Law Professor Defends ‘Rule of Reason’ in Antitrust Law

Antitrust is more important than ever in the age of big tech, online shopping, Edwards says

OXFORD, Miss. – University of Mississippi law professor Martin Edwards traveled to Florida State University this week as a part of a faculty exchange to discuss the ongoing national conversation surrounding antitrust law.

In the age of big tech and online shopping and business, antitrust laws have come to the forefront of national conversation, Edwards said. Amazon alone has faced multiple instances of antitrust litigation and is scheduled this month to come before the Federal Trade Commission with possible allegations of a violation of antitrust law and Google is in its own showdown after the U.S. Justice Department, along with 38 states and territories, accused the tech company of wielding monopolistic power. 

The Sherman Antitrust Act of 1890 outlawed monopolistic business practices, and the Clayton Act of 1914 further clarified that business mergers and combinations that lead to monopolies are also illegal. The understanding and application of these laws, however, has changed drastically in the last century, Edwards said.

“The courts muddled through application of the antitrust laws through the first half or more of the 20th century,” he said.

Martin Edwards

Edwards’ talk, “Vertical Restraints in an Amazon World,” discussed various interpretations of antitrust law through the years and the upcoming push to apply the antitrust laws more vigorously, which includes vertical restraints, a type of contract usually treated more permissively.

“Vertical restraint” is a term used in law to describe the agreements or restrictions imposed by manufacturers on their distributors. These restraints can include illegal measures, such as horizontal collusion to restrict competition, and legal agreements, such as exclusive dealing restrictions that do not harm competition.

“We generally like competition because that means you’ll have more businesses competing for your money,” Edwards said. “In theory, that means you’ll be able to purchase quality items at a reasonable price.” 

In 1978, scholar and Yale Law professor Robert Bork penned “The Antitrust Paradox,” which said much of the business that was considered anti-competitive at the time was actually pro-competitive or did not affect competition.

Bork, who later became a judge, found that some antitrust law is subject to the “rule of reason,” and requires analysis on a case-by-case basis. This view was widely accepted in the 1980s through the early 2000s.

“The common idea at the time Bork was writing was, ‘Big is bad,'” Edwards said. “Bork disagreed. He said we have to have a lens to look at these problems.

“You can’t just look at a problem and say, ‘Well, that’s a big company, so it’s bad.'”

Recently, however, Federal Trade Commission, along with other antitrust lawyers, have said that the more permissive approach to antitrust regulation allows too much manipulation.

In his talk Thursday, Edwards argued that abandoning the rule of reason could be harmful to small or less powerful businesses, which can rely on vertical restraints such as third-party seller restrictions to maintain quality control and uphold their brand standards.

“It’s a tough question of what we’re actually supposed to do here,” he said. “But I don’t think we want to abandon our careful approach to consumer welfare.” 

The question has particular relevance for Mississippi, which Amazon in 2019 declared the home of the nation’s fastest-growing small and medium business centers on Amazon Marketplace, Edwards said.

“We really punch out of our weight class when it comes to third-party sellers,” he said. “There are a large number of third-party sellers in Mississippi, and this could absolutely affect them.”