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This is the second section of a three-part article. The first appeared in 74 YALE L.J. 775 (1965).
The first section of this article argued that the uncertainty and inconsistency which patently afflict the law concerning price fixing and market division are attributable to the twofold failure of Sherman Act courts to be clear about the ultimate values the law implements and to develop a realistic analysis of the economic phenomena with which the law is required to deal.
The main tradition of the Sherman Act's rule of reason –established by Justice Peckham, Judge Taft, and Chief Justice White in 1911–necessarily rests, whether phrased in such terms or not, upon the premise that the law's exclusive concern is with the maximization of wealth or consumer want satisfaction. Though this premise is not the only one upon which social legislation may be based, it is implicit- and sometimes explicit-in the key decisions which established the main tradition of the rule of reason, and it is, moreover, the only premise capable of producing rational decisional law under the Sherman Act as now written. Acceptance of consumer want satisfaction as the law's ultimate value requires the courts to employ as their primary criterion the impact of any agreement upon output, and thus to determine whether the net effect of the agreement is to create efficiency, and thereby increase output or, alternatively, to restrict output. This common acceptance of the wealth-maximization premise and its inherent standards of judgment explains why the interpretations given the Sherman Act by Peckham, Taft and White, despite their widely differing phrasings, were so similar in result, and why each assigned a prominent place within the rule of reason to a category of agreements illegal per se.
The primary deviant tradition of the rule of reason-originally espoused by Justice White in 1897 and in 1918 by Justice Brandeis- rejects consumer welfare as the sole value of the law and admits competing considerations, most notably, perhaps, concern for small producers. The criteria required by the simultaneous use of wholly inconsistent values are necessarily either arbitrary or indefinable. Probably because this deviant strain has never become dominant, the criteria of the Brandeis tradition have in fact remained rather vague. They seem reducible, however, to the idea, early rejected by the judges of the main tradition, that a cartel should be judged by the "reasonableness" of the price it fixes. White's 1897 Trans-Missouri dissent is thus to be equated with Brandeis' reading of the Act in the 1918 Chicago Board of Trade opinion. The introduction of values incompatible with consumer welfare, values that could, in fact, be furthered by cartel agreements at the expense of consumers, was the reason that neither White (in 1897) nor Brandeis (in 1918) gave a prominent, or perhaps any, role to the per se concept.
The main tradition, with its insistence upon efficiency and restriction of output as the standards of the Sherman Act, is, therefore, entitled to be preferred not merely as a matter of precedent but also because of its exclusive ability to achieve those attributes of rationality, efficacy, tolerable certainty, and the proper demarcation of the respective functions of legislature and judiciary which are characteristics of good law.
Though a proper choice of values is necessary to good law it is not sufficient. The Sherman Act, which deals with price fixing and market division in widely varying business contexts, requires a coherent analytical structure to translate values into conclusions. The Act, however, has not evolved doctrine adequate to cope with this diversity of phenomena. Too often the law deals with particular forms of price fixing and market division as isolated and unique topics, neglecting to locate each within a rational conception of the whole. Perhaps just as often the law commits the opposite error of failing to make distinctions corresponding to economic differences, and applies broad formulas to situations in which they are wholly inappropriate. This second section of a three-part article attempts to provide a general theory capable of making the law of price fixing and market division internally consistent, congruent with the law of similar behavior, and effective in serving consumer welfare.
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