From PLI’s Course Handbook48th Annual Antitrust Law Institute#11034

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RELATIONSHIPS AMONGCOMPETITORS

Robert P. TaylorMintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC

Roxane C. BuseyBaker & McKenzie LLP

© 2007

Table of Contents

I. SECTION 1 OF THE SHERMAN ACT ........................................................ 5A. Criminal Enforcement ....................................................................... 5B. Civil and Private Enforcement........................................................... 8C. Comparison of Sections 1 and 2....................................................... 9

II. THE REQUIREMENT OF A PLURALITY OF ACTORSFOR SECTION 1 ....................................................................................... 10

A. Intra-Enterprise Conspiracy ............................................................ 10B. Vertical Arrangements..................................................................... 16

III. THE REQUIREMENT THAT THE ACTIVITY RESTRAINTRADE OR COMMERCE AMONG THE SEVERAL STATES,OR WITH FOREIGN NATIONS................................................................. 20

A. Trade or Commerce ........................................................................ 20B. Interstate Commerce Requirement................................................. 21C. Foreign Commerce ......................................................................... 22

IV. THE REQUIREMENT OF STANDING ...................................................... 25

V. PROOF OF THE CONTRACT, COMBINATION OR CONSPIRACY ....... 32A. Proof By Circumstantial Evidence................................................... 32B. Conscious Parallelism..................................................................... 35C. Price Announcements As An Invitation to Competitors

to Change Their Own Prices........................................................... 40

VI. THE REQUIREMENT OF INTENT IN SECTION 1 ................................... 41A. Intent in Civil Cases ........................................................................ 41B. Intent in Criminal Cases.................................................................. 42

VII. PROOF OF RESTRAINT OF TRADE ....................................................... 43A. Rule of Reason ............................................................................... 43B. Per Se Violations............................................................................. 46C. The “Quick Look” or “Truncated Rule of Reason” ........................... 47D. Antitrust Guidelines........................................................................ .52

VIII. EXPLICIT AGREEMENTS AFFECTING PRICES .................................... 52A. Price Fixing ..................................................................................... 52B. Bid Rigging...................................................................................... 59C. Controlling Production..................................................................... 59

IX. AGREEMENTS TO EXCHANGE INFORMATION.................................... 60A. Price Information............................................................................. 60B. Credit Information ........................................................................... 62C. Other Statistical Information............................................................ 63

X. AGREEMENTS TO DIVIDE MARKETS OR ALLOCATE CUSTOMERS............................................................................................ 64

A. Agreements Among Competitors (“Horizontal Agreements”).......... 64

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B. Agreements Between Companies at Different Levelsof Distribution (“Vertical Agreements”) ............................................ 66

C. Ancillary Agreements Not to Compete............................................ 68

XI. BOYCOTTS AND OTHER EXCLUSIONARY PRACTICES ..................... 69A. Concerted Refusals to Deal by Competitors................................... 69B. Concerted Refusals to Deal With Distributors or Suppliers ............ 73C. Membership Restrictions of Trade Associations ............................. 75D. Joint Research................................................................................ 77E. Standardizing Products................................................................... 78

XII. JOINT VENTURES.................................................................................... 80A. Introduction ..................................................................................... 80B. Defining a Joint Venture.................................................................. 81C. Common Types of Joint Ventures ................................................... 82D. Applicable Statutes ......................................................................... 82E. Analysis Under Section 1 of the Sherman Act................................ 85

XIII. IMMUNITIES.............................................................................................. 91A. State Action .................................................................................... 91B. Petitioning Government ................................................................ 100C. Statutory Immunities ..................................................................... 104D. Non-Statutory Exemptions............................................................ 104

XIV. LICENSING INTELLECTUAL PROPERTY RIGHTS.............................. 106A. Federal Guidelines........................................................................ 106B. Refusal to License and Nonuse.................................................... 107C. Concerted Refusal to Deal ........................................................... 107D. Pricing and Output Restrictions .................................................... 108E. Tying ............................................................................................. 108F. Cross-Licensing ............................................................................ 109G. Field of Use Restrictions............................................................... 110H. Geographic Market Restrictions ................................................... 111I. Customer Restrictions .................................................................. 111J. Exclusivity ..................................................................................... 111K. Patent Litigation Agreements........................................................ 112

XV. HYPOTHETICALS................................................................................... 113A. Terminated Distributor Hypothetical.............................................. 113B. Price-Fixing Hypothetical .............................................................. 115C. Rule of Reason Hypothetical ........................................................ 117D. Price Verification Hypothetical ...................................................... 119E. Price-Signaling Hypothetical......................................................... 120F. Staff Privileges Hypothetical ......................................................... 122G. Trade Association Hypothetical..................................................... 123H. Information Exchange Hypothetical ............................................. .126

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I. SECTION 1 OF THE SHERMAN ACT

“Every contract, combination in the form of trust or otherwise, or conspiracy, inrestraint of trade or commerce among the several States, or with foreign nations, isdeclared to be illegal. Every person who shall make any contract or engage in anycombination or conspiracy hereby declared to be illegal shall be deemed guilty of afelony, and, on conviction thereof, shall be punished by fine not exceeding$100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprison-ment not exceeding 10 years, or by both said punishments, in the discretion of thecourt.” 15 U.S.C. § 1 (2004). However, as the Department of Justice (“DOJ”)maintains, “Alternatively, as with other federal felonies, courts have the power ofimposing fines in an amount equal to twice the harm suffered by the crime’s vic-tims or twice the gain enjoyed by the perpetrators.”

U.S. Dept. of Justice, Opening Markets and Protecting Competition forAmerica’s Businesses and Consumers: Goals and Achievements of theAntitrust Division (March 27, 1996); see 18 U.S.C. § 3571(d) (1994).

A. Criminal Enforcement

(1) Since FY 2002, over $1.3 billion in criminal fines have beenimposed in criminal cartel cases brought by the Department ofJustice. In addition, over 5,000 jail days were imposed in FY2006 for price fixing, bid rigging, obstruction, fraud and relatedanticompetitive conduct by criminal cartels. See Dept. of Justice,December 21, 2006 Press Release, http://www.usdoj.gov/atr/pub-lic/press_releases/2006/220465.htm.

(2) In FY 2006, the Department of Justice obtained over $473 millionin criminal fines, including a $300 million fine against SamsungElectronics and its U.S. subsidiary and an $84 million fine againstElpida Memory Inc. for their participation in the internationalcartel that fixed prices for high-tech dynamic random accessmemory (DRAM). Overall, the DRAM investigation has yieldedmore than $732 million in criminal fines and 2,460 days of prisontime. Substantial criminal fines were also imposed as a result ofinvestigations of price-fixing cartels and bid-rigging in the ready-mixed concrete, rubber chemicals, gas pipeline construction andfreight forwarding industries. See Dept. of Justice, December 21,2006 Press Release, http://www.usdoj.gov/atr/public/press_releases/2006/220465.htm.

(3) The Justice Department prosecuted more than a dozen actionsagainst vitamin manufacturers and their executives for their par-ticipation in an international price fixing cartel. It obtained more

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than $875 million in fines. The largest fine was in United States v.Hoffman-LaRoche, Ltd., 6 Trade Reg. Rep. (CCH) ¶45,099, CaseNo. 4438 (1999) (fine of $500 million). See also United States v.Takeda Chemical International, Inc., 6 Trade Reg. Rep. (CCH)¶45,099, Case Nos. 4467-4469 (1999) (Japanese companies agreeto pay fines totaling $137 million); United States v. BASF AG,6 Trade Reg. Rep. (CCH) ¶45,099, Case No. 4439 (fine of $225Million), United States v. Chinook Group, Ltd., 6 Trade Reg.Rep. (CCH) ¶45,099, Case No. 4477 (Canadian vitamin companyagreed to pay $5 million for its participation in conspiracy to raiseprices for vitamins).

(4) The Department of Justice’s investigation in graphite electrodesindustry has resulted in criminal fines of more than $300 million.See e.g., United States v. SGL Carbon AG, 6 Trade Reg. Rep.(CCH) ¶45,099, Case No. 4431 (1999); United States v. UCAR,6 Trade Reg. Rep. (CCH) ¶45,098, Case No. 4338 (1998).

(5) The government’s investigation into illegal and collusive prac-tices in the worldwide food and feed additives industry resulted incriminal fines of more than $195 million. In October 1996,Archer Daniels Midland agreed to pay $100 million to resolvecharges for fixing prices of citric acid and lysine. 6 Trade Reg.Rep. (CCH) ¶45,096, Case No. 4253 (1996). In January 1997,Bayer AG agreed to pay $50 million to settle price fixing andmarket allocation charges in the sale of citric acid. 6 Trade Reg.Rep. (CCH) ¶45,097, Case No. 4267 (1997). Two Japanese firmsand a US subsidiary of a South Korean company also paid crimi-nal fines for alleged price fixing in lysine. 6 Trade Reg. Rep.(CCH) ¶45,096, Case No. 4261 (1996). Two Swiss companiesagreed to pay $25 million to resolve charges of price fixing andmarket allocation of citric acid. 6 Trade Reg. Rep. (CCH)¶45,097, Case Nos. 4277, 4278 (1997).

(6) Significant fines and criminal sentences have also been imposedagainst individuals. The largest fine for an individual was inUnited States v. Melvyn Merberg, CR. No. 1176 (S.D.N.Y. 2001)(CEO sentenced to 63 months in prison for bid rigging, fraud andtax conspiracies and fined $2.2 million in restitution); UnitedStates v. ll Young Cho, CR. No. 01-00008, 6 Trade Reg. Rep.(CCH) Case No. 4582 (D.C. Guam 2002) (government officialsentenced to 10 years, including 3 years for bid rigging, in

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scheme involving FEMA funded contracts). See also UnitedStates v. Kraus, 6 Trade Reg. Rep. (CCH) ¶45,099, Case No.4476 (1999) (CEO pled guilty of price fixing conspiracy andagreed to serve 17 months in jail and to pay $1.25 million fine).

(7) The Department of Justice maintains a Corporate Leniency Pro-gram and an Individual Leniency Program for criminal antitrustconspirators in an effort to encourage individuals and their com-panies to come voluntarily with evidence of conspiracy. http://www.usdoj.gov/atr/public/guidelines/lencorp.htm andhttp://www.usdoj.gov/atr/public/guidelines/lenind.htm. Under theprograms, the first conspirator to come forth to the authoritiesregarding a conspiracy that is not being investigated receivescomplete amnesty. If an investigation has begun, conspiratorswho fully disclose information to the authorities may also receiveleniency. Since being revised in 1993, the Corporate LeniencyProgram has elevated the rate of amnesty applications fromroughly one a year to one a month. http://www.usdoj.gov/atr/public/criminal/ 9938.htm. The program has led to several largefines in recent cases including the Vitamins investigation (Hoff-man-La Roche: $500 million fine, BASF: $225 million fine);Graphite Electrodes investigation and Fine Arts Auction(Sotheby: $45 million fine.) Id. In 2004, Congress passed theAntitrust Criminal Penalty Enhancement and Reform Act of2004, which limits the amount of damages recovered against aqualifying applicant of the leniency program to actual damagessuffered by the claimant attributable to the cooperating individu-als. See Section A - Antitrust Enforcement Enhancements andCooperation Incentives Act (Pub.L. 108- 237, Title II, June 22,2004, 118 Stat. 665).

(8) In Stolt-Nielsen, S.A. v. United States, 442 F.3d 177, 187 (3d Cir.2006), the Department of Justice could indict Stolt-Nielsen andits executive despite having entered into amnesty agreements withthem in exchange for their cooperation with its investigation intothe parcel tanker shippers conspiracy. The government claimedthat Stolt-Nielsen had failed to end the conspiracy in violation ofthe agreement. Stolt-Nielsen won an injunction against the indict-ments in the district court, Stolt-Nielsen, S.A. v. United States,352 F. Supp. 2d 553 (E.D. Pa. 2005), and the governmentappealed. The Third Circuit reversed, holding that the court

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lacked the authority to enjoin the executive branch from filing anindictment.

B. Civil and Private Enforcement

(1) In addition to criminal liability, violations of section 1 may giverise to civil lawsuits by the Department of Justice and the FederalTrade Commission. 15 U.S.C. §15a, 45(m)(1)(a). Civil actions toenforce the federal antitrust laws may also be brought by stateattorneys general (15 U.S.C. §15c (1994)) and “any person whoshall be injured in his business or property by reason of anythingforbidden in the antitrust laws may sue therefor,” in federal dis-trict court, “without respect to the amount in controversy, andshall recover threefold the damages by him sustained,” plus costs,attorney’s fees and, at the discretion of the court, interest onactual damages. 15 U.S.C. § 15(a) (1994). Monetary relief forconduct related to joint research and development activities, jointproduction, and standard setting is limited to single damageswhere the defendants provide notification of the challenged con-duct pursuant to the National Cooperative Research Act. 15U.S.C. §§ 4301-4305 (2004). Congress intended private and pub-lic enforcement of the antitrust laws “to be cumulative, not mutu-ally exclusive.” United States v. Borden Co., 347 U.S. 514, 518,74 S. Ct. 703, 706, 98 L. Ed. 903 (1954). Antitrust actions do notrequire a heightened pleading standard. Twombly v. Bell AtlanticCorp., 425 F.3d 99 (2d Cir. 2005), cert. granted, 126 S. Ct. 2965(June 26, 2006) (currently pending on elements necessary toplead conspiracy). Notice pleading is sufficient. Id.

(2) The largest civil settlements in antitrust cases include In re Vita-mins Antitrust Class Action 1999-2 Trade Cas. (CCH) ¶ 72,726(D.D.C. 1999) (seven vitamin manufacturers agree to pay$1.17 billion); In re NASDAQ Market-Makers Antitrust Litiga-tion, 1998-2 Trade Cas. (CCH) ¶ 72,337 (S.D.N.Y. 1998) ($1 bil-lion settlement approved).

(3) The courts have held agreements to arbitrate private antitrust dis-putes enforceable as to section 1 claims arising out of interna-tional transactions. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 624-40, 105 S. Ct. 3346, 3352-61,L. Ed. 2d 444 (1985) (holding contract provision for arbitration ofantitrust claims in agreement arising out of international transac-

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tion enforceable in United States) (JLM Industries, Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 170-80 (2d Cir. 2004) (holding that thearbitration clause at issue was broad and extended to “collateralmatters” including the price-fixing conspiracy alleged). As todomestic antitrust claims, see Kotam Elecs. v. JBL ConsumerProds., 93 F.3d 724, 725-28 (11th Cir. 1996) (en banc), cert.denied, Kotam Elec. v. JBL Consumer Prod., 117 S. Ct. 946(1997) (holding arbitration agreements concerning domestic anti-trust claims enforceable); Baxter Int’l, Inc. v. Abbot Labs., 312F.3d 829, 833 (7th Cir. 2003) (affirming arbitration decision thatconcluded the antitrust laws did not diminish the parties’ contrac-tual rights); Nghiem v. NEC Elec., 25 F.3d 1437, 1441-42 (9thCir.), cert. denied, 115 S. Ct. 638, 130 L. Ed. 2d 544, 63 U.S.L.W.3437 (1994) (holding domestic antitrust disputes subject to arbi-tration)). But see Mitsubishi, 473 U.S. at 641-45, 105 S. Ct. at3361-63 (Stevens, J., joined by Brennan & Marshall, JJ., dissent-ing) (arguing arbitration provision “could not encompass a claimthat the arbitration clause was itself part of a contract in restraintof trade”) and Jung v. Association of American Medical Colleges,300 F. Supp. 2d 119, 154 (D.D.C. 2004) (denying motion to com-pel arbitration and declaring that requiring arbitration of only oneprong of plaintiffs’ conspiracy claim would “undermine the pur-poses of the Sherman Act by improperly compartmentalizingplaintiffs’ single conspiracy claim”).

C. Comparison of Sections 1 and 2

“[O]ffenses under section 1 and section 2 of the Sherman Act arelegally distinct even though they may overlap.” Flintkote Co. v. UnitedStates, 7 F.3d 870, 874 (9th Cir. 1993) (citing American Tobacco Co.v. United States, 328 U.S. 781, 788, 66 S. Ct. 1125, 1128, 90 L. Ed.1575 (1946)); see also Amarel v. Connell, 102 F.3d 1494 (9th Cir.1997) (discussing differences between section 1 and section 2 viola-tions). “The Sherman Act contains a basic distinction between con-certed and independent action.” Copperweld Corp. v. IndependenceTube Corp., 467 U.S. 752, 767, 104 S. Ct. 2731, 2739, 81 L. Ed. 2d628 (1984) (citing Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S.752, 761, 104 S. Ct. 1464, 1469, 79 L. Ed. 2d 775 (1984)). “The con-duct of a single firm is governed by § 2 alone and is unlawful onlywhen it threatens actual monopolization.” Id. Section 1 of the ShermanAct, in contrast, reaches unreasonable restraints of trade effected by a

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‘contract, combination . . . or conspiracy’ between separate entities.”Id., 467 U.S. at 767, 104 S. Ct. at 2740 (citing 15 U.S.C. § 1) (empha-sis in original). Even if not found unlawful under section 1, concertedconduct may provide a basis for liability under a section 2 monopoliza-tion claim. LePage’s Inc. v. 3M, 324 F.3d 141, 157-58 (3d Cir. 2003)(although jury found against plaintiff on section 1 exclusive dealingclaim, the section 1 evidence could be used to support jury’s finding ofliability under section 2).

II. THE REQUIREMENT OF A PLURALITY OF ACTORSFOR SECTION 1

For conduct to violate section 1 of the Sherman Act, it must involve atleast two conspirators. Fisher v. City of Berkeley, 475 U.S. 260, 106 S. Ct.1045, 89 L. Ed. 2d 206 (1986) (municipal ordinance imposed upon land-lords constituted unilateral action not subject to section 1); Systemcare,Inc. v. Wang Lab. Corp., 85 F.3d 465, 469-71 (10th Cir. 1996) (finding noconcerted action in connection with alleged tying arrangement, and there-fore no section 1 liability); Winn v. Edna Hibel Corp., 858 F.2d 1517(11th Cir. 1988); Tower Air, Inc. v. Federal Express Corp., 956 F. Supp.270 (E.D.N.Y. 1996) (members of joint venture do not necessarily consti-tute a single entity). But see Hertz Corp. v. City of New York, 1 F.3d 121(2d Cir. 1993), cert. denied, 510 U.S. 1111, 114 S. Ct. 1054, 127 L. Ed. 2d375 (1994) (distinguishing Fisher where city ordinance affecting competi-tion was not “unilateral,” nor a “pure regulatory scheme”).

A. Intra-Enterprise Conspiracy

(1)(a)In Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752(1984), the Supreme Court held that a corporation and its whollyowned subsidiaries are incapable of conspiring under section 1 ofthe Sherman Act. The Court expressly overruled, to the extentthey are to the contrary, United States v. Yellow Cab Co., 332U.S. 218 (1947); Appalachian Coals, Inc. v. United States, 288U.S. 344 (1933); Kiefer-Stewart Co. v. Joseph E. Seagram &Sons, Inc., 340 U.S. 211 (1951); Schine Chain Theaters, Inc. v.United States, 334 U.S. 110 (1948); United States v. Griffith, 334U.S. 100 (1948); Timken Roller Bearing Co. v. United States, 341U.S. 593 (1951); Perma Life Mufflers, Inc. v. International PartsCorp., 392 U.S. 134 (1968). See also International Travel Arrang-ers v. NWA, Inc., 991 F.2d 1389 (8th Cir.), cert. denied, 510 U.S.932, 114 S. Ct. 345, 126 L. Ed. 2d 309 (1993) (once acquisition

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plan established, parties were incapable of conspiring); TotalBenefit Serv. v. Group Ins. Admin., Inc., 875 F. Supp. 1228 (E.D.La. 1995) (parent could not conspire with 90% and 100% ownedsubsidiaries).

(1)(b)The Court in Copperweld did not decide “under what circum-stances if any, a parent may be liable for conspiring with an affili-ated corporation it does not completely own.” 467 U.S. at 767. InComputer Identics Corp. v. Southern Pacific Co., 756 F.2d 200(1st Cir. 1985), the court held that where a parent corporation didnot own entirely an affiliated corporate entity, a jury must find asa matter of fact that defendants acted as one entity to avoid a find-ing of plurality of actors. See also American Vision Centers, Inc.v. Cohen, 711 F. Supp. 721 (E.D.N.Y. 1989) (finding individualswho together held 100% and 54% of the shares of competingoptical products companies not a “single business entity” andcapable of conspiring with regard to their companies’ activities).

(1)(c)The holding in Copperweld does not apply where an illegalacquisition brings about the corporate affiliation, e.g., where cor-porations are purchased to effect control of an industry. 467 U.S.at 761-762. Moreover, a corporation and its subsidiary are stillcapable of conspiring with a third party. 467 U.S. at 764. Cf. Voll-rath Co. v. Sammi Corp., 9 F.3d 1455 (9th Cir. 1993), cert.denied, 114 S. Ct. 2163, 128 L. Ed. 2d 886, 62 U.S.L.W. 3807(1994) (finding insufficient evidence of anti-competitive purposein acquiring another entity).

(2) Where two or more corporations are under common ownershipand control, plurality has been held not to exist. Siegel Transfer,Inc., v. Carrier Express, Inc., 54 F.3d 1125 (3d Cir. 1995) (sistercorporations incapable of conspiring with each other or with par-ent); Hood v. Tenneco Texas Life Ins. Co., 739 F.2d 1012 (5thCir. 1984) (applying Copperweld to sister subsidiaries of thesame parent); Century Oil Tool Inc. v. Prod. Specialties, Inc., 737F.2d 1316 (5th Cir. 1984) (applying Copperweld to commonlyowned and managed corporations). See also, Ball Mem’l Hosp.,Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1337 (7th Cir.1986) (separate corporations held unable to conspire where theyhad acted as one company for 30 years); Guzowski v. Hartman,969 F.2d 211, 214 (6th Cir. 1992), cert. denied, 506 U.S. 1053,113 S. Ct. 978, 122 L. Ed. 2d 132 (1993) (two racetracks with

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common ownership could not conspire); Hall v. Burger KingCorp., 912 F. Supp. 1509, 1548 (S.D. Fla. 1995) (franchisor andfranchisee incapable of conspiring for section 1 purposes); CoastCities Truck Sales v. Navistar Int’l Transp. Co., 912 F. Supp. 747,762 (D.N.J. 1995) (subsidiary of subsidiary incapable of conspir-ing with either subsidiary or parent corporation).

(3) Unincorporated divisions cannot conspire with each other or withtheir “parent” owner. Copperweld Corp. v. Independent TubeCorp., 467 U.S. 752, 771 (1984).

(4) Separate entities with a common economic interest may be con-sidered part of a single enterprise and therefore incapable of con-spiring for section 1 purposes, unless they also have divergentinterests. Compare Bell v. Fur Breeders Agric. Coop., 348 F.3d1224 (10th Cir. 2003) (although cooperative’s board memberscompeted against each other, board members were incapable ofconspiring because their actions were for good of cooperative as awhole, not merely for personal benefit) with Gregory v. FortBridger Rendevous Ass’n, 448 F.3d 1195 (10th Cir. 2006) (findingthat a non-profit volunteer organization with the exclusive right toconduct a historical reenactment, were capable of concertedaction under the Sherman Act); City of Mt. Pleasant, Iowa v.Associated Elec. Coop., Inc., 838 F.2d 268, 274-78 (8th Cir.1988) (members of electric utility cooperative with common eco-nomic interest incapable of conspiring) and American Chiroprac-tic Ass’n v. Trigon Healthcare, 367 F.3d 212 (4th Cir. 2004)(doctors serving on board of insurer had a unity of goals with theinsurer that precluded application of the independent personalstake exception), with Sullivan v. National Football League, 34F.3d 1091, 1099 (1st Cir. 1994), cert. denied, 115 S. Ct. 1252, 131L. Ed. 2d 133, 63 U.S.L.W. 3642 (1995) (“NFL member clubscompete in several ways off the field, which itself tends to showthat the teams pursue diverse interests and thus are not a singleenterprise under § 1.”), and Capital Imaging Associates v.Mohawk Valley Medical Associates, 996 F.2d 537 (2d Cir.), cert.denied, 114 S. Ct. 388 (1993) (members of an independent prac-tice association are capable of conspiring).

(5)(a)Generally, a corporation and its employees, officers and agentsare incapable of conspiring among themselves. CopperweldCorp. v. Independent Tube Corp., 467 U.S. 752, 770, n.15

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(“[n]othing in the language of the Sherman Act is inconsistentwith the view that corporations cannot conspire with their ownofficers”); Fraser v. Major League Soccer, L.L.C., 284 F.3d 47(1st Cir. 2002) (discussing application of Copperweld to MajorLeague Soccer; affirming lower court judgment for defendants onalternate grounds); Surgical Care Center v. Hospital Service Dis-trict No. 1, 309 F.3d 836, 841 (5th Cir. 2002) (hospital and itsmanaging agent could not conspire with each other); OzarkHeartland Electronics, Inc. v. Radio Shack, 278 F.3d 759, 763-64(8th Cir. 2002) (no liability for resale price maintenance wheremanufacturer directed Ozark, its agent, to sell at a particularprice); Siegel Transfer, Inc., v. Carrier Express, Inc., 54 F.3d 1125(3d Cir. 1995); International Travel Arrangers v. NWA, Inc., 991F.2d 1389 (8th Cir.), cert. denied, 510 U.S. 932, 114 S. Ct. 345,126 L. Ed. 2d 309 (1993); Mann v. Princeton Community Hospi-tal Assn., 1992-1 Trade Cas. (CCH) ¶ 69,738 (4th Cir. 1992);R. Ernest Cohn D.C., D.A.B.C.O. v. Bond, 953 F.2d 154 (4th Cir.1991), cert. denied, 112 S. Ct. 3057 (1992); Ryko Mfg. Co. v.Eden Services, 823 F.2d 1215, 1222-1223 (8th Cir. 1987), cert.denied, 484 U.S. 1026 (1988); Pink Supply Corp. v. Hiebert, Inc.,788 F.2d 1313, 1316 (8th Cir. 1986); Tiftarea Shopper, Inc. v.Georgia Shopper, Inc., 786 F.2d 1115, 1118 (11th Cir. 1986);Weiss v. York Hospital, 745 F.2d 786 (3d Cir. 1984), cert. denied,470 U.S. 1060 (1985).

(5)(b)Where the officers, directors or employees of a corporation havesome personal motive to conspire with their corporate employer,independently of the objectives of the corporation, they have beenheld capable of conspiracy. Motive Parts Warehouse v. FacetEnters., 774 F.2d 380, 387 (10th Cir. 1985) (employees who wereprospective franchisees were held capable of conspiring withemployer (franchisor) where they had an “independent personalstake” and stood to benefit from conspiracy). The courts do notagree on the issue of “whether a hospital has the capacity to con-spire with its medical staff,” (Willman v. Heartland Hosp. E., 34F.3d 605, 610 (8th Cir. 1994), cert. denied, 115 S. Ct. 1361, 131L. Ed. 2d 218, 63 U.S.L.W. 3689 (1995)), some holding “that ahospital and its medical staff are not separate entities for purposesof section one because the medical staff acts as an agent of thehospital during the peer review process,” (Id. (citing Oksanen v.Page Mem’l Hosp., 945 F.2d 696, 703 (4th Cir. 1991) (en banc),

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cert. denied, 112 S. Ct. 973 117, L. Ed. 2d 137 (1992); Weiss v.York Hosp., 745 F.2d 786, 817 (3d Cir. 1984), cert. denied, 470U.S. 1060, 105 S. Ct. 1777, 84 L. Ed. 2d 836 (1985)) and othersholding “that a hospital and the members of its medical staff arelegally separate entities capable of conspiring with one anotherunder the Sherman Act,” (Id. (citing Bolt v. Halifax Hosp. Med.Ctr., 851 F.2d 1273, 1280 (11th Cir. 1988) (subsequent historyomitted); Oltz v. St. Peter’s Community Hosp., 861 F.2d 1440,1450 (9th Cir. 1988)). In the Third Circuit, where the staff isfound to have no independent personal motives to conspire, noconspiracy will be found. Nanavati v. Burdette Tomlin Mem’lHosp., 857 F.2d 96 (3d Cir. 1988), cert. denied, 489 U.S. 1078,109 S. Ct. 1528, 103 L. Ed. 2d 834 (1989). At least one court ofappeals has declined to adopt the “independent economic inter-est” rule and holds corporations incapable of conspiring with itsemployees. See, e.g., Nurse Midwifery Ass’n v. Hibbett, 927 F.2d904 (6th Cir. 1990), cert. denied, 112 S. Ct. 406 (1991) (hospitalsand pediatrician shielded by intra-corporate conspiracy doctrine,but obstetricians who competed with midwives not shielded);Potters Med. Ctr. v. City Hosp. Ass’n, 800 F.2d 568 (6th Cir.1986); Cf. Crosby v. Hospital Auth., 93 F.3d 1515, 1529-32 (11thCir. 1996), cert. denied, 117 S. Ct. 1246 (1997) (holding that eventhough public hospital and its staff members, as separate eco-nomic entities, do not qualify for intraenterprise antitrust immu-nity, members of peer review committee, as agents of state, doqualify for state action antitrust immunity).

(5)(c)A corporation’s agents, independent sales representatives andattorneys, as long as they are not acting in their personal interests,may also be found incapable of conspiring with the corporation inviolation of section 1. Compare Victorian House, Inc. v. FisherCamuto Corp., 769 F.2d 466, 469 (8th Cir. 1985) (corporationfound to have engaged in an antitrust conspiracy with its agent,because the agent was acting in furtherance of his personal inter-ests), with Illinois Corporate Travel, Inc. v. American Airlines,Inc., 889 F.2d 751 (7th Cir. 1989), cert. denied, 495 U.S. 919(1990) (agency relationship precluded any finding of price fixingwhere travel agent was terminated for offering customers rebatesfrom his own commissions)), and F.B. Leopold Co. v. RobertsFilter Mfg. Co., 882 F. Supp. 433, 446-47 (W.D. Pa. 1995) (find-ing corporation legally incapable of conspiring, under section 1 of

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the Sherman Act, with its independent sales representativeswhose duties closely resembled those of employees, or with itspatent attorney because such parties’ conduct amounted to unilat-eral action). See also Solla v. Aetna, 1999-2 Trade Cas. (CCH)¶72,570 (2d. Cir. 1999) (no conspiracy found where no showingof personal stake by primary care physicians who participated indecision of HMOs to exclude chiropractors); Amarel v. Connell,102 F.3d 1494 (9th Cir. 1997) (citation omitted) (explaining attor-ney incapable of conspiring with client for section 1 purposesunless “he becomes an active participant in formulating policydecisions with his client to restrain competition,” and exerts hisinfluence over his client so as to direct the client “to engage in thecomplained of acts for an anticompetitive purpose.”).

(6) The creation of an agency relationship in form only will not pre-vent a finding of conspiracy. Simpson v. Union Oil Co., 377 U.S.13 (1964); Tamaron Distrib. Corp. v. Weiner, 418 F.2d 137 (7thCir. 1969).

(7) The extent to which a shareholder may be capable of conspiringwith the corporation whose shares it holds is not clear. CompareGoldlawr, Inc. v. Shubert, 276 F.2d 614 (3d Cir. 1960) (affirmingdismissal of a complaint based on a conspiracy between a corpo-ration and its sole shareholder who was also president of the cor-poration) with United States v. Metro MLS, Inc., 1974-2 TradeCas. (CCH) ¶ 75,311, (E.D.Va. 1973) (finding a conspiracyamong shareholder members of a corporation formed by realestate brokers for the purpose of clearing and exchanging infor-mation concerning real estate listings) and Nurse MidwiferyAssoc. v. Hibbett, 927 F.2d 904 (6th Cir. 1990) (physician share-holders of malpractice insurer capable of conspiring with eachother to exclude rival from coverage).

(8) An association, a group of persons, or entities which have joinedtogether for a common purpose can form the requisite conspiracyunder the Sherman Act. Alvord Polk, Inc. v. F. Schumacher &Co., 37 F.3d 996 (3d Cir. 1994); Montgomery County Assoc. ofRealtors v. Realty Photo Master Corp., 878 F. Supp. 804 (D. Md.1995), aff’d, 91 F.3d 132 (1996) (unpub. op.).

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B. Vertical Arrangements

(1) A unilateral refusal to deal or unnegotiated termination of a verti-cal arrangement does not satisfy the need for a plurality of actors.Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761(1984) (“there is the basic distinction between concerted andindependent action”); United States v. Colgate & Co., 250 U.S.300 (1919); Expert Masonery, Inc. v. Boone County, 440 F.3d336 (6th Cir. 2006) (holding that the act of circumventing the bid-ding process in reaching a final arrangement did not breach § 1 ofthe Sherman Act where the alleged vertical agreements involvedonly one buyer and one seller); Mularkey v. Holsum Bakery, Inc.,146 F.3d 1064 (9th Cir. 1998) (dismissal affirmed as no evidenceof concerted action between manufacturer and non-terminateddistributors presented); Metro Ford Truck Sales, Inc. v. FordMotor Co., 145 F.3d 320 (5th Cir. 1998), cert. denied, 142 L. Ed.2d 66 (1998) (“the distinction between independent action andjoint action is fundamental in antitrust jurisprudence, and a [§ 1]claim will not exist in the absence of the latter”); Fran Welch RealEstate Sales v. Seabrook Island, 809 F.2d 1030, 1033 (4th Cir.1987); Jack Walters & Sons Corp. v. Morton Bldgs., Inc., 737F.2d 698 (7th Cir.), cert. denied, 469 U.S. 1018 (1984) (minimumsteps taken to insure dealer compliance with manufacturer’sadvertised prices did not constitute price fixing); Russell StoverCandies, Inc. v. FTC, 718 F.2d 256, 260 (8th Cir. 1983) (“simplerefusal to sell to customers who will not sell at prices suggestedby the seller is permissible under the Sherman Act”). Cf. City ofVernon, Cal. v. Southern Cal. Edison Co., 955 F.2d 1361, 1371(9th Cir.), cert. denied, 113 S. Ct. 305 (1992) (although conspir-acy to monopolize may exist where one conspirator participatedinvoluntarily or under coercion, source had no choice but toacquiesce, which did not make it a conspirator).

(2) Many manufacturers have marketing programs which apply to awide number of dealers. The extent to which arrangements or dis-cussions between such a manufacturer and its dealers satisfy therequirement of joint action depends upon the facts of each case.

(2)(a)Termination of a dealer following, or even in response to, thereceipt of complaints from other dealers is not sufficient in and ofitself to establish joint action. Monsanto Co. v. Spray-Rite Serv.Corp., 465 U.S. 752, 764 (1984) (“something more than evidence

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of complaints is needed”). See also Abraham v. IntermountainHealth Care Inc., 461 F.3d 1249, 1261 (10th Cir. 2006) (exclusionof optometrists from defendant health plan’s provider networkfollowing lobbying by ophthalmologists not sufficient to showjoint action between health plan and ophthalmologists); Intervest,Inc. v. Bloomberg, L.P, 340 F.3d 144166-67 (3d Cir. 2003) (mar-keter of electronic bond trading platform failed to show that infor-mation network operator terminated marketer as part of concertedaction with broker-dealers whose profits were allegedly threat-ened by trading platform, where broker-dealers merely com-plained to network operator); County of Tuolumne v. SonoraComm. Hosp., 236 F.3d 1148 (9th Cir. 2001) (obstetrician’s threatto leave hospital was not deemed a “meeting of the minds” withhospital when hospital privileges were denied potential competi-tor); Americom Distrib. v. ACS Communications, 990 F.2d 223(5th Cir. 1993) (termination of distributorship was not anti-com-petitive where termination was independent business decisionbased on sound business policy); Bailey’s, Inc. v. Windsor Am.,Inc., 948 F.2d 1018 (6th Cir. 1991) (no direct evidence to supportper se allegation of price maintenance conspiracy among manu-facturer and distributors to terminate contract with mail order log-ging supplies dealer); H. J., Inc. v. Int’l Telephone & TelegraphCorp., 867 F.2d 1531 (8th Cir. 1989) (no conspiracy is inferredfrom dealer complaints and timing of decision to terminate,where there was no evidence to exclude possibility of indepen-dent action); Dunnivant v. Bi-State Auto Parts, 851 F.2d 1575(11th Cir. 1988) (no conspiracy found where complaints wereequally consistent with independent and collusive action); Winnv. Edna Hibel Corp., 858 F.2d 1517 (11th Cir. 1988) (manufac-turer’s response to pressure from dealer did not establish conspir-acy); Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d656 (7th Cir.), cert. denied, 484 U.S. 977 (1987) (evidence ofindividual meetings with distributors followed by terminationfound insufficient to establish conspiracy); O.S.C. Corp. v. AppleComputer, Inc., 792 F.2d 1464 (9th Cir. 1986) (plausible explana-tion of supplier’s conduct precluded finding of conspiracy); Rossiv. Standard Roofing, Inc., 958 F. Supp. 976 (D.N.J. 1997) (validbusiness reason for refusing to deal was sufficient to defeat con-spiracy); Nichols Motorcycle Supply, Inc. v. Dunlop Tire Corp.,1995 WL 532265 (N.D. Ill. 1995) (no evidence to exclude possi-bility of independent action by manufacturer). But see Jeanery,

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Inc. v. James Jeans, Inc., 849 F.2d 1148 (9th Cir. 1988); BigApple BMW, Inc. v. BMW of North America, Inc., 974 F.2d1358, 1365 (3d Cir. 1992), cert. denied, 113 S. Ct. 1262 (1993)(in defending a summary judgment motion, plaintiff must pro-duce “evidence that tends to exclude the possibility of indepen-dent action,” but no need to “eliminate all possible ‘independent’justifications.”).

