DEFENSE OF BIGNESS - THE PRICING OF GOODS AND SERVICES by Sumner H. Slichter The recent decision of the Supreme Court in the du Pont–General Motors case suggests the desirability of a review and an appraisal of American policy toward competition, monopoly, and bigness in business. The decision reveals the strong determination of the court to prevent competition from being weakened and the court's willingness to resort to controversial interpretations of the law in order to implement the public policy of preventing restraints on competition.
But the decision also reminds us that much thinking on the relation of bigness to competition is out of date and unrealistic. Hence, the adaptation of traditional American antitrust policy to the facts of modern industry requires that we take a fresh look at the role of large enterprises in American business—particularly the role of large enterprises as a source of vigorous and dynamic competition.
When one compares the economy of the United States with the economies of other advanced industrial countries, four characteristics stand out conspicuously.
(1) The Government of the United States endeavors through broad and drastic laws to prevent restraints on competition and to forestall the growth of monopoly. Most other advanced industrial countries either tolerate considerable restraint on competition or even encourage organizations of business men that are designed to control competition.
(2) Competition in American industry is far more vigorous and pervasive than in the industries of any other advanced industrial country. Indeed, the vigor of competition in the United States almost invariably attracted comment from the European productivity teams that visited this country in the years following the war.
(3) The United States has many more huge business enterprises than any other country. Several years ago this country had more than 100 corporations (exclusive of purely financial ones) with assets of more than $250 million each. General Motors produces far more cars than the combined British, German and French automobile industries, and the United States Steel Corporation produces more steel than the entire British steel industry.
(4) Production in many American industries (especially those requiring large capital investment) is highly concentrated in the hands of a few large concerns. As a general rule, the concentration of production in other industrial countries is far less than here.
These four characteristics of the American economy are not unrelated. It would be wrong to ascribe the widespread and intense competition in American industry solely to the strong public policy against restraint of trade, monopolization and interference with competition. Conditions in the United States—the absence of class lines, the abundance of opportunity, the weakness of tradition—have long made life here highly competitive in all its aspects, and competition in business is just one manifestation of this general competitive spirit. But America's unique and firm public policy against restraints on competition has undoubtedly helped greatly to keep industry here strongly competitive.
This strong policy, however, has paradoxically encouraged the development of giant industrial corporations and the concentration of production in many industries among a few large concerns. The growth of enterprises in Europe has been limited by the practice of forming cartels— a practice which governments have tolerated and even encouraged. The cartel or trade association divides markets among its members, limits the growth of the most efficient concerns, and assures the weak, high-cost concern a share of the market.
In the United States, where cartels are illegal, each concern is pretty completely exposed to competition from all other firms, and business goes to the firms that can get it. This means that in many industries production is gradually concentrated in the hands of a few industrial giants, and only a small part of the business is left for small firms.