|||SUPREME COURT OF THE UNITED STATES
467 U.S. 752, 104 S. Ct. 2731, 81 L. Ed. 2d 628, 52 U.S.L.W. 4821
|||June 19, 1984
|||COPPERWELD CORP. ET AL.
INDEPENDENCE TUBE CORP.
|||CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT.
|||Erwin N. Griswold argued the cause for petitioners. With him on the briefs
were William R. Jentes, Sidney N. Herman, Robert E. Shapiro, and Donald
|||Deputy Solicitor General Wallace argued the cause for the United States
as amicus curiae urging reversal. With him on the brief were Solicitor General
Lee, Assistant Attorney General Baxter, Deputy Assistant Attorney General
Collins, Carolyn F. Corwin, Barry Grossman, and Nancy C. Garrison.
|||Victor E. Grimm argued the cause for respondent. With him on the brief
were John R. Myers and Scott M. Mendel.*
|||Burger, C. J., delivered the opinion of the Court, in which Blackmun,
Powell, Rehnquist, and O'connor, JJ., joined. Stevens, J., filed a Dissenting
opinion, in which Brennan and Marshall, JJ., joined, post, p. 778. White,
J., took no part in the consideration or decision of the case.
|||The opinion of the court was delivered by: Burger
|||Petitioner Copperweld Corp. purchased petitioner Regal Tube Co., a manufacturer
of steel tubing, from Lear Siegler, Inc., which had operated Regal as an
unincorporated division, and which under the sale agreement was bound not
to compete with Regal for five years. Copperweld then transferred Regal's
assets to a newly formed, wholly owned subsidiary. Shortly before Copperweld
acquired Regal, David Grohne, who previously had been an officer of Regal,
became an officer of Lear Siegler, and, while continuing to work for Lear
Siegler, formed respondent corporation to compete with Regal. Respondent
then gave Yoder Co. a purchase order for a tubing mill, but Yoder voided
the order when it received a letter from Copperweld warning that Copperweld
would be greatly concerned if Grohne contemplated competing with Regal and
promising to take the necessary steps to protect Copperweld's rights under
the non-competition agreement with Lear Siegler. Respondent then arranged
to have a mill supplied by another company. Thereafter, respondent filed
an action in Federal District Court against petitioners and Yoder. The jury
found, inter alia, that petitioners had conspired to violate § 1 of
the Sherman Act but that Yoder was not part of the conspiracy, and awarded
treble damages against petitioners. The Court of Appeals affirmed. Noting
that the exoneration of Yoder from antitrust liability left a parent corporation
and its wholly owned subsidiary as the only parties to the § 1 conspiracy,
the court questioned the wisdom of subjecting an "intra-enterprise" conspiracy
to antitrust liability, but held that such liability was appropriate "when
there is enough separation between the two entities to make treating them
as two independent actors sensible," and that there was sufficient evidence
for the jury to conclude that Regal was more like a separate corporate entity
than a mere service arm of the parent.
|||Held : Petitioner Copperweld and its wholly owned subsidiary, petitioner
Regal, are incapable of conspiring with each other for purposes of §
1 of the Sherman Act. Pp. 759-777.
|||(a) While this Court has previously seemed to acquiesce in the "intra-enterprise
conspiracy" doctrine, which provides that § 1 liability is not foreclosed
merely because a parent and its subsidiary are subject to common ownership,
the Court has never explored or analyzed in detail the justifications for
such a rule. Pp. 759-766.
|||(b) Section 1 of the Sherman Act, in contrast to § 2, reaches unreasonable
restraints of trade effected by a "contract, combination . . . or conspiracy"
between separate entities, and does not reach conduct that is "wholly unilateral."
|||(c) The coordinated activity of a parent and its wholly owned subsidiary
must be viewed as that of a single enterprise for purposes of § 1 of
the Sherman Act. A parent and its wholly owned subsidiary have a complete
unity of interest. Their objectives are common, not disparate, and their
general corporate objectives are guided or determined not by two separate
corporate consciousnesses, but one. With or without a formal "agreement,"
the subsidiary acts for the parent's benefit. If the parent and subsidiary
"agree" to a course of action, there is no sudden joining of economic resources
that had previously served different interests, and there is no justification
for § 1 scrutiny. In reality, the parent and subsidiary always have
a "unity of purpose or a common design." The "intra-enterprise conspiracy"
doctrine relies on artificial distinctions, looking to the form of an enterprise's
structure and ignoring the reality. Antitrust liability should not depend
on whether a corporate subunit is organized as an unincorporated division
or a wholly owned subsidiary. Here, nothing in the record indicates any
meaningful difference between Regal's operations as an unincorporated division
of Lear Siegler and its later operations as a wholly owned subsidiary of
Copperweld. Pp. 771-774.
|||(d) The appropriate inquiry in this case is not whether the coordinated
conduct of a parent and its wholly owned subsidiary may ever have anticompetitive
effects or whether the term "conspiracy" will bear a literal construction
that includes a parent and its subsidiaries, but rather whether the logic
underlying Congress' decision to exempt unilateral conduct from scrutiny
under § 1 of the Sherman Act similarly excludes the conduct of a parent
and subsidiary. It can only be concluded that the coordinated behavior of
a parent and subsidiary falls outside the reach of § 1. Any anticompetitive
activities of corporations and their wholly owned subsidiaries meriting
antitrust remedies may be policed adequately without resort to an "intra-enterprise
conspiracy" doctrine. A corporation's initial acquisition of control is
always subject to scrutiny under § 1 of the Sherman Act and §
7 of the Clayton Act, and thereafter the enterprise is subject to §
2 of the Sherman Act and § 5 of the Federal Trade Commission Act. Pp.
|||CHIEF JUSTICE BURGER delivered the opinion of the Court.
|||We granted certiorari to determine whether a parent corporation and its
wholly owned subsidiary are legally capable of conspiring with each other
under § 1 of the Sherman Act.
|||The predecessor to petitioner Regal Tube Co. was established in Chicago
in 1955 to manufacture structural steel tubing used in heavy equipment,
cargo vehicles, and construction. From 1955 to 1968 it remained a wholly
owned subsidiary of C. E. Robinson Co. In 1968 Lear Siegler, Inc., purchased
Regal Tube Co. and operated it as an unincorporated division. David Grohne,
who had previously served as vice president and general manager of Regal,
became president of the division after the acquisition.
|||In 1972 petitioner Copperweld Corp. purchased the Regal division from
Lear Siegler; the sale agreement bound Lear Siegler and its subsidiaries
not to compete with Regal in the United States for five years. Copperweld
then transferred Regal's assets to a newly formed, wholly owned Pennsylvania
corporation, petitioner Regal Tube Co. The new subsidiary continued to conduct
its manufacturing operations in Chicago but shared Copperweld's corporate
headquarters in Pittsburgh.
|||Shortly before Copperweld acquired Regal, David Grohne accepted a job
as a corporate officer of Lear Siegler. After the acquisition, while continuing
to work for Lear Siegler, Grohne set out to establish his own steel tubing
business to compete in the same market as Regal. In May 1972 he formed respondent
Independence Tube Corp., which soon secured an offer from the Yoder Co.
to supply a tubing mill. In December 1972 respondent gave Yoder a purchase
order to have a mill ready by the end of December 1973.
|||When executives at Regal and Copperweld learned of Grohne's plans, they
initially hoped that Lear Siegler's non-competition agreement would thwart
the new competitor. Although their lawyer advised them that Grohne was not
bound by the agreement, he did suggest that petitioners might obtain an
injunction against Grohne's activities if he made use of any technical information
or trade secrets belonging to Regal. The legal opinion was given to Regal
and Copperweld along with a letter to be sent to anyone with whom Grohne
attempted to deal. The letter warned that Copperweld would be "greatly concerned
if contemplates entering the structural tube market . . . in competition
with Regal Tube" and promised to take "any and all steps which are necessary
to protect our rights under the terms of our purchase agreement and to protect
the know-how, trade secrets, etc., which we purchased from Lear Siegler."
Petitioners later asserted that the letter was intended only to prevent
third parties from developing reliance interests that might later make a
court reluctant to enjoin Grohne's operations.
|||When Yoder accepted respondent's order for a tubing mill on February 19,
1973, Copperweld sent Yoder one of these letters; two days later Yoder voided
its acceptance. After respondent's efforts to resurrect the deal failed,
respondent arranged to have a mill supplied by another company, which performed
its agreement even though it too received a warning letter from Copperweld.
Respondent began operations on September 13, 1974, nine months later than
it could have if Yoder had supplied the mill when originally agreed.
|||Although the letter to Yoder was petitioners' most successful effort to
discourage those contemplating doing business with respondent, it was not
their only one. Copperweld repeatedly contacted banks that were considering
financing respondent's operations. One or both petitioners also approached
real estate firms that were considering providing plant space to respondent
and contacted prospective suppliers and customers of the new company.
|||In 1976 respondent filed this action in the District Court against petitioners
and Yoder. *fn1
The jury found that Copperweld and Regal had conspired to violate §
1 of the Sherman Act, 26 Stat. 209, as amended, 15 U. S. C. § 1, but
that Yoder was not part of the conspiracy. It also found that Copperweld,
but not Regal, had interfered with respondent's contractual relationship
with Yoder; that Regal, but not Copperweld, had interfered with respondent's
contractual relationship with a potential customer of respondent, Deere
Plow & Planter Works, and had slandered respondent to Deere; and that Yoder
had breached its contract to supply a tubing mill.
|||At a separate damages phase, the Judge instructed the jury that the damages
for the antitrust violation and for the inducement of the Yoder contract
breach should be identical and not double counted. The jury then awarded
$2,499,009 against petitioners on the antitrust claim, which was trebled
to $7,497,027. It awarded $15,000 against Regal alone on the contractual
interference and slander counts pertaining to Deere. The court also awarded
attorney's fees and costs after denying petitioners' motions for judgment
n.o.v. and for a new trial.
|||The United States Court of Appeals for the Seventh Circuit affirmed. 691
F.2d 310 (1982). It noted that the exoneration of Yoder from antitrust liability
left a parent corporation and its wholly owned subsidiary as the only parties
to the § 1 conspiracy. The court questioned the wisdom of subjecting
an "intra-enterprise" conspiracy to antitrust liability, when the same conduct
by a corporation and an unincorporated division would escape liability for
lack of the requisite two legal persons. However, relying on its decision
in Photovest Corp. v. Fotomat Corp., 606 F.2d 704 (1979), cert. denied,
445 U.S. 917 (1980), the Court of Appeals held that liability was appropriate
"when there is enough separation between the two entities to make treating
them as two independent actors sensible." 691 F.2d, at 318. It held that
the jury instructions took account of the proper factors for determining
how much separation Copperweld and Regal in fact maintained in the conduct
of their businesses. *fn2
It also held that there was sufficient evidence for the jury to conclude
that Regal was more like a separate corporate entity than a mere service
arm of the parent.
|||We granted certiorari to re-examine the intra-enterprise conspiracy doctrine,
462 U.S. 1131 (1983), and we reverse.
|||Review of this case calls directly into question whether the coordinated
acts of a parent and its wholly owned subsidiary can, in the legal sense
contemplated by § 1 of the Sherman Act, constitute a combination or
The so-called "intra-enterprise conspiracy" doctrine provides that §
1 liability is not foreclosed merely because a parent and its subsidiary
are subject to common ownership. The doctrine derives from declarations
in several of this Court's opinions.
|||In no case has the Court considered the merits of the intra-enterprise
conspiracy doctrine in depth. Indeed, the concept arose from a far narrower
rule. Although the Court has expressed approval of the doctrine on a number
of occasions, a finding of intra-enterprise conspiracy was in all but perhaps
one instance unnecessary to the result.
|||The problem began with United States v. Yellow Cab Co., 332 U.S. 218 (1947).
