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Antitrust in the United States - Chapter Three - Antitrust and Competition Laws
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Originally from Antitrust and Competition Laws
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Chapter Three - ANTITRUST IN THE UNITED STATES
The modern antitrust world was born in the 1880s in America. Its parents were farmers, artisans and small entrepreneurs who railed against the large firms that appeared after the Civil War. Firm size, geographic reach and vertical integration dwarfed most businesses of the pre-industrial world. Popular complaints against “monopolies” made for millennia against grain speculators were replaced with new targets: large firms, most of which were formed from mergers, acquisitions or trusts rather than through internal growth. Economists largely scorned this movement and its federal culmination in the Sherman Act.
In the second half of the 19th century, railroads and communication networks spread throughout the United States. Markets expanded along with single businesses that extended activities from their local vicinities to regional or even national areas. In contrast to the single entrepreneur with a limited number of employees, larger firms hired salaried managers to supervise the increased scope of business. Exceptional economic growth led to greater output and falling prices, which threatened both the new larger firms and many traditional smaller businesses. This created strong incentives to coordinate and centralize operations, including among independent firms, in order to reduce capacity and minimize competitive pricing pressure. In the language of the day, this resulted in numerous loose combinations (like cartels or price fixing agreements) and tight combinations (like trusts).
The public record reflects popular concerns about these new and large combinations. Farmers and small businesses, primarily in the South and West, accused railroads of engaging in monopolistic and illegal practices, including discrimination, stock-watering and bribery. Popular agitation against the railroads gradually extended to other industrial combinations whose business practices were perceived as harming farmers, small independent business, traders and workers.
Barry E. Hawk is former Director of the Fordham Competition (formally Corporate) Law Institute and former Partner with Skadden Arps (New York and Brussels). He is former Vice Chair of the ABA Antitrust Section and former Chair of the New York State Bar Association Antitrust Section, as well as Professor at Fordham Law School and Visiting Professor at Michigan Law School, Monash University Law School, New York University Law School and the University of Paris.
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