Stephen Breyer and modern antitrust: a snug fit.
Predicting the effect on antitrust law of Stephen Breyer's ascension to the Supreme Court is a bit like projecting winners on election night: the deed is done, and forecasts are a highly flawed substitute for results that will manifest themselves shortly. Why bother? I suppose because it is great sport, and perhaps that is partly because the prognosticator can be judged definitively by the accuracy of his prediction. In an ambiguous world, we enjoy seeing unqualified success and stark failure, the latter only by others. The forecaster proven wrong always has a defense, of course: Yes, I said Dewey would win. But based on what I knew at the time of my prediction, he should have won. And so, you see, I was right after all." In the great tradition of economics, the forecaster argues ex ante.
The moral for one about to embark on the risky business of predicting the future (what else can one predict?) is that he best lay out carefully the basis for his predictions, so that he can, with a straight face, claim to have been right if his predictions prove wrong. In that spirit, let us consider the kinds of information relevant to Justice Breyer's likely influence on the development of antitrust law. First, we would want to know about Breyer's views on the substance of antitrust. Unlike some who might be or have been appointed to the Court, Stephen Breyer, as an official in two branches of government,(1) a law professor,(2) and a circuit court of appeals judge,(3) has left ample evidence in his wake. We have secondary sources, the opinions of legal commentators on Breyer and his writings. He has been called "a leading antitrust thinker," someone who "has brought a sense of order, clarity and practicality to his decisions in the antitrust field," attentive to "efficiency considerations" and willing "to plow new round, if necessary."(4) His First Circuit opinions have been called "distinctive for their scholarly, careful approach," the writer concluding that "no federal judge writes more thoughtfully and elegantly about antitrust issues than Judge Breyer."(5) He has been credited with bringing "an unusually sophisticated understanding of economics to the bench."(6)
More importantly, we can glean much about his views from a storehouse of primary sources. He has written, coauthored, or coedited four books(7) and at least eleven articles(8) that bear upon his analysis of antitrust issues. As an appellate judge, he wrote fourteen antitrust opinions(9) and participated in another eleven decisions,(10) not to mention his participation in a score of cases raising issues tangential to antitrust. Of course, we also have the hearings before the Senate Judiciary Committee on his confirmation to the Supreme Court, though his statements then must be read in context: he did not have the opportunity for lengthy reflection, and presumably his immediate objective was to win approval from the body.
We would also like to know something about his views on legal process and administration. By process, I do not mean procedure, but the process by which the law evolves. How important is legislative intent? What value ought to be assigned precedent in establishing sound rules? And how much weight should be given efficiency in the administration of the law in determining analytical methodology? Again, his writings and public statements provide clues.
Finally, we cannot project Justice Breyer's impact on antitrust law without some appreciation of the state of that law. We need to know where it has been and where it appears to be going. Similarly, we cannot assess Breyer's probable impact on the development of the law without some sense of the effect that Justice Blackmun had on the law, for Breyer has not been appointed the tenth member of the Court.
The next section of the article will offer a thumbnail sketch of Justice Breyer. He is, I conclude, a staunch follower of moderate free market principles.(11) I then offer a brief overview of the state of antitrust law and some evidence of what Justice Blackmun has meant to the field, and I speculate on how the law might have developed differently had Justice Breyer sat in his stead. Finally, I describe the state of the law in various specific areas, note some current issues, and share some guesses as to how the law, influenced by Justice Breyer, will evolve.
In the end, I believe Justice Breyer will fit in comfortably on a Court that has come to embrace a consumer welfare model of antitrust driven by mainstream economic analysis. He is likely to be more resolute in that orientation than was Justice Blackmun. Whether this is a happy prospect is, of course, a matter of taste. Efficiency-minded antitrust students ought to be pleased.
II. Stephen Breyer in a nutshell
Stephen Breyer believes that laws regulating the economy, including the antitrust laws, ought to be applied to promote efficiency, and be believes that only the least intrusive government intervention necessary to achieve that goal is warranted.(12) Thus, Breyer has consistently maintained that the purpose of the antitrust laws is to further allocative and productive efficiency, for the benefit of consumers. For example, during his confirmation hearings, he stated:
[T]he keystone to antitrust, what antitrust is all about, is getting low
prices for consumers, not high prices; and getting better products for
consumers, not worse products; and getting more efficient methods of
production. And that simple three-part key, which I carry around, I
think, engraved in my brain, I use to try to unlock [the doors of complicated
antitrust cases].(13) He has written, "[T]he antitrust laws rest upon the assumption that a workably competitive marketplace will achieve a more efficient allocation of resources, greater efficiency in production, and increased innovation. They seek to achieve these ends by removing private impediments to workable competition."(14) As a judge, Breyer counseled that the Sherman "Act's basic objectives [are] the protection of a competitive process that brings to consumers the benefits of lower prices, better products, and more efficient production methods."(15) He has recognized that practices that injure a competitor and not competition are the stuff of tort law, not antitrust.(16) Breyer's decisions demonstrate that his professed views on the purposes of the antitrust laws are not empty rhetoric; as the discussion of these cases later in this article will indicate, the results are almost uniformly consistent with an economic welfare model.
In his prominent book on regulatory reform, Breyer begins with the assumption that "the justifications for regulation . . . are traditional instances of market failure."(17) This, of course, virtually implies that regulation ought to be designed and used to promote economic efficiency, for markets are said to "fall" when they produce inefficient results.(18) He then offers a theory of "match and mismatch": he identifies a variety of market failures and of regulatory approaches, and he suggests that the regulatory approach should match the failure.(19) "Regulatory failure sometimes means a failure to correctly match the tool to the problem at hand."(20) This matching methodology is founded on the principle that regulatory tools fall along a spectrum of governmental intrusiveness and that the least intrusive tool ought to be used to address any market failure:
[C]lassical regulation ought to be looked upon as a weapon of last
resort. The problems accompanying classical regulation would seem
sufficiently serious to warrant adopting a "least restrictive alternative"
approach to regulation. Such an approach would view regulation
through a procompetitive lens. It would urge reliance upon an unregulated
market in the absence of a significant market defect. Then, when
the harm produced by the unregulated market is serious, it would suggest
first examining incentive-based intervention, such as taxes or
marketable rights, or disclosure regulation, bargaining, or other less
restrictive forms of interventions before turning to classical regulation
itself It would urge the adoption of classical regulatory methods only
where less restrictive methods will not work.(21) Of course, the "unregulated market" envisioned by Breyer is one policed by the antitrust laws,(22) and so one end of his regulatory spectrum seems to be antitrust, not utter laissez faire.(23)
These are the convictions of a free market moderate. I can elucidate what I mean by emphasizing what Breyer is not. On the one hand, he is not an antitrust populist, in the sense that efficiency at least sometimes ought to be sacrificed to achieve other goals.(24) For example, he has explicitly(25) and, by reiterating an efficiency objective of antitrust, implicitly rejected the idea that antitrust laws protect the "[i]nterests of entrepreneurs and small business."(26) Further, if the measure of a man can be taken by the friends he keeps, perhaps one can glean the beliefs of a scholar by the authors he cites. In his fourteen antitrust opinions, Breyer cites works written or co-written by Phillip Areeda eighty-two times, and Areeda is no populist.(27) Breyer believes that economics lies at the core of antitrust.(28)
On the other hand, Breyer is neither an architect nor a proponent of what are commonly considered the most conservative economic positions. Thus, for example, he has not been an intellectual pioneer in areas of economic regulation. In his most ambitious scholarly work, Regulation and Its Reform, Breyer offers no new and penetrating economic theories. He explicitly disclaims any attempt "to produce general causal theories explaining the origin of regulation or its effects."(29) Rather, Breyer impresses by his extraordinary command of a broad range of regulatory issues and the analysis of them that others have formulated, by his ability to organize this mass of information in logical fashion, and by his facility for lucid exposition. One reviewer commented, "The economic case is relatively simple, and has been made before. Breyer merely makes it in a perhaps more lawyerlike fashion."(30) Another remarked, "[I]t is not easy to find a truly original insight about regulation and its reform. Stephen Breyer has nonetheless tried, not so much by saying specific things that are new, but by constructing a framework for analyzing regulation and the debate about reform."(31) A third concluded that Breyer's analysis, to the economist, "is neither new nor startling."(32) Similarly, in his recent book analyzing the regulation of health risks, Breyer provides a useful synthesis of regulatory issues, but offers no innovative economic theory.(33)
Moreover, Breyer resists embracing the more radically conservative economic theories developed by others. For example, Breyer has steadfastly refused to endorse public choice theory as an explanation for governmental action.(34) He purported to avoid considering any general causal theory of regulation in his book on regulatory reform, but by adopting as his starting point the perspective of a "conscientious regulator who is trying to do his job well"--one seeking "in good faith" to attain the "reasonable human goals a program might have," which he identifies as the correction of market failure--Breyer implicitly rejects public choice theory.35 Later, calling upon his experience running the Senate Judiciary Committee staff, Breyer concluded that "elected officials seriously consider public interest arguments and act upon them far more often than the press, the public choice theorists, or the cynics would lead one to believe."(36) Breyer would seemingly find congenial the tenets of the more moderate theory of civil republicanism, which is based on the idea that "government actions [are] responsive to something other than private pressure," that politics transcends the different interests of society in search of the single common good.(37)
Consistent with this view, Breyer assumes that agencies try to serve the public interest. Agencies are staffed with conscientious regulators trying to achieve reasonable human oals; in the area of health risks, "[o]ur problems are essentially problems of good government."(38) Others prescribe the abolition of governmental agencies as the antidote for an array of regulatory failures. While Breyer endorses wholesale deregulation for some industries, such as air transportation,(39) he advocates continued economic regulation, albeit in a less intrusive form, for many others.(40) As to managing health risks, he contends that the answer lies not in the direction of deregulation, but of "a better-government or bureaucratic solution."(41)
On substantive antitrust matters, too, Breyer has generally avoided the most economically conservative positions. To begin with, he has cautioned, "While the law may `reflect' or 'rest upon' economic principles, it does not embody them. Rather, legal and economic considerations are frequently at odds."(42) "In sum, economics is merely part of the story in antitrust and economic regulation. Those who practice in these areas must argue that law on the basis of economic, administrative, and precedential criteria, but their argument cannot be phrased solely in terms of one of these considerations."(43) A more conservative scholar would unabashedly contend that economics ought to predominate.
Breyer's views on monopolization are instructive. A basic precept of Chicago school dogma is that, absent government assistance, firms can rarely if ever acquire or maintain monopolies through unilateral, inefficient exclusionary conduct.(44) A persistent monopoly, therefore, is either the result of superior efficiency or government sanction and, in either case, ought to be left alone by the antitrust laws. Indeed, monopolies based on efficiency should be encouraged. Practices thought to extend monopolies, such as tying arrangements, are really nothing more than methods of exploiting them and so generally should be found lawful. By contrast, Breyer not only believes that a firm can acquire and retain a monopoly by exclusionary acts, but through "simple, blind, dumb luck," citing Oliver Williamson for support, himself a Chicago Critic.(45) Given his assumption, Breyer is willing to countenance a policy of forbidding the retention of monopoly power after 10 to 20 years, except in the case of a natural monopoly.(46)
Breyer's position seems to rest on the notion that firms that acquire monopolies through productive efforts will not be deterred from engaging in them by such a policy, for the permissible period of monopoly profits serves as an ample lure. Firms that acquire monopolies through dumb luck need not be encouraged at all, though they will also be allowed to enjoy the permitted period of monopoly profits because courts are incapable of distinguishing the monopoly born of superior efficiency from that born of luck.(47) A Chicagoan would find this to be an unpersuasive and oddly static analysis. If a firm could acquire a monopoly by chance, surely its dominance would be ephemeral. If a firm continues to have a nonnatural monopoly after 20 years, it must be more efficient than its rivals, and to deprive it of that monopoly would in fact deter firms from continuing to strive for efficiency, a result that would subvert economic welfare.(48)
Breyer's views on single-firm exclusionary conduct are also evident from his analysis of airline computer reservation systems (CRSs). Breyer believes that an airline can maintain dominance in an air transportation market by integrating into a CRS market and thereby raising barriers to entry into the former.(49) Though he does not offer the classic leverage objection to vertical integration (or tying) by a monopolist,(50) he adopts a conception of entry barrier to which a Chicagoan might object.(51) Breyer is unimpressed by the argument that airlines need to be rewarded for their innovation for reasons of dynamic efficiency, commenting that "CRS-owning airlines have by now presumably made considerable profit from their investment in CRSS."(52) In the end, Breyer offers no clear policy prescription, noting only that "the arguments about CRSs may come down to questions about what relief can practically be ordered," questions he does not purport to answer.(53) Breyer recognizes the CRS issue as an example of an essential facilities problem, and in approaching those problems he favors looking "beneath the label, to consider directly `anticompetitive risks' and possible business justifications.'(54) But he is more receptive to anticompetitive theories and more skeptical of efficiency explanations than a staunchly conservative analyst would likely be.(55)
Breyer's record on the First Circuit does not suggest that he is an archconservative. William Kovacic concluded that, through 1990, Breyer had a more conservative voting record as a First Circuit Judge in nonimmunity antitrust cases than well-recognized Chicagoan Richard Posner, used as the "benchmark of antitrust conservatism."(56) Breyer cast no liberal vote in sixteen cases. After 1990, however, Breyer did cast liberal votes.(57) More importantly, Kovacic was conducting an empirical analysis based on judicial votes that were deemed conservative or liberal, not a qualitative evaluation of the judges' expressed views. Kovacic's findings, then, are not inconsistent with a characterization of Breyer as a moderate. Moreover, no dissent was registered in any of the cases in which Breyer participated, and no decision was Reversed by the Supreme Court, yet one might have imagined an occasional objection from an appellate judge to extreme positions.
In short, Breyer seems to believe that the antitrust laws have an economic core and should be interpreted to serve an economitcally coherent objective. The content of his economic analysis is more consistent with the Harvard school than the Chicago school, if a clear distinction can still be drawn between the two. After all, in his antitrust opinions he cited Areeda eighty-two times, Bork nine times, and Posner three times. He is not at the extreme of conservative ideology. How persuasive he finds new economic theories of predation remains to be seen, but he seems to believe that markets tend to work and that the burden is on those who seek antitrust intervention to offer a convincing justification for its need. Nevertheless, he believes that theory must be tempered by process and administrative concerns in the application of economic analysis. If antitrust is a six-lane highway, Breyer is motoring along to the right of the median, but in the center lane.
Also relevant in predicting Breyer's behavior are his views on antitrust methodology. Breyer has repeatedly emphasized that the legal process is in large part an "administrative" activity.(58) Consequently, "rules must be simple; they must be fairly uniform; . . . [and] they must be capable of application by nonexperts."(59) These concerns suggest that Breyer would appreciate the concept of a per se rule that sacrifices some efficiency-enhancing conduct in order to achieve economies in litigation and to reduce the prospects of error. And indeed he has explained that "per se categories have been developed for administrative reasons and their boundaries have been drawn so as to include just those agreements with a high potential for harm and low probability of countervailing justification. The occasional justified agreement is sacrificed to the need for clear lines and simplified court proceedings."(60) His conception of the rule of reason is conventional.(61)
The positions Breyer will take on antitrust issues before the Supreme Court cannot be gleaned solely from his views on substantive analysis and his commitment to administrable rules, and even those dimensions of his thought yield but an impressionistic assessment of his likely behavior. Decisions in antitrust cases implicate legal process considerations, and Breyer appears to place a high value on maintaining an orderly process of law. For Breyer, the fact that a doctrine is firmly established in the law counts, and the Court ought not approach a case implicating it as if the Court were writing on a clean slate. This means, of course, that, because a position has been adopted in prior cases, Breyer may adhere to it even though he believes it to be wrong on the merits. To be sure, the Court has on occasion explicitly overturned an established antitrust doctrine on the one hand and clung to a rule on the expressed ground that it had become embedded on the other.(62) Because antitrust jurisprudence over the years has reflected different and conflicting ideologies,(63) Justice Breyer's regard for precedent is of great moment. If there is a relevant analog of a substantive free market moderate, Breyer is a legal process moderate.
Consider the conception of stare decisis Breyer articulated during his Supreme Court confirmation hearings:
[S]tare decisis is very important to the law, obviously. You can't have
a legal system that doesn't operate with a lot of weight given to stare
decisis because people build their lives . . . on what they believe to be
the law. And insofar as you begin to start overturning things, you
upset the lives of men, women, children, people all over the country.
So, be careful, because people can adjust, and even when something is
wrong they can adjust [to] it. And once they've adjusted, be careful of
fooling with their expectations.(64)
Recall, too, Breyer's admonition that economics is merely part of the story in antitrust, that because the legal process is an administrative system, rules "must remain unchanged over relatively long periods of time," and that a practitioner must argue the law in part on the basis of "precedential criteria."(65) In his confirmation hearings, Breyer went on to suggest that a judge who is considering whether to overturn a case asks a series of specific questions:
How wrong do you think that prior precedent really was as a matter of
law? That is, how badly reasoned was it? You ask yourself how the
law has changed since--all the adjacent laws, all the adjacent rules
and regulations. Does it no longer fit? You ask yourself[,] how have
the facts changed[?] Has the world changed in very important ways?
You ask yourself, . . . irrespective of how wrong that prior decision
was . . . as a matter of reasoning, how has it worked out in practice?
Has it proved impossible or very difficult to administer? Has it really
confused matters? And finally you look to the degree of reliance that
people have had in their ordinary lives on that previous precedent.(66)
Breyer offered views on particular controversial topics that suggest a belief in the importance of precedent. For instance, when asked his views on the constitutionality of capital punishment, he responded:
It seems to me that the Supreme Court has considered that matter for
quite a long time in a large number of cases. And indeed, if you look
at those cases, you will see that the fact that there are some circumstances
in which the death penalty is consistent with the Cruel and
Unusual Punishment Clause of the Constitution is, in my opinion, settled
law. At this point, it is settled.(67)
Similarly, when questioned about Roe v. Wade,(68) and when asked specifically whether the state should be able to prohibit abortion during the first trimester of pregnancy, Breyer answered simply, "The case of Roe v. Wade has been the law for 21 years, or more, and it was recently affirmed by the Supreme Court of the United States, in the case of Casey. That is the law."(69)
Breyer's antitrust record as a circuit court judge contains no glaring instances in which he disregarded First Circuit precedent. He has not been timid, however, in rejecting precedent from other circuits that he found ill-conceived. In Barry Wright Corp. v. ITT Grinnell Corp.,(70) for example, he explicitly rejected the Ninth Circuit rule in predatory pricing cases that a price above incremental and average total cost can, in some circumstances, be illegal. In Town of Concord v. Boston Edison Co.,(71) though not explicitly rejecting a contrary approach, he concluded that price squeeze claims against regulated utilities should fail except in extraordinary circumstances, a position less permissive than those suggested by other courts. In both instances, Breyer believed that the more stringent position adopted by his circuit was required by the law's interest in administrable rules. These cases do not reflect a disregard for legal process, but a certain courage in rejecting the guidance of other courts Breyer deemed to be wanting on the merits.
Moreover, in one case he held that a dealer could challenge a maximum resale price agreement imposed on it by the manufacturer.(72) Writing for the court, Breyer based his decision on the substantive illegality of the alleged arrangement on Albrecht v. Herald Co.(73) Breyer questioned the wisdom of the rule, noting that "it seems to outlaw not only anticompetitive uses of maximum price fixing, but also procompetitive uses as well, namely, use of a maximum resale price agreement that protects consumers from the exercise of a retailer's monopoly power," citing Areeda.(74) But even though "Albrecht has proved a controversial case," he applied it. Of course, this episode demonstrates only that Breyer is sufficiently committed to the orderly process of law to avoid disregarding the precedent of a superior tribunal; it tells us little about his willingness to overturn a precedent of the same court, and that will now be the relevant issue. Still, it says something general about Breyer's respect for legal process, for surely some circuit judges would have been less reluctant to circumvent Supreme Court decisions they found wanting.
As one would expect of someone inclined toward moderation, Breyer rejects claims that legislative history should play no role in the interpretation of statutes.(75) He specifies several arguments, "more pragmatic than theoretical," in defense of the "classical practice" of using legislative history to interpret unclear statutory language.(76) Included among them are assertions that legislative history can aid in understanding specialized terms, in understanding the reasonable purpose a provision might serve, and in choosing among several possible reasonable purposes for language in a politically controversial law.(77) Breyer's views on legislative history no doubt have been influenced by his substantial experience on the staff of a congressional committee. That his experience would be sufficiently gratifying to lead him to favor its use, however, was not inevitable. In fact, Breyer formed the conviction that "elected officials seriously consider public interest arguments" frequently, and there is little wonder that someone who harbors such an impression of the legislative process would advocate an inquiry into the history of the process when construing its product.(78) Moreover, as a pragmatist, Breyer finds additional support for the use of legislative history in the undesirability of its alternatives. He concedes that the practice of using legislative history can be and is sometimes abused, but he concludes that the proper response is to take greater care.
The legislative history of many of the principal antitrust laws, in particular the Sherman Act, is obscure and controversial.(79) On whatever basis, Breyer has reached a conclusion as to the meaning of at least most of these statutes. Yet his views on statutory interpretation may well become important in construing more recent and future antitrust legislation as well as regulatory statutes that arguably contain or imply antitrust exemptions.
Because some antitrust decisions are those of the Federal Trade Commission, Breyer's conception of the role of administrative agencies and the deference to be accorded their decisions on judicial review may affect his impact on the law. Breyer is coeditor of a well-regarded casebook on administrative law.(80) He is well aware that the amount of deference due an agency's determination may depend upon whether it is characterized as a finding of fact, a conclusion of law, or a mixed, or policy, determination.(81) Even within a category, the approach used can vary among courts. At best perhaps all one can say is that Breyer's scholarship offers no clear hint that he would uphold the antitrust orders of the FTC more readily than those of district courts. Certainly as judge he has both enforced and set aside agency actions, including those of the FTC.(82)
Breyer's convictions on the substance and administrability of antitrust law and on legal process create an inherent tension, which complicates the task of the antitrust forecaster. The most pressing questions are the following: To what extent will Justice Breyer try to change settled doctrine when it conflicts with what he believes the law should be? And when will he sacrifice an efficient transaction challenged in a particular case to preserve an efficient rule? I cannot presume to give definitive answers to these questions, but I can identify some areas where the issues are apt to arise and offer some hunches. First, let us consider briefly the overall state of antitrust law.
