The law of vertical integration and the business firm: 1880-1960

Iowa Law Review

Volumn 95, Issue 3, 2010, Pages 863-918

  Hovenkamp, Herbert ^a  

^a UNIVERSITY OF IOWA COLLEGE OF LAW   (United States)

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EID: 77953074502     PISSN: 00210552     EISSN: None     Source Type: Journal    
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References (341)

1. See Martin Ricketts, The Economics of Business Enterprise: An Introduction to Economic Organization and the Theory of the Firm 217-18 (3d ed. 2002) (noting that vertical integration occurs where a single firm develops or acquires the intermediate stages required for production of final output).
2. For a definition from the earlier part of the twentieth century, when U.S. economists were first discussing the problem, see Lawrence K. Frank, The Significance of Industrial Integration, 33 J. POL. ECON. 179, 179 (1925) (denning vertical integration as "the functional coordination of one or more units in each of the several successive stages of production, so that they are all operated as a single, unified industrial process").
3. "Upstream" vertical integration is toward a source of supply, "downstream" vertical integration is toward consumers.
4. See United States v. Winslow, 227 U.S. 202, 217 (1913) (approving the 1899 merger that created the United Shoe Machinery Company);
5. CARL KAYSEN, United STATES V. UNITED SHOE Machinery Corporation. An Economic Analysis of an Anti-Trust Case 2-3 (1956) (describing the merger and subsequent expansion).
6. For a description of the shoe market, Brown Shoe Co. v. United States, 370 U.S. 294, 297 (1962)
7. Witherell & Dobbins Co. v. United Shoe Machinery Co., 267 F. 950, 951 (1st Cir. 1920).
8. See also KAYSEN, supra note 3, at 3-4 (describing the complexities of manufacturing both the machinery necessary to produce shoes and the shoes themselves).
9. Brown Shoe, 370 U.S. at 346.
10. See discussion infra text accompanying notes 72-73 (noting that both the Justice Department and the Supreme Court launched aggressive campaigns against vertical mergers in the wake of the 1950 amendment to the Clayton Act).
11. Brown Shoe, 370 U.S. at 296. For the district court's opinion describing the 1956 merger,
12. see United States v. Brown Shoe Co., 179 F. Supp. 721,724-27 (D. Mo. 1959).
13. See discussion infra text accompanying notes 111-14 (noting the incorporation of antitrust principles into vertical-integration analysis).
14. On the rise of marginalist economics, see MARK Blaug, ECONOMIC THEORY IN Retrospect, chs. 8-11, 15 (5th ed., Cambridge Univ. Press 1996),
15. Herbert Hovenkamp, The Marginalist Revolution in Legal Thought, 46 VAND. L. Rev. 305, 314-18 (1993) (discussing the relationship between Darwinism and the rise of marginalism).
16. See Herbert Hovenkamp, United States Competition Policy in Crisis: 1890-1955, 94 MINN. L. REV. 311, 322 (2009) (discussing the idea of "social control," which tended to normalize and limit industrial excesses).
17. See,e.g., WILLIAM J. NOVAK, THE PEOPLE'S WELFARE: LAW AND REGULATION IN NINETEENTH- CENTURY AMERICA 83-84 (1996) (discussing a lack of separation between market and state in early U.S. history);
18. Claudia Goldin & Gary D. Libecap, Introduction to THE REGULATED ECONOMY: A HISTORICAL APPROACH TO POLITICAL ECONOMY 1 (Claudia Goldin & Gary D. Libecap eds., 1994) (discussing the debatable relationship between government intervention and economic development);
19. Herbert Hovenkamp, Regulation History as Politics or Markets, 12 YALE J. ON REG. 549 (1995) (reviewing THE REGULATED ECONOMY: A HISTORICAL APPROACH TO POLITICAL ECONOMY (Claudia Goldin & Gary D. Libecap eds., 1994)).
20. On the history of competition policy and antitrust, see generally HERBERT HOVENKAMP, THE ANTITRUST ENTERPRISE: PRINCIPLE AND EXECUTION ch. 2 (2005), THE CAUSES AND CONSEQUENCES OF ANTITRUST: THE PUBLIC-CHOICE PERSPECTIVE (Fred S. McChesney & William F. Shughart II eds., 1995),
21. Id.
22. Thomas J. DiLorenzo, The Origins of Antitrust: An Interest-Group Perspective, 5 INT'L REV. L. & ECON. 73 (1985),
23. Thomas W. Hazlett, The Legislative History of the Sherman Act Re-Examined, 30 ECON. INQUIRY 263, 267 (1992),
24. George J. Stigler, The Origin of the Sherman Act, 14 J. LEGAL STUD. 1 (1985).
25. See generally GABRIEL KOLKO, RAILROADS AND REGULATION, 1877-1916 (1965) (revealing how railroad barons sought government regulation when competition forced them to underprice their services).
26. On this theory of regulation, see Sam Peltzman, Toward a More General Theory of Regulation, 19 J.L. & ECON. 211, 235-36 (1976),
27. Richard A. Posner, The Social Cost of Monopoly and Regulation, 83 J. POL.ECON. 807, 807 (1975).
28. Id.
29. See Herbert Hovenkamp, Neoclassicism and the Separation of Ownership and Control, 4 VA. L. & Bus. REV. 373, 375 (2009) (discussing how the firm's only goal in microeconomics is maximization of value);
30. Herbert Hovenkamp, The Marginalist Revolution in Corporate Finance, 1880-1965, at 8 (Univ. of Iowa Legal Studies, Working Paper No. 08-29, 2008), available at http://papers.ssrn.com/sol3/papers.cfm?abstract-id=1141291 (discussing how the marginalist revolution turned the corporation into a rational actor, intent on maximizing value).
31. Ronald H. Coase, The Nature of the Firm, 4 ECONOMICA 386, 404 (1937).
32. On this article and its relation to the rise of modem law and economics, see generally Herbert Hovenkamp, Coase, Institutionalism, and the Origins of Law and Economics (Univ. of Iowa Legal Studies, Working Paper No. 10-07, 2008), available at http://papers.ssrn.com/sol3/papers.cfm?abstract-id=1538279.
33. See Hovenkamp, supra note 10, at 320 ("Product differentiation served to limit firms' competition with one another even when they were in the same general market").
34. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations 330 (Penguin Books 1999) (1776).
35. Id. at 267.
36. George J. Stigler, The Division of Labor Is Limited fry the Extent ofthe Market, 59 J. POL. EdON. 185,185 (1951).
37. See generally Richard N. Langlois, Economic Change and the Boundaries of the Firm, 144 J. INSTITUTIONAL & THEORETICAL EcON. 635, 642 (1988) ("As the market for the final product expands, however, it becomes profitable for the increasing-returns activities to spin off and exploit their economies of scale by aggregating the demands for their services across the industry.").
