June 25, 1984 – Supreme Court Decides Chevron v. Natural Resources Defense Council Establishing Principle of “Chevron Deference” for Administrative Actions

“The Chevron Deference” is a term derived from the landmark case decided on this day in history, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). In that case, the Supreme Court, in a majority opinion written by Justice John Paul Stevens, found that:

With regard to judicial review of an agency’s construction of the statute which it administers, if Congress has not directly spoken to the precise question at issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”

Kevin W. Saunders, writing for the Arizona Law Review in 1988, noted that “When the administration of a statute is entrusted to an administrative agency, the agency is naturally faced with questions as to what the statutory terms mean.” (“Agency Interpretations and Judicial Review: A Search for Limitations on the Controlling Effect Given Agency Statutory Constructions,” online here.)

In Chevron, Saunders pointed out, the Court did not grant the agency view mere deference, but instead granted controlling weight, even without finding an explicit delegation to the agency of the authority to construe the statute. If the delegation was implicit rather than explicit, Justice Stevens wrote, “a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency. (footnote omitted)”

Justice John Paul Stevens

In 1990, Cass R. Sunstein argued in the Columbia Law Review in “Law and Administration after Chevron” (online here) that the Chevron principle is “quite jarring to those who recall the suggestion, found in Marbury v. Madison and repeated time and again in American public law, that it is for judges, and no one else, to ‘say what the law is.’” But, he adds, “it is also strikingly reminiscent of the New Deal enthusiasm for agency autonomy and the New Deal belief in a sharp disjunction between the realm of law and the realm of administration.”

What Chevron did, Sunstein asserted, was to alter the distribution of national powers among courts, Congress, and administrative agencies.

As a discussion of the Chevron Deference on the Cornell law website points out, however, in subsequent Supreme Court cases, the scope of the deference has been narrowed:

. . . only the agency interpretations reached through formal proceedings with the force of law, such as adjudications, or notice-and-comment rulemaking, qualify for Chevron deference, while those contained in opinion letters, policy statements, agency manuals, or other formats that do not carry the force of law are not warranted a Chevron deference.  In such cases, the Court may give a slightly less deferential treatment to the agency’s interpretation, giving a persuasive value under the Court’s ‘Skidmore deference’ analysis.” 

The “Skidmore Deference,” as the website Ballotpedia explains, was developed in the opinion for the 2000 U.S. Supreme Court case Christensen v. Harris County (529 U.S. 576) and named for the 1944 U.S. Supreme Court decision in Skidmore v. Swift & Co. (323 U.S. 134).

Unlike Chevron deference, which requires a federal court to defer to an agency’s interpretation of an ambiguous statute if the interpretation is considered reasonable, Skidmore deference allows a federal court to determine the appropriate level of deference for each case based on the agency’s ability to support its position.

Controversy over the Chevron Deference can be seen in recent cases before the court involving Medicare. (They include Becerra v. Empire Health Foundation and American Hospital Association (AHA) v. Becerra.) As reported in Penn’s “Regulatory Review,” during oral arguments over one of the cases held in January, 2022, “the complexity of the Medicare system led U.S. Supreme Court Justice Stephen Breyer, who used to teach courses on regulation at Harvard Law School, to acknowledge that ‘the chances I understand it correctly are near zero.’” Justice Neil Gorsuch, on the other hand, said that Chevron allows agencies to supplant courts, which are supposed to interpret the laws. Critics also argue that Chevron encourages Congress to grant agencies broad discretionary authority that should remain with lawmakers.

Update: James Romoser, Editor of ScotusBlog, reported of the newly decided American Hospital Association v. Becerra:

In a narrow and unanimous opinion [written by Justice Brett Kavanaugh] on [June 15, 2022], the court did not overturn the Chevron doctrine. Instead, it just ignored it. And in doing so, the court may have portended the future of Chevron, which already has been narrowed considerably over the years. Rather than a single, decisive blow or a continued death by a thousand cuts, the court might simply snuff out Chevron with the silent treatment.”

