Network economic effects and the limits of GTE Sylvania's efficiency analysis

Antitrust Law Journal

Volumn 68, Issue 3, 2001, Pages 945-964

  Ross, Stephen F ^a  

^a NONE

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EID: 0035585610     PISSN: 00036056     EISSN: None     Source Type: Journal    
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References (86)

1. 433 U.S. 36 (1977).
2. Id. at 52 n.19, 60; cf. Valley Liquors, Inc. v. Renfield Importers, Ltd., 678 F.2d 742, 745 (7th Cir. 1982) (Posner, J.).
3. See, e.g., Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985); NCAA v. Board of Regents of the Univ. of Okla., 468 U.S. 85 (1984).
4. In this essay, "intrinsic qualities" is used not as an economic term of art but rather simply as a means to distinguish those qualities of a product that make it attractive to consumers independent of the use of others - i.e., if rival products were to be compared while network effects were held constant and the products viewed in a hypothetical "stand alone" sense. Although consumers place a high value, for example, on the ability to use a cellular phone to connect to others anywhere in the world, many also value cellular phones that are small, have features that make dialing easy, etc. The latter are what are referred to as "intrinsic qualities."
5. Sylvania, 433 U.S. at 54 n.21.
6. Competition in the Software Industry: Hearing of the Senate Judiciary Comm. (Mar. 3, 1998).
7. Judge Jackson endorsed this view in United States v. Microsoft Corp., 84 F. Supp.2d 9 (D.D.C. 1999).
8. United States v. Microsoft Corp., 147 F.3d 935 (D.C. Cir. 1998).
9. I put to the side the evidence that many members of Congress may have been subjectively motivated by baser political ends, to focus on the public-regarding purposes. See Heydon's Case, 3 Co. Rep. 7a, 7b, 76 Eng. Rep. 637, 638 (1584) (judges interpreting statutes are to identify the remedy the legislature chose "to cure the disease of the commonwealth" and then construe the statute to "suppress the mischief, and advance the remedy" "according to the true intent of the makers of the Act, pro bono publico"); Jonathan Macey, Promoting Public-Regarding Legislation Through Statutory Interpretation: An Interest Group Model, 86 COLUM. L. REV. 223, 264 (1986).
10. See Robert Pitofsky, The Political Content of Antitrust, 127 U. PA. L. REV. 1051 (1979); Robert H. Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 HASTINGS L.J. 65 (1982).
11. See Robert Pitofsky, The Political Content of Antitrust, 127 U. PA. L. REV. 1051 (1979); Robert H. Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 HASTINGS L.J. 65 (1982).
12. Id.
13. Although Congress is theoretically well-suited to design programs that maximize both efficiency and equitable redistribution, judges should not read the Sherman Act as a directive to concern themselves only with efficiency, for several reasons. First, rather than seeing the congressional choice of the broad, common-law terms in the Sherman and Clayton Acts as reflecting either a preference for efficiency without redistribution or an intent to use other legislative instruments to accomplish redistribution, the better view of the broad charter to federal courts is that it is preferred to minute congressional regulation of trade because the legislative process will often tend to over-represent firms exploiting consumers and under-represent politically diffuse consumers. Second, the force of inertia in the legislative process means that asking the legislature ex ante to design a program that is both efficient and redistributive is very different from asking the legislature to modify an efficiency-based judicial decision, where opponents of redistribution can simply block the bill. Third, Congress has shown a reluctance to involve itself in competition claims until the courts have already spoken. Richard A. Posner, in Legal Formalism, Legal Realism, and the Interpretation of Statutes and the Constitution, 37 CASE W. RES. L. REV. 179 (1987), makes a contrary argument based, in large part, on his view that the importation of noneconomic goals into judge-made antitrust law would be unworkable, id. at 211, an objection that I address below. He also seems to conflate efficiency with benefiting consumers. Before Robert Lande's pathbreaking article, supra note 10, Chicago school advocates tended to conflate the analysis of Kaldor-Hicks efficient conduct that actually benefited consumers with conduct that maximized social wealth without regard to distributional consequences. Robert Bork, for example, uses the term "consumer welfare" to refer to overall societal welfare. See ROBERT BORK, THE ANTITRUST PARADOX 60 (1978). Most importantly, Judge Posner concedes that "it is hard to read the statute as a delegation to the courts to repeal it if and when expert knowledge teaches that the statute can no longer achieve the framers' purposes" and that the Sherman Act "begs - though it doesn't actually ask - the courts to do what they can to make it reasonable." Posner, supra, at 212. I would suggest that the approach set forth in this essay is more consistent with the framers' purposes and more reasonable than an efficiency-only approach.
