‘The Limits of Antitrust’ by Frank Easterbrook
Frank H. Easterbrook’s 1984 Texas Law Review article “Limits of Antitrust” advances a deceptively simple thesis that fundamentally reoriented competition policy: antitrust law should recognize its own institutional limitations and design rules accordingly.
The article contains two central insights. The first is that, because “antitrust is costly,” and because “judges act with imperfect information about the effects of the practices at stake,” (p. 4):
The legal system should be designed to minimize the total costs of (1) anticompetitive practices that escape condemnation; (2) competitive practices that are condemned or deterred; and (3) the system itself. (p. 16)
The second is that:
For a number of reasons, errors on the side of excusing questionable practices are preferable. (p. 15)
Together, these insights have become perhaps the most influential and fundamental animating principle of modern antitrust jurisprudence.
Easterbrook argues that antitrust faces an inescapable knowledge problem: courts cannot reliably distinguish beneficial business practices from harmful ones because most business arrangements involve complex tradeoffs between cooperation and competition. Every firm represents massive internal cooperation (“Exxon,” he notes, “entails far more coordination than the average cartel,” (p. 1)), yet we don’t condemn this cooperation, because it produces economic value. The challenge is determining when cooperation crosses the line into harmful collusion—a line that economic theory can’t precisely draw and that courts are ill-equipped to identify.