Summary: Ch 7: The Rule Of Reason + The Doctrine Of Ancillary Restraints (Sa 1: ...

Read the summary and the most important questions on Ch 7: The Rule of Reason + the Doctrine of Ancillary Restraints (SA 1: Conspiracies in Restraint of Trade)

• 1 Ch 7: The Rule of Reason + the Doctrine of Ancillary Restraints (SA 1: Conspiracies in Restraint of Trade)

  This is a preview. There are 11 more flashcards available for chapter 1
  Show more cards here

• Distinguishing the Rule of Reason from Per Se Illegality.

  The different is really just procedural: only a matter of which questions will be left open to the trier of fact and what evidence the plaintiff must prefer. Ultimately, the same substantive question governs all SA 1 cases: whether there was an UNREASONABLE multilateral restraint of trade.

• In all SA 1 cases, what is the ultimate question in determining whether the restraint is UNREASONABLE (the final, balancing stage)

  The trust test of illegality is whether the restraint (a)  merely regulates and thereby promote competition or (b) may suppress or destroy competition. See Chicago Board of Trade (CBOT) (US 1918).
  
   In making this determination, the court ordinarily must consider facts specific to the business: (1) the business' condition before and after the restraint was imposed; (2) the nature of the restraints and its (probable or actual) effect; (3) the history of the restraint; (4) the evil believed to exist/the reason for adopting the restraint/the purpose or end sought to be attained. 

• Do RoR cases often reach the final stage of "balancing"?

  No. Virtually all RoR cases---97% according to some studies--are disposed of on motions to dismiss or MSJs, for plaintiff's failure to properly allege or produce sufficient initial evidence suggesting that the challenged restraint could harm competition. Only 2% of the cases ever reach the final stage of balancing by the trier ff fact.

• How does the RoR operate in practice?

  As lower courts have begun to openly recognize, the RoR operates in practice as a set of burden-shifting, pre-trial steps (and rarely ever as an actual balancing test).

• 3 Step Burden Shifting under Rule of Reason

  1. P bears the initial burden of showing that the challenged agreement has had, or is likely to have, a substantially adverse effect on competition. 
  2. If P meets its initial burden, the burden shits to D, who must demonstrate the pro-competitive virtues of the arrangement
  3. If D produces evidence of pro-competitive virtues, then the burden shifts back to P, who must show either that (a) the challenged conduct is not reasonably necessary to achieve the stated objective or (b) that the anti-competitive effects of the conduct outweigh the pro-competitive virtues. 

• Determining whether the Rule of Reason Applies: In Operation

  Courts often devote a fact-intensive inquiry into the market conditions presented by a given cases before determining that a per se rule or the rule of reason applies, even where there is conduct resembling a multilateral restraint on price or output. See California Dental (US 1999)

• The Plaintiff's Burden under the Rule of Reason

  Ultimately, the plaintiff must convince the trier of fact that (1) the defendants were able to use their combined market power to harm the market with the restraint (through either direct evidence of harm or proof of MP through the MSP test) AND (2) that the harms caused by the restraint outweigh any pro-competitive benefit.

• Plaintiff's Evidentiary Burden under the RoR

  The plaintiff must proffer either: 
  

  1. Direct Evidence of Actual Harm (normally meaning some compelling proof of a sustained increase in price or decrease in output that was clearly caused by the challenged restraint); OR
  2. Proof of market power through the MSP test. 

• Role of intent in the RoR Analysis?

  Evidence of the Ds' intent is important but not controlling. See CBOT (US 1918) (intent will not save an otherwise objectionable restraint, nor will intent doom an otherwise pro-competitive restraint. Rather, intent is important because it may help the court to interpret the facts and predict the consequences of the restraint.

• Doctrine of Ancillary Restraints: Applies Where?

  The ancillary doctrine governs cases in which the challenged arrangement is overall pro-competitive (i.e., an agreement to create a new business or sell an existing firm), but some small part of it might, in isolation, seem anti-competitive.