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Amicus Brief "The court of appeals’ decision poses a grave risk to the innovation economy. The court condemned as per se violations of the antitrust laws practices that made competition possible in a nascent market through introduction of a new business model..."
“The court of appeals’ decision poses a grave risk to the innovation economy. The court condemned as per se violations of the antitrust laws practices that made competition possible in a nascent market through introduction of a new business model. And it did so in the absence of any precedent holding that the novel combination of practices at issue could be deemed per se illegal. The court of appeals’ decision thus sends a chill wind through industry sectors where entrepreneurs are contemplating the launch of innovative business models to fuel the modern economy.
This Court’s precedent on application of the per se rule is clear: “[I]t is only after considerable experience with certain business relationships that courts classify them as per se violations” of the antitrust laws. Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 9 (1979) (“BMI”). Per se condemnation is appropriate only when a practice lacks any plausible procompetitive rationale. Cal. Dental Ass’n v. FTC, 526 U.S. 756, 771 (1999). If there is no long track record of judicial experience establishing that a practice always or almost always lessens competition, then the practice should be subject to analysis under the rule of reason. BMI, 441 U.S. at 23-24. In that way, a finding that a novel practice (or an old practice in a new context) is anticompetitive may be made only after a rigorous analysis of all the facts and circumstances. Such a rule sensibly avoids unintentional condemnation of economically valuable activity where the full effects of that activity are simply unknown to the courts.
In disregard of these principles, the court of appeals applied the per se rule to a novel combination of competition-enabling practices in an emerging market. The negative consequences of the court’s ruling will be particularly acute for modern high technology sectors of the economy, where entrepreneurs planning to create entirely new markets or inject competition into existing ones through adoption of new business models will now face exactly the sort of artificial deterrents that this Court has strived to prevent. “Mistaken inferences and the resulting false condemnations ‘are especially costly, because they chill the very conduct the antitrust laws are designed to protect…’”
Amicus Brief "...One of the core guiding principles of modern antitrust law is the focus on maximizing the welfare of consumers. This guiding principle should lead to the conclusion that the antitrust laws may be violated when a transaction reduces consumer welfare but not when consumer welfare is increased..."
“…One of the core guiding principles of modern antitrust law is the focus on maximizing the welfare of consumers. This guiding principle should lead to the conclusion that the antitrust laws may be violated when a transaction reduces consumer welfare but not when consumer welfare is increased. The consumer welfare focus of the antitrust laws is a product of the same fundamental wisdom that underlies the Hippocratic Oath: primum non nocere, first, do no harm.
The decision of the Panel violates this principle and thus will harm consumers in the Ninth Circuit, and, insofar as it is followed in other Circuits, across the country. More specifically, the Panel takes several positions on proof of efficiencies that are contrary to the Horizontal Merger Guidelines and decisions in other Circuits. Chief among these positions are that “[i]t is not enough to show that the merger would allow St. Luke’s to better serve patients” and that “[a]t most, the district court concluded that St. Luke’s might provide better service to patients after the merger.” These positions are inconsistent with modern antitrust jurisprudence and economics, which treat improvements to consumer welfare as the very aim of competition and the antitrust laws.
If permitted to stand, the Panel’s decision will signal to market participants that the efficiencies defense is essentially unavailable in the Ninth Circuit, especially if those efficiencies go towards improving quality. Companies contemplating a merger designed to make each party more efficient will be unable to rely on an efficiencies defense and will therefore abandon transactions that promote consumer welfare lest they fall victim to the sort of reasoning employed by the panel in this case. Consequently, it is foreseeable that it will be a long time, if ever, that another panel of this Court will be able to revisit this issue that is critical to correct antitrust enforcement.
Compounding this problem is the fact that the Panel’s opinion fills something of a vacuum in efficiencies jurisprudence. Although efficiencies are recognized as an essential part of merger analysis, very little is written about them in most judicial decisions. The Panel’s decision will thus not only preempt potentially beneficial mergers but also the development of sound efficiencies analysis under Section 7.
