{"id":2982,"date":"2018-09-19T18:28:48","date_gmt":"2018-09-19T18:28:48","guid":{"rendered":"http:\/\/journals.law.harvard.edu\/lpr\/?p=2982"},"modified":"2019-02-20T17:58:35","modified_gmt":"2019-02-20T17:58:35","slug":"antitrust-political-economy-and-the-nomination-of-brett-kavanaugh","status":"publish","type":"post","link":"https:\/\/journals.law.harvard.edu\/lpr\/2018\/09\/19\/antitrust-political-economy-and-the-nomination-of-brett-kavanaugh\/","title":{"rendered":"Antitrust, Political Economy, and the Nomination of Brett Kavanaugh"},"content":{"rendered":"

By Chris Sagers[1]<\/a><\/p>\n

In the world there are weightier things than antitrust, and the Supreme Court nomination of Judge Brett Kavanaugh involves many of them. His replacement of Anthony Kennedy will likely change the Court\u2019s balance in several areas, perhaps including the constitutional status of abortion, marriage rights, and who knows what other civil rights affairs. It also no doubt poses concerns about challenges to the Trump administration and the President himself, in the ethical, national security, and other issues that will be litigated against them.[2]<\/a> But it so happens that Judge Kavanaugh\u2019s record in antitrust is both stark and arguably quite telling.<\/p>\n

Judge Kavanaugh\u2019s colleagues in more than one antitrust case called him a \u201cwishful\u201d judge who \u201capplies the law as he wishes it were, not as it currently is,\u201d[3]<\/a> and a \u201czeal[ot]\u201d who \u201cignores . . . precedent.\u201d[4]<\/a> The Supreme Court once reversed him for reading an \u201cunwritten exception\u201d into a law he didn\u2019t like, because \u201c[h]owever sensible\u201d his dislike of it might have been, a \u201ccourt\u2019s task is to apply the text [of a statute], not to improve upon it.\u201d[5]<\/a> At times, despite his acknowledged prowess, his reasoning has been legally sloppy, and that incaution suggests a judge concerned with lawmaking and not with law.[6]<\/a> Of all things, the White House itself argued for his confirmation by painting him as an anti-regulatory zealot.[7]<\/a> Accordingly, while Judge Kavanaugh\u2019s work in antitrust seems important in itself, it also corroborates a serious criticism of his approach to judging. His antitrust opinions, certain other competition matters, and a closely related dispute over the Obama net neutrality rule betray an ideological, anti-regulatory activist, willing to take bits and pieces of precedent and use them to change the law as he likes. He seems different, in other words, form conservative nominees like Justices Gorsuch, Roberts, Alito, or Scalia, judges about whose nominations I did not bother to publish detailed analyses. He has demonstrated a radicalism that seems inappropriate to the office.<\/p>\n

At a minimum, a Senate that confirms Judge Kavanaugh will bear responsibility for serious damage to our already compromised competition law. It is very unlikely that any antitrust plaintiff would win before the Court on the merits for at least another generation, and there would be deadening consequences throughout the lower courts. But more generally, that Senate will also be responsible for changes to the foundations of American political economy. They could frustrate government responses to social problems in a way not seen in America since the Great Depression. The law could revert to a state long ago rejected, and rejected for good reason.<\/p>\n

 <\/p>\n

1. The Narrow Balance in Antitrust<\/h3>\n

 <\/p>\n

So far, Judge Kavanaugh\u2019s antitrust positions have been sufficiently radical that they\u2019ve failed to persuade even the most conservative members of his own court.[8]<\/a> But on the Supreme Court he would have a different opportunity. The Court\u2019s significance in this law is often misunderstood, because it takes comparatively few cases. But in fact it is by far the most important institution in American antitrust. For example, in just one decision twenty-five years ago, the Court made it effectively impossible to prove predatory pricing.[9]<\/a> Predation claims are now vanishingly rare, and with minor exceptions, no predation plaintiff has won meaningful courtroom success since.[10]<\/a> Another example, and a poignant one given Judge Kavanaugh\u2019s preoccupation with it, is our merger law. It too is seriously impaired, such that only the largest, most dangerous horizontal mergers are now ordinarily challenged. While the Supreme Court didn\u2019t cause that result directly, the lower courts that did cause it could not have done their work without reliance on two factually idiosyncratic opinions issued more than forty years ago. Those two cases were decided, it so happens, immediately after President Nixon repopulated the Court in the early 1970s.[11]<\/a> That in itself is telling. It was not \u201cChicago\u201d or conservative economics or any other ideas in themselves that crippled antitrust. It was a major shift in the Supreme Court\u2019s personnel.[12]<\/a> Its make-up is centrally important to antitrust law.<\/p>\n

And so it is remarkable that a President who campaigned as an economic populist would nominate judges like Neil Gorsuch and now Brett Kavanaugh to the Court.[13]<\/a> On one level, Judge Kavanaugh\u2019s appointment is a fair bit more important than that of Justice Gorsuch, because of the seat he would fill.[14]<\/a> Admittedly, Justice Kennedy was no great antitrust hawk. He wrote the predatory pricing case[15]<\/a> and certain other pro-defendant decisions.[16]<\/a> However, he believed at least in principle in the goals of antitrust[17]<\/a> and supported plaintiffs in some important cases on the merits. He did that, for example, in joining the majority in FTC v. Actavis<\/em>[18]<\/a> and concurring in California Dental Association v. FTC.<\/em>[19]<\/a> A Justice Kavanaugh would do none of that. Moreover, to judge from the lengths he has gone to reach out for issues and keep them alive when he is in a minority,[20]<\/a> he would work to secure certiorari\u2014which requires only four votes\u2014in cases that Justice Kennedy would not have favored. With Justices Kavanaugh, Gorsuch, and the three other strong antitrust opponents already on the Court, one can easily imagine cases like Appalachian<\/em> Coals,<\/em>[21]<\/a> or the intermediate opinion in American Needle<\/em>,[22]<\/a> or the defendants\u2019 position in Addyston Pipe<\/em>[23]<\/a> finally becoming good law. The practical effect could be that nothing is any longer illegal.<\/p>\n

