From Volume 85, Number 3 (March 2012)
Andrew I. Gavil presents a thoughtful and illuminating portrait of the evolution of the rule of reason in United States antitrust law since Standard Oil. While the rule of reason, as initially embodied in Standard Oil Co. v. United States and Board of Trade of Chicago v. United States (“Chicago Board of Trade”), may have once been an invitation to make any and all arguments about the competitive nature of a given restraint, Gavil rightly points out that this is no longer the case. As currently employed, the rule-of-reason analysis is typically quite structured. The plaintiff must first show that the defendant’s action had an anticompetitive effect. If she can do this, then the defendant has the burden to prove that its action has a procompetitive benefit. If, and only if, the court finds that both sides have met their initial burden, will the court proceed to balance the two effects.
Of course, the evidence of anti- and procompetitive effects for any particular conduct is always far from perfect. Whenever evidence is imperfect, we know from decision theory (Bayes’ rule) that one’s prior beliefs about the plausibility of anti- or procompetitive effects will be important (and will be more important the less perfect the evidence). Thus, one can think of the per se rule in antitrust as just an extreme form of the rule of reason, in which the court’s prior beliefs dictate the decision. For example, a court’s prior belief that price-fixing is anticompetitive may be so strong that the evidence required to overcome that prior belief (establishing a procompetitive effect on balance) would have to be enormously powerful. One way to express the justification for the per se rule is that the probability that such evidence will exist is so small that it is not worth examining it. In that light, one can also view the structured rule of reason approach as one that should (although, in practice may not) reflect a similar paradigm in less extreme cases: we require stronger evidence of anticompetitive effects for conduct that we think are less likely to be anticompetitive and are more receptive to procompetitive effects arguments in such cases.