The fundamental goal of antitrust: Protecting consumers, not increasing efficiency

Notre Dame Law Review

Volumn 84, Issue 1, 2008, Pages 191-243

  Kirkwood, John B ^a   Lande, Robert H ^b  

^a SEATTLE UNIVERSITY   (United States)

^b UNIVERSITY OF BALTIMORE   (United States)

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EID: 58749087252     PISSN: 07453515     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (399)

1. See Andrew I. Gavil, Antitrust Bookends: The 2006 Supreme Court Term in Historical Context, ANTITRUST, Fall 2007, at 21, 22.
2. The view that consumer protection is the primary goal of the antitrust laws can also be referred to as a "purchaser protection," "buyer protection," "wealth transfer," "consumer impact," "price to consumers," "purchaser property rights," or "distributive" view.
3. Bork explained: Antitrust policy cannot be made rational until we are able to give a firm answer to one question: What is the point of the law-what are its goals? Everything else follows from the answer we give. . . . Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules. ROBERT H. BORK, THE ANTITRUST PARADOX 50 (1993).
4. See Robert H. Bork, Legislative Intent and the Policy of the Sherman Act, 9 J.L. & ECON. 7, 44 (1966). Richard Posner relied upon Bork's analysis of the legislative history for his own assertion that only efficiency can play a role in antitrust.
5. See RICHARD A. POSNER, ANTITRUST LAW 9-32 (2d ed. 2001). For other examples,
6. see Lande, supra note f, at 67-69. By performing a legislative history analysis Bork went far beyond arguing that the best antitrust policy was one concerned only with efficiency. After all, reasonable people could disagree over which policy was optimal. Bork sought to trump what others thought of his efficiency-oriented policy view with his "strict constructionist" legislative history argument. The only question, he correctly maintained, is what Congress cared about. By making a legislative history argument rather than a "here is what is best" argument, Bork vastly raised the stakes. If he could freeze the argument over the goals of the antitrust laws through an analysis of their legislative histories, he would win the argument not just while the Chicago School was in power, but for all time.
7. See Bork, supra note 4. Bork argued that if the legislative debates were analyzed closely, the then-common "populist" views of antitrust-including the belief that the antitrust laws were passed to further a variety of social and political goals, such as combating the political power of big business, or assisting small businesses-were not a concern of Congress.
8. See id. at 39-43. Bork asserted that even if social and political values might have motivated Congress to act, when it came down to the actual operation of the antitrust laws, Congress cared only about increasing the efficiency of our economy.
9. See id. at 43-44. For a general discussion of the influence of Bork's analysis,
10. see William E. Kovacic, The Antitrust Paradox Revisited: Robert Bork and the Transformation of Modern Antitrust Policy, 36 WAYNE L. REV. 1413, 1437-39, 1445-51 (1990).
11. Kovacic, supra note 5, at 1445 n.148, noted: "Reagan antitrust officials repeatedly embraced a single minded efficiency orientation."
12. See also, e.g., Robert E. Taylor, A Talk with Antitrust Chief William Baxter, WALL ST. J., Mar. 4, 1982, at 28 (quoting President Reagan's first Assistant Attorney General (AAG) for Antitrust, William Baxter: "The sole goal of antitrust is economic efficiency"). Likewise, an AAG for Antitrust in the first Bush administration recently proclaimed: [Twenty years ago] the only ones who refused to recognize this [efficiency] consensus were cranks and fuzzy thinkers on the fringe who were hostile to the cold efficiency of the market.... . . . Regardless of the label, the 1980s concept of . . . total surplus . . . seems clearly to be the better animator of antitrust policy than today's "wolf-in-sheep's-clothing" version (which is really consumer surplus). It is impossible for me to discern any plausible benefit to interpreting the antitrust laws in a way that ignores productive efficiency whenever it serves to increase producer (as opposed to consumer) surplus.
13. Charles F. Rule, Consumer Welfare, Efficiencies, and Mergers: Statement for the Hearing of the Antitrust Modernization Commission "Treatment of Efficiencies in Merger Enforcement" 5-6 (Nov. 17, 2005), http://govinfo.library.unt.edu/amc/commission-hearings/pdf/Statement-Rule.pdf.
14. See POSNER, supra note 4, at ix ("Almost everyone professionally involved in antitrust today-whether as litigator, prosecutor, judge, academic, or informed observer . . . agrees that the only goal of the antitrust laws should be to promote economic welfare ...."). By economic welfare, Posner means "the economist's concept of efficiency."
15. Id. Posner further asserts that the "wealth-redistribution argument . . . has no implications for the content of antitrust policy."
16. Id. at 24.
17. Douglas H. Ginsburg, An Introduction to Bork (1966), 2 COMPETITION POL'Y INT'L 225, 227-28 (2006).
18. The current AAG for Antitrust Thomas Barnett, said that the "[Supreme] Court has accepted the focus on economic efficiency and the use of economic analysis. Many of the recent decisions reflect no more than an application of these principles to outdated antitrust doctrines." Thomas O. Barnett, Assistant Att'y Gen., U.S. Dep't of Justice, Luncheon Address to the Federalist Society: Antitrust Update: Supreme Court Decisions, Global Developments, and Recent Enforcement 2 (Feb. 29, 2008), available at http://www.usdoj.gov/atr/public/speeches/230627.pdf.
19. The Bush administration's second AAG for Antitrust, R. Hewitt Pate, similarly observed: "'[T] he perfect [balancing] test in theory would of course be one that consistentiy and accurately condemned all, but only, that conduct which leads to a net decrease in economic welfare.'" Edward D. Cavanagh, Trinko: A Kinder, Gentler Approach to Dominant Firms Under the Antitrust Laws?, 59 ME. L. REV. III, 123 n.120 (2007)
20. (quoting R. Hewitt Pate, Testimony Before the Antitrust Modernization Commission Hearing Panel: Exclusionary Conduct: Refusals to Deal and Bundling and Loyalty Discounts 8 (Sept 29, 2005), available at http://govinfo.library.unt.edu/amc/commission-hearings/pdf/Pate-Statement.pdf).
21. In a major speech to the OECD, the Bush Administration's first AAG for Antitrust, Charles James, mentioned only one concern-efficiency. See Charles A. James, Assistant Att'y Gen., U.S. Dep't of Justice, Remarks Before the OECD Global Forum on Competition: International Antitrust in the 21st Century: Cooperation and Convergence 7 (Oct. 17, 2001), available at http://www.usdoj.gov/atr/public/speeches/9330.pdf.
22. The Bush administration's first FTC Chair, Timothy J. Muris, wrote that efficiency enhancing mergers should be approved even if they resulted in higher consumer prices. See Timothy J. Muris, The Government and Merger Efficiencies: Still Hostile After All These Years, 7 GEO. MASON L. REV. 729, 733 (1999) ("Another beneficial change in the 1997 Revised Merger Guidelines is the rejection of a rigid requirement that cost savings must be 'passed on' to consumers."). This is consistent with his earlier article on the subject, which explicitly rejected all consideration of wealth transfer effects on consumers.
23. See Timothy J. Muris, The Efficiency Defense Under Section 7 of the Clayton Act, 30 CASE W. RES. L. REV. 381, 393-402 (1980)
24. [hereinafter Muris, Efficiency Defense].
25. See SECTION OF ANTITRUST LAW, AMERICAN BAR ASSOCIATION, ANTITRUST POLICY OBJECTIVES 4 (2003), available at http://www.abanet.org/antitrust/at-comments/2003/reports/policyobjectives.pdf ("[O]ver time, the evolution of constitutional and economic theories and their perceived importance to antitrust review in combination with political, social and economic events, have led U.S. courts and antitrust agencies to adopt the current, more efficiencies-oriented, understanding of U.S. antitrust policy objectives as part of their interpretation and enforcement of federal antitrust legislation.");
26. id. at 26-27 ("The promotion of competition in terms of efficiencies is the antitrust objective best suited to incorporating economic analysis within a competition review and, accordingly, is a fundamental and necessary competition law objective."). Although this document criticizes other possible antitrust objectives, including protecting small business and promoting national champions, it virtually ignores the wealth transfer effects of market power.
27. William E. Kovacic, The Intellectual DNA of Modern U.S. Competition Law for Dominant Firm Conduct: The Chicago/Harvard Double Helix, 2007 COLUM. BUS. L. REV. 1, 35. Kovacic also quotes Professor Jacobs' description of the prevailing view: "Despite their differences, post-Chicago and Chicago scholars share a common metric. They agree that wealth maximization should be the exclusive goal of antirust policy, and antitrust enforcement should strive to achieve the highest practicable level of consumer welfare. They eschew the multivalent inquiries informing the Modern Populists' approach in favor of the single-minded pursuit of allocative efficiency."
28. Id. at 24 n.67
29. (quoting Michael S. Jacobs, An Essay on the Normative Foundations of Antitrust Economics, 74 N.C. L. REV. 219, 242 (1995)).
30. Likewise, Kovacic concludes that "it is difficult to identify over the past twenty years enforcement actions that the FTC or the Justice Department predicated upon the achievement of goals other than the enhancement of economic efficiency." William E. Kovacic, The Modem Evolution of U.S. Competition Policy Enforcement Norms, 71 ANTITRUST L.J. 377, 464 (2003).
31. "Consumers' surplus" is the difference between what something is worth to consumers and the price they pay for it. See LUIS M.B. CABRAL, INTRODUCTION TO INDUSTRIAL ORGANIZATION 16 (2000).
