It’s easy to imagine what went on back in 1972, when the boardrooms of DuPont Chemical were abuzz with conspiracy. Modern-day robber-barons reclined in chairs of fine Corinthian leather while their operatives described a breakthrough in making titanium dioxide, a pigment for paints and paper. DuPont, it seemed, had learned to make the stuff far more cheaply than anyone else. How best to corner the market with this knowledge? the barons must have wondered, as tuxedoed menials passed among them distributing brandy and snuff.


Should DuPont try the “multinational bribe strategy,” slipping black satchels to congressmen and functionaries? Or the “false advertising strategy,” passing off ti-ox as powdered milk in Third World nations? If only the company had been content with one of these conventional business practices. No, it opted for a far more sinister scheme—the “growth strategy.” In this diabolical plan, DuPont would cut its ti-ox price, but still make profit. Meanwhile, it would build factories to make more of the cheap stuff, hoping, as the cruel corporate jargon put it, to “grow.”


DuPont’s customers were lulled into complacency. They mistook lower prices for a good deal. But luckily they had an avenger, the Federal Trade Commission. FTC discerned the recondite purpose of the “growth strategy,” which officials found so distasteful as to require isolation from the normal flow of words via quotation marks. Customers, FTC hypothesized, would buy from whoever charged least. If DuPont increased its capacity for making cheap ti-ox, other companies—say, for example, ones that charged more—would lose business. DuPont would “grow.”


This may sound like the part in Economics 101 when you gazed absently out the window, looking for Halley’s Comet; of course companies grow when they cut prices. That’s billed as the positive side of capitalism. Maybe it doesn’t disturb you because you never realized what FTC realized—it’s an anti-trust violation. DuPont’s cost-cutting gave it an unfair advantage over its competitors, who wanted to charge more. Those imperiled firms were small but worthy champions of local civic pride, like Gulf+Western, American Cyanamid, and SCM Corp. There’s only one way to stop this injustice, thought FTC— force DuPont to raise its prices. That’s what the agency is asking for in the name of “consumer protection.”


Now, forcing up prices may strike you as a rather roundabout way to protect consumers. Surely when FTC looks at DuPont—a conglomerate giant spewing mutant molecules—it can find a more telling complaint than that the company doesn’t charge enough. But more important, you want to know what the price of ti-ox has to do with the battle against monopoly. Why isn’t the government off smashing up cartels, like in the good old days, and ferreting out the monopolists?

Monopoly Begins at Home

You know, as does the FTC, that the spirit of monopoly pervades American life. If there’s anything the American businessman yearns for more than the free flow of competition, it’s the elimination of his own competition. This urge has traveled far from our shores, and come back to haunt us in the form of monsters like OPEC. But like most habits, it begins near the home—on the street corners of every American town. The local distributors who serve our stores and institutions hoist up their own little monopolies, each carving off a particular product or section of town. Lawyers and doctors hide behind their guilds, dousing competition by declaring it unprofessional.

If you’re blessed with health and a clean legal slate—and don’t run your own business—you may have the good fortune of never dealing with this breed of local monopolist. Everyone, however, has been forced to genuflect before the legally sanctioned monopolies that preside over our daily lives– the phone company, the power utilities. If your gas fails on Friday evening, the power company will be by to fix it Monday morning. It doesn’t do any good to point out that you didn’t plan for the gas to shut off at an inconvenient time. Offhand references to the frost forming on your asthmatic grandmother’s glasses have no effect. There is nothing you can do.

Maybe while you are sitting in the cold, numbed by your helplessness, you can try to re-direct your anger at the next level of monopoly: the “regulated” industries where government intervenes to keep the buyer impotent. In banking, broadcasting, trucking, and others, the government grants firms an indulgence (disguised as a license). In return for protection from competition, the firms promise to charge whatever they please.

So as you shiver before your regulated television, you raise your anger one final step and wonder what became of the trust-busters—the FTC and the Justice Department’s AntiTrust Division. You don’t expect them to break up the trucking cartel; the legislature created that monopoly, and they can dissolve it. But you do expect them to take action against the rest, from the unglamorous local monopolist to the new robber-barons, the concentrated industries. Maybe you’ve read that one per cent of America’s firms control 64 per cent of the nation’s manufacturing assets. Why haven’t those Goliaths been routed lately? Why do we get complaints about the cheapness of paint pigments instead?

