Abstract
The European lawyer who would confine his study of the Rule of Reason to Appalachian Coals, Inc. v. United States (1) would certainly have some support for equating the Sherman Act, as construed in the light of reason, with the cartel prohibition of the Rome Treaty, as qualified by its exempting clause. The facts of this case are now so famous that one can dispense with a detailed analysis. It will be remembered however that, confronted with a severe crisis, the producers in the Appalachian territory—combining 74.4 per cent of the production of bituminous coal in this area but possessing only a share of 11.96 of the relevant selling market—created a common and exclusive selling agency with the overt purpose of achieving greater efficiency. Their plan, examined in advance of its operation, was upheld as justifiable under the Rule of Reason.
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Reference
Appalachian Coals, Inc. v. United States, 288 U.S. 344, 374 (1933).
Cf. the discussion of Appalachian Coals in Robert H. Bork, The Rule of Reason and the per se concept: Price-fixing and Market Division,74 Yale U. 822–826 (1964–1965).
See Neale, The Antitrust Law OF The United States OF America, 41 (1962); contra, J.A. Rahl, Price Competition and the Price-fixing Rules, 57 Nw. U. L. Rev. 144–145 and note 43 (1962).
See supra,the introduction, at 5–7.
See Neale, op. cit.,at 29.
United States v. Transmissouri Freight Association, 166 U.S. 290 (1897).
Northern Pacific Railway Co. v. United States, 356 U.S.._ 1 (1958).
Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959).
See my evaluation of the German law, infra,chapter II, at 99–103 and the position of the Eec Commission, infra,chapter Iii, at 116–118.
See Trorellw, The Federal Antitrust Policy, 166 (1954) (Emphasis supplied).
Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911).
See John T. Chadwell, Competition and Section 1 of the Sherman Act—Instant Antitrust or Long-run Policy?, 27 Aba Aantitrust Section, 60 (1965).
J.A. Rahl, Conspiracy and the Anti-Trust Laws, 44 Ill. R. Rev. 745 (1950).
See Oppenheim, Federal Antitrust Laws, 1 (1958).
Cf. United States v. Addyston Pipe and Steel Co., 85 Fed. 271, 279 (6th Cir. 1898), aff d, 175 U.S. 211 (1899).
See Rahl op. cit. at 745.
As to the latter formula, I am referring to the words of Justice Frankfurther in his dissent in Federal Trade Commission v. Motion Picture Advertising Service Co., 344 U.S. 392, 405 (1953).
United States v. Transmissouri Freight Association, 166 U.S. 290 (1897).
United States v. Transmissouri Freight Association, 166 U.S. 290, 312 (1897).
United States v. Addyston Pipe and Steel Co., 85 Fed. 271 (6th Cir. 1898), aff’d, 175 U.S. 211 (1899).
Handler, The Judicial Architects of the Rule of Reason, in Antitrust IN Perspective, 9 (1957).
United States v. Addyston Pipe and Steel Co., 85 Fed. 271, 282 (6th Cir. 1898 ).
It should be noted, however, that Taft might have been speaking of a process of integration when he wrote: “ But, in recent years, even the fact that the contract is one for the making of a partnership or a corporation, has not saved it from invalidity if it could be shown that it was only part of a plan to acquire all the property used in a business by one management with a view to establishing a monopoly.” United States v. Addyston Pipe and Steel Co., 85 Fed. 271, 291 (6th Cir. 1898 ).
Cf.,Denisson Mattress Factory v. Spring Air Co., 308 F. 2d 1642, 1647 (5th Cir. 1962). This is not to suggest that only ancillary restraints may be lawful under Section 1 of the Sherman Act. The test is one of competitive effect. Therefore even non-ancillary restraints which have only a minimum effect on competition may be upheld.
See e.g. in the field of international cartels, Timken Roller Bearing Co. v. United States, 341 U.S. 593 (1950); United States v. National Lead Co., 63 F. Supp. 513 (S.D.N.Y. 1945), affd 312 U.S. 319 (1947); United States v. General Electric Co., 82 F. Supp. 753 (D.N.J. 1949). However in these cases, the courts rejected defendants’ arguments that the restraints were merely ancillary.
Standard Oil of New Jersey v. United States, 221 U.S. 1 (1911).
United States v. American Tobacco Company, 221 U.S. 106 (1911).
