Symposium

Last updated on Apr 04, 2013

Section 2 Symposium

May 4-7, 2009

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. herehere , 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.

We would like to thank all of our participants and commenters for an outstanding symposium.  This was a truly impressive collection of commentaries on Section 2 and the Section 2 Report, and it should stand for some time as a useful, interesting and provocative collective statement on the issues.  For easy reference, you can access the complete collection of posts here or by clicking on the “section 2 symposium” category on the left side of this page.

We would also like to announce that the symposium will appear in collected form in Global Competition Policy, so be on the lookout for another opportunity to engage with these commentaries there.

Once again, thanks to everyone who participated!

Coda: Varney Withdraws Section 2 Report

I guess it comes as little surprise that Christine Varney has withdrawn the Section 2 Report.  The comments made in the statement withdrawing the Report indicate . . . well, that Varney isn’t convinced by reading this blog, among other things.  Coming on the heels of our Section 2  Symposium, the news is jarring, although not unexpected.  Moreover, as predicted in Howard Marvel’s first post here, Varney is using “recent events” in the economy as a lever:

Varney said that while there is no question that Section 2 cases present unique challenges, the report advocated hesitancy in the face of potential abuses by monopoly firms. She said that implicit in this overly cautious approach is the notion that most unilateral conduct is driven by efficiency and that monopoly markets are generally self-correcting. “The recent developments in the marketplace should make it clear that we can no longer rely upon the marketplace alone to ensure that competition and consumers will be protected,” Varney added.

She doesn’t say it in this statement (and I haven’t seen the text of her speech yet where she announced this policy), but implicit in this is her ongoing rejection of error-cost analysis and the cost of false positives.  As she has said elsewhere:

“My view and, you stole my thunder, I was prepared to say there is no such thing as a false positive, you know, let’s get real. I have counseled numerous incumbents who are dominant as well as numerous new entrants. I can tell you, at least in my own experience, there is not a dominant incumbent who hasn’t done something that is lawful because they were afraid that it might be reviewed by the DOJ or a state attorney general or an FTC. I just don’t see it. Ten years back in the private sector I have never once seen it, so I think that this ruse of, you know, we have to be restrained in our enforcement because false positives will chill innovation, take an economic toll on society and overall result in negative economic consequence, slowing output, increasing cost, I just think is false. I think the more people in the bars start rejecting this idea of false positives the better off we’re going to be.”

It is a stark reminder that we may, indeed, be living under a new antitrust regime.  I can’t say I’m optimistic about it.

Here’s the full text of the DOJ’s statement:

Christine A. Varney, Assistant Attorney General in charge of the Department’s Antitrust Division, today announced that the Department is withdrawing, effective immediately, a report relating to monopolization offenses under the antitrust laws that was issued in September 2008. As of today, the Section 2 report will no longer be Department of Justice policy. Consumers, businesses, courts and antitrust practitioners should not rely on it as Department of Justice antitrust enforcement policy.

The report, “Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act,” raised too many hurdles to government antitrust enforcement and favored extreme caution and the development of safe harbors for certain conduct within reach of Section 2, Varney said. Varney announced the withdrawal of the report today at a speech at the Center for American Progress.

“Withdrawing the Section 2 report is a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers,” said Varney. “The Division will return to tried and true case law and Supreme Court precedent in enforcing the antitrust laws.”

The report was issued after a series of joint hearings, involving more than 100 participants, that the Department and the Federal Trade Commission (FTC) held from June 2006 to May 2007 to explore the antitrust treatment of single-firm conduct. The FTC did not join with the Department in its report.

Varney said that while there is no question that Section 2 cases present unique challenges, the report advocated hesitancy in the face of potential abuses by monopoly firms. She said that implicit in this overly cautious approach is the notion that most unilateral conduct is driven by efficiency and that monopoly markets are generally self-correcting. “The recent developments in the marketplace should make it clear that we can no longer rely upon the marketplace alone to ensure that competition and consumers will be protected,” Varney added.

“I want to commend the efforts of those who participated in the Section 2 hearings,” said Varney. “While I do not agree with the conclusions of the Section 2 report, I do believe that the hearings and the report provided a valuable discussion of the enforcement issues involving single-firm conduct.”

