Planet Money - Antitrust in America (classic)

Episode Date: November 1, 2023

Earlier this fall, the Federal Trade Commission filed a high-stakes lawsuit against Amazon.In that suit, the FTC claims Amazon is a monopoly, and it accuses the company of using anti-competitive tactics to hold onto its market power. It's a big case, with implications for consumers and businesses and digital marketplaces, and for antitrust law itself. That is the highly important but somewhat obscure body of law that deals with competition and big business.And so, this week on Planet Money, we are doing a deep dive on the history of antitrust. It begins with today's episode, a Planet Money double feature. Two classic episodes that tell the story of how the U.S. government's approach to big business and competition has changed over time.First, the story of a moment more than 100 years ago, when the government stepped into the free market in a big way to make competition work. It's the story of John D. Rockefeller and Standard Oil, and a muckraking journalist named Ida Tarbell.Then, we fast forward to a turning point that took antitrust in the other direction. This is the story of a lawyer named Robert Bork, who transformed the way courts would interpret antitrust law.These episodes were produced by Sally Helm with help from Alexi Horowitz Ghazi. They were edited by Bryant Urdstadt. Alex Goldmark is Planet Money's executive producer.Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. Earlier this fall, a federal agency, the Federal Trade Commission, filed a high-stakes lawsuit against Amazon. Now, the FTC alleges that Amazon is a monopoly, and the FTC accuses the company of using anti-competitive tactics to hold on to its market power, to keep that monopoly. This is a huge case with implications for consumers and businesses and digital marketplaces and for antitrust law itself. Antitrust is the highly important but somewhat obscure body of law that deals with competition and big business. And so this week on Planet Money, we are doing a deep dive on antitrust. Now, on Friday, we're going to have an interview with Lina Khan, who is the current chair of the FTC, you know, really the person behind this big

high-stakes lawsuit. But today, we have a Planet Money double feature. We've got two classic episodes that tell the story of how the U.S. government's approach to big business and competition has changed over time. Part one is about a moment more than 100 years ago when it seemed like a few companies were taking over America and the government stepped into the free market in a big way to make competition work.

Here is that story. It is really epic gold here. Do you know which door we're supposed to go in? Front? The history of breaking up big companies in America arguably starts at an old house in Titusville, Pennsylvania, the childhood home of a woman named Ida Tarbell. The house is still standing. It's actually just about 25 minutes from the small town where I grew up.

Hi. You're Kenny? I'm Kenny. Great to meet you. We meet Lynn Cressman. She's the lead volunteer here, and somehow she knows my nana. I do know your grandma. I know her through my husband. Small towns, man.

Anyway, Lynn wants to show us this spot that little Ida Tarbell used to love. She opens up what looks like a closet door. Oh, my God. It is, in fact, the steepest staircase we have ever seen. The staircase leads up to the house's cupola, like a little tower full of windows. Sunlight is pouring in. And the view is awesome.

Look, you can see the hillsides of Titusville. About 150 years ago, Ida Tarbell was a brainy teenager. She used to come up to this tower to read her books, to look through her microscope, and look out the window. Like, what would she have seen out here? What would this have looked like? I think she would have seen wagons going down the street, horses pulling wagons loaded with barrels of oil. And certain streets would have been squishing through the mud and the oil mixed together. Okay, okay, maybe that sounds gross, but it was, in fact, a great problem to have in the 1800s. Titusville was the birthplace of the American oil industry.

It was the first place somebody figured out that you could use a drill to get a ton of oil out of the ground. Western Pennsylvania became, to the oil industry what Silicon Valley is now for the tech industry. In the 1860s, it would have seemed like everybody here had an oil well or a small startup oil refinery. People came from all over the country to get a piece of the money just bubbling out of the ground. One of those people was Franklin Tarbell, the father of Ida Tarbell. He and some partners were into producing oil, and he was doing pretty well. He had this nice house with an awesome tower for his daughter Ida to hang out in.

