AAI’s Antitrust Jury Instruction Project: A good idea in theory, but…
The American Antitrust Institute has announced plans to draft a comprehensive set of jury instructions for antitrust trials. According to AAI president Bert Foer:
In Sherman Act Section 1 and Section 2 civil cases, judges tend to gravitate towards the ABA Model Instructions as the gold standard for impartial instructions. … The AAI believes the ABA model instructions are, in some situations, confusing, out of date, or do not adequately effectuate the goals of the antitrust laws. To provide an alternative, the AAI will develop a set of jury instructions that can be widely disseminated to lawyers and judges.
Foer is certainly right about existing jury instructions. They’re often confusing and frequently provide so little guidance that jurors are effectively invited simply to “pick a winner.” Crafting clearer, more concrete jury instructions would benefit the antitrust enterprise and further AAI’s stated mission “to increase the role of competition [and] assure that competition works in the interests of consumers.”
But clarity alone is not enough. Any new jury instructions should set forth (in clear terms) liability standards whose substance enhances the effectiveness of the antitrust. Here’s where I worry about the AAI project.
Throughout its history, AAI has shown little regard for the inherent limits of antitrust. Those limits arise because the antitrust laws (1) embody somewhat vague standards that factfinders must flesh out ex post (e.g., they forbid “unreasonable” restraints of trade and “unreasonably” exclusionary conduct by monopolists) and (2) are privately enforceable in lawsuits giving rise to treble damages. The former feature ensures that courts, regulators, and business planners face difficulty in evaluating the legality of business practices. The latter guarantees that they’re regularly called upon to do so. It also discourages borderline practices that might wrongly be deemed, after the fact, to be anticompetitive. Antitrust therefore creates significant “decision costs” (in both adjudication and counseling) and “error costs” (in the form of either market power resulting from improper acquittals or foregone efficiencies resulting from improper convictions and the chilling of procompetitive conduct). Those decision and error costs constitute the limits of antitrust and are inexorable:
- you can’t decrease decision costs (by simplifying a liability rule) without increasing error costs (incorrect judgments and enhanced chilling effect);
- you can’t decrease error costs (by making the rule more nuanced in order to better separate pro- from anticompetitive conduct) without increasing decision costs;
- you can’t reduce false acquittals (by easing the plaintiff’s proof burden or cutting back on affirmative defenses) without increasing false convictions, and vice-versa.
In light of this unhappy situation, antitrust liability standards should be crafted so as to minimize the sum of decision and error costs. As I have recently explained, the Roberts Court has taken this tack in its eight major antitrust decisions.
AAI, by contrast, has shown little concern for false positives and seems to equate an effective antitrust regime with one that produces more liability. Time and again, the Institute has advocated “pro-plaintiff” liability rules that threaten high error costs in the form of false convictions (and the chilling effect that follows). In all but one of the Roberts Court’s antitrust decisions (which, as noted, are consistent with a “decision-theoretic” framework that would help minimize the sum of decision and error costs), AAI has advocated a pro-plaintiff position that the Supreme Court ultimately rejected. (See AAI’s positions in Twombly, Leegin, Credit Suisse, Dagher, Weyerhaeuser, LinkLine, and Independent Ink.) This is a stunningly bad record.
Moreover, AAI remains out of antitrust’s mainstream (which now acknowledges antitrust’s inherent limits and the need to constrain error costs) on practices involving somewhat unsettled liability rules. Consider, for example, AAI’s views on:
- Resale Price Maintenance (RPM). Even after Leegin abrogated the per se rule against minimum RPM, AAI urged courts to adopt a rule of reason that would burden a defendant with “justifying” any instance of RPM that results in an increase in consumer prices. Such an approach is likely to generate excessive liability because all instances of RPM — even those aimed at such procompetitive effects as the elimination of free-riding, the facilitation of new entry, or encouraging “non-free-rideable” demand-enhancing services — involve an increase in consumer prices. AAI’s preferred rule essentially amounts to a presumption of illegality for RPM. As I explained in this article, such an approach would involve huge error costs (and certainly wouldn’t minimize the sum of decision and error costs).
- Loyalty Rebates. Efficiency-minded antitrust scholars have generally concluded that there should be a safe harbor for single-product loyalty rebates resulting in an above-cost discounted price for the product at issue. The leading case on loyalty rebates, the Eight Circuit’s Concord Boat decision, agrees. The thinking behind such a safe harbor is that any equally efficient rival could match a defendant’s loyalty rebate that resulted in an above-cost discounted price; permitting liability on the basis of such a rebate would chill discounting and create a price umbrella for relatively inefficient rivals. AAI, however, has urged courts to reject the safe harbor approved in Concord Boat.
- Bundled Discounts. Efficiency-minded antitrust scholars have also approved a safe harbor for some sorts of multi-product or “bundled”
discounts: such a discount should be legal if each product in the bundle is priced above cost when the entire amount of the bundled discount is attributed to that single product. The Ninth Circuit approved this safe harbor in its PeaceHealth decision. Again, the rationale behind the safe harbor is that an equally efficient, single-product rival could meet any bundled discount resulting an above-cost pricing under this so-called “discount attribution” test. And again, AAI has opposed this safe harbor.
These are but a few examples of AAI’s wildly pro-plaintiff view of antitrust—a view that ultimately injures consumers by ignoring the error costs (e.g., thwarted procompetitive business practices) associated with false convictions. So in the end, I’m a bit worried about AAI’s jury instruction project. If the Institute can simply provide clarity without pushing substantive liability standards in its preferred, pro-plaintiff (error cost-insensitive) direction, antitrust will be better off because of its efforts. But I’m not optimistic.
Filed under: antitrust, bundled discounts, business, consumer protection, error costs, exclusionary conduct, regulation, resale price maintenance