39083 ple_19-3 Sheet No. 68 Side A 05/11/2017 10:58:06 OWER P HARTER C ATENT L HE OMMISSION C ”: T 645 OMPREHENSIVE OMPREHENSIVE ) 5/9/17) 5:34 PM RADE ELETE T D IBERTY OT “A C N L O (D DOCX DOCX . EDERAL RINTER F P TO _ CONOMIC After invisibility, decades of virtual and are The Supreme Court has the power to undo these changes, but an E AHEESAN ESURRECTING ESURRECTING M K OF OF THE attracting the attention of leading political and public figures again. political and public figures again. attracting the attention of leading Corporate control of markets now seen as an important is source of economic in American and political ills society. These ills include not just higher prices for consumers,also increased economic but inequality and a dominationcompromised democracy. This corporate of economy and politics was by impersonal not inevitable, dictated forces such as On the contrary, it is the result of “globalization” or “technology.” in the late 1970s and 1980s that conscious policy choices initiated succeeded in focusing antitrust law on the narrow concept of economic friendly to powerful businesses. efficiency and establishing legal standards The weakened antitrust laws have given large corporations freedom to dominate markets conduct, and restrictive through mergers, exclusionary trade practices. antitrust revival through the common law process is doubtful and, at best, sure to be protracted. When political circumstances favorable exist, advocates of renewed antitrust enforcement look to the should instead (“FTC”). The FTC has broad policymaking authority under modern administrative has quasi-legislative power law and can resurrect antitrust lawdelegated to it by Congress. The FTC under the FTC Act’s prohibition on unfair methods of . In using this power, the FTC should reject the ahistorical efficiency model for antitrust and embrace the political economic goals articulated by Congress when it created the Commission in 1914. In an era of high inequality, diminished * Counsel, Consumer Financial Protections Bureau. This Article reflects the * Regulations Counsel, Consumer Financial Protections Bureau. This Article reflects views of the author alone and not necessarily those of the or Consumer Khan, Financial Protection Bureau. The author thanks Ken Davidson, Ben Douglas, Lina Frank Pasquale, Sabeel Rahman, Jason Rathod, Bob Skitol, Maurice Stucke, and Randy on Stutz for their thoughtful feedback on earlier drafts of this Article and helpful input developing the ideas in this Article. R Sandeep Vaheesan* 4_V C Y 39083 ple_19-3 Sheet No. 68 Side A 05/11/2017 10:58:06 05/11/2017 A 68 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 68 Side B 05/11/2017 10:58:06                     M K C Y 5 ...... 651 5 ...... 688 5 ...... [Vol. 19:3 [Vol. ISION FOR ESTORE ECTION V S R AW ECTION L S XPANSIVE XPANSIVE E NTITRUST THAT EANING OF NTENT AND USINESS I A M XPANSIVE XPANSIVE B titrust Practice ...... 691 ...... titrust Practice E ...... 673 ...... AD AN AW H IMITED L Structural Remedies ...... 687 Structural Remedies...... L ontrol Markets ...... 666 ...... ontrol Markets ...... 663 ...... EFINE THE onal Intent ...... 690 ...... onal Intent D OURNAL OF OURNAL OALS J ONGRESSIONAL ONGRESS ) 5/9/17) 5:34 PM C and ...... 684 ...... and Oligopolies NTITRUST ’G ,C the Statute ...... 674 ...... the Statute A BJECTIONS TO AN ELETE CT O D ONOR OT H N FFIRMATION OF A UTHORITY TO O ONGRESS IKELY FTC A A OPULIST AN (D C L -P ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P 2015 A 5 ...... 5 ...... 657 FTC C S AS THE ...... 647 ...... OF RINTER ...... 698 ...... Section 5 of the FTC Act Has a Multifaceted Political Economic Purpose ...... 658 Section 5 Is Intended to Be Broader than the OtherSection 5 Is Intended to Be Broader than Antitrust Laws661 ...... Claiming that Proposed Section 5 Would Create Substantive Inconsistency Between the FTC and the DOJ Disregards Congressional Intent and Existing An Recognizing the Threat of Adverse Congressional Action Does 693 ...... Not Compel Continued Adherence to the Antitrust Status Quo Attacking the Proposed Interpretation of Section 5 on Efficiency Grounds Ignores Congressi The FTC Should Anchor Section 5 in the Congressionally The FTC Should Anchor Section 5 in the Expressed Goals of The FTC Should Establish Presumptions Against Competitively 676 ...... Suspect Conduct The FTC Should Challenge Durable or Otherwise Seriously Harmful Modern Administrative Discretion to Law Gives the FTC Broad 652 ...... Interpret Section 5 The FTC Doubled Down on the Ahistorical Efficiency Paradigm .... 664 .... The FTC Doubled Down on the Ahistorical Efficiency Paradigm Congress in 1914 Expressly Delegated Power to the FTC to Congress in 1914 Expressly Delegated 654 ...... Interpret Section 5 The FTC Endorsed a Legal Standard that Grants Powerful The FTC Endorsed a Legal Standard that Businesses Carte Blanche to C The FTC Should Favor Simple P FTC’ TO       NACTING THE        _ FTC H ONTRAVENES ROGRESSIVE ECTION OW THE E HE P S C A. B. B. C. A. A. B. C. D. A. A. B. B. ESPONDING TO H T N HE R I T   AHEESAN   ONCLUSION  NTRODUCTION I. III. C I 4_V U. 646 economic of protecting of politics, the goals and elite capture opportunity, consumers, maintaining open markets,and dispersing economic and political power remain as important To restore competitive as ever. market of presumptionsa series should establish structures, the FTC against competitivelymarket practices and challenge suspicious power highly damaging public. to the IV. II. V. 39083 ple_19-3 Sheet No. 68 Side B 05/11/2017 10:58:06 05/11/2017 B 68 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 69 Side A 05/11/2017 10:58:06 , . EV the 3 OLICY ee also P L. R NDICATORS OF I ORDHAM (Dec. 17, 2015), OMPETITION C , 81 F OOKS (Mar. 26, 2016), .B This discussion is not This discussion EV 2 R have all agreed that the have all agreed ATA AND FTC 647 647 FTC 6 OMPETITION AND the centrist Obama White D CONOMIST 4 C IG , N.Y. , E . 551, 553-54 (2012) (observing the lack of . 551, 553-54 (2012) (observing the lack of monopoly a and oligopoly are now 1 EV ENEFITS OF How Democrats Killed Their Populist Soul How Democrats Killed Their Populist OWER OF THE OWER OF ,B L. R P Antitrust’s Democracy Deficit ) 5/9/17) 5:34 PM NTRODUCTION I (Oct. 20, 2015), http://qz.com/529303/hillary-clinton- DVISERS ELETE D ATENT , 53 B.C. .A L OT : Being Pro-Business Doesn’t Mean Hanging N UARTZ CON Even Republicans are Getting Fed Up with Monopolies. Here’s Monopolies. Even Republicans are Getting Fed Up with O Challenging the Oligarchy HE E (D , Q DOCX DOCX . 4-6 (2016), https://www.whitehouse.gov/sites/default/files/page/files/ 4-6 (2016), https://www.whitehouse.gov/sites/default/files/page/files/ (Mar. 31, 2016), http://theweek.com/articles/613950/even-republicans-are- OUNCIL OF RINTER P EEK Hillary Clinton, Maurice E. Stucke & Allen P. Grunes, B Elizabeth Warren, Senator, Keynote Address at New America’s Open Markets C Ryan Cooper, OWER TO W P _ , Oct. 24, 2016, https://www.theatlantic.com/politics/archive/2016/10/how- and a conservative business publication and a conservative See See See See Too Much of a Good Thing See See 5 HE After decades of general neglect, , T AHEESAN ARKET M K TLANTIC Consumers Out to Dry Program Event: Reigniting Competition in the American Economy, (June 29, 2016) 2016) Program Event: Reigniting Competition in the American Economy, (June 29, “threatens our economy, and threatens markets (arguing that the lack of competition in the our democracy”). 4. topic of wide interest in the UnitedStates. Corporate dominationof wide swaths of the economy public debate. of is a focus Why. House, confined to one part of the political spectrum.confined to one part A progressive senator, http://www.economist.com/news/briefing/21695385-profits-are-too-high-america-needs- (arguing that giant-dose-competition-too-much-good-thing [https://perma.cc/759G-FD59] high profits indicate a need for competition). A http://www.nybooks.com/articles/2015/12/17robert-reich-challenging-oligarchy/ http://www.nybooks.com/articles/2015/12/17robert-reich-challenging-oligarchy/ argument attributing increased economic (describing an [https://perma.cc/5T77-TX3X] inequality to monopolies); Matt Stoller, M 1. 1. 4_V T 2017] democrats-killed-their-populist-soul/504710/ (“At the same (“At the democrats-killed-their-populist-soul/504710/ time that the nation has achieved perhaps the mostU.S. history, the destruction of the anti- tolerant culture in monopoly and anti-bank tradition in the Democratic Party has also cleared the way for the a century.”). greatest concentration of economic power in 3. 2016 Democratic for the presidency, candidate 235-51 (2016) (providing statistics on declining U.S. antitrust enforcement235-51 (2016) (providing statistics on declining since 1970, and in several industries); Mauricethe implications of weak enforcement E. Stucke, Reconsidering Antitrust’s Goals 20160414_cea_competition_issue_brief.pdf [https://perma.cc/C3CX-KQ3G] (detailing the 20160414_cea_competition_issue_brief.pdf [https://perma.cc/C3CX-KQ3G] proof of decline in competition). 6. Harry First & Spencer Weber Waller, public interest in both antitrust specifically and economicpublic interest in both antitrust specifically concentration generally); s getting-fed-monopolies-heres-why [https://perma.cc/968Y-MELM] (“[T]oday, the results of getting-fed-monopolies-heres-why [https://perma.cc/968Y-MELM] some conservatives are beginning to come monopoly are so patently horrible that even around.”); Paul Krugman, being-pro-business-doesnt-mean-hanging-consumers-out-to-dry/ [https://perma.cc/5EZL- being-pro-business-doesnt-mean-hanging-consumers-out-to-dry/ consumers). of monopolies on American JB2E] (describing the negative impacts 5. 2543, 2544 (2013) (describing the antitrust system2543, 2544 (2013) (describing the antitrust and as one “captured by lawyers economists control and economic advancing their own self-referential goals, free of political accountability”). 2. C Y 39083 ple_19-3 Sheet No. 69 Side A 05/11/2017 10:58:06 05/11/2017 A 69 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 69 Side B 05/11/2017 10:58:06 . M K M C Y A :FY UTHORS HE , A , T TATISTICS S [Vol. 19:3 [Vol. Subsequent 12 AW L ORKLOAD . 235, 265 (2017) (stating to the subversion of to the subversion EV 498, 502 (2016) (noting the :W R 10 Y ’ Bring Back Antitrust USINESS 11 Antitrust, Competition Policy, and OL B IVISION to the multi-decade growth in ULLETIN D 8 B .L.&P Our Four-Decade Antitrust Experiment Has and Inequality: The Antitrust The E-Scraper and E-Monopsony ARV NTITRUST NTITRUST OURNAL OF OURNAL , A J ) 5/9/17) 5:34 PM , 11 H 1, 2 (2015) (offering statistics on the growth of 1, 2 (2015) (offering statistics on the The View from the Shop—Antitrust and the Decline of , 61 A USTICE ELETE J note 3, at 3 (“The larger and more economically powerful D NLINE OT N T OF ’ O supra (D EP note 3, at 5-6; David Dayen, D (Mar. 15, 2016), http://www.motherjones.com/kevin-drum/2016/03/ (Mar. 15, 2016), http://www.motherjones.com/kevin-drum/2016/03/ .L.J.O ENNSYLVANIA ENNSYLVANIA (“Last year America’s airlines made $24 billion—more than Alphabet, DOCX DOCX . P EO id. supra ONES , Stacy Mitchell, , Warren, , U.S. , Jonathan B. Baker & Steven C. Salop, , J Antitrust officials in the executive branch and federal judges OF RINTER 13 P to the decline in business formation to the decline in 9 TO and lower incomes producers for 7 _ OTHER , 104 G (Nov. 9, 2015), http://prospect.org/article/bring-back-antitrust-0 (Nov. 9, 2015), http://prospect.org/article/bring-back-antitrust-0 See, e.g. See, e.g. See, e.g. See, e.g. See, e.g. , M (Apr. 12, 2017), https://www.authorsguild.org/industry-advocacy/law-profs-antitrust- Importantly, commentators that the current industrial have recognized AHEESAN UILD ROSPECT the parent company of Google. Even as the price of fuel, one of airlines’ main expenses, the parent company of Google. Even as the benefit was passed on to consumerscollapsed alongside the oil price, little of that through flat. After a bout of consolidation in the past lower prices, with revenues remaining fairly firms with tight financial discipline and many decade the industry is dominated by four shareholders in common. And the return on capital is similar to that seen in Silicon Valley.”) Ariel Ezrachi & Maurice Stucke, 8. administrations, Democratic including ones, have followed this antitrust philosophy. Counterrevolution and Its Discontents inequality); & Sandeep Vaheesan, that firms in concentrated markets, as opposed to competitive markets, can obtain political influence to support favorable policy). 10. America’s Independent Businesses inequality our-four-decade-antitrust-experiment-has-failed [https://perma.cc/2BQ7-VJV4]. our-four-decade-antitrust-experiment-has-failed [https://perma.cc/2BQ7-VJV4]. 13. G 7. 7. 4_V U. 648 P 2006-2015 5-6 (2015), https://www.justice.gov/atr/file/788426/download 2006-2015 5-6 (2015), https://www.justice.gov/atr/file/788426/download non-competitive of many structure markets The harms hurts the public. fromrange from markets concentrated higher prices for consumer appear to products Present economicUnited States was not inevitable. structure in the in the choice—starting the product of a deliberate policy arrangements are administration— in the 1980s under the Reagan late 1970s and accelerating to neuter the enforcement of the antitrust laws outside of , and market allocation between competitors. [https://perma.cc/356M-SMAZ]; Kevin Drum, [https://perma.cc/356M-SMAZ]; Failed decrease in small businesses, and the corresponding increase in large corporations in decrease in small businesses, and the corresponding increase in large corporations government policy, from 1997-2012). 11. these companies get, the more resources they can bring to bear on lobbying government to these companies get, the more resources they can bring to bear on lobbying government time, change the rules to benefit exactly the companies that are doing the lobbying. Over on this means a closed, self-perpetuating, rigged system – a playing field that lavishes favors Warren, the big guys, hammers the small guys, and fuels even more concentration.”) 12. enforcers-rein-super-platforms-look-upstream/ [https://perma.cc/SV8H-Q34R] (associating [https://perma.cc/SV8H-Q34R] enforcers-rein-super-platforms-look-upstream/ to the growing monopsony power of the decline in average income for authors over book publishers). 9. Inequality democratic politics by powerful private entities. 39083 ple_19-3 Sheet No. 69 Side B 05/11/2017 10:58:06 05/11/2017 B 69 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 70 Side A 05/11/2017 10:58:06 , . 936 This This EV 14 and “the L. R And now 15 19 Supreme Court th , 62 N.Y.U. and even liberal icon 17 the Supreme Court is Antitrust—Retrospective and 20 FTC 649 649 FTC OWER OF THE OWER OF P has been reduced to a technocratic field has been reduced Neil M. Gorsuch Sworn in as 113 16 ) 5/9/17) 5:34 PM Obama Chooses for Supreme Court ELETE D ATENT L OT N O HE (D (Apr. 10, 2017), https://www.washingtonpost.com/politics/ (Apr. 10, 2017), https://www.washingtonpost.com/politics/ authored or joined notable opinions that advanced the authored or joined notable opinions OST DOCX DOCX . 18 .P RINTER P (Mar. 16, 2016), http://www.nytimes.com/2016/03/17/us/politics/obama- , Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340, 346 (1990) , Credit Suisse Secs. (USA) LLC v. Billing, 551 U.S. 264, 264 (2007) (holding ASH Michael D. Shear et al., Eleanor M. Fox & Lawrence A. Sullivan, TO _ See E.g. See E.g. IMES , W T While laws and should reinterpret the antitrust the courts could to AHEESAN M K N.Y. (citation omitted) (finding that the plaintiff had suffered “no ‘antitrust injury’”)); Cargill, (citation omitted) (finding that the plaintiff had Inc. v. Monfort of Colo., Inc., 479 U.S. 104, that the plaintiff did not 117 (1986) (finding sufficiently allege “a threat of antitrust injury” caused by ). 19. Prospective: Where Are We Coming From? Where Are We Going? that “securities law implicitly laws to the conduct precludes the application of the antitrust alleged in this case”); WeyerhaeuserRoss-Simmons Hardwood Lumber Co., 549 Co. v. and U.S. 312, 318, 326 (2007) (applying a heightened standard to a predatory-bidding claim holding that the standard was not met). 18. constricted focus contradicts the broad economic,constricted focus social political, and laws.purposes of antitrust Aof law body be that could historically comprehensivecharacterized as “a charter of economic liberty” with limited reach. the common vision in 1890 and 1914 through accord with Congress’s law of circumstances, restoration, even under the best process, this judicial is the conservative compositionsure to be a slow process. Given of the courts, in particular the SupremeCourt, reinterpretation of the Sherman and Clayton Acts does not seem imminent. Many liberal judges have accepted, in large measure, antitrust that has been dominant the efficiency-oriented for nearly forty years. For example, Justice Breyer supreme-court-nominee.html?_r=0 [https://perma.cc/5BCU-587Y] (citing Charles supreme-court-nominee.html?_r=0 [https://perma.cc/5BCU-587Y] Chamberlain as stating that Garland was a nominee “seemingly designed to appease intransigent Republicans”). 20. Roert Barnes & Ashley Parker, Justice Brennan project to curtail antitrust law. Even if President Obama had appointed Merrick Garland and established a liberal majority on the Supreme Court, the Court would an antitrust revival. likely not have ushered in with Justice Gorsuch succeeding Justice Scalia, Justice with Justice Gorsuch succeeding have applied these laws to focus narrowly on the neoclassical concept of on the neoclassical focus narrowly these laws to have applied legal standards. defendant-friendly and adopted allocative efficiency [https://perma.cc/EYB6-DLAL] (noting that from 2006 to 2015, the Bush and Obama from 2006 (noting that [https://perma.cc/EYB6-DLAL] the number of merger cases and suit, administrations together filed just one filed annually remained about the same). 14. (1987) (detailing the development of the pro-defendant approaches of federal judges and (1987) (detailing the development of the executive branch officials). 15. 1, 4 (1958). N. Pac. Ry. Co. v. United States, 356 U.S. 16. 17. Inc., 405 U.S. 596, 610 (1972). v. Topco Assocs., United States 4_V T 2017] courts_law/gorsuch-to-be-sworn-in-to-supreme-court-today-in-two- Magna Carta of free enterprise” Justice C Y 39083 ple_19-3 Sheet No. 70 Side A 05/11/2017 10:58:06 05/11/2017 A 70 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 70 Side B 05/11/2017 10:58:06 M K 22 C Y , Novell, Inc. v. [Vol. 19:3 [Vol. AW L see, e.g. The FTC stated that it 26 USINESS 25 B 21 OURNAL OF OURNAL Congress intended the FTC’s antitrust Congress intended J ) 5/9/17) 5:34 PM 24 In enacting this statute, Congress articulated In enacting this statute, note 23. 23 ELETE D OT supra N Neil Gorsuch Sides with Big Business, Big Donors and Big Neil Gorsuch Sides with Big Business, Big O (D In articulating this narrow interpretation of Section 5, 27 ENNSYLVANIA ENNSYLVANIA (Feb. 21, 2017), https://www.washingtonpost.com/posteverything/wp/ (Feb. 21, 2017), https://www.washingtonpost.com/posteverything/wp/ DOCX DOCX . P OST OF RINTER .P P Fed. Trade Comm’n, Statement of Enforcement Principles Regarding “Unfair Section 5 also prohibits “unfair or deceptive acts or practices.” 15 U.S.C. § 15 U.S.C. § Section 5 also prohibits “unfair or deceptive acts or practices.” TO ASH _ Id. Id. Id. See , W Since the early 1980s, the FTC has championedSince the early 1980s, the FTC has antitrust law centered Under progressive leadership, one federal agency, the FTC, could leadership, one federal agency, Under progressive AHEESAN 45(a) (2006). This Article will focus exclusively on the FTC’s “unfair methods of competition” authority. 27. Section 5 Statement, 26. 26. on economic FTC codified this approach in a efficiency. In 2015, the Statement of Enforcement Principles laying out its interpretation of Section 5’s prohibition on unfair methods of competition. 25. 25. would use its Section 5 authority to advance “consumer would use its Section 5 authority to welfare,” which is functionally similar to the allocative efficiency goal, and apply the rule of reason framework. Modern of policymaking delegation and Congressional FTC expansive powerauthority grant the the antitrust provision to interpret FTC Act. of Section 5 of the 21. , ceremonies/2017/04/10/9ac361fe-1ddb-11e7-ad74-3a742a6e93a7_story.html?utm_ Zephyr term=.719f53c85f19 [https://perma.cc/5UGA-EQRS]. 21. Bosses 4_V U. 650 likely to cabin antitrust lawlikely to even further. Microsoft Corp., 731 F.3d 1064, 1075 (10th Cir. 2013) (holding that a monopolist’s refusal Microsoft Corp., 731 F.3d 1064, 1075 (10th Cir. 2013) (holding that a monopolist’s Methods of Competition” Under Section 5 of the Federal Trade Commission Act, 80 Fed. that Reg. 57,056, 57,056 (Sep. 21, 2015) [hereinafter “Section 5 Statement”] (stating expert Congress “left the development of Section 5 to the Federal Trade Commission as an a grand progressive-populist vision of antitrust. It wanted vision of antitrust. It a grand progressive-populist the FTC to police “unfair methods of competition” injure consumers, that prevent rivals from competing on the merits, to and allow large corporations dominate political system. our the FTC contradicted Congress’s political economicthe FTC contradicted Congress’s political vision in 1914, which to consumers, but also injuries sought to prevent not only short-term and the accumulationexclusionary practices by large businesses of private 2017/02/21/neil-gorsuch-always-sides-with-big-business-big-donors-and-big- [https://perma.cc/B5VV-4GDT]; bosses/?utm_term=.959433de0043 administrative body”). 24. authority to encompass more than the prohibitions in the Sherman and Clayton Acts problems and to nip anticompetitive in the embryonic stage power over consumers,before corporations gained undue small suppliers, competitors, American and the political system. resurrect antitrust lawresurrect antitrust as “a comprehensive charter of economic liberty.” to deal is actionable under the antitrust laws only if the monopolist sacrificed profits in the process). 22. 23. N. Pac. Ry Co. v. United States, 356 U.S. 1, 4 (1958). 39083 ple_19-3 Sheet No. 70 Side B 05/11/2017 10:58:06 05/11/2017 B 70 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 71 Side A 05/11/2017 10:58:06 EANING OF EANING M FTC 651 651 FTC EFINE THE D OWER OF THE OWER OF P UTHORITY TO ) 5/9/17) 5:34 PM A ELETE D ATENT L OT AS THE N O HE 5 (D DOCX DOCX FTC H . HE ECTION ECTION S RINTER P TO _ This Article proceeds as follows: Part I examines modern The FTC has broad power to define the meaning of Section 5. The FTC has broad power to define the meaning of Section 5. Despite being a champion of the efficiency paradigm since 1981, the I. T AHEESAN M K administrativeintent to show that the FTC has law and Congressional broad power political to interpret Section 5. Part II describes the expansive economic the rise of concentrated vision—one focused on preventing whenprivate power—that Congress had it enacted the FTC Act in 1914. 