Article Volume 5:4

Varieties of Approach to the Problem of Competition

Table of Contents

THE MeGILL
LAW JOURNAL

VOLUmE 5

1959

NumB-R 4

VARIETIES OF APPROACH TO THE PROBLEM

OF COMPETITION

Milton Handler*

Prior to World War II, the United States and Canada stood virtually alone
in their devotion to a policy of enforced competition. But today there is
substantial recognition of the economic desirability of trade unfettered by
private restraints.’ In 1953 a Report of the United Nations Economic and
Social Council 2 advocated that each member take appropriate measures to
prevent “business practices affecting international trade which restrain com-
petition, limit access to markets, or foster monopolistic control, whenever such
practices have harmful effects on the expansion of production or trade.” And
I am sure that you are familiar with the recent Restrictive Trade Practices
Act& in the United Kingdom and are as curious as I am about the effects of
the West German Law Against Restraints of Competition 4 which became
operative in January of 1958.

Now that many industrial nations either have retreated from tolerance
of restrictive business arrangements, or have injected renewed vigor into their
antitrust programs, 5 it is particularly appropriate to reexamine the premises
underlying the systems of competition to which our two countries are dedicated.
*Of the New York Bar and Professor of Law at Columbia University. This work
was originally presented as a paper at the McGill Conferences on “The Future of
in November 1958, at Montebello, Quebec. Grateful
Competition
acknowledgement is made to the valuable assistance of Joshua F. Greenberg in the
preparation of this paper.

in Canada” held

‘See U.N. ECOSOC COUNCIL OFF. REC. 16th Sess., Supp. No. 11A, at 12
(1953); ANTITRUST LAWS: A COMPARATIVE SYMPOSIUM

(E/2379)
passim (Friedmann ed. 1956).

2Report of

ECOSOC COUNCIL OFF. REC. 16th Sess., Supp. No. 11, at 12-13 (E/2380)

the Ad Hoc Committee on Restrictive Business Practices, U.N.
(1953).

3Restrictive Trade Practices Act, 1956, 4 & 5 Eliz. 2, c. 68.
4Law of July 27, 1957, 1 Bundesgesetzblatt 1081 (Fed. Rep. of Germany).
5See supra note 1.

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in translating

The common inspiration for our fundamental antitrust statute in the United
States, the Sherman Act of 1890,6 and for .the Canadian Act of 1889 as well,7
was the English common law of restraint of trade. The impetus for antitrust
legislation in our country was .the rise of the industrial trusts in -the post-Civil
War period which caused widespread concern over the preservation of basic
economic and political freedom. But, as so often happens, there was to be
legislation into effective social action.
great disappointment
Meagerness of appropriations and spotty enforcement undermined the Sherman
Law in its nascent years. There was, too, the inevitable confusion attending the
judicial construction of language which evidenced a broad stroke of the
legislative brush. The Sherman Act said that “every contract, combination…
or conspiracy, in restraint of trade.., is hereby declared -to be illegal”; it did
not speak of “unduly” or “unreasonably” restraining trade, as did the Canadian
legislation. It was thus not clear whether the Act prohibited the familiar
covenants not to compete ancillary to such lawful transactions as the sale of
a business, in addition to proscribing industry wide price-fixing and schemes
for controlling production.

In 1911 Chief Justice White mustered the support of all but one of his
colleagues on the Supreme Court, in the Standard Oils and American Tobacco9
cases, to promulgate a “rule of reason” which has since governed the admin-
istration of the Sherman Law. White’s exegesis was that at common law the
term “restraint of trade” signified only illegal practices or, in other words,
only unreasonable restraints; the Sherman Act codified the existing common
law and, therefore, outlawed only those arrangements which restrained trade
unreasonably. Without the benefit of explicit language, we thus imported a rule
of reason into our basic statute to moderate the uncompromising sweep of
the legislative condemnation. The -Canadian Criminal Code10 talks of “unduly”
the
lessening competition while the Combines Investigation Act” employs
qualification of public injury. A rule of reason is thus built into the Canadian
statutes themselves obviating the need for any judicial gloss.

