Results tagged “Sherman Act” from PlanetGreen.org

Conscious Commitment: The Trust in Your Pantry

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Trian.jpgPart 5 of 5 in a series, "The History of Antitrust"

In the one hundred and twenty-seven years that have elapsed since the passage of the Sherman Act, our nation has experienced countless social and political changes and enforcement of this law has fluctuated with the times. The administration of Theodore Roosevelt marked the pinnacle of public awareness of the subject; after ten years of unfettered consolidation resulted in the Great Depression, uncompromising regulation of the trusts became a staple of New Deal policy; and in the prosperity of postwar America, though the public largely lost interest in the issue of antitrust, it remained a significant mainstay of our capitalist economy. However, during the social upheaval that took place in the 1960s, the goal of a truly free market lost its place in the platforms of both parties.

The Democrats adopted the vision of Lyndon Johnson's "Great Society;" though the facets of this policy dealing with civil rights, education, and environmental protection were undoubtedly beneficial, its economic framework virtually ignored the issue of monopolization and instead relied on welfare programs and public spending to achieve equality. This system effectively relieved corporations of their core social responsibilities - to provide citizens with stable employment at fair wages and quality goods at fair prices - and instead shifted those responsibilities to the taxpayer. The Republicans, meanwhile, entirely abandoned their traditional emphasis on fiscal freedom and prioritized the interests of consolidated industry above those of their constituents. In the decades that followed, the viewpoints of these factions grew increasingly entrenched and the fundamental incompatibility of the two perspectives led to our present polarization. In 2017, as Democrats call for socialistic measures such as single-payer health insurance or a $15 minimum wage and Republicans doggedly maintain the status quo of rampant oligopoly in the healthcare, national defense, agriculture, and communications industries, the breach between both sides is steadily widening - and the solution that restored prosperity in the 1930s and allowed for the economic well-being of the mid-century, that protected both citizens and legitimate enterprise from untrammeled restraint of trade, has been isolated in the center of the political spectrum.

This trend affects society at all levels - from things that only indirectly affect most Americans, such as the cost of federal projects such as the improvement of cell phone networks or the maintenance of the military, to matters that impact local communities, such as the exorbitant amount your state pays each year for school lunches or highway repairs, to your own personal range of choices every time you restock your pantry.

The story of your groceries begins with an obscure investment company, Trian Partners, incorporated in Delaware and principally conducting business in New York. This firm is headed by billionaire and Wendy's Chairman of the Board Nelson Peltz and run by a tight-knit group of individuals prominent in the grocery industry. Peltz himself, in addition to his control of Wendy's, is a director of Kraft Heinz and its spin-off group Mondelez International. Together, these companies own products such as the Nabisco line of snacks, including Oreos, Ritz crackers, Fig Newtons, Nilla wafers, Premium saltines, Wheat and Vegetable Thins, Nutter Butter, Honey Maid, Cheese Nips, and even French cookie brand LU; candies and desserts including Cadbury chocolates, Trident gum, Swedish Fish, Jet-Puffed marshmallows, Toblerone, Sour Patch Kids, Twist, Mallomars, Stride, Dentyne, Milka chocolates, and Jell-O; meat brands such as Oscar Mayer, Ball Park hot dogs, and Lunchables, as well as the popular Boca line of vegetarian alternatives; drinks such as MiO, Tang, Wyler's, Kool-Aid, Crystal Light, Country Time and Capri-Sun; Gevalia and Maxwell House coffee, as well as all Starbucks products sold in stores; condiments like Heinz ketchup, A1 sauce, Kraft salad dressings, and Miracle Whip; dairy products including Cracker Barrel, Kraft Macaroni and Cheese, Cheez Whiz, Easy Cheese, Kraft Singles, Philadelphia Cream Cheese, Velveeta, and a nearly complete monopoly on parmesan cheese; Ore-Ida fries; and Planters nuts. In addition, Mondelez board member Josh A. Frank and former Heinz CEO William R. Johnson are now partners at Trian, further cementing this group's control over the snack titan.

