Law Antitrust - Instructor: Dwight Drake Key Words: Cartel: A combination of independent commercial or industrial enterprises designed to gain market advantage by coordinated and concerted actions. Horizontal Restraint: Market power exercised by two or more rival firms who cooperate and conspire to engage in concerted action that is designed to limit, restrict or prevent competition.

Law Antitrust - Instructor: Dwight Drake Manufacturer Manufacturer (“OEM”) Distributor Wholesaler Jobber Retailer Consumer Horizontal Vertical

Law Antitrust - Instructor: Dwight Drake Board of Trade of the City of Chicago v. United States (1918) Base Facts: Chicago Board of Trade set grain “Call” prices at end of trading session that governed all transactions between sessions. Big warehouses would buy grain cheap prior to Call and then cash in between sessions at Call price. Issue?

Law Antitrust - Instructor: Dwight Drake Board of Trade of the City of Chicago v. United States (1918) What was purpose of “Call” rule? What evil would rule potentially eliminate? Might it have promoted competition? Does it lessen competition?

Law Antitrust - Instructor: Dwight Drake Board of Trade of the City of Chicago v. United States (1918) Base Facts: Chicago Board of Trade set grain “Call” prices at end of trading session that governed all transactions between sessions. Big warehouses would buy grain cheap prior to Call and then cash in between sessions at Call price. Issue: Was agreement to fix prices during part of day per se illegal? Decision: Not per se illegal on its face. - Must look to see if agreement that restrains merely regulates and promotes competition or suppresses and destroys competition. - Restrain is very essence of every contract. - Lower court erred in not looking at the history, purpose and effect of the Call rule.

Law Antitrust - Instructor: Dwight Drake United States v. Trenton Potteries Co. (1927) Base Facts: 20 individuals and 23 corporations, who collectively controlled 82% of market for sanitary portable toilets, fixed prices. Any difference from Chicago Board of Trade? What was reason for agreement? What was primary issue?

Law Antitrust - Instructor: Dwight Drake United States v. Trenton Potteries Co. (1927) Issue: Should jury been given “not-guilty” instruction if agreements were reasonable? Holding: No. - Price-fixing illegal if agreement gives power to fix prices. - No need for reasonableness inquiry. What reasonable today not reasonable tomorrow. - Reasonableness inquiry would require difficult market and fact analysis.

Law Antitrust - Instructor: Dwight Drake Appalachian Coal, Inc. v. United States (1933) Base Facts: Dire conditions in coal market during depression. Excess supply and wasteful competition. To help, coal refiners formed Appalachian Coal, a sales agent that would represent 70-80% of all production and would regulate prices and productions needs. Appalachian sought DOJ approval and DOJ objected. Is this more like Chicago Board of Trade or Trent Potteries? Is restrain pro-competitive or anti-competitive? How relevant are market conditions?

Law Antitrust - Instructor: Dwight Drake Appalachian Coal, Inc. v. United States (1933) Issue: Should rule of reason apply to proposed plan? Holding: Rule of reason applicable and satisfied. - Purpose of Sherman is to prevent undue restrain, to maintain competition and to prevent monopolies. - Law not to be applied mechanically. - Here good intentions, need to protect all, still active competition from other markets, distressed market, honest effort to remove abuses.

Law Antitrust - Instructor: Dwight Drake United States v. Socony-Vacuum Oil Co. (1940) Base Facts: Major oil companies would agree to purchase “hot oil” that otherwise would be dumped on market at distressed prices. They meant periodically to allocate buy-up program with “dancing partners” so as to maintain prices in industry. Jury given “per se” instruction and convicted. Appellate court reversed. Note: Douglas wrote opinion. New to Court. Former SEC hotshot. Is arrangement in Socony any different than Appalacian Coal? Both are depression related. What was primary issue?

Law Antitrust - Instructor: Dwight Drake United States v. Socony-Vacuum Oil Co. (1940) Issue: Should jury have been given rule of reason instruction? Holding: No. - Any combination which interferes with free play of market forces is illegal. - Any agreement to control, fix, stabilize, depress or peg prices per se illegal. - Competition evils and good intention no defense. - Appalachian Coal different because there was no attempt there to affect consumer prices.

Law Antitrust - Instructor: Dwight Drake Fashion Originators Guild of America v. FTC (1940) Base Facts: Guild of apparel designers, manufactures and distributors agree to boycott discount copiers and sellers. No evidence of price increases or output limitations. FTC enjoined. Is this substantively different than Socony-Vacuum? Appalacian Coal? What was purpose of boycott? Any pro-competitive effects of boycott? What was primary issue for court?

Law Antitrust - Instructor: Dwight Drake Fashion Originators Guild of America v. FTC (1940) Issue: Does boycott violate Sherman if no price fixing? Holding: Yes. - Boycott narrows market outlets. - Boycott takes away freedom of members in market. - Price fixing, output limits and quality deterioration are not the only types of conduct banned by Sherman. Question: Is this per se case?

Law Antitrust - Instructor: Dwight Drake Klor’s v. Broadway-Hale Stores (1959) Base Facts: San Fran department chain secured agreement from suppliers (RCA, etc.) to not sell to small competing stores. Primary Issue? Are group boycotts as bad as price fixing? Could group boycott ever be procompetitive?

Law Antitrust - Instructor: Dwight Drake Klor’s v. Broadway-Hale Stores (1959) Base Facts: San Fran department chain secured agreement from suppliers (RCA, etc.) to not sell to small competing stores. Issue: Is group boycott per se illegal under Sherman? Holding: Yes. - Group boycotts “cripple the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment.”

Law Antitrust - Instructor: Dwight Drake United States v. Topco Asociates, Inc (1972) Base Facts: Grocers who produced proprietary Topco brands agreed through association to only sell in their markets. Court held that territorial agreement among competitors is per se illegal under Sherman 1 as a classic example of naked restrain that serves no purpose other than to stifle competition. Market Division Palmer v. BRG of Georgia, Inc. (1990) Bar/Bri licensed fierce Georgia independent to sell Bar/Bri bar review courses. Each agreed to stay out of others territory – prices jumped big. Was deal an ancillary restrain to an exclusive license of copyrighted material? Supreme Court held IP argument a sham, and gave summary judgment to plaintiff. Per se illegal market division.

Law Antitrust - Instructor: Dwight Drake Per Se Violations Price fixing Market divisions Group boycotts Exceptions? Should professions be different than businesses that exist to just make money?