<\/h3>\n

2. The Opinions<\/h3>\n

 <\/p>\n

Judgments about Judge Kavanaugh and antitrust must be made on only a few opinions over his career, principally his dissents in the merger cases FTC v. Whole Foods<\/em>[24]<\/a> and United States v. Anthem, Inc.<\/em>[25]<\/a> But the evidence is plenty. Those opinions are long, striking manifestos that lay out an abstract antitrust philosophy. The view of the judge they disclose is corroborated by three closely related non-antitrust opinions, and especially by a striking position he took concerning net neutrality.<\/p>\n

 <\/p>\n

A. The Competition Cases<\/em><\/h4>\n

 <\/p>\n

\u00a0 \u00a0 \u00a0 \u00a0Whole Foods<\/em> at least involved issues on which reasonable minds could disagree, and the able, well-regarded Democratic appointee who presided at trial agreed with Judge Kavanaugh on the outcome. But what stands out is not so much Judge Kavanaugh\u2019s specific disagreements with the majority. It is his skepticism that anticompetitive injury is even possible, the demands he would place on plaintiffs, and the degree to which he thinks scattered, ambiguous indications in Supreme Court opinions authorize him to remake the law as he likes.<\/p>\n

His basic claim is that the Supreme Court made a major change in merger law in the mid-1970s, and that courts now must apply \u201cmodern\u201d antitrust.[26]<\/a>\u00a0 Since no one now really doubts that the Supreme Court meant to make some sort of change in the decisions of the 1970s, it is worth pausing on whether they really support the claims that Judge Kavanaugh makes for them. They do not. There were only two,[27]<\/a> decided in 1974 and 1975, and they represent the last substantive comment the Supreme Court has made on merger law. More importantly, both cases were factually idiosyncratic, and each bore a special peculiarity. In each of them, there was a particular reason that the merging firms literally and logically could not compete even if they remained separate. As the most prominent among conservative antitrust experts have recognized, they are really not analogous at all to run-of-the-mill merger cases.[28]<\/a> A few lower courts did read them broadly, but therein lies much the same problem. Those decisions\u2014including one by then-Judge Clarence Thomas\u2014were by judges who are as skeptical of antitrust as Judge Kavanaugh does, and they grossly exaggerated the actual holdings and language of the Supreme Court opinions. They found within them warrant to engage in as much speculation of future entry as they liked, even in horizontal mergers with very large concentration numbers.[29]<\/a> Because the Supreme Court has said nothing on the matter since, those readings have gone without oversight or change.<\/p>\n

In Whole Foods <\/em>Judge Kavanaugh evidently found it amazing that the government would challenge a merger of firms controlling 300 supermarkets out of the 34,000 in the nation. Though the complaint was unanimously approved by a Republican-led Federal Trade Commission, and the agency based its case on the testimony of one of the nation\u2019s most prominent conservative economists, Judge Kavanaugh thought it would \u201cturn back the clock\u201d to the \u201cthe bad old days when mergers were viewed with suspicion regardless of their economic benefits.\u201d[30]<\/a> But what he takes to be \u201cmodern\u201d is evidently just a rule under which very little can be illegal, and his chief authority for it is not statute or case law, but Robert Bork\u2019s The Antitrust Paradox<\/em>\u2014the forty-year-old views of a private citizen.<\/em> In various opinions he has cited that book perhaps a dozen times,[31]<\/a> and quotes from it at length. It is not especially \u201cmodern,\u201d however, to privilege it over the decades of advancements that followed in industrial organization theory, including the \u201cunilateral effects\u201d model of harm that was at the heart of Whole Foods<\/em>.[32]<\/a> Even the most conservative of American economists have begun to question the book for its over-simplicity and its excessive skepticism of market power.[33]<\/a><\/p>\n

It also seems telling that the Whole Foods <\/em>dissent invokes the concern with \u201cinterbrand\u201d competition from the Court\u2019s vertical restraints cases, to support the claim that \u201cbasic economic principles . . . must be considered under modern antitrust doctrine.\u201d[34]<\/a> It is very hard to see what relevance the interbrand\/intrabrand distinction could have in a horizontal merger case in which the main dispute is product market definition. The Whole Foods \u201cbrand\u201d either competes in some special way with other organic markets, or it competes to the same degree with all supermarkets. No restraints or limits challenged by the government in Whole Foods <\/em>would have been within one \u201cbrand.\u201d The point of citing those cases seems to have been simply that the Supreme Court stated views that Judge Kavanaugh considered conservative or limiting, and therefore that he is free to limit the law too.<\/p>\n

