CITIZENS FOR VOLUNTARY TRADE

OFFICIAL REPORTS

THE RULE OF ONE:

REVIEWING THE SUPREME COURT’S YEAR IN ANTITRUST1

CVT Reports No. 4 / July-August 2004

The Solicitor General of the United States is arguably the most

prominent non-Cabinet, non-military officer in the federal
government. Although subordinate to the attorney general, it is the
solicitor general who conducts the executive branch’s important
business before the Supreme Court and other federal appellate
courts. Even when the government is not a party to a case, the
solicitor general, either by his own initiative or by judicial
invitation, will submit briefs and participate in oral arguments in
important Supreme Court cases. The solicitor general even
maintains a second working office in the Supreme Court building
(the Vice President is the only other official who maintains offices
in two branches of the government.) Given all this, it’s no surprise
that many in the legal community refer to the solicitor general as
the “tenth justice” of the Supreme Court.
Theodore Olson recently resigned as solicitor general after three
years. Olson’s appointment to the position by President Bush was
not unexpected: Olson successfully represented then-Gov. Bush in
the two Supreme Court cases that arose from the contested 2000
election in Florida. Before that he was a senior Justice Department
official in the Reagan administration and a longtime partner at the
law firm of Gibson, Dunn & Crutcher.
During the recently concluded term of the Supreme Court,
Olson’s office participated in four cases dealing with the antitrust
laws, only one of which the government was an actual party in. He
personally argued one case as a friend-of-the-court, or amicus curiae.
But even when General Olson did not appear individually, the

1This report was prepared by CVT staff. The staff thanks S.M. Oliva, Tom Ciavarella,
Nicholas Provenzo, Doug Messenger, Nicholas Fobe, Rick Merritt, Roger Blakelock,
Howard Bashman, and Judge Roy Snyder.
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power and gravitas of his office remained at the center of the

Supreme Court’s decision-making. In all four of the antitrust cases,
the position explicated by Ted Olson’s office carried the day. More
remarkably, in all four cases combined, there was only one
dissenting vote. Contrary to the common portrayal of the Supreme
Court as a five-to-four, sharply divided partisan entity, the 2003
Term’s quartet of antitrust cases reveal a Court in near-perfect
lockstep with the executive branch.
None of the four cases makes for exciting historical narrative.
The first deals with the fallout of Congress’ epic 1996 rewrite of the
nation’s telecommunications laws; the second addresses the Postal
Service’s amenability to antitrust suits; the third looks at the plight
of foreign companies against an alleged conspiracy of vitamin
manufacturers; and the fourth represents the latest chapter in the
technology industry’s antitrust wars: A dispute over discovery
rules. Despite the lack of popular excitement, each case produced
an important statement on the scope and application of the nation’s
antitrust laws, and the solicitor general’s role in shaping the Court’s
consensus on these issues speaks an often-overlooked truth: When
it comes to much of the Supreme Court’s docket, the Court often
speaks with one voice—that of the Office of the Solicitor General.
This report summarizes and criticizes each of the four antitrust
cases decided by the Supreme Court this past term, with an
emphasis on the solicitor general’s position and arguments. The
cases are presented in the order they were decided: Verizon
Communications Inc. v. Law Offices of Cutis V. Trinko, LLP (decided
January 13, 2004); Postal Service v. Flamingo Industries (USA) Ltd.
(February 25, 2004); F. Hoffman-LaRoche Ltd. v. Empagran S.A. (June
14, 2004); and Intel Corp. v. Advanced Micro Devices, Inc. (June 21,
2004).

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Verizon Communications Inc. v. Law Offices of

Curtis V. Trinko, LLP2
Introduction
In 1996, Congress passed the Telecommunications Act3 (the
1996 Act), which was intended to “de-monopolize” the telephone
industry by requiring local telephone companies to open their
networks to competitors. The Act created a wholesale telephone
service market, where the incumbent local carrier would sell their
telephone service to one or more rivals, who would then resell
services to the consumer. A rival carrier could also choose to build
its own network and connect it to the incumbent’s network at rates
controlled by the applicable state utility regulator. As a third
option, the rival could lease the incumbent’s network on an a la
carte or “unbundled” basis.
When the 1996 Act was adopted, NYNEX was the incumbent
telephone carrier in New York State. Today, following a series of
mergers, NYNEX is known as Verizon. In 1997, following the
terms of the 1996 Act, Verizon obtained regulatory approval from
New York of an agreement to connect its network to that of AT&T.
Verizon also obtained approval from the Federal Communications
Commission, in 1999, to offer long distance telephone service,
which required Verizon, among other things, to offer rivals
“nondiscriminatory access” to its telephone network in New York.
Later in 1999, AT&T, a rival, complained that Verizon was not
fulfilling its obligations under the agreements described above.
Specifically, AT&T said that orders it placed on behalf of its New
York retail customers were not being processed by Verizon’s
computers. Verizon said this was due to a software error. In
March 2000, following an investigation, the FCC and New York
officials issued orders requiring Verizon to remedy the situation
and pay fines of $3 million to the federal government and $10
million to AT&T and other affected rivals. By July 2000, Verizon
was processing wholesale orders without incident, and the
government orders were terminated.
One day after the FCC entered its March 2000 order, a New
York law firm, the Law Offices of Curtis V. Trinko, LLP (hereinafter

2 No. 02-682.
3 Public Law 104-104.

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“the Trinko firm” or “Trinko”) filed a federal class action lawsuit in

Manhattan against Verizon. The Trinko firm purchased its
telephone service from AT&T, who in turn purchased the service
wholesale from Verizon. The lawsuit claimed, in part, that
Verizon’s failure to process AT&T orders in a timely manner
constituted an attempt to monopolize the New York telephone
market, in violation of Section 2 of the Sherman Act.4 The Trinko
complaint relied solely on the December 1999 events, as described in
the FCC’s order.
A U.S. district court judge dismissed the Trinko firm’s
complaint. On the Section 2 claim, the court relied on a 2000 case
from the Chicago-based Seventh Circuit that found “deficient
assistance to rivals” alone could not form the basis of a Section 2
claim.5 The Second Circuit, however, which has jurisdiction over
New York, reinstated the Section 2 antitrust claim, relying on that
court’s longstanding view that a “monopolist has a duty to provide
competitors with reasonable access to ‘essential facilities,’ facilities
under the monopolist’s control and without which one cannot
effectively compete in a given market.”6 The Second Circuit also
said the Trinko firm could argue that Verizon illegally “leveraged”
its monopoly over the “wholesale” telephone service market to
dominate the retail market; under this theory, Verizon provided
ineffective assistance to AT&T in order to convince the latter’s
customers to drop AT&T and purchase telephone service directly
from Verizon.
The Supreme Court granted Verizon’s subsequent petition for
certiorari on the sole question, “Did the [Second Circuit] err in
reversing the District Court’s dismissal of [the Trinko firm’s]
antitrust claims?”

In the Supreme Court

Verizon argued that the 1996 Act’s requirement that an
incumbent telephone carrier assist its rivals did not extend the
incumbent’s liability under the antitrust laws. Verizon said the
Supreme Court’s cases only articulated a limited duty to deal with

4 15 U.S.C. ÿ 2.
5 See Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th Cir. 2000).
6 Brief for Petitioner at 8. (All citations to case documents refer to the case under
discussion, unless otherwise noted.)

