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Competition policy in the United States and the UnitedKingdom ‐ A look at underlying forcesRobert W. Scull aa Assistant Professor of Business Administration , Virginia Commonwealth UniversityPublished online: 10 Sep 2010.

To cite this article: Robert W. Scull (1980) Competition policy in the United States and the United Kingdom ‐ A look atunderlying forces , The Law Teacher, 14:1, 39-48, DOI: 10.1080/03069400.1980.9992526

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COMPETITION POLICY IN THE UNITED STATESAND THE UNITED KINGDOM - A LOOK AT

UNDERLYING FORCES*

By ROBERT W. Scul l†

INTRODUCTION

THE purpose of presenting this paper, comparing competition policy inthe United States and the United Kingdom, before a meeting of the Anglo^American Business Law Association is in part investigative. I intend tosketch out the direction of my research and thinking on competition policyin the United States and then to attempt to gather some ideas from ourvisiting colleagues on the direction of competition policy in the UnitedKingdom. Merely to report on legislation or on court decisions would betrivial. What is worthwhile is to attempt to identify the underlying forcesinfluencing competition policy and thus begin to provide some insight intothe future direction of policy for the coming generations of businessmanagers in our respective countries.

I will first summarise the results of my research and analysis withrespect to the development and direction of competition policy in theUnited States and then attempt to pull together some of the highlights ofthe development and philosophy underlying competition policy in theUnited Kingdom. I would then hope that our British colleagues who arepresent today will be able to throw some light on the direction competitionpolicy is taking in their country.

THE DEVELOPMENT OF COMPETITION POLICY IN THE UNITED STATES

The period between the Civil War and the end of the nineteenth centurywas one of a continuous decline in prices in the United States. This wasthe era of (1) rapid advances in technology and productivity, both inagriculture and in industry, (2) the creation of a truly national competitivemarket economy linked by railroads, and (3) the closing of the frontier.This was also the era of the development of large-scale industry and itshandmaiden, the corporate form of enterprise. In pre-civil war America,economic change for the large majority was a gradual affair, seldomcausing significant dislocation within a single generation; for those whowere dislocated, or sought to better themselves, a fresh start further Westwas still possible.

The decline in prices after the Civil War meant that the dollar wasappreciating in value at the same time as the price of commodities wasdeclining, particularly agricultural commodities. Loans taken out in oneperiod to finance productive capacity could only be repaid out of theproceeds from an increased quantity of goods in the next. There were noinformed economists who could come on a nightly news television pro-gramme to explain the root causes of this phenomenon. It seems worthinterjecting that the availability of both informed economists and nightlynews programmes in the inflationary 1970s has done little to persuadefarmers that they must adapt to such forces by redirecting their effortsrather than looking to the government to ensure that economic change willnot have a negative impact on them.

*A paper presented to the Second Anglo-American Business Law Conference held atWilliamsburg, Virginia, March 1979.

† Assistant Professor of Business Administration, Virginia Commonwealth University.

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40 ROBERT W. SCULL

With the frontier closed the entrepreneur farmer group of late nineteenthcentury America did look to the government to alleviate what was perceivedas price-gouging by the railroads in particular (despite continuously de-clining freight rates) and the eastern business establishment in general. Outof this was born the agrarian political movements, among them theGrangers and, more notably, the Populists. Much of what they advocatedbecame public policy in the" century that followed: farm credit, enlargementof the franchise, direct election of senators, management (and enlargement)of the money supply, and, of specific interest here, an ever-growing regu-lation of industry. In spite of much historical investigation, justificationfor this post-Civil War agrarian-sparked unrest remains inconclusive(note 6, p. 107). Justified or not, as one historian has pointed out,

"American capitalism . . . somehow spawned a massive opposition thathad to be either crushed or accommodated. Whenever the Populistinvective touched a vulnerable point, what had to be sacrificed for socialpeace was the price mechanism." (note 6, p. 107).

No doubt the agrarians sincerely believed in the causes of their distress;and the impact of their movement changed the economic system (note 6,p. 107). Nowhere was this more true than in the area of the regulation ofcompetition, and thus of the economic forces that established prices. Aswe shall see, what came to be protected was competitors rather than theforces of competition.

