Harmful Remedies: Optimal Reformation of Anticompetitive Contracts

Authors

Michal S. Gal, New York University Center for Law and Business

Abstract

Current law and economics literature identifies two main types of errors courts can make in applying antitrust law. Courts may erroneously label conduct as anticompetitive even though competition is not harmed. Alternatively, courts may fail to identify, and thus fail to attack, anticompetitive conduct. This Article focuses on a third possible error - where a court correctly identifies anticompetitive conduct, but its mode of interference, i.e., its prescribed remedy, harms competition. It analyzes this error in the context of anticompetitive contract reformation. Such error occurs, for example, where a court has chosen one reformation option that is less efficient and effective than an alternative reformation option. Accordingly, this Article identifies a set of clear and coherent principles for contract reformation in order to eliminate, or at least reduce, the occurrence of the third type of error. The analysis moves beyond the prevailing wisdom that contract reformation should simply sever the anticompetitive parts of a contract if doing so does not alter the nature of the contract, and suggests instead that in most cases courts should invalidate the contractual relationship in its entirety.

Disciplines

Antitrust and Trade Regulation | Consumer Protection Law | Contracts | Law

Recommended Citation

Michal S. Gal, Harmful Remedies: Optimal Reformation of Anticompetitive Contracts, 22 Cardozo L. Rev. 91 (2000).
Available at: https://larc.cardozo.yu.edu/clr/vol22/iss1/6