United States v. United States Gypsum Co.Annotate this Case
438 U.S. 422 (1978)
U.S. Supreme Court
United States v. United States Gypsum Co., 438 U.S. 422 (1978)
United States v. United States Gypsum Co.
Argued March 1, 1978
Decided June 29, 1978
438 U.S. 422
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Several major gypsum board manufacturers and various of their officials were indicted for violations of § 1 of the Sherman Act by allegedly engaging in a price-fixing conspiracy. One of the types of actions allegedly taken in formulating and effectuating the conspiracy was interseller price verification, i.e., the practice of telephoning a competing manufacturer to determine the price being currently offered on gypsum board to a specific customer. After some of the defendants pleaded nolo contendere and were sentenced, the remaining defendants were convicted after a trial of some 19 weeks. The Government's case focused on the interseller price verification charge, which the defendants defended on the ground that the price information exchanges were to enable them to take advantage of the "meeting competition" defense contained in § 2(b) of the Clayton Act, as amended by the Robinson-Patman Act (which permits a seller to rebut a prima facie price discrimination charge by showing that a lower price to a purchaser was made in good faith to meet an equally low price of a competitor). On the verification issue, tho trial judge charged the jury that, if the price information exchanges were found to have been undertaken in good faith to comply with the Robinson-Patman Act, verification alone would not suffice to establish an illegal price-fixing agreement, but that, if the jury found that the effect of verification was to fix prices, then the parties would be presumed, as a matter of law, to have intended that result. The judge further charged that, since only a single conspiracy was alleged, liability could only be predicated on the knowing involvement of each defendant, considered individually, in the conspiracy alleged, the judge having refused the defendants' requested charge directing the jury to determine what kind of agreement, if any, existed as to each defendant before any could be found to be a member of the conspiracy. With respect to the defendants' evidence as to withdrawal from the conspiracy, the judge instructed the jury that withdrawal had to be established by either affirmative notice to every other member of the conspiracy or by disclosure of the illegal enterprise to law enforcement officials. The judge
refused the defendants' requested instruction that vigorous price competition during the period in question could also be considered as evidence of abandonment of the conspiracy. After all the testimony had been presented, the jurors were sequestered for deliberation, and apparently disagreement among them arose. After approximately seven days of deliberations, the foreman of the jury informed the judge that he wanted to discuss the jury's condition, and this resulted, with the parties' consent, in an ex parte meeting between the judge and the foreman. Most of the discussion at the meeting involved the jurors' deteriorating health, but the foreman also referred to the jury's deadlock; there followed an exchange strongly suggesting that the foreman may have carried away from the meeting the impression that the judge wanted a verdict "one way or the other." The jury rendered its guilty verdict the following morning. The Court of Appeals reversed the convictions on various grounds, holding, inter alia, that verification of price concessions with competitors for the sole purpose of taking advantage of the "meeting competition" defense of § 2(b) constitutes a "controlling circumstance" precluding liability under § 1 of the Sherman Act, and thus an instruction allowing the jury to ignore the defendants' purpose in engaging in the alleged misconduct could not be sustained.
1. A defendant's state of mind or intent is an element of a criminal antitrust offense which must be established by evidence and inferences drawn therefrom, and cannot be taken from the trier of fact through reliance on a legal presumption of wrongful intent from proof of an effect on prices. Since the trial judge's instruction on the verification issue had this prohibited effect, it was improper. Pp. 438 U. S. 434-446.
(a) The Sherman Act is not to be construed as mandating a regime of strict liability crimes; rather, the criminal offenses defined therein are to be construed as including intent as an element. Pp. 438 U. S. 436-443.
(b) Action undertaken with knowledge of its probable consequences and having the requisite anticompetitive effects can be a sufficient predicate for a finding of criminal liability under the antitrust laws. Where carefully planned and calculated conduct is being scrutinized in the context of a criminal prosecution, the perpetrator's knowledge of the anticipated consequences is a sufficient predicate for a finding of criminal intent. Pp. 438 U. S. 443-446.
2. A good faith belief, rather than an absolute certainty, that a price concession is being offered to meet an equally low price offered by a competitor suffices to invoke the § 2(b) defense; exchanges of price information, even when putatively for the purpose of Robinson-Patman Act compliance, must remain subject to close scrutiny under the Sherman
Act. Therefore, the Court of Appeals erred in treating interseller price verification even as a limited "controlling circumstance" exception precluding Sherman Act liability. Pp. 438 U. S. 447-459.
3. The ex parte meeting between the trial judge and the jury foreman was improper, and the Court of Appeals would have been justified in reversing the convictions solely because of the risk that the foreman believed the judge was insisting on a dispositive verdict. Such a meeting is pregnant with possibilities for error, since it is difficult to contain, much less to anticipate, the direction the conversation will take at such a meeting, any occasion which leads to communication with the whole jury panel through one juror inevitably risks innocent misstatements of the law and misinterpretations despite the undisputed good faith of the participants, and the absence of counsel from the meeting aggravates the problems of having one juror serve as a conduit for communication with the whole panel. Here the meeting was allowed to drift into a supplemental instruction relating to the jury's obligation to reach a verdict, and counsel were denied any chance to correct whatever mistaken impression the foreman might have taken from the meeting. Pp. 438 U. S. 459-462.
