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Presented by James C. Cooper
George Mason University School of Law
Goals of Antitrust
Global Antitrust Institute
November 16, 2015
Honolulu, Hawaii
Copyright belongs to author (2015)
Evolu'on of U.S. An'trust Laws
United States v. Trans-Missouri Freight Assoc., 166 U.S. 290, 324 (1897)
“[I]t is not for the real prosperity of any country that … changes [in the ways of doing business] should occur which result in transferring an independent business man, the head of his establishment, small though it might be, into a mere servant or agent of a corporation for selling the commodities which he once manufactured or dealt in ….”
United States v. Aluminum Co. of America, 148 F.2d 416, 428-29 (2d Cir. 1945) (Hand, J.)
The Congress intended the Sherman Act to achieve certain socio-political aims, such as minimizing the “helplessness of the individual” and ensuring the “organization of industry in small units.”
Brown Shoe Co. v. United States, 370 U.S. 294, 333, 344 (1961) (discussing the Cellar-Kefauver amendment of 1950 to the
Clayton Act)
“[W]e cannot fail to recognize Congress’ desire to promote competition through the protection of viable, small, locally owned businesses. Congress appreciated that occasional higher costs and prices might result from the maintenance of fragmented industries and markets. It resolved these competing considerations in favor of decentralization.”
Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 699 (1967)
A “competitor who is forced to reduce his price to a new all-time low in a market of declining prices will in time feel the financial pinch and will be a less effective competitive force.”
Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50, 54, 69 (1977)
“Vertical restrictions promote interbrand competition by allowing the manufacturer to achieve certain efficiencies in the distribution of his products.” Justice White concurring: “[W]hile according some weight to the businessman’s interest in controlling the terms on which he trades in his own goods may be anathema to those who view the Sherman Act as directed solely to economic efficiency” – “[e].g., Bork, Legislative Intent and the Policy of the Sherman Act, 9 J. Law & Econ. 7 (1966); Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division, 74 Yale L. J. 775 (1965)” – “this principle is without question more deeply embedded in our cases than the notions of ‘free rider’ effects and distributional efficiencies borrowed by the majority from the ‘new economics of vertical relationships.’”
Justice Brennan, dissenting (with Justice Marshall): “I would not overrule the per se rule stated in United States v. Arnold, Schwinn & Co., 388 U. S. 365 (1967).”
National Society of Professional Engineers v. United States, 435 U.S. 679, 690 (1978)
“Under either [the per se rule or the rule of reason,] the inquiry is confined to a consideration of impact on competitive conditions. … The Sherman Act reflects a legislative judgment that ultimately competition will produce not only lower prices, but also better goods and services.”
Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979)
The Legislative history “suggest[s] that Congress designed the Sherman Act as a ‘consumer welfare prescription.’” (quoting R.H. Bork, Antitrust Paradox 66 (1978))
NCAA v. Board of Regents of University of Oklahoma, 468 U.S. 85, 107-08 (1984)
“Price is higher and output lower than they would otherwise be, and both are unresponsive to consumer preference. This … point is perhaps most significant, since Congress designed the Sherman Act as a consumer welfare prescription. A restraint that has the effect of reducing the importance of consumer preference in setting price and output is not consistent with this fundamental goal of antitrust law.”
71%
82%
25%
0%
11%
89%
47%50%
100%
75%
53%
18%
29%
50%
0%
20%
40%
60%
80%
100%
Johnson (8) Nixon-Ford(18)
Carter (14) Reagan (20) Bush I (10) Clinton (3) Bush II (10)
Decade (# of cases)
Plaintiff (%) Defendant (%)
United States’ Position as Amicus in Private Cases by Presidential Administration
30%
78% 77%
60%
0%
20%
40%
60%
80%
100%
1967-1976 (44) 1977-1986 (42) 1987-1996 (18) 1997-2006 (13)
Decade (# of cases)
Decisions citing Law & Economics work / Total cases
(works by Phillip Areeda, Ward Bowman, Robert Bork, and Richard Posner)
Percentage of Supreme Court Decisions Citing Law & Economics Works
What’s An'trust For? • Broad socio-‐poli'cal goals? (e.g., protec'ng small business, promo'ng privacy, ensuring employment).
• Maximizing choice? • Welfare?
– Total – Consumer – Output
Judging Standards
• How should we pick among compe'ng standards? – Administrability
• How easy is it to get an answer? – Predictability
• Can par'es predict what’s legal and illegal? • Rent seeking
– Increase economic performance • Does the standard help consumers
Non-‐Economic Goals
• Administrability: – How do you balance goals like privacy, dispersion of economic power, or preserving small business against price increases
• Predictability: – No objec've measure, means variance in outcomes – Ex. FTC Google
• Economic Performance: – Ex. Small town doctor cartel
Choice
• Administrability: – Easy to count
• Predictability: – What choices? – What is the op'mal number of firms or price/quality combina'ons?
• Economic Performance: – Misses trade offs
• Mergers • Ver'cal restraints
Welfare
• Administrability: – Economics tool kit
• Predictability: – Par'es know what courts/agencies will be weighing.
• Economic Performance: – Focuses on conduct that makes the “pie” bigger
Consumer Welfare vs. Total Welfare
Price
Quan'ty
S
P*
Q*
D
Total Welfare
Consumer Welfare vs. Total Welfare
Price
Quan'ty
S
P*
Q*
D
Total Welfare
Consumer Welfare
DH
DL
P
PRPM
QL QH
RPM: Consumer Surplus Net Gain
Consumer Gain
Consumer Loss
Producer Share of New Surplus
DH
DL
P
PRPM
QL QRPM
RPM– Consumer Surplus Net Loss
Consumer Gain
Consumer Loss
Producer Share of New Surplus
Welfare • Output as a proxy for compe''veness
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