Antitrust, Innovation, and Competitiveness

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

courts to use a "sliding scale" in stages 2 and 3; that is, to require stronger evidence on market power when efficiencies are clearly present and to require stronger evidence on efficiencies when market power is a clear danger. 54 Thus decisions are likely to continue to be written in terms of the existence of costs or benefits, rather than their magnitude.


CONCLUDING COMMENTS

I applaud the passing of the traditional per se rule against horizontal restraints. Its demise, however, presents both a challenge and an opportunity. The challenge is to devise an alternative policy with enough structure to maintain acceptable predictability and to avoid unnecessary and unproductive rambles through the wilds of economic theory. The opportunity is the chance to reduce the incidence of undesirable outcomes, like those in Sealy and Topco, that were produced by the traditional rule.

I have argued in this essay that the challenge can be met and the opportunity can be seized by policies that have the effect of confining the per se rule narrowly to utterly naked restraints of trade with no plausible efficiency benefits, that employ a rule-of-reason analysis of the remaining cases, and that rely heavily on the same market power tests that have come to dominate the evaluation of proposed mergers. I realize, of course, that antitrust policy is ultimately made by judges on the field as they decide particular cases, not by economists' shouts from the sidelines. I can only hope that the analysis here contributes to what is very likely--given the historic rate at which the practical meaning of the Sherman Act's constitutional language has evolved--to be a policy development process that will occupy judges, lawyers, and even economists for years, if not decades, to come.


NOTES

I am indebted for useful comments to participants in the Eighth Annual NERA Antitrust Seminar and in the Berkeley Conference, particularly Phillip Areeda, William Baxter, Joe Brodley, Jerry Hausman, Howard Kitt, Charles Rule, and the editors. This essay reflects only the author's opinions, not necessarily those of the Council of Economic Advisers, and only the author is responsible for its defects.

1.
United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898), aff'd, 175 U.S. 211 ( 1899); United States v. Trenton Potteries Co., 273 U.S. 392 ( 1927); United States v. Socony-Vacuum Oil Co., 310 U.S. 150 ( 1940).
2.
For a recent discussion of this hypothesis, see G. Bittlingmayer, "Did Antitrust Policy Cause the Great Merger Wave?" Journal of Law and Economics 28 ( 1985): 77.
3.
United States v. Container Corp. of America, 393 U.S. 333, 341 ( 1969).
4.
Chicago Board of Trade v. United States, 246 U.S. 231 ( 1918).
5.
273 U.S. 392, 401 ( 1927); 310 U.S. 150, 217 ( 1940).
6.
In particular, the often-cited dictum that "the test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition" ( 246 U.S. 231, 238

-114-

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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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