4. The trial judge's charge concerning participation in the conspiracy, although perhaps not completely clear, was sufficient, but his charge on withdrawal from the conspiracy was erroneous, since it limited the jury's consideration to only two circumscribed and arguably impractical methods of demonstrating withdrawal, rather than permitting consideration of any affirmative acts inconsistent with the object of the conspiracy and communicated in a manner reasonably calculated to reach coconspirators. Pp. 438 U. S. 462-465.
550 F.2d 115, affirmed.
BURGER, C J., delivered the opinion of the Court, in which BRENNAN, MARSHALL, and WHITE, JJ., joined; in all but Part IV of which STEWART, J., joined; in Parts I, II, V, and a portion of Part III of which POWELL, J., joined; in Part I and a portion of Part V of which REHNQUIST, J., joined; and in all but Part II of which STEVENS, J., joined. POWELL, J., filed an opinion concurring in part, post, p. 438 U. S. 469. REHNQUIST, J., post, p. 438 U. S. 471, and STEVENS, J., post, p. 438 U. S. 474, filed opinions concurring in part and dissenting in part. BLACKMUN, J., took no part in the consideration or decision of the case.
MR. CHIEF JUSTICE BURGER delivered the opinion of the Court.
This case presents the following questions: (a) whether intent is an element of a criminal antitrust offense; (b) whether an exchange of price information for purposes of compliance with the Robinson-Patman Act is exempt from Sherman Act scrutiny; (c) the adequacy of jury instructions on membership in and withdrawal from the alleged conspiracy; and (d) the propriety of an ex parte meeting between the trial judge and the foreman of the jury.
Gypsum board, a laminated type of wallboard composed of paper, vinyl, or other specially treated coverings over a gypsum core, has in the last 30 years substantially replaced wet plaster as the primary component of interior walls and ceilings in residential and commercial construction. The product is essentially fungible; differences in price, credit terms, and delivery services largely dictate the purchasers' choice between competing suppliers. Overall demand, however, is governed by the level of construction activity, and is only marginally affected by price fluctuations.
The gypsum board industry is highly concentrated, with the number of producers ranging from 9 to 15 in the period 1960-1973. The eight largest companies accounted for some 94% of the national sales, with the seven "single-plant producers" [Footnote 1] accounting for the remaining 6%. Most of the major producers and a large number of the single-plant producers are members of the Gypsum Association, which, since 1930, has served as a trade association of gypsum board manufacturers.
Beginning in 1966, the Justice Department, as well as the Federal Trade Commission, became involved in investigations into possible antitrust violations in the gypsum board industry. In 1971, a grand jury was empaneled and the investigation continued for an additional 28 months. In late 1973, an indictment was filed in the United States District Court for the Western District of Pennsylvania charging six major manufacturers and various of their corporate officials with violations of § 1 of the Sherman Act, ch. 647, 26 Stat. 209, as amended, 15 U.S.C. § 1. [Footnote 2]
The indictment charged that the defendants had engaged in a combination and conspiracy "[b]eginning sometime prior to 1960 and continuing thereafter at least until sometime in 1973," App. 34, in restraint of interstate trade and commerce in the manufacture and sale of gypsum board. The alleged combination and conspiracy consisted of:
"[A] continuing agreement understanding and concert of action among the defendants and coconspirators to (a) raise, fix, maintain and stabilize the prices of gypsum board; (b) fix, maintain and stabilize the terms and conditions of sale thereof; and (c) adopt and maintain uniform methods of packaging and handling such gypsum board."
The indictment proceeded to specify some 13 types of actions taken by conspirators "[i]n formulating and effectuating" the combination and conspiracy, the most relevant of which, for our purposes, is specification (h), which alleged that the conspirators
"telephoned or otherwise contacted one another to exchange and discuss current and future published or market prices and published or standard terms and conditions of sale and to ascertain alleged deviations therefrom."
The bill of particulars provided additional details about the continuing nature of the alleged exchanges of competitive information and the role played by such exchanges in policing adherence to the various other illegal agreements charged.
The first skirmish in the protracted litigation of this case was a motion for dismissal filed by the defendants alleging that their due process rights had been denied because of unreasonable preindictment delay. The District Court, after holding a five-day evidentiary hearing on the motion, concluded that there was "no evidence of unreasonable delay on the part of the Government," 383 F.Supp. 462, 470 (WD Pa. 1974), and that the defendants were not "prejudiced to any extraordinary degree whatsoever by the chain of events leading to this indictment." Ibid. The District Court denied a motion to dismiss the indictment. Thereafter, nine of the defendants entered pleas of nolo contendere and were sentenced. [Footnote 3] The trial of the remaining seven defendants commenced on March 3, 1975, and lasted some 19 weeks.