32. Unless noted otherwise, we use the term "consumers" to include all individual or business purchasers of products and services, regardless whether they are the ultimate end users. For the legislative and policy basis of this definition, see infra notes 45-47 and accompanying text.
33. Put differendy, the antitrust laws define certain private property rights and protect them from being stolen by firms that have acquired market power without justification.
34. Supracompetitive pricing not only forces consumers to pay more. It also causes a form of economic inefficiency called allocative inefficiency: To raise prices a monopoly reduces output from the competitive level. The goods no longer sold are worth more to would-be purchasers than they would cost society to produce. This foregone production of goods worth more than their cost is pure social loss and constitutes the "allocative inefficiency" of monopoly. For example, suppose that widgets cost $1.00 in a competitive market (their cost of production plus a competitive profit). Suppose a monopolist would sell them for $2.00. A potential purchaser who would have been willing to pay up to $1.50 will not purchase at the $2.00 level. Since a competitive market would have sold [the] widgets for less than they were worth to him, the monopolist's reduced production has decreased the consumer's satisfaction without producing any countervailing benefits for anyone. This pure loss is termed "allocative inefficiency." For an extended discussion and formal proof that monopoly pricing creates allocative inefficiency, see E. MANSFIELD, MICROECONOMICS: THEORY AND APPLICATIONS 277-92 (4th ed. 1982).
35. Robert H. Lande, The Rise and (Coming) Fall of Efficiency as the Ruler of Antitrust, 33 ANTITRUST BULL. 429, 433 n.17 (1988).
36. For a more detailed explanation of this diagram, see BORK, supra note 3, at 107-15.
37. Id. The price increase transfers the "consumers' surplus" in this rectangle to the monopoly or cartel. For the definition of "consumers' surplus,"
38. see supra note 13.
39. BORK, supra note 3, at 91.
40. Id. at 111. Bork also rejected other possible congressional concerns, such as a concern with small business welfare.
41. Id. For excellent summaries of the arguments regarding the wisdom of a large number of possible antitrust goals,
42. see John J. Flynn, Antitrust Jurisprudence: A Symposium on the Economic, Political and Social Goals of Antitrust Policy, 125 U. PA. L. REV. 1182 (1977);
43. Symposium, The Goals of Antitrust: A Dialogue on Policy, 65 COLUM. L. REV. 363 (1965).
44. For the history of this debate, see Harlan M. Blake & William K. Jones, In Defense of Antitrust, 65 COLUM. L. REV. 377, 377-82 (1965).
45. Bork, supra note 4, 12-21.
46. See id.
47. See BORK, supra note 3, at 98-101.
48. Bork also argued that only an efficiency orientation was administrable. He made a convincing case that even if there were any doubt as to congressional intent-he, of course, had none-the antitrust laws should be construed in an administrable manner. Since a social-political framework was so amorphous, he argued, administrability concerns also militated that the antitrust laws should be interpreted solely as a means of increasing economic efficiency. Indeed, Bork even pronounced all contrary views as being so incapable of predictable and administrable use as to be "unconstitutional." Robert H. Bork, The Role of the Courts in Applying Economics, 54 ANTITRUST L.J. 21, 24 (1985).
49. See Bork, supra note 4, at 26-31.
50. Id. at 7.
51. BORK, supra note 3, at 91.
52. We are indebted to Professor Steven Salop for this and related articulations of this concept.
53. Under Bork's definition, "consumer welfare" is improved when economic efficiency is increased even if consumers in the relevant market are harmed. Technically, Bork can make this claim because the owners of monopolies and cartels are also consumers. Indeed, in the classic tradeoff situation, they are the "consumers" who principally benefit from a merger that raises price but increases efficiency. (Consumers in other markets may also benefit if the merger lowers costs, because that frees up resources for use in other markets, which will increase supply in those markets and may lower prices.) However, those who purchase from the merged firm-the consumers that Congress wanted to protect-are substantially worse off. They gain none of the efficiency benefits, absorb some of the allocative inefficiency losses, and have their surplus extracted by the firms with market power.
54. Many commentators have pointed out that Bork's terminology was confusing or misleading because economic efficiency, as commonly measured, consists of the sum of consumers' surplus and producers' surplus. The more accurate synonym for economic efficiency is total welfare (or a variant such as aggregate welfare, total surplus, or wealth maximization).
55. See Jonathan B. Baker, Competition Policy As a Political Bargain, 73 ANTITRUST L.J. 483, 515 (2006);
56. Daniel J. Gifford & Robert T. Kudrle, Rhetoric and Reality in the Merger Standards of the United States, Canada, and the European Union, 72 ANTITRUST L.J. 423, 430-32 (2005);
57. Kirkwood, supra note f, at 47 n.11.
58. For an analysis of a Canadian case that incorrecdy blurred this distinction, see infra note 171; see also Alan A Fisher et al., Legalizing Merger to Monopoly and Higher Prices: The Canadian Competition Tribunal Gets It Wrong, ANTITRUST, Fall 2000, at 71 (analyzing wealth transfer and welfare in the context of the Canadian merger case).
59. As Judge Bork noted, the task of ascertaining the will of Congress should be "an attempt to construct the thing we call 'legislative intent' using conventional methods of collecting and reconciling the evidence provided by the Congressional Record." Bork, supra note 4, at 7 n.2.
60. 15 U.S.C. §§ 1-7 (2006). For similar statements from the legislative history of the Clayton Act, 15 U.S.C. §§ 12-27 (2006),
61. see Lande, supra note †, at 128;
62. for similar statements from the legislative history of the Celler-Kefauver Act, 15 U.S.C. §§ 18, 21 (2006),
63. see Lande, supra note f, at 135-36; for similar statements from the legislative history of the Federal Trade Commission Act, 15 U.S.C §§ 41-58 (2006),
64. see Lande, supra note †, at 112-14.
65. See 21 CONG. REC. 2462 (1890) (statement of Sen. Sherman) (asking Congress to protect the public from trusts that "restrain commerce, turn it from its natural courses, increase the price of articles, and therefore diminish the amount of commerce");
66. id. at 2460 (statement of Sen. Sherman) (arguing that it is sometimes contended that trusts reduced prices to the consumer, "but all experience shows that this saving of cost goes to the pockets of the producer");
67. id. at 2457 (statement of Sen. Sherman) ("[Trusts tend to] advance the price to the consumer.").
68. See, e.g., id. at 2558 (statement of Sen. Pugh) ("[T] rusts . . . [destroy] competition in production and thereby increas[e] prices to consumers . . . .").
69. Bork, supra note 4, at 16.
70. 21 CONG. REC. 2461 (1890) (statement of Sen. Sherman) (quoting Sen. George).
71. Id.
72. Id. at 2614 (statement of Rep. Coke).
73. Id. at 4101 (statement of Rep. Heard).
74. Id. at 4098 (statement of Rep. Taylor).
75. Id. at 4103 (statement of Rep. Fithian) (reading, with apparent approval, a letter from a constituent).
76. Id. at 2728 (statement of Sen. Hoar).
77. Id. at 1768 (statement of Sen. George).
78. A number of decisions explicitly refer to protecting buyers, purchasers or customers (not just consumers). For example, the Court noted in Associated General Contractors of California, Inc. v. California, 459 U.S. 519, 538 (1983): "As the legislative history shows, the Sherman Act was enacted to assure customers the benefits of price competition."
79. See also Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 489 (1968) ("The reason is that he has paid more than he should and his property has been illegally diminished, for had the price paid been lower his profits would have been higher. ... As long as the seller continues to charge the illegal price, he takes from the buyer more than the law allows.");
80. La. Wholesale Drug Co. v. Hoechst Marion Roussel, Inc. (In re Cardizem CD Antitrust Litig.), 332 F.3d 896, 904 (6th Cir. 2003) ("[T]he very purpose of antitrust law is to ensure that the benefits of competition flow to purchasers of goods affected by the violation.").
81. It would be a complicated, time-consuming, and useless task to attempt to determine precisely what happened to each good and service sold by a cartel. Depending upon the product, some would be consumed by direct purchasers, some would be resold, and others would be incorporated into different products.
82. Many of the complexities that would arise if the standard were limited to the welfare of ultimate consumers are analyzed in Gregory J. Werden, Monopsony and the Sherman Act: Consumer Welfare in a New Light, 74 ANTITRUST L.J. 707 (2007). These problems can all be avoided, however, by focusing only upon the direct purchasers.
83. It was not until 1938 that the first modern and rigorous discussion of allocative efficiency appeared. See Harold Hotelling, The General Welfare in Relation to Problems of Taxation and of Railway and Utility Rates, 6 ECONOMETRICA 242 (1938).
84. See ALFRED MARSHALL, PRINCIPLES OF ECONOMICS (1890). Although he devoted seventeen pages of the 1890 edition of this landmark treatise to "The Theory of Monopolies," only one footnote included even an arguable reference to the concept and the triangle we know so well today was not drawn anywhere in this book.
85. See id. at bk. V, ch. XIV.
86. See RICHARD HOFSTADTER, What Happened to the Antitrust Movement?, in THE PARANOID STYLE IN AMERICAN POLITICS AND OTHER ESSAYS 188, 200 (1965) ("The Sherman Act was framed and debated in the pre-expert era, when economists as a professional group were not directly consulted by legislators. But even if they had been, they would have given mixed and uncertain advice.").
