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  1. 1. Is Antitrust Too Complicated for Generalist Judges?<br />The Impact of Economic Complexity & <br />Judicial Training on Appeals<br />Michael R. Baye, Indiana University<br />Joshua D. Wright, George Mason University<br />Georgetown University School of Law<br />Law and Economics Workshop <br />October 2, 2009<br />
  2. 2. Introduction<br />Antitrust analysis is becoming increasingly complex<br />Increasingly relies on economic experts<br />More mathematically rigorous and technically demanding analysis<br />Shift from per se rules to a case by case, “effects-based” approach<br />Sherman Act delegates to the judiciary identification of “unreasonable restraints of trade”<br />Over the past few decades, merger analysis has “come of age”<br />So, what impact does this complexity have on the quality of judicial decision-making?<br />
  3. 3. Economic Complexity and Judicial Decisions<br />ABA Task Force published a report in 2006 on the role of economic evidence in federal court:<br />“It is critical that judges and juries understand economic issues and economic testimony in order to reach sound decisions”<br />Survey of antitrust economists found that only 24% believe that judges “usually” understand the economic issues<br />A number of potential solutions have been suggested:<br />Expanding use of court appointed experts<br />Increasing use of Daubert<br />Creating specialized antitrust courts<br />Providing basic economic training to judges<br />
  4. 4. Economic Training for Judges<br />George Mason’s Law and Economics Center (LEC) began training judges in 1976<br />At one point, it was responsible for providing economic training to about 40% of the federal judiciary<br />Criticism eventually arose that the program was designed to indoctrinate judges with a conservative, free-market oriented set of economic beliefs<br />Provides judges with economic knowledge they would otherwise not get <br />Many judges opt for such training<br />Rationale: it reduces time spent on cases and improves reputations (reduced appeals or reversals)<br />
  5. 5. Our Paper<br />Represents a first attempt to examine the effect of economic complexity and assess training on the quality of judicial decisions in antitrust<br />Our findings:<br />Economic complexity increases the likelihood that a judge’s opinion is appealed (and reversed)<br />Judges with basic economic training have decisions appealed (and reversed) less frequently<br />Experience is a poor substitute for economic training for judges<br />Lends some support to the claim that antitrust analysis has become too complex for generalist judges<br />
  6. 6. Four Categories of Data<br />Information extracted from judicial opinions<br />Universe of all rulings on substantive antitrust claims by federal district court judges (641 decisions) and administrative law judges (73 decisions) from 1996-2006<br />Includes<br />Type of antitrust claim (merger, monopolization, price fixing, etc.)<br />Plaintiff (FTC, DOJ, private party, State AG)<br />Date of decision<br />Whether the decision was appealed<br />Whether an appeal resulted in a reversal<br />
  7. 7. Four Categories of Data (cont.)<br />Judge and court characteristics<br />Judges’ political ideology (political party of the appointing President)<br />Judges’ post-graduate education<br />Judges’ prior antitrust experience (number of prior AT decisions)<br />Federal appellate circuit to which the judge belongs<br />
  8. 8. Four Categories of Data (cont.)<br />Economic complexity of the case<br />Searched decisions and generated counts of 14 key terms one would expect to arise in complex antitrust cases<br />Terms such as “Regression”, “Economic Expert”, “Statistics”, “Econometrics” , “Economist”, “Economic Report”, etc.<br />Whether judge received basic economic training<br />128 judges attended LEC economics training seminars beforethe particular decision was issued<br />
  9. 9. Majority of Cases Involve Judges with Little Antitrust Experience and are “Simple” Cases <br />Distribution of Judges’ Prior Antitrust Experience<br />Distribution of Economic Complexity<br />
  10. 10. Measures of the Quality of Judicial Decisions<br />Primary measure of the quality of an initial court’s decision is a party’s decision to appeal<br />Since a party incurs costs by appealing, such appeals constitute a revealed preference – i.e. the party decides that the opportunity to overturn the decision is great enough to warrant the cost<br />All things equal, an appeal indicates the party’s belief, often formed with input from economic experts, that it can convince the court that the initial decision contained reversible error<br />Though appeals may be based in legal issues, these are inextricably linked with economic issues in the realm of antitrust cases<br />
