Outline 2 Outline

Contents Horizontal Restraints.......................................................................................................................................................................... 1 I. Horizontal Price Fixing............................................................................................................................................................1 II. Division of Markets................................................................................................................................................................3 III. Group Boycotts & Concerted Refusals to Deal...................................................................................................................4 IV. Joint Ventures....................................................................................................................................................................5 V. Concerted Efforts to Influence Gov't......................................................................................................................................7 VI. Defining "Agreement" "Combination" & "Conspiracy"......................................................................................................9 VII. Trade Ass'n Activities - information exchange programs.................................................................................................12 Vertical Restraints............................................................................................................................................................................ 13 I. Intro..................................................................................................................................................................................... 13 II. Vertical Price Fixing (resale price maintenance)...................................................................................................................13 III. Customer & Territorial Restraints - vertical non-price restraints.....................................................................................15 IV. Refusals to Deal................................................................................................................................................................17 V. Tying Arrangements.............................................................................................................................................................18 VI. Exclusive Selling & Dealing Arrangements........................................................................................................................21 Monopolization................................................................................................................................................................................ 23 I. Single-Firm Monopolization.................................................................................................................................................23 II. Exclusionary Conduct (more detail).....................................................................................................................................26 III. Attempts to Monopolize..................................................................................................................................................30 Mergers............................................................................................................................................................................................ 31 I. Horizontal Mergers..............................................................................................................................................................32 II. Vertical Mergers...................................................................................................................................................................34 III. Joint Ventures/Conglomerate Mergers............................................................................................................................36 Jurisdictional Reach.......................................................................................................................................................................... 39 Foreign Trade Antitrust Improvements Act & Comity......................................................................................................................40 Horizontal Restraints I. Horizontal Price Fixing Per se rule Rule  any combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se. (Socony)  Market share irrelevant - wouldn't matter if only 2 of 100 competitors made an agreement (FN 59)  Reasonableness doesn't matter, but court doesn't overrule Chicago Board of Trade - it apparently survives. (FN 59)  Other reasons irrelevant - doesn't matter if other factors contributed to the effect.  Eliminating competitive evils is NOT a justification  Don't have to be capable of fixing prices to be guilty of conspiracy  The existence or exertion of power to accomplish the objective is important only when the offense charged is the actual monopolizing of any part of trade or commerce under § 2 of the SA. A crime under this section (§ 1) is distinct.  