What Influence Will the Section 2 Report Have? The Role of Political Ideology

Josh Wright —  12 January 2009

There has been a great deal of speculation and discussion in this blog and around the antitrust community regarding what will happen with the DOJ Section 2 Report.  Rightly so.  It is a document with the potential to influence both agency monopolization enforcement decisions, international antitrust enforcement, and U.S. doctrine itself in federal court.  What precisely happens with the Section 2 Report is also of considerable significance given the confluence of events that suggest, at least to me, a significant increase in monopolization enforcement (see also some more general predictions about the Obama antitrust regime).

One of the earliest opportunities for antitrust action for the Obama regime, at least symbolically, will be whether it decides to, as Danny Sokol predicts, bury the Section Report in “some large room, like the one that houses the Ark of the Covenant in the end credits of Raiders of the Lost Ark,” or whether it goes for one of the other options on the menu.  For example, the DOJ could formally rescind the report and issue a statement rejecting it much in the same flavor as the FTC Majority Statement.  It could go even further and issue a new Report, perhaps jointly with the FTC, in order to maximize its influence on Section 2 jurisprudence?

In the newest edition of the ABA’s Antitrust Magazine, Geraldine Alexis, Troy Sauro and Mamta Ahluwalia (all of Perkins Coie) offer an interesting take on these issues.  The basic argument is that the DOJ Section 2 Report offers, at its core, agency interpretations of the Sherman Act that are similar in nature to the statutory interpretations offered by the NLRB, EPA, NLRB and other administrative agencies.  Relying on the empirical literature on the relationship between political ideology and judicial deference to agency intepretations in federal court, and in particular the work of new regulatory czar Cass Sunstein and Tom Miles (Chicago Law) and a handful of other studies finding such a relationship, Alexis et al argue that the stakes here are quite high as it is likely that at least conservative federal judges will treat the Report as the gospel on Section 2 unless the new administration unequiovocally rebukes the report.

The rest of the argument goes something like this: (1) there is some compelling empirical evidence that federal court deference to agency interpretations have a substantial political component, (2) the DOJ Section 2 Report sets out what amount to agency interpretations of the Sherman Act, (3) George W. Bush has appointed more than a third of all federal judges now on the bench and these judges (the article argues with some citations) are quite conservative.  This leads to the punchline:

It does not require a great logical leap to predict that the Antitrust Division’s conservative approach to interpreting Section 2 in its Report will find a receptive judicial audience among Bush’s conservative judicial appointees.  The question remains what impact, if any, a possible withdrawal or repudiation of the Report by the next Administration will have on the willingness of conservative judges, nonetheless, to rely upon the “sound, clear, objective and administrable tests” set forth in the Report to interpret Section 2.

The authors go on to recommend, if the Obama regime disagrees with the Section 2 Report (you bet they do), formal withdrawal of the Report rather than an implicit rejection though they note that even a formal rejection won’t stop the Report from having some influence.  The authors might support the notion of a rejection combined with a joint DOJ/FTC Report that more accurately reflects the policy positions of the Obama regime or at least its interpretation of modern monopolization doctrine.

While I disagree with its ultimate conclusion and recommendation to reject the Report (conditional upon its disagreement with the content of the Report, which seems like a given), I liked this article.  Its thoughtful and well written, and relies on empirical evidence rather than hand-waving.  However, I ultimately disagree with the authors conclusion that the Obama regime should reject the Report — but this is mostly because I think it is in fact sound, carefully documents and supports its conclusions, and represents a consensus of economists and antitrust scholars emerging from the Section 2 hearings (in which I participated).  That said, what about the claim about the relationship between ideology and interpretation of the Sherman Act?  The authors point to Miles and Sunstein’s work on the EPA and NLRB as well as other scholarly work on interpretations of workplace law in the Supreme Court.  But what about antitrust and the interpretations of the Sherman Act specifically?

My recent work with Mike Baye, Is Antitrust Too Complicated for Federal Judges (discussed here), examines litigated antitrust decisions over the last decade.  We are interested in a different research question — whether economic complexity influences the quality of judicial decision-making — but use political ideology as a control variable and so have the data to examine whether conservative judges more frequently find for defendants in antitrust cases, controlling for other factors.  In fact, we did some of this work as a robustness check to ensure that our result that judges with economics training are appealed less often was not really capturing a conservative self-selection effect.  Check out the paper for the full results, and discussion, but the short answer is that we find that political ideology in federal district courts is not a significant predictor of plaintiff win rates once one accounts for case type, circuit, and other factors.  In other words, we find that judicial decision-making at the district court level is far less political than suggested by the authors.  Now, this evidence is not directly responsive to the authors’ argument concerning evidence that of judicial deference to agency interpretations combined with the ideological makeup of district courts.  But it is probative.  In federal court decisions interpreting the Sherman Act, judicial political ideology does not appear to be a significant predictor of win rate, appeal rate, or reversals.  I would tentatively interpret our results as suggesting that political ideology is a less important predictor of antitrust outcomes in federal district court than the authors suggest based upon the agency deference literature (of course, one might argue that political ideology is a much more significant predictor of antitrust outcomes and reasoning in appellate courts, including the SCOTUS).

The Obama administration might well reject the Report for other reasons.  I suspect it will do so formally and publicly rather than simply burying it both because it will have strong substantive disagreements with the Report and because there is some symbolic value in doing so.  But I’m not convinced that fear of ideologically driven adoption of the Section 2 Report’s conclusions in a way that shapes substantive monopolization doctrine is further reason for rejection.