Rule of reason
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The rule of reason is a doctrine developed by the United States Supreme Court in its interpretation of the Sherman Antitrust Act. The rule stated and applied in the case of Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911), is that only combinations and contracts unreasonably restraining trade are subject to actions under the anti-trust laws and that size and possession of monopoly power was not illegal.
Prior to the Standard Oil case, the Court had interpreted the language of the Sherman Act to hold that all contracts restraining trade were prohibited, regardless of whether the restraint actually produced no ill effects.
The rule was narrowed in later cases that held that certain kinds of restraints, such as price-fixing agreements, group boycotts, and geographical market divisions, were illegal per se.
See also: United States Government, US history