March 15: Kick-Off for The Law School Hiring Cartel
If you’re currently a law professor and you’re thinking you might want to change schools (because, for example, your school continued its precipitous slide in the law school rankings . . . more about that later), you’d better hop on the phone. Today is your last day to snag a visiting offer from another law school. (You’ve already missed the deadline for procuring a permanent offer. That was March 1.)
The competing law schools, you see, have agreed to limit competition amongst themselves for law professor talent. Pursuant to the Association of American Law Schools’ Statement of Good Practices for the Recruitment of and Resignation by Full-Time Faculty Members, the law schools have pledged to “make an[y] offer of an indefinite appointment as a teacher during the following academic year no later than March 1 and of a visiting appointment no later than March 15.”
If this arrangement strikes you as legally suspect, congratulations. You know more about antitrust law than does the Executive Committee of the AALS. This arrangement is, quite simply, an unreasonable horizontal restraint of trade — not unlike an agreement among Ford, Chrysler, and GM that they will not poach engineers and designers from one another during the six-month period preceding the debut of new models. They’d no doubt love to adopt an agreement like that, but their lawyers would wisely counsel against doing so.
Members of the AALS, of course, contend that their little arrangement is fine. First, they insist it’s merely a “statement of good practices,” not an actual agreement, which is necessary to satisfy the “contract, combination, or conspiracy” element of Sherman Act Section 1. In addition, they maintain, it’s not an “unreasonable” restraint of trade. They’re wrong on both points.
As anyone who’s spent time teaching in a law school knows, law school administrators treat the hiring arrangement as though it is an actual agreement that binds them. They speed up recruiting to ensure that they make lateral offers before the cut-off dates. They talk to each other about the arrangement as though they recognize it as a common commitment. Moreover, even if the arrangement were not the product of an express agreement, a reasonable factfinder would infer agreement from the fact that the law schools, in collectively adhering to the “good practice,” are engaging in consciously parallel behavior that would make no sense to adopt unilaterally (i.e., any law school that unilaterally adopted a policy of refusing to poach from its rivals after a certain date would hurt itself without procuring any economic benefit). Thus, there is no question that the arrangement represents an antitrust “agreement” under prevailing legal standards.
The restraint is also unreasonable. Most likely, the agreement would be deemed a “naked” restraint of trade. Herbert Hovenkamp has written that “a serviceable definition of a naked restraint is one whose profitability depends on the exercise of market power.” (The Antitrust Enterprise: Principle and Execution 112 (2005).) If the participants in this agreement didn’t have market power — e.g., if only 20 of the nearly 200 law schools in the AALS adopted this policy — the policy wouldn’t really work. An exercise of market power seems to be required for the arrangement to have efficacy, so the restraint is probably naked. And if it’s naked, then it’s per se unreasonable and thus illegal.
But even if the arrangement is not naked, it would be condemned under a more probing analysis — either a “quick look” or a full-on rule of reason analysis. Because it precludes law professors from procuring other offers when they’re most valuable to their existing employers (and thus in the best position to extract salaries approaching their actual worth), the arrangement systematically drives faculty salaries below the levels that persist in free competition. This is especially galling because most law professors do not learn what they will be paid the following year until after the deadline for procuring another offer has passed.
The law schools would contend, of course, that this anticompetitive effect is outweighed by an important benefit: avoidance of the disruption that inevitably occurs when a professor resigns late in the spring term, after the fall schedule has been completed and students have selected courses. There are at least two problems with that argument.
First, the argument really amounts to an assertion that vigorous competition among schools for professor talent is itself unreasonable because it leads to messy results. The Supreme Court has rejected that line of argument in no uncertain terms. In the Professional Engineers case, the Court condemned an agreement among engineers not to discuss price with potential clients, despite the engineers’ insistence that the agreement was necessary to prevent the shoddy design work that would result from low engineering prices. The engineers’ public safety argument would not fly, the Court concluded, because “the Rule of Reason does not support a defense based on the assumption that competition itself is unreasonable.” The Court explained that the Sherman Act is premised on “[t]he assumption that competition is the best method of allocating resources in a free market,” and it insisted that “[e]ven assuming occasional exceptions to the presumed [good] consequences of competition, the statutory policy precludes inquiry into the question whether competition is good or bad.” Thus, the competing law schools can’t agree not to compete for labor just because doing so is hard.
Second, even if the policy at issue creates a good effect — reduced disruption from untimely resignations — there are less restrictive means of securing that end. Each individual law school could negotiate resignation rules with its own professors. For example, a law school could agree with its professors that they may not resign after Date X, and it could even bargain for a liquidated damages provision that would compensate it for any disruption occurring from breach. Law schools would then compete with each other on this contract term — some would allow later resignations than others. They could even have different resignation dates for different professors. This sort of unilateral, non-collusive solution to the problem of untimely resignations would preserve competition for labor resources, causing them to be allocated more efficiently.
Of course, the members of the AALS know that they’re unlikely to be sued over this policy. After all, any disgruntled law professors that brought suit over the policy would signal that they are prone to litigate and would thereby reduce their attractiveness as lateral candidates. You’d think, though, that the AALS would show a little more respect for the law.
Filed under: antitrust, cartels, law school