purposes—​a fear that had motivated the passage of the Sherman Act. At the time, United Fruit’s actions in Central America begat inquiries from Congress,39 and some legal commentators decried the failure of US antitrust law to intervene in a private action and to protect American consumers.40 For the legal scholar Warren B. Hunting, United Fruit should not have gone

286  Antimonopoly and American Democracy unpunished, especially given that the prior conspiracy—​United Fruit’s insistence that McConnell either join the combination or cease banana cultivation and export—​provided proof enough of the intent to restrain trade. According to the plaintiffs, under existing US antitrust law, United Fruit’s actions created a cause of action by the mere fact of conspiracy, which was forbidden by the Sherman Act.41 And, moreover, Costa Rica need not be implicated in the judgment—​the illegal act by the private party gave rise to the liability.42 Indeed, Holmes had ignored the Wilson Tariff Act of 1894, which explicitly prohibited foreign or international cartels from importing into the US market, even though the plaintiff had brought it into their briefs. The Wilson Tariff had lowered tariffs and imposed an income tax to recoup lost revenue; also, it contained provisions similar to Section 1 of the Sherman Act as applied to foreign importers.43 One year after American Banana, Attorney General George Wickersham issued an official opinion,44 in response a State Department inquiry, asserting expansive extraterritorial antitrust jurisdiction over a German syndicate of potash producers, which employed an American importer (German Kali Works) for its distribution in the US market.45 In short, the German government passed legislation creating a “board of apportionment” to set overall quotas for potassium salt domestic consumption and export, and the board set production quotas for each mine, which were transferrable, but any sales in excess of the quota were met with a tax. The board fixed prices.46 In turn, the mine owners (all excluding one) formed a syndicate to market and sell its products, among other tasks. The result was “the price paid by the American purchasers immediately became about twice the amount specific in their contracts with the mine owners.”47 While Wickersham thought further evidence was needed, he declared that if the syndicate exported into the United States, then the Wilson Tariff and the Sherman Act should apply. It’s not clear if any part of this opinion was enforced. Where the act of state doctrine did not apply, Justice Holmes’s strict territoriality morphed into the “domestic conduct test,” requiring that some portion of the conduct take place on American soil. In a series of cases just before World War I, the Supreme Court considered instances when American firms had participated in international combinations to control infrastructure access in the United States and abroad. In each case, the Court held that even though participants to the combination or conspiracy were domiciled abroad and the acts fell under foreign jurisdiction, the fact that these American firms

Jurisdiction beyond Our Borders  287 had operationalized some part of the agreement on American soil meant that the Supreme Court had jurisdiction and that antirust liability would apply.48 Limiting access or controlling prices of railroad lines, steamships, or ports of entry, however, presented relatively easy distinguishing cases: these were clearly businesses affected with a public interest and thus perhaps impossible for the Supreme Court to let go unregulated. And, yet, what’s striking about this era of US antitrust enforcement was its uncertainty. Writing from the vantage point of the twenty-​first century, we can see the continuity—​the deference to stare decisis and international norms—​but that obscures the transformations taking place both in the application of the law and in the business community. The preceding cases, along with domestic antitrust cases, established baseline rules prohibiting cartel activity in the United States. Additionally, the famous cases of U.S. v. Standard Oil Co. and U.S. v. American Tobacco Co. (both handed down in 1911) enforced the antimonopolization provisions of the Sherman Act and affirmed the Court’s commitment to the rule of reason—​what would become a burden-​shifting framework employed to test the legality of the conduct. Yet the uncertainty regarding what restraints might be deemed “reasonable” led some business organizations, such as the National Industrial Conference Board, to call for antitrust reforms to clarify the act’s meaning. As early as 1911, Louis D. Brandeis, the famed “people’s lawyer” and antitrust activist, with the help of his sister-​in-​law, the social reformer Josephine Goldmark, presented to Congress a study of European competition policy.49 In short, they argued that US antitrust law should consider the benefits of European-​ style competition policy. Brandeis and the American “fair trade movement” later made some headways in enacting that vision: through the interwar period the Court affirmed certain market-​making and information-​sharing practices by associations of competitors.50 Brandeis and others provided a twofold critique of American antitrust law—​domestically, it restricted legitimate forms of business cooperation and, internationally, it impeded US ventures abroad. After all, European countries allowed—​if not supported—​cartel activities in strategically important industries, which disadvantaged US exporters and affected the US market.51 These and other concerns elevated antitrust and tariff reform to the limelight in the presidential election of 1912.52 Woodrow Wilson, the Democratic contender, campaigned to lower tariff rates and strengthen antitrust laws, which he argued were two sides of the same coin—​consumers were injured both by tariffs that facilitated domestic monopolies and by foreign cartels that

288  Antimonopoly and American Democracy similarly raised prices. Once in office, Wilson worked with congressional Democrats to sharpen antitrust statutes with the Federal Trade Commission Act and the Clayton Act, both of 1914. Each of these statutes contained language applying to foreign commerce.53 Moreover, the administration also amended the Wilson Tariff, reinstating the federal income tax and lowering average tariff rates from 40 percent to 25 percent.54 In 1916, the Federal Trade Commission (FTC) published a report suggesting that American exporters were hampered by their fear of antitrust prosecutions if they organized to promote their businesses abroad, but the report also raised doubts that the Sherman Act would apply to foreign trade activities.55 FTC chair Joseph E. Davies, in a letter to Congress, summarize the commission’s findings “that doubt and fear as to legal restrictions prevent Americans from developing equally effective organizations for overseas business and that the foreign trade of our manufacturers and producers, particularly the smaller concerns, suffers the consequence.”56 The report explained: In seeking business abroad, American manufacturers and producers must meet aggressive competition from powerful foreign combinations, often international in character. In Germany, England, France, Italy, Austria-​ Hungary, Switzerland, Holland, Sweden, Belgium, Japan, and other countries businessmen are much freer to cooperate and combine than in the United States. They have developed numerous comprehensive combinations, often aided by the government, which effectually unite their activities both in domestic and foreign trade.57

The report then listed the following industries affected by international combinations: “coal, iron and steel, agricultural machinery, oil, sulphur, superphosphate, cement, matches, chocolate embroidery, silk goods, watches, cotton goods, condensed milk, canned fish, currants, quebracho, iodine, cacao, etc.,” as well as shipping, banking, mining, and merchandising enterprises.58 Additionally, American exporters of timber, copper, cotton, and coal were injured by foreign buying combinations, which were accused of driving US prices “near or below the cost of production.”59 The FTC recommended that American export associations be formed to “combine their efforts” and “share the cost of developing new markets” in order to “compete more successfully with foreign syndicates and cartels.”60 The Webb-​Pomerene Act was first proposed by Senator Atlee Pomerene (D-​ OH) and Representative Edwin Y. Webb (D-​ NC) in April 1917.61

Jurisdiction beyond Our Borders  289 The bill’s aim was to increase American exports by allowing industries to form associations, similar to joint ventures, in order to compete in foreign markets. It encouraged American producers to sell off surplus goods to foreign markets, preventing overproduction and growing domestic industry.62 For Pomerene, it was particularly important for small producers who lacked the means to pursue export markets without pooling their resources.63 In response to Senator James A. Reed’s (D-​MO) (and other opponents of the bill) suggestion that it promoted the creation of cartels similar to that of Prussia in the nineteenth century,64 Pomerene insisted that foreign cartels existed and would continue to exist. Too weak to penetrate European markets, American exporters would be unable to combat “this Prussian-​made animal” and would be “crushed by its jaws.”65 Congress passed the act in 1918—​ exporters might collude abroad, but definitely not in the US market.66 The Webb-​Pomerene Act required export-​oriented associations to submit its business contracts to the FTC, and upon receiving approval, the “Webb association” received a tacit agreement that precluded antitrust prosecution.67 This act was a US experiment with European-​like competition policy that allowed for something akin to a cartel register. Since it created substantial government oversight of American cartelization, the Act encouraged American business groups to expand US exports through Latin America and, after World War I, to Europe as well, and into the Chinese market.68 Export-​oriented trade associations multiplied during the interwar period, though they largely escaped antitrust scrutiny.69 Although the law still remains on the books, it was severely rolled back in the Second New Deal (see Part 2) and it was later amended by the Export Trade Association Act of 1982.70 While the FTC pushed Webb associations onto export markets, the Department of Justice (DOJ) continued to investigate international agreements coming into the domestic import market. Building on those infrastructure cases, in 1927 the Supreme Court expanded the domestic conduct test and went so far as to apply it against a government-​owned monopoly in Mexico.71 In United States v. Sisal Sales Corp., the Court considered whether US antitrust laws could prevent an American importer—​Sisal Sales—​and its American business partners from securing and maintaining exclusive contracts with a state-​run monopoly—​Comisión Exportadora de Yucatán. In 1921, the Yucatán state government had created a government-​ owned corporation to control the purchase, sale, and export of sisal, a common type of rope or twine. Like most agricultural products, sisal prices

290  Antimonopoly and American Democracy had vacillated wildly around World War I and thereafter. When prices collapsed in 1921, both the Mexican and Yucatán governments redoubled efforts to control production and export. When a group of US-​based firms created Sisal Sales in order to contract with that government monopoly, the DOJ brought suit, seeking to enjoin the deal. Judge Augustus Hand, writing for the District Court, had ruled in 1925 that the American Banana decision gave him no choice: “an agreement to procure monopolistic legislation in another country cannot be treated as unlawful by our courts.”72 However, a unanimous Supreme Court disagreed and distinguished American Banana, rather than overturning it. Although in both cases an American agent had sought and secured “discriminating legislation” from a foreign government, in Sisal Sales the Court emphasized that the parties’ conspiracy had been conducted and was effective within the United States, which created the liability. “By constant manipulation of the markets, [Sisal Sales] acquired complete dominion over them, destroyed all competition, obtained power to advance and arbitrarily to fix excessive prices, and have made unreasonable exactions.”73 Because the Court distinguished American Banana, federal prosecutors continued to believe “that the Banana case limited federal prosecutorial power to the territorial limits of the United States,” even though Sisal intervened against an act of state, the state monopoly.74 In turn, the DOJ’s prosecutorial discretion remained constrained by the territoriality of the conduct—​not merely the intended effects of the conduct.75 International cartel activities had become an increasingly prevalent policy issue throughout the interwar period, particularly in Europe, and as a result, governmental and academic studies of international cartels began to multiply.76 In 1928 the US Department of Commerce published an investigation of international cartels, describing them as “one of the outstanding features of postwar economy.”77 The report focused on the economic and political conditions that had fostered cartelization within several European countries, including Belgium, France, Switzerland, and Great Britain, and it paid special attention to “Germany’s prominence in [the] international cartel movement.”78 Germany’s “highly developed cartel system,” the report explained, had played an instrumental role in both fostering German industrial development in minerals, chemicals, and consumer goods, which entered export markets, and “in overcoming [domestic] political antagonisms.”79 Ultimately, however, the Commerce Department lamented that while the 1927 World Economic Conference, held in Geneva that year, had intended to create rules

Jurisdiction beyond Our Borders  291 to govern transnational cartels, European states remained too divided on the issue to accomplish that goal.80 The Geneva conference built on the organizing principles of the 1925 League of Nations global conference, whose core purpose was to foster peace and international trade by reducing tariffs and harmonizing other commercial policies.81 Although many European countries had restored their prewar levels of agricultural and capital goods production, Europe’s share of world trade had not recovered to the same extent. The organizers of the Geneva conference—​specifically, the French politician and businessperson Louis Loucheur—​sought to outline transnational rules that would facilitate cross-​ border competition and enhance national productivity while also preventing future world war.82 Country-​specific and international cartels, however, played an important role in post–​World War I Europe. They had helped mitigate price fluctuations and currency volatility, especially in Germany; they had distributed excess production capacity; they had organized workers; and they had exercised political power.83 As the US Commerce Department documented, post–​World War I European governments employed cartels for both economic and political purposes. These agreements were intended to protect their domestic industries, currencies, and political coalitions through cartel policies and national tariffs to “manage” competition;84 however, these protections had the effect of fragmenting the European market, both economically and politically.85 The Geneva conference’s final report endorsed reducing tariffs and adopting the most-​favored-​nation (MFN) principle—​recommendations that were “hailed as a victory for liberalization.”86 However, those measures were soon overtaken by deflationary pressures brought about by the Great Depression.

Bringing Suit against Alcoa: A New Plan for Antitrust during the Second New Deal, 1932–​1940 On April 29, 1938, President Roosevelt announced a new antitrust program, which was already underway at the Department of Justice.87 “Unhappy events abroad” framed his message. “The liberty of a democracy is not safe,” he warned, “if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism—​ownership of government by an individual, by a group, or by any other controlling private power.” The “growing concentration of

292  Antimonopoly and American Democracy economic power as revealed in the ownership of corporate assets, in the income and profits of corporations, and in the income and property of individuals” threatened to make America into “a concealed cartel system after the European model.”88 This section explores how three leading figures in the Justice Department—​ Homer Cummings, Robert Jackson, and Thurman Arnold—​revived antitrust prosecutions, overthrowing the First New Deal’s experiments with coordinated markets, and then pushed to reform antitrust rules to apply to international cartels. Historians and legal scholars have mainly explained these efforts to revive and reform antitrust law within the context of domestic political economy. I argue in this section of the chapter, however, that international concerns over the connection between the economic concentrations of power and the rise of fascist states in Europe played a significant role in the DOJ’s reorientation of antitrust policy. Both international cartels and, most conspicuously, German cartels and consolidated industries provided a foil to the Americans’ renewed preference for more expansive economic regulation and more stringent antimonopoly policy. The leniency with which many European states had governed concentrations or combinations of private economic power, many US regulators began to argue, had fomented conditions ripe for national socialism.89 This section of the chapter focuses on how the Roosevelt administration pivoted away from the antitrust policy of the First New Deal and explained this shift to the public as a necessary corrective not only to restore market competition but also to safeguard political democracy. This connection between competitive markets and political democracy was a long-​standing one—​but now the argument the administration was making was not simply about economic concentration necessarily overpowering rickety domestic political institutions. The assertion was that economic concentration required the countervailing force of big government if market competition could not be effectively restored with the existing regulatory tools—​the antidote they prescribed was active antitrust enforcement against both domestic cartelization and monopolization as well as international combinations. Two cases took center stage. First, in December 1936, the DOJ brought charges against Socony-​Vacuum Oil Company (one of the world’s largest oil producers) and other US oil refiners for conspiring to fix prices in violation of the Sherman Act.90 In order to remove “surplus” gasoline from the market, the group had created a selling agency to price and market gasoline. The agency set up “dancing partners” by pairing “majors”—​the vertically

Jurisdiction beyond Our Borders  293 integrated oil companies, controlling 85 percent of the Midwest’s production and distribution capacity—​with smaller, independent producers; then, the majors would purchase surplus gasoline from those independents at the spot market price (rather than have the independents take whatever price the market might bear and further drive down prices).91 The defendants responded that they had received tacit approval for their output-​restricting scheme from the government’s Petroleum Administration, as organized by the First New Deal’s National Industrial Recovery Act.92 (The Court had declared the NIRA unconstitutional in 1935, however.93) And now the refiners argued that the Great Depression had necessitated, and rendered reasonable, their activities, which the jury should hear and consider to determine the legality of the acts.94 Solicitor General Jackson thought otherwise: for the DOJ, the agreement itself was enough to warrant a categorical condemnation.95 Showings of tacit approval from the now-​defunct NIRA or of intent to alleviate “so-​called competitive abuses or evils” were immaterial—​the refiners had no authority to make such an agreement.96 In his closing statements Jackson went further, “ ‘The enterprises of the country are . . . coldly marching, not for economic conquests only, but for political power . . . money is taking the field as an organized power. The question will arise . . . which shall rule, wealth or man? Which shall lead, money or intellect? Who shall fill the public stations, educated and patriotic free men, or the futile serfs of corporate capital?’ ”97 Although counsel raised objections to statements referring to the defendants as “malefactors of great wealth” and “eager, grasping men,” the court overruled them.98 It found drumming up class prejudice “undignified and intemperate,” but “it [was] not improper in Sherman Act cases to discuss corporate power, its use and abuse, so long as those statements are relevant to the issues at hand.”99 Ruling in 1940, the Supreme Court declared that the refiners “had as their direct purpose and aim the raising and maintenance of [prices].”100 This constituted a per se violation of the Sherman Act, and thus, no defense of reasonableness would stand.101 Price-​fixing contracts, conspiracies, or combinations “are all banned because of their actual or potential threat to the central nervous system of the economy”—​market competition, or the price mechanism.102 It was only in monopolization cases, Justice Douglas continued, that “an intent and a power to produce the result which the law condemns are then necessary.”103 Although the Court accepted that the conspiracy had affected prices, the majority also recognized the complexity of

294  Antimonopoly and American Democracy teasing out that causal relation and, in turn, it fell back on the nature of the contract itself.104 In Socony-​Vacuum, the Court affirmed long-​standing anti-​ cartel precedents and clarified its categorical prohibition of “naked” price-​ fixing agreements; and, in doing so, it helped usher in the DOJ’s pivot toward a new era of active antitrust enforcement. The second major case was brought against Alcoa, its financiers, and a long list of alleged collaborators. The Alcoa case, however, went further—​it charged Alcoa with monopolizing the domestic market for virgin ingot and with participating in an international cartel to allocate world markets.105 Historically, Alcoa had long been a famously successful American industrial corporation, and its aggressive tactics to protect and enhance its market share had garnered Justice Department attention as early as 1908.106 At that time, Alcoa dominated the domestic aluminum market, but it did have serious competitors abroad, particularly in France, Switzerland, and Brazil. When some of those foreign competitors expressed interest in opening a refinery in the United States, Alcoa pursued an agreement to exclusively divide national territories among themselves, as has been well documented by academics, regulators, and private litigation.107 The DOJ intervened, and Alcoa entered into a consent decree in 1912 to cease such agreements. We should note, however, that the consent decree abided the strict territoriality enunciated in American Banana—​the DOJ could tell Alcoa that it could not collude with foreign competitors while on US soil, but it could not hold those foreign firms operating on foreign soil liable for violating US law. Although Alcoa agreed to stop such agreements, the firm had remained of interest to both the DOJ and the FTC through the 1920s. As early as 1934, Cummings had pursued tax evasion charges against Andrew Mellon, a major owner of Alcoa; however, it seems that Cummings had set his sights on an antitrust suit against the firm from the beginning. In 1933, during his first year as US attorney general, Cummings had explained that the government needed data on “what it cost [Alcoa] to produce Aluminum” to build its case.108 Cummings intended to prove that Alcoa had foreclosed new competition and then reaped handsome rewards through its monopoly position. A recent private suit brought by the Baush Machine Tool Company against Alcoa presented a new opportunity because the district court had compelled Alcoa to “reveal its costs.”109 He urged the DOJ to “suspend the [Alcoa] investigation” until the private suit had been tried, and in February 1934 he wrote directly to George Haskell, who had been the president of Baush until its closure in 1931, to set up a meeting.110

Jurisdiction beyond Our Borders  295 The Baush suit against Alcoa exposed more information on Alcoa’s price-​ cost structures than had previously been disclosed.111 Piggybacking on an FTC antitrust investigation that had lasted nearly a decade, Baush sued Alcoa for $3 million. The charges ranged from monopolization of “crude aluminum” production to predatory pricing on alloys, to illegal cartelization with a foreign firm—​Aluminum Limited, which Baush alleged was hardly an independent firm in ownership or management. Alcoa sued for a motion to dismiss, attempting to avoid discovery (turning over interrogatories under oath as to price-​cost data). When that failed, Alcoa settled with Baush, paying a little less than a million dollars and placing Haskell on its payroll for five years.112 The DOJ’s 1937 indictment against Alcoa intertwined charges of domestic monopolization with allegations of participating in an international aluminum cartel to maintain that monopoly status. According to the complaint, in 1928 Alcoa had spun off its Canadian subsidiary, Limited, making it a legally separate entity; however, the two firms’ management and ownership remained deeply interconnected. Working through Limited, Alcoa’s officers had knowledge of the purpose and the effects of Limited’s participation in the Alliance—​L’Alliance Aluminium Compagnie. A Swiss corporation, Alliance brought together a British, a French, a Swiss, and two German aluminum producers who were negatively impacted by the Great Depression’s decline in aggregate demand and falling prices. Beginning in 1931, Alliance began coordinating the sale of all available metals by setting production quotas for each member firm.113 It also purchased members’ surplus, or unsold, aluminum at a predetermined price, effectively creating a worldwide price floor. Although Alcoa was not directly party to the agreement, the government alleged that it had tacitly participated in and benefited from the agreement by using Limited as its proxy.114 The original Alliance charter did not include imports into the United States as part of member firms’ quotas. However, in 1936, Alliance revised this agreement to include new penalties based on a royalties system, whereby if a member exceeded its production quota then it agreed to pay progressively scaled royalties in proportion to that excess, and now these quotas and payments extended to sales in the US market.115 The DOJ named Limited as a defendant alongside Alcoa, but it was unclear whether it had jurisdiction to do so since Limited was neither a subsidiary of Alcoa nor an importer. The government’s suit against Alcoa was as high-​profile a case as Standard Oil had been in 1911, and the regulators seemed increasingly aware of the

296  Antimonopoly and American Democracy public-​facing aspects of their work.116 In 1938, then–​Solicitor General Robert Jackson, who had been succeeded in his role at the Department of Justice Antitrust Division by Thurman Arnold in March of that year, explained that although US antitrust law had “saved us from the cartel system of Europe,” it currently lacked a “consistent or intelligible policy.”117 “Whatever solution” to the antimonopoly problem the United States adopted, for it “to be acceptable,” he explained, it had to conform to “our ideal of political and economic democracy,” with “no economic or political dictatorship imposed either by government or by big business.” Any kind of control would be “distasteful,” he insisted, “but if a choice has to be made the public will prefer governmental to private bureaucracy and regimentation.”118 Jackson singled out the Aluminum Company of America (Alcoa) as a case in point—​alongside unnamed monopolists in the fields of “parlor and sleeping cars, cameras, sewing machinery, cash registers, and farm machinery.” Monopolies, he explained, were locking in market control through “financial controls, interlocking directorates, patent controls, basing point practices, price leadership, [and] market dominance.”119 A new direction in American antitrust required a renewed attack on “industrial empire building,” and the Alcoa case “not only puts the company on trial for monopoly, but also puts the existing antitrust laws on trial.”120 Jackson’s vision of American antitrust appeared as much political as economic. While Attorney General Homer Cummings and Jackson launched the opening salvo in this renewed attack on monopoly power, it was Arnold who carried the mantle through direct legal confrontation and popular public addresses. A Yale law professor originally from Laramie, Wyoming, Arnold donned a thin mustache and stuffy double-​breasted suits that perhaps belied his progressive vision for American law and politics.121 Unafraid of confrontation, Arnold became not only the lead prosecutor but also the main spokesperson for a reinvigorated antitrust that tied the economic costs of monopoly and cartels to the democratic challenges of concentration and control.

United States v. Alcoa: Constructing a New Era for American Antitrust at Home and Abroad, 1941–​1945 The Alcoa trial began in June 1938 and lasted nearly two years. In late September 1941, federal district judge Francis Gordon Caffey, writing for the Southern District of New York, “wiped Alcoa’s slate clean” of the US

Jurisdiction beyond Our Borders  297 government’s monopolization and conspiracy charges.122 After months of testimony and more than 58,000 pages of trial records, Judge Caffey held that Alcoa lacked market power sufficient for him to declare it a monopoly and that the government had failed to prove any intent to monopolize.123 Thus there was nothing nefarious about Alcoa’s pursuit of market dominance, and rather than accepting Arnold’s charges of a “tacit” understanding among international competitors,124 Caffey held that “without an agreement there was no conspiracy.”125 Instead, he embraced Arthur V. Davis’s testimony stating that as chairman of Alcoa, he had “flatly refused” requests by the French Aluminum Company and the British Aluminum Company “to have Alcoa join” an international cartel.126 Over the course of ten days, Judge Caffey read his opinion aloud—​and then, according to Time magazine, he left New York “for a six-​week vacation in Maine.”127 Arnold appealed the decision, but events leading to America’s entry into World War II quickly overtook the appeal, and it languished throughout the duration of the war—​until Attorney General Francis Biddle revived it, and Judge Hand ultimately overturned Caffey’s opinion in March 1945. From 1941 to 1945, the US government began an intensive investigation into the problems of international cartels and monopolies—​an investigation that was in no small part linked to the widespread notion that cartels had played a decisive role in Hitler’s seizure of power and Germany’s wartime economic power. There was, as well, both an awareness that these issues would help shape the postwar world and a preference for shaping postwar international competition policy modeled on US law. Historians have paid a great deal of attention to the Temporary National Economic Committee (TNEC), focusing on its lengthy hearings and policy recommendations, as well as its limited impact on the direction of antitrust legislation.128 However, the TNEC Final Report along with State Department investigations and congressional inquiries amassed evidence that German cartels (as well as international cartels like Alliance) had impeded US war preparedness efforts, and some American firms appeared complicit. Arnold and others at the Antitrust Division became acutely aware of these relationships as well. This section of the chapter widens the aperture, zooming out from doctrinal analysis to focus on the external events that surrounded the Alcoa case. This section concludes with an analysis of the Alcoa holding especially as it established antitrust extraterritoriality. The TNEC Final Report entered into official documentation what many already believed, that “in Germany the rise to power of the dictator was made

298  Antimonopoly and American Democracy possible by the support of commercial and industrial organizations, organizations which now have no more freedom in that state than the humblest of regimented individuals.”129 Arnold testified that the Antitrust Division had been tasked with breaking up US combines that impeded the government’s war preparation efforts, and that the Division had uncovered collusion between domestic and foreign firms.130 Arnold employed these cautionary tales of fascist Europe and complicit US firms to warn that untrammeled “industrial autocracy” in the United States was also a threat to democracy so grave that it required intervention.131 For Arnold, a choice must be made between “free competition” or the “cartel system.” The former enshrined private property rights and democratic participation in governance; the latter (as a book reviewer put it) “leads inevitably to strangulation of trade, bureaucratic interference and finally a totalitarian economy of the Nazi type.”132 In popular speeches and publications, Arnold explained that both monopolies and cartels quashed market competition, fostered waste, and trammeled small producers; but he was quick to add that they also threatened democracy and would ultimately be overtaken by either public regulation or public ownership—​as he warned had been the case in Europe. Other leaders at the DOJ struck the same ominous tone, noting that while the Great Depression had incentivized some legitimate forms of consolidation, it had also been the harbinger of more nefarious forms of collusion, control, and inequality.133 Germany had long been known as the “land of cartels,” placed in sharp contrast with the American response to somewhat similar macroeconomic challenges of late nineteenth-​century industrialization.134 Industrial firms, working closely with supervising banks, offered self-​regulation as a means to stabilize economic and social dislocation, and foster a distinctly Germany nationalism, or identity. Moreover, the prevailing sentiment of German economists, such as Friedrich Kleinwacher, had acknowledged that economic efficiency and stability could be achieved through such industrial self-​ regulation.135 These agreements would be illegal, however, if they were shown to monopolize or exploit its market power to the detriment of consumers.136 The number of German cartel agreements had increased through the late nineteenth century, and increasingly became international in scope.137 During the post–​World War I inflationary period in Weimar Germany, however, public sentiment shifted against business cartels and, in 1923, emergency legislation was passed that required all inter-​firm agreements to be put in writing and established a special administrative court to hear cartel cases.138 Other central and northern European countries passed cartel laws,

Jurisdiction beyond Our Borders  299 often modeled on the debates taking place in Germany. Notably, Norway was alone in enacting a stringent competition law that more closely aligned to the American preference for adversarial judicial interventions, as opposed to the administrative German model.139 Regardless, German firms continued to play an important role in domestic stabilization efforts and were perceived to play a pivotal role in international cartel bodies.140 When the Nazi Party seized power in 1933, “cartels became not only compulsory, but quasi-​public bodies. This also applied in fascist Italy.”141 Yet, fascist Europe was more than just a cautionary foil to the American experience; it was also a looming presence that impeded immediate war preparedness, especially in materials such as synthetic rubber, aluminum, copper, and steel.142 In early 1941 the Senate voted to create the Special Committee to Investigate Contracts under the National Defense Program, which became known as the Truman Committee, given Vice President Harry Truman’s leadership role as chair. Leveraging reams of data collected by TNEC, by 1942 Arnold took aim at Standard Oil of New Jersey for conspiring with German chemical producer I.G. Farben to suppress the production of synthetic rubber. As the New Republic explained: “I. G. Farben was a center of anti-​democratic propaganda and illicit war preparation within Germany. It helped Hitler to take power and then became a basic part of Hitler’s world organization of agitation and espionage.”143 And, as Arnold testified, “while the Hitler government, for military reasons, was refusing to make available to this country the German buna rubber [a patented technology], Standard sent to I.G. Farben information as to American butyl rubber and Standard’s files show that a recommendation was made that 50 pounds of sample butyl should be sent to I.G. Farben.”144 As Arnold told the Truman Committee, “this is only a typical case of the operations of a cartel,” especially one involving a domestic monopolist with a “desire . . . to maintain its monopoly position.”145 In other words, Standard preferred to maintain “control” of the domestic market through its world-​market allocation agreements with Farben, rather than share its synthetic rubber technology through licensing agreements with other US firms.146 He also accused Alcoa of conspiring with I.G. Farben to suppress magnesium production through the “I.G.—​Alcoa Magnesium Cartel.”147 Arnold’s testimony cataloged the deals restraining trade in tungsten carbide, a chemical compound used in machine tool production. A 1938 contract between General Electric and Friedrich Krupp of Essen restricted US output and, as a result, raised its price.148 In another situation, the Schering Corporation of

300  Antimonopoly and American Democracy New Jersey agreed to take over the trademarks of Shelton AG of Germany in Latin American markets and thus circumvent the British blockage against the Axis. Consent decrees swiftly followed.149 Additionally, at the State Department a Special Committee on Private Monopolies and Cartels, for which Harvard economics professor Edward S. Mason served as deputy chairman, began investigating the problem of international cartels in May 1943.150 Arnold, then still at the DOJ, started working with Heinrich Kronstein, a German lawyer and professor who had fled the Nazi regime for the United States in the mid-​1930s. By the early 1940s, Kronstein had begun advising the US government on German cartel and monopoly policies, and in 1943 the special committee circulated “A List of International Cartels, 1939,” prepared by Kate and Heinrich Kronstein.151 As explained by legal historian Tony Freyer, the data provided by the Antitrust Division informed the State Department’s bombing strategies under Dean Acheson’s leadership.152 The Special Committee’s report on postwar foreign economic policy urged policymakers to consider both the immediate task of unwinding “Axis economic penetration through Europe and elsewhere” and “problems of a broader scope and more continuous nature which concern the business framework of international trade.”153 The report then provided a preliminary list of available studies and memoranda on these issues, conducted by the State Department, the Department of Justice, the Department of Commerce, the Office of Strategic Services, the Board of Economic Warfare, and the US Army.154 The State Department’s special committee recognized the need for an international agreement on cartels as a way to “lessen the need for judicial interpretation,”155 but it also remained keenly aware of what the United States could do unilaterally. For example, in 1943 Mason wrote to Myron Taylor, chair of the Committee for Coordination of Economic Policy Work and former chairman of US Steel, explaining that the Office of Alien Property Custodian allowed the United States “to void illegal international cartel agreements and to grant licenses on the patents involved.”156 The patent policy was not only about cartels; it reflected the desire to break Axis control of key industrial sectors whether controlled by consolidated firms or groups of firms.157 This required abrogating those patent rights that were exercised by monopolists and cartels and necessary to their market power.158 The United States pursued various multilateral strategies through the wartime Lend-​Lease Program (Article 7) and later through the Bretton Woods agreement, the General Agreement on Trade and Tariffs (GATT), and the

Jurisdiction beyond Our Borders  301 International Trade Organization (ITO) treaty. (The ITO treaty contained anticartel provisions; however, it died in 1950 because of protectionist objections in the US House Committee on Foreign Affairs.) While each of these three transnational agreements focused on liberalizing trade and investment flows, none implemented provisions to prohibit cartels or monopolistic practices. As the previous Geneva conference had demonstrated, regulation of a nation-​state’s internal organization and competitive structure remained firmly within the state’s prerogative. This inaction reflected both the historical tradition of lenient competition policies (relative to US antitrust law) and the continued ambivalence toward cartels as a form of business organization—​while cartels might act in their self-​interest, they also might help mitigate business cycle downturns. Although an international agreement on competition policy failed to materialize during this transnational institution-​building moment, the American antitrust regulators had already begun to embrace—​and institutionalize—​the Second New Deal’s vision for active antitrust enforcement. Wendell Berge, who succeeded Arnold at the Antitrust Division, appeared ready to take unilateral action. Antitrust prosecutors at the DOJ and the FTC reversed course on their previous interpretation of the Webb-​Pomerene Act’s export associations. Before World War II, Webb associations, as they were called, had accounted for 17.5 percent of US exports and yet had received little scrutiny from overseeing agencies.159 In the spring of 1944, however, the DOJ charged two American export associations, thirteen American manufacturers, and a British corporation and its American agent with maintaining an international cartel to restrain the trade of alkalis.160 (Alkalis are used in the manufacture of soap, textiles, rayon, paper, chemicals, and drugs.) The complaint also included four co-​conspirators—​two American corporations, one German, and one Belgian—​in the allocation of markets and export quotas. This was the first suit in which the government pursued Webb associations, and it sent a warning signal to US firms engaged in cooperative efforts to allocate markets abroad.161 Even after Arnold left his position at the DOJ in 1943 to take a seat on the US Court of Appeals for the District of Columbia, he continued his campaign for robust antitrust enforcement and focused on the problems that private cartels posed for democratic governance. He called this fight “the most important post-​war struggle,” describing it as a conflict “between the interests of vested capital representing cartels that can control industry in America and in England and in Europe, and the forces of new independent

302  Antimonopoly and American Democracy free enterprise that will be released by the technologies of a new industrial age.”162 Many of his speeches focused on European economic concentrations of power and their threat to European democracy, as well as their potential threat to American institutions.163 For Arnold, Berge, and others, the anticartel international activism of the postwar era was a continuation of the domestic antimonopoly fervor of the late nineteenth century—​in other words, fighting cartels presented a crucial, unifying touch point of antitrust activity. At this moment, a consensus had emerged within the administration that linked international cartels as a system of economic organization with political fascism; moreover, that US firms were found to be complicit with German cartels through market allocation, production quotas, and patent agreements seemed to underscore the vulnerability of American liberal capitalism, especially during wartime.164 The court interpreted the facts presented in the Alcoa case to prove that Alcoa possessed monopoly power in virgin ingot production (the relevant market) and that it had illegally monopolized that market by forestalling competition by producing ahead of demand. To establish the liability, the court revisited the congressional intent behind the Sherman Act. Despite Hand’s reluctance to intervene, the court proclaimed that Congress “forbad all” trusts.165 While acknowledging that “monopoly may have been thrust upon it” and “size does not determine guilt,” Hand concluded that Alcoa was “not a passive beneficiary of a monopoly”—​instead, it had the requisite market power and it utilized that power to maintain and enhance its position by producing ahead of demand.166 Next, Hand turned to the problem of the Swiss corporation (L’Alliance Aluminium Compagnie) controlling the international aluminum market. The DOJ had named both Alcoa and Aluminum Limited as defendants and had asserted that Alcoa’s 1928 spinoff of Limited was purely a “legalistic maneuver, which should not blind the court to the realities.”167 Hand, too, emphasized the firms’ “common shareholders” and their interconnected interests. Nevertheless, the court rejected the DOJ argument that Alcoa had directly participated in the agreement through Limited.168 Hand set Alcoa aside, and focused on Limited’s involvement in the Alliance agreements from 1931 and 1936, the latter including imports into the United States.169 Now, the court returned to congressional intent, asking whether Congress had intended to attach antitrust liability to foreign firms operating abroad.170 Hand rejected the idea that antitrust liability would attach if the agreement had not intended to affect US markets; but, where intent could be found, antitrust

Jurisdiction beyond Our Borders  303 liability might attach if “its performance is found actually to have had some effect,” just as it had in previous cases dealing with international cartels or monopolization.171 Critically, however, the burden then shifted to Limited—​ before effects were found—​to prove that its participation in Alliance had not detrimentally affected the US market. The court relied on Socony-​Vacuum for the proposition that “all factors which contribute to determine prices must be kept free to operate unhampered by [such] agreements”—​and the 1936 agreement was intended to do just that.172 Yet, this was not a per se case; instead the court applied a burden-​shifting framework and reasoned that both intent and effects are necessary to assign liability. The Alcoa ruling on antitrust extraterritoriality—​holding that an agreement among foreign firms that intended to and substantially did affect the US market was illegal under the Sherman Act—​relied on the “effects test” from preceding cases, which had distinguished away much of American Banana’s strict territoriality.173 It did not overrule American Banana, which concerned acts of state. For Hand, it seemed, the general rules established in Alcoa offered a response to the immediate crisis and a path forward. The Alliance, he explained, “still persists” and might resume its activities in peacetime “unless a judgment forbids” them from doing so.174 Although Alcoa was not broken apart—​because over the course of the war the federal government reoriented market shares through government contracts that bolstered Alcoa’s competitors, such as the Reynolds Metals Company—​on remand, the District Court ordered the dissolution of common stockholders to Alcoa and Limited.175 And the Alcoa case received a quick and sweeping affirmation from the US Supreme Court.176 Hand’s ruling gave US antitrust regulators expansive extraterritorial power over agreements made abroad between foreign firms, if those agreements had an intended and substantial effect on the US market.177 However, some limits remained in place over this new exertion of American legal and economic power. The Alcoa decision asserted American hegemony, but obviously it did not resolve the timeless tension of comity between countries, particularly where domestic laws existed in direct tension with one another. As legal scholar Wilbur Fugate has explained, “acts by private parties required by a foreign sovereign within its territory are ordinarily not subject to antitrust prosecution.”178 Thus some conduct that is illegal according to American law might still survive scrutiny by US regulators if another country required that conduct from its own companies. Nevertheless, lacking state law to the contrary, US regulators could apply American

304  Antimonopoly and American Democracy antitrust laws for foreign firms under the postwar effects test. Moreover, we should also note that the Alcoa case, as well as international competition policy more generally, represented only one aspect of US economic and regulatory power. The US State Department incentivized the Americanization of home country rules—​and when those incentives were coupled with extraterritorial jurisdiction, it is perhaps not surprising that more than two dozen countries revised their domestic antitrust laws in the years after World War II.179 There is certainly a story to be told—​and one with significant power and legitimacy—​that the United States exercised its own hegemonic will over postwar Europe and Japan by insisting upon the adoption of competition policies that largely reproduced American preferences for a so-​called free market economy. Yet although both jurisdictions certainly translated American antitrust into their own legal and economic systems, they did not actually adopt full-​fledged US law and policy.180 In fact, recent work in comparative international law has demonstrated that significant differences regarding the legal treatment of cartels persisted into the late twentieth century.181 Directly after the war, many European countries adopted cartel registers, which monitored for anticompetitive harms but also acknowledged the utility of some cooperative arrangements. Legal processes also differed—​most European states enforced competition law through specialized administrative bodies, such as Germany’s Federal cartel office or the French Autorité (née Conseil) de law concurrence.182 At the level of the European Union, competition policy has played an important role in economic integration of the “ever closer union” and the Directorate General of Competition has encouraged convergence among member states, particularly regarding increasingly stringent supranational anti-​cartel policies. In short, transatlantic convergence occurred in the 1980s with the prohibition of “hard core” cartels in EU law. And, more recently, many countries have revised their competition policy to include preemption clauses that limit the reach of US antitrust prosecutions within their borders.

Conclusion The extraterritorial application of US antitrust law did not simply emerge from the wreckage of World War II and the subsequent assertion of American economic power abroad. Contradicting that origin story is a

Jurisdiction beyond Our Borders  305 different narrative: American antitrust law through the 1920s and into the early 1930s was characterized by its experimentation—​the Court found numerous exceptions to its strict territoriality doctrine and Congress passed statutory exemptions for American firms operating abroad. However, by the mid-​1930s, amid the throes of the Great Depression and the rise of fascist Germany, it seemed increasingly precarious to allow international trade and capital flows to be governed through a system of antitrust exemptions. Cartels, it seemed, could be an important tool for fascist regimes’ economic organization and political control. Ultimately, Judge Hand revived anticartel antitrust law and extended it to extraterritorial cartels in an effort to resolve a long-​standing tension in international law and trade regulation regarding how to balance state sovereignty and liberal values of market competition. Within American antitrust law, the tension between enforcing market competition and respecting national sovereignty became untenable to liberal policymakers with the rise of Nazi fascism and its association with cartels. The German experience had provided a critical, time-​ sensitive foil to American antitrust law—​at the same time that the First New Deal faltered and DOJ regulators sought to revive antitrust prosecutions at home, the economic and political power of German cartels and patent-​holding monopolies had become frighteningly clear. For liberals, the problems and promises of a new globalization required a new era of international cooperation on the rules governing commerce and trade—​liberal rules that they were increasingly comfortable imposing abroad (if not reaching through consensus). Perhaps ironically, then, reviving US antitrust law and extending it abroad was a part of a larger liberal project to sustain democratic accountability by limiting anticompetitive economic concentration—​a strategy that would be accomplished by advancing both antimonopoly and anticartel policies, as reflected in both Socony-​Vacuum and Alcoa. Hand did not resolve that tension in international law; nor did he resolve the tension in American antitrust law between the antimonopolization provision of the Sherman Act and the insight that “the successful competitor, having been urged to compete, must not be turned upon when he wins.”183 Instead, he established two sweeping assertions of American antitrust law: first, if a firm possesses monopoly power and its actions are exclusionary such that they foreclose competition, then antitrust liability may attach. Second, an agreement made abroad among foreign firms that intends to affect the US import market supports a prima facie case for antitrust liability.

306  Antimonopoly and American Democracy Hand reasoned that the burden should shift to the defense to prove that it did not have the intended effect; otherwise the power to enact such a scheme would be assumed, according to Hand. Both general rules have been distinguished by case law and statutory interventions, which have clarified and constrained Hand’s opinion in Alcoa. Nevertheless, the intended effects test is responsible for the extraterritorial application of US antitrust laws to foreign firms, and the subsequent moves by other countries to either block that preemption or assert their own extraterritorial authority. Today, we live in a starkly different era of international law and statutory interpretation of American antitrust law—​yet in the modern era, the more things change, the more they stay the same. Three points of continuity are important. First, the Alcoa case did not explicitly overturn American Banana. The presumption against extraterritoriality that Holmes articulated in American Banana remains an important aspect of customary international law—​acts of state taking place within a foreign jurisdiction should not be superseded by US courts. Secondly, however, subsequent case law beginning with Sisal Sales and then reaching a crescendo with Alcoa distinguished American Banana away insofar as foreign or international cartels that have some actual and intended effect on the US market now fall under US jurisdiction.184 Third, and finally, antitrust extraterritoriality seems to follow the broader trends, or periodization, in international law.185 In the latter third of the twentieth century, developed-​ world competition policy largely converged across jurisdictions, particularly regarding cartels—​suggesting a diminished need for US courts to unilaterally assert antitrust law against multinational firms. And, in the twenty-​first century’s era of international “fracture,” the EU has asserted itself as a competition policy enforcer for the world, taking aim at American MNCs as well as state-​aid market distortions; China passed an antitrust law in 2008, and currently, more than one hundred countries have competition laws on their books.186 The story of how and why the US established antitrust extraterritoriality is at once both domestic and international legal history—​at its center is the development of the American state, the emergent economic and political hegemon of the twentieth century. In turn, the tensions inherent to antitrust law—​for example, that between admiration of the successful monopolist and fear of its monopoly power—​were amplified and transmuted onto the world stage through trade and capital flows as well as through wartime and legal skirmishes. American adherence to and adaptation of international law

Jurisdiction beyond Our Borders  307 reflected both shifting self-​interest as well as a commitment to the rule of law—​both concepts were constitutive of American liberalism and both have proven malleable across time and space. FDR’s Second New Deal reimagined American antitrust law, ending one period of experimentation and opening another—​one characterized by the idea that market competition and political democracy were reinforcing liberal phenomena. Although the meanings and the regulatory contours of both market competition and political democracy have shifted over time and across jurisdictions, that immutable connection between economic and political power has remained a central insight of—​and tension within—​antitrust law.

Acknowledgments I would like to thank Brian Balogh, John Cisternino, Harlan Cohen, Dan Crane, Herbert Hovenkamp, Richard John, Naomi Lamoreaux, Joel Michaels, Bill Novak, David Shorten, Mira Wilkins, and the participants at the following workshops: Tobin Project, Department of Justice, American Economic Liberties Project, University of Utah Eccles Business School, and UGA-​Emory Law School summer workshop. I am grateful for research assistance from Matthew Collins, Katherine Freeman, Katherine Graham, David Hauser, Matthew Linton, and Sofia Shaflak. Pam Ozaroff copyedited an earlier draft. And special thanks to two generous colleagues who shared their archival sources—​thank you Tony Freyer and Matthew Stoller.

Notes 1. United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945). William E. Kovacic, “Failed Expectations: The Troubled Past and Uncertain Future of the Sherman Act as a Tool for Deconcentration,” Iowa Law Review 74 (July 1989): 1117. Four justices recused themselves for unstated reasons but presumably because they had previously been involved in prosecuting Alcoa with the Justice Department. See Spencer Weber Waller, Thurman Arnold: A Biography (New York: New York University Press, 2005), 94. 2. See Spencer Weber Waller, “The Story of Alcoa: The Enduring Questions of Market Power, Conduct, and Remedy in Monopolization Cases,” in Antitrust Stories, ed. Eleanor M. Fox and Daniel A. Crane (New York: Foundation Press, 2007), 121–​44. 3. Unless otherwise noted, this and all subsequent references to Hand are to Learned Hand, not Augustus Hand.

308  Antimonopoly and American Democracy 4. See Louis Kaplow, “Market Definition, Market Power,” International Journal of Industrial Organization 43 (2015): 148–​61. 5. See Herbert Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice, 4th ed. (St. Paul, MN: West, 2011), 969. 6. The two companies were managed by brothers and shared a majority of stockholders and managers. Alcoa made favorable loans to Limited, and the latter shared proprietary information with the former. Although Aluminum Limited changed names multiple times since incorporation, it is referred to herein as Aluminum Limited and “Limited” for simplicity and because this is how Judge Hand referred to the entity in US v. Alcoa. See also Federal Corporation Information –​010058-​7, Government of Canada, (Accessed Sept. 14, 2020, 8:00AM), https://​www.ic.gc.ca/​app/​scr/​cc/​Cor​ pora​tion​sCan​ada/​fdrl​CrpD​tls.html?cor​pId=​100​587&V_​TO​KEN=​null&crpNm=​ Alcan%20Al​umin​ium%20Limi​ted&crpN​mbr=​&bsN​mbr=​ (showing a complete history of Limited’s name changes since incorporation in 1902 as Northern Aluminum Company). 7. See Wilbur L. Fugate, “Antitrust Jurisdiction and Foreign Sovereignty,” Virginia Law Review 49, no. 5 (June 1963): 925–​37; Fugate, Foreign Commerce and the Antitrust Laws, 4th ed. (Boston: Little, Brown, 1991), 2:467–​68. As clarified by the Foreign Trade Antitrust Improvements Act (1982), amending both the Sherman Act and the Federal Trade Commission Act. See Tonya Putnam, Courts without Borders: Law, Politics, and U.S. Extraterritoriality (Cambridge: Cambridge University Press, 2016). 8. See American Banana Co. v. United Fruit Co., 213 U.S. 347 (1909). 9. The key holding of Alcoa is that “any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state represents.” United States v. Aluminum Co. of America, 148 F.2d 416, 443 (2d Cir. 1945). 10. Ibid., 444. 11. See Sigmund Timberg, “Restrictive Business Practices: Comparative Legislation and the Problems That Lie Ahead,” American Journal of Comparative Law 2, no. 4 (Autumn 1953): 445–​73; Hans Thorelli, “Antitrust in Europe: National Policies after 1945,” University of Chicago Law Review 26, no. 2 (1959): 222–​36. 12. Gilbert H. Montague, “American National Policy regarding International Trade Agreements and Cartels” (address, American Academy of Political and Social Science, Philadelphia, November 25, 1944), reprinted in 90 Cong. Rec. A4621 (1944). 13. Lee McGowan, The Antitrust Revolution in Europe: Exploring the European Commission’s Cartel Policy (Cheltenham: Edward Elgar, 2010), 60–​63, 67. See also Mira Wilkins, The Maturing of Multinational Enterprise: American Business Abroad from 1914 to 1970, 3d ed. (Cambridge, MA: Harvard University Press, 2008), 260–​64. 14. See Alva Johnston, “Thurman Arnold’s Biggest Case,” pts. 1 and 2, New Yorker, January 24, 1942, 25–​31; January 31, 40–​46. On US policies that extended American economic imperialism, whether de jure or de facto, see Emily Rosenberg, “U.S. Mass Consumerism in Transnational Perspective,” in America in the World: The Historiography of American Foreign Relations since 1941, ed. Frank Costigliola and Michael J. Hogan, 2nd ed. (New York: Cambridge University Press, 2014), 307–​37.

Jurisdiction beyond Our Borders  309 On the various US legal domains with extraterritoriality, see Putnam, Courts without Borders, 3. See also Crane, “Fascism and Monopoly,” Michigan Law Review 119, no. 7 (2020): 1315–​70; Crane, “Antitrust and Democracy: A Case Study from German Fascism,” University of Michigan Law & Economics Research Paper Series Paper No. 18-​009, University of Michigan Public Law Research Paper No. 595, April 2018, https://​ssrn.com/​abstr​act=​3164​467. 15. See Tony A. Freyer, Antitrust and Global Capitalism, 1930–​2004 (New York: Cambridge University Press, 2006). But see Ellis W. Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (Princeton, NJ: Princeton University Press, 1966); Thomas K. McCraw, Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn (Cambridge, MA: Belknap Press of Harvard University Press, 1984); Alan Brinkley, The End of Reform: New Deal Liberalism in Recession and War (New York: Knopf, 1995). Separately, in the immediate postwar years most European countries created cartel offices to register, monitor, and police cartel arrangements. See Christopher Harding and Julian Joshua, Regulating Cartels in Europe: A Study of Legal Control of Corporate Delinquency (Oxford: Oxford University Press, 2010). 16. See David Shorten, For Capital or Country? International Bankers, Antimonopoly Politics, and the Origins of “Isolationism” in the United States, 1905–​ 1929 (Baltimore: Johns Hopkins University Press, 2024). 17. 21 Cong. Rec. 1766 (1890), as quoted in Fugate, Foreign Commerce, 1:4. 18. The following are antitrust provisions citing “foreign trade” or “commerce”: 15 U.S.C. §§1, 2 (1988) (Sherman Act); 15 U.S.C. §§12, 13(a) (1988) (Clayton Act); 15 U.S.C. §§41 et seq. (1988) (Federal Trade Commission Act); 15 U.S.C. §8 (1988) (Wilson Tariff Act); 15 U.S.C. §§61 et seq. (1988) (Webb-​Pomerene Act); 46 U.S.C. §§801 et seq. (1988) (Shipping Acts of 1916 and 1984); 47 U.S.C. §§202, 203, 309, 313–​14 (1988) (Federal Communications Act); 49 U.S.C. §§1302, 1378(b), 1381, 1382, 1384 (1982), as amended by Pub. L. 95-​504, 92 Stat. 1705 (1982), 49 U.S.C. §§1302 et seq. (1988) (Federal Aviation Act); 15 U.S.C. §31 (1988) (Atomic Energy Act). Subsequent US antitrust statutes contain similar language, see Fugate, Foreign Commerce, 1:19–​30. 19. See Murray v. Schooner Charming Betsy, 6 U.S. 64, 118 (1804). See also David L. Sloss, Michael D. Ramsey, and William S. Dodge, eds., International Law in the U.S. Supreme Court: Continuity and Change (New York: Cambridge University Press, 2011), 259. 20. 28 U.S.C. § 1350. The original text is here: Act to Establish the Judicial Courts of the United States, ch. 20, § 9, 1 Stat. 73, 77 (1789). For a recent discussion, see “Brief of Amici Curiae Professors of Legal History William Casto, Martin Flaherty, Stanley Ketz, Samuel Moyn, and Anne-​Marie Slaughter in Support of Petitioners,” Joseph Jesner et al. v. Arab Bank, PLC, No. 16-​499. Quoting the statutory text at p. 2. 21. American Banana Co. v. United Fruit Co., 213 U.S. 347 (1909). See Putnam, Courts without Borders, 23; William Dodge, “Understanding the Presumption against Extraterritoriality,” Berkeley Journal of International Law 16 (1998): 85–​125. 22. Warren B. Hunting, “Extra-​territorial Effect of the Sherman Act: American Banana Company versus United Fruit Company,” Illinois Law Review 6 (1911): 35.

310  Antimonopoly and American Democracy 23. Ibid., 35. 24. Ibid., 35. 25. Ibid., 40. 26. See Bradley Webster Palmer, The American Banana Company: An Account of the Operations of Herbert L. McConnell . . . (Boston: George Ellis Co., 1907). See also Charles David Kepner Jr. and Jay Henry Soothill, The Banana Empire: A Case Study of Economic Imperialism (New York: Vanguard Press, 1935). 27. American Banana, 213 U.S. 347. 28. Letter from Secretary of State Elihu Root to Minister Magoon on Rights of American Citizens in Disputed Territories, April 16, 1906, Document 309, in Papers Relating to the Foreign Relations of the United States, with the Annual Message of the President Transmitted to Congress December 3, 1906, Department of State ed. (Washington, DC: Government Printing Office, 2008), 2:1201 (Hereafter: Root Letter); American Banana Co. v. United Fruit Co., 213 U.S. 347 (1909), at 355. 29. Palmer, American Banana, 143. 30. Root Letter, 1203. 31. American Banana, at 358. 32. Ibid., 358. 33. Ibid., 356. 34. Ibid., 355–​56. See John T. Noonan Jr., Persons and the Masks of the Law: Cardozo, Holmes, Jefferson, and Wythe as the Makers of the Mask (New York: Farrar, Straus & Giroux, 1976), 73–​78, 107–​9. 35. American Banana, 213 U.S. at 358. The plaintiff had relied on Rafael v. Verelst, 96 Eng. Rep. 579 (1775). 36. See U.S. v. Sisal Sales Corp. (S.D.N.Y. June 4, 1925), reproduced in Brief for the United States as Amicus Curiae in Support of Neither Party at 48, Mountain Crest SRL v. Anheuser-​Busch InBev, No. 18-​2327 (7th Cir. May 8, 2019). 37. See Benjamin Allen Coates, Legalist Empire; International Law and American Foreign Relations in the Early Twentieth Century (New York: Oxford University Press, 2019). 38. The United States also paid several Caribbean countries’ outstanding European debts, recouped those payments through customs collections, and thus converted the area to dollar-​based trade (away from the British sterling). The US military intervened regularly in Latin America, and the US maintained a no-​tariff policy on banana imports, further encouraging investments in the region. Governments of the Caribbean Basin offered land grants to United Fruit (as well as New Orleans–​based Standard Fruit and Steamship Company) to build railroads and telegraph lines. See Marcelo Bucheli, “Multinational Corporations, Totalitarian Regimes, and Economic Nationalism: United Fruit Company in Central America,” Business History (July 2008): 439–​43; Kepner and Soothill, Banana Empire, 338–​41. 39. Hearing before a Subcommittee of the Committee on Interstate Commerce, US Senate, on S. Res. No. 139 (Washington, 1908). 40. Hunting, “Extra-​territorial Effect,” 34. 41. The plaintiff cited City of Atlanta v Chattanooga Foundry Co., 127 Fed. 23; Chicago Coal Co. v. People, 214 Ill. 453.

Jurisdiction beyond Our Borders  311 42. The plaintiff cited Swift v U.S., 375, at 396; Lowe v Lawlor, 208 U.S. 274 (The plaintiff here referred back to Rafael v. Verelst—​“Its officials were mere tools of defendant.” See Brief for the Petitioner, 39.) 43. Act of Aug 27, 1894, c.349, 28 Stat. 509, sections 73–​77. The Supreme Court declared the federal income tax provisions unconstitutional in 1895. The Sixteenth Amendment reinstated a federal income tax in 1913. 44. “Under the Judiciary Act of 1789, the Attorney General was authorized to render opinions on questions of law when requested by the President and the heads of Executive Branch departments.” https://​www.just​ice.gov/​olc/​opini​ons-​main, accessed February 14, 2022. 45. “Opinion re Potash Mines in Germany,” October 5, 1910, Opinions of the Attorney General, 31 (1916–​ 1919): 545, as cited in Fugate, 1:138–​ 39; also available at HeinOnline. 46. “Opinion re Potash Mines,” 548–​49. 47. Ibid., 551. 48. United States v. Nord Deutscher Lloyd, 223 U.S. 512, 518 (1912), holding that American Banana does not apply when a contract—​illegal in New York but signed in Bremen, Germany—​becomes operative in the United States. See also United States v. Pacific & Arctic Railway Co., 228 U.S. 87 (1913), enjoining a combination of foreign and domestic corporations that had monopolized transportation between Alaska and Washington state; Thomsen v. Cayser, 243 U.S. 66 (1917), applying the Sherman Act against a combination of transporters between New York and South African ports. See also Thomsen v. Union Castle Mail S.S. Co., 166 F. 251 (1908), striking down a conspiracy of shippers to fix prices between US and South African ports and holding that it was immaterial that the conspiracy was formed abroad. 49. Laura Phillips-​Sawyer, American Fair Trade: Proprietary Capitalism, Corporatism, and the “New Competition,” 1890–​1940 (New York: Cambridge University Press, 2018), 121. 50. See, e.g., Chicago Board of Trade v. United States, 246 U.S. 231 (1918). See also Maple Flooring Manufacturers’ Assn. v. United States, 268 U.S. 563 (1925). 51. William Notz, “Export Trade Problems and American Foreign Trade Policy,” Journal of Political Economy 26, no. 2 (1918): 105–​24. See also Sigmund Timberg, “Restrictive Business Practice,” 222–​36. 52. Daniel A. Crane, “All I Really Need to Know about Antitrust I Learned in 1912,” Iowa Law Review 100 (2015): 2025. 53. On the language from the FTC and Clayton Acts regarding “foreign commerce” see n.19, supra. 54. Amendment of Feb. 12, 1913, c.40, 37 Stat. 667 (1913). On tariff rates, see Douglas Irwin, Clashing over Commerce: A History of US Trade Policy (Chicago: University of Chicago Press, 2017). 55. Federal Trade Commission, “Report on Cooperation in American Export Trade” (Washington, DC, 1916), 1:4–​7, 200–​1. 56. Joseph Davies, “Cooperation in American Export Trade,” 64th Cong., 1st Sess. Sen. Doc. No. 426 (May 3, 1916), 2.

312  Antimonopoly and American Democracy 57. Ibid., 2–​3. 58. Ibid., 3. 59. Ibid., 5. 60. Ibid., 6. See also Joseph E. Davies, address before the National Foreign Trade Council, “Cooperation in Foreign Trade” (January 28, 1916). 61. Cong. Rec., May 23, 1917, p. 2784. 62. Cong. Rec., December 12, 1917, p. 171. 63. Ibid. 64. Reed fits the mold of the stereotypical isolationist. On isolationism and antitrust, see Shorten, Capital or Country? 65. Cong. Rec., December 12, 1917, p. 172. 66. Cong. Rec., Conference Report No. 450, April 2, 1918, pp. 1–​2. The Wilson Tariff of 1894 contained provisions (Sections 73–​77) prohibiting cartel activity that affected US import markets. 67. Webb-​Pomerene Act, Section 5. Relatedly, the Edge Act of 1919 allowed national banks to establish foreign subsidiaries and exempting those from US state law. See William F. Notz and Richard Selden Harvey, American Foreign Trade: As Promoted by the Webb-​Pomerene and Edge Acts . . . (Indianapolis: Bobbs-​Merrill, 1921). 68. McGowan, Antitrust Revolution, 64 69. See Zdzislaw P. Wesolowski, “An Inquiry into the Administration and Utilization of the Webb-​Pomerene Act,” International Lawyer 1, no. 4 (October 1969): 107–​ 124, 113. 70. Export Trading Company Act of 1982, 96 Stat. 1233. 71. United States v. Sisal Sales Corp., 274 U.S. 268 (1927). The complaint alleged violation of both the Sherman Act, Section 1, and the Wilson Tariff Act, Section 73, as amended. 72. Transcript of Record at 53, Sisal Sales Corp., 274 U.S. 268 (1927) (No. 200). 73. Sisal Sales Corp., at 274. 74. Fugate, Foreign Commerce, 1:56. Robert T. Molloy, “Application of the Antitrust Laws to Extraterritorial Conspiracies,” Yale Law Journal 49 (May 1940): 1312–​19, 1316. See United States v. Amsterdamsche Chininefabriek, 4 Fed. Trade Reg. Serv. 4186 (S.D.N.Y. 1928); United States v. Deutsches Kalisyndikat Gesellschaft, 4 Fed. Trade Reg. Serv. 4188 (S.D.N.Y. 1929); United States v. ABC Canning Co., 4 Fed. Trade Reg. Serv. 4213 (S.D.N.Y. 1931); Eastern States Petroleum Co. v. Asiatic Petroleum Corp., 103 F.2d 315, 319 (2d Cir., 1939). 75. William Donovan and Breck McAllister, “Consent Decrees in the Enforcement of Federal Antitrust Laws,” Harvard Law Review 46 (1933): 885–​932, 926–​27. 76. See, e.g., Louis Domeratzky, The International Cartel Movement (Washington, DC: US Department of Commerce, 1928); Robert Liefmann, International Cartels, Combines and Trusts (London: Europa Publishing, 1927); Robert Liefmann, Cartels, Concerns and Trusts (London: Methuen & Co., Ltd., 1932). 77. Domeratzky, International Cartel, 1, 2. 78. Ibid., 4. On the history of German cartels, see ibid., 9–​26. 79. Ibid.

