MINISTERIO DE HACIENDA

The principles and rules of the English common law on monopolies were used as a basis for the creation of antitrust rules in the US which focused on four different types of violation: the law on monopolies; the law on forestalling, engrossing, and regrating; the law on contracts in restraints of trade; and the law on combinations in restraint of trade.69

63 _{Ibid. at p.3.}

64 _{Bork, R., H., The Antitrust Paradox: A Policy at War with Itself (The Free Press, New York: 1993), at p.} 51.

65

E.g. political and moral goals, see Hofstadter, R., “What Happened to the Antitrust Movement?” re-printed in Sullivan, E., T., The Political Economy of the Sherman Act: The First One Hundred Years (Oxford University Press, New York, Oxford: 1991).

66 _{Ibid. at p.24.} 67

Bork, R., H., & Bowman, Jr., W., S., “The Goals of Antitrust: A Dialogue on Policy. The Crisis in Antitrust” at p. 365.

68 _{Kirkwood, J., B., & Lande, R., H., “The Fundamental Goal of Antitrust: Protecting Consumers, Not} Increasing Efficiency” [2008-2009] 84 Notre Dame L. Rev. 191 at p.192.

69

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There was a general perception that common law always protected freedom of trade and condemned monopoly. This perception was introduced by Sir Edward Coke, who significantly contributed to the development of common law. It was Sir Edward who argued that Magna Carta outlawed monopoly, basing his argument on its 29th and 30th Articles.70 Common law, on the other hand, had only begun to oppose monopoly at the end of the sixteenth century.71 Over time, English common law underwent a series of changes and adjustments in response to the economic and political situation at the time, reflecting the community’s desires and preferences.72 The congressmen who were involved in drafting the Sherman Act were also affected by the then current economic and political situation; thereby, interpreting the common law rules in the way which appeared to them to be most appropriate in the prevailing circumstances of late 19th Century America.

Initially, for example, the common law did not oppose monopolies granted by monarchs. Monopoly was originally an exclusive privilege granted by monarchs to merchants in the form of the letter-patent on the payment of generous fees. At that time, the letter-patent had a very broad scope,73 such that it was impossible to trade equally with the letter-patent holders. It was not until the end of the sixteenth century that the unfettered discretion of the monarch to grant letter-patent monopolies was controlled. By the end of the seventeenth century, the letter-patents were only given to those who contributed to the economic development. It has been argued that the shift in the tendency in granting the letter-patent monopoly changed mainly due to “disturbances within the monopolistic system administered largely by the guilds, and by objections [...] to the political power which the crown exercised in granting them”.74

This shows, therefore, that the common law’s negative attitude toward monopoly was developed over time which, in turn, shows that the common law had to go through various stages of social and political development in order to start recognising that what monopoly represented was, in fact, an offence.

70

Wagner, D., O., “Coke and the Rise of Economic Liberalism” [1935] 6(1) The Economic History Review 30 at p.39.

71 _{Letwin, W., L., “The English Common Law Concerning Monopolies” [1953-1954] 21 U. Chi. L. Rev. 355} at p.355.

72

Letwin, W., Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (Edinburgh University Press, Edinburgh: 1967) at p.18.

73 _{Walterscheid, E., C., “The Early Evolution of the United States Patent Law: Antecedents (Part 1)” [1994]} 76 J Pat.& Trademark Off. Soc’y 697 at p.700.

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The first case on monopoly which was recorded and subsequently cited was Davenant v

Hurdis75 (‘The Merchant Tailors’ case). This case was the first example of the judicial

examination of the monopolistic power exercised by the guilds.76 This case, in particular, was concerned with the question of whether the by-law, “An Ordinance for Nourishing and Relieving the Poor Members of the Merchant Tailors Company” passed in 1571 created a monopoly in the cloth-finishing trade. It was then decided that if the by-law did in fact create a monopoly then it would be void. It was argued that this decision brought an innovative perspective to both the relevant law and economic policy77 since it raised questions about the relationship between law and monopoly.

The next important case, Darcy v Allen78 (‘The Case of Monopolies’) was the decision that took the development of the common law of monopolies to the next level. In this case it was held that if a royal grant of patent provided an exclusive privilege of monopoly then it would be invalid. This decision clearly attacked monopoly granted by the royal letter which showed the beginning of the developing recognition of the harm associated with grant of Royal privileges in a commercial context. The attack on the royal prerogative to grant patent letters was not direct; but rather, relying on the fact that the Queen Elizabeth was deceived in her making of the grant.79 It was argued that during that time, “the right to work was protected by giving each guild a monopoly, and Darcy’s grant was condemned not because it was a monopoly and therefore necessarily bad, but because it was a bad monopoly”.80

This shows that initially, the existence of ‘monopoly’ was generally based on the simplest idea of providing the public with the right to work which, in turn, was achieved by providing the public with monopoly. It seems as if monopoly was not considered as being harmful for the market operation; but rather, being the only means to ensure that the public was protected from outside competitors.

The common law experience, therefore, showed the gradual formation of the law on the control of monopolies.81 Importantly, it did not stop the power and the spread of

75

[1598] 11 Co Rep 86a, Moore KB 576.

76 _{Davenant v Hurdis, [1598] 11 Co Rep 86a, Moore KB 576-- It was argued that this case was one of the} earliest cases “in which monopolies were outlawed under that name”—see Wagner, D., O., “The Common Law and Free Enterprise: an Early Case of Monopoly” [1937] 7(2)The Economic History Review 217. 77

Letwin, W., L., “The English Common Law Concerning Monopolies” at p 362. 78 _{[1602] 1 Web Pat Cas 1, 11 Co Rep 84b, Noy 173, Moore KB 671.}

79 _{Letwin, W., L., “The English Common Law Concerning Monopolies” at p 363.}

80 _{Letwin, W., Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act at p.29.} 81

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monopolies as the common law remedies were insufficient to address fully the problem. It was still an era in which the ‘freedom of trade’ was controlled by the Crown, the discretion of Parliament, and the Royal Assent. For such reasons, rules on governing competition within the market required more solid form, i.e. statutory legislation. In 1624, the Statute of Monopolies was passed which stated that “all monopolies and all commissions, grants, licenses, charters, and letters patents, [...], are altogether contrary to the laws of this realm, and so are and shall be utterly void and of none effect, and in no wise to be put in use or execution”.82

This was the first codified attempt to tackle the monopoly situation in England, and has been described as “‘the ancient and fundamental law’ against monopolies”.83

Although, it was argued that this attempt was not based on the promotion and protection of competition but rather on “constitutional objections to the power which the Crown presumed in granting monopolies and to the arbitrary reasons for which it had granted them”.84

Gradually private monopolies established by Royal grant were brought under Parliamentary control. Therefore, the Statute of Monopolies did manage to put the fast-growing tendency of private monopolisation under the Parliamentary control; albeit, it neither outlawed nor abolished the spread of corporate monopoly which continued to exclude competitors.