(2)(b)Even if complaints by a competing distributor rise to the level ofthreats, economic duress or coercion, the terminated distributorsmust still present additional evidence to exclude the possibility ofindependent action. Lovett v. General Motors Corp., 998 F.2d 575(8th Cir. 1993), cert. denied, 114 S. Ct. 1058 (1994); Jeanery, Inc.v. James Jeans, Inc., 849 F.2d 1148 (9th Cir. 1988); Isaksen v.Vermont Castings, Inc., 825 F.2d 1158, 1162 (7th Cir. 1987), cert.denied, 486 U.S. 1005 (1988); Garment District, Inc. v. BelkStores Services, Inc., 799 F.2d 905 (4th Cir. 1986), cert. denied,486 U.S. 1005 (1988); Terry’s Floor Fashions v. BurlingtonIndustries, 763 F.2d 604 (4th Cir. 1985); Blanton Enterprises, Inc.v. Burger King Corp., 680 F. Supp. 753 (D.S.C. 1988). But seeWorld of Sleep, Inc. v. La-Z-Boy Chair Co., 756 F.2d 1467, 1477(10th Cir.), cert. denied, 474 U.S. 823 (1985) (per se rule appliedwhere “dealer’s independent judgment is eliminated through acoerced agreement”); Bender v. Southland Corp., 749 F.2d 1205,1213 (6th Cir. 1984) (“actual or threatened affirmative action,beyond suggestion or persuasion, taken by a defendant in order toinduce a plaintiff to follow defendant’s prices” constitutes unlaw-ful coercion). See also Minnesota Mining and Manufacturing v.Graham-Field, Inc., 1997-2 Trade Cas. (CCH) ¶ 71,882 (S.D.N.Y.1997) (at pleadings stage allegations of relevant market, co-con-spirators, nature of conspiracy and effect of conspiracy were suf-ficient for conspiracy to refuse to deal).

(3) There is no requirement that vertically aligned co-conspiratorsshare an identical motive. Spectators’ Communication Network,Inc. v. Colonial Country Club, 231 F.3d 1005 (5th Cir. 2000)(holding a conspiracy can be shown where actors lack a commoninterest but a party has been enticed or coerced into anticompeti-tive behavior); Fineman v. Armstrong World Industries, Inc., 980F.2d 171, 215 (3d Cir. 1992), cert. denied, 113 S. Ct. 1285 (1993)(“motivations driving vertical co-conspirators will [always] dif-fer”); Petruzzi’s IGA Supermarkets v. Darling-Delaware,

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998 F.2d 1224 (3d Cir.), cert. denied, 114 S. Ct. 554 (1993)(“[D]efendants need not share the same motive. Rather all that isrequired is that they each have a motive to conspire.”).

(4) If joint action is proved, a distributor may even recover forrestraints resulting from the very agreement to which he is aparty. Perma Life Mufflers, Inc. v. International Parts Corp., 392U.S. 134 (1968); Bogosian v. Gulf Oil Corp., 561 F.2d 434 (3dCir. 1977), cert. denied, 434 U.S. 1086 (1978).

(5) The licensing of intellectual property has a vertical componentwhen it affects activities that are in a complementary relationship.U.S. Dep’t of Justice & U.S. Fed. Trade Comm’n, AntitrustGuidelines for the Licensing of Intellectual Property, § 3.3(1995).

(6) In United States v. Microsoft, 121 S. Ct. 25 (2000), after exten-sive findings by the trial court holding that Microsoft violatedSections 1 and 2 of the Sherman Act through its marketing prac-tices for the Windows operating system, the Supreme Courtrefused to take discretionary review pursuant to its powers underthe Expediting Act . 15 U.S.C § 29(b) (1994). The court ofappeals for the D.C. Circuit affirmed much of the lower courtdecision as to Section 2. The court of appeals remanded for fur-ther findings under a rule of reason analysis the holding thatMicrosoft had improperly tied its browser to the operating systemin violation of Section 1. United States v. Microsoft, 253 F.3d 34,84-97 (D.C. Cir. 2001). The court vacated the divestiture orderentered by the lower court and remanded for further findings onremedy. Id. at 97-107. A Final Judgment requiring Microsoft to,inter alia, modify certain licensing and business practices wasentered on November 12, 2002. United States v. Microsoft Corp.,Case No. 98-1232, 2002 WL 31654530 (D.D.C. November 12,2002), aff’d, Massachusetts v. Microsoft Corp., 373 F.3d 1199(D.C. Cir. 2004). In fulfillment of one of the provisions of thefinal judgment, Microsoft has continued to file status reports onits compliance. See November 21, 2006, Joint Status Report,http://www.usdoj.gov/atr/cases/f219800/219800.htm.

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III. THE REQUIREMENT THAT THE ACTIVITY RESTRAINTRADE OR COMMERCE AMONG THE SEVERAL STATES,OR WITH FOREIGN NATIONS

A. Trade or Commerce

(1) “Wherever any occupation, employment, or business is carried onfor the purpose of profit, or gain, or a livelihood, not in the liberalarts or in the learned professions, it is constantly called a trade.”United States v. National Assoc. of Real Estate Boards, 339 U.S.485, 490-491 (1950). See also Sheppard v. Lee, 929 F.2d 496 (9thCir. 1991) (termination of county employee by board of supervi-sors because employee filed petition to run for political office didnot constitute “trade or commerce;” that supervisors received sal-aries, as in Goldfarb, did not constitute commercial activity).

(2) Learned professions are now included within the term “trade orcommerce.” Arizona v. Maricopa County Medical Society,457 U.S. 332 (1982); National Soc. of Professional Engineers v.U.S., 435 U.S. 679 (1978); Bates v. State Bar of Arizona, 433U.S. 350 (1977); Goldfarb v. Virginia State Bar, 421 U.S. 773,787-789 (1975). See also United States v. Brown University, 5F.3d 658, 668 (3d Cir. 1993) (financial assistance for tuition heldto be “trade or commerce”; temporary exemption from antitrustlaws granted in 1994 for certain types of financial aid agreementsamong institutions of higher education (expired September 30,1997) (15 U.S.C. § 1 (1994)). But see Dedication & EverlastingLove to Animals v. Humane Society of the United States, Inc., 50F.3d 710 (9th Cir. 1995) (charitable fundraising does not consti-tute “trade or commerce”).

(3) To be considered a restraint of trade or commerce, the actioncomplained of must restrict or suppress commercial competition.Apex Hosiery Co. v. Leader, 310 U.S. 469 (1940); ColumbiaRiver People’s Util. Dist. v. Portland General Electric Co., 217F.3d 1187 (9th Cir. 2000) (question of which company is given agovernment monopoly on power is not a restraint of trade or com-merce). See also Santana Prod., Inc. v. Bobrick Washroom Equip-ment, 401 F.3d 123 (3rd Cir. 2005) (competition on merits ofproduct not a “restraint”).

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B. Interstate Commerce Requirement

(1) Courts have held that Congress intended in the Sherman Act toexercise its powers under the Commerce Clause to the fullestextent. Hospital Bldg. Co. v. Trustees of Rex Hospital, 425 U.S.738 (1976); Canadian American Oil Co. v. Union Oil Co.,577 F.2d 468 (9th Cir.), cert. denied, 439 U.S. 912 (1978). Com-pare Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186 (1974)(with respect to the Clayton Act prior to the amendment of theAct in 1980 expanding jurisdiction to include “any activity affect-ing commerce”) (15 U.S.C. § 18).

(2) The jurisdictional requirement of the Sherman Act may be satis-fied in two separate ways, either where the acts complained ofdirectly interfere with the flow of goods in commerce (the “incommerce” test) or where the acts complained of substantiallyaffect interstate commerce (the “effect on commerce” test).McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232,241 (1980); Hospital Bldg. Co. v. Trustees of Rex Hospital,425 U.S. 738 (1976).

(3) For purposes of the “effect on commerce” test, the challengedactivity itself need not be shown to have an effect on interstatecommerce, so long as the defendants’ general business activitiesaffect interstate commerce. See Summit Health Ltd. v. Pinhas,500 U.S. 322 (1991) (exclusion of ophthalmologist from hospitalin Los Angeles had sufficient effect on interstate commerce);McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232,244 (1980) (real estate brokerage activities held to have a sub-stantial effect on interstate commerce); United States v. Giordano,261 F.3d 1134, 1139 (11th Cir. 2001) (Sherman Act applicable toscrap-metal shipped to other states had effect on interstate com-merce); United States v. Romer, 148 F.3d 359 (4th Cir. 1998)(holding foreclosure auction of local property through localagents, where defendants were local residents, implicates inter-state commerce as a out-of-state lender was party that had realinterest in foreclosure proceedings); Hamilton Chapter of AlphaDelta Phi, Inc. v. Hamilton College, 128 F.3d 59 (2d Cir. 1997)(college policy requiring students to live in college housing andparticipate in college meal plan could affect interstate trade orcommerce); Joseph W. Hammes, et al. v. AAMCO Transmis-sions, Inc., et al., 33 F.3d 774, 779 (7th Cir. 1994) (allegations

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that defendants’ activities such as purchasing equipment andmailing fees, either occurred in or affected interstate commerceare sufficient to support jurisdictional requirements that defen-dants restrained interstate commerce); Fuentes v. South Hills Car-diology, 946 F.2d 196 (3d Cir. 1991) (boycott of cardiologist’sstaff privileges affected interstate commerce in that out-of-statepatients would not have traveled in-state but for cardiologist’scare); Ancar v. Sara Plasma, Inc., 964 F.2d 465, 469 (5th Cir.1992) (plasma price-fixing complaint provided adequate allega-tions of national market). But see Smith v. NCAA, 139 F.3d 180,186 (3d Cir. 1998), cert. denied, 119 S. Ct. 31 (1998), (NCAAstudent eligibility requirements not subject to Sherman Act scru-tiny); United States v. ORS, Inc., 997 F.2d 628 (9th Cir. 1993) (nonexus between defendants’ activities and interstate commerce);Wheat v. Mass, 994 F.2d 273 (5th Cir. 1993); Pocono InvitationalSports Camp, Inc. v. National Collegiate Athletic Ass’n, 317 F.Supp. 2d 569, 581-84 (E.D. Pa. 2004) (summary judgmentgranted to defendant on grounds that alleged restraint withrespect to eligibility rules and restrictions on recruiting at basket-ball camp did not involve “trade or commerce”).

C. Foreign Commerce

(1)(a)Prior to 1982, the Sherman Act was applied to conduct in foreigncountries where there could be shown to be a direct and substan-tial effect on United States commerce. Compare Continental OreCo. v. Union Carbide, 370 U.S. 690 (1962), and In re UraniumAntitrust Litigation, 617 F.2d 1248 (7th Cir. 1980), with Ameri-can Banana Co. v. United Fruit Co., 213 U.S. 347 (1909), over-ruled by United States v. Sisal Sales Corp., 274 U.S. 268 (1927).

(1)(b)In 1982, the Sherman Act was amended by the Foreign TradeAntitrust Improvements Act (FTAIA), which provides in sub-stance that the Sherman Act does not apply to conduct involved inforeign commerce unless the conduct in question has a direct,substantial and reasonably foreseeable effect on either the importtrade or the domestic commerce of the United States. (Pub.L.No.97-290, 96 Stat. 1233, § 402, amending 15 U.S.C. § 7 (1982). Seealso U.S. Dep’t of Justice, Antitrust Enforcement Guidelines forInternational Operations (1995); Hartford Fire Ins. Co. v. Califor-nia, 509 U.S. 764, 113 S. Ct. 2891, 2909 (1993); Hoffmann-LaRoche v. Empagran, 542 U.S. 155, 163-74 (2004) (foreign

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plaintiff who purchased products overseas from a foreign cartelparticipant could not sue the foreign sellers in the U.S. for viola-tion of the Sherman Act even though the particular foreign sellerswere involved in a price-fixing cartel that itself had an anticom-petitive effect in the U.S.); United States v. Anderson, 326 F.3d1319, 1330 (11th Cir. 2003) (court had jurisdiction over claimthat defendant rigged bids on foreign projects financed by UnitedStates Agency for International Development, because the allegedscheme affected funding that flowed between government andU.S. companies, but not any “trade or commerce” with foreignnations). United States v. Nippon Paper Industries Co., 109 F.3d 1(1st Cir. 1997), cert. denied, 522 U.S. 1143 (1998) (with intendedand substantial effect in United States, criminal price fixingaction against Japanese company would proceed). Compare Car-pet Group Int’l v. Oriental Rug Importers Ass’n, 227 F.3d 62(3d Cir. 2000) (court took jurisdiction); Laker Airways Ltd. v.Pan Am. World Airways, 568 F. Supp. 811, 817 (D.D.C. 1983)(court took jurisdiction) with United States v. LSL Biotechnolo-gies, 379 F.3d 672, 680-81 (9th Cir. 2004) (no jurisdiction overagreement to restrict sales in North America; alleged delay ininnovation and higher prices were not “immediate” consequencesof agreement and thus did not constitute “direct” effects underFTAIA); McGlinchy v. Shell Chemical Co., 845 F.2d 802(9th Cir. 1988) (no jurisdiction) and Timberlane Lumber Co. v.Bank of America, 749 F.2d 1378 (9th Cir. 1984), cert. denied,472 U.S. 1032 (1985) (court declined jurisdiction). Circuit courtsare split as to whether or not a plaintiff must show that his injuryarose from the effects on domestic commerce,. Compare Krumanv. Christie’s Int’l Plc , 284 F.3d 384 (2d Cir. 2002) (jurisdictionattached to price-fixing conduct regarding international auctionsthat had the requisite “effect” on domestic commerce) with DenNorske Stats Oljeselskap AS v. Heeremac VOF, 241 F.3d 420(5th Cir. 2001) (holding that the FTAIA requires plaintiff to dem-onstrate its alleged harm arose from anticompetitive effects onU.S. commerce); Caribbean Broadcasting System, Ltd. v. Cable& Wireless PLC, 148 F.3d 1080 (D.C. Cir. 1998) (holding thatmonopolization of the Eastern Caribbean broadcast market iswithin the reach of the Sherman Act, as “under the circumstancesit is quite plausible that the plaintiffs’ alleged conduct would havea significant effect upon U.S. commerce”). Cf. MetallgesellschaftAG v. Sumitomo Corp., 325 F.3d 836, 840-41 (7th Cir. 2003)

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(reserving “for another day” the question as to which test applies,because under either test plaintiffs alleged they were injured byalleged foreign conspiracy that raised copper prices in U.S. mar-ket).

(2)(a)The act of state doctrine may bar a claim for antitrust injury flow-ing from foreign sovereign acts allegedly induced and procuredby the defendant. American Banana Co. v. United Fruit Co., 213U.S. 347 (1909); Clayco Petroleum Corp. v. Occidental Petro-leum Corp., 712 F.2d 404 (9th Cir. 1983), cert. denied, 464 U.S.1040 (1984); Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir.), cert.denied, 434 U.S. 984 (1977).

(2)(b)While conduct which is compelled by a foreign sovereign may beprotected from antitrust liability, mere governmental approval orinvolvement will not necessarily insulate the activity from UnitedStates antitrust jurisdiction. Compare O.N.E. Shipping v. FloatMerchant Grancolombiana, 830 F.2d 449, 453 (2d Cir. 1987),cert. denied, 488 U.S. 923 (1988), and Interamerican RefiningCorp. v. Texaco Maracaibo, Inc., 307 F. Supp. 1291 (D. Del.1970), with Continental Ore Co. v. Union Carbide, 370 U.S. 690(1962); United States v. Sisal Sales Corp., 274 U.S. 268 (1927);and Timberlane Lumber Co. v. Bank of America, 549 F.2d 597(9th Cir. 1976). See also Restatement (Second) of Foreign Rela-tions Law of the United States, § 40 (1984 Supp.) and Restate-ment (Third) of Foreign Relations Law of the United States § 443(1986).

(2)(c)The act of state doctrine may bar a claim for antitrust injury flow-ing from foreign sovereign acts allegedly induced and procuredby the defendant. American Banana Co. v. United Fruit Co.,213 U.S. 347 (1909); Clayco Petroleum Corp. v. OccidentalPetroleum Corp., 712 F.2d 404 (9th Cir. 1983), cert. denied, 464U.S. 1040 (1984); Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir.),cert. denied, 434 U.S. 984 (1977).

(2)(d)The fact that conduct is lawful in the foreign state in which ittook place, or even strongly encouraged, does not necessarily pre-clude application of U.S. antitrust law. Hartford Fire Ins. v. Cali-fornia, 509 U.S. 764, 113 S. Ct. 2891 (1993). While conductwhich is compelled by a foreign sovereign may be protected fromantitrust liability, mere governmental approval or involvementwill not necessarily insulate the activity from United States anti-

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trust jurisdiction. Compare O.N.E. Shipping v. Flota MercanteGrancolombiana, 830 F.2d 449, 453 (2d Cir. 1987), cert. denied,488 U.S. 923 (1988), and Interamerican Refining Corp. v. TexacoMaracaibo, Inc., 307 F. Supp. 1291 (D.C. Del. 1970), with Conti-nental Ore Co. v. Union Carbide, 370 U.S. 690 (1962); UnitedStates v. Sisal Sales Corp., 274 U.S. 268 (1927), and TimberlaneLumber Co. v. Bank of America, 549 F.2d 597 (9th Cir. 1976).See also Restatement (Second) of Foreign Relations Law of theUnited States, § 40 (1984 Supp.) and Restatement (Third) of For-eign Relations Law of the United States, § 443 (1986).

(2)(e)The act of state doctrine does not apply unless the suit requires aU.S. court to declare invalid the official act of a foreign sovereign,performed in its own territory. W.S. Kirkpatrick & Co., Inc. v.Environmental Tectronics Corp., 493 U.S. 400 (1990). Similarly,when a foreign government is acting in a commercial capacity,the act of state doctrine has been held inapplicable. Alfred Dun-hill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 695-706(1976); Williams v. Curtiss-Wright Corp., 694 F.2d 300 (3d Cir.1982).

IV. THE REQUIREMENT OF STANDING

There is a “standing” requirement in antitrust jurisprudence that precludescertain potential plaintiffs from bringing suit. The standing doctrine todayrepresents an amalgam of several related doctrines.

(1) “Any person who shall be injured in his business or property by rea-son of anything forbidden in the antitrust laws . . . shall recoverthreefold the damages by him sustained, and the cost of suit, includ-ing a reasonable attorney’s fee.” (15 U.S.C. § 15).

(2)(a)In Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489(1977), the Supreme Court held that “plaintiffs must prove antitrustinjury, which is to say injury of the type the antitrust laws wereintended to prevent and that flows from that which makes the defen-dants’ acts unlawful” (emphasis in original). See also Atlantic Rich-field Co. v. U.S.A. Petroleum Co., 495 U.S. 328 (1990)(independent service station operator was without standing to com-plain of maximum price fixing by a competing refiner); Cargill, Inc.v. Monfort of Colorado, Inc., 479 U.S. 104 (1986) (“The antitrustlaws . . . were enacted for the protection of competition, not compet-

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itors”); Tal v. Hogan, 453 F.3d 1244 (10th Cir. 2006) (the fact that acorporation might benefit from a future business relationship with acompany that failed to receive a contract because of bid-rigging bydefendants, or through incidental and speculative increases in prop-erty value, was insufficient to constitute an antitrust injury; corpora-tion thus lacks standing to bring its antitrust claim); In re CanadianImport Antitrust Litig., 470 F.3d 785, 791-92 (8th Cir. 2006) (pre-scription drug consumers lacked antitrust standing where higherdrug prices were not caused by conduct of defendant drug compa-nies but rather by federal regulations which prevented, for labelingreasons, the importation of less expensive Canadian drugs); Wallacev. Int’l Bus. Machs. Corp., 467 F.3d 1104, 1107 (7th Cir. 2006) (noantitrust injury where “conspiracy” to provide free, open-sourcesoftware did not harm consumers); Commc’ns Winstar LLC v.Equify Office Prop., Inc., 170 Fed. Appx. 740 (2d Cir. 2006) (inju-ries alleged bore upon a different market and therefore were morecollateral effects on an individual participant or competitor in a sec-ondary market, thus plaintiffs lacked standing to bring suit); 2660Woodley Road Joint Venture v. ITT Sheraton Corp., 369 F.3d 732,738 (3rd Cir. 2004) (holding that plaintiff’s injury in paying inflatedpurchasing prices to vendors was caused by a “breach of contractand the corruption of a principal agent relationship,” which was notthe type of injury the antitrust laws were intended to prevent); GlenHolly Entm’t Inc. v. Tektronix Inc., 343 F.3d 1000, 1010 (9th Cir.2003) (dismissing as “too restrictive” the district court’s finding thatplaintiff did not suffer antitrust injury because the injury did notflow from artificially increased prices or reduced product quality;appellate court held that the defendants’ agreement not to competeinjured plaintiff by reducing customers’ product choices, which isthe type of injury the antitrust laws were designed to prevent); Mid-west Gas Servs. v. Indiana Gas Co., 317 F.3d 703, 711-12 (7th Cir.2003) (joint venture between gas marketers did not cause antitrustinjury where plaintiff failed to allege that competition was affectedin gas market); Ashley Creek Phosphate Co. v. Chevron USA, Inc.,315 F.3d 1245, 1261 (10th Cir. 2003) (affirming district court’s dis-missal of antitrust claims for lack of standing because plaintiff failedto demonstrate preparedness to enter market); Andrx Pharmaceuti-cals, Inc. v. Biovail Corp. Int’l, 256 F.3d 799 (D.C. Cir. 2001) (dis-missed without prejudice because plaintiff unable to allege intentand preparedness to enter market); St. Louis Convention & VisitorsComm’n v. National Football League, 154 F.3d 851 (8th Cir. 1998)

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(no showing of causation between alleged anticompetitive activitiesand loss fatal to § 1 claim); Addamax Corp. v. Open SoftwareFound., Inc., 152 F.3d 48 (1st Cir. 1998) (lack of standing whereplaintiff failed to show its injury resulted from conduct stipulated tobe anticompetitive); Doctor’s Hospital of Jefferson, Inc. v. SoutheastMedical Alliance, Inc., 123 F.3d 301 (5th Cir. 1997) (hospital estab-lished standing by alleging that exclusion from PPO resulted in anti-trust injury in form of alleged losses and competitive disadvantage);Ertag v. Naples Community Hospital, Inc., 121 F.3d 721 (11th Cir.1997) (not-for-publication) (neurologists denied privileges to inter-pret MRI scans had standing); McDaniel v. Appraisal Institute,117 F.3d 421 (9th Cir. 1997) (appraiser denied certification did notsuffer antitrust injury); Sullivan v. Tagliabue, et al., 25 F.3d 43, 47(1st Cir. 1994) (plaintiff lacked standing individually and asassignee of assets of corporation to assert antitrust claim; no anti-trust injury, injury was indirect and any damages were highly specu-lative. Factors to determine standing include: causal connectionbetween plaintiff and alleged antitrust violation; harm to plaintiff;improper motive and nature of alleged injury); Lovett v. GeneralMotors Corp., 975 F.2d 518, 521 (8th Cir. 1992), cert. denied,114 S. Ct. 1058 (1994) (owner of automobile dealership lackedstanding to bring antitrust claim because he did not personally sufferantitrust injury as a result of alleged anticompetitive activity of man-ufacturer); Todorov v. DCH Healthcare Authority, 921 F.2d 1438(11th Cir. 1991) (doctor who was denied radiological privileges byhospital lacked standing because his injury was the loss of allegedmonopoly profits); Nelson v. Monroe Regional Medical Center,925 F.2d 1555 (7th Cir.), cert. denied, 112 S. Ct. 285 (1991) (plain-tiffs had standing to sue hospital whose merger with local clinic anddecision to deny plaintiff nonemergency health care caused plaintiffto travel 40 miles for health care access and required other plaintiffto leave work to drive plaintiffs to alternate clinic); DeLong Equip-ment v. Washington Mills Electro Minerals Corp., 990 F.2d 1186,1199 (11th Cir. 1993) (distributor has standing where manufacturerterminated distributorship because distributor objected to price fix-ing conspiracy directed towards customer); Mr. Furniture Ware-house Inc. v. Barclays American/Commercial Inc., 919 F.2d 1517(11th Cir. 1990), cert. denied, 112 S. Ct. 68 (1991) (furniture sellerdid not suffer antitrust injury from a commercial factor who refusedto extend credit to seller even where factor had monopoly power incredit market).

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(2)(b)In Associated General Contractors of California, Inc. v. CaliforniaState Council of Carpenters, 459 U.S. 519 (1983), the Court set fortha flexible test for standing which takes into account several factors,including the nature of plaintiff’s injury, the directness or indirect-ness of the asserted injury, the potential for duplicative recovery, thecomplexity of apportioning damages, the speculative nature of dam-ages asserted, and the existence of other parties that have been moredirectly harmed.

(2)(c)Some courts view “antitrust injury” as an additional element ofstanding. E & L Consulting, Ltd. v. Doman Indus. Ltd, 472 F.3d 23(2d Cir. 2006) (affirming dismissal where former distributor failedto allege injury to competition—as opposed to mere “injury-in-fact”—when manufacturer established a rival as its exclusive distrib-utor); MacPherson’s Inc. v. Windermere Real Estate Servs. Co.,100 Fed. Appx. 651, 654, 2004 WL 1202131 (9th Cir. May, 25,2004) (unpub.) (summary judgment dismissal for lack of standing inaction by a property management firm against a competing firm andits franchisees because a “price-fixing” agreement would have bene-fited the plaintiff, not caused it harm); see George Haug Co., Inc. v.Rolls Royce Motor Cars Inc., 148 F.3d 136 (2d Cir. 1998) (com-plaint dismissed for failure to allege “antitrust injury,” plaintifffailed to allege its market share or that absorbed as a result of anti-competitive activity); Pittsburg v. West Penn Power Co., 147 F.3d256 (3d Cir. 1998) (“[t]he City has failed to offer any support for theproposition that the alleged harm—the fact that the City spentmoney to bring competition to the Redevelopment Zones—is a cog-nizable antitrust injury”); Rice v. Treasure Island Assocs., 117 F.3d1426 (9th Cir. 1997) (not-for-publication) (tenants of mobile homepark lack standing as either competitors or consumers because theydid not allege antitrust injury); Hodges v. WSM, Inc. et al., 26 F.3d36, 39 (6th Cir. 1994) (case claiming antitrust violations dismissedfor plaintiff’s failure to allege “antitrust injury”); South Dakota v.Kansas City Southern Industries, Inc., 880 F.2d 40 (8th Cir. 1989),cert. denied, 493 U.S. 1023 (1990); John Lenore & Co. v. OlympiaBrewing Co., 550 F.2d 495 (9th Cir. 1977)), Baglio v. Baska,940 F. Supp. 819 (W.D. Pa. 1996) (termination of physician fromdirector position at hospital was not antitrust injury, accordingly thephysician lacked standing); while others treat the two concepts asdistinct requirements (Angelico v. Lehigh Valley Hospital, 184 F.3d268 (3d Cir. 1999) (in holding excluded surgeon had standing, court

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distinguished between antitrust injury and anticompetitive effect);Local Beauty Supply, Inc. v. Lamaur Inc., 787 F.2d 1197 (7th Cir.1986); Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486,1500 (11th Cir. 1985), cert. denied, 475 U.S. 1107 (1986); EngineSpecialties, Inc. v. Bombardier Ltd., 605 F.2d 1, 12, n.16 (1st Cir.1979), cert. denied, 446 U.S. 983 (1980).

(3)(a)Standing is increasingly limited to competitors and customers orsuppliers of the defendant. See e.g., Caruana v. Gen. Motors Corp.,2006-2 Trade Cas. (CCH) ¶ 75,441 (6th Cir. 2006) (former owner ofcar dealership lacked standing to sue for harm to his former busi-ness; injury to his ownership and management interest was tooattenuated to constitute antitrust injury); Midwest Gas Services v.Indiana Gas Co., Inc., 317 F.3d 703, 710-11 (7th Cir. 2003) (market-ing affiliate of gas storage facility lacked standing to bring antitrustclaim because its injury was derivative of that suffered directly bythe storage facility); Bodie-Rickett and Associates v. Mars, Inc.,957 F.2d 287 (6th Cir. 1992) (product broker as indirect victim ofmanufacturer’s reorganization of brokerage arrangements lackedstanding); In re Lower Lake Erie Iron Ore Antitrust Litigation, 998F.2d 1144 (3d Cir. 1993) (standing where railroad conspired to pre-vent introduction of new technology, resulting in increased transpor-tation costs); Yellow Pages Cost Consultants, Inc. v. GTEDirectories, 951 F.2d 1158 (9th Cir. 1991), cert. denied, 112 S. Ct.1947 (1992) (GTE’s refusal to deal with yellow page consultantsdirectly injured consultants, who were found to compete with GTEfor advertisers); Thompson v. Metropolitan Multi-List, Inc.,934 F.2d 1566 (11th Cir.), reh’g denied, 946 F.2d 906 (11th Cir.1991), cert. denied, 113 S. Ct. 295 (1992) (real estate broker associ-ation had standing to sue on behalf of its members); SacramentoValley Chapter of The Nat’l Electrical Contractors Ass’n v. Interna-tional Brotherhood of Electrical Workers, 888 F.2d 604 (9th Cir.1989) (labor union lacked standing to challenge alleged conspiracyby employers to eliminate the union, as a supplier of labor, in favorof another union); Dry v. Methodist Medical Center, 893 F.2d 1334(6th Cir. 1989) (complaint dismissed for plaintiff’s failure to allegeparticipation in same economic market, either as customer or com-petitor, of defendant hospital); Exhibitors’ Service Inc. v. AmericanMulti-Cinema, Inc., 788 F.2d 574 (9th Cir. 1986) (cinema licensingagent lacks standing to challenge split agreement between its princi-pal and another exhibitor which had resulted in agent’s termination).

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But see American Ad Management, Inc. v. General Telephone Co.,190 F.3d 1051 (9th Cir. 1999) (sales representative had standing tochallenge alleged agreement among members of an association toeliminate commissions).

(3)(b)Several cases have held that derivative injuries sustained by employ-ees, officers, stockholders and creditors of an injured company donot qualify for standing. Tal v. Hogan, 453 F.3d 1244 (10th Cir.2006) (finding that developer, as corporate officer of corporation,did not have standing to assert antitrust claims because he had notshown that he suffered an antitrust injury); Eagle v. Star-Kist Foods,Inc., 812 F.2d 538, 541-542 (9th Cir. 1987); Adams v. Pan AmericanWorld Airways, Inc., 828 F.2d 24 (D.C. Cir. 1987), cert. denied,485 U.S. 961 (1988); National Independent Theatre Exhibitors, Inc.v. Buena Vista Distribution Co., 748 F.2d 602, 608 (11th Cir. 1984),cert. denied, 471 U.S. 1056 (1985); In re Industrial Gas AntitrustLitigation (Bichan), 681 F.2d 514, 519-520 (7th Cir. 1982), cert.denied, 460 U.S. 1016 (1983). See also Finnegan v. Campeau Corp.,915 F.2d 824 (2d Cir. 1990), cert. denied, 499 U.S. 976 (1991)(although shareholder of target corporation had standing to sue tworival bidders for agreeing to bid jointly for target, antitrust laws inthis case must give way to securities laws which permit rivals to bidjointly).

(3)(c)The lower courts have not, however, been entirely consistent inapplying the criteria set forth in Associated General as the basis forstanding. Compare McDonald v. Johnson & Johnson, 722 F.2d 1370(8th Cir. 1983), cert. denied, 469 U.S. 870 (1984) (no standing),with CVD, Inc. v. Raytheon, Co., 769 F.2d 842 (1st Cir. 1985), cert.denied, 475 U.S. 1016 (1986) (plaintiff has standing to seek lawyersfees previously incurred in defending bad faith trade secrets casebrought in alleged violation of the Sherman Act); and compareOstrofe v. H. S. Crocker Co., 740 F.2d 739 (9th Cir. 1984), cert. dis-missed, 469 U.S. 1200 (1985) (employee discharged for refusal toviolate antitrust laws has standing), with Gregory Marketing Corp.v. Wakefern Food Corp., 787 F.2d 92 (3d Cir.), cert. denied,479 U.S. 821 (1986) (agent similarly discharged is without stand-ing).

(4)(a)Indirect purchasers generally lack standing in federal court to chal-lenge antitrust violations by their suppliers. In Illinois Brick Co. v.Illinois, 431 U.S. 720 (1977), the Supreme Court held that only the

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first purchaser in a chain of distribution can sue to recover an over-charge imposed by price fixing except in cost plus contracts. Seealso Kansas and Missouri v. Utilicorp United, Inc., 497 U.S. 199(1990) (state did not have standing to sue under parens patriae forcustomers of public utilities who purchased gas at inflated pricesfrom gas producers and pipeline owner even though utility passedoff inflated price to its customers because customers were indirectpurchasers); Koth v. Microsoft Corp., 444 F.2d 312 (4th Cir. 2006)(no standing for purchasers who indirectly purchased products andlicenses from original equipment manufacturers and retailers atfixed prices); Paycom Billing Servs., Inc. v. Mastercard Int’l, Inc.,467 F.3d 283, 291-92 (2d Cir. 2006) (online merchant lacked stand-ing to sue credit card association where it was only the indirectpayor of chargebacks imposed directly on acquiring banks); Hughesv. Tobacco Institute, Inc., 278 F.3d 417, 423 (5th Cir. 2001) (nostanding for consumers that purchased tobacco products from dis-tributors entitled to bring their own suit, because this would result in“two sets of plaintiffs recovering from the defendant for the sameacts”); In re Brand Name Prescription Drugs Antitrust Litigation,123 F.3d 599 (7th Cir. 1997) (indirect purchaser doctrine precludedclaims against manufacturers by pharmacies that purchased fromwholesalers); Illinois, ex. rel. Burris v. Panhandle Eastern Pipe LineCo., 935 F.2d 1469 (7th Cir. 1991), cert. denied, 112 S. Ct. 1169(1992) (cost-plus exception in Utilicorp too narrow to include indi-rect purchasers of natural gas supplier).

(4)(b)State statutes permitting recovery by indirect purchasers are not pre-empted by federal law. California v. ARC America Corp., 490 U.S.93 (1989).

(4)(c)To determine if a plaintiff has suffered antitrust injury due to allegedmonopolistic barriers to entry, the court will consider: (1) the plain-tiff’s background in the prospective business, (2) affirmative actionon the plaintiff’s part to engage in the proposed business, (3) plain-tiff’s ability to finance entry, (4) consummation of contracts. In reDual-Deck Video Cassette Recorder Litigation, 11 F.3d 1460, 1465(9th Cir. 1993).

(4)(d)A valid assignment of antitrust claims must be express; “generalassignments without specific reference to antitrust claims, cannotvalidly transfer the right to pursue those claims.” Gulfstream III

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Associates v. Gulfstream Aerospace, 995 F.2d 425, 440(3d Cir. 1993).

V. PROOF OF THE CONTRACT, COMBINATION OR CONSPIRACY

A. Proof By Circumstantial Evidence

(1) A conspiracy may be established by direct evidence of agreementor through circumstantial evidence of conduct. AmericanTobacco Co. v. United States, 328 U.S. 781, 809-810 (1946);Interstate Circuit v. United States, 306 U.S. 208 (1939); EasternStates Retail Lumber Dealers’ Ass’n v. United States, 234 U.S.600 (1914); MCM Partners v. Andrews-Bartlett & Associates,62 F.3d 967 (7th Cir. 1995) (victim of coercion may still be co-conspirator); Esco Corporation v. United States, 340 F.2d 1000,1007 (9th Cir. 1965) (“[a] knowing wink can mean more thanwords”).