38. Alfred Marshall, Industry and Trade: A Study of Industrial Technique and Business Organization; and of Their Influences on the Condition of Various Classes and NATIONS (1919). Marshall was seventy-seven years old at the time, and he died in 1924. His Principles ofEconomicsvw published in 1890.
39. Id. at 147-48,156,373.
40. Id. at 156; see discussion infra text accompanying notes 215-16.
41. Marshall, supra note 20, at 380-81.
42. Id. at 559-61.
43. RH.Coase, The Firm, the Market, and the Law 3 (1988).
44. Eg., Lawrence Frank, The Significance of Industrial Integration, 33 J. POL. EOON. 179 (1925) (noting how discussion within business and industry was usually concerned with questions about relative economy, profitability, and efficiency).
45. On die Harvard School, see Hovenkamp, supra note 10, at 348 (noting how Joe Bain became the most prominent spokesperson for Harvard School structuralism).
46. Joe S. Bain, Industrial Organization 168,357-58 (1959).
47. Id. at 358.
48. Id. at 168.
49. Id. at 168-69.
50. Id. at 357.
51. BAIN, supra note 28, at 168, 358.
52. Id. at 358.
53. See, e.g., Benjamin Klein, Robert G. Crawford & Annen A. Alchian, Vertical Integration, Appropriable Rents, and the Competitive Contracting Process, 21 J.L. & EOON. 297, 299 (1978) (describing "vertical integration⋯ as a means of economizing on the costs of avoiding risks of appropriation of quasi rents in specialized assets by opportunistic individuals").
54. BAIN, supra note 28, at 358.
55. Id. at 330.
56. Id. at 331.
57. Frankh. Knighr, Rlsk, Uncirtainryandprofit (1921).
58. Coase, supra note 14.
59. KNIGHT, supra note 39, at 245;
60. see Richard N. Langlois & Metin M. Cosgel, Frank Knight on Risk, Uncertainty, and the Farm: A New Interpretation, 31 ECON. INQUIRY 456,462 (1993) (explaining the use of judgment to deal with uncertainty);
61. see also Yoram Barzel, Knight's "Moral Hazard" Theory of Organization, 25 ECON. INQUIRY 117, 177 (1987) (arguing Knight's "moral hazard" theory is the central feature of the firm);
62. Donald J. Boudreaux & Randall G. Holcombe, The Coasian and Knightian Theories of the Firm, 10 MANAGERIAL & DECISION ECON. 147, 148 (1989) ("An alternative, which corresponds to Knight's concept of the firm, is to model the entrepreneur as choosing to bring new goods to market or to use new production processes where the outcome is uncertain.").
63. See Pier Francesco Asso & Luca Fiorito, Was Frank Knight an InstitutionalistT, 20 REV. POL. ECON. 59,60 (2008) (arguing that Knight was an institutionalist).
64. Adolf A. Berle & Gardiner C. Means, The Modern Corporation and Private Property (1932).
65. Thorstein Veblen, Absentee Ownership and Business Enterprise in Recent Times: THE CASE OF AMERICA 5 (1923). On Veblen as a predecessor to Berle and Means
66. see HERBERT Hovenkamp, Enterprise and American law, 1836-1937, at 357-61 (1991).
67. See Hovenkamp, Neoclassicism and the Separation of Ownership and Control, supra note 13, at 381 ("Neoclassicism largely disregarded the ownership/control problem by positing that both the firm and its shareholders had only profit-maximization in mind.").
68. See, e.g, Commons J.R. Legal Foundations of Capitalism 270, 1942, (explaining how goodwill gained through unbridled vertical integration would quickly result in a monopoly);
69. Comment, Vertical Integration in Aluminum: A Bar to "Effective Competition," 60 Yale LJ. 1951 arguing that establishing effective competition requires changing natural industry patterns).
70. Hamilton W. The author of Vertical Integration in Aluminum: A Bar to "Effective Competition," was a Professor at Yale Law School from 1928 to 1948 although he trained as an economist rather than a lawyer. In particular, he argued that Alcoa's integration into fabrication served to foreclose that market to independent fabricators. The government's case against Alcoa's exclusionary vertical practices is made in Harold G. Reuschlein, Aluminum and Monopoly: A Phase of an Unsolved Problem 87 U. PA. L. Rev. 509 535-37 1939.
71. See also, Rostow E.V., A NATIONAL POLICY FOR THE On. INDUSTRY 71-76, (discussing the evils of vertical integration in the oil industry);
72. On this point, see Patrick Bolton & David S. Scharfstein, Corporate Finance, the Theory of the Fam, and Organizations,]. ECON. PERSP., Fall 1998, at 95.
73. See infra text accompanying note 73.
74. Coase moved to the United States in 1951 and became affiliated with the University of Chicago in 1964.
75. See BAIN, supra note 28.
76. R.H. Coase, The Nature of the Firm: Origin, 4 J.L. EOON. & ORG. 3,4 (1988).
77. Coase, supra note 14, at 404.
78. See generally Hovenkamp, The Marginalist Revolution in Corporate Finance, 1880-1965, supra note 13 (stating that the marginalist concept of the corporation entirely separated corporate decision-making from all human preference, unless those preferences were simply asserted to maximize value).
79. On the debate over marginalism and profit-maximization as explanatory devices for the business firm, see Fritz Machlup, Theories of the Firm: Marginalist, Behavioral, Managerial, 57 AM. ECON. REV. 1, 2-6 (1967).
80. See generally RICHARD M. CYERT & JAMES G. MARCH, A BEHAVIORAL THEORY OF THE FIRM (1963) (arguing for a more institutionalist behavioral theory of the firm).
81. E.g., 3B Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶¶ 756-62 (3d ed. 2006) (explaining that vertical integration lacks anticompetitive consequences when both markets are competitive);
82. Robert Bork, Vertical Integration and the Sherman Act: The Legal History of an Economic Misconception, 22 U. CHI. L. REV. 157, 159 (1954) (noting that the law has "consistently condemned" vertical integration).
83. BAIN, supra note 28, at 168-69.
84. See supra text accompanying notes 1-2 (describing the example of the village cobbler).
85. See generally United Shoe Mach. Corp. v. United States, 258 U.S. 451 (1922) (condemning anticompetitive lease agreements); United States v. United Shoe Mach. Corp., 110 F. Supp. 295 (D. Mass. 1953), aff'd mem., 347 U.S. 521 (1954) (similar).
86. United States v. United Shoe Mach. Corp., 110 F. Supp. 295 (D. Mass. 1953), aff'd mem., 347 U.S. 521 (1954) (similar).
87. G. E. Hale, Vertical Integration: Impact of the Antitrust Laws upon Combinations of Successive Stages of Production and Distribution, 49 COLUM. L. REV. 921,922 (1949).
88. See Richard N. Langlois & Paul L. Robertson, Explaining Vertical Integration: Lessons from the American Automobile Industry, 49 J. ECON. HIST. 361, 365 (1989) (explaining the early evolution of automobile industry).
