P1251955653uykdI

1
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 Assn 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.

2
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?

3
Dr. Miles Medical Co. v. John D. Park Sons Co.
(1911)
Basic Facts Dr. Miles sold medicines through
400 jobbers and 25k 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?
4
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 cant fare any
  better. Ulterior benefit to manufacturer
• cant support such a system.
• - Where commodities passed into commerce,
  validity of agreements to prohibit
• competition not determined by whether there
  many or one manufacturer.
• Having sold product, Dr. Miles cant 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

5
California Retail Liquor Dealers Assn 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 21st Amendment argument? Did
states policy protect retailers or reduce
consumption of alcohol? How did states interest
compare with national interest of competition
under Sherman Act?
6
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 Courts 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.
7
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 didnt
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.
8
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-Rites
Sherman 1 claim? What had jury decided? What
was alleged error on appeal?
9
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 price-
• cutting distributor in response to other dealer
  complaints. There must
• be evidence that excludes possibility that
  manufacturer and non-
• terminated 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.