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11 Antitrust 21 (1996-1997)
The What It is and How It is Being Applied: The Quick Look Rule of Reason

handle is hein.journals/antitruma11 and id is 139 raw text is: 

A   R   T   I   C   L   I-  S   *  A    N   1)      F I t  A   T    U   R   I:  S

What It Is and How I Is Being Applied:

The Quick Look Rule of Reason

by James A. Keyte

A i antitrust practitioner Itoday
         can hardly pick up a new
         set of government guidelines
         or all agency enforcemienl
speech without some reference to the so-
called quick look or truncated rule
of reason, an abbreviated test of reason-
ableness that is said to fall somewhere
between the traditional per se rule and
the full-blown rule of reason. For exam-
pie, a truncated rule of reason is incorpo-
rated into both the Intellectual Property
and Health Care Guidelines,' was recent-
ly the subject of a major speech by Joel
Klein, Acting Assistant Attorney General
of the U.S. Department of Justice,2 has
been the subject of FI'C speeches' and is
likely to be a topic of debate in the FTC's
recently announced joint venture project.'
Indeed, Jonathan Baker, Director of the
FTC Bureau of Economics, has suggest-
ed that some form of a quick look may
be appropriate to assess the competitive
effects of mergers involving differentiat-
ed products.'
   Notwithstanding the flurry of activity
surrounding this truncated test of reason-
ableness, neither the courts nor the
agencies have settled on consistent ter-
minology or a uniform standard for its
application. The FTC, in California
Dental Association, Docket No. 9259,
1996 FTC LEXIS 81 (Mar. 25, 1996),
recently abandoned the notion that the
truncated approach of Massachussetts
Board of Registration in OptometrY, I 10
ETC. 549 (1988) (Mass. Boa rd)-rather

  James A. Keyte is a partner with Skadden,
  Arps, Slate, Meagher & Flon LLP in
  New York and an associate editor of
  ANTITRUST. Chris Athanasia provided
  valuable assistance in the prcparation of
  this article.

than the traditional per se categories---
should be applied in all circumstances.
At the same time, however, tile l)OJ
announced in Klein's speech that it will
use a three step version of a quick look
in assessing any horizontal restraint that
directly limits output or price. The I)OJ
has apparently embraced a truncated
analysis as a way to require defendants to
prove-with hard evidence--that any
facially anticompetitive restraint has
actual procompetitive effects, before the
DOJ even has to consider a formal com-
petitive analysis.

per se test, where a plaintiff can establish
the existence of such a restraint, compet-
itive harn is presumed. Brown UIniver-
sity, 5 F3d. at 669.
   Unlike the per se rule, however, the
quick look does not condemn) restraints
without inquiry into procornpetitive
justi tications. Thus, where a defendant
can persuade a court or agency that the
alleged restraint is not so patently anti-
competitive that per se condemnation is
appropriate, it will be allowed to attempt
to demonstrate a competitive justilica-
tion for the restraint. 1f1 tile defendant

... neither the courts nor the agencies have settled on consistent
terminology or a uniforn standard for its application.

   Finally, several decisions-most
notably United States v. B0own Univer-
sitv, 5 F.3d 658 (3d Cir. 1993), and
Chicago Pro fessional Sports Ltd.
Partnerslhip v. National Basketball
Association, 95 F.3d 593 (7th Cir. 1996)
(NBA )-have rejected a quick look
approach altogether for certain types of
alleged horizontal restraints. They favor,
instead, a full-blown rule oif reason
inquiry into market definition and market
power at tile outset.

What is the Quick Look?
In general terms, the quick look or tnn-
cated rule of reason is an intermediate
test of reasonableness that has character-
istics of both the per se and full rule of
reason approaches. Like a per se rule, it is
used to analyze restraints that are facial-
ly anticompetitive or inherently sus-
pect because they directly affect price,
output, or other means of rivalry among
independent competitors. As with tile

cannot set forth any legitimate justifica-
tions as part of the quick look, then the
presumption of adverse competitive
impact prevails and tile practice is con-
denmed. id. If, however, evidence of a
procompetitive justification can be
demonstrated, the analysis returns to a
full-blown rule of reason, under which
the plaintiff Must prove the traditional
elements of market definition, market
power, and that the anticompetitive
effects outweigh the procompetitive
effects of the restraint. See id. at 668-69.
   Part of the confusion surrounding the
quick look or truncated rule of reason is
caused by the different contexts in which
the parties press for its application. For
example, whei faced with the possible
application of per se condemnation of a
facially anticompetitive restraint,
defendants will argue that, at a minir.in,
a quick look approach is more appro-
priate because the restraint is potentially
procompetitive. If the defendant prevails

.N I At At : R I 9 9 7  2 1

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