Before considering how we have given content to the rule of reason in the
United States, I want to stress that it does not permit our judiciary to “set
sail on a sea of doubt,” as some suggested it would.’ 2 It is not a rule where
results turn on the length of the Chancellor’s foot, or the visceral reactions of
the judge. Rather, as formulated by Justice Stone in the Trenton Potteries

626 Stat. 209 (1890), 15 U.S.C. s. I.
7Act for the Prevention and Suppression of Combinations in Restraint of Trade,

1889, 52 Viet. c. 41 (Canada).

8Standard Oil Co. v United States, 221 U.S. 1 (1911).
OUnited States v. American Tobacco Co., 221 U.S. 106 (1911).
10Stats. Can. 1953-54, d. 51, s. 411(1).
11R.S.C., 1952, c. 314, s. 2(a)(vi).
l2 See Taft, J., in United States v. Addyston Pipe & Steel Co., 85 Fed. 271, 284

(6th Cir. 1898), affd, 175 U.S. 211 (1899).

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the imposition of a system of licensing. These sovereign powers cannot safely
be vested in private groups to be exercised for private purposes.

History has taught us that uncurbed economic power eventually leads to the
emolument of individual interests at public expense. Private regulation of
economic affairs is but a prelude to the exacting public regulation which it
inevitably invites. Because we can not rely upon the haphazard processes of
litigation to protect the interests of the general public, far-reaching administra-
tive supervision becomes inescapable. And, even were we to have administra-
tive regulation of price and other restrictions on business, this. logically
necessitates a proliferation of controls relating to production, labor and all the
other elements of an industrial complex. With increased and permanent govern-
mental responsibility for the most intimate business details of all industry, our
private enterprise system would be replaced by an authoritarian regime of
either the left or the right. These were the “rival philosophies” from which
Congress chose when it enacted the Sherman Law in 1890.20 Thus, the choice
of free competition and rejection of monopoly abuse as a guiding rule for anti-
trust precludes both voluntary and compulsory cartels.

Thirty years after Trenton Potteries, using similar reasoning, the Canadian
Supreme Court in its Fine Papers decision 21 also has rejected the need for
proof of monopoly abuse in a price-fixing case. But there is some indication in
the Fine Papers opinions that restrictive arrangements by small minority
groups may be sanctioned under Canadian law. 22 In the past, American courts
also toyed with this doctrine – which I call “concentric circle” ;23 that is,
looking at the relevant market as the outer circle and the share of that market
controlled by the combination as the inner circle, is the perimeter of the inner
circle close enough to that of the outer circle to spell illegality?

The rationale of concentric circle is that a combine without any control of
the market is not likely to prejudice the public interest. Consequently, if there
are important business justifications for the moderation of competition among
the members of the group, there is no reason of policy to prevent the formation
of a combine of such limited power. This was the view of some of the common
law rulings in the United States as well as in Canada. This is not to say that
every restraint by a minority group will be upheld under concentric circle.
It means that the absence of monopoly power is a factor to -be considered in
determining the legality of private agreements among competing enterprises.

Those who reject concentric circle do so for various reasons. Administratively,
the adoption of this doctrine increases the burden of enforcement. Furthermore,
if one minority group is permitted to adopt restrictive practices, what is to
prevent other groups from being formed and upheld on the theory that they,

2OIbid.
2lHoward Smith Paper Mills Ltd. v. The Queen, [1957] S.C.R. 403, 411, 426-27.
22See id. at 409, 427.
23See Appalachian Coals v. United States, 288 U.S. 344 (1933); Standard Oil Co.

(Indiana) v, United States, 283 U.S. 163

(1931).

No. 4]

APPROACH TO COMPETITION

too, lack monopoly power? When this occurs, the public is left with limited
oligopolistic competition even in those areas where -there are many sellers. The
view is that while the anticompetitive effects of the first group may be
minuscule, the cumulative consequences may prove subversive of our com-
petitive institutions.