In This Symposium

In This Symposium

Welcome to the TOTM Section 2 Report Symposium

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 ... Welcome to the TOTM Section 2 Report Symposium

Section 2 Symposium: Tad Lipsky on Framing the Debate

Tad Lipsky is a partner in the Washington, D.C. office of Latham & Watkins and a former Deputy Assistant Attorney General with the Department of Justice. 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 ... Section 2 Symposium: Tad Lipsky on Framing the Debate

Section 2 Symposium: Michael Salinger on Framing the Debate

Michael A. Salinger is a managing director in LECG’s Cambridge office and a professor of economics at the Boston University School of Management, where he has served as chairman of the department of finance and economics.  He is a former Director of the Bureau of Economics at the FTC. Given the embarrassing outcome of the ... Section 2 Symposium: Michael Salinger on Framing the Debate

Section 2 Symposium: Dan Crane on Framing the Debate

Daniel Crane is a Professor of Law at Cardozo Law School (soon to be at University of Michigan Law School). I must confess that my basic reaction to the Section 2 report was disappointment.  It’s not that I find much fault with the report itself–a few quibbles yes, but generally I find it quite satisfactory–but ... Section 2 Symposium: Dan Crane on Framing the Debate

Section 2 Symposium: Alden Abbott on the View from Within the FTC

Alden Abbott is Associate Director, Bureau of Competition, Federal Trade Commission. The views expressed below are solely attributable to the author. They do not necessarily represent the views of the Federal Trade Commission or of any individual Federal Trade Commissioner. Much ink has been spilled concerning the policy split revealed by the Justice Department’s September ... Section 2 Symposium: Alden Abbott on the View from Within the FTC

Section 2 Symposium: David Evans–An Economist's View

David Evans is Head, Global Competition Policy Practice, LECG; Executive Director, Jevons Institute for Competition Law and Economics, and Visiting Professor, University College London; and Lecturer, University of Chicago. The treatment of unilateral conduct remains an intellectual and policy mess as we finish out the first decade of the 21st century. There were signs of ... Section 2 Symposium: David Evans–An Economist's View

Section 2 Symposium: Keith Hylton–An Economist’s View

Keith Hylton is a Professor of Law at Boston University School of Law. The “error cost” or “decision theory” approach to Section 2 legal standards emphasizes the probabilities and costs of errors in monopolization decisions.  Two types of error, and two associated types of cost are examined.  One type of error is that of a ... Section 2 Symposium: Keith Hylton–An Economist’s View

Section 2 Symposium: Howard Marvel–An Economist’s View

Howard P. Marvel is Professor of Economics in the Department of Economics and Professor of Law in the Moritz College of Law, both at The Ohio State University. In the wake of Bork and Posner, and Baxter and the Reagan Revolution, a consensus emerged that big could be bad, but the harm that dominant firms ... Section 2 Symposium: Howard Marvel–An Economist’s View

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

Section 2 Symposium: Thom Lambert on Defining and Identifying Exclusionary Conduct

Thom Lambert is an Associate Professor of Law at University of Missouri Law School and a blogger at Truth on the Market. There’s a fundamental problem with Section 2 of the Sherman Act: nobody really knows what it means. More specifically, we don’t have a very precise definition for “exclusionary conduct,” the second element of a ... Section 2 Symposium: Thom Lambert on Defining and Identifying Exclusionary Conduct

Section 2 Symposium: Bill Kolasky on a Stepwise Rule of Reason for Exclusionary Conduct

William Kolasky is a partner in WilmerHale’s Regulatory and Government Affairs Department, a member of the firm’s Antitrust and Competition Practice Group, and a former Deputy Assistant Attorney General in the Antitrust Division at the Department of Justice. The most controversial part of the Justice Department’s Single Firm Conduct Report is the Department’s proposed use of what ... Section 2 Symposium: Bill Kolasky on a Stepwise Rule of Reason for Exclusionary Conduct

Section 2 Symposium: Keith Hylton on The Error Cost Approach and the Case for "Substantial Disproportionality"

Keith Hylton is a Professor of Law at Boston University School of Law.  [Eds – This post originally appeared on Day 1 of the Symposium, but we are re-publishing it today because it bears directly on today’s debate over general standards] The “error cost” or “decision theory” approach to Section 2 legal standards emphasizes the ... Section 2 Symposium: Keith Hylton on The Error Cost Approach and the Case for "Substantial Disproportionality"