ANTI-TRUST PHILOSOPHY IN THE UNITED STATES

The validity of government regulation was first established in Munn v.Illinois (1877).7 The essence of the decision, which became known as theMunn Doctrine, held that private property whose use becomes of publicconcern is "clothed in the public interest" and may thus be regulated by thegovernment. In response to the agrarian revolt, the Interstate CommerceCommission to regulate railroad rates was established in 1887. Muchfurther reaching was the Sherman Anti-trust Act of 1890, "an idea of initialsimplicity that was to become an intellectual labyrinth" (note 7, p. 119).

The immediate purpose of the Sherman Act was to outlaw predatorytactics intended to destroy competitors, horizontal mergers resulting inmonopoly power and cartel arrangements between competitors to fix pricesand restrict output in order to maintain those prices. Senator Sherman in thedebates leading to the passage of the Act made it clear that his concern wasto outlaw arrangements designed to raise consumer prices. In short, thebasic concern was to assure minimum cost to the consumer by outlawingpractices that would eliminate competition as a basis for achieving econ-omic efficiency. Unfortunately the common law language of the Act's twomain sections provided little if any effective guidance to the courts inadjudicating cases brought before them under the statute. In the yearsimmediately following the passage of the Act, the key cases {Trans-Missouri and Joint Traffic) supported the consumer orientation the law-makers originally had in mind (note 2, p. 22). Trans-Missouri1* found rate-fixing to be illegal per se; reasonableness of the prices set was not acceptedas a defence; the only reasonable price was to be that set by competition. Inthe Joint Traffic case,12 which like the Trans-Missouri case involved thefixing of railroad rates, the Court distinguished between the illegal elimina-tion of actual or potential rivalry and the legal integration of productiveeconomic activity in order to produce greater efficiency (note 2, p. 23).From here on, however, policy goals other than consumer welfare beganto evolve.

In a society with a common law tradition decided cases determine what

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COMPETITION POLICY IN THE UNITED STATES AND UNITED KINGDOM 41

the law actually is in practice. As pointed out by Summer and Hickey:"The judge . . . takes all factors into account and renders a decision,which is the 'law' for that specific case. The judge discovers the law"(note 10, p. 599).

A series of such decisions in an area of conflict establishes legal policy.Among the factors which the courts clearly took into account in order to'discover' the original meaning of the Sherman Act was the stated intentof those legislators who argued for passage of the legislation. And here, it isquite clear, the intent was to protect consumers by assuring that the forcesof competition operated to produce the lowest possible price. But, whatabout (1) the political forces which acted to initiate antitrust legislationin the first place, and (2) the intent of the various blocks of legislators whovoted passage of the Act. Were these also to be taken into account? Giventhe law that was 'discovered', the courts must have believed more complexand even contradictory interests had somehow to be accommodated in thedecision process.

As Hughes has hypothesized: "Whenever important sectors of the bodypolitic begin to lose advantages formerly available from given lines ofendeavour, agitation for non-market control appears to preserve or restorethe situation." (note 6, p. 100). Such was the case with the agrarians, andfollowing the decline of populism, as industry grew in importance, suchwas also the case both with labour, as an advancing technology producedgreater returns on capital, and with individual entrepreneurs, as theassembly of professional management, capital, technology and labour,under the large corporate form, produced efficiencies which smaller firmscould not match. Has the Supreme Court attempted to make rational aneconomic philosophy it did not understand—or has it attempted to providefor the co-existence of competing groups, on a basis other than economicrationality?

In the American Tobacco and Standard Oil cases, it could reasonablybe argued that these two trusts violated the Sherman Act. However, Bork(note 2, p. 38) has very effectively argued that basing the findings on thedefendants' bad intent but then failing to distinguish between intent toexclude through superior efficiency and exclusion unrelated to efficiencyled directly to the Clayton, Federal Trade Commission, and Robinson-Patman Acts. He quotes John S. McGee's exhaustive study of the entireStandard Oil case, which concluded that "Standard Oil did not use pre-datory price discrimination to drive out competing refineries, nor did itspricing policies have that effect." Standard Oil achieved its market sharethrough merger, not predatory pricing (note 2, p. 145). It was the passageof these Acts that led away from rather than towards the maintenance ofcompetitive vigour.