III. An overview of antitrust law and Justice Blackmun's influence on it
Antitrust law today generally is interpreted to serve a consumer welfare objective in decisions that make economic sense. Typical of the Supreme Court's modern attitude is its flat statement in one case that "Congress designed the Sherman Act as a `consumer welfare prescription.'"(83) To be sure, not every member of the Court has accepted this proposition. For example, the Court's leading champion of a noneconomic component of the law not long ago proclaimed, "[O]ur antitrust laws are designed [to] safeguard more than efficiency and consumer welfare."(84) And, as will be demonstrated shortly, not every decision in the modem era can be reconciled with a goal of promoting efficiency. Still, no one can seriously doubt that an economic conception of the antitrust laws now holds sway and that the Court reaches decisions using primarily economics as its mode of analysis.(85)
Students of antitrust know that this approach did not always prevail. Though others might quibble, I believe that one can usefully date the modern era of antitrust from 1977. The Court decided five antitrust cases that calendar year, at least three of which became signally important. The Court articulated a concept of antitrust injury that thwarts a broad variety of private actions that might otherwise impede efficiency-increasing transactions.(86) The Court limited the right to bring treble damage actions against cartels to direct purchasers, thereby concentrating the right to recover in the most efficient enforcer.(87) And most significantly, it repudiated the rule of per se illegality of vertical nonprice restraints, in the process endorsing an economic free-rider argument with sweeping implications.(88) For good measure, the Court largely undid the harm done by arguably the worst tying decision, and one of the worst antitrust decisions in history, a case suggesting that the market power necessary for per se illegality is established by the fact of the arrangement itself and that credit and the good purchased on it are separate products.(89) The Court also found a ban on attorney advertising protected by state action immunity, though it struck down the prohibition on First Amendment grounds.(90)
The claim that 1977 was an important year in the emergence of an efficiency-based antitrust law is really not controversial. The claim that it was the beginning of some phase, or movement, however, is less obvious. That subsequent years brought, for the most part, a continuation of the trend, though not self-evident, can be shown without much trouble; I shall leave that demonstration for a later section of this article. But the proposition that earlier cases ought to be seen as belonging to a prior era is less clear still. In truth, the years 1974 through 1976 do not stand out for major decisions inconsistent with an efficiency paradigm. Rather, the cases decided during those years were not clearly indicative of any coherent ideology and were not as consequential as those decided in 1977. One must look back from 1977 at least to 1973 for a notable decision in tension with efficiency analysis, when the Court endorsed an expansive potential competition theory to support the government's attempt to block a nonhorizontal acquisition.(91) Perhaps one must reach back to 1972, when the Court decided Topco(92) and Ford Motor.(93) The fact is that the change in antitrust analysis took place over time, not at a single moment. Thus, the exposition later in this section of benchmark cases demonstrates that the Court reached some results that promoted efficiency prior to 1977 and some results that subverted efficiency after 1977. Identifying a year to mark the beginning of the new era is merely a convenient expositional device, and 1977 is as good a candidate as any.
Justice Blackmun joined the Court in 1970. His influence is notable, therefore, because it spans the relevant eras. The Court decided approximately 100 antitrust cases during Justice Blackmun's tenure. Justice Blackmun wrote the majority opinion in ten of these;(94) he filed a concurring or dissenting opinion in nine others.(95) I leave to another author, or at least another day, a detailed analysis of Justice Blackmun's antitrust jurisprudence. Still, some sense of his location on the ideological spectrum and his attitude toward legal process values helps sharpen expectations to Justice Breyer's impact on the law.
To glean a sense of Justice Blackmun's antitrust posture, I have selected twenty-one benchmark cases decided during his tenure. These cases have three characteristics. First, they are, in my view, significant. No Supreme Court decision is trivial, but some have greater impact both on the law, and because these are antitrust cases on the economy, than others, and the benchmark cases have had or promise to have considerable impact. Thus, for example, I exclude Bankamerica,(96) which held that an interlocking directorate between a bank and a nonbank is covered by the exclusion from the ban on interlocking directorates found in section 8 of the Clayton Act for "corporations . . . other than banks."(97) The case is not likely to have great consequence.
Second, they are cases in which the Court was divided on one or more issues of major ideological import. In particular, one or more members of the Court took a position in these cases generally consistent with an efficiency objective of antitrust law, economic analysis, and an abiding skepticism that judicial intervention in the marketplace often increases efficiency, while one or more others adopted a contrary position. With some ambiguity, the issue that splits the Court in these cases cleaves along an ideological fault line. In most cases, the positions are embodied in majority and dissenting opinions, but the opposing position may be stated in a concurrence.(98) One could roughly characterize the relevant categories as conservative and liberal, though because these terms carry deep, broad, and uncertain connotations, I emphasize that I use the labels only as shorthand for the distinction sketched above. One could also say that the first category approximates the Chicago school and, assuming a difference, usually the Harvard school position, whereas the second corresponds generally to a populist, or sociopolitical approach. I do not mean to suggest that a position characterized as conservative or liberal is necessarily as conservative or as liberal as outside analysts might advocate; the characterizations are meant primarily to contrast opposing opinions filed in the case. For example, a Chicago school critic might object to portions of Justice Scalia's dissenting opinion in Image Technical Services,(99) but nearly all commentators would agree that his position is more conservative than that of the majority.
Further, my methodology excludes unanimous decisions from the universe of benchmark cases, but this is not because there have been no important unanimous decisions or because no respectable opposing view could have been proffered. For example, Aspen Skiing(100) is an important decision, and a more conservative position than that adopted unanimously could have been stated; conversely, Northwest Wholesale(101) and Monsanto(102) are important cases, and more liberal positions than those adopted unanimously could have been expressed.(103) Rather, I exclude these cases because the point of this exercise is to locate Justice Blackmun, ideologically speaking, within the Court. If no member of the Court voiced opposition to a conservative or to a liberal position, Justice Blackmun's failure to articulate the opposing view implies nothing about his relative ideological position on the Court.
For similar reasons, this methodology also excludes split decisions where the difference of opinion does not center on a matter of major importance to antitrust ideology. By implication, these decisions are unanimous on issues of fundamental policy. For example, Ford Motor could be called an important case, and Justice Blackmun and Chief Justice Burger filed opinions dissenting in part.(104) But they took issue only with certain remedial portions of the order, not with the basic theories of potential competition and foreclosure used to declare the vertical merger unlawful. Likewise, J. Truett Payne established the important proposition that damages are not automatically proven when a Robinson-Patman Act violation is established, and four Justices, including Justice Blackmun, dissented in part.(105) But they disagreed only with the majority's decision to remand the case for a determination of whether the record supported a finding of a violation.(106)
Moreover, a position is characterized as liberal even when the justice adopts it for reasons of legal process while expressing a preference for the opposing view on the merits. Thus, for example, Justice Blackmun voted to hold the territorial restraints at issue in Topco illegal per se, but he wrote separately to emphasize that he did so only for reasons of stare decisis.(107) This nevertheless counts as a liberal position because Chief Justice Burger dissented-relative to Chief Justice Burger, then, Justice Blackmun took a liberal position, albeit only in the sense that the Chief Justice was willing to go to greater lengths to avoid an economic result both opposed.
The third characteristic of a benchmark decision is that it does not relate to an issue of jurisdiction or antitrust immunity. Many important cases have been decided during the relevant period pertaining to the interstate or foreign commerce requirement, state action immunity, federal regulatory exemptions, the McCarran-Ferguson Act, the statutory and nonstatutory labor exemptions, and Noerr-Pennington immunity, among other kinds of immunity. The difference of opinion expressed in these cases, however, does not clearly divide on grounds of basic antitrust ideology. For example, a conservative Justice might favor a broad interpretation of state action immunity on the ground that it maximizes state power in the federal scheme of government, but favor a narrow interpretation on the ground that state imposed restraints are the most effective barrier to competition.(108) A federal regulatory exemption may turn upon statutory construction regardless of the decision's impact on consumer welfare. These cases seldom provide crisp differences of opinion on antitrust theory.
Brief descriptions of the benchmark cases, set out in chronological order, follow; some of these cases are discussed more thoroughly in section V:
Hawaii v. Standard Oil Co.(109) In an opinion by Justice Marshall, in which Chief Justice Burger and Justices Stewart, White, and Blackmun joined, the Court held that a state cannot recover antitrust damages for injury to its economy. Justices Douglas and Brennan dissented in separate opinions, Douglas also joining in Brennan's dissent. Justices Powell and Rehnquist did not participate. The majority reflects the conservative position because it assumes that there is in theory an optimal antitrust penalty and that permitting states to recover threatens overdeterrence.
United States v. Topco Associates, Inc.(110) The Court held that supermarket chains with no market power commit a per se antitrust violation by maintaining exclusive areas for marketing products purchased cooperatively by the group and bearing private brands created by the group. The majority opinion was written by Justice Marshall and joined by Justices Douglas, Brennan, Stewart, and White. Justice Blackmun concurred, concluding that, though the result would stultify competition, it was compelled by the firmly established per se rule. Chief Justice Burger dissented, and Justices Powell and Rehnquist did not participate. Though the conservative approach would recognize that efficiencies in the administration of the antitrust laws may support a result in an individual case that is inconsistent with consumer welfare, the administrative benefits of a clear rule were not likely to be seriously impaired by recognizing the obvious efficiencies produced by Topco. The majority's conclusion, including Justice Blackmun's concurrence, is the liberal position.
United States v. General Dynamics Corp.(111) In an opinion by Justice Stewart, in which Chief Justice Burger and Justices Blackmun, Powell, and Rehnquist joined, the Court decided that the acquisition by one of the largest producers and sellers of coal in a market of another large coal supplier did not violate section 7 of the Clayton Act where the acquired firm, because of its lack of and inability to acquire uncommitted coal reserves, would not have a future competitive impact. Justice Douglas, joined by Justices Brennan, White, and Marshall, dissented, accusing the majority of harboring "a deep-seated judicial bias against [sections] 7."(112) The majority opinion demonstrates more sensitivity to efficiency considerations and is the conservative position.
United States v. Marine Bancorporation, Inc.(113) Justice Powell, joined by Chief Justice Burger and Justices Stewart, Blackmun, and Rehnquist, rejected the government's potential competition claim that a large Seattle bank violated section 7 by acquiring a medium-size Spokane bank, finding that state banking regulations precluded the acquiring bank from entering the concentrated Spokane market in a more procompetitive manner. Justice White, joined by Justices Brennan and Marshall, dissented, referring to General Dynamics and complaining, "For the second time this Term, the Court's new antitrust majority has chipped away at the policies of [sections] 7 of the Clayton Act."(114) Justice Douglas did not participate. Conservative analysts tend to be wary of the potential competition theory, for it can be used to thwart mergers that produce efficiencies and pose no significant anticompetitive threat.(115) The majority adopted the conservative approach by refusing to apply the doctrine where the acquisition did not in fact pose an anticompetitive danger.
United States v. Citizens & Southern National Bank(116) Because state law prohibited Atlanta banks from owning suburban branches, an Atlanta bank "sponsored" five suburban banks, in which it took five percent interests and which it operated as de facto branches. When banking regulations were relaxed, the Atlanta bank sought to acquire sponsored banks. The government claimed that the acquisition would violate section 7 and that the operation of these sponsored banks as well as of a sixth as de facto branches violated section 1 of the Sherman Act. In an opinion by Justice Stewart, joined by Chief Justice Burger and Justices Marshall, Blackmun, Powell, and Rehnquist, the Court rejected the claims, finding that the purpose and effect of the correspondent relationships were to defeat the state-imposed restraint on competition and that, because the banks had never really competed with each other, their acquisition did not violate section 7. Justice Brennan, joined by Justices Douglas and White, dissented. The majority, which recognized the anticompetitive nature of state banking laws, adopted the conservative position.
Illinois Brick Co. v. Illinois(117) In an opinion by Justice White, in which Chief Justice Burger and Justices Stewart, Powell, Rehnquist, and Stevens joined, the Court held that an indirect purchaser from a cartel may not recover antitrust damages. The Court in Hanover Shoe had prohibited defendants in most circumstances from asserting that the plaintiff direct purchaser had passed on the overcharge and thus was not injured.(118) The Illinois Brick majority were unwilling to allow offensive use of the pass--on theory while forbidding defensive use, for permitting only offensive use would pose a risk of multiple liability. The Court refused to overrule Hanover Shoe and allow use of the theory in both contexts because that result would needlessly complicate antitrust litigation. Justice Brennan dissented, in an opinion Joined by Justices Marshall and Blackmun, arguing that an asymmetrical approach to the pass-on theory would not pose a serious threat of multiple liability and would encourage vigorous private enforcement of the antitrust laws. In a separate dissent, Justice Blackmun claimed that the plaintiffs were "the victims of an unhappy chronology. If Hanover Shoe . . . had not preceded this case, and were it not on the books,' I am positive that the Court today would be affirming, perhaps unanimously, the judgment of the Court of Appeals."(119) In fact, though the majority admitted that "considerations of stare decisis weigh[ed] heavily" in their decision, they stated that apart from these considerations they were not "persuaded that the use of pass-on theories by plaintiffs and defendants in treble-damage actions is more consistent with the policies underlying the treble-damage action than is the Hanover Shoe rule."(120) Justice Blackmun decried the majority's effort to reach a result in Illinois Brick consistent with Hanover Shoe as "a wooden approach."(121) Characterizing the relevant positions as conservative and liberal is troublesome, for respectable arguments can be made that allowing indirect purchaser suits will promote the efficient level of deterrence.(122) Indeed, the fact that Justices White and Stevens, usually associated with liberal positions, joined in the majority with Justices Powell, Rehnquist, Stewart, and Chief Justice Burger, normally aligned with conservative positions, hints at the ambiguity. Still, economic logic suggests that the Illinois Brick rule promotes optimal antitrust law enforcement by concentrating the incentive to sue in the most efficient private enforcer while eliminating the possibility of excessive recovery,(123) and however the majority's position would compare to the symmetrical use of the pass-on theory, it is more conservative than the dissent's asymmetrical use position.
Continental TV, Inc. v. GTE Sylvania Inc.(124) In an opinion by Justice Powell, joined by Chief Justice Burger and Justices Stewart, Blackmun, and Stevens, the Court held that vertical nonprice restraints are not per se illegal, explicitly overruling Schwinn in the process. Justice Brennan, joined by Justice Marshall, dissented. Justice White concurred in the majority's result, but would have retained the Schwinn per se rule in some cases, apparently at least where the manufacturer has market power. The decision arguably was the most important development in the creation of an efficiency-based conception of antitrust law, and the majority's position is obviously more conservative than the dissent's. I also classify Justice White's position as liberal for the very reasons he criticizes the majority, namely that the majority would require a rule of reason analysis when the manufacturer has market power and that the logic of the majority's opinion suggests rule of reason treatment for vertical price restraints.
Broadcast Music, Inc. v. Columbia Broadcasting System, Inc.(125) The Court, in an opinion written by Justice White and joined by Chief Justice Burger and Justices Brennan, Rehnquist, Stewart, Marshall, Blackmun, and Powell, decided that a joint selling agent's sale of blanket licenses to perform copyrighted musical compositions was to be judged under the rule of reason and remanded the case for consideration under that standard. Justice Stevens dissented, agreeing that the rule of reason should govern but concluding that the challenged practice was unreasonable. If Continental TV was not the most important decision in the development of an efficiency-based antitrust ideology, BMI was. Justice Stevens did not take issue with the most important aspect of the majority's decision, but the fact that he would have found the practice illegal suggests a significant split with the tenor of the majority's analysis and justifies characterizing his position as liberal.
Arizona v. Maricopa County Medical Society(126) The Court, in an opinion by Justice Stevens, in which Justices Brennan, White, and Marshall joined, found that an agreement among physicians to charge specified maximum prices to patients insured by participating insurance companies was per se illegal. Justice Powell, joined by Chief Justice Burger and Justice Rehnquist, dissented. Justices Blackmun and O'Connor did not participate. No convincing economic justification has ever been offered for a rule that holds horizontal maximum price fixing illegal per se, given that such an agreement, were it a disguised minimum price-fixing agreement, would be illegal per se independently. Moreover, the participants in the market at issue who had an incentive to complain about an anticompetitive arrangement favored the plan. The majority adopts the conservative position.
Blue Shield of Virginia v. McCready(127) In an opinion written by Justice Brennan and joined by Justices White, Marshall, Blackmun, and Powell, the Court found that an insurance subscriber, who paid for the services of a psychologist when psychiatrists allegedly conspired to exclude psychologists' services from reimbursement under the policy, had standing to recover treble damages measured by the cost of the services she purchased. Justice Rehnquist, joined by Chief Justice Burger and Justice O'Connor, dissented, contending that McCready had not suffered antitrust injury. Justice Stevens filed a separate dissent. The most convincing economic analysis of the case demonstrates that the injury claimed by McCready was not antitrust injury, that McCready might have been able to claim antitrust injury in the form of an inflated insurance premium she indirectly paid, and that the Court's decision, besides needlessly muddling the distinction between antitrust standing and antitrust injury, created a serious risk of excessive liability.(128) For that reason, the majority takes the liberal position, and both dissents the conservative position.
Associated General Contractors v. California State Council of Carpenters(129) In an opinion written by Justice Stevens, in which Chief Justice Burger and Justices Brennan, White, Blackmun, Powell, Rehnquist, and O'Connor joined, the Court held that a union may not maintain a treble damage action against an association of union contractors for inducing nonmember contractors not to enter into collective bargaining relationships with the union, inducing member and nonmember contractors to hire nonunion subcontractors, and inducing land owners to hire nonunion contractors and subcontractors. Justice Marshall dissented. Though the case is analytically difficult,(130) Justice Marshall's opinion, which appears to recognize few clear limitations on antitrust injury and standing, is fairly characterized as liberal.
Jefferson Parish Hosp. Dist. No. 2 v. Hyde(131) The Court, in an opinion written by Justice Stevens and joined by Justices Brennan, White, Marshall, and Blackmun, decided that a hospital's use of a single group of anesthesiologists was neither a per se illegal nor unreasonable tying arrangement for which a competing anesthesiologist could recover because the hospital lacked market power in the tying product, hospital services. Justice O'Connor, joined by Chief Justice Burger and Justices Powell and Rehnquist, concurred. They assumed that the hospital had market power in the provision of hospital services, but they would have concluded that hospital and anesthesia services are not distinct products. More importantly, they advocated abandoning the per se approach to tying cases altogether, such as it is, and applying instead the rule of reason: "The time has therefore come to abandon the `per se' label and refocus the inquiry on the adverse economic effects, and the potential economic benefits, that the tie-in may have."(132) Justice Brennan wrote a separate concurrence, joined by Justice Marshall, responding directly to Justice O'Connor and contending that the per se rule should continue to apply to tying arrangements. Though all of the members of the Court reached the same result in the case, the majority opinion and Justice O'Connor's concurrence reflect an important ideological difference. The per se rule, even in the peculiar form in which it is applied to tying arrangements, promises to be less sensitive to efficiency considerations than does the rule of reason,(133) and economic analysis suggests that tying arrangements are rarely inefficient.(134) For these reasons, the majority opinion and Justice Brennan's concurrence represent the liberal position.
Copperweld Corp. v. Independence Tube Corp.(135) The Supreme Court held, in an opinion written by Chief Justice Burger and joined by Justices Blackmun, Powell, Rehnquist, and O'Connor, that a firm and its wholly owned subsidiary are incapable of conspiring for purposes of section 1 of the Sherman Act. Justice Stevens, joined by Justices Brennan and Marshall, dissented, concluding that the alleged exclusionary activity of the defendants was wrongful and basically reasoning that the fiction of separate entities should be maintained whenever it will allow section 1 to be employed to attack objectionable practices. There is simply no efficiency-based reason for treating affiliated firms with a common economic interest as separate entities for antitrust purposes, and Justice Stevens' dissent unquestionably represents the liberal position.
National Collegiate Athletic Ass'n v. University of Oklahoma(136) In an opinion by Justice Stevens, joined by Chief Justice Burger and Justices Brennan, Marshall, Blackmun, Powell, and O'Connor, the Court decided that the exclusive sale by the NCAA of television rights to the football games of its member schools, though not illegal per se, was unreasonable. The Court relied upon evidence that the NCAA's television plan resulted in fewer televised games and higher rights fees. Justice White, joined by Justice Rehnquist, dissented, claiming inter alia that the more appropriate measure of output was viewership and that the increase in price was a function of exclusivity of television rights, not a reduction in the relevant measure of output. The market at issue in NCAA is difficult to analyze, and the majority did attempt to analyze the economic realities under the rule of reason. But Justice White's dissent reflects a more sophisticated economic analysis and is therefore more conservative.
Matsushita Electric Industrial Co. v. Zenith Radio Corp.(137) Domestic manufacturers of consumer electronic products alleged that a group of foreign competitors, whose combined share of the market rose from 20% to 50%, engaged in a predatory pricing conspiracy over 20 years, funded by monopoly profits earned by fixing prices in their home market. Justice Powell, joined by Chief Justice Burger, and Justices Marshall, Rehnquist, and O'Connor, found that the complaint was insufficiently plausible to survive the defendants' motion for summary judgment. The majority found the plaintiffs' theoretical explanation unlikely and their asserted direct evidence of a conspiracy unpersuasive. Justice White, joined by Justices Brennan, Blackmun, and Stevens, dissented. The majority conducted a rather sophisticated economic analysis of the plaintiffs' complaint. Moreover, efficiency advocates are typically skeptical of suits brought by competitors, and the Court was willing to prevent the plaintiffs from reaching trial, thereby indicating that economic analysis can be used at a sufficiently early stage in litigation to minimize the leverage that a plaintiff-competitor might have to subvert efficient practices. For these reasons, the majority adopted the conservative position.
Cargill, Inc. v. Monfort of Colorado, Inc.(138) In an opinion by Justice Brennan, joined by Chief Justice Rehnquist and Justices Marshall, Powell, O'Connor, and Scalia, the Court held that a private plaintiff must allege threatened antitrust injury in order to obtain an injunction pursuant to section 16 of the Clayton Act.(139) The Court found that a meat packer opposing the merger of two competitors on the ground that the merged firm would engage in a price-cost squeeze and thereby drive the plaintiff from the market had not established threatened antitrust injury. Justice Stevens, joined by Justice White, dissented. Justice Blackmun did not participate. The majority was skeptical of the plaintiff's predatory pricing theory, and they prevented a competitor from thwarting a merger. The Court also implicitly recognized that efficiency-increasing transactions can be thwarted by actions for injunctive relief as well as by those for damages. The majority adopted the conservative position.
Business Electronics Corp. v. Sharp Electronics Corp.(140) In an opinion by Justice Scalia, joined by Chief Justice Rehnquist and Justices Brennan, Marshall, Blackmun, and O'Connor, the Court held that an agreement between a supplier and a dealer to terminate a competing dealer for price cutting, absent a further agreement on the price or price levels to be charged by the surviving dealer, is not per se illegal. Justice Stevens, joined by Justice White, dissented, arguing that such an agreement between the dealer and supplier is horizontal, naked, and, because it affects retail price, a price restraint. Justice Kennedy did not participate. The majority implicitly credited efficiency-increasing explanations of vertical restraints, such as suppression of free riding, and adopted a rule that tends to protect them from liability. It has its own shortcomings,(141) but it represents the conservative position.