The problem is that the federal trustbusters, through an almost uninterrupted string of court defeats, have lost their power to break up industries. The tremendous populist support for antitrust exists despite the reality that, since the Sherman Act was passed in 1890, there have been only a handful of classic monopoly-busting victories. The last victory was in 1968, when the mighty Grinnell Corp., a maker of security alarms, was brought to its knees. Breaking up really is hard to do.

Yet the government keeps firing duds at the fortress of big business— lengthy, expensive anti-trust suits that don’t go off. It makes great copy for the Attorney General to announce that he’s dragging Intergalactic MultiCorp into court. Eight years later, when the vaguely worded complaint is dismissed for lack of evidence, the dramatic announcements have long since been forgotten.

Hammering away at big business with futile lawsuits can have one welcome side effect. It may give the good-guy lawyers—and there actually are some—inside the boardrooms a chance to put on their white hats, persuading their clients that some particularly predatory action will lead to a costly anti-trust suit. This possibility once lent credence to a “perpetual harassment” theory of antitrust. If the government couldn’t bust up the big companies, explained a law professor and FTC advisor, “at least we could let them know we were breathing down their necks.” But this approach has its limits. “You can’t frighten the companies when you never win,” the professor noted. In fact, some businessmen have learned to see the pageantry of anti-trust battles as working to their advantage. With a couple dozen of the Fortune 500 always before the bar, and well-meaning government lawyers declaring that victory is within their grasp, the public may assume that big business is on the run.

So the government anti-trust lawyer begins to feel frustrated. He’s sick of losing cases. He gropes around for the new theory that might let him nail someone’s logo to his wall. He is confronted throughout his search by the extraordinary vagueness of the anti-trust laws. These laws offer only the dimmest of clues about what the companies should or shouldn’t do— basically, they just tell judges to go forth and clean things up. There is nothing even close to agreement among legal scholars on such fundamental points as, say, how big a company must be to be a monopoly. Does it need 30 per cent of a market? 50 per cent? 95 per cent? The absence of specifics has a Januslike effect. It makes it just short of impossible to prove that a company is monopolizing; but it makes it easy to read unfair behavior into almost any circumstances. One particularly fertile field for breeding new forms of legal attack is the clause in the Sherman Act that makes it illegal not only to have a monopoly but to “attempt” to get one. The “attempt” theory, in fact, is what’s allowing the government to sue DuPont, which has 42 per cent (not a controlling share) of the ti-ox business, and isn’t making extreme profits.

The drawback to these “attempt” cases is that the government never wins them either. The law demands proof of “dangerous probability” that a firm actually will win its monopoly. Keep in mind that this is the American legal system—the judicial mechanism that, after finding Col. Mustard, in the library, with the lead pipe, will stall for years before pronouncing conviction. How can you possibly “prove” that a smallish company will, at some unspecified time, become a lumbering titan? (Remember, you can’t even prove that lumbering titans are lumbering titans.) Stock brokers get handsome fees for trying to predict economic conditions a few days in advance. So you can see what an “attempt” case is up against.

The Naives Are Restless

DuPont got itself into an “attempt” mess by developing a cheap method for making ti-ox, a compound with a $700- million-a-year market. Traditionally, ti-ox was dissolved out of ore using sulphuric acid. There are only so many things you can do with a rock, but in the late 1940s DuPont figured out a way to use chloride on the ore, instead of sulphuric acid. This chloride process employed low-grade, low-cost ores, and did not produce tides of waste sulphuric acids. But it was hard to get the process to work in a factory. DuPont struggled with its chloride tiox plant through the 1950s, while its market share shrank to 15 per cent.

By the “growth strategy” sessions of 1972, however, the picture had changed. DuPont’s engineers had perfected the process. Meanwhile, the price of high-grade ores—the kind everybody else had to use—had doubled. EPA rules were making it expensive to get rid of sulphuric acids. DuPont found itself making ti-ox for far less than its rivals.

