Davis, Joshua P.

English

University of San Francisco

SYMPOSIUMSome Scholarly Consensus:Modernization of the Antitrust Laws IsGenerally Best Left to the JudiciaryBy JOSHUA P. DAVIs*THIS ISSUE of the University of San Francisco Law Review follows asymposium held at the University of San Francisco School of Law onthe Antitrust Modernization Commission ("AMC"). Formed by an Actof Congress in 2002, the AMC is charged with examining whetherthere is a need to modernize the antitrust laws, to identify particularissues of study, to solicit the views of those affected by the antitrustlaws, and to prepare and submit a report to Congress and the Presi-dent.1 The symposium was a wonderful success, benefiting from theparticipation of renowned scholars, sophisticated practitioners, impor-tant government officials, and, notably, one of the members of theAMC, Commissioner W. Stephen Cannon.The symposium was held because the winds of change seemed tobe stirring in the world of federal antitrust law. The AMC augured apossible significant shift in how the federal government regulates mar-kets. But, to extend the metaphor, the weather itself may havechanged since its formation. Indeed, whether the AMC will result inany significant reform is becoming increasingly unclear. It may in theend have little effect.One reason making significant reform unlikely is pragmatic; thefederal government is otherwise occupied. When Congress passed theAntitrust Modernization Commission Act, Republican control of thelegislative and executive branches held the potential for simultaneous* Professor of Law, U.S.F. School of Law. I would like to thank David W. Scopp andChristopher M. Wood for their extraordinary work in organizing the symposium thatresulted in this issue of the University of San Francisco Law Review.1. Antitrust Modernization Commission Act of 2002, Pub. L. No. 107-273,§§ 11051-60, 116 Stat. 1856 (to be codified at 15 U.S.C. § 1 note).UNIVERSITY OF SAN FRANCISCO LAW REVIEWlegislation on various matters. With the Bush Administration's recentstruggles-in reforming Social Security, in organizing prescriptiondrug benefits as part of Medicare, in contending with the aftermath ofHurricane Katrina, in grappling with the occupation of Iraq, and inaddressing nuclear threats in North Korea and Iran, to identify but afew key issues-suddenly political capital seems scarce. Thus, al-though businesses that support the current Administration may wellwant to amend the laws that govern competition, inertia may win theday. Whether they are seeking to insulate themselves from the disci-pline of the free market, or merely attempting to prune back laws thatcreate inefficiencies, the reality is that the federal government hasmany problems to solve. Modifying the federal antitrust laws is un-likely to be high on any politician's list of priorities.A second reason the AMC may be unlikely to achieve reform isthat it may not be attempting to do so in the best way. In particular, itis not at all clear that the best agent of change in antitrust doctrine isthe legislature. The judiciary, instead, may be ideally suited for updat-ing the antitrust laws, which it has been doing for many decadesthrough a common law process. The antitrust laws, by their nature,leave courts room to modify doctrine as appropriate. The relevantstatutes are relatively brief-much like our Constitution-and havebeen interpreted as embodying a relatively simple set of principles,which enable courts to adapt doctrine to changing circumstances. In-deed, despite origins in a populist concern for small businesses, thecourts have reached a rare consensus about the primary underlyingaim of the antitrust laws: the pursuit of efficiency, as that concept hasbeen defined by economists. According to the courts, free competi-tion in general promotes efficiency, creating incentives to satisfy thedesires of consumers as inexpensively as possible. And, as ProfessorHovenkamp argued at a previous symposium 2 at the University of SanFrancisco School of Law, the courts have proven reasonably good atformulating and modifying doctrine to give content to the generalterms of the antitrust laws, and at reading narrowly legislation Con-gress has passed in response to special interest groups.3 Federal anti-trust law is essentially a common law field with statutory authorization.And change-or, if you will, modernization-is integral to commonlaw decision-making.2. Symposium, Soaring Prices for Prescription Drugs: Just Rewards for Innovations or Anti-trust Violations?, 39 U.S.F. L. REv. 1 (2004).3. Herbert Hovenkamp, Sensible Antitrust Rules for Pharmaceutical Competition, 39U.S.F. L. REv. 11, 12-14 (2004).[Vol. 40SYMPOSIUM INTRODUCTIONIt is perhaps unsurprising, then, that, as Albert A. Foer discussesin his article in this symposium issue, Half-Time at the Antitrust Moderni-zation Commission, numerous blue-ribbon commissions have beenformed in the past to address antitrust law, few of them led to immedi-ate change, and the fate of the AMC may well be the same. Foer offersa useful analysis of the AMC's work to date, placing its efforts in abroader historical and political context. One implication of his analy-sis is that the AMC is unlikely to lead to a sudden, radical departurefrom traditional antitrust principles.It is similarly unsurprising that two other authors of articles in thesymposium issue of the law review argue against significant changes tothe relief currently available under the federal statutory antitrust re-gime. Professor Robert H. Lande's article, Five Myths About AntitrustDamages, addresses the statutory provision that provides treble dam-ages in private civil actions. The predicate for his argument is that, inpractice, the nominal award of treble damages deters potential viola-tors of antitrust laws as if the remedy were, at most, single damages.This is so in light of various limitations on private antitrust damages,including that they do not allow recovery of prejudgment interest, re-covery for allocative inefficiency, or recovery for the "umbrella effects"of market power, as well as the reality that many violators will not getcaught. Meanwhile, Professor Lande contends, courts often make in-formal adjustments to decrease damages because they have doubtsthat treble damages are appropriate. Professor Lande makes the ulti-mate conclusion: private civil damages in antitrust cases should re-main as they are, and, if any change should occur, it should be thatcourts stop adjusting other doctrines to make antitrust cases especiallydifficult for plaintiffs.Professor Stephen