Probability, Presumptions and Evidentiary Burdens in Antitrust Analysis: Revitalizing the Rule of Reason for Exclusionary Conduct

The conservative critique of antitrust law has been highly influential and has facilitated a transformation of antitrust standards of conduct since the 1970s and led to increasingly more permissive standards of conduct. While these changes have taken many forms, all were influenced by the view that competition law was over-deterrent. Critics relied heavily on the assumption that the durability and costs of false positive errors far exceeded those of false negatives. Many of the assumptions that guided this retrenchment of antitrust rules were mistaken and advances in the law and in economic analysis have rendered them anachronistic, particularly with respect to exclusionary conduct. Continued reliance on what are now exaggerated fears of “false positives,” and failure adequately to consider the harm from “false negatives,” has led courts to impose excessive demands of proof on plaintiffs that belie both established procedural norms and sound economic analysis. The result is not better and more reasonable antitrust standards, but instead an embedded ideological preference for non-intervention that creates a tendency toward false negatives, particularly in modern markets characterized by economies of scale and network effects. In this article, we explain how these erroneous assumptions about markets, institutions, and conduct have distorted the antitrust decision-making process and produced an excessive risk of false negatives in exclusionary conduct cases involving firms attempting to achieve, maintain, or enhance dominance or substantial market power. To redress this imbalance, we integrate modern economic analysis and the teaching of decision theory with the foundational conventions of antitrust law, which has long relied on probability, presumptions, and reasonable inferences to provide more effective means for evaluating competitive effects and resolving antitrust claims

Imagining a Counterfactual Section 36: Rebalancing New Zealand's Competition Law Framework

Like the competition-related laws of most other nations, s 36 of New Zealand's Commerce Act 1986 includes a prohibition of some unilateral acts by firms with substantial market power. Such prohibitions reflect the consensus view of many jurisdictions, courts and commentators that the anticompetitive potential of unilateral conduct largely depends on the market power of the firm undertaking it. In lieu of an inquiry into the actual or probable effects of challenged conduct, however, s 36 has been interpreted to rely on a "counterfactual" test, seemingly unique in the world. Under that approach, courts have been directed to ask whether a firm lacking substantial market power would have engaged in the same conduct, and from the answer to that question to infer the likely effects of the conduct by the firm with market power. This article argues that the counterfactual test will frequently be an unreliable method for implementing the language and underlying purposes of s 36.  In many common circumstances it will likely fail to proscribe conduct that may well be harmful to competition and consumers, and result in systematic under-deterrence. In other cases, it may fail to recognise and credit efficiencies that might be unique to the firm with market power, and hence over-deter procompetitive conduct.  The article concludes by considering several options for reform

A Flexible Health Care Workforce Requires a Flexible Regulatory Environment: Promoting Health Care Competition Through Regulatory Reform

Effective competition policy is critical to the success of U.S. health care reform, including efforts to reduce health care costs, increase quality of care, and expand access to health care services. While promoting competition is necessary at every level of the rapidly evolving health care system, it is particularly important with respect to licensed professionals who provide health care services. This Article argues that the current system of health care professional regulation, born of the last century, is in numerous respects an impediment to the kinds of changes needed to fully unleash the benefits of competition among different types of health care service providers. To the contrary, the current system of licensure and related regulations tends to artificially separate professionals in ways that not only insulate them from competition now, but also generate incentives to use regulation to perpetuate and fortify such insulation in the future. Drawing on analytic principles derived from antitrust law enforcement and other regulated industries, the Article argues that, although some regulation is necessary to protect public health and safety, the legacy regulatory system likely impedes the development of innovative, alternate service models that might facilitate enhanced competition by allowing all professionals to practice to the full extent of their education, licensure, and skill. The Article concludes by proposing a range of reforms that would re-conceptualize the core characteristics and methodology of traditional health care professional regulation

Raising rivals’ fixed costs

This article demonstrates that raising fixed costs can serve as a credible mechanism for a well placed firm to exclude its rivals. We identify a number of credible avenues, such as increased regulation, vexatious litigation and increased prices for essential inputs, through which such a firm can raise fixed costs. We show that for a wide range of oligopoly models this may be a profitable strategy, even if the firm’s own fixed costs are affected as much (or even more) than its rivals and even if it is less efficient. The resulting reduction in the number of firms in the market is detrimental to consumer welfare and hence worthy of scrutiny by competition and regulatory authorities