Teaching Antitrust

Josh Wright —  6 September 2008

I’m two weeks into the semester here at UT, and the antitrust course.  I’ve made a few changes to the course this year.  Specifically, I’m using the new 2nd edition of the Gavil, Kovacic and Baker.  So far so good on that front on adjusting to the new edition.  Its an excellent textbook.  In large part its advantage is that it outpaces the other books in inclusion of important non-SCOTUS cases, coverage of agency practice, and economic content.  I want to talk about two changes I made last year and am also experimenting with this year and see what other antitrust law profs and/or students think.

The first is starting the course with a few lectures of straight economics.  This year, its two 705 minute lectures.  I’m always a bit afraid that this will scare some students off.  I do promise no calculus!  The lectures also assume no economic background.  But the truth of the matter is that I think its just not possible to teach modern antitrust law and agency practice without some basic economics.   I think integrating important economics concepts adds significant value to the education the students receive in the sense that it will make them better antitrust lawyers.  With the degree of integration of economics and antitrust in modern doctrine, the bottom line is that its just too important not to cover basic economics.

Antitrust is fairly unique in its wholesale incorporation of a second discipline into the substantive doctrine (by the way, this is also another advantage of the Gavil, Baker, Kovacic book — it includes some useful economic exercises, sophisticated but accessible explanations of economic concepts, plus graphs and other material on important economic issues).  The payoff, in theory, of doing it early is that we’ve discussed some basics early that we will return to repeatedly throughout the semester.  Hopefully, we’ll be able to focus on applications of these concepts later in the semester without re-learning the basics, thereby saving some time to get into some more interesting doctrinal complexities and policy issues.  I imagine some other antitrust profs choose to teach some basic concepts as they go.

Others might do the same sort of economics bootcamp early in the semester.  We spend one lecture of demand principles and another on cost/supply concepts.  The focus is conceptual and not mechanical or about memorization.  For instance, we spend most of the demand lecture trying to understand some basics about what demand curves are, what their shape means, and how to think about elasticities.  On the cost side, we spend a lot of time learning about differences between fixed and marginal costs, average cost and concepts like economies of scale, diminishing marginal returns, and minimum efficient scale.   This is my second year starting off this semester with some basic economics and I’m pretty sure I’m going to stick with it.  Of course, the dynamics with this at George Mason were a bit different because we include a basic economics course in our mandatory 1L curriculum.  But I thought the lectures went relatively well.  At least, I didn’t see any dramatic decreases in enrollment.  Not yet anyway.  But its early.  How do other antitrust professors incorporate economics into their lectures?  Do students prefer learning the economic material early and then having it reinforced through applications throughout the semester or would you rather learn it as you go?  Does knowing this material is on the syllabus scare off students?

The second innovation I’m experimenting with is something I’ve never heard anybody else do, but it might be more common than I think.  I cover horizontal mergers first.  I stole borrowed this idea from a highly respected practitioner at top antitrust practice who told me that he would cover mergers first if he were ever to teach antitrust law.  While this creates some jumping around the textbook, which students never like, I think there are some real pedagogical advantages.  Let me make the case here.  First, the primary advantage is that doing mergers first allows the class to immediately jump into economic and legal concepts that will be used throughout the semester: market definition, demand elasticities, entry, efficiencies, burden-shifting analysis and balancing, and factors conducive to collusion (in coordinated effects cases) to name a few.  This allows us to reinforce some of the Week 1 while getting some merger doctrine under our belt.  Second, mergers are probably the most practically important area of modern antitrust analysis.  Leading with it seems right.  I spend 4-5 lectures on mergers and by putting it early, I think, calls attention to the importance of the topic if not only symbolically.  Third, I think there are some natural synergies to the sequence of economics, followed by mergers, followed by horizontal restraints.  Specifically, we’ll have already cover coordinated effects stories and factors that facilitate collusion in mergers when we get to collusion and horizontal restraints.  We’ll also have under our belt a basic understanding of how the rule of reason works in the horizontal restraint context — at least in terms of the basic structure of prima facie burdens and efficiency arguments.  Other than the downside of having to jump around the textbook, I’ve never heard a compelling reason for the standard sequence of material (typically leading with cartels).  So, theres my case for starting with mergers.  Are you sold?  If not, what costs of this approach am I missing from the pedagogical perspective?  What about for the students?  Do any other antitrust professors lead with mergers?

Comments appreciated!

5 responses to Teaching Antitrust

  1. 

    Very helpful Peter. Thanks for the input. (And feel free to email me offline to catch up on UT and other developments — you can get my email address at the GMU home page linked at the top of the blog).

  2. 

    Prof. Wright, I took one of your antitrust law classes at George Mason. Covering mergers first worked well for the reasons you state. It’s always topical, easy to apply, and the concepts repeat themselves throughout Section 1 and 2 units. Students always struggle to understand the genesis of the Clayton Act versus the Sherman Act so be aware of that. When you explain that it essentially plugged a hole and provided for predictive analysis versus after-the-fact analysis req’d by the Sherman Act, that helps. The story fits in nicely with the merger case law and the erosion of structural presumptions to the current state.

    I would not jump at front-loading all of the economics because it highlights the greatest weakness of most of your students. We can learn the law and apply economic policies naturally, but theoretical economics is hard. The better approach is to start each unit (Section 7, Section 1, Section 2) with an overview of the general economic concepts that are most often applied there. So it’s like 3 mini lectures on econ as you go along. This is the way I did my outline prior to the exam – although I didn’t have to take the exam because I audited the course!

    One last topic – joint ventures are so common in today’s global economy but they are extremely difficult to understand in the context of antitrust law, because they resemble both single firm and multi-firm conduct. I would spend more time in this area towards the end of the semester.

    Regards – and what are you doing at UT?

  3. 

    Oops, that 75 minutes not 705!

    Great suggestion Andy. Currently, I try to include some oligopoly theory in the economics primer, but only a bit. We do revisit when we hit coordinated effects mergers, but a detour to the collusion material there makes sense.

  4. 

    Josh:

    Thanks for the welcome feedback on the second edition of the casebook!

    I like your idea of moving from an economic overview to mergers. One advantage is that because merger analysis today is so very concept-focused, the approach will more quickly focus students on contemporary antitrust analysis — on asking the right economic questions. It poses less of a risk that the older, categorization-oriented material will confuse and confound them. Much of modern antitrust analysis can be taught through mergers, especially using the Guidelines and the newer lower court cases.

    Here’s one suggestion. If you do that, you might want to detour at coordinated effects back to the material in Chapter 3 on collusion, especially the front material that explores the economics of collusion. Because you will not have covered this given your acceleration of mergers, the students will not have a complete background in oligopoly theory. Integrating the Chapter 3 material at that point in Chapter 5 might help to cement the students’ understanding of the relationship between coordinated effects and collusion.

    Hope that helps.

    Best,
    Andy

  5. 

    Yes, Josh, I agree with you that it is better to teach those students without background some basic economic concepts before digging into antitrust cases.

    However, the question is to what extent. “two 705 minute lectures” seems too long. Well, I don’t know what concepts or how broad you are going to cover in those lectures. To me, 705 minutes of lectures as an introduction is scaring.

    But I DO like your innovation of going directly to a merger case first. This is really a good idea. Students will definitely have an impressive taste on many important economic concepts as you mentioned and the fundamental philosophy of antitrust law. And everyone will have something to say on merger cases. (It is much more intuitive than the vertical restraints cases.)