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Abstract: Two great, opposing ideologies of the market and the state have shaped the evolution of antitrust law in the United States since 1890. The evolutionary vision views the market, framed solely by common-law rules of property and contract, as a mechanism for facilitating free exchanges among countless individuals in the pursuit of their best interests;markets, in this vision, will destroymonopolywithout government intervention. The intentional vision views the market as a mechanism within which powerful interests can coerce consumers, labor, and small businesses; markets, in this vision, tend toward monopoly unless government intervenes. The Sherman Act embodied a legislative compromise between these two visions. It endorsed competition in markets as the fundamental mechanism for the allocation of resources, but it rejected the view that government can never improve market outcomes by direct intervention. Over the ensuing century and more, the underlying ideological tension in antitrust has continued to frame the debate over the interpretation of the Sherman Act. In the formative era of antitrust policy, the evolutionary vision had primary influence. In the period from the end of the New Deal through the Warren Court, the intentional vision was dominant, producing a multitude of new per se rules, an expansive definition of monopolization, and an aggressive merger policy. Beginning in the mid-1970s, however, another evolutionary approach, the Chicago School, began to influence law and policy. Still more recently, Post-Chicago analyses have emerged that express in formal economics some of the perceptions of the intentional vision.
antitrust law, economics, ideology, history, legislative history, Sherman Act
Abstract: Daubert v. Merrell Dow has deeply affected how courts evaluate testimony by putative experts of all kinds in a variety of legal contexts. But the influence of Daubert on the role of expert economic testimony in antitrust cases has been less clear. Several commentators have noted that, although Daubert motions do occur regularly in antitrust cases, courts also continue to scrutinize the legal sufficiency of expert testimony without reference to Daubert in motions for summary judgment or for judgment as a matter of law. In this article, we argue that, whatever the doctrinal rubric or procedural context in which courts examine economic testimony in antitrust cases, their inquiry is ultimately guided by economic authority, authoritative economic knowledge that courts have adopted from the scholarly literature. In interpreting and applying the antitrust laws, courts acquire their most important economic ideas by a pragmatic process that is independent of the strictures that Daubert places on the receipt of economic testimony. Once acquired, economic authority determines the qualifications trial experts must have, the issues on which they can testify, the models on which they can rely, and the methodologies they must use.
In the past thirty years, the most important source of economic authority has been the Chicago School's models of the practices that most concern antitrust: cartels, tying, predatory pricing, resale price maintenance, and so forth. The Supreme Court has relied on these models not, for the most part, to adopt rules of per se legality, as some Chicagoans have suggested, but in less sweeping ways, such as limiting or abandoning rules of per se illegality, defining antitrust injury and standing, and determining the sufficiency of evidence. In some notable examples, of course, the Court has declined to follow Chicago models in favor of others. In all of these contexts, however, economic authority frames and defines the role of expert testimony. In the main part of the article, we examine how economic authority has defined the role of expertise in four critical contexts: predatory pricing; market definition and market power; the characterization and proof of price fixing; and the definition and proof of antitrust injury. In the final section we consider the legitimacy of the deference to economic authority over expertise in the formation of antitrust law, and suggest how our account of the role of economic authority affects the continuing confrontation between Chicago and Post-Chicago economics.
antitrust, litigation, expert testimony, daubert
Abstract: Daubert v. Merrell Dow has deeply affected how courts evaluate testimony by putative experts of all kinds in a variety of legal contexts. But the influence of Daubert on the role of expert economic testimony in antitrust cases has been less clear. Several commentators have noted that, although Daubert motions do occur regularly in antitrust cases, courts also continue to scrutinize the legal sufficiency of expert testimony without reference to Daubert in motions for summary judgment or for judgment as a matter of law. In this article, we argue that, whatever the doctrinal rubric or procedural context in which courts examine economic testimony in antitrust cases, their inquiry is ultimately guided by economic authority, authoritative economic knowledge that courts have adopted from the scholarly literature. In interpreting and applying the antitrust laws, courts acquire their most important economic ideas by a pragmatic process that is independent of the strictures that Daubert places on the receipt of economic testimony. Once acquired, economic authority determines the qualifications trial experts must have, the issues on which they can testify, the models on which they can rely, and the methodologies they must use. In the past thirty years, the most important source of economic authority has been the Chicago School's models of the practices that most concern antitrust: cartels, tying, predatory pricing, resale price maintenance, and so forth. The Supreme Court has relied on these models not, for the most part, to adopt rules of per se legality, as some Chicagoans have suggested, but in less sweeping ways, such as limiting or abandoning rules of per se illegality, defining antitrust injury and standing, and determining the sufficiency of evidence. In some notable examples, of course, the Court has declined to follow Chicago models in favor of others. In all of these contexts, however, economic authority frames and defines the role of expert testimony. In the main part of the article, we examine how economic authority has defined the role of expertise in four critical contexts: predatory pricing; market definition and market power; the characterization and proof of price fixing; and the definition and proof of antitrust injury. In the final section we consider the legitimacy of the deference to economic authority over expertise in the formation of antitrust law, and suggest how our account of the role of economic authority affects the continuing confrontation between Chicago and Post-Chicago economics.
