Predatory Pricing in Antitrust Law and Economics Can a price ever be too low? Can competition ever be ruinous? Questions like these have always accompanied American antitrust law They testify to the difficulty of antitrust enforcement, of protecting competition without protecting competitors As the business practice that most directly raises these kinds of questions, predatory pricing is at the core of antitrust debates The history of its law and economics offers a privileged standpoint for assessing the broader development of antitrust, its past, present and future In contrast to existing literature, this book adopts the perspective of the history of economic thought to tell this history, covering a period from the late 1880s to present times The image of a big firm, such as Rockefeller’s Standard Oil or Duke’s American Tobacco, crushing its small rivals by underselling them is iconic in American antitrust culture It is no surprise that the most brilliant legal and economic minds of the last 130 years have been engaged in solving the predatory pricing puzzle The book shows economic theories that build rigorous stories explaining when predatory pricing may be rational, what welfare harm it may cause and how the law may fight it Among these narratives, a special place belongs to the Chicago story, according to which predatory pricing is never profitable and every low price is always a good price Nicola Giocoli is an Associate Professor of Economics at the University of Pisa, Italy The economics of legal relationships Sponsored by Michigan State University College of Law Series Editors: Nicholas Mercuro Michigan State University College of Law Michael D Kaplowitz Michigan State University Compensation for Regulatory Takings Thomas J Miceli and Kathleen Segerson Dispute Resolution Bridging the settlement gap Edited by David A Anderson The Law and Economics of Development Edited by Edgardo Buscaglia, William Ratliff and Robert Cooter Fundamental Interrelationships Between Government and Property Edited by Nicholas Mercuro and Warren J Samuels Property Rights, Economics, and the Environment Edited by Michael Kaplowitz Law and Economics in Civil Law Countries Edited by Thierry Kirat and Bruno Deffains The End of Natural Monopoly Deregulation and competition in the electric power industry Edited by Peter Z Grossman and Daniel H Cole Just Exchange A theory of contract F H Buckley Network Access, Regulation and Antitrust Edited by Diana L Moss 10 Property Rights Dynamics A law and economics perspective Edited by Donatella Porrini and Giovanni Ramello 11 The Firm as an Entity Implications for economics, accounting and the law Edited by Yuri Biondi, Arnaldo Canziani and Thierry Kirat 12 The Legal-Economic Nexus Warren J Samuels 13 Economics, Law and Individual Rights Edited by Hugo M Mialon and Paul H Rubin 14 Alternative Institutional Structures Evolution and impact Edited by Sandra S Batie and Nicholas Mercuro 15 Patent Policy Effects in a national and international framework Pia Weiss 16 The Applied Law and Economics of Public Procurement Edited by Gustavo Piga and Steen Treumer 17 Economics and Regulation in China Edited by Michael Faure and Guangdong Xu 18 Law, Bubbles and Financial Regulation Erik F Gerding 19 Empirical Legal Analysis Assessing the performance of legal institutions Edited by Yun-chien Chang 20 Predatory Pricing in Antitrust Law and Economics A historical perspective Nicola Giocoli * The first three volumes listed above are published by and available from Elsevier This page intentionally left blank Predatory Pricing in Antitrust Law and Economics A historical perspective Nicola Giocoli Routledge Taylor & Francis Group LONDON AND NEW YORK First published 2014 by Routledge Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2014 Nicola Giocoli The right of Nicola Giocoli to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988 All rights reserved No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalogue record has been requested for this book ISBN: 978-0-415-82252-7 (hbk) ISBN: 978-1-315-83269-2 (ebk) Typeset in Times New Roman by Wearset Ltd, Boldon, Tyne and Wear To Ninetta and the four cousins Enzo, Maria, Rita and Vincenzo In our worship of the survival of the fit under free natural selection we are sometimes in danger of forgetting that the conditions of the struggle fix the kind of fitness that shall come out of it; that survival in the prize ring means fitness for pugilism; not for bricklaying nor philanthropy; that survival in predatory competition is likely to mean something else than fitness for good and efficient production; and that only from a strife with the right kind of rules can the right kind of fitness emerge Competition and its purpose are not individual but social It is a game played under rules fixed by the state to the end that, so far as possible, the prize of victory shall be earned, not by trickery or mere self-seeking adroitness, but by value rendered It is not the mere play of unrestrained self-interest; it is a method of harnessing the wild beast of self-interest to serve the common good – a thing of ideals and not of sordidness It is not a natural state, but like any other form of liberty, it is a social achievement, and eternal vigilance is the price of it (Clark and Clark [1912] 1914, 200–1) Highly speculative belief about behavior or its consequences does not satisfy [the legal] standard, even when endorsed by expert economic witnesses (Demsetz 1992, 209–10) It would be indeed an extraordinary thing to strike at competition in the name of competition (Macrosty 1907, 345) Contents Acknowledgments Introduction §1 Three basic dichotomies §2 The trickiest antitrust problem §3 Further reasons to love predation §4 Lessons in persuasion §5 Treasures in the attic §6 Plan of the book 11 The economics of predatory pricing §1 Classic and modern definitions of predatory pricing 13 §2 The basic story 19 §3 The Chicago critique of the basic story 22 §4 It’s a brand new game: predation as strategic paradox 25 §5 The Stanford connection 28 §6 Madamina, il catalogo è questo 35 §7 Assessing the Bayesian approach to predation 42 13 The two freedoms and British common law §1 The two freedoms 49 §2 The monopoly problem in British common law 50 §3 The classical view of competition 54 §4 Competition in the late nineteenth-century British economy 58 §5 The dawn of predatory pricing: the Mogul case 60 §6 The Mogul decisions: is predation “a matter contrary to law”? 