Supreme Court Amicus Brief of Professors and Scholars in Law and Economics in Support of the Petitioners, Pacific Bell Telephone Co. v. Linkline Communications, Inc., No. 07-512 (Filed Sept. 4, 2008)

U.S. Supreme Court

24 Pages Posted: 11 Sep 2008 Last revised: 23 May 2012

See all articles by William J. Baumol

William J. Baumol

New York University - Stern School of Business, Berkley Center for Entrepreneurial Studies; Leonard N. Stern School of Business - Department of Economics

Robert H. Bork

Independent

Robert W. Crandall

Brookings Institution; AEI-Brookings Joint Center for Regulatory Studies

George Daly

Georgetown University - Robert Emmett McDonough School of Business

Harold Demsetz

University of California, Los Angeles (UCLA) - Department of Economics

Jeffrey A. Eisenach

NERA Economic Consulting; American Enterprise Institute

Kenneth G. Elzinga

University of Virginia - Department of Economics

Richard A. Epstein

New York University School of Law; Stanford University - Hoover Institution on War, Revolution and Peace; University of Chicago - Law School

Gerald R. Faulhaber

University of Pennsylvania - Wharton School

Franklin M. Fisher

Massachusetts Institute of Technology (MIT) - Department of Economics

Charles John Goetz

University of Virginia School of Law

Robert W. Hahn

University of Oxford, Smith School; Georgetown University

Jerry A. Hausman

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Keith N. Hylton

Boston University - School of Law

Thomas Jorde

University of California, Berkeley - School of Law

Robert E. Litan

Council on Foreign Relations (CFR) - Council on Foreign Relations- Washington D.C.

Paul W. MacAvoy

Yale School of Management (Deceased); Yale University, Yale Graduates Energy Study Group (Deceased)

Sam Peltzman

University of Chicago, Booth School of Business; National Bureau of Economic Research (NBER)

J. Gregory Sidak

Criterion Economics, L.L.C.

Pablo T. Spiller

University of California, Berkeley - Business & Public Policy Group

Daniel F. Spulber

Northwestern University - Kellogg School of Management

Date Written: September 5, 2008

Abstract

The linkLine price squeeze case pending in the Supreme Court for the Fall 2008 Term is one of the most significant antitrust cases on monopolization law that the Court has taken in years. Amici are professors and scholars in law and economics who have taught, or have conducted research on, antitrust law and the economics of industrial organization. They are William J. Baumol, Robert H. Bork, Robert W. Crandall, George Daly, Harold Demsetz, Jeffrey A. Eisenach, Kenneth G. Elzinga, Richard A. Epstein, Gerald Faulhaber, Franklin M. Fisher, Charles J. Goetz, Robert Hahn, Jerry A. Hausman, Keith N. Hylton, Thomas M. Jorde, Robert E. Litan, Paul W. MacAvoy, Sam Peltzman, J. Gregory Sidak, Pablo T. Spiller, and Daniel F. Spulber.

We agree with the petitioners that the Ninth Circuit has generated an inescapable conflict among circuits, and that its opinion is incompatible with the Supreme Court's decisions in Trinko, Weyerhaeuser, and Brooke Group. We agree with Judge Gould's dissent from the Ninth Circuit's decision in linkLine that Trinko "takes the issues of wholesale pricing out of the case," such that the plaintiffs' only possible remaining theory of harm would be predatory pricing at the retail level - which the plaintiffs did not allege. We also agree with Judge Ginsburg's opinion for the D.C. Circuit in Covad Communications Co. v. Bell Atlantic Corp., which in turn embraces the conclusion of the Areeda-Hovenkamp treatise that "it makes no sense to prohibit a predatory price squeeze in circumstances where the integrated monopolist is free to refuse to deal." The existence of a rule like linkLine has a pervasive impact on business behavior that, at the margin, affects competition and consumers. This deleterious effect extends beyond the telecommunications industry to affect all firms that do business in the Ninth Circuit. These reasons justify reversing the Ninth Circuit's decision.

In our minds, an even larger reason than those described above makes it imperative that the Court reverse this decision. The Ninth Circuit's decision in linkLine implicates the normative foundation of modern Sherman Act jurisprudence: that antitrust law exists to advance consumer welfare. We have three points to make.

First, any rule of price-squeeze liability that threatens liability based on the claim that the difference between a firm's upstream and downstream prices leaves downstream rivals insufficient margin substitutes a rule of competitor welfare for consumer welfare.

Second, properly understood, a price squeeze is a regulatory issue, which makes sense only as a rule of price regulation in an industry already subject to duties to deal and to control by institutionally competent regulators. Attempting to implement regulatory policy through section 2 of the Sherman Act is ill-advised, both because it makes no sense for courts to re-regulate deregulated or lightly regulated industries, and because courts lack the institutional competence to implement regulation.

