‘Rules vs. Standards’ or Standards as Delegation of Authority for Making (Optimally Differentiated) Rules

Abstract

On June 28, 2007, the US Supreme Court decided in the ‘Leegin’ case1 that resale price maintenance should no longer be per se prohibited in US antitrust law. Beginning with GTE Sylvania (1977) the court has reversed former per se prohibitions of vertical restraints and replaced them step by step through a rule of reason approach, as now for resale price maintenance. This development follows a more positive and differentiated assessment of vertical restraints by economists. Since it can be demonstrated that under certain conditions resale price maintenance might also be welfare-enhancing, many economists think that a per se prohibition is no longer appropriate (Motta 2004, 377). The general debate about ‘per se rules vs. rule of reason’ in US antitrust law is nearly as old as the law itself. Whereas a per se prohibition means that a business behavior is forbidden per se, i.e. without considering the specific circumstances in a case, a rule of reason approach allows for a much more differentiated analysis of the circumstances and effects in that particular case. In the last two decades — not only in the US, but also in Europe — a growing tendency to more rule of reason instead of per se rules can be observed. The main reason for this development is the insight of modern industrial economics that many business behaviors do not have generally positive or negative effects on competition or welfare. Often a greater differentiation and a deeper analysis of the circumstances and effects seem necessary for distinguishing between pro- and anticompetitive behaviors (Kerber and Schwalbe 2008, 230–235). A rule of reason analysis appears to be more appropriate. These developments also are the basis of the ‘more economic approach’ in European competition policy (Röller 2005). In combination with new theoretical and empirical methods for the quantitative analysis of the welfare effects this has led to a tendency for a greater case-by-case approach.