ScotusBlog continues:

Notably, the opinion does not contain even a single citation to Chevron v. Natural Resources Defense Council, even though hundreds of pages of briefing and a large chunk of the oral argument focused on the continued vitality of the landmark 1984 case and the doctrine it created.”

For further analysis and information, see these two reports from the Congressional Research Service: “Chevron Deference: A Primer (May 18, 2023)” and “Chevron Deference in the Court of Appeals (June 8, 2023).”

May 21, 1901 – Connecticut Passes 1st Automobile Speeding Law in U.S

Colonial Boston and New York had speed limits on riding horses through the city streets, but on this day in history, Connecticut became the first state to pass “An Act Regulating the Speed of Motor Vehicles.”

According to the new law, cars were not to exceed 12 miles per hour within city limits and 15 miles per hour on rural or suburban roads, and were required to slow down whenever they approached an intersection.

1901 Kidder Steam Wagon, New Haven, CT, via earlyamericanautomobiles.com

A Connecticut history site notes that the law governing speed proved difficult to enforce, since there were no accurate speed-measuring devices in 1901. But the maximum penalty for breaking the law apparently served as a sufficient deterrent. Violators could be fined up to $200 — which translates to nearly $6,000 in today’s dollars.

You can read the text of the law here.

April 12, 1900 – Foraker Act Establishes Civilian Government on Island of Puerto Rico

The Foraker Act, Pub.L. 56–191, 31 Stat. 77, replaced the governing military regime in Puerto Rico with a limited form of civil governance. Puerto Rico had recently become a possession of the United States as a result of the Spanish–American War. The legislation was known as the “Foraker Act” after its sponsor, Ohio Senator Joseph B. Foraker, although its main author has been identified as Secretary of War Elihu Root.

The new government had a governor and an 11-member executive council appointed by the President of the United States, a House of Representatives with 35 elected members, a judicial system with a Supreme Court (also appointed), a United States District Court, and a non-voting Resident Commissioner in Congress. In addition, all federal laws of the United States were to be in effect on the island. Importantly, on February 21, 1902, as part of the Foraker Act, the Official Languages Act was instituted mandating that English and Spanish should be “used indiscriminately” in all official and public activities, with translation provided as necessary. (The wording of the Official Language Act was somewhat specious. For example, as Alicia Pousada pointed out, all District Court officials were Americans, while most defendants were Puerto Ricans. Puerto Rican lawyers who did not know English could apply for permission to find and use their own interpreters during proceedings.) The same 1902 law that ordered the use of both English and Spanish as co-official languages in the government of Puerto Rico also made English the obligatory language of instruction in Puerto Rican high schools.

In this 1898 cartoon, Uncle Sam offers a suit of “stars and stripes” to a young Puerto Rican. The question of Puerto Rico’s assimilation and status remained a constant source of political friction on the island and in Congress. Image via Library of Congress

Pulitzer-Prize winning dramatist Quiara Alegría Hudes observed in her memoir, My Broken Language:

Language differences threatened then new colonizers’ ability to rule. Four hundred years of Puerto Rican literature, history, laws, and business records were in Spanish, but neither the U.S. government nor American sugar corporations hungry to buy up land spoke it. A few years into the acquisition, the Foraker Act foisted English, virtually unknown on the island, onto every level of the culture. Overnight, government departments were mandated to use English coequally with Spanish. . . . School days now began with the United States pledge of allegiance and national anthem. Students learned both phonetically, oblivious to their meaning. Teachers and students were forbidden to speak Spanish in schools. . . . English enforcement (for the ease of stateside governors and sugar corporations) was justified as moral imperative. New leaders touted their will to bestow the blessings of enlightened civilization on the island’s masses. English was not simply a language, but a betterment project.”