But one day, Ida came downstairs, and something had changed. Ida would later write, I remember a night when my father came home with a grim look on his face. He no longer told of the funny things he had seen and heard during the day. He no longer sang to my little sister. Hello and welcome to Planet Money. I'm Kenny Malone. And I'm Julia Simon. It would be 30 years before Ida Tarbell fully figured out what was going on that night and what she found out would change her life and the way the United States thinks about big business. Today on the show, Ida Tarbell versus the richest man in the world.

Hey everyone, Darren Woods here. Healthy economic growth means low unemployment. It means making more stuff. And it means higher mortality. So when the economy's doing well, deaths overall go up. That's kind of counterintuitive to hear, even for some economists. I would present the paper and the reaction I would have from economists would be, well, I can't see anything wrong with what you've done, but I just don't believe it. Booms, busts, and the surprising effect on mortality. That's in our latest bonus episode.

You can check that out now if you're a Planet Money Plus listener. If that's you, thanks for your support. If it's not, well, it could be. You get bonus content, sponsor-free listening, and you get to support NPR in the work we do. Go to plus.npr.org. Well, first, I'll start by asking you what your name and your position is. My name is Kathleen Brady. I am a writer and biographer. Kathleen Brady is the Ida Tarbell biographer.

She wrote Ida Tarbell, Portrait of a Muckraker. Because Ida Tarbell grew up and became a muckraker, an investigative journalist, but also a biographer. And she was a huge deal. She was kind of the Doris Kearns Goodwin of her day. She'd written this great biography of Napoleon, followed it up with an even more popular biography of Abraham Lincoln. And one day around the year 1900, Tarbell, some colleagues, and her magazine editor were all sitting around trying to brainstorm her next big project. And her editor, Sam McClure, is like, look, I feel like there is one defining issue of this moment. They decided to take up the trust,

the question of the trust, which they regarded as the question of the age. The question of trusts. How about this question first, though? What is a trust? After the Civil War, the U.S. was going through something kind of similar to what we're going through today. There had been these huge breakthroughs in technology, and they were allowing private companies to grow bigger than they'd ever been before. So one breakthrough was the telegraph, for example. Now you could have offices all across the country and still boss your employees around. The railroad networks. Now your widget factory didn't have to just serve Pennsylvania.

It could ship anywhere in the country. And so the U.S. economy started to consolidate. One regional company buys another and then another. And soon the country was left with just a handful of massive companies, what were known as trusts. Trusts. Trusts were technically a bunch of smaller companies legally stitched together. And in the end, many industries were controlled by one trust. There was a meat trust, a whiskey trust, a rope and cordage trust. There was a barbed wire fence trust. And this consolidation had happened unsettlingly fast. Americans were

starting to wonder, have these companies become too big and too powerful? So that is why Ida Tarbell and her editor, Sam McClure, were sitting around trying to figure out which trust she should investigate. Ida wanted to do sugar because it touched the family dinner table and McClure thought that was too trivial. They thought about doing meat, but the big titan of meat had just died. They wanted someone to profile. And Ida was saying, well, it's got to be something like what happened in the oil industry. And she was talking about that. Her own recollection. Her own recollection of the oil industry.

The oil industry. And McClure is like, yes, perfect. Oil. You will write about the biggest, baddest trust of them all. Standard oil. Penny Malone, we are here at the old Standard Oil building. It's still right near Wall Street in New York, 26 Broadway. And I feel like I can just imagine Ida Tarbell standing

exactly where we are, looking up at this fortress of wealth in America. This building is like brooding concrete. Very brooding. And there was this rumor that when Standard Oil was here, they had special doorknobs put on, and you had to know specifically how to turn these trick doorknobs in order to get into certain rooms. It's all very big and secretive.

