FEATURES Antitrust , Vol. 27, No. 2, Spring 2013. © 2013 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. too brief to complete this task. That was left to his successor, Thurmond Arnold, who served as head of the Division for five years, from March 1938 until March 1943, and whose story we will pick up in our next article in this series. World War I and the Sudden Decline of Antitrust Enforcement As the United States was slowly drawn into the First World War, Woodrow Wilson shifted his attention from domestic to interna - tional issues and to expanding war production to win the war. The war quickly overwhelmed any interest his administration might otherwise have had in strong antitrust enforcement. Appropria - tions for antitrust at the Department of Justice fell by two-thirds, from $300,000 in 1914 to $100,000 in 1919. 2 New case filings TRUST BUSTERS dropped even faster, from 22 in 1913 to just two in 1916. 3 The FTC made some effort to take up the slack, filing 64 restraint of trade cases in 1918 and 121 in 1919. 4 But unlike the head - Robert H. Jackson: line-capturing cases the Taft administration had brought under the Sherman Act to break up huge trusts like International How a “Country Lawyer” Harvester and U.S. Steel, these FTC cases mostly involved ver - tical restraints of trade imposed by small companies not critical Converted Franklin to the war effort. Apart from the immediate fall-off in antitrust enforcement, Roosevelt into a World War I had another, more lasting effect on antitrust policy. The war gave impetus to the so-called association movement, which emphasized the value of cooperation over competition in Trustbuster order to meet the surge in demand caused by the war. To oversee the effort to increase war production, Wilson created a War BY WILLIAM KOLASKY Industries Board, headed by New York financier, Bernard Baruch. 5 The Board required every major industry to organize a War Service Committee to link its industry to an administrative unit, or “Section,” of the Board. These Sections, working with the War N THE LAST INSTALLMENT OF OUR TRUSTBUSTERS Service Committees, laid down policies requiring the companies series , we studied the role George Rublee played in the in each industry to coordinate their production while imposing enactment of the Federal Trade Commission Act in 1914. 1 price controls to protect the public from price gouging. After the IThe passage of that Act, along with the Clayton Act that same war ended, many industries, fearing a collapse in prices as war year, was the culmination of a three-year campaign by Democrats orders disappeared, lobbied for a continuation of these policies, and Progressives for stronger antitrust laws, but it could not but Wilson ignored their pleas and disbanded the Board. This led have come at a worse time. While Congress was debating the these industries to form their own trade associations to promote final versions of both bills in the summer of 1914, the Guns of continued cooperation and prevent what they saw as “ruinous” August sounded and war broke out in Europe. competition. This article reviews the abrupt decline of antitrust enforce - As expected, the cessation of war orders triggered a sharp ment during the First World War and continuing through the recession in 1919 –1920, contributing to the election of Warren Roaring Twenties and into the early New Deal. It then focuses on G. Harding, a conservative Republican from Ohio, who promised how a self-proclaimed “country lawyer” from upstate New York— a “return to normalcy. ”6 In one of his first acts as President, and later Supreme Court justice—named Robert H. Jackson Harding appointed William Howard Taft to succeed Edward began to reinvigorate antitrust enforcement during Franklin Douglas White as Chief Justice, fulfilling Taft’s lifelong ambition. Roosevelt’s second term, in what some call the “Second New Despite Taft’s strong record as a trustbuster when he was Deal.” Jackson’s tenure at the Antitrust Division, however, was President, the Supreme Court’s antitrust record under his lead - ership was mixed, at best. The government continued to notch William Kolasky is a senior partner in the Washington, DC office of Wilmer some wins, usually in cases involving hard-core price fixing, like Cutler Pickering Hale and Dorr LLP, and is a member of the editorial Trenton Potteries ,7 but many of the Court’s other decisions, such board of A NTITRUST magazine. He previously served as Deputy Assistant as its rejection of the government’s case in U.S. Steel ,8 seemed Attorney General for International Enforcement and Policy in the U.S. Department of Justice Antitrust Division. to show judicial hostility toward strong enforcement of the anti - trust laws. SPRING 2013 · 85 FEATURES Neither Harding, nor his two Republican successors, Calvin Coolidge and Herbert Hoover, had much interest in enforcement Jackson never attended college and spent only of the antitrust laws. Hoover, in particular, was a strong proponent of trade associations, based in part on his experience during the one year at the Albany Law School, making him war as head of the Food Administration, where he had worked closely with the food industry to increase production to feed the the last Supreme Court justice to be appointed troops. 