Is Antitrust Too Complicated for Generalist Judges? The Impact of Economic Complexity and Judicial Training on Appeals

Modern antitrust litigation sometimes involves complex expert economic and econometric analysis. While this boom in the demand for economic analysis and expert testimony has clearly improved the welfare of economists—and schools offering basic economic training to judges—little is known about the empirical effects of economic complexity or judges' economic training on decision-making in antitrust litigation. We use a unique data set on antitrust litigation in district courts during 1996—2006 to examine whether economic complexity impacts decisions in antitrust cases, and thereby provide a novel test of the frequently asserted hypothesis that antitrust analysis has become too complex for generalist judges. We also examine the impact of one institutional response to economic complexity - basic economic training by judges. We find that decisions involving the evaluation of complex economic evidence are significantly more likely to be appealed, and decisions of judges trained in basic economics are significantly less likely to be appealed than are decisions by their untrained counterparts. Our results are robust to a variety of controls, including the type of case, circuit, and the political party of the judge. Our tentative conclusion, based on a revealed preference argument that views a party’s appeal decision as an indication that the district court got the economics wrong, is that there is support for the hypothesis that some antitrust cases are too complicated for generalist judges.antitrust, Daubert, complexity, economic training, expert witness

Guiding Section 5: Comments on the Commissioners

FTC Commissioners Joshua Wright and Maureen Ohlhausen have proposed that the Commission adopt Guidelines for the application of Section 5 to Unfair Methods of Competition. This short note comments on the role of Section 5 distinct from the Sherman Act. It suggests that Section 5 be used to attack and deter certain conduct that falls into gaps of the Sherman Act. This includes exclusionary unilateral conduct that likely leads to the achievement, enhancement, or maintenance of market power (as opposed to monopoly power). It also includes unilateral conduct such as invitations to collude and other practices that facilitate conscious parallelism, tacit or express collusion, but are not uniquely or sufficiently “unequivocal” or “consequential” to violate Section 2. The comment also explains why a limitation of Section 5 only to conduct with zero cognizable efficiency benefits would neutralize Section 5 and lead to under-deterrence problems and why a disproportionate harm standard also is problematical

The Appropriate Legal Standard and Sufficient Economic Evidence for Exclusive Dealing under Section 2: the FTC’s \u3ci\u3eMcWane\u3c/i\u3e Case

The FTC recently found McWane, Inc. liable for unlawful monopoly maintenance by a 3-1 majority. The dispute among the FTC Commissioners raises important and interesting issues regarding the law and economics of exclusive dealing and the proper evaluation of the competitive effects of exclusionary conduct. Commissioner Wright’s Dissent proposes and utilizes a new legal standard that requires the plaintiff to show “clear evidence” of harm to competition before shifting the burden to the defendant to show procompetitive efficiency benefits. This burden of proof and production on the plaintiff is much higher than showing “probable effect” based on a preponderance of the evidence standard. Application of this higher burden to interbrand exclusivity restraints by monopolists is not supported either by the case law, economic theory or empirical evidence. In evaluating harm to competition, this legal standard places no weight on certain important factors, including the fact that McWane was a monopolist with the explicit purpose of raising the costs and reducing the distribution of its only competitors. His proposed standard also does not consider whether McWane’s efficiency claims were valid, in the absence of other clear evidence of competitive harm. Commissioner Wright limits his economic analysis to only a single possible mechanism of exclusionary effect, whether the entrant was prevented from reaching minimum efficient scale of production, rather than a broader analysis of whether the entrant’s costs were raised or whether its ability to expand output was so limited by the exclusives that it was unable to prevent the maintenance of McWane’s monopoly pricing. Commissioner Wright also fails to credit the direct evidence of price effects found by the Commission. In our view, this proposed type of legal standard and economic approach is not an “enquiry meet for the case.” It creates a serious risk of leading to false negatives, under-enforcement and under-deterrence

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

Protecting Innovation: The Role of State Attorneys General in Antitrust Enforcement

Antitrust law was devised at the end of the 19th century. Since then, courts and regulators applying antitrust laws have developed a wide range of appallingly anticompetitive doctrines. Many of those doctrines tended to protect businesses from competitive forces, rather than the other way around. Nor were the stakes trivial: As Robert Bork insisted in his seminal work, the Antitrust Paradox (1978), many of these doctrines were "ultimately incompatible with the preservation of a liberal capitalist social order."In recent years, antitrust enforcement by state attorneys general has seen a dramatic rise. This raises several concerns: first, the potential of geographic bias that comes from state attorneys general protecting the interests of business or consumers in their states from competition; second, the potential for increased litigation and harsher penalties; and third, the duplicative nature of state antitrust enforcement, particularly in the context of parens patriae suits and pre-merger reviews. These concerns suggest that increased state involvement in antitrust enforcement could have significant negative consequences for competition and innovation. This danger is particularly acute in high-technology markets, where antitrust enforcement is already problematic in several ways. Consumers benefit from increased efficiency, but efficiency can increase market share, which in turn can trigger ill-advised antitrust enforcement. The complexity and rapid innovation of high-tech markets increase the danger of erroneous and damaging antitrust enforcement. These challenges are exacerbated by state involvement in antitrust. While we see a clear role for the states in enforcing antitrust law in local commerce, it is much more difficult to discern a role for the states in transactions that are in many cases not only national, but international. Instead, the involvement of the states in these markets is more likely to lead to an expansive regulatory regime that inhibits -- rather than enhances -- competition and innovation. This is particularly true in the case of e-commerce. This paper examines the role of states in antitrust enforcement and the impact this role can have on competition, particularly in high-tech markets. Part I provides a short summary of major antitrust laws. Part II looks at the different ways in which antitrust law is enforced. Part III provides a closer look at the role of the states in antitrust enforcement, focusing on Texas. Part IV sets forth a law-and-economics analysis of the main types of cases that are typically the subject of antitrust enforcement, with a special focus on the activity of state attorneys general. Part V provides a close look at antitrust enforcement in high-tech markets. Part VI makes recommendations for improvement.This paper argues for a continued effort to understand how markets work, and for revision of antitrust laws and judicial doctrines in light of those insights. We argue that the scope of state antitrust enforcement should be reduced, particularly with respect to interstate and high technology markets. Specifically, we recommend that states' ability to bring parens patriae suits under the federal antitrust laws should be repealed, and that state involvement in premerger review should be curtailed. We also find that where the federal government has settled an antitrust matter under investigation, continued state involvement makes little sense, and in fact may stifle product development, investment and innovation

Movements, Moments, and the Eroding Antitrust Consensus

Timothy Wu, The Curse of Bigness: Antitrust in the New Gilded Age (Columbia Global Reports, 2018). $14.99. Timothy Wu’s book, The Curse of Bigness, offers a brief history on and critical perspective of antitrust law’s development over the last century, calling for a return to a Brandeisian approach to the law. In this review-essay, I use Wu’s text as a starting point to explore antitrust law’s current political moment. Tracing the dynamics at play in this debate and Wu’s role in it, I note areas underexplored in Wu’s text regarding the interplay of antitrust law with other forms of industrial regulation, highlighting in particular current difficulties in copyright law as one of the underlying tensions driving popular discontent with the major technology firms or “tech trusts.” I consider the continuing influence of Robert Bork’s The Antitrust Paradox, now more than forty years old, and how the current reform movement might execute a shift as lasting and substantial as the one Bork spearheaded with his book