University of Windsor University of Windsor
Scholarship at UWindsor
Scholarship at UWindsor
Electronic Theses and Dissertations Theses, Dissertations, and Major Papers
1-1-1964
British experience under restrictive practices legislation with
British experience under restrictive practices legislation with
special reference to Canada.
special reference to Canada.
Carl MacKenzie
University of Windsor
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Recommended Citation Recommended Citation
MacKenzie, Carl, "British experience under restrictive practices legislation with special reference to Canada." (1964). Electronic Theses and Dissertations. 6360.
https://scholar.uwindsor.ca/etd/6360
BRITISH EXPERIENCE UNDER RESTRICTIVE PRACTICES LEGISLATION WITH SPECIAL
REFERENCE TO CANADA
SUBMITTED TC THE DEPARTMENT OF ECONOMICS and
POLITICAL SCIENCE o f th e
UNIVERSITY OF WINDSOR
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OP ARTS
BY
CARL MacKENZIE, B.A,
FACULTY OF GRADUATE STUDIES
UMI Number: EC52541
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ABSTRACT
A m o d ified v e rs io n o f th e p e r se r u le has been employed by Canada
f o r s e v e ra l d ecad es t o e n fo rc e r e s t r i c t i v e p r a c t i c e s l e g i s l a t i o n . One
fre q u e n t c r i t i c i s m of t h i s method o f enforcem ent i s i t s la c k o f f l e x
i b i l i t y . R e lian c e on judges and law y ers w ith l i t t l e o r no fo rm al t r a i n
in g i n economics t o d ecid e m a tte rs which a r e e s s e n t i a l l y economic i n
n a tu re h as caused t o evolve an enforcem ent procedure I n many r e s p e c ts
e x c e s siv e ly l e g a l i s t i c . I n good p a r t , t h i s has r e s u lte d from t h e
F e d e ra l Government1s n e ce ssa ry r e lia n c e on i t s powers t o e n a c t c rim in a l
l e g i s l a t i o n ( ' p ro p e rty and c i v i l r i g h t s ' b e in g e x c lu s iv e ly p r o v in c ia l
under th e B.N.A. A ct) i n o rd e r t o c o n tr o l combines and r e s t r i c t i v e p ra c
t i c e s , and th e i n e v ita b le d a s h between sta n d a rd s o f p ro o f, e t c . norm ally
expected i n c rim in a l pro ceed in g s and th o se a p p ro p ria te t o economic i s s u e s .
An a tte m p t has been made i n th e U nited Kingdom t o a v o id t h i s to e
l e g a l i s t i c approach t o r e s t r i c t i v e p r a c tic e s by th e e s ta b lis h m e n t o f a
s p e c ia l c o u rt t o pronounce upon r e s t r i c t i v e agreem ents. P ro v is io n has
been made f o r appointm ent t o th e c o u rt o f l a y members, q u a l i f i e d by
v ir tu e o f t h e i r ex p erien ee i n in d u s tr y , commerce o r p u b lic a f f a i r s , t o
s i t w ith l e g a l l y q u a l i f i e d ju d g es i n th e a d ju d ic a tio n o f r e s t r i c t i v e
agreem ents. In a r r i v i n g a t i t s d e c is io n th e c o u rt must c o n s id e r a l l
r e le v a n t economic f a c t o r s . Such an e c o n o m ic a lly -o rie n te d approach m ight
be e x p ected , on a p r i o r i g rounds, t o have economic r e s u l t s s u p e rio r t o
th o se em erging from c u rre n t Canadian p r a c t i c e , under which ( d e s p ite app
a re n t d efe re n c e t o 'u n d u e n ess' and p u b lic i n t e r e s t in th e l e g i s l a t i o n )
i n t e r p r e t a t i o n h as become s tr a i n e d , l e g a l i s t i c and even somewhat i n
c o n s is te n t, w ith v i r t u a l l y no re fe re n c e t o economic ca u se s o r e f f e c t s .
A n aly sis o f c a s e s r e l a t i n g t o th e p u b lic i n t e r e s t which have
appeared b e fo re t h i s c o u rt t o th e p re s e n t tim e f a i l s t o uphold such
e x p e c ta tio n s and i t i s concluded t h a t on th e b a s is o f B r i t i s h e x p e rie n c e ,
t h e r e i s i n s u f f i c i e n t p ro o f t o e s t a b l i s h th e a p r i o r i b e l i e f t h a t th e
economic r e s u l t s o f t h i s e c o n o m ic a lly -o rie n te d approach a r e s u p e rio r t o
th o se r e s u l t i n g from p e r se r u le s .
PREFACE
The purpose o f t h i s study i s t o examine t h e r e c e n t developm ents
i n r e s t r i c t i v e p r a c tic e s l e g i s l a t i o n i n th e U nited Kingdom, alm o st ex
c lu s iv e ly r e l a t e d t o p r ic e agreem ents, t o determ ine w hether t h e newer
B r i t i s h procedure c o n ta in s w orthw hile 'l e s s o n s ' a p p lic a b le t o th e Can
ad ian method o f enforcem ent. The U nited Kingdom l e g i s l a t i o n e s ta b li s h e s
an ec o n o m ic a lly -o rie n te d approach t o th e s u b je c t o f r e s t r i c t i v e p r a c t i c e s
enforcem ent. T h is d i f f e r s c o n sid e ra b ly from th e lo n g e r - e s ta b lis h e d
Canadian method o f enforcem ent w herein eoonomie c o n s id e ra tio n s p la y a t
most a m inor p a r t a s evidence which w i l l be c o n sid e red by t h e c o u r t.
In making acknowledgements, my forem ost g r a t it u d s i s t o t h e members
o f my com m ittee; P ro fe s s o r W. G. P h i l l i p s , P h .D ., Head o f Department o f
Economics and P o l i t i c a l S cien ce and Chairman o f my com m ittee, P ro fe s s o r
A. E. Kovacs o f th e Department o f Economics and P o l i t i c a l S cien ce and
P ro fe s s o r J . M. Brow nlie o f th e School o f B usiness A d m in istra tio n , 1 am
deeply in d e b te d t o th e e n t i r e Department o f Economies and P o l i t i c a l S cien ce
f o r t h e i r many h e lp f u l s u g g e stio n s and ccem ents b u t e s p e c ia lly t o Dr. W.
G. P h i l l i p s who aro u sed my I n i t i a l i n t e r e s t i n th e s u b je c t and succeeded
i n m a in ta in in g i t even beyond com pletion o f t h e stu d y .
I a l s o wish t o ex ten d ray th a n k s t o th e s t a f f o f t h e U n iv e rs ity o f
Windsor L ib ra ry f o r th e a s s is ta n c e given me, n o ta b ly t o Mr. A lb e rt V.
M ate, M.A., A .M .L.S., R eference L ib r a r ia n , and Mrs. E lis a b e th McGaffey,
a l s o o f th e re fe re n c e d ep artm en t, i n l o c a t i n g many o f t h e so u rces o f i n
form ation used i n t h i s s tu d y . Miss Mary D alton was a l s o b o th c h e e rfu l
and h e lp f u l, p ro v id in g v a lu a b le a s s is ta n c e on innum erable o c c a sio n s.