Abstract: Successful collusion requires that rivals reach consensus on the key terms and deploy some means of detecting and penalizing cheaters, usually by tracking rivals' transaction prices. Economists have shown that firms in an oligopoly can, in certain conditions, achieve noncompetitive prices and outputs without an express agreement by making choices that anticipate each others' likely responses. "Facilitating practices" are mechanisms that enhance rival firms' ability to police such an arrangement. If firms expressly agree to adopt one of these facilitating practices, for example as a trade association rule, and the effect of the practice is to reduce competition, then that agreement may be independently illegal under Section 1 of the Sherman Act. Moreover, the Sherman Act may preempt a state law that requires rivals to use a facilitating practice. A more difficult question arises, however, where the firms each adopt the same facilitating practice without any express agreement: does parallel pricing together with parallel adoption of facilitating practices allow a court to infer the requisite agreement? Both Donald Turner and Richard Posner believed that, unlike simple parallel pricing, the parallel adoption of a facilitating practice that permits noncompetitive pricing should be unlawful, because the problem of remedy is mitigated. But conduct is not evidence of an anticompetitive agreement simply because it can be enjoined. Facilitating practices may do more than simply facilitate rivals' efforts to achieve an inefficient oligopoly price. They also may provide certain immediate benefits to consumers by, among other things, reducing search or transaction costs. In these circumstances, the firms' adoption of the practice might well be for the benign reason rather than the collusive reason. Courts will not easily infer an agreement from the parallel adoption of facilitating practices where the practices have beneficial functions apart from facilitating price coordination. Unfortunately, the stated legal definitions of agreement under which courts evaluate circumstantial evidence, including facilitating practices, are inadequate. In this article, I review the deficiencies of the present law governing the definition and proof of agreement under Section 1 and propose that the law should recognize that communication among rivals is necessary for concerted action. I then examine cases involving facilitating practices in a variety of Section 1 contexts, and suggest that the courts have come to recognize the importance of communications among rivals in evaluating whether the evidence warrants an inference of agreement.
antitrust, collusion, facilitating practices, concerted action, Sherman Act
Abstract: The government's monopolization case against Microsoft has spawned a myriad of private lawsuits seeking treble damages. This study examines an important subset of those lawsuits, the class actions brought under state law on behalf of indirect purchasers of Microsoft's software, mostly consumers and businesses who bought the software along with new computers from Original Equipment Manufacturers (OEMs) like Compaq, Gateway, and Dell. Although the Illinois Brick rule denies indirect purchasers the right to sue under the federal antitrust laws, many states have authorized these suits under state antitrust or consumer protection law. Before the Microsoft cases, however, courts in the Illinois Brick repealer states had refused, more often than not, to certify indirect purchaser suits as class actions on the grounds that issues specific to the individual plaintiffs, particularly the issue of impact, predominated over the issues common to the class. In these courts' skeptical view, the complexities of proving whether and by how much the direct purchasers had passed on the overcharge to the plaintiffs would likely overwhelm any common issues, like questions of liability, and thus make the cases unsuitable for trial as class actions. The courts in the Microsoft indirect purchaser cases, however, have certified them as class actions much more frequently. Of the fourteen opinions in these cases, three (two in Michigan and one in Maine) denied certification, while eleven granted it. This rate of certification is significantly higher than the rate in other indirect purchaser cases during the same period. In this study, I explore possible explanations for this disparity in the rate of certification, including the application of lenient standards of certification; the existence of favorable factual characteristics in the cases; and the preclusive effect of the government case. In the conclusion, I consider whether the certification of these cases has been in the public interest.
Microsoft, antitrust, indirect purchaser, class certification, private antitrust remedies, state antitrust law
Abstract: An important provision in each of the final judgments in the government's Microsoft antitrust case requires Microsoft "make available" to software developers the communications protocols that Windows client operating systems use to interoperate "natively" (that is, without adding software) with Microsoft server operating systems in corporate networks or over the Internet. The short-term goal of the provision is to allow licensees of the protocols to write applications for non-Microsoft server operating systems that can interoperate as well with Windows client computers as can applications written for Microsoft servers. The long-term goal is to preserve, in the network context, the "middleware threat" to the Windows monopoly - the possibility that middleware applications running on servers might become a platform that could erode the "applications barrier to entry" as Netscape and Java had threatened to do. The district court singled out this provision as the "most forward-looking" in the final judgments, and as the key to assuring that the other provisions do not become "prematurely obsolete." The provision has, however, proven to be by far the most difficult to implement. We argue that it has not accomplished its purpose and that courts can draw some hard lessons from the experience. In 2003, almost a year after Microsoft first disclosed the protocols, only four firms had taken licenses. At the court's urging, both the plaintiffs and Microsoft have undertaken enormous efforts to promote the protocol program to developers, to make the license terms more attractive, to provide technical support, and especially to improve the technical documentation. The efforts have included several ambitious software development projects aimed at testing the adequacy of the documentation. Despite these efforts, as of March 2007, there were only 27 licensees producing 14 products, none of which had apparent platform potential. These results suggest that the program has failed in its primary goal. We argue that the real reason for the dearth of the licensees is that firms developing software applications to run on non-Microsoft servers generally do not need Microsoft's proprietary protocols to interoperate with Windows. They can achieve interoperability by using standard protocols supported in Windows, by adding other protocols, or by developing their own Windows client application. We draw two primary lessons for courts in future cases. First, court should only impose injunctive relief in response to a proven need. The clearest need is to stop illegal conduct that impedes normal market processes. The protocol licensing requirement, however, did not respond to a proven violation and did not address technologies that were the focus of the liability phase of the case. Nor was there an independent showing of need for a forward-looking provision - evidence taken during the remedial phase of the case did not support compulsory licensing of protocols. Second, the court should avoid regulatory decrees, especially in high-technology markets. The protocol licensing program has become highly regulatory. The plaintiffs have directly supervised the price of the licenses and other terms of dealing. More important, they have regulated the quality of the product through complex testing. If these characteristics appear in future monopolization cases, they should be treated as warning signs.
