Abuse of Plaintiff Win Rates as Evidence that Antitrust Law Is Too Lenient

Josh Wright —  14 October 2008

I was recently reading Dean Chemerinsky (Irvine Law) on the Roberts Court at Age 3. One of Chemerinsky’s standard takes when he talks about the Roberts Court is that the Court’s pro-business stance is one of its defining characteristics. Readers of the blog will know that I’ve been critical of Chemerinsky for his superficial antitrust commentary. For example, in this California Bar Journal piece, under the heading “Favoring Businesses over Consumers and Employees,” Chemerinsky argues that the Roberts Court antitrust decisions favored businesses over consumers by overturning Dr. Miles, “make it more difficult to sue business for antitrust violations” in Credit Suisse, and, in Twombly, made it “harder for plaintiff to get into court.”

Of course, this sort of superficial journalist-level analysis of Supreme Court antitrust decisions would not be appropriate for a law prof doing a serious law review piece. And of course, the point is wrong. Previously I wrote:

what gets me about this section is the heading: “Supreme Court favors businesses over consumers.” Is that really what these cases are about? I have read political accounts of the Supreme Court opinions in newspapers and periodicals or blogs that read this way (”The Roberts Court wants to stick it to the consumer — I can prove it: the Defendant won in all 4 cases this term”). But I’ve not heard law professors take this route too often, and never an antitrust commentator. In fact, a reasonable reading of the Court’s antitrust output this year suggests that the issues are much more nuanced than this oversimplified soundbite that pits business against consumers.

Is Leegin a pro-business and anti-consumer decision? I’m not sure I even know what that means in this context. Let’s turn the question on its head for a moment to illustrate its absurdity. Is a decision that prohibits a firm from engaging in some behavior clearly anti-business and pro-consumer? Of course not! It depends on the competitive effects of the conduct at issue and how the antitrust rule will impact firm behavior. Justice Kennedy’s opinion on behalf of the majority does allow manufacturers to engage in behavior that was previously constrained. Perhaps that is a sufficient condition for a pro-business label? On the other hand, the very reason the Court overturned the per se rule was the result of evidence that minimum resale price maintenance made consumers better off! Now, one might think that the Court got it wrong and that RPM actually harms consumers. I disagree and believe Leegin was correctly decided. But to argue that the Court got there by favoring business over consumers is not accurate, and obvious from reading the opinion.

The point here is that the issues are far more nuanced than his misleading characterization of the cases suggests. It is a short article, I know. There is not always room to get in every detail about every case. But these are not minor details. These sorts of misleading descriptions aimed at producing soundbites. That sort of thing should be left to journalists, not law professors.

I was interested in reading the law review length piece to see if Chemerinsky would push harder on his antitrust claim as evidence that the court was too pro-business. Interestingly, to his credit, and I think correctly, he dropped the point. Perhaps he reads the blog. Chemerinsky is not the only law professor, economist, or commentator to argue that the high defendant win rate in antitrust cases is evidence that the Supreme Court is anti-consumer and pro-business (to be distinguished from pro-business and pro-consumer), or to make the related point that we can simply look at the level of enforcement activity levels to figure out how well enforcers are performing (see, e.g. examples we’ve discussed here and here). I’ve also increasingly noticed reliance on the low plaintiff win rate before the SCOTUS in antitrust cases as evidence that antitrust law is moving away from a consumer welfare standard or favoring firms over consumers.

There are at least two major analytical flaws with these arguments that render the evidence irrelevant for the purposes frequently asserted.

The first is that plaintiff win rates do not account for the merits of the underlying case. It doesn’t make much sense to argue that Independent Ink favors businesses over consumers because it makes life more difficult for plaintiffs who must now prove market power in tying cases. There is an economic consensus that market power is required to do competitive harm and that patents are not sufficient to confer such power. The rule in Independent Ink thus eliminates the potential for serious error costs and chilling of pro-competitive tying and is good for consumers. Yes, even though the defendant won. One could conduct a similar analysis of decisions like Leegin where there is simply no evidence that the per se rule for minimum RPM is appropriate or benefits consumers. The important analytical point is that whether an antitrust decision is good or bad for consumers is not obviously related to who wins the case! One must understand the competitive effects of the conduct at issue, and the likelihood and social costs of errors in evaluating the conduct in order to assess a change in the liability rule in this way. Win rates just don’t cut it. This is similar to the point that one can’t just look at merger enforcement activity and make inferences about whether more is better. Rather, one has to have some idea about whether the “marginal”merger enforcement action is likely to increase or decrease consumer welfare. That necessitates a strategy of identifying those marginal merger enforcement decisions and some reliable evidence of their welfare effects. Without out, claims linking activity level to quality of enforcement don’t make any sense.

Second, the cases the Supreme Court selects are endogenously determined not randomly assigned. What types of decisions are they accepting one how might that impact win rates? Judge Douglas Ginsburg (with Leah Brannon in Competition Policy Int’l) recently described the case selection: “the Court, far from indulging in a pro-defendant or anti-antitrust bias, is [instead] methodically re-working antitrust doctrine to bring it into alignment with modern economic understanding.” I make a similar point here, arguing that the Roberts Court’s antitrust jurisprudence has identified low hanging fruit where there is an economic consensus. If the Court is looking for areas to bring modern antitrust law in align with economic theory, relative to the plaintiff friendly law of the 1960s, one would expect systematically that these decisions would come out in favor of defendants. It is no surprise that they do.  Defendant win rates in cases bringing what everybody agrees was a very anti-consumer and anti-business set of laws in the 1960s in step with modern economic theory and evidence is likely to substantially improve consumer outcomes.  Given the body of doctrine from which antitrust is coming from, to argue that defendant wins are evidence of consumer harm strikes me as implausible without some other corroborating evidence.

Litigation win at the Supreme Court, and enforcement activity levels for that matter, might be interesting for all sorts of reasons. But they are not reliable evidence of the quality of the substantive doctrine, enforcement, or consumer welfare.