5. It explains how the on Section Part III turns to recent FTC policymaking Commission, by endorsing the consumer goal and rule of reason welfare framework Statement in its 2015 of Enforcement failed to honor Principles, is Congressional intent. Part IV lays out an interpretation of Section 5 that rooted in Congressional intent and that would advance the three primary of the FTC Act. Part V responds goals expressed in the legislative history to likely objections to the proposed interpretation of Section 5. FTC under progressive leadership in theFTC under progressive still change course future could from Congressional intent and be true to the the agency was created when more an interpretation of Section 5, out ago. In setting than a century enforcementwhether through should actions or , the FTC in the expansive political economicanchor Section 5 vision of Congress. than remedy Act, Congress sought to prevent—rather By enacting the FTC after the fact—three principal harms from concentrated economic power: wealth transfers from consumers and producers to monopolies, oligopolies, entry and competitionand ; private blockades against in markets; and the accumulation of economicand political power hands. in corporate vision, the FTC should adopt To advance Congress’s antitrust of competitivelypresumptions suspicious conduct, variety of illegality for a such as mergers industries, exclusionary practices by firms in concentrated with market dominance and restraints on retail or near-dominance, competition;monopolies and challenge and oligopolies that inflict significant harm When on the public. restore seeking to preserve or competitive market structures, the FTC should pursue simple structural remedies over complicated behavioral fixes. Modern administrative law gives executive and independent agencies considerable freedom to define the meaning of statutes phrased in general with the Supremeterms. Court’s landmark A body of law, originating political power.political And in making of its the centerpiece the rule of reason a convoluted test that cannot analytical framework, FTC adopted the 5. vision underlying Section advance the Congressional 4_V T 2017] C Y 39083 ple_19-3 Sheet No. 71 Side A 05/11/2017 10:58:06 05/11/2017 A 71 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 71 Side B 05/11/2017 10:58:06 M K 29 C Y .L. US , 76 U. .B OLUM [Vol. 19:3 [Vol. , when Congress AW , 2014 C L Chevron Standard Oil Co. v. United USINESS Deference and the FTC: How and B decision revolutionized administrative OURNAL OF OURNAL and the Limits of Administrative Antitrust J ) 5/9/17) 5:34 PM that agencies have power that agencies to interpret to Improve Antitrust Enforcement ELETE Chevron D OT 30 N Chevron O Chevron (D ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P In delegating the power to define “unfair methods In delegating the power to define of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Resources Defense U.S.A., Inc. v. Natural Chevron 31 OF RINTER P . 209, 248 (2014); Royce Zeisler, Chevron at 842-45. TO _ EV Modern Gives the FTC Broad Discretion to Administrative Law Interpret Section 5 Id. in which the Court held that it had the ultimate power to interpret the has granted elastic quasi-legislative power quasi-legislative has granted elastic to the administrative state. Modern administrative significant lawmaking law has transferred The Supreme Court’s In addition to interpretive authority under In addition to interpretive 28 A. , .L.R . 266, 291-92 (2014). AHEESAN EV ITT 30. Justin (Gus) Hurwitz, Chevron Hurwitz, (Gus) Justin 30. power from the courts to the numerous and independent agencies executive in the federal government. of statutory interpretation that were Questions courts are now often resolved by, for once the jealous prerogative of the example, the Department Environmental of Labor, the Protection Agency, or the Federal Communications Commission. While agency statutory review, interpretations of statutes interpretations are still subject to judicial phrased in general termsare examined standard. under a deferential legal law and policymaking In reviewing a challenge to an in the United States. interpretation of the Clean Air Act by the Environmental Protection Agency, the Court established a deferential standard of review for agency interpretations of statutes. The Court held that an agency’s interpretation is ambiguously of a statute would be accorded deference if the statute ambiguously is reasonable. statutes so long as the interpretation worded 31. 221 U.S. 1, 69-70 (1911). Section 5 of the FTC Act, with its language on “unfair methodsits language on of FTC Act, with Section 5 of the competition,” is the type of generally worded that an agency is statute empowered to interpret. P R 29. 28. 467 U.S. 837 (1984). Why the FTC Should Use 4_V U. 652 enacted the FTC Act in 1914, it expressly granted the CommissionAct in 1914, it expressly granted enacted the FTC the methods meaningpower to define the Congress of competition.” of “unfair was reacting to the Supreme decision in Court States Sherman Act. 1984 decision 1984 decision Inc. competition” sought to reassert control over the to the FTC, Congress development and prevent the courts from of antitrust policy subverting legislative desires. The Court held in The Court held 39083 ple_19-3 Sheet No. 71 Side B 05/11/2017 10:58:06 05/11/2017 B 71 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 72 Side A 05/11/2017 10:58:06 . A 34 , 95 V Whether Whether Chevron Step deference. deference. 39 40 In practice, In practice, 32 Chevron deference. FTC 653 653 FTC . 823, 833 (2006) (exploring the EV Chevron Has Only One Step Chevron While notice-and-comment Do Judges Make Regulatory Policy? An 38 .L.R HI C OWER OF THE OWER OF Second, the Court stated that agencies Second, the Court P 35 ) 5/9/17) 5:34 PM justified this transfer of lawmaking justified this transfer and ELETE D ATENT deference represents a transfer of power from deference represents the L OT N Chevron, 73 U. O HE Chevron (D DOCX DOCX Chevron . . 187, 218 (2006). Third, the Court stated that agency heads, while they are EV , 467 U.S. at 843-44. , 467 U.S. at 843-45. 36 33 RINTER P As such, agencies face more public accountability than federal Thomas J. Miles & Cass R. Sunstein, NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974) (“[T]he Board is not NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974) (“[T]he .L.R 37 at 865. TO A deference applies to interpretations made deference applies to interpretations through other means, deference has meant is permissible that an agency’s interpretation _ See Id. Id. Chevron Chevron See . 597, 601 (2009). The Court in An does not have to be articulated of a statute agency’s interpretation , 92 V EV AHEESAN M K precluded from announcing new principles in an adjudicative proceeding and . . . the choice . . precluded from announcing new principles in an adjudicative proceeding and between and adjudication lies in the first instance within the Board’s 194, 203 (1947) (“[T]he choice made discretion.”); SEC v. Chenery Corp., 332 U.S. lies between proceeding by general rule or by individual, ad hoc litigation is one that primarily in the informed the administrative discretion of agency.”). 39. (2001). United States v. Mead Corp., 533 U.S. 218, 230-31 40. Barnhart v. Walton, Cass R. Sunstein, 535 U.S. 212, 222 (2002); Zero 38. 38. 37. 37. Empirical Investigation of rulemakings are one of the most common means of propounding an made through formalinterpretation of a statute, interpretations to adjudications are also typically entitled 36. 36. connection between the rate at which judges validate agency interpretations and their connection between the rate at which judges validate agency interpretations and political ideologies). 35. Chevron such as policy statements, basis. on a case-by-case is decided policymaking functions to agencies on multiple First, open-ended grounds. presumablystatutory language the part of Congress for reflects a desire on the statute. agencies to interpret worded and the agency’s interpretation is reasonable. interpretation and the agency’s worded Agencies have broad discretion over the policy instrumentAgencies have broad discretion over that they use to articulate interpretations of a statute. courts to the executive branch. Statutes that werecourts to the executive interpreted traditionally are now often given meaningby the federal courts federal agencies. by 32. 32. 33. Matthew & C. Stephenson Adrian Vermeule, 4_V T 2017] L. R not selected by popular vote, do answer to the democratically elected to the democratically answer not selected by popular vote, do president. judges with life tenure. through notice-and-comment rulemaking to receive 34. 34. Chevron this particular language expressly forecloses unless the statute’s interpretation. are better equipped than the courts, both in termsare better equipped than the courts, of expertise and questions often implicatedresources, to decide the technical in statutory interpretation. C Y 39083 ple_19-3 Sheet No. 72 Side A 05/11/2017 10:58:06 05/11/2017 A 72 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 72 Side B 05/11/2017 10:58:06 M K C Y upheld a 41 [Vol. 19:3 [Vol. In light of its 44 AW L Perez v. Mortgage National Cable &National Cable In this decision, the 45 . deference. The words Agencies are thereby not USINESS 42 B Chevron deference. deference. OURNAL OF OURNAL Chevron J ) 5/9/17) 5:34 PM Congress passed the FTC Act to reestablish 46 ELETE Chevron D OT N O (D note 30, at 248-49. Standard Oil Co. v. United States ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P supra , the Court held that agencies can subsequently revise these , the Court held that agencies can OF RINTER P at 981-82; FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515-16 (2009). TO _ Congress in 1914 Expressly Delegated Power to the FTC to Congress in 1914 Expressly Delegated Interpret Section 5 43 Id. Id. Congress, in creating the FTC, expressly sought to empowerCongress, in creating the FTC, expressly the The FTC’s interpretation of Section 5’s prohibition on unfair methods 5’s The FTC’s interpretation of Section Agencies statutory reverse earlier power to revise and also have the B. AHEESAN agency to define the meaning of “unfair methods The of competition.” Congress that enacted the FTC Act was reacting to the Supreme Court’s landmark ruling in 44. Hurwitz, 43. 44. 135 S. Ct. 1199, 1206 (2015). 45. 46. 221 U.S. 1, 69-70 (1911). wording, Section 5 appears to be the paradigmaticwording, Section 5 appears to be example of a statute whose interpretation is entitled to Court had established the rule of reason as the framework for analyzing most held that it had the power trade restraints and to articulate the meaning of the Sherman Act. “unfair methods of competition” are not self-defining and susceptible to multiple interpretations. These words and, on are open-ended in content their face, allow for a broad range of permissible interpretations. One every “Nearly nebulous Section 5 is: scholar has succinctly captured how word of the statute is rife with ambiguity: What is unfair? Unfair to whom? . . . What is a method? . . . What is competition?” significant change in the Federal Communicationssignificant change Commission’s they offer a reasoned Provided a statutory provision. interpretation of interpretations agencies’ revised changed interpretation, explanation for the to of a statute are entitled of competition is almost certain to receive 41. 42. 545 U.S. 967, 1000-01 (2005). 4_V U. 654 interpretations. The Supremeinterpretations. in Court decision Telecommunications Ass’n v. Brand X Internet Services Brand X Internet Ass’n v. Telecommunications and to interpret They have the power bound by prior interpretations. reinterpret ambiguouslytime. over phrased statutes Recently, the Supreme revisiting interpretive procedural flexibility on Court granted agencies rules, policy statements, interpretations that were other regulatory and not made through notice-and-comment rulemaking. In Bankers Ass’n less formal going through the notice-and-comment interpretations without process. 39083 ple_19-3 Sheet No. 72 Side B 05/11/2017 10:58:06 05/11/2017 B 72 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 73 Side A 05/11/2017 10:58:06 .L. OF . EX EC was a 47 . , 94 T Chevron , 24 ABA S , see v. Gray Schweiker Standard Oil Ferguson v. Skrupa, 372 . 227, 231 (1980). Justice Given this elitist generated much public EV The decision was seen 50 48 FTC 655 655 FTC L. R 57, 80 (1990). The Good and Bad Trust Dichotomy: A , 21 B.C. Standard Oil The holding in ULLETIN 51 B overruled in part by OWER OF THE OWER OF P ) 5/9/17) 5:34 PM The courts were anti-populist and pro-big The courts were Domination, Democracy, and Constitutional Political The Meaning Methods of Competition” in of “Unfair 49 Phelps Dodge Corp. v. NLRB, 313 U.S. 177 (1941); NTITRUST ELETE , 221 U.S. at 83 (Harlan, J., dissenting). D ATENT L.J. 1, 13-14 (2003). L OT , 35 A N O The Origins of the FTC: Concentration, Cooperation, Control, HE (D Antitrust in 1914: The Climate of Opinion NTITRUST DOCX DOCX Standard Oil . , 71 A overruled in part by 52 RINTER P , Adair v. United States, 208 U.S. 161 (1908) (striking down a ban on yellow- , E.I. du Pont de Nemours & 729 F.2d 128, 137 (2d. Cir 1984) (“As Co. v. FTC, L. 14, 20-21 (1964). at 21; Neil W. Averitt, TO _ , 453 U.S. 34, 44 (1981) (citation omitted) delegation (“In view of this explicit of Id. E.g. In the wake of the 1912 election that involved passionate debates and In the wake of the 1912 election that The Supreme decision in Court’s . 1329, 1329-30 (2016). AHEESAN M K NTITRUST EV Section 5 of the Federal Trade Commission Act dog contracts), Lochner v. New York, 198 U.S. 45 (1905) (striking down a law that limited the number of Lochner v. New York, 198 U.S. 45 (1905) (striking down a law that limited the number hours that bakery employees could work), U.S. 726 (1963); K. Sabeel Rahman, Economy in the New Gilded Age: Towards a Fourth Wave of Legal Realism 49. 49. business and routinely struck down federal and state public interest business and routinely struck down Americans. that protected ordinary major step in this direction as it established, in the common law the of Sherman bad monopolies Act, two classes of monopolies: and good monopolies. 51. Marc Winerman, Marc 51. and Competition orientation of the federal courts, many feared that the rule of reason meant the evisceration of the Sherman Act. control over the developmentcontrol over of competition accordingly policy and methods of competition to define unfair delegated the authority to the FTC. the FTC could arguably claimIn light of this history, that its interpretation of to deference, even in the absence of Section 5 is entitled A 47. agency interpretation of a For an example of the Court granting deference to an delegation of authority, statute on account of express Congressional Panthers substantive authority, the Secretary’s definition [of the contested term] . . . is entitled to . . substantive authority, the Secretary’s definition [of the contested term] of this kind, Congress entrusts to the Secretary, ‘legislative effect’ because, ‘in a situation rather than to the courts, the primary responsibility for interpreting the statutory term.’”). But see, e.g. the Commission moves away from attacking conduct that is either a violation of the antitrust or deceitful, and seeks to break new laws of collusive, coercive, predatory, restrictive Votaw, ground by enjoining otherwise legitimate practices, the closer mustbe our scrutiny upon Dow judicial review.”). 48. 4_V T 2017] R as a power grab by the Court. as a power grab by 52. Short History of a Legal Idea Eleanor M. Fox & Lawrence A. Sullivan, and congressional outrage. Although the Court had found the oil refining outrage. Although the Court had and congressional giant liable for monopolization of the company, and ordered the dissolution the Court also implicitly claimed prerogative of interpreting the the Shermanthe rule of reason framework. Act under Harlan in his dissent accused his colleagues in the majority of seizing legislative powers for Harlan in his dissent accused his colleagues in the majority of seizing the Supreme Court. 50. C Y 39083 ple_19-3 Sheet No. 73 Side A 05/11/2017 10:58:06 05/11/2017 A 73 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 73 Side B 05/11/2017 10:58:06 M K 59 60 57 C Y [Vol. 19:3 [Vol. AW A that statute L 54 Senator Cummins 61 note 51, at 76. USINESS B supra The Federal Trade Commission and . 407, 416 (1973). All I Really Need to Know About Antitrust I 58 EV OURNAL OF OURNAL J Congress sought to reclaim Congress authority over ) 5/9/17) 5:34 PM 53 .L.R note 51, at 52, 74 (noting that President in his . 2025 (2015) (noting that debates about the benefits of a ELETE D EV ASH It, however, would almost It, however, would certainly be under- supra OT 55 .W N L. R O EO note 51, at 3-5. note 51, at 67. (D OWA . 1225 (1911). . 13047 (1914). Daniel A. Crane, note 49, at 234. note 49, at 230, 236; Winerman, ENNSYLVANIA ENNSYLVANIA DOCX DOCX supra supra EC EC . , 41 G P .R .R , Winerman, supra supra , 100 I OF RINTER 62 P ONG ONG and susceptible to evasion over time, and susceptible as profit-oriented TO 56 _ See generally See, e.g. Congress created the FTC to maintain control over the meaning of To guard further against judicial encroachment in the interpretation of AHEESAN Learned in 1912 stressed the political accountability of a commissionstressed the political accountability and touted the superiority of “a commission at all times under the power of Congress, at all timespeople” over “the comparative under the eye of the seclusion of the courts.” 62. 51 C 51 62. Congress ultimately it passed the Clayton Act both options: pursued that the FTC Act that outlawed unfair prohibited particular practices and methods of competition in general. Congress created the Commission to the a legislative function “to exercise extent of determining what constitutes an unfair method of competition.” as an armThe FTC was created to act, in effect, of Congress that would use its expertise and investigatory powers to advance the legislative will. Senator Newlands wantedLaying out a vision of political accountability, a new commissionof Congress.” to be “the servant 54. Winerman, competitive economy were pervasive in the rhetoric of the 1912 presidential candidates). 54. businesses found new ways to engage in anticompetitivebusinesses found behavior. 53. 53. 4_V U. 656 unfair methods of competition and granted the Commission interpretive authority. Without the Commission, the members of Congress and Act feared that the courts would FTC Senators involved in drafting the on unfair methods of competition.apply a restrictive “judicial gloss” competing of antitrust, visions prohibited enumerated practices would provide greater legal guidance and provide greater legal guidance prohibited enumerated practices would certainty for businesses. 61. 47 C 47 61. competition policy. Among those who favored additional antitrust policy disagreementlegislation, a significant existed. Some supported a prohibit a list of problematiclaw that would practices, while others prohibition on anticompetitiveendorsed a general behavior, akin to what earlier with the ShermanCongress had done Act. inclusive 55. 55. 1912 campaign had promoted a statute with specific prohibitions and that proponents of the 1912 campaign prohibitions and that proponents of had promoted a statute with specific Winerman, FTC Act believed in the value of a generally-worded prohibition). 56. 60. Incipient Unfairness A. Everette MacIntyre & Joachim J. Volhard, 57. Averitt, 57. Averitt, 58. 59. 45 (2015). 2, 3, 7 (2015); 15 U.S.C. § 15 U.S.C. §§ 39083 ple_19-3 Sheet No. 73 Side B 05/11/2017 10:58:06 05/11/2017 B 73 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 74 Side A 05/11/2017 10:58:06 , the XPANSIVE XPANSIVE Initial drafts 71 E 63 AD AN H The Court stated that 67 This term was(and still FTC 657 657 FTC 64 rather than anticompetitive As such, unfair methods of 65 66 68 ONGRESS ,C CT FTC v. Sperry & Hutchinson Co. note 51, at 76. OWER OF THE OWER OF arrogate excessive power to itself if, in P 5 ) 5/9/17) 5:34 PM not supra FTC A ELETE D ATENT ECTION ECTION L OT S N O HE (D A subsequent Supremeaffirmed Court decision the 70 note 49, at 235. Supporters of the FTC Act had much less faith in note 49, at 235. note 49, at 235. note 49, at 235. DOCX DOCX . NACTING THE E supra supra supra supra ISION FOR N V RINTER P In affirming the Commission’s broad policymaking In affirming the Commission’s broad power, the (emphasis added). at 244. TO _ 69 Id. Id. The Congress that enacted the FTC Act and created the Commission The Congress that enacted the FTC Act and created the Commission The Supreme the policymaking Court has recognized power that . Id. . II. I 68 AHEESAN M K 71. FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 454-55 (1986). 70. 70. measuring a practice against the elusive, but congressionally mandatedmeasuring elusive, a practice against the of equity, considers public values standard of fairness, it, like a court beyond simply in the letter or encompassed those enshrined in the spirit of the antitrust laws.” used the established termused the established “unfair competition.” had an ambitious It progressive-populist vision for the new agency. Section 5, Congress took another important Congress took another Section 5, of the FTC step. The drafters Act the term adopted of art “unfair methods of competition.” 63. Averitt, 63. 64. Averitt, Averitt, 64. Averitt, 65. 66. to the courts than those who believed the Sherman Act’s rule of reason was sufficient control monopoly power. Winerman, 67. 405 U.S. 233, 239-40 (1972). 69. 4_V T 2017] is) associated with a large body of commonis) associated with law concerning businesses goods as those of a rival, passing off their practices. Using the term“unfair competition” and indirectly invoking the the courts once again in the statute raised the specter of related precedent thwarting will. congressional Membersof Congress feared that courts Section 5 and, in to assert authority to interpret would use this language the precedent on “unfair competition”particular, apply to narrow what statute. Congress intended to be an expansive Court observed that Congress wanted to flexibility preserve interpretive when prohibited unfair methods it competition. of Congress granted to the FTC. In Congress granted to the FTC. In competition are not limited to acts that may violate the other antitrust statutes. Commission’s power to define unfair methods of competition. Congress, by design, declined to anchor “the concept of unfairness to a Congress, by design, declined to common-law by enumeratingor the particular or statutory standard practices to which it was to apply.” intended Court held that the FTC “does C Y 39083 ple_19-3 Sheet No. 74 Side A 05/11/2017 10:58:06 05/11/2017 A 74 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 74 Side B 05/11/2017 10:58:06 M K 73 C Y NTITRUST . L.J. 257 T .S L.J. 65 (1982) H , 35 A [Vol. 19:3 [Vol. , 50 O AW ASTINGS L Congress, however, 72 , 34 H USINESS B Antitrust in the Formative Era: Political and Wealth Transfers as the Original and Primary Wealth Transfers as the Original and Primary OURNAL OF OURNAL J ) 5/9/17) 5:34 PM . 1121, 1128 (2011). EV ELETE D L. R OT N O (D The Federal Trade Commission on the Frontier: Suggestions for Robert H. Lande, ENNSYLVANIA ENNSYLVANIA The Future of Antitrust: Ideology Vs. Legislative Intent DOCX DOCX . P , 86 N.Y.U. OF RINTER P TO _ Section 5 of the FTC Act Has a Multifaceted Political Economic Section 5 of the FTC Act Has a Multifaceted Political Purpose See generally Congress, in creating the FTC, had an ambitiousCongress, in creating the FTC, had vision for its Section Section 5 was meant to be narrower in some than the other respects . 575, 583-88 (1990). A. AHEESAN ULL 5 powers. While term the “unfair methods of competition” is vague and susceptible to multiple culminating the legislative debates interpretations, in the passage of the FTC Actthree central purposes. The members reveal and passing the FTC Act wanted to of Congress involved in drafting protect consumers from wealth transfers, maintain markets open to all comers, of private economic and prevent the concentration and political power. These goals are remarkably similar to those expressed in the debates leading up to the enactmentof the Sherman and Clayton Acts. two others. Unlikeantitrust statutes—and broader in principal the substantive provisions of the Sherman and Clayton Acts, Section 5 lacks a private right of action or a treble damages remedy. (noting that the floor debates over federal antitrust legislation suggest that Congress (noting that the floor debates over federal antitrust legislation suggest that Congress “condemned monopolies”); James May, Economic Theory in Constitutional and Antitrust Analysis, 1880-1918 Congress enacted the antitrust laws in response to growing public fears about and hostility toward the large-scale corporate entities that emerged in (1989) (discussing legislators’ conflicting views on concentrated capitalism in the early (1989) (discussing legislators’ conflicting views on concentrated capitalism in the twentieth century). Congress reaffirmed this broad vision in subsequent antitrust statutes. Peter W. Rodino, Jr., 72. Amy Marshak, Amy 72. the Use of Section 5 B 4_V U. 658 intended it to reach a wider array of conduct than the other two antitrust statutes. Importantly, wanted Congress 5 to be an incipiency Section statute, whichand prevents practices in the bud nips anticompetitive monopolies from and oligopolies developing in the first place. established an agency with enforcement, an agency with established policymaking research, and the open-ended the agency the power to prohibit powers. In granting “unfair methods of competition,” political Congress expressed expansive economic aims guide the Commission’s that should exercise of its powers. Congress aimed consumers to protect and producers from wealth-extracting firms with market power, open markets preserve comers, for all and had expressed similar of private power. Congress prevent the concentration the Shermanobjectives in enacting and Clayton Acts. Concern of Antitrust: The Efficiency Interpretation Challenged 73. 