by Jesse W. Markham, Jr.
Marshall P. Madison Professor of Law
University of San Francisco School of Law
Competitive restraints challenged under Section 1 of the Sherman Act are evaluated under either the rule of reason or, for a small and diminishing group of restraints, under per se rules. The role for per se rules has diminished in recent years as courts have retreated from them out of concern that their rigid application can condemn desirable competitive conduct. Now, the rule of reason is the default mode of analysis applicable to nearly all categories of alleged competitive restraints. During the same period in which the Supreme Court expanded the reach of the rule of reason, it also rendered it devoid of the little guiding content that it previously had. Thus, one hundred years after the rule of reason was first announced in Standard Oil Co. v. United States, 221 U.S. 1, 60 (1911), the rule has been rendered essentially devoid of any meaningful content.
This article traces the disintegration of the rule of reason and argues for a restoration of categorical modes of analysis for claims brought under Section 1. From its inception, the rule of reason has called for a dangerously open-ended inquiry. However, in an earlier era, certain specific and familiar categories of conduct were condemned per se, which gave Section 1 a region of clarity. In California Dental Ass’n v. Federal Trade Comm’n, 526 U.S. 756, 781 (1999), the Supreme Court obliterated the line between per se and rule of reason analysis, and abandoned categorical antitrust analysis almost entirely. The overall result is that the rule of reason now governs nearly all Section 1 claims, but its meaning is substantially less clear now than it was 100 years ago. A set of presumptions about the lawfulness of restraints is needed to guide courts and businesses in the evaluation of restraints under Section 1.