This paper by Hovenkamp – available at – on the US rule of reason. It describes the historical background for the development of the rule of reason and its procedural requirements in US litigation.  It is short, very thorough, very opinionated, and should interesting to anyone interested on the basic underpinnings of competition law analysis (even if one is not a US antitrust lawyer).

The paper covers a lot of ground, including:

  1. the trade-off between consumer and general welfare as antitrust standards;
  2.  different modes of analysis of antitrust infringements (e.g. per se, rule of reason and “quick look”);
  3. how to balance pro- and anti-competitive effects;
  4.  the shifting role of the per se prohibitions and rule of reason (i.e. a trend over the last 40 years towards reducing the role for per se rules as antitrust enforcement has focused more and more on the effect of individual business practices); and
  5. the main practical difficulties in applying the concepts underpinning a rule-of-reason analysis.

While I think the whole paper is interesting, a section that I found particularly interesting is  devoted to the goals of antitrust (i.e. welfare). I would merely point out that the author clearly favours consumer over total welfare standards because the set of measurements necessary to compute a general welfare change makes the task heroic in all but the most obvious cases.

In any event, the focus of competition law is not on identifying welfare reductions directly. Hovenkamp demonstrates this by reference to the  balancing of pro- and anticompetitive effects. He notes that courts still routinely write that such balancing is required, “notwithstanding decades of litigation showing such balancing to be unworkable and actual attempts at it to be rare. Once a court purports to engage in balancing it is almost always acting outside of its competence except in the most obvious cases.” And:  “To the best of my knowledge, outside of the merger context no court has ever even attempted to put an actual number, such as dollars of economic loss or gain, on either the anticompetitive effects of a restraint or the justifications offered against it. A far better way to view the rule of reason is as a series of sequential steps intended to avoid balancing whenever possible.”

In other words, enhanced welfare may be the goal, but in practice competition cases are resolved by recourse to procedural proxies even in those cases that devote the greatest attention to the welfare implications of business conducts.


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