Thursday, August 23, 2018

From Brandeis and the American Fair Trade League to the U.S. Chamber of Commerce and Antitrust Reform


In my last post, I recounted the process I went through to find a research topic for a legal history seminar in graduate school at U.Va. That experience led me to my dissertation topic, which later became my first book, American Fair Trade. I hope that sharing that experience may prove useful to others going through that process. In a similar vein, this post reflects on the historiographical debate that drew me to studying the so-called fair trade movement and discusses where that historical inquiry led me in the archives. In my next post, I will highlight some additional archival resources at the Hagley Museum and Library, where I conducted much of my primary research.

Interpreting Louis Brandeis’s involvement in the fair trade movement presented a challenge because in part, so much has been written about his life and writings, but also, because the fair trade movement has undergone reinterpretation in law and economics. Briefly, independent proprietors, including both producers and retailers, advocated legislation to legalize resale price maintenance (RPM) contracts. The Supreme Court had declared these contracts per se illegal under the Sherman Antitrust Act in Dr. Miles Medical Co v. Park & Sons (US, 1911). Brandeis helped these businesspeople organize a lobbying and litigation campaign to change the law. I argue that their efforts – and Brandeis’s appointment to the Supreme Court – expanded the rule of reason analysis regarding inter-firm information-sharing practices and pricing policies through the 1920s. Brandeis believed in decentralized economic and political power, which he thought was necessary to maintaining a legitimate liberal-democracy. He applied those beliefs to supporting independent proprietors and a federal trade commission to oversee competitive markets.

The problem, of course, is that RPM looks a lot like price-fixing. In Dr. Miles, the Court held that producer-led RPM facilitated a horizontal combination of retailers fixing prices. Moreover, writing from the vantage point of the late twentieth century, many historians and legal scholars have dismissed the whole movement as a desperate attempt to stave off inevitable technological and social change. From that perspective, Brandeis appears naïve and backwards looking. Some scholars have argued that Brandeis simply didn’t understand economics – that he didn’t fully appreciate the efficiencies of economies of scale and scope that would continue to transform the U.S. economy throughout the twentieth century.

Well, maybe. We might call into question each of those conclusions. The Court has since overturned the Dr. Miles decision (Leegin v. PSKS, 2007). Newer histories of cooperative movements have questioned whether their business models were necessarily backwards and nefarious, asserting that there could be pro-competitive effects for brand development and service competition. And, Brandeis has been reconsidered as a leader of an alternative vision for American capitalism that influenced public policy at key moments in time. One might even wonder if his strong political and legal rhetoric belied his deeper understanding of mass production and consumerism. At minimum, an investigation of how proponents of fair trade lobbied and litigated to shape American competition policy should reveal a thicker description of competing visions for American capitalism through the early twentieth century.

Following Brandeis and his involvement with the American Fair Trade League (AFTL) led me to perhaps an unlikely source – the U.S. Chamber of Commerce (USCC) archives. As I’ve argued elsewhere, the USCC was formed in 1912 with the support of the Department of Commerce to facilitate inter-firm information-sharing and to promulgate industry-specific best practices. Legal uncertainty surrounding the Court’s antitrust rulings became a major point of debate in general assembly meetings and the USCC’s smaller “study groups.” Consistent support for legislation affirming the rule of reason analysis and creating an administrative agency to oversee competitive practices resurfaced time and again. Brandeis spoke at Chamber meetings, as did institutionalist economists from the leading universities and federal regulators from Commerce and (later) the FTC.  

Ultimately, these businesspeople, academics, and regulators campaigned for a version of market capitalism that looked much more like their European counterparts than anything free market. While the old myth of laissez faire American capitalism has long been overturned, we may still be missing the varieties of American capitalism that existed in the twentieth century. That business relies on the state to set rules, enforce contracts, and redistribute capital to popular constituencies and developmental projects is an enduring feature of American capitalism. These advocates of fair trade pursued something more than that. This cohort of businesspeople and their advocates in law and economics sought partnerships with federal and state regulators to manage competitive markets through industry trade rules and inter-firm contracts. Those ideas were distended by early New Deal policies that applied mandatory price-fixing across industries, and those ideas were also captured by “peak industry” leaders who retained influence over government agencies long after the first New Deal experiments in planning failed.

Much of this story unfolded in USCC meeting minutes. The Hagley Archive has made available transcripts for both study groups and general assembly meetings. While the general assembly minutes contains some Q. & A. following banquet speeches, the study groups have more lively discussions and debate. These groups met before the general meeting and probed some pressing business or policy issue, such as antitrust reform, cost accounting, domestic distribution, industrial production, finance, FTC trade practice conferences, and fabricated production. These groups contain speeches submitted by presenters and follow-up debates. The USCC general assembly resolutions emerged from those study groups, where one can track the original proposals, debates, and amendments. Much of that debate and discussion then informed the articles and opinions printed in the USCC’s magazine, Nation’sBusiness, which Hagley has provided online. For anyone interested in government-business relations, the Hagley archive is a treasure trove worth checking out.

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