The focus of the Government's price-fixing case at trial was interseller price verification -- that is, the practice allegedly followed by the gypsum board manufacturers of telephoning a competing producer to determine the price currently being offered on gypsum board to a specific customer. The Government contended that these price exchanges were part of an agreement among the defendants, had the effect of stabilizing prices and policing agreed-upon price increases, and were undertaken on a frequent basis until sometime in 1973. Defendants disputed both the scope and duration of the verification activities, and further maintained that those exchanges of price information which did occur were for the purposes of complying with the Robinson-Patman Act [Footnote 4] and preventing customer fraud. These purposes, in defendants' view, brought the disputed communications among competitors within a "controlling circumstance" exception to Sherman Act liability -- at the extreme, precluding, as a matter of law, consideration of verification by the jury in determining defendants' guilt on the price-fixing charge, and, at the minimum, making the defendants' purposes in engaging in such communications a threshold factual question.
The instructions on the verification issue given by the trial judge provided that, if the exchanges of price information were deemed by the jury to have been undertaken "in a good faith effort to comply with the Robinson-Patman Act," verification, standing alone, would not be sufficient to establish an illegal price-fixing agreement. The paragraphs immediately following, however, provided that the purpose was essentially irrelevant if the jury found that the effect of verification was to raise,
fix, maintain, or stabilize prices. The instructions on verification closed with the observation:
"The law presumes that a person intends the necessary and natural consequences of his acts. Therefore, if the effect of the exchanges of pricing information was to raise, fix, maintain, and stabilize prices, then the parties to them are presumed, as a matter of law, to have intended that result."
The aspects of the charge dealing with the Government's burden in linking a particular defendant to the conspiracy, and the kinds of evidence the jury could properly consider in determining if one or more of the alleged conspirators had withdrawn from or abandoned the conspiracy were also a subject of some dispute between the judge and defense counsel. On the former, the disagreement was essentially over the proper specificity of the charge. Defendants requested a charge directing the jury to determine "what kind of agreement or understanding, if any, existed as to each defendant" before any could be found to be a member of the conspiracy. The trial judge was unwilling to give this precise instruction, and instead emphasized at several points in the charge the jury's obligation to consider the evidence regarding the involvement of each defendant individually, and to find, as a precondition to liability, that each defendant was a knowing participant in the alleged conspiracy. [Footnote 5]
On the matter of withdrawal from the conspiracy, defendants sought an instruction stating explicitly that evidence of vigorous price competition during the period covered by the indictment could be considered by the jury as indicating abandonment of the charged conspiracy by one or more of the defendants. Substantial evidence on this subject had been
presented by the defendants in the course of the trial. The judge again was unwilling to accept defendants' construction of the applicable law, and substituted an instruction specifying that withdrawal had to be established by either affirmative notice to each other member of the conspiracy or by disclosure of the illegal enterprise to law enforcement officials. The trial judge allowed the defendants to argue their theory of withdrawal to the jury despite his unwillingness to refer to it explicitly in his charge.
The jury retired to deliberate early on the evening of Tuesday, July 8, 1975. Supplemental instructions were given in response to questions from the jury on Wednesday and Thursday, and the hours of deliberation were shortened on Friday after the court was informed that some of the jurors were exhausted, and not feeling well. On Saturday, after responding to further requests from the jury, the judge, sua sponte, in open court, used the supplemental instruction approved by the Court of Appeals [Footnote 6] to remind the jurors of their obligation to continue the deliberations. Essentially the same instruction was given to the jury again on Sunday, after the judge had received a note detailing the jury's inability to reach a unanimous verdict.
On Monday, the court received yet another note from the jury, this time stating that the foreman wished to "discuss the condition of the Jury" and to seek "further guidance" from the judge. The judge suggested to counsel that he confer privately with the foreman and that a transcript of the meeting be kept, but impounded. The judge indicated that, if his suggestion was rejected he would simply deny the foreman's request for the meeting. In response to questions from counsel, the judge stated that the purpose of the meeting would be to determine if the jury was in serious physical condition, and
he further indicated that no instructions on the law would be given to the foreman without calling in the jury and instructing them in open court with counsel present. [Footnote 7] After further discussion, all counsel agreed, albeit somewhat reluctantly, to the proposed meeting.
Most of the discussion between the jury foreman and the judge concerned the deteriorating state of health of the jurors after almost five months on the case followed by five days of intensive deliberations and the existence of personality conflicts among the members of the panel. The foreman also stressed at least twice during the conversation with the judge his belief that the jury was unable to reach a verdict, and that further discussion would not eliminate the disagreements which existed. The judge indicated that, while he would take into consideration what the foreman had said, he wanted the jury to continue its deliberations. Near the close of the meeting, the following colloquy took place:
"THE COURT. I would like to ask the jurors to continue their deliberations, and I will take into consideration what you have told me. That is all I can say."
"MR. RUSSELL. I appreciate it. It is a situation I don't know how to help you get what you are after."
