Economics and the Interpretation and Application of U.S. and E.U. Antitrust Law: Volume I Basic Concepts and Economics-Based Legal Analyses of Oligopolistic and Predatory Conduct

799 Pages·2014·5.59 MB·English

by  Richard S. Markovits (auth.)

Richard S. Markovits
Economics and the
Interpretation and
Application of U.S.
and E.U. Antitrust
Law
Volume I Basic Concepts and Economics-
Based Legal Analyses of Oligopolistic
and Predatory Conduct
Economics and the Interpretation and Application of
U.S. and E.U. Antitrust Law
ThiSisaFMBlankPage
Richard S. Markovits
Economics and the
Interpretation and
Application of U.S.
and E.U. Antitrust Law
Volume I Basic Concepts and Economics-
Based Legal Analyses of Oligopolistic and
Predatory Conduct
RichardS.Markovits
SchoolofLaw
TheUniversityofTexas
Austin
USA
ISBN978-3-642-24306-6 ISBN978-3-642-24307-3(eBook)
DOI10.1007/978-3-642-24307-3
SpringerHeidelbergNewYorkDordrechtLondon
LibraryofCongressControlNumber:2014939296
#Springer-VerlagBerlinHeidelberg2014
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To Robert Leslie Markovits, my brother,
for his intelligence, sense of humor, generosity,
and courage—for always doing the best that
he can.
.
Foreword to the Two-Study Project
The two-volume law study now being published—ECONOMICSANDTHE INTERPRETA-
TIONANDAPPLICATIONOFU.S.ANDE.U.ANTITRUSTLAW1—isthefirstcomponentofa
two-study project whose second (policy) component is entitled THE WELFARE
ECONOMICS OF ANTITRUST POLICY AND U.S. AND E.U. ANTITRUST LAW: A SECOND-
BEST-THEORY-BASED ECONOMIC-EFFICIENCY ANALYSIS. Although each of the two
studies in the project is freestanding in the sense that each can be read indepen-
dently, each builds on the other. Thus, the law study’s analyses of the organiza-
tional-economic-efficiency defense that I argue should as a matter of law be read
into the U.S. Clayton Act,2 the efficiency defense that U.S. courts interpret the
Sherman Act3 to recognize, the efficiency defenses that the United States Depart-
ment of Justice (DOJ)/Federal Trade Commission (FTC) Horizontal Merger
Guidelines4 indicate these institutions will accept, the “improving the production
1Throughoutthetextthatfollows,“U.S.”willstandfortheUnitedStatesofAmerica,“E.U.”will
standfortheEuropeanUnion,and“E.C.”(withperiods)willstandfortheEuropeanCommunities.
Theletters“EC”withoutperiodswillstandfortheEuropeanCommission.Aftertheratificationof
the Treaty of Lisbon on December 1, 2009, European Communities (E.C.) arrangements were
redesignated European Union (E.U.) arrangements. The text and footnotes that follow usually
avoiddistinguishingbetweenE.C.andE.U.lawordecisionsbyusingthesymbolE.C./E.U.to
refertothem.Thesubtitleofthefirstvolumeofthelawstudytowhosemaintitlethisfootnoteis
attached is ONTHE LEGITIMATE FUNCTIONS, POSSIBLE MONOPOLIZINGOR ABUSIVE CHARACTER, AND
COMPETITIVEIMPACTOFBUSINESSCONDUCT.Thesubtitleofthesecondvolumeofthelawstudyis
ECONOMICS-BASEDLEGALANALYSISOFMERGERS,VERTICALPRACTICES,ANDJOINTVENTURES.
2ClaytonAct,38Stat.730(1914)(codifiedasamendedat15U.S.C.Sections12-27)(hereinafter
ClaytonAct).
3ShermanAct,26Stat.209(1890)(codifiedasamendedat15U.S.C.Sections1-11)(hereinafter
ShermanAct).
4Department of Justice and Federal Trade Commission 1992 Horizontal Merger Guidelines
(hereinafter 1992 Horizontal Merger Guidelines), 4 Trade Reg. Rep. (CCH) Section 13,104
(1992),57Fed.Reg.41,532;1997Revisionofthe1992HorizontalMergerGuidelines,available
at http://www.justice.gov/atr/public/guidelines/hmg.pdf; and Department of Justice and Federal
Trade Commission 2010 Horizontal Merger Guidelines (hereinafter 2010 Horizontal Merger
vii
viii ForewordtotheTwo-StudyProject
ordistributionofgoods”and“promotingtechnicaloreconomicprogress”defences
(exemptions) promulgated by Article 101(3) of the 2009 Treaty of Lisbon5
(formerly Article 81(3) of the 1957 Treaty of Rome6), the efficiency defence
included in the European Commission’s (EC’s) Guidelines on the Assessment of
Horizontal Mergers,7 and the efficiency defence promulgated by the European
Community’s Merger Control Regulation (EMCR)8 rely on the summary that its
Chap. 1 provides of the policy study’s more detailed discussion of the “correct”
definition of “the impact of a natural event, non-government act, or government
policy(hereinafterpolicy)oneconomicefficiency”andonthesummarythatChap.
5 of the law study provides of the policy study’s more detailed account of the
variouscategoriesofeconomicinefficiencythatareexanteeconomicallyefficient
todistinguish.Similarly,thepolicystudy’sanalysesoftheeconomicefficiencyof
preventingallorspecifiedsubsetsofthevarioussortsofbusinessconductantitrust