Appalachian Coal might still be violative even though it was only a plan.  But, if companies don't actually do anything - e.g. just talking - might be a violation, but probably wouldn't be prosecuted - only 3 cases in 100 years. As a matter of prosecutorial discretion, at least, probably not.  If absolutely no effect, maybe no violation, but could argue that the agreement itself is the effect.  Fixing prices of raw materials is a violation - National Macaroni Manufacturers Association v. FTC - p.223, 7th Cir, 1965  Ass'n proposed using a certain ratio of wheat to make macaroni  Combining to fix the composition of their product with the design & result of depressing the price of an essential raw material violates the rule against price fixing  The agreement doesn't have to be on price - can be a term of sale only indirectly connected w/price - Catalano, Inc. v. Target Sales, Inc., p.224, SCOTUS, 1980  Beer wholesalers conspired to eliminate short-term credit, when they had competed over offering interest-free credit  Interest-free credit = discount, so the agreement eliminates one form of competition among the sellers  Covers all industries, including professional/public services , BUT maybe ok if premised on public service/ethical norms to improve professional service - Arizona v. Maricopa County Medical Society, p.225, SCOTUS1982 1  Setting maximum doctor fees; The per se rule isn't reconsidered for different industries & isn't different because this is the healthcare industry; The professional/public service aspect is immaterial here (may be material otherwise) because this wasn't premised on public service or ethical norms & doesn't enhance professional service.  Agreement to set maximum fees for services a PPO is willing to pay - Levine v. Central Florida Medical Affiliates, Inc, p.227, 11th Cir, 1996;  This is price fixing, but isn't prohibited  Difference between multiprovider networks where competitors agree on prices/market allocation (prohibited) and those networks wherein such decisions are handled unilaterally by each competitor or through a third-party messenger (allowed) & won't facilitate agreements to restrict comp United States v. Socony-Vacuum Oil Co., p.214, SCOTUS, 1940 (per se rule)  HELD  price fixing: Step 1: The purchases of the excess gas from each partner were at the going market price - not fixed there. Step 2: They then knew what the price each paid for the spot prices - was publicized. Step 3: Each sold the gas to "jobbers," at prices dependent on the spot market prices.  The price fixing comes because by removing the surplus gas from the market, it set a floor for the prices.  Note  maybe undermined by trade association cases =where stabilizing prices not a violation Characterization Rule  The characterization process distinguishes between price fixing and NOT price fixing  ask whether it's almost always anticompetitive w/o a corresponding benefit - if yes, per se; if no, RR; if maybe, quick look  IS price fixing  per se  plainly anticompetitive; likely to be w/o redeeming virtue  NOT price fixing  RR  if the agreement creates enormous efficiencies, creates a new product, or is necessary to bring a product to the market, it can avoid the per se rule, so use RR  Quick look  if the anticompetitive effects are very obvious, but there may also be justifications, court doesn't have to engage in complete RR - can dispose of it with a quick look.  Can look at any factors; Can be really easy - e.g. prices will go up, no justification - illegal; Others can be more complicated - nearly RR;  Don't just have it in a BMI situation - can do it any time ct concludes that there's a pretty clear anticompetitive effect, but there's also a business justification like BMI NOT price fixing  RR   Necessary to bring product to market  (NCAA)  If horizontal restraints are necessary if the products are to be available at all, then RR, not per se  Joint selling agent  must be "so efficient" to get RR  factors (BMI):  Scheme developed organically in response to market;  It creates efficiencies;  Note  look at marketwide competition - restraint in a limited part of a market may actually enhance it overall (NCAA)  The combination product is substantially different from the product any individual participant could sell;  There's a realistic alternative way for downstream buyers to get around the joint venture & buy directly from individuals;  Note  Court said it was realistic even for small TV buyers to go around the JV (Buffalo Broadcasting Co. v. ASCAP 2d Cir 1984)  Note  Common sales agents  not illegal per se as long as each mfg maintains price controls, BUT if the common agent sets uniform prices, it's per se Virginia Excelsior Mills v. FTC, 4th Cir 1958  Note  The size of the joint venture using the sales agent may be a factor - when small companies joining to reduce costs & compete better with larger rivals, it's been upheld under RR. BMI v. CBS, p. 233 US 1979: BMI holds license to huge library of music. They create blanket license to people like CBS to use what they need; royalities are distribt'd in accord w/use.  Ct says price has not literally been set - it's about behavior. Rejects argt that blanket licenses are illegal: (1) this lie of commerce exists only b/c of copyright law (2) does not restrict price or decrease output - it developed in response to market. 