The Evolution of Antitrust Doctrine After \u3ci\u3eOhio v. Amex\u3c/i\u3e and the \u3ci\u3eApple v. Pepper\u3c/i\u3e Decision That Should Have Been

If the Supreme Court’s recent decision in Apple Inc. v. Pepper (Apple) had hewed to the precedent established by Ohio v. American Express Co. (Amex), it would have begun its antitrust inquiry with the observation that the relevant market for the provision of app services is an integrated one, in which the overall effect of Apple’s conduct on both app users and app developers must be evaluated. A crucial implication of the Amex decision is that participants on both sides of a transactional platform are part of the same relevant market, and the terms of their relationship to the platform are inextricably intertwined. We believe the Amex Court was correct in deciding that effects falling on the “other” side of a tightly integrated, two-sided market from challenged conduct must be addressed by the plaintiff in making its prima facie case. But that outcome entails a market definition that places both sides of such a market in the same relevant market for antitrust analysis. As a result, the Amex Court’s holding should also have required a finding in Apple that an app user on one side of the platform who transacts with an app developer on the other side of the market, in a transaction made possible and directly intermediated by Apple’s App Store, is similarly deemed to be in the same market for standing purposes. Under the proper conception of the market, it is difficult to maintain that either side does not have standing to sue the platform for alleged anticompetitive conduct relating to the terms of its overall pricing structure, whether the specific terms at issue apply directly to that side or not. Both end users and app developers are “direct” purchasers from Apple—of superficially different products, but in a single, inextricably interrelated market. Both groups should have standing and should be able to establish antitrust injury—harm to competition—by showing harm to either group, as long as they can establish the requisite interrelatedness of the two sides of the market. As we discuss, such a result would have been consistent with the way antitrust doctrine has long evolved—in both its substantive and its procedural aspects—to reflect new economic knowledge, particularly with respect to such “nonstandard” business models. I. Introduction ... A. Ohio v. American Express Co. and Apple Inc. v. Pepper: A Failure of Antitrust Doctrinal Evolution II. The Nexus Between Procedure and Substance in Antitrust Law ... A. Quick Look and the Evolution of the Standards of Antitrust Review ... B. The Interplay of Procedure and Substance in the Doctrines of Antitrust Standing ... 1. Antitrust Injury and Antitrust Standing ... 2. The Indirect Purchaser Doctrine III. Nonstandard Contracts and Antitrust Doctrine: Accommodating the Economics of Two-Sided Markets in Antitrust Procedure ... A. The Basic Economics of Two-Sided Markets ... B. Amex, Market Definition, and Effects Analysis ... 1. Implications for the Consideration of “Out-of-Market” Effects ... C. The Relationship Between Market Definition and Standing IV. The Court’s Failure to Incorporate the Economics of Two-Sided Markets in Its Apple Inc. v. Pepper Decision ... A. Campos v. Ticketmaster and the Error of Doctrinal Formalism ... 1. The Consequences of the Formalistic Application of Illinois Brick to New Business Models V. What the Proper Procedural Analysis in Apple Inc. v. Pepper Would Have Looked Like ... A. Procedure Does Not Determine Substantive Outcomes VI. Conclusio

The Evolution of Antitrust Doctrine After \u3ci\u3eOhio v. Amex\u3c/i\u3e and the \u3ci\u3eApple v. Pepper\u3c/i\u3e Decision That Should Have Been