87. See, e.g., Ida M. Tarbell, The History of the Standard Oil Company, MCCLURE'S MAG., 1902-1904.
88. See generally RON CHERNOW, TITAN: THE LIFE OF JOHN D. ROCKEFELLER, SR. (1998).
89. See CHERNOW, supra note 51.
90. For an excellent and thorough analysis of the Standard Oil case, see James May, The Story (/Standard Oil Co. v. United States, in ANTITRUST STORIES 7 (Eleanor M. Fox & Daniel A. Crane eds., 2007). May analyzed, inter alia, over 1800 pages of briefs filed by both parties and never found an attempt by the government to condemn the Standard Oil Company for being inefficient.
91. See 21 CONG. REC. 2457, 2460 (1890) (statement of Sen. Sherman) ("[The bill] does not in the least affect combinations in aid of production where there is free and fair competition. ... It is sometimes said of these combinations [the monopolistic trusts] that they reduce prices to the consumer by better methods of production, but all experience shows that this saving of cost goes to the pockets of the producer.");
92. see also id. at 2457 (statement of Sen. Sherman) ("Experience has shown that they are the most useful agencies of modern civilization. They have enabled individuals to unite to undertake enterprises only attempted in former times by powerful governments. The good results of corporate power are shown in the vast development of our railroads and the enormous increase of business and production of all kinds.").
93. 15 U.S.C §§ 41-58 (2006). For an example of Congress' appreciation of corporate efficiency,
94. see 51 CONG. REC. 12, 146 (1914) (statement of Sen. Hollis) ("Fair competition is competition which is successful through superior efficiency. Competition is unfair when it resorts to methods which shut out competitors who, by reason of their efficiency, might otherwise be able to continue in business and prosper. Without the use of unfair methods no corporation can grow beyond the limits imposed upon it by the necessity of being as efficient as any competitor. The mere size of a corporation which maintains its position solely through superior efficiency is ordinarily no menace to the public interest.");
95. see also id. at 11,231 (statement of Sen. Robinson) ("Nearly all normal business men can distinguish between 'fair competition' and 'unfair competition.' Efficiency is generally regarded as the fundamental principle of the former-efficiency in producing and in selling, while oppression or advantage obtained by deception or some questionable means is the distinguishing characteristic of 'unfair competition.'" (quoting William H.S. Stevens, a leading economist of the times));
96. id. at 8854
97. (statement of Rep. Morgan) ("To enable us to secure all the benefits and advantages of the large industrial unit and escape the evils and dangers thereof. ... To relieve doubt and uncertainty in business, develop trade, encourage commerce, and promote enterprise."). Additional concern for efficiency can be found in the earliest proceedings of the FTC, which noted its desire in making rulings and orders "to promote business efficiency and, within the limits of practicability, to cooperate with the business world in developing the best standards of commercial ethics." 1916 FTC ANN. REP. 26.
98. 15 U.S.C. §§ 12-27 (2006). For an example of Congress' appreciation of corporate efficiency, see 51 CONG. REC. 14,223 (statement of Senator Thompson) ("The chief purpose of antitrust legislation is for the protection of the public, to protect it from extortion practiced by the trust, but at the same time not to take away from it any advantages of cheapness or better service which honest, intelligent cooperation may bring."). For other discussions of the legislative history,
99. see Muris, Efficiency Defense, supra note 10, at 393-402.
100. 15 U.S.C. §§ 18, 21 (2006). For an example of Congress' appreciation of corporate efficiency, see Corporate Merger and Acquisitions: Hearings on H.R 2734 Before the Subcomm. of the S. Comm. on the Judiciary, 81st Cong., 2d Sess. 59-61 (1949-1950) (statement of Rep. Emanuel Celler) ("[The] main reason for antitrust laws is that we believe the competitive system is more efficient than monopoly.");
101. see also id. at 308 (statement of James L. Donnelly, Executive Vice President of the Illinois Manufacturers' Association) (expressing concern over the bill's "effect on prices, the effect on productive efficiency").
102. Since the legislative history is so clear, one might ask how the efficiency orientation could have gained so much ground. We present three possible, non-exclusive explanations:
103. The presidency of President Reagan beginning in 1980 put into power enforcers and judges who were predisposed to accept the efficiency explanation.
104. The only available alternative to the efficiency model during the transition to the Reagan administration was the big is bad/small is good, social/political model, which was correctly perceived by decisionmakers as almost standardless and very difficult to administer in a predictable manner. See, e.g., Bork, supra note 4, at 9. By contrast, the transfer approach is just as easy to administer, and just as predictable, as the efficiency model.
105. See Alan A. Fisher et al., Afterword: Could a Merger Lead to Both a Monopoly and a Lower Price?, 71 CAL. L. REV. 1697,1705-06 (1983)
106. [hereinafter Fisher et al., Afterword];
107. Alan A Fisher & Robert H. Lande, Efficiency Considerations in Merger Enforcement, 71 CAL. L. REV. 1580, 1684-91 (1983);
108. Alan A Fisher et al., Price Effects of Horizontal Mergers, 77 CAL. L. REV. 777, 809-18 (1989)
109. [hereinafter Fisher et al., Horizontal Mergers]. This model was not, however, available during the dawn of the Reagan administration, so it perhaps was natural that the decisionmakers instead opted for the model that economists were using-economic efficiency.
110. Confusion over the term "consumer welfare." Bork's extremely influential work advocated maximizing "consumer welfare," a seemingly pro-consumer objective. However, he defined the term so that it included a concern with the welfare of monopolies and cartels; prices could rise and "consumer welfare" could still increase. His deceptive use of the term "consumer welfare," instead of the more honest term "total welfare," was a brilliant way to market the efficiency objective. See supra notes 28-30 and accompanying text
111. While Congress perceived that the trusts of the period were raising prices, the actual situation is much more complex. See Lande, supra note †, at 97-98.
112. As a double check, we challenge each reader of this Article to find ten intelligent friends and ask each: "Why might Congress have condemned cartels for raising prices?" We strongly doubt that any of them-other than friends with antitrust or economic training-would guess that the main problem with cartels is that they cause inefficiency. Author Lande has asked his antitrust law students these questions on many occasions. There is no doubt that the students find both efficiency explanations implausible. Some students often have a hard time even understanding the allocative inefficiency explanation.
113. For a discussion of the absence of legislative history on these issues, for those few other statements from the legislative history that did evidence a concern with small businesses, and for an explanation why this concern was meant to be subordinate to the Congressional concern for consumers, see Lande, supra note †, at 100-04.
114. The legislative history citations in this subpart were taken from Werden, supra note 47. This Article's interpretation of these statements from the legislative history, however, should not necessarily be attributed to Dr. Werden.
115. 21 CONG. REC. 2461 (1890)
116. (quoting Sen. George) (internal quotation marks omitted).
117. Id. at 2470.
118. Id. at 4098.
119. Id. at 4099. Dr. Werden noted:
120. Falling cattle prices and the role of the beef trust in bringing them about prompted the Senate to appoint a Select Committee on the Transportation and Sale of Meat Products to investigate whether "there exists any combination of any kind ... by reason of which the prices of beef and beef cattle have been so controlled or affected as to diminish the price paid to producer without lessening the cost of meat to the consumer." After taking extensive testimony, the Committee submitted its report on May 1, 1890. The report reached no conclusion as to whether the companies had entered into "a combination . . . not to bid against each other in the purchase of cattle," but had no doubt that "the principal cause of the depression in the prices paid to the cattle raiser, and of the remarkable fact that the cost of beef to the consumers is not decreased in proportion, comes from the artificial and abnormal centralization of markets." The report urged the passage of the Sherman Act, which became law two months later when President Harrison signed the bill. Werden, supra note 47, at 715-16 (internal citations omitted).
121. We can also imagine a third situation in which antitrust law might want to protect small business. Suppose a firm was in the process of becoming a monopoly by systematically violating a non-antitrust law. For example, suppose the firm systematically used illegal child labor or paid less than the minimum wage, and these law violations gave it a significant cost advantage over its small competitors. To avoid this unfair competition, antitrust law might want to step in and protect the small competitors. To be sure, these law violations could lead to lower prices for consumers, at least in the short term. But consumers are entitled only to the absence of supracompetitive pricing, not to the low prices that could result from violations of the child labor or minimum wage laws. For this reason, lower prices caused by law violations should not count as consumer benefits under the antitrust laws.
122. See infra Part III.B. Buyers' cartels that lower prices to subcompetitive levels also can be condemned to the extent they cause allocative inefficiency. If the buyers' cartel can perfectly price discriminate, however, this allocative inefficiency might not arise.
123. See infra note 170 and accompanying text.
124. 845 A.2d 552 (Me. 2004).
125. Plaintiffs also won significant non-monetary relief that restructured anticompetitive pricing methods in the industry. Id. To avoid industry-wide bankruptcy, the plaintiffs settled with the buyers' cartel for roughly $5 million.
126. See Robert H. Lande & Joshua P. Davis, Benefits from Private Antitrust Enforcement: An Analysis of Forty Cases, 42 U.S.F. L. REV. 879, 890 n.41 (2008).
127. In the long run, successful predation causes consumers to pay supracompetitive prices. Successful predation thus could be condemned under either a "stealing from consumers" approach, or an efficiency rationale, because the long term supracompetitive prices cause allocative inefficiency. See 2B PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 403b (3d ed. 2007);
128. 3 PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 723(a) (2d ed. 2002).