1000s of uses and 1000s of copyright holders. This creates efficiencies b/t them. (3) it is a different product than any individual copyright holder could sell on their own (4) it's not a simple horizontal agreement b/c CBS can go around it and deal w/individual (c) holders (5) the scheme was implemented by Consent Decree. Remand for Rule of Reason. STEVENS, DISSENT: This should fail RoR. It distorts b/c it promotes popular music NCAA v. Bd Regents Univ OK, p.249, US 1984: Okla and UGa argue that NCAA has illegally restrained trade in college games. The NCAA negotiated Ks with ABC, CBS they set price and frequency limis on broadcasting football games. Members can't go around to make their own deals. CFA set up to fight this system, made K with NBC, NCAA threatened disciplinary action.  Here, no per se b/c a "league" requires some level of horizontal agreement. What they market "is competition itself." B/c it allows this product to be available at all, it can be viewed as procompetitive. BMI says that SO EFFICIENT it is procomp. So, use RoR. This system has significant anticomp potential: restrains price and is not responsive to consumer demands. Members has no choice. Output is lower, price is higher than would otherwise be. This rewards all regardless of skill. It reduces output, increases price. NCAA says they don't have market power (seem to say that market is all broadcasting). But (1) market power is not 2 necessary (2) they do have mkt power - no substitutable good. Unlike BMI b/c schools can't go around the NCAA's K. the availability is ltd, not enhanced. Rule of Reason Rule  price fixing may be reasonable & not unlawful if there is no significant interference with or impact on competition - factors   Pito  important factors - effect on competition & efficiencies  facts peculiar to the business;  its condition before & after the restraint;  the nature of the restraint & its probable or actual effect;  the history of the restraint;  the evil believed to exist;  the reason for adopting the particular remedy;  the end sought.  Note - Market Power  Chicago Board doesn't mention market power as a factor;  NCAA says absence of market power doesn't justify a restraint - if agreement not to compete in terms of price or output, don't need market power analysis to find anticompetitive effect. Chicago Board of Trade v. United States, p.207, SCOTUS, 1918 - Board of Trade is the commercial center through which most of the trading in grain is done. Board adopted the "Call" rule - bids on grain had to be fixed at the day's closing bid on the Call of trading until the next opening.  HELD  Test is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it suppresses or even destroys competition.  FACTORS  facts peculiar to the business; its condition before & after the restraint; the nature of the restraint & its probable or actual effect; the history of the restraint; the evil believed to exist; the reason for adopting the particular remedy; the end sought.  Good intent won't save objectionable restraint, but it may help the court interpret facts & predict consequences.  This was a reasonable regulation - consistent with antitrust law.  Nature of the rule - placed on the period of price-making.  Scope - applies only to a small part of the daily grain shipped, only applies to grain that was to arrive in Chicago.  Effects - bc of scope, no appreciable effect on general market prices or the total volume of grain coming to Chicago. OTOH, did positively improve market conditions. Appalachian Coals, Inc. v. United States, p.211, SCOTUS 193 - ACI was exclusive selling agent for producers of coal in App territory - sold at prices fixed by ACI - best prices possible; distressed industry  HELD  it's price fixing because the selling agent sets the price for everybody - the producer can't set its price.  Note - selling agents aren't always price fixing - e.g. agent gets price from consumer & gives producer the option to accept it.  But, must consider the particular conditions & purposes - mere elimination of competition doesn't condemn it.  Sherman Act isn't mechanical - essential standard of reasonableness.  Here, there were good intentions - emphasizes distressed state of the industry.  And, if they had completely integrated, there wouldn't have been an antitrust violation - shouldn't be one if they decided to remain independent with a collective selling agent.  And, efficiency defense - didn't work here, but would be a useful defense today - whether the efficiencies that promote competition outweigh the negatives.  And, it was only a plan - not implemented - too early for injunction International Comparison  II. EU allow price-fixing to improve the production or distribution of goods or to promote technical or economic progress - maybe includes aiding distressed industries, as in Appalachian.  US has never taken that approach - economics are weighed much more heavily. We don't want the industry companies deciding who gets to stay - market will work it out. Division of Markets Rule  Any agreement among businesses performing similar services or dealing in similar products whereby the available market is divided up and each is given a share is illegal per se.  