"THE COURT. Oh, I am not after anything."
"MR. RUSSELL. You are after a verdict one way or the other."
"THE COURT. Which way it goes doesn't make any difference to me. [Footnote 8]"
Shortly thereafter, the foreman returned to the jury room and deliberations continued. The judge then informed counsel, in abbreviated fashion, what had transpired at the meeting with the foreman, and of his direction that the deliberations
continue. [Footnote 9] Defense counsel asked to see the transcript of the in camera meeting, and moved for a mistrial because of the jury's apparent deadlock. These requests were denied, [Footnote 10] although the judge indicated that, if no verdict were rendered by the following Friday, he would then reconsider the mistrial motions. The following morning, the jury returned guilty verdicts against each of the defendants.
The Court of Appeals for the Third Circuit reversed the convictions. 550 F.2d 115 (1977). The panel was unanimous in its rejection of the claim of preindictment delay, but divided over the proper disposition of the remaining issues.
Two judges agreed that the trial judge erred in instructing the jury that an effect on prices resulting from an agreement to exchange price information made out a Sherman Act violation regardless of whether respondents' sole purpose in engaging in such exchanges was to establish a defense to price discrimination charges. Instead, they regarded such a purpose, if certain conditions were met, [Footnote 11] as constituting a "controlling
circumstance" which, under United States v. Container Corp.,393 U. S. 333 (1969), would excuse what might otherwise constitute an antitrust violation. One judge considered the instructions regarding the purpose and scope of the conspiracy and the kinds of conduct necessary to demonstrate a withdrawal therefrom to be infirm, while another concluded that the convictions should be reversed because the trial judge "improperly induced" the jury into reaching a verdict during the in camera conversation with the foreman.
One judge, in dissent, would have sustained the convictions. He regarded the charge on verification to be consistent with Container Corp., and rejected the notion that the Robinson-Patman Act required the exchange of price information even in the limited circumstances identified by the majority. Neither of the alleged infirmities in the general conspiracy instructions, in his view, afforded any basis for reversal, and he disagreed with the characterization of the trial judge's conduct as coercing a verdict.
We granted certiorari, 434 U.S. 815 (1977), and we affirm.
We turn first to consider the jury instructions regarding the elements of the price-fixing offense charged in the indictment. Although the trial judge's instructions on the price-fixing issue are not without ambiguity, it seems reasonably clear that he regarded an effect on prices as the crucial element of the charged offense. The jury was instructed that, if it found interseller verification had the effect of raising, fixing, maintaining, or stabilizing the price of gypsum board, then such verification could be considered as evidence of an agreement to so affect prices. They were further charged, and it is this point which gives rise to our present concern, that,
"if the effect of the exchanges of pricing information was to raise, fix, maintain, and stabilize prices, then the parties to them are presumed, as a matter of law, to have intended that result."
App. 1722. (Emphasis added.)
The Government characterizes this charge as entirely consistent with
"this Court's longstanding rule that an agreement among sellers to exchange information on current offering prices violates Section 1 of the Sherman Act if it has either the purpose or the effect of stabilizing prices,"
Reply Brief for United States 1, and relies primarily on our decision in United States v. Container Corp., supra, a civil case, to support its position. See also American Column & Lumber Co. v. United States,257 U. S. 377 (1921); United States v. American Linseed Oil Co.,262 U. S. 371 (1923); Maple Flooring Mfg. Assn. v. United States,268 U. S. 563 (1925); Cement Mfrs. Protective Assn. v. United States,268 U. S. 588 (1925). In this view, the trial court's instructions would not be erroneous, even if interpreted, as they were by the Court of Appeals, to direct the jury to convict if it found that verification had an effect on prices, regardless of the purpose of the respondents. The Court of Appeals rejected the Government's "effects alone" test, holding instead that, in certain limited circumstances, a purpose of complying with the Robinson-Patman Act would constitute a controlling circumstance excusing Sherman Act liability, and hence an instruction allowing the jury to ignore purpose could not be sustained.
We agree with the Court of Appeals that an effect on prices, without more, will not support a criminal conviction under the Sherman Act, but we do not base that conclusion on the existence of any conflict between the requirements of the Robinson-Patman and the Sherman Acts. [Footnote 12] Rather, we hold that a defendant's state of mind or intent is an element of a criminal antitrust offense which must be established by evidence and inferences drawn therefrom, and cannot be taken from the trier of fact through reliance on a legal presumption of wrongful intent from proof of an effect on prices. Cf. Morissette v. United States,342 U. S. 246, 342 U. S. 274-275 (1952). Since the challenged instruction, as we read it, had this prohibited
effect, it is disapproved. We are unwilling to construe the Sherman Act as mandating a regime of strict liability criminal offenses. [Footnote 13]
We start with the familiar proposition that "[t]he existence of a mens rea is the rule of, rather than the exception to, the principles of Anglo-American criminal jurisprudence." Dennis v. United States,341 U. S. 494, 341 U. S. 500 (1951). See also United States v. Freed,401 U. S. 601, 401 U. S. 613 (1971) (BRENNAN, J., concurring in judgment); United States v. Balint,258 U. S. 250, 258 U. S. 251-253 (1922). In a much-cited passage in Morissette v. United States, supra at 342 U. S. 250-251, Mr. Justice Jackson, speaking for the Court, observed:
"The contention that an injury can amount to a crime only when inflicted by intention is no provincial or transient notion. It is as universal and persistent in mature systems of law as belief in freedom of the human will and a consequent ability and duty of the normal individual to choose between good and evil. A relation between some mental element and punishment for a harmful act is almost as instinctive as the child's familiar exculpatory 'But I didn't mean to,' and has afforded the rational basis for a tardy and unfinished substitution of deterrence and reformation in place of retaliation and vengeance as the motivation for public prosecution. Unqualified acceptance of this doctrine by English common
law in the Eighteenth Century was indicated by Blackstone's sweeping statement that, to constitute any crime, there must first be a 'vicious will.'"