The controlling shareholder of the Checker Cab Manufacturing Corp., Morris
Markin, also controlled numerous companies operating taxicabs in four cities.
With few exceptions, the operating companies had once been independent and
had come under Markin's control by acquisition or merger. The complaint
alleged conspiracies under §§ 1 and 2 of the Sherman Act among
Markin, Checker, and five corporations in the operating system. The Court
stated that even restraints in a vertically integrated enterprise were not
"necessarily" outside of the Sherman Act, observing that an unreasonable
|||"may result as readily from a conspiracy among those who are affiliated
or integrated under common ownership as from a conspiracy among those who
are otherwise independent. Similarly, any affiliation or integration flowing
from an illegal conspiracy cannot insulate the conspirators from the sanctions
which Congress has imposed. The corporate interrelationships of the conspirators,
in other words, are not determinative of the applicability of the Sherman
Act. That statute is aimed at substance rather than form. See Appalachian
Coals, Inc. v. United States, 288 U.S. 344, 360-361, 376-377.
|||"And so in this case, the common ownership and control of the various
corporate appellees are impotent to liberate the alleged combination and
conspiracy from the impact of the Act. The complaint charges that the restraint
of interstate trade was not only effected by the combination of the appellees
but was the primary object of the combination. The theory of the complaint
. . . is that 'dominating power' over the cab operating companies 'was not
obtained by normal expansion . . . but by deliberate, calculated purchase
for control.'" Id., at 227-228 (emphasis added) (quoting United States v.
Reading Co., 253 U.S. 26, 57 (1920)).
|||It is the underscored language that later breathed life into the intra-enterprise
conspiracy doctrine. The passage as a whole, however, more accurately stands
for a quite different proposition. It has long been clear that a pattern
of acquisitions may itself create a combination illegal under § 1,
especially when an original anticompetitive purpose is evident from the
affiliated corporations' subsequent conduct. *fn4
The Yellow Cab passage is most fairly read in light of this settled rule.
In Yellow Cab, the affiliation of the defendants was irrelevant because
the original acquisitions were themselves illegal. *fn5
An affiliation "flowing from an illegal conspiracy" would not avert sanctions.
Common ownership and control were irrelevant because restraint of trade
was "the primary object of the combination," which was created in a "'deliberate,
calculated'" manner. Other language in the opinion is to the same effect.
|||The Court's opinion relies on Appalachian Coals, Inc. v. United States,
288 U.S. 344 (1933); however, examination of that case reveals that it gives
very little support for the broad doctrine Yellow Cab has been thought to
announce. On the contrary, the language of Chief Justice Hughes speaking
for the Court in Appalachian Coals supports a contrary Conclusion. After
observing that " restrictions the Act imposes are not mechanical or artificial,"
288 U.S., at 360, he went on to state:
|||"The argument that integration may be considered a normal expansion of
business, while a combination of independent producers in a common selling
agency should be treated as abnormal -- that one is a legitimate enterprise
and the other is not -- makes but an artificial distinction. The Anti-Trust
Act aims at substance." Id., at 377. *fn7
|||As we shall see, (infra), at 771-774, it is the intra-enterprise conspiracy
doctrine itself that "makes but an artificial distinction" at the expense
|||The ambiguity of the Yellow Cab holding yielded the one case giving support
to the intra-enterprise conspiracy doctrine. *fn8
In Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211 (1951),
the Court held that two wholly owned subsidiaries of a liquor distiller
were guilty under § 1 of the Sherman Act for jointly refusing to supply
a wholesaler who declined to abide by a maximum resale pricing scheme. The
Court offhandedly dismissed the defendants' argument that "their status
as 'mere instrumentalities of a single manufacturing-merchandizing unit'
makes it impossible for them to have conspired in a manner forbidden by
the Sherman Act." Id., at 215. With only a citation to Yellow Cab and no
further analysis, the Court stated that the
|||"suggestion runs counter to our past decisions that common ownership and
control does not liberate corporations from the impact of the antitrust
|||and stated that this rule was "especially applicable" when defendants
"hold themselves out as competitors." 340 U.S., at 215.
|||Unlike the Yellow Cab passage, this language does not pertain to corporations
whose initial affiliation was itself unlawful. In straying beyond Yellow
Cab, the Kiefer-Stewart Court failed to confront the anomalies an intra-enterprise
doctrine entails. It is relevant nonetheless that, were the case decided
today, the same result probably could be justified on the ground that the
subsidiaries conspired with wholesalers other than the plaintiff. *fn9
An intra-enterprise conspiracy doctrine thus would no longer be necessary
to a finding of liability on the facts of Kiefer-Stewart.
|||Later cases invoking the intra-enterprise conspiracy doctrine do little
more than cite Yellow Cab or Kiefer-Stewart, and in none of the cases was
the doctrine necessary to the result reached. Timken Roller Bearing Co.
v. United States, 341 U.S. 593 (1951), involved restrictive horizontal agreements
between an American corporation and two foreign corporations in which it
owned 30 and 50 percent interests respectively. The Timken Court cited Kiefer-Stewart
to show that " fact that there is common ownership or control of the contracting
corporations does not liberate them from the impact of the antitrust laws."
341 U.S., at 598. But the relevance of this statement is unclear. The American
defendant in Timken did not own a majority interest in either of the foreign
corporate conspirators and, as the District Court found, it did not control
Moreover, as in Yellow Cab, there was evidence that the stock acquisitions
were themselves designed to effectuate restrictive practices. *fn11
The Court's reliance on the intra-enterprise conspiracy doctrine was in
no way necessary to the result.
|||The same is true of Perma Life Mufflers, Inc. v. International Parts Corp.,
392 U.S. 134 (1968), which involved a conspiracy among a parent corporation
and three subsidiaries to impose various illegal restrictions on plaintiff
franchisees. The Court did suggest that, because the defendants
|||"availed themselves of the privilege of doing business through separate
corporations, the fact of common ownership could not save them from any
of the obligations that the law imposes on separate entities [citing Yellow
Cab and Timken ]." Id., at 141-142.
|||But the Court noted immediately thereafter that " any event" each plaintiff
could "clearly" charge a combination between itself and the defendants or
between the defendants and other franchise dealers. Ibid. Thus, for the
same reason that a finding of liability in Kiefer-Stewart could today be
justified without reference to the intra-enterprise conspiracy doctrine,
see n. 9, (supra) , the doctrine was at most only an alternative holding
in Perma Life Mufflers.
|||In short, while this Court has previously seemed to acquiesce in the intra-enterprise
conspiracy doctrine, it has never explored or analyzed in detail the justifications
for such a rule; the doctrine has played only a relatively minor role in
the Court's Sherman Act holdings.
|||Petitioners, joined by the United States as amicus curiae, urge us to
repudiate the intra-enterprise conspiracy doctrine. *fn12
The central criticism is that the doctrine gives undue significance to the
fact that a subsidiary is separately incorporated and thereby treats as
the concerted activity of two entities what is really unilateral behavior
flowing from decisions of a single enterprise.
|||We limit our inquiry to the narrow issue squarely presented: whether a
parent and its wholly owned subsidiary are capable of conspiring in violation
of § 1 of the Sherman Act. We do not consider under what circumstances,
if any, a parent may be liable for conspiring with an affiliated corporation
it does not completely own.
|||The Sherman Act contains a "basic distinction between concerted and independent
action." Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 761 (1984).
The conduct of a single firm is governed by § 2 alone and is unlawful
only when it threatens actual monopolization. *fn13
It is not enough that a single firm appears to "restrain trade" unreasonably,
for even a vigorous competitor may leave that impression. For instance,
an efficient firm may capture unsatisfied customers from an inefficient
rival, whose own ability to compete may suffer as a result. This is the
rule of the marketplace and is precisely the sort of competition that promotes
the consumer interests that the Sherman Act aims to foster. *fn14
In part because it is sometimes difficult to distinguish robust competition
from conduct with long-run anticompetitive effects, Congress authorized
Sherman Act scrutiny of single firms only when they pose a danger of monopolization.
Judging unilateral conduct in this manner reduces the risk that the antitrust
laws will dampen the competitive zeal of a single aggressive entrepreneur.
|||Section 1 of the Sherman Act, in contrast, reaches unreasonable restraints
of trade effected by a "contract, combination . . . or conspiracy" between
separate entities. It does not reach conduct that is "wholly unilateral."
Albrecht v. Herald Co., 390 U.S. 145, 149 (1968); accord, Monsanto Co. v.
Spray-Rite Corp., supra, at 761. Concerted activity subject to § 1
is Judged more sternly than unilateral activity under § 2. Certain
agreements, such as horizontal price fixing and market allocation, are thought
so inherently anticompetitive that each is illegal per se without inquiry
into the harm it has actually caused. See generally Northern Pacific R.
Co. v. United States, 356 U.S. 1, 5 (1958). Other combinations, such as
mergers, joint ventures, and various vertical agreements, hold the promise
of increasing a firm's efficiency and enabling it to compete more effectively.
Accordingly, such combinations are Judged under a rule of reason, an inquiry
into market power and market structure designed to assess the combination's
actual effect. See, e. g., Continental T. V., Inc. v. GTE Sylvania Inc.,
433 U.S. 36 (1977); Chicago Board of Trade v. United States, 246 U.S. 231
(1918). Whatever form the inquiry takes, however, it is not necessary to
prove that concerted activity threatens monopolization.
|||The reason Congress treated concerted behavior more strictly than unilateral
behavior is readily appreciated. Concerted activity inherently is fraught
with anticompetitive risk. It deprives the marketplace of the independent
centers of decisionmaking that competition assumes and demands. In any conspiracy,
two or more entities that previously pursued their own interests separately
are combining to act as one for their common benefit. This not only reduces
the diverse directions in which economic power is aimed but suddenly increases
the economic power moving in one particular direction. Of course, such mergings
of resources may well lead to efficiencies that benefit consumers, but their
anticompetitive potential is sufficient to warrant scrutiny even in the
absence of incipient monopoly.
|||The distinction between unilateral and concerted conduct is necessary
for a proper understanding of the terms "contract, combination . . . or
conspiracy" in § 1. Nothing in the literal meaning of those terms excludes
coordinated conduct among officers or employees of the same company. But
it is perfectly plain that an internal "agreement" to implement a single,
unitary firm's policies does not raise the antitrust dangers that §
1 was designed to police. The officers of a single firm are not separate
economic actors pursuing separate economic interests, so agreements among
them do not suddenly bring together economic power that was previously pursuing
divergent goals. Coordination within a firm is as likely to result from
an effort to compete as from an effort to stifle competition. In the marketplace,
such coordination may be necessary if a business enterprise is to compete
effectively. For these reasons, officers or employees of the same firm do
not provide the plurality of actors imperative for a § 1 conspiracy.
|||There is also general agreement that § 1 is not violated by the internally
coordinated conduct of a corporation and one of its unincorporated divisions.
this Court has not previously addressed the question, *fn17
there can be little doubt that the operations of a corporate enterprise
organized into divisions must be Judged as the conduct of a single actor.
