- Overview
A?merica’s antitrust laws have long held a special status in the ?federal statutory hierarchy. The Supreme Court of the United States, for example, famously stated that the “[a]ntitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise.” Thus, when considering the qualifications of a nominee to the U.S. Supreme Court, the nominee’s views (if any) on antitrust are unquestionably of interest. Such an assessment is particularly significant today, given the fact that the Court has had only one remaining antitrust expert (Justice Breyer, who taught antitrust at Harvard), since the sad demise of Justice Scalia (author of the landmark Trinko opinion on the limits of monopolization law).
Fortunately, we know a great deal about the antitrust perspective of Judge Neil Gorsuch, President Trump’s first nominee to the Supreme Court. Judge Gorsuch authored several well-reasoned and highly persuasive antitrust opinions as a Tenth Circuit judge, which show him to be respectful of Supreme Court precedent and fully aware of the nuances of modern antitrust analysis. This is not surprising, since Judge Gorsuch in recent years has taught antitrust law at the University of Colorado Law School. In addition, he had exposure to antitrust matters as Principal Deputy Associate Attorney General during the George W. Bush Administration. What’s more, he worked on major antitrust cases as an associate and then a partner at the Kellogg Huber law firm (see here). Recent commentaries by highly respected antitrust lawyers on Judge Gorsuch’s antitrust jurisprudence manifest great respect for his mastery of the field (see, for example, here and here) – and put to shame a non-antitrust lawyer’s jejeune and misleading “hit piece” on Judge Gorsuch’s antitrust record (see here) that displays a woeful ignorance of the nature of antitrust analysis (see, for example, Ed Whelan’s devastating critique of that screed, here).
In short, Judge Gorsuch is extremely well-versed in antitrust and thus ideally positioned to make important contributions to the Supreme Court’s antitrust jurisprudence, should he be confirmed. A quick evaluation of Judge Gorsuch’s decisions in antitrust cases confirms this conclusion.
- Judge Gorsuch’s Antitrust Opinions
Let’s take a look at three antitrust opinions authored by Judge Gorsuch, two of which deal with refusals to deal, and one of which concerns municipal antitrust immunity. All three decisions show an appreciation for the underlying economic efficiency rationale that undergirds modern mainstream antitrust analysis, consistent with Supreme Court case law pronouncements.
a. Four Corners Nephrology, Associates, PC v. Mercy Medical Center of Durango, 582 F.3d 1216 (10th 2009). To provide Durango, Colorado, residents and Southern Ute Indian tribe members with greater access to kidney dialysis and other nephrology services, Mercy Medical Center, a non-profit hospital, together with the tribe, sought to entice Dr. Mark Bevan to join the hospital’s active staff. When Dr. Bevan declined, the hospital hired somebody else. To convince that physician and others to settle in Durango, and aware that starting a nephrology practice was likely to prove unprofitable for the foreseeable future, the hospital and tribe agreed to underwrite up to $2.5 million in losses they expected the practice to incur. To protect its investment, Mercy made its new practice the exclusive provider of nephrology services at the hospital.
Dr. Bevan sued, contending that Mercy’s refusal to deal with other nephrologists, including himself, amounted to the monopolization, or attempted monopolization, of the market for physician nephrology services in the Durango area. The district court granted summary judgment to the hospital.
Judge Gorsuch’s Sixth Circuit panel opinion affirmed, for two reasons. First, he held that the hospital had no antitrust duty to share its facilities with Dr. Bevan at the expense of its own nephrology practice. It stressed that in demanding access to Mercy’s facilities, Dr. Bevan sought to share, not to undo, the hospital’s putative monopoly. According to Judge Gorsuch, that is not what the antitrust laws are about: ?they seek to advance competition, not advantage competitors. Judge Gorsuch deftly distinguished the Supreme Court’s 1985 Aspen Skiing decision, which upheld a Sherman Act Section 2 refusal to deal claim based on a monopolist ski resort’s discontinuation of a joint ticketing arrangement with a smaller resort (a decision deemed “at or near the outer boundary of §2 liability” in Justice Scalia’s Trinko opinion). He noted that defendant terminated a profitable long-term contractual relationship in Aspen Skiing, in order to achieve long-term anticompetitive goals. In the instant case, however, the hospital was seeking to avoid an unprofitable short-term relationship with the plaintiff doctor – an action consistent with legal competition on the merits, as in Trinko. Second, Judge Gorsuch held that plaintiff had suffered no antitrust injury, because it was seeking to share in monopoly profits, not to undo a monopoly and thereby benefit consumers.
Judge Gorsuch’s careful reasoning in Four Corners adroitly cabined Aspen Skiing’s problematic reasoning. Future courts could benefit from his approach to help rein in inappropriate antitrust attacks on refusals to deal that manifest competition on the merits.
b. Novell, Inc. v. Microsoft Corporation, 731 F.3d 1064 (10th 2013). Novell produced office software, including WordPerfect, Microsoft Word’s leading rival in word processing applications. Microsoft initially gave independent software vendors, including Novell, pre-release access to design information which would enable them to produce applications for Windows 95. Microsoft subsequently changed its policy, however, denying such access prior to the release of Windows 95. This decision significantly delayed, but did not preclude, third party companies from developing Windows 95 applications. Novell sued Microsoft, alleging that Microsoft’s actions helped it maintain its monopoly in the market for Intel-compatible personal computer operating systems. The district court granted judgment for Microsoft as a matter of law, and the Tenth Circuit affirmed.