73. 39083 ple_19-3 Sheet No. 74 Side B 05/11/2017 10:58:06 05/11/2017 B 74 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 75 Side A 05/11/2017 10:58:06 . EV TSELF I .L.R AL . 2253, 2275 AR WITH EV W , 61 S. C A House report Representative L. R 79 78 OLICY AT ORDHAM FTC 659 659 FTC :AP 75 , 81 F ARADOX P Contrary to Robert Bork and other to Robert Bork Contrary 80 74 OWER OF THE OWER OF P NTITRUST A ) 5/9/17) 5:34 PM HE ELETE ,T D ATENT L OT ORK N The Sherman Act and the Balance of Power O HE A Americans colleague, Senator Lane, stated that Congress sought to prevent large corporations from Congress sought to prevent large (D 77 How Antitrust Lost Its Goal H. B 76 . 13223 (1914). . 63-533, pt. 1, at 14 (1914). note 73, at 112-14. O DOCX DOCX EC . . 63-597, at § 7 (1914). . 63-597, at § O . N OBERT .R supra EP .N RINTER R P ONG EP David Millon, at 8854. TO R _ Id. See The legislative debates reveal a widely shared anger toward large reveal a widely shared anger The legislative debates AHEESAN M K 80. H.R. 80. (2013) (quoting R 78. 51 C 51 78. 79. 79. are “being compelled fixed and unjustly high prices for to pay arbitrarily what they consume being robbed.” [and that] they are Morganwould “minimize the power of the expressed hope that the FTC people . and secure the . . wealth large industrial corporation to concentrate from levied by monopolistic unjust tribute corporations.” the decades followingthe decades War. the Civil 74. 74. 4_V T 2017] conservative thinkers, the legislative histories of the FTC Act do not show the legislative histories of the conservative thinkers, a concern with promoting economic by neoclassical efficiency as defined economics, an awareness of the concept. or even 76. Lande, 427 (rev. ed. 1993). 76. noted that powerful purchasers (monopsonies and oligopsonies in modern economic terms) power to depress prices paid to could similarly their use employees and other smallproducers. 77. S. 77. businesses that used their power to extract wealth from their power to extract wealth businesses that used consumers and this type of redistribution. for the FTC to prevent producers and a desire Several members at how and Senators expressed outrage of Congress use their power in the marketcorporations could to raise prices and capture consumingthe wealth of the shown, the public. As Robert Lande has exercise of market power was an the prevention of redistribution through important objective. using their power to deprive consumers of the benefits of technical progress labor. A sampleand producers of the fruits of their of quotes from the importancelegislative debate underscores the of this goal. The principal “unreasonable and Senate condemnedsponsor of the FTC Act in the extortionate prices.” 1219, 1226 (1988) (“The advent of big business on this massive scale was a traumatic event. scale was a traumatic event. massive on this 1219, 1226 (1988) (“The advent of big business established the small manufacturers, the ‘[T]he old gentry, the merchants of long standing, professional men, the civic leaders of an earlier era’ saw themselves deprived of economic the power, opportunity, personal independence, and social status. This urban middle class, backbone of the progressive reform movement, was profoundly antagonistic to big business, and no one complained more bitterly than the owners of small businesses. Agrarian the populism also identified big business, particularly the great railroad combinations, with his livelihood. Labor sought strength in farmer’s increasingly tenuous control over Orbach, broad collective organization to protect itself from the power of massed capit Thus, a Barak spectrum of American society complained bitterly about the evil powers of the trusts.”). 75. C Y 39083 ple_19-3 Sheet No. 75 Side A 05/11/2017 10:58:06 05/11/2017 A 75 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 75 Side B 05/11/2017 10:58:06 M K 84 C Y 81 [Vol. 19:3 [Vol. AW He endorsed the L 87 Congressman Stevens 86 USINESS B Senator Lane worried that, without Senator Lane worried that, without 82 Senator Cummins even raised the OURNAL OF OURNAL 88 J ) 5/9/17) 5:34 PM A House Minority Report lamented how 83 85 ELETE D OT N O (D . 13158 (1914). . 8850 (1914). . 13231 (1914). . 63-533, pt. 3, at 5 (1914). . 63-533, pt. 3, at 5 (1914). ENNSYLVANIA ENNSYLVANIA O DOCX DOCX EC EC EC note 73, at 296-97. . P .N .R .R .R OF EP RINTER supra R P ONG ONG ONG at 14938. at 14792. at 13223. TO _ Id. Id. Id. The fears about concentrated economic and political powerThe fears about concentrated economic indeed and The Congressional debates also indicate a commitment also indicate a debates The Congressional preserving to In expressing this desire to maintainIn expressing this markets, open Senator Reed was AHEESAN 82. 82. May,C 83. 51 84. 85. 86. H.R. 86. Senator Kenyon stated: “[I]f this GovernmentSenator Kenyon stated: “[I]f this is powerless to destroy monopoly, monopoly then we have got to concede that is powerful enough to destroy this Government.” creation of an FTC because it would guard the public against this creation of an FTC because it concentration of private power. 87. 51 C 51 87. “[f]ifty men in the United States control, through interlocking directorates, “[f]ifty men United States control, in the country.” forty percent of the wealth of the 81. 51C 81. observed that: “vast wealth has been accumulated,observed that: “vast wealth has been especially in the hands own consciences and sense of justice of a few, irresponsible except to their massand patriotism” of our people have a very that “the great and noted . . . just apprehension that this wealth, [the] power growing out of it and may and oppression.” be a potential source of injury 4_V U. 660 private autocracy were another important theme in the legislative debates. private autocracy were another important theme in the legislative debates. fromThe threat to democratic concentrated private power institutions had been a recurring motivation statutes. in enacting the other antitrust possibility of corporate dictatorship. He warned against his colleagues “if it involves the surrender of highly valuing cheap goods and services too mass of people to a single masterthe individual, the subjugation of a great the openness of markets to all parties. Several membersthe openness of markets of Congress and power to use their fear that large corporations would Senators expressed exclude smaller rivals frommarket. the Senator Reed stated this commitment to open markets eloquently: “We are trying to keep the unobstructed. Wehighways of opportunity trying to keep it so that the are feet of the men so that all may along an open path, of today may travel to gain a livelihood and to embarkhave a fair chance in business.” the FTC, the typical small be “driven out of business by enterprise would his larger or more crafty rival.” 88. 88. far from“a free alone among Burton sought to ensure his peers. Senator against irresistible corporate powerfield for all” in business and warned under which shall be destroyed or the deserving “equality of opportunity competitor driven out of business.” 39083 ple_19-3 Sheet No. 75 Side B 05/11/2017 10:58:06 05/11/2017 B 75 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 76 Side A 05/11/2017 10:58:06 96 After- Once a 93 94 note 60, at 414- supra Among these 91 FTC 661 661 FTC note 51, at 74 (discussing the supra In other words, Section 5 has a strong In other words, Section 5 has a strong OWER OF THE OWER OF note 60, at 414 (emphasizing the difficulties in note 73, at 288-300 (noting the “widespread 92 P Winerman, Winerman, ) 5/9/17) 5:34 PM supra supra note 73, at 82-142 (discussing the similar congressional ELETE D ATENT see also L supra OT N note 49, at 243 (noting the importance of stopping antitrust O HE note 49, at 238-96. (D note 49, at 243 (citing MacIntyre & Volhard, Lande, supra supra DOCX DOCX . 95 Congress aimed further in some to go important ways when supra 90 RINTER P Averitt, MacIntyre & Volhard, Averitt, at 12742. at 414 n.39 (noting President Wilson’s belief that stopping anticompetitive acts at 242-51. TO _ Section 5 Is Intended to Be Broader than the OtherSection 5 Is Intended Antitrust Laws Id. See See See generally See Id. Id. 89 While themes the legislative Act bear a close underlying the FTC Averitt has noted that “[t]he legislative history of the Federal Trade This incipiency theme is evident in the legislative debates. Indeed, B. AHEESAN M K 15). 96. Averitt, in their incipiency would help small businessmen have a place in the market). 96. addressing antitrust issues once a trend of concentration had already become evident). addressing antitrust issues once a trend of concentration had already become evident). 95. 93. 93. violations in their incipiency); congressional support for stopping anticompetitive acts at the start). congressional support for stopping anticompetitive acts at the start). 94. the-fact legal action was seen as unable to address monopolies.the-fact legal action was seen as unable 90. 90. behind goals of economic efficiency and protecting consumers from unfair wealth transfers the various antitrust laws); May, congressional commitment to the long-established ideals of economic opportunity, security of property, freedom of exchange, and political liberty”). 91. 92. 92. resemblance laws, to those underlying its sister antitrust the Sherman and Clayton Acts, Commission Act is replete with references which that the function reiterate of the Commission would be to arrest trade restraints in their incipiency.” mind.” 89. 89. 4_V T 2017] corporation became a monopoly, it became difficult to restructure the marketand restore competition. maintain To competitive markets, early and decisive legal action against anticompetitive conduct was considered essential. President Wilson also championed a preventative approach to antitrust policy. Congress and many members of the public were frustrated with the Sherman Act’s inability to tackle nascent threats to competition. prophylactic orientation. prophylactic orientation. it established the FTC. Neilit established the Averitt’s landmark article on Section 5 laid from interpretations, which ranged out several possible a statute that is coterminous with the other antitrust laws one that allows to to the FTC business conduct. police virtually all types of interpretations, an uncontroversial one is that Section 5 is intended, like the interpretations, an uncontroversial one Clayton Act, measure to be an incipient that prevents competitive problems before they have come to fruition. C Y 39083 ple_19-3 Sheet No. 76 Side A 05/11/2017 10:58:06 05/11/2017 A 76 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 76 Side B 05/11/2017 10:58:06 M K 97 C Y , the 104 Instead, the [Vol. 19:3 [Vol. 107 AW L Senator Cummins Similarly, Senator 99 98 had violated existing had violated existing 101 100 Fashion Originators Guild USINESS FTC v. Brown Shoe Co. B In In 103 In 106 OURNAL OF OURNAL J ) 5/9/17) 5:34 PM ELETE D OT N . 63-1142, at 19 (1914) (stressing the importance of stopping O O (D . 13118 (1914). .N note 49, at 246-47. and that “Congress enacted § 5 of the Federal Trade and that “Congress enacted § ENNSYLVANIA ENNSYLVANIA DOCX DOCX EP EC . P 102 .R supra OF RINTER 14941. 11455. 12030. P Among covers mergers other things, the Clayton Act and ONG FTC v. Brown Shoe Co., 384 U.S. 316, 322 (1966) (rejecting the argument that H.R. R at at at TO 105 _ See Id. Id. See Id. , the Supreme Court similarly acknowledged this legislative purpose The courts have held that the Section 5 incipiency standard applies in The courts have held that the Section The courts have affirmed standard in Section 5. While the incipiency AHEESAN outright proof of a Section 3 Clayton violation is necessary for a Section 5 FTC Act outright proof of a Section 3 Clayton violation is necessary for a Section 5 FTC violation). Newlands sought to check monopolyNewlands sought “in the embryo.” cases that implicate Act, the Clayton which has its own incipiency standard. antitrust rules, and Representative Covington sounded a similar Representative Covington sounded antitrust rules, and theme and everything else is we wish to do and ought to do above stated that “[w]hat of monopolyto prevent the growth at the beginning.” 102. FTC v. Motion Picture Advert. Serv. Co., 344 U.S. 392, 394-95 (1953). 103. FTC v. Texaco Inc., 393 U.S. 223, 225 (1968). Averitt, 104. 312 U.S. 457, 466 (1941). 105. 106. 14, 18 (2015). 15 U.S.C. §§ 107. aspired “to seize the offender before his ravages” aspired “to seize 101. 101. v. FTC the judiciary has not addressed incipiency—orthe judiciary has not addressed even Section 5 more generally—in decades, the most that recent decisions are unequivocal Section 5 is intended to prevent anticompetitive behavior in its infancy. The Supremestated that Section 5 is intended “to stop in their Court has incipiency acts and practices which, when full blown, would violate [the antitrust] Acts” 100. 100. Senator Reed [anticompetitive]“to strike those stated that the goal was acts worked out into instead of after they have been actually in their incipiency of monopolya complete system or restraint of trade.” Supreme Court rejected the defendant’s contention that the Commission Supreme Court rejected the defendant’s must show substantial likelihood of harm a to competition. 98. 51 C 51 monopolies at the outset). 98. 97. 97. 4_V U. 662 in the sale of goods. The Conference CommitteeThe Conference this theme report stressed of prevention. 99. 99. Court held that the FTC “has power under § 5 to arrest trade restraints in under § Court held that the FTC “has power Commission Act to combat in their incipiency trade practices that exhibit a strong potential for stifling competition.” behind the FTC Act, stating that the sponsors hoped “that its effect might behind the FTC Act, stating that the it attemptsbe prophylactic and that through to bring about complete monopolization might of an industry be stopped in their incipiency.” 39083 ple_19-3 Sheet No. 76 Side B 05/11/2017 10:58:06 05/11/2017 B 76 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 77 Side A 05/11/2017 10:58:06 110 In re 108 revolution in NTITRUST A which appear to have which appear to Chevron IMITED 109 FTC 663 663 FTC L OALS In establishing consumer 113 ’G Negotiated Data Sols. LLC, F.T.C. No. 51- ONGRESS OWER OF THE OWER OF P C In re ) 5/9/17) 5:34 PM FFIRMATION OF A FFIRMATION OF A ELETE The Section 5 Statementendorses a limited D ATENT L OT 112 2015 A N O S HE (D ONTRAVENES note 30, at 254. 111 C DOCX DOCX FTC’ . supra , Complaint at *9-12, HE THAT RINTER P limited the scope of its power and affirmed its commitment to Section 5 Statement, 80 Fed. Reg. at 57,056 (stating that Section 5 would track E.I. Du Pont De Nemours & Co. v. FTC, 729 F.2d 128, 142 (2d Cir. 1984) TO _ Id. See, e.g. See See Id. Just as monopoly, economic power, and antitrust reemerged as a topic The FTC has interpreted Section 5 narrowlyThe FTC has interpreted in recent decades. The III. T AHEESAN M K judicial interpretations of the Sherman and Clayton Acts where applicable). 113. 0094, 2008 F.T.C. LEXIS 119 (Sept. 22, 2008) (alleging patent holder reneged on licensing 0094, 2008 F.T.C. LEXIS 119 (Sept. 22, 2008) (alleging patent holder reneged on licensing commitment following commercialization patent); standard that included of technical (vacating the FTC’s order finding manufacturers of gasoline additives had conducted unfair competition methods); Official Airline Guides, Inc. v. FTC, 630 F.2d 920, 928 (2d Cir. of airline schedules to publish 1980) (reversing an order from the FTC forcing publisher 582 (9th Cir. 1980) 637 F.2d 573, v. FTC, certain connecting flights); Boise Cascade Corp. the (denying enforcement of an FTC order holding that manufacturers of plywood violated FTC Act by using a delivered pricing system). 110. Valassis Commc’ns, Inc., 141 F.T.C. 247, 249-52 (2006) (alleging invitation to collude). Hurwitz, 111. 112. 109. 109. the antitrust status quo. of public debate, the FTC, in its 2015 Statementof public debate, the FTC, in its 2015 of Enforcement Principles, voluntarily instilled a multi-decade timidity.past thirty years, the Commission For the in litigation and settlementshas invoked Section 5 infrequently and has been rather modest when it has. When the Commission has brought stand- intervening years, these cases have alone Section 5 actions in the represented only marginal extensions of existing Sherman Act precedent. None of these actions have questioned the frameworkNone of these actions have questioned of contemporary antitrust or sought to broaden its normative lens. While the FTC’s Section strengthened since the three appellate 5 antitrust authority has not been precededlosses in the 1980s, these cases the administrative law. their incipiency without proof that they amount without proof their incipiency violation of § to an outright 3 of the Clayton Act laws.” or other provisions of the antitrust 108. 108. 4_V T 2017] Commission’s 5 in the mid-twentieth of Section expansive interpretation memorycentury is a distant The FTC suffered three appellate in 2017. 5 mattersdefeats in Section 1980s, in the early policy program vision in establishing the reflect Congress’ that fails to Commission. The FTC stated that consumer welfare would be the guiding be the that the rule of reason would principle in its Section 5 actions and default analytical framework such cases. in C Y 39083 ple_19-3 Sheet No. 77 Side A 05/11/2017 10:58:06 05/11/2017 A 77 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 77 Side B 05/11/2017 10:58:06 . M K C Y CON E NTITRUST , 21 J. , 79 A [Vol. 19:3 [Vol. A group of AW 117 L USINESS B and should capture both profits— 116 OURNAL OF OURNAL J ) 5/9/17) 5:34 PM Does Antitrust Need To Be Modernized? ELETE D Was the Crisis in Antitrust a Trojan Horse? OT N O (D ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P 115 part II.A. , Dennis W. Carlton, Barak Orbach, OF RINTER By using this language, the FTC did not present as much By using this language, the FTC P See TO 114 _ The FTC Doubled Down on the Ahistorical Efficiency Paradigm See supra See, e.g. Id. In its Section 5 Statement, FTC affirmed the its commitment to the The definition of consumer welfare has been a contentious topic in A. AHEESAN neoclassical interpretation of antitrust law.neoclassical interpretation of antitrust The Commission stated that its by the goal of promotingSection 5 actions would be “guided consumer welfare.” 116. Allocative efficiency exists when goods and services are produced up to a point at If which the marginal benefit to the purchaser equals the marginal cost of production. antitrust law promotes that prevents the allocative efficiency, it seeks to police conduct reaching the socially optimal level. This so-called production of goods and services from the deadweight loss means that the marginal benefit from additional output exceeds marginal this marginal cost. Critically, benefit is tied to a consumer’s willingness and ability to pay. Under the allocative efficiency framework, a wealthy person’s desire for a luxury vacation home is accorded more significance than a poor person’s need for lifesaving healthcare. 115. 115. modern antitrust. One camp, generally associated with conservative thinkers (“conservative consumer claims welfare”), that consumer welfare means allocative economic efficiency clarity as it might have thought it did. In the antitrust world, “consumer welfare” is not a settled term has been the source of a running debate and between those who believe consumer should cover flesh-and-blood welfare consumers account for the welfare of and those who believe it should consumersof the interpretation the FTC and producers. Regardless Congress’s intentions in enacting intended to adopt, it failed to honor Section 5. When Congress viewed the protection of it passed the FTC Act, consumers antitrust goals that the new as only one of several Commission should advance. the welfare of producers—and consumerthe welfare of producers—and wellbeing. L.J. 881, 893-94 (2013). 117. 114. 114. 4_V U. 664 welfareSection 5 enforcement, objective of as the sole the FTC elevated and analysis of Robert Bork and false historical the conservative ideology academicsother Chicago School intent in creating the over Congress’s Commission.political economic wanted to advance a broad Congress monopoliesvision and prevent and oligopolies from emerging, rather than waitthem to attack after they had becomeaddition to entrenched. In endorsed the rule of of Section 5 too narrowly, the FTC defining the goal analytical framework.reason, a deficient practice, the rule of reason In on a range of problematicconfers de facto legality business conduct. 39083 ple_19-3 Sheet No. 77 Side B 05/11/2017 10:58:06 05/11/2017 B 77 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 78 Side A 05/11/2017 10:58:06 , L. 122 ONSUMER .C OY . 259, 264 (1988) L In contrast, they ULL , 22 B 121 Although they did not Although they 119 FTC 665 665 FTC 120 NTITRUST , 33 A OWER OF THE OWER OF Along with preventing powerful Along with preventing powerful P 123 Question: What Is the Real and Proper Antitrust ) 5/9/17) 5:34 PM note 73 (discussing the desire to prevent unfair wealth Notwithstanding their differences, both Notwithstanding ELETE D ATENT 118 They believed that monopolists and oligopolists L supra of the goals that Congress had in creating the of the goals that Congress had Antitrust Law and the Paradigm of Industrial Organization OT N 124 The Reagan Administration’s Antitrust Policy, “Original Intent” O HE note 119, at 299. (D Lande, note 73, at 112-13. . 487, 487-88 (1983). DOCX DOCX . supra only one EV Section II.a. , Steven C. Salop, supra L. R RINTER 155, 156-59 (2007) (arguing that antitrust laws should maximize 155, 156-59 (2007) (arguing that antitrust total P John J. Flynn, Flynn, TO _ AVIS See See, e.g. See generally See D See supra Progressive consumer welfare has much stronger historical support While the legislative progressive consumer welfare is anchored in . 336, 336-38 (2009) (placing the emphasis on consumer harm rather than an aggregated . 336, 336-38 (2009) (placing the emphasis on consumer harm rather than an aggregated AHEESAN M K EV ERSPECTIVES than the conservative conception. The progressive understanding of conception. The progressive than the conservative consumerhistories of the FTC deep grounding in the legislative welfare has ShermanAct as well as the and Clayton Acts. and the Legislative History of the Sherman Act conceive of antitrust in the technical termsconceive of antitrust in the technical of economics, the members of in drafting and debating the FTC Act Congress and Senators involved aimed to prevent powerful corporations from overcharges on and exacting thereby transferring wealth from the consuming public. businesses from from exacting wealth consumers, two other themes dominated passage of the FTC Act. the debates leading to the First, the membersof Congress who drafted the statute wanted to prevent dominant businesses from to drive out smaller using their power rivals and close markets to competitors. standard including seller welfare). 119. interpretations are rooted in the logic of neoclassical economics rooted in the logic of neoclassical interpretations are and focus on the short-run materialeffects of market power. surplus, not just consumer surplus). 118. Welfare Standard? Answer: The True Consumer Welfare Standard progressive antitrust scholars (“progressive consumer (“progressive antitrust scholars progressive welfare”) that argues consumer as Congress meant welfare, it, means protecting consumers from from associated with the higher prices the wealth transfers monopolies, cartels. oligopolies, and P 4_V T 2017] R showed no intent to advance the goal of conservative consumershowed no intent to advance the goal welfare. (noting that both conservative and progressive consumer welfare advocates utilize “latter- (noting that both conservative and progressive consumer welfare advocates utilize day economic theory” to parse congressional intent in the Sherman Act). 120. 124. 123. Peter C. Carstensen, history of the FTC Act, protecting consumershistory of the FTC Act, from protecting anticompetitive overcharges is Commission did not express a solely consumerist in 1914. Congress lawspurpose. It conceived of the antitrust and social statutes, as political not pure economic measures. had to be checked through federal legislation because they had the raw legislation because they had to be checked through federal transfers as a common goal behind the various antitrust statutes). Lande, 121. 