However, Trian's dominance does not end there. Its partners are heavily involved in other aspects of the supply chain as well - Peltz and Frank are both directors of food-service giant Sysco, and Trian also owns over two million shares of national retail store Family Dollar. In addition, they are also a major player in the soft drink industry. Their control over the Dr. Pepper Snapple Group (DPSG) has been well-documented in securities filings and acquisitions over the past decade. By the beginning of this century, products such as Royal Crown Cola, Snapple, and Stewart's Root Beer were owned by the parent company of Wendy's, of which Peltz, his son Matthew, and his son-in-law Edward Garden are all directors. These assets were sold in 2000 to Cadbury Schweppes - notably, the buyer is an important portion of the Mondelez/Kraft/Heinz conglomerate, indicating that this group may have been simply shuffling their subsidiaries rather than selling them - before the drink brands were eventually acquired by the parent company of Dr. Pepper. However, this second sale did not end Trian's interest in these products. Documents from 2008 show that 18.2 million shares in the DPSG were distributed among Peltz, Garden, several "straw" companies with names such as "Trian Partners Parallel Fund I" (the numeral in the name signifying that there are at least four of them), and two other Trian subsidiaries incorporated in the Cayman Islands. During these same years, Cadbury Schweppes also bought the entirety of the Dr. Pepper/7 Up Bottling Corp. and added it to the Kraft portfolio - though this acquisition was spun off in 2007 with Peltz' full support, there is no evidence that Trian members have significantly divested from it in the following years.

Recently, Trian has further strengthened their oligopoly of the consumer snack industry by quietly accumulating a significant stake in PepsiCo and subsequently utilizing that interest to eliminate competitors. Though PepsiCo is best known for its line of sodas, it is also the parent company of Frito-Lay, Quaker cereals, Tropicana, and Gatorade, assets that could complete Trian's virtual monopoly on the snack industry if controlled by Trian. The group's fiscal choices and personal connections vividly illustrate that a close bond was in fact forged between the companies in recent years. As of 2013, Trian had reportedly invested $1.3 billion dollars in PepsiCo, and was publicly using their role as shareholders to attempt to control the latter. Interestingly, Trian's employees are also closely connected to the soft drink titan - former PepsiCo CEO Michael D. White, who had worked there for twenty-nine years before becoming a partner at Trian, reported ownership of over two hundred thousand shares in the company after his most recent sale of PepsiCo stock. Another partner, William R. Johnson of Heinz, is a PepsiCo stockholder and a current member of the board. These influential members of the Trian ring may have influenced a 2009 agreement between PepsiCo and the Dr. Pepper Snapple Group, in which PepsiCo agreed to pay DPSG $900 million dollars for the privilege of bottling their products. Though the companies claimed that this contract would reduce the cost of soda to the consumer and be "mutually beneficial," independent company Mahaska Bottling sees the matter differently.

In a complaint filed under the Sherman Act last year, Mahaska alleges that collusion between PepsiCo, the Dr. Pepper Snapple Group, and Trian investment Family Dollar has led to price-fixing and monopolization. According to the plaintiffs, the increase in commerce experienced by PepsiCo after the DPSG deal gave them an unprecedented market share in soft drinks, and PepsiCo subsequently attempted to use this power to eradicate competition. As part of this plan, Family Dollar - of which Trian partner and Peltz' son-in-law Edward Garden was then a director - agreed last year to temporarily lower its soda prices to below bottling cost, refusing to carry any Pepsi or DPSG products until these new prices were met. The only bottlers capable of producing under those conditions happened to be directly owned by PepsiCo, and consumers' demands were supplied by them until Mahaska was driven from the market entirely. The words of the complaint concisely summarize this scheme:

"PepsiCo and PBC entered into an unlawful pricing arrangement with Family Dollar covering not only PepsiCo products but also DPSG products and unlawfully instructing Mahaska to discontinue all DPSG service to Family Dollar... so that they can subsequently raise prices in Mahaska's territories."

This case is still pending in the Southern District of Iowa, and is expected to go to trial at some point this year. Though at first glance, it may appear to be a relatively routine pricing dispute, even the most cursory investigation of the circumstances reveals that such concerted actions are not consistent with healthy competition - rather, the Mahaska dispute is one of the few visible instances of a decades-long, industry-wide attempt to corner the American supermarket.

Read the fourth installment of this series, "The New Deal and a New Start"

Conscious Commitment: The New Deal and a New Start

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NewDealheader.jpgPart 4 of 5 in a series, "The History of Antitrust"

Nearly all historians agree that the crash that took place on October 29th, 1929, was inevitable. The noninterference of the Harding, Coolidge and Hoover administrations, combined with a trend of reckless investing choices, formed an environment in which national prosperity was unprecedented but not sustainable. However, it was not speculation itself that led to the Great Depression - it was the rampant consolidation in the market. Investors poured their resources into companies such as U.S. Steel, General Electric, the Union Pacific, and other organizations which did not face substantial competition; if the one of these corporations wavered, as they began to do in September of 1929, the market was not balanced out by gains in the value of others in the same industry. This lack of choice increased the risk to stockholders and was a major catalyst of the economic collapse.