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competitors, and that the Trinko claim did not fall under that duty.
While the 1996 Act does not any waive existing antitrust liability—
the law explicitly states so—it does not create any new antitrust
claims based on its provisions, Verizon argued. And in any event,
Verizon said, the Trinko firm lacks standing to pursue a Section 2
claim because the firm “is not a customer of Verizon, or even a
would-be customer of Verizon, but a customer of Verizon’s
customer, AT&T.”7 Verizon said the Trinko firm’s injury was
“indirect” and thus not actionable under Section 2.
Solicitor General Olson filed a brief, and personally appeared at
oral argument, in support of Verzon. Olson told the Court, “It is
not a Sherman Act violation to breach a telephone interconnection
agreement.”8 His brief attacked the Second Circuit’s reliance on
“essential facilities” and monopoly leveraging theories, saying that
a Sherman Act violation required a demonstration “that the
challenged conduct be exclusionary or predatory—i.e. that the
refusal [to deal] not make economic sense except as an effort to
diminish competition.”9
Olson’s brief did not take a position on Verizon’s claim that the
Trinko firm, as an indirect customer, lacked standing. At oral
argument, he told the Court, “[The Government] feel[s] that the
question of whether or not there’s an antitrust violation in this case
comes before the determination of antitrust injury.”10 In other
words, since the Trinko firm never stated a valid antitrust claim, it
didn’t matter whether they have standing. The justices challenged
Olson’s position during the argument, and while he admitted the
Trinko firm would probably have standing to pursue an antitrust
claim against Verizon, the firm still had to allege a recognized
antitrust injury.
The Court issued its opinion on January 13, 2004, more than
four years after the initial Verizon software error gave rise to this
case. All nine justices voted to reverse the Second Circuit’s
judgment and dismiss the Trinko complaint. Six justices, led by
Justice Scalia, substantially agreed with the interpretation of Section
2 advanced by Verizon and the solicitor general. Justice Scalia said

7 Id. at 45.
8 Transcript of Oral Argument at 16.
9 Brief for the United States and the Federal Trade Commission as Amici Curiae at 9.
10 Transcript at 16.

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the 1996 Act “preserves claims that satisfy existing antitrust

standards, but does not create new claims that go beyond these
standards.”11 And under existing standards, Justice Scalia said,
Verizon’s alleged refusal to provide AT&T timely access to its
network did not constitute an “attempt to monopolize” under
Section 2. He added that requiring companies to share facilities
would actually lead to antitrust violations, not prevent them:
[Compelling firms to share “essential facilities”] may
lessen the incentive for the monopolist, the rival, or
both to in-vest in those economically beneficial
facilities. Enforced sharing also requires antitrust
courts to act as central planners, identifying the
proper price, quantity, and other terms of dealing—a
role for which they are ill-suited. Moreover,
compelling negotiation between competitors may
facilitate the supreme evil of antitrust: collusion.12
Ultimately, Justice Scalia said, the complex regulatory scheme
imposed by the 1996 Act was a more effective means of remedying
“anti-competitive harm” in the telephone industry, and that “the
additional benefit to competition provided by antitrust
enforcement” would likely prove insubstantial.
Justice Stevens, in an opinion joined by Justices Souter and
Thomas, said the Court should not have ruled on the substance of
the Trinko firm’s Section 2 claims, because as Verizon argued, the
firm lacked standing to bring an antitrust claim in the first place.
“AT&T, as the direct victim of Verizon’s alleged misconduct, is in a
far better position than [the Trinko firm] to vindicate the public
interest in enforcement of the antitrust laws,” Justice Stevens said.13

Commentary
The telephone industry is Exhibit A in the case against
government control of the economy. The 1996 Act was an effort to
deal with the local telephone monopolies that emerged in the
fallout from the 1980’s antitrust case against AT&T, itself a product
of decades of monopoly protection by government officials. The
1996 Act was based on the idea of “free competition enforced by

11 Slip Opinion at 7.
12 Id. at 8.
13 Slip Opinion of Stevens, J., concurring in judgment at 2.

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law,” a concept novelist-philosopher Ayn Rand once called a

“grotesque contradiction in terms.”14 Requiring companies to sell
access to their telephone networks at government-mandated rates
was indeed a grotesque contradiction. Allowing individual
customers—and class-action antitrust lawyers—to exploit this
requirement by entertaining antitrust lawsuits for “ineffective
assistance” would have been even more grotesque. Thankfully the
Court plugged that hole in the 1996 Act’s regulatory dam.
The 1996 Act said nothing in the law constituted an exemption
from any existing duty under the antitrust laws. The Second
Circuit ignored Congress’ direction and substituted its own judicial
doctrines in imagining the Trinko firm’s “right” to sue Verizon.
The court of appeals relied on a school of antitrust thought that
believes private property rights should be disregarded when the
property in question is deemed “essential” to the interests of a
property owner’s competitor. While the 1996 Act itself does force
the sharing of facilities at government-controlled prices, at least it
does so in the context of an unambiguous congressional statute and
accompanying regulatory regime.
The Second Circuit’s doctrine, in contrast, is wholly lawless,
based on nothing more than an egalitarian sense of “fairness,”
which reflects the vague, indefinable language of the Sherman Act.
Trinko’s essential facilities and leveraging arguments are little more
than a demand for money based on the subjective perception that
Verizon acted with intent to deprive AT&T and its customers of
timely network access.
While the solicitor general properly denounced the Second
Circuit’s approach, the government’s reasons lacked credibility.
The crux of the solicitor general’s position—which merely reflects
the views of the government’s top antitrust regulators—is that for
any antitrust liability to attach, a plaintiff must allege “exclusionary
or predatory” conduct; that is, that Verizon’s failure to service
AT&T customers “not make economic sense except as an effort to
diminish competition.” The solicitor general said the Second
Circuit’s standards “improperly trivializes the antitrust laws and
encourages litigants to seek antitrust remedies for ordinary

14Ayn Rand, “Antitrust: The Rule of Unreason,” in The Voice of Reason: Essays in Objectivist
Thought at 255.

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commercial and regulatory disputes.”15 This argument is

unconvincing for two reasons.
First, the “exclusionary or predatory” standard suffers the same
flaw as the Second Circuit’s standards: It relies on ethical
subjectivism to determine legality. The government believes
businesses have a right to engage in voluntary trade, except when
they are deemed “monopolies,” at which point they must not take
any action to substantially affect market conditions in their favor,
lest they “reduce” competition, itself an idea that cannot be
measured quantitatively. It is “predatory,” for example, when a
firm lowers prices with the intent of driving a competitor out of the
market, because the competitor lacks the ability to match the lower
price. This is nothing more than a case of a dominant firm,
bolstered by its own competitive efficiency, exercising its property
rights. But because the intent was “anti-competitive”—a term that
can be applied to almost any commercial act—the government
deems such actions a Sherman Act violation. The Second Circuit
and the solicitor general may differ on what specific cases intent
should be illegal, but they agree on the underlying principle that
property rights cease to exist when government officials
disapprove of the property owner’s selfish motives.
Second, the solicitor general’s claim that the Second Circuit
trivialized the antitrust laws by allowing the Trinko firm to seek
Sherman Act relief for an “ordinary commercial and regulatory
dispute” is hypocritical. The primary function of the Sherman Act.
and the antitrust laws generally, is to replace private contracts with
ad hoc industrial planning by regulators and the courts. Most of the
Federal Trade Commission’s docket is clogged with “ordinary”
commercial disputes, where the government tries to rewrite
contracts to benefit one party over the other. For instance, the FTC
routinely forces physicians to “renegotiate” contracts with
insurance companies on the grounds that the existing contracts
paid doctors “above competitive” prices. Antitrust cases allow
parties, be they government lawyers or private litigants, to
disregard free market principles and reorganize industries
according to their whims. Viewed in this light, the Trinko firm’s
claims are no better or worse than a typical government antitrust
case.