Third, the Ninth Circuit's rule is of pressing concern precisely because it will deter efficiency-enhancing conduct and competitive pricing. Vertical integration and partial integration are ubiquitous, and firms need to be able to make decisions about such integration without the threat of liability. Vertically integrated firms likewise need to be free to cut retail prices (as long as the prices are not predatory) without concern for rivals - the point of Brooke Group. Moreover, the Ninth Circuit's standard is so vague and open-ended that it creates uncertainty and invites litigation; it also permits imposition of liability based on apparently subjective evaluation of disputed and hard-to-prove facts, which will lead to a substantial risk of false positives.

Suggested Citation

Baumol, William J. and Bork, Robert H. and Crandall, Robert and Daly, George and Demsetz, Harold and Eisenach, Jeffrey A. and Elzinga, Kenneth G. and Epstein, Richard A. and Faulhaber, Gerald R. and Fisher, Franklin M. and Goetz, Charles John and Hahn, Robert W. and Hausman, Jerry A. and Hylton, Keith N. and Jorde, Thomas M. and Litan, Robert E. and MacAvoy, Paul W. and Peltzman, Sam and Sidak, J. Gregory and Spiller, Pablo T. and Spulber, Daniel F., Supreme Court Amicus Brief of Professors and Scholars in Law and Economics in Support of the Petitioners, Pacific Bell Telephone Co. v. Linkline Communications, Inc., No. 07-512 (Filed Sept. 4, 2008) (September 5, 2008). U.S. Supreme Court. Available at SSRN: https://ssrn.com/abstract=1264103 or http://dx.doi.org/10.2139/ssrn.1264103

William J. Baumol

New York University - Stern School of Business, Berkley Center for Entrepreneurial Studies ( email )

New York, NY
United States
212-998-8943 (Phone)
212-995-3932 (Fax)

Leonard N. Stern School of Business - Department of Economics

269 Mercer Street
New York, NY 10003
United States

Robert H. Bork

Independent

No Address Available

Robert Crandall

Brookings Institution ( email )

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
202-797-6291 (Phone)
202-797-6181 (Fax)

AEI-Brookings Joint Center for Regulatory Studies

1150 17th Street, N.W.
Washington, DC 20036
United States

George Daly

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Harold Demsetz

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States
(310) 825-3651 (Phone)

Jeffrey A. Eisenach

NERA Economic Consulting

1255 23rd Street, NW, Suite 600
Washington, DC 20037
United States
202-448-9029 (Phone)
202-466-3605 (Fax)

HOME PAGE: http://www.nera.com

American Enterprise Institute ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States

Kenneth G. Elzinga

University of Virginia - Department of Economics ( email )

PO Box 400182
Charlottesville, VA 22904-4182
United States

Richard A. Epstein

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012
United States
(212) 992-8858 (Phone)
(212) 995-4894 (Fax)

Stanford University - Hoover Institution on War, Revolution and Peace

Stanford, CA 94305-6010
United States

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-9563 (Phone)
773-702-0730 (Fax)

Gerald R. Faulhaber

University of Pennsylvania - Wharton School ( email )

Steinberg-Dietrich Hall
Suite 1400
Philadelphia, PA 19104-6372
United States
215-898-7860 (Phone)

Franklin M. Fisher

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States
617-864-3752 (Phone)

HOME PAGE: http://web.mit.edu/ffisher/www

Charles John Goetz

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Robert W. Hahn

University of Oxford, Smith School ( email )

Oxford
United Kingdom

Georgetown University

Georgetown Center for Business and Public Policy
Washington, DC 20057
United States

Jerry A. Hausman

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-271a
Cambridge, MA 02142
United States
617-253-3644 (Phone)
617-253-1330 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Keith N. Hylton

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States
617-353-8959 (Phone)
617-353-3077 (Fax)

Thomas M. Jorde

University of California, Berkeley - School of Law ( email )

Boalt Hall
Office 785 Simon
Berkeley, CA 94720-7200
United States
(510) 642-0340 (Phone)
(510) 642-3856 (Fax)

Robert E. Litan

Council on Foreign Relations (CFR) - Council on Foreign Relations- Washington D.C. ( email )

1777 F Street, NW
Washington, DC 20006
United States

Paul W. MacAvoy

Yale School of Management (Deceased)

Yale University, Yale Graduates Energy Study Group (Deceased)

Sam Peltzman

University of Chicago, Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

J. Gregory Sidak (Contact Author)

Criterion Economics, L.L.C. ( email )

1717 K Street, N.W.
Washington, DC 20006
United States
(202) 518-5121 (Phone)

HOME PAGE: http://www.criterioneconomics.com

Pablo T. Spiller

University of California, Berkeley - Business & Public Policy Group ( email )

545 Student Services Building
Berkeley, CA 94720
United States
510-642-1502 (Phone)
510-642-2826 (Fax)

Daniel F. Spulber

Northwestern University - Kellogg School of Management ( email )

Kellogg Global Hub
2211 Campus Dr.
Evanston, IL 60208
United States
847-491-8675 (Phone)
847-467-1777 (Fax)

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