In his opinion, Judge Gorsuch framed the standard of liability for illegal monopolization under Section 2 of the Sherman Act in a decision-theoretic manner that would gladden the hearts of law and economics mavens: “the question . . . is whether, based on the evidence and experience derived from past cases, the conduct at issue before us has little or no value beyond the capacity to protect the monopolist’s market power—bearing in mind the risk of false positives (and negatives) any determination on the question of liability might invite, and the limits on the administrative capacities of courts to police market terms and transactions.”
Applying this set of general principles in light of the case law and the facts presented, Judge Gorsuch ably dissected and rejected Novell’s theories of antitrust harm, explaining that Novell’s claims did not squeeze “through the narrow needle of [antitrust] refusal to deal doctrine.” Specifically, Microsoft’s actions failed to pass Aspen Skiing muster. Even though “[a] voluntary and profitable relationship clearly existed between Microsoft and Novell[,]. . . Novell . . . presented no evidence from which a reasonable jury could infer that Microsoft’s discontinuation of this arrangement suggested a willingness to sacrifice short-term profits, let alone in a manner that was irrational but for its tendency to harm competition.” The court also rejected Novell’s alternative claim of an antitrust violation based on an “affirmative” act of interference with a rival rather than on a refusal to deal. As Judge Gorsuch explained, “neither Trinko nor Aspen Skiing suggested this is enough to evade their profit sacrifice test, and we refuse to do so either. Whether one chooses to call a monopolist’s refusal to deal with a rival an act or omission, interference or withdrawal of assistance, the substance is the same”. Finally, Novell’s third theory, that Microsoft acted deceptively when it gave pretextual reasons for withdrawing key compatibility information from Novell, similarly proved unavailing. According to Judge Gorsuch, “[deception] . . . wasn’t the cause of Novell’s injury or any possible harm to consumers—Microsoft’s refusal to deal was. . . . Even if Microsoft had behaved [non-deceptively,] just as Novell sa[id] it should have, it would have helped Novell not at all.”
Novell, like Kay Electric, reflects Judge Gorsuch’s understanding of the importance of curtailing inappropriate antitrust attacks on the right not to deal with competitors. It also manifests his keen appreciation for protecting a successful firm’s market-driven economic incentives from being undermined by antitrust attacks. Finally, and most significantly, this decision highlights Judge Gorsuch’s understanding that decision theory is of central importance in administering a rules-based antitrust legal system (see here for a discussion of the role of decision theory in Roberts Court antitrust decisions).
c. Kay Electric Cooperative v. City of Newkirk, Oklahoma, 647 F.3d 1039 (10th 2011). In this case, the Tenth Circuit, per Judge Gorsuch, reversed and remanded a district court’s dismissal of an antitrust suit filed against a municipal electricity provider. Kay, an Oklahoma rural electric cooperative, offered to provide electricity to a new jail being built in an area just outside the city boundaries of Newkirk. The City of Newkirk responded by annexing the area and issuing its own service offer. As Judge Gorsuch pithily explained, “Kay’s offer was much the better but the jail still elected to buy electricity from Newkirk. Why? Because Newkirk is the only provider of sewage services in the area and it refused to provide any sewage services to the jail – that is, unless the jail also bought the city’s electricity. Finding themselves stuck between a rock and a pile of sewage, the operators of the jail reluctantly went with the city’s package deal.” Kay responded by suing Newkirk for unlawful tying and attempted monopolization in violation of the Sherman Antitrust Act. The district court found Newkirk “immune” from liability as a matter of law, and Kay appealed.
Judge Gorsuch surveyed the Supreme Court’s confusing case law on state action antitrust immunity, which shields state-sanctioned restraints of trade from Sherman Act scrutiny. He noted that “though it’s hard to see a way to reconcile all of the [Supreme] Court’s competing statements in this area, we can say with certainty this much – a municipality surely lacks antitrust ‘immunity’ unless it can bear the burden of showing that its challenged conduct was at least a foreseeable (if not explicit) result of state legislation [emphasis in the original].” The judge brilliantly parsed the “muddled” jurisprudence and found three “bright lines” that were “enough to allow us to dispose of this appeal with confidence.” First, “a state’s grant of a traditional corporate chapter to a municipality isn’t enough to make the municipality’s subsequent anticompetitive conduct foreseeable.” Second, “the fact that a state may have authorized some forms of municipal anticompetitive conduct isn’t enough to make all forms of anticompetitive conduct foreseeable [emphasis in the original].” Third, “when asking whether the state has authorized the municipality’s anticompetitive conduct we look to and preference the most specific direction issued by the state legislature on the subject.” Applying these rules to the facts at hand (including relevant Oklahoma statutes), the judge concluded “that it quickly becomes clear that Newkirk enjoys no immunity.”
Judge Gorsuch’s Kay Electric opinion displays great facility in reconciling respect for antitrust federalism with the Sherman Act’s goal of rooting out unreasonable constraints on free market competition. His concise ruling ably cuts through the complexities of the opaque (to be generous) antitrust state action doctrine decisions to identify clear administrable principles that, if broadly adopted, would reduce uncertainty regarding the legal status of anticompetitive municipal conduct. In short, if Kay Electric is any indication, Judge Gorsuch may be just the jurist needed to bring greater (and badly needed) clarity to the Supreme Court’s treatment of state action controversies.
- Conclusion
In sum, Judge Gorsuch’s antitrust opinions reflect a sound grounding in law and economics and decision theory, combined with a respect for Supreme Court precedent, careful attention to traditional judicial craftsmanship, and a respect for the appropriate contours of antitrust federalism. Accordingly, the Supreme Court’s antitrust jurisprudence would unquestionably benefit by having Judge Gorsuch join the Court. For this and for so many other reasons (see, for example, here), Judge Gorsuch merits swift confirmation by the Senate.