Price-fixing conspiracies among horizontal sellers are condemned under the antitrust laws as per se offenses. Ditto for wage-fixing conspiracies among horizontal buyers of labor.
At least in theory. In practice, conspiracies are often structured differently than these textbook examples, which has led courts to apply the more exacting rule-of-reason standard to conspiracies that would otherwise be classified as per se unlawful. For example, companies may employ intermediaries at different stages of the supply chain to do their bidding. This tactic often induces courts to classify the conduct as a “vertical” restraint under antitrust law, which requires plaintiffs to prove their case under a heightened evidentiary standard. Yet the presence of a middleman doesn’t substantively change the scheme or reduce anticompetitive effects. That means antitrust defendants can divert attention and resources from the relevant inquiry—whether the scheme harmed consumers or workers—with defenses that they collectively lack power in some relevant antitrust market, or that the conduct was motivated for efficiency reasons.
Here are three quick examples to drive home this point, one in an input market for labor and two in the output market for goods and services.
- No-poach rules: A franchisor issues licenses to franchisees to operate its store. Embedded in the license is an agreement not to hire workers from other franchisees. The agreement has the effect of suppressing wages paid by horizontal competitors in the labor market. But because it involves an intermediary (the franchisor) at a different level of the supply chain, the scheme can be treated under the rule-of-reason framework, thus avoiding per se condemnation.
- Retail-initiated retail price maintenance: A large retail buyer threatens to stop purchasing from a goods supplier (or impose other penalties) unless said supplier can cajole the buyer’s retail rivals to raise their retail prices. The restraint has the effect of raising prices charged by horizontal competitors in the retail market. But because it involves an intermediary (the goods supplier) at a different level of the supply chain, the scheme can be treated under the rule-of-reason framework.
- Common pricing algorithms: A pricing consultant offers to set prices for its clients based on information collected among all clients. The software has the effect of raising prices charged by horizontal competitors in the service industry (think hotel rooms or apartment rentals). But because it involves an intermediary (the pricing consultant) at a different level of the supply chain, the scheme can again be treated under the rule-of-reason framework.
Unfortunately, these are not hypothetical cases. They are happening in the real world, and federal district and appellate courts are establishing caselaw that will hem in future plaintiffs, decreasing their chances of prevailing even in meritorious cases, under the heightened evidentiary standard, and thus discouraging them from ever bring such challenges.
The district court in Deslandes et al. v. McDonald’s employed the rule-of-reason standard to assess the challenged no-poach provision. (Disclaimer: I was the workers’ expert.) In its summary judgment order, the district court ruled that the no-poach provision was an “ancillary restraint” to the franchise agreements “that was output enhancing in the market for fast food,” subject to rule-of-reason treatment. The court also concluded that the no-poach was a “vertical agreement between franchisor and franchisee,” because, in many states, no corporate-owned franchise competed with franchisee restaurants. Under the heightened evidentiary standard, the court was skeptical of whether all McDonald’s stores collectively possessed buying power—a necessary element under the rule-of-reason—because McDonald’s competes against a myriad of fast-food chains in the labor market, and because McDonald’s accounts for a small share of all fast-food jobs.
The Seventh Circuit reversed that decision, indicating that such agreements could be naked restraints of trade, depending on certain factors, making them per se illegal. The case settled before the district court was allowed to opine on class certification a second time. Although I have no insight into the terms, it is reasonable to believe that both parties to the settlement understood the skepticism of the district court towards the merits, potentially leading to compensation substantially below the actual harm to workers that was inflicted by the scheme. To wit, a peer-reviewed paper in the Review of Economics and Statistics by Callaci et al. (2024) showed that no-poach agreements employed by McDonald’s and similarly situated firm suppressed wages by between four and six percent, which would imply underpayments in the range of $400 to $600 million in lost wages per every $10 billion in compensation paid to its workers.
In 2007, the Supreme Court reclassified retail price maintenance (RPM) as subject to rule of reason in Leegin Creative Leather Products, Inc. v. PSKS, Inc. In Leegin and in other standard RPM cases, the manufacturer specifies in its contract with retailers the minimum price at which the retailer can sell the manufacturer’s product—that is, RPM is occurring at the behest of the manufacturer. Economists have recognized, however, that RPM can be anticompetitive if a large retailer is the impetus for it. The issue is particularly concerning when the retailer is a dominant platform, as suppliers are beholden to such a “pivotal buyer.” For example, in February 2026, California sought injunctive relief during resolution of its pending complaint against Amazon, alleging that the dominant platform engaged in price fixing by pressuring major brands like Levi’s and Hanes to ask competing retailers to raise prices on certain products. (The details were unredacted in April 2026.) In response to Amazon’s cajoling, a Hanes employee reportedly responded that the clothing brand had “reached out to Target … to have the prices increased.” Amazon also reportedly told suppliers that it was taking some products down because it did not want to match a lower price. To avoid this same fate, Maxi-Matic (an ice cream maker) allegedly asked BestBuy to do the same. While it is too early to know how the court might assess this conduct, to the extent it is subject to rule of reason, California would have to prove that Hanes has selling power in an underpants market, Levi’s has seller power in a jeans market, and Maxi-Matic has selling power in an ice-cream maker market.