The Clayton and Federal Trade Commission Acts added a new dimen-sion to antitrust law. The preamble to the Clayton Act included this pro-vocative phrase: ". . . to arrest the creation of trusts, conspiracies andmonopolies in their incipiency and before consumation."4 Practices theClayton Act made illegal were price discrimination with intent to injurea competitor, acquisition of stock in other companies and exclusive dealing"where [in the language of the Act] the effect may be to substantiallylessen competition or tend to create a monopoly" (emphasis added).

The first case to reach the Court under section 7 (mergers) of theClayton Act, as amended in 1950, was Brown Shoe. There the Courtupheld divestiture of Kenny Shoe Co. acquired through merger, stating:3

"It is competition, not competitors, which the Act protects. But wecannot fail to recognize Congress' desire to promote competitionthrough the protection of viable, small, locally owned businesses."

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42 ROBERT W. SCULL

Posner, analyzing the Brown Shoe decision, points out:"First the court says that the Act protects competition not individualcompetitors: in the next breath it says that the Act protects highercost from lower cost competitors. . . . Concentration involves theelimination of small firms that the Supreme Court values although theconsumer does not." (note 9, p. 104).The concern of Congress in amending Section 7 of the Clayton Act was

with "the rising tide of economic concentration". Is a merger more danger-ous in a market where concentration has been rising? It can be argued thatconcentration has been rising precisely because technological and economicconditions require an increasing minimum firm size. Prices may actuallybe higher under conditions of lower concentration due to the increased costsof operating at an inefficient scale of production (note 9, p. 100).

It has been argued that (note 2, p. 48):"The incipiency theory was embedded in the superficially innocuousword 'may' (see emphasis above) which has since been said by theSupreme Court to require, a 'reasonable probability' of a lessening ofcompetition or tendency to monopoly. This verbal formula has provedmeaningless. The fallacious economic theory employed by the courtsmakes the problem of forecasting the relevant economic events so in-tractable that there is no question of being able to estimate degrees ofprobability or possibility. The result has been that any imaginarythreat to competition, no matter how shadowy and unsubstantial, issufficient to satisfy the 'reasonable probability' test."The above sketch of antitrust development is intended to get across

to the reader a sense of the redirection that has occurred, from a policyof consumer protection to that of balancing such protection with a pro-tection of the large majority of entrepreneurs, those firms smaller than thelargest, from the rigours of competitive efficiency. No usable theory hasevolved that could predict how much protection was needed or could begiven to weaker competitors without causing harm in the long run to thecompetitive efficiency of the overall economy. In order to square twobasically conflicting policy goals without a workable predictive theory togo on, we have, it is argued here, created an economic climate in whichvigorous competition is not altogether respectable and which may be struckdown without warning.

THE ECONOMICS OF UNITED STATES ANTI-TRUST POLICY

A major finding of Gunnar Mydral's 1944 study of American socialrelations, published as An American Dilemma,9 was that there existed asignificant divergence between the racial equality that Americans subscribeto in the abstract and that which they are willing to practice in reality. Equalopportunity was fine as long as its impact was not felt directly, in the housenext door, or at the workplace. Many writers have pointed out that this alsoappears to be true with respect to competition. In the abstract no society ismore committed to the ethic of competition in a free market. Yet in actualityindividuals in our society have sought to escape the application of com-petitive pressure on their own business activity. Lawyers, physicians,realtors, among many others, have taken the veil of professional ethics inorder, to be defined as not engaging in competitive activity. Others, tooobviously in the business of making and marketing goods and services totake the veil, have sought legal protection against price-cutting (so-calledfair trade laws), application of anti-trust laws against larger competitors,government mandated price floors and/or purchase of surplus production,as well as protection from competition through import quotas, tariffs andtrigger prices. Further, much of the populist initiative to gain pro-

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COMPETITION POLICY IN THE UNITED STATES AND UNITED KINGDOM 4 3

tection for the small from the big be must be counted as a seeking ofprotection by less aggressive and knowledgeable competitors from thepower of market forces seemingly beyond individual control. This lastpolitical initiative, it is argued here, led to a significant shift in the ideologyof anti-trust enforcement, away from the protection of competition andtowards the protection of competitors from the rigours of competition.

