Tracing the Evolving Scope of the Rule of Reason and the Per Se Rule

Abstract

Analysis of alleged antitrust violations in the United States is conducted by generally using one of two rules of decision. Under the rule of reason, the presumptive mode of analysis, courts identify and balance the procompetitive and anticompetitive effects of a challenged restraint. Under the per se rule, courts have identified a narrow class of restraints (now limited to horizontal restraints) that always, or almost always, tend to be anticompetitive. If the restraint exists in the form contemplated by the per se rule, the court must find that it was illegal. This Introduction traces the development of both the rule or reason and the per se rule since the adoption of the Sherman Act.

As detailed below, the ebb and flow of the rule of reason and the per se rule have been inversely related. The current era, in which the rule of reason is flourishing, has been marked by an increased role of economics in the assessment of restraints and a decreased willingness by courts to accept asserted characterizations of “price fixing” or “market allocation” as sufficient for the restraint to warrant per se treatment.

In the modern era, courts have opted for a tailored approach to the application of the rule of reason that is “meet for the case” and that permits scrutiny beyond asserted labels for legitimate benefits of the alleged restraint. The predominant analytical question in all applications of the rule of reason, however, remains the same as that developed by Judge William Howard Taft developed in his landmark Sixth Circuit opinion, United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898)—does the alleged restraint serve a legitimate purpose of the practice in question?