Does the Packers and Stockyards Act Require Antitrust Harm?

The Packers and Stockyards Act was enacted in 1921. Congress was plainly influenced by the 1919 publication of a Federal Trade Commission Report on the meatpacking industry. Consistent with the FTC’s jurisdiction and concerns, the Report dealt with deceptive and unfair practices as well as practices that were believed to violate the antitrust laws. The language of the PSA does much the same, mixing the two. Of its seven specific prohibitions, three contain antitrust-like provisions requiring a lessening of competition. Two others reach unfair and tort-like conduct without any requirement of harm to competition. The remaining two reach both anticompetitive and tortuous conspiracies. One of the conspiracy provisions plainly reaches price fixing and market division agreements. The other plainly reaches a full range of tortious and anticompetitive conduct without stating a harm to competition requirement. This brief essay considers the wisdom of holdings in half a dozen Circuit Courts of Appeal that even those sections of the statute that do not explicitly require harm to competition must be interpreted as if they did

President Biden\u27s Executive Order on Promoting Competition: an Antitrust Analysis

In July, 2021, President Biden signed a far ranging Executive Order directed to promoting competition in the American economy. This paper analyzes issues covered by the Order that are most likely to affect the scope and enforcement of antitrust law. The only passage that the Executive Order quoted from a Supreme Court antitrust decision captures its antitrust ideology well – that the Sherman Act: rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conducive to the preservation of our democratic political and social institutions.Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 4 (1958) (Black, j.)

Rabban\u27s Law\u27s History

This is a brief review of David Rabban\u27s new book: Law\u27s History: American Legal Thought and the Transatlantic Turn to History (Cambridge, 2013)

Innovation and Competition Policy, Ch. 5 (2d ed): Competition and Innovation in Copyright and the DMCA

This book of CASES AND MATERIALS ON INNOVATION AND COMPETITION POLICY is intended for educational use. The book is free for all to use subject to an open source license agreement. It differs from IP/antitrust casebooks in that it considers numerous sources of competition policy in addition to antitrust, including those that emanate from the intellectual property laws themselves, and also related issues such as the relationship between market structure and innovation, the competitive consequences of regulatory rules governing technology competition such as net neutrality and interconnection, misuse, the first sale doctrine, and the Digital Millennium Copyright Act (DMCA). Chapters will be updated frequently. The author uses this casebook for a three-unit class in Innovation and Competition Policy taught at the University of Iowa College of Law and available to first year law students as an elective. This document is Chapter 5, second edition, on competition policy and the Copyright Act and DMCA

Prophylactic Merger Policy

An important purpose of the antitrust merger law is to arrest certain anticompetitive practices or outcomes in their “incipiency.” Many Clayton Act decisions involving both mergers and other practices had recognized the idea as early as the 1920s. In Brown Shoe the Supreme Court doubled down on the idea, attributing to Congress a concern about a “rising tide of economic concentration” that must be halted “at its outset and before it gathered momentum.” The Supreme Court did not explain why an incipiency test was needed to address this particular problem. Once structural thresholds for identifying problematic mergers are identified there is no need to condemn mergers that fall below that threshold. In the future merger law could always be brought to bear if the relevant numbers became larger. But this does not mean that incipiency tests are unimportant. They properly have a different use than the one that the Supreme Court identified. A better use of incipiency tests is to prevent certain bad outcomes early when antitrust rules make it difficult or impossible to prevent them later. Today most mergers are challenged before they occur. As a result, the feared post-merger conduct has not occurred either and the evidence pertains to predicted rather than actual effects. This makes it important to place some limits on merger law’s prophylactic reach. First, the language of §7 requires causation -- a showing that the merger is what is likely to facilitate that feared anticompetitive conduct. Second, we need to be satisfied that this conduct, if it should occur, will be both anticompetitive and difficult to reach through direct application of the antitrust laws. Third, the merger must raise a significant risk that the conduct will occur. Finally, as with all merger cases, there must not be offsetting gains that serve to justify the merger notwithstanding these threats to competition. This paper then applies these considerations in several areas: mergers threatening coordinated interaction; merges to monopoly and those facilitating anticompetitive unilateral effects; vertical mergers threatening input foreclosure or some instances of price discrimination; exclusionary IP acquisitions from outside inventors; and mergers of very small but highly innovative firm. The paper particularly focuses on some high profile transactions, including the AT&T/Time Warner acquisition, which the Justice Department has challenged, and the contemplated partial asset acquisition involving Disney and 21st Century Fox. We also examine the impact of the FCC’s decision rolling back net neutrality, which increases competitive concerns in this area, whether or not the acquisition falls under the jurisdiction of the FCC’s power to evaluate mergers. We also examine the recent Intellectual Ventures decision, now subject to appeal, which involves an allegedly anticompetitive acquisition of patents

