“ A lawyer who has not studied economics and sociology is very apt to become a public enemy.” Louis D. Brandeis

1. “ A lawyer who has not studied economics and sociology is very apt to become a public enemy.” Louis D. Brandeis Law 552 - Antitrust - Instructor: Dwight Drake

2. Contact Info – Office Hours • Email: djdrake@u.washington.edu • Phones: 425.281.1493, 425.222.5988, 480.272.6419, 206.616.6385 • Guaranteed Office Hours: - Tuesday 2:30 p.m to 4:00 p.m. - Wednesday 2:30 p.m. to 4:00 p.m. - By Appointment. Open Door - Whenever you can catch me! Course URL: http://faculty.washington.edu/djdrake/Antitrust/index.shtml Law 552 - Antitrust - Instructor: Dwight Drake

3. Course Objectives • Survey history, scope, impact of Antitrust. • Focus on Three Dimensions of Antitrust: - Neighborhood - National - World • Internalize Antitrust “flags”. • Enhance fundamental lawyer skills: - Analytical, creative thinking - Communication Skills Law 552 - Antitrust - Instructor: Dwight Drake

4. America’s Privately-Owned Businesses • 25 Million • 99 % of all employers • 75% of all new jobs • 53% of private workforce • 70% of all first jobs • 50% of all sales • 14 times more patents • Largest client base for professionals • Badly under-serviced by Bar Law 552 - Antitrust - Instructor: Dwight Drake

5. The Lawyer’s Role as an Advisor to Business Owners, Professionals and Entrepreneurs Flash Presentation (20 Min. approx) by Dwight Drake www.law.washington.edu/Career/Handouts/Flash Note: It takes a few minutes to load Law 552 - Antitrust - Instructor: Dwight Drake

6. What Course Is Not! • Hide the flags. • Hunt for the flags. • Memorize the flags. • Wave flags on exam – score! Law 552 - Antitrust - Instructor: Dwight Drake

7. Grade Criteria • Seven Case Memos (Each 6 Pts) - 42 pts (21%) • Key Team Case Presentation - 18 pts (9%) • Take Home Final - 140 pts (70%) Total 200 pts Note: Law School Curve Policy in effect. Law 552 - Antitrust - Instructor: Dwight Drake

8. Case Study Game • Number of Weekly Case Studies - 8 • Case Study Teams (5 persons) - 8 • Key Team for Week has until Friday 5 p.m. to make single email request for additional specific facts • New facts will be provided to Key Team via email within 24 hour of request • Key Team ( two players max) give oral “partner briefing” following Tuesday (12 Minutes Max). Plus, must provide written memo in Key Player format for entire class. • All others may submit optional written memo in Observer Format. Although optional, there is grade impact. Observer Memo individual, but team dialogue encouraged. Law 552 - Antitrust - Instructor: Dwight Drake

9. Different Fact Game Economic analysis determines: - What facts are relevant - What facts need to be ascertained - When ascertained, how facts impact or alter economic theory - How best to interpret facts The Challenge: Be good enough to get and apply the right facts! Law 552 - Antitrust - Instructor: Dwight Drake

10. Memo Presentation Format – Key Team • New facts – The stuff you found • Statement of the key issues • Summary of your conclusions and related rationale • Analysis • Short summation close Law 552 - Antitrust - Instructor: Dwight Drake

11. Memo Presentation Format -Observers • Desired additional facts • Statement of issues • Preliminary analysis of issues - predicated on discovery of additional facts Law 552 - Antitrust - Instructor: Dwight Drake

12. Writing Basics • Four “C”s – Concise, Credible, Confident, Convincing • Keep it tight, real tight. No needless words. • Use strong, precise verbs. • Avoid overstated adjectives. • 100% Intellectual honesty – no finessing. • Preferred max sentence length: 20 words. • Avoid multiple negatives. • No “shall”, “provisos”, “and/or” and other drafting jargon. • Write for the normal reader, not the intellectual. • End sentences emphatically. • Organize, then draft. • Edit, edit, edit. Law 552 - Antitrust - Instructor: Dwight Drake

