Four Lessons from the Whole Foods Case

One of the most maligned antitrust decisions in history involved a merger of grocery store chains. Indeed, even those voices inclined toward substantial antitrust intervention believe the U.S. Supreme Court erred in its 1966 Von\u27s Grocery decision, which condemned the merger of the third- and sixth-largest grocery store chains in Los Angeles. For example, the president of the reliably interventionist American Antitrust Institute conceded that the Supreme Court probably went too far and acknowledged that if Von\u27s Grocery had remained the rule, all of our industries would be highly fragmented and consumers would have lost out on many cost-cutting efficiencies. The fact is, grocery retailing involves huge scale economies and low barriers to entry - a combination that renders most consolidations beneficial to consumers. Despite the apparent consensus on Von\u27s Grocery, federal antitrust regulators seem determined to repeat its mistakes. Last summer, the Federal Trade Commission shocked the business community by seeking to block the merger of two highend grocery chains, Whole Foods Markets and Wild Oats Markets. Fortunately for consumers, cooler heads prevailed - the federal court hearing the FTC\u27s merger challenge rejected the agency\u27s motion for preliminary injunction. But while things turned out all right this time, the incident reveals a number of deficiencies in the merger review process. This article describes the Whole Foods debacle and catalogues four lessons regulators and courts should draw from the incident

Appropriate Liability Rules for Tying and Bundled Discounting

This article asserts a comprehensive response to Elhauge’s provocative arguments. With respect to tying, the article shows that governing Supreme Court precedent does not deem the non-foreclosure “power” effects of the practice to be anticompetitive and that those effects are unlikely to reduce social welfare in the long run, especially after accounting for dynamic efficiencies. With respect to bundled discounting, the article shows that Elhauge’s proposed liability rule is both inapposite to consumer harm and inadministrable and that both “linked” market foreclosure and a form of below-cost pricing are necessary for anticompetitive harm and should therefore be prerequisites to antitrust liability

Overvalued Equity and the Case for an Asymmetric Insider Trading Regime

This article argues for an asymmetric insider trading policy under which insider trading that decreases the price of an overvalued stock is generally permitted, but insider trading that increases the price of an undervalued stock is generally prohibited. Concluding that the net investor benefits of price-decreasing insider trading exceed those of price-enhancing insider trading, the article argues that an asymmetric insider trading regime likely represents the bargain that shareholders and corporate managers would strike if they were legally and practically able to negotiate an insider trading policy. Current insider trading doctrine would permit regulators to impose such an asymmetric insider trading policy as the default rule

The Case Against Private Disparate Impact Suits

This article argues that the Third Circuit, and the courts that have implicitly approved private disparate impact suits, have erred in construing Title VI to permit private plaintiffs to sue federally funded entities for discrimination based on disparate impact alone. From a policy standpoint, permitting private disparate impact suits is a bad idea, for the threat of such suits will lead to deterrence of actions and decisions that have incidental disparate effects but are, on the whole, good

Overvalued Equity and the Case for an Asymmetric Insider Trading Regime

This article argues for an asymmetric insider trading policy under which insider trading that decreases the price of an overvalued stock is generally permitted, but insider trading that increases the price of an undervalued stock is generally prohibited. Concluding that the net investor benefits of price-decreasing insider trading exceed those of price-enhancing insider trading, the article argues that an asymmetric insider trading regime likely represents the bargain that shareholders and corporate managers would strike if they were legally and practically able to negotiate an insider trading policy. Current insider trading doctrine would permit regulators to impose such an asymmetric insider trading policy as the default rule

A Decision-Theoretic Rule of Reason for Minimum Resale Price Maintenance

This article evaluates these approaches from the perspective of decision theory and, finding each lacking, proposes an alternative approach to structuring the rule of reason governing RPM. Part II sets forth the decision-theoretic perspective, which seeks to maximize the net benefits of liability rules by minimizing the sum of decision and error costs. Part III then evaluates, from the standpoint of decision theory, the proposed approaches to evaluating instances of RPM. Part IV proposes an alternative evaluative approach that is more consistent with decision theory’s insights

Weyerhaeuser and the Search for Antitrust\u27s Holy Grail

A general definition of exclusionary conduct has become a sort of Holy Grail for antitrust scholars. At present, four proposed definitions appear most promising: (1) conduct that could exclude an equally efficient rival; (2) conduct that raises rivals\u27 costs unjustifiably; (3) conduct that, on balance, impairs consumer welfare by creating market power without providing countervailing consumer benefits; and (4) conduct that makes no economic sense but for its exclusionary effect on rivals

Tweaking Antitrust\u27s Business Model

This essay evaluates Hovenkamp\u27s suggestions, concluding that most are sound, that a few might be slightly revised to enhance their effectiveness or administrability, and that a couple are downright unwise. In particular, the essay criticizes Hovenkamp\u27s call for abandonment of the indirect purchaser rule and his proposed test for identifying exclusionary conduct under Section 2 of the Sherman Act

Dr. Miles is Dead. Now What?: Structuring a Rule of Reason for Minimum Resale Price Maintenance

This article critiques six approaches that have been proposed for evaluating minimum RPM and offers an alternative approach. The six approaches critiqued are (1) the Brandeisian, unstructured rule of reason; (2) Judge Posner\u27s rule of per se legality; (3) the approach advocated by 27 states in the recent Nine West case; (4) the approach adopted by the Federal Trade Commission in that case; (5) the approach advocated by economists William Comanor and F.M. Scherer; and (6) the approach proposed in the Areeda & Hovenkamp Antitrust Law treatise. Finding each of these approaches deficient, the article proposes an alternative evaluative approach that harnesses economic learning and allocates proof burdens in a manner that minimizes the sum of decision and error costs, thereby maximizing the net social benefits of RPM regulation

The \u27Failure to Mitigate\u27 Defense in Antitrust

The article begins with the premise that any failure to mitigate defense should aim to minimize the sum of three costs: the costs associated with inefficient behavior by defendants, the costs associated with inefficient behavior by plaintiffs, and the administrative costs of claim adjudication. If cost minimization is the goal, then whether a failure to mitigate defense exists, and the content of the antitrust plaintiff’s mitigation requirement, should differ depending on the type of damages the plaintiff is seeking to recover. The bulk of this article discusses how the defense should apply to different damages claims.The article proceeds as follows: part II sets up the model by briefly outlining the three sources of social cost affected by recognition of a failure to mitigate defense and the three types of damages antitrust plaintiffs typically seek to recover. Parts III, IV, and V then consider how a failure to mitigate defense would affect the relevant social costs in each of the three damage contexts. I conclude that courts should not recognize a failure to mitigate defense when the antitrust plaintiff is seeking to recover overcharge damages but should do so when the plaintiff is seeking recovery of lost profits, even if the profit losses are the result of alleged market foreclosure