Atlantic Richfield Co. v. USA Petroleum, Inc.(142) The Court, in an opinion by Justice Brennan, joined by Chief Justice Rehnquist and Justices Marshall, Blackmun, O'Connor, Scalia, and Kennedy, held that a dealer does not suffer antitrust injury when it loses sales to a competitor charging nonpredatory prices pursuant to a maximum price-fixing agreement with that competitor's supplier. Justice Stevens, joined by Justice White, dissented. Conservative analysts have long criticized the application of the per se rule to vertical restraints, and particularly vertical maximum price fixing. By limiting the right of a competitor to attack a vertical price restraint that likely increases efficiency, the Court adopted the conservative position.
Kansas and Missouri v. Utilicorp United, Inc.(143) In an opinion by Justice Kennedy, in which Chief Justice Rehnquist and Justices Stevens, O'Connor, and Scalia joined, the Court refused to create an exception to the Illinois Brick rule for indirect purchaser plaintiffs when the direct purchaser is a regulated utility that is allowed to increase its rates by the full amount of an anticompetitive overcharge. Justice White, joined by Justices Brennan, Marshall, and Blackmun, dissented. Characterization of these positions is difficult. Conservative analysts would endorse vigorous enforcement of the antitrust laws against cartel activity, and if the regulated context really eliminates the incentive of the direct purchasing utility to sue, they would presumably support standing on the part of indirect purchasers.(144) But it is not clear that utilities would lack such an incentive, for passing up the right to recover damages represents an opportunity cost. Additionally, the dissent's position may have led to further erosion of the Illinois Brick rule, itself a conservative doctrine. For these reasons, the majority's position is conservative.
Eastman Kodak Co. v. Image Technical Services, Inc.(145) The Court, in an opinion written by Justice Blackmun and joined by Chief Justice Rehnquist, and Justices White, Stevens, Kennedy, and Souter, found that an equipment manufacturer that required some consumers to purchase service from it as a condition of obtaining its distinctive repair parts was not entitled to summary judgment on tying and monopolization claims brought by excluded independent service providers even though it lacked market power in the interbrand market. Justice Scalia, joined by Justices O'Connor and Thomas, dissented. The Court based its analysis on the fact that switching between brands is costly for consumers and that information on the cost of operating durable equipment is costly to acquire. The case has proven intensely controversial, and some of those who support the decision do so on grounds of efficiency.146 Nevertheless, the majority's articulated reasoning is not economically rigorous and offers no principled basis to avoid the implication that a multitude of innocuous and efficient transactions in the economy are potentially illegal.(147) The majority adopts the liberal position.
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.(148) A manufacturer of generic cigarettes alleged that a competitor, that individually had no market power but was part of an oligopoly, violated section 2(a) of the Robinson-Patman Act by engaging in predatory pricing to induce the plaintiff to raise its prices and thereby stimulate sales of branded cigarettes by the oligopolists. In an opinion by Justice Kennedy, joined by Chief Justice Rehnquist and Justices O'Connor, Scalia, Souter, and Thomas, the Court decided that the defendant was entitled to judgment notwithstanding the verdict because the evidence did not show that the predator had a reasonable prospect of recovering its costs of predation. Justice Stevens, joined by Justices White and Blackmun, dissented. Though some economists now endorse recent and relatively expansive theories of price predation,(149) the traditional economic analysis is that "predatory pricing schemes are rarely tried, and even more rarely successful."(150) In fact, the great danger of predatory pricing complaints, typically brought by competitors, is that they will chill price competition that benefits consumers.(151) By using a skeptical analysis that focuses on the alleged predator's prospects of recoupment, the majority adopted the conservative position.
The table summarizes the voting records in the benchmark cases of all of the justices who sat on the Court during the period in which these cases were decided.(152) The columns are largely self-explanatory. The last column indicates the proportion of a justice's total votes cast that are characterized as liberal. (Obviously, the same information could be gleaned by reporting the percentage of conservative votes.) The justices are ordered from most liberal to most conservative. Justice Blackmun cast a liberal vote in 47% of the benchmark cases in which he participated. He ranks near the middle of the fifteen justices who voted in these cases. He wrote the opinion for a liberal majority in Image Technical Services, an especially important decision, and he wrote separate liberal opinions in Topco and Illinois Brick. In a phrase, Justice Blackmun might be called a moderate liberal. [TABULAR DATA OMITTED]
IV. If Breyer had been Blackmun . . .
If Justice Breyer is a free-market moderate and Justice Blackmun a moderate liberal, one would expect Justice Breyer to adopt positions that are somewhat more conservative than Justice Blackmun's. One might then surmise that the law would be different today had Justice Breyer sat in Justice Blackmun's stead. To investigate the supposition, we return to the twenty-one benchmark cases and ask whether any outcome would have been different if Justice Breyer had been on the Court instead of Justice Blackmun. Of course, outcomes in these cases are not a perfect measure of the influence that Justice Breyer might have had on the law, for the persuasiveness of his opinions might have had lasting force apart from the results he reached. Further, I assume that Justice Breyer would not have convinced any member of the Court to change his or her vote, and this may understate his influence. Finally, predicting Justice Breyer's positions is at best educated conjecture, far from infallible.
With these caveats in mind, the list of twenty-one can be pared to seven. These are all of the cases in which a different vote by Justice Blackmun would have affected the outcome, in one case only in the sense that the Court's methodology in an area of the law would have changed. Thus, they are cases in which either Justice Blackmun was in a one- or two-vote majority or did not participate when the rest of the Court was evenly divided or separated by one vote. They are, in chronological order, the following: General Dynamics (5-4, Blackmun in conservative majority); Marine Bancorporation (5-3, Blackmun in conservative majority); Continental TV (5-3, Blackmun in conservative majority); Maricopa County (4-3, Blackmun not participating); McCready (5-4, Blackmun in liberal majority); Jefferson Parish (9-0, but 5-4 split between majority and concurring opinions, Blackmun in liberal majority); Copperweld (5-3, Blackmun in conservative majority).
It is not likely that Justice Breyer would have cast a vote different from Justice Blackmun's in General Dynamics, Marine Bancorporation, Continental T V, or Copperweld. These are cases in which Justice Blackmun voted for a position that was grounded in economic theory and animated by a desire to maximize economic welfare. The only question is whether Justice Breyer's concerns with legal order and administration would have induced him to reach a decision in a case at odds with economic theory but in accord with precedent or a broad interest in efficient rules. The answer in many instances depends on how he would have responded to the question he posed during his confirmation hearings: "How wrong do you think that prior precedent really was as a matter of law? That is, how badly reasoned was it?"(153)
No direct precedent cut against the position Justice Blackmun took in Marine Bancorporation, and Justice Breyer would have easily distinguished contrary precedent in General Dynamics. Though Chief Justice Burger explained in Copperweld that the Court had never squarely adopted the intraenterprise conspiracy doctrine, surely Justice Breyer would have recognized, as Justice Stevens contended, that the Court had unmistakably endorsed it in several cases. Still, I suspect that Justice Breyer would have at least concluded that those cases were sufficiently "wrong" that he would have voted with the majority, as did Justice Blackmun. Finally, Continental TV represents the rare instance in which the Supreme Court explicitly overruled a case. Justice White advocated distinguishing Schwinn. I have no doubt that Justice Breyer would have applied the rule of reason in Continental T V, thus opposing Justices Brennan and Marshall. And while he might have sided with Justice White, I believe he would have found the per se rule as applied to vertical nonprice restraints sufficiently pernicious to warrant overturning precedent.(154) He would have voted with the majority, as did Justice Blackmun.
That leaves three cases in which, in my opinion, Justice Breyer probably would have voted differently than did Justice Blackmun or would have cast a decisive vote when Blackmun did not participate. The easiest is McCready, not because Justice Blackmun's position in that case was more economically "wrong" than his position in the other two, but because it was wrong and no direct precedent conflicted with the right position. In Maricopa County, Justice Blackmun did not participate. Justice Breyer likely would have seen little threat of consumer injury in the case and no broad administrative benefit from a per se rule against maximum price fixing. Still, though no previous case had held that purely horizontal maximum price fixing was illegal per se, Justice Breyer would have realized that such a rule was a fair inference from several lines of cases. In the end, he would have found the economic arguments in favor of the dissent's position compelling, and the litigation would have ended in an evenly divided Court.
The most problematic case is Jefferson Parish. In her concurrence, Justice O'Connor explicitly called for abandoning the per se rule as to tying arrangements. Justice Breyer in a First Circuit case studiously discussed the differences between the Jefferson Parish majority and concurring opinions without clearly indicating a preference.(155) Still, given the peculiar nature of the per se rule in that context, which requires an inquiry into market power and may permit defenses, Justice Breyer likely would have seen little potential administrative benefit from a per se approach. Indeed, he might well have thought that formally adopting the rule of reason would serve an administrative benefit in simplifying the law. He would have taken exception to the logic of some of the old tying cases, as well as to some of their results. And I suspect that he would have found Justice O'Connor's reasoning substantially more persuasive than Justice Stevens'. Nevertheless, he would have understood that the per se rule was firmly entrenched. On balance, I believe he would have sided with the concurring justices, turning that opinion into the majority's.
If my predictions are correct, a substitution of Justice Breyer for Justice Blackmun would have resulted in a more economically sound doctrine of antitrust injury, the absence of a clear precedent holding horizontal maximum price fixing illegal per se, and an explicit rule of reason approach to tying arrangements. In all, these changes would be modest but significant.
V. Antitrust today and tomorrow
Having looked backward, it remains to look forward. What are some of the important issues in antitrust law today, and how is Justice Breyer apt to respond to them in the future? What follows does not purport to be comprehensive.156 Rather, the state of the law is summarized in selected areas of substance and procedure, with an emphasis on cases decided by the Court since Justice Blackmun joined it in 1970, some unresolved questions are identified, and a few predictions of Justice Breyer's positions, based on his scholarly and judicial record, are offered.
A. Horizontal collusion
The days when agreements among competitors were condemned outright, simply because they were that, have ended. The hostile attitude typified by Sealy(157) and Topco has been replaced by an approach that considers, under some rubric or other, whether the arrangement serves a productive economic function. In concluding that the blanket license in BMI was ancillary to an integration of economic functions, the Court was in effect upholding the restraint because it serves a productive economic function. Even in NCAA, though the Court declared the joint sale of college football television rights illegal, it applied the rule of reason to reach its conclusion.
The problems that remain in this area are largely those of comprehension, characterization, and methodology. With rare exception, the cases that will now reach the Supreme Court will be analytically challenging. To be sure, the arrangement in BMI was obviously efficient,(158) and the agreement between competing suppliers of bar review courses to divide territory in Palmer(159) was without serious doubt unproductive. But most cases will resemble NCAA in that, if the Court erred there, it did so partly because the analysis of a market in which the right to televise teams engaged in athletic competition, a public good, is sold to networks, which sell time on broadcasts to advertisers, who are interested in conveying commercial messages to viewers who want to receive the sports programming and not the advertisements yet directly pay nothing to receive either, is complicated. Similarly, the analysis of the markets in Maricopa County, in which two associations of
competing physicians, who were themselves in competition with other forms of health care providers, agreed to caps on prices that would be charged to patients who were insured by companies that promised to reimburse the doctors up to the specified amounts, was a daunting task.
Market analysis is a combination of theory and fact. It involves metaphor and story.(160) The analyst postulates theories that, if correct, imply predictable economic effects, either welfare enhancing or welfare reducing, and then determines the extent to which the known facts are consistent and inconsistent with each. Selecting the explanation for a given arrangement that will govern the outcome of a case is part science and part faith. Sometimes, all credible evidence will point to a single story. But usually, decisive data will be lacking, and the judge will be forced to weigh stories and determine which is most persuasive, a process colored by the judge's fundamental beliefs about how markets work.
Much of the challenge that lies ahead in this area is the formulation and clear articulation of theories as to how horizontal restraints on competition can benefit and injure consumers. The Court is not in a good position to generate better theories, but it can explain those it is using more lucidly than it has. In Professional Engineers,(161) the Court articulated no clear anticompetitive theory as to how an association that apparently lacked market power could injure consumers by agreeing to bid on jobs only sequentially. Nor did it clearly set out a plausible economic justification, instead only reciting and rejecting an obtuse public interest explanation, essentially that the restraint prevented buildings from collapsing on the heads of the citizenry.(162) To be sure, maybe the Society had power in an appropriately defined market, and maybe the restraint increased consumer search costs or increased the suppliers' marginal cost of informing consumers about their services, either of which could have injured consumers. But maybe the restraint resulted in the provision of a higher quality of service by participating engineers and allowed them to lower consumer search costs by creating the designation of Society membership as the mark of high-quality suppliers, a result that would have benefited consumers.(163) The point is simply that the Court's analysis is unsatisfying, and clarity of theory will improve the law.
Again, when wholesalers agree to eliminate trade credit historically extended to retailers, why will it not necessarily be true that competition will shift to invoice price, so that retailers are no worse off? Indeed, might retailers not benefit if invoice prices are easier to compare than the implicit price that is affected by credit, and would not such a reduction in retailer search costs also benefit wholesalers? In Catalano,(164) the Court proclaimed that a corresponding reduction in invoice price "is surely not necessarily to be anticipated." What the Court might have said is that we cannot tell whether the wholesalers also fixed invoice price, and if they eliminated credit to police more effectively a garden-variety cartel, consumers would suffer for the usual reasons. The Court is not the appropriate institution to create new economic theory, and it is the laudable nature of science that more powerful theories are developed and displace weaker ones. That is progress, and it will benefit the law of horizontal restraints as well as other areas of antitrust aw. The law would progress further if the Court were routinely to explain its theoretical analysis coherently.
Substantive analysis is performed within a methodological framework that itself may dictate results. The categories of per se illegality have shrunk, especially in the area of horizontal collusion, and even the meaning of the concept is cloudy.(165) One question now is whether horizontal restraints are ever really per se illegal anymore. The Court seemed to have authorized taking a "quick look" at a challenged restraint in Indiana Federation of Dentists(166) to determine whether it might be efficient, allowing the court to condemn it without elaborate inquiry if no procompetitive justification is plausible. It endorsed a similar notion in NCAA.(167) This suggests that quick look review has displaced the per se rule, but the Court concluded that the challenged practices were per se illegal in Palmer(168) and Superior Court Trial Lawyers.(169) Did the Court in fact take a quick look in these cases, find ustifications implausible, and simply label the result per se illegality? In fact, the Court seemed to take quite a long look at the practice in Superior Court Trial Lawyers, yet took great pains to explain that the conduct was illegal per se. Or are some practices not even to be given a quick look? And exactly what is the content of this quick look, or, as I have called it elsewhere, this flexible rule of reason?(170) Is the court to glance at the defendants' market power? To be sure, this review is not to subsume the kind of probing analysis of market power performed under the rule of reason. But sometimes the possession of market power or lack of it will be rather obvious. Was there any doubt that all of the dentists in one area and two-thirds in another had market power in Indiana Federation of Dentists?(171) And the Court believed that prices increased and output decreased because of the television plan in NCAA,(172) facts that would necessarily imply market power. Further, suppose quick look review implies that an antitrust plaintiff need not prove the defendant has market power in order to win. Is a court to reject a defendant's evidence that it lacks market power?
In particular, the application of the Sherman Act to patent licensing arrangements that potentially disguise collusion needs to be revisited and refined. The important cases in this area-General Electric,(173) Standard Oil of Indiana,(174) Masonite,(175) Line Material,(176) Ethyl,177 United States Gypsum(178)--are decades old. Patent licensing arrangements can be both horizontal, in relation to the manufacture of the product, and vertical, in relation to the exploitation of the patent. Economic theory and law have changed markedly with respect to both horizontal and vertical restraints since these cases were decided. Further, the exchange of price information among competitors is ripe for review. The Court visited the area in Citizens & Southern(179) in the peculiar context of de facto branch banks operated to avoid state banking regulations and briefly in U.S. Gypsum,(180) there repudiating the suggestion in Container Corp.(181) that price information exchanges are per se illegal.(182) The economics of information has developed substantially since the major cases in this area were decided. Finally, the Court has yet to offer a convincing explanation for tbe per se illegality of horizontal maximum price fixing, the justifications recited in Maricopa County supporting at best a rule of reason approach.(183) Why suppliers would routinely set a price ceiling so low as to discourage innovation, entry, and experimentation, even assuming that such phenomena take the form of higher cost service,(184) iS not at all clear, and a minimum price-fixing agreement disguised as a maximum one would be illegal per se for what it really is. The fact that suppliers of disparate skills receive equal economic rewards has no independent significance if the antitrust laws are intended to benefit consumers.
Further, the legal attributes of an agreement in the context of tacit collusion or oligopoly promise to evolve as economic theory and modes of proof change. The Court has instructed that "conscious parallelism" is not alone sufficient to prove an agreement.(185) How much more is required? The Court refused to find actionable conspiracies in Matsushita and Brown & Williamson.
While on the First Circuit, Justice Breyer decided few cases posing important issues of horizontal collusion, as opposed to exclusion. In Clamp-All Corp. v. Cast Iron Soil Pipe Institute,(186) he did recognize that an association of competitors may lower consumer search costs by establishing standards and advertising the fact that designated products meet them. Though the plaintiff, a manufacturer of pipe couplings, principally complained of exclusionary practices by some of its competitors, it also claimed that they fixed prices. Justice Breyer, writing for the court, concluded that the evidence showed no agreement, but at most interdependent pricing, notin, that such pricing is lawful only because devising a judicially enforceable remedy for it "is close to impossible."(187) He addressed the plurality-of-actors issue in Kartell v. Blue Shield of Massachusetts.(188) He concluded that Blue Shield, when it demanded from doctors terms favorable to subscribers, was a single buyer, not a "sham" organization seeking only to combine otherwise independent buyers, and hence it was not subject to section 1.
More importantly, his views on the purpose, content, and administrability of the antitrust laws suggest that he will find hospitable the kind of analysis that now dominates the law of horizontal collusion. He may well be amenable to reconsidering the rule of per se illegality of horizontal maximum price fixing. The economic justification is lacking, and though it is clearly established by Maricopa County and suggested in prior cases, it is not as deeply embedded as are various other doctrines, such as the per se illegality of vertical minimum price fixing.(189) Despite his respect for legal order, he may not be offended by a repudiation of the doctrine. Further, though he is sensitive to the need for rules that can be expeditiously applied in practice, a shift from per se analysis toward a kind of flexible rule of reason ought not disturb him greatly. The marginal cost of taking a quick look at restraints, including the defendants' apparent market power, is not likely to be high, and the benefits are apt to be substantial.
Justice Breyer's greatest contribution in this area may well be a receptivity to evolving theory, acuity of thought, and clarity of expression. He understands complex markets.(190) As an academic and a judge, Justice Breyer demonstrated a broad knowledge and sure grasp of economic theory, and though his writing may be more utilitarian than eloquent,(191) the prospect of another lucid writer on the Court is not to be scoffed at.
B. Vertical restraints
The Court formally recognized that distributional restrictions can be efficient in Continental TV, but stated that it would permit an explicit inquiry into effects only of vertical nonprice restraints. Still, the Court emphasized in Sharp that restrictions should be characterized when possible so as to require an inquiry into effects. And the Court in Monsanto,(192) even if its analysis of the evidence in the case was opaque, established the important proposition that dealer complaints about a competitor's prices followed by termination of its dealership is not sufficient to establish an unlawful agreement between the dealers and the supplier. In Sharp, the Court further restricted the viability of dealer termination sults, requiring an agreement on price between the supplier and the remaining dealers.
Barring legislative changes, four of the most significant issues in this area are the following: First, will Dr. Miles, which held vertical minimum price restraints illegal per se, continue to endure? Second, will the per se rule against vertical maximum price fixing recognized in Albrecht(193) survive? Third, for all its sagacity in Continental TV, the Court suggested that the rule of reason in vertical nonprice cases requires weighing the restraints' negative effects on intrabrand competition against the positive effects on interbrand competition, a process that involves the comparison of incomparables. Just how that process would work is not important when the supplier lacks market power, for the restraints then are easily deemed lawful. The fact is that a vertical restraint imposed by a single manufacturer does not impede competition in a relevant antitrust sense when a brand is not a market. To be sure, it inhibits the actions of dealers, or rivalry, but "competition" should be understood to be a process that maximizes economic welfare. A restraint on rivalry among dealers is not a reduction in intrabrand competition that needs to be offset by an increase in interbrand competition. The restraint works no reduction in competition at all. But how should the rule of reason apply when the supplier has market power? The potential efficiency justifications for vertical restraints do not evaporate when the supplier has market power. A monopolist manufacturer, for example, may impose restrictions on dealers to prevent free riding among themselves or on the supplier and thereby induce investments that benefit consumers so long as it can prevent its dealers from themselves exercising monopoly power. Market power in the vertical context is a necessary but not sufficient condition for injury to consumer welfare. Indeed, because the vertical restraint is not likely to exacerbate the supplier's power, there is little justification for per se condemnation of vertical restrictions regardless of the presense or absence of market power. Finally, will the Court articulate a theory of anticompetitive harm from exclusive dealing arrangements that makes economic sense? Thus far, the Court has relied upon the concept of foreclosure to justify illegality under the rule of reason, but the notion is vague and in some potential meanings has been repudiated, and the Court has seemed inhospitable to the efficiency-enhancing justifications for the practice.(194)
Justice Breyer no doubt recognizes that the arguments that support rule of reason analysis of vertical nonprice restraints support a like approach to vertical price agreements.(195) The economic literature on resale price maintenance has burgeoned, and though anticompetitive explanations have been offered, there is no persuasive evidence that it often, much less usually, has anticompetitive effects.(196) Still Dr Miles is entrenched, and Justice Breyer would be apt to approach the possibility of repealing it with extreme caution. Just how bad does he think the doctrine is? An educated guess is, not bad enough.
The per se rule against maximum vertical price fixing stands on a different footing, both because it has even less economic justification and because it is not as deeply embedded in the law. The Court explained in Albrecht that the maximum prices set by vertical agreement might be too low for dealers to provide the optimum level of service, channel sales through large dealers, or be minimum price fixing in disguise.(197) One would not expect the manufacturer to injure itself by setting a price cap too low to allow the provision of services consumers want, and if only the most efficient, large dealers survive, consumers would not be injured. Minimum vertical price fixing is itself illegal per se, and the justification for that rule is lacking. Justice Breyer understands the criticisms that have been leveled at this rule, and he has acknowledged that the rule may cause anticompetitive effects. In Caribe BMW, he wrote, "We recognize that Albrecht has proved a controversial case. That is, in part, because it seems to outlaw not only anticompetitive uses of maximum price fixing, but also procompetitive uses as well, namely, use of a maximum resale price agreement that protects consumers from the exercise of a retailer's monopoly power."(198) This doctrine is probably bad enough to move Justice Breyer to vote to overrule.
