Chapter IV. An Overview: The Standard of Review

• Pages: 41-60

CHAPTER IV

AN OVERVIEW: THE STANDARD OF REVIEW

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The antitrust analysis of joint ventures has evolved considerably over

the years. Having encountered an increasing number of joint venture

arrangements in a wide variety of contexts, the courts have had many

opportunities to analyze challenges to the legality of competitor

collaborations. In reviewing the legality of a joint venture, the threshold

issue is whether the arrangement – or a particular aspect thereof – will be

subject to per se condemnation or rule of reason analysis.1

A. THE PER SE STANDARD

A literal reading of the Sherman Act would render every competitor

collaboration unlawful.2 However, the Supreme Court has held only

those agreements or practices that are “plainly anticompetitive”3 and

“lack . . . any redeeming virtue”4 constitute naked restraints on trade. If a

“practice facially appears to be one that would always or almost always

tend to restrict competition and decrease output” rather than “‘increase

economic efficiency and render markets more, rather than less,

competitive,’” it is subject to the per se rule and is deemed illegal

1 Broadcast Music, Inc. v. CBS, Inc., 441 U.S. 1, 9 (1979) (“[I]t is necessary

to characterize the challenged conduct as falling within or without that

category of behavior to which we apply the label ‘per se price fixing’”).

2 Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 736-37 (1988)

(Stevens, J., dissenting) (“The plain language of § 1 of the Sherman Act

prohibits ‘every’ contract that restrains trade. Because such a literal reading

of the statute would outlaw the entire body of private contract law, and

because Congress plainly intended the Act to be interpreted in the light of

its common-law background, the Court has long held that certain ‘ancillary’

restraints of trade may be defended as reasonable.” (footnote omitted));

Arizona v. Maricopa County Med. Soc’y, 457 U.S. 332, 342 (1982)

(“Section 1 of the Sherman Act of 1890 literally prohibits every agreement

‘in restraint of trade.’”); United States v. Joint Traffic Ass’n, 171 U.S. 505,

568 (1898) (noting that Congress could not have intended to render every

business contract illegal).

3 Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 692 (1978).

4 N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958) .

42 Joint Ventures: Antitrust Analysis

without inquiry into any claimed business justifications or the precise

harm caused.”5 As a result, the per se rule is a useful policy and

enforcement tool because it avoids prolonged and expensive economic

investigation and litigation in cases in which the expenditure of such

resources is unnecessary.6

However, because the application of the per se rule forecloses

detailed antitrust analysis, the Supreme Court has limited its application

to restraints that are plainly or manifestly anticompetitive.7 As a general

rule, per se condemnation results only from unambiguous judicial

experience demonstrating that particular conduct is a naked restraint on

trade: “It is only after considerable experience with certain business

relationships that courts classify them as per se violations of the Sherman

Act.”8 In determining whether a restraint on trade is per se unlawful, the

focus is on the particular agreement at issue rather than the industry

5 Broadcast Music, 441 U.S. at 19-20 (quoting and citing United States v. U.

S. Gypsum Co., 438 U.S. 422, 436 n.13, 441 n.16 (1978)); see also NCAA

v. Bd. of Regents, 468 U.S. 85, 103-04 (1984) (“Per se rules are invoked

when surrounding circumstances make the likelihood of anticompetitive

conduct so great as to render unjustified further examination of the

challenged conduct.”); Angelico v. Lehigh Valley Hosp., Inc., 184 F.3d

268, 276 n.3 (3d Cir. 1999) (applying per se analysis to “agreements whose

nature and necessary effect are so plainly anticompetitive that no elaborate

study of the industry is needed to establish their illegality” (citation and

quotation marks omitted)).

6 Broadcast Music, 441 U.S. at 8 & n.11; N. Pac., 356 U.S. at 5; Cont’l T.V.,

Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50 n.16 (1977) (Per se rules

“require the Court to make broad generalizations about the social utility of

particular commercial practices” and “reflect[] the judgment that such cases

are not sufficiently common or important to justify the time and expense

necessary to identify them.”); see also Maricopa County, 457 U.S. at 344

n.16.

7 FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 458-59 (1986) (“[W]e have

been slow . . . to extend per se analysis to restraints imposed in the context

of business relationships where the economic impact of certain practices is

not immediately obvious.”); N.W. Wholesale Stationers, Inc. v. Pac.

Stationery & Printing Co., 472 U.S. 284, 295 (1985); NCAA, 468 U.S. at

103-04.

8 United States v. Topco Assocs., 405 U.S. 596, 607-08 (1972); see also FTC

v. Super. Ct. Trial Lawyers Ass’n, 493 U.S. 411, 432-33 (1990); NCAA,

468 U.S. at 101 n.21; Maricopa County, 457 U.S. at 349-51 & n.19;

Broadcast Music, 441 U.S. at 9-10; White Motor Co. v. United States, 372

U.S. 253, 263 (1963).