Since Ida Tarbell was a biographer, she was going to focus on the man who ran this place. Possibly the wealthiest man ever, one of the most feared businessmen in the world, the head of the Standard Oil company, John D. Rockefeller. We were able to find exactly one recording of Rockefeller. It is a video. It is super old. It is weirdly unedited. Tell me when, he says. Dear Mr. Holliday. Rockefeller's on camera wearing a three-piece suit

and those super round glasses that you can really only pull off if you're a billionaire. And it seems this video is a thanks, but I'm not coming to the Standard Oil anniversary party. I exceedingly regret that it will be impossible for me to attend. So Rockefeller, he was this mysterious titan of industry, and Ida Tarbell was going to figure out who this man really was. How did he become one of the richest men in the world, and how did he build his oil empire? And so she started her investigation. She's like, you know what? I need documents. Luckily, Standard Oil had been involved in all these court cases.

It was a big company. So Tarbell figured there'd be plenty of records from those. company. So Tarbell figured there'd be plenty of records from those. Plus, she'd heard there was like a book or pamphlet that contained a bunch of records from some of these court cases. And Ida thought, piece of cake, because there are all these court records. There are all these court records. And she thought she was just going to grind it out. Well, that's not what happened. No. When Ida Tarbell went searching for all these court records and pamphlets, they were gone. The records had disappeared in a lot of cases. Suspiciously disappeared?

Suspiciously disappeared. Pamphlets, entire runs of pamphlets had been bought up. And she learned that Standard Oil had bought up all the copies of this. Oh, man. Had they burned them or just kept them? I don't know what they did with them, but I would assume they did. They didn't want them in circulation. So she thought, well, I'll talk to my neighbors in Titusville.

So she started contacting people back in her hometown who might have known about the cases. Half of them were afraid to talk to her because they thought Rockefeller would hurt them. Some people thought she was the tool of Rockefeller and they didn't want to talk to her. Even her own father, back in Titusville, was leery of this project. He was very old at this point, but when Ida told him what she was up to... Her father said, don't do it. They will ruin the magazine. And he was serious. He was very serious. He was very serious.

He saw what happened and he saw their power. Nevertheless, Ida Tarbell kept going and slowly she started to piece together a portrait of John D. Rockefeller. Rockefeller was born in 1839 in upstate New York. His father was a con man. He was literally a snake oil salesman. John was very different from his dad. He was a devout Baptist and very serious about saving money.

He grew up and built a good business shipping produce. But when the oil boom kicked off, he wanted in on the action. He got into the oil refining business in Cleveland, Ohio. And Ida Tarbell gave him credit. He was great at the oil business. Instead of renting barrels to transport his oil, like everybody else was doing, he figured he could save money by making his own barrels. He also placed his refineries in genius locations, near the water, but also the train tracks.

And that way, if the railroads tried to charge him too much for shipping, he had a second option. But people were telling Tarbell there was something more to his success, something darker. And one day she got a breakthrough. She goes down to the New York Public Library. The librarian is like, Ida, remember those pamphlets that you thought had all suspiciously disappeared? Guess what I just found? She gets this pamphlet. What's she finding?

Well, she found that it presented the federal investigation into the South Improvement Oil Company. The South Improvement Company. In the movie version of this, Ida Tarbell would flash back to her childhood home in her little tower. And that day, her father was so upset. The South Improvement Company was less of a company and more of a secretive scheme from the 1870s, from back when Ida Tarbell was still in Titusville. And it was a shady scheme. Essentially, a small group of railroads got together with a handful of oil refiners, including Rockefeller, and they said, you know what? Let's all agree.

Everybody inside this deal will get good shipping rates for their oil. Everybody outside the deal will get bad shipping rates. When Ida Tarbell was 15, word of this deal got out. And the oil people in Titusville who were not on the inside of this deal, they were furious. And the oil men revolted and erupted and had meetings by flaming torches. They really had flaming torches? Well, yes, because there was no electricity. Ultimately, because of all the bad press, the deal didn't happen.

