Antitrust Enterprise: Principle and Execution.

• Author: Crane, Daniel A.
• Position: Book review

THE ANTITRUST ENTERPRISE" PRINCIPLE AND EXECUTION. By Herbert Hovenkamp. Cambridge and London: Harvard University Press. 2005. Pp. vi, 368. $39.95.

INTRODUCTION

Herbert Hovenkamp (1) is one of the preeminent antitrust scholars of his generation and the current custodian of the highly influential Areeda-Turner Antitrust Law treatise. (2) The treatise (now commonly referred to as the "Areeda-Hovenkamp" treatise) is in its second edition, spans fourteen volumes, and enjoys unparalleled prestige. It has been cited in over forty Supreme Court decisions and in hundreds of lower court decisions. Justice Breyer once remarked that advocates would prefer to have "two paragraphs of Areeda's treatise on their side than three Courts of Appeals or four Supreme Court Justices." (3)

As custodian of the treatise, Hovenkamp speaks with oracle-like authority on antitrust matters. Recently, a company that settled an antitrust lawsuit for a disappointingly low sum explained to its shareholders that a new draft article by Hovenkamp posted for public comment on the Social Science Research Network ("SSRN") had diminished the value of its claims by undermining one of its key legal theories. (4) Such is Hovenkamp's authority in antitrust circles.

Given Hovenkamp's influence and intellect, the publication of The Antitrust Enterprise is a major event, particularly since he sets out, according to the book's jacket, to provide "the first authoritative and compact exposition of antitrust law since Robert Bork's classic The Antitrust Paradox was published more than thirty years ago." Nevertheless, one could quibble with the jacket's claim. Richard Posner substantially updated his own authoritative and compact exposition of antitrust law in 2001. (5) In a 2003 book review, Hovenkamp called Posner's second edition a "marvelous and important book." (6) So, before beginning a review of Hovenkamp's new work, it seems necessary to address the question of why we need another such treatment four years later.

The answer is that Hovenkamp's goal is very different from that of Posner and Bork. Posner and Bork wrote what Hovenkamp calls "polemical works" against the prevailing antitrust regime (p. 37). In the 1970s the prevailing regime was highly interventionist, suspicious of all manner of horizontal and vertical restraints and mergers, and intent on protecting small business from larger rivals, regardless of the cost to consumers. Bork and Posner's "polemical" works attacked the entire edifice of antitrust reasoning that had prevailed since the second half of the New Deal. By 2001, Posner had seen much of his revolutionary vision come to fruition, but his second edition retained its attacks on the Warren Court's antitrust policies just in case anyone was tempted to turn back the clock.

Hovenkamp has no such revolutionary ambition. As custodian of the Areeda-Turner treatise and hence the doctrinal center, he takes care to avoid associating too closely with any particular antitrust "school." While he describes his own position as primarily "new Harvard" (p. 37), one is hard-pressed to locate the core tenets of this "new Harvard" school. It certainly does not resemble the Structure-Conduct-Performance Harvard school of the 1950s and '60s, which viewed antitrust problems in formalized structuralist terms. As Hovenkamp acknowledges, the Harvard school (and the Areeda treatise) took a sharp turn westward, toward Chicago, after Donald Turner's conversion experience in the late 1970s. (7) Although "new Harvard" borrows from the institutional design concerns of the traditional Harvard school-administrability is one of Hovenkamp's key concerns--this "new Harvard" school could just as easily be called "Chicago lite." It accepts the essential theoretic insights of the Chicago School but acts cautiously in applying them to real cases because of skepticism over the predictive power of theoretic models in litigation. Hovenkamp readily admits that the main differences between the new Harvard and Chicago schools "lie in details" (p. 38).

By the same token, this "new Harvard" school embraces some of the insights of the post-Chicago school--which tends to justify greater antitrust intervention following game-theoretic predictions of market failures--but then is hesitant to apply those theoretic insights without strong proof of their predictive power in real cases. As Hovenkamp notes, "new Harvard" is "the position most followed by the federal courts today" (p. 37). In other words, then, the antitrust enterprise that Hovenkamp advocates is the antitrust jurisprudence of the judicial mainstream, a generally incremental and cautious enterprise.

