Comments on Arguments in Justification of Agreements in Restraint of Trade—The United Kingdom, Australian and New Zealand Experience

• DOI: 10.1177/0003603X7401900203
• Author: Warren Pengilley
• Published date: 01 June 1974
• Date: 01 June 1974
• Subject Matter: Article

COMMENTS ON ARGUMENTS IN JUSTIFICATION

OF

AGREEMENTS

IN

RESTRAINT

OF

TRADE-

THE

UNITED

KINGDOM. AUSTRALIAN AND

NEW ZEALAND

EXPERIENCE

by

WARREN

PENGILLEY·

The attitudes of the United

States

and

Canada

are

singu-

larly

and

perhaps

uniquely uncompromising toward hori-

zontally agreed

restraints

of trade. Many other countries do

not

ban

such

restraints

per

se

but

allow

restraints

if

eco-

nomic benefits can be proven.

It

is the object of this article

to discuss

industry

attempts to

justify

agreements in re-

straint

of

trade

and

to reach some overall evaluation from

empirical observation. Do evaluations made by evaluative

tribunals

support

business arguments strongly

urging

the

benefits of

restraint

of

trade

by

industry

agreementY

1.

SCOPE

OF

OBSERVATIONS

This article is limited to factual evaluations and is not a

discussion of theory. The theoretical basis of the competitive

model is not difficult to grasp. However, exemptions

from

the overall theoretical model

are

generally claimed on the

basis of the alleged "experience of industry." This being so,

it

is

not

unreasonable to evaluate the industrial claims on

the empirical basis so often suggested by

industry:

How

has the "experience of

industry"

fared

in

its

attempts to

justify

agreements in

restraint

of

trade

when arguments by

industry

groups have been subjected to unbiased evaluation?

For

convenience, experience under the United Kingdom

legislation is taken as a basic source of evaluations. Refer-

ence is also made to

Australian

and New Zealand legislation

and

case studies.

'*'

Solicitor

and

Attorney

of the Supreme

Court

of New South

Wales, Australia.

257

258

THE

ANTITRUST

BULLETIN

2.

THE

TYPE

OF

LEGISLATION

CONSIDERED

Defenses

that

agreements in

restraint

of

trade

are

justified

are

primarily economic. Adapted to local legislation they

provide "economic benefit" defenses of restrictive agreements

for

evaluation by an evaluative tribunal. Rejecting much of

the view of the United States

and

Canada

that

illegalization

of

restraint

of

trade

is a prime protection of civil liberty,'

the laws allow an industry to proceed with an agreement if

certain economic benefits

are

provable.

In

some cases the legislation allowing justification on eco-

nomic grounds is quite specific, in other cases

very

broad.

Thus Section 21(1) of the United Kingdom Restrictive

Trade

Practices Act 1956 provides, in general terms,

that

an agree-

ment in

restraint

of

trade

may be sanctioned if one or more

of the following benefits can be proven:

(a)

That

the agreement is necessary to protect against

physical injury,

(b)

That

the agreement offers specific and substantial

advantages to the public,

(c)

That

the agreement is necessary to

protect

against

a monopoly,

(d)

That

the agreement is necessary to protect against

adominant buyer or seller,

(e)

That

the agreement is necessary to

protect

against

localized unemployment,

(f)

That

the agreement is necessary to protect substan-

tial

export

earnings.

The U. K. legislation requires, in addition to the above

"gateways,"

that

the "tailpiece" of Section 21 be

satisfied-

that

"the

restriction is not unreasonable having

regard

to the

1E.g.,

"Antitrust

is a distinctive American means

for

assuring the

competitive economy on which

our

political

and

social freedom under

representative government depends." (Report of the U. S. Attorney-

General's National Committee to

Study

Antitrust Laws, 31 Mar. 1955,

p.2.)