LPE Project - The Treatise that has Mislead Antitrust Lawyers for Decades
Legal director Sandeep Vaheesan publishes a piece with former OMI Louis Brandeis Fellow, Andy Fitch, discussing how the limited resources available for federal judges when facing antitrust trials can result in misleading verdicts for the defendants.
Imagine you’re a federal judge, or clerking for a judge, anxiously hearing your first antitrust case. A manufacturer alleges that a larger rival has marginalized it in the relevant market by entering into exclusive arrangements with all its distributors. To determine whether this action violates the law, you need to figure out what share of market foreclosure, or the percent of distribution channels tied up by the defendant in this case, is necessary to violate Section 3 of the Clayton Act. Thankfully, you’ve got “The Treatise” — Antitrust Law: An Analysis of Antitrust Principles and Their Application — by Herbert Hovenkamp and the late Philip Areeda. Treated as the gold standard of antitrust analysis, retired Supreme Court Justice Stephen Breyer has declared that “most practitioners would prefer to have two paragraphs of [the Areeda-Hovenkamp] treatise on their side than three Courts of Appeals or four Supreme Court Justices.” Legal scholar Rebecca Haw Allensworth notes that the treatise was cited by over 700 federal court decisions between 1989 and 2015.
You crack open this fount of antitrust wisdom and discover, in paragraph 1821, Hovenkamp’s 30% presumption: exclusive dealing that forecloses competitors from less than 30% of a market should be presumed legal. You apply this 30% test to your defendant’s share in the relevant market and voila, there is no violation. Pretty simple. For good measure, you paste Hovenkamp’s judicial record — the footnote lists 21 cases! — offering copious proof that you’ve faithfully followed the law. And you still can make happy hour.
The scene painted above, which has played out in literally hundreds of chambers, represents a travesty of antitrust law. Despite the treatise’s renown and influence, digging deeper into the treatise suggests not an impartial review of the law, but a volume that appears to be closer to a defense-side brief clothed in academic garb. For this post, we examined just two topics — thresholds for substantial exclusive-dealing foreclosure and an efficiencies defense for mergers — and found misleading accounts of the law in both. Based on a review of other treatise topics and Hovenkamp’s extra-treatise commentary, we doubt that these are two isolated aberrations. Accordingly, we believe the treatise has had a pernicious influence on antitrust law for decades, and the time has come for lawyers in the field to do their own research again.
Read full article here.