62 §7 The new reasonableness test: the Nordenfelt case 66 49 xii Index 311 analysis 198–9; methodology 197–9, 282–3; optimal enforcement theory 198; optimal penalty theory 198; settlements model 214 economic freedom 54; see also freedom: from government interference economic models: as possibility proofs 277n59; as possible worlds 48n33 economic/market performance 139, 140, 170, 176, 220; determined by market structure 248; effect in SCP 144, 145; impact of structural remedies 177 economic power 18, 60, 90, 93, 107, 111, 115, 116, 125, 126, 149, 151, 159, 161, 162, 163, 166, 168, 169, 170, 171, 205, 217, 256, 280; as antitrust concern 238, 246, 280; as distinct from market power 2–3, 8, 17, 49, 140, 152, 156, 170, 185, 215, 245; definition 2, 49, 89; sociopolitical effects 119 Edlin, A 275n21 Edmunds, Senator G 106, 107, 109–10, 113 Edwards, C 17 efficiency 205, 207n11; antitrust’s sole goal 18, 246, 262, 280; as defense 63, 177, 246; of business practices 220 egalitarian agenda/approach 162–3, 166, 168, 171, 185, 205, 217, 220, 238, 245, 247, 280; see also equality in the marketplace Egerton v Brownlow 77n6 Eighth Circuit 113, 277n66 Elhauge, E 164 Elman, P 209n48 Ely, R 83, 134n37; against classical economics 85; inevitability thesis 83; against laissez faire 86, 101n9 Elzinga and Mills; against game-theoretic approach 268–70; investment test 254–5; reply to BBR 268–70 Elzinga, K 203, 254, 268 enforcement statistics: ATR 222; augmented ATR 236–7; Koller’s study 203–4; PP case law 216, 275n28, 277n52; PP cases post-Brooke 257; Warren Court 171 engineering view of the firm 245–6 entry barriers 21, 46n6, 74, 213, 256; Bain’s definition 147–8; condition for profitable PP 190, 201, 204; debate in the literature 173n31; in SCP 145, 148, 173n30 entry deterrence 19, 26, 28, 31–2, 33, 39, 42, 43, 121, 214; Bain-Sylos-Modigliani model 239n3; Spence model 235 equality in the marketplace 49, 88, 107, 111, 115, 119, 162, 163, 167, 169, 216, 220 Ernst, D 10 Esposito, L 120–2 excess capacity 82, 87, 149, 189, 213, 227; pre-emptive investment 214, 232 excessive competition 63; see also destructive competition; ruinous competition exclusionary doctrine (in Bain) 150 exclusionary practices 61, 117, 126, 186; against freedom to compete 95; agreements 89; as coercion 58, 77; automatic exclusion 165, 194, 196; Bayesian approach 42; behavioral approach 139; Bork’s critique 193–6; Brooke doctrine 279; Chicago critique 179; choice-theoretic foundations 206; Clark and Clark’s definition 100; Clark’s classification 89, 93, 94, 100; competitive explanations 165; definition 3–4, 13; Director’s views 183; effects on competition 129; in American Tobacco 124; in common law 53, 71, 72, 77; in the formative era 89; list approach 127, 128–9; no economic sense test 6–7; obstacles to potential competition 95; per se lawful 204 per se unlawful 95, 96, 100, 120; post-Brooke approach 256; predatory paradigm 6–7; raising rivals’ costs paradigm 12n7; sacrifice test 6; single-test obsession 6; strategic approach 212, 226; Warren Court 179, 194 exclusive dealing 128, 129, 162, 165, 194, 195, 196, 248 exemplifying theory 284 expert testimony 271; and game-theoretic models 272–3; Daubert doctrine 271–3; “reliable and relevant” principle 271–2 extreme structuralism 148, 149, 151–2, 156, 157, 160, 164, 169, 176, 178, 217; against intent requirement 157–8; rejected by AGR 159 fair competition 111, 114, 136, 137,, 139, 168, 169 fairness 85, 246 fair price 51, 64, 65, 66, 89, 109, 112, 119, 137; as competitive prices 114; as outcome of combination 108; in Sherman Act debate 108 312 Index fair profit 112, 137; as a property right 108; as a right of every business 108, 119 Federal Trade Commission (FTC); defense of small businesses 175n76; era of neglect 136, 137; victories under Warren Court 171 Federal Trade Commission (FTC) Act 125, 128–9, 187; Clark (s)’s proposal 94, 101; “unfair competition” doctrine 128–9 Ferguson, J 173n31 Fetter, F 138 financial markets’ imperfections 23, 41, 46n8, 48n26, 62, 191–2, 208n32, 269 Fiorito, L 126, 127 First Circuit 260, 261 Fischer, J 273 Fisher, F 284 Fisher, I 85, 86, 134n35 fixed capital/fixed costs; huge investments in 59, 81–3, 84, 85, 86; irreversible investments 82 fixed-cost controversy 82–3, 86 Folk Theorem 45, 48n32, 270, 271, 284 forestalling, regrating and engrossing 51, 109 formal equality 119, 162; in antitrust 105; in contracts 104–5; versus substantive equality 162 formative era of antitrust law 112; basic PP story 131; common law phase 112, 113–14, 119; literalist phase 112, 114–17, 130; rule of reason phase 112, 118–20, 127 Fortner Enterprises 216–17, 240n19 Fourteenth Amendment 103, 117 “free and unrestricted competition” 115, 117, 119 free competition: literalist view 114–17; prescribed by Sherman Act 116; rhetoric 50; in Mason 1937 142; see also competition freedom: from coercion 73; from economic power 2, 160; from government interference 2, 55, 56, 103–4, 111, 119, 129, 171, 280; from market power 1, 2, 49, 52, 106, 112, 117, 119, 142, 151, 160, 171; to compete 76, 95; to cooperate 139; to set prices 4, 130, 137, 163 freedom of contract 1, 4, 49, 60, 63, 66, 68–9, 70–2, 73, 77, 96, 103–5, 106, 107, 111–17, 119, 129, 130, 131, 136, 139, 151, 161, 162, 171, 217, 280; and classical competition 54–8; and CRT law 51–4, 59, 74; as freedom to compete 76; as major component of public policy 54; clash with freedom to trade 52, 53, 63, 66, 77; classical view 162; dichotomic logic 131; freedom to form/ join a combination 63, 64, 75; never absolute 119–20; Warren Court’s view 162, 163, 168 freedom to trade 2, 4, 68–9, 70, 71, 73, 75, 91, 96, 104–5, 124, 142, 280; and classical competition 56–8; and CRT law 51–4, 59; as freedom from market power 52; clash with freedom of contract 52, 53, 63, 66, 77 free entry 56, 57, 59, 114, 246; as structural feature 147 free market ideology 280–1 Free Market Study 184 free riding 197; by rational customers 23; in GTE Sylvania 247–8; Telser’s analysis 247–8 free trade 109; as British “religion” 59, 60; preventing combinations 65 Freyer, T 174n56 Friedman, J 29, 31 Friedman, M 206 Fudenberg and Tirole model 35–6; see also signal-jamming model Fudenberg, D 35, 268 “full and free competition” 106, 107, 108, 109, 110, 112, 135 Fuller, Justice M 