The US Antitrust Law and Market Allocation - Essay Example

A restraint of trade, generally speaking, is an agreement among two entities or individuals that affects competition. Nonetheless, under this approach, even a purchase or sale contract would appear to be banned under antitrust laws.

Thus, courts have restricted Section 1 of the act as applying only to unreasonable restraints of trade. Over time, courts apply either a per se type of analysis or a wider rule of reason analysis to examine whether conduct contravenes Sherman Act (Section 1)Over the years, it has become well determined that certain kinds of agreement amongst competitors are so detrimental to consumers and competition that such conduct ought to be banned outright. The anti-trust regulations deem these kinds of behaviors as illegal per se since they will for the most part lead to consumer harm.

Cases in point of per se offenses include customer or market allocation. Although market allocation by NATLA may seem illegal per se under the Sherman Act, it is not entirely unreasonable because it is meant to facilitate each member to lease trucks on a full-service over-the-road basis and thus compete with the national truck-leasing companies. According to Parnass (2010, 1) per se offenses need an agreement to be deemed illegal under the anti-trust laws. By definition, an agreement requires more than one individual acting unilaterally, together, autonomous business decisions will fail to satisfy the agreement requirement.

In the case of an agreement, it does not have to be in a specific format, it can be verbal exchanges, a written document, or even deduced from behavior such as usual meetings by competitors ensued by joint behavior immediately. Market allocation is deemed illegal per se under the Sherman act (Parnass 2010, 1). Market allocation is an agreement amongst businesses not to engage in competition. For instance, the decision to divide or allocate sale territories, assign some clients to specific sellers, or lessen output would be considered illegal per se under the act.

The initial intent of setting up NATLA was to administer a reciprocal service arrangement that would enable each member to lease trucks on a full-service over-the-road basis and thus compete with the national truck-leasing companies. Although the NATLA specifically forbids each member from doing business as a National franchisee at any other location, it is not entirely unreasonable to be considered illegal per see. Although as stated earlier, Sherman Act bans every contract or conspiracy in restraint of commerce, such an all-encompassing interdiction, if applied by courts of law literally, would tend to invalidate practically all trade arrangements (Myron 2001, 33).

For that reason, the Supreme Court, as early as 1911, ruled that despite the all-encompassing statutory language, the Sherman Act only dealt with those restraints of trade which are irrational. Ever since the rule of reason has been the trademark of legal interpretation of the antitrust laws. The anticompetitive consequences of the challenged conduct, under its aegis, are weighed against the business benefits on which it is predicated and its alleged pro-competitive effect, and a judgment concerning its rationality is made.