Could not anti-trust policy just as well serve multiple interests? Con-sumers and small business and large businesses? The answer must be no.In the economic logic of the free enterprise system only a consumer canfunction as a true measure of productive efficiency. A business firm oftenfunctions as a consumer and in this role may need the protection of anti-trust law to assure productive efficiency. The original objective of anti-trustlaw after all was to assure all purchasers the lowest possible price, definedas the price set by competition. It is sellers (as competitors) who are theproblem. Therefore, an essential aspect of the hypothesis argued here is thatproductive efficiency, based on a system of lowest possible prices to allconsumers, could no longer be assumed once anti-trust law was warped toprotect smaller less efficient sellers in the market place from larger morevigorous competitors.

What economic rationale could the court have relied on to rationalisethe protection of one group of competitors against another? Criticism ofthe court in this regard has taken two forms: (1) reliance on inapplicableeconomic theory, and (2) unsound economic defences advocated before itby defendants in anti-trust cases.

Productive efficiency in a large, complex, multi-product firm, the typicalanti-trust defendant, defies measurement. Thus superior productive effic-iency has not been readily available as a defence in anti-trust cases. Instead,the courts have relied on theoretical models defined in terms of a particularmarket structure. This is to substitute what some economists term allocativeefficiency for productive efficiency as a legal criterion. But, are we trying topreserve a particular market structure? The model which has had thebroadest appeal is pure competition, theoretically the opposite of puremonopoly. Pure competition can be said to exist when:

"(1) all producers were small relative to the total market supply;(2) the commodity produced by all these small firms was homogeneous;and (3) when resources were mobile and no artificial restrictions existedon demand, supply or price" (note 1, p. 27; emphasis added).

In addition, perfect market knowledge had to be assumed on the part of allthose small firms. Just to state the criteria seems sufficient to argue theimpossibility of its attainment in the real world. But as an ideal deservingof legal protection, the model is positively bewitching, particularly withlarge numbers of politically potent small entrepreneurs clamouring at thedoor for the protection of their way of life. "It will put us out of business"has long been the political battlecry of the. American businessman facedwith economic change.

Schumpeter's view of competition would seem to conform much morenearly with economic reality. To Schumpeter (note 1, p. 36):

"The introduction of new methods of production and new commoditiesis hardly conceivable with perfect—and perfectly prompt—competitionfrom the start. And this means that the bulk of what we call economicprogress is incompatible with it."Would perfect competition as seen by the theorists attract real world

entrepreneurial capital and effort? No economist has been able to demon-strate that it would. But it is interesting to note that the real world ofproduct and technological invention, product diversity and product sub-stitution, not to mention differences in market shares and market segments,

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4 4 • ROBERT W. SCULL

has attracted vast amounts of capital and entrepreneur^ effort. Thus forSchumpeter:

"competition was a continuous process of creative destruction thatcame from the new commodity, the new technology, the new source ofsupply, the new type of organization . . . which commands a decisivecost or quality advantage and which strikes not at the margins of theprofits (the pure competition model) and the outputs of the existing firms,but at their foundations and their very lives" (note 1, p. 36).

The consumer seems more in need of protection from the political fallibilityof businessmen, and from the theoretical world of economists where onlywidgets are produced, than from 'incipient' competitive activities.

As D. T. Armentano has argued, "structural analysis fails to measurecompetition because it makes improvable assumptions about an optimalmarket structure and because it inherently deals with form and not sub-stance" (note 1, p. 48). As will be discussed later, our British compatriots(in common with most other European countries) have stuck to regulatingsubstance.

The second criticism noted above was the quality of advocacy bydefendants who are hauled before our courts on anti-trust charges. Juristsare busy generalists, seldom sufficiently trained in economic theory todevelop appropriate criteria on their own. And yet, as Judge Wyzonkipointed out in United Shoe, "In the anti-trust field the courts have beenaccorded, by common consent, an authority they have in no other branchof enacted law" (note 2, p. 409).

