Antitrust in an era of market failure

Harvard Journal of Law and Public Policy

Volumn 33, Issue 2, 2010, Pages 557-606

  Devlin, Alan ^a  

^a US Court of Appeals for the Seventh Circuit ^*  (United States)

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EID: 78049275491     PISSN: 01934872     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (333)

1. Cognizant of this restorative process, the law seeks to facilitate entry and to avoid mistaken findings that might insulate undesirable behavior from free-market forces. Obeisance toward the curative powers of the market has led U.S. law to adopt an agnostic approach to economic conduct of indeterminate long-run effect.
2. See Bruce M. Owen et al., China's Competition Policy Reforms: The Anti-Monopoly Law and Beyond, 75 ANTITRUST L.J. 231, 231 (2008) (explaining the myriad benefits competition policy has bestowed upon Western economies).
3. See Jonathan B. Baker, Recent Developments in Economics that Challenge Chicago School Views, 58 ANTITRUST L.J. 645, 646 (1989);
4. Herbert Hovenkamp, Post-Chicago Antitrust: A Review and Critique, 2001 COLUM. Bus. L. REV. 257, 258;
5. Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. PA. L. REV. 925 (1979).
6. See Siddharth Fernandes, F. Hoffmann-LaRoche, Ltd. v. Empagran and the Extraterritorial Limits of United States Antitrust Jurisdiction: Where Comity and Deterrence Collide, 20 CONN. J. INT'L L. 267, 268 (2005) (noting that the "United States has what is considered the world's most advanced and extensive antitrust regime" (footnote omitted));
7. Thomas A. Lambert, Tweaking Antitrust's Business Model, 85 TEX. L. REV. 153, 153-54 (2006) (reviewing HERBERT HOVENKAMP, THE ANTITRUST ENTERPRISE: PRINCIPLE AND EXECUTION (2005)).
8. See Neelie Kroes, Why Mcrosoft Was Wrong, WALL ST. J. EUR., Sept. 26, 2007, at 13 ("U.S. and EU antitrust laws agree on most things, not least the objective of benefiting consumers."); Mario Monti, Comm'r for Competition: European Comm'n, Comments and Concluding Remarks, Conference on Professional Regulation 16 (Oct. 28, 2003), available at http://ec.europa.eu/ comm/competition/speeches/text/ sp2003-028-en.pdf (referring to the goal of making "the EU the most competitive and dynamic economy in the world by 2010").
9. See Deborah A. Garza, Transatlantic Antitrust: Convergence or Divergence, 16 ANTITRUST 5, 5 (2001);
10. Ken Heyer, A World of Uncertainty: Economics and the Globalization of Antitrust, 72 ANTITRUST L.J. 375, 403 (2005);
11. Charles W. Smitherman III, The Future of Global Competition Governance: Lessons from the Transatlantic, 19 AM. U. INT'L L. REV. 769, 821-25 (2004).
12. See, e.g., GIORGIO MONTI, EC COMPETITION LAW 73-82 (2007) (comparing and contrasting the role of economic analysis in U.S. and EC competition law).
13. See Henry Kaufman, How Libertarian Dogma Led the Fed Astray, FT.COM, Apr. 27, 2009, http://www.ft.eom/cms/s/0/705574f2-3356-11de-8f1b-00144feabdc0, s01 =1.html?nclick-check=1.
14. See infra Part ILB;
15. see also Tamara Lytle, Obama!s New Antitrust Rules Have Big, Powerful Companies Sweating: The monopoly policy is a reversa of a Bush administration rule, U.S. NEWS & WORLD REP., May 20, 2009, http://www.usnews.com/articles/ news/ nationa]/2009/05/20/obamas-new-antitrust-rules-have-big-powerful- companiessweating.html.
16. See, e.g., Robert H. Lande, Revitalizing Section 5 of the FTC Act Using 'Consumer Choice'Analysis, ANTITRUST SOURCE, Feb. 2009;
17. Thomas B. Leary, A Suggestion for the Revival of Section 5, ANTITRUST SOURCE, Feb. 2009.
18. See DoJ, EU Actions Suggest Tougher Antitrust Enforcement, TELECOMM. REP., June 1, 2009, at 43.
19. See Mark D. Whitener, Interview with J. Thomas Rosch, Commissioner, Federal Trade Commission, 23 ANTITRUST 32, 41 (2009) ("A ... possibility is that the agencies will be taking a closer look to see whether or not the merger will result in a post transaction firm that is too big to fail....");
20. see also Jim Puzzanghera, Antitrust Enforcer Vows Tough Stance, L.A. TIMES, May 12, 2009, at B1 (noting Christine Varney's question of whether antitrust has failed if companies get too big to fail and observation that "[c]onsumers have been waiting for the markets to correct themselves, but the financial crisis has shown they haven't").
21. See, e.g., United States v. Syufy Enters., 903 F.2d 659, 668-69 (9th Cir. 1990).
22. See N.C.A.A. v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 107 (1984)
23. ("Congress designed the Sherman Act as a 'consumer welfare prescription.'" (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979));
24. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 57-59 (1977);
25. Joseph F. Brodley, The Economic Goals of Antitrust: Efficiency, Consumer Welfare, and Technological Progress, 62 N.Y.U. L. REV. 1020, 1025-27 (1987);
26. William J. Kolasky, Conglomerate Mergers and Range Effects: It's a Long Way from Chicago to Brussels, 10 GEO. MASON L. REV. 533, 533-34 (2002);
27. Robert H. Lande, Commentary: Implications of Professor Scherer's Research for the Future of Antitrust, 29 Washburn L.J. 256, 258 (1990) ("[T]he dominant paradigm today is that the only goal of the existing antitrust laws is to increase economic efficiency");
28. Timothy J. Muris, GTE Sylvania and the Empirical Foundations of Antitrust, 68 ANTITRUST L.J. 899, 900 (2001) (interpreting GTE Sylvania as "a ringing endorsement of the economic approach to antitrust").
29. But see John B. Kirkwood & Robert H. Lande, The Fundamental Goal of Antitrust: Protecting Consumers, Not Increasing Efficiency, 84 NOTRE DAME L. REV. 191 (2008).
30. See Douglas H. Ginsburg, Synthetic Competition, 16 MEDIA L. & POL'Y 1, 7-10 (2006) (observing the vast range of ends to which antitrust laws have historically been applied, noting that the "varied goals endorsed by the Supreme Court were... divisive and contradictory," and observing that the Supreme Court's decision in GTE Sylvania "largely ended the confusion... [and] made the maximization of consumer welfare, or allocative efficiency, the chief consideration when applying the antitrust laws").
31. It would, as Judge Robert Bork characterized it, be like "playing tennis with the net down." Robert H. Bork, Legislative Intent and the Policy of the Sherman Act, 9 J.L. & ECON. 7, 10 (1966).