15 Brief for the United States at 9.

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Indeed, the solicitor general’s opposition to the Trinko

complaint is less about protecting potential defendants from
expansive Sherman Act claims than it is protecting the
government’s existing regulatory schemes. Had the Trinko case
gone to trial and resulted in a substantial damage award, Verizon
and other telecommunications firms would be less likely to settle
future cases arising from the 1996 Act. Remember, the Trinko
complaint was based entirely on the findings of Verizon’s previous
settlement with the FCC and New York authorities. Had Verizon
anticipated a settlement would subject it to a Sherman Act lawsuit
(which allows defendants to obtain treble damages) by an indirect
purchaser, the company might have prolonged its dispute with the
government, generating unnecessary costs for all parties involved.
In this sense, the government’s position was correct: The 1996
Act could not function if every alleged violation triggered a
concurrent and previously unknown claim under the antitrust
laws. But once again, the problem is not with the government’s
conclusion, but with its inconsistent reasoning. Had there been no
conflict with the 1996 Act’s objectives, the solicitor general would
likely have endorsed or remained silent on the potential expansion
of antitrust liability. The antitrust agencies have a substantial
interest in keeping the Sherman Act’s reach as wide as possible—
there are hundreds of government jobs and millions of taxpayer
dollars tied to the enforcement of the antitrust laws.
Contrast the solicitor general’s position in Trinko with his later
argument in 3M Company v. LePage’s Inc.16, cautioning against an
attempt to restrict the potential scope of Section 2 liability. In 3M, a
defendant in a civil antitrust lawsuit sought review of a $68 million
judgment based on a previously unknown legal theory: The Third
Circuit said a company is guilty of attempted monopolization,
under Section 2, when it bundles rebates for several products that a
competitor cannot match, even when such rebates do not result in
pricing below “marginal cost.” The solicitor general asked the
Supreme Court to ignore the uncertainty the Third Circuit’s
decision created in the business community, because it was more
important for the Court to “await further development of the case
law, and further insights from academic commentary.”17 (The

16 No. 02-1865.
17 Brief for the United States as Amicus Curiae, 3M Company v. LePage’s Incorporated, at 9.

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Court obliged and refused certiorari in June 2004.) In other words,

until the antitrust establishment has had a chance to decide ex post
whether a business practice is legal, the Supreme Court should
remain silent and not jeopardize a potential source of revenue for
the government and private antitrust bars.
The lesson for the Trinko firm, and other potential plaintiffs, is to
lobby federal antitrust regulators before filing lawsuits that rely on
novel theories of Section 2 liability. By avoiding conflicts with
existing regulatory regimes—and their armies of government and
private lawyers—antitrust plaintiffs can proceed confidant that the
Justice Department won’t stand between them and the extortion of
American businesses.

United States Postal Service v. Flamingo Industries (USA) Ltd.18

Introduction
Flamingo Industries manufactures mail sacks. Not surprisingly,
Flamingo’s largest customer was the U.S. Postal Service (USPS).
When USPS terminated Flamingo’s mail sack contract, the
company sued. Before a federal district court in California,
Flamingo accused the Postal Service of manipulating its own
procurement rules to get out of its Flamingo contract. This scheme,
according to Flamingo, consisted of USPS adopting “outdated
requirements for mail sacks that could not be met by the modern
machines used by Flamingo and other domestic manufacturers,
creating a pretext for canceling the domestic mail sack contracts.”19
The Postal Service then “declared a fake emergency” that enabled
them, under postal procurement rules, to sign no-bid contracts with
cheaper Mexican mail sack manufacturers.
Flamingo’s lawsuit said this scheme violated the Sherman Act,
because the Postal Service was trying to create a “monopoly” in the
market for mail sacks. The district court declined to decide the
merits of this argument, however, because it ruled USPS enjoyed
“sovereign immunity” from antitrust prosecution. The district
court relied on a traditional construction of the antitrust laws,

18 No. 02-1290.
19 Petition for a Writ of Certiorari at 2a.

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which holds the United States Government is not a “person”

capable of being sued under the Sherman Act.20
The Ninth Circuit reversed the district court and held that
Congress waived the Postal Service’s sovereign immunity when it
enacted the Postal Reorganization Act of 1970.21 Relying on a 1994
Supreme Court ruling involving the Federal Deposit Insurance
Corporation (FDIC)22, the Ninth Circuit said the fact that USPS
could “sue or be sued” in its own name, rather than in the name of
the United States, combined with court decisions treating the Postal
Service as a corporation under other statutes, defeated the claim of
Sherman Act immunity.
Solicitor General Olson, representing the Postal Service, asked
the Supreme Court to reverse the Ninth Circuit’s decision.

In the Supreme Court

Deputy Solicitor General Edwin Kneedler represented the
Postal Service at oral argument. Flamingo was represented by
Harold Krent, dean of the Chicago-Kent College of Law. The
solicitor general’s brief argued that the Ninth Circuit misapplied
the 1994 FDIC ruling, because that case required a finding that
Congress had created a substantive cause of action against a federal
agency where sovereign immunity had been withdrawn. The
Ninth Circuit, the solicitor general said, did not make such a
finding in this case. But more to the point, he argued, USPS was a
sovereign entity, and regardless of whether immunity was waived,
it cannot be sued under the antitrust laws, because those laws never
apply to instruments of the government.
“Throughout the nation’s history,” Kneedler told the Court,
“postal operations have been carried out by the United States
Government itself, pursuant to the express authorization of
[A]rticle I of the Constitution, for Congress to establish post offices
and post roads.” Kneedler emphasized that, “the furnishing of
postal services has been historically regarded as a sovereign

20 See United States v. Cooper Corp., 312 U.S. 600 (1941) (holding the United States was not a
“person” capable of bringing a civil antitrust lawsuit.)
21 39 U.S.C. ÿ 101, et seq.
22 FDIC v. Meyer, 510 U.S. 471.

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function, indeed a sovereign necessity, to promote intercourse

among the states and bind the nation together.”23
Flamingo countered the solicitor general’s reliance on the Postal
Service’s sovereign functions by highlighting the commercial
aspects of USPS’ operations following the adoption of the Postal
Reorganization Act. Harold Krent told the Court, “Congress
launched the Postal Service into the commercial world in 1970,
authorizing it to compete in any market of its own choosing, and
the new commercial entity fits comfortably within the term ‘person’
under the antitrust laws.”24 Krent explained that USPS was
allowed to compete in virtually any commercial market it chose to
with scant government oversight.
This argument was strongly supported in an amicus brief filed
by PostalWatch Incorporated, a nonprofit watchdog group. For
example, PostalWatch noted USPS’ extensive commercial
exploitation of intellectual property, something no traditional
government agency does:

The USPS regularly registers its trademarks and

copyrights, has abandoned its governmental
www.usps.gov web address in favor of the
commercial www.usps.com and regularly sells,
licenses or otherwise profits from the
commercialization of its intellectual property. It
generates tens of millions of dollars from the licensing
of its change-of-address database, address correction
data and stamp artwork for commercial
reproductions sold to the public. 25

PostalWatch also disputed the solicitor general’s claim that

delivering the mail was a “quintessentially sovereign” function:
“There is nothing inherent in the function of transporting messages
written on paper, using ink, or like materials, between private,
commercial, and other parties in the United States, which uniquely
requires sovereign status or sovereign immunity.”26

