The Institutional Structure of Antitrust Enforcement.

AuthorKovacic, William E.
PositionBook review

THE INSTITUTIONAL STRUCTURE OF ANTITRUST ENFORCEMENT. By Daniel A. Crane. New York: Oxford University Press. 2011. Pp. xvi, 243. $75.

INTRODUCTION

Forty years ago, Graham Allison wrote the Essence of Decision (1) and transformed the study of foreign policy and public administration. (2) Allison's analysis of the Cuban Missile Crisis appeared amid profound concerns about the competence of U.S. government institutions. "Few issues about the American government," he wrote, "are more critical today than the matter of whether the federal government is capable of governing." (3) To Allison, better performance required greater insight into how the structure and operations of public institutions shaped policy results. "[B]ureaucracy is indeed the least understood source of unhappy outcomes produced by the U.S. government," (4) Allison wrote. "If analysts and operators are to increase their ability to achieve desired policy outcomes, ... we shall have to find ways of thinking harder about the problem of 'implementation,' that is, the path between preferred solution and actual performance of the government." (5) Essence of Decision quickly appeared on reading lists in political science departments and schools of public administration, and its analytical orientation and vocabulary have become enduring elements of academic discourse. (6)

Daniel Crane's The Institutional Structure of Antitrust Enforcement ("Institutional Structure") (7) may do for antitrust law what Essence of Decision did for public administration. Unlike most literature on antitrust law, this superb volume does not address pressing issues of substantive analysis (e.g., when can dominant firms offer loyalty discounts?). (8) Instead, Institutional Structure studies the design and operation of the institutions of U.S. antitrust enforcement. Professor Crane skillfully advances a basic and powerful proposition: to master analytical principles without deep knowledge of the policy implementation mechanism is dangerously incomplete preparation for understanding the U.S. antitrust system, or any body of competition law. "Institutions," Professor Crane observes, "are a critical and under-appreciated driver of an antitrust policy that interacts in many subtle ways with substantive antitrust rules and decisions" (p. xi). Institutional Structure demonstrates that the causes of observed policy outcomes, good and bad, often reside in the institutional framework. Seemingly potent conceptual insights may fizzle, or create mischief, if the institutions that must apply them are deformed. Good policy results depend on the strength of what Allison called "the path between preferred solution and actual performance." In the language of modern technology, one cannot deliver broadband-quality policy outcomes through dial-up institutions.

The emphasis in Institutional Structure on institutional arrangements helps correct a serious imbalance in the study of antitrust law. A substantial body of economic literature has examined how institutional quality affects public policy. (9) A number of economists have concentrated on the structure and operations of antitrust authorities, (10) including recent work that explores how the integration of economists into the agency decisionmaking process affects the development of cases. (11) Political scientists long have emphasized the significance of institutional design on government performance (12) and have used antitrust enforcement to show how institutional arrangements shape policy. (13) By contrast, the antitrust legal literature is rich in substantive concepts and lean in the study of institutions. Influential exceptions (such as the volumes of the antitrust treatise published by Phillip Areeda and Donald Turner in 1978. (14) are islands in a vast ocean of discourse on doctrine and analytical principles. The typical law school antitrust syllabus consigns the operational framework of antitrust enforcement to the oblivion of optional readings.

This Review proceeds by exploring Professor Crane's treatment of five distinct subject areas and suggesting fruitful topics for further study by scholars. Part I introduces the book and opens this exploration by examining the framework that Professor Crane uses for his analysis; it concludes by noting potential shortcomings in some of his choices. Part II tracks Professor Crane's discussion of antitrust enforcement's development and specifically looks at the continuing relevance of the strains of enforcement philosophy that he identifies. Part III examines Professor Crane's critique of the dual federal enforcement mechanism that engages the Department of Justice ("DOJ") and the Federal Trade Commission ("FTC" or "the Commission") in the implementation of competition policy. Part IV considers the role of state governments in antitrust enforcement, and Part V discusses the use of private rights of action to enforce the antitrust laws.