Justice Breyer has not opined directly on the application of the rule of reason to vertical nonprice restraints imposed by a supplier with market power, except in the context of a requirements contract, noted below. His general approach to the law suggests that he would not find such restrictions automatically unreasonable, but would instead evaluate efficiency-enhancing explanations.(199)
In Interface Group, Inc. v. Massachusetts Port Authority,(200) a public airport operator, Massport, effectively required charter airlines to obtain ground services from one of two private fixed base operators (FBOs), with whom Massport had contracted. The plaintiff charter airline wanted to use a different firm's ground services and claimed that Massport and the FBOs had entered into an unreasonable exclusive dealing arrangement. Writing for the appellate court, Justice Breyer rejected the claim. He identified the potential anticompetitive harm stemming from foreclosure as the raising of entry barriers. Thus, if a single manufacturer or a small group of providers entered into exclusive dealing arrangements with all existing retailers, it might become difficult for a new firm to enter the manufacturing market. "Higher entry barriers make it easier for existing firms to exploit whatever power they have to raise prices above the competitive level because they have less to fear from potential entrants."(201) Justice Breyer found the theory of potential harm inapplicable to the case, noting that the arrangement "did not make it easier for Massport to abuse its market power or more difficult for new firms to build competing airports."(202)
Finally, in Barry Wright Corp. v. ITT Grinnell Corp.,(203) perhaps Justice Breyer's most celebrated antitrust opinion, Grinnell, a builder of nuclear power plant pipe systems, was a major purchaser of mechanical snubbers, accounting for about 50% of sales.(204) Pacific produced almost all of the snubbers in the country, and Grinnell entered into a contract with Barry to help that firm develop alternative snubbers.(205) Following Barry's failure to develop the product as quickly as bad been anticipated, Grinnell agreed to buy from Pacific at favorable prices a dollar amount of snubbers during 1 year, and later promised to buy different amounts during the following 2 years; the amounts represented Grinnell's estimated requirements for the first 2 years and somewhat less than its estimated requirements for the third year. It eventually ended its collaboration with Barry, who sued, challenging, inter alia, the scope of the contracts.(206) The court rejected the claim. Justice Breyer noted that requirements contracts are judged under the rule of reason because "virtually every contract to buy `forecloses' or `excludes' alternative sellers from some portion of the market, namely the portion consisting of what was bought."(207) Though "a three-year `foreclosure' of 50 percent of the relevant market . . . sounds like a significant foreclosure," Justice Breyer found that the plaintiff's characterization overstated "the size of the foreclosure and its likely anticompetitive effect for several reasons."(208) Grinnell did not explicitly promise to buy all of its snubbers from Pacific, it entered into at least two separate contracts sequentially, snubber buyers typically place orders well in advance, requirements contracts benefit both buyers and sellers in this market, and "Grinnell is not a small firm that Pacific could likely bully into accepting a contract that might foreclose new [snubber] competition."(209)
C. Horizontal exclusion
This category pertains to arrangements among competitors by which another rival is excluded from the market. One might refer to them as "boycotts," but the Court has used that term in reference to arrangements among competitors that were not exclusionary in the sense used here. For example, the Court in Indiana Federation of Dentists said that an agreement among dentists to refuse to submit x-rays to insurers, an arrangement not designed to exclude a competitor, "resembles practices that have been labeled `group boycotts.'"(210) Indeed, the Court discussed the history and meaning of the term "boycott" for purposes of the McCarran-Ferguson Act exemption in St. Paul Fire & Marine, and it there recognized that the term has been applied to a variety of seemingly disparate arrangements.(211) By simply acknowledging the confusion surrounding the term, the Court took a step toward rationalizing the area.
The Court's major contribution, however, has been to hold that not every agreement among competitors to deny or attempt to deny a rival some input used in its production process is illegal per se, regardless of the boycott label that could be affixed to it. In Northwest Wholesale,(212) where a group of office supply retailers excluded a competitor from their cooperative buying arrangement, the Court said that in prior per se illegal boycott cases
the boycott often cuts off access to a supply, facility, or market necessary
to enable the boycotted firm to compete . . . , and frequently the
boycotting firms possessed a dominant position in the relevant market.
...In addition, the practices were generally not justified by plausible
arguments that they were intended to enhance overall efficiency and
make markets more competitive.(213) The Court went on to say that, where competitors exclude a rival from a cooperative arrangement, "[u]nless the cooperative possesses market power or exclusive access to an element essential to effective competition, . . . courts should apply a rule of reason analysis."(214)
It appears, then, that when competitors own or control some input that they deny to a rival, the arrangement is an illegal per se boycott only when they have market power, though requiring a showing of market power undercuts much of the purpose of a per se rule; exclusive access to an element "essential" to competition is tantamount to market power. But if the competitors agree not to deal with an independent supplier who deals with their rival, must they or the supplier possess market power in order to commit a per se violation? If they have no market power, the supplier may be able to ignore their demands, and if the supplier has no market power, the rival can turn to an alternative supplier. Is the court to consider the efficiency justification for such a boycott in deciding whether it is per se illegal, an inquiry that again would seem inconsistent with the logic of the per se rule?
In the end, cases in which competitors lacking an efficiency defense agree not to deal with a supplier that dealt with a rival may often be cases in which the defendants have market power, for otherwise the arrangement would likely be ineffectual. Still, cases in which the defendants lacked market power may arise, and the appropriate legal analysis is not absolutely clear. Further, what if the purpose of the agreement is to injure a rival who is violating the law, and thereby hurting the boycotting competitors? Is such a boycott "intended to enhance overall efficiency," in the words of Northwest Wholesale? Or should we continue to take seriously, if we ever did, the suggestion in Fashion Originators' Guild(215) that self-help is impermissible, that the boycott directed at style pirates is illegal even if they were violating state tort law?(216)
In Indian Head,(217) where competitors circumvented the rules of a standard-setting association in order to deny a rival's product approval of the association, the excluded rival was allowed to recover damages for lost sales in markets in which approval was not required by law. No one disputed that the largest proportion of exclusionary effect occurred in those jurisdictions that prohibited the use of products that were not approved, and arguably the purpose of the defendants and the association was to influence governmental entities to adopt the association's code. For this reason, much of the discussion in Justice Brennan's opinion, writing for a seven-justice majority, as well as in Justice White's dissenting opinion, centered on application of the Noerr-Pennington doctrine.(218) Apart from Noerr concerns, though, the case raises troubling issues about the antitrust liability of a standard-setting organization and its members when competitors circumvent, but do not violate, the organization's rules to disadvantage a commercial rival. The procedural abuse was patent in this case, but are antitrust courts to evaluate the severity of procedural irregularities and levy treble damages on the most egregious? More importantly, the organization's procedures might well permit a majority of members, who have an economic stake in the outcome of a vote, to decide whether a rival's product is approved. If the rival is denied approval for anticompetitive reasons, can the members be held liable for an antitrust violation even though the organization's procedures were not abused?
Finally, the Court in Matsushita was so skeptical of a claim that Japanese television manufacturers had engaged in a predatory pricing conspiracy over the course of two decades, financed by monopoly profits earned by cartelizing the Japanese market, to exclude competitors in the United States, where the plaintiff offered no direct evidence of the conspiracy, that it authorized summary judgment for the defendant.
In short, the law of horizontal exclusion, though happily moving away from the world of broad per se illegality, is not wholly settled. Not only is the legal framework still cloudy, but the economic analysis of boycotts is not strong.(219) It remains to be seen how receptive the Court will be to new economic models of horizontal exclusion and, for that matter, theories of single-firm and vertical exclusion.
Justice Breyer, while on the First Circuit, wrote the opinion in Clamp-All Corp. v. Cast Iron Soil Pipe Institute,(220) a case in which a trade association of pipe manufacturers, the Cast Iron Soil Pipe Institute (CISPI), each of whom made a particular kind of sanitary pipe coupling, designated that kind of coupling as "approved" as a CISPI coupling and refused to approve a rival's different kind of coupling. CISPI then persuaded various private standard-setting bodies and plumbing code authorities to refer to the CISPI standard as the kind of coupling that would meet their own standards. The court rejected the rival's antitrust claim, noting that CISPI was not obliged to write a standard that encompassed the product of a competitor, even if that competitor's product was equally good, and that successful efforts to persuade a standard-setting organization not to approve a competitor's product were not actionable absent "the use of unfair, or improper practices or procedures."(221)
In Jefferson Parish, the Court took an exclusive dealing case to reiterate and refine the law of tying. One could have imagined a better vehicle for the task, but the results represented an improvement. In particular, the holding implied a more stringent test for the market power in the tying product necessary for per se illegality than prior cases had suggested. Still, the decision left unresolved a number of issues. The Court explained that the requisite market power is presumed to exist when the seller holds a "patent or similar [legal] monopoly," has a high market share, or offers a "unique product,"(222) hardly a test with hard edges. Nor did the Court explicitly acknowledge that the seller may rebut the presumption. The Court articulated an obtuse test for the requirement of two separate products that is based on the existence of separate demands;(223) four concurring justices would have held that, at a minimum, a single product exists if no consumers would purchase the tied product without purchasing the tying product, and that in any event products are not separate if there are substantial economies of joint packaging.(224) The majority offered a cloudy vision of the purpose of tying law, suggesting inconsistently that tying is lawful and unlawful when the buyer would not have purchased the tied product at all absent the tie.(225)
Certainly the most intriguing unrest emanating from Jefferson Parish is the one-vote majority in favor of retaining a per se rule. Of course, the per se rule in tying cases mimics a rule of reason, but the explicit rule of reason approach advocated by the concurring justices would make clear that efficiencies produced by the tie are to be taken into account, whereas the status of an efficiency defense to an otherwise per se illegal tie remains a bit shaky,(226) and market power analysis would likely be more economically sound than the somewhat artificial, presumption-based approach that has evolved under the per se rule. Equally important, the bizarre orthodoxy that a tying arrangement that can survive per se scrutiny may nevertheless be found unreasonable would disappear.(227)
The most portentous recent case in the tying area, as well as in antitrust generally, is Image Technical Services,(228) in which the Court held that a manufacturer with no market power in an equipment market may nevertheless commit a per se tying offense by requiring its equipment owners to purchase service from it as a condition of obtaining distinctive repair parts. In terms of black letter tying law, the case is unexceptional. The alarming aspect of the decision has to do with the application of that law to the facts. The Court relied upon the fact that information about product attributes and prices over the course of the durable equipment's life cycle is costly for consumers to acquire and that switching between brands of equipment is costly. Of course, the cost of acquiring information about most products is positive, and purchasers are often "locked-in" for some period of time to a particular product once the purchase commitment is made. The Court sanctioned the use of the antitrust laws to thwart a kind of post-contractual opportunism, when that phenomenon is ubiquitous in the economy. A pressing question, then, is whether the principle of Image Technical Services has perceptible boundaries. Moreover, at a minimum no convincing theory of consumer welfare loss has yet been offered to explain why a manufacturer would tie service to parts, rather than parts or service to equipment, and the latter tie would survive per se scrutiny for want of market power in the tying product.
Justice Breyer's most telling exposition of tying law is his opinion for the First Circuit in Grappone, Inc. v. Subaru of New England, Inc.(229) Subaru accounted for less than one percent of new automobile sales in the country. Its regional distributor required dealers to purchase four kits of spare repair parts, two "dealer kits" and two "supplemental kits," as a condition of obtaining cars. The distributor was worried that dealers would not have sufficient parts on hand to repair recently purchased cars and thought that the availability of parts would stimulate new car sales. The combined kits sold for about $3300, and the plaintiff dealer thought they should contain fewer parts and sell for about $2000. The district court awarded damages on the ground that the distributor illegally tied the sale of cars to the purchase of parts kits, and the appellate court reversed. Justice Breyer cited Jefferson Parish for the proposition that "tying's anticompetitive mechanism is not obvious."(230) He explained:
If the Seller does not have market power in respect to Product A, it
cannot force buyers to take a more expensive or less desirable Product
B, for if the Seller tries to do so, buyers will simply turn elsewhere for
Product A. If the Seller does have, and has been fully exercising, market
power, it also cannot force buyers to take a more expensive or less
desirable Product B, unless it provides buyers equivalent compensation
by lowering the price of Product A (or maintaining Product A's
price at a level lower than the Seller has the power to charge), for otherwise
buyers, who were already paying as much as the Seller could
charge them (with its degree of market power) would also likely
switch to other sellers or discontinue use of Product A.(231)
In effect, Justice Breyer highlighted the fallacy of leveraging, which has been universally repudiated by analysts when products are used in fixed proportions. He wrote, "[T]o understand the harm that tying may cause requires a fairly subtle antitrust analysis."(232) Again citing Jefferson Parish, he provided that analysis: By charging a price for Product A below the monopoly level, the seller can induce purchasers to buy complementary Product B from it, which will drive competing sellers of B from the market. A new, competing producer of A would then have to enter both markets, a task more formidable than entering only market A, and this prospect may enable the seller to charge higher prices for A. "The tie, by permitting the Seller to extend its market power from one level to two, may thereby raise entry barriers, providing security that helps a monopolist-seller further harm the consumer."(233)
Whether this kind of argument, based on entry barriers, is convincing or, for that matter, whether there are other anticompetitive explanations is unimportant. Justice Breyer has offered a clear explanation of the danger he sees. What is important is his conclusion that "plaintiffs here cannot meet the significant `market power' requirement of Jefferson Parish."(234) The defendant's share of any reasonable car market was "minuscule," as was its share of an auto franchise market, few dealers complained, the dollar amount of the coerced sale was small, and Subarus were not shown to be unique.
Presaging Image Technical Services, the plaintiff suggested that the defendant may have had market power because dealers were locked-in to the Subaru brand by virtue of their brand-specific investments. Justice Breyer rejected the argument, noting that the plaintiff had not offered evidence of
large dealer investments in Subaru dealerships by those who protested
the tie; Grappone's multiple brand representation suggests the contrary,
at least for some significant number of franchisees; and, given
the strong competition by other brands, we do not see how such dealer
investment (if it existed) could easily translate into Subaru market
power of a kind that, through tying, could ultimately lead to higher
than competitive prices for consumers.(235) Of course, the suggestion that purchaser lock-in cannot easily translate into antitrust harm indicates a skepticism with the theory accepted by the Court in Image Technical Services. Finally, Justice Breyer opined that efficiency justifications may save an otherwise per se illegal tie-in: "[I]t is conceivable (though we need not decide), that the `tie' was `efficient' enough a way to do business that the agreement could have escaped per se condemnation under the lines of cases that have created certain exceptions to the per se rule where economic, or procompetitive justifications are particularly strong."(236)
E. Monopolization and attempt
The conventional elements of actual monopolization, possession of monopoly power and exclusionary conduct, are now firmly established. The issues have to do with the content of those terms. In Aspen Skiing(237) the Court suggested that exclusionary conduct is conduct designed to exclude rivals on some basis other than efficiency, an appealing standard, though perhaps one that cannot be intelligently applied without more precise guidance.(238) Major concerns lie elsewhere. Ski Co., the owner of three of four mountain skiing facilities in Aspen, at one time cooperated with Highlands, the owner of the fourth, in offering a joint ticket to skiers. It then refused to participate, and Highlands lost business. Credible anticompetitive explanations are possible. For example, by refusing to cooperate, Ski Co. effectively increased Highlands' marginal cost of operation. It may have even increased Ski Co.'s own marginal cost, but it is important only that refusal to cooperate increased Highlands' more.(239) For that matter, the cost incurred by a patron has two components, the price paid to the operator and the transaction cost incurred in obtaining access to the mountains. Elimination of the joint ticket increased a skier's access cost to the collective four-mountain area, and that increase likely had a disproportionate impact on the one-mountain, Highlands company. If skiing in Aspen constituted a relevant market, the results would have been higher prices, lower output, higher profits for Ski Co., and lower profits for Highlands. In short, the conduct would have been profitable for Ski Co. and exclusionary. But this is not the only possible explanation, and the Court was not anxious to determine which explanation was most likely.
Another problem is that assuming, as the Court found, that the defendant's justifications for abandoning the cooperative arrangement were pretextual, why should it matter whether Ski Co. once participated in the joint arrangement on the one hand or refused to cooperate from the outset on the other? The conduct would be equally inefficient. Does the reason relate solely to the relative ease of proof? And who should bear the burden of proving the efficiency or inefficiency of conduct that disadvantages a rival? Implicitly, the Court requires the monopolist to prove its conduct was efficient, yet that may be difficult to do. Perhaps Ski Co. was attempting to prevent Highlands from free riding on its investments. Placement of the burden may determine the outcome.(240) Further, just how far does a monopolist's duty to cooperate with a competitor extend?
Moreover, if Aspen constituted a relevant market, and if setting a joint price was inherent in cooperation, cooperation might not have made consumers appreciably better off.(241) The practice was then really a dispute about dividing monopoly profits, and why should that be an antitrust concern? Another problem relates to the relevant geographic market. If refusal to cooperate effectively increased the cost of skiing the Aspen mountains, would not skiers opt for other ski areas? The Court paid little attention to geographic market definition, presumably because the defendant did not challenge the assertion that Aspen was a relevant market.(242) In fact, though, the ski slope operators in Aspen probably had no more than the individual pricing discretion that most firms in the marketplace possess, which is to say they had no monopoly power in a relevant policy sense.(243)
The implicitly narrow market accepted by the Court in Aspen Skiing seems broad compared to the market defined in Image Technical Services. Though its analysis is ambiguous, the Court seemed willing to assume that Kodak repair parts and service of Kodak equipment were relevant markets even if an uncompensated increase in those prices would result in the purchase of no new Kodak equipment; the ability to exploit an ever-dwindling base of locked-in customers is enough to prove the possession of relevant monopoly power. If that is true, instances of monopoly power are rampant, and all that stands between the seller who can exploit some customer who has made transaction-specific investments and violation of section 2 is exclusionary conduct. Given that the defendant may have to prove the efficiency of conduct that injures a rival, this bulwark is little comfort. The Court found evidence sufficient to raise a triable issue that "Kodak took exclusionary action to maintain its parts monopoly and used its control over parts to strengthen its monopoly share of the Kodak service market."(244) The decision lends credence to monopoly leveraging claims, in which a monopolist uses power in one market to gain merely an advantage but not monopoly power in another.
In Otter Tail(245) the Court held that an integrated electric utility with monopoly power in transmission violated section 2 when it attempted to preserve its monopoly over distribution by, among other things, refusing to wheel power to municipalities who wished to operate their own distribution systems. The facts of the case turn out to be more complicated than the decision suggests, for the utility apparently was attempting to maximize the amount of low-cost power it could purchase from the federal government.(246) If So, the antitrust implications are unclear. The real concern raised by the case is the Court's superficial analysis of monopolization in the regulated context.
In the predatory pricing area, the Court has steadfastly refused to resolve the debate that flourished in the mid-1970s over the proper standard of cost by which to determine whether prices are predatory.(247) Instead, the Court has embraced a model of predation under which the predator expects to lose money during the predatory campaign, drive the competitor from the market, and more than recoup its losses thereafter. The Court has focused on the prospects for recoupment, the "back-end" of the scenario, and if the predator could not expect to profit, the prices will be assumed to be nonpredatory.(248) Consistent with this analysis, the Court will deem implausible a claim that a firm with a small market share engaged in predatory pricing, relying upon tacit collusion to recoup losses, for such a strategy would not likely be profitable.(249) The Court has largely repudiated the suggestion in Utah Pie(250) that price discrimination undertaken to injure rivals in a concentrated market that merely contributes to the erosion of price levels is illegal, and it has suggested that the standards for illegality under the Robinson-Patman Act and the Sherman Act are all but identical.(251)
Finally, in the realm of attempt to monopolize, the Court held in Spectrum Sports(252) that a firm cannot be found liable for attempt without proof of a relevant market and a dangerous probability of success, which cannot be inferred solely from a specific intent to monopolize; a demonstration of unfair or predatory conduct is not alone sufficient. The decision casts some doubt on the arguable implication of Image Technical Services that leveraging monopoly power merely to obtain a competitive advantage in another market is unlawful.
In all, though Image Technical Services can be construed in different ways, the Court seems to have adopted an economic conception of single-firm exclusion, requiring an inquiry into the impact on efficiency of conduct that injures a rival and proof of an economically relevant market. Mistakes are largely those of misapplication of sensible standards.
Stephen Breyer is surely committed to an economic concept of exclusion, but he may be willing to find exclusion where some conservative scholars would not. For instance, he understands that entry barriers are an essential component in the analysis of market power, noting that even markets with one or two suppliers are competitive when they are contestable.(253) In Grappone, he doubted that brand-specific investments by dealers could create relevant market power for the supplier.(254) Borrowing from Areeda and Turner, he has defined exclusionary conduct as "conduct, other than competition on the merits or restraints reasonably `necessary' to competition on the merits, that reasonably appears capable of making a significant contribution to creating or maintaining monopoly power."(255) He has also defined such conduct as "acts that impair the competitive opportunities of rivals without, at the same time, furthering those forms of competition that the antitrust laws encourage"; the fact that conduct injures a rival does not prove it is exclusionary.(256) He has cautioned against expanding or distorting the notion of exclusionary conduct and weakening the requirement of a causal connection between conduct and power.(257) He has recognized that exploiting monopoly or monopsony power by charging high prices or paying low ones is not exclusionary conduct,(258) thus grasping an economic point that has at times seemingly eluded the Court.(259)
Yet he believes that monopoly power may endure after the superior efficiency that created it has ended and that lasting monopoly power may even emanate from "simple, blind, dumb luck."(260) He would bar monopolization claims brought by competitors and treble damage actions against the "honest monopolist," but he would allow the government to sue for structural relief after such a monopolist has had a reasonable time to enjoy his well-gotten gains.(261)
As the above synopsis suggests, Justice Breyer is sensitive to the dynamic efficiency concerns that underlie section 2. He has observed that antitrust law has varied in its treatment of bottlenecks, or essential facilities, at times acting to eliminate the owner's economic reward and at times allowing him to retain it. "The reason for this different treatment lies in the need to favor efficiency and encourage innovation," for in some circumstances requiring the owner to provide access to competitors will not deter innovation whereas in others it will.(262) He seems confident that courts can distinguish between them. Justice Breyer believes that cases truly posing the problem of an essential facility are rare, but he would in any event prefer to eschew legal rules based on the label "essential facility," or "bottleneck," and instead reach legal conclusions on the basis of a direct consideration of anticompetitive risks and business justifications.(263) He apparently does not believe that a monopoly in one market can be leveraged into another, except in the sense that the monopolist may be able to raise entry barriers or chill nonprice competition,(264) and he believes that some essential facilities, such as computerized airline reservation systems, can be used anticompetitively in part by raising entry barriers.(265)
Without doubt Justice Breyer will bring a welcome sophistication to the Court's analysis of antitrust issues in the regulated sector. In Town of Concord,(266) two municipalities distributed electricity to their residents at rates that were not regulated; an investor-owned, integrated public utility sold electricity to residents of surrounding communities at rates regulated by a state agency and to the distributing cities at wholesale rates regulated by the Federal Energy Regulatory Commission.(267) The municipalities claimed that the utility violated section 2 by charging wholesale rates that were so close to its retail rates that the cities could not compete in the retail market; in other words, the utility allegedly had perpetrated a "price squeeze" to force the cities out of the business of electricity distribution.
