Procompetitive Justifications in Antitrust Law

Abstract

The Rule of Reason, which has come to dominate modern antitrust law, allows defendants the opportunity to justify their conduct by demonstrating “procompetitive” effects. Seizing the opportunity, defendants have begun offering increasingly numerous and creative explanations for their behavior.

But which of these myriad justifications are valid? To leading jurists and scholars, this remains an “open question," even an “absolute mystery." Examination of the relevant case law reveals a tangle of competing approaches and seemingly irreconcilable opinions. The ongoing lack of clarity in this area is inexcusable: procompetitive-justification analysis is absolutely vital to a properly functioning antitrust enterprise.

In response, this article provides answers and clarity. It identifies the “market failure” approach as doctrinally correct and economically optimal. The leading alternatives pose an unacceptably high risk of error, in the form of both false positives and false negatives. The article concludes by identifying the proper method for assessing procompetitive justifications. This three-step analytical framework increases transparency and minimizes errors, thereby maximizing societal welfare.

Keywords: antitrust, procompetitive justifications, business justifications, rule of reason, defenses, competition, consumer welfare, efficiency, California Dental, Bmi, efficiencies, restraints of trade, price theory, rational choice theory, behavioral economics, market failure, inefficiency, welfare

JEL Classification: D00, D11, D12, D18, D21, D41, D42, D60, D61, D62, D64, D83, D91, K21, L12, L14, L4, L40, L41, L85