§ 1. Moral judgments of competition and monopoly. § 2. Public character of private trade. § 3. Evil economic effects of monopolistic price. § 4. Common law on restraint of trade. § 5. Growing disapproval of combination. § 6. Competition sometimes favored regardless of results. § 7. Increasing regard for results of competition. § 8. Common-law remedy for monopoly ineffective. § 9. Federal legislation against monopoly. § 10. Policy of the Sherman Anti-Trust Law. § 11. Policy of monopoly accepted and regulated. § 12. Field of its application. § 13. The industrial trust,—a natural evolution? § 14. Artificial versus natural growth. § 15. Kinds of unfair practices. § 16. Growing conception of fair competition. § 17. The trust issues in 1912. § 18. Anti-trust legislation of 1914. § 19. Guiding principles of the new policy. § 20. Some early fruits.

§ 1. Moral judgments of competition and monopoly. What should be the attitude of society toward monopoly ? Is it good or bad as compared with competition? Some very strong ethical judgments bearing on practical problems are found in the popular mind connected with the ideas of competition and monopoly. Competition usually is pronounced bad when viewed from the standpoint of the competitors who are losing by it, and good when viewed from the standpoint of the traders on the other side of the market who gain by that competition. Competition among buyers thus appears to sellers to be a good thing; that among sellers appears to themselves to be a bad thing (and vice versa). Many persons are moved by sympathy to pronounce competition among low-paid and underfed workers to be bad, and each worker is convinced that it is so in his own trade. Yet nearly all men are of one mind that competition is a good thing in most industries, those that are thought of as supplying the "general public." Monopoly is believed by the public to be wrong in such cases, and competition to be the normal and right condition of trade. Yet there are some men interested in "large business" who look upon competition as bad, and upon monopoly as having essentially the nature of friendly cooperation. The roots of these opinions, or prejudices, are easily discoverable in the theoretical study of the nature of monopoly.1 Yet often different men or groups of men feel so strongly on this matter, viewing it from their own standpoints, that they are quite unable to understand how any one else can feel otherwise. There is thus a great deal of controversy to no purpose.

§ 2. Public character of private trade. Any such general judgment as that of the public, though it may be mistaken in some details, is likely to be a resultant of broad experience. There is in competitive trade a public, a social character, which monopoly destroys. Even in a simple auction, when the bidding is really competitive, price depends far less on shrewd bargaining, on bluff, or on stubbornness, than is the ease in isolated trade. Each bidder is compelled by self-interest to outbid his less eager competitors, and thus the limits within which the price must fall are narrowly fixed. The auction-sale is less a purely personal matter, takes on a more public aspect, has a more socialized character, than isolated trade, depends more on forces outside the control of any one man, and results in a price fixed with greater definiteness. The price in a more developed market results from the play of impersonal forces, or at least from the play of personal forces which have come under the rules of the market.2 This price, men are ready to accept as fair. It has a democratic character, whereas the gains of monopoly price arouse resentment as being the work of personal power and felt to be despotic. Monopoly price is a bad price to the one who pays it, not only because it is a high price but because it bears the character of personal extortion.

1 See Vol. I, especially pp. 74 and 75. 2 See Vol. I, pp. 59, 68, 70, 71.

The medieval notion of justum pretium, the just price, may have been often misapplied, and it was often criticized and ridiculed by economists in the period of idealized competition (from Adam Smith to John Stuart Mill). But at the heart of the notion was the judgment that general uniform prices fixed in the open market are the proper norms for prices when one of the traders is caught at an exceptional disadvantage. The modern world has been compelled to reexamine the conception of the just price.

§ 3. Evil economic effects of monopolistic price. Theoretical analysis confirms this view. Any exercise of monopolistic power over price keeps some, the weaker bidders, from getting any of the desired goods, or limits them to their most urgently desired units. "What may be called the "theoretically correct price"3 with two-sided competition is the one that permits the maximum number of trades with a margin of gain to each trader. In narrowing the possibility of substitution of goods by trade, the sum of values of goods for most men is diminished. Thus all citizens who are the victims of an artificially created scarcity look upon monopoly as "bad," just as they do upon the evils of nature - drought, locusts, fires, and pestilence. A monopoly has an indirect and more distant bad effect upon the spirit of all those trading with it. If they are producers selling at prices depressed by monopoly, their money incomes are reduced; if they are consumers buying at monopoly prices, their real incomes are reduced; in either case, their psychic incomes, the motives of all industry, are diminished and their industrial energies are relaxed.

§ 4. Common law on restraint of trade. The first recorded case in English law wherein the courts sought to prevent the limiting of competition by agreement runs back to the year 1415, in the reign of Henry V. This was a very simple case of a contract in restraint of trade, whereby a dyer agreed not to practise his craft within the town for half a year. The court declared the contract illegal (and hence unenforceable in a court), and administered a severe reproof to the craftsman who made it. Thus was set forth the doctrine of the moral and legal obligation of each economic agent to compete fully, freely, and without restraint, even restraint imposed by a contract voluntarily entered into for his own advantage.

3 See Vol. I, pp. 66, 67.

Not until the eighteenth century was this rigid doctrine somewhat relaxed so as to permit the sale of the "good-will" of a business under limited conditions, and some "reasonable" contracts in restraint of trade. Later the emphasis was somewhat further shifted, by judicial interpretations, from the notion of free competition to that of "fair" competition, so as to permit contracts involving moderate restraint of trade, if the essential element of competition was retained. Thus it was said that a piano manufacturer might by contract grant an exclusive agency to a dealer in a certain territory, there being many other competing makes of pianos, and such a contract "does not operate to suppress competition nor to regulate the production or sale of any commodity. " 4 But with such moderate limitations the courts in cases under the common law have steadily disapproved contracts in restraint of trade that would appear to be to the disadvantage of third parties, whether producers or consumers.