NO justifications or defenses  Palmer v. BRG of GA, Inc., US 1990  shows that ct still using per se years after Topco  Only exception (Posner)  free rider argument (General Leaseways - Posner)  But  Pito  Why no way to characterize out of the division like in BMI, esp since these are usually more efficient than horizontal price fixing?  If SCOTUS gets it, could impose BMI preliminary or overrule the per se rule 3  Leegin and Sylvania weaken this per se rule - they switch from per se to RR in context of minimum price maintenance & nonprice vertical restrictions.  Can make similar free rider arguments here as they made there. United States v. Topco Associates, Inc. (1972) p.305: Topco sells private label brands to local supermkts to compete with national chains' private label brands. Topco acted as a purchasing agent. Local chains are too small individually to do it on their own. Members pay cost for good. Avg mkt share of members is 6%. Two claims of govt: first, each member is given de-facto-exclusive territory and second, before permission is granted for sellng at wholesale, other licensees (usually retailers) whose interests are affected by wholesale ops are consulted as to their wishes in this matter. (restrictive on consumers). Topco argued that assoc actually increased competition because it enabled its members to increase efficiency in competing with larger nat'l chains.  Held  SC rejects D Ct's use of RoR here. It's a naked horizontal restraint must use per se.  Can't tolerate naked restraints of trade just bc they're well intended or allegedly increase competition.  Court is in no position to balance restraint in one sector (inter-brand Topco) v. increased comp in other sector (intrabrand Topco v. major supermkts' private labels). The per se rule here is predictable and easy. Stay out of the wilds of economics.  Dissent: doesn't involve restraints on interbrand competition or an allocation of mkts by an association with monopoly or near monopoly control of the sources of supply of one or more varieties of staple goods. Instead here we have an agreement among several small grocery chains to join in a cooperative endeavor which has an unquestionably lawful principal purpose  minimal ancillary restraints that are fully reasonable in view of principle purpose and that have never before today been held by this court to be per se violations General Leaseways Inc. v. National Truck Leasing Asso. - p.316 (7 th Cir 1984 - Posner): Restricted geographical proximity of truck-leasing franchisees & reciprocal repair deals; one franchise ignored the rule & was then expelled Held  Posner doesn't use a per se rule, and instead listens to the D's argument in justifying their market division scheme  D's main argument was the free rider concept - must protect users of your brand from other users  The dealers must invest in ads, sales, etc, to make the franchisor more successful & competitive with other franchisors. BUT, if only some of the dealers are investing, and the others save money & offer lower prices, those others are free riders. It's bad for consumers & economy because the free riders don't help the franchisor compete with other franchisors.  It only matters if the effect of the free riders is so significant that it drives the investing dealers out of business & thereby hurts the franchisor.  BUT, Posner doesn't buy the free rider argument - the "free riders" were charging the actual amnt that it cost them to do the repair  BUT, free rider problem would have been relevant in Topco because if a dealer took on the Topco brand entailed risk & investment - the brand wasn't established, so commitment of resources would be necessary. BUT, the court in Topco adopted the per se rule & didn't consider it.  Problem with Posner - you wouldn't spend money on those investments for a discount resale product like Topco, so many considerations in normal free rider analysis (ads, sales) might not be relevant.  Posner reads BMI narrowly - said that the agreement there allowed the creation of a new product, unlike here. And, there were enormous efficiencies there, unlike here. III. Group Boycotts & Concerted Refusals to Deal Rule  When a group of competitors agrees not to deal with a person/firm outside the group, deal only on certain terms, or coerce suppliers or customers not to deal w/the boycotted competitor, there's a combination in restraint of trade under § 1 SA. Per se rule, but cut way back. Per se rule (Klor's)  Klor's Inc. v. Broadway-Hale Stores, Inc. - p.337 (1959): B-H accused of using its market power to demand that suppliers not provide to a smaller competitor, Klor's; plenty of other competitors, so losing Klor's would have little effect on competition  Held  Can't expand market share by organizing boycotts & intimidating competitors - isn't efficient  Regardless of the actual impact - even if no impact on market of driving K out - normative argument that we don't want companies driving other out of business in this manner.  Plus, intimidation effect on other discounters - they'd be afraid of being put out of business.  