32. See Jonathan R. Macey & Geoffrey P. Miller, The End of History and the New World Order: The Triumph of Capitalism and the Competition Between Liberalism and Democracy, 25 CORNELL INT'L L.J. 277, 283 (1992).
33. See Timothy J. Brennan, Essential Facilities and Trinko: Should Antitrust and Regulation Be Combined?, 61 FED. COMM. L.J. 133, 147 (2008);
34. Thomas E. Kauper, The Report of the Attorney General's National Committee to Study the Antitrust Laws: A Retrospective, 100 MICH. L. REV. 1867, 1870 (2002) ("American antitrust rests heavily on what in the end is an act of faith, faith that markets work and are in large part self-correcting.").
35. See Frank H. Easterbrook, The Limits of Antitrust, 63 TEX. L. REV. 1, 18 (1984) ("When a business rival brings suit, it is often safe to infer that the arrangement is beneficial to consumers.").
36. Before proceeding further, a word on interpretation is needed. Specificity is the key to reasoned debate about the crisis. Sweeping references to "the market," "deregulation," "capitalism," "Chicago," and other broad terms are not likely to yield meaningful conclusions. Deregulation of industry segments that do not display natural monopoly characteristics is distinct from deregulation of banking activities predisposed to excessive leverage. "The market" performs a different role in antitrust analysis than it does when uncritically used to support wholesale deregulation. Each industry and every market must be subject to particularized analysis-conclusions about the perceived failure of capitalism in one context may have legitimate normative consequences in one setting and yet none in another.
37. See Robert H. Bork, Legislative Intent and the Policy of the Sherman Act, 9 J.L. & ECON. 7, 7 (1966);
38. Michael S. Jacobs, An Essay on the Normative Foundations of Antitrust Economics, 74 N.C. L. REV. 219, 226-27 (1995).
39. There is an important distinction between short-run static efficiency, in which a market displays allocative efficiency with zero deadweight loss, and long-run dynamic efficiency, in which markets may be subject to ephemeral bouts of monopoly that fuel ongoing innovation. In some information markets, often referred to collectively as the "new economy," there is a tension between static and dynamic efficiency, with the latter goal being by far the more important.
40. See Thomas O. Barnett, Interoperability Between Antitrust and Intellectual Property, 14 GEO. MASON L. REV. 859, 860 (2007). It is for this reason that society bestows certain inventors and artists with limited exclusivity under the intellectual property laws. The key point to remember is that although efficiency is indeed the goal of contemporary antitrust policy, the particular form of efficiency mandated by theory differs depending on the particular market.
41. See DENNIS W. CARLTON & JEFFREY M. PERLOFF, MODERN INDUSTRIAL ORGANIZATION 631 (2005).
42. See, e.g., Alan J. Meese, Liberty and Antitrust in the Formative Era, 79 B.U. L. REV. 1, 4-5 (1999).
43. See Eleanor M. Fox, What Is Harm to Competition? Exclusionary Practices and Anticompetitive Effect, 70 ANTITRUST L.J. 371, 379 (2002).
44. United States v. Topeo Assoes., 405 U.S. 596, 610 (1972).
45. Sherman Act, ch. 647, 26 Stat. 209 (1890) (codified as amended at 15 U.S.C. §§ 1-7 (2006)).
46. See RICHARD A. POSNER, How JUDGES THINK 48 (2008).
47. Notably, Senator Sherman commented on a related draft that the act "does not announce a new principle of law, but applies old and well recognized principles of the common law." John C. Peppin, Price-Fixing Agreements Under the Sherman Anti-Trust Law, 28 CAL. L. REV. 297, 306 n.29 (1940)
48. (quoting 21 CONG. REC. 2456 (1890)).
49. The Supreme Court has explicitly recognized this, noting that the "vagueness of [the Sherman Act's] language" left it to the courts to give "content to the statute." Apex Hosiery Co. v. Leader, 310 U.S. 469, 489 (1940).
50. See United States v. Aluminum Co. of America (Alcoa), 148 F.2d 416, 428-29 (2d Cir. 1945) (describing the "helplessness of the individual" before "great aggregations of capital" as an object of concern for antitrust).
51. See Harlan M. Blake & William K. Jones, Toward a Three-Dimensional Antitrust Policy, 65 COLUM. L. REV. 422, 422-23 (1965);
52. see also Robert Pitofsky, The Politica Content of Antitrust, 127 U. PA. L. REV. 1051, 1053-57 (1979).
53. See Daniel A. Crane, Rules Versus Standards in Antitrust Adjudication, 64 WASH. & LEE L. REV. 49, 102-03 (2007) (noting that "[a]ntitrust opposition to mergers, collaborative restraints of trade, and exclusionary practices reached its zenith under the Warren Court's rule-based approach which restricted concentrations of industrial power and favored non-economic values and small business interests");
54. Robert A. Skitol, The Shifting Sands of Antitrust Policy: Where It Has Been, Where It Is Now, Where It Will Be in its Third Century, 9 CORNELL J.L. PUB. POL'Y 239, 245 (1999).
55. Alcoa, 148 F.2d at 428-29.
56. See id.
57. Brown Shoe Co. v. United States, 370 U.S. 294 344 (1962).
58. Id.
59. See RICHARD A. POSNER, ANTITRUST LAW 28-29 (2001).
60. See United States v. Topeo Assocs., 405 U.S. 596, 609-11 (1972).
61. Id.
62. See Fortner Enters, v. U.S. Steel Corp., 394 U.S. 495, 503 (1969) (holding that tieins "generally serve no legitimate business purpose that cannot be achieved in some less restrictive way").
63. See, e.g., N. Pac. Ry. Co. v. United States, 356 U.S. 1, 6 (1958).
64. See David S. Evans & Michael Salinger, Why Do Firms Bundle and Tie? Evidence from Competitive Markets and Implications for Tying Law, 22 YALE J. ON REG. 37, 38-39 (2005).
65. See, e.g., United States v. Marine Bancorp., Inc., 418 U.S. 602 (1974);
66. FTC v. Procter & Gamble Co., 386 U.S. 568 (1967);
67. United States v. Phila. Nat'l Bank, 374 U.S. 321 (1963).
68. See Albrecht v. Herald Co., 390 U.S. 145, 153 (1968).
69. See Christopher M. Grengs, Verizon v. Tririko: From Post-Chicago Antitrust to Resource-Advantage Competition, 2 J.L. ECON. & POL'Y 105, 126-27 (2006);
70. Timothy J. Muris, Improving the Economic Foundations of Competition Policy, 12 GEO. MASON L. REV. 1, 9-10 (2003).
71. Muris, supra note 43.
72. See Herbert J. Hovenkamp, The Neal Report and the Crisis in Antitrust (Working Paper, Feb. 24, 2009), available at http://papers.ssrn.com/sol3/papers. cfm?abstract-id =1348707.