14. Although Congress is theoretically well-suited to design programs that maximize both efficiency and equitable redistribution, judges should not read the Sherman Act as a directive to concern themselves only with efficiency, for several reasons. First, rather than seeing the congressional choice of the broad, common-law terms in the Sherman and Clayton Acts as reflecting either a preference for efficiency without redistribution or an intent to use other legislative instruments to accomplish redistribution, the better view of the broad charter to federal courts is that it is preferred to minute congressional regulation of trade because the legislative process will often tend to over-represent firms exploiting consumers and under-represent politically diffuse consumers. Second, the force of inertia in the legislative process means that asking the legislature ex ante to design a program that is both efficient and redistributive is very different from asking the legislature to modify an efficiency-based judicial decision, where opponents of redistribution can simply block the bill. Third, Congress has shown a reluctance to involve itself in competition claims until the courts have already spoken. Richard A. Posner, in Legal Formalism, Legal Realism, and the Interpretation of Statutes and the Constitution, 37 CASE W. RES. L. REV. 179 (1987), makes a contrary argument based, in large part, on his view that the importation of noneconomic goals into judge-made antitrust law would be unworkable, id. at 211, an objection that I address below. He also seems to conflate efficiency with benefiting consumers. Before Robert Lande's pathbreaking article, supra note 10, Chicago school advocates tended to conflate the analysis of Kaldor-Hicks efficient conduct that actually benefited consumers with conduct that maximized social wealth without regard to distributional consequences. Robert Bork, for example, uses the term "consumer welfare" to refer to overall societal welfare. See ROBERT BORK, THE ANTITRUST PARADOX 60 (1978). Most importantly, Judge Posner concedes that "it is hard to read the statute as a delegation to the courts to repeal it if and when expert knowledge teaches that the statute can no longer achieve the framers' purposes" and that the Sherman Act "begs - though it doesn't actually ask - the courts to do what they can to make it reasonable." Posner, supra, at 212. I would suggest that the approach set forth in this essay is more consistent with the framers' purposes and more reasonable than an efficiency-only approach.
15. Although Congress is theoretically well-suited to design programs that maximize both efficiency and equitable redistribution, judges should not read the Sherman Act as a directive to concern themselves only with efficiency, for several reasons. First, rather than seeing the congressional choice of the broad, common-law terms in the Sherman and Clayton Acts as reflecting either a preference for efficiency without redistribution or an intent to use other legislative instruments to accomplish redistribution, the better view of the broad charter to federal courts is that it is preferred to minute congressional regulation of trade because the legislative process will often tend to over-represent firms exploiting consumers and under-represent politically diffuse consumers. Second, the force of inertia in the legislative process means that asking the legislature ex ante to design a program that is both efficient and redistributive is very different from asking the legislature to modify an efficiency-based judicial decision, where opponents of redistribution can simply block the bill. Third, Congress has shown a reluctance to involve itself in competition claims until the courts have already spoken. Richard A. Posner, in Legal Formalism, Legal Realism, and the Interpretation of Statutes and the Constitution, 37 CASE W. RES. L. REV. 179 (1987), makes a contrary argument based, in large part, on his view that the importation of noneconomic goals into judge-made antitrust law would be unworkable, id. at 211, an objection that I address below. He also seems to conflate efficiency with benefiting consumers. Before Robert Lande's pathbreaking article, supra note 10, Chicago school advocates tended to conflate the analysis of Kaldor-Hicks efficient conduct that actually benefited consumers with conduct that maximized social wealth without regard to distributional consequences. Robert Bork, for example, uses the term "consumer welfare" to refer to overall societal welfare. See ROBERT BORK, THE ANTITRUST PARADOX 60 (1978). Most importantly, Judge Posner concedes that "it is hard to read the statute as a delegation to the courts to repeal it if and when expert knowledge teaches that the statute can no longer achieve the framers' purposes" and that the Sherman Act "begs - though it doesn't actually ask - the courts to do what they can to make it reasonable." Posner, supra, at 212. I would suggest that the approach set forth in this essay is more consistent with the framers' purposes and more reasonable than an efficiency-only approach.