The Foraker Act was superseded in 1917 by the Jones–Shafroth Act (Pub.L. 64–368, 39 Stat. 951, enacted March 2, 1917) This act granted U.S. citizenship to anyone born in Puerto Rico on or after April 11, 1899. It also created the Senate of Puerto Rico, established a bill of rights, and authorized the election of a Resident Commissioner (previously appointed by the President) to a four-year term. The act also exempted Puerto Rican bonds from federal, state, and local taxes regardless of where the bondholder resided. [Coincidentally or not, two months later, when Congress passed the Selective Service Act, conscription was extended to the island. About 20,000 Puerto Ricans were drafted during World War I.]. Language specifications were unchanged.

In 1991 the government of Puerto Rico, under the administration of the Popular Democratic Party’s Rafael Hernández Colón, made Spanish its sole official language through a law commonly called the “Spanish-only Law.” On January 4, 1993, the 12th Legislative Assembly, with the support of the newly elected New Progressive Party (PNP) government of Pedro Rosselló González passed Senate Bill 1, establishing both Spanish and English as official languages of the government of Puerto Rico. (As it happened, in spite of a century of US presence in Puerto Rico, according to the 1990 census, 98.2% of all Puerto Ricans spoke Spanish, and over 50% did not speak English at all.)

2019 cartoon on America’s continued colonization of Puerto Rico

As James Baldwin wrote for the New York Times in 1979 on the uses of language as a political tool:

It is the most vivid and crucial key to identify: It reveals the private identity, and connects one with, or divorces one from, the larger, public, or communal identity. Language, incontestably, reveals the speaker. Language, also, far more dubiously, is meant to define the other. . . . People evolve a language in order to describe and thus control their circumstances, or in order not to be submerged by a reality that they cannot articulate. (And, if they cannot articulate it, they are submerged.) It goes without saying . . . that language is also a political instrument, means, and proof of power.”

You can read more about the history of language and identity in Puerto Rico in this Library of Congress research guide.

March 31, 1981 – First Patent Issued for Genetically Engineered Life Form; Upheld by SCOTUS

Ananda Mohan Chakrabarty was born in India in 1938 and moved to the U.S. with his wife after completing his Ph.D. in biochemistry. (His wife also had a Ph.D. in biochemistry.) Initially the couple worked at the University of Illinois Urbana-Champaign (UIC), and it was there that Chakrabarty developed an interest in the bacteria pseudomonas. After six years, the couple moved to upstate New York where Chakrabarty took a job at General Electric.

During the course of Dr. Chakrabarty’s research at GE, he and an associate genetically engineered a new, stable type of pseudomonas capable of breaking down crude oil. Dr. Chakrabarty sought a patent on this process pursuant to Title 35 U.S.C. Section 101, which provided patents for people who invented or discovered “any” new and useful “manufacture” or “composition of matter.”

The request was rejected by a patent examiner and affirmed by the Patent Office Board of Appeals, stating that living things were not patentable under Section 101. This decision was reversed by the Court of Customs and Patent Appeals, which concluded that the fact that micro-organisms were alive was without legal significance for purposes of the patent law.

Sidney A. Diamond, Commissioner of Patents and Trademarks, appealed to the Supreme Court. The Supreme Court case, Diamond v. Chakrabarty, 447 U.S. 303 (1980), was argued on March 17, 1980 and decided on June 16, 1980.

The patent was granted by the USPTO on March 31, 1981, this day in history. The court held that forms of life can be patented if they are the outcome of “human ingenuity and research” and not “nature’s handiwork.”

Chief Justice Warren E. Burger, delivering the opinion of the Court in a five-to-four decision, added:

Nor does the fact that genetic technology was unforeseen when Congress enacted § 101 require the conclusion that micro-organisms cannot qualify as patentable subject matter until Congress expressly authorizes such protection. The unambiguous language of § 101 fairly embraces respondent’s invention. Arguments against patentability under § 101, based on potential hazards that may be generated by genetic research, should be addressed to the Congress and the Executive, not to the Judiciary.”

The ruling was of immense importance for the growth of biotechnology companies, clearing the way for patents to be issued also on genetically-engineered mice and other animals.