129. Pricing below cost does not, of course, harm consumers. However, it does give rise to allocative inefficiency, and thus should be condemned under an efficiency model. See 3 AREEDA & HOVENKAMP, supra note 71, ¶ 739(c).
130. In order to avoid chilling legitimate price cuts, antitrust liability for failed predation should only be imposed if the plaintiff clearly proves that prices were below the competitive level and the defendant cannot establish any justification for its behavior. The defendant would be excused, for example, if it could show that it was offering a reasonable introductory discount on a new product
131. There is no reason to presume these businesses are not equally efficient 75 15 U.S.C. §§ 13, 13a-c, 21a (2006).
132. See Texaco Inc. v. Hasbrouk, 496 U.S. 543, 565-66 (1990). "Primary line" discrimination, in contrast, is discrimination that injures competing sellers. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 220 (1993).
133. See FTC v. Morton Salt Co., 334 U.S. 37, 43 (1948) ("The legislative history of the Robinson-Patman Act makes it abundandy clear that Congress considered it to be an evil that a large buyer could secure a competitive advantage over a small buyer solely because of the large buyer's quantity purchasing ability.").
134. See Terry Calvani & Gilde Breidenbach, An Introduction to the Robinson-Patman Act and Its Enforcement by the Government, 59 ANTITRUST L.J. 765, 770 (1991 ) ("It is quite clear that the underlying predicate of the Robinson-Patman Act was not consumer welfare. Rather, the Act was protectionist legislation.").
135. See John B. Kirkwood, Buyer Power and Exclusionary Conduct: Should Brooke Group Set the Standards for Buyer-Induced Price Discrimination and Predatory Bidding?, 72 ANTITRUST L.J. 625, 647-51 (2005) (describing five scenarios in which substantial, persistent, and non-cost-justified discrimination induced by a powerful buyer can harm consumers).
136. See, e.g., Coastal Fuels of P.R., Inc. v. Caribbean Petroleum Corp., 175 F.3d 18, 23 (1st Cir. 1999) ("[T]he Robinson-Patman Act, unlike the Sherman Act, was meant less to protect consumer welfare than to protect small merchants . . . .");
137. Rebel Oil Co. v. Ad. Richfield Co., 51 F.3d 1421, 1446 (9th Cir. 1995) ("The Robinson-Patman Act stands on entirely different footing than the Sherman Act and Clayton Act. . . . [T]he framers of the Sherman and Clayton Acts intended to proscribe only conduct that threatens consumer welfare .... Fairness and protection of secondary-line purchasers are the concerns of the Robinson-Patman Act....").
138. To the contrary, some decisions are quite clear. When they use the term "consumer welfare," they mean the welfare of consumers, not the welfare of society or cartels. For most other cases, although we cannot be positive, we can still be pretty sure they are not referring to economic efficiency. They do not mention efficiency as an objective and they seem fixated on protecting consumers from higher prices, regardless of cost savings.
139. The Robinson-Patman Act is outside the mainstream because, as noted above, see supra note 80, its principal purpose is not to promote competition but to protect small business from competition in certain circumstances. Since its protectionist features are well known,
140. see, e.g., Kirkwood, supra note 79, we do not discuss the Act here. In fact, when we refer to the antitrust laws in the remainder of this Article, we mean the antitrust statutes other than the Robinson-Patman Act.
141. See supra notes 19-27 and accompanying text.
142. Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979)
143. (citing ROBERT H. BORK, THE ANTITRUST PARADOX 66 (1978)). In Reiter, the Court did not actually endorse Bork's definition of consumer welfare; it never addressed the issue. Moreover, it stated that the treble-damages remedy was passed "as a means of protecting consumers from overcharges resulting from price fixing."
144. Id. Had the Court thought that the true goal of antitrust was to promote efficiency, not protect consumers, it would have said that the treble-damages remedy was passed to deter firms from imposing a deadweight loss on society.
145. See Lande, supra note 16, at 445-47.
146. We are not alone in reaching this conclusion. See Gifford & Kudrle, supra note 30, at 432-33 ("[T]he U.S. courts do not appear to be employing [consumer welfare] in the total-surplus sense that Bork formally attributed to it. That is, the U.S. courts use the phrase, but they appear to be following an antitrust policy predicated on the maximization of consumer surplus rather than total surplus.").
147. 509 U.S. 209 (1993).
148. See supra note 72 and accompanying text.
149. See infra text accompanying notes 109-110.
150. See Aaron S. Edlin, Stopping Above-Cost Predatory Pridng, 111 YALE L.J. 941, 947 n.24 (2002) (noting that the Brooke Group Court gave primacy to consumer welfare over total welfare because the Court argued that "prices below cost are not problematic from an antitrust perspective, even though they are allocatively inefficient, because such prices increase consumer welfare").
151. 383 F.3d 1124 (9th Cir. 2004).
152. Id. at 1136 ("Prohibiting a seller from eliminating arbitrage can diminish consumer welfare and allocative efficiency in the long run under some circumstances.");
153. see also infra Part III.A3.b.
154. Kochert v. Greater Lafayette Health Servs., Inc., 463 F.3d 710, 715 (7th Cir. 2006) ('"The principal purpose of the antitrust laws is to prevent overcharges to consumers.'"
155. (quoting Premier Elec. Constr. Co. v. Nat'l Elec. Contractors Ass'n, 814 F.2d 358, 368 (7th Cir. 1987))),
156. cert denied, 127 S. Ct 1328 (2007).
157. See infra note 139 and accompanying text
158. See Frank H. Easterbrook, Workable Antitrust Policy, 84 MICH. L. REV. 1696, 1702-03 (1986). When Congress passed the Sherman Act, the "choice they saw was between leaving consumers at the mercy of trusts and authorizing the judges to protect consumers. However you slice the legislative history, the dominant theme is the protection of consumers from overcharges."
159. Id. This program differs from "one based on 'efficiency,'" though only at the margins.
160. Id. at 1703. At other times, though, Judge Easterbrook has equated consumer welfare with allocative efficiency.
161. See Frank H. Easterbrook, When Is It Worthwhile to Use Courts to Search for Exclusionary Conduct?, 2003 COLUM. BUS. L. REV. 345, 347 ("[C]onsumers' welfare [is] a convenient shorthand for the allocative efficiency costs of monopoly.");
162. see also LAP.D., Inc. v. Gen. Elec. Corp., 132 F.3d 402, 404 (7th Cir. 1997) (Easterbrook, J.) ("Antitrust law is designed to protect consumers from the higher prices-and society from the reduction in allocative efficiency-that occurs when firms with market power curtail output").
163. 127 S. Ct 1069 (2007).
164. 127 S. Ct. 2705 (2007).
165. 416 F.3d 29 (D.C. Cir. 2005).
166. See infra text accompanying notes 111-16 (Weyerhaeuser), text accompanying notes 117-24 (Leegin), and text accompanying notes 129-33 (PolyGram).
167. Cf. BORK, supra note 3, at 91 ("The whole task of antitrust can be summed up as the effort to improve allocative efficiency without impairing productive efficiency so greatly as to produce either no gain or a net loss in consumer welfare." (emphasis added));
168. id. ("These two types of efficiency make up the overall efficiency that determines the level of our society's wealth, or consumer welfare." (emphasis added)). It is possible that the courts did not refer to productive efficiency because they had concluded that a case-by-case assessment of productive efficiency is unworkable, a position that both Bork and Posner have taken.
169. See id. at 126 ("[T]he quantification of the productive efficiency factor . . . renders the problem utterly insoluble.");
170. POSNER, supra note 4, at 112 ("[T] he measurement of efficiency [is] an intractable subject for litigation.");
171. Richard A. Posner, Antitrust Policy and the Supreme Court: An Analysis of the Restricted Distribution, Horizontal Merger and Potential Competition Decisions, 75 COLUM. L. REV. 252, 313 (1975). Contrary to the approach of Bork and Posner, however, it is now customary to examine the efficiency justifications for the defendant's conduct in any rule of reason analysis under § 1 or § 2 of the Sherman Act and in every case under § 7 of the Clayton Act. It seems unlikely, therefore, that productive efficiency and overall efficiency were not identified as antitrust goals because of administrability concerns.
172. See infra notes 131, 133, and accompanying text
173. See also Edlin, supra note 89, at 948 n.25 ("Despite the wish of economists and their fellow travelers that the goal of antitrust be to promote overall efficiency, neither case law nor legislative history [in the U.S.] stands for the proposition that overall economic welfare or wealth maximization trumps low prices.").
174. See supra notes 4, 7 & 8.
175. To be sure, it is even more common for courts to say that the purpose of the antitrust laws is to promote competition or the competitive process. See Kirkwood, supra note †, at 30-31;
176. Werden, supra note 47, at 724-29. Since the courts almost never define competition or the competitive process, however, these formulations do not provide a concrete guide for determining whether or not the antitrust laws have been violated. Suppose that a dominant firm eliminates its only rival by cutting prices and keeping them low. Does that conduct enhance competition or reduce it? The answer depends on the definition of competition. Without a commonly accepted definition, judges have to resolve antitrust issues either by resort to precedent or by specifying the aims of antitrust law more concretely. In recent years, many courts have specified the aims of antitrust more concretely by declaring that the purpose of the antitrust laws is to protect consumers.
