Vertical Distributional Restraints Under Schwinn and Sylvania: An Argument for the Continuing Use of a Partial Per Se Approach

Authors

Martin B. Louis, University of North Carolina School of LawFollow

Abstract

This phenomenon has been manifested in the vertical distribution cases, which seem to cry out for a departure from the rule of reason approach for several reasons. First, as section I of this article will show, vertical cases frequently involve a package of restraints--a characteristic that compounds all of the difficulties of evaluation mentioned above. Second, vertical restraints reduce intrabrand competition in order, supposedly, to promote interbrand competition. Thus, even if we could identify and measure both the procompetitive and anticompetitive effects of a particular restraint, we cannot assume a one-to-one equivalency, and we lack a workable process by which we can compare the net effect each way. Thus, all we can presently do under the rule of reason is muddle through. Finally, under a rule of reason standard an avalanche of vertical restraint cases would be a real possibility. The extreme reaction to Schwinn from the antitrust bar implies more than dissatisfaction with the decision's rationale: It suggests thwarted desires to employ vertical restraints widely and, if necessary, the will to litigate their legality under the rule of reason. The delay and uncertainty that would inevitably result from such a volume of litigation would surely invite questionable uses of restraints and even more litigation. Thus, a rule of reason approach to such cases would cause great uncertainty, delay, and waste, could not yield predictable or consistent results, and would have only the hollow satisfaction of theoretical purity to commend it.

There is no known escape from this problem other than some kind of bright-line test or approach. One such approach is the "structural" rule of reason test presently used in exclusive dealing and merger cases, whereby certain readily ascertainable market factors are identified and weighed to predict market effects, but no effort is made to measure actual market effects, upon which volumes of relevant information might be produced. The other available brightline standard is Schwinn's partial per se test, whereby the most restrictive practices are outlawed and other, less restrictive substitutes, which, as section II will show, are readily available to replace the prohibited restraints, are accepted as presumptively lawful under the rule of reason. Most of Schwinn's antitrust bar critics would probably also reject the structural approach, which was hardly applauded in its Clayton Act debut. However, the full rule of reason approach these critics advocate as an alternative would throw the problem into the proverbial briar patch, in which only they would feel at home. Consequently, there is a temptation to disregard further consideration of their position, supported as it is by so obviously interested advocacy, until they acknowledge and deal with its obvious difficulties. In any case, it is the position of this article that the partial per se rule represents the best available balance between business needs and the imperatives of antitrust enforcement.

Recommended Citation

Martin B. Louis, Vertical Distributional Restraints Under Schwinn and Sylvania: An Argument for the Continuing Use of a Partial Per Se Approach, 75 Mich. L. Rev. 275 (1976).
Available at: https://repository.law.umich.edu/mlr/vol75/iss2/4