But even after the economy became dominated by giant corporations, argued Gabriel Kolko in The Triumph of Conservatism, attempts to establish cartels by purely private means were largely failures. The big trusts immediately began losing market share to smaller and lower-cost competitors.
It was this inabiliity to maintain cartels by private means alone that sparked the Progressive Era’s regulatory state, as corporations turned to the state to suppress competition.
The tendency of cartels to break down into ruinous price wars was the reason for the “unfair competition” provisions of the Clayton and FTC Acts. Charging prices under cost was classed as unfair competition. According to Kolko, it was this provision that first made possible stable oligopoly markets in which firms competed in terms of brand-name image and fluff rather than price. That’s right: The “Progressive” regulatory state was really working for the folks it regulated.
Ever hear the expression “Baptists and Bootleggers”? The biggest advocates for keeping a county dry, and the biggest source of campaign funds for temperance politicians, are the people who make money selling bootleg whiskey.