177. Our survey covers decisions issued in the last fifteen years as well as a few significant earlier cases. See, e.g., Cantor v. Detroit Edison Co., 428 U.S. 579, 595-96 (1976) ("But all economic regulation does not necessarily suppress competition. On the contrary, public utility regulation . . . controls are necessary to protect the consumer from exploitation.");
178. Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 489 (1968) ("The reason [that the overcharged buyer is entitled to treble damages] is that he has paid more than he should and his property has been illegally diminished, for had the price paid been lower his profits would have been higher. ... As long as the seller continues to charge the illegal price, he takes from the buyer more than the law allows.").
179. 546 U.S. 164 (2006).
180. Id. at 180
181. (quoting Cont'l T. V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 52 n.19 (1977)).
182. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 221 (1993).
183. Id. at 224.
184. Id.
185. Id.
186. See Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 127 S. Ct 1069 (2007).
187. Id. at 1077
188. (quoting Brooke Group, 509 U.S. at 224).
189. Id. at 1077.
190. Id. at 1078.
191. Id.
192. See id.
193. Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct 2705, 2718 (2007)
194. Id. at 2713.
195. See infra notes 135-44 and accompanying text.
196. Leegin, 127 S. Ct at 2716.
197. Id. at 2717 ("Vertical agreements establishing minimum resale prices can have either procompetitive or anticompetitive effects, depending upon the circumstances in which they are formed. And although the empirical evidence on the topic is limited, it does not suggest efficient uses of the agreements are infrequent or hypothetical.").
198. E.g., id. at 2715 ("Resale price maintenance also has the potential to give consumers more options.").
199. Id. at 2722 (noting that inefficient methods hinder consumer welfare "because consumers are required to shoulder the increased expense of the inferior practices");
200. id. at 2722-23 ("The increased costs these burdensome measures generate flow to consumers in the form of higher prices.").
201. Id. at 2723. Altogether, the Court referred to consumer interests twice as often as it referred to efficiency.
202. See id. (twenty-five references to "consumers," "interests of consumers," "harmful to the consumer," and similar terms; three references to "consumer welfare"; and fourteen references to "efficiency," "inefficient," "wasteful," and similar terms).
203. Kochert v. Greater Lafayette Health Servs., Inc., 463 F.3d 710, 715 (7th Cir. 2006)
204. (quoting Premier Elec. Constr. Co. v. Nat'l Elec. Contractors Ass'n, 814 F.2d 358, 368 (7th Cir. 1987)), cert, denied, 127 S. Ct 1328 (2007).
205. La. Wholesale Drug Co. v. Hoechst Marion Roussel, Inc. (In re Cardizem CD Antitrust Litig.), 332 F.3d 896, 904 (6th Cir. 2003)
206. (quoting In re Cardizem CD Antitrust Litig., 105 F. Supp. 2d 618, 651 (E.D. Mich. 2000)). The appellate court added that protecting consumers from higher prices "was undoubtedly a raison d'etre of the Sherman Act when it was enacted in 1890."
207. Id. at 910.
208. Geneva Pharm. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485, 489 (2d Cir. 2004).
209. Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 902-03 (9th Cir. 2008).
210. PolyGram Holding, Inc. v. FTC, 416 F.3d 29, 37 (D.C. Cir. 2005).
211. 110 F.T.C. 549, 602-04 (1988).
212. See PolyGram Holding, 416 F.3d at 35-37.
213. Id. at 36 (emphasis added).
214. Judge Ginsburg's opinion in PolyGram is consistent with the view he expressed to author Lande that mergers ought to be evaluated by their impact on price, not efficiency: "Particularly in view of the infrequency with which efficiency showings can convincingly be made on behalf of a proposed merger, a price-driven standard for mergers would do more to avoid lost efficiencies through over-enforcement (of the Van's, Brown, or PNB sort) than could possibly be lost by the occasional blocking of a merger that would be both price and efficiency enhancing." Lande, supra note 16, at 460 n.118 (quoting Letter from Judge Douglas H. Ginsburg to Robert H. Lande (Feb. 3, 1988)).
215. In a recent article, Judge Ginsburg wrote that the Supreme Court has endorsed "allocative efficiency as the fundamental value underlying the antitrust laws." Ginsburg, supra note 8, at 230. The only cases he cited, however, were decided more than twenty years ago; he did not examine the recent decisions discussed in this chapter. Moreover, Judge Ginsburg simply showed that the older cases rejected populist goals and proclaimed that the ultimate aim of antitrust is consumer welfare. He did not establish that they equated consumer welfare with allocative efficiency rather than with protecting consumers in the relevant market. Although one of the older decisions cited Bork, none of them ever discussed what "consumer welfare" meant.
216. See, e.g., supra note 84 and accompanying text.
217. 253 F.3d 34 (D.C. Cir. 2001).
218. Id. at 58 (emphasis omitted).
219. See Spanish Broad. Sys. of Fla., Inc. v. Clear Channel Commc'ns, Inc., 376 F.3d 1065, 1071-72 (11th Cir. 2004);
220. Morris Commc'ns Corp. v. PGA Tour, Inc., 364 F.3d 1288, 1294 (11th Cir. 2004);
221. Dickson v. Microsoft Corp., 309 F.3d 193, 206 (4th Cir. 2002).
222. SCFC ILC, Inc. v. Visa USA, Inc., 36 F.3d 958, 965 (10th Cir. 1994).
223. Atl. Exposition Servs. Inc. v. SMG, 262 F. App'x 449, 451 (3d Cir. 2008)
224. (quoting Mathews v. Lancaster Gen. Hosp., 87 F.3d 624, 641 (3d Cir. 1996)), cert, denied sub nom. Casper v. SMG, 77 U.S.L.W. 3198 (Oct 6, 2008).
225. Digital Equip. Corp. v. Uniq Digital Techs., 73 F.3d 756, 761 (7th Cir. 1996).
226. 51 F.3d 1421 (9th Cir. 1995).
227. Id. at 1433;
228. see also Abbouds' McDonald's LLC v. McDonald's Corp., 2006-2 Trade Cas. (CCH) ¶ 75,324 (9th Cir. July 7, 2006) (finding that plaintiff failed to "demonstrate that the defendant's alleged conduct had any effect on consumer welfare");
229. Ticketmaster Corp. v. Tickets.com Inc., 127 F. App'x 346, 348 (9th Cir. 2005) ("[The challenged contract clauses] do not unreasonably restrain trade, as there is insufficient evidence in the record that they harm consumer welfare.");
230. MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1136 (9th Cir. 2004) ("Here, a false condemnation could hurt the very interest the antitrust laws seek to protect-consumer welfare.").
231. K.M.B. Warehouse Distribs., Inc. v. Walker Mfg. Co., 61 F.3d 123, 128 (2d Cir. 1995)
232. (quoting Graphic Prods. Distribs. v. Itek Corp., 717 F.2d 1560, 1571 (11th Cir. 1983));
233. see also Hamilton Chapter of Alpha Delta Phi, Inc. v. Hamilton Coll., 128 F.3d 59, 63 (2d Cir. 1997) ("[T]he Sherman Act's essential purpose [is] safeguarding consumer welfare.").
234. Augusta News Co. v. Hudson News Co., 269 F.3d 41, 47 (1st Cir. 2001).
235. LePage's, Inc. v. 3M, 324 F.3d 141, 163 (3d Cir. 2003) (en banc)
236. (quoting Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1183 (1st Cir. 1994)).
237. Rebel Oil defines "consumer welfare" as allocative efficiency. 51 F.3d at 1444 n.15 ("[A]llocative efficiency is synonymous with consumer welfare and is the central goal of the Sherman Act." (citation omitted)). Rebel Oil also states that "an act is deemed anticompetitive under the Sherman Act only when it harms both allocative efficiency and raises prices of goods above competitive levels or diminishes their quality."
238. Id. at 1433. This comment implies that a Sherman Act plaintiff must show harm to allocative efficiency as well as harm to consumers. It is not clear, however, that the Ninth Circuit would preclude liability in situations in which consumers were hurt but allocative efficiency was not The court did not discuss instances in which the two values conflicted and never said it would condone a practice that injured consumers in the relevant market if the practice enhanced allocative efficiency. In the event of a conflict, therefore, the Ninth Circuit may not actually assign preeminence to allocative efficiency. Indeed, in MetroNet, discussed below, the Ninth Circuit distinguished consumer welfare from allocative efficiency and treated consumer welfare as the superior value. 383 F.3d at 1136.
239. See Drug Mart Pharmacy Corp. v. Am. Home Prods. Corp., 472 F. Supp. 2d 385, 402 (E.D.N.Y. 2007) (" ' [T]he antitrust laws are not intended to protect profit margins but consumer welfare.'"
240. (quoting Feldman v. Health Care Serv. Corp., 562 F. Supp. 941, 950 (N.D. Ill. 1982)));
241. Cohlmia v. Ardent Health Servs., L.L.C., 448 F. Supp. 2d 1253, 1263 (N.D. Okla. 2006) ("'[T]he purpose of antitrust law is the promotion of consumer welfare.'"
242. (quoting Ginzburg v. Mem'l Healthcare Sys., Inc., 993 F. Supp. 998, 1015 (S.D. Tex. 1997)));
243. Mumford v. GNC Franchising L.L.G., 437 F. Supp. 2d 344, 354 (W.D. Pa. 2006) ("Congress designed the Sherman Act, after all, to protect consumer welfare by protecting competition itself, not particular competitors.");
244. Golden Bridge Tech., Inc. v. Nokia, Inc., 416 F. Supp. 2d 525, 529 (E.D. Tex. 2006) ("Under the rule of reason analysis a plaintiff must 'show that the defendants' actions amounted to a conspiracy against the market - a concerted attempt to reduce output and drive up prices or otherwise reduce consumer welfare.'"
