Albrecht overruled - At last

Antitrust Law Journal

Volumn 66, Issue 3, 1998, Pages 537-566

  Blair, Roger D ^a   Lopatka, John E ^b  

^a UNIVERSITY OF FLORIDA   (United States)

^b UNIVERSITY OF SOUTH CAROLINA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0032341203     PISSN: 00036056     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (150)

1. 390 U.S. 145 (1968).
2. 118 S. Ct. 275 (1997).
3. We use the terms "monopoly power" and "market power" interchangeably in this article. Similarly, we use the term monopolist to denote an entity having market power. See Thomas G. Krattenmaker et al., Monopoly Power and Market Power in Antitrust Law, 76 GEO. L.J. 241 (1987).
4. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977).
5. Adantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990).
6. Khan, 118 S. Ct. at 278. Khan himself signed the dealership contract with State Oil, and his corporation, Khan & Associates, Inc., operated the station. See Khan v. State Oil Co., 93 F.3d 1358, 1360 (7th Cir. 1996), rev'd, 118 S. Ct. 275 (1997). Both Khan and his corporation sued State Oil, but we refer to them collectively as "Khan."
7. Khan, 118 S. Ct. at 278.
8. Khan's contract claim was based on State Oil's occasional refusal to lower its suggested retail price on regular grade gasoline and, accordingly, its wholesale price, so that Khan could lower the retail price and maintain his profit margin. State Oil conceded that it had a contractual obligation to suggest competitively realistic retail prices, and Khan argued that State Oil breached its obligation by refusing to lower the suggested retail price when his competitors were charging lower prices. The district court found insufficient evidence in support of the claim and dismissed it; the appellate court affirmed, and the issue did not reach the Supreme Court. See Khan, 93 F.3d at 1366.
9. Id. at 1360-61.
10. Id. at 1363.
11. Id.
12. 429 U.S. 477 (1977).
13. Khan, 93 F.3d at 1363.
14. Id.
15. Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990).
16. Khan, 93 F.3d at 1364.
17. See Khan, 118 S. Ct. at 284 ("The Court of Appeals was correct in applying [the] principle [of stare decisis] despite disagreement with Albrecht, for it is this Court's prerogative alone to overrule one of its precedents.").
18. See id. at 280. The majority's reasoning in Albrecht was vigorously disputed at the time in dissents by Justices Harlan (390 U.S. at 156) and Stewart (id. at 168).
19. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977).
20. United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967).
21. Khan, 118 S. Ct. at 281. The Court cited Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1982); 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987); and ARCO.
22. Khan, 118 S. Ct. at 282 (citing Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 726 (1988)).
23. Id. at 281 (quoting ARCO, 495 U.S. at 340).
24. Id. at 282 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 594 (1986)).
25. Id.
26. Id.
27. Id.
28. Id.
29. Id. at 283.
30. Id.
31. See id. at 282 (recounting the explanation of the appellate court), 283.
32. Id. at 284.
33. Id. at 284-85.
34. Id. at 285.
35. Id. at 283.
36. For a sampling of critical commentary, see HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY 422 (1994); 3 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW ¶ 734e (1978); Roger D. Blair & David L. Kaserman, The Albrecht Rule and Consumer Welfare; An Economic Analysis, 33 U. FLA. L. REV. 461 (1981); Frank Easterbrook, Maximum Price Fixing, 48 U. CHI. L. REV. 886 (1981); Roger D. Blair & James M. Fesmire, Maximum Price Fixing and the Goals of Antitrust, 37 SYRACUSE L. REV. 43 (1986); John E. Lopatka, Stephen Breyer and Modern Antitrust Law: A Snug Fit, 40 ANTITRUST BULL. 1 (1995); F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 558 (3d ed. 1990); STEPHEN F. ROSS, PRINCIPLES OF ANTITRUST LAW 255 (1993).
37. For a sampling of critical commentary, see HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY 422 (1994); 3 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW ¶ 734e (1978); Roger D. Blair & David L. Kaserman, The Albrecht Rule and Consumer Welfare; An Economic Analysis, 33 U. FLA. L. REV. 461 (1981); Frank Easterbrook, Maximum Price Fixing, 48 U. CHI. L. REV. 886 (1981); Roger D. Blair & James M. Fesmire, Maximum Price Fixing and the Goals of Antitrust, 37 SYRACUSE L. REV. 43 (1986); John E. Lopatka, Stephen Breyer and Modern Antitrust Law: A Snug Fit, 40 ANTITRUST BULL. 1 (1995); F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 558 (3d ed. 1990); STEPHEN F. ROSS, PRINCIPLES OF ANTITRUST LAW 255 (1993).