In FTC’s eyes, DuPont had three options. Just by going along with the prevailing price, it could make a handsome profit. Or, it could plow some money back into new ti-ox plants. Or, it could lower prices. Since ti-ox accounts for about $1 of a $10 gallon of paint, the average man on the street might order those choices like this: Taking the profits would be cold villainy; building new factories would be okay; cutting the price would be really nifty. As it happened, DuPont chose to do a little bit of each—the “growth strategy.” You might assume that FTC thinks DuPont should have simply lowered prices. Wrong. FTC says the responsible thing to do would have been to take the profits and run. When a lawyer at the trial asked the FTC’s expert witness, economist William Shepard, “Isn’t it a good thing to keep prices low?” he replied, “To a naive view, yes.”

What FTC feared was that low ti-ox prices would reduce industry profit margins, making it harder for DuPont’s rivals to afford new factories once they figured out the chloride process. If the competitors couldn’t compete, FTC reasoned, then DuPont would become a “dominant” firm and start raising prices at will.

The best defense against “dominance” has always been the ability of other firms to jump into a business and compete. For complex modern businesses, though, it’s often a long leap. Because of the manufacturing and distribution networks required, it would be almost impossible to enter the auto business, even if GM sent you its patents, gift-wrapped. This isn’t necessarily the result of sinister acts. A firm already in a field, with experience and access to capital, naturally has the advantage over a newcomer. It’s the old circularity—How do you get your first job when you don’t have any experience?—operating at the industrial-strength level.

But FTC decided DuPont’s cost-cutting gave it an advantage that was unfair, building what economists call a “barrier to entry.” Barriers are bad things: making something cheaply is a good thing. When lawyers try to make the intellectual leap of saying a good action (cheap ti-ox) creates a bad result (barrier to entry), the going gets treacherous.

Especially so since, in the great grope session of getting an anti-trust victory, the Justice Department has sued other companies to demand that they keep competitors out. Some years ago, for example, a joint-venture company called Penn-Olin tried to enter the sodium chlorate (another paper-making chemical) market in the Southeast. Justice sued to block the new entry. It reasoned that as long as Penn-Olin was not in the market, it would be “on the edge, continuously threatening to enter.” This would force firms in the market to cut their prices, in order to scare Penn-Olin away, which the government said would be good. Never mind that now, in DuPont’s case, it says scaring away competitors is bad.

A Real Find

FTC stumbled across ti-ox and DuPont’s “growth strategy” in the mid-1970s, when it was checking out mergers in the paint business. The agency couldn’t help but notice that DuPont’s market share had blossomed from 30 per cent in 1972 to 42 per cent (and still climbing) today. But FTC didn’t find any predatory pricing— selling below cost to knock others out of business—at DuPont. It found something better. There were hot documents.

Unlike most conspirators, DuPont had written its plans down. When FTC staffers ran across the records, they smelled blood. “I’d never seen anything so blunt,” said one. “It was a real find.” Business expansion is like sexual conquest—everybody’s supposed to want it, but it’s indiscreet to say so. At last, thought the lawyers, here is the mercurial “proof’ of an attempt—a chance to win a case! They responded as their training taught them, pushing ahead to win without regard to whether it made any sense.

To the average citizen, the documents might seem hot only in comparison to the 1953 index of the Federal Register. Most were memos in which DuPont officials discussed their plans for new factories, and speculated about whether rivals would try to build cheap ti-ox plants of their own. The messages contain such smoking-gun passages as “Lack of major activity by DuPont . . . would prompt competition to implement their own plans.”

This is not the kind of stuff found at the bottom of the chairman’s safe. Every businessman wants to expand and outpace his rivals. It was from these documents, though, that FTC divined the “growth strategy” which, it said, had three elements: Hold down prices, to discourage other companies from investing in factories; build a big new factory as fast as possible; and don’t license the process to competitors. It took some ingenuity for FTC to make the “growth strategy” sinister, because it reads like a set of b-school flashcards. There was the additional drawback that reducing prices, building factories, and not licensing are all perfectly lawful actions.

What made it seem illegal? Mostly one of the hot documents, a computer printout. This printout was interpreted by FTC to prove that while consumers would save $186 million as DuPont cut ti-ox prices to grab the market, they would then lose $573 million when DuPont was free to drive its price up. DuPont claims the printout is inaccurate. “We’ve got printouts laying around here to prove anything you want,” one company official said. “Some of them prove DuPont just went out of business.” In fact, almost all of FTC’s information about the ti-ox business came from DuPont’s own files, and DuPont has proven itself a much better maker of chemicals than of predictions. Part of the “growth strategy” was the DuPont computer’s prediction that all factories using sulphuric acid—except one in St. Louis owned by NL Industries—would close by the end of the 1970s. At this writing, every one of those plants is going strong—except the NL plant in St. Louis, which shut down. This is the quality of information FTC is relying on.

