First Itinerant Reflections on 50 Years of Trial Practice The Antitrust Phase

Author Richard Solomon is a conflicts and crisis management lawyer with four decades of experience in business development, antitrust and franchise law, management counseling and dispute resolution including trials and crisis management.

     

This will be the first of a small series of reflections upon 50 years of law practice, focused mainly upon the specialty areas that have been the principal focus of my professional life - antitrust - franchising - dispute and crisis management.

Law school at the University of Michigan had one signal highlight - my clerkship for Profession S. Chesterfield Oppenheim, then the leading light in Antitrust law. It happened not as the product of great scholarship on my part, but mainly because I was his waiter at the Michigan Union Dining Room where he frequently had lunch. As his occasional servant in those events we became somewhat more than simply customer and waiter. When he learned I was a freshman law student he asked if I intended to take his class and seminar on Antitrust law.

Being from Charleston, S.C., I didn't know what Antitrust law was, but of course answered in the affirmative for the sake of tipping. When I did sign up, he suggested I take the course and the seminar at the same time. We quickly became friends and he hired me as a research clerk and to cater his parties. I was certainly not the sharpest legal mind in his clerkship stable, but I outworked everyone else and was by far the most productive. He was as much a parent to me as I have ever had, and I loved him dearly until his passing.

Oppie was a "Rule of Reason" person. The per se people believed that size was the most important issue in antitrust analysis, especially when it came to evaluating mergers under Section 7 of the Clayton Act. Congressman Cellar from New York once took Oppie to task while testifying before Congress on what was then the recent amendment to Section 7 of the Clayton Act because Oppie advocated giving less weight to size and more to the analysis of market behavior in adjudicating the status of challenged mergers. To Oppie a per se approach was lazy man's work, a snapshot taken of what in reality is a motion picture - the evolution and interaction of equilibrating market forces in the context of Antitrust analysis. That required real work and analytical talent. Cellar finally in frustration challenged Oppie, saying, "Professor Oppenheim, don't you support the Antitrust laws?" Oppie replied, "Of course. They have supported me for many years, haven't they?"

What I learned from Professor Oppenheim served me well in the coming years as the first case that the government lost under Section 7 of the Clayton Act was a case in which econometric market analysis of market dynamics trumped short hand approaches based upon market shares on the date of the merger itself. The government persisted in its simplistic approach as Harvardian pseudo analytics. Using such things as the Herfindahl Summary Indices made life easy for prosecutors who opposed mainly large law firms of plodders with little imagination. After all, why abandon what worked most of the time?

Eventually markets became more global than local, and the impact of international trade coupled with Republican administrations resulted in the tacit recognition of global market dynamics manifested by the bringing of far fewer Antitrust cases. Oppie had won in the end. That more realistic approach persists today despite a Democratic administration, thank goodness. The per se approach would have strangled the ability of the United States participation in world trade as countries would have retaliated against per se restrictive approaches by a narrow minded Justice Department and Federal Trade Commission.

The move away from the Antitrust per se approach of the 60s brought some crazies out of the woodwork. Worst of the lot was the lunatic ex professor of Antitrust from Yale Law School, and actual Supreme Court nominee Robert Bork who, in pandering to industry advocated a rule of reason approach to that ultimate loathsome disease of the Sherman Act, price fixing conspiracies. Suffice it to say that never came to pass, and his nomination to the high court was not confirmed.

Many of the 60s precedents espousing more per se approaches were scotched by the courts. The almost per se analysis of tying arrangements fell in the Jefferson Parish case, for example. The analysis of the White Motor case stayed with us in assessing vertical territorial confinement, reinforced in the GTE-Sylvania case with recognition of special consideration for market position and value added distributorships - it was OK for new entrants to restrain trade a tad in consideration of their adding competitive quality to an industry by dint of their entry and needing some extra help - balancing intrabrand restraints against interbrand competitive necessity. In franchising eventually vertical price fixing became acceptable in the sense that Burger King was allowed to enforce pricing promotions throughout its franchise system despite some franchisee objections that it would cause them to go broke, scotching the rationale of the Albrecht case that had slavishly followed Justice Douglas' statement in Socony Vacuum that any tampering at all with free market pricing was a per se violation of Section 1 of the Sherman Act. Post hoc analysis would seem to support that since the franchisees did not go broke as the result of the ruling.

I began practice as the junior punk on the Antitrust legal staff of General Motors in the early 60s, then the world's largest and most profitable industrial organization, changing places occasionally with Exxon in sales and profit leadership. Market dynamics and lack of vision would eventually lead to the unthinkable, the financial failure of General Motors Corporation. But in those days I got to experience first hand for a rather short period what life was like inside a real economic powerhouse. Since the forces of the global market did it in, that is perhaps the best argument for a Rule of Reason approach to Antitrust enforcement. But in those heady days the main Antitrust conversation in the USA was about breaking up General Motors. Alfred Sloan's arrogance before a Congressional hearing on the subject said it best when he said (as the Chairman of GM) that "What's good for General Motors is good for the USA".

