A LITIGATOR’S PERSPECTIVE ON THE EVOLVING ROLE OF ECONOMICS IN ANTITRUST LITIGATION

By Daniel M. Wall¹

I. PRELUDE

The first substantial assignment I had as an antitrust lawyer dropped me into the deep end of the law and economics pool. It was 1981 and I was a first-year lawyer in the DOJ Antitrust Division’s Honors Program and I had been assigned to the trial team for United States v. AT&T, the landmark case that resulted in the breakup of the Bell System. After the government rested its case in chief, AT&T filed a comprehensive motion to dismiss. One part of that motion challenged the legal sufficiency of the government’s predatory pricing theory on the ground that the government had not proven that AT&T had charged long distance rates below its average variable costs.

It would be difficult to overstate how intimidated I was when asked to respond to this particular part of AT&T’s motion. AT&T’s brief was strong and grounded in what was arguably the seminal article fusing antitrust law and economics into "one thing": Phillip Areeda and Donald F. Turner’s Predatory Pricing and Related Practices Under Section 2 of the Sherman Act.² The "Areeda and Turner test" that originated in this article required the plaintiff in a predatory pricing case to show that the defendant’s prices were below short run marginal costs or (as a proxy for marginal costs) average variable costs, and in the six years between the publication of that article and AT&T’s motion numerous courts had already adopted that standard. The momentum behind the Areeda and Turner test was strong enough that AT&T boldly proclaimed that the "only accepted test for predatory pricing is whether rates were intentionally set at a level below marginal costs." AT&T also argued, for the most part correctly, that the government had not made a case under that test.

But that is not what made this assignment so intimidating. The fear I felt was because I had no idea whether AT&T’s arguments were correct, whether they correctly described the Areeda and Turner test, whether there were alternatives, and most of all how I was supposed to figure that out.

I had no choice but to start reading law and economics articles, of which I discovered there were many. This led to the discovery that as well as the Areeda and Turner average variable cost test was doing in the courts, it was actually getting consistent negative

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criticism from economists and other academics.³ Some of that criticism went right to the core point of whether short run cost measures were appropriate indicators of predatory pricing in markets, such as telecommunications, with high fixed costs.

The government’s predatory pricing theory was, let us say, unusual. We argued that AT&T had priced its long distance services "without regard to costs" and that because it could subsidize unprofitable rates with profits made during the same period in another monopolized service, its conduct did not fall within the "lose money now, recoup later" model of the traditional predatory pricing claim. History has not been kind to this theory, and it is doubtful that any court would take seriously a similar argument made today. But history was not my concern in the Summer of 1981. I just wanted to beat a motion dismiss predicated on a clear overstatement about the role of short-run cost standards in the law. I recalled the advice I had received a year earlier when I was an extern for Judge David Bazelon of the D.C. Circuit, that "sometimes it is easier to say that the other side’s argument is wrong rather than that your side’s is right." And therefore I drafted an opposition brief that primarily said that AT&T was wrong: that the Areeda and Turner test was not the "only accepted test for predatory pricing"; that it was not appropriate for the telecommunications industry with its high fixed-costs; and that consequently AT&T’s motion to dismiss could be denied without making a definitive determination of whether the government’s "pricing without regard to costs" theory was right.

It worked. In September 1981, Judge Harold H. Greene denied AT&T’s motion to dismiss across-the-board.⁴ With regard to the predatory pricing claims, Judge Greene held that "defendants overstate the extent to which the marginal cost test (or its surrogate, the average variable cost test), advanced by Areeda and Turner … has become the sole legal standard for identifying non-compensatory pricing."⁵ He reserved judgment on whether the government’s theory could prevail ultimately. Judge Greene’s denial of AT&T’s motion to dismiss is widely regarded as the determinative moment in this historic litigation. Just four months later, in January 1982, AT&T agreed to be broken up.

II. THE HIGHLY CONTESTABLE MARKET FOR ANTITRUST ECONOMICS

This initial, formative experience in AT&T taught me that economics, like everything else in litigation, is contestable. Economics may be antitrust’s lodestar, but it is an unstable star at best, and often appears to be more like the binary star system in which two stars orbit around an unseen common center of mass. There is a constant push and pull between today’s accepted wisdom and the next great idea. There is more to it than the witticism that "no one ever got tenure by saying that everyone else was right," but that is part

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of it. Economists advance their careers by advancing the state of the art in economics, which necessarily takes the existing literature as a baseline and argues for a better way of addressing the chosen topic, be it predatory pricing, merger analysis, or anything else. Since industrial organization economics is a "soft" science, no one is ever proven definitively right, leaving plenty of room to criticize even major advancements like the Areeda and Turner article.

Lawyers then enter the picture to operationalize (or weaponize) the latest economic thinking. William Kovacic has noted how "[e]conomically astute attorneys such as [Robert] Bork, [Richard] Posner, Frank Easterbrook, and Ernest Gellhorn" were largely responsible for the influence of Chicago School economics on antitrust law because they "took new Chicago School analytical precepts and translated them into operational principles that judges readily could apply."⁶ On the other side of the ledger, lawyers arguing for more expansive (i.e., restrictive) antitrust rules regularly cite the economic literature that favors the more expansive rule. I experienced this in the well-known Kodak case,⁷ discussed below, in which the plaintiffs successfully used economics arguments credited to Steven Salop to convince the Supreme Court not to adopt a rule that a competitive "foremarket" precludes "aftermarket" monopolization claims.⁸ Today, it is routine for litigants in Supreme Court cases to solicit amicus support from ad hoc groups of economists. In most cases, economists support both sides.⁹ Lawyers, of course, write the briefs.

In my teaching, I illustrate the contestability of antitrust economics with the evolution of merger law and economics from the 1960s to the present day. There is a tendency to dismiss the discredited Supreme Court cases of the 1960s, the likes of Von’s¹⁰ or Brown Shoe,¹¹ as economics-free expressions of a populist antipathy to mergers. In reality, those decisions and the merger challenges that led to them were grounded in the prevailing economics of the day, in particular the "structure-conduct-performance paradigm" developed by Joe Bain and others. As Leonard Weiss summarized in 1979, "The main predictions of the structure-conduct-performance paradigm are: (1) that concentration will facilitate collusion, whether tacit or explicit, and (2) that as barriers to entry rise,

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the optimal price-cost margin of the leading firm or firms likewise will increase."¹² Economists of the day were also very skeptical about the capacity of mergers to create efficiencies. It was therefore easy to reason that "[w]ith a considerable amount to lose and apparently nothing much to gain," a tough anti-merger policy was appropriate.¹³ This was the economic mindset that led to successful challenges to mergers creating single-digit market shares, as in Von’s, and to the Philadelphia National Bank rule that mergers leading to combined market share of 30% or more are presumptively unlawful.¹⁴