Section 2 Symposium: Michael Salinger on Error Costs and the Case for Conduct-Specific Standards

Michael A. Salinger is a managing director in LECG’s Cambridge office and a professor of economics at the Boston University School of Management, where he has served as chairman of the department of finance and economics. He is a former Director of the Bureau of Economics at the FTC. The source of much of the ... Section 2 Symposium: Michael Salinger on Error Costs and the Case for Conduct-Specific Standards

Section 2 Symposium: Bill Page on Microsoft and the DOJ’s General Standards of Exclusion

William Page is a Marshall M. Criser Eminent Scholar in Electronic Communications and Administrative Law at the University of Florida, Levin College of Law. The DOJ’s § 2 Report offers two recommendations under the heading of “General Standards for Exclusionary Conduct.” First, for evaluating alleged acts of exclusion, the Report endorses the burden-shifting framework of ... Section 2 Symposium: Bill Page on Microsoft and the DOJ’s General Standards of Exclusion

Section 2 Symposium: Bruce Kobayashi on Are Administrable Bright Line Rules Underutilized in Section 2 Analyses?

Bruce Kobayashi is a Professor of Law at George Mason Law School. One of the most important changes in the antitrust laws over the past 40 years has been the diminished reliance of rules of per se illegality in favor of a rule of reason analysis. With the Court’s recent rulings in Leegin (eliminating per ... Section 2 Symposium: Bruce Kobayashi on Are Administrable Bright Line Rules Underutilized in Section 2 Analyses?

Section 2 Sympoisum: Welcome to the Final Day

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 ... Section 2 Sympoisum: Welcome to the Final Day

Section 2 Symposium: Bruce Kobayashi on Predatory Pricing and the Relevant Measure of Cost

Bruce Kobayashi is a Professor of Law at George Mason Law School. Dimming the Court’s Brooke Group Bright Line Administrable Rule? As noted in my earlier post, the Supreme Court’s Brooke Group rule is held out as the primary example of an administrable bright line rule aimed at controlling the costs of type I error. ... Section 2 Symposium: Bruce Kobayashi on Predatory Pricing and the Relevant Measure of Cost

Section 2 Symposium: Herbert Hovenkamp on Predatory Pricing and Bundled Discounts

Herbert Hovenkamp is Professor of Law at The University of Iowa College of Law. The baseline for testing predatory pricing in the Section 2 Report is average avoidable cost (AAC), together with recoupment as a structural test (Report, p. 65). The AAC test or reasonably close variations, such as average variable cost or short-run marginal ... Section 2 Symposium: Herbert Hovenkamp on Predatory Pricing and Bundled Discounts

Section 2 Symposium: Thom Lambert on The DOJ-FTC Divide on Bundled Discounts

Thom Lambert is an Associate Professor of Law at University of Missouri Law School and a blogger at Truth on the Market. A bundled discount occurs when a seller offers to sell a collection of different goods for a lower price than the aggregate price for which it would sell the constituent products individually. Such discounts ... Section 2 Symposium: Thom Lambert on The DOJ-FTC Divide on Bundled Discounts

Section 2 Symposium: Dan Crane on Buyer-Instigated Bundled Discounts

Daniel Crane is a Professor of Law at Cardozo Law School (soon to be at University of Michigan Law School). Bundled discounts have been one of the hottest monopolization topics of the last decade. Much of the trouble began with the Third Circuit’s en banc decision in LePage’s v. 3M, which reversed an earlier 2-1 ... Section 2 Symposium: Dan Crane on Buyer-Instigated Bundled Discounts

Section 2 Symposium: Howard Marvel on Safe Harbors for Short Term Exclusive Dealing Contracts

Howard P. Marvel is Professor of Economics in the Department of Economics and Professor of Law in the Moritz College of Law, both at The Ohio State University. Exclusive dealing prevents the bait-and-switch behavior by dealers who convert customers drawn by one brand to the products of its rivals. Despite the red flag of “exclusive” ... Section 2 Symposium: Howard Marvel on Safe Harbors for Short Term Exclusive Dealing Contracts

Section 2 Symposium: Tim Brennan on Predation, Exclusion, and Complement Market Monopolization

