THE OTHER "QUICK LOOK"

Written by Ashish Sudhakaran and Tyler Helms¹

I. INTRODUCTION

The Supreme Court’s recent decision in NCAA v. Alston² will likely have a significant impact on how courts assess restraints of trade challenged under Section 1 of the Sherman Act. Most will focus on Alston’s description of the proper framework for a "rule-of-reason" analysis in antitrust jurisprudence. But less obvious in the Court’s decision is its approval once and for all of an abbreviated "quick-look" analysis—previously used to presumptively condemn facially anticompetitive restraints—to summarily approve restraints that are facially procompetitive. The NCAA ultimately failed to convince the Court that its conduct should benefit from a "quick-look" stamp of approval, but the Court agreed with the NCAA in principle: a "positive"³ quick look can be used to summarily approve certain restraints of trade under Section 1 when the potential for anticompetitive harm is minimal.

While it remains to be seen just how prevalent the "positive" quick-look approach will be, Alston has three key implications for antitrust litigation. First, Alston suggests that the fact-intensive rule-of-reason analysis is no longer the most deferential standard of scrutiny that may be applied to restraints challenged under Section 1. Rather, Alston suggests that courts might now require plaintiffs to make a threshold showing that a challenged restraint has sufficient anticompetitive effects to even warrant a closer look under the rule of reason. Second, unless plaintiffs can make such a showing, courts may be more likely to entertain and grant early dispositive motions dismissing antitrust cases at the pleading stage. Third, even failing early motions to dismiss, a "positive" quick look militates in favor of courts using certain tools already at their disposal—such as early summary judgment motions and sequenced discovery—to narrow the scope of potentially expensive and protracted antitrust litigation. Accordingly, Alston’s pronouncement arguably represents a victory for antitrust defendants, and a caution to plaintiffs and judges against "mistaken condemnations of legitimate business arrangements"⁴ that are often costly and contrary to the purpose of antitrust law.

II. BACKGROUND: THE RULE OF REASON

A. BIRTH OF THE RULE

The antitrust "rule of reason" has its roots in the Supreme Court’s 1911 decision in Standard Oil Co. v. United States, where the Court reviewed a lower court decision ordering the break-up of the Standard Oil "trust."⁵ The trial court had entered judgment in favor of the government, finding that the Rockefellers and Standard Oil had violated Sections 1 and 2 of the Sherman Act.⁶ With respect to Section 1, the government contended that "the language of the statute embraces every contract, combination, etc., in restraint of trade, and hence its text leaves

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no room for the exercise of judgment, but simply imposes the plain duty of applying its prohibitions to every case within its literal language."⁷

The Supreme Court disagreed. Though Section 1 does appear to speak categorically—it prohibits "[e]very contract, combination . . . or conspiracy in restraint of trade or commerce"⁸—Chief Justice Edward D. White, writing for the Court, thought it "obvious that judgment must in every case be called into play in order to determine whether a particular act is embraced within the statutory classes, and whether, if the act is within such classes, its nature or effect causes it to be a restraint of trade within the intendment of the act."⁹ Because Section 1 does not "specifically enumerate[] or define[]" the types of restraint to which it applies, the Chief Justice reasoned, the necessary implication was that application of the statute must be "determined by the light of reason, guided by the principles of law and the duty to apply and enforce the public policy embodied in the statute."¹⁰ And so the rule of reason was born.

The Court’s adoption of this flexible standard was cold comfort to Standard Oil; Chief Justice Wright wrote that the lower court’s judgment that Standard Oil violated Section 1 was "clearly appropriate," and that its remedy was warranted.¹¹

B. DEVELOPMENT OF THE RULE OF REASON

1. A FACT-INTENSIVE ANALYSIS

The Supreme Court further expounded on the rule of reason seven years later, in Chicago Board of Trade v. United States.¹² In that case, the government challenged a rule adopted by the Board of Trade of the City of Chicago—an exchange for trading grain.¹³ The "call" rule, as it was known, prohibited the Board’s 1,600 members "from purchasing or offering to purchase, during the period between the close of the call"—"calls" were special trading sessions held immediately after the close of regular sessions—"and the opening of the session on the next business day, any wheat, corn, oats or rye ‘to arrive’ at a price other than the closing bid at the call."¹⁴ (Sales "to arrive" referred to agreements to deliver on arrival grain that was already on its way to Chicago or which was to be shipped within a specified time.¹⁵) In practical terms, the rule meant that "bids had to be fixed at the day’s closing bid on the call until the opening of the next session."¹⁶ Prior to the rule’s adoption, the Board’s members were free to fix bids throughout the day at whatever prices they deemed appropriate.¹⁷ According to the government’s suit, the "call" rule was an unlawful agreement in restraint of trade.¹⁸

In response, the defendants asserted that the rule’s "purpose was not to prevent competition or to control prices, but to promote the convenience of members by restricting their hours of business and to break up a monopoly in that branch of the grain trade acquired by four or five warehousemen in Chicago."¹⁹ The government successfully moved to strike the defendants’ allegations concerning the purpose of the "call" rule, and in trying the case, "made no attempt to show" that the rule had any actual anticompetitive effects.²⁰

The Supreme Court held that the district court had erred in "striking from the [defendants’] answer allegations concerning the history and purpose of the call rule and in later excluding any evidence on that subject."²¹ Writing for a unanimous Court, Justice Louis Brandeis gave a now-famous explanation for the rule of reason:

Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting

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the particular remedy, the purpose or end sought to be attained, are all relevant facts.²²

In the decades since Standard Oil and Chicago Board of Trade were decided, the rule of reason has embedded itself in antitrust jurisprudence as "the default mode of analysis" for restraints of trade challenged under Section 1 of the Sherman Act.²³ Consequently, outside of claims challenging horizontal price fixing, market allocation, or bid rigging—conduct that is considered per se illegal²⁴—"most [Section 1] antitrust claims are analyzed under a ‘rule of reason.’"²⁵