If the Supreme Court’s recent decision in Apple Inc. v. Pepper (Apple) had hewed to the precedent established by Ohio v. American Express Co. (Amex), it would have begun its antitrust inquiry with the observation that the relevant market for the provision of app services is an integrated one, in which the overall effect of Apple’s conduct on both app users and app developers must be evaluated. A crucial implication of the Amex decision is that participants on both sides of a transactional platform are part of the same relevant market, and the terms of their relationship to the platform are inextricably intertwined. We believe the Amex Court was correct in deciding that effects falling on the “other” side of a tightly integrated, two-sided market from challenged conduct must be addressed by the plaintiff in making its prima facie case. But that outcome entails a market definition that places both sides of such a market in the same relevant market for antitrust analysis. As a result, the Amex Court’s holding should also have required a finding in Apple that an app user on one side of the platform who transacts with an app developer on the other side of the market, in a transaction made possible and directly intermediated by Apple’s App Store, is similarly deemed to be in the same market for standing purposes. Under the proper conception of the market, it is difficult to maintain that either side does not have standing to sue the platform for alleged anticompetitive conduct relating to the terms of its overall pricing structure, whether the specific terms at issue apply directly to that side or not. Both end users and app developers are “direct” purchasers from Apple—of superficially different products, but in a single, inextricably interrelated market. Both groups should have standing and should be able to establish antitrust injury—harm to competition—by showing harm to either group, as long as they can establish the requisite interrelatedness of the two sides of the market. As we discuss, such a result would have been consistent with the way antitrust doctrine has long evolved—in both its substantive and its procedural aspects—to reflect new economic knowledge, particularly with respect to such “nonstandard” business models. I. Introduction ... A. Ohio v. American Express Co. and Apple Inc. v. Pepper: A Failure of Antitrust Doctrinal Evolution II. The Nexus Between Procedure and Substance in Antitrust Law ... A. Quick Look and the Evolution of the Standards of Antitrust Review ... B. The Interplay of Procedure and Substance in the Doctrines of Antitrust Standing ... 1. Antitrust Injury and Antitrust Standing ... 2. The Indirect Purchaser Doctrine III. Nonstandard Contracts and Antitrust Doctrine: Accommodating the Economics of Two-Sided Markets in Antitrust Procedure ... A. The Basic Economics of Two-Sided Markets ... B. Amex, Market Definition, and Effects Analysis ... 1. Implications for the Consideration of “Out-of-Market” Effects ... C. The Relationship Between Market Definition and Standing IV. The Court’s Failure to Incorporate the Economics of Two-Sided Markets in Its Apple Inc. v. Pepper Decision ... A. Campos v. Ticketmaster and the Error of Doctrinal Formalism ... 1. The Consequences of the Formalistic Application of Illinois Brick to New Business Models V. What the Proper Procedural Analysis in Apple Inc. v. Pepper Would Have Looked Like ... A. Procedure Does Not Determine Substantive Outcomes VI. Conclusio

Technology Mergers and the Market for Corporate Control

Several high-profile academic articles and reports claim to have identified important gaps in current merger enforcement rules, particularly with respect to tech and pharma acquisitions involving nascent and potential competitors—so-called “killer acquisitions” and “kill zones.” As a result of these perceived deficiencies, scholars and enforcers have called for tougher rules, including the introduction of lower merger filing thresholds and substantive changes, such as the inversion of the burden of proof when authorities review mergers and acquisitions in the digital platform industry. Meanwhile, and seemingly in response to the increased political and advocacy pressures around the issue, U.S. antitrust enforcers have recently undertaken several enforcement actions directly targeting such acquisitions. As this paper discusses, however, these proposals tend to overlook the important tradeoffs that would ensue from attempts to decrease the number of false positives under existing merger rules and thresholds. While merger enforcement ought to be mindful of these possible theories of harm, the theories and evidence are not nearly as robust as many proponents suggest. Most importantly, there is insufficient basis to conclude that the costs of permitting the behavior they identify is greater than the costs would be of increasing enforcement to prohibit it

Behavioral Economics Goes to Court: The Fundamental Flaws in the Behavioral Law & Economics Arguments Against No-Surcharge Laws

During the past decade, academics – predominantly scholars of behavioral law and economics – have increasingly turned to the claimed insights of behavioral economics in order to craft novel policy proposals in many fields, most significantly consumer credit regulation. Over the same period, these ideas have also gained traction with policymakers, resulting in a variety of legislative efforts, such as the creation of the Consumer Financial Protection Bureau. Most recently, the efforts of behavioral law and economics scholars have been directed toward challenging a number of state laws that regulate retailers’ use of surcharge fees for consumer credit card payments. In part as a result of these efforts, the issue has come before multiple courts with varying outcomes. In this article, we examine the merits of that effort. Claims about the realworld application of behavioral economic theories should not be uncritically accepted, and this is especially true when such claims are advanced to challenge a state’s commercial regulation on constitutional grounds. And courts should be particularly careful before relying on such claims where the available evidence fails to support them