The most surprising point in the Whole Foods <\/em>dissent is the claim that the Supreme Court\u2019s Brown Shoe <\/em>opinion, and another key merger decision, United States v. Philadelphia National Bank,<\/em>[35]<\/a> have been effectively reversed. They are \u201c1960s -era relics\u201d become \u201cmoribund,\u201d he says,[36]<\/a> though they remain not only good law, but foundations of modern merger analysis.[37]<\/a> He goes so far, in fact, as to imply that parts of Brown Shoe <\/em>have been literally, formally reversed. That claim is made largely without legal authority, and depends on several more paragraphs of the thoughts of Robert Bork. But the one citation to actual authority betrays the surprising sloppiness of a judge trying to make law rather than apply it. He claims that FTC v. H.J. Heinz Co.<\/em>[38]<\/a> rejected Brown Shoe<\/em>\u2019s \u201cpractical indicia\u201d test for definition of submarkets. To show it, he simply cited Heinz<\/em> with this parenthetical: \u201cnot applying Brown Shoe<\/em> practical indicia test; instead using the economically grounded Herfindahl-Hirschman Index test for market definition employed in FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997).\u201d[39]<\/a> But the parties in Heinz<\/em> didn\u2019t challenge market definition at all, and so there couldn\u2019t be a holding on it.[40]<\/a> Worse, the HHI is not a test for market definition, and literally has nothing to do with it. It can\u2019t even be applied until after the market has been defined by other means. But most remarkably, Staples <\/em>itself relied on the very rule of Brown Shoe<\/em> that allegedly had been rejected\u2014the \u201cpractical indicia\u201d approach to submarket definition\u2014not once, but eight separate times.[41]<\/a><\/p>\n

In any case, whatever reasonable doubts there might have been about Whole Foods <\/em>aren\u2019t really available for Anthem<\/em>. Not even that long ago the deal likely would not have been proposed, because\u2014even in this \u201cmodern\u201d era shorn of \u201c1960s relic[s]\u201d\u2014it would have been all but per se illegal. It was a four-to-three horizontal merger of the nation\u2019s second and third largest health insurers, which on various different market formulations would have produced very high concentration numbers. The parties themselves admitted that it would have anticompetitive consequences. They argued, however, that the \u201cefficiencies\u201d it generated would outweigh the harms, and Judge Kavanaugh agreed.<\/p>\n

This was a surprising hill on which to die, wholly aside from the legal uncertainties remaining around the efficiencies defense,[42]<\/a> because the particular efficiencies claims were uncommonly feeble. As the trial judge explained in a careful, thorough summary, the only efficiencies the parties claimed would have been legally irrelevant, even if they were substantiated.[43]<\/a> They boiled down to (a) a claim that a bigger insurer could squeeze lower prices out of doctors and hospitals, and (b) a claim that the merged firm could combine Anthem\u2019s lower prices with the target firm\u2019s higher quality plans. But as to the first, the \u201cbenefit\u201d is just an increase in the defendant\u2019s market power, and that is no defense at all.[44]<\/a> The second amounts to the claim that \u201cI can\u2019t make a mousetrap as good as my competitor, so you have to let me acquire it.\u201d That is, Anthem claimed that its forte was getting lower prices, but that it hadn\u2019t figured out how to marry them to high quality plans like those of its acquisition target. As the trial court and the majority recognized, that argument is already precluded by D.C. Circuit law, in a case on which Judge Kavanaugh much relied.[45]<\/a> That is so for the Clayton Act\u2019s very good policy reason of preferring internal growth over growth by acquisition. The law encourages giving consumers something new rather than just getting control over something they already have.<\/p>\n

In any case, Judge Kavanaugh again justifies all this by stressing that courts \u201care bound by the modern approach\u201d the Supreme Court purportedly adopted in the mid-1970s.[46]<\/a> He once again refers to Brown Shoe<\/em> as a \u201c1960s-era relic,\u201d and not just for the submarkets analysis that he thought was specifically rejected in Heinz<\/em>. This time he implies that Brown Shoe <\/em>was reversed in its entirety by the Supreme Court\u2019s 1970s merger decisions. But those opinions themselves repeatedly cite Brown Shoe<\/em> as governing law.[47]<\/a><\/p>\n

He again cites a vertical restraints case as requiring \u201cmodern\u201d analysis in horizontal merger cases, and requiring a \u201cfocus[] on the effects on the consumers of the product or service, not the effects on competitors.\u201d[48]<\/a> That is really quite strange. Neither the case he cited nor any other vertical case is specifically about protecting competition over competitors. If anything, they are at odds with that value, because vertical restraints are mainly used to stop<\/em> vigorous retail price competitors, and to protect higher-priced retailers from them.<\/em> Likewise, nothing about the challenged merger in Anthem <\/em>or stopping it really had anything to do with protecting competitors, and it is hard to imagine how any of the Court\u2019s vertical cases is at all relevant to a horizontal merger. Instead, the point again just seems to be that Judge Kavanaugh thinks those cases expressed a conservative ideology, and delegated lawmaking authority to the lower courts accordingly.<\/p>\n

In a way, the oddest thing about Whole Foods<\/em> was just that the trial court and majority did in fact entertain the defendants\u2019 efficiency claims, at elaborate length. Judge Kavanaugh happened to disagree, but that is not supposed to matter in review of fact finding. Worse yet, the evidence for the efficiencies was controverted and weak. Remarkably, it was attacked even by one of the merging parties, which had soured on the deal.[49]<\/a> Judge Kavanaugh accepted it with a hook-line-and-sinker credulousness, and he accepted that the benefits would be wildly large. He expected several billion dollars in savings, \u201cpractically guaranteed\u201d to be passed on in their entirety to consumers.[50]<\/a><\/p>\n

Finally, in a handful of closely related non-antitrust regulatory cases, Judge Kavanaugh has deployed the same great skepticism of market power as a brake on government intervention, despite whatever Congress might have intended. The implication is that wherever market power is plausibly in issue, he will reach out to decide the case on that basis, and when he does so he will find it lacking. In two communications cases he wrote separately to emphasize the lack of market power,[51]<\/a> in one of which the case could have been decided on much narrower grounds.[52]<\/a> He did the same in a natural gas regulatory case.[53]<\/a> Again the problem is not that he doubted market power in those specific cases, but language broadly implying that market power is largely impossible, and willingness to defend its relevance on whatever scattered fragments are available in precedent. In all these opinions he shows the same defiance of any suggestion that markets can be abused, or need government involvement.<\/p>\n