Writing for the court, Justice Breyer concluded that a "price squeeze . . . does not ordinarily violate Sherman Act [section] 2 where the defendant's prices are regulated at both the primary and secondary levels," for it is not exclusionary conduct.268 Because the utility's prices are regulated at both levels, the risk of anticompetitive harm is low, in part because the regulatory agencies exist to prevent the utility from charging monopoly rates, whereas "prices that create a squeeze might simultaneously bring about economic benefits."(269) Moreover, he found that the plaintiffs had not established that the defendant had monopoly power with respect to electricity, for other suppliers generated power, and the defendant was willing to wheel it for a nominal charge.(270)
The antitrust issues in regulated price squeeze cases are subtle, and in theory such a squeeze could injure competition.(271) Other courts had seemed more receptive to the cause of action, and though Justice Breyer was willing to hold out the possibility that a price squeeze could violate the antitrust law in "exceptional circumstances," he admitted that his analysis differed significantly from the other courts'.(272) But he recognized that a permissive approach to price squeeze claims could injure consumers by inducing utilities to charge higher retail rates, and he recognized the "special administrative difficulties" posed in the regulatory context.(273) For example, regulators must respect a utility's constitutional right to earn a fair return. In short, a rule hostile to regulated price squeeze claims promises to be an efficient rule because the balance in these cases will almost always tip away from illegality.
Justice Breyer believes that antitrust law is the appropriate policy response to predatory pricing.(274) In Barry Wright, discussed earlier in the context of requirements contracts, Barry also challenged Pacific's pricing practices. Justice Breyer adopted a cost-based test of predatory pricing, holding that a price above incremental and average total costs is conclusively lawful.(275) He rejected any inquiry into the subjective intent of the predator.276 Because of the facts of the case, he did not have to decide whether average variable cost is an appropriate surrogate for incremental cost, a suggestion proposed by Areeda and Turner, nor whether a price above incremental costs but below average total cost could be illegal, an issue on which Areeda and Turner and Posner have disagreed.(277) He also could avoid considering prices that are above average total costs but below incremental Costs.(278) Most importantly, he explicitly rejected the Ninth Circuit's view that prices above both incremental and average total cost may nevertheless be predatory if "the anticipated benefits of defendant's price depended on its tendency to discipline or eliminate competition and thereby enhance the firm's long-term ability to reap the benefits of monopoly power."(279) While recognizing the theoretical possibility that pricing at such a level could injure competition, Justice Breyer relied upon his conviction that legal rules must be administrable and found the Ninth Circuit rule impractical.(280)
F. Mergers and acquisitions
The Supreme Court established the modem paradigm for analyzing horizontal merger cases in United States v. Philadelphia National Bank:(281)
[A] merger which produces a firm controlling an undue percentage
share of the relevant market, and results in a significant increase in the
concentration of firms in that market, is so inherently likely to lessen
competition substantially that it must be enjoined in the absence of
evidence clearly showing that the merger is not likely to have such
Despite some backsliding,(282) the three-part inquiry into resulting concentration, increase in concentration, and mitigatin, factors prevalls today in the lower courts and enforcement agencies. The problem is that the content of those variables is not self-evident, and the Court has not decided the merits of a merger case in 20 years. For example, when will ease of entry save a presumptively anticompetitive acquisition? What efficiencies that a merger produces are relevant, and how are they to be taken into account? The lower courts have been left with the task of developing merger law in the face of evolving economic theory with little guidance from the Supreme Court.
In United States v. Greater Buffalo Press, Inc.,(283) the Court, with little analysis, found unlawful the acquisition of a firm that printed color newspaper comic supplements for a syndicator, which sold to newspapers, by a firm that printed such supplements for newspapers. The Court combined what the district court had thought were two separate markets into the single market of independent color comic supplement printing, found that the acquisition resulted in a 75% market share, dismissed the possibility of new entry, and applied a rigorous failing company doctrine, rejecting the defense. In General Dynamics,(284) of course, the Court employed a thoughtful analysis to conclude that a merger of coal producers with high shares of current sales was not likely to be anticompetitive because only shares of coal reserves accurately indicated the impact of the merger on competition.
The Court displayed a notable affection for the potential competition theory in Falstaff,(285) it seemed less enamored with the doctrine in Marine Bancorporation(286) and in Connecticut National Bank.(287) More recent literature suggests that the doctrine should be tightly circumscribed,(288) and it remains to be seen how the Court will apply the doctrine in the future. Further, in Ford,(289) a vertical acquisition of a spark plug manufacturer by a carmaker was held illegal both because it eliminated a potential competitor in the spark plug market and because it foreclosed the carmaker as a purchaser of other firms' spark plugs. In fact, the acquisition probably did nothing but rearrange supply patterns and generate efficiencies inherent in vertical integration. In the future, however, the possibility of truly anticompetitive foreclosure from vertical integration, as suggested in several emerging strains of the economics literature,(290) is likely to be a major antitrust battleground.
Although he has not written much on the topic, Justice Breyer will likely assist upon a showing of a significant, probable anti-competitive effect, in a relevant economic sense, to condemn a merger. He participated in two First Circuit cases that evinced an amicability toward vertical integration by newspaper publishers into distribution.(291) Further, he has expressed a concern with merger policy in newly deregulated markets, fearing that it will be both too lenient and too strict. Focusing on airlines, an industry that has had considerably more experience with competition since Justice Breyer wrote, he concluded that potential competition is especially important, for many city pairs are served by few airlines, and prices in these markets are disciplined only by the threat of entry. "Given the importance of potential competition, every unnecessary removal of a significant carrier as an independent entry-threatening entity gratuitously raises the probability of unwarranted price increases."(292) Of course, one might respond that every "unnecessary" acquisition by a potential competitor in every industry increases "gratuitously" the risk of harm; the issue is how one defines "unnecessary," and Justice Breyer offers little support for his fear that merger policy is likely to allow airline mergers that yield no efficiencies to go forward willy-nilly. Indeed, his concern that merger policy will be unduly harsh is that the industry is bound for a lengthy shakedown, now that long-standing and anticompetitive patterns of operation have been eliminated. There is thus "a need for leniency with respect to `failing company' and `efficiency' defenses in merger cases" in this industry.(293) How, then, do we identify the "unnecessary" merger?
G. Antitrust injury and standing
Doctrines governing the ability of private parties to sue for antitrust violations have been one of the most active areas of the law in recent times. Since 1970, the Court has held that consumers are injured in their "property" by an anticompetitive overcharge,(294) but states cannot recover for general damage to their economies.(295) A foreign government is a person entitled to sue for antitrust damages.(296) An indirect purchaser from a cartel can rarely sue for damages,(297) even when the direct purchaser is a utility allowed to raise price by the full extent of the overcharge.(298) In order to recover damages, a plaintiff must suffer "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful."(299) In order to obtain an injunction, a private plaintiff must allege threatened antitrust injury;(300) a structural order, such as divestiture, can be obtained under the rubric of injunctive relief.(301) The Court allowed an insurance subscriber to recover against psychiatrists as damages the amount paid for services to a psychologist for unlawfully excluding psychologists from coverage under her policy.(302) But it refused to allow a union to recover damages against contractors who allegedly tried to drive organized contractors out of business.(303) And it held that a retailer does not suffer antitrust injury when it loses sales to a competitor charging nonpredatory prices pursuant to a vertical, maximum price-fixing agreement.(304)
These decisions cannot be fully reconciled on the basis of a single, coherent theory. Still, trends can be discerned. The antitrust injury doctrine allows recovery only of losses that vary in proportion to the inefficiency associated with the alleged violation; the antitrust standing doctrine restricts the right of recovery on the part of those who have suffered antitrust injury in order to exclude from the defendant's total liability amounts that are offset by efficiency gains and to encourage the most efficient private enforcers to sue.(305) Together with the doctrine of Illinois Brick, really an aspect of standing, these doctrines serve to limit the scope of liability approximately to the amount of the optimal penalty.(306) This trend is important because errors in the application of substantive antitrust laws, aggravated by new, underlying economic theories of exclusion insusceptible of proof in application, and the strong incentives to sue created by the prospect of treble damages are bound to encourage groundless antitrust claims, especially by competitors.(307) These suits are not harmless, for they are expensive to litigate and can deter efficiency-increasing transactions. One might then argue for the abolition of suits by competitors;(308) alternatively, one might believe that injury and standing doctrines will suppress counterproductive competitor Suits.(309)
Whatever the best solution, the problem is real, and the Court has not done all that it might. For example, in Cargill the Court held that a competitor challenging an acquisition on the ground that the merged firm would drive it from the market through predatory pricing had not alleged threatened antitrust injury. But it refused to hold that competitors may never challenge mergers, thus at a minimum raising the cost of efficiency-producing mergers by exposing the parties to suits by rivals that cannot easily be dismissed without discovery.(310)
Bound by Albrecht and Atlantic Richfield, Justice Breyer had little choice but to hold in Caribe BMW that a dealer complaining about a maximum price restraint imposed by his supplier had alleged antitrust injury.(311) He pointed out in Clamp-All that, if pipe manufacturers had conspired to fix prices, the plaintiff competitor would not have been injured and could not complain.(312) In Kartell doctors alleged in part that Blue Shield had engaged in predatory pricing in the insurance market.(313) Justice Breyer acknowledged that anticompetitive activities in that market could injure suppliers to it, namely doctors.(314) But the only alleged instance of predatory pricing related to an insurer with less than .1 percent of the market, and so even successful predation could not significantly increase the defendant's market power.(315) "Under these circumstances the possibility of injury to a supplier is simply too remote and indirect to allow a supplier to brin, Suit."(316) He should have said that, assuming the challenged predatory pricing does not result in monopsony power, a supplier never has antitrust standing even though it suffers antitrust injury.(317) Finally, in Kenworth Justice Breyer observed that, if a supplier forced some truck dealers but not the plaintiff to accept its financing as a condition of obtaining trucks, the plaintiff would suffer no harm.(318)
H. Immunities and exemptions
The Court decided a host of cases raising exemption and immunity issues since 1970, including the protection of the Capper-Volstead Act,(319) the scope of the National Health Planning and Resources Development Act,(320) the meaning of the Reed-Bulwinkle and Interstate Commerce Acts,(321) the construction of the Shipping Act,(322) the interpretation of the McCarran-Ferguson Act,(323) the extent of the statutory and nonstatutory labor exemptions,(324) and the limits of Noerr-Pennington immunity.(325) Exploring the important issues surrounding Noerr-Pennington immunity is beyond the scope of this article. Issues pertaining to regulatory exemptions are diffuse, depending as they do on the specific statute at issue. In general, the Court is fond of reciting that explicit exemptions from the antitrust laws are strictly construed326 and that "[r]epeals of antitrust laws by implication from a regulatory statute are strongly disfavored, and have only been found in cases of plain repugnancy between the antitrust and regulatory provisions."(327) These canons hardly dictate ineluctable conclusions.
State action immunity(328) warrants specific attention. The framework is now reasonably settled: the anticompetitive actions of states are immune from antitrust liability.(329) Actions of private parties are immune if they are authorized by a clearly articulated and affirmatively expressed state policy and actively supervised by the state.(330) In Southern Motor Carriers Rate Conference, Inc. v. United States,(331) the Court held that the restraint need not be compelled. The actions of municipalities and almost certainly of state agencies are immune if they are clearly authorized by the state, though they need not be actively supervised.(332) In City of Columbia v. Omni Outdoor Advertising, Inc.,(333) the Court held that private parties do not lose immunity when they allegedly conspire with governmental entities, at least when those entities act in a governmental capacity. The Court has said that a state clearly authorizes conduct when the conduct is a "foreseeable result" of a statute.(334) Finally, in FTC v. Ticor Title Insurance Co.,(335) its most recent case on the topic, the Court held that active supervision "requires that state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy." Where states had the power to review and reject insurance rates but in fact merely allowed them to go into effect, the requirement was not satisfied.
Many questions remain in this area, and some of the most pressing follow. Given the scope of governmental policies, the Court's definition of a clear state policy recognizes the need for flexibility. But application of that test is not self-evident, and the determination of whether a restraint was the foreseeable result of legislative action promises to be difficult in many cases.(336) What happens, for example, if statutes are inconsistent? How much weight should be given a state's assertion in litigation that it did not intend to authorize the restraint? How is a court to determine whether a restraint that represents "a blend of private and public decisionmaking"(337) is really conduct of the state or of private parties? Just how active will a state's supervision have to be in order to afford immunity, and what should be done about the party who requests supervision but is left unsupervised through no fault of its own?
Justice Breyer's knowledge of regulatory economics and administrative law and process, his experiences on the staff of a Senate committee, and his attitude toward the use of legislative history in interpreting statutes are all bound to shape his decisions in the area of regulatory exemptions. One would be foolhardy to predict that these influences will push him in any one direction, either toward recognizing or rejecting immunity. In Fisichelli v. Town of Methuen,(338) developers requested approval from a town council for the issuance of state development bonds to build a mall. The council refused, allegedly because a council member owned a drugstore and the proposed mall would lease space to a competing store. Finding that the alleged restraint was the foreseeable result of the enabling legislation, Justice Breyer affirmed summary judgment for the defendants, holding that the plaintiffs' claim that a conspiracy eliminated state action immunity was foreclosed by Omni. He held in Interface Group that the Massachusetts Port Authority, if it is not the state itself, is at least equivalent to a municipality and hence enjoyed state action immunity because it acted pursuant to a clear state policy.(339)
In Tri-State Rubbish,(340) Justice Breyer sat on a panel that held first that a nonprofit, waste disposal company formed by twelve municipalities pursuant to explicit statutory authority occupied the position of a municipality.(341) It the held that actions taken by the company and the constituent towns to insure that all waste taken from the cities was delivered to the company's co-generation facility, to the detriment of a private hauler of one of the town's commercial waste, were immune from the hauler's antitrust attack as authorized by state law; the conduct of a competing hauler was immune to the extent that it was subject to active municipal supervision.(342) In Massachusetts Furniture Piano Movers Ass'n v. FTC,(343) the FTC had concluded that a state statute that permitted but did not require movers to agree upon rates filed with a state agency did not clearly authorize the practice for state action purposes. In an amicus curiae brief, the state represented that it did not intend to authorize collective rate making.344 Relying on the Supreme Court's intervening Southern Motor Carriers decision, the panel, of which Justice Breyer was a member, reversed, discerning the meaning of the statute from its terms rather than the arguments of the state.(345)
I. Standards for judgment as a matter of law
At one time, antitrust defendants were all but barred from winning summary judgment.(346) That changed with Matsushita, where the Court authorized summary judgment for the defendants charged with engaging in a predatory pricing conspiracy, commenting that if the moving parties carry their initial burden, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts."(347) The Court continued, "[I]f the factual context renders respondents' claim implausible--if the claim is one that simply makes no economic sense-respondents must come forward with more persuasive evidence to support their claim than would otherwise be necessary.")348) In Image Technical Services, the Court concluded that the defendant was not entitled to summary judgment, pronouncing its decision consistent with Matsushita.(349) But was it? The claim that Kodak had market power in a sense relevant to the antitrust laws would strike some as no more plausible than that the Matsushita defendants collectively engaged in predatory pricing. Was the Court in fact changing direction? Then in Brown & Williamson, the Court affirmed judgment notwithstanding the verdict for the defendant, holding that, where evidence is insufficient to overcome the theoretical presumption that an oligopolist will not be able to discipline a rival through predatory pricing and recoup its losses through subsequent tacit collusion, the defendant is entitled to judgment as a matter of law.(350)
These cases are important not only because they govern a defendant's ability to win a judgment prior to trial, but also because they control the propriety of judgments as a matter of law entered during and after trial.(351) If evidence in Image Technical Services that some consumers preferred service provided by independent suppliers to that provided by Kodak, and that some independent suppliers provided service that was of as high a quality as Kodak's service and at a lower price--evidence that is also consistent with some efficiency-increasing explanations--then a jury verdict for the plaintiffs based on that evidence could not be disturbed. And what is the standard? These cases require that for the defendant to win judgment as a matter of law the plaintiff's anticompetitive theory must fall below some implicit level of plausibility. Whether any particular theory falls below that level depends crucially on how sensible the theory seems to the Court. Though this principle offers little concrete guidance to lower courts confronting novel claims, the fact is that the Supreme Court believes it understands predatory pricing theory, though some analysts would disagree with it; it has little confidence in its grasp of the lock-in phenomenon in an environment of high information costs, and some would say its insecurity is well-founded.
Justice Breyer has no antipathy toward summary judgment, and he undoubtedly has a better understanding of economic theory than many on the Court. One would predict that he will not hesitate to authorize judgment as a matter of law when claims are unlikely. On the First Circuit, he voted to affirm the entry of judgment on the pleadings, summary judgment, or a directed verdict in favor of the defendant on the merits of antitrust claims in eleven cases(352) and affirmed judgments for the defendants after bench trials in two others.(353) He voted to reverse the entry of judgment for the plaintiff after bench or jury trials in three cases.(354) Of particular note, he held in Town of Concord that an electric utility price squeeze, except possibly in extraordinary circumstances, does not violate section 2, and in Barry Wright that a price above incremental and average total costs is not predatory. These are legal standards that facilitate summary disposition.
J. Interstate commerce requirement
In McLain,(355) the Court, while holding that an allegation of a price-fixing conspiracy among real estate brokers in a city satisfies the Sherman Act jurisdictional requirement of an effect on interstate commerce, articulated ambiguous standards. The Court seemed to say that a plaintiff need not establish that a challenged price-fixing agreement, if successful, would affect commerce, but merely that the activities infected by the agreement affected commerce. Given that the Court had long before held that the reach of the Sherman Act is coextensive with Congress' constitutional commerce clause power,(356) it is virtually inconceivable that an alleged price-fixing conspiracy in an integrated economy would fail the test. In Summit Health,(357) the Court held that where a plaintiff alleges that his competitors conspired to exclude him from a market, the commerce requirement is satisfied if the activities in the geographic area from which he is excluded affect interstate commerce. The test is by no means obvious. But the combined practical effect of McLain and Summit Health is that no well-plead antitrust complaint should fail on interstate commerce grounds.(358)
It is surprising, then, that Justice Breyer found the commerce requirement unsatisfied in Cordova & Simonpietri,(359) where an insurance broker in Puerto Rico alleged that a financing bank and an insurance company conspired to cancel then rewrite policies for car dealers originally represented by the plaintiff in such a way as to deny the plaintiff his commission. Of course, the decision was issued after McLain and before Summit Health, and Justice Breyer interpreted the ambiguous language of McLain narrowly, to require plaintiffs "to do more than simply point to some aspect of defendants' business which involves interstate commerce."(360) Moreover, the commerce issue was a relatively small aspect of the case, and the decision might reflect an expedient method of disposing of a case based on the unspoken belief that the allegations had little to do with antitrust.
The antitrust jurisprudence of Stephen Breyer rests on three legs: analysis grounded in economic theory should be used to reach results that promote efficiency; rules that can be applied to subvert efficiency in specific cases are nevertheless justified when they promote the efficient administration of the law; and doctrines that are ill-founded on the basis of substance and methodology should nevertheless be followed when the harm they do is outweighed by legal process values. These are the convictions of a moderate economic conservative, and though they cannot be used to predict positions on many specific issues, they do suggest likely tendencies.