When President Roosevelt began his revolutionary New Deal program upon assuming office, however, his focus was primarily upon raising prices and wages. He accomplished this goal partially by federal subsidies and large government purchases of commodities from grain to gold, and partially by enabling and encouraging businesses to promulgate agreements of "fair practices," which artificially inflated prices, limited manufacturing, and operatively curtailed competition. For a time these programs proved effective, but when the government began to scale back its spending in 1937 the economy slumped again. By the following year two million laborers had lost their jobs, production had come to a virtual standstill, and the stock market had precipitously declined, undoing much of the progress of the past four years. Clearly, despite the appearance of progress that the first phase of reforms had generated, some important ingredient was missing in the "alphabet soup" of the New Deal agencies.

On April 29th, 1938, Roosevelt delivered his fifty-ninth message to Congress. This time, he recognized that stringent regulation and massive spending could only serve as temporary fixes for the underlying economic problem; in order for a free economy to begin supporting itself again, it would have to be a truly free economy. In his address he announced a renewed commitment to the core principles of antitrust, suggested revision of the relevant statutes, authorized a massive study of current conditions, and declared that anticompetitive conduct would no longer be tolerated: 

"It is a program to preserve private enterprise for profit by keeping it free enough to be able to utilize all our resources of capital and labor at a profit... It is a program whose basic thesis is not that the system of free private enterprise for profit has failed in this generation, but that it has not yet been tried. Once it is realized that business monopoly in America paralyzes the system of free enterprise on which it is grafter, and is as fatal to those who manipulate it as to the people who suffer beneath its impositions, action by the government to eliminate these artificial restraints will be welcomed by industry throughout the nation."

TArnold.jpgThe main writers of the speech were also the men tasked with honoring this pledge over the next months. Thurman Arnold, a plainspoken professor from Wyoming whose approach to the antitrust laws focused almost solely on the interests of the consumer, and Robert Jackson, a former prosecutor who had recently concluded the celebrated tax evasion case against multimillionaire Andrew Mellon, quickly began acting to enforce the Sherman Act. They established an unprecedented pattern of instituting criminal proceedings, procuring indictments against both companies and individuals, and settling the majority of cases with nolo contendere pleas and stringent but fair consent decrees. In May a suit was commenced against Ford, Chrysler, and General Motors: a grand jury investigation into the coercive practices of these three titans returned eighty-six indictments, and while the other two companies quickly consented to cease their unlawful conduct, General Motors was criminally convicted. The dairy industry, which for years had kept milk off the shelves of retail stores and hiked the price of door-to-door deliveries by over two-fifths in the preceding years, came under scrutiny the following month: this investigation broadened until collusion was demonstrated between farm cooperatives, suppliers and jobbers, labor unions, and even local government officials. The construction conglomerate came next, and a massive effort ensued to ensure competition at all levels and lower both the cost of labor and the prices of commodities such as lumber, windows, gravel, sand, roofing, pipes, and even paint - by Arnold's estimate, this flurry of litigation saved individual Americans a total of $300,000,000. Chemical companies DuPont and Monsanto were accused of inflating the prices of various compounds sold to industries, researchers, and the government. The American Medical Association was sued for illicitly attempting to curb the availability of group health plans, duly convicted and fined, and defeated unanimously upon appeal to the Supreme Court. Under Jackson's direction, the primary players in the energy industry were indicted for a conspiracy to buy up all oil entering the market and reselling it at prohibitive rates to any companies attempting to compete with this cartel; the case made its way to the Court and resulted in another resounding antitrust decision. Several major pharmaceutical companies were prosecuted for restraining sales of antitrustradio.jpggeneric medicines. Prioritizing free competition above the possibility of negative publicity, the DOJ under the leadership of Arnold and Jackson filed complaints and criminal charges against major Hollywood producers for unfairly restricting showings of movies. The Associated Press was accused of geographical market division, and though it responded by denouncing Arnold as, among other things, an "idiot in a powder mill" (a term of opprobrium he proudly repeated at every opportunity for the next thirty years), on final appeal this case was also decided unequivocally in favor of the government. The record of this administration reflects an attempt to protect competition in industries receiving little public attention as well as those impacting nearly all Americans - tobacco cartels, meatpackers, tire makers, clothing fabricators, owners of petroleum pipelines, cheese companies, nearly every major railroad, optical equipment patent holders, produce distributors, shoe manufacturers, trucking conglomerates, gas station chains, glassware manufacturers, the radio broadcasting oligopoly, and even a popsicle stick monopoly were among the defendants in antitrust suits brought by Jackson and Arnold. Additionally, the renowned Alcoa prosecution was ongoing throughout these years.