Robert Bork has argued that the practising bar must bear its share ofresponsibility for permitting our appellate courts to 'discover' so muchunsound legal policy in the anti-trust field. His argument is that in anadversary system, contending lawyers "place before the courts the majoralternative lines of argument, that advocates must discuss the policychoices to be made and their consequences [and] . . . it is important theydebate the fitness of the rules" (note 2, p. 413). He goes on to say (note 2,p. 414):

"They have tended to accept the government's antimarket premises andto proceed, defensively, from there. No doubt this was due in part tothe fact that the court was for a considerable period of time overtlyhostile to the market economy and its institutions; but mainly becausethat hostility went largely unchallenged, it perhaps was not seen forwhat it was, either by the court itself or by the society."In a nutshell, the government has been permitted to get away with

pre-empting what would be excellent defences by characterising, forexample, business efficiency as 'competitive advantage' or 'barrier to entry'and the defence has settled (as in the case where Proctor and Gamble wasdivested of its Clorox acquisition) to deny any business efficiency resulted,a ridiculous state of affairs—why did they buy it in the first place? Onbehalf of defence lawyers, it must be noted that their arrival before the courtis a chance affair, in which the government picked their client and wheretheir concern has been, however short-sighted, to deny everything so asto get off the hook rather than to attempt to educate the court in soundcompetitive economic principles which might benefit another defendantfarther down the road, based, perhaps, on a dissent which might have beenevoked but went unwritten (note 2, p. 414). As Bork concludes, defence

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COMPETITION POLICY IN THE UNITED STATES AND UNITED KINGDOM 45

lawyers must begin to understand that microeconomics is now their province.Hopefully, American judicial reliance on form, and on the government

as arbiter of" what constitutes good form, however politically expedient,will one day give way to a substantive approach; if for no other reason, toenable the United States to compete better on a basis of productive effic-iency in the world economy. As guidance, recent British experience withits concentration on substance, may prove to be of considerable assistance.

T H E DEVELOPMENT OF COMPETITION POLICY IN THE UNITED KINGDOM

"Except in North America, laws designed to curb cartels and monopolieswere rare until after the second World War." (note 5, p. 3). Research forthis paper did not turn up the prior existence of any such laws in the UnitedKingdom. Protection against restrictive practices was left to individuals,who had to rely on general laws covering unfair competition, the right tochoose one's occupation, and the right to associate with others or toenter into contracts.

Prior to the twentieth century, the rarity of laws controlling restrictivebusiness practices can, in general, be explained by the small scale ofindustry and the absence of individual firms large enough to exercise overallmarket control. However, efforts by local suppliers to corner marketsbetween localities had been regulated as akin to fraud at common law (note5, p. 3). Such monopolies, as there were, had existed under governmentgrant; in England, such grants had become outlawed by the early years ofthis century. More interesting were the efforts between the two World Warsto sanction certain private monopolies deemed to be in the public interest,either as a basis for rationalising production for domestic consumption or tofacilitate more effective competition in international trade. Examples werecartels in electric power, cotton textiles, steel, coal and ocean shipping.

Following World War II this direction was reversed. Better informationas to who actually got the benefits of cartel activity as well as the desireto hold down post-war price increases contributed to much legislation inEurope aimed at controlling cartel activity. And, of course, direct Americaninvolvement in restructuring the post-war German economy made possiblethe attempt to impose American anti-trust philosophy in an area whichbefore the war had been a spawning ground for international cartels.

In the United Kingdom, in a much quoted 1944 White Paper on Em-ployment Policy, the point was made with respect to cartels that while"such agreements do not necessarily operate against the public interest,. . . the power to do so is there" (note 15, p. 129). This White Paper leddirectly to the passage of the Monopolies and Restrictive Practices (Inquiryand Control) Act 1948, the first legislative effort to regulate private re-strictive business practices in Britain. What followed is history. Reports ofthe investigatory commission set up under the Act led to passage of a muchstronger law, the Restrictive Practices Act 1956; rather than providing onlyfor inquiry as a basis for parliamentary action, as the 1948 Act had done,the 1956 Act set up a Restrictive Practices Court and required that allinter-company agreements with respect to terms of sale falling under theAct be registered with a Registrar of Restrictive Trading Agreements. This,of course, would have been tantamount to pleading guilty toper se violationsin the United States. In the United Kingdom, however, the law establishedonly a presumption that such agreements were against the public interest,and permitted the registering parties to rebut the presumption by argu-ments that the agreements met specified conditions and thus were in thepublic interest.