(2) Evidence must reasonably tend to prove a conscious commitmentto a common scheme designed to achieve an unlawful objective.Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764(1984). See also Matsushita Electric Industrial Co., Ltd. v. ZenithRadio Corp., 475 U.S. 574, 596-597 (1986) (“[l]ack of motivebears on the range of permissible conclusions that might bedrawn from ambiguous evidence; if [defendants] had no rationaleconomic motive to conspire, and if their conduct is consistentwith other equally plausible explanations, the conduct does notgive rise to an inference of conspiracy”); R.J. Reynolds TobaccoCo. v. Cigarettes Cheaper!, 462 F.3d 690, 695-97 (7th Cir. 2006)(horizontal agreement among cigarette manufacturer and retailerscould not be inferred from a retailer’s internal memo expressing adesire to achieve “a degree of pricing invincibility” by discount-ing R.J. Reynolds cigarettes to drive plaintiff cigarette discounterout of the market where there was no evidence that the memo wasseen or acted on by any other defendant retailer); Abraham v.Intermountain Health Care Inc., 461 F.3d 1249, 1261 (10th Cir.2006) (optometrists excluded from defendant health plan’s pro-vider network as a result of lobbying by ophthalmologists did notprove horizontal agreement where they failed to exclude the pos-sibility that the health plan’s decision was arrived at indepen-dently); International Healthcare Mgmt. v. The Hawaii CoalitionFor Health, 332 F.2d 600, 606-07 (9th Cir. 2003) (joint efforts by

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physician association and consumer group to modify non-feeterms of physician provider agreements to increase bargainingpower with managed care plans did not establish motive to fixfees or otherwise impair competition); TRI, Inc. v. Boise CascadeOffice Products, Inc., 315 F.3d 915, 918 (8th Cir. 2003) (plaintifffailed to present sufficient evidence of an agreement or conspir-acy, and defendants had no rational economic motive to conspireagainst plaintiff); Virginia Vermiculite, Ltd. v. Historic GreenSprings, Inc., 307 F.3d 277 (7th Cir. 2002) (plaintiff failed to offerevidence to show that defendant’s land donation was more than agenuine gift, i.e. unilateral action, and that defendants were thusengaged in concerted activity); Viazis v. American Association ofOrthodontists, 314 F.3d 758 (5th Cir. 2002) (orthodontist inventorfailed to present sufficient direct or circumstantial evidence thatorthodontist association and manufacturer of invention conspiredto exclude his invention from the market); In re Brand Name Pre-scription Drugs Antitrust Litigation, 288 F.3d 1028, 1033(7th Cir. 2002) (holding there was too little evidence to inferwholesalers’ guilt); Blomkest Fertilizer, Inc. v. Potash Corp. ofSaskatchewan, 203 F.3d 1028 (8th Cir.), cert. denied sub nom.,Hahnaman Albrecht, Inc. v. Potash Corp. of Saskatchewan,121 S. Ct. 50 (2000) (circumstantial evidence of conspiracy didnot tend to exclude possibility of independent action by potashmanufacturers); AD/SAT v. Associated Press, 181 F.3d 216(2d Cir. 1999) (action by association’s members did not proveconspiracy); Vakharia v. Swedish Covenant Hospital, 190 F.3d799 (7th Cir. 1999), cert. denied, 530 U.S. 1204 (2000) (anesthe-siologist did not show conspiracy between hospital, various phy-sicians and an anesthesiology association to exclude her from themarket); Ostrenski v. Columbia Hosp. for Women Found., Inc.,158 F.3d 1289 (D.C. Cir. 1998) (no evidence to support conspir-acy in legitimate peer review process); In re Brand Name Pre-scription Drugs, 186 F.3d 781 (7th Cir. 1999) (court dismissedconspiracy claim for lack of evidence of collusion among drugmanufacturers); Serfecz v. Jewel Food Store, 67 F.3d 591(7th Cir. 1995) (existence of mutual economic advantage does notexclude possibility of independent action); Greater RockfordEnergy & Technology Corp. v. Shell Oil Co., 998 F.2d 391(7th Cir. 1993), cert. denied, 114 S. Ct. 1054 (1994) (trade associ-ation participation insufficient to establish conspiracy); ParkwayGallery Furniture, Inc. v. Kittinger/Pennsylvania House Group,

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Inc., 878 F.2d 801 (4th Cir. 1989) (rule of Monsanto and Mat-sushita held to apply equally in non-price context); Todorov v.DCH Healthcare Authority, 921 F.2d 1438 (11th Cir. 1991) (doc-tor denied radiological privileges by hospital failed to excludepossibility that decision fostered competition among hospitals forradiology services); Wigod v. Chicago Mercantile Exchange,981 F.2d 1510 (7th Cir. 1992) (plaintiff’s per se theory that mer-cantile exchange conspired with other traders to terminate hisprivileges fails because no facts alleged to prove conspiracy). Butsee Champagne Metals v. Ken-Mac Metals, Inc., 458 F.3d 1073(10th Cir. 2006) (summary judgment for defendants was inappro-priate where plaintiff aluminum dealer had provided direct,although weak, evidence of a horizontal boycott by its competi-tors in addition to circumstantial evidence); In re High FructoseCorn Syrup, 295 F.3d 651, 663 (7th Cir. 2002) (reversing sum-mary judgment entered in favor of defendant high fructose manu-facturers, finding that plaintiff direct purchasers offered sufficientevidence to enable a reasonable jury to find a price-fixing agree-ment among manufacturers).

(3) Government’s suit against Visa and Mastercard alleged that jointcontrol of two networks by same group of banks limited competi-tion between the networks and with other networks. United Statesv. Visa, USA, Inc., 183 F.Supp.2d 613 (S.D.N.Y. 1999). The finalconsent decree prohibits either company from enforcing any pol-icy preventing issuers of credit cards from issuing with anothercard network. United States v. Visa, USA, Inc., 2001 U.S. Dist.Lexis 20222 (S.D.N.Y. 2001).

(4) A contractual arrangement need not be proved; an “understand-ing” or “tacit agreement” may be enough Norfolk Monument Co.v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700 (1969);United States v. Singer Mfg. Co., 374 U.S. 174, 193 (1963);United States v. Champion Int’l Corp., 557 F.2d 1270 (9th Cir.),cert. denied, 434 U.S. 938 (1977).

(5) Withdrawal from a conspiracy requires the withdrawing conspira-tor to report the conspiracy to the authorities or to announce hiswithdrawal to his co-conspirators. U.S. v. U.S. Gypsum Co.,438 U.S. 422, 463-65 (1978); In re Brand Name PrescriptionDrugs, Inc., 123 F.3d 599 (7th Cir. 1997); United States v. Nippon

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Paper Industries Co., Ltd., 62 F. Supp. 2d 173 (D. Mass. 1999)(notification of withdrawal to one trading house sufficient).

B. Conscious Parallelism

When one or more companies intentionally adopt the practices ofsome competing company, such companies are sometimes said to beengaged in consciously parallel business conduct or “conscious paral-lelism.” Such conscious parallelism may or may not be evidence ofconspiracy.

(1) Consciously parallel conduct alone is not enough to establish aconspiracy. Theatre Enterprises v. Paramount Film DistributingCorp., 346 U.S. 537, 540-541 (1954) (“To be sure, businessbehavior is admissible circumstantial evidence from which thefact finder may infer agreement. But this Court has never heldthat proof of parallel business behavior conclusively establishesagreement or, phrased differently, that such behavior itself consti-tutes a Sherman Act offense. . . . ‘conscious parallelism’ has notyet read conspiracy out of the Sherman Act entirely”); In re FlatGlass Antitrust Litigation, 385 F.3d 350, 360 (3d Cir. 2004) (evi-dence must be taken as whole in determining whether “plus” fac-tors are sufficient to infer a conspiracy. Wallace v. Bank ofBartlett, 55 F.3d 1166 (6th Cir. 1995), cert. denied, 116 S. Ct. 709(1996) (parallel pricing without more not sufficient to establishconspiracy); Petruzzi’s IGA Supermarkets v. Darling-Delaware,998 F.2d 1224, 1232 (3d Cir.), cert. denied, 114 S. Ct. 554 (1993)(conscious parallel behavior alone is not sufficient to establishconspiracy); Schwartz v. Hospital of the University of Pennsylva-nia, 1993-1 Trade Cas. (CCH) ¶ 70,222 (E.D. Pa. 1993) (no evi-dence that alleged co-conspirators were aware of parallelconduct); A&M Records, Inc. v. A.L.W. Ltd., 855 F.2d 368(7th Cir. 1988) (parallel refusal to deal insufficient to establishconspiracy where more plausible economic inference available);Richards v. Neilsen Freight Lines, 810 F.2d 898, 904 (9th Cir.1987) (“[t]he fact that many, if not all, firms in an industry reactsimilarly to a particular practice does not evidence an industry-wide agreement when there is a legitimate business purpose foreach firm’s behavior”); Wilcox v. First Interstate Bank of Oregon,N.A., 815 F.2d 522 (9th Cir. 1987) (parallel movement of primerates insufficient by itself to establish agreement); Weit v. Conti-nental Illinois Nat’l Bank and Trust, 641 F.2d 457, 463 (7th Cir.

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1981), cert. denied, 455 U.S. 988 (1982) (parallel pricing or con-duct lacks probative significance when the product in question isstandardized or fungible); Fears v. Wilhelmina Model Agency,2004 WL 594396, at *6-7 (S.D.N.Y. March 23, 2004) (plaintiffsestablished sufficient issue of fact on existence of conspiracy toavoid summary judgment where proof of “conscious parallelism”plus a motive to conspire and significant communications aboutpolicy among alleged conspirators); Rototherm Corp. v. PennLinen & Uniform Service, Inc., 1997-2 Trade Cas. (CCH)¶ 71,983 (E.D. Pa. 1997) (allegations that laundry services actedcontrary to own economic interests and that they had a logicalmotive to enter into an agreement in restraint of trade was insuffi-cient to state an antitrust claim where independent reasons fortheir actions); Lykes Pasco, Inc. v. Ahara Dairy Products Corp.,1997-2 Trade Cas. (CCH) ¶ 72,011 (E.D.N.Y. 1997) (parallel risein prices explained by increase in demand for orange juice). Butsee Dillard v. Merrill-Lynch, Pierce Fenner’s Smith, Inc.,961 F.2d 1148, 1159 (5th Cir. 1992), cert. denied, 113 S. Ct. 1046(1993) (although conscious parallelism alone is insufficient tostate an antitrust claim, on summary judgment, plaintiff need onlyallege a conspiracy); Baker v. Jewel, 823 N.E. 2d 93 (Ill. App. Ct.2005) (“plus” factors were insufficient to establish conspiracy incase alleging price fixing of milk between two major food stores).

(2) Many courts require plaintiffs to show conscious parallelism“plus,” requiring some additional circumstantial evidence,beyond uniform conduct, to infer conspiracy. “Plus” factors mostfrequently cited by the courts are:

(2)(a)That a defendant acted in contravention of its individual eco-nomic interests, i.e., that a single firm would not benefit from thepractice unless it was also adopted by competitors. E.g.,Petruzzi’s IGA Supermarkets v. Darling-Delaware, 998 F.2d 1224(3d Cir.), cert. denied, 114 S. Ct. 554 (1993); Cayman Explora-tion Corp. v. United Gas Pipe Line Co., 873 F.2d 1357 (10th Cir.1989); Supermarket of Homes v. San Fernando Valley Bd. ofRealtors, 786 F.2d 1400 (9th Cir. 1986); Proctor v. State FarmMut. Auto Ins. Co., 675 F.2d 308 (D.C. Cir.), cert. denied,459 U.S. 839 (1982); Weit v. Continental Illinois Nat. Bank &Trust, 641 F.2d 457, 463 (7th Cir. 1981), cert. denied, 455 U.S.988 (1982); Schoenkopf v. Brown & Williamson Tobacco Corp.,

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637 F.2d 205 (3d Cir. 1980); In re Nasdaq Market Makers Anti-trust Litigation, 894 F. Supp. 703 (S.D.N.Y. 1995).

(2)(b)That the defendant was unable or unwilling to rebut or explainuniform behavior at trial. Interstate Circuit v. United States, 306U.S. 208, 226 (1939) (“[s]ilence then becomes evidence of themost convincing character”); Long Beach v. Standard Oil Co.,872 F.2d 1401, reh’g. en banc denied, 886 F.2d 246 (9th Cir.1989), cert. denied, 493 U.S. 1076 (1990); Levitch v. ColumbiaBroad. Sys., Inc., 495 F. Supp. 649 (S.D.N.Y. 1980), aff’d,697 F.2d 495 (2d Cir. 1983).

(2)(c)That there was parallel conduct plus meetings or exchanges ofcorrespondence or other information. United States v. ContainerCorp. of America, 393 U.S. 333 (1969); City of Tuscaloosa v.Harcros Chems., Inc., 158 F.3d 548 (11th Cir. 1998), cert. denied,528 U.S. 812 (1999) (court denied summary judgment for defen-dants on antitrust claim based on theory of conscious parallelism.Plaintiff must show (1) significant evidence supporting the the-ory, (2) some “plus” factor that tends to indicate the absence ofindependent action, and (3) a showing that the defendants’ behav-ior was contrary to their own economic self-interest so as to raisean issue of good faith business judgment); Todd v. Exxon Corp.,275 F.3d 191 (2d Cir. 2001) (plaintiff successfully pled additionaldetail regarding information exchange between oil companies tomove claim of suppression of wages beyond mere conscious par-allelism); (In re Baby Food Antitrust Litigation, 166 F.3d 112(3d Cir. 1999) (parallel price movement accompanied byexchange of information between sales representatives with nopricing authority insufficient, without more, to establish conspir-acy); ES Development, Inc. v. RWM Enterprises, Inc., 939 F.2d547 (8th Cir. 1991), cert. denied, 112 S. Ct. 1176 (1992); ApexOil Co. v. DiMauro, 822 F.2d 246, 256-257 (2d Cir.), cert. denied,484 U.S. 977 (1987); In re Plywood Antitrust Litigation, 655 F.2d627 (5th Cir. 1981), cert. dismissed, 462 U.S. 1125 (1983); Vol-asco Products Company v. Lloyd A. Fry Roofing Company, 308F.2d 383 (6th Cir. 1962), cert. denied, 372 U.S. 907 (1963); Pitts-burgh Plate Glass Company v. United States, 260 F.2d 397(4th Cir. 1958), aff’d, 360 U.S. 395 (1959); In re Travel AgencyCommission Antitrust Litigation, 898 F. Supp. 683 (D. Minn.1995) (public speeches, electronic communications, dinners andindustry-bonding meetings created a triable issue of fact).

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Cf. United States v. Airline Tariff Publishing Co., 1993-2 TradeCas. ¶¶ 70,409-10 (D.D.C. 1993) (consent decree precludes dis-closure to and agreement among competing airlines by way ofelectronic or other means). But see In re Citric Acid Litigation,191 F.3d 1090 (9th Cir. 1999), cert. denied sub nom., Gangi Bros.Packing Co. v. Cargill, 529 U.S. 1037 (2000) (mere membershipin an association insufficient to establish “plus” factor); ReserveSupply Corp. v. Owens-Corning Fiberglass Corp., 971 F.2d 37,54-55 (7th Cir. 1992) (insulation manufacturers’ discussions attrade meeting, combined with advance price announcements andprice lists, insufficient to show proscribed joint action); Cooper v.Forsyth County Hospital Authority, Inc., 789 F.2d 278 (4th Cir.),cert. denied, 479 U.S. 972 (1986) (mere contacts and communica-tions were insufficient to infer a conspiracy); Wilson Industries,Inc. v. Chronicle Broadcasting Co., 794 F.2d 1359 (9th Cir. 1986)(evidence of social and business calls was insufficient to supportallegations of conspiracy); Zoslaw v. MCA Distributing Corp.,693 F.2d 870, 885 (9th Cir. 1982), cert. denied, 460 U.S. 1085(1983) (meetings and exchange of information without agreementinsufficient to establish conspiracy); Hall v. United Airlines, Inc.,296 F. Supp. 2d 652, 672 (E.D.N.C. 2003) (fact that airlines cuttheir commissions immediately after other airlines did the samedid not establish conspiracy; trade press articles and trade alli-ances were insufficient to constitute “plus factors” excluding thepossibility of competitive conduct).

(2)(d)That the defendant restricted or curtailed output. WestinghouseElec. Corp. v. Gulf Oil Corp., 588 F.2d 221 (7th Cir. 1978). SeeTurner, The Definition of Agreement Under the Sherman Act:Conscious Parallelism and Refusals to Deal, 75 Harv.L.Rev. 655(1962).

(2)(e)That there was a pattern of uniform overt acts of varying types.Toys ”R” Us v. FTC, 221 F.3d 928 (7th Cir. 2000) (sufficient evi-dence that toy retailer facilitated an agreement among toy manu-facturers to boycott warehouse clubs); Park v. El Paso Board ofRealtors, 764 F.2d 1053 (5th Cir. 1985), cert. denied, 474 U.S.1102 (1986); Schoenkopf v. Brown & Williamson Tobacco Corp.,637 F.2d 205 (3d Cir. 1980); DeJong Packing Co. v. U.S. Dept. ofAgriculture, 618 F.2d 1329 (9th Cir.), cert. denied, 449 U.S. 1061(1980).

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(3) In some cases even “plus” factors are insufficient to establish aconspiracy. Williamson Oil Co. v. Philip Morris USA, 346 F.3d1287, 1300-01 (11th Cir. 2003) (showing of parallel behavior and“plus factors” may be rebutted by evidence that reasonablyexcluded existence of price fixing conspiracy); Blomkest Fertil-izer, Inc. v. Potash Corp. of Saskatchewan, 203 F.3d 1028(8th Cir.), cert. denied sub nom., Hahnaman Albrecht, Inc. v. Pot-ash Corp. of Saskatchewan, 121 S. Ct. 50 (2000) (conspiracy tofix price of potash not inferred from parallel conduct, evidence ofcommunications at high-level, and one defendant’s actionsagainst its own interests); Merck Medco Managed Care v. RiteAid, 1999-2 Trade Cas. (CCH) ¶ 72,640 (4th Cir. 1999) (conspir-acy among retail pharmacies to boycott pharmacy benefits man-ager’s network not inferred from parallel conduct and motive toconspire); In re Baby Food Antitrust Litigation, 166 F.3d 112(3d Cir. 1999) (evidence of exchange of price information amonglow level employees insufficient to establish “plus” factors);Alpha Lyracom Space Communications, Inc. v. Comsat Corp.,968 F. Supp. 876 (S.D.N.Y. 1996) (alleged “plus factors” failed toexclude the possibility that the actions of the U.S. member of aninternational satellite communications system organization wereindependent).

(4) In Twombly v. Bell Atlantic Corp., 425 F.3d 99, 114 (2d Cir.2005), cert. granted, 126 S. Ct. 2965 (June 26, 2006), theSupreme Court will determine the elements necessary to pleadconspiracy. The Second Circuit found that absence of “plus fac-tors” will not support a motion to dismiss, “[t]o survive a motionto dismiss . . . an antitrust claimant must allege only the existenceof a conspiracy and a sufficient supporting factual predicate onwhich that allegation is based.”

(5) Some courts place significance on the fact that there is “interde-pendence” among the defendant firms, i.e., decision making isbased on an anticipated reaction of other firms in an oligopolymarket. Barry v. Blue Cross of California, 805 F.2d 866 (9th Cir.1986); Bogosian v. Gulf Oil Corp., 561 F.2d 434 (3d Cir. 1977),cert. denied, 434 U.S. 1086 (1978). See Wall Products Co. v.National Gypsum Co., 326 F. Supp. 295 (N.D. Cal. 1971); Pos-ner, Oligopoly and the Antitrust Laws: A Suggested Approach,21 Stan.L.Rev. 1562 (1969); Sullivan, Handbook of the Law ofAntitrust, § 122 (1977).

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C. Price Announcements As An Invitation to Competitorsto Change Their Own Prices

(1) Without proof of anticompetitive purpose or effect, the publicannouncement of prices by one firm which are then followed byother firms in an oligopolistic industry is not unlawful. E. I.duPont de Nemours & Co. v. FTC, 729 F.2d 128 (2d Cir. 1984);United States v. General Motors Corp., 1974-2 Trade Cas. (CCH)¶ 75,253 at p. 97,671 (E.D. Mich. 1974) (the “public announce-ment of a pricing decision cannot be twisted into an invitation orsignal to conspire; it is instead an economic reality to which allother competitors must react”); Universal Lite Distributors, Inc. v.Northwest Industries, Inc., 452 F. Supp. 1206 (D. Md. 1978),modified, 602 F.2d 1173 (4th Cir. 1979). See also Esco Corpora-tion v. United States, 340 F.2d 1000, 1007 (9th Cir. 1965) (“indi-vidual competitor’s sole decision to follow price leadership,standing alone, is not a violation of the law”); In re CoordinatedProceedings in Petroleum Products Antitrust Litigation, 906 F.2d432 (9th Cir. 1990), cert. denied, 111 S. Ct. 2274 (1991) (priceannouncements intended only for competitors create triable issueon conspiracy); In re High Fructose Corn Syrup Antitrust Litig.,156 F.Supp.2d 1017, 1036-37 (C.D. Ill. 2001) (similar price listsin highly oligopolistic industry is not enough to establish collu-sion).

(2) Several consent decrees prohibit the public dissemination of priceinformation in oligopolistic industries where other firms have fol-lowed the prices. United States v. General Electric Co. & West-inghouse Electric Corp., 1977-2 Trade Cas. (CCH) ¶¶ 61,659-61(E.D. Pa. 1977) (modification of consent decree to prohibit thepublic dissemination of any “price signaling” information, e.g.,price books or price lists, except in response to a specific inquiryfrom an actual or potential customer); United States v. AmericanAirlines, Inc., 1985-2 Trade Cas. (CCH) ¶ 66,866 (N.D. Tex.1985) (consent decree forbidding the discussion of prices for air-line passenger services except to implement legitimate joint activ-ities, and airline’s president forbidden from discussing pricingwith management of any other airline, required to consult counselbefore scheduling communications with another airline, andrequired to maintain written notes while communicating withother airlines); United States v. Leviton Mfg. Co., 1980-1 TradeCas. (CCH) ¶ 63,092 (D.Conn. 1979) (consent decree prohibiting

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communications regarding past, present or future prices except inresponse to specific inquiry from actual or potential customer).

(3) The Federal Trade Commission has challenged solicitations to fixprices as a violation of Section 5 of the FTC Act. See, e.g., Valas-sis Commc’ns Inc., No. 051-0008 (March 14, 2006) (consentdecree in settlement of FTC allegation that defendant used itsquarterly conference call to invite its competitor to collude with itto allocate customers and fix prices); Quality Trailer ProductsCorp., No. C-3403 (Nov. 5, 1992) (consent decree); AE Clevite,Inc., 5 Trade Reg. Rep. (CCH) ¶ 23,354 (March 24, 1993) (con-sent decree); YKK (U.S.A.) Inc., 5 Trade Reg. Rep. (CCH)¶ 23,355 (March 25, 1993) (consent decree).

(4) Clauses in sales contracts with customers which tend to bringprices in line with prices offered to other customers by the sameseller, such as “most favored customer” and “delivered price”clauses, generally have not been found to be anticompetitive,even in oligopolistic industries. E I. duPont de Nemours & Co. v.FTC, 729 F.2d 128 (2d Cir. 1984). But see United States v. Gen-eral Electric Co. & Westinghouse Electric Corp., 1977-2 TradeCas. (CCH) ¶¶ 61,659-61 (E.D. Pa. 1977)). However, agreementsto use delivered price formulas have been held violative of Sec-tion 5 of the FTC Act. FTC v. Cement Institute, 333 U.S. 683(1948). See also “most favored nation” cases in the health careindustry brought by the Department of Justice in Part VIII A(6).

VI. THE REQUIREMENT OF INTENT IN SECTION 1

A. Intent in Civil Cases

(1) “[T]he general rule [is] that a civil violation can be established byproof of either an unlawful purpose or an anticompetitive effect.”United States v. United States Gypsum Co., 438 U.S. 422, 436,n.13 (1978); see United States v. Container Corp. of America,393 U.S. 333, 337, 341 (1969).

(2) “The intent proscribed by the antitrust laws lies in the purpose toharm competition in the relevant market, not to harm a particularcompetitor.” Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d729, 735 (9th Cir. 1987). Nonetheless, intent to harm a singlecompetitor may support a finding of a violation, where harm tothe single competitor would in fact harm competition generally

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(E. W. French & Sons, Inc. v. General Portland, Inc., 885 F.2d1392 (9th Cir. 1989)). A plaintiff need not prove intent on the partof conspirators to restrain trade, so long as conspiracy has anti-competitive effect. U.S. Anchor Manufacturing v. Rule Indus-tries, Inc., 7 F.3d 986 (11th Cir. 1993). A simple allegation ofanticompetitive intent is conclusory in the absence of anticompet-itive conduct from which specific intent may be inferred. Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc., 627 F.2d 919, 924(9th Cir. 1980), cert. denied, 450 U.S. 921 (1981). But seeTraweek v. San Francisco, 920 F.2d 589 (9th Cir. 1990) (intent ofcity in prohibiting conversion of “affordable” condominiums didnot affect its immunity from suit under state-action doctrine).

B. Intent in Criminal Cases

(1) “[A] defendant’s state of mind or intent is an element of a crimi-nal antitrust offense which must be established by evidence andinferences drawn therefrom and cannot be taken from the trier offact through reliance on a legal presumption of wrongful intentfrom proof of an effect on prices.” United States v. United StatesGypsum Co., 438 U.S. 422, 435 (1978).

(2) The intent requirement may be satisfied by: (i) proof that conductwas undertaken with knowledge of its probable consequences andthe requisite anticompetitive effect; or (ii) proof that conduct wasundertaken with the purpose of producing anticompetitive effects.United States v. United States Gypsum Co., 438 U.S. 422, 446(1978).

(3) “[A] [c]orporation could be held criminally liable for antitrustviolations committed by its employees if they were acting withinthe scope of their authority, or apparent authority, and for the ben-efit of [the] corporation, even if such acts were against corporatepolicy or express instructions.” United States v. Basic Const. Co.,711 F.2d 570, 571 (3d Cir.), cert. denied, 464 U.S. 956 (1983).See also United States v. Twentieth Century Fox Film Corp.,882 F.2d 656, 660 (2d Cir. 1989) (corporation’s compliance pro-gram does not immunize it from conduct taken by an employee,under the scope of her employment, which fails to comply with aconsent decree); United States v. Automated Medical Laborato-ries, Inc., 770 F.2d 399 (4th Cir. 1985).

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(4) Lower courts have generally held that the element of intent, asrequired by Gypsum, is only an element of a criminal antitrustviolation where the activity is governed by the rule of reason.Thus, once defendants are proved to have intentionally made anagreement which is unlawful per se (e.g., price-fixing agreement),no further inquiry into intent to restrain trade or commerce needbe made (United States v. Brown, 936 F.2d 1042 (9th Cir. 1991)(district court’s decision that jury instruction requiring proof ofintent is unnecessary “accords with the holdings of six other cir-cuits, and the intimations of others”); United States v. Cargo Ser-vice Stations, Inc., 657 F.2d 676 (5th Cir. 1981), cert. denied,455 U.S. 1017 (1982); United States v. Society of IndependentGasoline Marketers of America (SIGMA), 624 F.2d 461 (4th Cir.1980), cert. denied, 449 U.S. 1078 (1981); United States v. Conti-nental Group, Inc., 603 F.2d 444 (3d Cir. 1979), cert. denied,444 U.S. 1032 (1980); United States v. Brighton Bldg. & Mainte-nance Co., 598 F.2d 1101 (7th Cir.), cert. denied, 444 U.S. 840(1979). But cf. United States v. MMR Corp., 907 F.2d 489(5th Cir. 1990), cert. denied, 499 U.S. 936 (unlike civil cases, incriminal cases the government must establish criminal intent);United States v. Foley, 598 F.2d 1323, 1335-1336 (4th Cir. 1979),cert. denied, 444 U.S. 1043 (1980).

VII. PROOF OF RESTRAINT OF TRADE

A. Rule of Reason

(1) “Every agreement concerning trade, every regulation of trade,restrains. To bind, to restrain, is of their very essence. The truetest of legality is whether the restraint imposed is such as merelyregulates and perhaps thereby promotes competition or whether itis such as may suppress or even destroy competition.” ChicagoBoard of Trade v. United States, 246 U.S. 231, 238 (1918).

(2) “Contrary to its name, the Rule [of Reason] does not open thefield of antitrust inquiry to any argument in favor of a challengedrestraint that may fall within the realm of reason. Instead, itfocuses directly on the challenged restraint’s impact on competi-tive conditions. . . . In sum, the Rule of Reason does not support adefense based on the assumption that competition itself is unrea-sonable.” National Soc. of Professional Engineers v. UnitedStates, 435 U.S. 679, 688, 696 (1978).

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(3) “Under [Rule of Reason], the fact finder weighs all of the circum-stances of a case in deciding whether a restrictive practice shouldbe prohibited as imposing an unreasonable restraint on competi-tion.” Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49(1977); Ezzo’s Investments v. Royal Beauty Supply, Inc.,243 F.3d 980, 986 (6th Cir. 2001); Wisconsin Music Network v.Muzak, Ltd., 5 F.3d 218 (7th Cir. 1993).

(4) Factors to be considered in determining reasonableness: (i) factspeculiar to industry; (ii) its condition before and after restraintimposed; (iii) nature of the restraint and its actual or probableeffect in the market; (iv) history and purpose of the restraint. Chi-cago Board of Trade v. United States, 246 U.S. 231, 238 (1918);Three Movies of Tarzana v. Pacific Theatres, Inc., 828 F.2d 1395,1399 (9th Cir. 1987), cert. denied, 484 U.S. 1066 (1988); GraphicProducts Distributors, Inc. v. Itek Corp., 717 F.2d 1560 (11th Cir.1983).

(5) Under a rule of reason analysis, a restraint is typically analyzed inthe relevant goods or service market. Certain restraints may alsobe analyzed in a technology or innovation market. U.S. Dep’t ofJustice & U.S. Fed. Trade Comm’n, Antitrust Guidelines for theLicensing of Intellectual Property, § 3.2 (1995).

(6) “The definition of the relevant market has two components—aproduct market and a geographic market.” Double D SpottingServices, Inc. v. Supervalu, Inc., 136 F.3d 554, 560 (8th Cir.1998).

(7) Failure to plead a relevant market is fatal to a § 1 case assertedunder the rule of reason. See Surgical Care Center v. HospitalService District No. 1, 309 F.3d 836, 842 (5th Cir. 2002) (“failuresufficiently to define the relevant geographic market . . . provesfatal to . . . claim under §1.”); Apani Southwest, Inc. v. Coca-ColaEnterprises, Inc., 200 F.3d 620, 629 (5th Cir. 2002) (beverageseller failed to properly allege the relevant geographic market);Pepsico, Inc. v. Coca-Cola Co., 315 F.3d 101, 111 (2d Cir. 2002)(Pepsico failed to provide adequate support for its definition ofthe relevant market); Double D Spotting Services, Inc. v. Super-valu, Inc., 136 F.3d 554 (8th Cir. 1998) (12(b)(6) dismissalupheld as no relevant market pled); All Care Nursing Service,Inc. v. High Tech Staffing Services, Inc., 135 F.3d 740 (11th Cir.1998) (verdict for defendant affirmed as jury properly found that

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plaintiffs failed to establish the relevant market). But see Todd v.Exxon Corp., 275 F.3d 191, 199-200 (2d Cir. 2001) (“[b]ecausemarket definition is a deeply fact-intensive inquiry, courts hesitateto grant motions to dismiss for failure to plead a relevant productmarket”).

(8) The plaintiff has the burden of proof that the conduct restrainstrade. Nynex Corp. v. Discon, Inc., 119 S. Ct. 493 (1998) (hold-ing that in absence of legitimate business reason for allegedlyanticompetitive acts, plaintiff must still prove injury to competi-tion); Spanish Broadcasting System of Florida v. Clear ChannelCommunication, 376 F.3d 1065, 1069-1073 (11th Cir. 2004) (sec-tion 1 claim properly dismissed for failing to show injury to com-petition); Inter-County Title Co. v. Data Trace Information Servs.,LLC, 105 Fed. Appx. 136, 137-38, 2004 WL 1238266 (9th Cir.2004) (unpub.) (affirming summary judgment dismissal of con-spiracy claims of title insurer who alleged that competitors haddenied insurer access to database of real estate records); Orr v.Bank of America, NT & SA, 285 F.3d 764, 782-83 (9th Cir. 2002)(plaintiff failed to offer any evidence to support existence of anunlawful agreement or to establish a restraint of trade); 42nd Par-allel North v. E Street Denim Co., 286 F.3d 401, 404-05 (7th Cir.2002) (plaintiff failed to allege any anticompetitive effect in therelevant market); Johnson v. University Health Services, Inc.,161 F.3d 1334 (11th Cir. 1998) (plaintiff failed to show any inter-ference with competition from alleged anticompetitive acts);Pittsburgh v. West Penn Power Co., 147 F.3d 256 (3d Cir. 1998)(no restraint of trade when decreased competition results fromstructure of regulated industry and not from agreement to with-draw competition application); Tops Markets, Inc. v. QualityMarkets, Inc., 142 F.3d 90 (2d Cir. 1998) (summary judgmentagainst plaintiff affirmed; only injury shown is that to a competi-tor, not to competition); Banks v. National Collegiate AthleticAss’n., 977 F.2d 1081, 1087-1088 (7th Cir. 1992), cert. denied,113 S. Ct. 2336 (1993) (plaintiff failed to define an anticompeti-tive effect of alleged restraints imposed by no draft rule in collegefootball); Stratmore v. Goodbody, 866 F.2d 189 (6th Cir.), cert.denied, 490 U.S. 1066 (1989); First Beverages, Inc. of Las Vegasv. Royal Crown Cola Co., 612 F.2d 1164 (9th Cir.), cert. denied,447 U.S. 924 (1980).

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(9) The courts have developed market power as an important consid-eration for Rule of Reason analysis. “The first step in any Rule ofReason case is an assessment of market power.” Polk Bros., Inc.v. Forest City Enter., Inc., 776 F.2d 185, 191 (7th Cir. 1985) (cita-tions omitted). “Market power is a necessary ingredient in everycase under the Rule of Reason.” Ball Mem’l Hosp., Inc. v. MutualHosp. Ins., Inc., 784 F.2d 1325, 1334 (7th Cir. 1986) (citing PolkBros.). “Market Power comes from the ability to cut back themarket’s total output and so raise price; consumers bid more incompeting against one another to obtain the smaller quantityavailable.” Id. at 1335. “Market power generally is defined as thepower of a firm to restrict output and thereby increase the sellingprice of its goods in the market.” Ryko Mfg. Co. v. Eden Ser-vices, 823 F.2d 1215, 1232 (8th Cir. 1987), cert. denied, 484 U.S.1026, 108 S. Ct. 751, 98 L. Ed. 2d 763 (1988) (citing Ball Mem’lHosp.). “Without market power to increase prices above competi-tive levels, and sustain them for an extended period, a predator’sactions do not threaten consumer welfare.” Rebel Oil Co. v.Atlantic Richfield Co., 51 F.3d 1421, 1434 (9th Cir.), cert. denied,116 S. Ct. 515, 133 L. Ed. 2d 424, 64 U.S.L.W. 3378 (1995).“Market power may be demonstrated through either of two typesof proof. One type of proof is direct evidence of the injuriousexercise of market power.” Id. at 1434. However, “The more com-mon type of proof is circumstantial evidence pertaining to thestructure of the market. To demonstrate market power circum-stantially, a plaintiff must: (1) define the relevant market, (2)show that the defendant owns a dominant share of that market,and (3) show that there are significant barriers to entry and(4) show that existing competitors lack the capacity to increasetheir output in the short run.” Id. Maris Distributing Co. v.Anheuser-Busch, 302 F.3d 1207, 1217 (11th Cir. 2002)(“Anheuser-Busch’s market share in the relevant market is inade-quate . . . to permit a finding of market power.”)

