One of the problems with an iconic speech is that, over time, it becomes an abstract symbolic reference, and fewer and fewer people have actually read it. Such has been the case with former Federal Trade Commission Chairman Michael Pertschuk’s famous 1977 speech to the New England Antitrust Conference.
That address is cited by most people as the chief exemplar of overreaching antitrust enforcement, and a warning about positions that are better avoided. At least some other people, however, find within it prescient insights on political economy.
Whichever the case, the speech is referred to so often that we all ought to be familiar with its actual words. So here it is. The text has been edited down to a bit under half its original length, but preserves the tone of the original:
NEW DIRECTIONS FOR THE FTC, November 18, 1977
On a clear day in Boston, it may well be that one can see forever. On a normal day in Washington, it takes radar to see tomorrow. Barring the unforeseen, I should be at the FTC for a full seven-year term. So, early in the game, I made up my mind to devote some portion of every day to the long run — not Keynes' long run in which we are all dead, but long enough at least to think beyond the horizon.
I have become increasingly convinced that current antitrust policies lack clarity and conviction. Indeed, the very term “antitrust” with all its connotations and circumscriptions is so limiting that I think we might best use instead the broader rubric of “competition policy.” For if the government is to develop an approach to the economy which is more consistent with the norms, ideals, and needs of our people — which I think is absolutely essential — the beginning point should be our attitude toward competition policy.
Let me try to outline my conception for you.
The economy of this nation passes muster neither as pure capitalism nor as pure socialism. Rather, it is a subtle and inconsistent mixture of regulated, private, and quasi-regulated activity. In each industry the mixture is somewhat different, and thus in each industry the role of competition is necessarily different.
Antitrust is one instrument of competition policy. But there is a widespread perception that antitrust has failed to deal significantly with significant problems. There appears a failure of philosophy, a failure of resources, and, most important, a failure of political courage, of will.
I am sympathetic to these complaints, and I will add a few others.
Too much effort has been expended on proving liability for violations of law, while insufficient thought has been devoted to remedies, and what thought there has been has often come too late. Remedy is the bottom line of enforcement arid must therefore receive far more attention.
The antitrust enforcement agencies have often been lacking in historical perspective and imagination. Tending to think only like litigators, they have failed to provide leadership in their most important and fundamental area of responsibility: taking the broad view and attempting through enforcement initiatives and the power of information to bring the structure and behavior of major industries and, indeed, of the economy itself more into line with the nation's democratic political and social ideals.
Competition policy has inadequately served the American people because it has forgotten that human beings are its constituency. We have underused the wisdom of many of the professions which study people and their institutions — particularly psychologists, sociologists, historians and political scientists. The individual has been left to dog-paddle as best he can in a rough sea of over-sized and often undemocratic organizations — big government, big business, big labor.
The heart of the present dilemma is a misunderstanding of the social and political underpinnings of competition policy in the United States, most vividly demonstrated by the role economic analysis is accorded today. Antitrust has been preoccupied with, if not entirely overtaken by, the narrow Chicago School objective of allocative efficiency. And yet competition policy, as I picture it, incorporates far more than this.
There is thus a critical need to arrive at a new consensus as to what we are about. I will state what seem to me to be the abiding principles.
First, the economy should provide consumers with a variety of products and services at reasonable prices. I believe the competition statutes are among the original consumer protection laws. A significant number of competitors in the market — efficient and aggressively striving for the consumer's dollar — maximizes consumer benefit and promotes consumer sovereignty.
My second point is that economic structure should be consistent with the democratic political and social norms of the nation. As Richard Hofstadter has pointed out, antitrust expresses an abiding American conservatism, a perennial American impulse to find ways to divide, limit and diffuse both governmental and non-governmental power.
My third point is not unrelated. Individuals should be able to obtain self-fulfillment through their economic roles, and the structure of the economy should permit this. When institutions get out of human scale, the result is alienation — and alienation yields up increasing inefficiency as well as unhappiness. In strictly economic terms, there are diseconomies as well as economies of scale.
In human terms, we must maintain the opportunity to own and run a business with a reasonable chance of survival in the marketplace. Competition policy cannot make every person a company president, but it can help assure that there will be enough presidencies to aspire to so that the system will not be stifled by a pervasive feeling that there is no room at the top. And below the top, competition policy can help assure that the worker has a choice of employers to deal with and a workplace of human scale. Increasing macroconcentration can turn this country into a series of very big and very frightening company towns.
My fourth point is that the economic structure should be self-policing to the maximum extent possible. Competition policy, through its presumption in favor of the market system, is a method of assuring minimal government interference in the economy. Where intervention is needed for social objectives that can't be met by an unfettered market, regulation should utilize the least anticompetitive mechanisms.