Microsoft, antitrust, monopolization, remedy, network, protocol
Abstract: After the Supreme Court's 2007 decision in Bell Atlantic Corp. v. Twombly, an antitrust plaintiff who tries to plead an agreement in restraint of trade under Section 1 of the Sherman Act must allege more than parallel conduct and an undefined "conspiracy." Now, the complaint must include "enough factual matter (taken as true) to suggest that an agreement was made." Although the Court insisted it was not imposing a heightened pleading standard, it did require antitrust plaintiffs to provide enough detail to make the claimed agreement plausible. In this article, I examine an important substantive consequence of Twombly's pleading regime. In nineteen reported cases, federal courts have applied the new pleading standard to complaints alleging concerted action under Section 1 of the Sherman Act. In doing so, the courts have had to address a crucial defect in the substantive law of agreement: the Supreme Court's traditional definitions of agreement, which Twombly itself simply repeated, are too vague to help litigants and courts distinguish between consciously parallel conduct and concerted action. In the course of applying Twombly, however, the lower courts have adopted a more meaningful definition, one that requires that the parties have communicated to each other their intentions to act in a certain way, and their reliance on each other to do the same. This clarification of the standard has important implications for the role of discovery in pleading and resolving claims of concerted action.
antitrust, collusion, conscious parallelism, facilitating practices, concerted action, Sherman Act, pleading, Twombly
Abstract: Antitrust law has long recognized that firms have a qualified right to refuse to deal. Nevertheless, a refusal to deal or an exclusionary contract may reduce competition by denying a dominant firm's rivals needed resources or outlets. As a remedy in such cases, a court may require the defendant to form contracts (or at least offer to form contracts) on specified terms. The American and European Microsoft cases both resulted in mandatory contracting remedies aimed at fostering competition. Various provisions in the orders require Microsoft (1) to permit its trading partners to deal on favorable terms with Microsoft's rivals; (2) to permit computer manufacturers to sell machines with versions of the Windows operating system from which certain functionality has been deleted; and (3) to disclose and license to rivals certain types of interoperability information. Parts of these orders are still being implemented, but it is now possible to evaluate the outcomes of most of them. While the orders in the first category have benefited consumers to some degree, the orders in the second category have accomplished nothing. The interoperability provisions have thus far accomplished little at great expense; the European order on this subject may actually facilitate cloning of Microsoft's proprietary server functionality. These experiences should provide guideposts for courts in crafting future mandatory dealing orders.
antitrust, remedies, refusal to deal, mandatory contracting
Abstract: Aspen Skiing v. Aspen Highlands Skiing has had theoretical importance for antitrust law far out of proportion to the trivial dispute it resolved. It has divided adherents of the Chicago and Post-Chicago Schools, providing a useful vehicle for considering the proper goals of antitrust. And it has gained still more significance by the Supreme Court's recent characterization of it in Verizon Communications v. Trinko as at or near the outer boundary of Section 2 liability. The Court's metaphor suggests that antitrust governs a limited domain within a larger economy regulated by a variety of other laws, from the common law standards of property and contract to the much more intrusive requirements of the Telecommunications Act. In this image, Aspen recognized a duty to cooperate that was at the margin of antitrust's reach, while the Trinko plaintiffs sought recognition of a duty beyond it. Both cases involved a monopolist's refusal to deal with a smaller rival. Aspen, however, held that an operator of skiing facilities monopolized by refusing to continue to assist a smaller rival in offering skiers easy access to their combined areas, while Trinko held that a local telephone carrier did not monopolize by failing to provide smaller rival carriers with elements of its network. In evaluating the allegations in Trinko, the Court repeatedly referred to the facts and reasoning of Aspen.
In this essay, we attempt to clarify monopolization standards by examining why the Court considered the refusal to deal in Aspen to be within the boundaries of Section 2 liability and the one in Trinko beyond them. Attempting to clarify monopolization standards by resort to Aspen, and the Trinko Court's characterization of it, is a daunting task, however. As we show below, the Aspen Court failed to recognize a possible procompetitive explanation of the defendant's conduct, and failed to identify evidence sufficient to support a plausible anticompetitive explanation. Trinko was only partly successful in clearing up the confusion. The Court did reaffirm the principle, stated in Aspen, that even monopolists have no general duty to deal with their competitors, and it usefully offered three reasons for the right to refuse to deal. But the Trinko Court's explanation of why Aspen merited an exception to the general rule betrayed a misunderstanding of Aspen, which itself was ill-onsidered.
We try to restore a measure of clarity by identifying the real issues in Aspen, and the importance of those issues in defining the limits of a monopolist's right to refuse to deal. We begin by discussing the factors relevant to the characterization of allegedly monopolistic conduct - its effects on consumers and competitors, and its likely motivation - and examining the rationale for recognizing the right of a monopolist to refuse to deal. We then offer a model drawn from the facts of Aspen that illustrates the likely, or at least possible, effects of the termination of the all-Aspen ski ticket. We reexamine the facts of Aspen in light of the model. We suggest that the most plausible interpretation of the evidence is that, although the joint pass benefited consumers, it had become unprofitable to Ski Co., so long as the profits were distributed according to skiers' usage of the facilities. Consequently, one should evaluate Ski Co.'s termination of the pass and subsequent refusals to sell in the context of a bargaining impasse. Finally, we argue that our reconstruction of the issues in Aspen casts doubt on Trinko's extensive reliance on the case to define the boundary of Section 2 liability.