16 U.C. 122. 122. C Y 39083 ple_19-3 Sheet No. 78 Side A 05/11/2017 10:58:06 05/11/2017 A 78 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 78 Side B 05/11/2017 10:58:06 M K C Y As As 128 129 . 1051, 1051 EV [Vol. 19:3 [Vol. .L.R AW note 125, at 7. She A L P supra , 127 U. USINESS They feared that corporate They feared that B 126 127 note 128, at 7. While the FTC could analyze OURNAL OF OURNAL supra J ) 5/9/17) 5:34 PM Second, the authors of the FTC Act sought Second, the authors 125 ELETE D OT N O The Political Content of Antitrust (D The rule of reason requires a deep investigation of the The rule of reason requires a deep ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P 130 Section II.a. Section II.a. Section II.a. OF RINTER P TO _ The FTC Endorsed a Legal Standard that Grants Powerful The FTC Endorsed a Legal Standard MarketsBusinesses Carte Blanche to Control See supra See supra See supra Along with adopting the narrow goal of consumerAlong with adopting the narrow goal welfare, the FTC In endorsing the language of “consumerIn endorsing the Section 5 welfare,” the B. AHEESAN stated that its Section 5 cases would rely on “a framework similarstated that its Section 5 cases would to the rule of reason.” to forestall concentrations of private power. to forestall concentrations former FTC Chairman wrote, this disregard for the political goals of antitrust is “bad policy, and bad law.”history, bad Statement failed to honor Congress’s aims in enacting the FTC Act. At Statement aims honor Congress’s failed to set out in its only one of the goals Congress best, the FTC fulfilled Even if the Commissionfounding statute. embraces progressive consumer welfare, it would still not do justice to what Congress intended. The Commission would disregard the other two principal objectives that 5 StatementCongress envisioned. The Section did not acknowledge the Congressional aims of maintaining markets open and preventing the focused exclusively and narrowly on the concentration of private power. It economic well-being of consumers whilepolitical and social ignoring the objectives of the FTC Act. the publication of the In a speech to announce Section 5 Statement, Ramirez Chairwoman stressed the focus on Edith consumer welfare the political and social aims and seemed of to disparage the FTC Act to competition.” as “public policy concerns unrelated 125. 4_V U. 666 added that this means that “the rule of reason does not ‘necessarily . . . call for the fullest . . added that this means that “the rule of reason does not ‘necessarily market analysis’ in all cases.” Ramirez, a range of conduct under the truncated rule of reason or even presumptions of illegality, it is (1979). 130. Statement of Enforcement Principles Regarding “Unfair Methodsof Competition” (Sept. Under Section 5 of the Federal Trade Commission Act, 80 Fed. Reg. 57,056, 57,056 21, 2015). Chairwoman Ramirez stated that the rule of reason in the Section 5 Statement should be understood in “its broad, modern sense.” Ramirez, 126. power to control marketspower to threat to small an existential and represented businesses and entrepreneurs. 127. giants threatened to underminegiants threatened American democracythe transform and state into their servants. institutions of the 128. Chairwoman , Fed. Trade Comm’n, Address at Center at George Washington Law School 5 (Aug. 13, 2015), University https://www.ftc.gov/system/files/documents/public_statements/735411/150813section5spee Pitofsky, ch.pdf [https://perma.cc/UAH6-K4E2]. Robert 129. 39083 ple_19-3 Sheet No. 78 Side B 05/11/2017 10:58:06 05/11/2017 B 78 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 79 Side A 05/11/2017 10:58:06 , 416 F.3d 29, 37 Starting in the 136 Rather than merely FTC 667 667 FTC 134 Polygram Holding, Inc. v. FTC OWER OF THE OWER OF , The plaintiff can then either rebut the The plaintiff can P When a plaintiff demonstrates likely 133 ) 5/9/17) 5:34 PM 132 e.g. , , McWane, (11th Cir. Inc. v. FTC, 783 F.3d 814, 842 ELETE See D ATENT L OT N See, e.g. O note 128, at 8. This is a telling example. Over the past three HE (D 135 . 49 (2007). Daniel A. Crane, Rules Versus Standards in Antitrust Adjudication, EV supra DOCX DOCX . L. R note 128, at 10. In laying out a streamlined version of the rule of reason, note 128, at 10. In laying out a streamlined RINTER EE P Section 5 Statement, 80 Fed. Reg. at 57,056 (“[T]he act or practice will be Section 5 Statement, 80 Fed. Reg. at Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 886-87 Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 886-87 at 59. TO For a plaintiff to establish a prima For a plaintiff to case under the rule of facie _ supra .&L See generally See Id. See Id. 131 The rule of reason stands in contrast to per se and presumptionThe rule of reason stands in contrast of ASH AHEESAN M K 64 W evaluated under a framework similar to the rule of reason, that is, an act or practice evaluated under a framework similar to the rule of reason, that is, an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications . . . .”). 136. 135. 135. 134. 134. “similar,” 5 Statement’s the Section high-level description of the rule of to the long-standing interpretation reason appears to be virtually identical of the rule of reason. relevant industry and credible evidence of actual or likely anticompetitive evidence of industry and credible relevant outcomes,today to mean defined economic higher prices or reduced output. likely to use simpler that the iterations of the rule of reason sparingly. Ramirez emphasized Section 5 Statementa break with it. is an expression of continuity with the past, rather than Ramirez, Ramirez cites the FTC’s “quick look” rule of reason in the context of conduct resembling Ramirez cites the FTC’s “quick look” rule . Ramirez, of reason analysis to horizontal restraints on decades, the FTC has applied a truncated rule price and non-price competition. 4_V T 2017] exclusive dealing was illegal under a 2015) (upholding FTC’s decision that a monopolist’s as an affirmation of FTC practice over the past full rule of reason analysis). Treating it several decades, the Section 5 Statement should be seen as leaving some space for simpler legal standards for collusion-like conduct but requiring full market analysis for mergers, monopolies, and vertical restraints. 131. (2007) (identifying the rule of reason as the standard for determining whether a practice restrains trade and discussing the factors that are considered). 132. (D.C. Cir. 2001). v. Microsoft Corp., 253 F.3d 34, 58-59 United States 133. illegality. In the rules versus standards dichotomy,illegality. In the rules versus standards the rule of reason is antitrust law’s standards-based framework, whereas presumptive illegality moreand especially per se illegality are rules-oriented. anticompetitive opportunity to rebut this effects, the defendant has the and other business efficiencies the presentation of showing through justifications from the conduct. justification (restraint does not promote procompetitive does not promote justification (restraint benefits or there are or show that the anticompetitiverestrictive alternatives) substantially less effects outweigh the procompetitive benefits. reason, it must typically show actual or likely anticompetitive effects from challenged. the conduct being (D.C. Cir. 2005) (affirming FTC’s decision that agreements between competitors to restrict suspect). Elsewhere, the FTC has relied on the price cutting and advertising is inherently full-blown rule of reason. C Y 39083 ple_19-3 Sheet No. 79 Side A 05/11/2017 10:58:06 05/11/2017 A 79 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 79 Side B 05/11/2017 10:58:06 . M K 137 EV C Y See, ERGER M .L.R INN [Vol. 19:3 [Vol. 140 , 95 M ORIZONTAL AW ,H L N ’ OMM C USINESS B RADE analysis and appears to be .T 142 Anticompetitive Effect Today, only price fixing, market Today, only price ED Palmer v. BRG of Ga., Inc. 498 U.S. 46, 139 This task calls for “speculative, This task calls for “speculative, &F Does the Rule of Reason Violate the Rule of 141 OURNAL OF OURNAL see also J ) 5/9/17) 5:34 PM USTICE J ELETE D T OF ’ OT . 1375, 1442 (2009) (suggesting that judicial fact-finders are . 1375, 1442 (2009) (suggesting that judicial fact-finders EP N D O EV (D L. R Maurice E. Stucke, U.S. ENNSYLVANIA ENNSYLVANIA , 522 U.S. at 10. DOCX DOCX . P AVIS , Weyerhaeuser Hardwood Lumber Co., 549 U.S. Co. v. Ross-Simmons D OF RINTER P The Supreme is now the Court has held that the rule of reason Nynex Corp. v. Discon, Inc., 525 U.S. 128, 133-34 (1998) (summarizing the Nynex Corp. v. Discon, Inc., 525 U.S. 128, Welfare Welfare (2010), http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf (2010), http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf TO 138 _ See generally See, e.g. See See generally State Oil Co. The rule of reason requires a case-by-case balancing that is beyond the The rule of reason requires a case-by-case 1. Is Not The Rule of Reason Equipped to Advance Consumer , 42 U.C. , NCAA v. Bd. of Regents of Univ. of Okla., (1984) (stating that a 468 U.S. 85, 109-10 AHEESAN UIDELINES 312, 314 (2007) (holding that a two-pronged reasonableness test that applied to predatory 312, 314 (2007) (holding that a two-pronged State Oil Co. v. Khan, 522 U.S. 3, actions); pricing claims also applied to predatory bidding previous decisions regarding the rule of 10-15 (1997) (reviewing the Supreme Court’s per se rules).reason and highlighting the reluctance to adopt 138. capability of federal antitrust enforcers, let alone generalist courts. For capability of federal antitrust enforcers, example, balance the short-term how can the FTC or a court credibly loss of price competition from a horizontal merger of against the realization longer-term dynamicefficiencies? The federal antitrust agencies have adopted a similarThe federal antitrust analytical framework, antitrust concerns in inquiries, for addressing one reliant on fact-driven mergers. possibly labyrinthine, and unnecessary” not capable of assigning values to short and long term efficiencies because of feasibility and consistency concerns). 142. Hon. Richard D. Cudahy & Alan Devlin, G 137. 137. 4_V U. 668 Law? division, and bid rigging betweendivision, and bid rigging remain rivals per se illegal. 140. 140. to horizontal and vertical price-fixingSupreme Court’s decisions with respect while highlighting its status as per se illegal); 49-50 (1990) (finding that a market division agreementbetween rivals was illegal “on its face”). Some have been deemed types of collusion-like behavior presumptively illegal, under the so-called quick look test, in multiple Supreme Court and lower court rulings. e.g. demonstration“a detailed market of anticompetitive behavior does not need to rely on analysis”); N. Tex. Specialty Physicians v. FTC, 528 F.3d 346, 362-63 (5th Cir. 2008) “net (finding that a quick-look analysis was an appropriate way to determine the Holding, Inc. v. FTC, 416 F.3d 29, 36 anticompetitive effects” were obvious); Polygram (D.C. Cir. 2005) (finding a restraint presumptively unlawful because of obviousness). 141. late 1970s, the courts, in their antitrust decisions, shifted decisively away shifted decisively their antitrust decisions, the courts, in late 1970s, from that most and toward standards and held rules types of business the rule of reason. analyzed under balancing tests like conduct should be [https://perma.cc/E623-FVNT] (outlining the analytical techniques used to address antitrust (outlining the analytical techniques used [https://perma.cc/E623-FVNT] concerns following a merger or acquisition). 139. default analytical tool in antitrust cases. default analytical 59, 87 (2010). 39083 ple_19-3 Sheet No. 79 Side B 05/11/2017 10:58:06 05/11/2017 B 79 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 80 Side A 05/11/2017 10:58:06 , 45 By By 145 United . For one Decision Sylvania not very easily FTC 669 669 FTC OWER OF THE OWER OF P ) 5/9/17) 5:34 PM 143 , the Court acknowledged its institutional Vertical Restraints: De Facto Legality Under the Rule of ELETE D ATENT L OT N O HE (D L.J. 67 (1991) (analyzing how the rule of reason analysis has been DOCX DOCX . , Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 916 , Leegin Creative Leather Prods., Inc. v. RINTER 144 . 1, 14 (1977). NTITRUST P Douglas H. Ginsburg, EV TO _ See See, e.g. , 60 A .L.R While intellectual inquiry, the rule in theory calling for an impossible There have been tremendous departures from a free- the notion of enterprise system in this country. as it was originally conceived action have been the product of congressional These departures and the will to be made of the people. If a decision is to sacrifice competitionone portion of the economy in for greater competition this too is a decision that must in another portion, be made forces or by the courts. by Congress and not by private of their ownPrivate forces are too keenly aware in interests making and ill-situated ill-equipped such decisions and courts are for such decisionmaking. To analyze, interpret, and evaluate the myriad of competing interests and the endless data that would decisions, and to makesurely be brought to bear on such the delicate judgment values to society of competitive on the relative areas of the economy, the judgment of the elected representatives of the people is required. HI AHEESAN C M K Reason thing, it is often difficult to identify who—producer or dealer—is the moving force behind thing, it is often difficult to identify who—producer or dealer—is the moving force large any given resale price maintenance agreement. Suppose, for example, several multibrand[sic] retailers all sell resale-price-maintained products. Suppose further that small prices because they fear that, producers set retail otherwise, the large retailers will resale favor (say, by allocating better shelf space) the goods of other producers who practice price maintenance. Who ‘initiated’ this practice, the retailers hoping for considerable insulation from who simply retail competition, seek to deal best with the or the producers, circumstances they find? For another thing, as I just said, it is difficult to determine just when, and where, the ‘free riding’ problem is serious enough to warrant legal protection.”). 145. (2007) (Breyer, J., dissenting) (“How easily can courts identify instances in which the (2007) (Breyer, J., dissenting) (“How easily benefits are likely to outweigh potential harms? My own answer is, of reason, in practice, functions as a standard of “de facto legality.” a standard of of reason, in practice, functions as beyond the capacities of even the most capacities of even beyond the Before the institutional actors. able paradigm,adoption of the efficiency the Supreme Court cited the practical impossibility of measuring in declining to and balancing costs and benefits conduct. In reason to certain types of business apply the rule of Associates States v. Topco limitations when asked to make legislative-type determinations: 143. 611-12 (1972). United States v. Topco Assocs., 405 U.S. 596, 144. 4_V T 2017] applied by federal courts of appeals to vertical non-price constraints). Judge Posner has applied by federal courts of appeals to vertical non-price constraints). Judge Posner similarly described the rule of reason as a “euphemism for nonliability.” Richard A. Posner, The Rule of Reason and the Economic Approach: Reflections on the In more recent times,Breyer has raised similar Justice administrative to resale price maintenance reason objections to applying the rule of agreements. U. C Y 39083 ple_19-3 Sheet No. 80 Side A 05/11/2017 10:58:06 05/11/2017 A 80 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 80 Side B 05/11/2017 10:58:06 M K C Y See also [Vol. 19:3 [Vol. AW L 146 Corporate Governance and USINESS note 138, at § 10 (“[A] primary note 138, at § B Are U.S. Industries Becoming More Evidence for the Effects of Mergers on supra , . 833, 873-79 (2011) (discussing sources and EV OURNAL OF OURNAL J UIDELINES ) 5/9/17) 5:34 PM This pro-merger assumption seems to rest L. R G 147 ELETE D . 827, 828 (2009). ASON The Rule of Reason: An Empirical Update for the 21st The Rule of Reason: An Empirical Update OT EV ERGER 24 (Fin. & Econ. Discussion Series Working Paper No. 2016- N .M O M Furthermore, the assumption that markets with low EO L. R (D 148 ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P ASON , 18 G .M OF ORIZONTAL RINTER 41 (2016) (“This paper documents that over the last 15 years the level of EO P H Bruce A. Blonigen & Justin R. Pierce, TO _ See See , 16 G In the merger of evidence shows that context, a growing body In adopting the rule of reason, the FTC practically guaranteed that it of reason, the FTC practically In adopting the rule AHEESAN studies that suggest “certain categories of mergers value and do little, if destroy shareholder anything, to create meaningful efficiencies or to enhance market competition”). Gustavo Grullon, Yelena Larkin & Roni Michaely, Concentrated? This product in the US has increased across most industries. Wephenomenon has been fueled consolidation of public firms into mega firms. by show that the increase in concentration levels has implications to firm performance, as it affects profitability, investment, and returns to investors. First, the increase in industry concentration levels is associated with remaining firms generating higher profits through be higher profit margins. The results suggest that the increase in profit margin cannot attributed to increased efficiency but rather to increased market power. Second, mergers in concentrated industries enjoy more positive market reactions, consistent with the idea that market power considerations are becoming a key source of value during these corporate stock events. Finally, firms in concentrated industries experience significant abnormal returns, suggesting that considerable portion of the gains accrues to shareholders.”). insisting on rule of reason style analysis comes at a significant cost to insisting on rule of reason style analysis consumers. The Horizontal Merger assume Guidelines that mergers generally enhance efficiency. 147. 147. Michael A. Carrier, 146. Century 4_V U. 670 benefit of mergers to the economy is their potential to generate significant efficiencies and potential to generate significant efficiencies benefit of mergers to the economy is their thus enhance the merged firm’s ability and incentive to compete, which may result in lower prices, improved service, or new products.”). quality, enhanced 148. 082, 2016) (finding significant evidence of increased average markups from M&A increased 082, 2016) (finding significant evidence of activity Weberin manufacturing industries); Spencer Waller, Market Power and Efficiency Competition Policy or moderatedefined by the Horizontal Merger concentration (as endorsing the rule of reason, the FTC has given powerful businesses broad powerful businesses the FTC has given the rule of reason, endorsing freedom to dominate mergers, through markets, exclusionary whether anticompetitiveconduct, or other The rule of reason imposes practices. establishes a strong plaintiffs and, correspondingly, heavy burdens on presumption of legality for even competitively suspect conduct by firms with market power. cases. The statistics bring few, if any, Section 5 would be able to demonstrate, that the plaintiff of reason means in practice, that the rule 2000 and 2009, study found that, between almost always loses. A leading court ruling in moredefendants received a favorable ninety-five than percent of antitrust cases implicating the rule of reason. on a thin bed of evidence. In the manufacturing sector, mergers, of instead on a thin bed of evidence. In the manufacturing marketcreating efficiencies, have led to enhanced power, as seen in higher price-cost markups. 39083 ple_19-3 Sheet No. 80 Side B 05/11/2017 10:58:06 05/11/2017 B 80 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 81 Side A 05/11/2017 10:58:06 ETROSPECTIVE Jesse Eisinger & :AR In a separate study, In a separate study, EMEDIES R 151 See generally FTC 671 671 FTC 150 48 (Ne. Univ. Dep’t of Econ., appears empirically suspect. empirically appears suspect. AND , note 138, at § 5.3 (“Mergers note 138, at § resulting 149 supra , ONTROL C OWER OF THE OWER OF P ) 5/9/17) 5:34 PM ERGER UIDELINES G ELETE ,M D ATENT L OT . L.J. 513, 555-56 (2007). (Nov. 16, 2016), https://www.propublica.org/article/these- Behavioral Economists at the Gate: Antitrust in the Twenty- Behavioral Economists at the Gate: Antitrust N ERGER The Structural Presumption and the Safe Harbor in Merger HI O HE ERGERS 153 M 155 (2014). (D ,M UBLICA These findings cast doubt on the need for open-ended, These findings cast doubt on the .U.C P DOCX DOCX . 152 OLICY OY RO WOKA K , P These Professors Make More Than a Thousand Bucks an Hour Peddling RINTER ORIZONTAL P , 38 L U.S. P John Kwoka, H TO Under Progressive-Populist Antitrust _ OHN See See John Kwoka’s research has raised further questions about whether the has raised further questions John Kwoka’s research 2. Reason’s Deficiencies Become The Rule of Even More Acute The problemsreason become with the rule of only more under severe AHEESAN M K NALYSIS OF Working Paper, 2016), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2782152 Working Paper, 2016), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2782152 (finding that structural presumptions of illegality are highly [https://perma.cc/2KN2-K9SX] accurate in identifying anticompetitive mergers under the consumer welfare standard). While appearing to fail consumers, the current merger review process is an 153. important source of income for economists and lawyers who specialize in merger analysis and have experience at one of the federal antitrust agencies. Review: False Positives, or Unwarranted Concerns? Justin Elliott, Mega-Mergers time-consuming of horizontal mergers investigations in already concentrated markets. in unconcentrated markets to have adverse competitive are unlikely effects and ordinarily require no further analysis.”). 150. Maurice E. Stucke, First Century 151. J 151. 152. 152. Kwoka found that simpleKwoka found that structural presumptions, such as the market share of the merging parties and combined market leading firms, share of the which mergershave a high rate of accuracy in predicting short-term lead to consumer harm. fact-intensive merger review process promotes consumer welfare. fact-intensive merger promotes review process consumer welfare. Kwoka’s meta-analysis of merger that the retrospective studies found failed to act against moreantitrust agencies than sixty percent of the studied mergers that resulted in price increases. Guidelines) are not conducive to collusion are not conducive Guidelines) 149. 149. A 4_V T 2017] the antitrust goals articulated by Congress. This progressive-populist the antitrust goals articulated by philosophy seeks to protect consumers and producers from powerful sellers and purchasers, maintain open markets, and prevent the accumulation of also fails to advance the incipiency private power. The rule of reason had adopted the goals Congress laid standard in Section 5. Even if the FTC the rule of reason would foreclose out in 1914 in its Section 5 Statement, professors-make-more-than-thousand-bucks-hour-peddling-mega-mergers (discussing the high earnings of professors who are hired [https://perma.cc/UA6V-KC8P] by large companies to rebut concerns of increased market power from corporate mergers). Contrary to this assumption, collusive conduct has price fixing and other manybeen uncovered in unconcentrated markets. C Y 39083 ple_19-3 Sheet No. 81 Side A 05/11/2017 10:58:06 05/11/2017 A 81 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 81 Side B 05/11/2017 10:58:06 M K C Y This This 155 These 156 [Vol. 19:3 [Vol. AW monopolies and L prevent USINESS susceptible to quantification susceptible to quantification B not Antitrust Review of the AT&T/T-Mobile 154 OURNAL OF OURNAL J ) 5/9/17) 5:34 PM ELETE D OT . standard L.J. 47, 58 (2011) (explaining how the incipiency N O note 1, at 620 (suggesting that the rule of reason is not consistent (D OMM note 51, at 243 (discussing comments by members of Congress ENNSYLVANIA ENNSYLVANIA .C supra DOCX DOCX . P ED supra OF RINTER P them after they had emerged and become entrenched. Stucke, Allen P. Grunes & Maurice E. Stucke, , 64 F TO _ See See The current rule of reason practically bars early interdiction against The current rule of reason practically Some bar for antitrust decisions have gone even further in raising the The original aims of the FTC Act are In eschewing per se rules and presumptions in favor of the rule of AHEESAN and balancing. How could the FTC balance incommensurableand balancing. How such things as short-term corporate power effects against enhanced price in the political system? is evident on its face. of this type of balancing The absurdity determinationsThese are qualitative that call for legislative-type judgments, rule of reason compels a futile quantification exercise. The not its lens narrowly:the FTC to focus it must on quantifiable, concentrate short-term harms (from, for example, mergers) and ignore qualitative and longer-term harmsin their entirety. prophylactic, or incipient, purpose recognized that prevention of prophylactic, or incipient, purpose competitive problems is more curing them effective than after the fact. has becomeCongress believed that once a corporation a monopolist it may be very difficult, if not impossible, to restructure the firm and restore competitive market conditions. anticompetitivepermits conduct and action against dominant firms only in a very limited set of circumstances. Given the hazards of predicting the future, long-term anticompetitive effects are difficult, if not impossible, to the showingprove in court. In insisting on of likely anticompetitive the incipiency standard. effects, the rule of reason undercuts cannot be honored under an effects-based approach). Transaction 154. 