Justice Scalia and Sherman Act Textualism

Alan J. Meese*

Section 1 of the Sherman Act prohibits contracts “in restraint of trade or commerce among the several States.”¹ How should a proponent of an “original public meaning” approach to statutory interpretation go about determining whether a challenged agreement is, in fact, “in restraint of trade”? The most straightforward approach, it would seem, would be to read “in restraint of trade” as a common-law term of art invoking a rich body of contract law, generated largely by state courts, in place in 1890 when Congress passed the Act. This body of law defined with some precision the types of contracts that courts declined to enforce. By employing this term, it might be said, Congress presumably invoked that body of law and compelled federal courts to ban those restraints, but only those restraints, that common-law courts would have declined to enforce in 1890. Conceptually, then, judicial enforcement of the Sherman Act could be a straightforward exercise in legal research, familiar in some respects to the approach that originalists have taken in other statutory contexts.²

But Justice Scalia took a different approach to the Sherman Act. Most notably, in Business Electronics Corp. v. Sharp Electronics Corp., the Justice rejected the claim that the Sherman Act simply banned a fixed list of agreements deemed unenforceable in 1890.³ Instead, he said, section 1 of the Act bans agreements that produce a “particular economic consequence.”⁴ That consequence was the exercise of market power to the detriment of consumers.⁵ Moreover, he said, both the actual and perceived impact of identical agreements can differ “in varying times and circumstances.”⁶ Thus agreements deemed “in restraint of trade” (by common-law courts) and thus contrary to the Sherman Act in 1890 can become perfectly lawful in 1990, despite the lack of any intervening change in the statutory text. Under this approach, adjudication under the Sherman Act is less an exercise in historical research than an opportunity for microeconomic analysis, drawing upon recent law review articles instead of nineteenth-century state reports. Indeed, the account of the meaning of the Sherman Act sketched and applied in Business Electronics replicated that advocated by leading members of the Chicago School of antitrust analysis, particularly Robert Bork and Frank Easterbrook. Both jurists, and the Chicago School in general, have read the Sherman Act to articulate a standard, “consumer welfare,” delegating to courts authority to employ economic analysis to determine whether a challenged agreement reduces such welfare and thus violates the Sherman Act.

Some scholars claim that Justice Scalia’s Chicago-style antitrust jurisprudence contradicted his professed commitment to reading statutes according to their original public meaning. At least as practiced by the Justice, they say, an original public meaning approach would require courts to treat the term “in restraint of trade” as invoking a set of fixed common-law rules, not the sort of economic standard the Justice endorsed in Business Electronics. These rules, they say, did not reflect concern for consumer welfare but instead values such as fairness and individual autonomy and thus often diverged from the result that application of an economic standard would produce. These same scholars contend that the original public meaning approach necessarily precludes the sort of dynamic approach Justice Scalia endorsed in Business Electronics. That is, despite section 1’s invocation of the common law, judges generating section 1 jurisprudence must ignore advances in economic theory, even if such advances entirely undermine the economic premises of particular common-law rules. Indeed, some such scholars contend that Justice Scalia’s approach to section 1 exemplifies the approach that jurists take to socalled “super statutes” as opposed to mere “ordinary legislation” and thus departs from his professed method of statutory interpretation.

This Essay offers a defense of Justice Scalia’s approach to the Sherman Act. For one thing, the approach broke little new ground, either in general or as applied in cases such as Business Electronics. Instead, such an approach was a faithful implementation of Standard Oil Co. of New Jersey v. United States, which announced section 1’s “Rule of Reason.”⁷ After its own lengthy exegesis of the common law, Standard Oil announced that the term “restraint of trade” does not refer to a set of fixed rules, but instead directs courts to apply a “standard of reason” when evaluating challenged restraints.⁸ That is, courts should ask whether a challenged agreement produces monopoly or the consequences of monopoly, namely, higher prices, reduced output, and/or reduced quality. A broader reading, the Court said, would ban contracts and combinations protected by liberty of contract.⁹ Moreover, in making this assessment, Standard Oil said, courts should recognize that “economic conceptions” change over time, and apply the latest conception when evaluating the impact of a restraint.¹⁰

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© 2017 Alan J. Meese. Individuals and nonprofit institutions may reproduce and distribute copies of this Essay in any format at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review, and includes this provision in the copyright notice.

*Ball Professor of Law, Tazewell Taylor Research Professor, and Co-Director, Center for the Study of Law and Markets, William and Mary Law School. Judicial Clerk to Justice Antonin Scalia, 1990–1991. The author thanks Aaron Bruhl and Barry Cushman for helpful conversations about this topic.

1 Sherman Act, ch. 647, § 1, 26 Stat. 209 (1890) (codified as amended at 15 U.S.C. § 1 (2012)).

2 Cf. Moskal v. United States, 498 U.S. 103, 121–26 (1990) (Scalia, J., dissenting) (invoking pre-statutory interpretations of a statutory term of art as establishing the meaning of the contested term); see also infra notes 86–101 and accompanying text (discussing other examples).

3 485 U.S. 717, 732 (1988).

4 Id. at 731.

5 See infra notes 48–50 and accompanying text (explaining that Business Electronics treated such an exercise of market power as the sole cognizable antitrust harm).

6 Bus. Elecs., 485 U.S. at 731.

7 221 U.S. 1, 61–62 (1911).

8 Id. at 60 (emphasis added).

9 See id.

10 Id. at 55.