Summary: Ch 5: An Introduction To Sa 1 (Conspiracies In Restraint Of Trade)

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• 1 Ch 4: An Introduction to SA 1 (Conspiracies in Restraint of Trade)

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• Should SA 1 be read literally (as prohibiting every contract that restrains trade).

  • Yes - Trans-Missouri Freight (US 1987). SCOTUS held that SA 1 had to be read literally and therefore that every contract that restrains trade is illegal under SA 1. 
  • No - Standard Oil (US 1911). SCOTUS borrowed form the common law on which the Sherman Act was built, and held that it prohibits only those restraints of trade that are UNREASONABLE.  Hence, the rule of reason was born/recovered. 

• SCOTUS interp of SA 1 - General Rule

  A contract, combination, or conspiracy violates SA 1 only if it is an UNREASONABLE restraint of trade.

• Under SA 1, a multilateral restraint will be analyzed under 1 of 4 doctrines

  1. Per Se Illegality. 
  2. Quick-Look Rule of Reason
  3. Tying Agreements (subject to a special doctrinal test)
  4. the Rule of Reason. 

• What is the importance of the distinction between (A) per se, (b) quick-look, and (c) pure rule of reason

  The chief difference centers on the plaintiff's EVIDENTIARY BURDEN

• Theory of Per Se Illegality under SA 1.

  In a number of cases over the years, SCOTUS has held that certain classes of conduct at AUTOMATICALLY UNREASONABLE. For restraints falling in the per se category, the idea is that the challenged conduct--if proven--is so obviously detrimental to competition that it will be presumed to be unreasonable as a matter of law.

• SA 1: Distinguish (a) Per Se v. (b) Rule of Reason Cases.

  (a) Per Se Cases. Once the plaintiff proves that the challenged conduct falls within a per se category, all he must prove is (1) that the challenged conduct occurred. 
  
  (b) Rule of Reason Cases. The plaintiff must show that (1) the defendant engaged in the challenged conduct and (2) that the conduct unreasonably restrained trade. 

• Per Illegality: Covers 3 classes of conduct

  1. Horizontal price-fixing
  2. Horizontal market allocations 
  3. Some horizontal concerted refusals to deal ("boycotts")

• Why does SA 1 treat horizontal restraints more harshly than vertical arrangements (I.e., vertical arrangements are never subject to per se)

  Horizontal agreements are treated much more harshly because head-to-head competitors ordinarily have little reason to cooperate or agree with one another about much of a anything.

• The SA 1 "Category Approach"

  At least superficially, many of the SA 1 cases still seem to follow a "category approach"--that is, they conceive of any particular type of challenged conduct as falling into a particular category and then apply the rules applicable to that category (Per se -  quick look - rule of reason)

• Problem with the "Category Approach"

  Except in very clear-cut cases (i.e., where head-to-head competitors meet in clandestine conditions to explicitly fix prices), the courts have found it extremely challenging to formulate any clear rules about when a case is per se and when it is not (quick look or RoR). First recognized in Broad Music (US 1989).