Antitrust, monopolization, bargaining, exclusion, refusal to deal
Abstract: In 2004, the European Commission held that Microsoft had abused its dominant position under Article 82 of the European Treaty by, among other actions, refusing Sun Microsystems' request for information Sun needed to interoperate with Windows workgroup server products. The EC ordered Microsoft to disclose complete and accurate specifications for the protocols used by Windows work group servers in order to provide file, print, and group and user administration services to Windows work group networks. In September 2007, the European Court of First Instance affirmed the EC's liability ruling and its remedial order. Last December, with the active encouragement of the EC, Microsoft reached a licensing agreement for the covered protocols with Samba, an open-source development project that produces server software that emulates the behavior of Microsoft's server operating systems. The Microsoft-Samba license agreement is by far the most important tangible outcome of the European Microsoft case. The EC's other remedial order in the case, which required Microsoft to create a version of Windows without Windows Media Player, was an embarrassing failure. The Samba agreement, however, is both significant and perilous for global antitrust policy. It provides critical protocols and documentation to Microsoft's most important rival in the server market, a rival, moreover, whose development methods are focused on the analysis of those very protocols. Samba is thus more likely to put the disclosures to effective competitive use than any other licensee. It is also possible that Microsoft will derive technical and competitive benefits from the interaction with the Samba team. The long-run peril is that the disclosures will go beyond the specifications that the CFI contemplated, and will allow Samba to clone Microsoft's proprietary algorithms. That result, although reducing prices in the short run, would inhibit dynamic competition by undermining the incentives of leading firms to innovate.
antitrust, Microsoft, competition, licensing, monopolization, abuse of dominant position, remedies
Abstract: It is a familiar scenario in U.S. antitrust litigation: The plaintiffs allege that a pattern of identical pricing (or refusals to deal) is "concerted" and therefore per se illegal; the defendant responds that the practice is merely "consciously parallel" or "interdependent" and therefore legal. Under U.S. law, to avoid summary judgment or judgment as a matter of law, a plaintiff must produce a "plus factor," evidence that "tends to exclude the possibility" that the defendants' actions were merely interdependent. Courts have identified various plus factors - for example, evidence that the alleged conduct was against the defendant's interest unless it was pursuant to an agreement - but they have been notably vague about what exactly constitutes concerted action. Obviously, the Sherman Act does not require the plaintiff to prove that the defendants formed a legally enforceable contract - the Sherman Act, after all, makes agreements illegal and therefore unenforceable. But beyond that, the law tells us little. Courts still quote the Supreme Court's sixty-year-old formulation that a Sherman Act agreement requires only "a unity of purpose, a common design and understanding, or a meeting of the minds." Unfortunately, however, this language could easily be interpreted to condemn conscious parallelism.
In this article, I argue that concerted action should be defined to require communication among rivals. I begin by describing the development of the distinction in law and theory between consciously parallel and concerted action. I then show that the received definitions of concerted action leave courts and especially juries with inadequate guidance. Economic expert testimony does not fill the void, because economic theory does not distinguish concerted and interdependent conduct. I propose, building on the recent work of Oliver Black, that the distinguishing characteristic of concerted action is communication among rivals, not only of intentions, but also of the firms' reliance on their rivals' actions in choosing a common course of action. I argue that the proposed definition has implications for U.S. antitrust law. First, it is at least consistent with the older Supreme Court cases. Second, it helps us evaluate whether various public announcements or private communications justify the inference that parallel conduct is concerted. Finally, courts applying the standard plus-factors analysis in recent years have implicitly required something like the sort of communications in the proposed definition, even though they continue nominally to apply the received nebulous definitions.
Including communication in the definition of concerted action would have limited consequences. Communication is itself an ambiguous term that requires clarification. Even if it can be defined with reasonable clarity, courts will still be required to determine whether proven communications satisfy the definition. Moreover, plaintiffs would not necessarily be required to produce direct evidence of communications that meet the definition, so long as they can offer circumstantial evidence that would permit an inference that the requisite communications have occurred. Thus, the problem of inferring an agreement from ambiguous evidence, including communications of various kinds, will remain under the proposal. But at least courts, juries, and litigants will know better what are supposed to be inferring.
Sherman Act, agreement, tacit collusion, conspiracy, cartel, conscious parallelism
Abstract: Between 1907 and 1911, executives of American steel manufacturers gathered in a series of social events and meetings that became known as the Gary dinners. At the meetings, the participants announced the prices they intended to charge, but made no promises that they would adhere to those prices. The architect of the dinners, Judge Elbert H. Gary, chairman of the board of the United States Steel Corporation, saw them as a lawful way to stabilize steel prices by fostering information-sharing and an ethos of cooperation. The government agreed that the dinners stabilized prices, but took a different view of their legality: it brought suit in 1911, asking the court to dissolve U.S. Steel as an illegal monopoly. In 1915, the trial court held that the dinners amounted to price fixing, but that U.S. Steel's resort to them only proved that the firm could not control steel prices on its own and therefore could not have monopolized the industry. In 1920, the Supreme Court affirmed. Commentators have long questioned the holding that U.S. Steel lacked monopoly power. In this essay, however, I focus on the intermediate conclusion that the dinners involved concerted action. I describe the legal and historical circumstances in which the dinners occurred and what happened at them. I then examine how the courts analyzed the dinners and extract some lessons that might help modern courts clarify the boundaries of the Sherman Act's agreement requirement.
antitrust, cartel, price fixing, concerted action, monopolization, Gary dinners, United States Steel
Abstract: The Department of Justice’s Section 2 Report considered in great detail how courts should best go about identifying exclusionary conduct and how they should best remedy that kind of conduct once they found it. Even though the new Assistant Attorney General has now withdrawn the Report as an official statement of Antitrust Division policy, the questions the Report addressed remain for the new administration. In this essay, I will comment on two subsidiary but nonetheless critical subjects that the DOJ addressed in the Report: general standards of exclusion and affirmative-obligation remedies. In both instances, my observations will draw on the experience of United States v. Microsoft, the DOJ’s last and still pending monopolization case.