Then economists figured out that many of these assumptions were wrong. The Chicago School is given (and takes¹⁵) much of the credit for this, especially in challenging the assumption that mergers do not generate efficiencies.¹⁶ Equally important was the work by empirical economists testing the predictions of the structure-conduct-performance paradigm. That work provided no support for the view that small increases in concentration led to increases in prices or profits. Eventually, consensus emerged that it was much more important to focus on already-concentrated markets and on mergers that increased concentration "at the top," e.g., combinations of market leaders. Courts began retreating from the 1960s cases, most notably in United States v. General Dynamics Corp.,¹⁷ in which the government suffered its first Supreme Court loss in a merger case since the 1950 amendments to the Clayton Act. "General Dynamics ... shifted the evaluation of proposed mergers from a strict market-share-based approach to a functional approach under which a single ultimate question—whether there would be a substantial lessening of competition if the merger went forward—took center stage."¹⁸ By 1984, the government itself proclaimed in its Merger Guidelines that it "will not challenge mergers solely on the basis of concentration and market share data without considering other relevant factors…."¹⁹ The 1984 Merger Guidelines also adopted the Herfindahl-Hirschman Index, a measure of concentration that gives more weight to the larger firms in a market, and is therefore particularly attuned to potential coordinated effects from mergers that create or strengthen oligopolies. The 1984 Guidelines also contained an extensive set of factors to consider in determining whether the market was prone to collusion, reflecting the prevailing view, as stated by Judge Richard Posner in Hospital Corp. of America v. FTC, that

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"[w]hen an economic approach is taken in a section 7 case, the ultimate issue is whether the challenged acquisition is likely to facilitate collusion."²⁰

Then economists figured out that maybe collusion wasn’t the key issue; unilateral effects were. The 1992 Merger Guidelines, in no small measure the work of economists Janusz Ordover and Robert Willig,²¹ revolutionized merger analysis by simultaneously adding requirements for a coordinated effects case that makes them very difficult to bring, and more importantly articulating the unilateral effects theory that now dominates the field.²² Unilateral effects concerns are entirely different than coordinated effects concerns—even if both are ultimately about increased market power. A merger creates unilateral effects if eliminating competition between the merging firms themselves could create or enhance market power. A traditional coordinated effects theory is about collusion. An adverse unilateral effect occurs in a portion of a market (raising legal issues about whether it lessens competition in a "line of commerce," as Section 7 requires). Coordinated effects are inherently marketwide. The change in emphasis ushered in by the 1992 Guidelines is therefore fundamental, and it all comes from economics and changing viewpoints on what economic risks mergers pose. This process has continued over the last 30 years, highlighted by the substantially more aggressive and litigation-hardened 2010 Merger Guidelines.²³ Carl Shapiro has likened the evolution of the Guidelines over four decades to a transition from a hedgehog that "knows one big thing"—that "horizontal mergers that increase market concentration inherently are likely to lessen competition"—to a fox that "knows many things."²⁴ If so, it is a fox deeply influenced by the constant changes in the economics it has been studying.

The same process has been changing the standards that apply to conduct or behavioral cases brought under Sections 1 or 2 of the Sherman Act. That evolution is addressed by an extensive literature debating the influence of the Chicago School and whether

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it "overshot the mark."²⁵ From my own perspective, the modern era of antitrust began with Continental T.V. Inc. v. GTE Sylvania Inc., in which the Supreme Court held that all nonprice vertical restraints warrant rule of reason analysis.²⁶ I read Continental T.V. the year after it was decided, in my first antitrust class. Justice Lewis Powell’s majority opinion bypassed an easy way to distinguish United States v. Arnold, Schwinn & Co.,²⁷ and instead overruled Schwinn. The analysis is notable for its citation to economists on both the competitive benefits of non-price vertical restraints and the folly of the Schwinn decision. Judge Richard Posner’s scathing criticism of various Supreme Court antitrust decisions features prominently.²⁸

This turned out to be the beginning of a trend, as throughout the late 1970s and 1980s, lawyers effectively marshaled Chicago School insights and arguments to change the antitrust common law that governed predatory pricing,²⁹ refusals to deal,³⁰ tying,³¹ and practically everything else. This was the environment in which I began my career, and which provided repeated opportunities to integrate economics argument into my advocacy.

III. KODAK AND THE BIRTH OF POST-CHICAGO ECONOMICS

In 1987, eighteen Independent Service Organizations (or "ISOs") filed suit in San Francisco against Eastman Kodak Co. alleging tying and monopolization because Kodak refused to sell them spare parts used in servicing Kodak-brand copiers and micrographics

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equipment. Kodak hired McCutchen, Doyle, Brown & Enersen to defend the case, and I was the junior partner on the team.³²

Everyone knew that Kodak was a monopolist—in film. Xerox was the copier monopolist, "Xeroxing" having become a verb. No one, I soon learned, monopolized the various micrographics equipment markets. But the plaintiffs contended all that was irrelevant, because the "monopolies" at issue were in the aftermarkets for servicing Kodak copiers and micrographics equipment, and the leverage was coming from Kodak’s control over the spare parts for its own products, which it also monopolized. Was it correct, I wondered, that a company with very modest equipment market shares could have monopolies in parts for its own products and servicing its own products?

A then-recent Ninth Circuit case seemed to provide a favorable answer for defendants. In General Business Systems v. North American Philips Corp.,³³ the court had affirmed summary judgment in relation to a claim that a computer company had tied service and warranty protection to computer hardware, precisely because of the defendant’s small market share in the relevant computer equipment market. The Philips court identified the key issue as whether the manufacturer would have been able to "raise the price of its [parts] without reducing its profits," considering whether increased parts prices "would diminish sales of its computer system and … adversely affect aggregate profits."³⁴ The decision describes the basic dynamics of systems competition, including the role of lifecycle costs and lock-in, and ultimately concludes that had Philips "attempted to impose significant pressure to buy [computer parts] by use of the tying service," it "would have hastened the date on which Philips surrendered to its competitors in the small business computer market."³⁵ This seemed like a strong, if not perfect, analogy to the ISOs’ claims against Kodak, so we chose a litigation strategy based on an early summary judgment motion on market and monopoly power.³⁶

The Supreme Court would later say that Kodak’s summary judgment motion was based exclusively on its low share of the equipment markets; that "Kodak [did] not present any actual data on the equipment, service, or parts markets"; and that Kodak sought a "per se" rule that equipment market competition invariably "precludes … monopoly power in derivative aftermarkets."³⁷ None of those assertions is true.³⁸ Kodak’s motion in fact anticipated that lifecycle costs, information costs and switching costs (leading to lock-in) would be part of the summary judgment calculus, as they were in Philips and other relevant cases. So Kodak offered declarations by its executives on those subjects, and offered discovery on those issues. The plaintiffs only addressed one of those issues, lock-in, in their responsive papers. Their argument was more categorical and formalistic than anything Kodak argued: they distinguished between

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"buyers" and "owners" of Kodak equipment, and claimed that for "owners" (those who had already bought) switching equipment because of high parts and services prices was not feasible.

