University of Southern California

Moving Beyond Caricature and Characterization: The Modern Rule of Reason in Practice

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Article by Andrew I. Gavil
From Volume 85, Number 3 (March, 2012)

After one hundred years one might expect a rule of law to be settled. In the case of the “rule of reason,” first endorsed by the Supreme Court in its 1911 decision dissolving the Standard Oil trust, the conventional wisdom often portrays the opposite. Citing its principal early enunciation in Board of Trade of Chicago v. United States (“Chicago Board of Trade”), critics often denigrate the rule of reason variously as “unstructured,” “full-blown,” “uncertain,” “error-prone,” and costly to administer in all its forms. In a metaphor first applied by Judge Taft in his earlier United States v. Addyston Pipe & Steel Co. decision, application of the rule of reason has been likened to “set[ting] sail on a sea of doubt.”

That criticism of the rule of reason is dated and exaggerated. The rule of reason has evolved considerably since Standard Oil and Chicago Board of Trade, largely due to the Court’s own march away from per se rules and undemanding burdens of proof. As that march began in the late 1970s, the Court moved to add contemporary economic content to the broad principles articulated in Chicago Board of Trade. In formative cases like Continental T.V., Inc. v. GTE Sylvania Inc.; National Society of Professional Engineers v. United States (“NSPE”); Broadcast Music, Inc. v. CBS (“BMI”); and NCAA v. Board of Regents of the University of Oklahoma, the modern era’s rule of reason was honed to focus on specific, core economic concepts, especially anticompetitive effect and efficiency.

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