antitrust, monopolization, exclusion
Abstract: The Antitrust Modernization Commission has proposed that Congress abandon the thirty-year-old federal policy of Illinois Brick. The proposal would weaken the federal right of action for direct purchasers by reviving the passing-on defense, but would create a new federal right of action for indirect purchasers. Although federal rights of action under the proposed regime would not be exclusive, state law claims would be subject to expanded federal jurisdiction to allow consolidation of all claims in a single court for both discovery and trial. All recoveries in the consolidated actions would be limited to the initial overcharge, trebled. Congress should not adopt these proposals, for two primary reasons. First, a pure direct purchaser regime would provide the most efficient means of imposing a deterrent penalty equal to three times the overcharge. Second, even if compensation is an appropriate goal, indirect purchaser suits is will not achieve it. We are all indirect purchasers of goods that are more expensive because of antitrust violations; most of us have even received notice that we were members of putative or certified classes. But our harms are usually too diffuse, too individualized, and too small for the courts to calculate and distribute efficiently. The legal system should focus its energies on imposing the appropriate deterrent penalty for antitrust violations at the lowest possible direct cost.
antitrust, indirect purchaser, class certification, private antitrust remedies, state antitrust law, Antitrust Modernization Commission
Abstract: Section III.E of the final judgments in the American Microsoft case requires Microsoft to make available to software developers certain communications protocols that Windows client operating systems use to interoperate with Microsoft's server operating systems. This provision has been by far the most difficult and costly to implement, primarily because of questions about the quality of Microsoft's documentation of the protocols. The plaintiffs' technical experts, in testing the documentation, have found numerous issues, which they have asked Microsoft to resolve. Because of accumulation of unresolved issues, the parties agreed in 2006 to extend Section III.E for up to five more years. Microsoft's continuing failure to resolve the plaintiffs' issues, despite its commitment of enormous resources to the project, led the district judge in January 2008 to extend the other provisions in judgments for at least two years. Paradoxically, however, there is no evidence that software developers cannot use the protocols because of the issues generated in the plaintiffs' testing program. In this article, we argue that the court abandon the unresolved issues as its standard of compliance and ask instead whether Microsoft has provided documentation and technical support that meet the standards of the market and needs of real-world developers.
Abstract: Frank Easterbrook’s 1984 article, The Limits of Antitrust, did not focus on public antitrust enforcement. Nevertheless, it expressed the kind of antitrust thinking that led the Antitrust Division of the U.S. Department of Justice, around that same time, to shift its resources to cartel prosecutions and away from big monopolization cases. The Microsoft case, filed in 1998, broke this pattern. I argue that the Division made this exception, and ultimately achieved a partial victory in the courts, because the relatively new economic theory of network effects seemed to make the filters Easterbrook proposed in 1984 less applicable in high technology markets like the ones in which Microsoft competed. In this essay, I return to Easterbrook’s filters and consider whether they offer a different perspective on the Division’s decision to sue and the courts’ eventual resolution of the case.
Antitrust, monopolization, public enforcement
Abstract: Scholars have long argued that Section 5 of the Federal Trade Commission Act can or should be interpreted to reach more conduct than Section 1 of Sherman Act - whether, in other words, there are gaps in the coverage of Section 1 that allow certain forms of anticompetitive conduct that Section 5 should condemn. Perhaps the most important issue in the interpretation of Section 1 concerns how courts should distinguish conscious parallelism from unlawful concerted action. In this paper, I argue that there is no substantive gap between the two antitrust statutes on this issue-both statutes prohibit (and permit) the same conduct. There may, however, be a procedural gap. Particularly after the Supreme Court's 2007 decision in Bell Atlantic Corp. v. Twombly, the FTC has an advantage over private plaintiffs in the procedures at its disposal for discovering unlawful concerted action.
antitrust, FTC, Sherman Act, concerted action, procedure
Abstract: This article, published in 1995, analyzes the use of the concept of network externalities in the Antitrust Division's first antitrust case against Microsoft. That case resulted in a consent decree that, among other things, prohibited Microsoft from imposing per processor licenses of its Windows operating system. The article challenges the claim that the practices at issue in the case were more likely to be harmful or long-lived because of the presence of network externalities in the market for computer operating systems.
antitrust, network effects, microsoft, monopolization
Abstract: This essay reviews Richard A. Epstein, Antitrust Consent Decrees in Theory and Practice: Why Less is More (AEI Press 2007).
antitrust, consent decrees, remedies
Abstract: This book chapter, published in 2002, argues that courts decide antitrust cases based mainly on their perception of the “obvious” effects of the practices at issue on consumers. Courts must rely on both theory and evidence in resolving antitrust cases, but the persuasiveness of theoretical predictions depends in large part on the determinacy of their implications for consumers. Theories of liability are often too restrictive in their assumptions and markets are often too complex to allow confident predictions that a practice that obviously benefits consumers in the short run will ultimately hurt them in the long run, or vice versa.
Abstract: This article, published in 1995, describes antitrust law’s framework for proving individual harm as the basis for an award of treble damages. Antitrust damages are based on a standard of net individual harm, adapted (by the antitrust injury and Illinois Brick doctrines) to conform to a larger principle of net social harm. Net individual harm, so qualified, is measured by the difference between the plaintiff’s actual condition and its “but-for condition,” that is, the condition the plaintiff would have been in but for the defendants’ anticompetitive conduct. The plaintiff must project its but-for condition from a reasonably comparable base experience. In doing so, it must offer a theoretical model and an evidentiary foundation sufficient to isolate the defendant’s illegal conduct as the cause of the difference between the actual and but-for conditions.