9 All three continued to starve the Justice Department of the funds needed for strong enforcement. During their twelve without having graduated from law school. years in office, appropriations for antitrust enforcement aver - aged less than $200,000 a year. 10 The NRA: A Near-Death Experience for Antitrust result was essentially to cartelize the entire economy. By the time One might have thought that the election of a progressive the NRA was a year old, some 459 codes, covering over 90 per - Democrat from New York—especially one named Roosevelt— cent of major industries, had been approved. 17 might reinvigorate antitrust enforcement. But exactly the opposite The effects of these codes on prices and output were exact - occurred. Franklin D. Roosevelt had served as Assistant Secre - ly what one would expect. By the fall of 1933, after a brief sum - tary of the Navy during the First World War and had been part of mer upturn, economic indices began falling as prices began ris - what he called “the great cooperation of 1917 and 1918.” 11 ing and output falling due to the codes’ production and price When he became President, Roosevelt announced that this expe - controls. By the end of the year, workers were demanding to rience had given him “faith that we can count on our industry know “why the costs of the necessaries of life, such as flour and once more to join in our general purpose to lift this new threat fuel, are allowed to increase as they are.” 18 Farmers, likewise, [the Great Depression] and to do it without taking any advantage were protesting that prices for their equipment and supplies of the public trust which has this day been reposed without stint were rising faster than the prices they could get for their crops; in the good faith and high purpose of American business.” 12 and even others in the administration, such as Harold Ickes at As soon as Roosevelt was inaugurated in April 1933, he the Public Works Administration, were complaining that they often asked the leader of his “brain trust,” Raymond Moley of Columbia received identical bids on public works projects. University, to recruit a group of advisors to draft legislation along This growing chorus of complaints led to increasing calls by the model of the War Industries Board to help fight the Depres- consumers groups, farmers, and others to repeal the NRA and sion. The advisors Moley recruited included General Hugh resume enforcing the antitrust laws. In the Senate, William Borah Johnson, who had worked closely with the Board during the war, of Idaho and Gerald Nye of North Dakota—both long-time cham - and Donald Richberg, a prominent labor lawyer who Johnson pions of antitrust—began “blasting away” at the NRA, urging its brought in to assure that the interests of the working man were repeal. 19 But Roosevelt was not persuaded. In his February 1935 protected. Their efforts produced the National Industry Recovery Annual Message to Congress, Roosevelt called for a two-year Act, which Roosevelt signed into law on June 16, 1933, declar - extension of the NRA, although—in a concession to its critics— ing it “the most important and far-reaching legislation ever enact - he proposed to “limit future price and production controls to ed by the American Congress. ”13 those that were needed to protect small business, check monop - The Chamber of Commerce agreed, hailing the law as a new olistic practices, prevent destructive competition, or conserve “Magna Charta of industry and labor.” 14 The purpose of the new natural resources.” 20 law, according to the Chamber, was to promote “constructive The Supreme Court ended this debate in May 1935 by declar - cooperation” among businesses and to eliminate the “unscrupu - ing the Act’s broad grant of authority to the President an uncon - lous price-cutter,” so that goods could “be sold at a price which stitutional delegation of legislative authority. 21 As Ellis Hawley will enable the manufacturer to pay a fair price for his raw mate - shows in his study, The New Deal and the Problem of Monopoly , rial, to pay fair wages to his men, and to pay a fair dividend on this decision provided an opening for a new group of informal his investment.” 15 To achieve these objectives, the Act authorized advisers—whom Hawley dubs the “antitrusters”—to persuade the creation of the National Recovery Administration (NRA) to Roosevelt to abandon the collectivist model of the NRA and oversee the development by trade groups of codes of fair con - replace it with a program that would rely on competition, not coop - duct.