657. While other authors have also addressed issues associated
     with regulation and its alternatives, see, e.g., Alan Stone,
     Regulation and its Alternatives (Washington, DC:
     Congressional Quarterly Press, 1982); Almarin Phillips,
     "Regulation and its Alternatives," in Regulating Business:
     The Search for an Optimum (San Francisco:  Institute for
     Contemporary Studies, 1978), this researcher finds Breyer's
     framework to be a particularly balanced, well-reasoned
     approach that may be useful to state policy makers in
     attempting to resolve the often complex issues presented in
     the House Resolution.  The framework draws primarily from
     the following two sources:  Stephen G. Breyer, "Analyzing
     Regulatory Failure:  Mismatches, Less Restrictive
     Alternatives, and Reform," 92 Harv. L. Rev. 549 (Jan. 1979)
     (written when Breyer was Professor of Law at Harvard
     University); and Stephen G. Breyer, Regulation and its
     Reform (Cambridge, MA:  Harvard University Press, 1982)
     (written while Breyer was Circuit Judge of the United States
     Court of Appeals for the First Circuit).

658. Breyer (1979) at 553.

659. Id. at 15.

660. See text accompanying notes 22 to 24 in chapter 9.

661. Breyer (1979) at 553-554.

662. Id. at 554.

663. Breyer (1982) at 21.

664. Id. at 23 (footnote omitted).

665. Breyer (1979) at 556; see also note 14 in chapter 13.

666. Id. at 557.

667. Breyer (1982) at 32.

668. Id. at 33 (footnotes omitted).

669. Id. (footnotes omitted).

670. Id.

671. Id. at 34.

672. Id.

673. Breyer (1979) at 560-561.

674. See Breyer (1982) at 184-185.

675. Id. at 188.

676. See generally Breyer (1982) at 156-183; Breyer (1979) at
     578-584.  Breyer also discusses nationalization as an
     alternative to classical regulation, which is not considered
     in this report.

677. See notes 15 to 19 and accompanying text in chapter 13.

678. Breyer (1982) at 164.

679. Id. at 165.

680. Id. at 171-172.

681. Id. at 172.

682. Id.

683. Id. at 175.

684. Breyer (1979) at 583 (footnotes omitted).

685. Id. at 582-583; Breyer (1982) at 177-179.

686. Breyer (1982) at 179.  For a discussion of alternate dispute
     resolution and consensus-building in the electric-utility
     industry, see Jonathan Raab, "Electric-Utility Industry
     Braces for a Brave New World -- of Competition," and Matt
     Gentile, "ZAP!  Fed Energy Agencies Use ADR to Boost Their
     Efficiency," in Consensus:  Helping Public Officials Resolve
     Stubborn Policy Disputes, No. 28 (Cambridge, MA:  MIT-
     Harvard Public Disputes Program, October, 1995) at 1.

687. Id. at 156-157 (emphasis in original).

688. Id. at 157.

689. See infra notes 120 to 128 and accompanying text.

690. Id. at 159; see notes 66 to 74 and accompanying text in
     chapter 15 for a discussion of predatory pricing.

691. Breyer (1982) at 192 (table 3).

692. Breyer cautions that his framework contains a number of
     limitations that make it "partial and suggestive in nature,
     rather than a comprehensive effort to deal with all
     regulation or to propose definitive solutions...."  Breyer
     (1982) at 7.  State lawmakers are therefore encouraged to
     use this framework, not as a conclusive analysis of
     regulatory alternatives, but rather as a tool to assist them
     in making policy decisions.

693. Letter to researcher from Ted Gamble Clause, Deputy Attorney
     General, dated July 26, 1995, at 3 (response to question
     (11) concerning divestiture); see text accompanying note 1
     in chapter 12.

694. Hawaii, Department of the Attorney General, An Investigation
     of Gasoline Prices in Hawaii:  A Preliminary Report
     (Honolulu:  Sept. 1990) at 7-13 (hereinafter, "AG (1990)").

695. Hawaii, Department of the Attorney General, The Attorney
     General's 1994 Interim Report on the Investigation of
     Gasoline Prices (Honolulu:  1994) at 9 (hereinafter, "AG
     (1994)").

696. Id. ("[I]t remains a fact that the exchange agreements among
     the incumbent oil companies (1) are agreements among
     incumbent competitors (2) that facilitate the limitation of
     gasoline supplied to Hawaii to that manufactured in Hawaii,
     (3) that facilitate the allocation of gasoline among the
     incumbents, (4) that facilitate the incumbents keeping the
     price of gasoline as high as the Hawaii markets will bear,
     and (5) that facilitate the incumbents keeping out
     competitive gasoline from the mainland.")

697. No attempt has been made at an economic analysis of Hawaii's
     gasoline markets, which would require, inter alia, an
     analysis of the interrelationship and profitability of the
     various petroleum products produced in the refining process.
     Such an analysis is beyond the scope of this study.  See AG
     (1990) at 9; see also Nancy D. Yamaguchi and David T. Isaak,
     Hawaii and the World Oil Market:  An Overview for Citizens
     and Policymakers (Honolulu:  East-West Center Energy
     Program, Aug. 1990) at 76.

698. AG (1994) at 13.

699. Id. at 7.  Another negative spillover is air pollution; see,
     e.g., Walter Wright and Angela Miller, "Gas Cloud from
     Refinery Sickens 29 Workers Here," The Honolulu Advertiser,
     November 22, 1995, at A1, A6 (reporting the release of
     sulfur dioxide from the BHP Petroleum refinery); Christopher
     Neil, "Toxic Gas Leak at BHP Was 20th this Year" and "State
     Investigates Gas Leak, Plans to Monitor Refinery," The
     Honolulu Advertiser, November 23, 1995, at A1, A2; see also
     Haw. Rev. Stat. chapter 342B (air pollution control).

700. 1991 Haw. Sess. Laws Act 291, §1; see note 23 in chapter 13.

701. Sorensen (1991), however, argues that with respect to the
     United States as a whole,  "[b]oth wholesale and retail
     markets for gasoline in the U.S. are highly competitive."
     Philip E. Sorensen, An Economic Analysis of the Distributor-
     Dealer Wholesale Gasoline Price Inversion of 1990:  The
     Effects of Different Contractual Relations (Manuscript,
     April 1991) at 35.

702. See note 10 and accompanying text in chapter 3.

703. Haw. Const. art. XI, §1 provides in relevant part:
     
             Section 1.  For the benefit of present and future
        generations, the State and its political subdivisions
        shall conserve and protect Hawaii's natural beauty and
        all natural resources, including ... energy sources,
        and shall promote the development and utilization of
        these resources in a manner consistent with their
        conservation and in furtherance of the self-
        sufficiency of the State.  * * *

704. Haw. Rev. Stat. §226-18 provides as follows:
     
             §226-18  Objectives and policies for facility
        systems--energy.  (a)  Planning for the State's
        facility systems with regard to energy shall be
        directed towards the achievement of the following
        objectives:
     
             (1)  Dependable, efficient, and economical
                  statewide energy systems capable of
                  supporting the needs of the people;
     
             (2)  Increased energy self-sufficiency where the
                  ratio of indigenous to imported energy use
                  is increased; and
     
             (3)  Greater energy security in the face of
                  threats to Hawaii's energy supplies and
                  systems.
     
             (b)  To achieve the energy objectives, it shall
        be the policy of this State to ensure the provision of
        adequate, reasonably priced, and dependable energy
        services to accommodate demand.
     
             (c)  To further achieve the energy objectives, it
        shall be the policy of this State to:
     
             (1)  Support research and development as well as
                  promote the use of renewable energy sources;

(2)  Ensure that the combination of energy
                  supplies and energy-saving systems are
                  sufficient to support the demands of growth;
     
             (3)  Base decisions of least-cost supply-side and
                  demand-side energy resource options on a
                  comparison of their total costs and benefits
                  when a least-cost is determined by a
                  reasonably comprehensive, quantitative, and
                  qualitative accounting of their long-term,
                  direct and indirect economic, environmental,
                  social, cultural, and public health costs
                  and benefits;
     
             (4)  Promote all cost-effective conservation of
                  power and fuel supplies through measures
                  including:
     
                  (A)  Development of cost-effective demand-
                       side management programs;
     
                  (B)  Education; and
     
                  (C)  Adoption of energy-efficient practices
                       and technologies;
     
             (5)  Ensure to the extent that new supply-side
                  resources are needed, the development or
                  expansion of energy systems utilizes the
                  least-cost energy supply option and
                  maximizes efficient technologies;
     
             (6)  Support research, development, and
                  demonstration of energy efficiency, load
                  management, and other demand-side management
                  programs, practices, and technologies; and
     
             (7)  Promote alternate fuels and energy
                  efficiency by encouraging diversification of
                  transportation modes and infrastructure.

705. Haw. Rev. Stat. §226-103(f) provides as follows:
     
             §226-103  Economic priority guidelines.  * * *
     
             (f)  Priority guidelines for energy use and
                  development:
     
             (1)  Encourage the development, demonstration,
                  and commercialization of renewable energy
                  sources.
     
             (2)  Initiate, maintain, and improve energy
                  conservation programs aimed at reducing
                  energy waste and increasing public awareness
                  of the need to conserve energy.
     
             (3)  Provide incentives to encourage the use of
                  energy conserving technology in residential,
                  industrial, and other buildings.
     
             (4)  Encourage the development and use of energy
                  conserving and cost-efficient transportation
                  systems.

     The Hawaii State Plan also encourages energy efficiency in
     planning for the state's facility systems with regard to
     transportation.  Section 226-17(b)(11), Hawaii Revised
     Statutes, notes that it is the policy of the State to
     "[e]ncourage safe and convenient use of low-cost, energy
     efficient, non-polluting means of transportation...", while
     paragraph (13) of that subsection seeks to "[e]ncourage
     diversification of transportation modes and infrastructure
     to promote alternate fuels and energy efficiency."

