APPENDIX
SUGGESTED GUIDELINE LANGUAGE:
PER SE RULE AND RULE OF REASON
The Per Se Rule
The Agencies begin an antitrust analysis of competitor collaboration by assessing the nature and purpose of agreements among the collaborators. This assessment includes an evaluation of agreements regarding joint activity as well as associated or "ancillary" agreements regarding the actions of the collaborators outside the scope of the collaboration. The nature and purpose of agreements are determined based on the substance, rather than the form of the agreement.(1)
Some types of agreements among competitors have been identified by the Supreme Court as causing particularly serious harm to competition, including price-fixing agreements,(2) output restriction agreements,(3) market allocation agreements,(4) and certain types of group boycotts.(5) These types of agreements have the potential to raise price and restrict output significantly while offering no countervailing benefits to consumers. Other agreements, though not falling into these traditional categories, may cause similar substantial, harmful effects. When the Agencies review agreements that have these substantial, harmful effects on competition, they will seek to determine if there are plausible procompetitive justifications. If there are no associated plausible procompetitive justifications, the Agencies will conclude that these agreements are per se unlawful. The significance of a per se designation is that such agreements violate the antitrust laws without regard to proof of market power or anticompetitive effects.
Justifications
The Agencies will always consider good faith claims of procompetitive justifications for agreements, even agreements that appear to fall into general categories of restraints identified as per se unlawful. However, following Supreme Court precedent, the agencies will give no give weight to justifications that are inconsistent with the fundamental Sherman Act policy favoring competition.(6) Similarly, following Supreme Court precedent, the Agencies will not give weight to asserted justifications that do not have a rational basis in economic theory.(7) While procompetitive justifications will be considered, parties to such agreements should take note of prior caselaw and agency decisions. To the extent that prior cases or agency decisions have already analyzed certain type of restrictions and proffered justifications, the Agencies may rely on these prior analyses. In addition, parties to such agreement should take note that the willingness of the Agencies to consider asserted procompetitive justifications does not preclude criminal enforcement in appropriate cases.
Limited Rule of Reason
If restraints on competition have plausible procompetitive justifications, the Agencies will assess these restraints under a Rule of Reason. The nature of the Rule of Reason inquiry will depend on the degree to which such restraints harm competition and the weight to be given to the asserted justifications. In the event that restraints substantially harm competition and the asserted procompetitive justifications are insignificant, the Agencies will conduct a limited Rule of Reason analysis. The significance of a limited Rule of Reason is that the Agencies will conduct an abbreviated or "truncated" assessment of competitive effects.(8) If this limited Rule of Reason shows that a restraint is likely to harm competition, the Agencies will conclude that it violates the antitrust laws.
Full Rule of Reason
In the event that the anticompetitive effects of restraints on competition are unclear, the asserted procompetitive justifications are significant, or both, the Agencies will conduct a full Rule of Reason analysis. The significance of a full Rule of Reason analysis is that the Agencies will conclude that a restraint is unlawful only after conducting an extensive inquiry regarding competitive effects, including an assessment of market definition, market shares, the degree to which competition is benefited by the restrictions, and other relevant factors. The determination of whether an agreement violates the antitrust laws will require an overall balancing of harmful and beneficial effects on competition.
Back to Statement
1. For example, the Agencies will consider whether a "literal" price-fixing agreement is better characterized as an efficiency-enhancing arrangement that brings a new product to the market. See Broadcast Music, Inc. v. Columbia Broadcasting Sys., Inc., 441 U.S. 1 (1979). Similarly, a geographic market allocation scheme that is intended to promote individual marketing efforts by collaborators, such as the one reviewed in United States v. Topco Associates, Inc. 405 U.S. 596 (1972), will not be viewed as unlawful simply because competitors have allocated markets.
2. See, e.g., United States v. Trenton Potteries Co., 273 U.S. 392 (1927).
3. See, e.g., United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940).
4. See, e.g., Jay Palmer v. BRG of Georgia, 498 U.S. 46 (1990).
5. See, e.g., Fashion Originators' Guild of America, Inc. v. FTC, 312 U.S. 447 (1941).
6. See, e.g., National Society of Professional Engineers v. United States, 435 U.S. 679 (1978).
7. See, e.g., Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 648-50 (1980).
8. For example, the Agencies may consider whether an agreement includes most of the members of a professional association, whether a professional association has the power to enforce compliance among its members, and whether an agreement among collaborators prevents sales that would occur in a competitive market. See, e.g., FTC v. California Dental Association, 1996 FTC Lexis 88; aff'd, California Dental Assoc. v. FTC, 1997-2 Trade Cas. (CCH) para. 71,954; 1997 U.S. App. Lexis 28882 (Oct. 22, 1997). Evidence of market power that would be relevant in an extensive analysis of market power will also be considered if it is readily available.