The district court granted Kodak’s motion; the Ninth Circuit reversed; and the Supreme Court granted certiorari.

This was when I learned that when the Supreme Court agrees to hear "your case," it is no longer your case. It becomes something much larger than the dispute between the litigants. Numerous interested third parties enter the fray either formally, as amici, or attempting to influence the arguments and outcome informally. And in 1991, after two decades of rising Chicago School influence in antitrust, Kodak became a kind of "barricade on the Rue de la Chanvrerie" which the resistance could use to slow, if not stop, the Chicago School’s influence. Enter Steven Salop, one of the most preeminent post-Chicago economists, who was essentially handed the pen by plaintiffs’ counsel to include in their merits briefan economic essay on how parts policies like Kodak’s might be anticompetitive were Kodak willing to engage installed base opportunism.³⁹ Respondents also explicitly associated Kodak’s arguments with the Chicago School, arguing that "Economic theory – even if valid – is not a substitute for law."⁴⁰

Looking back at this, I still recoil at the suggestion that Kodak advanced a Chicago School economic argument. During the certiorari process and afterwards, Kodak was advised by Janusz Ordover and Carl Shapiro, who no one accuses of being Chicago School economists. Kodak’s arguments were grounded in broadly accepted principles of systems competition that Shapiro discusses in a 1995 article.⁴¹ They anticipated arguments that would not come "from Chicago," such as the possibility of a price discrimination strategy. And while Kodak cited to Chicago School figures such as Ward Bowman and Richard Posner, it cited to others as well.

On the other hand, a Chicago School precept certainly featured in Kodak’s arguments: the idea that antitrust needs to consist of administrable rules that are not so preoccupied with the edge cases that they deter practices that are ordinarily competitively benign. Kodak’s argument that this was an appropriate case for summary judgment definitely echoed that position, and in that regard we cited both The Limits of Antitrust, Judge Frank Easterbrook’s classic article advocating the use of an error cost framework in formulating antitrust rules,⁴² and an article in which Easterbrook argued specifically that addressing "questionable practices pursued by firms without [market] power will spin the wheels of the courts – at great expense – for no substantial result."⁴³

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It is with respect to that administrability principle, a mix of substance and process, that Chicago lost out in Kodak. Salop’s substantive installed base opportunism argument accomplished little in the long run. As others have noted, in subsequent ISO litigation courts limited Kodak to its facts and "the defendants almost uniformly prevailed."⁴⁴ The Kodak plaintiffs did not themselves pursue the installed base opportunism theory on remand, since Kodak’s conduct could in no way be explained by it. In numerous later ISO cases I defended, no plaintiff ever pursued that theory either; to the contrary, it was an effective defense strategy to explain what an installed base opportunism theory requires and contrast that with what the plaintiff was arguing. The requirement that the allegedly anticompetitive practice was unanticipated, or a "surprise," was a particularly strong defense argument because almost invariably the challenged aftermarket practice was known or knowable to buyers when they purchased in the foremarket. All nine Justices on the Kodak Court agreed that had there been evidence that Kodak’s restrictive practices were generally known, the foremarkets would have been the relevant markets, not the aftermarkets.⁴⁵

Nevertheless, Salop’s theories carried the day when combined with the plaintiffs’ argument that summary judgment had been granted prematurely, without an opportunity to conduct meaningful discovery. That procedural context allowed a story not supported in the record to overcome the Chicago preference for limited, administrable rules that in this case would not entertain Salop’s theory—not because it was wrong, but because as Phillip Areeda (of the Harvard School) once said, "relative clarity is itself an attribute of justice, allowing private parties to plan their affairs, minimizing the social burdens of uncertainty and the costs of litigation, and reducing the likelihood of quixotic results flowing from vague standards, inconsistently applied."⁴⁶ The majority in Kodak framed the case as procedural: "This is yet another case that concerns the standard for summary judgment in an antitrust controversy."⁴⁷ It declared, as the Court often does, that "[t]his Court has preferred to resolve antitrust claims on a case-by-case basis, focusing on the ‘particular facts disclosed by the record,’" instead of legal presumptions.⁴⁸ It claimed falsely that Kodak had not provided any evidence for its arguments and was seeking a per se rule of legality.⁴⁹ That procedure-versus-substance set-up is plainly

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the battle between the majority and Justice Scalia’s dissent, which begins with: "This is not, as the Court describes it, just ‘another case that concerns the standard for summary judgment in an antitrust controversy.’ Rather, the case presents a very narrow—but extremely important—question of substantive antitrust law…."⁵⁰ Justice Scalia’s perspective was classically Chicago. The majority did not share it. That preference for resolving cases on the facts is arguably the only enduring principle from Kodak, and it is honored inconsistently at best.

If Kodak was a victory for post-Chicago economics, what are the spoils? In fact, it is difficult to identify clear-cut substantive "wins" for post-Chicago economics, i.e., changes in decisional rules that arise from post-Chicago thinking comparable to how Chicago economics led to Leegin.⁵¹ The "raising rivals’ costs" ("RRC") concept developed by Salop and his collaborators is arguably the seminal contribution of post-Chicago economics, and I have found it very useful in assessing vertical foreclosure issues of all kinds. Yet it is very hard to identify any cases in which the particular RRC framework advanced in the Krattenmaker and Salop⁵² article has been adopted as the legal decisional framework. In summary, the RRC analysis has two steps: "First, one should ask whether the conduct of the challenged firm unavoidably and significantly increases the costs of its competitors. If so, one then should ask whether raising rivals’ costs enables the excluding firm to exercise monopoly power…."⁵³ Both are rigorous, even daunting requirements if one addresses them as the RRC literature requires.⁵⁴ Making out an RRC case is by no means as easy as saying that a monopolist raised the plaintiff’s costs. And so it is notable that as often as the Krattenmaker and Salop article is cited in legal opinions, it tends to be collateral support for an analysis conducted under a different decisional framework derived from case law.⁵⁵

I suspect part of the reason for this is that plaintiffs find only a watered-down version of the first part of the RRC test useful—they would like to start and finish by showing that the defendant’s conduct meaningfully raises the rival’s costs. Very few plaintiffs will find it useful to address that issue as the RRC literature says it should be addressed, which is either in relation to minimum viable or minimum efficient scale, or at the very least by

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proof that the burden of higher costs constrains rivals’ output or ability to expand.⁵⁶ Fewer still will want to take on the burden of the second and more demanding requirement that the defendant’s conduct creates "power over price." Therefore, as Janusz Ordover and I predicted in 1987,⁵⁷ the tendency has been to cite Krattenmaker and Salop’s RRC article for the raising rivals’ costs epithet but not to go down the complete, rocky road that they and other RRC economists modeled.