I would be f o re v e r I n e r r o r I f I d id n o t e x p re ss g r a t it u d e t o my
w ife f o r h e r c o n tin u a l encouragement and fo rb e a ra n c e i n th e fa c e o f w hat(
a t th e tim e , appeared t o be m ajor d i f f i c u l t i e s . F i n a l l y , 1 w ish t o th an k
TABLE OF CONTENTS
Abstract 11
P re fa c e It
In tr o d u c tio n 1
I L egal A ttitu d e Towards R e s tr ic tiv e P r a c tic e s 3 i n Canada
A. The M odified P e r Se Rule 4
B. C o n e titu tio n a l Problems 5
I I The U nited Kingdoms Economic Background 12
A. P o st World War I 12
B. P o st World War I I 15
I I I The M onopolies and R e s t r i c t i v e P r a c tic e s Act, 1948 17
A, D e f in itio n o f Monopoly C o n d itio n s 17 A D ig ressio n on Conscious P a r a lle lis m 18
B. Some C ritic !m s s o f th e Act 21
Double F u n ctio n o f th e Commission 21
P o l i t i c a l Expediency 22
Few R ep o rts 27
IV The R e s t r i c t i v e P r a c tic e s A ct, 1956 29
A. Main P ro v is io n s o f th e Act 29 The R e s t r i c t i v e P r a c tic e s C ourt 31 The Seven "Gateways* and th e "T a ilp ie c e * 32
B. Seme Weaknesses i n th e 1956 Act 33
In fo rm a tio n Agreements 34
R e g is tr a tio n 35
No C rim in al S a n c tio n s 36
R e sale P ric e M aintenance 36
B i l a t e r a l Agreements 38
S e rv ic e s 40
V The 1956 Act a t Work 41
A. Sane S tan d ard Agreements 42
P r ic e S t a b i l i t y 43
Q u a lity 44
S u rp lu s C ap a city 44
Investm ent and R esearch 47
6 . S u c c e s sfu l Arguments under S e o tio n
(2 1 ) (1 ) (b ) 49
Black B o lts and Nuts 50
Cement 53
Magnets 56
M etal Windows 59
Net Bodes 61
E v a lu a tio n o f th e 1956 Act 67
A. E f f e c ts o f th e Act 67
B. A M iddle Way 70
G. C onclusions 73
Appendix 78
B ib lio g rap h y 115
INTRODUCTION
The purpose o f t h i s study i s t o d e s c rib e and a n a ly s e th e B r i t i s h
method of e n fo rc in g r e s t r i c t i v e p r a c t i c e s l e g i s l a t i o n t o d eterm ine
w hether t h i s newer approach whereby r e s t r i c t i v e agreem ents a r e Judged
by t h e i r eoonomic e f f e c t s i s s u p e rio r t o Canadian enforcem ent pro
cedure whereby r e s t r i c t i v e agreem ents which in v o lv e a preponderance
o f th e in d u s tr y o r a s u b s t a n t i a l p a r t of th e m arket a r e p e r se i l l e g a l .
The Canadian pro ced u re h as avoided any r e f in e d economic a n a ly s is by th e
c o u rts and h a s been c o n te n t t o r e l y on th e t e s t t h a t c o llu s iv e b eh av io u r
has reduced c o m p e titio n t o a p o in t which i s , i n to e court* s o p in io n ,
undue. Once t h i s p o in t h as been re a d ie d th e agreem ent i s p e r se i l l e g a l
w ith no re g a rd f o r to e economic consequences which m ight fo llo w removal
o f th e r e s t r i c t i o n s .
I f th e p r o p o s itio n i s accep ted t h a t a c o m p e titiv e economy i s more
p ro d u ctiv e th a n i t s noncom petitive c o u n te r p a rt, to e need f o r l e g i s l a t i o n
p r o h ib itin g r e s t r i c t i v e p r a c t i c e s i s obvious. I t i s o n ly i n more r e c e n t
y e a rs , however, t h a t t h i s p r o p o s itio n h a s found wide a c c ep tan ce o u ts id e
o f North America and even th e n i t h as o n ly been accep ted w ith q u a l i f i c a
t i o n s . The re c e n t U nited Kingdom l e g i s l a t i o n e s ta b li s h e s a presum ption
i n fa v o u r o f co m p e titio n b u t p ro v id e s f o r ex c e p tio n s t o t h e c o m p e titiv e
p r in c ip le when i t can be dem onstrated t h a t r e s t r i c t i v e p r a c t i c e s a re
n o t c o n tra ry t o th e p u b lic i n t e r e s t . T h is e x e m p lifie s th e w id ely h e ld
b e l i e f i n England t h a t n o t a l l r e s t r i c t i o n s a re harm ful and t h a t some
even may be b e n e f i c i a l .
I n North America th e b e n e f i t s o f co m p e titio n have lo n g been e x to lle d .
2
Even th e businessm an who would pursue a r e s t r i c t i v e p o lic y i n th e f u r t h e r
ance o f h i s own i n t e r e s t s , would p r e f e r t o see o th e r businessm en sub
je c te d t o th e r ig o u r s o f co m p e titio n . C om petition i s e g a l i t a r i a n i n
n a tu re and i t i s upon such p o l i t i c a l p r in c ip le s t h a t th e N orth American
dem ocracies o f th e U nited S t a t e s and Canada were founded. The d e s ir e
f o r p o l i t i c a l e q u a l i t y and th e f e a r o f c o n c e n tra tio n o f eoonomic power
were tr a n s l a t e d i n t o an economic p o lic y where g re a t f a i t h has been
p laced upon th e l e v e l l i n g powers o f c o m p e titio n . There i s l i t t l e wonder
th e n t h a t p e r se r u le s were adopted i n North American a s a g u a ra n to r o f
a c o m p etitiv e economy.
I t i s o n ly i n North America t h a t th e p e r se approach t o r e s t r i c t i v e
p r a c tic e s i s found. C o u n trie s which have become concerned w ith th e a n t i
t r u s t problem i n r e c e n t y e a rs have adopted an e m p iric a l approach t o th e
problem. T h is r a i s e s th e q u e s tio n w hether th e p e r se approach h a s become
somewhat d a te d . Why have o th e r c o u n tr ie s n o t seen f i t t o a d o p t t h i s
method o f enforcem ent which h as th e b e n e f it o f such le n g th y ex p erien ce?
The p ro ced u re follo w ed i n answ ering th e s e and o th e r q u e s tio n s which
a r i s e w i l l be t o d e s c rib e th e economic background and th e n move on t o th e
l e g a l framework on which th e system o f enforcem ent r e s t s . An a n a ly s is
fo llo w s o f e a se s c o n te s te d b e fo re th e R e s t r i c t i v e P r a c tic e s C ourt to
determ ine w hether agreem ents were c o n tra ry t o th e p u b lic i n t e r e s t . The
f i n a l s e c tio n o f th e t h e s i s w i l l e v a lu a te th e e f f e c t s o f th e B r i t i s h
l e g i s l a t i o n on co m p etitio n w ith in th e c o u n try i n an a tte m p t t o d eterm in e
w hether th e econom ically o rie n te d approach u sed i n th e U nited Kingdom
3
CHAPTER I
LEGAL ATTITUDE TOWARDS RESTRICTIVE PRACTICES IN CANADA
R e s t r i c t i v e p r a c tic e s l e g i s l a t i o n developed alm ost sim u lta n e o u sly
Ln Canada (1889) and th e U nitad S t a t e s (1890) a s a r a a o tio n t o th e oon-
e e n tr a tio n o f economic power evidenced by th e m erger movement o f th e
p e rio d . I t h as been s ta te d t h a t l e g i s l a t i o n was enacted i n b o th c o u n tr ie s
" p ro h ib itin g com prehensively and i n p r in c ip le a l l f o r a s o f r e s t r i c t i v e
agreem ents te n d in g t o e lim in a te com petition."^" Some q u a l i f i c a t i o n i s
re q u ire d f o r t h i s sta te m e n t b u t i t does ex p ress th e manner l n v h ie h th e
" ru le o f law" o p e ra te s .
The Sherman Act i n th e U nited S t a t e s d id p r o h ib it a l l r e s t r a i n t s 2
o f tr a d e j th e Canadian l e g i s l a t i o n , however, condemned o n ly th o s e
r e s t r a i n t s which "unduly*1 lim ite d c o m p e t i t i o n .A r o u n d th e t u r n o f th e
1 W. Friedm ann, "A Com parative A n a ly s is ," i n W. Friedm ann, e d i t o r , A nti T ru s t Laws, (T o ro n to : The C arsw ell Co. L t d ., 1956),
2 S e c tio n 1 outlaw s "Every c o n tr a c t, com bination i n th e f o r a o f t r u s t o r o th e rw ise , o r c o n sp ira c y , i n r e s t r a i n t o f tr a d e o r commerce among th e s e v e r a l S t a t e s , o r w ith f o re ig n n a tio n s ” j and s e c tio n 2 makes g u i l t y o f a misdemeanour "Every person who s h a l l m o nopolise, o r
combine o r c o n sp ire w ith any o th e r p erso n o r p e rso n s , t o m onopolise any p a r t o f th e tr a d e o r c a m e rc e among th e s e v e ra l S t a t e s o r w ith f o re ig n n a tio n s ." B aphasis su p p lie d . 26 S t& t. 209 (1 8 9 0 ), a s amended, 15 U.S.C. (1 9 5 6 ).
4
c e n tu ry , th e American c o u r ts i n te r p r e te d th e q u a l i t a t i v e t e s t o f un
re a so n a b le n e ss i n t o th e Act and Friedm ann, i n a 195$ a r t i c l e , con
cluded " t h a t th e d iff e r e n c e s between Canadian and American law have a t
l e a s t t h e o r e t i c a l l y been reduced t o in s i g n i f i c a n c e ." ^
I t i s co n v en ien t a t t h i s p o in t t o c l a r i f y th e p r e s e n t Canadian l e g a l
p o s itio n on r e s t r i c t i v e p r a c tic e s a s th e o b je c t o f t h i s stu d y i s t o ju d g e,
i n th e l i g h t o f re c e n t B r i t i s h e x p e rie n c e , w hether th e Canadian approach
t o r e s t r i c t i v e p r a c tic e s enforcem ent m ight he o u td ated o r i n f e r i o r t o th e
more r e c e n t B r i t i s h approach which w i l l be d e sc rib e d below.