13. Antitrust Lingo Nail the Glossary NOW! Pages 1-13 of Supplemental Materials Law 552 - Antitrust - Instructor: Dwight Drake

14. Overriding Goal of US Antitrust Preserve, protect and maintain public confidence in free market system by deterring and eliminating economic oppression. Law 552 - Antitrust - Instructor: Dwight Drake

15. Social Goals of U.S. Antitrust • Efficient allocation of goods and services • Prevent “deadweight loss” • Stop “wealth transfer” from market power • Promote innovation – “dynamic efficiency” • Two fading-fast goals: - Protect market entry for individual firms - Decentralize economic power Law 552 - Antitrust - Instructor: Dwight Drake

16. Antitrust Statutes • Broad statements, ala constitution • Courts have huge interpretive freedom • Courts used “charter of freedom” to gradually define what we call “Antitrust law” • An ever evolving process – at varying speeds and often in varying directions • Tangled with microeconomic analysis that cries out for commentators and experts • Cases heavily fact driven Law 552 - Antitrust - Instructor: Dwight Drake

17. Sherman Act Section 1 • Every “contract, combination, conspiracy” • In “restrain of trade or commerce” • Justice Hughes in 1933 – a “Charter of Freedom” ala constitution provisions • First two approaches – “Rule of Reason” and “Per Se” doctrines. • Middle ground approach since ’78 – “Truncated Rule of Reason” Law 552 - Antitrust - Instructor: Dwight Drake

18. Sherman Act Section 2 Three criminal offenses: - To monopolize - To attempt to monopolize - To combine or conspire to monopolize Not unlawful to just be a monopolist There must be offensive conduct Separate elements of each offense Law 552 - Antitrust - Instructor: Dwight Drake

19. Robinson-Patman §§ 2 -3 • Price discrimination unlawful • Must show “substantially lessen competition”, “tend to create monopoly” or “injure, destroy or prevent competition” • No monopolization showing required • Overlap with Sherman 2 where price discrimination in seller’s own market • Burden of proof shift • Exclusive dealing, tying Law 552 - Antitrust - Instructor: Dwight Drake

20. FTC Act Section 5 • Makes unlawful “unfair methods of competition” and “unfair and deceptive acts and practices” • Empowers FTC • Gives FTC broad power to wade in • Monopolization enforcement heavily influenced by Sherman 2 interpretations Law 552 - Antitrust - Instructor: Dwight Drake

21. FTAIA of 1982 • Bottom line: Foreigners not protected • Export commerce to foreign nations excluded. • Other foreign commerce included if “direct, substantial, reasonable effect” on: - Non foreign commerce - Import commerce - Injury to export business in US Law 552 - Antitrust - Instructor: Dwight Drake

22. H.R. 1086 – June 22, 2004 • Increased Sherman Act criminal penalties - $10 mill to $100 mill for corporations - $250k to $1 mill for individuals - Jail time from 3 to 10 years • Civil penalty drop for squealers – single damages only, no joint and several • Easier on Standard Dev. Orgs – Single damages only, rule of reason applied • Tougher Tunney Act; Approval of consent decrees – Notice and comment period Law 552 - Antitrust - Instructor: Dwight Drake

23. The Players • Congress • Feds, DOJ & FTC – up and down • The courts – off and running after commerce clause boom of mid-’30s • Academic commentators • State Attorney General Offices • Private antitrust bar Law 552 - Antitrust - Instructor: Dwight Drake

24. Fed Ups and Downs • Vigorous during Taft years (1909-1913) • Slow down in the roaring ‘20s. • Hit all time low in depression years 30-35 • FDR’s 1st term cartel experiments • FDR’s 2nd term started hard-nosed action • Enforcement peaked during ’60s • Commentators triggered slow down in ’70s • Reagan accelerated slow down in ’80s • Bush One cranked up a little • Clinton turned up more, but nothing like ’60s • Bush two more than expected. Law 552 - Antitrust - Instructor: Dwight Drake