Post-Chicago economists have also made important contributions to our understanding of tying; for example Michael D. Whinston’s, Tying, Foreclosure, and Exclusion,⁵⁸ which shows how tying can exclude rivals if the tied market is subject to economies of scale and leveraging induces exit or deters entry in the tied market by making continued operation unprofitable. But again, where is the case that adopts this as the decisional framework in a challenge to tying? My suspicion is that not very many antitrust plaintiffs have found it in their self-interest to embrace this test, because legal standards stated in terms of the tie affecting "a ‘not insubstantial’ amount of interstate commerce" in the tied product are more generous.⁵⁹ Contrast that with the eagerness of defense attorneys to embrace Chicago School proposals to limit prior antitrust doctrine. Selection bias goes a long way toward explaining the differential influence of the two schools of thought.

That "post-Chicago insights have had little apparent impact in litigation,"⁶⁰ does not mean that they have been unimportant. At the very least, post-Chicago economics has strongly elevated the importance of game theory, which is largely absent from Chicago and even Harvard models. The unilateral effects theories that are now the driving force in merger analysis are also fairly attributed to post-Chicago economics. Furthermore, the post-Chicago literature presents litigators with a wealth of ideas for how to approach the novel or difficult case, from either the plaintiff or defendant perspective. Post-Chicago economics are undoubtedly present in many expert reports and theories of the case; in my own cases, I have had to answer sophisticated economic arguments explicitly labeled as post-Chicago. So the impact is there, even if it is not directly apparent in new or modified legal standards.

III. EVIDENCE-BASED ANTITRUST – AND WHO OWNS IT

In recent years, both conservative and progressive scholars have tried to move beyond the Chicago/post-Chicago debate by saying that what they really favor is "evidence-based" antitrust analysis. Joshua Wright tries to own this moniker for the right,⁶¹ while in a forthcoming paper Carl Shapiro defines a "Modern" approach to antitrust as one in which the

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latest economic thinking is integrated with "reliable evidence, not … outdated assumptions or laissez faire ideology."⁶²

Of course it is hard to be against evidence-based anything. An objection to evidence-based analysis sounds like an objection to reason itself. It is a particularly difficult concept for a litigator to oppose, since at its core litigation is the application of law to competing versions of the relevant evidence.

Joshua Wright argues that his version of evidence-based antitrust is agnostic to whether the economics come from Chicago, post-Chicago or elsewhere—"as long as such [theoretical] insights have empirical support."⁶³ That is a significant hedge given that one of the Chicago School’s persistent criticisms of post-Chicago economics is that it is theoretical and lacks empirical support. He also incorporates into his evidence-based approach what I regard as a pillar of Chicago School thinking: the idea that one should "apply the tools of decision theory with the goal of producing liability rules that minimize the social and administrative costs of erroneous decisions."⁶⁴ That, I imagine, is what Shapiro would categorize as "laissez faire ideology." Shapiro argues that "Easterbrook’s entire analysis [of error costs] was based on an economic assumption he made that ‘Monopoly is self-destructive. Monopoly prices eventually attract entry.’ But his assumption that monopoly power erodes soon enough was based on ideology, not evidence."⁶⁵

I am a modernist at heart, simply because it seems wrong not to want to keep up with the latest, greatest economic thinking. At the same time, I have reservations that come from processing antitrust disputes through the courts for over forty years. The courts are imperfect generally, and our rules of civil procedure distort the decisions judges make in numerous ways. Preliminary challenges to complaints, i.e., motions to dismiss, are constrained by rules that favor plaintiffs—even after Twombly.⁶⁶ If a complaint survives an initial challenge (or there is none), the next opportunity for a defendant to have the case dismissed is at summary judgment, probably a year or more down the road. Yet because summary judgment requires no reasonable

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dispute over material facts,⁶⁷ not every case or issue is amenable to summary judgment. Worse, there is not always correlation between the strength of a plaintiff’s case and its prospects at surviving summary judgment. Like other litigators, I have obtained summary judgment in relatively strong cases (from the plaintiff’s perspective) because the plaintiff’s weak point lined up with a legal principle that could be applied effectively in a summary judgment motion, and I have lost summary judgments in much weaker cases because they were factually weak but did not have the right kind of legal failing for this procedure.

The next decision point in most private civil cases would be a jury trial, a forum in which neither the nuances of economic models nor the fine points of legal doctrine play much of a role at all.

The judicial system compels me to recommend what some might regard as the Chicago approach (which is what I read Professor Wright to be advocating), but I see differently. Our decisional rules must be administrable in our district courts, and especially at summary judgment, even if to make them administrable they do not cover the meritorious edge case. This is not an endorsement of the "thumb on the scale" that Easterbrook proposes out of concern for error costs, in particular over-deterrence. Administrability as I use it here is a different, narrower concept focused on how a substantive rule interacts with procedural rules in the district courts. Then-Judge Stephen Breyer put it this way in Barry Wright Corp. v. ITT Grinnell Corp.:

[W]hile technical economic discussion helps to inform the antitrust laws, those laws cannot precisely replicate the economists’ (sometimes conflicting) views. For, unlike economics, law is an administrative system the effects of which depend upon the content of rules and precedents only as they are applied by judges and juries in courts and by lawyers advising their clients. Rules that seek to embody every economic complexity and qualification may well, through the vagaries of administration, prove counter-productive, undercutting the very economic ends they seek to serve.⁶⁸

Two rules with identical intent—for example, each seeks to deter the same amount of predatory pricing—will in practice be differentially restrictive depending on how they can be applied in the district courts, and in particular at summary judgment. Broadly speaking, the rule with "fewer parts," so to speak, will give the defendant a better opportunity to obtain summary judgment and therefore be less restrictive in practice. The rule that is more factually intense and multi-dimensional will be harder to apply at summary judgment and therefore more restrictive in practice. The latter rule creates greater legal risk for those engaging in the behavior because they are more likely to have to defend it through trials and appeals. It is therefore not costless to promote flexibility or (in a Kodak sense) a desire to consider "all the facts." Flexibility almost always means a broader, more proscriptive legal principle, given the institutional setting in which those rules are applied.

In many ways, my views on this mirror those I have with regard to antitrust’s quest for universal tests for exclusionary conduct. I refer to proposals such as Judge Richard Posner’s

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"equally efficient rival" test,⁶⁹ the profit sacrifice or "no economic sense" test,⁷⁰ the raising rivals’ costs models discussed earlier, and so forth. The literature on this is substantial. All of these tests are in some sense alternatives to the bespoke standards that have developed through case law for particular practices, i.e., the non-universal tests for predatory pricing, refusals to deal, tying, etc.⁷¹ In this debate I am firmly in the non-universal camp for the reasons Mark Popofsky gives in his excellent treatment of this subject.⁷² Specificity and clarity simply work better in a system administered by judges and juries, and bespoke decisional rules are inherently more likely to provide clarity and be more administrable. Ironically, the influential D.C. Circuit en banc decision in Microsoft⁷³ provides an object lesson in our natural preference for specific, administrable rules. The decision is primarily known for the "Microsoft balancing" approach to the rule of reason, and in it the court proclaimed that antitrust "courts routinely apply a … balancing approach" under which "the plaintiff must demonstrate that the anticompetitive harm … outweighs the procompetitive benefit."⁷⁴ But then the court issued a split decision whereby the government won on some issues and Microsoft prevailed on others without the court ever doing any balancing. Instead, as Herbert Hovenkamp has noted, "If the defendant offered a nonpretextual defense, the court simply accepted it, and it condemned behaviors for which no defense was offered."⁷⁵ This is the norm in rule of reason cases; courts strive to avoid the final, ad hoc step of balancing positives and negatives, and instead seek out, and latch on to, the administrable principle that can support the desired outcome.

