American Fair Trade: Proprietary Capitalism, Corporatism, and the 'New Competition,' 1890–1940

Laura  Phillips Sawyer

Book | 2018

American Fair Trade: Proprietary Capitalism, Corporatism, and the 'New Competition,' 1890–1940

Abstract

American Fair Trade explores the contested political and legal meanings of the term fair trade from the late nineteenth century through the New Deal era. This history of American capitalism argues that business associations partnered with regulators to create codes of fair competition that reshaped both public and private regulatory power.

Rather than viewing the history of American capitalism as the unassailable ascent of large-scale corporations and free competition, American Fair Trade argues that trade associations of independent proprietors lobbied and litigated to reshape competition policy to their benefit. At the turn of the twentieth century, this widespread fair trade movement borrowed from progressive law and economics, demonstrating a persistent concern with market fairness—not only fair prices for consumers but also fair competition among businesses. Proponents of fair trade collaborated with regulators to create codes of fair competition and influenced the administrative state’s public-private approach to market regulation. New Deal partnerships in planning borrowed from those efforts to manage competitive markets, yet ultimately discredited the fair trade model by mandating economy-wide trade rules that sharply reduced competition. Laura Phillips Sawyer analyses how these efforts to reconcile the American tradition of a well-regulated society with the legacy of Gilded Age laissez-faire capitalism produced the modern American regulatory state.

Keywords: Economic Systems; Competition; Policy; Fairness; History; Governing Rules, Regulations, and Reforms; United States;

Format: Print

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Citation:

Phillips Sawyer, Laura. American Fair Trade: Proprietary Capitalism, Corporatism, and the 'New Competition,' 1890–1940. New York: Cambridge University Press, 2018.

The key pieces of antitrust legislation in the United States—the Sherman Antitrust Act of 1890 and the Clayton Act of 1914—contain broad language that has afforded the courts broad latitude in interpreting and enforcing the law. This article chronicles the judiciary’s shifting interpretations of antitrust law and policy over the past 125 years. It argues that jurists, law enforcement agencies, and private litigants have revised their approaches to antitrust to accommodate economic shocks, technological developments, and predominant economic wisdom. Over time an economic logic that prioritizes lowest consumer prices as a signal of allocative efficiency—known as the consumer welfare standard—has replaced the older political objectives of antitrust, such as protecting independent proprietors or reducing wealth transfers from consumers to producers—known as the total welfare standard. Today, however, a new group of progressive activists has again called for revamping antitrust so as to revive enforcement against dominant firms, especially in digital markets, and to refocus attention on the political effects of antitrust law and policy. This shift suggests that antitrust may remain a contested field for scholarly and popular debate.

Working Paper | HBS Working Paper Series | 2019

Voting Trusts and Antitrust: Rethinking the Role of Shareholder Rights and Private Litigation in Public Regulation, 1880s to 1930s

Naomi R. Lamoreaux and Laura Phillips Sawyer

Scholars have long recognized that the states’ authority to charter corporations bolstered their antitrust powers in ways that were not available to the federal government. But they have also argued that the growth of large-scale enterprises operating in national and even international markets forced states to stop prosecuting monopolistic combinations out of fear of doing serious damage to their domestic economies. Our paper has revised this conventional view by focusing attention on the lawsuits that minority shareholders brought against their own companies in state courts of law and equity, especially suits that challenged the anticompetitive use of voting trusts. Historically judges had been reluctant to intervene in corporations’ internal affairs and had displayed a particular wariness of shareholders’ private actions. By the end of the 19th century, however, they had begun to revise their views and to see shareholders’ private actions as useful checks on economic concentration. Although the balance between judges’ suspicion of and support for shareholders’ activism shifted back and forth over time, the long-run effect was to make devices like voting trusts unsuitable for the purposes of economic concentration.

Keywords: voting trusts; antitrust; Business and Shareholder Relations; Lawsuits and Litigation; History; United States;

Citation:

Lamoreaux, Naomi R., and Laura Phillips Sawyer. "Voting Trusts and Antitrust: Rethinking the Role of Shareholder Rights and Private Litigation in Public Regulation, 1880s to 1930s." Harvard Business School Working Paper, No. 19-109, May 2019. View Details

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American Fair Trade: Proprietary Capitalism, Corporatism, and the 'New Competition,' 1890–1940

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