WICKARD THROUGH AN ANTITRUST LENS.

Author:Meese, Alan J.
Position:Special Issue on Antitrust Law
 
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TABLE OF CONTENTS INTRODUCTION 1336 I. WICKARD AND THE SHERMAN ACT: THE DOMINANT JUDICIAL NARRATIVE 1338 II. THE COMMERCE POWER BEFORE WICKARD? 1344 III. THE SHERMAN ACT AS AN EXPRESSION OF THE COURT'S COMMERCE CLAUSE JURISPRUDENCE 1355 IV. WICKARD AND THE SUBSTANTIAL EFFECTS TEST 1369 V. FLIPPING THE SCRIPT: WHAT WICKARD MIGHT HAVE LEARNED 1375 VI. A PARTIAL REHABILITATION OF WICKARD 1391 INTRODUCTION

Discussions of antitrust and the Constitution generally focus on how the latter informs or controls the former. This is not surprising; antitrust regulation is a creature of statute, (1) and a vague statute susceptible to flexible interpretations. Moreover, the Constitution is the paramount law, and statutory regimes must yield to it and not the other way around. (2) No court ever says: we are construing the relevant constitutional provision so as to be consistent with the statute before us. So it should be no surprise that scholars have identified various ways in which constitutional doctrines or considerations have influenced and informed the ever-evolving jurisprudence that implements the Sherman Act's unchanged text.

The Court's jurisprudence regarding the reach of the Sherman Act vis-a-vis local conduct exemplifies such one-sided interaction between Constitution and statute. Initially, and famously, the Court read the Act in light of the Court's Commerce Clause precedents, holding that the Act did not reach a merger to monopoly because such intrastate activity only impacted interstate commerce "indirectly." (3) The Court continued to invoke and apply the "direct/indirect" formula in the Sherman Act context into the mid-1980s. (4) Of course, the Court adjusted its Commerce Clause jurisprudence during the New Deal, vastly expanding the scope of congressional power vis-a-vis purely local conduct. Most notably, in Wickard u. Filburn, the Court held that Congress could reach any conduct that produced "a substantial economic effect on interstate commerce," (5) even if that effect was indirect within the meaning of prior Commerce Clause caselaw. Just six years later, and almost as if on cue, the Court imported the substantial effects test from Wickard into its antitrust federalism jurisprudence. (6) In so doing, the Court repudiated five decades of contrary precedent, despite the absence of any statutory change. Since that time, the Court has repeatedly applied the Act to local conduct producing purely intrastate harms, so long as such conduct produced the requisite substantial effect. (7) In some such cases the Court invoked Wickard in support of this approach. (8) The Court also claimed that developments in the nation's economy justified the vast expansion of the commerce power--and the correlative expansion of the scope of the Sherman Act. (9)

This Article offers what one might call an alternative history of the relationship between Wickard v. Filburn and the Sherman Act. Thus, the Article "flips the script" and asks what would have happened if Wickard had looked to Sherman Act precedents for guidance and not vice-versa. While counter-intuitive at first, such an inquiry sheds important and surprising light upon the massive constitutional (and, under the Sherman Act, statutory) change that Wickard wrought. In particular, the Court's pre- Wickard experience with application of the direct/indirect test in the antitrust context contradicts and/or undermines several assumptions that purportedly drove Wickard's decision to repudiate the direct/indirect standard and replace it with the far more generous (to Congress) substantial effects test. Moreover, and ironically, a thorough understanding of the Court's pre-New Deal antitrust federalism decisions helps generate a more enduring and plausible rationale for the result in Wickard, a rationale that does no violence to the constitutional order that Wickard inherited.

Part I of this Article recounts the Supreme Court's own account of the relationship between Wickard and the Sherman Act. Part II describes the scope of the commerce power before Wickard, particularly the direct/indirect test that was in place when Congress passed the Sherman Act and which the Court employed to evaluate whether the commerce power reached purely local conduct. Part III describes the Court's pre-Wickard approach to the reach of the Sherman Act, which, as will be seen, was a straightforward application of the Court's pre-1890, indeed pre-New Deal, Commerce Clause jurisprudence. Part IV describes Wickard and, in particular, the Court's rationale for repudiating five decades of Commerce Clause jurisprudence in favor of the substantial effects test. This Part also explains how, in Mandeuille Island Farms, Inc. v. American Crystal Sugar Co., the Court embraced both Wickard's substantial effects test under the aegis of the Sherman Act as well as Wickard's rationale for repudiating the longstanding direct/indirect test in the first place. (10) Part V flips the script and examines what the Wickard Court could have learned from the antitrust jurisprudence that Mandeville Island Farms repudiated. Part VI explains how the pre-Wickard antitrust decisions provide a more defensible foundation for the result in Wickard, if not its rationale.