116; opinion in E.C Knight 114 Galbraith, J 241n28 games: with complete information 47n11; with imperfect information 25, 28, 29; with incomplete information 25, 28, 29; with perfect information 47n11 game-theoretic approach to antitrust/ PP197, 210–11, 215; citation statistics 267–8; courtroom impact 206, 239; criticized 270–1; Daubert doctrine 272–3; Elzinga and Mills critique 268–70; failure with respect to PP 267, 268; revolution in IO 234, 263, 281; story-based 286; see also Bayesian game theory game-theoretic models: as “fables” 267; as mere existence proofs 269, 271, 272; as possible worlds 248; expert testimony 272–3; multiplicity of equilibria 272, Index 313 273; failure in PP case law 284–5; PP stories 265, 269, 271; purely normative 267; simplified market structure 269; see also Post-Chicago models General Dynamics 240n20 General Foods 269, 277n56 generalizing theory 284 gentlemen’s agreements 59 Glazer, K.: PP law post-Brooke 257; recoupment test 274n13; un-Chicago character of Brooke doctrine 258–9 goodwill 51, 52, 67, 68, 247 Greenawalt, K 225 Griffith 151, 173n37 Grinnell 163–4, 166, 174n66, 219 Grinnell doctrine/test 163–6, 169, 230–1; bad microeconomics 164; intent 164, 165; monopoly power 163, 166 GTE Sylvania 220, 240n25, 247–8, 250, 257, 274n5, 274n7, 280; endorsing Chicago antitrust 248; free riding argument 247–8 Gunpowder Trust 203, 209n52 Gunton, G 90, 102n18 Hadley, A 81, 83, 86; critique of neoclassical approach 101n1; on big business 81–2; on railroads 81–2; ruinous competiton 82 Hall, R 277n66 Hamilton, W 143 Hand, Judge L 185; on Sherman Act purpose 152; opinion in Alcoa 152–3, 156, 180 Handbook of Industrial Organization 28, 263 Harberger, A 207n17 Harlan, Justice J 114; dissent in American Tobacco 134n33; dissent in E.C Knight 114; dissent in Lochner 132n2; dissent in Standard Oil 128, 134n26; opinion in Northern Securities 116–17, 132n2; original synthesis 117 Harsanyi, J 25, 28; his approach to game theory 25, 29, 32, 34 Hart, Senator P 178, 206n7 Harvard Industrial Organization orthodoxy 169, 170, 171, 210 Hay, G 218, 228, 231, 242n42, 242n56; PP ideal rule 286; rule of reason in PP 231 Heflebower, R 144 Hilton v Eckersley 63, 64, 79n24 history of economic thought (HET) 10–11 Hofstadter, R 136, 138 holding companies 75, 116, 128 Holmes, Justice O.W 112; and Mogul 76; classical view of competition 75, 76–7; definition of combination and CRT 76, 77; dissent in Lochner 117; dissent in Northern Securities 75, 76, 107, 116, 117; dissent in Vegelahn v Guntner 75–6, 77; exclusionary practices 77; freedom of contract 75, 76; freedom to form/join a combination 75; his view of the Sherman Act 75–7, 80n44, 117; opinion in Swift 149, 252; predatory pricing example 76 Homan, P 135 Horner v Graves 67, 68, 79n30 House of Lords: Judicial Committee 71, 72; Mogul decision 60, 62, 65–6, 76, 113; Nordenfelt decision 67–9 Hovenkamp, H.: definition of exclusionary practice 13; fixed-cost controversy 82; on administrability 259; on American common law of CRTs 74–7; on Areeda and Turner’s goal 230; on Chicago key principles 192; on classical competition 55, 73; on Holmes’s approach to CRTs 75–7; on Neal Report 202–3, 206n6; on Post-Chicago approach 270, 273, 288n10; on price-fixing agreements 73–4; substantive due process 103–4; tests of exclusionary conduct Hudson, J 88 Hughes, Justice C 136 incipiency doctrine 179–80, 186; Chicago critique 180 increasing returns 81–2 individual liberty 49, 51; see also antitrust law: evolutionary view Industrial Organization (IO): and Chicago TPE 263; game-theoretic approach 18, 27, 234, 263, 281; Harvard orthodoxy 169, 170, 171, 210; SCP as organizing framework 141, 148 industry case studies 144 industry codes 137, 139 infant industry argument 275n21 information: asymmetric 22, 32, 39, 41, 42, 45, 206, 269; imperfect 25, 26, 28, 29, 33, 34, 35, 42, 210, 271; incomplete 25, 26, 28, 29, 32, 34, 35, 38, 39, 41, 42, 271; perfect and complete 25, 26, 28, 29, 31, 32, 33, 38, 42, 146, 210, 213, 234, 264 314 Index Inglis 243n73, 274n13; PP test 260–1, 276n39 inhospitality doctrine/tradition 162, 245 In re Dean Milk 175n76 In re Greene 113–14, 118, 133n16 intent 257, 274; and EAL 198; anticompetitive 155, 157, 170, 262; as obstacle to enforcement 100; as redefined by the new rule of reason 132; Grinnell test 164, 165; predatory 17, 18, 45, 62, 88, 100, 121, 153, 165, 195, 196, 200, 204, 230, 234, 236, 266; presumed from market share170–1; requirement for PP 18, 125, 130, 215, 216, 218, 237–8; requirement of monopolization 139, 163; Standard Oil doctrine 166, 169; to exclude 18, 40, 153, 165, 166, 214, 215, 228; to injure 63, 65; to monopolize 17, 63, 124, 149, 158, 166, 252 interlocking directorates 128 International Salt 162, 174n60 interstate commerce 116, 127, 133n18 Interstate Commerce Committee (ICC) Report 128 Jackson, Judge H 113; classical competition 113, 114; common law logic 114; freedom of contract 114; opinion in In re Greene 113–14 Jacobs, M 281–2 James, Sir W 53 Jeffersonian ideal 3, 50, 88, 107, 161, 171, 216, 238; see also republican values Jenks, J 82; against 1911 decisions 126; inevitability thesis 83; on publicity 133n12; Report on Trusts and Industrial Combinations 133n12; ruinous competition 82–3, 87–8 Jessel, Sir G 54, 70 Jewett, A 277n63 joint monopoly 84 Jones, E 123 Joskow and Klevorick rule 230–1, 232–3, 236, 243n73, 260, 265, 266, 275n24; see also predatory pricing: two-tier rule Joskow, P 230, 235 judicial self-restraint 65 judicial errors: false positives 198; welfare costs 198; see also Type I errors; Type II errors Kahn, A 157, 159; against extreme structuralism 157; on intent 157–8, 163, 164; on “new” Sherman Act 157; on workable competition 157–8 Kauper, T.: on AGR 159, 160; on Chicago contribution 246–7; on Warren Court 171 Kaysen, C 177; see also dissolution proposals: Kaysen and Turner’s Keynes, J.M 285 Kitch, E 184 Kitzmiller 277n63 Klaes, M 184 Klevorick, A 226, 230, 235; citation statistics 267–8 Klor’s 162, 174n62 Knight, F 181, 182 Kobayashi, B 256–7 Koller, R 203., 250, 1971 study 203–4, 209n53, 252 Kovacic, W 10, 220–1, 259, 270; administrability of antitrust rules 259–60, 262; Harvard versus Chicago 259, 262 Kreps and Wilson reputation model 31, 32, 33–5, 44; fragility of game-theoretic results 35; multiplicity of equilibria 34 Kreps, D 28, 268 laissez faire 53, 54, 70, 70, 86, 94, 104, 171, 280; in