Will a Supreme Court Without Breyer Mean No Justice for Antitrust?
By Ankur Kapoor
Although the betting is underway for who will succeed Justice Stephen Breyer on the U.S. Supreme Court, all we know now is that Justice Breyer will retire as soon as the Court recesses for the summer. Given Justice Breyer’s leading role on the Court in antitrust cases, we thought we’d take a look back at Justice Breyer’s antitrust jurisprudence, at what the Supreme Court might be losing, and at what that could mean for how the Court fashions antitrust law going forward.
During his confirmation process, then-Judge Breyer was criticized for being extremely pro-business and, well, anti-antitrust. Antitrust experts testified in confirmation hearings that Judge Breyer’s belief in neoclassical price theory made him permissive of anticompetitive conduct by dominant firms. Statement of Lloyd Constantine, Senate Hearing 103-715, 527-534 (1994). Data supported that criticism: In his nearly 14 years as a judge on the First Circuit Court of Appeals, Judge Breyer ruled in an antitrust plaintiff’s favor only once, just a few months before his confirmation hearings. Caribe BMW, Inc. v. BMW AG, 19 F.3d 745 (1st Cir. 1994).
Justice Breyer’s antitrust legacy would turn out quite differently, although it might not have appeared so in the beginning. His first four antitrust opinions for the Supreme Court were in the defendants’ favor: Brown v. Pro Football, Inc., 518 U.S. 231 (1996); NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998); F. Hoffman-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004); and Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264 (2007). But the issues were limited and non-controversial.
Brown reaffirmed the antitrust exemption for collective bargaining by labor and employers, on the basis that regulation of labor was best left to the National Labor Relations Board (NLRB). Billing similarly exempted from antitrust law conduct that was pervasively regulated by the Securities & Exchange Commission (SEC). Empagran excluded from the Sherman Act conduct purely outside the U.S. and with purely foreign effects. And NYNEX held that a buyer’s and its agent’s decision to deal with one supplier instead of another was not a per-se unlawful group boycott. Neither case had any significant dissent.
Ten days after Billing was decided, the Court decided Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007), and by a 5-to-4 vote overturned federal antitrust law’s ban on resale price maintenance (RPM), a.k.a. vertical price fixing—a supplier’s agreement with its distributors or retailers that the latter will price at or above certain levels. The federal ban on RPM had stood for 96 years. Although certain state antitrust laws have continued to prohibit RPM, under federal antitrust law manufacturers—of laundry machines, for example—may be able to prohibit retailers such as Amazon, Costco, P.C. Richard & Son, Target, or Walmart from discounting the prices paid by consumers for laundry machines.
Justice Breyer wrote the dissenting opinion. He rejected application of the price theory he had previously used to dismiss antitrust cases—in this case, that higher retail prices could encourage retailers to provide better service and promote the manufacturer’s products—as having no empirical support. 551 U.S. at 915-16. Instead, he pointed to empirical studies that RPM caused consumers to pay higher prices. Id. at 912. A decade later, in his dissenting opinion in Ohio v. American Express Co., 138 S. Ct. 2274, 2290 (2018), also a 5-to-4 decision, Justice Breyer would again call-out the majority for being long on economic theory and short on economic reality and the evidence. Justice Breyer again looked to the effect of the challenged conduct on consumers, and found that American Express’s business practices caused higher retail prices.
Justice Breyer also dissented in a case involving class-action procedure in antitrust cases. In Comcast Corp. v. Behrend, 569 U.S. 27 (2013), the Supreme Court decertified a class because the class’s expert’s damages calculations attributed damages to lawful conduct. Comcast has not shown itself to be controversial, in part because of the dissent co-written by Justices Breyer and Ginsburg in which Justices Sotomayor and Kagan joined. The dissent emphasized that the majority had maintained the settled principle that class-wide calculation of damages was not necessary in order to bring an antitrust class action—only that any such calculation must be properly done. 569 U.S. at 41-42. A number of courts have cited the dissent for that settled principle and thereby maintained the availability of antitrust class actions. E.g., Dial Corp. v. News Corp., 314 F.R.D. 108, 118 (S.D.N.Y. 2015).
Justice Breyer’s opinion which singularly will have the most lasting impact on antitrust is undoubtedly his opinion for the Court in FTC v. Actavis, 570 U.S. 136 (2013). Actavis held that payments made by pharmaceutical patent-holders to generic competitors to settle patent litigation with the generic competitor staying off the market—so-called “pay-for-delay” or “reverse-payment” agreements—were subject to greater scrutiny under the antitrust laws than had been given. For a decade, the courts had permitted such payments so long as the patent facially covered the generic version of the drug and without regard to the possibility that the patent was invalid or that the generic version did not infringe it. See Kapoor, “Getting to a Rule for Reverse Payments,” Law360, June 28, 2012. The result was delayed generic competition and higher costs for prescription drugs borne by consumers and their health plans.
In writing for the Court in Actavis why such agreements should be subject to enhanced antitrust scrutiny, Justice Breyer reasoned that an otherwise unjustified, large payment by a patent-holder to a generic “itself would normally suggest that the patentee has serious doubts about the patent’s survival”—“suggest[ing] that the payment’s objective is to maintain supracompetitive prices to be shared among the patentee and the challenger rather than face what might have been a competitive market—the very anticompetitive consequence that underlies the claim of antitrust unlawfulness.” 570 U.S. at 157. Since the Actavis decision, reverse-payment agreements have decreased dramatically.
With Justice Breyer’s retirement, the Supreme Court is losing an experienced antitrust jurist who understood neoclassical price theory and its possible application, but who also viewed it with a healthy skepticism that always included keeping an eye on the economic evidence. And when that economic evidence showed harm to consumers, especially in the form of higher prices, he made it known.
None of the judges whose names have been floated as Justice Breyer’s successor has much antitrust experience (if any). Among the other eight justices, only Justices Thomas and Gorsuch have written substantial antitrust opinions. Justice Gorsuch’s opinion for a unanimous Court last year in NCAA v. Alston, 141 S. Ct. 2141 (2021), perhaps surprised many as a decision in favor of the plaintiffs who challenged the NCAA’s rules restricting education-related compensation to student-athletes and succeeded at trial. Alston was a thorough exposition of the mode of antitrust analysis known as the “rule of reason,” which balances a competitive restraint’s anticompetitive effects and procompetitive effects and concludes that a net anticompetitive restraint is unlawful.
One of the Alston opinion’s points on the fundamentals of antitrust law sounds very much like Justice Breyer’s jurisprudence: “Whether an antitrust violation exists necessarily depends on a careful analysis of market realities. If those market realities change, so may the legal analysis.” Id. at 2158 (internal citations omitted). In upholding the trial court’s judgment, Justice Gorsuch relied on the evidence of those market realities: “based on a voluminous record, the district court held that the student-athletes had shown the NCAA enjoys the power to set wages in the market for student-athletes’ labor—and that the NCAA has exercised that power in ways that have produced significant anticompetitive effects.” Id. at 2161. On the other side of the scale, the plaintiffs had shown that the NCAA could have achieved its procompetitive objectives using means less restrictive of competition. Id. at 2162.
It may be that Justice Breyer’s influence on antitrust in the Supreme Court will continue into future terms, and that NCAA v. Alston was a sign of that influence. If so, we can expect a Supreme Court that approaches antitrust by looking at empirical economic data, market realities, and record evidence of business practices’ impact on consumers and competition. And that would be a good thing.
Written by Ankur Kapoor
Edited by Gary J. Malone
Tagged in: Antitrust Enforcement, Antitrust Litigation,