Comparative Advantage and Antitrust Law

Abstract

old in thinking about economic arrangements but novel in thinking about the application of law to industrial organization: comparative advantage. Until the 1970's antitrust law sorted all business practices into two bins. The practices in one bin were declared unlawful per se; the practices in the other were evaluated under the rule of reason, which as a practical matter meant that they were declared lawful per se, although the attorneys' fees incurred on the way to the ritual absolution were a hefty tax on the lawful conduct. The per se rules came under attack on the ground that many of the condemned practices might be beneficial, making summary condemnation improvident. Throughout the last fifteen years courts have been willing to indulge explanations for conduct formerly condemned. Along the way the rule of reason also became a testing ground for explanations, so that three years ago the Supreme Court finally declared an important business arrangement illegal under the rule of reason.2 At the same time the Court adopted a middle ground, a quick look version of the rule of reason under which justifications for business practices might be summarily evaluated.3 Modern antitrust law is a search for economic explanations of problematic conduct. If the explanations show the conduct efficient-and therefore ultimately to the consumers' benefit-then the court stays its hand; if not, the court condemns the conduct. Professor Areeda's essay, like his treatise, both praises the new approach to antitrust and offers thoughtful assessments of the justifications that could be offered for each business practice. The dominant approach puts us at risk of losing sight of the impetus