16. Although Congress is theoretically well-suited to design programs that maximize both efficiency and equitable redistribution, judges should not read the Sherman Act as a directive to concern themselves only with efficiency, for several reasons. First, rather than seeing the congressional choice of the broad, common-law terms in the Sherman and Clayton Acts as reflecting either a preference for efficiency without redistribution or an intent to use other legislative instruments to accomplish redistribution, the better view of the broad charter to federal courts is that it is preferred to minute congressional regulation of trade because the legislative process will often tend to over-represent firms exploiting consumers and under-represent politically diffuse consumers. Second, the force of inertia in the legislative process means that asking the legislature ex ante to design a program that is both efficient and redistributive is very different from asking the legislature to modify an efficiency-based judicial decision, where opponents of redistribution can simply block the bill. Third, Congress has shown a reluctance to involve itself in competition claims until the courts have already spoken. Richard A. Posner, in Legal Formalism, Legal Realism, and the Interpretation of Statutes and the Constitution, 37 CASE W. RES. L. REV. 179 (1987), makes a contrary argument based, in large part, on his view that the importation of noneconomic goals into judge-made antitrust law would be unworkable, id. at 211, an objection that I address below. He also seems to conflate efficiency with benefiting consumers. Before Robert Lande's pathbreaking article, supra note 10, Chicago school advocates tended to conflate the analysis of Kaldor-Hicks efficient conduct that actually benefited consumers with conduct that maximized social wealth without regard to distributional consequences. Robert Bork, for example, uses the term "consumer welfare" to refer to overall societal welfare. See ROBERT BORK, THE ANTITRUST PARADOX 60 (1978). Most importantly, Judge Posner concedes that "it is hard to read the statute as a delegation to the courts to repeal it if and when expert knowledge teaches that the statute can no longer achieve the framers' purposes" and that the Sherman Act "begs - though it doesn't actually ask - the courts to do what they can to make it reasonable." Posner, supra, at 212. I would suggest that the approach set forth in this essay is more consistent with the framers' purposes and more reasonable than an efficiency-only approach.
17. For an acknowledgment of this point by a Chicago-school critic, see Robert H. Lande, The Rise and (Coming) Fall of Efficiency as the Rule of Antitrust, 33 ANTITRUST BULL. 429 (1988).
18. See, e.g., United States v. Von's Grocery Co., 384 U.S. 270 (1966) (merger resulting in a firm with 8.9% of a market tending toward concentration unlawful) (citing United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 323 (1897) (wrong to exclude from market "small dealers and worthy men"), and United States v. Aluminum Co. of America, 148 F.2d 416, 429 (2d Cir. 1945) (antitrust seeks to "perpetuate and preserve, for its own sake and in spite of possible cost, an organization of industry in small units which can effectively compete")).
19. Indeed, as the Court portrayed it, the dispute arose because Sylvania chose to add a distributor in San Francisco (where Sylvania sales were half its national share of 5%) to compete with Continental, while precluding the plaintiff from selling in Sacramento (where Sylvania's distributor had achieved exceptional results, increasing Sylvania's market share to 15%). Sylvania, 433 U.S. at 40. For an alternative version of the facts, see Peter C. Carstensen, Annual Survey of Antitrust Developments 1976-77, 35 WASH. & LEE L. REV. 1, 17-21 (1978). Carstensen suggests that multi-brand retail outlets seek to increase profits by offering a combination of low-priced established brands (like the dominant RCA and Zenith brands, at the time) with higher-priced brands offering a "quality" image for consumers who were not price-sensitive. Sylvania sought to increase its own market share by eliminating intrabrand price competition, thus inducing these dealers to use its brand as their high-priced offering. Although Carstensen is skeptical of the efficiency claims made in the case (noting that internal Sylvania documents emphasized dealer profits and not dealer services), he does not disagree with the general view that demonstrably efficient distribution schemes should be lawful. Id. at 33.