Justice Blackmun himself was a moderate on the Court during an era when antitrust law turned sharply, adopting the maximization of efficiency as the goal and embracing economic analysis as the means of attaining it. This vision of antitrust undoubtedly appeals to Justice Breyer, indeed more so than it did to Justice Blackmun, who on notable occasions spurned it. Still, had Justice Breyer sat in Justice Blackmun's stead, the law today would have progressed only slightly further in the direction it has taken. In the years ahead Justice Breyer will be a force in antitrust law, and he will push to stay its course. (1) Breyer was a Special Assistant to the Assistant Attorney General for Antitrust from 1965 to 1967 and an Assistant Special Prosecutor in the Watergate Investigation in 1973. He was Special Counsel, Administrative Practices Subcommittee, Senate Judiciary Committee from 1974 to 1975 and Chief Counsel, Senate Judiciary Committee from 1979 to 1980. See 2 Almanac of the Federal Judiciary, First Circuit at 1 (1994). (2) Breyer was a law professor at Harvard University from 1967 to 1980, though presumably on leave during some of that time. (3) Breyer served on the First Circuit Court of Appeals from his confirmation in December of 1980 until his appointment to the Supreme Court. (4) Donald 1. Baker, Appointing an Antitrust Thinker to the U.S. Supreme Court, 15 Canadian Competition Record 16 (1994). (5) William E. Kovacic, Reagan's Judicial Appointees and Antitrust in the 1990s, 60 Fordham L. Rev. 49, 95 (1991). (6) Wesley A. Magat, Howard Latin's Analysis of the Legal and Economic Considerations in the Decisions of Judge Breyer, 50 Law Contemp. Probs. 86 (Autumn 1987). (7) Stephen Breyer, Breaking the Vicious Circle: Toward Effective Risk Regulation (1993); Stephen G. Breyer & Richard B. Stewart, Administrative Law and Regulatory Policy (3d ed. 1992); Stephen Breyer, Regulation and its Reform (1982); Stephen Breyer & Paul MacAvoy, The Federal Power Commission and the Regulation of Energy (1974). (8) Stephen Breyer, On the Uses of Legislative History in Interpreting Statutes, 65 S. Cal. L. Rev. 845 (1992); Stephen Breyer, Regulation and Deregulation in the United States: Airlines, Telecommunications and Antitrust, in Deregulation or Regulation? Regulatory Reform in Europe and the United States (Gianndommenico Majone ed., 1990); Stephen Breyer, Luncheon Address, in 57 Antitrust L. J. 771 (1989); Stephen Breyer, Antitrust, Deregulation and the Newly Liberated Marketplace, 75 CAL. L. REV. 1005 (1987); Stephen Breyer, Economists and Economic Regulation, 47 U. Pitt. L. Rev. 205 (1985); Stephen Breyer, Reforming Regulation, 59 Tul. L. Rev. 4 (1984); Stephen Breyer, Two Models of Regulatory Reform, 34 S.C. L. Rev. 629 (1983); Stephen Breyer, Economics for Lawyers and Judges, 33 J. Leg. Educ. 294 (1983); Stephen Breyer, Analyzing Regulatory Failure: Mismatches, Less Restrictive Alternatives, and Reform, 92 Harv. L. Rev. 549 (1979); Stephen Breyer, Five Questions About Australian Anti-Trust Law, 51 Australian L. J. 28 (1977); Stephen Breyer, The Problem of the Honest Monopolist, 41 Antitrust L. J. 194 (1975). (9) Caribe BMW, Inc. v. Bayerische Motoren Werke, AG, 19 F.3d 745 (1st Cir. 1994); Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 990 F.2d 25 (1st Cir. 1993); Fisichelli v. City of Methuen, 956 F.2d 12 (1st Cir. 1992); Town of Concord v. Boston Edison Co., 915 F.2d 17 (1st Cir. 1990), cert. denied, 499 U.S. 931 (1991); Monahan's Marine, Inc. v. Boston Whaler, Inc., 866 F.2d 525 (1st Cir. 1989); Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792 (1st Cir. 1988); Clamp-All Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478 (1st Cir. 1988), cert. denied, 488 U.S. 1007 (1989); FTC v. Monahan, 832 F.2d 688 (1st Cir. 1987), cert. denied, 485 U.S. 987 (1988); Interface Group, Inc. v. Massachusetts Port Authority, 816 F.2d 9 (1st Cir. 1987); Kartell v. Blue Shield of Massachusetts, Inc., 749 F.2d 922 (1st Cir. 1984), cert. denied, 471 U.S. 1029 (1985); Kenworth of Boston, Inc. v. Paccar Financial Corp., 735 F.2d 622 (1st Cir. 1984); Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227 (1st Cir. 1983); Allen Pen Co. v. Springfield Photo Mount Co., 653 F.2d 17 (1st Cir. 1981); Cordova & Simonpietri Ins. Agency, Inc. v. Chase Manhattan Bank, 649 F.2d 36 (1st Cir. 1981). (10) R.W. Int'l Corp. v. Welch Food, Inc., 13 F.3d 478 (1st Cir. 1994); Tri-State Rubbish, Inc. v. Waste Management, Inc., 998 F.2d 1073 (1st Cir. 1993); Elgabri v. Lekas, 964 F.2d 1255 (1st Cir. 1992); Texaco Puerto Rico, Inc. v. Median, 834 F.2d 242 (1st Cir. 1987); Massachusetts Furniture & Piano Movers Ass'n, Inc. v. FTC, 773 F.2d 391 (1st Cir. 1985); Computer Identics Corp. v. Southern Pac. Co., 756 F.2d 200 (1st Cir. 1985); Home Placement Serv., Inc. v. Providence Journal Co., 739 F.2d 671 (1st Cir. 1984), cert. denied, 469 U.S. 1191 (1985); Systemized of New England, Inc. v. SCM Inc., 732 F.2d 1030 (1st Cir. 1984); Zell-Aire of New England, Inc. v. Zell-Aire Corp., 684 F.2d 174 (1st Cir. 1982); White v. Hearst Corp., 669 F.2d 14 (1st Cir. 1982); Auburn News Co. v. Providence Journal Co., 659 F.2d 271 (1st Cir. 198 1), cert. denied, 455 U.S. 921 (1982). Breyer heard oral argument in another antitrust case but did not participate in the issuance of the opinion. Sullivan v. Tagliabue, 25 F.3d 43 (1st Cir. 1994). (11) I characterize Breyer as a free market moderate; a Washington business lawyer has called him, approvingly, a "21st century technocrat." Paul M. Barrett, High-Court Business: Brewing, Banking, Bias, WALL ST. J., Sept. 16, 1994, at B 1. Perhaps we mean the same thing. (12) Breyer has argued that the antitrust laws are best viewed. not as a form of governmental regulation akin to classical, public utility regulation, but as a set of legal mandates that insure that "unregulated" markets are workably competitive. Breyer, Regulation and its Reform, supra note 7, at 157. Antitrust is thus "an alternative to regulation and, where feasible, a better alternative." Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, supra note 8, at 1007. Nevertheless, Breyer recognizes that antitrust is a form of governmental intervention in the marketplace and thus constitutes a kind of economic regulation, broadly conceived. Breyer, Regulation and its Reform, id. at 156. (13) Hearing of the Senate Judiciary Committee, Supreme Court Confirmation Hearing for Judge Stephen G. Breyer, July 12, 1994, Federal News Service 44 (hereinafter Confirmation Hearings). (14) Breyer, Regulation and its Reform, supra note 7, at 158. (15) Clamp-All Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478, 486 (1st Cir. 1988), cert. denied, 488 U.S. 1007 (1989). See also Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792, 794 (1st Cir. 1988) ("the antitrust laws exist to protect the competitive process itself, not individual firms[,] . . . in order to help individual consumers by bringing them the benefits of low, economically efficient prices, efficient production methods, and innovation" ; Interface Group, Inc. v. Massachusetts Port Authority. (816 F.2d 9, 10 (1st Cir. 1987) (the term "anticompetitive" in antitrust law "refers not to actions that merely injure individual competitors, but rather to actions that harm the competitive process, . . . a process that aims to bring consumers the benefits of lower prices, better products, and more efficient production methods" ; Town of Concord v. Boston Edison Co., 915 F.2d 17, 21-22 (1st Cir. 1990) ("a practice is not 'anticompetitive' simply because it harms competitors, . . [but] only if it harms the competitive process . . . [and it] harms that process when it obstructs the achievement of competition's basic goals-lower prices, better products, and more efficient production methods"), cert. denied, 499 U.S. 931 (1991). (16) See Clamp-All, 851 F.2d at 489. See also Kartell, 749 F.2d at 933-34 (practices designed to injure entities in a vertical relationship with the defendant are, without an effect on competition, merely business torts). (17) Breyer, Regulatiom and Its Reform, supra note 7, at 7. is Thus, Roger Noll remarks that "Breyer comes close to equating the general public interest served by regulatory policy with an improvement in economic efficiency." Roger G. Noll, Handbook for Reform: Breyer on Regulation, 83 Colum. L. Rev. 1108, 1109 (1983) (book review). (19) Breyer, Regulation and its Reform, supra note 7, at 191-96. (20) Id. at 191. (21) Id. at 185. Douglas Ginsburg comments that Breyer's analysis "support[s] the reasonableness of a preference hierarchy that runs from unregulated markets to incentive-oriented intervention, and only as a last resort, to thoroughgoing substitution of regulation for the market." Douglas H. Ginsburg, 20 Harv. J. Legis. 647, 655 (1983) (reviewin, Stephen Breyer, Regulation and its Reform (1982)). (22) See supra note 12. (23) For an insightful discussion of the public policy alternatives to antitrust, see Donlad Dewey, The Antitrust Experiment in America 136-57 (1990). (24) Donald Baker similarly concludes that Breyer "is not a populist." Baker, supra note 4, at 16. (25) See, e.g., the cases cited in note 15, supra. (26) Eleanor M. Fox, The Modernization of Antitrust: A New Equilibrium, 66 Cornell L. Rev. 1140, 1153 (1981). This is not the place to survey arguments in favor of political and social goals of antitrust, which can be referred to collectively as populist claims. For additional examples, see Harlan M. Blake & William K. Jones, In Defense of Antitrust, 65 Colum. L. Rev. 377, 382-84 (1965); Robert Pitofsky, The Political Content of Antitrust, 127 U. Pa. L. Rev. 1051, 1052-60 (1979). (27) See, e.g., 1 Phillip Areeda & Donald F. Turner, Antitrust Law 7-33 (1978) (there are "overpowering reasons for antitrust courts to refrain from giving priority to populist goals" (at 25), and populist goals are inappropriate even if no conflict with efficiency exists (at 30)). Given that Breyer was a student or professor at Harvard Law School for 16 years, and a lecturer for 13 years after that, and that Areeda has been a professor at Harvard since Breyer was a student, perhaps Areeda's influence on Breyer is understandable. (28) See Breyer, Economics for Lawyers and Judges, supra note 8, at 295 ("economics has a central role" in antitrust). (29) Breyer, Regulation and its Reform, Supra note 7, at 9. (30) Ginsburg, supra note 21, at 662. (31) Noll, supra note 18, at 1108. (32) Ernest Gellhorn, Rationalizing Regulatory Reform, 81 Mich. L. Rev. 1033, 1035 (1983) (book review). (33) Breyer, Breaking the Vicious Circle, supra note 7. (34) Public choice theory, broadly speaking, postulates that government action is procured by interest groups pursuing private gain at public expense. See generally James D. Gwartney & Richard L. Stroup, Economics: Private and Public Choice (1987); Public Choice Theory and Constitutional Economics (James D. Gwartney & Richard E. Wagner eds., 1988); Daniel A. Farber & Philip P. Frickey, Law and Public Choice (1991). (35) Breyer, Regulation and its Reform, supra note 7, at 9-10. (36) Breyer, On the Uses of Legislative History in Interpreting Statutes, supra note 8, at 867. (37) Cass R. Sunstein, Naked Preferences and the Constitution, 84 Colum. L. Rev. 1689, 1691 (1984). (38) Breyer, Breaking the Vicious Circle, supra note 7, at 59. (39) See Breyer, Regulation and its Reform, supra note 7, at 197-221. (40) One commentator complained that Breyer professes to recognize that once an imperfcct state of affairs is discovered, it does not necessarily follow that a regulatory change will be an improvement. But he "sometimes does not consider that in some of these circumstances, no regulation may be preferred" to a less intrusive form of regulation. Gellhorn, supra note 32, at 1037. (41) Breyer, Breaking the Vicious Circle, supra note 7, at 59. Specifically, Breyer offers a two-part suggestion: "(1) establishment of a new career path that would provide a group of civil servants with experience in health and environmental agencies, Congress, and OMB; and (2) creation of a small, centralized administrative group, charged with a rationalizing mission, whose members would embark upon this career path." Id. at 59-60. (42) Breyer, Economics for Lawyers and Judges, supra note 8, at 296. (43) Id. at 300. (44) See generally Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. Pa. L. Rev. 925, 928 (1979); Robert H. Bork, The Antitrust Paradox 160 (1978, 1993); Richard A. Posner, Antitrust Law: An Economic Perspective 171 (1976); Ward S. Bowman, Jr., Patent and Antitrust Law: A Legal AND Economic APPRAISAL (1973). Here and elsewhere in the article I refer to the "Chicago school." I do so with misgivings, for I share the perception that the outlines of the school are not now nearly as distinct as some find them. See Posner, The Chicago School, id.; Bork, id. at xi-xiii (1993 ed. ; Frank H. Easterbrook, Workable Antitrust Policy, 84 Mich. L. Rev. 1696 (1986). Still, I use the term because there is a common understanding of the core of the school, namely a coherent theory of antitrust based on the principle that the law serves the goal of economic welfare, on a rigorous application of price theory, and on a conviction that courts are typically less competent to correct market failures than is the market itself. (45) Breyer, The Problem of the Honest Monopolist, supra note 8, at 194. Breyer sides with those who argue that "the `natural erosion' of market power will often not take place. A firm that has been lucky or that once had an outstanding management or a better product may dominate the market for many years thereafter. New firms will not enter. . . . At the least, one should not underemphasize plain luck as a way to stay on top." Id. at 195. (46) Id. at 196, 197, 200. Not only would a Chicagoan object to the fundamental policy Breyer advocates, Chicagoans and others might find equally unacceptable Breyer's contention that courts could impose a 10- to 20-year time limit on monopoly power "without further legislation." Id. at 200. (47) Id. at 197. (48) This is not to say that a Chicagoan would object to all of Breyer's proposals for dealing with monopolies. Breyer argues that courts and agencies should avoid classifying procompetitive conduct as exclusionary simply because it forces firms out of business and that private actions and treble damage actions against monopolists should be restricted. Breyer, The Problem of the Honest Monopolist, supra note 8, at 200. A. Chicagoan would find these proposals hospitable. (41) Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, supra note 8, at 1036. (50) See Donald F. Turner, The Validity, of Tying Arrangements Under the Antitrust Laws, 72 Harb. L. Rev. 50, 60-62, 63 n.42 (1958). On the equivalence of tyin, and vertical integration, see Roger D. Blair David L. Kaserman, Law and Economics of Vertical Integration and Control 52-58 (1983). (51) See Posner, The Chicago School of Antitrust Analysis, supra note 44, at 929-30, 934. Similarly, Breyer seems to reject the classic leverage justification for the illegality of tying arrangements, but he believes these arrangements may be anticompetitive by raisin, entry barriers, by discouraging innovation and efficiency, and by impeding competition "on the merits." Breyer. Five Questions About Australian Anti-Trust Law, supra note 8, at 70-71. (52) Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, supra note 8, at 1038. (53) Id. at 1038. Breyer offers other anticompetitive theories to explain the use of CRSs, and he is clearly skeptical of any procompetitive justification. He voiced similar concerns in his luncheon address on deregulation to the ABA's Antitrust Section. Breyer, Luncheon Address, supra note 8, at 775. (54) Breyer, Luncheon Address, supra note 8, at 775. (55) In one area of anticompetitive exclusion by unilateral action, Breyer's views are unequivocally conservative: he is unsympathetic to claims of predatory pricing and he was willing as a judge to adopt a test that was more hostile to these claims than the one accepted by other courts. See Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227 (1st Cir. 1983). See also Breyer, Regulation and its Reform, supra note 7, at 32, 159-60. Of course. even in this area, his views are perhaps not as extreme as some. See, e.g., Bork, supra note 44, at 149-55. (56) Kovacic, supra note 5, at 89. (57) See, e.g., Caribe BMW, Inc. v. Bayerische Motoren Werke, AG, 19 F.3d 745 (1st Cir. 1994); Tri-State Rubbish, Inc. v. Waste Management, Inc., 998 F.2d 1073 (1st Cir. 1993). (58) See, e.g., Breyer, Economics for Lawyers and Judges, supra note 8, at 296; Breyer, Economists and Economic Regulation, supra note 8, at 205 (referring specifically to economic regulation). (59) Breyer, Economics for Lawyers and Judges, supra note 8. at 296. (60) Breyer, Regulation and its Reform, supra note 7, at 158. (61) For example, he has said that courts applying the rule of reason will ask three basic questions: "(a) Does the agreement tend to limit competition? In what respects? (b) Does the agreement none the less achieve certain legitimate economic or business objectives? (c) If so, might those objectives be achieved in a less restrictive way? Is the agreement necessary to achieve them or is there a less restrictive alternative?" Breyer, Five Questions About Australian Anti-trust Law, supra note 8, at 29. (62) Perhaps the most famous example of explicit repudiation of an antitrust doctrine is Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977), where the Court expressly overruled the decision in United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967), that vertical nonprice restraints are illegal per se. Conversely, the Court refused to reconsider the per se rule against vertical price fixing at least in part because "the Court's decision in Dr. Miles Medical Co. v. John D. Park Sons Co., 220 U.S. 373 (1911) . . . has stood for 73 years." Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 769 (1984) (Brennan, J., concurring). In Flood v. Kuhn, 407 U.S. 258 (1972), the Court, in an opinion written by Justice Blackmun, refused to repudiate the antitrust exemption for professional baseball established in Federal Baseball Club v. National League, 259 U.S. 200 (1922), and substantially reaffirmed in Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953), even though the Court had rejected analogous immunity for professional boxing (United States v. International Boxing Club, 348 U.S. 236 (1955)) and football (Radovich v. National Football League, 352 U.S. 445 (1957)). And in Square D Co. v. Niagara Frontier Tariff Bureau, 476 U.S. 409 (1986), the Court refused to overturn the doctrine established 64 years earlier in Keogh v. Chicago & Northwestern R. Co., 260 U.S. 156 (1922), (63) See William H. Page, Ideological Conflict and the Origins of Antitrust Policy, 66 Tulane L. Rev. I (1991). that a shipper cannot recover treble damages from a carrier based on rates filed with the Interstate Commerce Commission, even though the Keogh doctrine had lost its theoretical force during the intervenin, years. It is also interesting for purposes of this article that, even though he found the result in the case "at odds with the public interest," Justice Blackmun concurred in Topco because the "per se rule . . . now appears to be so firmly established by the Court that, at this late date, I could not oppose it. Relief, if any is to be forthcoming, apparently must be by way of legislation." United States v. Topco Associates, Inc., 405 U.S. 596, 613 (1972) (Blackmun, J., concurring).
