Amex in Context: Tracing the Application of the Rule of Reason to Vertical Restraints

Wednesday, April 24th, 2019 at 9:39 pm by Wiliam H. Rooney, Timothy G. Fleming, and Sruti Swaminathan

In his 1911 State of the Union address, President William Howard Taft, the former and future jurist, discussed the development of antitrust law since the Sherman Act’s passage: “Slowly the mills of the courts ground, and only gradually did the majesty of the law assert itself.” While Taft allowed for the possibility that some changes to the law may be beneficial, he also argued that the “object” of the Act was “near achievement,” and spoke against those calling to “abandon this work of twenty years and try another experiment[.]” Ultimately, the experiment was not abandoned, and the Sherman Act remains at the center of antitrust law in the United States.

Meanwhile, the “mills of the courts” have continued to grind away. Various judges, justices—including the eventual Chief Justice Taft himself—and scholars have shaped the contours of antitrust law. One area of ongoing development is the organic rule of reason, which Taft played no small role in originating. The rule of reason was first articulated in United States v. Addyston Pipe & Steel Co.5 in 1898 and played an important role, not long after, in the titanic cases of Standard Oil of New Jersey v. United States6 and United States v. American Tobacco Co. During Taft’s presidency, however, the Supreme Court held that vertically imposed price restraints were per se illegal, and, over the decades that followed, the rule of reason began to wither and was gradually replaced, in significant part, by a series of per se rules.

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Author Information

William H. Rooney is a partner of Willkie Farr & Gallagher LLP and the Co-Chair of the firm’s U.S. Antitrust Practice. Timothy G. Fleming is a fourth-year litigation associate at Willkie Farr & Gallagher LLP. Sruti Swaminathan is a second-year associate at Willkie Farr & Gallagher LLP.