B. Per Se Violations

(1) “[T]here are certain agreements or practices which because oftheir pernicious effect on competition and lack of any redeemingvirtue are conclusively presumed to be unreasonable and there-fore illegal without elaborate inquiry as to the precise harm theyhave caused or the business excuse for their use.” Northern Pac.

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R. Co. v. United States, 356 U.S. 1, 5 (1958) (tying arrange-ments); Fashion Originators’ Guild v. Federal Trade Comm’n,312 U.S. 457 (1941) (group boycott); United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940) (price fixing); UnitedStates v. Trenton Potteries Co., 273 U.S. 392 (1927) (price fix-ing); United States v. Addyston Pipe & Steel Co., 85 Fed. 271(6th Cir. 1898), mod., 175 U.S. 211 (1899) (market division).

(2) Per se violations are frequently the subject of criminal as well ascivil antitrust enforcement. See discussion in Part I.

C. The “Quick Look” or “Truncated Rule of Reason”

(1)(a)Over the past two decades, the distinction between per se and ruleof reason cases has become increasingly blurred. The SupremeCourt has shown reluctance to categorize arrangements as per seillegal without further inquiry or to impose a full-blown marketanalysis in all rule of reason cases. In California Dental Associa-tion v. FTC, 526 U.S. 756 (1999), the Supreme Court noted:

“[T]here is generally no categorical line to be drawn between restraintsthat give rise to an intuitively obvious inference of anticompetitive effectand those that call for more detailed treatment. What is required, rather isan enquiry meet for the case, looking to the circumstances, details, andlogic of a restraint. The object is to see whether the experience of the mar-ket has been so clear, or necessarily will be, that a confident conclusionabout the principal tendency of a restraint will flow from a quick (or atleast quicker) look, in place of a more sedulous one.”

(1)(b)The per se rule has not been applied in all price-fixing cases. InBroadcast Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1(1979), the Supreme Court refused to apply a per se rule andupheld a blanket license agreement among composers on theground that the pricing arrangement was essential to the produc-tion of a new product. In NCAA v. Board of Regents of the Uni-versity of Oklahoma, 468 U.S. 85 (1985), the Supreme Courtapplied a rule of reason rather than the per se rule to the NCAA’sexclusive network contracts for the telecasting of college footballgames. Since there was no justification for the restraint on output,the contracts were found unlawful under a rule of reason. See alsoWorldwide Basketball and Sport Tours, Inc. v. National Colle-giate Athletic Ass’n, 388 F.3d 955 (6th Cir. 2004) (NCAA rulelimiting Division I teams to two basketball tournaments everyfour years subject to rule of reason rather than “quick look” anal-

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ysis and requires analysis of effect on relevant market); Law v.NCAA, 134 F.3d 1010 (10th Cir. 1998), cert. denied, 119 S. Ct.532 (1998) (maximum price restraint on coaching salaries subjectto truncated rule of reason analysis); United States v. BrownUniv., 5 F.3d 658 (3d Cir. 1993) (price fixing agreement amonguniversities required rule of reason analysis); Metropolitan Inter-collegiate Basketball Ass’n v. National Collegiate Athletic Ass’n,337 F. Supp.2d 563, 572-73 (S.D.N.Y. 2004) (summary judgmentfor plaintiff denied over NCAA rule restricting post season bas-ketball tournaments subject to rule of reason rather than “quicklook”); Metropolitan Intercollegiate Basketball Ass’n v. NationalCollegiate Athletic Ass’n, 339 F. Supp.2d 545, 549 (S.D.N.Y.2004) (same).

(1)(c)The per se rule has not been applied in all boycott cases. InNorthwest Wholesale Stationers, Inc. v. Pacific Stationery &Printing Co., 472 U.S. 284 (1985), the Supreme Court refused toapply a per se rule to the expulsion of a competitor from a groupbuying group on the ground that a per se rule should not beapplied to group boycotts unless the group possesses “marketpower or exclusive access to an element essential to competition.”Similarly, in FTC v. Indiana Federation of Dentists, 476 U.S. 447(1986), the Supreme Court declined to apply a per se rule to thecollective refusal by competing dentists to provide x-rays for costcontainment purposes to third-party insurers, but condemned therestraint under a rule of reason analysis without elaborate inquiryinto the market. See also Craftsmen Limousine, Inc. v. FordMotor Col, 363 F.3d 761, 773-776 (“something more than cur-sory per se analysis” required to determine economic impact ofdefendant’s safety standard requirement, which gave rise to boy-cott claim); Adaptive Power Solutions, LLC v. Hughes MissileSys. Co., 141 F.3d 947 (9th Cir. 1998) (joint refusal to deal withsupplier of missile power supply judged under rule of reason);Lie v. St. Joseph Hosp. of Mount Clemens, Mich., 964 F.2d 567,570 (6th Cir. 1992) (absent “a naked restriction on price or out-put” or actual detrimental effects to competitors, plaintiff mustallege and prove market power to sustain an antitrust action); U.S.Healthcare v. Healthsource, Inc., 986 F.2d 58 (1st Cir. 1993).

(1)(d)Application of the per se rule to section 1 tying claims requires ashowing of market power in the market for the tying product.Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 15-18,

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104 S. Ct. 1551, 1560-61, 80 L. Ed. 2d 2, 15-17 (1984). “When,however, the seller does not have either the degree or the kind ofmarket power that enables him to force customers to purchase asecond, unwanted product in order to obtain the tying product,an antitrust violation can be established only by evidence of anunreasonable restraint on competition in the relevant market.”Id., 466 U.S. at 17-18, 104 S. Ct. at 1561, 80 L. Ed. 2d at 16.See also Reifert v. South Central Wis. MLS Corp., 450 F.3d 312,n.2 (7th Cir. 2006) (not adopting a per se analysis and stating that“Although the per se analysis of the Jefferson Parish Hosp. Dist.No. 2 majority has not been expressly overruled, in the interven-ing 21 years since Carl Sandberg Vill. Condo Ass’n No. 1, theSupreme Court has not found occasion to disagree with this Cir-cuit’s approach).” Brokerage Concepts, Inc. v. U.S. Healthcare,Inc., 140 F.3d 494 (3d Cir. 1998) (no per se tying liability as nopower in tying market); Technical Resource Services, Inc. v.Dornier Medical Sys., Inc., 134 F.3d 1458 (11th Cir. 1998) (“Inorder to prove a § 1 tying arrangement that is per se illegal, aplaintiff must establish at least the following elements: . . .(3) that the seller possesses sufficient economic power in thetying market to coerce buyer acceptance of the tied product”);Roy B. Taylor Sales v. Hollymatic Corp., 28 F.3d 1379, 1381-82(5th Cir. 1994), cert. denied, 115 S. Ct. 779, 130 L. Ed. 2d 673,63 U.S.L.W. 3516 (1995) (citing Breaux Bros. Farms v. TecheSugar Co., 21 F.3d 83, 86 (5th Cir. 1994) (citing Hyde)) (“Anillegal tie may be shown by proof that the tying firm ‘exerts suf-ficient control over the tying market . . . to have a likely anti-competitive effect on the tied market.’ This is sometimesdescribed as ‘per se’ illegality. This label makes sense whendescribing price fixing or horizontal market division, but is con-fusing here because it insists on an inquiry into market power asa predicate to ‘per se’ illegality. This odd use of the term ‘per se’is descriptive of a rule located between a per se and a rule of rea-son inquiry.”); Mozart Co. v. Mercedes-Benz of N. Am., Inc.,833 F.2d 1342, 1345 (9th Cir. 1987), cert. denied, 488 U.S. 870,109 S. Ct. 179, 102 L. Ed. 2d 148 (1988) (“The majority inHyde, rather than abandoning the per se rule against tying, choseto limit antitrust liability for tie-ins by insisting on a showing ofactual market power in the tying product.”). Nobody in Particu-lar Presents, Inc. v. Clear Channel Communications, Inc., 311 F.Supp. 2d 1048, 1097-98 (D. Colo. 2004) (summary judgment

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granted to defendant music conglomerate dismissing allegedtying claim under rule of reason analysis where plaintiff failed todefine proper relevant market for tied product). Cf. BorschowHosp. & Med. Supplies v. Cesar Castillo Inc., 96 F.3d 10, 16(1st Cir. 1996) (“[A] threat alone is insufficient to constitute anillegal tying arrangement.”); Marts v. Xerox, Inc., 77 F.3d 1109,1113 (8th Cir. 1996) (citing Amerinet, Inc. v. Xerox Corp.,972 F.2d 1483, 1498, 1500 (8th Cir. 1992), cert. denied, 506 U.S.1080, 113 S. Ct. 1048, 122 L. Ed. 2d 356 (1993)) (“Even if theproducts are available separately, an illegal tying arrangementcan exist if purchasing the items together is the ‘only viable eco-nomic option.’“); Data Gen. Corp. v. Grumman Sys. SupportCorp., 36 F.3d 1147, 1178 (1st Cir. 1994) (citing Eastman KodakCo. v. Image Technical Servs., Inc., 112 S. Ct. 2072, 2079, 119L. Ed. 2d 265 (1992)) (“In addition to outlawing “positive” tieslikely to restrain competition, Section 1 also forbids “negative”ties—arrangements conditioning the sale of one product on anagreement not to purchase a second product from competingsuppliers.”). One court has held that in order to state a per setying violation, the ultimate consumer must be foreclosed fromchoice. Southern Card & Novelty, Inc. v. Lawson Mardon Label,Inc., 138 F.3d 869, 875 (11th Cir. 1998). The Ninth Circuit alsorequires the defendant to have an economic interest in the tiedproduct for there to be a per se violation. County of Tuolumne v.Sonora Community Hosp., 236 F.3d 1148, 1158 n.7 (9th Cir.2001) (“if the tying entity receives no economic benefit from thetie, then we can safely presume that it is not attempting to spreadits power into the tied-product market. . . .”) (citation omitted).

(2) The Federal Trade Commission has long advocated a “quicklook” or “truncated rule of reason” approach which applies a perse rule when the conduct is inherently suspect and without a validefficiency justification and a rule of reason when the conduct isinherently suspect but with a valid efficiency justification. Seegenerally Massachusetts Board of Registration in Optometry, 110F.T.C. 549, 602-04 (1988). In re Detroit Auto Dealers Ass’n, 111F.T.C. 417 (1989), aff’d in general but remanded in part, 955 F.2d457 (6th Cir.), cert. denied, 113 S. Ct. 461 (1992) (applying“quick look” to agreement not to compete with respect to thehours during which dealers’ showrooms were open to customers).

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However, this analysis needs to be read in light of California Den-tal Association v. FTC, 526 U.S. 756, 119 S. Ct. 1604 (1999).

(3) In 1996, the Justice Department instituted a “three-step mode ofanalysis” for “analyzing horizontal agreements under Section 1 ofthe Sherman Act.” Joel I. Klein, Acting Assistant Attorney Gen-eral, U.S. Department of Justice, Address before the AmericanBar Association’s Antitrust Section Semi-Annual Fall Policy Pro-gram (Nov. 7, 1996) (transcript available under title, “A StepwiseApproach to Antitrust Review of Horizontal Agreements,” at<http://www.usdoj.gov/gopherdata/atr/talks/jikaba.htm>);see also U.S. Dep’t of Justice & U.S. Fed. Trade Comm’n, Anti-trust Guidelines for Collaborations Among Competitors (2000).Under this approach, the Antitrust Division first asks whether theagreement “is the type of restraint that is currently recognized bythe courts as being a per se violation, such as an unadorned agree-ment to fix prices, curtail output, or divide markets.” Id. Sec-ondly, if the Division concludes that the agreement is not illegalper se, the Division asks the party defending the agreement toprovide “a procompetitive justification for the agreement.” Id. Inresponse to such an inquiry, the Division expects “a response thatdoesn’t merely speculate about the existence of efficiencies, butrather comes forward with real-world evidence—factual evi-dence, expert economic evidence, and preferably both—to sup-port the claim.” Id. If the Division finds the justificationunsubstantiated, it will “conclude that the agreement should bestruck down.” Id. If the Division finds “significant procompetitivebenefits to the agreement,” it then proceeds to the third step in itsanalysis, which is to evaluate the agreement under the rule of rea-son. Id. However, in light of California Dental Association v.FTC, 526 U.S. 756 (1999), the second part of this three-stepapproach may not hold up in court in non-merger situationsbecause it shifts the initial burden of proof to the defendant,reversing the usual evidentiary burdens in rule of reason analysis.See also Hairston v. Pacific 10 Conf., 101 F.3d 1315 (9th Cir.1996) (citing Bhan v. NME Hosp., Inc., 929 F.2d 1404, 1413(9th Cir.), cert. denied, 502 U.S. 994 (1991) (“Under the rule ofreason, the fact-finder examines the restraint at issue and deter-mines whether the restraint’s harm to competition outweighs therestraint’s procompetitive effects. The plaintiff bears the initialburden of showing that the restraint produces significant anticom-

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petitive effects within the relevant product and geographic mar-kets. If the plaintiff meets this burden, the defendant must comeforward with evidence of the restraint’s procompetitive effects.The plaintiff must then show that ‘any legitimate objectives canbe achieved in a substantially less restrictive manner.’”))

D. Antitrust Guidelines.

From time to time, the Federal Trade Commission and the Depart-ment of Justice have issued guidelines addressing antitrust issuesrelated to collaborations among competitors.

(1) The Statements for Antitrust Enforcement Policy in Health Care,issued in August 1996, outline the federal agencies’ approach tocertain health care collaborations. Available athttp://www.usdoj.gov/atr/public/guidelines/ 0000.htm.

(2) The Antitrust Guidelines for Licensing of Intellectual Property,issued April 6, 1995, outline the federal agencies’ approach withrespect to intellectual property licensing among competitors.Available at http://www.usdoj.gov/atr/ public/guidelines/ipguide.htm.

(3) The Antitrust Guidelines for Collaborations Among Competitors,issued April 2000, outline the antitrust issues with respect tocompetitor collaborations. Available at http://www.ftc.g-+ov/os/2000/04/ftcdojguidelines.pdf.

VIII. EXPLICIT AGREEMENTS AFFECTING PRICES

A. Price Fixing

(1)(a)Agreements among competitors to establish the prices theycharge others are unlawful per se. Arizona v. Maricopa CountyMedical Society, 457 U.S. 332 (1982) (agreement among doctorsto establish maximum fees to be charged patients held per seunlawful); United States v. Socony-Vacuum Oil Co., 310 U.S.150, 223 (1940) (“a combination [of competitors] formed for thepurpose and with the effect of raising, depressing, fixing, peg-ging, or stabilizing the price of a commodity in interstate or for-eign commerce is illegal per se”). See also Williams ElectronicGames v. Garrity, 366 F.3d 569, 578 (7th Cir. 2004) (commonprice increase alone insufficient to show collusion); Freeman v.San Diego Assn. of Realtors, 322 F.3d 1133, 1152-54 (9th Cir.

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2003) (explicit agreement by real estate associations to chargesupracompetitive prices for access to house listings was per seunlawful; firms could not justify cartel pricing on grounds that itrescued the most inefficient firms); Kruman v. Christie’s Interna-tional PLC, 284 F.3d 384, 393 (2d Cir. 2002) (plaintiffs alleged aper se unlawful agreement to fix prices); United States v.Andreas, 216 F.3d 645 (7th Cir. 2000) (convictions of corporateofficers who conspired to fix global lysine prices and allocate out-put upheld); United States v. Alston, 974 F.2d 1206 (9th Cir.1992) (court reversed acquittal not withstanding the verdict andgrants new trial to dentists who participated in conspiracy to raisecopayment in dental plans); Ancar v. Sara Plasma, Inc., 964 F.2d465, 470 (5th Cir. 1992) (“price fixing agreements among com-petitors fall with the per se unreasonable category.”); Denny’sMarina v. Renfro Productions, 8 F.3d 1217 (7th Cir. 1993)(reversing District Court which failed to apply per se rule to pricefixing allegations); In re Pharmaceutical Industry AverageWholesale Price Litigation, 307 F.Supp.2d 196 (D. Mass. 2004) (motion to dismiss denied in case alleging that pharmaceuticalcompanies conspired to overstate the published average whole-sale prices of prescription drugs); State of Wisconsin v. Abbott,341 F.Supp.2d 1057 (W.D. Wis. 2004) (action against 20 pharma-ceutical manufacturers for inflating average wholesale price ofdrugs); United States v. Computer Associates Int’l, Inc., 2002-2Trade Cas. (CCH) ¶73,883 (D.D.C. 2002) (final judgment) (set-tling allegations that, prior to merger, competitors limited dis-counts on prices and exchanged competitively sensitive pricinginformation); In re NASDAQ Market-Makers Antitrust Litiga-tion, 1998-2 Trade Cas. (CCH) ¶72,337 (S.D.N.Y. 1998)(approval of $1 billion class action settlement of alleged conspir-acy to fix spread of “bid” and “ask” prices of 1600 stocks);United States v. General Electric Co., 869 F. Supp. 1285 (S.D.Ohio 1994) (vertical agreement with customer that sits on com-petitor’s board does not establish price fixing). See also UnitedStates v. Citadel Communications Corp., 1999-2 Trade Cas.(CCH) ¶ 72,644 (D.D.C., 1999) (consent decree terminated jointsales agreement between two radio station operators); UrologicalStone Surgeons, Inc., 5 Trade Reg. Rep. (CCH) ¶ 24,367 (1998)(consent decree) (global fees for lithotripsy services by indepen-dent physicians prohibited).

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(1)(b)In international context, at least one court has required “per seplus” test. United States v. Nippon Paper Industries Co., Ltd.,1999-2 Trade Cas. (CCH) ¶ 72,515 (D. Mass. 1999).

(1)(c)An agreement that is purely vertical, i.e., between one level ofdistribution and another, which establishes resale price, is alsounlawful per se. The Supreme Court recognized an exception formaximum resale prices in State Oil Co. v. Khan, 522 U.S. 3(1998) which are now subject to a rule of reason analysis. Onremand, Khan abandoned his rule of reason claim and attemptedto argue that because of the low margin on gasoline, as a practicalmatter, the suggested retail price became his floor price (becausehe could not make up any marginal losses through increased mar-gins on other grades of gasoline) and therefore a minimum resaleprice subject to per se treatment. Khan v. State Oil Co., 143 F.3d362, 363-64 (7th Cir. 1998). The court rejected this argument,holding that its acceptance would convert every maximum resaleprice case into a minimum resale price case. Id. See also 324Liquor Corp. v. Duffy, 479 U.S. 335 (1987); Monsanto Co. v.Spray-Rite Serv. Corp., 465 U.S. 752, 761-762, n.7 (1984); Cali-fornia Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc.,445 U.S. 97 (1980); Arizona v. Maricopa County Medical Soci-ety, 457 U.S. 332, 347 (1982); Albrecht v. Herald Co., 390 U.S.145 (1968); Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211(1951); Dr. Miles Medical Co. v. John D. Park & Sons Co.,220 U.S. 373 (1911). See also National Auto. Dealers Assoc.,60 Fed.Reg. 51491,7 Trade Reg. Rep. (CCH) ¶ 50,788 (1995)(consent decree prohibited association from urging dealers toadopt specific prices or to refuse to deal with discounters). Cf.Fisher v. City of Berkeley, 475 U.S. 260, 106 S. Ct. 1045, 89 L.Ed. 2d 206 (1986) (rent ceilings unilaterally imposed upon land-lords by a city do not constitute a price-fixing conspiracy).

(1)(d)The U.S. Supreme Court will review the long-standing per se ruleagainst minimum resale price-fixing when it reviews the FifthCircuit’s decision in Leegin Creative Leather Prods., Inc. v.PSKS, Inc., 171 Fed. Appx. 464 (5th Cir. 2006), cert. granted,127 S. Ct. 763 (U.S. Dec. 7, 2006) (No. 06-480). PSKS was aretailer of leather products manufactured by Leegin. Leegin insti-tuted a policy that it would only do business with retailers thatadhered to its suggested retail prices. According to the complaint,when Leegin learned that PSKS was selling Leegin’s products at

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below suggested retail prices, Leegin stopped supplying its prod-ucts to PSKS. PSKS claimed that PSKS and its retailers hadagreed to fix the retail prices of Leegin’s products. The juryagreed and awarded PSKS nearly $4.5 million in damages, aftertrebling. The Fifth Circuit affirmed. The case presents theSupreme Court with the opportunity to abandon the per se rule infavor of a rule of reason analysis of vertical price-fixing conduct.

(1)(e)Without agreement on price or price levels, a vertical restraintsuch as an agreement between a supplier and dealer to terminate adiscounter or another dealer is not per se unlawful. Bus. Elec.Corp. v. Sharp Elec. Corp., 485 U.S. 717, 735-36, 108 S. Ct.1515, 1525, 99 L. Ed. 2d 808, 824 (1988); AT&T Corp. v. JMCTelecom, LLC, 470 F.3d 525, 531 (3d Cir. 2006) (district courtproperly dismissed prepaid phone card seller’s per se claim wherealleged restraint was vertical); Euromodas, Inc. v. Zanella, Ltd.,368 F.3d 11 (1st Cir. 2004) (clothing retailer alleged that compet-ing retailer entered into vertical minimum price-fixing agreementwith clothing manufacturers but no evidence of agreement onprice; Roy B. Taylor Sales v. Hollymatic Corp., 28 F.3d 1379,1383 (5th Cir. 1994), cert. denied, 115 S. Ct. 779, 130 L. Ed. 2d673, 63 U.S.L.W. 3516 (1995) (citing Business Electronics); Cen-ter Video Indus. Co. v. United Media, 995 F.2d 735 (7th Cir.1993); A-Abart Elec. Supply, Inc. v. Emerson Elec. Co., 956 F.2d1399, 1402-03 (7th Cir.), cert. denied, 506 U.S. 867, 113 S. Ct.194, 121 L. Ed. 2d 137 (1992); Bailey’s Inc. v. Windsor Am.,Inc., 948 F.2d 1018, 1028 (6th Cir. 1991).

(1)(f)In Texaco, Inc. v. Dagher, 126 S.Ct. 1276, 1280-81 (2006), theSupreme Court held that a joint venture’s decision to sell sepa-rately branded gasoline at a unified price did not constitute a perse illegal horizontal agreement to fix prices. The Court noted thatCongress intended to prevent only unreasonable restraints. Id.(citing State Oil v. Khan, 522 U.S. 3, 10 (1997)). Because thelegitimate business decisions of a joint venture do not fall withinthis narrow category of illegality under Section 1, the Courtreversed the Ninth Circuit’s reversal of the district court’s sum-mary judgment order.

(1)(g)Price agreements are not excused by either their economic justifi-cation or their ineffectiveness. Arizona v. Maricopa County Med.Soc’y, 457 U.S. 332, 351 (1982) (“The anticompetitive potential

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inherent in all price-fixing agreements justifies their facial invali-dation even if procompetitive justifications are offered for some.Those claims of enhanced competition are so unlikely to provesignificant in any particular case that we adhere to the rule of lawthat is justified in its general application”); United States v.Socony-Vacuum Oil Co., 310 U.S. 150, 225-226, n.59 (1940) (“aconspiracy to fix prices violates § 1 of the Act though no overt actis shown, though it is not established that the conspirators had themeans available for accomplishment of their objective, andthough the conspiracy embraced but a part of the interstate or for-eign commerce in the commodity . . . . Whatever economic justi-fication particular price-fixing agreements may be thought tohave, the law does not permit an inquiry into their reasonableness.They are all banned because of their actual or potential threat tothe central nervous system of the economy.”).

(2) In the service industries, use of professional fee schedules hasbeen held unlawful per se. Goldfarb v. Virginia State Bar,421 U.S. 773 (1975)), but less restrictive guidelines as to feesmay be tested under the rule of reason and upheld (Vogel v.American Society of Appraisers, 744 F.2d 598 (7th Cir. 1984)(fixed percentage fee prohibition tested under rule of reason);United States v. American Society of Anesthesiologists, Inc.,473 F. Supp. 147 (S.D.N.Y. 1979) (use of relative value guidesupheld). But see American Society of Internal Medicine,105 F.T.C. 505 (1985) (advisory opinion indicating that publica-tion of relative value scale was not an agreement in restraint oftrade but created substantial danger that physicians would agreeto use a scale, which would be an antitrust offense); CaliforniaMedical Assoc., FTC Dkt. No. C-2967 (Apr. 17, 1979) (consentdecree prohibiting use of relative value guides in setting physi-cians’ fees).

(3) Credit terms have been held to be an “inseparable part of theprice” so that an agreement to terminate the extension of creditfalls squarely within the per se rule against price fixing. Catalano,Inc. v. Target Sales, Inc., 446 U.S. 643 (1980).

(4) Agreements between insurance companies and providers ofgoods or services which determine the price of goods or servicesprovided to third parties have generally been held not to be per seillegal. Barry v. Blue Cross of California, 805 F.2d 866 (9th Cir.

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1986) (agreements by physicians to participate in insurance plancreated by nonprofit organization whereby physicians providedservice at fixed rates not per se unreasonable); Brillhart v. MutualMedical Ins., Inc., 768 F.2d 196 (7th Cir. 1985) (agreementbetween physicians and physician-run insurer with respect toreimbursement not unlawful); Kartell v. Blue Shield of Massa-chusetts, Inc., 749 F.2d 922 (1st Cir. 1984), cert. denied, 471 U.S.1029 (1985) (provision in medical insurance program prohibitingphysicians from billing patients more than amounts paid byinsurer not unlawful); Pennsylvania Dental Ass’n. v. Medical Ser-vice Ass’n., 745 F.2d 248 (3d Cir. 1984), cert. denied, 471 U.S.1016 (1985) (insurer’s determination of reimbursement for pre-paid dental plan not unlawful); Royal Drug Co., Inc. v. GroupLife and Health Ins. Co., 737 F.2d 1433 (5th Cir. 1984), cert.denied, 469 U.S. 1160 (1985) (agreements with pharmacies toprovide insured groups with prescription drugs at prices notexceeding fixed amount did not constitute per se illegal horizontalprice fixing). But see Hahn v. Oregon Physicians’ Service,868 F.2d 1022 (9th Cir. 1988), cert. denied, 110 S. Ct. 140 (1989)(maximum reimbursement rates set by health care plan’s board ofcompeting physicians could constitute per se illegal price-fixing);Glen Eden Hospital, Inc. v. Blue Cross Blue-Shield of Michigan,Inc., 740 F.2d 423 (6th Cir. 1984) (if hospital could show controlby competing hospitals over reimbursement payments of insurers,per se illegal price-fixing conspiracy would be established);Ratino v. Medical Service of District of Columbia (Blue Shield),718 F.2d 1260 (4th Cir. 1983) (insurer’s provider agreement withparticipating physician’s board could be per se illegal).

(5) The rule of reason is sometimes applied to agreements whichfacially appear to involve price, but where the parties to suchagreements retain their freedom to contract separately at prices oftheir own selection. Broadcast Music Inc. v. Columbia Broad.Sys., Inc., 441 U.S. 1, 99 S. Ct. 1551, 60 L. Ed. 2d 1 (1979) (blan-ket licenses to a large number of copyrights at a single price notillegal per se); Law v. National Collegiate Athletic Ass’n,134 F.3d 1010 (10th Cir. 1998) (NCAA rule limiting coaches’compensation unlawful und0er truncated rule of reason). TheTennessean Truckstop, Inc. v. NTS, Inc., 875 F.2d 86 (6th Cir.1989) (rule of reason applied to credit card issuer’s policy prohib-iting truck stops from charging credit card users more than 105%

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of prices paid by cash customers); Volvo North America Corp. v.Men’s Int’l Professional Tennis Council, 857 F.2d 55 (2d Cir.1988) (rule with respect to player compensation may be subject toper se or rule of reason); National Bancard Corp. (NaBanco) v.Visa, U.S.A., Inc., 779 F.2d 592 (11th Cir.), cert. denied, 479 U.S.923 (1986) (rule of reason applied to credit card system whichestablished a single transfer cost for all members and nonmem-bers). See also, L.A.P.D. v. General Electric Corp., 132 F.3d 402(7th Cir. 1997) (use of common sales agent for industrial lightingmanufacturer and commercial lighting manufacturer with lessthan 15% of market not unlawful under rule of reason); IllinoisCorporate Travel, Inc. v. American Airlines, Inc., 889 F.2d 751(7th Cir. 1989), cert. denied, 495 U.S. 919 (1990) (airline’s banon discount ticket advertisements by travel agents analyzed underrule of reason and found to be lawful); Gerlinger v. Amazon.com,Inc., 311 F. Supp. 2d 838, 857, (website agreement betweenAmazon and Borders in which Amazon set the prices for bookspurchased online did not constitute price fixing agreement);SouthTrust Corp. v. Plus Systems, Inc., 913 F. Supp. 1517 (N.D.Ala. 1995) (rule of reason upheld uniform interchange fee and nosurcharge rule in ATM network).

(6) Most favored nation clauses are standard devices by which buyerstry to bargain for low prices by getting the seller to agree to treatthem as favorably as any other customer. The Department of Jus-tice has challenged several MFN provisions on the theory thatthey inhibit price competition. See United States v. MedicalMutual of Ohio, 7 Trade Reg. Rep. ¶ 50,846 (N.D. Ohio 1998)(consent decree); United States v. Delta Dental of Rhode Island,1997-2 Trade Cas. (CCH) ¶ 71,860 (D.R.I. 1997) (consentdecree); United States v. Oregon Dental Service, 60 Fed.Reg.21218 (1995); United States v. Delta Dental Plan of Arizona, Inc.,1995-1 Trade Cas. (CCH) ¶ 71,048 (D. Ariz. 1995) (consentdecree) (similar challenge); United States v. Vision Service Plan,60 Fed.Reg. 5210 (1995) (consent decree) (similar challenge). Cf.United States v. Lykes Bros. Steamship Co., 60 Fed.Reg. 52208,1996-1 Trade Cas. ¶ 71,272 (D.D.C.1995) (consent decree) (guar-anteed 5% rate differential challenged). But see Blue Cross &Blue Shield United v. Marshfield Clinic, 63 F.3d 1406 (7th Cir.1995) (competing clinic’s use of MFN not unlawful).

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B. Bid Rigging

(1) Agreements which interfere with competitive bidding are price-fixing agreements and per se unlawful. National Soc. of Profes-sional Engineers v. United States, 435 U.S. 679 (1978); UnitedStates v. All Star Industries, 962 F.2d 465, 473 (5th Cir.), cert.denied, sub nom., Midco Pipe & Tube, Inc. v. United States,113 S. Ct. 377 (1992) (defendants in bid-rigging conspiracy “can-not escape per se rule supply because their conspiracy involved a‘middle-man,’ even if the middle-man conceptualized the con-spiracy, orchestrated it by bringing the distributors togetheraround contracts it held with its buyers, and collected most of thebooty.”); United States v. Reicher, 983 F.2d 168 (10th Cir. 1992)(bidder conspired to rig bids, despite fact that bidder with whomit conspired did not have the ability to perform the contract);United States v. Misle Bus & Equipment Co., 967 F.2d 1227(8th Cir. 1992) (conspiracy to rig bids on vehicles to school dis-tricts per se illegal); United States v. MMR Corp., 907 F.2d 489(5th Cir. 1990), cert. denied, 499 U.S. 936 (1991); United Statesv. W.F. Brinkley & Son Construction Co., 783 F.2d 1157 (4th Cir.1986) (criminal conviction); United States v. Sargent Electric Co.,785 F.2d 1123, 1127 (3d Cir.), cert. denied, 479 U.S. 819 (1986);United States v. Fischbach & Moore, Inc., 750 F.2d 1183 (3d Cir.1984), cert. denied, 470 U.S. 1029 (1985); United States v. Ports-mouth Paving Corp., 694 F.2d 312 (4th Cir. 1982); United Statesv. Seminole Fertilizer Corp. 1997-2 Trade Cas. (CCH) ¶ 71,942(M.D. Fla. 1997) (company entered consent decree settlingcharges that company entered into secret agreement with compet-itor regarding terms of a joint bid).

C. Controlling Production

(1)(a)Agreements that limit the quantity of production or the supply ofgoods or services to the marketplace are generally per se unlawfulFTC v. Superior Trial Court Lawyers Ass’n, 493 U.S. 411 (1990);United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940);Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221 (7thCir. 1978); National Macaroni Mfrs. Ass’n v. FTC, 345 F.2d 421(7th Cir. 1965). Cf. United States v. National Ass’n of Broadcast-ers, 536 F. Supp. 149 (D.D.C. 1982).

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(1)(b)In NCAA v. Bd. of Regents of the University of Oklahoma,468 U.S. 85 (1984), the Supreme Court held unlawful a planadopted by National Collegiate Athletic Association which lim-ited the number of college football games that a given schoolcould have televised. The Court stated that while horizontal priceand output limitations are normally given per se treatment, in anindustry where horizontal restraints are essential if the product isto be available at all, a rule of reason analysis may be more suit-able. See also National Hockey League Players’ Assn. v. Ply-mouth Whalers Hockey Club, 325 F.3d 712, 719 (6th Cir. 2003)(rule of reason applied to league rule limiting number of “over-age” players; restriction on age of players was the type of hori-zontal restraint “necessary for the product to exist”); ChicagoProfessional Sports Ltd. Partnership v. NBA, 95 F.3d 593(7th Cir. 1996) (rule of reason—rather than “quick look”—appli-cable to league rule regarding broadcasts); Chicago ProfessionalSports Limited Partnership v. National Basketball Ass’n, 961 F.2d667 (7th Cir.), cert. denied, 113 S. Ct. 409 (1992) (rule limitingnumber of superstation television broadcasts from 25 to 20unlawful under “quick look”); Detroit Auto Dealers Ass’n Inc. v.FTC, 955 F.2d 457, 472 (6th Cir.), cert. denied, 113 S. Ct. 461(1992) (limitation on hours unlawful under rule of reason); R.D.Imports Ryno Industries, Inc. v. Mazda Distributors (Gulf), Inc.,807 F.2d 1222 (5th Cir. 1987), cert. denied, 484 U.S. 818 (1988)(the allocation of cars to dealers based on sales volume not anunreasonable restraint of trade).

IX. AGREEMENTS TO EXCHANGE INFORMATION

A. Price Information

(1) The exchange of price data is not illegal per se. United States v.United States Gypsum Co., 438 U.S. 422, 441, n.16 (1978) (“Theexchange of price data and other information among competitorsdoes not invariably have anticompetitive effects; indeed suchpractices can in certain circumstances increase economic effi-ciency and render markets more, rather than less, competitive. Forthis reason, we have held that such exchanges of information donot constitute a per se violation of the Sherman Act.”); UnitedStates v. Citizens & Southern Nat’l Bank, 422 U.S. 86, 113(1975); Wilcox v. First Interstate Bank of Oregon, N.A., 815 F.2d

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522, 526-527 (9th Cir. 1987); Amey, Inc. v. Gulf Abstract & Title,Inc., 758 F.2d 1486 (11th Cir. 1985), cert. denied, 475 U.S. 1107(1986); Battipaglia v. New York State Liquor Authority, 745 F.2d166 (2d Cir. 1984), cert. denied, 470 U.S. 1027 (1985); Continen-tal Cablevision of Ohio, Inc. v. American Electric Power Co.,715 F.2d 1115 (6th Cir. 1983); Krehl v. Baskin-Robbins IceCream Co., 664 F.2d 1348, 1357 (9th Cir. 1982). Violation ofConsent Decrees prohibiting the exchange of pricing informationcan lead to civil and criminal penalties. See U.S. v. American Air-lines, 2004-2 Trade Cas. ¶74,564 (D.D.C. 2004)(penalty of $3million against American Airlines for violating 1994 consentdecree by publishing a fare with advanced purchase requirementsthat did not apply to current travel).

(2) The systematic exchange of price information in specific transac-tions has been held unlawful because of a “chilling” effect onprice competition and no “controlling circumstances” which jus-tify it. United States v. Container Corp. of America, 393 U.S. 333(1969)). See also In re Baby Food Antitrust, 166 F.3d 112, 125(3d Cir. 1999) (“[S]poradic exchanges of shop talk among fieldrepresentatives who lack pricing authority is insufficient to sur-vive summary judgment”); In Re Coordinated Proceeding inPetroleum Products Antitrust Litigation, 906 F.2d 432 (9th Cir.1990) (press release and public posting by oil companiesannouncing increased wholesale “tankwagon” oil prices to becharged franchised dealers and withdrawal of dealer discountsraised inference of a price-fixing conspiracy), cert. denied, 111 S.Ct. 2294 (1991); United States v. Utah Society for HealthcareHuman Resources Administration, 1994-2 Trade Cas. (CCH)¶ 70,795 (D. Utah 1994) (hospitals and associations agreed not toexchange nurse wage information); United States v. Burgstiner,1991-1 Trade Cas. (CCH) ¶ 69,422 (D.C. Ga. 1991) (22 obstetri-cians/ gynecologists agreed not to exchange pricing informationto settle charges that agreements to exchange information resultedin higher fees to patients).