law covers make use of the conclusions that the law study reaches about the
definitions of various legal concepts that are correct as a matter of law and about
thedeterminantsofvariouseconomicimpactsoftherelevantcategoriesofconduct.
Morespecifically,thepolicystudymakesuseofthelawstudy’sdefinitionsofsuch
(cognate) legal concepts as(1)monopolizing conduct,9attemptstomonopolize,10
contracts, combinations, or conspiracies in restraint of trade,11 conduct whose
object is the prevention or restriction of competition,12 and exclusionary abuses
(of a dominant position),13 (2) conduct that lessens competition,14 conduct whose
effect is the prevention or restriction of competition,15 and conduct that impedes
effective competition,16 and (3) unfair methods of competition17 and conduct
Guidelines) available at http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf (August 19,
2010).
5Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the
European Community (hereinafter 2009 Treaty of Lisbon), 2007 OJ C306 p. 1 (December 13,
2007).
6TreatyEstablishingtheEuropeanEconomicCommunity(hereinafterTreatyofRome),298U.N.
T.S.11(March25,1957).
7ECGuidelinesontheAssessmentofHorizontalMergers,C31/5OJ(2004).
8CouncilRegulation139/2004ontheControlofConcentrationsBetweenUndertakings,OJL24/1
(May1,2004)(hereinafterEMCR).
9ShermanActatSection2.
10Id.
11Id.atSection1.
122009TreatyofLisbonatArticle101(1).
132009TreatyofLisbonatArticle102.
14ClaytonActatSections2-7.
152009TreatyofLisbonatArticle101(1).
16EMCRatArticle2.
17FederalTradeCommissionAct,38Stat.717(1914)(codifiedasamendedat15U.S.C.Sections
41-45)(hereinafterFTCAct).
ForewordtotheTwo-StudyProject ix
whoseobjectoreffectistodistortcompetition.18Thepolicystudyalsomakesuse
of the law study’s many analyses of (1) the legitimate private functions of each
category of conduct covered by U.S. antitrust law and/or E.C./E.U. competition
law,(2)theconditionsunderwhicheachsuchcategoryofconductcancorrectlybe
said to be monopolizing, to have as its object the prevention or restriction of
competition, or to constitute an exclusionary abuse, (3) the determinants of the
impact of each such category of conduct on the intensity of price competition,
(4)thedeterminantsoftheimpactofeachsuchcategoryofconductontheintensity
of the kind of competition that firms wage by increasing the quality or variety of
theirproductvariantsordistributiveoutletsorbyincreasingtheaveragespeedwith
whichtheycansupplytheirproductsandservicesthroughoutafluctuating-demand
cycle by adding to their capacity and inventory (which I call quality-or-variety-
increasing-investment [QV-investment] competition), and (5) the ways in which
thosecategoriesofrelevantconductthatcandistortcompetitioncandosoandthe
circumstancesinwhicheachwilldoso.
ThisForewordtotheTwo-StudyProjectisdesignedtosummarizethecoverage
ofboththelaw-studyandthepolicy-studycomponentsofthisprojectandtoexplain
why I think that all the analyses the project contains will be useful as well as
intellectuallyinterestingtothevariouscategoriesofreadersIhopethetwostudies
willattract.TheForeword’ssummaryofthetwostudieswilltaketheformoflists
ofthesetsofrelatedquestionstheyrespectivelyaddress.
Before proceeding to delineate those lists, some encouragement and advice. I
startwiththeencouragement.AlthoughIincludeintheForeworddefinitionsofall
the concepts that play a critical role in the articulation of the questions its lists
delineate—definitions that I hope are sufficiently clear to make the questions
comprehensible—alltheseconceptswillbedefinedinamoreelaboratedwaythat
often includes illustrations the first time they are used in the studies that employ
them.Thestudieswillthereforebemuchmoreeasilyandfullycomprehensiblethan
thequestion-liststhatsummarizetheircoverage.Nowtheadvice.Readerswhodo
notwanttoincurthecostofobtaininginadvanceinformationabouttheissuesthat
this project addresses and the distinctions, concepts, conceptual systems, and
theoriesthestudieswillarticulate,define,explain,andemploycanproceeddirectly
totheForewordtothisLawStudy.
Inter alia, this book on ECONOMICSANDTHE INTERPRETATIONAND APPLICATIONOF
U.S.ANDE.U.ANTITRUSTLAWaddressesthefollowing18setsofissues:
(1) Why is it correct as a matter of U.S. law to interpret the Sherman Act’s
prohibition of “contracts, agreements, or conspiracies in restraint of trade,”
actsofmonopolization,and“attemptstomonopolize”topromulgateatestof
illegality according to which covered conduct is illegal if and only if its
perpetrator’sorperpetrators’exanteperceptionthatitwasexanteprofitable
was critically affected by its/their belief that it would or might increase its/
182009TreatyofLisbonatArticle101(1).