Though the rule of reason’s end goal may seem simple enough—determining whether a challenged restraint is, on balance, anticompetitive²⁶—the analysis, as Justice Brandeis’s formulation suggests, is "fact intensive."²⁷ That reality has invited both judicial²⁸ and scholarly criticism.²⁹

2. A BURDEN-SHIFTING FRAMEWORK

Perhaps in an effort to bring structure and discipline to the rule of reason, the courts in recent decades have coalesced around a burden-shifting framework, whereby (1) "the plaintiff has the initial burden to prove that the challenged restraint has a substantial anticompetitive effect that harms consumers in the relevant market"; (2) if the plaintiff makes that showing, "then the burden shifts to the defendant to show a procompetitive rationale for the restraint"; and (3) if the defendant bears its burden, "then the burden shifts back to the plaintiff to demonstrate that the procompetitive efficiencies could be reasonably achieved through less anticompetitive means."³⁰

Even under this framework—which the Supreme Court has twice endorsed in recent years³¹—questions remain. (For example, is a showing of market power required?³² And when, if at all, does balancing come into play?³³)

Nonetheless, the rule of reason remains a mainstay in modern antitrust law. Since the mid-1970s, the Supreme Court has only expanded the rule of reason’s role, holding in a series of decisions that vertical nonprice restraints, vertical maximum resale price maintenance agreements, and vertical minimum resale price maintenance agreements should be evaluated under the rule of reason rather than the per se rule.³⁴

C. AN ALTERNATIVE TO THE RULE OF REASON: THE "QUICK LOOK" TO CONDEMN PRESUMPTIVELY ANTICOMPETITIVE RESTRAINTS

Ever since 1927, when the Supreme Court first recognized horizontal price fixing as per se illegal under Section 1 of the Sherman Act,³⁵ the Court has largely "divided antitrust analysis into two modes, the per se rule and the rule of reason."³⁶ According to Herbert Hovenkamp, the "large amount of empty space" between these two "silos," combined with "[t]he high cost and indeterminacy of antitrust litigation under the rule of reason[,] led to exploration of that empty space for useful shortcuts."³⁷ The Antitrust Law treatise proposed an "alternative view": namely, that "the modes of antitrust analysis represent a continuum, or ‘sliding scale,’ with different fact finding requirements for different situations."³⁸ The Supreme Court itself eventually expressed agreement with the notion of a "sliding scale," though perhaps with some reticence.

In California Dental Association v. FTC, the Court agreed with Antitrust Law that "[t]here is always something of a sliding scale in appraising reasonableness,"³⁹ but cautioned against cursory analyses.⁴⁰ In that case, the Federal Trade Commission had applied an "abbreviated" rule-of-reason analysis to condemn the restraint at issue—an ethical rule adopted by a nonprofit dental association that placed restrictions on its members’ advertising—"without an elaborate industry analysis."⁴¹ The Court acknowledged that in at least some circumstances, something short of a full-blown rule-of-reason analysis was appropriate. Indeed, the "most condensed rule-of-reason analysis" might allow one to conclude in "the twinkling of an eye" that a restraint was unlawful.⁴²

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The Court acknowledged that certain of its prior decisions provided a "basis for what has come to be called abbreviated or ‘quick-look’ analysis under the rule of reason."⁴³ In NCAA v. Board of Regents, for example, the Court had ruled that a "naked restraint on price and output requires some competitive justification even in the absence of a detailed market analysis."⁴⁴ And in National Society of Professional Engineers v. United States, the Court had held that "no elaborate industry analysis [was] required to demonstrate the anticompetitive character" of an "absolute ban on competitive bidding."⁴⁵ In those and other cases involving horizontal restraints on price or output, the Court explained, "quick-look analysis carries the day [because] the great likelihood of anticompetitive effects can easily be entertained."⁴⁶ Put another way, it said, "quick-look analysis applies ‘where a practice has obvious anticompetitive effects.’"⁴⁷

But in the case of the California Dental Association’s advertising ethics rule, any anticompetitive effects were not so obvious.⁴⁸ The rule was ostensibly aimed at preventing false or misleading advertising, and in the Court majority’s view, the rule did not have clear effects on price or output.⁴⁹ And so, the Court concluded, the FTC and the Court of Appeals should have given the restraint "a more deliberate look"—or at least "a less quick look"—before condemning it.⁵⁰ Giving a nod to Antitrust Law’s "sliding scale" approach, the Court suggested that "the fullest market analysis" might not be required on remand—but it stopped short of providing concrete guidance on when an abbreviated rule-of-reason analysis is appropriate.⁵¹ Rather, it left the lower courts with the (somewhat question-begging) instruction that "[w]hat is required, rather, is an enquiry meet for the case, looking to the circumstances, details, and logic of a restraint."⁵²

In FTC v. Actavis, Inc.,⁵³ decided 14 years later, the Supreme Court again acknowledged that some intermediate level of antitrust scrutiny—a "quick-look" application of the rule of reason—could be appropriate. That case involved "reverse-payment settlements," that is, agreements to settle patent-infringement litigation under which the patent holder (typically a brand-name drug company) pays the alleged infringer (typically a generic drug company) to stay off the market for a period of time.⁵⁴ (The settlement payment is said to be "reverse" because, unlike in a run-of-the-mill settlement, it flows from the plaintiff to the defendant.)

