Some Horizontal Rule of Reason Special Factors Rule

Some Horizontal “Rule of Reason” Special Factors “Rule of Reason” analysis essential in select cases. Complete analysis must be applied to unique facts of case. Some unique factors we have seen include: • • • Does restrain merely regulate, not restrain, competition? Chicago Board. Does restrain change character of established market? Aspens Ski Does restrain involve essential facility? Otter Tail, Terminal Ass’n of St. Louis? Does restrain force blanket license, long-term lease or boycott that forecloses competition? U. S. Shoe, Griffith, Loraine Journal. Does restrain amount to to tort or contract liability, not antitrust claim? Olympic Equip, Curtis Tinker. Is party giving up short-term profits for long-term anticompetitive effect? Aspen Ski. Is there a legitimate exercise of IP rights? Xerox. Are IP rights just a pretext, phony excuse? Kodak, Microsoft. Does restrain shut out competitors? Microsoft. Does restrain impact price-setting mechanism? Indiana Dentists. Law 552 - Antitrust - Instructor: Dwight Drake

Some Horizontal “Rule of Reason” Special Factors • • Does restrain have potential to enhance or strengthen market? Cal Dentists. Is there dominate market power or a tight oligopoly? Rothery Storage, Microsoft. • Does restrain promote or demand exclusivity? Broadcast Music, Microsoft. • Is industry susceptible to collusion? Todd/Exxon, Container Corp. • Does restrain help get product to market? Broadcast Music, GM/Toyota. • Is there an expectation consumer prices will decrease? GM/Toyota • Are there fundamental social welfare issues? Brown University. • Are there efficiency-enhancing infrastructures? Med South • Is there any free-riding? VISA USA • Is restrain ancillary to broader J. V. or business arrangement? Addyston Pipe, VISA USA, GM/Toyota All these potentially impact mega factors: 1. Is their power to limit output or market efficiency? 2. Is there injury to innovation or dynamic efficiency? 3. Do the pro-competitive effects outweigh anticompetitive effects? 4. Are there less restrictive means to pro-competitive benefits? Law 552 - Antitrust - Instructor: Dwight Drake

Dr. Miles Medical Co. v. John D. Park & Sons Co. (1911) Basic Facts: Dr. Miles sold medicines through 400 jobbers and 25 k retailers, specified price for products and required wholesalers to sell only to authorized dealers. Park acquired medicines cheap and sold at discount. Dr. Miles sued on interference with contract, and Park claimed restrains illegal under antitrust. What was Dr. Miles secret process argument? Any validity? Does right to sell or not sell confer right to impose conditions on sale? What is restrain on alienation? What business justification would Dr. Miles have for fixing resale price? Law 552 - Antitrust - Instructor: Dwight Drake

Dr. Miles Medical Co. v. John D. Park & Sons Co. (1911) Holding: Dr. Miles resale restrains void – violate antitrust. - General restrain on alienation void. - Dr. Miles agreements designed to maintain prices after sale and prevent competition among those who trade in goods. - Agreements among dealers to fix prices would violate antitrust. Manufacturer who forces same result can’t fare any better. Ulterior benefit to manufacturer can’t support such a system. - Where commodities passed into commerce, validity of agreements to prohibit competition not determined by whethere many or one manufacturer. - Having sold product, Dr. Miles can’t deny public advantage of competition. Dissent: (Holmes): Should let people manage own business unless ground for interference clear. Not clear here. Exaggerate value of public competition. Market will force fair pricing. Dr. Miles knows better than court what is best for his business and products. Law 552 - Antitrust - Instructor: Dwight Drake

California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc. (Sup. Ct. 1980) Basic Facts: Cal. Statute prohibited wine wholesalers from selling below posted prices. Violators fined and lost license to sell. Violator sued for injunction. Cal. Ct of App. held scheme violated Sherman Act. Retailers, desiring price protection, appealed to Sup. Ct. What was argument for state immunity under Parker v. Brown? Why did immunity claim fail? What was 21 st Amendment argument? Did state’s policy protect retailers or reduce consumption of alcohol? How did state’s interest compare with national interest of competition under Sherman Act? Law 552 - Antitrust - Instructor: Dwight Drake

United States v. Colgate & Co. (Sup. Ct. 1919) Basic Facts: Colgate set uniform prices for products, gathered data on dealers who did not adhere to uniform prices, and terminated business with such dealers. Dist. Ct. quashed indictment. Was there any agreement? Did Colgate demand agreement that retailers honor uniform prices? Is Court’s decision consistent with Dr. Miles? As to Colgate, if no monopoly issue, a manufacturer is free to exercise discretion as to whom he will deal. Law 552 - Antitrust - Instructor: Dwight Drake

United States v. Parke, Davis & Co. (1960) Basic Facts: Park Davis, large manufacturer and seller of pharmaceuticals, published minimum price list, actively secured consent of big retailers, then cut off all those who didn’t follow pricing guidelines. Program forced compliance by all parties. Why did Parker fall outside of “limited dispensation” of Colgate? Was there much of Colgate left after Parker? How would you advise Client? As to Parker, Ct. said product comes in “competition free wrapping – by virtue of concerted action induced by the manufacturer. The manufacturer is thus the organizer of a price-maintenance combination or conspiracy in violation of the Sherman Act. ” Law 552 - Antitrust - Instructor: Dwight Drake

Monsanto Co. v. Spray-Rite Service Corp. (1984) Basic Facts: Monsanto, with 15% share of herbicide market, terminated distributor agreement with Spray-Rite, a wholesale distributor who bought large quantities and sold at discount. Spray-Rite alleged Sherman 1 violation. What program had Monsanto adopted? Was Spray-Rite big Monsanto distributor? How important was Monsanto to Spray-Rite? What was basis of Spray-Rite’s Sherman 1 claim? What had jury decided? What was alleged error on appeal? Law 552 - Antitrust - Instructor: Dwight Drake

Monsanto Co. v. Spray-Rite Service Corp. (1984) Holding: Lower Court erred in holding that plaintiff can survive motion for directed verdict by only showing manufacturer terminated pricecutting distributor in response to other dealer complaints. There must be evidence that excludes possibility that manufacturer and nonterminated dealers were acting independently. Need have a “conscious commitment to common scheme…” - Big distinction between concerted and independent actions. - Distinction between price restrictions and non-price restrictions. - Something more than just complaints are necessary. Must have evidence that precludes independent action. Here, plenty of such evidence. Hence, jury verdict upheld even though standard used by lower ct. was error. Law 552 - Antitrust - Instructor: Dwight Drake