We have fluctuated in our adherence to concentric circle. While it appears
to receive a warm reception in Canada, the current climate in the United States
involved 24 It will be
is extremely frigid where loose-knit restraints are
interesting for our two countries to contrast and exchange experiences in regard
to your possible toleration and our apparent condemnation of various restric-
tions by minority groups. Perhaps, through the illumination of your experience,
we may shift back to a more favourable attitude toward such arrangements and,
conversely, we may induce a change of attitude (n your part. For we are in an
area of antitrust where there can be no dogma and where, in the present state
of our knowledge, variation of judgments is inevitable.

We have evolved doctrines of per se illegality for restraints such as price-
fixing, territorial division, customer allocation and production limitation. The
economic raison d’etre for these rules is that such restrictions have so demoraliz-
ing an effect on competition as to outweigh by far whatever tenuous long-range
good may derive from them. Thus, the approach of Trenton Potteries has
become the anchor point of modem American antitrust doctrine in respect of
price-fixing and similar loose-knit restrictions. But outside this area of per se
illegality the rule of reason governs. While abuse of economic power need not
be proved and minority market shares are not decisive of legality, the rule of
reason is far from sterile. We demand a careful measurement of actual and
probable anticompetitive effects to determine whether the challenged practice
significantly impairs the vigor of competition.

The rule of reason recognizes that some restraints, though foreclosing com-
petition between the parties, strengthen the forces of competition in the market
as a whole. Restraints may be used as a technique of waging competition with
salutary long run consequences for the economy. Temporary defensive meas-
ures against the encroachments of monopoly and the ravages of the business
cycle may well preserve the competitive system from extinction. So, too, mergers,
exclusive dealing and arrangements for orderly marketing may promote com-
petition. In some instances, of course, they may have a contrary effect, depend-
ing on all the facts and circumstances. When that occurs, the restraint is
deemed unreasonable and therefore unlawful.25

24See Northern Pacific Railway Co. v. United States, 356 U.S. 1 (1958), discussed

in Handler, Recent Antitrust Developments, 13 The Record 417 (1958).

25As stated by the Supreme Court in Times-Picayune Pub. Co. v. United States,
345 U.S. 594, 615 (1953), quoting, United States v. Columbia Steel Co., 334 U.S. 495,
527 (1948),

the reasonableness of a restraint will depend upon

‘the percentage of business controlled, the strength of the remaining competition
to
[and] whether
monopolize.’

the action springs from business requirements or purpose

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The rule of reason apparently also is given statutory sanction in the Combines
Investigation Act’s 26 seeming
imposition of the’ duty upon the Crown to
establish detriment to the public over and above proof of the combination to
restrain trade. However, Justice Kellock in the Fine Papers case27 interpreted
“public injury” as an integral part of the restraint and not as a supplementary
and additional legal requirement. He said that

The statute proceeds upon
lessening of
competition is in itself an injury to the public. It is not concerned with public
injury or public benefit from any other standpoint.28

the preventing or

the footing that

Without the benefit of specific statutory

language, American antitrust
doctrine has developed to much the same point. We will soon hear again from
our Supreme Court on this issue when it decides the Klor’s case.29 I think
that Canada will be particularly interested in our jurisprudence concerning
public injury, in part because of the Fine Papers decision and also because
of the English Restrictive Trade Practices Act,30 which accords preeminence
in the statutory scheme to the criterion “contrary to the public interest.”