As this is written, there are proposals in Congress and elsewhere to enact presumptions that will, in practice, make merger and monopolization litigation less evidence-based. For example, S. 225, the "Competition and Antitrust Law Enforcement Reform Act of 2021," would effectively reverse the burden of proof in many merger cases. There is no need for this in relation to mergers—unless one simply wants to move the goalposts and make merger law more restrictive. Non-jury merger trials are the high-water mark for antitrust from the perspective of rational decision-making. Both the evidence and the economics are addressed at a much deeper and nuanced level than one typically finds in the run-of-the-mill private action. Government conduct cases (such as Qualcomm⁷⁶ or American Express⁷⁷) would be a close second because they too are tried to the court, often in lengthy trials. I have little sympathy for complaints that today’s decisional rules make it too hard for the government to win these cases. Mistakes are made, as in Qualcomm, where I am inclined to agree that the Ninth Circuit panel

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displayed a remarkably poor understanding of antitrust basics. But if the story of the rise of the Chicago School and its effects on prior antitrust doctrine proves anything, it is that there are equilibrating processes in antitrust that eventually correct errors. Errors introduced into the system by legislation will not be correctible absent later, unlikely legislation.

IV. THE UNCERTAIN FUTURE FOR RATIONAL ANTITRUST ANALYSIS

The antitrust story of 2021 is the rise of the antitrust "populists" within the administration of President Joseph R. Biden. Shapiro identifies this group as "deeply concerned about the political power of large companies. They favor deconcentrating the economy to reduce that power and thereby open up opportunities for small businesses, benefit workers, and lessen racial and economic inequities. They favor simple, bright-line rules and are highly skeptical of the role of economics and expertise in antitrust."⁷⁸ Prominent populists include Tim Wu, the Columbia Law professor, current Special Assistant to the President for Technology and Competition Policy, and author of THE CURSE OF BIGNESS: ANTITRUST IN THE NEW GILDED AGE (2018) and THE MASTER SWITCH: THE RISE AND FALL OF INFORMATION EMPIRES (2010); and Lina Khan, Chair of the Federal Trade Commission, who also taught at Columbia Law and made her name as a critic of Amazon and other large technology companies.⁷⁹ Khan was a principal author of the October 6, 2020, report by the House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law, which is an aggressive, 449-page attack on Google, Apple, Facebook and Amazon.⁸⁰

I fail to see any coherent, let alone legally cognizable, economic theory in the Subcommittee Report. To a very large degree, the contentions in the Subcommittee Report boil down to (a) an almost categorical aversion to vertical integration, and (b) Tim Wu’s longstanding view that platforms should be required to be "open."⁸¹ Take for example a primary complaint about Amazon: that it should not be both "referee and player" by operating both a platform and its own retail business. As Randal Picker notes, "We should start with the natural question: why is it useful for Amazon to both be a traditional retailer and then also operate as a platform?"⁸² The answer, simple enough, is that having created an enormous presence as an online retailer, but having neither the capacity nor interest to supply everything Amazon customers want to buy, it makes sense for Amazon to sell platform services including its renowned back-end transaction and fulfillment services to third parties. That is not anticompetitive; it brings more capacity and competition to the market for back-end transaction and fulfillment services. Does anyone claim this makes "no economic sense" but for its tendency to exclude competition? No. Does anyone claim this raises Amazon’s rivals’ costs such that it gains power over price?

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No. The populists just do not like that fact that Amazon is enormous, vertically-integrated in multiple ways, and undoubtedly powerful. It really is a belief that big is bad.

But this is not surprising because the populists take aim straight at what makes economics important in antitrust: the consumer welfare standard. Tim Wu calls the generally accepted view that consumer welfare is antitrust’s lodestar "absurd and exaggerated."⁸³ Lina Khan’s Amazon’s Antitrust Paradox article is, start-to-finish, an argument that applying traditional antitrust analysis grounded in the consumer welfare standard gets it all wrong.⁸⁴ So many populist proposals are just "put a limit on" size, share, integration or other metrics without any evident or even claimed economic justification. Regrettably, there appear to be strong political tailwinds behind this push.

There are some who say that behavioral economics may improve antitrust analysis.⁸⁵ This is the school of thought that replaces the classical notion of rational economic behavior whereby consumers maximize their utility and firms maximize their profits with "bounded rationality," a term that means that economic actors are rational (in the classical sense) to a point but are also influenced by biases, reference points, loss aversion, social considerations such as fairness and other factors.⁸⁶ There were some early efforts to suggest that behavioral economics showed that Chicago School economics were incomplete and therefore antitrust should not follow Chicago School economics any longer. My mentor and friend, the late FTC Commissioner J. Thomas Rosch, was among those espousing that view.⁸⁷ But there is a gargantuan problem with this line of reasoning ably explored by Avishalom Tor, which is that once one accepts that the classical notion of rational economic behavior upon which antitrust policy is based is flawed, it is not so clear that the antitrust system with its emphasis on promoting competition is very valuable. For example, if consumers really don’t respond to a small but significant nontransitory increase in price, i.e., a SSNIP, because in their bounded rationality calculus that is unimportant, what are we doing blocking mergers on the ground that they might lead to SSNIP-like increases in post-merger prices? As Tor puts it, "[t]his discrepancy between theory and reality [concerning consumer behavior] raises fundamental questions about the ability of competition and its protection to yield the efficiency and welfare benefits predicted by the

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standard neoclassical model."⁸⁸ Furthermore, behavioral economics may be an even less helpful way to achieve administrable decisional rules than the classical alternatives because one of its key insights is that the behavior of both firms and consumer is very difficult to predict and not neatly correlated to the state of competition.

I therefore revert to the modernist approach of using the latest, greatest advances in classical economics to guide both the development of the law and the outcome in difficult cases—so long as the economics can be reduced to administrable principles. Alternatives that are fundamentally anti-economic or challenge the foundational belief that competition promotes consumer welfare do not seem like improvements.

