The Real Rule of Reason: Bridging the Disconnect
102 Pages Posted: 7 Dec 2006
One of the most famous rules in antitrust law is the "Rule of Reason." The common understanding of the Rule of Reason is that courts balance the anticompetitive and procompetitive effects of agreements. If the anticompetitve effects predominate, the agreement is invalidated; if the procompetitive effects win out, the agreement is upheld.
This Article conducts an empirical analysis of all the Rule of Reason cases in the modern era. It concludes that, in contrast to the common understanding, courts in an astonishing 96% of Rule of Reason cases do not balance at all.
Instead, courts engage in a burden-shifting analysis, dismissing the case at any of three stages preceding the ultimate balancing. The three stages focus on anticompetitive effects, procompetitive justifications, and reasonable necessity.
In addition to presenting the results of the empirical analysis, the Article undertakes a normative analysis, asking whether the courts should consider each stage of Rule of Reason analysis. The conclusions are based on the legislative history of the Sherman Act, the common law preceding the Act, and the Chicago and Post-Chicago Schools. Relatedly, the Article examines whether courts are able to assess each stage of the analysis.
Discovering the disconnect between what courts do and what everyone thinks they do leads to consequences: fewer lawsuits, more focused attention on the relevant factors, and a reconciliation of the reasoning and results of antitrust cases.
Keywords: Rule of Reason, balancing, anticompetitive effects, procompetitive justifications
JEL Classification: K21, L10, L41, L42
Suggested Citation: Suggested Citation