Private Monopoly and Economics
Schedule Wayne Holstad for Your Group
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Like the corrupt
beneficiaries of the patronage of King John and the Sheriff of Nottingham,
the Robber Barons arose as a new, privileged class during the period known
as Reconstruction. Despite the enactment of the Fourteenth Amendment and the
Civil Rights Act of 1871, which promised equality to all individuals,
patronage became a common practice during the Post Civil War era, and did so
without interference from the Supreme Court.
America’s antimonopoly heritage, rooted in
opposition to the king’s prerogative and the antiquated feudalist land
system, was behind the right to contest government-granted monopolies. That
right was swept away by the Supreme Court in The Slaughter-House Cases,
ruling that the privileges and immunities and equal protection of the law
did not extend to the opposition to government granted monopolies.
By the turn of the century, Tom Johnson, the
mayor of Cleveland, Ohio, who became wealthy as the owner of Cleveland’s
exclusive streetcar franchise, remarked, “no monopoly could exist, or
continue to exist, without the assistance of the government.”
Government-approved monopoly took two forms:
direct grants and exclusive privileges for private individuals without
interference by the courts, and by the court’s reluctance to stop
anticompetitive practices that were prohibited under Common Law.
The prohibition of private restraints on
competition existed under Common Law and were routinely administered by the
courts when adjudicating noncompetition clauses in contract disputes. These
principles were used to attack the growth of monopolies in the Nineteenth
Century. As a result, private antimonopoly principles are related, sometimes
erroneously, to the late Nineteenth Century constitutional principles of
liberty of contract. The issues are different and in conflict.
Constitutional liberty of contract issues from
the Nineteenth Century pertain to the relationship of government
interference with private contracts. Antimonopoly, or antitrust issues also
pertain to interference with private contracts and free trade, but the
interference and restrictions are imposed and maintained by private
individuals or corporations, not governments. These restrictions are found
in covenants not to compete between companies and key employees and are also
seen in agreements to boycott competitors.