Law Commons^™

The Progressives' Antitrust Toolbox, Herbert J. Hovenkamp

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The period 1900 to 1930 was the Golden Age of antitrust theory, if not of enforcement. During that period courts and scholars developed nearly all of the tools that we use to this day to assess anticompetitive practices under the federal antitrust laws. In subsequent years antitrust policy veered to both the left and the right, but today seems to be returning to a position quite similar to the one that these Progressive adopted. Their principal contributions were (1) partial equilibrium analysis, which became the basis for concerns about economic concentration, the distinction between short- and long-run analysis, and later …

The Invention Of Antitrust, Herbert J. Hovenkamp

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The long Progressive Era, from 1900 to 1930, was the Golden Age of antitrust theory, if not of enforcement. During that period courts and Progressive scholars developed nearly all of the tools that we use to this day to assess anticompetitive practices under the federal antitrust laws. In a very real sense we can say that this group of people invented antitrust law. The principal contributions the Progressives made to antitrust policy were (1) partial equilibrium analysis, which became the basis for concerns about economic concentration, the distinction between short- and long-run analysis, and later provided the foundation for the …

Vertical Control, Herbert J. Hovenkamp

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Antitrust litigation often requires courts to consider challenges to vertical “control.” How does a firm injure competition by limiting the behavior of vertically related firms? Competitive injury includes harm to consumers, labor, or other suppliers from reduced output and higher margins.

Historically antitrust considers this issue by attempting to identify a market that is vertically related to the defendant, and then consider what portion of it is “foreclosed” by the vertical practice. There are better mechanisms for identifying competitive harm, including a more individualized look at how the practice injures the best placed firms or bears directly on a firm’s …

Platforms And The Rule Of Reason: The American Express Case, Herbert J. Hovenkamp

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In Ohio v. American Express Co., the Supreme Court applied antitrust’s rule of reason to a two-sided platform. The challenge was to an “anti-steering” rule, a vertical restraint preventing merchants from shifting customers who offered an AmEx card from to a less costly alternative such as Visa or Mastercard.

A two-sided platform is a business that depends on relationships between two different, noncompeting groups of transaction partners. For example, a printed periodical such as a newspaper earns revenue by selling both advertising and subscriptions to the paper itself. Success depends on a platform’s ability to maintain the appropriate balance …

Implementing Antitrust's Welfare Goals, Herbert J. Hovenkamp

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United States antitrust policy is said to promote some version of economic welfare. Antitrust promotes allocative efficiency by ensuring that markets are as competitive as they can practicably be, and that firms do not face unreasonable roadblocks to attaining productive efficiency, which refers to both cost minimization and innovation. One important welfare debate is whether antitrust should adopt a “consumer welfare” principle rather than a more general “total welfare” principle.

The simple version of the consumer welfare test is not a balancing test. If consumers are harmed by reduced output or higher prices resulting from the exercise of market power, …

Post-Sale And Related Distribution Restraints Involving Ip Rights, Herbert J. Hovenkamp

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This book of CASES AND MATERIALS ON INNOVATION AND COMPETITION POLICY is intended for educational use. The book is free for all to use subject to an open source license agreement. It differs from IP/antitrust casebooks in that it considers numerous sources of competition policy in addition to antitrust, including those that emanate from the intellectual property laws themselves, and also related issues such as the relationship between market structure and innovation, the competitive consequences of regulatory rules governing technology competition such as net neutrality and interconnection, misuse, the first sale doctrine, and the Digital Millennium Copyright Act (DMCA). Chapters …

Vertical Restraints, Dealers With Power, And Antitrust Policy, Herbert J. Hovenkamp

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The Supreme Court’s Leegin decision has now brought the rule of reason to all purely vertical intrabrand distribution restraints. But the rule of reason does not mean per se legality and occasions for anticompetitive vertically imposed restraints may still arise. Of all those that have been suggested the most plausible are vertical restraints imposed at the behest of a powerful dealer or group (cartel) of dealers.

Although a vertical distribution restraint resembles a dealer cartel in that both limit intraband competition, a manufacturer restraining the distribution of its product shuns the excess dealer profits a dealer cartel would seek. Accordingly, …

Harvard, Chicago And Transaction Cost Economics In Antitrust Analysis, Herbert J. Hovenkamp

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Since Oliver Williamson published Markets and Hierarchies in 1975 transaction cost economics (TCE) has claimed an important place in antitrust, avoiding the extreme positions of the two once reigning schools of antitrust policy. At one extreme was the “structural” school, which saw market structure as the principal determinant of poor economic performance. At the other extreme was the Chicago School, which also saw the economic landscape in terms of competition and monopoly, but found monopoly only infrequently and denied that a monopolist could “leverage” its power into related markets. Since the 1970s both the structural and Chicago positions have moved …

What Can Antitrust Contribute To The Network Neutrality Debate?, Christopher S. Yoo

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Over the course of the last year, policymakers have begun to consider whether antitrust can play a constructive role in the network neutrality debate. A review of both the theory and the practice of antitrust suggests that it does have something to contribute. As an initial matter, antitrust underscores that standardization and interoperability are not always beneficial and provides a framework for determining the optimal level of standardization. In addition, the economic literature and legal doctrine on vertical exclusion reveal how compelling network neutrality could reduce static efficiency and show how mandating network neutrality could impair dynamic efficiency by deterring …