<\/h4>\n

B. Not an Isolated Context: Net Neutrality and the New <\/em>Lochner<\/h4>\n

 <\/p>\n

It is worth considering one closely related economic regulatory decision. Interestingly enough, it involved a federal regulation that many conservatives said was unnecessary precisely because the underlying problems could be handled by antitrust.[54]<\/a> Given his apparent confidence that antitrust should virtually never apply, however, it seems likely that Judge Kavanaugh would insist that this sector be subject to neither <\/em>antitrust nor <\/em>regulation. His opinion follows the same pattern of cobbling scattered and controverted fragments of precedent into new and potentially radical law.<\/p>\n

By the time Judge Kavanaugh wrote his opinion in the matter, the D.C. Circuit had twice rejected FCC efforts at internet regulation and the Supreme Court and Ninth Circuit had also weighed in. In one of its decisions, the D.C. Circuit seemed to suggest that if the FCC wanted to regulate broadband access, it must subject it to the \u201ccommon carrier\u201d regulation traditionally imposed on telephone companies.[55]<\/a> And thus the Commission did so. That revision, the Obama administration\u2019s last net neutrality effort, survived D.C. Circuit review and was held legal.[56]<\/a> Judge Kavanaugh dissented from a denial of rehearing en banc, however,[57]<\/a> on two remarkable grounds. He said that the Obama rule violated both the broadband companies\u2019 First Amendment rights and a new rule of administrative law that he claimed to find in Supreme Court caselaw, but that has been taken by experts as radical and new.[58]<\/a><\/p>\n

As in some of his other decisions, it was striking how far Judge Kavanaugh reached for these issues, just because he wanted to decide them. His two arguments had been raised by no participant in the case,[59]<\/a> nor by the two FCC Commissioners who dissented from the rulemaking under review, nor any member of the initial panel. By the time of the en banc decision they were likewise joined by no other judge on his court.[60]<\/a> Moreover, the dispute itself was by then to some large degree moot. A presidential election had come and gone, and a repopulated FCC had already made clear that it would do away with the Obama rule. No one at that point could seriously expect the short-lived Obama net-neutrality policy ever to go into effect, regardless what the courts did.[61]<\/a> Federal judges ordinarily avoid deciding any <\/em>questions unnecessary to resolve a dispute, as a commonplace of judicial restraint driven by their understanding of their constitutional role. Judge Kavanaugh by contrast reached far out to render not one but two extraordinarily controversial conclusions, in a case that was barely even a live controversy and could surely be resolved on narrower grounds.<\/p>\n

The First Amendment argument was on some level the less striking, because it technically boiled down to a narrow issue.[62]<\/a> But it was nevertheless remarkable. Judge Kavanaugh favored very strong constitutional protection for a handful of the largest companies that have ever existed, and he favored it to protect their strictly commercial interests. That is, he would protect their freedom to determine what content to carry, but no one believed that any of the underlying decisions were content-based in any respect. The conduct at issue was just extraction of monopoly rents from suppliers and customers, unrelated to the underlying content, and seems the same in constitutional respects as similar conduct by a distributor of any other good. His rule would also protect those companies while diluting the intellectual rights of the human individuals one might have expected to be the First Amendment\u2019s primary concern. The constitution would be a tool not to ensure that individuals can hear and say what they like, but to ensure that one small, privileged sector of the economy can withdraw as much profit as possible from the flow of information.<\/p>\n

In any case, what Judge Kavanaugh would accomplish through his new rule of administrative law is of a different magnitude. As with the broad activism of his antitrust opinions, he pieced together a significant, mandatory new rule from scattered fragments. He did that by setting out broad generalizations of the results<\/em> of four Supreme Court opinions\u2014but not their reasoning\u2014and synthesized from them an interpretive canon of constitution-like significance that could significantly restrict the effectiveness of the executive branch and Congress\u2019s ability to legislate.[63]<\/a> Specifically, those four cases purportedly held that any agency action concerning a \u201cmajor\u201d question is illegal unless the action was \u201cclearly\u201d authorized by Congress.<\/p>\n

Among the many serious problems in this purported new rule,[64]<\/a> one is especially relevant: the reading it required of a very recent Supreme Court opinion on nearly identical facts. National Cable & Telecommunications Ass\u2019n v. Brand X Internet Services<\/em>[65]<\/a> considered whether the FCC had permissibly determined that cable broadband was an \u201cinformation service\u201d within the meaning of the Communications Act, rather than a \u201ctelecommunications service.\u201d If it was the latter, it would be subject to common carrier oversight, but if it was the former, it would not. The Court found the statute to \u201cleave[] federal telecommunications policy in this technical and complex area to be set by the Commission.\u201d[66]<\/a> It explicitly held that \u201cthe Commission\u2019s choice\u201d to treat a cable broadband as a \u201ctelecommunications\u201d product \u201cis entitled to [Chevron<\/em>] deference.\u201d[67]<\/a><\/p>\n