(2)(a)Prevention of fraud upon the defendants may be such a “control-ling circumstance.” Compare Sugar Institute v. United States,297 U.S. 553 (1936), and Cement Mfrs.’ Protective Ass’n v.United States, 268 U.S. 588 (1925), with United States v. Con-tainer Corp. of America, 393 U.S. 333, 335 (1969).

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(2)(b)Price verification for purposes of satisfying the “good faith”requirements of section 2(b) of the Robinson-Patman Act is notsuch a “controlling circumstance.” United States v. United StatesGypsum Co., 438 U.S. 422, 458 (1978).

(3) Statistical reports on average cost sent to all trade associationmembers, without identifying the parties to specific transactions,have been held lawful. Compare Maple Flooring Mfrs.’ Ass’n. v.United States, 268 U.S. 563 (1925) (statistical reports of pastprices), with American Column & Lumber Co. v. United States,257 U.S. 377 (1921) (dissemination of both current and futureprices held unlawful).

(4) The Federal Trade Commission has challenged the disclosure ofprice related information to a competitor as unlawful. FTC v.Abbott Laboratories, 1992-2 Trade Cas. (CCH) ¶ 69,996 (D.D.C.1992). See also In re Mead Johnson Co. and American HomeProducts, 5 Trade Reg. Rep. (CCH) ¶ 23,209 (June 11, 1992)(consent decree prohibiting disclosure of price formula or prefer-ential system to a competitor prior to submission of sealed bid ormass media advertising strategy to a competitor).

(5) In Statement 6 of the Statements of Antitrust Enforcement Policyin Health Care, the federal antitrust enforcement agencies setforth an antitrust safety zone that describes exchanges of priceand cost information among providers that will not be challengedby the Agencies under the antitrust laws, absent extraordinary cir-cumstances. “Exchanges of price and cost information that falloutside the antitrust safety zone generally will be evaluated todetermine whether the information exchange may have an anti-competitive effect that outweighs any procompetitive justificationfor the exchange,” but “[e]xchanges of future prices for providerservices or future compensation of employees are very likely tobe considered anticompetitive.” “If an exchange among compet-ing providers of price or cost information results in an agreementamong competitors as to the prices for health care services or thewages to be paid to health care employees, that agreement will beconsidered unlawful per se.”

B. Credit Information

(1) When intended solely to assist association members in avoidingor limiting future credit losses, providing credit information to aid

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association members in exercising their independent judgment ingranting credit will not establish violation. Cement Mfrs. Protec-tive Ass’n. v. United States, 268 U.S. 588 (1925); Zoslaw v. MCADistributing Corp., 693 F.2d 870 (9th Cir. 1982), cert. denied,460 U.S. 1085 (1983); Michelman v. Clark-Schwebel Fiber GlassCorp., 534 F.2d 1036 (2d Cir.), cert. denied, 429 U.S. 885 (1976).

(2) But where reporting constitutes a “blacklist” or is an agreementas to uniform credit terms, a violation of section 1 will be found.Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980); UnitedStates v. First Nat. Pictures, Inc., 282 U.S. 44 (1930); Swift andCompany v. United States, 196 U.S. 375 (1905).

C. Other Statistical Information

(1) The dissemination of production figures may be unlawful. Hart-ford-Empire Co. v. United States, 323 U.S. 386 (1945), clarified,324 U.S. 570 (pooling of patents which gave defendants controlover the industry and the power to allot production held unlaw-ful); United States v. United Fruit Co., 1958 Trade Cas. (CCH)¶ 68,941 (E.D. La. 1958) (consent decree prohibiting theexchange of current supply or expected imports of bananas).

(2) The dissemination of confidential business information may beunlawful. American Column & Lumber Co. v. United States,257 U.S. 377 (1921) (complete disclosure of defendant’s businessactivities held to have the purpose and effect of restricting pro-duction and was therefore unlawful). See also United States v.American Bar Ass’n, 60 Fed.Reg. 39421, 7 Trade Reg. Rep.¶ 50,782 (1995) (consent decree prohibiting collection or dissem-ination of law school faculty compensation); United States v.Philadelphia Savings Fund Society, 1979-2 Trade Cas. (CCH)¶ 62,917 (E.D. Pa. 1979) (consent decree prohibiting exchange ofconfidential business information).

(3) The dissemination of information about workplace conditions inmanufacturing facilities around the globe may not result in anti-trust enforcement by the DOJ. See Dep’t of Justice, BusinessReview Letter to World Monitors Incorporated and Fair FactoriesClearinghouse (June 19, 2006). Similarly, a proposal to developand publicize model agreements between motor carriers andfreight transportation brokers may not result in antitrust enforce-ment by the DOJ where the model agreements do not contain any

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provisions specifying rates to be charged or other competitivelysignificant terms, use of the agreements or any of their provisionswill be left to the determination of each company acting indepen-dently. See Dep’t of Justice, Business Review Letter to the Amer-ican Trucking Association, Inc. (August 10, 2006).

X. AGREEMENTS TO DIVIDE MARKETS OR ALLOCATE CUSTOMERS

A. Agreements Among Competitors(“Horizontal Agreements”)

(1) Horizontal agreements to divide markets or allocate customersare per se unlawful. Palmer v. BRG of Georgia, Inc., 498 U.S. 46(1990) (agreement not to compete between two bar review courseproviders including sharing of revenues was per se illegal);United States v. Topco Associates, Inc., 405 U.S. 596 (1972);United States v. Sealy, Inc., 388 U.S. 350 (1967); Timken RollerBearing Co. v. United States, 341 U.S. 593 (1951); AddystonPipe & Steel Co. v. United States, 85 Fed. 271 (6th Cir. 1898),aff’d, 175 U.S. 211 (1899). Compare In re Cardizem CD Anti-trust Litig., 332 F.3d 896, 908 (6th Cir. 2003) (agreement inwhich generic drug manufacturer agreed to delay introduction ofits product in return for quarterly $10 million payments frombrand name manufacturer was per se unlawful), with Valley DrugCo. v. Geneva Pharm., Inc., 344 F.3d 1294, 1304-11 (11th Cir.2003) (agreement in which generic drug manufacturer agreed todelay introduction of product in return for quarterly $3 millionpayments from brand name manufacturer was not per se unlawfulto the extent that it had no broader exclusionary effect than thatprovided by patent for brand name drug) and In re Tamoxifen Cit-rate Antitrust Litigation, 466 F.3d 187 (2d Cir. 2006), cert. filed(2007) (settlement agreement, entered into during appeal fromjudgment of patent of invalidity, did not violate Section 1, absenta showing that the exclusionary effects went beyond the scope ofthe patent’s protection or that the patent was not valid); but see,on remand, In re Terazosin Hydrochloride Antitrust Litigation,352 F. Supp. 2d 1279 (S.D Fla. 2005) (settlement agreementbetween Abbott and Geneva, which partially resolved a patentdispute, constituted per se market allocation). See also Blue Cross& Blue Shield United v. Marshfield Clinic, 65 F.3d 1406 (7th Cir.

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1995) (agreement among HMOs and affiliated physicians not toopen offices in other’s territories unlawful), on remand,980 F. Supp. 1298 (W.D. Wis. 1997) (injunction denied), rev’d inpart, 1998 Trade Cas. (CCH) ¶72,220 (7th Cir. 1998) (injunctiongranted); Blackburn v. Sweeney, 53 F.3d 825 (7th Cir. 1995)(agreement among lawyers limiting advertising intended to bemarket allocation was per se unlawful); Hammes v. AAMCOTransmission, Inc., 33 F.3d 774, 782 (7th Cir. 1994) (call for-warding scheme could be unlawful customer allocation); UnitedStates v. Brown, 936 F.2d 1042 (9th Cir. 1991) (agreementbetween two billboard advertising companies providing eachwould not bid on the other’s former billboard leaseholds for oneyear after space was lost was per se illegal); Auwood v. HarryBrandt Booking Office, Inc., 850 F.2d 884 (2d Cir. 1988); Har-kins Amusement Enterprises, Inc. v. General Cinema Corp.,850 F.2d 477 (9th Cir.), cert. denied, 109 S. Ct. 817 (1988);United States v. Capitol Service, Inc., 756 F.2d 502 (7th Cir.),cert. denied, 474 U.S. 945 (1984); Affiliated Capital Corp. v. Cityof Houston, 735 F.2d 1555 (5th Cir.), cert. denied, 474 U.S. 1053(1985); Reid Brothers Logging Co. v. Ketchikan Pulp Co.,699 F.2d 1292 (9th Cir.), cert. denied, 464 U.S. 916 (1983);Reilly v. MediaNews Group Inc., 2006-2 Trade Cas. (CCH)¶ 75,523 (N.D. Cal. 2006) (granting preliminary injunctionagainst transactions between media companies that plaintiffclaimed were designed to reduce the number of newspapers in theBay Area and divide up the geographic market between them);In re Polygram Holdings, Inc., Dkt. No. 9298 (June 28, 2002),http://www.ftc.gov/os/2002/06/ polygramid.pdf (initial decision)(ALJ held joint collaboration agreement in which parties agreedto refrain from discounting and advertising music recording to bean unlawful restraint of trade); (United States v. The MathWorks,Inc., No. 02-888-A (E.D. Va. Sept. 19, 2002), http://www.usdoj.gov/atr/cases/indx346.htm (competitive impact statement)(defendants allegedly entered into a per se market allocation andprice-fixing agreement that eliminated competition betweenthem); New York v. Saint Francis Hospital, 94 F. Supp. 2d 399(S.D.N.Y. 2000) (insufficient integration in joint venture betweenhospitals resulted in per se market allocation); Rozema v. TheMarshfield Clinic, 977 F. Supp. 1362 (W.D. Wis. 1997) (classaction by employers and purchasers of health care services alleg-ing unlawful market allocation); Garott Anderson Agencies v.

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Blue Cross & Blue Shield United, 1993-1 Trade Cas. (CCH)¶ 70,235 (N.D. Ill. 1993) (agreement to withdraw coverage foundunlawful). See also Summit Communications Group, 60 Fed.Reg. 39399, 5 Trade Reg. Rep. (CCH) ¶ 23,858 (1995) (FTC con-sent decree prohibiting cable operators from dividing markets orcontracts); Reuters America, Inc., 60 Fed.Reg. 52194, 5 TradeReg. Rep. (CCH) ¶ 23,900 (1995) (FTC consent decree prohibit-ing any allocation or division of markets or customers for newstranscripts). But cf. Metro Indus. v. Sammi Corp., 82 F.3d 839,844-47 (9th Cir. 1996), cert. denied, 117 S. Ct. 181, 136 L. Ed. 2d120, 65 U.S.L.W. 3261 (1996) (holding foreign conduct allegedlyconstituting market division must be evaluated under “jurisdic-tional rule of reason” even if conduct would require application ofper se rule in domestic context).

(2) An exclusive distributorship agreement between competitorswhich restricts one party from competing in the market of theother party may constitute a horizontal allocation. Engine Spe-cialties, Inc. v. Bombardier Limited, 605 F.2d 1 (1st Cir. 1979),cert. denied, 446 U.S. 983 (1980); In re Biovail Corp., Dkt. No.C-4057 (August 20, 2002), http://www.ftc.gov/os/2002/08/biov-aldo.pdf (decision and order) (FTC consent decree barred agree-ment between two generic drug manufacturers where onemanufacturer was the sole distributor for the other); Bascom FoodProducts Corp. v. Reese Finer Foods, Inc., 715 F. Supp. 616(D.N.J. 1989). See also Pilkington plc, 7 Trade Reg. Rep. (CCH)¶ 50,758 (D. Ariz. 1994) (consent decree prohibiting use ofexpired patent license to allocate markets); S.C. Johnson & Son,Inc., 7 Trade Reg. Rep. (CCH) ¶ 50,765 (N.D. Ill. 1994) (consentdecree prohibiting exclusive license which allegedly allocatedgeographic markets).

B. Agreements Between Companies at Different Levelsof Distribution (“Vertical Agreements”)

(1) Vertical non-price agreements, e.g., those limiting the location orgeographical area in which a distributor may resell, are not per seunlawful, but are subject to a rule of reason analysis. Dickson v.Microsoft Corp., 309 F.3d 193, 211 (4th Cir. 2002) (plaintiffalleged that Microsoft and original equipment manufacturers con-spired to restrain trade by entering into licensing agreements withanticompetitive provisions; court rejected plaintiff’s “rimless

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wheel conspiracy” and held that, under rule of reason analysis,plaintiff did not allege specific facts that would demonstrate avertical agreement between Microsoft and each original equip-ment manufacturer resulting in anticompetitive effects); Conti-nental T.V. Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977). Cf.Eastern Food Servs., Inc. Pontifical Catholic Univ. Servs. Assn.,357 F.3d 1, 8-9 (1st Cir. 2004) (allegations of exclusive agreementbetween university and soft drink company were insufficientunder rule of reason because Plaintiff could not show that exclu-sive dealing substantially foreclosed competition or that entrywas unreasonably restricted). Ezzo’s Investments, Inc. v. RoyalBeauty Supply, Inc., 243 F.3d 980 (6th Cir. 2001) (hair productmanufacturer’s requirement that salon reseller receive 50% ofrevenue from services is subject to rule of reason analysis); U.S.Healthcare, Inc. v. Health Source, Inc., 986 F.2d 589 (1st Cir.1993) (exclusive agreement between doctors and HMO subject torule of reason analysis); Orson v. Miramax Film Corp., 79 F.3d1358, 1368 (3d Cir. 1996) (citations omitted) (“The SupremeCourt has also confirmed in vertical restraint cases that interbrandcompetition, as opposed to intrabrand competition, is the primarygoal of the antitrust laws.”)

(2) When a vertical agreement is negotiated by a group of competi-tors at the same level of distribution, e.g., a group of dealers, itmay become horizontal and per se unlawful. United States v.General Motors Corp., 384 U.S. 127 (1966); ES Development,Inc. v. RWM Enterprises, Inc., 939 F.2d 547 (8th Cir. 1991), cert.denied, 112 S. Ct. 1176 (1992) (concerted and parallel pressureexercised by dealers upon manufacturer to prevent entry of newcompetitor was horizontal restraint, subject to per se rule).

(3) When the manufacturer sells both to distributors and at retail, andthus competes with its distributors (so-called “dual distribution”by the manufacturer), an otherwise vertical arrangement with dis-tributors may acquire horizontal implications and be held unlaw-ful. See White Motor Co. v. United States, 372 U.S. 253 (1963);Hampton Audio Electronics, Inc. v. Contel Cellular, Inc., 1992-1Trade Cas. (CCH) ¶ 69,848 (4th Cir. 1992) (summary judgmentappropriate where plaintiff fails to produce evidence of an anti-trust injury or proof of damages); Graphic Products Distributors,Inc. v. Itek Corp., 717 F.2d 1560 (11th Cir. 1983); Krehl v.Baskin-Robbins Ice Cream Co., 664 F.2d 1348 (9th Cir. 1982);

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Abadir & Co. v. First Mississippi Corp., 651 F.2d 422 (5th Cir.1981); Altschuler, Sylvania, Vertical Restraints, and Dual Distri-bution, XXV Antitrust Bulletin 1 (1980).

C. Ancillary Agreements Not to Compete

(1) An agreement not to compete within a given territory or for spe-cific customers, entered into ancillary to some other agreement orlegitimate joint venture, is not per se unlawful. Referring to three“emblematic” Supreme Court cases, the Tenth Circuit explains,“In rejecting automatic per se treatment in these joint venturecases, the Court directs us instead to look at the challenged agree-ment to judge whether it represents the essential reason for thecompetitors’ cooperation or reflects a matter merely ancillary tothe venture’s operation; whether it has the effect of decreasingoutput; and whether it affects price.” SCFC ILC, Inc. v. VisaUSA, Inc., 36 F.3d 958, 964 (10th Cir. 1994), cert. denied, 115 S.Ct. 2600, 132 L. Ed. 2d 84663, U.S.L.W. 3891 (1995) (footnoteomitted) (citing Broadcast Music, Inc. v. Columbia Broad. Sys.,Inc., 441 U.S. 1, 99 S. Ct. 1551, 60 L. Ed. 2d 1 (1979), NCAA v.Board of Regents of Univ. of Okla., 468 U.S. 85, 104 S. Ct. 2948,82 L. Ed. 2d 70 (1984), and Northwest Wholesale Stationers, Inc.v. Pacific Stationary & Printing Co., 472 U.S. 284, 105 S. Ct.2613, 86 L. Ed. 2d 202 (1985)). See also Paladin Assoc., Inc. v.Montana Power Co., 328 F.3d 1145, 1154-57 (9th Cir. 2003) (perse rule did not apply to agreement by natural gas producer toassign long-term transportation rights to competing gas pro-ducer’s customers, which had effect of driving plaintiff producerfrom market; under rule of reason, defendants’ agreement was notanticompetitive because long-term transportation contractsincreased efficiencies, improved customer choice, and plaintiffended up selling gas at lower price as a result) (citing N’westWholesale Stationers, Broadcast Music, and NCAA cases). Roth-ery Storage & Van Co. v. Atlas Van Lines, 792 F.2d 210 (D.C.Cir. 1986); National Bancard Corp. (NaBanco) v. VISA, U.S.A.,Inc., 779 F.2d 592, 597, n.6 (11th Cir.), cert. denied, 479 U.S. 923(1986); Polk Bros., Inc. v. Forest City Enterprises, Inc., 776 F.2d185 (7th Cir. 1985). See also Statements of Antitrust EnforcementPolicy in Health Care, Statements 8 and 9 (recognizing applica-bility of rule of reason analysis to agreements to fix prices or allo-cate markets reasonably necessary to realize procompetitive

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benefits of physician network joint ventures and multiprovidernetworks).

(2) Such restrictive covenants should meet generally the followingrequirements: (a) the restraint must be ancillary to the main pur-pose of a lawful contract; (b) the restraint must neither beimposed by a party with monopolistic power nor foster a monop-oly; (c) the restraint must be partial in nature and reasonably lim-ited in time and scope; and (d) the restraint must be no greaterthan necessary to afford fair protection to the parties and not soextensive as to interfere with the interest of the public. See gener-ally United States v. Addyston Pipe & Steel Co., 85 Fed. 271(6th Cir. 1898), mod., 175 U.S. 211 (1899); Lektro-Vend Corp. v.Vendo Co., 660 F.2d 255 (7th Cir. 1981), cert. denied, 455 U.S.921 (1982); Sound Ship Building Corp. v. Bethlehem Steel Corp.,387 F. Supp. 252 (D.N.J. 1975), aff’d, 533 F.2d 96 (3d Cir.), cert.denied, 429 U.S. 860 (1976). United States v. General ElectricCo., 1997-1 Trade Cas. (CCH) ¶ 71,765 (D. Mont. 1997) (cove-nants not to compete in licenses prohibiting the servicing of hightech medical equipment is challenged as unlawful per se wherenot ancillary to legitimate agreement).

XI. BOYCOTTS AND OTHER EXCLUSIONARY PRACTICES

A. Concerted Refusals to Deal by Competitors

(1) A concerted refusal by competitors to provide goods or servicesto a buyer is per se illegal. FTC v. Superior Court Trial LawyersAss’n, 493 U.S. 411 (1990). See also Robert Lewis, et al., 2004-1Trade Cas. ¶15, 607 (July 23, 2004) (FTC consent decree settlingprice fixing charges against four lawyers who provide criminaldefense to indigents in Washington); United States v. Federationof Certified Surgeons & Specialists, Inc., 1999-1 Trade Cas.(CCH) ¶ 72,549 (M.D. Fla. 1999) (consent degree prohibits phy-sicians and their accounting firm from threatening a boycott toexact higher fees for physicians); FTC v. College of Physicians-Surgeons of Puerto Rico, 5 Trade Reg. Rep. (CCH) ¶ 24,335(1997) (FTC consent decree prohibiting physicians from boycott-ing or refusing to provide medical services if prices were notincreased); La Asociacion Medica de Puerto Rico, 60 Fed.Reg.16144, 5 Trade Reg. Rep. (CCH) ¶ 23,785 (1995) (FTC consentdecree prohibiting psychiatrists from jointly refusing to deal with

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third party payor and physicians from negotiating with or refus-ing to deal with third party payor); Santa Clara County Motor CarDealers Ass’n, 60 Fed.Reg. 39959, 5 Trade Reg. Rep. (CCH)¶ 23,874 (1995) (FTC consent decree prohibiting car dealersassociation from jointly refusing to deal with media); NewEngland Juvenile Retailers Ass’n, 59 Fed.Reg. 54604, 5 TradeReg. Rep. (CCH) ¶ 23,689 (1994) (FTC consent decree prohibit-ing retailers from jointly refusing to deal with manufacturers thatdeal with catalogs); In re Southbank IPA, Inc., 5 Trade Reg. Rep.(CCH) ¶ 23,065 (Sept. 30, 1991) (23 obstetricians/gynecologistsenter consent decree to settle charges by FTC that they had con-spired to fix prices and boycott third-party payors in Jacksonvillearea). See also Faulkner’s Auto Body Center, Inc. v. CovingtonPike Toyota, Inc., 2002-2 Trade Cases ¶ 73,771 (6th Cir. 2002)(upholding district court’s finding that dealer entered into a con-spiracy to boycott body shop from any referrals) (unpub. opin-ion); Big Bear Lodging Association v. Snow Summit, Inc.,182 F.3d 1096 (9th Cir. 1999) (ski lodges stated claim against twoski resorts for conditioning purchase of lift tickets on membershipin association, which excluded other lodges and which limiteddiscounts).

(2) A horizontal agreement between competitors which has the pri-mary purpose or effect of excluding some other competitor fromthe market is per se illegal. Fashion Originators’ Guild v. FTC,312 U.S. 457 (1941) (agreement among garment and textile man-ufacturers to exclude competitors from the market held per seunlawful). But see Wilk v. American Medical Ass’n, 895 F.2d352 (7th Cir.), cert. denied, 496 U.S. 927 (1990) (ethical canoneffectively prohibiting AMA members from associating with chi-ropractors held unlawful under rule of reason).

(3) Where one or more competitors at one level of distribution com-bine with traders at a second level of distribution to exclude acompetitor from the market at either level, a per se violation maybe found. United States v. General Motors Corp., 384 U.S. 127(1966) (conspiracy among dealers and manufacturer wherebymanufacturer imposed restrictions upon competing dealers deal-ing with discounters held per se unlawful); Klor’s, Inc. v. Broad-way-Hale Stores, Inc., 359 U.S. 207 (1959) (agreement amongmanufacturers, distributors and retailer to exclude a competingretailer held per se unlawful); Toys ”R” Us Corp., 2000-2 Trade

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Cas. (CCH) ¶72,978 (7th Cir. 2000) (largest toy retailer found tohave orchestrated horizontal agreements among toy manufactur-ers to restrict sales to warehouse clubs); ES Development, Inc. v.RWM Enterprises, Inc., 939 F.2d 547 (8th Cir. 1991), cert.denied, 112 S. Ct. 1176 (1992) (conspiracy among auto dealers toprevent manufacturers from granting franchises to competitorsheld per se unlawful); Weiss v. York Hospital, 745 F.2d 786(3d Cir. 1984), cert. denied, 470 U.S. 1060 (1985) (group boycottby staff members of osteopaths was per se unlawful); Olsen v.Progressive Music Supply, Inc., 703 F.2d 432 (10th Cir.), cert.denied, 464 U.S. 866 (1983) (group boycott of price-cuttingmusical instrument retailer was per se unlawful); Com-Tel, Inc. v.Du Kane Corp., 669 F.2d 404 (6th Cir. 1982) (conspiracy betweenmanufacturer and franchised distributors to refuse to deal withnonfranchised installer found per se unlawful); Wilder Enter-prises, Inc. v. Allied Artists Pictures Corp., 632 F.2d 1135(4th Cir. 1980) (agreement among exhibitors and distributors offilms to allocate films held illegal). See also CSR Limited v. Fed-eral Insurance Co., 40 F. Supp. 2d 559 (D.N.J. 1998) (allegedboycott by insurers unless claims were withdrawn withstooddefendants’ motion to dismiss). But see United States v. VisaU.S.A., Inc., 344 F.3d 229, 238 (2d Cir. 2003) (two credit cardnetworks’ “exclusionary rules” prohibiting member banks fromissuing credit cards of competitors, American Express and Dis-cover, were not per se unlawful, but were anticompetitive underrule of reason); Pepsico, Inc. v. Coca-Cola Co., 315 F.3d 101, 110(2d Cir. 2002) (Pepsico failed to offer sufficient evidence of ahorizontal agreement among independent food distributors toboycott Pepsico based on their contracts with Coca-Cola.); Cof-fey v. Healthtrust, Inc., 955 F.2d 1388, 1392 (10th Cir. 1992) (nohorizontal boycott by physicians where physicians individuallyagreed with hospital to refer patients to radiologist with exclusivecontract); Balmoral Cinema, Inc. v. Allied Artists Pictures Corp.,885 F.2d 313 (6th Cir. 1989) (split agreement among film exhibi-tors and distributors not per se unlawful; jury verdict in favor ofdefendants upheld).

(4) Where one or more entities provide a service or facility that isessential to participation in the market, they may be obligated toprovide all competitors with access to such service or facility.Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko,

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540 U.S. 398, 408-11 (2004) (no duty to cooperate with rivalexcept under compulsion of Telecommunications Act); AspenSkiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985)(the offer of a combined lift ticket for three out of four ski areasrequired the seller also to offer a combined ticket for all fourareas); United States v. Terminal Railroad Ass’n of St. Louis,224 U.S. 383 (1912) (defendant required to offer all railroadsownership and control of railroad terminal facility); Fishman v.Estate of Wirtz, 807 F.2d 520 (7th Cir. 1986) (agreement not tolease Chicago Stadium to basketball franchise found to be per seviolation); Hecht v. Pro-Football, Inc., 570 F.2d 982 (D.C. Cir.1977), cert. denied, 436 U.S. 956 (1978) (jury question whetherfailure to lease RFK Stadium to football promoters was unreason-able restraint of trade). But see City of Chanute, Kan. v. WilliamsNatural Gas Co., 955 F.2d 641, 653 (10th Cir.), cert. denied,113 S. Ct. 96 (1992) (pipeline company’s denial of access to othergas suppliers had legitimate business purpose given governmentregulatory turmoil in natural gas industry); Paddock Publs. v. Chi-cago Tribune Co., 103 F.3d 42 (7th Cir. 1996) (holding supple-mental news services and features syndicators’ exclusivecontracts with subscribers in large cities permissible under sec-tion 1); Pontius v. Children’s Hospital, 552 F. Supp. 1352 (W.D.Pa. 1982) (even though a hospital is an “essential facility,” it isstill permitted to exclude incompetent doctors from its use).

(5) A horizontal agreement between competitors which has the pri-mary purpose and effect of accomplishing a legitimate businessobjective with only an ancillary adverse effect upon the businessof a competitor is subject to a rule of reason analysis. See gener-ally FTC v. Indiana Federation of Dentists, 476 U.S. 447 (1986)(agreement among dentists to withhold x-rays from insurers heldan unreasonable restraint of trade); Northwest Wholesale Statio-ners, Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284(1985) (expulsion of plaintiff from wholesale purchasing cooper-ative not subject to per se rule against group boycotts); NestleFood Co. v. Abbott Laboratories, 1997-1 Trade Cas. (CCH)¶ 71,770 (9th Cir. 1997) (unpub. op.) (rule of reason applicable toagreement not to advertise directly to consumers); Chicago Pro-fessional Sports Ltd. Partnership v. NBA, 95 F.3d 593 (7th Cir.1996) (broadcasting rule of basketball league subject to rule ofreason analysis); SCFC ILC, Inc. v. Visa USA, Inc., 36 F.3d 958,

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964 (10th Cir. 1994), cert. denied, 115 S. Ct. 2600, 132 L. Ed. 2d84663, U.S.L.W. 3891 (1995) (exclusion of card issuer from jointventure lawful under rule of reason); In re Detroit Auto DealersAssn., Inc. v. FTC, 955 F.2d 457, 472 (6th Cir.), cert. denied,113 S. Ct. 461 (1992) (new car dealers’ agreement restrictingshowroom hours unreasonably restrained trade even though priceand profit margins unaffected); Rothery Storage & Van Co. v.Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986), cert. denied,479 U.S. 1033 (1987); M & H Tire Co. v. Hoosier Racing TireCorp., 733 F.2d 973 (1st Cir. 1984) (rule requiring drivers at race-track to use one brand of tire did not amount to per se illegal boy-cott where rule was designed to control expenses and increaseparity among race competitors); United States Trotting Ass’n v.Chicago Downs Ass’n, Inc., 665 F.2d 781 (7th Cir. 1981) (associ-ation’s by-laws prohibiting members from racing horses at meetssponsored by organizations not members of association subject torule of reason analysis); Blackburn v. Crum & Forster, 611 F.2d102 (5th Cir.), cert. denied, 447 U.S. 906 (1980) (insurers’ refusalto deal with an agent as a result of a business dispute held lawfulunder rule of reason analysis); Addamax Corp. v. Open SoftwareFound., Inc., 888 F. Supp. 274, 281-83 (D. Mass. 1995) (jointventure’s refusal to accept bid for security system subject to ruleof reason analysis).

(6) A concerted refusal to deal which has as its objective political,social or other non-commercial goals has generally been foundlawful. See generally NAACP v. Claiborne Hardware Co.,458 U.S. 886 (1982); State of Missouri v. National Organizationfor Women, Inc., 620 F.2d 1301 (8th Cir.), cert. denied, 440 U.S.842 (1980) (convention boycott of states that had not ratified theEqual Rights Amendment not subject to Sherman Act); Johnsonv. Nyack Hospital, 964 F.2d 116 (2d Cir. 1992) (legitimate medi-cal reasons to terminate surgical privileges precludes antitrustclaim).

B. Concerted Refusals to Deal With Distributors or Suppliers

(1) Where one party’s refusal to deal with a supplier or distributor isprompted by a competing distributor, a rule of reason analysis isgenerally applicable. Nynex Corp. v. Discon, Inc., 119 S. Ct. 493(1998) (per se rule did not apply to one buyer’s decision to buyfrom one supplier); Republic Tobacco Co. v. North Atlantic Trad-

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ing Co., Inc., 381 F.3d 717, 736-40 (7th Cir. 2004) (affirminggrant of summary judgment on exclusive dealing claim becauseno evidence to support southeastern United States as a proper rel-evant market for “roll your own” cigarette papers); Diaz v. Farley,215 F.3d 1175 (10th Cir. 2000) (group boycott between hospitalgroup and anesthesiologists against other anesthesiologistsassessed under a rule of reason); Minnesota Assoc. of NurseAnesthetists v. Unity Hospital, 208 F.3d 655 (8th Cir. 2000)(exclusive dealing arrangement between hospitals and anesthesi-ologists reviewed under rule of reason); Doctor’s Hospital of Jef-ferson, Inc. v. Southeast Medical Alliance, Inc., 123 F.3d 301(5th Cir. 1997) (substitution of hospital in PPO did not injurecompetition); Electronic Communications Corp., Inc. v. ToshibaAmerica Consumer Products, Inc., 129 F.3d 240 (2d Cir. 1997)(agreement to reinstate exclusive distributor and terminate otherdistributor not unlawful); Tunis Bros. Co., Inc. v. Ford Motor Co.,952 F.2d 715 (3d Cir. 1991), cert. denied, 112 S. Ct. 3034 (1992)(former tractor dealer’s intrabrand market definition too narrow toestablish rule of reason violation); Crane & Shovel Sales Corp. v.Bucyrus-Erie Co., 854 F.2d 802 (6th Cir. 1988) (substitution ofexclusive distributor for existing distributors held lawful underrule of reason analysis); Lomar Wholesale Grocery v. Dieter’sGourmet Foods, Inc., 824 F.2d 582 (8th Cir. 1987), cert. denied,484 U.S. 1010 (1988) (food distributor’s allegation that competi-tor conspired with suppliers to foreclose his access to productsheld lawful under rule of reason analysis); Westman CommissionCo. v. Hobart Int’l, Inc., 796 F.2d 1216 (10th Cir. 1986), cert.denied, 486 U.S. 1005 (1988) (manufacturer’s denial of a distrib-utorship at urging of a competing distributor was lawful under arule of reason analysis); Dos Santos v. Columbus-Cuneo-CabriniMedical Center, 684 F.2d 1346 (7th Cir. 1982) (an exclusive deal-ing contract between hospital and corporation providing anesthe-sia services was subject to rule of reason; preliminary injunctionvacated and case remanded); A. H. Cox & Co. v. Star MachineryCo., 653 F.2d 1302 (9th Cir. 1981) (manufacturer’s change in dis-tribution prompted by dealer found lawful under rule of reasonanalysis); Oreck Corp. v. Whirlpool Corp., 639 F.2d 75 (2d Cir.1980), cert. denied, 454 U.S. 1083 (1981) (a supplier’s refusal todeal with a distributor at the request of competing distributorfound legal after applying rule of reason analysis); Rossi v. Stan-dard Roofing, Inc., 958 F. Supp. 976 (D.N.J. 1997) (refusal to sell

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material to distributor did not have anticompetitive effect whereother products available at reasonable prices).

(2) Even an agreement between a supplier and dealer to terminate adiscounter without a further agreement on the price or price levelsto be charged by the remaining dealer is not per se unlawful.Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S.717 (1988). See also Garment District, Inc. v. Selk Stores Ser-vices, Inc., 799 F.2d 905 (4th Cir. 1986), cert. denied, 486 U.S.1005 (1988); McCabe’s Furniture, Inc. v. La-Z-Boy Chair Co.,798 F.2d 323 (8th Cir. 1986), cert. denied, 486 U.S. 1005 (1988).

(3) An alleged agreement between an equipment manufacturer andits customers or distributors to deny spare parts to a competingprovider of maintenance services for such equipment was held towithstand a motion for summary judgment in Eastman Kodak Co.v. Image Technical Services, Inc., 112 S. Ct. 2072 (1992).

(4) General Electric settled a case brought against it by the Depart-ment of Justice, claiming that exclusionary provisions in copy-right licenses that effectively barred the use of third-partymaintenance services constituted a per se violation of Section 1.United States v. General Electric Co., 1999-2 Trade Cas. (CCH)¶ 72,706 (D.D.C. 1998).

(5) Although exclusive dealing is usually analyzed under Section 1,exclusive dealing contracts may be the basis of a Section 2monopolization claim. LePage’s Inc. v. 3M, 324 F.3d 141, 157-58(3d Cir. 2003) (although jury found against plaintiff on section 1exclusive dealing claim, the section 1 evidence could be used tosupport jury’s finding of liability under section 2; moreover,express agreement was unnecessary to support finding of exclu-sive dealing, where defendant’s rebates encouraged retailers touse give business solely to defendant).

C. Membership Restrictions of Trade Associations

(1) Membership restrictions are not per se unlawful. National Ass’nof Review Appraisers & Mortgage Underwriters v. AppraisalFound., 64 F.3d 1130 (8th Cir. 1995) (exclusion resulting fromlegitimate criteria not unlawful under rule of reason analysis);Precision Piping & Instruments, Inc. v. E. I. duPont deNemours & Co., 951 F.2d 613, 617 (4th Cir. 1991) (association

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expulsion of member for having successfully negotiated an inde-pendent agreement with a labor union lawful under rule of rea-son); Charley’s Taxi Radio Dispatch Corp. v. SIDA of Hawaii,Inc., 810 F.2d 869 (9th Cir. 1987) (exclusion of taxi fleet operatorfrom association of individual taxi owner-operators not per seunlawful); Phil Tolkan Datsun, Inc. v. Greater Milwaukee DatsunDealers’ Advertising Ass’n, Inc., 672 F.2d 1280 (7th Cir. 1982)(exclusion of auto dealer from membership in dealer trade associ-ation subject to rule of reason analysis); United States v. RealtyMulti-List, Inc., 629 F.2d 1351 (5th Cir. 1980) (two significantfactors: degree to which association is involved in actual businessactivities of members and extent to which association possessesmarket power); Hatley v. American Quarter Horse Ass’n,552 F.2d 646 (5th Cir. 1977) (definition of quarter horse adoptedby association judged under rule of reason). But see, NorthwestWholesale Stationers, Inc. v. Pacific Stationery & Printing Co.,472 U.S. 284 (1985) (concerted exclusion of member may meritper se treatment if association possesses market power).