  1. WICKARD AND THE SHERMAN ACT: THE DOMINANT JUDICIAL NARRATIVE

    The dominant narrative within the courts regarding the interaction between Wickard and the Sherman Act goes something like this: when Congress passed the Sherman Act, it sought to exercise the full extent of its commerce power, using the language of the Commerce Clause to describe the reach of the Act. (11) However, in several early decisions, particularly United States v. E. C. Knight Co., (12) the Court thwarted Congress's intent. (13) That is, the Court erred by reading the Act in light of the division of authority between state and federal sovereigns described in the Court's pre-1890 Commerce Clause jurisprudence. (14) The cases creating this jurisprudence arose in the context of claims by regulated parties that state laws were invalid because they in fact regulated interstate commerce. (15) Thus, it is said, such decisions announced unduly narrow accounts of the reach of federal power, so as to avoid claims that states were exercising authority exclusively delegated to Congress, and thereby validate state authority over essentially intrastate activity. (16) E. C. Knight, it is said, improperly treated these precedents as demarking the boundaries of affirmative federal power that Congress sought to exercise by statute via the Sherman Act. (17)

    To be sure, subsequent decisions backtracked some from E. C. Knight's categorical holding that the Act could never reach manufacturing (and by implication agriculture and mining). (18) However, despite continuing integration of the national economy and the growing role of truly national enterprises, and despite decisions outside the antitrust context--most notably The Shreveport Rate Case--that purportedly read the commerce power more generously, (19) the Court continued to invoke the pre-1890 mechanical direct/indirect test when determining whether the Act reached a challenged restraint. (20) As a result, the pre-New Deal Court repeatedly held that the Act did not reach various forms of anticompetitive conduct that, while local, nonetheless affected interstate commerce, and thus should have fallen within the scope of Congress's commerce power as properly understood in The Shreveport Rate Case and similar decisions. (21)

    Fortunately, the story goes, other developments in Commerce Clause jurisprudence finally caught up with antitrust's unduly narrow approach to the Sherman Act. This is where Wickard enters the story. Wickard, of course, was not an antitrust case. (22) But it did involve economic regulation of output as part of an effort to raise prices. (23) Moreover, the regulated party in the case invoked the direct/indirect standard, contending that, at most, his activities had only an "indirect" effect on interstate commerce. (24) A dissenting judge in the lower court, invoking the same standard, disagreed, contending that, when combined with similar activities by other regulated parties, the plaintiff s activities in fact directly impacted interstate commerce. (25)

    Wickard did not resolve this disagreement between the regulated party and the dissent below. Instead, the Court took the opportunity to jettison the direct/indirect test altogether as a "mechanical" exercise that obscured focus on the real question--namely, whether the activity that Congress sought to regulate "exerts a substantial economic effect upon interstate commerce." (26) This question was asked and answered "irrespective of whether such effect is what might at some earlier time have been defined as 'direct' or 'indirect.'" (27) While the plaintiffs own activities did not exert such an effect, the Court said similar activities, when aggregated with one another, did have a substantial effect, bringing the plaintiffs activities within Congress's authority. (28) This approach, the Court said, implemented the breathtaking scope of the commerce power recognized in Gibbons v. Ogden (29) and never surpassed since. (30)

    By illustrating the putative shortcomings of the direct/indirect test more generally, Wickard paved the way for banishing the putative test from antitrust jurisprudence as well. Just six years after Wickard, the Court unanimously jettisoned fifty years of Sherman Act precedent, invoking Wickard several times and opining that the direct/indirect test was a "mechanical" and "artificial" relic of a preindustrial age. (31) Modern economic conditions, as Wickard taught, required the Sherman Act to reach any conduct that produced a "substantial effect" on interstate commerce, regardless of whether that effect was direct or indirect. (32) The reach of the Sherman Act was once again yoked to the scope of the commerce power.

    The Court has repeatedly applied this test in...

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