What Iron Pipefittings Can Teach Us About Public and Private Power in the Market

Government restrictions on competition, whether in the market for cars, hotel rooms, or taxicabs, have attracted a great deal of attention of late. As a basic matter, government is not exogenous to the market: a functioning state is, in reality, a precondition for modern markets. Because it establishes the rules necessary for markets to develop and potentially flourish, government unavoidably shapes the bounds and structures of the private economic sphere. And more specifically, public limitations on competition are not intrinsically hostile to the interests of ordinary Americans and can, in fact, advance vital social goals, such as full employment and public safety. Accounting for these considerations, governmental restraints should not be blindly condemned as harmful; rather, they should be examined on a case-by-case basis. Even aggressive newcomers with savvy public relations (such as Airbnb, Tesla, and Uber) and giddy talk of “disruption” should not lead us to denounce legal restrictions on these actors as a matter of reflex. Critically, the present focus on public restraints should not mean that private efforts to create closed markets get a free pass. In contrast to democratic public authorities, large corporations face little accountability. Dominant firms can use predatory and other exclusionary methods to maintain their long-run supremacy and prosper through exploitation of the public. Given the awesome power of monopolistic and oligopolistic corporations, antitrust enforcers and other regulators must reassert public discipline over private empires

The Morality of Monopolization Law

Congress enacted the Sherman Act in 1890 and prohibited, among other practices, monopolization. To prove monopolization, the government and other plaintiffs must show that a firm both possessed monopoly power and engaged in bad conduct. In interpreting the spare language of the statute, the courts have identified many practices that constitute monopolization, including below-cost pricing, refusals to deal with rivals, and tying. In general, however, they have failed to explain why these practices are unfair and restricted by law. Judges have instead applied labels such as anticompetitive without articulating normative foundations for their decisions. A close examination of the case law reveals that the monopolization doctrine embodies implicit notions of unfairness. Legal precedent limits businesses\u27 abilities to use their monopoly power, financial privileges, or generally prohibited conduct to acquire or perpetuate a monopoly. With its expansive unfair methods of competition authority, the FTC can codify and strengthen existing norms on unfair conduct. The FTC should specifically restrict firms\u27 abilities to use exclusive dealing and below-cost pricing and ban the use of generally prohibited practices as unfair methods of competition. By proscribing these forms of business rivalry, the FTC would encourage businesses to grow and succeed through the fair treatment of trading partners, development of new products, and investment in new plants, facilities, and technologies

Accommodating Capital and Policing Labor: Antitrust in the Two Gilded Ages

In enacting the antitrust laws, Congress sought to prevent big businesses from maintaining and augmenting their power through collusion, mergers, and exclusionary and predatory practices and also aimed to preserve the ability of workers to act in concert. At times, the antitrust laws have benefited ordinary Americans. Antitrust achievements include the restructuring of the oil industry in 1911, the creation of competitive market structures in the mid-twentieth century, and the termination of AT&T’s telecommunications monopoly in 1984. Yet, the history of antitrust in the United States is not one of uninterrupted successes. Over two forty-year periods, the executive branch and federal courts, in enforcing and interpreting the antitrust laws, have failed to advance Congress’s vision and indeed inverted congressional intent. During the original and current Gilded Ages, the antitrust laws were and are used to protect the power of large-scale business and also to limit the autonomy of workers to organize and demand higher wages and better working conditions. Through this anti-labor application, the federal government has employed antitrust to aid big business, rather than restrain its power. Despite this history of accommodating capital and policing labor, the antitrust laws can still be reinterpreted and redeemed. Congressional, executive, and judicial action can remake these laws to control the power of large corporations and also protect the freedom of all workers to organize for higher wages and better working conditions. A renewal of antitrust, in accordance with the expressed purposes of Congress, would help remedy the inequities of the New Gilded Age and create a more just society

