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Less Restrictive Alternatives in Antitrust Law

 |  October 4, 2015

Posted by Social Science Research Network

Less Restrictive Alternatives in Antitrust Law C. Scott Hemphill (New York University)

Abstract: Antitrust courts often confront “mixed” conduct that has two contrasting effects, one harmful and the other beneficial. For example, a nationwide agreement not to pay college football players harms the players, while benefiting fans of amateur sports. An important tool for analyzing mixed conduct is to compare the action to a hypothesized alternative, and ask whether the alternative action is “less restrictive” and hence less harmful. The less restrictive alternative (LRA) test is used widely, from the rule of reason to mergers to monopolization. The test often assumes a particular, narrow form, that the alternative must be dominant: not only less restrictive but also equally (or more) effective. In other words, could the benefits have been achieved equally well with less harm?

This Article offers a new account of the LRA test that draws inspiration from constitutional law and other fields. Dominant LRAs offer a shortcut that avoids the difficult tradeoff between increased benefit and increased harm. However, most LRAs are less effective, rather than dominant. Such alternatives may serve instead as a locus for balancing. Thus, balancing in antitrust is not a myth, as many believe; instead, the net effects tradeoff has shifted to the LRA test. As the Article shows, courts that restrict their analysis to dominant LRAs run a high risk of false negatives, particularly when they also ignore the overall competitive effects of the restraint, as in the recent O’Bannon v. NCAA case. I also demonstrate how the LRA test serves to “smoke out” an inference of anticompetitive effect. Finally, the Article proposes a set of best practices in applying the LRA test in order to minimize the risk of false positives.