In 1956, the United States -Court of Appeals for the Ninth Circuit in the
Radovich cases’ dismissed a complaint by a former professional football player
charging a boycott by the teams constituting the National Football League.
The court could find no allegation in the complaint showing that “‘the con-
spiracy was reasonably calculated to prejudice the public interest by unduly
restricting the free flow of interstate commerce.’ “32 However, the Supreme
Court reversed, holding that the complaint “need only be ‘tested under the
Sherman Act’s general prohibition on unreasonable restraints of trade’… and
meet the requirement that [plaintiff] has thereby suffered injury” because
“Congress has, by legislative fiat, determined that such prohibited activities
are injurious to the public.”33 The Supreme Court observed that “in ithe face
20R.S.C., 1952, c. 314, s. 2(a)(vi), (“combine means a combination having relation
to any commodity which may be the subject of trade or commerce, of
two or
more persons by way of actual or tacit contract, agreement or arrangement having or
designed to have the effect of… otherwise restraining or injuring trade or commerce,
or a merger, trust or monopoly, which combination, merger, trust or monopoly has
operated or is likely to operate to the detriment or against the interest of the public,
whether consumers, producers or others”).

2THoward Smith Paper Mills Ltd. v. The Queen, [1957] S.C.R. 403. While the
Supreme Court was specifically concerned with the Criminal Code, its reasoning
seems to apply also to the Combines Investigation Act.

281d. at 411.
29Klor’s, Inc. v. Broadway-Hale Stores, Inc., 255 F. 2d 214 (9th Cir. 1958), cert.

granted, 27 U.S.L. Week 3110 (U.S. Oct. 13, 1958)

(No. 76).

SORestrictive Trade Practices Act, 1956, 4 & 5 Eliz. 2, c. 68, s. 20(1).
SlRadovich v. National Football League, 231 F. 2d 620 (9th Cir. 1956).
321d. at 623, quoting, Feddersen Motors v. Ward, 180 F. 2d 519, 522 (10th Cir. 1950).
33Radovich v. National Football League, 352 U.S. 445, 453

(1957).

No. 4]

APPROACH TO COMPETITION

of such a policy, this Court should not add requirements to burden the private
litigant beyond what is specifically set forth by Congress in those laws.”‘3 4

Last year, the Ninth Circuit, which had been reversed in Radovich, again
grappled with the public injury issue in the Klor’s case.35 The opinion was
written by Judge Stanley Barnes, who had served for several years as the
vigorous head of the Antitrust Division of the Department of Justice. Klor’s
was a retail appliance dealer in San Francisco who contended that a competing
retail outlet induced ten manufacturers and eight distributors to refuse jointly
to supply Klor’s with household appliances. Defendants, on a motion for
summary judgment, pointed to the large number of plaintiff’s competitors who
sold appliances and showed that Klor’s was still able to purchase goods from
many competing sources. The heart of the defense was that the undisputed
evidence established that no injury to the public had resulted, even if defendants
had boycotted Kor’s in concert. Klor’s rested on its complaint and contended
that any combination in restraint of trade is always beyond the pale of legality
“no matter in what degree and no matter against whom… directed ’36

The Court of Appeals disagreed with Klor’s and affirmed the award of
summary judgment for defendants. After determining that the boycott did not
fall within the category of restraints which are illegal per se under the Sherman
Act, the court grappled with the Supreme Court’s ruling in Radovich on the
issue of public injury. Judge Barnes in Klor’s construed the Radovich decision
to mean that there is no separate requirement that a private litigant must
establish public injury as well as a statutory violation. But this did not mean
that in determining what constitutes an unreasonable restraint of trade the
impact of the restraint on the public is immaterial. On the contrary, public
injury is viewed in Klor’s as an integral part of the inquiry demanded by the
rule of reason, and therefore inseparable from the issue of violation. Judge
Barnes makes clear, as did Justice Kellock in the Fine Papers case, that there
is no additional requirement of proof of injury to the public, 37 ‘but he holds
that “where there is no conceivable way in which a substantial segment of the
public can be injured by the conduct attacked,
the Sherman Act is not
violated.”38

Applying the rule of reason to the facts before it in Klor’s, the court found
that the restraint did “not substantially interfere with either the ‘retailing
public’ or the ‘consuming public,'” since “there are literally hundreds of dealers
in the San Francisco Bay Area dealing in the same kinds and brands of major
appliances” withheld from Klor’s and because “there are numerous brands

34Id. at 454.
35Klor’s, Inc. v. Broadway-Hale Stores, Inc., 255 F. 2d 214 (9th Cir. 1958).
86Id. at 221.
87See id. at 231.
38Id. at 233.