89. See Fed. Exch. Comm'n, Causes of the High Prices of Farm Implements 672-75 (1920) (discussing the plan for a division of International Harvester).
90. See generally International Harvester, FORTUNE, Aug. 1933, at 21.
91. See 4 WILLIAM S. HOLDSWORTH, A HISTORY OF ENGLISH LAW 375-79 (2d ed. 1937) (relating the offenses to Medieval price-control policies);
92. Wendell Herbruck, Forestalling, Regrating and Engrossing, 27 MICH. L. REV. 365, 378-80 (1929) (discussing relevant eighteenth-century evenis). Technically, the crime of regrating involved the purchasing of commodities from their producers and then reselling them within four miles from the point of purchase. Id. at 377.
93. William Ilungworth, An Inquiry into the Laws, Ancient and Modern, Respecting Forestalling, Regrating, and Engrossing: Together with Adjudged Cases, Copies of Original Records, and Proceedings in Parliament, Relative to Those Subjects 102 (London, Luke Hansard 1800).
94. 27 Edw. 3, c. 3, § 2 (1353) (Eng.) (death penalty for forestalling), repealed by 38 Edw. 3, c. 6, § 1 (1363) (Eng.).
95. William Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act 33-34 (1956).
96. See Herbruck, supra note 62, at 367-79.
97. See e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 346 (1962) (condemning a vertical merger by clearly non-dominant firms).
98. See HOVENKAMP, supra note 44, at 335-60;
99. VICTOR MORAWETZ, A TREATISE ON THE LAW OF PRIVATE CORPORATIONS §§ 362-365,393 (2d ed. 1886) (discussing the collateral-transactions rule).
100. Herbert Hovenkamp, The Classical Corporation in American Legal Thought, 76 GEO. L.J. 1593, 1669-70, 1687 (1988).
101. See infra text accompanying notes 82-85.
102. On this point, see 1 AREEDA & HOVENKAMP, supra note 55, ¶ 102.
103. Clayton Act, ch. 323, § 7,38 Stat 730 (1914) (current version at 15 U.S.G § 18 (2006)).
104. See discussion infra text accompanying notes 82-84.
105. For an excellent survey of the political environment at the time, see generally JOSEPH C. PALAMOUNTAIN JR., The Politics of Distribution (1955).
106. See FREDERICK M. ROWE, PRICE DISCRIMINATION UNDER THE ROBINSON-PATMAN ACT 3-25 (1962) (describing the background of the Act); Hugh C. Hansen, Robinson-Potman Law: A Review and Analysis, 51 FORDHAM L. Rev. 1113, 1119 n.33 (1983) (explaining that the counsel for the U.S. Wholesale Grocers' Association "is credited with drafting most of the Act").
107. See generally Ark. Wholesale Grocers' Ass'n v. FTC, 18 F.2d 866 (8th Cir. 1927) (condemning the grocers' association boycott of suppliers who sold to chain-store retailers at the same price as they sold to the defendant wholesalers, thus limiting the latter's markup and placing their own purchaser/retailers at a disadvantage);
108. United States v. S. Cal. Wholesale Grocers' Ass'n, 7 F.2d 944 (S.D. Cal. 1925) (similar Justice Department suit). Much of the history is recounted in Richard C. Schragger, The Anti-Chain Store Movement, Localist Ideology, and the Remnants of the Progressive Constitution, 1920-1940, 90 IOWA L. REV. 1011 (2005).
109. Natural Industrial Recovery Act, ch. 90, 48 Stat 195 (1933), invalidated by A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935).
110. See Amendment to the Antitrust Laws, ch. 690, 50 Stat. 693 (1937) (creating a "fair trade" exemption from the Sherman Act);
111. Act of July 14, 1952, ch. 745, 66 Stat. 631 (1952) (adding the exemption to the Federal Trade Commission Act).
112. See PALAMOUNTAIN, supra note 74, at 159-87 (discussing various taxes levied against chain stores in the 1930s);
113. see also Louis K. Ugett Co. v. Lee, 288 U.S. 517, 540-41 (1933) (upholding a state tax that was graduated according to the number of stores a firm owned);
114. Godfrey M. Lebhar, Chain Stores in America, 1859-1962, at 125-55 (3d ed. 1963) (discussing the chain taxes enacted in many states during the 1920s through the 1940s as well as various other anti-chain legislation from that time period);
115. Carl H. Fulda, Food Distribution in the United States, the Struggle Between Independents and Chains, 99 U. Pa. L. REV. 1051, 1076-82 (1951) (discussing the local backlash to the growth of chain grocers and the state-chain-tax movement during the early 1930s);
116. Thomas W. Ross, Store Wars: The Chain Tax Movement, 29 J.L. & ECON. 125, 137 (1986) (discussing certain economic variables that led some states to introduce franchise taxes and explaining why they did not have a major long-term impact).
117. See Asher A. Blass & Dennis W. Carlton, The Choice of Organizational Form in Gasoline Retailing and the Cost of Laws that Limit that Choice, 44 J.L. & ECON. 511, 511-12 (2001) (discussing the introduction of state divorcement legislation, as well as other legislation and litigation aimed at limiting refiner-owned gas stations);
118. Michael G. Vita, Regulatory Restrictions on Vertical Integration and Control: The Competitive Impact of Gasoline Divorcement Policies, 18 J. REG. ECON. 217,217-18 (2000) (discussing the history and purpose of divorcement legislation).
119. See Thomas S. Dicke, Franchising in America: The Development of a Business Method, 1840-1980, at 45-84 (1992) (presenting a case study of The Ford Motor Company franchising practices from 1903-1956);
120. see also David Gumick & Steve Vieux, Case History of the American Business Franchise, 24 OKLA. CITY. U. L. REV. 37, 54-55 (1999) (discussing Congress's reasons for passing the Automobile Dealers Day in Court Act).
121. See Derek C. Bok, Section 7 of the Clayton Act and the Merging of Law and Economics, 74 HARV. L. Rev. 226, 234-36 (1960) (discussing the broad range of anticompetitive influences under which Congress amended section seven of the Clayton Act);
122. Herbert Hovenkamp, Derek Bok and the Merger of Law and Economics, 21 U. MICH. J.L. REFORM 515, 524-28 (1988) (discussing the anticompetitive political influence present in the legislative history of Congress's amendment of section seven of the Clayton Act and Bok's response thereto).
123. Brown Shoe Co. v. United States, 370 U.S. 294 (1962).
124. United States v. Brown Shoe Co., 179 F. Supp. 721, 738 (E.D. Mo. 1959). The Federal Trade Commission took the same position. See In re Foremost Dairies, Inc., 60 F.T.C. 944, 1084 (1962) (concluding that efficiencies resulting from a merger were bad because they gave post-merger firms a "decisive advantage ⋯ over ⋯ smaller rivals"). On the Brown Shoe decision and the subsequent revolution in antitrust policy, see Christina Bohannan & Herbert Hovenkamp, IP and Antitrust: Reformation and Harm, 51 B.C. L. REV. (forthcoming 2010).