Abstract: This article, published in 1986, compares and contrasts the Chicago School's conceptual approach to antitrust issues with Phillip Areeda's legal process (or "Harvard School") approach. The study focuses on the antitrust injury doctrine, but it reveals the fundamental characteristics of the two schools, both of which have deeply influenced the evolution of U.S. antitrust law.
antitrust, Chicago School, Harvard School, antitrust injry
Abstract: In this article, first published in 17 Managerial & Decision Econ. 127 (1996), we show how economic theory guides the courts' determinations of which harms from collusive and exclusionary practices constitute antitrust injury.
antitrust, antitrust injury, standing
Abstract: This article, published in 1989, examines the influence of the Chicago School's antitrust paradigm on the evolution of antitrust law. It argues that courts have accepted many of the Chicago Schools positive models of practices like cartels, tying arrangements, and predatory pricing, but have been slower to adopt key elements of the Chicago School's policy program -- particularly rules of per se legality -- as substantive rules. The article identifies the primary influence of the Chicago School's models in subsidiary decisional contexts, particularly the characterization of practices as within or without established substantive rules; the determination of whether private harms from practices constitute antitrust injury; and in the determination of whether a plaintiff's evidence is sufficient to raise a triable issue of fact that a violation has occurred.
antitrust, antitrust injury, summary judgment, Chicago School
Abstract: This article, published in 1980, proposes a theory linking the antitrust injury doctrine to the standard of economic efficiency. Private injuries from practices like mergers, tying arrangements, and resale price fixing do not necessarily correspond to any inefficiency that the practices cause. Awarding treble damages for all private harms would thus run the risk of overdeterrence. The article argues that the antitrust injury doctrine can partially redress this imbalance between the private and social costs of antitrust violations by requiring that private harm be connected to the anticompetitive aspect of alleged violations.
antitrust, antitrust injury, damages
Abstract: In Illinois Brick Co. v. Illinois, the Supreme Court denied indirect purchasers the right to sue for a illegal overcharge, reasoning that concentrating the full right of recovery in direct purchasers would lead to more effective enforcement of the antitrust laws. But several states and the District of Columbia reject the federal rule and authorize indirect purchaser suits. State indirect purchaser litigation undermines Illinois Brick?s policy of efficient deterrence by providing fora in which indirect purchaser classes can sue for damages. In recent years, however, trial courts in many of these jurisdictions have refused to certify indirect purchaser class actions on the ground that issues common to the class did not predominate over individual issues. These cases cast doubt on the wisdom of state Illinois Brick repeals, because they suggest that only a small subset of all indirect purchasers of price-fixed products will satisfy the requirements for class certification. Consequently, despite the enormous burdens indirect purchaser suits impose on state court systems, such suits fail to achieve any meaningful compensation for those actually injured by price-fixing conspiracies.
Abstract: This article, published in 1991, describes the two great ideologies of the market and the state that shaped antitrust law at its inception. In the evolutionary vision, market outcomes are spontaneous and unintended results of countless interactions of self-interested individuals; the resulting social order is presumptively optimal; and state intervention is unwise or pernicious. In the intentional vision, social and market outcomes are the result of the conscious intent of powerful actors; the social order resulting from these actions is illegitimate; and democratic governmental intervention is necessary to restore legitimacy. The Sherman Act (1890) was a compromise that shared elements of both visions. Adherents of the visions competed to shape the courts' interpretation of the statute in its early decades.
antitrust, Sherman Act, evolution, common law
Abstract: This article, published in 2001, argues that bundling of broadband transmission and Internet services by cable companies does not pose a sufficient risk of harm to innovation to justify a regulatory or antitrust requirement of open access.
antitrust, cable, internet, bundling
Abstract: This article, published in 2001, shortly after the D.C. Circuit's decision in the Microsoft case, considers which classes of plaintiffs might have suffered antitrust injury as a result of Microsoft's illegal conduct. We suggest that consumers, computer manufacturers, and competitors, particularly Netscape, would all face significant challenges in proving that they were harmed either by an illegal overcharge or by inefficiently exclusionary conduct.
antitrust, Microsoft, monopolization, antitrust injury, damages
Abstract: This article, published in 1996, responds to Joseph F. Brodley, Antitrust Standing in Private Merger Cases: Reconciling Private Incentives and Public Enforcement Goals, 94 Mich. L. Rev. 1 (1995). Brodley argues that the courts' strict interpretation of the antitrust injury doctrine has undermined merger enforcement by denying competitors and takeover targets the right to sue to challenge anticompetitive mergers under Section 7 of the Clayton Act. We argue that public merger enforcement is generally effective in preventing anticompetitive mergers, and that the antitrust injury doctrine properly limits rivals' right to sue in merger cases. We particularly dispute Brodley's claim that mergers that pose a risk of coordinated monopoly pricing also pose a risk of anticompetitive exclusion.
antitrust, antitrust injury, mergers, private right of action
Abstract: This article, published in 2003, argues that indirect purchaser class actions under state antitrust law have failed to advance the consumer interest. They rarely provide significant compensation to those actually injured by anticompetitive overcharges, and there is little evidence that they provide better deterrence than suits by direct purchasers.
antitrust, class actions, price fixing, private actions, damages
Abstract: This article, published in 1999, offers our preliminary assessment of Microsoft case during its trial in the district court. We argued that, while Microsoft had a monopoly of operating systems, its integration of IE and Windows and its contracts with Internet firms were not seriously exclusionary.