38. For a sampling of critical commentary, see HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY 422 (1994); 3 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW ¶ 734e (1978); Roger D. Blair & David L. Kaserman, The Albrecht Rule and Consumer Welfare; An Economic Analysis, 33 U. FLA. L. REV. 461 (1981); Frank Easterbrook, Maximum Price Fixing, 48 U. CHI. L. REV. 886 (1981); Roger D. Blair & James M. Fesmire, Maximum Price Fixing and the Goals of Antitrust, 37 SYRACUSE L. REV. 43 (1986); John E. Lopatka, Stephen Breyer and Modern Antitrust Law: A Snug Fit, 40 ANTITRUST BULL. 1 (1995); F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 558 (3d ed. 1990); STEPHEN F. ROSS, PRINCIPLES OF ANTITRUST LAW 255 (1993).
39. For a sampling of critical commentary, see HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY 422 (1994); 3 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW ¶ 734e (1978); Roger D. Blair & David L. Kaserman, The Albrecht Rule and Consumer Welfare; An Economic Analysis, 33 U. FLA. L. REV. 461 (1981); Frank Easterbrook, Maximum Price Fixing, 48 U. CHI. L. REV. 886 (1981); Roger D. Blair & James M. Fesmire, Maximum Price Fixing and the Goals of Antitrust, 37 SYRACUSE L. REV. 43 (1986); John E. Lopatka, Stephen Breyer and Modern Antitrust Law: A Snug Fit, 40 ANTITRUST BULL. 1 (1995); F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 558 (3d ed. 1990); STEPHEN F. ROSS, PRINCIPLES OF ANTITRUST LAW 255 (1993).
40. For a sampling of critical commentary, see HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY 422 (1994); 3 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW ¶ 734e (1978); Roger D. Blair & David L. Kaserman, The Albrecht Rule and Consumer Welfare; An Economic Analysis, 33 U. FLA. L. REV. 461 (1981); Frank Easterbrook, Maximum Price Fixing, 48 U. CHI. L. REV. 886 (1981); Roger D. Blair & James M. Fesmire, Maximum Price Fixing and the Goals of Antitrust, 37 SYRACUSE L. REV. 43 (1986); John E. Lopatka, Stephen Breyer and Modern Antitrust Law: A Snug Fit, 40 ANTITRUST BULL. 1 (1995); F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 558 (3d ed. 1990); STEPHEN F. ROSS, PRINCIPLES OF ANTITRUST LAW 255 (1993).
41. For a sampling of critical commentary, see HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY 422 (1994); 3 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW ¶ 734e (1978); Roger D. Blair & David L. Kaserman, The Albrecht Rule and Consumer Welfare; An Economic Analysis, 33 U. FLA. L. REV. 461 (1981); Frank Easterbrook, Maximum Price Fixing, 48 U. CHI. L. REV. 886 (1981); Roger D. Blair & James M. Fesmire, Maximum Price Fixing and the Goals of Antitrust, 37 SYRACUSE L. REV. 43 (1986); John E. Lopatka, Stephen Breyer and Modern Antitrust Law: A Snug Fit, 40 ANTITRUST BULL. 1 (1995); F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 558 (3d ed. 1990); STEPHEN F. ROSS, PRINCIPLES OF ANTITRUST LAW 255 (1993).
42. For a sampling of critical commentary, see HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY 422 (1994); 3 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW ¶ 734e (1978); Roger D. Blair & David L. Kaserman, The Albrecht Rule and Consumer Welfare; An Economic Analysis, 33 U. FLA. L. REV. 461 (1981); Frank Easterbrook, Maximum Price Fixing, 48 U. CHI. L. REV. 886 (1981); Roger D. Blair & James M. Fesmire, Maximum Price Fixing and the Goals of Antitrust, 37 SYRACUSE L. REV. 43 (1986); John E. Lopatka, Stephen Breyer and Modern Antitrust Law: A Snug Fit, 40 ANTITRUST BULL. 1 (1995); F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 558 (3d ed. 1990); STEPHEN F. ROSS, PRINCIPLES OF ANTITRUST LAW 255 (1993).
43. HOVENKAMP, supra note 36.
44. See Albrecht, 390 U.S. 145.
45. See Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990); Khan.
46. See Jack Walters & Sons Corp. v. Morton Bldg., Inc., 737 F.2d 698 (7th Cir. 1984) (Posner, J.).
47. See Slowiak v. Land O'Lakes, Inc., 987 F.2d 1293 (7th Cir. 1993).
48. See Acquaire v. Canada Dry Bottling Co., 24 F.3d 401 (2d Cir. 1994).
49. See Caribe BMW, Inc. v. Bayerische Motoren Werke Aktiengesellschaft, 19 F.3d 745 (1st Cir. 1994) (Breyer, C.J.).
50. Joseph J. Spengler, Vertical Integration and Antitrust Policy, 58 J. POL. ECON. 347 (1950); see also Fritz Machlup & Martha Taber, Bilateral Monopoly, Successive Monopoly, and Vertical Integration, 27 ECONOMICA 101 (1960).
51. Joseph J. Spengler, Vertical Integration and Antitrust Policy, 58 J. POL. ECON. 347 (1950); see also Fritz Machlup & Martha Taber, Bilateral Monopoly, Successive Monopoly, and Vertical Integration, 27 ECONOMICA 101 (1960).
52. The analysis assumes that demand is sufficient to support a competitive industry, so that no stage is a natural monopoly due to economies of scale relative to the demand for the product. See Spengler, supra note 44, at 347, 351.