154. with enforcement of antitrust policy’s traditional goals). with enforcement of antitrust Averitt, 155. aspiring to stop monopolies in their infancies). 156. 4_V U. 672 effects can be shown only after a corporation’s anticompetitive strategy has marketfulfilled its objective of enhanced power or, at best, when the its objective. The rule of reason, by strategy is on the cusp of fulfilling requiring the showingeffects, demands of anticompetitive that plaintiffs wait and grant anticompetitive conduct the opportunity to blossom and even flourish. plaintiffs in rule of reason cases. In the area of monopolization, for example, some courts have adopted a restrictive effects-based approach the realization of these aims.the realization oligopolies from dominating markets the first place, rather than in restructure reason, the FTC also contradicted the incipiency principle of Section 5. In principle of Section 5. In incipiency reason, the FTC also contradicted the aspired to enacting the FTC Act, Congress 39083 ple_19-3 Sheet No. 81 Side B 05/11/2017 10:58:06 05/11/2017 B 81 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 82 Side A 05/11/2017 10:58:06 .L. In TAN see also 157 , 56 S AW L NTENT AND I If excluded rivals are If excluded rivals note 142. 158 FTC 673 673 FTC NTITRUST A supra ONGRESSIONAL C OPULIST 159 -P OWER OF THE OWER OF ONOR P H ) 5/9/17) 5:34 PM AN Defining Better Monopolization Standards ELETE D ATENT L OT N ROGRESSIVE note 141; Cudahy & Devlin O FTC C HE P L.J. 3, 59-60 (2004) (laying out deficiencies for the “equally deficiencies for L.J. 3, 59-60 (2004) (laying out (D supra DOCX DOCX . 161 Exclusionary Distribution Strategies by Dominant Firms: Striking a Better , Einer Elhauge, OW THE ESTORE NTITRUST R RINTER P Chief Justice Roberts has also criticized the rule of reason for Chief Justice Roberts has also criticized , Stucke, F.T.C. v. Actavis, Inc., 133 S. Ct. 2223, 2245 (2013) (Roberts, C.J., dissenting) Cascade Health Sols. v. PeaceHealth, 515 F.3d 883, 909 (9th Cir. 2008) Cascade Health Sols. v. PeaceHealth, 515 TO 160 _ See, e.g. See E.g. See , 72 A Given its effective lawmaking over Section 5, the FTC can authority In place of the crabbed efficiency vision of a once expansive body of In place of the crabbed efficiency vision IV. H . 253, 321 (2003) (discussing means of constraining rival efficiency without ever . 253, 321 (2003) (discussing means of constraining rival efficiency without ever AHEESAN M K EV (“[A]lthough the question posed by this case is fundamentally a question of patent law—i.e., fundamentally a question of patent law—i.e., (“[A]lthough the question posed by this case is whether Solvay’s patent was valid and therefore permitted Solvay to pay competitors to honor the scope of its patent—the majority declares that such questions should henceforth that be scrutinized by antitrust law’s unruly rule of reason. Good luck to the district courts must, when faced with a patent settlement, weigh the ‘likely anticompetitive effects, in redeeming virtues, market power, and potentially offsetting legal considerations present the circumstances.’”). Andrew I. Gavil, Balance (discussing the primary “anticompetitive danger” posed by “multi-product bundled challenging the discount must meet); discount[s]” and the requirements a plaintiff efficient competitor” standard while suggesting it “could harm consumer welfare”). 158. 161. 161. driving them out of the market). driving them out of the market). 159. United States v. Microsoft Corp., 253 F.3d 34, 79 (D.C. Cir. 2001) 160. R that requires plaintiffs to showthat requires had the capability excluded rival(s) the that of providing short-term price competition the defendant. against 157. 157. 4_V T 2017] its complexity. law, the FTC should look to the goals expressed by the memberslaw, the FTC should look to the of and the protection of consumers it: Congress and Senators that created producers from firms with market power, the preservation of open markets, and the dispersal of private economic and political power.a century Even (a “citizen interest” rather than a after the FTC’s founding, these goals practical terms, under this standard dominant firms liable only can be held that have comparablefor excluding rivals cost structures—an unlikely possibility for most new entrants and small rivals. required to show antitrust protection under this of that they are “worthy” monopolistscost-based screen, reign to squash nascent, are given “free albeit unproven, competitors at will.” still change course and embrace vision Congress established for Section the 5. A critical first step is for the Commissionrepudiate the ahistorical, to discredited efficiency paradigm. Moreover, many scholars who believe in antitrust enforcement the rule of reason as the primary oppose legal standard. C Y 39083 ple_19-3 Sheet No. 82 Side A 05/11/2017 10:58:06 05/11/2017 A 82 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 82 Side B 05/11/2017 10:58:06 M K C Y End the Failed [Vol. 19:3 [Vol. AW L and would be much 164 Part II.A. USINESS B 37, 41 (2014) (describing how large Y 50 (1978). ’ OL Market Structure and Political Law: A See supra .P UB ARADOX Has Failed and Why It Can and Should Be P OURNAL OF OURNAL J are as relevant as ever, and arguably even as ever, and are as relevant ) 5/9/17) 5:34 PM .L.&P 162 Chevron looks beyond statutory text and examines legislative ELETE note 9, at 276. ON NTITRUST D A OT J. C 166 . 779, 818 (2010). Under this less deferential formulation of N HE supra O EV ,T Chevron UKE (D ORK ENNSYLVANIA ENNSYLVANIA The proposed interpretation would follow a venerable would follow a venerable The proposed interpretation .L.R DOCX DOCX . , 9 D P 163 H. B ONN OF RINTER P , Dole v. United Steelworkers of Am., 494 U.S. 26, 35, 40 (1990) (applying Zephyr Teachout & Lina Khan, at 9. TO OBERT _ , 42 C Bork looked to the legislative histories of the antitrust statutes and statutes of the antitrust Bork looked to the legislative histories The FTC Should Anchor Section 5 in the Congressionally The FTC Should Anchor Section 5 in Expressed Goals of the Statute E.g. See Id. Experiment Now: How , the proposed interpretation of Section 5 would still rest on a solid legal basis, 165 To advance the citizen interest standard, the FTC should interpret citizen interest standard, the FTC To advance the Before specific legal rules can be formulated, the FTC must the revisit A. AHEESAN “traditional tools of statutory construction” including review of legislative history). One “traditional tools of statutory construction” including review of legislative history). common application of history to determine whether a statute is ambiguous. Jack M. Beermann, Chevron more consulting the dated economic defensible than musings of legal scholars for guidance. goals of antitrust law In helping in general and Section 5 in particular. Robert Bork himselfof antitrust, overthrow the historical understanding of the goals of the legal regimerecognized that the identification is the essential first step. He wrote that one must first ask, “What is the point of else follows fromthe law—what the answer we are its goals? Everything give.” Overruled incorrectly claimed allocative efficiency as the only goal establish that they of antitrust enforcement. more so today. corporations have “(1) the power to set policy, (2) the power to regulate, and (3) the power corporations have “(1) the power to set policy, to tax”). 164. whereas the efficiency interpretation would not. Chevron R 165. 162. Khan & Vaheesan, 163. Taxonomy of Power 4_V U. 674 canon of statutory interpretation, looking to the legislative history of a law to the legislative history interpretation, looking canon of statutory to articulate the meaning text, of general statutory “consumer standard) welfare” 166. 166. Section 5 to cover a range of high risk conduct, some is treated of which a range of high risk conduct, Section 5 to cover the FTC should establish Specifically, present. very leniently at presumptions of illegality for mergersconcentrated markets, in certain types of conduct by firms market with power, and vertical restraints that limit retail competition and challenge durable or otherwise harmful possession of market power. Simpler and stronger doctrine must be accompanied by simpler remedies and stronger for Section 5 violations. In remedying anticompetitive FTC should generally favor one- behavior, the time structural remedies over complicated behavioral fixes. 39083 ple_19-3 Sheet No. 82 Side B 05/11/2017 10:58:06 05/11/2017 B 82 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 83 Side A 05/11/2017 10:58:06 170 The (2013). (2014), NDICATORS I ENTURY C . 1140, 1150 (1981) NSTITUTION I EV IRST -F Perpetuating an ill- L. R OMPETITION AND 173 C FTC 675 675 FTC WENTY fewer new businesses, note 30, at 263 (explaining that T ROOKINGS ORNELL 169 supra , B ENEFITS OF What’s the Firm Driving the Decline in , 66 C ,B They also include diminished They also include 168 OWER OF THE OWER OF APITAL IN THE P ,C DVISERS and more profits concentrated in fewer ) 5/9/17) 5:34 PM 171 .A ELETE note 3, at 2-4 (blaming market concentration for the lack note 3, at 2-4 (blaming market concentration IKETTY D ATENT CON P E L OT N supra O HE (D note 73, at 286-300 (citing traditional economic theory as the HOMAS T DOCX DOCX . OUNCIL OF supra 4 (2016) (noting that increased industry concentration is an indication of 4 (2016) (noting that increased industry part II.A. at note 6. , Warren, , C RINTER P OWER Ian Hathaway & Robert E. Litan, May, May, P TO These goals are not just a historical artifact. The growing public not just a historical artifact. The growing These goals are _ —bear a striking resemblance that Congress voiced more to those See See generally See supra See, e.g. See, e.g. See supra See 167 172 The FTC must the narrow efficiency paradigm renounce and The efficiency or consumerThe efficiency welfare dominated goals that have ARKET AHEESAN M M K Formation Rate? A Partial Explanation lower competition). 170. driving force behind antitrust laws, rather than firm efficiency). Eleanor M. Fox, driving force behind antitrust laws, rather than firm efficiency). Modernization of Antitrust: A New Equilibrium OF than a century ago. reembrace The efficiency paradigm the broad vision of Congress. is an the 1960s and 1970s. It reflects the ahistorical innovation developed in someempirically-deficient ideologies of economists and lawyers, not the not the goals when the Clayton Act was goals of Congress in 1914 or 1890, amended after World War II, and not even the implicit goals of Congress when the FTC Act was amended in the 1980s. http://www.brookings.edu/wp-content/uploads/2016/06/driving_decline_firm_formation_ http://www.brookings.edu/wp-content/uploads/2016/06/driving_decline_firm_formation_ rate_hathaway_litan.pdf [https://perma.cc/3BFX-V6WN]. 171. increasing wealth inequality, opportunities for entrepreneurs due to closed marketsopportunities for entrepreneurs due and the subversion of democracy by businesses with market power. In short, the fears being expressed today—increasing concentration, antitrust for the past twoantitrust for the of neither reflect the objectives generations the structural problemsCongress nor address economy. in today’s the FTC, had a numberCongress, in creating of aims. To be sure, the protection of consumers was an aim, it was only one of several aims. but to protect consumers, enacted the FTC Act sought The Congress that producers, competitors, from and political institutions private concentrated power. 167. 167. 168. of consumer choice, barriers to competition, the dearth of small businesses, “concentrated political power,” and the decline of the middle class). 169. 4_V T 2017] concerns about monopoly and oligopoly in the Americanconcerns about monopoly economy and oligopoly extend consumerbeyond higher prices. firms (“The legislative history of the Celler-Kefauver Amendment speaks clearly and (“The legislative history of the Celler-Kefauver Amendment speaks clearly who supported the The legislators overwhelmingly of the social evils of ‘concentration.’ Amendment did so on grounds of the dangers of increasing economic concentration, not on grounds of the virtues of efficiency.”); Hurwitz, of Congress amended the FTC’s authority to comply with the logic neoclassical economicsbut did not cabin its competition authority in the same manner). 172. 172. 173. C Y 39083 ple_19-3 Sheet No. 83 Side A 05/11/2017 10:58:06 05/11/2017 A 83 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 83 Side B 05/11/2017 10:58:06 , M K C Y It, It, 176 NTITRUST A with [Vol. 19:3 [Vol. FY 2006–2015 5, AW L While this decline in 174 TATISTICS S USINESS B If the FTC is to effectuate 175 ORKLOAD ,W FY 1970–1979 4, https://www.justice.gov/ OURNAL OF OURNAL J ) 5/9/17) 5:34 PM IVISION ELETE D D The Obama Administration and Section 2 of the Sherman Act OT TATISTICS N S O (D , ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 303 (3rd Cir. 2012) NTITRUST ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P A , Polygram Holding, Inc. v. FTC, 416 F.3d 29, 37 (D.C. Cir. 2005) . 1611, 1613 (2010). While standards in plaintiffs face unfavorable legal OF ORKLOAD RINTER See, e.g. P EV e.g. , TO _ The FTC Should Establish Presumptions Against Competitively The FTC Should Establish Presumptions Suspect Conduct ,W L. R See Compare To advance Congress’s goals in enacting Section 5, the FTC should To advance Congress’s goals in enacting B. AHEESAN IVISION (affirming FTC’s decision that agreements competitors between to restrict price cutting and 362-advertising is inherently suspect); N. Tex. Specialty Physicians v. FTC, 528 F.3d 346, 63 (5th Cir. 2008) (concluding that “quick-look analysis” was appropriate for evaluating price fixing-like conduct). establish presumptions of illegality for competitively suspicious conduct. establish presumptionsillegality for competitively of suspicious conduct. of reason meansContinued reliance on the rule continued antitrust dormancy. of Section 2 (anti-monopoly) Just consider the death enforcement by the Department (“DOJ”). of Justice monopolizationsome cases, have still won important victories in this trying legal environment. exclusive dealing); Spirit for anticompetitive (affirming jury verdict finding defendant liable Airlines, Inc. v. Nw. 917, 953 (6th Cir. 2005) (vacating district Airlines, Inc., 431 F.3d court’s grant of summary judgment for defendant accused of predatory pricing). 176. the number of DOJ 2 cases has multiple Section causes, the pro-defendant legal standards are likely a major factor. Congressional intent, it must a series of reject the rule of reason and adopt presumptions conduct that can injure consumers of illegality for and The FTC already private power. producers, exclude rivals, and concentrate applies presumptions to conduct resembling of illegality collusion. 174. 174. D 4_V U. 676 however, should go further and apply presumptionshowever, should go further and apply to a much broader set of competitively behavior. suspect defined efficiency goal with the rule of reason subverts the intentions of subverts the the rule of reason goal with defined efficiency Congress. By embracing Congress efficiency, the FTC has allowed what feared to come and monopolistic to fruition: oligopolistic markets that undermineharm democratic consumers, institutions. The restrict entry, and FTC must enforcement, anchor its advocacy, and rulemaking in the ever- of consumers and sellers (such 1) the protection relevant aims of Congress: as farmers) from due to firm wealth transfers market power, 2) the markets,preservation of open of private economic and 3) the dispersal and political power. https://www.justice.gov/atr/file/788426/download [https://perma.cc/FGJ7-9H4Q] (showing [https://perma.cc/FGJ7-9H4Q] https://www.justice.gov/atr/file/788426/download that only one monopoly case was filed in court between 2006 and 2015), 90 B.U. sites/default/files/atr/legacy/2009/06/09/215792.pdf [https://perma.cc/M6VU-AVTR] [https://perma.cc/M6VU-AVTR] sites/default/files/atr/legacy/2009/06/09/215792.pdf Hovenkamp, (indicating that fifteen monopoly and oligopoly cases were filed in 1971 alone). Herbert 175. 39083 ple_19-3 Sheet No. 83 Side B 05/11/2017 10:58:06 05/11/2017 B 83 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 84 Side A 05/11/2017 10:58:06 177 179 182 180 been It can not 178 deference. treatment in express (Jan. 6, 2016), OST Chevron Chevron FTC 677 677 FTC .P ASH , W through the 1994 FTC Reauthorization). note 30, at 251 (“Congress has expressly OWER OF THE OWER OF P ) 5/9/17) 5:34 PM supra ELETE D ATENT FTC Chairwoman Edith Ramirez Chats About , FTC Chairwoman Edith Ramirez Chats L OT these presumptionswould of illegality discourage N note 30, at 233-37 (tracing the FTC’s Section 5 rulemaking O 183 HE Hurwitz, (D supra See note 141, at 1461-63. DOCX DOCX . supra RINTER P Hurwitz, United States v. Mead Corp., 533 U.S. 218, 229-30 (2001) (“We have National Petroleum Refiners Ass’n TO _ See See The FTC can issue competitionrules under the standard notice-and- On the competitionFTC’s rulemaking side, the has authority The FTC has flexibility over how has flexibility over The FTC legal standards. to develop these As to specific practices, the FTC should hold mergersAs to specific practices, the FTC should in concentrated By replacing the costly and time-consuming rule of reason and other 181 AHEESAN M K changed in the multiple amendments post-1970s Congressional to the FTC Act. congressional authorizations to engage in the process of rulemaking or adjudication that congressional authorizations to engage in the process of rulemaking or adjudication produces regulations or rulings for which deference is claimed.”). 181. power from 182. While Congress has modified the FTC’s rulemaking power under its consumer protection authority since 1973, it has not modified this power for the Commission’s antitrust authority. recognized a very good indicator of delegation meriting It can create them which has been the adjudication, through case-by-case agency’s primary policymaking vehicle over the past few decades. Also, or rulemaking of whether to proceed through adjudication the choice accord to an FTC level of deference that courts would does not affect the Section 5. Interpretations madeinterpretation of either through adjudication or rulemaking to are generally entitled acknowledged, discussed, and declined to alter this power in the context of Section 5’s 5’s acknowledged, discussed, and declined to alter this power in the context of Section prohibition against unfair methods of competition.”). Stucke, 183. Tsukayama, Hayley 177. Aerospace Co. Div. NLRB v. Bell (1974). 416 U.S. 267, 294 of Textron Inc., 178. CES Security and Why She’s At 4_V T 2017] https://www.washingtonpost.com/news/the-switch/wp/2016/01/06/ftc-chairwoman-edith- ramirez-chats-about-privacy-security-and-why-shes-at-ces/?utm_term=.df0f4f06b860 (describing FTC as “mainly a law enforcement agency”). [https://perma.cc/6LKD-GA7U] 179. D.C. Circuit has held that the FTC has rulemaking authority under Section 5. The Nat’l Petroleum Refiners Ass’n v. FTC, 482 F.2d 672, 697-98 (D.C. Cir. 1973). 180. anticompetitive quasi-bright lines as to permissible conduct and establish markets, potential by dominant conduct with exclusionary and near- dominant firms, and vertical restraints on retail and other distributional competition to be presumptively illegal. These types of conduct can harm and rivals and new entrants, consumers and producers, unfairly exclude these harmsconcentrate private power. To prevent instead of themcorrect presumptionsafter the fact, the FTC should establish of illegality for a range of competitively problematic conduct. open-ended standards, also establish Section 5 antitrust legal standards through rulemakings. 5 antitrust legal standards through also establish Section comment procedures under the Administrative Procedure Act. AnFTC competition rule would not have to comply with the more onerous Magnuson-Moss procedures required for consumer Act protection rules. C Y 39083 ple_19-3 Sheet No. 84 Side A 05/11/2017 10:58:06 05/11/2017 A 84 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 84 Side B 05/11/2017 10:58:06 M K C Y , 2 J. note 141, supra [Vol. 19:3 [Vol. arose in the AW 16 (June 2016), L Competition Policy with ROGRESS USINESS .P B M A note 138, at §§ 6-7. note 138, at §§ 1. note 138, at § The Court intimated that a merger 188 supra supra FOR . , , Reviving Antitrust: WhyEconomy Needs a Our OURNAL OF OURNAL TR J C ) 5/9/17) 5:34 PM Philadelphia National Bank At the same time, these presumptions would , ELETE 184 UIDELINES UIDELINES D While vertical mergers are assumed to be less 189 G G OT 186 N O . 215 (2006) (favoring rule differentiation over case-by-case (D Mergers can also enhance the consolidating entities’ ERGER ERGER CON Arndt Christiansen & Wolfgang Kerber, 185 M M ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P , Marc Jarsulic et al., OF RINTER L. & E P TO Furthermore, of private power should not be the concentration ORIZONTAL ORIZONTAL _ See, e.g. Id. See generally 187 1. Mergers Mergers in concentrated markets have serious anticompetitive To prevent the harms from horizontal mergers, the FTC should use its AHEESAN OMPETITION involving parties with a combined market share of twenty percent may also be presumptively illegal. power to exclude rivals. 186. H 186. 187. Progressive Competition Policy https://cdn.americanprogress.org/wp-content/uploads/2016/06/28143212/ https://cdn.americanprogress.org/wp-content/uploads/2016/06/28143212/ (suggesting that studies showed RevivingAntitrust.pdf [https://perma.cc/NVY7-88QP] increased opportunities for anticompetitive effects following vertical integration). 188. Bank, 374 U.S. 321, 364 (1963). United States v. Phila. Nat’l 189. 184. 184. “Per Se Rules vs Rule of Reason” Optimally Differentiated Rules Instead of C 4_V U. 678 and impermissible conduct. potential. These corporate consolidations can raise consumer corporate consolidations can raise potential. These prices by eliminating head-to-head competition and facilitating both express and implicit collusion. not amount enumerated to categorical prohibitions of the practices. Rather, they would of proof to firms shift the burden in competitively that engage and invite themsuspicious behavior presumption to rebut the of illegality of credible business justifications. through the showing adjudication). Proceedings under the proposed presumptions would not necessarily be as adjudication). Proceedings under the proposed presumptions would not necessarily expeditious and straightforward as those under per se rules because, in some cases, market Stucke, inquiries. definitions and efficiencies would call for fact-intensive at 1461-62. H 185. harmful than horizontal mergers, can also have serious anticompetitive they effects. For example, in markets with strong network effects, a dominant firm market in one can acquire a firm in an adjacent market, foreclose rivals from this market,the long-term and dictate development of the entire sector. Section 5 authority to adopt a strong presumptionSection 5 authority to adopt a strong of illegality for mergers in concentrated markets. look to Supreme The FTC should Court precedent for guidance here. The Supreme Court has held that a horizontal merger that would result in the merged entity having a share of greater than thirty percent is presumptively illegal. ignored. Mergers kinds—horizontal, vertical, or conglomerate— of all concentrate the control of economic and political power in fewer hands. 