There is no way to legislate competition; there are no
Ubid., pp. 422-423.
standards by which one could define who should compete with whom, how many competitors should exist in any given field, what should be their relative strength or their so-called “relevant markets,” what prices they should charge, what methods of competition are “fair” or “unfair.” None of these can be answered, because these precisely are the questions that can be answered only by the mechanism of a free market
With no principles, standards, or criteria to guide it, the antitrust case law is the record of seventy years of sophistry, casuistry, and hair-splitting, as absurd and as removed from any contact with reality as the debates of medieval scholastics. With only this difference: the scholastics had better reasons for the questions they raised—and no specific human lives or fortunes hung on the outcome of their debates.
Let me give you a few examples of antitrust cases. In the case of Associated Press v. United States of 1945, the Associated Press was found guilty, because its bylaws restricted its membership and made it very difficult for newly established newspapers to join. I quote from Mr. Neale’s book:
It was argued in defense of the Associated Press that there were other news agencies from which new entrants might draw their news. . . . The Court held that . . . Associated Press was collectively organized to secure competitive advantages for members over non-members and, as such, was in restraint of trade, even though the non-members were not necessarily prevented altogether from competing. [The Associated Press news service was considered so important a facility that] by keeping it exclusive to themselves the members of the association impose a real hardship on would-be competitors. … It is no defense that the members have built up a facility … for themselves; new entrants must still be allowed to share it on reasonable terms unless it is practicable for them to compete without it [Italics mine.]8
Whose rights are here being violated? And whose whim is being implemented by the power of the law? What qualifies one to be “a would-be competitor”? If I decided to start competing with General Motors tomorrow, what part of their facilities would they have to share with me in order to make it “practicable” for me to compete with them?
In the case of Milgram v. Loew’s, of 1951, the consistent refusal of the major distributors of motion pictures to grant
•Ibid., pp. 70—71.
first-runs to a drive-in theater was held to be a proof of collusion. Each company had obviously valid reasons for its refusal, and the defense argued that each had made its own independent decision without knowing the decisions of the others. But the Court ruled that “consciously parallel business practices” are sufficient proof of conspiracy and that “further proof of actual agreement among the defendants is unnecessary.” The Court of Appeals upheld this decision, suggesting that evidence of parallel action should transfer the burden of proof to the defendants “to explain away the inference of joint action,” which they had not, apparently, explained away.
Consider for a moment the implications of this case. If three businessmen reach independently the same blatantly obvious business decision—do they then have to prove that they did not conspire? Or if two businessmen observe an intelligent business policy originated by the third—should they refrain from adopting it, for fear of a conspiracy charge? Or if they do adopt it, should he then find himself dragged into court and charged with conspiracy, on the ground of the actions taken by two men he had never heard of? And how, then, is he “to explain away” his presumed guilt and prove himself innocent?
In the case of patents, the antitrust laws seem to respect a patent owner’s right—so long as he is alone in using his patent and does not share it with anyone else. But if he decides not to engage in a patent war with a competitor who holds patents of the same general category—if they both decide to abandon that alleged “dog-eat-dog” policy of which businessmen are so often accused—if they decide to pool their patents and to license them to a few other manufacturers of their own choice—then the antitrust laws crack down on them both. The penalties, in such patent-pool cases, involve compulsory licensing of the patents to any and all comers—or the outright confiscation of the patents.
I quote from Mr. Neale’s book:
The compulsory licensing of patents—even valid patents lawfully acquired through the research efforts of the company’s own employees—is intended not as punishment but as a way in which rival companies may be brought into the market … In the I.C.I, and duPont case of 1952, for example, Judge Ryan … ordered the compulsory licensing of their existing patents in the fields to which their restrictive agreements applied and improvement patents but not new patents in these fields. In this case an auxiliary remedy was awarded
which has become common in recent years. Both LCI. and duPont were ordered to provide applicants, at a reasonable charge, with technical manuals which would show in detail how the patents were practiced.9
This, mind you, is not regarded as “punitive”!
Whose mind, ability, achievement, and rights are here sacrificed—and for whose unearned benefit?
The most shocking court decision in this grim progression (up to, but not including, the year 1961) was written—as one would almost expect—by a distinguished “conservative,” Judge Learned Hand. The victim was ALCOA. The case was United States v. Aluminum Company of America of 1945.
Under the antitrust laws, monopoly, as such, is not illegal; what is illegal is the “intent to monopolize.” To find ALCOA guilty, Judge Learned Hand had to find evidence that ALCOA had taken aggressive action to exclude competitors from its market. Here is the kind of evidence which he found and on which he based the ruling that has blocked the energy of one of America’s greatest industrial concerns. I quote from Judge Hand’s opinion:
It was not inevitable that it [ALCOA] should always anticipate increases in the demand for ingot and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel.10
Here, the meaning and purpose of the antitrust laws come blatantly and explicitly into the open, the only meaning and purpose these laws could have, whether their authors intended it or not: the penalizing of ability for being ability, the penalizing of success for being success, and the sacrifice of productive genius to the demands of envious mediocrity.
If such a principle were applied to all productive activity, if a man of intelligence were forbidden “to embrace each new opportunity as it opened,” for fear of discouraging some coward or fool who might wish to compete with him, it
‘Ibid., p. 410. “Ibid., p. 114.
would mean that none of us, in any profession, should venture forward, or rise, or improve, because any form of personal progress—be it a typist’s greater speed, or an artist’s greater canvas, or a doctor’s greater percentage of cures— can discourage the kind of newcomers who haven’t yet started, but who expect to start competing at the top.
As a small, but crowning touch, I will quote Mr. Neale’s footnote to his account of the ALCOA case:
It is of some interest to note that the main ground on which economic writers have condemned the aluminum monopoly has been precisely that ALCOA consistently failed to embrace opportunities for expansion and so underestimated the demand for the metal that the United States was woefully short of productive capacity at the outset of both world wars.11
Now I will ask you to bear in mind the nature, the essence, and the record of the antitrust laws, when I mention the ultimate climax which makes the rest of that sordid record seem insignificant: the General Electric case of 1961.
The list of the accused in that case reads like a roll call of honor of the electrical-equipment industry: General Electric, Westinghouse, Allis-Chalmers, and twenty-six other, smaller companies. Their crime was that they had provided you with all the matchless benefits and comforts of the electrical age, from bread toasters to power generators. It is for this crime that they were punished—because they could not have provided any of it, nor remained in business, without break’ ing the antitrust laws.
The charge against them was that they had made secret agreements to fix the prices of their products and to rig bids. But without such agreements, the larger companies could have set their prices so low that the smaller ones would have been unable to match them and would have gone out of business, whereupon the larger companies would have faced prosecution, under these same antitrust laws, for “intent to monopolize.”