Section 7 of the Clayton Act prohibits mergers that harm competition in “in any line” of commerce. And, indeed, the Supreme Court’s decisions in Philadelphia National Bank and Topco are often cited on behalf of the proposition that this means any single cognizable market, and that anticompetitive effects in one market cannot be offset by procompetitive effects in another.

That would appear to simplify antitrust analysis, and it certainly can. But as is so often the case in antitrust, apparent simplicity can be confounding in application. Is it really true that harm in any market, however narrow, is grounds to block a merger, whatever its broader effects? Is that the best reading of legal precedent? Is it required? And is it either practicable or desirable?

Read the full piece here.

ICLE Academic Affiliate Giuseppe Colangelo participated in a webinar hosted by the South Korean law firm Bae, Kim, & Lee exploring the proposed Platform Competition Promotion Act. Video of the full webinar is embedded below.

Although it was overshadowed by the Federal Trade Commission (FTC) and U.S. Justice Department’s (DOJ) year-end release of the 2023 merger guidelines, one should also note the abrupt end of the FTC v. Illumina/Grail saga. The saga finished with the FTC’s Dec. 18 press release announcing that Illumina decided on Dec.17 to divest itself of its recently reacquired Grail cancer blood-testing subsidiary.

The press release crowed that the 5^th U.S. Circuit Court of Appeals “issued an opinion in the case finding that there was substantial evidence supporting the Commission’s ruling that the deal was anticompetitive.”

Read the full piece here.

As part of a set of “shock therapy” measures introduced to deregulate and stabilize its economy, the Argentinian government led by newly elected President Javier Milei has already adopted an emergency decree (Decreto de Necesidad y Urgencia) that makes broad array of legal changes. Toward the same goal, the government in late December sent up an omnibus bill on Bases and Starting Points for the Freedom of Argentines Act that, among its 600 changes, proposes to modify the current Act for the Defense of Competition (Act No. 27.442).^[1]

Read the full piece here.

Well, they have done it. On Dec. 18, the Federal Trade Commission (FTC) and U.S. Justice Department (DOJ) issued their final 2023 merger guidelines, as an early New Year’s gift (nicely sandwiched between Hanukkah, which ended Dec. 15, and Christmas) of the porcine sort.

The two agencies try to put lipstick on this pig by claiming that the guidelines “emphasize the dynamic and complex nature of competition,” an approach that supposedly “enables the agencies to assess the commercial realities of the United States’ modern economy when making enforcement decisions.” But no amount of verbal makeup prevents this porker from oinking, despite the valiant best efforts of the antitrust agencies’ talented and highly respected chief economists (Susan Athey and Aviv Nevo) to argue otherwise.

Read the full piece here.

Abstract

Dynamic competition defines an improvement path for antitrust law. Interested in competitive realities more than political activities, the growing body of scholarship studying dynamic competition wants to make antitrust diagnosis and analysis more accurate without sacrificing administrability. At a high level, the dynamic competition approach appears to some as a twenty-first-century equivalent of the Chicago School of antitrust. This article shows that the analogy is only partially correct. Unlike the Chicago School of antitrust law, the dynamic competition scholarship is innovation oriented, empirical, enforcement friendly, and interdisciplinary. More generally, dynamic competition is the natural evolution for all systems of antitrust law that reassess doctrine in light of the progression of economic and technical understanding of competition.

Read at SSRN.

INTEREST OF AMICUS CURIAE[1]

The International Center for Law & Economics (“ICLE”) is a nonprofit, non-partisan global research and policy center aimed at building the intellectual foundations for sensible, economically grounded policy. ICLE promotes the use of law and economics methodologies, as well as the results of economic research, to inform public policy debates, and it has longstanding expertise in antitrust law. It has filed amicus briefs in this Court and others around the country. See, e.g., Apple Inc. v. Epic Games, Inc., No. 23-344 (U.S.); United States v. Am. Airlines Grp. Inc., No. 23-1802 (1st Cir.); Giordano v. Saks Inc., No. 23-600 (2d Cir.).

ICLE respectfully submits that the decision below undermines the economic foundations of antitrust law by presuming that a potentially procompetitive restraint is per se unlawful, rather than analyzing the restraint under the default rule of reason. The Court should grant the petition for a writ of certiorari to clarify that the type of restraint at issue here is presumptively procompetitive and thus subject to the rule of reason.

ICLE scholars have written extensively on issues closely related to this case, and respectfully submit that their expertise will help clarify the economic problems with the decision below and highlight the reasons for the Court to grant certiorari.

