Plaintiffs who sue under section 1 of the Sherman Act must allege a contract, combination, or conspiracy that restrains competition. Some kinds of conspiracies so patently harm competition that courts presume injury and call them "per se" violations. Agreements between competitors to fix prices, not to compete for specific customers or in particular areas, and to boycott a competitor come to mind.
But other, less obviously pernicious kinds of conduct fall under the "rule of reason". Section 1 then requires the plaintiffs to allege and prove actual damage to competition. And a basic building block of the requirement involves defining the "relevant market" — both in terms of product and geography.
[Note, though, that, as the Federal Trade Commission reminded us today in an amicus brief, some "inherently suspect" kinds of practices may shortcut the analysis of power in a relevant market.]
Today, the Fifth Circuit skipped the difference between per se and rule of reason cases under section 1. The plaintiffs alleged that AT&T and owners of multiple dwelling units conspired to shut out competition for MDU dwellers' purchases of cable, Internet, and telephone services. The panel said:
In order to demonstrate a violation of § 1, Appellants must allege that (1) AT&T and the Manor owners engaged in a conspiracy, (2) the conspiracy had the effect of restraining trade, and (3) trade was restrained in the relevant market. The first step in this analysis is determining the relevant market, which itself is a function of the relevant product market and the relevant geographic market.
Wampler v. Southwestern Bell Telephone Co., No. 09-50208, slip op. at 3 (5th Cir. Feb. 22, 2010) (footnotes omitted). The claim failed, the court held, because an MDU doesn't represent a relevant geographic market (too little) as a matter of law. But the opinion says naught about the fact that the plaintiffs alleged a rule of reason claim, not a per se one.