News and Events

TILEC Seminar: Barak Orbach (University of Arizona)

Interstate Circuit and (Other) Antitrust Myths
10:45-11:45, M 1003

Barak Orbach is a Professor of Law and the Director of the Business Law Program at the University of Arizona James E. Rogers College of Law, as well as an elected member of the American Law Institute and a Fellow of the American Bar Foundation. Professor Orbach is recognized as a leading scholar of antitrust and regulation. His study of the motion-picture industry is credited for contributing to a change in movie pricing in the United States. He holds undergraduate degrees in law and economics from Tel Aviv University and masters and doctorate degrees in law from Harvard Law School.

Before joining academia, Professor Orbach served as an Advisor for Law & Economics to the Israeli Antitrust Commissioner and as an associate with Cleary, Gottlieb, Steen & Hamilton, New York. Professor Orbach is the author of the leading casebook on regulation, Regulation: Why and How the State Regulates (Foundation Press, 2012). Additionally, he has published over 30 articles, essays, and book chapters.

Interstate Circuit and (Other) Antitrust Myths

Abstract

Interstate Circuit v. United States, 306 U.S. 208 (1939), is one of the U.S. Supreme Court’s most known antitrust opinions. It is taught in every basic antitrust course in the United States. The case is a leading precedent in the area of conspiracy inference. It has been used for the development, explanation, and teaching of a relatively large number of doctrinal and economic concepts in this area, such as the agreement requirement, plus factors, conscious parallelism, hub-and-spoke conspiracies, raising rivals’ costs, and cartel ringmaster.

Hundreds of judicial opinions, books, and articles summarize Interstate Circuit or refer to summaries of the decision. The summaries are more or less uniform in their core details. Any serious reading of the Supreme Court’s opinion, however, would conclude that the summaries are materially flawed. They omit material facts and result in an account that portrays unrealistic market behavior and is at odds with basic antitrust knowledge. The doctrines that build on this account are often criticized for being incoherent. This Article explains the relationships between the misreading of Interstate Circuit and challenges that courts identify in the law of conspiracy inference.

Interstate Circuit concerned a film distributor’s partially-owned subsidiary, a powerful movie exhibitor. The subsidiary conceived an idea for the revision of the movie licensing agreements used in its territories. The idea was favorable for the subsidiary and unfavorable for its rivals, independent exhibitors in which film distributors did not own equity. The subsidiary circulated the idea among its suppliers—its parent company and seven other film distributors. The subsidiary’s executives then discussed the idea with executives of parent company and drafted a more elaborate proposal. The subsidiary circulated this proposal and negotiated agreements with the parent company’s competitors. The case raised the question of whether the subsidiary orchestrated an unlawful conspiracy among the eight distributors—its parent company and the seven rivals of that parent company. The summaries of the case offer a profoundly different fact pattern.

Interstate Circuit emerged in an era with several similarities to present days: an industrial revolution transformed the economy, leading to the elimination of jobs, the rise of large business entities with which small businesses could not compete, and an increase in social discontent. Interstate Circuit defendants were technological companies that gained control over the motion picture industry. The Article, thus, studies the formation of a cartel in an industry transforming through rapid technological change and affected by a deep recession (the Great Depression).

 


When: 27 September 2017 10:45

End date: 27 September 2017 11:45

Where: Montesquieu building