To be sure, Hovenkamp is not merely an apologist for the status quo. He musters criticisms of several mainstream antitrust positions--for example, the Supreme Court's Kodak, (8) Illinois Brick, (9) Maricopa, (10) Brooke Group, (11) California Dental, (12) and Dr. Miles (13) decisions, and the Department of Justice's ("DOJ") post-appeal position on remedies in Microsoft (14)--and offers numerous suggestions for improving antitrust law and practice. But the general tenor of the book is conservative, in both senses of the word. Hovenkamp defends the essential character of the antitrust enterprise as it exists today and advocates a restrained approach to antitrust intervention in commercial markets.

Overall, Hovenkamp defends the antitrust status quo in accessible and wonderfully jargon-free prose. The book succeeds in offering profound insights for antitrust specialists while remaining accessible to lay readers. Where necessary, Hovenkamp rounds off the rough edges of an antitrust enterprise that is otherwise about where it ought to be. His proposals for reform, summarized at the conclusion of the book, are mostly ideas that mainstream voices have proposed, and some may see the light of day when the Antitrust Modernization Commission concludes its work in 2007. (15)

The Antitrust Enterprise is organized into three parts. Part I--"Limits and Possibilities"--presents an overview of consumer welfare economics, the limitations of antitrust as a regulatory regime, and the procedural apparatus of antitrust enforcement. Part II--"Traditional Antitrust Rules"--examines the state of contemporary antitrust law in its three primary areas of coverage: collaborative restraints of trade, (16) unilateral exclusionary conduct, (17) and mergers. (18) Part III--"Regulation, Innovation, and Connectivity"--addresses various "hot" issues in antitrust enforcement, such as the obligation to do business with competitors, intellectual property and antitrust convergence, and the role of competition policy in network industries.

Hovenkamp's work is an important and welcome book by an undisputed master of the trade. But perhaps the lingering value of the book is that it thoroughly captures the spirit of this particular moment in U.S. antitrust law both for the present generation and for historians to come. To exaggerate only slightly, Hovenkamp is the modern antitrust enterprise. And, like Hovenkamp himself, the antitrust enterprise has become, in a word, modest--existentially, procedurally, and substantively. In the following sections, this Review examines this modesty from existential, procedural, and substantive perspectives. The Review then offers some insights as to where the antitrust enterprise may go next whenever it sheds its current modesty and reclaims a more aggressive posture.

1. EXISTENTIAL MODESTY

   For someone whose life's work is antitrust law, (19) Hovenkamp has low expectations about what antitrust should seek to accomplish. He repeatedly admonishes that antitrust is "an economic, not a moral, enterprise," dismissing the specter that antitrust's heavy artillery should be turned on ordinary business torts (pp. 10, 54). Further, Hovenkamp does not believe that antitrust is well suited to perform a wealth-redistribution function, such as allocating the gains of trade between producers, consumers, labor, and other interests (p. 45). Hovenkamp understands allocative efficiency as antitrust's sole normative aspiration.

   So far, no surprises. Very few mainstream scholars view antitrust's goals as moral or assign it a redistributionist goal. (20) But Hovenkamp goes further than simply limiting antitrust's normative goal. In at least three additional ways, he seeks to reign in antitrust's ambitions.

   First, he assigns antitrust a back seat to other branches of regulatory policy. In his view, antitrust is merely a "residual" regulator, "promot[ing] competition to the extent that market choices have not been preempted by some alternative regulatory enterprise" (p. 13). Thus, antitrust principles never should be invoked to challenge legislative overextension of intellectual property rights or regulatory folly (p. 255). Antitrusters may wring their hands in frustration at congressional largesse with copyright holders, as with the Sonny Bono Copyright Term Extension Act, (21) but theirs is not to rectify (p. 250). Antitrust corrects market failures, not governmental failures.

   Second, Hovenkamp advocates restraint when applying antitrust law to correct even admitted market failures. Hovenkamp describes antitrust law as a "second order" regulatory regime that is "largely reactive" to severe market distortions (pp. 14-15). In what could be the topic sentence for Bork's The Antitrust Paradox, Hovenkamp admonishes, "At all times we must remember that if we believe that markets generally work well when left alone, then intervention is justified only in the relatively few cases where the judiciary can fix the problem more reliably, more cheaply, or more quickly than the market can fix itself" (p. 124). Antitrust interventions should be few and far between.

   Finally, Hovenkamp takes a narrow view of the kind of harm with which antitrust law should be concerned. This comes out particularly in Hovenkamp's sharp criticism of the Supreme Court's Kodak (22)...