706. William Noller, ed., Energy Self-Sufficiency for the State
     of Hawaii, prepared by students of civil engineering and
     interdisciplinary studies, University of Hawaii at Manoa
     (Honolulu:  Sept. 1978) at 123-124.  Energy conservation has
     been pursued by utilities as a less expensive means of
     recapturing energy.  See generally Charlotte A. Carter-
     Yamauchi, Utility-Financing of Energy Conservation:  A
     Short-Term Approach to Hawaii's Oil Dependency, Report No. 3
     (Honolulu:  Legislative Reference Bureau, 1988).  It has
     also been noted that participation by Hawaii's small
     businesses in energy efficiency decisions will strongly
     impact on state energy conservation efforts.  Speaking at
     the Governor's Conference on Energy Investments in Honolulu
     in 1985, then Lieutenant Governor John Waihee noted that
     Hawaii "is composed primarily of small businesses with 98
     percent of the 21,000 firms in this State having fewer than
     100 employees and 50 percent with less than five employees",
     and that ultimately, "it will be the hundreds and thousands
     of individual decisions by these firms to invest in energy
     conservation which will determine the extent to which
     overall improvement in energy efficiency will take place in
     Hawaii."  Hawaii, Department of Planning and Economic
     Development, The Governor's Conference on Energy
     Investments:  Profiting from Energy Savings, Executive
     Summary Report (Honolulu:  May 8-9, 1985) at 19.

707. For a review of proposed legislative initiatives to reduce
     energy consumption in the building, utilities, and
     industrial sectors, see generally Frank Kreith and George
     Burmeister, Energy Management and Conservation (Denver:
     National Conference of State Legislatures, 1993) at 97-98.

708. See Hawaii, Department of Planning and Economic Development,
     Managing a Gasoline Shortage in Hawaii (Honolulu:  Oct.
     1981) (vol. 2) at 38 (hereinafter, "DPED (1981)"):
     
        Gasoline, like other fuels, is a special case of a
        good that is desired not as a final consumption
        product in and of itself, but rather as an input into
        the production of final services.  In other words,
        gasoline is not desired for its own qualities, but for
        its use in the production of vehicle transportation
        services or mobility.  Economists term the demand for
        inputs such as gasoline a "derived demand" because
        their demand is derived from the demand for the final
        goods or services they are used to produce.  As a
        result of this characteristic, the demand for gasoline
        will depend on the demand for gasoline-powered vehicle
        transportation services.  Determinants of vehicle-
        transportation-services demand, and hence gasoline
        demand, include:  (1) the price of vehicle

        transportation services, including the price of
        owning, operating and parking a gasoline-powered motor
        vehicle; (2) the price and availability of alternate
        modes of transportation such as public transit,
        bicycling and walking; (3) the number of vehicles and
        consumers; (4) consumer tastes and preference for
        transportation; (5) the use and importance of
        transportation services to the consumer; and (6)
        information.

709. Gerard M. Brannon, Energy Taxes and Subsidies, A Report to
     the Energy Policy Project of the Ford Foundation (Cambridge,
     MA:  Ballinger Publishing Co., 1974) at 136.

710. In addition, the following list of legislative proposals
     aimed at energy conservation in the transportation sector
     was offered as a starting point for further deliberation in
     a recent National Conference of State Legislatures
     publication, some of which are already being implemented on
     the state and county levels in Hawaii:
     
        .    Promote construction of mass transit systems
        .    Provide initiatives for ride sharing
        .    Implement installation and use of intelligent
             vehicle/highway systems
        .    Coordinate traffic light sequencing with traffic
             flow by use of responsive computer programs
        .    Support expansion of telecommuting
        .    Provide funds for scrapping inefficient and
             polluting vehicles
        .    Purchase alternative fuel vehicles for state
             agencies
        .    Introduce "gas guzzler taxes"
        .    Increase gasoline taxes
        .    Establish information sharing on alternative
             fuels with other states.  Kreith and Burmeister
             (1993) at 97.

711. See Hawaii, House of Representatives, Special Committee on
     Energy, Investigation of the Hawaii Gasoline Market
     (Honolulu:  March 1974) at 70-72 (hereinafter, "Haw. House
     Report (1974)"):

        First, the State of Hawaii should compile and
        maintain accurate data on the supply and demand for
        petroleum products in the State. ...
     
             Second, the State should encourage the
        development of alternative energy sources to reduce
        our present almost-total reliance on oil. ...
     
             Third, the State should encourage greater efforts
        at conservation in the future.  With continued
        shortages ahead, we should try to keep our energy
        demands down within available supplies in order to
        avoid socially and economically disruptive shortfalls.
     
             Fourth, we should intensify our efforts to
        develop an efficient public transportation system,
        especially for commuter use.  The private passenger
        car is an inefficient mode of transportation in terms
        of energy consumption for simply traveling between
        home and work.
     
             Fifth, we will now have to take into account the
        energy factor in future public policy decisions.

712. In particular, the Department reviewed the following
     measures:
     
        1.   Those that influence the price of gasoline-
        powered vehicle transportation services by affecting
        the cost of owning, operating and parking a vehicle
        (example:  a tax upon vehicle ownership or operation,
        an increase in parking charges, a reduction in the
        availability of parking in certain areas, an increased
        tax on gasoline that would act to encourage less
        driving and more fuel-efficient vehicles).
     
        2.   Those that decrease the price or increase the
        availability of alternate modes of transportation
        (examples:  increased bus services, lower bus fares,
        ridesharing incentives, facilities for bicycle or
        motorbike use and parking, increased pedestrian
        walkways).
     
        3.   Those that decrease the number of vehicles or
        drivers (examples:  ban on general motor traffic in
        certain areas, increase in the driving age
        requirement, ridesharing incentives).
     
        4.   Those that influence consumers' preferences for
        driving or for other modes of transportation
        (examples:  campaign to instill a conservation ethic
        in gasoline use, increase the attractiveness of
        alternate modes of transportation).
     
        5.   Those that affect the frequency of travel and
        need for private vehicle transportation (examples:
        encouragement of flexible working hours so that
        workers can use alternate forms of transportation,
        adjustment of school hours to facilitate
        transportation to school).
     
        6.   Those that provide consumers with information
        needed to make rational decisions about transportation
        (examples:  programs for conservation information
        including how to save gasoline, alternatives
        available, where to go for information or services,
        etc.).
     
        7.   Those that allow consumers to travel further on
        the same amount of gasoline (examples:  improvements
        in traffic flows, engine tune-up programs, vehicle
        efficiency requirements).
     
     DPED (1981) (vol. 21) at 38-39; see also id. at 39-41.

713. Hawaii, Department of Business, Economic Development, and
     Tourism, Hawaii Integrated Energy Policy (Honolulu:  Dec.
     1991) at 61 (hereinafter, "DBEDT (1991)").  While not an
     energy plan for the State, this report on the Hawaii
     integrated energy policy development program solicited input
     from persons and organizations throughout the State,
     identified a number of issues and problems, and made
     recommendations for solutions to these problems.

714. Id.

715. In particular, the report made the following recommendations
     regarding transportation energy use:
     
        .    Hawaii should analyze the effectiveness of
        transportation policy options, including public
        transit, energy pricing and other fiscal policies, and
        infrastructure changes, that will reduce demand for
        petroleum based fuels.  DBED - Energy Division or the
        new energy agency, in consultation with DOT, should
        conduct the analysis and implement those that prove
        the most effective.  Policy options should include use
        of incentives and disincentives such as rebates and
        surcharges on new automobiles, and user fee revenues
        to support alternate fuel development.  The energy
        implications of alternative transportation modes, such
        as the proposed water ferry system and rapid transit
        system, should also be analyzed.  DOT's Transportation
        Functional Plan should include specific (energy
        related) initiatives called for in the Energy
        Functional Plan.  This is a mid-term recommendation.
     
        .    State, County and Federal governments, and
        selected private companies, should form a
        transportation task force to coordinate fleet-wide
        demonstrations of alternate fuel and energy-efficient
        vehicles.  The State should prepare a list of ground
        transportation options complete with technical and
        cost information on each.  At the request of the ERC,
        a task force should be formed with representatives
        from appropriate agencies at each level of government
        and private companies that maintain a corporate fleet
        to participate in a major "alternative forms of
        transportation demonstration program."  This is a
        near-term recommendation.
     
        .    Hawaii should expand the telework program and
        other satellite office facilities.  The State should
        publicize the energy savings and other advantages of
        decentralization strategies and encourage public
        agencies and private companies and organizations to
        participate.  This initiative is included in the
        Transportation Functional Plan.  This is a near- to
        mid-term recommendation.
     
        .    Hawaii should establish commuter information
        centers to facilitate commuter ride sharing for
        government, communities, schools, businesses and
        hotels/resorts.  This initiative is included in the
        Transportation Functional Plan.  This is a near-term
        recommendation.
     
        .    Hawaii should assist the counties of Maui, Kauai
        and Hawaii in the planning, assessment, development,
        and/or improvement of public transportation systems.
        Based on the results of the County-wide Transportation
        Planning Process, conducted jointly by DOT and the
        County governments, the State should support and
        promote public transportation and alternative
        transportation modes as a means of reducing gasoline
        consumption.  This initiative is included in the
        Transportation Functional Plan.  This is a mid-term
        recommendation.
     
        .    Hawaii should renew, upgrade and implement the
        bikeway program.  DOT should work with the counties,
        bicycling organizations, bike tour operators and
        communities in this effort.  This initiative is
        included in the Transportation Functional Plan.  This
        is a mid-term recommendation.  Id. at 64.

