Antitrust and Global Capitalism, 1930-2004

Published by EH.NET (October 2007)

Tony A. Freyer, Antitrust and Global Capitalism, 1930-2004. New York: Cambridge University Press, 2006. xii + 437 pp. $80 (cloth), ISBN: 0-521-81788-2.

Reviewed for EH.NET by B. Zorina Khan, Department of Economics, Bowdoin College.

This well-written book presents a modern history of global antitrust in six and a half chapters. As in the author’s previous work, Regulating Big Business: Antitrust in Great Britain and America, 1880-1990 (Cambridge University Press, 1992), the reader is impressed by the range and plethora of details that inform this account of the development of competition policy and its variation across countries. These diverse facts are marshaled in a magisterial fashion to support the theory that antitrust policies evolved to accommodate the particular needs of regions that modified American rules and standards to suit their own circumstances. Initial objections to American-style antimonopoly rules and practices subsequently gave way to strong enforcement across these countries, and today the internationalization of antitrust policies is integral to debates about the autonomy of the state in a global society.

The global history of antitrust, according to Freyer, should be divided into three eras: the period from the Great Depression to World War II; the postwar phase through 1970; and more recent years. In that first phase up to the Second World War, the United States was unique in its strong enforcement of antitrust, as chapter one relates. Chapter two considers policy choices in Europe, Australia and Japan between 1930 and 1945. Chapter three assesses American antitrust since 1945. The final three chapters bring the reader up to date on the competition policies of Japan, Europe and Australia after the Second World War, and are followed by a brief conclusion.

This work examines antitrust through the prism of personality (officials, entrepreneurs, legal experts, even economists). Freyer further dissects bureaucratic structures (ITO, WTO, GATT, RTAA, SCAP, FBI (no, Federation of British Industries), FTC (no, Fair Trade Commission of Japan), USTR …) to expose the individuals, committees and decisions that produced proposals and actual policies. The first chapter elaborates on his conviction that American-style antitrust was constructed by such vigorous Department of Justice enforcers as Thurman Arnold and Robert Jackson. Arnold, in particular, engaged in a “large-scale assault” (p. 37) on U.S. multinational corporations that were party to international cartel agreements, and he linked the prosecution of antitrust infractions to questions of national security.

Other countries ultimately tended to be supportive of cartels and trade policies, which they regarded as essential for domestic stability and for ensuring their competitiveness in international markets. Between 1930 and 1945, Europe, Australia and Japan chose to engage in “protectionism over competition” based on preferences that owed to their national identities and cultural choices. Germany viewed cartels as part of a new self-regulated world economic order, and Japanese authorities also did not disfavor market cartelization. Britain and Australia vacillated but ultimately did little to dissuade cartelization and monopoly. To other countries, the American approach seemed to advocate unproductive conflict and confrontation rather than workable cooperation between government and business.

After the war both private and public antitrust lawsuits increased in the United States, and this period “witnessed the most effective antitrust enforcement in U.S. history” (p. 399). These heightened the costs of lateral expansion and propelled firms into diversified organizational structures. At the same time, American antitrust authorities also challenged the activities of foreign subsidiaries of domestic multinational firms, raising questions of extraterritoriality and the appropriate reach of domestic laws. In Japan, the Antimonopoly Law of 1947 and its amendments received an ambivalent response from many segments of society, given the prevalence of oligopolies, holding companies and cartels. Unlike the U.S., private antitrust suits were rare in Japan. During the 1990s, consumer interests in Japan were articulated more clearly and the need to maintain global competitiveness led even big business to turn to antitrust as a means of increasing Japanese economic standing in the global marketplace. An implication of the exposition seems to be that American antitrust influenced the restructuring of large enterprise, but in Japan the causality was reversed to some extent.

Postwar Europe established competition policy as the keystone for a strategy of regional integration, albeit within a context of business regulation to promote social welfare that was more aligned with the Japanese model. In recent years, international cooperation and convergence have occurred in the approach to price-fixing, resulting in record numbers of actions and fines against multinational cartels. However, some disparities still exist in the area of mergers, monopolies and trade-related competition. Similarly, Australians have tended more towards American-style antitrust but they also attempt to achieve a balance between notions of economic efficiency and the pursuit of public interest objectives. In short, for more than a century the United States government has engaged in a quest to ensure the integrity of the marketplace and to countermand attempts at monopolization by large firms. Other countries initially resisted the adoption of Americanized policies but have gradually come to adopt a modified version of U.S. antitrust that still is consistent with their own culture and institutions. In the arena of the international political economy of antitrust, the counterpoints and interplay between domestic agendas, bilateral treaties and international organizations are still being worked out.

Tony Freyer is University Research Professor of History and Law at the University of Alabama, and the lucid exposition is very much in the pure historical style, with an ample array of valuable footnotes, but no tables, statistics, or attempts to fully articulate implied hypotheses. It should also be noted that the book deals almost entirely with the horizontal structure of firms (mergers, cartels and monopolies) and does not really explore other facets of allegations of anticompetitive conduct such as vertical restraints, patent abuse or predatory behavior. This feature is especially curious because the focus for the U.S. is exclusively on the Department of Justice, rather than the Federal Trade Commission which has a greater fraction of the merger cases on its docket.

Economic historians are advised that no shrift, short or otherwise, is given to empirical findings that might lead us to question some of the key premises (such as the notion that American antitrust owed to a popular reaction against the overweening power of corporations and their managerial masters; or that cartelization has recently been driven by short-termism on the part of management). The more jaded among us might propose that antitrust statutes resulted from the machinations of otherwise obsolete small firms trying to retain their place in a world in which they risked losing their competitiveness, and that such policies have since been propagated on the basis of faulty theorizing. Moreover, rather than embracing innovation, one can argue that recent antitrust decrees in a significant number of cases tend to depreciate the intangible assets of innovative enterprises in ways that seem unwarranted. For those who wish to conduct further research into such questions this excellent book comprises an essential resource.

B. Zorina Khan is Associate Professor of Economics at Bowdoin College and a member of the National Bureau of Economic Research. Her book, The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920 was awarded the Alice Hanson Jones biennial prize for an outstanding work in North American economic history.