By John M. Yun.
Antitrust analyses relegate efficiencies to a second-class status. Not only are they often an after-thought when assessing conduct within a relevant market, but the Supreme Court, in 1963 with its Philadelphia National Bank (PNB) decision, established that efficiencies realized outside of the relevant market construct, that is, “out-of-market” efficiencies, are not even counted. While the PNB case involved a horizontal merger between two Philadelphia banks, many interpret the PNB precedent as establishing a prohibition of out-of-market efficiencies in non-merger cases as well. The precedent and associated out-of-market efficiencies principle have had a profound influence on the enforcement of antitrust laws. Yet, the principle is increasingly out of step with sound assessments of business conduct—particularly in digital markets with network effects. Further, the principle unreasonably handicaps defendants, which is an increasing concern due to the current policy movement to severely tilt antitrust enforcement in favor of plaintiffs. Consequently, this Article argues that the out-of-market efficiencies principle needs serious reform—but in a specific way. Full Article.