(Footnotes omitted.) Although Blackstone's requisite "vicious will" has been replaced by more sophisticated and less colorful characterizations of the mental state required to support criminality, see ALI, Model Penal Code § 2.02 (Prop.Off.Draft 1962), intent generally remains an indispensable element of a criminal offense. This is as true in a sophisticated criminal antitrust case as in one involving any other criminal offense.
This Court, in keeping with the common law tradition and with the general injunction that "ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity," Rewis v. United States,401 U. S. 808, 401 U. S. 812 (1971), has on a number of occasions read a state-of-mind component into an offense even when the statutory definition did not in terms so provide. See, e.g., Morissette v. United States, supra.Cf. Lambert v. California,355 U. S. 225 (1957). Indeed, the holding in Morissette can be fairly read as establishing, at least with regard to crimes having their origin in the common law, an interpretative presumption that mens rea is required. "[M]ere omission . . . of intent [in the statute] will not be construed as eliminating that element from the crimes denounced"; instead Congress will be presumed to have legislated against the background of our traditional legal concepts which render intent a critical factor, and "absence of contrary direction [will] be taken as satisfaction with widely accepted definitions, not as a departure from them." 342 U.S. at 342 U. S. 263.
While strict liability offenses are not unknown to the criminal law, and do not invariably offend constitutional requirements, see Shevlin-Carpenter Co. v. Minnesota,218 U. S. 57 (1910), the limited circumstances in which Congress has created and this Court has recognized such offenses, see e.g.,
United States v. Balint, supra; United States v. Behrman,258 U. S. 280 (1922); United States v. Dotterweich,320 U. S. 277 (1943); United States v. Freed, supra, attest to their generally disfavored status. See generally ALI, Model Penal Code, Comment on § 2.05, p. 140 (Tent. Draft No. 4, 1955); W. LaFave & A. Scott, Criminal Law 222-223 (1972). Certainly far more than the simple omission of the appropriate phrase from the statutory definition is necessary to justify dispensing with an intent requirement. In the context of the Sherman Act, this generally inhospitable attitude to non-mens rea offenses is reinforced by an array of considerations arguing against treating antitrust violations as strict liability crimes.
The Sherman Act, unlike most traditional criminal statutes, does not, in clear and categorical terms, precisely identify the conduct which it proscribes. [Footnote 14] Both civil remedies and criminal sanctions are authorized with regard to the same generalized definitions of the conduct proscribed -- restraints of trade or commerce and illegal monopolization -- without reference to or mention of intent or state of mind. Nor has judicial elaboration of the Act always yielded the clear and definitive rules of conduct which the statute omits; instead open-ended and fact-specific standards like the "rule of reason" have been applied to broad classes of conduct falling within the purview of the Act's general provisions. See, e.g., Standard Oil Co. v. United States,221 U. S. 1, 221 U. S. 60 (1911); United
States v. Topco Associates,405 U. S. 596, 405 U. S. 607 (1972); Continental T.V., Inc. v. GTE Sylvania Inc.,433 U. S. 36, 433 U. S. 49 (1977). Simply put, the Act has not been interpreted as if it were primarily a criminal statute; it has been construed to have a "generality and adaptability comparable to that found to be desirable in constitutional provisions." Appalachian Coals, Inc. v. United States,288 U. S. 344, 288 U. S. 359-360 (1933). See generally 2 P. Areeda & D. Turner, Antitrust Law § 310 (1978).
Although, in Nash v. United States,229 U. S. 373, 229 U. S. 376-378 (1913), the Court held that the indeterminacy of the Sherman Act's standards did not constitute a fatal constitutional objection to their criminal enforcement, nevertheless, this factor has been deemed particularly relevant by those charged with enforcing the Act in accommodating its criminal and remedial sanctions. The 1955 Report of the Attorney General's National Committee to Study the Antitrust Laws concluded that the criminal provisions of the Act should be reserved for those circumstances where the law was relatively clear and the conduct egregious:
"The Sherman Act, inevitably perhaps, is couched in language broad and general. Modern business patterns, moreover, are so complex that market effects of proposed conduct are only imprecisely predictable. Thus, it may be difficult for today's businessman to tell in advance whether projected actions will run afoul of the Sherman Act's criminal strictures. With this hazard in mind, we believe that criminal process should be used only where the law is clear and the facts reveal a flagrant offense and plain intent unreasonably to restrain trade."
