History of competition law

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The history of competition law refers to attempts by governments to regulate competitive markets for goods and services, leading up to the modern

Second World War
. Increasingly, the focus has moved to international competition enforcement in a globalised economy.

Early history

Competition law
Basic concepts
Anti-competitive practices
Enforcement authorities and organizations

Laws governing competition law are found in over two millennia of history. Roman Emperors and Mediaeval monarchs alike used

combination acts" and the "restraint of trade
".

Roman legislation

See also: Roman law

The earliest surviving example of modern competition law's ancestors appears in the Lex Julia de Annona, enacted during the

Edict on maximum prices established a death penalty for anyone violating a tariff system, for example by buying up, concealing or contriving the scarcity of everyday goods.[2] The most legislation came under the Constitution of Zeno of 483 AD which can be traced into Florentine Municipal laws of 1322 and 1325.[3] It provided for property confiscation and banishment for any trade combinations or joint action of monopolies private or granted by the Emperor. Zeno rescinded all previously granted exclusive rights.[4] Justinian I also introduced legislation not long after to pay officials to manage state monopolies. As Europe slipped into the Dark Ages, so did the records of law making until the Middle Ages brought greater expansion of trade in the time of lex mercatoria
.

Middle ages

See also:
Guilds
Statute of Labourers
to cap wages, and provide double damages against infringers

Legislation in England to control monopolies and restrictive practices were in force well before the

US antitrust law. Also under Edward III, the following statutory provision in the poetic language of the time outlawed trade combinations.[10]

"...we have ordained and established, that no merchant or other shall make Confederacy, Conspiracy, Coin, Imagination, or Murmur, or Evil Device in any point that may turn to the Impeachment, Disturbance, Defeating or Decay of the said Staples, or of anything that to them pertaineth, or may pertain."

Examples of legislation in Europe include the constitutiones juris metallici by

King Henry VIII
reintroduced tariffs for foodstuffs, designed to stabilise prices in the face of fluctuations in supply from overseas. The legislation read here that whereas,

"it is very hard and difficult to put certain prices to any such things... [it is necessary because] prices of such victuals be many times enhanced and raised by the Greedy Covetousness and Appetites of the Owners of such Victuals, by occasion of ingrossing and regrating the same, more than upon any reasonable or just ground or cause, to the great damage and impoverishing of the King's subjects."[11]

Around this time, organisations representing various tradesmen and handicraftspeople, known as guilds had been established and enjoyed many concessions and exemptions from the laws against monopolies. The privileges conferred were not abolished until the Municipal Corporations Act 1835.

Renaissance developments

See also: Renaissance
globalisation

Europe around the 15th century was changing quickly. The new world had just been opened up, overseas trade and plunder was pouring wealth through the international economy and attitudes among businessmen were shifting. In 1561, a system of Industrial Monopoly Licences, similar to modern

Wealth of Nations in 1776[17]
he was somewhat cynical of the possibility for change.

"To expect indeed that freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but what is more unconquerable, the private interests of many individuals irresistibly oppose it. The Member of Parliament who supports any proposal for strengthening this Monopoly is seen to acquire not only the reputation for understanding trade, but great popularity and influence with an order of men whose members and wealth render them of great importance."

Restraint of trade

Main article: Restraint of trade
Judge Coke in the 17th century thought that general restraints on trade were unreasonable.

The English law of restraint of trade is the direct predecessor to modern competition law.

Nordenfelt v Maxim, Nordenfelt Gun Co[19]
a Swedish arms inventor promised on sale of his business to an American gun maker that he "would not make guns or ammunition anywhere in the world, and would not compete with Maxim in any way."

To consider whether or not there is a restraint of trade in the first place, both parties must have provided valuable

Dyer's case[20]
a dyer had given a bond not to exercise his trade in the same town as the plaintiff for six months but the plaintiff had promised nothing in return. On hearing the plaintiff's attempt to enforce this restraint, Hull J exclaimed:

"per Dieu, if the plaintiff were here, he should go to prison until he had paid a fine to the King."

