Vanderbilt Law Review


Joel J. Finer

First Page



Although the interpretation and application of the federal antitrust laws are replete with paradoxes, inconsistencies, and seemingly conflicting premises, few situations illustrate the contradictory nature of federal policy toward industrial structure and business behavior as dramatically as the Justice Department's rejection of General Electric's proposed decree. For example, one primary objective of the Sherman Act is to prevent practices that tend to restrict output and raise prices, and price-fixing agreements are illegal per se because it is unreasonable to believe that they have any beneficial results. Many industries exhibit a high degree of concentration that enables a few firms to operate through a structure of quasi-agreements and spontaneous coordination, from which comes an implicit understanding that they will enhance their individual profits by refraining from engaging in price competition. A major current concern of antitrust administration and industrial economics is to find ways of rendering these "oligopolies" more competitive, yet the crux of the government's allegations against General Electric and its executives was that they participated in a scheme designed to reduce prices in an oligopolistic industry. In view of the widespread concern over inflexible, unnaturally high prices, the rationale of the Justice Department's attempts in similar situations to prohibit "unreasonably low" prices with neither a showing that the alleged violator had an intent to suppress competition nor an examination of the effect that the lowering of prices had on the competitive process warrants critical examination. This Article will first survey the development and present status of legal limitations upon low or lowered prices. Following sections will examine the applicable legal doctrines within a framework of economic analysis, and the final section will propose an approach to the law of price cutting that attempts to bring it in line with the broader objectives of antitrust policy.