Report of the Attorney General's National Committee to Study the Antitrust Laws 349 (1955). The Antitrust Division of the Justice Department took a similar, though slightly more moderate, position in its enforcement
guidelines issued contemporaneously with the 1955 Report of the Attorney General's Committee:
"In general, the following types of offenses are prosecuted criminally: (1) price-fixing; (2) other violations of the Sherman Act where there is proof of a specific intent to restrain trade or to monopolize; (3) a less easily defined category of cases which might generally be described as involving proof of use of predatory practices (boycotts for example) to accomplish the objective of the combination or conspiracy; (4) the fact that a defendant has previously been convicted of or adjudged to have been, violating the antitrust laws may warrant indictment for a second offense. . . . The Division feels free to seek an indictment in any case where a prospective defendant has knowledge that practices similar to those in which he is engaging have been held to be in violation of the Sherman Act in a prior civil suit against other persons. [Footnote 15]"
Id. at 350.
While not dispositive of the question now before us, the recommendations of the Attorney General's Committee and the guidelines promulgated by the Justice Department highlight the same basic concerns which are manifested in our general requirement of mens rea in criminal statutes and suggest that these concerns are at least equally salient in the antitrust context.
Close attention to the type of conduct regulated by the Sherman Act buttresses this conclusion. With certain exceptions for conduct regarded as per se illegal because of its unquestionably anticompetitive effects, see, e.g., United States v. Socony-Vacuum Oil Co.,310 U. S. 150 (1940), the behavior
proscribed by the Act is often difficult to distinguish from the gray zone of socially acceptable and economically justifiable business conduct. Indeed, the type of conduct charged in the indictment in this case -- the exchange of price information among competitors -- is illustrative in this regard. [Footnote 16] The imposition of criminal liability on a corporate official, or for that matter on a corporation directly, for engaging in such conduct which only after the fact is determined to violate the statute because of anticompetitive effects, without inquiring into the intent with which it was undertaken, holds out the distinct possibility of overdeterrence; salutary and procompetitive conduct lying close to the borderline of impermissible conduct might be shunned by businessmen who chose to be excessively cautious in the face of uncertainty regarding possible exposure to criminal punishment for even a good faith error of judgment. [Footnote 17] See 2 P. Areeda & D. Turner, Antitrust Law 29
(1978); R. Bork, The Antitrust Paradox 78 (1978); Kadish, Some Observations On the Use of Criminal Sanctions in Enforcing Economic Regulations, 30 U.Chi.L.Rev. 423, 441-442 (1963). Further, the use of criminal sanctions in such circumstances would be difficult to square with the generally accepted functions of the criminal law. See Hart, The Aims of the Criminal Law, 23 Law & Contemp. Prob. 401, 422-425 (1958); ALI, Model Penal Code, Comment on § 2.05, p. 140 (Tent. Draft No. 4, 1955). The criminal sanctions would be used not to punish conscious and calculated wrongdoing at odds with statutory proscriptions, but instead simply to regulate business practices regardless of the intent with which they were undertaken. While, in certain cases, we have imputed a regulatory purpose to Congress in choosing to employ criminal sanctions, see, e.g., United States v. Balint,258 U. S. 250 (192), the availability of a range of nonpenal alternatives to the criminal sanctions of the Sherman Act negates the imputation of any such purpose to Congress in the instant context. [Footnote 18] See generally Baker, To Indict or Not To Indict:
Prosecutorial Discretion in Sherman Act Enforcement, 63 Cornell L.Rev. 405 (1978).
For these reasons, we conclude that the criminal offenses defined by the Sherman Act should be construed as including intent as an element. [Footnote 19]
Having concluded that intent is a necessary element of a criminal antitrust violation, the task remaining is to treat the practical aspects of this requirement. [Footnote 20] As we have noted, the language of the Act provides minimal assistance in determining what standard of intent is appropriate, and the sparse legislative
history of the criminal provisions is similarly unhelpful. We must therefore turn to more general sources and traditional understandings of the nature of the element of intent in the criminal law. In so doing, we must try to avoid "the variety, disparity and confusion" of judicial definitions of the "requisite but elusive mental element" of criminal offenses. Morissette v. United States, 342 U.S. at 342 U. S. 252.