That being nearly the opposite of what he wanted to hold in the net neutrality case, Judge Kavanaugh set out a reading of Brand X<\/em> that virtually no one shares, including apparently any member of his own court. In effect he argued that while Brand X<\/em> found the decision to be within the agency\u2019s discretion, the agency nevertheless could only make one legally permissible choice. That was so because he considered application of common carrier oversight to be a \u201cmajor\u201d decision, and therefore one that\u2014under his reading of Supreme Court precedent\u2014could be made only with clear statutory authorization. Since he also believed there was no clear authorization, he believed that the regulation could not be legally adopted. Accordingly, he could read Brand X <\/em>as he did only by assuming that the Supreme Court rendered an opinion nearly directly on point that would have been resolved definitively by the \u201cmajor rules doctrine,\u201d but just failed to mention that for some reason.<\/p>\n

Worse yet, Judge Kavanaugh\u2019s reading actually would render Brand X <\/em>logically incorrect. The issue for the FCC had only two possible solutions\u2014cable broadband was either a telecommunications service or an information service. On Judge Kavanaugh\u2019s rule, the FCC could not legally find it to be telecommunications, because Congress had not clearly authorized it. But if a statute has only one legally permissible interpretation, then it is not ambiguous. Brand X <\/em>held as a matter of law that the statute was <\/em>ambiguous, because that holding is a necessary predicate to Chevron <\/em>deference. Importantly, if Judge Kavanaugh\u2019s major-rules doctrine were in fact the law, it was established before Brand X,<\/em> because two of the decisions purportedly creating it had already been decided.[68]<\/a> The Brand X <\/em>Court therefore would have known it was reaching an impossible result.<\/p>\n

An intelligent and talented lawyer presumably understood weaknesses like these, and in any case they were explained in a separate opinion in the same decision.[69]<\/a> One therefore doubts that Judge Kavanaugh really thought his reading of Brand X<\/em> was the best one. It is not even seriously plausible. Rather, he liked it better ideologically than other readings, and it seemed to him not literally impossible.\u00a0 Reasonably minds might disagree, and this analysis considers only a narrow set of opinions, but it appears that to this judge, precedent does not matter.<\/p>\n

 <\/p>\n

III.\u00a0 Antitrust and Political Economy Under a Gorsuch-Kavanaugh Majority<\/h3>\n

 <\/p>\n

A theme unifies Judge Kavanaugh\u2019s antitrust cases, his views of broadband companies\u2019 First Amendment rights, and his \u201cmajor rules\u201d reasoning: an overriding commitment of political economy, and a generalized model of judging used to serve it. What seems most significant is that these rulings involved not just reviews of the facts or technical matters of statutory interpretation or limits on Chevron <\/em>or any other local legal issues. They ultimately are about power,<\/em> and specifically about Congress\u2019s authority to take action against private power. They betray a judge whose real goals are to limit government as radically as his appellate colleagues will permit him to do.<\/p>\n

There could well be many consequences, throughout our law, and I am only competent to judge one narrow slice of them. But the record discloses a position in antitrust that is radical, and more than good enough reason to believe that it won\u2019t just be antitrust.<\/p>\n

 <\/p>\n

[1]<\/a>\u00a0Chris Sagers is the James A. Thomas Professor of Law, Cleveland State University, c.sagers@csuohio.edu.<\/em> In preparing this essay I relied on the work of colleagues at the American Antitrust Institute, see <\/em>Rick Brunell & Randy Stutz, Am. Antitrust Inst., AAI Opposes Nomination of Judge Kavanaugh to Supreme Court: Analysis Shows Hostility to Antitrust Plaintiffs and Leniency to Big Business,<\/em> July 17, 2018,\u00a0 available at<\/em> https:\/\/www.antitrustinstitute.org\/sites\/default\/files\/Analysis%20of%20Judge%20Kavanaugh%27s%20Antitrust%20Record%5B1%5D.pdf, but I personally had no role in preparing that document. I also relied on an excellent online post, Stephen Calkins, How Might A Justice Kavanaugh Impact Antitrust Jurisprudence?,<\/em> ProMarket.org, July 20, 2018.<\/p>\n

[2]<\/a> See, e.g., <\/em>James Hohmann, The Daily 202: Why <\/em>U.S. v. Nixon Matters \u2014 Now More Than Ever,<\/em> Wash. Post, July 24, 2018 (discussing comments by Kavanaugh favoring executive authority); cf. <\/em>Brett M. Kavanaugh, Separation of Powers During the Forty- Fourth Presidency and Beyond, <\/em>93 Minn. L. Rev. 1454, 1459-62 (2009) (arguing for broad, temporary presidential immunity from civil or criminal proceedings while in office).<\/p>\n

[3]<\/a> United States v. Anthem,<\/em> Inc., 855 F.3d 345, 354 (D.C. Cir. 2017).<\/p>\n

[4]<\/a> FTC v. Whole Foods,<\/em> 548 F.3d 1028, 1048 (D.C. Cir. 2008).<\/p>\n

[5]<\/a> Environmental Protection Agency v. EME Homer City Generation, LP, 134 S.Ct. 1584, 1600 (2014) (alteration in original; citations and internal quotation marks omitted).<\/p>\n

[6]<\/a> See infra <\/em>notes 35-41, 49 and accompanying text.<\/p>\n

[7]<\/a> Robert Barnes & Steven Mufson, White House Counts on Kavanaugh in Battle Against \u2018Administrative State,\u2019<\/em> Wash. Post, Aug. 12, 2018 (discussing White House statements on Kavanaugh nomination).<\/p>\n

[8]<\/a> Namely, his Whole Foods <\/em>dissent was from a panel opinion by Judge Janice Rogers Brown (which was initially joined by Judge Tatel; Judge Tatel later wrote separately, but only to state his own disagreements with the dissent).<\/p>\n

[9]<\/a> Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (U.S. 1993).<\/p>\n

[10]<\/a> Chris Sagers, #LOLNothingMatters,<\/em> 63 Antitrust Bull. 7, 22 & n.84 (2018).<\/p>\n

