House Judiciary Committee Commits Its Own “Type I Error” By Criticizing Judge Easterbrook Article


The House Judiciary Committee Antitrust Subcommittee’s majority staff report on antitrust takes aim at now-Seventh Circuit Judge Frank Easterbrook’s seminal law review article The Limits of Antitrust. In that article, Judge Easterbrook explained the risks with overenforcement of antitrust law. Because of these risks, he urged erring on the side of caution. In statistical terms, he advocated avoiding Type I errors. Today, Judge Easterbrook’s position is considered mainstream.  

Yet the report suggests Congress repudiate Judge Easterbrook’s position. As an alternative, the report urges Congress to say that cautious antitrust enforcement is as harmful as overenforcement. Congress should reject this plea because Judge Easterbrook was right. The Department of Justice, the Federal Trade Commission, and courts should continue to recognize that “antitrust is an imperfect tool for the regulation of competition.” Since it is an imperfect science, we should strive to avoid Type I errors.

In the real world, judges and policymakers lack perfect information about markets, competitors, and consumers. Without perfect information, it is impossible to flawlessly enforce antitrust laws. Rather, enforcement agencies make mistakes. Sometimes, a business will get away with anticompetitive behavior because of this imperfect information. Other times, a company will get sanctioned because of pro-competitive behavior. Unless we live in the House Judiciary Committee’s fantasyland, avoiding errors in antitrust enforcement is impossible. The question is which mistakes do we want to avoid? Or should we be indifferent to the types of errors we make? 

The answer is clear: As Judge Easterbrook said, we should err on the side of caution. There are several reasons why this is the best approach:

  • Violating the antitrust laws can lead to more than just civil liability: It also carries criminal penalties. As Benjamin Franklin said, “it is better 100 guilty Persons should escape, than that one innocent Person should suffer.” But if antitrust laws are enforced in the manner suggested by the majority staff, there will be one innocent executive thrown in prison for every one executive that escapes antitrust liability. This goes against well-settled due process principles. 
  • Successful plaintiffs in antitrust suits are entitled to treble (triple) damages. They also get attorneys’ fees and costs. From an economic perspective, this means that—ignoring possible criminal liability—companies will not engage in anti-competitive behavior if the risk of getting caught is higher than about 30%. This is enough to deter companies from engaging in most anti-competitive behavior.
  • Because treble damages—combined with the current level of enforcement—can deter anti-competitive behavior, increasing enforcement will lead to companies shying away from pro-competitive behavior. Even if a company knows that its actions fully comply with antitrust laws, it may decide against engaging in those actions because of the risk of erroneous enforcement activity. In other words, the benefits that the company sees from the pro-competitive behavior may be outweighed by the risk of the company being improperly found to have violated antitrust laws. This risk is especially troubling because firms do not internalize consumer benefits to their pro-competitive conduct. So although the total welfare increase may dwarf the costs of an erroneous antitrust enforcement action, companies care about only that portion the companies realize. This further distorts the market and keeps innovation at bay in the name of political expediency.     
  • The damage from cautious antitrust enforcement is relatively low. The market destroys a monopoly. When other firms see monopoly profits, they enter the market. Eventually, this eliminates monopoly rents. Antitrust enforcement merely speeds up the process of a return to competitive markets. 
  • These reasons do not include the focus of Judge Easterbrook’s article. He explained that the nation’s best economists can disagree about the effect of some competitive activities. The disagreement could stem from different assumptions or different methodologies. Without a crystal ball and perfect knowledge about all firms, it is impossible for Nobel-prize-winning economists to agree on whether actions help or hurt competition. 

If the best economists in the world cannot agree, what chance is there for generalist federal judges and lay jurors? The answer is obvious—none. In many cases, a judge or jury might as well flip a coin to decide whether to hold a company liable. They lack the education and training to understand the theoretical underpinnings of a case. They similarly lack the mathematical background to process the complex econometric analysis that is the staple of today’s antitrust litigation.

The House Judiciary Committee Antitrust Subcommittee’s majority staff report is an anti-capitalist manifesto. The attack on Judge Easterbrook is meant to undermine the Chicago School of Economics. Those pushing for more antitrust enforcement want legal victories that they can use to then push for more anti-capitalist reforms. 

It seeks to destroy entrepreneurial businesses that contribute to Americans’ well-being. The report would prefer companies like Google and Amazon—which have become indispensable during the COVID-19 pandemic—disappear. The subcommittee staff opposes these successful businesses because they recognize the companies are free-market success stories that benefit society.  

The report tries to disguise the attack by dressing it up as antitrust law. Yet it lacks any basis in law or economic reality. It therefore should be seen for what it is—a full-frontal attack on our market-based economy. Courts and governmental regulators must reject it as pure propaganda.



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