(2) In determining reasonableness of membership restrictions, courtslook both to purpose and effect.

(2)(a)The economic burden on others of denial of membership is con-sidered. Associated Press v. United States, 326 U.S. 1 (1945)(restrictions imposed by defendant news service held to impedethe growth of competitors of members of defendant’s associa-tion); United States v. Insurance Board of Cleveland, 188 F. Supp.949 (N.D. Ohio 1960) (association rule excluding from member-ship agents handling insurance issued by mutual companies heldunreasonable).

(2)(b)The rationale or purpose of the restriction is also considered, e.g.,the need to fund association activities (Pope v. Mississippi RealEstate Commission, 872 F.2d 127 (5th Cir. 1989) (rule of reasonapplied to Board of Realtors’ sliding fee schedule, whichimposed higher fees on larger members and thereby led plaintiffs,a large agency, to resign)); or the necessity for numerical limits(Kreuzer v. American Academy of Periodontology, 735 F.2d1479 (D.C. Cir. 1984) (legality depends on whether membershiprestriction had a procompetitive effect, worked to increase thequality of patient care, and was the least restrictive means chosento achieve that end)).

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(2)(c)Where the trade association occupies a dominant position in amarket, the degree of procedural due process involved in a termi-nation or denial may be important. Compare Silver v. New YorkStock Exch., 373 U.S. 341 (1963) (termination of broker’s “directwire connections” without prior notice held unlawful), withNorthwest Wholesale Stationers, Inc. v. Pacific Stationery andPrinting Co., 472 U.S. 284 (1985) (absence of procedural safe-guards irrelevant to termination).

(3) The refusal of access by nonmembers to an association serviceconferring a significant competitive advantage may be an unrea-sonable restraint. Associated Press v. United States, 326 U.S. 1(1945) (access to newsgathering services); United States v. Auto-mobile Mfrs. Ass’n, 307 F. Supp. 617 (C.D. Cal. 1969), aff’d,397 U.S. 248 (1970) (access to basic research of association). Butsee Pretz v. Holstein Friesian Ass’n of America, 698 F. Supp.1531 (D.Kan. 1988) (cattle breeder association’s exclusion ofplaintiff for rules violations is subject to rule of reason analysis,despite importance of participation to individual breeders, wherecompetition would not be harmed by plaintiff’s exclusion).

D. Joint Research

(1) Joint research programs funded by and participated in by compet-itors are tested by a rule of reason and damages are limited to theactual amount of injury, not treble damages, where certain statu-torily prescribed conditions are met. 15 U.S.C. §4301, et seq.(2004) (National Cooperative Research Act of 1984). Joint ven-tures may be subject to attack if they appear to be part of anagreement to restrict research rather than promote it Schachar v.American Academy of Ophthalmology, Inc., 870 F.2d 397(7th Cir. 1989) (alleged conspiracy to restrain development ofradial keratotomy not a “restraint” subject to rule of reason);United States v. Manufacturers Aircraft Ass’n, Inc., 1976-1 TradeCas. (CCH) ¶ 60,801 (S.D.N.Y. 1975) (consent decree requiringassociation to make available certain technical information). SeeU.S. Dep’t of Justice & U.S. Fed. Trade Comm’n, AntitrustGuidelines for Collaborations Among Competitors (issued April2000); U.S. Dep’t of Justice & U.S. Fed. Trade Comm’n, Anti-trust Guidelines for the Licensing of Intellectual Property (1995);U.S. Dep’t of Justice, Antitrust Guide Concerning Research JointVentures (Nov. 1980).

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(2) Market power of participating firms is likely to be a significantfactor. Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263(2d Cir. 1979), cert. denied, 444 U.S. 1093 (1980).

(3) Settling patent disputes, cross-licensing and the formation ofpatent pools is tested under rule of reason, but caution is calledfor. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100(1969); United States v. Singer Mfg. Co., 374 U.S. 174 (1963);Hartford-Empire Co. v. United States, 323 U.S. 386 (1945); Stan-dard Oil Co. v. United States, 283 U.S. 163 (1931); United Statesv. Westinghouse Elec. Corp., 648 F.2d 642 (9th Cir. 1981); In reSummit Tech. Inc. & VISX, Inc., Docket No. 9286 (before theFederal Trade Commission, complaint and consent decrees avail-able at <http://www.ftc.gov/os/1998/9808>) (Defendants agreedto dissolve patent pool, cross-license allegedly blocking patents,and compete in the primary product market). See generally U.S.Dep’t of Justice & U.S. Fed. Trade Comm’n, Antitrust Guidelinesfor the Licensing of Intellectual Property (1995); Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005) (“reversepayments” found lawful). But see In re Cardizem CD AntitrustLitig., 332 F.3d 896 (6th Cir. 2003) (“reverse payments” found tobe per se unlawful).

E. Standardizing Products

(1) Recovery against standard setting organizations is now limited tosingle damages in standard setting cases where the challengedactivity is undertaken in accordance with statutory procedures.15 U.S.C. §4303 (2004). An agreement to standardize products isnormally tested under the rule of reason, Clamp-All Corp. v. CastIron Soil Pipe Institute, 851 F.2d 478 (1st Cir. 1988), cert. denied,109 S. Ct. 789 (1989) (association’s development of standardslawful under rule of reason analysis); Consolidated Metal Prod-ucts, Inc. v. American Petroleum Institute, 846 F.2d 284 (5th Cir.1988) (association’s delay in approving specifications not unlaw-ful under rule of reason); Gunter Harz Sports, Inc. v. U.S. TennisAss’n, Inc., 665 F.2d 222 (8th Cir. 1981) (association’s rule regu-lating the characteristics of tennis rackets upheld under rule ofreason analysis). Cf. In re Insurance Antitrust Litigation, 938 F.2d919 (9th Cir. 1991), aff’d in part, rev’d in part on other grounds,113 S. Ct. 2891 (1993) (complaint alleged conspiracy to restrictavailability of certain insurance coverage as a result of policy

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forms developed by ISO); Jessup v. American Kennel Club,1999-2 Trade Cas. (CCH) ¶ 72,637 (S.D.N.Y. 1999) (two showdog organizations’ height restriction on show dogs was reason-able), aff’d, 210 F.3d 111 (2d Cir.), cert. denied, 121 S. Ct. 762(2000).; In re Circuit Breaker Litigation, 984 F. Supp. 1267 (C.D.Cal. 1997) (motivated by legitimate safety concerns, trade associ-ation’s withdrawal of standard and test for reconditioned circuitbreakers was lawful under rule of reason analysis); AddamaxCorp. v. Open Software Found., 888 F. Supp. 274, 282-83(D. Mass. 1995) (deciding to apply rule of reason analysis to jointventure’s setting standards in novel context of complicated com-puter industry). But see United States v. National Assn. of Broad-casters, 536 F. Supp. 149 (D.D.C. 1982) (advertising standard oftrade association of television broadcasters prohibiting the adver-tisement of more than one product in a commercial lasting lessthan 60 seconds held per se illegal).

(2) Standardization undertaken with an intent to restrain trade isunreasonable and thus unlawful. Allied Tube & Conduit Corp. v.Indian Head, Inc., 486 U.S. 492 (1988) (insufficient safeguards toprevent standard setting process from being biased by memberswith economic interest in restraining competition resulted in anti-trust violation); American Society of Mechanical Engineers, Inc.v. Hydrolevel Corp., 456 U.S. 556 (1982) (association held liablefor restraint of trade caused by association members misinterpret-ing an association standard for their own purposes). But see Elia-son Corp. v. Nat’l Sanitation Found., 614 F.2d 126 (6th Cir.), cert.denied, 449 U.S. 826 (1980) (plaintiff unable to show either thatit was barred from obtaining approval of its products on a dis-criminatory basis or that the standards as a whole were manifestlyanticompetitive and unreasonable); Sessions Tank Liners, Inc. v.Joor Mfg., 17 F.3d 295 (9th Cir. 1994) (distinguishing AlliedTube and holding conduct protected under Noerr-Penningtonimmunity doctrine). See also In re Rambus, Inc., FTC Docket No.9302, (F.T.C. August 2, 2006) (nondisclosure of patents in settinga standard violated Section 2 of the Sherman Act and Section 5 ofthe FTC Act); United States v. Dell Computer Co., 5 Trade Reg.Rep. ¶ 24,054 (1996) (consent decree prohibiting Dell fromenforcing patents incorporated into standards for personal com-puters); Dep’t of Justice, Business Review Letter to VITA

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(Oct. 30, 2006)(approval of association’s patent disclosure andlicensing policy).

(3) Even if no express intent to restrain trade is shown, an agreementestablishing standards may violate the Sherman Act if the stan-dards are not objective and if the standards restrain competitors.Radiant Burners, Inc. v. Peoples Gas Lgt. & Coke Co., 364 U.S.656 (1961). See also ECOS Electronics Corp. v. UnderwritersLaboratories, Inc., 743 F.2d 498 (7th Cir. 1984), cert. denied,469 U.S. 1210 (1985); National Macaroni Manufacturers Ass’n v.FTC, 345 F.2d 421 (7th Cir. 1965); United States v. American BarAss’n, 60 Fed.Reg. 39421, 7 Trade Reg. Rep. (CCH) ¶ 50,782(1995) (consent decree prohibiting ABA accreditation of lawschools on compensation paid to faculty or employees). But seeSantana Prod., Inc. v. Bobrick Washroom Equipment, Inc.,823 N.E.2d 93 (3rd Cir. 2005) (marketing campaign against com-petitor’s product that did not meet code requirements not a“restraint”).

XII. JOINT VENTURES

A. Introduction

Joint ventures have long been the subject of antitrust debate and liti-gation. This is due in part to their variety and complexity. A number ofguidelines have been issued by the Federal Trade Commission and theDepartment of Justice to assist in the antitrust analysis of joint ven-tures.

(1) The most notable of these are the Antitrust Guidelines for Collab-orations Among Competitors (“Competitor Collaboration Guide-lines”) issued in April 2000.

(2) The Statements of Antitrust Enforcement Policy in Health Care(the “Health Care Statements”) are also instructive in terms ofcertain health care collaborations.

(3) The Antitrust Guidelines for the Licensing of Intellectual Prop-erty (the “Intellectual Property Guidelines”) outline the agencies’enforcement position with respect to intellectual property licens-ing agreements among competitors in joint ventures and othercollaborations.

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B. Defining a Joint Venture

(1) One of the major problems in applying antitrust principles to jointventures is the problem of defining a joint venture. The term jointventure has been applied to a wide variety of collaborativearrangements and does not have a single generally acceptedmeaning under the antitrust laws. In recent years joint venturesand strategic alliances have been used to achieve efficiencies andenhance competitiveness in both domestic and global markets.Some of these are more traditional in that partners each contributeassets and share in the profits and losses of a newly created, sepa-rate entity. Others may involve only joint marketing, distributionand sales. Still others are consortia of one type or another thattypically involve research and development. Others are contrac-tual only, involving little or no equity, often called strategic alli-ances. The challenge from an antitrust perspective is how to applygeneral antitrust principles to this wide variety of transactions.

(1)(a) In the Competitor Collaboration Guidelines the antitrust agen-cies use the term competitor collaboration (rather than joint ven-ture among competitors) to describe any agreement ”between oramong competitors to engage in economic activity.”

(1)(b) In the International Guidelines the Department of Justice defineda joint venture as “essentially any collaborative effort, short of amerger, among firms with respect to production, R&D, distribu-tion and/or the marketing of products or services.” U.S. Dept. ofJustice Guidelines on Antitrust and International Operations(1995) § 3.4, reprinted in 4 Trade Reg. Rep. (CCH) §13,109.10 at20, 599.

(1)(c) “A joint venture could involve any business enterprise in whichtwo or more persons collaborate to achieve some commercialgoal—a definition that includes all of antitrust except, perhaps,some single firm attempts to monopolize or monopolizing con-duct.” Robert Pitofsky, “A Framework for Antitrust Analysis ofJoint Ventures,” 54 Antitrust L.J. 893 (1986).

(2) Simply labeling something a “joint venture” does not confer anyimmunity from liability under the antitrust laws. Timken RollerBearing Co. v. United States, 341 U.S. 593, 598 (1951).

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C. Common Types of Joint Ventures

Joint ventures serve many different functions. The Competitor Col-laboration Guidelines recognize that competitor collaborations caninvolve one or more business activities such as research and develop-ment, production, marketing, distribution, sales or purchasing. Com-petitor Collaboration Guidelines at §3.31(a).

(1) Research and Development. These joint ventures are often pro-competitive and are typically analyzed under the rule of reason.Certain aspects of the antitrust analysis of competitor collabora-tions involving R&D may be governed by the National Coopera-tive Research and Development Act, 15 U.S.C. §§4301-02.According to the Guidelines, “R&D agreements are more likelyto raise competitive concerns when the collaboration or its partic-ipants already possess a secure source of market power over anexisting product and the new R&D efforts might cannibalize theirsupracompetitive earnings.”

(2) Production. Joint ventures that involve the joint production of anew or improved product are often procompetitive. In some casesthere may be concern about each party’s ability to compete out-side the joint venture or about the joint marketing or pricing ofsuch products.

(3) Marketing and Distribution. Joint ventures that relate only to sell-ing, distributing or promoting goods or services may present anti-trust concerns if they involve agreements on price, output, orother competitively significant terms.

(4) Buying. Most joint buying agreements are procompetitive and donot raise antitrust concerns. However, antitrust concerns may beraised where such agreements create or increase market power(commonly referred to as “monopsony power”) to the point thatprices are depressed and output is reduced below competitive lev-els.

D. Applicable Statutes

(1) Joint ventures among competitors can raise competitive concernseither by increasing concentration in the same way as a merger oran acquisition or by facilitating collusion among the joint ventur-ers. Joint ventures may face antitrust scrutiny during formation

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under Section 7 of the Clayton Act and in operation under Sec-tions 1 and 2 of the Sherman Act or Section 5 of the FTC Act.

(2)(a)Like mergers and acquisitions, joint ventures may be subject toSection 7 of the Clayton Act. Where a joint venture is establishedthrough a separate entity, its formation may require notificationunder the Hart-Scott-Rodino Antitrust Improvements Act.,18 U.S.C. § 18 A. See United States v. Penn-Olin Chem. Co.,378 U.S. 158, 167-72 (1964)(Court treated joint venture as amerger); In re Shell Oil Co., 125 F.T.C. 769 (1998)(FTC and sev-eral state attorneys general approved the formation of Equilon byTexaco and Shell); FTC v. Warner Communications, 742 F.2d1156 (9th Cir. 1984)(joint venture of Warner and Polygram for thejoint distribution of prerecorded music was treated as a mergerbecause it eliminated all competition between the two firms);United States v. Ivaco, Inc., 704 F. Supp. 1409 (W.D. Mich.1989)(court enjoined a joint venture of two leading railroadtamper manufacturers with 70% of the market).

(2)(b)In some cases a joint venture will be indistinguishable from amerger and will be analyzed as a merger. These types of jointventures typically preclude the parties from acting independentlyin pricing and output decisions or otherwise competing with thejoint venture.

(2)(c)The Agencies treat a competitor collaboration as a horizontalmerger when (a) the participants are competitors in the relevantmarket; (b) the formation of the collaboration involves an effi-ciency-enhancing integration of economic activity in the relevantmarket; (c) the integration eliminates all competition among theparticipants in the relevant market; and (d) the collaboration doesnot terminate within a sufficiently limited period by its own spe-cific and express terms. Competitor Collaboration Guidelines,§1.3.

(2)(d)The federal antitrust enforcement agencies’ approach to mergersis set out in the Horizontal Merger Guidelines with respect to hor-izontal mergers. The principal focus of the analysis is whether thetransaction would create, enhance or facilitate the exercise ofmarket power.

(2)(e)One area where the antitrust analysis of joint ventures can differfrom the analysis of mergers is with respect to “spillover” effects.

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In some cases the restrictions that are imposed on the joint ven-turers spill over into markets other than the joint venture market.In other cases the spill over effect is due to the exchange of com-petitively sensitive information outside of the joint venture inwhich the parties continue to compete. See e.g., General MotorsCorp., 103 F.T.C. 374 (1984)(consent decree)(FTC permitted theGM-Toyota joint production venture to produce autos at an idleGM plant so that GM could learn more efficient Japanese manu-facturing and management techniques as long as the venture’soutput was limited to 200,000 autos per year and the partiesagreed not to exchange unnecessary price, cost and planningdata).

(2)(f)The antitrust analysis of joint ventures can also result in limita-tions on the joint venture’s operations. See United States v. AlcanAluminum Ltd., 605 F. Supp. 619 (W.D. Ky. 1985)(parties agreedto a “Chinese Wall” arrangement with respect to production, mar-keting and pricing decisions).

(3) One of the fundamental questions raised by joint ventures iswhether the joint venture represents the plurality of actors neces-sary to establish the concerted action required by Section 1 orwhether the conduct should be treated as unilateral behavior sub-ject only to Section 2 of the Sherman Act. In some instances, thejoint venture may function as a single entity in which case onlySection 2 applies. See Copperweld Corp. v. Independence TubeCorp., 467 U.S. 752 (1984) (a single entity “deprives the marketshare of the independent centers of decisionmaking that competi-tion assumes”). In other instances, a joint venture may moreclosely resemble a collaboration. Chicago Professional SportsLtd. v. NBA, 95 F.3d 593, 599-600 (7th Cir. 1996).

(4) “Joint ventures present a difficult concept for antitrust analysis,defining neat classification and precise definition and, by exten-sion, well established rules for evaluating their competitiveimpact. On the one hand, the joint venture provides a method oforganization which enables competitors to join together to pro-duce that which is beyond the productive capacity or inclinationof its individual members. Conversely, the joint venture threatensto reduce actual or potential competition between rivals by pro-viding a method of operations which engenders collusion detri-

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mental to competition.” COMPACT v. Metropolitan Gov’t,594 F. Supp. 1567, 1574 (M.D. Tenn. 1984).

E. Analysis Under Section 1 of the Sherman Act

In analyzing a joint venture under Section 1 of the Sherman Act,there are typically three basic questions: (1) Is the joint venture a legit-imate joint venture or a guise for otherwise illegal conduct? (2) Towhat extent do the parties to the joint venture have the ability to exer-cise market power? and (3) Are the joint venture’s ancillary restraintsreasonably related to the purpose of the joint venture?

(1)(a)One of the most difficult problems is to distinguish a legitimatejoint venture from an illegal cartel. Legitimate joint ventures aresubject to a rule of reason analysis whereas naked agreements onprice or output are per se illegal.

(1)(b)Under the Competitor Collaboration Guidelines, if the partiesparticipate in an efficiency-enhancing integration of economicactivity and enter into an agreement that is reasonably related tothe integration and reasonably necessary to achieve its procom-petitive benefits, the Agencies will analyze the agreement underthe rule of reason. §3.2

(1)(c)The types of agreements that have been held per se illegal areagreements among competitors to fix prices or output, rig bids, orshare or divide markets by allocating customers, suppliers, terri-tories, or lines of commerce. Competitor Collaboration Guide-lines, §1.2.

(2) (a)In some cases a legitimate joint venture requires some mean-ingful level of economic integration among the parties, whichtypically means some pooling of capital and sharing of profitsand losses. As the Competitor Collaboration Guidelines indicate,participants in an efficiency-enhancing integration typically com-bine, by contract or otherwise, significant capital, technology, orother complementary assets to achieve procompetitive benefitsthat the parties could not achieve separately. Id. at §3.2. See alsoHealth Care Statements, Statement 8 (which creates an antitrustsafety zone for certain physician networks wherein physiciansshare substantial financial risk).

(2)(b)In other cases the legitimacy of the joint venture has been estab-lished because of new product development or because of other

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forms of non-economic integration. See Health Care Statements,Statement 8 (which recognizes other non-economic integrationamong physicians likely to produce efficiencies sometimesreferred to as “clinical integration”).

(2)(c)Key cases addressing this issue include:

(2)(c)(i) In United States v. Addyston Pipe & Steel Co., 85 F. 271(6th Cir. 1898), aff’d, 175 U.S. 211, 282 (1899), Judge Taft dis-tinguished a “naked restraint” from ancillary restraints” to an oth-erwise legitimate agreement and found agreements invalid“where the sole object of both parties in making the contract . . .is merely to restrain competition and enhance or maintain prices.”

(2)(c)(ii) In United States v. Topco Associates, Inc., 405 U.S. 596(1972), the Supreme Court found a joint merchandising arrange-ment by a number of independent grocery stores to create a pri-vate label brand in which the stores allocated exclusive territoriesillegal even though the purpose of the arrangement was to com-pete more effectively against the larger grocery chains. The par-ticipating stores ranged in market share from 1.5 to 16 % of theirrespective markets. In light of the Supreme Court’s decision inBMI, discussed below, many judges and commentators believethat Topco would be decided differently today. See Rothery Stor-age & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 226(D.C. Cir. 1986)(J. Bork).

2(c)(iii) In Broadcast Music, Inc. v. Columbia Broadcasting System,Inc., 441 U.S. 1 (1979) (“BMI”), the Supreme Court found that ablanket licensing among thousands of music composers was not a“naked restraint of trade with no purpose except stifling of com-petition.” Rather the Court found that the license “was quite dif-ferent from anything any individual owner could issue.” Itreduced costs and allowed for the immediate use of compositionswithout the individual negotiations. It also allowed for the inte-gration of sales, monitoring and enforcement against unautho-rized copyright use. As a result, the Court found that the blanketlicense was greater than the sum of its parts and therefore not sub-ject to per se condemnation.

2(c)(iv) In Arizona v. Maricopa County Medical Society, 457 U.S. 332(1982), in a 4-3 decision, the Supreme Court found that the activ-ities of the medical society’s foundation, which represented over

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70 percent of the physicians in Phoenix, were per se illegal. Thefoundation was formed for the purposes of establishing a sched-ule of maximum fees for patients insured under health plans,reviewing the medical necessity and appropriateness of treatmentrendered by physicians, and paying the foundation’s physiciansfrom amounts paid by the health plans. Justice Stevens distin-guished the foundation’s activities from the blanket licensearrangement in BMI by noting that unlike the blanket license inBMI, the physicians had not provided any new product. TheCourt also found that, while there was little competition amongindividual composers for their separate compositions, the founda-tion was composed of individual physicians who competed withone another for patients. The Court also noted that the foundationhad not been set up like partnerships or other arrangements “inwhich persons who would otherwise be competitors pool theircapital and share the risks of loss as well as the opportunities forprofit.” Id. at 356. Justice Powell dissented on the grounds thatthe foundations were similar to the blanket license in BMI in thatthe foundation offered a wider range of physician services thatany individual physician could not offer and that the maximumfee schedules were a stronger cost control mechanism for healthinsurers than the “usual customary and reasonable” rates that theywould have replaced.

See also Palmer v. BRG of Georgia, Inc., 111 S. Ct. 401(1990)(Court struck down a horizontal product allocation thatwas not ancillary to any economic integration.); New York v.Saint Francis Hospital, 94 F. Supp.2d 399 (S.D.N.Y. 2000) (insuf-ficient integration in joint venture between hospitals resulted inper se illegal market allocation).

(3)(a)In assessing a joint venture under a rule of reason analysis, themarket power of the parties to the joint venture and of the ventureitself are considered. Where the parties to the joint venture do nothave the ability to exercise market power, the likelihood of anti-competitive effect and antitrust liability are low. Where, however,the parties to the venture have significant market power, there islikely to be greater antitrust scrutiny of any joint venture thatinvolves them. Even then the combined market share of the par-ties may not indicate that the venture itself has market power ifthe parties to the venture can act independently in pricing andoutput decisions of the venture or can compete with the venture.

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(3)(b)In order to determine the market share of the parties and the ven-ture, it is important to identify and assess the competitive effectsin all of the relevant product and geographic markets in whichcompetition may be affected by the competitor collaboration. Theprincipal market affected by the joint venture is the relevant mar-ket in which the joint venture competes. Typically, a joint ventureis assessed in a product or service market (commonly referred toas a “product” or “goods” market). If the rights to intellectualproperty are marketed separately from the products in which theyare used, a technology market may also be identified in which toassess the competitive impact of the joint venture. In cases whereresearch and development is involved, an innovation market mayalso be defined. According to the Competitor CollaborationGuidelines, the Agencies only define an innovation market whenthe research and development can be associated with specializedassets or characteristics of specific firms. Competitor Collabora-tion Guidelines at §3.32

(3)(c)The Collaboration Guidelines provide that, absent extraordinarycircumstances, the Agencies will not challenge a competitor col-laboration where the parties’ combined market share is no morethan 20% of the relevant market except that this antitrust safetyzone does not apply to agreements that are per se unlawful orwhere a merger analysis is appropriate. Id. at §4.2. See alsoHealthcare Statements, Statements 8 and 9 (where exclusive net-works of no more than 20% and nonexclusive networks of nomore than 30% are protected by an antitrust safety zone, whereother conditions are met).

(3)(d)The Collaboration Guidelines also provide an antitrust safetyzone in an innovation market where there are at least three otherindependently controlled research efforts in the innovation mar-ket of the joint venture except that this antitrust safety zone doesnot apply to agreements that are per se unlawful or where amerger analysis is appropriate. Competition Collaboration Guide-lines at §4.3.

3(e) Aside from market share and market concentration, there are anumber of other factors that are taken into account in determiningwhether the joint venture will unreasonably restrain competitionor tend to create a monopoly. The Competitor CollaborationGuidelines lists them as follows: (a) the extent to which the rele-

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vant agreement is non-exclusive in that participants are likely tocontinue to compete independently outside the collaboration inthe market in which the collaboration operates; (b) the extent towhich participants retain independent control of assets necessaryto compete; (c) the nature and extent of participants’ financialinterests in the collaboration or in each other; (d) the control ofthe collaboration’s competitively significant decision making; (e)the likelihood of anticompetitive information sharing; and (f) theduration of the collaboration. Id. at §3.34.

(3)(f)Some cases also consider potential competition and the likelihoodthat the parties to the joint venture would have entered the marketalone. See United States v. Penn-Olin Chem. Co., 378 U.S. 158(1964)(where two firms formed a joint venture to establish a newplant, and the Court remanded for a determination whether eitherof the competitors would have entered the market alone). Seealso, Healthcare Statements, Statement 2 (where joint venture topurchase expensive equipment is subject to an antitrust safetyzone where number of purchasesr is limited to those necessary tocover the cost of the equipment).

(3)(g) In one recent joint venture, national security reasons were setforth to justify a launch vehicle joint venture subject to consentdecree. In re Lockheed Martin Corporation, the Boeing Companyand United Alliance, LLC., FTC File No. 0510165(Oct. 3, 2006)(consent decree).

(4)(a)In reviewing ancillary restraints, there are typically three broadcategories of restraints to analyze from an antitrust perspective:(1) restrictions on price competition between the parties;(2) restrictions on competition between the parties or with theventure itself; and (c) restrictions on membership in the venture.

4(b) Agreements with respect to the price of the products produced bythe venture are likely to be reasonably necessary to the venture ifthe venture is a legitimate one. Texaco Inc., v. Dagher, 126 S.Ct.1276 (2006)(not unlawful for “an economically integrated jointventure to set the prices at which the joint venture sells its prod-ucts”); Broadcast Music, Inc. v. CBS, Inc., 441 U.S. 1 (1979)(price for a blanket license for the use of copyrighted music wasnecessary for the product to be available at all); Bancard Corp. v.VISA, U.S.A., Inc., 779 F.2d 592 (11th Cir. 1986) (universal feepaid by the merchant’s bank to the card holder’s bank for process-

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ing credit card transactions was necessary for the universal accep-tance of the card); Gerlinger v. Amazon, Inc., 311 F. Supp. 2d 838(N.D. Cal. 2004) (pricing restriction in joint venture betweenAmazon and Borders not unlawful under rule of reason). Wherepricing restrictions are not reasonably necessary to the joint ven-ture, they have been struck down as unreasonable restraints oftrade. NCAA v. Board of Regents, 468 U.S. 85 (1984)(output andprice restrictions on the sale of television rights to college footballgames were not necessary to college football).

(4)(c)Agreements that preclude competition between the parties orwith venture itself are also subject to scrutiny. In cases where theyare reasonably necessary to the venture, they are upheld. PolkBros. v. Forest City Enterprises, Inc., 776 F.2d 185, 189 (7th Cir.1985)(restrictive covenant that precluded the parties from sellingcertain products was ancillary to the main purpose of the venturewhich was to build a new store together). According to the court,“A restraint is ancillary when it may contribute to the success of acooperative venture that promises greater productivity and out-put.” In other cases where the restrictive covenants are viewed asunnecessary or overbroad, they may be struck down. See UnitedStates v. Visa U.S.A., Inc., 36 F.3d 958 (10th Cir. 1994) (exclu-sionary rules of both Visa and MasterCard that prohibited mem-ber banks from joining American Express or Discover wereunlawful); United States v. General Electric Co., 1997-1 TradeCas. (CCH) ¶ 71,765 (D. Mon. 1997) (license covenants not tocompete in servicing of high tech medical equipment not subjectto the license were challenged as per se illegal); In re PolygramHolding, Inc., Dkt. No. 9298 (FTC, July 24, 2003) (FTC held thata joint venture that restricted sales of recordings not covered bythe venture to be unlawful). Generally, the concern is that the ven-ture will affect either party’s independent control of assets neces-sary to compete, or give either party a financial interest in theproducts provided by the other.

(4)(d)There is also a concern that a joint venture may have an exclu-sionary effect in the market. This concern can arise where a jointventure provides a product or service important to downstreamcompetition, and the denial of that product or service couldexclude those downstream competitors from the market. SeeAssociated Press v. United States, 326 U.S. 1 (1945)(allowingmember newspapers to exclude competing papers seriously lim-

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ited new newspapers from entering the market); United States v.Terminal Railroad Association, 224 U.S. 383 (1912) (denial ofaccess to the only railroad bridge precluded nonmember railroadsfrom competing). See also Northwest Wholesale Stationers v.Pacific Stationery & Printing Co., 472 U.S. 284 (1985)(where theCourt held that exclusion from a cooperative buying group wasnot unlawful where the group did not possess market power oraccess to an essential input).

(5) In considering the ancillary restraints of a joint venture, the Agen-cies will also take into account “cognizable efficiencies” whichare efficiencies that have been verified, do not arise from reduc-tions in output or service and cannot be achieved through practi-cal, significantly less restrictive means. CompetitionCollaboration Guidelines at §3.36. If the restraints are reasonablynecessary to achieve cognizable efficiencies, the Agencies willassess the efficiencies and anticompetitive harms to determine theoverall actual or likely effect on competition. Id. at § 3.37

(6) There is also the concern that the venture will facilitate explicit ortacit collusion if it entails the exchange of significant competi-tively sensitive information that is not otherwise publicly avail-able. As the Competitor Collaboration Guidelines indicate, insome cases, the sharing of information related to a market inwhich the collaboration operates or in which the participants areactual or potential competitors may increase the likelihood of col-lusion on matters such as price, output or other competitively sen-sitive variables. Id. at §3.31 (b).

XIII. IMMUNITIES

A. State Action

(1) The Sherman Act does not apply to anticompetitive restraintsimposed by states “as an act of government.” Parker v. Brown,317 U.S. 341 (1943). For antitrust immunity to apply, the chal-lenged policy must be (i) “clearly articulated and ultimatelyexpressed as state policy” and (ii) “actively supervised” by thestate itself. City of Lafayette v. Louisiana Power & Light Co.,435 U.S. 389 (1978); California Retail Liquor Dealers Ass’n v.Midcal Aluminum, Inc., 445 U.S. 97 (1980); Michigan PaytelJoint Venture v. City of Detroit, 287 F.3d 527, 534 (6th Cir.

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2002); Berger v. Cuyahoga County Bar Assoc., 983 F.2d 718(6th Cir.), cert. denied, 113 S. Ct. 2416 (1993); Sandy RiverNursing Care v. Aetna Casualty, 985 F.2d 1138 (1st Cir.), cert.denied, 114 S. Ct. 70 (1993).

(2) This two-pronged test also applies to determine whether state reg-ulation of private parties is shielded from federal antitrust laws.Southern Motor Carriers Rate Conference, Inc. v. United States,471 U.S. 48 (1985) (collective ratemaking activities of fourstates’ private motor carrier “rate bureaus” held immune fromantitrust liability where legislatures of three of the statesexpressly permitted carriers to submit collective rate proposals tostate public service commissions). See Hoover v. Ronwin,466 U.S. 558 (1984) (state action immunity applied to grading ofbar examinations under Arizona Supreme Court rules); NewMotor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. 96(1978) (California program requiring state approval of the loca-tion of new automobile dealerships under certain circumstancesnot subject to Sherman Act due to the active role played by thestate in displacing unfettered competition with its own power);Bates v. State Bar of Arizona, 433 U.S. 350 (1977) (Arizona rulesprohibiting lawyer advertising held immune from Sherman Actbecause they reflected the clearly articulated state policy andwere subject to close supervision by the Arizona Supreme Court);Snake River Valley Elec. Ass’n v. PacifiCorp, 357 F.3d 1042(9th Cir. 2004) (affirming summary judgment dismissing refusalto deal claim by small electric cooperative against large utilitybecause of state action immunity); Electrical Inspectors, Inc. v.Village of East Hills, 320 F.3d 110, 127 (2d Cir. 2003) (two-pronged immunity test applied to nonprofit board appointed asexclusive agent of government-mandated electrical inspectionservices); North Star Steel Co. v. MidAmerica Energy HoldingsCo., 184 F.3d 732 (8th Cir.), cert. denied, 528 U.S. 1046 (1999)(statute contemplated exclusive utility service policy); MichiganPaytel Joint Venture v. City of Detroit, 287 F.3d 527, 536 (6th Cir.2002) (affirming district court’s grant of summary judgment forAmeritech on grounds that it was protected by state action immu-nity); Columbia Steel Casting Co. v. Portland Gen. Elec. Co.,60 F.3d 1390 (9th Cir. 1995) (holding allocation of exclusiveelectric utility service territories immune as foreseeable result oforder by state agency); FTC v. Hospital Board of Directors of Lee

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County, 38 F.3d 1184 (11th Cir. 1994) (legislation reasonablycontemplated further hospital acquisitions to invoke state action);Yeager’s Fuel, Inc. v. Pennsylvania Power & Light Co., 22 F.3d1269 (3d Cir. 1994) (state action requirements satisfied in suitagainst electric utility’s alleged attempt to monopolize homeheating market); Ticor Title Ins. Co. v. FTC, 922 F.2d 1122(3d Cir. 1991), aff’d in part, rev’d in part, 112 S.Ct 2169 (1992)(title insurance companies’ collective agreement to set rates fortitle search and examination services in four states immune fromantitrust suit because two states’ regulatory laws sanctioned col-lective rate making and two others actively supervised title insur-ers’ rate setting-Supreme Court reversed as to two states where noactive supervision or ratemaking); Mass. School of Law atAndover, Inc. v. American Bar Association, 107 F.3d 1026(3d Cir. 1997) (inability of unaccredited law students to take statebar exam was protected under state action); Praxair v. FloridaPower & Light, 64 F.3d 609 (11th Cir. 1995) (state approved divi-sion of electrical service territory); Green v. State of Texas,27 F.3d 1083 (5th Cir. 1994) (state committee created by statuteprotected under state action doctrine); Ticor Title Ins. Co. v. FTC,998 F.2d 1129 (3d Cir. 1993) (state’s supervision of insurancerates was insufficient to support claim of immunity under act ofstate doctrine); Allright Colorado v. City and County of Denver,937 F.2d 1502 (10th Cir.), cert. denied, 112 S. Ct. 587 (1991)(state articulated clear policy to replace competition with regula-tion in field of transportation to and from airports); Lease Lights,Inc. v. Public Service Co. of Okl., 849 F.2d 1330 (10th Cir. 1988),cert. denied, 488 U.S. 1019 (1989)(state action doctrine protectedstate supervised aspects of public utility operation); CoastalNeuro-Psychiatric Associate, P.A. v. Onslaw Memorial Hosp.,795 F.2d 340 (4th Cir. 1986) (exclusive right to perform and inter-pret CAT scans on county hospital’s equipment pursuant to statestatute was immune from antitrust liability); Llewellyn v.Crothers, 765 F.2d 769 (9th Cir. 1985) (state workers’ compensa-tion department immune from antitrust attack under state actiondoctrine, even though state regulation was procedurally defectiveand there existed bad faith motives by defendants); Capital Tele-phone Co., Inc. v. N. Y. Telephone Co., 750 F.2d 1154 (2d Cir.1984), cert. denied, 471 U.S. 1101 (1985) (telephone company’sdiscriminatory pricing policy immune under state action doc-trine); Benson v. Arizona State Bd. of Dental Examiners,

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673 F.2d 272 (9th Cir. 1982) (actions of licensing board wereimmune from antitrust laws); Turf Paradise, Inc. v. ArizonaDowns, 670 F.2d 813 (9th Cir.), cert. denied, 456 U.S. 1011(1982) (allocation of dates between competing racetrack opera-tors pursuant to statute held immune from reach of the ShermanAct); New York v. Saint Francis Hospital, 94 F. Supp. 2d 399(S.D.N.Y. 2000) (lack of active supervision and change in stateregulatory scheme precluded state action protection for hospitaljoint venture).

