This paper argues that recent claims to the effect that antitrust should be used to combat a variety of social ills – such as industrial concentration, the economic or political power of large firms, the maldistribution of wealth, high profits, low wages, or the absence of policies protecting small business – are not new. Such claims have appeared and reappeared periodically in the history of antitrust, and amount to a rhetorical use of antitrust for promoting various societal goals which must be distinguished from the technical enterprise of antitrust. There is between these two dimensions of antitrust an unsurmountable contradiction, as the main goal of the antitrust enterprise (lower prices, larger output, etc.) will often be at odds with the rhetorical uses of antitrust (e.g. protecting small businesses).

The paper is structured as follows:

  • A first section looks at the virtues and defects of technical antitrust. “Technical antitrust” refers to: “a set of antitrust rules that begin with a picture of some best set of social circumstances reasonably achievable through the antitrust laws. (…) technical antitrust relies on experts to develop an approach that tries to give effect to them consistent with the very substantial limitations of the institutions that make antitrust policy. The goals are coherent, even though the individual values they assert or the means of attaining them can be controversial. (…) Technical antitrust often appears to be underdeterrent because of its insistence on due process and rationality, administrability and clear proof, or its inability to take long run concerns into account. (…) [It] is concerned about testability of antitrust rules, although in many cases it confronts the fact that testing is difficult.” In short, he identifies two main limitations of technical antitrust; (i) the range of problems that it is competent to address is as narrow as the ability of available tools; and (ii) it has a bias towards underdeterrence, i.e. it systematically fails to recognize and remedy particular types of harmful practices.
  • Section 2 quickly reviews the limitations of the antitrust movement. In very sharp contrast to technical antitrust, movement antitrust builds on the vague language of antitrust provisions to makes expansive claims about business practices that are technically undisciplined, untestable and often incoherent. The antitrust movement focuses on absolute size, industrial concentration, high prices, leverage, and unspecified injury to small business, and provides little guidance in the way of administrable rules.
  • A third section then deals with the sources of contemporary technical antitrust. This requires a dissection of the Harvard and Chicago Schools, and of the adoption since the late 1970s of a more economically-aligned approach to antitrust enforcement. He also reviews the main developments in US antitrust law during this period – on predatory pricing and other single-firm exclusionary practices; on vertical practices; on tying and bundling; on horizontal and vertical mergers; on the “state action” doctrine; on ancillary restraints; and, ultimately, on the role of the rule of reason – and how they have led to a legal environment which became more favourable to defendants over time.

A particularly interesting note – and a trope in Hovenkamp’s work – is that, while the Chicago School has had considerable influence on antitrust scholarship, most decisions adopted since the 1970s have followed the proposals of the Harvard School with its focus on the administrability of antitrust rules. His point here is that the antitrust movement’s attacks on the Chicago school are misguided and fail as criticisms of current antitrust practice – but what goes unsaid is that Hovenkamp is the leading exponent of this variant of the Harvard School.

  • The fourth section seeks to explain how technical antitrust can be improved without having to rely on the antitrust movement. This section begins with an acknowledgment that antitrust has failed both as regards the most ambitious political goals set for it and the more technical objectives of protecting ‘low prices, increased output and product or service quality’. However: ‘the news is not all bad. First, antitrust today has a more widely accepted and defensible goal than it any time in its history – namely, consumer welfare. (…) That goal provides a metric, which is manageable in theory. (…) antitrust analysis under the consumer welfare principle should focus on one question: whether the practice is conducive to higher or lower output. (…) [When effects are dubious] the market power requirement can serve to screen out harmless cases ’.

The paper then moves to a critique of the antitrust movement’s goals, by comparing them to technical antitrust: “The broader goals identified by movement antitrust, including wealth equality, job provision and wages, and protection of small business, are much more difficult to manage [than protecting consumer welfare]. Worse yet, they often operate at cross purposes with one another.” In other words, if competition law would pursue such goals, it would risk quickly becoming unmanageable. Further, the antitrust movement is concerned with increases in market concentration and with lower percentages of output being captured by labour. But this is not an antitrust problem, nor is there empirical evidence that antitrust policy was a driver in such outcomes, with one exception: merger policy.

Market structure is relevant as a way of getting at concerns about output and price. This imposes on antitrust enforcers a need to assess the relationship between concentration and output, which is what current merger control is all about. Current literature tends to find a troublesome relationship between high concentration and high price-cost margins – i.e. as firms face fewer competitors price-cost margins tend to rise – and this seems to be confirmed by ex post analysis of merger decisions.  This would seem to justify merger policy becoming more aggressive to keep higher product prices in check.

  • A last section is devoted to what promises to become the topic of 2018 in the US: antitrust and labour. There are a number of papers coming out on the topic, which I will circulate next week. One of these papers is by Hovenkamp (as I said, he works a lot), so there is no point in reviewing this section of the paper here. Suffice to say that he thinks that antitrust has a role to play in labour markets.

This is a good piece if one wants to have a big picture of the debates currently convulsing antitrust law in the US – and, by extension, around the world. As is often the case, Hovenkamp presents himself as the guardian of antitrust orthodoxy – as suits someone who has been more cited in antitrust decisions by the US Supreme Court and Circuit Courts than anyone else in decades. His argument is that: ‘The way to repair deficiencies in antitrust law today is not to resort to an undisciplined set of goals that provide no guidance and could do serious harm to the economy. Rather, it is to make ongoing adjustments in our technical rules of antitrust enforcement which reflect what research and experience has taught us.’ In so arguing, he tries to define antitrust law as a technical endeavour focused on those conducts regarding which antitrust enforcement is able to do most good. This can only be achieved by relying on tools related to output maximisation that can be deployed without engaging in controversial value judgements. In this way, Hovenkamp places himself halfway between the extremes represented by the Bork version of the Chicago School and by the new progressives of the New Brandeis movement.

In addition, this piece also provides a succinct, but comprehensive overview of developments in US antitrust law over the last four decades, and how they reflect the inputs of the various schools of antitrust.

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