Abbreviated Rule of Reason

Abbreviated Rule of Reason: no bright line rule - per CA Dental, what is required is an "enquiry meet for the case," looking to the "circumstances, details, and logic" of the restraint

• The P must usually show either direct evidence of anticompetitive effects (NCAA, IN Dentists) or a high likelihood of such effects (e.g., NSPE)
• Courts will ask whether the restraint is too broad relative to a lawful purpose (e.g., NCAA, CA Dental)
• If D is unable to rebut the P's case by providing a strong procompetitive justification to shift the burden back, then P wins even though the restraint was not per se illegal General idea: a court can find a restraint to be illegal under Section 1 if the defendant's procompetitive justifications are strong enough that per se treatment is not warranted, but not strong enough to shift the burden of production back to the plaintiff.

Direct vs. indirect evidence of harm:

• Direct evidence of harm: increased price, reduced quantity, reduced quality, reduced variety, worse terms of credit, lessened innovation, evidence of exclusion
• Circumstantial/indirect evidence of harm: look at circumstances that suggest an inference that participants are harmed (market definition, market shares, inference of market power)
  • High market shares in relevant product and geographic market
  • High barriers to entry and other evidence of why high market shares are indicative of market power
  • Argument that the restraint, in light of this market power, will have an anticompetitive effect

Caselaw:

NCAA v. Board of Regents of Oklahoma (1984) (abbreviated ROR can be applied)

• Holding: NCAA plan is not per se illegal, but is nevertheless an illegal restraint of trade under Section 1
  • Direct evidence:
    • Teams harmed: price teams could get for their TV rights was suppressed
    • Consumers harmed: amount of college football on TV was reduced under the NCAA's plan
  • NCAA arguments and Court's response
    • Accepted: NCAA organizes competition between teams, so their general oversight of the league is procompetitive
    • Rejected: Judiciary lacks experience to opine in the competition (Topco)
    • Rejected: NCAA was just preserving competition
    • Rejected: NCAA was a non-profit, different rules applied
    • Rejected: NCAA didn't have market power - Court's response:
      1. Market has never been required (dicta)
      2. Here, market power is present - college football is a distinct market (even though NCAA tried to argue any leisure activity was the relevant market)
  • NCAA's procompetitive justifications and the Court's response:
    • Rejected: facilitates commerce that wouldn't be possible otherwise (BMI)
      • Court: schools can (and did) contract individually with networks, unlike musicians in BMI
    • Rejected, but closer: limiting the amount of college football on TV makes live football more attractive
    • Rejected, but closer: allowing teams to contract individually would allow a small number of schools to get all the money and attention, disrupt the competitive balance
    • Accepted in principle, but not a justification for the restraint: purpose of football programs is to allow students to engage in athletic activity as part of their education
• Facts: agreement between network and NCAA limited teams' TV appearances and had a negotiated fee schedule that NCAA "recommended" schools follow
  • Schools attempted to contract with another network to show more games

FTC v. Indiana Federation of Dentists (1986)

• Holding: the Commission's findings are sufficient to establish a Section 1 violation per the abbreviated rule of reason
  • Not per se illegal: IFD is a professional association, which is allowed to make policies about patient care (some deference to the association's judgment)
  • Direct evidence: x-rays not being provided to insurers, can't verify whether care is needed at all, no good procompetitive justification
• Facts: IFD refuses to supply x-rays to insurers, preventing the insurers from verifying the cost and quality of care provided by the physician (no different than denying consumers access to their own x-rays)
• Note: not as clear a case as NCAA, there is not uncontroverted evidence of price and quantity fixing like in NCAA, but there is direct evidence of harm through the effect on inputs

CA Dental Association v. FTC (1999) (abbreviated ROR shouldn't be applied)

• Holding: failed to shift the burden to D to provide procompetitive evidence
  • Procompetitive justification: D has good reason to limit ads (prevent inferior services)
  • Effect could go either way: restrictions could hurt consumers or not, no obvious anticompetitive effect was shown - not obvioius enough to permit quick-look
• Dissent: evidence substantiates restraint limited truthful and nondeceptive advertising
  • Sufficient consideration of the specific restraint, likely anticompetitive effects, procompetitive justifications, and evidence of market power
• Facts: dentist's association (D) prohibited advertising of across-the-board discounts ("15% off all services") and unsubstantiated quality claims ("family friendly care")
• Note: this case is on the boundary line of full and abbreviated rule of reason
  • Dissent shows how close the case is, argues there was a sufficient showing to warrant the burden shift to D
  • Defense bar: quick look requires actual evidence of anticompetitive effects
  • Plaintiff's bar: quick look doesn't require evidence if the likelihood of anticompetitive conduct is high (NSPE)