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of appliances to which [Klor’s] was not denied access and which compete
favourably with those he was denied.” 39

Under Judge Barnes’ careful analysis in Klor’s, public injury is a sine qua
non of proof of an antitrust transgression; public injury and violation are
part and parcel of the same thing. Public interest, according to Judge Barnes,
is not synonymous with the economic predilections of individual judges, but
rather it is rooted in the purposes and traditions of antitrust. Unless the
alleged violation entails anticompetitive consequences of such a mature or
dimension as to impair the vigour of competition in the appropriate market, the
conduct is a non-actionable restraint under the rule of reason.

There has been a trend in the United States to seek an expansion of rules
of per se illegality and a concomitant narrowing of the area in which the rule
of reason may operate. If a similar movement has not yet been evident in
Canada, it may not be far off. For example, there are some in the United
to orderly
States who would condemn, out-of-hand,
marketing; they would apparently vitiate exclusive selling arrangements for
trademarked products, 40 or territorial limitations 41 or customer restrictions 42
on the resale of branded goods. In short, they would insist upon intra-brand
competition, in addition to the traditional vying among products of various
manufacturers. To me, this is the quintessence of short-sighted thinking.

limitations conducive

I perceive in this approach the demise of the small businessman in America.
As we forbid practices which prevent marketing chaos among small distributors,
we encourage manufacturers to achieve the same ends .by integrating vertically
independent
and
distributors.

thereby eliminating both their legal problems and their

43

Clearly, absent monopolistic control, a distributor always must meet the
competition of other manufacturers’ products. Why, then, demand that a
manufacturer compete against himself? Of course, it may increase competition
– momentarily –
if a multitude of distributors slash prices recklessly as a
result of intra-brand warfare. But those of us who feel that the small business-
man has an important economic function to perform in the distribution of
goods, who are convinced that a social and political good comes from his

391d. at 235.
40But see e.g., Sclzwing Motor Co. v. Hudson Sales Corp., 138 F. Supp. 899 (D.Md.
1956), af ‘d per curiam, 239 F. 2d 176 (4th Cir. 1956), cert. denied, 355 U.S. 823
(1957); Packard Motor Car Co. v. Webster Motor Car Co., 243 F. 2d 418 (D.C. Cir.
1957), cert. denied, 355 U.S. 822 (1957).

4 1E.g., United States v. Volkswagen of America, Inc., Civ. 1232-57 (D.N.J. Dec. 4,
(complaint). But see Columbus Coated Fabrics Corp., FTC Dkt. 6677, p. 4

1957)
(July 8, 1958)

(initial decision).

42Cf. United States v. Arnold, Schwinn & Co., Civ. 58C272(3)

(E.D. Mo. June 30,
(complaint). But see Roux Distributing Co., Inc., FTC Dkt. 6636 (Feb. 17,
(initial decision).

43See Standard Oil Co. of California v. United States, 337 U.S. 293, 320

(1949)

1958)
1958)

(dissent).

No. 4]

APPROACH TO COMPETITION

preservation, deplore such quixotic condemnation of limitations which bring
about orderly marketing.

Zeal for antitrust should not be permitted to result in overreaching which
may cause an unfavorable reaction to its salutary purpose. It is possible that
the recent English and German statutues may have just such an unfortunate
result. For example, in England, restricting the persons to whom or the areas
in which goods may be resold is a practice which is apparently subject to
invalidation.44 And in Germany, there are general declarations of invalidity,45
which if interpreted without full recognition of competitive necessities, may
impair efforts to develop orderly marketing. Of course, -there are exceptions
under both statutory schemes –
the most noteworthy being the exemption in
the German statute for agreements which rationalize economic processes. 48