The existence of an unincorporated division reflects no more than a firm's
decision to adopt an organizational division of labor. A division within
a corporate structure pursues the common interests of the whole rather than
interests separate from those of the corporation itself; a business enterprise
establishes divisions to further its own interests in the most efficient
manner. Because coordination between a corporation and its division does
not represent a sudden joining of two independent sources of economic power
previously pursuing separate interests, it is not an activity that warrants
§ 1 scrutiny.
|||Indeed, a rule that punished coordinated conduct simply because a corporation
delegated certain responsibilities to autonomous units might well discourage
corporations from creating divisions with their presumed benefits. This
would serve no useful antitrust purpose but could well deprive consumers
of the efficiencies that decentralized management may bring.
|||For similar reasons, the coordinated activity of a parent and its wholly
owned subsidiary must be viewed as that of a single enterprise for purposes
of § 1 of the Sherman Act. A parent and its wholly owned subsidiary
have a complete unity of interest. Their objectives are common, not disparate;
their general corporate actions are guided or determined not by two separate
corporate consciousnesses, but one. They are not unlike a multiple team
of horses drawing a vehicle under the control of a single driver. With or
without a formal "agreement," the subsidiary acts for the benefit of the
parent, its sole shareholder. If a parent and a wholly owned subsidiary
do "agree" to a course of action, there is no sudden joining of economic
resources that had previously served different interests, and there is no
justification for § 1 scrutiny.
|||Indeed, the very notion of an "agreement" in Sherman Act terms between
a parent and a wholly owned subsidiary lacks meaning. A § 1 agreement
may be found when "the conspirators had a unity of purpose or a common design
and understanding, or a meeting of minds in an unlawful arrangement." American
Tobacco Co. v. United States, 328 U.S. 781, 810 (1946). But in reality a
parent and a wholly owned subsidiary always have a "unity of purpose or
a common design." They share a common purpose whether or not the parent
keeps a tight rein over the subsidiary; the parent may assert full control
at any moment if the subsidiary fails to act in the parent's best interests.
|||The intra-enterprise conspiracy doctrine looks to the form of an enterprise's
structure and ignores the reality. Antitrust liability should not depend
on whether a corporate subunit is organized as an unincorporated division
or a wholly owned subsidiary. A corporation has complete power to maintain
a wholly owned subsidiary in either form. The economic, legal, or other
considerations that lead corporate management to choose one structure over
the other are not relevant to whether the enterprise's conduct seriously
threatens competition. *fn19
Rather, a corporation may adopt the subsidiary form of organization for
valid management and related purposes. Separate incorporation may improve
management, avoid special tax problems arising from multistate operations,
or serve other legitimate interests. *fn20
Especially in view of the increasing complexity of corporate operations,
a business enterprise should be free to structure itself in ways that serve
efficiency of control, economy of operations, and other factors dictated
by business judgment without increasing its exposure to antitrust liability.
Because there is nothing inherently anticompetitive about a corporation's
decision to create a subsidiary, the intra-enterprise conspiracy doctrine
" grave legal consequences upon organizational distinctions that are of
de minimis meaning and effect." Sunkist Growers, Inc. v. Winckler & Smith
Citrus Products Co., 370 U.S. 19, 29 (1962). *fn21
|||If antitrust liability turned on the garb in which a corporate subunit
was clothed, parent corporations would be encouraged to convert subsidiaries
into unincorporated divisions. Indeed, this is precisely what the Seagram
company did after this Court's decision in Kiefer-Stewart Co. v. Joseph
E. Seagram & Sons, Inc., 340 U.S. 211 (1951). *fn22
Such an incentive serves no valid antitrust goals but merely deprives consumers
and producers of the benefits that the subsidiary form may yield.
|||The error of treating a corporate division differently from a wholly owned
subsidiary is readily seen from the facts of this case. Regal was operated
as an unincorporated division of Lear Siegler for four years before it became
a wholly owned subsidiary of Copperweld. Nothing in this record indicates
any meaningful difference between Regal's operations as a division and its
later operations as a separate corporation. Certainly nothing suggests that
Regal was a greater threat to competition as a subsidiary of Copperweld
than as a division of Lear Siegler. Under either arrangement, Regal might
have acted to bar a new competitor from entering the market. In one case
it could have relied on economic power from other quarters of the Lear Siegler
corporation; instead it drew on the strength of its separately incorporated
parent, Copperweld. From the standpoint of the antitrust laws, there is
no reason to treat one more harshly than the other. As Chief Justice Hughes
cautioned, " must dominate the judgment." Appalachian Coals, Inc. v. United
States, 288 U.S., at 360. *fn23
|||Any reading of the Sherman Act that remains true to the Act's distinction
between unilateral and concerted conduct will necessarily disappoint those
who find that distinction arbitrary. It cannot be denied that § 1's
focus on concerted behavior leaves a "gap" in the Act's proscription against
unreasonable restraints of trade. See post, at 789. An unreasonable restraint
of trade may be effected not only by two independent firms acting in concert;
a single firm may restrain trade to precisely the same extent if it alone
possesses the combined market power of those same two firms. Because the
Sherman Act does not prohibit unreasonable restraints of trade as such --
but only restraints effected by a contract, combination, or conspiracy --
it leaves untouched a single firm's anticompetitive conduct (short of threatened
monopolization) that may be indistinguishable in economic effect from the
conduct of two firms subject to § 1 liability.
|||We have already noted that Congress left this "gap" for eminently sound
reasons. Subjecting a single firm's every action to judicial scrutiny for
reasonableness would threaten to discourage the competitive enthusiasm that
the antitrust laws seek to promote. See (supra) , at 767-769. Moreover,
whatever the wisdom of the distinction, the Act's plain language leaves
no doubt that Congress made a purposeful choice to accord different treatment
to unilateral and concerted conduct. Had Congress intended to outlaw unreasonable
restraints of trade as such, § 1's requirement of a contract, combination,
or conspiracy would be superfluous, as would the entirety of § 2. *fn24
Indeed, this Court has recognized that § 1 is limited to concerted
conduct at least since the days of United States v. Colgate & Co., 250 U.S.
300 (1919). Accord, post, at 789.
|||The appropriate inquiry in this case, therefore, is not whether the coordinated
conduct of a parent and its wholly owned subsidiary may ever have anticompetitive
effects, as the Dissent suggests. Nor is it whether the term "conspiracy"
will bear a literal construction that includes parent corporations and their
wholly owned subsidiaries. For if these were the proper inquiries, a single
firm's conduct would be subject to § 1 scrutiny whenever the coordination
of two employees was involved. Such a rule would obliterate the Act's distinction
between unilateral and concerted conduct, contrary to the clear intent of
Congress as interpreted by the weight of judicial authority. See n. 15,
(supra) . Rather, the appropriate inquiry requires us to explain the logic
underlying Congress' decision to exempt unilateral conduct from § 1
scrutiny, and to assess whether that logic similarly excludes the conduct
of a parent and its wholly owned subsidiary. Unless we second-guess the
judgment of Congress to limit § 1 to concerted conduct, we can only
conclude that the coordinated behavior of a parent and its wholly owned
subsidiary falls outside the reach of that provision.
|||Although we recognize that any "gap" the Sherman Act leaves is the sensible
result of a purposeful policy decision by Congress, we also note that the
size of any such gap is open to serious question. Any anticompetitive activities
of corporations and their wholly owned subsidiaries meriting antitrust remedies
may be policed adequately without resort to an intra-enterprise conspiracy
doctrine. A corporation's initial acquisition of control will always be
subject to scrutiny under § 1 of the Sherman Act and § 7 of the
Clayton Act, 38 Stat. 731, 15 U. S. C. § 18. Thereafter, the enterprise
is fully subject to § 2 of the Sherman Act and § 5 of the Federal
Trade Commission Act, 38 Stat. 719, 15 U. S. C. § 45. That these statutes
are adequate to control dangerous anticompetitive conduct is suggested by
the fact that not a single holding of antitrust liability by this Court
would today be different in the absence of an intra-enterprise conspiracy
doctrine. It is further suggested by the fact that the Federal Government,
in its administration of the antitrust laws, no longer accepts the concept
that a corporation and its wholly owned subsidiaries can "combine" or "conspire"
under § 1. *fn25
Elimination of the intra-enterprise conspiracy doctrine with respect to
corporations and their wholly owned subsidiaries will therefore not cripple
antitrust enforcement. It will simply eliminate treble damages from private
state tort suits masquerading as antitrust actions.
|||We hold that Copperweld and its wholly owned subsidiary Regal are incapable
of conspiring with each other for purposes of § 1 of the Sherman Act.
To the extent that prior decisions of this Court are to the contrary, they
are disapproved and overruled. Accordingly, the judgment of the Court of
Appeals is reversed.
|||It is so ordered.
|||JUSTICE WHITE took no part in the consideration or decision of this case.
|||JUSTICE STEVENS, with whom JUSTICE BRENNAN and JUSTICE MARSHALL join,
|||It is safe to assume that corporate affiliates do not vigorously compete
with one another. A price-fixing or market-allocation agreement between
two or more such corporate entities does not, therefore, eliminate any competition
that would otherwise exist. It makes no difference whether such an agreement
is labeled a "contract," a "conspiracy," or merely a policy decision, because
it surely does not unreasonably restrain competition within the meaning
of the Sherman Act. The Rule of Reason has always given the courts adequate
latitude to examine the substance rather than the form of an arrangement
when answering the question whether collective action has restrained competition
within the meaning of § 1.
|||Today the Court announces a new per se rule: a wholly owned subsidiary
is incapable of conspiring with its parent under § 1 of the Sherman
Act. Instead of redefining the word "conspiracy," the Court would be better
advised to continue to rely on the Rule of Reason. Precisely because they
do not eliminate competition that would otherwise exist but rather enhance
the ability to compete, restraints which enable effective integration between
a corporate parent and its subsidiary -- the type of arrangement the Court
is properly concerned with protecting -- are not prohibited by § 1.
Thus, the Court's desire to shield such arrangements from antitrust liability
provides no justification for the Court's new rule.
|||In contrast, the case before us today presents the type of restraint that
has precious little to do with effective integration between parent and
subsidiary corporations. Rather, the purpose of the challenged conduct was
to exclude a potential competitor of the subsidiary from the market. The
jury apparently concluded that the two defendant corporations -- Copperweld
and its subsidiary Regal -- had successfully delayed Independence's entry
into the steel tubing business by applying a form of economic coercion to
potential suppliers of financing and capital equipment, as well as to potential
customers. Everyone seems to agree that this conduct was tortious as a matter
of state law. This type of exclusionary conduct is plainly distinguishable
from vertical integration designed to achieve competitive efficiencies.