20. Indeed, as the Court portrayed it, the dispute arose because Sylvania chose to add a distributor in San Francisco (where Sylvania sales were half its national share of 5%) to compete with Continental, while precluding the plaintiff from selling in Sacramento (where Sylvania's distributor had achieved exceptional results, increasing Sylvania's market share to 15%). Sylvania, 433 U.S. at 40. For an alternative version of the facts, see Peter C. Carstensen, Annual Survey of Antitrust Developments 1976-77, 35 WASH. & LEE L. REV. 1, 17-21 (1978). Carstensen suggests that multi-brand retail outlets seek to increase profits by offering a combination of low-priced established brands (like the dominant RCA and Zenith brands, at the time) with higher- priced brands offering a "quality" image for consumers who were not price-sensitive. Sylvania sought to increase its own market share by eliminating intrabrand price competition, thus inducing these dealers to use its brand as their high-priced offering. Although Carstensen is skeptical of the efficiency claims made in the case (noting that internal Sylvania documents emphasized dealer profits and not dealer services), he does not disagree with the general view that demonstrably efficient distribution schemes should be lawful. Id. at 33.
21. 433 U.S. at 50 & n.15 (citing Chicago Board of Trade v. United States, 246 U.S. 231, 238 (1918)).
22. The Court made it clear that its opinion did not apply to price-fixing restraints, nor did it apply to agreements among competitors. The Court found that different economic and legal considerations justified continued per se condemnation of vertical price-fixing and horizontal agreements to restrict distribution. Id. at 52 n.18, 59 n.28. Specifically, the Court explicitly overruled a prior decision that condemned certain distributional restraints as violative of the common law rule against restraints on alienation, as a misreading of history and improper antitrust analysis. Id. at 53 & n.21 (overruling United States v. Arnold, Schwinn & Co., 388 U.S. 365, 380 (1966)). The Court also refused to condemn redistricted distribution as facilitating anticompetitive product differentiation. Id. at 57 & n.25. The Court suggested that a per se rule would simply result in the manufacturer using less efficient methods to attain the same effects.
23. Id. at 54 n.21 (quoting Judge Browning's concurring opinion in the court below, 537 F.2d 980, 1019 (9th Cir. 1976)).
24. Id.
25. In interpreting the cause of action created by Section 4 of the Clayton Act for those injured in their "business or property" to include consumers victimized by overcharging, the Court has written that the Sherman Act is a "consumer welfare prescription." Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979).
26. See generally Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479, 488-500 (1998).
27. See, e.g., id. at 497 (citing Michael L. Katz & Carl Shapiro, Systems Competition and Network Effects, 8J. ECON. PERSP. 93, 106 (1994)). Network effects can also impose significant barriers to entry and fringe expansion by potentially more efficient rivals. See Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617, 620 (1999).
28. See, e.g., id. at 497 (citing Michael L. Katz & Carl Shapiro, Systems Competition and Network Effects, 8J. ECON. PERSP. 93, 106 (1994)). Network effects can also impose significant barriers to entry and fringe expansion by potentially more efficient rivals. See Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617, 620 (1999).
29. See, e.g., id. at 497 (citing Michael L. Katz & Carl Shapiro, Systems Competition and Network Effects, 8J. ECON. PERSP. 93, 106 (1994)). Network effects can also impose significant barriers to entry and fringe expansion by potentially more efficient rivals. See Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617, 620 (1999).
30. First, the theory provides a basis to understand how and when to conclude that a firm currently possesses market power (in Sylvania's lexicon, the absence of vigorous interbrand competition that checks intrabrand exploitation, 433 U.S. 59 n.19) despite the absence of conventional barriers to entry. Second, because dominant firms will obtain higher returns where there are network effects, "relatively risky strategies, such as predation... might be rational in a networks market." Lemley & McGowan, supra note 21, at 495. This insight may be critical for plaintiffs seeking to meet the Supreme Court's requirement that predation claims be accompanied by plausible theories of recoupment. See Brooke Group v. Brown & Williamson Tobacco Co., 509 U.S. 209 (1993). Third, providing effective relief against illegal conduct by a firm that has monopolized may be affected by network effects. Conventional remedies may be insufficient to "kick-start" competition in a market where so many consumers value the monopolist's product simply because of its network properties. See R. Craig Romaine & Steven C. Salop, Alternative Remedies for Monopolization in the Microsoft Case, ANTITRUST, Summer 1999, at 18. Related to both the second and third arguments is the point that, because an effective remedy for monopolization in a market characterized by network effects is more difficult, there is a greater justification for antitrust intervention, rather than letting the market "work itself out," in these cases. I thank Tom Ulen for this observation.
