MINISTERIO DE SALUD

In the 19th Century, American markets started experiencing various events which led to drastic changes in the manufacturing industries.85 This also led to the appearance of a large market which created the possibility for firms to greatly expand the size of their business. It, in turn, created the favourable conditions for the creation of private powers within the certain industries.

Following English common law experience, US antitrust law heavily relied on the common law rules on the control of monopolies. Monopolies tend to take various forms,86 being different in nature but having similar effects on a market.87 Monopolies are always

82 _{Section I, Statute of Monopolies (21 Jac. I, cap. 3. A. D. 1623-24).}

83 _{Price, W., H., The English Patents of Monopoly (Houghton, Mifflin & Company, Boston and New York:} 1906) at p. 34.

84

Letwin, W., L., “The English Common Law Concerning Monopolies” at p 366. 85 _{E.g. transportation and communication systems.}

86 _{E.g. patent monopolies which originated from the English history when the Crown was granting privileged} “letter patents” in relation to any type of trade.

87

22

considered to mean “some sort of unjustified power, especially one that raised obstacles to equality of opportunity”.88

Over time growing impatience with monopolies led to a public outcry demanding government’s intervention. Interestingly, the public did not really understand the actual harm caused by monopoly; however, the general perception of treating monopoly as evil, a view promoted and reinforced by substantial media coverage led to the public’s antagonistic attitude toward monopolies.

In the period between the founding of the US, and the enactment of the Sherman Act, the US government, although recognising the spread of monopolies, did not interfere significantly in powerful firms’ activities. A firm of a considerable size and which had various advantages over its competitors used to be occasionally referred as ‘big business’ which entailed the idea of a corporate body that took control over an entire industry; thereby, squeezing weaker rivals out of a market. According to Louis Brandeis, big business “is size attained by combination, instead of natural growth, which has contributed so largely to our financial concentration”.89

This argument signifies an illegality behind a firm’s growth which is going to be discussed by the Supreme Court in a several leading cases under Section 2.90

The post-revolutionary political and economic situation did dictate the market environment; thereby allowing powerful firms to play according to their own rules. The establishment of two Banks of the United States91 in 1791 could be used as an example as it became prominent monopoly in the financial sector. In fact, the first Bank mostly consisted of private business despite the fact that it was regarded as a government bank.92 One of the Bank’s charters had a non-compete or monopoly clause which required the Federal Government not to create rival banks. Such a clause clearly provided the Banks with an exclusive monopolistic position in the financial market. The attempts to delete the monopoly clause failed and no further attempts were made until 20 years after the operation of the banks was terminated. One of the reasons for their termination related to

88 _{Letwin, W., Law and Economic Policy in America: the evolution of the Sherman Antitrust Act at p.59.} 89 _{1 Brandeis, L., D., The Brandeis Guide to the World, Alfred Lief ed. 17 1941 at p.18.}

90

See Chapter 5.

91 _{There was also the Bank of North America which was created in 1781 for the purposes of financing the} American Revolution in the last half of the 18th Century.

92 _{Hammond, B., “Jackson, Biddle, and the Bank of United States” [1947] 7(1) The Journal of Economic} History 1 at p.1.

23

Congress’ constitutional powers to create banks.93

During the renewal of the second Bank of the United States’ charter, President Jackson vetoed such a renewal on the grounds that “an exclusive privilege of banking under the authority of the General Government, a monopoly of its favour and support, and, as a necessary consequence, almost a monopoly of the foreign and domestic exchange”94

was inimical to the public interest. Therefore, President Jackson relied, inter alia, on a monopoly clause in the charter in order to justify the refusal to renew the charter.

The economic and social situation in the US at that time required a tighter and codified control over the US markets as they started being affected by the accumulation of wealth and power in the hands of powerful corporations. The ‘corporation’ was the main example of a firm which possessed both elements of a monopoly power, i.e. size and bigness. They had always been disliked by the public due to the common belief that every corporation was monopolistic because it was a corporation.95 The development and growth of corporations was not spontaneous; rather, the political environment along with the development of earlier corporate institutions96 influenced the formation of the present kind of corporation. 97 The royal monopolies, for instance, could be a substantial contribution to the first business entity that shaped the development of corporations. Most of the large entities which were holding exclusive rights of trade were also considered to be monopolists. For such reasons, due to the fact that large firms were making up the largest part of the private power in the US market, the view developed that all corporations were monopolies.98 Furthermore, before the nineteenth century corporations were granted monopolies by special legislation which defined their rights and duties. Corporations could not be formed by anyone without permission; therefore, those receiving the permission to form a corporation were granted a pure monopoly over their business. Therefore, the privileges, the separate legal personality, the state’s protection and stability could be very appealing factors in favour of incorporation. After considering this, it is unsurprising that the general public was against corporations. At that time, the general public did not benefit

93 _{Letwin, W., L., “Congress and the Sherman Antitrust Law: 1887-1890” at p.227. See also: St Clair Clarke,} M., & Hall, D., A., Legislative and Documentary history of the Bank of the United States: Including the Original Bank of North America (Gales & Seaton, 1832)

94 _{President Jackson’s Veto Message Regarding the Bank of the United States (Washington, July 10, 1832).} Available at: <http://avalon.law.yale.edu/19th_century/ajveto01.asp>.

95

Letwin, W., Law and Economic Policy in America: the evolution of the Sherman Antitrust Act at p.63. 96 _{E.g. the development of the earliest English corporate entities known as guilds.}

97 _{Williston, S., “The History of the Law of Business Corporations before 1800” 1-Committee of the} Association of American Law Schools, Select Essays in Anglo-American Legal History, [1909] vol. 3. 98

24

from corporations’ business and not any one could incorporate as such a business deal was reserved to very high-ranked and wealthy people. The public’s antagonism toward corporations was further supported by the argument that “a corporation may be too large to be the most efficient instrument of production and of distribution”99

which reflects the economic side of the argument. Despite the fact that at that time, corporations were providing the largest employment positions in the US, they were still perceived as not being beneficial for the both the consumer and the US market.