A. The M odified P e r Se Rule
Friedmann*s statem en t t h a t i n Canada " a l l r e s t r i c t i v e agreem ents
te n d in g t o e lim in a te co m p e titio n "^ a re p ro h ib ite d h as been c r i t i c i s e d and
he has been accused o f a tte m p tin g t o cus up th e Canadian ju ris p ru d e n c e
i n th e statem en t t h a t "any r e s t r i c t i o n o f co m p etitio n m ust be presumed
t o be p e r se an o ffen ce a g a in s t th e la w ."^ T h is i s an im p o rta n t p o in t
t o c l e a r up a s th e o p in io n i s w idespread i n Canada t h a t any and a l l r e
s t r a i n t s upon co m p etitio n a r e p e r se i l l e g a l . T h is b e l i e f i s " a s i n -7
c o r r e c t a s i t i s i n f l u e n t i a l . "
4 W.
Friedm ann, "Monopoly, R easonableness and. P u b lic I n t e r e s t " , Canadian Bar Review,m i l l (1955), 145}
see a l s o1 / C.
R eynolds, The C o n tro l o f C om petition i n Canada. (Cambridge, Mass. i Harvard U n iv e rs ity P re s s , 1946), pp. 169-7$”where Se s t a t e s "The p ro c e ss of j u d i c i a l i n t e r p r e t a t i o n h a s ...b r o u g h t th e two s t a t u t e s i n t o m u # c lo s e r agreem ent th an one would s u sp e c t from th e w ording."5 I n D. C. K ilg o u r, "Cases and C o n sen ts", Canadian Bar Review. XXXV (1 9 5 7 ), 1088.
6 I b i d .
5
Two n o ted a u t h o r i t i e s len d t h e i r w eight t o th e o p in io n t h a t a l l
r e s t r a i n t * upon co m p e titio n a r e n o t p e r se i l l e g a l i n Canada. P ro fe s s o r
Skeoch h a s s ta te d :
each and ev ery degree of i n t e r f e r e n c e w ith f r e e co m p etitio n i s n o t condemned, b u t only t h a t deg ree which r e s u l t s from e f f e c t i v e c o n tr o l of a s u b s t a n t i a l p a r t o f th e m arket concerned.®
Maxwell Cohen, a p p earin g a s a w itn e ss b e fo re th e House o f Ccraaons
Committee on Banking and Commerce, s a id :
When <me t a l k s about th e e x is te n c e i n Canada o f an a t t i t u d e by th e c o u r ts , which i s v e ry tough and sim ple and o v er s im p lif ie d , one m ust remember t h a t t h i s over s im p lif ic a tio n , on th e w hole, i s confined t o s i t u a t i o n s where th e preponder ance o f th e in d u s tr y i s in v o lv e d i n such c o -o p e ra tiv e o r c o llu s iv e b e h a v io u r.^
The c o n s tru c tio n m ost l i k e l y t o be p laced by th e c o u r ts to d a y upon
th e wording o f th e Act ap p e a rs t o be t h a t th o se r e s t r a i n t s upon com-
!p e titio n which in v o lv e "a s u b s t a n t i a l p a r t o f th e m arket" o r "preponder
ance of th e in d u s tr y 1'w i l l be judged p e r se i l l e g a l . T h is i s th e mod
i f i c a t i o n t o th e s t r i c t p e r se r u le which a p p e a rs i n th e Canadian
l e g i s l a t i o n .
B. C o n s titu tio n a l Problems
Even th e b r i e f e s t o u tlin e o f th e p re s e n t Canadian l e g a l a t t i t u d e
tow ards r e s t r i c t i v e p r a c t i c e s would be s e r io u s ly d e f i c i e n t w ith o u t seme
m ention o f th e c o n s t i t u t i o n a l problem s p e c u lia r t o Canada, which have
played an im p o rta n t r o le i n th e fram ing o f th e an ti-c o m b in es l e g i s l a t i o n .
8 L. A. Skeoch, "The Combines I n v e s tig a tio n A ct: I t s I n te n t and A p p lic a tio n " , Canadian J o u rn a l o f Economics and P o l i t i c a l S c ie n c e .
m i (1956), 30-31.
9 M. Cohen, t o House o f Commons Committee on Banking and Commerce, M inutes o f P ro ceed in g s and E vidence. Combines I n v e s tig a tio n A ct. I9 6 0 .
6
S e c tio n 91 o f th e B r i t i s h North America Act e n t r u s t s t o th e
f e d e r a l government e x c lu s iv e a u th o r ity o v er " th e r e g u la tio n o f tr a d e
and commerce" and " th e c rim in a l l a v ," S e c tio n 92 g iv e s a u t h o r it y t o
th e p ro v in c e s over " p ro p e rty and c i v i l r i g h t s i n th e P ro v in c e s .n
There i s an a p p a re n t c o n f l i c t h e r e . Almost any eoonomic r e g u la tio n s
w i l l a f f e c t both " tra d e and cortaaerce" and " p ro p e rty and c i v i l r i g h t s . "
The c l a s s i c a l d e f i n i t i o n o f th e " tr a d e and commerce" c la u s e was
la i d down i n C itiz e n s * In su ra n c e Company v s . P arso n s (1881) where i t was
s ta te d t h a t th e a u th o r ity o f th e f e d e r a l government
t o l e g i s l a t e f o r th e r e g u la tio n o f t r a d e and commerce does n o t comprehend th e power t o r e g u la te by l e g i s l a t i o n th e c o n tr a c ts o f a p a r t i c u l a r b u s in e s s o r t r a d e , such a s th e b u s in e s s o f f i r e in s u ra n c e i n a s in g le p ro v in c e.
As a r e s u l t o f th e co u rts* i n t e r p r e t a t i o n o f th e " tr a d e and comm
e rc e " c la u s e , th e f e d e r a l government h a s been fo rc e d t o r e s o r t t o th e
c rim in a l code t o e n fo rc e i t s an ti-c o m b in e s p o l i c i e s . The p r o p r ie ty o f
t h i s was a l s o q u estio n e d b u t upheld i n 1931 on th e ground t h a t th e
prim ary o b je c t o f th e Combines I n v e s tig a tio n Act was " to make th e
f o r a a tio n o f a combine a c rim in a l o ffe n c e , and t h a t th e i n v e s tig a to r y
powers o f th e R e g is tr a r a r e re a so n a b ly a n c i l l a r y t o t i l l s o b je c t.* ^ *
As r e c e n tly a s 1952, th e HaoQuarrie R eport s ta te d t
The c o n s ti t u t i o n a l case f o r monopoly l e g i s l a t i o n i s narrow er i n Canada th an i n c i t h e r th e U nited Kingdom, which i s a u n ita r y s t a t e , o r th e U nited S t a t e s , where th e commerce c la u s e h as re c e iv e d a wide i n t e r p r e t a t i o n . 12
10 See L. C. R eynolds, oj>. d t . . pp. 247-48.
11 I b i d . . p . 258.
7
Because o f r e l ia n c e on th e c rim in a l law , p u b l i c i t y and c rim in a l
p ro se c u tio n have been th e p r in c ip a l means o f enforcem ent used a g a in s t
r e s t r i c t i v e p r a c t i c e s i n Canada. C i v i l rem edies a re v e ry d i f f i c u l t
due t o th e c o n s ti t u t i o n a l problem s. T h is h as r e s u lte d i n an unhappy
s t a t e o f a f f a i r s a s c rim in a l s a n c tio n s a r e in a p p r o p ria te i n a l l c a s e s .
The s u b s t i t u t i o n o f c i v i l o r a d m in is tr a tiv e rem edies i n p la c e o f c rim in a l
p ro se c u tio n would make i t p o s s ib le t o m itig a te th e h a rsh n e ss o f th e
l a t t e r where d e s ir e a b l e . In th e Ifriited S ta te s b o th c i v i l and c rim in a l
p ro s e c u tio n s may be brought ( c o n c u rre n tly i f d e s ir e d ) by th e Department
o f J u s t i c e under th e Sherman Act and th e F e d e ra l Trade Commission may
u p p ly a d m in is tr a tiv e rem ed ies; i n B r i t a i n both c i v i l and a d m in is tr a tiv e
c o n tr o ls a re employed. In Canada th e only a l t e r n a t i v e t o th e c rim in a l
law i s a d e c is io n by th e M in is te r o f J u s t i c e n o t t o proceed any f u r t h e r
w ith a c a s e . T h is i s h a rd ly s a t i s f a c t o r y a s i t does n o t comprehend " th e
many in te rm e d ia te s it u a t i o n s w h e r e ...a c tio n i e re q u ire d b u t c rim in a l
p ro se c u tio n may a p p ear to o se v e re .