V. CONCLUSIONS

Economics and the constant advances in economics are at the core of what makes the antitrust system work. Maybe these principles, or arguments if you prefer, are not neutral, but they are the closest thing we have to a "true north" for an analysis that constantly jumps from industry to industry, market structure to market structure, and covers a broad swath of potentially anticompetitive conduct. Economics allows us to say that "Chicago overshot the mark," and that today’s populists are off the map. It allows us to say that the Areeda and Turner average variable cost test is right most of the time, and apply a better standard when it would be wrong. It allows us to jettison merger standards that would condemn the most innocuous combinations, but also redirect merger enforcement toward unilateral effects that were once ignored.

Antitrust lawyers also know how to use these tools, integrating economic analysis into the decisional rules we call the law. Institutional constraints such as administrability challenge those efforts, but the experience of the last 50 years—the period in which economics has taken center stage—shows that for the most part the antitrust system can appropriately debate and implement useful advances in antitrust economics.

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Notes:

^1. Daniel M. Wall is a partner at Latham & Watkins LLP in San Francisco. This article was written in connection with Mr. Wall’s designation as the Antitrust and Unfair Competition Law Section’s 2021 Antitrust Lawyer of the Year. The views expressed are Mr. Wall’s alone and do not represent the views of Latham & Watkins or its clients.

^2. 88 HARV. L. REV. 697 (1975).

^3. See, e.g., Oliver E. Williamson, Predatory Pricing: A Strategic and Welfare Analysis, 87 YALE L.J. 284 (1977); F. M. Scherer, Predatory Pricing and the Sherman Act: A Comment, 89 HARV. L. REV. 869 (1976); William J. Baumol, Quasi-Permanence of Price Reductions: A Policy for Prevention of Predatory Pricing, 89 YALE L.J. 1 (1979); Paul L. Joskow & Alvin K. Klevorick, A Framework for Analyzing Predatory Pricing Policy, 89 YALE L.J. 213 (1979). Herbert Hovenkamp has written a succinct history of the Areeda and Turner test. See Herbert J. Hovenkamp, Predatory Pricing under the Areeda-Turner Test, FACULTY SCHOLARSHIP AT PENN LAW (2015), https://scholarship.law.upenn.edu/faculty_scholarship/1825.

^4. United States v. Am. Tel. & Tel. Co., 524 F. Supp. 1336 (D.D.C. 1981).

^5. Id. at 1368.

^6. William E. Kovacic & Carl Shapiro, Antitrust Policy: A Century of Economic and Legal Thinking, 14 J. ECON. PERSPS. 43, 53 (2000); see also William E. Kovacic, The Antitrust Paradox Revisited: Robert Bork and the Transformation of Modern Antitrust Policy, 36 WAYNE L. REV. 1413, 1437-39, 1445-51 (1990).

^7. Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451 (1992).

^8. See Daniel M. Wall, Editor’s Note: Kodak: A Personal Perspective, 7 ANTITRUST 4 (1992).

^9. As just one example, in Ohio v. American Express Co., 138 S. Ct. 2274 (2018), the controversial 5-4 decision that Amex’s anti-steering provisions did not violate Section 1 of the Sherman Act, eight economists filed an amicus brief supporting Ohio and the view that one did not need to consider both sides of a two-sided market. Brief for Amici Curiae John M. Connor et al. in Support of Petitioners, 2017 WL 6492474. Professors David S. Evans and Richard Schmalensee filed an amicus brief in support of American Express, and fifteen scholars of antitrust, law, and economics filed a separate brief supporting American Express. Brief for Amici Curiae Prof. David S. Evans and Prof. Richard Schmalensee in Support of Respondents, 2018 WL 798389; Brief for Amici Curiae Antitrust Law & Economics Scholars in Support of Respondents, 2018 WL 582320.

^10. United States v. Von’s Grocery Co., 384 U.S. 270 (1966).

^11. Brown Shoe Co. v. United States, 370 U.S. 294 (1962).

^12. Leonard W. Weiss, The Structure-Conduct-Performance Paradigm and Antitrust, 127 U. PA. L. REV. 1104, 1105 (1979) (footnote omitted).

^13. Id. at 1117.

^14. See United States v. Philadelphia Nat. Bank, 374 U.S. 321, 363 (1963) (holding that a presumption of anticompetitive effects arises when a merger "produces a firm controlling an undue percentage share of the relevant market, and results in a significant increase in the concentration of firms in that market.").

^15. See Frank H. Easterbrook, Workable Antitrust Policy, 84 MICH. L. REV. 1696 (1986).

^16. See Kovacic & Shapiro, supra note 6, at 52-55.

^17. 415 U.S. 486 (1974).

^18. Diane P. Wood, Theory and Practice in Antitrust Law: Judge Cudahy’s Example, 29 YALE J. REG. 403, 405-06 (2012); see also United States v. Baker Hughes Inc., 908 F.2d 981, 990 (D.C. Cir. 1990) ("General Dynamics began a line of decisions differing markedly in emphasis from the Court’s antitrust cases of the 1960s.").

^19. See U.S. DEP’T OF JUST., 1984 MERGER GUIDELINES, 49 C.F.R. 26823-03, 1984 WL 88949 (1984), http://www.justice.gov/atr/hmerger/11249.pdf.

^20. 807 F.2d 1381, 1386 (7th Cir. 1986).

^21. See Janusz A. Ordover & Robert D. Willig, Economics and the 1992 Merger Guidelines: A Brief Survey, 8 REV. INDUS. ORG. 139 (1993).

^22. U.S. DEP’T OF JUST. & FTC, HORIZONTAL MERGER GUIDELINES (1992, rev. 1997), http://www.justice.gov/atr/public/guidelines/hmg.pdf.

^23. U.S. DEP’T OF JUST. & FTC, HORIZONTAL MERGER GUIDELINES (2010), http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf. The 2010 Guidelines are unabashedly a litigation-oriented document—as its authors acknowledge. See Joseph Farrell & Carl Shapiro, The 2010 Horizontal Merger Guidelines After 10 Years, 58 REV. INDUST. ORG. 1, 3 (2021) ("The 2010 Guidelines … sought to reinvigorate merger enforcement, within the contours of established case law, both where economic analysis had improved and also where accumulated interpretations of earlier Guidelines had made enforcement more difficult without sound reason."). Farrell and Shapiro served, respectively, as the FTC’s Director of the Bureau of Economics and the DOJ Antitrust Division’s Deputy Assistant Attorney General for Economics as the 2010 Guidelines were developed, and were undoubtedly driving forces behind them.

^24. Carl Shapiro, The 2010 Horizontal MergerGuidelines: From Hedgehog to Fox in Forty Years, 77 ANTITRUST L.J. 701, 702-03 (2010).

