Talking 'Bout My Antitrust Generation: Overeager Attorneys on the State Level and in Europe Threaten to Destroy an Improved Antitrust Climate

By McChesney, Fred S. | Regulation, Fall 2004 | Go to article overview

Talking 'Bout My Antitrust Generation: Overeager Attorneys on the State Level and in Europe Threaten to Destroy an Improved Antitrust Climate


McChesney, Fred S., Regulation


TWENTY-SEVEN YEARS AGO, I TOOK MY law school antitrust course from a new assistant professor who had just left the Federal Trade Commission. My performance was adequate but not stellar.

In retrospect, I think my underperformance was because I was a soon-to-be economist as well as a budding lawyer. I approached antitrust with a presumption that the gears of industrial organization economics and antitrust law meshed more or less synchronously. But such a presumption was scarcely warranted; "competition" law was often sand, not grease, in the gears of competition. I went into the final exam conflicted, and evidently it showed.

Today, the conflicts are fewer, thanks to a new brand of antitrust thinking that has developed and a new breed of judges and antitrust enforcers who have arrived over the past generation. However, those conflicts could grow more numerous in the future as state attorneys general and European regulators and lawyers become increasingly active in the antitrust arena.

ANTITRUST LAW AND ANTITRUST ECONOMICS

The past generation of antitrust has witnessed much intellectual competition among economists and competition-minded jurists as to what that body of law is supposed to do. Section I of the Sherman Act outlaws "every contract, combination ... or conspiracy" that is "in restraint of trade," but it defines none of those terms. Likewise, Section 2 makes it illegal to "monopolize" (or attempt to "monopolize"), but does not define that term, either. The operative language of the other two important antitrust statutes, the Clayton Act and the Federal Trade Commission Act, is equally bare-bones.

Courts, lawyers, and economists were left to flesh out what would be deemed anticompetitive. At sea for the most part, judges initially used "per se" methodologies--declaring a practice illegal because it constituted a contract as described in the antitrust laws, regardless of whether the practice restrained or enhanced competition. As a result, courts declared per se illegal many contracts among horizontal competitors and many agreements among vertical contractors, particularly price agreements among vertically linked parties.

UNIFIED APPROACH Traditionally in antitrust, each sort of "contract, combination, or conspiracy" or allegedly "monopolizing" practice has been treated as requiring a separate mode of analysis. A separate body of case law specific to each contract or practice evolved, rather than a single system based on more fundamental notions of competition.

Increasingly, however, disparate strands of antitrust law have coalesced to ignore this needless taxonomy. Justice Sandra Day O'Connor fired an important shot across the bow with her 1984 concurrence in the tying case of Jefferson Parish Hospital District v. Hyde. Particularized rules for each sort of contract or practice coming under the antitrust lens made no sense, she wrote. Instead, she called for a unified approach to antitrust analysis based on a common rule-of-reason approach that compares a practice's economic benefits and costs. According to Justice O'Connor,

   The time has therefore come to abandon the "per se"
   label and refocus the inquiry on the adverse economic
   effects, and the potential economic benefits, that the tie
   may have. The law of tie-ins will thus be brought into
   accord with the law applicable to all other allegedly
   anticompetitive economic arrangements.

Lower courts have leapt at the invitation to combine antitrust's disjointed jurisprudence into a single analytic model. For example, in its (hopefully) final opinion in United States v. Microsoft, the D.C. Circuit Court of Appeals interpreted the standards that should be applied under Sections 1 and 2 of the Sherman Act as a single test. The court said that regardless of statutory origin, an antitrust challenge should be evaluated by competitive costs and benefits of the challenged practice, noting that other circuits had concluded the same thing in other cases. …

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