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46 ROBERT W. SCULL

Experience with the 1948 and 1956 Acts resulted in legislation in 1964,essentially outlawing resale price maintenance, and in 1965, restrictingmergers, the first real effort to control market domination by large firms.Under the Monopolies and Mergers Act 1965, mergers involving more thanone-third of the goods and services concerned, or where the assets takenover amounted to more than five million pounds sterling, could be referred bythe Board of Trade to the Monopolies Commission. The Commission wasempowered to hold up the merger and if it found it to be against the publicinterest, initiate its dissolution. The Fair Trading Act 1973 rounded out themajor post-war legislation. It provided for increased power to protect con-sumers against unfair trading practices. While the Act widened the areaof possible inquiry and provided for more effective machinery to controlunfair competition, it retained the basic principle of wide discretion indetermining what constituted abuse: a major characteristic of Britishlegislation in the post-war period.

As will be discussed in the section that follows, the basic anti-trustphilosophy in the United Kingdom has been to control business practicesnot deemed in the public interest (i.e., unfair) rather than with the outrightprohibition of practices assumed, based on economic theory or otherpolitical argument, to be ipso facto not in the public interest. This has led toconsiderable discretion in the application of legislation, a case-by-case con-sideration of specific restrictive practices by individual firms (or throughouta given industry), and action based on an evaluation of the probable effectsof such practices on specific consumers. One might reasonably concludethat the direction of post-war restrictive practices legislation has been todefine jurisdiction with respect to specific cases of restrictive practices andto provide better and better mechanisms for the discretionary application ofpre-existing common law criteria to such cases.

ANTI-TRUST PHILOSOPHY IN THE UNITED KINGDOM

At this point it seems reasonable to conclude that anti-trust law in theUnited States and in the United Kingdom rest upon different philosophicalfoundations. Anti-trust law in the United States stems from two basicpremises: (1) that competition as an end in itself is a good thing, and (2)that too much concentration of power in a few hands is of itself a bad thing.Those who emigrated to what was to become the United States threw offtheir colonial status precisely because of subjugation to uncontrolled con-centrations of political and, therefore, economic power. Political power inthe United States was diffused through a separation of powers between theexecutive, legislative and judicial branches of government. And the freedomthe United States Constitution gave to each individual to pursue his ownbest interest so long as the rights of others were not trod upon was based,at least in part, on the belief that the 'unseen hand' of Adam Smith wouldoperate to assure that "the interplay of selfish motives" (note 5, p. 17) com-peting in a free market guaranteed maximum economic benefits to all.Logically, then, in the American view, bad consequences could be expectedto follow if excessive economic power became concentrated in too fewhands. The British tradition is quite different.16

In Britain economic power has always been highly concentrated;liberating movements, as exemplified by the 'revolt' which led to the MagnaCarta, came about to make centralised power responsible, not to diffuse it.Likewise, the regulation of economic concentration has been directed atmaking such activities acceptable, that is of benefit of the public, not toeliminate activity.

The codes which governed the conduct of business were initially church

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codes. That is, the moral conduct of economic affairs required fair com-petition, just wages and prices, and just rewards for business activities. Theregulation of economic activity during feudal times, as with all other aspectsof life, could only be described as pervasive. Where and when and on whatbases markets could be conducted were prescribed by the feudal lords inwhose fiefdoms the activities took place. Divine right stood behind bothmoral and secular authority. But this power over trade did not transferwell to the parliamentary governments which superseded feudal society;such pervasive control was not functional for the economic life of townsas they became the centres of trade carried on over wide areas. In time,private citizens were able to wrest from government the right to conductbusiness affairs as they saw fit, within the common law which had evolvedfrom the moral precepts of the old church codes.

Economic concentration was not deemed unfair, only its abuse was;insofar as it interfered with the rights of others to enter into contracts, toenter occupations, or to pay only fair prices for goods purchased. That thecommon law might one day prove inadequate could, perhaps, have beenforeseen; a time was coming when the right to enter an occupation (busi-ness) would run into the rights already exercised by others to contractamong themselves for control of entry or for the prices charged within anentire market. Prior to the second World War, such difficulties could onlybe resolved through adjudication by individual plaintiffs against associationsof defendants. After the War, the government, in effect, undertook torepresent the plantiffs.

