The Antitrust Revolution: Charting the Course of Antitrust Enforcement

• Published date: 01 December 2020
• DOI: 10.1177/0003603X20950204
• Date: 01 December 2020

Article

The Antitrust Revolution:

Charting the Course

of Antitrust Enforcement

Richard J. Gilbert*

Abstract

The seven volumes of The Antitrust Revolution published between 1989 and 2019 include dozens of

excellent articles that describe topical antitrust cases and the circumstances that motivated them.

Taken together, the volumes provide invaluable insights into the course of antitrust enforcement

over more than three decades and the factors that influenced the direction of change. This essay

follows the course described in the pages of The Antitrust Revolution for two major components of

antitrust enforcement: mergers and vertical restraints. The cases demonstrate that economic

analysis profoundly impacted merger decisions, although the trajectory has been anything but linear.

The revolution was more dramatic for the treatment of vertical price and nonprice restraints

of trade. Courts relied on economic principles to upset decades of legal precedent for these

arrangements.

Keywords

antitrust, mergers, acquisitions, vertical restraints, resale price maintenance

I. Introduction

John Kwoka and Larry White produced the first edition of The Antitrust Revolution in 1989. The book

hit the shelves (there were no online purchas es then) a decade after Robert Bork challe nged the

prevailing tenets of antitrust enforcement in The Antitrust Paradox.

1

Judge Bork and his colleagues

were the progenitors of the Chicago School of law and economics. A revolution in antitrust policy was

underway, and the excellent contributions to the seven volumes of The Antitrust Revolution published

between 1989 and 2019 document how the teachings of the Chicago School and its critics took hold in

antitrust enforcement.

* Department of Economics, University of California, Berkeley, CA, USA

Corresponding Author:

Richard J. Gilbert, Department of Economics, University of California, Berkeley, 549 Evans Hall #3880, CA 94720, USA.

Email: rjgilbert@berkeley.edu

1. ROBERT H. BORK,THE ANTITRUST PARADOX (1978).

The Antitrust Bulletin

2020, Vol. 65(4) 587–605

ªThe Author(s) 2020

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DOI: 10.1177/0003603X20950204

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This essay describes the evolution of antitrust enforcement for two important components of

antitrust enforcement: mergers and vertical restraints. I view the evolution through the lens of cases

described in the pages of The Antitrust Revolution that were litigated to a decision in a federal court.

The restriction to litigated outcomes provides a focal point to study how court s have assimilated

economic analysis into their enforcement decisions, although it necessarily omits many outstanding

contributions to these volumes.

The law and economics of antitrust enforcement for mergers and vertical restraints experi-

enced dramatic developments over the three decades spanned by the seven volumes of The

Antitrust Revolution. In addition to the influence of the Chicago School, these developments

include the retreat from market structure as the sole basis for merger evaluations, concerns about

the balance of errors of overenforcement and underenforcement, acceptance of efficiency

defenses, increased reliance on empirical evidence, sophisticated analysis of unilateral compet-

itive effects, and the replacement of the Chicago School by “Post-Chicago” industrial organi-

zation analysis. Some of these developments have had demonstrable impacts on litigation

outcomes for mergers and vertical restraints, while others have yet to become part of mainstream

antitrust jurisprudence.

The merger cases described in the pages of the seven volumes of The Antitrust Revolution illustrate

a gradual and fitful progression in the courts from a structural approach to merger evaluation to an

approach that considers the likely effects of mergers on prices and output. This progression has not

been without costs for the enforcement agencies. Although economic analysis allows the agencies to

focus evaluation on relevant competitive effects, its embrace by the courts also opened a window for

defendants to use economic arguments proactively in their defense and to defuse arguments presented

by antitrust plaintiffs.

The revolution in the antitrust evaluation of vertical restraints was in many respects even more

dramatic than the revolution for merger enforcement. Merger enforcement evolved to place

greater emphasis on the role of economic analysis, but it did not change the legal standard for

a violation of the Clayton Act, which has always been the likelihood of a substantial lessening of

competition. In contrast, courts changed the legal standard to evaluate price and nonprice vertical

restraints.

Postsale price and nonprice vertical restraints were per se unlawful violations of the Sherman

Act in the decade before Kwoka and White published the first edition of The Antitrust Revolution.

The per se rule does not require proof of anticompetitive effects or allow for possible offsetting

benefits. In the late 1970s, the Supreme Court ruled that nonprice vertical restraints should be

evaluated under the rule of reason, which allows for consideration of potential procompetitive

benefits from the restraint along with alleged anticompetitive effects. Postsale vertical price

restraints continued to be per se unlawful until 1997 when the Supreme Court ruled that max-

imum resale price maintenance should be evaluated under the rule of reason. Ten years later, the

Supreme Court ruled that all forms of resale price maintenance should be evaluated under the rule

of reason.

The revolutions in antitrust policy for mergers and vertical restraints that occurred over the past

several decades had their origins in law and economics journals and in the headquarters of the U.S.

Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ). The

cases in the seven volumes of The Antitrust Revolution provide penetrating insights into whether these

revolutions changed the conduct of the courts that enforce the antitrust laws in the United States.

Antitrust enforcement is case-specific, and it can be hazardous to draw general conclusions from

individual case studies. Nonetheless, the cases reviewed in this essay show that developments in law

and economics had significant impacts on decisions by the courts, although with a long lag before their

adoption by the judiciary.

588 The Antitrust Bulletin 65(4)