In Praise of All or Nothing Dichotomous Categories: Why Antitrust Law Should Reject the Quick Look
48 Pages Posted: 27 Apr 2016 Last revised: 24 Oct 2016
Date Written: April 26, 2016
This article examines and critiques the so-called Quick Look methodology of assessing restraints under Section 1 of the Sherman Act. Proponents of the Quick Look claim that this middle ground approach improves upon traditional dichotomous Section 1 analysis, whereby restraints are either condemned outright as unlawful per se or subject to a full-blown Rule of Reason that nearly all restraints survive. In particular, proponents claim that the Quick Look furthers antitrust’s regulatory objectives by reducing enforcement and adjudication costs, enhancing accuracy of administrative and judicial determinations and increasing deterrence of harmful restraints.
The article contends that courts and the enforcement agencies should abandon the Quick Look. The Quick Look adds an additional layer to the analysis of restraints that avoid per se condemnation, namely, an inquiry into whether the challenged agreement is “inherently suspect.” The result of this inquiry is generally outcome-determinative, and both plaintiffs and defendants will predictably invest significant resources attempting to convince the tribunal that the challenged restraint is or is not inherently suspect. Tribunals, in turn, will expend significant resources assessing these contending arguments.
The significant costs of this threshold inherently suspect inquiry produce no offsetting benefits. In most cases tribunals reject claims that a challenged restraint is inherently suspect, thereby confirming the traditional result: full-blown Rule of Reason analysis. While tribunals declare some restraints inherently suspect, they always reject defendants’ assertions that such restraints may produce cognizable economic benefits and thus invariably condemn such agreements. To be sure, such condemnation is less costly than condemnation after full-blown rule of reason analysis, thereby suggesting that application of the Quick Look reduces the cost of condemning such restraints while enhancing deterrence and accuracy. However, any such cost savings are illusory, given that a straight-forward application of the traditional per se test articulated in Northern Pacific Railway Co. v. United States, 356 U.S. 1 (1958), would also condemn such restraints, without incurring the additional costs of the inherently suspect inquiry.
Engrafting the Quick Look on to the traditional dichotomous approach thus increases the costs of enforcement and adjudication without producing any offsetting benefits. These costs are themselves a deadweight social loss, consuming resources that could produce social value elsewhere. Because defendants will bear some of these costs, the Quick Look also functions as a tax on numerous forms of concerted action that survive per se condemnation. This tax will induce some firms, at the margin, to abandon agreements that tribunals might conceivably deem “inherently suspect,” even if such agreements produce benefits for the parties and consumers compared to alternatives. In other words, the Quick Look is currently a “lose-lose” that imposes deadweight social losses and distorts underlying economic activity.
The mere fact that the Quick look, as currently structured, consumes agency, private and judicial resources with no offsetting benefits does not establish that the traditional dichotomous approach is the best we can construct. The article ends by exploring two possible reforms of the Quick Look: (1) better integration of per se analysis with the Quick Look and (2) a more expansive definition of the “inherently suspect” category. Neither approach, it is shown, promises any improvement over the traditional dichotomous approach.
Keywords: Sherman Act, Rule of Reason, Quick Look, Per Se Rule
JEL Classification: K21, L40, L41
Suggested Citation: Suggested Citation