Section 2 and the Section 2 Report:

Perspectives and Evidence

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.

We’re very pleased to be able to kick off Truth on the Market’s symposium on Section and the Section 2   Report.  We’ve put together a lineup that includes current and former agency representatives, economists, practicing lawyers and academics in the hopes of creating an environment conductive to a productive discussion of not only the actual content and policy recommendations of the Section 2 Report and the current controversies surrounding the Report, but also the process of the hearings themselves and where our panelists think that the critical Section 2 debates are headed in the future.

When the Section 2 hearings kicked off in June 2006, Chairman Majoras noted the importance of finding consensus on the issues surrounding monopolization enforcement:

Unilateral or “single-firm” conduct, however, still vexes. Even though we can find some respectable measure of consensus around principles that should apply, we find a range of opinions from knowledgeable people about how to apply those principles to enforcement in the market. The question of the proper test that our agencies should apply to conduct of a single firm with market power now has dominated antitrust debate for several years….

The Chairman articulated the process that she had in mind for how the hearings would elicit the information and analysis necessary to move the ball forward on the these critical issues that began with increasing our understanding of the relevant business practices and their competitive consequences and then moved toward mapping that increased understanding into improvements in antitrust law:

We want the panels to discuss the conduct from the market perspective from the ground up, that is, examine why and when firms engage in it, how they do it, and what effects it produces for the firm, for other firms (customers and competitors), and for consumers. We should look at whether firms in competitive markets engage in the same conduct and, if so, examine why they do it.  We want these discussions, to the extent possible, to include knowledgeable business people or at least their advisors. From these discussions, we then should endeavor to develop signposts for when the conduct may harm competition and when it typically does not. From these signposts, it would be beneficial to draw some guiding principles. Only then should we turn to examining the current state of the law as it has been applied to such conduct and then to determining what workable legal rules can be applied to the specific conduct at issue for the panel. Perhaps at that point, we may examine what we have learned about workable legal rules for individual types of conduct and determine whether we can pull those together into a broader test or set of rules. Even if these hearings do not produce consensus on a universal test or set of tests, I am optimistic that they can identify relative consensus on a number of principles and on how to approach a significant fraction of the single-firm conduct we encounter.

Likewise, Tom Barnett in his opening remarks was clear about the rationale for the hearings from the DOJ perspective:

The Antitrust Division is co-sponsoring these hearings to help advance our own thinking about unilateral conduct and better inform our judgment about when it is appropriate for the United States to bring enforcement actions under Section 2 of the Sherman Act. Antitrust experts continue to advance the understanding of the different ways that firms unilaterally can–and cannot–harm competition. The Antitrust Division tries to incorporate the latest scholarship and economic thinking into its enforcement decisions, and these hearings will help us meet that goal by providing a forum for experts to review the literature, the business practices, and the law and to speak directly to each other and to us. A number of prominent practitioners and economists have committed to participate in these hearings, and the Antitrust Division is grateful to them for agreeing to share their insights. We are also seeking the views of the business community, consumer groups, and business historians. Those views are significant to our understanding of the real-world implications of various business practices and their potential impact on competition. Improving the legal system helps us all, and I commend those who contribute through either written submissions or panel participation for rendering a valuable public service.

A second reason for these hearings is to advance the development of the law, particularly by articulating points of consensus. Developing the law–or, more accurately, influencing the development of the law–in ways that help competition is an important goal for the Antitrust Division. Courts routinely rely on the Antitrust Division’s views when construing the antitrust laws.

With all of the well known debate over the Section 2 Report, some of which we have covered here at TOTM (see, e.g. here, here , here and here), the new incoming administration, and what looks like a sea change in monopolization enforcement at the agencies, we thought it an appropriate time to take a retrospective look at the Section 2 Report process and outcomes relative to the stated goals above, the substantive content of the Report itself, and the important questions moving forward.

To provide informative commentary on these issues, we’ve invited some of the most prominent and insightful commentators on Section 2 (including many who were involved in the Section 2 hearings themselves) to comment on various aspects of the Section 2 Report.  Today, posts will focus on various perspectives on the Report, process, and outcomes.  Tuesday we will turn to the the Report’s analysis of the the appropriate general standard of exclusionary conduct under Section 2.  On Wednesday, our panelists will tackle some of the specific issues in the Report, including tying, predatory pricing, remedies, exclusive dealing, etc.

Before we start, we want to thank all of these excellent panelists for agreeing to take some time away from their busy schedules to participate in this project.  We are hopeful that this discussion provides some insight and perspective on the Report, and an opportunity for the panelists to interact with one another (and our excellent commenters) in the comments to each other’s posts.

Our first posts will come from Tad Lipsky (Latham & Watkins), Michael Salinger (Boston University, LECG), and Dan Crane (Cardozo, headed to the University of Michigan) who will start things off by framing the debate.   Alden Abbott (FTC) will then share some views on the Section 2 Report from within the Commission.  David Evans (UCL, University of Chicago, LECG), Howard Marvel (Ohio State), and Keith Hylton (Boston University, LECG) will then wrap things up for our first day by providing some insights from an economist’s perspective.

Without further ado, we’ll begin with contributions from Tad Lipsky, Michael Salinger, and Dan Crane.