Monopolistic Competition in Distribution

Modern economics defines our present price structure as a synthetic product in which economic elements of both competition and monopoly have been blended.' Although the nature and effects of monopolistic competition in production have attracted wide interest among economists, lawyers, and governmental agencies, the field has been little explored as far as the distributive trades are concerned. While in production and transportation the octopus of monopoly was being scientifically dissected and its parts analyzed, the analysts lost cognizance of the original goal of their analysis. They came to associate the evidence of the phenomenon with the phenomenon itself, price fixing with monopoly. They forgot that the whole theory of competition is essentially based on the assumption of a balance between production and consumption which should be obtained through the medium of a free price, and that this very balance, not free price, constitutes its essence. Particularly have the courts, which are required to cast economic theory into the mould of a legal formalism, failed to segregate the paraphernalia of monopoly from this essential maintenance of balance. They have failed to recognize big business as the largest threat to the balance of competitive forces. The courts and many students of economics also frequently overlook some distinct features which give to operation of monopoly in the distributive trades a different aspect from what has been observed in manufacturing industries. Unlike his manufacturing counterpart, the large-scale dealer is more often both a monopolistic seller and buyer. The distributor, as the middleman between a large number of producers and a still larger number of consumers, holds a key position in the mechanism which determines the price to the ultimate consumer. To the proper balance of the system it is as important that competitive buying prevails as it is that there are rival sellers. If there is a monopolistic buyer or monopsonist, as science calls him, the balance is disturbed.2 A surplus profit occurs for the buyer, which has been called consumer's surplus, that is comparable to the monopoly