A Revival of Nondomination in Antitrust Law

80 Pages Posted: 15 Apr 2024

Date Written: March 24, 2024

Abstract

For decades, the theme of nondomination has been largely absent from federal antitrust law. Beginning in the late 1970s, the Supreme Court held that economic efficiency would be the guiding principle of its interpretations of the Sherman Act. Limiting domination in economic life was dismissed as a relic of the old common law, even though this philosophy had animated the Court’s decisions in the 1940s, 50s, and 60s. Under the influence of law and economics scholars such as Robert Bork and Richard Posner, the Supreme Court, which had shifted rightward following appointments by Presidents Richard Nixon and Gerald Ford, relaxed postwar antitrust rules governing contractual controls, or vertical restraints in the language of antitrust. In the landmark decision Continental TV, Inc. v. GTE Sylvania Inc., the Court in 1977 held, on distributional efficiency grounds, that manufacturers could broadly dictate non-price resale terms to independent distributors, such as where and to whom they sold their products. The Court subsequently built on Sylvania and removed antitrust limits on vertical price restraints too. While revolutionary, these decisions were based on a weak empirical and theoretical foundation. In lifting antitrust restrictions on vertical restraints, the Supreme Court empowered corporations to control independent trading partners, such as distributors, suppliers, workers, or franchisees, through contract. They could obtain employer-like control without the duties and responsibilities of employers. The result has been a flourishing of what economist David Weil called “fissured work” arrangements, including in fast food and the gig economy. Millions of nominally independent workers and proprietors, whether Uber drivers or fast-food franchisees, are under the thumb of powerful corporations and enjoy little independence in practice.

Antitrust law may be on the cusp of a nondomination revival, with the Federal Trade Commission poised to resurrect this norm. In January 2023, the FTC proposed to prohibit non-compete clauses for all workers and initiated what could be the beginning of a philosophical reorientation of antitrust law in the United States. The FTC’s ban, if enacted, would free tens of millions of workers from these contracts. Critically, the rule is based, in part, on nondomination principles and specifically limiting employers’ ability to coerce workers into signing non-compete contracts and to prevent them from pursuing other employment or entrepreneurial opportunities. If the FTC enacts the rule as proposed, it could be the start of a major reorientation of antitrust law. To carry out this project, the FTC cannot stop with the non-compete rule. Using its expansive policymaking powers under the FTC Act, it should target other contractual methods of domination, such as exclusive dealing and most-favored nation clauses. If it is indeed the first step, the non-compete rule could be the Sylvania for anti-monopolists.

Keywords: Antitrust, fissured work, Federal Trade Commission, franchising, gig economy, non-compete clauses

Suggested Citation

Vaheesan, Sandeep, A Revival of Nondomination in Antitrust Law (March 24, 2024). George Washington Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4771094

Sandeep Vaheesan (Contact Author)

Open Markets Institute ( email )

1440 G St NW
Washington, DC 20005
United States

HOME PAGE: http://www.openmarketsinstitute.org/

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