THE INFLUENCE OF ECONOMICS ON ANTITRUST LAW

Abstract

Economists today play prominent roles in formulating antitrust policy and litigating antitrust cases. This paper explains why economics influences antitrust law and describes how economic theories enter and shape the antitrust system. Antitrust policy and doctrine change over time in response to developments in economic theory, and the decentralization of the antitrust adjudication system and the wide latitude accorded judges in interpreting antitrust statutes ensure that legal rules will reflect advances in the economic literature concerning the appropriate content of standards governing business conduct. I. INTRODUCTION Twenty-five years ago, George Stigler [1976] asked whether economists matter in the formulation of public policy. A century of experience with the federal antitrust laws indicates that they do. Whereas assessments of their impact vary, most observers regard economists as important participants in the antitrust system. Eisner [1991] emphasizes the modern imprint of Chicago School economic perspectives upon antitrust enforcement and litigation. Rowe [1984] and Hovenkamp [1989] show that economists and economic theory have influenced antitrust doctrine and policy throughout the period since the passage of the Sherman Act. As a rough contemporary market test, one can simply note the expanding number of economic consulting firms for whom antitrust counselling and litigation are staples of the practice.[1] This allocation of society's resources is a reliable sign that economic analysis is significant in the prosecution and adjudication of antitrust cases. This paper suggests why economists and economic learning matter to antitrust policy and describes how the work of economists affects antitrust litigation. The discussion is divided into four parts. The first identifies features of the antitrust system that permit or require economic ideas to be taken seriously. The second part considers how antitrust-relevant economic ideas are generated and absorbed into the antitrust system. The third part examines factors that determine how deeply economic ideas influence antitrust adjudication. The paper concludes by discussing how economics will influence the antitrust system in the Sherman Act's second century. II. THE OPENNESS OF THE ANTITRUST SYSTEM TO ECONOMIC IDEAS Economic analysis influences antitrust litigation because the federal antitrust system is unusually permeable. This permeability is the result of three important features of the antitrust system. The first is the wide range of analytical criteria that courts are permitted to consider in resolving antitrust disputes. Federal judges play a central role in determining the content of the antitrust statutes- Outcomes under the Sherman Act depend crucially upon the construction of ambiguous terms such as conspiracy in restraint of trade and monopolize. As Salop and White [1988, 37] point out, the decision to cast the statutes in general terms has given judges substantial discretion to determine litigation outcomes by defining the content of the statutes' operative terms. In conferring this interpretive role upon the federal courts, Congress has allowed judges to devise standards of conduct at least in part by reference to the likely economic effects of various forms of business behavior. Despite sharp disagreement over the weight Congress meant to accord productive and allocative efficiency as judicial decision making criteria,[2] few scholars seriously argue that Congress intended that courts treat such concerns as irrelevant. Economists would play a far less important part in antitrust adjudication if Congress had precluded judicial consideration of efficiency in implementing statutory commands. The open ended language and indeterminate goals of the antitrust statutes allow economists to affect adjudication and rule formulation to a degree unattainable under most other federal regulatory schemes. …