125. United States v. Aluminum Co. of Am., 148 F.2d 416,429 (2d Cir. 1945) ("Throughout the history of these statutes it has been constantly assumed that one of their purposes was to perpetuate and preserve, for its own sake and in spite of possible cost, an organization of industry in small units which can effectively compete with each other.").
126. Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373, 397 (1911) (condemning resale-price-maintenance contracts); Lochner v. New York, 198 U.S. 45, 59 (1905) (striking down the maximum-hours provision applied to bakers). Justice Holmes dissented in both cases. See Herbert Hovenkamp, The Political Economy of Substantive Due Process, 40 STAN. L. REV. 379, 395-98 (1988) (discussing the effect of the Fourteenth Amendment).
127. See infra text accompanying notes 98, 100 (discussing why legal policy was so hostile towards vertical agreements).
128. Coase, supra note 14, at 394-95.
129. For an example of this view, see Armen A. Alchian & Harold Demsetz, Production, Information Costs, and Economic Organization, 62 AM. ECON. REV. 777, 794 (1972).
130. See also Harold Demsetz, The Theory of the Firm Revisited, in OWNERSHIP, CONTROL, and THE FIRM: ORGANIZATION OF ECONOMIC AcnviTV 144, 147 (1990) (stating that greater weight must be given to information costs in order to create a more complete theory of the firm).
131. Cf. Henry v. A.B. Dick Co., 224 U.S. 1, 31 (1912) (declining to apply the firt-sale doctrine to A.B. Dick's tying of its paper, ink, and stencils to the use of its patented mimeograph machine).
132. See infra text accompanying notes 195-97.
133. Standard Oil Co. of Gal. v. United States, 337 U.S. 293, 316 (1949) (Douglas, J., dissenting).
134. Id.
135. Id. at 318-20. Douglas was referring to LOUIS D. BRANDEIS, THE CURSE OF BIGNESS (Osmond K. Fraenkel ed., 1934).
136. Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business 515 n.3 (1977).
137. Id. at 334-38.
138. Id. at 375,499.
139. Id. at 499.
140. John Chipman Gray, Restraints on the Alienation of Property iii-viii (2d ed. Boston Book Co. 1895) (1883).
141. Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373,405,409 (1911).
142. Bloomer v. McQuewan, 55 U.S. (14 How.) 539, 549 (1853) ("[W]hen the machine passes to the hands of the purchaser, it is no longer within the limits of the [patent] monopoly.'').
143. Adams v. Burke, 84 U.S. (17 Wall.) 453,460 (1873).
144. Id. at 457.
145. See Quanta Computer, Inc. v. LG Elec., Inc., 128 S. Cl 2109, 2117 (2008) (reaffirming a broad first-sale rule for patents).
146. See generally GRAY, supra note 99 (characterizing the first-sale doctrine as a common-law property rule).
147. See Earl of Huntington v. Lord Mountjoy (Mountjoy's Case), (1583) 123 Eng. Rep. 488 (C.P.D.) (holding that an easement in gross could be divided only if co-owners operated it as "one stock"). The rule was followed in the United States in Miller v. Lutheran Conference & Camp Ass'n, 200 A. 646, 652 (Pa. 1938) (granting a recreational license to use lake required "common consent" by co-owners in partnership).
148. E.g., Martin v. Music, 254 S.W.2d 701 (Ky. 1953) (holding that an owner of an easement benefiting a defined parcel of land could divide the parcel and each co-owner could share the easement).
149. Appollinaris Co. v. Scherer, 27 F. 18 (S.D.N.Y. 1886).
150. See discussion infra text accompanying notes 112-13.
151. Bobbs-Merrill Co. v. Straus, 210 U.S. 339,349-51 (1908).
152. Halue Erminie Rives,The Castaway (1904).
153. Bobbs-Merrill Co. v. Straw, 210 US. 339,349-51(1908).
154. Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373, 404-05 (1911). The Court was referring to Lord Chief Justice Edward Coke's Commentary upon Littleton (1628), typically cited as Coke on Littleton, which was Volume 1 of Coke's Institutes of the Lowes of England. That volume was a largely verbatim copy of Sir Thomas Littleton's Tenures, first printed in 1481 or 1482. The Court quoted the following: "' [That if someone] be possessed of a horse or any other chattel, real or personal, and give his whole interest, or property therein, upon condition that the donee or vendee shall not alien the same, the same is void, because his whole interest and property is out of him, so as he hath no possibility of reverter; and it is against trade and traffic and bargaining and contracting between man and man.'"
155. Dr. Miles, 220 U.S. at 404-05 (quotingjohn D. Park & Sons Co. v. Hartman, 153 F. 24, 42 (6th Cir. 1907) (referencing 1 COKE ON LITTLETON bk. 3, ch. 5, § 360, at 223 (n.p. 1628))). The Court also referenced John Chipman Gray's Restraints on Alienation of Property. See supra note 99 and accompanying text Gray's book never mentioned patented or copyrighted goods. GRAY, supra note 99.
156. United States v. Arnold, Schwinn & Co., 388 U.S. 365, 380 (1967) ("But to allow this freedom where the manufacturer has parted with dominion over the goods-the usual marketing situation-would violate the ancient rule against restraints on alienation and open the door to exclusivity of outlets and limitation of territory further than prudence permits."). The dissent cited Coke on Littleton and accused the majority of embracing a legal rule "merely on grounds of its antiquity." Id. at 391 (Stewart, J., dissenting in part).
157. Cont'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 67-68 (1977) (White, J., concurring).
158. Henryv.A.B.DickCo.,224U.S. 1,11-12 (1912).
159. 7d.at46.
160. Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 518-19 (1917). On the centrality of this decision to both the antitrust law of contractual vertical integration and the developing doctrine of patent "misuse,'' see Christina Bohannan, IP Misuse as Foreclosure 4-6 (Univ. of Iowa Legal Studies, Working Paper No. 0941, 2009), available at http://ssm.com/ sol3/papers.cfin?abstract=1474407.
161. While not the earliest inventor, Edison was one of the earliest commercial developers of the sprocketed-projector take-up wheel and film with little holes on the side that engaged the sprocket, thus permitting the film to run smoothly and eliminating the jerkiness that often appeared in very early motion pictures. Ownership of the technology itself was disputed. See Charles Musser, The Emergence of Cinema: The American Screen to 1907, at 130-80 (1994).