245. (quoting Consol. Metal Prods., Inc. v. Am. Petroleum Inst., 846 F.2d 284, 292-93 (5th Cir. 1988)));
246. Davray, Inc. v. City of Midlothian, No. Civ. A3:04-CV-0539-B, 2005 WL 1586574, at *13 (N.D. Tex. July 6, 2005) (same);
247. Ramallo Bros. Printing, Inc. v. El Dia, Inc., 392 F. Supp. 2d 118, 129 (D.P.R. 2005) ("[C]onsumer welfare is the primary concern of the antitrust laws.");
248. Abraham v. Intermountain Health Care, Inc., 394 F. Supp. 2d 1312, 1326 (D. Utah 2005) ("'[W]e must bear in mind that the purpose of the antitrust laws is the promotion of consumer welfare. . . .'" (quoting Reazin v. Blue Cross & Blue Shield of Kansas, 899 F.2d 951, 960 (10th Cir. 1990)));
249. SmithKline Beecham Corp. v. Apotex Corp., 383 F. Supp. 2d 686, 697 (E.D. Pa. 2004) ("'The fundamental policy underlying the law, of course, is that competition benefits consumer welfare. Here, from the consumer perspective, the critical fact is that a generic drug reached the marketplace, thereby enhancing consumer choice.'"
250. (quoting Eon Labs Mfg., Inc. v. Watson Pharm., Inc., 164 F. Supp. 2d 350, 358 (S.D.N.Y. 2001)));
251. Dooley v. Crab Boat Owners Ass'n, 2004-1 Trade Cas. (CCH) ¶ 74, 421 (N.D. Cal. Apr. 26, 2004) ("While competition among rivals does not violate the Sherman Act, a reduction of competition which harms consumer welfare does contravene the Act");
252. United States v. UPM-Kymmene Oyj, 2003-2 Trade Cas. (CCH) ¶ 74, 101 (N.D. 111. July 25, 2003) ("Consumers of the products will be damaged by paying more than they otherwise would pay [if the merger is allowed]. . . . The intended purpose of federal antitrust laws is to be a consumer welfare prescription." (internal quotation marks omitted));
253. United States v. Visa USA, Inc., 163 F. Supp. 2d 322, 406 (S.D.N.Y. 2001) (noting that "[s]ince defendants' exclusionary rules undeniably reduce output and harm consumer welfare," and since defendants have not shown procompetitive justifications, the rules violate the Sherman Act), aff'd, 344 F.3d 229 (2d Cir. 2003) ;
254. In re Mercedes-Benz Antitrust Litig., 157 F. Supp. 2d 355, 364 (D.N.J. 2001) ("Where, as here, it is alleged that consumers paid a price higher than the price that would have been offered had the dealers been competing, the purpose of the antitrust laws is obviously thwarted.");
255. Danielson Food Prods, v. Poly-Clip Sys., 120 F. Supp. 2d 1142, 1143 (N.D. Ill. 2000) ("[T]he overarching standard, as the courts interpret it today, is whether the defendants' actions diminish competition and injure consumer welfare.");
256. Chase v. Nw. Airlines Corp., 49 F. Supp. 2d 553, 569 (E.D. Mich. 1999) (arguing that restraint on intrabrand competition may violate Section 2 of the Sherman Act because "intrabrand competition may provide the only significant source of consumer welfare in the relevant market").
257. See E. Portland Imaging Ctr., P.C. v. Providence Health System-Oregon, 2006-1 Trade Cas. (CCH) ¶ 75, 197 (D. Or. Mar. 21, 2006) ("An act is deemed anticompetitive under the Sherman Act 'only when it harms both allocative efficiency and raises the prices of goods above competitive levels or diminishes their quality.'" (first emphasis added)
258. (quoting Rebel Oil Co., 51 F.3d at 1433));
259. In re NCAA 1-A Walk-on Football Players Litig., 398 F. Supp. 2d 1144, 1151 (W.D. Wash. 2005) ("Generally, the test for harm to competition is whether consumer welfare has been harmed such that there has been a decrease in allocative efficiency and an increase in price.").
260. While these are not the only areas in which a conflict might arise, see Baker, supra note 30, at 517-18, we have not found any decisions addressing the conflict in other areas, with one exception. In Kartell v. Blue Shield of Massachusetts, Inc., 749 F.2d 922 (1st Cir. 1984), a buy-side case discussed in subpart B below, then-Judge Breyer declared that even if the defendant's conduct reduced allocative efficiency, courts should be reluctant to condemn it because it appeared to benefit consumers.
261. Id. at 930-31.
262. For the classic demonstration of this proposition, see Oliver E. Williamson, Economies As an Antitrust Defense: The Welfare Tradeoffs, 58 AM. ECON. REV. 18 (1968).
263. Williamson also shows that in many circumstances, economic efficiency would increase even though the merger would impose a relatively large price increase and produce relatively small cost savings. This occurs because what counts in efficiency analysis is the deadweight loss, not the transfer of wealth from consumers to the merged firm. For analyses of this tradeoff that determine how large efficiencies must be to prevent prices from rising to consumers, see Fisher et al., Afterword, supra note 58, at 1702-06;
264. Fisher & Lande, supra note 58, at 1670-77;
265. Fisher et al., Horizontal Mergers, supra note 58, at 797-810.
266. 246 F.3d 708 (D.C. Cir. 2001).
267. Id. at 720 (quoting FTC v. Univ. Health, Inc., 938 F.2d 1206, 1223 (11th Cir. 1991)).
268. 131 F. Supp. 2d 151 (D.D.C. 2000).
269. Id. at 172.
270. 211 F. Supp. 2d 34 (D.D.C. 2002).
271. Id. at 53.
272. Id.
273. 983 F. Supp. 121 (E.D.N.Y. 1997).
274. Id. at 147.
275. Dr. Pepper/Seven-Up Cos. v. FTC, 798 F. Supp. 762, 777 (D.D.C. 1992)
276. (quoting Administrative Record at 233, Dr. Pepper, 798 F. Supp. 762 (No. 1:91cv02712)), rev'd on other grounds, 991 F.2d 859 (D.C. Cir. 1993).
277. See, e.g., FTC v. Ach Coal, Inc., 329 F. Supp. 2d 109, 153 (D.D.C. 2004) ("The existence of such efficiencies . . . remains relevant to an assessment of the . . . potential benefits to consumers from cost reductions and increased competition.");
278. United States v. Franklin Elec. Co., 130 F. Supp. 2d 1025, 1035 (W.D. Wis. 2000) ("Defendants have not made the necessary showing that efficiencies would result and that they would lead to benefits for consumers in the relevant market");
279. FTC v. Tenet Healthcare Corp., 17 F. Supp. 2d 937, 948 (E.D. Mo. 1998) ("[M]any of the projected efficiencies would not benefit Poplar Bluff consumers."), rev'd, 186 F.3d 1045 (8th Cir. 1999);
280. FTC v. Staples, Inc., 970 F. Supp. 1066, 1090 (D.D.C. 1997) ("[Defendants' projected pass through rate - the amount of the projected savings that the combined company expects to pass on to customers in the form of lower prices-is unrealistic.");
281. FTC v. Butterworth Health Corp., 946 F. Supp. 1285, 1301 (W.D. Mich. 1996) (positing that acquisition would yield substantial cost savings "that would, in view of defendants' nonprofit status and the Community Commitment, invariably be passed on to consumers"), aff'd, 121 F.3d 708 (6th Cir. 1997).
282. Professors Gifford and Kudrle observe that "[m]any courts have indicated that some of the merger-generated cost savings must be passed on to consumers, thus suggesting a consumer-surplus approach to the evaluation of efficiency." Gifford & Kudrle, supra note 30, at 447 n.83. They conclude that American merger case law "appears to equate the 'consumer welfare' goal of antitrust law with the use of a consumer surplus standard," not a total surplus standard.
283. Id. at 446.
284. 970 F. Supp. 1066 (D.D.C. 1997).
285. See id. at 1089-90.
286. Id. at 1092.
287. Id. at 1090 ("[T]he Court also finds that the defendants' projected pass through rate ... is unrealistic. . . . [T] he defendants have projected a pass through rate of two-thirds of the savings while the evidence shows that, historically, Staples has passed through only 15-17%.").
288. Id. at 1091 ("Without an injunction, consumers in the 42 geographic markets where superstore competition would be eliminated or significantly reduced face the prospect of higher prices than they would have absent the merger.").
289. Dr. Pepper/Seven-Up Cos. v. FTC, 798 F. Supp. 762, 777 (D.D.C. 1992) (finding "merit in plaintiffs' argument" that the acquisition "would create cost efficiencies in the distribution and marketing of Seven-Up products in the New York metropolitan market").
290. Id. (finding that an acquisition is unlawful, despite its cost savings, if it would result in higher prices and that there was "ample evidence in the record from which the Commission could rationally conclude that such an outcome was likely").
291. FTC v. Libbey, Inc., 211 F. Supp. 2d 34, 53 (D.D.C. 2002).
292. Id. ("Although the evidence presented by the defendants demonstrates that there could potentially be some positive results of the acquisition, the Court does not believe that these results outweigh the potential harm to the market that could result given the fact that there has not been sufficient evidence to establish . . . why Libbey will not use this opportunity to raise its own prices.").
