The Economics of Antitrust Injury and Firm-Specific Damages

Acknowledgments xiii Preface xv Chapter 1: The Economics of Competitive Injury 1 Kevin S. Marshall, J.D., M.P.A., Ph.D. 1.1 Introduction 1 1.2 Antitrust Injury Brunswick and its Progeny 2 1.3 The Perfectly Competitive Model A Paradigm for Identifying Conduct Injurious to Competition 5 A. Efficiency The Objective of Perfect Competition and the U.S. Antitrust Laws 7 B. The Perfectly Competitive Model and Its Condition of Rationality 9 C. The Perfectly Competitive Model and Its Condition of Numerous, Price-Taking Buyers and Sellers 12 D. The Perfectly Competitive Model and Its Condition of Independence 16 E. The Perfectly Competitive Model and Its Condition of No Entry or Exit Barriers 18 F. The Perfectly Competitive Model and Its Condition of Product Homogeneity 20 G. The Perfectly Competitive Model and Its Unrestricted Forces of Supply and Demand Maximizing Output at Minimum (Competitive) Prices 21 1.4 An Analytical Paradigm 25 1.5 Conclusion 27 Chapter 2: Antitrust Damages and Deadweight Loss 45 Christopher R. Leslie, M.P.P., J.D. 2.1 Monopolies, Cartels, and Deadweight Loss 46 2.2 Antitrust Law Fails to Award Damages Based on Deadweight Loss 49 2.3 The Harms of Not Providing a Remedy for Deadweight Loss 52 2.4 Issues in Incorporating Deadweight Loss Concerns into Antitrust Litigation 54 A. Measuring Deadweight Loss 54 B. Who Should Recover Deadweight Loss Damages 59 2.5 Deadweight Loss and Detrebling 69 2.6 Conclusion 70 Chapter 3: Quality Control of Economic Expert Testimony: The Fundamental Methods of Proving Antitrust Damages 87 Michele Molyneaux, J.D. 3.1 Introduction 87 3.2 Methods of Proving Amount of Damages 89 A. Yardstick Method 90 B. Before-and-After Method 92 C. Market-Share Method 95 D. Going-Concern Method 98 3.3 Analysis Must be Based on Sufficient Facts 99 3.4 Analysis Must be Tailored to Antitrust Injury ("Fit") 102 A. Antitrust Injury 102 B. Disaggregation 104 3.5 Conclusion 106 Chapter 4: Antitrust Damages from Lost Opportunities 121 William B. Tye, Ph.D. and Stephen H. Kalos, Ph.D. 4.1 Introduction 121 4.2 Objectives in Formulating Principles for Determining Damages 122 4.3 Basic Principles for Estimating Damages 124 4.4 Common Examples of Methodological Errors in Damage Studies 125 A. Sunk Costs and Market Imperfections as Sources of Damages 129 B. Case Study: Pennzoil v. Texaco 130 4.5 Considerations of the Lag Between the Offenses and Damages: The Role of Hindsight 132 4.6 Special Consideration of Antitrust Damages 136 4.7 Conclusions 137 Chapter 5: How to Value a Lost Opportunity: Defining and Measuring Damages from Market Foreclosure 145 William B. Tve, Ph.D. Stephen H. Kalos, Ph.D. and A. Lawrence Kolbe, Ph.D. 5.1 Introduction 147 A. Objectives of this [Chapter] 147 B. Preliminary Ground Rules 147 C. Summary of Conclusions 149 5.2 A Framework for Estimating the Value of Lost Opportunities 150 A. Damages when Hindsight is Irrelevant 150 B. Damages when Hindsight is Relevant 153 5.3 Consideration of the Lag Between the Offense and Damages: The Role of Hindsight 153 5.4 Prejudgment Interest on Post-Trial Lost Profits in the Ex Ante Approach 158 A. Considerations Based on Principles of Finance 160 B. Considerations Based on Nature of Risk 160 5.5 Prejudgment Interest on Post-Trial Lost Profits in the Ex Post Method 163 5.6 Prejudgment Interest for Pretrial Lost Profits 167 5.7 An Integrated Approach to Prejudgment Interest and Damage Methodology 169 5.8 Should Damages Seek to Make the Victim "Whole" as of the Offense or as of the Trial? 171 A. Purging the Ex Post Method of Bias 171 B. Difficulties in Accurately Applying the Ex Ante and Ex Post Methods 173 C. Opportunism in the Choice of Methodology 173 D. A Summing Up 174 5.9 Special Consideration of Antitrust Damages 176 5.10 Conclusion 176 Chapter 6: Economic Authority and the Limits of Expertise in Antitrust Cases 195 John E. Loptka, J.D., L.L.M. and William H. Page, J.D., L.L.M. 6.1 Introduction 196 6.2 Conceptual Models, Expert Testimony, and the Process of Adjudication 197 A. Models, Evidence, and Adjudication 198 B. Expert Testimony and Daubert 199 6.3 Economic Authority and Expertise in Antitrust Cases 202 A. Economic Authority and Antitrust: Models, Rules, and the Domain of Fact 202 B. Economic Authority and Expert Testimony in Antitrust Cases 208 6.4 Judicial Control of Expert Testimony in Critical Contexts 213 A. Predatory Pricing 214 B. Markets and Market Power 218 C. Cartels 224 D. Damages 231 6.5 Evaluating the Primacy of Economic Authority Over Expertise 236 A. Comparing Institutional Characteristics 237 B. Implications for the Confrontation Between Chicago and Post-Chicago Economics 240 6.6 Conclusion 242 Chapter 7: The Tension Between Jurisprudential Economics and Microeconomics 307 Kevin S. Marshall, J.D., M.P.A., Ph.D. 7.1 Introduction 307 7.2 Antitrust Injury 308 7.3 Microeconomic Analysis of Conduct Injurious to Competition 310 A. The Perfectly Competitive Model A Paradigm for Identifying Conduct Injurious to Competition 310 B. Perfect Competition and Its Assumption of Rationality 311 C. Perfect Competition and Its Information Requirements 311 D. Product Disparagement and Its Nurturing and Injurious Effects 311 7.4 Microeconomics vs. Jurisprudential Economics 315 A. Antitrust Analysis and the Tension Between Microeconomics and Jurisprudential Economics 315 B. Sanderson v. Culligan International Co. Judge Easterbrook's Flawed Jurisprudential Economics 316 C. Judge Easterbrook's Analysis 318 D. Intentional False Disparagement Is Per Se Unreasonable 319 7.5 Conclusion 320 References 333 About the Authors 365 Index 369