classical economists and public opinion 78n9 learning curve 39, 40, 41; as barrier to entry 48n29; hypothesis 39, 40; predation model 39–41, 101n12 (see also Cabral and Riordan model) Leather Cloth v Lorsont 78n7 Leegin 248, 257, 274n8, 276n38, 281 legal history 9–10 legal process jurisprudence 221, 224, 225 legal realism 241n29 LePage’s 275n28, 279, 288n4 Lerner index 17, 143 Letwin, W 51, 53, 60, 72, 109, 113 leverage theory 184 Levi, E 183; antitrust “conversion” 184, 185; monopoly and monopolization 184, 185, 187; see also Director and Levi 1956 manifesto Levy, F 135–6 Liggett Co 274n19 limit pricing 29–30, 31, 47n17, 146, 173n29 linear cost model 221, 226 literalist faction/majority 112, 114, 115, 117, 138, 162 Index 315 Lochner 104–5, 117, 119, 132n1, 162, 171; formal equality 119, 162; Harlan’s dissent 132n2 long purse assumption 19, 213; see also deep pocket: assumption/story long run marginal cost (LRMC) 226–7; relation to SRMC 228 Lord Bowen 60; opinion in Mogul 63–5, 66, 216; opinion in Nordenfelt 67 Lord Bramwell 65, 79n25, 79n27, 79n29 Lord Esher 79n25 Lord Fry 63, 64–5 Lord Halsbury 62, 65 Lord Hannen 65 Lord Herschell 67–8 Lord Macclesfield 52–3, 58, 66, 67, 68, 74 Lord Macnaghten 66, 69, 79n29; opinion in Nordenfelt 67–9, 71 Lord Morris 66, 79n28 Lord Parker 69, 72 Lord Truro 77n6 Lord Watson 66, 68 MacGregor, D 64, 79n26 Maple Flooring 136, 172n4 marginal cost 19, 201; see also short run marginal cost; long run marginal cost marginalist school 81 Marine Bancorp 240n20 market power 57, 106, 107, 123, 216–17, 252, 256, 280;; as §2 offense 140, 155; as cause of monopoly power 186; as power to coerce 49; as redefined by the new rule of reason 132; concentrated 146, 157; constraining freedom to trade 2; definition 2; dissolution proposals 177; in neoclassical economics 89; in SCP 220; in workable competition 170; market share analysis 156, 158, 159; measurement 17; per se unlawful 151; precondition of monopoly power 139, 163, 166; requirement for PP 16, 18, 124, 130, 215, 216, 218, 237–8; shortterm phenomenon 49, 59, 280 market share (s) 65, 161, 164, 170, 256; analysis in Alcoa 186; index of market power 17; presumption of monopolization 150, 152, 169, 186, 217; thresholds 177, 178 market structure 55, 155, 236; as antitrust offense 157; as cause in SCP approach 144, 145, 169; as element of SCP 141; classification 144, 146; competitive 18, 56, 86, 95, 139, 142, 177, 220, 248; concentrated 177, 178, 184, 202, 256; endogeneity 144; exogeneity 144, 145; favoring collusion 157, 169; leader/ follower duopoly 21; Mason’s definition 143; precondition in recoupment test 256; simplified in game-theoretic models 269; structural inefficiency 146–7 Marshall, Justice T.; opinion in Topco 216 Martin, S 41, 263; definition of PP 15 Mason, E 141, 148, 151, 157, 184, 238, 1937 paper 141–2, 144, 146, 151, 1939 manifesto 141, 142–5; against analytical methods 143; against Institutionalists 143; critique of Chamberlin 173n20; CRT case law 142; definitions of market and market structure 143, 145, 146; empirical analysis 144, 148; exclusionary practices 142; exogeneity of market structure 144; legal versus economic notion of monopoly 141, 145; “moderate” SCP 169, 170, 171; pure competition 142 Masson, R 37, 242n42, 242n56, 243n68 Matsushita 48n28, 208n28, 209n51, 243n65, 244n75, 248–50, 251, 259, 273, 274n10, 274n12, 274n13, 274n20, 276n36, 284; as Harvard product 260; Breyer’s “birds” principle 261; Chicago foundations 250; chilling competitive behavior 250; conspiracy requirement 250; dictum 249, 255; price/cost relation 249; quoted in Brooke 254; recoupment condition 249, 250 May, J 55 McChesney, F 286 Mc Gee 1958 paper 22, 27, 31, 120, 122, 184, 188–90, 193, 196, 203–4, 211, 213, 238, 283; case study 188, 190, 203, 207n23; conclusions on PP 190, 203, 204, 208n27; entry barriers 213; neglect of strategic issues 212; neglected by courts 216, 218–19, 220, 266–7; PP as irrational/unprofitable behavior189–90, 194, 223, 229; price discrimination 208n26; primary goal 188, 191; support to his thesis 203–4; takeovers 189, 208n25 McGee, J 27, 32, 37, 38, 181, 188, 193, 205, 210, 219, 224, 250, 251, 273; biography 207n20; debt to Director 188; entry deterrence 235; on price/cost rules 234; PP mantra 190, 203, 255; strategic and intertemporal features 234; vindicated by Brooke 255 316 Index McKinley tariff 105 McLaughlin, J 130, 172n8 McNulty, P 57 Means, G 135 mechanism design theory 25, 47n15, 206 Medema, S 54, 183 mergers 117, 217; alternative to PP 195; horizontal 159; in CRT law 110; in nineteenth-century American law 73, 75; incipiency doctrine 179; law and policy 12n9, 161, 169; Rockefeller’s strategy 190; to monopoly 24, 84, 190; see also corporate mergers migration from classroom to courtroom 8–9, 27, 44, 236, 263, 271, 285 Milgrom and Roberts: antitrust implications of reputation model 33; assessment of Bayesian game theory 42–6; on McGee (1958) 31, 266; reputation model 31–3, 34 (see also reputation game); signaling model 29–31, 235 (see also signaling game) Milgrom, P 28, 29, 42, 235, 268 Mill, J.S 60 Miller-Tydings Act 172n10 Mills, D 254, 268 Mitchel v Reynolds 52, 64, 67–8, 70, 77n5 model selection problem 266; ideological foundations 282 Modern Populism 140, 167, 169, 172n12, 178, 203, 204, 206, 219, 238, 246, 280, 281; threatening the antitrust enterprise 220; Type I errors 224 Mogul 54, 60–6, 70, 72, 76, 78n21, 79n23, 79n29, 113, 216; Court of Appeal decision 63–5, 66; doctrine 66, 71, 113 Mogul Steamship Co 60–6 monopolization 107, 113, 135; abuse approach 184, 186, 187–8; Alcoa doctrine 152–3; as exclusionary behavior 150; behavioral/structuralist dichotomy 150, 151; Chicago approach 186–8; conduct requirement 169; dangerous probability doctrine 149, 252, 254; extreme structuralism 153, 156; in §2, 6, 13, 24, 31, 105, 109–10; in American economy 81; in common law 53; In re Greene doctrine 113, 118; intent requirement 139, 163, 165, 169; lawful conspiracy 137; no-fault criterion 188; power to exclude 150, 153, 155, 158; presumed by market share 186; presumption in Standard Oil 187; size- based approach 188; structural requirement 139, 163, 169; Swift doctrine 149; two basic requirements 163; via CRTs 71; via predatory pricing 87–8, 89 monopoly: as market control (control over price) 142; as restraint of trade 142; at common law 113, 114; British common law 50–1, 71, 72; by “superior