Initially brought in 1937, the Alcoa case had been undertaken by Jackson to test whether "a 100 percent monopoly with the absolute power to exclude others constitutes an illegal monopoly per se under Section 2 of the Sherman Act." Although Roosevelt was dubious at the time, suggesting that a case of this magnitude could shift focus away from the central programs of the New Deal and hinting that a solution could be worked out in other ways, the Division persisted, and the following year the aluminum giant was brought to trial. The trial was the longest in American history at the time, lasting from June 1st of 1938 to August 14, 1940, and though heavily covered by the press in its first days, quickly dropped out of the public's eye. Over these twenty-five months, the government introduced over five thousand pages of exhibits and successfully proved that Alcoa had unlawfully restrained trade by entirely monopolizing commerce in pure aluminum ingot; slowly gaining control over the supply of raw ore until competition became impossible; entering into a conspiracy with a shady entity known only as "Limited" to restrict imports of raw aluminum and bauxite; selling selectively to two manufacturing companies in which it owned a large stake; and unlawfully pooling patents until it owned the rights to every automobile piston design in the nation. During the course of the case the DOJ not only presented the factual basis of their case, but also the  social and political importance of unhindered competition. As Jackson declared in December of 1937:

"The trend toward concentration is also a very real threat against the individual competitive system. This private socialism, this private regimentation of industry, finance and commerce, if not stopped, is the forerunner of political socialism. Our democratic forms of government offer a periodical chance at election time to check and change political administrations. But there is no practical way on earth to regulate the economic oligarchy of autocratic, self-constituted and self-perpetuating groups. With all their resources of interlocking directors,... with all their power to giver or withhold millions of dollars worth of business, with their power to contribute to campaign funds, they are as dangerous a menace to political as they are to economic freedom."

The government's vision of economic freedom was eventually rewarded. Though the federal district judge before whom the case was tried rejected their arguments and the Supreme Court could not muster a quorum to hear a direct appeal, the Second Circuit Court of Appeals reversed the lower decision and enjoined Alcoa from any future anticompetitive practices in an enduring decision authored by Judge Learned Hand. United States v. Aluminum Co. of America, 148 F. 2d 416. One seemingly unexceptional case had redefined our body of antitrust law to read not only that "unreasonable" trusts were illicit, but that any deliberate attempt, action, or conspiracy to restrain trade was impermissible. For the first time since the beginning of the antitrust movement, more than sixty years before, the goal of a truly free market seemed within reach.

Then, in 1941, the United States entered World War II. Almost all the products and commodities in which the Division had finally ensured fair trade practices were suddenly in short supply, and the need for a constant flow of manufactures to aid the Allied powers was prioritized above the economic rights of citizens and small businesses. As Arnold observed in 1943, "the war is being used as an excuse to soften provisions of the antitrust laws to pave the way for domination of industry after the war." The same year Roosevelt offered him a judgeship on the D.C. Circuit, and though many suspected this maneuver was less to reward Arnold for his work at the Division than to remove him from his post when rigorous implementation of the Sherman Act was no longer politically exigent, he did accept. His judicial career lasted only three years before he left to form a partnership with his trusted friend (and future Justice) Abe Fortas. Together, Arnold and Fortas pioneered the private civil suit as a tool of antitrust enforcement, as well as taking on several important civil liberties cases such as Gideon v. Wainwright, 372 U.S. 335 (1963). Jackson had long since left the DOJ for a seat on the Supreme Court, where he served for eleven years. Though the blueprint of successful prosecution which the pair had pioneered is still followed to this day, Arnold's departure still marked the end of any serious attempt to prevent unhealthy consolidation and coercion in American industry. The temporary suspension of free competition beginning with the war would not be fully lifted until the Eisenhower administration ended our involvement in Korea; and by then, politicians and the public had all but forgotten about the existence and importance of the Sherman Act.

