What are per se antitrust violations?

by | Jan 23, 2023 | Antitrust

In the United States antitrust law divides business practices into two basic categories. In the first category is any business practice which so obviously is an antitrust violation that federal antitrust law will never allow them. In the second category is any business practice may be an antitrust offense, but may not be.

The Sherman Act applies what it calls the per se rule to conduct which will so obviously harm competition it will never allow this conduct. To other business practices the Sherman Act applies what it calls the Rule of Reason. This conduct may harm competition, it may be an unreasonable restraint of trade, but it also may not have an anticompetitive effect. The Supreme Court requires courts to extensively analyze such conduct. Thus much antitrust revolves around whether such a restraint of trade was reasonable.

In contract to complex cases which require much rule of reason analysis, cases in which a company violated the per se rule are relatively simple. Conduct which the Sherman Act will consider a per se violation include:

  • Fixing Prices:
    The Supreme Court has called an agreement in which two competitors agree to charge the same price the “archetypal example” of a violation of the per se rule. The following examples are all really forms of price fixing and the antitrust enforcers will also deem them anti competitive behavior:
  • Bid rigging:
    A competitor cannot agree with another on what price both will offer when bidding for a project
  • Limiting output:
    A competitor cannot agree with another that each will lower its output.
  • Allocating territories:
    A competitor cannot agree with another to only compete in certain territory
  • Allocating customers:
    A competitor cannot agree with another that each will only sell to certain customers.

Any agreement which includes such terms clearly violates antitrust law. Case law, including important Supreme Court cases, makes abundantly clear that such terms require conduct which is an unreasonable restraint of trade. A court need not define the relevant market. Factors such as firm’s market power are irrelevant.

Whether the Sherman Antitrust Act makes other conduct a per se antitrust violation can at times be unclear. For example:

  • Group boycotts:
    A group of competitors may not act at one company, requiring customers to only buy from that group. But to lead a successful criminal prosecution the Antitrust Division of the Justice Department would have to prove the group consciously worked together, which can be unclear.
  • Information Exchanges:
    Trade association members commonly exchange information. But intellectual property takes many forms, and such information can at times include sensitive price information. Whether this is a violation is often unclear, and has led to much antitrust litigation.

The rules regarding anti-competitive behavior are evolving. For example, the Supreme Court does sometimes change its per se and Rule of Reason analysis. For example, the Supreme Court said that whenever a manufacturer told a seller what price to charge, that would always cause antitrust injury. But in an important 2007 antitrust case the Supreme Court changed its mind, saying a manufacturer can set a retailer’s minimum price.