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Pulling the plug on antitrust law; Meese's monopoly game.

Pulling the Plug On Antitrust Law

The nomination of Robert Bork to be a Justice of the Supreme Court is the latest step by the Administration to reinforce its policy of not enforcing the antitrust laws. Bork is, of course, the author of The Antitrust Paradox, a book that presaged Attorney General Edwin Meese 3d's distaste for antitrust actions. Another recent Administration move was the appointment of Charles Rule to be Assistant Attorney General of the Justice Department's antitrust division.

Bork and Rule are graduates of the University of Chicago and members of the "Chicago school,' a small band of economic zealots who argue that promoting corporate efficiency should be the sole aim of antitrust policy. The Chicago school sees antitrust law not as rules governing and promoting a fair and competitive economy but as an evil form of Federal regulation. Accordingly, the school's advocates see enforcement of the antitrust laws not as a task for lawyers but primarily as an intellectual exercise for its own brand of economist.

The Chicago school also provides the economic rationale for the existence and behavior of the same powerful corporations whose power the Sherman Antitrust Act and other measures were designed to check. Although there is no reason to believe that Meese even vaguely understands the complicated Chicago school theories of Bork and Rule, he instinctively believes that big business should not be the subject of government concern, even if Federal statutes hold to the contrary. Bork's contempt for antitrust is well known; Rule's views, less so.

As chief of the antitrust division, Rule is the appointee to whom the President has delegated his constitutional authority to "take care that the [antitrust] laws be faithfully executed.' The constitutional responsibilities of the job are those of an enforcer, a guardian, a caretaker.

Earlier this year, Rule appeared before the Senate Judiciary Committee (which later approved his appointment) in his role as Acting Assistant Attorney General and asked Congress to cut his staff by 15 percent next fiscal year. The Senators thus faced what has become a familiar dilemma in the Reagan years: Should it approve a nominee to a position of high public trust who will act less like a caretaker than an undertaker? In Rule, Meese chose an undertaker.

It is supreme irony that the Meese Justice Department would adopt anything other than a tough antitrust policy. When it comes to crime--and many antitrust violations are felonies--Meese is a law-and-order man. When it comes to legal interpretation, Meese believes in looking to the original intent of the law. Also, Republican philosophy is to protect free and open markets, one of the prime purposes of the antitrust laws.

Yet, under Meese, the antitrust division has failed to enforce entire portions of the laws against monopoly and restraint of trade and has demonstrated unprecedented leniency to corporate giants. More important for the long term, the Justice Department has worked to weaken the laws themselves, thereby attempting to insure that the lax policy will continue under Meese's successors. The appointment of Rule is notice to Congress that Meese will continue his attitude of contempt for law enforcement where the antitrust laws are involved.

Our nation has a long antimonopoly tradition. The American colonists were extremely resentful of British trading monopolies back home and the mercantilist policies that promoted them. The Boston Tea Party was, in part, an antimonopoly demonstration. Around that time, Adam Smith wrote The Wealth of Nations, the classic attack on mercantilism, which exposed how merchant interests could subvert state power. Thomas Jefferson, the most prominent proponent of dispersion of political power, protested the Constitution's failure to prohibit monopolies.

Congress passed the Sherman Antitrust Act--the basic law prohibiting monopolies and cartels--in 1890 as a response to the rapid growth of trusts after the industrial revolution. The trusts possessed immense political and social power, as well as vast economic power. According to Henry Adams in 1870: "The belief is common in America that the day is at hand when corporations far greater than [the] Erie Railroad . . . will ultimately succeed in directing government itself.' Clarence Darrow sardonically noted that the Pennsylvania Legislature could not adjourn until the Pennsylvania Railroad had concluded its business.

Just as Magna Carta restrained the power of the king and the Constitution restrained the power of the government through laws, the Sherman Antitrust Act restrained naked corporate power through law. In the words of the Supreme Court, the law was "a comprehensive charter of economic liberty' whose purpose was in part to provide "an environment conducive to the preservation of our democratic political and social institutions.' The act sought to promote free, open and fair competition and to prevent corporate domination of our lives, business opportunities and government. It provided libertarian benefits as well as economic ones.

