76-year old antitrust case may end

November 15, 2005 1:40 AM by S.M. Oliva (Archive)

[Cross-posted to the Voluntary Trade Council Weblog.]

On October 21 of this year, a motion was filed with the U.S. District Court in Chicago to terminate a consent decree between the Justice Department and Ludowici-Celadon Co. (now Ludowici Roof Tile.) The introduction to the company's brief was as follows:

This case originated as an antitrust enforcement action brought by the administration of President Herbert Hoover in 1929. At that time, the United States Department of Justice (“DOJ�) alleged that defendant Ludowici Roof Tile, Inc. f/k/a Ludowici -Celadon Co. (“Ludowici�), a manufacturer of clay roofing tiles, along with a number of its officers, employees, and distributors, violated Sections 1 and 2 of the Sherman Act by engaging in a scheme to monopolize the alleged clay roofing tile market. The action was settled by the entry of a Consent Decree on March 18, 1929, six days after the DOJ's Petition was filed. The Consent Decree restricted Ludowici's ability to expand its presence in the market, engage in exclusive distribution agreements, and to reduce its prices to some, but not all customers. In the more than seventy-five years that the Consent Decree has been in place, Ludowici has, to the best of its knowledge, always complied with its terms and never been subject to a Motion for Civil Contempt.

Unsurprisingly, the clay roofing market has changed radically since 1929. While the DOJ alleged in 1929 that Ludowici had 90% market share, its market share today is only 3-4%. Indeed, Ludowici has only one third the number of plants today that it had in 1929. Clearly, the purpose of the Consent Decree—preventing Ludowici from monopolizing the clay roofing tile market—has been achieved and market conditions are completely different than they were in 1929. At this point, the Consent Decree, far from aiding the antitrust laws' goals of free and fair competition, hinders those goals by artificially limiting Ludowici's ability to expand capacity and to engage in price discounting. Ludowici accordingly respectfully requests this Court enter an Order vacating the Consent Decree.

How is this decree still on the books after 76 years? In 1975, a mere 46 years into the Decree's lifespan, the DOJ refused company's request to eliminate a provision forbidding Ludowici from acquiring the assets of another clay roof tile manufacturer. The DOJ still insisted that clay roof tile was a distinct market from all other roofing materials, and that Ludowici was still a potential monopolist. During the next quarter-century, Ludowici did not make another attempt to overturn the Decree, “because the outside legal expense to terminate the Consent Decree outweighed the then present benefits to Ludowici.�

Ludowici finally decided it was worth it two years ago, and they asked the DOJ to finally put an end to a case that has spanned 13 presidential administrations. The fifteen individually-named defendants, Ludowici executives, have all left the company and, presumably, died since 1929. Ludowici itself has been bought and sold several times, and today it operates a single plant in Ohio.

In its own filing with the district court, the DOJ's Antitrust Division said that the Consent Decree “is no longer necessary to sustain a competitive market,� implying that it had been necessary for over 75 years.

The same year that Ludowici signed its Consent Decree, a 48-year-old Ludwig Von Mises wrote A Critique of Interventionism, which may offer the best contemporary explanation for the Hoover administration's actions:

The history of the last decades can be understood only with a comprehension of the consequences of such inter­vention in the economic operations of the private property order. Since the demise of classical liberalism, intervention­ism has been the gist of politics in all countries in Europe and America.

The economic layman only observes that “interested par­ties� succeed again and again in escaping the strictures of law. The fact that the system functions poorly is blamed ex­clusively on the law that does not go far enough, and on cor­ruption that prevents its application. The very failure of interventionism reinforces the layman’s conviction that pri­vate property must be controlled severely. The corruption of the regulatory bodies does not shake his blind confidence in the infallibility and perfection of the state; it merely fills him with moral aversion to entrepreneurs and capitalists.

But the violation of law is not an evil that merely needs to be eradicated in order to create paradise on earth, an evil that flows from human weakness so difficult to uproot, as etatists so naively proclaim. If all interventionist laws were really to be observed they would soon lead to absurdity. All wheels would come to a halt because the strong arm of gov­ernment comes too close.

Our contemporaries view the matter like this: farmers and milk dealers conspire to raise the price of milk. Then comes the state, the welfare state, to bring relief, pitting common interest against special interest, public economic view against private point of view. The state dissolves the “milk cartel,� sets ceiling prices, and embarks upon criminal prosecution of the violators of its regulations. The fact that milk does not become as cheap as the consumers had wished is now blamed on the laws that are not strict enough, and on their enforcement that is not severe enough. It is not so easy to oppose the profit motive of pressure groups that are injurious to the public. The laws must therefore be strengthened and enforced without consideration or mercy.

In reality, the situation is quite different. If the price ceil­ings were really enforced, the delivery of milk and. dairy products to the cities would soon come to a halt. Not more, but less milk, or none at all, would come to the market. The consumer still gets his milk only because the regulations are circumvented. If we accept the rather impermissible and fallacious etatist antithesis of public and private interests, we would have to draw this conclusion: the milk dealer who violates the law is serving the public interest; the govern­ment official who seeks to enforce the ceiling price is jeopar­dizing it.