As for excluded rivals being shy about running to regulators, that does not seem to to be the case in Europe in recent years and I’m also skeptical about the claim in the United States. Nonetheless, perhaps the hesitation on the part of excluded rivals is a function of low levels of monopolization enforcement, a trend not likely to continue in the next few years. So, while theoretical concerns about retaliation on excluded rivals are interesting and plausible, there is plenty of reason to believe this is now or will be a bigger problem in Section 2 than under Section 1.

I really don’t know why, however, this is so contentious. I am with Josh about hunches, but I must say that it takes very little guesswork to believe that this is a problem. Given risk aversion; given that the law does not perfectly prohibit only inefficent behavior; given that enforcers and courts are not perfect; given that businesses do not know exactly what is efficient; given private enforcement and competitor access to enforcers’ ears; and given the costs of litigation and penalties (including treble damages and injunctions)–how could it be otherwise? Without clear evidence one way or the other to settle the question, how do you arrive at the conclusion that false positives aren’t a problem? What assumptions do you make to reach that conclusion?

But when you say “let’s turn to the merits,” however, can’t we do better than what Christine Varney or Geoff or you or I have as hunches about the prevalence of false positives properly defined? There is a body of evidence out there that tells us that some practices are prevalent in competitive markets, the competitive consequences of some of the practices at issue, and the theoretical conditions under which these practices might lead to consumer welfare losses. Seems like that literature is a much better place to focus than hunches — even mine.

And by the way, the inference you’d like to draw about Varney’s observation about refusing to engage in pro-competitive conduct because of fear of antitrust liability just doesn’t line up with her statement about refusal to engage in *legal conduct.* That’s just a different point altogether.

And as Geoff suggests (and I have earlier), I take the mistaken definition of a false positive as (together with the statements above) as pretty good evidence that the new DOJ is not working within the error cost framework. One must stretch far, and in my view too far to be plausible, to turn the above statements into something that fits the error cost framework.

But the more general point is that all of this talk about hunches about false positives aren’t really turning to the merits. The point of the Section 2 Report was to turn to the merits and collect evidence on both the incidence and magnitude of false positives and negatives in order to inform sensible Section 2 liability rules, burdens, safe harbors, and enforcement decisions. The Salinger quote also provides an explanation for why we might expect very little of this sort of testimony to be forthcoming at public hearings.

The hearings yielded some but not much of this sort of evidence. One of the challenges in finding “false positives” is that, because they include actions firms do not take for fear of antitrust liability, they are inherently hard to observe. An example of the type of information the organizers were hoping to elicit came out in the business history session. The Alcoa Board had as a central concern that it avoid liability for predatory pricing. This concern both occupied the board’s time and resulted in higher prices than Alcoa otherwise would have charged. This bit of evidence was rare, however. Despite the outreach, companies were not forthcoming with testimony like, “We would like to have exclusive deals; we do not do so for fear of antitrust liability; the additional costs we bear because we cannot pursue our preferred strategy is $x/year.” Perhaps such testimony did not materialize because the antitrust laws are not a significant constraint. More likely, companies perceive little private benefit from sharing their deliberations on strategy in a public hearing. Arguably, this should have come as no surprise.