Also, idea that antitrust is more than just economics - there's a normative code of conduct aspect Moving towards RR  Northwest Wholesale Stationers & Indiana Federation a) Rule  to get per se rule, must show there is a probable anticompetitive effect (Northwest). Otherwise, apply RR. a. Factors  market power; efficiencies/business justifications; if there are efficiencies, court seems willing to go to rule of reason, not per se (Northwest) b. Per se approach is generally limited to cases where firms w/market power boycott suppliers/customers in order to discourage them from doing business w/a competitor. (Indiana Federation) c. Slow to condemn rules adopted by professional associations as unreasonable per se or where the economic impact isn't obvious (Indiana Federation) d. If anticompetitive effects are obvious, no need to do market power analysis, & can't be sustained under RR unless there's some countervailing pro-competitive justification (Indiana Federation)  Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co. - p.354 (1985): Members could purchase from NW, ultimately at a lower price than non-members; said members couldn't sell at wholesale AND retail; Pacific didn't follow the rule, kicked out of the association after it changed ownership & didn't notify  Held  Doesn't overrule Klor's, but puts some hurdles in the way 4  Court says this isn't the kind of boycott which deserves the per se rule.  Factors - market power; efficiencies/business justifications - maybe use quick look, but not per se  Klor's was horizontal AND vertical - that combination made the boycott more wide  BMI & here allow characterization - let D's argue that it's not a boycott at all  Which is narrower? BMI has been narrowed down a lot - hard to get out of per se rule for horizontal price fixing on the basis of characterization. Here, this is broader - if there are efficiencies, court seems willing to go to rule of reason, not per se. Maybe because people generally think the per se rule against horizontal price fixing is a good idea - shouldn't have much room for BMI exceptions. OTOH, the per se rule against boycotts isn't as highly regarded, so maybe the exception here is broader.  FTC v. Indiana Federation of Dentists - p.362 (1986): dentist federation prohibited sending x-rays to insurance - didn't want them to review their decisions;  Held  RR  Court says no need to do market analysis - if direct evidence of anticompetitive effects, no need - PROF thinks that's right, esp since defining relevant market takes so long - why bother if there are definitely anticompetitive effects  Dentists' arguments - Other alternatives are unrealistic & too expensive; Would affect quality of care - can't be second guessed by insurance providers - BUT, argument rejected & withholding the xrays isn't a way of improving quality of care  Court says you don't have to PROVE anticompetitive effect - enough that it would LIKELY be there  No evidence that denying the xrays was a sign of efficiency. Market Power Screen  look first to whether the players have market power, it not, then no violation. (Rothery)  But, market power screens have never caught on & other countries don't do it either.  Problems w/market power screen   What about the per se rules? Anticompetitive effect is irrelevant for per se - wouldn't a screen do away with that & incur lengthy trials.  In some cases, the anticompetitive effect may be outside of simple economics & market power, as more of a code of conduct - e.g. Klor's - putting a legitimate business out of play  Indiana Federation - if there's evidence of anticompetitive behavior, it doesn't matter what effect  Rothery Storage and Van Co. v. Atlas Van Lines - p.370 (DCCir 1986 Bork): Employed franchisees to handle their moving business; Atlas didn't want its franchisees to open up their own operations & call it Atlas  Held  Market power screen  Only small market share, so couldn't eliminate competition by raising prices or curtailing output - only explanation for doing it is that it's efficient.  Scholars have wanted this - look first to whether the players have market power, it not, then no violation.  Synthesize Klor's, Northwest, & Indiana Federation, & Rothery  o Market power  Yes in Northwest & Rothery,  No in Indiana Efficiencies must be taken into account Cut off goods/services necessary to compete  Yes - Northwest  Unclear - Indiana (not about it) o Proof of effect  Yes  Indiana - likely is good enough Business justifications  More likely to give RR. o Hard to get to per se in boycott area - just not a great idea IV. Joint Ventures Definition  As is relevant under SA, a joint venture is an undertaking by 2+ entities for some limited purpose—something short of a complete merger or combination—e.g. joint sales agency or joint research. o 2 forms  1. New jointly owned corporate subsidiary - then the asset & share transfers may invoke § 7 of the Clayton Act, dealing with mergers (see mergers section) 2. MORE COMMON - Partnership among firms for limited purpose - raises Sherman Act questions - some characteristics of a group boycott since they may exclude competitors. o 2 effects of monopoly (cartel) pricing  1. Monopoly overcharge transfers wealth from consumer to monopolist (wealth transfer) 2. Higher price chokes demand - consumers don't buy at the monopoly price, but would buy below that but above the production cost. (deadweight loss)  Some say antitrust should address both problems bc it's a consumer welfare statute, others say it's a social welfare statute, so should only focus on deadweight loss, not wealth transfer 5  This is relevant to joint ventures because they may create efficiencies in production that lower production costs but also allow price raises to monopoly prices - if efficiency savings outweight deadweight loss, should antitrust laws be concerned?  