Thursday, January 7, 2010

Section 5 FTC Act Blog Symposium: Comments of Dan Crane

Posted by Dan Crane

I should disclose at the outset that I have been retained by Intel to provide policy analysis on the FTC enforcement action, although the views I express here are solely my own.  Also, I will shortly be disseminating a white paper addressing the Section 5 issues.  This is just a short preview of some of its key themes.

For several years, I have been advocating a separation between the liability norms in public and private antitrust enforcement, for many of the reasons expressed in the Commission's press release accompanying the Intel complaint.  Last fall, at the FTC's Section 5 hearings, I testified in favor of declaring Section 5 independence from the Sherman Act.  Still, the Intel case strikes me as a very bad one in which to declare independence.  It is likely to provoke a negative reaction from the reviewing courts and stymie further efforts at Section 5 independence.

The reason, in short, is that there is very little, if anything, in the FTC's comparative institutional advantages, that justifies Section 5 independence in the Intel case.  As I have previously written, it is imperative that when the FTC strikes out for Section 5 independence, it first articulate the reasons that Section 5 independence is justified in that particular case and suggest some judicial review principles that make clear that courts will continue to have a reviewing role to play.  In Intel, the Commission did no such thing.

To his credit, Commissioner Rosch made an attempt (in a statement that, tellingly, dissented from the Commission's filing of a supplemental Sherman Act Section 2 claim).  However, none of Commissioner's Rosch's four supposed justifications have anything to do with the FTC's comparative institutional advantages.  Rather, they sound like complaints with the interpretation courts have given to the Sherman Act.  This is exactly the sort of Commission rhetoric mostly like to provoke a strong judicial reaction.

In my forthcoming white paper, I articulate principles--based in the Commission's comparative institutional advantages--for when it should and should not declare Section 5 independence.  To give just one example here, much of the case law on Section 5 suggests that the Commission may have prophylactic powers in cases of incipient conduct. 

Perhaps this is because the Commission is better than the courts at predicting likely effects of emerging market forces.  But such a justification cannot possibly serve in Intel, since the conduct at issue has been in play for over a decade.

In short, while I strongly support separating Section 5 from the Sherman Act, great care has to be taken to pick the right cases for making the arguments.  Intel--a high-profile case with punitive and drastic proposed remedies entailing conduct paradigmatically covered by the Sherman Act--is the wrong case.

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Dan: I'm torn. I agree with your criticisms of Leibowitz's and Rosch's lame justifications for use of Section 5 in this case, but I disagree that there is really any strong justification for the public/private separation you advocate (I'll await your article for more extensive comment . . . ). But you mention the possibility (for other cases, not here) that the FTC could be better than the courts at predicting emerging market forces. In the first place, I'm curious why you think that or what evidence you have to support the claim. But more important, even if true, why isn't it perfectly applicable here? Who cares that the conduct has been going on for a decade? Today there are "emerging market forces" that may or may not have existed the last 10 years. By your own claim, the FTC may be better at anticipating these. Just because the conduct has been going on for 10 years does not mean that the market conditions have remained the same, and today is a new day with new emerging market forces. Thus, it seems to me, if you want to claim that the FTC's alleged better ability to predict emerging market forces justifies use of Section 5, you are providing justification for this use of Section 5.

Posted by: geoff manne | Jan 7, 2010 7:33:07 PM

Thanks, Geoff. There is abundant case law talking about the importance of allowing the FTC some prophylactic space to go after "incipiency." Perhaps this is just a misguided fantasy-vestige of the Progressive Era, but you might think that an expert agency would have the expertise to make predictions about future consquences of brand-new and previously unknown behavior than a court would. But when we've seen the exact conduct unfold in the exact market for over a decade, it's hard to understand how that incipiency advantage--if any--applies.

Posted by: Dan Crane | Jan 9, 2010 5:42:23 AM

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