(3) Where there is no clear articulation of state policy to replace com-petition with a regulatory scheme or no active supervision by thestate, there may be no immunity for private parties. See Patrick v.Burget, 486 U.S. 94 (1988) (no active supervision where a stateagency did not have the “power to review private peer reviewdecisions and overturn a decision that fails to accord with statepolicy”); 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987) (lack ofactive supervision precludes state action doctrine); CaliforniaRetail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S.97 (1980) (liquor fair trade law held subject to antitrust lawsbecause the activity was not actively supervised by the state);Cantor v. Detroit Edison Co., 428 U.S. 579 (1976) (marketingscheme approved by regulatory agency not adequate to immunizevertical tying agreement); Goldfarb v. Virginia State Bar,421 U.S. 773 (1975) (fee schedules of state bar held not immunefrom antitrust laws because not mandated by the VirginiaSupreme Court); Freedom Holdings, Inc. v. Spitzer, 357 F.3d 205(2d Cir. 2004) (no immunity where statute passed in connectionwith multi-state settlement creates disincentives to increase mar-ket share through price competition; state failed to articulaterationale for policy and did not actively supervise pricing deci-sions); Telecor Communications, Inc. v. Southwestern Bell Tele-phone Co., 305 F.3d 1124, 1140 (10th Cir. 2002) (holding thatstate action immunity was inapplicable to Southwestern Bell’sconduct because state likely was not even aware of SouthwesternBell’s conduct, let alone exercised control over it); Evans v. NewYork State Public Service Commission, 287 F.3d 43, 46-47(2d Cir. 2002) (affirming district court’s dismissal of antitrustclaim because Order of New York Public Service Commissionwas act of government to which antitrust laws are inapplicable);A.D. Bedell Wholesale Co. v. Philip Morris Inc., 263 F.3d 239

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(3d Cir. 2001) (no immunity where multi-state settlement createsdisincentives to increase production of cigarettes without activestate supervision of prices or output, even with a clearly articu-lated state policy); TFWS, Inc. v. Schaefer, 242 F.3d 198 (4th Cir.2001) (liquor post-and-hold pricing not immune under stateaction doctrine because not actively supervised); Snake RiverValley Electric Assoc. v. PacifiCorp (“Snake River I”), 238 F.3d1189 (9th Cir. 2001) (no immunity because state authorization ofpower company’s refusal to wheel power is not actively super-vised, since there is no legislative, executive, or judicial over-sight); Snake River Valley Electric Assoc. v. PacificCorp. (“SnakeRiver II”), 357 F.3d. 1042 (9th Cir. 2004) (immunity foundbecause subsequent amendments to state statute established thatstate officials obtained, and exercised, the power to supervisepower company’s refusal to wheel power); Hospital Service Dis-trict v. Surgical Care Center 171 F.3d 231 (5th Cir. 1999) (enbanc), cert. denied, 528 U.S. 964 (exclusive contracts with man-aged care plans not immune); Municipal Utilities Bd. ofAlbertville v. Alabama Power Co., 21 F.3d 848 (11th Cir. 1994)(state legislature clearly articulated and actively supervised policyto displace competition in retail electric market); Buckley Con-str., Inc. v. Shawnee Civic & Cultural Dev. Auth., 933 F.2d 853(10th Cir. 1991) (state legislature authorized Authority to solicitbids and choose contractor; subjective motivations of Authoritymembers in choosing contractor should not be relevant); Miller v.Indiana Hospital, 930 F.2d 334 (3d Cir. 1991) (peer review pro-cess insufficiently supervised by state to be protected by stateaction doctrine); Lancaster Community Hospital v. Antelope Val-ley Hospital District, 940 F.2d 397 (9th Cir. 1991), cert. denied,112 S. Ct. 1168 (1992) (private hospital not protected from anti-trust laws where state did not intend to replace competition withregulation); Miller v. Hedlund, 813 F.2d 1344 (9th Cir. 1987),cert. denied, 484 U.S. 1061 (1988) (state regulations governingpricing of beer and wine not immune because state neither estab-lished prices nor reviewed reasonableness of price schedules);City of Kirkwood v. Union Electric Co., 671 F.2d 1173 (8th Cir.1982), cert. denied, 459 U.S. 1170 (1983) (rate structure not suffi-ciently controlled by state to be immune from antitrust laws);City of Mishawaka v. America Electric Power Co., Inc., 616 F.2d976 (7th Cir. 1980), cert. denied, 449 U.S. 1096 (1981) (state

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agency did not create, approve or mandate antitrust violation byordering rate reductions).

(4) One judge has questioned whether 324 Liquor was decided cor-rectly. TFWS, Inc. v. Schaefer, 242 F.3d 198, 213 (4th Cir. 2001)(Luttig, J., concurring). Judge Lutting explained that the state reg-ulation at issue in TFWS could not lead to a § 1 violation, sincethe prices were set by each defendant unilaterally, but that theywere indistinguishable from the regulations at issue in 324Liquor. Id. at 213-215.

(5) Immunity does not apply directly to local governments but amunicipality’s restriction on competition may be immune as anauthorized implementation of state policy if the municipality’santicompetitive action is authorized by statute and the resultingsuppression of competition is a foreseeable result of what the stat-ute authorizes. City of Columbia v. Omni Outdoor Advertising,111 S. Ct. 1344 (1991) (city’s restriction of billboard constructionimmune where state zoning statutes authorize such regulation andwhere the anticompetitive result was foreseeable). To qualify forimmunity, the municipality need not show that its restrictive pol-icy is supervised by state officials. Hallie v. Eau Claire, 471 U.S.34 (1985) (city’s refusal to permit neighboring cities to partici-pate in sewage disposal system held immune from antitrust laws).See also City of Lafayette v. Louisiana Power & Light Co.,435 U.S. 389 (1978) (remand to determine whether city-ownedutility had acted pursuant to authority granted by the state legisla-ture); Tal v. Hogan, 453 F.3d 1244 (10th Cir. 2006) (upheld stateimmunity for an urban renewal authority that was given authorityby statute to make contracts “necessary or convenient to” theexercise of its powers); Southern Disposal, Inc. v. Texas WasteManagement, 161 F.3d 1259 (10th Cir. 1998) (exclusive dealingcontract for waste disposal services by municipality pursuant tostate policy, and immune from antitrust scrutiny); Zimomra v.Alamo Rent-A-Car, Inc., 111 F.3d 1495 (10th Cir. 1997) (uniformusage fee set by rental car agencies at airport immune under stateaction doctrine); Askew v. DCH Regional Health Care Authority,995 F.2d 1033 (11th Cir. 1993) (whether health care authorityqualified for state immunity in connection with purchase of pri-vate health care facility judged under test applicable to acts ofmunicipalities); McCallum v. City of Athens, GA, 976 F.2d 649,652-53 (11th Cir. 1992) (city immune from antitrust claim regard-

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ing alleged anticompetitive conduct in operation of its water-works); Fisichelli v. City Known as the Town of Methuen,956 F.2d 12, 16 (1st Cir. 1992) (anticompetitive denial of devel-opment bonds immune from antitrust suit; immunity includednamed town manager and town counselors in their private capaci-ties since basic conduct at issue concerned decisions made intheir official capacities); Jacobs, Visconsi & Jacobs Co. v. City ofLawrence, Kansas, 927 F.2d 1111 (10th Cir. 1991) (state urbanrenewal law immunized city from suit for its refusal to rezonelandowner’s property to allow shopping mall); Sproul v. City ofWooster, 840 F.2d 1267 (6th Cir. 1988) (city’s refusal to extendwater and sewer services exempt from antitrust liability); Boonev. Redevelopment Agency of the City of San Jose, 841 F.2d 886(9th Cir.), cert. denied, 109 S. Ct. 489 (1988) (city and urbanrenewal agency immune under legislative grant even though actedin bad faith); Campbell v. City of Chicago, 823 F.2d 1182(7th Cir. 1987) (ordinance limiting number of taxicabs exemptfrom antitrust liability); Kern-Tulare Water Dist. v. City ofBakersfield, 828 F.2d 514 (9th Cir. 1987), cert. denied, 486 U.S.1015 (1988) (refusal to allow water district to sell certain wateracquired from city immune); Ambulance Serv. of Reno, Inc. v.Nevada Ambulance Services, Inc., 834 F.2d 862 (9th Cir. 1987)(supervision of board of health sufficient to invoke immunity);Interface Group, Inc. v. Massachusetts Port Authority, 816 F.2d 9(1st Cir. 1987) (Massachusetts Port Authority is equivalent tomunicipality and therefore immune from liability); Sterling BeefCo. v. City of Fort Morgan, 810 F.2d 961 (10th Cir. 1987) (cityordinance held foreseeable consequence of statutory power ofmunicipalities to acquire gas distribution system and thusshielded from liability); Mercy-Peninsula Ambulance, Inc. v. SanMateo County, 791 F.2d 755 (9th Cir. 1986) (county’s award ofcontract to provide paramedic services, after competitive bidding,was subject to state action immunity from antitrust liability); Cat-alina Cablevision Associates v. City of Tucson, 745 F.2d 1266(9th Cir. 1984) (municipality’s grant of cable license exemptbecause of statute reflecting state policy to displace competition);BFI Waste Sys. of North America v. Dekalb County, Georgia,303 F. Supp. 2d 1335, 1357-58 (N.D. Ga. 2004) (county entitledto summary judgment dismissing Sherman Act claims of devel-oper who was denied zoning permit under state action immunity);Classic Communications, Inc. v. Rural Telephone Service Co.,

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Inc., 1997-2 Trade Cas. (CCH) ¶ 71,865 (D.C. Kan. 1997) (citiesalleged to have conspired with a telecommunications firm pro-tected under state action doctrine). See also Fisher v. City of Ber-keley, California, 475 U.S. 260, 106 S. Ct. 1045, 89 L. Ed. 2d 206(1986) (concurring opinion would have upheld municipal rentcontrol ordinance on state action grounds). But see CommunityCommunications Co., Inc. v. City of Boulder, Colo., 455 U.S. 40(1982) (a home-rule municipality with authority to regulate cabletelevision was not exempt from Sherman Act liability).

(6) Where the city’s anticompetitive restraint also involves acts by aprivate party, it is unsettled whether a failure to show activesupervision of the private party would defeat both private party’sclaim of immunity and the city’s claim of immunity. In ElectricalInspectors, Inc. v. Village of East Hills, 320 F.3d 110, 122 (2d Cir.2003), the city granted an exclusive inspection services contractto a private nonprofit board. While the city’s anti-competitive actwas authorized by state statute and the resulting suppression ofcompetition was foreseeable, it was unclear whether immunityfor the city still would depend on whether the private board wasactively supervised. In remanding to the district court, the appel-late court noted that no prior decision has “squarely addressedthis issue” and the district court “may consider for the first time”whether immunity would allow an injunction against the munici-pality if the district court found that the private board was notactively supervised, even though the city’s actions were autho-rized by the state. Id. at 129.

(7) Where acts are taken by a hybrid entity, privately owned but withsome attributes of a municipality or a state agency, the stateaction doctrine may apply without regard to the need for activesupervision by the state. Bankers Ins. Co. v. Florida ResidentialProperty & Casualty Joint Underwriting Ass’n, 137 F.3d 1293(11th Cir. 1998) (involuntary association of residential-propertyinsurers created by statute had sufficient government-likeattributes such that it qualified for political-subdivision status andnot subject to “active supervision” requirement); Haas v. OregonState Bar, 883 F.2d 1453 (9th Cir. 1989), cert. denied, 494 U.S.1081 (1990); Fuchs v. Rural Elec. Convenience Coop., Inc.,858 F.2d 1210 (7th Cir. 1988), cert. denied, 109 S. Ct. 1744(1989). Cf. Arroyo-Melecio v. Puerto Rican Ins. Co., 398 F.3d 56(1st Cir. 2005) (compulsory underwriting association created by

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statute not entitled to state action immunity; for-profit associa-tion, whose members are chosen by corporate members, was “nota state agency” and alleged anticompetitive conduct was not“mandated or authorized by the state”).

(8) Despite several Circuits’ prior rulings that the state action doc-trine would not apply where politicians or political entities areinvolved as conspirators with private actors in restraint of trade,the Supreme Court recently expressly overruled the availability ofsuch an exception. City of Columbia v. Omni Outdoor Advertis-ing, 499 U.S. 365, 111 S. Ct. 1344 (1991); NeoGen Screening,Inc. v. New England Newborn Screening, 187 F.3d 24 (1st Cir.),cert. denied, 528 U.S. 1061; In re Recombinant DNA TechnologyPatent and Contract Litigation, 874 F. Supp. 904, 912 (S.D. Ind.1994).

(9) Under a 1984 statute, no damages, interest on damages, costs orattorneys’ fees may be recovered under Clayton Act section 4, 4Aor 4C (15 U.S.C. § 25, 15a or 15c) from any local government orofficial or employee thereof acting in an official capacity in anyaction commenced after September 24, 1984. Local GovernmentAntitrust Act of 1984, Pub.L.No. 98-544, 98 Stat. 2750 (Dec.1984). See e.g., R. Ernest Cohn D.C., D.A.B.C.O. v. Bond,953 F.2d 154 (9th Cir. 1991), cert. denied, 112 S. Ct. 3057 (1992)(members of municipal hospital medical staff immune underAct).

(10) Because the United States is not considered a “person” under theantitrust laws, the United States and entities owned and operatedby the United States enjoy absolute immunity from the antitrustlaws. Jackson v. West Indian Co., 944 F. Supp. 423 (D.V.I. 1996)(citing United States v. Cooper, 312 U.S. 600, 61 S. Ct. 742, 85 L.Ed. 1071 (1941) and Sea-Land Service, Inc. v. Alaska R.R.,659 F.2d 243 (D.C. Cir. 1981)); see also McCarthy v. MiddleTenn. Elec. Membership Corp., 466 F.3d 399, 414 (6th Cir. 2006)(Tennessee Valley Authority entitled to immunity from antitrustliability with regard to its contracts with electric cooperatives,entered into under Congressional authority, for the purpose ofimproving rural electric use).

(11) The Federal Trade Commission’s State Action Task Force hasissued a report criticizing appellate courts for applying the stateaction doctrine too broadly. Among other things, the task force

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advised that the FTC re-affirm a clear articulation standard andclarify and strengthen the standards for active supervision. Thereport may be obtained through the FTC’s website atwww.ftc.gov/os/2003/09/stateactionreport.pdf

B. Petitioning Government

(1) Actions taken for the purpose of influencing government havebeen held immune from antitrust attack on First Amendmentgrounds. United Mine Workers of America v. Pennington,381 U.S. 657 (1965) (joint effort by union and mine operators toinfluence Secretary of Labor held lawful irrespective of anticom-petitive purpose); Eastern R. Presidents Conf. v. Noerr MotorsFreight, Inc., 365 U.S. 127 (1961) (joint activity by railroads toinfluence anti-truck legislation held lawful irrespective of anti-competitive purpose); City of Columbia v. Omni Outdoor Adver-tising, 499 U.S. 365, 111 S.Ct 1344 (1991) (billboard company’slobbying and other activities relating to enactment of restrictiveordinance was immune from suit); FTC v. Superior Court TrialLawyers’ Assoc., 493 U.S. 411 (1990) (trial lawyers’ boycott fol-lowing unsuccessful attempt to receive higher compensation forrepresenting indigents was not immune as a protective means forobtaining favorable legislation); A Fisherman’s Best, Inc. v. Rec-reational Fishing Alliance, 310 F.3d 183, 190-91 (4th Cir. 2002)(actions of defendant organization were attempts to solicit gov-ernment and were therefore immune from antitrust liability);A.D. Bedell Wholesale Co. v. Phillip Morris Inc., 263 F.3d 239(3d Cir. 2001) (settlement with states protects tobacco companiesunder Noerr-Pennington immunity, but not under Parker immu-nity); Baltimore Scrap Corp. v. David J. Joseph Co., 237 F.3d 394(4th Cir. 2001) (defendants, competitors of plaintiff who financeda citizen group lawsuit against plaintiff, are immune despitedeceitful, underhanded, and morally wrong actions); ArmstrongSurgical Center, Inc. v. Armstrong County Memorial Hospital,185 F.3d 154 (3d Cir. 1999), cert. denied 120 S. Ct. 2716 (2000)(hospital and 19 physicians that opposed CON of competing sur-gical center immune despite physician boycott and misrepresen-tations); Kottle v. Northwest Kidney Centers, 146 F.3d 1056 (9thCir. 1998) (lobbying effort designed to influence state administra-tive agency’s decision to issue “Certificate of Need” falls withinNoerr-Pennington immunity); Mass. School of Law at Andover,

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Inc. v. American Bar Association, 107 F.3d 1026 (3d Cir. 1997)(ABA’s campaign supporting its law school accreditation pro-gram protected under Noerr doctrine); Zimomra v. Alamo Rent-A-Car, Inc., 111 F.3d 1495 (10th Cir. 1997) (lobbying immune);McGuire Oil Co. v. MAPCO, Inc., 958 F.2d 1552, 1558-59(11th Cir. 1992) (conspiracy to initiate litigation immune fromantitrust enforcement provided litigation not a sham); Lawline v.American Bar Ass’n, 956 F.2d 1378, 1383-84 (7th Cir. 1992),cert. denied, 114 S. Ct. 551 (1993) (bar associations petitioning tocourt to prohibit unauthorized practice of law protected); HuronValley Hospital, Inc. v. City of Pontiac, 849 F.2d 262 (6th Cir.),cert. denied, 109 S. Ct. 367 (1988) (joint use of federal and statehealth care process to oppose hospital’s certificate of need appli-cation immune); Wilk v. American Medical Assoc., 895 F.2d 352(7th Cir.), cert. denied, 496 U.S. 927 (1990) (AMA’s activitiesdirected less towards influencing legislation and more towardsurging physicians and hospitals not to associate with chiroprac-tors); King v. Idaho Funeral Service Assn., 862 F.2d 744 (9th Cir.1988) (reporting unlicensed casket maker to state held immuneconduct); Campbell v. City of Chicago, 823 F.2d 1182 (7th Cir.1987) (cab companies’ lobbying efforts for the passage of anordinance immune from antitrust liability); Alexander v. NationalFarmers Organization, 687 F.2d 1173 (8th Cir. 1982) (dairy coop-erative’s attempts to block competitor’s approval were genuineattempts to influence policymaking); Amerimax Real Estate Part-ners, Inc. v. RE/Max Int’l, Inc., 2006-2 Trade Cas. (CCH) ¶75,455 (N.D. Ill. 2006) (defendants’ pre-litigation efforts to pro-tect trademark immune under Noerr-Pennington even though thetrademark was later found invalid); Miller Pipeline Corp. v. Brit-ish Gas plc; 69 F. Supp. 2d 1129 (S.D. Ind. 1999) (gas company’spre-litigation and litigation activities were protected); In reRelafen Antitrust Litigation, 349 F. Supp. 2d 365-66 (D. Mass.2004) (defendant drug manufacturer’s motion for summary judg-ment denied on grounds that issues of fact existed with respect towhether challenged conduct came within the “sham” or WalkerProcess fraud exceptions). But see In re: Buspirone Patent Litiga-tion, 185 F.Supp.2d 363 (S.D.N.Y. 2002) (company submissionof patent information to FDA for insertion into the “OrangeBook” not protected); Sandy River Nursing Care v. Aetna Casu-alty, 985 F.2d 1138 (1st Cir.), cert. denied, 114 S. Ct. 70 (1993)(Noerr doctrine inapplicable when private actors impose chal-

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lenged restraint through a boycott or other traditionally unlawfuleconomic measure, even when the boycott’s sole purpose is toinstigate favorable governmental action); Medimmune v. Genen-tech, Inc., 427 F.3d 958 (Fed. Cir. 2005) (affirming Central Dis-trict of California holding that the Noerr doctrine protected patentowners’ joint submission of a settlement agreement to the districtcourt and to the Patent and Trademark Office.).

(2) A private association will not be treated as a quasi-legislativebody for purposes of Noerr-Pennington protection even if legisla-tures routinely adopt its code. Allied Tube & Conduit Corp. v.Indian Head, Inc., 486 U.S. 492 (1988). See also Preferred Physi-cians Mut. Risk Retention Group v. Cuomo, 865 F. Supp. 1057(S.D.N.Y. 1994) (NAIC not governmental body so no protection).

(3) Conduct designed to harass, deter or preclude competitors fromfair and unlimited access to the courts or other governmentalbranches or agencies is a sham designed to impede competitionand is not immune from the antitrust laws. Trucking Unlimited v.California Motor Transport Co., 432 F.2d 755 (9th Cir. 1970),aff’d, 404 U.S. 508 (1972) (institution of state and federal pro-ceedings utilized to deter plaintiffs from access to courts andagencies held unlawful). See also Professional Real Estate Inves-tors, Inc. v. Columbia Pictures Industries, Inc., 113 S. Ct. 1920(1993) (objectively reasonable effort to litigate is not “sham”regardless of subjective intent); Primetime 24 Joint Venture v.Nat’l Broadcasting Co., 219 F.3d 92 (2d Cir. 2000) (if there is apattern of legal challenges, they are immunized unless broughtwithout regard to the merits and with the purpose of injuring arival). Hydranautics v. FilmTec Corp., 70 F.3d 533 (9th Cir. 1995)(patent litigation where patent obtained by fraud is triable as tosham exception); Rickards v. Canine Eye Registration Found.,783 F.2d 1329 (9th Cir.), cert. denied, 479 U.S. 851 (1986) (a sin-gle sham lawsuit must be accompanied by additional evidence ofanticompetitive activity); Energy Conservation, Inc. v. Heliodyne,Inc., 698 F.2d 386 (9th Cir. 1983) (a single lawsuit is sufficient toestablish sham exception); Grip-Pak, Inc. v. Illinois Tool Works,Inc., 694 F.2d 466 (7th Cir. 1982), cert. denied, 461 U.S. 958(1983) (even though cause existed for litigation, if purpose was toharass, it could still violate Sherman Act); Landmarks HoldingCorp. v. Bermant, 664 F.2d 891 (2d Cir. 1981) (the bringing ofnumerous meritless appeals and deliberate delay in prosecuting

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those appeals stated a cause of action under the antitrust laws);Ernest W. Hahn, Inc. v. Codding, 615 F.2d 830 (9th Cir. 1980)(series of baseless lawsuits designed to prevent competitor fromconstructing proposed shopping center could constitute shamexception). But see City of Cleveland v. Cleveland Electric Illu-minating Co., 734 F.2d 1157 (6th Cir.), cert. denied, 469 U.S. 884(1984) (electric utility’s sponsorship of single lawsuit was not“sham” action, even if done with primary intent to do harm tocity’s utility); Coastal States Marketing, Inc. v. Hunt, 694 F.2d1358 (5th Cir. 1983) (oil producers’ litigation reflected genuinedesire for judicial relief); Boulware v. State of Nevada, Dept. ofHuman Resources, 960 F.2d 793, 799 (9th Cir. 1992) (both initialsuccess on the merits and subsequent reversal of the injunctionrelevant to inquiry of whether single claim baseless, but neitherfactor determinable); In re Terazosin Hydrochloride Antitrust Lit-igation, 2004-2 Trade Cas. ¶74,579 (S.D. Fla. 2004) (filing of 17lawsuits for patent infringement was not “sham exception” toNoerr); Lender’s Service, Inc. v. Dayton Bar Assoc., 758 F. Supp.429 (S.D. Ohio 1991) (bar association’s prosecution of unsuc-cessful suit for unauthorized practice of law was not a shambecause it involved a genuine legal issue).

(4) Bad faith conduct which is an abuse of the administrative processis not immunized from antitrust scrutiny. Whelan v. Abell, 48F.3d 1247 (D.C. Cir. 1995); St. Joseph’s Hospital, Inc. v. HospitalCorp. of America, 795 F.2d 948, reh. en banc denied, 801 F.2d404 (11th Cir. 1986); Litton Systems, Inc. v. AT&T Co., 700 F.2d785 (2d Cir. 1983); MCI Communications Corp. v. AT&T Co.,708 F.2d 1081 (7th Cir. 1983), cert. denied, 464 U.S. 891 (1983);In re Union Oil Company of California, Trade Reg. Rep. ¶15,618(No. 9305) (July 6, 2004)(FTC reverses ALJ and remands for fur-ther factual development with respect to misrepresentation). Butsee Armstrong Surgical Center, Inc. v. Armstrong County Memo-rial Hospital, 185 F.3d 154 (3d Cir. 1999) (misrepresentation didnot constitute exception).

(5) Where the effort to influence government relates to the govern-ment’s commercial activities, there is generally no immunity.Sacramento Coca-Cola Bottling Co. v. Chauffeurs, Teamsters andHelpers Local No. 150, 440 F.2d 1096 (9th Cir.), cert. denied,404 U.S. 826 (1971); George R. Whitten, Jr., Inc. v. Paddock PoolBuilders, Inc., 424 F.2d 25 (1st Cir.), cert. denied, 400 U.S. 850

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(1970). But see In re Airport Car Rental, 693 F.2d 84 (9th Cir.1982), cert. denied, 462 U.S. 1133 (1983).

(6) Overruling several circuit courts, e.g., Oberndorf v. Denver,900 F.2d 1434 (10th Cir.), cert. denied, 498 U.S. 845 (1990), theSupreme Court has refused to recognize a co-conspirator excep-tion which would render the Noerr-Pennington doctrine inappli-cable if a conspiracy between private persons and public officialsexists. City of Columbia v. Omni Outdoor Advertising, 499 U.S.365, 111 S. Ct. 1344 (1991).

(7) The Federal Trade Commission’s Noerr-Pennington Task Forcehas issued a report entitled “Enforcement Perspectives on theNoerr-Pennington Doctrine” that focuses on proper application ofthe Noerr-Pennington doctrine on: (1) requests for ministerialgovernment acts; (2) misrepresentations to government agenciesin a non-political context; and (3) repetitive requests for govern-ment action solely to suppress competition. This report is avail-able on the FTC website at www.ftc.gov/reports/PO13518enfperspectiveNoerr-Penningtondoctrine.pdf.

C. Statutory Immunities

There are various types and sources of federal statutory immunities.See, e.g., JES Props., Inc. v. USA Equestrian, Inc., 458 F.3d 1224(11th Cir. 2006) (defendants immune from antitrust liability under fed-eral Amateur Sports Act); Jung, M.D. v. AAMC., 184 Fed. Appx. 9(D.C. Cir. 2006) (claims of antitrust violations based entirely upon theNational Resident Matching Program are barred by § 207 of the Pen-sion Funding Equity Act of 2004, 15 U.S.C. §37b, which exemptedgraduate medical education residency matching programs from anti-trust claims and barred evidence of any participation in such programsin support of an antitrust claim). For a detailed listing, see 7 Von Kali-nowski, Antitrust Laws and Trade Regulation, § 44.02[3].

D. Non-Statutory Exemptions

(1) The Supreme Court has recognized a “‘nonstatutory’ laborexemption from the antitrust laws.” Brown v. Pro Football,116 S. Ct. 2116, 135 L. Ed. 2d 521, 64 U.S.L.W. 4554, 4555(U.S. 1996) (Breyer, J.) (citing Connell Constr. Co. v. Plumbers,421 U.S. 616, 622, 44 L. Ed. 2d 418, 95 S. Ct. 1830 (1975); MeatCutters v. Jewel Tea Co., 381 U.S. 676, 14 L. Ed. 2d 640, 85 S.

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Ct. 1596 (1965); Mine Workers v. Pennington, 381 U.S. 657, 14L. Ed. 2d 626, 85 S. Ct. 1585 (1965)). The exemption applies not“only to understandings embodied in a collective-bargainingagreement,” (64 U.S.L.W. at 4557) but also to employer conducttaking place “during and immediately after a collective-bargain-ing negotiation.” (Id. at 4559). See also Clarett v. National Foot-ball League, 369 F.3d 124 (2d Cir. 2004) (reversing summaryjudgment granted to football player in action against professionalfootball league, holding that league’s eligibility rules were subjectto a non-statutory labor exemption because eligibility is a manda-tory subject of collective bargaining between league and players’union). Local Union 257 I.B.E.W. v. Sebastian Electric,121 F.3d 1180 (8th Cir. 1997) (recognizing nonstatutory exemp-tion); Phoenix Elec. Co. v. National Elec. Contrs. Ass’n, 81 F.3d858, 860 (9th Cir. 1996) (citing Mackey v. National FootballLeague, 543 F.2d 606, 614 (8th Cir. 1976), Pennington & Con-nell) (The exemption applies “to an agreement restraining trade”only if “(1) the restraint primarily affects the parties to the agree-ment and no one else, (2) the agreement concerns wages, hours,or conditions of employment that are mandatory subjects of col-lective bargaining, and (3) the agreement is produced from bonafide, arm’s-length collective bargaining.”).

(2) Federal sovereign immunity does not exempt the United StatesPostal Service from antitrust claims because Congress has waivedthe Postal Service’s sovereign immunity. Flamingo IndustriesLtd. v. United States Postal Service, 302 F.3d 985, 993 (9th Cir.2002).

(3) Implied immunity exists where there is a plain repugnancybetween the antitrust laws and regulatory schemes. Billing v.Credit Suisse First Boston Ltd., 426 F.3d 130 (2nd Cir. 2005), cert.granted, 127 S. Ct. 762 (Dec. 7, 2006) (appellate court vacatedand remanded district court’s holding that the securities lawsimpliedly repealed federal antitrust laws and pre-empted stateantitrust laws, thereby dismissing plaintiff’s complaints); VerizonCommunications, Inc. v. Law Offices of Curtis V. Trinko,540 U.S. 398, 408-11 (2004) (holding that antitrust savingsclause in Telecommunications Act was bar to finding of impliedimmunity); In re Stock Exchanges Options Trading Antitrust Liti-gation, 317 F.3d 134, 148 (2d Cir. 2003) (affirming district court’sconclusion that the Securities and Exchange Act impliedly

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repealed §1 of the Sherman Act with respect to listing and tradingequity options); Friedman v. Salomon/Smith Barney, Inc.,313 F.3d 796, 799 (2d Cir. 2002) (holding implied immunitybarred plaintiffs’ antitrust claims where Congress implicitlydetermined that SEC regulations should apply); MFS SecuritiesCorp. v. New York Stock Exchange, Inc., 277 F.3d 613, 617-18(2d Cir. 2002) (reversing district court’s dismissal of antitrustclaim and ordering stay during pending SEC administrative pro-cess). But see Covad Communications Co. v. Bellsouth Corp.,299 F.3d 1272, 1280-81 (11th Cir. 2002) (finding that there is no‘plain repugnancy’ between the Telecommunications Act and theantitrust laws, thus allowing internet provider’s antitrust claimsagainst telephone company to go forward).

XIV. LICENSING INTELLECTUAL PROPERTY RIGHTS

A. Federal Guidelines

(1) In 1995, the Federal Trade Commission and the Department ofJustice promulgated jointly Antitrust Guidelines for the Licensingof Intellectual Property. These guidelines address the generalprinciples used by the agencies in making enforcement decisions.Most notably, the guidelines recognize the fundamentally pro-competitive nature of most licensing arrangements. As a result,most licensing arrangements are evaluated under a rule of reason.U.S. Dep’t of Justice & Federal Trade Comm’n, Antitrust Guide-lines for the Licensing of Intellectual Property, §3.4 (1995),“Intellectual Property Guidelines”). Some restraints, such asnaked price-fixing and market division amongst competitors, willbe treated under a per se analysis. Id.

(2) Since 1995, at least two licensing arrangements have been chal-lenged under per se rules. In re Summit Tech. Inc. & VISX Inc.,Docket No. 9286 (FTC, filed March 4, 1998) (two companiesentered patent pool that combined competitive patented technol-ogy of in photorefractive keratectomy ordered dismantled);United States v. General Elec. Co., 1999-1 Trade Cas. (CCH)¶ 72,399 (D. Mont. 1999) (consent decree prohibiting GE fromrestricting licensees of medical equipment software from compet-ing in the service market of those same machines).

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B. Refusal to License and Nonuse

(1) In general, the unilateral refusal to license a patent or copyright orprovide access to products encompassing such intellectual prop-erty is not deemed an antitrust violation. Standard Oil Co. v.United States, 283 U.S. 163, 179 (1931) (patent pool participantsnot required to license because each had the “right to determinewho should use their respective processes”); In re IndependentServ. Org. Antitrust Litig., 203 F.3d 1322 (Fed. Cir. 2000) (manu-facturer’s refusal to sell patented replacement parts and copy-righted manuals to independent service organizations not aviolation); Intergraph Corp. v. Intel Corp., 195 F.3d 1346 (Fed.Cir. 1999) (withdrawal of prerelease access to intellectual prop-erty not an unreasonable restraint of trade); Image Tech. Serv. Incv. Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997) (found lia-bility in refusal to sell parts, despite existence of intellectual prop-erty); Datagate Inc. v. Hewlett-Packard Co., 60 F.3d 1421, 1427(9th Cir. 1995) (acknowledges the right to unilaterally refuse todeal); Service & Training, Inc. v. Data Gen. Corp., 963 F.2d 680,686 (4th Cir. 1992) (“Data General may lawfully license [its soft-ware] to whomever it chooses”); SCM Corp. v. Xerox Corp.,645 F.2d 1195, 1204-1205 (2d Cir. 1981) (refusal to license pat-ents related to xerography to competitor not unlawful); but seeData Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147,1184-1187 (1st Cir. 1994) (refusal to license copyrighted work “isa presumptively valid business justification”).

(2) The Intellectual Property Guidelines acknowledge that the intel-lectual property owner is not obligated “to license the use of thatproperty to others.” Intellectual Property Guidelines at § 2.2.

(3) Where one or more entities provide a service or facility that isessential in the market, they may be obligated to provide all com-petitors with access to such facility. However, the plaintiff and theentity with the essential facility must be in the same market. Inter-graph Corp. v. Intel Corp., 195 F.3d 1346, 1356-1358 (Fed. Cir.1999) (essential facilities doctrine not applicable to pre-releasemicroprocessor samples for workstation manufacturer).

C. Concerted Refusal to Deal

(1) Unlike a unilateral refusal to deal, a concerted refusal to deal maybe treated as a group boycott. Zenith Radio Corp. v. Hazletine

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Research, Inc., 395 U.S. 100, 135 (1969) (exclusive patent poolheld unlawful); Primetime 24 Joint Venture v. National Broad.Co., Inc., 219 F.3d 92, 103 (2d Cir. 2000) (“a concerted refusal tolicense copyrighted programming to [plaintiff] in order to preventcompetition from it is a boycott”).

D. Pricing and Output Restrictions

(1) Some cases have ruled that granting a license related to the manu-facture and sale of patented or copyrighted products in which theintellectual property owner establishes the sale price is not unlaw-ful. United States v. General Electric Co., 272 U.S. 476 (1926)(license to build and sell patented electric lamps with price deter-mined by patent owner not unlawful, patentee served as an agent);Ozark Heartland Elecs. V. Radio Shack, 278 F.3d 759, 762(8th Cir. 2002) (ending retailers authority to sign up subscribersto satellite service for not abiding with the prepayment pricespecified in license agreement with satellite service provider notunlawful); LucasArts Entertainment Co. v. Humongous Enter-tainment Co., 870 F.Supp. 285, 288-289 (N.D. Cal. 1993) (resaleprice restriction set by copyright owner fell within the “safe har-bor” established by General Electric).

(2) However, several subsequent cases have limited the applicabilityof General Electric. United States v. Line Material Co., 333 U.S.287 (1948) (establishing sublicensee’s price, where patents werecross-licensed, was held illegal); Newburgh Moire Co. v. Supe-rior Moire Co., 237 F.2d 283 (3d Cir. 1956) (granting severallicenses with price restrictions on the products sold by licenseemay violate the Sherman Act).

