Keywords: Rule of Reason, per se Rules, Innovation, Antitrust, Estearbrook, Structure Rule of Reason
29 Pages Posted
Thibault Schrepel
University of Paris-Saclay
Date Written: February 2, 2017
Abstract
Applying the per se illegality doctrine for years has proven to be a mistake. The challenge is now to avoid committing the same error by applying per se legality for practices related to the New Economy — notably predatory innovation. This Article then advocates for eliminating per se legality as it relates to innovation issues that stem from ideologies rather than particular facts.
Avoiding general per se rules does not mean, however, that we should apply a general rule of reason. Frank H. Easterbrook’s findings demonstrate how filters can create an efficient error-cost framework, but his findings are not well suited for the practices related to the New Economy. This Article proposes implementing a newly structured rule of reason tailored for innovation issues and based on three filters that will suit contemporary antitrust law issues and would considerably improve antitrust law and economic analysis in the long run, while also avoiding false positives.
We should immediately emphasize the absence of any automaticity between the rule of reason and the balancing test. To the best of my knowledge, the Supreme Court has indeed never linked the two. Additionally, a recent study analyzing over 300 court decisions proved that the balancing test had been applied in only five percent of these cases.4 In short, this Article understands the rule of reason as being a negation of general per se rules, and that is about it. The question of which test to apply to each practice arises after the need to implement a rule of reason is agreed upon. It could be the balancing test—that I reject for reasons related to its administrability—or for instance, the profit sacrifice test, the equally efficient rival test, or the no-economic sense test. This is exactly what is underlined by Mark S. Popofsky, who states that “the unifying principle is that each Section 2 legal test reflects a specific expression of the same underlying ‘rule of reason,’”5 and that “Section 2’s rule of reason, so understood, asks: For the type of conduct at issue, which legal test likely maximizes consumer welfare over the long run?”6 I then emphasize that this Article does not intend to take a side on which test to apply to each practice that violates antitrust law. It is only focused on the need to recognize that general per se rules are to be avoided in the first place. Download the paper
