Law School Case Brief
Law v. NCAA - 134 F.3d 1010 (10th Cir. 1998)
Two analytical approaches are used to determine whether a defendant's conduct unreasonably restrains trade: the per se rule and the rule of reason. The per se rule condemns practices that are entirely void of redeeming competitive rationales. Once a practice is identified as illegal per se, a court need not examine the practice's impact on the market or the pro-competitive justifications for the practice advanced by a defendant before finding a violation of antitrust law. Rule of reason analysis, on the other hand, requires an analysis of the restraint's effect on competition. A rule of reason analysis first requires a determination of whether the challenged restraint has a substantially adverse effect on competition. The inquiry then shifts to an evaluation of whether the pro-competitive virtues of the alleged wrongful conduct justifies the otherwise anticompetitive impacts.
Defendant, the National Collegiate Athletic Association (NCAA), promulgated a rule limiting annual compensation of certain Division I entry-level coaches to $16,000. Basketball coaches affected by the rule filed a class action challenging the restriction under Section 1 of the Sherman Antitrust Act. The district court, applying the rule of reason standard to its analysis of the rule, granted summary judgment on the issue of liability to the coaches and issued a permanent injunction restraining the NCAA from promulgating this or any other rules embodying similar compensation restrictions. The NCAA appealed, arguing that the court should have applied a per se analysis to the rule. The NCAA further argued that the district court erred by failing to define the relevant market and by failing to find that the association possessed power in that market.
- Should the district court have applied a per se analysis to the rule in question?
- Did the district court err by failing to define the relevant market and by failing to find that the association possessed power in that market?
The Court of Appeals for the Tenth Circuit held that the per se rule was a demanding standard that should be applied only in clear-cut cases. As a result, courts consistently have analyzed challenged conduct under the rule of reason when dealing with an industry in which some horizontal restraints are necessary for the availability of a product, even if such restraints involve horizontal price-fixing agreements. Courts have imposed a consistent structure on rule of reason analysis by casting it in terms of shifting burdens of proof. Anent the second issue, the Court held that the district court was not required to resolve fact issues pertaining to the definition of the relevant market to support its decision that the rule was a naked price restraint. Thus, the Court affirmed the decision of the district court.
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