The amici respectfully submit that the decision of the Panel is contrary to modern thinking on efficiencies in antitrust analysis and therefore urge the Ninth Circuit to rehear the case en banc in order to correct the defects in the Panel’s decision and to provide clearer guidance and analysis on the efficiencies defense.”
Amicus Brief Unlike in a pre-merger investigation, the Federal Trade Commission (“FTC”) did not need to rely on indirect evidence related to market structure to predict the competitive effect of the conduct challenged in this case.
Unlike in a pre-merger investigation, the Federal Trade Commission (“FTC”) did not need to rely on indirect evidence related to market structure to predict the competitive effect of the conduct challenged in this case. McWane’s Full Support Program, which gave rise to the Commission’s exclusive dealing claim, was fully operational—and had terminated—prior to the proceedings below. Complaint Counsel thus had access to data on actual market effects.
But Complaint Counsel did not base its case on such effects, some of which suggested an absence of anticompetitive harm. Instead, Complaint Counsel theorized that McWane’s exclusive dealing could have anticompetitively “raised rivals’ costs” by holding them below minimum efficient scale, and it relied entirely on a self-serving statement by McWane’s chief rival to establish what constitutes such scale in the industry at issue. In addition, Complaint Counsel failed to establish the extent of market foreclosure actually occasioned by McWane’s Full Support Program, did not assess the degree to which the program’s significant exceptions mitigated its anticompetitive potential, and virtually ignored a compelling procompetitive rationale for McWane’s exclusive dealing. In short, Complaint Counsel presented only weak and incomplete indirect evidence in an attempt to prove anticompetitive harm from an exclusive dealing arrangement that had produced actual effects tending to disprove such harm. Sustaining a liability judgment based on so thin a reed would substantially ease the government’s burden of proof in exclusive dealing cases.
Exclusive dealing liability should not be so easy to establish. Economics has taught that although exclusive dealing may sometimes occasion anticompetitive harm, several prerequisites must be in place before such harm can occur. Moreover, exclusive dealing can achieve a number of procompetitive benefits and is quite common in highly competitive markets. The published empirical evidence suggests that most instances of exclusive dealing are procompetitive rather than anticompetitive. Antitrust tribunals should therefore take care not to impose liability too easily.
Supreme Court precedents, reflecting economic learning on exclusive dealing, have evolved to make liability more difficult to establish. Whereas exclusive dealing was originally condemned almost per se, Standard Oil of California v. United States, 337 U.S. 293 (1949) (hereinafter “Standard Stations”), the Supreme Court eventually instructed that a reviewing court should make a fuller inquiry into the competitive effect of the challenged exclusive dealing activity. See Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 329 (1961). In In re Beltone Electronics, 100 F.T.C. 68 (1982), the FTC followed Tampa Electric’s instruction and embraced an economically informed method of analyzing exclusive dealing.
The decision on appeal departs from Beltone—which the FTC never even cited—by imposing liability for exclusive dealing without an adequate showing of likely competitive harm. If allowed to stand, the judgment below could condemn or chill a wide range of beneficial exclusive dealing arrangements. We therefore urge reversal to avoid creating new and unwelcome antitrust enforcement risks.”
Popular Media If this symposium is asking the single question whether U.S. jurisdictions should deregulate the practice of law, my answer has to be no. My problem . . .
If this symposium is asking the single question whether U.S. jurisdictions should deregulate the practice of law, my answer has to be no. My problem is that the question itself conflates at least three questions, and the answers to each should be different.
The first question is whether people other than licensed lawyers should be allowed to provide all or many traditional legal services. The right answer to that question is yes. First Thing We Do, Let’s Deregulate All the Lawyers, gives that correct answer, but it is far from a new insight. The proposal is essentially to eliminate prohibition of the unauthorized practice of law. I called for it in the Harvard Law Review in 1977, Deborah Rhode wrote a much more extensive argument in the Stanford Law Review in 1981, and dozens have made the same points since. Almost everyone acknowledges that law firms have made extensive use of paralegal staff for many years, and even the ABA Commission on Professionalism admitted in 1986 that many services now delivered only by licensed lawyers could be handled as well by trained paralegals.
