The Sherman Act is a No-Fault Monopolization Statute: A Textualist Demonstration

Authors

Robert H. Lande, University of Baltimore School of LawFollow
Richard O. Zerbe Jr., Evans School of Public Policy and Governance, University of WashingtonFollow

Document Type

Article

Journal Title

American University Law Review

Volume

70

First Page

497

Publication Date

2020

Abstract

The drafters of the Sherman Act originally designed Section 2 to impose

sanctions on all monopolies and attempts to monopolize, regardless whether the

firm had engaged in anticompetitive conduct. This conclusion emerges from the

first ever textualist analysis of the language in the statute, a form of interpretation

originally performed only by Justice Scalia but now increasingly used by the

Supreme Court, including in its recent Bostock decision.

Following Scalia’s methodology, this Article analyzes contemporaneous

dictionaries, legal treatises, and cases and demonstrates that when the Sherman

Act was passed, the word “monopolize” simply meant that someone had acquired

a monopoly. The term was not limited to monopolies acquired or preserved through

anticompetitive conduct. A textualist analysis accordingly suggests that Section 2

should be applied to impose liability and corrective remedies on all monopolies and

attempts to monopolize.

A textualist approach to statutory construction would not imply or create

unstated exceptions. Since Section 2 of the Sherman Act contains no explicit

exception for a monopoly acquired or preserved without proof of anticompetitive

conduct, none should be implied or created. Current case law requiring plaintiffs to

prove the corporation involved engaged in improper conduct should be overturned.

This Article also briefly analyzes the practical economic implications likely to

follow if the courts adopt a “no-fault” approach to monopolization law. This

analysis will demonstrate that the overall economic effects will be uncertain.

They will depend upon empirical issues whose net effect is speculative or

ambiguous. They nevertheless are likely to be beneficial on the whole, and this

provides some support for the no-fault position, and a fortiori demonstrate that

the Article’s textualist conclusions should be implemented.

Imposing sanctions on all extremely large monopolies could improve economic

welfare in many ways. This should increase innovation and international

competitiveness. It should prevent the allocative inefficiency effects of monopoly

pricing and the form of exploitation that arises when monopolies acquire wealth

from consumers. It would be likely to decrease the inefficiencies that result from

monopolies enjoying a “quiet life.” It should avoid the waste that can arise as a

firm struggles to attain and protect its monopoly, and some of the time and cost of

Section 2 litigation. It should improve privacy and decrease income inequality.

The new standard would admittedly also cause some costs and difficulties.

For example, imposing sanctions on all monopolies could sometimes send a

confusing or perverse signal to firms engaging in hard but fair competition,

especially as a firm’s market share neared the ambiguous level required for a

violation. No-fault liability could also enable competitors to file baseless

lawsuits. The transaction costs involved in imposing sanctions on monopolies

could be significant. It also could lead to difficult remedy issues in cases

involving natural and patent monopolies. We believe, however, that the benefits

of no-fault are likely to outweigh the costs.

Textualism has been used in more and more Supreme Court analyses in recent

years. Moreover, there recently have been many calls, from very different parts of

the political spectrum, for imposing sanctions on extremely large monopolies

without inquiring into whether the firm engaged in anticompetitive conduct.

This issue has not, however, been analyzed seriously either from a legal or an

economic perspective in roughly a half century.

The purpose of this Article is not to resolve all of the relevant questions. Its goal

is to re-kindle debate about the legal and economic issues involved in imposing

sanctions on all monopolies and attempts to monopolize under the Sherman Act

and also, a fortiori, under Section 5 of the FTC Act. And to demonstrate that its

textualism-derived conclusions constitute reasonable policy options.

Recommended Citation

Robert H. Lande & Richard O. Zerbe Jr., The Sherman Act is a No-Fault Monopolization Statute: A Textualist Demonstration, 70 American University Law Review 497 (2020).
Available at: https://scholarworks.law.ubalt.edu/all_fac/1115