Tim Brennan is a professor of public policy and economics at UMBC and a senior fellow with Resources for the Future (RFF). As evidenced by this on-line symposium, the handling of cases under the rubrics “monopolization,” “single firm conduct”, or “abuse of dominance” continues to be debated by the competition policy community. This debate, as ... Section 2 Symposium: Tim Brennan on Predation, Exclusion, and Complement Market Monopolization

Section 2 Symposium: Josh Wright on An Evidence Based Approach to Exclusive Dealing and Loyalty Discounts

Josh Wright is a Professor of Law at George Mason Law School, a former FTC Scholar in Residence and a regular contributor to Truth on the Market. The primary anticompetitive concern with exclusive dealing contracts is that a monopolist might be able to utilize exclusivity to fortify its market position, raise rivals’ costs of distribution, ... Section 2 Symposium: Josh Wright on An Evidence Based Approach to Exclusive Dealing and Loyalty Discounts

Section 2 Symposium: Bill Kolasky on Proving Market Power

The market power section of the Department’s Single Firm Conduct report is one of the strongest sections of the report.  It provides an exceptionally clear discussion of the market power element under Section 2.  It recognizes, in particular, that a violation of Section 2 requires more than mere market power, but rather a finding of ... Section 2 Symposium: Bill Kolasky on Proving Market Power

Section 2 Symposium: Herbert Hovenkamp on Patents and Exclusionary Practices

Herbert Hovenkamp is Professor of Law at The University of Iowa College of Law. One interesting aspect of the DOJ Report on Section 2 is the scant, episodic treatment of IP issues. The Report rejects the presumption of market power for patent ties (p. 81); has a very brief discussion of refusal to license patented ... Section 2 Symposium: Herbert Hovenkamp on Patents and Exclusionary Practices

Section 2 Symposium: Tim Brennan on the Relationship Between Regulation and Antitrust

Tim Brennan is a professor of public policy and economics at UMBC and a senior fellow with Resources for the Future (RFF). When I first started working in antitrust at the Justice Department over thirty years ago—there’s a hard reality to accept—the Antitrust Division was then embroiled in an effort to reform the regulation of ... Section 2 Symposium: Tim Brennan on the Relationship Between Regulation and Antitrust

Section 2 Symposium: Bill Page on Microsoft’s "Forward-Looking" Monopolization Remedy

William Page is a Marshall M. Criser Eminent Scholar in Electronic Communications and Administrative Law at the University of Florida, Levin College of Law. The DOJ’s Section 2 Report speaks in general terms about the costs and benefits of various remedies for monopolization. It prefers “prohibitory” remedies, but holds open the possibility of “additional relief,” ... Section 2 Symposium: Bill Page on Microsoft’s "Forward-Looking" Monopolization Remedy

Section 2 Symposium: Alden Abbott on the International Perspective

Alden Abbott is Associate Director, Bureau of Competition, Federal Trade Commission. The views expressed below are solely attributable to the author. They do not necessarily represent the views of the Federal Trade Commission or of any individual Federal Trade Commissioner. As I indicated in my prior blog entry, U.S. competition policy vis-à-vis single firm conduct ... Section 2 Symposium: Alden Abbott on the International Perspective

Section 2 Symposium: David Evans on "Tying as Antitrust's Greatest Intellectual Embarrassment"

David Evans is Head, Global Competition Policy Practice, LECG; Executive Director, Jevons Institute for Competition Law and Economics, and Visiting Professor, University College London; and Lecturer, University of Chicago. I’d like to propose a contest for the greatest intellectual embarrassment of antitrust. Let me name the first contestant—tying, which some of you know has been ... Section 2 Symposium: David Evans on "Tying as Antitrust's Greatest Intellectual Embarrassment"

Section 2 Symposium: Wrap Up

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. ... Section 2 Symposium: Wrap Up

Coda: Varney withdraws Section 2 Report

I guess it comes as little surprise that Christine Varney has withdrawn the Section 2 Report.  The comments made in the statement withdrawing the Report indicate . . . well, that Varney isn’t convinced by reading this blog, among other things.  Coming on the heels of our Section 2  Symposium, the news is jarring, although ... Coda: Varney withdraws Section 2 Report