skill and intelligence” 109–10; classical view 57, 83, 85; inevitability thesis 83, 85, 86, 87, 88, 92, 93, 107, 123, 185; intentional outcome of competition 87; legal notion 141; short-term phenomenon 49, 57, 66, 74, 109; welfare loss 207n17 monopoly power: Grinnell definition 163; per se unlawful 153, , 183; presumed from market share 164, 169; requirement of monopolization 163; requirement of PP 100 Monsanto 250, 274n14 Mont Pèlerin Society 183, 184, 207n14 Morgan, J.P 112, 116 Morgenstern, O 28 Motta, M 15 Municipal Corporations Act 50 Nash equilibrium 25, 30, 38, 48n32, 276n50; refinements 267 Nash, J 25 Nashville Milk 172n9 National Industry Recovery Act (NIRA) 137, 138, 139 natural law (s): of competition 55 (see also competition: classical view); of exchange 55; of property 55; in classical economics 55, 78n10 natural monopolies 60 Neal, P 178 Neal Report 178, 202–3; amendments of Robinson-Patman Act 209n50, 241n32; Concentrated Industries Act 178, 202 neoclassical economics 117, 140, 160, 167, 262; and basic PP story 132; cost/ benefit approach 132; and “new” rule of reason 132; methodology 139 neoliberalism 184, 185 net present value (NPV)/present discounted value 19, 20–1, 24, 189, 191, 211 neutral principles 225 New Deal 119; so-called Second 139 “new” rule of reason 131–2, 136, 139, 158; friendlier environment for neoclassical Index 317 economics 132; see also Brandeis Justice L.: “new” rule of reason “new” Sherman Act 151–2, 155, 157, 207n16; and PP 154–6; Turner’s critique 154; see also Rostow E.: “new” Sherman Act New York Court of Appeals 74 New York Great Atlantic 154, 173n43; see also A&P case Ninth Circuit 252, 260, 278 non-competing groups 90–2 Nordenfelt 66–9, 70, 72, 79n29; Court of Appeal decision 67 Nordenfelt Co 67, 68 Nordenfelt, T 67 Nordenfelt test 66, 68–9, 71; see also reasonableness: test for CRTs Northern Securities 75, 76, 80n41, 112, 116–17, 118, 133n22; Harlan’s opinion 116–17, 132n2; Holmes’s dissent 107, 117 Northern Securities Co 116 Nutter, W 184 occupancy doctrine (in Bain) 150, 153, 156, 158, 169, 170 OECD; defininition of PP 14–15 oligopoly theory 143, 157, 170; as exemplifying theory 284 operationality 41, 78, 223, 230, 231, 233, 235, 236, 237, 238, 259–60, 262, 267, 272 Oppenheim, C 174n50 optimal deterrence 198–9 optimal enforcement theory 198 optimal penalty theory 198 Ordover, J 14, 243n63, 268, 270 Oregon Steam v Winsor 73 over-bidding 278 over-deterrence 198, 218, 227, 250, 251, 252, 259, 267, 287 over-production 82–3, 87 Page, W 49; legal process jurisprudence 221 Pareto optimality 192 Peckham, Justice R 12n3, 101n14, 112, 116; equality in marketplace 115; “free and unrestricted competition” 115; literalist reading of Sherman Act 115–16; opinion in Lochner 104–5, 132n1; opinion in TMFA 114–15; postTMFA opinions 116 Peltzman, S 270 Perelman, M 110 Peritz, R 107, 109, 114, 152, 250; reactions to rule of reason 125; Sherman Act’s procedural innovations 110; Standard Oil case 118; two freedoms 106; meta-market notion of economic power 170; on AGR 159–60; on Columbia Steel 157; on industry codes 137, 139; on trade associations 135; property rights rhetoric 217 per se prohibitions/rules 159, 162–3, 169, 245, 246; and enforcement costs 224; rule-based approach 223 Phillips, A 228 Pitofsky, R 246 planning 135 Platt, Senator O.H 108, 109, 133n7 Poller 165, 175n70, 275n25 Pollock, Sir F 80n44 populist “economists” 111–12, 126, 129 Posner, R 226, 231, 248, 251; and TPE 283; critique of ATR 227–8, 242n44; critique of Schwinn 163; divergent expectations 214; EAL methodology 183, 197, 205, 282–3; intent in tort and criminal law 165; not belonging to Chicago antitrust 206; on Chicago/ Harvard convergence 215, 240n24; on RPM 274n7; PP as rational strategy 213, 214; pricing at AVC 228; rational choice theory 206; reply to Jacobs 282; skepticism about McGee (1958) 208n35, 209n55, 212, 243n66, 283; strategic and intertemporal character of PP 229, 233, 283 Posner 1976 book 206, 253; and ATR 227–8; and more efficient rivals 228; average balance-sheet costs 242n50; definition of PP 228; on SRMC and LRMC 228 post-ATR debate 226–35, 238, 248, 251, 259, 260, 266, 285; Chicago contributions 233–5; enforcement statistics 236–7; impact on courts 235–7; imperfect rules 287; operational rules 234, 239; post-ATR rules 231–3; strategic analysis without game theory 239 Post-Chicago antitrust 28, 33, 263, 268, 276n33, 281, 283, 284; against Chicago price theory 285; and Daubert doctrine 272–3; as exemplifying theories 284; its failure 259, 263, 271, 284–5; Keynes’s “dentist test” 285 318 Index Post-Chicago models 264; and Daubert doctrine 272–3; as mere existence proofs 271; unfalsifiable 272; see also game-theoretic models post-McGee debate 27, 210, 211–15, 219, 224, 226, 238, 285; Chicago contributions 212–14, 215; courtroom impact 236; strategic stories 212–15, 233 potential competition 90, 90–4, 95–7, 98–9, 111, 113, 126, 130, 139, 146, 153, 171, 205, 280; as test for common law 97; as trump card against monopoly 92; Gunton’s definition 90; hindered by exclusionary practices 95; in classical economics 57, 74; in McGee (1958) 189; its limits 129; structural determinants 14 potential effect doctrine (in Bain) 150 predatory behavior/practices; 1911 cases 120, 121; A&P case 154; American Tobacco case 124–5; as real world phenomenon 122; prevented by industry codes 137; Bork’s critique 193–6; definition 13–18; distributional predation 195; during formative era 130; fear in the public opinion 4; in common law 61, 62; per se unlawful 129 predatory bundling 275n28 predatory buying 278 predatory investment 227 predatory paradigm 287n3 predatory phase 20, 22, 191, 211; length 21 predatory pricing (PP): above-cost pricing 214, 237; absolute profitability 19, 20–1, 189; against less-efficient rivals 339; and the “new” Sherman Act 154–6; as coercive practice 58; as a crime 216; as exclusionary practice 14, 27; as instrument of monopolization 87–8, 89; Barry Wright rule 260; basic story 19–21, 22–4, 34, 37, 38, 39, 43, 46, 61, 102n26, 121, 122, 123, 124, 125, 130–1, 179, 188, 191, 196, 201, 204; Baumol rule 232, 233, 236, 266; BBR’s definition 4, 264; BBR’s five-step approach 264, 265–6; below-cost pricing 62; Brooke doctrine 287; Brooke test 253, 255–7, 274n20; Chicago critique 22–4, 27, 42, 171, 184, 188, 196; Chicago doctrine/story 191, 203, 204–5, 210–11, 213, 215, 218, 