[11]<\/a> United States v. Citizens & S. Nat. Bank, 422 U.S. 86 (1975); United States v. General Dynamics Corp., 415 U.S. 486 (1974).<\/p>\n

[12]<\/a> Between 1969 and 1972, President Nixon appointed Blackmun, Burger, Rehnquist, and Powell to replace Fortas, Warren, Black, and Harlan. In those two years he transformed what had been the most pro-enforcement antitrust Court in history into what shortly would become the most anti-enforcement (until perhaps now).<\/p>\n

[13]<\/a> Justice Gorsuch perhaps indicated how conservative his antitrust views will become, now that he is free to vote as Justice, during oral argument in Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018). His aggressive questioning implied perhaps seriously exaggerated concern for output as a sole antitrust goal.<\/p>\n

[14]<\/a> On a different level, it is less important, because had Merrick Garland been nominated, the change in antitrust could have been significant in the opposite direction. That fact seems of historic significance, but is a story for another day.<\/p>\n

[15]<\/a> Brooke Group,<\/em> 509 U.S. at 209.<\/p>\n

[16]<\/a> See <\/em>Leegin Creative Leather Products, Inc. v. PSKS, Inc., 2007 551 U.S. 877 (2007) (reversing the long-standing per se rule against vertical price-fixing); Kansas v. UtiliCorp United, Inc., 497 U.S. 199 (1990) (expanding the filed-rate rule to prohibit private recovery against filed rates under effectively all circumstances).<\/p>\n

[17]<\/a> See, e.g., <\/em>North Carolina State Bd. of Dental Examiners v. F.T.C., 135 S.Ct. 1101 (2015) (Kennedy, J.) (\u201cFederal antitrust law is a central safeguard for the Nation\u2019s free market structures. . . . The antitrust laws declare a considered and decisive prohibition by the Federal Government of cartels, price fixing, and other combinations or practices that undermine the free market.\u201d).<\/p>\n

[18]<\/a> F.T.C. v. Actavis, Inc., 133 S.Ct. 2223 (2013) (finding for the first time that \u201cpay for delay\u201d pharmaceutical patent settlements can violate antitrust).<\/p>\n

[19]<\/a> California Dental Ass’n v. F.T.C., 526 U.S. 756, 781 (1999) (Breyer, J., concurring) (critical of majority for increasing antitrust plaintiffs\u2019 evidentiary burdens).<\/p>\n

[20]<\/a> See infra <\/em>note 52-53, 59-61 and accompanying text.<\/p>\n

[21]<\/a> Appalachian Coals v. United States, 288 U.S. 344 (1933) (upholding a joint selling cooperative, even though it was literally just a naked price cartel, because of the economic challenges of the Great Depression). Appalachian Coals<\/em> has never been reversed as to its substantive holding, but it plainly no longer states the law.<\/p>\n

[22]<\/a> Am. Needle Inc. v. Nat\u2019l Football League, 538 F.3d 736 (7th Cir. 2008), rev\u2019d<\/em> 560 U.S. 183 (2010) (holding that any collection of separately organized entities could be immune from Sherman Act \u00a7 1 so long as its members \u201cact as a single entity,\u201d notwithstanding internal conflicts of interest).<\/p>\n

[23]<\/a> In this case, decided in the law\u2019s earliest, uncertain years, the parties to a naked price cartel said they should be allowed to defend the arrangement as raising prices no more than was \u201creasonable.\u201d The courts rejected the claim, and in the course of the litigation then-Judge Taft famously wrote that such defenses would \u201cset sail on a sea of doubt.\u201d United States v. Addyston Pipe & Steel Co., 85 F. 271, 283 (6th Cir. 1898), aff\u2019d<\/em> 175 U.S. 211 (1899).<\/p>\n

[24]<\/a> 548 F.3d 1028 (D.C. Cir. 2008) (dissenting from a majority joined by Judge Janice Rogers Brown).<\/p>\n

[25]<\/a> 855 F.3d 345 (D.C. Cir. 2017).<\/p>\n

[26]<\/a> Whole Foods,<\/em> 548 F.3d at 1059, 1063 (Kavanaugh, J., dissenting)<\/p>\n

[27]<\/a> United States v. Citizens & S. Nat. Bank, 422 U.S. 86 (1975); United States v. General Dynamics Corp., 415 U.S. 486 (1974). The Court decided a few other merger cases at around this time, but none were as significant and they are not generally taken as authority for the change in substantive policy.<\/p>\n

[28]<\/a> Hosp. Corp. of Am. v. FTC, 807 F.2d 1381, 1385 (7th Cir. 1986) (Posner, J.) (so holding). See also id.<\/em> at 1386 (noting that \u201cGeneral Dynamics<\/em> was like a failing company case\u201d and that \u201cin Citizens & Southern<\/em> the merger was a mere formality\u201d).<\/p>\n

[29]<\/a> The most important of these decisions were United States v. Baker Hughes Inc., 908 F.2d 981, 985 (D.C. Cir. 1990) (Thomas, J.); United States v. Waste Mgt., Inc., 743 F.2d 976 (2d Cir. 1984) (Winter, J.). See generally <\/em>Sagers, supra <\/em>note 10, at 38-40.<\/p>\n

