Document Type

Article

Disciplines

International Law

Abstract

I was interested to read the notes sent to me by your Secretary on the history of the Society, a rather checkered one it would seem from its foundation in 1838 until 1935 when, at a meeting addressed by Professor G. C. Allen, the Society finally firmly established itself. In the years before and after the Second World War, Professor Allen served as president of this Society, an admirable choice for a Society whose object was, and still is, to bring serious students of economic and statistical problems in the City and the University into closer touch.

As it happens this distinguished professor of economics also has an important place in the history of competition policy, the subject of my talk to you tonight. During the War Professor Allen was a temporary civil servant at the Board of Trade. So was Hugh Gaitskell. Together they wrote a paper in 1943 for the Coalition Government on post-war reconstruction and employment policy entitled Control of Monopoly.' The paper argued for statutory controls of monopolies and restrictive agreements in order to promote industrial efficiency and full employment in post-war United Kingdom.

It is difficult to imagine in 1987 how revolutionary a governmental proposal for a statutory competition policy, as we would now call it, must then have seemed. In the 1920s and 1930s cartels flourished, often encouraged by government which had intervened extensively in the operation of many industries struggling with the problems of surplus and out-of-date capacity. The trade associations, usually the vehicles for cartel arrangements, were strengthened by the requirements of wartime planning and, to many, seemed destined to be a continuing feature of industrial organization in the post-war period.

In 1943 the law provided virtually no protection against monopoly and cartels. But this had not always been so. After Magna Carta various monopolistic practices were made unlawful, even criminal. During Edward VI's reign, more general legislation followed. Crown monopolies continued to be granted until 1623 when the Statute of Monopolies' brought them under some sort of control. But Edward VI's legislation was repealed in 1772 and by the date of the founding of your Society, private monopoly, including the guilds and trading companies, eluded the reach of all but a benign common law.

In medieval times the law generally held unenforceable contracts to fix prices or restrain trade, for example, by covenants not to compete upon the sale of a business.' However, ,by the nineteenth century the law had become much more permissive. Restraints on trade were held enforceable where the principal purpose of the contract was not to restrain trade and where they were reasonable "in the interests of the parties concerned and reasonable in the interests of the public . . ."' Restraints would be "reasonable in the interests of the public" if they were not unreasonably wide.

Price fixing agreements, in earlier centuries regarded as potentially indictable conspiracies, gained acceptance by the nineteenth century as legally enforceable. I must not be tempted into too long a historical introduction and will quote briefly from just one judgment to illustrate the point that, by the time laissez faire had become the accepted doctrine of economic organization in the United Kingdom, the law provided as little protection against monopoly abuse as against other types of market failure. In Hearn v. Griffin,6 which concerned an agreement between two rival coach owners not to run in opposition to each other and to charge a common price, the judge observed, "This is merely a convenient mode of arranging two concerns which might otherwise ruin each other."

The wartime Coalition Government introduced a bill to establish, for the first time since Edward VI, a statutory machinery for the control of monopoly and restrictive practices. The bill lapsed with the fall of the government in 1945, and not until 1948 did the legislation pass, modeled on one of the options first put forward in 1943 by Professor Allen and Hugh Gaitskell.

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