When the Justice Department issued its Unilateral Conduct Report last September, it became an instant sensation not primarily because of its content, but because of a strident public critique issued by three FTC Commissioners, including now-Chairman Leibowitz. The three (Harbour, Leibowitz and Rosch, hereinafter “HLR”) accused the Antitrust Division of placing “a thumb on the scales in favor of firms with monopoly . . . power”, and of adopting “drastic changes” comprising “a legal regime [that places] . . . the interests of firms that enjoy monopoly or near monopoly power . . .ahead of the interests of consumers”. Thundering on, HLR savaged the DOJ Report as a “blueprint for radically weakened enforcement of Section 2”, accusing DOJ of “seriously overstat[ing] the level of . . . consensus” on Section 2, and of improperly glorifying economics as “tantamount to the law itself”. Although signed by three of the four Commission members, the Statement was not presented as a position of the FTC, leaving observers to wonder about the internal process that produced the HLR statement and what it reflected about the views of the various Bureaus and other key Commission staff. For FTC/DOJ relations, already rocked by a long series of public disagreements over a string of antitrust issues (reverse-payment Hatch-Waxman settlements, price squeezes), this was a new low, unprecedented in the living memory of the antitrust bar.
The turbulence of this interagency mud-wrestling easily washed away any indistinct traces of more subtle differences on the real issues, such as the proper microeconomic analysis of bundled discounts or the distinction between “disproportionate” versus “balancing” tests for anticompetitive effect. To retrieve the underlying sources of the feud, one must return to the record of the Unilateral Conduct hearings — a process that lasted a full year — extensively summarized in the 213-page Report, for the most part compiled jointly by the staffs of the two agencies. Unquestionably, there are genuine disagreements on the merits of certain issues. Arguably the Division was aggressive in stating its own positions as constituting the state of the law itself (on the “disproportionate” anticompetitive effects standard, for example) as distinct from its own preferred gloss on the law. But one can also question the merits of the HLR Statement — did it really suggest (intentionally or otherwise) that there is too much use of economics in Section 2 jurisprudence and enforcement policy? Bill Baxter stated his bedrock enforcement principle clearly and publicly: ” If it doesn’t make economic sense, it doesn’t happen.” Does the HLR Statement — as well as new AAG Christine Varney’s vow to “rebalance legal and economic theories” in antitrust — portend future government actions against unilateral conduct that would fail to pass through the “economic sense” screen?
The shudder moving through the much wider world of economic policy and the public zeitgeist after the Panic of 2008 — like the impact of the Titanic striking history’s most infamous iceberg almost a century ago — includes a deep doubt about the long-run security of the commitment by the US and the world’s leading nations to free-market competition among private enterprises as the preferable mode of organizing productive activity — the dominant politico-economic philosophy since at least the days of the Washington Consensus. Should we now desert the big free-market ship and row off into the frigid darkness of ad hoc industrial intervention, telling our Chryslers, AIGs and Citigroups to row toward any distant light that might represent a point of refuge? Or do we trust that the big ship isn’t mortally wounded after all — that it can be patched, righted, pumped out and once again made seaworthy? That suggests we not risk our long-run economic health by off-loading the women and children, pouring trillions in stimulus into the fiscal boilers and more trillions into the monetary boilers of our central bank, or by preparing even more drastic measures for our largest and most fundamental industries such as health care and energy.
One of the HLR signatories, Commissioner Rosch, seems to have decreed that the ship is as good as sunk, and has suggested we have already given the call to abandon the SS Chicago School. What is the implication for public policy toward economically powerful firms? History offers some but not much encouragement that antitrust tools can solve the problems of long-term unilateral monopoly power. Indeed, as Commissioner Kovacic — not a co-author of HLR but a more neutral critique of the DOJ Report — decreed in a 1989 article about the efforts of the federal antitrust agencies to use antitrust to restructure dominant firms and concentrated industries,
Never in antitrust history has so massive a litigation program yielded such disappointing results. Most of the government’s deconcentration cases either collapsed before trial or failed to establish liability. The most noteworthy of the government’s few victories received a mixed reaction, as commentators sharply disputed the merits of the relief obtained. While the benefits of rare litigation successes such as the AT&T case seemed uncertain, the costs of the failures were unmistakable and substantial. Most notably, the government’s attacks upon IBM and the nation’s leading petroleum refiners fruitlessly consumed vast resources and became notorious symbols of prosecutorial ineptitude.
Are we about to undertake a similar effort? Or is the antitrust enterprise going to maintain the course set by the decisive turn toward economic analysis that occurred in the late 1970’s and early 1980’s?