But it freaked everybody out, including Ida Tarbell's father. That night he came home and was so upset, it was because he knew, from now on, the oil business would be a world with big players making secret deals that Franklin Tarbell would not be a part of. And as Ida Tarbell continued her research, she learned that this scheme may have failed, but it was like a playbook for how Rockefeller ended up conquering the oil industry. Rockefeller's company got big enough that he was able to go to the railroads and start making demands. He'd be like, look, I ship a lot of oil. If you want my business, I want a discount. But let's make this look not shady. Make it look like I get the same rates as everybody else. Then give me some money back later. And maybe more egregiously, he would also

be like, yeah, you know what else? I'm also not so crazy about you carrying my competitor's oil, but I'm going to let you do it. Just every time you do that, you also need to pay me money. These were bombshell details. They meant that Standard Oil had a secret, maybe unfair advantage over its competition, had a secret, maybe unfair advantage over its competition, and Rockefeller used that advantage. In 1872, Rockefeller had about 30 rivals, these other refineries in Cleveland.

He basically said to them, you can either join me, get in on this amazing Standard Oil stock, or you have to compete with me. And if you don't sell to me, I am going to lower my prices more than you can, and I will crush you. Of his nearly 30 rival refineries, Rockefeller was able to buy up 22 of them, six of those in one 48-hour period. They called this the Cleveland Massacre.

And he kept using this move all across the country, in New Jersey and Kansas and Oklahoma and California. When all the dust settled, Standard Oil controlled around 90 percent of oil refining in America. 90 percent. Those sketchy deals with the railroads helped build his empire. But Rockefeller realized things could be even better. What if he owned the means of transport himself? So he started buying up pipeline companies. He owned so much of the oil industry, he could just set the price of oil where he wanted it. And he did. He fixed prices. Ida Tarbell's stories about the shenanigans of Rockefeller and Standard Oil, they were coming out in McClure's magazine. And the magazine's circulation was getting bigger and bigger and bigger.

Ida Tarbell was making the 1902 version of the Serial podcast. And everybody's reading this around America. Everybody's reading it. Everybody's reading this around America. It was an enormous success. Originally, she was supposed to write three stories. Then it was expanded to six. Then it became 12. They eventually made a two-volume book out of these articles.

Everybody was reading these stories, including President Theodore Roosevelt. In 1906, the Department of Justice filed a federal antitrust lawsuit against the Standard Oil Company. After the break, the death of Standard Oil. There's a modern biography of John D. Rockefeller called Titan. It's written by Ron Chernow, and he writes about this dramatic moment at the U.S. Supreme Court.

He writes, at the U.S. Supreme Court. He writes, At 4 p.m. on May 15, 1911, Chief Justice Edward White told a sleepy courtroom, quote, I have also to announce the opinion of the court in No. 398, the United States against the Standard Oil Company.

At once, the room quivered with expectation as senators and congressmen streamed in to hear the verdict. And as White started to read the decision, there was this kind of unusual moment. Justice White said, hold up, hold up. Before we can figure out what to do with this standard oil company, we all need to get on the same page about something. There had been a law on the books from about 20 years before called the Sherman Antitrust Act. It was theoretically

a way for the government to step in when these new giant trusts were misbehaving. But there were some big problems. It was vague and confusing, and it was mostly not working. And Justice White zeroes in on this one phrase that seemed to be tripping everybody up. The Sherman Act said trusts that were, quote, in restraint of trade were illegal. But everybody was like, what? What does that mean? What does restraint of trade mean? And Justice White was like, well, we're seeing it now. Some of the things that Ida Tarbell had uncovered were clearly a restraint of trade. Making secret deals with the railroads that forced your competitors out of business?

