Tuesday, November 6, 2007
Posted by D. Daniel Sokol
ABSTRACT: Legal doctrines vary in the extent to which they apply either detailed, categorical rules or broad, open-ended standards that allow for case-specific adjudication. Antitrust law is generally thought of as inhabiting the standards end of this spectrum. In fact, however, despite the generality of the enabling statutes antitrust law is rife with categorical distinctions.
In Part I, we explore not only the well-known distinction between conduct that is per se illegal and conduct judged under the rule of reason, but also a number of categorical distinctions the courts draw, either to help delineate the scope of the per se rule or to create distinctions within the scope of the rule of reason itself. By and large these rules don't come from the antitrust statutes. They are created by courts, who are in effect converting case-specific standards en masse into categorical rules.
In Part II, we identify a number of problems with these distinctions. One problem is administrative: courts spend a great deal of time trying to parse conduct in order to put it on one side or another of the lines they have created. Indeed, in many cases courts spend more time on categorization than they do on actual economic analysis of the case itself. Second, judicial antitrust categories are subject to manipulation. Parties go to great lengths to fit into a box that will give them more favorable treatment, sometimes by legal argument, sometimes by restructuring a transaction, and sometimes by concealing or misrepresenting the facts of that transaction. Third, a number of the categories the courts have created make no sense, whether because they have lost their meaning over time, because their boundaries have eroded, because they actually tell us very little of relevance to the competitive effects of the transaction, or because they are simply dumb. The net result is a mess. Categories have become conclusions, displacing the fact-specific economic analysis in which antitrust law is supposed to be engaging.
In Part III, we argue that there is a better way. We evaluate the costs and benefits of the judicial creation of categories, and contend that the complex of antitrust boxes the courts have created today does more harm than good. We don't mean to suggest there is no value to categories, and that everything must be thrown into a pure cost-benefit analysis. Some rules (the per se rule against price fixing, for instance) make sense. Rather, the important thing is to make sure that the categories we use have empirical support, and that they are communicating valuable information to courts about the competitive effects of a general practice. We think the courts have gone too far in the creation of rules in a variety of cases. Finally, we suggest that courts make more use than they do of certain tools ? the doctrine of direct economic effect and empirical evidence ? as powerful filters for distinguishing good from bad antitrust claims.