716. Pamela Martin, Telecommuting:  The Ride of the Future,
     Report No. 2 (Honolulu:  Legislative Reference Bureau, 1992)
     at 7.  In addition, the Department of Business, Economic
     Development, and Tourism noted that early assessments of the
     Hawaii telework center demonstration project "suggest that
     participants have reduced travel time by 78%, decreased
     transportation costs by 59%, and reduced fuel consumption by
     nearly 30%."  See DBEDT (1991) at 61 (footnote omitted).  In
     addition, two other recent Legislative Reference Bureau
     studies also discuss energy policy issues regarding vehicle
     transportation:  Denise Miyasaki, Two Aspects of
     Ridesharing:  State Parking Control Policy and HOV Lane
     Enforcement, Report No. 14 (Honolulu:  Legislative Reference
     Bureau, 1992); and Junie Hayashi, Rideshare Policies and
     Programs:  A Review, Report No. 14 (Honolulu:  Legislative
     Reference Bureau, 1989).  See also Haw. Rev. Stat. chapter
     279G (ridesharing) and chapter 291C, pt. XVII (traffic code;
     high occupancy vehicle lanes).

717. United States, President's Commission for a National Agenda
     for the Eighties, Panel on Government and the Regulation of
     Corporate and Individual Decisions, Government and the
     Regulation of Corporate and Individual Decisions in the
     Eighties (Washington, DC:  1980) at 11-12 (hereinafter,
     "President's Commission (1980)").

718. Id. at 12-13.

719. V. Kerry Smith, "Regulating Energy:  Indicative Planning or
     Creeping Nationalization," in Regulating Business:  The
     Search for an Optimum (San Francisco:  Institute for
     Contemporary Studies, 1978) at 69.

720. See Walter A. Rosenbaum, Energy, Politics and Public Policy,
     (Washington, DC:  Congressional Quarterly Press, 1981) at
     134 (footnote omitted):
     
        Rising energy prices punish and reward most Americans,
        but not on an equal basis and often without respect
        for their ability to endure the consequences.  In New
        York, for example, increased energy costs had forced
        the average older American's household to spend one-
        third of its income on energy by 1979, whereas middle-
        income families were spending only 9.6 percent.  At
        the same time, stockholders in the nation's major
        petroleum companies reaped record dividends.  In
        short, Americans differ in their ability to pay higher
        energy prices, in the sacrifices they experience, and
        in the extent to which they also benefit from
        increased energy prices.

721. Id. at 134-135.

722. Id. at 135.

723. Id. at 136.

724. Id. at 136-137.

725. Rosenbaum (1981) at 137.  See also Stone (1982) at 125-126:
     
             One person's notion of equity is apt to be
        another's sense of inequity.  For example, if the
        Interstate Commerce Commission should impose upon a
        railroad a below-operating cost rate between small
        communities and allow that railroad to subsidize the
        resulting loss by charging a high rate between large
        communities, both the favored and disfavored
        communities can point to reasons why the rate
        structure is equitable or inequitable--depending on
        whether the argument is made from the winner's or
        loser's perspective.  The smaller communities will
        point to the need to help commerce and economic
        growth, lest large urban communities virtually
        disappear.  The large communities will point to the
        discriminatory rate structure and the fact that large
        areas in effect are subsidizing smaller ones. ...

726. Joseph P. Kalt, The Economics and Politics of Oil Price
     Regulation:  Federal Policy in the Post-Embargo Era
     (Cambridge, MA:  MIT Press, 1981) at 237-8.

727. Rosenbaum (1981) at 137-138.

728. Stone (1982) at 188-189.

729. Gasoline shortages frequently bring calls for regulation and
     investigation of the oil industry.  See, e.g., Haw. House
     Report (1974); see also Stone (1982) at 179-184; and Bruce
     M. Owen and Ronald Braeutigam, The Regulation Game:
     Strategic Use of the Administrative Process (Cambridge, MA:
     Ballinger Publishing Co., 1978), who argue that during
     shortages, people are more willing to trade off market
     efficiency for increased procedural fairness; "[w]hen there
     is a sudden shortage of gasoline or natural gas, ... an
     overpowering instinct in favor of rationing and price
     controls seems to motivate both public opinion and political
     action."  Id. at 35.

730. Stone (1982) at 190.

731. Id. at 186.

732. See Mark R. Lee, "Oil Price Shocks, Antitrust and Politics:
     The Supply of Petroleum and the Demand for Regulation," 15
     S. Ill. U. L.J. 529, 537-538 (1991) (footnotes omitted):
     
             Why do politicians persist in responding to
        petroleum rises with calls for regulation and
        investigation when this behavior causes such perverse
        effects? ...
     
             Responding to petroleum price rises with calls
        for regulation and investigation must somehow serve
        politicians' self interest.  The theory of public
        choice suggests three ways in which it might do so.
        First, this behavior could curry favor with voters.
        Calls for regulation and investigation play to the
        nearly universal desire to have more and pay less for
        everything consumed.  The idea that the calls
        themselves frustrate this desire would probably seem
        counterintuitive to most voters, and voters qua voters
        have little incentive to acquire and evaluate the
        information required to upset their intuition.  Thus,
        responding to petroleum price rises with calls for
        regulation and investigation may curry favor with
        voters, thereby securing additional votes.
     
             This behavior could also serve politicians' self
        interest by currying favor with opinion leaders.  A
        large number of these leaders seem strongly inclined
        to statism, perhaps because for many of them, their
        personal wealth tends to vary directly with the amount
        of resources controlled by government.  Currying favor
        with these opinion leaders could elicit expressions of
        support, and this might enable politicians to secure
        more votes and more campaign contributions.
     
             Finally, and most importantly, responding to
        petroleum price rises with calls for regulation and
        investigation will induce a lawful flow of cash and
        cash equivalent favors from the petroleum market to

        the politicians.  The flow will take a variety of
        forms:  campaign contributions from political action
        committees, "honoraria" for "lectures,"
        "reimbursement" for the "expense" of attending
        "seminars" or conferences, and the like.  Those making
        the disbursements publicly justify them as securing
        "access," but they serve the same function as
        "protection" payments.  The politicians on the
        receiving end use the flow both to finance elections
        and increase their wealth.

733. Rosenbaum (1981) at 202, 203.

734. See United States, Department of Energy, Deregulated
     Gasoline Marketing:  Consequences for Competition,
     Competitors, and Consumers (Washington, DC:  March 1984) at
     120-123 (hereinafter "DOE (1984)").  A supplier may grant
     certain price discounts, in the form of temporary voluntary
     allowances, temporary competitive allowances, or rent
     rebates, to limit its market share loss and protect its
     dealers in areas of intense price competition.  Legislative
     proposals would prohibit the selective use of these
     discounts by requiring that they be granted to all of the
     supplier's outlets in a broad geographical area.  Id. at
     120.

735. See generally Rayola Dougher and Thomas F. Hogarty, The
     Impact of State Legislation on the Number of Retail Gasoline
     Outlets, Research Study #062 (Washington, DC:  American
     Petroleum Institute, Oct. 1991); Energy Research Associates
     Inc., Economic Feasibility of Gasoline Vapor Recovery
     Systems for Hawaii, (Honolulu:  Hawaii Office of
     Environmental Quality Control,  Feb. 1981); Robert A.
     Brazener, "Validity and Construction of Statute or Ordinance
     Regulating or Prohibiting Self-Service Gasoline Filling
     Stations," 46 A.L.R.3d 1393 (1972).

736. Moreover, had chapter 486I been implemented upon its
     enactment in 1991, legislators would now have available four
     years' worth of relevant, impartial data regarding some of
     the issues discussed in this report, such as whether a price
     inversion has occurred in the distribution of gasoline in
     the State (question (5) of the Resolution) and whether or
     not the existing moratorium has resulted in lower gasoline
     prices (question (17)), arguably rendering those portions of
     the current study unnecessary.

737. Kreith and Burmeister (1993) at 288.  The NCSL report also
     commented that "[l]egislators need objective assistance from
     professionals who do not have potential to gain financially
     in the outcome of energy legislation."  Id. at 289.  Each of
     the survey participants representing the various petroleum
     industry groups in this study have a stake in the outcome of
     legislation affecting their interests.  While their views
     should not be disregarded solely on that basis, their
     arguments nevertheless should be viewed in this context.

738. See supra text accompanying notes 22 and 23.  Breyer
     suggested that classical regulation should not ordinarily be
     used for purposes of rent control; rather, taxes or
     deregulation are the preferable alternatives.  Breyer (1982)
     at 195.

739. Rosenbaum (1981) at 148-150.

740. Breyer (1982) at 165-167:
     
             Potential shortages were avoided by use of an
        ingenious program that distributed entitlements to
        refine old, cheap oil.  The program allocated the
        cheap oil "fairly" among refiners.  Each refiner
        received the right to process an amount of old oil in
        proportion to the total amount of oil he refined.  The
        government determined monthly the total amount of oil
        refined in the United States and the proportion of
        that oil accounted for by old, cheap crude.  Each
        refiner then received a number of entitlement tickets
        roughly equal to that proportion of his total
        throughput.  Thus, if 23 percent of all oil refined
        was old, a refiner with a throughput of 1,000 barrels
        received 230 tickets.  If he refined 2,000 barrels, he
        received 460 tickets.  It was unlawful to refine old
        oil without an entitlement.  A refiner with extra
        (more than 23 percent) supplies of old oil had to buy
        entitlements from refiners with extra tickets (those
        using less than 23 percent old oil).  The price paid
        equaled the difference between the world market price
        and the old-oil price, or about $9.00 per ticket.
        Each refiner in effect received the value of having 23
        percent of his throughput made up of old, cheap oil,
        because those with too many tickets sold them to those
        with too few.
     
             The effect of this system was to lower the cost
        of imports to the refiner and to lower domestic market
        prices.  The refiner had to pay about $14.50 for a
        barrel of imported oil.  Yet he received 23 percent of
        an entitlement ticket (worth about $2.25) when he
        imported an extra barrel.  Hence, the barrel actually
        cost him slightly more than $12.00.  He received the
        $2.25 when he sold the .23 entitlement to a refiner
        with an extra .23 barrel of old oil.  It represented
        the potential windfall profit available from the sale
        of that .23 barrel.  Thus, part of the windfall profit
        was used to subsidize the cost of the import.  Under
        this system, oil will continue to be imported to
        satisfy demand at prices lower than the world market
        price so long as rents are available to pay the cost.
        In other words, there will be (and has been) no
        perceived shortage because the rents are used in part
        to pay for the import of sufficient foreign crude to
        satisfy all demand. ...