The FTC advocated that reverse-payment settlements should be subject to "quick-look" scrutiny, which would treat the restraints as "presumptively unlawful."⁵⁵ The Court did not take issue with the FTC’s formulation of the "quick-look" inquiry; citing California Dental, the Court agreed that quick-look analysis "in effect" treats restraints as presumptively anticompetitive by "shift[ing] to ‘a defendant the burden to show empirical evidence of procompetitive effects.’"⁵⁶ The Court just didn’t think reverse-payment settlements were so clearly harmful that quick-look scrutiny was called for.⁵⁷

Once again invoking the "sliding scale" metaphor, the Court indicated that trial courts could "structure" reverse-payment litigation so as to avoid opening the door to "consideration of every possible fact or theory irrespective of the minimal light it may shed on the basic question—that of the presence of significant unjustified anticompetitive consequences."⁵⁸ But as in California Dental, it left that structuring to the lower courts to figure out.⁵⁹ As it happens, courts have generally construed Actavis as requiring full-blown rule-of-reason analysis.⁶⁰

Although National Society of Professional Engineers, Board of Regents, California Dental, and Actavis do not provide the clearest guidance about when a "quick look" can be substituted for the full-blown rule of reason, these decisions all agree that an abbreviated inquiry is available, and that the inquiry creates a rebuttable presumption of anticompetitive effects.⁶¹ On this understanding, "quick look" alleviates plaintiffs’ initial burden of proving actual anticompetitive effects in cases involving restraints that are almost certainly unreasonable, but which fall short of per se condemnation.

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And that is, as a general matter, how the lower courts and antitrust agencies have understood the quick-look inquiry. The U.S. Courts of Appeals, for instance, have described quick look as "presuming anticompetitive harm,"⁶² as treating certain restraints as "inherently suspect,"⁶³ as requiring defendants to proffer a "justification on procompetitive grounds" once "a restraint is deemed facially anticompetitive,"⁶⁴ and as permitting a court to "condemn[] the practice without ado."⁶⁵

In administrative proceedings, the FTC has similarly treated quick look as a shortcut to finding obviously anticompetitive restraints unlawful. In In re Polygram Holding, Inc., the Commissioners explained that when "anticompetitive effects . . . are obvious[,] the burden of proceeding switches," such that the respondents "would have the burden of showing that the procompetitive benefits of the restraint justify the anticompetitive effects."⁶⁶ Likewise, in In re Realcomp II Ltd., the FTC stated that when restraints have "obvious anticompetitive effects," they "may be held unlawful under a rule of reason framework unless the defendants proffer some acceptable ‘competitive justification’ for the practice."⁶⁷ The FTC proceeded to treat the respondent’s challenged policies as "presumptively unreasonable" under a quick-look framework.⁶⁸ The FTC has continued to apply the quick-look inquiry to condemn restraints as unreasonable, though it tends to describe its approach as an "’inherently suspect’ analysis."⁶⁹

The Department of Justice, for its part, generally favors the per se rule and has stopped short of endorsing the "quick look" approach, except in rare cases. In one case involving an alleged "no-poach" agreement in a commercial-franchise relationship, the DOJ asserted that the "quick-look analysis" applies only "when the great likelihood of anticompetitive effects can easily be ascertained, and it is ‘implausible’ that procompetitive benefits would outweigh harm to competition."⁷⁰ Similarly, in opposing a defendant’s motion to dismiss, the DOJ argued that although the per se rule should apply to an alleged agreement between eBay and Intuit to not compete for hiring each other’s employees, the quick-look analysis should be applied in the alternative.⁷¹ The DOJ acknowledged that the quick-look analysis concerns "[c]onduct [that] may be condemned after a ‘quick look’ if ‘an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.’"⁷²

III. THE OTHER QUICK LOOK

A. THE SUPREME COURT APPROVES A "POSITIVE" QUICK LOOK TO APPROVE PRESUMPTIVELY PROCOMPETITIVE RESTRAINTS

In NCAA v. Alston, decided in June 2021, the Supreme Court confirmed that a "quick-look" inquiry also may apply to restraints of trade that are obviously procompetitive.⁷³ In Alston, the plaintiffs (three classes of Football Bowl Subdivision and Division 1 basketball players) challenged the NCAA’s ban on member schools compensating their student athletes. The district court held that the NCAA could limit traditional compensation, i.e., "salaries" for athletic performance, but not "education-related benefits" such as "scholarships for graduate or vocational school, payments for academic tutoring, or paid posteligibility internships."⁷⁴ The Ninth Circuit upheld the district court’s judgment, and the NCAA appealed to the Supreme Court.⁷⁵

On appeal, the NCAA argued that the district court and Ninth Circuit erroneously applied the traditional rule-of-reason analysis in determining that the NCAA’s restrictions on education-related benefits violated the Sherman Act; in the NCAA’s view, the lower courts should instead have given the restrictions "at most an ‘abbreviated deferential review,’ . . . or a ‘quick look,’ . . . before approving them."⁷⁶ This was so, the NCAA contended, because (1) it is a joint venture, and collaboration among its members is necessary to offer consumers the benefit of intercollegiate athletic competition,⁷⁷ and (2) the NCAA’s member-schools are not "commercial enterprises" but institutions that further the important noncommercial purpose of providing undergraduate education to students.⁷⁸

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Writing for a unanimous Court, Justice Gorsuch explained that the "quick-look" analysis should be applied to "restraints at opposite ends of the competitive spectrum" as opposed to "restraints in the great in-between" that require a full-blown rule-of-reason analysis.⁷⁹ At one end of the spectrum, "some agreements among competitors so obviously threaten to reduce output and raise prices that they might be condemned as unlawful per se or rejected after only a quick look."⁸⁰ That observation is nothing new. As discussed, courts have traditionally applied the quick-look inquiry to facially anticompetitive restraints that may be deemed unlawful without a full rule-of-reason analysis.

But then things got interesting. Justice Gorsuch went on to acknowledge that the NCAA was correct in principle: the quick-look framework also applies to restraints that "may be so obviously incapable of harming competition that they require little scrutiny."⁸¹ Put differently, according to Justice Gorsuch, there are presumptively procompetitive restraints that can be deemed lawful without the need for a traditional, fact-intensive rule-of-reason analysis.