My next point is that the economic structure must operate within a framework of fairness and ethical commercial conduct. The prohibition of “unfair methods of competition” in Section 5 of the FTC Act clearly subsumes concepts of both equity and efficiency.
It's already been revealed in the press that our staff is investigating several instances of questionable payments by aerospace companies to foster their overseas sales. The Commission is also considering a consent agreement in a case involving kickbacks and rebates to physicians by a medical laboratory. Despite some economic arguments that such activities are a form of price competition, the Commission has tentatively concluded that they require Commission action.
This illustrates my sixth point, that although efficiency considerations are important, they alone should not dictate competition policy. Competition policy must sometimes choose between greater efficiency, which may carry with it the promise of lower prices, and other social objectives, such as the dispersal of power, which may result in marginally higher prices. In 1977, no responsive competition policy can neglect the social and environmental harms produced as unwelcome byproducts of the marketplace: resource depletion, energy waste, environmental contamination, worker alienation, the psychological and social consequences of marketing-stimulated demands.
Economic analysis can clarify the terms of the tradeoff between efficiency and other objectives, but it alone cannot dictate the final outcome.
Where does the FTC fit into this? The FTC is more than a cop on the beat. It must look not only to past and present law violations, but also toward the future structure, conduct and performance of industry.
I have mentioned the breadth of Section 5. What is often overlooked is that the mandate of Section 5 is essentially future-oriented. Our most difficult and important judgments are those that deal with incipient problems. Our economists, analysts, accountants and other experts ably inform us of past trends and present violations, but boldness in enforcement requires more and better prediction analysis. That is a part of the mandate of Section 5 which has been largely dormant since 1914.
It is against this background that my approach to the work of the Commission can be explored.
For seven months we have engaged in a search for fundamentals that can shape a coherent long-term competition enforcement program. We have reorganized internally to permit rethinking and an unusual amount of planning. We are now examining the need for access to new sources of professional expertise — such as tax policy and planning, business planning, marketing science, sociology, psychology, history and political science — which could be useful in creating a wise competition policy.
We are looking at a variety of possibilities for new initiatives and approaches. For example, we have task forces operating in the following areas: competition rulemaking, energy, health care, insurance, food and nutrition, transportation, joint ventures, mergers, economies of scale, vertical restraints, dominant firms, transnational activities, corporate accountability, remedies, and state regulation.
We are effecting greater coordination between our operating bureaus and among the various segments of the agency. Many of the task forces, for example, cross operating-unit lines.
We are attempting to achieve greater coordination with other members of the competition policy community. Liaison arrangements with the various federal agencies that make decisions affecting competition are being considered. Our relationships with the antitrust oversight committees on the Hill are remarkably close and characterized by mutual respect.
This process of change which I have been describing is far from complete, but I can suggest some of the more particular directions I intend to pursue.
We intend to concentrate, first of all, on those industries and organizations which have the most direct or significant impact upon consumers. These include ongoing programs in energy, health care and professional services generally, the production and distribution of food, and transportation.
We will also be looking at industries whose structure may facilitate anticompetitive behavior or poor market performance.
We are contemplating a number of test cases we would like to bring, when the appropriate facts are presented, to resolve the breadth of Section 5 so that Congress will have a clearer picture of the scope of existing competition legislation and the possible need for statutory revisions.
I anticipate a step-up in our merger activities, not only in response to what Business Week now calls “the great takeover binge,” but in response to the clear intent of Congress, expressed in its granting of relatively new authority to obtain merger information and seek injunctive relief before the eggs get scrambled.
You can expect us to refine the concept of actual potential competition and to try to win its acceptance either through the courts or, if necessary, by legislation. I would also anticipate that we will increase and broaden our involvement in regulated activities, utilizing our expertise to attack governmental restraints which are anticompetitive. In terms of procedures, we are working to develop new approaches and procedures to streamline our cases — to plead narrowly, and to limit discovery. We are also well along the path to competition rulemaking. Finally, we will utilize our fact-finding powers to develop reports and legislative positions aimed at problems that go beyond our current areas of litigative jurisdiction, such as the non-profit status of certain potential respondents.
I expect the next seven years to be the most challenging of my life. I believe we have a mandate to develop competition policy in its broadest sense, and I am confident that by the time my term expires this endeavor will have brought some measure of benefit, both tangible and intangible, to the American consumer.—Neil practiced antitrust law at the FTC for 37 years. He welcomes your comments and suggestions at email@example.com.