741. Id. at 167.

742. Id. at 271.

743. Id. at 273.

744. See id. at 275-284.

745. See id. at 168-169.  A similar form of this argument may be
     used in opposition to the idea of tariffs, as well; since
     market prices for goods and services fluctuate, filing
     tariffs and changes to those rates reduces flexibility and
     increases paperwork and other administrative costs.

746. See text accompanying note 40 in chapter 3.

747. Yamaguchi and Isaak (1990) at 52.

748. See text accompanying note 23 in chapter 6.

749. Id. at 59-60 (emphasis added).

750. Brannon (1974) at 138 (footnote omitted):
     
             It should also be taken into account, in regard
        to a possible increase in gasoline taxes, that the
        United States is one of the few major countries that
        does not treat gasoline as a net revenue source, as it
        does tobacco and alcohol.  Most European countries
        rely on gasoline taxes to such an extent that ... the
        price of gasoline is two to three times as high as it
        is in this country.  As should be expected under this
        pricing arrangement, the consumption of gasoline per
        capita is about half as high in Europe as it is here,
        taking into account income differences.  A consequence
        of the heavy gasoline tax is the much greater
        preference for small cars as well as greater reliance
        on energy-efficient public transportation.

751. Id.

752. Rosenbaum (1981) at 138.

753. DPED (1981) (vol. 2) at 42.  One way that the government may
     assist consumers who are burdened by higher gasoline prices
     is to institute an income assistance program.  Id. However,
     programs that subsidize or eliminate income losses resulting
     from higher energy costs may resist "national policies to
     conserve energy in ways that appear to threaten economic
     growth."  Rosenbaum (1981) at 138.

754. See, e.g., Kevin Dayton, "Estimate:  1 in 3 Cars Uninsured,"
     The Honolulu Advertiser, May 22, 1994; Susan Hooper, "Couple
     Balk at $14,500 for Auto Coverage," The Honolulu Advertiser,
     May 23, 1994.

755. In the 1995 Regular Session, for example, House Bill No. 1261 
     (1995) would have established a system of motor vehicle
     insurance funded by a "gasoline pump surcharge"--a tax on
     motor vehicle fuel purchased at the pump--as well as by
     motor vehicle registration and driver's licensing fees.
     Similarly, House Bill No. 1560 (1995) would have established
     a no-fault insurance state fund program, essentially a "pay
     as you go" no-fault insurance system, funded by no-fault
     taxes imposed on liquid fuel sold or used for operating
     motor vehicles in the State, as well as motor vehicle
     registration and driver's licenses and renewals.  While the
     gasoline tax under this bill would be paid by all drivers at
     the pump for every gallon of liquid fuel purchased for the
     operation of motor vehicles, certain public assistance
     recipients would be provided additional assistance in making
     the no-fault tax payments.

756. Estimates of price increases range from a low of 23 cents
     added to each gallon of gasoline to a high of $1.28 added
     per gallon.  See Hugh Clark, "Rural Commuters Nix Plan; Say
     Paying Insurance at Pump Too Costly," The Honolulu
     Advertiser, Aug. 8, 1995, at A5; Kevin Dayton, "Legislators
     Defer Action on 'Pay-at-Pump,'" The Honolulu Advertiser,
     Feb. 11, 1993, at A3.  In addition, a pay-at-the-pump
     proposal for the City and County of Honolulu proposed a 50-
     cent tax on each gallon of gasoline purchased.  See Mike
     Yuen, "Fasi Revs Up 'Pay at the Pump' Plan," Honolulu Star-
     Bulletin, June 3, 1993, at A-3.

757. See, e.g., Kevin Dayton, Feb. 11, 1993, supra note 100, at
     A3:
     
             A spokesman for the Chamber of Commerce of Hawaii
        said pay-at-the-pump schemes do not offer any
        incentives for drivers to be cautious, because careful
        and reckless drivers alike would pay the same rates.
     
             Insurance industry officials said the tax would
        land especially heavily on people who drive long
        distances because they use more gasoline.
     
             They argued that people with bad driving records
        should pay more--not people who drive long distances.

     In addition to raising the price of gasoline, opponents also
     argue that a pay-at-the-pump plan would create a large new
     state bureaucracy and drive some private insurers out of
     Hawaii's market.  Kevin Dayton, "Gas-Tax Bill for No-Fault
     Dies," The Honolulu Advertiser, March 2, 1994 (regarding
     House Bill No. 3596, H.D. 1).  Finally, the Tax Foundation
     of Hawaii has argued that such a measure is regressive and
     will increase the already high cost of living in Hawaii:
     
        It should be noted that under the proposed measure,
        drivers who drive the most would be penalized as they
        would be paying more in fuel taxes and higher
        registration fees since vehicles used to commute to
        work more than 40 miles per roundtrip would be subject
        to higher no-fault taxes.  This would result in those
        who travel the greatest distances paying the bulk of
        the costs of this new beneficiary program of no-fault
        insurance.
     
        Distance traveled certainly is no indicator of how
        safe or dangerous a driver is or the risk involved.
        In fact, when one considers that the poor live
        furthest from urban employment centers because housing
        is less expensive, this measure is regressive with the
        poor paying the bulk of the taxes collected as their
        consumption of fuel will be higher...
     
        Unfortunately, ... the proposal to pay for a state no-
        fault insurance program at the pump may in fact create
        more problems than it would solve.  Certainly the user
        taxes being tapped for the insurance fund do not bear
        any direct relationship to the risk exposure
        experienced by each driver.  There is no valid reason
        for the state to enter the insurance business.
     
        From an economic vantage point, if substantial
        increases are added to the fuel tax, those increases
        will have a devastating effect on the already high
        cost of living in Hawaii.  The increased taxes paid by
        commercial operations will be passed on to consumers
        and clients and will be included in the base against
        which percentage mark-ups are calculated.  This cost
        will pyramid so that the end consumer will see price
        increases many times more than the nominal increase in
        the fuel tax.
     
        Finally, it should be noted that the fuel tax has been
        the traditional funding source for highway
        improvements and maintenance.  It is structured so
        that it must continually be reviewed for adequacy and
        relationship between user and beneficiary.  Should
        this proposal be enacted at a substantial rate on fuel
        for insurance, any future proposals to increase the
        rate for the purpose of funding highway improvements
        will be subject to significant resistance.

     Legislative Tax Bill Service (Tax Foundation of Hawaii,
     Honolulu:  Feb. 1995) at 234-235 (re:  House Bill No. 1560
     (1995)).  Opponents on the Big Island, which lacks public
     transportation in many rural areas and where many residents
     must commute long distances to their places of work, also
     argue that "unemployment would rise if the cost of gasoline
     rises so sharply, because people wouldn't be able to afford
     to commute to their jobs on the relatively large island."
     See Hugh Clark, Aug. 8, 1995, supra note 100, at A5.

758. For example, Brannon (1974) noted the following:
     
             Even though the energy cost of automobile
        transportation is high the present system of pricing
        highway services causes people to think that, in most
        driving decision situations, the highway is cheaper
        than it really is.  Consumers pay for highways through
        a gasoline tax, which is a fairly uniform charge that
        applies to various driving conditions.  For example,
        driving to work during rush hours is considerably more
        expensive from a social standpoint than driving on an
        open highway free of traffic.  The major difference is
        that the additional crowding involved in commuter
        traffic when one more car is added means some loss of
        highway efficiency for all the other cars.  Any
        particular driver, however, evaluates his decision to
        use the highway only in his own terms--in terms of the
        time it saves him and of his automobile expenses.  He
        does not consider the slowdown that he imposes on
        other drivers as a cost.
     
             Economists who have examined this question
        uniformly favor variable highway tolls as a way of
        charging motorists for highway expenses.  The tolls
        would, for instance, be very heavy for passing bottle-
        neck points during crowded hours and probably zero for
        using highways in times and places where there is no
        crowding.  The public however, has resisted toll
        booths, presumably because they slow down traffic as
        well as absorb money, and the Highway Act of 1956
        specifically eliminated tolls as a way of paying for
        highways in the new interstate system.  A few older
        roads that were financed before the interstate system
        still have highway tolls.
     
             We think that the continued absence of highway
        tolls results in commuters underestimating the social
        costs of getting to work by private automobile.  This
        results in over-dependence on automobile commuting and
        inadequate reliance on mass transportation, which can
        move people more efficiently and with much less energy
        outlay.
     
             An ideal solution would be to institute highway
        tolls at federal, state, and local levels.  Because
        most of the roads involved are technically local
        streets, an ideal form of bringing about improved
        pricing of highway services would be a matching grant
        program from the federal government that would give
        better treatment to states that raise some highway
        funds through tolls.  Id. at 136-137.

759. DPED (1981) (vol. 2) at 40.

760. Id., (vol. 1) at xvii.

761. Brannon maintained that a parking tax was a viable
     alternative to highway tolls for this reason:
     
	    One promising alternative is a parking tax that would
        parallel the effect of tolls by making it very
        expensive for a commuter to bring an automobile into
        the central city for the day.  The ideal base of the
        tax would be daytime parking fees at commercial lots.
        These would be supplemented by higher parking meter
        fees for on-street parking and taxes related to the
        number of free spaces provided business
        establishments.  Higher parking-meter rates should be
        imposed mainly in the central city; fringe parking
        near mass-transit terminals should be tax-free.
        Because it is the parking of cars involved in rush-
        hour traffic that should be taxed, there could be a
        small tax or no tax at all on short-time parking
        between rush hours.
     