Bad for trade. Using that leverage to buy up all your rivals? Clearly bad for competition. Fixing prices? Yeah, that one's pretty obviously bad. The court said certainly these are examples of restraints of trade. And the court used this case to draw an important line. It said, look, use this case to draw an important line. It said, look, this guy, John D. Rockefeller, he is really good at his job. That's part of the reason why his company grew, because he's so good at business. But at some point, Standard Oil just became a bully. It used its sheer size to gain unfair advantages that had nothing to do with being a better oil company. unfair advantages that had nothing to do with being a better oil company. And so it grew simply because it was already big, simply because it could restrain trade. The court took drastic action. It said to Standard Oil, you are in violation of the Sherman Antitrust Act,

and we are going to break up this company into a bunch of smaller companies. And we are going to break up this company into a bunch of smaller companies. It was a huge deal. But it was also not perfect because even after the decision, Rockefeller was like, hey, how about the officials from all these new companies still meet every morning at 1030 at Standard Oil headquarters? Again, Ida Tarbell, biographer, Kathleen Brady. Ida correctly saw that now instead of one company, there were 33 supposedly separate companies actually coordinating with each other. And in addition to everything else, along came the automobile and the demand for oil increased. It was actually 34 companies. And Rockefeller still got stock in those companies.

And that was even better business for him. All those new mini standard oils, they were still oil companies, and oil was good business. They became some of the biggest companies in the world. Exxon, Mobil, ConocoPhillips, Chevron. Rockefeller just became richer than ever. So Ida really didn't feel she had achieved her goal at all, I'm sorry to say. I mean, her goal was to tell a story and that she did, but she did not feel that Rockefeller was punished in any way for breaking the law.

But, but, this case against Standard Oil, in that moment when the Supreme Court said, let's clarify the Sherman Antitrust Act, this would be important for the rest of antitrust history. This clarification would guide the court for decades and decades. It helped the government to go after misbehaving corporations. And, you know, I look back at this case as this moment when the country was really discovering that there is a strange tension in free markets. A free market is great because it promotes competition.

Companies have to battle it out. They have to make things cheaper or better, and that is great for consumers. But businesses do not necessarily like competition. I'm over here selling my thing. It's going great. Then somebody comes along and sells it for less or sells a better version. I don't want that. So I'll just buy up all my rivals before they put me out of business. And before you know it, I have eliminated all competition. So the free market is good because it leads to competition, but the free market also can lead to a lack of competition. One of the main points of antitrust law is to solve this problem, to use government intervention to make free market competition work. The Standard Oil case showed that the federal government was willing to do this, to step into the market in a huge way

to try to make the market work. Okay, so that was the first episode of our classic antitrust series. The breakup of Standard Oil sent the government down the path of stepping into the free market, intervening when it thought big companies were doing things that were bad for competition. After that case, the government got more and more aggressive. It kept stepping in

until years later, there was a reaction to all of that stepping in. And that is part two, the second episode in our double feature. It's about the backlash and the man who arguably made that backlash happen. Ladies and gentlemen, it is my privilege tonight, my very great privilege, to introduce one of the great constitutionalists of our day, the Honorable Robert Bork. This is from a speech a judge named Robert Bork gave in 1987. Thank you. Bork's signature look was this sort of shaggy 19th century style beard. And before we started working on these shows about antitrust, the thing that I knew about Robert Bork was that he was nominated to the Supreme Court and rejected because Democratic senators did not like his long history of very conservative opinions on subjects like abortion and civil rights. And when he died in 2012, that is the subject that his obituaries were all about.

But there is something else about Bork that you don't hear as much about. These reflections are prompted by the history of antitrust law. When I first started at Yale, I really thought the situation of the law was hopeless. Robert Bork completely transformed the way antitrust law works in this country. He changed the very definition of what's legal and illegal for big companies to do. I mean, he changed it so much, it is shocking it is still the same law. And it seems like even Bork was surprised by the impact he had. The fact is, I simply underestimated the power of ideas.

Now that's a very natural error for a professor. If you sit in enough faculty meetings, you are very likely to underestimate the power of thought. Hello and welcome to Planet Money. I'm Jacob Goldstein. And I'm Kenny Malone. Today on the show, how Robert Bork won the fight over the very meaning of competition in America and how he paved the way for some of the biggest, most powerful companies we've ever seen.

So let's talk about Bork. I mean, did you know him? Did you work with him? Oh, sure. I knew him well. This is Eleanor Fox. She's a professor at NYU. Says her political views are significantly more liberal than Robert Bork's.

