Antitrust, Regulatory Harm and Economic Liberty
99 Iowa Law Review Bulletin 115 (2014)
21 Pages Posted: 18 Jan 2015
Date Written: May 1, 2014
This essay responds to a recent article by Thomas Nachbar advocating a "constitutional" approach to antitrust law. Nachbar contends that the Sherman Act mirrors the Constitution's own prohibition on legislative delegation of coercive regulatory authority to private parties. As a result, Nachbar says, courts should ban contracts and other conduct that restrain liberty and produce what he calls "regulatory harm," just as courts invalidate such legislative delegations as deprivations of liberty without due process of law. To implement this "constitutional" approach, Nachbar offers a common sense distinction between economic conduct that is "proprietary," on the one hand, and that which is "regulatory," on the other. The former, he says, entails a firm's disposition of its own property, including price-setting, while the latter entails tying contracts and other agreements that by their terms restrict the manner in which trading partners deal with their own property. While some conduct falls clearly into one category or the other, much lies somewhere on a spectrum between the two. Nachbar advises courts to identify conduct that is unduly regulatory by measuring the distance between the ownership of a defendant's property, on the one hand, and the control exercised by the restraint, on the other.
There is some rhetorical support in the Sherman Act's legislative history and subsequent case law for Nachbar's creative, constitutional approach. Nonetheless, this essay contends that such an approach would not improve upon an efficiency interpretation of antitrust as a normative or descriptive matter. The Due Process Clause protects liberty from coercive restraint. However, the "constitutional" approach would ban any number of voluntary agreements, thus protecting parties' "liberty from contract" and thwarting economic liberty. While some voluntary agreements are harmful and thus properly condemned under an efficiency approach, many produce benefits and improve social welfare. An enforcement policy that condemned such agreements would reduce both liberty and welfare.
As a descriptive matter, Nachbar's constitutional approach does not improve upon the efficiency norm's explanation of any major facet of modern antitrust law. Moreover, the constitutional approach does not explain certain facets of antitrust law that are consistent with an efficiency norm. In addition to its normative shortcomings, then, the constitutional approach provides a less satisfying explanation of current law than the main alternative approach.
Keywords: Sherman Act, Liberty of Contract, Due Process of Law, Contractual Integration
JEL Classification: B12, B13, K21, L41, L50, L51, P16
Suggested Citation: Suggested Citation