Chicago and Harvard School

Debate
Harvard approach
Under the "Harvard School" approach, the courts
and agencies presumed the illegality of any mergers,
joint ventures, or agreements that allowed firms to
obtain, enhance, or exercise market power,
 regardless of whether the conduct had the potential
to benefit consumers by lowering prices or
increasing output.
These scholars argued that, when markets are
concentrated, firms are more likely to engage in
anticompetitive conduct. Harvard School academics
pointed out that, when Congress enacted the Sherman
and Clayton Acts, it was concerned with the growing
economic and political power of trusts such as the
Standard Oil Company and United States Steel
Corporation.
Harvard scholars opposed market concentration,
even when it might lower costs and prices, thereby
benefiting consumers. Harvard scholarship
convinced many judges to presume the illegality of
any conduct by firms with market power,
regardless of its effect on consumers.
For example, in 1945, in United States v. Aluminum
Co. of America, Judge Learned Hand found Alcoa liable
for monopolizing the aluminum manufacturing
market. Taking advantage of economies of scale by
expanding its manufacturing capacity to meet
increasing demand, Alcoa was able to deliver quality
products to customers at low prices. Judge Hand's
decision penalized Alcoa simply for engaging in
aggressive competition that benefitted consumers.
The principle of per se unreasonableness avoids the
necessity for an incredibly complicated and prolonged
economic investigation into the entire history of the
industry involved, as well as related industries, in an
effort to determine at large whether a particular
restraint has been unreasonable an inquiry so often
wholly fruitless when undertaken.
1. 2. case American
Standard oil Tobacco case
corporation
Merits

Specificity
Certainty
 Demerits

Ignored Consumer Welfare

Presumption of illegality

RULE OF REASON

Specific to general
-Inductivereasonin
By the late 1960s, a group of scholars at the University of
Chicago had set forth an opposing theory of antitrust
analysis in a series of articles and treatises. Robert Bork
defined economic efficiency in terms of conditions that
maximized wealth, and he equated wealth enhancement
with "consumer welfare," meaning lower costs, reduced
prices, and increased output of products and services
desired by customers.
Since markets are self-correcting in any event, the courts
and enforcement agencies should only intervene in the
competitive process when it was clear, after thorough
study, that anti competitive conduct was threatening
consumer welfare.
Firms cannot in general obtain or enhance monopoly power
by unilateral action -unless, of course, they are irrationally
willing to trade profits for position. Consequently, the focus
of the antitrust laws should not be on unilateral action;
it should instead be on:
(1) cartels and
(2) horizontal mergers large enough either to create
monopoly directly, as in the classic trust cases, or to
facilitate cartelization by drastically reducing the number of
significant sellers in the market.
Merits

Consumer Welfare
Rule of Reason
Demerits

Lengthy and costly Fact finding process

 Complex economic issues
Application of both the rules
In a jurisdiction where tying arrangement is considered
per se illegal, there only the question of the tied product
being tied with another product and the compulsion of
the consumers in buying both the products proves the
allegation and accordingly the competition agency can
take appropriate action.
In another jurisdiction, where it is treated with rule of
reason, the following things are supposed to be
proved.First, the tying arrangement - tying product
and tied product.
Second, the purchase of one product must be
conditioned on the purchase of another product.
Third, a seller must have sufficient market power in
a tying product to restrain competition in a tied
product.
Fourth, a tying arrangement must be shown to
areciabl restrain commerce.
Instead of viewing antitrust analysis through either a
 Harvard or Chicago School lens, the courts and agencies
should adopt a "third way" that builds upon the insights of
both Schools. Neither the Harvard School's presumptions
nor the Chicago School's empiricism are appropriate in all
cases.

IMPLICATIONS OF PER SE RULE

AND RULE OF REASON
BURDEN OF PROOF
1.
 Horizontal agreements - per se rule- on the Opposite
party to show that there has been no AAEC because of
the agreement entered.
2.
Vertical agreements - rule of reason- on the informant
to show that there has been AAEC because of the
agreement entered.
Implications on Decisions

Per se rule - More convictions

 Rule of reasons - Less
convictions
California Dental Assn v FTC made it clear that
antitrust analysis should be conducted under a
sliding scale, allowing for different levels of
scrutiny depending upon the type of restraint at
issue. However, California Dental did not explain
how to apply its sliding scale analysis to specific
types of competitive conduct, and the lower federal
courts have not yet been able to use California
Dental to reconcile the antitrust divide between the
Harvard and Chicago Schools.