Friday, January 19, 2007
Posted by Shubha Ghosh
Wonderful thread at Truth on the Market sparked by my comments on the status of Dr Miles as superprecedent. Two issues still floating: superprecedents in antitrust and the per se treatment of minimum RPM.
As far as superprecedent goes, there is an argument that the term applies only to constitutional precedents. Justice Roberts, as far as I know, has not explicitly said so, but the examples he gives are constitutional. Precedents on statutory interpretation may be more flexible and may never become invincible. On the other hand, Justice Roberts may have been talking about the integrity of the Court and that there are some precedents, whether constitutional or statutory, that are so well established and accepted, that the Court will lose credibility if they are reversed. So was Justice Roberts using the concept of superprecedents to apply solely to the integrity of the Constitution or the institution that interprets it? Discuss.
Let me assume that the Chief Justice was concerned with the integrity of the Court. His recent interview in The Atlantic Monthly seems consistent with that assumption. What are the implications for antitrust? I would argue that Socony-Vacuum, and its condemnation of price fixing and its broader statement that price competition is the central nervous system of the economy, constitute a superprecedent. The promotion of price competition that leads to lower prices for consumers would arguably be a basic principle, a grundnorm, for antitrust law. Under this view, reversing Dr Miles is not as simple as my colleagues at Truth on the Market suggest. While my colleagues are correct that there are output expanding justifications for minimum RPM, there are other contractual measures to increase output that will resolve the free riding problems and increase output (territorial restrictons, requirements of minimum expenditures on service and quality, trademark law and policing). So the question becomes: should the court countenance restrictions on price competition--establishing a floor on price--that have benefits which can be realized through non-price restrictions?
I can anticipate two objections. First, Socony-Vacuum is about price fixing among competitors rather than price fixing imposed by a manufacturer on a retailer. But there are output expanding benfits from so-called horizontal price fixing. Price supports can have economic benefits but not as pronounced, admittedly, as those from minimum RPM. Appalachian Coals is still good precedent for allowing price fixing in times of crisis, whatever that means. Despite these potential benefits from horizontal price fixing, the per se rule still stands with good reason. A similar logic should apply to minimum RPM. There may be output expanding benefits, but the question is whether these benefits could just as readily be realized through non-price restrictions.
Second, the current asymmetry between the treatment of maximum RPM (rule of reason) and minimum RPM (per se) may , with its superficial inconsistency, seem to show a chink in the armor of the Court's integrity. But a foolish consistency is the hobgoglin of little minds, with the emphasis on foolish. Maximum RPM serves to check market power among retailers, market power that may in part be the product of territorial restrictions and intellectual property law. Therefore, there is strong economic justification for RPM and more importantly, an output expanding result that cannot readily be obtained through non-price restrictions. As noted above, minimum RPM has a different justification and can be mimicked through non-price mechanisms.
Now perhaps economics is the kryptonite for antitrust superprecedents. Where appropriate, fields outside of law should provide the kryptonite. Remember the role of social science data in Brown to reverse Plessy. But even when you expose Dr. Miles to the kryptonite of economics, I think it does still fly, perhaps not at the pace of a speeding bullet, but up, up and away nonetheless.