From Indiana Dentists to California Dental: Presumptions and competitive effects in antitrust law

Antitrust Law Journal

Volumn 68, Issue 3, 2001, Pages 735-751

  Kattan, Joseph ^a  

^a NONE

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EID: 0035586288     PISSN: 00036056     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (74)

1. 356 U.S. 1, 7-8 (1958).
2. Standard Oil Co. of Cal. v. United States, 337 U.S. 293, 305-06 (1949).
3. See Jonathan B. Baker, Per Se Rules in the Antitrust Analysis of Horizontal Restraints, 36 ANTITRUST BULL. 733, 738 (1992); Jonathan B. Baker, Promoting Innovation Competition Through the Aspen/Kodak Rule, 7 GEO. MASON L. REV. 495 (1999).
4. See Jonathan B. Baker, Per Se Rules in the Antitrust Analysis of Horizontal Restraints, 36 ANTITRUST BULL. 733, 738 (1992); Jonathan B. Baker, Promoting Innovation Competition Through the Aspen/Kodak Rule, 7 GEO. MASON L. REV. 495 (1999).
5. See C. Frederick Beckner & Steven C. Salop, Decision Theory and Antitrust Rules, 67 ANTITRUST L.J. 41, 62-64 (1999); Timothy J. Muris, The New Rule of Reason, 57 ANTITRUST L.J. 859 (1989).
6. See C. Frederick Beckner & Steven C. Salop, Decision Theory and Antitrust Rules, 67 ANTITRUST L.J. 41, 62-64 (1999); Timothy J. Muris, The New Rule of Reason, 57 ANTITRUST L.J. 859 (1989).
7. A similar analysis can, of course, be applied to presumptions of legality.
8. 476 U.S. 447 (1986).
9. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 506 U.S. 209, 225 (1993).
10. 119 S. Ct. 1604 (1999).
11. Id. at 1612.
12. Id. at 1621.
13. California Dental Ass'n v. FTC, No. 96-70409, slip op. at 10935 (9th Cir. Sept. 5, 2000).
14. Stephen Calkins, California Dental Association: Not a Quick Look But Not the Full Monty, 67 ANTITRUST L.J. 495, 521 (2000).
15. Broadcast Music, Inc. v. CBS, Inc., 441 U.S. 1, 19-20 (1979).
16. See ROBERT BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF 269 (1978).
17. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977).
18. NYNEX Corp. v. Discon, Inc., 119 S. Ct. 493 (1998); Northwest Wholesale Stationers v. Pacific Stationery & Printing, Inc., 472 U.S. 284 (1985).
19. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984). See Mozart Co. v. Mercedes-Benz of N. Am., Inc., 833 F.2d 1342 (9th Cir. 1987) (recognizing efficiency defense); Federal Trade Commission and U.S. Department of Justice, Antitrust Guidelines for the Licensing of Intellectual Property § 5.3 (1995), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,132 (enforcement agencies will challenge tying only where it produces adverse effects on competition in the market for the tied product that are not outweighed by efficiency justifications).
20. Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717 (1988); Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984).
21. State Oil v. Kahn, 118 S. Ct. 275 (1997).
22. Broadcast Music, Inc. v. CBS, Inc., 441 U.S. 1 (1979).
23. 506 U.S. 447, 459 (1993).
24. 509 U.S. 209, 225 (1993).
25. NYNEX Corp. v. Discon, Inc., 119 S. Ct. 493, 499 (1998) (quoting 3 PHILLIP AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 651d, at 80 (1996)) (internal quotations omitted).
26. Calkins, supra note 14, at 522.
27. For a contrary view, see Baker, Promoting Innovation Competition through the Aspen/Kodak Rule, supra note 3.
28. NCAA v. Board of Regents, 468 U.S. 85 (1984).
29. See U.S. Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 589, 594 (1st Cir. 1993) (quick look cases "contracted the per se rule").
30. 435 U.S. 679 (1978).
31. Catalane, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980).
32. 476 U.S. at 460.
33. Id. at 461.
34. Id. at 459.
35. Id. at 460 (quoting NCAA, 468 U.S. at 109-10).
36. Id.
37. Id.
38. Id. at 460-61 (quoting 7 PHILLIP AREEDA, ANTITRUST LAW ¶ 1511 at 429 (1986)).
39. Id. at 460-61 (quoting 7 PHILLIP AREEDA, ANTITRUST LAW ¶ 1511 at 429 (1986)).
40. Calkins, supra note 12, at 524.
41. Id. at 2019 n.3
42. Massachusetts Bd. of Registration in Optometry, 104 F.T.C. 549 (1988).
43. Id. at 604.
44. 110 F.T.C. at 605-07.
45. 121 F.T.C. 190 (1996), aff'd, 128 F.3d 720 (9th Cir. 1997), rev'd, 119 S. Ct. 1604 (1999).
46. See Joel I. Klein, A "Stepwise" Approach for Analyzing Horizontal Agreements Will Prove Needed Structure to Antitrust, ANTITRUST, Spring 1998, at 41, 42. For an insightful criticism of this approach, see William Kolasky, Counterpoint: The Department of Justice's "Stepwise" Approach Imposes Too Heavy a Burden on Parties to Horizontal Agreements, ANTITRUST, Spring 1998, at 41, 43.
47. See Joel I. Klein, A "Stepwise" Approach for Analyzing Horizontal Agreements Will Prove Needed Structure to Antitrust, ANTITRUST, Spring 1998, at 41, 42. For an insightful criticism of this approach, see William Kolasky, Counterpoint: The Department of Justice's "Stepwise" Approach Imposes Too Heavy a Burden on Parties to Horizontal Agreements, ANTITRUST, Spring 1998, at 41, 43.
48. Federal Trade Commission and U.S. Department of Justice, Antitrust Guidelines for Collaborations Among Competitors § 3.3 (2000), available at http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf [hereinafter Competitor Collaboration Guidelines].
49. Id. § 1.2.
50. Id. § 3.3.
