The Antitrust Enterprise: Principle and Execution

377 Pages·2008·0.9 MB·English

by  Herbert Hovenkamp

The Antitrust Enterprise

The Antitrust Enterprise
Principle and Execution
Herbert Hovenkamp
HARVARD UNIVERSITY PRESS
Cambridge,Massachusetts
London,England
Copyright©2005bythePresidentandFellowsofHarvardCollege
Allrightsreserved
PrintedintheUnitedStatesofAmerica
FirstHarvardUniversityPresspaperbackedition,2008
LibraryofCongressCataloging-in-PublicationData
Hovenkamp,Herbert,1948–
Theantitrustenterprise:principleandexecution/HerbertHovenkamp
p. cm.
Includesbibliographicalreferencesandindex.
ISBN978-0-674-01897-6(cloth : alk.paper)
ISBN978-0-674-02741-1(pbk.)
1.Competition—UnitedStates. 2.Antitrustlaw—Economicaspects—
UnitedStates. I.Title.
HF1414.H682005
343.73′0721—dc22 2005050362
Contents
Preface vii
Introduction 1
I LIMITS AND POSSIBILITIES 11
1 TheLegalandEconomicStructure
oftheAntitrustLaws 13
2 TheDesignofAntitrustRules 31
3 ThePromisesandHazardsofPrivate
AntitrustEnforcement 57
4 ExpertTestimonyandthePredicament
ofAntitrustFactFinding 77
II TRADITIONAL ANTITRUST RULES 93
5 UnreasonableExercisesofMarketPower 95
6 CombinationsofCompetitors 125
7 DominantFirmsandExclusionaryPractices 150
8 AntitrustandDistribution 181
9 TheNationalPolicyonBusinessMergers 207
III REGULATION, INNOVATION,
AND CONNECTIVITY 225
10 AntitrustunderRegulationandDeregulation 227
11 TheConflictbetweenAntitrustand
IntellectualPropertyRights 249
vi Contents
12 NetworkIndustriesandComputerPlatform
Monopoly 277
Epilogue:AntitrustReform 305
Notes 315
Index 363
Preface
The operating principles of every discipline must periodically be reex-
amined. Too much mischief results when the everyday rules of the law
loseconnectiontotheirfoundationsandacquirealifeoftheirown.This
bookoriginatedinmanylawschoolandeconomicsclassesandseminars
devoted to the effective administration of the antitrust laws. More than
any other forum, classroom encounters have challenged me to identify
antitrust’smostfundamentalandrealisticaspirations.
Ihavetoomanyintellectualdebtstolisthere,butImustmentionone.
PhillipE.Areedawasmyseniorcoauthorfornearlyfifteenyearspriorto
his untimely death in 1995. He helped me to understand and make or-
deroutofthisdiscipline,toappreciateitssignificantlimitations,andto
articulateanddefineitsrules.Hislife’swork,themultivolumeAntitrust
Law treatise that he and Donald F. Turner began in the 1970s, has now
becomemylife’sworkaswell.
IamalsoindebtedtotheUniversityofIowa—andparticularlytothe
two deans under whom I have served, N. William Hines and Carolyn
Jones—foramplesupportofmyresearch.Finally,andgratefully,Idedi-
catethisbooktomyfather,BertHovenkamp.

Introduction
Afterdecadesofdebate,todayweenjoymoreconsensusaboutthegoals
oftheantitrustlawsthanatanytimeinthelasthalfcentury.Bycontrast,
antitrust’s rules for decision making remain unfocused and imprecise.
Fewpeopledisputethatantitrust’scoremissionisprotectingconsumers’
righttothelowprices,innovation,anddiverseproductionthatcompeti-
tion promises. Articulating the means to achieve this end is a different
matter. Policy makers continue to dispute questions about the robust-
ness of markets; about the extent to which strategic business behavior
existsandwhetherantitrustcandomuchaboutit;aboutwherethemost
protectionisneededandwhatformitshouldtake;aboutthespecialrole
ofantitrustinregulatedorderegulatedindustries;andabouttheproper
relationshipbetweenantitrustandinnovation.1
The modern debate over basic antitrust goals began during the era
whenEarlWarrenwasChiefJusticeoftheSupremeCourt(1953–1969).
Under Warren antitrust cases became relatively easy for plaintiffs to
bringandwin,andtheywerehighlylikelytogotojurytrialsunlessfear-
ful defendants settled out of court. But too often the protected class
seemedtobesmallbusinessratherthanconsumers.Indeed,manyWar-
ren-eradecisionscondemnedconductpreciselybecauseitreducedcosts
or generated more desirable products.2 Such practices harm rivals un-
abletomatchthem,buttheybenefitconsumers.Ontopofthat,Warren
Court antitrust was highly distrustful of markets, suspicious of innova-
tion and the intellectual property laws, and convinced that aggressive
antitrust remedies would make the economic world a better place. The
result, wrote Robert H. Bork, the most influential critic of Warren-era
1