Even more complicated depending on the way firms use resources to become monopolists - can "rent-seek" by trying to deter rivals from entering or raising rivals' costs (which hurts consumers); or may invest in R&D (which helps). Rule  Probably RR.  MAYBE per se if the agreement between competitors is to fix prices, rig bids or divide markets or if it's an agreement to destroy competition (AP) or if it's extraordinary, such as a geographic barrier to new competition. (Terminal Railroad).  BUT, Dagher said probably no room for per se for horizontal price fixing, at least when there's efficiencies. Rule of Reason Analysis (DOJ Guidelines)  basically, balance anticompetitive effects against legitimate interests  focuses on the state of competition with v. without the agreement - whether it would harm competition by increasing ability or incentive profitably to raise price above the status quo ante or reduce output, quality, service or innovation below it 1. Look at business purpose & whether the agreement has caused anticompetitive harm 2. If possible anticompetitive concerns, analyze in greater depth - 1. Define relevant markets 2. Calculate market shares & concentration  is it likely that the agreement may create or increase market power or facilitate its exercise? 3. Ability and incentive for participants to compete independently 4. Entry & other market circumstances that may foster or prevent anticompetitive harms. 3. If potential harm exists, consider whether the agreement is reasonably necessary to achieve offsetting pro-competitive benefits. 4. 6 factors relevant to whether participants can and would compete or collude  1. Non-exclusivity of the agreement - they're likely to continue to compete outside the collaboration market 2. Independent control of assets necessary to compete 3. Nature & extent of participants' financial interests in the collaboration or each other 4. Control of the coll's competitively significant decision making 5. Likelihood of anticompetitive info sharing 6. Duration of the coll Research/development joint ventures  special rules under National Cooperative Research Act - 1984  Definition of "joint research and development" o Beyond expected activities, Includes the "production of a product, process or service" o Excludes exchanging info related to cost, sales, profitability, pricing, etc.; marketing; sale licensing or sharing of inventions; restricting or requiring participation in other R&D activities  Use rule of reason.  Limited safe harbor for joint R&D ventures - Antitrust exposure limited to single damages & atty fees  D's who prevail in a challenge may recover costs & fees from P if the claim is found frivolous Patent Pools  special rules under DOJ letter Patent pool = any aggregation of patent rights for the purpose of joint package licensing. o Test - examine the pool's expected benefits & potential restraints on competition.  Benefits - competitive benefits; more efficient  Restraints - restrict competition among IP rights in the pool & in downstream products; innovation in the pool; foreclose competition in related markets  Competitive v. complementary patents  If patents could be competitive with each other, could raise price fixing & competitive problems.  BUT, if patents are complementary, could be efficient  To ensure that the pool only includes complementary rights, you limit it to patents that are essential - that have no substitutes.  Broadening it from "essential" entails 2 risks - could turn it into a price-fixing mechanism & could unreasonably foreclose the non-included patents from use by manufs  This seems to be only complementary patents, but the patent expert must be scrupulous & independent to make sure  Note  Probably NO room for a per se rule against horizontal price fixing in the context of a joint venture, at least where there's efficiency enhancing integration (Dagher)  Texaco Inc. v. Dagher (2006) - p.18supp - Texaco & Shell JV ("Equilon") to sell gas under their names in Western states; ended comp in domestic refining & marketing; FTC & states consented, & didn't set restrictions on pricing of the gas  Held § 1 SA only outlaws unreasonable restraints - presumptive RR, pre se only where plainly anticompetitive  Horizontal price fixing agreements are per se bc plainly anticomp, but this isn't one bc they didn't compete, but instead participated in the market via JV - might be price fixing literally, but not in the antitrust sense  Ct assumes the JV isn't a sham, so it's getting the usual efficiencies - if challenging the JV itself, must show anticompetitive under RR.  Wouldn't be per se illegal to sell under a single brand, so can't say it's per se to sell two brands at a single price; if it is anticompetitive, must challenge under RR.  