As an example, Justice Gorsuch described a situation where a joint venture commanded such a small market share (say, five to six percent) that it was "incapable of impairing competition" because any reduction of output on the joint venture’s part would have "no effect upon market price because firms making up the other 94% of the market would simply take over the abandoned business."⁸² Justice Gorsuch pointed to authorities recognizing that if antitrust defendants lack market power, their conduct is unlikely to affect let alone reduce competition in violation of Section 1.⁸³

Unfortunately for the NCAA, the Court concluded that the NCAA could not benefit from a quick look in this instance. The NCAA’s restrictions on providing education-related benefits to its student-athletes did not fall into the category of presumptively procompetitive benefits that could be approved following an abbreviated analysis.⁸⁴

B. NEW GROUND OR OLD HAT?

As we have seen,⁸⁵ courts, antitrust enforcers, and practitioners have overwhelmingly treated "quick look" as code for presumptive illegality since the term first entered the antitrust lexicon. The Supreme Court’s recognition of a "positive" quick look in Alston breaks with that tradition. But is it really a novel idea? Maybe not.

For one, as we must acknowledge, Alston picked up on a thread the Court had left dangling over a decade earlier in American Needle v. NFL.⁸⁶ There, the Court hinted at the use of quick look to exonerate "restraints on competition [that] are essential if the product is to be available at all"—which are "likely to survive the Rule of Reason"—noting that "depending upon the concerted activity in question, the Rule of Reason may not require a detailed analysis; it ‘can sometime be applied in the twinkling of an eye.’"⁸⁷ The implication was that such restraints are presumptively lawful and can be upheld against antitrust challenge without needing to apply the full rule of reason. Indeed, relying on American Needle, the Seventh Circuit concluded in a pre-Alston case that certain NCAA bylaws could be deemed procompetitive in the "twinkling of an eye."⁸⁸ (Whether that Seventh Circuit decision survives Alston is a question for another day.⁸⁹)

Not only that, some earlier antitrust decisions can be read as upholding restraints in the blink of an eye, even if the courts did not employ the language of "quick look." Any antitrust practitioner worth her salt can identify types of agreements that routinely withstand Section 1 scrutiny without elaborate analysis or fanfare. For instance, courts have summarily dismissed antitrust claims challenging exclusive contracts that were relatively short in duration or could easily be terminated.⁹⁰ Courts similarly have declared exclusive distributorships to be "presumptively legal."⁹¹

Regardless of whether Justice Gorsuch was truly breaking new ground in Alston, it now seems beyond dispute that courts may apply a "positive" quick-look analysis to summarily approve restraints that are facially procompetitive.⁹²

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C. IMPLICATIONS OF A "POSITIVE" QUICK LOOK

What are the implications of courts taking just a "quick look" at facially procompetitive conduct that would likely be upheld under a full rule-of-reason analysis?

First, Alston suggests that the full-blown rule of reason is no longer the most deferential level of scrutiny that courts must apply to restraints of trade challenged under Section 1. Traditional wisdom dictated that all restraints of trade were subject to the rule-of-reason analysis unless the restraint was obviously anticompetitive.⁹³ But if there is a "positive" quick look, then the rule of reason is not the "floor" when it comes to assessing restraints and their competitive effects. That in turn indicates that Section 1 plaintiffs must do more than simply allege an agreement in restraint of trade to unlock the door to the rule of reason and subject defendants to the costs of protracted antitrust litigation.

Exactly how much must be alleged remains to be seen. One situation where Alston‘s "positive" quick look might have an impact is in cases involving alleged reverse-payment settlements. In Actavis, the Supreme Court explained that reverse-payment settlements could "bring with [them] the risk of significant anticompetitive effects" but only if the payments were "large and unjustified."⁹⁴ Applying Alston‘s rationale, trial judges might require plaintiffs to make a threshold showing that a challenged reverse-payment patent settlement was "large and unjustified" before allowing the case the proceed to the fact-intensive rule-of-reason analysis.

Second, Alston suggests that where plaintiffs fail to make a preliminary showing that a full factual record is likely to reveal anticompetitive effects, courts can efficiently and quickly resolve claims challenging facially procompetitive restraints by granting early dispositive motions. Granted, some courts have already been doing this, as in the case of short-term or readily terminable exclusive agreements.⁹⁵ But Alston suggests, at the very least, that it is time to reconsider the refrain that the rule of reason’s fact-intensive nature is itself a reason to decline pleading-stage dispositive motions.⁹⁶ Unless the plaintiffs’ factual allegations "present[] complex questions requiring more than a blink to answer," as Alston puts it,⁹⁷ courts should be hesitant to commit the litigants (or the judicial system itself) to the rigmarole of protracted antitrust litigation.

Third, even where dismissal on the pleadings is not warranted, Alston supports the notion that district courts should structure litigation so as to facilitate the early and efficient adjudication of threshold questions about whether full-fledged rule-of-reason scrutiny is appropriate. The Federal Rules give district judges ample discretion to sequence discovery and to hear early summary judgment motions,⁹⁸ which would allow these threshold issues to be explored and resolved as a precondition to "full merits discovery on all issues relevant to the rule of reason analysis."⁹⁹

District courts already use these tools in other contexts. As an example, in In Re Capacitors Antitrust Litigation, a case involving an alleged price-fixing cartel, the district judged ordered early summary judgment motions and briefing in "phases" to resolve questions concerning the application of the Foreign Trade Antitrust Improvements Act.¹⁰⁰ As the court put it, in "set[ting] a separate and early briefing track for FTAIA issues," "[t]he goal was to resolve the parties’ FTAIA disagreements early enough to realize downstream efficiencies and economies in discovery and class certification and other motions."¹⁰¹ In light of Alston’s recognition of a "positive" quick look, courts should consider using these same procedural tools to prioritize discovery and dispositive motions on whether a full-scale rule-of-reason analysis is warranted. For instance, if there is a question about the existence of an exclusivity or tying arrangement, courts may address that issue—which may be outcome-determinative under a positive quick look—before requiring fact and expert discovery on market definition, market power, price and output effects, and other fact-intensive considerations.