219, 224, 235, 250, 264, 279, 280; citation statistics 268; classic economic definition 17–18, 19; classic legal standard 18, 19, 38, 39, 46, 88, 121, 124, 125, 130, 155, 169, 193, 204, 215, 217, 218–19, 235, 238; cost measures 43, 253, 255; customers’ help 22–3, 197, 210; Daubert doctrine 273; deep pocket assumption/story 19, 20, 22, 38–9, 191, 201, 204; definitions 13–18; during associationalist era 136; during formative era 112; during structuralist era 140; EAL methodology 198–9; economics-based analysis 238; enforcement equilibrium 237; enforcement statistics 203–4, 216, 275n28, 277n52; entry deterrence 19, 58, 214, 232, 235; financial markets’ help 22–3, 191, 204, 210; gametheoretic approach 27, 35–9, 210, 211, 214, 215, 235, 237, 239, 242n57, 264, 268, 268–71, 276n44, 284; gametheoretic failure 267, 268; gametheoretic stories 27, 46, 265, 269, 271; ideal rule 286–7; imperfect rules 286–7; in British common law 60, 62; in late 1930s 140; in oligopoly 258; Inglis test 260–1, 274n13, 276n39; intent requirement 100, 215, 216, 218, 237–8; investment in the creation of market power 16, 20, 191, 193, 211, 254, 256; irrational behavior/strategy 24, 210, 229, 280; Koller’s study 203–4, 209n53; length of predatory phase 21; long purse assumption 31; loss leader pricing 172n10; market power requirement 215, 216, 218, 237–8; Matsushita dictum 249, 255; McGee’s conclusion 190; modern economic definition 18; monopoly power requirement 100; noncost-based definition 121; Ordover and Willig’s approach 243n63; output (Williamson) rule 232, 233, 235, 236; peculiarity with respect to other exclusionary practices 256; per se unlawful 120; Posner’s definition 228; Post-Chicago failure 259; price/cost relation 17, 18, 45, 215, 223; price/cost rules 20, 43, 221, 226, 229, 233, 235, 236, 249, 253, 254, 266; price-theoretic approach 268, 286; price-theoretic rules 205, 210, 223, 225, 233; rational behavior/strategy 213, 214, 229; relative profitability 19, 23; reputation 213, 214, 277n53; rule of reason approach 287; Index 319 rule-based approach 211, 217, 223, 229, 234, 237, 238, 245, 286; signal against entry 232; simple rules 205, 210, 211, 221, 223, 235–6; story-based approach 211, 214, 219, 223, 224, 229, 233, 237, 238, 265, 286; strategic and intertemporal character 16, 24, 27, 45, 64, 211, 229, 231–3, 235, 236, 238–9, 283, 288n9; strategic definition 214–5; strategic stories 219, 235; takeover strategy 46n5, 23–4, 212; threats 212–13, 214; total cost standard 233; total enforcement cost 223–4; two requirements 215; two-tier rule 232–3, 236 (see also Joskow and Klevorick rule); Type I errors 218, 219, 223, 224, 225; Type II errors 224; unlimited borrowing 191–2; “unnatural” exercise of freedom of contract 120; vague narrative 18 Presidential election (1912) 125, 128 preying for time 37; see also Easley, Masson and Reynolds model price and production policies: as effects in SCP 144; Mason’s 1939 definition 142–3, 144 price cuts: as test-distruptive action 36; de facto lawful 257, 278; per se lawful 190, 196, 199, 204, 218, 219, 222, 224, 229 price discrimination 89, 126, 128, 129, 137–8, 167, 179, 217, 274n20; as predatory practice 199, 200, 201; as procompetitive practice 209n50; in McGee (1958) 208n26 price-fixing agreements 75, 108, 152, 159, 162; and property rights 288n5; by trade associations 135, 137; lawful if voluntary 73–4; per se unlawful 115, 130 price theory 42, 44, 143, 170, 181, 196, 201, 203, 205, 206, 210, 211, 221, 223, 224, 226, 238, 245, 246, 249, 263, 264, 283, 286; applied against PP basic story 22–4, 188–90, 204; core of Chicago economics 183, 192; decline in 1990s economics 263; dichotomic logic 224; enforcers’ economic literacy 262; neglected by American courts 193; showing the irrationality of PP 194–5 price war 84, 86–8, 123, 189, 191, 195, 212–14 principle of competition 105, 116, 117, 119, 138, 162; see also competition principle Printing & Numerical Registering v Sampson 78n8 promote or suppress test 131, 132, 158 property rights 52, 64, 70, 71, 103, 107, 113, 119, 131, 136, 168, 280; in classical economics 54–5; fair profit 108; freedom to compete 95; rhetoric 49, 52, 109, 136, 171, 247, 252, 217, 280; sanctioning price-fixing 288n5 public interest/policy 49, 51, 52–4, 65, 66, 67–9, 69–72, 142, 144; in Sherman Act110; Wilberforce’s distinction 77n6 publicity 111, 127, 133n12 railroad economics 81–2 rational behavior 205, 283 rational choice theory 196, 205, 206; integrating/replacing price theory 183, 197, 198 rational expectations 30, 197, 210; equilibrium 30 rationality assumptions/requirements 44, 46, 267; in Chicago antitrust 197; in Chicago TPE 197; parametric 211, 239n2; perfect 213, 224; strategic/ interactive 211, 239n2 reasonableness: between the parties and for the public 67, 69, 70–1; in CRT law 52, 60, 61, 66, 67, 68; test for CRTs 52–3, 66, 68–9, 113, 120 (see also Nordenfelt test) recoupment phase 20–2, 189, 191, 211 recoupment test/condition 256–7; actual versus theoretical possibility 256; and PP peculiarity 256; capability and sufficiency 256; economizing on court’s information 257–8, 265; in Brooke 249, 254–5; in Inglis 243n73, 274n13; in Matsushita 249; methodology 254; operationality 262; structural preconditions 256, 275n24; two elements 256 Red C Oil Manufacturing Co 122 Reder, M 192–3, 194 Regulation: of big business 111; of competition 135 Report on the Tobacco Industry 123 republican values 59; see also Jeffersonian ideal reputation 213, 214, 268; as predator 31, 32, 121, 123; effects 33, 34, 36; fragility in Kreps & Wilson game 34 reputation game 31–3, 33–5, 277n53; see also Kreps and Wilson model; Milgrom and Roberts: reputation model 320 Index resale price maintenance (RPM): per se prohibition 247–8; pro-efficiency practice 248; rule of reason approach 248, 276n38 Reynolds, R 37, 243n68 Riordan, M 16, 39, 237, 264 Roberts, J 28, 42,, 235, 268; on McGee (1958) 266 Robinson-Patman Act 14, 159, 167, 187, 274n20, 279; anti-price discrimination 137–8; its real goal 200–1; Neal Report’s amendments 209n50; unreasonably low prices 172n9 Rockefeller, J.D 112, 118, 121–2, 125, 188, 190, 212, 279; predatory practices 175n78 Roosevelt, F.D 139, 219 Rosenthal, R 34 Rostow, E 151, 156, 157, 158, 159; American Tobacco 153; “new” Sherman Act 151, 155, 157, 207n16; structural remedies 153 Rubinstein, A 46, 267; “fables” 46, 197, 267, 271 ruinous competition 