^25. See, e.g., HOW THE CHICAGO SCHOOL OVERSHOT THE MARK: THE EFFECT OF CONSERVATIVE ECONOMIC ANALYSIS ON U.S. ANTITRUST (Robert Pitofsky ed., 2008); William E. Kovacic, The Intellectual DNA of Modern U.S. Competition Law for Dominant Firm Conduct: The Chicago/Harvard Double Helix, 2007 COLUM. BUS. L. REV. 1; Herbert J. Hovenkamp & Fiona Scott Morton, Framing the Chicago School of Antitrust Analysis, 168 U. PA. L. REV. 1843 (2020); Joshua D. Wright, Abandoning Antitrust’s Chicago Obsession: The Case For Evidence-Based Antitrust, 78 ANTITRUST L.J. 241 (2012). From a practitioner’s perspective, debating whether "Chicago" or "Harvard" (both simplifications) had the most impact on antitrust law seems to miss the point. The Chicago School was undoubtedly a catalyst in the process by which economics arguments from all quarters infused antitrust analysis.

^26. 433 U.S. 36 (1977).

^27. 388 U.S. 365 (1967).

^28. 433 U.S. at 48 n.13 (citing Richard Posner, Antitrust Policy and the Supreme Court: An Analysis of the Restricted Distribution, Horizontal Merger and Potential Competition Decisions, 75 COLUM. L. REV. 282 (1975)).

^29. See Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993).

^30. See Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985). This may seem an odd citation in relation to the Chicago School’s influence, with Justice Scalia’s 2004 decision in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004), the better example. In fact, for the central point of the decision—that disrupting a longstanding cooperative relationship might indicate an anticompetitive refusal to deal—the Aspen Skiing decision cites Robert Bork’s THE ANTITRUST PARADOX (1978), a seminal if controversial contribution of the Chicago School. See 472 U.S. at 603 n.29 & 604 n.31.

^31. See Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 34 (1984) (O’Connor, J., concurring) (noting that despite the majority’s ostensible retention of the per se rule against tying, "tying cases [have] always required an elaborate inquiry into the economic effects of the tying arrangement"). One of the defining positions of the Chicago School was that there is only one monopoly profit, and therefore that most if not all antitrust leveraging theories are misplaced. See Ward S. Bowman, Jr., Tying Arrangements and the Leverage Problem, 67 YALE L. J. 19, 20 (1957) ("[T]he tying sale is only a means of utilizing effectively a power already possessed….").

^32. Donn P. Pickett was lead counsel, and Alfred C. Pfeiffer, Jr. and Holly House rounded out the team.

^33. 699 F.2d 965, 977-78 (9th Cir. 1983).

^34. Id. at 972.

^35. Id. at 977.

^36. The district judge to whom Kodak was assigned, William W. Schwarzer, was an advocate of early summary judgment motions as a case management tool. See William W. Schwarzer, Summary Judgment and Case Management, 56 ANTITRUST L.J. 213 (1987).

^37. Kodak, 504 U.S. at 466 & n.11.

^38. See Wall, supra note 8, at 4.

^39. See Brief of Respondents at 20 n.13, 33, https://appliedantitrust.com/22_tying/00_classic_cases/09_kodak/3_sc/kodak_us_opp9_20_1991.pdf. In short, installed base opportunism is a strategy of exploiting locked-in customers by raising aftermarket prices enough to exceed reasonable expectations of total costs of ownership. Not any price increase will do that since rational customers expect some increases in parts, service and supply costs over time. Opportunism is most often an end-of-life strategy in declining industries. See Kathryn Rudie Harrigan & Michael E. Porter, End-Game Strategies for Declining Industries, HARV. BUS. REV., July 1983.

^40. Brief of Respondents, supra note 39 at 43 (citing Gordon B. Spivack, The Chicago School Approach to Single Firm Exercises of Monopoly Power: A Response, 52 ANTITRUST L.J. 651, 651-54, 672-74 (1983)).

^41. Carl Shapiro, Aftermarkets and Consumer Welfare: Making Sense of Kodak, 63 ANTITRUST L.J. 483, 486 (1995).

^42. Frank H. Easterbrook, The Limits of Antitrust, 63 TEX. L. REV. 1 (1984).

^43. Frank H. Easterbrook, Comparative Advantage and Antitrust Law, 75 CALIF. L. REV. 983, 989 (1987).

^44. Jonathan I. Gleklen, The ISO Litigation Legacy of Eastman Kodak Co. v. Image Technical Services: Twenty Years and Not Much to Show for It, 27 ANTITRUST 56, 62 (2012); see also Christopher S. Yoo, The Post-Chicago Antitrust Revolution: A Retrospective, 168 U. PA. L. REV. 2145, 2165 (2020) ("Kodak has not proven to be generative. The plaintiff abandoned its post-Chicago theory on remand, and ‘lower courts have bent over backwards to construe Kodak as narrowly as possible,’ as even supporters have been forced to concede." (footnotes omitted)).

^45. See Kodak, 504 U.S. at 477 n.24 (majority opinion), 492 (Scalia, J., dissenting); see also Digital Equip. Corp. v. Uniq Digital Techs., Inc., 73 F.3d 756, 763 (7th Cir. 1996) ("The Court did not doubt in Kodak that if … Kodak had informed customers about its policies before they bought its machines, purchasers could have shopped around for competitive life-cycle prices."); PSI Repair Servs., Inc. v. Honeywell, Inc., 104 F.3d 811, 820 (6th Cir. 1997) ("[A]n antitrust plaintiff cannot succeed on a Kodak-type theory when the defendant has not changed its policy after locking-in some of its customers, and the defendant has been otherwise forthcoming about its pricing structure and service policies.").

^46. Phillip Areeda, Monopolization, Mergers and Markets: A Century Past and the Future, 75 CALIF. L. REV. 959, 970 (1987), quoted in Tying – Market Power at Summary Judgment, 106 HARV. L. REV. 328, 338 (1992).

^47. 504 U.S. at 454.

^48. Id. at 466-67.

^49. Id. at 466 & n.11. This recalls another thing I learned in Kodak: that the first casualty of a Supreme Court opinion is the losing party’s best argument—which often goes missing in action.

^50. Id. at 486 (Scalia, J., dissenting).

^51. See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) (overruling the nearly 100 year-old rule that vertical agreements to fix minimum resale prices are per se unlawful).

^52. See Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising Rivals’ Costs to Achieve Power Over Price, 96 YALE L.J. 209 (1986).

^53. Id. at 214.

^54. See David T. Scheffman and Richard S. Higgins, Twenty Years of Raising Rivals’ Costs: History, Assessment, and Future, 12 GEO. MASON L. REV. 371 (2003).

^55. E.g., McWane, Inc. v. FTC, 783 F.3d 814, 832-33 (11th Cir. 2015) (applying the decisional framework of United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam), but stating: "Of particular relevance to this case, an exclusive dealing arrangement can be harmful when it allows a monopolist to maintain its monopoly power by raising its rivals’ costs sufficiently to prevent them from growing into effective competitors."). In Novell, Inc. v. Microsoft Corp., then-Judge Gorsuch rejected RRC as an alternative for a "profit sacrifice" test. 731 F.3d 1064, 1079 (10th Cir. 2013) ("This shouldn’t be (mis)taken as suggesting raising rivals’ costs theories play no role in antitrust. It is to say only and much more modestly that they do not displace Aspen and Trinko’s profit sacrifice test in the narrow world of refusal to deal cases….").

