rule of reason

In antitrust law, the rule of reason is a general system of analysis used to determine whether restraints of trade that are not per se unlawful, violate Section 1 of the Sherman Antitrust Act.

To establish a claim under Section 1 of the Antitrust Act, the plaintiff generally must show:

  1. A concerted agreement between two or more parties;
  2. That resulted in an unreasonable restraint of trade; and
  3. The unreasonable restraint of trade affected interstate commerce.

Under Section 1, certain contracts, combinations, or conspiracies that unreasonably restrain foreign or interstate commerce are per se unlawful. Examples of per se unlawful agreements include:

In most cases, the alleged anticompetitive behavior does not fit into one of the per se categories and is subsequently subject to judicial interpretation under the rule of reason standard. The rule of reason doctrine asks whether the restraint “merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.” See Board of Trade of City of Chicago v. U.S., 246 U.S. 231 (1918). To answer the question, a fact dependent inquiry into the context of the restraint is often required. Today, the commonly accepted method is a burden shifting framework that places the initial burden on the plaintiff to show the defendant's behavior has or will harm competition in the “relevant market.” The application of the rule of reason often requires a case-by-case contextual definition of the relevant market. See Ohio v. American Express Co., 585 U.S. 529 (2018). Plaintiffs can show harm to competition through direct or indirect evidence. Direct evidence includes reduced output, increased prices, and decreased quality in the relevant market. Indirect evidence requires proof of market power in the relevant market along with evidence that the defendant’s behavior could harm competition. See Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90 (2d Cir. 1998).

If the plaintiff is able to successfully show that the challenged restraint harms competition, then the burden shifts to the defendant to provide procompetitive justifications for the restraint. Procompetitive justifications can include: increased output, the creation of a new product, and increased efficiency. See Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1 (1979). If the defendant can successfully provide a procompetitive justification, then the burden shifts back to the plaintiff. The plaintiff must show that the procompetitive objective offered by the defendant could be reasonably achieved through a substantially less restrictive alternative. See National Collegiate Athletic Association v. Alston, 594 U.S. 69 (2021) and Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986). It is not necessary that the defendant’s conduct was the least restrictive means to further the procompetitive objective; however, the conduct should be reasonably necessary to achieve a legitimate procompetitive objective. It is important to note that these three steps are not “a rote checklist, nor may they be employed as an inflexible substitute for careful analysis.” See NCAA v. Alston.

The judiciary and legal scholars alike have debated whether the rule of reason analysis ultimately requires an explicit “balancing test” of the restraint's anticompetitive and procompetitive effects. Nonetheless, modern U.S. Supreme Court decisions generally describe the rule-of-reason inquiry in terms of three steps rather than a separate fourth balancing step. For the balancing test, the fact finder determines whether the procompetitive benefits outweigh the anticompetitive harms of the particular conduct. 

At times, courts may use an abbreviated version of the rule of reason, known as “quick-look” cases, where the particular conduct is such that “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” See California Dental Ass’n v. F.T.C., 526 U.S. 756 (1999). This quick-look analysis bypasses the plaintiff’s initial burden and instead asks the defendant to provide procompetitive justifications. If the defendant does so, the rule of reason is carried out as usual.

See also: 15 U.S.C. § 4302 Rule of Reason Standard, and 

[Last reviewed in August of 2026 by the Wex Definitions Team]

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