The FTC was also aroused because it saw in the memos proof of DuPont’s “intent” to monopolize the market. This made the hot documents even hotter. They showed that DuPont had a conscious strategy; it wasn’t just throwing darts. “Without the documents,” an FTC lawyer told me, “there would have been no point to this case.”

Does that mean, I asked the lawyer impudently, that if DuPont were just blundering along—cutting prices through typographical errors, inadvertently putting $200 million into a factory when it meant to give the money to the Fund for the Whales— things would be fine? “Yes, of course,” he said. “It is their intentions that are on trial here.” This is an oddly evangelical notion to exercise in the anti-trust courts. It’s akin to the Christian stance that coveting your neighbor’s wife is a sin whether you ever lure her to your hot tub or not. The “intent” concept was meant mainly to keep out of circulation incompetent robber-barons—ones who tried to organize cartels and failed. But allowing monopoly cases to turn on whether a businessman dreamed aloud of dominating a market might lead only to the stocking of corporate files with cloying records. Future DuPont memos may read:

CHAIRMAN OF THE BOARD: Say, did you notice our market share just jumped 25 per cent?

CHIEF EXECUTIVE OFFICER: Heavens sake, why?

CHAIRMAN: Could it have something to do with that 200-acre factory you dedicated last month?

CEO: I’d forgotten all about that. Say, should we license the revolutionary new process we’ve developed there?

CHAIRMAN: I’d like to, but I feel too inner-directed to worry about business today. Besides, I’m in a triple-low. Let’s just blunder along aimlessly, as we have in the past.

CEO: We could do that. .. but it would be wrong.

Shaking the Invisible Hand

Nobody can dispute that, if free copies of the cheap ti-ox plans were available (signed, “Love, DuPont”), we’d all be better off. Competition among firms armed with the improved process would drive the price down even further. It’s just that this has been true since Henry Ford invented the wheel. That’s the reward that inspires businessmen to search for new ways of doing things. Nobody ever challenged this entrepreneurial privilege until the ti-ox case, according to several legal scholars. FTC lawyers strenuously protest that their intent is not to discourage innovation—it just works out that way in this particular instance. But if the government wins, there are several reasons for thinking that will be precisely the effect.

One reason is the government’s absolute inability to so much as hint at what DuPont should have done instead of what it did. I asked that question of all the principal government lawyers in the case and all dodged it. Finally, one FTC official addressed it. “What DuPont should have done,” he said, “is anything they wanted to, so long as it wasn’t later interpreted as a violation of the [anti-trust] laws.” A helpful slogan for businessmen to hang on their walls.

Another reason is that, as part of its judicial “remedy,” FTC wants DuPont to license its process, without royalties, to its competitors. “The other companies (in the ti-ox business) are at a tremendous disadvantage through no fault of their own,” said an FTC economist. Gulf+ Western, NL and industrial giants of their ilk could have been perfecting the cheaper process years ago (its basic chemistry is well known). But they didn’t bother. Why should they, with federal no-fault insurance available?

Suddenly, in such twists, fair is foul and foul fair in the filthy air of Wilmington, Delaware. When antitrust is perverted into a device for maintaining the status quo—cancelling the impact of competition—it becomes just another government subsidy for big business. And a subsidy only for lousy business, to boot. Suppose DuPont had done what FTC implies it should—kept prices up, and not built a new factory. NL, which used to be the ti-ox leader (DuPont passed it in 1974) would still be reaping big profits on its antiquated process. The profits would be rewards for failure. One of the reasons NL’s sulphuric acid process became too expensive was that it produced seven times more waste acid than a chloride system. NL was spending more and more on acid disposal because EPA kept requiring it to barge the chemicals farther out to sea before dumping them. It sounds like capitalism’s invisible hand is doing everybody a favor by giving the thumb to such pollution. FTC would rather protect it by artificially high prices.