31. This refers to dominant firm's degrading or failing to optimize the quality of its product in some way, to make it less compatible with other products, in order to take greater advantage of favorable network effects. An example would be if Microsoft were to make it more difficult for consumers to translate documents created in Word or Excel to/from rival word processing or spreadsheet applications.
32. Lemley & McGowan, supra note 21, at 487.
33. As to the latter situation, antitrust solutions designed to create ex ante rules for competition for the market that enhance efficiency and consumer choice might be desirable, but are beyond the scope of this essay.
34. Id. at 498.
35. For example, in markets where consumers prefer a dominant firm because of the increased availability of complementary products, a firm that bundles products can so marginalize its rivals as to deprive them of sufficient market share to justify significant complementary products. Another example of how firms can facilitate network effects is by designing their product to limit its inter-operability with other products, even though consumers might prefer greater interoperability. To be sure, firms in typical markets can also make investments that reduce the equilibrium number of firms and generate higher prices. One notable example is the extensive use of national advertising. See JOHN SUTTON, SUNK COST AND MARKET STRUCTURE: PRICE COMPETITION, ADVERTISING, AND THE EVOLUTION OF CONCENTRATION (1991). Sylvania holds, however, that advertising provides consumers with desired information. 433 U.S. at 57 & n.25. Whatever the validity of that conclusion, it is judicially manageable and determinate.
36. See, e.g., STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); John Lopatka & William Page, Microsoft, Monopolization, and Network Externalities: Some Uses and Abuses of Economic Theory in Antitrust Decisionmaking, 40 ANTITRUST BULL. 317 (1995).
37. See, e.g., STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); John Lopatka & William Page, Microsoft, Monopolization, and Network Externalities: Some Uses and Abuses of Economic Theory in Antitrust Decisionmaking, 40 ANTITRUST BULL. 317 (1995).
38. LIEBOWITZ & MARGOLIS, supra note 29, at 64; Lopatka & Page, supra note 29, at 346. The welfare effects of granting intellectual property protection to product standards, like computer operating systems, appears to be similarly indeterminate. Allowing firms to copyright product standards increases incentives to produce non-compatible products, even though consumers would prefer to take advantage of the efficiencies of a network. On the other hand, granting legal protection would provide a greater incentive for such firms to create new and superior product standards. See Peter S. Menell, Tailoring Legal Protection for Computer Software, 39 STAN. L. REV. 1329, 1340-44 (1987).
39. 433 U.S. at 57 n.27.
40. This difference is not necessarily unique to network effects cases. Compare Michael H. Riordan & Steven C. Salop, Evaluating Vertical Mergers: A Post-Chicago Approach, 63 ANTITRUST L.J. 513 (1995) (vertical mergers which demonstrably increase price should be illegal unless parties can demonstrate merger-specific efficiencies), with David Reiffen & Michael Vita, Is There New Thinking on Vertical Mergers? A Comment, 63 ANTITRUST L.J. 917 (1995). In light of the traditional merger approach of shifting the burden to the parties upon a showing of any consumer harm, the Riordan and Salop approach seems workable where the consumer injury is a price increase. That is, absent the parties' demonstration of efficiencies sufficient to counteract the price-raising tendencies of the merger, it will be prohibited. The Riordan and Salop approach becomes more difficult where consumers are not particularly price sensitive and the consumer harm comes from a reduction in consumer choice. In this regard, consider the critical comments of Reiffen and Vita, supra, at 923-24: [the economic models underlying Riordan & Salop's proposals] fail to provide economists and others with a means for differentiating empirically between procompetitive and anticompetitive transactions. Like many other models in industrial organization (and other branches of economics), [these models] have proven useful for demonstrating, at a theoretical level, what might happen in a variety of different settings. But it has proven difficult to derive empirically verifiable predictions from [these models] capable of providing practical guidance to antitrust enforcers. This, of course, only raises - rather than answers - the question of what courts should do when economic tools are lacking. To the extent that a plaintiff is able to develop facts sufficient to prove net economic harm under the Riordan and Salop model, Sylvania permits such proof, and nothing in this essay suggests anything to the contrary.