             All of these considerations argue strongly for
        local imposition of parking taxes.  The local
        government can best identify congested areas and
        congested times and decide how much refinement to
        build into the system.  The politics of local parking
        taxes is complex, and there is a fairly well organized
        automobile lobby.  Downtown business interests look on
        parking taxes as favoring suburban shopping.  Again,
        some federal influence might be brought to bear by
        introducing differentials in local grants under mass
        transit in favor of cities that introduce parking
        taxes.  Brannon (1974) at 137.

762. DPED (1981) (vol. 2) at 39.

763. Noller (1978) at 127.

764. See Brannon (1974) at 139-140:
     
             The disadvantage of relying on a tax on new cars
        as a way of getting at transportation energy use, of
        course, is that it completely ignores the possibility
        of inducing consumers to make less use of their
        present cars, which may also be high polluters.  It
        also overlooks the possibility of cutting the use of
        new cars.  Once he has purchased his car, the consumer
        will have paid the tax.  And whether the tax was high
        or low, he will continue to find it economical to
        drive the car to work or around the block for a local
        errand.

765. Noller (1978) at 127.

766. Breyer (1982) at 272-273.  Breyer noted that the federal
     Environmental Protection Agency is already experimenting
     with a similar system known as the "bubble":  "Instead of a
     rule limiting the amount of emissions from each of a
     factory's smokestacks, the EPA places an imaginary bubble
     over the factory in the form of a rule stating the total
     amount of pollution the factory can emit, leaving it to the
     owner to decide how much pollutant each stack will emit.
     The owner will curtail emissions more from those stacks
     where curtailment is cheaper, and less from those where
     curtailment is more expensive; thus, the same level of
     curtailment is brought about more efficiently."  Id.

767. Id. at 273-274.

768. Id. at 274.

769. See id. at 173.

770. See id. at 173-174.

771. Id. at 174-175 and n. 40; see also R. Coase, "The Problem of
     Social Cost," 3 J.Law & Econ. 1 (1960) and other sources
     cited in n. 40; G. Calabresi and A. Melamed, "Property
     Rules, Liability Rules, and Inalienability:  One View of the
     Cathedral,"  85 Harv. L. Rev. 1089 (1972).

772. Haw. Rev. Stat. §128D-6(a) (liability), provides as follows:
     
        "(a)  Notwithstanding any other provision or rule of
        law, and subject only to the defenses set forth in
        subsection (c):
     
             (1)  The owner or operator or both of a facility
                  or vessel;
             
             (2)  Any person who at the time of disposal of
                  any hazardous substance owned or operated
                  any facility at which such hazardous
                  substances were disposed of;
     
             (3)  Any person who by contract, agreement, or
                  otherwise arranged for disposal or
                  treatment, or arranged with a transporter
                  for transport for disposal or treatment, of
                  hazardous substances owned or possessed by
                  such person, by any other party or entity,
                  at any facility or on any vessel owned or
                  operated by another party or entity and
                  containing such hazardous substances; and 
     
             (4)  Any person who accepts or accepted any
                  hazardous substances for transport to
                  disposal or treatment facilities or sites
                  selected by such person, from which there is
                  a release, or a threatened release, which
                  causes the incurrence of response costs of a
                  hazardous substance;
     
        shall be strictly liable for (A) all costs of removal
        or remedial actions incurred by the State or any other
        person; to the extent such costs and actions are
        consistent with this chapter, the state contingency
        plan, and any other state rules; (B) damages for
        injury to, destruction of, or loss of natural
        resources, including the reasonable costs of assessing
        such injury, destruction, or loss resulting from such
        release; and (C) the costs of any health assessment or
        health effects study carried out consistent with this
        chapter, the state contingency plan, or any other
        state rules."

773. Haw. Rev. Stat. §128D-1 defines "hazardous substance" and
     "oil" in relevant part as follows:
     
             ""Hazardous substance" includes any substance
        designated pursuant to section 311(b)(2)(A) of the
        Clean Water Act; any element, compound, mixture,
        solution, or substance designated pursuant to section
        102 of CERCLA; any hazardous waste having the
        characteristics identified under or listed pursuant to
        §3001 of the Solid Waste Disposal Act; any toxic
        pollutant listed under section 307(a) of the Clean
        Water Act; any hazardous air pollutant listed under
        section 112 of the Clean Air Act, as amended (42
        U.S.C. §§7401-7626); any imminently hazardous chemical
        substance or mixture regulated under section 7 of the
        Toxic Substances Control Act, as amended (15 U.S.C.
        §§2601-2671), oil, trichloropropane, and any other
        substance or pollutant or contaminant designated by
        rules adopted pursuant to this chapter. * * *"
        (emphasis added).
     
             ""Oil" means oil of any kind or in any form,
        including, but not limited to, petroleum, fuel oil,
        sludge, oil refuse, oil mixed with wastes, crude oil
        or any fraction or residue."

774. Breyer (1982) at 176.

775. Another possible area of deregulation is that of motor
     vehicle repairs (Haw. Rev. Stat. chapter 437B).  That
     chapter, it may be argued, places additional restrictions on
     the provision of automotive services.  (House Resolution
No.
     174, H.D. 2, seeks to protect the interests of Hawaii's
     gasoline consumers in part "by ensuring the ...
     [a]vailability of automotive services...".)  The Auditor's
     1994 sunset review of that chapter recommended that while
     motor vehicle repair dealers should continue to be licensed,
     the regulation of individual mechanics was unwarranted.
     Hawaii and Michigan are the only states that currently
     license mechanics.  See Hawaii State Auditor, Sunset
     Evaluation Update:  Regulation of Motor Vehicle Repairs,
     Report No. 94-11 (Honolulu:  Sept. 1994); see id. at 21-51
     for proposed legislation.

776. Breyer (1982) gave the following general synopsis of the
     objectives of antitrust laws:
     
    Although antitrust laws are extremely complex in
        their application, their essence and objectives can be
        described very simply.  Essentially, the antitrust
        laws' broadly phrased prohibitions forbid agreements
        "in restraint of trade," "attempts to monopolize,"
        "monopolization," and mergers that may "lessen
        competition substantially."  The first two
        prohibitions police anticompetitive market conduct-
        -agreements among firms or actions of individual firms
        that may prevent or inhibit competition in a
        particular market.  The third and fourth prohibitions
        are aimed at anticompetitive market structures, in
        which one firm or a handful of firms, instead of many
        competing firms, supply an industry's entire output.
        The law against monopolization allows the courts to
        restore competition where there is an existing
        monopoly--say, by breaking apart a firm with monopoly
        power into several smaller competing firms, thereby
        restoring competition.  The merger law seeks to
        prevent a presently competitive marketplace from
        becoming uncompetitive in the future through mergers
        that reduce the number of competitors and increase
        concentration within the marketplace.
     
             The basic principle used in applying these
        prohibitions is the "rule of reason."  Essentially,
        the courts have realized that some agreements or
        conduct that injure competition or restrain trade may
        also be commercially necessary or desirable.  A
        partnership agreement restrains trade between the
        partners but allows them to compete more effectively
        against others.  Similarly, a firm may obtain a
        monopoly by selling a better product.  Should it be
        discouraged from doing so?  Mergers that increase
        concentration may also allow firms to produce more
        efficiently.  The "rule of reason" allows the courts
        to weigh the anticompetitive harms of the practice
        under attack against the procompetitive
        justifications, condemning the practice only if, on
        balance, it produces significant injury.  Breyer
        (1982) at 157 (footnotes omitted; emphasis in
        original).

777. See E. Thomas Sullivan and Jeffrey L. Harrison,
     Understanding Antitrust and its Economic Implications, Legal
     Text Series, 2d ed. (New York, NY:  Matthew Bender, 1994) at
     1; see also Herbert Hovenkamp, Federal Antitrust Policy:
     The Law of Competition and its Practice (St. Paul:  West
     Publishing Co., 1994) at 2-3 (footnote omitted):
     
             Market economies are dedicated to the principle
        that in the first instance people are responsible for
        their own welfare.  Further, they are best off if they
        can make voluntary exchanges of goods and services in
        competitive markets.  If all exchanges are voluntary,
        each person will continue to exchange goods and
        services until he can make himself no better off by an
        exchange that is voluntary for both parties to the
        transaction.  If all exchanges occur at competitive
        prices, society as a whole is wealthier than if some
        occur at a higher or lower price.  An important goal
        of antitrust law--arguably its only goal--is to ensure
        that markets are competitive.

778. Breyer (1982) at 158 (footnote omitted).  While antitrust
     policy generally allows activities that increase a firm's
     productive efficiency (unless the activities also increase
     the firm's market power), however, "a firm does not
     generally violate the antitrust laws simply by being
     inefficient.  For example, although vertical integration may
     reduce a firm's costs and permit it to produce and deliver a
     product at a lower price, failure to integrate is not
     illegal under the antitrust laws.  The market itself
     disciplines inefficient firms."  Hovenkamp (1994) at 74.

779. President's Commission (1980) at 18.

780. See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294,
     320 (1962); see also Copperweld Corp. v. Independence Tube
     Corp., 467 U.S. 752, 767 n. 14 (1984); Brunswick Corp. v.
     Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977); Oahu Gas
     Service, Inc. v. Pacific Resources, Inc., 838 F.2d 360, 370
     (9th Cir. 1988), cert. denied, 488 U.S. 870 (1988).

781. See, e.g., Owen and Braeutigam (1978) at 32:  "[M]uch
     antitrust policy historically has protected competitors, not
     competition."
782. See John J. Flynn and James F. Ponsoldt, "Legal Reasoning
     and the Jurisprudence of Vertical Restraints:  The
     Limitations of Neoclassical Economic Analysis in the
     Resolution of Antitrust Disputes," 62 N.Y.U. L. Rev. 1125,
     1126 n. 4 (Nov. 1987):  "One of the more popular cliches is
     that the antitrust laws protect competition, not
     competitors....  The cliche implicitly asserts that one can
     have competition without competitors, contains no definition
     of 'competition,' and is frequently used to deny the
     congressionally defined goals of antitrust policy in favor
     of the narrow goals assumed by the neoclassical model."  See
     also John J. Flynn, "The 'Is' and 'Ought' of Vertical
     Restraints After Monsanto Co. v. Spray-Rite Service Corp.,"
     71 Cornell L. Rev. 1095, 1100 (Sept. 1986).

