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

Naomi R. Lamoreaux; Laura  Phillips Sawyer

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

by Naomi R. Lamoreaux and Laura Phillips Sawyer

Abstract

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;

Language: English

Format: Print

43 pages

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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.

Working Paper | HBS Working Paper Series | 2019

U.S. Antitrust Law and Policy in Historical Perspective

Laura Phillips Sawyer

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.

Keywords: antitrust; trusts; restraint of trade; Merger; cartel; New Deal; Harvard school; Chicago school of law and economics; post-Chicago; Law; Competition; Policy; Vertical Integration; Horizontal Integration; Acquisition;

Citation:

Phillips Sawyer, Laura. "U.S. Antitrust Law and Policy in Historical Perspective." Harvard Business School Working Paper, No. 19-110, May 2019. (Revised September 2019.) View Details

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

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