Is There Still Such a Thing as a Monopoly Under the Law?
[NOTE: This is a guest post by Dan Bischoff]
Did you ever wonder how companies get to be Too Big Too Fail? By mergers and acquisitions, of course. Now, when do you suppose was the last time the Supreme Court ruled on merger law?
That would be 1974, when the court approved the takeover of a strip-mining company by a subsidiary of General Dynamics, and most of today's antitrust litigators were wearing short pants and watching The Banana Splits. In the last 37 years, Department of Justice guidelines and Federal Trade Commission enforcement policies have wandered far from the standards enunciated by the Supremes in the 1960s and 1970s, and a review of antitrust standards by the Court would appear to be long overdue.
As fate would have it, the FTC has finally brought a case that should actually set the outer limits of antitrust policy in a go-go regulatory environment. In 2006, drugmaker Lundbeck -- which held a patent on a drug to cure a potentially fatal birth defect called patent ductus arteriosus, or PDA -- bought out the only manufacturer of a competing drug for the same disease. As soon as the merger was complete, Lundbeck raised the price for both drugs more than 1300 percent -- the cost of a three-dose treatment by either remedy went to almost $1500 from $120 overnight.
Corporations are people, too -- just not very nice ones
FTC vs. Lundbeck would seem to be the perfect agency monopolization case: The merger had an immediate and negative price impact on the neo-natal drug market, bringing windfall profits to the merged company and no benefits to consumers, who in this case happen to be stricken parents.
And yet yesterday a three-judge panel of the 8th Circuit Court of Appeals upheld a lower court ruling that the two drugs were not part of the same market, even though they were used to cure the same defect. Because doctors had not considered the low, pre-merger price of either drug when prescribing it, the lower court had ruled, there was no antitrust case here. Lundbeck could charge whatever the market -- that is, desperate, frightened families -- can bear.
The implications of this ruling for the control of potentially predatory monopolies are as frightening as any birth defect.
Does the dingo have a right to that baby?
All of this story has been ably laid out by Bill McConnell of The Deal, who believes the FTC will likely take the case to the full 8th Circuit and then appeal to the Supreme Court.
We know the 5/4 breakdown of the Supremes quite well, but what's happening in the lower courts is much more dramatic. Of the three-judge panel that made the 8th Circuit ruling, two members -- Steven Colloton and Duane Benton -- were appointed by George W. Bush; the third, sent to the panel from the U.S. District Court in Nebraska, was Richard Kopf, who was appointed by Bush's father (he's best known for outlawing late-term abortions).
Over the past two decades the rate of Congressional approval for presidential appointments to district and circuit courts has been slowing; at this point in his presidency, Bill Clinton had seen 84% of his nominees confirmed, George W. Bush 70%, and Barack Obama just 62%.
But no matter who gets appointed by either party, the legal consensus on corporate issues has trended strongly to the right. The 1974 General Dynamics decision was key -- after that ruling, plaintiffs had to prove monopolies caused harm to the public, not merely market consolidation. It set loose a tsunami of mergers that continued well into the 21st century.
And given the still-growing acceptance of University of Chicago theories about the public being "served" by larger and larger companies via greater efficiencies that create lower prices -- whether they do or not -- many more cases like this one seem likely.
Even though many corporations think "To Serve the Public" is a cookbook.
Dan Bischoff writes about art for The Star-Ledger in New Jersey; He was European editor for WorldBusiness and National Affairs Editor for The Village Voice.