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Monday, September 19, 2011

The Institutional Structure of Antitrust Enforcement: Comments of Josh Wright

Posted by Josh Wright

In the first paragraph of Professor Crane´s "The Institutional Structure of Antitrust Enforcement," he sets forth the nature, scope, and objective of his project:

Antitrust enjoys a strong tradition of relatively short monographs that cover the entire field from a theoretical, historical, and normative perspective.  Among them are Richard Posner´s path-breaking 1976 Antitrust Law (substantially updated in 2001); Robert Bork´s 1978 Chicago School Bible, The Antitrust Paradox; Keith Hylton´s 2003 economically oriented Antitrust Law: Economic Theory and Common Law Evolution; and Herbert Hovenkamp´s 2005 The Antitrust Enterprise.  Each of these books focuses primarily on substantive antitrust norms (i.e., merger or predatory pricing law) and the appropriate level of regulatory intervention in particular industrial segments (i.e., the new economy or regulated industries).  To date, no one has tried to present a comprehensive account of the institutions that implement antitrust law.  This book makes such an attempt.

Mission accomplished.  I write this review from an office in which the 4 aforementioned "relatively short" monographs (a term best loosely applied to Bork´s volume and perhaps the others) sit next to one another, occupying the ever-valuable "eye-level shelf space" of my book shelf reserved for frequently referenced texts.  

The design and structure of antitrust and competition policy institutions is increasingly critical to the way that academics think about "optimal" regulation not only within antitrust, but how institutions and institutional design relates to economic growth generally.  Within antitrust, I do not know of any scholar who has thought longer and harder about institutional design than Commissioner Kovacic -- whose FTC at 100 Report is mandatory reading for anybody interested in this subject.  Crane's work fits quite nicely within the research agenda for antitrust institutions set forth by Commissioner Kovacic.  Crane's focus on the origins and development of U.S. antitrust institutions (Section I of the book) especially demonstrates the historical perspective that often illuminates his work.  I learned a great deal about the history of antitrust institutions as well as what Crane describes as "anti-institutions" (political or legal forces that arise to counter the directional pull of institutions) from this Section.  A second characteristic of Crane's work is that it is generally quite data-driven; historical trends and claims are meticulously supported with evidence where available. 

No book review is complete without the reviewer lodging a complaint, typically with reference to a dispute over which his priors differ from the author's.  The biggest challenge facing the daunting task of creating a volume of one-stop shopping for consumers of knowledge concerning U.S. antitrust institutions is navigating the blurry line between substance and procedure.  Positive analysis of the development of institutions  -- as Crane acknowledges -- cannot really be done without "also implicating its substantive goals, ideological commitments, rules, and attitudes toward the competitive process."  The trick here is to make one's assumptions about the relationship between process and substance clear.  For economists, changes in procedure are generally evaluated by the same welfare-maximization standard as substantive rules are assessed.  In at least one place in the book -- and an area in which I think Crane's conventional approach would be highly informative -- I was left wanting either a more explicit articulation of the normative model being applied to evaluate policy proposals or evidence that they would in fact generate desirable outcomes.

Perhaps no U.S. antitrust institutional reform has been discussed more frequently as of late than what to do about Section 5 of the FTC Act.  In Chapter 7, where Crane most clearly shifts gears from positive to normative policy prescription and various institutional reforms to improve the FTC and DOJ, he takes on the Section 5 mess (pages 135-143).  After discussing the relevant history, Crane discusses the well-known failure of Section 5 to make any real dents in antitrust policy through litigation and considers possible interpretations of Section 5 that would lead to policy improvements.  In considering approaches to Section 5, Crane makes many points I find myself agreeing with ("the Commission is on strongest grounds when challenging market power created by fraud or deception" or "courts are most likely to defer to administrative agency judgments in cases involving commercial practices about which the courts have not developed a deeply rooted body of precedent.").  Neither of these points makes a strong normative case for broadening the scope of Section 5.

But Crane also argues that the "Commission is likely to find greater judicial receptivity to its norm creation in cases involving consumer decision making" and that the Commission's Section 5 program should be centered upon cases in which it can "explain how its expertise with consumer psychology, values, and practices justifies a more liberal construction of Section 5 than might be justified under the Sherman Act."  (page 139).  Crane pushes further by arguing that "agency expertise may be most useful -- and hence call for the greatest judicial deference --- where it concerns predictions about future consequences of incipient behavior."  (p. 140).  The heart of the claim is that "courts may be comparatively ill-equipped to divine the future and more likely to trust an agency's prediction based on its superior familiarity with the type of conduct at issue."

These claims are susceptible to empirical examination.  Does the Commission really have a comparative advantage over generalist Article III judges in evaluating antitrust cases generally?  Cases involving predictions about the future?  There is some evidence available with respect to the performance of generalist judges.  But here, Crane appears to presume that the Commission is a higher quality decision-maker than federal district court judges.  Of course, given the Commission's lack of success with Section 5 in the courts, one wonders both whether (1) the available data would support that claim, and (2) if not, what institutional features of the FTC prevent it from claiming such superiority (or if so, which institutions foster that advantage).

One can always find something to disagree with in a 250-page monograph.  Perhaps the best feature of Crane's work (and this book is no exception) is that his multi-faceted approach offers something for everyone: economists, lawyers, and practitioners will all learn from the book.  My overall view of the quality of Professor Crane´s book -- no surprise to readers of his academic articles from which the book is largely derived -- is perhaps best revealed by the company it will now keep on that book shelf.

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