rule of reason
normally only unreasonable restraints are illegal. a court considers many factors and balances the anticompetitive and procompetitive effects of the restraint. (i.e. a restraint on business is not always illegal if it is for a reasonable purpose) ex.) 1. covenant not to compete is reasonable if it is for a reasonable time and area 2. vertical territorial limitations between a seller and its distributors and retailers are acceptable if their effect on competition is not unreasonable.
The rule of reason is a legal principle applied to antitrust law cases in the United States. It states that the courts should evaluate the competitive effects of a business practice or agreement on its merits and consider the economic benefits as well as the harm caused by it.
The rule of reason analysis recognizes that some business practices may have some anti-competitive effects, but it is also possible that the same practice may have efficiency-enhancing benefits. Therefore, the rule of reason requires a case-by-case analysis to determine whether a particular practice or agreement is anti-competitive and whether it outweighs the economic benefits.
Under the rule of reason, the plaintiff has the burden of proving that the challenged practice has a significant anti-competitive effect that outweighs its pro-competitive benefits. If the plaintiff successfully makes this showing, the defendant may attempt to refute the claims by demonstrating that the practice in question could easily be adopted by competitors.
Overall, the rule of reason is a flexible approach that attempts to balance the need to promote competition with the recognition that certain business practices can provide significant economic benefits.
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