Jurisdiction beyond Our Borders  313 80. Ibid., 57. David Gerber, Global Competition: Law, Markets and Globalization (Oxford: Oxford University Press, 2010), c­ hapter 2. The US was not officially party to the League or the Geneva conference. 81. See Arthur Salter, “The Contribution of the League of Nations to the Economic Recovery of Europe,” Annals of the American Academy of Political and Social Science 134 (1927): 132. Recently, there has been a resurgence of historical work on the League of Nations, focusing on the creation of new international economic regulations by liberal technocrats. See, for example, Patricia Clavin, Securing the World Economy: The Reinvention of the League of Nations 1920-​1946 (Oxford University Press, 2013). See also Laura Phillips-​Sawyer, “Revisiting Interwar Global Economic Governance: Technocrats, Sovereignty, and the Perennial Problem of Legitimacy in Global Governance,” Business History Review (forthcoming 2023). 82. Domeratzky, International Cartel, 57. 83. Zara Steiner, Lights That Failed: European International History 1919–​ 1933 (Oxford: Oxford University Press, 2005), 278, 446–​49; Gerber, Global Competition. See also Domeratzky, International Cartel, 3–​4, 38. 84. Domeratzky, International Cartel, 38. 85. Ibid., 4. (Domeratzky noted the alternative hypothesis that European cartels might “prepar[e]‌the way for a European customs union.”) On tariff levels and fragmentation, see Steiner, Lights That Failed, 448, Table 20. 86. Steiner, Lights That Failed, 449. 87. “Recommendations to Congress to Curb Monopolies and the Concentration of Economic Power, April 29, 1938,” in The Public Papers and Addresses of Franklin D. Roosevelt, Vol. 7 (New York: The MacMillan Company, 1941), 305–​ 32. (Hereafter: FDR, “Curb Monopolies.”) See William Kolasky, “Trustbusters: Robert H. Jackson: How a ‘Country Lawyer’ Converted Franklin Roosevelt into a Trustbuster,” Antitrust 17, no. 2 (Spring 2013): 85. 88. FDR, “Curb Monopolies,” 321 and 308, respectively. 89. Scholars have attributed the Second New Deal’s antitrust program to the growing influence of Keynesian economics and to the political problems posed by the “Roosevelt Recession” of 1937. During that recession, New Dealers increasingly attributed the collapse of the economy “to misuse of business power, to pricing decisions that had negated the effects of monetary expansion, and to the withholding of investment for political reasons.” See Ellis Hawley, “Antitrust,” in Encyclopedia of American Economic History, ed. Glenn Porter (New York: Charles Scribner’s Sons, 1980), 780. But see Freyer, Antitrust and Global Capitalism. 90. United States v. Socony-​Vacuum Oil Co., 310 U.S. 150 (1940). 91. The spot market price refers to a composite of current market prices. See Yale Law Journal, 762. 92. Socony-​Vacuum, 225–​27 (rejecting that argument). 93. A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935) and Panama Refining Co. v. Ryan, 293 U.S. 388 (1935) 94. The defense relied on Appalachian Coals, Inc. v. U.S., 288 U.S. 344 (1933), where the Court upheld a joint sales agency among 137 coal producers. In that case, the venture

314  Antimonopoly and American Democracy provided procompetitive benefits, such as marketing, research, and distribution services, in addition to its pricing functions. Moreover, the agency did not control prices, nor could it—​“their coal would continue to be subject to ‘active competition.’ ” See Socony-​Vacuum, at 214–​17, quote at 215. On joint ventures, see Hovenkamp, Federal Antitrust, 260. More recently, see Texaco v. Dagher, 547 U.S. 1 (2006), at 6. 95. The prosecution relied on US v. Trenton Potteries Co., 273 U.S. 392 (1927), striking down an agreement among toilet producers controlling 82 percent of the national market to fix prices. See Socony-​Vacuum, at 212. 96. Socony-​Vacuum, at 237. 97. Ibid., 238. Douglas quoted from Jackson, who had quoted a Wisconsin judge. (Ellipses in original.) 98. Ibid., 238. 99. Ibid., 239. 100. Ibid., 216. 101. Ibid., 210, 218. 102. Ibid., n.59. 103. Ibid. 104. Justice Owen Roberts, dissenting, insisted that market effects must be proven in order to hold that a conspiracy had actually fixed prices. Ibid., 260. 105. United States v. Aluminum Company of America, et al., Filed April 1937, Box 71, Wright Patman Papers, LBJ Presidential Library. [Hereafter: Patman Papers.] (No specific date in April given.) See also Annual Report of the Attorney General of the United States of 1937, 43. 106. See George David Smith, From Monopoly to Competition: The Transformations of Alcoa, 1888–​1986 (Cambridge: Cambridge University Press, 1988). See also Donald H. Wallace, Market Control in the Aluminum Industry (Cambridge, MA: Harvard University Press, 1937). 107. See the petition of the United States and answer of the principal defendant, Alcoa case. See also Wallace, Market Control, 118–​28, 157–​69; Haskell v. Perkins, 31 F. 2d 53 (CCA 3d, 1929), cert denied, 279 US 872 (1929); Baush Machine Tool Company v. Alcoa, 60 F. 2d 586 (DC Conn. 1932), affirmed, 60 3F (2d) 778 (CCA 2d, 1933), cert denied sub nom. Alcoa v. Baush Machine Tool Company, 289 US 739 (1933); Senate Doc. No. 67, 69th Congress, 1st session (1926). 108. Cummings, “Memorandum to Mr. Stevens: Assistant Attorney General, In Re Aluminum Company of America,” July 8, 1933, Box 71, Patman Papers. 109. Ibid. 110. Letter Cummings to Haskell, February 7, 1934, Box 71, Patman Papers. Cummings had previously represented Haskell in an antitrust suit against George Perkins, see Haskell v. Perkins, 28 F. 2d 222 (1928); “Demands $9,000,000 in Aluminum Suit,” New York Times, June 28, 1928, 33. 111. Baush Machine Tool Co. 60 F. 2d 586; Canadine, Mellon, 516. 112. “Final Report and Recommendations of the Temporary National Economic Committee: Investigation of Concentration of Economic Power,” Senate Doc. No. 35, 77th Sess. (March 31, 1941), 230. 113. Alcoa, 44 F. Supp. 97, at 280.

Jurisdiction beyond Our Borders  315 114. Brief for the United States in Support of a Preliminary Finding of Conspiracy, District Court of the United States for the Southern District of New York (June 1, 1939), 2, 10–​12. 115. 44 F. Supp. 97, at 225, 277, 280. 116. See Johnston, “Arnold’s Biggest Case.” See also Waller, “Story of Alcoa,” 135. 117. Robert H. Jackson and Edward Dumbauld, “Monopolies and the Courts,” University of Pennsylvania Law Review 86, no. 3 (January 1938) : 237. 118. Ibid., 237. 119. Ibid., 239–​40. 120. Robert H. Jackson, “Should the Antitrust Laws Be Revised?” United States Law Review 71, no. 10 (October 1937): 575, 577. (Address before the Trade and Commerce Bar Association and Trade Association Executives, September 17, 1937.) 121. Brinkley, End of Reform, 118. 122. “Aluminum: Judge Caffey Concludes,” Time, October 20, 1941, 87–​88. 123. United States v. Aluminum Co. of America, 44 F. Supp. 97 (S.D.N.Y. 1941). 124. Ibid., 30. 125. Ibid. 126. Ibid., at 231, 280. 127. “Aluminum: Judge Caffey.” 128. See Hawley, New Deal and the Problem of Monopoly; Brinkley, End of Reform. 129. TNEC, Final Report, 8, as quoted in Robert Franklin Maddox, The War within World War II: The United States and International Cartels (Westport, CT: Praeger, 2001), 4. 130. TNEC, Final Report, 103. 131. Arnold, Bottlenecks, 18. 132. Alan R. Sweezy, “Mr. Arnold and the Trusts,” New Republic, June 8, 1942, 803. 133. Thurman W. Arnold, “Fair and Effective Use of Present Antitrust Procedure,” Yale Law Journal 47, no. 8 (June 1938): 1294–​95. 134. Gerber, Global Competition, 69; Saxon Wood Pulp case (German Imperial court, 1897). See also Jeffrey R. Fear, Organizing Control: August Thyssen and the Construction of German Corporate Management (Cambridge, MA: Harvard University Press, 2005), 237–​39. 135. Fear, Organizing Control, 236. 136. Ibid., 238. 137. See W. Henderson, The Industrial Revolution on the Continent 1800–​ 1914 ( London: Frank Cass and Co. Ltd., 1961), 60, as cited in Joshua and Harding, Regulating Cartels, 66. 138. See Liefmann, Cartels, Concerns and Trusts, 351. 139. Gerber, Global Competition, 155–​59. 140. See Robert Liefmann, “International Cartels,” Harvard Business Review 5, no. 2 (January 1927): 129–​48. 141. Susanna Fellman and Martin Shanahan, eds., Regulating Competition: Cartel Registers in the 20th Century World (London: Routledge, 2016), 5. See also William Conrad Kessler, “The New German Cartel Legislation: July 15, 1933,” American Economic Review 24, no. 3 (September 1934): 477–​82.

316  Antimonopoly and American Democracy 142. US Senate Committee on the National Defense Program, hearings, 77th Congress, 1st session (Washington, DC, 1942), 4283–​ 838, 4773. [Hereafter: Truman Committee.] 143. Michael Straight, “Standard Oil: Axis Ally,” New Republic, April 6, 1942, https://​newr​ epub​lic.com/​arti​cle/​104​346/​stand​ard-​oil-​axis-​ally; Frank L. Kluckhohn, “Arnold Says Standard Oil Gave Nazis Rubber Process,” New York Times, March 27, 1942. 144. Arnold, Truman Committee, 4318. 145. Ibid., 4321. 146. Ibid., 4322. 147. Ibid., 4819. 148. Straight, “Standard Oil.” 149. See Exhibit No. 441, Truman Committee, 4693–​721. See also: U.S. v. Standard Oil Co. (N.J.), Civ. No. 2091 (D.N.J. 1942); U.S. v. Dow Chem. Co., Cr. No. 109-​191 (S.D.N.Y. 1941); U.S. v. Sperry Corp., Civ. No. 19-​175 (S.D.N.Y. 1941); U.S. v. Am. Bosch Corp., Civ. No. 20-​164 (S.D.N.Y. 1942). 150. “Special Committee on Monopoly and Cartels” (October 14, 1943), Notter Files, RG 59, Box 34, National Archives. (Declassified September 24, 2002.) 151. Memo: Kate and Heinrich Kronstein, “A List of International Cartels, 1939,” Notter Files, RG 59, Box 34, National Archives. 152. Freyer, Antitrust and Global Capitalism, 44. 153. “Report of Special Committee on Private Monopolies and Cartels to the Committee on Post-​War Foreign Economic Policy,” July 1, 1943, Marriner S. Eccles Papers, Federal Reserve Papers, Subseries III, Domestic Economic Stabilization, Box 32, Folder 19, Item 4. 154. Ibid., subsection “Progress Report: Subcommittee on European Enemy and Enemy Occupied Countries,” 5–​10. 155. “Special Committee on Monopoly and Cartels,” Memo 5 (November 5, 1943), Notter Files, RG 59, Box 34, National Archives. 156. Ibid., Doc. No. 5 (December 23, 1943). 157. Heinrich Kronstein, “The Dynamics of German Cartels and Patents,” University of Chicago Law Review 9, no. 4 (1942): 643–​71. 158. See U.S. v. International Lead Co., 332 U.S. 319 (1947), striking down an international titanium cartel that employed cross-​licensing of patents for market division purposes. 159. Wesolowski, “Webb-​Pomerene Act,” 107, 113. 160. United States v. U.S. Alkali Export Ass’n., 58 F. Supp. 785 (S.D.N.Y. 1949). See also United States v. Minn. Mining & Mfg. Co., 92 F. Supp. 947 (D. Mass. 1950). 161. See Wendell Berge, Cartels: Challenge to a Free World (Washington, DC: Public Affairs Press, 1944), 192–​207. 162. “Cartels,” Address by the Honorable Thurman Arnold, February 8, 1944, Thurman Arnold Papers, University of Wyoming American Heritage Center (Box 4). [Hereafter: Arnold Papers.] 163. “Speech to American Business Congress,” March 17, 1944, Arnold Papers (Box 4); Arnold, “The A-​B-​Cs of Cartels,” in Credit Executive, January–​February 1943,

Jurisdiction beyond Our Borders  317 Arnold Papers (Box 81); Thurman Arnold, “America’s Choice: Cartels or Free Enterprise,” Manuscript 1944, Arnold Papers (Box 81); Thurman Arnold, Book Review of Cartels: Challenge to a Free World by Wendell Berge, Survey Graphic Magazine, February 1945, Arnold Papers (Box 81); “Let’s Face the Issue: Are Cartels Necessary?” Radio show script, where Arnold was a speaker, February 25, 1945, Arnold Papers, Box 106. 164. Corwin Edwards, “International Cartels as Obstacles to International Trade,” American Economic Review 34 (March 1944): 330–​39; Committee on Military Affairs, Report of Subcommittee on War Mobilization, Cartels and National Security, 78th Cong., 2d sess. (1944); George Stocking and Myron Watkins, Cartels or Competition? The Economics of International Controls by Business and Government (New York: Twentieth Century Fund, 1948); Stocking and Watkins, Cartels in Action: Case Studies in International Business Diplomacy (New York: Twentieth Century Fund, 1946). See also Roland N. Stromberg, “American Business and the Approach of War, 1935–​1941,” Journal of Economic History 13 (Winter 1953): 78; Gabriel Kolko, “American Business and Germany, 1930–​1941,” Western Political Quarterly 15, no. 4 (1962): 713–​28. 165. Alcoa, at 427, quoting: 21 Cong. Rec., 2460. On Hand’s “reluctance” and his reliance on congressional intent to condemn monopolies, see Winerman and Kovacic, “Learned Hand.” 166. Alcoa, at 429, 430. Alcoa was also found to have committed a “price squeeze” against aluminum fabricators by keeping ingot prices high but (fabricated) rolled sheet prices low relative to competitors. Alcoa, at 437–​38. But see DuPont, 96 FTC 653, 747 (1980). 167. Equity Case Files No. 85-​73, Brief of the United States, National Archives, RG 21, Box 4167, Folder 1. 168. Alcoa, at 442. 169. Ibid., 443. 170. Ibid. 171. Ibid., 444 172. Ibid., 445. 173. U.S. v. Hamburg-​Amerikanische P.F.A. Gesellschaft, 200 F. 806 (S.D.N.Y. 1911), at 807, rev’d on other grounds, 239 U.S. 466 (1916); Thomsen v. Cayser, 243 U.S. 66 (1917), at 88; U.S. v. Aluminum Co. of Am., 148 F.2d 416 (2d Cir. 1945), at 445. 174. Alcoa, at 448. 175. US v. Alcoa, 91 F. Supp. 333 (SDNY, 1950). 176. American Tobacco Company v. United States, 328 U.S. 781 (1946), affirming the Alcoa ruling. On government contracts, see Andrew Perchard, “This Thing Called Goodwill: The Reynolds Metals Company and Political Networking in Wartime America,” Enterprise & Society 20, no. 4 (December 2019): 1044–​83. 177. U.S. v. General Elec. Co., 82 F. Supp. 753 (D.N.J. 1949), at 891; U.S. v. National Lead Co., 63 F. Supp. 513 (S.D.N.Y. 1945), at 527, mod. and aff ’d, 332 U.S. 319, (1947); U.S. v. Timken Roller Bearing Co., 83 F. Supp. 284 (N.D. Ohio 1949), at 309, mod. and aff ’d, 341 U.S. 593 (1951); U.S. v. Imperial Chem. Indus., Ltd., 100 F. Supp. 504

318  Antimonopoly and American Democracy (S.D.N.Y. 1951), at 592; Continental Ore Co. v. Union Carbon & Carbide Corp., 370 U.S. 690 (1962); U.S. v. The Watchmakers of Switzerland Info. Center, Inc., 1963 Trade Cases, ¶70,6000 (S.D.N.Y. 1962); Ibid., ¶77,457. See also cases cited at Zenith Radio Corp. v. Matsushita Elec. Indus. Co., 494 F. Supp. 1161 (E.D. Pa. 1980), at 1187. 178. Fugate, “Antitrust Jurisdiction,” 926. 179. Fugate, Foreign Commerce and Antitrust, 2:467–​68. 180. On US antitrust policies being adopted, translated, and imposed abroad, see Freyer, Antitrust and Global Capitalism. See also Wyatt Wells, Antitrust and the Formation of the Postwar World (New York: Columbia University Press, 2001). 181. See, e.g., Gerber, Global Competition; Joshua and Harding, Regulating Cartels; Fellman and Shanahan, eds. Regulating Competition; Kathleen Thelen, “Historical Institutionalist in Comparative Politics,” Annual Review of Political Science 2, no. 1 (1999): 369–​404. 182. Putnam, Courts without Borders, 109. 183. Alcoa, at 430. 184. See Hartford Fire Ins. Co. v. California, 509 U.S. 764 (1993), affirming Alcoa’s effects test (Id. 796); F. Hoffman–​La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004), holding that the Foreign Trade Antitrust Improvements Act of 1982 did apply to an international cartel of vitamin producers; however, foreign plaintiffs must seek redress in their home jurisdictions, which had their own competition policy. 185. John Fabian Witt, “The View from the U.S. Leviathan: Histories of International Law in the Hegemon” (January 22, 2022). Available at SSRN: https://​ssrn.com/​abstr​act=​ 4014​826 or http://​dx.doi.org/​10.2139/​ssrn.4014​826. 186. See Anu Bradford, Adam S. Chilton, Katerina Linos, and Alex Weaver, “The Global Dominance of European Competition Law over American Antitrust Law,” Journal of Empirical Legal Studies 16 (2019): 731.

9 From Market Power to State Capture The Fateful Shift in Postwar Antimonopoly James T. Sparrow

Contrary to common wisdom, American antitrust politics did not decline steadily after WWII. Indeed it grew more powerful, attaining a crescendo by the early 1970s. Yet within less than a decade Reaganite conservatives would summarily dismantle it. How was this possible? The political economy and culture of World War II and the Cold War transformed who the antimonopolists were, and what they were fighting against. The populist-​ progressive coalition that had pioneered antimonopoly politics evolved into a liberal coalition of independent businesses, trade associations, and consumer welfare advocates. While this coalition notched major wins, notably the passage and enforcement of the Celler-​Kefauver Anti-​Merger Act of 1950, it abandoned a tight focus on market power—​just as a massive wave of conglomerate mergers rose to evade the Act and bolster a conservative assault on antitrust. Without a focus on market power, antitrust quickly became an empty shell. From the late 1930s to the 1970s, a golden age of antimonopoly politics cemented the influence of the liberal coalition over the postwar mixed economy. Yet the antimonopoly project faced considerable headwinds in these decades, including a cartelistic defense economy and an elusive global market that altered the assumptions and operating conditions under which competition policy could be pursued. In these years, major liberal constituencies such as organized farmers and unions made their peace with the corporatism that had been forged in depression and war. The initiative for antimonopoly politics fell to independent businesses, trade associations, and a range of professionals advocating consumer safety, health, and welfare—​all of whom nonetheless grew increasingly skeptical of state power over time. Mounting fears of totalitarianism cast a troubling light on bureaucratic regulation of economic life, prompting antimonopoly advocates to reframe James T. Sparrow, From Market Power to State Capture In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0009

320  Antimonopoly and American Democracy attacks on business consolidation as preempting state capture rather than market power per se. Challenging as they were, these developments did not spell the end of antimonopoly as a political movement, Richard Hofstadter’s notorious complaint notwithstanding. Ever since his influential 1964 essay, “What Happened to the Antitrust Movement?,” historians have largely taken for granted Hofstadter’s claim that antitrust ceased being a robust political movement from World War II onward, surviving instead as a technocratic apparatus within the postwar state.1 The simple fact is that antitrust never lost its political constituency. As the liberal coalition gained influence in the postwar period, a network of antimonopoly advocates in Congress marshaled an active if fissiparous coalition. By 1950 they accomplished the last major expansion of the antitrust laws to date: the Celler-​Kefauver Anti-​Merger Act of 1950, which provided a robust if flawed foundation for postwar antimonopoly. Its sustained and effective enforcement remade patterns of corporate concentration, incentivizing firms to avoid the kinds of vertical and horizontal mergers it proscribed. But the same aversve behaviors unleashed the proliferation of conglomerate mergers—​a fateful development for antitrust prosecution and for regulation more generally.2 Meanwhile, years of aggressive prosecution focused the opposition, rallying abundant political and intellectual resources to the defense of big business, even as liberal constituencies dissipated their animus against an ever-​widening spectrum of corporate targets. Despite the substantial political clout the liberal coalition exerted, the priorities structuring the antimonopoly agenda shifted in the postwar period, reflecting the initiative of small businesses, trade associations, and consumers. As Hofstadter observed, antitrust experts entrenched themselves within the burgeoning administrative state building a massive technocratic hive of inward-​looking expertise and regulation.3 But their long-​term success in doing so was sustained by a broader politics thatcounter-​intuitively celebrated business, prioritized “free competition,” and presumed the sovereignty of the consumer—​decades before deregulation and Robert Bork’s “consumer welfare prescription” finally hollowed out the mixed economy.4 The critical development for the fate of postwar antimonopoly politics, then, was not primarily the rise of reactionary politics to force the “end of reform” or the inadequate radicalism of the Cold War Left that resulted from it..5 Antitrust thrived for two decades after both developments beset the New Deal coalition. Instead, the transformation of antimonopoly resulted from

From Market Power to State Capture  321 the reconfiguration of a coalition whose policy accomplishments and political leverage grew even as its focus on market power lost coherence. Thus reconfigured, the antimonopoly coalition was ill-​equipped to navigate a domestic political economy that fostered great concentration and uncompetitive activity, especially within the dominant defense economy, while incubating an emerging global marketplace formed by trade and aid policies that favored economic giants capable of securing strategic interests rather than competition. The seeds of failure are often sown at the heights of success. This was the case for the liberal coalition, whose rapid fall from the commanding heights of the mixed economy in the 1960s and 1970s requires explanation. Political mobilization against monopolies continued with vigor well into the 1970s as a mature cadre of antitrust professionals brought a wave of cases to meet the conglomerates’ merger mania, while politicians and disparate political movements harnessed the growing anti-​corporate mood of the era. But the liberal coalition was overwhelmed by an anti-​establishment politics that took on too many enemies at once, diverting anger and attention to other targets while conglomerates only grew stronger. By the time of Bork’s devastating assault on antitrust at the end of the 1970s, he was able to co-​opt the most visible surviving elements of antimonopoly politics—​notably those emphasizing consumer welfare—​while combining them with established fears of corrupt state “capture” and Vietnam Era paranoia about the machinations of “big government.” Without a unified focus on market power as the mobilizing concern of antimonopoly politics, or a popular embrace of government power sufficient to counteract it, the mixed economy was ripe for a takeover by its enemies. *** The mobilization for total war in World War II was an antimonopolist’s worst nightmare. Many of the corporatist solutions originally devised for the Great War and warmed over for the First New Deal enjoyed a third life—​this time secured under the auspices of virtually unlimited presidential war powers that waxed for more than half a decade. USDA subsidies now boosted rather than suppressed agricultural production. Farmers participated in county-​ level committees to meet booming production requirements to feed GIs and Allies as well as the domestic population. OPA controls stabilized most prices by late 1942, protecting workers’ paychecks without limiting farmers’ incomes. Other microeconomic controls, such as rationing, wage caps, and

322  Antimonopoly and American Democracy overtime guarantees, further insulated workers from being buffeted by the drastic swings of the booming war economy. Unions took a seat at tripartite production committees in war plants, involving themselves in everything from bond and production drives to promotion, seniority, benefits, hours, and working conditions—​this time as co-​managers, not only as collective bargaining adversaries.6 While farmers and unionists experienced burgeoning prosperity and stature during the war effort, taking their places in the corporatist mobilization, independent proprietors suffered a very different fate. Small businessmen and -​women were largely shut out of the war government, relegated to local defense boards charged with organizing civil defense drills, ration book distribution, scrap and bond drives, and the like. Bankers, lawyers, and economists outflanked them at the ramparts of the war planning agencies. The Defense Production Corporation and the Treasury financed the massive output that by mid-​war ensured the United States outproduced Germany by a factor of two and Japan by a factor of five. The War Production Board—​a resurrected WIB—​sought to manage the allocation of critical materials such as rubber and gasoline, while local businesses scrambled to secure what they could. What made the war economy so alarming to the exponents of antimonopoly was not its corporatism per se, but the direction of economic activity by officials—​ civilian and military—​ whose overriding concern was massive output to guarantee that Roosevelt’s “Arsenal of Democracy” could be mounted in time to win the day. FDR set the tone, calling for an air force of 50,000 planes after the invasion of France and continuing to demand unimaginable outputs of war materiel thereafter. By the end of 1942, virtually all antitrust prosecutions of any consequence to the war effort had been blocked by either the Army or the Navy. “Dollar-​a-​year” men in the WPB and other civilian agencies naturally shared the outlook of their erstwhile colleagues when resolving the supply and priority problems that inevitably pitted businesses against each other as they scrambled to operate in the war boom. Military procurement agents, who called the tune of the war economy, did take measures to keep costs and contractors’ practices in line. But the superior efficiency at scale of large concerns like Kaiser, US Steel, Alcoa, and DuPont nonetheless placed the lion’s share of war contracting in their coffers—​even if they did subcontract a substantial portion of their war work out to smaller firms.

From Market Power to State Capture  323 The result was a striking pattern of corporate concentration which can be discerned in patterns of employment and prime contracting. Between 1939 and 1944 the proportion of workers employed by firms with fewer than 500 employees shrank from 51.7 percent to 38.1 percent, even though these firms comprised roughly the same proportion (over 97%) of all business establishments. During that same period, giant corporations employing 10,000 or more workers engaged almost a third of all employees (31%) at their peak in 1944—​250 percent of the proportion they had commanded in 1939. These shifts resulted from the distribution of prime war contracts, the greatest portion of which went to the very largest firms. Of the $175 billion spent between June 1940 and September 1944, two-​thirds went to the 100 largest corporations. Among the top 100, concentration was also the rule: the top 10 received 30 percent of all contracts. Half went to the 30 largest firms. The remainder was divided, unevenly, among the other 18,439 corporations receiving prime war contracts—​a relatively selective group that excluded tens of thousands of smaller businesses.7 In light of the divergent economic and political fates meted out to large versus moderate to small firms by the Arsenal of Democracy, it is unsurprising that Congress should have become a home to politicians who found it easy to score points in their home districts by bashing big business. The friends of labor and small business—​not often aligned—​constantly sought publicity by criticizing big business for “cost-​plus” contracts, “excess profits,” and executive salaries exceeding $25,000 a year in a time of wage caps. In so doing they touched the nerve Gerald Nye had jolted with his investigations of “war profiteers” in the preceding decade.8 A generation of Americans had been badly disillusioned by revelations about the House of Morgan’s financial stake in the Great War, the astronomical profits enjoyed by war contractors like the DuPonts, and the systematic abuse of public power by the likes of Andrew Mellon. They chafed at the likelihood that the “ruling barons” of the American economy, as Roosevelt derided them, would get another bite at the apple. Harry Truman was, of course, the most prominent politician to capitalize on the currents of antimonopoly sentiment unleashed by the war economy. His national profile was established by the highly publicized investigations into defense contracting he directed as chair of the Senate Special Committee to Investigate the National Defense Program. That committee’s investigations ran from 1941 until 1948 (extending to cover postwar surplus property

324  Antimonopoly and American Democracy disposal), and was distinguished by its extraordinary bipartisan success. All of its many reports were unanimous, perhaps reflecting the influence of populism that had rocked the Southern and Western hinterlands in the previous generation.9 The committee’s hearings were a highly publicized and constant influence on public policy discussion during the war years, filling headlines with the sordid details of war contracting and consuming reams of paper in their testimony (27,568 pages’ worth, documenting 2,284 appearances in 432 public hearings). Sharing the limelight with hinterland Democrats Tom Connally of Texas, Carl Hatch of New Mexico, and Harley Kilgore of West Virginia, Truman placed the inconvenient details of the major war contractors’ activities before a national audience whose Southern and Western constituents paid special attention to the concerns surfaced by their senators on the committee. James Mead of New York, a former railroad switchman, added the perspective of labor, which became even more prominent after he assumed the chairmanship upon Truman’s nomination as the Democrats’ vice presidential candidate in the 1944 election.10 Another committee, dedicating itself to the concerns and sensibilities of small business, conducted inquiries similar to (if less publicized) than those of the Truman Committee. Democrats Wright Patman of Texas and James Murray of Montana made headlines publicizing corporate profits and contract-​ hogging from their perches on the Senate Small Business Committee. Although the war economy stymied any systematic response to small business’s demands, it did provide an opening for one substantial victory. Patman and Murray sponsored the creation of a Smaller War Plants Corporation (SWPC) for the giant-​friendly War Production Board. The SWPC’s last director, Maury Maverick, inserted himself into the reconversion process.11 Toward the war’s end, Patman joined forces with Georgia’s Walter George to cosponsor a Surplus Property Act (1944) that gave teeth to the SPA administrator, Stuart Symington, who was in charge of disposing of government-​owned war plant and capital equipment. Although Patman did not accomplish much for small businessmen, his hearings rallied them nonetheless to scrutinize wartime contracting practices. And the creation of the SPA produced results. Alcoa lost its prewar monopoly on aluminum when Symington declined to sell it the government-​owned plants it had operated during the war, instead leasing or selling them to Reynolds and Kaiser to foster genuine competition. Together they divided half the market for aluminum while Alcoa took the other half—​a great improvement over the 90 percent share Alcoa had enjoyed before 1940.12

From Market Power to State Capture  325 The politics of war contracting had ramifications extending well beyond this solitary consequence of Symington’s discretion. All the political energy devoted to scrutinizing big war contractors produced real results, despite the concentration that notoriously occurred during World War II. Notwithstanding the infamous claims of I. F. Stone and C. Wright Mills, it turns out that corporate profit rates during World War II varied inversely with company size. Even more surprisingly, military contractors saw lower returns on investment than did their civilian counterparts in manufacturing, thanks to sharp limitations on profit-​ taking and aggressive contract renegotiation—​practices that reflected the considerable public pressures operating upon procurement officials thanks to the work of Truman, Maverick, Patman, and their allies in Congress.13 As formidable as this influence was, it did not prevent the arrogation of market share to the biggest firms during the war, which alone had the power to add or drop smaller subcontractors and corner the market even as their profits took a temporary hit.14 This market power, protected by the shield of national defense, the veil of secrecy, and war-​born networks of contracting relationships, set an ominous precedent for the political economy that came together under NSC-​68 during the Korean War.15 Corporate concentration would continue apace after World War II, proliferating within a defense sector inclined to monopsony as well as monopoly. It would also proliferate well beyond it, among burgeoning conglomerates acquiring new divisions to meet the explosive demand of the consumer society. The resulting managerialism of both the public and private sectors would provide a unifying worldview that lent authority to “the establishment” born in these years. It would also provide a target around which political anger could coalesce. The postwar legislative agenda for expanding antitrust prosecution thus emerged from the heightened politicization of bigness resulting from the World War II mobilization. It was in 1943, at the peak of the war mobilization, that Senator Joseph C. O’Mahoney of Wyoming introduced a bill to amend Title 7 of the Clayton Antitrust Act in order to close the loophole allowing vertical and conglomerate mergers through asset purchases. The text of the Anti-​Merger bill closely tracked the bold recommendations of the Temporary National Economic Committee (TNEC) final report of 1941—​a definitive statement of the antitrust offensive that the Roosevelt administration had been pursuing for four years running. The administration’s prosecution of monopoly was not only a response to the economic maladies of the

326  Antimonopoly and American Democracy Depression, but a strategy to defend democracy itself. As Roosevelt had put it in his original message to Congress authorizing TNEC in 1938: The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is Fascism—​ownership of Government by an individual, by a group, or by any other controlling private power.16

O’Mahoney, a Westerner like Nye and a seasoned member of the Democrats’ progressive wing, was simply picking up where he had left off as chair of TNEC, when he had pushed antitrust to the forefront of public policy in the last phase of the Depression. Although this bill would fail to pass in 1943 due to Republicans’ surging electoral strength and alliance with conservative Democrats in the 78th Congress, it was reintroduced in various forms over the remainder of the decade. Sustained by a strong network of Democrats who remained focused on antimonopoly throughout the 1940s, New York’s Emanuel Celler in the House and Tennessee’s Estes Kefauver in the Senate finally maneuvered it onto the floor for a vote during the Democratic resurgence of 1949–​1950, in the 81st Congress.17 Thus it is the persistence and ultimate success of this policy agenda—​rather than the temporary setback of suspended antitrust prosecutions at the height of the production push in 1942–​1943 emphasized by Hofstadter and Brinkley—​ that should guide any conclusions we might draw about the strength of antimonopoly politics in the postwar period.18 As Democrats pulled together their coalition in Congress during the 1940s, they enjoyed sustained institutional support from antitrust professionals within the Roosevelt and Truman administrations. This support came in the form of information from the reports the FTC had been diligently filing since its beleaguered years in the 1920s—​reports and expertise on which Emanuel Celler relied extensively in hearings before the Subcommittee on the Study of Monopoly Power—​and in a conspicuous wave of cases brought by the FTC and the Antitrust Division of the Department of Justice.19 The death of antimonopoly activism that Hofstadter and others presumed to have resulted from the mobilization for World War II was not true even on its face, at least when it came to actual antitrust cases. It is simply wrong-​ headed to describe the departure of Thurman Arnold from the Antitrust Division in the middle of 1943 as the end of a discrete “antimonopoly moment” that “symbolized the failure of liberals to find a lasting place in

From Market Power to State Capture  327 American politics for antitrust enforcement and the larger concept of combatting monopoly of which it was a part.”20 While it was true that many cases were suspended at the peak of the mobilization by late 1943, it was also true that within less than a year electoral calculations for the 1944 election would prompt FDR to allow the Department of Justice to return to its backlog of suspended cases, pushing reactivated cases back into the courts soon after the war concluded.21 The total number of antitrust cases filed in district courts dropped from a robust 64 in 1943 (24 civil, 40 criminal) down to 29 by 1945, but rose steadily thereafter, shooting up to 66 (39 civil, 27 criminal) by 1949 and 76 (42 civil, 34 criminal) the year thereafter. Private cases followed a similar trend line, dipping from a high of 110 in 1941 to a low of 27 in 1945, but then doubling to 68 during the first postwar year and exceeding 160 by 1949. The government cases from that decade represented over 40 percent of all 1,064 that had been filed since the adoption of the Sherman Act in 1890.22 These aggregate patterns reflected a Democratic determination to counteract the consolidation brought on by the war mobilization—​an investment of political capital Truman only doubled down on when he became president, authorizing an even more muscular Antitrust Division that would become the bête noir of the resurgent postwar business community. The federal government prosecuted several high-​profile cases toward the end of World War II, resulting in the landmark Alcoa (1945) and American Tobacco (1946) decisions, and initiating the Imperial Chemicals/​DuPont case, which would not be concluded until 1951. Other important cases emerging at war’s end included the Associated Press and Hartford Empire Co. cases, both decided in 1945. After the backlog of World War II prosecutions made its way through the pipeline, a new set of cases emerged in the immediate postwar period, this time supported by a Truman administration that was for obvious reasons predisposed to assist small business and advance antimonopoly initiatives. These cases clustered in sectors decisive to the new economic conditions of the postwar period. Industrial concentration remained a concern, as reflected in Columbia Steel and General Electric in 1948, or Standard Oil, Richfield Oil, and Pillsbury in 1951. With the reconstruction of Europe, the destabilization of European empire, and the nascent international machinery of the Bretton Woods system coming on line, firms engaged in international trade attracted the attention of antitrust lawyers: International Salt Co. (1947), National Lead Co. (1947), and the US Alkali Export Association joined ICI/​DuPont (1951) in expanding the sphere of antitrust overseas. And

328  Antimonopoly and American Democracy in keeping with their prominent (and privileged) role in the war effort, media companies drew new attention in the Paramount Pictures (1948) and MPAA (1953) cases. Most economists supported these developments at the time. Even George Stigler, leading light of the Chicago School law and economics movement, recalled that “in 1950 I believed that monopoly posed a major problem . . . and should be dealt with boldly by breaking up dominant firms and severely punishing businesses that engaged in collusion.”23 The Truman administration’s antitrust offensive represented the first surge of a sustained postwar tide. Civil filings by the Department of Justice rose tenfold from the late 1930s to the late 1970s, dipping slightly only once, in the late 1960s. Its criminal filings spiked in the very early 1940s, but immediately after the war still remained several times higher than at the peak of New Deal prosecution in the late 1930s, and rose steadily through the early 1960s, spiking again by the late 1970s.24 Budgets followed the same trendline, with the authorization for the Department of Justice’s Antitrust Division increasing steadily by a factor of four (after adjusting for inflation), and that for the Federal Trade Commission (FTC) by a factor of eight, between the late 1930s and the early 1980s.25 Not only were the increases in antitrust activity steady and substantial, but expenditures to pursue them consumed a portion of the GDP that counterintuitively spiked well above peak progressive levels during the corporatist moments of World War II and Korea, ramping up again after Vietnam. Even the “peacetime” baseline levels after 1945 remained at least as high as Progressive Era peaks, if not higher—​and well above the New Deal at its peak.26 *** As had been the case in the 1930s, the new wave of postwar prosecutions rose on a politics of mounting concern about big business. This time it was sparked by World War II demobilization and subsequent remobilization for the Korea War, which locked in the defense economy on which the military Keynesianism of the Cold War would rest. As during World War II, political commentators took aim at businessmen returning to Washington again to work as “dollar-​a-​year men.” By 1950, however, the barrage of high-​profile prosecutions in the second half of the 1940s had helped mobilize several vocal and overlapping publics. Political entrepreneurs acted to crystallize the issue.

From Market Power to State Capture  329 We can gain insight into both the breadth and the complexity of political support for antimonopoly in this period by considering the efforts of its two most successful exponents: Congressman Emanuel Celler of New York and Senator Estes Kefauver of Tennessee. Both were progressive stalwarts essential to the larger coherence and force of the Democratic coalition that dominated Congress throughout the postwar period. Through their leadership in the House and the Senate, Celler and Kefauver crystallized political support for expanding antimonopoly policy. This makes an analysis of their constituent support a particularly valuable window onto the fight against economic concentration at the height of the Cold War. Today Celler is known more for his work on behalf of immigrants, but throughout his fifty-​year career he was a wide-​ranging progressive who remained vital to the Democratic coalition until his retirement in 1972. His role as a leader of antimonopoly politics in the late 1940s and early 1950s is indisputable. He chaired the Monopoly Subcommittee of the House Judiciary Committee from 1949 to 1953, conducting high-​profile investigations of baseball and the insurance industry, and publishing the larger run of the hearings on a number of industries in a multivolume collection titled Study of Monopoly that has proven an essential reference for the history of antitrust at its most muscular.27 Kefauver is mostly remembered for his explosive investigations into organized crime during the 1950s, but he remained a driving leader of antimonopoly politics well into the 1960s. He rose to a seat in the Senate in 1949 after a stint as chair of the House Select Committee on Small Business, which he led to much acclaim from 1946 to 1948 while also advocating loudly for bigger budgets for the Antitrust Division and FTC. These hearings prepared him well for a new round of hearings in the Senate, leading to his successful cosponsorship in 1950 of the bill amending Section 7 of the Clayton Antitrust Act. After a few years spent pursuing the Democratic nomination for president—​an ambition made plausible, if not ultimately successful, by the national profile his hearings had established—​Kefauver turned back to his original issue as Chair of the Senate Antitrust and Monopoly Subcommittee from 1957 to 1963. His hearings on the pharmaceutical industry gained a boost from the Thalidomide controversy, leading to the landmark Kefauver-​ Harris Drug Act of 1962.28 The trajectories that brought Kefauver and Celler into effective partnership intersected within a larger field of antimonopoly politics sustained by intense, if sometimes fractious, pressure by lobbyists, organized interests,

330  Antimonopoly and American Democracy and contending constituencies. After years of Democratic effort dating back to O’Mahoney’s failed bill in 1943, Celler and Kefauver managed to pass legislation in 1950 that amended Section 7 of the Clayton Antitrust Act to support a broader set of anti-​merger provisions prohibiting the purchase of a competitor’s assets to form vertical and conglomerate monopolies. The Celler-​Kefauver Anti-​Merger law was the last major expansion of antitrust law. Yet improbably, Celler and Kefauver secured its passage in the midst of the war mobilization for Korea, which cemented the corporatist contours of the Cold War defense economy authorized by NSC-​68. Both men were eloquent exponents of the aims of antimonopoly politics, articulating a non-​socialist vision of democracy within the modern economy. Although Celler had introduced his bill in February 1949, getting it passed by the end of that summer, Kefauver’s bill still had not passed in the Senate until mid-​ December 1950, months after the outbreak of war—​and right around the time General George MacArthur’s forces had retreated to their positions in the long stalemate along the 38th Parallel. This would not seem to have been a propitious time to restrict the economic might of the major corporations responsible for war production. The anti-​communist politics peaking at that moment must have made the moment for antimonopoly seem even less auspicious. The immensity of these headwinds—​McCarthyism and the ineluctable defense-​sector cartelism of NSC-​68—​suggests the formidable electoral forces propelling Celler and Kefauver forward despite the odds. Indeed, the fact that the Senate bill passed with the support of 40 percent of the Republicans and without any Democratic opposition indicates an impressive advance over the partisan gridlock of the 80th Congress.29 Celler worked closely with a number of organized interests including the CIO, fifteen different railroad brotherhoods, the National Farmers’ Union, the Modern Order of American Consumers, the National Federation of Independent Business, the National Association of Retail Grocers, the National Association of Retail Druggists, the National Association of Independent Tire Dealers, and several other associations of small businesses. The opponents testifying against the bill were a who’s who of big business, led by the National Association of Manufacturers.30 During Celler’s hearings on aluminum—​still the most concentrated industry by 1949, with 73 percent of the market controlled by Alcoa and its two war-​born competitors—​he was in constant contact with independent fabricators, who relied entirely on the big three for pig and ingot sources. It was precisely the shortages of pig and ingot aluminum caused by the war

From Market Power to State Capture  331 mobilization in 1952–​1953 that brought this pressure, and the hearings, to a head. More than one constituent wrote to denounce the “death sentence” that Alcoa’s hold on ingot production exercised over small businesses, especially under conditions of war production for a military newly reliant on aluminum for air power.31 This was an explicit reference to PUHCA, another highly publicized foundation-​stone of antimonopoly, but it was also a reminder of the bitter memories small firms harbored of their marginalization during the World War II mobilization. Another reliable and active source of small business pressure on Celler was the National Federation of Independent Businesses (formerly of Small Businesses), which also worked closely with Kefauver.32 No match for giant lobbies like NAM or the US Chamber of Commerce, the NFIB nonetheless provided a steady channel of communication to small businesses that were otherwise disorganized and inchoate as a constituency. Because we lack a developed historical literature on small business in this period—​or of small proprietors more generally—​it is all too easy to fall into assuming that they shared the same anti–​New Deal agenda that the big business pioneers of the New Right cultivated from the Liberty League in the 1930s onward.33 But the constituent mail that flooded into the offices of Celler and Kefauver suggested otherwise. Far from mindlessly celebrating big business, small businesses developed sharp critiques of their outsized competitors that they honed into legislative proposals. George J. Burger, vice president of the NFIB, corresponded frequently with Kefauver and was closely involved in the drafting of the Anti-​Merger Act.34 Like Kefauver, Celler was in regular contact with antitrust experts in the FTC and Department of Justice, making use of the abundant reports and other factual material they could provide. While it may be a distortion to claim that the experts of the FTC constituted their own social movement, they clearly operated as more than a politically inert body of experts.35 Even as Celler’s energies and ideas reflected the rising influence of small business, consumers, and antitrust experts, he continued to devote considerable effort to engaging unions and farmers, as his speech file attests.36 Kefauver’s constituent mail was just as rich and extensive as Celler’s, although it reflected a somewhat different set of concerns and priorities. He was quite cool to unions, and on occasion made guarded comments that reflected deep ambivalence flowing from his belief that unions exercised a monopoly on their members’ labor—​something inconceivable to Celler, who rejected the idea of labor as a commodity. In response to a female constituent

332  Antimonopoly and American Democracy demanding he aim antitrust activity at the notorious UMW leader John L. Lewis, Kefauver wrote, “I wish to say that I am opposed to monopolies whether they be in the field of labor, Government or private business.” “The Taft-​Hartley law, to curb labor strikes,” he reassured her, “has been invoked in the past and may be again if the President sees fit to do so.”37 Kefauver’s closer relationship to small business may have influenced this tendency. Their letters to him boiled over with anti-​union sentiment. This constituency harbored a petit bourgeois radicalism that could swerve left or right—​or both ways at once. Their whipsawing resentment of concentrated power could be seen in a letter from a small electrical supplier who sent a clipping that warned of sinister designs to wage a coordinated publicity campaign against public power plants. In the middle of the letter bashing big utility interests, the proprietor took time to digress about the need to investigate big labor, who were guilty of “crookedness, coercion, brow beating . . . above all things non-​taxable funds which relieves them of paying any type of income tax even though they enter into private business.” He thought “union workers themselves” and “the country as a whole” would be better off without them.38 Whereas Celler mobilized small businesses concerned with aluminum fabrication, Kefauver reached the more broad-​based and overtly progressive public power crowd, reflecting the prominence of the TVA in his home state of Tennessee. He had an abiding relationship to groups like the American Public Power Association and Citizens for TVA. These, in turn, lent a high profile to his hearings on public power and the TVA.39 The National Federation of Independent Businesses (NFIB) worked even more closely with Kefauver than with Celler. This closeness was especially evident during the passage of the Anti-​Merger Act in 1950, when the NFIB supported letter-​writing campaigns, paid for speeches, placed lots of positive press, and provided draft language that Kefauver selectively borrowed in drafting the bill.40 Ed Wimmer, the vice president of the NFIB, wrote with revealing candor and intimacy in early November 1950: “Estes, I am doing everything possible to stir up interest in H.R. 2734 [the anti-​merger bill]. We are still mailing copies of the reprint which was placed in the Record, and I think that 99 per cent of the people in the audiences to whom I talk are in favor of the bill.”41 Kefauver’s relationship to the FTC was also especially close, as reflected in his bold decision to appoint veteran antitruster John Blair as chief economist of the Subcommittee for Antitrust and Monopoly upon his assumption of the chairmanship in 1957.42 That move earned abundant hate mail,

From Market Power to State Capture  333 with the expected constituent fulminations against Kefauver’s “leanings toward socialism,” and statements against the “Marxian dialectical proofs” advanced by “Mr. Blair and his Philosophy.” But interspersed with such complaints were letters of a seemingly opposite tenor, such as the one that denounced his dedicated critic the New York Herald Tribune as a “pawn” of the oil companies.43 Celler and Kefauver’s constituents seized on the terminology and conceptions of antimonopoly law to identify the harms and vulnerabilities they suffered as “the little guy.” The mail they sent to Washington, DC, featured sharp complaints about the monopolistic behavior they wanted to see the government curb through more effective measures. Mergers dominated Celler and Kefauver’s constituent mail, which was natural given the purpose of the proposed amendment. For example, Burger’s earliest appeals to Kefauver were made from his point of view as the proprietor of a small automobile tire business. Noting the dramatic decline in the number of tire makers from 300 in 1921 to 21 in 1947, he claimed that roughly 93 percent of all sales were controlled by four manufacturers. “All of the mergers,” he claimed, “involving the strongest of the companies so acquired were accomplished through purchase of assets.”44 Almost as frequently, constituents wrote to decry other practices proscribed by antitrust law, including predatory pricing, price discrimination, patent and copyright abuse, and unfair marketing practices such as tying. In 1947, as Kefauver conducted hearings on antimonopoly measures, a gas station operator wrote in to him about being forced by oil companies to buy appliances he could not sell. That same year a “small insurance operator” complained that General Motors locked out other insurers by making dealers into registered insurance and financing agents. “In no less than 90% of the cases,” the letter claimed, “a purchaser of a new General Motors car (Cadillac, Buick, Olds, etc.) MUST not only buy insurance to cover the installment payments but, in most cases, cannot pay cash for his purchase.”45 Just as small contractors supplying independent radio makers had written to O’Mahoney back in the 1930s to complain of predatory pricing practiced by the Radio Corporation of America to secure exclusive sourcing of parts from licensees, so too did a bookstore owner write to Kefauver in 1947 to report a local “dime and dollar store that undersells everybody with their cheap goods.”46 ***

334  Antimonopoly and American Democracy Anger at the predations of big business did not automatically carry over into faith in government power to counteract it. On the contrary, the suspicion of centralized power that antimonopoly politics stirred up seemed to adhere to everything around it in a generalized revulsion at corruption in high places.47 Amid the rising anti-​communism of the late 1940s, which consistently sought to conflate liberal administrators with “communists in government,” fears of “big government” could become especially poisonous, reinforcing Hayekian arguments against regulation as a “road to serfdom.” This was quite clear among those small businesses that opposed antimonopoly. In March 1949, F. W. Danner, owner of a modest-​sized print shop, wrote to Kefauver against his Anti-​Merger bill. He was convinced that antitrust laws would only “accelerate the giant glacier of Statism, or Fascism that is slowly, but inexorably, moving down on us.” Once “there was a time when the employer was on one side; the union on the other; and the government in the middle. Today, the government and union are on one side; we are on the other.” Most revealingly, Danner admitted that: As a small businessman, I am willing to be taken over by a large corporation. In fact, I want to be taken over by a large corporation. What I have worked all my lifetime for, is in machinery and in other hard merchandise and assets. It is not liquid. If I were taken over by a larger printing plant, or corporations and given stock therefor, I could easily become liquid.48

The small businessmen whom Celler and Kefauver rallied in support of antimonopoly measures probably did not have a fundamentally different perspective from Danner’s. They simply wanted to craft public power to enable them to enter and engage the marketplace with the autonomy they presumed should inhere in free enterprise. As “small” concerns, they were disinclined to think of cashing out as contributing to dangerous consolidation. Until they should choose to exit their markets, they wanted the federal government to act as a powerful referee to guarantee fair competition. But to the extent that the government seemed to be forming alliances with big labor, as the Democratic Party had done since the 1930s, or favoring large corporations through regulations or contracting relationships, it ran afoul of the very political commitments that many of their antimonopolist constituents sought to cultivate. For this reason, many of the protests that were later lodged against the appointment of John Blair as chief economist to the Sub-​Committee in 1957 opened with claims that he was “anti-​capitalist,”

From Market Power to State Capture  335 but soon revealed more fear of state micro-​management of “free enterprise” than genuine worries about Soviet subversion. Even without the fears and suspicions fostered by loyalty politics, small business’s interests had already shifted in ways that infused their attachment to antimonopoly politics with newly anti-​statist resonances. The 1940s were not the 1930s: boom had replaced bust; inflation prevailed where deflation had threatened; labor embraced corporatism instead of militancy; the war had burnished the image of corporate America; the government was bigger, stronger, and more effective than ever. In this new context of what Barton Bernstein once called “the politics of inflation,” small business found itself squeezed by large organized economic actors and inclined to see conspiracies in restraint of trade in all corners, public and private.49 This can be seen even in the politics of antimonopoly. In 1949 the NFIB informed Kefauver of a poll it had conducted showing that 80 percent of its members supported a bill sponsored by Wright Patman to prohibit chain stores from deducting losses from below-​costs sales from their tax obligations. But an even higher proportion, 89 percent, also opposed Truman’s plan for compulsory national health insurance because it would “create too many taxes for business.”50 Beyond this general aversion to expanding bureaucracies and raising tax rates, memories of microeconomic management and heavy-​handed contracting practices in World War II burned strong. What had begun in 1940 as a crash program for defense mobilization evolved into a permanent defense economy in which contracting relationships were no longer “for the duration.” By 1947, Missouri’s James E. Murray, erstwhile Democratic chair of the Senate Committee to Study the Problems of Small Business, warned that independent businesses were locked in a “death struggle” with large firms and required special protections. He contrasted small firms’ neglect with the privileged treatment accorded to “big business,” which had “turned a deaf ear on the pleadings of the government for increased output . . . until given every assurance that government provision covering all costs of such expansion would be forthcoming, plus an assured profit.”51 As West Virginia’s Harley Kilgore would observe to Kefauver a few years after the Anti-​Merger Act was passed, “the United States Government is the largest single customer of business and industry,” a fact that consistently led small businesses to call for a review of the government’s procurement program to determine whether it was “contributing to the growth of monopoly control, and a weakening of our free economy.”52

336  Antimonopoly and American Democracy Vernacular fear of “big government”—​a dread of “creeping socialism” on the right; a suspicion of “sweetheart deals,” insider fixing, and pandering to business interests on the left—​was not restricted to the political rank and file. Antimonopoly politicians and experts also grew wary of statism operating under the wrong influences, despite their aggressive pursuit of expanded government power in the public interest. The late 1940s and 1950s marked a transformative moment in US political culture, when pervasive fears of totalitarianism suffused public life and reoriented even center-​left politics away from mass democracy and toward more liberal solutions circumscribing centralized power.53 Both Celler and Kefauver partook of this anti-​totalitarian turn in Cold War liberalism. In a press release during the summer of 1949 intended to bolster an Antitrust Division suit against life insurance companies, Celler affirmed the need for measures against “private power over production and prices” that would constrain “free enterprise” or “burden consumers with monopoly prices.” If the government failed to act against monopoly, all of democracy would be in jeopardy. Echoing the concerns of “virtually every witness” who had appeared before his committee to study monopoly power, he argued that private monopoly “cannot fail to result in ‘big government’.” It eventually provoked a government search for alternatives to it, which led inevitably to “fascism, communism, or some form of democratic socialism,” which he hastened to add was “unsuited to the American tradition.”54 Three years later, Kefauver drew similar conclusions about the ultimate threat posed by monopoly, while campaigning for Adlai Stevenson at the very start of the election season in Concord, New Hampshire. He reminded his audience of the state-​sponsored cartels of interwar Germany and Italy, which “financed Hitler and Mussolini” and helped “create Fascism and Nazism with all their horrors.” But “the monopolists also breed socialism,” he warned, “for when the great mass of the people find that the great industries are being permanently controlled by the few for the few, they will want the state to take over these industries and operate them for the many.” Kefauver concluded by stating, “Now I am opposed to both Nazism and Socialism. That is why I am also opposed to private monopolies and near monopolies which help to spur on both of these movements.”55 In casting antitrust as an antidote to totalitarianism, Celler and Kefauver affirmed the social democratic political theories and legal ideas developed during World War II by Karl Polanyi, Franz Neumann, and Wendell Berge—​the last two of whom were centrally involved in the “export” of

From Market Power to State Capture  337 American antimonopoly politics for the purposes of reconstructing post-​ Nazi Germany through decartelization.56 Polanyi’s conception of the “double movement,” in particular, rested on the proposition that monopoly capital leads to fascism, shutting down liberal society in a totalitarian “solution” driven by mass politics. But claiming that the same totalitarian trajectory could also run through socialism departed from the assumptions of any of the social democratic theorists, hitching Celler and Kefauver’s concerns to the dire warnings against planning and state power articulated by Hayek in The Road to Serfdom.57 Never mind that Hayek and Polanyi understood their ideas and principles to be mutually incompatible; in electoral politics, all conflations are possible. Although this anti-​totalitarian synthesis still prioritized the need to counteract corporate consolidation, it made the centralization of power in the national state the ultimate threat to free society, tacitly reinforcing the very “free market” ideology that corporate conservatives had been using to bludgeon New Deal projects since the late 1930s.58 Even for Celler and Kefauver, state capture of the economy was the real fear; firms’ market power was ultimately a danger insofar as it led to statism. Antimonopoly leaders like Celler and Kefauver harbored sufficiently articulated notions of regulation in the public interest that the postwar regime could continue and grow for another twenty years. But their center-​left understanding of the dangers of centralized power operated in a political climate awash in vernacular antistatism and vehement anticommunism, both of which leaned right—​giving businessmen the benefit of the doubt while leaving government officials narrowed straits within which to maneuver.59 The ambivalence expressed by Celler and Kefauver regarding centralized power may ultimately have worked against their antimonopoly agenda. Celler’s extramural hearings in 1950 and 1957 concerning the applicability of antitrust law to professional baseball, an all-​American pastime, cannot have won much popular support beyond the already committed. Kefauver’s blockbuster hearings on organized crime only confirmed suspicions of big city racketeering and government corruption, rather than affirming public faith in government’s ability to clean up it up. *** The eclipse of market power as the overriding danger against which antimonopoly had to guard did not immediately diminish the scope or force of antimonopoly politics, but it did redirect political energies. This

338  Antimonopoly and American Democracy shift can be seen in Kefauver’s last major accomplishment, the passage in 1962 of the Kefauver-​Harris Amendments to the 1938 Food, Drug, and Cosmetic Act. With public outrage surging in 1961 over the tragic spate of birth deformities caused by the anti-​nausea drug Thalidomide, Kefauver moved to reopen hearings on the pharmaceutical industry that he had begun in 1959 as chair of the Senate Subcommittee on Antitrust and Monopoly. Adapting to overriding concerns about testing, safety, and government oversight, he reintroduced legislation aimed at bolstering the powers of the FDA. This greatly raised the regulatory bar pharmaceutical firms had to meet to bring a drug to market, requiring clinical studies, rigorous reporting, an intensive approval process overseen by the FDA, and an extensive evaluation of efficacy for drugs approved since 1938. The law also regulated the marketing of generic drugs and set industry standards requiring regular government inspection. In short, Kefauver-​ Harris imposed substantial restrictions on pharmaceutical firms pertaining to some of the most enduring concerns of antitrust policy, including price, competition, and public accountability. Despite this, the pharmaceutical sector would become one of the most monopoly-​prone precincts of the postwar economy.60 The amendments that finally passed in 1962 were a far cry from the legislation Kefauver and Celler had been shepherding in parallel bills after hearings on administered prices from 1959 to 1960 had established clear patterns of anticompetitive activity in the pharmaceutical industry. The most important issues that emerged from Kefauver’s hearings had to do with the use of patents and licensing to suppress competition and keep prices high. Of the more than 1,200 drug companies, only twenty-​two firms dominated the market for “ethical drugs,” with fifteen accounting for over two-​thirds of all prescriptions in the United States. As a consequence, these firms enjoyed levels of profitability that greatly exceeded those of other manufacturing industries. They accomplished their effective oligopoly through a variety of mechanisms, notably patent monopolies and restricted cross-​licensing, as well as marketing arrangements and aggressive advertising.61 Kefauver was also concerned about the general failure to test drugs for their efficacy (the central failing that had led to the Thalidomide disaster), as well as procedures to ensure product safety, but these consumer welfare measures were clearly secondary to addressing the cause of drug companies’ evasion of accountability. However, as a consequence of secret meetings between the

From Market Power to State Capture  339 Kennedy administration and the conservative members of his own subcommittee, Kefauver was outmaneuvered and another bill substituted for his that dropped all of the patent and licensing provisions aimed at market power. At the last moment, the Thalidomide controversy forced a new bill that included many of Kefauver’s consumer protection measures. The result was a law that did a great deal to regulate drug companies and address the most pressing concerns of consumers but was toothless to prevent the worst monopolistic practices (aside from advertising and marketing) that cemented pharmaceuticals’ market power.62 The final contours of the 1962 legislation may tell us more about pressure group politics and the desperation of the Kennedy administration to attain some kind of visible domestic policy gains than it reveals about the demands of the antimonopoly coalition. But the hearings Kefauver held leading up to them do offer considerable insight into the ways in which it was becoming more difficult to politicize market power per se. The first thing that stands out is the constituencies that mobilized most intensely for the legislation. It was letters from hundreds of doctors and thousands of patients, concerned primarily with high prices and aggressive, misleading promotions, that initially led to the hearings in 1959. The doctors proved to be the most essential to the hearings. They testified to the abject failure of the American Medical Association to guide physicians and thus enable the market to regulate itself. They also revealed how intensely drug companies’ advertising efforts bombarded them and often shaped their colleagues’ approach to particular drugs and therapies. Thousands of new drugs had flooded the market since the end of World War II, many of them representing very minor chemical modifications to justify marketing them as new products, and many others offering only dubious efficacy. Physicians were under great pressure and considerable temptation to file prescriptions that served drug companies’ needs rather than their patients’ welfare. Dr. Ronald Lamont-​Havers, medical director of the Arthritis and Rheumatism Foundation, testified that “I am always surprised at the number of physicians—​I shouldn’t say I’m surprised, I am not—​who rely a great deal on many of the drug detail men for their knowledge of the drugs, and certainly this is one way in which new types of therapy are disseminated among the medical profession.”63 Even doctors who kept up with the most recent literature were blinkered by the industry, whose advertising was so important to most journals that it preempted the publication of critical studies.