antitrust, Microsoft, exclusionary practices, monopolization
Abstract: Under the Midcal test for state-action immunity from the federal antitrust laws, a state must clearly articulate its policy to displace competition and must actively supervise any private conduct pursuant to the policy. But state action need not meet these requirements, if it is unilateral and therefore does not not conflict with Section 1. Only if the state-authorized restraint is hybrid, combining state and private action in a way that resembles a prohibited agreement, need the restraint satisfy Midcal. In this 2003 article, we argue that a unilateral restraint is one in which government actors define the extent of consumer harm, while a hybrid restraint is one that gives private actors discretion to harm consumers in a way that resembles an antitrust violation. Under this definition, state laws that facilitate tacit collusion and serve no competitively benign purpose conflict with Section 1.
antitrust, hybrid restraints, tacit collusion, Sherman Act
Abstract: This article, published in 2001, considers the appropriate standards for monopolization cases in which the defendant has allegedly reduced innovation by refusing to deal with the plaintiffs. We note that claims of reduced innovation are problematic, particularly in dynamic markets, because economic theory does not often allow a confident prediction of what would have happened but for the defendant's conduct. Consequently, there is a danger that antitrust law will too readily shift the burden to the defendant to justify conduct simply because it has harmed a rival. We suggest that plaintiffs in such cases should be required to support their claims with a plausible theory and evidence, and that the burden should be greater in cases in which the defendant's conduct produced immediate consumer benefits.
antitrust, monopolization, Microsoft, Intel, innovation
Abstract: This article, published in 1995, argues that legal realism has influenced antitrust decision making ever since the New Deal. Until the mid-1970s, a majority of the Supreme Court, accepting the realist concept of market coercion, created rules of per se illegality and strict merger standards. Since Sylvania (1977), the Court has largely endorsed the Chicago School's evolutionary view of the market, but has retained the early realists' insights about the judicial role. Most members of the Court have endorsed the legal process school's view of judicial legitimacy. The Court uses economic theory to guide its inquiries, but with an awareness of its institutional limitations within the larger legal system. Instead of using theory to formulate rules of legality, the Court has used it primarily to guide the application of established rules in subsidiary decisional contexts.
antitrust, legal realism, evolution, ideology, legal process
Abstract: This article, published in 1985, defines the scope of antitrust liability by reconciling the doctrines of antitrust injury and standing with the standard of optimal deterrence. Under the proposed approach, the antitrust injury inquiry provides a first approximation of the optimal penalty by limiting recovery to harms that are proportional to the offense's harm to economic efficiency. The standing inquiry provides a second approximation by limiting the right to sue to those classes of plaintiffs whose antitrust injury is least costly to calculate and involves the lowest risk of error.
antitrust, antitrust injury, standing, optimal deterrence
Abstract: Public choice scholars have claimed that antitrust, like all forms of regulation, is not about advancing the public good, but is instead about advancing private interests that have special influence on legislative and administrative processes. This article, published in 1999, uses the Microsoft litigation as a case study to test this contention.
antitrust, public choice, Microsoft
Abstract: This comment, published in 1992, responds to Edward A. Snyder & Thomas E. Kauper, Misuse of the Antitrust Laws: The Competitor Plaintiff, 90 Mich. L. Rev. 551 (1991). Snyder and Kauper argue that rivals of alleged offenders file baseless antitrust suits so frequently that rivals should be denied the right to sue entirely. We argue, however, that the antitrust injury doctrine, properly applied on a motion to dismiss or for summary judgment, provides a sufficient constraint on competitors' perverse incentives to bring lawsuits based on legitimate competitive harms.
antitrust, antitrust injury, treble damages
Abstract: In FTC v. Ticor Title Insurance, the Supreme Court denied antitrust immunity to insurers that had participated in state-sanctioned rate-setting activities. Applying the two-part Midcal test, the Court held for the first time that a state agency had failed to "actively supervise" private action under a clearly articulated state policy. In this 1993 article, we propose a theory of state action that accounts for the values that the Court invoked. Under this theory, federalism is a background norm that counsels a narrow interpretation of the Sherman Act to permit state regulation that is not a naked repeal of antitrust rules. Displacement of antitrust is immune if it is ancillary to a positive regulatory program in which state actors control discretion to harm consumers, e.g., by fixing prices.
K21, K41, K43, L41, L51
Abstract: William Kovacic's recent article, Merger Enforcement in Transition Economies, addresses important issues raised by the spread of antitrust worldwide following the collapse of the Soviet Union. Professor Page's comment on Kovacic expresses concerns that the fledgling antitrust regimes in countries with no tradition free markets will be unduly interventionist. To illustrate these concerns, the comment examines recent cases in which the Brazilian antitrust agency, CADE, blocked or imposed conditions on the approval of international acquisitions. In these instances, CADE?s economic analysis was questionable, particularly in light of the Brazil?s need for foreign investment.
Abstract: This essay, published in 1986, reviews three seminal works of the law and literature movement: Robert Ferguson’s Law and Letters in American Culture; Richard Weisberg’s The Failure of the Word: The Lawyer as Protagonist in Modern Fiction; and James Boyd White’s When Words Lose Their Meaning: Constitutions and Reconstitutions of Language, Character, and Community. All published in 1984, the works display the breadth and central concerns of the field. Law and Letters in American Culture looks back to a time before the Civil War when, according to Joseph Story, the study of law required ‘a full possession of the general literature of ancient and modern times.’ Yet by the Civil War, the professional and intellectual interdependence of law and literature had dissolved. The concerns of legal study became progressively more technical and indifferent to literature, while the concerns of literature became more individualistic and hostile to the operation of positive law. Weisberg and Ferguson offer differing assessments of the modern antagonism between the fields. The Failure of the Word focuses on the repeated literary depiction of lawyers using the language of the law to gain power over less articulate but more complete characters. White's When Words Lose Their Meaning attempts to reestablish a linkage of law and literature based on a knowledge of classical and world literature and of the nature of language.
