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Page 1

Dominant Firm Conduct: Lessons from Early Antitrust Enforcement

Wallace P. Mullin, George Washington University

DOJ/FTC Hearings on Single Firm Conduct and Antitrust Law


Page 2

Overview

  • First dominant firms arose out of Trust movement and merger to monopoly

  • Comparative case studies on

    • Standard Oil

    • U.S. Steel

    • American Sugar Refining Corporation

  • Lessons on dominant firm behavior and effect of antitrust prosecution and remedy.


Page 3

Standard Oil

  • An aggressive competitor.

  • Supreme Court found Standard Oil guilty, ordered dissolution.

  • Comanorand Scherer (1995) argue that dissolution improved long term industry performance.

  • Dissolution of formerly independent entities aided success of remedy, Kovacic(1999).


Page 4

United States Steel

  • U.S. Steel a price umbrella for fringe firms, gradually lost market share

  • Supreme Court found in favor of U.S. Steel.

  • Dissolution would have lowered steel prices, Mullin, Mullin, and Mullin, 1995.

  • US Steel’s acquisition by long term lease of Hill iron ore properties viewed as anti-competitive by contemporary antitrust authorities.


Page 5

U.S. Steel Enforcement Lessons

  • Antitrust law protects competition, not competitors.

  • Supreme Court’s 1920 acquittal seemed influenced by competitor praise.

  • New contractual arrangements may have efficiency motivations.

  • Hill ore lease best explained as efficiency enhancing rather than vertical foreclosure, Mullin and Mullin, 1997.


Page 6

American Sugar Refining Corporation

  • Profitably engaged in predatory pricing, Genesoveand Mullin, 2006

  • Department of Justice prosecution resulted in a consent decree

  • Antitrust serves as a deterrent

  • Government victories in American Tobacco and Standard Oil cases helped induce partial “voluntary” divestiture.