Legal Definitions - per se rule

The per se rule is a legal principle, primarily applied in antitrust law, which dictates that certain business practices are considered inherently illegal without any need to prove actual harm to competition or consumers. Under this rule, the mere existence of the practice is sufficient to establish a violation of the law, because these actions are deemed so anticompetitive that they are almost always detrimental to a free market.

Here are some examples illustrating the per se rule:

• Price Fixing Among Competitors: Imagine two major airlines, "SkyHigh Airways" and "CloudHopper Airlines," secretly agree to charge the exact same fare for flights on a popular route, rather than competing to offer different prices. This agreement eliminates price competition between them.

  How this illustrates the per se rule: This scenario describes price fixing. Under the per se rule, a court would not need to investigate whether passengers actually paid higher prices or if the market was truly harmed. The very act of these competitors agreeing on prices, rather than setting them independently based on market forces, is enough to constitute an illegal violation.

• Bid Rigging in Public Contracts: A state government solicits bids for a new highway construction project. Three large construction firms, "RoadBuilders Inc.," "BridgeWorks Co.," and "PaveRight LLC," secretly meet and decide that "PaveRight LLC" will submit the lowest bid to win the contract, and the other two will submit intentionally higher, non-competitive bids. They agree to share a portion of the profits later.

  How this illustrates the per se rule: This is an example of bid rigging. Even if the state government somehow ended up with a reasonable price for the project, the per se rule means that the agreement among the companies to manipulate the bidding process is automatically illegal. The law presumes that such collusion undermines fair competition and public trust, regardless of the immediate financial outcome for the state.

• Market Allocation by Geographic Area: Two prominent fast-food chains, "Burger Barn" and "Fry King," which operate in adjacent regions, enter into an agreement. "Burger Barn" agrees not to open any new restaurants in the northern region where "Fry King" is dominant, and "Fry King" agrees to stay out of the southern region where "Burger Barn" has a strong presence.

  How this illustrates the per se rule: This situation demonstrates market allocation. The per se rule applies because the agreement itself eliminates competition between the two chains within their respective territories. There is no need to prove that consumers in either region faced higher prices or had fewer choices; the act of dividing the market is inherently anticompetitive and thus illegal.