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Book Review
| Wyatt Wells, Antitrust and the Formation of the Postwar World, New York: Columbia University Press, 2002. Pp. x + 276. $32.50 cloth (ISBN 0-231-12398-1); paper $22.50 (ISBN 0-231-12399-X).
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| In this brief volume Wells develops a thesis that is generally familiar to twentieth-century economic historians, although the details have always been thin. Prior to World War II United States antitrust policy was focused almost exclusively on domestic issues, except for prosecution of a few international cartels with clear domestic ties. Foreign nations generally pursued their own competition policies, and these were often very different from ours. For example, Germany not only condoned cartel agreements, it actually permitted the parties to enforce them in court. As Wells develops, this view led many in the United States to believe that one of the causes of World War II was Germany's excessive submission to its industrial machine. Americans tended to believe that a strong anti-cartel law would help to correct this. The United States had greater success in reforming competition policy in Germany than in Japan, largely because the Japanese retained greater control over their own internal economic policy and business even during the occupation period. |
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This thesis is generally consistent with the view that World War II greatly facilitated the United States' move from economic isolationism to globalization. But an additional consequence of American opposition to cartels abroad was greater attentiveness to cartels that had substantial effects in the United States. After an initial flirtation with cartels as a way of facilitating wartime production, President Franklin D. Roosevelt became much more aggressive about the antitrust laws and appointed judges who were likely to be sympathetic, such as Frankfurter and Douglas. This momentum toward domestic antitrust expansionism continued after the war and occupation ended. Wells details significant efforts against the oil and steel industry through the postwar period and into the Eisenhower administration. Ultimately, however, United States policy was to permit the world cartelization of the oil markets, largely because of the belief that oil was too important to submit to the vagaries of the free market. |
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The main contribution of Wells's book is his insight into the policy discussions that led to globalization of competition policy during and following the war. He spends a great deal of time detailing various prosecutions of international cartels and also in describing how several foreign countries altered their own antitrust policy under United States pressure. The result was what might be called the first "harmonization" of world competition policy. Wells concludes that the American move for expanded world antitrust succeeded in liberal environments or in markets such as Germany that became liberalized after the war. It was much less successful in societies such as Japan that experienced a great deal of economic regimentation and tended to keep its markets closed. |
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The strength of Wells's book is its focus on politics and public decision. It is weaker on the underlying theory, both the economic concerns that led the United States to move for a world competition policy and the basic theory of collusive behavior on which it was based. For example, he presents the Aluminum Company of America decision ("Alcoa") in 1945 as if it condemned monopoly without fault ("regardless of how it developed, the very existence of Alcoa's monopoly violated the antitrust laws") (63). This statement is false. Neither Judge Hand nor any other American court has condemned monopoly without fault, although today we regard some of the theories under which the aluminum monopoly was condemned as farfetched and insufficiently attentive to issues of innovation and efficiency. The book also talks at some length about United States challenges to patent agreements, while saying almost nothing about the theory for determining which kinds of patent agreements were deemed to be anticompetitive and worthy of challenge. He does note that during the immediate postwar period hostility toward patents was far greater than today, with many administration leaders tending to believe that patents inhibited rather than encouraged research. This formed the basis of an antitrust policy that condemned some patent licenses that would be considered procompetitive today. However, Wells does not explore these distinctions. |
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Wells also overlooks a significant doctrinal development that was essential to the creation of the antitrust world whose emergence he describes. Prior to 1945 the jurisdictional reach of the United States antitrust laws was governed mainly by Justice Holmes's conclusion in the American Banana case (1909) that the legality of an act must be determined entirely by the law of the place where the act occurred. This doctrine, which was a strongly held historical principle of legislative jurisdiction, effectively made a truly international antitrust policy impossible. In his 1945 Alcoa decision, however, Judge Hand developed the "effects" test, which permitted the United States to assert its antitrust power to conduct such as price fixing that occurred abroad, provided that the conduct had a measurable effect on the United States. After 1945 antitrust enforcers were able much more effectively to reach cartels that were organized entirely abroad, but whose products were imported into the United States. |
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In spite of its limited horizon, this book does what it does very well, which is trace the details of United States antitrust prosecutorial policy during the immediate postwar years and the creation of American hegemony of world antitrust policy respecting cartels, international patent licensing, and similar restraints on trade. |
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| Herbert Hovenkamp
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| University of Iowa |
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