162. On the history, see MICHAEL CONANT, ANTITRUST IN THE MOTION PICTURE INDUSTRY: Economic and Legal Analysis 16-21, 77-80 (I960);
163. Benjamin B. Hampton, History of the American Film Industry 8-11,17-24,34,64-76,79-81 (1970);
164. Lewis Jacobs, The Rise of the American Film 8,81-85,88,164-65,291-92 (1939).
165. Motion Picture Patents Co., 243U.S. at 516.
166. Bohannan, supra note 118, at 4-5 (describing the origins of the misuse doctrine).
167. Classical contract theory reached its apex in Samuel Williston's treatise, The Law of Contracts.
168. On classical contract law, see MORTON J. HORWITZ, The TRANSFORMATION OF American Law, 1870-1960: The Crisis of Legal Orthodoxy 9-31 (1992) (providing background on late nineteenth entury classical legal thought),
169. WILLIAM M. WlECEK, THE Lost World of Classical Legal Thought: Law and Ideology in America, 1886-1937, at 102-05 (1998).
170. David Chamey, Nonlegal Sanctions in Commercial Relationships, 104 HARV. L. Rev. 373, 392-93 (1990);
171. Simon Deakin et al., Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms, 21 J.L. & SoCy 329, 334-35 (1994);
172. Ian R. MacNeil, Contracts: Adjustment of Long-Term Economic Relations Under Classical, Neoclassical, and Relational Contract Law, 72 Nw. U. L. REV. 854,857 (1978).
173. See sources cited supra note 123 (describing classical contract law and legal thought); cf. Stewart Macaulay, Non-Contractual Relations in Business: A Preliminary Study, 28 Am. SOC. Rev. 55, 62 (1963) ("[Relatively contractual methods are used to make adjustments in ongoing transactions and to settle disputes.").
174. See Seymour v. McCormick, 57 U.S. (16 How.) 479, 490 (1854) (describing the arrangement). McCormick later changed to a more centralized distribution system with wholly owned outlets. On the company's history, see CHANDLER, supra note 95, at 305-07, 402-08 (discussing the company's success in using a centralized distribution system), and DlCKE, supra note 81, at 18-19 (same).
175. Ruth Brandon, A Capitalist Romance: Singer and the Sewing Machine 117 (1977) ("dark solved the problem by taking McCormick's idea several stages further. 'Why not rent a sewing machine to the housewife and apply the rental fee to the purchase price of the machine?'"); Andrew B. Jack, The Channels of Distribution for an Innovation: The Sewing-Machine Industry in America, 1860-1865, 9 EXPLORATIONS IN ENTREPRENEURIAL HIST. 113, 114 (1957) (discussing the successful launch of the Wheeler & Wilson Co., the Grover and Backer Co., and I.M. Singer & Co.).
176. See Adams v. Burke, 84 U.S. (17WaU.) 453,457 (1873). For a fuller statement of the facts, see generally Adams v. Burks, 1 F. Cas. 100 (CC.D. Mass. 1871) (No. 50).
177. Hatch v. Adams, 22 F. 434, 438 (C.C. Pa. 1884). Contra McKay v. Wooster, 16 F. Cas. 183,185 (C.C.D. Cal. 1873) (No. 8847) (permitting good, a patented container for transporting eggs, to be resold in exclusive territory of a different licensee, but relying on construction of grant language rather than first-sale rule).
178. Norman D. Axelrad, Franchising-Changing Legal Skirmish Lines or Armageddon? Some Observations from the Foxhole, 26 BUS. LAW. 695, 699 (1971);
179. see also Ellis v. Dodge Bros., 246 F. 764, 768 (5th Cir. 1917) (finding an open-ended agreement requiring Dodge to sell automobiles to franchisee not void for lack of mutuality). On the Ford Motor Company's early experiences, see DlCKE, supra note 81, at 59-74.
180. See MARTIN MENDELSOHN, INTERNATIONAL FRANCHISING: AN OVERVIEW 4-5 (Martin Mendelsohn ed., 1984) (discussing that major franchising growth occurred after World War II).
181. See, e.g., Bailey v. Austrian, 19 Minn. 535, 535 (1873) (holding that a requirements contract to supply pig iron to a foundry lacked mutuality because buyer was not required to purchase any particular amount of a good); see also Harold C. Havighurst & Sidney M. Berman, Requirement and Output Contracts, 27 ILL. L. REV. 1, 3 (1932) (discussing requirements contracts and their potential lack of consideration and mutuality).
182. Samuel Williston, The Law of Contracts § 104 (1920) (citing numerous decisions).
183. See, e.g., Oscar Schlegel Mfg. Co. v. Peter Cooper's Glue Factory, 132 N.E. 148, 149 (N.Y. 1921) (holding a contract invalid where it imposed no obligations on buyer).
184. See, e.g., Ellis, 246 F. at 766-67 (holding a contract valid as to mutuality where buyer had to meet requirements); E.C. Dailey Co. v. Clark Can Co., 87 N.W. 761, 762 (Mich. 1901) (upholding a contract where buyer could only purchase requirements from seller).
185. See, e.g., Hufftnan v. Paige-Detroit Motor Car Co., 262 F. 116, 116 (8th dr. 1919) (holding an open-ended franchise contract terminable at will for insufficient mutuality of obligation);
186. Oakland Motor Car Co. v. Ind. Auto. Co., 201 F. 499, 499-500 (7th Cir. 1912) (holding that a contractual provision allowing cancellation for just cause was too indefinite to be valid).
187. But see Moon Motor Car Co. of N.Y. v. Moon Motor Car Co., 29 F.2d 3, 4 (2d Cir. 1928) (holding that the contract had sufficient mutuality of obligation and distinguishing Huffman and Oakland).
188. See also Arthur L. Corbin, The Effect of Options on Consideration, 34 YALE L.J. 571, 586 (1925) (discussing lack of mutuality in open-ended franchise agreements);
189. Note, Options and Consideration in Automobile Dealership Agreements, 22 Va. L. REV. 324, 324 (1936) (examining courts' refusal to grant relief in open-ended franchise contracts).
190. E.g, Buick Motor Co. v. Thompson, 75 S.E. 354, 356 (Ga. 1912);
191. see also Erskine v. Chevrolet Motors Co., 117 S.E. 706, 710 (N.C. 1923) (asserting the importance of information costs).
192. E.g., Buggs v. Ford Motor Co., 113 F.2d 618 (7th Cir.), cert, denied, 311 U.S. 688 (1940).
193. Ford Motor Co. v. Kirkmyer Motor Co., 65 F.2d 1001, 1006 (4th Cir. 1933);
194. see also Bushwick-Decatur Motors, Inc. v. Ford Motor Co., 116 F.2d 675, 677 (2d Cir. 1940) (noting the problem of adhesion contracts, but refusing to address it judicially in the absence of legislation).
195. 15 U.S.C. § 14 (2006).