53. This result indicates that successive monopoly is inefficient, which provides added incentive for vertical integration. That is, the fact that total profits will be larger with a single, integrated monopolist while prices to consumers will be lower indicates that the unintegrated, successive monopoly structure imposes additional deadweight welfare losses.
54. For an expansive treatment, see ROGER D. BLAIR & DAVID L. KASERMAN, LAW AND ECONOMICS OF VERTICAL INTEGRATION AND CONTROL (1983); see also FREDERICK R. WARREN-BOULTON, VERTICAL CONTROL OF MARKETS: BUSINESS AND LABOR PRACTICES (1978).
55. For an expansive treatment, see ROGER D. BLAIR & DAVID L. KASERMAN, LAW AND ECONOMICS OF VERTICAL INTEGRATION AND CONTROL (1983); see also FREDERICK R. WARREN-BOULTON, VERTICAL CONTROL OF MARKETS: BUSINESS AND LABOR PRACTICES (1978).
56. This analysis is presented more formally and more completely in Roger D. Blair & Amanda K. Esquibel, Maximum Resale Price Restraints in Franchising, 65 ANTITRUST L.J. 157 (1996).
57. See supra notes 27-30 and accompanying text.
58. See Khan, 118 S. Ct. at 282-83.
59. See Khan, 93 F.3d at 1361; Albrecht, 390 U.S. at 164-65 (Harlan, J., dissenting). Both jurists offered this theory to explain Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211 (1951), where the Court held illegal per se an agreement between what it viewed as competing distillers to impose resale price ceilings on their wholesalers.
60. For an extensive economic and legal analysis of monopsony, see ROGER D. BLAIR & JEFFREY L. HARRISON, MONOPSONY: ANTITRUST LAW AND ECONOMICS (1993).
61. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (holding that an equipment manufacturer with no market power in die sale of equipment is nevertheless not entitled to summary judgment on an antitrust claim against it alleging that it denied unique repair parts to independent service providers, thereby inducing machine owners to procure repair service from it).
62. For recent statements of his views, see RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 271-75 (5th ed. 1998).
63. RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 99 (1st ed. 1972).
64. The earliest observation that an "invisible hand" leads individuals pursuing their own self-interest to promote die interests of society generally is contained in ADAM SMITH, THE WEALTH OF NATIONS 477-78 (1776). Of course, in a complex economy, Smith's invisible hand may not operate satisfactorily. See F.M. Bator, The Anatomy of Market Failure, 72 Q.J. ECON. 351 (1958).
65. The earliest observation that an "invisible hand" leads individuals pursuing their own self-interest to promote die interests of society generally is contained in ADAM SMITH, THE WEALTH OF NATIONS 477-78 (1776). Of course, in a complex economy, Smith's invisible hand may not operate satisfactorily. See F.M. Bator, The Anatomy of Market Failure, 72 Q.J. ECON. 351 (1958).
66. Paul Rubin, Why Is the Common Law Efficient?, 6 J. LEGAL STUD. 51 (1977).
67. Rubin's article spawned an interesting literature extending his insight. See, e.g., George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) [hereinafter Priest, Common Law Process]; John Goodman, An Economic Theory of the Evolution of the Common Law, 7 J. LEGAL STUD. 393 (1978); George L. Priest, Selective Characteristics of Litigation, 9 J. LEGAL STUD. 399 (1980); Lawrence Blume & Daniel L. Rubinfeld, The Dynamics of the Legal Process, 11 J. LEGAL STUD. 405 (1982); George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1 (1984); Ronald A. Heiner, Imperfect Decisions and the Law: On the Evolution of Legal Precedent and Rules, 15 J. LEGAL STUD. 227 (1986); Martin J. Bailey & Paul H. Rubin, A Positive Theory of Legal Change, 14 INT'L REV. L. & ECON. 467 (1994); Mark J. Roe, Chaos and Evolution in Law and Economics, 109 HARV. L. REV. 641 (1996); Nicholas L. Georgakopoulos, Predictability and Legal Evolution, 17 INT'L REV. L. & ECON. 475 (1997). For a summary of several objections to this theory, see POSNER, supra note 54, at 614.
68. Rubin's article spawned an interesting literature extending his insight. See, e.g., George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) [hereinafter Priest, Common Law Process]; John Goodman, An Economic Theory of the Evolution of the Common Law, 7 J. LEGAL STUD. 393 (1978); George L. Priest, Selective Characteristics of Litigation, 9 J. LEGAL STUD. 399 (1980); Lawrence Blume & Daniel L. Rubinfeld, The Dynamics of the Legal Process, 11 J. LEGAL STUD. 405 (1982); George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1 (1984); Ronald A. Heiner, Imperfect Decisions and the Law: On the Evolution of Legal Precedent and Rules, 15 J. LEGAL STUD. 227 (1986); Martin J. Bailey & Paul H. Rubin, A Positive Theory of Legal Change, 14 INT'L REV. L. & ECON. 467 (1994); Mark J. Roe, Chaos and Evolution in Law and Economics, 109 HARV. L. REV. 641 (1996); Nicholas L. Georgakopoulos, Predictability and Legal Evolution, 17 INT'L REV. L. & ECON. 475 (1997). For a summary of several objections to this theory, see POSNER, supra note 54, at 614.
