The per Se Legality of Some Naked Restraints: A [re]Conceptualization of the Antitrust Analysis of Cartelistic Organizations

DOI10.1177/0003603X0004500205
Published date01 June 2000
Date01 June 2000
Subject MatterDomestic Antitrust
The Antitrust Bulletin/Summer 2000
The per se legality
of
some naked
restraints: a[re]conceptualization
of
the antitrust analysis
of
cartelistic organizations
BY PETER C. CARSTENSEN* and BETTE ROTH**
I. Introduction: implausible doctrines
and
unpredictable holdings
349
One
of
the few generally reliable rules
of
antitrust law is that
cartels and similar naked restraints are per se illegal regardless
of
excuse
or
justification.
Despite
this
apparent
consistency,
the Supreme Court has made a number
of
aberrant declarations
suggesting
sometimes
that
cartelistic
behavior, not expressly
exempted from antitrust scrutiny, may be lawful.
*
**
Young-Bascom Professor of Law, University of Wisconsin.
Member California, Massachusetts, and Wisconsin bars.
AUTHORS'
NOTE: The authors thank Paul Olszowka
for
his diligent
and
thoughtful
research
assistance.
Tom
Arthur,
Steve Caulkins, Kevin
O'Connor
and
Steve Ross have provided us with reviews
of
an earlier
draft. As is evident from the footnotes,
our
readers do not necessarily
agree with our thesis.
© 2000 by Federal Legal Publications. Inc.
350 The antitrust bulletin
These decisions cluster in four areas: college athletics, regula-
tions governing professions, safety standards, and regulations con-
trolling specific businesses. In
NCAA,·
for example, the Court
applied a"rule of reason" analysis to an organization that it ulti-
mately found to be a cartel and in powerful dicta, signaled that
naked restraints adhered to by NCAA members were lawful. Simi-
larly,
Goldfarb
and National Society
of
Professional
Engineers
condemned the specific naked restraints adopted by professional
organizations while intimating that where professional regulation
is at issue, "
...
practice[s] which would properly be viewed as a
violation of the Sherman
Act.
. . [may] be treated differently."2
Despite the historic illegality of collusive behavior, the Supreme
Court applied a rule of reason test to evaluate restraints imposed
by private groups as part
of
safety standard-setting.> Finally,
while most group boycotts are per se illegal, in Silver
v.
New York
Stock
Exchange, the Court declared that even though the con-
duct at issue was a naked restraint, "justification derived from the
policy
of
another statute or otherwise" could make such conduct
lawful.'
These significant four categories
of
cases involve essentially
cartelistic activity that restricts some aspect
of
economic competi-
tion; yet such controls were not per se illegal. On the surface, one
could explain the results as a series
of
ad hoc exceptions to the
general rule, leaving only an absurdly broad statement
of
the law:
cartelistic behavior is absolutely (per se) illegal,
except
when it is
not. This formulation creates enormous and basically intractable
problems within the existing framework
of
the dual standards
of
National Collegiate Athletic Ass'n v. Bd.
of
Regents
of
the Univ.
of Oklahoma, 468 U.S. 85 (1984).
Goldfarb v. Virginia State Bar, 421 U.S. 773, 788 n.17 (1975);
National
Soc'y
of Professional
Eng'rs
v. United States, 435 U.S. 679,
696 (1978).
3Allied Tube &Conduit v. Indian Head, 486 U.S. 492 (1988);
American
Soc'y
of Mechanical Eng''rs, Inc. v. Hydrolevel Corp., 456
U.S. 556 (1982).
4
Silver
v. New York
Stock
Exchange,
373
U.S.
341,
348-49
(1963).
Cartelistic organizations :351
antitrust-the
rule
of
reason
and the per se rules.
The
biggest
questions
are
left
unanswered:
When
mayan
admitted
cartel
defend its conduct? And when such a defense is possible, what are
the relevant considerations in determining the lawfulness of any
particular restraint?
The purpose
of
this article is to propose apredictive as well as
adescriptive explanation for these apparently aberrational deci-
sions. We contend that the courts, particularly the Supreme Court,
employ acoherent, identifiable set
of
criteria to determine when
cartelistic restraints are lawful. These criteria are not explicit in
the formal statements
of
doctrine. They must instead be deduced
from an analysis
of
the cases that employs testable hypotheses
derived from the discussion and description of the facts and cir-
cumstances
of
the cases. In approaching this task, we made two
important assumptions.
First, the Supreme Court is not irrational, even though it may
be inarticulate. Consequently, we sought to identify consistent
factors
in the
cartel
cases
to which the Court has applied this
different standard.
Second, we assumed that there may well be a significant dif-
ference between the standards the courts actually use, and the for-
mal language with which they describe these operational criteria.
Traditional antitrust law recognizes only two categories of sub-
stantive
standard-the
per se rules and the
rule
of
reason, but
there is no reason to believe that this area of law is inherently
binary.
If
in fact more than two operational standards were sub-
sumed under these two conventional doctrinal labels, one would
predict the kind
of
chaos that exists in the decisional law. Hence,
we looked at the
decisions-especially
in the aberrant
areas-to
see whether it was possible to identify consistent, operational cat-
egories and related standards that courts in fact employ. A proper
identification and definition of these standards should provide a
coherent framework that can reconcile the results
of
cases, but not
the doctrinal language. The descriptive and predictive accuracy of
this redefinition
of
antitrust standards will measure its validity
and utility as a positive analysis of antitrust law in practice.

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