Restoring American Antitrust's moral arc.

Author:Horton, Thomas J.

    As a law professor, my Antitrust & Consumer Protection Law courses begin with the students viewing the American Antitrust Institute's excellent educational film titled Fair Fight in the Marketplace. (1) The film shows actual tapes of top lysine-company executives in hotel rooms in the 1990s, planning and implementing the massive price fixing and output limitation conspiracy that led to their successful prosecution under Section 1 of the Sherman Act. (2) Included in the dialogue is a statement by former Archer Daniel Midland's ("ADM") CEO Michael Andreas: "Our competitors are our friends. Our customers are the enemy." (3) As described by one leading antitrust textbook in its analysis of United States v. Andreas:

    Captured in grainy, black and white images were hours of discussions in which the world's lysine producers set output levels, argued over their individual quotas, and devised ways to audit compliance with their pact. In one memorable session in a hotel room in Atlanta, the competitors joked openly about the possibility that the FBI or the United States antitrust agencies might detect their behavior. (4) As the students watch the film and read the Seventh Circuit's 2000 decision, they are inevitably shocked and dismayed by the antitrust violators' brazen lack of business ethics and morality. Nearly universally, they believe that such conduct violates and offends fundamental moral and ethical norms.

    As the semester continues, students read additional cases in which businesspersons deliberately set out to destroy competition and subvert the competitive process. For example, in studying invitations to collaborate, students read the following exchange from February, 1982, between Robert Crandall, American Airlines' President, and Howard Putnam, Braniff Airlines' President:

    [Putnam]: Do you have a suggestion for me? [Crandall]: Yes. I have a suggestion for you. Raise your goddamn fares twenty percent. I'll raise mine the next morning. [Putnam]: Robert, we-- [Crandall]: You'll make more money and I will too. [Putnam]: We can't talk about pricing. [Crandall]: Oh bullshit, Howard. We can talk about any goddamn thing we want to talk about. (5) Turning to dominant firm behavior and conduct having exclusionary effects, the students read case after case in which a dominant firm or group of firms successfully drives an aggressive competitor out of business by using predatory conduct. Students learn that unethical business tactics routinely have been applauded and blessed by reactionary, interventionist appellate courts determined to protect dominant firms from the wrath of antitrust juries. (6) They also learn that "most antitrust commentators today think that juries are anathema to antitrust." (7) Even though citizen jurors may be "morally outraged" by unethical and immoral business conduct, the courts consistently rule that antitrust liability is inappropriate because no damage to economic competition supposedly has been proven. (8)

    As students read the courts' economic justifications for such decisions, they are introduced to the current American economic thinking that antitrust should be amoral, with no moral content. (9) Some commentators have even gone further and posited that "business competition simply may be amoral." (10) As a corollary, students learn that moral norms of fairness are also considered anathema to many antitrust scholars and judges today. (11) As the semester moves along, students must decide for themselves whether America's antitrust laws should include norms of morality and fairness, or continue their current pretense of being amoral and solely driven by economics-based notions of consumer welfare and allocative efficiency. (12)

    The current rationale for amorality in antitrust is simple and straightforward. Proponents of amorality believe that "[b]asic microeconomic theory is of course a science." (13) Seventh Circuit Judge Richard Posner characterizes economics as "the science of rational choice in a world--our world--in which resources are limited in relation to human wants." (14) As a science, competition economics should only be concerned with allocative-efficiency and an economics-based notion of consumer welfare. (15) Judge Posner, for example, believes that the promotion of economic efficiency is "positive, not normative; scientific, not ideological." (16)

    The popularity and widespread acceptance of such views in current American antitrust thinking cannot be overstated. Professor Steven Teles, for example, observes that "law and economics is the most successful intellectual movement in the law in the past [thirty-eight] years, having rapidly moved from insurgency to hegemony." (17) As cogently observed by Professor Tynn Stout of Cornell University, we are living in the midst of a "generation of legal experts instructed in the ways of homo economicus...." (18)