Ultimately, these implications will go some way towards addressing the Supreme Court’s enduring concerns with antitrust litigation: (1) expensive

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discovery,¹⁰² (2) the settlement of weak antitrust claims for fear of protracted litigation and the threat of prohibitive liability;¹⁰³ and (3) "mistaken condemnations of legitimate business arrangements [that] chill the very procompetitive conduct the antitrust laws are designed to protect.¹⁰⁴ Alston’s elucidation of another "truncated" analysis is one that courts can use to avoid these dangers in favor of realizing the judicial "efficiencies and economies"¹⁰⁵ that are so often rare in antitrust litigation.

IV. CONCLUSION

The Supreme Court’s approval in Alston of a positive quick-look approach to exonerate certain restraints of trade represents a new tool in an antitrust defendant’s arsenal. For one, it confirms that the "sliding scale" approach to antitrust analysis does not solely tip in favor of plaintiffs. Whereas some restraints may be so clearly anticompetitive that they can be condemned with only a "quick look," it is now clear that facially procompetitive restraints can be upheld without elaborate analysis. While it remains to be seen how and when courts will use the "positive" quick look, Alston suggests that courts may quickly and efficiently resolve cases involving facially competitive restraints by requiring a threshold showing of anticompetitive effects, entertaining early dispositive positions, and sequencing discovery. Doing so will ensure that litigants are not unnecessarily subjected to costly antitrust discovery, while guarding against coercive settlements and enforcement efforts that deter procompetitive conduct.

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Notes:

^1. Ashish Sudhakaran is a counsel in the San Francisco office of O’Melveny & Myers LLP, and Tyler Helms is an associate in the Los Angeles office of O’Melveny & Myers LLP. The opinions expressed in this article are those of the authors and do not necessarily reflect the views of O’Melveny & Myers LLP or its clients.

^2. Nat’l Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141 (2021).

^3. See Eric H. Grush & Claire M. Korenblit, American Needle and a "Positive" Quick Look Approach in Challenges To Joint Ventures, 25 Antitrust 2 (2011) (arguing that the Supreme Court has previously envisioned using a truncated analysis to approve of certain joint venture conduct).

^4. Id. at 2161 (quoting Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 414 (2004)).

^5. Standard Oil Co. of N.J. v. United States, 221 U.S. 1 (1911).

^6. Id. at 45-46.

^7. Id. at 63.

^8. 15 U.S.C. § 1 (emphasis added).

^9. Standard Oil, 221 U.S. at 63.

^10. Id. at 63-64.

^11. Id. at 79-82.

^12. Bd. of Trade of City of Chi. v. United States, 246 U.S. 231 (1918).

^13. Id. at 235-37.

^14. Id. at 237.

^15. Id. at 236-37.

^16. Id. at 237.

^17. Id.

^18. Id. at 237-38.

^19. Id. at 237.

^20. Id. at 237-38.

^21. Id. at 238-39.

^22. Id. at 238.

^23. In re Processed Egg Prods. Antitrust Litig., 962 F.3d 719, 726 (3d Cir. 2020); see also Buccaneer Energy (USA) Inc. v. Gunnison Energy Corp., 846 F.3d 1297, 1306 (10th Cir. 2017) ("The rule of reason is the default approach, and there is a presumption in favor of its application."); Cal. ex rel. Harris v. Safeway, Inc., 651 F.3d 1118, 1133 (9th Cir. 2011) ("The rule of reason is the presumptive or default standard . . .").

^24. See PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION ¶ 1910b (2022 suppl.).

^25. State Oil Co. v. Khan, 522 U.S. 3, 10 (1997).

^26. As the D.C. Circuit put it in the Microsoft case, the rule of reason requires plaintiffs to "show that [the defendant’s] conduct was, on balance, anticompetitive." United States v. Microsoft Corp., 253 F.3d 34, 95 (D.C. Cir. 2001) (per curiam).

^27. In re Wellbutrin XL Antitrust Litig., 868 F.3d 132, 170 n.64 (3d Cir. 2017) (collecting cases).

^28. See, e.g., Kimberlin v. Dep’t Just., 139 F.3d 944, 949 (D.C. Cir. 1998) (referring to the "open-ended kitchen sink rule of reason in antitrust law") (cleaned up); see also N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958) (observing that the virtue of per se illegality is that, in contrast to the rule of reason, "it avoids the necessity for an incredibly complicated and prolonged economic investigation into the entire history of the industry involved, as well as related industries, in an effort to determine at large whether a particular restraint has been unreasonable—an inquiry so often wholly fruitless when undertaken").

^29. See, e.g., AREEDA & HOVENKAMP, supra note 24, ¶ 1742c ("[R]ule of reason review is expensive, burdensome, uncertain, and prone to error."); Maurice E. Stucke, Does the Rule of Reason Violate the Rule of Law?, 42 US Davis L. Rev. 1375, 1461-62 (2009) ("Rule-of-reason litigation, however, is a crusade, enlisting legions of economists, lawyers, and paralegals. It is unclear how many private litigants (even with the prospect of trebled damages) will incur the ‘litany of costs’ and risks associated with suing companies with market power by embarking on such a crusade—especially if their chance of prevailing is less than one in three."); Edward D. Cavanaugh, The Rule of Reason Re-Examined, 67 BUS. LAWYER 435, 435 (2012) ("From the beginning, federal courts have been troubled by the open-ended nature of the Brandeis formulation of the Rule of Reason, which directed courts to examine a broad range of factors in analyzing competitive conduct but provided no guidance for how these factors should be analyzed or weighed so as to provide some semblance of clarity, predictability, and consistency in the application of antitrust standards.").

^30. Ohio v. Am. Express Co. ("Amex"), 138 S. Ct. 2274, 2284 (2018) (citations omitted).

^31. See Alston, 141 S. Ct. at 2160 (2021); Amex, 138 S. Ct at 2284.