340  Antimonopoly and American Democracy The doctors who testified before Kefauver were not, for the most part, independent proprietors like the small businesses that had supported the Anti-​Merger Act over a decade before. But their expertise and professional standards lent them a similar kind of independence, at least in their outlook toward the drug companies. They were quite critical of the ways in which they used their market power to undermine competition, raise prices and profits, and dump most of their externalities on the unsuspecting consumer. Yet their focus on high prices and aggressive marketing did not get at the root causes of monopolization. Perhaps this was because, unlike the trade associations and independent businesses that had supported the Anti-​Merger Act, they were not in fact competitors of the pharmaceutical industry, and so did not concern themselves with patent restrictions and licensing (as Kefauver did). While the legislation enjoyed the support of critical groups—​notably the National Association of Retail Druggists and the AFL-​CIO—​these groups were not a driving presence in the hearings or behind the scenes. It is worth noting that the American Farm Bureau Federation opposed some provisions of the legislation, notably on drug efficacy. There really were no small business competitors to speak of. The pharmaceutical industry was by that point so concentrated that small firms were confined to the cut-​throat 10 percent rump of the market that dealt in generic drugs—​a consequence of the massive barriers to entry posed by capital-​ intensive research and development, and by the legal expenses pertaining to intellectual property. Large firms “just wouldn’t license a small manufacturer like ourselves,” stated Dr. Philip Berke of Formet Laboratories.64 The arms race over advertising and marketing only made things even more hopeless for small operators. “Right now,” Seymour Blackman of Premo Pharmaceutical Laboratories observed, “the advertising costs have become so disproportionately expensive, small companies cannot afford to make their way in the marketplace.”65 The dangers posed by market power couldn’t have been clearer, with the FDA enfeebled by limited appropriations, the AMA and the Pharmaceutical Manufacturers Association practicing little to none of the self-​regulation that critics of state capture claimed made strong government intervention unnecessary, and no competitive pressures able to break through the interlocking edifices of patents and licensing. Kefauver saw them clearly. But political leverage obtained mainly for matters of consumer interest, while the harms of concentrated market power that Kefauver unearthed in antitrust hearings fell by the wayside. And while the consumer welfare measures that resulted

From Market Power to State Capture  341 from his campaign were formidable, they ultimately proved unequal to the juggernaut that would become “Big Pharma” in a few decades’ time. *** By the time of his early death in 1963, Kefauver had earned accolades for his work advancing drug regulation. Antimonopoly politics remained robust, if conceptually defanged. As one review concluded, by the start of the 1960s “antimerger litigation” had “become a paramount concern” of both the FTC and the Antitrust Division, with cases evenly split between the two agencies, and the great preponderance of them (86%) initiated during the Eisenhower administration—​facts that suggested considerable bipartisan acceptance.66 The distinctiveness and force of antitrust policy was also readily apparent to interested observers overseas, who were struck by the American approach to competition—​particularly as it was imposed on them by way of US policies for aid, trade, and increasingly internationalized antitrust enforcement. “Antitrust thrives,” wrote the British observer A. D. Neale four years before Hofstadter’s pessimistic essay, “and the Attorney General’s National Committee . . . can unanimously declare that the Sherman Act stands well above partisan controversy.”67 Neale thought the robustness of the policy could be attributed to the abiding “American distrust of all sources of unchecked power,” which explained “the breadth and persistence of the public favor enjoyed by antitrust” and its accommodation by big business and other organized interests whose foreign colleagues watched on in bemusement. It was crucial, he thought, that antitrust relied on a juridical framework dedicated to ensuring that the rules of economic competition were openly applied to all entrants, regardless of size. Had support for antitrust been mere lip service, “this service would not long be paid” if it “were a system of administrative regulation carried on by politicians and economic experts.” And far from being grounded in anti-​capitalist sentiment or Brandeisian suspicion of bigness, support for antitrust was instead “very much the same thing” as support for market society, and contained within it acceptance of the efficiencies of large-​ scale enterprise along with unrelenting suspicion of the same.68 Yet there were unanticipated consequences to the vigorous antitrust enforcement that flowed from Celler-​Kefauver. With more than a decade of lively application of the Anti-​Merger law, firms consistently avoided mergers among closely related businesses, instead opting for conglomerate opportunities that did not run afoul of the legislation. According to one

342  Antimonopoly and American Democracy economist writing two decades later, the “extremely strict antitrust enforcement of the ’60s made most related acquisitions infeasible, or at least costly, and so forced firms to diversify.”69 The result was a wave of conglomerate mergers that took off in the second half of the 1960s, reaching 2,442 mergers in 1968, a 150 percent increase over the previous year and a 300 percent increase above 1960 levels. These were driven by the largest firms at the very top of the economy. From 1966 to 1968 alone, the number of acquired firms with assets exceeding $10 million nearly doubled, from 101 to 192.70 Between the passage of the Celler-​Kefauver Act in 1950 and the peak of conglomerate activity twenty years later, the value of horizontal and vertical mergers dropped from 62.6 percent to 11.4 percent of the assets of all mergers, while conglomerates swamped them by absorbing 88.5 percent of merged assets in 1968 (up from less than half that in 1948–​1951).71 Celler continued to pursue this burst of conglomerate mania undaunted by the loss of his comrade in arms Kefauver, holding intensive investigations that extended into the early 1970s. His investigations tracked a secular rise in antitrust activity more generally, which only increased through the end of the decade and well into the 1970s, as private litigation augmented suits by the federal government. This second wave of cases crested in the late 1960s and early 1970s, as Nixon’s Antitrust Division followed through on suits begun during the late Johnson administration, while the FTC also increased its caseload.72 According to Robert Pitofsky, “the United States had by far the most stringent antimerger policy in the world in the 1960s.” The Supreme Court affirmed the government’s aggressive enforcement, “embark[ing] upon a relentless condemnation of mergers,” in the words of Philip Areeda.73 By the late 1960s there were eight ongoing investigations of mergers, including inquiries by the FTC, the House Antitrust Subcommittee, and the Antitrust and Monopoly Subcommittee in the Senate. More unsettling than the quantitative explosion of mergers was their qualitative effects on American society, which cut at the very fabric of democratic life. “What happens in these mergers?” Celler asked while testifying before Miles Kirkpatrick for the American Bar Association’s Antitrust Section in 1969: Frequently corporate headquarters are moved from a small or medium sized city to a metropolis. Local management is removed or subordinated to outside interests. Civic leaders familiar with community needs may be

From Market Power to State Capture  343 replaced with professional managers whose concern is with the problems of a profit and loss statement, and who have little time or interest for the problems of local school boards, municipal and county government, community charity, local real estate taxes, adequate policing of crime, and to solutions to other civic disruptions manifest throughout the land.74

Rejecting the defense of conglomerates as more efficient than smaller concerns, Senator William Proxmire of Wisconsin reported to Celler that the viability of free enterprise was threatened by “industrial giants with their immense political clout.” Such a grave threat to the market, and to democracy itself, required a comprehensive overhaul of government power to regulate large firms.75 Celler recommended repealing all existing antitrust laws and replacing the century-​old, fragmented antitrust machinery with a unified Office of Industrial Organization in the Executive Office of the President with the power to authorize or reject all corporate mergers or acquisitions. Emanuel Celler did not have time to pursue the ambitious plans he outlined in 1971 for a unified Office of Industrial Organization. He lost his seat to a young lawyer named Elizabeth Holtzman by a razor-​thin margin in 1972—​the first in a wave of senior Democrats washed out by the reformers flooding into Congress in a burst of energy unleashed by liberal outrage over Vietnam and Watergate. The most senior member of Congress had lost his seat of half a century, and his chairmanship of the Judiciary Committee.76 Celler’s demise was partly due to his vote against the Equal Rights Amendment, a stance that drove a wedge between him and the rising generation of Democrats who challenged corporate power to attack sources of inequality that extended well beyond the confines of market power. His defeat also heralded the mounting success of congressional reformers who would unseat several older Democratic chairs, institute reforms to the seniority-​ based committee system, and make party leadership more accountable to rising constituencies. While these reforms were aimed at conservatives who had long thwarted civil rights legislation and expansive welfare programs, they also took down Cold War liberals like Celler who had advanced more progressive agendas.77 A rising generation of “Watergate Babies” completed the task, supplanting antimonopoly firebrands in Congress like Wright Patman by 1974.78 ***

344  Antimonopoly and American Democracy Beyond the paneled rooms in which congressional hearings and antitrust enforcement played out, social movements made the 1960s and 1970s a veritable trial by fire for big business. Activists coalescing around civil rights, consumer safety, and environmental protection directed a surge of anger against corporate power as a major obstacle to equal citizenship . Some of the most intense criticism of concentrated corporate power emerged from the antiwar movement, which served as a cultural and organizational transmission belt for the proliferating social movements of the period. Widespread protests against defense contractors crested throughout the Vietnam War. During the Free Speech Movement at Berkeley in the early 1960s, protesters chanted “do not fold, spindle, or mutilate” to simultaneously critique IBM, the prominent defense contractor that processed their enrollment data, and to bemoan their reduction to the status of alienated punch cards in the technocratic machine that was Chancellor Clark Kerr’s “multiversity.” At Berkeley and on other campuses of the Cal system, students put flame to punch cards and draft cards alike to communicate their rejection of the multiversity’s complicity in the war effort.79 Campus criticism of universities’ entanglement with defense contracting sometimes turned violent, most memorably in the Dow Chemical riot on the campus of the University of Wisconsin–​Madison in 1967.80 At that point Dow, the maker of Napalm, was drawing passionate protest across the many campuses where it sponsored research, including Berkeley and Wayne State. The machine that Berkeley activist Mario Savio urged his fellow protesters to stop by placing their “bodies upon the gears and upon the wheels” was the cartel-​like complex in which research universities, defense-​related agencies, and government contractors had combined. Yet this seemingly impregnable “Establishment” was too all-​encompassing, its sins too varied, to provide the kind of coherent legal target that antimonopoly constituencies had attacked since Celler-​Kefauver. Antiwar furies ran too hot, were too global, in their campaign against a system of endless war and informal empire, patriarchal violence, and neocolonial domination to content themselves with focused assaults on corporate concentration and market power. The will to counteract militarism overflowed policy domains in a surfeit of participatory democracy that repudiated even the more progressive strand of Cold War liberalism that Celler and Kefauver had learned to practice. It also drew on profoundly anti-​statist sensibilities that ultimately undermined faith in any systematic use of government power—​whether to assault market power or geopolitical enemies.

From Market Power to State Capture  345 Civil rights provided another salient along which the burgeoning social movements of the 1960s and 1970s could mobilize great political energy against corporate power. Following the passage of the Civil Rights Act and the creation of the Office of Economic Opportunity in 1964, African Americans sought to realize concrete gains from the campaign against segregation and discrimination. Title VII prohibited employment discrimination, exposing employers to unprecedented scrutiny of their personnel practices. Large firms soon discovered that their national scope, symbolic importance, and deep pockets made them targets of scrutiny. A flood of complaints overwhelmed the EEOC in the first decade of its existence, increasing its caseload by nearly an order of magnitude, from 9,000 to 77,000 per year.81 Black workers were the pioneers, building on the Northern Civil Rights Movement’s long-​term emphasis on social and economic rights as foundational to full citizenship. Through boycotts, union pressure, demonstrations, and formal complaints, black workers seized upon the opening provided by the equal opportunity law. Other groups suffering from workplace discrimination followed suit: women, Jewish and Mexican Americans, later Asian Americans and the disabled.82 As the decade wore on, black professionals and entrepreneurs pressed for greater access to corporate decision-​making as an index of black empowerment. One such pioneer, Leon Sullivan of General Motors, succeeded in establishing a code of conduct for corporate involvement with firms and agencies in South Africa, leveraging social movement pressure into a visible form of “social responsibility.”83 Affirmative action, as initiated in the Johnson administration and cemented under Nixon’s Philadelphia Plan, placed further pressure on corporate boardrooms by setting expectations for federal contractors.84 The EEOC and affirmative action did not eliminate occupational inequality. But fair employment rights did rock assumptions of corporate sovereignty through a rising tide of litigation beginning in the 1960s. After the brief window offered by the Great Society had passed, Congress increasingly relied on private enforcement rather than expert-​led agency authority to implement national policy. A generation of fresh-​faced lawyers answered the call, making litigation an increasingly prominent way to realize employment rights, and effectively expand the state .85 Women’s employment rights benefited dramatically from the litigious turn, as women’s right organizations took aim at the workplace. Opportunities opened after Congress made the EEOC responsible for enforcing the 1963 Equal Pay Act, the Age Discrimination and Employment Act of 1967, and

346  Antimonopoly and American Democracy fair employment practices within the federal government. In the first half of the 1970s, NOW and a local coalition of feminist organizations undertook a massive campaign against the retail giant Sears to counteract its pattern of relegating women to the least remunerative and lowest-​status jobs, helping to launch a lawsuit that exerted a minatory influence for years, despite its ultimately disappointing outcome in EEOC v Sears (1986).86 The big successes didn’t come until the 1980s. From his position in AFSCME, the pioneering lawyer Winn Newman urged women to “step up the pace of filing discrimination charges and litigating these cases.” By 1979, AFSCME had founded the NCPE as a clearinghouse to foster efforts to establish pay equity for women. NCPE soon attracted over 100 members and formed a litigation task force. By the 1980s, AFSCME led the charge, taking on comparable worth cases and winning.87 If litigation over employment discrimination was a force to be reckoned with by corporate legal and personnel departments, it nonetheless did not challenge market concentration. Arguably, it posed a challenge that the largest firms with the greatest resources were best positioned to meet. Furthermore, by privatizing enforcement of public policy, it obscured the public goods framework within which antimonopoly measures were most effective. Finally, employment rights—​whether secured through public measures like affirmative action or private remedies including litigation—​served to reinforce their beneficiaries’ place within an existing corporate structure, rather than fundamentally reorganizing it to decentralize market power. Civil rights were not the only quarter from which corporate interests faced profound political challenges. Consumer and environmental activism expanded dramatically in the political space directly adjacent to antimonopoly. From the dawn of the Kennedy administration to the close of the Carter administration, consumer advocates enjoyed considerable success prompting Congress to pass over thirty new laws protecting consumer welfare and safety in a range of areas ranging from cigarette labeling and flammable fabrics to toxic substances and fair lending practices. They prompted established government agencies like the FDA and the FCC to adopt a more proactive stance, and fostered a wave of class action lawsuits and related litigation (particularly around product liability) that placed the onus on corporations for establishing limits to their liability. With the sensational publication of Unsafe at Any Speed in 1965, Ralph Nader became a standard-​bearer of this resurgent consumer movement, directing trained legal inquiry and broad popular concern at corporate abuse of power in a wide range of industries.

From Market Power to State Capture  347 Within a few years he commanded a small army of young litigators recruited from the top ranks of elite law schools.88 Rachel Carson’s Silent Spring, published in 1962, exerted a similarly catalyzing influence on organized groups that after World War II had shifted political concern from a more nationalist understanding of conservation to understandings of environmental protection that often prioritized concerns about quality of life and standard of living. With the creation of the Environmental Protection Agency in 1970 and the enactment of laws protecting air (1962, 1970) and water quality (1965, 1970), a wide array of groups exerted enormous pressure on large corporations—​ from traditional conservation, fish, game, wildlife, and recreation organizations, to more aggressive new entrants such as the Environmental Defense Fund, Environmental Action, and Greenpeace. Thanks to the conglomerate merger movement, offending companies were increasingly likely to affect sister enterprises that would have had nothing to do with each other before they were acquired by a common corporate parent. Like antitrust, consumer and environmental regulatory measures were designed to prevent the abuse of concentrated corporate power. But they did not strike at the root causes of concentration—​namely, mergers—​and they tended to have a fracturing effect on the myriad interest groups that formed around particular consumer items and public welfare concerns. Indeed, they accentuated individual consumer benefit in ways that would feed directly into the Bork-​led assault on more comprehensive understandings of market power. Furthermore, environmental organizations were heavily localized and specialized, with particular communities (e.g., Love Canal) and regions (e.g., the Pacific Northwest) cultivating strong but particularistic loyalties.89 Concentrating public attention intensely on a particular dam, power station, chemical, endangered creature, or nature preserve, these movements succeeded in circumscribing corporations’ power to operate as they saw fit, and brought substantial regulation of entire industries. But regulations are not incompatible with the concentration of corporate power. And after decades of well-​funded pushback denouncing it as market-​killing bureaucracy or even socialism, environmental protection fell prey to the ambient anti-​statism that had animated the New Right from its inception. *** If postwar antimonopoly politics were robust, they also contained critical vulnerabilities that precipitated their subsequent decline. In keeping with

348  Antimonopoly and American Democracy broader trends in postwar politics and political economy, the interests of the consumer increasingly came to dominate center-​left politics.90 Indeed, they had inflected public support for antitrust since the earliest years of its golden age. A study of attitudes in 1949 revealed that most respondents approved of antitrust to the extent that it lowered prices—​but that same criterion produced an acceptance of bigness, a majority (60%) opposition to splitting up the retailer A&P or breaking up big companies in general, and an even split over whether mergers, acquisitions, interlocking directorates, or sheer size should be circumscribed by government action.91 This basic orientation among the voting public was in place and ready to be exploited decades before Bork made the consumer king of antitrust in 1978.92 It eclipsed an older producerist outlook once prevalent among farmers, workers, and small businesses, whose intense focus on market power and fair competition had provided a coherent and forceful basis for political action. Yet it was in these years that producerist politics really lost their bite, as labor devolved into a Cold War variant of bread-​and-​butter unionism, while agribusiness swelled on a tide of crop subsidies, food relief, and preferential trade conditions sustained by foreign aid, multilateral agreements, and international institutions.93 The coalition sustaining antimonopoly measures had shifted. The mixed economy of World War II and the Cold War changed the terms on which small producers might pursue their economic independence. Once labor relations stabilized around a corporatist model during and after World War II, and the challenge of exporting “free labor” to anti-​communist allies overshadowed shop-​floor challenges at home, unions lost much of their incentive to tilt forcefully against combinations in restraint of trade. Not only were formerly militant unions politically purged by anticommunists and placated by the private welfare state built into their contracts, they were excluded from rapidly industrializing states that instituted hostile “right to work” laws. Crop subsidies and food aid had a similar effect on small farmers (particularly from the South and West), who had provided much of the base of the movement against monopoly since the days of populist revolt. The rise of agribusiness made small and even medium-​sized farmers an endangered species. As farmers and workers made their separate peace with the postwar political economy, still supporting antimonopoly in a general way but no longer really fighting for it, small businesses and consumers rose to the fore. But consumers were largely unconcerned about firms’ market power if it served to keep prices low and products proliferating. And small businesses only resented larger firms’ market power when it thwarted them—​not when

From Market Power to State Capture  349 it generated preferential contracting agreements, or enabled a big buyout upon acquisition. Small businesses largely departed the folds of the center-​ left, alienated by the corporatism of the postwar labor-​management social contract and drawn to the center-​right by anti-​communist politics and mounting anti-​regulatory sensibilities. Only in the 1970s—​with the collapse of the Bretton Woods system, spiking inflation coupled with persistent unemployment, and the crusade for deregulation—​did the mixed economy finally become vulnerable to the critical onslaught waged by the Chicago School. That vulnerability resulted from diverging priorities within a liberal coalition whose political investments had come unyoked.94 With market power displaced by a more straitened understanding of the harms of monopoly, even a resurgence of antitrust prosecutions such as happened in the late 1960s and 1970s could not preserve the vitality of antimonopoly politics. Labor, farmers, and small business had long since gone their own ways. As they disengaged the coalition, they took with them their focus on market power as a direct threat to democratic market relationships. New constituencies, notably consumer rights and environmental organizations, offered conceptual and political resources for attacking corporate power but prioritized its harms to consumers’ pocketbooks and standard of living—​problems that might be resolved without democratizing market power. Unfortunately, their focus on consumers’ rights rather than market structure fed directly into the Chicago School’s decisive reduction of antitrust to price minimization. Other potential constituencies, such as the rising number of black businesses and professional women, understandably devoted their political energies to civil rights and feminism, neither of which prioritized monopoly per se as a central concern. With the arrival of “Watergate Babies” to reform the committee system and revolutionize generational dynamics in Congress, standard-​bearers like Emanuel Celler and Wright Patman left the national legislature without any seasoned leadership in antimonopoly. The robust cadres of professional antitrust officials in the FTC and the Department of Justice would continue to pursue ambitious cases against IBM and AT&T for another decade, but they did so while suspended above a political chasm that would swallow them when the Reagan administration adopted a radically new approach to antitrust. By the time Bork’s radically reduced vision of antitrust could shape policy in the 1980s conservatives were already pushing through an open door, unimpeded by any constituency capable of mobilizing against the dangers posed by market power.

350  Antimonopoly and American Democracy

Acknowledgments I owe special thanks to Cleo Nevakivi-​Callanan for her heroic feats of research assistance in the Celler and Kefauver papers, and her superior command of all manner of library research methods. I am also grateful to her, to Louis Galambos, and to Dan Crane, Bill Novak, Richard John, Laura Phillips-​Sawyer, and the rest of the Tobin working group on antitrust, for discerning readings of earlier drafts of this chapter.

Notes 1. Richard Hofstadter, “What Happened to the Antitrust Movement,” in The Paranoid Style in American Politics (New York: Knopf, 1965). See also Richard Polenberg, War and Society: The United States, 1941–​1945 (Philadelphia: J. B. Lippincott, 1972); John Morton Blum, V Was for Victory (New York: Harcourt, Brace, Jovanovich, 1976); and Alan Brinkley, The End of Reform: New Deal Liberalism in Recession and War (New York: Knopf, 1995), all of whom largely agree with Hofstadter’s central argument. 2. Neil Fligstein, The Transformation of Corporate Control (Cambridge, MA: Harvard University Press, 1990), 191–​225, 363–​70. 3. Daniel A. Crane, “Technocracy and Antitrust,” Texas Law Review 86, no. 6 (May 2008): 1160–​221; and Crane, The Institutional Structure of Antitrust Enforcement (New York: Oxford University Press, 2011), 69–​90, esp. 86–​90. 4. The primacy of consumer welfare as criterion of legitimate antitrust action was the central, crystallizing thesis of Robert Bork, The Antitrust Paradox: A Policy at War with Itself (New York: Basic Books, 1978). 5. Brinkley, The End of Reform; Brinkley, “The Antimonopoly Ideal and the Liberal State: The Case of Thurman Arnold,” Journal of American History 80, no. 2 (September 1993): 557–​79. 6. The summary of corporatism and economic concentration in World War II featured in these three paragraphs is drawn from Mark Wilson, Destructive Creation: American Business and the Winning of World War II (Philadelphia: University of Pennsylvania Press, 2016); Paul Koistinen, Arsenal of World War II: The Political Economy of American Warfare, 1940-​1945 (Lawrence: University Press of Kansas, 2004); Brinkley, End of Reform, 175–​201; and Blum, V Was for Victory, 105–​46. 7. Smaller War Plants Corporation, Economic Concentration and World War II: Report of the Smaller War Plants Corporation to the Special Committee to Study Problems of American Small Business, US Senate (Washington, DC: US Government Printing Office, 1946), 24–​25, 27–​29. 8. Nelson Lichtenstein, Labor’s War at Home: The CIO in World War II (New York: Cambridge University Press, 1982), 82–​109; Brinkley, The End of Reform, 190–​92;

From Market Power to State Capture  351 Mark Leff, “The Politics of Sacrifice on the American Home Front in World War II,” Journal of American History 77, no. 4 (March 1991): 1296–​318. 9. Alonzo Hamby, Man of the People: A Life of Harry S. Truman (New York: Oxford University Press, 1995), 248–​60. 10. Donald H. Riddle, The Truman Committee: A Study in Congressional Responsibility (New Brunswick, NJ: Rutgers University Press, 1964), 18–​21, 142. 11. Brinkley, End of Reform, 192–​34; Nancy Beck Young, Wright Patman: Populism, Liberalism, and the American Dream (Dallas: Southern Methodist University Press, 2000), 105–​33. 12. Wilson, Destructive Creation, 261–​63. 13. Bartholomew Sparrow, From the Outside In: World War II and the American State (Princeton, NJ: Princeton University Press, 1996), 240–​ 43; Wilson, Destructive Creation, ch. 4 (esp. tables on 182–​83, 186–​87). 14. Cf. Wilson, Destructive Creation, 167, 181, 183. 15. Curt Cardwell, NSC 68 and the Political Economy of the Early Cold War (New York: Cambridge University Press, 2011); Michael Hogan, A Cross of Iron: Harry S. Truman and the Origins of the National Security State, 1945–​54 (New York: Cambridge University Press, 1998). 16. FDR, “Message to Congress on Curbing Monopolies,” April 29, 1938, accessed February 27, 2022, from The American Presidency Project, UC Santa Barbara, https://​ www.pre​side​ncy.ucsb.edu/​docume​nts/​mess​age-​congr​ess-​curb​ing-​mon​opol​ies. 17. “Section 7 of the Clayton Act: A Legislative History,” Columbia Law Review 52, no. 6 (June 1952): 766–​81; Bill Luchansky and Jurg Gerber, “Constructing State Autonomy: The Federal Trade Commission and the Celler-​Kefauver Act,” Sociological Perspectives 36, no. 3 (Autumn 1993): 217–​40. 18. Cf. arguments advanced by Hofstadter and Brinkley, cited above. 19. Stoller, Goliath, 512n41; cf. Luchansky and Gerber, “Constructing State Autonomy,” 217–​ 40; Robert Branyan, “Antimonopoly Activities during the Truman Administration” (PhD diss., University of Oklahoma–​Norman, 1961). 20. Brinkley, End of Reform, 122. 21. Wyatt Wells, Antitrust and the Formation of the Postwar World (New York: Columbia University Press, 2002), chs. 3–​4, esp. 98–​105. 22. John Chadwell and Richard McLaren, “The Current State of the Antitrust Laws,” University of Illinois Law Review 4 (Winter 1950): 491n2. 23. George Stigler, Memoirs of an Unregulated Economist (New York: Basic Books, 1988), 99; as quoted in Johan van Overtfeldt, The Chicago School (Chicago: Agate, 2007), 73; see also Stigler, “The Case against Big Business,” Fortune, May 1952. 24. Crane, Institutional Structure of Antitrust Enforcement, Figure 4.2, 83. 25. Ibid., Figures 2.1, 31. 26. Ibid., Figure 4.3, 85. 27. House Committee on the Judiciary, Study of Monopoly Power (Washington, DC: US Government Printing Office, 1949–​1952). See also Emanuel Celler, You Never Leave Brooklyn (New York: J. Day, 1953).

352  Antimonopoly and American Democracy 28. Charles Fontenay, Estes Kefauver, A Biography (Knoxville: University of Tennessee Press, 1980); Harvey Swados, Standing Up for the People: The Life and Work of Estes Kefauver (New York: E. P. Dutton, 1972); Joseph Gorman, Kefauver: A Political Biography (New York: Oxford University Press, 1971); John Anderson, The Kefauver Story (New York: Dial Press, 1956). 29. As recorded in https://​www.govtr​ack.us/​congr​ess/​votes/​81-​1950/​s450. 30. See folder 4, “Monopoly Legislation,” box 221, Kefauver MSS, and esp. boxes 55–​59, Emanuel Celler Papers, MSS51755, Library of Congress (hereafter “Celler MSS”). 31. See materials on the Alcoa case, especially the correspondence in folder 1, box 55, Celler MSS. 32. See, e.g., NFIB to Celler, folder 4, box 52, Celler MSS, protesting the Paramount-​ABS merger allowed by the FCC in 1953. 33. On big business and the organized campaign to roll back the New Deal, see Howell John Harris, The Right to Manage: Industrial Relations Policies of American Business in the 1940s (Madison: University of Wisconsin Press, 1982); Elizabeth Fones-​Wolf, Selling Free Enterprise: The Business Assault on Labor and Liberalism, 1945–​60 (Urbana: University of Illinois Press, 1994); Kimberly Phillips-​ Fein, Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan (New York: W. W. Norton, 2009); and Wendy Wall, Inventing the “American Way”: The Politics of Consensus from the New Deal to the Civil Rights Movement (Oxford University Press, 2008). 34. Burger to Kefauver, January 12, 1949, folder 6 “Monopoly: Legislation (3 of 3)—​ 1948–​1949,” box 221, University of Tennessee Modern Political Archives MPA.144 (hereafter “Kefauver MSS”). 35. Cf. Luchansky and Gerber, “Constructing State Autonomy,” 217–​40. 36. See folder 2, box 53; folder 10, box 533; folder 8, box 536, Celler MSS. 37. Kefauver to Talley, December 12, 1949, folder 5, box 221, Kefauver MSS. 38. See, e.g., Scruggs Electric Company (Tennessee) to Kefauver, July 21, 1955, folder 3, box 209, Kefauver MSS. 39. See PPA newsletters in folder 3, box 204, Kefauver MSS; direct memos from the PPA and the National Rural Electric Association, folder 7, box 209. 40. See materials supporting the Celler-​Kefauver bills, e.g., letter dated November 30, 1950, cosigned by the National Federation of Independent Businesses, the National Association of Retail Druggists in folder 4, box 221, Celler MSS. 41. Wimmer to Kefauver, November 10, 1950, folder 4, box 221, Celler MSS. 42. Blair was an old antitrust hand and author of Seeds of Destruction: A Study in the Functional Weakness of Capitalism (New York: Civici, Friede, 1938). A thick file of material organized to track opposition to Blair can be found in folder 3, box 206, Kefauver MSS. 43. See letters responding to hostile Herald Tribune coverage in May 1957, in folder 3, box 206, Kefauver MSS. 44. George J. Burger, Burger Tire Consultant Service, summarizing testimony in “Confidential Bulletin,” March 21, 1947, folder 8, “Legislation, Clayton Act Amendment 1946–​1947 (Folder 2),” box 221, Kefauver MSS.

From Market Power to State Capture  353 45. Statement attached to letter from Kefauver to Victor Kramer, Assistant Chief, Small Business Section, Antitrust Division, Department of Justice, May 24, 1947, box 221, Kefauver MSS. 46. “National Union Accuses R.C.A. of Unfair Trade,” NY Herald Tribune, November 17, 1936, Folder 34 “Speech Material—​General, 1936,” box 22, O’Mahoney Papers. 47. On this theme, see Michael Czaplicki, “The Corruption of Hope: Political Scandal, Congressional Investigations, and New Deal Moral Authority, 1932–​1952” (PhD thesis, University of Chicago, 2010), ch. 5. 48. F. W. Danner, Danner Press Co., to Kefauver, March 4, 1949, in box 221, folder 6, “Monopoly: Legislation (3 of 3)—​1948–​1949,” Kefauver MSS. 49. Barton Bernstein, “The Truman Administration and the Politics of Inflation” (PhD diss., Harvard University, 1963). 50. NFSB Press Release, March 18, 1949, box 221, folder 6, “Monopoly Legislation (3 of 3)—​1948–​1949,” Kefauver MSS. 51. “Senator Murray Urges Inquiry into Monopoly: Sees Big Industry Gaining in Power, Threatening End to Small Business,” New York Herald Tribune, February 10, 1947, 26. 52. Kilgore to Kefauver, February 18, 1955, box 206, folder 8, Kefauver MSS. 53. David Ciepley, Liberalism in the Shadow of Totalitarianism: (Cambridge, Mass.: Harvard University Press, 2006); Richard Primus, “A Brooding Omnipresence: Totalitarianism in Postwar Constitutional Thought,” Yale Law Journal 106, no. 2 (1996): 423–​57. 54. “Celler Counters Charges Made by Mutual Life Insurance Policy,” statement by Congressman Emanuel Celler, June 24, 1949, 1–​3, in box 533, folder 2, “Press Releases 1949,” Celler MSS. 55. Press release for President Headquarters, Concord, NH, n.d. [early] 1952, box 854, folder 11 “Monopolies 1952,” Kefauver MSS. 56. See the chapter by Dan Crane in this volume; Franz Neumann, Behemoth: The Structure and Practice of National Socialism 1933-​1944 (New York: Oxford University Press, 1942, rev. ed. 1944); Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Times (New York: Farrar & Rinehart, 1944); Wendell Berge, Cartels: Challenge to a Free World (Washington, DC: Public Affairs Press, 1944) and Economic Freedom for the West (Lincoln, Neb.: University of Nebraska Press, 1946). 57. Friedrich Hayek, The Road to Serfdom (Chicago: University of Chicago Press, 1944). 58. Kimberly Philips-​Fein, Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan (New York: W. W. Norton, 2009); Wendy Wall, Inventing the “American Way”: The Politics of Consensus from the New Deal to the Civil Rights Movement (New York: Oxford University Press, 2008); Howell John Harris, The Right to Manage: Industrial Relations Policies of American Business in the 1940s (Madison: University of Wisconsin Press, 1982). 59. Landon Storrs, The Second Red Scare and the Unmaking of the New Deal Left (Princeton, NJ: Princeton University Press, 2013). 60. The story of FDA regulation of the drug industry since 1962 is far too involved to evaluate here. For a comprehensive account, see Daniel Carpenter, Reputation and

354  Antimonopoly and American Democracy Power: Organizational Image and Pharmaceutical Regulation at the FDA (Princeton, NJ: Princeton University Press, 2010), esp. chs. 2–​4. 61. Drug Industry Antitrust Act: Hearings before the Subcommittee on Antitrust and Monopoly of the Committee of the Judiciary, 87 Cong., 1st Sess. 62. A concise history of the pharmaceutical legislation can be found in Joseph Bruce Gorman, Kefauver: A Political Biography (New York: Oxford University Press, 1971), ch. xxi. 63. Hearings before the United States Senate Committee on the Judiciary, Subcommittee on Antitrust and Monopoly, 85 Cong., 1st Sess. to 88 Cong., 1st Sess., 8010. 64. Dr. Philip Berke, Vice President, Formet Laboratories, Roselle, NJ, testimony before Subcommittee on Antitrust and Monopoly, Committee on the Judiciary, U.S. Senate (1959–​1962), 8057 (hereafter cited as “Senate Pharmaceutical Hearings”). 65. Seymour N. Blackman, Executive Secretary of Premo Pharmaceutical Laboratories, Senate Pharmaceutical Hearings, 8210. 66. Milton Handler and Stanely Robinson, “A Decade of Administration of the Celler-​ Kefauver Antimerger Act,” Columbia Law Review 61, no. 4 (April 1961): 629. 67. A. D. Neale, The Antitrust Laws of the U.S.A.: A Study of Competition Enforced by Law (Cambridge: Cambridge University Press, 1960), 423. 68. Ibid., 421–​23. The preface written by Abe Fortas attests to Neale’s “highly perceptive evaluation” of American antitrust and attributes it to Neale’s ability to “trace the particulars of antitrust development to their abiding source: to America’s ‘distrust of all sources of unchecked power’ ” (v–​vi). 69. Fligstein, The Transformation of Corporate Control, 190–​225, 365–​70; Andrei Schleifer and Robert Vishny, “Takeovers in the ’60s and the ’80s: Evidence and Implications,” Strategic Management Journal 12 (1991): 51–​59, esp. 58. See also Frank J. Kottke, “Mergers of Large Manufacturing Companies, 1951 to 1959,” Review of Economics and Statistics 41, no. 4 (November 1959): 430–​33, for contemporary recognition that while mergers had “increased significantly” over the decade, resulting in great “disparities in size among the largest manufacturing companies,” they did not strike antitrust authorities as serving to “lessen competition substantially” in any particular market (433). 70. Emanuel Celler, “Conglomerate Merger Investigations,” Antitrust Law Journal 38, no. 2 (1969): 184. 71. Jerome B. Cohen, “The Economic Aspects of Conglomerates,” St. John’s Law Review 44, no. 5 (Spring 1970): 49. 72. Crane, The Institutional Structure of Antitrust Enforcement, 52, Fig. 3.1; William Kovacic, “The Modern Evolution of U.S. Competition Policy Enforcement Norms,” Antitrust Law Journal 71, no. 2 (2003): 377–​478; and Kovacic, “Failed Expectations: The Troubled Past and Uncertain Future of the Sherman Act as a Tool for Deconcentration,” Iowa Law Review 74 (1989): 1106–​8, 1125–​27. 73. Robert Pitofsky, “Proposals for Revised United States Merger Enforcement in a Global Economy,” Georgetown Law Journal 81, no. 2 (December 1992): 196; Phillip Areeda, “Monopolization, Mergers, and Markets: A Century Past and the Future,” California Law Review 75 (May 1987): 975n86, as cited in Kovacic, “The Modern

From Market Power to State Capture  355 Evolution,: 431n177 and 433n185. Crane, Institutional Structure, 83–​86, notes that when considered in the context aggregate levels of economic activity, the 1970s enforcement wave is less striking than that of the 1940s; yet the number of civil filings was at its highest in absolute numbers during the 1970s (Figure 4.2), and the Antitrust Division’s expenditures as a proportion of the GDP also peaked in that period (Figure 4.3). 74. Celler, “Conglomerate Merger Investigations,” 184–​85. 75. “Antitrust Drive Urged by Celler,” New York Times, September 7, 1971, 19; Celler, “Investigation of Conglomerate Corporations,” Hearings before the United States House Committee on the Judiciary, Subcommittee on Antitrust, 91 Cong., 1st sess. (June 4, 5, 1969 and March 4, 5, 1970) (Washington, USGPO, 1970); Celler, “Conglomerate Merger Investigations,” Antitrust Law Journal vol. 38, no. 2 (March 27-​28, 1969), 184-​191. 76. Grace Lichtenstein, “Holtzman-​Celler,” New York Times, June 21, 1972, 29. 77. Julian Zelizer, On Capitol Hill: The Struggle to Reform Congress and Its Consequences, 1948–​2000 (Cambridge: Cambridge University Press, 2007). 78. Matt Stoller, Goliath (New York: Simon & Schuster, 2019), esp. 332–​47. 79. Steven Lubar, “ ‘Do Not Fold, Spindle or Mutilate’: A Cultural History of the Punch Card,” Journal of American Culture 15, no. 4 (Winter 1992): 43–​55, card-​burning referenced at 48. 80. “76 Hurt in UW Rioting; Campus Strike Results,” Wisconsin State Journal, October 19, 1967, 1. 81. Nancy MacLean, Freedom Is Not Enough: The Opening of the American Workplace (New York: Russell Sage Foundation, 2006), 76. 82. MacLean, Freedom Is Not Enough, Prologue and chs. 1–​3. See also John Skrentny, The Minority Rights Revolution (Cambridge, MA: Harvard University Press, 2002)esp. chs. 4 and 9. 83. Jessica Levy, “Black Power in the Boardroom: Corporate America, the Sullivan Principles, and the Anti-​Apartheid Struggle,” Enterprise & Society 21, no. 1 (March 2020): 170–​209; Skrentny, Minority Rights Revolution, ch. 5. 84. Guian A. McKee, The Problem of Jobs: Liberalism, Race, and Deindustrialization in Philadelphia (Chicago: University of Chicago Press, 2008); Skrentny, The Ironies of Affirmative Action: Politics, Culture, and Justice in America (Chicago: University of Chicago Press, 1996). 85. Sarah Staszak, “Realizing the Rights Revolution: Litigation and the American State,” Law & Social Inquiry 38, no. 1 (Winter 2013): 222–​45; Charles Epp, Making Rights Real: Activists, Bureaucrats, and the Creation of the Legalistic State (Chicago: University of Chicago Press, 2009); Sean Farhang, The Litigation State: Public Regulation and Private Lawsuits in the United States (Princeton, NJ: Princeton University Press, 2010); Quinn Mulroy, “Public Regulation through Private Litigation: The Regulatory Power of Private Lawsuits and the American Bureaucracy” (PhD diss., Columbia University, 2012); Mulroy, “Approaches to Enforcing the Rights Revolution: Private Civil Rights Litigation and the American Bureaucracy,” in The Rights Revolution Revisited: Perspectives on the Role of Private Enforcement of Civil Rights in the U.S.,

356  Antimonopoly and American Democracy ed. Lynda Dodd (New York: Cambridge University Press, 2018). On the flood-​tide of private antitrust litigation, see Crane, Institutional Structure of Antitrust Enforcement, 49–​67, esp. 53–​56. 86. Katherine Turk, “Out of the Revolution, into the Mainstream: Employment Activism in the NOW Sears Campaign and the Growing Pains of Liberal Feminism,” Journal of American History 97, no. 2 (September 2010): 399–​423. 87. Turk, Equality on Trial: Gender and Rights in the Modern American Workplace (Philadelphia: University of Pennsylvania Press, 2016), 104–​18. 88. For the definitive overview of consumer activism in this period, see Lizabeth Cohen, A Consumer’s Republic: The Politics of Mass Consumption in Postwar America (New York: Knopf, 2003), 345–​87, esp. 357–​61 (see Table 7 on 360) and 384–​87. 89. Samuel P. Hays, Beauty, Health, and Permanence: Environmental Politics in the United States, 1955–​1985 (Cambridge: Cambridge University Press, 1987). 90. Cohen, A Consumer’s Republic; Meg Jacobs, Pocketbook Politics: Economic Citizenship in Twentieth-​Century America (Princeton, NJ: Princeton University Press, 2007). 91. ORC, October 1949. 92. Cf. Stoller, Goliath, e.g., 242–​50. 93. Nelson Lichtenstein, Labor’s War at Home; Lichtenstein, The Most Dangerous Man in Detroit: Walter Reuther and the Fate of American Labor (New York: Basic Books, 1995); Jennifer Klein, For All These Rights: Business, Labor and the Shaping of America’s Public-​Private Welfare State (Princeton, NJ: Princeton University Press, 2010). 94. See the “Janus-​faced” model of the state developed by Ira Katznelson, “Rewriting the Epic of America,” in Shaped by War and Trade: International Influences on American Political Development, ed. Ira Katznelson and Martin Shefter (Princeton, NJ: Princeton University Press, 2002), 3-​23.

PART IV

A N T IMONOPOLY A ND AME R IC A N DE MO CR ACY: SE L E C T C ASE ST U DI E S

10 Antitrust and the Corporate Tax, 1909–​1928 Reuven Avi-​Yonah

But besides making the Sherman Law certain, and providing legal machinery, we need administrative machinery. . . . We must know, and know contemporaneously, what business-​what big business-​is doing. When we know that through an authoritative source, we shall have gone very far toward the prevention of the evils which attend the conduct of business. —​Louis D. Brandeis, The Regulation of Competition Versus the Regulation of Monopoly (1912)

Introduction: Corporate Bigness and Democracy. Before the end of the Civil War, there were in the United States hundreds of thousands of small for-​profit corporations, incorporated under general incorporation laws with minimal interference by the state, and whose shareholders enjoyed limited liability. Those shareholders were relatively limited in number; few corporations before 1865 required massive amounts of capital, and most were small, closely held enterprises. This enabled the Civil War income tax on corporate income to be imposed directly on the shareholders of corporations.1 This state of affairs began to change with the advent of the railroads, followed by the steel and oil companies. With the rise of large corporate enterprises, massive amounts of capital were required, and between 1865 and the 1890s the widely held, publicly traded, non-​owner-​managed enterprises gradually became the norm for US business activities. This was followed, from 1895 to 1904, by a wave of consolidation that left several important business areas dominated by monopolies run by the “robber barons,” such as Reuven Avi-​Yonah, Antitrust and the Corporate Tax, 1909–​1928 In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0010

360  Antimonopoly and American Democracy J. P. Morgan’s U.S. Steel Corporation and John D. Rockefeller’s Standard Oil Corporation.2 Between the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914, the question of what to do about “trusts” dominated American political life. Before 1889, the dominant form of amalgamating competing businesses was the trust, because corporations could not hold shares in other corporations, and instead the shareholders would exchange their shares for trust certificates. But in 1889, New Jersey (the “traitor state,” according to muckraking journalist Lincoln Steffens) changed its corporate law to allow for holding company structures, setting off a great wave of amalgamations in areas like oil, tobacco, sugar, and steel.3 This chapter will focus on one attempt to address the “trust problem” by means other than the Sherman Act (which faced some resistance in the courts, as the government lost the E. C. Knight case in the Supreme Court in 1895 and barely won the Northern Securities case in 1905). This was the corporate tax act of 1909, which as will be seen below was primarily intended as an antitrust measure. However, after the enactment of the Clayton Act and the creation of the FTC in 1914, the corporate tax became less vital as an antitrust measure, and between 1919 and 1928 its antitrust features were largely eliminated. Before embarking on the history, a few words on the problem of corporate bigness and its relation to democracy are in order. Big Tech is a well-​studied example of how bigness in corporations can have ramifications beyond their respective industries. Aside from the intertwined nature of bigness and monopoly mentioned above, bigness itself can also create cross-​industry, political, and social impacts. Historically, industry monopolies and enormous trusts were the subjects of deep case law and vigorous public discussion.4 Modern concerns over Big Tech evoke historical comparisons of Standard Oil to an octopus, such as over the intensity of acquisitions and market entrenchment led by those companies.5 The well-​documented benefits of network effects and other characteristics of online platforms facilitate rapid growth, often too difficult to challenge by potential competitors.6 Other concerns relate to Big Tech’s ability to expand beyond their markets and leverage their resources into new, unexplored industries. While some have celebrated the rapid expansion of those industries to the rich investments by Big Tech, potential new start-​up companies are possibly

Antitrust and the Corporate Tax, 1909–1928  361 being discouraged from entering the market due to the overwhelming financial superiority of existing competitors.7 The political concern generated by the prominence of Big Tech has also generated much public attention. The widely publicized Facebook–​ Cambridge Analytica scandal in 2018 and issues of foreign meddling in American elections were centered on the members of Big Tech, particularly Facebook and Google. Commentators have also pointed out that sustained bigness in industries has historically encouraged the growth of extremist and illiberal, antidemocratic political movements.8 Lastly, the social concern generated by Big Tech has been their ability to shape the course of American economic development. Their hegemonic dominance over their respective industries has led some to question whether America’s “marketplace of ideas” is facing restrictions and a decline.9 In what follows, I will first lay out the history of the corporate tax of 1909 as an antimonopoly measure. I will then explain why the antimonopoly features of the corporate tax were eliminated in the decade following World War I. Finally, I will develop a proposal to revive the antimonopoly features of the corporate tax by adopting a progressive tax structure, followed by a concluding section.

Antitrust and the Corporate Tax of 1909 The current US corporate tax dates to 1909, two years before the Supreme Court decreed the breakup of the Standard Oil Company and the American Tobacco Company in the second case implementing the Sherman Act of 1890.10 An examination of the legislative history of the corporate tax shows that these two facts were related: the corporate tax was to a significant extent intended in 1909 as an antitrust device to limit the power of the monopolies in several ways. First, the original corporate tax provided for tax returns to be made public, giving the government as well as newspapers and voters information about which corporations were the most profitable and therefore the likeliest targets of antitrust enforcement. Second, the original corporate tax provided that corporate mergers would be taxable and that the profits of one corporation could not be offset by the losses of another. Third, while the original corporate tax rate was only 1 percent, both proponents and opponents of the tax understood that once such a tax was in place, the rate could be raised

362  Antimonopoly and American Democracy to levels that would fulfill Chief Justice Marshall’s dictum that “the power to tax is the power to destroy.”11 The corporate tax of 1909 was the third US federal income tax. The first one was enacted during the Civil War and was allowed to expire in 1872. It did not tax corporations, although it applied a withholding tax on dividends and interest paid by railroads and banks.12 Instead, the 1864 version of the tax stated that “the gains and profits of all companies, whether incorporated or partnership, other than the companies specified in this section, shall be included in estimating the annual gains, profits, or income of any person entitled to the same, whether divided or otherwise.”13 This form of pass-​ through taxation was possible because in the 1860s most US corporations were small and distributed most of their earnings to the shareholders. The imposition of the tax on amounts that were not distributed to shareholders was upheld as constitutional by the Supreme Court in 1870.14 As a practical matter, most of the tax was collected by withholding on the dividends distributed by railroads and banks, which were the only large corporations.15 The second US federal income tax was enacted after the financial panic of 1893 and the resulting recession. At the time, the main source of revenue for the federal government was tariffs imposed on imported goods, which were a highly regressive form of taxation since the poor consumed more of their income in purchasing such goods than the rich. The tariff benefited the manufacturing centers of the Northeast and burdened the agricultural South and West. In addition, as the passage of the Sherman Act in 1890 indicates, there was growing concern in Congress about the growing wealth and power of railroad, sugar, and steel magnates, whose wealth was not reached by the state personal property tax because it was in intangible form such as stocks, bonds, and trust certificates. In 1894, the Democrats representing the South and West gained a majority in Congress and enacted an income tax. The 1894 version of the income tax imposed a tax of 2 percent on the net income of “corporations, companies, or associations doing business for profit in the United States, no matter how created or organized, but not including partnerships.”16 However, Steven Bank has shown that despite this broad language, the intent of the 1894 income tax was not to tax corporations but rather their shareholders.17 Bank points out that dividends from corporations were excluded from the income of shareholders, and that the individual tax rate was also 2 percent, so that the corporate tax should be viewed as a withholding device to enforce the individual tax.18 Moreover, Bank shows that the version of the 1894 income tax passed by the House of

Antitrust and the Corporate Tax, 1909–1928  363 Representatives did not tax corporations but only imposed a withholding tax on dividends and interest and on amounts added to surplus, and that this provision was broadened in the Senate to apply to the undistributed income of all corporations.19 Thus, the 1894 tax should be seen as a natural extension of the Civil War version of the tax, which was aimed at taxing shareholders. Bank further shows that the legislative history of the 1894 act indicates that its intent was to tax the rich shareholders, and not the corporations.20 Finally, Bank argues that since in 1894 most corporate profits were still being distributed as dividends, a corporate tax was only imposed as a collection device on the shareholders of widely held enterprises and as an anti-​avoidance measure on amounts added to corporate surplus.21 The 1894 income tax was short-​lived because the Supreme Court struck it down in 1895 as a “direct” tax that could not under the Constitution be imposed without apportionment by number of residents of each state.22 The result was that until the adoption of the Sixteenth Amendment in 1913, Congress was barred from imposing an income tax on individuals. This victory of Republican income tax opponents was sealed by the defeat of the Democrats in the 1896 and 1900 elections, which elected to the presidency William McKinley, who as chair of the House Ways and Means Committee was a major advocate for tariffs.23 However, the political situation was changed by the rise of the progressive faction within the Republican party and the ascension of Theodore Roosevelt to the presidency in 1901 following McKinley’s assassination by an anarchist. Before Roosevelt, the Sherman Act had become a dead letter, because the federal government refused to enforce it despite the rapid growth of the trusts, after having lost the E. C. Knight case in 1895.24 Roosevelt was determined to use the power of the federal government against the trusts, winning the Northern Securities case and initiating the litigation that ultimately led to the Standard Oil case in the Supreme Court.25 In addition, Roosevelt established the federal Bureau of Corporations to collect information on corporate activity, which ultimately led to the establishment of the Federal Trade Commission.26 Roosevelt also proposed unsuccessfully that all corporations should be incorporated under federal rather than state law. This background explains the enactment of the corporate tax of 1909 as an antitrust device, modeled after an excise tax imposed by Congress in 1898 on the gross income of oil and sugar companies, which was upheld by the Supreme Court in 1899.27 In 1907 there was another financial panic, during which the federal government was saved from default by the intervention

364  Antimonopoly and American Democracy of J. P. Morgan. In response, Roosevelt proposed to reintroduce an income tax, but opponents of the tax were able to postpone its consideration until after the 1908 election. President Taft was not a proponent of the income tax, which he viewed as unconstitutional, but was faced with pressure in Congress from both the Democrats and the progressive wing of his own party, who together outnumbered the conservative Northeastern Republicans.28 The debate in 1909 centered on the Payne-​Aldrich tariff bill, supported by President Taft and the Northeastern Republicans but opposed by both Democrats and progressive Republicans. The tariff bill was passed in the House by the Republican majority, but in the Senate it faced difficulties because nineteen progressive Republicans threatened to join the Democrats and vote it down. The leaders of the opposition, Senators Robert La Follette (R-​WI) and Joseph Bailey (D-​TX) argued that an income tax was required to counter the “envious voice of anarchy” (socialism). Ultimately, the main Republican opponent of the income tax, Senator Nelson Aldrich (R-​RI), met with President Taft in the White House and agreed on a compromise: there would be a corporate excise tax, regarded by both men as constitutional, and a constitutional amendment permitting a federal income tax, which neither Aldrich nor Taft expected to pass.29 At the same time, the high tariffs would be maintained as the main source of revenue for the federal government. Aldrich explicitly stated in Congress that “I shall vote for a corporation tax as a means to defeat the income tax.”30 This compromise, which included the original corporate tax, passed the Senate 45–​34 and the House 195–​183 and was signed into law by the president on August 5, 1909. The 1909 Corporate Tax Act imposed “a special excise tax with respect to the carrying on or doing business” of 1 percent of net income over $5,000 of “every corporation, joint stock company or association organized for profit” under US law, and every foreign corporation engaged in business in the United States. Dividends from taxable corporations were excluded from taxable income, a provision that will be discussed below.31 As Marjorie Kornhauser has shown, the legislative history of the corporate tax of 1909 proves that it was enacted largely as an antitrust device to regulate and limit the power of large corporations.32 This can already be seen in President Taft’s message to Congress of June 16, 1909. The president’s message gave three reasons for enacting a corporate tax, rather than an income tax. First, Taft stated that “[t]‌his is an excise tax upon the privilege of doing business as an artificial entity and of freedom from a general partnership liability enjoyed by those who own the stock.”33 This characterization

Antitrust and the Corporate Tax, 1909–1928  365 was needed to preserve the constitutionality of the tax because the Supreme Court had upheld a similar excise tax on sugar and oil companies in 1898, but Taft did not emphasize it because he was well aware that both the privilege of doing business and limited liability stemmed from state law and therefore could not justify a federal tax.34 Second, Taft explained that a corporate tax “imposes a burden at the source of the income at a time when the corporation is well able to pay and when collection is easy.”35 While the reference to collection “at the source” suggests that the tax was a withholding tax on the shareholders (referred to as “stoppage at source”), the emphasis is on the corporation’s own ability to pay, since a tax on the shareholders was unconstitutional. Finally, the main reason Taft gives for enacting the corporate tax was the power that such a tax gives the federal government to regulate the trusts. This argument is emphasized much more than the previous ones, since Taft devotes a whole paragraph to it: Another merit of this tax is the federal supervision which must be exercised in order to make the law effective over the annual accounts and business transactions of all corporations. While the faculty of assuming a corporate form has been of the utmost utility in the business world, it is also true that substantially all of the abuses and all of the evils which have aroused the public to the necessity of reform were made possible by the use of this very faculty. If now, by a perfectly legitimate and effective system of taxation, we are incidentally able to possess the Government and the stockholders and the public of the knowledge of the real business transactions and the gains and profits of every corporation in the country, we have made a long step toward that supervisory control of corporations which may prevent a further abuse of power.36

Since this paragraph was written at the same time that Taft’s Department of Justice was litigating against Standard Oil all the way to the Supreme Court, it is clear that the “abuses” Taft is referring to were violations of the Sherman Act. The same arguments were repeated in the congressional debate. While some senators mentioned the fact that the tax was an excise tax on corporations, and others raised the possibility that the tax could function as a withholding device, most of the discussion revolved around the antitrust features of the tax. In particular, opponents objected to the fact that the tax

366  Antimonopoly and American Democracy applied to all corporations, rather than just to the trusts, and also to the exclusion of intercorporate dividends, since holding company structures were the essential feature of the trusts. Proponents replied that it was necessary to impose the tax on all corporations to obtain the necessary information to discover which ones were abusive, and that it would be unfair and unnecessary to the antitrust purpose to tax corporate income twice by not excluding intercorporate dividends. The excise tax argument was made primarily by proponents who were concerned about the constitutionality of the tax. For example, Senator Elihu Root (R-​NY), who was one of the main drafters of the bill and a personal friend of the president, defended the tax in part as based on the privilege of limited liability.37 The opponents of the tax replied that this was not a valid basis for taxing corporations, since limited liability derived from state and not federal law.38 Opponents of the tax complained that if it were seen as a device for taxing the shareholders, it did not discriminate between wealthy and less wealthy ones. Proponents replied that this was not the purpose of the tax, since a tax on shareholders would be unconstitutional.39 Most of the congressional debate focused on the regulatory, antitrust element of the tax, including both the publicity feature and the direct potential of the tax to limit corporate power. On publicity, Senator Flint (R-​CA), a supporter of the tax, stated that “it would give a certain amount of control of corporations by the national government, publicity as to the conditions and affairs of corporations, and supervision to a certain extent over those corporations.”40 Senator Dixon (R-​MT) stated that he favored the tax primarily because of the publicity feature.41 Senator Newlands (D-​NV) likewise supported the tax as “securing, through publicity and otherwise, such supervisory control by the National Government as can be constitutionally exercised over corporations.”42 Even Senator Aldrich, the ultra-​conservative chair of the Finance Committee, supported the publicity feature.43 Senator Cummins (R-​IA), who opposed the tax, nevertheless supported the publicity feature because the “revolution in industry” resulting from the rise of large corporations “is simply a prelude to industrial commercial slavery unless the Government intervenes with its strong arm, and it cannot intervene unless it has the information necessary to enable it to act intelligently and wisely.”44 Other senators emphasized the direct regulatory potential of the tax, even without the publicity feature. For example, Senator Newlands stated

Antitrust and the Corporate Tax, 1909–1928  367 that “I favor also present legislative action imposing an excise tax in such form as to reach the great accumulated wealth of the country, or its earnings, engaged in corporate enterprise.”45 This was not a reference to taxing the shareholders, because he went on to state that “there was no reason why the great combinations monopolizing these industries [protected by the tariff] should not pay some part of national expenses as well as the masses of the people who use and consume [their products].”46 Newlands thus viewed the tax as falling especially on the monopolies. Senator Root likewise emphasized the potential of the tax to reach the accumulated wealth of the trusts: Mr. President, it has so happened that in the development of the business of the United States the natural laws of trade have been making the distinction [between earned and unearned income] for us, and they have put the greater part of the accumulated wealth of the country into the hands of corporations, so that when we tax them we are imposing the tax upon the accumulated income and relieving the earnings of the men who are gaining a subsistence for their old age and for their families after them.47

The same emphasis can be found in the words of opponents of the bill, who favored instead a tax that would be more focused on the trusts. Senator. Cummins, for example, was not opposed to any federal regulation through the corporate tax, just to a tax that indiscriminately applied to all corporations, big or small, as opposed to taxing the great trusts: If we can regulate our corporations simply through the medium of taxation, we can destroy every trust in a fortnight. It would be a great deal better for the Finance Committee to turn its attention to the imposition of such a tax upon corporations and the persons who actually need regulation, who are exercising powers that are injurious to the American people, destroying competition and invading our prosperity, than to attempt to levy a revenue tax upon all the little shareholders of all the little corporations throughout the length a breadth of the United States.48

Other opponents of the tax also supported the antitrust feature of the tax, comparing it to the excise tax imposed on the gross income of the sugar and oil trusts in 1898. However, they opposed the corporate tax bill because it excluded intercorporate dividends and therefore holding company

368  Antimonopoly and American Democracy structures, which ever since New Jersey permitted them became the defining element of monopolies, supplanting the original trusts. The legislative history thus shows that the original corporate tax of 1909 was primarily an antitrust device. From a modern perspective, it had several features that could be useful to regulate the trusts. The corporate tax of 1909 provided for corporate tax returns to be made public. It imposed tax on corporate mergers, and it did not include a provision for filing consolidated returns. In addition, once the Sixteenth Amendment was adopted in 1913, corporate movements from state to state became taxable to shareholders, which increased the potential of regulatory action by the states. However, as will be seen below, all of these antitrust features were eliminated by 1928, so that the tax lost its antitrust potential, and even the anti-​corporate FDR administration was unable to revive those features.

