What is the Worst Antitrust Decision That is Good Law?

Josh Wright —  22 July 2008

There’s been a bit of discussion about the “most destructive” decision that is good law around the blogs, e.g. here and here, in response to John McCain’s criticism of Boumedine calling it “one of the worst decisions in the history of this country.” The line of discussion led me to think about the titular question. Antitrust law has the fairly odd feature that lower court decisions are overturned at a fairly low rate. There are a handful of SCOTUS reversals of old, “bad” precedent, e.g. Leegin overturned Dr. Miles, State Oil overturned Albrecht, Independent Ink overturned the rule that a patent holder was presumed to have market power in tying cases (my analysis here). In fact, prior to Leegin, the SCOTUS had been routinely reversing some bad prior precedent with little discussion (compare the reaction to Leegin to the unanimous State Oil decision on Max RPM in 1997 in which there was zero talk of stare decisis!).

On the other hand, consider that some of the classic “infamous” antitrust cases are still good law. Bad cases are left to die a slower death, whittled away indirectly by subsequent cases over time. The phenomenon hasn’t gone unnoticed by commentators. Milton Handler argued that the merger opinions of the Supreme Court as well as nearly all pre-1980 rulings could not “be taken at face value” though “none have been expressly overruled.” Examples are not hard to find. The most obvious examples are in merger cases, and probably nowhere more evident that vertical mergers. Robert Bork has noted: “the connoisseur of bad antitrust opinions must take into account Fortner I, Utah Pie, Sealy, Schwinn, Procter & Gamble, Von’s Grocery, and many others.” There are also the exclusive dealing cases finding liability with tiny foreclosure rates. Not to mention Jefferson Parish, which I’ve argued (along with others) is ripe for reversal.

Let me first defend the titular question against an obvious objection. One typical response to this sort of question about the Supreme Court’s outdated and discredited antitrust jurisprudence is that outdated precedents are of little important to modern antitrust enforcement because they would not be prosecuted in today’s agency-centric enforcement regime. Therefore, the argument goes, it simply does not matter whether these decisions are overturned or left alone to accumulate dust. Indeed, a prominent antitrust commentator emailed me this precise response to my student note on the Von’s Grocery which made an empirical and legal case for overturning that decision (Vons Grocery and the Concentration-Price Relationship in Grocery Retail, 48 UCLA L. Rev. 743 (2001) — sorry, unavailable on SSRN).

 

Without more, this response strikes me as incomplete and inadequate. Most antitrust claims involve at least the possibility of state and private enforcement even if can trust that the agencies would never bring such nonsensical claims. Indeed, federal interpretation of the Sherman Act can significantly influence enforcement at the state level. Further, allowing “bad” cases to stick around can cause other sorts of havoc. Take the existence of Jefferson Parish or the patent holder market power rule reversed by Independent Ink. I believe both caused significant social welfare losses in terms of both deterring efficient business practices and litigation costs. So what’s my answer? My instinct is that the agency-centric nature of merger enforcement does at least minimize (but not eliminate) the social costs of failure to reverse cases like Vons, and so to look elsewhere despite the fact that I would like to see the Supreme Court take a merger case to clarify some important areas and clean house a bit. My best guess is that the Jefferson Parish decision is probably the worst remaining culprit on a consumer welfare basis as it interferes with all sorts of efficiency enhancing marketing and distribution efforts. The practice is prevalent in the modern economy, and there is an economic consensus (see also here) on the view that tying is generally pro-competitive and that a per se approach (even a “modified” one) is inappropriate. For now, I’ll stick with Jefferson Parish.

What would be the first antitrust decision that the Supreme Court should overturn?


 


 

6 responses to What is the Worst Antitrust Decision That is Good Law?

  1. 

    Point taken, Josh. This one may get bounced on procedural grounds as well, but I would put Alcoa on the list.

    While cases like Grinnell and Aspen Ski have added some gloss, the notion that certain, otherwise legal business conduct is off limits to a monopolist by sheer virtue of the company’s size is still hanging around.

  2. 

    Standard Stations gets my vote. Rejects the rule of reason for exclusive dealing and instead adopts the “quantitative” foreclosure rule, which as Hovenkamp, Handler and others pointed out might as well be per se liability, given that 6.7% foreclosure was sufficient. Plus, its dicta persuaded the Court in MPAA (which is also a good candidate for the worst decision) to aggregate the foreclosure shares of non-conspiring defendants – a decision which has allowed plaintiffs in some jurisdictions to maintain antitrust suits challenging loyalty discounts and other vertical practices against competitors with tiny market shares.

  3. 

    Brian: A good place to start on my views is here:
    http://www.truthonthemarket.com/2007/06/30/evaluating-leegin/

    David: Topco is definitely a top (bottom?) 5 in my book.

    BRJ: I agree both of those are pretty bad, but you aren’t playing by the rules. We need SCOTUS decisions.

  4. 

    For more recent cases, LePage’s and Conwood are both pretty bad.

  5. 

    I nominate Topco!

  6. 

    Why do you think Leegin was a good decision when it is hurting consumers as we speak?