In 1945, in a case involving the Aluminum Company of America, a federal appeals court considered how large a market share a firm could hold before it should be scrutinized for monopolistic practices. The court settled on 90 percent, noting "it is doubtful whether sixty or sixty-five percent would be enough, and certainly thirty-three percent is not."
In 1961, a number of companies in the electrical equipment industry were found guilty of fixing prices in restraint of competition. The companies agreed to pay extensive damages to consumers, and some corporate executives went to prison.
In 1963, the U.S. Supreme Court held that a combination of firms with large market shares could be presumed to be anti-competitive. The case involved Philadelphia National Bank. The court ruled that if a merger would cause a company to control an undue share of the market, and if there was no evidence the merger would not be harmful, then the merger could not take place.
In 1997, a federal court concluded that even though retailing is generally unconcentrated, certain retailers such as office supply "superstores" compete in distinct economic markets. In those markets, merger of two substantial firms would be anti-competitive, the court said. The case involved a home office supply company, Staples, and a building supply company, Home Depot. The planned merger was dropped.
As these examples demonstrate, it is not always easy to define when a violation of antitrust laws occurs. Interpretations of the laws have varied, and analysts often disagree in assessing whether companies have gained so much power that they can interfere with the workings of the market. What's more, conditions change, and corporate arrangements that appear to pose antitrust threats in one era may appear less threatening in another. Concerns about the enormous power of the Standard Oil monopoly in the early 1900s, for instance, led to the breakup of Rockefeller's petroleum empire into numerous companies, including the companies that became the Exxon and Mobil petroleum companies. But in the late 1990s, when Exxon and Mobil announced that they planned to merge, there was hardly a whimper of public concern, although the government required some concessions before approving the combination. Gas prices were low, and other, powerful oil companies seemed strong enough to ensure competition.
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This article is adapted from the book "Outline of the U.S. Economy" by Conte and Carr and has been adapted with permission from the U.S. Department of State.