^32. Compare Fed. Trade Comm’n v. Ind. Fed’n Dentists, 476 U.S. 447, 461 (1986) (concluding that "the finding of actual, sustained adverse effects on competition" could "obviate the need for an inquiry into market power" or "elaborate market analysis"), to Amex, 138 S. Ct at 2283-84 (explaining that courts must "conduct a fact-specific assessment of market power and market structure to assess the restraint’s actual effect on competition" in cases involving vertical restraints).

^33. Historically, balancing the harms and benefits of the challenged conduct has been treated by courts as the final step of the rule-of-reason analysis. See, e.g., Areeda & Hovenkamp, supra note 24, ¶ 1507d (after proceeding through the "basic burden-shifting framework," the "court must then determine whether the anticompetitive effects" of the conduct "are sufficiently offset by the proffered defense."); Cty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001) ("Because plaintiffs have failed to meet their burden of advancing viable less restrictive alternatives, we reach the balancing stage."); Microsoft, 253 F.3d at 59 ("[I]f the monopolist’s procompetitive justification stands unrebutted, then the plaintiff must demonstrate that the anticompetitive harm of the conduct outweighs the procompetitive benefit."); Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1413 (9th Cir. 1991) ("Finally, the court must weigh the harms and benefits to determine if the behavior is reasonable on balance."). But in recent cases, the Supreme Court has endorsed a "three-step" burden-shifting formulation with no mention of balancing, casting doubt on the role balancing pays in the rule-of-reason analysis. See, e.g., Alston, 141 S. Ct. at 2160; Amex, 138 S. Ct. at 2284. The Ninth Circuit and its district courts also have a history of omitting a balancing step from the rule-of-reason analysis. See, e.g., Fed. Trade Comm’n v. Qualcomm Inc., 969 F.3d 974, 991 (9th Cir. 2020); O’Bannon v. Nat’l Collegiate Athletic Ass’n, 802 F.3d 1049, 1070-74 (9th Cir. 2015) (endorsing a "three-step framework of the Rule of Reason" and, after finding both anticompetitive and procompetitive effects, "turn[ing] to the final inquiry—whether there are reasonable alternatives to the NCAA’s current compensation restrictions.") (emphasis added). In one case, the Ninth Circuit affirmed summary judgment against the plaintiffs for failing to carry their burden of showing a viable less restrictive alternative, ending the analysis and finding for defendants without any mention of balancing. See Hairston v. Pac. 10 Conf., 101 F.3d 1315, 1319 (9th Cir. 1996) ("The burden then returned to the athletes to show that the Pac-10’s procompetitive objectives could be achieved in a substantially less restrictive manner. . . . This they failed to do. . . . Hence summary judgement was proper.").

^34. Stucke, supra note 29, at 1379-80 (discussing Cont’l T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977), State Oil Co. v. Khan, 522 U.S. 3 (1997), and Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007)).

^35. See United States v. Trenton Potteries Co., 273 U.S. 392, 397-402 (1927) ("The aim and result of every price-fixing agreement, if effective, is the elimination of one form of competition.").

^36. Herbert J. Hovenkamp, The Rule of Reason, 70 FLA. L. REV. 81, 122 (2018).

^37. Id. Others have suggested that the search for some intermediate form of scrutiny between per se illegality and the rule of reason was spurred by "growing antagonism by courts to reflexive application of the per se rule, especially with regard to conduct that arguably had a valid anticompetitive purpose." Max R. Schulman, The Quick Look Rule of Reason: Retreat From Binary Antitrust Analysis, 2 SEDONA CONF. J. 89, 90 (2001).

^38. Hovenkamp, supra note 36, at 123 (quoting and citing PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION ¶¶ 1500, 1507 (4th ed. 2017)).

^39. Cal. Dental Ass’n v. Fed. Trade Comm’n, 526 U.S. 756, 780 (1999) (quoting PHILLIP E. AREEDA, ANTITRUST LAW ¶ 1507 (1986)).

^40. See id. ("At the same time, Professor Areeda also emphasized the necessity, particularly great in the quasi-common-law realm of antitrust, that courts explain the logic of their conclusions. ‘By exposing their reasoning, judges . . . are subjected to others’ critical analyses, which in turn can lead to better understanding for the future.’") (quoting AREEDA, supra note 39, ¶ 1500).

^41. Id. at 763 (quotations omitted).

^42. Id. at 780. As the Court noted, Phillip Areeda was the first to "enrich[] antitrust law" with the "twinkling of an eye" metaphor. Id.; see Phillip Areeda, The Changing Contours of the Per Se Rule, 54 ANTITRUST L.J. 27, 30 (1985) ("[T]here is a spectrum in which the rule of reason can sometimes be applied in the twinkling of an eye.").

^43. Cal. Dental, 526 U.S. at 770.

^44. Nat’l Collegiate Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 110 (1984).

^45. Nat’l Soc’y Prof’l Eng’rs v. United States, 435 U.S. 679, 692 (1978).

^46. Cal. Dental, 526 U.S. at 770.

^47. Id. (quoting Law v. Nat’l Collegiate Athletic Ass’n, 134 F.3d 1010, 1020 (10th Cir. 1998)).

^48. Id. at 771.

^49. Id. at 771-75.

^50. Id. at 779-81.

^51. Id.

^52. Id. at 781.

^53. Fed. Trade Comm’n v. Actavis, Inc., 570 U.S. 136 (2013).

^54. The Supreme Court described reverse-payment settlements as follows: "Company A sues Company B for patent infringement. The two companies settle under terms that require (1) Company B, the claimed infringer, not to produce the patented product until the patent’s term expires, and (2) Company A, the patentee, to pay B many millions of dollars." Id. at 140. These settlements are predominately, if not exclusively, confined to the pharmaceutical industry.

^55. Id. at 158-59.

^56. Id. at 159 (quoting Cal. Dental, 526 U.S. at 775 n.12).