Indeed, while the organized bar in many states continues to press for enforcement of unauthorized practice restrictions, and while Constitutional requirements of the right to counsel in criminal cases might prevent complete freedom of choice, a great deal of deregulation in this first sense is taking place already. About two-thirds of all legal services today are performed for corporate clients. Many of those clients employ in-house counsel. Such counsel may employ non-lawyers just as law firms employ paralegals, and the non-lawyers need not work on-site. Thus, if a company legal department wants to outsource required discovery responses to a group of non-U.S.-licensed lawyers or non-lawyers, or even non-lawyers located in states that have unauthorized practice, it may do so, limited only by how averse it is to the risk the work will not be performed adequately.
In recent years, firms have brought this kind of practical deregulation to the broader public. LegalZoom, for example, sells documents over the internet that are personalized with the client’s name, designated beneficiaries, other parties, etc., all based on information that the client supplies online. Quicken also sells CD-ROMs that can produce multiple documents of different kinds for different situations. Lawyer organizations continue to assert that unauthorized-practice restrictions provide them protection, and some challenges to these consumer-friendly sources of legal assistance are now pending, but the barrier to unauthorized practice is rapidly breaking down. I join in advocating that this form of deregulation be celebrated and made official as soon as possible.
The second way states regulate the legal profession, however, is not nearly as appropriate for deregulation. The rules of professional conduct – of which the ABA Model Rules are best known – regulate how lawyers are to operate in a number of specific situations. They describe the duty of confidentiality, for example, and the limits of that duty. They require lawyers to avoid conflicts of interest. More narrowly but similarly important, they prescribe how lawyers are to respond when they receive a message or document that someone obviously did not mean to make available to them and how lawyers are to respond when a client lies on the witness stand.
Some of these regulatory rules are certainly protectionist, e.g., the rule against sharing a legal fee with a non-lawyer. Others are most properly default rules, i.e., subject to informed waiver. In fact, many of these rules would be required by general principles of contract, tort and agency law even without being expressed in regulatory terms. But most of these kinds of rules standardize expectations and reduce transaction costs in lawyer-client and lawyer-lawyer interaction. Many of the rules could be improved and some should be eliminated, but general deregulation of this aspect of the law governing lawyers’ work would be counterproductive. Instead, the better course would be to take the course adopted by the U.S. Patent & Trademark Office and also make the rules applicable to non-lawyers doing work that formerly had been reserved only to lawyers.
The third way we regulate delivery of legal services is by limiting use of the title “lawyer” to persons with a given level of training and demonstrated knowledge. The issue here is whether, once many people with quite different kinds of training and experience may deliver legal services, all of them should be allowed to call themselves a “lawyer.” I believe not. I believe that clients should be entitled to accurate information about the training and experience of persons purporting to provide legal services.
Indeed, in the future, this kind of regulation may be more important than ever. As part of its effort to remain authorized by the U.S. Department of Education to accredit U.S. law schools, the ABA Section on Legal Education and Admission to the Bar has proposed new standards that would significantly reduce the educational requirements required to become a lawyer. Required subjects of training would largely be limited to courses in ethics and professionalism. Beyond that, a law school could define almost any other course as preparation for law practice and the school’s graduates could call themselves lawyers, provided only that they can pass a bar exam and have paid their law school for a three year education.
In one sense, of course, this development could be seen as the ultimate deregulation. If anyone, with almost any kind of training, can call themself a lawyer, then no offering of legal services could be seen as unauthorized. We are far from that point, however, and for at least a transition period, I believe formally-defining service providers based on basic categories of training and experience would be appropriate. Specialities should also be easier to create and to claim, and lawyers should be allowed to communicate length of experience in a given area of practice. Corporate counsel might be able to create alternative information sources with which to decide what outside counsel to retain, but the point of this third kind of regulation would be to provide individual legal service consumers with basic information necessary to make informed choices from among possible service providers.
This symposium’s title is “unlocking the law.” All should agree with that objective. I simply believe that some targeted regulation will continue to be needed as we continue to move toward that ultimate goal.