51. Id. § 3.31. In a similar vein, a recent article by a senior Justice Department economist suggests that defendants should have the burden of persuasion that restrictions that "eliminate independent decision making by participants over a strategy central to competition" are justified by a social benefit that cannot be achieved by less restrictive means. Gregory J. Werden, Antitrust Analysis of Joint Ventures: An Overview, 66 ANTITRUST L.J. 701, 720 (1998). Under this approach, a collaboration of two firms with 5 percent market shares that requires them to market a jointly developed product to the exclusion of prior-generation products developed alone could be condemned unless the defendants could satisfy enforcers that the restriction is supported by strong efficiencies that cannot be achieved through less restrictive means.
52. Id.
53. It is true that some cases involving conduct that was once condemned as per se unlawful might also be decided on the basis of characterization and efficiencyjustifications. For example, in Broadcast Music, the Supreme Court characterized the conduct at issue as potentially subject to per se condemnation, but then determined that per se condemnation was inappropriate because of the immense efficiencies offered by the licensing arrangement at issue in this case. But in that case the existence of an efficiency was used as the predicate for a full rule of reason analysis of conduct that traditionally would have been condemned without any analysis. In other words, the Court recognized that the reflexive application of presumptions would result in the condemnation of procompetitive conduct. The "quick look" advocated by the enforcement agencies, however, has been used in the opposite way to condemn conduct traditionally subject to rule of reason analysis without any consideration of its competitive effects.
54. Timothy J. Muris, The Federal Trade Commission and the Rule of Reason: In Defense of Massachusetts Board, 66 ANTITRUST L.J. 773, 800-01 (1998).
55. Robert Pitofsky, Proposals for Revised United States Merger Enforcement in a Global Economy, 81 GEO. L.J. 195, 210 (1992).
56. Recent merger cases, such as FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997), confirm that enforcers have good reason to maintain a skeptical attitude. See also FTC v. University Health, Inc., 938 F.2d 1206 (11th Cir. 1991).
57. U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines § 4 (1992, revised 1997), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,104.
58. Competitor Collaboration Guidelines, supra note 44, § 3.36(a).
59. Id. § 4.2. Some proponents of the "quick look" approach argue that the analysis set forth above is incomplete unless it can successfully reconcile its support for market power screens, which absolve defendants of liability, with its opposition to shortcuts used to establish liability. But there is no conflict to reconcile here. In a market economy, freedom of contract is the norm, and it is the burden of those who seek to render market behavior unlawful to establish that it harms economic efficiency or conflicts with other goals that a particular law might promote (such as product safety or environmental quality). Further, universally accepted economic theory holds that firms that lack market power cannot harm competition because consumers have alternatives to dealing with such firms. While even small firms in highly competitive markets conceivably may be able to cause harm to individual consumers because of market imperfections, the cost of the pervasive interference with the workings of the market implied by subjecting such firms to antitrust liability outweighs any possible benefit of such liability. Another way to look at this issue is to ask whether too many meritorious antitrust cases fail based on the use of market power screens. If such cases exist, opponents of market power screens should be easily able to identify them. In contrast, it is easy to point to scores of cases in which antitrust liability for procompetitive conduct was erroneously established based on the use of presumptions of competitive harm.
60. 955 F.2d 457 (6th Cir. 1992).
61. Id. at 471.
62. U.S. Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 589, 594 (1st Cir. 1993). See also General Leaseways, Inc. v. National Truck Leasing Ass'n, 744 F.2d 588, 595 (7th Cir. 1984) ("if the elimination of competition is apparent on a quick look, the practice is illegal per se") (Posner, J.).
63. The "quick look" approach has been endorsed by the courts in two cases in the past ten years. One involved an output restriction that the court believed to be identical in substance to that held unlawful in NCAA (Chicago Prof'l Sports Ltd. Partnership v. National Basketball Ass'n, 951 F.2d 667 (7th Cir. 1992)) and the other involved an agreement on price (Law v. NCAA, 134 F.3d 1010 (7th Cir. 1998)).
64. 121 F.T.C. at 299 n.7.
65. Id. at 313.
66. Id. at 314.
67. California Dental Ass'n v. FTC, No. 96-70409, slip op. at 10925 (9th Cir. Sept. 5, 2000).
68. Bates v. State Bar of Ariz., 433 U.S. 350, 377 (1977).
69. 119 S. Ct. at 1613.
70. Id. at 1612.
71. Id. at 1618.
72. Id. at 1618 (Breyer, J., dissenting).
73. On remand, the same Ninth Circuit panel that had decided the case on its way to the Supreme Court concluded that its "earlier look at the voluminous record before the FTC [had been] much too quick" and apologized for "our error in light of the Supreme Court's reliance on our assessment of the record." California Dental Ass'n v. FTC, No. 96-70409, slip op. at 10909 n.1 (9th Cir. Sept. 5, 2000).
74. Competitor Collaboration Guidelines, supra note 44, § 3.31.