Is Complexity in Antitrust a Virtue? The Accuracy-Simplicity Tradeoff

• DOI: 10.1177/0003603X1405900406
• Date: 01 December 2014
• Published date: 01 December 2014
• Subject Matter: Article

THE ANTITRUST BUL L E T I N :Vol. 59, N o. 4/Winte r 2014 :827

Is complexity in antitrust a virtue?

The accuracy-simplicity tradeoff

BYTIMOTHY J. BRENN AN*

With the increasing technical sophistication in economic theory and

econometric estimation, antitrust assessments have become increasingly

complex. Calls to incorporate additional considerations such as

business strategy, managerial acumen, externalities, and consumer

error would add to this complexity.Such technical advancements and

added dimensions to assessments come at a cost. Business managers

require expensive legal and econo mic consultation to ascerta in if a

proposed practice, merger, or venture may violate the antitrust laws.

Judges and juries face similar difficulties in determining liability. The

pendulum perhaps should shift back toward simplicity. Simplicity is

consistent with different views regarding strict or loose concentration

standards, the role of intent, or criteria for per se legality or illegality

of various practices. Recognizing simplicity may reopen historical

debates over whether economic welfare or other considerations—

political power, the right to ply one’s trade, the “competitive process”

—should define the objectives of a more easily comprehended

antitrust law.

KEY WORDS:simplicity, complexity, mergers, monopolization, per se rules,

intent, policy objectives

© 2014by Federal Legal Publications, Inc.

* Professor, Department of Public Policy, University of Maryland Balti-

more County; Senior Fellow,Resources for the Future.

AUTHOR’S NOTE: I thank Greg Gundlach, Robert Lande, Diana Moss, Thomas

Rosch, an anonymous referee, and participants in the American Antitrust

Institute symposium for very helpful comments. I am also grateful to AAI for

the opportunity to present these observations. All errors remain my responsi-

bility.

I. INTRODUCTION

It may be somewhat unorthodox to begin with some biographical

anecdotes, but in this case they nicely illustrate the article’s central

point. Both involve events from the 2006 annual American Bar Asso-

ciation Antitrust Section spring meeting in Washington.

The first arose from a panel discussion on the merits of using

antitrust-specific specialist courts, rather than general federal courts,

to hear antitrust cases. As an economist, I instinctively thought that

specialization was preferable. Advances in the economics of strategic

behavior and, especially, econometric techniques and data sets for

estimating and simulating the effe cts of co nduct a nd merge rs on

prices, require expertise to decide which theories best apply in a

given case to determine the past or prospective likelihood of signifi-

cant effects on competition. To take a prominent example of many, it

remains striking that the judge who heard the antitrust case against

Microsoft in the late 1990s also presided over the cocaine possession

trial of former Washington mayor Marion Barry.

During the course of the panel discussion, however, Judge Diane

Wood argued against the use of specialized courts. Her argument was

compelling and, for me, something of an epiphany. She said that if the

reas ons f or and agai nst a nti trus t act ion t o halt a cart el, b loc k a

merger, or ban conduct cannot be clearly stated and understood by a

federal judge, those in the business community probably would not

understand them either. Consequently, antitrust decisions won’t do a

very good job providing their most important function—provide

guidance f or the business commu nity regardi ng what practices to

avoid and which practices are permissible.

At this same spring meeting, I was attending as part of a delega-

tion from the Canadian Competition Bureau, where I was spending

2006 as a visiting research economist. Between panel sessions, I was

standing next to Sheridan Scott, then Commissioner of Competition,

in the atrium of the conference hotel, from which one could see the

escalators running between the many floors on which the sessions

were being held. Seeing these escalators and balconies full of attor-

neys (and some economists) going to their next meeting, Ms. Scott

expressed wondrous appreciation for the large number of people

828 :THE ANT I T R U S T BULLETIN:Vol. 59, No. 4/Winter 2014