A “New” Rule of Reason from Justice Brandeis’ “Concentric Circles” and Other Changes in Law
| DOI | 10.1177/0003603X9904400406 |
| Date | 01 December 1999 |
| Published date | 01 December 1999 |
| Author | Charles D. Weller |
| Subject Matter | Article |
The Antitrust BulletinlWinter 1999
A"new" rule
of
reason from
Justice
Brandeis'
~concentric
circles" and
other
changes in
law
BY
CHARLES
D. WELLER*
881
For
over
100 years, antitrust
joint
venture law has been a morass
of confusion and ambiguity. "[I]ncoherence and inconsistency" is
how Gellhorn and Miller describe the "case law and enforcement
policies applied to
joint
ventures," including the perverse result
that
"joint
ventures receive a more hostile reception in the agen-
cies and courts" than mergers.' A"mystery shrouded in a riddle
wrapped in an enigma," in the words of another antitrust commen-
tator, borrowed from Winston Churchill."
*Partner, Baker &Hofstetler LLP, Cleveland, Ohio.
Gellhorn &Miller, Competitor Collaboration
Guidelines-A
Rec-
ommendation, 42
ANTITRUST
BULL.
851, 854 (1997). See generally the
article
by
Anthony
Chavez
elsewhere
in this
symposium
and
articles
cited therein. See also In re Brunswick Corp., 94 F.T.C. 1253,
1265-66
(Pitofsky, Commissioner 1979),
aff'd
in relevant
part
sub nom. Yamaha
Motor
Co.,
Ltd.
v. FTC,
657
F.2d
971
(8th
Cir. 1981), cert. denied,
456 U.S.
915
(1982).
November
2, 1984 J. Paul McGrath remarks, 18th
Annual
New
England
Antitrust
Conference, 5
Trade
Reg. Rep. (CCH) 1150,470, at
56,137.
© 2000 by Federal Legal Publications, Inc.
882
The antitrust bulletin
As a
result,
antitrust
joint
venture
law
and
policy
often
inhibits, rather than encourages, the very innovation
and
effi-
ciency
the
antitrust laws are intended to protect and
promote.
Robert Pitofsky, along-time student of antitrust joint venture law
and current FTC Chairman, writes that "uncertainties in enforce-
ment policy [and law] have almost certainly blocked, delayed, or
raised
the
cost of legitimate undertakings."3 James Langenfeld,
formerly an FTC Deputy Director for
Antitrust
in
the
Bureau
of Economics and David Scheffman, detail example after example
of
how "U.S. competition policy has been overtly or indirectly
used to penalize innovation."4
Today, the problem is more urgent than ever. As explained by
Peter
Drucker
elsewhere
in
this
symposium,
joint
ventures
"[i]ncreasingly
are
becoming
the
dominant
form
of
economic
integration in the world economy," as "knowledge" has
become
"the
primary resource for individuals and for the economy over-
all."5
The
antitrust laws
should
be
the
First
Amendment
of
a
knowledge economy of joint ventures. Too often the antitrust laws
are like the Gulag.
There simply is no time to wait for clarification
of
the law by
the courts or the agencies." As a result, this article explores a dif-
ferent approach to reducing the antitrust risks of joint ventures: a
litigation approach, designed to win in court, focused on three
changes in law:"
Pitofsky, A Framework
for
Antitrust Analysis
of
Joint Ventures,
74
GEO.
L. J. 1605 (1986).
4
Langenfeld
&
Scheffman,
Innovation
and
u.s.
Competition
Policy, 34
ANTITRUST
BULL.
1(1989).
P.
DRUCKER,
MANAGING
IN
A
TIME
OF
GREAT
CHANGE
152,
75
(1995);
THE
AGE
OF
DISCONTINUITY
(1968).
The
Joint Venture Project
of
the Federal Trade
Commission
and
Antitrust Division for some time has been developing enforcement policy
guidance
on
joint
ventures. See, e.g., 62 Fed. Reg. 22,945
(April
28,
1997).
These
efforts may be helpful and hopefully the analysis
presented
here will help. It will not, however, produce binding law.
California Dental Assn. v. FTC, 143 L. Ed. 2d 935, 944,
955-56
(1999) is a fourth change that was decided too late to be
included
at any
"New"
rule
of
reason 883
1. the Daubert trilogy's sea-change in the law of economic and other
expert evidence."
2. the National
Cooperative
Research and Production
Act
of
1993
(the NCRPA),9 and
3. Justice Brandeis' "concentric circle" rule of reason, so-named by
Milton
Handler'? for an analysis perfected in "Cracking Oil" in
1931,11
amultidimensional analysis, with a "definite factual show-
ing,"12 of whether
"the
quality of competition in the market as a
whole remains unimpaired," not of whether a"combination elimi-
nates competition
inter
sese."
There
is
little
downside,
and
substantial
upside,
to
exploring
and
exploiting,
with
a
litigation
approach,
these
changes
in
law
and
California Dental.
There
is
little
downside,
because
if
the
length here. Afive-member majority made a stunning holding:
"any
anti-
competitive effects" of a professional association's restriction on price
and
quality
advertising
were
"far
from
intuitively
obvious,"
and
any
"plausible" justification
"rules
out
...
indulgently abbreviated review."
Thus presumed anticompetitive effects under a"quick-look" rule, and,
afortiori,
per
se rules, could not be used. The decision may mean there is
amajority on the Court willing to pursue amuch-needed, Daubert-like
refinement of current antitrust law.
Daubert v. Merrell
Dow
Pharmaceutical, Inc., 125 L. Ed. 2d 469
(1993); General Electric Co. v. Joiner, 522 U.S. 130 (1997); Kurnho Tire
Co., Ltd. v. Carmichael, 143 L. Ed. 2d 238 (1999).
9 15
U.S.C.
§§
4301-06,6
Trade
Reg.
Rep.
(CCH)
~
27,080.
See also Prof. Dougherty's article on the NCRPA in this symposium.
10
See
Handler,
The
Judicial
Architects
of
the
Rule
of
Reason,
in
TWENTy-FIVE
YEARS
OF
ANTITRUST
1,
27-31
(M. Handler ed., 1973).
Justice Brandeis' "concentric circle" rule of reason has never been over-
ruled,
just
forgotten, so that, in effect, it is a change in law when applied
today.
11 Standard Oil of Indiana v. U.S., 283 U.S. 163 (1931).
12
Handler, supra note 10, at 29 (quoting Cracking, 283 U.S. at 179).
Justice Brandeis' requirement of a "definite factual showing
of
illegality"
in Cracking Oil has striking similarities to Justice
Souter's
California
Dental
opinion,
with its
repeated
call for
"empirical
but
not
apriori
analysis," because "implicit burden-shifting" and "assumption alone will
not do." 143 L. Ed. 2d at
953-54
n.12.
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