39083 ple_19-3 Sheet No. 84 Side B 05/11/2017 10:58:06 05/11/2017 B 84 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 85 Side A 05/11/2017 10:58:06 191 The FTC should The FTC 190 FTC 679 679 FTC OWER OF THE OWER OF P ) 5/9/17) 5:34 PM ELETE D ATENT L 193 OT N O note 150, at 555-56 (observing collusion in many moderately Although the FTC does not have comparable Although the HE (D 192 supra DOCX DOCX . , Guidelines on the Assessment of Non-Horizontal Mergers under the RINTER P Brown Shoe Co. v. United States, 370 U.S. 294, 328 (1962) (“Since the Brown Shoe Co. v. United States, 370 U.S. 294, 328 (1962) (“Since Stucke, at 335. TO _ See, e.g. See See Id. Under the proposed presumptions, parties would have the opportunity Under the proposed presumptions, parties would have the opportunity In the area of vertical mergers,In the area of vertical also establish a the FTC should AHEESAN M K Council Regulation on the Control of Concentrations Between Undertakings, 2008 O.J. (C Council Regulation on the Control of Concentrations Between Undertakings, 2008 O.J. in non-horizontal mergers, be it of a 265) 6, 9 (“The Commission is unlikely to find concern new coordinated or of a non-coordinated nature, where the market share post-merger of the entity in each of the markets HHI is below concerned is below 30% and the post-merger 2000.”). diminution of the vigor of competition which may stem from a vertical arrangement results primarily from a foreclosure of a share of the market otherwise open to competitors, an be important consideration in determining whether the effect of a vertical arrangement ‘may substantially to lessen competition, or to tend to create a monopoly’ is the size of the share of the market this factor will seldom foreclosed. However, be determinative.”). 193. to rebut a prima illegality through the showing facie case of of business justifications. Parties to these combinations could rebut the presumption by showing that the merger means to achieve a particular restrictive is the least legitimate business goal. For example, they could demonstrate that the merger lines. The presumption is necessary to develop new product would acquirer could reasonably achieve its be strong and difficult to rebut. If the competition,purported objectives through means such as less threatening to internal expansion, the presumption of illegality would not be overcome. establish that the mergerConversely, if the acquirer can is the least it could rebut the presumptionrestrictive way to realize the objectives, of illegality. concentrated and unconcentrated markets). concentrated and unconcentrated markets). 192. precedential guidance in this area, it can use its investigatory and research in this area, it can use its investigatory precedential guidance the dynamicspowers to understand of vertical mergers and determine the mergerspoint at which vertical rivals. threaten to raise prices and exclude At a minimum,should deem the FTC vertical acquisitions by dominant or near-dominant firms to be presumptively illegal, regardless of the size of the acquired firm.addition, a merger In between a firm with a thirty percent or greater market share in one marketfirm and another with a thirty marketpercent or greater share in an adjacent could be subject to a presumption of illegality. recognize the broader substantive reach of the Section 5 and adopt a substantive reach of the Section recognize the broader presumption the twenty of illegality at no higher than threshold. percent comparable presumption of illegality. The Supreme Court has not lines concerning vertical mergers,established bright it has with as horizontal mergers. 191. 191. context of Section 7 of the Clayton Act, not Section 5. Clayton Act, not Section 7 of the context of 190. 190. 4_V T 2017] C Y 39083 ple_19-3 Sheet No. 85 Side A 05/11/2017 10:58:06 05/11/2017 A 85 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 85 Side B 05/11/2017 10:58:06 M K C Y 141, ARK M 197 While 196 [Vol. 19:3 [Vol. They can also AW 194 L VERSHOT THE O USINESS CHOOL S B HICAGO C . L.J. 81, 84-94 (2015) (discussing suspected US B OURNAL OF OURNAL J ) 5/9/17) 5:34 PM OW THE In addition, they can engage in — In addition, they H 195 ELETE Reconsidering Brooke Group: Predatory Pricing in Light ERKELEY . 397, 417-20 (2009). D Economic Analysis of Exclusionary Vertical Conduct: Where Conduct: Economic Analysis of Exclusionary Vertical OT EV N O , 12 B (D .L.R Tying, Bundled Discounts, and the Death of the Single Monopoly ENNSYLVANIA ENNSYLVANIA ARV DOCX DOCX . P , Jefferson Parish Hosp. Dist. No. 2. v. Hyde, 466 U.S. 2, 15-18 (1984) OF RINTER P , 123 H Sandeep Vaheesan, Steven C. Salop, TO _ See, e.g. See See Collins Inkjet Corp. v. Eastman Kodak Co., 781 F.3d 264, 271-72 (6th Cir. 2015) Collins Inkjet Corp. v. Eastman Kodak Co., 781 F.3d 264, 271-72 For dominant and near-dominant firms, the FTC should establish 2. Dominant Firm Conduct Dominant would-be dominant and firms to a variety of can resort AHEESAN of the Empirical Learning Chicago Has Overshot the Mark, in exclusionary tactics cannot be cataloged exhaustively, these are someexclusionary tactics cannot be cataloged of the anticompetitivehave been used over time practices that in a variety of industries. presumptions for particular types of conduct with of illegality exclusionary standard of Section 5, these special potential. To further the incipiency presumptions should apply to both firms on the threshold of dominance, and firms with established market dominance. A market share greater than or equal to forty percent would seem to cutoff. For firms be a reasonable in presumptions of illegality for, among this category, the FTC should adopt discounts, and predatory market-share other practices, exclusive dealing, pricing. Dominant and near-dominant firms that engaged in these practices of Section 5. The FTC would be would be presumptively in violation followingSherman the logic of the existing Act approach to tying. resort to predatory pricing whereby they use short periods of below-cost pricing whereby they use short resort to predatory competitorspricing to exclude possible entrants from and deter market.participating in the (citations omitted) (“The tie falls foul of antitrust law if the seller has appreciable economic of power in the tying product market and the arrangement affects a substantial volume . A tying arrangement that falls foul of these criteria and . . commerce in the tied market. because it tends to force morelacks a valid business justification is anticompetitive efficient 197. 197. (stating that the validity of a tying arrangement should be determined by assessing whether consumers are forced to accept the tying arrangement through the sellers’ market power); see also 150 (Robert Pitofsky ed., 2008) (suggesting that competition for exclusives creates competitive market constraints on participants and can lead to the exclusion of rivals). 195. conditioning the purchase of a product in which they have monopolyconditioning the purchase of a product power in a competitiveon the purchase of a related product market as a means of extending their marketinto this second market. power 194. 194. 4_V U. 680 Profit Theory 196. Einer Elhauge, Elhauge, and confirmed predatory pricing practices by dominant firms in the twentieth century). Einer 196. practices to exclude competitorspractices to exclude while maintaining or enhancing their marketMonopolists power. and near-monopolists can use exclusive dealing and market to prevent rivals fromor rebates share penalties accessing consumers or essential distribution channels. 39083 ple_19-3 Sheet No. 85 Side B 05/11/2017 10:58:06 05/11/2017 B 85 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 86 Side A 05/11/2017 10:58:06 199 In re IDEXX In re FTC 681 681 FTC Given this enforcement 201 , 149 F.T.C. at 1317 (foreclosure of “rivals . OWER OF THE OWER OF The former has serious exclusionary P 198 ) 5/9/17) 5:34 PM ELETE D ATENT L OT N O HE (D note 195, at 99-100. Transitions Optical, Inc., 149 F.T.C. 1281, 1325 (2010) (settling DOCX DOCX . supra , In re Transitions Optical, Inc The Commission that under these recognized RINTER 200 In re P , McWane, 814, 842 (11th Cir. 2015) (affirming FTC Inc. v FTC, 783 F.3d Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 488 (1992) Eastman Kodak Co. v. Image Tech. Servs., TO _ E.g. See, e.g. See Under these presumptions firms of illegality, would have the A presumption on a market of illegality based recognize share would Similar dealing practiced by a logic distinguishes exclusive AHEESAN M K (Scalia, J., dissenting) (“Behavior that might otherwise not be of concern to the antitrust otherwise not be of concern to the antitrust (Scalia, J., dissenting) (“Behavior that might laws—or that might even be viewed as procompetitive—can take on exclusionary connotations when practiced by a monopolist.”). Vaheesan, 199. 200. 200. decision that producer of domestic pipe fittings used exclusive dealing to improperly exclude competing domestic manufacturers of ductile iron pipe fittings); Labs., Inc., 155 F.T.C. 241, 242 (2013) (alleging that the respondent used exclusive dealing to foreclose market access to rival manufacturers of veterinary diagnostic products); Pool Corp., F.T.C. No. 101-0115, 2012 WL 159752, at *6-7 (Jan. 10, 2012) (settling allegations the respondent used exclusive dealing to marginalize rival pool product distributors); allegations that respondent’s exclusive dealing with lens casters foreclosed rival photochromic lens makers from market). 201. opportunity to present business justifications to rebut the FTC’s prima facie opportunity to present business justifications case of anticompetitive overcome conduct. They could the presumption by showing that the practice is necessary to achieve a legitimate business aim record and collective body of evidence, exclusive dealing by dominantrecord and collective body of evidence, firms obvious target for further policy development appears to be an by the through either an enforcement action FTC. A future FTC should establish, or rulemaking, by dominant that exclusive dealing firms and near-dominant is presumptively Section 5. illegal under potential, while is much the latter more likely to be competitively benign. that the competitive implications form of a particular of conduct depend on the power it. For example, of the entity practicing pricing by a below-cost firm withof the market a fifty percent share has radically different competitive implications pricing by a recent entrant with than below-cost of the market.just five percent from key distribution channels” reduced competition and led to and led to from key distribution channels” reduced competition “higher prices, lower output, reduced innovation and diminished consumer choice”). competitors the tied product market.”). out of 198. 4_V T 2017] monopolist other dominant or firm from a exclusive dealing practice by firm a small with market recognized the share. The FTC has already competitive threat of monopolists’ use of exclusive arrangements with brought many the FTC enforcementdistributors. Between 2008 and 2016, actions against monopolists insisted on exclusivity arrangements that with distributors. circumstances, exclusive dealing threatened to exclude competitorscircumstances, exclusive dealing threatened and long run. injure consumers in the short and C Y 39083 ple_19-3 Sheet No. 86 Side A 05/11/2017 10:58:06 05/11/2017 A 86 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 86 Side B 05/11/2017 10:58:06 M K C Y 196, 210- ARK M [Vol. 19:3 [Vol. Resale price Predatory Pricing: AW 204 L 205 VERSHOT THE O USINESS B The harms extend beyond 203 CHOOL S L.J. 407, 441-42 (1997). . 2280-81 (1999) (outlining several L.J. 2239, HICAGO EO OURNAL OF OURNAL C J NTITRUST ) 5/9/17) 5:34 PM , 88 G ELETE , 65 A D OW THE OT H N in How Manufacturers Deal with the Price-Cutting Retailer: When O . 473, 509 (2010). The presumption be strong and could only be would , (D 202 ULL Free Riding: An Overstated, and Unconvincing, Explanation for B Resale Price Maintenance: The Internet Phenomenon and Free Rider ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P OF RINTER P Patrick Bolton, Joseph F. Brodley & Patrick Bolton, Joseph F. Brodley Michael H. Riordan, NTITRUST TO _ See The procompetitive justifications offered for resale price maintenance Resale price maintenance (“RPM”), by design, restricts competition at 3. Vertical Restraints Distributional restraints have immediate and long-term , 55 A AHEESAN Strategic Theory and Legal Policy the retail level, raises consumer and impedes prices, the emergence of new retailers and retail formats. It sets a floor on retail prices and prevents retailers from competingfreely on price. are theoretical and have limited applicability to real-world retail markets. are theoretical and have limited to real-world retail markets. applicability The principal rationale is the need to protect full-service retailers offering of lower-cost, no-service costly point-of-sale support from the “free-riding” maintenance regimes also inhibit the growth of new innovative retail models cost structure cannot compete because sellers with a lower freely on with consumers.price and share their cost advantages 202. 202. 4_V U. 682 203. Marina Lao, viable proof of efficiencies defenses that could rebut the presumption of illegality). Marina 203. Resale Price Maintenance and that the practice is the least restrictive meansthe least restrictive the practice is and that For of doing so. example, a firm with a market engaged share in excess of forty percent that the presumption rebut in a period of below-cost pricing could of illegality by showing that this pricing practice was and the least restrictive necessary means of implementing long-term a learning-by-doing strategy to lower costs of production. anticompetitive lack empirically effects, validated business justifications, of illegality under Section 5. and so should be subject to a presumption Practices such as resale price maintenanceterritories limit and exclusive intrabrand competition, raise consumer prices, and impede entry in the these restraints are largely theoretical retail sector. The justifications for and not applicable to the vast majority of consumer products. overcomecredible evidence, not just the presentation of specific, through efficiencies. assertions about theoretical 11 (Robert Pitofsky ed., 2008). 11 (Robert Pitofsky ed., 2008). 204. Robert L. Steiner, Are Vertical Restraints Efficient? 205. Marina Lao, Marina 205. Issues higher retail prices in the short run. Withhigher retail prices in the short diminished price competition at to put less pressure on upstreamthe retail level, retailers are likely distributors and manufacturers to cut wholesale prices. 39083 ple_19-3 Sheet No. 86 Side B 05/11/2017 10:58:06 05/11/2017 B 86 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 87 Side A 05/11/2017 10:58:06 . L. 211 ULL B The 209 212 Antitrust , 62 N.Y.U. 210 NTITRUST , Justice Breyer , 55 A At oral arguments The Empirical Effects of 206 the FTC should hold 213 : Seeking Consensus Reform of FTC 683 683 FTC L.J. 467, 478 (2008). Leegin 208 Notwithstanding this dearth of 207 NTITRUST OWER OF THE OWER OF P , 75 A ) 5/9/17) 5:34 PM 3 (Univ. of Chi. Kilts Ctr. for Mktg., Paper No. 2-006, 3 (Univ. of Chi. Kilts Ctr. for Mktg., Paper No. 2-006, ELETE D ATENT Vertical Arrangements and Antitrust Analysis L OT N Rethinking Antitrust Policy Toward RPM The Path Forward After O . 473, 482 (2010). HE note 206, at 447. (D ULL B Resale Price Maintenance: The Internet Phenomenon and Free Rider DOCX DOCX . supra note 203, at 201. , Alexander MacKay & David Aron Smith, , 551 U.S. at 891-92; Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, RINTER to be presumptively Section 5. This standard illegal under supra P NTITRUST 214 TO _ See, e.g. Leegin While intangible promotional services can be important, they are not Given the guaranteed loss of retail competition from vertical restraints , 55 A . 1153, 1160 (1987). Leegin Creative Leather Products, Inc. v. PSKS, Inc. Leegin Creative AHEESAN M K EV growth of online commerce the availability of product has increased information and diminished the need for retail sales support. relevant for most consumereffective— and can be provided through goods require special sales for goods that and less restrictive—alternatives support. As a practical matter, few goods require retail services. 2014) (finding that resale price maintenance is, on the whole, anticompetitive, resulting in 2014) (finding that resale price maintenance is, on the higher prices and lower output). 214. William S. Comanor, Minimum Resale Price Maintenance 212. Kirkwood, Kirkwood, 212. 213. A manufacturer can also restrict the distribution of its products to, for distribution of its products A manufacturer the can also restrict extensive sales support. example, full-service retailers that provide R and improbability of offsetting consumer benefits, retailers that competeretailers that discounting. aggressive through 206. John B. Kirkwood, 4_V T 2017] policy should not be made on a theory that is applicable to a very small subset of manufacturers and products. And for goods that require sales At the retail level, one option is support, superior alternatives exist. promotional that allowances to retailers a discrete bundle of agree to offer services. For instance, a manufacturer of a complex product can pay they provide product demonstrations.retailers a fee on the condition that 211. Warren S. Grimes, the Antitrust Law of Vertical Restraints resale price maintenance and similar practices such as exclusive territories in and yet continues to is decades-old justification noted that this theoretical have very limited empirical support. evidentiary support for the free riding theory, the Supreme for the free riding theory, the evidentiary support Court, in its to restraints, has stressed the need the lawdecisions liberalizing on vertical riding at the retail level. protect against free 423, 443-48 (2010). 207. Leegin Creative Leather Prods., Inc. 551 U.S. 877, 877 (2007); v. PSKS, Inc., Inc., Transcript of Oral Argument at 12-13, Leegin Creative Leather Prods., Inc. v. PSKS, 551 U.S. 877 (2007) (No. 06-480). 208. 725 (1988). Lao, Lao, 209. Marina 210. Issues C Y 39083 ple_19-3 Sheet No. 87 Side A 05/11/2017 10:58:06 05/11/2017 A 87 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 87 Side B 05/11/2017 10:58:06 M K C Y (Dec. IMES [Vol. 19:3 [Vol. , N.Y. T AW L a purely preventative 216 USINESS B OURNAL OF OURNAL J ) 5/9/17) 5:34 PM ELETE D OT N Book Shopping in Stores, Then Buying Online O note 6. (D ENNSYLVANIA ENNSYLVANIA supra DOCX DOCX , . P 215 OF RINTER P Julie Bosman, TO CONOMIST _ The FTC Should Challenge Durable or Otherwise Seriously The FTC Should Challenge Durable Harmful Monopolies and Oligopolies See In addition to policing against the emergenceIn addition to policing against the of monopolistic and Under present Sherman Act precedent, monopoly power alone is not C. AHEESAN oligopolistic market structures, the FTC should challenge possession of durable or otherwise harmful monopoly oligopoly power. Given the and the economy,existing levels of concentration in approach is not likely to be sufficient to tackle the problems of monopolyapproach is not likely to be sufficient and oligopoly. Durable market power can inflict substantial harm on the public—most pricing above competitive obviously through prolonged levels or depressed wages for workers and prices for producers. Monopoly and oligopoly power in the marketnecessities, even when for it is not enduring, can similarly harm. in significant result In addition, a monopoly represents a dramatic example concentration of private power and of the resources in which single entity controls an entire market a just today, not of time.but perhaps for an extended period In interpreting Section 5 to apply to these instances of harmful market power, the FTC would depart from existing monopolization doctrine in an important way—it would not of the firmrequire the showing of bad acts on the part or firms with market power. 215. 215. 4_V U. 684 4, 2011), https://mediadecoder.blogs.nytimes.com/2011/12/04/book-shopping-in-stores- (“Thirty-nine then-buying-online/?ref=todayspaper&_r=0 [https://perma.cc/5AFJ-252M] looked percent of people who bought books from Amazon in the same period said they had at the book in a bookstore before buying it from Amazon, the survey said. As frustrated stores’ bookstore owners see it, the practice allows customers to take advantage of the — all while careful selection of books, staff recommendations and warm atmosphere spending their money elsewhere.”). E 216. would reflect the high risks of harm the high risks would reflect same from At these practices. the time, be allowed to rebut the presumption businesses should by offering pro-consumer they should be entitled to justifications. Specifically, overcome the presumption is reasonably by showing that the restraint end, to achieve a beneficial least restrictive alternative necessary and the For instance, book services. of point-of-sale such as the provision publishers may resale price maintenance. in instituting be justified Brick- and-mortar opportunity to browse a sellers provide readers a distinctive recommendations and receive wideselection of titles and subjects from maystore staff, which as Amazon services on which online sellers such be can free ride. 39083 ple_19-3 Sheet No. 87 Side B 05/11/2017 10:58:06 05/11/2017 B 87 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 88 Side A 05/11/2017 10:58:06 224 L.J. , 2009 U. NTITRUST Yet, the harm , 49 A 218 221 The landmark In the market for 223 219 . 425, 430 (2003). (Aug. 25, 2016), EV . 83, 87 (1980). FTC 685 685 FTC OST .R EV How Mylan, the Maker of EpiPen, CON L. R .P .E EE M ASH .&L Elimination of the Conduct Requirement in , 93 A OWER OF THE OWER OF ASH P even short periods of market even short periods power can , W ) 5/9/17) 5:34 PM 220 , 37 W ELETE Should the Government Prosecute Monopolies? D ATENT L OT N Measuring Unilateral Market in Wholesale Power Electricity O HE By requiring evidence of anticompetitive behavior, (D This principle is a long-standing norm This principle in antitrust Do the Proposals Make Any Sense from a Business Standpoint? Pro 222 217 DOCX DOCX . , Carolyn Y. Johnson & Catherine Ho, RINTER P e.g. Maurice E. Stucke, , at 1265. TO _ See See Id. The doctrinal requirementof bad conduct can be a costly and The FTC should challenge persistent or otherwise harmfulThe FTC should challenge persistent market AHEESAN M K Ill. L. Rev. 497, 546 (noting the historical preference in the United States for “maintaining Ill. L. Rev. 497, 546 (noting the historical preference competitive market structures, rather than regulatory dictates”). 223. John J. Flynn, No-Conduct Monopoly: An Assessment for the Lawyer and Businessman Became a Virtual Monopoly monopolization suits against AT&T and IBM embody the problems Litigants spent huge sums of approach. associated with a conduct-focused money the defendants had undertaken and years trying to resolve whether improper acts, when the purpose ofto remedy the cases was the persistent monopolistic telecommunications structure of the and computer markets. https://www.washingtonpost.com/business/economy/2016/08/25/7f83728a-6aee-11e6-ba32- (discussing the harm of current 5a4bf5aad4fa_story.html [https://perma.cc/RPJ7-MXDP] monopolies to the pharmaceutical industry). 222. case law, preceding the Chicago School reinterpretation. case law, preceding 221. 221. Frank A. Wolak, 220. Markets: The California Market, 1998-2000 necessities, such as electricity, necessities, such unnecessary diversion. In monopolization cases, the aim of the litigation may a noncompetitive be to restructure market—not merely prohibit particular bad acts. Section 2 precedent has required the devotion of substantial resources to a Section 2 precedent has required the secondary issue and led to interminable and costly litigation, resembling “an epic Russian film cast of hundreds, byzantine with a bewildering procedural complexity,elaborate records.” and illegal even though it can inflict substantial harminflict substantial though it can illegal even on To invite the public. legal liability, monopoly power must be accompaniedbad acts, such as by predatory pricing. Government Monopolization Cases 217. Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, Verizon Commc’ns, 407 (2004). 