If, as seems to be the case, the challenged conduct was manifestly anti-competitive,
it should not be immunized from scrutiny under § 1 of the Sherman Act.
|||Repudiation of prior cases is not a step that should be taken lightly.
As the Court wrote only days ago: " departure from the doctrine of stare
decisis demands special justification." Arizona v. Rumsey, ante, at 212.
It is therefore appropriate to begin with an examination of the precedents.
|||In United States v. Yellow Cab Co., 332 U.S. 218 (1947), the Court explicitly
stated that a corporate subsidiary could conspire with its parent:
|||"The fact that these restraints occur in a setting described by the appellees
as a vertically integrated enterprise does not necessarily remove the ban
of the Sherman Act. The test of illegality under the Act is the presence
or absence of an unreasonable restraint on interstate commerce. Such a restraint
may result as readily from a conspiracy among those who are affiliated or
integrated under common ownership as from a conspiracy among those who are
otherwise independent." Id., at 227.
|||The majority attempts to explain Yellow Cab by suggesting that it dealt
only with unlawful acquisition of subsidiaries. Ante, at 761-762. But the
Court mentioned acquisitions only as an additional consideration separate
from the passage quoted above, *fn1
and more important, the Court explicitly held that restraints imposed by
the corporate parent on the affiliates that it already owned in themselves
violated § 1. *fn2
|||At least three cases involving the motion picture industry also recognize
that affiliated corporations may combine or conspire within the meaning
of § 1. In United States v. Crescent Amusement Co., 323 U.S. 173 (1944),
as the Court recognizes, ante, at 762, n. 6, the only conspirators were
affiliated corporations. The majority's claim that the case involved only
unlawful acquisitions because of the Court's comments concerning divestiture
of the affiliates cannot be squared with the passage immediately following
that cited by the majority, which states that there had been unlawful conduct
going beyond the acquisition of subsidiaries:
|||"That principle is adequate here to justify divestiture of all interest
in some of the affiliates since their acquisition was part of the fruits
of the conspiracy. But the relief need not, and under these facts should
not, be so restricted [to divestiture]. The fact that the companies were
affiliated induced joint action and agreement. Common control was one of
the instruments in bringing about unity of purpose and unity of action and
in making the conspiracy effective. If that affiliation continues, there
will be tempting opportunity for these exhibitors to continue to act in
combination against the independents." 323 U.S., at 189-190 (emphasis supplied).
|||Similarly, in Schine Chain Theatres, Inc. v. United States, 334 U.S. 110
(1948), the Court held that concerted action by parents and subsidiaries
constituted an unlawful conspiracy. *fn3
That was also the holding in United States v. Griffith, 334 U.S. 100, 109
(1948). The majority's observation that in these cases there were alternative
grounds that could have been used to reach the same result, ante, at 763,
n. 8, disguises neither the fact that the holding that actually appears
in these opinions rests on conspiracy between affiliated entities, nor that
today's holding is inconsistent with what was actually held in these cases.
|||In Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211
(1951), the Court's holding was plain and unequivocal:
|||"Respondents next suggest that their status as 'mere instrumentalities
of a single manufacturing-merchandizing unit' makes it impossible for them
to have conspired in a manner forbidden by the Sherman Act. But this suggestion
runs counter to our past decisions that common ownership and control does
not liberate corporations from the impact of the antitrust laws. E. g. United
States v. Yellow Cab Co., 332 U.S. 218. The rule is especially applicable
where, as here, respondents hold themselves out as competitors." Id., at
|||This holding is so clear that even the Court, which is not wanting for
inventiveness in its reading of the prior cases, cannot explain it away.
The Court suggests only that today Kiefer-Stewart might be decided on alternative
grounds, ante, at 764, ignoring the fact that today's holding is inconsistent
with the ground on which the case actually was decided. *fn4
|||A construction of the statute that reaches agreements between corporate
parents and subsidiaries was again embraced by the Court in Timken Roller
Bearing Co. v. United States, 341 U.S. 593 (1951), *fn5
and Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134
The majority only notes that there might have been other grounds for decision
available in these cases, ante, at 764-766, but again it cannot deny that
its new rule is inconsistent with what the Court actually did write in these
|||Thus, the rule announced today is inconsistent with what this Court has
held on at least seven previous occasions. *fn7
Perhaps most illuminating is the fact that until today, whether they favored
the doctrine or not, it had been the universal Conclusion of both the lower
and the commentators *fn9
that this Court's cases establish that a parent and a wholly owned subsidiary
corporation are capable of conspiring in violation of § 1. In this
very case the Court of Appeals observed:
|||" salient factor is that the Supreme Court's decisions, while they need
not be read with complete literalism, of course they cannot be ignored.
It is no accident that every Court of Appeals to consider the question has
concluded that a parent and its subsidiary have the same capacity to conspire,
whether or not they can be found to have done so in a particular case."
691 F.2d 310, 317 (CA7 1982) (footnotes omitted).
|||Thus, we are not writing on a clean slate. " must bear in mind that considerations
of stare decisis weigh heavily in the area of statutory construction, where
Congress is free to change this Court's interpretation of its legislation."
Illinois Brick Co. v. Illinois, 431 U.S. 720, 736 (1977). *fn10
There can be no doubt that the Court today changes what has been taken to
be the long-settled rule: a rule that Congress did not revise at any point
in the last four decades. At a minimum there should be a strong presumption
against the approach taken today by the Court. It is to the merits of that
approach that I now turn.
|||The language of § 1 of the Sherman Act is sweeping in its breadth:
"Every contract, combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States, . . . is declared
to be illegal." 15 U. S. C. § 1. This Court has long recognized that
Congress intended this language to have a broad sweep, reaching any form
|||" view of the many new forms of contracts and combinations which were
being evolved from existing economic conditions, it was deemed essential
by an all-embracing enumeration to make sure that no form of contract or
combination by which an undue restraint of interstate or foreign commerce
was brought about could save such restraint from condemnation. The statute
under this view evidenced the intent not to restrain the right to make and
enforce contracts, whether resulting from combination or otherwise, which
did not unduly restrain interstate or foreign commerce, but to protect that
commerce from being restrained by methods, whether old or new, which would
constitute an interference that is an undue restraint." Standard Oil Co.
v. United States, 221 U.S. 1, 59-60 (1911).
|||This broad construction is illustrated by the Court's refusal to limit
the statute to actual agreements. Even mere acquiescence in an anticompetitive
scheme has been held sufficient to satisfy the statutory language. *fn11
|||Since the statute was written against the background of the common law,
to the common law is particularly enlightening in construing the statutory
requirement of a "contract, combination in the form of trust or otherwise,
or conspiracy." Under the common law, the question whether affiliated corporations
constitute a plurality of actors within the meaning of the statute is easily
answered. The well-settled rule is that a corporation is a separate legal
entity; the separate corporate form cannot be disregarded. *fn13
The Congress that passed the Sherman Act was well acquainted with this rule.
See 21 Cong. Rec. 2571 (1890) (remarks of Sen. Teller) ("Each corporation
is a creature by itself"). Thus it has long been the law of criminal conspiracy
that the officers of even a single corporation are capable of conspiring
with each other or the corporation. *fn14
This Court has held that a corporation can conspire with its employee, *fn15
and that a labor union can "combine" with its business agent within the
meaning of § 1. *fn16
This concept explains the Timken Court's statement that the affiliated corporations
in that case made "agreements between legally separate persons," 341 U.S.,
at 598. Thus, today's holding that agreements between parent and subsidiary
corporations involve merely unilateral conduct is at odds with the way that
this Court has traditionally understood the concept of a combination or
conspiracy, and also at odds with the way in which the Congress that enacted
the Sherman Act surely understood it.
|||Holding that affiliated corporations cannot constitute a plurality of
actors is also inconsistent with the objectives of the Sherman Act. Congress
was particularly concerned with "trusts," hence it named them in §
1 as a specific form of "combination" at which the statute was directed.
Yet "trusts" consisted of affiliated corporations. As Senator Sherman explained:
|||"Because these combinations are always in many States and, as the Senator
from Missouri says, it will be very easy for them to make a corporation
within a State. So they can; but that is only one corporation of the combination.
The combination is always of two or more, and in one case of forty-odd corporations,
all bound together by a link which holds them under the name of trustees,
who are themselves incorporated under the laws of one of the States." 21
Cong. Rec. 2569 (1890).
|||The activities of these "combinations" of affiliated corporations were
of special concern:
|||" enterprise and capital are not satisfied with partnerships and corporations
competing with each other, and have invented a new form of combination commonly
called trusts, that seeks to avoid competition by combining the controlling
corporations, partnerships, and individuals engaged in the same business,
and placing the power and property of the combination under the government
of a few individuals, and often under the control of a single man called
a trustee, a chairman, or a president.
|||"The sole object of such a combination is to make competition impossible.
It can control the market, raise or lower prices, as will best promote its
selfish interests, reduce prices in a particular locality and break down
competition and advance prices at will where competition does not exist.
Its governing motive is to increase the profits of the parties composing
it. The law of selfishness, uncontrolled by competition, compels it to disregard
the interest of the consumer. It dictates terms to transportation companies,
it commands the price of labor without fear of strikes, for in its field
it allows no competitors. . . . It is this kind of a combination we have
to deal with now." Id., at 2457. *fn17
|||Thus, the corporate subsidiary, when used as a device to eliminate competition,
was one of the chief evils to which the Sherman Act was addressed. *fn18
The anomaly in today's holding is that the corporate devices most similar
to the original "trusts" are now those which free an enterprise from antitrust
|||The Court's reason for rejecting the concept of a combination or conspiracy
among a parent corporation and its wholly owned subsidiary is that it elevates
form over substance -- while in form the two corporations are separate legal
entities, in substance they are a single integrated enterprise and hence
cannot comprise the plurality of actors necessary to satisfy § 1. Ante,
at 771-774. In many situations the Court's reasoning is perfectly sensible,
for the affiliation of corporate entities often is procompetitive precisely
because, as the Court explains, it enhances efficiency. A challenge to conduct
that is merely an incident of the desirable integration that accompanies
such affiliation should fail. However, the protection of such conduct provides
no justification for the Court's new rule, precisely because such conduct
cannot be characterized as an unreasonable restraint of trade violative
of § 1. Conversely, the problem with the Court's new rule is that it
leaves a significant gap in the enforcement of § 1 with respect to
anticompetitive conduct that is entirely unrelated to the efficiencies associated
|||Since at least United States v. Colgate & Co., 250 U.S. 300 (1919), §
1 has been construed to require a plurality of actors. This requirement,
however, is a consequence of the plain statutory language, not of any economic
principle. As an economic matter, what is critical is the presence of market
power, rather than a plurality of actors. *fn19
From a competitive standpoint, a decision of a single firm possessing power
to reduce output and raise prices above competitive levels has the same
consequence as a decision by two firms acting together who have acquired
an equivalent amount of market power through an agreement not to compete.
conduct by a firm with market power has no less anticompetitive potential
than conduct by a plurality of actors which generates or exploits the same
and probably more, since the unilateral actor avoids the policing problems
faced by cartels.
|||The rule of Yellow Cab thus has an economic justification. It addresses
a gap in antitrust enforcement by reaching anticompetitive agreements between
affiliated corporations which have sufficient market power to restrain marketwide
competition, but not sufficient power to be considered monopolists within
the ambit of § 2 of the Act. *fn22
The doctrine is also useful when a third party declines to join a conspiracy
to restrain trade among affiliated corporations, and is harmed as a result
through a boycott or similar tactics designed to penalize the refusal. In
such cases, since there has been no agreement with the third party, only
an agreement between the affiliated corporations can be the basis for §
1 inquiry. *fn23
Finally, it must be remembered that not all persons who restrain trade wear
grey flannel suits. Businesses controlled by organized crime often attempt
to gain control of an industry through violence or intimidation of competitors;
in such cases § 1 can be applied to separately incorporated businesses
which benefit from such tactics, but which may be ultimately controlled
by a single criminal enterprise. *fn24
|||The rule of Yellow Cab and its progeny is not one that condemns every
parent-subsidiary relationship. A single firm, no matter what its corporate
structure may be, is not expected to compete with itself. *fn25
Functional integration by its very nature requires unified action; hence
in itself it has never been sufficient to establish the existence of an
unreasonable restraint of trade: "In discussing the charge in the Yellow
Cab case, we said that the fact that the conspirators were integrated did
not insulate them from the act, not that corporate integration violated
the act." United States v. Columbia Steel Co., 334 U.S. 495, 522 (1948).