The common law has evolved to reflect changing business conditions. So in the 1613 case of Rogers v Parry[21] a court held that a joiner who promised not to trade from his house for 21 years could have this bond enforced against him since the time and place was certain. It was also held that a man cannot bind himself to not use his trade generally by Chief Justice Coke. This was followed in Broad v Jolyffe[22] and Mitchel v Reynolds[23] where Lord Macclesfield asked, "What does it signify to a tradesman in London what another does in Newcastle?" In times of such slow communications, commerce around the country it seemed axiomatic that a general restraint served no legitimate purpose for one's business and ought to be void. But already in 1880 in Roussillon v Roussillon[24] Lord Justice Fry stated that a restraint unlimited in space need not be void, since the real question was whether it went further than necessary for the promisee's protection. So in the Nordenfelt case[19] case Lord McNaughton rule that while one could validly promise to "not make guns or ammunition anywhere in the world" it was and unreasonable restraint to "not compete with Maxim in any way." This approach in England was confirmed by the House of Lords in Mason v The Provident Supply and Clothing Co[25]

Modern age

Modern competition law begins with the United States legislation of the

Clayton Act of 1914. While other, particularly European, countries also had some form of regulation on monopolies and cartels, the U.S. codification of the common law position on restraint of trade had a widespread effect on subsequent competition law development. Both after World War II and after the fall of the Berlin Wall
, competition law has gone through phases of renewed attention and legislative updates around the world.

United States antitrust

Main article: United States antitrust law
Standard Oil was one of the greatest companies to be broken up under United States antitrust laws

The American term

Standard Oil of New Jersey v. United States,[26] where Chief Justice White explicitly linked the Sherman Act with the common law and sixteenth-century English statutes on engrossing.[27]
The Act's wording also reflects common law. The first two sections read as follows,

"Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine....

Section 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine...."

The Sherman Act did not have the immediate effects its authors intended, although

Clayton Act of 1914 was passed to supplement the Sherman Act. Specific categories of abusive conduct were listed, including price discrimination(section 2), exclusive dealings (section 3) and mergers which substantially lessened competition (section 7). Section 6 exempted trade unions from the law's operation. Both the Sherman and Clayton Acts are now codified under Title 15 of the United States Code
.

Post war consensus

See also: Competition regulator

It was after the

Nazis to assume total economic control simply by bribing or blackmailing the heads of a small number of industrial magnates. Similarly in Japan, where business was organised along family and nepotistic ties, the zaibatsu
were easy for the government to manipulate into the war effort. Following World War II and the unconditional surrender of Japan and Germany, tighter controls, replicating the existing American policies and regulations were introduced.

However, further developments were considerably overshadowed by the move towards

Trade Practices Act
in 1974. Recently however there has been a wave of updates, especially in Europe to harmonise legislation with contemporary competition law thinking.

European Union law

Main article:
European Community competition law

In 1957 six Western European countries signed the

EU law
, under which competition law falls. Healthy competition is seen as an essential element in the creation of a common market free from restraints on trade. The first provision is Article 81 EC, which deals with cartels and restrictive vertical agreements. Prohibited are...

"(1) ...all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market..."

Article 81(1) EC then gives examples of "hard core" restrictive practices such as price fixing or market sharing and 81(2) EC confirms that any agreements are automatically void. However, just like the

Clayton Act
's substantial lessening of competition. Finally, Articles 86 and 87 EC regulate the state's role in the market. Article 86(2) EC states clearly that nothing in the rules can be used to obstruct a member state's right to deliver public services, but that otherwise public enterprises must play by the same rules on collusion and abuse of dominance as everyone else. Article 87 EC, similar to Article 81 EC, lays down a general rule that the state may not aid or subsidise private parties in distortion of free competition, but then grants exceptions for things like charities, natural disasters or regional development.