196. On the congressional concern, see H.R. REP. No. 63-1168, at 11-12 (1914).
197. Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, 355-57 (1922). The common law generally refused to condemn such arrangements. See, e.g., Chi., St Louis & New Orleans R.R. Co. v. Pullman S. Car Co., 139 U.S. 79, 89-91 (1891) (applying the common law and upholding exclusive-dealing agreement in Pullman sleeping cars); Brown v. Rounsavell, 78 111. 589, 590 (1875) (upholding a merchant's agreement to deal exclusively in seller's sewing machines and accessories in exchange for a thirty-percent discount).
198. Standard Fashion Co., 258 U.S. at 351-53.
199. Id. at 357.
200. Standard Oil Co. of N.Y. v. Fed. Trade Comtn'n, 273 F. 478, 480 (2d Cir. 1921). The Supreme Court agreed with the Second Circuit in Federal Trade Commission v. Sinclair Co., 261 U.S. 463 (1923). See also DlCKE, supra note 81, at 85-86, 115 (discussing the history of gasoline franchising).
201. See, e.g., Standard Oil Co. of Cal. v. United States, 337 U.S. 293, 302 (1949) (applying aggressive antitrust rules to gasoline exclusive dealing even though the covered market shares were relatively small);
202. see supra notes 82-84 and accompanying text.
203. For example, prior to MacPheryon v. Buick Motor Co., 111 N.E. 1050 (N.Y. 1916), a manufacturer could avoid breach-of-warranty claims for a defective product if the good had been sold first to a dealer.
204. See, e.g., Joslyn v. Cadillac Auto. Co., 177 F. 863, 867 (6th Cir. 1910) (classifying franchisees as vendees); Isbell v. Anderson Carriage Co., 136 N.W. 457, 457-58 (Mich. 1912). (classifing franchisees as purchasers).
205. See supra notes 129-30 and accompanying text (discussing how the first-sale doctrine peiforms an antitrust function).
206. United States v. Gen. Elec. Co., 272 U.S. 476, 481-83 (1926).
207. Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373, 394-98 (1911).
208. The Court reached the same conclusion in Standard Fashion Co. v. Magrant-Houston Co., 258 U.S. 346, 354-55 (1922).
209. Straus v. Victor Talking Mach. Co., 243 U.S. 490, 494-96 (1917).
210. See generally Ford Motor Co. v. Union Motor Sales Co., 244 F. 156 (6th Cir. 1917) (holding that Ford could not by agreement "license" the patents in its cars to car dealers on the condition that the dealers adhere to Ford's stipulated resale prices; such a license was a mere subterfuge in order to avoid the resale-price-maintenance rule).
211. Straus, 243 U.S. at 500-01.
212. Simpson v. Union Oil Co. of Cal., 377 U.S. 13, 24 (1964).
213. Id. at 20-22.
214. See DlCKE, supra note 81, at 3 ("By the late 1950s perceptive entrepreneurs realized that, to use a popular example, there was more money to be made selling hamburger stands than in selling hamburgers.").
215. See, e.g., Kypta v. McDonald's Corp., 671 F.2d 1282, 1286 (11th Cir. 1982) (rejecting the claim that the franchisor unlawfully tied the license of its name and trademark to the restaurant lease);
216. Principe v. McDonald's Corp., 631 F.2d 303, 308 (4th Cir. 1980) (same), cert, denied, 451 U.S. 970 (1981).
217. E.g., Siegel v. Chicken Delight, Inc., 448 F.2d 43, 47-48 (9th Cir. 1971) (condemning an arrangement under which franchisor did not charge franchise fee but required franchisee to take various supplies at prices higher than the market rate), cert, denied, 405 U.S. 955 (1972).
218. For a catalog and description of the statutes, see Friedrich Kessler, Automobile Dealer Franchises: Vertical Integration by Contract, 66 YALE LJ. 1135,1169 & n.224 (1957).
219. Id.
220. E.g., Fed. Trade Comm'n, Annual Report 24-25 (1939), available at http://www.ftc.gov/os/annualreports/arl939.pdf;
221. see also PALAMOUNTAIN, supra note 74, at 136 (discussing the discovery that statutes regulating the franchising process were the result of dealer collusion).
222. Automobile Dealers' Day in Court Act, Pub. L, No. 1026, 70 Stat 1125 (1956) (codified at 15 U.S.C. §§ 1221-1225 (2006));
223. see Donald P. McHugh, The Automobile Dealer Franchise Act of 1956, 2 ANTITRUST BULL. 353, 354 (1957) (discussing the Act's relationship to antitrust law).
224. H.R. REP. No. 2850, at 3 (1956).
225. Automobile Dealers' Day in Court Act pmbl.
226. See ROWE, supra note 75, at 3-35 (discussing the background and legislative history of the Robinson-Patman Act);
227. PALAMOUNTAIN, supra note 74, at 169-222;
228. Schragger, supra note 76, at 1011 (discussing the anti-chain movement and the loss of progressive constitutionalism since the New Deal).
229. See James M. Mayo, The American Grocery Store 78-82 (1993);
230. William I. Walsh, The Rise and Decline of the Great Atlantic & Pacific Tea Company 36 (1986);
231. Iizabeth Cohen, The Class Experience of Mass Consumption: Workers as Consumers in Interwar America, in THE Power of Culture: Critical Essays in American History 135,149 (Richard Wrightman Fox & T.J.Jackson Leans eds., 1993).
232. Fed. Trade Comm'n, Final Report on the Chain Store Investigation 57-58, 85-97 (1934);
233. see ELLIUS W. HAWLEY, THE NEW DEAL AND THE PROBLEM OF MONOPOLY 248-50 (1966) (arguing that when large chain stores push down prices, they do so at the expense of small, family-owned stores).
234. See FED. TRADE COMM'N, supra note 167, at 57-58,85-97.
235. See 14 HERBERT HOVENKAMP, ANTITRUST Law ¶ 2361 (2d ed. 2006) ("The concern of [the] original §2 was predatory pricing in which those paying the low price are the long-term victims.").
236. E.g., Standard Oil Co. v. Fed. Trade Comm'n, 340 U.S. 231, 249-50 (1951);
237. Myers v. Shell Oil Co., 96 F. Supp. 670, 673 (S.D. Cal. 1951);
238. Goodyear Tire & Rubber Co., 22 F.T.C. 232, 237 (1936) (holding that it was unlawful to charge Sears a lower price for similar tires sold to branded Goodyear dealers).
239. See Richard A. Posner, The Robinson-Patman Act 26-27 (1976);
240. Philip Elman, The Robinson-Patman Act and Antitrust Policy: A Time for Reappraisal, 42 WASH. L. REV. 1, 11-13 (1966) (questioning the efficacy of the Robinson-Patman Act);
241. Frederick Rowe, The FTC's Administration of the Anti-Price Discrimination Law: A Paradox of Antitrust Policy, 64 COLUM. L. REV. 415,416 (1964) (arguing that the Robinson-Patman Act is not a true antitrust measure because it "arose from efforts to shelter traditional distribution channels from competition");
242. Note, The Good Faith Defense of the Robinson-Patman Act: A New Restriction Appraised, 66 YALE L.J. 935, 943 (1957) (stating that "giving to the vertically-integrated distributor a competitive advantage unrelated to his performance ⋯ frustrates die antitrust laws' attempt to promote efficiency").
