Skip to main content

Development of Per Se Illegality

Requirements for a per se § 1 violation after Socony: illegal per se = lacks a "cognizable" or "plausible" procompetitive justification

A CCC formed with the "purpose and effect" of fixing price is illegal per se (highly likely to give rise to anticompetitive effects):

  • Purpose (intent) and effect are sufficient for a violation
  • Purpose (intent) and power are sufficient for a violation even if there is no effect
  • Purpose (intent) without power is sufficient (but dicta from Socony n.59 - these cases usually not worth pursuing because there is no harm) After Topco, agreements are only per se illegal when courts have "considerable experience" with their general type - see the list of per se illegal acts below.
Additional notes:
  • "Per se illegal" is a conclusion, not a method of analysis
  • A court must always analyze a restraint: if the restraint is of a type that is highly likely to be anticompetitive because of its (1) nature, (2) scope, and (3) the court's past experience with it, and (4) there are no obvious procompetitive benefits of the kind that courts have recognized in the past or that stem from the economic cicumstances of the case, then the court will conclude that the restraint is per se illegal
  • This conclusion can often be done without elaborate factual findings (Andreas)

Policy Note (Northern Pacific): don't require effect to declare price fixing per se illegal (power is sufficient) because we want to empower enforcers to charge defendants before the cartel has a chance to actually fix prices

Acts deemed per se illegal (D can't provide legally cognizable procompetitive justification):

  1. Price fixing/"reasonable prices":
    • U.S. v. Trenton Potteries (1927, fixed prices for bathroom fixtures)
    • U.S. v. Trans-MO Freight (1897, can't argue reasonable prices and destructive competition)
    • U.S. v. Socony-Vacuum Oil (1940, can't argue destructive competition and reasonable method of stabilizing prices)
  2. Minimum price fixing/price floor:
    • Goldfarb v. Virginia State Bar (1975, minimum fee schedule by bar association)
  3. Maximum price fixing/price ceiling: courts don't trust Ds to do this
    • Arizona v. Maricopa County Medical Society (1982, agreement between doctors/insurers on maximum prices charged by doctors)
  4. Suggested prices: courts believe this won't have beneficial consequences on average
    • Plymouth Dealers Assn. v. U.S. (1960, auto dealers using common list prices, courts don't trust Ds to do this)
  5. Quantity fixing: analogous to controlling price
    • Hartford-Empire Co. v. U.S. (1945, limitation of production of glass products)
  6. Market division (geographic/product/customer): no reason for firms to do this other than protect themselves - tends to hurt consumers
    • Palmer v. BRG of Georgia (1990, division of Georgia bar review course market)
  7. Agreement to limit credit: firms should compete for credit card customers
    • Catalano, Inc. v. Target Sales, Inc. (1980, beer distributors agree to eliminate free short-term credit)
  8. Competition is destructive: whole point of antitrust is to promote competition
    • NSPE v. U.S. (1978)
  9. Non-profit status
    • NCAA v. Board of Regents (1984, NCAA prohibits teams from negotiating their own network deals)
  10. Upholding amateurism in sport
    • NCAA v. Board of Regents (1984, NCAA prohibits teams from negotiating their own network deals)

Historical Debate: Justice Burger vs. Justice Marshall

  • Burger: the court cannot escape weighing competitive effects, so it should try to do its best
    • Supports the rule of reason
  • Marshall: the court isn't good at weighing competitive effects, so it should avoid doing so
    • Supports per se liability
  • Burger's perspective won, leading to the expansion of the rule of reason/stop of the expansion of per se liability

Caselaw:​

U.S. v. Trenton Potteries (1927) (reasonableness of price not cognizable)​

  • Holding: reasonableness of the prices set under a ROT is not material
    • Agreements that create power over prices may be held to be unreasonable or unlawful in themselves under the Sherman Act
    • Uniform price fixing is prohibited: the "reasonableness" of particular prices is not a defense
  • Facts:
    • Ds control 82% of vitreous pottery (bathroom fixtures) in the U.S.
    • Ds fixed prices and limited sales, argued that the prices they set were reasonable
  • Note: made two types of cases: one where you consider reasonableness (CBT) and one where there aren't cognizable legal defenses that the fixed price is reasonable (Trenton)

U.S. v. Socony-Vacuum Oil (1940) (can't justify price fixing by claiming that competition is destructive or claiming "stability")​

  • Holding: CCC with the purpose and effect of raising prices is per se illegal
    • Provided requirements for a Section 1 violation:
      • Purpose (intent) and effect are sufficient for a violation
      • Purpose (intent) and power are sufficient for a violation even if there is no effect
      • Purpose (intent) without power is sufficient (but dicta)
    • Here, the CCC was completed with the purpose and effect of raising prices
  • Facts:
    • In the Depression, government tried to raise prices with price floors under the National Industrial Recovery Act (NIRA)
    • NIRA held unconstitutional, but oil companies continued to coordinate (majors agreed to buy from independent oil distributors to stabilize price at high levels)
  • Note: by expanding what is considered per se illegal, this case narrowed the law of agreement by incentivizing businesses to hide their agreements