Antitrust And Labor Movements Return to Their Roots

By: Brian Callaci (Democracy Journal)

With Congress gridlocked, hopes for progressive legislation has turned to state and local governments. True to form, the traditional leaders, California and New York, are considering landmark legislation to raise wages through sectoral councils: tripartite employer-worker-government bodies empowered to regulate competition in the fast food and nail salon industries, respectively. The California bill, the FAST Recovery Act, would create a council with worker and employer representatives empowered to set minimum wage and safety standards for the fast food industry. The New York bill, the Nail Salon Minimum Standards Council Act, would create a similar council for the nail salon industry. Both bills harken back to a Progressive Era movement, driven by small businesses, trade unions, and antitrust reformers, which called for the negotiation of similar fair competition codes to govern competitive practices in specific industries. While modern antitrust reformers are preoccupied with the amount of competition—the more competition the better—early twentieth century antitrust activists argued that the quality of competition mattered too: Were companies competing on the basis of superior efficiency and innovation, or were they unfairly pricing below cost, reducing quality and engaging in ruthless wage-cutting?

The proposed fast food and nail salon bills follow in this tradition by confronting the market conditions and competitive practices driving exploitative business models. California’s fast food council would include not only representatives of workers and fast food corporations, but also the independent small business franchisees that actually operate most fast food restaurants. Doing so could give mom and pop franchisees a voice in the price and operating standards—imposed by their corporate franchisors—that ultimately determine the wages they can afford to pay. Meanwhile, New York’s nail salon council would also go beyond merely establishing minimum wages and working conditions. It would also empower the industry council, in consultation with academic experts, to set a fair minimum pricing model for the industry. Establishing a fair pricing model would allow the council to address the cutthroat competition that makes employers that abide by industry standards unable to compete against low-road rivals.

Progressive Era reformers like Louis D. Brandeis, architect of the Federal Trade Commission and eventual Supreme Court justice, believed that cutthroat competition too often forced small firms to compete by reckless price- and wage-cutting instead of by improving quality and innovation. What is more, Brandeis and his allies believed that what they called “destructive” or “ruinous” competition ultimately led to the creation of monopolies, as unscrupulous competitors used predatory price cuts to grab market share, and financiers merged small firms into larger firms to control markets. These reformers therefore saw no contradiction between fighting monopolies with one hand while encouraging new forms of publicly supervised cooperation through small business trade associations and trade unions with the other.

The antitrust movement first emerged among populist farmers during the last quarter of the nineteenth century, a period of industrial chaos in which the economy veered wildly from boom to bust as it underwent the wrenching transition from agrarian and family capitalism to the industrial era…

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