Of course, these examples do not speak to the more frequent cases in which the Court implicitly repudiates established doctrines while purporting to adhere to precedents. See, e.g., Northwest Wholesale Stationers, Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284 (1985) (not all boycotts are illegal per se); Copperweld Corp. v. Independence Tube Corp.. 467 U.S. 752 (1984) (parent and wholly owned subsidiary cannot conspire). Nor do they pertain to cases in which the Court reaffirms doctrines ostensibly because of their merits but in reality because of stare decisis. (64) Confirmation Hearings, July 13, 1994, supra note 13, at 82-83. (65) Brever, Economics for Lawyers and Judges, supra note 8, at 296, 300. (66) Confirmation Hearings, July 13, 1994, supra note 13, at 83. (67) Confirmation Hearings, July 12, 1994, supra note 13, at 38. (68) 410 U.S. 113 (1973). (69) Confirmation Hearings, July 12, 1994, supra note 13, at 38. Breyer expressed a similar sentiment--that what the Court has firmly established should be taken as a given--with respect to freedom of religion and a right to privacy. Id. at 60. (70) 724 F.2d 227 (1st Cir. 1983). (71) 915 F.2d 17 (1st Cir. 1990), cert. denied, 499 U.S. 931 (1991). (72) Caribe BMW, Inc. v. Bayerische Motoren Werke, AG, 19 F.3d 745 (1st Cir. 1994). (73) 390 U.S. 145 (1968). (74) Caribe BMW. 19 F.3d at 753. (75) For a sample of arguments that legislative intent and legislative history ought play no role in the interpretation of statutes, see Frank Easterbrook, The Role of Original Intent in Statutory Construction, 11 Harv. J- L. & Pub. Pol'y 59 (1988); Frank Easterbrook, Statutes' Domain, 50 U. Chi. L. Rev. 533 (1983); Pittston Coal Group v. Sebben, 488 U.S. 105 (1988) (Scalia, J.); Puerto Rico Department of Consumer Affairs v. Isla Petroleum Corp., 485 U.S. 495 (1988) (Scalia, J.). For a summary and critique of these views, see Farber & Frickey, supra note 34, at 88-115. (76) Breyer, On the Uses of Legislative History in Interpreting Statutes, supra note 8, at 847. (77) Id. at 851-60. (78) Id. at 867. (79) See generally Bork, supra note 44, at 56-66; Pitofsky, supra note 26, at 1060-65; Robert H. Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 Hastings L. J. 65 (1982). (80) See Breyer & Stewart, supra note 7. (81) See generally Stephen Breyer, Judicial Review of Questions of Law and Policy, 38 Admin. L. Rev. 363 (1986). (82) See, e.g., Boston Edison Co. v. FERC, 885 F.2d 962 (1st Cir. 1989) (upholding FERC): FTC v. Monahan, 832 F.2d 688 (1st Cir. 1987) (upholding the FTC), cert. denied, 485 U.S. 987 (1988); Massachusetts Furniture & Piano Movers Ass'n, Inc. v. FTC, 773 F.2d 391 (1st Cir. 1985) (in part upholding and in part reversing FTC). (83) Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979), citing Robert H. Bork, The Antitrust Paradox 66 (1978). (84) Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 360 (1990) (Stevens, J., dissenting). (85) One commentator has observed, "By and large, with some ambiguity at times, the more recent cases have adopted a consumer welfare model. Aside from some explicit statements to that effect, the best evidence for this proposition is that courts now customarily speak the language of economics rather than pop sociology and political philosophy." Bork, supra note 44, at 427 (1993 ed.). (86) See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977). (87) See Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). (88) See Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977). (89) See U.S. Steel Corp. v. Fortner Enterprises, Inc., 429 U.S. 610 (1977) (Fortner II). While maintaining the appearance of consistency, the Court repudiated much of the logic of Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495 (1969) (Fortner 1), a decision excoriated in Kenneth W. Dam, Fortner Enterprises v. United States Steel: "Neither a Borrower, Nor a Lender Be, " 1969 Sup. Ct. Rev. 1. (90) See Bates v. State Bar of Arizona, 433 U.S. 350 (1977). (91) See United States v. Falstaff Brewing Corp., 410 U.S. 526 (1973). The government claimed that the acquiring company, Falstaff, would have entered the New England beer market de novo or by a toe-hold acquisition had it not attempted to acquire Narragansett, the largest seller in the region. In today's parlance, the government articulated an actual potential competition theory, or claimed that the acquisition deprived the market of a beneficial future effect. See Dept. of Justice, 1984 Moreover Guidelines, [sections] 4.112; 5 Areeda & Turner, supra note 27, at [paragraph] 1121. The district court found that Falstaff would not have entered in a more procompetitive way, but the Supreme Court held that the court should have considered whether Falstaff's position in the wings of the market had a positive present effect on prices. In other words, the court should have considered the perceived potential competition theory. See 1984 Merger Guidelines, supra, at [sections] 4.111; 5 Areeda & Turner, supra, note 27 at [paragraph] 1120. Not only did the Court assert a theory that the government apparently did not advocate (see Falstaff, 410 U.S. 527, 573-74 (Rehnquist, J., dissenting), it seemed to overstate the concern with the existing level of market concentration, care little about whether other potential entrants would remain to preserve the beneficial perceived potential competition effects, and ignore the possibility that the acquisition would produce significant efficiencies. See generally 5 Areeda & Turner, supra, note 27 at [paragraph] 1116b; Posner, supra note 44, at 120-22. While the potential competition theory has not been repudiated wholesale by economists, probably most believe that it ought to be tightly confined and that it has been misused by the Court. See, e.g., Posner, supra note 44. at 122-25; Bork, supra note 44, at 259-62; Joseph Brodley, Potential Competition Mergers: A Structural Synthesis. 87 Yale L. J. 1 (1977). Falstaff succests an affection for the doctrine that efficiency-minded scholars would find alarming. (92) United States v. Topco Associates, Inc., 405 U.S. 596 (1972) (a horizontal division of territories among small supermarket chains for the marketing under private labels of products procured by a cooperative buying agency is per se illegal). This is not to say that no possible efficiency justification could be offered for the Court's decision. But that explanation would have to relate to the administrative efficiencies attendant upon a per se rule, and most analysts would probably conclude that any such efficiencies of administration were outweighed by the efficiencies produced by the collective marketing arrangement. (93) Ford Motor Co. v. United States, 405 U.S. 562 (1972) (acquisition by a car manufacturer of a spark plug manufacturer held unlawful on both potential competition and foreclosure theories). Many efficiency-oriented analysts conclude that neither theory supported the result. See, e.g., Blair & Kasermen, supra note 50, at 144; Herbert Hovenkamp, Federal Antitrust Policy 343 (1994). (94) Hartford Fire Ins. Co. v. California, 113 S. Ct. 2891 (1993); Eastman Kodak Co. v. Image Technical Services, Inc., 112 S. Ct. 2072 (1992); Falls City Industries, Inc. v. Vanco Beverage, Inc., 460 U.S. 428 (1983); American Society of Mechanical Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556 (1982); Greyhound Corp. v. Mt. Hood States, Inc., 437 U.S. 322 (1978); National Broiler Marketing Ass'n v. United States, 436 U.S. 816 (1978); Bates v. State Bar of Arizona, 433 U.S. 350 (1977); Abbott Laboratories v. Portland Retail Druggists Ass'n, Inc., 425 U.S. 1 (1976); Gordon v. New York Stock Exchange, Inc., 422 U.S. 659 (1975); Flood v. Kuhn, 407 U.S. 258 (1972). Blackmun also authored the majority opinion in Dawson Chemical Co. v. Rohm and Haas Co., 448 U.S. 176 (1980), a case addressing the doctrine of misuse under the patent law, a doctrine with important direct implications for antitrust tying law. (95) FTC v. Superior Court Trial Lawyers Ass'n, 493 U.S. 411 (1990) (Blackmun, J., concurring in part and dissenting in part); New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (Blackmun, J., concurrin); Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978) (Blackmun, J., concurring in antitrust aspects of the decision but dissenting as to the Commerce Clause aspect); National Society of Professional Engineers v. United States, 435 U.S. 679 (1978) (Blackmun, J., concurring); Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (Blackmun, J., dissenting); Cantor v. Detroit Edison Co., 428 U.S. 579 (1976) (Blackmun, J., concurring); American Pipe & Construction Co. v. Utah, 414 U.S. 486 (1974) (Blackmun, J., concurring) ; United States v. Topco Associates, Inc., 405 U.S. 596 (1972) (Blackmun, J., concurring); Ford Motor Co. v. United States, 405 U.S. 562 (1972) (Blackmun, J., concurring in judgment and dissenting only as to certain remedial provisions in the order). (96) Bankamerica Corp. v. United States, 462 U.S. 122 (1983). (97) 15 U.S.C. [sections] 19 (1988). (98) For example, an important disagreement in approach is reflected in the majority and concurring opinions in Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984). (99) Eastman Kodak Co. v. Image Technical Services, Inc., 112 S. Ct. 2072 (1992). Justice Scalia intimates that, if a firm has monopoly power in a tying product market, no efficiency justification can save the tying arrangement from illegality. Id. at 2093 (Scalia, J., dissenting) (where the defendant has market power in the tying product, "the arrangement is adjudged in violation of [sections] 1 ... without any inquiry into the practice's actual effect on competition") (emphasis in original). This is a position to which a Chicago school analyst might object. See John E. Lopatka, The Court's Economic Gibberish, Legal Times S34 (week of July 27, 1992). (100) Aspen Skiin, Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985). (101) Northwest Wholesale Stationers, Inc. v. Pacific Stationery Printing Co., 472 U.S. 284 (1985). (102) Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984). (103) Other cases that do not qualify as benchmark cases because they are unanimous decisions include Spectrum Sports, Inc. v. McQuillan, 113 S. Ct. 884 (1993); Texaco Inc. v. Hasbrouck, 496 U.S. 543 (1990); California v. American Stores Co., 495 U.S. 271 (1990); FTC v. Indiana Federation of Dentists, 476 U.S. 447 (1986); Falls City Industries, Inc. v. Vanco Beverage, Inc., 460 U.S. 428 (1983); Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980); Reiter v. Sonotone Corp., 442 U.S. 330 (1979); Greyhound Corp. v. Mt. Hood Stages, Inc., 437 U.S. 322 (1978); United States Steel Corp. v. Fortner Enterprises, Inc., 429 U.S. 610 (1977) (Fortner II); Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977). In addition, FTC v. Sperry & Hutchinson Co., 405 U.S. 233 (1972), and United States v. Greater Buffalo Press, Inc., 402 U.S. 549 (1971), were unanimous decisions and therefore disqualified. Unlike the other cases, though, they also are not sufficiently important to be deemed benchmark cases. (104) Ford Motor Co. v. United States, 405 U.S. 562 (1972). (105) J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557 (1981). (106) Similarly, United States v. United States Gypsum Co., 438 U.S. 422 (1978), established that effect on price alone is insufficient to support a criminal Sherman Act violation and that interseller price verification cannot be justified on the round that it is required to establish the meeting competition defense under the Robinson-Patman Act. Six justices formed the majority on these antitrust issues, and two justices filed separate dissents. But these dissents did not raise central ideological disagreements. Justice Blackmun took no part in the decision. In Pfizer, Inc. v. Government of India, 434 U.S. 350 (1977), a majority of five justices held that a foreign nation may bring an antitrust suit for treble damages; three justices dissented. Though the issue is significant to antitrust policy and the disagreement is clear, one cannot easily say that the issue is of central importance to antitrust ideology or determine which position is more conservative, in the sense of the word used here. Justice Blackmun took no part in the case. (107) United States v. Topco Associates, Inc., 405 U.S. 596 (1972). (108) See, e.g., Kovacic, supra note 5, at 69. (109) 405 U.S. 251 (1972). (110) 405 U.S. 596 (1972). (111) 415 U.S. 486 (1974). (112) Id. at 527 (Douglas, J., dissenting). (113) 418 U.S. 602 (1974). (114) Id. at 643 (White, J., dissenting). (115) See generally Posner, Supra note 44, at 122-25; Bork, supra note 44, at 259-62; Brodley, supra note 91; 5 Areeda & Turner, supra note 27, at 99 1116-26; Hovenkamp, supra note 93, at 508-15. (116) 422 U.S. 86 (1975). (117) 431 U.S. 720 (1977). (118) Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968). (119) 431 U.S. at 765 (Blackmun, J., dissenting). (120) Id. at 736-37. (121) Id. at 766 (Blackmun, J., dissenting). (122) See generally Robert G. Harris & Lawrence A. Sullivan, Passing on the Monopoly Overcharge: A Comprehensive Policy Analysis, 128 U. Pa. L. Rev. 269 (1979); Elmer J. Schaefer, Passing-on Theory in Antitrust Treble Damage Actions: An Economic and Legal Analysis, 16 Wm. & Mary L. Rev. 883 (1975). (123) See generally William M. Landes & Richard A. Posner, Should Indirect Purchasers Have Standing to Sue Under the Antitrust Laws? An Economic Analysis of the Rule of Illinois Brick, 46 U. Chi. L. Rev. 602 (1979); Edward A. Snyder, Efficient Assignment of Rights to Sue for Treble Damages, 28 J. L. & Econ. 469 (1985); William H. Page, The Scope of Liability, for Antitrust Violations, 37 Stan. L. Rev. 1445, 1487 (1985); Robert Cooter, Passing on the Monopoly Overcharge: A Further Comment on Economic Theory, 129 U. Pa. L. Rev. 1523 (1981), William M. Landes & Richard A. Posner, The Economics of Passing On: A Reply to Harris and Sullivan, 128 U. Pa. L. Rev. 1274 (1980). (124) 433 U.S. 36 (1977). (125) 441 U.S. 1 (1979). (126) 457 U.S. 332 (1982). (127) 457 U.S. 465 (1982). (128) See Page, supra note 123, at 1499-1506. (129) 459 U.S. 519 (1983). (130) Compare Page, supra note 123, at 1506-11 (arguing that the union suffered no antitrust injury) with Frank H. Easterbrook, Detrebling Antitrust Damages, 28 J. L. & Econ. 445, 465 (1985) (arguing that the union may have suffered antitrust injury). (131) 466 U.S. 2 (1984). (132) Id. at 35 O'Connor, J., concurring). Justice O'Connor pointed out, "The `per se' doctrine in tying cases has . . . always required an elaborate inquiry into the effects of the tying arrangement." Id. at 34. Such an inquiry is at odds with the notion of a per se rule. (133) As Justice O'Connor explained, "[T]ying doctrine incurs the costs of a rule-of-reason approach without achieving its benefits: the doctrine calls for the extensive and time-consuming economic analysis characteristic of the rule of reason, but then may be interpreted to prohibit arrangements that economic analysis would show to be beneficial." Id. at 34. (134) See generally Keith K. Wollenberg, An Economic Analysis of Tie-In Sales: Reexamining the Leverage Theory, 39 Stan. L. Rev. 737 (1987); Bork, supra note 44, at 365-81; Tyler A. Baker, The Supreme Court and the Per Se Tying Rule: Cutting the Gordian Knot, 66 Va. L. Rev. 1235 (1980); Blair & Kaserman, supra note 50, at 166-68. But see Louis Kaplow, Extension of Monopoly Power Through Leverage, 85 Colum. L. Rev. 515 (1985). (135) 467 U.S. 752 (1984). (136) 468 U.S. 85 (1984). (137) 475 U.S. 574 (1986). (138) 479 U.S. 104 (1986). (139) 15 U.S.C. [sections] 26 (1988). (140) 485 U.S. 717 (1988). (141) See Wesley J. Liebeler, Resale Price Maintenance and Consumer Welfare: Business Electronics Corp. v. Sharp Electronics Corp., 36 UCLA L. Rev. 889 (1989). (142) 495 U.S. 328 (1990). (143) 497 U.S. 199 (1990). (144) It is an indication that a conservative scholar would support standing that Judge Posner, in an analogous case, found that the indirect purchaser could sue. See Illinois ex rel. Hartigan v. Panhandle Eastern Pipe Line Co., 852 F.2d 891 (7th Cir. 1988). (145) 112 S. Ct. 1842 (1992). (146) See, e.g., Severin Borenstein, Jeffrey MacKie-Mason & Janet S. Netz, The Economics of Customer Lock-In and Market Power in Services, in THE SERVICE AND PRODUCTIVITY CHALLENGE (P. Harker ed., 1994); Steven C. Salop, Exclusionary Vertical Restraints Law: Has Economics Mattered?, 83 AMER. ECON. REV. 168 (1993). (147) See generally Benjamin Klein, Market Power in Antitrust: Economic Analysis After Kodak, 3 SUP. CT. ECON. REV. 43 (1994); BORK, supra note 44, at 436-38 (1993); Michael S. Jacobs, Market Power Through imperfect Information: The Staggering Implications of Eastman Kodak Co. v. Image Technical Services and a Modest Proposal for Limiting Them, 52 MD. L. REV. 336 (1993). (148) 113 S. Ct. 2578 (1993). (149) See generally Alvin K. Klevorick, THE CURRENT STATE OF THE LAW AND ECONOMICS OF PREDATORY PRICING, 83 AMER. ECON. REV. 162 (1993). (150) Matsushita, 475 U.S. at 589. For a penetrating analysis of Brown & Williamson, see Donald J. Boudreaux, Kenneth G. Elzinga & David E. Mills, The Supreme Court's Predation Odyssey: From Fruit Pies to Cigarettes, 4 SUP. CT. ECON. REV. (forthcoming 1995). For examples of the conventional analysis of predatory pricing, see BORK, supra note 44, at 149-55; John S. McGee, Predatory Price Cutting: The Standard Oil (N.J.) Case, 1 J. L. & ECON. 137 (1958); John S. McGee, Predatory Pricing Revisited, 23 J. L. & ECON. 289 (1980); Frank H. Easterbrook, Predatory Strategies and Counterstrategies, 48 U. CHI. L. REV. 263 (1981); Kenneth G. Elzinga & David E. Mills, Testing for Predation: Is Recoupment Feasible?, 34 ANTITRUST BULL. 869 (1989). (151) Justice Breyer recognized the point in Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 234-36 (1st Cir. 1983). (152) This period is not quite coextensive with Justice Blackmun's tenure on the Court. Recently, Justice Ginsbur, who replaced Justice White, has sat on the Court with Justice Blackmun, and Justice Harlan, who was replaced by Justice Rehnquist, was a member of the Court when Justice Blackmun joined. No benchmark case was decided during either of the tails of Justice Blackmun's tenure. I have excluded United States v. Phillipsburg National Bank & Trust Co., 399 U.S. 350 (1970). The decision was released on June 29, 1970, shortly after Justice Blackmun joined the Court, and it would have qualified as a benchmark case because Justice Harlan and Chief Justice Burger in dissent adopted a considerably more conservative position on a basic issue of market definition in a bank merger case than the majority's approach. But Justice Blackmun took no part in the consideration or decision of the case, and so in reality the case preceded Justice Blackmun's effective tenure on the Court. Justice Harlan was also on the Court along with Justice Blackmun when it decided Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 (1971). But it was not a benchmark case because the decision was unanimous, with a concurrence written by Justice Harlan and joined by Justice Stewart that did not raise a fundamental issue of antitrust ideology. Therefore, the table does not contain references to Justices Ginsburg or Harlan. (153) See supra note 66 and accompanying text. (154) In an article written after Continental T.V. was decided by the Ninth Circuit but before it was considered by the Supreme Court, Justice Breyer did offer lukewarm support for the proposition that vertical territorial restraints are "almost unlawful per se." Breyer, Five Questions About Australian Anti-Trust Law, supra note 8, at 32. He wrote that these "restrictions on intra-brand competition . . . may be offset by the agreements' effect in promoting inter-brand competition," an effect "most likely to occur when a manufacturer is either a new firm, trying to break into a market, or a failing company, fighting to remain in business." Id. at 33. He concluded, "None the less, in many ordinary cases, the adverse effect on competition among dealers in a single brand will not be coupled with any offsetting justification, and in such cases the agreement ought to be prohibited." Id. Whether Breyer meant to justify the then-prevailing per se rule or to endorse a rule of reason is not altogether clear. At least he recognized the efficiency-enhancing potential of vertical restraints. More troublesome is his suggestion that vertical restraints increase efficiency only in unusual contexts. The suggestion may have been inadvertent, for his discussion was brief and off the main point of the article. In any event, his judicial opinions indicate to me that he now holds no such circumscribed view of the utility of vertical restraints. (155) See Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792 (1st Cir. 1988). (156) Notably, the Robinson-Patman Act is not considered, for the intricacies are incommensurate with the scope of this article. For reference, Justice Breyer decided several cases raisin, Robinson-Patman issues while on the First Circuit: Caribe BMW, Inc. v. Bayer Motoren Werke, AG, 19 F.3d 745 (1st Cir. 1994); Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 990 F.2d 25 (1st Cir. 1994); Allen Pen Co. v. Springfield Photo Mount Co., 653 F.2d 17 (1st Cir. 1981). (157) United States v. Sealy, Inc., 388 U.S. 350 (1967). (158) Justice Breyer once commented, "Isn't BMI a case where pricefixing was so clearly justifiable that the Supreme Court permitted it despite the per se rule?" Breyer, Luncheon Address, supra note 8, at 772. (159) Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990). (160) See Donald N. McCloskey, If You're So Smart: The Narrative of Economic Expertise 10-23 (1990). (161) National Society of Professional Engineers v. United States, 435 U.S. 679 (1978). (162) Id. at 693 (unrestricted bidding would lead to "inferior work with consequent risk to public safety and health"). (163) See generally John E. Lopatka, Antitrust and Professional Rules: A Framework for analysis, 28 San Diego L. Rev. 301, 365 (1991). (164) Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980). (165) See Thomas G. Krattenmaker, Per Se Violations in Antitrust Law: Confusing Offenses With Defenses, 77 Geo. L. J. 165 (1988). (166) FTC v. Indiana Federation of Dentists, 476 U.S. 447 (1986). The Court found that an agreement among dentists not to submit x-rays to insurance companies was illegal under the rule of reason, noting that application of the rule "to these facts is not a matter of reat difficulty." Id. at 459. The Court found no credible procompetitive justification for the restraint and that "the Commission's failure to engage in detailed market analysis" was not fatal to its conclusion that the agreement was unreasonable. Id. at 460. The Court noted that the Commission found actual "adverse effects on competition in those areas where IFD dentists predominated" and that "markets for dental services tend to be relatively localized." Id. at 461. (167) NCAA, 468U.S. at 110 n.42. (168) Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990) (per curiam) agreement to divide territory between providers of bar review courses unlawful on its face, citin, Topco). (169) FTC v. Superior Court Trial Lawyers Ass'n, 493 U.S. 411, 432-36 (1990) (agreement among lawyers not to represent indigent criminal defendants until the government increased their compensation illegal per se). (170) See Lopatka, supra note 163, at 360-81. See also James L. Langenfeld Louis Silvia, The Federal Trade Commission's Horizontal Restraint Cases: An Economic Perspective, 61 Antitrust L. J. 653, 679-84 (1993). The FTC's statement of a "structured" rule of reason is contained in Massachusetts Bd. of Registration in Optometry, 110 F.T.C. 549 (1988). (171) Indiana Federation of Dentists, 476 U.S. at 451. The Court also noted that the FTC was entitled to view the challenged restraint "in light of the reality that markets for dental services tend to be relatively localized." Id. at 461. (172) NCAA, 468 U. S. at 104, 107, 110. (173) United States v. General Electric Co., 272 U.S. 476 (1926). (174) Standard Oil Co. (Indiana) v. United States, 283 U.S. 163 (1931). (175) United States v. Masonite Corp., 316 U.S. 265 (1942). (176) United States v. Line Material Co., 333 U.S. 287 (1948). (177) Ethyl Gasoline Corp. v. United States, 309 U.S. 436 (1940). (178) United States v. United States Gypsum Co., 333 U.S. 364 (1948). (179) United States v. Citizens & Southern National Bank, 422 U.S. 86 (1975). 