  1. ANTITRUST POLICY AS A SYSTEM OF INTERDEPENDENT INSTITUTIONS

    The subject of inquiry in Institutional Structure is a regulatory regime with astonishing, distinctive characteristics. No system of U.S. law (maybe no body of law in any jurisdiction) decentralizes the decision to prosecute more than the antitrust regulatory regime. (15) The roster of potential plaintiffs includes two national competition bodies (the Antitrust Division of the DOJ and the FTC), state governments, and aggrieved private parties, including customers and rivals of the alleged violator. The three principal U.S. antitrust laws (the Sherman Act, Clayton Act, and Federal Trade Commission Act) contain relatively open-ended commands, and their interpretation is largely dedicated to the federal courts--a delegation without equal in U.S. regulatory law. (16)

    Institutional Structure examines this remarkable system in three parts. Professor Crane sets out the origins and chief elements of the U.S. antitrust institutions, discusses possible improvements, and places the United States' experience in a global context. The volume's materials on "Comparative and International Perspectives" describe foreign systems at a relatively high level of generality, but Institutional Structure uses international experience to make informative comparisons with U.S. practices and suggest areas for improvements in the U.S. regime.

    One major challenge in taking on these subjects is to identify the relevant implementation mechanisms. "Institutions" can encompass a staggering range of formal and informal arrangements, and Professor Crane seeks to capture both the formal, visible structures and procedures of the U.S. system and less readily observable customs and habits that determine how the DOJ and the FTC operate in practice. (17) As one expert in institutional economics observes,

    [Institutions] can be organizations or sets of rules within organizations. They can be markets or particular rules about the way a market operates. They can refer to the set of property rights and rules governing exchanges in a society.... They may include cultural norms of behavior. The rules can be either formally written down and enforced by government officials or unwritten and informally sanctioned. (18) To discuss antitrust law (or any other subject), how is one to choose among these vast possibilities? (19) A truly comprehensive (and daunting) treatment of the U.S. system might examine the behavior of and interaction among the public antitrust agencies, the Congress and state legislatures, the office of the president, regulatory commissions with concurrent antitrust jurisdiction over specific sectors, private litigation, executive departments that administer trade policy, authorities that grant rights in intellectual property, the private bar, the business community, universities, think tanks, lobbyists, economic consultancies, public interest organizations, advocacy groups, media organizations, and foreign competition authorities--just to name a few.

    Professor Crane makes a choice that is both reasonable and debatable. He focuses on "antitrust enforcement," an activity ordinarily understood to consist of prosecuting prohibitions against anticompetitive business arrangements, such as producer cartels. Yet, as Professor Crane recognizes, law enforcement is not the only (or always the most effective) way for agencies to make antitrust policy:

    "Enforcement" is the bete noire of my title because it implies that antitrust is a system of legal sanctions that must be wielded against recalcitrant subjects.... But there are alternative approaches to achieving antitrust's regulatory goals, many of which I will argue are preferable to the "enforcement" model. (p. xv) Institutional Structure does address nonenforcement tools such as rulemaking, which Professor Crane sees as an underused and potentially useful element of the FTC's portfolio of instruments (pp. 141-43). The attention in Institutional Structure to nonenforcement measures (especially in discussions about the role of the FTC) is useful as far as it goes but deserves expansion. There is growing recognition that the proper measure of a competition agency is not its output of cases, but its demonstrated ability to solve competition problems. (20) This goes to the very heart of conceptions about what antitrust agencies ought to do and how their effectiveness ought to be measured. The prosecution of cases may be an inferior means to address problems most effectively, and a well-equipped agency can apply a flexible set of policy instruments that includes law enforcement, advocacy, research, and the publication of studies. (21) This portfolio enables the agency to use the right tool, or combination of instruments, to achieve first-best solutions. A report that inspires improvements in the process for granting intellectual property rights may the best way to cure competition policy problems that stem from failures of rights-granting agencies to apply sufficiently rigorous standards to...

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