Now let us consider the so-called close-knit arrangements. While the Com-
bines Investigation Act4 7 outlaws a “merger, trust or monopoly” which “has
operated or is likely to operate to the detriment or against the interest of the
public,” it appears that such arrangements have been attacked only rarely in
Canada. Similarly, mergers and monopolies are accorded but peripheral atten-
tion in the English statutory scheme, 48 and it is only the abuses by so-called
“market-dominating enterprises” that are condemned in Germany. 49

The American experience with close-knit restraints provides a sharp con-
trast. Because of dissatisfaction with the paucity of results from the application
of the Sherman Act to corporate mergers, in 1950 our Congress passed the
Celler-Kefauver Amendment -to the Clayton Act.50 This was designed to
strengthen the prohibitions against concentration ‘by imposing more exacting
standards of illegality. There was substituted for the phraseology of restraint
of trade and monopolization, the criterion of whether the acquisition would
probably substantially lessen competition in any line of commerce in any section
of the country. Since the 1950 enactment, there have been 43 suits instituted
by the Government of which 10 have been settled and about 7 have been
resolved at the lower levels of our decisional structure and are now pending
on appeal. The new statute has not yet been construed by our Supreme Court.
The closest that that Court has come to interpreting our antimerger legislation
44Restrictive Trade Practices Act, 1956, 4 & 5 Eliz. 2, c. 68, s. 6(1) (e). But cf. id.

at 8(3).

45Law of July 27, 1957, 1 Bundesgesetzblatt

1081, 1(1),15,18

(Fed. Rep. of

Germany).

4Id. at s. 5(2).
47R.S.C., 1952, c. 314, s. 2(a) (vi).
48See Monopolies and Restrictive Practices

& 12 Geo. 6, c. 66, amended, 1 & 2 Eliz. 2, c. 51
2, c. 68 (1956).

(Inquiry and Control) Act, 1948, 11
(1953), amended, 4 & 5 Eliz.

4 9Law of July 27, 1957, 1 Bundesgesetzblatt 1081, ss. 22-24 (Fed. Rep. of Germany).
5064 Stat. 1125 (1950),

15 U.S.C. s. 18.

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[Vol. 5

was the duPont-General Motors case,51 which arose under the original version
of the Clayton Act before its 1950 amendment.

There are two central questions in every merger litigation. First, there must
be a delineation of the relevant markets, i.e., the line of commerce and the
section of the country to which we must look for the requisite anticompetitive
effects. Then, there is the question of whether illegality is to flow solely from
the quantitative substantiality of the competition eliminated by a corporate
fusion, or whether there must be an impairment of the vigour of competition
in the appropriate market as a whole.

With respect to the question of the relevant market, our courts5 2 and the
Federal Trade Commission 53 have rejected the view that the product market
should be limited to goods which are substantially identical with those involved
in the merger. They recognize that the market includes the area of effective
competition, whether from identical goods or from other products vying for
the consumer’s patronage. The law is now clear that inter-product competition
must be taken into account. But it is still unclear as -to the precise formulation
of the standard. In the Cellophane case,54 the Supreme Court expressed it in
for which
terms of “reasonable interchangeability of products for the purpose
they are produced,” and in the duPont-General Motors case,55 it was put in
terms of “sufficient peculiar characteristics and uses to constitute.., a ‘line of
commerce.'” While the formulations may differ, the principle is essentially
the same.

With respect to the substantive standard of legality, some zealous advocates
argue that the test is the amount of competition disappearing by virtue of the
merger. However, the United States Court of Appeals for the Second Circuit
in the American Crystal Sugar case56 and the Federal Trade Commission in
the Brillo case 57 refused to follow so unrealistic a rule –
despite some language
of the Supreme Court in the duPont-General Motors case 58 which seems to
veer toward the quantitative substantiality of the competition eliminated by an
acquisition.

