The Four-Step Rule of Reason

By Michael A. Carrier (Rutgers Law School)

Pity the Rule of Reason. The framework employed in the majority of antitrust cases is frequently discussed but continually misunderstood. It is associated with balancing, but its burden-shifting framework almost never reaches that stage. It is called indeterminate, but its analysis is not. And now — thanks to the Ninth Circuit, with an assist from the Supreme Court — it is kneecapped, with balancing extricated from its framework.

Courts employ the rule of reason to assess a restraint’s effects on competition. Commentators have recently debated the predictability and appropriate structure of the analysis. But as these nuances have been fleshed out in the literature, courts appear to have lost sight of first principles — the jurisprudence, purpose, and analytical basis of the rule of reason. This oversight was most recently illustrated by the Ninth Circuit in NCAA v. O’Bannon and the Supreme Court in Ohio v. American Express. These detours threaten potential consequences of reduced clarity, unreasonable burdens on plaintiffs, and outcomes that lack the critical weighing of competitive effects at the heart of the rule of reason.

The rule of reason has four steps, not three. This article confirms this basic, but important, point. Faithful application of the fourth step in a disciplined manner is consistent with antitrust history and necessary to effectuate the principles underlying standard antitrust analysis. It does not make sense to ask courts to assess a restraint’s effects on competition while taking away the option of balancing anticompetitive and procompetitive effects.

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