218. (1966). United States v. Grinnell Corp., 384 U.S. 563, 570-71 Alfred F. Dougherty, Jr. et al., 219. 4_V T 2017] from marketbad conduct. For in the absence of power is no less real even example, enduring marketamount paying a private power can to the public for an extended period of time.tax for a product result in massive wealth transfers from consumers to businesses. The exercise of market power in a number of pharmaceutical markets is the latest illustration of the real harm inflicted on consumers. 1255, 1264 (1980). 224. C Y 39083 ple_19-3 Sheet No. 88 Side A 05/11/2017 10:58:06 05/11/2017 A 88 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 88 Side B 05/11/2017 10:58:06 M K C Y Working [Vol. 19:3 [Vol. AW L The required factual The required factual 225 USINESS 228 B Furthermore, this satisfying 227 Severin Borenstein, James B. Bushnell & , at 10, WD (2011) 54 (Oct. 14, 2011), . 1376, 1398 (2002) (finding that between the See also OURNAL OF OURNAL J EV ) 5/9/17) 5:34 PM .R note 219, at 90-91. ELETE D CON OT note 221. The United Kingdom’s Competition and Markets supra N .E O M (D supra note 220, at 430. ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P , 92 A Measuring Market Inefficiencies in California’s Restructured Wholesale , Press Release, Competition & Mkts. Auth., Pharm. Co. Accused of supra OF RINTER and pharmaceutical markets. P E.g. 226 TO _ The FTC should establish two legal standards for no-fault market standards establish two legal The FTC should AHEESAN showing should be significant and should only be satisfied in exceptional significant and should only be satisfied showing should be harmcases in which the to the public is enduring or otherwise severe. FTC should show durable monopolypower. First, the that has not power change, or reduced technological been diminished new entry, through demand the FTC should show for the product. Second, and alternatively, market power monetary that inflicts substantial harm on the public because it affects the markets for necessities in which demand is highly inelastic. Examples include the markethas been witnessed in some power that electricity summers of 1998 and 2000, oligopoly rents “increased by an order of magnitude, from summers of 1998 and 2000, oligopoly rents “increased by an order of magnitude, about $425 million to $4.44 billion”). 227. Johnson & Ho, 225. pricing under the The European Commission’s careful targeting of exploitative action against durable monopolies. abuse of dominance standard can inform FTC Party No. 2 on Competition and Regulation [https://perma.cc/87X5-GN96] (“The case law . . . shows that the Commission and http://ec.europa.eu/competition/international/multilateral/2011_oct_excessive_prices.pdf . . (“The case law [https://perma.cc/87X5-GN96] of excessive prices only in markets with an European Courts addressed the question entrenched dominant position where entry and expansion of competitors could not be expected to ensure effective competition in the foreseeable future.”). Wolak, 226. 4_V U. 686 Frank A. Wolak, Electricity Market power under its Section 5 authority even in the absence of bad conduct. bad conduct. the absence of authority even in its Section 5 power under structural problems these be interpreted to reach Section 5 should directly when a persistent lack of competition harm or substantial public can be no-fault marketshown. That said, power is a departure from existing and should be applied judiciously. antitrust doctrine requirement of persistent or substantially harmfulrequirement of persistent or substantially market power should establish only a presumption of illegality. Parties should have the opportunity to rebut this presumption by demonstrating that the monopoly that would be of operational efficiencies power is, for instance, the product lost under a more competitive market structure or was the necessary spur to innovate, as in certain pharmaceutical markets. Authority has brought multiple no-fault monopoly actions against pharmaceutical companies. https://www.gov.uk/government/news/pharmaceutical- Overcharging NHS (Dec. 16, 2016), Press Release, company-accused-of-overcharging-nhs [https://perma.cc/4UAL-7BCW]; Competition & Mkts. Auth., CMA Fines Pfizer and Flynn £90 Million for Drug Price Hike to NHS (Dec. 7, 2016), https://www.gov.uk/government/news/cma-fines-pfizer-and-flynn- 90-million-for-drug-price-hike-to-nhs [https://perma.cc/FMT4-HR9Y]. 228. Dougherty, Jr. et al., 39083 ple_19-3 Sheet No. 88 Side B 05/11/2017 10:58:06 05/11/2017 B 88 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 89 Side A 05/11/2017 10:58:06 230 TUDY OF ,AS . 147, 189-90 N ’ EV OMM C .L.R R t-sold-as-part-of-merger- RADE .T FTC 687 687 FTC , 84 O ED F . J. (Nov. 24, 2015, 7:26 PM), (1999), https://www.ftc.gov/sites/default/files/ (1999), https://www.ftc.gov/sites/default/files/ OWER OF THE OWER OF T [https://perma.cc/R3BP-XSKA]. S P 231 Albertsons to Buy Back 33 Stores It Sold as Part of Albertsons to Buy Back 33 Stores ) 5/9/17) 5:34 PM Furthermore, do nothing these divestitures OMPETITION OF THE ROCESS 233 C P ALL ELETE . L.J. 781, 833 (1979). D T ATENT bertsons-to-buy-back-33-stores-i L OT .S Antitrust Remedies Revisited N H , W O Structural Remedies in Competition Cases Under the Federal HE (D UREAU OF IVESTITURE , 40 O B D DOCX DOCX . S ’ Some recent FTC-mandated in mergers divestitures have RINTER 232 Under these circumstances, a company may be allowed to P United States v. E.I. Du Pont de Nemours & 366 U.S. 316, 323 (1961) Co., 229 TO _ TAFF OF THE The FTC Should Favor Simple Structural Remedies Structural Remedies Should Favor Simple The FTC See OMMISSION Along with presumptions establishing illegality for competitively of The FTC should establish a strong presumption in favor of structural in favor of presumption The FTC should establish a strong To ensure the effectiveness of Section 5, the FTCTo ensure the effectiveness of Section must commit to C D. AHEESAN M K (“The proper disposition of antitrust cases is obviously of great public importance, and their remedial phase, more than not, is crucial. For the suit has been a futile exercise if the often Cavanagh, adequate to redress it.”). fails to secure a remedy Government proves a violation but Edward 230. (2005). 231.Neil W. Averitt, Trade Commission Act In contrast, a structural remedy allowsfor a one-time fix that, if properly implemented, addresses the problem and removes the need for intrusive regulatory oversight in the future. 232. S 232. THE suspicious conduct and bringing persistent or otherwise harmful and bringing persistent or otherwise suspicious conduct market mustpower, the FTC adopt effective remedies establishes a when it anticompetitive legal prohibitions on 5. Even clear violation of Section effective if they are accompaniedbehavior cannot be weak, inadequate by remedies. 229. 229. failed in spectacular fashion. 4_V T 2017] Merger With Safeway attachments/merger-review/divestiture.pdf 233. Brent Kendall & Peg Brickley, solutions in merger and other matters implicating market structure. In challenging anticompetitive mergers, FTC should seek to stop mergers the Divestituresoutright instead of modify have divestitures. them through often failed to preserve competition even from a consumer welfare perspective. https://www.wsj.com/articles/al Brent Kendall & Jacqueline with-safeway-1448411193 [https://perma.cc/A62Z-WB7Z]; continue its anticompetitive conduct or a market may remain structurally noncompetitive. simple structural remedies. In cases in which a specific anticompetitive to a competitivepractice is the principal barrier market, a conduct remedy—athis act—may prohibition on be sufficient to restore competition. which In cases in the structure of the market is at issue, only a structural remedy A conduct remedy,be sufficient. is likely to in these matters, would involve a combination typically of prohibitions, requirements, the FTC. Conduct remedies and ongoing oversight by are likely to be incomplete susceptible to evasion in spirit, if not in letter. and C Y 39083 ple_19-3 Sheet No. 89 Side A 05/11/2017 10:58:06 05/11/2017 A 89 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 89 Side B 05/11/2017 10:58:06 M K C Y [Vol. 19:3 [Vol. Google Gets a Seat AW L XPANSIVE XPANSIVE E . J. (Dec. 8, 2013, 8:03 PM), T S USINESS ALL B (Nov. 15, 2016, 4:08 PM), , W note 153 (“Economists who specialize in note 153 (“Economists who specialize NTERCEPT BJECTIONS TO AN And even those sympathetic to a more O OURNAL OF OURNAL supra J , I 234 ) 5/9/17) 5:34 PM ELETE IKELY D L OT N O (D 5 ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P , Eisinger &Elliott, OF RINTER P ESPONDING TO ESPONDING ECTION ECTION TO S _ See, e.g. How the FTC’s Hertz Antitrust Fix Went Flat Chicago’s intellectual ascendance also aligned fortuitously with the interests of the increasingly organized business community. Henry Manne, an Antitrust Workshop a critical entrepreneur in the law and economics alum who was movement, found that between 1968 and 1971 it became much easier to raise The proposed interpretation of Section 5 represents a break with The proposed interpretation of Section V. R V. AHEESAN https://theintercept.com/2016/11/15/google-gets-a-seat-on-the-trump-transition-team/ https://theintercept.com/2016/11/15/google-gets-a-seat-on-the-trump-transition-team/ (“Joshua Wright has been put in charge of transition efforts [https://perma.cc/D7VX-GMF3] at the influential Federal Trade Commission after pulling off the rare revolving-door quadruple-play, moving from Google-supported academic work to government – as an FTC commissioner – back to the Google gravy train and now back to the government.”). funding from big business interests: antitrust can be attributed, in part, to self-interested ascendancy of the Chicago School in Looking beyond particular individuals, the decades of antitrust thinking and would trigger opposition if adopted. It trigger opposition decades of antitrust thinking and would of antitrust that had a moreharkens back to an older tradition comprehensive power than today’s fixation on understanding of corporate short-term corporations certainly prefer Dominant price and output effects. the permissive antitrust environment at present and would resist any efforts academics,to strength antitrust doctrine. Industry-funded consultants, and lobbyists who champion wouldpolicy another likely be lax antitrust important voice against change. Palank, 4_V U. 688 to stop the concentration of private economic and political power. of private economicthe concentration to stop political power. and Companiespermitted are to growthrough consolidation, so long as in size marketsthey sell assets in in which there is head-to-head competition. In dominant firm the underlying market cases that seek to address structure, example, that, for restructuring remedies the FTC should pursue divide the company multiple into competinglines of or separate related entities firms.business into separate antitrust — affiliated with Chicago, Harvard, Princeton, the University of California, antitrust — affiliated with Chicago, Harvard, — Berkeley, and other prestigious universities field through scholarly work reshaped their that benefit consumers. But they reap their scale showing that mergers create efficiencies of academic authority to mergers their corporate most lucrative paydays by lending their a dozen them from Compass Lexecon and half clients propose. Corporate lawyers hire documenting that a merger won’t be ‘anti- other firms to sway the government by competitive’: in other words, that it won’t raise retail prices, stifle innovation, or restrict the product offerings. Their optimistic forecasts, though, often turn out to be wrong, and mergers they champion may be hurting the economy.”); David Dayen, on the Trump Transition Team https://www.wsj.com/articles/SB10001424052702303330204579246281764302824 https://www.wsj.com/articles/SB10001424052702303330204579246281764302824 [https://perma.cc/TGT2-URTR]. 234. 39083 ple_19-3 Sheet No. 89 Side B 05/11/2017 10:58:06 05/11/2017 B 89 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 90 Side A 05/11/2017 10:58:06 By establishing 235 .”) (footnotes omitted). . L. 591, 623-24 (2012) (“The With of relative a series FTC 689 689 FTC IN 236 du jour .&F ORP J. C OWER OF THE OWER OF P 33, 52-53 (Geo. Mason Mercatus Ctr., Working Sailing A Sea of Doubt: A Critique of the Rule of ) 5/9/17) 5:34 PM ORDHAM ELETE D ATENT The Perils of Excessive Discretion: The Elusive Meaning of L OT , 17 F N O HE (D DOCX DOCX . RINTER P , James C. Cooper, Jesse W. Markham, Jr., TO _ See E.g. industry money on its behalf: ‘At this point, the [corporate] world knew that industry money on its behalf: ‘At this point, could possibly save them from an Chicago economics was the only thing that . Well, [major of the eleven . . that. antitrust debacle, and I related it strongly to I had $10,000 from ten of them, corporations] I wrote to, within a few weeks Similarly, funders of the Airlie and the last $10,000 came in a few weeks later.’ saw themselves as having House conference, at which Chicago supporters trounced [the structure-conduct-performance school of antitrust thought], read basically like a list of 1960s Antitrust Division targets: Alcoa, Amoco, General Motors, IBM, and so on. Bethlehem Steel, Exxon, General Electric, The proposed interpretation wouldThe proposed interpretation one common defuse criticism that AHEESAN M K Reason in U.S. Antitrust Law expansive Section 5 mayexpansive of past because express reservations against a zealous FTC. AtCongressional backlash least three arguments in public debates. are likely to gain traction Someagainst Section 5 for manyhas been leveled commentators years. have claimed vagueness, creates great uncertainty that Section 5, with its this view, corporationsfor businesses. Per and their counsel do not know 5. of conduct runs afoul of Section in advance what type 4_V T 2017] rule of reason is now 100 years old and the promise of clarification through judicial application has proven to be empty. The rule’s purported standard is devoid of substantive Not content that could guide judges to apply it consistently so that patterns could emerge. but it has indulged in shifting only has the Court failed to give content to this legal standard, the standard around in response to the economic theory bright lines, businesses would have muchbright lines, businesses would have on greater legal guidance permissibledo, at present, under the open-ended rule of conduct than they reason and Horizontal . a system of presumptions, 5 advanced here the interpretation of Section would greatly diminish and simplify legal uncertainty compliance. The have greater clarity than the rule would proposed interpretation of Section 5 of reason under the Sherman and Clayton Acts. Paper No. 13-20, 2013), http://mercatus.org/sites/default/files/Perils-Excessive-Discretion- (stating that the ambiguous antitrust provision Summary.pdf [https://perma.cc/6ZF4-Q7DX] “unfair methods of competition”of the FTC Act has left businesses unsure of in comparison to legal activities). 236. Elizabeth Popp Berman, How Experts Can, and Can’t, Change Policy: Economics, Elizabeth Popp Berman, How Experts Antitrust, and the Linked Evolution of the Academic and Policy Fields 24-25 (Jan. 2017) [https://perma.cc/PF5Y- (unpublished manuscript), https://osf.io/c4bfm/?action=download 27P9] (footnotes omitted). 235. Unfairness in Section 5 of the FTC Act C Y 39083 ple_19-3 Sheet No. 90 Side A 05/11/2017 10:58:06 05/11/2017 A 90 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 90 Side B 05/11/2017 10:58:06 M K C Y To To 239 9 (Univ. Fla. [Vol. 19:3 [Vol. AW . 259, 265-67 (1988). . 259, 265-67 (1988). L ULL B USINESS B NTITRUST Rather, the Congress that enacted Rather, the Congress that enacted , 33 A 238 240 Poetic Justice: Punitive Damages and Legal OURNAL OF OURNAL J ) 5/9/17) 5:34 PM ELETE D 237 OT By omitting any consideration of distributional N . 1393, 1450 (1993)). O 241 EV (D The Reagan Administration’s Antitrust Policy, “Original Intent” ENNSYLVANIA ENNSYLVANIA DOCX DOCX note 165. . P part II.A. .U.L.R M OF supra RINTER P TO Some Inconvenient Truths About Antitrust Law and Economics _ Grounds Ignores Congressional Intent Grounds Ignores , 42 A See supra Critics of the proposed interpretation mayCritics of the proposed claim that it would prevent This objection is wide of the mark and assumes that efficiency is the Allocative efficiency is not somehow “neutral” or “apolitical.” It A. on Efficiency 5 the Proposed Interpretation of Section Attacking AHEESAN businesses from conduct. Conduct that engaging in efficiency-enhancing theory, precepts of neoclassical price according to the enhances efficiency, 5, under an expansive Section or discouraged would be either prohibited the critics would claim. The result would and reduced be higher prices economic According output. to this view, would antitrust be a once again policy “at war with itself.” proper objective of Section 5 and antitrust lawproper objective of Section 5 and antitrust a generally. To paraphrase line from Holmes, an iconic dissent of Justice the FTC Act does not enact Mr. Robert Bork’s Antitrust Paradox. Even on neoclassical terms, the efficiency paradigm is deficient because it ignores Even on neoclassical terms, the efficiency externalities, a rather major of global climate omission change. Jeffrey L. at a time Harrison, Levin Coll. of Law, Legal Studies Research Paper Series, Paper No. 17-1, 2017), criticize the proposed interpretation of Section 5 for reducing economiccriticize the proposed interpretation efficiency is to assume efficiency goal is the appropriate ill-defined that an goal of antitrust. The of the antitrust statutes, including legislative histories the FTC Act, assumption contradict this in no uncertain terms. As the Supreme “[c]itizens and legislators may Court has noted, insist that rightly they are willing to tolerate some loss in economic efficiency in order to is and that “efficiency deter what they consider morally offensive conduct” just one consideration among many.” seeks to promote of social welfare a concept that takes the existing posits that humandistribution of resources as given, behavior is rational enforce property and contractual rights and selfish, and calls on the state to to a maximal degree. 237. Bork, 237. 4_V U. 690 the FTC Act that aimed had a grand political economic vision to protect consumers and producers from the overwhelming power of large freedomcorporations, preserve businesses’ to compete, and defend American from political institutions the power of large businesses. 241. John J. Flynn, and the Legislative History of the Sherman Act 238. Lochner v. New York, 198 U.S. 45, 75 (1905) (Holmes, J., dissenting). 239. 240. Leatherman Tool Grp., Inc., 532 U.S. 424, 439-40 (2001) Cooper Indus., Inc. v. (quoting Marc Galanter & David Luban, Pluralism 39083 ple_19-3 Sheet No. 90 Side B 05/11/2017 10:58:06 05/11/2017 B 90 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 91 Side A 05/11/2017 10:58:06 CHOOL S . 213, 215 EV They would HICAGO C 244 .L.R ICH OW THE , 84 M H FTC 691 691 FTC Efficiencies would no longer be 243 and thereby harm consumers. In contrast, OWER OF THE OWER OF P process ) 5/9/17) 5:34 PM ELETE D ATENT The Efficiency Paradox, in will not suffice.”). Antitrust Policy After Chicago L OT N O HE (D 77, 81-86 (Robert Pitofsky ed., 2008) (observing how conservative competitors DOCX DOCX . ARK , United States v. Microsoft Cir. 2001) (“[T]o Corp., 253 F.3d 34, 58 (D.C. M Exposing these assumptions reveals the conservative nature assumptions reveals the conservative Exposing these RINTER P 242 TO _ Inconsistency Between the FTC and the DOJ Disregards Inconsistency Between the FTC and Practice Congressional Intent and Existing Antitrust See, e.g. Critics of the proposed Section 5 would likely also claimCritics of the proposed Section 5 would that it would The proposed presumptions not dismiss would the importance of B. Claiming that Proposed Section 5 Would Create Substantive AHEESAN M K VERSHOT THE drive a wedge between authorities of the FTC and those of the the statutory the FTC moreDOJ. Proposed Section 5 would give than sweeping powers FTC could have a very different result the DOJ. An investigation by the than a comparable the DOJ. investigation by In the context of mergers, this problem may be most agencies have divided up the acute because the two in the chemicalA merger review process by industry. industry harm to one or more be condemned as exclusionary, a monopolist’s act must have an ‘anticompetitive effect.’ be condemned act must have an ‘anticompetitive as exclusionary, a monopolist’s effect.’ That is, it must harm the competitive See Eleanor M. Fox, 244. of allocative efficiency. of allocative efficiency. proposed Section 5, operations. Under the efficiency in business a presumptionbusinesses that trigger illegality, whether of due to a proposed merger or competitively would suspect conduct, have the example, business justifications. For opportunity to establish a horizontal merger be of twenty percent would the threshold that exceeds however,presumptively could rebut this presumption illegal. The parties, by demonstrating way that the merger is necessary and the least restrictive to achieve an operational efficiency. This approach would be an inversion efficiencies are assumedof the current standard in which and anticompetitive harm has to be shown. have to be shown. Given the congressional vision for the FTC Act, this is have to be shown. Given the congressional the appropriate standard. consequence, this conception of efficiency is heavily skewed in favor of the heavily skewed of efficiency is this conception consequence, status quo. O https://poseidon01.ssrn.com/delivery.php?ID=3500170640030841130670980990871111190 97014088087016004031104071030089006066070008030032012051099111045001108075 00808511907502905807301705206502006801111802402406409008802903212306611611 8090028120117082072076093066073089123024021113079065119111085124070&EXT= Hovenkamp, pdf [https://perma.cc/WB9V-M9V3]. Herbert 242. 4_V T 2017] (1985). 243. accepted as a matter of faith in neoclassical economic logic. economic assumptions antitrust rulings). have driven Supreme Court’s C Y 39083 ple_19-3 Sheet No. 91 Side A 05/11/2017 10:58:06 05/11/2017 A 91 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 91 Side B 05/11/2017 10:58:06 M K C Y [Vol. 19:3 [Vol. IDEXX Labs., Inc., And during the AW 247 L In re USINESS B Transitions Optical, Inc., 149 F.T.C. These are just someof the 248 In re OURNAL OF OURNAL J ) 5/9/17) 5:34 PM For example, standard of the the incipiency ELETE 245 D OT Pool Corp., F.T.C. No. 101-0115, 2012 WL 159752 (Jan. 10, N O (D In re ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P The broader reach of Section 5 was a conscious choice by The broader reach of Section 5 was Part II.B. Part II.B. 246 OF RINTER P Corp., 150 F.T.C. 420 (2010); Press Release, Fed. Trade Comm’n, React to Department FTC Commissioners TO _ See supra See supra See In re The divergence criticism ignores current antitrust practice and The possibility of divergences wouldThe possibility of not undercut the case for a more a conscious they would reflect would arise, Even when differences AHEESAN Congress. Demanding apply their powers in an that the DOJ and the FTC decision. identical fashion overlooks this Congressional assumes an inter-agency harmonydoes not exist at present. At any that different leadership and can be expected given time, the DOJ and FTC have example, For FTC has brought many the to diverge at least on the margins. more that the formersince 2009, suggesting 2 actions than the DOJ Section views monopolization priority than the latter. as a higher George W. Bush administration, the two agencies clashed in public, most notably over the meaning2. of Section 245. 245. 246. 