I recently read two books that may be of interest to others in the antitrust field.

Spencer Waller’s Thurman Arnold:  A Biography (NYU 2005) traces Arnold’s assent from small town Wyoming to the pinnacles of New Deal power and an (unhappy) seat on the D.C. Circuit, followed by an anti-establishment stint as defender of civil rights during the McCarthy era (and founder of Arnold & Porter).  Antitrust practitioners may be most interested in Chapter 6, which details Arnold’s tenure as head of the Antitrust Division during the second half of the New Deal, when the Roosevelt administration turned from mandated industrial cartelization under the NIRA to rigorous criminal antitrust enforcement.  Although the trend began under the brief tenure of Arnold’s prececessor, Robert Jackson, Arnold is often credited with turning around the Antitrust Division and transforming it into a modern, effective, and aggressive enforcement agency. 

Although much of the story that Waller recounts is familiar, the tale is nicely told and brings out the complications of being an aggressive antitrust enforcer in a political administration deeply ambivalent about competition policy.  Arnold’s indictment of the carpenter’s union and its president, William Hutcheson, was a serious political miscalculation because labor was such an important component of the New Deal coalition.  Arnold was finally forced out of the DOJ after he attemped to indict the railroads (which were essential to the war effort) and political luminary Averell Harriman for price fixing.  We owe much to Arnold for taking antitrust seriously–including the lesson that competition policy always takes a back seat to direct economic management by powerful political institutions.

My second recommendation is Christopher Mason’s The Art of the Steal (Berkley 2004), which provides juicy detail on the Christie’s/Sotheby’s price-fixing scandal.  Mason, a contributor to the New York Times, received cooperation from a number of the indicted executives, particularly Al Taubman and Deede Brooks of Sotheby’s, and the story therefore emerges somewhat sympathetically to Sotheby’s.  Then again, regardless of how the story is told, it’s hard not to feel that Taubman in particular got the short end of the stick in light of the fact his counterparts at Christie’s got off without any criminal sanction, thanks to the Justice Department’s leniency program and the geographical accident that the Christie’s principals lived in England and the Sotheby’s principals in the U.S.

Art of the Steal is fun to read partly because of the prurient pleasure of peeking into the lives of really rich, arrogant people who get to deal in art.  From an antitrust perspective, what struck me the most was that (with the benefit of hindsight, of course) the public discovery of the price-fixing scheme appeared inevitable.  Inexplicably, Christie’s CEO Chris Davidge actually kept notes of his price-fixing activities and there were enough tell-tale signs to make any interested observer (and there were many) begin to wonder.  There is some empirical work suggesting that the probability that a cartel will be detected is only about 13 to 17 percent.  See Peter G. Bryant and E. Woodrow Eckhard, Price Fixing: The Probability of Getting Caught, 73 Rev Econ & Stat 531 (1991).  In light of the Christie’s/Sotheby’s debacle, it’s hard to imagine how anyone would ever get away with it.

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