The ALI Model Penal Code is one source of guidance upon which the Court has relied to illuminate questions of this type. Cf. Leary v. United States,395 U. S. 6, 395 U. S. 46 n. 93 (1969); Turner v. United States,396 U. S. 398, 396 U. S. 416 n. 29 (1970). Recognizing that "mens rea is not a unitary concept," United States v. Freed, 401 U.S. at 401 U. S. 613 (BRENNAN, J., concurring in judgment), the Code enumerates four possible levels of intent -- purpose, knowledge, recklessness, and negligence. In dealing with the kinds of business decisions upon which the antitrust laws focus, the concepts of recklessness and negligence have no place. Our question, instead, is whether a criminal violation of the antitrust laws requires, in addition to proof of anticompetitive effects, a demonstration that the disputed conduct was undertaken with the "conscious object" of producing such effects, or whether it is sufficient that the conduct is shown to have been undertaken with knowledge that the proscribed effects would most likely follow. While the difference between these formulations is a narrow one, see ALI, Model Penal Code, Comment on § 2.02, p. 125 (Tent.Draft No. 4, 1955), we conclude that action undertaken with knowledge of its probable consequences and having the requisite anticompetitive effects can be a sufficient predicate for a finding of criminal liability under the antitrust laws. [Footnote 21]
Several considerations fortify this conclusion. The element of intent in the criminal law has traditionally been viewed as a bifurcated concept embracing either the specific requirement of purpose or the more general one of knowledge or awareness.
"[I]t is now generally accepted that a person who acts (or omits to act) intends a result of his act (or omission) under two quite different circumstances: (1) when he consciously desires that result, whatever the likelihood of that result happening from his conduct; and (2) when he knows that the result is practically certain to follow from his conduct, whatever his desire may be as to that result."
W. LaFave & A. Scott, Criminal Law 196 (1972). See also G. Williams, Criminal Law: The General Part §§ 16, 18 (2d ed.1961); Cook, Act, Intention, and Motive in the Criminal Law, 26 Yale L.J. 645, 653-65 (1917); Perkins, A Rationale of Mens Rea, 52 Harv.L.Rev. 905, 910-911 (1939). Generally this limited distinction between knowledge and purpose has not been considered important, since "there is good reason for imposing liability whether the defendant desired or merely knew of the practical certainty of the results." LaFave & Scott, supra at 197. See also ALI, Model Penal Code, Comment on § 2.02, p. 125 (Tent.Draft No. 4, 1955). In either circumstance, the defendants are consciously behaving in a way the law prohibits, and such conduct is a fitting object of criminal punishment. See 1 Working Papers of the National Commission on Reform of Federal Criminal Laws 124 (1970).
Nothing in our analysis of the Sherman Act persuades us that this general understanding of intent should not be applied to criminal antitrust violations such as charged here. The business behavior which is likely to give rise to criminal antitrust charges is conscious behavior normally undertaken
only after a full consideration of the desired results and a weighing of the costs, benefits, and risks. A requirement of proof not only of this knowledge of likely effects, but also of a conscious desire to bring them to fruition or to violate the law would seem, particularly in such a context, both unnecessarily cumulative and unduly burdensome. Where carefully planned and calculated conduct is being scrutinized in the context of a criminal prosecution, the perpetrator's knowledge of the anticipated consequences is a sufficient predicate for a finding of criminal intent.
When viewed in terms of this standard, the jury instructions on the price-fixing charge cannot be sustained. "A conclusive presumption [of intent] which testimony could not overthrow would effectively eliminate intent as an ingredient of the offense." Morissette, supra at 342 U. S. 275. The challenged jury instruction, as we read it, had precisely this effect; the jury was told that the requisite intent followed, as a matter of law, from a finding that the exchange of price information had an impact on prices. Although an effect on prices may well support an inference that the defendant had knowledge of the probability of such a consequence at the time he acted, the jury must remain free to consider additional evidence before accepting or rejecting the inference. Therefore, although it would be correct to instruct the jury that it may infer intent from an effect on prices, ultimately the decision on the issue of intent must be left to the trier of fact alone. The instruction given invaded this factfinding function. [Footnote 22]
Our construction of the Sherman Act to require proof of intent as an element of a criminal antitrust violation leaves
unresolved the question upon which the Court of Appeals focused, whether verification of price concessions with competitors for the sole purpose of taking advantage of the § 2(b) "meeting competition" defense should be treated as a "controlling circumstance" precluding liability under § 1 of the Sherman Act. We now turn to that question. [Footnote 23]
In Cement Mfrs. Protective Assn. v. United States,268 U. S. 588 (1925), the Court held exempt from Sherman Act § 1 liability an exchange of price information among competitors because the exchange of information was necessary to protect the cement manufacturers from fraudulent behavior by contractors. [Footnote 24] Over 40 years later, in United States v. Container Corp., 393 U.S. at 393 U. S. 335, Mr. Justice Douglas characterized the Cement holding in the following terms:
"While there was present here, as in Cement Mfrs. Protective Assn. v. United States,268 U. S. 588, an exchange of prices to specific customers, there was absent the controlling
circumstance, viz., that cement manufacturers, to protect themselves from delivering to contractors more cement than was needed for a specific job, and thus receiving a lower price, exchanged price information as a means of protecting their legal rights from fraudulent inducements to deliver more cement than needed for a specific job."
