Section 2 Symposium: Welcome to Day 2 on Section 2 and the Section 2 Report–The Debate over General Standards

Geoffrey Manne is Director, Global Public Policy at LECG and a Lecturer in Law at Lewis & Clark Law School.  He is a founder of Truth on the Market.

Josh Wright is Assistant Professor at George Mason University School of Law and a former Scholar in Residence at the FTC.  He blogs regularly at Truth on the Market.

Welcome to the second day of the TOTM Symposium on Section 2 and the Section 2 Report. Yesterday, we started the symposium with a variety of perspectives on the Section 2 Report, the process under which it was created, the subsequent inter-agency debates, and the future of Section 2 enforcement.  We’ve collected links to the posts from the first day here:

• Tad Lipsky (Latham and Watkins) kicked things off by asking whether the FTC dissent from the Section 2 Report and the financial crisis would lead to a reduced role of economics in antitrust along with a dramatically more aggressive monopolization agenda?  (“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?”)
• Michael Salinger (Boston University/LECG) wrote an incisive post about the need for–and difficulty of–employing an error cost framework in Section 2 analysis.  It is worth repeating the admonition in his final paragraph here, perhaps to fuel the next two days’ comments:

Absent objective measures of the necessary inputs into the decision analysis of antitrust standards, positions necessarily rest on subjective estimates.  In this symposium, I believe it would be useful for commenters to articulate as best they can what they believe about the frequency of pro- and anti-competitive uses of practices, the benefits from the competitive uses and costs of the anticompetitive uses, and the quality of the available screens to distinguish between the competing hypotheses.  It would also be useful to examine what the foundations of those beliefs are.  In particular, to what extent are the beliefs based on evidence and to what extent are they based on the plausibility of underlying theory.

• Dan Crane (headed to Michigan Law) noted that while the failure to issue a consensus report on Section 2 (even if somewhat watered down on hot button issues) was a missed opportunity to provide some much needed instructional value to courts on substantive monopolization issues percolating in the lower courts, perhaps the greatest failure of the hearings was “that the agencies were not able to speak as one voice on the rules that should govern private monopolization lawsuits, an issue on which the agencies do not have a direct stake and hence could have served as an ‘honest broker.’”
• Alden Abbott (FTC) then presented us with the insider view of the Section 2 Hearings and the Report process, noting that the apparent disagreement between the agencies is part and parcel of an expansive international debate over the appropriate approach to single firm conduct, and reminding us that (as other participants noted, as well), the Report represents several years of work by staff members from both agencies, and is, in fact, part of an ongoing, collaborative process.
• David Evans (LECG, UCL, University of Chicago) offered the first of three perspectives on the Section 2 Report from an economic perspective, emphasizing the promise of an “evidence based” approach to antitrust and laying down the gauntlet to the economics profession to take the challenge to do the rigorous empirical work necessary to fuel the error cost approach.
• Keith Hylton (Boston University) next succinctly set out the essential defense of an error cost approach that favors avoiding false positives:

Although it is ultimately an empirical question, there are several reasons to adopt the presumption that false conviction costs are greater than false acquittal costs in the monopolization context.  Two of the most persuasive reasons are based on the incentives for entry and for rent-seeking.  The costs of false acquittals in the monopolization setting can be kept in check through the threat of competitive entry.  The costs of false convictions, on the other hand, generate rent seeking incentives to file suit under Section 2 on the part of firms that compete against dominant firms.  Another important reason for the presumption is the asymmetric impact of errors.  False acquittals permit one firm, the falsely-acquitted defendant, to continue practices that harm consumers.  False convictions overdeter dominant firms in general, and can lead to a form of soft competition which is especially harmful to consumers.

• Howard Marvel (Ohio State University) finished things off for our trio of economists by considering the implications of the financial crisis for the Section 2 debates and antitrust enforcement more generally, criticizing some recent calls from overseas and the United States to incorporate the “too big to fail” notion into modern antitrust analysis as harkening back to the days of some of antitrust’s most discredited and counterproductive ideas.

Today we continue our symposium with a series of posts and, we hope, an engaged discussion over the thorny question of a general standard for Section 2 analysis.  Today we’ll hear from:

• Thom Lambert (University of Missouri Law)
• Bill Kolasky (WilmerHale)
• Keith Hylton (Boston University Law)
• Michael Salinger (Boston University Business and LECG)
• Bill Page (University of Florida Law)
• Bruce Kobayashi (George Mason Law)

We hope you’ll join us, and join in the comments.