Lewis & Clark Law Review
First Page
951
Abstract
The rule of reason under Section 1 of the Sherman Act, the primary framework for analyzing the legality of agreements in restraint of trade, has degenerated into a muddled and incoherent guessing game, with courts applying disparate and convoluted versionsof the test that are inconsistent across and within circuits and are untethered from the basic goals of antitrust law. A primary cause of the atrophy of the rule of reason has been the ascension of the less restrictive alternative as the dispositive analytical factor for determining the legality of restraint of trade. Rather than focus on the net competitive effect of a restraint, the modern rule of reason has transformed into a means-ends analysis that focuses on the availability of less restrictive alternatives.
The transformation of the rule of reason has accelerated through a series of antitrust challenges to the amateurism model of the National Collegiate Athletic Association (NCAA). These cases have generated significant attention because of their potential impact on the future of college sports and the economic rights of college athletes, but their impact on the future of the rule of reason and antitrust law has gone virtually unnoticed. These cases illuminate the fatal flaws of the modern rule of reason and the devolution of antitrust law into a new “sea of doubt.”
Every federal circuit has adopted at least one of three different new permutations of the rule of reason that have emerged over the last few decades, each using a form of the less restrictive alternative analysis as a dispositive factor while subverting or eliminating the traditional balancing of competitive effects. The first version of the new rule of reason is a conjunctive test that hinges legality on whether the restraint’s procompetitive benefits outweigh its anticompetitive effects and whether there were no less restrictive alternatives for achieving those benefits. The second variant excludes balancing and asks solely whether the restraint’s procompetitive benefits could have been achieved through less restrictive alternatives. The third permutation also excludes balancing and asks only whether the restraint is “directly related” to its procompetitive benefits.
These new frameworks have exacerbated the complexity and confusion of the rule of reason and threaten to convert antitrust law from an ex antedeterrent of anticompetitive conduct to an expostregulator of procompetitive business decisions. This Article examines the evolution of the rule of reason and traces the emergence, disappearance, and reappearance of the less restrictive alternative as the analytical core within the rule of reason. This Article also provides a new descriptive framework for analyzing the different formulations of the modern rule of reason analysis and assesses the flaws of each of the formulations, with a focus on the antitrust challenges to the NCAA’s amateurism model. The Article concludes that the role of the less restrictive alternative should be limited to reorient the rule of reason on the overall competitive effect of the challenged restraint. A renewed focus on the net competitive effect will provide a clearer and more coherent framework for the rule of reason and better serve the competitionprotecting function of antitrust law.
Recommended Citation
Gabe Feldman,
The Demise of the Rule of Reason,
24
Lewis & Clark L. Rev.
951
(2020).
Available at:
https://lawcommons.lclark.edu/lclr/vol24/iss3/6