69. Rubin's article spawned an interesting literature extending his insight. See, e.g., George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) [hereinafter Priest, Common Law Process]; John Goodman, An Economic Theory of the Evolution of the Common Law, 7 J. LEGAL STUD. 393 (1978); George L. Priest, Selective Characteristics of Litigation, 9 J. LEGAL STUD. 399 (1980); Lawrence Blume & Daniel L. Rubinfeld, The Dynamics of the Legal Process, 11 J. LEGAL STUD. 405 (1982); George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1 (1984); Ronald A. Heiner, Imperfect Decisions and the Law: On the Evolution of Legal Precedent and Rules, 15 J. LEGAL STUD. 227 (1986); Martin J. Bailey & Paul H. Rubin, A Positive Theory of Legal Change, 14 INT'L REV. L. & ECON. 467 (1994); Mark J. Roe, Chaos and Evolution in Law and Economics, 109 HARV. L. REV. 641 (1996); Nicholas L. Georgakopoulos, Predictability and Legal Evolution, 17 INT'L REV. L. & ECON. 475 (1997). For a summary of several objections to this theory, see POSNER, supra note 54, at 614.
70. Rubin's article spawned an interesting literature extending his insight. See, e.g., George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) [hereinafter Priest, Common Law Process]; John Goodman, An Economic Theory of the Evolution of the Common Law, 7 J. LEGAL STUD. 393 (1978); George L. Priest, Selective Characteristics of Litigation, 9 J. LEGAL STUD. 399 (1980); Lawrence Blume & Daniel L. Rubinfeld, The Dynamics of the Legal Process, 11 J. LEGAL STUD. 405 (1982); George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1 (1984); Ronald A. Heiner, Imperfect Decisions and the Law: On the Evolution of Legal Precedent and Rules, 15 J. LEGAL STUD. 227 (1986); Martin J. Bailey & Paul H. Rubin, A Positive Theory of Legal Change, 14 INT'L REV. L. & ECON. 467 (1994); Mark J. Roe, Chaos and Evolution in Law and Economics, 109 HARV. L. REV. 641 (1996); Nicholas L. Georgakopoulos, Predictability and Legal Evolution, 17 INT'L REV. L. & ECON. 475 (1997). For a summary of several objections to this theory, see POSNER, supra note 54, at 614.
71. Rubin's article spawned an interesting literature extending his insight. See, e.g., George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) [hereinafter Priest, Common Law Process]; John Goodman, An Economic Theory of the Evolution of the Common Law, 7 J. LEGAL STUD. 393 (1978); George L. Priest, Selective Characteristics of Litigation, 9 J. LEGAL STUD. 399 (1980); Lawrence Blume & Daniel L. Rubinfeld, The Dynamics of the Legal Process, 11 J. LEGAL STUD. 405 (1982); George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1 (1984); Ronald A. Heiner, Imperfect Decisions and the Law: On the Evolution of Legal Precedent and Rules, 15 J. LEGAL STUD. 227 (1986); Martin J. Bailey & Paul H. Rubin, A Positive Theory of Legal Change, 14 INT'L REV. L. & ECON. 467 (1994); Mark J. Roe, Chaos and Evolution in Law and Economics, 109 HARV. L. REV. 641 (1996); Nicholas L. Georgakopoulos, Predictability and Legal Evolution, 17 INT'L REV. L. & ECON. 475 (1997). For a summary of several objections to this theory, see POSNER, supra note 54, at 614.
72. Rubin's article spawned an interesting literature extending his insight. See, e.g., George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) [hereinafter Priest, Common Law Process]; John Goodman, An Economic Theory of the Evolution of the Common Law, 7 J. LEGAL STUD. 393 (1978); George L. Priest, Selective Characteristics of Litigation, 9 J. LEGAL STUD. 399 (1980); Lawrence Blume & Daniel L. Rubinfeld, The Dynamics of the Legal Process, 11 J. LEGAL STUD. 405 (1982); George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1 (1984); Ronald A. Heiner, Imperfect Decisions and the Law: On the Evolution of Legal Precedent and Rules, 15 J. LEGAL STUD. 227 (1986); Martin J. Bailey & Paul H. Rubin, A Positive Theory of Legal Change, 14 INT'L REV. L. & ECON. 467 (1994); Mark J. Roe, Chaos and Evolution in Law and Economics, 109 HARV. L. REV. 641 (1996); Nicholas L. Georgakopoulos, Predictability and Legal Evolution, 17 INT'L REV. L. & ECON. 475 (1997). For a summary of several objections to this theory, see POSNER, supra note 54, at 614.