Ananda Mohan Chakrabarty in 2009

Upon his death on July 10, 2020, the UIC posted an obituary noting:

Chakrabarty’s fame as the name on the first patent for a recombinant microbe led to a second career as an expert and lecturer on legal issues of patenting and intellectual property rights of biological significance. He sat on many American and international committees and taught in workshops for American and international judges on these matters. For his achievements in genetic engineering technology, he was awarded the prestigious civilian Padma Shri by the government of India in 2007.”

March 21, 1804 – Napoleonic Code, or “the Civil Code of the French” Established

The Napoleonic Code, officially called the Civil Code of the French, was established in 1804 and is still in force, although it has been frequently amended.

The Ancien Régime was the political and social system of the Kingdom of France beginning in the Late Middle Ages. It lasted until the French Revolution of 1789, which led to the abolition of hereditary monarchy and of the feudal system of the French nobility.

The Napoleon Series website, dedicated to the promotion of scholarly exploration of the Napoleonic Age, points out:

Under the ancien regime more than 400 codes of laws were in place in various parts of France, with common law predominating in the north and Roman law in the south. The Revolution overturned many of these laws. In addition, the revolutionary governments had enacted more than 14,000 pieces of legislation. Five attempts were made to codify the new laws of France . . . “

Napoleon succeeded in forming an expert commission to draft a new civil code to consolidate all the laws in place and devise new ones when needed.

The commission drawing up the code consisted of two jurists specializing in common/customary oral law, and two jurists specializing in written law. The resulting body of law comprised 36 laws and 2,281 articles, arranged in 3 parts dedicated to persons, property, and means of acquiring property.

As for Napoleon’s own contributions to the code, an article by Charles Sumner Lobingier from the December 1918 Harvard Law Review is illuminating, and can be accessed online here.

As the Daily History site notes:

The Code played a significant role mainly in the formation of the 19th century civil codes in most countries of continental Europe and Latin America. Today many European legal systems are established upon its basis and strong influence. The Civil Code has turned into a truly modern instrument successfully applied for over 200 years despite the vast social transformations in the French society.”

Later Napoleon also promulgated four other codes: the Code of Civil Procedure (1807), the Commercial Code (1808), the Code of Criminal Procedure (1811), and the Penal Code (1811).

You can see a copy of the French Civil Code online in either English or French here.

December 15, 1967 – The US Age Discrimination Employment Act Becomes Public Law

On this day in history, the Age Discrimination in Employment Act of 1967 (ADEA) (Pub. L. 90-202) was signed into law by President Lyndon B. Johnson. The ADEA prevents age discrimination and provides equal employment opportunity under conditions that were not explicitly covered in Title VII of the Civil Rights Act of 1964. It also applies to the standards for pensions and benefits provided by employers, and requires that information concerning the needs of older workers be provided to the general public.

Specifically, the purpose of the legislation was to prohibit employment discrimination against persons over the age of 40, and “to promote employment of older persons based on their ability rather than age; to prohibit arbitrary age discrimination in employment; [and] to help employers and workers find ways of meeting problems arising from the impact of age on employment.”

LBJ signing the Age Discrimination Employment Act in 1967

An AARP attorney reported:

Prior to passage of the Age Discrimination in Employment Act (ADEA or the Act), approximately half of all private-sector job openings explicitly barred applicants over age fifty-five, and one quarter barred those over forty-five. ‘Help Wanted’ ads could state that only workers under thirty-five need apply, and employers had unbridled authority to retire older workers based solely on age. Not surprisingly, twenty-seven percent of unemployed workers, and forty percent of the long-term unemployed, were forty-five and older.”

The ADEA applies to employers who have “twenty or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year.” In this way it also differs from the Civil Rights Act which applies in situations of 15 or more employees. Both acts do, however, only apply to employers in industries affecting interstate commerce. The 20 employees can include overseas employees.

After it was enacted, the ADEA went through a series of amendments to strengthen and expand its coverage of older employees. Originally, the ADEA only covered employees between the ages of 40 and 65. Eventually the upper age limit was extended to age 70, and then eliminated altogether. In 1978, enforcement authority of the ADEA was transferred from the Department of Labor to the Equal Employment Opportunity Commission (EEOC). The text of the act as amended is here.

