Vertical Integration and the Sherman Act: The Legal History of an Economic Misconception

Abstract

STHOUGH THE LAW OF VERTICAL INTEGRATION' has been developing ,yunder the Sherman Act for better than forty years, opinions as to what that law is, and what it has been, are still confused. In part, this confusion reflects the state of the law; in part, it springs from a misreading of the cases. This paper represents an attempt to reorder this area of the antitrust law; it is an attempt to discern a consistent doctrine concerning vertical integration running through the cases, and to evaluate the worth of that doctrine in terms of the purposes of the Sherman Act. The current predominant view of the case law appears to be that prior to 1940 vertical integration had not been attacked as such, and that the Sherman Act does not, and did not, condemn such integration except when it is used to extend monopoly from one level of production to another. 2 This paper reaches completely contrary conclusions. First, the recent attacks upon vertical integration are not something new in the law. Rather they are merely a spectacular bringing to fruition of a way of thinking, an attitude, that goes back to the earliest cases. Second, the Sherman Act, "new" or "old," has not condemned vertical integration only where there was monopoly at one level of operation (horizontal monopoly). Where the courts have thought abusive practices traceable to

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