The Unraveling of the Corporate Tax as an Antitrust Measure, 1910–​1928 From an antitrust perspective, the 1909 corporate tax was flawed from its inception because of the exemption for intercorporate dividends. That provision, as opponents pointed out, encouraged the formation of holding company structures that were the legal basis for the trusts since New Jersey permitted them in 1889.49 Proponents replied that it was better to have a corporate tax with an exemption than to not tax the trusts at all.50 The 1909 corporate tax did have some promising regulatory features, from an antitrust perspective. The publicity of corporate tax returns ensured that the public and the press would be aware of which corporations were the most profitable and therefore the most likely to be targets for antitrust enforcement. There were no provisions for consolidation, so that the profits of one corporation could not be offset by the losses of another in a holding company structure. Movements of corporations from one state to another resulted in the imposition of tax on the shareholders once the income tax was enacted in 1913. And there were no provisions for tax-​free corporate mergers. All these potentially useful features were dismantled in the period from 1910 to 1928. The publicity feature was the first to go. It was already subject to criticism before enactment: The New York Times editorialized that it might lead to corporate bankruptcies because creditors would be made aware of the assets of the corporation and be induced to call in their debts.51 Small corporations

Antitrust and the Corporate Tax, 1909–1928  369 were concerned that larger competitors might use the information to harm them.52 Others objected to the publicity feature as an illegitimate use of the taxing power for purposes unrelated to raising revenue.53 After enactment, the publicity feature was the main focus of criticism of the tax.54 The first set of regulations issued by the Treasury acknowledged that there had been criticism but stated that the intent of Congress was clear and repeated the statutory language.55 But already in January 1910 the Treasury stated that returns would not be open to public inspection unless Congress appropriated money for that purpose. On February 17, 1910, the IRS issued a directive that contrary to Section 6 of the corporate tax act, corporate returns were not to be treated as public records. Congress promptly followed by sharply limiting, and eventually eliminating, the publicity feature.56 The next major change came in lifting the corporate tax on mergers and acquisitions, despite their monopolization potential. There had been significant uncertainty whether the individual income tax (as well as the corporate tax) applied to capital gains or rather followed the UK (which did not tax capital gains until 1965) in exempting them. The uncertainty was ultimately resolved by the Supreme Court when it held in four related cases that capital gains were taxable.57 At the same time, the IRS successfully imposed tax on the exchange of shares when DuPont and then General Motors reincorporated from New Jersey to Delaware.58 The result of these cases was that corporate mergers as well as migrations from state to state were taxable events, and that created significant potential for using the tax to regulate monopolies since it would tax anti-​competitive mergers and enable states to regulate corporations in the knowledge that they could not migrate. Congress responded to these cases by gradually creating and then expanding the concept of tax-​free reorganization. The Revenue Act of 1918 exempted from tax “reorganization, merger or consolidation,” to be defined by the Treasury. Regulation No. 45, promulgated pursuant to the 1918 Act, outlined the types of transactions that were eligible for this nonrecognition treatment, to include cases where corporations unite their properties by either (a) the dissolution of corporation B and the sale of its assets to corporation A, or (b) the sale of its property by B to A and the dissolution of B, or (c) the sale of the stock of B to A and the dissolution of B, or (d) the merger of B into A, or (e) the consolidation of the corporations.59

370  Antimonopoly and American Democracy In 1921, in response to the Supreme Court’s capital gains and realization cases and the DuPont Delaware transaction, Congress expanded this definition to include a merger or consolidation (including the acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation, or of substantially all the properties of another corporation), recapitalization, or mere change in identity, form, or place of organization of a corporation (however effected).60

This language was further expanded in 1924 to read: The term “reorganization” means (A) a merger or consolidation (including the acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation, or substantially all the properties of another corporation), or (B) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer or its stockholders, or both, are in control of the corporation to which the assets were transferred, or (C) a recapitalization, or (D) a mere change in identity, form or place of organization, however effected.61

Why did Congress enact these provisions? Steven Bank has argued that it was crafting a compromise between an accrual model of taxation (in which capital gains are taxed when they occur) and a consumption or cash flow model (in which capital gains are only taxed when they are consumed).62 But this is a very modern view of the debate and does not explain the departure from the regulatory goals of the 1909 act. In addition, the debate about realization that culminated in the Supreme Court’s Eisner v. Macomber decision (1920) and the capital gains cases (1921–​1925) both happened after the original enactment of the reorganization provision in 1919, and therefore were not relevant to it. Jerome Hellerstein was right in pointing out that there was nothing in the original corporate or individual income tax that required such generous treatment of mergers.63 In fact, the new provisions run directly counter to the spirit underlying the corporate tax of 1909, since they promote monopolization rather than restricting it. The provisions should be seen, as Hellerstein implied, as reflecting the

Antitrust and the Corporate Tax, 1909–1928  371 influence of lobbying by the corporations and their wealthy shareholders, especially since it was not limited to stock consideration. The same Revenue Act of 1918 that invented tax-​free reorganizations also invented the foreign tax credit, an unprecedentedly generous provision with no parallel in the world at the time, since it reduced US revenues dollar for dollar for foreign taxes (without even a limit to the US tax rate), and percentage depletion for oil and gas producers, another generous provision since it allows for depreciation without regard to basis. It also eliminated previous limits on the corporate interest deduction, the source of many later problems such as leveraged buyouts.64 The most plausible explanation for these provisions as well is corporate lobbying of Thomas Adams, the Treasury economist responsible for tax policy.65 Hellerstein explicitly linked the allowance for tax-​free mergers to antitrust, which was also a major concern in the 1950s (when he wrote the following, the Supreme Court had just blocked the merger of GM and Dupont under the Clayton Act): Moreover, in formulating reorganization tax policy, we must consider the impact of mergers on increased concentration of industry, the development of oligopoly in industry, and the elimination of small businesses basic to the health of our economy. The extent of oligopolistic tendencies and significant accentuation of economic power in our economy, and the impact of mergers on these developments are open to controversy. But we are here dealing with a provision of the tax law which extends an extraordinary tax advantage, not afforded to exchanges generally, to the type of transaction which is characteristic of mergers into larger companies. While we do not have the data from which to ascertain the importance of this tax advantage in encouraging mergers, there is enough over-​all evidence and there are a sufficient number of individual cases in which this tax factor has been disclosed to have been an element, although perhaps not a major factor, in the determination to merge. This would justify the conclusion that the reorganization provisions tend to encourage the merger movement. In view of the risks of oligopoly and increased concentration of business and the importance of preserving the separate existence of smaller businesses, it would appear to be sound governmental policy to eliminate this tax incentive to such mergers and to leave the tax law neutral in this area—​neutral in the sense that the usual tax results of sales and exchanges under the Code will attach to such mergers.66

372  Antimonopoly and American Democracy Finally, the last and most decisive move to eliminate any limits imposed by the corporate tax on monopolization came when Congress authorized the elective filing of consolidated returns. Ironically, consolidated returns were originally an anti-​taxpayer provision: they originated in Regulation 41, Articles 77 and 78, of the War Revenue Act of 1917, which gave the commissioner authority to require related corporations to file consolidated returns “whenever necessary to more equitably determine the invested capital or taxable income.”67 In 1921 the commissioner was authorized by statute to consolidate the accounts of affiliated corporations “for the purpose of making an accurate distribution or apportionment of gains, profits, income, deductions, or capital between or among such related trades or business.”68 However, in 1928 the consolidated return provision was made elective, so that taxpayers could choose to file a joint return of their profitable and loss-​making enterprises. Until 1969, there was not even a provision limiting the acquisition of target corporations for the purpose of using their losses. It is hard to imagine a tax provision more designed to undermine the antimonopolization role of the original corporate tax.

Can the Corporate Tax Limit Monopoly Power? The story told above ends on a pessimistic note: the antitrust features of the 1909 corporate tax were eliminated one by one, until by 1928 none was left. Moreover, the anti-​corporate FDR administration was unable to reinstate them, despite putting some limits on the dividends received deduction and on tax-​exempt reorganizations.69 And even if we could reverse these changes by, for example, eliminating the dividends received deduction, tax-​free mergers, and consolidated returns, this will not significantly change the business model of today’s monopolists (and would adversely affect non-​monopolists). However, I would like to suggest that tax law can in fact be useful in limiting monopoly power. Specifically, I would advocate for reinstating another FDR-​era reform, albeit in a modified way: a progressive corporate tax.70 The current corporate tax is flat: “The amount of the tax imposed by subsection (a) shall be 21 percent of taxable income.”71 Between 1936 and 2017, there was some progressivity in the corporate tax, but it applied only to small corporations, most of whom were not subject to it. A flat rate of 35 percent applied to taxable income of corporations over $10 million, and

Antitrust and the Corporate Tax, 1909–1928  373 a surtax eliminated the progressive rate structure for taxable income above $15 million.72 The rationale for the flat corporate tax was that corporations do not bear the burden of the tax, people do, so it was an inappropriate vehicle for redistribution because the incidence of the tax was not clear (it could fall on shareholders, on all capital providers, on employees, or on consumers, depending on the economic model used).73 But if the main reason to have a corporate tax is to tax rents and limit monopolies, then the tax should have a different rate structure than we have now. I would suggest that the effective tax rate on normal corporate profits should be zero. On super-​normal returns, since the main concern is monopolies and quasi-​monopolies, the tax should be progressive, with a very high tax rate (e.g., 80%) for profits above a very high threshold (e.g., $10 billion). In between, there should be a series of graduated tax rates, similar to the individual rate schedule before 1980.

Normal Returns There is no reason to tax corporations on normal returns. Normal returns are the risk-​free return from investing in, for example, US Treasuries. In recent years, these returns have been quite low, but they have historically been higher. However, from the point of view of only applying the corporate tax to rents, these returns should be exempt. In addition, there is uncertainty about the incidence, which suggests that a tax on normal returns is less likely to contribute to the progressivity of the system. Finally, the deadweight loss from the corporate tax arises from the tax on normal returns, since a tax on pure rents does not generate deadweight loss (i.e., it does not change taxpayer behavior, since taxpayers not subject to any competition would derive net profit from rents even if 99% of them were taxed away). Since from a political perspective a zero tax rate on normal returns is unlikely to pass, and since it is hard to determine what normal returns are, I would suggest that we keep the current flat rate of 21 percent on corporations (with no de minimis exception, since small corporations are likely to be pass-​ throughs), but allow for permanent expensing of capital expenditures. Under the Cary Brown theorem, such expensing is equivalent to an exemption for the normal return to capital.74 As explained below, however, we should

374  Antimonopoly and American Democracy not allow expensing for R&D, since that typically generates rents, nor a deduction for interest, since combining it with expensing generates negative tax rates.

Super-​normal Returns (Rents) Economists are unanimous in supporting a tax on rents since (a) it does not create deadweight loss and is therefore efficient, and (b) it falls on the above normal return to capital and is therefore progressive. Above the de facto exemption resulting from expensing, the corporate tax should be sharply progressive. In order not to create sudden jumps in the marginal tax rate, progressivity should be gradual, similarly to the way the individual tax was structured when it was more progressive (before 1980). The reason to have a progressive tax on rents is that in addition to targeting rents, we also want to discourage bigness, which is equivalent to monopoly or quasi-​monopoly status. The less competition a business firm faces, the more profitable it is likely to be, because competition generally drives down prices. That is why our most monopolistic firms are also the most profitable, and why they engage in behaviors like “killer acquisitions” designed to eliminate competition.75 At the top, the corporate tax rate should be 80 percent for income above $10 billion.76 In 2019, this rate would have applied to the Big Tech: Amazon ($10.1 billion), Apple ($59.5 billion), Facebook ($22.1 billion), Google ($30.7 billion), and Microsoft ($16.6 billion). Other corporations that had profits over $10 billion in 2019 include other major tech companies (Intel, Micron), Big Banks (Chase, Bank of America, Wells Fargo, Citi, Goldman Sachs, Visa), Big Pharma (Pfizer), Big Oil (Exxon, Chevron), Big Telecomm (AT&T, Verizon, Broadcom), United Health, Boeing, and some major consumer brands (Johnson & Johnson, Home Depot, Disney, Pepsi). All of those enjoy some degree of monopolistic or quasi-​monopolistic status.77 Such a high tax rate would make corporate regulation through the tax highly effective. It should enable Congress to grant deductions for activities it deems desirable, such as job creation during the current recession or in underdeveloped areas of the country, and impose high rates on activities it deems undesirable, such as invading consumer privacy.

Antitrust and the Corporate Tax, 1909–1928  375 In addition, the high rate may persuade the corporations subject to it to split up. Splitting up corporations to reduce their profits and therefore escape the 80 percent tax rate is actually a feature of the proposal and not a bug: as Lina Khan and others have proposed, we should ideally want to induce Big Tech to divest their anti-​competitive acquisitions (e.g., Facebook’s acquisitions of Instagram and WhatsApp). And if the tax structure also motivates an actual breakup of the core business (e.g., along geographic or business segment lines), any loss in efficiency would be more than compensated by the removal of the threats to democracy posed by Big Tech.78 Besides the rate structure, the new corporate tax should have several other features missing from the current corporate tax.

The Tax Base The problem with using current definitions of the corporate tax base is that it allows large corporations like Big Tech to pay low effective tax rates because of three factors: profit-​shifting to offshore jurisdictions with low tax rates, expensing research and development (R&D), and deducting stock option compensation. Profit-​ shifting can be dealt with relatively simply by mandating consolidated returns (at the 50 percent level by vote or value, to prevent tax-​ motivated deconsolidation without giving up control) and including foreign corporations in the consolidation. The standard objection that this will impede competitiveness does not apply since rents are not subject to competition by definition. R&D should not be expensed because unlike physical capital expenditures it does not just generate future profits but specifically future rents.79 Thus, it should be amortized over a fifteen-​year term like acquired intangibles. Unsuccessful R&D can be deducted when it becomes clear that it will not result in future profits. Stock options should be valued and deducted as wages when granted, as is done for book purposes. There is no reason to pretend that stock options have no value when granted. The same goes for restricted stock and other forms of stock-​based compensation. Interest should not be deductible because combining an interest deduction with expensing results in negative tax rates. In addition, under current

376  Antimonopoly and American Democracy conditions much interest is effectively guaranteed by the government so it should not receive a tax subsidy as well.

Anti-​Avoidance Provisions The most important anti-​ avoidance provision for public companies controlled by their founders is already in the Code: Section 877A prevents the controlling owners of Big Tech from expatriating and selling their shares with no tax. However, if the mark-​to-​market proposal raised above is adopted, this will be irrelevant if it is applied to the entire unrealized appreciation. If that move is not politically feasible, a high tax rate (discussed below) of 50 percent should be applied upon expatriation. In addition, inversion transactions can be prevented, as the Obama administration proposed, by (a) reducing the section 7874 threshold to 50 percent, and (b) redefining corporate residence as location of the headquarters.

Shareholder Taxation Ideally, shareholders in public corporations should be taxed on a mark-​to-​ market basis, including on past unrealized appreciation. In addition, accrual taxation should be applied to non-​publicly traded property as well by adding an interest charge when the property is sold and abolishing the Section 1014 step-​up. Those steps should enable the United States to adopt a significantly more progressive system of individual taxation, up to, say, 50 percent, for all income (including dividends).80 Capital gains would not be taxed to domestic US shareholders, but stock buybacks as well as dividends should be subject to withholding tax for foreign shareholders not subject to the mark to market regime. Taxing actual dividends in addition to mark-​to-​market may seem like double taxation, but in practice it is not because the market value of stock is not a good proxy for underlying corporate earnings, and the receipt of dividends increases ability to pay as much as capital gains (which will be taxable under either mark-​to-​market and/​or the higher tax rates). Dividends as well as interest should not be deductible.

Antitrust and the Corporate Tax, 1909–1928  377

Conclusion This chapter has sought to tell the story of the origins of the corporate tax as an antitrust device and to develop a proposal for a new corporate tax that could be appropriate for targeting rents earned by large, monopolistic or quasi-​monopolistic enterprises like the Big Tech. Its main recommendations are that normal corporate returns should be functionally exempt by allowing permanent expensing for capital expenditures, but that super-​ normal returns should be taxable on a progressive basis (up to 80% above $10 billion in profit) and on a broad base that (a) includes foreign subsidiaries; (b) disallows current R&D and interest deductions; and (c) limits deductions for stock-​based compensation to value on date of grant. In addition, I recommend a mark-​to-​market regime for shareholders as well as full taxation of dividends at a progressive rate of 50 percent, but would allow for tax-​free split-​ups. These steps should complement antitrust enforcement to bring our large monopolies down to a normal size, without creating deadweight loss.

Acknowledgments I would like to thank Kim Clausing, Dan Crane, Nir Fishbien, Ed Fox, David Miller, Bill Novak, Joel Samuels, Fadi Shaheen and the participants in the Tobin Project on antimonopoly and democracy for helpful comments, and Alex Mantilla for outstanding research assistance.

Notes 1. Act of July 1, 1862, ch. 119, sec. 81–​82, 12 Stat. 432, 473. 2. See generally Naomi R. Lamoreaux, The Great Merger Movement in American Business, 1895–​1904 (New York: Cambridge University Press, 1985). 3. Lincoln Steffens, The Struggle for Self-​Government (New York: McLure, Phillips & Co. 1906), 209; Edward Q. Keasbey, “New Jersey and the Great Corporations,” Harvard Law Review 13 (1899): 198, 209–​11. 4. Early American history is rich with public discussion of monopoly, and later trusts. See William L. Letwin, Congress and the Sherman Antitrust Law: 1887-​1890, University of Chicago Law Journal (1956): 226–​35; Barry C. Lynn, Cornered (Hoboken, NJ: Wiley, 2010), 98–​113.

378  Antimonopoly and American Democracy 5. See Axel Gautier and Joe Lamesch, “Mergers in the Digital Economy,” CESifo Working Paper No. 8056 (February 3, 2020); Colleen Cunningham, Florian Ederer, and Song Ma, “Killer Acquisitions,” Journal of Political Economy 129, no. 3 (2021): 649–​702; Marc Bourreau and Alexandre de Streel, “Big Tech Acquisitions,” Issue Paper: Center on Regulation in Europe (2020). 6. See Kenneth A. Bamberger and Orly Lobel, “Platform Market Power.” 7. For example, nearly 80 percent of the virtual reality (VR) device market in 2018 was composed of four multibillion-​dollar companies: Sony, Facebook, HTC, and Microsoft. See https://​www.stati​sta.com/​sta​tist​ics/​755​645/​glo​bal-​vr-​dev​ice-​mar​ ket-​share-​by-​ven​dor/​. 8. See Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age (New York: Columbia Global Reports, 2018), 78–​83. 9. See Lina M. Khan, “Amazon’s Antitrust Paradox,” Yale Law Journal 126 (2017): 767; Lynn, Cornered, ch. 6. 1 0. Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911). The first case was Northern Securities Co. v. United States, 193 U.S. 197 (1904), a 5–​4 decision, following the government’s defeat in United States v. E. C. Knight Co., 156 U.S. 1 (1895). 11. McCulloch v. Maryland, 17 US 316 (1819). 12. Act of July 1, 1862, ch. 119, sec. 81–​ 82, 12 Stat. 432, 473. Shareholders and bondholders were permitted to exclude dividends and interest subject to withholding from income. Id., sec. 91, 12 Stat. 473–​74. On the early history of the corporate tax in the United States see generally Steven A. Bank, “Entity Theory as Myth in the Origins of the Corporate Income Tax,” William & Mary Law Review 43 (2001): 447. 13. Act of June 30, 1864, sec. 117, 13 Stat. 282. Under this act a withholding tax was imposed on dividends and interest paid by certain types of corporations and those dividends and interest were excluded from income. Id., sec. 120–​22, 13 Stat. at 283–​85. 14. Collector v. Hubbard, 79 US (12 Wall) 1 (1870). 15. Bank, “Entity Theory as Myth.” 16. Tariff Act of 1894, ch. 349, sec. 32, 28 Stat. 509, 556. 17. Bank, “Entity Theory as Myth,” 459. 18. Tariff Act of 1894, ch. 349, sec. 28, 28 Stat. 509, 554; Bank, “Entity Theory as Myth,” 462. 19. 26 Cong. Rec. 6831 (1894). 20. Bank, “Entity Theory as Myth.” 21. Ibid., 530–​31. 22. Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429 (1895). 23. On the development of the income tax debate between 1894 and 1913 see generally Randolph E. Paul, Taxation in the United States (Boston: Little, Brown & Co., 1954); Marjorie E. Kornhauser, “Corporate Regulation and the Origins of the Corporate Income Tax,” Indiana Law Journal 66 (1990): 53; Steven R. Weisman, The Great Tax Wars: Lincoln to Wilson—​The Fierce Battles over Money and Power That Transformed the Nation (New York: Simon & Schuster, 2002); Reuven S. Avi-​Yonah, “Corporations,

Antitrust and the Corporate Tax, 1909–1928  379 Society and the State: A Defense of the Corporate Tax,” Virginia Law Review 90 (2004): 1193. 24. See, e.g., George Bittlingmayer, Antitrust and Business Activity: The First Quarter Century, Business History Review 70 (1996): 363; E. C. Knight, supra, note 11 (rejecting government attempt to break up sugar trust). 25. Northern Securities, supra, note 11 (5–​4 decision, upholding breaking up a trust for the Northwestern railroads); Standard Oil, supra, note 11 (8–​1 government victory). 26. Act of Feb. 14, 1903, ch. 552, sec. 6, 32 Stat. 825. See Marc Winerman, “The Origins of the FTC: Concentration, Cooperation, Control, and Competition,” Antitrust Law Journal 71 (2003): 1. 27. Spreckles Sugar Refining Co. v. McClain, 192 US 397 (1899). 28. Weisman, The Great Tax Wars. 29. Kornhauser, “Corporate Regulation and the Origins of the Corporate Income Tax.” 30. 44 Cong. Rec. 3929 (June 29, 1909). 31. Tariff Act of 1909, sec. 38, 36 Stat. 112. 32. Kornhauser, “Corporate Regulation and the Origins of the Corporate Income Tax,” 53. For the opposite view that the 1909 tax was also designed to tax shareholders see Steven A. Bank, “Entity Theory as Myth in the U.S. Corporate Excise Tax of 1909,” in Studies in the History of Tax Law, vol. II, ed. John Tiley (Portland, OR: Hart Publishing, 2006); UCLA School of Law, Law-​Econ Research Paper No. 06-​02, available at SSRN: https://​ssrn.com/​abstr​act=​880​100; Steven A. Bank, “The Shareholder-​ Based Origins of the Corporate Income Tax,” Stanford/​Yale Jr. Faculty Forum Paper No. 01-​02 (2001), available at SSRN: https://​ssrn.com/​abstr​act=​275​444 or http://​ dx.doi.org/​10.2139/​ssrn.275​444. Bank seems to have accepted the regulatory purposes of the 1909 corporate tax in Bank and Ajay Mehrotra, “Corporate Taxation and the Regulation of Early Twentieth-​Century American Business,” in Corporations and American Democracy, ed. Naomi Lamoreaux and William Novak (Cambridge, MA: Harvard University Press, 2017); UCLA School of Law, Law-​Econ Research Paper No. 17–​18, available at SSRN: https://​ssrn.com/​abstr​act=​3084​802. 33. 44 Cong. Rec. 3344 (June 16, 1909). 34. Spreckles Sugar Refining Co. v. McClain, 192 US 397 (1899), cited by Taft in 44 Cong. Rec. 3344 (1909). 35. 44 Cong. Rec. 3344 (1909). 36. Ibid. 37. 44 Cong. Rec. 4006 (July 1, 1909). 38. “The United States did not create these corporations.” Senator Cummins, 44 Cong. Rec. 3977 (June 30, 1909). 39. “Shall we levy an income tax upon the stockholders of all corporations for pecuniary profit, without respect or regard to the extent of the income earned or enjoyed by those stockholders” (Senator Cummins, 44 Cong. Rec. 3955 (June 29, 1909)). See also 44 Cong. Rec. 4008 (July 1, 1909) (statement of Senator Clapp to same effect). 40. 44 Cong. Rec. 3937 (June 29, 1909). 41. 44 Cong. Rec. 3941 (June 29, 1909). See also 44 Cong. Rec. 4000–​01 (July 1, 1909) (statement of Senator Bourne in favor of the publicity feature: “I personally

380  Antimonopoly and American Democracy concur with the President that the corporation net-​earnings tax, in view of the publicity feature incident to it, is of infinitely greater importance and will be far more beneficial to this country than either the inheritance or income tax.”) 42. 44 Cong. Rec. 3756 (June 24, 1909). See also 44 Cong. Rec. 3759 (June 24, 1909) (“securing information which would enable Congress to act intelligently in future with reference to taxation, the regulation of industrial combinations, and the imposition of tariff duties”). 43. 44 Cong. Rec. 3930 (June 29, 1909); See also 44 Cong. Rec. 4006–​07 (July 1, 1909) (statement by Senator Root in support of the publicity feature). 44. 44 Cong. Rec. 3965 (June 30, 1909). 45. 44 Cong. Rec. 3756 (June 24, 1909). 46. 44 Cong. Rec. 3761 (June 24, 1909) (emphasis added). See also 44 Cong. Rec. 3762 (“Justice demands that the various forms of manufactured wealth, in whose favor the taxing power of the Nation is so freely exercised, should make some substantial contribution to the national expenses”). 47. 44 Cong. Rec. 4003 (July 1, 1909); see also 44 Cong. Rec. 4006 (distinguishing between earned income and “accumulated capital” which should be taxed). Senator Cummins argued that the corporate tax would not achieve this purpose since it would fall on all shareholders, rather than just on management. 44 Cong. Rec. 4038 (July 2, 1909). 48. 44 Cong. Rec. 3978 (June 30, 1909) (emphases added). See also 44 Cong. Rec. 4047 (July 2, 1909) (statement of Senator Hughes arguing that regulation should be done directly). Senator Cummins also suggested that much higher rates would drive the trusts out of business, 44 Cong. Rec. 4232 (July 7, 1909). 49. 44 Cong. Rec. 4010 (July 1, 1909) (statement of Senator Clapp); 44 Cong. Rec. 4230 (July 7, 1909) (Senator Dolliver). Senator Aldrich replied that the exemption was necessary to avoid double corporate taxation and that no for-​profit corporation was exempt from tax. Id., at 4231. On New Jersey, see Edward Q. Keasbey, “New Jersey and the Great Corporations,” Harvard Law Review 13 (1899): 198, 209–​11. 50. 44 Cong. Rec. 4036 (July 2, 1909) (statement of Senator Davis). 51. New York Times, June 26, 1909. 52. Kornhauser, “Corporate Regulation and the Origins of the Corporate Income Tax,” 116. 53. Ibid., 117. 54. Ibid., 118. 55. Ibid., 125. 56. Ibid., 133. The only remnant was a rule allowing a 1 percent shareholder to view corporate tax returns, which is still in the Code. 57. Marjorie E. Kornhauser, “The Origins of Capital Gains Taxation: What’s Law Got to Do with It,” Southwestern Law Journal 39 (1985): 869. 58. United States v. Phellis, 257 U.S. 156 (1921); Rockefeller v. United States, 257 U.S. 176 (1921); Cullinan v. Walker, 262 U.S. 134 (1923); Marr v. United States, 268 U.S. 536 (1925). 59. Treas. Reg. 45, art. 1567, 21 Treas. Dec. 170, 395 (1919). Importantly, this rule was not limited to stock consideration.

Antitrust and the Corporate Tax, 1909–1928  381 60. Revenue Act of 1921, ch. 136, 42 Stat. 227, section 202. 61. Revenue Act of 1924, ch. 234, § 203(h)(1), 43 Stat. 253, 257. 62. Steven A. Bank, “Mergers, Taxes, and Historical Realism,” Tulane Law Review 75 (2000): 1. 63. Jerome R. Hellerstein, “Mergers, Taxes, and Realism,” Harvard Law Review 71 (1957): 254. Prior to the publication of Hellerstein’s article, the definitive analysis of the subject was a 1938 Columbia Law Review article by Milton Sandberg. See Milton Sandberg, “The Income Tax Subsidy to ‘Reorganizations,’” Columbia Law Review 38 (1938): 98. Both Hellerstein and Sandberg opposed the tax-​free reorganization provisions. 64. See Steven A. Bank, “Historical Perspective on the Corporate Interest Deduction,” Chapman Law Review 18 (2014): 29; UCLA School of Law, Law-​Econ Research Paper No. 14-​04, available at SSRN: https://​ssrn.com/​abstr​act=​2413​968; on the later problems from an unlimited interest deduction see Daniel N. Shaviro, Decoding the Corporate Tax (Washington, DC: Urban Institute Press, 2009), 44, 48; Alvin C. Warren Jr., “The Corporate Interest Deduction: A Policy Evaluation,” Yale Law Journal 83 (1974): 1585. 65. See Michael J. Graetz and Michael M. O’Hear, “The Original Intent of US International Taxation,” Duke Law Journal 46 (1996): 1021. On the Revenue Act of 1918 see also Reuven S. Avi-​Yonah, “The Worst Tax Law Ever Enacted?,” International Tax Journal 47 (2020): 45, available at SSRN. I hope in the future to be able to re-​examine the Adams Papers at Yale, which include significant evidence of Adams’s close ties to the gas, cement, and sugar industries, among others. See Thomas Sewall Adams Papers, archives.yale.edu. 66. Hellerstein, “Mergers, Taxes, and Realism,” 279–​80 (emphasis added). 67. T.D. 2694, 20 Treas. Dec. Int. Rev. 294, 321 (1918). See also War Revenue Act of 1917, ch. 63, 40 Stat. 300 (1917). 68. Revenue Act of 1921, ch. 136, section 240(d), 42 Stat. 260 (1921) (re-​enacted in Revenue Act of 1924, ch. 234, section 240(d), 43 Stat. 288 (1924), and Revenue Act of 1926, ch. 27, section 240(f), 44 Stat. 46 (1926)). 69. On the DRD see Steven A. Bank, “When We Taxed the Pyramids,” Florida State University Law Review 41 (2013): 39; UCLA School of Law, Law-​Econ Research Paper No. 13–​18, available at SSRN: https://​ssrn.com/​abstr​act=​2340​152; and Steven A. Bank and Brian R. Cheffins, “The Corporate Pyramid Fable” (January 28, 2010), UCLA School of Law, Law-​Econ Research Paper No. 10-​01; ECGI–​Law Working Paper No. 146/​2010, available at SSRN: https://​ssrn.com/​abstr​act=​1544​023. On tax-​ free reorganizations see Steven A. Bank and Ajay K. Mehrotra, “Corporate Taxation and the Regulation of Early Twentieth-​Century American Business,” in Corporations and American Democracy, ed. Naomi Lamoreaux and William Novak (Cambridge, MA: Harvard University Press, 2017). 70. On the history of the progressive corporate rate see Steven A. Bank, “Taxing Bigness,” Tax Law Review (2013): UCLA School of Law, Law-​Econ Research Paper No. 12-​20, available at SSRN: https://​ssrn.com/​abstr​act=​2188​647. 71. Section 11(b). 72. Former section 11(b), as in effect before December 31, 2017:

382  Antimonopoly and American Democracy The amount of the tax imposed by subsection (a) shall be the sum of: (A) 15 percent of so much of the taxable income as does not exceed $50,000, (B) 25 percent of so much of the taxable income as exceeds $50,000 but does not exceed $75,000, (C) 34 percent of so much of the taxable income as exceeds $75,000 but does not exceed $10,000,000, and (D) 35 percent of so much of the taxable income as exceeds $10,000,000. For a corporation which has taxable income in excess of $100,000 for any taxable year, the amount of tax determined under the preceding sentence for that taxable year shall be increased by the lesser of (i) 5 percent of that excess, or (ii) $11,750. For a corporation which has taxable income in excess of $15,000,000, the amount of the tax determined under the foregoing provisions of this paragraph shall be increased by an additional amount equal to the lesser of (i) 3 percent of that excess, or (ii) $100,000. 73. For a recent discussion of the incidence issue and an argument that the corporate tax falls mostly on economic rents and is therefore borne by capital, see Edward G. Fox, “Does Capital Bear the U.S. Corporate Tax after All? New Evidence from Corporate Tax Returns,” Journal of Empirical Legal Studies 17 (2020): 71; see also Laura Power and Austin Frerick, “Have Excess Returns to Corporations Been Increasing over Time?” National Tax Journal 69 (2016): 831. Given today’s environment (expensing for equipment, some interest deductibility), this is probably even more the case under current law. 74. For an explanation see, e.g., Avi-​Yonah, “Risk, Rents and Regressivity: Why the United States Needs both an Income Tax and a VAT,” Tax Notes 105 (2004): 1651. 75. See, e.g., Naomi R. Lamoreaux, “The Problem of Bigness: From Standard Oil to Google,” Journal of Economic Perspectives 33, no. 3 (2019): 94–​117; Kenneth A. Bamberger and Orly Lobel, “Platform Market Power,” Berkeley Technology Law Journal 32 (2017): 1051; Axel Gautier and Joe Lamesch, “Mergers in the Digital Economy,” CESifo Working Paper No. 8056 (Feb. 3, 2020); Colleen Cunningham, Florian Ederer, and Song Ma, “Killer Acquisitions” (2019); Marc Bourreau and Alexandre de Streel, “Big Tech Acquisitions” (2020). 76. While the United States never had a corporate tax rate above 53 percent, the World War II excess profits tax, which applied to rents resulting from the war, was capped at 80 percent. See Reuven S. Avi-​Yonah, “Taxes in the Time of Coronavirus: Is It Time to Revive the Excess Profits Tax?” (2020). University of Michigan Public Law Research Paper No. 671; U of Michigan Law & Econ Research Paper No. 20-​008, available at SSRN: https://​ssrn.com/​abstr​act=​3560​806 or http://​dx.doi.org/​10.2139/​ ssrn.3560​806. 77. See Fortune 500: https://​fort​une.com/​for​tune​500/​2019/​sea​rch/​?prof​i ts=​desc. 78. Khan, “Amazon’s Antitrust Paradox.” 79. See Calvin H. Johnson, “The Effective Tax Ratio and the Undertaxation of Intangibles,” Tax Notes, December 15, 2008, 1289. Arguably, R&D generates positive externalities (mostly in the form of ideas that can migrate to other firms) but (a) there is less human capital migration than there used to be because of the above-​market-​ rate salaries offered by Big Tech, and (b) there are significant negative externalities

Antitrust and the Corporate Tax, 1909–1928  383 imposed by Big Tech. R&D should be treated like any other expense, that is, matched to the income stream it generates. 80. Rates above 50 percent may induce the rich to work less, and the United States has never (except during World War II) had effective rates of over 50 percent on the rich (top 1%) even though nominal rates were much higher. That is why the corporate tax on rents should be higher than the top individual tax rate, which will also encourage moving businesses out of subchapter C and distribution of dividends, both of which make it easier to tax the rich on business profits. See Avi-​Yonah, “Why Tax the Rich? Efficiency, Equity, and Progressive Taxation” (Review of Slemrod, Does Atlas Shrug? The Economic Consequences of Taxing the Rich (Cambridge, MA: Harvard University Press, 2000)), Yale Law Journal 111 (2002): 1391.

11 Beyond the Labor Exemption Labor’s Antimonopoly Vision and the Fight for Greater Democracy Kate Andrias

Introduction The story of the relationship between labor and antitrust policy in the twentieth-​century United States is largely one of conflict. From the enactment of the Sherman Act in 1890 until the Supreme Court’s decisions in Apex Hosiery Co. v. Leader in 19401 and United States v. Hutcheson in 1941,2 the federal courts relentlessly subjected unions to antitrust penalties for engaging in strikes, boycotts, and other concerted activities—​on the ground that such activity is inherently anticompetitive.3 The government’s use of antitrust law against workers at the behest of corporations repeatedly crippled unions, destroying more than a few. As numerous scholars have documented, the American Federation of Labor (AFL) responded with a multi-​decade campaign to win an express labor exemption from the law’s prohibition against anticompetitive activity.4 This long history of conflict between labor and antitrust law, combined with the tendency of some antimonopoly advocates to de-​ emphasize problems of class and to focus on breaking up business in ways that do not necessarily provide workers more power, has left the impression that the labor tradition and the antimonopoly tradition are distinct, if not fundamentally incompatible.5 According to the conventional story, antimonopoly sentiment did not historically enjoy substantial labor support, and labor’s agenda on these matters has been almost exclusively focused on removing itself from antitrust law’s sanction.6 This chapter challenges the dominant account, showing that labor’s antimonopoly focus has not always been limited to removing itself from antitrust law’s sanction, nor has the antimonopoly tradition always been Kate Andrias, Beyond the Labor Exemption In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0011

Beyond the Labor Exemption  385 divergent from labor’s goals. Rather, from the late nineteenth century through the post–​World War II period, the more left-​leaning industrial unions repeatedly and insistently used the language of antimonopoly to argue that private concentration of economic power posed a grave threat to workers and to democracy. In their view, however, the cure for monopoly power was not necessarily decentralization or smaller business organization, as often associated with Louis Brandeis and Progressive Era antimonopoly thinkers. Instead, labor argued that antimonopolism demanded that firms’ autonomy and power be democratically constrained either by the firm’s workers or by a more democratic state. The precise contours of left-​labor’s antimonopoly agenda changed over time as the economy evolved, but at bottom, it focused on building a more democratic political economy. Three key features characterized industrial labor’s antimonopoly agenda beyond the labor exemption. First, these unions focused on problems of power and, in particular, on achieving a more egalitarian distribution of power. They were acutely attuned to how law and policy created, reproduced, and protected concentrated political and economic power. They sought to shift power relationships not only by obtaining an end to injunctions against workers’ collective action, but also by organizing industrial unions to achieve countervailing power at the worksite and in the broader economy. They also advocated legislative and administrative interventions that would reduce subsidies and legal advantages granted to large corporations. Second, the industrial unions were committed to democracy—​a more radical form of democracy than simply the use of the franchise. That is, they explicitly argued that concentrated economic power posed a threat to republican government and, more fundamentally, to political equality. Through a range of strategies, they sought to impose democracy at the workplace, democracy over the economy, and a more democratic form of governance. Third, and relatedly, for most of the industrial unions, the agenda was explicitly statist, or social, as well as cooperative. Specifically, in advancing their antimonopoly agenda, they recognized that the exercise of governmental power was inevitable and therefore governmental power needed to be used for democratic and egalitarian ends. Industrial labor thus advanced its goals through political channels as well as through industrial action and worker cooperation, seeking to harness the power of the state against economic royalists. To these ends, the industrial unionists worked to build labor organization on a mass scale to enable workers to wield power in the workplace and in government; sought to impose national democratic economic planning in which

386  Antimonopoly and American Democracy workers would play a co-​equal role with business; supported a range of progressive regulatory reforms to help workers and consumers; opposed policies that enabled business to concentrate economic power; and demanded nationalization or public control of certain industries—​all the while explicitly invoking the language of antimonopoly, as well as the language of industrial democracy. By examining labor’s antimonopoly tradition beyond the struggle for a labor exemption, this chapter draws a more complicated picture of the American antimonopoly tradition—​one that challenges the dominant narrative about the relationship between labor and antitrust and enriches our understanding of what the Progressive and New Deal era antimonopoly vision entailed. It shows that, like the Brandeisians, the more left-​leaning and industrial wing of labor was determined to cut back on the power of economic royalists, but it saw this effort as part of a broader program to achieve greater industrial and political democracy. Applied to contemporary debates, this vision suggests that the goals of an antimonopoly movement ought not to be exclusively, or even primarily, the size or market power of the firms in question—​although those are important factors—​but rather the degree to which firms’ autonomy and power are democratically constrained and, ultimately, the extent to which reforms help achieve a more democratic political economy.

The Struggle for a Labor Exemption For years, leading accounts of the relationship between labor and antitrust have posited a fundamental conflict between the two regimes. Even prominent labor law scholars have labeled the two regimes “intrinsically incompatible.”7 On this account, “[t]‌he purpose and effect of every labor organization is to eliminate competition in the labor market.”8 In contrast, the antitrust laws have the primary goal of advancing economic efficiency by promoting competition and prohibiting restraint of trade. Thus, antitrust law, logically extended, “must condemn the very existence of labor organizations, since their minimum aim has always been the suppression of any inclination on the part of working people to offer their services to employers at different prices.”9 Even before the enactment of antitrust law, common law condemned the concerted activities of workers as criminal and then civil conspiracies.10

Beyond the Labor Exemption  387 Efforts of workers to set prices for their labor violated the liberty of contract. Eventually, juries and state court judges began to reject the argument that workers’ concerted efforts to raise wages constituted an illegal conspiracy under state law. But following the enactment of the Sherman Act in 1890, union opponents successfully turned to federal courts and antitrust law to achieve similar results. By one count, at least 4,300 injunctions were issued against union activity between 1880 and 1930.11 At the same time, courts struck down hundreds of protective labor laws by invoking the due process liberty of contract doctrine, as well as a narrow understanding of congressional commerce power.12 The decision by federal courts to apply antitrust law to labor activity was, from the outset, on exceedingly thin legal ground. The Sherman Act was directed at business monopolies; there is considerable evidence that it was never intended to apply to labor.13 The popular movement that agitated for the Sherman Act and many of the legislators who enacted it had a view of antitrust law that permitted democratic coordination among social actors with the aim of reducing economic domination.14 To be sure, many in Congress voted for the Sherman Act in order to avert more radical reforms.15 But even those more conservative legislators saw antitrust law as a means to limit concentrations of corporate power to protect democracy and safeguard labor rights, as well as to ensure business competition.16 Justice Harlan articulated the statute’s more ambitious goals in the famous 1911 Standard Oil case: All who recall the condition of the country in 1890 will remember that there was everywhere, among the people generally, a deep feeling of unrest. The Nation had been rid of human slavery—​fortunately, as all now feel—​but the conviction was universal that the country was in real danger from another kind of slavery sought to be fastened on the American people, namely, the slavery that would result from aggregations of capital in the hands of a few individuals and corporations controlling, for their own profit and advantage exclusively, the entire business of the country, including the production and sale of the necessaries of life. . . . [T]‌o the end that the people . . . might not be dominated by vast combinations and monopolies, having power to advance their own selfish ends, regardless of the general interests and welfare, Congress passed the Anti-​Trust act of 1890.17

Nonetheless, during the era before the New Deal, the Supreme Court’s crabbed reading of congressional power under the commerce clause sharply

388  Antimonopoly and American Democracy constrained the government’s ability to challenge corporate mergers, effectively enabling a rise of monopolies and oligopolies. Most famously, in United States v. E. C. Knight, the Court held that Congress did not have the constitutional authority to regulate manufacturing using the commerce clause and therefore the attorney general could not use the Sherman Act to challenge mergers among manufacturing companies.18 Conversely, in 1908 with Loewe v. Lawlor (the Danbury Hatters’ case), the Supreme Court concluded that federal antitrust laws could be applied to restrain the activity of organized labor.19 Although some observers emphasized the narrow impact of the Danbury Hatters’ case, Samuel Gompers, president of the AFL, was outraged and alarmed by it. In his view, the opinion enabled federal courts to condemn most labor activism—​almost any strike or boycott might be forbidden as an unlawful attempt to restrain interstate commerce.20 Gompers was soon proven correct: the federal labor injunction became a potent weapon for subduing labor activity.21 Most famously, in 1912, when the United Mine Workers (UMW) sought to regularize wages throughout the coal industry, they were met not only by violent repression by coal operators, but also by criminal indictments of union leaders and a court injunction that permanently prevented the UMW from organizing the nonunion coal mines.22 Facing what it believed to be an existential threat, the AFL dedicated itself to reforming antitrust law to make clear that labor was exempt.23 In 1914, the labor federation thought it had prevailed. Congress enacted the Clayton Act of 1914 providing, in Section 6, that the “labor of a human being is not a commodity or article of commerce” and that the antitrust laws were not to be construed to forbid the existence of labor unions or to restrain individual members from “lawfully carrying out the legitimate objects thereof.”24 Gompers declared the Act the “Magna Carta” of organized labor.25 The Supreme Court, however, soon interpreted Section 6 as a mere codification of existing law: because an intent to restrain trade was not considered to be a “legitimate” object of a labor organization, courts continued to enjoin workers’ collective activity, particularly when it involved strikes and boycotts across more than one employer or against a “neutral” employer.26 For decades, labor remained sharply constrained by antitrust law with numerous courts rejecting the notion that combinations of workers should be judged differently than those of business.27 In 1932, at labor’s urging, Congress intervened again with passage of the Norris–​La Guardia Act.28 This time the legislature was even more explicit: The

Beyond the Labor Exemption  389 new act explicitly overturned the Court’s narrow construction of the Clayton Act and prohibited issuance of injunctions in all cases involving a “labor dispute.” The Supreme Court, now in its post–​New Deal composition, finally assented. With its decisions in Apex Hosiery Co. v. Leader29 and then United States v. Hutcheson,30 the Court held that most union concerted action would be exempt from antitrust law. Thus began a period, lasting until the 1970s, during which the Court largely interpreted antitrust law to serve as a check on the power of capital, not labor.31

Labor’s Broader Antimonopoly Tradition and the “Desire for Democracy” The vast majority of scholarship that examines the relationship of labor to the problem of monopoly power details the preceding history, and then goes on to trace subsequent developments regarding the scope of the labor exemption. The focus on this history is understandable: the debate over the labor exemption was not only about statutory interpretation of the antitrust laws but also about the very legitimacy of unions and collective bargaining during a period of intense industrialization and labor strife. Moreover, the dispute had lasting implications for the labor movement. As William Forbath and Victoria Hattam have argued, labor’s interaction with antitrust law helps explain both the dominant union ideology at the time and the shape of modern labor law. Encounters with the legal system at the turn of the century, and in particular the use of antitrust law against unions, led the labor movement—​the AFL in particular—​to turn toward “voluntarism,” that is, a commitment to the private ordering of industrial relations between unions and employers and a disinterest in a broader egalitarian or socialist political agenda.32 In so doing, the AFL broke from the nineteenth-​century labor movement’s more radical vision of social and political reform.33 As Samuel Gompers declared in 1901, testifying before the Industrial Commission: [O]‌rganized labor looks with apprehension at the many panaceas and remedies offered by theorists to curb the growth and development or destroy the combinations of industry. We have seen those who knew little of statecraft and less of economics urge the adoption of laws to “regulate” interstate commerce and laws to “prevent” combinations and trusts, and

390  Antimonopoly and American Democracy we have also seen that these measures, when enacted, have been the very instruments to deprive labor of the benefit organized effort, while at the same time they have simply proved incentives to more subtly and surely lubricate the wheels of capital’s combination. For our own part we are convinced that the State is not capable of preventing development or natural concentration of industry.34

The current legal regime is very much shaped by the AFL ideology. The National Labor Relations Act (NLRA) enables voluntary, private bargaining on a worksite-​by-​worksite basis. Unlike most industrial democracies, the United States lacks a system of government-​mandated sectoral bargaining, leaving millions of workers without union rights and unions with little influence over the direction of the political economy.35 Yet the focus on the labor exemption has resulted in a blinkered account of labor’s antimonopoly tradition more broadly. In fact, a broader antimonopoly tradition, embracing a fundamental critique of capitalism, was pressed in varying forms by early labor groups like the Knights of Labor in the nineteenth century, the Industrial Workers of the World (IWW) and socialist labor leader Eugene Debs in the early twentieth century, and even, at times, the AFL and Gompers himself. Similar themes were again taken up by industrial labor leaders like Sidney Hillman of the garment workers, John Lewis of the mine workers, and later United Auto Workers (UAW) president Walter Reuther and Steelworkers president Philip Murray, as well as by female progressive labor activists from the National Consumers’ League, like Florence Kelly and Lucy Mason. These labor leaders and their movements all offered a sustained critique of concentrated economic power and its effect on both workers and democracy. Albeit in varying ways and to different extents, they all sought reforms far broader than a labor exemption to antitrust law—​and they rejected the premise that labor rights and antimonopoly policy were in tension. To the contrary, they located the fight against monopoly power in part of a broader struggle to democratize the economy and provide for worker freedom, and they drew on antimonopoly rhetoric in offering their vision for a more democratic and egalitarian political economy.

From the Knights of Labor to Eugene Debs From the Civil War until the turn of the twentieth century, labor, along with nearly every agricultural group and many small producers, championed a

Beyond the Labor Exemption  391 broad antimonopoly agenda, one that understood concentrations of capital to be a threat to democracy and to freedom.36 The Knights of Labor had a particular perspective in this effort. The largest labor organization in the post–​Civil War period, the Knights appealed to workers as both producers and citizens, organizing coal miners and factory workers, as well as artisans and craftsmen; they welcomed not only native-​born white men but also immigrants, African Americans, and women.37 In the view of the Knights of Labor, the developing system of “wage-​slavery” threatened republican liberty. As Terence Powderly, the leader of the Knights, argued in a famous 1890 speech: “One hundred years ago we had one king of limited powers. . . . Now we have a hundred kings, uncrowned ones, it is true, but monarchs of unlimited power, for they rule through the wealth they possess.”38 In the view of Powderly and the Knights, the survival of republican government required the end of the “tyranny” of corporations and capital.39 To that end, the Knights of Labor advanced not only a “free labor” agenda but also an antimonopoly agenda.40 Although some Knights leaders expressed concern about government intervention, describing themselves as “individualist[s]‌,”41 the organization sought the enactment of wage and hour laws and workplace regulation, while also urging the breaking up of big companies, the abolition of private banking, public funding for worker-​owned industry, the nationalization of monopolies,42 and the possibility of cooperative ownership as a way to practice republican ideals.43 At the 1899 Chicago Conference on Trusts, for example, John Hayes, the Knights’ general secretary, urged that the problem of trusts and monopolies be understood not as an issue of competition, but rather as one of “human rights, of individual liberty, of the status of the citizen, of the dignity of citizenship, the right of defense, a limit to the power of wealth.”44 In his speeches, Powderly repeatedly and explicitly connected problems of labor to problems of monopoly power, asking: Should we not make an effort to dissolve the political bonds which have connected the vital interests of the American people with the trusts, combines, and monopolies of the present age? Is it not high time for us to cast about for a means of separation and should we not declare the causes which impel us to shake off the yoke of monopoly when we seek for the final separation? Is not history repeating itself, is it not time to think of making a new Declaration of Independence?45

Critically, Powderly advocated government ownership of telephones, telegraphs, railroads, and coalfields, saying he could “see no reason in

392  Antimonopoly and American Democracy supporting two governments when one [would] answer all practical purposes.”46 By the end of the nineteenth century, however, the Knights of Labor were defunct, the AFL was ascendant, and it had become clear that labor in exchange for wages would be an enduring fact of working-​class life for men and women.47 Under the leadership of Samuel Gompers, the AFL increasingly came to embrace an antistatist view, eschewing broad-​ranging political reforms and privileging instead the right of craftsmen to privately negotiate with employers.48 To be sure, within the AFL, the staunchly voluntarist position was contested. Some AFL union leaders favored greater political engagement and a broader economic reform agenda, including the end of government grants of privileges to railroad monopolies.49 Others, including leading progressive reformers, resisted the depiction of the labor movement as divided between those who wanted increased government control of industries and those who wanted solutions to economic and moral questions through voluntary cooperation, arguing that both were needed.50 Indeed, at times, Gompers himself spoke in terms of building a different kind of democracy: at the 1899 conference, he expressed hope that through the creation of strong unions, workers, albeit in some distant future, could eventually take over the government.51 But in Gompers’s view, the state had long been “the representative of the wealth-​possessors”; until workers were fully organized, he had little interest in a broad political reform project.52 At the national level, the AFL focused its efforts on ending the use of the Sherman Act and court injunctions as weapons against labor, as discussed in the next section.53 Yet while the AFL’s struggle against antitrust injunctions was its hallmark, Gompers was never the only face of labor—​nor of labor’s views on antitrust and antimonopoly. In 1893, Eugene Debs, frustrated with the narrow craft unionism of his AFL affiliate union, the Brotherhood of Locomotive Fireman, helped found the American Railway Union (ARU), with the aim of organizing all railway workers on an industrial basis.54 In 1894, the ARU won its first major strike against the Great Northern Railroad.55 Pressed by union delegates and rank-​and-​file workers, an initially reluctant Debs next threw his support behind a strike against the Pullman Company, which had imposed a severe wage cut on employees in addition to autocratic and harsh management tactics.56 Railroad workers across the country joined the strike, aiming to pressure their employers to stop hauling Pullman cars.57 The strike was met with extraordinary governmental repression. The attorney general of the United States obtained a court injunction against the union for violating the Sherman Act; President Grover Cleveland ordered federal

Beyond the Labor Exemption  393 troops to suppress the strikers; and Debs and other union leaders were tried and imprisoned for their leadership of the strike.58 Debs emerged from prison having learned different lessons than Gompers from his direct conflict with antitrust law and the coercive power of the state. In his view, the alliance between the corporation and the government was too strong to challenge solely on the private, economic front.59 Political engagement was imperative. Debs now explicitly identified as a socialist, though his form of socialism was deeply American, rooted in Protestant and Republican values.60 In the next years, he helped found the International Workers of the World,61 which, unlike the AFL, was committed to organizing on an industrial scale, engaging in a political as well as an economic program, and including African Americans, women, and immigrant workers.62 Debs also began running for president as a socialist, which he did in 1904, 1908, 1912, and 1920. His political career culminated with yet another conflict against the government—​a trial and conviction for violating the Espionage Act by urging resistance to the draft—​and with Debs eventually running his last presidential campaign from prison.63 The story of Debs as a labor leader and American socialist is well covered in the literature. But his views on antimonopoly policy are less familiar.64 In fact, during this period, Debs repeatedly pressed a set of arguments about monopoly power, tying them expressly to both labor rights and democracy. In an essay entitled “Political Lessons of the Pullman Strike,” for example, Debs condemned the system of “wage slavery” that prevailed under “trusts” and “syndicates,” analogizing its harms to chattel slavery: Since that period of vanquishing wrong [African American slavery] and the enthronement of the right, a system of wage-​slavery has been introduced. Warmed into life in the womb of greed, and fostered by laws and legislation as unholy as that which legalized slave stealing and the breeding of human beings, like swine, for the market, it has gained power and prestige until wage-​slaves, under the domination of the money power, acting through trusts, syndicates, corporations, and monopoly-​land stealing, capitalization, railroad wrecking, bribery, and corruption, defying proper characterization, we are confronted with conditions bearing the impress of peonism, infinitely more alarming than was African slavery in its darkest days.65

In numerous other speeches, he called for the breaking up of “trusts, monopolies, and unholy combinations of human sharks” as part and parcel of a set of demands about democracy.66

394  Antimonopoly and American Democracy Over time, however, Debs came to see trusts as an inevitable part of industrial capitalism—​and as a necessary precursor to socialism.67 Against that background, he argued, labor needed to mimic capital’s concentration by organizing into strong, industrial unions.68 And he urged that working people, through democratic processes, should take over monopolies, nationalizing functions that he believed were rightly governmental.69 Thus, like Louis Brandeis and other leading antimonopolists of the time, Debs’s concern was not so much with exclusive privilege granted by the government, but rather with private economic power more generally.70 At the same time, Debs’s vision was quite distinct from that of Brandeis, whose 1914 essay “A Curse of Bigness” in Harper’s Weekly offered a Jeffersonian vision of a social-​economic order organized on a small scale.71 Whereas Brandeis focused on breaking up concentrations of economic power, Debs focused on transforming its ownership. In 1916, Debs drew the contrast, writing: “Republicans, Democratic, and Progressive parties believe in regulating the trusts. The socialist party believes in owning them so that all the people may get the benefit of them.”72

The Progressive Era and Early New Deal: Antimonopoly through Regulation, Planning, and Collective Organization Other industrial union leaders from the early twentieth century focused less explicitly on socialism, but they took up many of Debs’s themes on trusts and monopoly power, connecting them to arguments about industrial and political democracy.73 Dissatisfied with the Gompers approach, these labor leaders sought to redistribute power over economic life both by changing work relations at the site of production and by demanding national economic planning, social and economic regulation, and, sometimes, collective or state ownership.74 Notably, they sought to build power for all workers—​women, immigrants, and African Americans, as well as white men. William “Big Bill” Haywood, leader of the Industrial Workers of the World, for example, argued that oligarchic corporations “ma[de] the real laws of the land,” thereby imposing “an awful tyranny” on workers.75 IWW organizers detailed the problem of monopoly in industries like timber and mining, and the resulting power corporations exercised over workers and the “state machinery of government.”76 They urged direct worker action in the form of industry-​wide strikes aiming for worker control of industry.77 In their view,

Beyond the Labor Exemption  395 industrial democracy—​which they defined as “the supervision of industry in the hands of those who do the work”—​was the answer to concentrated economic power.78 In a similar vein, Sidney Hillman, president of the industrial garment workers’ union, the Amalgamated Clothing Workers of America, urged shared control of economic decisions in factories, through unionization, industrial strikes, and collective bargaining, as well as new forms of political and regulatory control.79 Notably, the experience in the garment industry highlighted for Hillman the limits of an antimonopoly agenda focused on breaking up business into smaller units. The chaotic, disorganized nature of the textile industry made organizing unions challenging and pushed wages down. Governmental regulation was necessary to force coordination among employers and to enable union organization. Thus, although Hillman shared the Brandeisian commitment to “regulated competition” and to “industrial liberty,” he was less enamored with atomistic competition.80 Hillman’s opposition to extreme concentration of capital also led him, like Debs, to urge governmental takeover of trusts and public ownership, though this was never his primary agenda.81 Progressive reformers of the time agreed that while monopoly power was dangerous, the answer was not simply breaking up big business but rather imposing a broader democratization of the economy.82 Indeed, Brandeis himself supported workers’ demands for industrial democracy, although his vision of industrial democracy involved more worker participation rather than worker control.83 Meanwhile, leaders of the National Consumers’ League (NCL), like Florence Kelly, focused on protective legislation—​such as wage and hour laws for women and worker safety legislation—​which they saw as a way to weaken employer power and protect women excluded from unions.84 Like the union leaders, some of the progressive reformers also urged planned production and collective organization.85 For example, Lucy Randolph Mason, who began her career with the NCL but ultimately became a union organizer, sought to impose order on the Southern textile industry in order to improve labor conditions for both Black and white female workers, while also seeking to eliminate racial exclusions.86 For women in the South, overproduction and unmitigated competition were disastrous, leading to long hours and dangerous night work.87 Changing this behavior required moving away from the ideal of robust competition among small businesses and toward a degree of cooperation and standard setting within a given industry.88 By the 1920s, success was limited in the South, but in

396  Antimonopoly and American Democracy the North, the garment workers’ union had penetrated industry decision-​ making at virtually every level. As Nelson Lichtenstein has written, “[i]‌ts representatives jointly set piece rates, influenced the appointment of foreman, bailed out bankrupt firms, set the terms for introduction of new technology, and . . . helped managers even of the largest clothing firms plan and market new product lines.”89 Efforts to share in economic power at the worksite were only part of the strategy. Working with leading Progressive reformers, the garment workers’ union also experimented with cooperative approaches to economic activity, focusing on social service provision through cooperative housing, banking, and unemployment insurance.90 But unlike the Knights of Labor, the garment workers did not envision a return to a utopian world of private, collective ownership by workers. Rather, the union tried to use its cooperatives to exercise greater control over capital by, for example, employing its cooperative bank to supervise the business operations of garment companies that sought loans from the bank.91 In addition, the garment workers’ union and other industrial unions urged economic democracy through political action.92 For example, joining Debs and Hillman’s calls for public ownership, in 1919 and 1920, the UMW passed resolutions calling for the nationalization of coal mines and the public ownership of railroads.93 The UMW also urged legislation to make employer interference with unionization of workers a criminal offense; to establish a thirty-​hour work week; to create a system of national health insurance; and to require the release of all political prisoners and the demilitarization of United States.94 Indeed, World War I had highlighted for these groups the capacity of the modern state to harness the government’s coercive power to cabin the power of capital—​and the limits of purely voluntary and cooperative approaches. The War Labor Boards, which helped grow union membership while engaging the unions in economic policymaking, encouraged those unionists who wanted both more political engagement and more industrial struggle as a means for workers to share power over the economy and the worksite.95

The New Deal through World War II: Industrial Democracy, Economic Democracy, for All? With the post–​World War I recession, union growth stalled and labor’s hopes for a broader democratization of the economy dimmed.96 The following

Beyond the Labor Exemption  397 decade was devastating for workers—​and a boon for concentrated capital. By 1929, the 200 largest US corporations controlled half of all corporate assets, wages had stagnated or declined, and inequality skyrocketed.97 The Great Depression and the election of President Franklin D. Roosevelt, however, brought both the labor question and the monopoly question back to the center of political debate.98 The series of statutes enacted in the New Deal reflected much of labor’s intertwined antimonopoly and industrial democracy agenda. First, Congress enacted the Norris–​La Guardia Act in 1932, prohibiting federal courts from enjoining most labor activity, including under the Sherman Act.99 The act represented the legislative capstone of the AFL’s long-​running campaign to exempt union activity from antitrust law’s sanction. Early New Deal legislation also embraced some of labor’s demands for industrial democracy and democratic economic planning.100 The National Industrial Recovery Act of 1932 (NIRA) required the executive branch to establish industrial committees with participation from both business and labor organizations and, at the same time, protected the right of workers to organize unions (albeit without an enforcement mechanism). NIRA ultimately failed, mired in practical problems even before the Supreme Court struck down the legislation for delegating too much power to the president.101 However, in the view of industrial labor leaders and female labor activists, the problem with NIRA was not its commitment to state involvement and economic planning—​that is, the cartelization of the economy—​but rather its pro-​business cast.102 As Lucy Mason explained in a searing critique that was signed by over 200 supporters, the NIRA codes failed to do enough to raise wages or to build worker power.103 “Industrial democracy” was the key frame for labor’s ambitions during this period,104 but the movement also expressly drew on antimonopoly rhetoric. The two goals were interconnected. Unions must be given their share, Mason wrote, “not only in the profits of their industry but what is far more important, in the control of their methods of work, their conditions of life, and their own industrial government.” At stake, she declared, was whether “big business will dominate America.”105 Labor’s chief demand focused on the need for strong industrial unions to counter the power of capital. The National Labor Relations Act of 1935 (NLRA), or the Wagner Act, was the key piece of legislation to that end.106 The Wagner Act gave workers the right to organize and bargain collectively and established the National Labor Relations Board (NLRB) to enforce the statute. In the aftermath of the act’s passage, John Lewis of the United Mine

398  Antimonopoly and American Democracy Workers and Sidney Hillman of the Amalgamated Clothing Workers of America formed the new Committee for Industrial Organization (CIO) and began a massive industrial organizing campaign, rejecting the AFL’s narrow, craft-​based, and often exclusionary approach.107 The CIO’s success was remarkable. In the year following the United Auto Workers strike at General Motors in Michigan, nearly 5 million workers took part in industrial action and almost 3 million joined a union.108 Although the NLRA established a firm-​by-​firm system of organizing and bargaining, the industrial unions that composed the CIO aimed to organize all workers—​male and female, white and Black, native born and immigrant—​striving for “the complete organization of the workers of America.”109 Industry-​wide trade unions, the theory ran, would defend workers’ dignity on the job, while also providing workers a coequal role with business in production policy and national economic planning.110 Over the next decade, the industrial unions continued to grow, breaking with the craft unions’ exclusionary policies and becoming a vehicle for racial and economic empowerment of African Americans as well as a force for workplace democracy and rising living standards.111 The CIO saw the efforts to organize the South and to organize Black workers as essential to challenge the industrial oligarchy of that region. Unionists hoped that the effort to organize the South, known as “Operation Dixie,” would both avoid downward pressure on wages and job conditions and realign Southern politics, weakening the stranglehold of Southern capital.112 While engaging in mass organizing campaigns, the CIO also advanced a broader economic democracy agenda, echoing many of the antimonopoly demands made by earlier generations of labor leaders like Debs and the Knights of Labor.113 In a 1939 piece in the New Republic, Hillman framed the unions’ goals as fundamentally about sharing power over the economy: American labor is satisfied that [the] challenge [confronting our generation] can be met within the framework of the democratic process. It believes that our failure to remove these obstacles has been the result, not of too much, but of too little democracy—​too little organized participation by the great mass of our people in the affairs of government and industry. . . . The first prerequisite to intelligent and effective planning is the establishment of strong, responsible, and independent organizations representing the various groups and interests in our national life. Thus the complete organization of the workers of America is a basic necessity, not

Beyond the Labor Exemption  399 only for the protection of the immediate interests of labor but as one of the instrumentalities essential for a planned economy.114

CIO publications explicitly connected the labor-​organizing project to a project for economic democracy, distinguishing this effort from “trust busting.”115 One article declared: [W]‌age earners have turned to unions not only for better living conditions but also because of their desire for greater democracy. . . . It is well to consider the power of big business at this time because our nation will be making important decisions on democracy and on levels of living in the next few years. CIO unions do not go in for trust busting of the old style. They know that big concerns are here to stay. But the unions do ask that power be tempered by democratic participation.116