Consumer Welfare & the Rule of Law: The Case Against the New Populist Antitrust Movement

Populist antitrust notions suddenly are fashionable again. At their core is the view that antitrust law is responsible for a myriad of purported socio-political problems plaguing society today, including but not limited to rising income inequality, declining wages, and increasing economic and political concentration. Seizing on Americans’ fears about changes to the modern US economy, proponents of populist antitrust policies assert the need to fundamentally reshape how we apply our nation’s competition laws in order to implement a variety of prescriptions necessary to remedy these perceived social ills. The proposals are varied and expansive but have the unifying theme of returning antitrust to the “big-is-bad” enforcement era prevalent in the first half of the twentieth century. But the criticisms populist antitrust proponents raise are generally unsupported and often dramatized, and the resulting policy proposals are, accordingly, fatally flawed. There is sparse evidence today suggesting that the underlying trends these critics purportedly identify are real or in any way linked to lax antitrust enforcement. Ironically, populist antitrust proponents ignore that antitrust law debated over 50 years ago the same proposals that they are raising anew today. At that time, leading jurists, economists, enforcers, and practitioners from across the political spectrum rejected the use of liability standards that seek to evaluate a variety of vague and often contradictory socio-political goals or that condemn conduct based simply on the size of a company. They recognized that these tests led to incoherent and paradoxical results that often did more to hinder than to promote competition by undermining the rule of law and fostering corporate welfare. Instead, antitrust evolved the elegant “consumer welfare standard” that simplified the core issue of what constitutes harm to competition into a straightforward question: does the conduct at issue harm consumers? Today, the consumer welfare standard offers a rigorous, objective, and evidence-based framework for antitrust analysis. It leverages developments in modern economics more reliably to predict when conduct is likely to harm consumers as a result of harm to competition. It offers a tractable test that is broad enough to contemplate a variety of evidence related to consumer welfare but also sufficiently objective and clear to cabin discretion and honor the principle of the rule of law. Perhaps most significantly, it is inherently an economic approach to antitrust that benefits from new economic learning and is capable of evaluating an evolving set of commercial practices and business models. These virtues are precisely the target of the new populist antitrust movement, which seeks to reject economics in favor of mere supposition. This Article makes the case in support of the current consumer welfare standard and against a sweeping set of unsupported populist antitrust reforms. There is significant room for debate within the consumer welfare model for what types of conduct should face antitrust scrutiny, what evidence is relevant, and where liability standards should be drawn. Such debate is healthy and to the benefit of antitrust enforcement. But it does not require abandoning decades of experience and economic learning that would turn back the hands of time and return us to an era where antitrust enforcement was incoherent and deleterious

Micro-Symposium on Orin Kerr\u27s \u27A Theory of Law\u27

For more than a century, careful readers of the Green Bag have known that “[t]here is nothing sacred in a theory of law...which has outlived its usefulness or which was radically wrong from the beginning...The question is What is the law and what is the true public policy?” Professor Orin Kerr bravely, creatively, and eloquently answered that question in his article, “A Theory of Law,” in the Autumn 2012 issue of the Green Bag. Uniquely among all theories of law that I know of, Kerr’s answer to the fundamental question of law and true public policy enables all scholars to answer that same question in their own ways. The Green Bag is pleased to be featuring his “A Theory of Law” in its first micro-symposium, and just as pleased with the quality, quantity, and diversity of the responses to the call for papers. Blessed with an abundance of good work but cursed by a shortage of space, we were compelled to select a small set – representative and excellent – of those essays to publish in the Green Bag or its sibling publication, the Journal of Law. We regret that we cannot do full justice to the outpouring of first-rate legal-theoretical commentary we received