23 Transcript of Oral Argument at 3.

24 Id. at 24.
25 Brief of PostalWatch Incorporated as Amicus Curiae at 5.
26 Id. at 10.

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A second amicus brief, filed by the Center for the Advancement

of Capitalism (CAC), argued the Court should look not only to the
non-postal, commercial aspects of the Postal Service’s operations,
but also to the constitutionality of USPS’ structure. Relying on a
1986 Supreme Court decision, Morrison v. Olson27, CAC said that if
the Postal Service was a sovereign entity under the Executive
Branch, there was a constitutional problem, because USPS’ chief
executive was not appointed by the president of the United States.
Article II of the Constitution grants the president exclusive power
to appoint the heads of executive departments, but permits
Congress to invest the appointment of “inferior” officers in other
individuals. The Postal Reorganization Act places control of the
USPS with an 11-member Board of Governors. Nine governors are
appointed by the president with the consent of the Senate, as
contemplated by Article II. These nine, however, then appoint the
other two governors: the postmaster general—the Postal Service’s
CEO—and the deputy postmaster general.
CAC said this method of appointing the postmaster general
violated the Court’s interpretation of Article II in Morrison. That
case involved a challenge brought by Ted Olson before he became
solicitor general to a law permitting three federal judges to appoint
an independent counsel, an executive branch officer, who could
only be fired “for cause” by the attorney general. Olson, then the
target of an investigation conducted by Independent Counsel
Alexia Morrison, said the independent counsel was a “superior
officer” who had to be appointed and fired by the president at-will.
Morrison countered that she was an “inferior officer” subject to the
attorney general’s control, and thus it was constitutional for
Congress to vest her initial appointment with the judiciary.
The Court held that Morrison was an “inferior” officer for three
reasons, CAC’s brief explained:
First, the [Independent Counsel] was “subject to
removal by a higher Executive Branch official”;
second, the law provided only “certain limited
duties” for the Independent Counsel, or put another
way, the office did not “include any authority to
formulate policy for the Government or the Executive

27 487 U.S. 654 (1988).

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Branch”; finally, the office itself was “limited in

jurisdiction.” The Morrison Court read all three of
these factors together in holding the Independent
Counsel was unmistakably an inferior officer under
the Appointments Clause.28
CAC said that under all three of these tests, the postmaster general
was a “superior officer,” and thus either the Postal Reorganization
Act was unconstitutional or the Postal Service was not, in fact, a
“sovereign” entity.
A third amicus brief was filed in support of Flamingo by the
American Trucking Associations (ATA), a trade group that
includes USPS competitors United Parcel Service and FedEx
Corporation. The brief, filed by former solicitor general Drew
Days, insisted that, “Congress intended that the federal antitrust
laws apply to all types of persons that are capable of monopolizing
commercial markets or restraining trade because Congress enacted
those laws to ensure that the market encourage economically
efficient behavior and innovation to benefit consumers.”29 ATA
maintained that the Postal Service’s status as an “independent
establishment” of the government meant that, outside its statutory
monopoly over letter-mail, USPS must “be treated like the other
participants in competitive markets and not as the United States
[Government].”
ATA presented evidence that the government previously
endorsed the idea of subjecting USPS to the antitrust laws. The
brief cites a 1978 Justice Department filing that said USPS was “a
Government corporation engaged in utility-like operations,” and
that “neither the case law nor sound public policy would indicate
that the Postal Service enjoys any comprehensive ‘sovereign
immunity’ from the antitrust laws.”30 Even as recently as 2002, the
brief added, the DOJ and USPS supported legislation that would
have expressly subjected the Postal Service’s non-monopoly
activities to the antitrust laws.
In the end, however, the Court ignored Flamingo and the amici
and unanimously ruled in favor of the Postal Service. Justice

28 Brief of the Center for the Advancement of Capitalism as Amicus Curiae at 6.

29 Brief for the American Trucking Associations, Inc. as Amicus Curiae at 2.
30 Id. at 23.

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Kennedy, writing for the Court, said that while Congress did waive
the USPS’ sovereign immunity, the Postal Service was still a
sovereign entity, and not a “person” capable of being sued under
the Sherman Act. Justice Kennedy said that Congress expressly
declined to organize the Postal Service as a “corporation,” and that
its official status as an “independent establishment” reflected its
quintessentially governmental function: “Our conclusion is
consistent with with the nationwide, public responsibilities of the
Postal Service,” which has different goals from private
corporations, the most important being “that it does not seek
profits, but only to break even.”31

Commentary
The antitrust laws, especially in modern times, embrace a fatal
contradiction: They condemn private firms that dominate their
markets through free-market competition while ignoring, even
embracing, firms that gain strength through government policies
and protections. For example, if two steel manufacturers merge,
the government will object on antitrust grounds, saying no firm
should have too large a share of the market. But the government
may concurrently impose tariffs on steel imports or enact
regulations that prevent new steel firms from opening, thereby
reducing competition and increasing prices in order to protect the
market position of incumbent firms. The antitrust laws act as if
these contradictions are non-existent or irrelevant.
In this case, we have perhaps the government’s most famous
monopoly, the Postal Service, deemed beyond the reach of the
antitrust laws on a subject that’s presumably unrelated to the mail-
monopoly created by Congress. Justice Kennedy’s opinion offers
the excuse that the Postal Service “lacks the prototypical means of
engaging in anti-competitive behavior: the power to set prices.”32
Antitrust enforcers frequently obsess over the alleged ability of
dominant firms to “unilaterally” determine prices. In a free
market, of course, all prices are set through voluntary transactions
between parties. The antitrust laws deem it suspicious, however,
when prices increase and inure to the seller’s benefit. The
discredited but still-used theory of “pure and perfect” competition

31 Slip Opinion at 9-10.

32 Id. at 10.

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holds that prices should be held as close as possible to “marginal

cost,” an arbitrary measure of cost that largely ignores the seller’s
investment and profit motive.
The Court placed the substantial weight of its analysis here on
the Postal Service’s not-for-profit motive. Profits are unique to
corporations, the Court reasoned, while the Postal Service fulfills a
larger “sovereign” duty to provide “universal” mail service,
regardless of cost. This argument bypasses the need to consider the
traditional antitrust principle of “marginal cost” since the Postal
Service, by its nature, is expected to keep prices just high enough to
cover costs and break even. Without the ability to substantially
exceed marginal cost, the theory says, there is no true monopoly
threat. This is how antitrust theory justifies real monopolies—
businesses backed by the government—while falsely condemning
private businesses for charging “monopoly prices.”
The Postal Service, in fact, does establish its own prices. The
only check on this power comes from the Postal Rates Commission
(PRC), which is an advisory panel that can only recommend rate
changes to the Board of Governors, who retain the final say. Justice
Kennedy contends that the absence of a profit motive plus the
PRC’s involvement in the process proves the Postal Service lacks
the power to charge “monopoly prices.” And while admitting the
Service can set prices for non-postal services free of the PRC’s
input, Justice Kennedy dismissed those services as irrelevant to the
USPS’ main objective of mail delivery.
It should not matter whether or not the Postal Service has a
profit motive. When competing in the marketplace against other
businesses, USPS should have to abide by the same rules. Judging
the legality of actions by “motive” alone is contrary to the rule of
law. Traditional legal principles only require intent to violate the
law, not any particular motive. Murder is murder whether done
for money or for revenge. Similarly, the courts have generally not
distinguished between antitrust violators on the basis of motive.
Indeed, not-for-profit corporations have been successfully
prosecuted by the government for antitrust violations.
The Postal Service may not have an incentive to set prices above
“marginal cost,” but like any government bureaucracy, USPS is
attempting to expand its operations beyond the scope of its original