41. This difference is not necessarily unique to network effects cases. Compare Michael H. Riordan & Steven C. Salop, Evaluating Vertical Mergers: A Post-Chicago Approach, 63 ANTITRUST L.J. 513 (1995) (vertical mergers which demonstrably increase price should be illegal unless parties can demonstrate merger-specific efficiencies), with David Reiffen & Michael Vita, Is There New Thinking on Vertical Mergers? A Comment, 63 ANTITRUST L.J. 917 (1995). In light of the traditional merger approach of shifting the burden to the parties upon a showing of any consumer harm, the Riordan and Salop approach seems workable where the consumer injury is a price increase. That is, absent the parties' demonstration of efficiencies sufficient to counteract the price-raising tendencies of the merger, it will be prohibited. The Riordan and Salop approach becomes more difficult where consumers are not particularly price sensitive and the consumer harm comes from a reduction in consumer choice. In this regard, consider the critical comments of Reiffen and Vita, supra, at 923-24: [the economic models underlying Riordan & Salop's proposals] fail to provide economists and others with a means for differentiating empirically between procompetitive and anticompetitive transactions. Like many other models in industrial organization (and other branches of economics), [these models] have proven useful for demonstrating, at a theoretical level, what might happen in a variety of different settings. But it has proven difficult to derive empirically verifiable predictions from [these models] capable of providing practical guidance to antitrust enforcers. This, of course, only raises - rather than answers - the question of what courts should do when economic tools are lacking. To the extent that a plaintiff is able to develop facts sufficient to prove net economic harm under the Riordan and Salop model, Sylvania permits such proof, and nothing in this essay suggests anything to the contrary.
42. Like dynamic markets, economics is a dynamic science and advances in theory or econometric technique might well permit courts to reach practically determinate conclusions in the future about topics that defy judicially manageable standards today.
43. The most prominent and prolific of antitrust scholars advocating this approach is Judge Frank H. Easterbook. See Frank H. Easterbook, The Limits of Antitrust, 63 TEX. L. REV. 1 (1984); Workable Antitrust Policy, 84 MICH. L. REV. 1696 (1986). The political rationale for this view was most clearly articulated by President Reagan's appointee to chair the Federal Trade Commission, Daniel Oliver. See FTC Chairman Says Agency Must Establish Public Interest Before Limiting Freedoms, 51 Antitrust & Trade Reg. Rep. (BNA) 428 (1986).
44. The most prominent and prolific of antitrust scholars advocating this approach is Judge Frank H. Easterbook. See Frank H. Easterbook, The Limits of Antitrust, 63 TEX. L. REV. 1 (1984); Workable Antitrust Policy, 84 MICH. L. REV. 1696 (1986). The political rationale for this view was most clearly articulated by President Reagan's appointee to chair the Federal Trade Commission, Daniel Oliver. See FTC Chairman Says Agency Must Establish Public Interest Before Limiting Freedoms, 51 Antitrust & Trade Reg. Rep. (BNA) 428 (1986).
45. Easterbrook, Workable Antitrust Policy, supra note 34, at 1712.
46. See, e.g., United States v. Microsoft Corp., 147 F.3d 935, 950 (D.C. Cir. 1998) (technological integration lawful if "there is a plausible claim that it brings some advantage"); ILC Peripherals Leasing Corp. v. IBM Corp., 458 F. Supp. 423, 429 (N.D. Cal. 1978) (conduct lawful if can be defended from "an engineering standpoint"), aff'd per curiam sub nom. Memorex Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980).
47. Plaintiff's counsel can even cite "true maroon" Chicagoists Lopatka and Page for this observation. See supra note 29, at 17 (antitrust "represents an uneasy compromise between laissez faire and interventionist visions of public policy.").
48. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985).
49. John S. Wiley, Jr., "After Chicago": An Exaggerated Demise?, 1986 DUKE L.J. 1003, 1005.
50. Indeed, although his Workable Antitrust Policy article seeks to imply that his views are widely accepted, Judge Easterbook criticizes the Supreme Court's decision in Aspen Skiing on precisely these grounds. See Easterbrook, Workable Antitrust Policy, supra note 34, at 1710-11.
