The Invention of Antitrust
U of Penn, Inst for Law & Econ Research Paper No. 22-05
96 Pages Posted: 29 Dec 2021 Last revised: 22 Aug 2022
Date Written: August 21, 2022
The long Progressive Era, from 1900 to 1930, was the Golden Age of antitrust theory, if not of enforcement. During that period courts and Progressive scholars developed nearly all of the tools that we use to this day to assess anticompetitive practices under the federal antitrust laws. In a very real sense we can say that this group of people invented antitrust law.
The principal contributions the Progressives made to antitrust policy were (1) partial equilibrium analysis, which became the basis for concerns about economic concentration, the distinction between short- and long-run analysis, and later provided the foundation for the development of the antitrust “relevant market”; (2) classification of costs into fixed and variable, with the emergent belief that industries with high fixed costs were more problematic; (3) development of the concept of entry barriers, contrary to a long classical tradition of assuming that entry is easy and quick; (4) the distinction between horizontal and vertical relationships and the emergence of vertical integration as a competition problem; (5) price discrimination as a practice that could sometimes have competitive consequences. Finally, at the end of this period came (6) theories of imperfect competition, including the rediscovery of oligopoly theory and the rise of product differentiation as relevant to antitrust policy making.
Subsequent to 1930 antitrust policy veered sharply to the left. Then, two decades later it turned just as sharply to the right. Eventually it moderated, reaching a point that is not all that far away from the Progressives' original vision.
Keywords: Progressive Era, monopoly, antitrust, economics, legal history, vertical restraints, trusts
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