I t would n o t be d i f f i c u l t t o argue th e s u p e r i o r i ty o f l e g i s l a t i o n
c o n ta in in g a f u l l a r s e n a l o f weapons, i . e . , c r im in a l, e i v i l and adm in-
1 s t r a t i v e rem ed ies, t o t h a t c o n ta in in g a s in g le b lu n d er b u s s , c rim in a l
s a n c tio n s . The a u th o rs o f th e HacQ u arrle R eport o b v io u sly th o u g h t l i k e -
w ise.
We a r e n o t u n a w a r e ...th a t th e r e a r e s e c to r s o f th e economy i n which e f f e c t i v e co m p etitio n i s n o t m a in ta in e d , le a v in g problem s which i n a u n ita r y s t a t e m ight be met by c i v i l r e s t r a i n t o r
o th e r rem ed ies. I t may be t h a t a t some f u tu r e tim e i t s i g h t be p o s s ib le t o extend th e scope o f th e l e g i s l a t i o n .* *
13 W. Friedmann i n A n ti-T ru s t la w s, p . 544*
The answer t o w hether o r n o t c i v i l c o n tr o ls could bo m o o te d
19 c o n tin g e n t upon th e a t t i t u d e o f th e Supreme Court o f Canada t o th e
" tra d e and commerce" c la u s e o f th e B r i t i s h N orth America A ct. Gosse and
Friedmann h are e x p ressed optimism t h a t t h i s c la u s e may r e c e iv e a more
fa v o u ra b le i n t e r p r e t a t i o n th a n i n th e p a s t i f i t becomes s u b je c te d a g a in
t o c o u rt i n t e r p r e t a t i o n . U n til such tim e we must c o n s id e r a n ti-c o m b in e
l e g i s l a t i o n t o be bound w ith in th e c o n fin e s o f th e c rim in a l code.
Due t o th e c rim in a l n a tu r e o f p ro c e e d in g s, th e sta n d a rd o f p ro o f
norm ally ao cep ted by th e c o u rt d i f f e r s from t h a t re q u ire d i n c i v i l p ro
s e c u tio n s . The sta n d a rd o f p ro o f re q u ire d i n a c rim in a l case i s "beyond
a re a so n a b le doubt" w h ile t h e l e s s e r sta n d a rd which must be met i n a
c i v i l case i s " th e b alan ce o f p r o b a b i l i t i e s . " The l a t t e r i s o b v io u sly
b e t t e r adapted t o e a s e s where th e l i k e l y eeonoralc consequences, which
a re them selves som ething l e s s th a n p r e c is e and a b s o lu te , must be e v a lu a t
ed . A " re a so n a b le doubt" could be invoked i n th e m a jo rity o f s i t u a t i o n s
where o fte n c o n f l ic ti n g economic f a c t o r s must be b a la n c e d , e s p e c i a l l y
when judged by p a r t i e s w ith no fo rm al t r a i n i n g i n econom ics. Canadian
c o u r ts have a tte m p te d , w ith some su c c e ss , t o av o id problem s o f t h i s
n a tu r e . Maxwell Cohen s t a t e s :
The c o u r ts came t o th e co n clu sio n e a r ly t h a t th e purpose o f th e l e g i s l a t i o n was n o t t o impose upon them th e r e f in e d economic ta s k o f th e measurement o f many c a lc u la tio n s and f a c t o r s o f what was a g a in s t th e p u b lic i n t e r e s t , b u t t o con f in e t o them th e main ta s k o f say in g : has c o m p e titio n , a s we u n d erstan d t h a t co n c ep tio n , been red u ced , and reduced t o such an e x te n t t h a t i t becomes worrisome t o u s , a s a c o u r t,
lo o k in g a t i t * ..T h e h is to r y o f Canadian a n t i - t r u s t i n t e r p r e t a t io n . . .h a s been a h i s t o r y o f a v o id in g re fin e m e n ts o f economic a n a ly s is by th e c o u r ts , and th e y have r e s te d upon th e sim ple f a c t t h a t c o llu s iv e b eh av io u r was s u f f i c i e n t . 15
9
.M le th e Canadian c o u rt a have bean a tte m p tin g t o s k i r t th o
economic i s s u e s in v o lv e d I n r e s t r i c t i r s p r a c tic e s e a s e s , th e B r i t i s h
have s e t up a s p e c ia l c o u rt o f law , th e R e s t r i c t i v e P r a c t ic e s C o u rt,
and s p e c i f i c a l l y r e q u ire t h i s body t o examine each r e s t r i c t i v e ag re e
ment i n th e l i g h t o f th e l i k e l y economic c cm sequences r e s u l t i n g from i t
so t h a t i t can be pronounced e i t h e r w ith in o r w ith o u t th e p u b lic i n t e r e s t .
C iv il rem edies a r e employed by t h i s c o u rt i n t h e enforcem ent o f i t s
a c t i v i t i e s . The low er s ta n d a rd o f p ro o f re q u ire d when c i v i l reme d ie s
a re used no doubt f a c i l i t a t e s t h e re a c h in g o f d e c is io n s by th e c o u r t.
T h is i s a p t l y p u t by R, L. S ie h , R e g is tr a r o f R e s t r i c t i v e T rad in g Agree
m ents i n th e U nited Kingdom i
I t i s , o f c o u rse , t r u e t h a t th e kind o f m a tte rs which have t o be co n sid e red do n o t le n d th em selv es to p r e c is e and a b s o lu te
d e m o n s tra tio n .. • But th e s e a r e c i v i l and n e t c rim in a l proceed in g s , and hence, t o d isc h a rg e th e onus o f p ro o f, a f a c t does n o t have t o be e s ta b lis h e d beyond re a so n a b le d o u b t; i t i s enough t h a t an th e b alan ce o f p r o b a b i l i t i e s i t i s more l i k e l y t o be so th a n n o t . «
An example o f th e h ig h e r sta n d a rd o f p ro o f re q u ire d i n a c rim in a l
case can be found i n th e Canadian B rew eries d e c is io n where McRuer, C. J .
s ta te d a
I f I am c o r r e c t i n a p p ly in g , by an alo g y , th e language o f C a rt w rig h t, J . l n th e Howard Sm ith case t o th e Combines A c t, i t must be i n t e r p r e t e d a s d i f f e r i n g from th e C lay to n A ct i n t h i s im p o rta n t r e s p e c tt under th e Combines Act i t m ust be dem onstrat ed beyond a re a so n a b le doubt t h a t th e m erging o f c o m p e titiv e c o rp o ra tio n s i s l i k e l y t o p u t i t w ith in th e power o f t h e m erger t o so e x tin g u is h co m p etitio n a s t o a f f e c t p r ic e s by m o n o p o listic c o n tr o l. As lo n g a s th e ev id en ce shows t h a t t h e r e i s s tro n g v i r i l e co m p etitio n i n th e m ark et, n o tw ith sta n d in g t h s m erger, I do n o t th in k th e m erging o f competing companies comes w ith in
16 R. L. S ie h , " P ro g re ss Under th e R e s t r i c t i v e Trade P r a c t ic e s A ct, 1956", Y orkshire B u lle tin o f Economic and S o c ia l R esearch .
10
th e sta n d a rd o f p ro o f re q u ire d i n a c rim in a l e a s e ..
I n Canada, th e n a tu re o f p ro o f re q u ire d i n c rim in a l o a s e s , th e
predom inant r o l e s played by law y ers and Judges and t h e i r avoidance o f
economic c o n s id e ra tio n s , th e l e g a l i s t i c req u irem en ts f o r s u c c e s s fu l
p ro s e c u tio n , th e s e f a c t o r s have in flu e n c e d th e work o f o th e r a u t h o r i t i e s
r e s p o n s ib le f o r p re p a rin g c a se s f o r p ro se c u tio n and have r e s u lte d i n a
l e g a l i s t i c ap proach. R osenbluth and Thorburn claim t h a t combines i n
Canada a r e viewed a s c o n s ti t u t i n g a p o lic e problem and a l e g a l problem
r a t h e r th a n economic problem and have accused th e enforcem ent a u th o r
i t i e s of employing a "cops and ro b b e rs” approach t o a n ti-c c m b in e s
I d enforcem ent p o lic y .