Opposite end of the spectrum. What was he like? Oh, lovely man. Very, very nice. Very cordial. Very witty. Eleanor Fox started practicing law in 1962. Right around the time Robert Bork started teaching at Yale. And you found your way to antitrust, right?

You became an antitrust. Yeah, it found me. It found me. Luckily, it found me. Why luckily? Oh, because I love it. Why do you love antitrust? Well, I loved David against Goliath.

In David against Goliath, which side did you root for? Oh, David. David and Goliath. So take the classic example from the first episode of this series. Goliath was Standard Oil, the giant oil company controlled by one of the richest men in the world. oil company controlled by one of the richest men in the world. David was the little startup refiners that Standard Oil bought or forced out of business in order to gain control of 90% of the refining business. What was the antitrust worldview when you started practicing in the 1960s? It was for the little guy without power. It was the suspicion that when big firms did anything that made life tough for competitors,

that was probably illegal. And you can really see this in this moment, the 1960s. The Supreme Court kept pushing antitrust further and further, case by case. There was a case in 1962, Brown Shoe Company versus the United States. Can a shoe company buy up a chain of shoe stores? Supreme Court was like, no, that shoe company would just kick the other shoe brands out of those chain stores. No, can't do it. 1966, United States versus Vons Grocery. Can two local grocery store chains merge in Los Angeles? I don't know. Merger?

Okay, but after the merger, they'd only have 7.5% of the local market. Supreme Court was like, no. No, you can't do it. It would be too hard on mom-and-pop shops. Okay, 1967. Utah pie

versus continental baking. Can big, national, frozen pie companies sell really cheap pies in Utah and make business tough for a local pie company?

No way! Okay, but what if the local pie company controls most of the local market and keeps making a profit through most of the price war? Still no. Nope. So in case after case, the court kept ruling for the little guy, kept ruling for Team David and expanding the definition of what was illegal, what was bad for competition.

So there was a kind of joke at the time that the Supreme Court was like the little boy who thought he knew how to spell banana but didn't know when to stop. But what I want to say— Wait, wait, wait. Tell me more about that joke. The little boy, he was trying to spell banana but didn't know where to stop. So we kept going, B-A-N-A-N-A-N-A-N-A. Kenny, I had to get her to explain this to me like three times. But finally, I got it, right?

She was saying that it was appropriate for the Supreme Court to find for David, to find for small businesses in some cases, in a lot of cases. That's the banana, B-A-N-A-N-A. But the court didn't stop there. It kept intervening in cases when it probably should have just left the market alone. That's the N-A-N-A-N-A-N-A. But the court didn't stop there. It kept intervening in cases when it probably should have just left the market alone. That's the N-A-N-A-N-A-N-A. And to be clear, for Eleanor Fox, the basic antitrust worldview at the time was correct. It was just that the court went too far in a few cases. But Robert Bork did not see it that way at all. He had gone to law school at the University of Chicago, where he was profoundly influenced by this group of economists and lawyers who are arguing in a very broad way that in general, the government was way too involved in the free market.

When Bork applied this Chicago school logic to antitrust, he didn't see just a few weird Supreme Court decisions. he didn't see just a few weird Supreme Court decisions. Instead, he saw an entire worldview built on a fundamental misunderstanding of what competition meant and what the point of antitrust was supposed to be. So he set out to destroy that worldview, to just reduce it to rubble and build a whole new worldview in its place. He started writing and arguing. And in 1978, he published what was arguably the most important work on antitrust since Ida Tarbell took on John D. Rockefeller and Standard Oil. It was a book called The Antitrust Paradox.

Do you remember when that book came out? Yes. Was it a big deal? Yes. Did you see people reading it? Like, was it a – did it have a moment? Would you be on the subway? I'm not sure you were going to say the subway. No, I never saw anybody in the subway reading it.

