Antitrust Governance: The New Wave of Antitrust

Antitrust law has entered a new phase of an always-controversial existence. The role of antitrust in moderating interfirm relationships depends both on the problems that arise in such relationships and the institutional capacity of antitrust decision-makers to respond to those problems effectively. For much of the twentieth century, the model firm was hierarchical: vertical integration within the business organization was a way of achieving transaction cost efficiencies and delivering to market higher levels of output at a lower price. The argument that integration was beneficial for organizing efficient production was used to induce a shift in the focus of antitrust law away from its traditional concern about concentrated power, to a policy focused on economic efficiency. This change in emphasis produced a more modest antitrust policy. Moreover, courts responded by insulating antitrust decision-making from economic knowledge necessary either to formulate ex ante efficiency rules, or to pursue outcomes that were ex post efficient, both because they were not institutionally well-suited to engage in such analysis and because the increased complexity and heterogeneity of economic relationships made it more difficult to formulate such rules. The past two decades have witnessed a transformation in the paradigmatic model of the firm as a combined result of both changes in technology and the greater volatility in market environments in which * © Yane Svetiev, LL.M. (Colum.), LL.B. (Hons) and B. Ec. (Hons.), (Univ. of Sydney), and J.S.D. candidate (Colum.). The article was conceived and written while the author was in the associate-in-law teaching program at Columbia Law School. The author is presently with Cravath, Swaine & Moore LLP. With thanks to Michael Dorf, Harry First, Eleanor Fox, Philip Hamburger, George Hay, Robert Pitofsky, Michael Riordan, Philip Weiser, Shaun Wilson for many useful discussions and for their comments and suggestions on earlier drafts of this paper and especially to Charles Sabel for his encouragement and supervision of this project. The author is, of course, responsible for all remaining errors of omission and commission and welcomes comments—all correspondence should be sent to ys2413@columbia.edu. 594 Loyola University Chicago Law Journal [Vol. 38 firms operate. Production is increasingly de-integrated, and characterized by looser networks of independent collaborators: ongoing innovation and speedy adjustment to new market conditions are key aspects of firm success. This article brings together the emerging literature that describes the reasons for, and manifestations of, these changes in firm organization, as well as the governance problems that may arise in the new forms of joint development where collaborators must engage in deep information-sharing and face profound uncertainty about the future market landscape. The author argues that antitrust law can play an important role in governing these new forms of collaborative production, in a way that both resolves concrete problems arising in such collaborative relationships and advances the public interest. Importantly, the article also provides normative principles for the design of the institutions and remedies of the new antitrust policy. 2007] Antitrust Governance 595