Read the last part of the series, "The Golden Age of Antitrust"

Conscious Commitment: The Trusts Take Control

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Grange Awakening the Sleepers.jpgPart 1 of 5 in a series of posts, "The History of Antitrust"

Economic liberty - the unfettered ability to maintain one's own property and earn one's own living by pursuing any lawful calling - has always been a vital part of American political tradition. It can be argued that the Revolutionary War itself was waged primarily to preserve this freedom, and the Fifth and Fourteenth Amendments to our Constitution inextricably wove it into our legal framework. However, although property rights are mostly safe from governmental despotism in this nation, we continue to face the complex problems arising when a private individual or corporation infringes on the rights of another. The history of antitrust legislation and litigation is the story of countless attempts to solve these problems.

Long before the populist movement of the late nineteenth century galvanized public sentiment in favor of regulating commerce to promote competition, the common law recognized monopolization as inherently illegal and immoral. Contracts "in restraint of trade," such as those in which parties agreed not to engage in a certain industry within a certain area or pledged not to directly compete with each other for customers while both remaining in business, have traditionally been held to be against public policy and therefore void. In England in 1689, it was concisely declared: "The law now is, that total restraints of trade are absolutely bad, and that all restraints, though only partial... are presumed to be bad: therefore if there be simply a stipulation, though in an instrument under seal, that a trade or profession shall not be carried on in a particular place, without any averments shewing circumstances which rendered such a contract reasonable, the instrument is void." Hunlocke v. Blacklowe, 2 Wm. Saund. 156. American courts also consistently enforced this rule well into the nineteenth century: in Jerome v. Bigelow, 66 Ill. 452 (1872), an acquisition deal between two physicians was voided as an unreasonable impediment to free competition; in Callahan v. Donnolly, 45 Cal. 152, a contract providing that a yeast manufacturer refrain from entering the yeast market for eight years was struck down; and in Harkinson's Appeal, 78 Penn. 196 (1875), a mother who sold a bakery and promised as part of the transaction not to "engage in the same business directly or indirectly" - and thereafter opened another bakery with her son in the same area - was not liable to the second owners of the establishment because the clause in question was unconscionable. This principle effectively protected consumers and small businessmen as long as trade was conducted on a largely local scale, but as nationwide and eventually worldwide commerce burgeoned, stronger prohibitions of anticompetitive conduct would clearly be needed.

The transcontinental railroads were probably more responsible for these societal shifts than any other industry. Built using millions of dollars of government subsidies and land cessions instead of private financing, the newly laid tracks were almost immediately profitable, as rail shipping between opposite coasts quickly proved far more efficient than previously used ocean routes. However, not content with the highly lucrative traffic that naturally fell to them, the railway corporations resorted to various forms of oligarchy and chicanery in the attempt to extract every last cent from the nation their lines now spanned. Partisanship and discrimination became rampant. In order to ensure that all direct and incidental profit was collected directly by railroad executives, freight and passenger rates to "company towns" was often drastically cheaper than to independent settlements, even when the latter were fifty miles nearer to a given starting point. Ticket costs plummeted whenever a new competitor emerged and rose again when the threat to the large roads' monopoly was either acquired or bankrupted. In some instances, packages were routed to major rail terminals such as St. Louis, San Francisco, or Omaha, and then sent on to their true destinations - which were often the same stations the incoming train had already stopped at. The public was understandably umbrageous, and several attempts to regulate this untrammeled extortion, including the repeated introduction of antitrust bills in federal and state legislatures, were mounted over the next decades. As one reformer, inveighing against the unjust practices of the Central Pacific, proclaimed twelve years before the passage of the Sherman Act: "I assert that discrimination against one place and in favor of another, or against one man and in favor of another, or against one corporation and in favor of another, is unjust upon the face of it, and not to be justified under any possible contingency." Countless editorials, orations, and exposes reiterated these sentiments, but while the railroad corporations continued to profit they were impervious to common opinion.