SUMMARY OF ARGUMENT

This Court has clearly and repeatedly recognized that “[t]he rule of reason is the accepted standard for testing whether a practice restrains trade in violation of [Sherman Act] § 1” and that per se prohibitions are “con- fined to restraints … ‘that would always or almost al- ways tend to restrict competition and decrease output.’” Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 885–86 (2007) (quoting Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723 (1988)). The decision below cannot be reconciled with those important principles.

The Seventh Circuit committed at least three errors that threaten the economic foundations of antitrust law and are worthy of this Court’s attention.

First, the Seventh Circuit inverted the strong presumption in favor of rule of reason analysis—a presumption that is critical in preventing antitrust law from deterring productive and beneficial conduct. Plaintiffs can overcome that presumption, but only when they show that the challenged restraint falls squarely within a class or category that “always or almost always” harms competition. Leegin, 551 U.S. at 885–86. For a court to make that prediction with confidence, it must have sufficient experience with the restraint. Here, the Seventh Circuit turned settled law on its head. From a dearth of experience, the court of appeals reasoned that a per se claim was plausible and sustainable. This approach threatens to chill Interbrand competition.

Second, the Seventh Circuit sustained a per se challenge to a restraint that has significant procompetitive virtues. The challenged contractual provision was designed, and chiefly functioned, as a vertical restraint. The economic literature shows that intrabrand vertical restraints tend to benefit competition. While there are circumstances under which certain vertical restraints can be anticompetitive, there is no literature demonstrating that they are typically anticompetitive. In the franchise context, intrabrand vertical restraints strengthen the franchise’s brand overall and thus foster competition. The existence of some horizontal aspects or applications of such a restraint, moreover, does not negate these procompetitive virtues. The rule of reason fosters consideration of such issues, whereas the Seventh Circuit’s decision curtails it.

Third, the Seventh Circuit held that positive effects on consumers cannot justify a restraint in the labor market. This holding is in deep tension with this Court’s admonition that antitrust analysis focus on “the commercial realities” of a business or industry rather than on “formalistic distinctions.” See Ohio v. Am. Express Co., 138 S. Ct. 2274, 2285 (2018) (“AmEx”) (quoting Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 466–67 (1992)). Second, the decision below is at odds with this Court’s teaching that “reasonableness” is a holistic endeavor, which incorporates consideration of consumer welfare. See NCAA v. Alston, 141 S. Ct. 2141, 2151 (2021). As petitioners explain, a growing circuit split on this fundamental, analytical issue warrants this Court’s immediate attention.

[1] Pursuant to S. Ct. Rule 37.2(a), counsel for all parties have been notified about the filing of this brief. No counsel for a party authored this brief in whole or in part and no person or entity other than amicus, its members, or counsel made a monetary contribution to its preparation or submission.

Abstract

This paper examines algorithmic collusion from legal and economic perspectives, highlighting the growing role of algorithms in digital markets and their potential for anti-competitive behavior. Using bandit algorithms as a model, traditionally applied in uncertain decision-making contexts, we illuminate the dynamics of implicit collusion without overt communication. Legally, the challenge is discerning and classifying these algorithmic signals, especially as unilateral communications. Economically, distinguishing between rational pricing and collusive patterns becomes intricate with algorithm-driven decisions. The paper emphasizes the imperative for competition authorities to identify unusual market behaviors, hinting at shifting the burden of proof to firms with algorithmic pricing. Balancing algorithmic transparency and collusion prevention is crucial. While regulations might address these concerns, they could hinder algorithmic development. As this form of collusion becomes central in antitrust, understanding through models like bandit algorithms is vital, since these last ones may converge faster towards an anticompetitive equilibrium.

Facebook parent Meta Platforms Inc. filed suit against the Federal Trade Commission in the U.S. District Court for the District of Columbia on Nov. 29, alleging the FTC’s administrative proceedings against the company are “structurally unconstitutional,” and that they violate the Fifth Amendment’s Due Process Clause, the Seventh Amendment’s right to trial by jury, and Articles I and III of the U.S. Constitution.

The suit — which also names Commissioners Lina Khan, Rebecca Kelly Slaughter and Alvaro Bedoya — raises complex issues of constitutional and administrative law.

In brief, it’s about the limits of agency authority and, not incidentally, what authority Congress can properly delegate to federal agencies. It is also, at least arguably, an expression of backlash to regulatory overreach.

Such a backlash seemed increasingly likely, if not inevitable, given the FTC’s recent blitz of activity in the tech sector. That includes not just enforcement matters but an ambitious regulatory agenda.

Read the full piece here.