293. None of these decisions considered Professor Baker's limited exception to a consumer impact standard. See Baker, supra note 30, at 520 n.137 ("[A]ntitrust should seek to protect consumers except when the aggregate efficiency costs of doing so would be large."). In contrast, Canada allowed the merger of Superior Propane and ICG Propane, even though it would harm consumers, because it would produce a substantial increase in total welfare. Specifically, the Canadian Competition Tribunal found that the transaction would result in a significant price increase and a wealth transfer of approximately $40.5 million a year.
294. See Comm'r of Competition v. Superior Propane, Inc., [2003] 3 F.C 529, ¶ 22 (Can.). The Tribunal also concluded, however, that it would pass a total surplus test, even if the surplus were reduced to reflect the merger's adverse effects on low income consumers. The Federal Court of Appeal sustained this conclusion, upholding the following findings of the Tribunal: (a) the merger would generate efficiency gains of $29.2 million a year, id. 15;
295. (b) the deadweight loss from the price increase and an expected reduction in services offered would not exceed $6 million a year, id.;
296. (c) the only portion of the wealth transfer that should be included was the transfer from "low income households that used propane for essential purposes and had no good alternatives," a transfer of just $2.6 million a year, id. ¶ 24;
297. and (d) even if this transfer was doubled-the highest reasonable weight that could be assigned - the total anticompetitive effects of the merger would not exceed $11.2 million ($6 million in deadweight loss plus $5.2 million in weighted wealth transfer), an amount that was less then the merger's efficiency gains.
298. Id. ¶ 25.
299. For a more in depth analysis of this case, see Fisher et al., supra note 31.
300. See, e.g., Gifford & Kudrle, supra note 30, at 432 n.32 ("The use of tying arrangements ... to effect first-degree price discrimination would be treated as lawful under a total surplus standard but as unlawful under a consumer surplus standard.");
301. accord Baker, supra note 30, at 518 n.128;
302. Warren S. Grimes & Lawrence A. Sullivan, Illinois Tool Works, Inc. v. Independent Ink, Inc. : Requirements Tie-Ins and Intellectual Property, 13 SW. J.L. & TRADE AM. 335, 347-49 (2007). Professor Areeda addressed a similar situation - a perfecdy discriminating cartel - and recognized that it maximized efficiency, but he had no doubt that it reduced consumer welfare:
303. The perfecdy discriminating cartel is taking from some people and giving to other people more than competition would. I regard this as an anticompetitive distortion. "Consumer welfare" embraces what individual consumers are entitled to expect from a competitive economy. If the efficiency extremists insist that only their definition of consumer welfare is recognized by economists, we would answer that ours is clearly recognized by the statutes. The legislative history of the Sherman Act is not clear on much, but it is clear on this.
304. Phillip Areeda, Introduction to Antitrust Economics, 52 ANTITRUST L.J. 523, 536 (1983).
305. William F. Baxter & Daniel P. Kessler, Toward a Consistent Theory of the Welfare Analysis of Agreements, 47 STAN. L. REV. 615, 623-24 (1995).
306. 466 U.S. 2 (1984).
307. Id. at 15 n.23 (explaining that "[s]ales of the tied item can be used to measure demand for the tying item," forcing "purchasers with greater needs for the tied item" to "in effect . . . pay a higher price to obtain the tying item," while purchasers with lesser needs for the tied item in effect pay a lower price for the tying item).
308. Id. at 14-15.
309. Id. at 15. Justice O'Connor's concurring opinion also used language that evokes a consumer protection approach to antitrust. She noted that market power in the tying product may result in "exploitation of consumers."
310. Id. at 35 (O'Connor, J., concurring).
311. See id. at 12-16 (majority opinion);
312. see also Gifford & Kudrle, supra note 30, at 432 n.32 ("An old Supreme Court decision that dealt with [the price discrimination] issue took the route indicated by the consumer surplus standard." (citing IBM Corp. v. United States, 298 U.S. 131 (1936))).
313. See MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124 (9th Cir. 2004).
314. Id.
315. Id. at 1136.
316. Id. In this example, the court concluded that consumer welfare would be diminished because the favored customers would no longer have the opportunity to purchase at a discounted price, while the disfavored customers would continue to purchase at a high price. The court measured consumer welfare, therefore, by price levels in the market, not by output, deadweight loss, or other components of allocative efficiency. When the court referred to the impact of arbitrage on both "consumer welfare and allocative efficiency," it also distinguished consumer welfare from allocative efficiency.
317. Id.
318. Id.
319. 5 F.3d 658 (3d Cir. 1993).
320. Id. at 678.
321. Id. at 662-63.
322. MIT asserted that it did not make any money from the agreement. See id. at 664. The case focuses on MIT because all the other members of the Overlap Group signed consents immediately after the complaint was filed. Only MIT chose to litigate.
323. Id. at 662 n.1.
324. See id. at 664-65.
325. See id. at 678.
326. The court first made this point in the course of rejecting the colleges' argument that they were exempt from the Sherman Act because they were nonprofit organizations. The court stated: "Nonprofit organizations are not beyond the purview of the Sherman Act, because the absence of profit is no guarantee that an entity will act in the best interest of consumers."
327. Id. at 665.
328. The court later added: "Enhancement of consumer choice is a traditional objective of the antitrust laws . . . ." Id. at 675.
329. Id. at 678.
330. Id. at 674.
331. Id. at 675.
332. Id. at 678.
333. Id.
334. Id. at 675.
335. Id.
336. Id. at 678.
337. Id. at 675.
338. As we explained above, supra note 82, we do not discuss case law
339. This example is derived from Woods Exploration & Producing Co. v. Aluminum Co. of America, 438 F.2d 1286, 1307-08 (5th Cir. 1971). The merger might have no measurable effect on downstream consumers if the pipelines deliver their gas to a distribution point that is served by other pipelines. If the merged pipelines had a trivial share in this downstream market, their output decisions would not have a material impact on the market price.
340. If there is perfect price discrimination by the merged firm, output will not fall and no allocative inefficiency will be created. In this case the price discrimination could be condemned under a wealth transfer approach, but not on efficiency grounds. See Richard A. Posner, Natural Monopoly and Its Regulation, 21 STAN. L. REV. 548, 550-52 & 552 n.6 (1969). However, if the merged firm does not engage in perfect price discrimination, the lower amount of natural gas produced in this field will instead be produced somewhere else, where its production will be relatively less efficient Thus, imperfect price discrimination by a buyer sometimes can be condemned on efficiency grounds.
341. See Michael L. Katz, An Analysis of Cooperative Research and Development, 4 RAND J. ECON. 527, 527 (1986).
342. Telecor Commc'ns, Inc. v. Sw. Bell Tel. Co., 305 F.3d 1124 (10th Cir. 2002).
343. Id. at 1133-34;
344. accord White Mule Co. v. ATC Leasing Co., 540 F. Supp. 2d 869, 888 (N.D. Ohio 2008) (rejecting argument that suppliers are not protected by antitrust laws);
345. see also Pease v. Jasper Wyman & Son, 845 A.2d 552, 555 (Me. 2004) (upholding antitrust damages awarded to blueberry growers); infra note 213 (citing additional cases).
346. In order to satisfy the second prong of the Court's test, a plaintiff must establish that the defendant's conduct created a dangerous probability of monopsony power, not monopoly power. See Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 127 S. Ct 1069, 1078 (2007).
347. See ROGER D. BLAIR & JEFFREY L. HARRISON, MONOPSONY (1993) (collecting and analyzing the relatively small number of cases against buyers).
348. See id. at 1, 18-19;
349. Albert A Foer, Introduction to Symposium on Buyer Power and Antitrust, 72 ANTITRUST L.J. 505, 505 (2005).
350. See Weyerhaeuser, 127 S. Ct. at 1075-78 (observing the similarity between buy-side and sell-side cases).
351. 885 F.2d 313 (6th Cir. 1989).
352. Id. at 317.
353. 749 F.2d 922 (1st Cir. 1984).
354. The court assumed, for the purpose of evaluating plaintiffs' case, that "Blue Shield possesses significant market power" and that "Blue Shield uses that power to obtain 'lower than competitive prices.'" Id. at 927.
355. Id. at 930-31. In Kartell, therefore, Judge Breyer indicated that a conflict between allocative efficiency and the welfare of consumers should be resolved in favor of consumers. If Blue Shield had paid physicians less than the competitive rate, as Judge Breyer was willing to assume, then Blue Shield's behavior reduced allocative efficiency. Yet Judge Breyer would not hold it illegal, in part because it brought "low price benefits to the consumer."
356. Id. at 931.
357. In Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979 (9th Cir. 2000), the court rejected the defendants' attempt to justify an alleged buying cartel by claiming it would result in lower prices to consumers. The court stated that the public interest would be furthered by "free competition" among buyers.
358. Id. at 988 (quoting Speegle v. Bd. of Fire Underwriters, 172 P.2d 867, 873 (Cal. 1946)).
359. In Law v. National Collegiate Athletic Ass'n, 134 F.3d 1010 (10th Cir. 1998), the Tenth Circuit rebuffed the defendant's argument that its ceiling on the salaries Division I colleges could pay entry-level basketball coaches was a reasonable restraint because it lowered the costs of college basketball. The court declared that "cost-cutting by itself is not a valid procompetitive justification. If it were, any group of competing buyers could agree on maximum prices. Lower prices cannot justify a cartel's control of prices charged by suppliers, because the cartel ultimately robs the suppliers of the normal fruits of their enterprises."