Restraints that act only on the parent or its subsidiary as a consequence
of an otherwise lawful integration do not violate § 1 of the Sherman
But if the behavior at issue is unrelated to any functional integration
between the affiliated corporations and imposes a restraint on third parties
of sufficient magnitude to restrain marketwide competition, as a matter
of economic substance, as well as form, it is appropriate to characterize
the conduct as a "combination or conspiracy in restraint of trade." *fn27
|||For example, in Yellow Cab the Court read the complaint as alleging that
integration had assisted the parent in excluding competing manufacturers
from the marketplace, 332 U.S., at 226-227, leading the Court to conclude
that "restraint of interstate trade was not only effected by the combination
of the appellees but was the primary object of the combination." Id., at
227. Similarly, in Crescent Amusement the Court noted that corporate affiliation
between exhibitors enhanced their buying power and "was one of the instruments
in . . . making the conspiracy effective" in excluding independents from
the market. 323 U.S., at 189-190. Thus, in both cases the Court found that
the affiliation enhanced the ability of the parent corporation to exclude
the competition of third parties, and hence raised entry barriers faced
by actual and potential competitors. When conduct restrains trade not merely
by integrating affiliated corporations but rather by restraining the ability
of others to compete, that conduct has competitive significance drastically
different from procompetitive integration. *fn28
In these cases, the affiliation assisted exclusionary conduct; it was not
the competitive equivalent of unilateral integration but instead generated
power to restrain marketwide competition.
|||There are other ways in which corporate affiliation can operate to restrain
competition. A wholly owned subsidiary might market a "fighting brand" or
engage in other predatory behavior that would be more effective if its ownership
were concealed than if it was known that only one firm was involved. A predator
might be willing to accept the risk of bankrupting a subsidiary when it
could not afford to let a division incur similar risks. Affiliated corporations
might enhance their power over suppliers by agreeing to refuse to deal with
those who deal with an actual or potential competitor of one of them; such
a threat might be more potent coming from both corporations than from only
|||In this case, it may be that notices to potential suppliers of respondent
emanating from Copperweld carried more weight than would notices coming
only from Regal. There was evidence suggesting that Regal and Copperweld
were not integrated, and that the challenged agreement had little to do
with achieving procompetitive efficiencies and much to do with protecting
Regal's market position. The Court does not even try to explain why their
common ownership meant that Copperweld and Regal were merely obtaining benefits
associated with the efficiencies of integration. Both the District Court
and the Court of Appeals thought that their agreement had a very different
result -- that it raised barriers to entry and imposed an appreciable marketwide
restraint. The Court's Discussion of the justifications for corporate affiliation
is therefore entirely abstract -- while it dutifully lists the procompetitive
justifications for corporate affiliation, ante, at 772-774, it fails to
explain how any of them relate to the conduct at issue in this case. What
is challenged here is not the fact of integration between Regal and Copperweld,
but their specific agreement with respect to Independence. That agreement
concerned the exclusion of Independence from the market, and not any efficiency
resulting from integration. The facts of this very case belie the Conclusion
that affiliated corporations are incapable of engaging in the kind of conduct
that threatens marketwide competition. The Court does not even attempt to
assess the competitive significance of the conduct under challenge here
-- it never tests its economic assumptions against the concrete facts before
it. Use of economic theory without reference to the competitive impact of
the particular economic arrangement at issue is properly criticized when
it produces overly broad per se rules of antitrust liability; *fn30
criticism is no less warranted when a per se rule of antitrust immunity
is adopted in the same way.
|||In sum, the question that the Court should ask is not why a wholly owned
subsidiary should be treated differently from a corporate division, since
the immunity accorded that type of arrangement is a necessary consequence
of Colgate. Rather the question should be why two corporations that engage
in a predatory course of conduct which produces a marketwide restraint on
competition and which, as separate legal entities, can be easily fit within
the language of § 1, should be immunized from liability because they
are controlled by the same godfather. That is a question the Court simply
fails to confront. I respectfully Dissent.
|||* J. Randolf Wilson, Russell H. Carpenter, Jr., Stephen A. Bokat, Cynthia
Wicker, William E. Blasier, and Quentin Riegel filed a brief for the Chamber
of Commerce of the United States et al. as amici curiae urging reversal.
|||A brief of amici curiae urging affirmance was filed for the State of Alabama
et al. by Robert K. Corbin, Attorney General of Arizona, and Richard A.
Alcorn and Charles L. Eger, Assistant Attorneys General; Charles A. Graddick,
Attorney General of Alabama, and Richard Owen, Assistant Attorney General;
John Steven Clark, Attorney General of Arkansas, and Jeffrey A. Bell, Assistant
Attorney General; Duane Woodard, Attorney General of Colorado, and Thomas
P. McMahon, Assistant Attorney General; Neil F. Hartigan, Attorney General
of Illinois, and Robert E. Davy, Assistant Attorney General; Thomas J. Miller,
Attorney General of Iowa, and John R. Perkins, Assistant Attorney General;
Robert T. Stephan, Attorney General of Kansas, and Wayne E. Hundley, Deputy
Attorney General; Steven L. Beshear, Attorney General of Kentucky, and James
M. Ringo, Assistant Attorney General; Hubert H. Humphrey III, Attorney General
of Minnesota, and Stephen P. Kilgriff, Assistant Attorney General; Bill
Allain, Attorney General of Mississippi, and Robert Sanders, Special Assistant
Attorney General; Mike Greely, Attorney General of Montana, and Joe R. Roberts,
Assistant Attorney General; Paul L. Douglas, Attorney General of Nebraska,
and Dale A. Comer, Assistant Attorney General; Robert O. Wefald, Attorney
General of North Dakota, and Alan C. Hoberg, Assistant Attorney General;
Michael C. Turpen, Attorney General of Oklahoma, and James B. Franks, Assistant
Attorney General; Dave Frohnmayer, Attorney General of Oregon; John J. Easton,
Jr., Attorney General of Vermont, and Glenn R. Jarrett, Assistant Attorney
General; Ken Eikenberry, Attorney General of Washington, John R. Ellis,
Deputy Attorney General, and Jon P. Ferguson, Assistant Attorney General;
Bronson C. La Follette, Attorney General of Wisconsin, and Michael L. Zaleski,
Assistant Attorney General; Joseph I. Lieberman, Attorney General of Connecticut,
and Robert M. Langer, Assistant Attorney General; Charles M. Oberly, Attorney
General of Delaware, and Vincent M. Amberly, Deputy Attorney General; James
E. Tierney, Attorney General of Maine, and Stephen L. Wessler, Senior Assistant
Attorney General; Stephen H. Sachs, Attorney General of Maryland, and Charles
O. Monk II, Assistant Attorney General; Frank J. Kelley, Attorney General
of Michigan, and Edwin M. Bladen, Assistant Attorney General; Paul Bardacke,
Attorney General of New Mexico; Rufus L. Edmisten, Attorney General of North
Carolina, and H. A. Cole, Jr., Special Deputy Attorney General; Dennis J.
Roberts II, Attorney General of Rhode Island, and Faith A. LaSalle, Special
Assistant Attorney General; Mark V. Meierhenry, Attorney General of South
Dakota, and Dennis R. Holmes, Deputy Attorney General; William M. Leech,
Jr., Attorney General of Tennessee, and William J. Haynes, Jr., Deputy Attorney
General; David L. Wilkinson, Attorney General of Utah, Stephen G. Schwendiman,
Chief, Assistant Attorney General, and Suzanne M. Dallimore, Assistant Attorney
General; A. G. McClintock, Attorney General of Wyoming, and Gay Vanderpoel,
Senior Assistant Attorney General; Inez Smith Reid, Acting Corporation Council
for the District of Columbia, and Francis S. Smith, Assistant Corporation
|||Briefs of amici curiae were filed for the Canadian Manufacturers Association
et al. by John DeQ. Briggs III, Scott E. Flick, and Jan Schneider; and for
Kaiser Aluminum & Chemical Corporation by Milton Handler and John A. Moore.
chairman of the board and chief executive officer of both Copperweld and
Regal, Phillip H. Smith, was also named as a defendant. In addition, respondents
originally charged petitioners and Smith with an attempt to monopolize the
market for structural steel tubing in violation of § 2 of the Sherman
Act, 26 Stat. 209, as amended, 15 U. S. C. § 2. Before trial respondent
dismissed Smith as a defendant and dismissed its § 2 monopolization
|||Petitioners counterclaimed on the ground that respondent and Grohne had
used proprietary information belonging to Regal, had competed unfairly by
hiring away key Regal personnel, and had interfered with prospective business
relationships by filing the lawsuit on the eve of a large Copperweld debenture
offering. At the close of the evidence, the court directed a verdict against
petitioners on their counterclaims. The Disposition of these claims is not
at issue before this Court.
jury was instructed to consider many different factors: for instance, whether
Copperweld and Regal had separate management staffs, separate corporate
officers, separate clients, separate records and bank accounts, separate
corporate offices, autonomy in setting policy, and so on. The jury also
was instructed to consider "any other facts that you find are relevant to
a determination of whether or not Copperweld and Regal are separate and
distinct companies." App. to Pet. for Cert. B-9.
1 of the Sherman Act provides in pertinent part:
|||"Every contract, combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States, or with foreign
nations, is declared to be illegal. Every person who shall make any contract
or engage in any combination or conspiracy hereby declared to be illegal
shall be deemed guilty of a felony." 26 Stat. 209, as amended, 15 U. S.
C. § 1.
the arrangements condemned in Northern Securities Co. v. United States,
193 U.S. 197, 354 (1904) (plurality opinion), "all the stock [a railroad
holding company] held or acquired in the constituent companies was acquired
and held to be used in suppressing competition between those companies.
