The Antitrust Paradox is an influential 1978 book by Robert Bork that criticized the state of United States antitrust law in the 1970s. A second edition, updated to reflect substantial changes in the law, was published in 1993. [1] Bork has credited Aaron Director as well as other economists from the University of Chicago as influences. [2]
Bork argues that the original intent of antitrust laws as well as economic efficiency makes consumer welfare and the protection of competition, rather than competitors, the only goals of antitrust law. [3] Thus, while it was appropriate to prohibit cartels that fix prices and divide markets and mergers that create monopolies, practices that are allegedly exclusionary, such as vertical agreements and price discrimination, did not harm consumers and so should not be prohibited. The paradox of antitrust enforcement was that legal intervention artificially raised prices by protecting inefficient enterprises from competition.
The book has been cited by over a hundred courts. [1] From 1977 to 2007, the Supreme Court of the United States repeatedly adopted views stated in The Antitrust Paradox in such cases as Continental Television, Inc. v. GTE Sylvania, Inc. , 433 U.S. 36 (1977), Broadcast Music, Inc. v. CBS, Inc. , NCAA v. Board of Regents of the University of Oklahoma , Spectrum Sports, Inc. v. McQuillan , State Oil Co. v. Khan , Verizon v. Trinko , and Leegin Creative Leather Products, Inc. v. PSKS, Inc. , legalizing many practices previously prohibited.
The Antitrust Paradox has shaped antitrust law in several ways, prominently by focusing the discipline on efficiency and articulating its goal as "consumer welfare". Many lawyers and economists, however, have pointed out that Bork was wrong in his analysis of the legislative intent of the Sherman Antitrust Act of 1890 and have criticized him for incorrect economic assumptions and analytical errors. One of the key criticisms focuses on Bork's use of the term "consumer welfare", which became the stated goal of American antitrust law.
Bork argues that Congress enacted the Sherman Act as a "consumer welfare prescription". [4] The Supreme Court embraced this view in Reiter v. Sonotone Corp., 442 U.S. 330 (1979) and in all subsequent decisions. Many scholars, however, have shown that Congress had several motives for the adoption of the Sherman Act, probably none of which was "consumer welfare". [5] Moreover, Bork's use of the term "consumer welfare" was inconsistent with its use by economists. When the Supreme Court adopted the view that Congress enacted the Sherman Act as a "consumer welfare prescription", it did not define the meaning of the term, which has remained ambiguous. [5]
The book's title is referenced in Amazon's Antitrust Paradox, a popular paper by Lina Khan who became Chair of the Federal Trade Commission. Her paper seeks to reframe and strengthen antitrust law. [6]
The Sherman Antitrust Act of 1890 is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce and consequently prohibits unfair monopolies. It was passed by Congress and is named for Senator John Sherman, its principal author.
In the United States, antitrust law is a collection of mostly federal laws that govern the conduct and organization of businesses in order to promote economic competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits price fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.
Robert Heron Bork was an American legal scholar who served as solicitor general of the United States from 1973 until 1977. A professor by training, he was acting United States Attorney General and a judge on the U.S. Court of Appeals for the D.C. Circuit from 1982 to 1988. In 1987, President Ronald Reagan nominated Bork to the U.S. Supreme Court, but the Senate rejected his nomination after a contentious and highly publicized confirmation hearing.
The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction over federal civil antitrust law enforcement with the Department of Justice Antitrust Division. The agency is headquartered in the Federal Trade Commission Building in Washington, DC.
Predatory pricing is a commercial pricing strategy which involves the use of large scale undercutting to eliminate competition. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels to attract all consumers and create a monopoly. For a period of time, the prices are set unrealistically low to ensure competitors are unable to effectively compete with the dominant firm without making substantial loss. The aim is to force existing or potential competitors within the industry to abandon the market so that the dominant firm may establish a stronger market position and create further barriers to entry. Once competition has been driven from the market, consumers are forced into a monopolistic market where the dominant firm can safely increase prices to recoup its losses.
The rule of reason is a legal doctrine used to interpret the Sherman Antitrust Act, one of the cornerstones of United States antitrust law. While some actions like price-fixing are considered illegal per se, other actions, such as possession of a monopoly, must be analyzed under the rule of reason and are only considered illegal when their effect is to unreasonablyrestrain trade. William Howard Taft, then Chief Judge of the Sixth Circuit Court of Appeals, first developed the doctrine in a ruling on Addyston Pipe and Steel Co. v. United States, which was affirmed in 1899 by the Supreme Court. The doctrine also played a major role in the 1911 Supreme Court case Standard Oil Company of New Jersey v. United States.
Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust law, anti-monopoly law, and trade practices law; the act of pushing for antitrust measures or attacking monopolistic companies is commonly known as trust busting.
Resale price maintenance (RPM) or, occasionally, retail price maintenance is the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices, at or above a price floor or at or below a price ceiling. If a reseller refuses to maintain prices, either openly or covertly, the manufacturer may stop doing business with it. Resale price maintenance is illegal in many jurisdictions.
United States v. Trans-Missouri Freight Association, 166 U.S. 290 (1897), was a United States Supreme Court case holding that the Sherman Act applied to the railroad industry, even though the U.S. Congress had enacted a comprehensive regime of regulations for that industry.
In United States antitrust law, monopolization is illegal monopoly behavior. The main categories of prohibited behavior include exclusive dealing, price discrimination, refusing to supply an essential facility, product tying and predatory pricing. Monopolization is a federal crime under Section 2 of the Sherman Antitrust Act of 1890. It has a specific legal meaning, which is parallel to the "abuse" of a dominant position in EU competition law, under TFEU article 102. It is also illegal in Australia under the Competition and Consumer Act 2010 (CCA). Section 2 of the Sherman Act states that any person "who shall monopolize. .. any part of the trade or commerce among the several states, or with foreign nations shall be deemed guilty of a felony." Section 2 also forbids "attempts to monopolize" and "conspiracies to monopolize". Generally this means that corporations may not act in ways that have been identified as contrary to precedent cases.
Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), is a US antitrust case in which the United States Supreme Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co.Dr Miles had ruled that vertical price restraints were illegal per se under Section 1 of the Sherman Antitrust Act. Leegin established that the legality of such restraints are to be judged based on the rule of reason.
Competition law theory covers the strands of thought relating to competition law or antitrust policy.
Albrecht v. Herald Co., 390 U.S. 145 (1968), was a decision by the United States Supreme Court, which reaffirmed the law that fixing a maximum price was illegal per se. This rule was reversed in 1997 by State Oil Co. v. Khan, which held that maximum price-setting was not inherently anti-competitive and not always a violation of antitrust law, and should therefore be evaluated for legality under the rule of reason rather than a per se rule.
Continental Television v. GTE Sylvania, 433 U.S. 36 (1977), was an antitrust decision of the Supreme Court of the United States. It overturned United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967), which held that vertical restraints on the territory a product could be sold in were per se illegal. Here, the Court clarified that such non-price vertical restraints would be analyzed under the "rule of reason," allowing defendants to offer justifications for the restraint.
Donald Frank Turner was an American lawyer, economist, and legal scholar known for his expertise in United States antitrust law. He was a professor at Harvard Law School from 1954 to 1979 and served as the Assistant Attorney General in charge of the Antitrust Division of the U.S. Department of Justice from 1965 to 1968.
Pfizer Inc. v. Government of India, 434 U.S. 308 (1978), decision of the Supreme Court of the United States in which the Court held that foreign states are entitled to sue for treble damages in U.S. courts, and should be recognized as "persons" under the Clayton Act.
The history of United States antitrust law is generally taken to begin with the Sherman Antitrust Act 1890, although some form of policy to regulate competition in the market economy has existed throughout the common law's history. Although "trust" had a technical legal meaning, the word was commonly used to denote big business, especially a large, growing manufacturing conglomerate of the sort that suddenly emerged in great numbers in the 1880s and 1890s. The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business. It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act and the Federal Trade Commission Act of 1914, the Robinson-Patman Act of 1936, and the Celler-Kefauver Act of 1950.
Lina Maliha Khan is a British-born American legal scholar serving since 2021 as chair of the Federal Trade Commission (FTC). She is also a professor at Columbia Law School. While a student at Yale Law School, she became known for her work in antitrust and competition law in the United States after publishing the influential essay "Amazon's Antitrust Paradox". President Joe Biden nominated Khan to the FTC in March 2021, and after her confirmation she became the youngest FTC chair ever in June 2021.
The New Brandeis or neo-Brandeis movement is an antitrust academic and political movement in the United States which argues that excessively centralized private power is dangerous for economical, political and social reasons. Initially called hipster antitrust by its detractors, also referred to as the "Columbia school" or "Neo-Progressive antitrust," the movement advocates that United States antitrust law return to a broader concern with private power and its negative effects on market competition, income inequality, consumer rights, unemployment, and wage growth.
In the context of U.S. competition law, the consumer welfare standard (CWS) or consumer welfare principle (CWP) is a legal doctrine used to determine the applicability of antitrust enforcement.