73. See Shubha Ghosh, The Market as Instrument: A Response to Professor Harrison, 52 SMU L. REV. 1717, 1721-23 (1999);
74. William E. Kovacic & Carl Shapiro, Antitrust Policy: A Century of Economic and Legal Thinking, 14 J. ECON. PERSP. 43, 52 (2000).
75. JOE S. BAIN, BARRIERS TO NEW COMPETITION: THEIR CHARACTER AND CONSEQUENCES IN MANUFACTURING INDUSTRIES 144-66 (1956).
76. Id.
77. See Spencer Weber Waller, The Language of Law and the Language of Business, 52 CASE W. RES. L. REV. 283, 297 (2001) (describing the rise of the Structure-ConductPerformance paradigm in antitrust enforcement).
78. See Brown Shoe Co. v. United States, 370 U.S. 294 344 (1962);
79. United States v. Aluminum Co. of America (Alcoa), 148 F.2d 416, 428 (2d Cir. 1945).
80. See Edward A. Purcell Jr., The Class Action Fairness Act in Perspective: The Old and the New in Federal Jurisdiction Reform, 156 U. PA. L. REV. 1823, 1916-17 (2007)
81. ("Milton Friedman attributed the recent dominance of the 'Chicago school' to the economic crises of the 1970s and early 1980s and to the subsequent collapse of Communism and the Soviet Union. It wasn't my talking that caused people to embrace these ideas, just as the rooster doesn't make the sun rise, [Friedman] explained. 'Collectivism was an impossible way to run an economy. What has brought about the change is reality, fact-and what Marx called the inevitable forces of history.'" (citations omitted));
82. see also NAOMI KLEIN, THE SHOCK DOCTRINE: THE RISE OF DISASTER CAPITALISM (2007).
83. See Posner, supra note 3, at 925-33.
84. See POSNER, supra note 35, at 261;
85. Bork, supra note 16, at 9;
86. Robert H. Bork & Ward S. Bowman, Jr., The Crisis in Antitrust, 65 COLUM. L. REV. 363, 375-76 (1965).
87. See Posner, supra note 3, at 926-28.
88. See, e.g., DT. ARMENTANO, ANTITRUST POLICY: THE CASE FOR REPEAL (1986).
89. At this juncture, it is crucial to draw a distinction between the "Chicago School" -broadly defined, but referring in particular to macroeconomic policy-and the approach to competition policy dictated by both that School and the post-Chicago literature. See 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, 21-29. The latter occupies a distinct position, and assumed a role of transformational importance in causing U.S. antitrust law to evolve beyond the Warren Court jurisprudence.
90. See, e.g., Maurice E. Stucke, Should the Government Prosecute Monopolies?, 2009 U. III. L. REV. 497, 506-07.
91. See Frank H. Easterbrook, Workable Antitrust Policy, 84 MICH. L. REV. 1696, 1701 (1986) (discussing the Workable Antitrust Policy School, which advocates a "profoundly skeptical program" that would consist of "little other than prosecuting plain vanilla cartels and mergers to monopoly").
92. POSNER, supra note 35, at 251;
93. see also Richard A. Posner, Keynote Address: Vertical Restrictions and "Fragile" Monopoly, 50 ANTITRUST BULL. 499, 500 (2005) ("[E]ven the early versions of Chicago school thinking recognized that there could be cases in which single-firm abuses would give rise to a serious antitrust concern.").
94. See Bork, supra note 16 (explaining these points in detail);
95. Posner, supra note 3, at 925-33 (same).
96. See Jacobs, supra note 21, at 240-50.
97. See ROBERT H. BORK, THE ANTITRUST PARADOX 310 (1978).
98. See Hovenkamp, supra note 3, at 278;
99. Steven C. Salop, Economic Analysis of Exclusionary Vertical Conduct: Where Chicago Has Overshot the Mark, in How THE CHICAGO SCHOOL OVERSHOT THE MARK: THE EFFECT OF CONSERVATIVE ECONOMIC ANALYSIS ON U.S. ANTITRUST (Robert Pitofsky ed., 2008);
100. Lawrence A. Sullivan, Post-Chicago Economics: Economists, Lawyers, Judges, and Enforcement Officials in a Less Determinate Theoretical World, 63 ANTITRUST L.J. 669, 672 (1995).
101. See Hovenkamp, supra note 3, at 258, 279;
102. Keith N. Hylton & Michael Salinger, Tying Law and Policy: A Decision-Theoretic Approach, 69 ANTITRUST L.J. 469, 497 ("[T]he post-Chicago literature arose in response to the Chicago School's implication that tying should be legal per se. The post-Chicago models indicate that tying can be anticompetitive, not that it must be anticompetitive or that it is likely to be anticompetitive. Indeed, the models cannot tell us even that anticompetitive tying is more than a remote possibility.").
103. See Jacobs, supra note 21, at 219.
104. See POSNER, supra note 35, at viii (characterizing the pre-Chicago School body of antitrust doctrine as an "intellectual disgrace").
105. See BORK, supra note 61, at 4
106. See Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979)
107. (quoting BORK, supra note 61, at 66);
108. see also NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 107 (1984).
109. See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007)
110. (overruling its 1911 Dr. Miles decision, which had held that vertical minimum price fixing is illegal per se);
111. Tool Works, Inc. v. Indep. Ink, 547 U.S. 28 (2006) (overruling presumption that patents confer market power for the purposes of the antitrust laws);
112. State Oil Co. v. Kahn, 522 U.S. 3 (1997) (overruling its 1968 Albrecht decision, which had held that vertical maximum price fixing was a per se antitrust violation);
113. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (requiring that an antitrust plaintiff who alleges predatory pricing establish a dangerous probability of recoupment);
114. Cont'l T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977) (advocating the abandonment of per se rules that are inconsistent with prevailing economic theory and analyzing vertically-imposed nonprice constraints under the rule of reason).
115. See Brooke Group, 509 U.S. at 223.
116. See Nickolai G. Levin, Weyerhaeuser's Implications for Future Antitrust Disputes, 4 N.Y.U. J.L. &BUS. 343, 352-53 (2007).
117. See Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1433, 1444 n.15 (9th Cir. 1995);
118. see also MetroNet Servs. Corp. v. U.S. West Commc'ns, 329 F.3d 986, 1006 (9th Cir. 2003).
