Monday, June 21, 2010

The Role of Economic Analysis in Competition Law

Posted by D. Daniel Sokol

Douglas H. Ginsburg, U.S. Court of Appeals for the District of Columbia and Eric M. Fraser, University of Chicago - Law School, University of Chicago - Booth School of Business explain The Role of Economic Analysis in Competition Law.

ABSTRACT: From 1890 into the 1970s competition law in the United States was not economically coherent. As a result, in all but the prosecution of cartels, enforcement was close to random. New business practices were viewed with suspicion, particularly when introduced by large firms, and mergers were interdicted without any understanding of their likely effects for good or ill. Indeed, in 1966 one Justice of the Supreme Court correctly observed, “The sole consistency ... in [merger cases is that] the Government always wins.” Beginning in the 1970s, however, the agencies charged with antitrust enforcement and then later the courts began to use economic analysis in order, respectively, to decide what cases to bring and to review the merits of those cases. Today economic analysis plays a vital role in the enforcement of antitrust laws at all levels. We discuss the evolving role of economists and economic evidence in both the antitrust agencies and the courts. Our account demonstrates how the predictability of economic analysis supports a rule of law regime, but we also recognize the difficulties involved in interpreting and applying increasingly complex economic analyses to the facts in competition cases. Countries with relatively young competition laws and enforcement agencies may be able to draw from the experience of the United States, both to avoid repeating its mistakes and to emulate its successes.

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