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Table of contents :
Introduction: The crisis in antitrust
PART I - THE THEORY
1. The Historical Foundations of Antitrust Policy
2. The Goals of Antitrust: The Intentions of Congress
3. The Goals of Antitrust: The Responsibility of the Courts
4. Business Behavior and the Consumer Interest: Some Rudiments of Theory
5. The Consumer Welfare Model
6. The Method of Antitrust Analysis
7. Injury to Competition: The Law's Basic Theories
PART II - THE LAW AND THE POLICY
8. Monopoly and Oligopoly: The Problem of Horizontal Size by Internal Growth
9. The Crash of Merger Policy: The Brown Shoe Decision
10. Horizontal Mergers
11. Vertical Mergers
12. Conglomerate Mergers
13. Horizontal Price Fixing and Market Division
14. Resale Price Maintenance and Vertical Market Division
15. Exclusive Dealing and Requirements Contracts
16. "Barriers to Entry"
17. Boycotts and Individual Refusals lo Deal
18. Predation Through Governmental Processes
19. Tying Arrangements and Reciprocal Dealing
20. Price Discrimination
PART III - SUMMATION
22. Final Thoughts
Appendix to chapters 13 & 14
Index of cases
The Antitrust Paradox
ANTITRUST PARADOX A Policy at ~r with Itself ROBERT H. BORK
Basic Books., Inc.., Publishers
Library of Congress Cataloging in Publication Data Bork, Robert H. The antitrust paradox. Includes bibliographical references and index. 1. Antitrust law-United States. I. Title. KF1649.B67 343'.73'072 ISBN: 0-465-00369-9
Copyright © 1978 by Basic Books, Inc. Printed in the United States of America DESIGNED BY VINCENT TORRE
All that is meant, and that will be understood, cannot be expressed in a dedication. This book is for Claire.
ACKNOWLEDGMENTS INTRODUCTION: THE CRISIS IN ANTITRUST
PART I THE THEORY 1. 2. 3.
The Historical Foundations of Antitrust Policy The Goals of Antitrust: The Intentions of Congress The Goals of Antitrust: The Responsibility of the Courts Business Behavior and the Consumer Interest: Some Rudiments of Theory The Consumer Welfare Model The Method of Antitrust Analysis Injury to Competition: The Law's Basic Theories
15 50 72
PART II THE LAW AND THE POLICY 8.
9. 10. 11. 12.
13. 14. 15. 16.
Monopoly and Oligopoly: The Problem of Horizontal Size by Internal Growth The Crash of Merger Policy: The Brown Shoe Decision Horizontal Mergers Vertical Mergers Conglomerate Mergers Horizontal Price Fixing and Market Division Resale Price Maintenance and Vertical Market Division Exclusive Dealing and Requirements Contracts "Barriers to Entry"
163 198 217 225
246 263 280 299 310
Boycotts and Individual Refusals lo Deal Predation Through Governmental Processes 19. Tying Arrangements and Reciprocal Dealing 20. Price Discrimination 17. 18.
PART III SUMMATION 21. 22.