72, 82–3, 87, 88, 108, 118, 123, 137, 152, 168 ; as defense 85, 87, 115, 116; Britain versus America 79n34; see also destructive competition rule-based approach 211, 217, 223, 229, 234, 237, 238, 245, 286 rule of reason 9, 117, 118–20, 125, 129, 154, 162; §2 cases 165; and intent 158; and the Chicago School 184–5; and workable competition 170; as judicial legislation 128, 129; balancing approach 131, 132; BBR 2000 paper 266; Brandeis’s “new” version 131–2, 136, 139, 158; endorsed by AGR 159; enforcement costs 224; first statement in TMFA 115–6; ICC report 128; in British common law 52–3, 60, 66, 68–9; inductive versus deductive procedure 132; ineffective against exclusionary practices 126; lack of economic foundations 126; PP cases 218, 228–31, 235, 267, 287; reinforcing Swift doctrine 149; RPM cases 248, 276n38; source of antitrust uncertainty 126, 127, 129; story-based approach 223; vertical restraints cases 247, 248 Rule-of-Reasonist faction 112 safe harbors 253, 260, 261, 287n1 Saloner, G 268 Salop, S scale economies 59, 81–2, 87, 110, 147, 177; minimum efficient scale 245 Scalia Justice A 276n38 Schelling, T 234 Scherer, F 226, 235, 1976 checklist 229–30, 233; §2 enforcement 156; critique of ATR 229–30; definition of PP 16, 17–18; feedback effects in SCP 144–5; on Kaysen and Turner’s proposal 178; on monopolization 149–50; predation as entry deterrence 33; rejoinder to Areeda and Turner 230, 242n54; rule of reason in PP 229–30, 231, 233, 236; SCP method 140; SCP two groups 145 Schmalensee, R 28, 226, 263, 284; engineering view of the firm 245–6; rule of reason in PP 230 Schwinn 162, 163, 174n62, 240n25, 247 Schwinn Co 163 Scott, Morton F 62 second best theory 198 Second Circuit 152, 173n41 Seligman, E 86 Selten, R 25–6, 27, 28, 31; backward induction 25, 32; chain-store paradox (CSP) 25–6, 29, 32, 33, 42, 234; subgame perfect equilibrium 25 Seventh Circuit 154, 175n68, 175n71, 275n24 Shapiro, C 10, 270 Sherman Act: §1, 105, 109, 118; §1 conspiracy 249; §2, 13, 105, 109, 125; American economists’ 1932 statement 138; as anti-cartel statute 75; as “Edmunds Act” 106, 109; as enactment of common law 51, 75, 77, 105, 107, 109, 111, 113, 114, 117, 119; as replacement of common law 114; Congress debates 50, 105, 105–9, 151; Congressional factions 107; consumers’ protection 107; conventional economists’ view 111; corporatist economists’ view 110–11; dichotomic view of antitrust 106; economists’ influence 101; economists’ reaction 110–12; era of neglect 136; literalist reading 115–17; Lochner doctrine 105; motivation 105–6; “police power” 110; populist economists’ view 111–12; prescribing competition 116; procedural innovations 77, 106, 107, 110; Index 321 prohibiting PP 14; third-party actionability 110, 130; treble damages 110; why not in Britain 79n37 Sherman, Senator J 106, 114, 162; consumers’ protection 107, 108; full and free competition 108, 112, 114; his view of combinations 107; original Bill 102n16, 106, 107, 110, 115; various Bills 106–7, 109, 112 shipping conferences 61, 62, 65, 76 short run/long run tradeoff short run marginal cost (SRMC) 198, 221, 223, 224–5, 232; relation to ATC 226–8; relation to AVC 226–7; relation to LRMC 228 signaling game 29–30, 35, 36, 43, 268; see also Milgrom and Roberts: signaling model signal-jamming model 35–6; see also Fudenberg and Tirole model simple rules 46, 205, 210, 211, 221, 223, 235–6 Simpson 162, 163, 174n62 Simons, H 182, 184, 1934 pamphlet 181–3, 185; anti-monopoly program 182–3, 185; as classical liberal 185; his law and economics 181; influence on Director 183 “small dealers and worthy men” 3, 88, 107, 111, 112, 137, 161, 162, 238; Peckham’s statement in TMFA 115 Smith, A 54, 56; on monopolies 78n14; system of natural liberty 55 social welfare Socony-Vacuum 152, 173n39 Sosnick, S 146 Spectrum Sports 252–3, 254, 274n18; and Brooke 253, 254; goal of antitrust 252; monopolization doctrine 252; Ninth Circuit decision 252 Spence, M.; entry deterrence model 234–5, 240n9, 243n60 Spencer, H 117 Spirit Airlines 244n73 Standard Oil 7, 9, 10, 12n8, 112, 118–20, 120–2, 124, 128, 129, 133n23, 153, 166, 167, 169, 179, 208n35, 279; abuse approach to §2, 187–8; bogus companies 122; intent 166, 169; McGee’s critique 188–90; monopolization 203; obstacle to Chicago antitrust 188; per se prohibition of PP 215; presumption of monopolization 187; size-based approach to §2, 188; unlawful unilateral practices 120; White’s opinion 118–20 Standard Oil Co 8, 101n4, 118–20, 121–2, 138, 188, 190, 203, 207n22 Standard Oil Kentucky 122 Stanford Four 28, 35, 37, 45 Stanford Graduate School of Business 28 Statute of Monopolies 50 Stevens, Justice J.P.: dissent in Brooke 258; un-Chicago character of Brooke 258 Stevenson, R 144 Stewart, Justice P.; dissent in Utah Pie 168 Stickney, A 74 Stigler, G 46n8, 173n31, 206, 1969 White House commission 203; against business size 207n13; competition as rivarly in a race 57; critique of workable competition 175n80; financial markets’ imperfections 191–2, 193, 194; motivation of Sherman Act 133n3 Stocking, G 184, 206n2 Stone, J 271 Stone, Justice H.F 136 story-based approach 211, 214, 219, 223, 224, 229, 233, 237, 238, 265; enforcement costs 224; in Post-Chicago antitrust 286 structural reductionism 148; see also extreme structuralism structure-conduct-performance (SCP) approach/paradigm 140, 147, 159, 160, 167, 177, 203, 205, 206, 210, 220, 238, 246; and antitrust law 148–9, 161–2, 169, 170; and the Warren Court 178; Bain’s 1959 formulation 148; basic conditions 141; “behaviorist” group 145; causal chain 141, 144; competitive market structure 248; criticized by Chicago 205; entry barriers 148; feedback effects 144; Harvard IO orthodoxy 169, 170, 171, 210; its critics 163; market power 220; market structure exogeneity 144, 145; Mason’s 1939 manifesto 142–5; Mason’s definition 144; monopolization 150, 169; new notion of market 145; organizing framework of IO 141, 148; problem of conduct 145; Scherer’s definition 140; “structuralist” group 145, 156; Weiss’s interpretation 148–9 subgame perfect equilibrium 25 subjective beliefs 25, 35, 206, 271 substantive due process (SDP) 103–5, 108, 119 322 Index sufficiency of the evidence 253 Sugar Institute 137, 139, 172n5 summary judgment 256, 275n25 sunk costs 21, 81–3 Supreme Court; 1911 decisions 98, 119, 120, 125, 1967 antitrust decisions 161, 163, 171; A.L.A Schechter Poultry