Since at least the 1930's economists have puzzled over how to delineate the boundaries of the firm. With the advent of antitrust legislation in 1890, courts have been pressed to consider what constitute conspiracies between corporate entities to restrain commerce. By the 1940's, courts started to characterize conspiracies by sorting out what they are not – specifically, by extending the status of “single entity” to certain types of business arrangements. Both efforts in economics and in the law to sort out what constitutes a “firm” or “single entity” have focused on “control.” A difficulty is that neither the law nor economics offer an operationally significant concept of control. Even so, both law and economics contribute concepts other than control that provide a way of understanding economic organization. These concepts – control rights, adaptation, delegation, and renegotiation – suggests how one can subsume the sometimes confusing array of single entity tests proposed in the case law within a two-stage sequence of tests.

Note to ESNIE participants about readings

I have provided three items to read: (1) a working paper titled “Organization, Control and the Single Entity Defense in Antitrust,” (2) a selection of passages from selected cases, and (3) a law review article titled “The Vatican Merger Defense – Should Two Catholic Hospitals Seeking to Merge Be Considered a Single Entity for Purposes of Antitrust Merger Analysis?”

The working paper is “must read.”  The second item is not “must read,” but readers may find the context useful.  In the table of contents of the law review article I indicate in red, bold italics the items that readers should “skim.”  The article catalogues “single entity tests” that have been proposed in the case law, and the point of skimming the article is to see that these tests constitute a confusing and sometimes inconsistent mix of instructions.