I t would a p p ear d e s ir e a b le t o b rin g th e economic c o n s id e ra tio n s
involved i n r e s t r i c t i v e p r a c tic e s o ases i n t o s h a rp e r fo c u s th a n has been
th e p r a c tic e i n t h e p a s t. Under th e p e r se d o c tr in e , a s i t e x i s t s i n
Canada, any agreem ent which " in e f f e c t r e s t r i c t s tr a d e and in v o lv e s a
predom inant s e c tio n o f th e i n d u s t r i a l s i l l e g a l w ith o u t any in q u ir y a s t o
"w hether th e s e agreem ents have been good f o r p r i c e s , o r have been bad f o r
20
p r ic e s ." Bladen and S ty k o it have argued t h a t a l l p r ic e agr eem ents do
17 McCruer, C. J . ' s statem en t i n Regina v . Canadian B rew eries. L t d . . 126 CCC 133, P. 161, quoted i n R e s t r i c t i v e Trade P r a c tic e s dcmm-i a s dcmm-i o n , R ep o rt Concerndcmm-ing th e M anufacture. D dcmm-is tr dcmm-ib u tdcmm-io n and S a le o f F a p e rb o a ra S h ip p in s C o n tain ers and R e la te d P ro d u c ts . (O ttaw a: Queens
---18 C. R osenbluth and H. G. Thorburn, "Canadian Anti-Combines
A d m in istra tio n , 1952-1960," i n M. H. W atkins and D. F . F o r s t e r , e d i t o r s , Economics; Canada. (T o ro n to : McGraw-Hill, 1 9 63), p . 9 3 , r e p r in te d from The Canadian jo u r n a l o f Economic and P o l i t i c a l S c ie n c e . XXVII. (Nov.
---19 M. Cohen, ©£. c l t . . p . 556.
I I
n o t c r e a te an "undue" degree o f p r ic e r i g i d i t y and t h a t acme r i g i d i t y
may even be n e c e ssa ry i n th e p u b lic i n t e r e s t . ^ - I f such be th e c a s e ,
we may e n q u ire w hether l e g i s l a t i o n o f th e ty p e now found i n th e U nited
Kingdom, whereby i t i s p o s s ib le t o r e t a i n i n fo rc e r e s t r i c t i v e ag re e
m ents which a r e c o n sid ered t o be i n th e p u b lic I n t e r e s t , i s l i k e l y t o
r e s u l t i n b e t t e r i n d u s t r i a l perform ance and more b e n e f its f o r th e people
th a n our m odified p e r se r u l e s by which th e good ( i f t h e r e be any good
r e s t r i c t i v e agreem ents) a r e a u to m a tic a lly swept o u t w ith th e bad .
S in ce th e U nited Kingdom l e g i s l a t i o n h as been i n e f f e c t f o r such
a s h o rt p e rio d , i t i s a p p ro p ria te t o d e s c rib e e v e n ts p reced in g t h e 194®
and 1956 A cts t o ensure t h a t th e need f o r such l e g i s l a t i o n i n B r i t a i n i s
a p p re c ia te d .
21 V. W. Bladen and S . S ty k o lt l n A n t i - t r u s t Lews, p. 5&J see a l s o J . A. Schum peter, C a p ita lis m . S o c ia lism and Democracy ( t h i r d e d i t i o n , New York and B vanstoni H arper and How, l$ fi2 ),< J h a p ie r 7111,
CHAPTER I I
THE UNITED KINGDOM! ECONOMIC BACKGROUND
At th e b eg in n in g o f th e T w en tieth C entury th e U nited Kingdom was
r'an e c o n o m y l a r g e l y re g u la te d by th e fu n c tio n in g o f th e m arket i n th e
c l a s s i c a l economic t r a d i t i o n . P r o f e s s o r G. C. A llen s t a t e s t h a t on
th e e re o f World War I B r i t i s h in d u s tr y , on th e w hole, could claim t o be
more co m p etitiv e th a n German o r American in d u s tr y and t h a t co m p e titio n 2 v a s co n sid e red t o be th e g e n e ra l r u l e governing i n d u s t r i a l e n t e r p r i s e .
Im portant f a c t o r s which in flu e n c e d t h i s a t t i t u d e were th e l a r g e i n t e r e s t s
which th e m ajor B r i t i s h i n d u s t r i e s had i n th e ex p o rt m ark ets o f th e w orld
and th e adherence o f G reat B r ita in t o a f r e e tr a d e p o lic y .
A. P ost World War I
O p p o sitio n t o m onopolies in c re a s e d a f t e r World War I due t o an i n
c re a s e i n th e c o s t o f l i v i n g which was a t t r i b u t e d i n p a r t t o m o n o p o listic
p r a c tic e s which had been an outgrow th o f th e war p e rio d . I n 1918 th e
B r i t i s h Government ap p o in ted th e Committee on T ru s t t o c o n s id e r a c tio n s
t o safeguard th e p u b lic i n t e r e s t " in view o f t h e p ro b ab le e x te n s io n o f
tra d e o r g a n is a tio n s and com binations a f t e r th e war."-* The committee
r e p o r t recommended s u rv e illa n c e and th e c o lle c tio n o f in f o n s a tio n on
1 G. C. A lle n , "Monopoly and C om petition i n th e U.K." i n E . H. Chamberin, e d . , Monopoly and C om petition and T h e ir R e g u la tio n . I n t e r n a tio n a l Economic A sso c ia tio n , (London* MacMillan, 1954), p . SS.
2 A lle n , o£. c i t . . p . 100;
3 R. G osse, "The Enforcem ent o f Com petition i n th e U .K .", Canadian Bar Review. XXXVIII, ( I9 6 0 ) , 165.
13
com bination a c t i v i t y i n in d u s tr y .
No l e g i s l a t i v e a c t i v i t y vac ta k e n on t h i s r e p o r t a# o p p o s itio n
t o m onopolies began t o a b a te w ith th e o n se t o f th e p o st-w a r d e p re s s io n .
The ch ro n ic s t a t e o f d e p re ssio n experienced by many B r i t i s h I n d u s t r ie s
d u rin g th e 1920* s provided a s tro n g inducem ent f o r buslnesm een t o en
g a g e in r e s t r i c t i v e p r a c t i c e s .^ The m ajor problem f a c in g d ep ressed
i n d u s t r i e s was th e p resen ce o f ex c e ss c a p a c ity which gave no i n d i c a t i o n
o f b ein g removed by th e c o m p e titiv e p ro c e ss .
R a tio n a lis a tio n o f in d u s tr y began t o f in d fav o u r a s an a l t e r n a t i v e
to th e c o m p e titiv e p ro ce ss f o r th e removal o f ex cess c a p a c ity and schemes
were in tro d u c e d t o implement i t i n s e v e ra l o f th e le a d in g i n d u s t r i e s
( e .g . s h ip - b u ild in g , co al-m in in g , wool-combing, c o tto n and t i n - p l a t e
p ro d u c tio n ).^ The Bank o f England was a l s o in s tru m e n ta l i n th e a tte m p t
t o r a t i o n a l i s e in d u s tr y ; th e L a n cash ire C otton C o rp o ratio n l i m i t e d was
formed w ith th e f i n a n c i a l backing o f th e Bank i n 1929.^
4 " In p e rio d s o f p r o s p e r ity co m p e titio n seemed t o p o saese th e v i r t u e s a t t r i b u t e d t o i t . When, however, c o n d itio n s changed f o r th e w o rse.. . c o -o p e ra tio n r a t h e r th a n c o m p e titio n , was th e l i f e o f tr a d e and even th e law o f s e lf - p r e s e r v a t io n .* i n H. H eaton, Economic H is to ry o f Europe, ( r e v is e d e d i t i o n ; New York: H arper and B ro s ., 1^44},
pp. 6Q3-& .
5 "The term * r a t io n a lis a tio n * was in v e n te d l a t e i n th e 1920* s t o e x p re ss th e id e a o f sem i-com pulsory r e o r g a n is a tio n .” S . A. C. Robinson, The S tru c tu r e o f C om petitive I n d u s tr y , ( r e v is e d e d i t i o n ; U n iv e rs ity o f Chio i y j f r £ i t . , P . 154. " 4 la r g e
p ro p o rtio n o f t h e s o -c a lle d 'r a t i o n a l i s a t i o n schem es' o f th e 1930*s re p re s e n te d a m isguided a tte m p t t o e x o rc is e d e p re ssio n by a d ju s tin g c a p a c ity t o th e low l e v e l o f req u irem en ts o f th e bottom o f th e de p r e s s io n . Compulsory and s ta te - s u b s id is e d d e s tr u c tio n o f v a lu a b le equipment i n p o t e n t i a l l y growing i n d u s t r i e s i s th e l e a s t a p p ro p ria te measure y e t d isc o v e re d f o r c u rin g a d e p re s s io n " ; a l s o G. C. A lle n , SB* JS&*f ?• ®9.
u
By 1929 th e B alfo u r Committee ra p o rte d t h a t th a r a was no u rg e n t
need f o r l e g i s l a t i o n d e a lin g w ith th a ab u ses o f monopoly an d , f u r t h e r ,
t h a t England was f o r tu n a te i n n o t b ein g hampered by such a n t i - t r u s t
7
l e g i s l a t i o n a s p re v a ile d i n th e U nited S t a t e s .
