April 1, 2007
Posted by D. Daniel Sokol
Peter Carstensen of the University of Wisconsin Law School and Harry First of NYU Law School revisit the Topco decision in their book chapter in ANTITRUST STORIES, entitled Rambling Through Economic Theory: Topco's Closer Look. It is one the must read articles of the year and a good piece of historical antitrust scholarship.
Abstract: This paper, which will be published as a chapter in Foundation Press's forthcoming volume of antitrust stories, reviews United States v. Topco Associates, the Supreme Court's 1972 decision holding that horizontal territorial divisions are per se unlawful under Section 1 of the Sherman Act. Most commentators believe the decision was ill-considered - one of the most telling exemplars of Populist era jurisprudence, wrote one commentator; one of the most infamous antitrust cases ever, a case founded on judicial expediency, not economics and one now appropriately viewed as outside the antitrust mainstream, wrote another. We disagree.
Drawing on the transcript of the oral argument, Justice Department documents, the trial record, participant recollections, and the economic background of the supermarket industry, we show how Donald Turner successfully framed the case to solidify the per se rule. We also show that the case was correctly viewed as an attack on a cartel effort by medium-sized supermarket chains to exclude each other from their respective core geographic markets. We also argue that the Court was actually not indifferent to the factual issues the case presented and that at least some members were likely skeptical of Topco's purported justifications. The Court's decision was thus not made on a completely doctrinal basis. Indeed, its below-the-surface consideration of the facts was at least a closer look, even if not the deliberate one today's Supreme Court would require.
Clear rules have their rewards. Donald Turner was right to bring Topco and the Court was right to favor free entry over territorial treaties among competitors. There are complicated areas in antitrust, but the Topco agreement, on closer look, turns out not to be one of them.
April 1, 2007 | Permalink
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