Antitrust, Innovation, and Competitiveness

By Thomas M. Jorde; David J. Teece | Go to book overview
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sion of the effectiveness of remedies in the main cases brought by the United States against the "trusts" formed during the merger movement.
Here, one needs only to cite the two grand antitrust cases brought under the Sherman Act, viz., United States v. United Shoe Machinery, Corp., 110 F. Supp. 295, 345 U.S. 521, and United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945). Speaking broadly, the antitrust law's concern with exclusionary behavior as such reflects the sound policy view that the mere possibility of entry tends to constrain the exercise of market power by a dominant incumbent. It is also fair to say that courts, legal and economic scholars, and enforcement agencies have been modifying their views as to what constitutes barrier-raising exclusionary conduct.
The papers in White ( 1988) provide a comprehensive theoretical, empirical, and public policy discussion of many of the points raised in this section.
In no instance does the losing plaintiff have to compensate the defendant for costly disruption of business activities, which can be far higher than the litigation costs. Here it is interesting that defendants tend to spend more on their side of the case than do private plaintiffs. See Teplitz ( 1988).
See Benston ( 1988) for a comprehensive discussion of some of these issues.
This handicap does not carry to the appeals stage, however, where some of the lower court decisions are apt to be reversed.
Of course antitrust is hardly the only arena in which litigation provides opportunities for rent seeking.
This also includes firms that seek to protect themselves from the rigors of foreign competition and who place the blame for their poor showing in the marketplace on the allegedly hobbling antitrust provisions.
But regulatory agencies appear also to have been captured to a degree by the incumbents who dread having their bailiwicks challenged by new firms.
See Ordover and Baumol ( 1988).
See Areeda and Hovenkamp ( 1987), 738.1-4, for a discussion of recent judicial developments.
See Katz and Ordover ( 1990), for the analysis of competitive effects of research joint ventures.
15 U.S.C. 4301-5.
See Ordover and Baumol, op. cit., p. 11.
Though a number of critics have raised questions about the frequency with which approximations to perfect contestability are to be found in reality, and about the desirability of the performance to be expected of firms and industries in markets that are imperfectly contestable, no one, to our knowledge, has raised doubts about the desirability of the use of perfect contestability as a policy benchmark in the manner described here.
Interstate Commerce Commission, "Coal Rate Guidelines, Nationwide", Ex Parte No. 347 (Sub-No. 1) ( Washington, D.C.: August 3, 1985).


Areeda P., and Hovenkamp. 1987. Antitrust Law, Supplement. Boston: Little, Brown.

Baldwin W. L., and J. T. Scott. 1987. Market Structure and Technological Change, vol. 17. In J. Lesourne and H. Sonnenschein, eds. Fundamentals of Pure and Applied Economics. Harwood.

Benston G. J. 1988. "A Comprehensive Analysis of the Determinants of Private AntitrustLitigation, with Particular Emphasis on Class Action Suits and the Rule of Joint and Several Damages"


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