73. Rubin's article spawned an interesting literature extending his insight. See, e.g., George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) [hereinafter Priest, Common Law Process]; John Goodman, An Economic Theory of the Evolution of the Common Law, 7 J. LEGAL STUD. 393 (1978); George L. Priest, Selective Characteristics of Litigation, 9 J. LEGAL STUD. 399 (1980); Lawrence Blume & Daniel L. Rubinfeld, The Dynamics of the Legal Process, 11 J. LEGAL STUD. 405 (1982); George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1 (1984); Ronald A. Heiner, Imperfect Decisions and the Law: On the Evolution of Legal Precedent and Rules, 15 J. LEGAL STUD. 227 (1986); Martin J. Bailey & Paul H. Rubin, A Positive Theory of Legal Change, 14 INT'L REV. L. & ECON. 467 (1994); Mark J. Roe, Chaos and Evolution in Law and Economics, 109 HARV. L. REV. 641 (1996); Nicholas L. Georgakopoulos, Predictability and Legal Evolution, 17 INT'L REV. L. & ECON. 475 (1997). For a summary of several objections to this theory, see POSNER, supra note 54, at 614.
74. Rubin's article spawned an interesting literature extending his insight. See, e.g., George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) [hereinafter Priest, Common Law Process]; John Goodman, An Economic Theory of the Evolution of the Common Law, 7 J. LEGAL STUD. 393 (1978); George L. Priest, Selective Characteristics of Litigation, 9 J. LEGAL STUD. 399 (1980); Lawrence Blume & Daniel L. Rubinfeld, The Dynamics of the Legal Process, 11 J. LEGAL STUD. 405 (1982); George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1 (1984); Ronald A. Heiner, Imperfect Decisions and the Law: On the Evolution of Legal Precedent and Rules, 15 J. LEGAL STUD. 227 (1986); Martin J. Bailey & Paul H. Rubin, A Positive Theory of Legal Change, 14 INT'L REV. L. & ECON. 467 (1994); Mark J. Roe, Chaos and Evolution in Law and Economics, 109 HARV. L. REV. 641 (1996); Nicholas L. Georgakopoulos, Predictability and Legal Evolution, 17 INT'L REV. L. & ECON. 475 (1997). For a summary of several objections to this theory, see POSNER, supra note 54, at 614.
75. Rubin's article spawned an interesting literature extending his insight. See, e.g., George L. Priest, The Common Law Process and the Selection of Efficient Rules, 6 J. LEGAL STUD. 65 (1977) [hereinafter Priest, Common Law Process]; John Goodman, An Economic Theory of the Evolution of the Common Law, 7 J. LEGAL STUD. 393 (1978); George L. Priest, Selective Characteristics of Litigation, 9 J. LEGAL STUD. 399 (1980); Lawrence Blume & Daniel L. Rubinfeld, The Dynamics of the Legal Process, 11 J. LEGAL STUD. 405 (1982); George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1 (1984); Ronald A. Heiner, Imperfect Decisions and the Law: On the Evolution of Legal Precedent and Rules, 15 J. LEGAL STUD. 227 (1986); Martin J. Bailey & Paul H. Rubin, A Positive Theory of Legal Change, 14 INT'L REV. L. & ECON. 467 (1994); Mark J. Roe, Chaos and Evolution in Law and Economics, 109 HARV. L. REV. 641 (1996); Nicholas L. Georgakopoulos, Predictability and Legal Evolution, 17 INT'L REV. L. & ECON. 475 (1997). For a summary of several objections to this theory, see POSNER, supra note 54, at 614.
76. See Rubin, supra note 57, at 55.
77. See Goodman, supra note 58, at 402.
78. See Rubin, supra note 57, at 55-56.
79. See Paul Rubin, Common Law and Statute Law, 11 J. LEGAL STUD. 205, 212 (1982): [D]isputants who are in the market will tend to litigate until they reach a favorable decision. They may achieve such a decision by spending more on litigation; by relitigating cases whenever issues arise until a favorable decision is reached; by waiting to litigate until a particularly apt case for establishing precedent occurs; and by using other techniques aimed at obtaining favorable precedents. See also Galanter, Why the "Haves" Come Out Ahead: Speculation on the Limits of Legal Change, 9 L. & SOC. REV. 95 (1974).
80. See Paul Rubin, Common Law and Statute Law, 11 J. LEGAL STUD. 205, 212 (1982): [D]isputants who are in the market will tend to litigate until they reach a favorable decision. They may achieve such a decision by spending more on litigation; by relitigating cases whenever issues arise until a favorable decision is reached; by waiting to litigate until a particularly apt case for establishing precedent occurs; and by using other techniques aimed at obtaining favorable precedents. See also Galanter, Why the "Haves" Come Out Ahead: Speculation on the Limits of Legal Change, 9 L. & SOC. REV. 95 (1974).
81. Priest, Common Law Process, supra note 58. In an addendum to his paper, Rubin offers a critique of Priest's contribution. See Rubin, supra note 57, at 62-63.
82. Priest shows that even if the judiciary decides the outcome randomly (e.g., by flipping a coin), efficiency will emerge over time due to the opportunity set of cases that the judiciary considers. Priest, Common Law Process, supra note 58, at 68-69.