But if you are still dying to nail DuPont, there is a final objection to the FTC’s approach. Neither the FTC nor DuPont know for certain what will happen in this, or any other, industry. FTC officials acknowledge that by pressing this suit, they run the risk of discouraging innovation in other fields. So why bring the case now— when there’s only a possibility of monopoly? The government claims DuPont’s cost advantage is so profound, and its growth so irresistible, that it is “inevitable” the company will obtain a full-blown monopoly. If so, why not wait till it does, and the case is clear-cut? And if there’s a chance DuPont won’t get its monopoly—well?

The Last War

Compared to the glacial advance of most anti-trust actions, DuPont’s is speeding through the system. It went from complaint in 1978 to trial last winter. One of FTC’s internal judges just dismissed the charges, so the government is appealing. All this speed is the result of DuPont’s confession. The company basically agreed it planned to go after the market, but said, in effect, “So what?” If the case reaches the U.S. Court of Appeals, the government stands little chance of success. “It’s a born loser,” a former FTC lawyer declared. Yet the agency is devoting substantial resources to pressing the case, according to one of FTC’s chief anti-trust planners, because “This is no minor matter for the future of American industry.”

How do trust-busters get backed into such corners? They are sophisticated and public-spirited officials, and not oblivious to the irony of their position. But their century-old legal weapons are antiquated. Anti-trust laws were designed to combat the single-firm, fire-breathing monopolies controlled by a single robber-baron puffing a single fat cigar. Flagrant examples of that—and cartels such as Standard Oil and American Tobacco in the 1910s—were like zeppelins. They droned along, boastful of their bloated outlines, and many got knocked down. But the industrial barons in the zeppelins got the message. They regrouped, and emerged again as today’s concentrated industries. In concentrated industries, three or four independent firms share a market. They can wield the same kind of economic clout, and charge the same kind of orchestrated prices, as monopolies. But they’re not a single firm or a blatant conspiracy—the things monopoly laws were designed to fight. If monopolies were zeppelins, their modern counterparts are clouds; everybody can see ’em, but nobody can touch ’em. Armed with obsolete weapons, the trust-busters are condemned to fight the previous war.

One is a bit taken aback to discover this vacuum at the core of a critical field of law. Here, where great intellects have focused on a single problem for nearly a century, we expect to find a highly structured art. Instead, there’s little more substance than an unenforceable general rule that it’s better if companies tone it down. This is just as frustrating to anti-trust lawyers as it is to the rest of us.

Unfortunately, the lawyers all too frequently take out their frustrations by filing cases like DuPont. Or else, pressured to do something about the economic power of big business, they file dramatic cases doomed to run aground. Here’s the status of some of the great beached whales of anti-trust now before the courts:

Exxon. This suit, against the eight largest oil companies, was filed after the embargo in 1973. The unfair practices it accuses them of are so vague, however, that a trial date has yet to be set. “There was no theory (specific charge) in 1973, and there’s no theory now,” said an informed FTC lawyer. “It’s the lost brigade we wish we could recall.” Former FTC official Wesley Liebeler calculates that, by last year, the government had spent $17 million preparing its case; the defendants, he thinks, have spent several times more. There is little chance the government will win, but the case cannot be dropped because it would look like caving in to Big Oil.

IBM. The five-year trial of this 11- year-old suit is still in progress. New Attorney General Benjamin Civiletti is trying for an out-of-court settlement that would involve as little loss of face as possible. If any contemporary firm tripped the monopoly alarms, it had to be IBM, with 80 per cent of the mainframe computer market. But as the lawsuit crept along, competitors sprang up, IBM was forced to cut prices, and the company now is just another lumbering titan.

This suit was filed on the last day of the Johnson administration. A senior government official explained that Johnson wanted to leave Nixon an embarrassment—a hopeless case he could not drop, because it would look like caving in to IBM. Nixon passed the favor along.

Ethyl. Four makers of gasoline anti-knock compounds are charged with “price signalling.” FTC says they maintained a quasi-public cartel by using press releases to tip each other off about prices. That way, each could coincidentally raise its price whenever another did. This must be extra perplexing for DuPont, one of the minor defendants in Ethyl. In the ti-ox affair, FTC is mad at DuPont for not charging what everybody else charges. Here, it’s mad at DuPont for charging what everybody else charges.

