Law Enforcement by the Fair Trade Commission Viewed in Light of the Evolution of Anti-trust Thinking in the U.S.

1. Background
   The U.S. was the first country in the world to develop anti-trust legislation, starting with the Sherman Act of 1890. In the period of more than a century that has elapsed since then, U.S. anti-trust laws have had a major impact, not only on the U.S., but on the rest of the world. The competition legislation of more or less every country on the planet shows the influence of U.S. anti-trust laws; this is true in Germany, France, Japan, South Korea, and also in Chinese Taipei, where the Fair Trade Law was heavily influenced by U.S. practice in this area. The noted Germany competition theorist Kurt Markert has said that most of the decision-making relating to Germany’s Competition Law can be traced back to U.S. anti-trust legislation, reflecting the need to be aware of how the most important country in the world goes about these things. Markert has also pointed out that U.S. anti-trust legislation is the oldest in the world, and has the widest scope of application; it has been the subject of more legal and economic research than that of any other country, and can thus be of benefit to every country in the world. The fact that Germany, where the rule of law is so well-established, would choose to follow the example of the U.S. in its anti-trust legislation shows why it was felt advisable for Taiwan, where the rule of law took longer to become established, to do likewise.
   However, the rigor with which U.S. anti-trust legislation is enforced has varied considerably over time depending on the economic situation in which the U.S. found itself, and on the attitudes of the executive branch. Court rulings in anti-trust cases have tended to reflect the overall state of American competitiveness, and the administrative regulations applying to anti-trust matters also vary from administration to administration. Over the years, both court rulings and administrative rules have been affected by the influence of different schools of economic thought. For this reason, before referring to or adopting U.S. practice in the area of anti-monopoly legislation, it is important to consider not just what U.S. practice is in this area but also why it is as it is. One needs to understand how U.S. anti-trust policy has changed over time in response to new ideas; failure to do so may result in being “unable to see the wood for the trees,” and lead to ill-judged decisions. This is the main motivation for the present study.
2. Key Recommendations
   In broad outline, the history of anti-trust legislation in the U.S. over the past hundred years can be seen as a move away from “illegal per se” towards the “rule of reason.” This is because:
   Efficiency is the sole (or at least the most important) goal behind U.S. anti-trust policy.
   For the U.S., when determining whether a business enterprise has engaged in anti-competitive behavior, the key issue is not whether the firm has harmed or excluded its competitors, but whether it has had a deleterious impact on market efficiency. In other words, anti-trust policy is not intended to protect inefficient firms; the opportunity to eliminate inefficient competitors lies at the heart of free competition. Anti-competitive behavior can be said to exist only when an enterprise harms or excludes other firms that are as competitive as, or more competitive than, that enterprise.
   Anti-trust policy in the U.S. has been heavily influenced by economics.
   From the Harvard School and the Chicago School down to today’s Neo-industrial Organization Theory, economic thinking has always influenced anti-trust policy in the U.S. Actual anti-trust cases often raise new questions that spark debate and new research among economists; economists’ conclusions then influence judges when deciding on rulings. For this reason, law students in the U.S. who wish to specialize in anti-trust law are required to study economics, and both the Federal Trade Commission and the Department of Justice have established their own economic analysis departments. More significantly, in anti-trust lawsuits, both the plaintiff and the defendant will normally ask economists to serve as expert witnesses on their behalf.
   A cautious approach to market intervention on the part of the government
   While anti-trust policy takes the external form of government intervention in the marketplace, in its essential aspects it is actually quite different from direct controls and other industrial policy tools. Anti-trust policy is not intended to replace the operation of the market, much less to surpass it; rather, it is employed to maintain proper functioning of the market price mechanism. The government intervenes only when the price mechanism has become distorted. Those responsible for enforcing the law consider it preferable to allow anti-competitive behavior to go unpunished than to risk misjudging behavior that is not anti-competitive as being anti-competitive; the former can be corrected by the market relatively easily, but that latter can cause long-lasting harm to society.
   The thinking behind anti-trust legislation in the U.S., and the techniques employed to enforce it, are the product of extensive study and discussion among jurists and economists over an extended period of time; they have also been tested in practice. As such, anti-trust law in the U.S. can be considered to possess sound theoretical underpinnings and strong efficacy. In the light of the U.S. experience with anti-trust legislation over the past century, the following suggestions are offered to the Fair Trade Commission, with regard to anti-trust thinking and practice:
   1. Efficiency should be the main objective in the enforcement of anti-trust legislation.
   2. Full use should be made of economic analysis when handling anti-trust cases.
   3. The methods used to implement anti-trust laws in the U.S. offer lessons for Chinese Taipei.