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Abstract:
The Supreme Court implicitly has been using an new method of statutory interpretation in recent federal criminal cases. I call this new method "the rule of mandatory culpability," because the Court has construed criminal statutes to ensure they reach only morally culpable action. This new method of interpretation has notable features. It makes ignorance of the law a valid legal defense in some cases. It drastically reduces the Supreme Court's reliance on one form of prosecutorial discretion as a safeguard of liberty. It employs a moral code rooted neither in statutes nor the Constitution. And it demolishes the federal criminal doctrines of strict liability and of the "public welfare offense" in most, perhaps all, cases. After examining these features, I conclude the new method is an important and welcome development. It deserves close attention from federal judges, congressional legislators and staff, lawyers in federal criminal practice, and scholars.

Abstract:
We are grateful to Ilya Segal and Michael Whinston for improving our analysis. We are pleased they confirm our two main conclusions. The first is that normally a firm cannot use contracts with its customers or suppliers inefficiently to exclude a rival from competition, because the high price of these contracts will make this strategy unprofitable. This is an old point, well summarized in Robert Bork's 1978 book. Second, and in contrast, exclusionary contracts can be profitable, effective, and socially inefficient--under certain limited conditions. One condition is that firms in the industry must be able to operate only at or above some minimum efficient scale. Another condition is that the victims--customers or suppliers--must expect that the exclusionary tactic will succeed, and must be unable to coordinate their actions to defeat the tactic. An excluding firm in this situation can buy naked exclusion affordably because it can scare victims into selling cheaply; no single victim can stop the exclusion by itself, so no single victim has any bargaining power. At a theoretical limit, the excluding firm can gain the exclusionary rights for free.

This striking result has implications for antitrust policy by suggesting that naked exclusion is, in theory, a potentially viable threat to efficient competition. Also striking from an antitrust perspective, however, is the lack of fit between this theory and the cases in which the United States Supreme Court has forged the law most relevant to exclusionary conduct. A simple legal label for contracts of naked exclusion is "exclusive dealing": "You agree to deal only with me, and not with my competitors." The facts of the three relevant Supreme Court cases, however, clearly violate the assumptions of the naked exclusion theory, as we explain in Rasmusen, Ramseyer and Wiley (1998).

Two important conclusions follow. We cannot establish whether this kind of naked exclusion ever really happens by looking at the three legally most relevant cases. The theory awaits other empirical testing. And second, naked exclusion--if it ever really occurs--cannot be the only explanation for exclusive dealing. Rather, exclusive dealing "often" serves legitimate business purposes, as Judge (now Justice) Stephen Breyer wrote in his 1987 opinion in Interface Group, Inc v. Massachusetts Port Authority. The theory at hand thus does not support outlawing exclusive dealing on a per se or summary basis. If a legal prohibition is justified at all, any sensible legal test would have to be far more discriminating. Lawyers and judges who might seek to translate this theory into practice, please take note.

Abstract:
We are grateful to Ilya Segal and Michael Whinston for improving our analysis. We are pleased they confirm our two main conclusions. The first is that normally a firm cannot use contracts with its customers or suppliers inefficiently to exclude a rival from competition, because the high price of these contracts will make this strategy unprofitable. This is an old point, well summarized in Robert Bork's 1978 book. Second, and in contrast, exclusionary contracts can be profitable, effective, and socially inefficient -- under certain limited conditions. One condition is that firms in the industry must be able to operate only at or above some minimum efficient scale. Another condition is that the victims -- customers or suppliers -- must expect that the exclusionary tactic will succeed, and must be unable to coordinate their actions to defeat the tactic. An excluding firm in this situation can buy naked exclusion affordably because it can scare victims into selling cheaply; no single victim can stop the exclusion by itself, so no single victim has any bargaining power. At a theoretical limit, the excluding firm can gain the exclusionary rights for free.

This striking result has implications for antitrust policy by suggesting that naked exclusion is, in theory, a potentially viable threat to efficient competition. Also striking from an antitrust perspective, however, is the lack of fit between this theory and the cases in which the United States Supreme Court has forged the law most relevant to exclusionary conduct. A simple legal label for contracts of naked exclusion is "exclusive dealing": "You agree to deal only with me, and not with my competitors." The facts of the three relevant Supreme Court cases, however, clearly violate the assumptions of the naked exclusion theory, as we explain in Rasmusen, Ramseyer and Wiley (1998).

Two important conclusions follow. We cannot establish whether this kind of naked exclusion ever really happens by looking at the three legally most relevant cases. The theory awaits other empirical testing. And second, naked exclusion - if it ever really occurs - cannot be the only explanation for exclusive dealing. Rather, exclusive dealing "often" serves legitimate business purposes, as Judge (now Justice) Stephen Breyer wrote in his 1987 opinion in Interface Group, Inc v. Massachusetts Port Authority. The theory at hand thus does not support outlawing exclusive dealing on a per se or summary basis. If a legal prohibition is justified at all, any sensible legal test would have to be far more discriminating. Lawyers and judges who might seek to translate this theory into practice, please take note.

Abstract:
An exclusionary agreement says: "You agree not to buy from anyone but me." American antitrust law calls that agreement "exclusive dealing." Like many things in life, exclusive dealing has been hard to understand. Comparing its law and economics reveals shortcomings in both. The law of exclusive dealing is aged and unsupported. It embodies hostility toward exclusive dealing that is unwarranted by legislative intentor by economic analysis. This economic analysis in turn is helpful but incomplete. There are two new strands. One is the important transactions cost literature, which undercuts current law by suggesting the many ways that exclusionary agreements can benefit consumers. This literature has been empirically confirmed but has yet to offer definitive accounts of the governing cases -- the type of evidence most persuasive to the judges who craft American antitrust policy and who must grapple with precedent. A different literature about predatory vertical foreclosure postulates conditions under which exclusionary agreements may harm consumers. These theories are largely empirically unverified, and commonly require -- as current law does not -- that the excluding firm have market power or special access to unusual market conditions. This body of theory does not, and does not purport to, offer support for reigning Supreme Court law about exclusive dealing.