Recommendations Final Thoughts
APPENDIX TO CHAPTERS I
INDEX OF CASES
This book grows out of long experience with the antitrust laws as student, practitioner, and teacher. Its appearance has been delayed perhaps six or seven years by a series of unexpected events. The first draft was finished in 1969, at the completion of a sabbatical year, and in the ordinary course the book would have been rewritten during 1970 and published, probably, in 1971. The turbulence of the campus during those years and certain personal concerns, however, precluded serious work. I had returned to my work and almost completed it when my entry into government in June 1973 once more put a stop to the effort. Since leaving government, I have been able, with some very generous assistance, to bring the project to a close. This is the result. My intellectual indebtedness is particularly heavy. Much of what is said here derives from the work of Aaron Director, who has long seemed to me, as he has to many others, the seminal thinker in antitrust economics and industrial organization. His reputation is immense among those who know him; that it is not more widespread is entirely due to his choice to publish little and rest content with the establishment of a strong oral tradition at the law school of the University of Chicago, where he taught economic theory. I had the good fortune to be his student in 1953 and 1954, the latter year as a graduate research associate, and our discussions permanently and substantially altered my ways of thinking about much more than antitrust. It is impossible to capture the impressiveness of the man for the reader who does not know him: he depended for his results not at all upon pedagogical fireworks but rather upon a quiet manner and a remorseless logic. He gave the impression of absolute intellectual integrity, a very rare quality and so immensely impressive when encountered. Perhaps his genius lay in that, and in his capacity for examining what appeared the most ordinary propositions of law and perceiving at length that the shibboleths were empty. He is my idea of what a real intellectual is like. Closely associated with Director in those days was Edward H. Levi, without question the most brilliant classroom teacher I have ever
seen. He heavily influenced all my views of antitrust and of law generally. It was his capacity to dazzle, to entrance, to see more rapidly than anyone else the ramifications of ideas that attracted many of us to antitrust, because he taught it. There is much more to be said of Levi and his intellectual influence in the law school at that time, but that is another story. At Yale for eleven years I benefited immeasurably from discussions with Ward S. Bowman, Jr., so much so that I cannot begin to identify all of the things in this book that could be traced to him. He, too, has acknowledged the powerful influence of Aaron Director during the years Bowman spent at Chicago. Bowman's own book, Patent and Antitrust Law,1 is so good and so definitive that I have not even attempted in this book to comment upon that branch of the law. There is nothing more to say. His comments on my manuscript have been of enormous assistance. Ralph K. Winter, Jr., another Yale colleague, also has read the manuscript and made many helpful comments and corrections. So, too, has Frederick M. Rowe, a prominent lawyer in Washington, himself the author of the exhaustive and excellent Price Discrimination Under the Robinson-Patman Act. 2 Antonin Scalia, a former colleague at the Department of Justice, now a professor of law at the University of Chicago, read and was particularly helpful with the last chapter. Midge Deeter has been as encouraging, skilled, and perceptive an editor as everyone told me she would be. I have never fully understood the custom of exonerating everybody who reads an author's manuscript from any complicity in its errors and shortcomings, but I am willing to follow the tradition. One and all, they are absolved. ( Formally and in public, at least.) I wish to acknowledge with gratitude the support of grants from Yale University made possible by the generosity of the Reim Foundation and the General Electric Foundation. I also wish to thank William J. Baroody and the American Enterprise Institute for Public Policy Research, of which he is president. AEI housed and supported me during the spring of 1977 so that the book could at long last be finished. A comment upon one other matter seems appropriate. On several occasions in this book, and particularly in Chapter 8, I have used the automobile industry and the General Motors Corporation to illustrate my argument. These passages were written in 1968-1969. In 1977, I agreed to represent General Motors in connection with an investigation involving some of the issues discussed here. I have decided to let the text stand. To change it now in order to discuss a different company in a
different industry would not only delay completion of the book once again, a prospect neither I nor my family could bear to contemplate, but would also be disingenuous. My analysis and conclusions would remain the same and would be completely transferable to the context of the automotive industry. The general position taken here is one I have held for many years and first took publicly, I believe, in dissenting from the Report of the White House Task Force on Antitrust Policy ( the Neal Report) in 1968. ROBERT H. BORK
New Haven, 1978
I acknowledge the kind permission of the editors and publishers to use material that first appeared under their auspices: "The Crisis in Antitrust," with Ward S. Bowman, Jr. Fortune 68 ( 1963): 138. "The Supreme Court Versus Corporate Efficiency." Fortune 76 ( 1967): 92. "Antitrust In Dubious Battle." Fortune So ( 1969) : 103. "Legislative Intent and the Policy of the Sherman Act, f ournal of Law and Economics 9 ( 1966): 7-48. "Vertical Integration and the Sherman Act: The Legal History of An Economic Misconception." University of Chicago Law Review 22 (1954): 157-201. "The Rule of Reason and the Per Se Concept: Price Fixing and Market Division."Partl. YaleLawfournal74 (1965): 775-847."" "The Rule of Reason and the Per Se Concept: Price Fixing and Market Division." Part II. Yale Law fournal 75 (1966): 373-475. "A Reply to Professor Gould and Yamey." Yale Law fournal 76 ( 1967): 731-743. "Resale Price Maintenance and Consumer Welfare," Yale Law fournal 77 ( 1968): 950-964.
