Rule or Reason? The Role of Balancing in Antitrust Law

Michael A. Carrier* & Mark A. Lemley**

Antitrust law has two basic ways of analyzing conduct alleged to be anticompetitive.¹ Some conduct is viewed as so inherently pernicious that it is deemed illegal per se: proof that you engaged in the act is enough to condemn you. Everything else is judged under the “rule of reason,” a test that considers and balances the harms and benefits of individual conduct.² Over the past four decades, the per se rule has been narrowed to the vanishing point by courts concerned about false positives.³ The result is that with rare exceptions, everything in antitrust falls into the rule of reason’s balancing test.

Given that the rule of reason is often said to be at the center of antitrust law, and that balancing is at the heart of the rule of reason, it is quite surprising to discover that courts almost never do any actual balancing of harms and benefits.⁴ In 97% of cases in the modern antitrust era, courts have not even made it past step one of the rule of reason⁵ because plaintiffs failed to demonstrate a significant anticompetitive effect.⁶ Balancing takes place in only approximately 3% of cases that go to judgment.⁷ Indeed, balancing has become so rare that in the Supreme Court’s most recent articulation of the rule of reason test, it omitted the actual balancing of anticompetitive harms and procompetitive benefits altogether!⁸ In so doing, the Court—seemingly unwittingly—took sides in a circuit split over the test for the rule of reason, choosing a three-step, burden-shifting approach without balancing over the four-step approach some courts have articulated and the different three-step approach other circuits have applied, each of which includes balancing.⁹ But the Court did so without acknowledging that there was any such divide, much less that it was resolving the disagreement, and it did so in dictum, in a case that didn’t require it to determine what the test actually was.

The result has been confusion. The Ninth Circuit recently articulated a four-step test for the rule of reason notwithstanding NCAA v. Alston.¹⁰ Other circuits have disagreed.¹¹ But none of the circuits that omit the balancing inquiry have confronted the fundamental oddity of a “rule of reason” that turns out, in their formulation, to be all rule and no reason.

In this Essay, we argue that the proper test for antitrust’s rule of reason is a four-step, burden-shifting framework that ends with a balancing of the likely harms and benefits of particular conduct. One reason balancing has become rare even in circuits that permit it is that it seems hard. Antitrust is shot through with economic theory and evidence, and courts aren’t experts in economics. So they tend to look for shortcuts that allow them to resolve the case without having to apply that economic evidence to assess the likely net effect of a defendant’s conduct. But those shortcuts themselves reflect (often implicit) economic judgments, and those judgments are frequently wrong, or at least contestable. Further, the entire project of the Chicago School approach to antitrust has been to reject a prior set of shortcuts (in the form of the per se rule) on the grounds that the economic effects of many sorts of conduct were too complicated for simple rules.¹² But that logic cuts both ways. If we are to ground antitrust analysis in the rule of reason because simple rules get it wrong, that analysis needs to employ reason, not just rules.

© 2025 Michael A. Carrier & Mark A. Lemley. Individuals and nonprofit institutions may reproduce and distribute copies of this Essay in any format at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review Reflection, and includes this provision in the copyright notice.

*Board of Governors Professor of Law, Rutgers Law School.

**William H. Neukom Professor of Law, Stanford Law School; of counsel, Lex Lumina LLP. Thanks to Jorge Contreras, Rose Hagan, Scott Hemphill, Christopher Leslie, Doug Melamed, Josh Sarnoff, and Steve Shadowen for comments on an earlier draft and Jack Gleiberman for research assistance.

1 Technically, there is a third way, but such a “quick look” review is not frequently applied. See infra notes 29–31 and accompanying text.

2 See Bd. of Trade of Chi. v. United States, 246 U.S. 231, 238–39 (1918).

3 Stacey L. Dogan & Mark A. Lemley, Antitrust Law and Regulatory Gaming, 87 Tex. L. Rev. 685, 700–01 (2009) (“Courts in the last three decades have dismantled every per se rule applied to vertical conduct, limited the per se rule in horizontal conspiracies in a variety of ways, made it harder for plaintiffs to infer conspiracies, all but eliminated predatory-pricing claims, and substantially restricted the role of monopolization cases.” (footnotes omitted)).

4 See infra Part II.

5 For a discussion of the steps of the rule of reason, see infra Part II.

6 See Michael A. Carrier, The Rule of Reason: An Empirical Update for the 21st Century, 16 Geo. Mason L. Rev. 827, 828 (2009).

7 Balancing occurred in 26 of 897 cases. Michael A. Carrier, The Real Rule of Reason: Bridging the Disconnect, 1999 BYU L. Rev. 1265, 1293 (finding balancing in 20 of 495 cases between June 1977 and February 1999, id. at 1269 n.13); Carrier, supra note 6, at 828–29 (finding balancing in 5 of 222 cases between February 1999 and May 2009). In connection with the NCAA v. Alston lawsuit, one of us updated the research, finding balancing in 1 of 180 cases between May 2009 and February 2021.

8 See NCAA v. Alston, 141 S. Ct. 2141, 2160 (2021) (discussing three-step burden shifting test). For Justice Breyer’s contemplation of balancing in Ohio v. American Express Co., see infra note 74 and accompanying text.

9 See infra Part II.

10 See Epic Games, Inc. v. Apple, Inc., 67 F.4th 946, 993–94 (9th Cir. 2023) (including a balancing test at step four).

11 See, e.g., infra notes 62–67 and accompanying text.

12 For a discussion of the replacement of the old shortcuts with new pro-defendant shortcuts like per se legality and quick-look approval, see Christopher R. Leslie, Disapproval of Quick-Look Approval: Antitrust After NCAA v. Alston, 100 Wash. U. L. Rev. 1 (2022).