Concerted refusals to deal

Exclusionary group boycotts:

Per se approach under S1 (Northwest Wholesale):

• (1) Exclusionary conduct: joint efforts to disadvantage competitors and restricted access to supply or distribution (equivalent to CCC and ROT)
• (2) Market power: collective market power by the boycotting firms (not really necessary)
• (3) No procompetitive justification: lack of a procompetitive justification
  • The agreement that triggers S1 and the possibility of per se illegality will (for our purposes) always be an agreement between competitors
  • All are not necessary to merit per se treatment (but 1 and 3 probably are per Prof.)

Procompetitive justifications: very similar to those for S1 collusive agreements between competitors

• Purchasing/sales/production cooperatives or joint ventures (Northwest Wholesale)
• Membership and disciplinary action by professional associations or sports leagues (NCAA)
• Competition in networks (news associations/payment systems/app stores)
• Boycotts motivated by political rather than commercial purposes

Collusive boycott:

Per se approach under S1 (Socony) (basically the same as exclusionary boycott):

• (1) Agreement between competitors
• (2) Restraint of trade
• (3) No procompetitive justification
  • However, no case directly says this. It's unclear if we take justifications into account first, or we say that the conduct is per se illegal on the basis of the restraints.

Types of group boycotts: most courts are not sophisticated and don't distinguish between the two

• Collusive: competitors agree not to deal with a supplier or distributor unless they agree to certain terms (e.g., price) (SCTLA: refuse to work unless employer raises wages)
• Exclusionary: competitors agree to induce a supplier or distributor not to deal with a rival (JTC Petroleum: cement cartel induces suppliers not to deal with uncooperative rival)
• Shared attributes: basically the same set of questions, just look at different evidence
  • Both (almost always) involve agreements between competitors
  • Both can involve per se illegality under Section 1
    • Three categories for per se illegality: S1 collusion, S1 exclusion, S1/C3 tying
  • Collusion and exclusion often go together (JTC Petroleum)
  • Courts often refer to both as "concerted refusals to deal"
    • Contrast with unilateral refusals to deal (Aspen Skiing/Trinko, S2)
• Main difference: the party who is harmed
  • Exclusionary group boycott: harms the defendant firm's rivals
  • Collusive group boycott: harms the defendant firm's transaction partners (suppliers/distributors)

Caselaw

Early cases

Eastern States Retail Lumber Dealers' Association v. United States (1914)

• Holding: not per se illegal
  • Case analyzed under the rule of reason
    • Agreement: association was an agreement between competitors
    • Restraint of trade: association agreed not to deal with rival
    • No procompetitive reason: association boycotting on the basis of the rival's structure, not the quality of the rival's lumber
  • Primary anticompetitive effect of boycott is exclusionary
  • Likely that retailers were also expressly or tacitly colluding
• Facts: association of competing lumber retailers (D) boycotted wholesalers who were dual (retail + wholesale) distributors. The dual distributors were undercutting D on price.
• Prof. Note: today, this would be per se illegal under the NW Stationers standard:
  • Exclusionary conduct: yes, retail cartel boycotted distributors run by competitors, denying competitors access to a portion of the retail market
  • Market power as a group: yes
  • No procompetitive justification: boycott was based on the rival's business structure

Fashion Originators' Guild of America v. FTC (1941) (exclusion is enough, collusion isn't necessary)

