Findings of the Business Advisory Council

In 1952, the Secretary of Commerce announced the findings of the Business Advisory Council that had studied the antitrust laws to determine the relationship between existing statutes and administrative procedures and public interest. Some of the key points of this report as they relate to competition are summarized below.

To uphold competition was presented as the primary concern of antitrust policy. The Council agreed with the principle of economic freedom as expressed in the Sherman Act, but suggested room for improvement in antitrust policy, interpretation, and administration. The basic problem centered around the inconsistencies between various antitrust statutes themselves and around their various interpretations. Judicial opinions have been widely divergent. The inconsistencies, in turn, create a great deal of confusion for the businessman who cannot be certain whether he is abiding by, or violating, the laws.

The realm of the kind of competition creates uncertainties. Some of the interpretations require "hard" competition so that any easing or lessening of price competition, regardless of the consequences in the industry, is forbidden. Yet, other statutes, such as the Robinson-Patman Act, call for the "soft" competition which rules out price reductions if they injure competitors, although they may otherwise be acceptable to consumer welfare. A potentially unifying force in interpreting the antitrust laws is the Rule of Reason, which is applied where questionable practices are deemed to be reasonable and, consequently, acceptable. Even here problems arise because there are few explicit standards that determine what is or is not reasonable. In fact, some statutes specifically bar the application of the Rule of Reason. Because of the Rule's greater flexibility and opportunity for a "caseby-case" approach, its application is generally favored by businessmen.

The Council recommended that the Rule of Reason be revitalized and that standards of reasonableness be developed to allow for more uniform antitrust interpretation and administration. As far as the term "competition" itself is involved, the Council also raised a number of questions concerning its meaning. The perfect competition of abstract economics was rejected as being unrealistic. But effective competition was described as existing in a business community characterized by ceaseless striving among sellers to sell their goods and expand their share of the market, by producing more and better goods, and by offering improved services at lower prices. Safeguards need to be provided, to be sure, against unfair or predatory competition. Effective competition is able to achieve these goals because of market forces that offer alternatives. So long as buyers and sellers have freedom of choice, the stagnation that comes with collusion is not likely to prevail. Effective competition is the desired solution, according to the Council, for the problems of monopoly and bigness. The antitrust laws seek to correct the evils of monopoly and bigness, but these terms have been used so loosely and erroneously that their original meaning has been obscured.

In economics,a monopoly exists when there is a single seller who controls the price and determines the scope of competition. Crucial to this power is the definition of the market itself. In recent years, the tendency is to narrow the nature of markets so much that single-seller domination is not hard to discover. Bigness, too, is a relative concept. A big economy may demand big industry. The nature of mass production, mass consumption, and mass technology often dictates a large-sized firm. Effective competition is endorsed further as a balancing device to protect the interests of smaller businessmen struggling for their share of the market.

The Council also voiced criticism of the procedural matters associated with antitrust enforcement. It was suggested that an important test of reasonableness should be the effects on the public. The use of preliminary conferences to settle most actions was recommended. In fact, the Council estimated that at least 90 per cent of all actions could be settled in this manner. In a similar vein, the Council recommended that businessmen should have prior determination of the legality of a proposed action. The creation of a review board also was suggested. Such a board could review particular cases and make positive recommendations to insure that antitrust enforcement would not be harmful to the public interests.