U.S. and E.U. Antitrust Law as Written

• Date: 01 September 2017
• DOI: 10.1177/0003603X17719763
• Author: Richard S. Markovits
• Published date: 01 September 2017
• Subject Matter: Articles

Article

U.S. and E.U. Antitrust Law as

Written: Their Differences,

Common Features, and

Relative and Absolute Moral

Desirability

Richard S. Markovits*

Abstract

This Article (1) articulates operational definitions of eight possible morally-defensible test of antitrust

legality, (2) describes the conduct-coverage of, tests of prima facie illegality promulgated by, and

economic-efficiency defenses recognized by U.S. and E.U. antitrust law correctly interpreted as

matters of law, (3) delineates the seven most important differences between U.S. and E.U. antitrust law

as written and the two most important shared attributes of U.S. and E.U. antitrust law as written, and

(4) evaluates the relative and absolute moral desirability of these two antitrust-law regimes as written

from the perspectives of both the liberal conception of justice and various nonliberal conceptions of

the moral good. Inter alia, the Article explains why (1) conduct that manifest one or more perpe-

trators’ specific anticompetitive intent or distorts competition (constitutes unfair competition) vio-

lates liberal moral-rights, (2) conduct that manifests specific anticompetitive intent, lessens

competition or distorts competition is distributively undesirable from utilitarian, various nonliberal-

egalitarian and various individual history/conduct-focused normative perspectives, and (3) analyses that

take appropriate account of the General Theory of Second Best reveal that (A) although the fact that

conduct reduced price competition in some area of product-space does not imply that it generated

economic inefficiency by causing too few resources to be devoted to unit-output production in that

area of product-space relative to the amount devoted to unit-output product elsewhere, it does imply

that the relevant conduct generated economic inefficiency by allocating resources from unit-output

production to quantity-or-variety-increasing-investment (QV-investment) creation, (B) price-fixing

and predatory pricing generate economic inefficiency not only by generating allocative transaction

costs but by leading to undercutting by competitive inferior’s and retaliation that results in suppliers’

that are allocatively as well as privately worse-than-best-placed making sales, (C) conduct that reduces

QV-investment competition increases economic efficiency by allocating resources from QV-invest-

ment creation t unit-output production and production-process-research execution, and (D) the use

of many pricing-techniques (price discrimination, the simultaneous charging of lump-sum fees and

*

The University of Texas at Austin, Austin, TX, USA

Corresponding Author:

Richard S. Markovits, The University of Texas at Austin, Austin, TX 78712, USA.

Email: rmarkovits@law.utexas.edu

The Antitrust Bulletin

2017, Vol. 62(3) 514-590

ªThe Author(s) 2017

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DOI: 10.1177/0003603X17719763

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per-unit prices, and some functional types of tie-ins and reciprocity) is economically inefficient

although it does not manifest the perpetrator’s specific anticompetitive intent or lessen competition.

Keywords

economic efficiency, the general theory of second best, the liberal conception of justice, nonliberal

conceptions of the moral good, tests of antitrust illegality, U.S. and E.U. antitrust law

This Article (1) summarizes my conclusions about the actor-coverages of, the conduct-coverages of,

the tests of prima facie illegality promulgated by, and the defenses recognized by the current versions

of each of the three major United States (U.S.) antitrust statutes—the Sherman Act,

1

the Clayton Act,

2

and the Federal Trade Commission Act

3

—as correctly interpreted and applied as matters of law; (2)

summarizes my conclusions about the same components of each of the three sources of contemporary

European Union (E.U.) competition law—what is now Article 101 of the 2009 Treaty of Lisbon,

4

what

is now Article 102 of the 2009 Treaty of Lisbon,

5

and the current European Merger Control Regula-

tion

6

—as correctly interpreted and applied as matters of law; (3) delineates the respects in which

contemporary U.S. antitrust law as written and contemporary E.U. competition law as written are like

and unlike

7

and analyzes whether each of these differences makes U.S. antitrust law as written morally

1. 26 Stat. 209 (1890) (codified as amended at 15 U.S.C. Sections 1–11) (hereinafter Sherman Act).

2. 38 Stat. 730 (1914) (codified as amended at 15 U.S.C. Sections 12–27) (hereinafter Clayton Act).