• Holding: D's exclusionary boycott violated S1
  • Not necessary to find a collusive agreement: it's enough to find an agreement to exclude
  • Excludes evidence that D's conduct was reasonable because of the need to protect its members from design piracy
  • Rejects D's plea that no violation could be found absent a finding that the Guild "fixed or regulated prices, parceled out or limited production, or brought about a deterioration in quality"
  • Finds evidence of market power and anticompetitive effects
• Facts: Guild members refuse to sell garments to retailers that sell copies of their original creations and fine members who sell to retailers who sell copies. Guild prohibits members from retail advertising, regulates their discounts, prohibits retail selling, and prohibits sales to retailers in homes/hotels/apartments.
• Prof. Note: dressmakers have a lack of IP protection that leaves them vulnerable to free riders
  • Guild lost the case, but at least they still have a guild that can advocate for better IP protections
  • Note that if a single firm made an exclusive contract with a retailer, there would have been no problem; however, when multiple firms agree to exclude, it's an issue
  • Application of NW Stationers per se test:
    • Exclusionary conduct: yes, excludes the knock-off dressmakers from accessing retailers
    • Combined market power: yes (guild includes most dress designers)
    • No procompetitive justification: yes (compensating for a lack of IP protections is not sufficient justification)

Klor's v. Broadway-Hale Stores (1959) (established per se rule for exclusionary boycotts)

• Holding: D's conduct illegal as an exclusionary boycott under S1
  • Group boycotts/concerted refusals to deal with other traders are in the per se category
    • It's irrelevant that the boycott was reasonable in the specific circumstances
    • Court says that it's irrelevant that there wasn't a meaningful harm to competition here (P was a small retailer)
  • "Monopoly can surely thrive by the elimination of such small businessmen, one at a time, as it can by driving them out in large groups"
• Facts: retailer (D) and 10 manufacturers and distributors agree either not to sell to small plaintiff retailer (P) or only sell on unfavorable terms. D does not dispute allegations, but submits unchallenged evidence that there are hundreds of appliance retailers in the area.
• Prof. Note: there is no agreement between competitors here
  • This is an area where issues can perhaps be better addressed by state tort law rather than antitrust law (there was no harm to competition here!)
  • Application of per se test from NW Stationers: ambiguous case, lack of market power makes outcome unclear
    • Exclusionary conduct: yes, D's agreement excluded P from dealing with the involved manufacturers and distributors
    • Combined market power: no, D and the relevant manufacturers and distributors didn't account for much of the market
    • No procompetitive justification: yes, this seems to be the result of some personal conflict

Modern cases

Northwest Wholesale Stationers v. Pacific Stationery & Printing Co. (1985) (rule of reason + modern test)

• Holding: D's conduct is not illegal group exclusionary conduct
  • Case should be analyzed under rule of reason
    • Wholesale purchasing cooperatives like D are unlikely to result in predominantly anticompetitive effects
    • P must show that D possesses market power OR unique access to a business element necessary for effective competition
  • Per se cases generally involve power + conduct + no procompetitive justification:
    • (1) Joint efforts to disadvantage competitors and denial of access to supply/facility/market necessary to compete: D's expulsion of P from the cooperative might count
    • (2) Market power on the side of the boycotting firms: no real reason to believe D has market power here
    • (3) Lack of a procompetitive argument: not the case here, the cooperative provides a more efficient way for these stores to purchase paper supplies
  • All are not necessary to merit per se treatment (but 1 and 3 probably are per Prof.)
• Facts: NW (D) is a purchasing cooperative of 100 office-supply retailers that acts as a wholesaler/warehouse for its member retailers. P (retailer and wholesaler) is removed from D after D changes its bylaws to disallow wholesalers from membership.

Flaa v. Hollywood Foreign Press Association (9th Cir. 2022)

• Holding: D did not violate antitrust laws
  • D's conduct does not qualify as per se illegal (NW Stationers)
    • Conduct: D did not cut off access to supply necessary for boycotted firm to compete
    • Power: D lacks market power (there are many substitutes for Hollywood reporters, so the market is quite large and competitive)
    • Justifications: D's conduct has procompetitive justifications (exclusivity justifies the existence of the group)
  • Because D lacks market power, not illegal under rule of reason
• Facts: Flaa (P), a foreign entertainment journalist, denied admission to the HFPA (D) (~85 members). D organizes the Golden Globes, which brings benefits to members (like access to the biggest stars).