E. Tying

(1) Combining a license or use of a patented or copyrighted productto another license or product may constitute unlawful tying.Motion Picture Patents Co., v. Universal Film Mfg. Co., 243 U.S.502, 516 (1917) (requiring movies used on patented projector tobe leased solely from patent owner goes beyond scope of patentgrant and unlawful under the Sherman Act); International SaltCo. v. United States, 332 U.S. 392, 395 (1947) (tying the sale ofsalt to the lease of a patented salt processor held unlawful); Mon-santo Co. v. Scruggs, 459 F.3d 1328, 1340-41 (Fed. Cir. 2006) (notying claim where licensing agreement for seeds containing

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defendant’s patented seed treatment included incentives for grow-ers to use defendant’s herbicide); United States. v. MicrosoftCorp., 253 F.3d 34 , 84-97 (D.C. Cir. 2001) (Sherman §1 tyingclaim where license to distribute operating system was condi-tioned upon obtaining a license to distribute web browserremanded to evaluate under a rule of reason); System Case, Inc. v.Wang Lab. Corp., 85 F.3d 465, 470 (10th Cir. 1996) (tyingarrangement by a single entity is not proscribed by Sherman §1);Service & Training Inc. v. Data Gen., 963 F.2d 680, 686 (4th Cir.1992) (refusal to license software to competitors did not consti-tute tying because the license to use software was not conditionedon the purchase of repair services); but see U.S. Philips Corp. v.Int’l Trade Comm’n, 424 F.3d 1179 (Fed. Cir. 2005) (holding thata package patent licensing agreement, which provided essentialtechnology for a fee, did not constitute illegal tying

(2) In Illinois Tool Works, Inc. v. Independent Ink, Inc., 126 S. Ct.1281, 1291 (2006), the Supreme Court held that a patent does notnecessarily confer market power on the patent owner. This deci-sion reversed the Federal Circuit’s holding that in patent tyingcases, the defendant has a rebuttable presumption of marketpower in the tying product. The Supreme Court's decision was notunexpected, and brings the burden of proof in patent tying casesback in line with general tying cases.

F. Cross-Licensing

(1) A patent pool occurs where two or more entities cross licenseeach other or otherwise create a pool of intellectual propertyrights that certain competitors can have access to. In U.S. PhilipsCorp. v. Int’l Trade Comm’n, the Federal Circuit held that with-out evidence of anticompetitive effects patent pools are lawful.424 F.3d 1179, 1196-97 (Fed. Cir. 2005). The circuit court’s deci-sion reversed an International Trade Commission ruling that tyingthe license of essential compact disc patents to nonessential pat-ents in a patent pool constituted per se patent misuse. Id. at 1182.The antitrust agencies recognize the procompetitive aspects ofcross-licensing. Intellectual Property Guidelines, § 5.5. Manypatents (blocking patents) exist that cannot be used without beingcombined with other patents. Therefore, antitrust analysis of twoor more entities that cross-license is usually evaluated under arule of reason. Standard Oil Co. v. United States, 283 U.S. 163

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(1931) (cross-licensing of patents related to petroleum processingnot unlawful).

(2) On the other hand, if a cross-licensing arrangement is used toestablish a price fixing or market division scheme, it is assessedunder a per se rule. Intellectual Property Guidelines, § 5.5; UnitedStates v. New Wrinkle, Inc., 342 U.S. 371 (1952) (cross-licensingof wrinkle finish patents coupled with a price-fixing arrangementruled illegal per se).

(3) The Federal Trade Commission investigated cross-licensingamongst competitors under Section 5 of the FTC Act. In re Sum-mit Tech. Inc. & VISX Inc. involved two companies which settledpatent infringement lawsuits by pooling their patents related tophotorefractive keratectomy (laser eye surgery). Docket No. 9286(FTC, filed March 4, 1998). Their patents were the only two thathad received marketing approval from FDA to perform laser eyesurgery. The complaint alleged that the pool had the effect of set-ting prices of a per-use royalty, one party could not license itsown patents without the approval of the other party, and anymeaningful competition between the two competing sets of pat-ents was eliminated. Both parties entered into a consent decreewhich required the elimination of the pool. (http://www.ftc.gov/os/1998/9808>).

G. Field of Use Restrictions

(1) A “field of use” restriction is one where a patent owner restricts alicense grant to use in a particular market or application. Manyfield of use restrictions on licenses have been held to be lawful.General Talking Pictures Corp. v. Western Electric Co., 304 U.S.175, aff’d on rehearing, 305 U.S. 124 (1938) (licensing patentrelated to amplifiers to be made and sold to theaters by subsidiaryand a separate license provided to others to make and sell radioreceivers to be sold in private homes upheld); Brulotte v. Thys,379 U.S. 29 (1964) (allowing use restriction on patented machine,as long as patent had not expired); Mallinckrodt, Inc. v. Medipart,Inc., 976 F.2d 700, 706 (Fed. Cir. 1992) (single use restriction onmedical device should be assessed under patentee’s right toexclude and the rule of reason where anticompetitive effects areasserted)

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(2) The D.C. Circuit ruled on two field of use cases where a licensingrestriction was placed on the unpatented product produced by thepatent process. In Robintech, Inc. v. Chemidus Wavin, LTD., thecourt held that a licensed restriction on the sale of pipe manufac-tured through a licensed method patent constituted patent misuse.628 F.2d 142 (D.C. Cir. 1980). However, in United States v. Stu-diengesellschaft Kohle, m.b.H., the court held that a licensewhich granted the use of a patent process, but restricted the saleof any product produce from such a process, is to be governedunder a rule of reason. 670 F.2d 1122 (D.C. Cir. 1981). The seem-ingly contradictory rulings were held one year apart.

(3) The Intellectual Property Guidelines note the procompetitiveaspects of field of use restrictions. Intellectual Property Guide-lines at § 2.3 and Example 1.

H. Geographic Market Restrictions

(1) An exclusive licensee may be granted to a patentee for use in theUnited States or “any specified part” thereof. 35 U.S.C. § 261(West 1994). Many geographic restrictions on license grants havebeen deemed lawful. Ethyl Gasoline Corp. v. United States, 309U.S. 436, 456 (1940) (may grant license, “restricted in space ortime,” without violating the antitrust laws).

I. Customer Restrictions

(1) A patent licensor may also restrict the manufacturing licensee’sability to sell to particular customers. In re Yarn ProcessingPatent Validity Litig., 541 F.2d 1127, 1135 (5th Cir., 1976) (lic-ensee manufacturers restricted from selling to any one other thanthose licensed by patent licensor is protected under patent grant);Carter v. Variflex, Inc., 101 F.Supp.2d 1261 (C.D. Cal. 2000)(patent license preventing sale in mass merchandise segment heldlawful under rule of reason).

J. Exclusivity

(1) A patent holder may license its intellectual property on an exclu-sive basis without violating antitrust laws. Zenith Radio Corp. v.Hazeltine Research, Inc., 395 U.S. 100, 135-136 (1969);Genetech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 949 (Fed Cir.1993) (grant of an exclusive license is protected under the right to

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excluded provided under the Patent Act); Abbott Labs. v. BaxterInt’l Inc., 2002 U.S. Dist. LEXIS 5475 (March 26, 2002) (sublic-ensee’s enforcement of exclusivity provision coupled with animpairment of contract action against licensor, preventing licen-sor from competing with sublicensee in the inhaled anestheticsmarket, held not unlawful).

(2) The Federal Trade Commission investigated the licensing ofmicroprocessor technology. In re Digital Equip. Corp., No. C-3818 (FTC, filed July 14, 1998). Digital and Intel entered into asettlement agreement regarding mutual patent infringement suits.In the settlement, Digital agreed to provide Intel with an exclusivelicense to manufacture Digital’s microprocessor. At the time,Digital and Intel were the only two chips that could run WindowsNT in “native mode.” The FTC alleged that because Intel was insole control of the manufacture of their only competitor’s chip,competition was eliminated. Both parties entered into a consentdecree, which required Digital to use IBM as an additionalfoundry and to provide its chip design to AMD and Samsung.(http://www.ftc.gov/os/1998/9807/ 9810040d&o.htm).

K. Patent Litigation Agreements

(1) Certain drug manufacturers have settled patent infringement liti-gation involving producers of generics by entering into agree-ments by which the generic drug manufacturer agreed to delayintroduction of its product in return for quarterly payments fromthe patent holder. The circuit courts that have addressed suchagreements have split as to whether they are per se unlawful.Compare In re Cardizem CD Antitrust Litig., 332 F.3d 896, 908-09 (6th Cir. 2003) (agreement was per se unlawful, because “theagreement cannot be fairly characterized as merely an attempt toenforce patent rights” and the restrictions extended to non-infringing versions of the generic drug), with Valley Drug Co. v.Geneva Pharm., Inc., 344 F.3d 1294, 1304-11 (11th Cir. 2003)(agreements were not per se unlawful to the extent that they hadno broader exclusionary effect than that provided by patent forbrand name drug; rejecting Sixth Circuit’s per se analysisbecause, at this early stage of litigation, it did not appear that“exclusionary effect of the Agreements were bolstered by the exitpayments to a degree that exceeds the potential exclusionarypower of the patent.”). However, on remand, the District Court

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held that under the facts of the case per se analysis would beappropriate. In re Terazosin Hydrochloride Antitrust Litigation,352 F.Supp.2d 1279 (S.D. Fla. 2005) (alleged settlement agree-ment between drug patentee and manufacturer of generic versionof patented drug challenging patent to keep generic version ofdrug off the market subject to per se condemnation where therewas substantial likelihood that patent would be held invalid onappeal).

(2) In Schering-Plough Corp. v. F.T.C., 402 F.3d 1056 (11th Cir.2005), cert. denied, 126 S. Ct. 2929 (2006), the Eleventh Circuitfound that license payments from a patent holder to generic drugmanufacturers were legitimate. The settlements did not fit thegeneral pattern where a patent holder pays generic drug manufac-turers to stay off the market. Rather, the patent holder agreed thatthe generics could enter the market in advance of the patent expi-ration date, three and six years in advance respectively. Thepatent holder also paid the generics for exclusive licenses onother products. Id. at 1058-61. The court rejected the argumentthat the payments were shams meant to delay generic entry. With-out the settlement, the generics could not have entered the marketbefore the patent expiration date. The court also found that settle-ment of patent litigation is favored because it may enhance mar-ket efficiencies and encourage innovation. Id. at 1072-76. But see,In re Tamoxifen Citrate Antitrust Litigation, 466 F.3d 187 (2d Cir.2006), cert. filed (2007) (settlement agreement, entered into dur-ing appeal from judgment of patent of invalidity, did not violateSection 1, absent a showing that the exclusionary effects wentbeyond the scope of the patent’s protection).

XV. HYPOTHETICALS

A. Terminated Distributor Hypothetical

In June 2003, XYZ Company, a widget manufacturer in the UnitedStates, entered into a written agreement to supply Discount Dealer withwidgets for a two-year period. In return Discount Dealer agreed to pro-mote, display and sell XYZ’s widgets. In May 2004, QR Dealer,another dealer for XYZ Company selling widgets in the same geo-graphic area as Discount Dealer, complained to XYZ Company thatDiscount Dealer was a low pricing, high volume dealer, and that

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QR Dealer had been forced to lower its prices to compete with Dis-count Dealer.

Although XYZ Company does not suggest resale prices,XYZ Company is concerned that it will lose QR as a dealer. XYZ,therefore, is considering terminating its contract with Discount Dealer.XYZ Company has contacted you.

(a) What would you advise XYZ Company about terminating Dis-count Dealer?

(b) Would it make a difference if XYZ Company had urged DiscountDealer to raise its prices?

(c) Would it make a difference if QR Dealer was one of several deal-ers who complained jointly about Discount Dealer’s pricing poli-cies?

(d) Does XYZ’s market share for widgets make a difference?

(e) Would it make a difference if XYZ Company also sold widgets inthe same geographic area as Discount Dealer and QR Dealer?

Authorities:

Nynex Corp. v. Discon, Inc., 119 S. Ct. 493 (1998)

Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S.717 (1988)

Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984)

FTC v. Superior Trial Court Lawyers Ass’n, 493 U.S. 411 (1990)

United States v. General Motors Corp., 384 U.S. 127 (1966)

Klor’s v. Broadway-Hale Stores, 359 U.S. 207 (1959)

Fashion Originators’ Guild v. Federal Trade Commission,312 U.S. 457 (1941)

United States v. Colgate & Co., 250 U.S. 300 (1919)

Palmer v. BRG of Georgia, 111 S. Ct. 401 (1990)

ES Development, Inc. v. RWM Enterprises, Inc., 939 F.2d 547(8th Cir. 1991), cert. denied, 112 S. Ct. 1176 (1992)

Lovett v. General Motors Corp., 998 F.2d 575 (8th Cir. 1993),cert. denied, 114 S. Ct. 1058 (1994)

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Denny’s Marina v. Renfro Productions, 8 F.3d 1217 (7th Cir. 1993)

DeLong Equip. Co. v. Washington Mills Abrasive Co., 887 F.2d1499 (11th Cir. 1989), cert. denied, 494 U.S. 1081 (1990)

Parkway Gallery Furniture Inc. v. Kittinger/Pennsylvania HouseGroup, Inc., 878 F.2d 801 (4th Cir. 1989)

H.J. Inc. v. International Tel. & Tel. Corp., 867 F.2d 1531,reh’g denied, 876 F.2d 59 (8th Cir. 1989)

Dunnivant v. Bi-State Auto Parts, 851 F.2d 1575 (11th Cir. 1988)

Winn v. Edna Hibel Corp., 858 F.2d 1517 (11th Cir. 1988)

The Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148 (9th Cir. 1988)

H. L. Hayden Co. of New York v. Siemens Medical Systems, Inc.,879 F.2d 1005 (2d Cir. 1989)

O.S.C. Corp. v. Apple Computer, Inc., 792 F.2d 1464 (9th Cir. 1986)

Dimidowich v. Bell & Howell, 803 F.2d 1473 (9th Cir. 1986),modified, 810 F.2d 1517 (1987)

Victorian House, Inc. v. Fisher Camuto Corp., 769 F.2d 466(8th Cir. 1985)

Russell Stover Candies, Inc. v. FTC, 718 F.2d 256 (8th Cir. 1983)

Zidell Exploration Inc. v. Conval Int’l, Ltd., 719 F.2d 1465(9th Cir. 1983)

Com-Tel, Inc. v. Dukane Corp., 669 F.2d 404 (6th Cir. 1982)

H. L. Moore Drug Exchange v. Eli Lilly and Co., 662 F.2d 935(2d Cir.), cert. denied, 459 U.S. 880 (1982)

B. Price-Fixing Hypothetical

The Bombay Company, one of 10 manufacturers of widgets in theUnited States, has recently received notice that the Justice Departmentis commencing an investigation of the widget industry. Mr. Bombay,president of Bombay, is concerned that he and the company may becharged with price fixing.

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During an initial conference, Mr. Bombay confided that he waspresent at two meetings with competitors where prices had been dis-cussed. The first meeting occurred in the spring of 2003 at a breakfastheld at an annual trade association meeting. During this meeting,Mr. Competitor announced that his company, a competitor of Bombay,intended to increase prices about three percent by the fall of 2004.Although none of the other competitors, including Mr. Bombay, saidanything about increasing their prices, all of the competitors who wererepresented at the meeting subsequently increased their prices three toseven percent.

The second meeting occurred in March 2005, at a dinner held at theannual trade association meeting. During this meeting Mr. Johnsonstated that his company, also a competitor of Bombay, was consideringincreasing its prices because of increased costs. Other competitorsstated that they too anticipated increased prices within the next sixmonths.

(a) What is your opinion as to the civil or criminal exposure ofMr. Bombay and the Bombay Company?

(b) Would it make any difference if the Bombay Company could jus-tify each of its price increases from 2000 to the present on thebasis of increased costs?

(c) Would it make any difference if Mr. Bombay told you that henever said a word concerning prices at either of these meetings?

(d) Would it make any difference if Mr. Bombay told you that hedidn’t attend any trade association meetings during 2005-2006because he thought prices might be discussed?

(e) Would it make any difference that Bombay Company had adoptedand rigorously enforced a firm policy against discussing priceswith a competitor?

Authorities:

Criminal:

United States v. Socony-Vacuum Oil Co., 31 U.S. 150 (1940)

United States v. Alston, 974 F.2d 1206 (9th Cir. 1992)

United States v. Basic Const. Co., 711 F.2d 570 (4th Cir.), cert. denied, 464 U.S. 956 (1983)

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United States v. United States Gypsum Co., 438 U.S. 422 (1978)

United States v. Cargo Service Stations, Inc., 657 F.2d 676 (5th Cir. 1981), cert. denied, 455 U.S. 1017 (1982)

United States v. David E. Thompson, Inc., 621 F.2d 1147 (1st Cir. 1980)

United States v. Gillen, 599 F.2d 541 (3d Cir.), cert. denied, 444 U.S. 866 (1979)

United States v. Foley, 598 F.2d 1323 (4th Cir. 1979), cert. denied, 444 U.S. 1043 (1980)

United States v. Brighton Bldg. & Maintenance Co., 598 F.2d 1101 (7th Cir.), cert. denied, 444 U.S. 840 (1979)

United States v. SIGMA, 624 F.2d 461 (4th Cir. 1980), cert. denied, 449 U.S. 1078 (1981)

Civil:

Arizona v. Maricopa County Medical Society, 457 U.S. 332(1982)

In re Plywood Antitrust Litigation, 655 F.2d 627 (5th Cir. 1981),cert. dismissed, 462 U.S. 1125 (1983)

Weit v. Continental Illinois Nat. Bank & Trust, 641 F.2d 457 (7th Cir. 1981), cert. denied, 455 U.S. 988 (1982)

Gainesville Utilities v. Florida Power & Light Co., 573 F.2d 292(5th Cir.), cert. denied, 439 U.S. 966 (1978)

Volasco Products Company v. Lloyd A. Fry Roofing Company,308 F.2d 383 (6th Cir.), cert. denied, 372 U.S. 907 (1963)

United States v. American Airlines, Inc., 743 F.2d 1114 (5th Cir. 1984), cert. dismissed, 474 U.S. 1001 (1985)

Cayman Exploration Corp. v. United Gas Pipe Line Co., 873 F.2d 1357 (10th Cir. 1989)

C. Rule of Reason Hypothetical

The Ajax County Medical Association (“ACMA”), whose member-ship includes approximately 90% of all physicians within the county,has undertaken a joint project with Carrier Insurance, a major nation-wide health insurance company, to ascertain the cost of preventive

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health care relative to the cost of surgery and other treatments. Pursuantto guidelines worked out between ACMA and Carrier in connectionwith the project, Carrier is requiring all physicians who submit bills forreimbursement to provide certain information concerning the natureand type of preventive measures used by the patient, the nature andtype of treatment where prevention has failed, and the relative cost ofeach.

Although initially the discussions between ACMA officials andCarrier related only to the cost evaluation project, ACMA officialsseized the opportunity to discuss with Carrier certain grievances har-bored by some of the ACMA members with respect to the compensa-tion scheme used by Carrier in connection with physicianreimbursement. More specifically, the ACMA members object to thefact that Carrier establishes levels of physician compensation based onnational averages for particular procedures which tend to be lower thanthe prevailing compensation levels in Ajax County for the same proce-dures. After several months of fruitless discussions in respect to thesegrievances, a number of ACMA members have notified their regularpatients that they will no longer submit bills to Carrier for reimburse-ment, but will look to the individual patient to pay his own medicalexpenses in full, irrespective of Carrier’s reimbursement schedules.Other ACMA members, while still willing to submit claims to Carrierand to limit their fees to the scheduled reimbursement amounts, haverefused to submit the information required by Carrier in connectionwith its cost prevention program.

You have been consulted by a small group of physicians who prac-tice together as a preferred provider organization (“PPO”) seekingadvice with respect to whether they, too, may refuse to participate inthe Carrier reimbursement program and to provide the informationrequired by Carrier.

(a) What is your advice to the PPO with respect to each question?

(b) Would it make a difference that the PPO had received letters fromsome of those who have refused to deal with Carrier urging a sim-ilar action by others?

(c) Would it make a difference that the PPO decided on its own not todeal with Carrier for reasons that are unrelated to compensationand that predate the discussions between ACMA and Carrier?

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(d) Would it make a difference that none of the physicians who makeup the PPO is a member of ACMA?

Authorities:

FTC v. Indiana Federation of Dentists, 476 U.S. 447 (1986)

Matsushita Elec. Ind. Co. v. Zenith Radio, 475 U.S. 574 (1986)

Arizona v. Maricopa County Medical Society, 457 U.S. 332(1982)

Broadcast Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1,99 S. Ct. 1551, 60 L. Ed. 2d 1 (1979)

In re Southbank IPA, Inc., 5 Trade Reg. Rep. (CCH) ¶ 23,065(Sept. 30, 1991)

NCAA v. Board of Regents of the University of Oklahoma, 468 U.S. 85 (1985)

In re Detroit Auto Dealers Ass’n, Inc., Docket No. 9189 (FTCMarch 9, 1989), aff’d in part, 955 F.2d 457 (6th Cir.), cert. denied,113 S. Ct. 461 (1992)

Massachusetts Board of Registration in Optometry, Docket No. 9195, slip op. at 10 (FTC June 13, 1988)

Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210(D.C.Cir. 1986), cert. denied, 479 U.S. 1033 (1987)

Wilcox v. First Interstate Bank, 815 F.2d 522 (9th Cir. 1987)

Barry v. Blue Cross of California, 805 F.2d 866 (9th Cir. 1986)

Hahn v. Oregon Physicians’ Service, 868 F.2d 1022 (9th Cir. 1988), cert. denied, 493 U.S. 846 (1989)

D. Price Verification Hypothetical

Mr. Day is Vice President of Sales at Day Company. InMarch 2006, Mr. Day received a phone call from Mr. Night, SalesManager at Night Company, who asked him to verify the Day Com-pany’s prices to the Blue Company. During this conversation Mr. Daystated that he had recently quoted a price of $10,000 to the Blue Com-pany.

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In accordance with company policy, Mr. Day reported this conver-sation to his immediate superior who suggested that counsel beadvised.

(a) What is your opinion concerning the civil or criminal liability ofMr. Day?

(b) Would it make any difference if this telephone call was one ofmany similar calls?

(c) Would it make a difference if Mr. Day also discussed withMr. Night when the Day Company intended to increase prices?

(d) Would it make any difference whether Day told Night the truthabout the prices charged?

(e) Would it make any difference that Day’s price was public infor-mation, readily available in trade journals?

(f) Would it make any difference that Blue was in fact attempting todefraud Night Company by misrepresenting prices available fromDay Company?

Authorities:

Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980)

United States v. United States Gypsum Co., 438 U.S. 422 (1978)

United States v. Container Corp., 393 U.S. 333 (1969)

Continental Cablevision v. Am. Elec. Power Co., 715 F.2d 1115(6th Cir. 1983)

United States v. Essex Group, Inc., 1980-2 CCH Trade Cas.¶ 63,296 (C.D. Cal. 1980)

E. Price-Signaling Hypothetical

As a result of a recent market analysis and cost report, ABC Com-pany, a leading manufacturer of widgets, has decided to increase priceseffective September 1, 2006. In the past, ABC Company hasannounced its price increases at least 30 days prior to the effective date(a) by press release to The Wall Street Journal, (b) in The Widget, apublication circulated only to widget manufacturers, and (c) in promo-tional material to its customers and potential customers.

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After attending a business seminar, Mr. Jones, Sales Vice Presidentfor ABC, is concerned that the company’s advance price announce-ments may be illegal under some antitrust theory.

(a) What would you advise Mr. Jones?

(b) Would it make a difference if ABC Company was the price leaderin the industry?

(c) Would the number of widget manufacturers make a difference?

(d) Would it make a difference if prices were generally uniform in theindustry?

(e) Would it make a difference if, in addition to merely announcingprices in The Widget, Jones was interviewed and opined that inhis view, other sellers were under similar cost pressures toincrease prices?

(f) Would it make a difference if the practice of announcing priceincreases in the press was adopted as a substitute for direct pricecommunications between manufacturers which were discontin-ued in 2002 on advice of counsel?

Authorities:

E. I. Dupont de Nemours & Co. v. FTC, 729 F.2d 128 (2d Cir. 1984)

United States v. Foley, 598 F.2d 1323 (4th Cir. 1979), cert. denied, 444 U.S. 1043 (1980)

Universal Lite Distributors, Inc. v. Northwest Industries, 452 F. Supp. 1206 (D. Md. 1978), mod’d, 602 F.2d 1173 (4th Cir. 1979)

United States v. General Electric Co. & Westinghouse ElectricCorp., 1977-2 CCH Trade Cas. ¶¶ 61,659-61,661 (E.D. Pa. 1977)

United States v. General Motors Corp., 1974-2 CCH Trade Cas.¶ 75,253 (E.D. Mich. 1974)

In re Coordinated Pretrial Proceedings in Petroleum ProductsAntitrust Litigation, 906 F.2d 432 (9th Cir. 1990)

In re Infant Formula Antitrust Litigation, 1991-2 Trade Cas.(CCH) ¶ 69,501 (N.D. Fla. 1991)

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United States v. American Airlines, Inc., 743 F.2d 1114 (5th Cir. 1984), cert. dismissed, 474 U.S. 1001 (1985)

United States v. Airline Tariff Publishing Co., Trade Reg. Rep.(CCH) ¶ 50,742 (D.D.C. 1992)

F. Staff Privileges Hypothetical

Dr. Snyder is an ophthalmic surgeon on the staff at Anytown Hospi-tal, a privately owned hospital in a small town with no other hospitals.After several patients complained to the hospital administrator thatDr. Snyder was negligent in dealing with their medical problems, Any-town has decided to convene a special proceeding to determine ifDr. Snyder should continue to have staff privileges to conduct surgery.Dr. Snyder has threatened to sue if his privileges are diminished. Any-town hospital seeks legal advice concerning potential antitrust liability.

(a) Will it make any difference to your analysis if Dr. Snyder alsooperates an ambulatory eye clinic which performs surgery on alow-cost basis identical to that performed at Anytown hospital?

(b) Will it make any difference if a state statute requires the hospitalto establish quality control standards for surgery and to policethose standards through peer review?

(c) Will it make any difference if some of Dr. Snyder’s patients at thehospital are from out-of-state, if some of his surgeries are paid forby out-of-state insurance companies, or if the surgeries he per-forms require products shipped from out-of-state?

(d) Should Anytown permit other ophthalmic surgeons to sit on thepeer review board?

Authorities:

(a) Patrick v. Burget, 486 U.S. 94, reh’g denied, 487 U.S. 1243(1988)

Miller v. Indiana Hosp., 843 F.2d 139 (3d Cir.), cert. denied, 109 S. Ct. 178 (1988)

(b) California Liquor Dealers v. Midcal Aluminum, 445 U.S. 97(1980)

Parker v. Brown, 317 U.S. 341 (1943)

Shahawy v. Harrison, 875 F.2d 1529 (11th Cir. 1989)

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Marrese v. Interqual, Inc., 748 F.2d 373 (7th Cir. 1984), cert. denied, 472 U.S. 1027 (1985)

(c) Summit Health, Ltd. v. Pinhas, 111 S. Ct. 1842 (1991)

(d) Oksanen v. Page Memorial Hospital, 945 F.2d 696 (4th Cir. 1991), cert. denied, 112 S. Ct. 973 (1992)

Weiss v. York Hosp., 745 F.2d 786 (3d Cir. 1984), cert. denied, 470 U.S. 1060 (1985)

G. Trade Association Hypothetical

At the present time, all domestic manufacturers of complex widgetsbelong to Complex Widget Manufacturers’ Association. The primarypurpose of this association is to promote research and development andto keep abreast of technical problems that arise in the manufacture andservicing of complex widgets.

Recently, several proposals have been made by the ManagementCommittee of the association. Mr. White, a sales manager of White &Company and a member of the Management Committee, has requestedyour opinion concerning the legality of each of the following propos-als:

(a) Membership Restrictions. A proposal has been made to amendthe association’s by-laws so that only domestic manufacturers ofcomplex widgets are eligible for membership. Due to a recentshortage in supply, several foreign manufacturers of complexwidgets are considering entering the United States market.Because the foreign manufacturers have no long-term commit-ment to this market, some of the domestic manufacturers do notwant to include them in the association.

(b) Production Data. The association’s by-laws currently require eachmember company to pay annual dues in an amount to be deter-mined by the Management Committee. Some of the smaller com-panies have proposed that the by-laws be amended so that eachmember company’s annual dues are in proportion to its percent-age of total production. The amendment would further requirethat each member company submit annual production figures tothe Management Committee for this purpose.

(c) Credit Risks. As a result of a growing concern with regard to badcredit risks, a proposal has been made that each member company

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prepare a monthly statement of all overdue accounts for distribu-tion to association members. A variation of this proposal wouldencourage members to adopt standardized payment terms andother credit practices to make the statements comparable.

(d) Standards. A proposal has been made to develop minimum speci-fications for complex widgets. Would it make a difference if thesespecifications were necessary to assure compatibility of compo-nent parts? To promote health and safety? Would it make a differ-ence if the government had to approve the specifications? Wouldit make a difference if these specifications were more restrictivethan those already approved by the government?

(e) Joint Purchasing. A proposal has been made to have the associa-tion negotiate with suppliers of raw materials on behalf of all itsmembers.

(f) Sales to Catalog Houses. An association of complex widgetretailers have approached the complex widget manufacturersabout their sales to catalog houses requesting them to stop theirsales or reduce their discounts to these catalog houses.

(g) Benchmarking. The president of one of the member complexwidget manufacturers has submitted a proposal to the associationfor a voluntary benchmarking program. As proposed, the plancalls for the reciprocal exchange of information on key produc-tion, marketing and distribution methods.

Authorities:

(a) Associated Press v. United States, 326 U.S. 1 (1945)

Phil Tolkan Datsun, Inc. v. Greater Milwaukee Datsun, 672 F.2d1280 (7th Cir. 1982)

United States v. Realty Multi-List, Inc., 629 F.2d 1351 (5th Cir. 1980)

Kreuzer v. American Academy of Periodontology, 735 F.2d 1479(D.C.Cir. 1984)

Vogel v. American Society of Appraisers, 744 F.2d 598(7th Cir. 1984)

United States v. Automobile Mfrs. Ass’n, 307 F. Supp. 617(C.D. Cal.), affirmed, 397 U.S. 248 (1969)

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Wilk v. American Medical Ass’n, 895 F.2d 352 (7th Cir.),cert. denied, 110 S. Ct. 2621 (1990)

In Re Workers’ Compensation Ins. Antitrust Litigation, 867 F.2d1552 (8th Cir.), cert. denied, 109 S. Ct. 3247 and 110 S. Ct. 72(1989).

(b) Hartford-Empire Co. v. U.S., 323 U.S. 386 (1945)

American Column Co. v. United States, 257 U.S. 377 (1921)

United States v. Philadelphia Savings Fund Society, 1979-2Trade Cas. (CCH) ¶ 62,917 (E.D. Pa. 1979)

United States v. United Fruit Co., 1958 Trade Cas. (CCH)¶ 68,941 (E.D. La. 1958)

Pope v. Mississippi Real Estate Commission, 872 F.2d 127(5th Cir. 1989)

Supermarket of Homes v. San Fernando Valley Bd. of Realtors,786 F.2d 1400 (9th Cir. 1986)

(c) United States v. First Nat. Pictures, Inc., 282 U.S. 44 (1930)

Cement Mfrs. Protective Ass’n. v. United States, 268 U.S. 588(1925)

Swift and Company v. United States, 196 U.S. 375 (1905)

Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980)

(d) Allied Tube & Conduit Corp. v. Indian Head, 486 U.S. 492(1988)

ASME, Inc. v. Hydrolevel Corp., 456 U.S. 556 (1982)

Radiant Burners v. Peoples Gas Co., 364 U.S. 656 (1961)

United States v. Natl. Malleable & Steel Casting Co., 1957 CCHTrade Cas. ¶ 68,890 (N.D. Ohio 1957), affirmed per curiam,358 U.S. 38 (1958)

Clamp-All Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478(1st Cir. 1988), cert. denied, 488 U.S. 789 (1989)

Consolidated Metal Prod. v. American Petroleum Institute, 846 F.2d 284 (5th Cir. 1988)

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Eliason Corp. v. National Sanitation Found., 614 F.2d 126(6th Cir.), cert. denied, 449 U.S. 826 (1980)

United States v. National Assn. of Broadcasters, 536 F. Supp. 149(D.D.C. 1982)

(e) NCAA v. Board of Regents of the University of Oklahoma,468 U.S. 85 (1984)

Northwest Wholesale Stationers Inc. v. Pacific Stationery &Printing Co., 472 U.S. 284 (1985)

Southern Motor Carriers Rate Conf. v. United States, 471 U.S. 48(1985)

Balmoral Cinema, Inc. v. Allied Artists Pictures, Corp.,885 F.2d 313 (6th Cir. 1989)

All Care Nursing, Inc. v. Bethesda Memorial Hosp. Inc.,887 F.2d 1535 (11th Cir. 1989)

(f) National Automobile Dealers Ass’n, 60 Fed. Reg. 51491, 7 TradeReg. Rep. (CCH) ¶ 50,788 (1995) (consent decree).

(g) United States v. United States Gypsum Co., 438 U.S. 422 (1978).

In re Coordinated Proceedings in Petroleum Products AntitrustLitigation, 906 F.2d 432 (9th Cir. 1990), cert. denied, 111 S. Ct.2274 (1991).

FTC v. Abbott Laboratories, 1992-2 Trade Cas. (CCH) ¶ 69,996(D.D.C. 1992)

In re Mead Johnson Co. and American Home Products, 5 TradeReg. Rep. (CCH) ¶ 23,209 (June 11, 1992) (consent decree).

H. Information Exchange Hypothetical.

Faced with competition (or potential competition) from new inter-net companies, five of the largest widget manufacturers in the world areconsidering forming a business to business information exchange fortheir component parts suppliers. They have retained you as their anti-trust counsel and an outside consultant to assist them with their busi-ness plan. Because they represent a significant share of the widgetmarket, they are concerned that they will be subject to review by theantitrust enforcement agencies. They seek your input on the followingissues:

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(a) Data Sharing. To set up the information exchange, the widgetmanufacturers would like to exchange information concerningeach of their component parts suppliers. The consultant firstasked each widget manufacturer to provide a list of its currentcomponent parts suppliers and their current prices. Later the con-sultant asked each widget manufacturer to provide a list of com-ponent parts suppliers that it has dealt with in the past and thereason that it is not buying from them at present.

(b) Approved Suppliers. To provide for a more efficient informationexchange, the consultant has recommended that the group includeonly those suppliers who are currently supplying at least one ofthe widget manufacturers. The consultant has also recommendedthat, in the future, the group only add new suppliers that areapproved by at least three of the widget manufacturers. Alterna-tively, the consultant has suggested that there be no more thantwo suppliers of each component part.

(c) Joint Purchasing. The consultant has advised the widget manufac-turers that they could likely leverage their market power andobtain better prices if they engage in joint purchasing. All but oneof the widget manufacturers express some interest in doing this.The consultant has recommended that the widget manufacturersagree to buy at least 90% of their purchases through the informa-tion exchange mechanisms. At least one widget manufacturer hasexpressed concern about this because it purchases some of itsproducts using a different internet exchange set by one of theinternet companies.

(d) New Members. The consultant has advised the widget manufac-turers that the exchange will likely cost each widget manufacturerbetween $5-10 million to develop a common technology platformfor use by them and their approved suppliers. Because of thisinvestment, the widget manufacturers are reluctant to invite anyother widget manufacturers to participate in the network. Alterna-tively, they would like to assess any new member a portion of thecapital costs as a membership fee.

(e) Standards. One of the widget manufacturers has developed itsown existing information exchange with its component suppliers.The manufacturer would like for the others to adopt its technol-ogy as the standard for the new network. The manufacturer hasapplied for a patent on its technology. One of the widget manu-

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facturers has expressed concern about adopting this technology asa standard because it is not an “open” standard.

(f) Competitive Terms. The consultant has recommended that thewidget manufacturers agree to standard terms and conditions forpurchase of components and for sale of widgets. These terms andconditions include credit terms, payment terms, limitations on lia-bility, liquidated damages and dispute resolution.

Authorities:

Entering the 21st Century: Competition Policy in the World ofB2B Electronic Marketplaces (FTC Staff Report) (October 2000).

“FTC Terminates HSR Waiting Period for Covisint B2B Venture”(FTC Press Release) (Sept. 11, 2000).

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