83. Id. at 72.
84. 15 U.S.C. § 1.
85. WILLIAM LETWIN, LAW AND ECONOMIC POLICY IN AMERICA 3 (1965).
86. A.D. NEALE & D.G. GOYDER, THE ANTITRUST LAWS OF THE U.S.A. 22 (3d ed. 1980).
87. For a criticism of the judicial activism that this engendered, see Thomas Arthur, Farewell to the Sea of Doubt: Jettisoning the Constitutional Sherman Act, 74 CAL. L. REV. 263 (1986).
88. HERBERT HOVENKAMP, ECONOMICS AND FEDERAL ANTITRUST LAW 52 (1985).
89. PHILLIP AREEDA & LOUIS KAPLOW, ANTITRUST ANALYSIS 44 (5th ed. 1997). See also HANS B. THORELLI, THE FEDERAL ANTITRUST LAWS 228-29 (1954) ("[I]n adopting the standard of the common law Congress expected the courts not only to apply a set of somewhat vague doctrines but also in doing so to make use of that 'certain technique of judicial reasoning' characteristic of common law courts.").
90. PHILLIP AREEDA & LOUIS KAPLOW, ANTITRUST ANALYSIS 44 (5th ed. 1997). See also HANS B. THORELLI, THE FEDERAL ANTITRUST LAWS 228-29 (1954) ("[I]n adopting the standard of the common law Congress expected the courts not only to apply a set of somewhat vague doctrines but also in doing so to make use of that 'certain technique of judicial reasoning' characteristic of common law courts.").
91. For examples of cases in which lower courts applied Albrecht during the first nine years after that case was decided, see Milsen Co. v. Southland Corp., 454 F.2d 363 (7th Cir. 1971) (holding that a convenience store franchisee was entitled to a preliminary injunction preventing termination of its franchises where the franchisor, inter alia, required franchisees to adhere to the maximum retail prices set by the franchisor on products some of which the franchisor supplied); Blankenship v. Hearst Corp., 519 F.2d 418 (9th Cir. 1975) (holding that a newspaper distributor could sue the publisher for fixing the maximum prices that could be charged by carriers who purchased papers from the distributor); Bowen v. New York News, Inc., 522 F.2d 1242 (2d Cir. 1975) (holding that an otherwise illegal maximum resale price agreement between a newspaper and its dealers was protected under the fair trade laws); Greene v. General Foods Corp., 517 F.2d 635 (5th Cir. 1975) (holding that a food supplier's actions to prevent its distributor from selling its products to national buyers at prices above those set by the supplier constituted illegal vertical maximum price fixing); Knutson v. Daily Rev., Inc., 548 F.2d 795 (9th Cir. 1976) (holding that a newspaper publisher was liable in an action brought by one of its dealers alleging vertical maximum price fixing).
92. The analytical details are provided in Roger D. Blair & Carolyn D. Schafer, Antitrust Law and Evolutionary Models of Legal Change, 40 U. FLA. L. REV. 379 (1988).
93. 15 U.S.C. § 15.
94. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977) (holding that nonprice vertical restraints imposed by a manufacturer on its dealers are lawful if reasonable).
95. Under Sylvania, a manufacturer can agree to grant a distributor an exclusive territory. Some lower courts reasoned that if a manufacturer can confer exclusive territories on its dealers in order to stimulate the provision of point-of-sale services by eliminating the risk of free riding, thereby granting each a monopoly in its brand, the manufacturer can lawfully constrain the prices that the monopolist dealer can charge. See, e.g., Jack Walters & Sons Corp. v. Morton Bldg., Inc., 737 F.2d 698, 706-07 (7th Cir. 1984) (Posner, J.) (suggesting that "the continued vitality of Albrecht is in doubt after" Sylvania); Acquaire v. Canada Dry Bottling Co., 24 F.3d 401 (2d Cir. 1994) (questioning validity of Albrecht in light of Sylvania). Indeed, the Supreme Court later acknowledged that after Sylvania, "the procompetitive potential of a vertical maximum price restraint is more evident . . . than it was when Albrecht was decided, because exclusive territorial arrangements and other nonprice restrictions were unlawful per se in 1968." Atlantic Richfield Co. v. USAPetroleum Co., 495 U.S. 328, 343 n.13 (1990).
96. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) (articulating the antitrust injury requirement).
97. Some courts held that the profits lost by competing dealers because of a maximum resale price restraint do not constitute antitrust injury, for they represent losses incurred as a result of stiffer competition from rivals charging lower prices, not as a result of lessened competition. See, e.g., Indiana Grocery, Inc. v. Super Valu Stores, Inc., 864 F.2d 1409 (7th Cir. 1989). See also Roger D. Blair & Jeffrey L. Harrison, Rethinking Antitrust Injury, 42 VAND. L. REV. 1559 (1989). Other courts held that even the dealers subject to the vertical price cap suffer no antitrust injury, for the profits they are prevented from earning are monopoly profits ineligible for antitrust protection. See, e.g., Jack Walters, 737 F.2d at 708-09; Kestenbaum v. Falstaff Brewing Corp., 575 F.2d 564 (5th Cir. 1978).