Similarly heedless of the rising clamor against monopolization, other companies were quick to follow its example. One of the most flagrant instances of such monopolization occurred in Nevada during the heyday of the Comstock Lode, when an enterprising engineer named Adolph Sutro proposed to construct a tunnel under the lode to adequately ventilate the mines and extract ore in a manner that would be both safer and cheaper than the current method hauling it up the shafts to the surface. Due to its obvious benefits, Sutro's plan initially enjoyed the backing of both the workers themselves and many of the mines. Yet he lost this support when prominent businessman and U.S. Senator William Sharon, who controlled virtually all of the region's ore mills and was an important shareholder in many of the mines, realized that the completed tunnel would allow new mills to spring up at the mouth of the tunnel and compete with his current cartel. Almost immediately the funding that had been promised to Sutro was withdrawn, he was denounced in local newspapers heavily influenced by Sharon, the state legislature even came close to revoking his easement, and he was bankrupted in his efforts to push ahead with construction in the face of these obstacles. Senator Sharon's monopoly continued unchallenged and it looked as though the tunnel project was defeated - until the early morning hours of an uneventful spring day four years later, when a wholly preventable tragedy occurred. The first shift of the day had just descended into the Yellow Jacket mine when it suddenly erupted in uncontrollable flames, killing forty-eight men and injuring hundreds who breathed the toxic smoke. It later emerged that the inferno could have been forestalled simply by providing better airflow in the subterranean passages, precisely what Sutro's tunnel would have done. Though Sharon continued his opposition to the undertaking, many recognized his partial responsibility for the fire, and excavation of the tunnel slowly but steadily continued. In 1878 it was finally completed.

By then, the antitrust movement was gaining traction in the political arena. Just one year before the completion of the tunnel, the Supreme Court decided in Munn v. Illinois, that corporations possessing a "virtual monopoly" over their given markets were subject to more stringent regulation than other businesses. By depriving consumers of other options, reasoned the Court, the owner of such a company "devotes his property to a use in which the public has an interest, [and] he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good." 94 U.S. 113 (1877). Organized labor was becoming a major national force, and Terence Powderly, president of the Knights of Labor, defended Americans' right to a free market both by defending his position in speeches and debates and by pressuring the legislature to act on the matter before democracy itself was irreparably injured. In Congress, the Interstate Commerce Act was introduced, debated at length, and finally passed: the first significant national attempt to restrict railroads' discretion in setting fares and freight charges. On the lecturing circuit, renowned populist Mary Elizabeth Lease was declaring: "Wall Street owns the country. It is no longer a government of the people, by the people, and for the people, but a government of Wall Street, by Wall Street, and for Wall Street. The great common people of this country are slaves, and monopoly is the master." Across the U.S., citizens were beginning to realize that oligopoly had palpable and highly harmful consequences to them personally and collectively, and it was apparent that the present economic oppression could not continue for much longer. The only question remaining was precisely how it would be curtailed.

Conscious Commitment: Inmar, Inc.

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coupon.jpgYour wallet speaks for itself. Evidence of Inmar, Inc.'s dominance in the coupon industry is everywhere. Blazoned under the colorful trademarks of everything from breakfast cereal to batteries; stacked beneath the flashing lights of that dispenser on the grocery store aisle shelf; inserted in the newspaper curled up in that mailbox; folded and crumpled in that disorganized folder; printed on glossy vibrant paper and plastered onto the boxes composing that supermarket display.

Just last April, Inmar released a statement announcing that it had taken over coupon processing services for Procter & Gamble brands. This development cements the existing diarchy Inmar and its supposed competitor but actual collaborator, Valassis Communications, enjoy over this industry. In the statement, Inmar asserts that P&G formerly handled its own coupons, but this has not always been the case. A 2006 10-K form Valassis filed with the SEC states that P&G accounted for over 10% of that company's income the previous year, indicating that P&G has merely shuttled its business between the two corporations instead of comprising a third major player in the coupon-clearing market.

In the same 10-K form, Valassis names Inmar as one of its main competitors, but this claim is plainly refuted by the business relations they openly sustain. In its capacity as the owner of RedPlum, a mailing distributing coupons held by various companies directly to consumers, Valassis openly and actively aids Inmar in disseminating its coupons. Clearly this is not the aggressive competition one would expect from two companies which jointly "control approximately ninety-five percent (95%) of the total vendor coupon redemptions" (Compl. §16, 15-4434 (JLL), Dist. NJ (1015)).

The pattern of monopolization does not stop there, however. Though Inmar's coupon redemption and product return business is its most visible enterprise to consumers, it is certainly not its only venture. It is actually the predominant figure in the pharmaceutical returns market as well, and our research into its practices indicates that the leverage it enjoys as a result of its prominence could have far-reaching consequences for citizens compelled to trust it with their health.