Handler, A Study OF The Construction And Enforcement OF The Federal Antitrust LAws, Tnec Monograph no. 38, 2 (1941).
Cf. Brown Shoe Co. v. United States, 370 U.S. 294, 319 (1962).
This is, for instance, the opinion expressed by Blake and Jones, The Goals of Antitrust: A Dialogue on Policy — In Defense of Antitrust,65 Comm. L. Rev. 376, 381 and footnote (35) (1965).
J.A. Rahl, Antimerger Law in Search of a Policy,Proceedings of the Fourth Annual Corporate Counsel Institute, 74 (1965). Professor Rahl refers to United States v. United States Steel Corp., 251 U.S. 417 (1920) (Consolidation of 50% of industry upheld); United States v. International Harvester Co., 274 U.S. 630 (1927) (64% allowed to stand).
J.A. Rahl, op. cit., at 74.
Handler, Op. Cit.,at 8. Handler (Id.,at 74) summarized his review of the Supreme Court cases as follows: “ The course of decision in the field of mergers and consolidations has been erratic and unpredictable… There is today virtually as much doubt and uncertainty regarding the permissive limits of capital combinations as there was in 1890. ” Furthermore, he wrote (Id.,at 83): “ The standard of reason has permitted the Court to sit as censor on corporate integrations and undoubtelly has resulted in a more tolerant attitude toward such combines than would have been the case had the rule of reason been rejected. Once it was decided that the statute does not, on the one hand, prohibit every business consolidation, nor permit, on the other, integrations just short of complete domination, the Court, with or without a rule of reason, was compelled to draw the line somewhere in the scale from 1 to 100%. The rule of reason has not altered the nature of the problem with which the courts have been confronted and except for its doubtful psychological value, has not assisted the courts in the formulation of any clear and predictable tests by which the legality of corporate integrations might be measured. ”
But certain European anticartel statutes (see e.g. Section 5(2) of the German Law against Restraints of Competition and Art. 59bis and ter of the French Ordinance No. 45–1483 of June 30, 1945) favor, for instance, market-sharing arrangements as to types of products (so-called “ specialization ” cartels). In that respect, these cartels may be considered as furthering economic progress. But it is to be stressed that cartels then become instrumentalities of the government’s economic policy. This illustrates that European legislatures do not have full confidence in the free play of market forces.
Klor’s Inc. v. Broadway-Hale Stores, 359 U.S. 207 (1959).
See infra,this chapter, at 52.
Standard Oil of New Jersey v. United States, 221 U.S. 1, 65 (1911).
Id., cf. United States v. American Tobacco Co., 221 U.S. 106, 179–180 (1911).
United States v. Joint Traffic Association, 171 U.S. 505 (1898).
Standard Oil of New Jersey v. United States, 221 U.S. 1, 64–68 (1911).
Handler, op. cit.,at 9. A similar view of the Rule of Reason has been proposed by Eugen V. Rostow, Monopoly Under the Sherman Act: Power or Purpose?, 43 Ill. L. Rev. 754, 751, 752 (1948–1949).
Report OF The Attorney General’S National Committee TO Study The Antitrust Laws, 11 (1955).
Cf.,Turner, Conglomerate Mergers and Section 7 of the Clayton Act.,78 Harv. L. Rev. 1313, 1395 (1965).
J.T. Chadwell, op. cit., at 61.
See Rep. No. 1326, 62d Cong., 3d Sess., 1913.
See Adehnan, Acquire the Whole or Part of the Stock or Assets of Another Corporation,Aba Antitrust Section 111, 118 (1953). Accord J.A. Rahl, op. cit., at 77.
Board of Trade of City of Chicago v. United States, 246 U.S. 231 (1918).
I am quoting the analysis of the Report OF The Attorney General’S National Committee TO Study The Antitrust Lawns, 23 (1955).
Board of Trade of City of Chicago v. United States, 246 U.S. 231, 238 (1918).
White Motor Co. v. United States, 372 U.S. 253 (1963).
American Column and Lumber Co. v. United States, 257 U.S. 377 (1921).
Handler, op. cit. at 17. To support his proposition, Professor Handler refers mainly to Brandeis, The Curse OF Bigness, Pt. 3 and to Brandeis’ defense of resale price maintenance (see Handler op. cit.and note 138, at 95).