A number of cases have been brought to the Supreme Court to test and define the limits of the act, including Meacham v. Knolls Atomic Power Lab, 2008, Gomez-Perez v. Potter, 2008, Gross v. FBL Financial Services, Inc., 2009, and most recently Babb v. Wilkie, 2020. Babb v. Wilkie changed the standard of proof in age discrimination cases filed against federal employers, holding that a federal employee or applicant may establish that an adverse personnel action took place by showing that their age was simply a “motivating factor” in the federal employer’s decision.

December 1, 1959 – Antarctic Treaty Signed

On Dec. 1, 1959, this day in history, representatives of 12 countries, including the United States and the Soviet Union, signed a treaty in Washington designating Antarctica as a scientific preserve, free from military activity.

The signatories included the seven nations to have claimed control over a part of Antarctica: Argentina, Australia, Britain, Chile, France, Norway and New Zealand. The treaty did not affect these claims though it did ban all future claims.

The Antarctic Treaty remains the basis for international relations in Antarctica. It has been supplemented by many other agreements concerning issues like flora and fauna protection and waste dumping. The treaties, collectively known as the Antarctic Treaty System, currently have 48 signatory nations, 28 of which conduct scientific research in the area.

Meanwhile, as the Washington Post reported in September, 2020:

Massive Antarctic glaciers are falling apart, which could spell deep trouble for global sea-level rise. Meanwhile, the Trump administration has added another climate denier to lead an agency that is supposed to follow the science.”

The warning on the Antarctic glaciers came a week earlier in a paper by an international group of scientists, including a researcher at the NASA Goddard Space Flight Center. Satellite images show that glaciers are losing integrity along their edges. Over the past decade, crevasses and fractures have appeared in the ‘shear zones’ that restrain their movement toward the ocean. The glaciers are moving more rapidly into the sea.”

For more information, see the article, “Greenland, Antarctica Melting Six Times Faster Than in the 1990s” on the NASA website.

An aerial view of the icebergs near Kulusuk Island, off the southeastern coastline of Greenland, a region that is exhibiting an accelerated rate of ice loss. Credit: NASA Goddard Space Flight Center

November 12, 1933 – First Legal Sunday Football Games in Pennsylvania

In 1682 Pennsylvania enacted its first “blue law” relating to worldly business on Sundays, the Christian Sabbath. The law prescribed criminal sanctions for “Whoever does or performs any worldly employment or business whatsoever on the Lord’s day, commonly called Sunday, works of necessity and charity only exempted, or uses or practices any game, hunting, shooting, sport or diversion whatsoever on the same day not authorized by law.”

(But not on Sunday)

The ban carried over when Pennsylvania became a state in 1787, and was re-enacted by the Pennsylvania Legislature almost verbatim in 1939.

But as the AP reports:

Pennsylvania’s prohibition on Sunday sports finally bent, but didn’t break, with the public’s demand to be able to see professional teams such as the Philadelphia Athletics.

In 1933, lawmakers enacted compromise legislation. Baseball and football could be played on Sunday between 2 and 6 p.m., if local voters approved a referendum. Most of the larger cities and towns approved.”

In fact, voters in Pittsburgh and Philadelphia overwhelmingly endorsed Sunday baseball and football, by 7 to 1 margins. (See, J. Thomas Jable, “Sunday Sport Comes to Pennsylvania,” online here.)

On November 12, 1933 – this day in history, and the first Sunday after the sports exception was signed into law, the Philadelphia Eagles and Pittsburgh Steelers played Pennsylvania’s first Sunday football games. The Eagles tied the Chicago Bears in front of 20,000 fans in Philadelphia, and the Steelers (then known as the Pittsburgh Pirates) lost to the Brooklyn Dodgers in front of 12,000 fans in Pittsburgh. [The Brooklyn Dodgers were an American football team that played in the National Football League from 1930 to 1943, and in 1944 as the Brooklyn Tigers.]