Being the company punk at the bottom rung of humanity did not work well for me and I was gone from there in about fifteen months, off to General Mills in Minneapolis where I was to become their chief Antitrust lawyer. What a different world that was! General Mills' gross sales then were less than general Motors' net profits. Gone were notions of market power assessed simply on size.

During my eight years at General Mills the company went from $ 400,000,000 to over $ 1,000,000,000 in sales. What crossed my desk went from almost total behavior issues like price and other discrimination under the Robinson-Patman Act to merger cases where market position was the government's shop worn theory. That is probably why the government lost its first merger case under Section 7 of the Clayton Act when it attacked our acquisition of Gorton Seafood.

I learned that it was a total boondoggle in price fixing cases to undertake pricing studies in the "hope" that it might show pricing disparity rather than pricing lock step. Later in private practice it became obvious that in price fixing cases involving large defense law firms those pricing "studies" were simply billing binges. They always showed near uniform pricing in every case I ever saw and many times they were done even after client company employees had told the lawyers that the conspiracies had indeed happened and described how they worked. There was no hope that any "pricing study" would ever show disparity. Worse still, once the results were in it was not permissible to destroy the studies despite the attorney work product rule without violating obstruction of justice statutes. That ploy was sorely missed by the heavy billers. I never let my clients participate in them for obvious reasons - they were always evidence favoring conviction with the potential to make plea bargains much more difficult.

Executives had become accustomed to slap on the wrist sentences in price fixing cases. After all, they were the most respectable of our citizenry, belonging to the right country clubs and all that stuff. In the Farm Implement case the executives were given jail time, and I met the lawyer of the one who committed suicide because of it. He never got over it. I met him as an opposing counsel in some negotiations in which his client wanted price controls over my client as part of the agreement. When I raised the price fixing risk in the negotiations they gave up on that point immediately.

At the end of the Johnson administration the antitrust specialty practice went to hell in a hand basket. Lyndon Johnson filed the last big case of that era on his last day as President with the Justice Department filing the IBM monopolization case. One Wall Street firm had 168 lawyers jobbing that file for years. On the day after the government wimped out with a nothing of substance consent order every associate who had worked on that case for the firm was summarily discharged. They flooded the job market with resumes stating that their only professional experience for many years of practice was working on screening documents for production or exclusion in discovery disputes in the IBM case. They were then the world's least useful and least employable attorneys.

During the so called Arab oil embargo of the mid 70s, when major oil companies were withholding so much oil from the market to cause prices to go up that it made the old Socony Vacuum case look like the most modern of fact patterns, many oil companies decided to use the scenario to get rid of dealers and distributors who had contributed to price cutting. As one executive's memo described it, it would be "the final solution to the price cutting dealers". Major oil companies withdrew from each others' markets when they had small market share in that market, terminating their dealers and distributors in those markets.

Somehow I managed to keep all my clients in business thanks to 28 USC Section 1641, the so called All Writs statute that would allow a federal district judge to issue orders to preserve the equity jurisdiction inherent in the case. That was a stretch, but one which my opposition did not want to take up on appeal. So my clients stayed in business throughout the so called shortage and were then picked up by other refiners when the conspiracy ran out of gas.

The occasional defense of a price fixing case would walk in the door of my firm thereafter, but diversification was the key to survival. I wouldn't touch plaintiff class action price fixing cases. They became pariah cases due to plaintiff counsel abuses. In my opinion those would be out of character for that reason and for the reason that the various plaintiff class counsel constantly fought each other for pieces of the billing pie, trying always to outdo each other for things that produced little or no value for the plaintiff class itself. Members of these class action cases rarely get a lot of money. The lawyers get most of the cash. I saw from the defense side antics by plaintiff counsel that would simply turn your stomach. We tried construction and tender offers and anything else that walked in with good facts and resources to pay for representation. Then luck handed me a really good franchising case.

Antitrust as a specialty practice was done in by globalization and the digital age. Market definitions are no longer meaningful without consideration that any location is reachable by any seller. You don't have to leave your home to buy anything but booze and groceries anymore. Life is much better for most due to that increased participation. It helps that I live in Houston, perhaps the most hospitable place on the planet in every conceivable dimension. In Detroit things are still rather bleak and it will be a long road to recovery for them.

Fortunately for me, my practice is a national/international practice and I am not dependent upon the vicissitudes of any particular location. In retrospect I think that most people/companies think of Detroit law firms as essentially for local matters, including its larger firms. Some have opened offices elsewhere but that has not often been what was hoped for. In Texas one does not have that kind of limitation. I seriously believe that the last 30 years in Houston have played a major role in enabling the expansion of the scope of what I do. For that I will eternally be grateful.