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Frank Easterbrook’s seminal analysis of error-cost minimization in The Limits of Antitrust has special relevance to antitrust intervention in markets where innovation is a critical dimension of competition. Both product and business innovations involve novel practices. Historically, the economics profession has tended initially to rely upon monopoly explanations for such practices. Courts have reacted with similar hostility. But almost always there has followed a more nuanced economic understanding of the business practice that recognized its procompetitive virtues. Antitrust standards have adjusted occasionally to reflect that new economic learning. This sequence has produced a fundamental link between innovation and antitrust error that transcends the uncontroversial point that the probability of false positives and their social costs are both higher in the case of innovation and innovative business practices. We discuss some principles for applying Easterbrook’s error-cost framework to innovation. We then discuss the historical relationship between antitrust error and innovation. We conclude by challenging the conventional wisdom that the error-cost approach implies that the rule of reason, rather than per se rules, should apply to most forms of business conduct. We instead identify simple filters to harness existing economic knowledge to design simple rules that minimize error costs. We make five such proposals.

Twenty-five years ago, Frank Easterbrook published his essay The Limits of Antitrust, in which he argued for a set of filters that government enforcement authorities and judges could use to test the propriety of a given action under the antitrust laws. That essay aptly exposed serious concerns about expansive use of antitrust laws, especially at the behest of lagging competitors of the enforcement target, contributing to a movement toward less ambitious use of antitrust law in the United States. More recently, changes in academic theories coupled with developments in the law outside the United States have set the stage for a reversal of the forces aligned with Judge Easterbrook’s arguments. This article identifies reasons for supporting a more limited deployment of antitrust (competition) law, describes ways in which law in the United States has evolved toward greater congruence with that approach, and explores the forces that are now pulling the law in the opposite direction. Critically, the increased availability of alternative enforcement regimes with relatively low jurisdictional thresholds has created forum-shopping incentives for complainants. At the same time, antitrust regulators frequently will have incentives to behave in ways that encourage forum-shopping. This behavior will threaten to undermine results in line with Judge Easterbrook’s work, creating special risks to competition in markets with a dominant firm.

In 1984, then-Professor (now-Judge) Frank Easterbrook published an article recommending that U.S. courts use five filters to dismiss antitrust cases without considering the merits of the plaintiff’s or State’s claim in any detail. According to Easterbrook, the courts’ use of these filters would serve the public interest more by preventing them from mistakenly finding lawful conduct illegal than it would disserve the public interest by enabling some perpetrators of illegal conduct to escape liability or conviction. Although Easterbrook did not emphasize this fact, if his filters were as inexpensive to apply as he assumed, their use would also serve the public interest by reducing the transaction costs generated by antitrust litigation. Easterbrook’s proposals belong to a wider set of proposals made and/or adopted by economists, antitrust law professors, antitrust judges, and antitrust enforcement officials that are designed to serve the public interest (usually, more specifically, to increase economic efficiency) by simplifying the application of U.S. antitrust law. This article argues that no member of any of the eight sets of proposals of this kind that have been made and/or adopted can bear scrutiny. It argues first that all these proposals must be rejected because they are too inaccurate to be morally acceptable or legally valid—that is, because they ignore the fact that the U.S. antitrust laws promulgate cognizable specific-anticompetitive-intent or decreasing-competition tests of legality (do not authorize the courts to “regulate” the conduct the statutes cover in the public interest, much less in the way that would be most economically efficient) and the related fact that the moral-rights bearers for whom the United States is responsible have a moral and legal right to courts, and juries’ doing their best in individual cases to discover the answer to the legal claim at issue that is correct as a matter of law. It argues second that, for a variety of reasons, the proposals in question would not serve the public interest or increase economic efficiency even if such moral-rights considerations could be ignored because they are too inaccurate and relatively too transaction-costly to be desirable, moral rights considerations aside.

Frank Easterbrook’s 1984 article, The Limits of Antitrust, did not focus on public antitrust enforcement. Nevertheless, it expressed the kind of antitrust thinking that led the Antitrust Division of the U.S. Department of Justice, around the same time, to shift its resources to cartel prosecutions and away from big monopolization cases. The Microsoft case, filed in 1998, broke this pattern. I argue that the Division made this exception, and ultimately achieved a partial victory in the courts, because the relatively new economic theory of network effects seemed to make the filters Easterbrook proposed in 1984 less applicable in high technology markets like the ones in which Microsoft competed. In this article, I return to Easterbrook’s filters and consider whether they offer a different perspective on the Division’s decision to sue and the courts’ eventual resolution of the case.

The 1984 article by Frank Easterbrook, The Limits of Antitrust, has had considerable influence on antitrust enforcement and adjudication. Principally, Easterbrook focused on the things that antitrust could not do well. When antitrust’s reach exceeds its grasp, it creates type I and type II errors. But Easterbrook points out that, in antitrust matters, type II errors are largely self-correcting. Letting price-fixers go free may be a mistake, but cartels are prisoner’s dilemmas, so the mistake is corrected in the market. Letting monopolizers continue to raise prices may be an error, but new-firm entry will solve that problem as well. Easterbrook provides a taxonomy of the sources of antitrust errors, including the difficulty that antitrust defendants have in explaining procompetitive rationales and the difficulty that judges and juries have in understanding the theory and empirics involved in antitrust cases.

I situate Frank Easterbrook’s article, The Limits of Antitrust, within the Chicago School antitrust tradition. I demonstrate the link between the article and the works of Aaron Director and Ronald Coase, in particular their emphasis (1) on the superior effect of markets to government attempts to correct monopoly behavior and (2) the expectation of judicial error. The Easterbrook article is shown to have extended the Director–Coase antitrust program.