Dan Crane on Section 5 and Principles of Self-Restraint

Dan Crane —  1 August 2013

Dan Crane is Sr. Professor of Law and Associate Dean for Faculty and Research at the University of Michigan Law School

I’m delighted that Josh and Maureen have launched a concerted effort to have the FTC articulate clear principles for Section 5 enforcement.  My own views on the proper scope of Section 5 are articulated in my book The Institutional Structure of Antitrust EnforcementI won’t attempt a comprehensive regurgitation here, but just offer three quick observations that may be relevant to the present debate.

First, the most important reason for the articulation of clear Section 5 principles is not to give greater guidance to the business community, although that’s important too.  The most important reason is to articulate principles of self-restraint that Article III courts can invoke in reviewing Commission decisions applying Section 5 in spaces that Sections 1 and 2 of the Sherman Act would not apply under current judicial doctrine.  History suggests that courts jealously guard their interpretations of the Sherman Act and are reluctant to allow the FTC to effectively override them based on assertions of Section 5 independence.  The courts rejected FTC efforts to wield an independent Section 5 in the late 70s and early 80s.  They will be inclined to do so again if the FTC merely asserts “Section 5 is a prophylactic statute; trust us to wield it to good ends.”  By articulating principles that delimit how far the FTC can go under Section 5, the FTC would provide courts assurances that meaningful judicial review can still occur.

Second, and in the same vein, the Commission needs to articulate principles not just about how far it can go under Section 5 but also about how far it cannot go.  It needs to say, in effect, “courts, here is how you will know if we crossed the line.”  These limitation principles need to be concrete enough that defendants have a reasonable opportunity to show through objective evidence that their conduct does not contravene the statute.  In other words, the Commission needs to explain how its view of Section 5 independence is not a plea for greater administrative discretion, which courts will be unlikely to afford, but for an expanded scope of antitrust coverage under principles that can be fairly contested in litigation.

Shifting to the substance of these limitation principles, my third point concerns one of the criteria proposed by Josh—that the challenged conduct have no cognizable efficiency benefits.  I agree with the thrust of Josh’s suggestion, but would suggest a small qualification.   There is virtually no anticompetitive conduct that doesn’t produce some efficiency.  Heck, even the proverbial blowing up of the competitor’s factory might product some efficiency (the rebuilt factory might be 3% more efficient than the old one and hence might spur greater competition in the long run).  Cartels often have some efficiency benefit—they reduce planning costs, smooth prices to customers, etc.  So if the criterion were that the challenged conduct had to be absolutely devoid of efficiency benefits, that might create a null set of independent Section 5 cases.  I would suggest, as a qualification, that the criterion be akin to that used to justify the per se rule—that the challenged conduct is so unlikely to have redeeming efficiencies that the law is justified in not inquiring into whether there are in fact efficiencies.  This is not to say that Section 5 cases would disallow inquiry into efficiencies, but rather that the Commission would need to show that any claimed efficiencies were so trivial or speculative compared to the clear competitive harms that the conduct was similar in kind to price fixing, market division, or bid rigging.  The paradigmatic Section 5 cases—invitations to collude and fraud—easily fit that bill.

Dan Crane


Daniel Crane is the Frederick Paul Furth Sr. Professor of Law at the University of Michigan Law School. He served as the associate dean for faculty and research from 2013 to 2016. He teaches Contracts, Antitrust, Antitrust and Intellectual Property, and Legislation and Regulation.

4 responses to Dan Crane on Section 5 and Principles of Self-Restraint


    Dan – excellent points re the importance of guidance/limits. Curious what you think of my post (http://truthonthemarket.com/2013/08/01/geoffrey-manne-on-the-importance-of-sensible-guidance-for-umc-enforcement/) and Gus’ second post (http://truthonthemarket.com/2013/08/01/gus-hurwitz-on-a-policy-statement-is-not-enough/) expanding on this question of the relationship between the FTC and the courts.

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