FTC wants anti-knock companies banned from mentioning prices to the press. This is supposed to prevent them from cross-checking on price. Never mind that it will have no impact, because the companies will always be able to get their rivals’ prices just by calling up customers. It indicates the lengths trust-busters will reach in their genuine desire to accomplish something—but it’s the equivalent of banning handguns on an artillery range.

Kellogg. If any suit promised to crack a concentrated industry, it was this one. FTC started with a clean, simple complaint. It charged four firms with dominating the breakfast cereal business. The plan was to avoid a legal sideshow over the firms’ conduct, and simply see if the courts would break them up. If the courts would not—as it was believed they probably would not—anti-trust advocates would then go to Congress and say, “Look, we found the perfect case and we lost. Now give us new laws that work, or forget it.”

This case became a splashy one, involving mothers, children, nutrition, and our national habit of starting the day with a bowl of candy. Industry circled into the obligatory stall defense. FTC was sucked in. It let the case get mired in endless debate over equivocal questions, like whether cereal makers produce hundreds of cereal flavor combinations in order to guarantee there will be no space to stock rivals on grocers’ shelves. Four years after the charges were filed, the judge retired. The case is now in limbo.

• and AT&T. In this instance, the Justice Department basically told AT&T, “We know you’re monopolizing the communications industry, but we don’t know how. So give us all your records.” AT&T began, of course, by falling back on the obligatory stall. When, after three years of virtuoso stalling, it realized it would have to surrender documents, AT&T switched to the “boxcar” defense. It said it would deliver boxcar after boxcar of documents-50 million in all. After a year of pleading, the government won the dubious right to receive only 5 million documents. It’s sifting through them now.

According to a well-informed source on the AT&T defense team, the conglomerate has 2,000 people working full time on the defense of this case. The bill so far is running to $100 million a year in legal fees. Where does all that money come from? Look for a rate increase.

The picture is not rosy. But it’s too early to leave revolvers in the desks of anti-trust officials and expect them to do the manly thing—at least, just yet. Government trust-busting has won some victories for consumers. The FTC, for example, has compiled an admirable record against the price-fixing activities of professional associations. It cracked the ban on price advertising for eyeglasses. The result, according to FTC officials, has been a 40-percent decrease in the cost of eyeglasses in many states, and a national savings to consumers of $500 million a year. FTC forced Levi Strauss Co. to stop retail-price maintenance for its jeans; prices fell $2-$3 per pair on the day of the ruling. FTC is in the final stages of forcing the American Medical Association, the patron saint of professional greed, to allow competitive advertising. Most of these victories involve monopolistic passages in the charters of professional associations or the laws of our states— something the lawyers can sink their teeth into. But in the major economic arenas where competition has given way to collusion—such as the concentrated industries—there are no published bylaws.

Spacing Out

Is there no defense, then, against the new fat cats? At the international level, where cartels like OPEC threaten the world’s economy, the problem has passed out of the trust-busters’ hands. Stopping OPEC requires American, and international, determination. This is determination we’ve yet to develop.

On the local level, the trust-busters could dig in against the scores of mini-monopolies in distribution and service. But these routine cases must be prosecuted outside the library. They seem like “minor matters for the future of American industry.” They don’t get written up in law reviews. The high-powered federal legal talent often isn’t interested.

As for the concentrated industries that command the national scene, it’s time we faced the fact they are beyond the reach of anti-trust laws. To get at them, we would need new laws. These laws could either set specific, numerical limits on the market shares a company may reach—thus rescuing judges from never-never land economic arguments—or allow Congress to break up industries on a case-by-case basis. They could lead to a radical re-structuring of the economy. But we should either write them, or give up the chase. Until then, a lot of talented and motivated trust-busters—some of the best people in our government—are wasting their time and our money.

Anti-trust law has become the legal equivalent of the space program. While there are critical social problems like the oil shortage unaddressed here on Earth, we sink hundreds of millions of dollars into Moon shots. These probes fly off into the legal heavens in the faint hope that somewhere, out there, they’ll discover something worth reaching. By the time any of them return, Buck Rogers will be President.

Gregg Easterbrook

Gregg Easterbrook has published three novels and eight nonfiction books, mostly recently It’s Better Than It Looks: Reasons for Optimism in an Age of Fear. He was an editor at the Washington Monthly from 1979 to 1981.