Prominent antitrust scholar presents inaugural Heath Lecture
UF Law welcomed Professor Herbert Hovenkamp, Ben and Dorothy Willie Chair at the University of Iowa College of Law, to campus on Friday to speak in the Inaugural Bayard Wickliffe Heath Memorial Lecture Series on U.S. Antitrust Policy.
Dr. James McClave, president and founder of Info Tech, gave a brief introduction about Heath, whom he worked with since 1990. McClave described Heath as innovative, passionate, irreplaceable and determined.
“When Wick got his teeth into an antitrust case, the bad guys had no chance,” McClave said. “There were no eight hour days for Wick, whether he was working for a state agency or for Info Tech. He was an around-the-clock kind of a guy once he got into a case.”
After the introduction, McClave turned the floor over to Hovenkamp, who spoke about the Federal Trade Commission and the Sherman Act. Hovenkamp gave a brief introduction to the FTC as background for his lecture. The FTC was created in 1914 to identify and condemn unfair methods of competition. The FTC consists of five commissioners and no more than three can be members of the same political party.
“Congress chose not to create an elaborate code of behavior but rather to condemn ‘unfair methods of competition’ and give these commissioners a very broad amount of discretion to determine what would constitute an unfair method of competition,” said Hovenkamp, 2008 Department of Justice Antitrust Division John Sherman Award recipient and principal author of Areeda & Hovenkamp, Antitrust Law, the leading treatise and the field.
Over the years, the FTC’s powers have been expanded to be broader than the Sherman Antitrust Act, which was enacted in 1890 to regulate competition and monopolies. This approach is historically justified and approved by the Supreme Court, but there are positives and negatives to the expansive powers, Hovenkamp argued.
Hovenkamp used the Brown Shoe Case to demonstrate when the FTC overstepped its boundaries in his opinion. Brown Shoe had a quasi-exclusive dealing contract which was nothing more than an efficient method of distribution, Hovenkamp said. But the FTC enjoined the practice despite the fact that the practice was not at all competitively harmless but it also would have benefitted consumers.
“Reaching beyond what the Sherman Act reaches is likely to condemn practices that are not economically harmful and might even benefit consumers,” Hovenkamp said. “Historical experience provides considerable warrant for the proposition that when the FTC reaches beyond the Sherman Act, it is treading into dangerous territory where it’s more likely to do harm than good.”
The arguments for the FTC having expansive power include an incipiency concern, which would stop potentially harmful practices before they get too serious. There is no incipiency clause in the Sherman Act. Another benefit to the FTC having broad authority is that the FTC uses expert judges over regular circuit judges and its evidentiary rules are more flexible. Further, if the FTC uses its own laws instead of antitrust laws, their injunctions cannot be used as prima facie evidence in a civil case.
For these reasons, Hovenkamp sees the need for the FTC to go beyond the Sherman Act, but it must be careful when it exercises this authority, he said.
“I believe there is serious merit to many of these propositions. The FTC should expand its reach to bring in some conduct that does not fall within the coverage of the Sherman Act and Clayton Act as currently interpreted by the Supreme Court,” he said. “In doing so, however, the FTC needs to be mindful of one thing that has often alluded it. Practices that it condemns must really be anti-competitive in a meaningful sense. That is, there must be some basis for thinking that the practice either does or will lead to reduced output and higher consumer prices or lower quality in the effective market.”
The Heath Memorial Lecture Series was made possible by a gift from Inez Heath, Ph.D., widow of Bayard “Wick” Heath. Before his death in 2008, Heath was the senior competition consultant with Info Tech, a Gainesville firm specializing in statistical and econometric consulting, expert witness testimony and antitrust law.