Dylan Matthews: Most Americans know Robert Bork as Reagan's failed Supreme Court nominee in 1987. Why is his work on antitrust so important?
Barak Orbach: Antitrust was defined by Robert Bork. I cannot overstate his influence. Any antitrust person would tell you the same thing. Perhaps we will differ on the interpretation of him but Robert Bork is the single most important person in antitrust in America. Whatever happened in 1987 was insignificant by comparison.
In 1960, he was concerned the socialists would take over the country through antitrust. Antitrust then was about protecting small businesses. He built a full framework about how antitrust should be more about economic efficiency than about helping small businesses. He expanded upon this in articles and the book, The Antitrust Paradox, in 1978. He wrote a sentence: Congress enacted the Sherman act [ed - the main antitrust act] as a "consumer welfare prescription.” The Supreme Court adopted that sentence in 1979. That is the stated goal in antitrust today. It is a big deal. A huge deal. In antitrust, it’s operational. Robert Bork defined it.
DM: Back up a bit. What was the regime before Bork's views took hold, where the focus was on helping small businesses?
BO: In antitrust, antimonopoly law, it is easy to think about why big is bad. The view is, "Big businesses are bad. We should protect small businesses. We should not have big businesses." So that’s what happened in the history of the Sherman Act, between 1880 and 1960. There was no systemic methodology that said, “How do we analyze a merger?”
How do you go about it? With economics? It wasn’t clear that economics was the methodology being used. Bork came around and said that we were protecting inefficient businesses. That was one of his most significant contributions. There’s always a trend that big businesses go up, and then people have this sentiment that we should protect small businesses. So that was one thing that he created. He created this framework where antitrust should be efficient. He introduced economics into antitrust in a really systematic matter.
DM: How did that view take hold among policymakers?
BO: There are two things that Robert Bork, two of the main trends in recent antitrust policy. that we all give credit to Bork. One thing is that back then, there was a distinction between horizontal agreements — or deals among competitors — and vertical agreements. Those are agreements along the distribution line, the production chain. An agreement between manufacturers and retailers, for example.
Robert Bork said only horizontal agreements can be anti-competitive. Vertical agreements are unlikely to be anti-competitive. He changed the presumption. He had a big influence in that dimension. That was a major thing because beforehand, many vertical agreements were illegal per se. The court did not have to review them.
There were many such agreements. For example, there were geographical restrictions. There is a famous case about the mattress manufacturer, Seely. If they say to distributors, "You have this territory, you have Arizona, you have Nevada," that was illegal in the past. But it makes sense to have geographical restrictions. If you think about car dealers, it makes sense to have geographic restrictions since the dealer has an incentive to promote the product being sold. Until the 1960s that was illegal. The only thing that the agencies had to prove is that it existed.
What happened was politics got into play, particularly the question of how much you believe that markets are efficient or inefficient. When you say businesses should protect efficiency, well, Bork thought markets were always efficient. That’s happened not to be true, at least to my mind. Most of us today don’t think this way. Back in the days, in the 1960s, the government was highly interventionist. Just to put it in context, if you had an industry that had eight firms and firms wanted to merge, they could say no. Now you could have four firms turn to three, or three to two. Back then everything was considered anti-competitive. The assumption was that businesses intended to do bad things. The flip side is that Bork thought everything was efficient.
In a simple manner, Robert Bork introduced economic thinking to antitrust and specifically reversed concerns against big business’s evolution. The courts always thought that big businesses are bad and we should be concerned about everything they do. It was radical, it's called the antitrust tradition of “inhospitability.” This name was coined by Donald Turner when he was the head of the antitrust division at the DOJ. In the 1960s, he said this is what antitrust is about. This tradition of inhospitality.
Bork was the single most important figure in changing this. That’s huge in businesses. Huge in law. If you think about Macy’s, Bloomingdale’s, Amazon, Google, it’s huge.
Robert Bork thought this because of the so-called "Chicago school" of economics. Their takeover was the major success in the academic world, in implementing academic ideas, at the time. The court started thinking they should have an economic framework, and they had Chicago's work as very simple ideas they could use.