3. 38 Stat. 717 (1914) (codified as amended at 15 U.S.C. Sections 41–45) (hereinafter FTC Act).

4. Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the European Community (hereinafter

2009 Treaty of Lisbon) at Article 101, 2007 OJ C306 p.1 (December 13, 2007).

5. Id. at Article 102.

6. Council Regulation 139/2004 on the Control of Concentrations Between Undertakings, OJ L24/1 (May 1, 2004) (hereinafter

EMCR). The original EMCR was promulgated as Council Regulation 4064/8 9 on the New Control of Concentrations

Between Undertakings, OJ L395/1 (1989).

7. This article will not address a number of important differences between contemporary U.S. antitrust law and contemporary

E.U. competition law as written: inter alia, (1) differences between the protocol that the Hart-Scott-Rodino Act requires the

Department of Justice (DOJ) and FTC to follow when reviewing the legality of proposed horizontal mergers under U.S.

antitrust law and the protocol that the European Commission (EC) is required to follow when reviewing the legality of

proposed horizontal mergers under E.U. competition law; (2) the fact that, in the U.S., nongovernment actors that have an

appropriate antitrust interest in challenging the legality of business conduct have the legal power (have standing) to do so

(indeed, can collect treble damages for their losses and reasonable attorney-fees), whereas nongovernment actors have no

such powers under E.U. law; and (3) differences in the injunction and penalty provisions of U.S. and E.U. antitrust law and in

the authority of the EC and of the U.S. FTC and DOJ to compel businesses to cease engaging in particular acts or patterns of

conduct off their own bat (i.e., without judicial “intervention”). The citation of the Hart-Scott-Rodino Act is 15 U.S.C.

Section 18a 2009 Treaty of Lisbon (1976). For the protocol that the EC is required to follow when applying Article 101 and

Article 102 of the Treaty of Lisbon, see EEC Council, Regulation No. 17, First Regulation Implementing Articles 85 and 86

of the Treaty, Articles 2–3 and 9 inset 1, English Special Edition: Series I, C hap. 1959–62 at 87 (1962) and Council

Regulation (EC) No. 1/2003 on the Implementation of the Rules of Competition Laid Down in Articles 81 and 82 of the

Treaty (Dec. 16, 2002), OJ L1/1 (2003). For a detailed account of the protocol in question, see Peder Christensen, Kyriakos

Founotukakus, & Dan Sjo¨blum, Mergers 421, 535–92, Chapter 5 in THE E.C. LAW OFCOMPETITION (Jonathan Faull & Ali

Nikipay eds., 2d ed., 2007). For the protocol that applies in EMCR cases, see Council Regulation 139/2004 on the Control of

Concentrations Between Undertakings (May 1, 2004). For the U.S. antitrust-law provisions that authorize nongovernment

actors to bring antitrust suits and to collect treble damages (as well as reasonable attorneys fees) from defendants that have

been found guilty, see Sherman Act, Section 15a and Clayton Act, Section 4. Admittedly, Article 230 of the EC Treaty does

authorize natural or legal persons to bring annulment proceedings against EC decisions before a Court of First Instance (CFI)

(challenging findings of fact) or before the European Court of Justice (ECJ) (challenging conclusions of law): appeals against

EC decisions are common in nonmerger cases but less common in merger cases, though the rate of merger-case appeals may

be increasing as a result of the CFI’s adopting a “fast-track” procedure for reviewing merger-case appeals and announcing

various decisions in merger-appeal cases criticizing the EC for failing to execute appropriate economic analyses. See RICHARD

Markovits 515

superior or morally inferior to E.U. competition law as written; and (4) explains why important shared

components of U.S. antitrust law and E.U. competition law as written render both morally inferior to a

morally-ideal antitrust-law/business-conduct-regulation regime.

8

This article has two parts. Part I has seven subparts. Each carefully defines and provides some

important information that relates to a competition-theory, economic-efficiency-analysis, lega l, or

moral concept or related set of concepts that plays important roles in the analyses of Part II. These

subparts respectively address the four sets of questions that the preceding paragraph articulates in the

order in which they appear in that paragraph.

