ICLE on McDonald’s v DesLandes

An amicus brief submitted by ICLE to the U.S. Supreme Court was cited in a Law360 story about the McDonald’s v DesLandes no-poach case. You can read full piece here.

The International Center for Law & Economics and the International Franchise Association both argued in Dec. 27 briefs that the Seventh Circuit wrongly opened up franchise-based arrangements, like McDonald’s rules that bar franchisees from hiring employees who had worked at another restaurant in the chain in the past six months, to treatment as per se or automatically illegal under U.S. antitrust law.

…ICLE argued that plaintiffs can invoke the per se standard and avoid the “presumption” in favor of rule of reason treatment “only when they show that the challenged restraint falls squarely within a class or category that ‘always or almost always’ harms competition.”

“For a court to make that prediction with confidence, it must have sufficient experience with the restraint. Here, the Seventh Circuit turned settled law on its head. From a dearth of experience, the court of appeals reasoned that a per se claim was plausible and sustainable. This approach threatens to chill interbrand competition,” the think tank said in its brief.

…”The economic literature shows that intrabrand vertical restraints tend to benefit competition. While there are circumstances under which certain vertical restraints can be anticompetitive, there is no literature demonstrating that they are typically anticompetitive,” the ICLE said. “In the franchise context, intrabrand vertical restraints strengthen the franchise’s brand overall and thus foster competition. The existence of some horizontal aspects or applications of such a restraint, moreover, does not negate these procompetitive virtues.”

…ICLE also criticized the Seventh Circuit for writing off “positive effects on consumers,” arguing courts are supposed to look at the full commercial realities of a situation.

“Economic arrangements should be measured by their overall competitive effects, factoring in their effects on consumer welfare. An overly formalistic repudiation of ‘cross-market’ effects risks condemnation of restraints that are, on balance, beneficial to both competition and consumers,” ICLE said.