In a monograph entitled “The Dynamics of Industrial Democracy” (1942), Clinton S. Golden and Harold Ruttenberg of the Steelworkers Union similarly advanced a vision of economic democracy achieved through strong industrial unions and economic planning as key mechanisms to temper the power of big business. In their view, individual employee/​employer bargaining was a “primitive form of industrial democracy,” and instead the goal should be for labor to have a share in the management of individual companies, industry, and the national economy.117 Philip Murray, who was vice president of the mine workers’ union from 1920 to 1942, the first president of the United Steelworkers of America from 1942 until his death in 1952, and the president of the CIO, coauthored a monograph in which he argued for a form of centralized planning.118 He distinguished the unions’ demands from the economic systems of Germany and Italy, emphasizing that planning should not and need not “weaken liberty and initiative.”119 During World War II, the industrial unions increased their demands for national economic planning in which worker organizations would play a key role, along with large industrial firms. Walter Reuther of the UAW, for example, emerged as a forceful spokesperson for labor participation in production policy. Industry councils, in his view, could give labor “representation in the field of industry and in the field of government.”120 In January 1942, unions saw some of their demands for a role in economic planning granted when President Roosevelt resurrected the National War Labor Board (WLB), first established by President Wilson during World War I.121 The aim

400  Antimonopoly and American Democracy of the WLB was to ensure industrial peace during wartime.122 Unions were required to forgo strike activity in exchange for the opportunity to submit disputes to arbitration. Nonetheless, the WLB’s tripartite structure, with an equal number of representatives from labor, industry, and government, afforded labor a relatively unprecedented role in setting national labor and employment policy, while the NLRB’s pro-​union posture during this period also contributed to rapid union growth.123 The popular press took note of the CIO’s far-​reaching economic democracy agenda,124 underlining the extent to which it represented a break from the AFL’s focus on limiting the use of the antitrust injunction against unions.125 Indeed, although the CIO, like the AFL, maintained the fight against the antitrust injunction, it located the arguments about the labor exemption in a broader narrative about economic power and democracy. For example, the CIO’s amicus brief in Apex Hosiery Co. v. Leader126 emphasized that the Sherman Act was intended to eliminate “the vast accumulation of wealth in the hands of corporations and individuals, the enormous development of corporate organizations.”127 In addition, the CIO argued, drafters of the Sherman and Clayton Acts believed that “the anti-​trust laws could not apply to labor organizations because they were necessary to the existence of Republican institutions.”128 Accordingly, the legislators “did not intend to include them in a bill directed toward organizations menacing Republican institutions and relating only to commercial transactions.”129 And the CIO contextualized antitrust law within a broader framework of statutes designed to achieve a more democratic political economy: The Congressional Acts cited above are not isolated enactments. Each constitutes a thread in a definite pattern of social policy. . . . It is anticipated and intended that under this national policy (a) Labor, free to organize, will develop national unions able to cope with modern aggregates of capital to obtain for the workers and their families their fair share of the bounties of the country; and (b) Unions will be free to exercise their economic power against the employers who are determined to break down and destroy the unions and the standards which they seek to establish, thereby assuring a competitive protection to the employers who desire to cooperate through collective bargaining and comply with the national policy of the country. It is significant that this policy, in its basic outlines, was advanced and defended by the statesmen who framed and passed the Sherman Act.130

Beyond the Labor Exemption  401

The Postwar Period and the CIO’s Struggle against “Octopus” Corporations During the period immediately following World War II, the United States seemed poised to move to the kind of labor-​backed social democracy that the CIO urged, and that would characterize much of postwar Europe, with its attendant democratic controls over capital.131 And antitrust law seemed ready to accommodate this vision, albeit somewhat uneasily. The Supreme Court’s recognition of a labor exemption in Apex Hosiery and Hutcheson, although not fully on the terms the labor movement had urged, had left most workers free to organize without fear of antitrust enforcement.132 Likewise, with Parker v. Brown in 1943, the Court recognized a state action exemption permitting states to legislate for the public good even if they do so in ways that are anticompetitive, as long as the state policy is clear and any anticompetitive activity is supervised by the state.133 As Dan Crane has explained, from one perspective, Parker stood the meaning of “monopoly” on its head: Whereas, the primary meaning of “monopoly” in the Anglo-​American tradition had been a governmental grant of exclusive privilege—​an interference with the natural rights of other market participants—​that primary sense of “monopoly” was now to be excluded altogether from the Sherman Act’s antimonopoly legal regime. Only purely private monopolies—​ the second sense of the word discussed above—​would be covered by antitrust.134

However, if antitrust is understood as only one piece of a broader project to democratize power over the economy, Parker is entirely consistent with antitrust law.135 Indeed, Parker grew out of the Supreme Court’s post-​1937 constitutional jurisprudence rejecting Lochner-​era judicial scrutiny of regulatory schemes—​ frequently labor and employment laws—​ impairing property or contract rights.136 Just as the post-​1937 constitutional settlement would avoid second-​guessing democratic legislative and regulatory judgments under the due process doctrine, so too Parker held that the courts would avoid second-​guessing legislatures under the Sherman Act. In World War II’s aftermath, however, the industrial unions found their efforts to build a more democratic political economy stymied.137 Unions faced a slew of hostile court decisions, a powerful remobilization of business

402  Antimonopoly and American Democracy and conservative forces in the legislative arena, and the dismantling of state-​ sponsored bargaining.138 Most notably, in 1947, at the behest of business, and buoyed by popular concerns about rising labor militancy and union abuses, Congress passed the Taft-​Hartley Act over President Harry Truman’s veto.139 With the enactment of Taft-​Hartley, federal policy no longer favored unions’ concerted action and collective bargaining. Instead, it took on the voluntarist and privatized orientation it maintains today, guaranteeing employees’ “full freedom” to refrain from engaging in union activity while only weakly protecting their right to engage in it.140 Moreover, the act limited unions’ ability to exercise power over the economy. In particular, Taft-​ Hartley forbade unions from engaging in secondary boycotts, a practice wherein workers had successfully exerted economic pressure and won significant gains across industries by refusing to handle goods from firms where other workers were embroiled in a union dispute.141 In short, although the Sherman Act still offered a “labor exemption,” the Taft-​Hartley Act prohibited the very practice that had been most targeted by the antitrust injunction. In the next years, the labor movement increasingly had to battle the argument that unions were inherently anticompetitive. Labor worried about congressional efforts to put unions once again under the ambit of the Sherman Act. It reiterated its arguments that “labor is not a commodity” and that labor unions arose to counterbalance the monopolistic power of employers.142 In a series of articles and cartoons, CIO publications highlighted the hypocrisy of monopolistic corporations using antitrust law to restrain labor: Today a handful of octopus corporations already exert near monopoly control over a score of major industries. Is it not an amazing spectacle when these same Big Business outfits who violate the spirit, if not the letter, of the Antitrust Act every day, hurl the monopoly charge at organized labor? . . . Corporate monopolies are anti-​social conspiracies created only to increase profits to enrich the few at the expense of the consuming public. Labor unions arose to end monopoly in the labor market—​the employers’ monopoly over wages and working conditions.143

At the same time that it sought to protect unions from once again becoming targets of antitrust law, the CIO expressly and repeatedly offered an affirmative antimonopoly vision: union leaders linked concentrated economic power to an erosion of democracy and worker freedom, while advocating far-​ reaching reforms. A 1949 CIO publication noted that

Beyond the Labor Exemption  403

Figure 11.1  CIO, Department of Education & Research, “ ‘Labor Monopoly’—​ A Phony Issue,” Economic Outlook 11 (1950): 25.

organized labor had “naturally concentrated the greater part of its attention” on Social Security, public housing, minimum wage, labor legislation, and related issues but declared that “beneath the surface of our economic life rolling freely and steadily, have been growing forces of economic concentration and monopoly.”144 CIO president Murray highlighted labor’s antimonopoly demands in an essay in the New Republic, entitled, “What Union Labor Wants”: We must also come to grips with the problem of monopoly control of our nation’s industry and natural resources. The staggering accumulation of financial power accruing to the great corporations in recent years threatens a serious lack of balance in our national life. . . . More effective checks and balances over the distribution of wealth and economic power are in order, both for our own domestic welfare and for the preservation and strengthening of America’s democratic influence throughout the world.145

Murray explained the connection between monopolies and the erosion of democracy, emphasizing the necessity of electing legislative bodies that could resist industry pressure.146 Building on this theme, in a series of newsletters

404  Antimonopoly and American Democracy addressed to its members, the CIO emphasized the relationship between monopoly power and democracy, warning about the effect of concentrated power on the behavior of administrative agencies and government actors.147 CIO cartoons depicted business as an aristocrat, not only greedy, but incompatible with political and social equality. Over time, the CIO increasingly framed its antimonopoly concerns in the language of consumerism, reflecting the rise of consumer politics in the mid-​ twentieth-​century United States.148 In a 1947 issue of its Economic Outlook, for example, the CIO Department of Education and Research detailed the problems of monopoly power to workers as consumers.149 First, the article went through the typical day of an average working man—​“Mr. Jones”—​and pointed out all the ways that monopolies impacted him, for instance, by raising the price of milk, his morning cigarette, and newspaper ink. The article noted that if Mr. Jones thought concretely about how monopolies affect him personally, he would treat the subject as one of the “basic and central questions affecting the welfare and future of the ordinary citizen in the United States,” ranking “only below the improvement of industrial relations and preservation of civil liberties.”150 More generally, the CIO provided data to its readers on the extent of monopoly concentration and pointed to data and case studies from the Great Depression to illustrate how monopolies and monopsonies function to reduce competition, set prices, and control employment opportunities.151

Figure 11.2  CIO, Department of Education & Research, “How Big Is Big Business?,” Economic Outlook (August 1946): 1.

Beyond the Labor Exemption  405

Figure 11.3  CIO, Department of Education & Research, “How Much Profit Is Enough?,” Economic Outlook 11 (1950): 41.

Notably, CIO authors did not treat monopoly power as a natural byproduct of market forces. Rather, they repeatedly identified a connection between the concentration of economic power in a few corporations and governmental policy.152 In particular, they advanced a pointed critique of the relationship between war contracts and concentrated economic power, detailing how defense contracts helped facilitate monopoly power, and urged support for small businesses.153 The organization also identified tax policy as a cause of monopoly power.154 Among the specific antitrust reforms urged by the CIO and industrial unions were for the Interstate Commerce Commission, the Federal Trade Commission (FTC), and the Department of Justice to coordinate their work, for Congress to better staff the agencies, and for agency enforcement powers to be expanded.155 The CIO repeatedly pushed the FTC to take more aggressive antitrust enforcement action.156 It also expressed support for a bill that would limit the ability of firms to purchase assets,157 advocated in

406  Antimonopoly and American Democracy support of small businesses, including for government-​provided loans to such businesses,158 and sought changes in corporate law and tax law to diffuse concentrated power.159 More radically, the CIO urged increased public control and ownership of industry, though not to the same extent or with the same vigor as some of the earlier labor leaders like Debs or the UMW. One article in the Economic Outlook ventured: “In the light of the present economic tendencies, it may become necessary to give serious consideration to this suggestion that ‘public control, either through regulation or ownership,’ be explored as a means of curbing monopoly practices.”160 The federation was particularly concerned about patent access, arguing for universal use and control of patent rights and for “unrestricted use in American industry of patents resulting from government research.”161 In a 1954 publication, the CIO argued that the federal government should not let private industry take over the commercial development of the atom.162 More generally, the CIO urged that there should be a preference for public and cooperative entities, licensing should be opened fairly to both small and big businesses, and there should be “government yardsticks.”163 CIO publications pointed to past experiences with “power monopolies” that resulted in high electricity prices. In areas with “yardstick operations,” such as those operated by the Tennessee Valley Authority, private companies had to reduce their prices.164 By 1951, the CIO newsletter declared, “[n]‌early all Americans agree that the word ‘monopoly’ has just about the most evil meaning in all the economic vocabulary.”165

Figure 11.4  CIO, Department of Education & Research, “The Atom: Golden Windfall for Big Business?,” Economic Outlook 15 (1954): 73.

Beyond the Labor Exemption  407

The AFL and CIO Merger and the Monopoly Capitalism Settlement In 1955, however, the AFL and the CIO merged, and in subsequent years the newly unified labor movement dropped its more aggressive antimonopoly rhetoric,166 as well as its explicit demands for economic democracy through mass unions, national economic planning, and public ownership.167 A few leaders persisted in offering a more transformative vision, with Walter Reuther, for example, telling the Detroit Free Press in 1959 that “when monopolies . . . jeopardize the safety of the country, they can no longer be trusted in private hands to use them for a profit.”168 But even Reuther tempered his views, adding, “[t]‌hat is my private philosophy. It hasn’t got a damn thing to do with automobiles or industries operating on non-​monopolistic basis. And it has nothing to do with the question of wages in this case.”169 Thus, labor increasingly agreed to settle for a private system of bargaining, albeit one that brought its members significant gains.170 Because unions in industries like auto and steel had already achieved significant density, they were able to force employers to engage in pattern or industry-​wide bargaining.171 In exchange for assurances of industrial discipline and stability, unions won substantial wage increases with cost of living adjustments, pensions, and generous health benefits.172 The companies could afford to agree to such generous contracts in part because they enjoyed limited competition in their coordinated, oligopolistic markets.173 Meanwhile, the government frequently inserted itself into collective bargaining in consolidated markets like steel and auto in order to hold down prices.174 The arrangement, known to some observers as “monopoly capitalism,” had some significant downsides, including technological stagnation, the eventual rise of inflation, and a comparatively depoliticized and complacent labor movement. It also primarily benefited white male workers, excluding industries dominated by people of color and women. Nonetheless, for a time, it helped produce one of the most economically egalitarian periods in American history.175 Moreover, despite the enactment of the Taft-​ Hartley Act and the 176 emerging negative image of “big labor,” the postwar years were marked by relatively little antitrust enforcement against labor—​and relatively aggressive antitrust enforcement against companies.177 The reigning model for antitrust enforcement during this period was the Harvard School’s

408  Antimonopoly and American Democracy structural approach,178 which argued that economically concentrated markets are likely to perform poorly based solely on their structure and thus opposed market concentration even in cases where such concentration might lower prices for consumers.179 In 1950, Congress amended the Clayton Act to prohibit corporations from acquiring the assets of other corporations when doing so substantially lessened competition, while also extending the act’s reach to vertical mergers.180 The Supreme Court broadly interpreted the amendments to disfavor mergers181 and sought to maintain fragmented markets.182 More generally, the Court reduced the burden of proof on the government for a range of antitrust violations, including monopolization, while also rejecting efficiency defenses.183 Meanwhile, the focus on structural market power left labor unions largely untouched by antitrust law, allowing significant collective activity without the threat of court injunction.

Antitrust against Labor, Again The détente between antitrust law and labor was, however, short-​lived. In 1965, the Court issued a pair of rulings establishing what is now known as the Noerr-​Pennington doctrine, which immunizes, for First Amendment reasons, concerted activity that involves petitioning the executive or legislative branch.184 But while protecting government-​focused concerted activity from antitrust liability, Noerr-​Pennington and the accompanying case Amalgamated Meat Cutters v. Jewel Tea prohibited forms of collective action among workers aimed at exercising power over the economy: the Court held that unions violate the Sherman Act when they bargain to impose standards throughout an industry by conditioning collective bargaining agreements on achieving similar conditions with other employers.185 The renewed antipathy to labor was hardly limited to antitrust law. Employers began to implement a range of new management strategies that would ultimately lead to the collapse of labor unions in the private sector.186 They waged sophisticated antiunion campaigns to ward off new organizing, while outsourcing and restructuring in order to reduce labor costs and move existing jobs out of unionized shops.187 The Court largely permitted these tactics, privileging employers’ managerial and property rights over

Beyond the Labor Exemption  409 employees’ rights to organize, bargain, and strike when interpreting the NLRA.188 At the same time, a growing movement of conservative intellectuals, like Robert Bork and Richard Posner, began to push a new vision for antitrust law generally, putting greater emphasis on economic efficiency and consumer welfare.189 The courts and agencies were increasingly persuaded by the “Chicago School” of economics. By the late 1970s, the federal antitrust agencies rarely blocked mergers, except for horizontal mergers in highly concentrated markets. The courts too accepted the theory that mergers produced productive efficiencies that benefited consumers and society.190 Indeed, in 1979, the Supreme Court cited Bork, declaring that “Congress designed the Sherman Act as a ‘consumer welfare prescription.’ ”191 Labor frequently cooperated, trying to eke out benefits for workers ravaged by capital flight in exchange for not opposing mergers.192 Meanwhile, agencies and courts increasingly used antitrust law to restrain workers’ collective activity, which once again was seen as anticompetitive and harmful to consumer welfare. Most notably, in Connell Construction Co. v. Plumbers & Steamfitters Local 100, the Court held that a union violated antitrust law when it sought to compel general contractors to agree that they would deal only with subcontractors that were parties to the union’s current collective bargaining agreement.193 In addition, the federal antitrust agencies called on states to scale back putatively anticompetitive occupational licensing rules designed to help workers.194 They also opposed union-​like organization by non-​employee workers and professionals.195 Increasingly, courts imposed a narrow reading of the labor exemption, holding that workers who are not employees under the National Labor Relations Act could be liable for collusive conduct under antitrust law when they engage in strikes and boycotts.196 The antitrust agencies also advocated against collective bargaining rights at the state and local level among, for example, medical professionals, home health workers, and writers.197 In short, since the 1970s, the antitrust agencies and the federal courts embraced an interpretation of antitrust law that enabled the re-​concentration of economic power in massive companies, while restricting the freedom of workers to organize and simultaneously constraining democratic regulatory power, all putatively in the service of a consumer welfare agenda. For the most part, this neoliberal antitrust approach was bipartisan, with minimal variation as political control of the executive branch shifted between parties.198

410  Antimonopoly and American Democracy And though the labor movement opposed some mergers and fought against the application of antitrust law to workers, it increasingly found itself on the defensive. Desperate to retain members’ economic status in an increasingly antiunion, low-​wage, and global economy, labor no longer advanced an ambitious, far-​reaching antimonopoly agenda. *** The neoliberal or consumer welfare approach to antitrust, along with the renewed restraints on worker concerted activity, date to the 1970s. Yet, the negative impact on workers has increased in recent years. One reason is that labor monopsony has become increasingly pervasive in the United States, enabling employers to control their workers and suppress their wages through mergers, non-​competes, and no-​poaching agreements.199 The problem, however, is not limited to monopsony power. Antitrust law also stands as an ever more potent obstacle to worker-​concerted activity because of the increasingly fissured and contracted nature of the economy.200 Consider the doctrine that prohibits the imposition of standards throughout an industry using an employer-​union bargaining agreement. That rule, along with the Taft-​Hartley Act’s prohibition against secondary boycotts, is increasingly far-​reaching now that ever greater numbers of workers are employed in highly fissured industries with their working conditions set by companies that do not qualify as their employers. The more fissured the industry, the more workers need to be able to impose terms throughout the sector, rather than solely with their employer, if they hope to improve conditions. In addition, as employers fissure the employment relationship, they classify more and more workers as independent contractors, rather than employees, thereby pushing more workers out of the reach of the labor exemption and under antitrust law. The millions who are now classified as contractors and freelancers are potentially liable if they join together in an attempt to improve the price at which they sell their labor. Moreover, federal antitrust agencies, with support from the business community and the courts, have sought to narrow the state action exemption, limiting the ability of state and local governments to regulate in ways that protect workers, particularly the growing number of gig workers who do not benefit from the labor exemption.201 For example, in one recent case, at the urging of both the business community and the FTC, the Ninth Circuit held that a city law enabling collective bargaining among gig workers was not saved by the state action doctrine.202

Beyond the Labor Exemption  411

Conclusion: A New Antimonopoly Agenda for a Democratic Political Economy The renewed hostility to worker collective action and extensive judicial review of democratically enacted state and local laws under antitrust doctrine are another example of what many have termed the new Lochnerism.203 As in the original Lochner era, however, the reigning antitrust philosophy is very much contested. In the face of staggering inequality and new concentrations of economic power, the notion that antitrust law and policy should focus solely on economic efficiency and consumer welfare has come under attack from a range of prominent voices.204 So-​called neo-​Brandeisian scholars and advocates urge not only aggressive antitrust enforcement, but also broad structural and regulatory reforms to achieve more decentralized and competitive markets.205 Lina Khan, Zephyr Teachout, and Tim Wu, for example, argue for mandating separations between key economic functions and breaking up large companies.206 Even scholars operating within the reigning consumer welfare model have conceded the need for reform, urging more aggressive antitrust enforcement in product markets.207 Others have brought new attention to the problem of concentrated labor markets, advocating the use of existing antitrust law against labor monopsonists and new prohibitions on employers’ ability to insist on arbitration and noncompete clauses in employment contracts.208 But for the most part, problems of class and the labor/​capital conflict have not been at the center of these efforts. Moreover, it is not clear to what extent these approaches would improve workers’ lives, let alone transform them. Without a mechanism for exercising collective power in both the workplace and the broader political economy, workers, particularly those in low-​wage jobs, will likely continue to find themselves exploited, working under autocratic and antidemocratic regimes, and with little power in the broader political economy.209 Thus, despite shared antipathy to rising inequality and to the reigning approach to antitrust law, unionists have spent little energy on antitrust policy, focusing instead on the need for worker organization.210 Meanwhile, labor scholars have greeted the revived antimonopoly project with some skepticism, highlighting the limits of antitrust enforcement for workers,211 and arguing that the antimonopoly movement has too often “opposed the economic elite but not the social system that gave rise to it.”212 Some scholars thus emphasize that antimonopoly sentiment historically did not enjoy

412  Antimonopoly and American Democracy substantial support “among ‘the people’ in general or the working class in particular.”213 Yet as this chapter shows, the antimonopoly movement and the labor movement were not always conflicting or even distinct endeavors. Rather, industrial labor advanced its own version of antimonopolism: one that was intertwined with the struggle for industrial democracy and that put problems of class—​and sometimes, although not frequently enough, race and gender—​at the center. Recovering that history is important not only because it provides a more nuanced and complete picture of the antimonopoly tradition and of labor’s role in it, but also because it can help inspire a path forward for contemporary scholars and advocates working to innovate in both labor and antitrust. Rather than understanding the two endeavors as separate, overlapping only by coincidence or for tactical reasons, advocates should see them as part of the joint effort against concentrated economic power and in favor of greater economic and political democracy. Several of the neo-​ Brandeisians and heterodox antitrust scholars have gestured in this direction. Sabeel Rahman and William Novak have emphasized the need to look beyond achieving decentralized markets in thinking about problems of monopoly power, focusing, for example, on public utility as a tool of democratic reform;214 while others have focused on the role of public options215 and on democratic economic planning.216 Marshall Steinbaum has argued that labor policy and antitrust policy must operate in tandem to deconcentrate economic power and increase worker bargaining power.217 Sanjukta Paul has sought to reframe the conception of antitrust law, showing how the law functions as an “allocator of coordination rights,” and urging protection for collective action among less-​powerful economic actors.218 Sandeep Vaheesan and Nathan Schneider have explored the possibility of worker cooperatives as an antimonopoly strategy.219 On the ground, new organizations are bringing together worker groups and citizen groups to fight against concentrated corporate power under a broad “democracy” banner.220 Meanwhile, the Biden administration, particularly the FTC under the leadership of Chair Lina Khan, has focused on the problem of market consolidation and its effect on workers.221 In addition, reformers and government officials increasingly urge exempting independent contractors, such as gig economy workers, from antitrust law.222 Yet the unifying analytic frame for these efforts remains underdeveloped. The history presented in this chapter helps provide such a frame. It offers, rather than smallness or decentralization, the goals of power redistribution

Beyond the Labor Exemption  413 and “greater democracy”—​at the workplace, in the economy, and in the government. With greater democracy as the goal, many of the vexing conflicts between labor law and antitrust law can be resolved. For example, labor’s right to engage in collective activity and government’s right to regulate under the Parker doctrine would no longer be understood as exceptions to antitrust law, but rather as consistent with the fundamental aims of greater economic democracy. From that vantage point, collective action rights would extend to non-​traditional employees, including putative independent contractors who are workers, and Parker rights would extend to local governments as well as to states. In addition, other strategies to build economic democracy—​ including those that focus on building power for all workers—​ought to be understood as central to the antimonopoly agenda. Consistent with the vision of labor leaders from the early and mid-​ twentieth century, these strategies would include a new system of sectoral bargaining and “unions for all,” enabling all workers—​including those long excluded from protections and those workers still subject to antitrust law’s sanction, like gig workers—​to organize and bargain over their terms and conditions of work throughout their industries, and to engage in collective action both at their own workplaces and in solidarity with others. Also critical are regulations to limit the power of employers over workers’ lives, not only prohibitions on non-​competes, no-​poach, and mandatory arbitration agreements but also just-​cause rights to prevent arbitrary dismissal and discipline.223 Even more ambitiously, a democracy-​focused antimonopoly agenda could include a commitment to democratic economic planning—​administrative processes that would give labor, as well as business, real power and input over decisions about the direction of the political economy and a defined role in overseeing a robust social welfare system. Finally, corporate and banking law reform could be redesigned to increase democratic control over capital and to encourage worker ownership, while antimonopolists might begin, once again, to explore public control or ownership of critical sectors of the economy on which all citizens depend. In short, the goal is not to revive old approaches, but rather to recall and reinvigorate labor’s long-​standing “desire for greater democracy” and to achieve, through a range of mechanisms, a more equitable distribution of power over the economy and the democracy. Ultimately, recovering the history of labor’s antimonopoly agenda helps underline that labor, antitrust, corporate, and other economic reforms should not be seen as a disparate

414  Antimonopoly and American Democracy array of policy proposals but as an integrated program in favor of a more democratic and egalitarian society.

Acknowledgments For helpful feedback on this essay, I am grateful to Bill Novak, Dan Crane, the staff and leadership at the Tobin Project, the other authors in this volume, workshop participants at the Max Planck Sciences Po Center on Coping with Instability in Market Societies, and to Nico Bowie, Willy Forbath, Lorenzo Luisetto, Lina Khan, Nelson Lichtenstein, and Stacey Mitchell. Thanks also to Chris Blythe, Nicole Frazer, and MacKenzie Thurman for excellent research assistance and to the librarians at the University of Michigan Law Library, where the research for this project was completed. All errors are mine.

Notes 1. 2. 3. 4.

Apex Hosiery Co. v. Leader, 310 U.S. 469 (1940). United States v. Hutcheson, 312 U.S. 219 (1941). E.g., Loewe v. Lawlor, 208 U.S. 274 (1908). See, e.g., Daniel R. Ernst, “The Labor Exemption, 1908–​1914,” Iowa Law Review 74, no. 5 (1989): 1151; Edward Berman, Labor and the Sherman Act (New York, NY: Harper & Brothers, 1930), 3–​87; William E. Forbath, “The Shaping of the American Labor Movement,” Harvard Law Review 102, no. 6 (1989): 1109, 1185–​95; Alpheus Mason, Organized Labor and the Law (Durham, NC: Duke University Press, 1925), 119–​62; Elizabeth Sanders, Roots of Reform (Chicago, IL: University of Chicago Press, 1999), 93–​100, 286–​89. 5. See Gabriel Winant, “No Going Back: The Power and Limits of the Anti-​Monopolist Tradition,” The Nation, January 21, 2020, https://​www.thenat​ion.com/​arti​cle/​cult​ ure/​goli​ath-​monop​oly-​and-​democr​acy-​matt-​stol​ler-​rev​iew/​ (critiquing Matt Stoller, Goliath: The 100-​Year War between Monopoly Power and Democracy (New York, NY: Simon & Schuster, 2019)). 6. See below, section on “Labor’s Broader Antimonopoly Tradition and the ‘Desire for Democracy.’ ” 7. Ted St. Antoine, “Connell: Antitrust Law at the Expense of Labor Law,” Virginia Law Review 62, no. 1 (1976): 603. 8. Archibald Cox, “Labor and the Antitrust Laws—​A Preliminary Analysis,” University of Pennsylvania Law Review 104, no. 2 (1955): 252, 254. 9. St. Antoine, “Antitrust Law at the Expense of Labor Law.”

Beyond the Labor Exemption  415 10. See Christopher L. Tomlins, The State and the Unions: Labor Relations, Law, and the Organized Labor Movement in America, 1880–​1960 (Cambridge, U.K.: Cambridge University Press,1985), 11–​ 59; Forbath, “The Shaping of the American Labor Movement,” 1185–​95. 11. William E. Forbath, “The New Deal Constitution in Exile,” Duke Law Journal 51, no. 1 (2001): 165; Forbath, “The Shaping of the American Labor Movement,” app. B, 1249–​53. 12. Forbath, “The Shaping of the American Labor Movement,” 1133 n.78, app. A, 1237–​48. 13. St. Antoine, “Antitrust Law at the Expense of Labor Law,” 604; Berman, Labor and the Sherman Act, 3–​54; Mason, Organized Labor and the Law, 120–​31; Louis B. Boudin, “The Sherman Act and Labor Disputes: I,” Columbia Law Review 39, no. 8 (1939): 128; Louis B. Boudin, “The Sherman Act and Labor Disputes: II,” Columbia Law Review 40, no. 1 (1940): 14; see also Sandeep Vaheesan, “Accommodating Capital and Policing Labor: Antitrust in the Two Gilded Ages,” Maryland Law Review 78, no. 4 (2019): 766, 768, 779–​83; Sanjukta Paul, Solidarity in the Shadow of Antitrust: Labor and the Legal Idea of Competition (Cambridge, U.K.: Cambridge University Press, forthcoming). For a contrary perspective, see Herbert Hovenkamp, “Labor Conspiracies in American Law, 1880–​1930,” Texas Law Review 66, no. 5 (1988): 919, 951 (arguing that the Sherman Act effectively brought the conspiracy theory of labor organization into federal law). 14. See Sanjukta Paul, “Recovering the Moral Economy Foundations of the Sherman Act,” Yale Law Journal 131, no. 1 (2021): 175. 15. Daniel Crane, “Antitrust’s Unconventional Politics,” Virginia Law Review Online 104 (2018): 118, 133–​34. 16. Robert Pitofsky, “The Political Content of Antitrust,” University of Pennsylvania Law Review 127, no. 4 (1979): 1051; Vaheesan, “Accommodating Capital and Policing Labor,” 772–​73, 777; Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age (New York, NY: Columbia Global Reports, 2018); Paul, Solidarity in the Shadow of Antitrust. 17. Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 83–​84 (1911). 18. United States v. E. C. Knight, 156 U.S. 1 (1895). 19. Loewe v. Lawlor, 208 U.S. 274 (1908). 20. Ernst, “The Labor Exemption,” 1153; Martin J. Sklar, The Corporate Reconstruction of American Capitalism, 1890–​ 1916 (Cambridge, U.K.: Cambridge University Press,1988), 224. 21. Richard White, Railroaded: The Transcontinentals and the Making of Modern America (New York, NY: W.W. Norton & Company, 2011), 384 (noting that the Sherman Act was “aimed at capital but hit labor”); Hovenkamp, “Labor Conspiracies in American Law,” 950–​63 (describing how the law of labor injunctions became more hostile to labor activity over time). 22. Hitchman Coal & Coke Co. v. Mitchell, 202 F. 512 (N.D.W. Va. 1912); see also Coronado Coal Co. v. United Mine Workers, 268 U.S. 295 (1925). For further discussion, see Ernst, “The Labor Exemption,” 1160.

416  Antimonopoly and American Democracy 23. See William E. Forbath, Law and the Shaping of the American Labor Movement (Cambridge, MA: Harvard University Press, 1991); Ernst, “The Labor Exemption”; Louis B. Boudin, “Organized Labor and the Clayton Act,” Virginia Law Review 29, no. 4 (1942): 272. 24. 38 Stat. 930 (1914), 15 U.S.C. § 17 (2018). 25. William Forbath, “Politics, State Building, and the Courts, 1870–​1920,” in The Cambridge History of Law in America, vol. 2, ed. Michael Grossberg and Christopher Tomlins (Cambridge, U.K.: Cambridge University Press, 2007): 1092, 1151. 26. E.g., Duplex Printing Press Co. v. Deering, 254 U.S. 443 (1921); see also Paine Lumber Co. v. Neal, 244 U.S. 459, 485 (1917). 27. See Forbath, Law and the Shaping of the American Labor Movement, (Cambridge, MA: Harvard University Press, 1991), 75, 101; Daniel Ernst, Lawyers against Labor: From Individual Rights to Corporate Liberalism (Champaign, IL: University of Illinois Press, 1995). 28. 29 U.S.C. §§ 101–​15 (1940). 29. Apex Hosiery Co. v. Leader, 310 U.S. 469 (1940). 30. United States v. Hutcheson, 312 U.S. 219 (1941). But see Allen Bradley Co. v. Int’l Bhd. of Elec. Workers, 325 U.S. 797 (1945) (holding that the labor exemption does not shield a union that conspires with employers to monopolize and fix prices, even when such agreement was obtained through union pressure for a closed shop and hot cargo agreements). 31. Vaheesan, “Accommodating Capital and Policing Labor,” 792–​93. 32. Forbath, “The Shaping of the American Labor Movement”; Victoria C. Hattam, Labor Visions and State Power, The Origins of Business Unionism in the United States (Princeton, NJ: Princeton University Press, 1994); see also Sanders, Roots of Reform, (Chicago, IL: University of Chicago Press, 1999), 71–​93. 33. On the nineteenth-​century movements, see Alex Gourevitch, From Slavery to the Cooperative Commonwealth: Labor and Republican Liberty in the Nineteenth Century (Cambridge, U.K.: Cambridge University Press, 2014); David Montgomery, Beyond Equality: Labor and the Radical Republicans, 1862–​1872 (Champaign, IL: University of Illinois Press, 1974); David Montgomery, Citizen Worker (Cambridge, U.K.: Cambridge University Press, 2010); Leon Fink, Workingmen’s Democracy: The Knights of Labor and American Politics (Champaign, IL: University of Illinois Press, 1983); Forbath, Law and the Shaping of the American Labor Movement (Cambridge, MA: Harvard University Press, 1991); William Forbath, “The Ambiguities of Free Labor: Labor and the Law in the Gilded Age,” Wisconsin Law Review 1985, no. 4 (1985): 767. 34. U.S. Indus. Comm’n, 57th Cong., 7 Rep. of the Industrial Commission on the Relations and Conditions of Capital and Labor Employed in Manufactures and General Business, at 656 (1901) (“While I believe that the trust should be regulated, believe in publicity of the trust, I fear most the attempt of legislative action to deal with them, for as a rule the methods proposed to deal with the trust have not dealt with the trust, but they have dealt with us. The courts have interpreted these laws to apply to us, to organized labor, and not to trusts. It has not affected the trusts at all.”).

Beyond the Labor Exemption  417 35. See Kate Andrias, “The New Labor Law,” Yale Law Journal 126, no. 1 (2016): 2; Nelson Lichtenstein, State of the Union (Princeton, NJ: Princeton University Press, 2002). But cf. Kate Andrias, “An American Approach to Social Democracy: The Forgotten Promise of the Fair Labor Standards Act,” Yale Law Journal 128, no. 2 (2019): 616 (describing partial system of sectoral bargaining over wages under the early FLSA); Mark Barenberg, “The Political Economy of the Wagner Act: Power, Symbol, and Workplace Cooperation,” Harvard Law Review 106, no. 7 (1993): 1379, 1389 (describing Senator Wagner’s aspirations to use the NLRA to build a cooperative social democracy). 36. Gretchen Ritter, Goldbugs and Greenbacks: The Antimonopoly Tradition and the Politics of Finance in America, 1865–​1896 (Cambridge, U.K.: Cambridge University Press, 1997); Kenneth Lipartito, “The Antimonopoly Tradition,” University of St. Thomas Law Journal 10, no. 4 (2013): 1991; Sanders, Roots of Reform, (Chicago, IL: University of Chicago Press, 1999), 107–​8; Montgomery, Beyond Equality. Indeed, as early as the 1810s, and particularly following the Panic of 1819, working people were worried about the problem of concentrated economic power and its relationship to democracy. Through new Workingmen’s Parties, they argued that banking “was the foundation of artificial inequality of wealth, and, thereby, of artificial inequality of power.” Jill Lepore, These Truths (New York, NY: W.W. Norton & Company, 2018), 207. They demanded shorter hours and better conditions and objected to “an unequal and very excessive accumulation of wealth and power into the hands of a few.” Lepore; see also Leon Fink, “The New Labor History and the Powers of Historical Pessimism: Consensus, Hegemony, and the Case of the Knights of Labor,” Journal of American History 75, no. 1 (1988): 115, 116. 37. Forbath, Law and the Shaping of the American Labor Movement, (Cambridge, MA: Harvard University Press, 1991), 12; Sanders, Roots of Reform, (Chicago, IL: University of Chicago Press, 1999), 33–​55; see also Nell Painter, “Black Workers from Reconstruction to the Depression,” in Working for Democracy, ed. Paul Buhle and Alan Dawley (Champaign, IL: University of Illinois Press, 1985), 63, 66–​68 (describing the racial justice focus of the Knights, in contrast to the segregationist commitments of the AFL). 38. Jefferson Cowie, The Great Exception: The New Deal & the Limits of American Politics (Princeton, NJ: Princeton University Press, 2016), 41–​42 (quoting Terence V. Powderly, Gen. Master Workman, Knights of Labor, Address at Priceburg (July 4, 1890)). 39. Fink, “The New Labor History and the Powers of Historical Pessimism,” 4; Gourevitch, From Slavery to the Cooperative Commonwealth, (Cambridge, U.K.: Cambridge University Press, 2014); Forbath, “The Ambiguities of Free Labor”; Cowie, The New Deal & the Limits of American Politics (Princeton, NJ: Princeton University Press, 2016). 40. See Sanjukta Paul, “Recovering Labor Antimonopoly,” New Labor Forum 28, no. 3 (2019): 34; Sanders, Roots of Reform, (Chicago, IL: University of Chicago Press, 1999), 46–​48. 41. U.S. Indus. Comm’n, 57th Cong., 7 Rep. of the Industrial Commission on the Relations and Conditions of Capital and Labor Employed in Manufactures and

418  Antimonopoly and American Democracy General Business, at 450 (1901) (statement of Jacob Schonfarber, Rep., Knights of Labor). 42. Forbath, Law and the Shaping of the American Labor Movement, (Cambridge, MA: Harvard University Press, 1991), 13–​14; Sanders, Roots of Reform, (Chicago, IL: University of Chicago Press, 1999), 46–​49. 43. See Fink, “The New Labor History,” 34, 228; Gourevitch, From Slavery to the Cooperative Commonwealth, (Cambridge, U.K.: Cambridge University Press, 2014), 10, 97–​137; Steve Leikin, The Practical Utopians: American Workers and the Cooperative Movement in the Gilded Age (Detroit, MI: Wayne State University Press, 2005), xviii. 44. Richard White, “From Antimonopoly to Antitrust,” this volume, p. 89 (quoting John W. Hayes, Chicago Conference on Trusts (1899)). 45. Fink, “The New Labor History,” 133–​34 (quoting Terence V. Powderly, Gen. Master Workman, Knights of Labor, Address at Priceburg (July 4, 1890)). 46. Fink, “The New Labor History.” 47. Lawrence B. Glickman, A Living Wage: American Workers and the Making of Consumer Society (Ithaca, NY: Cornell University Press, 1997), 11–​13, 80. 48. See Forbath, “The Ambiguities of Free Labor”; Hattam, Labor Visions and State Power; Sanders, Roots of Reform, (Chicago, IL: University of Chicago Press, 1999), 81–​93; see also Andrew Wender Cohen, The Racketeer’s Progress: Chicago and the Struggle for the Modern American Economy, 1900–​1940 (Cambridge, U.K.: Cambridge University Press, 2004) (describing the resistance of craftsmen in Chicago to corporate dominance and showing how unions and associations governed commerce through pickets, assaults, and bombings). 49. David Montgomery, “Industrial Democracy or Democracy in Industry: The Theory and Practice of the Labor Movement, 1870–​1935,” in Industrial Democracy in America: The Ambiguous Promise, ed. Nelson Lichtenstein and Howell Harris (Cambridge, U.K.: Cambridge University Press, 1993), 20, 24, 28, 35–​36. 50. William English Walling, “Is Labor Divided as to Political Principles,” American Federationist 32 (1925): 347, 348–​50 (“Voluntary organizations can be made secure only by an increased popular control over government and an increased governmental control over industry. . . . Progress by voluntary organization and progress by political democracy are not two hostile or rival movements, they are interdependent parts of a single movement—​real or industrial democracy. Organized labor in American has consistently supported both liberalism and progressivism.”). 51. See White, The Transcontinentals and the Making of Modern America, (New York, NY: W.W. Norton & Company, 2012), 36. 52. U.S. Indus. Comm’n, 57th Cong., 7 Rep. of the Industrial Commission on the Relations and Conditions of Capital and Labor Employed in Manufactures and General Business, at 655 (1901) (“The great wrongs attributable to the trusts are their corrupting influence on the politics of the country; but as the State has always been the representative of the wealth-​possessors we shall be compelled to endure this evil until the toilers are organized and educated to the degree when they shall know that the State is by right theirs.”).

Beyond the Labor Exemption  419 53. That is not to say that the AFL had no other political program. Among other initiatives, the AFL was involved in backing Progressive Era democracy reforms, e.g., seeking to enact state and national initiative processes and recall mechanisms. See Philip S. Foner, History of the Labor Movement, vol. 5 (New York, NY: International Publishers, 1980), 45–​55. 54. Nick Salvatore, Eugene V. Debs: Citizen and Socialist (Champaign, IL: University of Illinois Press, 1982), 110–​15. 55. Ibid., 119–​23; see In re Debs, 158 U.S. 564, 599–​600 (1895) (relying on the commerce clause powers to uphold the governmental actions against the strikers). 56. Salvatore, Eugene V. Debs, 126–​30; White, The Transcontinentals and the Making of Modern America, 418–​19, 430. 57. White, The Transcontinentals and the Making of Modern America, (New York, NY: W.W. Norton & Company, 2012), 430. 58. Salvatore, Eugene V. Debs, 131–​38, 148–​50. 59. Ibid., 148–​50. 60. Ibid., 150–​52; see also Sanders, Roots of Reform, (Chicago, IL: University of Chicago Press, 1999), 60. For an example of Debs’s invocation of the particularly American roots of his socialism, see “Eugene V. Debs to the Workingmen of Cleveland,” Cleveland World, January 19, 1896, 3. 61. Salvatore, Eugene V. Debs, 183–​207 62. Philip S. Foner, History of the Labor Movement, vol. 3 (New York, NY: International Publishers, 1964). 63. Salvatore, Eugene V. Debs, 220–​61, 292–​302. 64. But cf. Crane, “Antitrust’s Unconventional Politics,” 125 (citing Debs). 65. Eugene V. Debs, “Political Lessons of the Pullman Strike,” Railway Times 2, no. 5 (March 1, 1895): 1, 2–​3. 66. Eugene V. Debs, “Do We Want Industrial Peace?,” Locomotive Firemen’s Magazine, March 1890, 193–​95; see also Debs, “Political Lessons of the Pullman Strike,” 1, 2–​ 3; “Eugene V. Debs to the Workingmen of Cleveland,” Cleveland World 7, no. 147 (January 19, 1896): 3 (critiquing the way courts enjoined labor concerted activity but not corporate activity and arguing that there “can be no civil liberty with industrial slavery”). 67. “Eugene V. Debs to the Workingmen of Cleveland,” 3; see also Eugene V. Debs, “The Workers and the Trusts,” Jamestown Weekly Alert, August 31, 1899, 6; Eugene V. Debs, Speech at Central Music Hall: Competition vs. Cooperation (October 13, 1900); “Debs’ Great Speech,” Miners’ Magazine, August 1902, 26–​35; Eugene V. Debs, “The Socialist Party’s Appeal,” The Independent, October 24, 1912, 950. 68. “Industrial Union Manifesto,” Voice of Labor, March 1905, 3–​5; “Eugene V. Debs to the Workingmen of Cleveland,” 3. 69. “Eugene V. Debs to the Workingmen of Cleveland,” 3; see also Speech at Central Music Hall; “Debs’ Great Speech,” 26–​35. 70. Crane, “Antitrust’s Unconventional Politics,” 120. 71. Louis D. Brandeis, “A Curse of Bigness,” Harper’s Weekly, January 10, 1914, 18. 72. Eugene V. Debs, Labor and Freedom (St. Louis, MO: Phil Wagner, 1916), 167–​75.

420  Antimonopoly and American Democracy 73. Nelson Lichtenstein and Howell Harris, “Introduction,” in Industrial Democracy in America: The Ambiguous Promise, ed. Nelson Lichtenstein and Howell Harris (Cambridge, U.K.: Cambridge University Press, 1993) (tracing history of the term “industrial democracy”). 74. David Montgomery, “Industrial Democracy or Democracy in Industry,” 20, 35–​36. For a discussion of Progressive Era approaches to monopoly more generally, see Sanders, Roots of Reform, (Chicago, IL: University of Chicago Press, 1999), 197–​202, 275–​82; Martin J. Sklar, The Corporate Reconstruction of American Capitalism, 1890–​ 1916 (Cambridge, U.K.: Cambridge University Press, 1988). 75. William D. Haywood and Frank Bohn, Industrial Socialism (Chicago, IL: Charles H. Kerr & Co., 1911), 37, 52. 76. James Rowan, The IWW in the Lumber Industry (Chicago, IL: Lumber Workers Industrial Union no. 500, 1921). 77. See Nico Bowie, “Corporate Personhood v. Corporate Statehood,” Harvard Law Review 132, no. 7 (2019): 2009, 2029–​35. 78. William E. Trautman, ed., Proceedings of the First Convention of the Industrial Workers of the World I (New York, NY: New York Labor News Company,1905) (speech of Chairman William D. Haywood, June 27, 1905). 79. Steve Fraser, Labor Will Rule: Sidney Hillman and the Rise of American Labor (New York, NY: Free Press Publishing, 1991). 80. See Forbath, “Politics, State Building, and the Courts,” 1121; cf. Brandeis, “A Curse of Bigness,” 18. For further discussion of Brandeis’s vision, see Gerald Berk, Louis D. Brandeis and the Making of Regulated Competition, 1900–​1932 (Cambridge, U.K.: Cambridge University Press, 2009). 81. Sidney Hillman, “Address at National Press Club,” Amalgamated Clothing Workers of America, March 16, 1912 (on file with author) (“The nation must own the trusts instead of the trust magnates owning the nation and this is to my knowledge the only solution of the trust question”). 82. Sanders, Roots of Reform, (Chicago, IL: University of Chicago Press, 1999), 277–​313. 83. Bowie, “Corporate Personhood v. Corporate Statehood,” 2038–​39. 84. Alan Dawley, Struggles for Justice ( Cambridge, MA: Harvard University Press, 1991), 102–​3, 156. 85. Landon R. Y. Storrs, Civilizing Capitalism (Chapel Hill, NC: The University of North Carolina Press, 2003), 72. 86. Ibid., 72–​74, 105. 87. Ibid., 71. 88. Ibid., 72–​74. 89. Nelson Lichtenstein, “Great Expectations: The Promise of Industrial Jurisprudence and Its Demise, 1930–​1960,” in Industrial Democracy in America: The Ambiguous Promise, (Cambridge, U.K.: Cambridge University Press, 1993), 113, 118. 90. Fraser, Sidney Hillman and the Rise of American Labor, (New York, NY: Free Press Publishing, 1991), 220. 91. Ibid. 92. Montgomery, “Industrial Democracy or Democracy in Industry,” 42.

Beyond the Labor Exemption  421 93. Ibid., 36; see also David Montgomery, The Fall of the House of Labor: The Workplace, the State, and American Labor Activism, 1865–​1925 (Cambridge, U.K.: Cambridge University Press, 1987), 370–​410. 94. Montgomery, “Industrial Democracy or Democracy in Industry,” 36. 95. Ibid., 35–​36. 96. Ibid., 42. 97. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 23. 98. Ibid. 99. 29 U.S.C. § 52 (2018). 100. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 24–​26. 101. A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). 102. Storrs, Civilizing Capitalism, (Chapel Hill, NC: The University of North Carolina Press), 103, 119; cf. Colin Gordon, New Deals: Business, Labor, and Politics in America, 1920–​1935 (Cambridge, U.K.: Cambridge University Press, 1995). 103. Storrs, Civilizing Capitalism, (Chapel Hill, NC: The University of North Carolina Press), 103, 119. 104. See Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 30–​35. 105. Storrs, Civilizing Capitalism, (Chapel Hill, NC: The University of North Carolina Press), 123 (quoting Lucy Mason, Open Letter, in The Nation, Survey Graphic, and The New Republic (April 1934)); see also Ellis W. Hawley, The New Deal and the Problem of Monopoly (Princeton, NJ: Princeton University Press, 1966), 72, 80–​81, 139, 149. 106. Hawley, The New Deal and the Problem of Monopoly, (Princeton, NJ: Princeton University Press, 1966), 195; Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 36; Barenberg, “The Political Economy of the Wagner Act.” 107. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 44; Irving Bernstein, The Turbulent Years: 1933–​1941 (Chicago, IL: Haymarket Books, 1970), 400–​2; Melvyn Dubofsky and Warren Van Tine, John L. Lewis: A Biography (Champaign, IL: University of Illinois Press, 1986), 163. 108. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 51–​52. 109. Sidney Hillman, “The Promise of American Labor,” New Republic 101 (1939): 62; see also Barenberg, “The Political Economy of the Wagner Act.” 110. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 148. 111. Ibid., 78–​ 85, 104; see also Robin Kelley, Hammer and Hoe (Chapel Hill, NC: The University of North Carolina Press 2015) (describing organizing of Black Communists in Alabama and their work with the CIO). 112. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 153; see also Lucy Mason, To Win These Rights: A Personal Story of the CIO in the South (New York, NY: Harper, 1952).

422  Antimonopoly and American Democracy 113. Andrew Wender Cohen, The Racketeer’s Progress (Cambridge, U.K.: Cambridge University Press, 2009). 114. Hillman, “The Promise of American Labor.” 115. CIO, Department of Education & Research, “Business and Democracy,” Economic Outlook, September 1944, 1. 116. CIO, “Business and Democracy,” 1, 4. 117. Clinton S. Golden and Harold J. Ruttenberg, The Dynamics of Industrial Democracy (New York, NY: Harper & Brothers, 1942). 118. Philip Murray and Morris Llewellyn Cooke, Organized Labor and Production (New York, NY: Harper & Brothers, 1940), 246. 119. Ibid. 120. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 144. 121. Exec. Order No. 9017, 7 C.F.R. 237 (1942). 122. Josiah Bartlett Lambert, “If the Workers Took a Notion”: The Right to Strike and American Political Development (Ithaca, NY: Cornell University Press, 2005), 110. 123. Lambert, The Right to Strike and American Political Development, 111; Steve Fraser, “The Good War and the Workers,” American Prospect, September 20, 2009, https://​ prosp​ect.org/​spec​ial-​rep​ort/​good-​war-​work​ers/​; Clyde Summers, “Labor and the Wartime State,” University of Pennsylvania Journal of Labor & Employment Law 2 (1999): 375 (reviewing James B. Atleson, Labor and the Wartime State: Labor Relations and Law during World War II (Champaign, IL: University of Illinois Press, 1998)). 124. “Industrial Union Extends Aims,” Christian Science Monitor, February 9, 1937, 4. 125. “To Regulate Monopoly,” New Republic, August 5, 1946, 120; Oliver Hoyem, “What Labor Intends to Get . . .,” Washington, April 1945, 36; see also Robert M. Bleiberg, “Suspicions and Resentments Affect Labor Productivity: Belief Widespread That Only Union Pressure Can Win Economic Gains,” Barron’s National Business & Financial Weekly, November 4, 1947, 3 (critiquing the CIO’s hostility to free enterprise). 126. Apex Hosiery Co. v. Leader, 310 U.S. 469 (1940). 127. Brief for the CIO as Amicus Curiae at 14, Apex Hosiery Co. v. Leader, 310 U.S. 469 (1940) (No. 638), 1940 WL 71203 (quoting Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 50 (1911)). 128. Brief for the CIO, 19. 129. Ibid., 19. 130. Ibid., 65–​66. 131. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 124–​33; see also Lizabeth Cohen, A Consumers’ Republic: The Politics of Mass Consumption in Postwar America (New York, NY: Vintage Books, 2003); Meg Jacobs, Pocketbook Politics: Economic Citizenship in Twentieth-​Century America (Princeton, NJ: Princeton University Press, 2005); Jennifer Klein, For All These Rights: Business, Labor, and the Shaping of America’s Public-​Private Welfare State (Princeton, NJ: Princeton University Press, 2003).

Beyond the Labor Exemption  423 132. See supra, notes 29–​30. For the limitations of these decisions, see Sanjukta Paul, “The Enduring Ambiguities of Antitrust Liability for Worker Collective Action,” Loyola University of Chicago Law Journal 47, no. 3 (2016): 101. 133. Parker v. Brown, 317 U.S. 341 (1943). 134. Crane, “Antitrust’s Unconventional Politics,” 130–​31. 135. See Merrick B. Garland, “Antitrust and State Action: Economic Efficiency and the Political Process,” Yale Law Journal 96, no. 3 (1987): 486, 489 (“A child of the New Deal, Parker assertedly saw regulation both as an economically necessary effort to correct market defects, and as a politically legitimate effort to serve the public interest. It was this public interest vision that drove the Court to defer to state regulation and declare it off-​limits to antitrust challenge.”). 136. Crane, “Antitrust’s Unconventional Politics,” 130. 137. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 84–​89, 134. 138. Ibid., 134; see also James A. Gross, The Reshaping of the National Labor Relations Board: National Labor Policy in Transition, 1937–​1947 (Albany, NY: State University of New York Press, 1981); Tomlins, The State and the Unions, 148–​50. 139. Labor Management Relations (Taft-​Hartley) Act of 1947, 29 U.S.C. §§ 141–​97 (2018) (amending the National Labor Relations Act of 1935). On the passage of Taft-​Hartley, see generally Kim Phillips-​Fein, Invisible Hands: The Businessmen’s Crusade against the New Deal (New York, NY: W.W. Norton & Company, 2010), 31–​32; Archibald Cox, “The Evolution of Labor-​Management Relations,” in Law and the National Labor Policy (Los Angeles, CA: University of California, Los Angeles-​-​Institute for Research on Labor and Employment, 1960), 13–​18. Labor historians disagree as to whether the Taft-​Hartley Act was a codification and consolidation of preexisting legal restrictions or a turning point. See Tomlins, The State and the Unions, 250–​51; Nelson Lichtenstein, “Taft-​Hartley: A Slave-​Labor Law?,” Catholic University Law Review 47, no. 3 (1998): 763, 763–​65. On the anticommunist campaigns that eventually culminated in the Taft-​Hartley loyalty oath, see Landon R. Y. Storrs, The Second Red Scare and the Unmaking of the New Deal Left (Princeton, NJ: Princeton University Press, 2013). 140. 29 U.S.C. § 151 (2018); see Andrias, “The New Labor Law,” 18–​19 (describing retrenchment under the Taft-​Hartley Act); Richard Yeselson, “Fortress Unionism,” Democracy 29 (Summer 2013), https://​democ​racy​jour​nal.org/​magaz​ine/​29/​fortr​ ess-​union​ism/​; Lichtenstein, State of the Union (Princeton, NJ: Princeton University Press, 2002). 141. 29 U.S.C. § 158(b)(4) (2018); see also Kate Andrias, “The Fortification of Inequality,” Indiana Law Journal 93, no. 5 (2018): 5, 12–​15; Julius Getman, The Supreme Court on Unions (Ithaca, NY: Cornell University Press, 2016), 90–​100. 142. CIO, Department of Education & Research, “‘Labor Monopoly’—​A Phony Issue,” Economic Outlook 11 (1950): 25. 143. Ibid., 25, 28; see also CIO, Department of Education & Research, “Big Business Is Getting Bigger,” Economic Outlook 10 (1949): 73; CIO, Department of Education & Research, “How Big Is Big Business?,” Economic Outlook (August 1946): 1.

424  Antimonopoly and American Democracy 144. CIO, “Big Business Is Getting Bigger,” 73. 145. Philip Murray, “What Union Labor Wants,” New Republic, March 27, 1950, 12. 146. Ibid. 147. CIO, Department of Education & Research, “Consumers, Workers Pay Cost of New Factories,” Economic Outlook 10 (1949): 1; see also CIO, “Big Business Is Getting Bigger,” 76 (“No great stretch of the imagination is required to foresee that if nothing is done to check the growth in concentration, either the giant corporations will ultimately take over the country or the Government will be impelled to step in and impose some form of direct regulation in the public interest” (quoting the Federal Trade Commission)). 148. On the rise of consumerism, see Louis Glickman, Buying Power: A History of Consumer Activism in America (Chicago, IL: University of Chicago Press, 2009). 149. CIO, Department of Education & Research, “Growth of Monopolies Threatens Age of Plenty,” Economic Outlook (June 1947):1. 150. Ibid. 151. Ibid. (noting that 200 of the largest non-​financial corporations owned about 55 percent of the total corporate assets and examining the cigarette and bread industries as case studies). 152. Milton Plumb, “Why Don’t the Monopolies Move into U.S. Treasury?,” CIO News, August 27, 1951, 3. 153. “Too Many Defense Contracts Held by Too Few Firms,” CIO News, September 17, 1951, 3. 154. CIO, Department of Education & Research, “CIO’s Tax Program for Full Employment,” Economic Outlook (April 1947): 4, 6 (urging that tax relief be given to small corporations because “[t]‌hey are the bulwarks against monopoly control and monopolistic practices of big business”); Irving Fagan and Cushman Reynolds, “You, Mr. Taxpayer, Pay for Industry’s Expansion,” CIO News, April 9, 1951, 5 (critiquing tax amortization). 155. See CIO, Department of Education & Research, “Who Owns Corporations?,” Economic Outlook (July 1948): 12 (arguing that “Congress should give the Department of Justice the right to stop mergers resulting from large corporations acquiring the assets of small companies” and that American corporations should not be able to enter into international cartel agreements). 156. CIO, “How Big Is Big Business?,” 8; see also “Anti-​Trust Suit Is Aimed at $6 Billion duPont Empire,” CIO News, March 10, 1952, 5; “Interlocks: How Big Business Runs the Economy,” CIO News, March 5, 1951, 7; “Economic Outlook X-​rays Monopolies,” CIO News, November 14, 1949, 9. 157. CIO, “Big Business Is Getting Bigger,” 78 (expressing support for H.R. 2734 (a bill preventing the purchase of assets of other corporations, if the result would lessen competition “substantially” or “tend to monopoly”), which had passed the House and was pending before the Senate Judiciary Committee in October 1949, and declaring: “For over twenty years the FTC has pleaded for legislation to plug this gap in our anti-​monopoly laws and carry out the original intent of the Clayton Act”).

Beyond the Labor Exemption  425 158. CIO, “Growth of Monopolies Threatens Age of Plenty,” 12 (“Government should provide loans to small businesses because the banking houses that control monopoly corporations may be reluctant to lend to competing businesses.”). For discussion of the CIO’s alliance with small business, see Stacy Mitchell and Susan R. Holmberg, “Why the Left Should Ally with Small Business,” The Nation, November 18, 2020, https://​www.thenat​ion.com/​arti​cle/​soci​ety/​democr​ats-​labor-​busin​ess-​monop​oly/​. 159. CIO, “Who Owns Corporations?,” 1, 4 (criticizing the outsize influence that a small number of wealthy individuals have on corporations due to their ownership of a large number of shares and directorships on corporations’ boards and noting the impact of the interconnectedness of corporate ownership on the control of corporations). 160. CIO, “How Big Is Big Business?,” 1, 8. 161. CIO, “Growth of Monopolies Threatens Age of Plenty,” 12. 162. CIO, Department of Education & Research, “The Atom: Golden Windfall for Big Business?,” Economic Outlook 15 (1954): 73. 163. Ibid. 164. Ibid. 165. Plumb, “Why Don’t the Monopolies Move into U.S. Treasury?” 166. E.g., while antimonopoly rhetoric pervaded nearly every issue of the CIO’s Economic Outlook, the 1963 publication by the AFL-​CIO that surveyed economic problems did not once mention monopoly power or antitrust. Executive Council of the AFL-​ CIO, Labor Looks at the Nation’s Economy (1963). The AFL-​CIO’s 1976 Platform Proposal to the Democratic and Republican Parties did highlight the problem of concentrated economic power, but it offered few ideas for reform beyond tax policy changes and did not mention antitrust or antimonopoly as goals. The AFL-​ CIO Platform Proposals (1976). Labor did continue to speak out against rising inequality and corporate profits and to demand price controls and profit sharing. See, e.g., The AFL-​CIO Platform Proposals; The January 1966 Economic Report of the President: Hearings before the Joint Economic Committee., 89th Cong., at 387–​ 436 (1966) (statement of Nathaniel Goldfinger, Director of Research, AFL-​CIO); The 1967 Economic Report of the President: Hearings before the Joint Economic Committee, 90th Cong., at 717–​92 (1967) (statement of Walter Reuther, President, AFL-​CIO). 167. Joseph Shister, “Unresolved Problems and New Paths for American Labor,” Industrial and Labor Relations Review 9, no. 3 (1956): 447; cf. A. H. Raskin, “What’s Ahead for Labor?,” Challenge Magazine 1, no. 6 (1953): 6. 168. Robert Shogan, “Will Reuther and Hoffa Tangle? Their Contrasts May Hold Answer,” Detroit Free Press, April 19, 1959. 169. Ibid. 170. Steve Fraser, “The ‘Labor Question’,” in The Rise and Fall of the New Deal Order, 1930–​ 1980, ed. Steve Fraser and Gary Gerstle (Princeton, NJ: Princeton University Press, 1989), 55; Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 143–​44; Shister, “Unresolved Problems and New Paths for American Labor,” 447.