119. Of course, it is not possible to delineate politics and economics into two distinct and mutually exclusive disciplines. The teachings of each influence the other. Nevertheless, they are not coterminous. Fundamentally, price theory provides the policymaker with a means by which to ascertain the economic consequences, both positive and negative, of a particular course of action. That theory does not dictate a single right approach, however. Society can, and often does, pursue policies that are inconsistent with aggregate welfare. One need only think of minimum wage laws. Economics teaches that such laws will prevent certain labor markets from clearing at optimal levels, with ensuing deadweight loss. This loss takes the form of jobs that would have existed, but for the government policy. While those who receive jobs gain from these laws, economics predicts on the whole that workers are made worse off. Mindful of this theory, society nevertheless concludes that certain political factors-the belief that an individual's effort has to be worth at least a certain amount, the concern that employers may force wages to suboptimal levels due to the homogeneity of the workforce, and others-are of sufficient value that the laws are nonetheless justified. The case is no different with antitrust economics, which approximate the impact of challenged business conduct on allocative efficiency. An electorate can choose to adopt this measure of efficiency as its sole normative metric, or it can elect to take such efficiency into account as a relevant factor amongst several.
120. The most dramatic example is the Supreme Court's decision in Trinko. There, the Court opined that "[t]he opportunity to charge monopoly prices-at least for a short period-is what attracts 'business acumen' in the first place; it induces risk taking that produces innovation and economic growth." Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004).
121. See Reed Hundt, The Future of the Net-Comments on Lawrence Lessig's Code and Other Laws of Cyberspace and The Future of Ideas, 68 BROOK. L. REV. 289, 293 (2002).
122. See Mark A. Lemley, The Economics of Improvement in Intellectual Property Law, 75 TEX. L. REV. 989, 994-95 (1997);
123. Richard A. Posner, Antitrust in the New Economy, 68 ANTITRUST L.J. 925, 930 (2001).
124. See Barnett, supra note 21, at 865.
125. See id.
126. See Trinko, 540 U.S. at 407.
127. See Brown Shoe Co. v. United States, 370 U.S. 294 344 (1962).
128. Illustratively, Albert Foer, president of the American Antitrust Institute, has opined that the crisis will cause the public mood to shift "from worship of big corporations to skepticism of the role they play." David R. Francis, How Obama could prevent firms from becoming 'too big to fail', CHRISTIAN SCI. MONITOR, Apr. 26 2009, at 32.
129. See supra note 11.
130. See infra Part II.B.
131. Tal v. Hogan, 453 F.3d 1244 1258 (10th Cir. 2006).
132. For an example of a position that would not be appropriate in current market conditions,
133. see Deborah Platt Majoras, Deputy Ass't Att'y Gen., Antitrust Div., U.S. Dep't of Justice, GE-Honeywell: The U.S. Decision, Remarks Before the Antitrust Law Section, State Bar of Georgia 8 (Nov. 29, 2001) (opining that the capital requirements for entry into a market should not be construed as an entry barrier because "[c]apital markets generally work very efficiently and there is no obvious reason... why [an incumbent's] cost of capital for a particular project should be any lower than that of its rivals").
134. U.S. DEP'T OF JUSTICE, COMPETITION AND MONOPOLY: SINGLE-FIRM CONDUCT UNDER SECTION 2 OF THE SHERMAN ACT (2008) [hereinafter COMPETITION AND MONOPOLY].
135. See Stephen Labaton, Administration Plans to Strengthen Antitrust Rules, N.Y. TIMES, May 11, 2009, at Al. One questioning the existence of this controversy need merely read the FTC's reaction to the report.
136. See Press Release, Fed. Trade Comm., FTC Commissioners React to Department of Justice Report, "Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act" (Sept. 8, 2008), available at http://www.ftc.gov/opa/2008/09/section2.shtm.
137. See Puzzanghera, supra note 12.
138. This Part is intentionally concise because an exhaustive treatment of Chicago's influence on macroeconomic and regulatory policy would demand a book in itself. The purpose here is to provide the reader with sufficient knowledge about the School's broader role in the deregulatory movement that swept across some Western economies from the 1980s on.
139. See Kovacic, supra note 55, at 25 n.71 (quoting various authorities for the proposition that Ronald Regan's acceptance of Chicago School theories informed the deregulatory movement in the 1980s).
140. An exception to the Chicago School's free-market approach lay in its promotion of government-controlled monetary policy. Milton Friedman's revolutionary work on monetarism, which rejected the prevailing Keynesian and post-Keynesian theories of the day to focus on money supply, grew in influence throughout the 1970s. The body of thought, perhaps best summarized by the conclusion that "inflation is always and everywhere a monetary phenomenon," typically regarded markets as inherently stable. As a result, monetarist thought concludes that governments need merely control the money supply and need not employ the fiscal policies associated with Keynes. Alan Greenspan, Chairman of the Federal Reserve from 1987 to 2006, largely adhered to monetarist policy.
141. See Ashutosh Bhagwat, Unnatural Competition?: Applying the New Antitrust Learning to Foster Competition in the Local Exchange, 50 HASTINGS L.J. 1479, 1485-86 (1999) (observing that "[t]he impact of the Chicago School on regulatory policy is less obvious than on antitrust policy, but is almost certainly reflected in the massive wave of deregulation and unbundling that has swept through regulated industries in the past two decades").
142. See RICHARD J. PIERCE, JR. & ERNEST GELLHORN, REGULATED INDUSTRIES 348 (4th ed. 1999).
143. See Richard A. Posner, The Effects of Deregulation on Competition: The Experience of the United States, 23 FORDHAM INT'L L.J. S7, S12 (2000);
144. Richard A. Posner, Natural Monopoly and Its Regulation, 21 STAN. L. REV. 548, 548 (1969).
145. See 2 ALFRED E. KAHN, THE ECONOMICS OF REGULATION: PRINCIPLES AND INSTITUTIONS 123 (1971).
146. See James Walter Grudus, Local Broadband Networks: A New Regulatory Philosophy, 10 YALE J. ON REG. 89, 114 (1993);
147. Richard A. Posner, Taxation by Regulation, 2 BELL J. ECON. & MGMT. SCI. 22 (1971);
148. Win Whittaker, A Price-Level (Incentive) Regulation Proposal for Oil Pipelines, 46 OKLA. L. REV. 415, 417 (1993) (noting that "the failure of traditional cost-of-service regulation to achieve its primary objective-the replication of competitive results in terms of return levels, resource utilization, and efficiencies-is dramatic and well documented");
149. Herbert Hovenkamp, The Takings Clause and Improvident Regulatory Bargains, 108 YALE L.J. 801, 825 (1999)
150. (reviewing J. GREGORY SIDAK & DANIEL F. SPULBER, DEREGULATORY TAKINGS AND THE REGULATORY CONTRACT: THE COMPETITIVE TRANSFORMATION OF NETWORK INDUSTRIES IN THE UNITED STATES (1997)).