51. Lopatka & Page, supra note 29, at 320.
52. See Easterbrook, Workable Antitrust Policy, supra note 34, at 1710 (suggesting antitrust enforcement be limited to cartels and mergers to monopoly).
53. See, e.g., Mitchel v. Reynolds, 24 Eng. Rep. 347 (K.B. 1711). Mitchel has been accepted as part of the American common law of restraint of trade, see RESTATEMENT (SECOND) OF CONTRACTS § 187 (1981), and as the basis of the rule of reason for horizontal restraints under the Sherman Act. See National Soc'y of Prof 1 Eng'rs v. United States, 435 U.S. 679, 689 (1978).
54. See, eg., 2 HERBERT HOVENKAMP, ANTITRUST LAW ¶ 1913 (1988) (citing cases). Cf. Easterbrook, The Limits of Antitrust, supra note 34, at 12 n.23 (criticizing this analysis as improperly placing burden of uncertainty on defendants).
55. See, eg., 2 HERBERT HOVENKAMP, ANTITRUST LAW ¶ 1913 (1988) (citing cases). Cf. Easterbrook, The Limits of Antitrust, supra note 34, at 12 n.23 (criticizing this analysis as improperly placing burden of uncertainty on defendants).
56. 537 F.2d 980, 1019 (9th Cir. 1976) (Browning, C.J., dissenting).
57. 433 U.S. at 68-69 (White, J., concurring).
58. Id. at 53 n.21.
59. To be sure, the political and economic vision that underlay Lochner-era constitutional activism to remove publicly imposed restraints on the process of free exchange also fueled the Sherman Act and antitrust's prohibition on privately imposed restraints. See James May, Antitrust in the Formative Era: Political and Economic Theory in Constitutional and Antitrust Analysis, 1880-1918, 50 OHIO ST. L.J. 257 (1989). Unlike the latter, which was enacted by an elected Congress, the former primarily reflected judicial policy preferences. It is in that sense that 21st-century laissez faire is akin to Lochner activism.
60. Paradox Revisited: Interview with Robert H. Bork, ANTITRUST, Summer 1989, at 17.
61. Richard Hofstadter, What Happened to the Antitrust Movement, in THE PARANOID STYLE IN AMERICAN POLITICS AND OTHER ESSAYS 209 (1967).
62. BENJAMIN FRANKLIN, THE AUTOBIOGRAPHY OF BENJAMIN FRANKLIN AND SELECTIONS FROM His OTHER WRITINGS 222 (Modern Library, ed. 1944).
63. Ralph W. Emerson, lecture, quoted in THE PENGUIN DICTIONARY OF QUOTATIONS 155 (J.M. Cohen & M.J. Cohen eds., 1977).
64. Lawrence A. Sullivan, Economics and More Humanistic Disciplines: What Are the Sources of Wisdom for Antitrust?, 125 U. PA. L. REV. 1214, 1219 (1977).
65. PAGE SMITH, THE NATION COMES OF AGE 28 (1981) See also id. at 894 (Americans reconcile differences in personal wealth with notion that men were born equal with view "that every American had, at least theoretically, an equal opportunity to define himself by making money").
66. PAGE SMITH, THE NATION COMES OF AGE 28 (1981) See also id. at 894 (Americans reconcile differences in personal wealth with notion that men were born equal with view "that every American had, at least theoretically, an equal opportunity to define himself by making money").
67. Indeed, it is not among the top three noneconomic goals enunciated by Robert Pitofsky in his oft-cited work, The Political Content of Antitrust, 127 U. PA. L. REV. 1051 (1979) (identifying as political goals of antitrust inhibiting antidemocratic political pressure caused by excessive economic concentration, maximizing individual and business discretion, and avoiding concentrations of power that inevitably lead to increased government intervention in the economy).
68. HANS B. THORELLI, FEDERAL ANTITRUST POLICY 1 (1954).
69. WOODROW WILSON, THE NEW FREEDOM 221 (1913).
70. Id. at 173.
71. Eleanor Fox & Lawrence Sullivan, Antitrust - Retrospective and Prospective: Where Are We Coming From? Where Are We Going?, 62 N.Y.U. L. Rev. 936, 940 & n.23(1987) (citing legislative history, President Wilson's address on Trusts and Monopolies, and Louis Brandeis's antitrust work, THE CURSE OF BIGNESS). See also Edwin J. Hughes, The Left Side of Antitrust: What Fairness Means and Why it Matters, 77 MARQ. L. REV. 265, 294 & n.82 (1994) (citing additional legislative history from 1914).