243. See 14 HOVENKAMP, supra note 169,1 2312.
244. Standard Oil Co. v. Brown, 238 F.2d 54, 57 (5th Cir. 1956);
245. Enter. Indus, v. Tex. Co., 136 F. Supp. 420, 421 (D. Conn. 1955), rev'don other grounds, 240 F.2d 457 (2d Cir.), cert, denied, 353 U.S. 965 (1957). For a full canvas, see Note, Gasoline Marketing and the Robinson-Patman Act, 82 YALE L.J. 1706(1973).
246. United States v. Bordon Co., 347 U.S. 514, 515 (1954);
247. In re The Great Ad. & Pac. Tea Co., 26 F.T.C. 486,486 (1938).
248. ROWE, supra note 75, at 536.
249. Id. at 538.
250. Id. at 538-40.
251. Id. at 541.
252. Id. at 541-42.
253. E.g., Standani Oil Co. of Cal. v. United States, 337 U.S. 293, 293 (1949) (finding a violation of section 3 of the Clayton Act).
254. Sherman Act, 15 U.S.C. §§ 1-2 (2006).
255. On the details of the cartel, see HOVENKAMP, supra note 44, at 331-48 (stating that the organization imposing the maintenance of resale prices represented ninety percent of the wholesale drug trade at the time of the cartel).
256. See generally Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) (discussing the use of resale price maintenance in Dr. Afifejas a cartel facilitator (relying on HOVENKAMP, supra note 11, at 186-88)).
257. Leegin overruled Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 406-07 (1911) (applying rule of reason to a resale-price- maintenance claim).
258. See supra text accompanying notes 118-20 (noting that certain groups tried to monopolize the film industry using Thomas Edison's projector and film patents).
259. On the development of the case law, see 8 PHILLIP E. AREEDA & HERBERT HOVENKAMP, Antitrust Law ¶¶ 1620-1627 (2d ed. 2000).
260. On this point, see Lester Telser, Why Do Manufacturers Want Fair Trade?, 3 J.L. & ECON. 86,87 (1960) (stating the free-rider explanation for resale price maintenance).
261. Leegin, 551 U.S. at 887 (overruling Dr. Miles, 220 U.S. at 373 (applying the rule of reason to a resale-price-maintenance claim)).
262. Int'l Salt Co. v. United States, 332 U.S. 392 (1947). On the development of tying law's per se rule, see 9 AREEDA & HOVENKAMP, supra note 184, ¶¶ 1720-1722.
263. On the lack of any foreclosure in many of these early decisions, see Bohannan, supra note 118, at 25-27.
264. Int'l Salt Co., 332 U.S. at 396-97.
265. Id. at 396.
266. United States v. Loew's, Inc., 371 U.S. 38, 45-46 (1962).
267. III. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28,45-46 (2006).
268. Siegel v. Chicken Delight, Inc., 448 F.2d 43, 51-52 (9th Cir. 1971), cert, denied, 405 U.S. 955 (1972).
269. Former Enters, v. U.S. Steel Corp., 394 U.S. 495, 508-09 (1969);
270. see also United States v. Gen. Motors Corp., 121 F.2d 376, 400-01 (7th Cir. 1941) (condemning tying of General Motors' own financing to financed purchases of its automobiles), cert, denied, 314 U.S. 618 (1941).
271. See Gen. Motors Corp., 34 F.T.C. 58, 86 (1941), modified, 34 F.T.C. 84 (1942) (forbidding General Motors from requiring its dealers to use only its parts). On tying claims in the automobile industry, see Kessler, supra note 159, at 1161.
272. United States v. Arnold, Schwinn & Co., 388 U.S. 365,382 (1967).
273. Albrecht v. Herald Co., 390 U.S. 145,153 (1968).
274. Id.
275. See Herbert Hovenkamp, Vertical Integration by the Newspaper Monopolist, 69 IOWA L. Rev. 451, 456, 458-59 (1984) (explaining how high newspaper-carrier prices disadvantage newspapers).
276. See, e.g., PaschaU v. Kan. City Star Co., 727 F.2d 692, 704 (8th Cir. 1984) (en bane) (holding that the newspaper did not unlawfully monopolize distribution market by terminating contracts with independent carriers and switching to an employee-distribution scheme), cert, denied, 469 U.S. 872 (1984).
277. ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR AGAINST ITSELF 210-16 (1978).
278. United States v. Arnold, Schwinn & Co., 388 U.S. 365,367 (1967).
279. Brief of the United States, United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967) (No. 25), 1967 WL 129568.
280. Id. at 46-50.
281. Id. at 50-51.
282. Richard A. Posner, The Next Step in the Antitrust Treatment of Restricted Distribution: Per Se Legality, 48 U. CHI. L. REV. 6, 7-8 (1981);
283. see also 3 PHILLIP E. AREEDA & DONALD F. TURNER, ANTITRUST LAW I 734c, at 262 (1978) (explaining that vertically imposed territorial restrictions, even by a monopolist, are not presumed unlawful; no citation to Schwinn).
284. Cont'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 36-37 (1977).
285. George Ellery Hale & Rosemary D. Hale, Market Power: Size and Shape Under the Sherman Act 49 (1958).
286. See supra note 182 and accompanying text (discussing the details of the Dr. Miles cartel).
287. See supra text accompanying notes 195-98 (discussing Albrechi's per se rule against maximum-price restraints).
288. Brown Shoe Co. v. United States, 370 U.S. 294,343-44 (1962).
289. Celler-Kefauver Act, Pub. L. No. 81-899, 64 Stat 1125 (1950) (rewriting section 7 of the Clayton Act, 15 U.S.C. § 18 (1946)). On the legislative history, see Derek C. Bok, Section 7 of the Clayton Act and the Merging of Law and Economics, 74 HARV. L. REV. 226, 249 (1960), and Hovenkamp, supra note 82, at 521-22.
290. Brief for the United States at 136-37, Brown Shoe Co. v. United States, 370 U.S. 294 (1962) (No. 4), 1961 WL 101890.
291. Id. (footnotes omitted).
292. United States v. Am. Tobacco Co., 221 U.S. 106,187-88 (1911).
293. Standard Oil Co. v. United States, 221 U.S. 1, 76-77 (1911).
294. See, e.g., United States v. Standard Oil Co., 47 F.2d 288, 309-11 (E.D. Mo. 1931) (praising vertical integration in petroleum for its efficiency).
