How the Chicago School Overshot the Mark: The Effect of Conservative Economic Analysis on U. S. Antitrust » (New Edition)

Robert Pitofsky has seen all sides of regulatory law enforcement and analysis: government enforcer and judge, private sector defense attorney, government consultant and for over 40 years law professor. He has taught antitrust and other aspects of regulatory law (communications, intellectual property) for about 40 years at New York University and Georgetown and as a Visiting Professor at Harvard and Columbia. He has been a law enforcer with three periods of service at the Federal Trade Commission (culminating in six years as Chairman) and served as defense counsel with several large New York and District of Columbia law firms.

How the Chicago School Overshot the Mark is about the rise and recent fall of American antitrust. It is a collection of 15 essays, almost all expressing a deep concern that conservative economic analysis is leading judges and enforcement officials toward an approach that will ultimately harm consumer welfare.

For the past 40 years or so, U.S. antitrust has been dominated intellectually by an unusually conservative style of economic analysis. Its advocates, often referred to as "The Chicago School," argue that the free market (better than any unelected band of regulators) can do a better job of achieving efficiency and encouraging innovation than intrusive regulation. The cutting edge of Chicago School doctrine originated in academia and was popularized in books by brilliant and innovative law professors like Robert Bork and Richard Posner. Oddly, a response to that kind of conservative doctrine may be put together through collections of scores of articles but until now cannot be found in any one book. This collection of essays is designed in part to remedy that situation.

The chapters in this book were written by academics, former law enforcers, private sector defense lawyers, Republicans and Democrats, representatives of the left, right and center. Virtually all agree that antitrust enforcement today is better as a result of conservative analysis, but virtually all also agree that there have been examples of extreme interpretations and misinterpretations of conservative economic theory that have led American antitrust in the wrong direction. The problem is not with conservative economic analysis but with those portions of that analysis that have "overshot the mark" producing an enforcement approach that is exceptionally generous to the private sector. If the scores of practices that traditionally have been regarded as anticompetitive are ignored, or not subjected to vigorous enforcement, prices will be higher, quality of products lower, and innovation diminished. In the end consumers will pay.

Introduction Setting the Stage Robert Pitofsky Pitofsky, Robert 3

1 Conservative Economic Analysis and Its Effects 7

Thoughts on the Chicago Legacy in U.S. Antitrust Richard Schmalensee Schmalensee, Richard 11

Some Practical Thoughts About Entry Irwin M. Stelzer Stelzer, Irwin M. 24

Conservative Economics and Antitrust: A Variety of Influences F. M. Scherer Scherer, F. M. 30

Influence of Conservative Economic Analysis on the Development of the Law of Antitrust Thomas E. Kauper Kauper, Thomas E. 40

On the Foundations of Antitrust Law and Economics Daniel L. Rubinfeld Rubinfeld, Daniel L. 51

2 Is Efficiency All That Counts? 75

The Efficiency Paradox Eleanor M. Fox Fox, Eleanor M. 77

The Chicago School's Foundation Is Flawed: Antitrust Protects Consumers, Not Efficiency John B. Kirkwood Kirkwood, John B. Robert H. Lande Lande, Robert H. 89

3 Chicago School and Dominant Firm Behavior 107

The Harvard and Chicago Schools and the Dominant Firm Herbert Hovenkamp Hovenkamp, Herbert 109

Comment on Herbert Hovenkamp and the Dominant Firm: The Chicago School Has Made Us Too Cautious About False Positives and the Use of Section 2 of the Sherman Act Harvey J. Goldschmid Goldschmid, Harvey J. 123

4 Can Vertical Arrangements Injure Consumer Welfare? 139

Economic Analysis of Exclusionary Vertical Conduct: Where Chicago Has Overshot the Mark Steven C. Salop Salop, Steven C. 141

Wrong Turns in Exclusive Dealing Law Stephen Calkins Calkins, Stephen 156

5 Has the Free Rider Explanation for Vertical Arrangements Been Unrealistically Expanded? 179

The Sylvania Free Rider Justification for Downstream-Power Vertical Restraints: Truth or Invitation for Pretext?Warren S. Grimes Grimes, Warren S. 181

Free Riding: An Overstated, and Unconvincing, Explanation for Resale Price Maintenance Marina Lao Lao, Marina 196

6 Reinvigorating Merger Enforcement That Has Declined as a Result of Conservative Economic Analysis 233

Reinvigorating Horizontal Merger Enforcement Jonathan B. Baker Baker, Jonathan B. Carl Shapiro Shapiro, Carl 235

Appendix 289

Index 293