Law Commons^™

Policing The Firm, D. Daniel Sokol

D. Daniel Sokol

Criminal price fixing cartels are a serious problem for consumers. Cartels are hard both to find and punish. Research into other kinds of corporate wrongdoing suggests that enforcers should pay increased attention to incentives within the firm to deter wrongdoing. Thus far, antitrust scholarship and policy have ignored this insight in the cartel context. This Article suggests how to improve antitrust enforcement by focusing enforcement efforts on changing the incentives of internal firm compliance.

Quality-Enhancing Merger Efficiencies, Roger D. Blair, D. Daniel Sokol

D. Daniel Sokol

The appropriate role of merger efficiencies remains unresolved in US antitrust law and policy. The Patient Protection and Affordable Care Act (ACA) has led to a significant shift in health care delivery. The ACA promises that increased integration and a shift from quantity of performance through increased competition will create a system in which quality will go up and prices will go down. Increasingly, due to the economic trends that respond to the ACA, including considerable consolidation both horizontally and vertically, it is imperative that the antitrust agencies provide an economically sound and administrable legal approach to efficiency enhancing mergers. …

Appraising Merger Efficiencies, Herbert Hovenkamp

Herbert Hovenkamp

Mergers of business firms violate the antitrust laws when they threaten to lessen competition, which generally means a price increase resulting from a reduction in output. However, a merger that threatens competition may also enable the post-merger firm to reduce its costs or improve its product. Attitudes toward mergers are heavily driven by assumptions about efficiency gains. If mergers of competitors never produced efficiency gains but simply reduced the number of competitors, a strong presumption against them would be warranted. We tolerate most mergers because of a background, highly generalized belief that most or at least many produce cost savings …

Antitrust, Innovation, And Product Design In Platform Markets: Microsoft And Intel, William H. Page, Seldon J. Childers

William H. Page

The Antitrust Division’s Microsoft case and the Federal Trade Commission’s Intel case both rested on claims that antitrust intervention was necessary to preserve innovation in technological platforms at the heart of the personal computer. Yet, because those very platforms support markets that are among the most innovative in the American economy, injudicious intervention might well have jeopardized the very innovation that antitrust should promote. In this article, we review the role of platforms in technological innovation and consider how antitrust standards should apply to them. We then examine how Microsoft resolved antitrust issues affecting platform design at various stages of …

Josh Wright’S “Chicago School Papers”: An Overview, William H. Page

William H. Page

In what follows, I consider three of FTC Commissioner Josh Wright's “Chicago School Papers.” In these papers, Commissioner Wright considers the past, present, and future role of the Chicago School of antitrust analysis in the shaping of law and policy, offering along the way some interesting insights into what his priorities at the FTC are likely to be. The papers discussed have common themes: the mischaracterization of the “Chicago School,” the scientific advantage of dispensing altogether with “School” labels, and a focus on empirical findings in shaping antitrust analysis.

Devising A Microsoft Remedy That Serves Consumers, John E. Lopatka, William H. Page

William H. Page

According to Judge Thomas Penfield Jackson, Microsoft was a “predacious” monopolizer that did extensive “violence . . . to the competitive process.” Through a “single, well-coordinated course” of anticompetitive action, it suppressed competition from Netscape's Navigator, an Internet browser, and from Sun's Java programming language and related technologies. Microsoft “mounted a deliberate assault upon entrepreneurial efforts, . . . placed an oppressive thumb on the scale of competitive fortune, . . . and trammeled the competitive process.” Having colorfully concluded that Microsoft's offenses were extreme, Judge Jackson deferred to the government's demand for a drastic remedy. He ordered that Microsoft …

A Neo-Chicago Approach To Concerted Action, William H. Page

William H. Page

In this article, I offer an approach to concerted action that builds on traditional Chicago School analyses of the issue, but adds a focus on the role of communication. Chicago scholars uniformly identify cartels as the primary target of antitrust enforcement. They have also established much of the framework within which courts and economists analyze concerted action. George Stigler’s seminal theory of oligopoly, which sought to identify the determinants of effective collusion, has spawned an enormous literature in game theory that models the pricing behavior of oligopolists. Richard Posner’s early analysis of tacit collusion - rivals’ coordination of noncompetitive pricing …