The thing about this is that they were very simple. You read them, you understand them. Any person can understand them. That’s what this was about. The court started adopting them in the '70s, so we called this era the Chicago era. From 1984. we call it post-Chicago. The Chicago simple framework is simple. The world is not that simple. Presumption there is a lot of information, markets are efficient, etc. But it's not true.
DM: Did this happen mostly through the courts or the administrative agencies charged with enforcing the laws?
BO: Mostly the courts. The Federal Trade Commission and Department of Justice were highly sophisticated. Let me just give you an example. The antitrust academia is very small. I happen to be the person who wrote a lot about Bork, but we're composed of about 20 people. We had a conference in October about Bork. It was about the goals of antitrust law, which is to say it was about Bork. Let me give you an example of how that became the law.
In the 1970s, he was the solicitor general. Frank Easterbrook, now a federal appeals court judge, was at the time deputy solicitor general. Easterbrook wrote a brief, in that he wrote “the point of antitrust is consumer welfare,” the phrase from The Antitrust Paradox. Everyone would tell you Bork made up this sentence. That’s extreme. He said, I studied the legislative history, this is what they did in 1880. This is the thing. The Supreme Court casually adopted it. It’s extreme for people like us.
DM: You're saying you don't think that was really the point of the Sherman Act.
BO: Every person thinks that. Every person in antitrust will tell you that. The legislators who wrote it, they were confused. There are many individuals who have many things in mind. This is how they enact law. Back in 1890, the phrase “consumer welfare” did not exist. Economics did not exist. What Congress had in mind is protecting small businesses against large businesses. They were concerned about Standard Oil.
When Bork started writing about developing his framework in the early 1960, he said they wrote X but it means Y. And then the phrase consumer welfare caught on. It became a highly popular term, adopted by Ralph Nader, and other lefties too. And so when it got to the Court they just adopted it.
Every doctrine is analyzed based on that. Something he made up.
People outside business law, they cite his work on statutory interpretation, which is something I don’t really know that well. But everything he developed was through looking at antitrust. He said the Russians were about to take over, through antitrust! In 1963 he wrote an article in Fortune called, "The Crisis in Antitrust," and he, in that article, he’s describing the socialists who threatened free market forces. It wasn’t too far-fetched if you think about it. If you think antitrust is used to suppress competition, then this is a suppression of the American spirit, of entrepreneurship, of free markets. Who does these things? Socialists.
This was the second thing he wrote about in antitrust. He started by writing this article to Fortune. From this article he developed a full-blown framework. The most amazing thing about it is it is very simple, very accessible. He summarized everything. The courts, they don’t understand antitrust, but they understand his article.
The story, it’s extreme. I know that it doesn’t sound believable.
DM: Where do you think we'd be without Bork?
BO: Bork is a target for many of us. He represents oversimplicity of thinking. His contribution cannot be overstated, in terms of introducing economic thinking and making sure protection of inefficient businesses is not desired. Oversimplicity in thinking is an issue everything.
Let me say two things. I don’t think we would have been here without Bork. Antitrust would have been much better. He is not the only thinker. Other people would have come up and introduced the same framework. Economics is economics. It’s very rare that you have one thinker who has so much influence, and he is influential because of that. It would be more nuanced. What could have happened, it’s just a guess.
Let’s say inhospitality would have existed. The U.S. would have failed. We could not have developed. All the dotcoms would not exist, big business would not exist. Some people don’t like the big businesses but this is what makes the economic efficient. People like low prices. The Internet is based on economies of scale, and that’s the revolution. Telecom, financial industry, everything's faster. So the tradition of inhospitality could not have allowed concentration of industries, and many industries today are highly concentrated. Telecom, finance, e-commerce. Think about Amazon. Could not have existed.
DM: So your ideal is some middle ground.
BO: I prefer economic thinking. I think that thinking is relatively traditional in antitrust. Antitrust has limited tools. It cannot cure all illnesses in the economy. What it can do is it can protect competition, and that’s it. We cannot protect against unsafe medicine, we cannot protect the environment. It’s all about competition. That’s what it’s about. It’s not about protecting small businesses, and it’s not about attacking big businesses.