United States Competition Policy in Crisis: 1890-1955

The development of marginalist, or neoclassical, economics led to a fifty-year long crisis in competition theory. Given an industrial structure with sufficient fixed costs, competition always became ruinous, forcing firms to cut prices to marginal cost without sufficient revenue remaining to pay off investment. Early neoclassicists such as Alfred Marshall were not able to solve this problem, and as a result many economists were hostile toward the antitrust laws in the early decades of the twentieth century. The ruinous competition debate came to an abrupt end in the early 1930\u27s, when Joan Robinson and particularly Edward Chamberlin developed models that took product differentiation into account. The emergent theory of monopolistic competition came with its own problems, however - namely, excessive product variety and advertising, chronic excess capacity, and prices above short-run marginal cost. In sharp contrast to the ruinous competition model, the monopolistic competition model called for aggressive antitrust enforcement. This change of model largely explains the Roosevelt administration\u27s abrupt shift in antitrust policy between the First and Second New Deals. Only with John Maurice Clark\u27s theory of workable competition in 1940 and the Mason-Bain structure-conduct-performance paradigm developed in the 1950s did neoclassical competition theory begin to reach a new equilibrium which attempted to calibrate the amount and kind of competition policy necessary to produce satisfactory results in diverse markets. The subsequent debate between Harvard structuralism and the emergent Chicago School occurred largely within this paradigm

The Warren Campaign’s Antitrust Proposals

Antitrust policy promises to be an important issue in the 2020 presidential election, and for good reason. Market power measured by price-cost margins has been on the rise since the 1980s. Presidential candidate Senator Elizabeth Warren has two proposals directed at large tech platforms. One would designate large platform markets such as Amazon “platform utilities,” and prohibit them from selling their own merchandise on the platform in competition with other retailers. The other proposes more aggressive enforcement against large platform acquisitions of smaller companies.This paper concludes that the first proposal is anticompetitive, leading to reduced output and higher prices at the expense of consumers and labor, and for the benefit of traditional trademarked brands. The second proposal has some merit but needs more careful definition. As stated, it would condemn mergers likely to result in lower prices and higher output, mainly for the benefit of firms dedicated to obsolete technologies or business methods

Innovation and Competition Policy: Cases and Materials (2nd ed.): Chapter 1: Competition Policy and the Scope of Intellectual Property Protection

This casebook differs from other IP/antitrust casebooks in that it considers sources of competition policy other than antitrust, including those that emanate from the intellectual property laws themselves, and also related issues such as the relationship between market structure and innovation, the competitive consequences of regulatory rules governing technology competition such as net neutrality and interconnection, misuse, the first sale doctrine, the Digital Millenium Copyright Act (DMCA). The book is free for all to use and distribute, subject to restrictions contained in an open source license agreement printed in each chapter. Chapters will be updated frequently. The author uses this casebook for a three-unit class in Innovation and Competition Policy taught at the University of Iowa College of Law and available to first year law students as an elective

Neoclassicism and the Separation of Ownership and Control

Separation of ownership and control is a phrase whose history will forever be associated with Adolf A. Berle and Gardiner C. Means\u27 The Modern Corporation and Private Property (1932), as well as with Institutionalist economics, Legal Realism, and the New Deal. Within that milieu the large publicly held business corporation became identified with excessive managerial power at the expense of stockholders, social irresponsibility, and internal inefficiency. Neoclassical economists both then and ever since have generally been critical, both of the historical facts that Berle and Means purported to describe and of the conclusions that they drew. In fact, however, within neoclassical economics the separation of ownership and control has always been an essential element of efficient corporate governance and corporate finance. This paper explores the history of the concept of separation of ownership and control within neoclassical economics, starting with Yale economist Irving Fisher\u27s separation theorem developed early in the twentieth century, which held that a corporation\u27s profit function could not be derived from shareholders\u27 utility functions; Ronald Coase\u27s The Nature of the Firm (1937), which applied purely marginalist analysis to the determinants of the horizontal and vertical structure of the corporation; and then to the great corporate finance theorems of the 1950s and 1960s. These concluded that ownership and debt are nothing more than alternative, fungible sources of capital, and that a profitable stock ownership strategy involves no knowledge whatsoever about the firms in which purchasers are investing. Within this model separation of ownership and control actually understates the degree of separation. A better phrase would be separation of ownership and awareness

The Invention of Antitrust

The long Progressive Era, from 1900 to 1930, was the Golden Age of antitrust theory, if not of enforcement. During that period courts and Progressive scholars developed nearly all of the tools that we use to this day to assess anticompetitive practices under the federal antitrust laws. In a very real sense we can say that this group of people invented antitrust law. The principal contributions the Progressives made to antitrust policy were (1) partial equilibrium analysis, which became the basis for concerns about economic concentration, the distinction between short- and long-run analysis, and later provided the foundation for the development of the antitrust “relevant market”; (2) classification of costs into fixed and variable, with the emergent belief that industries with high fixed costs were more problematic; (3) development of the concept of entry barriers, contrary to a long classical tradition of assuming that entry is easy and quick; (4) the distinction between horizontal and vertical relationships and the emergence of vertical integration as a competition problem; (5) price discrimination as a practice that could sometimes have competitive consequences. Finally, at the end of this period came (6) theories of imperfect competition, including the rediscovery of oligopoly theory and the rise of product differentiation as relevant to antitrust policy making. Subsequent to 1930 antitrust policy veered sharply to the left. Then, two decades later it turned just as sharply to the right. Eventually it moderated, reaching a point that is not all that far away from the Progressives\u27 original vision