The Ftc's Procedural Advantage In Discovering Concerted Action, William H. Page

William H. Page

Scholars have long argued that Section 5 of the Federal Trade Commission Act can or should be interpreted to reach more conduct than Section 1 of Sherman Act - whether, in other words, there are gaps in the coverage of Section 1 that allow certain forms of anticompetitive conduct that Section 5 should condemn. Perhaps the most important issue in the interpretation of Section 1 concerns how courts should distinguish conscious parallelism from unlawful concerted action. In this paper, I argue that there is no substantive gap between the two antitrust statutes on this issue-both statutes prohibit (and permit) the …

Objective And Subjective Theories Of Concerted Action, William H. Page

William H. Page

Communication is useful and often necessary for rivals to coordinate price and output decisions. All would agree that evidence of communication on these issues is relevant to the issue of whether firms reached an illegal agreement or engaged in concerted action in violation of Section 1 of the Sherman Act. Most courts and commentators would go further and define agreement and concerted action to require communication of one kind or another. I call this view the objective theory of concerted action. Louis Kaplow has recently challenged this approach in three important articles, all of which argue that the focus on …

Patent Misuse And Antitrust: Rebirth Or False Dawn?, Daryl Lim

Daryl Lim

This Article examines how two recent cases, F.T.C. v. Actavis and Kimble v. Marvel Enterprises Inc. could affect both the equitable defense of patent misuse and the patent-antitrust interface more generally. It begins by tracing the history of patent misuse and its reformulation into an “antitrust-lite” doctrine by the Federal Circuit. This Article presents new empirical data confirming this reformulation, and unveils the surprising influence of the Seventh Circuit and the Chicago School on that reformulation. The Article then explores Actavis and Kimble. It explains why Actavis will catalyze more antitrust challenges when patent rights are exercised, and why it …

In Defense Of, Or Offensive To Farms? Hog Farming And The Changing American Agricultural Industry, Shi-Ling Hsu

Shi-Ling Hsu

American agriculture is inexorably concentrating into the hands of a small number of large conglomerates. Expanding farms pursuing scale economies would also normally have to abide by a system of environmental and other laws that would, in theory, require farms to account for negative externalities. If those laws were observed and enforced, they would help strike a balance between the greater profitability and the larger externalities of larger farms. But these laws are not widely observed and not rigorously enforced, upsetting this balance and giving large-scale farms a cost advantage while insulating them from corresponding responsibilities.

Perhaps nowhere in agriculture …

Antitrust And Information Technologies, Herbert Hovenkamp

Herbert Hovenkamp

Technological change strongly affects the use of information to facilitate anticompetitive practices. The effects result mainly from digitization and the many products and processes that it enables. These technologies also account for a significant portion of the difficulties that antitrust law encounters when its addresses intellectual property rights. Changes in the technologies of information also affect the structures of certain products, in the process either increasing or decreasing the potential for competitive harm. For example, digital technology affects the way firms exercise market power, but it also imposes serious measurement difficulties. In purely digital markets intellectual property rights are crucial …

Franchising As A Device For The Organization, Financing, Control, And Growth Of The Small Business, John Clinton Evans Jr.

John Evans

The franchise system of distribution of goods and services is playing an increasing role in our economy. One marketing authority distinguishes between the product franchise and the franchise of an entire business entity in terms of the role played by each in our complex marketing system of today. Product franchises are given to a few selected dealers in a community, and the distribution of the product is limited to these outlets alone. The other meaning of franchise, as a method of operating an entire business will concern us here.