1811 United States v. U.S. Gypsum Co., 438 U.S. 422 (1978). (181) United States v. Container Corp., 393 U.S. 333 (1969). (182) U. S. Gypsum, 43 8 U.S. at 441 n. 16. (183) See Maricopa County, 457 U.S. at 342-48. (184) Innovation, for example, may take the form of a lower-cost method of producino, a iven product. A firm that invented such a process would profit from it despite the price cap. (185) Theatre Enterprises, Inc. v. Paramount Film Distributing Corp., 346 U.S. 537, 541 (1954). (186) 851 F.2d 478, 487-88 (1st Cir. 1988), cert. denied, 488 U.S. 1007 (1989). (187) Id. at 484. Justice Breyer also considered the claim that the defendants agreed to follow a basin, point pricing scheme, noting that such a common practice among defendants can facilitate cartel behavior and might be condemned even absent proof of an explicit agreement because a judicial remedy might be fashioned. It could not be held illegal in this case, though, because the plaintiff would not have suffered antitrust injury because of it. Id. at 484-85. (188) 749 F.2d 922, 925 (1st Cir. 1984). cert. denied, 471 U.S. 1029 (1985). (189) See Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911). (190) For example, compare the Court's analysis of the health insurance market in Maricopa County to Justice Breyer's more penetrating analysis of such a market in Kartell, 749 F.2d at 922. (191) Justice Breyer is fond of enumeration, and I predict that he will, within his first three opinions, use the phrase. "for one thin,." (192) Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984). (193) Albrecht v. Herald Co., 390 U.S. 145 (1968). (194) See generally Blair & Kaserman, supra note 50, at 171-80. In Jefferson Parish, 466 U.S. at 16-18, the Court mentioned the possibility of unreasonable exclusive dealing contracts, and the concurring justices amplified on the kind of harm that may flow from exclusive arrangements (id. at 45 (O'Connor, J., concurring)). But neither opinion offered much depth of analysis. (195) See generally Richard A. Posner, The Rule of Reason and the Economic Approach: Reflections on the Sylvania Decision, 45 U. Chi. L. Rev. 1 (1977). Some evidence that Justice Breyer has doubts about the procompetitive justifications of vertical restrictions is discussed in note 154, supra. (196) For a good summary of the literature and an empirical analysis of different theories, see Pauline M. Ippolito, Resale Price Maintenance: Empirical Evidence From Litigation, 34 J. L. & Econ. 263 (1991). See also Stanley I. Ornstein, Resale Price Maintenance and Cartels, 30 Antitrust Bull. 401 (1985). (197) Albrecht, 390 U.S. at 152-53. (198) See Caribe BMW, 19 F.3d at 753. At least one court has suggested already that vertical maximum price fixing is not illegal per se. See Jack Walters & Sons Corp. v. Morton Building, Inc., 737 F.2d 698, 706 (7th Cir.), cert. denied, 469 U.S. 1018 (1984). In Atlantic Richfield, the Court assumed arguendo that vertical maximum price fixing continues to be per se illegal. See Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 335 n.5 (1990). (199) Justice Breyer decided few cases in this area while on the First Circuit, and they were generally mundane. In his opinion for the court in Monahan's Marine, Inc. v. Boston Whaler, Inc., 866 F.2d 525 (1st Cir. 1989), he found that an agreement under which a boat builder sold boats to favored dealers at effective prices lower than those the builder charged the plaintiff rival dealer was not in restraint of trade, and even if the builder terminated the plaintiff's dealership because the plaintiff complained, the act was unilateral and not in furtherance of an activity unlawful under # 1. In Zell-Aire of New England, Inc. v. Zell-Aire Corp., 684 F.2d 174 (1st Cir. 1982), he was on the panel that issued a per curiam opinion affirming a district court's finding that a distributor had not proven that it was terminated for failure to comply with an illegal resale price maintenance agreement. In Auburn News Co. v. Providence Journal Co., 659 F.2d 273 (1st Cir. 1981), cert. denied, 455 U.S. 921 (1982), he was a member of the panel that reversed entry of a preliminary injunction that prohibited a newspaper, attempting to integrate into distribution, from refusing to deal with the complaining independent dealers. The dealers asserted that the newspaper had previously coerced them into charging maximum resale prices, and the court found that, assuming they could prove the charge, they had an adequate remedy at law. In a similar case, Justice Breyer was on a panel that found that plaintiff newsdealers had proffered no evidence of a vertical price-fixing agreement or that their replacement by the newspaper was in furtherance of such a conspiracy. White v. Hearst Corp., 669 F.2d 14 (1st Cir. 1982). (200) 816 F.2d 9 (1st Cir. 1987). (201) Id. at 11. (202) Id. In R.W. Int'l Corp. v. Welch Food, Inc., 13 F.3d 478 (1st Cir. 1994), a fruit juice manufacturer terminated its relationship with a distributor because the distributor was also distributing a competitor's juice. In effect, the plaintiff dealer was complaining about an exclusivity requirement imposed by its supplier. The First Circuit panel, which included Justice Breyer, rejected the claim, concluding that, because evidence demonstrated that the competing juice succeeded in the marketplace, the inference was that competition had not been injured. In Computer Identics Corp. v. Southern Pac. Co., 756 F.2d 200 (1st Cir. 1985), the Association of American Railroads (AAR) adopted an experimental rule that required all railroad cars to be equipped with retroreflective labels, which could be read by optical scanners for purposes of identification. The scanners used Sylvania technology, and plaintiff Identics was a supplier of the technology. A defendant, Southern Pacific, developed an alternative technology, TOPS, that allegedly competed with the optical scanner technology. The plaintiff claimed that Southern Pacific entered into a number of conspiracies to persuade AAR ultimately to drop the scanner technology, which it did, and that it induced certain customers not to adopt the scanner technology. The First Circuit panel, on which Justice Breyer sat, affirmed a judgment for the defendants entered on a jury verdict. (203) 724 F.2d 227 (1st Cir. 1983). (204) Id. at 229. (205) Id. (206) Id. (207) Id. at 236. (208) Id. at 237. (209) Id. (210) FTC v. Indiana Federation of Dentists. 476 U.S. 447, 458 (1986). (211) St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531 (1978). (212) Northwest Wholesale Stationers, Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284 (1985). (213) Id. at 294. (214) Id. at 295. (215) Fashion Originators' Guild v. FTC, 312 U.S. 457 (1941). (216) Id. at 468. One circuit court, writing before Northwest Wholesale, said that a "boycott is illegal per se under the antitrust laws only if used to enforce a rule or policy or practice that is itself illegal per se." Vogel v. American Society of Appraisers, 744 F.2d 598, 600 (7th Cir. 1984). (217) Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1988). (218) The doctrine, which protects from antitrust liability attempts to influence the government to take anticompetitive actions, takes its name from two cases: Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); UMW v. Pennington, 381 U.S. 657 (1967). The Indian Head majority consisted of Justice Brennan, Chief Justice Rehnquist, and Justices Marshall, Blackmun, Stevens, Scalia, and Kennedy. Justice O'Connor joined in Justice White's dissent. As part III of this article suggests, this is an unusual division. (219) For a recent article expounding an economic theory of boycotts, though through two cases that did not involve boycotts in a conventional sense, see Timothy J. Brennan, Refusing to Cooperate with Competitors: A Theory, of Boycotts, 35 J. L. & Econ. 247 (1992). (220) 851 F.2d at 478. (221) Id. at 488. (222) Jefferson Parish, 466 U.S. at 16-17. (223) Id. at 21-22 (separate products in this case required "a sufficient demand for the purchase of anesthesiological services separate from hospital services to identify a distinct product market in which it is efficient to offer anesthesiological services separately from hospital services"). (224) Id. at 39-40 (O'Connor, J., concurring). (225) Compare the following statements: "Our cases have concluded that the essential characteristic of an invalid tying arrangement lies in the seller's exploitation of its control over the tying product to force the buyer into the purchase of a tied product that the buyer . . . did not want at all. . . " Id. at 12. "[W]hen a purchaser is `forced' to buy a product he would not have otherwise bought even from another seller in the tied product market, there can be no adverse impact on competition because no portion of the market which would otherwise have been available to other sellers has been foreclosed." Id. at 16. (226) The concurring justices in Jefferson Parish suggested that affirmative defenses are cognizable, citing United States v. Jerrold Electronics Corp., 187 F. Supp. 545, 560 (E.D. Pa. 1960), aff'd per curiam, 365 U.S. 567 (1961). Jefferson Parish, 466 U.S. at 34 n.1 (O'Connor, J., concurring). And the Court hinted in IBM Corp. v. United States, 298 U.S. 131 (1936), that a goodwill defense would save a tie if it were the only feasible method of preserving goodwill, though holding that other methods were available in that case. Yet in Eastman Kodak Co. v. Image Technical Services, Inc., 112 S. Ct. 2072, 2093 (1992) (Scalia, J., dissenting), Justice Scalia in dissent, though acknowledging, Jerrold Electronics, stated, "[W]here the tying arrangement is backed up by the defendant's market power in the `tying,' product, the arrangement is adjudged in violation of [sections] I of the Sherman Act . . . without any inquiry into the practice's actual effect on competition and consumer welfare." (Emphasis in original.) This implies that no efficiency justification is cognizable. (227) For example, in Fortner I, 394 U.S. at 500, the Court said that a plaintiff who cannot satisfy the per se standards "can still prevail on the merits whenever he can prove, on the basis of a more thorough examination of the purposes and effects of the practices involved, that the general standards of the Sherman Act have been violated." See also Fortner H, 429 U.S. at 612 n.l. In Image Technical Services, 112 S. Ct. at 2094 (Scalia, J., dissenting), Justice Scalia suggested that the plaintiff may claim that a tie is both illegal per se and unreasonable. If the challenged tie fails the test of per se illegality, it is difficult to imagine how the tie could nevertheless be found to have had on balance a negative effect on competition. (228) Eastman Kodak Co. v. Image Technical Services, Inc., 112 S. Ct. 2072 (1992). (229) 858 F.2d 792 (1st Cir. 1988). Justice Breyer also participated in the decision of several uninteresting tying cases. In Kenworth of Boston, Inc. v. Paccar Financial Corp., 735 F.2d 622 (1st Cir. 1984), a truck manufacturer ceased offering financing to one of its distributors and allegedly made it more difficult for the distributor to obtain financing from independent firms. Justice Breyer, writing for the court, was unable to find a coherent theory as to how the conduct constituted a tie. He commented, "We need not treat the concept of a `tie' like a procrustean bed onto which this practice must be squeezed or stretched--particularly when doing so could lead to finding `per se' unlawful a practice that may well be justified as reasonable." Id. at 624. In Cordova & Simonpietri Ins. Agency, Inc. v. Chase Manhattan Bank, 649 F.2d 36 (1st Cir. 1981), an insurance broker obtained insurance contracts for two car dealers, who had obtained financing from a bank. The broker claimed that insurer later canceled the policies, then agreed with the bank to reinstate them without using the broker's services. Justice Breyer, writing for the court, thought that the complaint conceivably alleged an unlawful tie--the bank would supply financing only if the dealers bought insurance from the designated insurer--but that any injury would have had an insubstantial effect on commerce. Finally, in Systemized of New Encland, Inc. v. SCM, Inc., 732 F.2d 1030 (1st Cir. 1984), the plaintiff dealer purchased a branch office of the defendant manufacturer, expecting to receive the right to service at lucrative commission rates, machines leased to customers by the manufacturer. The manufacturer allegedly required the dealer to buy numerous defective machines as a condition of obtaining the branch. The dealer claimed that the manufacturer had tied the service accounts (tying product) to the purchase of defective machines (the tied product). The court, with Justice Breyer on the panel, rejected the claim, stating that the plaintiff had no contractual or purchase rights in the accounts and had failed to prove market power in them. (230) Grappone, 858 F.2d at 794. (231) Id. at 795. (232) Id. (233) Id. at 795-96. Where an electric utility was accused of attempting to use a monopoly in power generation and transmission to obtain and preserve a monopoly in distribution through a price squeeze, a claim analytically similar to a tying arrangement, Justice Breyer offered an analogous potential anticompetitive explanation: The extension of monopoly power may raise entry barriers and thereby fortify the firm's monopoly in the first market. Town of Concord v. Boston Edison Co., 915 F.2d 17, 23 (1st Cir. 1990), cert. denied, 499 U.S. 931 (1991). He also stated that preservation of competitors in the second market may stimulate nonprice competition by creating an incentive to develop better products and production methods. Id. at 24. (234) Grappone, 858 F.2d at 796. (235) Id. at 798. (236) Id. at 799. (237) Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985). (238) See Frank H. Easterbrook, On Identifying Exclusionary, Conduct, 61 Notre Dame L. Rev. 972, 978 (1986). (239) See Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising Rivals' Costs to Achieve Power Over Price, 96 Yale L. J. 209 (1986). (240) See Easterbrook, supra note 238, at 975. (241) Apparently the Colorado Attorney General believed that ticket prices could be set unilaterally despite collaboration on the joint pass. See Aspen Skiing, 472 U.S. at 591 n.9. (242) See id. at 596. (243) See Klein, supra note 147, at 72. (244) Image Technical Services, 112 S. Ct. at 2091. (245) Otter Tail Power Co. v. United States, 410 U.S. 366 (1973). (246) See Andrew N. Kleit & Robert J. Michaels, Antitrust, Rent-Seeking, and Regulation: The Past and Future of Otter Tail, 39 Antitrust Bull. 689 (1994). (247) See, e.g., Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 113 S. Ct. 2578, 2587 n.1 (1993); Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 341 n. 10 (1990); Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 117-18 n.12 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 585 n.8 (1986). (248) See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 113 S. Ct. 2578 (1993); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); A.A. Poultry Farms v. Rose Acre Farms, 881 F.2d 1396, 1400-01 (7th Cir. 1989). (249) See Brown & Williamson, 113 S. Ct. at 2590. (250) Utah Pie Co. v. Continental Baking Co., 386 U.S. 685 (1967). (251) Brown & Williamson, 113 S. Ct. at 2587. (252) Spectrum Sports, Inc. v. McQuillan, 113 S. Ct. 884 (1993). (253) See Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, supra note 8, at 1007. (254) Grappone, 858 F.2d at 798. (255) Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 230 (1st Cir. 1983). (256) Breyer, The Problem of the Honest Monopolist, supra note 8, at 194, 200. (257) Id. at 198-99. (258) In writing the opinion for the court in Kartell, Justice Breyer assumed arguendo that Blue Shield had monopsony power in the purchase of medical services on behalf of subscribers. The insurer's practice of refusing to pay doctors directly unless they agreed not to make additional charges to the subscriber then amounted to exploitation of its power, and ordinarily "even a monopolist is free to exploit whatever market power it may possess when that exploitation takes the form of charging uncompetitive prices." 749 F.2d at 927. (259) For example, in United States v. Grinnell Corp., 384 U.S. 563, 570, 576 (1966), the Court suggested that price discrimination, in the form of charging low prices in cities where the firm faced competition and high prices elsewhere, was exclusionary conduct. It thus confused a result of monopoly power with a source. (260) Breyer, The Problem of the Honest Monopolist, supra note 8, at 194. Justice Breyer concluded, "Given the thousands of different industries in the economy. one cannot explain dominance entirely on the basis of superior product, superior management, or even predatory practices." Id. at 196. (261) Id. at 200. (262) Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, supra note 8, at 1033-34. (263) Breyer, Luncheon Address, supra note 8, at 774-75. Justice Breyer has held that, at a minimum, the denial of an essential facility cannot be actionable unless the firm deprived of the facility is an actual or potential competitor of the monopolist. Interface Group, 816 F.2d at 12 (an airport's refusal to allow an airline to use the ground services of its choice did not establish a [section] 2 claim). (264) See Town of Concord, 915 F.2d at 23. (265) Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, supra note 8, at 1035-38; Breyer, Luncheon Address, supra note 8, at 775. Though he fears the anticompetitive use of these reservation systems, and seems willing to conclude that the airlines who created them have reaped sufficient economic rewards, he is uncertain about the appropriate legal response--divestiture, forced admission of other airlines to ownership. or enforcement of "anti-bias" rules. Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, supra note 8, at 1038. By contrast, Justice Breyer considers the argument that telephone operating companies should be prohibited from expanding into related markets on the round that they will use their essential facilities anticompetitively and rejects it, concluding that such a policy would inhibit efficiency-enhancing activities. Id. at 1038-43. He also rejects the argument that AT&T, having been shorn of it natural monopolies, should nevertheless be handicapped, arguing instead that efficiency is likely to increase if the company is allowed to compete vigorously against its new rivals. Id. at 1022-27. (266) Town of Concord v. Boston Edison Co., 915 F.2d 17 (1st Cir. 1990), cert. denied, 499 U.S. 931 (1991). (267) Id. at 19-20. (268) Id. at 22, 28. (269) Id. at 24. (270) Id. at 29-32. (271) See John E. Lopatka, The Electric Utility Price Squeeze as an Antitrust Cause of Action, 31 UCLA L. Rev. 563 (1984). (272) Town of Concord, 915 F.2d at 28-29. (273) Id. at 26-27. (274) Breyer, Regulation and its Reform, supra note 7, at 159-61. (275) 724 F.2d at 236. See also Clamp-All, 851 F.2d at 483. (276) Barry Wright, 724 F.2d at 232. (277) Id. at 2 3 3. (278) Id. at 235. (279) Id. at 233-35. (280) Justice Breyer was a member of a First Circuit panel that reversed in part the dismissal of predation claims, including a predatory pricing claim, in Tri-State Rubbish, Inc. v. Waste Management, Inc., 998 F.2d 1073 (1st Cir. 1993). The case involved complicated relationships between the successor of a waste collection firm, various municipalities, a consortium of the cities, and commercial refuse customers. A competing waste collection firm sued its rival. The court held that the conduct of the defendant vis-a-vis its own customers was not protected by state action immunity and that the complaint was not so obviously devoid of merit as to warrant dismissal. Id. at 1079-80. (281) 374 U.S. 321 (1963). (282) See, e.g., United States v. Von's Grocery Co., 384 U.S. 270 (1966) (given a trend toward concentration, virtually any horizontal merger is illegal); United States v. Pabst Brewin, Co., 384 U.S. 546 (1966) (same). (283) 402 U.S. 549 (1971). (284) United States v. General Dynamics Corp., 415 U.S. 486 (1974). See supra note 111 and accompanying text. (285) United States v. Falstaff Brewing Corp., 410 U.S. 526 (1973) (though national brewer may not have entered the New England market de novo, its acquisition of a regional brewer may nevertheless have injured competition in that market by eliminating a perceived potential competitor who exerted an immediate effect on prices). (286) United States v. Marine Bancorporation, Inc., 418 U.S. 602 (1974) merger of a large, nationally chartered commercial bank in Seattle and a medium-size, state-chartered commercial bank in Spokane not illegal in light of state bankino, laws). (287) United States v. Connecticut National Bank, 418 U.S. 656 (1974) (district court erred by including commercial and savings banks in the same product market, thereby reducing the apparent combined market share of two mergin, commercial banks, and erred in defining the state as the relevant geographic market, where the two banks did not compete on that basis). (288) See supra notes 91, 115. (289) Ford Motor Co. v. United States, 405 U.S. 562 (1972). (290) See, e.g., Sanusz A. Ordover, Garth Saloner & Steven C. Salop, Equilibrium Vertical Foreclosure, 80 Amer. Econ. Rev. 127 (1990); Michael A. Salinger, Vertical Mergers and Market Foreclosure, 103 Q. J. of Econ. 345 (1988); Parthsaradhi Mallela & Babu Nahata, Theory of Vertical Control With Variable Proportions, 88 J. Pol. Econ. 1009 (1980). (291) See White v. Hearst Corp., 669 F.2d 14 (1st Cir. 1982); Auburn News Co. v. Providence Journal Co., 659 F.2d 273 (1st Cir. 1981), cert. denied, 455 U.S. 921 (1982). (292) Breyer, Antitrust, Deregulation, and the Newly Liberated Marketplace, supra note 8, at 1015 (emphasis in orignal). (293) Id. at 1017. (294) Reiter v. Sonotone Corp., 442 U.S. 330 (1979). (295) Hawaii v. Standard Oil Co. of California, 405 U.S. 251 (1972). The decision was effectively overturned by the Hart-Scott-Rodino Act, codified in relevant portion at 15 U.S.C. [subsections] 15c, 15d, 15e (1988). (296) Pfizer, Inc. v. Government of India, 434 U.S. 308 (1978). (297) Illinois Brick, 431 U.S. at 720. (298) Utilicorp, 497 U.S. at 199. (299) Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977). (300) Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104 (1986). (301) California v. American Stores Co., 495 U.S. 271 (1990). (302) Blue Shield of Virainia v. McCready, 457 U.S. 465 (1982). (303) Associated General Contractors v. California State Council of Carpenters, 459 U.S. 519 (1983). (304) Atlantic Richfield Co. v. USA Petroleum, 495 U.S. 271 (1990). (305) See generally Page, supra note 123. (306) See William M. Landes, Optimal Sanctions for Antitrust Violations, 50 U. Chi. L. Rev. 652 (1983). (307) Ironically, competitors may be best situated to detect horizontal price fixing, but they stand to benefit from the conduct. See Pablo Spiller, Comments on Easterbrook and Snyder, 28 J. L. & Econ. 489 (1985). (308) See Edward A. Snyder & Thomas E. Kauper, Misuse of the Antitrust Laws: The Competitor Plaintiff, 90 Mich. L. Rev. 551 (1991). (309) See William H. Page & Roger D. Blair, Controlling the Competitor Plaintiff in Antitrust Litigation, 91 Mich. L. Rev. 111 (1992). (310) See, e.g., R.C. Bigelow, Inc. v. Unilever N.V., 867 F.2d 102 (2d Cir. 1989) (reversing the entry of summary judgment for the defendant on a motion to enjoin a mer,er of the plaintiff's competitors). (311) Caribe BMW, 19 F.3d at 752-54. For a view less sympathetic to Justice Breyer's conclusion, see Rocer Blair's article in this issue. (312) Clamp-All, 851 F.2d at 484. (313) Kartell, 749 F.2d at 932. (314) Id. (315) Id. at 933. (316) Id. (317) See Page, supra note 123, at 1492-93. (318) Kenworth, 735 F.2d at 624. (319) See National Broiler Marketing Ass'n v. United States, 436 U.S. 816 (1978). (320) See National Gerimedical Hospital and Gerontology Center v. Blue Cross of Kansas City, 452 U.S. 378 (1981). (321) See Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409 (1986). (322) See FMC v. Seatrain Lines, Inc., 411 U.S. 726 (1973). (323) See Hartford Fire Ins. Co. v. California, 113 S. Ct. 2891 (1993); Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982); Group Life Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979); St. Paul Fire Marine Ins. Co. v. Barry. 438 U.S. 531 (1978). (324) See H. A. Artists & Associates, Inc. v. Actors' Equity Ass'n, 451 U.S. 704 (1981); Connell Construction Co. v. Plumbers and Steamfitters Local Union No. 100, 421 U.S. 616 (1975); Ramsey v. UMW, 401 U.S. 302 (1971). (325) See Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 113 S. Ct. 1920 (1993); City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365 (1991); FTC v. Superior Court Trial Lawyers Ass'n, 493 U.S. 411 (1990); Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1988); California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972). (326) See, e.g., FMC v. Seatrain Lines, Inc., 411 U.S. 726 (1973), citing United States v. McKesson & Robbins, Inc., 351 U.S. 305 (1956). (327) United States v. Philadelphia National Bank, 374 U.S. 321 (1963). (328) The doctrine is generally regarded to have originated in Parker v. Brown, 317 U.S. 341 (1943). (329) Hoover v. Ronwin, 466 U.S. 558 (1984). (330) California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980). (331) 471 U.S. 48 (1985). (332) Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985). (333) 499 U.S. 365 (1991). (334) Town of Hallie, 471 U.S. at 42; Omni, 111 S. Ct. at 1350. (335) 112 S. Ct. 2169, 2177 (1992). For a discussion of the case, see William H. Page & John E. Lopatka, State Regulation in the Shadow o Antitrust: FTC v. Ticor Title Insurance Co., 3 Sup. CT. Econ. Rev. 189 (1994). (336) See generally Page & Lopatka, supra note 335, at 203-07 (arguing that "legislation must articulate a choice with sufficient clarity to make the legislature politically accountable for it"). (337) Cantor v. Detroit Edison Co., 428 U.S. 579, 592 (1976). (338) 956 F.2d 12 (1st Cir. 1992). (339) Interface Group, 816 F.2d at 12-14. (340) Tri-State Rubbish, Inc. v. Waste Management, Inc., 998 F.2d 1073 (1st Cir. 1993). (341) Id. at 1077. (342) Id. at 1078-79. (343) 773 F.2d 391 (1st Cir. 1985). (344) Id. at 396. (345) Id. at 396-97. In FTC v. Monahan, 832 F.2d 688 (1st Cir. 1987), the FTC issued subpoenas to investigate rules of the Massachusetts Board of Pharmacy, and the Board resisted on the round that the investigation could not lead to antitrust complaint in light of the Board's state action immunity. Justice Breyer ordered the subpoenas enforced, finding that it was too early to tell whether the Board satisfied the clear state policy requirement or whether any of its activities were essentially those of private parties., and if so, whether they were actively supervised. (346) In Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473 (1961), the Court stated that "summary procedures should be used sparingly in complex antitrust litigation." A more liberal approach suggested 7 years later in First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 289-90 (1968), that an antitrust plaintiff is not necessarily entitled to a full-dress trial when there is no "significant probative evidence tending to support the complaint," went largely ignored. By 1969, Kenneth Dam observed that "Fortner I may stand primarily for the proposition that it is per se erroneous to grant summary judgment against a plaintiff in any treble-damage action." Dam, supra note 89, at 10. (347) Matsushita, 475 U.S. at 586. (348) Id. at 587. (349) See Image Technical Services, 112 S. Ct. at 2087-88. (350) Brown & Williamson, 113 S. Ct. at 2598. (351) The standards for summary judgment and for judgment as a matter of law, or directed verdicts and judgment notwithstanding the verdict, are functionally identical. See Matsushita, 475 U.S. at 588. (352) Fisichelli, 956 F.2d at 13; Monahan's Marine, 866 F.2d at 526; Clamp-All, 851 F.2d at 481; Interface Group, 816 F.2d at 10, 14; Allen Pen, 653 F.2d at 19; Cordova & Simonpietri, 649 F.2d at 38; R.W. International, 13 F.3d at 479-80; Tri-State Rubbish, 998 F.2d at 1076, 1083 affirmed in part and reversed in part); Texaco Puerto Rico, 834 F.2d at 243-44; Systemized, 732 F.2d at 1031, 1037; White, 669 F.2d at 16, 20. (353) Barry Wright, 724 F.2d at 230; Zell-Aire, 684 F.2d at 175. (354) Town of Concord, 915 F.2d at 19 (jury verdict); Grappone, 858 F.2d at 793 (bench trial); Kartell, 749 F.2d at 923 (bench trial). In Kenworth, 735 F.2d at 623, Justice Breyer reversed the entry of a preliminary injunction, in part because the plaintiff "showed little, if any, likelihood of success" on the merits. (355) McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232 (1980). (356) United States v. South-Eastern Underwriters Ass'n, 332 U.S. 533 (1944). (357) Summit Health, Ltd. v. Pinhas, 500 U.S. 322 (1991). (358) See generally Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774 (7th Cir. 1994). (359) Cordova & Simonpietri Ins. Acency, Inc. v. Chase Manhattan Bank, 649 F. 2d 3 6, 45 (1st Cir. 1981). (360) Id.
JOHN E. LOPATKA, Alumni Professor of Law, University of South Carolina, School of Law. AUTHOR'S NOTE: I thank Donald Dewey and William Curran III, for useful comments on a prior draft and William G. Flowers for his able research assistance.
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|Title Annotation:||Symposium: Justice Stephen Breyer, the Supreme Court and Antitrust|
|Author:||Lopatka, John E.|
|Date:||Mar 22, 1995|
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