I. Basic Concepts

1. The Intensity of Competition

It is not surprising that antitrust scholars and officials often reference the concept “the intensity of

competition”: as we shall see, the Clayton Act makes the prima facie illegality of any conduct it covers

depend on the likelihood that the conduct will (substantially) “lessen competition,” Article 101 of the

2009 Treaty of Lisbon makes the prima facie illegality of any conduct it covers depend inter alia on

whether the conduct will have “the effect” of “preventing” or “restricting” “competition,” and the

European Merger Control Regulation (EMCR) makes the prima facie illegality of any conduct it

covers depend on whether the conduct “significantly impedes effective competition.”

What is surprising is the inadequacy of antitrust scholars’ and officials’ discussions of the concept

“the intensity of competition.” This subpart addresses five deficiencies of these discussions.

The first is that (with very-limited, largely-very-recent exceptions

9

) U.S. and E.U. antitrust-law

scholars and officials have totally ignored one of the two most important types of competition in which

S. MARKOVITS,ECONOMICS AND THE INTERPRETATION AND APPLICATION OF U.S. AND E.U. ANTITRUST LAW,VOLUME I: BASIC

CONCEPTS AND ECONOMICS-BASED LEGAL ANALYSES OF OLIGOPOLISTIC AND PREDATORY CONDUCT (hereinafter MARKOVITS,

ECONOMICS OF ANTITRUST LAW I) 320 (2014) and sources cited therein.

8. This article also does not address the mistakes that I believe the U.S. courts and antitrust-enforcement “agencies”—the

Antitrust Division of the Department of Justice (the DOJ) and the Federal Trade Commission (the FTC)—currently make

when interpreting and applying U.S. antitrust law or the mistakes that I believe the European Commission (the EC) and the

E.U. courts—the Courts of First Insta nce (CFIs) and the European Court of Just ice (the ECJ)—currently make when

interpreting and applying E.U. antitrust law. Readers who are interested in detailed discussions of these mistakes can find

them in MARKOVITS,ECONOMICS OF ANTITRUST LAW I and RICHARD S. MARKOVITS,ECONOMICS AND THE INTERPRETATION AND

APPLICATION OF U.S. AND E.U. ANTITRUST LAW,VOLUME II: ECONOMICS-BASED LEGAL ANALYSES OF MERGERS,VERTICAL

PRACTICES,AND JOINT VENTURES (hereinafter MARKOVITS,ECONOMICS OF ANTITRUST LAW II) (2014). The word “agencies” is

enquoted in the first sentence of thi s note because, unlike the FTC, which is a n administrative agency, the DOJ is a

prosecutorial office.

9. The relevant U.S. exceptions are contained in various sections of U.S. DEP’TOFJUSTICE &FED.TRADE COMM’N,HORIZONTAL

MERGER GUIDELINES (hereinafter 2010 DOJ/FTC Horizontal Merger Guidelines) (Aug. 19, 2010), http://www.justice.gov/ato/

public/guidelies/hmg-2010.pdf. See id. at Section 6.4 {{ 2, 3, 4, and 5, Section 7 {2, and Section 10 {10. For a discussion of

these sections, see MARKOVITS,ECONOMICS OF ANTITRUST LAW II at 158–59. However, these exceptions are extremely limited:

although the 2010 DOJ/FTC Horizontal Merger Guidelines do recognize that horizontal mergers can affect Clayton-Act-

relevant buyers by altering what I call “total QV investment” and “the intensity of QV-investment competition” in the

relevant portion of product-space and do manifest some awareness of some of the intermediate determinants of the intensity

of QV-investment competition in any portion of product-space, they (1) ignore many such intermediate determinants (see

Subpart I2B, infra), (2) do not recognize that the way in which these intermediate determinants of the intensity of QV-

investment competition interact to determine that intensity depends upon the relationship between the entry-preventing

QV-investment quantity and th e entry-barred expansion-pre venting QV-investment quantity in the relevant port ion of

product-space, and (3) offer no analysis of the way in which the relevant intermediate determinants of the intensity of

QV-investment competition in any portion of product-space interact in any of the three types of QV-investment-competition

equilibria that must be distinguished to determine that intensity. See MARKOVITS,ECONOMICS OF ANTITRUST LAW II at 159. The

relevant E.U. exceptions are contained in EUR.COMM’N,GUIDELINESON THE ASSESSMENT OFHORIZONTAL MERGERS at Sections III

516 The Antitrust Bulletin 62(3)