^57. Id.

^58. Id. at 159-60.

^59. See id. at 160 ("We therefore leave to the lower courts the structuring of the present rule-of-reason antitrust litigation.").

^60. See, e.g., King Drug Co. of Florence, Inc. v. Smithkline Beecham Corp., 791 F.3d 388, 398 n.15 (3d Cir. 2015) (holding that Actavis requires application of "the traditional, full-fledged rule of reason standard" to reverse-payment settlements); In re Humira (Adalimumab) Antitrust Litig., 465 F. Supp. 3d 811, 838 (N.D. Ill. 2020) (claims challenging reverse-payment settlements "require full rule of reason analysis"), aff’d, 42 F.4th 709 (7th Cir. 2022).

^61. See Actavis, 570 U.S. at 158-59 (quick-look approach treats challenged restraints as "presumptively unlawful"); Cal. Dental, 526 U.S. at 775 n.12 ("quick-look analysis in effect requires" that the burden be "shift[ed] to defendant . . . to show empirical evidence of procompetitive effects," even where the "claim of anticompetitive effects" is "theoretical"); Bd. of Regents, 468 U.S. at 110 ("This naked restraint on price and output requires some competitive justification even in the absence of a detailed market analysis."); Nat’l Soc’y Prof’l Eng’rs, 435 U.S. at 692-93 ("On its face, this agreement restrains trade within the meaning of § 1 of the Sherman Act.").

^62. Deutscher Tennis Bund v. ATP Tour, Inc., 610 F.3d 820, 832 (3d Cir. 2010) ("[C]ompetitive harm is initially presumed under ‘quick look’").

^63. N. Tex. Specialty Physicians v. Fed. Trade Comm’n, 528 F.3d 346, 360-61 (3d Cir. 2008) ("The ‘inherently suspect’ paradigm that the FTC employed in the present case is a ‘quick-look’ rule-of-reason analysis.").

^64. Realcomp II, Ltd. v. Fed. Trade Comm’n, 635 F.3d 815, 825 (6th Cir. 2011).

^65. Chi. Prof’l Sports Ltd. P’ship v. Nat’l Basketball Ass’n, 961 F.2d 667, 674 (7th Cir. 1992).

^66. In re Polygram Holding, Inc., 136 F.T.C. 310, 477 (2003), aff’d sub nom. Polygram Holding, Inc. v. Fed. Trade Comm’n, 416 F.3d 29 (D.C. Cir. 2005).

^67. In re Realcomp II Ltd., 148 F.T.C. 137, 375 (2009), aff’d sub nom. Realcomp II, Ltd. v. Fed. Trade Comm’n, 635 F.3d 815 (6th Cir. 2011).

^68. Id. at 388-89. Notably, the FTC proceeded to analyze Realcomp II’s policies under the full rule of reason as well. Id. at 396-416.

^69. E.g., In re 1-800 Contacts, Inc., 166 F.T.C. 250 (2018), vacated sub nom. 1-800 Contacts, Inc. v. Fed. Trade Comm’n, 1 F.4th 102 (2d Cir. 2021); In re N.C. State Bd. of Dental Exam’rs, 153 F.T.C. 1749 (2012), rev’d sub nom. N.C. State Bd. Dental Exam’rs v. Fed. Trade Comm’n, 574 U.S. 494 (2015).

^70. Statement of Interest of the United States of America at 17, Stigar v. Dough Dough Inc., No. 2:18-cv-00244-SAB (E.D. Wash. Mar. 7, 2019), Dkt. 30 (citing Cal. Dental, 526 U.S. at 770, 775-76).

^71. See Opposition of the United States to Defendant’s Motion to Dismiss Pursuant to FRCP Rule 12(b)(6) at 17, United States v. eBay, Inc., No 5:12-cv-05869-EJD (N.D. Cal. Feb 26, 2013), Dkt. 24 (citing California ex rel. Harris v. Safeway Inc., 651 F.3d 1118, 1134 (9th Cir. 2011) (en banc)); see also Competitive Impact Statement at 7, United States v. Adobe Sys., Inc., No. 1:10-cv-01629-RBW (D.D.C. Sept. 24, 2010), Dkt. 2 (arguing that the agreements could be condemned as per se illegal or under a "quick look").

^72. Opposition of the United States, supra note 71, at 17 (quoting Safeway, 651 F.3d at 1134).

^73. Alston, 141 S. Ct. at 2155.

^74. Id. at 2154.

^75. Id.

^76. Id. at 2155.

^77. Id.

^78. Id. at 2158.

^79. Id.

^80. Id. at 2156.

^81. Id. at 2155 (emphasis added).

^82. Id. at 2156 (citing Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 217 (D.C. Cir. 1986)).

^83. Id. (citing Rothery Storage, 792 F.3d at 217 (holding that firm with six-percent market share was incapable of harming competition); Polk Bros., Inc. v. Forest City Enters., Inc., 776 F.2d 185, 191 (7th Cir. 1985) ("Unless the firms have the power to raise price by curtailing output, their agreement is unlikely to harm consumers, and it makes sense to understand their cooperation as benign or beneficial."); and AREEDA & HOVENKAMP, supra note 38, ¶1507a ("If . . . the exercise of market power is not plausible, the challenged practice is legal.")).

^84. Id. at 2166.

^85. See supra Part II.C.

^86. Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183 (2010); see Grush & Korenblit, supra note 3 ("American Needle suggested that similarly abbreviated [quick-look] analysis can also be used to approve of conduct."); Edward D. Cavanagh, Whatever Happened to Quick Look?, 26 U. MIAMI BUS. L. REV. 39, 65 (2017) ("[T]he Supreme Court in American Needle recognized the concept of presumptive legality . . . .").

^87. Am. Needle, 560 U.S. at 203 (internal citations omitted).