[30]<\/a> Whole Foods,<\/em> 548 F.3d at 1052.<\/p>\n

[31]<\/a> United States v. Anthem, Inc., 855 F.3d 345, 376 (D.C. Cir. 2017), cert. dismissed<\/em>, 137 S. Ct. 2250 (2017) (Kavanaugh, J., dissenting); Comcast Cable Commun., LLC v. F.C.C., 717 F.3d 982, 990 (D.C. Cir. 2013) (Kavanaugh, J., concurring); Cablevision Sys. Corp. v. F.C.C., 597 F.3d 1306, 1326 (D.C. Cir. 2010) (Kavanaugh, J., dissenting); F.T.C. v. Whole Foods Mkt., Inc., 548 F.3d 1028, 1052, 1059 (D.C. Cir. 2008) (Kavanaugh, J., dissenting); Natl. Fuel Gas Supply Corp. v. F.E.R.C., 468 F.3d 831, 840 (D.C. Cir. 2006).<\/p>\n

[32]<\/a> Much of that same theory has also been adopted in the agencies\u2019 Horizontal Merger Guidelines,<\/em> and Judge Kavanaugh relies on those Guidelines <\/em>very heavily as authority.<\/p>\n

[33]<\/a> See, e.g.,<\/em> Sam Peltzman, Industrial Concentration Under the Rule of Reason<\/em>, 57 J.L. & Econ. S101 (2014).<\/p>\n

[34]<\/a> 548 F.3d at 1059 (Kavanaugh, J., dissenting) (citing, with \u201ccf.,\u201d to Leegin Creative Leather Prods. v. PSKS, Inc.,<\/em> 127 S.Ct. 2705, 2718 (2007), and State Oil Co. v. Khan,<\/em> 522 U.S. 3, 14 (1997)).<\/p>\n

[35]<\/a> United States v. Philadelphia National Bank, 374 U.S. 321 (1963).<\/p>\n

[36]<\/a> Whole Foods,<\/em> 548 F.3d at 1059\u00ad\u201361.<\/p>\n

[37]<\/a> Very recent appellate opinions from a variety of circuits cite both cases repeatedly as leading authority. E.g.,<\/em> FTC v Advocate Health Care Network, 841 F.3d 460, 464, 467, 468, 470, 474, 476 (7th Cir. 2016); FTC v. Penn State Hershey Medical Center, 838 F.3d 327, 335, 337, 338, 342, 344, 345, 347 (3d Cir. 2016); Saint Alphonsus Medical Center-Nampa Inc. v. St. Luke\u2019s Health Sys., 778 F.3d 775, 783, 786, 789 & n.14 (9th Cir. 2015); ProMedica Health System, Inc. v. F.T.C., 749 F.3d 559, 564, 565 (6th Cir. 2014); F.T.C. v. Lundbeck, Inc., 650 F.3d 1236, 1240, 1242 (8th Cir. 2011); Polypore Int\u2019l, Inc. v. FTC, 686 F.3d 1208, 1214, 1217, 1218 (11th Cir. 2012). Courts also routinely cite them as controlling in non-merger cases, see, e.g., <\/em>McWane, Inc. v. FTC, 738 F.3d 814, 828, 829, 830, (11th Cir. 2015), including as to points that Judge Kavanaugh believes to have been specifically reversed, see id. <\/em>at 828 (quoting discussion of submarket analysis from Brown Shoe<\/em>). See also <\/em>Calkins, supra <\/em>note 1, at n.20.<\/p>\n

[38]<\/a> 246 F.3d 708 (D.C. Cir. 2001).<\/p>\n

[39]<\/a> 548 F.3d at 1059 (Kavanaugh, J., dissenting).<\/p>\n

[40]<\/a> Heinz, <\/em>246 F.3d at 716 n.10.<\/p>\n

[41]<\/a> 970 F. Supp. at 1075-79. See generally<\/em> Calkins, supra <\/em>note 1.<\/p>\n

[42]<\/a> According to a well-known history, the law at one time formally rejected all efficiency defenses, and even implied that increased efficiency could make a merger illegal. The courts and agencies have moderated that stance significantly, and it is generally assumed that, in principle, efficiencies could justify an otherwise illegal merger in an appropriate case. However, the defense is still strictly limited, and defendants attempting to prove it face several difficult burdens, because of the risk of abuse it entails. It remains the case that no court in a litigated merger challenge has ever permitted an otherwise illegal merger on efficiencies grounds. See generally <\/em>Lawrence A. Sullivan, Warren S. Grimes & Chris Sagers, The Law of Antitrust: An Integrated Handbook 539-42 (3d ed. 2015).<\/p>\n

Moreover, unlike Judge Kavanaugh, serious observers understand the problems implied by the defense, and do not take them lightly. Genuine believers in the likelihood and value of merger efficiencies have often argued that no case-by-case defense should be available, and would instead recognize them through simpler tests, like raised concentration thresholds. See, e.g., <\/em>Richard A. Posner, Antitrust Law: An Economic Perspective 112-13 (1976); Alan A. Fisher & Robert H. Lande, Efficiency Considerations in Merger Enforcement,<\/em> 71 Cal. L. Rev. 1580, 1651-77 (1983). Oddly enough, even Robert Bork acknowledged that directly measuring efficiencies would be prohibitively difficult. See id. <\/em>at 157-58 (summarizing Bork\u2019s views on the difficulties of case-by-case efficiencies measurement).<\/p>\n

[43]<\/a> United States v. Anthem, Inc., 236 F. Supp. 3d 171, 181-83 (D.D.C. 2017).<\/p>\n

[44]<\/a> On this point, Judge Kavanaugh made a very strange argument with little elaboration. He said that the increased negotiating power would follow from pro-competitive \u201cbargaining power,\u201d rather than anti-competitive \u201cmonopsony power.\u201d But the only way a merger could increase a buyer\u2019s buying power with procompetitive effects would be to generate some volume or other cost savings that could make it cheaper for sellers to serve the merged firm. Judge Kavanaugh did not question the trial court\u2019s explicit rejection of any such cost savings. See<\/em> 236 F. Supp. 3d at 181-82.<\/p>\n