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mission. It’s understandable why the Postal Service would want to

expand: The core mission of delivering letter-mail on a “universal”
basis is not financially self-sustaining. The United States is no
longer a loose confederation of 13 rural colonies but an integrated
nation that spans an entire continent. New methods of
communication have long rendered the Postal Service’s letter-mail
monopoly non-essential to the “national interest.” But because
modern political thinking strongly discourages eliminating any
government function, irrespective of its merits, USPS has been
permitted, indeed encouraged, to expand its activities into markets
already served by established private firms.
Justice Kennedy’s opinion ignores the consequences of allowing
the Postal Service to compete in any market it chooses to under a
different set of rules than private firms. Not only is USPS now
categorically exempt from antitrust laws, it can use its monopoly
over letter-mail as leverage to enter other markets at a competitive
advantage. When private firms do this, they are subject to
“attempted monopolization” charges under Section 2 of the
Sherman Act (see the discussion of the Trinko case above.) But no
private firm enjoys a statutory monopoly that criminalizes
competition as the private express statutes ban First Class mail
delivery. A private firm that leverages dominance from one market
in another must still compete to maintain its original market share.
The Postal Service will always have 100% of the letter-mail market
in addition to government backing and partial regulatory powers.
The other contradiction in this case is the idea that a function
can be “sovereign” without being political. Since the Progressive
Era, advocates of expanding government power have sought to
“take the politics out of” various government endeavors. The
Postal Reorganization Act was such an effort. Prior to the PRA, the
Post Office existed as a cabinet department under the direct control
of the president. Critics said the Post Office Department was
improperly used as a presidential patronage machine. This
argument had merit, but it missed the point: Any governmental
function is inherently political. The only way to eliminate politics
from an agency is to remove it from the government entirely.
The PRA, in contrast, kept the politics but removed the Postal
Service’s accountability to the constitutional branches of
government. The Postal Service lacks presidential control but

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exercises certain governmental powers; it has a monopoly over one

business but is exempt from the antitrust laws in all other
businesses; and it has no owners and does not operate for profit,
yet it is free to generate revenue in fields unrelated to the
“sovereign” objective of universal mail service.
Justice Kennedy’s opinion does nothing to address these
contradictions, and in fact encourages Congress and the president
to maintain the status quo with respect to USPS. But this does not
benefit the public, and it certainly doesn’t benefit the Postal
Service’s competitors in non-letter delivery businesses. The truth
is, there is no need for the government to maintain an artificial mail
monopoly through USPS. Whatever arguments justified the federal
government’s postal power in 1789 does not hold today. Indeed,
the Constitution authorizes Congress to establish post offices (and
post roads), but does not require Congress to maintain an extensive,
nationwide bureaucracy that excludes private competition.
Ultimately, as the contradictions continue to mount between the
Postal Service’s government functions and its business endeavors,
Congress will have to downsize the scope and authority of the
Postal Service. Congress may not abolish or privatize USPS, but it
must consider (1) restoring presidential control to bring the Postal
Service’s governing structures in accordance with Morrison; (2)
abolishing the private express laws, which prevent private
businesses from providing First Class letter-mail delivery; and (3)
prohibiting USPS from competing in any market unless it subject to
the same laws as existing competitors.
For its part, the Court must reconsider its expansive definition
of “sovereign” to encompass, without question, virtually any action
the government undertakes. In this case, Justice Kennedy found
that USPS was “sovereign” even when engaged in activities that
bore no relation to an enumerated constitutional duty. Because the
bulk of USPS’ activities fell within Article I’s Post Office Clause, the
Court reasoned, it had to be treated as “sovereign” in all instances,
and therefore beyond the Sherman Act’s reach. This reasoning
turns the classical American view of sovereignty on its head. As
CAC’s amicus brief said, quoting former chief justice John Jay,
“sovereignty is in the people of the Nation.” Every man is a
sovereign unto himself, with governments being constituted to
protect individual rights. No government may assume for itself

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sovereignty—power—that has not been expressly delegated

through its constitution.
The contemporary view of sovereignty, in contrast, views
governmental action as inherently valid so long as some “public”
purpose is articulated. But as a Virginia scholar wrote in 1820, in
response to the Supreme Court’s ruling in McCulloch v. Maryland,
this statist concept of sovereignty appears nowhere in the United
States’ founding documents:
Neither the declaration of independence, nor the
federal constitution, nor the constitution of any single
state, uses this equivocal and illimitable word . . . In
fact, the term “sovereignty,” was sacrilegiously stolen
from the attributes of God, and impiously assumed
by kings. Though they committed the theft,
aristocracies and republicks claimed the spoil.33
The federal courts have historically been reluctant to question the
Executive Branch’s expansionist assumptions of power. Often the
Supreme Court will hide behind a vapid sense of pragmatism to
justify deference to the president and Congress on subjects that the
Constitution never committed to those branches in the first place.
In this case, we saw this unjust deference to the second degree—
first to support the existence of the antitrust laws (a perversion of
Article I’s Commerce Clause), and second to support the notion
that government agencies are presumed immune from the laws of
the land under some extra-constitutional judicial doctrine, as
opposed to expressly immune under the Constitution or the law
itself.
Flamingo Industries exposed a basic contradiction when it filed
an antitrust lawsuit against USPS—the Sherman Act bans all
monopolies, except those maintained by the government in
defiance of constitutional principles. Rather than address this
contradiction, however, Justice Kennedy and all of his colleagues
chose to reiterate the longstanding judicial myth that “sovereignty”
of the state outweighed any individual’s claim to justice. That this
explanation itself was a contradiction—how can a nation

33 John Taylor, Construction Construed and Constitutions Vindicated at 21 (Shepherd and

Pollard, 1820), cited in Randy E. Barnett, Restoring the Lost Constitution at 172-173
(Princeton Univ. Press, 2004).

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predicated on individual sovereignty place a state entity above the

law?—was either lost on or ignored by the Court.

F. Hoffman LaRoche Ltd. v. Empagran, S.A.34

Introduction
The United States and several foreign governments conducted a
worldwide investigation of alleged price-fixing in the vitamin
industry. In 1999, Rhþne-Poulenc SA, a large vitamin
manufacturer, began cooperating with the U.S. Department of
Justice in exchange for amnesty from criminal prosecution. Rhþne-
Poulenc’s cooperation resulted in more than two dozen plea
agreements with other vitamin companies and individual
defendants, generating more than $900 million in criminal fines.
The government’s criminal investigation naturally led to a rash
of civil lawsuits against the vitamin manufacturers. A series of
lawsuits brought by American vitamin customers yielded more
than $2 billion in settlement payouts.
In July 2000, five foreign companies based in Australia,
Ecuador, Panama, and Ukraine brought their own class action
lawsuit against several vitamin companies in U.S. district court in
Washington. The proposed class included “all foreign entities that
purchased vitamins for delivery in foreign countries.” Because the
plaintiffs only described commercial acts that took place outside
the United States, the district court dismissed the complaint for lack
of jurisdiction.
The U.S. Court of Appeals for the District of Columbia Circuit
reversed the district court’s dismissal. Although the Foreign Trade
Antitrust Improvements Act of 1982 (FTAIA) precludes U.S. courts
from hearing antitrust lawsuits arising from foreign commerce, the
appellate court said the plaintiffs could proceed with their lawsuit,
because they described foreign actions that also affected U.S.
commerce. Although the plaintiffs, as foreign companies, could not
pursue those domestic claims, other potential plaintiffs could,
thereby giving U.S. courts subject-matter jurisdiction over all
claims.

