A New Yardstick for Monopoly
NOBODY is henceforth going to be afraid of or suspicious of any business merely because it is big." With these words, spoken after the passage of the Clayton Antitrust Act in 1914, President Woodrow Wilson thought he had laid to rest, once and for all, the question of how big a business should be. He could not have been more wrong. Time and time again, the nation's industrial giants have been haled into court on antitrust charges that smacked of prosecution for bigness alone. The problem has been raised again by the roadblock against the Bethlehem-Youngstown steel merger (TIME, Oct. 11), although Bethlehem claimed that the merger would have permitted it to expand in the Midwest markets, thereby increasing competition. Thus, at issue is the old question: Can the size of a business be limited?
In the 1945 decision that restricted Alcoa's further expansion, Federal Judge Learned Hand tried to set up a percentage chart. Said he: "[Over 90% of the market] is enough to constitute a monopoly; it is doubtful whether 60% or 64% would be enough, and certainly, 33% is not." But many another judge and businessman have disagreed. The confusion over bigness and monopoly started in 1890 with the Sherman Act, the forerunner of all antitrust legislation. Although the act clearly stated that any person "who shall monopolize" is guilty of a crime, it failed to define monopoly. Thus every merger in the early trustbusting days was a calculated risk. Industry breathed easier after the Supreme Court in 1911 adopted the flexible "rule of reason," which held that only "unreasonable restraints on commerce" violated the Sherman Act. The question was further clarified when the Supreme Court, in its 1920 decision on U.S. Steel, ruled that "the law does not make mere size . . . or the existence of unexerted power an offense." But in the Depression-ridden '30s, when "economic royalists" were fair game, the Democratic Administration again held that mere size and power were the dangers. The Supreme Court, in its 1946 American-Tobacco decision, agreed, ruling that monopoly exists when "power exists to raise prices or to exclude competition." In effect, a business did not have to restrict competition to be guilty; it merely had to have the power.
The old rule of reason returned early last year when Boston's Federal Judge Charles Wyzanski brought forth a new, clear-cut doctrine, and won the Supreme Court's endorsement. Said
Judge Wyzanski: "The defendant may escape statutory liability if it ... owes its monopoly solely to superior skill, superior products, natural advantages . . . low margins of profit maintained and without discrimination, or licenses."