An antitrust revolution is upon us. Numerous pundits and political leaders blame many of today’s societal and economic ills on what they claim is the increasing concentration of economic power in the hands of a few. Perceived lax antitrust enforcement and permissive antitrust laws, many claim, is the cause of that. Indeed, President Joe Biden has placed antitrust enforcement at the forefront of his administration and aims to use antitrust enforcement to remedy social inequities and restore democratic ideals.

Such a rallying cry is not new. The antitrust laws were enacted over 100 years ago precisely because of growing economic consolidation. But the antitrust laws and their objectives have changed dramatically over the last century, bringing us to the precipice of a new age, or perhaps back to its roots, as some may claim. To properly appreciate the full scope of the current movement in antitrust law and enforcement, though, one must view matters from a historical perspective. Accordingly, in Part I of our series, we seek to provide you with a brief summary of how the antitrust laws have evolved to date.

The 1890s: Congress enacts the nation’s oldest antitrust law

President Theodore Roosevelt was the first to “bust” many large businesses by enforcing the first antitrust laws. In the 1880s, entire sections of the economy, such as railroads, oil, steel and sugar, were controlled by large businesses, known as “trusts.” Two of the most famous trusts were U.S. Steel and Standard Oil. America’s newfound prosperity was being threatened.

In response, Congress passed the very first antitrust law, the Sherman Act, named for U.S. Sen. John Sherman. This act restored economic competition by making it illegal for companies to limit competition. Section 1 proscribes “every contract, combination or conspiracy in restraint of trade,” while Section 2 makes it unlawful to engage in “monopolization, attempted monopolization, or conspiracy or combination to monopolize.”

1900-1920: The Clayton Act and the Federal Trade Commission Act

The end of trusts and the Sherman Act’s proscriptions meant companies had to find new ways to dominate the market. Companies found that merging and acquiring competitors provided them with the means to drive up prices and dominate markets. Merging and appointing common directors to boards of competing companies (a practice known as “interlocking directorates”) allowed the same person to make decisions for competing companies.

In response, Congress passed the Clayton Act and Federal Trade Commission Act in 1914. The Clayton Act protects consumers by prohibiting mergers or acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly.” It also prohibited appointment of common directors for competing companies. The act further provided for a private right of action for a violation of any of the antitrust laws, and offered an incentive for private plaintiffs to sue by allowing them to recover three times their damages. Congress also created a new federal agency – the Federal Trade Commission – giving it the authority to investigate and stop unfair methods of competition and deceptive practices.

Then, as now, there were protests against big business. Consumers complained about the power of large retailers, farmers railed against large middlemen and the control Wall Street had over the agricultural industry, and people across the country protested against high prices for electricity, fuel and other everyday necessities. The antitrust laws were seen as the vehicle to address these issues.

1940-1970: The golden era of antitrust action

The 1940-70 era is viewed by some as a golden era of antitrust because antitrust law played a large role in society. Strengthening competition was seen as both an antidote to fascism as well as a tool to restore the economy after the Great Depression of the 1930s. This led President Franklin D. Roosevelt to advocate for broad antitrust enforcement. During his campaign speech at the Democratic National Convention in 1936, President Roosevelt spoke of an “industrial dictatorship,” which according to him, was comprised of a small group of powerful corporations and banks that had restricted America’s freedom. He aimed to restore this freedom through antitrust enforcement.

Upon his election, President Roosevelt appointed Thurman Arnold to run the U.S. Justice Department’s antitrust division. Arnold grew the caseload by eight-fold and implemented anti-monopoly policies that continued for multiple administrations, including that of Harry Truman and Dwight Eisenhower. During this time, encouraging competition and dispersing power from the hands of the few to the hands of the many were seen as ideals and became the objective of antitrust enforcement. At this time, “big” was bad and the antitrust laws were seen as the means to protect small businesses. Economic efficiency was not viewed as a goal of the antitrust laws. Indeed, in 1936, Congress pass the Robinson-Patman Act, which made it unlawful to charge customers different prices for the same product, notwithstanding that such a practice is efficient economically, allocating resources to where they are most valued.

1970-1990: the Chicago and post-Chicago schools of economics theories

Beginning in the 1970s, the government started bringing fewer enforcement actions and antitrust policy began being influenced by what has been called the “Chicago school of economics.” Emphasizing the free market and laissez-fair economic principles, the Chicago school of thought believed that economic actors, consumer and producer alike, make rational, self-interested economic choices. Additionally, the Chicago school believed that markets are self-correcting and that free markets without government interference would produce the best outcomes for consumers and society.

The Reagan Administration endorsed the Chicago school and consequently challenged fewer mergers than its predecessors. Only the most egregious mergers – those that would lead to market power in a market that would not likely self-correct – were enjoined. Gradually, this economic school of thought dominated economic literature and made its way into antitrust jurisprudence. Antitrust law became focused on allocative efficiency and its objective was to maximize “consumer welfare,” a confusing, and perhaps misleading, term that is intended to denote a focus on what benefits the consumer most – namely, low prices, increased output, high quality and innovation. (We will discuss this concept and the arguments put forth by some critics for why it should not be the objective of the antitrust laws in our next article.)

As the saying goes, history tends to repeat itself. This early history of antitrust law provides a useful precursor for the current emerging antitrust movement as the outcries against monopoly power are once again being heard. The Biden Administration’s prioritization of antitrust enforcement and the growing concern over monopolization of power reflect the early 1900s and foreshadow another golden era of antitrust. Our next article will discuss the continued evolution of antitrust through the 1990s and 2000s and the arguments for, and against, retaining “consumer welfare” as the prime or sole objective of the antitrust laws.