34 No.

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The defendants asked the Supreme Court to reverse the D.C.

Circuit’s ruling, which they said conflicted with a previous decision
of the Fifth Circuit.

In the Supreme Court

Although it was the U.S. government’s criminal investigation
that eventually led to the foreign plaintiffs’ lawsuit, the Department
of Justice supported the vitamin manufacturers in this dispute. R.
Hewitt Pate, the assistant attorney general for antitrust, appeared at
oral argument as amicus curiae for the defendants. Pate told the
Court that permitting U.S. courts to hear foreign civil antitrust
lawsuits would harm the DOJ’s efforts to work with foreign
governments in pursuing criminal antitrust violators. “There’s
nothing in the FTAIA, much less any clear congressional statement,
in [a] statute that after all was jurisdiction-limiting in intent, that
would require jeopardizing our progress in those enforcement
efforts through a dramatic extraterritorial application of U.S treble
damages litigation,”35 Pate said, referring to the fact that civil
plaintiffs in U.S. antitrust litigation can recover trebled damages.
Pate emphasized the importance of the DOJ’s amnesty program,
whereby alleged members of a price-fixing agreement can receive
immunity from criminal prosecution in exchange for providing
evidence against co-conspirators. But amnesty applicants are
usually not immunized from civil lawsuits and potential treble
damages. Since many price-fixing arrangements involve firms
doing business throughout the world, Pate said companies would
not cooperate with U.S. officials if they were subject to civil
lawsuits by domestic and foreign plaintiffs:
[I]t is our experience that when a company finds that
its employees for freedom from criminal liability
against the certainty that civil treble damages will
follow. And to make the type of sea change in the law
that's advocated by [the plaintiffs] here to provide for
unquantifiable, potentially unknowable worldwide
liability will in our judgment lead to the risk that
companies who discover this type of conduct will

35 Transcript of Oral Argument at 17-18.

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instead hunker down and simply hope not to be

detected.

The effect will be even more dramatic with respect to

the amnesty programs of some of our trading
partners, such as the countries who have filed briefs
here, because in those systems, treble damages are
simply unknown. So while we fear a marginal
decrease in the effectiveness of our program, there
would be a dramatic impact on foreign amnesty
programs.36

The plaintiffs’ brief, filed by attorney Thomas Goldstein,

dismissed Pate’s concerns as overblown. The brief noted that the
DOJ amnesty program only dated back to 1993 and that Congress
was considering (and has since passed) legislation to reduce treble-
damage liability for certain defendants that seek amnesty. And in
any case, the brief said, the FTAIA applies equally to criminal and
civil lawsuits: If the plaintiffs can’t pursue their civil claims, then
the DOJ should not have been able to pursue its civil and criminal
claims. The antitrust allegations involved a worldwide market for
vitamins, and domestic and foreign lawsuits could be dealt with in
U.S. courts without running afoul of the FTAIA.
The defendants’ brief, filed by attorney Arthur Golden,
countered that the plaintiffs could not simply allege a “global
conspiracy” to establish U.S. jurisdiction. “U.S. antitrust law does
not protect international competition for its own sake,”37 the brief
said, but rather focuses on protecting domestic commerce from the
effects of illegal actions. It is the effects, not the conduct, that is
central to establishing jurisdiction, the plaintiffs argued.
With Justice O’Connor recused, the remaining eight justices
voted unanimously to vacate the D.C. Circuit’s decision. Six
justices, led by Justice Breyer, held that where “the price-fixing
conduct significantly and adversely affects both customers outside
and within the United States, but the adverse foreign effect is
independent of any adverse domestic effect,”38 foreign plaintiffs are

36 Id. at 18-19.
37 Brief for Petitioners at 36.
38 Slip Opinion at 7.

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prohibited under the FTAIA from raising an antitrust claim in U.S.

courts. Justice Breyer cited language from a congressional
committee report on the FTAIA to support this interpretation. In
addition, Justice Breyer said the Court did not want the FTAIA
read so as to conflict with the antitrust laws of other countries: “It is
not reasonable to apply American laws to foreign conduct insofar
as that foreign conduct causes independent foreign harm that alone
gives rise to a plaintiff’s claim.”39
Justice Scalia, joined by Justice Thomas, issued a one-paragraph
opinion joining in the Court’s judgment, saying, “the language of
the [FTAIA] is readily susceptible of the interpretation the Court
provides and because only that interpretation is consistent with the
principle that statutes should be read in accord with the customary
deference to the application of foreign countries’ laws within their
own territories.”40 Justice Scalia disfavors interpreting laws
according to “legislative history,” which includes materials such as
the committee report cited in Justice Breyer’s majority opinion.
The Court’s decision did not end the underlying case. Justice
Breyer said the plaintiffs could ask the court of appeals to consider
an alternate claim that tied the alleged foreign antitrust injury to
effects on U.S. commerce. The Court’s opinion, Breyer said, only
precluded a claim predicated on conduct that caused foreign injury
independent of any domestic effects.

Commentary
Like the Trinko case, the Justice Department here makes a self-
serving argument: The antitrust laws should not be expanded to
cover private lawsuits that could undermine government
objectives. Hewitt Pate’s call to protect the government’s ability to
coerce settlements from defendants accused of price-fixing betrays
a central tenet of the modern antitrust establishment—why fight to
vindicate your rights when you can give the government
everything they want, behind closed doors and without meaningful
judicial or public scrutiny?
Price-fixing is considered a crime under the Sherman Act, but it
is not a crime under the objective definition of that term. In the

39 Id. at 8.
40 Slip Opinion of Scalia, J., concurring in judgment, at 1.

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American constitutional system, a crime requires the violation of an

individual’s rights. The term “rights,” in turn, defines man’s
freedom of action within a social context. Rights are reciprocal: I
recognize your right to life, and you recognize mine. The
Declaration of Independence and the Constitution enunciate four
broad categories of rights: life, liberty, property, and the pursuit of
happiness. The latter three, however, all derive from the right to
life. A theft violates the victim’s right to use his property, and, by
extension, his right to live his life according to his chosen values.
The Sherman Act criminalizes price-fixing because, in the
government’s judgment, customers (and potential customers)
possess a right to “competition” in any given market. When the
vitamin manufacturers in this case voluntarily agreed to set prices
and outputs for their products, the government said the rights of
consumers were violated. This “right” is predicated on the view
that producers have a duty to “compete” against one another and
strive to sell their products at the lowest possible price. But such a
duty, especially when imposed by the government through force, is
inconsistent with free market principles. In a free market,
individual firms may act unilaterally or in concert with other firms,
as their mutual self-interests dictate. A corporation, after all, is
nothing more than a combination of investors and employees that
might otherwise compete against one another. A price-fixing
“cartel” is no different or less ethical (unless it is backed by
government force, such as OPEC).
Antitrust theory seeks to create non-reciprocal rights, which is a
contradiction in terms. The antitrust laws arbitrarily divide society
into “consumers” and “producers,” and assign the latter group a
lesser degree of legal protection. This is done under the pretext of
protecting competition. Competition, however, is not rooted in
man’s freedom to act, but rather it is a reflection of economic
scarcity. Whenever the demand for an economic good exceeds
supply, competition exists. (This is not unique to human society—
competition occurs in nature among non-rational animals.) It is
unnecessary, and economically inefficient, for the government to
maintain a particular level or method of competition by force. A
free market deals with competition and scarcity through private
contract and without not coercive third-party intervention. The
antitrust laws, in contrast, hold that violent intervention is superior

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to private contract whenever the government deems it expedient.