During th e 1930* s i n t e r n a t i o n a l tra d e d e c lin e d a s th e m ajo r i n
d u s t r i a l c o u n tr ie s attem p ted t o e x p o rt t h e i r d e p re ss io n hy red u ain g
im p o rts and im posing o th e r re stri.e td .o n s. In th e U nited S t a t e s p ro
t e c t i o n i s t f o r o e s succeeded i n having th e Smoot-Hawley Aet (1930) p asse d .
T h is a e t r a is e d t a r i f f s t o an a l l - t i m e h ig h and le d t o r e t a l i a t o r y a c tio n
by many o th e r c o u n tr ie s . S te e p t a r i f f b a r r i e r s were r a is e d by one c o u n try
a f t e r a n o th e r, q u o tas were s e t , e x p o rts s u b sid ise d and d is c r im in a tio n
p ra cticed . M e r c a n tilist p o lic ie s were so c lo s e ly em ulated a s t o evoke
&
th e d a s c r ip tio n "neo-mer c a n t i l i s t ."
In England r a t i o n a l i s a t i o n and c a r t e l i s a t i o n co n tin u ed t o e n jo y
p u b lic and gove r nme n t a l fa v o u r. P ro fe s s o r A llen s t a t e s , "From 1932 on
wards government p o lic y became w h o le h e a rted ly c c a n itte d t o h a s te n in g a
th e r e t r e a t from c o m p etitio n. " 7 The B r i t i s h I ro n and S te e l F e d e ra tio n
was formed w ith government u rg in g , f o r th e purpose o f e n te r in g i n t o
agreem ents w ith th e European S t e e l C a r te l t o f i x im p o rt q u o tas and de
term ine p r ic e s . The government a ls o I n i t i a t e d p r o t e c t i o n i s t m easures
w ith r e s p e c t t o th e c o a l, t e x t i l e and s h ip b u i l d i n g I n d u s t r ie s f o r th e
7 F in a l R eport o f th e Committee on I n d u s try and T rad e. (London: ft.M.s.0. , ”1 9 5 9 ), p . 1957
8 D. A. S n id e r, I n tr o d u c tio n t o I n te r n a t i o n a l Economics. (Homewood, I l l i n o i s : R ichard D. Irw in , r e v is e d e d i t i o n , 195$)» p . W 2.
9 G. C. A lle n , og>. c l t . . p . 90; f o r a v ery good contem porary account o f th e p e rio d , see A. F . Luoas, "The B r i t i s h Movement f o r I n d u s t r i a l R ec o n stru c tio n and C o n tro l o f C om petitive A c tiv ity " , Q u a rte rly J o u rn a l o f Economics. 1935, r e p r in te d i n Readings l n th e
15
purpose o f l i m i t i n g o u tp u t, e lim in a tin g s u rp lu s e a p a c ity and f i x i n g
10 l e g a l minimum p r ic e s .
R a tio n a lis a tio n schemes were favoured a l s o by th e n o ta b le i n
c re a se i n th e s tr e n g th o f tra d e a s s o c ia tio n s which o ccu rred d u rin g World
War 1 1 . ^ Firm s which had p re v io u sly been independent and co m p e titiv e
became lin k e d through tr a d e a s s o c ia tio n s , th e r e s u l t b e in g a f u r t h e r
c o n s o lid a tio n o f i n t e r e s t s and in c re a s e d f a c i l i t y f o r th e e x te n s io n o f
com binations*
B. P o st World War I I
Towards th e end o f th e war a change was noted l n government and
p u b lic o p in io n a s u n fav o u rab le com parisons were b e in g drawn betw een
B r i t i s h and American i n d u s t r i a l e f f i c i e n c y . ^ The r e s t r i c t i o n ! a t
p o l i c i e s , which had been adhered to by B r i t i s h in d u s tr y , were c r i t i c i s e d
a s a c o n tr ib u tin g f a c t o r t o th e I n f e r i o r i t y and s ta g n a tio n o f th e i n t e r
-t . 13 war period*
The B r i t i s h Labour government su b seq u en tly took s te p s t o e f f e c t a
n a t i o n a l i s a t i o n program. From 1946 t o 1946, p u b lic c o n tr o l was extended
10 The Bow Group, M onopolies and M ergers. (C o n serv ativ e P o l i t i c a l C en tre , No. 270, S u ssex : P* 59.
11 G. C. A lle n , og. c i t . . p . 107j see a ls o Bow Group, op. d t . p . 35* The n e c e s s ity t o c o -o rd in a te and expand p ro d u c tio n d u rin g both World Wars r e s u lte d i n government encouragement o f th e fo rm atio n o f tr a d e a s s o c ia tio n s . A s im ila r d ev elo p aen t occu rred I n Canada.
12 G. C. A lle n , og. c i t . . p . 107} G. C. A lle n , "Economic P ro g re s s , R e tro sp e c t and P ro sp e c t” , Economic J o u rn a l. IX , (S e p t. 1950), 466, where he c i t e s h ig h e r c a p i t a l i z a t i o n a s one re a so n f o r h ig h e r American p ro d u ct i v ity } he c i t e s th e m ain re aso n f o r low er B r i t i s h p r o d u c tiv ity a s p o o re r te c h n iq u e s and o rg a n iz a tio n } see a l s o E . R o th b a rth , "Causes o f th e
S u p e rio r E f f ic ie n c y o f U.S.A. In d u s try a s ft caps red w ith B r i t i s h I n d u s tr y ," Economic J o u rn a l. LVI, (S e p t. 1946).
16
t o many i n d u s t r i e s I n v h io h pow erful m onopolies had f e m s r i y e x i s t e d .
Sen* o th e r i n d u s t r i e s which had lo n g been engaged i n r e s t r i c t i v e p r a c t i c e s
were n a tio n a lis e d , n o ta b ly fin a n c e (The Bank o f E n g lan d ), oommunioations,
p u b lic u t i l i t i e s , co a l and i r o n and s t e e l . ^
The ac cep tan ce by th e B r i t i s h government i n 1944 o f th e p r in c ip l e s
o f a full-em ploym ent p o lio y ^ w a s in co m p a tib le w ith m o n o p o listic p r a c tic e s
which r e s t r i c t e d o u tp u t and employment, c au sin g such p r a c t i c e s t o f a l l
f u r t h e r i n t o d is r e p u te . The s tr e n g th o f m arket demand a t t h i s tim e a l s o
c o n trib u te d t o re n d e rin g i n e f f e c t i v e th e tim e-w orn p r o t e c t i o n i s t a rg u a s n ts
i n fav o u r o f r e s t r i c t i v e p r a c t i c e s .
The change i n p u b lic o p in io n which o ccu rred was a change i n deg ree
r a t h e r th a n a com plete tu rn in g away from th e t a c i t a c cep tan ce o f th e
m o n o p o listic and r e s t r i c t i v e p r a c tic e s which had lo n g p r e v a ile d i n Eng
lan d to th e d e s ir e f o r c o m p etitio n i n th e N orth American s e n s e . S tev en s
e x p re sse s t h i s change i n th e s e wordst
The p u b lic i s undoubtedly more s e n s itiv e t o r e s t r i c t i v e p r a c t i c e s th a n i t u sed t o b e ...B u t a s a whole i t i s s t i l l n o t v e ry h e a v ily committed t o c u ttin g bade r e s t r i c t i v e p r a c t i c e s .
14 C. W ilcox, P u b lic P o l i c i e s Toward B u sin ess. (Homewood, I l l i n o i s : 1 9 5 5 ), C hapter 27 " P o lic y i n O ther C o u n trie s " .
15 W. H. B everidge, F u l l Employment i n a F ree S o c ie ty . (New York:
w . w . Horton and C o ., 1 945), p . 266.
CHAPTER I I I
TUB XG8C&0L&Z A81- PSSTSXCTXWt PRACTICED ACT, 1 9 4 8
The White Paper on S sp lo y aen t P o lic y (1 9 4 4 ), observed!
