Presented by James C. Cooper

George Mason University School of Law

Goals of Antitrust

Global Antitrust Institute

November 16, 2015

Honolulu, Hawaii

 

Copyright belongs to author (2015)

Evolu'on  of  U.S.  An'trust  Laws  

United States v. Trans-Missouri Freight Assoc., 166 U.S. 290, 324 (1897)

“[I]t is not for the real prosperity of any country that … changes [in the ways of doing business] should occur which result in transferring an independent business man, the head of his establishment, small though it might be, into a mere servant or agent of a corporation for selling the commodities which he once manufactured or dealt in ….”

United States v. Aluminum Co. of America, 148 F.2d 416, 428-29 (2d Cir. 1945) (Hand, J.)

The Congress intended the Sherman Act to achieve certain socio-political aims, such as minimizing the “helplessness of the individual” and ensuring the “organization of industry in small units.”

Brown Shoe Co. v. United States, 370 U.S. 294, 333, 344 (1961) (discussing the Cellar-Kefauver amendment of 1950 to the

Clayton Act)

“[W]e cannot fail to recognize Congress’ desire to promote competition through the protection of viable, small, locally owned businesses. Congress appreciated that occasional higher costs and prices might result from the maintenance of fragmented industries and markets. It resolved these competing considerations in favor of decentralization.”

Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 699 (1967)

A “competitor who is forced to reduce his price to a new all-time low in a market of declining prices will in time feel the financial pinch and will be a less effective competitive force.”

Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50, 54, 69 (1977)

“Vertical restrictions promote interbrand competition by allowing the manufacturer to achieve certain efficiencies in the distribution of his products.” Justice White concurring: “[W]hile according some weight to the businessman’s interest in controlling the terms on which he trades in his own goods may be anathema to those who view the Sherman Act as directed solely to economic efficiency” – “[e].g., Bork, Legislative Intent and the Policy of the Sherman Act, 9 J. Law & Econ. 7 (1966); Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division, 74 Yale L. J. 775 (1965)” – “this principle is without question more deeply embedded in our cases than the notions of ‘free rider’ effects and distributional efficiencies borrowed by the majority from the ‘new economics of vertical relationships.’”

Justice Brennan, dissenting (with Justice Marshall): “I would not overrule the per se rule stated in United States v. Arnold, Schwinn & Co., 388 U. S. 365 (1967).”

National Society of Professional Engineers v. United States, 435 U.S. 679, 690 (1978)

“Under either [the per se rule or the rule of reason,] the inquiry is confined to a consideration of impact on competitive conditions. … The Sherman Act reflects a legislative judgment that ultimately competition will produce not only lower prices, but also better goods and services.”

Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979)

The Legislative history “suggest[s] that Congress designed the Sherman Act as a ‘consumer welfare prescription.’” (quoting R.H. Bork, Antitrust Paradox 66 (1978))

NCAA v. Board of Regents of University of Oklahoma, 468 U.S. 85, 107-08 (1984)

“Price is higher and output lower than they would otherwise be, and both are unresponsive to consumer preference. This … point is perhaps most significant, since Congress designed the Sherman Act as a consumer welfare prescription. A restraint that has the effect of reducing the importance of consumer preference in setting price and output is not consistent with this fundamental goal of antitrust law.”

71%

82%

25%

0%

11%

89%

47%50%

100%

75%

53%

18%

29%

50%

0%

20%

40%

60%

80%

100%

Johnson (8) Nixon-Ford(18)

Carter (14) Reagan (20) Bush I (10) Clinton (3) Bush II (10)

Decade (# of cases)

Plaintiff (%) Defendant (%)

United States’ Position as Amicus in Private Cases by Presidential Administration

30%

78% 77%

60%

0%

20%

40%

60%

80%

100%

1967-1976 (44) 1977-1986 (42) 1987-1996 (18) 1997-2006 (13)

Decade (# of cases)

Decisions citing Law & Economics work / Total cases

(works by Phillip Areeda, Ward Bowman, Robert Bork, and Richard Posner)

Percentage of Supreme Court Decisions Citing Law & Economics Works

What’s  An'trust  For?  •  Broad  socio-­‐poli'cal  goals?  (e.g.,  protec'ng  small  business,  promo'ng  privacy,  ensuring  employment).  

•  Maximizing  choice?    •  Welfare?  

– Total  – Consumer  – Output    

Judging  Standards  

•  How  should  we  pick  among  compe'ng  standards?  – Administrability  

•  How  easy  is  it  to  get  an  answer?  – Predictability  

•  Can  par'es  predict  what’s  legal  and  illegal?    •  Rent  seeking  

–  Increase  economic  performance  •  Does  the  standard  help  consumers  

Non-­‐Economic  Goals  

•  Administrability:  – How  do  you  balance  goals  like  privacy,  dispersion  of  economic  power,  or  preserving  small  business  against  price  increases    

•  Predictability:  – No  objec've  measure,  means  variance  in  outcomes  –  Ex.  FTC  Google  

•  Economic  Performance:  –  Ex.  Small  town  doctor  cartel  

Choice  

•  Administrability:  –  Easy  to  count  

•  Predictability:  – What  choices?    – What  is  the  op'mal  number  of  firms  or  price/quality  combina'ons?    

•  Economic  Performance:  – Misses  trade  offs  

•  Mergers  •  Ver'cal  restraints  

Welfare  

•  Administrability:  – Economics  tool  kit  

•  Predictability:  – Par'es  know  what  courts/agencies  will  be  weighing.    

•  Economic  Performance:  – Focuses  on  conduct  that  makes  the  “pie”  bigger  

Consumer  Welfare  vs.  Total  Welfare  

Price  

Quan'ty  

S  

P*  

Q*  

D  

Total  Welfare  

Consumer  Welfare  vs.  Total  Welfare  

Price  

Quan'ty  

S  

P*  

Q*  

D  

Total  Welfare  

Consumer  Welfare  

DH  

DL  

P  

PRPM  

QL   QH  

RPM:  Consumer  Surplus  Net  Gain  

Consumer  Gain  

Consumer  Loss  

Producer  Share  of  New  Surplus  

DH  

DL  

P  

PRPM  

QL   QRPM  

RPM–  Consumer  Surplus  Net  Loss  

Consumer  Gain  

Consumer    Loss  

Producer  Share  of  New  Surplus  

Welfare  •  Output  as  a  proxy  for  compe''veness