It wasn’t until 1978 that the State Supreme Court ruled that the blue laws were unconstitutional, because the legislation caused “different treatment be accorded to persons placed by a statute into different classes on the basis of criteria wholly unrelated to the objective of the particular statute.” Justice Louis L. Manderino, writing for the court in Kroger Co. v. O’Hara Tp. (481 Pa. 101), pointed out:

The Sunday Trading Laws as a whole must fail when examined in this light. There is no fair and substantial relationship between the objective of providing a uniform day of rest and recreation and in permitting the sale of novelties but not Bibles and bathing suits; in permitting the sale of fresh meat patties but not frozen meat patties; or in permitting the installation of an electric meter but not a T.V. antenna.”

The Court did say, however, that the Legislature could re-enact certain Sunday prohibitions if they were uniformly enforced.

October 22, 2003 – Dog Fouling (Scotland) Act 2003 Comes Into Force

In January, 2021 the UK Guardian reported that there were an estimated 9 million dogs in the UK each producing about 340g of waste a day – or slightly more than 3,000 tonnes between them. The paper observed: “The issue is of more than merely scatological interest.” Dog poop, they note, is full of viruses and bacteria, and moreover, arouses the ire of those who unfortunately step on it while out and about.

In Scotland, approximately 24% of households have dogs. A Highland Council Press release stated:

Almost 7 in 10 people rated dog mess as the item on our streets, parks and beaches that bothered them most; that is the finding of recent research into public attitudes to littering carried out by Keep Scotland Beautiful. . . “

The UK as a whole has taken a number of legal measures to alleviate the situation.

The Dogs (Fouling of Land) Act 1996 was an act of the UK Parliament which created a criminal offense if a dog defecated at any time on designated land and the person in charge of the dog at that time failed to remove the feces from the land.

Poster created by Keep Scotland Beautiful

It was repealed by Clean Neighbourhoods and Environment Act 2005 section 65, and replaced by similar legislation in the same act. But the act applied only in England and Wales. The situation was not regulated in Scotland until the passing of the Dog Fouling (Scotland) Act 2003.

The Dog Fouling (Scotland) Act 2003 repealed the dog fouling provisions of the Civic Government (Scotland) Act 1982, changing the emphasis of the offense from allowing a dog to foul in any public place to failing to clean up after it. It also introduced additional enforcement provisions to allow officers of local authorities and the police the option of issuing fixed penalty notices to those persons they believe have committed an offense. The full text of the act is here.

In 2016 the fixed penalty for leaving dog fouling was increased to £80, and can in some cases lead to conviction and a fine of up to £500.

Sign in Brora, Scotland

Review of “Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age” by Amy Klobuchar with John D. Bessler, Contributor

Senator Amy Klobuchar and I graduated from the same law school, the University of Chicago. My favorite course in law school was called “Competition and Monopoly,” which dealt with American antitrust law and the economics behind that body of law. It was taught jointly by three distinguished professors: Edward Levi, who later became Attorney General of the United States in Gerald Ford’s presidency; Phil Neal, who later became dean of the law school; and Aaron Director, an eminent economist who was one of the principal founders of the “Chicago School” of economics.

I mention this course because the legal analysis in the first third of Amy Klobuchar’s Antitrust could have been written from my class notes. But her book is not pure legal analysis (for which there is a relatively limited market); indeed, she augments her narrative with important political and (somewhat) relevant personal family history. A strength of the book is that it relates the early history of federal antitrust law (the late 19th century) when “robber barons” like John D. Rockefeller and James J. Hill are thought to have dominated the American economy through the use of “trusts,” i.e., agreements that eliminated competition between the largest producers either through merger or less formal agreements to refrain from competing.