It came into existence only for that purpose." In Standard Oil Co. v. United
States, 221 U.S. 1 (1911), and United States v. American Tobacco Co., 221
U.S. 106 (1911), the trust or holding company device brought together previously
independent firms to lessen competition and achieve monopoly power. Although
the Court in the latter case suggested that the contracts between affiliated
companies, and not merely the original combination, could be viewed as the
conspiracy, id., at 184, the Court left no doubt that "the combination in
and of itself" was a restraint of trade and a monopolization, id., at 187.
to the Dissent's suggestion, post, at 779, 788, n. 18, our point is not
that Yellow Cab found only the initial acquisition illegal; our point is
that the illegality of the initial acquisition was a predicate for its holding
that any postacquisition conduct violated the Act.
discussing the fact that some of the affiliated Chicago operating companies
did not compete to obtain exclusive transportation contracts held by another
of the affiliated companies, the Court stated:
|||" fact that the competition restrained is that between affiliated corporations
cannot serve to negative the statutory violation where, as here, the affiliation
is assertedly one of the means of effectuating the illegal conspiracy not
to compete." 332 U.S., at 229 (emphasis added).
|||The passage quoted in text is soon followed by a cite to United States
v. Crescent Amusement Co., 323 U.S. 173, 189 (1944). Crescent Amusement
found violations of §§ 1 and 2 by film exhibitors affiliated (in
most cases) by 50 percent ownership. The exhibitors used the monopoly power
they possessed in certain towns to force film distributors to give them
favorable terms in other towns. The Court found it unnecessary to view the
distributors as part of the conspiracy, id., at 183, so the Court plainly
viewed the affiliated entities themselves as the conspirators. The Crescent
Amusement Court, however, in affirming an order of divestiture, noted that
such a remedy was appropriate when "creation of the combination is itself
the violation." Id., at 189. This suggests that both Crescent Amusement
and Yellow Cab, which cited the very page on which this passage appears,
stand for a narrow rule based on the original illegality of the affiliation.
|||The Dissent misconstrues a later passage in Crescent Amusement stating
that divestiture need not be limited to those affiliates whose "acquisition
was part of the fruits of the conspiracy," 323 U.S., at 189. See post, at
780-781. This meant only that divestiture could apply to affiliates other
than those who were driven out of business by the practices of the original
conspirators and who were then acquired illegally to increase the combination's
monopoly power. See 323 U.S., at 181. It did not mean that affiliates acquired
for lawful purposes were subject to divestiture.
Coals does state that the key question is whether there is an unreasonable
restraint of trade or an attempt to monopolize. "If there is, the combination
cannot escape because it has chosen corporate form; and, if there is not,
it is not to be condemned because of the absence of corporate integration."
288 U.S., at 377. Appalachian Coals, however, validated a cooperative selling
arrangement among independent entities. The statement that intracorporate
relationships would be subject to liability under § 1 is thus dictum.
The statement may also envision merely the limited rule in Yellow Cab pertaining
to acquisitions that are themselves anticompetitive.
two cases decided soon after Yellow Cab on facts similar to Crescent Amusement,
see n. 6, (supra) , affiliated film exhibitors were found to have conspired
in violation of § 1. Schine Chain Theatres, Inc. v. United States,
334 U.S. 110 (1948); United States v. Griffith, 334 U.S. 100 (1948). Griffith
simply assumed that the companies were capable of conspiring with each other;
Schine cited Yellow Cab and Crescent Amusement for the proposition, 334
U.S., at 116. In both cases, however, an intra-enterprise conspiracy holding
was unnecessary not only because the Court found a § 2 violation, but
also because the affiliated exhibitors had conspired with independent film
distributors. See ibid.; Griffith, supra, at 103, n. 6, 109.
the plaintiff apparently never acquiesced in the resale price maintenance
scheme, Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 182 F.2d 228,
231 (CA7 1950), rev'd, 340 U.S. 211 (1951), one of the subsidiaries did
gain the compliance of other wholesalers after once terminating them for
refusing to abide by the pricing scheme. See 182 F.2d, at 231; 340 U.S.,
at 213. A theory of combination between the subsidiaries and the wholesalers
could now support § 1 relief, whether or not it could have when Kiefer-Stewart
was decided. See Albrecht v. Herald Co., 390 U.S. 145, 149-150, and n. 6
(1968); United States v. Parke, Davis & Co., 362 U.S. 29 (1960).
See United States v. Timken Roller Bearing Co., 83 F.Supp. 284, 311-312
(ND Ohio 1949), aff'd as modified, 341 U.S. 593 (1951). The agreement of
an individual named Dewar, who owned 24 and 50 percent of the foreign corporations
respectively, was apparently required for the American defendant to have
For almost 20 years before they became affiliated by stock ownership, two
of the corporations had been party to the sort of restrictive agreements
the Timken Court condemned. Three Justices upholding antitrust liability
were of the view that Timken's "interests in the companies were obtained
as part of a plan to promote the illegal trade restraints" and that the
"intercorporate relationship" was "the core of the conspiracy." Id., at
600-601. Because two Justices found no antitrust violation at all, see id.,
at 605 (Frankfurter, J., Dissenting); id., at 606 (Jackson, J., Dissenting),
and two Justices did not take part, apparently only Chief Justice Vinson
and Justice Reed were prepared to hold that there was a violation even if
the initial acquisition itself was not illegal. See id., at 601-602 (Reed,
J., joined by Vinson, C. J., Concurring).
The doctrine has long been criticized. See, e. g., Areeda, Intra-enterprise
Conspiracy in Decline, 97 Harv. L. Rev. 451 (1983); Handler & Smart, The
Present Status of the Intracorporate Conspiracy Doctrine, 3 Cardozo L. Rev.
23 (1981); Kempf, Bathtub Conspiracies: Has Seagram Distilled a More Potent
Brew?, 24 Bus. Law. 173 (1968); McQuade, Conspiracy, Multicorporate Enterprises,
and Section 1 of the Sherman Act, 41 Va. L. Rev. 183 (1955); Rahl, Conspiracy
and the Anti-Trust Laws, 44 Ill. L. Rev. 743 (1950); Sprunk, Intra-Enterprise
Conspiracy, 9 ABA Antitrust Section Rep. 20 (1956); Stengel, Intra-Enterprise
Conspiracy Under Section 1 of the Sherman Act, 35 Miss. L. J. 5 (1963);
Willis & Pitofsky, Antitrust Consequences of Using Corporate Subsidiaries,
43 N. Y. U. L. Rev. 20 (1968); Note, "Conspiring Entities" Under Section
1 of the Sherman Act, 95 Harv. L. Rev. 661 (1982); Note, Intra-Enterprise
Conspiracy Under Section 1 of the Sherman Act: A Suggested Standard, 75
Mich. L. Rev. 717 (1977).
Section 2 of the Sherman Act provides in pertinent part:
|||"Every person who shall monopolize, or attempt to monopolize, or combine
or conspire with any other person or persons, to monopolize any part of
the trade or commerce among the several States, or with foreign nations,
shall be deemed guilty of a felony." 26 Stat. 209, as amended, 15 U. S.
C. § 2. By making a conspiracy to monopolize unlawful, § 2 does
reach both concerted and unilateral behavior. The point remains, however,
that purely unilateral conduct is illegal only under § 2 and not under
§ 1. Monopolization without conspiracy is unlawful under § 2,
but restraint of trade without a conspiracy or combination is not unlawful
under § 1.
For example, the Court has declared that § 2 does not forbid market
power to be acquired "as a consequence of a superior product, business acumen."
United States v. Grinnell Corp., 384 U.S. 563, 571 (1966). We have also
made clear that the "antitrust laws . . . were enacted for 'the protection
of competition, not competitors.'" Brunswick Corp. v. Pueblo Bowl-O-Mat,
Inc., 429 U.S. 477, 488 (1977) (damages for violation of Clayton Act §
7) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)).
See, e. g., Schwimmer v. Sony Corp. of America, 677 F.2d 946, 953 (CA2),
cert. denied, 459 U.S. 1007 (1982); Tose v. First Pennsylvania Bank, N.
A., 648 F.2d 879, 893-894 (CA3), cert. denied, 454 U.S. 893 (1981); Morton
Buildings of Nebraska, Inc. v. Morton Buildings, Inc., 531 F.2d 910, 916-917
(CA8 1976); Greenville Publishing Co. v. Daily Reflector, Inc., 496 F.2d
391, 399 (CA4 1974) (dictum); Chapman v. Rudd Paint & Varnish Co., 409 F.2d
635, 643, n. 9 (CA9 1969); Poller v. Columbia Broadcasting System, Inc.,
109 U. S. App. D.C. 170, 174, 284 F.2d 599, 603 (1960), rev'd on other grounds,
368 U.S. 464 (1962); Nelson Radio & Supply Co. v. Motorola, Inc., 200 F.2d
911, 914 (CA5 1952), cert. denied, 345 U.S. 925 (1953). Accord, Report of
the Attorney General's National Committee to Study the Antitrust Laws 31
(1955). At the same time, many courts have created an exception for corporate
officers acting on their own behalf. See, e. g., H & B Equipment Co. v.
International Harvester Co., 577 F.2d 239, 244 (CA5 1978) (dictum); Greenville
Publishing, supra; Johnston v. Baker, 445 F.2d 424, 427 (CA3 1971).
|||Nothing in the language of the Sherman Act is inconsistent with the view
that corporations cannot conspire with their own officers. It is true that
a "person" under the Act includes both an individual and a corporation.
15 U. S. C. § 7. But § 1 does not declare every combination between
two "persons" to be illegal. Instead it makes liable every "person" engaging
in a combination or conspiracy "hereby declared to be illegal." As we note,
the principles governing § 1 liability plainly exclude from unlawful
combinations or conspiracies the activities of a single firm.
See 691 F.2d 310, 316 (CA7 1982) (decision below); Cliff Food Stores, Inc.
v. Kroger, Inc., 417 F.2d 203, 205-206 (CA5 1969); Joseph E. Seagram & Sons,
Inc. v. Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 83-84 (CA9 1969), cert.
denied, 396 U.S. 1062 (1970); Poller v. Columbia Broadcasting System, Inc.,
109 U. S. App. D.C., at 174, 284 F.2d, at 603.
The Court left this issue unresolved in Poller v. Columbia Broadcasting
System, Inc., 368 U.S., at 469, n. 4.
As applied to a wholly owned subsidiary, the so-called "single entity" test
is thus inadequate to preserve the Sherman Act's distinction between unilateral
and concerted conduct. Followed by the Seventh Circuit below as well as
by other Courts of Appeals, this test sets forth various criteria for evaluating
whether a given parent and subsidiary are capable of conspiring with each
other. See n. 2, (supra) ; see generally Ogilvie v. Fotomat Corp., 641 F.2d
581 (CA8 1981); Las Vegas Sun, Inc. v. Summa Corp., 610 F.2d 614 (CA9 1979),
cert. denied, 447 U.S. 906 (1980); Photovest Corp. v. Fotomat Corp., 606
F.2d 704 (CA7 1979), cert. denied, 445 U.S. 917 (1980). These criteria measure
the "separateness" of the subsidiary: whether it has separate control of
its day-to-day operations, separate officers, separate corporate headquarters,
and so forth. At least when a subsidiary is wholly owned, however, these
factors are not sufficient to describe a separate economic entity for purposes
of the Sherman Act. The factors simply describe the manner in which the
parent chooses to structure a subunit of itself. They cannot overcome the
basic fact that the ultimate interests of the subsidiary and the parent
are identical, so the parent and the subsidiary must be viewed as a single
Because an "agreement" between a parent and its wholly owned subsidiary
is no more likely to be anticompetitive than an agreement between two divisions
of a single corporation, it does not matter that the parent "availed of
the privilege of doing business through separate corporations," Perma Life
Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 141 (1968). The
purposeful choice of a parent corporation to organize a subunit as a subsidiary
is not itself a reason to heighten antitrust scrutiny, because it is not
laden with anticompetitive risk.