Okay. So no one in the subway reading it, but were people like, hey, did you read the antitrust paradox? Oh no, you were assumed to have read the antitrust paradox. Jacob and I both have copies of this book. We both read it. And it's an important book that we're going to talk about for a little bit. Yeah, the book is like really the center of this show. Because in this book, Bork goes through those cases from the 1960s and many, many more cases and essentially says, if you look at these, you can see clearly antitrust policy has gone way too far. So, for example, the Brown Shoe Company decision.

If a shoe company wants to buy a shoe store, fine. If the shoe company forces out other brands and then consumers want those other brands, they will go to another store. The shoe company will either start selling those other brands again or go out of business. Either way, the free market will sort it out. The government did not need to intervene. And that Vons grocery store case, that case where two stores wanted to merge into one, you know, he looks at that universe and he says, yes, sometimes mergers are bad for competition. You know, if, say, two firms merge and get 100% of the market, that's clearly definitely bad. And in fact, you know, he steps back and he looks and he finds this threshold that's way below that. He says it may be reasonable to block mergers where

the new firm would have more than 40% of the market. But that Vons grocery store case in L.A., Vons would have had seven and a half percent of the Los Angeles grocery store market. He looks at that and he says, clearly that's not bad for competition. Clearly we can let that happen. Also, that Utah pie case where the company said it was the victim of a price war but kept selling pies at a profit. Bork looked back at that case and wrote, there is no economic theory worthy of the name that could find an injury to competition on the facts of the case. Defendants were convicted not of injuring competition, but quite simply of competing. Bork's big argument in the book was this. The point of antitrust is to encourage competition. Everybody agrees. But encouraging competition doesn't mean protecting David against Goliath. You know,

if Goliath comes along and makes a more pleasant grocery store or sells a cheaper frozen pie, then Goliath should win and David should lose. That is what competition means. The Supreme Court, in Bork's view, was not encouraging competition. It was protecting companies like the Utah Pie Company that didn't want to compete. The court was using antitrust law to make competition itself illegal. That is the paradox. Antitrust, the law that is supposed to help competition, was actually harming competition. And Bork, in this book, not only pointed out these problems, he also argued for a solution.

The key, he said, was to stop focusing on competitors, on, you know, David and the other David and Goliath. Instead, Bork said, we should focus on protecting consumers. So, you know, straight up price fixing when a bunch of companies get together and decide not to compete on price. That is definitely bad for consumers. We should go after that. Also, you know, like those mergers. If a company buys up all the other companies in its business like Standard Oil did, also pretty clearly bad for consumers. But Bork looks back at lots of other things the court found illegal. Price wars, manufacturers buying retailers, small mergers.

And he says those are usually fine. If they lead to lower prices or better stuff, that's good for consumers. And if they don't, consumers will shop somewhere else. We can leave this to the free market. You can almost boil the book down into this one sentence that's in the final chapter. It says, the only goal that should guide the interpretation of the antitrust laws is the welfare of consumers. Consumer welfare was this really pretty different goal for antitrust law. Bork was saying, when a business wants to do something we're not so sure about, we've been focusing on how this will affect the other businesses. We should be focusing on how this will affect the consumer. After the book came out, consumer welfare became this viral phrase among conservative

antitrust nerds. Did you have a sense that it would be impactful when you read it? I think yes, but I probably could not have imagined how impactful it would be. Say more about that. Oh, because it became the Bible. In 1980, Ronald Reagan was elected president. He was very much on board with this free market gospel. And his administration adopted new, much more permissive, very borky merger guidelines built around this idea of consumer welfare. And the idea also transformed the way the Supreme Court itself thought about antitrust.