  11. 11. Measures of the Quality of Judicial Decisions<br />Secondary measure of the quality is the reversal of decisions by appellate. Disadvantages of this measure:<br />Reversals made by panels of decision-makers, so difficult to control for training, ideology, and interaction among these decision-makers<br />Occurs conditional on an appeal, so greatly reduces sample size<br />
  12. 12. Caveats<br />Number of “complex” cases is limited<br />Not sufficient thickness in the data to separately control for each key term<br />Split decisions into “simple” (no key terms) and “complex” (any key term) cases<br />Some potentially important predictors of appeals not observed<br />Stakes of the litigation may correlate with case type and complexity, which are in the model<br />Quality of legal representation and judge-specific effects may also affect the appeal rate<br />The sample excludes cases that are settled and focuses on “close calls”<br />Potential endogeneity<br />
  13. 13. Comparison of Means<br />
  14. 14. Summary of Means Comparisons<br />Appeal rates differ greatly based on complexity and training<br />Economically complex cases are 24.2% more likely to be appealed than simple cases<br />Decisions authored by judges with basic economic training are 12.8% less likely to be appealed than those by untrained judges<br />Results are significant at the 1% level<br />Similar results when reversals are used as indicator of judicial quality<br />Complex cases are reversed 9.1% more often<br />Untrained judges’ decisions are reversed 10.1% more often<br />
  15. 15. Appeal Rates and Training Levels Vary Greatly Across Circuits, Case Types, and Plaintiffs<br />
  16. 16. Regression Analysis<br />Probit regressions<br />Dependent variable is an indicator for whether the case was appealed<br />Independent variables:<br />Dummy for whether the case was “complex”<br />Whether the judge was trained<br />Interactions<br />Year of decision<br />Type of case fixed effects<br />Plaintiff fixed effects<br />Circuit fixed effects<br />
  17. 17. Baseline Probit Regressions<br />
  18. 18. Summary of Baseline Results<br />Results similar to means comparisons<br />Complexity increases the appeal rate by 23.6% while economic training reduces appeals by 10.7%<br />Including interaction terms:<br />Complexity increases appeal rate by 10%<br />Basic economic training decreases appeals by 10% in simple cases<br />Economic training has no effect in complex cases<br />Results robust to the addition of a time trend and fixed effects for case type, plaintiff, and circuit<br />
  19. 19. Economic Training vs. Prior Antitrust Experience<br />These results lend some support to reforms to provide judges with greater economic training<br />What about proposals to create antitrust tribunals to give judges repeated exposure to complex antitrust issues? Does experience in antitrust cases have an effect on the appeal rate?<br />Add “EXPERIENCE,” which measures the number of previous antitrust decisions issued by the judge, which has a small negative effect on appeals (suggesting experience not a substitute for training)<br />
  20. 20. Economic Training vs. Prior Antitrust Experience<br />
  21. 21. Additional Robustness Checks<br />Alternative dataset with Federal District Court judges only<br />FTC administrative litigation has higher appeal rate (91.2%), greater levels of economic complexity (78.1%), and ALJs had no economic training (0%)<br />Judicial training vs. political ideology<br />Perhaps decision to attend training captures conservative or pro-business leanings. Control for PARTY<br />Judicial training vs. judge quality<br />Perhaps propensity to get training reflects fact that better judges seek to improve themselves. Control for QUALITY (Masters or Ph. D)<br />
  22. 22. Results Robust For These Data and Additional Controls<br />
  23. 23. Summary and Concluding Remarks<br />Decisions involving the evaluation of complex economic evidence are appealed at a 10% higher rate<br />Decisions of judges with basic economic training have a 10% lower appeal rate in “simple” cases<br />Basic economic training does not reduce appeals in “complex” cases<br />Court appointed experts?<br />More advanced economic training?<br />Antitrust experience (repeated exposure to antitrust cases) does not appear to be a good substitute for economic training<br />Specialized tribunals?<br />Out of sample predictions?<br />