Traditional Republican philosophy has been that governmental power should be used to prohibit private restraints. Thus antitrust was a bipartisan project and, in the main, Republicans and Democrats followed the Sherman Antitrust Act's original intent and took a "law-and-order' approach. When Teddy Roosevelt's Justice Department sued J.P. Morgan's Northern Securities Company for antitrust violations, Morgan immediately went to Washington to meet with T.R. and Attorney General Philander Chase Knox to object to the lack of advance notice.

"If we have done anything wrong, send your man to my man [Morgan's lawyer] and they can fix it up,' Morgan remonstrated.

"That can't be done,' Roosevelt said.

"We don't want to fix it up, we want to stop it,' Knox chimed in.

Roosevelt and Knox were not the last Republican trust-busters. More recently, Nixon Attorneys General John Mitchell and William Saxbe delivered fire and brimstone speeches on the need for antitrust enforcement. Ford's Attorney General, Edward Levi, and his Supreme Court appointment, John Paul Stevens, are both antitrust experts whose views are consistent with the Republican mainstream. The Nixon and Ford Administrations both energetically prosecuted the case against I.B.M.; the Ford Administration brought the case against A.T.&T. Vigorous antitrust enforcement was a plank of the 1976 Republican platform.

Meese's most significant contribution to the history of antitrust is that he is seeking to kill the enforcement mechanisms themselves. The Administration's legislative package in this area would radically alter the standards, for judging mergers. It would also pull the teeth from private enforcement by cutting back on damage awards. If enacted, these reforms would make it much more difficult for Justice Departments of the future to bring "structural' cases, which cover entire industries to prevent monopolies and oligopolies, and for victims to have their day in court. So far, Congress has balked at passing such reforms.

The antitrust division's 1988 budget, unveiled earlier this year, shows the Justice Department's real intent. Other divisions, including civil rights, faced only modest reductions or had increases. The antitrust division faces, in a single year, a reduction of approximately 15 percent of its staff, about 100 employees. Donald Baker, Ford's antitrust chief, has testified that the budget is a "disaster.' In Baker's words, "Money talks. So does the absence of money.' The proposed cut directly affects the future quality of the antitrust division's staff. The government must depend on its career staff for the experience and expertise necessary to do battle with the corporate giants.

The policeman who turns his back is telling the criminal he does not care. In his precinct, crime will rise. The Meese antitrust division has not only turned its back, it is trying to handcuff the next shift as well. The effects are not surprising. In the words of one Wall Street economist, when the Administration "passed the word that it was disinclined to invoke the antitrust statues. . . . the Boesky bombshell was inevitable.' Wasted resources, wealth transfers from the average citizen to the privileged, and upheavals of entire communities are but a few of the ill effects of the takeover wave of unprecedented proportions that the country is experiencing.

The full effect is worse. Disarming the antitrust authorities while allowing corporate dinosaurs to hunt and plunder freely in America's heartland critically affects every one of us. As Walter Adams and James W. Brock have pointed out in their vital new book, The Bigness Complex, planning by private power groups determines the "kind of society in which we shall live.' They argue persuasively that we are witnessing a return to merchantilism in which the big interests will capture the government.

The great irony is that the leap backward to merchantilism is led by an Attorney General with an Adam Smith necktie. And, in the background, the Chicago school theologians, personified by Bork and Rule, are delighted at the sight of an Attorney General following their siren call without the slightest concern for the tragic consequences of his inaction.

If Meese has his way, an antitrust division chief in the 1990s well be only a pathologist of the emaciated remains of antitrust enforcement. It's hard to believe that a small band of Chicago school economists could be the cause of it all.
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Title Annotation:Edwin Meese
Author:Cohen, Jerry S.; Cuneo, Jonathan W.
Publication:The Nation
Date:Sep 26, 1987
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