Antitrust And The Patent System: A Reexamination, Herbert Hovenkamp

Herbert Hovenkamp

Since the federal antitrust laws were first passed they have cycled through extreme positions on the relationship between competition law and the patent system. Previous studies of antitrust and the patent system have generally assumed that patents are valid, discrete, and generally of high quality in the sense that they further innovation. As a result, increasing the returns to patenting increases the incentive to do socially valuable innovation. Further, if the returns to the patentee exceed the social losses caused by increased exclusion, the tradeoff is positive and antitrust should not interfere. If a patent does nothing to further innovation, …

Federalism, First Amendment & Patents: The Fraud Fallacy, Robin C. Feldman

Robin C Feldman

Living With Monsanto, Daryl Lim

Daryl Lim

Bowman v. Monsanto Co. signaled the end of an era of seed saving. Farmers must buy new seed for replanting or risk patent infringement. The familiar rhetoric of oppressed farmers belies the fact that Monsanto’s success rests in part on farmers prizing its innovations. Current trends indicate that this reliance on Monsanto will continue. The Supreme Court correctly found for Monsanto. However, future cases must iron out the kinks in the Bowman decision. Despite the Court’s best intentions, inadvertence cannot shield farmers from patent infringement. The Court must also make it clear that patentees cannot use licensing restrictions to claw …

Efficiencies And Antitrust Reconsidered: An Evolutionary Perspective, Thomas J. Horton

Thomas J. Horton

The author reconsiders the issue of efficiencies and antitrust from the perspectives of evolutionary biology and the growing field of evolutionary economics. He begins by discussing how the term efficiency as currently used in antitrust today is more of a term of social science and economic ideology than a meaningful scientific concept. He then moves on to address how the lessons of evolutionary biology and economics, including the need for systemic diversity and unremitting competition at all systemic levels, can be applied to structural antitrust and efficiencies analyses. The author concludes that it is time to bring fresh perspectives to …

Ohio And Sports Law, Adam Epstein

Adam Epstein

The purpose of this paper is to offer a broad perspective on how individuals, universities and professional teams associated with the state of Ohio have had a varied impact on sports law in general. Many of the cases and decisions discussed in this paper include familiar incidents and issues involving basketball coach Jim O’Brien, pitcher Andy Oliver, running back Maurice Clarett, sprinter Harry “Butch” Reynolds, high school football player Bobby Martin, Major League Baseball (MLB) manager Pete Rose and others. This article could also be viewed as a starting point for further research involving this Midwestern state also known as …

Living With Monsanto, 2015 Mich. St. L. Rev. 559 (2015), Daryl Lim

Daryl Lim

Agency Boundaries And Network Neutrality, Tejas N. Narechania

Tejas N. Narechania

The Quiet Revolution In U.S. Antitrust Law, George Hay

George A. Hay

In this paper, I report on a series of recent decisions in antitrust cases by the U.S. Supreme Court. While each decision, read separately, may be only of moderate interest (even to a U.S. audience), the slate of decisions, looked at in its entirety, conveys a significant message, and one that may have meaning for scholars and practitioners in Australia and other jurisdictions outside the U.S. I would suggest that a quiet revolution is occurring in which the arguments economists have been making for nearly fifty years have suddenly been embraced by both the left and the right on the …

"Why Can't A Woman Be More Like A Man?" American And Australian Approaches To Exclusionary Conduct, George Hay, Rhonda L. Smith

George A. Hay

Much of antitrust law (in the U.S.) or trade practices law (in Australia) is about “exclusionary conduct,” things that large firms do to acquire an even larger share of the market or to preserve their large market share from being eroded by smaller rivals or new entrants. In the U.S., the main vehicle for policing inappropriate exclusionary conduct by large firms against smaller competitors is Section 2 of the Sherman Act, which prohibits monopolization or attempted monopolization. In Australia, the main vehicle is Section 46 which, generally speaking, prohibits the misuse of market power. The main purpose of this paper …

The Messenger Model: Don't Ask, Don't Tell?, Jeffrey L. Harrison

Jeffrey L Harrison

This article makes the case that the messenger model is either tacitly or inadvertently a "don't ask, don't tell" policy when it comes to competitor cooperation. In addition, this article presents an economic framework that explains how such a policy may benefit health care consumers. Finally, it is suggested that the "don't ask, don't tell" policy has created an area of per se legality that precludes an examination designed to distinguish consumer-benefiting practices from those that provide no benefit.

