Antitrust, Innovation, and Competitiveness

By Thomas M. Jorde; David J. Teece | Go to book overview

5
Agreements Between Competitors

RICHARD SCHMALENSEE

The per se rule against "horizontal restraints"--agreements between competitors that serve to restrain rivalry-is almost as old as the Sherman Act itself. This rule is commonly held to have originated with William Howard Taft 1898 Addyston Pipe opinion, to have reached its majority with the 1927Trenton Potteries decision, and to have attained full maturity with Justice Douglas's opinion in Socony-Vacuum. 1

Thus generations of lawyers and economists have discussed the apparent economic inconsistency between the evaluation of horizontal mergers by their likely economic effects under Section 2 of the Sherman Act (and later under the Clayton and Celler-Kefauver Acts) and the courts' refusal to consider economic effects in applying the per se rule under Section 1 to less durable horizontal restraints. It has long been a provocative and entertaining classroom device to point out that two executives considering a legal horizontal merger would commit a felony if they decided instead simply to coordinate their pricing. The muchdiscussed hypothesis that the merger wave around the turn of the century was triggered by the birth of the per se rule illustrates nicely the apparent tension between these two parts of the antitrust law. 2

Until the 1980s, however, most post-Socony-Vacuum discussions of the per se rule seem to have stressed its procedural strengths rather than its substantive weaknesses. In his 1969Container Corp. dissent, Justice Marshall expressed well the traditional case for per se rules:

Per se rules always contain a degree of arbitrariness. They are justified on the assumption that the gains from imposition of the rule far outweigh the losses and that significant administrative advantages will result. In other words, the potential competitive harm plus the administrative costs of determining in what particular situations the practice may be harmful must far outweigh the benefits that may result. If the potential benefits in the aggregate are outweighed to this degree, then they are simply not worth identifying in individual cases. 3

In 1969 and earlier, most lawyers and economists would have agreed that this test was passed by the traditional per se rule against horizontal restraints and

-98-

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Antitrust, Innovation, and Competitiveness
Table of contents

Table of contents

  • Title Page iii
  • Preface vii
  • Notes viii
  • Contents ix
  • Contributors xi
  • 1 - Introduction 3
  • Notes 25
  • References 27
  • 2 - Antitrust Law as Industrial Policy: Should Judges and Juries Make It? 29
  • Notes 45
  • 3 - Innovation, Cooperation, and Antitrust 47
  • Notes 63
  • References 68
  • Appendix: National Cooperative Research and Commercialization Act (ncrca) 71
  • 4 - Antitrust: Source of Dynamic and Static Inefficiencies? 82
  • Notes 95
  • References 96
  • 5 - Agreements Between Competitors 98
  • Notes 114
  • 6 - Ignorance and Antithrust 119
  • Notes 132
  • 7 - Antitrust Lenses and the Uses of Transaction Cost Economics Reasoning 137
  • Notes 158
  • References 161
  • 8 - Monopoly Conduct, Especially Leveraging Power from One Product or Market to Another 165
  • 9 - Market Structure and Technical Advance: The Role of Patent Scope Decisions 185
  • Notes 219
  • 10 - Conclusion 233
  • Index 235
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