For example, " incorporation may reduce federal or state taxes or facilitate
compliance with regulatory or reporting laws. Local incorporation may also
improve local identification. Investors or lenders may prefer to specialize
in a particular aspect of a conglomerate's business. Different parts of
the business may require different pension or profitsharing plans or different
accounting practices." Areeda, 97 Harv. L. Rev., at 453.
Sunkist Growers provides strong support for the notion that separate incorporation
does not necessarily imply a capacity to conspire. The defendants in that
case were an agricultural cooperative, its wholly owned subsidiary, and
a second cooperative comprising only members of the first. The Court refused
to find a § 1 or § 2 conspiracy among them because they were "one
'organization' or 'association' even though they have formally organized
themselves into three separate legal entities." 370 U.S., at 29. Although
this holding derived from statutory immunities granted to agricultural organizations,
the reasoning of Sunkist Growers supports the broader principle that substance,
not form, should determine whether a separately incorporated entity is capable
of conspiring under § 1.
See Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke & Liquors, Ltd., 416
F.2d 71 (CA9 1969), cert. denied, 396 U.S. 1062 (1970).
The Dissent argues that references in the legislative history to "trusts"
suggest that Congress intended § 1 to govern the conduct of all affiliated
corporations. See post, at 787-788. But those passages explicitly refer
to combinations created for the very purpose of restraining trade. None
of the cited debates refers to the postacquisition conduct of corporations
whose initial affiliation was lawful. Indeed, Senator Sherman stated:
|||"It is the unlawful combination, tested by the rules of common law and
human experience, that is aimed at by this bill, and not the lawful and
useful combination." 21 Cong. Rec. 2457 (1890).
Even if common-law intracorporate conspiracies were firmly established when
Congress passed the Sherman Act, the obvious incompatibility of an intracorporate
conspiracy with § 1 is sufficient to refute the Dissent's suggestion
that Congress intended to incorporate such a definition. See post, at 784-787.
Moreover, it is far from clear that intracorporate conspiracies were recognized
at common law in 1890. Even today courts disagree whether corporate employees
can conspire with themselves or with the corporation for purposes of certain
statutes, such as 42 U. S. C. § 1985(3). Compare, e. g., Novotny v.
Great Am. Fed. Sav. & Loan Assn., 584 F.2d 1235 (CA3 1978) (en banc), vacated
and remanded on other grounds, 442 U.S. 366 (1979), with Dombrowski v. Dowling,
459 F.2d 190 (CA7 1972). And in 1890 it was disputed whether a corporation
could itself be guilty of a crime that required criminal intent, such as
conspiracy. Commentators appear to agree that courts began finding corporate
liability for such crimes only around the turn of the century. See generally
Edgerton, Corporate Criminal Responsibility, 36 Yale L. J. 827, 828, and
n. 11 (1927); Miller, Corporate Criminal Liability: A Principle Extended
to Its Limits, 38 Fed. Bar J. 49 (1979); Note, 60 Harv. L. Rev. 283, 284,
and n. 9 (1946). Of course, Congress changed that common-law rule when it
explicitly provided that a corporation could be guilty of a § 1 conspiracy.
But the point remains that the Sherman Act did not import a pre-existing
common-law tradition recognizing conspiracies between corporations and their
" [intra-enterprise conspiracy] doctrine has played a relatively minor role
in government enforcement actions, and the government has not relied on
the doctrine in recent years." Brief for United States as Amicus Curiae
26, n. 42.
|||1 The language I have quoted, most of which is overlooked by the majority,
makes it clear that the Court's adoption of the concept of conspiracy between
affiliated corporations was unqualified. As the first word of the sentence
indicates, the Court's following statement: "Similarly, any affiliation
or integration flowing from an illegal conspiracy cannot insulate the conspirators
from the sanctions which Congress has imposed," 332 U.S., at 227, expresses
a separate if related point.
|||2 " preventing the cab operating companies under their control from purchasing
cabs from manufacturers other than CCM, the appellees deny those companies
the opportunity to purchase cabs in a free, competitive market. The Sherman
Act has never been thought to sanction such a conspiracy to restrain the
free purchase of goods in interstate commerce." Id., at 226-227 (footnote
|||3 " combining of the open and closed towns for the negotiation of films
for the circuit was a restraint of trade and the use of monopoly power in
violation of § 1 and § 2 of the Act. The concerted action of the
parent company, its subsidiaries, and the named officers and directors in
that endeavor was a conspiracy which was not immunized by reason of the
fact that the members were closely affiliated rather than independent. See
United States v. Yellow Cab Co., 332 U.S. 218, 227; United States v. Crescent
Amusement Co., 323 U.S. 173." 334 U.S., at 116.
|||4 In Kiefer-Stewart, Seagram unsuccessfully argued that Yellow Cab was
confined to cases concerning unlawful acquisitions, see Brief for Respondents,
O. T. 1950, No. 297, p. 21. Thus the Kiefer-Stewart Court considered and
rejected exactly the same argument embraced by today's majority.
|||5 "The fact that there is common ownership or control of the contracting
corporations does not liberate them from the impact of the antitrust laws.
E. g., Kiefer-Stewart Co. v. Seagram & Sons, [340 U.S.,] at 215. Nor do
we find any support in reason or authority for the proposition that agreements
between legally separate persons and companies to suppress competition among
themselves and others can be justified by labeling the project a 'joint
venture.' Perhaps every agreement and combination to restrain trade could
be so labeled." 341 U.S., at 598.
|||6 "There remains for consideration only the Court of Appeals' alternative
holding that the Sherman Act claim should be dismissed because respondents
were all part of a single business entity and were therefore entitled to
cooperate without creating an illegal conspiracy. But since respondents
Midas and International availed themselves of the privilege of doing business
through separate corporations, the fact of common ownership could not save
them from any of the obligations that the law imposes on separate entities.
See Timken Co. v. United States, 341 U.S. 593, 598 (1951); United States
v. Yellow Cab Co., 332 U.S. 218, 227 (1947)." 392 U.S., at 141-142.
|||7 Also pertinent is United States v. Citizens & Southern National Bank,
422 U.S. 86 (1975), in which the Court wrote:
|||"The central message of the Sherman Act is that a business entity must
find new customers and higher profits through internal expansion -- that
is, by competing successfully rather than by arranging treaties with its
competitors. This Court has held that even commonly owned firms must compete
against each other, if they hold themselves out as distinct entities. 'The
corporate interrelationships of the conspirators . . . are not determinative
of the applicability of the Sherman Act.' United States v. Yellow Cab Co.,
332 U.S. 218, 227. See also Kiefer-Stewart Co. v. Joseph E. Seagram & Sons,
Inc., 340 U.S. 211, 215; Timken Roller Bearing Co. v. United States, 341
U.S. 593, 598; Perma Life Mufflers, Inc. v. International Parts Corp., 392
U.S. 134, 141-142." Id., at 116-117.
|||8 See, e. g., William Inglis & Sons Baking Co. v. ITT Continental Baking
Co., 668 F.2d 1014, 1054 (CA9), cert. denied, 459 U.S. 825 (1982); Ogilvie
v. Fotomat Corp., 641 F.2d 581, 587-588 (CA8 1981); Las Vegas Sun, Inc.
v. Summa Corp., 610 F.2d 614, 617-618 (CA9 1979), cert. denied, 447 U.S.
906 (1980); Photovest Corp. v. Fotomat Corp., 606 F.2d 704, 726 (CA7 1979),
cert. denied, 445 U.S. 917 (1980); Columbia Metal Culvert Co. v. Kaiser
Aluminum & Chemical Corp., 579 F.2d 20, 33-35, and n. 49 (CA3), cert. denied,
439 U.S. 876 (1978); H & B Equipment Co. v. International Harvester Co.,
577 F.2d 239, 244-245 (CA5 1978); George R. Whitten, Jr., Inc. v. Paddock
Pool Builders, Inc., 508 F.2d 547, 557 (CA1 1974), cert. denied, 421 U.S.
|||9 See, e. g., Report of the Attorney General's National Committee to Study
the Antitrust Laws 30-36 (1955) (hereinafter cited as Attorney General's
Committee Report); L. Sullivan, Law of Antitrust § 114 (1977); Areeda,
Intraenterprise Conspiracy in Decline, 97 Harv. L. Rev. 451 (1983); Handler,
Through the Antitrust Looking Glass -- Twenty-First Annual Antitrust Review,
57 Calif. L. Rev. 182, 182-193 (1969); Handler & Smart, The Present Status
of the Intracorporate Conspiracy Doctrine, 3 Cardozo L. Rev. 23, 26-61 (1981);
McQuade, Conspiracy, Multicorporate Enterprises, and Section 1 of the Sherman
Act, 41 Va. L. Rev. 183, 188-212 (1955); Willis & Pitofsky, Antitrust Consequences
of Using Corporate Subsidiaries, 43 N. Y. U. L. Rev. 20, 22-24 (1968); Comment,
Intraenterprise Antitrust Conspiracy: A Decisionmaking Approach, 71 Calif.
L. Rev. 1732, 1739-1745 (1983) (hereinafter cited as Comment, Decisionmaking);
Comment, All in the Family: When Will Internal Discussions Be Labeled Intra-Enterprise
Conspiracy?, 14 Duquesne L. Rev. 63 (1975); Note, "Conspiring Entities"
Under Section 1 of the Sherman Act, 95 Harv. L. Rev. 661 (1982); Note, Intra-Enterprise
Conspiracy Under Section 1 of the Sherman Act: A Suggested Standard, 75
Mich. L. Rev. 717, 718-727 (1977) (hereinafter cited as Note, Suggested
|||10 See also Monsanto Co. v. Spray-Rite Service Co., 465 U.S. 752, 769
(1984) (BRENNAN, J., Concurring).
|||11 See Albrecht v. Herald Co., 390 U.S. 145, 149 (1968); United States
v. Parke, Davis & Co., 362 U.S. 29, 44 (1960). See also Monsanto Co. v.
