It turns out that the “economic sense” referred to by the Court did not belong to jurors, businessmen, or economists, but to the Court itself. The economic sense of Matsushita—something that is better described as “economic sensibility”—is a legal construct. Others have referred to it as the Court’s “economic authority”: a merger between the justices’ understanding of academic economics and their best guess at business judgment, with a little ideology and a lot of institutional pragmatism mixed in. The Court’s economic sensibility is derived from academic economics, but the path of influence creates delay and distortion, as it adapts economic arguments to the institutional exigencies of regulating competition. Academic economics is one important contributor, but another is common sense. The Court’s economic sensibility is a view of economics that is simple, intuitive, easily explained, and utterly plausible. Of course, like all simplifications of human behavior, it is wrong. But as way of marrying what modern antitrust law demands—economic sophistication and institutional practicability—the Court’s economic sensibility is superior to total deference to economic expertise.
Importantly, by using its economic sensibility to resolve cases, and not just at the summary judgment stage as in Matsushita, the Court reserves for itself—not expert economists, law professors, juries, or market actors—the authority to define “economic sense.” Judges use their economic sensibility to limit and control the influence of expert testimony on litigation as often as they allow economic expertise to inform and inspire that sensibility. One feature of the Court’s economic sensibility is that it is skeptical of—at times hostile to—economic expert witnesses at the same time as it demands expert testimony as a condition of liability.
Thus, a great irony of Matsushita is that it represents at once the Court’s assertion of authority over antitrust law and the case that turned antitrust suits into combat by experts. Even though the Court mandates little deference to economic expert testimony, one cannot overstate the importance of experts to the success of an antitrust suit or Matsushita’s role in that development. Plaintiffs interpreted Matsushita, quite reasonably, to require them to bolster their claims with more and better economic expert opinions, even though the Court’s ultimate compass in that case was its own sensibility. And lower courts encouraged this interpretation by rejecting claims unsupported by an expert witness. As plaintiffs hired more experts, the adversarial method demanded that defendants did the same to tear them down. And because the opinion of any expert (no less an economist) is always contestable, parties began to realize that more was more. Antitrust litigants today typically employ several economists for the same dispute; some even hire experts to do nothing but remain silent.
Matsushita’s “economic sense” has thus come to have a double meaning. The case both announced the supremacy of the Court’s common-sense economic sensibility and made essential the use of technical scientific evidence. Today, having an economic expert on your side is a necessary but not a sufficient condition for winning your case. Both meanings of “economic sense” contribute to the rationality and efficiency of antitrust law. Scientific expertise can help judges apply their economic sensibility to the facts of a case and to form and reform that sensibility as economic knowledge progresses. At the same time, judicial control of that expertise is necessary to maintain the predictability, practicability, and fairness of antitrust law. All judicial decision making involves judgment about what authorities and opinions count, and how much. This article seeks to describe Matsushita’s enduring influence on that judgment.
Part I of this essay explores the possible meanings of Matsushita’s “economic sense” language, with careful attention to whose economic sense ultimately mattered in the case and what counted as economic sense (or sensibility). Part II uses predatory pricing as an example to illustrate the key features of the Court’s economic sensibility: it is a delayed, simplified, and pragmatic version of economic science. This Part then traces the evolution of the first meaning of “economic sense”—the Court’s economic sensibility—as it became relevant to more than summary judgment standards in conspiracy cases. Part III then discusses another legacy of Matsushita’s “economic sense” language: the rise of the battle of the experts. This Part explores the irony of this meaning of “economic sense,” because while courts have encouraged the proliferation of economic expertise in antitrust cases, they are often skeptical or even hostile towards economic expert opinion. Part IV then attempts to reconcile Matsushita’s twin legacies, concluding that both meanings contribute to sound antitrust decision making. This Part also identifies, however, places where the Court’s sensibility goes awry, such as when it departs too far from social science or when the Court presents its sensibility as economic fact. A short section concludes.
I. Disambiguating Matsushita: Whose Economic Sense?
When the Court in Matsushita declared that “if the claim is one that simply makes no economic sense” the plaintiff would have to support it with especially convincing evidence, it seemed to state a sensible—even obvious— rule of thumb. Like all facts proved through circumstantial evidence, as the scheme in Matsushita largely was, its plausibility was probative of its occurrence. But the remark, which has evolved into more than just a rule of thumb about inferring conspiracy, contains an important ambiguity. Whose “economic sense” counts when deciding whether a case requires especially strong evidence?
Continue reading the full text of this article in PDF format.
