Question

Court rulings on anti-trust cases tend to follow one of two principles, the rule of reason or the per se rule. Which of these two principles do you believe should guide courts in ruling on an anti-trust case. Write a 250 word posting in which you state and justify your selection.

Answer 1

Solution

As said above,the anti-trust cases tend to follow one of two principles, the rule of reason (or) the per se rule.

The rule of reason - According to this principle,the courts / authorities which monitor the competition in the market evaluate the pro-competitive features of the business decision of the firm against it's anti-competitive features inorder to arrive at a decision whether to not to prohibit (or) to prohibit the firm's decision.

Example:For Example,in a telecom industry,if a player A with deep pockets plans to acquire an another ailing player B whose is unable to provide the consumers with good services due to lack of capital but having a very good presence in some markets (say one among top 2 players).So,here there are both positive and negative impact associated with the acquisition.Positive effect is by acquiring the company B, A can provide quality services to the customers in all the markets in which B is presently existing.

Negative effect is that it elimiating competition in the markets,causing the market to become monoplistic in nature.

So the court will take the dedcision where to say yes (or) no to this business decison of company A

The per-se-rule:

This is completely in contrast with the rule of reason.Here,the authorities will not consider the positives and negatives of the business decision but simply see whether the decision is in line with pre-set rules and regulations defined to say whether a decison is legal (or) illegal.

Example:Consider the same situation as above.So, the court / regulatory authority while decide that this decision of the firm is illegal if it is mentioned the same in the pre-set rules/regualtions regardless of whether this decison is benefitting the customer.(Say) will declare the firm's decision as illegal even though the acquistion is benefitting the customers and industry as a whole since according to the regulation,acquiring a competitor who is having a consderable market is anti-competitive.

I would prefer rule of reason principle as it is reasonable :

The rules/ regulations are not always up-to date with the present market conditions.So,what may be true when the rule is framed may not be reasonable / relevant now as the market conditions have changed - markets have become dynamic and volatile these days.

Please give a "Thumbsup" rating for this solution !!