25. Academic Commentators • Traditionalists – industrial organization economists • Chicago School of Antitrust • Post-Chicago Players Law 552 - Antitrust - Instructor: Dwight Drake

26. Industrial Org. Economists • Big impact players during ’50s and ‘60s • Structuralists – Number of buyers and sellers and entry barriers were ball game • Assumed market concentration was always anticompetitive • Efficiency no big deal – to tough to prove • Focus was on “Concentration trends” and “Concentration ratios” • Fed and plaintiffs had an easier job Law 552 - Antitrust - Instructor: Dwight Drake

27. Chicago School • Emerged in ’50s, kicked-in late ’70s • Pioneers from University of Chicago • Rejected “structure” – lead to bad decisions that hurt competition, efficiency • Focus on price theory, efficiency – assumptions of how firms and markets behave • Few prohibitions of ’50s and ’60s were objectionable to Chicago School • Profit maximizing plus efficiency equal “consumer welfare” • Music to ears of conservative political tide Law 552 - Antitrust - Instructor: Dwight Drake

28. Post Chicago Analysis • Emerged in mid ’80s • Focus – efficiency and wealth transfer • Unlike Chicago, look hard at game theory and strategic conduct of situation • Work inductively from broad inquiry of facts of particular case • New empirical tools for spotting strategic interactions • Biggest impact in “exclusion” cases and new merger guidelines Law 552 - Antitrust - Instructor: Dwight Drake

29. State AG Offices • May enforce Fed law on behalf of citizens • Treble damages plus attorneys fees • No claim for injury to economy • May sue to stop mergers • 19 states and DC joined Fed in Microsoft litigation Law 552 - Antitrust - Instructor: Dwight Drake

30. Private Antitrust Suits • Treble damages - deterrence and greed • Uniquely American • High watermark late ’70s – 20 to 1 • Today – 10 private to 1 government • Tougher now – fairness, efficiency values; standing, injury, causation issues • The debate continues Law 552 - Antitrust - Instructor: Dwight Drake

31. Enforcement Limitations • Interstate Commerce – Usually no big deal • Federal exemptions – labor, insurance, pro baseball, clear regulatory conflicts • State action to “regulate” and “supervise” • Act of city or private party pursuant to state policy to regulate • Noerr-Pennington doctrine: Lobbying for government action protected • Standing issues - huge Law 552 - Antitrust - Instructor: Dwight Drake

32. Economic Globalization • A process of integrating national economies through trade, investment, and capital, technology and labor flows • Pre-WWI Globalization: Steam engine, railroad, telegraph • War periods – complete retrenchment • Post WWII actions – IMF, World Bank, ITO, GATT, WTO Law 552 - Antitrust - Instructor: Dwight Drake

33. Global Reach of US Antitrust • “Stop at Shore” Doctrine • “Effects” Alcoa Doctrine • “Direct, substantial and reasonable foreseeable effect” • ’80s export deficit – Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”) Law 552 - Antitrust - Instructor: Dwight Drake

34. Globalization Driving Forces • Technology, innovation • Evolution of money markets • Failure of import-substitution countries • End of Berlin Wall and Soviet Union • Boom ’90s – Near universal buy-in • Proliferation of multinationals • Spread of democracy Law 552 - Antitrust - Instructor: Dwight Drake

35. Shared Fears • More risks, anxieties from new unknowns, more and different competitors • Spreading gaps between Have and Have-nots, Skilled and Unskilled • New roles for many governments – referee, trainer, safety net • Deadly opposing forces • Environment and oil • Preservation of free market competition Law 552 - Antitrust - Instructor: Dwight Drake

36. Major U.S. Globalization Challenges • Huge competition for skilled and unskilled • America’s huge oil advantage • America’s toughest antitrust laws • America’s dismal savings capacity • America’s neglected, brewing mega financial crisis • Terrorism - the “war”, the cost, the hate Law 552 - Antitrust - Instructor: Dwight Drake