98. See cases cited in note 76, supra.
99. For example, Khan itself is such a case. See also Caribe BMW, Inc. v. Bayerische Motoren Werke Aktiengesellschaft, 19 F.3d 745 (1st Cir. 1994) (Breyer, C.J.).
100. Khan, 118 S. Ct. at 283.
101. Various alternatives are examined in depth in Blair & Esquibel, supra note 48.
102. This substitution helps explain why the evolutionary process was stunted.
103. See Spengler, supra note 44.
104. Paschall v. Kansas City Star Co., 727 F.2d 692 (8th Cir. 1984).
105. See ANTONY W. DNES, FRANCHISING, EXTERNALITY, AND DUAL DISTRIBUTION (1994).
106. See ROGER D. BLAIR & DAVID L. KASERMAN, ANTITRUST ECONOMICS 295-99 (1985).
107. Jack Walters & Sons v. Morton Bldg., Inc., 737 F.2d 698, 706 (7th Cir. 1984).
108. See Andrea Shephard, Contractual Form, Retail Price, and Asset Characteristics in Gasoline Retailing, 24 RAND J. ECON. 58, 62 (1993).
109. See Jack Walters, 737 F.2d at 708. The court's recognition that maximum resale price fixing may be socially beneficial because it is necessary to facilitate price advertising, itself a productive practice, is sound. The publisher in Albrecht, however, also advertised a suggested price in its newspaper, and that did not save its maximum resale price restraint from per se condemnation. See Albrecht, 390 U.S. at 147.
110. Acquaire v. Canada Dry Bottling Co., 24 F.3d 401 (2d Cir. 1994). Canada Dry distributors received the same per-case commission irrespective of whether the supplier was running a promotion or not. The supplier did this by adjusting the effective wholesale price to the distributors.
111. United States v. General Elec. Co., 272 U.S. 476 (1926).
112. 823 F.2d 1215 (8th Cir. 1987).
113. See Simpson v. Union Oil Co., 377 U.S. 13 (1964).
114. 517 F.2d 635 (5th Cir. 1975).
115. Morrison v. Murray Biscuit Co., 797 F.2d 1430, 1436 (7th Cir. 1986) (Posner, J.).
116. See generally 1 AREEDA & TURNER, supra note 36, ¶¶ 103-113; ROBERT H. BORK, THE ANTITRUST PARADOX 50-71 (rev. ed. 1993); RICHARD A. POSNER, ANTITRUST LAW: AN ECONOMIC PERSPECTIVE 8-22 (1976).
117. See generally 1 AREEDA & TURNER, supra note 36, ¶¶ 103-113; ROBERT H. BORK, THE ANTITRUST PARADOX 50-71 (rev. ed. 1993); RICHARD A. POSNER, ANTITRUST LAW: AN ECONOMIC PERSPECTIVE 8-22 (1976).
118. See, e.g., 1 AREEDA & TURNER, supra note 36, ¶¶ 103-105; BORK, supra note 97, at ix-xii; POSNER, supra note 97, at 8-22.
119. See, e.g., Harlan Blake & William Jones, In Defense of Antitrust, 65 COLUM. L. REV. 377, 382-84 (1965); Kenneth Elzinga, The Goals of Antitrust: Other Than Competition and Efficiency, What Else Counts?, 125 U. PA. L. REV. 1191, 1209-13 (1977); DONALD DEWEY, THE ANTITRUST EXPERIMENT IN AMERICA 1-51 (1990); Robert Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 HASTINGS L.J. 65 (1982).
120. See, e.g., Harlan Blake & William Jones, In Defense of Antitrust, 65 COLUM. L. REV. 377, 382-84 (1965); Kenneth Elzinga, The Goals of Antitrust: Other Than Competition and Efficiency, What Else Counts?, 125 U. PA. L. REV. 1191, 1209-13 (1977); DONALD DEWEY, THE ANTITRUST EXPERIMENT IN AMERICA 1-51 (1990); Robert Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 HASTINGS L.J. 65 (1982).
121. See, e.g., Harlan Blake & William Jones, In Defense of Antitrust, 65 COLUM. L. REV. 377, 382-84 (1965); Kenneth Elzinga, The Goals of Antitrust: Other Than Competition and Efficiency, What Else Counts?, 125 U. PA. L. REV. 1191, 1209-13 (1977); DONALD DEWEY, THE ANTITRUST EXPERIMENT IN AMERICA 1-51 (1990); Robert Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 HASTINGS L.J. 65 (1982).
122. See, e.g., Harlan Blake & William Jones, In Defense of Antitrust, 65 COLUM. L. REV. 377, 382-84 (1965); Kenneth Elzinga, The Goals of Antitrust: Other Than Competition and Efficiency, What Else Counts?, 125 U. PA. L. REV. 1191, 1209-13 (1977); DONALD DEWEY, THE ANTITRUST EXPERIMENT IN AMERICA 1-51 (1990); Robert Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 HASTINGS L.J. 65 (1982).