247. The DOJ has brought two Section 2 cases during the Obama years: United States v. States United Cont’l Holdings, Inc., No. 2:15-cv-07992 (D.N.J. filed Nov. 10, 2015); United v. United Reg’l Health Care Sys., No. 7:11-cv-00030 (N.D. Tex. filed Feb. 25, 2011). The McWane,FTC has brought at least seven Section 2 cases: 783 F.3d 814 (11th Inc. v. FTC, Apr. 20, 2015); (S.D.N.Y. filed Cir. 2015); FTC v. Cardinal Health, Inc., No. 15-cv-3031 FTC v. AbbVie Inc., 107 F. Supp. 3d 428, 430 (E.D. Pa. 2015); 4_V U. 692 (traditionally reviewed by the FTC) would be subject to different legal be subject to different the FTC) would reviewed by (traditionally mergerstandards than a airline industry (traditionally reviewed in the by DOJ). the 5. Someexpansive Section For example, differences could be resolved. the DOJ similar and litigation, seek to establish could, through guidelines Act, which, like FTC under the Clayton or identical merger the standards to the FTC Act, is an incipiency statute. of Congress. Whenchoice on the part creating the FTC, Congress granted the FTC more authority than the DOJ. expansive statutory The FTC was the Shermanestablished against the backdrop of Act being enforced by the DOJ and private parties. The Sherman Act had been in existence for twenty-five years when the FTC came being. Congress intended for into the FTC Actconduct than the Sherman to reach a larger set of business up to the challenge of controlling the Act, which was viewed as not being corporate giants of the day. FTC Act was meant the overly permissive to correct standard of the Sherman Act. of Justice Report, Competition and Monopoly: Single-Firm of the Conduct Under Section 2 Sherman Act (Sept. 8, 2008), https://www.ftc.gov/news-events/press-releases/2008/09/ftc- commissioners-react-department-justice-report-competition-and [https://perma.cc/KPC3- 155 F.T.C. 241 (2013); 2012); 1281 (2010). 248. 39083 ple_19-3 Sheet No. 91 Side B 05/11/2017 10:58:06 05/11/2017 B 91 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 92 Side A 05/11/2017 10:58:06 250 (Mar. 1, 1978), The Washington For instance, a For instance, a OST 252 249 .P FTC 693 693 FTC ASH , W Cascade Health Sols. v. PeaceHealth, 515 . 51, 53 (1986). with OWER OF THE OWER OF EV P LePage’s Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) ) 5/9/17) 5:34 PM .L.R ELETE KLA D ATENT Compare L OT N Where Here: Reflection on the Recent Saga of the to From O , 39 O HE (D note 141, at 1432-33. DOCX DOCX The FTC as National Nanny . supra RINTER This period of aggressive enforcement and rulemaking P This period of zeal ended poorly for the FTC. Congress This period of zeal ended poorly 251 TO 253 _ Compelthe Antitrust Status Quo Continued Adherence to Among those sympathetic 5, some to an expansive Section are likely The federal judiciary adds another thick layer of doctrinal adds another thick layer The federal judiciary C. Congressional Action Does Not Recognizing the Threat of Adverse AHEESAN M K to express reservations about its political feasibility. Historyto express reservations about its certainly has been hostile to an activist FTC lends support to this concern. Congress to move to rein in any activism.in the past and could be expected In the its antitrust and consumer1970s, the FTC zealously pursued protection missions. F.3d 883, 905-06 (9th Cir. 2007) (applying standard favoring defendants). F.3d 883, 905-06 (9th Cir. 2007) (applying standard favoring defendants). William J. Baer, 251. Federal Trade Commission (adopting a more plaintiff-friendly standard) (adopting a more plaintiff-friendly merger judge is likely to fare differently challenge heard by a conservative than a merger certain a progressive judge. At present, challenge before as morecircuits are seen sympathetic to particular claims than others. triggered a powerful backlash from America. corporate The Supreme establish Court could, of course, standardization. Yet, legal heard by the Supremein light of the relatively few cases Court in a given year, harmonizationof legal standards is improbable and, at best, likely to conflicting or inconsistent standards in happen after an extended period of the lower courts. Post condemned Commission as the Nanny” in a stinging “National the editorial. differences between two agencies. between two agencies. differences In a legal systeminconsistency today. made up of hundreds of district and the federal system,appellate judges at harmony legal aspiration. is a futile lawThe existing substantive antitrust, which in elevates open-ended guarantees a legal patchwork. standards over rules, 74ZY] (stating that the Department of Justice Report on Section 2 “is chiefly concerned Report on Section 2 74ZY] (stating that the Department of Justice power, and prescribes a legal regime that with firms that enjoy monopoly or near-monopoly places these firms’ interests ahead of those of consumers”). Stucke, 249. 250. As an example of the divergence, the Third and Ninth Circuits treat loyalty rebates by dominant firms differently. 4_V T 2017] 252. , Comm’r, Fed. Trade Comm’n, Lecture at the University of Nanny: Stoning the National California Berkeley School of Business Administration: (Nov. 11, 1981), https://www.ftc.gov/ Congress and the FTC in the Late 70’s system/files/documents/public_statements/688981/19811104_pertschuk_lecture_iii_stoning [https://perma.cc/P7UA- _the_national_nanny-_congress_and_the_ftc_in_the_late_70s.pdf LF88]. Editorial, 253. C Y 39083 ple_19-3 Sheet No. 92 Side A 05/11/2017 10:58:06 05/11/2017 A 92 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 92 Side B 05/11/2017 10:58:06 M K C Y [Vol. 19:3 [Vol. In light of its AW 254 257 L USINESS B 255 (Mar. 16, 2016), http://www.nytimes.com/ (Mar. 16, 2016), http://www.nytimes.com/ OURNAL OF OURNAL J ) 5/9/17) 5:34 PM OOK House Republicans Clash With Consumer Protection CFPB Turns 5 – and Financial Scammers Aren’t B ELETE EAL D OT (July 22, 2016), http://www.thefiscaltimes.com/Columns/ (July 22, 2016), http://www.thefiscaltimes.com/Columns/ N :D O (D IMES IMES T T ENNSYLVANIA ENNSYLVANIA DOCX DOCX note 251, at 54. . P , David Dayen, , Victoria Finkle, OF ISCAL The CFPB is seen as aggressively pursuing its statutory The CFPB is seen as aggressively RINTER supra P 256 , N.Y. , F TO _ See, e.g. See, e.g. This fear of a political backlash fromThis fear of a political and Congress may business be The recent experience of another federal agency is instructive. is instructive. of another federal agency The recent experience The probable reaction from many ideologically or financially captured AHEESAN Congressional Republicans, with the support of someCongressional Republicans, with Democrats, have been trying to hobble the Consumer Financial Protection Bureau (“CFPB”). the strongest line of criticismthe strongest line 5. Corporations pour of an expansive Section money campaigns into Congressional that their interests are to ensure been averse to policy Although the FTC has represented and advanced. activism has tried to limit innovation for decades, the House or the FTC’s mergersauthority to challenge Section 5, in the name under of creating harmony between the FTC and the DOJ. mission,a wide range of enforcement bringing actions and writing a number of rules to regulate consumer finance markets. https://www.washingtonpost.com/archive/politics/1978/03/01/the-ftc-as-national- [https://perma.cc/632F-DTQL]. nanny/69f778f5-8407-4df0-b0e9-7f1f8e826b3b/ Baer, 254. Press Release, House of Representatives Judiciary Comm., Regulatory Reform 255. Subcommittee to Hold Hearing on the SMARTER12, 2015), Act (June https://judiciary.house.gov/press-release/regulatory-reform-subcommittee-to-hold-hearing- [https://perma.cc/Z95A-XRPG]. on-the-smarter-act/ 256. 4_V U. 694 2016/03/17/business/dealbook/house-republicans-clash-with-consumer-protection-unit- criticism levelled at the bureau by (describing chief.html [https://perma.cc/PK9K-E99P] Congressional Republicans and some Democrats). 257. Celebrating vigor, the opposition from does not come Congress as a surprise. Even under more favorable political circumstances, an FTC that seeks to breathe comparablelife into Section 5 is certain to invite Congressional opposition. members of Congress should not be underestimated, let alone ignored. allies wouldCorporate interests and their Congressional curtail any seek to is a creation of Congress and so mustSection 5 expansions. The FTC undertake a range of actions to limitanswer to Congress. Congress can the At and its statutory power.FTC’s day-to-day ability to function an FTC Act and shut down the FTC extreme, Congress could repeal the entirely. The risks to the FTC’s future would include various existential reinterpretation of Undertaking a threats and should not be brushed aside. Hillpolitical dynamics on Capitol Section 5 without would an awareness of asserted new power over the agency and imposedthe agency and new power over asserted additional procedural use of its consumerconditions on the authority. protection 2016/07/22/CFPB-Turns-5-and-Financial-Scammers-Aren-t-Celebrating 2016/07/22/CFPB-Turns-5-and-Financial-Scammers-Aren-t-Celebrating [https://perma.cc/9H6A-FXSZ]. Unit Chief 39083 ple_19-3 Sheet No. 92 Side B 05/11/2017 10:58:06 05/11/2017 B 92 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 93 Side A 05/11/2017 10:58:06 , 262 At At 259 Even Senator into doubt. Public concerns 260 (Nov. 10, 2016), 258 264 OOK B FTC 695 695 FTC EAL though it seems unlikely he :D Future of Big Mergers Under Trump? 266 IMES T OWER OF THE OWER OF including antitrust. P 267 263 ) 5/9/17) 5:34 PM Even President Trump has raised concerns , N.Y. Senator Bernie Sanders, a self-described Senator Bernie Sanders, a self-described 265 ELETE 261 D ATENT . (Apr. 21, 2016), https://www.dissentmagazine.org/ . (Apr. 21, 2016), https://www.dissentmagazine.org/ L OT N How the Elizabeth Warren Wing Shifted Tuesday’s Democratic AG O A World Bernie Sanders to Make: Eleven Theses for the , http://www.huffingtonpost.com/adam-green/how-the-elizabeth- HE Trump Names as Acting FTC Chairwoman M (D (June 16, 2016), http://www.latimes.com/politics/la-na-pol-bernie- OST note 3. note 2. note 2. P Bernie Sanders Signals He’s Winding Down His Campaign, But Bernie Sanders Signals He’s Winding Down DOCX DOCX IMES . T notes 1 and 2. notes 1 and 2. supra supra supra ISSENT RINTER (Jan. 25, 2017), https://www.washingtonpost.com/news/the-switch/wp/ (Jan. 25, 2017), https://www.washingtonpost.com/news/the-switch/wp/ P , Adam Green, , L.A. Brian Fung, TO , D UFFINGTON _ OST See supra See supra E.g. See , H .P Yet, these political risks do not call for resignation and indefinite for resignation risks do not call Yet, these political AHEESAN ASH M K Debate will act in any systematic fashion. a 2016 Senate antitrust oversight hearing, Democratsa 2016 Senate antitrust and Republicans inadequate antitrust enforcement.raised concern over Mike from Lee, a hardline conservative Utah,the effectiveness questioned of current merger policy. The Democratic Party now has a faction that seeks to challenge the status quo across a number of areas, about the power of corporations are being reported in the mainstreamabout the power of corporations are press again, after years of neglect. 2017/01/25/trump-names-maureen-ohlhausen-as-acting-ftc-chairwoman/?utm_ 2017/01/25/trump-names-maureen-ohlhausen-as-acting-ftc-chairwoman/?utm_ (describing Ohlhausen’s skepticism term=.738c83e5845d [https://perma.cc/JRF7-BDSQ] toward FTC enforcement actions and FCC’s rules). warren-_b_8270958.html [https://perma.cc/D6QD-6YXJ] (last updated Oct. 9, 2016) [https://perma.cc/D6QD-6YXJ] warren-_b_8270958.html Like Much Else, It’s Unclear about corporate mergers and monopolies, be a grave mistake.be a grave the powerinaction. Just as American of corporate interests in society cannot be dismissed, the changing political dynamics in the United States discounted. Forty years of incomeshould also not be stagnation and a dramatic meritsrise in inequality have brought the of existing political economic arrangements, including weakened antitrust, 258. 258. Purdy, Jedediah 259. Generation 4_V T 2017] (stating that Democrats shifted the focus to economic populist issues during the 2016 (stating that Democrats shifted the focus to economic populist issues presidential debates). Warren, 264. 265. 266. Michael J. de la Merced & Cecilia Kang, sanders-campaign-20160616-snap-story.html [https://perma.cc/KS5G-VM9N]. [https://perma.cc/KS5G-VM9N]. sanders-campaign-20160616-snap-story.html 263. W http://www.nytimes.com/2016/11/11/business/dealbook/future-of-big-mergers-under-trump- like-much-else-its-unclear.html?_r=0 [https://perma.cc/FYR7-MERP]. 267. democratic socialist, championed economic populism and a revival of the in his campaignNew Deal and won twenty-two states to be the Democratic nominee for president—a campaign that seemed quixotic just a year ago. online_articles/eleven-theses-bernie-sanders-generation-democratic-socialism online_articles/eleven-theses-bernie-sanders-generation-democratic-socialism [https://perma.cc/WFN8-N8C3]. Cooper, 260. 261. Cooper, Lee, 261. Kurtis 262. Doesn’t Quit C Y 39083 ple_19-3 Sheet No. 93 Side A 05/11/2017 10:58:06 05/11/2017 A 93 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 93 Side B 05/11/2017 10:58:06 , M K 274 ILL C Y H , N.Y. HE , T (Aug. 2015) [Vol. 19:3 [Vol. ROJECT AW P and pressure from L 275 and a number of 272 ETTYSBURG USINESS 269 B offers lessons on how the FTC offers lessons on 268 Furthermore, the FCC enjoyed key Businesses that stood to lose from Businesses that stood the 271 270 OURNAL OF OURNAL J calling for strong net neutrality rules. calling for strong net neutrality ) 5/9/17) 5:34 PM 273 ELETE D OT N O (D Obama Asks F.C.C. to Adopt Tough Net Neutrality Rules It Took Four Million E-Mails to Get the FCC to Set Net-Neutrality ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P (Feb. 3, 2015, 1:55 PM), http://www.bloomberg.com/news/articles/ (Feb. 3, 2015, 1:55 PM), http://www.bloomberg.com/news/articles/ Obama Just Announced His Full Support to Preserve Net Neutrality Obama Just Announced His Full Support (Nov. 10, 2014, 12:05 PM), http://www.motherjones.com/ (Nov. 10, 2014, 12:05 PM), http://www.motherjones.com/ , Verizon v. FCC, 740 F.3d 623, 659 (D.C. Cir. 2014) (vacating the FCC’s OF Franken: Net Neutrality Is “First Amendment Issue of Our Time” RINTER Protecting and Promoting the Open Internet, 30 FCC Rcd. 5601 (2015). Protecting and Promoting the Open Internet, P , Press Release, Office of Senator Ron Wyden, Senators Urge FCC to Promote ONES J TO _ LOOMBERG E.g. Id. In re See, e.g. (Nov. 10, 2014), http://www.nytimes.com/2014/11/11/technology/obama-net- The FCC succeeded in large measureThe FCC succeeded political support because of the Political and public support for a broad Section 5 is essential. If the Political and public support for a broad The Federal CommunicationsThe Federal Commission’s to impose (“FCC”) rule , B AHEESAN OTHER IMES Net Neutrality, Reverse Proposal to Create Internet Toll Lanes (May 9, 2014), https://www.wyden.senate.gov/news/press-releases/senators-urge-fcc-to-promote-net- neutrality-reverse-proposal-to-create-internet-toll-lanes [https://perma.cc/KW2M-PZRA]; Julian Hattem, 272. Inae Oh, Inae 272. 2010 net neutrality rules); Comcast Corp. v. FCC, 600 F.3d 642, 661 (D.C. Cir. 2010) 2010 net neutrality rules); Comcast v. FCC, 600 F.3d 642, Corp. broadband network). (vacating the FCC’s regulation of Comcast’s 270. What Worked Net Neutrality, G in the Fight for mojo/2014/11/obama-net-neutrality [https://perma.cc/8LJY-6YN5]. [https://perma.cc/8LJY-6YN5]. mojo/2014/11/obama-net-neutrality 273. for net neutrality. Activistsfor net neutrality. the and advocates effectively conveyed importance and tailored their of net neutrality to the broader population messagecommunities. to different The groundswell the 4 million of public support, reflected in mostly supportive comments that were submitted to the FCC, M support in Washington, President Obama with 2015-02-03/a-rant-and-4-million-e-mails-later-fcc-to-set-web-traffic-rules 2015-02-03/a-rant-and-4-million-e-mails-later-fcc-to-set-web-traffic-rules [https://perma.cc/HTV4-4Q2V]. high-profile political figures persuaded the FCC to take a strong approach high-profile political figures persuaded and surely steeled its political will. public support and backing fromFTC were to proceed without strong the in Congress, it wouldWhiteodds face long House and progressive factions http://gettysburgproject.org/net-neutrality [https://perma.cc/Q8XH-AF6X]. 271. could proceed. The FCC’s campaigncould proceed. The neutrality challenged to establish net some of the mostinvolved in the country and powerful corporations multiplejudicial setbacks and policy reversals. Representatives and Senators 268. 268. 269. 4_V U. 696 T 275. Todd Shields, neutrality-fcc.html [https://perma.cc/8ZJ4-JLWB]. Todd 275. Rules exclusionary practices of broadband providers also played an important providers exclusionary practices of broadband role in championing net neutrality. (July 8, 2014, 4:08 PM), http://thehill.com/policy/technology/211607-franken-net- Wyatt, neutrality-is-first-amendment-issue-of-our-time [https://perma.cc/JD3T-D8G8]. Edward 274. non-discrimination no-blocking requirements and providers on broadband (popularly known as “net neutrality”) 39083 ple_19-3 Sheet No. 93 Side B 05/11/2017 10:58:06 05/11/2017 B 93 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 94 Side A 05/11/2017 10:58:06 , ARANOID P HE T in , FTC 697 697 FTC And the success of the 279 188, 189 (1965). ttps://www.theguardian.com/commentisfree/ ttps://www.theguardian.com/commentisfree/ SSAYS OWER OF THE OWER OF E P ) 5/9/17) 5:34 PM THER O ELETE D ATENT L OT What Happened to the Antitrust Movement? N O We Must Rethink Globalization, or Trumpism Will Prevail HE (D OLITICS AND note 267. DOCX DOCX P . can certainly be translated into accessible and compelling can certainly be translated into accessible But looking past the immediate future and to subsequent supra RINTER 276 Moreover, that are threatened by dominant businesses . 2457 (1890). P 278 277 EC TO MERICAN (Nov. 16, 2016, 6:00 AM), h _ A .R [If] we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade, with power to prevent competition and to fix the price of any commodity. If, however, the FTC can draw on and reinforce public support and can draw on and reinforce public If, however, the FTC An Section 5 would not be easy and antitrust revival through would While the near term on antitrust, among is bleak other areas, a future ONG AHEESAN M K UARDIAN TYLE IN 2016/nov/16/globalization-trump-inequality-thomas-piketty [https://perma.cc/6EYH- 2016/nov/16/globalization-trump-inequality-thomas-piketty CENA]. language. of success. One agency alone, regardless One agency alone, of success. determination, of its stand cannot big business. up to the power of count on the White House and Congress to champion its efforts, it has a much of overcoming better chance powerful opposition. Activists and advocates who support open, competitive markets would have to play a As of Section 5 to the public. the significance principal role in explaining episode shows,the net neutrality advocates can explain and skilled demonstrateissues such as telecommunications significance of arcane the audience. Antitrustpolicy to a lay law,which once inspired popular movements, 276. Richard Hofstadter, Richard 276. S leadership, the FTC may to make have an opportunity antitrust a force and for ordinary Americans.against concentrated private power require determination on the part of those inside and outside and patience Section 5. And success, even government who believe in a reinvigorated under the best circumstances, not be guaranteed. Yet, popular would demand action seems for aggressive anti-monopoly growing. Given to be economic realities, the growing in general does discontent in the country timenot appear poised to subside any soon. 4_V T 2017] 21 C 277. For example, Senator John Sherman eschewed the arcane language of economics and declared: FCC’s net neutrality rules show that there is a way forward for the FTC 278. Fung, 278. incumbents would also have to be engaged and mobilized to challenge the 5 monopolistspower and narrative of the anti-Section and oligopolists. the progressive-populist foundation of FTC may be in a position to restore antitrust law. Under the leadership of the conservative Maureen for at least a few moreOhlhausen, the FTC appears poised years of dormancy. 279. Thomas Piketty, Thomas 279. G C Y 39083 ple_19-3 Sheet No. 94 Side A 05/11/2017 10:58:06 05/11/2017 A 94 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 94 Side B 05/11/2017 10:58:06 M K C Y [Vol. 19:3 [Vol. AW L USINESS B OURNAL OF OURNAL J ONCLUSION ) 5/9/17) 5:34 PM C ELETE D OT N O (D ENNSYLVANIA ENNSYLVANIA DOCX DOCX . P OF RINTER P TO _ Although reinterpret the antitrust laws any judicial efforts to in accord For more a proponent of an than thirty years, the FTC has been After exile from decades of practical monopoly popular discussion, AHEESAN 4_V U. 698 even in the face of fierce corporate opposition. The FTC’scorporate opposition. face of fierce even in the the defeats in compellate 1970s do not quiescence. another generation of agency with Congress’s original vision are uncertain and likely to take years, if not with Congress’s original vision are decades, the Federal Trade Commission under progressive leadership has the power antitrust in the more to restore progressive-populist immediate future. Under contemporary administrative law and Congressional delegation of policymaking Federal Trade Commission power, the has lawbroad authority to resurrect antitrust FTC Act. under Section 5 of the wanted the FTC to police “unfair In enacting this statute, Congress methods of competition” that injure consumers and smaller sellers, prevent competitors from competing and allowon the merits, corporations to large dominate our political system. antitrust intended the FTC’s Congress authority to encompass more in the Sherman than the prohibitions and Clayton Acts problems and to nip anticompetitive in the embryonic stage before they harmed markets and society. antitrust that stresses the primacy of economic The FTC’s efficiency. Section 5 Statement indicated that the Commission would use its Section 5 authority to advance “consumer welfare” and apply the rule of reason framework. In articulating this narrow 5, the FTC interpretation of Section contradicted Congress’s broader political economic which vision in 1914, sought to prevent not only short-term injuries to consumers but also exclusionary practices by large businesses and the accumulation of private political power. Furthermore, the FTC adopted the complicated rule of and oligopoly are topics of public debate again. Politicians and topics of public debate again. and oligopoly are commentators fromspectrum across the ideological acknowledge that there is a lack of competition across the U.S. economy and that the harms from this noncompetitive very real. Importantly, industrial structure are many current industrial structure in the United observers have recognized that the policy choice. Beginning in the late States was the product of a deliberate the Reagan administration, under 1970s and accelerating in the 1980s branch and federal judges reinterpreted antitrust officials in the executive the neoclassical economicthese laws to focus narrowly on concept of legal standards favorable to powerful allocative efficiency and adopted stealth counterrevolution reinterpreted laws that corporate defendants. This the myriadCongress had enacted to check harms from concentrated corporate power. 39083 ple_19-3 Sheet No. 94 Side B 05/11/2017 10:58:06 05/11/2017 B 94 Side No. Sheet ple_19-3 39083 39083 ple_19-3 Sheet No. 95 Side A 05/11/2017 10:58:06 FTC 699 699 FTC OWER OF THE OWER OF P ) 5/9/17) 5:34 PM ELETE D ATENT L OT N O HE (D DOCX DOCX . RINTER P TO _ Despite being a champion of the efficiency paradigm since 1981, the AHEESAN M K FTC in the future could still change course and be true to Congressional could still change course and be FTC in the future of In setting out an interpretation the agency in 1914. intent in creating through enforcementSection 5, whether rulemakings, actions or the FTC economic 5 in the expansive political should anchor Section vision of the Federal Trade CommissionCongress. In enacting Act to supplement the Sherman Acts, Congress sought to prevent and Clayton three principal harms from economic concentrated wealth transfers exacted by power: monopolies, and cartels, privately-erected barriers to oligopolies, competition, and accumulation of economic and political power in corporate hands. To advance Congress’saim antitrust vision and for the the FTC should adopt presumptions FTC Act to be a prophylactic statute, of illegality for a variety of competitively suspicious conduct, challenge durable or otherwise significantly harmful monopolies, and support simple structural remedies. 5, proposed interpretation of Section the In adopting vision Congress had in creating the the FTC would be true to the Commission to growing popular and political respond a century earlier and demands monopoly to tackle the curse of pervasive and oligopoly in the economy. reason that arguably cannot even protect consumers, the let alone advance even protect arguably cannot reason that 5. philosophy underpinning Section progressive-populist 4_V T 2017] C Y 39083 ple_19-3 Sheet No. 95 Side A 05/11/2017 10:58:06 05/11/2017 A 95 Side No. Sheet ple_19-3 39083