295. United States v. U.S. Steel Corp., 251 U.S. 417, 442 (1920).
296. United States v. Eastman Kodak Co., 226 F. 62,79-80 (W.D.N.Y. 1915).
297. United States v. Corn Prods. Refining Co., 234 F. 964,984-90 (S.D.N.Y. 1916).
298. Id. at 1013; Eastman Kodak Co., 226 F. at 80.
299. Munn v. Illinois, 94 U.S. 113, 135-36 (1876); see HOVENKAMP, supra note 44, ch. 12 (discussing the history, purpose, and effect of the development of railroad regulation).
300. For a reading that strongly promotes these views, see ARTHUR R. BURNS, THE DECLINE of Competition: A Study of the Evolution of American Industry 445 (1936).
301. See also David Lynch, The Concentration of economic Power 132 (1946) ("Organized in a vertical manner, they operate all stages of the productive process."). But see HAWLEY, supra note 167, at 218-20 (presenting the potential benefits of integration).
302. See ALFRED E. KAHN, THE ECONOMICS OF REGULATION 9-10 (2d ed., MIT Press 1988) (1971) (describing the economic climate during the Depression).
303. See Roy C. Cook, Control of the Petroleum Industry by Major Oil Companies 51-52 (Temp. Nat'l Econ. Comm., Investigation of Concentration of Economic Power Monograph No. 39, 1941) (describing how integration has handicapped smaller business in the oil industry).
304. Henry Simons, A Positive Program for Laissez-faire 20-21 (1934).
305. ROSTOW, supra note 46, at 117. Rostow later became the dean of Yale Law School, from 1955 to 1965.
306. Corwin D. Edwards, Maintaining Competition 130 (1949).
307. United States v. Paramount Pictures, Inc., 334 U.S. 131, 174 (1948) (citations omitted).
308. Edward Chamberun, The Theory of Monopolistic Competition 71-73 (1933).
309. See Hovenkamp, supra note 10, at 344 (describing that in "sharp contrast" to the First New Deal, the Second New Deal ushered in antitrust policies that were "highly suspicious of any form of agreement among rivals and increasingly hostile toward both dominant firms and vertical integration").
310. See id. at 341 (describing how Edward Chamberlin's model of monopolistic competition "solved the ruinous competition puzzle by illustrating how firms in product differentiated markets would shift their efforts into repositioning their products rather than producing more").
311. CHAMBERUN, supra note 229, at 123.
312. Joe S. Bain, Barriers to New Competition: Their Character and Consequences in MANUFACTURING INDUSTRIES 142-43, 212 (1956). While Bain was Harvard trained and became the principal spokesperson for the Harvard School industrial organization theory in the 1950s, he spent most of his academic career at the University of California, Berkeley.
313. Id. at 144-66.
314. Id. at 212.
315. Id.
316. U.S. Dep't of Justice, 1968 Merger Guidelines 9-10 (1968), available at http://www. usdoj.gov/atr/hmerger/11247.pdf. These Guidelines were drafted while Donald F. Turner was head of the Department's Antitrust Division and issued on his last day in office.
317. United States v. Yellow Cab Co., 332 U.S. 218, 227 (1947). There the Court claimed: The fact that these restraints occur in a setting described by the appellees as a vertically integrated enterprise does not necessarily remove the ban of the Sherman Act⋯ Such a restraint may result as readily from a conspiracy among those who are affiliated or integrated under common ownership as from a conspiracy among those who are otherwise independent.
318. Id. This "intraenterprise conspiracy" doctrine was later overruled by the Supreme Court in Coppenoeld Corp. v. Independence Tube Corp., 467 U.S. 752, 752 (1984). See 7 AREEDA & HOVENKAMP, supra note 184, \ 1463 (discussing the evolution and demise of the "intraenterprise conspiracy" doctrine between Yellow Cab Co. and Coppenveld Corp.).
319. United States v. Paramount Pictures, Inc., 334 U.S. 131, 131-32 (1948). The problem had already been cited during the New Deal. See Daniel Bertrand et al., The Motion Picture Industry-A Pattern of Control (Temp. Nat'l Econ. Comm., Investigation of Concentration of Economic Power Monograph No. 43,1941) (noting the disadvantaged position of independent exhibitors of motion pictures in comparison with affiliated exhibitors).
320. Yellow Cab Co., 332 U.S. at 226-27.
321. United States v. Columbia Steel Co., 334 U.S. 495, 495 (1948);
322. see also Note, The Columbia Steel Case: New Light on Old Antitrust Problems, 58 YALE L.J. 764, 768 (1949) (discussing the problems of antitrust law that arise from vertical integration).
323. Yellow Cab Co., 332 U.S. at 226-27.
324. United States v. N.Y. Great Atl. & Pac. Tea Co., 173 F.2d 79,85 (7th Cir. 1949).
325. See United States v. N.Y. Great Ad. & Pac. Tea Co., 67 F. Supp. 626, 641 (E.D. 111. 1946) (explaining that the government accused the defendant of predation).
326. Bork, supra note 55, at 181.
327. Brief for the United States at 2, United States v. Columbia Steel Co., 334 U.S. 495 (1948) (No. 461), 1948 WL 47544 (emphasis added).
328. See generally U.S. Dep'T OF JUSTICE, supra note 237 (outlining the U.S. Department of Justice's hostility toward vertical mergers).
329. United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586,588 (1957).
330. Id.at588-9.
331. Brief for the United States at 113, du Pont, 353 U.S. 586 (No. 3) (emphasis omitted), 1956 WL 88967.
332. Brief for Appellee Gen. Motors Corp. at 171, du Pont, 353 U.S. 586 (No. 3), 1956 WL 88968.
333. Compare United States v. Columbia Steel Co., 334 U.S. 495 (1948) (holding that excluding competition via vertical integration does not necessarily violate the Sherman Act), with H.R. REP. No. 81-1191, at 11 (1949) (noting that the amendment of section 7 of the Clayton Act was intended to "make it clear that the bill applies to all types of mergers and acquisitions, vertical and conglomerate as well as horizontal").
334. For the Court's solution to the retroactivity problem, see du Pont, 353 U.S. at 590.
335. See Ronald H. Coase, The Nature of the Firm: Influence, 4 J.L. ECON. & ORG. 33, 34 (1988) (asserting that his two articles had two separate aims).
336. Ronald H. Coase, The Problem of Social Cost, 3J.L. & ECON. 1 (1960).
337. See Herbert Hovenkamp, The Coase Theorem and Arthur Cecil Pigou, 51 Ariz. L. REV. 633, 633 (2009) (discussing Arthur Cecil Pigou's influence on Ronald Coase and the transaction-costs model).
338. Coase, supra note 254, at 33.
339. See generally OLIVER E. WILLIAMSON, MARKETS AND HIERARCHIES: ANALYSIS AND ANTITRUST Implications (1975) (using Coase's ideas of transaction costs and uncertainty); Klein, Crawford & Alchian, supra note 35, at 298 (1978) (citing Coase's article, The Nature of the Firm, as fundamental and aiming to expand on Coase's ideas).
340. Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877,877 (2007).
341. Id. at 903.