Justice Scalia and Sherman Act textualism.

• Author: Meese, Alan J.
• Position: Antonin Scalia

INTRODUCTION

Section 1 of the Sherman Act prohibits contracts "in restraint of trade or commerce among the several States." (1) How should a proponent of an "original public meaning" approach to statutory interpretation go about determining whether a challenged agreement is, in fact, "in restraint of trade"? The most straightforward approach, it would seem, would be to read "in restraint of trade" as a common-law term of art invoking a rich body of contract law, generated largely by state courts, in place in 1890 when Congress passed the Act. This body of law defined with some precision the types of contracts that courts declined to enforce. By employing this term, it might be said, Congress presumably invoked that body of law and compelled federal courts to ban those restraints, but only those restraints, that common-law courts would have declined to enforce in 1890. Conceptually, then, judicial enforcement of the Sherman Act could be a straightforward exercise in legal research, familiar in some respects to the approach that originalists have taken in other statutory contexts. (2)

But Justice Scalia took a different approach to the Sherman Act. Most notably, in Business Electronics Corp. v. Sharp Electronics Corp., the Justice rejected the claim that the Sherman Act simply banned a fixed list of agreements deemed unenforceable in 1890. (3) Instead, he said, section 1 of the Act bans agreements that produce a "particular economic consequence." (4) That consequence was the exercise of market power to the detriment of consumers. (5) Moreover, he said, both the actual and perceived impact of identical agreements can differ "in varying times and circumstances." (6) Thus agreements deemed "in restraint of trade" (by common-law courts) and thus contrary to the Sherman Act in 1890 can become perfectly lawful in 1990, despite the lack of any intervening change in the statutory text. Under this approach, adjudication under the Sherman Act is less an exercise in historical research than an opportunity for microeconomic analysis, drawing upon recent law review articles instead of nineteenth-century state reports. Indeed, the account of the meaning of the Sherman Act sketched and applied in Business Electronics replicated that advocated by leading members of the Chicago School of antitrust analysis, particularly Robert Bork and Frank Easterbrook. Both jurists, and the Chicago School in general, have read the Sherman Act to articulate a standard, "consumer welfare," delegating to courts authority to employ economic analysis to determine whether a challenged agreement reduces such welfare and thus violates the Sherman Act.

Some scholars claim that Justice Scalia's Chicago-style antitrust jurisprudence contradicted his professed commitment to reading statutes according to their original public meaning. At least as practiced by the Justice, they say, an original public meaning approach would require courts to treat the term "in restraint of trade" as invoking a set of fixed common-law rules, not the sort of economic standard the Justice endorsed in Business Electronics. These rules, they say, did not reflect concern for consumer welfare but instead values such as fairness and individual autonomy and thus often diverged from the result that application of an economic standard would produce. These same scholars contend that the original public meaning approach necessarily precludes the sort of dynamic approach Justice Scalia endorsed in Business Electronics. That is, despite section l's invocation of the common law, judges generating section 1 jurisprudence must ignore advances in economic theory, even if such advances entirely undermine the economic premises of particular common-law rules. Indeed, some such scholars contend that Justice Scalia's approach to section 1 exemplifies the approach that jurists take to so- called "super statutes" as opposed to mere "ordinary legislation" and thus departs from his professed method of statutory interpretation.

This Essay offers a defense of Justice Scalia's approach to the Sherman Act. For one thing, the approach broke little new ground, either in general or as applied in cases such as Business Electronics. Instead, such an approach was a faithful implementation of Standard Oil Co. of New Jersey v. United States, which announced section l's "Rule of Reason." (7) After its own lengthy exegesis of the common law, Standard Oil announced that the term "restraint of trade" does not refer to a set of fixed rules, but instead directs courts to apply a "standard of reason" when evaluating challenged restraints. (8) That is, courts should ask whether a challenged agreement produces monopoly or the consequences of monopoly, namely, higher prices, reduced output, and/or reduced quality. A broader reading, the Court said, would ban contracts and combinations protected by liberty of contract. (9) Moreover, in making this assessment, Standard Oil said, courts should recognize that "economic conceptions" change over time, and apply the latest conception when evaluating the impact of a restraint. (10)