123. See generally SCHERER & ROSS, supra note 36, at 15-56.
124. Bork's position is certainly unequivocal: "[T]He only legitimate goal of antitrust is the maximization of consumer welfare." BORK, supra note 97, at 7. In addition to his provocative book, see Robert H. Bork, Legislative Intent and the Policy of the Sherman Act, 9 J.L. & ECON. 7 (1966).
125. See Lande, supra note 99. In addition, Elzinga notes that the conventional wisdom holds that there is a tradeoff between equity and efficiency: In light of this well-known tradeoff, it is notable that antitrust enforcement generally served to help those at the low end of the income distribution range without decreasing efficiency. Antitrust achieves this double benefit when it promotes efficiency in resource allocation by preventing the cartelization or monopolization of a market shopped in by low-income buyers. The reason is straightforward: prices will be made lower in this market so that for any given income, however low, a larger basket of goods and services can be purchased . . . . In sum, the pursuit of efficiency goals through antitrust enforcement is consistent with the objective of an equitable distribution of income. Elzinga, supra note 99, at 1194-96. In fact, in most cases economists will take the distribution of income as given or will "hold income constant" when dealing with matters of efficiency. This does not deny the fact that some distributions of income are more conducive to economic efficiency than others. Regrettably perhaps, it is often true that the more equal distributions of income are those that provide incentives that to some extent discourage economic efficiency.
126. See Lande, supra note 99, at 72-74, 80-82.
127. See id. at 83-85.
128. See id. at 87-88.
129. Eleanor M. Fox, The Modernization of Antitrust: A New Equilibrium, 66 CORNELL L. REV. 1140, 1152-54 (1981).
130. Robert Pitofsky, The Political Content of Antitrust, 127 U. PA. L. REV. 1051, 1054 (1979).
131. United States v. Aluminum Co. of Am., 148 F. 2d 416 (2d Cir. 1945).
132. Id. at 428.
133. See, e.g., Benjamin Klein, Market Power in Antitrust: Economic Analysis After Kodak, 3 SUP. CT. ECON. Rev. 43, 72 (1993).
134. Blake & Jones, supra note 99, at 383.
135. See id.
136. Id. at 384.
137. Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U.S. 211, 213 (1951).
138. See Paschall v. Kansas City Star Co., 695 F. 2d 322, 325 (8th Cir. 1982); reh'g en banc, 727 F. 2d 692, 695 (8th Cir. 1984) (noting that, in spite of the Kansas City Star's policy of not recognizing a carrier's propietary right in its assigned route, some routes were sold to third parties for hundreds of thousands of dollars).
139. For an insightful analysis that predates the en banc rehearing in Paschall, see Herbert Hovenkamp, Vertical Integration by the Newspaper Monopolist, 69 IOWA L. REV. 451 (1984).
140. 752 F.2d 473 (9th Cir. 1985).
141. See id. at 475, 477.
142. Khan, 93 F.3d at 1362-63.
143. See, e.g., ARCO, 495 U.S. at 339 (observing that a private party cannot recover unless it is "adversely affected by an anticompetitive aspect of the defendant's conduct"). For detailed analyses of the antitrust injury doctrine, see William H. Page & John E. Lopatka, Antitrust Injury, Merger Policy, and the Competitor Plaintiff, 82 IOWA L. REV. 127 (1996); William H. Page, The Scope of Liability for Antitrust Violations, 37 STAN. L. REV. 1445 (1985).
144. See, e.g., ARCO, 495 U.S. at 339 (observing that a private party cannot recover unless it is "adversely affected by an anticompetitive aspect of the defendant's conduct"). For detailed analyses of the antitrust injury doctrine, see William H. Page & John E. Lopatka, Antitrust Injury, Merger Policy, and the Competitor Plaintiff, 82 IOWA L. REV. 127 (1996); William H. Page, The Scope of Liability for Antitrust Violations, 37 STAN. L. REV. 1445 (1985).
145. ARCO, 495 U.S. at 345.
146. See Caribe BMW, Inc. v. Bayerische Motoren Werke Aktiengesellschaft, 19 F.3d 745, 752-54 (1st Cir. 1994) (Breyer, C.J.). To be precise, the court held that profits lost by the dealer due to an inefficient aspect of the practice are antitrust injury, whereas if the profits the plaintiff lost because of the price cap were supracompetitive profits, "it is at least arguable that no 'antitrust injury' occurred." Id. at 753-54.
147. Khan, 93 F.3d at 1364.
148. Khan, 118 S. Ct. at 285.
149. See Khan, 93 F.3d at 1364.
150. The appellate court suggested that, if a practice causes no antitrust injury, then even public enforcers are unable to bring suit. Khan, 93 F.3d at 1364. Though the assertion has analytical appeal, the Court has explained the antitrust injury doctrine as a limitation solely on private enforcement. See, e.g., ARCO, 495 U.S. at 339 (commenting that antitrust injury does not arise "until a private party is adversely affected by an anticompetitive aspect of the defendant's conduct"). The idea of a substantive antitrust offense, subject to public enforcement, that causes no one anticompetitive harm is troubling, but it is not impossible.