^56. See Steven C. Salop, The Raising Rivals’ Cost Foreclosure Paradigm, Conditional Pricing Practices, and the Flawed Incremental Price-Cost Test, 81 ANTITRUST L.J. 371 (2017).

^57. Janusz A. Ordover & Daniel M. Wall, Proving Predation after Monfort and Matsushita: What the "New Learning" Has to Offer, 1 ANTITRUST 5 (1987).

^58. 80 AM. ECON. REV. 837 (1990).

^59. E.g., Fortner Enters. v. U.S. Steel Corp., 394 U.S. 495, 498-99 (1969); N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5-6 (1958).

^60. See Christopher J. Sprigman, Editor’s Note: Monopolization Remedies and Antitrust After the Fall, 76 ANTITRUST L.J. 5, 9 (2009).

^61. Joshua D. Wright, Abandoning Antitrust’s Chicago Obsession: The Case for Evidence-Based Antitrust, 78 ANTITRUST L.J. 241 (2012).

^62. Carl Shapiro, Antitrust: What Went Wrong and How to Fix It, 35 ANTITRUST 33, 33-34, 39 (forthcoming 2021), https://faculty.haas.berkeley.edu/shapiro/fixingantitrust.pdf.

^63. Wright, supra note 61, at 263.

^64. Id.

^65. Shapiro, supra note 62, at 37 (footnote omitted).

^66. Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). There is no clear evidence as to the effects of Twombly on antitrust litigation, in particular whether it results in more cases being dismissed with prejudice. A study by William H.J. Hubbard suggests that overall dismissal rates (i.e., for all kinds of cases) remain about the same as they were prior to Twombly and Iqbal, but there were too few antitrust cases in Professor Hubbard’s study set to come to statistically valid conclusions about antitrust cases. William H.J. Hubbard, The Empirical Effects of Twombly and Iqbal, Coase-Sandor Working Paper Series in Law and Economics, No. 773 (2016), https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2479&context=law_and_economics. My own experience is that Twombly made successful motions to dismiss possible in antitrust cases, and undoubtedly increased the number of Rule 12(b)(6) motions that defendants file, but to what productive end I am not sure. Amended complaints (if not the first then the second) still survive in most cases, including most dubious cases. Whether the massive expenditure of time and money on motions to dismiss is worth weeding out a relatively small number of cases is an open question.

^67. See, e.g., Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 578-79 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

^68. 724 F.2d 227, 234 (1st Cir. 1983).

^69. See RICHARD A. POSNER, ANTITRUST LAW 194-95 (2d ed. 2001).

^70. See A. Douglas Melamed, Exclusive Dealing Arrangements and Other Exclusionary Conduct — Are There Unifying Principles?, 73 ANTITRUST L.J. 375, 391-92 (2006) (no economic sense test); Janusz A. Ordover & Robert D. Willig, An Economic Definition of Predation: Pricing and Product Innovation, 91 YALE L.J. 8, 9 (1981) (the foundational article on the profit sacrifice test).

^71. Marina Lao, Defining Exclusionary Conduct Under Section 2: The Case for Non-Universal Standards, 2006 FORDHAM COMP. L. INST. 433, 435 (Barry E. Hawk ed., 2007).

^72. Mark S. Popofsky, Defining Exclusionary Conduct: Section 2, the Rule of Reason, and the Unifying Principle Underlying Antitrust Rules, 73 ANTITRUST L.J. 435, 437 (2006). Popofsky emphasizes error costs more than I would. Administrability is a standalone justification for clear legal rules.

^73. United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam).

^74. Id. at 59.

^75. Herbert J. Hovenkamp, Antitrust Balancing, 12 NYU J. LAW & BUS. 369, 372 (2016).

^76. FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020).

^77. Ohio v. American Express, 138 S. Ct. 2274 (2018).

^78. Shapiro, supra note 62 at 34.

^79. See Lina M. Khan, Amazon’s Antitrust Paradox, 126 YALE L.J. 710 (2017).

^80. STAFF OF H. COMM. ON THE JUDICIARY, 116TH CONG., INVESTIGATION OF COMPETITION IN DIGITAL MARKETS: MAJORITY STAFF REPORT AND RECOMMENDATIONS 39 (Comm. Print 2020).

^81. For a response, see Hanno F. Kaiser, Are ‘Closed Systems’ an Antitrust Problem?, 7 COMPETITION POL’Y INT’L 91 (2011).

^82. Investigation into the State of Competition in the Digital Market Place Before the Subcomm. on Antitrust, Commercial, and Admin. L. of the H. Comm. on the Judiciary, 116th Cong. 21 (2020) (statement of Randal C. Picker), https://picker.uchicago.edu/PickerHouseStatement.100.pdf.

^83. TIM WU, THE CURSE OF BIGNESS: ANTITRUST IN THE NEW GILDED AGE 135 (2018).

^84. This attack on the consumer welfare standard is comprehensively explored in Leon B. Greenfield et al., Antitrust Populism and the Consumer Welfare Standard: What Are We Actually Debating?, 83 ANTITRUST L.J. 393 (2020).

^85. See, e.g., Maurice E. Stucke, Behavioral Economists at the Gate: Antitrust in the Twenty-First Century, 38 LOY. U. CHI. L.J. 513 (2007); Avishalom Tor, The Fable of Entry: Bounded Rationality, Market Discipline, and Legal Policy, 101 MICH. L. REV. 482 (2002).

^86. A readable treatment of this subject is Elizabeth M. Bailey, Behavioral Economics: Implications for Antitrust Practitioners, ANTITRUST SOURCE, June 2010, at 1.

^87. See J. Thomas Rosch, Comm’r, FTC, Behavioral Economics: Observations Regarding Issues that Lie Ahead, Remarks at the Vienna Competition Conference (June 9, 2010), http://www.ftc.gov/speeches/rosch/100609viennaremarks.pdf; J. Thomas Rosch, Comm’r, FTC, Managing Irrationality: Some Observations on Behavioral Economics and the Creation of the Consumer Financial Protection Agency, Remarks at the Conference on the Regulation of Consumer Financial Products (Jan. 6, 2010), https://www.ftc.gov/public-statements/2010/01/managing-irrationality-some-observations-behavioral-economics-and-creation.

^88. Avishalom Tor, Should Antitrust Survive Behavioral Economics?, CPI ANTITRUST CHRONICLE 8 (Jan. 2019), https://ssrn.com/abstract=3291886. Tor continues: "All is not lost, however. … First, while competition with real, boundedly rational consumers usually cannot maximize efficiency or welfare, it still has the general tendency of advancing these critical goals. Second, a competition-favoring approach remains a more attractive policy baseline than its realistic alternatives of diminished competition due to either increased private market power or enhanced governmental regulation, the substantial shortcomings of competition notwithstanding." Id.