151. See In re Policy and Rules Concerning Rates for Dominant Carriers, 4 F.C.C.R. 2873, 2878 (F.C.C. 1989).
152. What little incentive such a regulated entity may have to limit costs emanates from the phenomenon of regulatory lag. See Stephen F. Williams, Deregulatory Takings and Breach of Regulatory Contract: A Comment, 71 N.Y.U. L. REV. 1000, 1001 (1996).
153. See Alfred E. Kahn & William B. Shew, Current Issues in Telecommunications Regulation: Pricing, 4 YALE J. ON REG. 191, 227 n.87, 240 (1987);
154. Gregory J. Vogt, Cap-Sized: How the Promise of the Price Cap Voyage to Competition Was Lost in a Sea of Good Intentions, 51 FED. COMM. L.J. 349, 360-61 (1999).
155. See Ronald R. Braeutigam & John C. Panzar, Effects of the Change from Rate-OfReturn to Price-Cap Regulation, 83 AM. ECON. REV. 191, 193 (1993).
156. See Jeffrey I. Bernstein & David E.M. Sappington, Setting the X Factor in Price-Cap Regulation Plans, 16 J. REG. ECON. 5, 5-6 (1999).
157. See Jim Chen, The Nature of the Public Utility: Infrastructure, the Market, and the Law, 98 Nw. U. L. REV. 1617, 1672 (2004) (reviewing JOSÉ A. GÓMEZ-IBÁÑEZ, REGULATING INFRASTRUCTURE: MONOPOLY, CONTRACTS, AND DISCRETION (2003)).
158. See STUART M. BENJAMIN ET AL., TELECOMMUNICATIONS LAW AND POLICY 427 (2001).
159. See Jerry Eilig, Costs and Consequences of Federal Telecommunications Regulations, 58 FED. COMM. L.J. 37, 42-43 (2006);
160. Damien Geradin & Robert O'Donoghue, The Concurrent Application of Competition Law and Regulation: The Case of Margin Squeeze Abuses in the Telecommunications Sector, 1 J. COMPETITION L. & ECON. 355, 377 (2005).
161. See Vogt, supra note 97, at 360-61.
162. Howard A. Shelanski, Adjusting Regulation to Competition: Toward a New Model for U.S. Telecommunications Policy, 24 YALE J. ON REG. 55, 80 (2007).
163. See CARLTON & PERLOFF, supra note 22, at 89.
164. See Dennis W. Carlton, Market Definition: Use and Abuse, 3 COMPETITION POL'Y INT'L 1, 7 (2007);
165. David Genesove & Wallace P. Mullin, Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914, 29 RAND. J. ECON. 355, 355 (1998).
166. See, e.g., United States v. AMR Corp., 335 F.3d 1109, 1116 (10th Cir. 2003);
167. RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 311-12 (6th ed. 2003).
168. See Lawrence H. Summers, Competition Policy in the New Economy, 69 ANTITRUST L.J. 353, 355-56 (2001).
169. More controversially, the Chicago School also alleged the existence of a phenomenon it labeled "regulatory capture," which described regulators' tendency to become influenced by, and ultimately serve the interests of, those they sought to constrain.
170. See Gary S. Becker, A Theory of Competition Among Pressure Groups for Political Influence, 98 Q. J. ECON. 371 (1983);
171. Sam Peltzman, Toward a More General Theory of Regulation, 19 J.L. & ECON. 211 (1976);
172. George J. Stigler, The Theory of Economic Regulation, 2 BELL J. ECON. &MGMT. SCI. 3 (1971).
173. See Harold Demsetz, Why Regulate Utilities?, 11 J.L. & ECON. 55 (1968);
174. Richard A. Posner, Taxation by Regulation, 2 BELL J. ECON. & MGMT. Sci. 22, 38 (1971) (observing that "many regulated industries are not monopolistic in structure");
175. George J. Stigler, The Economics of Information, 69 J. POL. ECON. 213 (1961);
176. George J. Stigler, Public Regulation of the Securities Markets, 19 Bus. LAW. 721, 721 (1964);
177. George J. Stigler & Clair Friedland, What Can Regulators Regulate? The Case of Electricity, 5 J.L. &ECON. 1 (1962).
178. See PIERCE & GELLHORN, supra note 92, at 343-44; Hovenkamp, supra note 95, at 825.
179. See Gerald R. Faulhaber, Will Access Regulation Work?, 61 FED. COMM. L.J. 37, 38 (2008).
180. See PIERCE & GELLHORN, supra note 92, at 343-78;
181. Posting of Gary Becker to The Becker-Posner Blog, Greater Regulation of Financial Markets?, http://www.becker-posner-blog.com/ (Apr. 28, 2008, 19:37 EDT).
182. The results were largely satisfactory, even if all were not convinced. Even before the onset of the current crisis, which itself strongly suggests that unbridled deregulation can produce far from desirable results, some were skeptical of the curative powers of deregulation.
183. See, e.g., Richard D. Cudahy, The Folklore of Deregulation (with Apologies to Thurman Arnold), 15 YALE J. ON REG. 427 (1998).
184. See RICHARD A. POSNER, A FAILURE OF CAPITALISM: THE CRISIS OF '08 AND THE DECENT INTO DEPRESSION (2009).
185. J. Thomas Rosch, Commissioner, Fed. Trade Comm'n, Remarks to the New York Bar Association Annual Dinner: Implications of the Financial Meltdown for the FTC 2 (Jan. 29, 2009), available at www2.ftc.gov/speeches/rosch/ 090129financialcrisisnybarspeech.pdf.
186. See PITOFSKY, supra note 62, at 7 (discussing various economists' growing "unease" with Chicago School analysis).
187. Edmund L. Andrews, Greenspan Concedes Error on Regulation, N.Y. TIMES, Oct. 24, 2008, at B1. 118. For a consideration of the normative conclusions to be drawn from the recession, see infra Part II.B.
188. See POSNER, supra note 114 at vii.
189. See id. at 31-34 (noting the vast increase in consumer debt and further observing that "in the years leading up to the current depression, the personal savings rate of Americans had plummeted").
190. See id. at vii-xi.
191. See id. at 66-68.
192. See id. at 68.
193. See id. at 209.
194. See id. at 133, 274 (characterizing the decision "to allow Lehman Brothers to slip into bankruptcy ... as the single biggest blunder to date in the response to the gathering storm").
195. See What Next?, ECONOMIST, Sept. 20, 2008, at 19-20 (surveying the week's events, opining that "[i]t is no hyperbole to say that for an inkling of what is at stake, you have only to study the 1930s," and concluding that it had been "a black week").
196. See Yalman Onaran & Christopher Scinta, Lehman Files Biggest Bankruptcy Case as Suitors Bdk, BLOOMBERG.COM, Sept. 15, 2008, http://www.bloomberg.com/apps/news?sid=awh5hRyXkvs4&pid=20601087.