Explaining The Importance Of Public Choice For Law, D. Daniel Sokol

D. Daniel Sokol

The next generation of government officials, business leaders and members of civil society likely will draw from the current pool of law school students. These students often lack a foundation of the theoretical and analytical tools necessary to understand law's interplay with government. This highlights the importance of public choice analysis. By framing issues through a public choice lens, these students will learn the dynamics of effective decision-making within various institutional settings. Filling the void of how to explain the decision-making process of institutional actors in legal settings is Public Choice Concepts and Applications in Law by Maxwell Stearns and …

Designing Antitrust Agencies For More Effective Outcomes: What Antitrust Can Learn From Restaurant Guides, D. Daniel Sokol

D. Daniel Sokol

Antitrust policy should be concerned with the quality and effectiveness of the antitrust system. Some efforts at agency effectiveness include self-study of antitrust agencies to determine the factors that lead to improving agency quality. Such studies, however, often focus only on enforcement decisions and other agency initiatives such as competition advocacy. They do not reflect at least one other part of the equation: what do non-government users of the antitrust system think about the quality of antitrust agencies? This Symposium Essay advocates the use of a ratings guide by antitrust practitioners for antitrust agencies to add to the tools in …

The Rule Of Reason And The Goals Of Antitrust: An Economic Approach, Roger D. Blair, D. Daniel Sokol

D. Daniel Sokol

In this paper, we discuss the problem of the rule of reason and the welfare standard in antitrust. We begin with the Introduction (Section I), which provides an overview of the problem. In Section II, we review the Supreme Court’s guidance on the standard for conducting a rule of reason analysis. Put simply, the Supreme Court has failed to identify clearly what standard to use in conducting a rule of reason inquiry. After a careful — albeit selective — reading of Supreme Court opinions it is simply not clear. While a case can be made for total welfare as the …

China's Competition Policy Reforms: The Anti-Monopoly Law And Beyond, Bruce M. Owen, Su Sun, Wentong Zheng

Wentong Zheng

In August 2007, China adopted the Antimonopoly Law, its first comprehensive antitrust legislation, thirteen years after the drafting of the law began. Such a protracted legislative process is highly unusual in China, and can only be explained by the controversies the law presents. This paper discusses the fundamental issues in China’s economy that give rise to the challenges China faced in the drafting and adoption of the Antimonopoly Law. Those fundamental issues include the role of state-owned enterprises, perceived excessive competition, mergers and acquisitions by foreign companies, administrative monopolies, and the enforcement of the Antimonopoly Law. How China will enforce …

Competition Policy And Comparative Corporate Governance Of State-Owned Enterprises, D. Daniel Sokol

D. Daniel Sokol

The legal origins literature overlooks a key area of corporate governance-the governance of state-owned enterprises ("SOEs"). There are key theoretical differences between SOEs and publicly-traded corporations. In comparing the differences of both internal and external controls of SOEs, none of the existing legal origins allow for effective corporate governance monitoring. Because of the difficulties of undertaking a cross-country quantitative review of the governance of SOEs, this Article examines, through a series of case studies, SOE governance issues among postal providers. The examination of postal firms supports the larger theoretical claim about the weaknesses of SOE governance across legal origins. In …

The Lessons From Libor For Detection And Deterrence Of Cartel Wrongdoing, Rosa M. Abrantes-Metz, D. Daniel Sokol

D. Daniel Sokol

In late June 2012, Barclays entered into a $453 million settlement with UK and U.S. regulators due to its manipulation of Libor between 2005 and 2009. Among the agencies that investigated Barclays is the Department of Justice Antitrust Division (as well as other antitrust authorities and regulatory agencies from around the world). Participation in a price fixing conduct, by its very nature, requires the involvement of more than one firm. We are cautious to draw overly broad conclusions until more facts come out in the public domain. What we note at this time, based on public information, is that the …

Limiting Anticompetitive Government Interventions That Benefit Special Interests, D. Daniel Sokol

D. Daniel Sokol

When government regulates, it may either intentionally or unintentionally generate restraints that reduce competition ("public restraints"). Public restraints allow a business to cloak its action in government authority and to immunize it from antitrust regulation. Private businesses may misuse the government's grant of antitrust immunity to facilitate behavior that benefits businesses at consumers' expense. One way is by obtaining government grants of immunity from antitrust scrutiny. A recent series of Supreme Court decisions has made this situation worse by limiting the reach of antitrust law in favor of sector regulation. This is true even though the Supreme Court refers to …