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May 20, 2019
Brattle Economists Examine the Use of the Sherman Act to Address Alleged Market Manipulation

Brattle Principals Shaun Ledgerwood, Jeremy Verlinda, and Guy Ben-Ishai, and Director of Global Development James Keyte have co-authored an article in the Energy Law Journal in which they address whether the use of antitrust laws, specifically Section 2 of the Sherman Act, to address alleged market manipulation makes sense from an economic perspective.

The article, “The Intersection of Market Manipulation Law and Monopolization under the Sherman Act: Does It Make Economic Sense?” examines the recent use of Section 2 to bring civil actions based on alleged acts of market manipulation. According to the authors, the elements of proof under Section 2 differ greatly from those under the market manipulation laws, as do the types of injuries which those laws seek to address. Given several recent cases where Section 2-based manipulation claims have survived motions to dismiss, this has raised the question of whether Section 2 and other antitrust laws are appropriate to address manipulation allegations.

Drawing on their respective backgrounds as practitioners in these areas, the authors offer a close examination of the economics behind market manipulation and antitrust laws and argue that, in most circumstances, Section 2 is not appropriate for addressing manipulation claims. Section 2 claims require proof of durable, anti-competitive effects which typically are absent in manipulation cases (where such effects are limited to the duration of the scheme). Likewise, while intent is a key requirement of proof for market manipulation cases, the role of intent in Section 2 monopolization cases is limited only to the extent in which it may have informed anticompetitive effects.

The authors conclude that, while there may be a small number of cases where Section 2 will apply to manipulative behavior (such as when the behavior durably impinges market liquidity), in most cases the intersection of market manipulation and antitrust law should be confined to contexts involving collusion or conspiracies where Section 1 of the Sherman Act applies.

The full article can be found below.