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Judicial Interpretation of Section 1 of the Sherman Antitrust Act

Stare decisis : "Let the decision stand" or "let the precedent stand"  Once a clear cut rule of interpretation has been delineated with respect to a specific statute, the courts adhere to the principle of stare decisis-- unless there is a compelling case to reverse course.

Issue: Is price-fixing illegal per se? That is, have the courts applied a per se rule of interpretation to section 1 ?
bulletIf a particular business practice is viewed as having no beneficial effects (that is, the alleged behavior is regarded as inherently harmful), then the statute covering that business practice is a strong candidate for a per se rule on interpretation.
bulletIn the case of a per se rule, the prosecution merely needs to show beyond a reasonable doubt that a violation of the statute occurred and there is no allowable defense. Listen to audio file redlight.wav

If the courts have determined that a particular business practice does not meet the criteria for a per se rule, then the relevant antitrust statute is subject to a rule of reason. The rule of reason takes us into a murky area because the courts must then consider

bulletInherent Effect : The courts do not assume that the behavior covered under the statute is inherently harmful and therefore must judge if the beneficial effects outweigh the harmful consequences. For an analysis of the inherent effect principle in the case of horizontal mergers, see O. Williamson, "Economies as an Antitrust Defense: The Welfare Tradeoffs," American Economic Review, March 1968: 18-36. See graph
bulletEvident Purpose: What purpose did the agents seek to advance? Was the "intent" of the agents nefarious or benign?

bulletCourt cases involving per se antitrust violations tend to proceed quickly and without undue complications.
bulletBy contrast, where the rule of reason applies cases tend to be protracted and complex.

Supreme court Justice Thurgood Marshall explained the logic underpinning per se rules in the Container Corporation of America Decision:

"Per se rules always (ital. added) contain a degree of arbitrariness. They are justified on the assumption that the gains from the imposition of the rule will far outweigh the losses and that significant administrative advantages will result" U.S. v. Container Corp. of America, 339 U.S. 333, 431 (1969).

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