The court cited the antitrust paradox the year after it came out. And then for decades, in one ruling after another after another, the court started reversing its earlier antitrust decisions and using the consumer welfare standard to legalize more and more kinds of business practices. There was an argument going on in the 70s and Bork won. He won. Are we still living in Bork's world? Yes. This consumer welfare standard now defines antitrust law. So take this relatively recent case from 2018. It went before the Supreme Court. Your argument next in case 16-14-54, Ohio et al. versus American Express Company. American Express, in this case, was definitely the Goliath. And one minute and 15 seconds into

the oral arguments, Justice Neil Gorsuch broke in with a question. We're not here to protect competitors, right, Mr. Murphy? Correct. Or necessarily even merchants. The antitrust laws are aimed at protecting consumers. You'd agree with that? Correct, although in this case... Okay, so... It was like the ghost of Robert Bork was sitting there whispering in Justice Gorsuch's ear.

My question is, do you have any evidence that on a net basis consumers pay more? And I don't believe you have. The court found in favor of American Express. Some antitrust cases are simple. You know, a bunch of companies collude to fixed prices. That is obviously bad for competition, obviously bad for consumers. The government should definitely stop it, punish the companies, prevent it from happening. But there are lots and lots and lots of antitrust

cases. Say, when a manufacturer wants to buy a retailer, or when a bunch of companies start engaging in a price war, when it is much harder to figure out whether the government should intervene. And one of the really striking things is, a lot of the time, the answer you get to is basically the result of where you start. If you start out thinking, you know, the free market mostly works, new competitors can come in and take business away from the big established players, then you will usually want to let the free market sort it out. But if you think the free market just doesn't work that well, if you think it's pretty easy for big companies to use their power to suppress competition, then you will think, yeah, in a lot of those sort of hard call cases, the government should intervene in the two parts. The first part was a useful corrective to some of the excesses of the 60s. It really did sharpen thinking about the economics of

antitrust and what competition really means. But there was also this second part, a part that was never explicit. But that second part, she says, was implicit in everything Robert Bork wrote. The second part is about the presumptions that the market works really well, that government intervention is really bad, that government messes up when it comes in, that firms can take care of themselves and if they don't do right, the market will catch them. So that second part is the ideological part. The first part, we needed badly and we got and we adjusted to it. The second part we didn't need. Fox says that second part, the assumption that the free market is good, government intervention is bad, has pushed the government and the court too far in the other direction now. The government just doesn't bring antitrust cases as often as it

used to. And when it does, it's like the banana joke is back. But instead of fighting for David every time, now the court almost always rules in favor of Goliath. As a result, in lots of industries, in food production and banking and airlines and on and on and on, a smaller number of firms is controlling a bigger and bigger share of the market. This tends to feel, you know, pretty abstract to us as consumers. But just in the past few years, and even really just in the past year, this issue has suddenly come to feel much more real, much more sort of visceral, much more urgent. And this is largely because of the incredibly fast rise of a few gargantuan companies, basically Google, Facebook, and Amazon. The world Robert Bork created was the world that made it possible for those companies to get so big and so powerful so quickly.

These episodes first aired a few years ago in 2019. Back then, the last episode in our series featured an interview with a recent law school graduate who had written a viral article, or at least as far as legal papers can go viral. The article was about Amazon and monopoly power, and it sparked a debate about the future of antitrust law. and monopoly power, and it sparked a debate about the future of antitrust law. It was written by Lina Khan, who now chairs the FTC, the Federal Trade Commission, which filed a lawsuit against Amazon just weeks ago. So on Friday, one of my fellow hosts here at Planet Money, Alexi Horowitz-Ghazi,

talks with Lina Khan and asks her about that suit and what it's like taking on big tech. You're kind of like taking on the oil barons of our era in a way. Do you think about it that way? I think it's fair to think that, you know, there are certain markers of the Gilded Age once again that we're living through. And so the robber barons and the industrial trusts that the FTC was charged with taking on a century ago, were once again facing similar battles. You can hear that conversation on the next episode of Planet Money. These episodes were produced by Sally Helm with help from Alexi Horowitz-Gazi. They were edited by Brian Terstadt, and Alex Goldmark is our executive producer. The Robert Bork audio you heard at the beginning of the episode

comes from a 1987 speech he gave to the Philadelphia Society. The Supreme Court tape you heard in this episode comes from the website Oye.org. I'm Kenny Malone. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.