This view is a repudiation of the reciprocal nature of rights.
It was the Justice Department that committed a crime—a
violation of individual rights—by investigating and prosecuting the
vitamin manufacturers. The government disregarded private
contracts and unilaterally decided to redistribute resources through
a series of punitive fines and restrictions on future business
practices. The subsequent civil lawsuits against the vitamin
manufacturers, including the foreign complaint at issue in this case,
are secondhand efforts to compound the government’s extortion.
The Justice Department believed, with justification, that
allowing the foreign plaintiffs’ lawsuit to proceed would
undermine the U.S. government’s power to coerce “cartel”
members into seeking amnesty from criminal antitrust prosecution.
But in order to reach this conclusion, as the plaintiffs noted, the
government had to argue a contradiction: The Justice Department
usually defines the geographic market in antitrust cases as the
entire world, yet the plaintiffs in this case were told they had to
allege a more specific U.S.-based injury. This contradiction is not
limited to American antitrust enforcement. The European Union,
for instance, claims the power to fine an antitrust violator based on
percentage of worldwide revenues, not just those generated in EU
nations.
Despite the government’s argument that expanding FTAIA’s
reach in civil cases would undermine international comity, the
Department of Justice and Federal Trade Commission have
expended substantial resources in recent years to lobby other
nations into adopting strict, U.S.-style antitrust laws. It is federal
policy to make antitrust policy uniform throughout the world.
Thus, it is disingenuous for the government to argue here that they
seek to respect each nation’s right to decide its own antitrust policy.
The Justice Department simply did not want to compromise its
existing amnesty program in order to achieve worldwide antitrust
hegemony.

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Intel Corporation v. Advanced Micro Devices, Inc.

Since the 1850s, federal law has authorized American courts to
compel the testimony of witnesses for use in foreign judicial
proceedings. The current version of this rule, 28 U.S.C. ÿ 1782, says
a district court “may” order testimony or document discovery “for
use in a proceeding in a foreign or international tribunal . . . upon
the application of any interested person.”
Intel and Advanced Micro Devices (AMD) are well-known
competitors in the microprocessor industry. AMD believed that
Intel had violated European Union antitrust law by through acts of
price discrimination, illegal rebates, exclusive arrangements with
customers, and other abuses of its “dominant position.” Under the
EU’s governing treaties, any party may file an antitrust complaint
with the Commission of the European Communities, the EU’s
executive branch. AMD filed such a complaint with the
Commission’s Directorate-General of Competition (DGC).
The DGC has exclusive authority to investigate antitrust
complaints and issue an administrative decision through the
Commission. If the DGC decides a complaint has merit, it then
issues a Statement of Objections, and the respondent is afforded the
right to a closed-door hearing. This is not a judicial proceeding,
however, but rather a private meeting between the respondent’s
representatives and the DGC. Only after this hearing does the
DGC, through the Commission, issue an administrative decision.
A respondent can then seek judicial review of the Commission’s
action with the European Court of First Instance and the European
Court of Justice. The party filing the complaint also has a limited
right to seek review in the Court of First Instance if the DGC
decides not to conduct a full investigation.
In January 2001, the DGC, acting on AMD’s complaint, directed
Intel to produce documents and answer questions related to
AMD’s charges. Intel was later given a partial copy of AMD’s
complaint and told to file a formal answer. AMD also made
additional submissions to the DGC. Intel and AMD never shared
their respective DGC filings with one another, however.
AMD encouraged the DGC to conduct discovery in the United
States under ú1782. When the DGC declined to do so, AMD filed
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roughly 600,000 pages of documents from Intel. The district court

refused to issue the order, agreeing with Intel that a preliminary
investigation before a prosecutorial agency did not constitute a
“proceeding in a foreign or international tribunal,” as required by
the statute.
The Ninth Circuit reversed the district court and ordered a
hearing on the merits of AMD’s request. The court of appeals said
that ú1782 was applicable here because the DGC’s investigation
would likely lead to a “quasi-judicial proceeding,” either because
the Commission would conclude Intel violated EU law, thus
leading Intel to appeal to the European courts, or because the DGC
would decline further investigation, allowing AMD to appeal. The
Ninth Circuit further rejected Intel’s claim that the materials sought
by AMD in the U.S. were not subject to discovery in the EU. The
court said it was irrelevant that EU law expressly denied discovery
rights to AMD, because ú1782 was intended to provide maximum
assistance to foreign tribunals.
Following the Ninth Circuit’s decision, a federal magistrate
judge told AMD to narrow the scope of its discovery requests to
matters directly related to the DGC’s investigation. This
proceeding was delayed, however, when Intel’s petition for
certiorari was granted by the Supreme Court on the Ninth Circuit’s
decision.

In the Supreme Court

The most interesting aspect of the Supreme Court’s proceedings
in this case was not the principal conflict between Intel and AMD,
but the conflict between the U.S. and EU governments. Both
entities appeared at oral argument: The United States for AMD,
and the European Union, paradoxically, for Intel.
The solicitor general’s brief mirrored AMD’s position that ú1782
“authorizes, but does not require” a district court to order
discovery in an EU investigation that might lead to an adjudicative
proceeding. The brief said ú1782 did not “categorically prohibit”
the type of discovery sought by AMD. Nor did the solicitor general
agree with the Ninth Circuit and Intel that the European
Commission, an executive and administrative body, was not a
“tribunal” under ú1782. “The European Commission is a ‘foreign or
international tribunal’ within the meaning of Section 1782 because

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it exercises adjudicative functions,” the brief said.41 The solicitor

general emphasized that ú 1782 “authorizes district courts to
compel testimony and documents for use in an investigation that
may lead to a governmental adjudication.”42
The European Commission, appearing as amicus curiae
supporting Intel, disputed the solicitor general’s definition of
“tribunal.” The Commission said it was not performing an
“adjudicative” function in conducting a preliminary investigation
of AMD’s complaint against Intel, and therefore ú 1782 did not
apply. Carter Phillips, representing the Commission at oral
argument, said that EU policy was to go through governmental
channels—i.e. a request issued through the FTC or DOJ—to obtain
information for investigations. What the EU did not want, Phillips
maintained, was for private parties to file complaints with the
Commission in order to obtain discovery rights in U.S. courts
under ú 1782 that they would not otherwise have.
The Court ultimately supported the solicitor general and AMD.
By a vote of 7-1 (Justice O’Connor was again recused), the justices
held that ú 1782 “authorizes, but does not require, a federal district
court to provide assistance to a complainant in a European
Commission proceeding that leads to a dispositive ruling, i.e., a
final administrative action both responsive to the complaint and
reviewable in court.”43 Justice Ginsburg, writing for the majority,
said the Commission constituted a “tribunal” when it acted as an
initial decision-maker, and that AMD was an “interested person”
entitled to seek discovery in U.S. courts. Justice Ginsburg rejected
Intel’s argument that a Commission investigation did not qualify as
a “proceeding” simply because no adjudication was imminent.
Justice Ginsburg’s opinion enunciated several factors for the
district court to consider on remand—when AMD’s specific
discovery requests will be ruled upon—but did not establish any
categorical rules for handling future ú 1782 requests. The factors
included whether the party discovery is sought from is already a
participant in the foreign proceeding (an existing party, as Intel is
here, is already subject to the Commission’s jurisdiction relating to
discovery), whether a request “conceals an attempt to circumvent