197. See POSNER, supra note 114 at 274;
198. Accelerating Downhill, ECONOMIST, Jan. 17, 2009, at 13-14 129.
199. See POSNER, supra note 114 at viii.
200. See I Want Your Money, ECONOMIST, Sept. 27, 2008, at 17.
201. See All You Need Is Cash, ECONOMIST, Nov. 22, 2008, at 17.
202. See World on the Edge, ECONOMIST, Oct. 4, 2008, at 11-12.
203. See POSNER, supra note 114 at 275.
204. See The End of the Affdr, ECONOMIST, Nov. 22, 2008, at 39-40;
205. When the Golden Eggs Run Out, ECONOMIST, Dec. 6, 2008, at 95-97.
206. See Chris Isidore, It's Official: Recession Since Dec'07, CNN MONEY.COM, Dec. 1, 2008, http://money.cnn.com/2008/12/01/news/economy/recession/index.htm.
207. See Where Have All Your Savings Gone?, ECONOMIST, Dec. 6, 2008, at 13.
208. See Alan Greenspan, Banks Need More Capital, ECONOMIST, Dec. 18, 2008, at 122.
209. See Decoupling 2.0, ECONOMIST, May 23, 2009, at 14
210. See Judy Dempsey, Iceland's Government Collapses, N.Y. TIMES, Jan. 27, 2009, at A8;
211. Eric Pf anner, Iceland Is All But Officially Bankrupt, N.Y. TIMES, Oct. 9, 2008, at B1.
212. Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343, 122 Stat. 3765.
213. In fact, it was a solvency problem See POSNER, supra note 114 at 64-74
214. American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115.
215. Recovery.gov, The Act, http://www.recovery.gov/About/Pages/The-Act.aspx (last visited Mar. 27, 2010).
216. See Press Release, U.S. Dep't of Commerce, Bureau of Econ. Analysis, Gross Domestic Product: Fourth Quarter 2009 (Jan. 29, 2010), available at http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm (reporting that GDP rose at an annual rate of 5.4% in the fourth quarter of 2009);
217. see also Justin Fox, Is the Economy Starting to Recover? Or Just Less Bad?, TIME.COM, Mar. 26, 2009, http://www.time.com/time/business/article/0,8599, 188768400.html;
218. Carlo Piovano, World Stocks Rally on Hopes for Economic Recovery, ABCNEWS, May 19, 2009, http://abcnews.go.com/Business/wireStory?id=7620953.
219. See Annys Shin, Federd Reserve Leaders See Economic Progress, WASH. POST, May 21, 2009, at A15.
220. See Patrice Hill Unemployment Rate Stays at 9.7%; 36K Jobs Lost, WASH. TIMES, Mar. 5, 2010, available at http://www.washingtontimes.com/news/2010/mar/ 05/unemployment-held-steady-97-percent-february/.
221. Richard A. Posner, http://www.theatlantic.com/richard-a-posner (May 20, 2009, 9:59 EDT).
222. Id.
223. see also POSNER, supra note 114 at 273.
224. Posner, supra note 147.
225. Although this Part seeks to provide a reasonably detailed explanation of how and why the economic crisis occurred, such that the reader can properly interpret the consequences of the global recession for macroeconomic and, more importantly for this Article, antitrust policy, a full and authoritative treatment of the subject would require space far in excess of what is feasible for an article. Readers who seek a more detailed treatment of the crisis should look to any of a number of excellent books.
226. See, e.g., POSNER, supra note 114;
227. JOHN B. TAYLOR, GETTING OFF TRACK: HOW GOVERNMENT ACTIONS AND INTERVENTIONS CAUSED, PROLONGED, AND WORSENED THE FINANCIAL CRISIS (2009);
228. MARK ZANDI, FINANCIAL SHOCK: A 360° LOOK AT THE SUBPRIME MORTGAGE IMPLOSION, AND HOW TO AVOID THE NEXT FINANCIAL CRISIS (2008).
229. Notably, some weaknesses are already being resolved. For example, the market for credit-default swaps has transformed itself in the short time since the onset of the crisis.
230. Puzzanghera, supra note 12. 153. Id.
231. Id.
232. See, e.g., Brennan, supra note 18, at 147;
233. Herbert Hovenkamp, The Monopolization Offense, 61 OHIO ST. L.J. 1035, 1049 (2000);
234. Kauper, supra note 18, at 1870.
235. See FED. TRADE COMM'N & U.S. DEP'T OF JUSTICE, HORIZONTAL MERGER GUIDELINES §§3.0-3.4 (1997).
236. See Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 902-03 (9th Cir. 2008) ("One of the challenges of interpreting and enforcing the amorphous prohibitions of §§1 and 2 of the Sherman Act is ensuring that the antitrust laws do not punish economic behavior that benefits consumers and will not cause long-run injury to the competitive process.").
237. Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004).
238. See Frank H. Easterbrook, The Chicago School and Exclusionary Conduct, 31 HARV. J.L. & PUB. POL'Y 439, 440 (2008) (noting that "[antitrust law and bankruptcy law go hand in hand").
239. See Colorado Interstate Gas Co. v. Natural Gas Pipeline Co., 885 F.2d 683, 695-96 (10th Cir. 1989);
240. Williamsburg Wax Museum, Inc. v. Historic Figures, Inc., 810 F.2d 243, 252 (D.C. Cir. 1987);
241. Dimmitt Agri Indus., Inc. v. CPC Int'l, Inc., 679 F.2d 516, 530 (5th Cir. 1982);
242. see also William M. Landes & Richard A. Posner, Market Power in Antitrust Cases, 94 HARV. L. REV. 937, 959 (1981). The only exception relates to per se illegal conduct, such as naked price-fixing and market allocation.
243. In re Borden, Inc., 92 F.T.C. 669, 795 (1978).
244. See POSNER, supra note 114 at 5-7.
245. See Ben S. Bernanke, Remarks Before the National Economists Club: Deflation: Making Sure "It" Doesn't Happen Here (Nov. 21, 2002), available at http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/ default.htm.
246. See POSNER, supra note 114 at 7-8.
247. Id.
248. See Michael Elliott, The Anatomy of the GE-Honeywell Disaster, TIME.COM, July 8, 2001, http://www.time.com/time/business/article/0,8599,166732-2,00.html (quoting Treasury Secretary Paul O'Neill as denouncing the European Commission's veto of the GE-Honeywell merger for being "off the wall");
249. Press Release, Thomas O. Barnett, Assistant Att'y. Gen. for Antitrust, Dep't of Justice, Statement on European Microsoft Decision (Sept. 17, 2007), available at http://www.usdoj.gov/atr/public/press-releases/2007/226070.htm (criticizing a decision of the Court of First Instance of the European Communities, which affirmed a decision of the EC, because "rather than helping consumers, [it] may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition").