International enforcement

See also: World Trade Organization and International Competition Network

Competition law has already been substantially internationalised along the lines of the US model by nation states themselves, however the involvement of international organisations has been growing. Increasingly active at all international conferences are the

Doha round of trade talks for the World Trade Organization, discussion includes the prospect of competition law enforcement moving up to a global level. While it is incapable of enforcement itself, the newly established International Competition Network[31]
(ICN) is a way for national authorities to coordinate their own enforcement activities.

See also

Notes

  1. ^ This is Julius Caesar's time according to Babled in De La Cure Annone chez le Romains
  2. ^ a b Wilberforce (1966) p. 20
  3. ^ Wilberforce (1966) p. 22
  4. ^ a b Wilberforce (1966) p. 21
  5. ^ Pollock and Maitland, History of English Law Vol. II, 453
  6. ^ 51 & 52 Hen. 3, Stat. 1
  7. ^ 51 & 52 Hen. 3, Stat. 6
  8. ^ Wilberforce (1966) p. 23
  9. ^ 23 Edw. 3.
  10. ^ 27 Edw. 3, Stat. 2, c. 25
  11. ^ 25 Hen. 8, c. 2.
  12. ^ according to William Searle Holdsworth, 4 Holdsworth, 3rd ed., Chap. 4 p. 346
  13. ^ (1602) 11 Co. Rep. 84b
  14. ^ e.g. one John Manley paid £10,000 p.a. from 1654 to the Crown for a tender on the "postage of letters both inland and foreign" Wilberforce (1966) p. 18
  15. ^ (1685) 10 St. Tr. 371
  16. ^ 9 Anne, c. 30
  17. ^ Adam Smith, An Enquiry into the Wealth of Nations (1776)
  18. ^ "the modern common law of England [has] passed directly into the legislation and thereafter into the judge-made law of the United States." Wilberforce (1966) p. 7
  19. ^
    Nordenfelt v Maxim, Nordenfelt Gun Co
    [1894] AC 535
  20. ^ (1414) 2 Hen. 5, 5 Pl. 26
  21. ^ Rogers v Parry (1613) 2 Bulstr. 136; (1613) 79 ER 278
  22. ^ Broad v Jolyffe (1620) Cro. Jac. 596
  23. ^ Mitchel v Reynolds (1711) 1 P.Wms. 181
  24. ^ Roussillon v Roussillon (1880) 14 ChD 351
  25. ^ Mason v The Provident Supply and Clothing Co. [1913] AC 724
  26. ^ 221 U.S. 1 (1911)
  27. King Edward VI
    in 1552, 5 & 6 Edw. 6, c. 14
  28. ^ see, Tony Prosser, The Limits of Competition Law (2005) ch.1
  29. ^ see a speech by Wood, The Internationalisation of Antitrust Law: Options for the Future 3 February 1995, at http://www.usdoj.gov/atr/public/speeches/future.txt
  30. ^ Whish (2003) p. 448
  31. ^ see, http://www.internationalcompetitionnetwork.org/

References

Books
  • RH Bork, The Antitrust Paradox (2nd edn Free Press 1993).
    ISBN 0-02-904456-1
    .
  • H Coing and W Wilhelm (eds), Wissenschaft und Kodifikation des Privatrechts im 19. Jahnrhundert (vol IV, Frankfurt, 1979)
  • M Friedman, The Business Community's Suicidal Impulse (1999)
  • JK Galbraith
    , The New Industrial State (1967)
  • JS Mill, On Liberty (1859)
  • Tony Prosser, The Limits of Competition Law (OUP, 2005) ch. 1.
  • J Schumpeter, The Process of Creative Destruction (1942)
  • A Smith
    , An Enquiry into the Nature and Causes of the Wealth of Nations (1776)
  • R Wilberforce, The Law of Restrictive Practices and Monopolies (Sweet and Maxwell 1966)
  • R Whish, Competition Law (6th Edn Lexis Nexis Butterworths 2009)
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