Working Paper No. 00-41:
Rule of Reason After California Dental

Author(s):

Timothy Muris

Date Posted: 2000

Availability:
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Abstract:

Antitrust practioners, scholars, and jurists have struggled for decades with the appropriate form of analysis for restraints among competitors. One theme that emerges from this struggle is that, since the Warren Court era, there has been much progress. Per se categorization no longer determines results in antitrust cases. Nevertheless, as California Dental reveals, the steps of applying the Rule of Reason remains elusive. For restraints that clearly threaten consumer welfare, the crucial issue has become whether the collaborators can justify them. By blessing "truncated" analysis explicitly, CDA demonstrates that categorization remains necessary to determine when such analysis is appropriate for the practice at hand. I argue that the decision to truncate must be based on probable economic effects, not just on analogies. Empirical economic evidence provides the basis for determining these effects. In CDA, for example, although not part of the record, considerable empirical evidence exists to show that when professionals restrict advertising, even partially, prices increase without an offsetting increase in quality. Finally, I argue that the FTC's 1988 Massachusetts Board decision remains highly useful in determining the steps of truncated analysis.