250. See POSNER, supra note 35, at 9-32.
251. See FED. TRADE COMM'N & U.S. DEP'T OF JUSTICE, ANTITRUST GUIDELINES FOR COLLABORATIONS AMONG COMPETITORS 2-3 (2000).
252. See generdly id. at 1;
253. POSNER, supra note 35, at 136-40.
254. In some circumstances, however, cartels will not have long-run anticompetitive effect, as the increase in price to supracompetitive levels will spur rapid entry. See Roger D. Blair, James Mak & Carl Bonham, Collusive Duopoly: The Economic Effects of the Aloha and Hawdian Airlines' Agreement to Reduce Capacity, 74 ANTITRUST L.J. 409, 436 (2007).
255. See POSNER, supra note 35, at 136-40.
256. See Whitener, supra note 12; Puzzanghera, supra note 12.
257. See John D. Harkrider, Lessons from the Great Depression, 23 ANTITRUST 6, 9 (2009).
258. See id.
259. One need merely observe the debate leading up to the XM-Sirius merger, which largely divided along party lines. For a discussion of the economics applicable to that merger, see J. Gregory Sidak & Hal J. Singer, Evaluating Market Power with Two-Sided Demand and Preemptive Offers to Dissipate Monopoly Rent: Lessons for High-Technology Industries from the Antitrust Division's Approvd of the XM-Sirius Satellite Radio Merger, 4 J. COMPETITION L. & ECON. 697 (2008).
260. Democratic administrations are likely to be significantly tougher on merger enforcement than their Republican counterparts are. See Julie Johnsson et al., 346 Days: With less than a year left in the Bush administration's tenure, some see an urgency to push through mergers in a pro-business climate, CHI. TRIB., Feb. 8, 2008, at 1.
261. Aggregate-welfare models place as much relevance on producer-side cost savings as they do on merger-specific consumers' benefits. Oliver Williamson famously demonstrated that output-restricting mergers, which increase prices for consumers, may be socially desirable if even a relatively small productive efficiency gain is achieved. See Oliver E. Williamson, Economies as an Antitrust Defense: The Welfare Tradeoffs, 58 AM. ECON. REV. 18 (1968).
262. At present, so-called "Williamson mergers" are not allowed in the United States. Debate on whether this prohibition is appropriate continues.
263. See Alan Devlin & Bruno Peixoto, Reformulating Antitrust Rules to Safeguard Societa Wealth, 13 STAN. J.L. BUS. & FIN. 225, 231-32 (2007) (making the case for an aggregate-welfare approach to antitrust policy).
264. The classic example is FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997).
265. See POSNER, supra note 35, at 157-58 (explaining the econometric techniques employed in the case and concluding that "[e]conomic analysis of mergers had come of age"). These empirical tools have also been employed in consummated mergers to prove actual anticompetitive effects.
266. See In re Evanston Nw. Healthcare Corp., F.T.C. No. 9315 (Aug. 6, 2007).
267. See 15 U.S.C. § 18(2006).
268. The feasibility, likelihood, and effect of post-merger entry arguably play the most important role in the merger assessment process after market definition.
269. See FED. TRADE COMM'N & U.S. DEP'T OF JUSTICE, HORIZONTAL MERGER GUIDELINES §§ 3.0-3.4 (1997).
270. Indeed, U.S. courts have previously chastised the enforcement agencies for seeking to enjoin combinations when post-merger entry is likely. Perhaps the most important case under this heading is United States v. Syufy Enters., 903 F.2d 659 (9th Cir. 1990).
271. See Decoupling 2.0, supra note 138, at 14;
272. Economists: Recession to End in 2009, CNN MONEY, May 27, 2009, http://money.cnn.com/2009/05/27/news/economy/NABE-recovery-outlook/index.htm
273. See POSNER, supra note 35, at 115.
274. For example, the U.S. Justice Department approved a controversial merger between General Electric and Honeywell that was subsequently blocked by the European Commission. The Commission was concerned, in part, by GE's large capital reserves, which GE-Honeywell would be able to use to fund its activities in various markets. GE-Honeywell's competitors, by contrast, would not have access to such funds. The Justice Department rejected this contention, reasoning that "[c]apital markets generally work very efficiently and there is no obvious reason, absent some clearly defined market imperfection, why GE's cost of capital for a particular project should be any lower than that of its rivals." Majoras, supra note 84, at 8. Such a conclusion might lie on shakier foundation were it reached in the present, credit-deprived economy.
275. See Reazin v. Blue Cross & Blue Shield of Kan., Inc., 899 F.2d 951, 968 (10th Cir. 1990).
276. See, e.g., Evanston Nw. Healthcare Corp., F.T.C. No. 9315, 2007 WL 2286195 (Aug. 6, 2007) (noting that, in a consummated merger, "our analysis is a retrospective inquiry based on empirical evidence" of competitive effects).
277. See HOWARD DAVIES & DAVID GREEN, GLOBAL FINANCIAL REGULATION 8-9 (2008).
278. Id. at 9.
279. See T. Randolph Beard, Robert B. Ekelund Jr., & George S. Ford, The Law and Economics of Unbundling and Impdrment, 2003 U. III. J.L. TECH. & POL'Y 475, 476 n.3;
280. Douglas Gegax & Kenneth Nowotny, Competition and the Electric Utility Industry: An Evduation, 10 YALE J. ON REG. 63, 67-68 (1993).
281. See, e.g., Oliver Budzinski & Katharina Wacker, The Prohibition of the Proposed Springer-Prosiebensat.l Merger: How much Economics in German Merger Control? 3 J. COMPETITION L. & ECON. 281, 286 (2007).
282. For the classic discussion of this point, see WALTER BAGEHOT, LOMBARD STREET: A DESCRIPTION OF THE MONEY MARKET (2005).
283. See DAVIES &GREEN, supra note 186, at 16-17.
284. See Whitener, supra note 12; Puzzanghera, supra note 12.
285. See POSNER, supra note 114 at ix. 194. As the Seventh Circuit classically explained, "[n]o court has yet said that the accumulation and use of great power is unlawful per se.
286. Bigness is no crime...." United States v. N.Y. Great Atl. & Pac. Tea Co., 173 F.2d 79, 87 (7th Cir. 1949);
287. accord Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 274 (2d Cir. 1979) (distinguishing mere size from market power);
288. Bailey's Bakery, Ltd. v. Cont'l Baking Co., 235 F. Supp. 705, 718 (D. Haw. 1964),
289. aff'd, 401 F.2d 182 (9th Cir. 1968) ("Mere size, nor continued exercise of lawful powers by even a monopolist, is not illegal....").