See J.A. Rahl, Price Competition and the Pricefixing Rule, 57 NW. U. L. Rev. 141 (1962).
Handler, op. cit., supra,note (2), p. 30, at 85. To support his proposition, this author referrend e.g. to Chesapeake and Ohio Fuel Co., v. United States [115 Fed. 610 (6th Cir. 1902)] where “ the court held illegal an exclusive sales,agency which had been formed to market about 30 ’% of the coal and about 45% of the coke which was produced in the Kanawha district of West Virginia. The coal of the combine was less than 1% of that sold in the same markets in which it competed and the coke sold met `severe’ competition in all markets. The sales agency was given the power to fix the prices and to control the production of the members of the group. Although the combination was subject to effective competition in all markets, it was held illegal since it deprived the public of the benefits of competition within the group. ” (Handler, id.,at 30). “ The law reaches combinations which may fall short of complete control of a trade or business, and does not await the consolidation of many small combinations into the huge `trust’ which shall control the production and sale of a commodity.” [115 Fed. 610, 624 (6th Cir. 1902)].
United States v. Socony Vacuum Oil Co., 310 U.S. 150 (1940).
American Column and Lumber Co. v. United States, 257 U.S. 377 (1921).
Appalachian Coals Inc. v. United States, 288 U.S. 344, 377 (1933).
See J.A. Rahl, op. cit., supra,note (4), p. 31, at 73–74; Handler, op. cit., supra,note (2), p. 30, at 85, had raised the question as to whether the coalescence of both rules “should be effected by the adoption of the more liberal rule applicable to mergers, as suggested in the Appalachian case, or of the more stringent rule applicable to restraint of trade.”
Professor Rahl noted in regard to amended Section 7 of the Clayton Act that “antitrust evolution has finally ironed out its old ambivalence, and has brought anti-merger policy alongside the policy of loose arrangements. ” (Op. cit.,at 86.)
United States v. Trenton Potteries Co., 273 U.S. 392 (1927).
United States v. Socony Vacuum Oil Co., 310 U.S. 150 (1940).
Fashion Originator’s Guild of America, Inc. v. Federal Trade Commission, 312 U.S. 417 (1941).
Klors Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959).
See J.T. Chadwell, op. cit.,at 62.
United States v. Trenton Potteries Co., 273 U.S. 392, 396 (1927).
Ibid., at 397.
United States v. Socony-Vacuum Oil Co., Inc., 310 U.S. 150 (1940).
J.A. Rahl, Price-competition and the Price-Fixing Rule Preface and Perspective, 57 NW U. L. Rev. 141 (1962).
United States v. Socony Vacuum Oil Co. Inc., 310 U.S. 150, 224, 225 (1940).
See J.A. Rahl, id., at 145. We must ask however whether in Appalachian Coals there was not a sufficient effect on market prices. Granting that the parties had no intent to affect general market conditions, it should be stressed that it was not disclaimed that their plan was likely to affect market prices in some discernible way. For this reason, I insist that Appalachian Coals is rather an isolated case. Douglas’ opinion would be intellectually more satisfactory if Appalachian Coals had been frankly overruled instead of being merely distinguished.
Fashion Originators’ Guild of America Inc. v. Federal Trade Commission, 312 U.S. 457 (1941).
Cf. Interborough News Co. v. Curtis Pub. Co., 127 F. Supp. 286, 300 (S.D.N.Y. 1954), alf d 225 F. 2d 289 (2d dr. 1955).
See J.A. Rahl, op. cit., supra,note 135, at 145.
Klor’s Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959).
J.A. Rahl, Per se Rules and Boycotts Under the Sherman Act: some reflections on the Klor’s case45VA. L.Rev. 1168 (1959).
Klors Inc, v. Broadway-Hale Stores, Inc., 359 U.S. 207, 211 (1959).
Oppenheim, Selected Antitrust Developments in the Courts and Federal Trade Commission during past years15 Aba Antitrust Section, 41 (1959).
Silver v. New York Stock Exchange, 373 U.S. 341, 347 (1963).
Klor’s Inc. v. Broadway-Hale Stores Inc., 359 U.S. 207, 211 (1959).
Although it cited the Klor’s case in support of its argument, United States v. General Motors Corporation [384 U.S. 127 (1966)1 is not as far-reaching as that case. In the General Motors case, there was ample evidence in the record to support a finding that the concerted effort to eliminate sales of new Chevrolet cars by discounters was intended to restrain market competition and actually had that effect. The purpose as well as the necessary effect of the boycott was to protect franchised dealers from price competition and thus to deprive consumers of the opportunity to buy in a competitive market.
