The Rule of Reason and the Per Se Concept: Price Fixing and Market Division

Abstract

I THE purpose of this article is to develop, primarily in the context of pricefixing and market-division agreements, a general theory of the appropriate roles and criteria of the rule of reason and the per se concept in the decision of antitrust cases concerning the elimination of competition between agreeing parties.The topics of antitrust are probably best classifiedand the closeness of the relationships of phenomena to one another most accurately measuredaccording to the methods by which particular practices are thought to injure competition.This results in two major categories, for the theory underlying current antitrust law supposes that there are two fundamentally distinct means by which competition may be lessened:(1) Agreements by which consenting parties remove some or all of the competition existing or likely to exist between themselves; and(2) Practices by which one or more parties injure competitors, and thereby injure the competitive process itself.Agreements in the first group injure consumers directly by enabling the parties to restrict output, thus creating misallocation of resources.The theory concerning practices in the second category appears to be that by the exclusion of rivals parties may gain a market position which will make it profitable for them to restrict output.'Price fixing and market division, the primary subjects of this paper, thus belong to a more general field which includes such related phenomena as agreements not to compete, concerted refusals to deal not intended to injure rivals, and horizontal mergers.The second category consists of such practices as *This is the first section of an article to be published in two parts.The second part will appear in