law and literature, humanities
Abstract: This article, published in 1987, responds to John Shepard Wiley, A Capture Theory of Antitrust Federalism, 99 Harv. L. Rev. 713 (1986). In an earlier article, I argued that the "clear articulation" requirement is the best criterion for "state action" antitrust immunity because it reinforces representative (as opposed to administrative) political processes. Wiley argued, however, that even clearly articulated state economic choices are illegitimate, and should therefore not be immune, if they are the product of capture by interest groups. I argue in response that the Madisonian gauntlet of state legislative processes provides a more appropriate basis for deference to state economic choices than the theory of legislative capture.
antitrust, state action immunity, exemption
Abstract: This article, published in 1995, reconsiders Richard A. Posner, A Program for the Antitrust Division, 38 U. Chi. L. Rev. 500 (1971), twenty-five years after its publication. Posner argued that the Antitrust Division of the U.S. Department of Justice should try to maximize the efficiency of antitrust enforcement by discovering and implementing those policies whose net social product is largest. His guide for identifying those policies was the consensus of opinion among mainstream economists. Applying this standard, Posner argued that the Division should limit its focus to cartels (including tacit collusion), horizontal mergers, and regulatory reform. We argue that the Division has largely followed Posner's approach, although it has essentially abandoned tacit collusion as a basis for liability. One major departure from Posner's prescriptions was the Division's filing of its first case against Microsoft. We suggest that novel theories of anticompetitive exclusion and the theory of network effects, developed since Posner's article, do not justify redirecting public enforcement resources against exclusionary practices.
antitrust, cartels, price-fixing, tacit collusion, exclusionary practices, public enforcement
Abstract: This article analyzes Judge Thomas Penfield Jackson's structural remedy in the Microsoft case. Published in 2001, before the D.C. Circuit's decision reversing Judge Jackson's order, the article argues that "any severe restructuring of Microsoft, including the separation of its applications and operating systems activities ordered by the court, will almost certainly raise prices to consumers and will fail to produce long-term competitive benefits." The article also "sketches the content of a conduct remedy tailored to promote consumer interests." For our views on the eventual final judgments, see William H. Page & John E. Lopatka, The Microsoft Case: Antitrust, High Technology, and Consumer Welfare (Univ. of Chicago Press 2007).
antitrust, monopolization, structural remedies, divestiture, conduct remedies
Abstract: This article was published in 1999 while the Microsoft trial was still in progress. It examines the opposing positions of the parties on the legality, under Section 2 of the Sherman Act, of Microsoft's integration of its Internet Explorer web browser with its Windows operating system. For the government, the purported integration (or at least the prevention of dis-integration) had no technical justification and was merely exclusionary; for Microsoft, integration created a new, single, and better product. After scrutinizing the evidence in support of these positions, we argue that the issue of whether the browser was properly integrated with Windows under a judicially formulated standard has little relevance to the proper concerns of antitrust policy. For our later analysis of the issue of integration, see William H. Page & John E. Lopatka, The Microsoft Case: Antitrust, High Technology, and Consumer Welfare (Univ. of Chicago Press 2007).
antitrust, monopolization, integration, Microsoft
Abstract: This article, published in 1981, examines the two-part Midcal Aluminum standard for state action antitrust immunity. Under that standard, private actors are immune from antitrust liability if (1) they act pursuant to a regulatory policy that is clearly articulated by the state as sovereign and (2) the state actively supervises their conduct. The article endorses the clear articulation requirement, but argues for abandonment of the active supervision requirement. Clear articulation provides an appropriate basis for deference to state economic choices made through legitimate political processes. Active supervision, however, the article argues, bears no necessary relationship to the legitimacy of the state’s regulatory scheme. It unjustifiably relies on command-and-control regulatory structures as a measure of the substantive legitimacy of the state’s regulatory policy.
For the more recent views of the author on the state action doctrine, see William H. Page and John E. Lopatka, State Action and the Meaning of Agreement Under the Sherman Act: An Approach to Hybrid Restraints, 20 Yale J. Reg. 269 (2003) and William H. Page and John E. Lopatka, State Regulation in the Shadow of Antitrust: FTC v. Ticor Title Insurance Co., 3 Sup. Ct. Econ. Rev. 189 (1993).
Antitrust, State Action, Midcal Aluminum
Abstract: After the Supreme Court's 2007 decision in Bell Atlantic Corp. v. Twombly, an antitrust plaintiff who tries to plead an agreement in restraint of trade under Section 1 of the Sherman Act must allege more than parallel conduct and an undefined “conspiracy.” Now, the complaint must include “enough factual matter (taken as true) to suggest that an agreement was made.” Although the Court insisted it was not imposing a heightened pleading standard, it did require antitrust plaintiffs to provide enough details to make the claimed agreement plausible. In this article, I examine an important substantive consequence of Twombly's pleading regime. In more than twenty reported cases, federal courts have applied the new pleading standard to complaints alleging horizontal concerted action under Section 1 of the Sherman Act. In doing so, the courts have had to address a crucial defect in the substantive law of agreement: the Supreme Court's traditional definitions of agreement, which Twombly itself simply repeated, are too vague to help litigants and courts distinguish between consciously parallel conduct and concerted action. In the course of applying Twombly, however, the lower courts have adopted a more meaningful definition, one that requires that the parties have communicated to each other in ways that facilitate the parallel conduct. This clarification of the standard has important implications for the role of discovery in pleading and resolving claims of concerted action.
Abstract: This essay reviews Wyatt Wells, Antitrust and the Formation of the Postwar World (Columbia Univ. Press. 2002).
antitrust, Thurman Arnold, history
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