Judge Bork, Consumer Welfare, and Antitrust Law

Article excerpt

The Sherman Antitrust Act of 1890 broadly prohibits contracts, combinations, and conspiracies in "restraint of trade" and makes it unlawful "to monopolize" any line of commerce. (1) The open-textured nature of the Act vests the judiciary with considerable responsibility for interpretation. In a 1966 article published in the Journal of Law and Economics, then-Professor Robert H. Bork examined the legislative history of the Act. (2) Bork was candid about the "difficulties inherent in the very concept" of legislative intent. (3) Nevertheless, Bork thought the undertaking was justified by the need to counter the judiciary's repeated invocation of values that were unrelated to the debate that had informed congressional enactment of the Sherman Act and, lacking any legitimate economic rationale, were likely to produce real economic harm.

For example, in Fashion Originators' Guild of America v. FTC, (4) the Supreme Court had counted among the policies underlying the Sherman Act protection of "the freedom of action of [Guild] members [not] to reveal to the Guild the intimate details of their individual affairs." (5) No lesser light than Judge Learned Hand had asserted that the Congress intended the Sherman Act to achieve certain sociopolitical aims, such as minimizing the "helplessness of the individual" (6) and ensuring the "organization of industry in small units." (7) Obviously, such policies are highly malleable; they can be invoked (or not) to justify almost any result in any situation. Indeed, as Bork pointed out, Judge Hand went so far as to state that in enacting the Sherman Act, the Congress had "delegated to the courts the duty of fixing the standard for each case." (8)

Bork's examination of the text and structure of the Sherman Act against the background of preliminary proposals and draft legislation, statements by Senators and Representatives, and contemporaneous understandings of constitutional and common law led him to conclude: "The legislative history ... contains no colorable support for application by courts of any value premise or policy other than the maximization of consumer welfare." (9) By "consumer welfare," Bork meant "the maximization of wealth or consumer want satisfaction," (10) known today as allocative efficiency--a concept he thought the framers of the Sherman Act clearly grasped even though they did not "speak ... with the precision of a modern economist." (11) Bork also explained that maximization of consumer welfare is the common denominator underlying the central prohibitions of the Act, that is, the condemnation of cartel agreements, monopolistic mergers, and predatory business practices. (12) He explained that legislators used the term "monopolize" to refer only to those three prohibited activities, as opposed to a "monopoly," which might arise from superior efficiency. (13) According to Bork, "[o]nly a consumer-welfare value which, in cases of conflict, sweeps all other values before it can account for Congress' willingness to permit efficiency-based monopoly." (14)

When Bork's article was first published in 1966, his thesis was novel; by 1977, it had become the conventional wisdom of the federal courts. That year, the Supreme Court, in Continental T. V., Inc. v. GTE Sylvania Inc., (15) repudiated the position it had taken only 10 years before in United States v. Arnold, Schwinn & Co. (16) In the earlier case, the Court had held that a nonprice vertical restraint imposed by a manufacturer on a distributor after "title, dominion, or risk" had passed was a per se violation of the Sherman Act, (17) that is, regardless of its actual--and possibly efficient--economic effect.

In GTE Sylvania Inc. v. Continental T. V., Inc., (18) a retailer of televisions claimed that a manufacturer's limitation upon the locations at which the retailer could sell its televisions was a per se violation of the Sherman Act. (19) The Ninth Circuit expressly adopted Bork's thesis and rejected the multiplicity of "values" the Supreme Court had been reading into the Sherman Act for decades. …