426  Antimonopoly and American Democracy 171. Nelson Lichtenstein, The Most Dangerous Man in Detroit (New York, NY: Basic Books, 1995), 271–​98; Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 296–​98; Mark Anner, Jennifer Bair, and Jeremy Blasi, “Learning from the Past: The Relevance of Twentieth-​Century New York Jobbers’ Agreements for Twenty-​First-​Century Global Supply Chains,” in Achieving Workers’ Rights in the Global Economy, ed. Richard P. Appelbaum and Nelson Lichtenstein (Ithaca, NY: Cornell University Press, 2013), 239. Industry-​wide bargaining persists in some industries, including the arts and professional sports. See, e.g., Catherine Fisk, Writing for Hire: Unions, Hollywood, and Madison Avenue (Cambridge, MA: Harvard University Press, 2016) (describing industry-​wide bargaining in Hollywood). But while permitted, these arrangements are not required by law. 172. Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 296–​98. E.g., between 1947 and 1960, during the heyday of the UAW, average wages in the automobile industry nearly doubled. Lichtenstein, Most Dangerous Man, 288. 173. Winant, “The Power and Limits of the Anti-​Monopolist Tradition.” 174. Ibid. Notably, some of the industrial unions encouraged greater governmental involvement in price controls. See The January 1966 Economic Report of the President: Hearings before the Joint Economic Committee, 89th Cong., at 387–​436 (1966) (statement of Nathaniel Goldfinger, Director of Research, AFL-​CIO). 175. Winant, “The Power and Limits of the Anti-​Monopolist Tradition”; Nicholas von Hoffman, “A New Look at Unionism,” Washington Post, May 20, 1974. Union density and pattern bargaining in oligopolistic industries were by no means the only drivers of this relative economic equality. A range of other factors, including a growing economy, technological changes, the enactment of the GI Bill, comparatively low executive pay, robust financial regulation, a progressive tax system, the rise of public sector unionism, and the entrance of women into the workforce, all contributed to the rise of the American middle class and the period of relative economic egalitarianism. See Cowie, The New Deal & the Limits of American Politics, 153; Jacob S. Hacker and Paul Pierson, Winner-​Take-​All Politics: How Washington Made the Rich Richer—​And Turned Its Back on the Middle Class (New York, NY: Simon & Schuster, 2010), 88–​90; Michael Lind, Land of Promise (New York, NY: HarperCollins, 2012), 329–​62; Suzanne Mettler, Soldiers to Citizens: The G.I. Bill and the Making of the Greatest Generation (New York, NY: Oxford University Press, 2007). 176. See AFL & CIO, Department of Research, “The ‘Labor Monopoly’ Myth,” Economic Review 1 (1956): 13. 177. Vaheesan, “Accommodating Capital and Policing Labor,” 792–​93; Thomas A. Piraino Jr., “Reconciling the Harvard and Chicago Schools: A New Antitrust Approach for the 21st Century,” Indiana Law Journal 82, no. 2 (2007): 345, 348. 178. William F. Adkinson Jr., Karen L. Grimm, and Christopher N. Bryan, “Enforcement of Section 2 of the Sherman Act: Theory and Practice” (November 3, 2008) (unpublished Federal Trade Commission working paper), https://​www.ftc.gov/​sys​tem/​ files/​docume​nts/​public​_​eve​nts/​sect​ion-​2-​sher​man-​act-​heari​ngs-​sin​gle-​firm-​cond​ uct-​rela​ted-​comp​etit​ion/​secti​on2o​verv​iew.pdf; Piraino, “Reconciling the Harvard and Chicago Schools.”

Beyond the Labor Exemption  427 179. Piraino, “Reconciling the Harvard and Chicago Schools,” 349. 180. Brown Shoe Co. v. United States, 370 U.S. 294, 311–​14, 316–​17 (1962) (interpreting the Celler-​Kefauver Anti-​Merger Act). Prior to the 1950 amendments, the Clayton Act only covered stock acquisitions by direct competitors. Brown Shoe Co., 312–​13. 181. United States v. Phila. Nat’l Bank, 374 U.S. 321 (1963). 182. Debra A. Valentine, Former Gen. Counsel, Federal Trade Commission, Prepared Remarks before INDECOPI Conference: The Evolution of U.S. Merger Law (August 13, 1996), https://​www.ftc.gov/​pub​lic-​sta​teme​nts/​1996/​08/​evolut​ion-​us-​mer​ger-​law. 183. Robert Pitofsky, “Past, Present, and Future of Antitrust Enforcement at the Federal Trade Commission,” University of Chicago Law Review 72, no. 1 (2005): 209, 211–​12; see William E. Kovacic and Carl Shapiro, “Antitrust Policy: A Century of Economic and Legal Thinking,” Journal of Economic Perspectives 14, no. 1 (2000): 43, 50–​51; “The Merger Guidelines and the Integration of Efficiencies into Antitrust Review of Horizontal Mergers,” U.S. Department of Justice Archives, https://​www.just​ice.gov/​ archi​ves/​atr/​mer​ger-​gui​deli​nes-​and-​inte​grat​ion-​effic​ienc​ies-​antitr​ust-​rev​iew-​hor​ izon​tal-​merg​ers (“During this period the Court showed a strong bias toward developing per se rules whenever possible”). Leading examples from the case law include Fed. Trade Comm’n v. Procter & Gamble Co., 386 U.S. 568, 578 (1967); Phila. Nat’l Bank, 374 U.S. at 364; Am. Tobacco Co. v. United States, 328 U.S. 781, 809 (1946); United States v. Von’s Grocery Co., 384 U.S. 270, 274 (1966); Brown Shoe Co., 370 U.S. at 344. 184. United Mine Workers v. Pennington, 381 U.S. 657 (1965); E. R.R. Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961). 185. Pennington, 381 U.S. 657; Amalgamated Meat Cutters v. Jewel Tea Co., 381 U.S. 676 (1965). The Court, however, did not prohibit all forms of pattern bargaining; “a union may make wage agreements with a multi-​employer bargaining unit and may in pursuance of its own union interests seek to obtain the same terms from other employers.” Pennington, 381 U.S. at 665–​66. 186. Tami J. Friedman, “Capital Flight, ‘States’ Rights,’ and the Anti-​Labor Offensive after World War II,” in The Right and Labor in America: Politics, Ideology, and Imagination (2012), 81–​83; Andrias, The New Labor Law, 22–​23. 187. Cowie, The New Deal & the Limits of American Politics, 28; Lichtenstein, State of the Union, (Princeton, NJ: Princeton University Press, 2002), 228–​45. 188. See Andrias, The New Labor Law, 22–​23; Karl E. Klare, “Judicial Deradicalization of the Wagner Act and the Origins of Modern Legal Consciousness, 1937–​1941,” Minnesota Law Review 62, no. 3 (1978): 265. 189. See Herbert Hovenkamp, “On the Meaning of Antitrust’s Consumer Welfare Principle,” Journal of Corporation Law 45 (2020): 101; Vaheesan, “Accommodating Capital and Policing Labor,” 769 (citing Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979)); Robert Bork, The Antitrust Paradox (New York, NY: Free Press, 1978), 66 (same); U.S. Department of Justice & Federal Trade Commission, Horizontal Merger Guidelines § 1 (2010). On the role that the law and economics movement played in shaping judicial decision-​making, see Elliott Ash, Daniel L. Chen, and Suresh Naidu, Ideas Have Consequences: The Impact of Law and Economics on American

428  Antimonopoly and American Democracy Justice (March 20, 2019) (unpublished manuscript), 992782. For an argument that the modern Harvard School also contributed to this shift, see William E. Kovacic, “The Intellectual DNA of Modern U.S. Competition Law for Dominant Firm Conduct: The Chicago/​Harvard Double Helix,” Columbia Business Law Review (2007): 1. 190. Vaheesan, “Accommodating Capital and Policing Labor,” 770, 795. 191. Reiter, 442 U.S. at 343 (quoting Bork, The Antitrust Paradox, New York, NY: Free Press, 1978, 66). For further discussion, see Crane, “Antitrust’s Unconventional Politics.” 192. See, e.g., Agis Salpukas, “Steel Union Offers a Lykes-​ LTV Merger Condition Support: Labor Leader Says Reopening of Youngstown Sheet’s Campbell Works Should Be Required,” New York Times, April 11, 1978. Unions were more likely to oppose coordination among non-​union companies, joining with unionized competitors in those efforts. See John Koten, “Bumpy Road Ahead: GM Toyota Venture Stirs Major Antitrust and Labor Problems,” Wall Street Journal, June 10, 1983. On the tension between workers’ interests as workers and their interests as consumers, especially in an increasingly non-​union environment, see Otto Kahn-​Freund, Labour Relations: Heritage and Adjustment (Oxford, U.K.: Oxford University Press for the British Academy, 1979), 78–​79. 193. Connell Const. Co. v. Plumbers & Steamfitters Loc. Union No. 100, 421 U.S. 616 (1975). For a critique of this doctrine, see Milton Handler and William C. Zifchak, “Collective Bargaining and the Antitrust Laws: The Emasculation of the Labor Exemption,” Columbia Law Review 81, no. 3 (1981): 459. 194. Vaheesan, “Accommodating Capital and Policing Labor,” 810–​11. 195. Ibid., 798. 196. E.g., Fed. Trade Comm’n v. Superior Ct. Trial Laws. Ass’n, 493 U.S. 411 (1990). 197. See, e.g., Federal Trade Commission, Opinion Letter on Ohio Executive Order 2007–​23S (February 14, 2008); William Morris Endeavor Entm’t, LLC v. Writers Guild of Am., West, Inc., No. 2:19-​cv-​05465-​AB (AFMx), 2020 WL 2559491 (C.D. Cal. Apr. 27, 2020); see also Vaheesan, “Accommodating Capital and Policing Labor,” 814. At the same time, the embrace of putatively efficient market-​based solutions led to privatization of public services in the name of “competition.” Federal and state governments—​ Democratic and Republican both—​ increasingly contracted out work, weakening public sector unions and democratic control over public services. On privatization, see, e.g., Martha Minow, Partners, Not Rivals: Privatization and the Public Good (Boston, MA: Beacon Press, 2002); and Jon D. Michaels, Constitutional Coup: Privatization’s Threat to the American Republic (Cambridge, MA: Harvard University Press, 2017). On battles over public sector unions, see Kate Andrias, “Janus’s Two Faces,” Supreme Court Review (2018): 28. 198. See Jonathan B. Baker, “Competition Policy as a Political Bargain,” Antitrust Law Journal 73, no. 2 (2006): 483, 511–​12 (“To a substantial extent . . . the shift in antitrust doctrine that took place during the late 1970s and 1980s appears to reflect a bipartisan consensus”).

Beyond the Labor Exemption  429 199. Marinescu and Posner, Why Has Antitrust Law Failed Workers? (collecting research); José Azar, Ioana E. Marinescu, and Marshall Steinbaum, “Labor Market Concentration,” Journal of Human Resources (May 12, 2020); U.S. Department of Justice, Antitrust Division & Federal Trade Commission, “Antitrust Guidance for Human Resource Professionals” (2016), https://​www.just​ice.gov/​atr/​file/​903​511/​ downl​oad. 200. See Marshall Steinbaum, “Antitrust, the Gig Economy, and Labor Market Power,” Law and Contemporary Problems 82, no. 3 (2019): 45; Hiba Hafiz, “Picketing in the New Economy,” Cardozo Law Review 39, no. 5 (2018): 1845; Paul, “The Enduring Ambiguities of Antitrust Liability,” 101. On fissuring of the employment relationship, see David Weil, The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It (Cambridge, MA: Harvard University Press, 2014), 10; and Nelson Lichtenstein, “Two Cheers for Vertical Integration,” in Corporations and American Democracy, ed. Naomi Lamoreaux and William J. Novak (Cambridge, MA: Harvard University Press, 2017). 201. Vaheesan, “Accommodating Capital and Policing Labor,” 809–​11. 202. Chamber of Comm. v. City of Seattle, 890 F.3d 769 (9th Cir. 2018). 203. On the “new Lochner” era, see, e.g., Amanda Shanor, “The New Lochner,” Wisconsin Law Review 2016: 133, 199–​200; Amy Kapczynski, “The Lochnerized First Amendment and the FDA: Toward a More Democratic Political Economy,” Columbia Law Review Forum 118, no. 7 (2018): 179; Jedediah Purdy, “Neoliberal Constitutionalism: Lochnerism for a New Economy,” Law and Contemporary Problems 77, no. 4 (2014): 195. 204. See Crane, “Antitrust’s Unconventional Politics” (discussing vibrant contemporary debate in the field of antitrust, in both academic and political circles). But cf. Daniel A. Crane, “Antitrust and Wealth Inequality,” Cornell Law Review 101, no. 5 (2016): 1171, 1176, 1207 (questioning antitrust law’s relationship to inequality). 205. See Lina Khan, “The New Brandeis Movement: America’s Antimonopoly Debate,” Journal of European Competition Law and Practice 9, no. 3 (2018): 131. 206. Lina Khan, “The Separation of Platforms and Commerce,” Columbia Law Review 119, no. 4 (2019): 973; Wu, The Curse of Bigness: Antitrust in the New Gilded Age (New York, NY: Columbia Global Reports, 2018); Zephyr Teachout, Break ’Em Up: Recovering Our Freedom from Big Ag, Big Tech, and Big Money (New York, NY: All Points Books, 2020). 207. See, e.g., C. Scott Hemphill and Philip J. Weiser, “Beyond Brooke Group: Bringing Reality to the Law of Predatory Pricing,” Yale Law Journal 127, no. 7 (2018): 2048; Steven C. Salop, “Invigorating Vertical Merger Enforcement,” Yale Law Journal 127, no. 7 (2018): 1962; Michael Katz and Jonathan Sallet, “Multisided Platforms and Antitrust Enforcement,” Yale Law Journal 127, no. 7 (2018): 2142; C. Scott Hemphill and Nancy L. Rose, “Mergers That Harm Sellers,” Yale Law Journal 127, no. 7 (2018): 2078; Herbert Hovenkamp and Carl Shapiro, “Horizontal Mergers, Market Structure, and Burdens of Proof,” Yale Law Journal 127, no. 7 (2018): 1996; A. Douglas Melamed and Carl Shapiro, “How Antitrust Law Can Make FRAND

430  Antimonopoly and American Democracy Commitments More Effective,” Yale Law Journal 127, no. 7 (2018): 2110; Fiona Scott Morton and Herbert Hovenkamp, “Horizontal Shareholding and Antitrust Policy,” Yale Law Journal 127, no. 7 (2018): 2026. 208. See, e.g., Suresh Naidu, Eric A. Posner, and E. Glen Weyl, “Antitrust Remedies for Labor Market Power,” Harvard Law Review 132, no. 2 (2018): 536; Ioana Marinescu and Eric A. Posner, “Why Has Antitrust Law Failed Workers?,” Cornell Law Review 105, no. 5 (2020): 1343; see also Alan Manning, “Monopsony in Labor Markets: A Review,” Industrial and Labor Relations Review 74, no. 1 (2021): 3, 13–​ 15; Eric A. Posner, How Antitrust Failed Workers (New York, NY: Oxford University Press, 2021). 209. See Elizabeth Anderson, Private Government: How Employers Rule Our Lives (Princeton, NJ: Princeton University Press, 2017). 210. See Tim Bray and Christy Hoffman, Opinion, “We Have a Question for Jeff Bezos and Other Billionaires: Will You Finally Let Your Workers Unionize?,” New York Times, July 29, 202), https://​www.nyti​mes.com/​2020/​07/​29/​opin​ion/​ama​zon-​union-​ congr​ess-​antitr​ust.html. On labor’s relative acquiescence, see Zephyr Teachout, (@ ZephyrTeachout), Twitter (7:19 AM, July 28, 2020), https://​twit​ter.com/​Zep​hyrT​ each​out/​sta​tus/​1288​0716​4800​9244​672. But see Karen Weise and David McCabe, “Unions Push F.T.C. to Study if Amazon Warps the Economy,” New York Times, February 27, 2020, https://​www.nyti​mes.com/​2020/​02/​27/​tec​hnol​ogy/​ama​zon-​uni​ ons-​ftc.html. 211. Brishen Rogers, “The Limits of Antitrust Enforcement,” Boston Review, April 30, 2018, https://​bosto​nrev​iew.net/​artic​les/​bris​hen-​rog​ers-​labor-​tru​sts/​. 212. Winant, “The Power and Limits of the Anti-​Monopolist Tradition.” 213. Ibid. 214. K. Sabeel Rahman, “Infrastructural Regulation and the New Utilities,” Yale Journal on Regulation 35 (2018): 911; William J. Novak, “American Antimonopoly and the Rise of Regulated Industries Law,” this volume, 168–​178; cf. Lina Khan, “The End of Antitrust History Revisited,” Harvard Law Review 133 (2020): 1656, 1682 (reviewing Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age (New York, NY: Columbia Global Reports, 2018)) (urging subsequent work to engage in a broader analysis regarding monopoly power). 215. Anne Alstott and Ganesh Sitaraman, The Public Option: How to Expand Freedom, Increase Opportunity, and Promote Equality (Cambridge, MA: Harvard University Press, 2019). 216. See Nell Abernathy, Darrick Hamilton, and Julie Margetta Morgan, “New Rules for the 21st Century: Corporate Power, Public Power, and the Future of the American Economy,” Roosevelt Institute (2019), https://​roo​seve​ltin​stit​ute.org/​wp-​cont​ent/​ uplo​ads/​2020/​07/​RI_​2​021-​Report​_​201​904.pdf; Todd Tucker and Steph Sterling, “Industrial Policy and Planning: A New (Old) Approach to Policymaking for a New Era,” Roosevelt Institute (2021), https://​roo​seve​ltin​stit​ute.org/​wpcont​ent/​uplo​ ads/​2021/​07/​RI_​ANewOldApproachtoPolicymakingf​oraN​ewEr​a_​Is​sueB​rief​_​202​ 108.pdf.

Beyond the Labor Exemption  431 217. Marshall Steinbaum, “Antitrust, the Gig Economy, and Labor Market Power,” 45; Brian Callaci, Opinion, “It’s Time for Labor to Embrace Antimonopoly,” The Forge, April 13, 2021, https://​forg​eorg​aniz​ing.org/​arti​cle/​its-​time-​labor-​embr​ace-​antim​ onop​oly; Vaheesan, “Accommodating Capital and Policing Labor”; see also Hiba Hafiz, “Labor Antitrust’s Paradox,” University of Chicago Law Review 87, no. 2 (2020): 381. 218. Paul, “The Enduring Ambiguities of Antitrust Liability,” 101. On the need to protect small business, see Mitchell and Holmberg, “Why the Left Should Ally with Small Business.” 219. Sandeep Vaheesan and Nathan Schneider, “Cooperative Enterprise as Antimonopoly Strategy,” Pennsylvania State Law Review 124, no. 1 (2019): 1. 220. See Athena, Delivering Democracy, https://​athen​afor​all.org/​. 221. Executive Order on Promoting Competition in the American Economy (July 9, 2021), https://​www.whi​teho​use.gov/​brief​i ng-​room/​presi​dent​ial-​acti​ons/​2021/​07/​ 09/​execut​ive-​order-​on-​promot​ing-​comp​etit​ion-​in-​the-​ameri​can-​econ​omy/​; see also “FTC and DOJ to Hold Virtual Public Workshop Exploring Competition in Labor Markets,” Federal Trade Commission, October 27, 2021, https://​www.ftc.gov/​ news-​eve​nts/​press-​relea​ses/​2021/​10/​ftc-​doj-​hold-​virt​ual-​pub​lic-​works​hop-​explor​ ing-​comp​etit​ion-​labor. 222. See, e.g., Erin Mulvaney and Siri Bulusu, “Gig-​Economy Rise Prompts FTC Chief ’s Call to Alter Antitrust Law,” Bloomberg Law, November 2, 2021, https://​news.bloom​ berg​law.com/​antitr​ust/​gig-​econ​omy-​rise-​prom​pts-​ftc-​chi​efs-​call-​to-​alter-​antitr​ ust-​law. 223. See Kate Andrias and Alexander Hertel-​Fernandez, “Ending At-​Will Employment: A Guide for Just Cause Reform,” Roosevelt Institute (2021), https://​roo​seve​ltin​stit​ute. org/​wp-​cont​ent/​uplo​ads/​2021/​01/​RI_​A​tWil​l_​Re​port​_​202​101.pdf.

12 Anti-​Monopoly in the Media Industries A History Sam Lebovic

When viewed through the lens of technological development, the history of the media in America’s twentieth century appears to be defined by proliferating diversity, as newspapers were joined by radio, then television, and then the Internet (in all of its multiplicities). But when viewed through the lens of political economy, a different history of the media emerges—​one in which consolidation and centralization of ownership has posed ongoing challenges to media diversity. The number of newspapers in the nation, for instance, reached its highest point in 1909 and has been declining ever since.1 Witnessing the rise of newspaper chains and one-​newspaper towns, commentators have been worrying about the disappearance of a diverse daily newspaper market for just as long. When broadcast media emerged in the interwar years, similar issues of centralized control arose when networks developed and when newspaper publishers began purchasing stations to create the first mixed-​media companies. And from William Randolph Hearst to Rupert Murdoch, fear of the power of media barons has been a recurrent feature of American political culture across the century. As was typical of so many other economic fields, these processes of centralization and consolidation were often criticized as signs of “monopoly”—​a label that grasped powerful tendencies in the media industries, even if a perfect monopoly in the media never emerged. Monopoly in the media poses unique challenges to American democracy. Self-​rule and the formation of public opinion rely on the free flow of information to the public, but the actual circulation of information in the twentieth-​century polity rested on media markets that were structured by economics, not by abstract norms of democratic theory. At the same time that liberal philosophy came to embrace the notion of a “free market of ideas” as the sine qua non of a democratic public sphere, the actual media market was Sam Lebovic, Anti-​Monopoly in the Media Industries In: Antimonopoly and American Democracy. Edited by: Daniel A. Crane and William J. Novak, Oxford University Press. © The Tobin Project 2024. DOI: 10.1093/​oso/​9780197744666.003.0012

Anti-Monopoly in the Media Industries  433 consolidating and centralizing. There have always been straightforward normative reasons to favor diversified ownership in the media as a good in and of itself—​it deprives media barons of untoward power over public discourse; it provides greater checks on corruption; competition provides a check within the media landscape itself.2 And it seems hard to have a robust and diverse public sphere, full of contrasting viewpoints and multiple sources of information, when ownership forms a bottleneck in the marketplace of ideas. Finding a policy solution to increasing concentration in the media industries, however, has proven elusive. This chapter narrates a history of anti-​monopoly efforts in the media industries since the late nineteenth century. It argues that while concern about media monopoly arose repeatedly across the century, efforts to address trends to consolidation were always partial and inadequate. This was the case for two primary reasons. First, the strange and complex economics of the media industries upset efforts to articulate clear policies of diversification. Unlike most industries, there are two consumers involved in any transaction in the media marketplace—​the citizen-​consumer who has purchased the media commodity to read, watch, or listen to the media content; and the advertiser who has purchased the advertising time or white space in the media content to reach the citizen-​consumer. Increasingly, the sale of white space to the advertiser became the central economic relationship in the media field. As Walter Lippmann put it in a study of the newspaper business in the early 1920s, “circulation is, therefore, the means to an end. It becomes an asset only when it can be sold to the advertiser.”3 By the second half of the twentieth century, newspapers earned something like 70 percent of their revenue from advertising; broadcast media like radio and television were completely free to the consumer and the broadcasters made money exclusively by selling the attention of their audience to the advertisers.4 Nevertheless, media companies in the twentieth century were always involved in a triangular trade, selling to two consumers. The result was that policymakers seeking to diversify the media were faced with two sets of consumer interests to manage when seeking to intervene in markets trending toward monopoly. They could try to directly promote the interests of the citizen-​consumer in receiving diverse forms of content by articulating something like a public-​interest defense of media diversity—​a move that made sense in terms of democratic desires to create a well-​informed public, but which tended to bracket the advertising exchange at the heart of the industry’s actual economics. Or they could try to defend

434  Antimonopoly and American Democracy competitive economics in the media industries by regulating the advertising market—​a move that promised to address the mechanisms by which smaller media players were actually driven from the market, but which protected the consumer interest in media content only indirectly, as a potential downstream beneficiary from a more competitive media marketplace. As we will see, while reformers flirted with both approaches, they never fully embraced either. In part, this was because the ambiguities of media economics made it hard to apply the consumer-​interest standard that drove most anti-​trust policy in the twentieth century. There was also a second reason that these efforts to develop pro-​diversity policies were only ever partial—​they were always deeply controversial, and they were opposed by the media industries themselves. Throughout the century, the media industries mobilized a third vision of ideal policy in the media—​a laissez-​faire vision that any form of pro-​diversity policy was a statist interference with the free marketplace of ideas. On this view, which obviously benefited the bottom line of powerful media enterprises, any concentration that emerged in media markets was a function of aggregate consumer demand, and hence more democratic than any top-​down regulatory framework could ever be. Moreover, media industry lobbyists argued, any state regulation of media economics was a form of statist interference in the public sphere, and hence a form of potential censorship that threatened the “free marketplace of ideas” that the First Amendment was intended to protect. Compared with the ambiguities posed by developing a public-​interest approach to media regulation on behalf of the citizen, or the difficulties and technocratic minutiae involved in minimizing uncompetitive practices in the advertising marketplace, this was a vision of media policy compelling in its simplicity, one that mobilized democratic and civil libertarian norms to shore up already existing media economics. Over the course of the twentieth century, it played a central role in first blunting, and then rolling back, efforts to confront media consolidation. Throughout the twentieth century, as this chapter traces, media policy emerged out of clashes between these three visions: a public-​interest vision centered on the citizen-​consumer; a pro-​competitive vision centered on economistic regulation of the advertising marketplace; and a laissez-​faire vision of the “free marketplace of ideas.” The chapter begins in the long progressive era, documenting the rise of concerns about media concentration and monopoly. The following section then explores anti-​monopoly activity during the late New Deal, when anti-​trust action in the newspaper and

Anti-Monopoly in the Media Industries  435 radio fields came closest to developing a public-​interest approach to media policy—​only to be confronted and curtailed by vigorous arguments from the media industries that a laissez-​faire policy was necessary to protect civil liberties from statist regulation. The compromise that emerged from this clash is the subject of the section “The Limits of Postwar Diversity Policy,” which shows that media policy in the two decades after World War II was defined by attempts to protect competitive economics in the industry on strictly economic criteria—​they took a technocratic form far removed from the democratic passions that mobilized the public-​interest approach. And while such economistic approaches might have accomplished much to diversify media if they had been wholeheartedly embraced, they were only applied in a partial and incomplete fashion. As the concluding section shows, the mid-​1960s did witness a brief resurgence of interest in media diversity and an attempt to more rigorously apply pro-​competitive policies. But amid political backlash from the media industries, a general turn to free market economics, and a proliferation of new media technologies, the period since the 1970s has witnessed the triumph of the laissez-​faire vision of media policy—​ as well as an ongoing consolidation of media ownership.

The Problem of Media Monopoly In the second half of the nineteenth century, the media landscape of the United States underwent a series of remarkable transformations. Increasingly urban and increasingly literate citizens provided expanding markets for newspaper publishers. A booming advertising industry, keen to access those markets of potential customers, provided new streams of revenue. And a series of interlocking transformations in printing technology—​the application of steam power to the press, new methods of newsprint production, and the mechanization of typesetting—​meant that newspaper publishers had the capacity to print ever-​larger newspapers in ever-​larger numbers. In short, the press underwent an industrial revolution.5 But as in so many industries in the Gilded Age, industrialization threatened diversity in the newspaper industry. It was expensive to purchase and run the plant required to produce one of the new mass newspapers—​ creating a newspaper, as one journalist observed in 1892, now “involved the sinking of considerable capital.”6 The only way to cover those costs was to rely on advertising revenues. But advertisers were incentivized to purchase white

436  Antimonopoly and American Democracy space only with the most successful papers in any given market, for that would allow them to reach the widest number of readers at the lowest cost per reader. This created a dangerous spiral, in which profitable newspapers with a large market share grew ever more profitable, with greater resources to grow their market share still further. Smaller newspapers, by contrast, became starved of revenue, unable to compete with their expanding rivals. As early as 1900, one industry watcher was already declaring that “the newspaper business, if not a ‘natural monopoly,’ is at least a business in which a large aggregation of capital and a widespread and unified organization for news-​gathering and news-​distribution is essential to success.”7 Or as another commentator put it in 1915, “the increased cost of production in every department will drive the weaker and less efficient papers either to merge with the stronger or suspend.”8 The first decades of the twentieth century thus witnessed both the growth of overall circulation, and a decline in diversity. Newspaper consolidation took two primary forms. First, as smaller newspapers went under, one-​paper towns became the norm—​in 1910, 689 cities had competing dailies; by 1930, only 288 did.9 Second, the remaining newspapers were increasingly united under common ownership. By 1933, there were sixty-​three newspaper chains in the nation, which held 37 percent of daily circulation10 Frank Munsey, one of the first men to establish a chain newspaper, explained what was going on: “The same law of economics applies to the newspaper business that operates in all other important businesses today; small units in any one are no longer competitive factors.”11 Oswald Garrison Villard reached the same conclusion, complaining in 1931 that “the daily tends to disappear . . . there is now evidence that the trend among newspapers is as distinctly toward monopoly as elsewhere in industry.”12 The same reformers who were generally agitated by the rise of monopoly were also concerned about the consolidation of the newspaper industry, which seemed to pose particular threats to the democratic process. It didn’t take long for the muckrakers to explore the ways that monopolistic business interests were controlling public opinion through economic influence over the press—​Ray Stannard Baker revealed “How Railroads Make Public Opinion,” while Charles Edward Russell explored the “Keeping of the Kept Press,” in which the press was responsible for “not so much (in the old phrase) molding public opinion as perverting or poisoning it.” (Pearson concluded that the press was “gag[ged] through the irresistible medium of the advertising business.”13) Henry George’s interest in monopoly was sparked by

Anti-Monopoly in the Media Industries  437 his failure to purchase a wire subscription for his San Francisco newspaper, and he continued to be concerned about the “bondage of the press” to business interests in the early twentieth century.14 In 1911, William Jennings Bryan, who had complained about corporate corruption of the press since his 1896 electoral defeat, asserted that “so many newspapers are owned by, or mortgaged to, speculators, capitalists and monopolists, and are used for advocating or excusing legislation, having for its object the conferring of special privileges upon a few of the people at the expense of the rest of the people, that the press has been robbed of much of its legitimate influence.”15 Control over the press, reformers worried, had become consolidated in a few hands, closely aligned with the interests of the economic elite. Such concerns about media monopoly reached a crescendo during the New Deal. New Deal investigations of the corporate economy confirmed the many ways in which monopolists influenced public opinion through the increasingly consolidated press. FTC explorations of the public utilities industry, for instance, revealed the prevalence of power industry propaganda throughout the press. Press critics decried the power of the “Utilities octopus” over the press, one commentator noting that it was a “result of the incorrigible forces of economic determinism”—​or, more precisely, “the concentration of ownership and control in the newspaper field similar to what is going on elsewhere.”16 Meanwhile, as newspapers expanded their holdings in the radio—​they would own one-​third of radio stations by decade’s end—​ critics worried that the rise of the new medium inaugurated an era of increasingly powerful cross-​media companies. “If monopoly is bad in the material realm,” declared one such critic, “it is infinitely worse in the realm of instruments for the formation of public opinion.” Or, as one letter writer to the New York Times put it, if newspaper publishers are allowed to own radio stations, the “circle of transmitting information will be disastrously closed with dangerous consequences for the spirit of the free press principle.” In the same years, tellingly, people began to describe such media combinations with a new, troubling, metaphor—​they were media “empires.”17 Creating particular concern in the minds of reformers was the outsize role that powerful, deeply conservative media barons were playing in opposing the New Deal. William Randolph Hearst used his vast media holdings to criticize FDR’s administration, as did the Chicago Tribune’s Robert McCormick—​the reformist impulses of the New Deal not only upset these men’s conservativism in principle, but efforts to introduce measures like “truth-​in-​advertising” threatened their bottom lines. Soon the publishers

438  Antimonopoly and American Democracy were working to defeat FDR in the polls. Hearst organized Alf Landon’s campaign, publisher Frank Knox was Landon’s vice presidential candidate, McCormick funded Landon campaigners, and only 37 percent of newspapers endorsed the sitting president. “The electorate went to the election booths,” observed Villard, “under the strongest impression not only that the press was mainly Republican, but that it was fighting not for the country as a whole but for its own personal interests.”18 Such press politicking continued in the late 1930s. Frank Gannett, head of the large Gannett newspaper chain, for instance, funded a Committee to Uphold Constitutional Government to attack FDR’s plans to pack the Supreme Court and reorganize the executive—​he also fancied a run for the presidency in 1940.19 In this context, media critics became increasingly convinced that consolidation in the media industries was interfering with the flow of information to the public, and hence distorting the formation of public opinion. Max Lerner thought that “the American press today is 90 percent a class monopoly. That means that it responds to the pressures and compulsions to which other big business enterprises respond.”20 Such complaints were echoed by those within the administration. In 1938, Sherman Minton declared that the press was so opposed to the New Deal that “the administration can’t get a headline in the newspapers” and criticized the “propaganda that appears in the sheets of this country.”21 In 1940, Edward Flynn, chair of the Democratic National Convention, asserted that the newspapers “are under a real dictatorship, a financial dictatorship of their advertisers and stockholders.”22 The key figure in the New Deal assault on the media barons was Harold Ickes, who published a book—​America’s House of Lords—​in which he attached the “misrepresentation of individuals and propaganda directed against the public welfare in the interest of the further enrichment and enhancement of the power of our economic royalists.” Ickes, who also engaged in a public debate with Gannett in which he accused the press of bondage to financial interests, worried that the newspaper industry was suffering from the “same disease that affects the general national economy”—​a trend toward monopoly.23 Economic trends toward media monopoly, in the eyes of New Dealers and Popular Fronters alike, posed foundational threats to democratic life. The media were not acting as a neutral arena for political debate. Rather, the press was now a “part of big business,” journalist Irving Brant concluded, so the press “thinks and acts with big business just as a man’s arm or leg or optic nerve functions in the organic whole of which it is a part.” Observing the role of the press in the 1940 election, Brant worried that “alliance between

Anti-Monopoly in the Media Industries  439 the press and Big Business throws into the political scales, all on one side, a crushing weight of propaganda and money.”24 Bruce Bliven of the New Republic came to a similar conclusion. He thought that powerful media magnates like Hearst and McCormick “wield more power than is safe in a democracy.”25

The High Tide of Anti-​Monopoly in the Late New Deal Given New Deal concerns about conservative control of the nation’s media landscape, alongside the resurgence of anti-​trust activity under Thurman Arnold in the late New Deal, there was considerable interest in anti-​ monopoly activity in the media industries in the early 1940s. On multiple fronts, New Dealers sought to create a more diversified media landscape in the belief that a more competitive media ecosystem would better serve American democracy.26 More media outlets, they argued, would minimize control over the organs of public opinion, increase the variety of voices and modes of information available to the public, and create a public sphere more accommodating to the “free marketplace of ideas” than the monopolistic and biased public sphere that they blamed on conservative business control. Given their critique of the existing media market, they felt no need to distinguish arguments based on neutral or proceduralist grounds from arguments based on partisan interest. Rather, they believed that diversification would simultaneously produce public goods on both procedural and partisan grounds—​ diversification would produce more competition by creating space for media more hospitable to their broader reformist, liberal agenda. New Dealers first focused their energies on the radio. In 1939, FDR appointed James Lawrence Fly as chairman of the Federal Communications Commission. Fly had studied under Felix Frankfurter at Harvard and then worked for the attorney general’s office as special assistant with responsibilities for anti-​trust, before becoming a key player in the TVA’s legal department. He was a loyal New Dealer and a committed opponent to media monopoly. Worried about “the increasing domination of the media of communication by a few economic entities, and the resultant lessening of opportunities for the full, free spread of all kinds and shades of opinion,” he championed the “need for diversity of control over the various media so that the public may have access to a variety of opinions.”27 Two years later, Fly was joined on the FCC by Clifford Durr, Hugo Black’s brother-​in-​law, and a lawyer with similarly

440  Antimonopoly and American Democracy liberal commitments—​Durr had resigned from the Reconstruction Finance Corporation to protest its lack of commitment to anti-​monopoly laws.28 In 1941, the newly reformist FCC issued a Report on Chain Broadcasting, which outlined eight new rules to prevent network control of their affiliates in an effort to diversify the voices and content on the radio spectrum—​in particular, to help the relatively new Mutual Broadcasting System compete with the established NBC and CBS networks. Most significant was a rule that no company could maintain more than one network—​a challenge to NBC, which owned two of the three major networks. The overall philosophy of the rules reflected a faith that “competition, given a fair test, will best protect the public interest. That is the American system.” Fly hoped that there might ultimately be six, rather than two national networks.29 Interest in injecting more competition into the radio industry also required confronting cross-​media ownership and taking action to break apart radio-​ newspaper combinations. A Payne Fund report had called for the separation of newspapers and radio ownership in 1935. Two years later, House and Senate resolutions had been introduced to begin exploring whether the FCC could take action in the field, only to be sidelined by more pressing matters (Burton Wheeler, for instance, had been consulting with the FCC on the issue until he was distracted by the outbreak of the court-​packing scandal).30 But in December 1940, FDR wrote to Fly to ask for hearings on the matter. On March 21, 1941, the FCC launched much-​publicized and deeply controversial hearings into whether there should be a ban on cross-​ownership. Media reform advocates used the hearings to critique media consolidation and call for greater diversity. Morris Ernst, for instance, complained about the “bottle-​necks going into the marketplace of thought,” which he thought the “most important problem facing the American people.” Ernst had written a Brandeisian critique of corporate consolidation entitled Too Big the previous year; in 1946 he would apply the same anti-​monopoly framework to media consolidation in The First Freedom.31 In 1942, the Department of Justice extended anti-​monopoly activity into the newspaper industry directly when it charged the Associated Press with anti-​trust violations. The AP was a cooperative news-​gathering enterprise—​ the 1,200 newspapers that subscribed to the wire service shared stories exclusively with each other, which provided members with a diversity of content at a minimal cost. The Department of Justice’s case in 1942 was sparked by the effort by Marshal Field III to start a new daily paper in the Chicago newspaper market—​he argued that his efforts to do so were hamstrung by

Anti-Monopoly in the Media Industries  441 the fact that, under AP bylaws, the Chicago Tribune was able to block Field subscribing to the service. This fact, argued Field and the Department of Justice, amounted to a restraint on trade—​it was not economically feasible to start a rival newspaper without an AP subscription, and the AP membership laws thus perpetuated newspaper monopolies and prevented the operation of a truly free press. By 1942, AP members had 96 percent of the morning circulation and 77 percent of the evening circulation; only six newspapers had successfully joined the service in the twentieth century—​over 100 had tried. And that was after the AP had reformed its by-​laws in both 1900 and 1915 in response to earlier anti-​trust suits. In its particulars, it was also a deeply political case. Field’s new paper was intended to provide an internationalist, pro-​FDR voice in a newspaper market dominated by one of the administration’s most vociferous conservative critics.32 And the AP had long been subject to criticism by media reformers who complained that the service circulated biased stories about race relations (produced by monopoly Democratic papers in the US South) or labor relations (produced by monopoly papers owned by conservative newspaper barons).33 But the AP suit was also of a piece with a broader New Deal interest in media diversification. As the Department of Justice explained in a press briefing on the suit: the national policy in favor of freedom of the press requires that newspapers engaged in disseminating news be unhampered and unrestrained in selecting the particular news they choose to publish . . . a corollary of such national policy is that newspapers be unhampered by any artificial or unnecessary restraints . . . [because] the public interest is promoted by the establishment and continued availability to the public of as many responsible newspapers, representing differing and varied points of view, as can successfully participate in the business of disseminating news and related comment.34

Seen together, the chain-​broadcasting case, the cross-​ownership hearings, and the AP anti-​trust action constituted a multipronged effort to inject renewed competition into the media industries in the early 1940s. They were of a piece with a broader New Deal interest in cultivating alternative channels of information through which the public sphere could operate without relying exclusively on organs owned by capitalist media barons, many of whom were plainly hostile to the broader economic reforms of the period.

442  Antimonopoly and American Democracy Alongside cultivating new owners of media outlets—​particularly those, like Field, who shared their policy goals and who undermined the monopolies of old foes like McCormick—​the New Deal also experimented with new forms of direct address that would connect the regulatory state with the public directly, without relying on the media. The Fireside Chats were the most famous of these experiments; probably more influential was the rise of a rash of publicity agencies within the regulatory state, which produced a torrent of news handouts and press releases to explain to the public the policies being implemented. It all amounted to an effort to rebalance the public sphere away from corporate control, so that the reformist state could be more plainly understood by the public. It was all undertaken in the interests of what was understood to be a public interest in diversity in the media landscape, one that required state intervention to arrest the economic drift of media markets to monopoly.35 Lawyers for the media industry opposed all these policies, arguing that such state intervention was, of itself, a form of statist interference with democratic liberty. They particularly relied on assertions that the First Amendment protected them from any such economic regulation. NBC argued that the FCC’s chain regulations exceeded the regulatory powers granted it by the Communications Act of 1934, and that such sweeping regulations interfered with their right to free speech.36 Industry journal Broadcasting asserted that the FCC was practicing “Gestapo tactics” when it began investigating newspaper ownership of radio stations. “If ever an industry cringed in a virtual state of terror,” it asserted, “it is broadcasting today under the lash of the FCC.”37 Such classically liberal, anti-​statist arguments were made with particular force when newspapers, always vigilant guardians of their press freedom, were involved. During the hearings into cross-​ownership laws, an array of experts—​including Roscoe Pound, Frank Luther Mott, and Fred Siebert—​testified on behalf of the newspapers that any economic regulation of the press would violate civil liberties and threaten democracy. James Stahlman, publisher of the Nashville Banner, refused to even recognize the subpoena calling him to testify before the FCC, asserting that such administrative hearings were unconstitutional interferences with press liberty.38 The AP and Robert McCormick made similar arguments in the AP case, claiming that the First Amendment protected the press from all economic regulation, because any such regulation opened the door to dictatorial control of the news media. If the anti-​trust action was successful, charged one newspaper industry lawyer in 1943, the “people of the US will be confronted

Anti-Monopoly in the Media Industries  443 just as the people of Germany today are confronted, with a government-​ controlled press.”39 But whereas such classical visions of press freedom had assumed that the state had to be kept out of the “free market of ideas” to allow for the flourishing of a diverse marketplace, the New Dealers were attempting to articulate a theory of media freedom more appropriate to the twentieth century—​one in which the state had obligations to confront centralizations of power within the market. During World War II, in lower-​court decisions upholding anti-​ trust actions against NBC and the AP, Learned Hand gave this new theory its most significant articulation. Authoring a majority decision for the District Court for the Southern District of New York, Hand determined in 1942 that the FCC’s chain regulations did not violate the First Amendment because they protected the “very interests which the First Amendment itself protects, ie. first, of the ‘listeners,’ next, of any licensees who may wish to be freer of the ‘networks’ than they are, and last, of any future competing ‘networks’.”40 This was an important effort to reorient US conceptualization of the rights protected by the First Amendment. Rather than focus on the right of the speaker—​in this case, the newly regulated networks, who claimed that state regulations intervened in their free speech—​Hand was focused on the rights of the receiver. Seen from this angle, the First Amendment legitimized state intervention to diversify a media market where it was tending to monopoly; the First Amendment authorized anti-​trust activity, it did not block it. The next year, in his decision on the AP suit, Hand applied the theory to justify anti-​trust action in the newspaper field, and again tried to think about the social or public interest in the right to a free press: Neither exclusively, nor even primarily, are the interests of the newspaper industry conclusive; for that industry serves one of the most vital of all general interests: the dissemination of news from as many different sources, and with as many different facets or colors as is possible. That interest is closely akin to, if indeed not the same as, the interest protected by the First Amendment; it presupposes that right conclusions are more likely to be gathered out of a multitude of tongues.41

The hesitant, probing language is telling—​for Hand was articulating a new theoretical defense of free competition in the media marketplace, one updated for the era of media monopoly. Others were groping in the same direction. Freedom of speech, James Fly argued, is “not just the clothing of

444  Antimonopoly and American Democracy the individual with the legal power of expression”—​the more important right was the “right of the listener.” (And if that was your framework, he continued in a jab at the media industries, “then you cannot take the position that the operator of the broadcasting station can do whatever he chooses with the powerful instrument he has been licensed to use.”)42 Durr made the same point in a 1944 article entitled “Freedom of Speech for Whom?” in which he criticized concentration and commercialism in the radio industry and hoped for a radio “as uncurbed by commercial as by political restraints” because “democracy can function only in an atmosphere of full information and frank discussion.”43 In later decades, media reformers would repeatedly return to these ideas in an effort to contend with media monopoly in their own era. But Hand’s lower-​court jurisprudence was the closest the United States ever came to articulating a citizen-​oriented theory of monopoly regulation in the media industries. These thoughtful rulings, emerging from the decades-​long critique of media consolidation as well as more recent partisan ructions during the New Deal, were the high-​water mark for this public-​ oriented defense of media diversity. Media industry representatives quickly appealed to the Supreme Court to overrule Hand’s decisions in both the NBC and the AP cases. And while the Justice Department won both appeals, the decisions of the Supreme Court justices in the cases marked a retreat from Hand’s public-​interest theory of media diversity. This was plainest in the AP case, in which a fractured Court issued a technical and confusing 5–​3 decision that upheld the anti-​trust action against the AP, but on different grounds than Hand. Writing for the majority, Hugo Black stopped short of Hand’s broad reformulation of the purpose of the First Amendment. Hand had thought that the AP restraint on trade did not, of itself, rise to the level of an anti-​trust violation—​the AP was not, he thought, a “a monopoly in the sense that membership is necessary to build up, or support even a great newspaper. Such papers have been founded and have thriven without it.”44 It was for this reason that he had introduced a broader criterion of public interest in diversity to justify the anti-​trust action. Black, by contrast, upheld the anti-​trust action on strictly economic grounds, arguing that the by-​laws were straightforward violations of the Sherman Act because their effect was to “seriously limit the opportunity of any new paper to enter those cities” where a rival newspaper held a subscription: “trade restraints of this character aimed at the destruction of competition, tend to block the initiative which brings newcomers into a field of business and to frustrate the free enterprise system.”45 There was no

Anti-Monopoly in the Media Industries  445 need to consider the broader public interest in diverse flows of information; considering the newspaper industry as an economic industry like any other provided sufficient grounds to justify anti-​trust action. Felix Frankfurter was more enamored of Hand’s approach and issued a concurring opinion that justified the anti-​trust action against the AP because the public interest in diversity trumped the private speech rights of the newspaper industry—​“the interest of the public is to have the flow of news not trammeled by the combined self-​interest of those who enjoy a unique constitutional privilege . . . a public interest so essential to the vitality of our democratic government may be defeated by private restraints no less than by public censorship.”46 That logic was in keeping with Frankfurter’s broader jurisprudence, in which he routinely favored public interests over private rights. And it was in keeping with his majority opinion in the NBC chain-​ broadcasting decision two years earlier, in which he had upheld the FCC’s regulations on the grounds that the FCC had been issued sweeping powers to regulate the radio in the “public interest”—​understood to be the “the interest of the listening public in ‘the larger and more effective use of radio.’ ”47 But it was telling that Frankfurter did not draw on his earlier NBC decision to help justify his similar ruling in the AP case. On one level, both cases reflected the same concerns—​they were about the relationship between information producers and wholesalers, on the one hand, and information retailers, on the other; by regulating that relationship, anti-​trust action sought to have a downstream impact by diversifying the information available to members of the public. But Frankfurter famously grounded public interest regulation of the radio in the technical limitations of the spectrum—​laissez-​ faire was inappropriate in that medium, he argued, because the spectrum was scarce. (“Freedom of utterance is abridged to many who wish to use the limited facilities of radio. Unlike other modes of expression, radio inherently is not available to all. That is its unique characteristic, and that is why, unlike other modes of expression, it is subject to governmental regulation.”48) It was a successful argument, one that did much to buttress public regulation of the radio for decades. But such technological arguments were also a neat way to avoid frontally confronting the relationship between the private First Amendment interests of media barons, and the public interest in a diverse media landscape. One can’t help wondering whether that decision was shaped, indirectly, by the deployment of anti-​statist media claims of free speech. Whatever the motivation, the introduction of the technological argument isolated the jurisprudence of radio from the jurisprudence of the press.

446  Antimonopoly and American Democracy On the press side of the emerging bifurcation in media jurisprudence, Black’s decision did similar limiting work. It also justified anti-​trust action while stopping short of a full articulation of the public interest in media diversity. For Black, anti-​trust action in the press was justified on strictly economic grounds, because the AP membership laws violated the rights of rival publishers to compete fairly. Because he did not need to consider the rights of readers to access diverse sources of news, Black could therefore sidestep, rather than directly reject, the First Amendment issues raised by the newspaper publishers. “Surely,” he asserted, “a command that the government itself shall not impede the free flow of ideas does not afford non-​governmental combinations a refuge if they impose restraints upon that constitutionally guaranteed freedom. . . . Freedom to publish is guaranteed by the constitution, but freedom to combine to keep others from publishing is not. Freedom of the press from governmental interference under the First Amendment does not sanction repression of that freedom by private interests.”49 As in Frankfurter’s technological argument for radio regulation, this was a neat distinction—​one that allowed Black to preserve his absolutist commitments to both private speech rights and to anti-​monopolistic economics. (In this sense, Black was a consistent liberal, favoring competitive economics in the free market of both goods and ideas.50) But this form of the argument also allowed him to avoid engaging with the consumer-​oriented vision of media diversity that Hand had articulated. In Black’s view, the interests of the reader in diverse information would be protected by competition between publishers; anti-​trust action was taken on behalf of the publishers, not the public. So while the AP and NBC decisions were technically victories for the Justice Department, they fell far short of representing a new philosophy of public-​ interest regulation of media monopoly. Instead, they established narrow and technical justifications for diversification. Radio was to be regulated broadly, but as an exception to the general rule of laissez-​faire media economics that was justified on grounds of technological necessity as much as public interest—​a thin reed upon which to construct a robust program of media diversification (and one left vulnerable to later technological developments). Newspaper monopoly, on the other hand, was a problem to be dealt with by anti-​trust action to ensure competition between publishers—​as a field of state activity it would be defined by economistic criteria, not questions of public interest. It remains unclear what a broader, consumer-​oriented anti-​monopoly media policy might have looked like if it had been left free to flourish in

Anti-Monopoly in the Media Industries  447 the late New Deal. Its contours were never developed. While the media industries were unsuccessful in making legal claims that anti-​monopoly activity was unconstitutional—​the AP and NBC decisions showed that it was not—​accusations that media reform posed a dictatorial threat to democratic governance were made routinely in public political confrontations. For instance, when a federal appellate court ultimately ordered publisher James Stahlman to abide by his subpoena and appear before the FCC, it added in dicta that would not have upheld a prohibition of newspaper ownership of radio stations, for that power lay beyond the authority of the FCC.51 Meanwhile, the FCC became the target of early red-​baiting, as conservative congressmen opened investigations into allegations of disloyalty and communism at the Commission. Congress launched five separate investigations of the FCC during Fly’s term. In the most famous of them, segregationist senator Eugene Cox charged that the FCC was turning into an American gestapo. (Cox’s investigation came to a desultory close when it was revealed that he had taken money from a Georgian radio station seeking help with a license application.)52 The arguments of the media industry were more successful in the political culture than in the courts. Public accusations that the anti-​trust actions in the media field violated First Amendment freedoms sapped reformers of their will; confronted with accusations of statist interference with civil liberties, they blinked. The FCC delayed issuing any final decision based on its investigation into instituting a ban on cross-​media ownership, and then avoided adopting a “categorical rule barring newspaper owners.” Citing the “grave legal and policy questions involved” in the matter—​a clear concession to the political flak it had received from newspaper publishers—​the FCC instead decided to adopt an ad-​hoc approach to the question rather than issue a firmer ruling. As it made licensing decisions, it would simply consider “newspaper ownership as one element of the public interest.”53 That (non-​)policy had been recommended to the committee by noted civil-​libertarian legal theorist Zechariah Chafee Jr.; as he consulted with the FCC he was simultaneously serving as a member of the Hutchins Commission on Freedom of the Press—​a multiyear investigation into the philosophical and policy problems the media posed to democratic life in the United States, staffed by some of the liberal luminaries of the period. If a philosophical defense of a more robust policy response to the challenge of media monopoly was going to emerge in the 1940s, it would have emerged from the Hutchins Commission.54

448  Antimonopoly and American Democracy At first, in fact, the Commission was concerned with media monopoly and so embraced the AP anti-​trust action as a way to re-​democratize the press. Chafee initially shared in this “general feeling” that the Commission’s “recommendations would have to rely heavily on the anti-​trust laws.” Early versions of its report, written by Archibald MacLeish in early 1946, argued for widespread anti-​trust activity to democratize the media: “I would like to see absentee ownership of the press made impossible. I would like to see chains substantially broken down.”55 “Yet during the long ensuing discussions [of the Commission],” Chafee later reflected, “this comprehensive program faded away.” The deliberations of the Commission thus provide a way to trace the broader retreat of New Deal liberals from enthusiasm for public-​interest regulation of media economics.56 As they talked about the problem of media monopoly, the Commissioners became concerned that anti-​ trust action risked violating the First Amendment. Whether or not robust public-​interest regulation of media diversity would necessarily have opened the door to illiberal forms of content regulation remains unclear. It is certainly the case that some of those invested in public-​interest regulation of the media, like Frankfurter, were less invested in absolutist free speech claims. But others, like MacLeish or Fly (who went on to serve as director of the ACLU), were simultaneously committed civil libertarians—​ working out whether and how commitments to statist economic regulation can be reconciled with anti-​ statist commitments to free speech is a normative problem worth further investigation. And while it is true that the public-​interest frameworks that legitimized FCC regulation of broadcast economics also legitimized content regulations, we need a finer-​grained mapping of the impact of content regulation on civil liberties (and the cultural ecosystem at large) before we can meaningfully weigh the costs and benefits of content regulation, on the one hand, against the costs and benefits of media diversification, on the other. How specific content regulations work in mass media ecosystems is a complex subject—​FCC content regulations on broadcast media didn’t cause the collapse of American democracy, of course, but they were also offset or checked by the lack of public-​interest regulation in the newspaper industry. The tendency to frame this argument in the hyperbolic terms of democracy and dictatorship doesn’t help; the real question is one of balancing between competing requirements of democracy. However one might think about the best way to reconcile commitments to freedom and diversity in the abstract, liberals in the 1940s worried about

Anti-Monopoly in the Media Industries  449 totalitarianism thought that pro-​diversity state action in the media industries posed a threat to civil liberties, and hence an existential challenge to democracy. Chafee realized that the AP case only protected the rights of the publisher, not the consumer. (It worked to “protect the retailer against the power of the manufacturing wholesaler”—​it did not protect the consumer-​reader against the power of the publisher-​retailer.) But to go further and protect the reader, Chafee thought, would have required government intervention in the “contents, performance, and personal attitudes” of papers, journalists, and publishers, posing a clear threat to press freedom. Given the sweeping power of anti-​trust consent decrees—​Chafee felt them “far more drastic in their potentialities than the sporadic prosecutions of eighteenth-​century England”—​he retreated from his brief flirtation with anti-​trust law in order to protect classical speech rights. John Dickinson, former head of the anti-​trust division, agreed, arguing that relying on consent decrees in the media would create “a field day for government interference.” In all, as Chafee explained in a private letter to Morris Ernst, “we cannot expect the government to employ the anti-​trust laws extensively and at the same time to be very sparing in legal actions about sedition and obscenity.”57 And so this commission of leading liberals internalized the argument previously made by media industry advocates: state action to promote diversity threatened First Amendment rights. “Government ownership, government control or government action to break up the greater agencies of mass communication might cure the ills of freedom of the press,” the Commission declared in its final report, “but only at the risk of killing the freedom in the process.” The Commission concluded that anti-​trust laws should be used “sparingly” to “maintain competition among large units and to prevent the exclusion of any unit from facilities which ought to be open to all; their use to force the breaking-​up of large units seems to us undesirable.” The Commission’s reform program instead focused on the ethical and professional responsibilities of monopoly publishers to act in the public interest. “At last,” Robert Hutchins concluded privately, “we have come a long way from the Sherman anti-​trust act neurosis that we had at the beginning.”58 Yet however much adversarial politics and fears of statist tyranny had limited the interests of liberals in anti-​monopoly activity in the media industries, the AP and NBC precedents did suggest that the state had the legal right to intervene in media markets to encourage diversity. The question for the postwar period was what forms such intervention would take.