360. Id. at 1022.
361. While the court stated that cost-cutting "by itself" is not valid defense, the court later asserted that lowering costs "arguably is beneficial to the members of the industry and ultimately their consumers." Id. at 1023
362. (quoting Gary R. Roberts, The NCAA, Antitrust, and Consumer Welfare, 70 TUL. L. REV. 2631, 2643 (1996)). Like Knevelbaard Dairies, therefore, Law appears to have rejected a pass-on defense to buyer price fixing.
363. For a discussion of the importance of protecting small suppliers from exploitation, see Warren S. Grimes, Buyer Power and Retail Gatekeeper Power: Protecting Competition and the Atomistic Seller, 72 ANTITRUST L.J. 563 (2005).
364. In his recent analysis of buy-side and other cases, supra note 47, Gregory Werden gets many things right. He correctly notes that "Congress intended to protect sellers victimized by trusts and other conduct within the scope of the Sherman Act's prohibitions." Id. at 714.
365. He also recognizes that sellers should be protected from anticompetitive conduct by buyers whether or not the conduct "threatens the welfare of [the buyers'] customers or the welfare of end users." Id. at 735.
366. Moreover, he concludes that "consumer welfare is the principal goal of the Sherman Act," id., and that "the Sherman Act protects the competitive process in the expectation that doing so best protects consumer welfare over the long term," id. at 729.
367. He is incorrect, however, when he says, "to the extent that the Court has taken seriously the proposition that the Sherman Act is a 'consumer welfare prescription,' it must have meant a broad welfare concept, such as aggregate welfare." Id. at 723. In recent years, as we have shown, both the Supreme Court and the lower courts have largely adopted the proposition that the ultimate objective of the antitrust laws in sell-side cases is to protect consumers in the relevant market, not to enhance aggregate welfare. Werden's contrary conclusion rests on an incomplete analysis of recent case law. He does not mention the Court's willingness in Brooke Group to sacrifice allocative efficiency in order to achieve lower prices for consumers; the Court's articulation in Leegin of a one-to-one correspondence between effects on consumers and effects on competition; or the Court's distinct focus in both Leegin and Weyerhaeuser on consumer impact rather than efficiency. He also misses lower court statements that conduct cannot reduce competition or cause antitrust injury unless it threatens to harm consumers in the relevant market; the lower courts' failure to characterize productive efficiency as a goal of the antitrust laws, even though it is an essential component of aggregate welfare; the courts' unwillingness to say that either productive efficiency or allocative efficiency trumps consumer impact; and, most important, the courts' uniform refusal to consider the productive efficiencies of a merger unless they are likely to be passed on to consumers in the relevant market. Werden is correct that "[a]ctual adverse effects on consumer welfare never have to be proved; rather, it is sufficient that a restraint impairs the competitive process in a manner that makes harm to consumer welfare predictable."
368. Id. at 736. But the "harm to consumer welfare" that must be predictable is harm to consumers in the relevant market, not harm to economic efficiency.
369. For an example of such a system, see Steven C. Salop, Question: What Is the Real and Proper Antitrust Welfare Standard? Answer: The True Consumer Welfare Standard 1 (Nov. 4, 2005) (unpublished manuscript), available at http://govinfo.library.unt.edu/amc/public-studies-fr28902/exclus-conduct-pdf/ 051104-Salop-mergers.pdf.
370. See id. at 1-2.
371. For a thorough analysis of these and related issues that comes to a somewhat different position, see Baker, supra note 30. Professor Baker believes: The interpretation of antitrust law as a [political] bargain between consumer and producer interests .... [suggests that] antitrust enforcers and courts should seek to maximize aggregate surplus, subject to the constraint that consumers and producers sufficiently share the efficiency gains, at least on average . . . . [T] his perspective implies that antitrust law should be enforced today with a qualified emphasis on consumers: protecting consumers without regard to aggregate surplus unless the aggregate efficiency costs of doing so would be large.
372. Id. at 484-85. Many of the ideas in this argument were suggested to author Lande by Professor Stephen Ross. Prof. Baker does not, however, discuss whether such a rule follows from the antitrust laws' legislative histories or would be administrable. Would it be as easy to predict, understand, or administer a rule that mergers should not be allowed to lead to higher consumer prices unless the resulting efficiency savings were "large," as it would be to predict, understand, or administer a rule that no merger should be allowed to lead to higher consumer prices?
373. See Ronald H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1 (1960). The Coase Theorem states that in the absence of transaction costs, the efficient allocation of property rights will result regardless who initially owns the right. If transaction costs are negligible, the parties can and will bargain over this right. As a result of this bargaining, the person willing to pay the most for the right will end up with it, and this will result in the most efficient allocation of resources.
374. See Steven C. Salop, Note on the Coase Theorem 1 (unpublished manuscript, on file with author).
375. It also would be consistent with the Coase Theorem. See Salop, supra note 218, at 1.
376. "Trickle down economics" advocates assisting businesses and the well-to-do in the short run in order to benefit all members of society in the long run. See William B. Barker, The Three Faces of Equality: Constitutional Requirements in Taxation, 57 CASE W. RES. L. REV. 1, 50 (2006);
377. see also Daniel Seligman, Tricklism, FORTUNE, Nov. 16, 1992, at 199, 199 ("TDE [trickle down economics] has a long history. The MBA's Dictionary tells us the phrase was coined by Will Rogers, and Safire's Political Dictionary, produced by the eminent New York Times pundit, notes that it gained fame in the 1932 election, when Herbert Hoover was accused of believing in tricklism - 'feeding the sparrows by feeding the horses.' A half-century later, the phrase had a leading role in the 1981 drama wherein David Stockman was taken to the woodshed by Ron for telling Washington Post editorialist William Greider that TDE was favored by the Reaganites.").
378. See, e.g., JOHN MAYNARD KEYNES, A TRACT ON MONETARY REFORM 80 (1923) ("[L]ong run is a misleading guide to current affairs. In the long run we are all dead.").
379. THE RUBÁIYÁT OF OMAR KHAYYAM, Verse XIII, at 35 (Edward Fitzgerald trans., 1898).
380. While this Article has typically focused on the price and effects of anticompetitive conduct, sometimes consumer welfare cannot adequately be protected by antitrust enforcement that only considers price and such closely related areas as cost and quantity. The "consumer choice" approach is another, more complex way to articulate the goals of the antitrust laws in those situations when non-price issues are at stake. "Consumer choice" is an emerging paradigm that also is completely economic in nature. It does incorporate the wealth transfer effects of market power. It also differs from the efficiency model because it gives greater weight to short term non-price choices having to do with quality or variety, and also to long term innovation effects.
381. See Neil W. Averitt & Robert H. Lande, Using the "Consumer Choice" Approach to Antitrust Law, 74 ANTITRUST L.J. 175 (2007).
382. See Fisher & Lande, supra note 58, at 1684-91.
383. The European Competition Commission believes that protecting consumers from unfair transfers of wealth should be the primary concern of competition law and that a concern for enhanced economic efficiency should not be allowed to lead to higher consumer prices. See European Competition Commission, DG Competition Discussion Paper on the Application of Article 82 of the Treaty to Exclusionary Abuses 4, 17-18 (Dec. 2005), available at http://ec.europa.eu/comm/competition/antitrust/art82/discpaper2005.pdf.
384. See Baxter & Kessler, supra note 173, at 621.
385. See id. at 621-26.
386. See id.
387. See supra note 149 and accompanying text.
388. See Fisher & Lande, supra note 58, at 1624-36, 1670-77.
389. Id.
390. For an analysis of many of the economic issues involved in these situations, see Robert H. Lande & Howard P. Marvel, The Three Types of Collusion: Fixing Prices, Rivals, and Rules, 2000 WIS. L. REV. 941, 949-84.
391. See Robert H. Lande, Should Predatory Pricing Rules Immunize Exclusionary Discounts?, 2006 UTAH L. REV. 863, 883;
392. see also European Competition Commission, supra note 225, at 40 ("Another possible negative effect of rebate systems is price discrimination between the different buyers.");
393. id. at 54 (referring to price discrimination as an anticompetitive effect of tying arrangements). Commissioner Kovacic provocatively notes: "It is conceivable that the evaluation of distribution practices would be influenced more deeply than merger enforcement if a wealth transfer standard gained acceptance."
394. Kovacic, supra note 5, at 1463 n.234.
395. See, e.g., HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY: THE LAW OF COMPETITION AND ITS PRACTICE 576-78 (3d ed. 2005).
396. Id. at 576. In the case of perfect price discrimination, for example, allocative efficiency is not harmed but there may be a substantial transfer of wealth from consumers to the discriminating firm.
397. See supra note 171 and accompanying text.
398. Another complexity arises from the fact that price discrimination may not entail only a transfer from consumers to the monopolist. Relative to a single-price regime, price discrimination could also transfer surplus from consumer group A (e.g., low-elasticity consumers, who pay a higher price) to consumer group B (e.g., highelasticity consumers, who pay a lower price). Any analysis of the wealth transfer effects of price discrimination should also account for this type of effect
399. HOVENKAMP, supra note 234, at 576; accord Kovacic, supra note 5, at 1463.