Spray-Rite Service Co., 465 U.S., at 764, n. 9.
|||12 E. g., Associated General Contractors of California, Inc. v. Carpenters,
459 U.S. 519, 531-532 (1983); National Society of Professional Engineers
v. United States, 435 U.S. 679, 687-688 (1978); Standard Oil, 221 U.S.,
|||13 See, e. g., Schenley Corp. v. United States, 326 U.S. 432, 437 (1946)
(per curiam); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440-442 (1934);
Burnet v. Clark, 287 U.S. 410 (1932); Louisville, C. & C. R. Co. v. Letson,
2 How. 497, 558-559 (1844); Bank of the United States v. Deveaux, 5 Cranch
|||14 Attorney General's Committee Report, (supra) n. 9, at 30-31 (citing
Barron v. United States, 5 F.2d 799 (CA1 1925); Mininsohn v. United States,
101 F.2d 477 (CA3 1939); Egan v. United States, 137 F.2d 369 (CA8), cert.
denied, 320 U.S. 788 (1943)). See also, e. g., United States v. Hartley,
678 F.2d 961, 971-972 (CA11 1982), cert. denied, 459 U.S. 1170 (1983); Alamo
Fence Co. of Houston v. United States, 240 F.2d 179 (CA5 1957); Patterson
v. United States, 222 F. 599, 618-619 (CA6), cert. denied, 238 U.S. 635
(1915); Union Pacific Coal Co. v. United States, 173 F. 737 (CA8 1909);
United States v. Consolidated Coal Co., 424 F.Supp. 577, 579-581 (SD Ohio
1976); United States v. Griffin, 401 F.Supp. 1222, 1224-1225 (SD Ind. 1975),
aff'd mem. sub nom. United States v. Metro Management Corp., 541 F.2d 284
(CA7 1976); United States v. Bridell, 180 F.Supp. 268, 273 (ND Ill. 1960);
United States v. Kemmel, 160 F.Supp. 718 (MD Pa. 1958); Welling, Intracorporate
Plurality in Criminal Conspiracy Law, 33 Hastings L. J. 1155, 1191-1199
|||15 See Hyde v. United States, 225 U.S. 347, 367-368 (1912). See also United
States v. Sampson, 371 U.S. 75 (1962); Fong Foo v. United States, 369 U.S.
141 (1962) (per curiam); Lott v. United States, 367 U.S. 421 (1961); Nye
& Nissen v. United States, 336 U.S. 613 (1949).
|||16 See Duplex Printing Press Co. v. Deering, 254 U.S. 443, 465 (1921).
|||17 See also 21 Cong. Rec. 2562 (1890) (remarks of Sen. Teller); id., at
2570 (remarks of Sen. Sherman); id., at 2609 (remarks of Sen. Morgan).
|||18 This legislative history thus demonstrates the error in the majority's
Conclusion that only acquisitions of corporate affiliates fall within §
1. See ante, at 761-762. The conduct of the trusts that Senator Sherman
and others objected to went much further than mere acquisitions. Indeed,
the irony of the Court's approach is that, had it been adopted in 1890,
it would have meant that § 1 would have no application to trust combinations
which had already been formed -- the very trusts to which Senator Sherman
|||I cannot believe that the Court really intends to express doubt as to
whether the Congress that passed the Sherman Act thought conspiracy doctrine
could apply to corporations. Ante, at 775-776, n. 24. If that were not the
case, then the Sherman Act would have no application to corporations. Since,
as is clear and as the Court concedes, the Sherman Act does apply to corporations,
there can be no doubt that Congress intended to apply the law of conspiracy
to agreements between corporations.
|||19 Market power is the ability to raise prices above those that would
be charged in a competitive market. See Jefferson Parish Hosp. Dist. No.
2 v. Hyde, 466 U.S. 2, 27, n. 46 (1984); United States Steel Corp. v. Fortner
Enterprises, Inc., 429 U.S. 610, 620 (1977); United States v. E. I. du Pont
de Nemours & Co., 351 U.S. 377, 391 (1956).
|||20 Significantly, the Court never suggests that the plurality-of-actors
requirement has any intrinsic economic significance. Rather, it suggests
that the requirement has evidentiary significance: combinations are more
likely to signal anticompetitive conduct than is unilateral activity: "In
any conspiracy, two or more entities that previously pursued their own interests
separately are combining to act as one for their common benefit. This not
only reduces the diverse directions in which economic power is aimed but
suddenly increases the economic power moving in one particular direction."
Ante, at 769. That is true, but it is also true of any ordinary commercial
contract between separate entities, as can be seen if one substitutes the
word "contract" for "conspiracy" in the passage I have quoted. The language
of the Sherman Act indicates that it treats "contracts" and "conspiracies"
as equivalent concepts -- both satisfy the multiplicity-of-actors requirement
-- and yet one of the most fundamental points in antitrust jurisprudence,
dating at least to Standard Oil, is that there is nothing inherently anticompetitive
about a contract. Similarly, an agreement to act "for common benefit" in
itself is unremarkable -- all agreements are in some sense a restraint of
trade be they contracts or conspiracies. It is only when trade is unreasonably
restrained that § 1 is implicated. The Court's evidentiary concern
|||21 We made this point in the context of resale price maintenance in United
States v. Parke, Davis & Co., 362 U.S. 29 (1960):
|||"The Sherman Act forbids combinations of traders to suppress competition.
True, there results the same economic effect as is accomplished by a prohibited
combination to suppress price competition if each customer, although induced
to do so solely by a manufacturer's announced policy, independently decides
to observe specified resale prices. So long as Colgate is not overruled,
this result is tolerated but only when it is the consequence of a mere refusal
to sell in the exercise of a manufacturer's right 'freely to exercise his
own independent discretion as to parties with whom he will deal.'" Id.,
at 44 (quoting Colgate, 250 U.S., at 307).
|||22 " is the potential which this conspiracy concept holds for the development
of a rational enforcement policy which, if anything, will ultimately attract
the courts. If conduct of a single corporation which restrains trade were
to violate Section 1, a forceful weapon would be available to the government
with which to challenge conduct which in oligopolistic industries creates
or reinforces entry barriers. Excessive advertising in the cereal, drug,
or detergent industries, annual style changes in the auto industry, and
other such practices could be reached as soon as they threatened to inhibit
competition; there would be no need to wait until a 'dangerous probability'
of monopoly had been reached, the requirement under Section 2 'attempt'
doctrine. Nor would a single firm restraint of trade rule be overbroad.
It would in no way threaten single firm activity -- setting a price, deciding
what market it would deal in, or the like -- which did not threaten competitive
conditions." L. Sullivan, (supra) n. 9, § 114, at 324 (footnotes omitted).
|||23 This was the case in Kiefer-Stewart, for example. Seagram had refused
to sell liquor to Kiefer-Stewart unless it agreed to an illegal resale price
maintenance scheme. Kiefer-Stewart refused to agree, and as a result was
injured by losing access to Seagram's products. See 340 U.S., at 213.
|||24 See United States v. Turkette, 452 U.S. 576, 588-593
(1981) (discussing congressional findings underlying the Organized Crime
Control Act of 1970). Section 1 of the Sherman Act has on occasion been
used against various types of racketeering activity. See Hartwell, Criminal
RICO and Antitrust, 52 Antitrust L. J. 311, 312-313 (1983); McLaren, Antitrust
and Competition -- Review of the Past Year and Suggestions for the Future,
in New York State Bar Assn., 1971 Antitrust Law Symposium 1, 3 (1971).
|||25 See Comment, Decisionmaking, (supra) n. 9, at 1753-1757; Note, Suggested
Standard, (supra) n. 9, at 735-738. Professor Sullivan elaborates:
|||"Picture, at one end of the spectrum, a family business which operates
one retail store in each of three or four adjacent communities. All of the
stores are managed as a unit by one individual, the founder of the business
who sets policy, does all the buying, decides on all the advertising, sets
prices, and hires and fires all employees other than family members. The
fact that each store is operated by a separate corporation should not convert
a family business into a cartel. . . . If there is, as a practical matter,
an integrated ownership and management, this small business is a single
firm. And a single firm cannot compete with itself. Hence it cannot restrain
price competition with itself, or divide markets with itself, or act as
a common purchasing agent for itself or otherwise restrain competition with
itself, regardless of how many separate corporations the single firm may,
for reasons unrelated to the act, be divided into." L. Sullivan, (supra)
n. 9, § 114, at 326-327.
Thus, the Court is wrong to suggest, ante, at 771-772, 774-776, and n. 24,
that Yellow Cab could reach truly unilateral conduct involving only the
employees of a single firm.
If the rule of Yellow Cab and its progeny could be easily circumvented through,
for example, use of unincorporated divisions instead of subsidiaries, then
there would be reason to question its efficacy as a tool for rational antitrust
enforcement. However, the Court is incorrect when it asserts, ante, at 770-771,
772-774, that there is no economic substance in a distinction between unincorporated
divisions, which cannot provide a plurality of actors, and wholly owned
subsidiaries, which under Yellow Cab can. If that were the case, incorporated
subsidiaries would never be used to achieve integration -- the ready availability
of an unincorporated alternative would always be employed in order to avoid
antitrust liability. The answer is provided by the Court itself -- the use
of subsidiaries often makes possible operating efficiencies that are unavailable
through the use of unincorporated divisions. Ante, at 772-774. We may confidently
assume that any corporate parent whose contingent antitrust liability exceeds
the savings it realizes through the use of subsidiaries already utilizes
unincorporated divisions instead of corporate subsidiaries. Thus, it is
more than merely a question of form when a decision is made to use corporate
subsidiaries instead of unincorporated divisions, and the rule is not that
See L. Sullivan, (supra) n. 9, § 114, at 328 ("To have two competitors
acting concertedly two separate firms, not just persons, are needed. Thus
'concerted action' by two 'legal persons' which is limited solely to the
internal management of a single firm does not restrain competition; but
'concerted action' by two 'legal persons' which erects barriers to entry
by another separate firm, a competitor or potential competitor, can be a
restraint of trade"); see also Willis & Pitofsky, (supra) n. 9, at 38-41.
The Attorney General's National Committee to Study the Antitrust Laws made
the same point in 1955:
|||"The substance of the Supreme Court decisions is that concerted action
between a parent and subsidiary or between subsidiaries which has for its
purpose or effect coercion or unreasonable restraint on the trade of strangers
to those acting in concert is prohibited by Section 1. Nothing in these
opinions should be interpreted as justifying the Conclusion that concerted
action solely between a parent and subsidiary or subsidiaries, the purpose
and effect of which is not coercive restraint of the trade of strangers
to the corporate family, violates Section 1. Where such concerted action
restrains no trade and is designed to restrain no trade other than that
of the parent and its subsidiaries, Section 1 is not violated." Attorney
General's Committee Report, (supra) n. 9, at 34.
Professor Sullivan provides another example:
|||" a parent corporation and its wholly owned subsidiary (or two corporations
wholly owned by the same parent or stockholder group) which operate, respectively,
a newspaper and a radio station in the same city. If the radio station,
which has no local competitors, were to deny advertising to a local business
because the latter advertised in a rival newspaper, the integration between
the two corporations, however close in terms of ownership or management
or both, would not protect them from a charge of conspiracy to restrain
trade. . . . concerted action here involved is not merely carrying on the
business of a single integrated firm, it is action which is aimed at restraining
trade by utilizing such market power as is possessed by the firm because
of its radio station in order to erect a competitive barrier in front of
a competitor of the firm's newspaper." L. Sullivan, (supra) n. 9, §
114, at 327 (footnote omitted).
E. g., Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977).
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