It was a minor incident, and never should have been the major controversy it turned into. In November of 2008, Johnson & Johnson and its affiliate, McNeil Consumer Healthcare, noticed that several lots of their product Motrin failed to satisfy their manufacturing standards and were defective. This news immediately followed a string of recalls of other popular Johnson & Johnson products, including widely used cold and allergy medicines. Presumably to avoid the negative publicity that would result from expanding the recall to include the faulty Motrin, Johnson & Johnson decided to keep their findings secret. To do this, they formed a plan to send operatives into retail stores posing as customers, who would then buy back as much Motrin as possible. However, consumers who had already bought the defective Motrin would not be notified in any way of the problems.

Johnson & Johnson then hired Inmar to carry out this clandestine design, rejecting bids from several companies to handle the recall openly. Inmar promptly mobilized its employees and contractors, instructing them:

"You should simply 'act' like a regular customer while making these purchases. THERE MUST BE NO MENTION OF THIS BEING A RECALL OF THE PRODUCT! If asked, simply state that your employer is checking the distribution chain of this product and needs to have some of it purchased for the project."

Approximately five thousand convenience stores were searched in this fashion. The first two hundred and fifty stores yielded 595 vials, but the actual number of defective Motrin remaining on the market was dramatically higher - in one state alone, seven hundred and eighty-seven packages remained missing even after Inmar's feeble attempts to rectify the situation.

The recall was finally made public in February of 2010, over a year after Johnson & Johnson became aware of the problem and over ten months after Inmar became involved in the cover-up. Congressional hearings, civil lawsuits and criminal prosecutions ensued, but though Johnson & Johnson was made to take responsibility for its misconduct, Inmar escaped any meaningful penalty.

Now, five years after the federal firestorm subsided, Inmar is still in the pharmaceutical returns business, a job mostly composed of disposing waste, juggling returned or expired merchandise, and managing recalls. On its website, it proudly boasts that it provides these services to twenty-four thousand retail pharmacies (out of approximately twenty-eight thousand in the country), giving it control over 86% of the market. As Inmar has proven in the past, this anticompetitive situation could prove injurious to consumers which may never have heard its name, but still entrust it with their well-being every time they purchase the simplest of medications.

My Conscious Commitment to a Free Market

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thosedays.jpgCapitalism.

The word conjures up mental images of vast fields of low-lying factories turning out various commodities at unprecedented speeds. A board of directors, assembled on the fourteenth floor of some glass-and-steel temple of merchandising, discussing annual returns. A network of spidery railroads and ship routes and interstate highways, spun first around the continent and then the globe. A 3D model of the "next big thing," revolving slowly in circles on brightly lit screens. Firm handshakes, locked vaults, and indecipherable numbers and abbreviations whizzing by in a procession of green and red lights. An entire culture built around the acquisition of assets and influence alike, a fast-paced game with few rules and a universally coveted prize of market dominance.

However, this conception - of industries dominated by billion-dollar enterprises - cannot rightly be called by the term "capitalism." That word, in its pure and original context, denotes a free market, an economic environment requiring only ingenuity, efficiency, and hard work for success. That was conceived in a time of greater opportunity and untapped resources, when competition and the human drive to improve products, methods and ideas were essential to continued national expansion. That was reality before the age of consolidation, prior to the protracted decline of interpersonal commerce.

The national struggle to preserve capitalism as it was initially envisioned began in earnest in 1890, with the passage of the landmark Sherman Anti-Trust Act. This officially criminalized "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations" (15 U.S.C. §1), and was the first significant recognition of the right to a free economy. Corporate actions such as price-fixing, collaborating to eliminate competitors, and merging to dominate an entire field were thereafter prosecuted as infringements of this right. In the years following the law's enactment, it was used against railroad titans, banking institutions, manufacturers of overpriced necessities, and those seeking to further augment their inherently unequal bargaining power in the making of employment contracts. In 1914, it was buttressed by the Clayton Act, which protected labor unions from the threat of antitrust suits while strengthening the provisions targeted at corporate offenders and their powerful executives. Since then, the government's vigilance in ensuing compliance has fluctuated based on a number of factors, primarily the political climate and the courts' ideological tendencies.

Even though antitrust has dropped out of the national spotlight in the past decades, fair but uncompromising enforcement remains vital to the collective prosperity of both citizens and businesses, spreading wealth across an industry and its workers that would otherwise be concentrated in the coffers of a solitary company.