    Classifying economics as a rigorous science allows economists to take "detached, amoral stance[s]" toward aggressive and unethical economic strategies that harm competitive rivals. (19) In such a supposedly scientific world, antitrust should not rely "on moral considerations, but on solely economic considerations." (20) As Michael Sandel noted, "[m]ost economists prefer not to deal with moral questions, at least not in their role as economists. They say their job is to explain people's behavior, not judge it." (21) Consequently, deceased Judge Robert Bork concluded, "[c]onsumer welfare, as the term is used in antitrust, has no sumptuary or ethical component...." (22)

    Professor Maurice E. Stucke has observed that "[r]educing antitrust to normative morality judgments would represent, for [Judge] Richard Posner and others, antitrust's descent into 'a weak field, a field in disarray, a field in which consensus is impossible to achieve in our society.'" (23) The apostles of neoconservative economics see morality as a subjective and non-scientific concept that lacks any meaningful economic guidance, and one which "could lead to the application of widely divergent standards and result in markedly inconsistent and unpredictable outcomes." (24) In the words of Milton Friedman: "Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible." (25) In such a world, antitrust cannot be permitted to have any moral content.

    In recent years, a number of antitrust scholars, including this author, have sought to catalyze a new dialogue and debate as to whether antitrust analyses and decisions should recognize and pay homage to moral norms of fairness and ethics. (26) This article attempts to further spur this debate by reconsidering the issue of morality and antitrust from an interdisciplinary perspective that includes scholarship and learning from such diverse fields as evolutionary biology, economics, philosophy, history, and behavioral and socioeconomics. (27) Such a "consilience" of interdisciplinary approaches can shed new light and bring new perspectives to an area of law that "may be particularly representative of intellectual inertia." (28)


    Our antitrust laws exist to protect the competitive process and to prevent and control large aggregations of economic power and their abuse. (29) As recognized by Henry Simons, who has been called the "Crown Prince" of the Chicago School of Economics, "[p]olitical insight reveals that concentration of power is inherently dangerous and degrading... while economic insight reveals that it is quite unnecessary." (30) At their best, America's antitrust laws are consequently "rooted in a preference for pluralism, freedom of trade, access to markets, and freedom of choice. All of these values contribute to the law's summarizing norm--commitment to the maintenance of the competitive process." (31)

    Unfortunately, "seduced by siren calls of theoretical purity," American antitrust has lost its way, and is in a state of crisis. (32) Captured by the lure of neoclassical economics and economists' purported technocratic expertise, antitrust has slid today into a state of virtual "political irrelevance." (33) "During the 1980s, we witnessed the most lenient antitrust enforcement program in fifty years." (34) Thirty years later, neoclassical economics still largely rules antitrust, as jurists and scholars favoring economic consumer welfare and allocative efficiency considerations remain ascendant. (35) All of this "has led to an antitrust system captured by lawyers and economists advancing their own self-referential goals, free of political control and economic accountability." (36)

    Worse yet, blind adherence to neoclassical economic theories has resulted in the protection and encouragement of dominant firms and monopolies by "doing nothing, even when enforcement of the antitrust laws would achieve the goals of more consumer surplus (as traditionally defined) and allocative efficiency." (37) In the words of Nobel Prize winning economist, Joseph Stiglitz: "We have altered not only our institutions--encouraging ever increased concentration in finance--but the very rules of capitalism. We have announced that for favored institutions there is to be little, or no, market discipline." (38)

    United States Senator Elizabeth Warren goes even further: "[T]oday, in America, competition is dying. Consolidation and concentration are on the rise in sector after sector. Concentration threatens our markets, threatens our economy, and threatens our democracy." (39) Professors First and Waller explain that "[c]ombining today's error cost approach with today's rule of reason approach ends up reducing antitrust enforcement to a near null set." (40) To reinvigorate our competitive processes, Senator Warren calls for "a revival of the movement that...

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