decision 139; American Tobacco decision 124–5; and exclusionary practices 256; and the “new” Sherman Act 151–2; and the three D’s of antitrust 178; Brooke decision 217, 253–5, 256–7; Brown Shoe decision 161–2, 180; Brunswick decision 250; Cargill decision 250–2; Chicago Board of Trade decision 131; Columbia Steel decision 156–7; Daubert decision 271–3; du Pont decision 179–80; EC Knight decision 114; endorsing Chicago’s views 248, 250, 254, 257; Grinnell decision 163–4, 166; GTESylvania decision 247–8; its microeconomics 185, 201; Lochner decision 104–5; Matsushita decision 248–50; Northern Securities decision 116–17; Poller decision 165; Spectrum Sports decision 252–3; Standard Oil decision 118–20; Sugar Institute decision 137, 139; Swift decision 149; TMFA decision 114–16; Topco decision 216; two factions 112, 117, 133n15; US Steel decision 149; Utah Pie decision 167–9; Weyerhaeuser decision 278–9; see also Warren Court Supreme Court of Massachusetts 75 Swift 153, 173n33; monopolization doctrine 149, 252 Swope, G 172n2 Swope Plan 135 Sylos postulate 239n3 Taft Justice W.H 112 takeover 23–4, 46n5, 122, 123, 189, 208n25, 212 Taussig F 127 technical efficiency 86, 90, 93, 94, 110 Telex 240n15 Telser, L 193, 205; cooperative game theory 234; long purse assumption 213; on McGee (1958) 212; predatory threats 212–13, 239n6; price wars 213; RPM as pro-efficiency 247–8 Tenth Circuit 274n16 territorial restraints 162, 245 test-market predation 36 Third Circuit 279 Threats: of entry 26; against potential entry 32, 212–13; credibility 213, 214; predatory 24, 33, 121, 212–13 three D’s of antitrust 178; see also divesture/dissolution proposals tight prior equilibrium (TPE) 192–3, 205, 210; as methodological principle 193, 194, 263, 283; in antitrust law and economics 192, 194; rationality assumptions 197; never IO mainstream 263 Timken Roller 178, 206n4 Tindal Judge N 67, 68 Tindal test 67–8 Tirole, J 35, 263, 268 Tom, W.K 164, 286 Topco 216, 240n16 total enforcement cost 223–4 Town of Concord 276n41, 288n11 trade associations 135–8; and price stability 135; industry codes 137 Trans-Missouri Freight Association (TMFA) 12n3, 113, 133n17; lower courts’ decisions 113–14; Peckham’s opinion 114–15; principle of competition 115; rule of reason 115; Supreme Court decision 114–16, 133n19; White’s dissent 115–16 Trinko 276n38 Trusts: as lawful monopolies 118; as modern feudalism 88; per se unlawful 118; public fears 88; reasonable/ unreasonable 119–20, 125; rise in American economy 84–5, 126; sociopolical dimension of the problem 88; threat to American democracy 111; see also corporate trusts Tugwell, R 135 Turner, D 177, 215, 220, 221, 259, 260, 262; head of Antitrust Division 221; on A&P case 154–5; on “new” Sherman Act 154; see also Areeda and Turner 1975 paper; dissolution proposals: Kaysen and Turner’s tying 129, 159, 162, 184, 186, 245 Type I errors (false positives) 198, 218, 286; in PP cases 218, 219, 223, 224, 225; see also judicial errors Type II errors (false negatives) 286; in PP cases 224; see also judicial errors under-deterrence 287 Index 323 unfair competition (FCT Act §5) 128–9 United Shoe Machinery (1909) 71, 72, 79n35 United Shoe Machinery (1953) 207n19 US Code 14 US Senate; Interstate Commerce Committee (ICC), 102n23, 127–8; Judiciary Committee 106, 109, 110 US Steel 149, 152, 153, 173n34 US Steel Co 156 Utah Pie 167–9, 175n75, 202, 205, 209n48, 209n50, 211, 216, 217, 219, 245; Bowman’s critique 199–202; milestone of PP law 167 Utah Pie Co 167, 168, 175n79, 199, 201 Van Horn, R 184 Vegelahn v Guntner 75–6, 77, 80n42, 80n43 vertical agreements/restraints 179, 184, 186, 247; Chicago approach 248, 274n4; rule of reason approach 240n25 Viner, J 182 Viscusi, K 15 Volker Fund 184 von Neumann, J 28 Wagner, Senator R 172n7 Walker, F.A 56 Warren Court 160, 170, 171, 284; against business size 178, 186; and predatory pricing 215–16; and SCP 178; bad microeconomics 163–4, 246; Chicago critique 186; economists’ reaction 176, 178; egalitarian approach 162–3, 166, 168; enforcement statistics 171; exclusionary practices 194; freedom of contract 162, 163; Grinnell doctrine 163–4; its critics 171; merger doctrine 161–2; per se prohibitions 162–3; Poller 165; populism 188; property rights rhetoric 247, 280; socio-political goals 179, 185–6, 205, 216; structuralist antitrust 160–3; see also Supreme Court Warren, Justice E 174n53; opinion in Brown Shoe 161 Watkins, M 184, 206n2 Weiss, L 145; Bain’s methodology 148–9; on SCP and antitrust law 148–9 Wells, M 225 Werden, G 164 Weyerhaeuser 278–9, 281, 285, 287n2 Whig history 11, 12n14 White House Task Force on Antitrust Policy 178, 202, 209n50 White, Justice B.; opinion in Utah Pie 167–8, 200, 201 White, Justice E 112; basic PP story 124; classical competition 119; classical legal standard of PP 124; critique of literalism 115; dissent in Northern Securities 116; dissent in TMFA 115–6; exclusionary practices 125; limits to freedom of contract 120; opinion in American Tobacco 124–5; opinion in Standard Oil 118–20; rejection of competition principle 118–19; rule of reason 118–20, 132; “solution” in Standard Oil 118, 120 Wilberforce, Lord R 50, 53 Williamson, O 226, 231, 235; ATR as defendant’s paradise 222; critique of ATR 232; on price regulation 232; operationality 232; output rule 232, 233, 235, 236 Willig, R 14, 28, 243n63, 263 Wilson, R 28, 268 Wilson, W 126; as social scientist 134n37; as US President 128; on antitrust reform 128; on competition 128, 134n41 Winerman, M 128 Wood v Whitehead Bros 80n39 workable competition 145–6, 160, 167, 170, 238; behaviorist intepretation 146; endorsed by AGR 158–60, 170; Kahn’s proposal 157–8; structuralist intepretation 146, 147; taxonomy 173n26 Wright, J 271 Wyzanski, Judge C.; on Alcoa doctrine 186 Yamey, B.; forerunner of strategic approach to PP 214–15; predatory threats 212–13; takeovers 208n25 Young, A.; critique of Clayton Act 129; on predatory pricing 129 This page intentionally left blank Taylor & Francis eBooks 5S5 я FOR Vour liBRARIES Over 23,000 eBook titles in the Humanities, Social Sciences, STM and Law from some of the world's leading imprints Choose from a range of subject packages or create your own! ~ Free MARC records кШІ ~ COUNTER-compliant usage statistics ~ Flexible purchase and pricing options ~ Off-site, anytime access via Athens or referring 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