ENFORCING A WALL OF SEPARATION BETWEEN BIG BUSINESS AND STATE: PROTECTION FROM MONOPOLIES IN STATE CONSTITUTIONS.

Date01 December 2020
AuthorHowell, Alexandra K.

INTRODUCTION

In 2016, New York Times columnist Farhad Manjoo dubbed Amazon, Apple, Alphabet (the parent company of Google), Facebook, and Microsoft the "Frightful Five." (1) Since then, Americans' fear of monopoly has only grown. Headlines ask, "Should you be scared of Amazon?" (the answer, according to the author, is yes). (2) Academics have been celebrated for developing policies to tackle the problem of powerful companies that consumers generally like. (3) The 2020 Democratic presidential candidates tried to ride the antimonopoly wave. Senator Elizabeth Warren released a comprehensive plan to break up big tech. (4) Senator Bernie Sanders went even further--when asked if he would consider jailing CEOs who worked to restrict trade, Sanders commented, "[d]amn right they should be [in jail]." (5) In the midst of the coronavirus pandemic, the House Subcommittee on Antitrust, Commercial, and Administrative Law virtually grilled tech executives and promised an end to their market power. (6)

Yet despite the monopoly-phobia that has captivated economic debate, few Americans think twice about the monopolies in their own backyards. Across the country, there are thousands of small-scale monopolies with the same attributes that the dreaded Silicon Valley giants supposedly have: the power to keep out competitors, raise prices, and mistreat customers. Take, for example, the story of Rafael Lopez, a restaurant owner in San Antonio, Texas. (7) Lopez wanted to open a second location that included a food truck and outdoor seating, but according to city law he had to get every brick-and-mortar competitor nearby to sign off. (8) Or consider the case of six-year-old Kyler Truesdell, who had to wait two hours for an ambulance in Kentucky. (9) Kyler's cousin Hannah Howe runs an ambulance service a few minutes away in Ohio, but is unable to operate in Kentucky because she was denied the right to legally operate in the state. (10) Howe's application was rejected--despite a declared ambulance shortage--when incumbent operators protested. (11)

If Google and the federal government openly teamed up to keep out competitors, it would be a national scandal. Yet when city hall joins forces with established restaurants, barber shops, optometrists, or even florists, the outrage is rather dull. There is reason, however, for those who fear private monopolies to question state-backed barriers to entry with equal force. Both the Obama and Trump administrations have complained that occupational licensing stalls economic growth, raises prices, and increases unemployment. (12) Yet beyond economic woes, allowing the state to pick economic winners is fundamentally contrary to the American scheme of government. Like how progressives have conflated the growth of private monopolies with the destruction of the American ideal of equality under the law, (13) so too does a state-granted monopoly fly in the face of this principle.

The goal of this Note is not to convince the reader to care more about regulatory monopolies than private ones. In fact, it is not to talk about private antitrust law at all. Instead, the goal is to put today's concern with monopolies in historical perspective. Part I traces the history of the antimonopoly spirit in the United States starting with the English tradition that was highly influential on the Founders. This Note then demonstrates that today's concern with private monopolies comes from a shift that took place during the progressive era. In Part II, this Note highlights the role state constitutional claims can have in protecting rights, as explained by Justice William Brennan. Finally, in Part III, this Note provides a blueprint for how state antimonopoly provisions may be used to target state-created monopolies in practice and reclaim America's Founding antimonopoly spirit.

  1. MONOPOLIES: A HISTORICAL PERSPECTIVE

    This Part briefly outlines the history of American antimonopoly sentiment, which originated in England and was brought to the colonies. This spirit is relevant because it informed many of the state antimonopoly provisions that are the focus of this Note. Furthermore, it is important to recognize that the progressive focus on private antitrust law was an ideological shift. In order to reclaim the Founders' antimonopoly spirit to combat crony capitalism today, it is important to realize the historical trajectory.

