The U.S. Experiment with Fair Trade Laws: State Police Powers, Federal Antitrust, and the Politics of 'Fairness,' 1890-1938

Laura  Phillips Sawyer

Working Paper | HBS Working Paper Series | 2015

The U.S. Experiment with Fair Trade Laws: State Police Powers, Federal Antitrust, and the Politics of 'Fairness,' 1890-1938

by Laura Phillips Sawyer

Abstract

Prior to the Great Depression and President Franklin Roosevelt's New Deal programs, considerable pressure for antitrust revision came from trade associations of independent proprietors. A perhaps unlikely leader, Edna Gleason, organized California's retail pharmacists and coordinated trade networks to monitor and enforce Resale Price Maintenance (RPM) contracts, a system of price-fixing, then known as "fair trade." Progressive jurists, including Louis Brandeis, and institutional economist E.R.A. Seligman supported RPM as a legitimate tactic to protect small businesspeople and enhance non-price competition. The breakdown of legal and economic consensus regarding what constituted "unfair competition" allowed businesspeople to act as intermediaries between heterodox economic thought and contested antitrust law, ultimately tailoring federal policy to accommodate state regulations.

Keywords: Competition; Fairness; Laws and Statutes; Supply and Industry; Business and Government Relations;

Language: English

Format: Print

30 pages

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Citation:

Phillips Sawyer, Laura. "The U.S. Experiment with Fair Trade Laws: State Police Powers, Federal Antitrust, and the Politics of 'Fairness,' 1890-1938." Harvard Business School Working Paper, No. 16-060, November 2015.

Case | HBS Case Collection | November 2018 (Revised October 2019)

Rebuilding Puerto Rico

Laura Alfaro, Laura Phillips Sawyer and Haviland Sheldahl-Thomason

On September 20, 2017, Hurricane Maria swept over Puerto Rico, devastating the island’s infrastructure and agriculture. The natural disaster was layered atop years of mounting financial distress. Before the hurricane, Puerto Rico had accumulated $74 billion in debt and beginning in 2014, the island had withheld debt payments despite the commonwealth’s constitutional guarantee of its general obligation bonds. In turn, the island found itself effectively excluded from capital markets while simultaneously unable to declare bankruptcy in US courts due to its status as a territory. In 2016, the US Congress had intervened, passing the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa), which established an eight-member Oversight Board to manage the island’s fiscal planning and restructure its debts and other fiscal obligations under bankruptcy-like proceedings. Many stakeholders felt hopeful that the Oversight Board could help Governor Ricardo Rosselló enact reforms that would improve public services, eliminate government waste, re-establish creditworthiness, and ultimately, foster economic growth. But, many questions still remained: Was Promesa and the Oversight Board the best method to assist the island in fiscal recovery? Was the Board’s fiscal plan an acceptable approach? Would the island be able to regain access to capital markets and attract investments without allocating funds for its creditors in the near future?

Keywords: Natural Disasters; Financial Crisis; Infrastructure; Borrowing and Debt; Economy; Strategic Planning; Governing Rules, Regulations, and Reforms; Puerto Rico;

Citation:

Alfaro, Laura, Laura Phillips Sawyer, and Haviland Sheldahl-Thomason. "Rebuilding Puerto Rico." Harvard Business School Case 719-018, November 2018. (Revised October 2019.) View Details

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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 wide 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. 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.

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The U.S. Experiment with Fair Trade Laws: State Police Powers, Federal Antitrust, and the Politics of 'Fairness,' 1890-1938

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