Of course, Justice Scalia was sometimes willing to abandon longstanding precedent if he believed that that precedent deviated significantly from a correct reading of the relevant legal text. Thus, stare decisis is not a categorical defense to claims that the Justice deviated from his stated approach to interpretation in the Sherman Act context. This Essay therefore attempts to test various scholars' claims that an original public meaning approach to the Sherman Act produces statutory meaning different from that announced in Business Electronics and, for that matter, Standard Oil. The Essay rejects the Supreme Court's apparent claim that the absurdity canon supports Standard Oils reading of section 1, as the statutory text does not satisfy Justice Scalia's standard for declaring a term "absurd." Nor would most modern proponents of original meaning embrace Standard Oil's invocation of liberty of contract as a rationale for reading the statute narrowly.

This leaves the common law as the last possible support for Standard Oils Rule of Reason. Modern scholars, as already noted, (implicitly) claim that Standard Oil misread the common law, mistakenly imputing to that jurisprudence a purely economic standard. However, evaluation of the claim that Business Electronics takes a nontextual approach does not require us to adjudicate this dispute about the meaning of the common law. As this Essay shows, the common law was not the only body of law relevant to the meaning of the term "restraint of trade or commerce" when Congress passed the Sherman Act in 1890. Instead, the term "restraint of ... commerce among the several states" appeared several times in the Court's Commerce Clause jurisprudence during the 1880s. (11) That is, the Court employed this term as a synonym for (state) "regulation" of commerce among the several states, regulation that Congress had implicitly preempted according to what we now call the Court's "dormant Commerce Clause" jurisprudence. According to that well-developed body of law, a state statute was such a restraint or regulation of commerce among the several states if it "directly" burdened or "directly obstructed" interstate commerce. Regulations that imposed so-called "indirect restraints" of such commerce, by contrast, fell within states' exclusive authority to impose. By enforcing this distinction, the Court created a regime of free trade among the states, thereby preventing states from interfering with the competitive allocation of resources and exploiting consumers.

The Court's pre-Sherman Act Commerce Clause jurisprudence and its distinction between direct and indirect restraints provides a potent source of meaning for the term "restraint of trade or commerce." Congress, of course, possessed no general authority to generate a common law governing private contracts in 1890. Instead, the Sherman Act was, on its face, an exercise of the power to regulate "[c]ommerce ... among the several States," (12) a power that consisted of the authority to preempt "regulations" or "restraints" of interstate commerce. The Court's dormant Commerce Clause jurisprudence, which defined that category of state-imposed restraints that Congress had implicitly preempted, therefore provided a ready definition of the term "restraint of trade or commerce among the several states," and a definition that implements the then-extant limits on congressional power. That is, the term "restraint of trade or commerce" could refer to those contracts or agreements that "directly" obstruct or burden trade and thus, like analogous state statutes, impermissibly regulate commerce and fall within Congress's authority for that reason. This definition, of course, would exclude so-called "indirect" burdens or obstructions from the reach of the Act, leaving such agreements exclusively within the jurisdiction of the states, even if such agreements were otherwise unenforceable according to the common law of 1890.

Of course, identification of one possible source of meaning does not thereby exclude other possibilities. Instead, such identification merely requires the interpreter to choose between the competing sources identified. Such a choice is relatively straightforward in this context, however. After all, the "direct/indirect" taxonomy was not merely linguistic. It also communicated a distinction of constitutional dimension, denying Congress authority over agreements that merely restrained trade indirectly. Beginning with this premise, reading the Act to invoke the common law of contracts would be awkward at best. At worst, reading the Act to incorporate the common law of contracts, even those connected in one way or another to interstate commerce, is an anachronism, as Congress would have no authority over those agreements that restrained commerce "indirectly." Thus, reading the term "contract[s] ... in restraint...