The Rule of Reason

Antitrust’s rule of reason was born out of a thirty-year Supreme Court debate concerning the legality of multi-firm restraints on competition. By the late 1920s the basic contours of the rule for restraints among competitors was roughly established. Antitrust policy toward vertical restraints remained much more unstable, however, largely because their effects were so poorly understood. This Article provides a litigation field guide for antitrust claims under the rule of reason—or more precisely, for situations when application of the rule of reason is likely. At the time pleadings are drafted and even up to the point of summary judgment, the parties are often uncertain whether a court will apply the rule of reason. Part I examines pleading and summary judgment rules, including the role of stare decisis, arguing that stare decisis should apply to a mode of analysis rather than to a specific class of restraints. Then, Part II discusses numerous problems surrounding the burden of proof and the quality of evidence needed to shift the burden or get to a jury. It also shows why a consumer welfare standard for antitrust violations is the only manageable one for evaluating practices under the rule of reason. The alternative, general welfare standard requires that all consumer losses be quantified and compared with producer efficiency gains, as well as likely effects on others. Aside from any substantive reasons for preferring a consumer welfare standard, a general welfare standard is impossible to apply in any but the most obvious cases. Additionally, this Article considers how to identify the types of conduct to which antitrust’s rule of reason should be applied, as well as the range of appropriate remedies, particularly when the basic features of joint activity are either unchallenged or conceded to be competitive, but a specific provision or practice threatens competition. It then turns to the special case of antitrust restraints in markets for intellectual property rights. The final Part examines the market structure requirements for antitrust rule of reason cases