783. See, e.g., James F. Ponsoldt, "The Enrichment of Sellers as
     a Justification for Vertical Restraints:  A Response to
     Chicago's Swiftian Modest Proposal", 62 N.Y.U. L. Rev. 1166,
     1166-1167 (Nov. 1987) (emphasis in original; footnotes
     omitted):
     
             In thinking about the intent of the framers of
        the antitrust laws with respect to vertical restraint
        agreements, ... I was inspired by two recent concrete,
        anecdotal events.  The first event was the passage of
        a bill by the Georgia legislature that would have
        absolutely prohibited vertically integrated oil
        companies from opening retail gas stations.  [Georgia
        S. Bill No. 177 (1987)]  The Georgia legislature acted
        primarily in response to the urging of a retail
        dealers' association which cited allegedly coercive,
        unpoliced vertical conduct by suppliers, allegedly
        designed to achieve vertical integration.
     
             The second event was the reaction of many of my
        foreign LL.M. students during an antitrust seminar
        devoted to recent lower court developments.  In
        discussing recent vertical restraint cases, students
        were particularly interested in a recent Ninth Circuit
        decision in which the court blithely, and without
        citing any Supreme Court authority, announced that
        vertical price fixing was not per se illegal and was
        not unreasonable unless it could be or it was proven
        to have an anticompetitive effect throughout a defined
        product and geographic market.  [49er Chevrolet, Inc.
        v. General Motors Corp., 803 F.2d 1463 (9th Cir.
        1986)]  My foreign students reacted with unusually
        open cynicism, claiming that antitrust law
        specifically, and the ability of democratic government
        to regulate capital in general, were illusory at best,
        and perhaps fraudulent.
     
             The inferences I draw from these two anecdotes
        are:
     
             1.  Assuming a majoritarian political process
        truly prevails, legislatures will, as they have
        throughout history, impose more intrusive, less
        efficient forms of regulation if traditional antitrust
        policing does not occur or is unsuccessful; and
     
             2.  Those who rely primarily upon the alleged
        efficiency goals of antitrust--even if their reliance
        is justified in particular cases--ignore history and
        political science to our long-term disadvantage.
        Moreover, an overly permissive attitude toward
        facially anticompetitive business conduct plays into
        the hands of either industrial policy proponents or
        critical legal studies adherents here and abroad, and
        will undermine our free market.

     The Georgia bill referred to in the text ("Gasoline
     Marketing Retail Sales:  Prohibitions") passed both houses
     of the Georgia Legislature but was vetoed by Georgia's
     Governor on March 20, 1987.  Id. at 1166, n. 3; see also
     Michael Hinkelman, "Big Money Riding on Oil Bill:  Georgia
     Oil Jobbers Push Divorcement Legislation," Atlanta Business
     Chronicle, vol. 13, no. 37, (Feb. 11, 1991) at 1A.

784. See Robert H. Bork, The Antitrust Paradox:  A Policy at War
     with Itself (New York:  Basic Books, Inc., 1978) at 7
     (footnote omitted):
     
             Because antitrust's basic premises are mutually
        incompatible, and because some of them are incorrect,

        the law has been producing increasingly bizarre
        results.  Certain of its doctrines preserve
        competition, while others suppress it, resulting in a
        policy at war with itself.  During the past twenty
        years or so, the protectionist, anticompetitive
        strains in the law has undergone a spectacular
        acceleration, bringing to pass ... the "crisis in
        antitrust." ...
     
             A consumer-oriented law must employ basic
        economic theory to judge which market structures and
        practices are harmful and which beneficial.  Modern
        antitrust has performed this task very poorly. ...
        [P]erhaps the core of the difficulty is that the
        courts, and particularly the Supreme Court, have
        failed to understand and give proper weight to the
        crucial concept of business efficiency.  Since
        productive efficiency is one of the two opposing
        forces that determine the degree of consumer well-
        being (the other being resource misallocation due to
        monopoly power), this failure has skewed legal
        doctrine disastrously. ...

     Others argue that there is no "antitrust paradox":  "The
     paradox ... arises because analysts start with the premise
     that the antitrust laws are 'consumer-oriented' and that
     their basic goal is to promote economic efficiency....
     [I]nstead ... antitrust, as with virtually all government
     activity, is designed to benefit special-interest groups
     rather than to promote the 'public interest.'"  Bruce L.
     Benson and M. L. Greenhut, "Special Interests, Bureaucrats,
     and Antitrust:  An Explanation of the Antitrust Paradox," in
     Antitrust and Regulation, ed. Ronald E. Grieson (Lexington,
     MA:  Lexington Books, 1986) at 54.

785. Generally, a social cost may be defined as a net loss that
     society suffers as a result of a particular transaction,
     while a social benefit is a net gain.  Hovenkamp (1994) at
     17; see also Roger D. Blair and David L. Kaserman, Law and
     Economics of Vertical Integration and Control (New York:
     Academic Press, 1983) at 192.

786. Breyer (1982) at 173.

787. Don E. Waldman, Antitrust Action and Market Structure,
     (Lexington, MA:  Lexington Books, 1978) at 15-17:
     
        In the United States, antitrust policy is the primary
        method used by the government to maintain competition.
        The broad objective is to inhibit undesirable business
        conduct and maintain market structures that are
        conducive to efficient economic performance.  While
        judges, lawyers, and economists might all agree with
        these basic objectives, their individual objectives
        may be very different.
     
             Government lawyers often consider victory the
        major objective.  This is understandable, since a
        lawyer's reputation is built on victories not on
        positive economic gains to society.  If a lawyer
        wishes to move up the ladder at the Justice
        Department, it is probably much more important to win
        cases than to obtain major economic gains.  Government
        lawyers are therefore likely to act quickly in
        response to a relatively minor complaint from a
        competitor, since the complaining firm will supply
        much of the evidence needed for a conviction, but are
        unlikely to respond at all to a major covert
        oligopolistic price-fixing scheme, since evidence is
        difficult to obtain and a conviction is questionable
        at best. ...
     
             Judges interpret the laws and actually determine
        the effectiveness of antitrust policy, yet few are
        schooled in economics.  Their decisions are based on
        their interpretations of the laws, not on the basis of
        creating a more competitive economy.  Historically,
        judges have interpreted the laws more as a challenge
        to certain business practices than as a means of
        directly altering poor market structures or
        performance. ...  [T]he courts have generally ruled
        that identical prices which result from the natural
        forces of oligopoly are legal, despite the fact that
        identical oligopolistic pricing can be more harmful
        than overt price-fixing agreements in fairly
        competitive industries.  Furthermore, judges have
        shown a great reluctance to directly change market
        structures through the use of divestiture,
        dissolution, or divorcement.
     
             Where does this leave the economist?  His
        objective is to improve efficiency.  The economist is
        primarily concerned with market power that results in
        negative efficiency effects.  While judges and lawyers
        are very concerned about the method used to obtain
        power, the economist's objective is to eliminate the
        negative effects of power, regardless of the method
        use to obtain that power. ...  Any time the expected
        welfare gains are greater than the expected costs of
        litigation, the economist will favor antitrust action.
     
             Since lawyers, judges, and economists have
        different objectives, conflicts often arise.  Lawyers
        will hesitate to initiate a broad attack on an
        oligopolistic industry because of a low probability of
        winning, and an even lower probability of winning
        during their stay with the government.  Economists,
        however, often encourage challenging oligopolists
        because the potential efficiency gains are great. ...

     Waldman also argued that antitrust actions may affect market
     structure indirectly by reducing traditional or artificial
     entry barriers or the threat of retaliation.  See id. at 21-
     29; see also Bork (1978) at 413-417.

788. See Hovenkamp (1994) at 158-159 (emphasis in original):
     
             While we can generalize about the types of
        welfare losses that result from ... cooperative and
        non-cooperative oligopoly, measuring the social cost
        in a particular instance is virtually impossible, and
        ... there have been no complete attempts to do so.
     
             One important caveat even increases our
        uncertainty.  When the policy maker measures social
        cost, she must always ask "relative to what?"  The
        goal of the antitrust policy maker is generally to
        find the solution that produces the largest net social
        gains....  [T]he social cost of certain kinds of
        remedies, such as the forced breakup of large firms to
        achieve more competition, may be larger than the
        social cost of simply leaving the oligopoly industry
        as it lies.

     Hovenkamp further analyzed this issue in terms of the
     concept of "minimum efficient scale" (MES), that is, the
     smallest production unit capable of achieving all relevant
     economies of scale.  See generally id. at 27-31.  In
     general, he argued that breaking up oligopolies by dividing
     the market into smaller firms would deprive all or most of
     MES, leading to both a loss in productive efficiency and the
     need for continuing intervention by the State:
     
             One of the most controversial questions in
        antitrust policy is how courts and enforcers should
        deal with the problem of poor economic performance in
        concentrated markets when there is no evidence of
        express collusion....
     
             Even if courts could administer the restructuring
        of an entire industry, however, it is by no means
        clear that consumers would benefit.  Absent unusual
        deterrents to competitive entry, markets are generally
        concentrated because operation at minimum efficient
        scale (MES) requires a firm with a relatively large
        share of the market.  For example, if MES in the
        widget industry requires an output level equal to 30%
        of market demand at the competitive price, the market
        in equilibrium is likely to have three or fewer firms.
        Smaller firms would either combine by merger, increase
        their own market share by driving other firms out of
        business, or else go out of business themselves.  A
        program of combatting oligopoly by breaking the market
        into a dozen firms would deprive all or most of MES,
        and the costs of the loss in productive efficiency
        might well exceed the social loss caused by oligopoly
        performance.  Indeed, the fact that the firms are
        inefficiently small would likely lead to a further
        round of cartels, bankruptcies or mergers until the
        industry once again hit an equilibrium in which the
        firms operated efficiently.  Maintaining such an
        industry at inefficient output levels would require
        the ongoing, intervening hand of the State. ...
     