I have stated in numerous articles and lectures that the economic thrust
of an acquisition must necessarily vary case by case. This is not to assimilate
such qualitative analysis with the Sherman Act rule of reason test, now dis-
carded for close-knit combinations that fall under the terms of the Celler-

MlUnited States v. E. I. duPont de Neinours & Co., 353 U.S. 586 (1957).
52Ancrican Crystal Sugar Co. v. Cuban-American Sugar Co., 1958 Trade Cases

par. 69,155, pp. 74,507-08 (2d Cir. 1958).

53Brillo Mfg. Co., FTC Dkt. 6557, CCH Trade Reg. Rep. par. 27,243, p. 36,625 (1958).
S4United States v. E. I. duPont de Nernours & Co., 351 U.S. 377, 404 (1956).
55United States v. E. L duPont de Nernours & Co., 353 U.S. 586, 593-94 (1957).
56Ainerican Crystal Sugar Co. v. Cuban-American Sugar Co., 1958 Trade Cases

par. 69, 155, p. 74, 506

(2d Cir. 1958).

57Brillo Mfg. Co., FTC Dkt. 6557, CCH Trade Reg. Rep. par. 27,243, p. 36,625 (1958).
5SUnited States v. E. I. duPont de Neinours & Co., 353 U.S. 586, 595 (1957).

No. 4]

BOOK REVIEWS

Kefauver Amendment. Surely, the scope of permissive merger is narrower
is to demonstrate
under this amendment. Moreover, all that is necessary
probable adverse consequences, rather than actual competitive harm. But only
by analyzing all relevant market data can we arrive at a determination which
will best maintain workable competition in the market place.

the principles are beginning

Out of the welter of pending litigation, more precise guides will be formulated.
time,
After eight years
they will be amplified with case-by-case development. However, this is an
area in which there can be no mathematical formulae. We will always have
to depend upon a comprehensive investigation of competitive data to ascertain
if the structure of the relevant market is so altered ‘by a merger or acquisition
that the public is likely to lose the benefits of competition.

to emerge.

In

I am convinced that a regime of effective competition necessitates statutory
tools to cope with such anticompetitive mergers and acquisitions. In the United
States we now have those tools in the provisions of the Celler-Kefauver Act.
Careful consideration of the American experience in this area of antitrust is
merited particularly in Canada, but also by those in other nations who would
learn from us.

As you well know, substantive law can only be translated into observance
by efficient procedural devices. Unencumbered by the constitutional limitations
which beset Canada, the panoply of procedural weapons for enforcement of the
antitrust laws in the United States permits of great flexibility and effectiveness.
Criminal prosecutions to our mind are inappropriate for the multitude of
borderline business decisions which are challenged under antitrust laws. It
appears however that even with the amendments in the aftermath of the
MacQuarrie Report,59 injunctive relief may be awarded in Canada only in
criminal suits. On the other hand, indictments in the United States are
customarily reserved for violations which are predatory or as free from doubt
as price-fixing. We find that our most effective deterrents to future violations
are injunctions decreed in civil suits instituted either by the Department of
Justice or by private parties injured by the transgressions. Also effective are
the cease and desist orders of the Federal Trade Commission, which has
coordinate jurisdiction with the Department of Justice to bring civil antitrust
enforcement proceedings. The civil nature of the suit facilitates proof and an
ultimate finding of illegality, for there is none of the revulsion which naturally
attends convicting a businessman for decisions made in good faith.

Many other nations premise enforcement of their antitrust laws on the
principle of registration and publicity.60 In Canada the statutory requirement
of a public report by the Restrictive Trade Practices Commission to the

59R.S.C., 1952, c. 314, s. 31.
6OSee U.N. ECOSOC Council Off. Rec. 16th Sess., Supp. No. 11A, at 34 (E/2379)
(1953) ; Cf. Restrictive Trade Practices Act, 1956, 4 & 5 Eliz. 2, c. 68; Law of July
27, 1957, 1 Bundesgesetzblatt 1081

(Fed. Rep. of Germany).