72. Eleanor Fox & Lawrence Sullivan, Antitrust - Retrospective and Prospective: Where Are We Coming From? Where Are We Going?, 62 N.Y.U. L. Rev. 936, 940 & n.23(1987) (citing legislative history, President Wilson's address on Trusts and Monopolies, and Louis Brandeis's antitrust work, THE CURSE OF BIGNESS). See also Edwin J. Hughes, The Left Side of Antitrust: What Fairness Means and Why it Matters, 77 MARQ. L. REV. 265, 294 & n.82 (1994) (citing additional legislative history from 1914).
73. H.R. REP. No. 1191, 81st Cong., 2d Sess. 8 (1949).
74. 21 CONG. REC. 2457 (1890).
75. 21 CONG. REC. 3151-52 (1890) (remarks of Senator Hoar) (cited in United States v. du Pont & Co., 351 U.S. 377, 390 & n.15 (1956)).
76. Harlan M. Blake & William K. Jones, Toward a Three-Dimensional Antitrust Policy, 65 COLUM. L. REV. 422, 428 (1965) (discussing Montague & Co. v. Lowry, 193 U.S. 38 (1904)). The article also discusses a number of other precedents that support the political objective of protecting individual freedom and opportunity.
77. Northern Pac. Ry. v. United States, 356 U.S. 1, 6 (1958) (emphasizing how tied sales deny rivals free access to the product based on power or leverage rather than a superior product or lower price); International Salt Co. v. United States, 332 U.S. 392, 396-97 (1947).
78. See, e.g., Harlan M. Blake & William K. Jones, In Defense of Antitrust, 65 COLUM. L. REV. 377, 383-84 (1965).
79. Hofstadter, supra note 50, at 211.
80. F.M. SCHERER & DAVID ROOS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 682 (3d ed. 1990). This conclusion may not apply, however, for products where network effects so strong relative to the intrinsic value of rival products that consumers will always prefer a single product. Even here,Jacksonian values point to creating a market where rival, interoperable products operate under a uniform standard, as opposed to the assignment of proprietary rights to a single firm. In those instances where assignment of rights to a single firm would be demonstrably efficient, however, Jacksonian and efficiency values are in conflict.
81. 8WOODROW WILSON, Address to the American Electric Railway Ass'n (Jan. 29, 1915), in THE MESSAGES AND PAPERS OF WOODROW WILSON 101, 101-02 (Albert Shaw ed., 1924).
82. If rivals conspire without any plausible efficiency justification, courts are likely to find the practice to be illegal per se. If a monopolist engages in exclusionary conduct without any efficiency justification, this will be held illegal under traditional Section 2 standards.
83. The debate stems from language in United States v. Griffith, 334 U.S. 100, 107 (1948), that "the use of monopoly power, however lawfully acquired, to foreclose competition, to gain a competitive advantage, or to destroy a competitor, is unlawful." For an effort to contain that language to the acquisition of monopoly power in a second market, see 3 PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW 90-91 (rev. ed. 1996).
84. As Lopatka & Page observe, supra note 29, at 345, network effects were present in the market for 8-track music tapes, but that did not prevent their replacement by audio cassettes and later compact discs.
85. The Supreme Court, in United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 390 (1956), cited with approval the remarks of Sherman Act co-author Senator Hoar, who said that monopoly involved something more than extraordinary commercial success, "that it involved something like the use of means which made it impossible for other persons to engage in fair competition." 21 CONG. REC. 3151 (1889).
86. See, e.g., Reiter v. Sonotone Corp., 442 U.S. 330 (1979) (broad, consumer-oriented definition of whose "business or property" injuries may be compensated for under Section 4 of the Clayton Act) ; U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (1992, revised 1997), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13, 104 (efficiency defense in mergers only available if efficiencies "sufficient to reverse the merger's potential to harm consumers in the relevant market"); Lande, supra note 10.