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Stevens and antitrust—A Commentary by George L. Priest and William Ranney Levi ’10

The following commentary was published in The National Law Journal on May 24, 2010.

Stevens and antitrust
By George L. Priest and William Ranney Levi ’10

Most articles describing retiring Justice John Paul Stevens' career on the U.S. Supreme Court have focused on his progressive shift over time to the Court's liberal wing. It has not been noted that Stevens deserves principal credit for initiating the vast change in the Court's understanding of antitrust law since the late 1970s, as the Court came to embrace the economic antitrust analysis of the Chicago School, perhaps his most lasting contribution.

Prior to his appointment to the bench, Stevens was an antitrust lawyer in Chicago; he was also a longtime friend of Edward Levi, an antitrust professor at the University of Chicago Law School, later dean and president of the university. Levi and Stevens were schoolmates from elementary school through college.

After President Nixon resigned in disgrace over Watergate, his successor, Gerald Ford, appointed Levi attorney general in order to restore integrity to the highest levels of the Justice Department. In his short tenure, Ford had one Supreme Court vacancy to fill. He put Levi in charge of the search; Levi recommended Stevens. President Ford has stated that his most lasting achievement was the appointment of Stevens to the Supreme Court.

Earlier, as a professor, Levi had taught a now-legendary antitrust course with the economist Aaron Director. Director was also the head of an antitrust research program at Chicago that supported the work of scholars such as Robert Bork, John McGee and Ward Bowman, among others, who were highly critical of then-prevailing antitrust doctrine on economic grounds, showing repeatedly that Supreme Court rulings almost uniformly harmed competition, rather than promoted it. Richard Posner, the prominent scholar and 7th Circuit judge, continued this work at Chicago.

In a little-known tribute to Levi (then deceased) on the 30th anniversary of his appointment as attorney general, Stevens told a story about Levi — the significance of which has never been fully recognized. Stevens stated that one of Levi's greatest achievements was hiring Aaron Director to the Chicago Law faculty. Because of Levi's increasing administrative obligations, he had asked Stevens to teach the course with Director in two separate years. Stevens told how much he learned from his teaching with Director. Unknown to all then, this was the start of the Supreme Court's transformation of antitrust law.

Ford appointed Stevens to the Court in 1976. Shortly thereafter, the Court began to take Chicago School ideas seriously, ultimately completely overturning antitrust doctrine in a movement that continues today.

It is difficult to overstate Stevens' contribution. At the time of his appointment, the development of antitrust doctrine for four decades had consisted of the continuous expansion of per se rules prohibiting a wide range of practices: price-fixing and territorial restrictions; group boycotts; tying arrangements; predatory pricing; and resale price maintenance, among others.

Director and his group, to the contrary, had shown that most of these prohibitions misunderstood that companies in vertical arrangements were in competition with other companies and had adopted the various practices to enhance, not suppress, competition. These views, however, were alien to the Supreme Court and the antitrust academy. Although there were some exceptions, most antitrust scholars and virtually the entirety of the antitrust bar viewed the Chicago critique as nearly the lunatic fringe.

Stevens, through his persuasive powers and intellectual honesty, succeeded in convincing the Court of the importance of the Chicago School ideas even as the antitrust bar was berating them.

In 1977, the Court in Brunswick v. Pueblo Bowl-O-Mat vastly restricted private actions by requiring competitors to show harm to competition, not simply harm to themselves. During the same term, in Continental TV v. GTE-Sylvania, the Court adopted a new analysis of vertical territorial restrictions, overruling U.S. v. Schwinn's per se prohibition and supporting the conclusion with Chicago School scholarship. In 1978, the movement continued with Stevens playing publicly a more central role. He authored the Court's National Society of Professional Engineers v. U.S. opinion, rejecting application of the per se prohibition of price-fixing in place of the more flexible rule of reason. Stevens' opinion, essentially, adopts the analysis of antitrust law that Bork was to publish for a more popular audience that same year in The Antitrust Paradox.

During roughly a decade, Stevens became the voice of the Court on antitrust issues. In 1984, he wrote its opinion in NCAA v. Board of Regents, opening up television competition for college football. That same term, he authored the Court's opinion in Jefferson Parish Hospital v. Hyde, importantly shifting the analysis of tying arrangements away from per se prohibition toward the rule of reason. In 1985, he wrote the opinion in Northwest Wholesale Stationers v. Pacific Stationery, rejecting the per se prohibition of group boycotts, and also Aspen Skiing v. Aspen Highlands Skiing on monopolization, again extensively citing Bork, clarifying the inscrutable U.S. v. Alcoa opinion.

In subsequent years, Stevens more often dissented in antitrust cases, often insisting on more careful analysis of underlying practices, sometimes disagreeing (including with the Chicago School) on the prospects of predatory pricing and the competitive harms from resale price maintenance. In 1986, he dissented in Matsushita v. Zenith Radio and in 1993 in Brooke Group v. Brown & Williamson, both involving claims of predatory pricing. In 1988, he dissented in Business Electronics v. Sharp Electronics and, more recently, in 2007, he joined Justice Stephen Breyer's dissent in Leegin v. PSKS, continuing to believe that resale price maintenance may derive from a dealer cartel.

But by this time, the full analytical power of Director's Chicago School analysis had been unleashed — unleashed by Stevens himself — and commanded broad Court majorities even over his opposition.

Nothing is known of Elena Kagan's opinions about antitrust, but they are unlikely to differ substantially from Stevens'. Even if they do, the basics of Chicago School economic analysis are now entrenched deeply in the law. That is thanks to the enduring accomplishment of John Paul Stevens.

George L. Priest teaches antitrust at Yale Law School, where William Ranney Levi is a third-year student. Levi is the grandson of Edward Levi.