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[Vol. 5

Minister of Justice prior to prosecution0′ seems to evidence adherence to this
principle to some extent. It may well be that such experience and that of others
supports substantial reliance upon publicity as a deterrent to anticompetitive
practices. However, we find that the pressures brought to bear on American
businessmen to forego competition are such that adverse publicity is wholly
inadequate as a remedial device. Official injunctive and criminal processes
are crucial for us, as is the private action for enforcement.

The vast hiatus which necessarily results from any governmental regulation
of all industry is well-filled by private enforcement of our antitrust laws.
More than some abuse has resulted because an award of treble damages,
attorneys’ fees and costs are mandatory under our law once private damage
caused by an antitrust violation is found, whether the violation was predatory
and patent or of the borderline variety. Strike suits and harrassment have
not been unknown. There is undoubtedly much room for improvement in our
system of private suits, but, on balance, it has proved a significant and helpful
supplement to official action.

What, in conclusion, are the lessons of our antitrust experience? We have
learned that education and publicity are insufficient to bring about wide-
spread compliance with antitrust requirements. The law is not self-executing.
We can get only as much observance as we are willing to pay for in the form
of the cost of administration. A corporal’s guard cannot enforce with vigour
and wisdom a law applicable to all of American industry in the conduct of its
interstate and foreign trade activities. When enforcement agencies are starved
for funds, restraints flourish and the public is denied the benefits of competition.
Our antitrust laws are enforceable only if the sinews of war are available
to prosecuting officials.

Fair and effective enforcement prevents the growth of monopoly and the
subversion of competition by the protean arrangements of businessmen designed
to eliminate or control ‘the competition of the market place. But for our anti-
trust laws, the trusts which induced the passage of the Sherman Act would
have proliferated to the point where most basic industries today would be
controlled by a single colossus. Had not the philosophy of Trenton Potteries
prevailed, price-fixing would be rife in this country and judicial regulation
would be desultory, anaemic and ineffectual. Our rules of antitrust have
maintained the integrity of free enterprise in those areas where it still exists.
But it would be naive to believe that the competition in our vast market place
is the pure and undefiled variety of the old textbooks. Our industrial landscape
runs the gamut from the intense competition of industries characterized by
large numbers of sellers to the highly concentrated industries where there are
but a few producers. We have neither pure monopoly nor pure competition.
Our aim in those fields where the Government has not withdrawn the activity
from the regularizing force of free competition, has been to maintain healthy,

01R.S.C., 1952, c. 314, s. 19.

No. 4]

APPROACH TO COMPETITION

vigorous and workable competition, which is not theoretically perfect, but is
practically effective. There is no least common denominator to which all of
business can be reduced. Our purpose is not to require equality of size or
unattainable uniformity of structure. Rather it is to preserve freedom of entry,
to protect the small businessman from the aggressions of the large, to elevate
the plane of competition to a level of fair dealing, and to safeguard the public
from the detriments of collusive business behaviour.

Our accomplishments have not been the maximum obtainable. But neither
have they been the minimum. We believe that we have made some progress.
We think that in the years ahead we can do even better. We are confident
that the aberrations resulting from an excess of zeal will be eliminated by the
robust common sense which characterizes a pragmatic society.

While we recognize that there are some economic wastes resulting from
our system, we are wedded to the idea of enforced competition. It may well be
that history will place its encomium on other systems and other methods, but
for us, as Justice Black of the Supreme Court recently stated, our basic
premise is that:

… the unrestrained interaction of competitive forces will yield the best allocation
of our economic resources, the lowest prices, the highest quality and the greatest
material progress, while at the same time providing an environment conducive
to the preservation of our democratic political and social institutions.62
Free and open competition is part of our political credo. Antitrust is our
charter of liberty; it is a counterpart of our Bill of Rights, standing as the
bulwark of our economic freedom. We are dedicted to it because we can
see no alternative which is compatible with our traditions and aspirations as
a free people.

62Northern Pacific Railway Co. v. United States, 356 U.S. 1, 4 (1958).

in this issue Theory of Government Contracts, The

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