"Articles from Yale Law Journal by permission of The Yale Law Journal Company and Fred B. Rothman and Company.
The Antitrust Paradox
INTRODUCTION: THE CRISIS IN ANTITRUST
Improbable as the statement may seem, antitrust today is almost an unknown policy. It is ubiquitous: Antitrust constitutes one of the most elaborate deployments of governmental force in areas of life still thought committed primarily to private choice and initiative. It is popular: There is some intellectual but almost no political opposition to its main features. And it is even exportable: This supposedly peculiarly American growth has spread to and taken at least equivocal root in Europe and even in Asia. Yet few people know what the law really commands, how its doctrines have evolved, or the nature of its ultimate impact upon our national well-being. Even among the specialized and elite corps of lawyers who operate the antitrust system there is remarkably little critical understanding of the policy. This state of affairs is curious, and certainly unfortunate, but perhaps it is understandable. Antitrust is a subcategory of ideology, and by the time a once militant ideology triumphs and achieves embodiment in institutional forms, its adherents are likely long since to have left off debating first principles. "The antitrust movement," as Professor Richard Hofstadter remarks, "is one of the faded passions of American reform." 1 But Hofstadter goes on, and probably it is not a paradox-"the antitrust enterprise has more significance in contemporary society than it had in the days of T.R. or Wilson, or even in the heyday of Thurman Arnold." The very nearly simultaneous "collapse of antitrust feeling both in the public at large and among liberal intellectuals" and our arrival at a state of affairs in which "the managers of the large corporations do their business with one eye constantly cast over their shoulders at the Antitrust Division" are probably to be explained, though Hofstadter does not quite make the causality explicit, by the fact that "antitrust as a legal-administrative enterprise has been solidly institutionalized in the
past quarter-century." The waning of fervor with the growth of organization, bureaucracy, and effective power is a familiar occurrence in both secular and religious movements. But the ideology remains, and its inner logic drives the antitrust enterprise-lawyers, economists, judges, and legislators-inexorably toward the conclusions implicit in the premises. This phenomenon, along with a modest resurgence of antitrust feeling, accounts for the current round of litigation and proposed legislation designed to dissolve many of America's most successful corporations. In all kinds of political weather the machinery of antitrust enforcement grinds steadily on, mindlessly reproducing both the policy triumphs and disasters of the past. Even when public and political enthusiasm for the harassment of business is at an ebb, the enforcement bureaucracy and the residual potency of the antitrust symbol remain strong enough to prevent the law's mistakes from being retracted. The full range of modern rules that significantly impair both competition and the ability of the economy to produce goods and services efficiently is discussed in detail in the remainder of this book. Generally, these rules ignore the obvious fact that more efficient methods of doing business are as valuable to the public as they are to businessmen. In modern times the Supreme Court, without compulsion by statute, and certainly without adequate explanation, has inhibited or destroyed a broad spectrum of useful business structures and practices. Internal growth to large market size has been made dangerous. Growth by merger with rivals is practically impossible, as is growth by acquisition of customers or suppliers. Even acquisitions for the purpose of moving into new markets have been struck down, as the law evolves a mythology about the dangers of conglomerate mergers. Cooperative ventures between independent businesses are outlawed thr