The early thrust of antitrust law, led by Presidents Teddy Roosevelt and William Howard Taft, was to stimulate competition among producers by dismantling uncompetitive agreements among large companies. Indeed, the government was able to break up monopolies in large industries like oil, railroads, steel, sugar, and tobacco, among others. Klobuchar’s legal analysis and history about that era are accurate — at least they agree with my understanding and with what was taught at the University of Chicago Law School.

The Great Depression changed the way many scholars, judges, and economic regulators viewed antitrust law. Things were so bad that even monopolists and price fixers had a hard time making money. In an effort to forestall some firms from going out of business, FDR’s New Dealers under the National Recovery Act actually encouraged price fixing to prevent prices from plummeting. With the passage of the Robinson-Patman Act in 1936, emphasis of antitrust enforcement had switched from preventing monopolistic industry structure to protecting “small businesses” from ostensibly uncompetitive practices of larger firms.

This change of emphasis led to some very confused thinking. Should competitors compete hard, but not too hard? If low prices are obviously good for consumers, how do we determine whether a price is “too low”? How can we protect vigorous competition and still protect weak competitors? These kinds of considerations led to some very confusing court decisions.

A group of economists and legal scholars, most of whom taught at or were associated with the University of Chicago, often referred to as the “Chicago School,” led the way out of the intellectual morass that had become antitrust law. They argued that consumer welfare would be maximized through economic efficiency. They applied rigorous economic analysis to various business practices to determine whether those practices had the effect of constraining production, which is the principle method by which monopolists reap “monopoly profits.” They have been severely criticized, however, for ignoring issues of distributive justice. For example, they had little to say about income inequality. Nonetheless, they should be credited for demonstrating the salutary effects of vertical integration and for showing that some forms of exclusive dealing and price discrimination benefit both producers and consumers by giving incentives for increasing production.

Monopolies and distributive justice

Two of the leading legal scholars associated with the Chicago School were Richard Posner and Robert Bork. Posner, a very influential federal appellate judge and author, was educated at Harvard, but taught at Chicago. He became famous by applying economic analysis not only to antitrust, but many other fields of law. Bork, another influential federal appellate judge, was educated at Chicago (both undergraduate and law school) and taught at the Yale Law School before ascending to the bench.

In Amy Klobuchar’s telling, Bork is a bete noire of antitrust law. His 1978 book, The Antitrust Paradox, subtitled A Policy at War with Itself, pointed out how confusion about the ends of antitrust had produced a mishmash of case law by encouraging a costly form of protection for inefficient and uncompetitive small businesses. Although the book is very well written, has been cited more than 100 times in federal court cases, and is often thought of as ground breaking, it contains very little that was not already covered in the Competition and Monopoly course I took in 1967. I suspect that Bork learned a lot of his economic analysis of law from the same course a few years before me.

Bork’s book, although not particularly original, did eloquently and succinctly summarize a large corpus of law review articles (many by Posner) and less trenchant books that had preceded it. Whether Bork or his predecessors were the cause, antitrust law changed significantly in the 1980s and thereafter. For example, the Robinson-Patman Act was interpreted very narrowly by the courts, and the federal regulators (the Justice Department and the Federal Trade Commission) pretty much ignored it. Moreover, many mergers and acquisitions that would have been challenged even a few years before were allowed to take place.

via Yale School of Management

Despite her own academic background, Senator Klobuchar rejects the basic outlook and many of the conclusions of the Chicago School. For example, she seems more concerned with the basic fairness of specific business practices than with fundamental market structure. She maintains that the Chicago School’s conservative orthodoxy is unequal to the very different challenges of the 21st century economy. In fact, she specifically contrasts the Chicago School with the “Harvard” approach, and sides with the Crimson over the Maroon.

One of her principal recommendations is to amend Section Seven of the Clayton Act to make it easier for the government to forestall uncompetitive mergers or acquisitions. She would ease the standard of proof of harm to competition and shift the burden of proof from the government to the parties to the proposed transaction. Here she would find herself in agreement with the Chicago School if the proposed merger were “horizontal” (i.e., among direct competitors), but opposed to the Chicago School if the proposed transaction were “vertical” (i.e., among suppliers and customers) or “conglomerate” (i.e., among unrelated parties).