450  Antimonopoly and American Democracy

The Limits of Postwar Diversity Policy During the heyday of the post–​World War II boom, from 1945 until the early 1960s, efforts to confront media monopoly were anemic. As a result of the political clashes of the late New Deal, there was no serious effort to diversify a media landscape that continued its long-​term trend to increasing concentration. The FCC, which had the authority to promote diversity in both the radio industry and the new medium of television, entered a period of somnolence and inadequacy—​when James Landis reported on the state of the administrative agencies to the incoming Kennedy administration in 1960, he concluded that the FCC was a “somewhat extraordinary spectacle” that had “drifted, vacillated, and stalled in almost every major area.”59 As a result, little effort was made to encourage diversity in any holistic sense. The main hope for the diversification of television, for instance, was the development of the Ultra High Frequency portion of the spectrum, and in 1952 the FCC opened up seventy new UHF channels—​but it didn’t mandate that television sets be able to receive UHF signals until 1964, which meant that there was no advertising market to support the new channels and so they withered on the vine. (In 1957, Emanuel Celler blamed the situation on “regulatory uncertainty, vacillation, and lack of leadership.”60) In the newspaper industry, there wasn’t even a regulatory agency with the nominal capacity to develop industry-​ wide policies. Instead, the postwar years witnessed a resignation to the ongoing decline of newspaper diversity. As early as 1950, press critic A. J. Liebling complained that “the end-​of-​a-​newspaper story has become one of the commonplaces of our time, and schools of journalism are probably giving courses in how to write one.”61 In 1947, Democratic senator James Murray, chairman of the US Senate Small Business Committee, issued a report entitled The Small Newspaper: Democracy’s Grass Roots that called for hearings on newspaper economics to confront the fact that the “competitive press is dying”—​the hearings never happened.62 Rather than imagine policy solutions to the economic trends, press commentators followed the Hutchins Commission and instead focused on the ethical obligations of monopoly publishers, on their “social responsibility” to the readers and communities. In the absence of a broad commitment to diversity, reformers in both the broadcast and print industries dealt with the problem of media concentration through narrow, economistic criteria, focused particularly on trying to prevent monopolistic or anti-​competitive economic behavior. Even if they

Anti-Monopoly in the Media Industries  451 stopped short of imagining policies to protect the public interest in diversity, such economistic regulations could have done a great deal to preserve diversity in these industries—​after all, the main trends to consolidation were themselves economic. But in both the newspaper and broadcast industries, anti-​monopoly regulations were applied in a piecemeal and ambivalent fashion. More precisely, limitations in the way that the relevant market for monopoly regulation was determined, as well as a narrowed understanding of anti-​competitive behavior in the field, served to delimit anti-​monopoly activity in the media field. The first problem was the way that regulators conceptualized the scale of the media market in which competition had to be preserved. In the newspaper field, anti-​trust laws were applied only to the local market—​the competition between two newspapers in the same city. At first, this had been a way to strengthen the applicability of anti-​trust laws in the newspaper field. In 1928, when a group of seven rural Indiana newspapers were charged with conspiring to starve a rival of advertising revenue, they had argued that they could not be guilty of anti-​competitive practices because they did not exercise control of the national market in advertising or news media—​the Supreme Court had dismissed the argument.63 But by focusing only on competition within local newspaper markets, anti-​trust law avoided thinking about growing concentration at the national level—​particularly the rise of chains that owned papers across multiple markets, and which could take advantage of their economies of scale and deep financial resources to run independent competitors into the ground. By 1960, 32 percent of all daily papers in the country were owned by newspaper groups; in 1930, it had been only 15 percent.64 But this form of concentration was invisible to postwar anti-​ trust regulation and went unchallenged. In the broadcast media, by contrast, the FCC did recognize the challenge of chain ownership. In 1953 it established caps on the number of stations that any one company could own: seven AM stations, seven FM radio station, and five television stations (raised to seven the following year, so long as two of the stations were in the UHF spectrum). The FCC explained that the “fundamental purpose . . . of the multiple ownership rules is to promote diversification of ownership in order to maximize diversification of program and service viewpoints as well as to prevent any undue concentration of economic power contrary to the public interest” and the Supreme Court upheld its authority to issue them.65 The problem was that a hard numerical cap didn’t take into account the relative size of those stations, and hence left the

452  Antimonopoly and American Democracy door open to individual station owners establishing dominant market share. By 1957, for instance, NBC could reach 27 percent of the population of the country by virtue of the seven television stations it owned—​it had stations in the plum markets of New York, Chicago, Los Angeles, Philadelphia, and Washington, DC.66 Meanwhile, the way that regulation of the media industry had been divided between broadcast and print media interfered with efforts to grapple with the rise of cross-​media enterprises. Newspapers facing charges of monopoly would argue that the relevant market in any locality was not the newspaper market, but the full range of paid advertising media—​an argument that had mixed success, but was one way of diluting the appearance of monopoly control in the newspaper field.67 And the FCC, which had given up on developing a serious policy on cross-​media ownership in 1944, now handled the issuance of radio and television licenses on an ad-​hoc basis. In some cases it granted licenses to newspapers, in others it opted not to. Michael Stamm, who has written the best work on the subject, concluded that FCC policy was marked by “drift and incoherence.” In the absence of clear policy, economic advantage lay with existing media owners. By 1953, newspapers owned 88 of the 138 television stations in operation in the nation.68 Three years later, less than one station in ten was independently owned in the top twenty-​five television markets in the country—​70.7 percent were parts of chains, and 20 percent were owned by a local newspaper publisher.69 Because of the disjointed ways that regulatory approaches to media concentration had developed, such overall trends to concentration slipped through the cracks. The place to confront them would have been in local markets, where chain owners had, in the form of deep financial resources and economies of scale, competitive advantages over independent rivals. Rigorous efforts to enforce fair trade practices and anti-​monopoly regulations may have contained the trend to concentration. But in neither industry was this effort made. In the case of broadcast media, the problem lay in the power of the networks. The chain broadcasting rules had had little impact in dislodging the networks from the radio—​six years after their introduction, 97 percent of radio stations were affiliated with a network.70 The same problems were transferred to the new medium of television—​by 1957, 417 of the 455 television stations were affiliated with one of the three major networks. In that year, Emanuel Celler’s anti-​trust committee considered the television industry, and the FCC commissioned a Broadcast Network Study. Both found

Anti-Monopoly in the Media Industries  453 multiple ways that the networks encouraged concentration of control and undermined diverse approaches to station management and the production of diverse forms of content. Because the networks themselves owned stations in lucrative markets, they began with a sizable market share to sell to advertisers. They also implemented “must-​buy” agreements, in which they insisted that advertisers that wanted to buy on some parts of their network had to buy space on a set list of stations—​this made it difficult for independent stations to attract advertising revenue, difficulties only exacerbated by the fact that the networks could also offer bulk discounts on advertising space. Meanwhile, on the content side, the networks imposed “option-​time” agreements on their affiliates, in which the affiliates agreed to show network programs in prime time hours. For the network, this provided the key mechanism to allow them to sell national advertising, because it meant they could guarantee that their programs (and hence ads) would reach the widest market. But for rival program producers, it meant that they were squeezed out of the most lucrative hours in the schedule—​problems that only seemed more unfair when the networks themselves began producing programs, which they then had the capacity to place into the key prime time slots. Victor Hansen, assistant attorney general in charge of anti-​trust, concluded that the power of the networks over the TV stations “dwarfs” the power that the major film studios had had over theaters in the movie industry. But despite proposals from the Senate and the FCC that regulatory action needed to be taken to allow for freer competition between television stations, nothing was done.71 In the press, too, larger organizations had the capacity to undermine their competitors by monopolizing advertising revenue. Seemingly far removed from the interests of the public in receiving diverse forms of information from a diverse newspaper market, this was precisely the sort of issue in which a narrow focus on anti-​competitive business practices may have helped produce downstream benefits for the news-​reading public, just as Black had suggested in his AP decision. And there was reason to think there were real abuses in this part of the market. An internal National Recovery Administration memo in the early 1930s had concluded that “the newspaper publishing business for many years, and particularly since the war, has been the victim of as many unfair competitive methods as any industry in the country”—​such as “the development of a large number of newspaper monopolies, discrimination between advertisers, secret rebates of various kinds to advertisers and news dealers.”72

454  Antimonopoly and American Democracy But efforts to prevent unfair trade practices in the newspaper field were lackluster after World War II. In a few cases, when newspapers made egregious efforts to monopolize local advertising markets, the Anti-​ Trust Division had some success. In the late 1940s, for instance, the tiny Lorain Journal, with a circulation of 20,000, reaching 99 percent of the population, had applied for a radio license but was rebuffed by the FCC, on the grounds that it had a poor record of public service. In response, the Journal refused to sell advertising space to businesses that advertised on the new local radio station—​an effort to squeeze it out of business. Such practices were a clear violation of the anti-​trust laws, and even though the Journal claimed a First Amendment right to control who had access to its white space, the Supreme Court unanimously upheld the anti-​trust conviction against the paper, ruling that the “purpose and intent of this procedure was to destroy the broadcasting company.”73 And in the early 1950s, the Department of Justice successfully brought anti-​trust charges against the Kansas City Star, which had required advertisers to purchase ads in both its morning and afternoon editions together, and refused to sell advertising space in its papers or radio or television stations to advertisers who took out ads with a rival newspaper. But the penalties for these practices were mild, involving consent decrees to ban future discrimination, and small fines. The Kansas City Star, for instance, was fined $5,000, and forced to sell its radio and television stations—​the sale brought in $7.5 million.74 And those were the rare successes. More telling were the failed anti-​trust cases. In 1949, The Times-​Picayune Company, which operated the only morning paper in New Orleans as well as one of two afternoon papers, introduced what was known as a unit rate—​advertisers who wanted access to readers of the city’s only morning paper would have to buy advertising in both of the Times-​Picayune papers. The Anti-​Trust Division charged that this was an illegal tying arrangement and an attempt by the Times-​Picayune to drive its only competitor (the afternoon Item) out of business. It was an important case, for such practices were widespread in the 1950s—​168 of 175 morning-​evening combinations had introduced such a rule. But although the District Court ruled that the unit rate violated the anti-​trust laws, the Supreme Court reversed in a 5–​4 decision. The majority opinion found that there could only be violation of the anti-​trust laws if the Times-​Picayune held a monopoly in one market that it was exploiting in another, or if it introduced the combination rate with the intent to drive the Item out of business. It thought neither condition existed here—​it argued that the morning and

Anti-Monopoly in the Media Industries  455 afternoon newspaper markets were not separate markets, but one market of “fungible customer potential,” which meant that the Times-​Picayune was not exploiting a monopoly position in the morning market, but was simply competing with a rival in the overall advertising market (the logic reflected both the real commodity relations at the heart of the newspaper industry, as well as the ambiguities of the “market” in advertising space). And it argued that there was neither intent to harm the Item, nor any necessary evidence that the combination rate did harm the Item. The pitiless economics of newspaper consolidation soon made a mockery of the Supreme Court’s judgment that the Item was thriving. By 1958, having held the threat of the Item at bay with its combination rate, the Times-​Picayune had established a dominant position in the advertising market and bought the Item out. New Orleans became a monopoly newspaper town; the Times-​Picayune immediately raised its advertising rates by 30 percent. The purchase was approved by the Department of Justice on the condition that Times-​Picayune provide a sixty-​ day window in which a rival could purchase the Item at a set price—​no one came forward—​and that it sell its radio station.75 The Times-​Picayune decision thus served to delimit the applicability of the anti-​trust laws to the newspaper market. In finding even a forced combination rate lawful, it scuttled any chance that voluntary combination rates would be found to be unlawful. Yet these widespread rates—​in which a publisher would sell advertising in two of its papers at a rate only marginally above the price of advertising in a single paper—​were widespread and served to deprive rival papers of advertising revenue. In the early 1960s, small publishers told Congress that such combined rates were “deadly” to competition.76 But the Times-​Picayune decision closed the door on any effort to stop them. Indeed, the kind of economies of scale that led to consolidation in the New Orleans newspaper market were increasingly treated as natural, inevitable features of the newspaper industry. Justice Tom Clark’s majority decision in Times-​Picayune had observed, with an air of fatalism, that “the daily newspaper, though essential to the effective functioning of our political system, has in recent years suffered a drastic economic decline.” In 1958, when the Department of Justice charged a Texas newspaper chain with monopolistic behavior for buying out its only rival in Greenville, the District Court for the Northern District of Texas swiftly acquitted. It found no “planned design to destroy competition to the detriment of the advertising public,” just bare-​ knuckled competition and a clear winner in a newspaper economy in which competition was no longer possible. “Our attention,” observed the District

456  Antimonopoly and American Democracy Court, “is called to the fact that the day of the old hand-​press with a few sheets of local news when a paper could be operated on a plant of little cost has gone by . . . the trend of events and commercial activity has seemingly limited it to one paper in most cities.”77 Such assumptions had become commonplace. By 1961, when only fifty-​one cities still had competing dailies, one industry observer noted that “the daily newspaper industry, primarily as a result of the communications revolution and its basic price and market structure seems hardly capable of being restructured to provide either a free, a workably competitive, or a publicly accountable, responsible press.”78 Three years later, another observer concluded that in a city below 650,000 people, “newspaper competition is so rare as to be regarded as accidental or the product of unique forces.”79 And those monopoly newspapers were increasingly bound together in chains. In 1962, one of a new breed of managerial publishers, Samuel Newhouse, had purchased the Times-​Picayune company, to add the paper’s monopoly profits to his growing portfolio of media assets.80 And yet little was done. Anti-​trust action, which might have followed Black’s lead in the AP case and sought to preserve economic competition in the newspaper market, had become so narrowed in its application that it was essentially abandoned. In 1962 the Chandlers and Hearsts came to an agreement to end competition in the Los Angeles newspaper market—​ Hearst would shut its morning paper, ceding a monopoly to the Chandler’s Los Angeles Times; the Chandlers would shut their afternoon paper, leaving Hearst’s Herald Examiner sole owner of the afternoon market. But although members of the anti-​trust division thought the deal a “blatant . . . case of willful violation of the antitrust laws,” they took no action—​a Hearst representative had cleared the deal with higher-​ups in the Justice Department and been given assurances there would be no prosecution.81 And there was no broader effort to promote diversity in the interests of the news-​reading public. In 1963, the House Antitrust Subcommittee held a few days of hearings into newspaper concentration, but they were quickly suspended and had no impact—​the hearings were not even published.82

The Last Stand of Anti-​Monopoly in the Media Industries The 1960s did witness one last flourish of anti-​monopoly activity in the media industries. The FCC experimented with new regulations designed to promote diversity, the Department of Justice brought anti-​trust cases to block

Anti-Monopoly in the Media Industries  457 new forms of merger in the media field, and these state actions were upheld in the courts in the face of constitutional challenges. But as had happened in the late New Deal, these efforts ran into considerable opposition from the media lobby—​and as had been the case in the 1940s, the arguments of the media industry found great purchase in politics. Beginning in the late 1960s, Congress and regulatory agencies began to turn away from efforts to promote media diversity through state regulatory activity. Instead, they embraced a laissez-​faire approach to media economics, presuming that unregulated competition and technological developments were the best methods to produce a diversified public sphere. State action to reform media concentration took various forms in the 1960s. The FCC, for instance, began trying to promote diversity primarily by adding to existing networks. These efforts began under the short-​lived chairmanship of Newton Minow, who is famous for his declaration that television was a “vast wasteland”—​it is less remembered that he thought that “most of television’s problems stem from a lack of competition.”83 In 1962, in an effort to create more television stations, FCC pressure led to the passage of the All-​Channel Receiver act, which mandated that all televisions be capable of receiving UHF signal. (Historian David Potter captured the enthusiasm of UHF as a diversification policy when he speculated in 1964 that UHF television “might even destroy the monolithic bulk of the mass audience and lead to a situation where the viewing public, like the reading public, forms a variety of audiences, and chooses from a considerable range of offerings that are really different.”84) In 1964, in a similar effort to diversify the use of the spectrum, the FCC ruled that AM station owners could not replicate more than half of their programming on their FM stations in cities larger than 100,000 people—​one consequence of this technocratic rule was the emergence of FM rock stations and the rise of the soundtrack to the counterculture.85 The next year, the FCC introduced a new rule that no one could own more than three television stations in the top-​fifty markets.86 And in 1967, Congress created the Public Broadcasting Service to add a belated public broadcaster to the US media ecosystem—​albeit, a financially precarious one. The Department of Justice, too, took a new interest in anti-​monopoly action in the media industries in the mid-​1960s. In the newspaper field, the Anti-​Trust Division tried to maintain economic competition in a field trending toward consolidation. In 1964, it won anti-​trust cases against two newspapers in Ohio that had bought out rival local newspapers.87 In 1966, when the collapsing New York newspaper market saw a mega-​merger of

458  Antimonopoly and American Democracy a number of failing papers (including the Herald Tribune and the World Telegram), the Department of Justice succeeded in forcing the new paper to sign a consent decree waiving exclusivity to a number of the feature contracts it inherited from its predecessors—​as a result, rival newspapers in the New York area could purchase Walter Lippmann or Joseph Alsop columns.88 Allowing more papers access to syndicated features was of a piece with a broader hope that the rise of new suburban newspapers would provide what Donald F. Turner, head of the Anti-​Trust Division, called a “counter-​trend” to the “decline In newspaper competition.” Turner thought that the emergence of new suburban papers “holds considerable hope for a revival of competition in many parts of the country,” provided that they could be protected from city dailies that sought to acquire their new rivals—​for this reason, the Justice Department successfully prevented the Los Angeles Times from acquiring the San Bernardino Sun-​Telegram.89 The logic of these interventions was strictly economistic—​the Justice Department acted to allow for at least a modicum of competition in a consolidating marketplace and did not consider broader questions of public interest, presuming these would be protected as downstream consequences of a more competitive marketplace. The same considerations were also at work in what turned out to be the most significant area of anti-​trust activity in the newspaper field in the 1960s—​the effort to bar what were called Joint Operating Agreements (JOAs). JOAs were a form of merger between rival newspapers in the same city—​while both companies kept separate newsrooms and continued to print separate newspapers, they combined their production, distribution, and (occasionally) their advertising and circulation departments. The first JOA had been formed in 1933, and by the mid-​1960s they existed in almost twenty-​five cities. The Justice Department had been troubled by JOAs at various points in the past, and although its staff had recommended filing complaints against them at earlier moments, no action had ever been taken. But in 1964, amid a new round of mergers (including in the important San Francisco newspaper market), the Anti-​Trust Division undertook a large-​scale investigation of all JOAs. It concluded that such agreements undermined competitive economics in the newspaper field, particularly when advertising and circulation departments were combined. “Probably the most offensive feature of a joint publishing agreement,” observed Donald Turner, “is profit pooling, since by its nature it eliminates all incentive for either party to the agreement to increase its circulation and advertising revenues at the expense of the other.” In 1965, the Justice Department charged two Tucson newspapers with anti-​trust

Anti-Monopoly in the Media Industries  459 violations. It was considered a strong test-​case—​the two newspapers had entered into a JOA in 1940, were turning good profits, and one had also recently bought out the other, creating traditional monopoly questions to be pursued alongside the JOA matter. Members of the Anti-​Trust Division hoped that the Tucson case would produce a precedent that “could result in the widespread renewal of newspaper competition by the elimination of clear violations of the antitrust laws.”90 In 1968, the Justice Department won the case, and a District Court judge ordered the two papers to sever their advertising and circulation departments. But in a sign of how narrowly the Justice Department was conceiving of economic competition by this point, the two Tucson papers were allowed to maintain joint printing and distribution facilities, and were even allowed to print a joint Sunday edition. Such economies of scale posed a bar to any further entrant to the Tucson newspaper market; anti-​monopoly policy now boiled down to a desire to ensure that two papers were competing with each other, not colluding.91 In the same year as its success in the Tucson case, the Justice Department also sent the FCC a memo urging it to introduce new bans on newspaper ownership of broadcast stations and threatened to take action itself if the FCC did not. The memo prompted a long period of deliberation, and in 1975 the FCC adopted new rules barring newspaper-​broadcasting combinations in the future. But the FCC grandfathered in all existing combinations, except for sixteen cases where a city had only one newspaper and one station both under monopoly control.92 The grandfather clause suggested the limits of the FCC’s commitment to an active policy of diversification, but the broader rule nevertheless suggested a new interest in promoting economic competition in the broadcast field. In 1970, for instance, the FCC introduced financial interest and syndication rules that were intended to reduce the power of the networks over the production and distribution of content. And in 1972, the Department of Justice brought an anti-​trust suit against the three national networks in an effort to force them to separate their production wings from their distribution wings.93 Unsurprisingly, the media industries challenged the legality of these anti-​ monopoly policies. But as had been the case in the New Deal, the courts were surprisingly tolerant of state action in the field. The Tucson newspapers claimed that they should be exempt from anti-​trust law because they were “failing companies,” asserting that their merged operations were the only way to avoid a one-​newspaper town. Citing the Associated Press precedent, as well as the profit margins of the Tucson papers, the Supreme Court easily

460  Antimonopoly and American Democracy dismissed the challenge in 1969 (only one judge dissented.)94 Similarly, when newspapers claimed that the new FCC rule preventing them from owning broadcasting stations was a statist interference with their First Amendment rights, the Supreme Court unanimously upheld the authority of the FCC to issue the rules. (An appeals court had actually gone further, arguing that the FCC should have ordered the divestiture of all newspaper-​broadcasting combinations in the same city.95) And although the courts first dismissed the Justice Department’s anti-​trust suit against the networks because of fears that Nixon was using the anti-​trust laws to punish the media for its handling of Watergate, the Justice Department soon refiled, and the courts did not interfere in the long denouement of the suit, which ultimately led to consent decrees, albeit unsatisfying ones. (“The guts of it,” concluded one industry insider in 1980, “is that they [the Justice Department] haven’t accomplished anything.”)96 Although the media industries could not defeat anti-​monopoly policies in the courts, their political power provided numerous other opportunities to blunt reform. Take, for instance, the case of Newton Minow, who was hounded during his short stint at the FCC as a potential censor of the press. Minow reacted to the charges, just as James Fly had done two decades earlier, by trying to claim a public interest in media freedom that could be mobilized against the free speech arguments of the media industries. “Those broadcasters who clothe themselves with the arguments of John Milton,” he asserted, “should also be prepared to serve the public interest.” But such arguments had little impact on a Congress that was subject to intense lobbying by media enterprises (upon whom members relied for political coverage) and was also itself deeply committed to a classically liberal attitude to media freedom. As Congressman Jim Wright, a moderate Democrat from Texas, put it, “Congress instinctively and rightly reacts with extreme caution against anything which even remotely smacks of increased power which could conceivably result in even the subtlest censorship.”97 And so congressional opposition served to stymie Minow’s program of reform and he resigned in frustration in June 1963. “Despite all his talk,” observed Business Week, “Minow hasn’t done much to alter the structure of broadcasting.”98 Minow was replaced on the FCC by Lee Loevinger, whose background in the anti-​trust division obscured a hostility to public-​interest regulation of the broadcast industry. “We are not the moral proctor of the public,” he announced—​he preferred to let the broadcast market and consumer demand

Anti-Monopoly in the Media Industries  461 develop the contours of the industry. He was soon heading a conservative faction on the FCC, because Lyndon Johnson, whose wife owned broadcasting stations and who himself generally favored collaborative relations with big business, was not interested in appointing reformers. Neither was Richard Nixon.99 As a result, the FCC retreated from its pro-​diversity policies. When the FCC barred anyone from owning more than three stations in a top-​ fifty market, the broadcasting industry had rushed to argue that there was no real threat to media diversity, that group ownership encouraged competition, and that there were numerous instances in which such ownership models provided the only way to provide adequate service to consumers—​a newly formed Council for Television Development, representing forty-​two group owners, funded a 443 page report to prove the point. And the FCC was convinced by these arguments. It immediately began waiving the ban in certain situations, and then, in a 4–​3 vote, abandoned the rule just two and a half years after introducing it (having granted all nine waivers requested while the rule was in place).100 Similarly, after 1975, the FCC often waived its cross-​ownership rule, arguing that divestiture from cross-​ownership was only required when it could be shown that there was detriment to the public interest.101 The process of retreat from anti-​monopoly media activity can be seen most cleanly in the newspaper field. In reaction to the Tucson anti-​trust action, the newspaper industry went to Congress to lobby for a formal exemption from anti-​trust law. In 1967, Senator Carl Hayden from Arizona introduced a bill to protect “failing” newspapers from prosecution if they merged—​it had a broad definition of “failure” and grandfathered in all existing joint operating agreements. Newspapers lobbied hard for the bill, and after the Supreme Court upheld the Tucson decision, Emanuel Celler observed that there was an “avalanche of opinion in favor of the bill.” In 1970, Nixon signed into law what was now known as the Newspaper Preservation Act. Twenty-​five years after the AP decision, newspapers had finally been granted an anti-​trust exemption. Very few newspapers actually took advantage of the provisions of the law and formed JOAs—​there were increasingly few cities with rival newspapers, let alone rivals that were willing to bind themselves together in a long-​term contract.102 But the law was important for ending the US flirtation with anti-​trust law in the newspaper field. The Newspaper Preservation Act, observed one federal court, “merely looses the same shady market forces which existed before the passage of the Sherman, Clayton and other antitrust laws.”103

462  Antimonopoly and American Democracy And the passage of the Newspaper Preservation Act was the opening gambit of a long period of retreat from anti-​monopoly activity in all the media industries. Even though the Newspaper Preservation Act provided a sanction for new forms of media merger, it was presented by its champions as a way to preserve press diversity by allowing media owners flexibility to experiment with new business models free from the regulatory hand of the state. Barry Goldwater, for instance, repurposed the anti-​monopoly language of Learned Hand and Hugo Black when he argued that the bill was necessary because “the First Amendment rests on the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the public welfare.”104 As was typical of the broader libertarian vision of political economy in the later decades of the twentieth century, unregulated markets were being embraced as fonts of diversification—​however poorly the theory fit the particulars of a newspaper market trending toward local monopoly. This laissez-​faire vision of media policy came first to the newspaper industry because the case for government regulation had always been weakest there. But as broadcasting media underwent technological revolutions, old arguments that broadcast media were in exceptional need of regulation because of the scarcity of the spectrum began to lose their purchase.105 The apparent abundance of cable and satellite upset the entire framework that had developed in the New Deal. In a 1978 symposium on media concentration, First Amendment scholar Thomas Emerson summed up an emerging consensus—​“technological change is coming along pretty fast and the coming problem will really be quite different with the advent of cable tv. When we have cablecasting and other increases in facilities, the electronic media should be treated, and will have to be treated under the First Amendment, almost the same as the press.”106 Reagan’s appointees to the FCC embraced these arguments, which accorded well with their broader governing philosophy. In 1982, Mark Fowler promised a “Marketplace Approach to Broadcast Regulation”; his successor, Dennis Patrick, made plain the ways that laissez-​faire attitudes to media regulation were spilling over from the newspaper industry: “We seek to extend to the electronic press the same First Amendment guarantees that the print media have enjoyed since our country’s inception.”107 The result was a relaxation of media regulations that had been designed to promote diversity in the broadcast industry. In 1984, Fowler loosened the old caps on broadcast station ownership. Where once you could own no more

Anti-Monopoly in the Media Industries  463 than 7(FM)-​7(AM)-​7(TV) stations; now you could own 12 of each. In 1992, the cap rose to 18; two years later it rose again to 20. And then in 1996, in reaction to the impact of the internet, the Telecommunications Act removed the numeric caps on ownership altogether, replacing them with a new rule that no one entity could own a portfolio of stations that reached more than 35 percent of US households—​a limit that was raised to 39 percent in 2003. Meanwhile, other forms of media regulation were also quietly abolished. In 1993, the FCC discarded its 1970s financial interest and syndication rules. The Telecommunications Act extended licenses from five to eight years and removed the bar on joint radio-​television ownership in the same market.108 The logic of this shifting regulatory approach to broadcast media has been turned into a straightforward and simple story. Once upon a time, back when Frankfurter upheld the constitutionality of the Chain Broadcasting Report, the limitations of the spectrum meant that stations were scarce, so regulations to maintain diversity were essential. Today, the story continues, there is no longer a need to promote diversity through state regulation—​now that cable, satellite, and internet technologies provide limitless outlets, the market can do so itself. The problem with this story is that it treats monopoly as a problem of technology rather than a problem of political economy. Putting the history of newspapers alongside the history of broadcast media reminds us that even in a medium in which there was no technological scarcity, the twentieth century witnessed a collapse of diversity. By the early 1990s, at a time when broadcast media policy was being deregulated on the grounds that it needed to be brought into alignment with the ostensibly already-​diversified landscape of the newspaper industry, the press of the nation was actually shrinking. By then, in fact, there were more broadcasting stations (13,000) in the country than there were daily newspapers (1,700).109 Indeed, the late twentieth and early twenty-​first centuries experienced a period of increasing consolidation in the media industries. The six years after the passage of the Telecommunications Act saw the number of commercial radio station owners decline by 25 percent, and a 40 percent decline in the number of TV station owners. Vast new chains emerged, such as Clear Channel with its 1,200 radio stations, and the Sinclair Broadcasting Group, which by 2018 owned 193 television stations.110 Similar trends were at work in the newspaper field, in which profitable monopoly newspapers were increasingly traded publicly and merged in ever-​larger groups. By 1980, 75 percent of the newspapers in the country were part of chains, which meant they had to return high rates of profit to service corporate debt and fund new waves

464  Antimonopoly and American Democracy of expansion. Even before the internet decimated the advertising revenues of the press, there were pressures to cut costs to maintain these profit rates. And then as advertising revenue collapsed between 2004 and 2018, 1,800 local papers were forced to close or merge. Those papers that continued to survive existed on skeletal budgets and slashed costs—​the number of journalists employed in the nation fell by 40 percent.111 Amid the wreckage, consolidation continued—​a handful of prominent newspapers, such as the New York Times and the Washington Post, emerged as national brands; less prominent papers were bought up by chains. In 2019, after the Justice Department approved the merger of the Gannett and Gatehouse chains, that new mega-​chain owned 1 in 5 newspapers in the country.112 And then, of course, there were the new cross-​media empires—​most notably that of Rupert Murdoch, with vast and influential holdings in entertainment, television, and print.

Conclusion In the 1930s, earlier trends to consolidation had produced deep anxieties in the political culture, as reformers had worried whether Hearst and McCormick exercised more power than was safe in a democracy, and feared that they could influence the flow of news to the public in light of their own political interests. Many are concerned about precisely these problems today; and for understandable reasons. And yet criticism of media consolidation has never again won the prominence in the political culture that it had in the New Deal. It is hard to imagine a member of the Clinton or Obama administrations drawing on the work of Noam Chomsky to criticize the press in the way that Ickes had drawn on George Seldes. In fact, from Edith Efron and Spiro Agnew through to Donald Trump, the critique of media monopoly today has tended to come from the right, in the form of accusations of snobbishly liberal bias—​a critique of consolidation that obviously brackets economic questions.113 The political economy of the media has come to seem a naturalized feature of life. Was consolidation inevitable? The unhappy story of the twentieth century may seem, at first blush, to confirm old fears that the media are natural monopolies—​that given a zero-​sum game for audience attention and limited advertising revenue, advantage will always pool to the larger entities. On this view, diversity in one part of the media economy will only lead to concentration at a different point—​most notably, concentration at the level of content

Anti-Monopoly in the Media Industries  465 production, where the economies of scale are most real. Take, for instance, efforts to require local station ownership in broadcast media which led to the emergence of networks.114 Or consider one unanticipated outcome of the Associated Press anti-​trust case, which obviously did little to slow the rise of newspaper monopolies, and which may have actually undermined the diversity of news the public received—​once all papers could buy the AP service, more papers came to rely on it, which reduced the diversity of news presented in different papers in the country.115 By 1960, in his tellingly titled The Fading American Newspaper, Carl Lindstrom was already observing “one reason why more and more newspapers are being created in each other’s image is that the Associated Press is rivalled only by death as the great leveler.”116 The arrival of the internet seems to provide another angle onto this problem—​the massive diversity of outlets has spread advertising revenue so thinly that production of new content has collapsed. In the collapse of investigative journalism, and the spread of clickbait, reaction stories, and endless political commentary, we perhaps see the result of “ruinous competition” in the media marketplace. For some, the ability to monopolize revenue at a point of concentration now appears to be essential to underwrite the production of quality content. The AP provides a fascinating case study of this problem. In the late 1990s, the AP made a decision to sell its stories to all online news sites, including sites such as Yahoo.com that provided their content for free. This made perfect sense for the AP as an organization; it simply wanted to maximize its revenues. The decision was also a downstream result of the anti-​trust action of the 1940s—​the AP was, as instructed, simply providing to all comers. But that policy decision undermined the efforts of newspapers to place news behind paywalls, and thus maintain the economics that had supported the production of new information. The AP’s willingness to sell to all had become what one commentator called “the business equivalent of an autoimmune disease”—​it couldn’t stop selling even to organizations that were robbing its member newspapers of their lifeblood.117 For this reason, newspapers are now arguing that they need exemptions from anti-​ trust laws to allow them to combine to sell their content to websites.118 A clearer history of the monopoly problem in the media industries suggests the limitations of these approaches, and not just because newspaper publishers made similar arguments for anti-​ trust exemptions in both the 1940s and the 1960s. In the first place, a fuller history reminds us that US efforts to confront media monopoly have only ever been partial. A public interest standard for media policy, one that sought to maximize the

466  Antimonopoly and American Democracy flow of diverse voices to the public, was never adopted. Even the narrower, economistic approach to preserving competition among media enterprises was applied in highly partial ways. We simply don’t know whether a more holistic policy would have sustained diversity throughout the media ecosystem. We don’t know what newspaper economics would look like if anti-​trust action in the newspaper field had been applied not just to the AP, but also to combination advertising rates, just as we don’t know how FCC regulation of the networks might have complemented efforts to preserve local ownership. Partial policies of diversification undoubtedly drove media concentration to other points in media economics; but that doesn’t mean that more holistic policies would have been ineffective. Secondly, mapping the incomplete and uneven efforts to diversify media in the past reminds us of the need to confront the complex, triangular economic relationships at the heart of media economics. Any effort to imagine a media policy of diversification will require thinking not only about the relationship of the media to the citizen-​consumer, but also the relationship between the media and the advertiser. For this reason, arguments that the internet has rendered anti-​monopoly activity obsolete make little sense in the media context—​any productive anti-​monopoly policy in the media will need to look past the apparent diversity of content confronting the citizen-​ consumer and address the fact that Google and Facebook are monopolizing digital ad revenues.119 The history of anti-​monopoly in the media industries also reminds us that any effort to develop policy solutions to the problem of media concentration will be controversial. We require the institutions of the media to play a vital role in our political process—​in theory, they are neutral conduits for conversations within the polity and for the flow of information to inform the public. But in practice, they are also economic institutions motivated by the need for profit. The relationship between these two functions has been a source of friction in the past—​from reformers who accused wealthy publishers of undermining the common weal for personal gain, to publishers who used their economic clout to lobby and litigate against efforts to reform their industries. Any effort to diversify the media in the future will produce similar conflict; a clearer history of the ideological struggle over the legitimacy of media reform will help us better navigate these ructions. None of this is to suggest that a program of diversification is a panacea to the problems that plague our media, let alone our democracy. Advocates of media diversity normally hope that diversity will take several forms, and

Anti-Monopoly in the Media Industries  467 they often assume that diversity of ownership will have downstream effects on the diversity of content produced, and the diversity of content received by citizen-​consumers. In practice, these are difficult assumptions to justify empirically—​we simply don’t really know how a more diversified media landscape could work.120 In the end, perhaps that is the ultimate lesson that history can teach us. The United States has never really tried to produce a diverse media market; across the twentieth century, Americans resigned themselves to an increasingly consolidated media market as an inherent feature of a modern, capitalist democracy. The challenge now is to try to imagine what kind of media landscape a modern democracy truly requires—​a task that has only barely been begun.

Notes 1. Alfred McClung Lee, “The Basic Newspaper Pattern,” Annals of the American Academy of Political and Social Science 219 (January 1942): 46; Raymond B. Nixon, “Trends in Daily Newspaper Ownership since 1945,” Journalism Quarterly 31 (Winter 1954): 7. 2. C. Edwin Baker, Media Concentration and Democracy: Why Ownership Matters (New York: Cambridge University Press, 2007). 3. Walter Lippmann, Public Opinion (Miami: BN Publishing, 2007), 101. 4. Richard J. Barber, “Newspaper Monopoly in New Orleans: The Lessons for Antitrust Policy,” Louisiana Law Review 24 (1964): 509; Keith Roberts, “Antitrust Problems in the Newspaper Industry,” Harvard Law Review 82 (1968): 324; Tim Wu, The Attention Merchants: The Epic Scramble to Get Inside Our Heads (New York: Vintage Books, 2016). 5. Gerald J. Baldasty, The Commercialization of the News in the Nineteenth Century (Madison: University of Wisconsin Press, 1992); Michael Schudson, Discovering the News: A Social History of American Newspapers (New York: Basic Books, 1978), 3–​35; Michael Stamm, Dead Tree Media: Manufacturing the Newspaper In Twentieth Century North America (Baltimore: Johns Hopkins University Press, 2018), 31–​54; Paul Starr, The Creation of the Media: Political Origins of Modern Communications (New York: Basic Books, 2004), 251–​53. 6. Baldasty, Commercialization of the News, 86. 7. Delos F. Wilcox, “The American Newspaper: A Study in Social Psychology,” Annals of American Academy of Political and Social Science 16 (July 1900): 89. 8. Merle Thorpe, “The Coming Newspaper,” in The Coming Newspaper, ed. Merle Thorpe (New York: H. Holt, 1915), 3–​26, at 19. 9. Starr, Creation of the Media, 252; Raymond B. Nixon and Jean Ward, “Trends in Newspaper Ownership and Inter-​Media Competition,” JQ 38 (1961): 5.

468  Antimonopoly and American Democracy 10. Sam Lebovic, Free Speech and Unfree News: The Paradox of Press Freedom in America (Cambridge, MA: Harvard University Press, 2016), 19–​20, 51–​52. 11. Silas Bent, Ballyhoo: The Voice of the Press (New York: Boni & Liveright, 1927), 260. 12. Oswald Garrison Villard, “The Waning Power of the Press,” Forum, September 1931, 141–​44 13. Charles Edward Russell, “The Keeping of the Kept Press,” Pearson’s Magazine 31, no. 1 (January 1914): 33–​44, accessed May 24, 2011, http://​books.goo​gle.com/​books?id=​ 0ZQkA​QAAI​AAJ; C. C. Regier, The Era of the Muckrakers (Gloucester, MA: Peter Smith, 1957), 165–​79; Margaret A. Blanchard, “Press Criticism and National Reform Movements: The Progressive Era and the New Deal,” Journalism History 5, no. 2 (Summer 1978): 33. 14. Richard R. John, Network Nation: Inventing American Telecommunications (Cambridge, Mass: Belknap Press of Harvard University Press, 2010), 146; Henry George, The Menace of Privilege (New York, 1906), excerpted in Our Unfree Press: 100 Years of Radical Media Criticism, ed. Robert McChesney and Ben Scott (New York: The New Press, 2004), 88. 15. Linda Lawson, Truth in Publishing: Federal Regulation of the Press’s Business Practices, 1880–​1920 (Carbondale: Southern Illinois University Press, 1993), 15. 16. Carl D. Thompson, Confessions of the Power Trust (New York: E. P. Dutton, 1932), 285–​87; Lebovic, Free Speech and Unfree News, 49–​51. 17. Michael Stamm, Sound Business: Newspapers, Radio and the Politics of New Media (Philadelphia: University of Pennsylvania Press, 2011), 5, 18, 28, ch. 2 18. Oswald Garrison Villard, The Disappearing Daily: Chapters in American Newspaper Evolution (New York: A. A. Knopf, 1944), 9. 19. Richard Norton Smith: The Colonel: The Life and Legend of Robert T. McCormick, 1880–​1955 (Boston: Houghton Mifflin, 1997), 342, 345–​49; David Nasaw, The Chief: The Life of William Randolph Hearst (Boston: Houghton Mifflin, 2000), 500–​27; Richard Polenberg, Reorganizing Roosevelt’s Government: The Controversy over Executive Reorganization, 1936–​1939 (Cambridge, MA: Harvard University Press, 1966), 64–​65, 149; Betty Houchin Winfield, FDR and the News Media (Urbana: University of Illinois Press, 1990), 127–​47; Sam Lebovic, “When the Mainstream Media Was Conservative: Press Criticism in the Age of Reform,” in Media Nation: The Political History of News in Modern America, ed. Bruce J. Schulman and Julian Zelizer (Philadelphia: University of Pennsylvania Press, 2017), 63–​76. 20. St. Louis Post-​Dispatch, St. Louis Post-​Dispatch Symposium on Freedom of the Press: Expressions by 120 Representative Americans, reprinted from December 13 to December 25, 1938, issues (No publication details, 1938), 43. 21. “Newspaper Curb Bill Offered,” Los Angeles Times, April 29, 1938, 2; “Minton Asks Bill Falsifying News Be Made Penalty,” Atlanta Constitution, April 29, 1938, 9. 22. Winfield, FDR and the News Media, 144. 23. Harold L. Ickes, America’s House of Lords: An Inquiry into Freedom of the Press (New York: Harcourt, Brace, 1939), x.

Anti-Monopoly in the Media Industries  469 24. Brant, “The Press for Willkie Club,” in Freedom of the Press Today: A Clinical Examination by 28 Experts, ed. Harold L. Ickes (New York: Vanguard Press, 1941), 52–​60. 25. Bruce Bliven, “Balance Sheet for American Journalism,” in Ickes, ed., Freedom of the Press Today, 34. 26. In addition to the newspaper and radio industries discussed here, anti-​trust action was also brought in the movie industry in 1938 in what eventually proved to be a successful effort to end the practice of block-​booking. For reasons of space, and to focus on the news media industries, the problem of monopoly in the movie industry has been excluded from this chapter, though it is very much part of the same story. 27. Mickie Edwardson, “James Lawrence Fly’s Fight for a Free Marketplace of Ideas,” American Journalism 14, no. 1 (January 1997): 24; Stamm, Sound Business, 24–​25. 28. Victor Pickard, America’s Battle for Media Democracy: The Triumph of Corporate Libertarianism and the Future of Media Reform (New York: Cambridge University Press, 2015), 39–​41; Jonathan Reed Winkler, “Blurred Lines: National Security and Civil-​Military Struggle for Control of Telecommunications Policy during WWII,” Information and Culture 51, no. 4 (2016): 509. 29. James L. Baughman, Television’s Guardians: The FCC and the Politics of Programming, 1958–​1967 (Knoxville: University of Tennessee Press, 1985), 9; “The Impact of the FCC’s Chain Broadcasting Rules,” Yale Law Journal 60 (1951): 78–​111; James R. Schiffman, “Undervaluing Mutual: The FCC’s Missed Opportunity to Restructure Radio Broadcasting in the New Deal Era,” Journal of Radio & Audio Media 24, no. 2 (July 3, 2017): 303 30. Stamm, Sound Business, ch. 3. 31. Ibid., 122–​24; Morris Ernst, The First Freedom (New York: Macmillan, 1946). 32. U.S. District Court for the Southern District of New York, “Findings of Fact and Conclusions of Law,” Civil Action no. 19–​163, box 2842, folder 3, Appellate Case files, 57 O.T. 194, RG 267; Margaret A. Blanchard, “The Associated Press Antitrust Suit: A Philosophical Clash over Ownership of First Amendment Rights,” Business History Review 61 (1987); Lebovic, Free Speech and Unfree News, 76–​84. 33. Upton Sinclair, The Brass Check: A Study of American Journalism (Pasadena, CA: printed by author, 1920), 353–​76; Villard, The Disappearing Daily, 40–​57. 34. Department of Justice, Press Release, August 28, 1942, box 60, folder: Associated Press, Thurman Wesley Arnold Papers, Collection Number 00627, American Heritage Center, University of Wyoming, WY. 35. Lebovic, Free Speech and Unfree News, 56–​64; Lebovic, “When the ‘Mainstream Media’ Was Conservative.” 36. William E. Lee, “Antitrust Enforcement, Freedom of the Press and the ‘Open Market’: The Supreme Court on the Structure and Conduct of Mass Media,” Vanderbilt Law Review 32 (November 1979): 1315–​20. 37. Mickie Edwardson, “Convergence, Issues, and Attitudes in the Fight over Newspaper-​ Broadcast Cross-​Ownership,” Journalism History 33, no. 2 (July 2007): 79–​92. 38. Stamm, Sound Business, 108–​32

470  Antimonopoly and American Democracy 39. Elisha Hanson, “Says AP Ruling Will Lead to Regulation of the Press,” Editor and Publisher, November 13, 1943, 8; Lebovic, Free Speech and Unfree News, 76–​84. 40. NBC v. United States et al., 47 F.Supp.940, at 946 (1942) 41. United States v. Associated Press et al., 52 F.Supp.362, at 371–​72 (1943). 42. Edwardson, “James Lawrence Fly’s Fight for a Free Marketplace of Ideas,” 22 43. Clifford Judkins Durr, “Freedom of Speech for Whom?” Public Opinion Quarterly 8, no. 3 (1944): 391–​406. 44. United States v. Associated Press et al., 52 F.Supp.362, at 371. 45. AP v. U.S., 326 U.S. (1945), at 13–​14. 46. AP v. U.S., 326 U.S. (1945), at 48. 47. NBC Inc. v. US, 319 U.S. 190 (1943), at 216. 48. Ibid., at 226 49. AP v. US, 326 U.S. at 20. 50. W. Wallace Kirkpatrick, “Justice Black and Antitrust,” UCLA Law Review 14 (1967): 475–​500; “Justice Black and First Amendment ‘Absolutes’: A Public Interview,” NYU Law Review 37 (1962): 549–​63 51. Stamm, Sound Business, 132-​133 52. Pickard, America’s Battle for Media Democracy, 45–​59; 118–​22; Joon-​Man Kang, “Franklin D. Roosevelt and James L. Fly: The Politics of Broadcast Regulation, 1941–​ 1944,” Journal of American Culture 10, no. 2 (1987): 29; Susan L. Brinson, “War on the Homefront in World War II: The FCC and the House Committee on Un-​American Activities,” Historical Journal of Film, Radio and Television 21 (March 2001): 63–​75. 53. Stamm, Sound Business, 141–​43. 54. The Commission on Freedom of the Press, A Free and Responsible Press: A General Report on Mass Communication: Newspapers, Radio, Motion Pictures, Magazines, and Books (Chicago: University of Chicago Press, 1947); Lebovic, Free Speech and Unfree News, 139–​45. 55. “Draft Report—​ Commission on Freedom of the Press: First Revision,” Doc. 34, 151, Box 2, Folder 4, Commission on Freedom of the Press Records, Special Collections Research Center, University of Chicago Library, Chicago, IL; Summary of Discussion and Action for Meetings, January 27–​29, 1946, Doc. 90, 9, Box 4, Folder 9, Commission on Freedom of the Press Records. 56. Zechariah Chafee Jr., Government and Mass Communications: A Report from the Commission on Freedom of the Press (Chicago: University of Chicago Press, 1947), 674; Smith, Zechariah Chafee Jr., 107 57. Summary of Discussion, July 7–​9, 1946, doc. 108c, 146, 150, 161, box 8, folder 5, Commission on Freedom of the Press Records; Chafee, Government and Mass Communications, 628, 633, 643, 674; Smith, Zechariah Chafee Jr., 107; George L. Haskins, “John Dickinson: 1894–​1952,” University of Pennsylvania Law Review 101 (1952): 1–​25. 58. Meeting Minutes, March 31 to April 2, 1946, Doc. 94, 21–​24, box 5, folder 4, Commission on Freedom of the Press Records; Free and Responsible Press, 2–​5, 83–​85. 59. Baughman, Television’s Guardians, 52

Anti-Monopoly in the Media Industries  471 60. Emanuel Celler, “Antitrust Problems in the Television Broadcasting Industry,” Law and Contemporary Problems 22, no. 4 (1957): 553; Herbert I. Schiller, Mass Communications and American Empire (New York: A. M. Kelley, 1969), 27–​28. 61. A. J. Liebling, The Press (New York: Pantheon Books, 1975), 60. 62. Chairman of Special Committee to Study Problems of American Small Business, United States Senate, Survival of a Free, Competitive Press: The Small Newspaper: Democracy’s Grass Roots, January 2, 1947, Senate committee print no. 17, 80th Cong., 1st Sess. (Washington, DC: Government Printing Office, 1947), 5 63. Lee, “Antitrust Enforcement, Freedom of the Press and the ‘Open Market,’ ” 1255–​57. 64. Eli Noam, Media Ownership and Concentration in America (Oxford: Oxford University Press, 2009), 137. 65. Herbert H. Howard, “Multiple Broadcast Ownership: Regulatory History,” Federal Communications Bar Journal 27 (1974): 10–​12; Lee, “Antitrust Enforcement, Freedom of the Press and the ‘Open Market,’ ” 1322–​25. 66. Celler, “Antitrust Problems in the Television Broadcasting Industry,” 559. 67. John C. Busterna, “Anti-​Trust in the 1980s: An Analysis of 45 Newspaper Actions,” Newspaper Research Journal 9 (1988): 30 68. Stamm, Sound Business, 152–​55, 186. 69. Roscoe L. Barrow, “Network Broadcasting. The Report of the FCC Network Study Staff,” Law and Contemporary Problems 22, no. 4 (1957): 621. 70. James R. Schiffman, “Undervaluing Mutual: The FCC’s Missed Opportunity to Restructure Radio Broadcasting in the New Deal Era,” Journal of Radio & Audio Media 24, no. 2 (July 3, 2017): 303. 71. Celler, “Antitrust Problems in the Television Broadcasting Industry”; Barrow, “Network Broadcasting”; Herbert H. Howard, “Multiple Broadcast Ownership: Regulatory History,” Federal Communications Bar Journal 27 (1974): 27–​ 31; Victor R. Hansen, “Broadcasting and the Antitrust Laws,” Law and Contemporary Problems 22, no. 4 (1957): 583. 72. Memo on Fair Competition and Newspaper Industry, n.d., OF 466; Suffolk News Company Inc., to General Hugh S. Johnson, August 7, 1933, box 203, Code of Fair Competition for Daily Newspaper Publishing Business, vol. B, pt. 1, entry 20, RG 9. 73. Stamm, Sound Business, 153–​54; Lee, “Antitrust Enforcement, Freedom of the Press and the ‘Open Market,’ ” 1262–​65; Lorain Journal Co v. United States, 342 U.S. 143 (1951), at 148–​49. 74. “Kansas City Star Loses Court Plea,” New York Times, January 24, 1957, 22; “Kansas City Star Indicted as Trust,” New York Times, January 7, 1953, 29; “Kansas City Star Loses Review Plea,” New York Times, June 18, 1957, 23; “Kansas City Star to Drop Radio, TV,” New York Times, November 16, 1957, 39; “Star Sells Stations,” New York Times, November 26, 1957, 51. 75. Times-​Picayune Publishing Co. v. United States, 345 U.S. 594 (1953); Roberts, “Antitrust Problems in the Newspaper Industry,” 341, 354; Barber, “Newspaper Monopoly in New Orleans,” 503–​54; Stephen R. Barnett, “Newspaper Monopoly and the Law,” Journal of Communication 30 (1980): 72–​77.

472  Antimonopoly and American Democracy 76. Roberts, “Antitrust Problems in the Newspaper Industry,” 345–​47. 77. United States v. Harte-​Hanks Newspapers Inc., 170 F. Supp 227 (N.D. Tex 1959). 78. T. J. Kreps, “The Newspaper Industry” in The Structure of American Industry: Some Case Studies, ed. Walter Adams (New York: Macmillan, 1961), 529–​30. 79. Barber, Newspaper Monopoly in New Orleans, 541. 80. Ibid., 537. 81. William Orrick, “Memo for the AG Re USA v. Hearst Publishing Co Inc,” n.d., “Proposed Civil Complaint Charging Hearst and Chandler,” July 18, 1963, both in box 109, folder: LA Newspaper Case, Ramsey Clark Papers, LBJ Library; David Halberstam, The Powers That Be (New York: Alfred A. Knopf, 1979), 291–​92; CBS Reports, “Death in the City Room” Transcript, January 25, 1962, box 116a, folder 4: Monopoly and the Newspaper Crisis, NGNY Records, Tamiment Library 82. Stuart C. Babington, “Newspaper Monopolies under the Microscope: The Celler Hearings of 1963,” American Journalism 28 (Spring 2011): 113–​37. 83. Baughman, Television’s Guardians, 63 84. Ibid., 153 85. Eric Klinenberg, Fighting for Air: The Battle to Control America’s Media (New York: Metropolitan Books, 2007), 39–​40. 86. Anne Coffey, “The Top 50 Market Policy: Fifteen Years of Non-​Policy,” Federal Communications Law Journal 31, no. 2 (1979): 303–​40. 87. “17 Antitrust Cases Filed against Papers since 1890,” Washington Post, August 2, 1977, D7. 88. Donald F. Turner, “Antitrust Division Activity in Newspaper Industry,” February 10, 1967, Box 88, Folder: Antitrust Newspapers, Ramsey Clark Papers, LBJ Library. 89. Ibid. 90. William H. Orrick, Jr, “Joint Publishing Agreements in the Newspaper Industry,” n.d., box 88, folder: Antitrust Newspapers, Ramsey Clark Papers, LBJ Library; Turner, “Antitrust Division Activity in Newspaper Industry”; Warren Christopher, Memo for Larry E. Temple, February 8, 1968, WHCF Box 24, Executive Folder JL 2-​1, LBJ Library; Donald F. Turner, “Memo for the AG re San Francisco Newspapers,” July 30, 1965, box 88, folder: Antitrust Newspapers, Ramsey Clark Papers. 91. Citizen Publishing Co. v. United States, 394 U.S. 131 (1969). 92. Lee, “Antitrust Enforcement, Freedom of the Press and the ‘Open Market,’ ” 1328–​ 34; Stamm, Sound Business, 189–​91; Bruce M. Owen, Economics and Freedom of Expression: Media Structure and the First Amendment (Cambridge, MA: Ballinger Publishing Co., 1975), 139. 93. Lee, “Antitrust Enforcement, Freedom of the Press and the ‘Open Market,’ ” 1276; Merril Brown, “CBS v. Justice Drama Ending Its Long Run,” Washington Post, May 7, 1980. 94. Citizen Publishing Co. v. United States, 394 U.S. 131 (1969). 95. Lee, “Antitrust Enforcement, Freedom of the Press and the ‘Open Market,’ ” 1328-​34. 96. Brown, “CBS v. Justice Drama Ending Its Long Run.” 97. Baughman, Television’s Guardians, 73–​74.

Anti-Monopoly in the Media Industries  473 98. Ibid., 124–​27. 99. Nicholas Johnson was an important exception. Ibid., 124–​27, 133–​52. 100. It continued to apply the policy on an ad hoc basis, asking those who wanted to acquire more than three top-​fifty stations to show a “compelling public interest” justifying the purchase—​ by 1979 it had approved nineteen such mergers on top of the nine waivers granted in the first years. Herbert H. Howard, “Multiple Broadcast Ownership: Regulatory History,” Federal Communications Bar Journal 27 (1974): 46–​52; Coffey, “The Top 50 Market Policy.” 101. Coulson, “Antitrust Law and the Media,” 82. 102. Felicity Barringer, “A 1970’s Act to Preserve Faltering Newspapers Seems Only to Delay the Inevitable End,” New York Times, August 16, 1999; Janice E. Rubin, “The Newspaper Preservation Act,” Congressional Research Service, April 5, 1989; Robbie Steele, “Joint Operating Agreements in the Newspaper Industry: A Threat to First Amendment Freedoms,” University of Pennsylvania Law Review 138 (1989): 283; Glenn Becker, “Failing Newspapers or Failing Journalism: The Public vs. the Publishers,” University of San Francisco Law Review 4 (1970): 466–​67; Randy Brubaker, “The Newspaper Preservation Act: How It Affects Diversity in the Newspaper Industry,” Journal of Communication Inquiry 7 (1982). 103. Barnett, “Newspaper Monopoly and the Law,” 79; Busterna, “Anti-​Trust in the 1980s,” 37–​49. 104. Brubaker, “The Newspaper Preservation Act,” 95–​97. 105. Lee C. Bollinger, Images of a Free Press (Chicago: University of Chicago Press, 1991), 143. 106. Proceedings of the Symposium on Media Concentration, December 14 and 15, 1978 (Bureau of Competition, FTC: Government Printing Office, 1979), 193–​97. 107. Mark S. Fowler and Daniel L. Brenner, “Marketplace Approach to Broadcast Regulation,” Texas Law Review 60 (1981): 207–​57; Julian Zelizer, “How Washington Helped Create the Contemporary Media: Ending the Fairness Doctrine in 1987,” in Media Nation: The Political History of News in Modern America, ed. Bruce J. Schulman and Julian E. Zelizer (Philadelphia: University of Pennsylvania Press, 2017), 188. 108. Douglas Gomery, The FCC’s Newspaper-​ Broadcast Cross-​ Ownership Rule: An Analysis (Washington, DC: Policy Institute, 2002), cited from https://​www.epi.org/​ publ​icat​ion/​book​s_​cr​oss-​owners​hip/​; Klinenberg, Fighting for Air, 27; Philip M. Napoli, “Deconstructing the Diversity Principle,” Journal of Communication 49 (1999): 10; Mark Hertsgaard, On Bended Knee: The Press and the Reagan Presidency (New York: Schocken Books, 1989), 181–​82. 109. Bollinger, Images of a Free Press, 94. 110. Alvin Chang, “Sinclair’s Takeover of Local News, in One Striking Map,” Vox, April 6, 2018, vox.com/​2018/​4/​6/​17202824/​sinclair-​tribune-​map; Victor Pickard, Democracy without Journalism: Confronting the Misinformation Society (New York: Oxford University Press, 2019), 108–​9, 118; Klinenberg, Fighting for Air, 88–​89, 99–​102.

474  Antimonopoly and American Democracy 111. Anthony Smith, Goodbye Gutenberg: The Newspaper Revolution of the 1980’s (Oxford: Oxford University Press, 1980); Sam Kuczun, “Ownership of Newspapers Increasingly Becomes Public,” Journalism Quarterly 55 (1978): 342–​44; Elizabeth MacIver Neiva, “Chain Building: Consolidation of the American Newspaper Industry, 1953–​1980,” Business History Review 70 (1996): 26–​32; Larry J. Sabato, Feeding Frenzy: How Attack Journalism Has Transformed American Politics (New York: Free Press, 1991), 50; James T. Hamilton, Democracy’s Detectives: The Economics of Investigative Journalism (Cambridge, MA: Harvard University Press, 2016), 47, 186. 112. Marc Tracy, “Gannett, No Largest U.S. Newspaper Chain, Targets ‘Inefficiencies,” New York Times, November 19, 2019, https://​www.nyti​mes.com/​2019/​11/​19/​busin​ ess/​media/​gann​ett-​gateho​use-​mer​ger.html. 113. Lebovic, “When the Mainstream Media Was Conservative.” 114. Owen, Economics and Freedom of Expression, 106–​7, 120, 140 115. Kreps, “The Newspaper Industry,” 515. 116. Carl E. Lindstrom, The Fading American Newspaper (Garden City, NY: Doubleday, 1960), 136. 117. Russell Adams, “New-​Media Focus Splits Associated Press Members,” Wall Street Journal, June 26, 2008; Paul Farhi, “A Costly Mistake,” American Journalism Review, April/​May 2009, 37-​41. , 118. “The Decimation of Local News Has Lawmakers Crossing the Aisle,” New York Times, January 12, 2020. 119. Pickard, Democracy without Journalism, 77 120. Kari Karppinen, Rethinking Media Pluralism (New York: Fordham University Press, 2013); Napoli, “Deconstructing the Diversity Principle.”

