“Per se” and “rule of reason”

The two ways of analysing a restriction of competition in US law. The choice between the two most often decides the outcome of the case.

In brief

Per se: the practice is so harmful that it is illegal without examining its effects — “no defense or justification is allowed” (FTC). Categories: price fixing, market allocation, bid rigging.
Rule of reason: the judge weighs anticompetitive and procompetitive effects on a defined relevant market — a long, costly procedure, statistically unfavourable to the plaintiff.
Under the per se regime, the plaintiff has neither to define the market nor to prove market power: it is enough to prove the agreement.
DOJ and FTC, Antitrust Guidance for HR Professionals (October 2016): naked wage-fixing or no-poaching agreements are per se illegal, and the DOJ “intends to proceed criminally”.
Ancillary restraint: a clause genuinely necessary to a legitimate collaboration switches to the rule of reason; otherwise it remains per se.

All litigation over no-poach clauses in franchising comes down to this choice. If the clause is held to be naked — a mere pact between employers not to take each other's employees — it is illegal in itself, and the plaintiff wins by proving only that it existed. If it is held to be ancillary to a legitimate franchise agreement, a relevant labour market must be defined, market power proved, the effect on wages quantified: a mountain.

The 7^th federal circuit, in Deslandes v. McDonald's USA (25 August 2023), refused to rule at the outset in favour of the second characterisation, and noted that a benefit to consumers cannot by itself justify harm inflicted on workers.

“Per se” and “rule of reason”

Sources

Where this comes up in the case file

Other glossary entries — Legal concepts