[45]<\/a> Heinz,<\/em> 246 F.3d at 722.<\/p>\n

[46]<\/a> Anthem, <\/em>855 F.3d at 377 (Kavanaugh, J., dissenting).<\/p>\n

[47]<\/a> See <\/em>United States v. Citizens & S. Nat\u2019l Bank, 422 U.S. 86, 122 (1975); United States v. General Dynamics, 415 U.S. 486, 498, 505, 506 (1974).<\/p>\n

[48]<\/a> Id. <\/em>at 376 (citing Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977)).<\/p>\n

[49]<\/a> 855 F.3d at 348 n.1.<\/p>\n

[50]<\/a> Anthem, <\/em>855 F.3d at 380 (Kavanaugh, J., dissenting).<\/p>\n

[51]<\/a> Comcast Cable Commun., LLC v. F.C.C., 717 F.3d 982, 987 (D.C. Cir. 2013) (Kavanaugh, J., concurring); Cablevision Sys. Corp. v. F.C.C., 597 F.3d 1306, 1315 (D.C. Cir. 2010) (Kavanaugh, J., dissenting).<\/p>\n

[52]<\/a> Compare<\/em> Comcast,<\/em> 717 F.3d at 994 (Edwards, J., concurring), with id.<\/em> at 987 (Kavanaugh, J., concurring).<\/p>\n

[53]<\/a> Mobil Pipe Line Co. v. F.E.R.C., 676 F.3d 1098 (D.C. Cir. 2012).<\/p>\n

[54]<\/a> See, e.g., <\/em>Maureen K. Ohlhausen, Acting Chair, Federal Trade Commission, Net Neutrality and the Role of Antitrust: Hearing Before the Subcommittee on Regulatory Reform, Commercial, and Antitrust Law, <\/em>House Judiciary Committee (Nov. 1, 2017).<\/p>\n

[55]<\/a> See generally<\/em> Tim Wu, Network Neutrality, Broadband Discrimination,<\/em> 2 J. Telecomm. & High Tech. L. 141 (2003); Pierre C. Hines, Note, The Third Way 2.0: Evaluating the Title II Reclassification and Forbearance Approach to Net Neutrality, <\/em>103 Geo. L.J. 1609 (2015).<\/p>\n

[56]<\/a> U.S. Telecom Ass\u2019n v. FCC, 825 F.3d 674 (D.C. Cir. 2016) (U.S. Telecom I<\/em>)<\/p>\n

[57]<\/a> 855 F.3d at 381, 417 (D.C. Cir. 2017) (en banc) (U.S. Telecom II<\/em>) (Kavanaugh, J., dissenting).<\/p>\n

[58]<\/a> See, e.g., <\/em>Mila Sohoni, King‘s Domain<\/em>, 93 Notre Dame L. Rev. 1419, 1433-37 (2018); Asher Steinberg, Another Addition to the <\/em>Chevron Anticanon: Judge Kavanaugh on the “Major Rules” Doctrine,<\/em> The Narrowest Grounds, May 7, 2017, available at<\/em> http:\/\/narrowestgrounds.blogspot.com\/2017\/05\/another-addition-to-chevron-anticanon.html (calling Kavanaugh\u2019s view an \u201cinversion\u201d of the Supreme Court\u2019s well-known Chevron<\/em> doctrine that \u201ccannot plausibly be described as existing law.\u201d).<\/p>\n

[59]<\/a> One petitioner during judicial review raised a First Amendment argument, though as Judge Srinivasan wrote in a separate opinion, that party wouldn\u2019t even have been subject to the Obama net neutrality rules. That firm in fact it exercised editorial content control. See U.S. Telecom II,<\/em> 855 F.3d at 388-89 (Srinivasan, J., concurring).<\/p>\n

[60]<\/a> Even Judge Brown, who also dissented from the en banc denial and stated some similar views, did not join Judge Kavanaugh\u2019s opinion.<\/p>\n

[61]<\/a> The Commission\u2019s decision to repeal the rules is itself subject to judicial review challenge, but even if the petitioners in those cases succeed, their remedy will just be a remand to the Commission to reconsider the repeal. If that happens, the Commission will surely just adopt a more fully reasoned decision to repeal the rules.<\/p>\n

[62]<\/a> The Obama net neutrality rules by their terms applied only to firms that formally committed to their customers to impose no restrictions on content, and play no editorial role. Therefore, strictly speaking, the only issue before the court was whether the First Amendment forbids common carrier regulation of content carriers who contractually bind themselves to making no editorial judgments. See U.S. Telecom II,<\/em> 855 F.3d at 388-89 (Srinivasan, J., concurring).<\/p>\n

[63]<\/a> U.S. Telecom II, <\/em>855 F.3d at 420-21 (Kavanaugh, J., dissenting).<\/p>\n

[64]<\/a> See <\/em>sources cited supra <\/em>note 58.<\/p>\n

[65]<\/a> 545 U.S. 967 (2005).<\/p>\n

[66]<\/a> Natl. Cable & Telecomm. Ass’n v. Brand X Internet Services, 545 U.S. 967, 992 (2005).<\/p>\n

[67]<\/a> Brand X, <\/em>545 U.S. at 989.<\/p>\n

[68]<\/a> 855 F.3d at 420 (discussing MCI Telecommunications Corp. v. AT&T, 512 U.S. 218 (1994) and FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000)).<\/p>\n

[69]<\/a> 855 F.3d at 384-86 (Srinivasan, J., conc.).<\/p>\n","protected":false},"excerpt":{"rendered":"

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