Regarding common pricing algorithms, the Ninth Circuit panel in Gibson v. Cendyn concluded that the licensing agreements between hotels and a pricing-software provider were not even vertical agreements but “ordinary sales contracts,” which need not be reviewed under the rule of reason. To dismiss any vertical relationship between the pricing-software provider and its hotel clients, the Court claimed that “While hotels may use Cendyn’s revenue-management software to maximize profits, the software is not an input that goes into the production of hotel rooms for rentals.” (emphasis added) Yet the revenue-management software is precisely an input in the selling of hotel rooms. Even so, the vertical relationship between software provider and hotel should not move the case outside of per se scrutiny—a price-fixing conspiracy is a price-fixing conspiracy. In November 2025, the Ninth Circuit denied en banc review. Plaintiffs filed for certiorari, but the Supreme Court denied a hearing in April 2026. Absent Congressional action, the opinion would exempt a swath of common pricing algorithms from per se scrutiny—and potentially even rule-of-reason scrutiny—despite a growing literature that such practice can raise prices and facilitate collusion, even in the absence of the sharing of competitively sensitive information.
A Modest Proposal
In a recent issue of the LPE Blog, I described the pitfalls for plaintiffs under the rule-of-reason standard. To review, a plaintiff can lose a case by losing on market definition, even when the anticompetitive effects are clear. Or a plaintiff can prevail on market definition, but exhaust so much goodwill with the court that they lose on antitrust impact. The social costs of using a heightened standard when one is not needed are (1) victims will not be adequately compensated victims for the harms incurred in existing cases, and (2) future meritorious cases will not be pursued in the first instance.
To address this enforcement gap, Congress should classify—and in the case of retailer-initiated RPM, reclassify—the aforementioned schemes meant to effectuate price-fixing (or wage-fixing) via the employment of an intermediary at a different level of the supply chain under per se treatment, eliminating market definition and efficiencies from the evidentiary burdens. That an intermediary was used to achieve the monopoly price (or the monopsony wage) does not change the anticompetitive motivation or effect. Thus, the use of an intermediary should not change the plaintiffs’ evidentiary standard; the end result is still the same with or without the intermediary. If avoiding collusive action to raise prices is one clear goal of antitrust policy, then why permit such ambiguity and give anticompetitive action a roadmap to evade scrutiny?
Cutting Off Other Pathways to Rule of Reason
Finally, the problem identified here is potentially broader than the three examples involving intermediaries to effectuate a price- or wage-fixing conspiracy. For example, judicial precedent in Board of Regents prescribed that certain wage-fixing cases involving student-athletes be adjudicated under the rule of reason. As Ted Tatos and I explained in a recent law review piece, the Court declined to apply the per se rule based on Judge Bork’s logic that some activities (e.g., the length of a half) require coordination for the product to exist (e.g., league sports); the Court reasoned that when some ancillary restraint(s) exist, then any challenged restraint, even if not ancillary, must be adjudicated under the rule of reason. As a result, the district courts in O’Bannon and Alston had to entertain various specious arguments that the NCAA and its experts advanced to cast doubt on the cartel’s market power and posit various “procompetitive justifications” for its plainly anticompetitive conduct. This unfortunate state of affairs was recognized by Judge Milan Smith in his Ninth Circuit Alston concurrence: “I write separately to express concern that the current state of our antitrust law reflects an unwitting expansion of the Rule of Reason inquiry in a way that deprives the young athletes in this case (Student-Athletes) of the fundamental protections that our antitrust laws were meant to provide them.”).
To address cases such as these, Congress could revisit the “ancillary restraint” exemption in cases involving horizonal rivals, which as noted above in Deslandes v. McDonald’s, also moves cases outside of per se treatment. A defendant in a single-firm monopoly or monopsony case could still invoke the ancillary restraint defense. But multiple horizontal defendants in an alleged price- or wage-fixing scheme would be barred from asserting that the restraint was essential for the main or any lawful business purpose to succeed.