290. Chi. Prof'l Sports, Ltd. v. Nat'l Basketball Ass'n, 95 F.3d 593, 597 (7th Cir. 1996).
291. Alcoa, the landmark case that stood for the proposition that a company can violate the antitrust laws by monopolizing a market on the sole basis of efficiency, has been characterized as "discredited," "defunct," and "no longer the law." J. Gregory Sidak, Abolishing the Price Squeeze as a Theory of Antitrust Liability, 4 J. COMPETITION L. & ECON. 279, 304 (2008) (quoting POSNER, supra note 35, at 103, 196, 250, 263).
292. See Kolasky, supra note 14 at 533.
293. See generlly Joseph P. Bauer, Government Enforcement Policy of Section 7 of the Clayton Act: Carte Blanche for Conglomerate Mergers?, 71 CAL. L. REV. 348 (1983).
294. See Alan A. Fisher & Robert H. Lande, Efficiency Considerations in Merger Enforcement, 71 CAL. L. REV. 1580, 1603 n.101 (1983);
295. Donald F. Turner, Conglomerate Mergers and Section 7 of the Clayton Act, 78 HARV. L. REV. 1313, 1321-22 (1965).
296. See Edmund H. Mantell, Conglomerate Mergers, Allocative Efficiency, and Section 7 of the Clayton Act, 56 TEX. L. REV. 207, 208 (1978).
297. Compare James Cooper, Luke Froeb, Daniel O'Brien & Michael Vita, A Critique of Professor Church's Report on the Impact of Vertical and Conglomerate Mergers on Competition, 1 J. COMPETITION L. & ECON. 785 (2005),
298. with Jeffrey Church, The Church Report's Analysis of Verticd and Conglomerate Mergers: A Reply to Cooper, Froeb, O'Brien, and Vita, 1 J. COMPETITION L. & ECON. 797 (2005).
299. See BORK, supra note 61, at 257; POSNER, supra note 35, at 131 n.30;
300. George Stephanov Georgiev, Recent Development, Bridging the Divide? The European Court of First Instance Judgment in GE/Honeywell, 31 YALE J. INT'L L. 518, 519 (2006).
301. This includes the Warren Court era in the United States where antitrust largely reflected populist principles. For a contemporaneous articulation of the view at that time, see Harlan M. Blake, Conglomerate Mergers and the Antitrust Laws, 73 COLUM. L. REV. 555, 586 (1973).
302. See Ilene Knable Gotts et al., Nature vs. Nurture and Reaching the Age of Reason: The U.S.IE.U. Treatment of Transatlantic Mergers, 61 N.Y.U. ANN. SURV. AM. L. 453, 473-74 (2005).
303. See, e.g., United States v. Aluminum Co. of America (Alcoa), 148 F.2d 416, 421, 429-30 (2d Cir. 1945).
304. See Jacobs, supra note 21, at 228; Herbert J. Hovenkamp, The Neal Report and the Crisis in Antitrust (March 2009) (unpublished manuscript), available at http://ssrn.com/abstract=1348707.
305. See Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004).
306. Alcoa, 148 F.2d at 430-32.
307. United States v. Syufy Enters., 903 F.2d 659, 668 (9th Cir. 1990) (citations omitted).
308. See Ronald H. Coase, The Nature of the Firm, 4 ECONOMICA 386, 388 (1937) (explaining that firms exist and grow in response to the transaction cost-savings made possible by internal production and coordination).
309. 210. POSNER, supra note 35, at viii.
310. Pub. L. No. 73-66, 48 Stat. 162 (1933) (repealed 1999) (separating investment and commercial-banking activities).
311. Decision theory is the branch of economics concerned with decision making under conditions of uncertainty. Uncertainty is to be distinguished from risk, which is quantifiable.
312. See POSNER, supra note 35, at 60.
313. Type I errors involve erroneous conclusions of anticompetitive conduct.
314. Type II errors involve mistaken determinations that conduct is procompetitive.
315. See Frank H. Easterbrook, The Limits of Antitrust, 63 TEX. L. REV. 1, 3 (1984).
316. COMPETITION AND MONOPOLY, supra note 85, at ix.
317. Press Release, Dep't of Justice, Justice Department Withdraws Report on Antitrust Monopoly Law: Antitrust Divisions to Apply More Rigorous Standard With Focus on the Impact of Exclusionary Conduct on Consumers (May 11, 2009), available at http://www.justice.gov/atr/public/press-releases/2009/245710.htm. Commissioner Rosch has expressed a similar sentiment.
318. See Whitener, supra note 12, at 40-41.
319. See POSNER, supra note 114 at 82-85.
320. See Whitener, supra note 12, at 40-41.
321. For an excellent compilation of leading works in this area, see ADVANCES IN BEHAVIORAL ECONOMICS (Colin F. Camerer, George Loewenstein & Matthew Rabin eds., 2004).
322. Compare Christine Jolis, Cass R. Sunstein & Richard Thaler, A Behaviord Approach to Law and Economics, 50 STAN. L. REV. 1471 (1998),
323. with Richard A. Posner, Rationd Choice, Behaviord Economics, and the Law, 50 STAN. L. REV. 1551 (1998).
324. See Claire A. Hill, The Rationdity of Preference Construction (and the Irrationdity of Rational Choice), 9 MINN. J.L. Sci. &TECH. 689, 701-02 (2008).
325. See POSNER, supra note 35, at ix. But see Note, Organizationd Irrationality and Corporate Human Rights Violations, 122 HARV. L. REV. 1931, 1932-33 (2009).
326. See POSNER, supra note 114 at 79.
327. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
328. For an exception, see Maurice E. Stucke, Behavioral Economists at the Gate: Antitrust in the Twenty-First Century, 38 LOY. U. CHI. L.J. 513, 525 (2006) (advocating the use of behavioral economics in market analysis).
329. Alan Greenspan, Economic Focus: Banks Need More Capital, ECONOMIST, Dec. 20, 2008, at 122.
330. See id. 229.
331. See Kolasky, supra note 14, at 537 ("In the U.S., we have very little confidence in the ability of regulators to make these judgments, which would necessarily involve predictions far out into the future. U.S. antitrust agencies believe, in the immortal words of my favorite golfer, Tin Cup McAvoy, that they need to 'be humble.' The agencies also have more confidence in the self-correcting nature of markets. This confidence is especially strong when the markets are populated by strong rivals and strong buyers, who will usually find ways to protect themselves from an aspiring monopolist. This strong belief in markets and humility in their predictive abilities lead U.S. authorities to be skeptical of claims by rivals that a merger will lead to their ultimate demise and to demand strong empirical proof before we will accept such claims." (footnotes omitted)).
332. See Lessons from a Crisis, ECONOMIST, Oct. 4 2008, at 55.
333. Id.