Turner’s clever turn of phrase now is a part of antitrust lore. The central thrust of his speech, however, has been lost to history. This is unfortunate because the term “inhospitality tradition” does little justice to Turner’s views on vertical restraints, as he protested in his speech. After stating that he approached restraints on distribution “inhospitably,” Turner continued: “But like all quick answers, that doesn’t tell you very much, and I shall try to tell you more by reflecting on some basic antitrust issues that these restrictions confront us with.”
The rest of his speech shows Turner at his best. He recognized efficiency justifications for restraints on distribution, leading him to conclude that it was appropriate to analyze them under a rule of reason. However, a “loose” rule of reason would not do. Turner believed that one could shortcut a full rule of reason by asking whether a less restrictive alternative existed that allowed realization of the efficiencies associated with a restraint. If so, he would deem the restraint illegal. After suggesting that such an analysis could be a useful shortcut for assessing restraints on distribution, he went on to argue that one could apply the analysis fruitfully to other business practices, including tying and joint ventures. For Turner, the use of a less restrictive alternatives analysis to reduce the burdens of a rule-of-reason analysis was “applying the ‘rule of reason’ in its finest and most accurate sense, namely in the development of what Kingman Brewster so happily phrased as ‘reasonable rules.’”
Turner’s willingness to consider possible efficiencies arising from nonprice vertical restraints suggests he approached them reasonably, not inhospitably. Unfortunately, commentators sometimes have used the term “inhospitality tradition” so indiscriminately that they improperly taint Turner by association. Some critics have used the term narrowly to refer to an unduly hostile approach in the 1960s and 1970s to restraints on distribution; others have used it to refer to an undue hostility toward contractual restraints; and yet others have used it more broadly to refer to courts and policy makers that were unduly hostile to efficient business practices they did not understand. At times, critics have associated a broad reading with Turner and his views, leaving one with the impression that Turner was an unsophisticated antitrust analyst who was hostile toward efficiency-enhancing business practices, especially non-price vertical restraints. In fact, Turner took a sophisticated approach to vertical restraints—and antitrust more generally—throughout his career as an academic, policymaker, and advocate.
In this article I reconsider Turner’s approach to antitrust law and policy through the lens of three cases that defined the Supreme Court’s evolving approach to non-price vertical restraints on distribution: White Motor, Schwinn, and Sylvania. Although the Court’s treatment of non-price vertical restraints varied widely (and some would say wildly) across the three cases, Turner recognized the restraints’ potential efficiencies, and advocated for rule-of-reason treatment. His thoughts on the appropriate structure of the rule of reason as applied to vertical restraints, however, evolved as economic thinking evolved during the 1960s and 1970s. Turner initially advocated for a tightly circumscribed rule of reason, recognizing only a limited number of justifications in White Motor and Schwinn; he later argued for a more openended rule of reason in Sylvania in recognition of subsequent academic work suggesting that vertical restraints were not as harmful as he once believed.
His academic work had a notable influence on the Court’s 1963 decision in White Motor. In a case of first impression regarding the treatment of territorial restraints, the Court decided it did not have enough information to apply the per se rule of illegality as argued for by the government and remanded the case for further consideration of whether per se or rule-of-reason treatment was appropriate. Justice Brennan’s concurring opinion in that case, however, argued for rule-of-reason treatment of territorial restraints based in part on a Turner article identifying possible justifications for territorial restraints. In the Schwinn case, decided in 1967, AAG Turner was responsible for the government’s argument that it was appropriate to treat customer restraints under a rule of reason. Under Turner’s predecessors at the Antitrust Division, the government had argued in district court that Schwinn’s customer and territorial restraints were per se illegal. Turner departed from that position to argue for rule-of-reason treatment, a position that the Court rejected. Finally, Turner coauthored an influential amicus brief in GTE Sylvania arguing for rule-of-reason treatment of locational restraints, a position that the Court adopted, overturning Schwinn.
Turner’s work on White Motor and Schwinn also illustrates the ways in which his approach to antitrust differed sharply from those of his predecessors as AAG. Robert Bicks headed the Antitrust Division when the White Motor case was in district court; Lee Loevinger headed the Division when White Motor came before the Supreme Court, and when it tried Schwinn in district court. Neither Bicks nor Loevinger had the background in economics that Turner had; and neither had given substantial thought to the ways in which one might use economics to inform antitrust law or policy. In their work on White Motor and Schwinn, Bicks and Loevinger adhered to longstanding Division policy, which disregarded potential efficiencies arising from restraints on distribution to deem them per se illegal. As AAG, Turner openly departed from that policy, arguing that non-price vertical restraints should be treated under a rule of reason, one of many changes he made at the Division to make its approach to law enforcement more economically rational.
Turner’s approach to non-price vertical restraints also illustrates his approach to antitrust, which reflected a novel blend of legal, economic, and administrative concerns, as I have previously explored in the context of the Department’s horizontal merger policy under Turner. He generally believed that a consideration of all relevant facts in an antitrust analysis was a fool’s errand because of the inability of judges, economists, and lawyers to assess the net competitive effects of a business practice in a particular case. However, he had faith in the ability of economists to predict the general competitive tendencies of a practice, which could inform presumptions that would shortcut a full rule of reason. His approach to antitrust anticipated later work by others reflecting legal, economic, and administrative concerns, most notably that of Frank Easterbrook in The Limits of Antitrust. Indeed, an irony of Easterbrook’s work is that it criticized Turner’s “inhospitality tradition,” only to propose an approach to antitrust that closely resembled Turner’s approach.
As did Turner in his 1966 speech, I shall try to tell you more.
I. Turner at Harvard
Turner’s approach to restraints on distribution reflected his approach to antitrust more generally, which he grounded firmly in economics. Turner earned a Ph.D. in economics from Harvard before earning a Yale law degree (while simultaneously teaching economics at Yale). His economics background gave him the tools to understand the contemporary economic literature as it related to antitrust law and policy. He began his academic career at Harvard Law School, where he was part of a group of lawyers and economists studying and discussing competition and monopoly. He also participated in an antitrust seminar with three members of the group: lawyer Kingman Brewster, economist Edward Mason, and economist Carl Kaysen. Their work, as well as that of group member and economist Joe Bain, appears to have substantially influenced Turner’s positions on antitrust, which reflected a blend of economics and concerns about limits on the ability of economists, lawyers, and judges to apply the law properly.
When Turner arrived at Harvard in 1954, several members of the group were publishing work on competition and antitrust policy. The group revolved around Edward Mason, whom fellow economist Bain credited with creating the field of industrial organization. Other economists in the group included Charles Kindleberger and Morris Adelman. In 1958, Bain published Barriers to New Competition, a study of the relation between market structure and performance, inspired by Mason’s work; a year later, he published Industrial Organization, a textbook dealing in part with antitrust policy. Bain’s work and that of other economists in the group had a lasting impact on industrial organization; it also influenced the lawyers in the group. Much of Bain’s work provided the empirical underpinnings for Turner’s work as an academic and a policy maker. In particular, Bain’s work suggesting that advertising could contribute to product differentiation, creating a barrier to entry that enhanced market power, would, for a time, have a notable influence on Turner’s approach to non-price vertical restraints.
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