^88. Agnew v. Nat’l Collegiate Athletic Ass’n, 683 F.3d 328, 341 (7th Cir. 2012); see also Cavanagh, supra note 86, at 66.

^89. In petitioning for certiorari in Alston, the NCAA argued that Supreme Court intervention was necessary to resolve disagreement among the Courts of Appeals surrounding the level of antitrust scrutiny that applies to NCAA rules. Petition For a Writ of Certiorari at 19-23, Nat’l Collegiate Athletic Ass’n v. Alston, No. 20-512 (Oct. 15, 2020). According to the NCAA, several Circuits, including the Seventh, had properly "upheld [NCAA rules] without trial and fact-intensive analysis," whereas the Ninth Circuit had subjected NCAA rules to "demanding rule-of-reason scrutiny." Id. at 19, 22. In Alston, of course, the Court held that the challenged NCAA bylaws were subject to the traditional rule of reason. 141 S. Ct. at 2166.

^90. See, e.g., Omega Env’t, Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1163 (9th Cir. 1997) (reversing district court’s denial of defendants’ denial of motion for judgment as a matter of law, explaining that, "the short duration and easy terminability of the[] agreements negate substantially their potential to foreclose competition"); PNY Techs., Inc. v. SanDisk Corp., No. 11-cv-04689-WHO, 2014 WL 1677521, at *5-6 (N.D. Cal. Apr. 25, 2014) (dismissing exclusive dealing claims where contracts at issue were relatively short in duration and easily terminable because they "are not anticompetitive").

^91. See E&L Consulting, Ltd. v. Doman Indus. Ltd., 472 F.3d 23, 30 (2d Cir. 2006) ("Thus, we have noted that exclusive distributorship arrangements are presumptively legal.") (quotation omitted); cf. also Paddock Publ’ns, Inc. v. Chi. Trib. Co., 103 F.3d 42, 47 (7th Cir. 1996) (affirming dismissal of exclusive distributorship claims where "[c]ontract terms [were] short, so competition for the contract [could] flourish," and where "exclusive distribution of news or features through a single paper" allowed newspapers to distinguish themselves and better compete with rivals); NicSand, Inc. v. 3M Co., 507 F.3d 442, 453 (6th Cir. 2007) (affirming dismissal of claims against multi-year exclusive-dealing arrangements between a supplier and retailers where the exclusive arrangements had clear procompetitive benefits to both parties, allowing "the retailer to insist that the supplier charge lower prices" and "eas[ing] an aspiring ^plier‘s ability to clear existing market barriers").

^92. See, e.g., Jesse Addo, Antitrust Implications of the NCAA’s Restrictions on the Use of Name, Image, and Likeness of Student-Athletes, 18 U. St. Thomas L.J. 188, 206 (2022) ("[F]or the first time, the Court recognized that restraints can also be exonerated with a ‘quick look’ approach—a lower antitrust standard of review."); NCAA v. Alston Signals Peril for the NCAA’s Amateurism Defense But Implications for Antitrust Go Well-Beyond Collegiate Sports, CROWELL & MORING, LLP (June 23, 2021) ("[T]he Court recognized for the first time that restraints can also be exonerated with a ‘quick look.’ The Court explained, for example, that agreements which are needed to produce a sports league—such as the number of players and the time of play, but not wages—could pass muster with a quick look, providing an especially powerful tool to joint venture participants."); Jodi S. Balsam, What NCAA v. Alston Means for Professional Sports Leagues 2, HARV. J. SPORTS & ENT. L.-SPECIAL ISSUE (Fall 2021) ("Alston elucidates that ‘quick look’ antitrust review is available not just to condemn, but also to approve a challenged business practice.").

^93. See supra note 23 and accompanying text.

^94. Actavis, 570 U.S. 136 at 158.

^95. See supra notes 90-91 and accompanying text.

^96. See, e.g., Lumber Liquidators, Inc. v. Cabinets To Go, LLC, 415 F. Supp. 3d 703, 713 (E.D. Va. 2019) ("Because of the inherently fact-intensive nature of [the rule-of-reason] inquiry, ‘disposition of an antitrust suit at the pleading stage is accordingly rarely appropriate.’") (quoting Cont’l Airlines, Inc. v. United Air Lines, Inc., 120 F. Supp. 2d 556, 563 (E.D. Va. 2000)); Pecover v. Elec. Arts Inc., 633 F. Supp. 2d 976, 983 (N.D. Cal. 2009) ("The rule of reason analysis requires a factual analysis of the line of commerce, the market area and the affected share of the relevant market. . . . Such a factual inquiry is improper at this stage in the proceedings.").

^97. Alston, 141 S. Ct. at 2157.

^98. See, e.g., FED. R. CIV. P. 26(b)(1), (2) (courts have discretion to limit the scope of discovery, the number of discovery requests and depositions, and the length of depositions); FED. R. CIV. P. 26(c)(1) (courts may, for good cause, issue orders limiting discovery to "protect a party or person from . . . undue burden or expense"); Fed. R. Civ. P. 56(b) (court may issue orders governing the timing of summary judgment motions); see also Crawford-El v. Britton, 523 U.S. 574, 598 (1998) ("Rule 26 vests the trial judge with broad discretion to tailor discovery narrowly and to dictate the sequence of discovery.").

^99. See Grush & Korenblit, supra note 3.

^100. See Order Re Phase I of Summary Judgment on Foreign Transactions, No. 14-cv-03264-JD (N.D. Cal. Sept. 24, 2010) , Dkt. 1302.

^101. Id.

^102. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 546 (2007) ("[P]roceeding to antitrust discovery can be expensive").

^103. Id. at 559 ("[T]he threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings.")

^104. Alston, 141 S. Ct. at 2161 (quoting Trinko, 540 U.S. at 414); see also NCAA v. Alston Signals Peril, supra note 92 (noting the Court’s "continued emphasis on false positives as a concern in antitrust enforcement").

^105. Order Re Phase I of Summary Judgment, supra note 100.

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