Calkins in Civil Monetary Remedies Available toFederal Antitrust Enforcers reaches similar conclusions in addressing theremedies available to the federal government in antitrust cases. In par-ticular, he analyzes (1) whether the Federal Trade Commissionshould retain the power to seek monetary equitable relief for thoseharmed by antitrust violations (worried about under-deterrence, heargues against change) and (2) whether the Department of Justiceshould be authorized to impose civil fines or penalties (for the samereason, he tentatively suggests such authority be granted as an inter-mediate choice between a mere civil injunction and criminal liability).Note that Professor Calkins's main argument is against reform, thathis proposal for change is modest and tentative, and that it is on anissue that the courts cannot address themselves through the commonSpring 2006]UNIVERSITY OF SAN FRANCISCO LAW REVIEWlaw process. Only Congress can authorize a new remedy under thefederal antitrust statute.Professor Herbert Hovenkamp in Federalism and Antitrust Reformalso argues for the most part in favor of only tinkering with, not trans-forming, the status quo. Specifically, he recommends adjusting, butnot changing radically, the background rules for determining whenstate action immunizes private actors from antitrust liability. He doesmake one proposal for substantial change, but even there it is not toalter antitrust law as it has developed through a common law process,but rather to undo a legislative incursion into the federal antitrust re-gime. This proposal is to repeal the immunity from the antitrust lawsthat the McCarran-Ferguson Act 4 confers on the insurance industry.More generally, Hovenkamp's position is that courts should be some-what skeptical of state approval of anti-competitive schemes andshould not be uncritical in allowing state action to serve as a smokes-creen for private collusion. According to Hovenkamp, a special ex-emption to the federal antitrust laws should arise only if a state clearlyauthorizes and actively supervises private behavior. In other words, ac-cording to Hovenkamp, in the great majority of cases the rules gov-erning competition as developed through a common law processshould not be set aside because of a political decision by a stategovernment.Perhaps the most dramatic proposal in this symposium issuecomes from two state attorneys general, J. Thomas Prud'homme andEllen S. Cooper, One More Challenge for the AMC: Repairing the Legacy ofIllinois Brick. They argue for a repeal of the "direct purchaser rule"established in Illinois Brick Co. v. Illinois,5 which allows only purchaserswho buy goods or services directly from a violator of the antitrust lawsto seek a monetary recovery under federal antitrust law. 6 Related isthe Supreme Court's rejection of any "pass on defense" in HanoverShoe, Inc. v. United Shoe Machinery Corp.,7 which allows direct purchas-ers to recover the full overcharge they pay on goods or services as aresult of an antitrust violation, even if they pass some of the over-charge down the chain of distribution . Prud'homme and Coopermake in essence two arguments: first, Illinois Brick should be over-4. McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 (2000).5. 431 U.S. 720 (1977).6. Loeb Indus., Inc. v. Sumitomo Corp., 306 F.3d 469, 482 (7th Cir. 2002) (describ-ing the "Direct Purchaser Rule"), cert. denied, 539 U.S. 903 (2003).7. 392 U.S. 491 (1968).8. See id. at 494.[Vol. 40SYMPOSIUM INTRODUCTIONruled, allowing indirect purchasers to bring damages actions underfederal antitrust law; and, second, this change should be madethrough legislation.There is some basis for believing that the federal courts wouldnot be ideally suited to revisit and revise Illinois Brick. If Illinois Brickwas in fact wrongly decided, one reason may have been that the fed-eral courts were swayed by self-interest. Illinois Brick, along with Hano-ver Shoe, simplified federal antitrust cases. Together these decisionsspared federal courts from having to calculate the amount of dam-ages, if any, suffered by purchasers at each link in the sometimeslengthy chain of distribution. As Prud'homme and Cooper point out,federal courts will no longer have this luxury, as various states haveadopted indirect purchaser statutes, and Congress recently enactedthe Class Action Fairness Act,9 which creates federal subject matterjurisdiction over many class actions that are based on state law, 10 andthat, in the past, would have been litigated in state court. Perhaps thisnew circumstance will spur the federal courts to reconsider IllinoisBrick and Hanover Shoe.Even though the judgment of the federal courts in formulatingand modifying antitrust doctrine is not beyond reproach, particularlywhen it comes to Illinois Brick, Prud'homme and Cooper's analysisgives rise to concerns about legislative intervention. As their articlerecognizes, the interaction is complex between the direct purchaserrule and any pass on defense. The ideal way to deal with that complex-ity will depend on practical issues, many of which will come to lightonly through litigation. The authors attempt to address some of theseissues, but, understandably, their analysis raises far more questionsthan it provides answers. Congress is not well-suited to anticipate thepractical issues that will arise from any change in Illinois Brick. Nor is itbuilt to resolve them in a way that serves the underlying purposes ofthe antitrust laws, as opposed to the interests of powerful lobbyinggroups that wish to avoid the discipline of free markets. Thus, evenassuming that reform of Illinois Brick is appropriate, the collective wis-dom of the contributors to this symposium issue of the University ofSan Francisco Law Review seems to suggest that that effort should beleft, in whole or in part, to the courts.This symposium issue of the University of San Francisco Law Review,then, may be greater than the sum of its parts. Each of the articles9. 28 U.S.C. § 1332(d).10. See id.Spring 2006]566 UNIVERSITY OF SAN FRANCISCO LAW REVIEW [Vol. 40provides insights on an important topic in antitrust law. Taken to-gether, the articles suggest a presumption in favor of leaving the de-velopment of antitrust law to courts, even if Congress has the will toact.

Some Scholarly Consensus: Modernization of the Antitrust Laws Is Generally Best Left to the Judiciary

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Some Scholarly Consensus: Modernization of the Antitrust Laws Is Generally Best Left to the Judiciary

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