Klor’s Inc. v. Broadway-Hale Stores Inc., 359 U.S. 207, 213 (1959).
Cf. J.A. Rahl, op. cit.,at 1172.
J.T. Chadwell, Competition and Section 1 of the Sherman Act - Instant Antitrust or Long-run Policy, 27 Aba Antitrust Section, 60, 65 (1965).
Northern Pacific Railway Co. v. United States, 356 U.S. 1 (1958).
Blake and Jones, The Goals of Antitrust: A Dialogue on Policy - Toward a Three-Dimensional Antitrust Policy,65 Colum. L. Rev. 422, 431 (1965).
Standard Oil Co. of California v. United States, 337 U.S. 293 (1949).
Northern Pacific Railway Co. v. United States, 356 U.S. 1, 6 (1958).
United States v. Loew’s Inc., 371 U.S. 38, 45 (1962).
White Motor Co. v. United States, 372 U.S. 253 (1963).
See J.A. Rahi, op. cit., at 1173.
United States v. Jerrold Electronic Corp., 187 F. Supp. 545 (E.D.Pa. 1960), all’d per curiam, 365 U.S. 567 (1961).
Dehydrating Process Co. v. A.O. Smith, 292 F. 2d 654 (1st Cir. 1961 ).
Report OF The Attorney General’S National Committee TO Study The Antitrust Laws, 26 (1955).
Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5 (1958).
United States v. Addyston Pipe and Steel Co., 85 F. 271 (6th Cir. 1898), affd, 175 U.S. 211 (1899).
Report OF The Attorney General’S National Committee TO Study The Antitrust Laws, 26 (1955).
White Motor Co. v. United States, 372 U.S. 253, 259 (1963).
Timken Roller Bearing Co. v. U.S., 341 U.S. 593 (1950).
Timken Roller Bearing Co. v. U.S., 341 U.S. 593, 605 (1950).
CI. Report OF The Attorney General’S National Committee TO Study The Antitrust Laws, 26 (1955).
United States v. National Lead Co., 63 F. Suppl. 513, 523 (S.D.N.Y. 1945), air 332 U.S. 319 (1947).
Ibid.,63 F. Supp. 513, 521 (S.D.N.Y. 1945).
United States v. Imperial Chemical Industries, Ltd., 100 F. Supp. 504, 593 (S.D.N.Y. 1951 ).
CI. Report OF The Attorney General’S National Committee TO Study The Antitrust Laws, 26 (1955).
Justice Frankfurter in his dissent in Timken Roller Bearing Co. v. United States, 341 U.S. 593, 605 (1950).
CI. for price-fixing agreements, J.A. Rahl, Price Competition and the Price Fixing Rule,57 Nw. U. L. Rev. 146 (1962).
Northern Pacific Railway Co. v. United States, 356 U.S. 1, 4 (1958).
See Handler, A Study OF The Construction And Enforcement OF The Antitrust Laws, Tnec Monograph no. 38, 4–5 (1941).
See Neal, The Antitrust Laws OF The U.S.A., 13 1962 ).
J.A. Rahl, Per Se Rules and Boycotts under the Sherman Act: Some Reflections on the Klor’s Case, 45 Virg. L. Rev. 1174 (1959).
White Motor Co. v. United States, 372 U.S. 253, 260 (1963).
Cf. J.A. Rahl, op. cit., at 1174.
White Motor Co. v. United States, 372 U.S. 253, 263 (1963).
Packard Motor Car Co. v. Webster Motor Car Co., 243 F. 2d 418, 421 (D.C. Cir. 1957), certiorari denied 355 U.S. 822 (1957).
Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5 (1958).
Op. cit., supra,note 186, at 391–392.
S. Chesterfield Oppenheim, Federal Antitrust Legislation: Guideposts to a Revised National Antitrust Policy 50 Mimi. L. REv., 1139, 1161 (1951–1952).
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Joliet, R. (1967). Rule of Reason and per Se Violations under Section I of the Sherman Act. In: The Rule of Reason in Antitrust Law. Collection Scientifique de la Faculté de Droit de l’Université de Liège. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-5900-7_2
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