Antitrust's Rule of Reason: Only Competition Matters

Abstract

The rule of reason is the standard for testing whether a restraint of trade violates the Sherman Act. The thesis of this article is that the only issue under the rule of reason is the impact of a restraint on the competitive process; the Sherman Act does not employ a welfare standard. This thesis is developed first by clarifying welfare concepts, explaining how the views of Robert Bork have been misrepresented, and examining the relationship between the Sherman Act's goal and its liability standard. The article then reviews Supreme Court decisions articulating and explicating the rule of reason to show that the Court's focus has been on the competitive process rather than welfare. The article also outlines the application of the rule of reason using impact on the competitive process as the test for legality. Finally, the article shows that Sherman Act cases cited by scholars as adopting or implying a welfare standard actually do no such thing.

Keywords: antitrust, rule of reason, consumer welfare, Robert Bork

JEL Classification: K21, L40