Index For the benefit of digital users, indexed terms that span two pages (e.g., 52–​53) may, on occasion, appear on only one of those pages. Tables indicated by an italic t following the page/​paragraph number. “A Curse of Bigness,” 394 Acheson, Dean, 300 act of state doctrine, 285 Adams, Branden, 100 Adams, Charles F., 95–​97, 99–​100, 102, 105 Adams, Henry C., 85, 89–​90 Adams, Henry Carter, 170 Adams, John, 21–​22, 37–​41, 45, 53–​54, 58–​59, 70, 73n.12 Adler, Edward, 172–​73 affirmative action, 343 AFL-​CIO, 338, 407–​8, 425n.166 African Americans civil rights movement, 343–​44 labor movement, 393, 395–​96, 397–​98 land ownership, 52, 55–​56 AFSCME, 344 Age Discrimination and Employment Act of 1967, 344 Akin, Edward C., 145 Alabama, 159n.32 Alcoa, 321–​22, 329 Alcoa ruling. see United States v. Alcoa Aldrich, Nelson W., 366 Alien Torts Statute of 1789, 282–​83 alkalis trading, 301 All-​Channel Receiver Act, 457 Alliance Aluminium Compagnie, L’, 295, 296–​97, 302–​3 Alsop. Joseph, 457–​58 aluminum shortages, 329 Amalgamated Clothing Workers of America, 397–​98 Amalgamated Meat Cutters v. Jewel Tea, 408

Amazon, 3–​4, 36, 70, 374 American Bankers Association, 209 Farm Bureau Federation, 338 Federation of Labor (AFL), 384, 388, 389, 390, 392 Ice Company, 141–​43 Medical Association, 337, 338–​39 Public Power Association, 331 Railway Union, 98 Socialist Party, 68–​69 Sugar Refining Company, 139, 181–​82 American Banana Co. v. United Fruit Co., 279–​80, 283–​87, 290, 294, 303, 306, 311n.48 American Railway Union (ARU), 392–​93 American Tobacco Company breakup of, 62–​63, 361–​62 economic consolidation by, 62–​63 quo warranto suit, 144 Sherman Act effects, 105, 172, 223, 287, 326 unfair competition practices, 181–​82 America’s House of Lords (Ickes), 438 Andrias, Kate, 25 anti-​alcohol movement, 153–​54, 164n.115 Anti-​Merger Act. see Celler-​Kefauver Anti-​Merger Act of 1950 Anti-​Monopolist, 60–​61 antimonopoly American colonies/​early Republic, 17–​ 21, 33n.62 bank chartering proposal, 19 coalitions, 27–​28 collusive agreements, 15

476 Index antimonopoly (cont.) Congressional chartering proposal, 18–​19 developmental history of, 11–​13, 31n.29 economic power obtained without grant, 20–​21 economic reform theme, 172–​73 English common law traditions, 14–​ 17, 32n.40 federalism/​activism relationships, 27 historical roots of, 9–​11, 13–​14 incorporated consolidation, 12 industrial monopolies, 9 industries regulation model, 12 land monopolies, 9, 11–​12 legacy of, 28 market concentration reduction, 27 monopolies criticisms of, 3–​4 power/​authority distribution theme, 171–​72, 178 preservation of democracy via, 3–​5, 6–​9 producerist citizenship threat of, 11–​12 Progressive–​New Deal policies, 12–​13 restraint of trade concepts, definitions, 32n.40 socioeconomic power concentration, 7–​9, 26–​28, 33–​34n.77 structure-​and-​conduct standard, 71–​72 tool/​consumer welfare approach, 4 antitrust American common law traditions, 182, 201–​2n.86 anticompetitive practices bans, 151–​55, 166–​67n.146 antimonopoly vs., 84, 85–​87 capital investment evaluation, 106–​7 capital stock restrictions, 123t, 125, 126t centralization vs. monopoly, 90 charter-​era regulations, 129–​38, 131t, 157–​58n.20, 158n.26, 159n.32, 159n.33, 160n.39, 160n.50, 160n.52, 161n.54, 161n.58 Chicago Conference on Trusts (1899), 85–​86 competition policy enforcement, 164–​65n.117 constitutional bans/​special charters, 121–​22 constructive competition, 106

cooperative agreements, 99–​103, 109 corporate debt limitations, 122–​25, 123t, 126t, 131t corporate domiciling, 130–​38, 158n.26, 193, 369 corporate mergers/​stockholding, 128, 129–​34, 131t, 135–​36, 140–​43, 159n.32, 160n.39 criticisms of, 99 cultivational regulation, 108 cumulative voting rules, 156–​57n.10 duration restrictions, 123t, 125, 126t, 131t enforcement patterns, 100–​1, 119–​20, 136, 138–​51, 155–​56n.2, 161n.60, 201n.85 equal treatment without discrimination, 90–​92 evolution of, 103–​10 exclusive-​dealing contracts, 166–​67n.146 exemptions, 144–​45 filing rules, 123t, 126t, 131t, 134 foreign corporations, 120, 131t, 134–​37, 160n.50, 160n.52, 192–​93 funding, 143–​44, 146–​47, 149–​50, 152, 164n.113 gas price regulation, 163n.88 general incorporation statutes, 120–​28, 123t, 126t, 151–​52, 156n.6, 156n.9, 156–​57n.10, 157n.19 goals of, 88–​89, 103, 108 government ownership, 102–​3, 106, 173–​74 government regulation role, 87–​88, 92, 94–​95 groups in favor of, 99 historical roots of, 83–​84 human vs. corporate personhood, 88 independent producers in, 84 interstate commerce, 159n.33 laissez-​faire competition, 106, 122, 125, 170, 191, 193–​94 legacy of, 108–​10 liability rules, 122–​28, 123t, 126t, 129, 131t, 136–​37 market competition and, 84–​85, 92, 95–​ 96, 99–​100, 105–​6, 177 merchants/​farmers coalitions in, 91–​92 monopoly causes, 87

Index  477 natural antimonopolism, 99–​100, 103, 106 political/​economic centralization fears, 86–​87 political economy in, 153 price discrimination, 142–​43, 148–​49, 154, 166–​67n.146 private land ownership reforms, 92–​93 professional litigants, 163n.91 self-​determination provisions, 192–​93 strict unanimity rule, 157n.19 taxation reforms, 92–​93 trust agreements, 139–​41, 161n.64 trust consolidation, 103–​4 trust contracts, 129–​30 trust utility evaluation, 89–​90, 106–​7 trusts, Wison’s war on, 63–​65 vanguard antimonopolism, 99–​100 voting rules, 122–​28, 123t, 126t, 129, 131t Antitrust Division. see Department of Justice antiwar movement, 342–​43 Apex Hosiery Co. v. Leader, 384, 388–​ 89, 400 Apple, 3–​4, 374 Aristotle, 7–​8, 13–​14 Arizona, 135–​36, 461 Arkansas, 119, 135–​36, 166n.145 Arnold, Thurman, 265–​66, 278–​79, 281–​ 82, 292, 295–​96, 297–​98, 300, 301–​2, 326, 439 Arsenal of Democracy, 321–​22 Arthritis and Rheumatism Foundation, 337–​38 Associated Press case, 326, 440–​49, 453, 459–​60, 464–​65 AT&T, 374 Autobiography (Franklin), 50–​51 Avi-​Yonah, Reuven, 25 Baker, Ray Stannard, 436 ballot initiatives, 57 Bancroft, George, 43–​45 Bank, Steven, 362–​63, 370–​71 Bank Holding Company Act (1956), 23–​24 Bank of America, 216–​17, 374 Bank of the United States, 43, 45–​46, 86, 205

Bankers’ Trust Co., 233n.12 banking/​bank holding companies antitrust law applications to, 210–​13, 221, 231, 236n.42, 240n.90, 240–​ 41n.93, 241n.98 asset acquisition loophole, 241n.98, 269–​70 bank shares ownership, 217–​18, 233–​34n.24 Banking Act/​BHCA, 209, 212, 213–​14, 216–​17, 224–​26, 229–​31, 234n.31, 242n.114, 243n.121, 244n.137, 244n.138, 244n.142, 245n.144 branch banking, 27, 207–​8, 210–​11, 214–​15, 234n.29, 234n.30 chartering/​expansion of, 207–​9, 233–​ 34n.24, 234n.31 credit access, 209, 226–​27, 235n.33, 236n.42, 237n.56 defined, 230–​31 deposit insurance, 209, 210 economic/​political power, 204–​7, 209–​ 21, 223–​24, 226–​28, 235n.33, 235–​ 36n.37, 236n.45, 237n.48, 239n.77, 243n.121, 243n.128, 243–​44n.132, 244n.133, 244n.137 elimination of, 211–​15, 236n.45 federal initiatives, 187 federal oversight of, 212–​20, 224–​25, 237n.56, 239n.77, 239n.81, 240n.83 Federal Reserve System membership, 218–​19 financial reform history, 204–​7, 233n.12 free banking statutes, 75n.35 interbank deposits/​call loan market, 206–​7, 232n.11 interlocking bank directorships, 206–​7, 233n.12, 234n.27 legislative charters/​privileges, 204–​5 monopoly grants, 35–​36 nationalization of, 227–​30, 243n.128, 243–​44n.132 nonbank investment prohibitions, 219–​24, 226, 228–​29, 230–​31, 239n.81, 240n.83, 240n.90, 240–​ 41n.93, 241n.98, 241n.100, 241n.102, 242n.107 one-​bank exception, 245n.144 overview, 23–​24

478 Index banking/​bank holding companies (cont.) public utility licensing restrictions, 185–​86 Pujo Committee, 206–​7, 208, 219–​20, 233n.12, 234n.27 state regulation, 229–​30, 312n.67 taxation of, 362, 374, 378n.12 trust consolidation, 103–​4 unit banking reforms, 207–​12, 224–​26, 233n.21, 234n.29, 234n.30, 234n.31, 235n.34, 235–​36n.37, 236n.42, 236n.45, 243n.119, 243n.121 Baush Machine Tool Company, 294–​95 Beale, Joseph Henry, 174–​75 Becker, Gary S., 31n.29 Beecher, Lyman, 49, 53–​54 Belgium, 290–​91 Bellamy, Edward, 102 Bemis, Edward, 85, 89 Bendix, 268 Bengali famine, 39 Benson, Lee, 91–​92 Berge, Wendell, 301, 335 Berk, Gerald, 103, 108 Berke, Philip, 338 Bernstein, Barton, 334 Beryllium Corporation, 268 Biddle, Francis, 278–​79, 296–​97 Biden, Joseph R., 3–​4 Bill of Rights, 35 Bismarck, Otto von, 256–​57 Black, Hugo, 439–​40, 444–​45, 446, 453, 462 Black and White: Land, Labor, and Politics in the South (Fortune), 56 Blackman, Seymour, 338 Blackstone, William, 15 Blair, John, 332, 333 Blair, Montgomery, 44–​45 Bland, Thomas A., 52 Bliven, Bruce, 438–​39 Boeing, 374 Bonbright Utility Regulation Chart, 177–​78 Borden, Fanny, 170–​71 Bork, Robert, 4, 201n.84, 320–​21, 345, 409 Boston Tea Party, 37–​39 Brandeis, Louis, 12, 66–​67, 69, 71–​72, 80n.99, 103–​5, 108, 172, 185–​86, 207, 287–​88, 359, 384–​85, 395–​96

Brant, Irving, 438–​39 Brazil, 294 Bretton Woods agreement, 300–​1, 326–​ 27, 346 Brinkley, Alan, 320 Broadcast Network Study, 452–​53 Broadcasting, 442–​43 Broadcom, 374 Bronson, Richard, 253–​54 Brookings Institution, 3–​4 Brotherhood of Locomotive Fireman, 392–​93 Brown Shoe decision, 270 Bryan, William Jennings, 60–​61, 69, 85, 86, 87–​88, 102–​3, 106, 436–​37 Bureau of Corporations, 180–​83 Bureau of Economic Research, 85 Burger, George J., 330, 332 Burke, Edmund, 40 Business Electronics Corp. v. Sharp Electronics Corp., 32n.40 Butler, Nicholas Murray, 57 Caffey, Francis G., 296–​97 California, 56, 101–​2, 109–​10, 123t, 125–​ 28, 126t, 131t, 135, 217, 218 Cambridge Analytica, 361 Carey, Henry C., 76–​77n.38 Carson, Rachel, 345 Cary Brown theorem, 373–​74 Casson, Herbert N., 119, 154 CBS, 439–​40 Celler, Emanuel, 227–​28, 270–​71, 326, 328–​42, 346, 452–​53, 461 Celler-​Kefauver Anti-​Merger Act of 1950, 241n.98, 249–​50, 269–​72, 277n.102, 320, 325–​26, 329–​32, 338 Central Competitive Field, 100 Central Pacific Railroad, 55 Chafee, Zechariah Jr., 447–​49 Chandler, Alfred, 168, 187 Charles River Bridge case, 15 Chase, 374 Chevron, 374 Chicago Civic Association (CAC), 143–​44 Chicago Conference on Trusts (1899), 85–​86 Chicago Gas Trust Company, 143–​44

Index  479 Chicago School, 3–​4, 9–​10, 12, 326–​27, 346, 409 Chicago Tribune, 437–​38, 440–​42 child labor legislation, 188 Chinese exclusion laws, 55–​56 Christian Science Monitor, 271 Christianity and the Social Crisis (Rauschenbusch), 56 CitiBank, 374 Citizens United decision, 3–​4 Civic Federation of Chicago, 85, 89 Civil Rights Act of 1964, 343 civil rights movement, 343–​44 Clark, John Bates, 84–​85, 90–​91, 99, 102–​ 8, 109 Clark, John M., 184–​86 Clark, Thomas, 221–​22 Clark, Tom, 455–​56 Clay, Lucius, 253–​54 Clayton Antitrust Act of 1914 anti-​competition provisions, 147–​48 antimonopoly effects of, 25, 207 asset purchase mergers, 325 banking reform applications, 207, 214, 221–​24, 227–​28, 234n.27, 240n.90 business-​government relations and, 183–​84, 187 common law foundation, 201n.85 corporate mergers/​asset purchases, 407–​8 labor provisions, 107, 388, 400 legislative history, 23, 287–​88 legislative support of, 104–​5, 181–​82 passage of, 70–​71, 103, 104–​5 Section 7 amendments, 325, 328 taxation (corporate), 360 unfair/​illegal practices provisions, 181–​82 Clear Channel, 463–​64 Cleveland, Grover, 392–​93 coal mining, 58, 100–​1, 162n.81, 388 Code of Hammurabi, 13–​14 Coke, Edward, 15, 17 Cold War, 212, 327–​28, 329, 345 Coleman, Chiles Crittendon, 148–​49, 150 Colorado, 148, 159n.32 Columbia Steel case, 326–​27 Columbia University, 57, 85

Committee for Coordination of Economic Policy Work, 300 Committee for Industrial Organization (CIO), 397–​400, 401–​6 Committee of the Knights of Labor, 11–​12, 88–​89, 93, 99, 100, 390–​94 Committee to Uphold Constitutional Government, 437–​38 Commoner, 60–​61 Commons, John, 197n.45 Communications Act of 1934, 442–​43 competency (monetary), 55, 87 Comptroller of the Currency, 216–​17 Connally, Tom, 323 Connecticut, 156n.6, 159n.32 Connell Construction Co.v. Plumbers & Steamfitters Local 100, 409 Connelly v. Union Sewer Pipe, 154 consent decrees, 198n.51, 299–​ 300, 457–​58 Consolidated Gas Company, 142–​43 Constitution, 35–​36 consumer activism, 344–​45 consumer lobbies, 66, 68–​69 Control of the Market: A Legal Solution of the Trust Problem (Wyman), 175–​76 Control of Trusts, The (Clark), 84, 91, 105 Cooley, Thomas, 20–​21, 170 copyrights, 35–​36, 188 Corn Products Refining Company, 181–​82 corporate domiciling, 130–​38, 158n.26, 193, 369 Corporation Tax Act, 188. see also taxation (corporate) Corporations and American Democracy (Tobin Project), 168 Costa Rica, 283–​86 Cotton Oil Trust, 139 Council for Television Development, 460–​61 counterfeiting, 48 Crane, Daniel A., 24, 201n.84 Crowley, Leo, 216, 218 Cullom, Shelby, 95 Cummings, Homer, 278–​79, 292, 296 Cummins, Albert B., 366 Cunneen, John, 141–​42

480 Index Cyclopedia of Law and Procedure (Beale/​ Wyman), 174–​75 Danbury Hatters’ case, 387–​88 Danner, F. W., 332–​33 Darcy v. Allein (The Case of Monopolies), 16, 17, 19–​20 Dartmouth College v. Woodward (1819), 122 Darwin, Charles, 54 Davies, John C., 141–​42 Davies, Joseph E., 182–​83, 288 Davis, Arthur V., 296–​97 Dawson, John S., 149–​51 Debs, Eugene, 62–​63, 390, 392–​94 Decartelization Project benefits of, 249–​50, 255 business surveillance, 266–​67 cartelization/​consolidation, 252, 256–​ 58, 261–​63, 265–​69, 274n.41, 297–​300 consent decrees, 299–​300 corruption mechanisms, 261–​69 data sources, 255–​56, 273n.29 deconcentration efforts, 253–​54 democracy decline/​firms, 268–​69 donations to Nazi Party, 259–​62 Enabling Act (1933), 261–​62 Ferguson Committee, 271 historical background, 250–​51 Hitler’s rise to power, 258–​62, 267–​68, 275n.48, 275n.50, 276n.68, 297–​ 300, 335 legacy of, 269–​72, 277n.102 Lex Krupp decree, 269 market allocation agreements, 268, 298–​99 military-​industrial complex, 267–​68 monopolies under civil law, 274n.41 monopoly profits/​political power, 261–​ 65, 276n.68 Nazi Party/​industrialists relationships, 252, 253–​54, 255–​69, 273n.29, 275n.48, 276n.68, 335 nonsupport of, 254–​55 oath of allegiance/​Hitler, 261–​62, 267–​ 68, 276n.68 objectives, 251–​52, 254 OMGUS, 253–​54, 255, 259, 273n.29 organizational support/​Nazis, 264–​65

overview, 24, 249–​50 political power consolidation, 265–​69 propaganda dissemination, 264–​65, 299 shuttering of, 253–​55 state collectivism, 277n.102 Declaration of Independence, 40, 73n.12 Defense Production Corporation, 321 Delaware, 87, 104, 106, 130, 135–​36, 151–​ 52, 156n.9, 159n.32, 176, 192–​93, 369 Democracy and Education (Dewey), 57 Democratic National Convention, 438 Democratic Party/​Democrats, 46–​47, 49–​50, 60–​61, 63–​64, 86, 139, 141–​ 42, 205, 229–​30, 288–​89, 323, 329, 341–​42, 363, 450, 460. see also liberal coalition policies democratic socialism, 68–​69 Department of Commerce and Labor, 180–​81, 290–​91 Department of Justice Alcoa and, 281–​82 antitrust enforcement, 339–​42, 354n.68 antitrust policy reorientation, 292–​94 antitrust prosecutions generally, 180–​81 antitrust reforms, 405–​6 budget, 327, 328 decartelization agenda, 250, 265–​ 66, 297–​98 enforcement actions 1970s, 326–​27 institutional support provided by, 330 joint operating agreements (JOAs), 458–​59 media industry litigation, 440–​41, 454–​ 56, 457–​58 Sherman Act interpretation by, 65 Transamerica inquiry, 221 Department of Treasury, 321, 369 Destler, Chester McArthur, 76–​77n.38 Detroit Free Press, 407 Dewey, John, 12–​13, 53, 57 Diamond Match Company, 179 Dickinson, John, 448–​49 digital markets Congressional report 2020, 3–​4 Disney, 374 Distilling and Cattle Feeding Company, 144 District of Columbia, 176, 218–​19 Dixon, Joseph M., 366

Index  481 domestic conduct test, 286–​87 Donnelly, Ignatius, 60–​61, 69 Douglas, Paul, 226–​27, 229–​30 Douglas, William O., 216–​17, 293–​94 Douglas Amendment, 230–​31 Douglass, Frederick, 50 Dow Chemical riot, 342 Dreibelbis, J. P., 221–​22 Drift and Mastery (Lippmann), 58, 60, 64, 66–​67, 68–​69 drug market regulation, 336–​39 Duane, William J., 74n.20 DuPont, 321–​22, 369 duPont de Nemours Powder Company, 181–​82 Durr, Clifford, 439–​40, 443–​44 Dust Bowl, 52 Dyer case (1415), 15 E. C. Knight case. see United States v. E. C. Knight Earth-​Hunger (Sumner), 58–​59 East Asia, 41 East India Company, 39, 120–​21 Easterbrook, Frank, 192 Eastman Kodak Company, 141–​ 42, 181–​82 Eccles, David, 213 Eccles, Marriner, 212–​25, 228, 230, 237n.56, 240n.90, 240–​41n.93 Eccles v. Peoples Bank of Lakewood Village, 218–​19 ecological sustainability, 69–​70 Economic Outlook, 404, 406 Edge Act of 1919, 312n.67 EEOC, 343–​44 EEOC v Sears, 344 Eichholtz, Dietrich, 258–​59 Eisenhower, Dwight D., 250–​51, 267–​68 Eisner v. Macomber, 370–​71 Ely, Richard T., 173–​74, 196n.25, 196n.30 Emerson, Thomas, 462 Employers’ Liability Acts, 188 employment rights, 343–​44 England, 227–​28 Environmental Action, 345 environmental activism, 344–​45 Environmental Defense Fund, 345

Environmental Protection Agency (EPA), 345 Equal Pay Act of 1963, 344 Equal Rights Amendment, 342 Ernst, Morris, 440 ethical drugs market, 336 Evans, George H., 49, 50–​51, 53–​54 Executive Order on Competition, 3–​4 extraterritoriality. see United States v. Alcoa Exxon, 374 Facebook, 3–​4, 36, 70, 361, 374 Factories in the Fields (McWilliams), 56 Fading American Newspaper, The (Lindstrom), 464–​65 Farmers’ Alliance, 100, 101–​3 farming cooperative agreements, 101–​3 labor rights movement, 345–​46 USDA subsidies, 321, 345–​46 fascism, 24, 204, 209, 211–​12, 220–​21, 222, 227, 250, 270, 280–​81, 332–​33. see also Decartelization Project Federal Communications Commission (FCC), 344, 439–​40, 442–​45, 447, 450, 451–​53, 456–​61 Federal Deposit Insurance Corporation (FDIC), 216, 217, 218 Federal Good Roads Act, 188 Federal Housing Authority (FHA), 237n.56 Federal Oil Conservation Board, 184 Federal Reserve Act of 1913, 70–​71, 221 Federal Reserve Board/​System, 207, 212–​ 23, 230–​31 Federal Trade Commission Act (1914), 70–​71, 183–​84, 201n.85, 287–​88 Federal Trade Commission (FTC) American export associations/​foreign market competition, 288 antitrust enforcement, 339–​42, 354n.68 antitrust reforms, 405–​6 budget, 327, 328 on corporate concentration, 271 establishment of, 23, 25, 103, 104–​5, 180–​84, 187, 360 institutional support provided by, 326, 330, 332 newspaper regulation by, 437

482 Index Field, Marshal III, 440–​42 Field, Stephen J., 134 Fireside Chats, 441–​42 First Amendment, 408, 434, 442–​46, 448–​ 49, 454, 462 First Freedom, The (Ernst), 440 First National bank, 233n.12 First Trust and Savings Bank, 217 Fly, James L., 439–​40, 443–​44, 460 Flynn, Edward, 438 Food, Drug, and Cosmetic Act of 1938, 336–​39 Food and Drug Administration (FDA), 336, 338–​39, 344 Forbath, William, 389 Foreign Trade Antitrust Improvements Act of 1982, 318n.184 Formet Laboratories, 338 Fortas, Abe, 354n.68 Fortune, T. Thomas, 56 Fowler, Mark, 462–​63 France, 290–​91, 294, 321–​22 Frankfurter, Felix, 218–​19, 439–​40, 445, 448, 463 Franklin, Benjamin, 18–​19, 50–​51 Free Speech Movement/​Berkeley, 342–​43 “Freedom of Speech for Whom?,” 443–​44 Freidman, Milton, 33–​34n.77 Fugate, Wilbur, 303 Fulbright, J. W., 225–​26 Gannett, Frank, 437–​38 garment industry, 390, 395–​96 Gas and Electric Utility Corporations (1928–1935), 184 General Agreement on Trade and Tariffs (GATT), 300–​1 General Corporation Law (Delaware), 192–​93 General Electric, 268, 299–​300, 326–​27 General Motors, 343, 369, 397–​98 George, Henry, 21–​22, 37, 52–​59, 65, 70–​ 71, 92–​93, 169, 436–​37 George, James Z., 98 George, Walter, 323 Georgia, 135–​36, 323 German Big Business and the Rise of Hitler (Turner), 260

German Economic Decentralization: An Analysis of the German Cartel and Combine Problem, 252 Germany, 227, 243–​44n.132, 280–​81, 290–​91, 321. see also Decartelization Project Germany’s Major Industrial Combines, 252 Gerry, Elbridge, 19 Gerstle, Gary, 72n.4 Giannini, A. P., 215–​20, 223–​24, 228, 236n.42, 239n.77, 241n.102 “Giannini Empire” memo, 222 Gilded Age, The (Twain), 52–​53 Glass, Carter, 210–​11, 214–​15, 230, 236n.42 Glass-​Steagall Act, 219–​20 Golden, Clinton S., 399 Goldman Sachs, 374 Goldmark, Josephine, 287 Goldwater, Barry, 462 Gompers, Samuel, 85, 107, 388, 389, 390, 392 Good Society (Lippmann), 64 Google, 3–​4, 36, 70, 361, 374 Göring, Hermann, 259–​60 Gould, Jay, 48 grain price fixing, 148–​49 Grange, 92 Granger cases (1877), 93 Granger Laws, 192 Great Britain, 290–​91 Great Depression, 85, 101, 209, 213, 291, 295, 304–​5, 396–​97 Great Northern Railroad, 392–​93 Green-​Wood Cemetery, 57–​58 Greenpeace, 345 Grischkan, Jamie, 23–​24, 27 Gronlund, Laurence, 85, 102–​3 Guaranty Trust Co., 233n.12 Hadley, Arthur T., 95–​96, 169–​70 Hadley, Herbert S., 151 Hallgarten, George, 259 Hamilton, Alexander, 19, 205 Hamilton, Walton, 180 Hamlin, Howland J., 145–​47 Hand, Augustus Noble, 278–​79, 289–​90

Index  483 Hand, Learned, 278–​80, 296–​97, 302–​3, 304–​6, 443–​45, 462 Handcock, Theodore E., 141 Handler, Milton, 180–​81, 182, 185–​87 Hansen, Victor, 452–​53 Harlan, John Marshall, 182–​83, 387 Harper’s Weekly, 394 Harrison, Benjamin, 99 Hartford Empire Co. case, 326 Haskell, George, 294–​95 Hatch, Carl, 323 Hattam, Victoria, 389 Hawley, Ellis, 191 Hayden, Carl, 461 Hayek, Friedrich A. von, 31n.29 Hayes, John W., 88–​89, 391 Hays, Samuel, 11–​12 Haywood, William “Big Bill,” 394–​95 Hearst, William Randolph, 141–​42, 162n.81, 432, 437–​38, 456 Hellerstein, Jerome, 370–​71 Hepburn Act, 106 Hepburn Committee, 178 Herald Examiner, 456 Herald Tribune, 457–​58 Hillman, Sidney, 390, 395, 397–​98 Hindenburg, Paul von, 259, 261–​62 History of the United States (Bancroft), 43–​44 Hitler, Adolph, 243–​44n.132, 258–​62, 267–​68, 275n.48, 275n.50, 276n.68. see also Decartelization Project Hoar, George, 282 Hofstadter, Richard, 319–​20 Holmes, Oliver Wendell Jr., 7–​8, 279–​ 80, 283–​86 Holtzman, Elizabeth, 341–​42 Home Depot, 374 Homestead Act of 1862, 49, 51–​52, 93 House Banking and Currency Committee, 224–​25, 229–​30 House Select Committee on Small Business, 328 Hovenkamp, Herbert, 201n.84 “How Railroads Make Public Opinion,” 436 Hudson, Charles, 93–​94 Hughes, Charles Evans, 172

Hull, Cordell, 265–​66 Hume, David, 40 Hunt, George, 143–​44 Hunting, Warren B., 285–​86 Huntington, Collis P., 96–​97 Huntington, Samuel, 192 Hurst, Willard, 8–​9 Husbands, Sam, 241n.102 Hutchins, Robert, 449 Hutchins Commission on Freedom of the Press, 447–​49 hydroelectric power, 58 I. G.Farben, 252, 259–​60, 264–​65, 267–​68, 269, 299–​300 ice trade monopoly, 141–​43 Ickes, Harold, 438 Idaho, 135 Illinois, 123t, 126t, 135–​36, 138, 143–​48, 150, 152–​54, 160n.50, 161n.58, 164n.113, 164n.115, 164n.116, 164–​ 65n.117, 165n.119 immigration policies, 328 Imperial Chemicals/​DuPont case, 326 Income Tax Act, 188 Independent Bankers Association (IBA), 209, 225 Indiana, 148 Industrial Commission, 180–​82, 197n.45 Industrial Workers of the World (IWW), 390, 394–​95 Inquiry into the Principles and Policy of the Government of the United States (Taylor), 45 Intel, 374 intended effects doctrine, 279, 303–​4, 305–​6, 318n.184 Interborough-​Metropolitan (transit) Company, 142–​43 Interdepartmental Banking Committee, 214–​15 International Harvester, 119, 149–​50, 154–​ 55, 166n.145, 166–​67n.146, 181–​82 International Salt Co. case, 326–​27 International Shoe Co. v. Federal Trade Commission, 147–​48 International Trade Organization (ITO) treaty, 300–​1

484 Index International Workers of the World, 393 Interstate Commerce Act of 1887, 22, 95, 96–​97, 98 Interstate Commerce Commission antitrust reforms, 405–​6 business-​government relations effects, 187 Chicago Conference on Trusts 1899, 85 as compromise, 95–​96 enforcement actions, 162n.81 formation of, 94–​95, 178 legal authority, 104–​5, 170 railroad investigations by, 94–​98, 107 scope of authority, 192 Interstate Commerce Commission v. Brimson, 182–​83 Interstate-​Commerce Railway Association, 97 Iowa, 148 Italy, 298–​99 Jackson, Andrew, 19, 43, 45–​46, 205, 229–​30 Jackson, Fred C., 151 Jackson, Robert, 281–​82, 292, 295–​96 Jackson, William Schuyler, 139–​40, 142–​ 43, 162n.81, 163n.88 James, William, 68–​69 Japan, 227, 321 Jefferson, Thomas, 19, 35, 42–​43, 73n.12, 204–​5 Jenks, J. W., 85 John, Richard, 9, 21–​22, 171, 436–​37 Johnson, Lyndon, 460–​61 Johnson, Tom, 57–​58 Johnson & Johnson, 374 Joint Convention, 100–​1 joint operating agreements (JOAs), 458–​ 59, 461 jurisdiction. see United States v. Alcoa Justice Department. see Department of Justice Justinian Code, 13–​14 jute bagging industry, 101–​2 Kaiser, 321–​22 Kali Works, 286 Kansas, 119, 129–​30, 136–​37, 148–​51, 152–​54, 165n.119, 166n.137, 166n.145, 166–​67n.146

Kansas City Live Stock Exchange, 149–​50 Kansas City Star, 454 “Keeping of the Kept Press,” 436 Keezer, Merriam, 188 Kefauver, Estes, 270, 271, 328–​42 Kefauver-​Harris Amendments, 336–​39 Keller, Morton, 97 Kelly, Florence, 390, 395–​96 Kendall, Amos, 74n.21 Kennedy, John F., 336–​37, 344, 450 Kent, James, 74n.22 Kentucky, 119, 135, 159n.32, 166n.145, 224–​25 Kersten, Charles, 271 Khan, Lina, 172, 411, 412 Kilgore, Harley, 250, 253–​54, 323, 334 Kirdorf, Emil, 259 Kleinwacher, Friedrich, 298–​99 Knights of Labor. see Committee of the Knights of Labor Knox, Frank, 437–​38 Korean War, 324, 327–​28, 329 Kornhauser, Marjorie, 364–​65 Kronstein, Heinrich, 300 Krupp, Alfried, 269 Krupp (Germany), 259–​60, 261, 265, 268, 269, 299–​300 Ku Klux Klan, 136–​37 La Follette, Robert, 182–​83 labor movement. see also Committee of the Knights of Labor antimonopoly agenda, 11–​12, 25, 66, 384–​86, 411–​14 antitrust law applications to, 384, 386–​410, 416n.34, 423n.135, 423n.139, 424n.147, 424n.155, 424n.157, 425n.159 banking, 417n.36 civil rights/​workplace equality, 343–​44 Clayton Act effects, 107, 388, 400 collective bargaining, 407, 408, 409, 412–​13, 426n.171, 428n.197 collective ownership, 394–​96, 406 common law, 386–​87 cooperative agreement effects, 101–​3 corporate mergers/​asset purchases, 387–​88, 405–​6, 407–​8, 409, 424n.155, 424n.157

Index  485 democracy agenda, 385, 389–​408, 416n.34, 417n.36, 418n.50, 418n.52 economic equality, 426n.175 economic planning/​organization, 394–​ 96, 413 economic/​political power, 384–​86, 392, 394–​96, 418n.52, 423n.135, 423n.139, 424n.147, 424n.154, 424n.155, 424n.157, 425n.158, 425n.159, 425n.166 federal initiatives, 188 federal labor injunctions, 386–​88, 392–​ 93, 397 independent contractors/​gig workers, 410, 412–​13 industrial/​economic democracy, 396–​400 institutional support provided by, 330–​ 31, 333, 345–​46 labor exemption, 384, 386–​89, 390, 400, 401–​2, 409 liberty of contract doctrine, 386–​87 monopoly capitalism settlement, 407–​ 8, 425n.166, 426n.171, 426n.174, 426n.175, 428n.197 Noerr-​Pennington doctrine, 408 Norris–​La Guardia Act, 388–​89, 397 occupational licensing, 409 price controls, 426n.174 private sector union collapse, 408–​9 public sector unions, 409, 428n.197 public utility licensing restrictions, 185–​86 Sherman Act effects, 62, 107, 386–​87, 400, 408 small businesses loans, 405–​6, 425n.158 social service provision, 396 social transformation role, 68–​69, 343–​ 44, 385, 389, 392, 394 state action doctrine, 410 state regulation, 423n.135 strikes, 392–​93, 394–​95, 397–​98, 399–​400 Taft-​Hartley Act, 330–​31, 401–​2, 407–​8, 410, 423n.139 tax policy in, 405, 424n.154 unionization, 396–​400, 413 voluntarism in, 389–​90, 392

voluntary organizations/​political democracy relationships, 418n.50 wage slavery system, 393 war economy effects, 321, 322–​23 worker safety legislation, 395–​96 Labour Party, 227–​28 Lamont-​Havers, Ronald, 337–​38 Lamoreaux, Naomi R., 22–​23, 85 Land-​Grant College Act of 1862, 51 Lande, Robert, 201n.84 Landis, James, 450 Landon, Alf, 437–​38 Langer, William, 271 Lanham, Saul, 97–​98 Lapp, John A., 187 Latin America, 41, 283–​86, 289–​90, 294 League of Nations, 291 Lebovic, Sam, 25–​26 Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 32n.40 Leggett, William, 37, 45–​49, 53, 70 Lend-​Lease Program, 300–​1 Lerner, Max, 438 letters of marque, 106 Letwin, William, 191, 201n.85 Lewis, John, 390, 397–​98 Lewson, John, 170–​71 liberal coalition policies advertising/​marketing costs, 338 antimonopoly generally, 319–​21, 350n.4 antitrust enforcement, 339–​42, 354n.68, 354–​55n.73 cases filed list, 326–​27 cases filed statistics, 326 centralized power/​big government, 332–​36 conglomerate mergers, 320, 339–​42 constituent mail, 330–​31, 332–​33, 337 consumer welfare primacy, 320, 345, 350n.4 corporate concentration, 321–​22, 324, 336 defense contracting, 321–​24, 345–​46 dollar-​a-​year men, 321–​22, 327–​28 economic/​political power, 325 failures of, 320–​21, 326, 329 institutional support for, 326, 330, 332 international trade, 326–​27

486 Index liberal coalition policies (cont.) labor/​unionists in, 321, 322–​23, 330–​31, 333, 345–​46 market share arrogation, 324 pharmaceutical industry hearings, 336–​39 political support for, 327–​32 predatory pricing, 332 priority shifts, 320, 336–​39, 350n.4 prosecution legislative agenda, 325–​26 returns on investment, 323–​24 small business in, 321, 322–​23, 329–​36, 338, 345–​46 social movements in, 342–​45, 346 war profiteering, 322 Liberalism and Social Action (Dewey), 57 libertarians, 46–​47, 55 Liebling, A. J., 450 life insurance companies, 334–​35 Lincoln, Abraham, 49–​50 Lindstrom, Carl, 464–​65 Lipartito, Kenneth, 72n.4 Lippmann, Walter, 21–​22, 37, 58–​59, 64–​ 70, 71–​72, 80n.99, 81n.122, 82n.138, 433, 457–​58 liquor law violations, 150 Little, John T., 148–​49 Lloyd, Henry D., 7–​8, 89, 169 Lochner v. New York, 7–​8, 401, 411 Loewe v. Lawlor, 387–​88 Looking Backward (Bellamy), 102 Lorain Journal, 454 Los Angeles Times, 456, 457–​58 Loucheur, Louis, 291 Louisiana, 159n.32 MacArthur, George, 329 MacLeish, Archibald, 448 Macune, Charles, 101–​2 Madison, James, 18–​19, 35, 41–​42, 71–​72 Magna Carta, 15 Maine, 130, 137–​38, 159n.32, 161n.54 Malthus, Thomas, 53, 54 Martin, James, 253–​54 Marx, Karl, 53 Marxism, 258–​59, 275n.48, 332 Maryland, 130, 159n.32

Mason, Edward S., 300 Mason, George, 18–​19 Mason, Lucy, 390, 397 Massachusetts, 123t, 126t, 131t, 135, 139, 156n.6, 157–​58n.20, 159n.32 Massachusetts Railroad Commission, 105 “Materials for the Study of Business,” 184–​85 Maverick, Maury, 323 May, James, 155–​56n.2 May, Stacy, 188 Maybank, Burnet, 229–​30 Mayer, Julius M., 141–​42 McAdoo, William Gibbs, 210–​11, 236n.42 M’Cartney, Washington, 44–​45 McCabe, Thomas, 223–​24, 228–​29 McCarthyism, 329 McConnell, Herbert, 284, 285–​86 McCormick, Cyrus, 154 McCormick, Robert, 437–​38, 441–​42 McCulloch v. Maryland, 19 McKenna, Joseph, 154 McKinley, William, 363 McKinley Tariff, 61–​62, 80n.99 McKinney’s Consolidated Laws of New York (1931), 185–​86 McWilliams, Carey, 56 Mead, James, 323 media industries advertising revenues, 433, 435–​36, 437–​ 38, 450, 451, 452, 453–​55 anticompetitive trade practices, 452–​56 antimonopolism in, 25–​26, 432–​35, 439–​64, 469n.26 antitrust actions list, 326–​27 Associated Press case, 440–​49, 453, 459–​ 60, 464–​65 British disinformation campaigns (19th century), 41–​43, 71–​72 cable/​satellite, 462–​63 chain-​broadcasting, 437–​38, 441–​ 42, 452–​53 chain ownership, 451–​52 civil liberties/​democracy relationships, 442–​43, 445, 448–​49 competitive economics policies, 433–​35 consent decrees, 457–​58

Index  487 cross-​ownership, 440, 441–​42, 447–​48, 452, 459–​61, 462–​63 diversification policies, 433–​34, 456–​64 diversity policy limitations, 450–​ 56, 465–​66 economic/​political power, 436–​39, 456–​ 57, 459–​61 economic regulation, 433, 434–​35, 442–​ 44, 446, 457–​58 First Amendment effects, 442–​46, 448–​ 49, 454, 462 free market of ideas, 434–​35, 439, 443, 446 freedom of speech, 443–​44, 448 internet, 463, 465 joint operating agreements (JOAs), 458–​59, 461 laissez-​faire competition, 434–​35, 445–​ 46, 462 licensing, 447, 454 Lippman’s criticisms of, 67–​69, 82n.138 local market competition, 451 mergers/​acquisitions waivers, 460–​62, 473n.100 must-​buy agreements, 452–​53 newspaper consolidation, 432, 435–​39, 442–​43, 450–​64 newspaper editorials, 47 one-​paper towns, 436 option-​time agreements, 452–​53 profit pooling, 458–​59 public-​interest theory, 442–​49, 460 public opinion influencing by, 436–​38, 441–​42, 445, 453 radio, 437, 439–​40, 443–​45, 451–​54, 457, 462–​64 Sherman Act effects, 444–​45 television, 450, 452–​53, 457, 460–​ 61, 462 truth-​in-​advertising laws, 437–​38 Mellon, Andrew, 294 “Memorandum of Recommendations as to Trust Legislation,” 182–​83 Michigan, 20–​21, 50–​51, 89, 109–​ 10, 125–​28 Micron, 374 Microsoft, 374

military procurement agents, 321–​22 Milk Exchange, 139–​40 milk industry regulation, 186–​87, 199–​200n.72 Mill, John Stuart, 53–​54 Miller, George, 91–​92 Mills, C. Wright, 323–​24 mine workers, 390 minimum income guarantee, 55, 87 Minnesota, 225 Minnesota Farmer-​Labor Party, 209 Minow, Newton, 457, 460–​61 Minton, Sherman, 438 Missouri, 119, 135–​36, 148, 151, 154, 159n.32, 166n.145, 166–​67n.146, 334 Mitchel v. Reynolds (1711), 17 Model Treaty (Adams), 40–​41 Modern Corporation and Private Property, The (Berle/​Means), 7 Modern Order of American Consumers, 329 Moloney, Maurice T., 144–​45, 146–​47 Monopolies and Trusts (Ely), 196n.30 Monopoly Subcommittee/​House Judiciary Committee, 328 Monopoly the Cause of All Evil (O’Connor), 46–​47 Montana, 135, 323 Moody & Waters Company v. Case-​Moody Pie Corporation (1933), 147–​48 Morgan, J. P., 104, 163n.91, 206–​7, 233n.12, 359–​60, 363–​64 Morgenthau, Henry, 214–​15, 216 mortgage foreclosure, 49 Mott, Frank Luther, 442–​43 MPAA case, 326–​27 multiversity, 342 Munn v. Illinois, 20 Munsey, Frank, 436 Murdoch, Rupert, 432, 463–​64 Murray, James E., 323, 334, 450 Murray, Philip, 390, 399, 402–​4 Mutual Broadcasting System, 439–​40 Nader, Ralph, 344 napalm, 342 Nashville Banner, 442–​43

488 Index National Association of Independent Tire Dealers, 329 Association of Manufacturers, 65 Association of Retail Druggists, 225–​26, 329, 338 Association of Retail Grocers, 329 Bank Act of 1863, 233n.21 Board of Trade and Transportation, 96 Cash Register, 181–​82 City Bank, 233n.12 Consumers’ League (NCL), 390, 395–​96 Cordage Company, 101–​2 Farmer’s Union, 329 Federation of Independent Business, 225–​26, 329–​30, 331–​32, 334 Indian Defense Association, 52 Industrial Recovery Act of 1932 (NIRA), 292–​93, 397 Labor Relations Act (NLRA), 390, 397–​ 98, 409 Labor Relations Board, 397–​98 Linseed Oil Company, 144 Monetary Commission, 206–​7 National Lead Co. case, 326–​27 Reform Association, 49 Union Company, 101–​2 War Labor Board, 399–​400 Native Americans, 52 natural resources monopolization, 58 Navigation Acts, 38–​41, 42, 43–​44, 73n.12, 74n.20 NBC, 439–​40, 442–​43, 446–​49, 451–​52 NCPE, 344 Neale, A. D., 339, 354n.68 Nebbia v. New York (1934), 186–​87 Neumann, Franz, 335 Nevada, 159n.32, 216–​17 New Deal, 9–​10, 12, 212, 216–​17, 230, 321, 336, 396–​400, 437–​38, 439–​43 New Freedom, The (Wilson), 63–​64 New Hampshire, 156n.6, 224–​25 New Jersey corporate domiciling in, 130–​36, 158n.26, 369 foreign corporations domiciling in, 135 general incorporation laws, 104, 106, 119–​ 20, 123t, 126t, 131t, 151–​52, 157n.19

holding company structures allowance, 360 intercorporate dividends exemption, 368 self-​determination provisions, 192–​93 Seven Sisters laws, 182–​83 New Mexico, 323 New Nationalism, 63 New Republic, 299, 398–​99, 403, 438–​39 New York antitrust prosecutions by, 139–​43, 152–​53, 161n.64, 162n.81, 163n.88, 163n.91 Chamber of Commerce, 96 chartering revenues, 135–​38 corporate domiciling in, 130–​34, 137–​ 38, 159n.32 economic enterprise statutes, 185–​87 economic/​political power concentration, 270 Federal Reserve Bank, 214 financial system control by, 216–​17 general incorporation statutes, 123t, 126t, 131t manufacturing companies restrictions, 123t, 126t, 131t public utility regulation, 178–​79 Stock Exchange, 60 Telegraph Act of 1848, 47–​48 war contractors investigation by, 323 New York Banking Act of 1838, 47–​ 48, 75n.35 New York Times, 253–​54, 368–​69, 463–​64 Newlands, Francis G., 366–​67 Newman, Winn, 344 Newspaper Preservation Act of 1970, 461–​62 newspapers. see media industries Nixon, Richard M., 340, 343, 459–​61 Nock, Albert Jay, 55 Noerr-​Pennington doctrine, 408 Norris–​La Guardia Act, 388–​89, 397 North Dakota, 271 Northern Securities case, 360, 363 Norway, 298–​99 Novak, William J., 23, 412 Novanglus essays, 38 NSC-​68, 324, 329, 334

Index  489 Nye, Gerald, 322, 325–​26 O’Connor, Arthur Condorcet, 46–​47 Office of Alien Property Custodian, 300 Office of Economic Opportunity, 343 Office of Industrial Organization, 341–​42 Ohio, 61, 123t, 125–​28, 126t, 129–​ 30, 131t, 134, 135–​36, 139–​40, 159n.32, 457–​58 oil industry, 58, 85, 99–​100, 280–​81, 332 Oklahoma, 136, 153–​54 oligopoly/​oligarchy, 7–​8 O’Mahoney, Joseph C., 325–​26, 329 OMGUS. see Decartelization Project Open Markets Institute, 3–​4 organized crime, 328, 336 Origin and Progress of the United States (M’Cartney), 44 Our Land and Land Policy (George), 92 Packers and Stockyards Act of 1921, 184 Paine, Thomas, 49 Panic of 1873, 52–​53, 76–​77n.38 Panic of 1907, 206–​7, 219–​20, 233n.12 Paramount Pictures case, 326–​27 Parker v. Brown, 401, 412–​13, 423n.135 patents, 35–​36, 62–​63, 188, 268 Patman, Wright, 209, 323, 334, 342, 346 Patrick, Dennis, 462 Paul, Sanjukta, 412 Paul v. Virginia (1869), 134 Payne-​Aldrich tariff bill, 363–​64 Peace of Westphalia, 285 Pembina Consolidated Silver Mining v. Pennsylvania, 134 Penn, William, 17 Pennsylvania, 100–​1, 121–​22, 123t, 126t, 128, 131t, 134, 136–​37, 139, 159n.32 Peoples Bank of Lakewood Village, 218–​19 Pepsi, 374 Pfizer, 374 pharmaceutical industry hearings, 336–​39 Philadelphia Plan, 343 photographers’ supplies monopoly, 141–​42 Pillsbury case, 326–​27 Pincus, Steve, 73n.12 Pingree, Hazen, 89

Piott, Steven, 151 Pitofsky, Robert, 6–​7, 340 Plan of Treaties (Adams), 38–​39, 40 Polanyi, Karl, 335 political economy (long nineteenth century) American colonies/​early Republic, 35–​ 36, 72n.4, 73n.12 assiento privilege, 43–​45 Atlantic seaboard shippers, 76–​77n.38 bad business vs. good industry, 81n.122 bank chartering, 43, 45–​48, 75n.35 British disinformation campaigns, 41–​ 43, 71–​72 British monopoly powers, 36–​45, 70, 73n.12, 74n.20 economic consolidation, 58–​71, 80n.99, 80–​81n.103, 81n.122, 82n.138 electoral reforms, 57 federal government–​chartered corporations, 45–​49 government ownership of industry, 65–​66 laissez-​faire commerce, 43, 45–​48, 61–​ 62, 75n.35 land reform, 49–​52, 70–​71, 76–​77n.38 land-​use planning, 56–​58 landholding/​landlords, 52–​56 market competition, 48, 59–​61 Massachusetts junto power grab, 37–​39 monopoly grants, 35–​36 open door policy, 41 Populist anti-​monopolism, 82n.138 producerism, 76–​77n.38 reciprocity in commerce privileges, 40 regionalism, 76–​77n.38 slavery, 43–​45, 50, 74n.22, 76–​77n.38 social group mobilization, 66–​70 tariff barriers, 41, 60–​62, 80n.99 universal monopoly, 74n.20 US access to global commerce, 36–​ 41, 73n.12 “Political Lessons of the Pullman Strike,” 393 Politics (Aristotle), 13–​14 Pomerene, Atlee, 288–​89 Populist Party, 60–​61, 69, 86, 148–​ 49, 230–​31

490 Index Posner, Richard, 409 Postal Telegraph-​Cable Company, 142–​43 Postel, Charles, 82n.138 potassium salt, 286 Potsdam Agreement, 250–​51 Pound, Roscoe, 442–​43 poverty and land ownership, 52–​ 56, 70–​71 Powderly, Terence, 93, 100, 390–​92 predatory pricing, 80n.99 Preface to Politics (Lippmann), 68–​69 Premo Pharmaceutical Laboratories, 338 private land ownership reforms, 49–​50, 52–​56, 70–​71, 92–​93 Problems of To-​Day: A Discussion of Protective Tariffs, Taxation, and Monopolies (Ely, Richard), 173 Progress and Poverty (George), 52–​53, 60, 70–​71 Progressive Party/​Progressive Era, 63, 212, 228–​31, 384–​85 Prohibition, 153–​54, 164n.115 Proxmire, William, 341 Public Broadcasting Service, 457 public-​interest theory, 442–​49 public lands management, 63 public utility law American common law traditions, 182, 201–​2n.86 antimonopoly and, 173–​78, 196n.25, 196n.30 commissions, 176–​78, 182–​83, 186–​87 consent decrees, 198n.51 economic policy principles, 191 federal initiatives, 187–​89 franchise-​created vs. combination-​ created monopolies, 173–​74 history of, 168–​73, 194n.5 holding companies, 211–​12, 228 legacy of, 189–​94, 201n.84, 201n.85, 201–​2n.86 licensing restrictions, 185–​87 natural monopolies, 173–​77, 196n.25 oversight, 176–​78, 186–​87 price/​production controls, 186–​87 private transactions safeguards, 201–​2n.86 public-​private distinction, 173–​74 publicly created monopoly grants, 169, 194n.5

regulated industries law, 184–​89, 199–​200n.72 scope of, 175–​76 state regulation, 177–​78, 182, 437 statute topic coverage, 199–​200n.72 unfair competition, 178–​84, 197n.45, 198n.51 unfair methods list, 183–​84 PUHCA, 329–​30 Pujo Committee, 206–​7, 208, 219–​20, 233n.12, 234n.27 Pullman Company, 392–​93 Pullman Strike 1893, 98 quo warranto suits, 139–​40, 144, 148–​50 radio. see media industries Rahman, Sabeel, 412 Railroad Transportation (Hadley), 95–​ 96, 169 railroads capital investment evaluation, 106–​7 commissions, 93–​95, 178–​79 cooperative agreements, 99–​103 discrimination by, 87, 93–​94 economic/​political power, 436–​37 enforcement jurisdiction, 99, 100–​1 government-​enforced pools, 96–​97 government-​granted special privilege, 55, 392 government ownership of, 102–​3, 396 government subsidization of, 310n.38 labor movement, 392–​94 labor strikes, 392–​93 land grants for, 51–​52 market competition and, 95–​96 merger movement effects on, 60–​61 price fixing by, 94, 97, 99, 101, 141–​ 43, 177 rebate prohibitions, 95 regulation of, 91–​98, 136, 168–​69, 172–​ 73, 280–​81 Sherman Act effects on, 62 short haul/​long haul distinctions, 95 taxation of, 362, 378n.12 unfair competition practices, 178–​79 Railways of Europe and America (Todd), 102 Rauschenbusch, Walter, 56 Rayburn, Sam, 226–​27

Index  491 Reagan, John H., 94–​95, 96 recall elections, 57 Reconstruction Amendments, 19–​20 Reconstruction Finance Corporation, 439–​40 Reed, James A., 288–​89, 312n.64 referenda, 57 Reform Democrats, 97–​98 regulated industries law. see public utility law Regulation 41, 372 Regulation No. 45, 369–​70 Reichsbank, 259–​60 Reign of Monopoly (Bland), 52 Report on Chain Broadcasting, 439–​40 Report on German Cartels and Combines, 252 Republican Party/​Republicans, 41, 49–​50, 52, 61, 89, 141, 144–​46, 148–​49, 224–​ 25, 329, 363 Reuther, Walter, 390, 399–​400, 407 Revenue Act of 1918, 369, 370–​71 Reynolds Metals Company, 303 Rhode Island, 156n.6 Richfield Oil case, 326–​27 Robertson, A. Willis, 229–​30 Robinson-​Patman Act of 1936, 184 Rockefeller, John D., 99–​100, 102, 139–​ 40, 359–​60 Rodgers, Daniel T., 72n.4 Roepke, Wilhelm, 256–​57 Romano, Roberta, 130 Roosevelt, Franklin D., 211–​12, 213–​14, 216–​17, 236n.45, 250, 265–​66, 281–​ 82, 291–​92, 321–​22, 325–​26, 396–​97, 399–​400, 437–​38 Roosevelt, Theodore, 4, 52, 62–​63, 64, 70–​71, 80n.99, 106, 141–​42, 162n.81, 207, 363–​64 Root, Elihu, 284, 366, 367 Rule of Reason cases (1911), 201n.85 Russell, Charles Edward, 436 Ruttenberg, Harold, 399 San Bernardino Sun-​Telegram, 457–​58 Sanders, Elizabeth, 161n.60 Santa Clara v. Southern Pacific Railroad (1886), 192–​93 Savio, Mario, 342–​43 Sawyer, Laura Phillips, 24, 178 Schacht, Hjalmar, 259–​60

Schneider, Nathan, 412 Schonfarber, J. G., 88–​89 Schoolmasters case, 15 Schwartz, Ivo, 266–​67 Seavoy, Ronald, 75n.35 Second Circuit, 278–​79 Second Great Awakening, 49 Second New Deal, 291–​96, 306–​7, 313n.89 secret ballot, 57 Sedgwick, Theodore Jr., 46–​47 Senate Banking and Currency Committee, 223, 224–​25 Senate Committee on Interstate Commerce, 106 Senate Committee to Study the Problems of Small Business, 334 Senate Select Committee on Interstate Commerce, 91 Senate Special Committee to Investigate the National Defense Program, 323 Senate Subcommittee on Antitrust and Monopoly, 336 Seven Sisters antitrust laws (1913), 135–​ 36, 182–​83 Sherman, John, 61–​62, 80n.99, 171, 179 Sherman Antitrust Act of 1890 antitrust liability, 302–​3, 305–​6 banking reform applications, 221 business-​government relations and, 22, 23 court interpretation of, 105–​6, 302 criticisms, 61 efficiency interpretation, 201n.84 enforcement jurisdiction, 104–​6 English common law foundations, 14–​15 evolution of, 201n.85 extraterritoriality, 278–​80, 282–​83, 287–​88, 308n.9 foreign import tariffs, 286 intra-​state business practices, 61–​62 legislative history, 25, 109, 171–​72, 179, 182–​83, 187, 191 preconditions for, 9–​10, 41 price fixing contracts, 292–​94 rationale, 61 tariff reform, 98–​99 taxation (corporate), 360, 362, 363, 365 transportation monopolies, 311n.48 unfair competition practices, 65, 179–​81

492 Index Sherwood, Champlin, 179–​80 Shipping Board Act, 188 Siebert, Fred, 442–​43 Silent Spring (Carson), 345 Singer, Jonathan W., 165n.119 Sisal Sales Corp., United States v., 289–​ 90, 306 Sixteenth Amendment, 363, 368 Skidmore, Thomas, 49 Sklar, Martin, 201–​2n.86 Skowronek, Stephen, 192 Slaughter-​House cases (1872), 19–​20 Small Business Committee, 450 Small Newspaper: Democracy’s Grass Roots, The, 450 Smaller War Plants Corporation (SWPC), 323 Smith, Adam, 16–​17, 53, 89–​90 Smith, Gerrit, 50 Snyder, John, 223, 241n.102 socialism, 36, 68–​69, 227–​28, 277n.102, 280–​81, 292, 334–​35, 393, 394 Socialist Party, 62–​63 Socony-​Vacuum Oil Company, 292–​ 94, 302–​3 Solow, Robert, 56–​57 South Africa, 343 South Dakota, 136–​37 Southern Livestock Prices (1920), 184 Southern Pacific Railroad, 96–​97, 192–​93 sovereign grants of exclusivity, 16–​18 Soviet Union, 280–​81 Sparrow, James T., 24–​25 Special Committee to Investigate Contracts, 299 Spence, Brent, 224–​25, 227–​29 St. Louis Convention of the Populists, 102 Standard Fruit and Steamship Company, 310n.38 Standard Oil Company background, 105 breakup of, 361–​62 cartel activity prohibition, 287 industrial concentration by, 326–​27 Kansas’s action against, 148–​50 New York’s action against, 139–​40 relationship with I.G. Farben, 268, 299

Sherman Act effects, 62–​63, 172, 387 state regulation of, 119, 120, 154, 192–​93 taxation of, 359–​60, 363, 365 trust contract usage by, 84, 129–​30 unfair competition practices, 99–​100, 129–​30, 181–​82 state regulation banking/​bank holding companies, 229–​ 30, 312n.67 corporate domiciling, 130–​38, 158n.26, 193, 369 corporate mergers/​stockholding, 129–​ 34, 131t, 135–​36, 140–​43 enforcement, 136 enforcement patterns, 138–​51, 161n.60 exemptions, 144–​45 filing rules, 134 foreign corporations, 134–​37 funding, 143–​44, 146–​47, 149–​50, 152, 164n.113 general incorporation laws, 45–​49 general incorporation statutes, 151–​52 interstate commerce, 159n.33 liability rules, 129, 131t, 136–​37 oversight authority, 136 political economy in, 153 powers to legislate antimonopoly/​ antitrust, 19–​20, 22–​23 public utility law, 177–​78, 182, 437 state incorporation laws, 129–​38, 131t, 157–​58n.20, 158n.26, 159n.32, 159n.33, 160n.39, 160n.50, 160n.52, 161n.54, 161n.58 trust agreements, 139–​41, 161n.64 trust contracts, 129–​30 voting rules, 129 Stead, William H., 146–​47 Stedman, John, 254–​55 Steelworkers Union, 390, 399 Steffens, Lincoln, 67–​68, 360 Steinbaum, Marshall, 412 Stevenson, Adlai, 334–​35 Stigler, George, 192, 326–​27 Stiglerian capture thesis, 33–​34n.77 Stone, I. F., 323–​24 strict territoriality doctrine, 283–​88, 290, 294, 304–​5

Index  493 Subcommittee for Antitrust and Monopoly, 332 Subcommittee on the Study of Monopoly Power, 326 sugar-​refinery decision 1895, 63 Sullivan, Leon, 343 Sumner, William Graham, 55, 58–​60 Surplus Property Act of 1944, 323 Survey of Germany’s Major Industries, 252 Swan, Thomas W., 278–​79 Switzerland, 290–​91, 294 Symington, Stuart, 323 Tabor, Charles F., 139 Taft, William H., 62–​63, 363–​65 Taft-​Hartley Act, 330–​31, 401–​2, 407–​8, 410, 423n.139 Tammany Hall, 141–​42, 178 tariffs barriers, 41, 60–​62, 80n.99 foreign import tariffs, 286 GATT, 300–​1 McKinley Tariff, 61–​62, 80n.99 Payne-​Aldrich tariff bill, 363–​64 reform, 87, 97–​98 Wilson Tariff Act of 1894, 286 taxation (corporate) anti-​avoidance provision, 376 antitrust features, 25, 360, 363, 365, 366–​72, 380n.49 of capital gains, 369, 370–​71, 376 collection of, 157–​58n.20 consolidated returns filing, 372, 375 corporate bigness/​democracy relationships, 360–​61 corporate tax of 1909, 361–​72, 378n.12, 380n.49 dividends/​interest withholding, 362–​63, 365–​66, 367–​68, 378n.12 double taxation, 365–​66, 380n.49 excess profits tax, 374, 382n.76 excise tax argument, 363–​66 federal income tax, 311n.43 federal initiatives, 188 for-​profit exemption, 380n.49 foreign corporations, 120, 131t, 137–​38 foreign import tariffs, 286 general incorporation laws in, 119–​20

interest, 375–​76 legislative history, 363–​68 limited liability privilege, 366 lobbying influences on, 370–​71 loss deductions/​below-​costs sales, 334 mergers/​acquisitions, 369–​71 monopoly power limitations via, 372–​ 76, 381–​82n.72 normal returns, 373–​74 Payne-​Aldrich tariff bill, 363–​64 private land ownership reforms, 49–​ 50, 52–​56 progressive, 363, 372–​76 publicity feature, 366, 368–​69, 379–​80n.41 rationale, 366–​67, 370–​71, 380n.46 R&D, 375–​76, 382–​83n.79 as regulatory mechanism, 365, 366–​67, 368, 374 rents, 374–​75, 382n.76 revenues, 161n.54, 161n.58 section 11(b)/​taxable income, 372–​73, 381–​82n.72 of shareholders, 362–​63, 365, 366–​67, 376, 383n.80 stock options, 375 stock watering, 87 tax base, 375–​76, 382–​83n.79 tax-​free reorganization, 369–​71 Taylor, John, 45 Teachout, Zephyr, 411 Telecommunications Act of 1996, 462–​63 telegraphy eminent domain effects, 55 general incorporation effects, 47–​48 government ownership of, 102 government subsidization of, 310n.38 monopoly power consolidation, 96 price fixing, 142–​43 regulation of, 173 temperance movement, 153–​54, 164n.115 Temporary National Economic Committee (TNEC), 297–​99, 325 Tennessee, 270 Tennessee Valley Authority (TVA), 58, 331, 439–​40 Texas, 119, 135–​36, 148, 153–​54, 165n.119, 166n.145, 323, 455–​56, 460

494 Index textile industry, 395 thalidomide, 328, 336–​37 Third Circuit, 224 Thyssen, Fritz, 259 Tiedeman, Christopher, 20–​21 Times-​Picayune decision, 454–​56 Tito, Josip Broz, 244n.138 Tobey, Charles, 224–​25 Tobin Project, 4–​5 Todd, Marion, 102 Tolstoy, Leo, 53 Too Big (Ernst), 440 totalitarianism, 335–​36, 448–​49 Trade Practice Conferences (FTC), 184 Trans-​Missouri Freight Association, 99 Transamerica Corporation, 214, 216–​ 24, 239n.77, 241n.100, 241n.102, 242n.107 Treaty of Paris (1783), 36–​37 Treaty of Utrecht, 43–​44 Truman, Harry S., 223, 299, 323, 326–​ 27, 401–​2 Truman Committee, 299, 323 Trump, Donald, 3–​4 Trust Laws and Unfair Competition (1916), 182–​83 Tucson decision, 458–​59, 461 Turner, Donald F., 457–​59 Turner, Frederick Jackson, 53 Turner, Henry, 259, 260 Twain, Mark, 52–​53 U. S. v. American Tobacco Co., 287 U. S. v. Standard Oil Co., 287 ultra vires doctrine, 192–​93 unions. see labor movement United Auto Workers (UAW), 390, 397–​ 98, 399–​400 United Fruit Company, 283–​88, 290, 294, 303, 306, 310n.38 United Health, 374 United Labor Party, 93 United Mine Workers (UMW), 388, 396, 397–​98 United States School Furniture Company, 144 United States v. Alcoa antitrust liability, 283, 285–​91, 302–​ 3, 304–​6

antitrust provisions citing foreign trade/​ commerce, 309n.18 background, 24, 278–​82, 308n.9, 326 board of apportionment, 286 bringing suit, 313n.89, 313–​14n.94, 314n.95 Caribbean Basin investment, 310n.38 cartelization, 279–​81, 286, 288–​91, 295, 296–​97, 300–​2, 304–​5 collusion, 294–​95, 297–​300, 302–​3 contract law holding, 311n.48 defense argument, 313–​14n.94 domestic conduct test, 286–​87 economic analysis/​legal reasoning, 281–​82 economic/​political power, 291–​ 92, 296–​98 extraterritoriality holding, 303, 308n.9 federal income tax, 311n.43 holdings, 296–​97, 302–​3, 306 impacts of, 303–​4, 306–​7 intended effects doctrine, 279, 303–​4, 305–​6, 318n.184 isolationism, 312n.64 legal proceedings, 296–​304, 317n.166 legal questions/​principles, 279–​80 market competition/​democratic accountability, 281–​82, 292–​94, 296–​ 302, 305–​6 price fixing contracts, 286, 292–​94, 317n.166 prosecution argument, 293, 295–​96, 314n.95 Roosevelt Recession of 1937, 313n.89 strict territoriality doctrine, 283–​88, 290, 294, 304–​5 territorial division agreements, 294–​95 territorial sovereignty, 279–​91, 309n.18, 310n.38, 311n.43, 311n.48, 312n.64, 312n.67 US hegemony and, 303–​4 Webb associations, 288–​90, 301–​3 United States v. E. C. Knight, 360, 363, 387–​88 United States v. Hutcheson, 384, 388–​89 United States v. Sisal Sales Corp., 289–​ 90, 306 United Steel Works, 259–​60 United Steelworkers of America, 399

Index  495 University of Chicago Law Review, 254 University of Wisconsin–​Madison, 342 Unsafe at Any Speed (Nader), 344 urban transit systems, 57–​58 “U.S. Soviet Difficulties Laid to Monopolists,” 253–​54 US Alkali Export Association case, 326–​27 US Industrial Commission, 85 US Steel Corporation, 321–​22, 359–​60 Utah, 135, 159n.32 Vaheesan, Sandeep, 412 Veblen, Thorstein, 81n.122, 197n.45 Venner, Clarence H., 163n.91 Verizon, 374 Vermont, 137–​38, 161n.54 Vietnam War, 341–​42 Villard, Oswald Garrison, 436 Visa, 374 Wabash, St. Louis & Pacific Ry. Co. v. Illinois, 95 Wagner Act, 390, 397–​98 War Labor Boards, 396 War of 1812, 70 War of Independence (American Revolution), 70, 102 War Production Board, 321, 323 War Revenue Act of 1917, 372 Warren, Elizabeth, 3–​4, 58 Washington Consensus, 41 Washington Post, 463–​64 Watergate, 341–​42, 459–​60 Watson, David K., 139–​40 Webb, Edwin Y., 288–​89 Webb-​Pomerene Act of 1918, 280–​81, 288–​90, 301 Welch, John C., 169 Wells, Harwell, 130 Wells Fargo, 374 West, Charles, 153–​54

West Virginia, 130, 323, 334 Western Union, 48, 55, 96, 142–​43, 173 Western White Sand Company, 144 “What Happened to the Antitrust Movement?,” 319–​20 Whig Party, 41 Whiskey Trust, 144, 181–​82 White, Richard, 9, 21–​22, 76–​77n.38, 151, 171 Wickersham, George, 286 Wilkinson, Lawrence, 253–​54 Wilson, James, 18–​19 Wilson, Woodrow, 62–​65, 69, 80–​81n.103, 104–​5, 182–​83, 207, 210–​11, 287–​88, 399–​400 Wilson Tariff Act of 1894, 286 Wimmer, Ed, 331–​32 Wisconsin, 135–​36, 182–​83, 271, 341 Wisconsin Retail Hardware Association, 225–​26 women’s rights movement, 343–​ 44, 395–​96 Wooten, Dudley G., 86–​87 World Economic Conference (1927), 290–​91 World Telegram, 457–​58 World War I, 257, 258, 270–​71, 280–​ 81, 396 World War II, 24–​25, 212, 217–​18, 222, 270–​71, 279–​80, 321, 327, 334, 345–​46, 382n.76, 443. see also liberal coalition policies Wright, James, 460 Wu, Tim, 411 Wyman, Bruce, 174–​76 Wyoming, 58, 128, 135–​36, 159n.32, 325 Yucatán, 289–​90 Yugoslavia, 244n.138 Zingales, Luigi, 33–​34n.77, 262–​63