             The problem of scale economies and concentrated
        markets leaves the antitrust policy maker in a
        quandary.  An oligopoly is an oligopoly, whether or
        not the high concentration results from economies of
        scale.  Indeed, an oligopoly market in which MES is
        very high is likely to perform more poorly than an
        oligopoly in which MES is low.  The firms in the
        latter oligopoly have to worry about new entry.  When
        they measure price and output, they must consider not
        only how the other firms in the market will respond,
        but also the possibility that new equally efficient
        firms will enter if the price rises too much.  By
        contrast, if there are three firms in a market in
        which MES exceeds a 30% market share, the firms have
        less reason to fear new entry.  Any new entrant whose
        market share is less than 30% will have a cost
        disadvantage.  The greater that disadvantage, the more
        room there will be for supracompetitive pricing by the
        firms already in the market.
     
             So the consequences of severe structural change
        in most industries are difficult to predict, and the
        litigation process is certainly not well designed to
        make such predictions.  Break-up of oligopoly firms
        will certainly yield an industry with more firms, and
        they will likely price their output closer to their
        costs, but their costs could be substantially higher.
        Ex ante, it may be difficult to say whether the
        structural change will yield a price increase or a
        price decrease.  Once we include the large
        administrative costs of predicting when such relief
        would be appropriate, and the costs of administering
        such relief, it is doubtful that the result of
        structural reorganization of oligopoly industries
        would be efficient.
     
             There are some reasons for believing that the
        social costs of oligopoly behavior, at least of the
        noncooperative kind, are small compared to the cost of
        denying firms the chance to achieve their most
        efficient rate of output.  If that is the case,
        consumers may be best off if firms are permitted to
        attain minimum optimal scale, even at the expense of
        some high concentration, with the antitrust laws used
        to make both non-cooperative and cooperative price
        coordination as difficult as possible.  Id. at 163-165
        (emphasis in original).

789. Alan Stone, "Economic Regulation, the Free Market, and
     Public Ownership," in Economic Regulatory Policies, ed.
     James E. Anderson (Lexington, MA:  Lexington Books, 1976) at
     198 (footnotes omitted):
     
             The best evidence to date shows that "most if not
        all of the positive correlations between profit rates
        and concentration uncovered by some earlier studies
        can be attributed to variations in the size of firms,
        not the degree to which markets are concentrated."
        Thus, the higher profit rates of high concentration
        industries are due to the greater proportion of very
        large firms in such industries.  These firms tend to
        produce more efficiently and at lower average cost
        than their smaller competitors.  Large firms benefit
        from plant economies of scale, capital raising
        economies, procurement economies, etc., while multi-
        plant large firms benefit from economies of
        coordination, research, and distribution.  Thus, a
        move to deconcentrate industries by breaking up large
        firms is very likely to increase, not decrease, costs
        and prices.
     
             This conclusion tends to be confirmed by a study
        of price increases over the 1947-1971 period which
        shows that the prices of products produced by large
        oligopolistic corporations have displayed a generally
        slower rate of increase than have "market determined"
        prices.  A deconcentration policy might very likely
        have the effect of raising costs and prices, advancing
        the rate of inflation and retarding economic
        development by sharply reducing profits which could be
        employed for expansion, cost reduction or innovation.
        Nor is there convincing evidence that any compensating
        public benefits would accrue from such a policy.

     Bork (1978) also maintained that it is false to assume that
     oligopolistic structures lead naturally to monopolistic
     behavior and that dissolution of oligopolies produces
     results that are favorable to consumers; in reality,
     dissolution would result in a loss of social welfare:
     
        [I]t looks very much as though there is a high
        probability, amounting in fact to a virtual certainty,
        that dissolving any oligopolistic firm that grew to
        its present size would inflict a serious welfare loss.
        Oligopolistic structures probably do not lead to
        significant restrictions of output; firm sizes reflect
        comparative efficiencies; and firms of equal or
        greater efficiency are free to enter or to grow
        anytime restriction of output occurs.  Bork (1978) at
        196; see also id. at 173-197.

790. Breyer (1982) at 160-161:
     
             In the area of monopoly and oligopoly some might
        argue that there should be more regulation and less
        antitrust.  Although the antitrust laws are reasonably
        effective in dealing with anticompetitive conduct and
        in preventing mergers, they are less effective in
        correcting anticompetitive market structures-
        -monopolies and oligopolies.  Monopoly cases, for
        example, typically take years to resolve.  The parties
        argue whether the defendant in fact possesses monopoly
        power and whether he has achieved that power through
        illegitimate exclusionary conduct.  Enormous amounts
        of documentary and economic evidence are produced, and
        the cases remain in the courts for a decade or more.
        Moreover, the law condemns only monopolies that rest
        upon exclusionary conduct.  It is feared that to
        condemn all (nonnatural) monopolies might discourage
        firms from competing, because the winner of the
        competitive game would then lose the prize.  Thus, the
        "honest" monopolist may continue to exert economic
        power in the marketplace.  Finally, and most
        important, the law does not attack existing
        oligopolies--industries in which a handful of firms
        dominate the market, and which together may exert as
        much power as a monopolist.  Yet if the law were
        interpreted to attack oligopolists, it might severely
        interfere with the incentive of firms to outcompete
        each other, or it would risk being ineffective.  For
        these reasons, it has occasionally been proposed to
        regulate the prices of ordinary monopolies and
        oligopolies.  Although the choice--regulation or
        antitrust--in the area is a close one, the problems of
        regulation have been thought sufficiently great to
        warrant reliance upon antitrust instead.

791. Sullivan and Harrison (1994) at 53, 55.  In particular, they
     note that the intersection of regulation and antitrust law
     raise questions regarding the applicability of each:
     
             Not all formal regulation displaces competition.
        Regulation and competition sometimes co-exist.  Some
        regulated industries face scrutiny under both agency
        review and traditional antitrust.  Numerous legal and
        policy issues may be in conflict when antitrust and
        regulation interact.
     
             A frequent inquiry is:  When is antitrust
        displaced by regulation?  Explicit and implicit
        exemptions from antitrust coverage occur.  The
        "pervasiveness" of the regulatory scheme may dictate
        whether antitrust enforcement has any role to play.
        Exemptions can be absolute or qualified.  If only
        qualified, the industry may be subject to both
        "regimes of government control."  This may raise
        tensions between antitrust enforcement and economic
        regulation.
     
     Id. at 55 (footnotes omitted).  In discussing matches of
     regulatory ends and means, Breyer suggested that when the
     justification for regulation is unequal bargaining power, as
     may be asserted by small businesses, one alternative to
     regulation would be exemption from antitrust laws.  See
     Breyer (1982) at 193 ("One might associate ... unequal
     bargaining power with exemptions from the antitrust
     laws...").  One example of an explicit antitrust exemption
     is Hawaii's motor carrier law.  See Haw. Rev. Stat. §271-
     35(h); see also Sumner LaCroix, Walter Miklius, and James
     Mak, "The New Standards of Unfair Competition:  An Economic
     Analysis of the Du Pont v. FTC Litigation," 9 U. Haw. L.
     Rev. 457, 478 (Fall 1987).

792. Breyer (1982) at 161.

793. William R. Hughes and George R. Hall, "Substituting
     Competition for Regulation," 11 Energy L.J. 243, 243 (1990)
     (footnote omitted); see also Raab (1995) at 1, 4.

794. Id. at 245-246:
     
             In recent years there has been a movement to
        introduce the process of competition into regulated
        industries to replace the process of conventional
        regulation in order to achieve competitive results.
        There has also been a movement in some areas to
        integrate competitive considerations explicitly with
        the regulatory process. ...
     
             In an unregulated market or a deregulated market,
        prices are determined by the play of supply and demand
        forces unconstrained by governmental intervention.
        The sellers charge what the competitive process will
        allow.  If competition is effective, in the long run,
        the typical firm should recover its investment and a
        fair return thereon.  However, return is not
        guaranteed.  A firm may, as a result of skill or good
        luck, earn a substantial amount on the original cost
        of the assets involved.  Conversely, because of
        incorrect decisions or poor fortune, the firm may fail
        to recover its investment.  In an industry regulated
        by a conventional rate-of-return type of process,
        prices are based on the regulated firm's costs.  A
        rate base of prudent investments is established and
        the rate of return necessary to compensate investors
        is determined and applied to this rate base.  This
        rate base is added to the depreciation and other
        prudent expenses of the regulated firm to determine
        the revenue requirement.  Rates or prices are designed
        to cover this cost of service.
     
             Light-handed regulation is a blend of these two
        basic price-determining processes.  Regulators retain
        jurisdiction over the regulated firm and may set
        limits or constraints, such as "price-caps,"
        "benchmarks," and so forth; there may be oversight of
        affiliate relationships, price discrimination,
        customer complaints or other issues.  However, subject
        to compliance with any ceilings or other constraints,
        under light-handed regulation, the firm is free to set
        such prices as will be permitted by competitive supply
        and demand forces.

795. House Resolution No. 174, H.D. 2 (1995), p. 1, lines 5-7.

796. Flynn (1986) at 1099-1100 (footnotes omitted).

797. Hovenkamp (1994) at 61.  Productive efficiency refers to the
     ratio of a firm's output to its inputs, while allocative
     efficiency refers to the welfare of society as a whole.  Id.
     at 74.