The use of the phrase "controlling circumstance" in Container Corp. implied that the exception from Sherman Act liability recognized in Cement Mfrs. was not necessarily limited to the special circumstances of that case, although the exact scope of the exception remained largely undefined.
Since Container Corp., several courts have read the "controlling circumstance" exception as encompassing exchanges of price information when undertaken for the purpose of compliance with § 2(b) of the Clayton Act, as amended by the Robinson-Patman Act. See, e.g., Belliston v. Texaco, Inc., 455 F.2d 175, 181-182 (CA10 1972); Wall Products Co. v. National Gypsum Co., 326 F.Supp. 295, 312-315 (ND Cal.1971). [Footnote 25] The Court of Appeals in the instant case essentially adopted the same tack -- albeit with some additional limitations [Footnote 26] -- finding such a step necessary to eliminate a perceived conflict between the Sherman Act's proscriptions regarding the exchange of price information among competitors and the claimed necessity of such exchanges to perfect the § 2(b) defense. The Government challenges that resolution on two grounds: first, that there is no general "controlling circumstance" exception to the Sherman Act, and second, that, in any event, there is no conflict between the two antitrust statutes which would require the prohibitions of the Sherman Act to
be tempered even to the degree mandated by the Court of Appeals' carefully circumscribed holding in this case. We agree generally with the Government as to the proper accommodation of the Sherman and Robinson-Patman Acts, and therefore find it unnecessary to address the more general question going to the existence and proper scope of the so-called "controlling circumstance" exception.
Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(a) (1976 ed.), embodies a general prohibition of price discrimination between buyers when an injury to competition is the consequence. The primary exception to the § 2(a) bar is the "meeting competition" defense which is incorporated as a proviso to the burden of proof requirements set out in § 2(b):
"Provided, however, That nothing herein contained shall prevent a seller rebutting the prima facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor."
The role of the § 2(b) proviso in tempering the § 2(a) prohibition of price discrimination was highlighted in Standard Oil Co. v. FTC,340 U. S. 231 (1951). There we recognized the potential tension between the rationales underlying the Sherman and Robinson-Patman Acts, and sought to effect a partial accommodation by construing § 2(b) to provide an absolute defense to liability for price discrimination.
"We need not now reconcile, in its entirety, the economic theory which underlies the Robinson-Patman Act with that of the Sherman and Clayton Acts. It is enough to say that Congress did not seek by the Robinson-Patman Act either to abolish competition or so radically to curtail it that a seller would have no substantial right of self-defense
against a price raid by a competitor. For example, if a large customer requests his seller to meet a temptingly lower price offered to him by one of his seller's competitors, the seller may well find it essential, as a matter of business survival, to meet that price, rather than to lose the customer. . . . There is . . . plain language and established practice which permits a seller, through § 2(b), to retain a customer by realistically meeting in good faith the price offered to that customer, without necessarily changing the seller's price to its other customers."
340 U.S. at 340 U. S. 249-250.
In FTC v. A. E. Staley Mfg. Co.,324 U. S. 746 (1945), the Court provided the first and still the most complete explanation of the kind of showing which a seller must make in order to satisfy the good faith requirement of the § 2(b) defense:
"Section 2(b) does not require the seller to justify price discriminations by showing that, in fact, they met a competitor's price. But it does place on the seller the burden of showing that the price was made in good faith to meet a competitor's. . . . We agree with the Commission that the statute at least requires the seller, who has knowingly discriminated in price, to show the existence of facts which would lead a reasonable and prudent person to believe that the granting of a lower price would in fact meet the equally low price of a competitor."
Id. at 324 U. S. 759-760. Application of these standards to the facts in Staley led to the conclusion that the § 2(b) defense had not been made out. The record revealed that the lower price had been based simply on reports of salesmen, brokers, or purchasers, with no efforts having been made by the seller "to investigate or verify" the reports or the character and reliability of the informants. 324 U.S. at 324 U. S. 758. Similarly, in Corn Products Co. v. FTC,324 U. S. 726 (1945), decided the same day, the § 2(b) defense was not allowed because
"[t]he only evidence said to
rebut the prima facie case . . . of the price discriminations was given by witnesses who had no personal knowledge of the transactions, and was limited to statements of each witness's assumption or conclusion that the price discriminations were justified by competition."
324 U.S. at 324 U. S. 741.
Staley's "investigate or verify" language, coupled with Corn Products' focus on "personal knowledge of the transactions," have apparently suggested to a number of courts that, at least in certain circumstances, direct verification of discounts between competitors may be necessary to meet the burden of proof requirements of the § 2(b) defense. See Gray v. Shell Oil Co., 469 F.2d 742, 746-747 (CA9 1972); Belliston v. Texaco, Inc., 455 F.2d at 181-182; Webster v. Sinclair Refining Co., 338 F.Supp. 248, 251-252 (SD Ala. 1971); Wall Products Co. v. National Gypsum Co., 326 F.Supp. at 312-315; Di-Wall, Inc. v. Fibreboard Corp., 1970 Trade Cases
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