41 Brief for the United States as Amicus Curiae at 16.

42 Id. at 17.
43 Slip Opinion at 11.

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foreign proof-gathering limits or other policies of a foreign country

or the United States,” and whether a request is “unduly intrusive or
burdensome.”44
Justice Breyer, the lone dissenting vote (Justice Scalia authored a
concurring opinion), wrote separately that Justice Ginsburg’s
opinion “reads the scope of 28 U.S.C. ú 1782 to extend beyond what
I believe Congress might reasonably have intended.”45 Justice
Breyer said AMD’s discovery requests should be categorically
prohibited for two reasons. First, Justice Breyer said that when the
application of the statutory term “tribunal” was in doubt, U.S.
courts should defer to the foreign government’s interpretation,
which the majority did not in this case. Second, Breyer said ú 1782
discovery should be categorically prohibited when, “(1) A private
person seeking discovery would not be entitled to that discovery
under foreign law, and (2) the discovery would not be available
under domestic law in analogous circumstances.”46

Commentary
After emphasizing the importance of international “comity” in
F. Hoffman-La Roche, the solicitor general here brazenly defies the
European Commission’s plea to prevent U.S. courts from meddling
in its affairs. Not only does the solicitor general tell the DGC it
must accept unwanted discovery “assistance” via AMD, but it tells
the Commission that is a “tribunal,” notwithstanding clear
evidence to the contrary. International comity, it turns out, is less
important to the Department of Justice than preserving the ability
of competing firms to harass one another through the use of the
federal judiciary’s generous discovery rules.
Unlike Trinko and F. Hoffman-La Roche, AMD’s European
antitrust crusade poses no imminent threat to any governmental
antitrust objective in the United States. If anything, the DOJ
encourages private discovery and litigation, because oftentimes it is
competitors that open the door for the government to bring its own
antitrust actions. So long as private litigation does not expose
contradictions in government policy regimes—like the
Telecommunications Act in Trinko and the DOJ’s amnesty program

44 Id. at 20-21.
45 Slip Opinion of Breyer, J., dissenting, at 1.
46 Id. at 3.

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in F. Hoffman-La Roche—the solicitor general will not be inclined to

argue for any policy that narrows the potential scope of the
antitrust laws.
That said, was the solicitor general, and the Court, correct in
holding the DGC’s investigation of AMD’s complaint was a
proceeding before a tribunal under ú 1782? Justice Breyer makes a
tempting argument that it wasn’t. Unfortunately, his arguments
rely on pragmatist policy arguments; they reflect his view of what
the law should probably say, rather than looking at what the law
actually says. Justice Ginsburg’s opinion, however, suffers from a
related problem, as she relies on circumstantial evidence of
congressional intent—principally a Senate committee report—
rather than examining the text of the statute.
Justice Scalia’s concurring opinion, which rejects any attempt to
discern congressional intent and instead concludes that Intel’s
position has no “support in the categorical language” of ú 1782,
provides a logical, if not wholly satisfying outcome. Justice
Breyer’s policy concerns have merit. There is a real concern that
American businesses will file antitrust complaints with the
European Commission as a pretext for acquiring discovery rights
under ú 1782 that would not otherwise exist. But at the same time,
ú 1782 itself is a valid exercise of federal power. Congress has the
authority to make rules granting foreign entities discovery through
U.S. courts. Such rules are no different than laws governing the use
of discovery in domestic proceedings. The challenge is to develop
rules that exclude the abusive and frivolous claims while protecting
the interests of legitimate parties to a foreign dispute.
Under European law, AMD had the right to file a complaint,
which it did, and to challenge a decision by the Commission not to
fully investigate that complaint. Since the Commission had yet to
render a decision either way, the Supreme Court should have
barred AMD from pursuing its ú 1782 request while the matter was
still pending. The Commission already possessed ample authority
to conduct discovery and obtain evidence prior to commencing a
full investigation. AMD’s actions did nothing to aid the DGC’s
decision-making. And as the Commission noted at oral argument,
these extra-territorial lawsuits place a burden on DGC resources,
since they must monitor any ú 1782 litigation related to an ongoing
investigation. Justice Ginsburg’s opinion ignored these concerns,

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thus leaving the Commission vulnerable to future abuse of its

antitrust process as companies may file complaints for the sole
purpose of justifying ÿ 1782 requests in the U.S.
Of course, if the EU amended its current antitrust process—
which stresses protecting particular competitors from their own
failures by punishing successful rivals—none of this would be a
concern. But the EU’s bad law does not excuse or justify an
overbroad interpretation of ú 1782, especially because it is accused
companies—who are generally innocent of any actual crimes—that
bear the burden of contesting the antitrust investigation and the
discovery requests.

Conclusion
It would be simplistic to say the solicitor general’s office dictated
the result of the four cases described above, with the Supreme
Court acting as mere transcribers. A more accurate conclusion
would be that when it comes to antitrust law, the Court is largely
uninterested in the impact of its decisions, and it gives deference to
the solicitor general’s position unless an unimpeachable case to the
contrary is made. The Court views the solicitor general as a partner
who protects the justices from unwanted encroachments. Whether
the solicitor general is protecting the rights of the American people
is an entirely different matter.
Justice Breyer’s dissent in Intel marked the lone break with the
solicitor general’s guidance in the four antitrust cases. His dissent
expressed concern that unnecessary U.S. discovery would impose
burdens on foreign governments and defendants in foreign
proceedings. Such burdens are of no concern to the current
solicitor general, and by extension the Bush administration
generally. The current Republican administration has shown no
concern for the adverse effects of antitrust law on American
businesses. The political appointees heading the Federal Trade
Commission and Antitrust Division of the Justice Department have
pursued what can be accurately described as an “imperialistic”
antitrust policy, where the constitutional rights of Americans are
disregarded in favor of ad hoc economic planning by unelected staff
lawyers at the agencies.

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The common theme of the solicitor general’s position in the four

antitrust cases is simple: Preserve government power. This theme
takes precedence over the government’s nominal objectives such as
protecting consumers from genuine monopolies (Postal Service) and
international comity (contrast Empagran with Intel). The judiciary
passively accepts the executive branch’s antitrust imperialism
because (1) most judges are pragmatists who reject any need for
absolute principles and standards, and thus embrace the
government’s position as “practical”; and (2) the legal
establishment has invested more than a century in the antitrust
laws, and there is no desire by any interested party, including
judges, to seriously question the laws’ underlying principles.
The result of executive imperialism and judicial pragmatism is
the de facto elimination of separation of powers and the lack of any
meaningful constitutional scrutiny of government policy.
Although three of the four antitrust cases this term were private
lawsuits, it was the government, specifically the solicitor general,
that decided the outcome. In the end, the solicitor general and the
Court spoke with one voice. A casual observer might welcome the
Court’s consensus on antitrust in light of the justices’ sharp
divisions on other issues. But the truth is not so naive. The
consensus is nothing more than an abdication of judgment to the
state. When it comes to antitrust matters, in 2003-2004 the Supreme
Court of the United States operated according to a Rule of One—
the representative of the Solicitor General of the United States.

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CVT Reports is a bimonthly policy paper series published by Citizens for

Voluntary Trade, a Virginia nonprofit corporation that educates the
public on matters related to antitrust policy, the Federal Trade
Commission, and business regulation generally. Nothing in CVT Reports
should be construed as an attempt to hinder or aid the passage of any bill
before Congress, or to influence the outcome of any federal, state, or local
election.

ý2004 by Citizens for Voluntary Trade. All rights reserved. For

additional information or reprint permission, contact Citizens for
Voluntary Trade, Post Office Box 66, Arlington, VA 22210, telephone
(571) 242-1766, fax (760) 418-9010, e-mail info@voluntarytrade.org. Visit
CVT’s website at www.voluntarytrade.org.

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