798. Hovenkamp (1994) at 71.

799. Flynn (1986) at 1139.

800. Hovenkamp (1994) at 71-72 (footnotes omitted).

801. Id. at 72.  Before attempting to balance these competing
     values, however, state policymakers must be prepared with an
     understanding of the economics involved:

        Before someone can "balance" competing values,
        however, he must have a fairly good idea about what is
        being thrown into the scales.  This means that the
        multi-valued policy maker, who believes that antitrust
        should consider small business welfare as well as
        economic efficiency, must have a good basic knowledge
        of prices, markets and industrial organization.  There
        is no basis for the view that the adoption of some
        "competing" noneconomic policy for antitrust, such as
        the protection of small business welfare, permits one
        to do antitrust without knowing economics.  Even the
        multi-valued policy maker needs economics to help her
        estimate the relative costs of protecting certain
        noneconomic values and determine whether society is
        willing to pay the price.  Presumably, it is not worth
        any price to protect small businesses.  If that were
        the policy, even price fixing by small businesses
        would be legal.  Id.

802. Richard A. Posner, Antitrust Law:  An Economic Perspective,
     (Chicago:  The University of Chicago Press, 1976) at 19
     (emphasis in original):
     
        The popular (or Populist) alternative to an antitrust
        policy designed to promote economic efficiency by
        limiting monopoly is a policy of restricting the
        freedom of action of large business firms in order to
        promote small business. ...  The idea that there is
        some special virtue in small business compared to
        large is a persistent one.  I am not prepared to argue
        that it has no merit whatever.  I am, however,
        confident that antitrust enforcement is an
        inappropriate method of trying to promote the
        interests of small business as a whole.  The best
        overall antitrust policy from the standpoint of small
        business is no antitrust policy, since monopoly, by
        driving a wedge between the prices and the costs of
        the larger firms in the market ..., enables the
        smaller firms in the market to survive even if the
        costs are higher than those of the large firms.  The
        only kind of antitrust policy that would benefit small
        business would be one whose principal objective was to
        limit the attempts of large firms to underprice less
        efficient small firms by sharing their lower costs
        with consumers in the form of lower prices.

803. See, e.g., the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. section 2801, et seq.  Miklius and LaCroix (1993)
     note that one of the most important effects of that Act were
     to restrict the ability of major oil companies to terminate
     dealers; "[t]he net effect of the PMPA was ... to give the
     dealer more latitude to take actions that increase dealer
     profits at the expense of joint dealer-oil company profits.
     Since the Act increased the cost of franchising, it provided
     incentives for companies to use company-owned stores more
     frequently."  Walter Miklius and Sumner J. LaCroix,
     Divorcement Legislation and the Impact on Gasoline Retailing
     in the United States and Hawaii (Honolulu:  University of
     Hawaii, Jan. 20, 1993) at 41-42.  But see DOE (1984) at 95-
     97 (arguing that while the PMPA made the replacement of
     franchisees by company operations more difficult, there was
     sufficient flexibility written into the PMPA to allow
     franchisors to achieve most of their legitimate marketing
     goals within the franchise system): "It does not appear,
     therefore, that the PMPA significantly alters the incentives
     to expand through company operations versus lessee dealers.
     Nor does the PMPA make the contractual process so difficult
     that lessee dealers are viewed as an inherently less
     desirable alternative.  The PMPA has not created incentives
     to eliminate lessee dealers through some form of
     anticompetitive conduct; nor has it created incentives
     sufficient to compel refiners to choose one form of
     distribution over another."  Id. at 97.

804. Posner (1976) at 19-20; see also Richard Schmalensee, The
     Control of Natural Monopolies (Lexington, MA:  Lexington
     Books, 1979) at 18.

805. Hovenkamp (1994) at 76.

806. Id. at 72.

807. 337 U.S. 293 (1949); see also Texaco v. Hasbrouck, 496 U.S.
     543 (1990).  In Texaco v. Hasbrouck, several independent
     dealers in the Spokane, Washington area brought suit against
     Texaco, alleging price discrimination under the Robinson-
     Patman Amendments to the Clayton Act.  The Robinson-Patman
     Amendments were enacted in part because of the failure of
     the Clayton Act to deal with obstacles faced by small businesses, especially their inability to compete with the
     "expanding 'chain store menace'".  See Richard Albert,
     "Recent Decisions:  Trade Regulations--Clayton Act-
     -Robinson-Patman Price Discrimination Act--Oil Company
     [Texaco v. Hasbrouck, 496 U.S. 543 (1990)]," 29 Duq. L. Rev.
     803, at 810 (footnote omitted), 811, and 812 n. 77 (Summer
     1991).  The United States Supreme Court nevertheless held
     that "a price differential that accords due recognition and
     reimbursement for actual functions performed does not
     trigger the presumption of an injury to competition, and
     therefore is legal under the Clayton Act."  See id. at 803.

808. Standard Stations, 337 U.S. at 295.

809. Id. at 299; Sullivan and Harrison (1994) at 178.

810. Standard Stations, 337 U.S. at 314.

811. Id. at 305-306.

812. Id. at 306.

813. Id. at 311.

814. Id. at 311-312.

815. Id. at 320-321 (Douglas, J., dissenting).  Justice Douglas
     further noted the following:
     
             It is common knowledge that a host of filling
        stations in the country are locally owned and
        operated.  Others are owned and operated by the big
        oil companies.  This case involves directly only the
        former.  It pertains to requirements contracts that
        the oil companies make with these independents.  It is
        plain that a filling-station owner who is tied to an
        oil company for his supply of products is not an
        available customer for the products of other
        suppliers.  The same is true of a filling-station
        owner who purchases his inventory a year in advance.
        His demand is withdrawn from the market for the
        duration of the contract in the one case and for a
        year in the other.  The result in each case is to
        lessen competition if the standard is day-to-day
        purchases.  Whether it is a substantial lessening of
        competition within the meaning of the Anti-Trust Laws
        is a question of degree and may vary from industry to
        industry.
     
             The Court answers the question for the oil
        industry by a formula which under our decisions
        promises to wipe out large segments of independent
        filling-station operators.  The method of doing
        business under requirements contracts at least keep
        the independents alive.  They survive as small
        business units.  The situation is not ideal from
        either their point of view or that of the nation.  But
        the alternative which the Court offers is far worse
        from the point of view of both.
     
             The elimination of these requirements contracts
        sets the stage for Standard and the other oil
        companies to build service-station empires of their
        own.  The opinion of the Court does more than set the
        stage for that development.  It is an advisory opinion
        as well, stating to the oil companies how they can
        with impunity build their empires.  The formula
        suggested by the Court is either the use of the
        "agency" device, which in practical effect means
        control of filling stations by the oil companies ...
        or the outright acquisition of them by subsidiary
        corporations or otherwise. ... Under the approved
        judicial doctrine either of those devices means
        increasing the monopoly of the oil companies over the
        retail field. ...  Id. at 319-320 (footnote and
        citations omitted).

816. See Hovenkamp (1994) at 58 (footnotes omitted):
     
        Concern for concentration, entry barriers, and the
        linkage between structure and oligopoly dominated the
        post-war period.  At the same time, American
        enforcement agencies became highly concerned--in fact,
        almost paranoid--about vertical practices that were
        thought to increase entry barriers, facilitate
        collusion, or enable firms to leverage additional
        monopoly profits out of secondary markets.  The result
        was continued aggressive enforcement of the laws
        against resale price maintenance, new attention to
        vertical nonprice restraints, and numerous challenges
        to tying arrangements, exclusive dealing and vertical
        mergers.

817. Id. at 59 (footnotes omitted).

818. William S. Comanor, "Vertical Arrangements and Antitrust
     Analysis," 62 N.Y.U. L. Rev. 1153, 1153 (Nov. 1987).

819. Hovenkamp (1994) at 38 (footnotes omitted):
     
             One can generalize that avoidable transaction
        costs are a substantial source of inefficiency in the
        economy.  Indeed, the business firm itself can be
        viewed as nothing more than a device for reducing the
        transaction costs of engaging in business.  Reduction
        or avoidance of transaction costs explains many
        phenomena that have been made subject to antitrust
        scrutiny.  Among these are mergers, vertical price and
        nonprice transactions, tying arrangements and
        exclusive dealing.
     
             Importantly for antitrust analysis, many
        practices that look suspicious at first appear more
        benign when transaction costs are considered.
        Vertical mergers and numerous forms of vertical
        contracting are a good example.  For many years
        antitrust policy makers tended to look at these
        practices with great suspicion, viewing them
        principally as mechanisms for permitting firms to
        enhance their market power, or perhaps to "leverage" a
        second monopoly in another market.  But in most cases
        these practices are nothing other than devices by
        which firms reduce the costs of doing business, by
        making transactions less risky, less costly, or
        eliminating them altogether.
820. Hovenkamp (1994) at 388.

821. For example, question number (6) of the Resolution requests
     the views of survey participants regarding "[t]he effects of
     encouraging the establishment of a public bulk gasoline
     terminal facility, which could make the importation of
     gasoline cost effective and could also lead to a reduction
     in wholesale gasoline prices..."  House Resolution No. 174,
     H.D. 2, at 3, lines 20-24 (emphasis added).  This statement
     arguably presumes the favorable outcome of the research
     request.

822. See supra text accompanying notes 92 and 93; see also text
     accompanying note 23 in chapter 6.

823. See text accompanying note 29 in chapter 3.

824. See text accompanying notes 37 to 39 in chapter 14.

825. Yamaguchi and Isaak (1990) at 80 (emphasis in original);
see
     also Haw. House Report (1974) at 61:  "[T]here is an
     alternative solution to the energy crisis other than
     [g]overnment regulation; and that solution is not to
     regulate the oil industry."  (Emphasis in original).

826. See Yamaguchi and Isaak (1990) at 76-82.

827. The United States has already exhausted two-thirds of all
     the domestic oil and gas that it will ever produce.  John
     Gever, et al., Beyond Oil:  The Threat to Food and Fuel in
     the Coming Decades (Cambridge, MA:  Ballinger Publishing
     Co., 1986) at 219.

828. Rosenbaum (1981) at 195.

829. Id.

830. Gever et al. (1986) at 220, 221.

831. Id. at 221.

832. Stone (1982) at 56.

833. Id. at 56-58.

834. Breyer (1982) at 184-185 (emphasis in original).

	Chapter 16	Studies and Reports