The net result, for the United Kingdom, is an anti-trust philosophywhich does not condemn economic concentrations of power so long as theydo not result in high prices, unused capacity or unemployment, or in price-fixing agreements or other restrictive practices that result in prices sohigh as to be deemed unfair at common law. This means prices unduly highin relation to the costs of labour (the socialist's case against monopolies)and other factors entering into production. Economic theory, of course,holds that prices are set by conditions of supply and demand rather thanby costs; apparently only multiple sellers acting independently can get awaywith charging high prices in relation to costs—monopolists' prices wouldhave reasonably to relate to cost, not a socially undesirable outcome manywould argue.

One point worth noting is the different attitudes towards resale pricemaintenance which have evolved in the United States and the UnitedKingdom, affirming our different cultural perspectives. The passage of so-called fair trade laws in the United States follows logically from theestablished right of the government to regulate business transactions in theinterest of all consumers. (The fact that the United States fair trade law infact protected sellers' rather than consumers' margins is also worth noting.)In Britain, the concept of fairness produces an opposite result, a law (theResale Prices Act 1964) prohibiting suppliers from fixing minimum prices.Nor can, as at common law, a supplier refuse to sell his goods (with a fewexceptions) to one customer in favour of another, a state of affairs unknownin the United States.

The concern for productivity underlying United States anti-trust lawis not a part of British anti-trust philosophy. As Edwards has pointed out,"Public policy towards restrictions is focused upon fairness in dividing upwhat the economy produces rather than enlargement of the product" (note5, p. 21). Fairness here concerns prices and availability of supplies andaccess to markets as between suppliers. In sum, the per se prohibitionagainst price-fixing that evolved from the Sherman Act does not hold forBritain, where unquestionably the Tram-Missouri case would have been

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48 ROBERT W. SCULL

decided the other way; the reasonableness of the prices charged would haveconstituted an admissible defence. Nor is there concern that a firmmay become a monopoly through rough but fair means (the Standard Oilcase). A study in itself would be to attempt to determine how many of themajor United States anti-trust decisions would have gone the other wayunder British post-war anti-trust legislation.

A REMAINING ISSUE

Research for this paper did not turn up any material on the actual impact ofpost-war restrictive practices legislation in the United Kingdom. Who hasactually benefited? Is there a commonly held perception in Britain thatenforcement of current law is for the benefit of all consumers? In the UnitedStates, one might argue that the law has been subjected to so much* pullingand hauling that we are no longer sure what it is that we are enforcing. Anindividual, now a Supreme Court Associate Justice, in a publicly statedopinion compared anti-trust enforcement in the United States with the oldfrontier deputy sheriff whose approach to law enforcement was tooccasionally walk up and down the main street and pistol-whip a few peopleas an example to others to obey the law.

FOOTNOTES

1 Armentano, D. T., The Myths of Antitrust, Arlington House, New Rochelle,N.Y., 1972.

2 Bork, Robert H., The Antitrust Paradox. Basic Books, New York, 1978.3 Brown Shoe Co. v. United States 370 U.S. 294 (1962).4 The Clayton Act 15 U.S.C. 12-27 (1970).5 Edwards, C. D., Control of Cartels and Monopolies: An International Comparison,

Oceana, Dobbs Ferry, N.Y., 1967.6 Hughes, J. R. T., The Governmental Habit, Basic Books, New York, 1977.7 Munn v. Illinois. 94 U.S. 113 (1877).8 Myrdal, G., An American Dilemma, Harper, New York, 1944.9 Posner, R. A., Antitrust Law, University of Chicago Press, Chicago, 1976.10 Summer, C. E. and Hickey, S., The University of Washington Law School Case,

in The Managerial Mind, 4th ed., Summer, C. E., O'Connell, J. J. and Peery,Jr., N. S., Irwin, Homewood, Illinois.

11 United States v. American Tobacco Co. 221 U.S. 106(1911).12 United States v. Joint Traffic Association 166 U.S. 290 (1898).13 United States v. Standard Oil Co. of New Jersey 221 U.S. 1 (1911).14 United States v. Trans-Missouri Freight Association 171 U.S. 505 (1897).15 Walsh, A. E. and Paxton, J., Competition Policy, The Macmillan Press Ltd.,

London, 1975.16 The analysis which follows is based on Corwin D. Edwards' excellent study in

comparative law: Controls of Cartels and Monopolies, 1967.

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