I’m delighted that Butler Shaffer’s In Restraint of Trade can now reach the widest possible audience. I reviewed the book here.
Some selections:
Early on, Shaffer details the rise of trade associations and codes of ethics, which allows for some downright entertaining quotations, a welcome delight for a book concerned with inter-war trade practices. The American Bottlers of Carbonated Beverages, for example, solemnly pledged, “My desire shall not be to undersell my fellow bottlers, but to contend with them for first place in the quality of my products and service I render my patrons” (p. 65). A prominent textile trade association offered a similar exhortation: “Legitimate competition is the life of the industry, but unscrupulous competition is injurious to yourself, to your competitor, and to your industry” (p. 65). However, the doubletalk of these codes pales in comparison to the rhetorical excellence of the American Warehousemen’s Association, which framed its proscriptions of price-cutting not as an attempt to strengthen the industry, but to rescue the beleaguered consumer: “Nothing so shakes the confidence of the Public as the knowledge that only through haggling and bargaining can it be sure of obtaining the lowest and presumably fairest rates; nothing is so unfair to the unsuspicious and trusting customer; nothing is so damning to the effort to establish confidence and good-will and to carry on our business legitimately and honestly on a plane of fair dealing with equal advantage to all.”
Shaffer explains that these initially voluntary codes and associations failed in their announced purpose to eliminate “unhealthy” pricecutting, and soon turned to government to enforce such “voluntarism.” He then offers the single most powerful critique of the predatory pricing bogey that this reviewer has ever seen (pp. 67-68), though it does not quite satisfy the reader acquainted with Game Theory (e.g., even if a big firm is reaping inordinate profits, why would it be strategically wise for any individual upstart to challenge it, if the big firm has the resources to ruin at least the first few such challengers?). Such theoretical concerns aside, Shaffer decisively demonstrates that predatory pricing is not a realistic danger, and that ostensible historical examples of the strategy are dubious.
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