The Abuse of Offsets as Procompetitive Justifications: Restoring the Proper Role of Efficiencies after Ohio v. American Express and NCAA v. Alston

By Ted Tatos & Hal J. Singer (Econ One)

Under the rule-of-reason framework, litigation involving the NCAA has condoned the practice of crediting purported benefits to one group as an “offset” to antitrust injury suffered by another. Although the Ohio v. American Express decision addressed countervailing effects on merchants versus cardholders within the same two-sided market (credit cards), NCAA v. Alston, consistent with the 1986 NCAA v. Board of Regents decision, acknowledged procompetitive justifications that occur in an entirely different market (the output market for viewing sporting events) than the market in which harm occurred (the labor market for college athletes). Both cases elevated the welfare of consumers above that of injured workers (Alston) or other input providers (American Express). In Alston, the Supreme Court muted any intent it may have had to cabin its American Express decision to two sided transactional platforms defined by indirect network effects. Further, the blind search for offsets in single firm monopolization cases such as American Express and in wage fixing cases such Alston evinces a clear incongruity with the prohibition against cross-market offsets in merger evaluation. This Article discusses how a logical error in NCAA v. Board of Regents opened the door to justifying harms to workers through even the feeblest claims of consumer benefit. As American Express and Alston have blurred the lines between offsets that cross market lines, we explain that the terms “intergroup” and “intragroup” offsets accurately describe benefits and harms that occur to different constituencies versus those that affect the same, respectively. Although the rule of reason lens properly concerns itself with the latter, the former falls under the ambit of the legislative branch. As such, we argue for statutory repeal of American Express and a prohibition on judicial balancing of claimed benefits to any group other than the group that suffered antitrust injury. The search for offsets has resulted in the justification of harms to labor even in the presence of direct evidence of antitrust injury to workers, a clear erosion of per se adjudication of cartel behavior by expanding the definition of ancillary restraints. Consistent with the broader policy of protecting labor from anticompetitive conduct, including the exercise of monopsony power, legislative intervention should prohibit such balancing. In wage fixing cases involving multiple defendants, the no offset rule would immediately condemn the restraint and bar courts from considering any claimed efficiencies, regardless of whom they benefit. In single firm monopsony cases, the no offset rule would bar courts from considering any offsetting benefits to parties other than the injured group of workers or input providers.

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