She also spends significant ink on her desire to protect competition in the beer market. As she explained in a news release from her Senate office:

“Because major wholesalers typically carry either Anheuser-Busch InBev (ABI) or SABMiller products, ABI might be able to curb the growth of craft brewers by limiting access to wholesalers. ABI has acquired seven craft brewers since 2014 and four since merger negotiations with SABMiller began. Further, ABI’s incentive program seems to penalize wholesalers for carrying a craft brewer that has achieved more than a modest level of success.”

My own experience as general counsel for a consumer products company showed me that what Senator Klobuchar avers indeed takes place. Wholesalers and retailers can be “persuaded” by large companies through profits and incentive programs not only to limit access to competing products, but even to affect shelf placement if they continue to carry the competitor’s products, which of course affects sales.

In Senator Klobuchar’s view, reinvigorated enforcement of the antitrust laws could accomplish a great many things, some or which go beyond the usually understood purpose of those laws. For example, she asserts that antitrust enforcement helps to raise wages. That’s possible, but certainly not inevitable. Increasing competition among firms incentivizes them, ceteris paribus, to minimize costs — and wages are a cost of doing business. Moreover, near-monopolists like Google of today and General Motors of the 1950s are known to pay very high wages. On the other hand, she correctly asserts that breaking up today’s tech giants would reduce their inordinate influence on opinions and politics, whether or not it had any effect in their respective industries.

In general, I agree with much of what Senator Klobuchar says and recommends, e.g., for antitrust nerds, the Illinois Brick case definitely should be overturned. [See Illinois Brick Company et al., v. State of Illinois et al., 431 U.S. 720, 1977.] However I have to express my disagreement on three issues of significant importance.

First, she recommends increased enforcement against “predatory pricing.” Despite the Herculean efforts of Professor Phillip Areeda of the Harvard Law School to define it, the concept of predatory, as opposed to just plain competitive, pricing remains elusive in practice.

Via Market Business News

I think the law’s current skepticism toward the concept is justified. Indeed, the classic case of alleged predatory pricing, Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911), has undergone significant reevaluation beginning with John S. McGee’s article, “Predatory Price Cutting: The Standard Oil (N. J.) Case,” in the Journal of Law and Economics. It turns out that Rockefeller built the Standard Oil monopoly not by driving his competitors out of business, but rather by the more benign method of eliminating competition by purchasing those competitors. The case was rightly decided because it found a series of anti-competitive contracts (the acquisition of competitors), not because it found that Standard Oil’s pricing practices were illegal.

Second, the Senator casts a wary eye on vertical mergers, i.e., mergers between producers and their customers or suppliers. But the Chicago School pointed out that vertical mergers do not increase either party’s share of its own market. Rather, such mergers do reduce the transaction costs between the parties, making both of them more efficient.

Third, Senator Klobuchar asserts that monopsonies (single buyers) or oligopsonies (very few buyers) are as harmful as monopolies (single sellers) or oligopolies (very few buyers). Monopolists harm consumers and the economy as a whole by restricting production in order to charge non-competitive prices. Monopsonies, on the other hand, have no such power, unless they are also monopolies. Monopsonies actually tend to increase production by exerting their buying power to obtain competitive (low) prices from their suppliers.

I commend the Senator for her thorough research and her heart-felt efforts to improve the functioning and fairness of the economy. Her book provides a valuable lesson in revealing how relaxed (or should I say, lax) enforcement of the antitrust laws has allowed significant concentration in some industries such as telecommunications. E.g., T-Mobile and Sprint were allowed to merge. And consumers are well-acquainted with the deleterious effects of cable mergers.

Her book is a worthwhile effort to acquaint the general reading public with some important issues of public policy. For a more rigorous academic treatment and a more traditional perspective on the same issues, see Richard Posner’s Antitrust Law, Second Edition (2001), the University of Chicago Press.

Antitrust by Amy Klobuchar is published by Knopf Publishing Group, 2021