Pito  Only argued per se horizontal price fixing; should have argued in alternative for RR 6   Not surprising that there's no room for a per se rule here for efficiency enhancing integration But, surprising that they call this price setting by a single entity - unclear what to make of it - don't see that much United States v. Terminal Railroad Association - p.379 (1912) - 3 railroads operated independent terminals, resulting in unnecessary duplication of facilities, but ensured competition; They formed an association & bound to use only Ass facilities & required unanimous consent to admit new roads or use of them by non-members - made it geographically impossible for new competitors.  HELD  illegal restraint of trade even though they didn't exclude all non-proprietary firms or charge exorbitant rates - normally it would be ok, but this is extraordinary - other firms simply cannot opt not to join & construct new terminals; and, the Ass engaged in practices bad for commerce & arbitrarily discriminated in prices  Pito  Remedy - must provide for admission to other RR, or provide services at fair & non-discriminatory rates; and must abolish discriminatory charges & billing practices. Associated Press v. United States - p.381 (1945) - US alleges combination & conspiracy in restraint of trade & commerce in news; and, attempt to monopolize part of that trade; By-Laws of AP prohibited members form selling news to non-members & granted members power to block non-member competitors from membership; basically impossible for non-members to get news from AP or members  HELD  The By-Laws are facially restraints of trade - doesn't matter whether they've resulted in trade yet (cites Socony) & doesn't matter whether they've achieved monopoly yet  And, in fact, did limit competition - it's a program to destroy competition.  Prohibited from, by contracts or combinations, express or implied, unduly hinder or obstruct the free & natural flow of commerce in the channels of interstate trade (cites Bausch & Lomb)  Can't use the collective power of an unlawful combination to hamper rivals  Doesn't matter that the object of sale is creative product.  THUS, can't treat as a program to encourage full freedom of sale & disposal of property by its owners  Thus, this contractual restraint of interstate trade, designed in the interest of preventing competition is illegal. V. Concerted Efforts to Influence Gov't Rule  If a restraint on trade or monopolization is the result of valid gov't action, as opposed to private action, NO violation of SA. (Noerr)  Note  only relevant if a group of firms approach the gov't - if one does it alone, it's not concerted & SA not implicated (Noerr)  Does NOT prohibit mere solicitation of gov't WRT the passage/enforcement of laws.  Rationale - SA only prohibits business activity, not political activity; 1st A right of petition; representative gov't relies on people to give info; legislature can protect itself thru staff/lawyers/etc  Intent doesn't matter - intent in Noerr was to destroy trucking comp - irrelevant.  Use of "third-party technique" doesn't matter - the act of making propaganda appear to be spontaneous declarations of independent groups when it's actually being circulated by a party in interest.  Knowing infliction of injury is irrelevant  Exception for "shams"  if the gov't solicitation & publicity campaign is a mere sham to cover a mere attempt to interfere directly with the business relationships of a competitor, SA may apply.  Is a sham if designed to bar competitors from meaningful access to administrative or judicial proceedings - California Motor Transport Co. v. Trucking Unlimited (1972) - alleged conspired to institute actions & federal agency proceedings to delay and defeat opponent applications for trucking operating rights - weren't seeking to influence public officials, but rather to bar competitors from meaningful access  Dicta - no perjury, no fraud on patents (California Motor)  Can't lie to administrative agency - Woods Exploration and Producing Co. v. Alcoa (5th Cir 1971) - false production forecasts not allowed before an administrative agency  Litigation can only be a sham if objectively baseless - only then can you consider subjective intent . (PRE)  Objective - That no reasonable litigant could reasonably expect success on the merits.  Subjective - whether the baseless lawsuit was an attempt to interfere directly w/business relationships of a competitor thru use of gov't process rather than the outcome of the process, as an anticompetitive weapon.  Existence of probable cause to sue is an absolute defense.  Repetitive litigation with insubstantial claims designed to prevent establishment of competitive systems is a sham - Otter Tail Power Co. v. United States (1973)  But, PRE  Litigation with intent to harm competition by the institution of the litigation rather than the result more likely to be sham - MCI Communications Corp. v. AT&T Co. (7th Cir 1983).  But, PRE  Conspiring to protest all tariff modifications w/o regard to merit in order to injury competition is a sham - Clipper Exxpress v. Rocky Mountain Motor Tariff Bureau, Inc. (9th 1982)  Partial success on the merits of litigation doesn't mean it can't be a sham - In re Burlington Northern Inc. (5th 1987)  Not a sham if it's a "genuine effort"; fact that it was successful indicates not a sham (Noerr) 7

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