There has i n r e s e n t p e a r s been a growing tendency tow ards com b in e s and tow ards agreem ents, b o th n a tio n a l and i n t e r n a t i o n a l , by which m anufacturer* have s o e fh t t o e o n tr o l p r i s e s and o u t p u t, to d iv id e m arkets snd f i x c o n d itio n s o f
sale.*-T h is r e p o r t p 'v e d th e way f o r th e 1948 Act which re c e iv e d th e un
animous su p p o rt o f s l l p o l i t i c a l p a r tie s *
The Act e s ta b lis h e d an independent t r i b u n a l , th e M onopolies and
R e s tr ic tiv e P r a c t is e s Commission,^ whieh was empower ed t o e n q u ire i n t o
a o n o p o l y c o n d itio n s upon r e fe r e n c e t r m th e Board o f Trade*^ P ro v is io n s
were made f o r two c a te g o r ie s o f i n v e s t i g a t i o n ; (1 ) in v e s t i g a t i o n s i n t o
monopoly c o n d itio n s and p r a c tic e s i n p a r t i c u l a r in d u s tr ie s } ^ ( 2 ) i n
v e s tig a tio n s i n t o p a r t i c u l a r p r a c t i c e s i n in d u s tr y and tr a d e g e n e r a lly .^
A. D e f in itio n o f Monopoly O c n d itien s
Monopoly c o n d itio n s were g iv e n a wide d e f i n i t i o n i n th e 1948 A ct.
B roadly, such c o n d itio n s were co n sid ered t o p r e v a il when a t l e a s t o n
e-1 C. G runfeld and 6 . 3* Taney, "U nited Kingdom" i n A n ti-T ra s t Laws, p . 361.
2 R e fe rre d t o h e r e a f t e r a s th e M onopolies Commission o r th e Commission*
3 Monopoly c o n d itio n s a r e s e t out i n s e c tio n s 3 , 4 and 5 o f th e 1948 Act. The Report on C o lle c tiv e D isc rim in a tio n . (London, H.M.S.O*, 1955), Cmnd. $ $ & , p. 5 7 d e s c rib e s monopoly c o n d itio n s a s g e n e r a lly e x i s t i n g where "s s in g le concern o r group o f concerns which a r e p a r t i e s t o r e s t r i c t i v e agreem ents s u p p lie s o r a p p lie s a p ro o e ss t o a t l e a s t o n e -th ird o f th e m arket f o r t h e i r goods."
4 S (2 )
5 S (1 5 )
18
t h i r d o f a l l th e goods o f th e d e s c r ip tio n a r e su p p lie d o r p ro c e sse d ,
by o r t o any one p e rso n , o r two o r more p erso n s b ein g in te r-c o n n e c te d
b o d ies c o rp o ra te o r who h a re an o v e rt o r c o v e rt agreem ent t o l i m i t
co m p etitio n i n th e p a r t i c u l a r t r a d e . T h is d e f i n i t i o n co v ers th e a c t
i v i t i e s o f o n e-firm m onopolies, dominant firm s and a ls o tr a d e asso c
i a t i o n s on b o th th e buying and s e l l i n g s id e s o f th e m ark et. I t a p p e a rs
t o have been a l l - i n c l u s i v e a s any firm o r group o f firm s which could
m a te r ia lly in flu e n c e th e m arket was l i k e l y t o handle a t l e a s t o n e - th ir d
o f th e goods i n q u e s tio n . P ro fe s s o r B. S . Taaey, an a u t h o r it y am th e
B r i t i s h l e g i s l a t i o n , s t a t e s :
The .p h raseo lo g y employed i n th e d e f i n i t i o n semes t o be wide enough t o co v er s o -c a lle d o lig o p o ly c o n d itio n s i n which each o f a em ail nmaber o f firm s may, i n i t s own i n t e r e s t s , eschew th e more s e v e re methods o f co m p etitio n ( e .g . p r ic e e c m p e titio n ) w ith o u t th e r e b ein g any o v e rt o r c o v e rt agreem ent o r a rra n g e ment among th e f ir m s . The term in o lo g y o f th e Act seams t o
a v o id th e d i f f i c u l t i e s en countered i n American a n t i - t r u s t a c t i v i t i e s o f having t o e s t a b l i s h c o llu s io n between th e
o l i g o p o l i s t s o r t o i n f e r c o llu s io n from n o n -e o llu s iv e p a r a l l e l o r c o -o rd in a te d b eh av io u r. I n any e v e n t, most o lig o p o ly s i t u a tio n s would q u a lif y f o r i n v e s tig a tio n under th e A et because n orm ally a t l e a s t one o f th e o l i g o p o l i s t s s u p p lie s o n e - th ir d o f th e m a rk e t.”
A D ig re ssio n on Conscious P a r a lle lis m
The ty p e of o lig o p o ly s i t u a t i o n r e f e r r e d t o by Taney h as c re a te d
many problems i n th e U nited S t a t e s i n e a s e s w here, a lth o u g h t h e r e a r e no
agreem ents, th e firm s do n o t c o n s id e r i t i n t h e i r own i n t e r e s t s t o com
p e te .
Under th e U nited S ta te s law i t i s d i f f i c u l t t o proceed a g a in s t such s i t u a t i o n s u n le ss i t can be shown t h a t th e companies a r e engaged i n , f o r exam ple, a c o n sp ira c y t o m onopolise o r a con s p ira c y i n r e s t r a i n t o f t r a d e . I t i s o f te n v e ry d i f f i c u l t t o f in d any i n d i c i a o f agreem ent o r c o n sp ira c y . There h as been
some ten d en cy t o a p p ly th e th e o ry o f what i s c a lle d c o n scio u s
19
pa r a i le ll a m , b u t t h i s r e q u ir e s p ro o f o f c o n tin u ity o f i d e n t i c a l a c tio n t o a p o in t t h a t agreem ent n i g h t be i n f e r r e d . 7
I n 1946 i n th e second American Tobacco e a s e , th e c o u r t, r e ly in g
e n t i r e l y upon c ir c u m s ta n tia l e v id e n c e , i n f e r r e d u n law fu l co n sp ira cy
cm th e p a r t o f th e re sp o n d e n ts. Evidence o f i d e n t i t y o f b e h av io u r by
th e th re e d efen d an t dominant firm s was p l e n t i f u l w ith re g a rd t o p r ic e
l i s t s , p r ic e changes, p u rch ases and g e n e ra l b u s in e s s p r a c t i c e s . W illiam
N ic h o lls s t a t e s " th e ease was p ro b ab ly unique i n t h a t t h e r e was n o t a
w hit o f evidence t h a t a ocmmon p la n had even been contem plated o r p ro
-p o sed ." T h is d e c is io n bro u g h t t h i s ty p e o f o lig o p o ly s itu m tlo h whereby
"a few dominant f i r m s . . .in d e p e n d e n tly and p u re ly a s a m a tte r o f s e l f
-9
i n t e r e s t , ev o lv e n o n -a g re ssiv e p a tte r n s o f behaviour* w ith in th e re a c h
o f th e c o n sp ira c y p ro v is io n s o f th e Sherman Aot and i t was f e l t t h a t
a s o lu tio n had been found f o r d e a lin g w ith such s i t u a t i o n s .
I n more r e c e n t y e a rs th e r e has been some evidence o f a r e t r e a t
7 Dean
w.
A lle n W a llis , e d i t o r , P ro ceed in g s. I n te r n a t i o n a l Con fe re n c e on th e C o n tro l o f R e s t r i c t i v e B usiness P r a c t ic e s . ( tt n lv c r s ity o f Chicago, f He f re e iPress o? ddenooe, r n i n o T s , 1966) , pp. 130-39} co n scio u s p a r a l l e l ! a n " r e p r e s e n ts a s i t u a t i o n where a nmaber o f firm s a re c o n tin u a lly and r e g u l a r l y each a c tin g i n a manner in d i c a t i n g a knowledge o f what th e o th e r s would d o , and i n th e absence o f d i r e c tagreem ent, th e a c tio n s a re such a s t o su p p o rt an in fe re n c e o f agreem en t." op. c i t . , p . 145J 1 . Cr> Reynolds i n Secnam los. A G eneral I n tr o d u c tio n . XHomewood, I l l i n o i s , Irw in , 1963, a t p . 2^9 s t a t e s " " s im ple p r ic e
le a d e rs h ip w i l l n o t norm ally be h e ld u n la w fu l. B ut, i f th e companies a ls o m a in ta in an e la b o r a te s i m i l a r i t y o f p o lic y on o th e r term s o f s a le such a s q u a n tity d is c o u n ts , p r ic e d i f f e r e n t i a l s between v a r io u s q u a l i t i e s and ty p e s o f p roduce, and f M ig h t ch a rg e s o r d e liv e r e d p r ic e a rra n g e m ents, th e c o u r ts may f in d a b re ac h o f law . I t i s u n lik e ly t h a t ‘a l l t h a t much p a r a lle lis m ' could occur w ith o u t in tim a te c o -o p e ra tio n among th e com panies."
