The Progressives’ Antitrust Toolbox

By Herbert Hovenkamp (University of Pennsylvania)

The period 1900 to 1930 was the Golden Age of antitrust theory, if not of enforcement. During that period courts and scholars developed nearly all of the tools that we use to this day to assess anticompetitive practices under the federal antitrust laws. In subsequent years antitrust policy veered to both the left and the right, but today seems to be returning to a position quite similar to the one that these Progressive adopted. Their principal contributions 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 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.

Continue Reading…