I. Monopoly Eliminates Jobs

In twenty-first century America, unemployment and low wages are major obstacles in the effort to restore the economy. Deleterious deals such as NAFTA and the proposed TPP shrink the domestic market by exporting jobs, but they are only part of the problem. Consolidation is another major factor in the stagnation of salaries and the dearth of available employment. 

Monopolization is a relatively simple phenomenon: two separate companies, each engaged in the manufacture of the same materials, separately employ approximately five hundred workers each. Then a merger is agreed on, and the number of workers necessary to operate one process, even if it turns out more products than one of the original two lines at a faster rate, will still be significantly lower than the combined total of the existing two companies' workforce. This reduction in the number of open jobs affects a living wage in two ways. Firstly, it lowers the wage outright by increasing the number of willing candidates for extant positions and denying dissatisfied applicants the opportunity to work for a nonexistent competitor. Secondly, it gives the new conglomerate increased power over the prices of its products, decreasing the purchasing power of the already substandard rate.

Though the political promises of the 2016 campaign have largely revolved around statutory increases in the minimum wage and the expansion of welfare benefits, these measures only serve to shift the costs of unlawful corporate practices onto the government. The monopolies have grown secure in their own dominance and lost all incentive to develop or maintain quality products, fair prices and wages, and accountability for any defects in their services, and these surface symptoms of a fundamentally blighted economic system cannot be remedied by relieving corporations of their core social functions and responsibilities.

II. Competition as a Civil Right

The relation between a free society and a free economy has been trivialized in recent years by the classification of antitrust enforcement as a regulatory matter. Violations of the Sherman Act are treated as mala prohibita - acts which are made illegal by statute, but which are not inherently immoral - and corporate convicts can officially expiate their wrongdoing with insignificant fines, suspended or nonexistent sentences, lenient civil settlements, and a complete lack of censure from their peers. The quiet and comparatively painless resolution of cases in an administrative and private, rather than adversary and public, venue fails to discourage recidivism and prevent similar transgressions by other companies. Therefore, though the streamlining of the process has facilitated secretive and speedy settlement, it has led to grave mistakes in the way monopolization is perceived and prosecuted.

The Due Process Clause of the Fifth and Fourteenth Amendments explicitly safeguards "life, liberty, and property," unequivocally prohibiting unreasonable encroachment on the right to acquire and maintain private assets. This is a double-edged statement, however, and its meaning has varied with the vicissitudes of over two hundred years of social changes. In the past it has been interpreted to preclude any regulation interfering with absolute "liberty of contract," even such essential measures as the minimum wage, the eight-hour day, and the Sherman Act (see Lochner v. New York, 198 U.S. 45 (1905), Morehead v. New York ex rel. Tipaldo (298 U.S. 587 (1936)). After the ensuing corporate lawlessness and rampant monopoly led to the Great Depression, this dogma was re-examined, and it was conclusively established that "the Constitution does not make conspiracy a civil right." Dennis v. United States, 341 U.S. 494 (1952). In its modern meaning, the Due Process Clause simply preserves the right to economic as well as political pluralism.

The liberty to conduct business without interference or intimidation from larger and more powerful private entities remains a vital constitutional right, however. See Vietnamese Fishermen's Ass'n v. Knights, 543 F.Supp. 198 (S.D. Tex 1982). Title 42 U.S.C. §1983, part of the Civil Rights Act of 1964, conclusively provides:  "Every person who... subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress."  The elimination of racial discrimination, the Act's main purpose, has largely been achieved - but its broader objective, the protection of equality on all fronts, requires a freedom of enterprise incompatible with the industrial oligarchy that defines our current economic landscape. The fight for our fundamental civil rights has resulted in monumental progress on multiple fronts, but it is far from over; our country cannot be truly free as long as this neglected element of due process is violated openly and daily.

Conclusion

To meet the burden of proof in antitrust cases, plaintiffs must "present direct or circumstantial evidence which reasonably tends to prove that the [defendants] and others had a conscious commitment to a common scheme, designed to achieve an unlawful objective." Monsanto Corp. v. Spray-Rite Serv. Corp, 465 U.S. 752 (1984). To honor the provisions of the Sherman Act by showing an equal level of "conscious commitment" towards a lawful and progressive objective, I am hereby launching a series to expose monopoly, explore the statutes that govern it, and examine the enforcement process in this country.

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