What Iron Pipefittings Can Teach Us About Public and Private Power in the Market

Government restrictions on competition, whether in the market for cars, hotel rooms, or taxicabs, have attracted a great deal of attention of late. As a basic matter, government is not exogenous to the market: a functioning state is, in reality, a precondition for modern markets. Because it establishes the rules necessary for markets to develop and potentially flourish, government unavoidably shapes the bounds and structures of the private economic sphere. And more specifically, public limitations on competition are not intrinsically hostile to the interests of ordinary Americans and can, in fact, advance vital social goals, such as full employment and public safety. Accounting for these considerations, governmental restraints should not be blindly condemned as harmful; rather, they should be examined on a case-by-case basis. Even aggressive newcomers with savvy public relations (such as Airbnb, Tesla, and Uber) and giddy talk of “disruption” should not lead us to denounce legal restrictions on these actors as a matter of reflex. Critically, the present focus on public restraints should not mean that private efforts to create closed markets get a free pass. In contrast to democratic public authorities, large corporations face little accountability. Dominant firms can use predatory and other exclusionary methods to maintain their long-run supremacy and prosper through exploitation of the public. Given the awesome power of monopolistic and oligopolistic corporations, antitrust enforcers and other regulators must reassert public discipline over private empires

Market Power in Power Markets: The Filed-Rate Doctrine and Competition in Electricity

State and federal initiatives have opened the American electric power industry to competition over the past four decades. Although the process has not occurred uniformly across the country, wholesale electricity markets exist everywhere today. Independent power producers can construct generation facilities and sell their output to utilities and industrial customers through bilateral contracts. In many regions, centralized power markets now facilitate the sale of billions of dollars in electricity annually through auctions. Although market forces have replaced direct price regulation in electricity, antitrust enforcement has not expanded its role commensurately. A lack of competition has been a serious problem in many power markets and led to billions of dollars in wealth transfers from ratepayers to generators. The federal courts, however, have invoked the filed-rate doctrine to prohibit private antitrust suits against generators and other market participants accused of collusive behavior. They have held that federal and state regulation is adequate to maintain competitive markets and questioned their own ability to deter anticompetitive behavior, effectively immunizing power generators from antitrust damages liability. Congress or the Supreme Court should limit the application of the filed-rate doctrine in electricity markets and allow for the antitrust laws to be enforced against collusive conduct. Eliminating the filed-rate immunity, however, is not sufficient to create competitive power markets. Private treble-damages suits could help deter express collusion between competing generators. Yet the antitrust laws are comparatively powerless to remedy two important types of anticompetitive behavior seen in power markets. Antitrust jurisprudence in the United States does not proscribe the exercise of unilateral market power and creates high hurdles to finding liability for tacit collusion. Given the limitations of traditional private antitrust remedies, federal and state regulators must focus on creating competitive market structures. They can take three concrete steps toward this end: police generator consolidation more carefully, encourage expansion of the transmission grid, and expose more ratepayers to wholesale price signals. Applying these broader competition policy measures is necessary to redeem a restructuring project that has resulted in several episodes of serious market-power abuse and yielded uncertain benefits

Can COVID-19 Get Congress to Finally Strengthen U.S. Antitrust Law?

The COVID-19 pandemic could cause Congress to strengthen our merger laws. The authors of this short article strongly urge Congress to do this, but to do this in a manner that ignores 5 myths that underpin current merger policy:Myth 1: Mergers Eliminate Wasteful Redundancies and Produce More Efficient BusinessesMyth 2: Current Merger Enforcement Protects ConsumersMyth 3: Merger Remedies Preserve CompetitionMyth 4: The Current Merger Review System Offers Transparency and Guidance to Businesses and the PublicMyth 5: Corporations Need Mergers to Gro

Cooperative Enterprise as an Antimonopoly Strategy

After decades of neglect, antitrust is once again a topic of public debate. Proponents of reviving antitrust have called for abandoning the narrow consumer welfare objective and embracing a broader set of objectives. One essential element that has been overlooked thus far is the ownership structure of the firm itself. The dominant model of investor-owned business and associated philosophy of shareholder wealth maximization exacerbate the pernicious effects of market power. In contrast, cooperative ownership models can mitigate the effects of monopoly and oligopoly, as well as advance the interests of consumers, workers, small business owners, and citizens. The promotion of fair competition among large firms should be paired with support for democratic cooperation within firms. Antitrust law has had a complicated history and relationship with cooperative enterprise. Corporations threatened by cooperatives have used the antitrust laws to frustrate the growth of these alternative businesses. To insulate cooperatives from the antitrust threat, Congress has enacted exemptions to protect cooperative entities, notably a general immunity for farm cooperatives in the 1922 Capper-Volstead Act. As part of an agenda to tame corporate monopoly, all three branches of the federal government and the states should revisit these ideas and seek to protect and enable the cooperative model across the economy. Although protections that farmers fought for a century ago may seem obsolete in an era of big-box retail and online platforms, matters of ownership design have at least as much relevance today and should be a part of the antimonopoly arsenal