8 W. N ic h o lls , "The Tobacco Case o f 1946," American Economic Review. XXXII (1 9 4 9 ), 285} M e a l s o C. W ilcox, P u b lic P o l i c i e s Toward B u sin ess, p p . 119-21 and C.
w.
S to c k in g , Workable C om petition and A n ti- T ru s t P o lic y , ( lf a s h v ille t V a n d e rb ilt U n iv e rs ity P r e s s , 1961), p .20
from th e d o c trin e o f oonsoioua p a r a l l e l i s e . J u s t i c e C la rk , i n 1954,
s ta te d !
T h is C ourt has n ev er h eld t h a t p ro o f o f p a r a l l e l b u s in e s s beh av io u r c o n c lu s iv e ly e s ta b li s h e s agreem ent, o r phrased d i f f e r e n t l y , t h a t such b eh av io u r i t s e l f c o n s ti t u t e s a Sherman Act o ffe n c e . C irc u m s ta n tia l ev id en ce o f c o n sc io u sly p a r a l l e l b eh av io u r may have made heavy in ro a d s i n t o th e t r a d i t i o n a l j u d i c i a l a t t i t u d e tow ard c o n sp ira c y ; b u t 1 co n scio u s p a r a l l e l - ism* has n o t y e t re a d co n sp ira c y out o f th e Sherman Act
e n t i r e l y . 1®
T h is has l e d W ilcox t o remark t h a t th e d o c trin e o f co n scio u s
p & ra ils11 sb
,
a lth o u g h n o t r e p u d ia te d , i s l i k e l y t o be used "more s p a rin g -11l y i n th e n e a r f u tu r e th a n i n th e re c e n t p a s t."
C le a r ly i f th e 1948 Act succeeded i n a v o id in g problem s o f t h i s
n a tu re i t would be a s i g n i f i c a n t improvement upon t h i s a s p e c t o f American
l e g i s l a t i o n and would have "b rought th e b a s ic assum ption o f modem
12
o lig o p o ly th e o ry " i n t o th e p u b lic s p o tl i g h t .
U n fo rtu n a te ly , th e 1948 Act o n ly su p p lie d th e M onopolies Commission
w ith in v e s tig a to r y powers which were t o be in c o rp o ra te d i n t o recommenda
t i o n s . T h is proved t o be an i n v i t a t i o n t o non-enforcem ent and c e r t a i n l y
o ffe re d no s o lu tio n t o t h e r e s t r i c t i v e p r a c tic e s problem . The R ep o rts
o f th e Ccraaiscion w ere w e ll w r i t t e n , d e t a i l e d s tu d ie s o f th e i n d u s t r i e s
concerned; th e reeoam endations co n tain ed t h e r e i n , however, were f o r th e
most p a r t ig n o re d by th e Board o f T rad e. T h is g r e a t l y reduced th e i n
flu e n c e o f th e Commission. w ith o u t s t r u c t u r a l changes i n t h e organ
i s a t i o n o f o l i g o p o l i s t i c i n d u s t r i e s , p a r a l l e l b eh av io u r could be e x
-10 i n T h e a tre E n te r p r is e s . I n c . v . Paramount Film D is tr ib u tin g C o rp ., 346 U .S. $^7, 546, q u o t e d i n C. W ilcox, o£. c i t . . p . 141.
11 I b i d .
21
p ected t o c o n tin u e . T ru e , most o lig o p o ly s it u a t i o n s d id q u a l i f y f o r
in v e s tig a tio n under th e Act b u t no s o lu tio n m is found t o th s problem
o f p a r a l l e l b eh av io u r.
B. Sobs C ritic is m s o f th e 1940 Aet
I t was ex p eeted t h a t th e 1948 A ct, b e in g th e f i r s t B r i t i s h l e g i s
l a t i o n i n over 300 y e a rs d e a lin g w ith monopoly and r e s t r i c t i v e p r a c t i c e s ,
would eone i n f o r i t s sh are of a b u se . The c r i ti c i s m s t o which i t was
s u b je c te d , however, a l s o a s s i s t e d i n making c e r t a i n w eaknesses a p p a re n t.
Double F u n ctio n o f th e C (am ission
One c r i ti c i s m o f th e Act was t h a t th e double fu n c tio n o f th e Comm
i s s i o n , o f f a c t - f i n d i n g and a p p r a i s a l , sh o u ld be se p a ra te d o r t h a t t h e
13 Commission should be changed i n t o sose s o r t o f j u d i c i a l t r i b u n a l .
T h is p o in t h a s been made p a r t i c u l a r l y by in d u s tr y and r e s t s t o same ex
t e n t on a m is c o n c e p tio n .^ As p o in te d o u t i n M onopolies. M ergers and
R e s t r i c t i v e P r a c t ic e s t
The Cosm iaslon i s n o t a j u d i c i a l t r i b u n a l concerned w ith th e a p p lic a tio n o f a body o f law i n which th e l e g i s l a t u r e has l a i d
13 C. G runfeld and B. S. Yamey, eg . c i t . . p . 388. T h is c r i t - i c i s a was e f f e c t i v e l y handled i n so f a r a s r e s t r i c t i v e a g r e a u n t s were concerned by th e enactm ent o f th e R e s t r i c t i v e Trade P r a c t is e s A c t. 1956 by which a R e g is tr a r was a p p o i n t e d t o conduct th e 'in v e s tig a tio n and a s p e c ia l c o u r t was e s ta b lis h e d t o ap p rA iie th s e f f e c t s o f th e agreem ents; v id e i n f r a , p. 31-32.
14 M onopolies. M ergers and R e s t r i c t i v e P r a c t ic e s . (London: H.M.S.O., bmnd. 22$$), p . 2 ; see a l s o P . H utber. Wanted - A Monopoly P o lic y . The Fabian S o c ie ty , R esearch S e r ie s 219, (Dartm outh S i . , S .w .j D e c., I9 6 0 ), pp. 4*5.
22
down r u l e8 f o r d eterm in in g w hether th e p a r t i c u l a r p r a c t i c e s a r e o r a r e n e t a g a in s t th e p u b lic i n t e r e s t . The Commission i s an i n v e s t i g a t i n g body, and a s such i t s ta s k i s t o e l i c i t and examine i m p a r tia lly th e r e le v a n t f a c ts .™
In d u s try h a s , th ro u g h tr a d e a s s o c i a t i o n s , q u e stio n e d th e f in d in g s
o f th e Commission and a ls o a lle g e d t h a t i t s r e p o r t s were b i a s e d . ^ The
government r e c e n tly gave n o tic e o f i t s i n t e n t i o n t o remove th e grounds
f o r f u r t h e r c o n f l i c t on t h i s i s s u e by drawing
a c l e a r e r d i s t i n c t i o n between th e two s ta g e s o f an in q u iry i n t o a monopoly - th e in v e s tig a tio n i n t o th e f a c t s , i . e . i n t o w hat i s done by th e monopoly, and th e assesm sent o f t h e i r consequences i n r e l a t i o n t o th e p u b lic I n t e r e s t .
I t h as proposed t h a t a R e g is tr a r o f M onopolies be ap p o in ted t o con
d u c t th e in v e s t i g a t i o n i n t o th e f a c t s and t o a s s i s t th e Coosaission
i n i t s ta s k o f a s s e s s in g where th e p u b lic i n t e r e s t l a y by making such f u r t h e r i n v e s t i g a t i o n and e lu c id a tio n a s th e Commission s i g h t f in d n e c e s s a r y .^
P o l i t i c a l Expediency
There h as been some evidence o f le n ie n c y on th e p a r t o f th e Board
o f Trade i n th e enforcem ent o f Gcmmission reocssaendations. I n s te a d o f
e x e rc is in g th e s t a t u t o r y in s tr u m e n t^ o r th e d e c la r a tio n by a "com petent
15 M onopolies. M ergers and R e s t r i c t i v e P r a c t ic e s , p . 2 , p arag rap h
10
.
16 P . H u tb er, ©g. c i t . , pp. 4-5? Bow Group, og. c i t . , p p . 46*7.
17 M onopolies. M ergers and R e s t r i c t i v e P r a c t ic e s , p . 2 , p arag rap h
18 I b id . . p arag rap h 12.