    1. The English Tradition

      The American antimonopoly spirit dates back to seventeenth-century England. According to Professors Calabresi and Leibowitz, two events during this century mark the first displays of public outrage over government-granted monopolies. (14) The first was the English common-law case Darcy v. Allen--famously called The Case of Monopolies. (15) During the reign of Queen Elizabeth I, the Queen frequently sold royal monopolies as a way to raise revenue. (16) In the case, Edward Darcy brought suit, claiming that haberdasher Thomas Allen infringed on his royal monopoly right to import and sell all trading cards in England. (17) The court invalidated the monopoly, not because monopolies were per se invalid, but because this type of monopoly had never been granted by the Queen before. (18) A monopoly in playing cards was, according to the court, contrary to the common law as it "violated the right of others to carry on their trade." (19) Furthermore, in his report on the case, influential seventeenth-century lawyer Edward Coke explained that the problem of the monopoly was that it hurt those who did not obtain an exclusive grant and "now will of necessity be constrained to live in idleness and beggary." (20) Coke's critique hinged on the monopoly infringing on a common right possessed by the other card sellers--this understanding was later adopted by many states in interpreting their antimonopoly provisions. (21)

      The Queen died the year Darcy was decided and her successor, King James I, continued her practice of selling monopolies to pad the royal budget--leading to the second case of outrage over monopoly: a power struggle between the King, Parliament, and the courts. (22) The King fired Coke, then the Lord Chief Justice of England, for ruling against him in monopoly cases (23) and dissolved Parliament in the fight as well. (24) Finally, in 1624 the Statue of Monopolies was passed in Parliament, with the help of Lord Coke who joined Parliament after he was booted from the bench. (25) The statute was surprisingly broad in scope with Section One stating: "[A] 11 monopolies... are altogether contrary to the laws of this realm, and so are and shall be utterly void and of none effect, and in no wise to be put in u[s]e or execution." (26) While Lord Coke wrote the statute, it was mostly intended as a check on the King--Parliament could still grant monopolies as it saw fit. (27) In fact, Parliament later granted Darcy his exclusive right to playing cards. (28)

    2. The Rise and Fall of the American Antimonopoly Spirit

      Ironically, the original thirteen colonies inherited the English antimonopoly sentiment despite being an outgrowth of the crown's ability to grant royal charters in the colonies. (29) Lord Coke's influence is especially noteworthy with his works being cited to oppose tyrannical actions by the crown. (30) Coke's writings were "standard" reading in America and studied by "John Adams, John Marshall, James Wilson, and Thomas Jefferson." (31) Additionally, some colonies adopted their own version of the Statute of Monopolies (32)--precursors to the antimonopoly provisions discussed in Part III.

      The colonial concern with monopolies is evident in the writings of James Madison and Thomas Jefferson. During the debate over ratification, Jefferson wrote to Madison expressing his desire that the Constitution include a Bill of Rights which would include "restriction against monopolies." (33) Madison responded with a recognition that monopolies were contrary to free government but "[w]here the power, as with us, is in the many not in the few, the danger can not be very great that the few will be thus favored." (34)

      While Jefferson did not get his wish, many scholars point to the Supreme Court's early Contracts Clause jurisprudence as evidence of an "antimonopoly principle" retained in the Constitution. (35) In Trustees of Dartmouth College v. Woodward, (36) for example, the Court held that the College's corporate charter--granted by King George III--was a contract between the state and the owners so the charter could not be altered without the owner's consent under the Contracts Clause. (37) Thus, corporations "were no longer mere government privileges; they were private property that the government had to respect." (38) The holding in Woodward empowered the growth of private corporations that "were no longer viewed as the monopoly recipients of special governmental grants of privilege." (39) Private corporations, unlike royal charters, could not be granted and rescinded at the state's whim. (40)

      In some ways, the legal detachment of corporations from the state can be blamed for the eventual abandonment of the Founders' antimonopoly sentiment. Scholar Timothy Sandefur explains that with the proliferation of private corporations and rapid industrialization, many Americans abandoned the free-labor ideology of Jacksonian democracy and instead called for a guarantee of economic opportunity from the government. (41) A reaction to the "growing influence and power of Standard Oil and other corporations," for example, led to the Sherman Antitrust Act in 1890. (42)

      Additionally, liberal state incorporation laws led to crony capitalism and abuses. The railroad monopolies of the late-1800s were especially despised for corruption. (43) The Camden and Amboy Railroad of New Jersey, for example, was granted a monopoly on transit through New Jersey in exchange for railroad stock. (44) The intellectual movements that grew out of this period opposed "monopolies in general.... These groups feared that these...

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