Tools of Reason : Truncation Through Judicial Experience and Economic Learning

In 1979, the Supreme Court began departing from strict rule of reason/per se categorization and by 1999 the Court made clear that the rule of reason was a continuum. With the Court providing little guidance on the details of the conduct for which truncated analysis is warranted, the FTC has attempted to fill this gap, focusing not on questions of market power but on the restraint itself. The Commission provided a basic structure for truncated analysis in 1988 Massachusetts Board, later modified in 2003 in Polygram. More recently, the federal antitrust agencies have sought to expand the class of conduct for which truncated analysis should apply in recent enforcement actions by the FTC involving real estate brokers and by the DOJ involving agreements between Silicon Valley tech companies not to cold-call each other's employees. We argue that the agencies' approach in these cases is not grounded on a reasoned analytical framework but instead relies on flawed reasoning through analogy. Truncation remains an important tool, both to promote efficient antitrust enforcement against those few restraints that can be condemned based on prior judicial experience and current economic learning without detailed and expensive consideration of market issues and to prohibit restraints that are shown through unambiguous direct evidence to cause substantial anticompetitive effects. Full consideration of the benefits and costs of challenged conduct remains the antitrust norm, and the government's recent attempts to expand the scope of truncated analysis through reasoning by analogy should be dismissed as aberrations that do not warrant judicial recognition