Petitioner Copperweld Corp. purchased petitioner Regal Tube Co.,
a manufacturer of steel tubing, from Lear Siegler, Inc., which had
operated Regal as an unincorporated division, and which, under the
sale agreement, was bound not to compete with Regal for five years.
Copperweld then transferred Regal's assets to a newly formed,
wholly owned subsidiary. Shortly before Copperweld acquired Regal,
David Grohne, who previously had been an officer of Regal, became
an officer of Lear Siegler, and, while continuing to work for Lear
Siegler, formed respondent corporation to compete with Regal.
Respondent then gave Yoder Co. a purchase order for a tubing mill,
but Yoder voided the order when it received a letter from
Copperweld warning that Copperweld would be greatly concerned if
Grohne contemplated competing with Regal, and promising to take the
necessary steps to protect Copperweld's rights under the
noncompetition agreement with Lear Siegler. Respondent then
arranged to have a mill supplied by another company. Thereafter,
respondent filed an action in Federal District Court against
petitioners and Yoder. The jury found,
inter alia, that
petitioners had conspired to violate § 1 of the Sherman Act, but
that Yoder was not part of the conspiracy, and awarded treble
damages against petitioners. The Court of Appeals affirmed. Noting
that the exoneration of Yoder from antitrust liability left a
parent corporation and its wholly owned subsidiary as the only
parties to the § 1 conspiracy, the court questioned the wisdom of
subjecting an "intra-enterprise" conspiracy to antitrust liability,
but held that such liability was appropriate "when there is enough
separation between the two entities to make treating them as two
independent actors sensible," and that there was sufficient
evidence for the jury to conclude that Regal was more like a
separate corporate entity than a mere service arm of the
parent.
Held: Petitioner Copperweld and its wholly owned
subsidiary, petitioner Regal, are incapable of conspiring with each
other for purposes of 1 of the Sherman Act. Pp.
467 U. S.
759-777.
(a) While this Court has previously seemed to acquiesce in the
"intra-enterprise conspiracy" doctrine, which provides that § 1
liability is not
Page 467 U. S. 753
foreclosed merely because a parent and its subsidiary are
subject to common ownership, the Court has never explored or
analyzed in detail the justifications for such a rule. Pp.
467 U. S.
759-766.
(b) Section 1 of the Sherman Act, in contrast to § 2, reaches
unreasonable restraints of trade effected by a "contract,
combination . . . or conspiracy" between separate entities, and
does not reach conduct that is "wholly unilateral." Pp.
467 U. S.
767-769.
(c) The coordinated activity of a parent and its wholly owned
subsidiary must be viewed as that of a single enterprise for
purposes of § 1 of the Sherman Act. A parent and its wholly owned
subsidiary have a complete unity of interest. Their objectives are
common, not disparate, and their general corporate objectives are
guided or determined not by two separate corporate consciousnesses,
but one. With or without a formal "agreement," the subsidiary acts
for the parent's benefit. If the parent and subsidiary "agree" to a
course of action, there is no sudden joining of economic resources
that had previously served different interests, and there is no
justification for § 1 scrutiny. In reality, the parent and
subsidiary always have a "unity of purpose or a common design." The
"intra-enterprise conspiracy" doctrine relies on artificial
distinctions, looking to the form of an enterprise's structure and
ignoring the reality. Antitrust liability should not depend on
whether a corporate subunit is organized as an unincorporated
division or a wholly owned subsidiary. Here, nothing in the record
indicates any meaningful difference between Regal's operations as
an unincorporated division of Lear Siegler and its later operations
as a wholly owned subsidiary of Copperweld. Pp.
467 U. S.
771-774.
(d) The appropriate inquiry in this case is not whether the
coordinated conduct of a parent and its wholly owned subsidiary may
ever have anticompetitive effects or whether the term "conspiracy"
will bear a literal construction that includes a parent and its
subsidiaries, but rather whether the logic underlying Congress'
decision to exempt unilateral conduct from scrutiny under § 1 of
the Sherman Act similarly excludes the conduct of a parent and
subsidiary. It can only be concluded that the coordinated behavior
of a parent and subsidiary falls outside the reach of § 1. Any
anticompetitive activities of corporations and their wholly owned
subsidiaries meriting antitrust remedies may be policed adequately
without resort to an "intra-enterprise conspiracy" doctrine. A
corporation's initial acquisition of control is always subject to
scrutiny under § 1 of the Sherman Act and § 7 of the Clayton Act,
and thereafter the enterprise is subject to § 2 of the Sherman Act
and § 5 of the Federal Trade Commission Act. Pp.
467 U. S.
774-777.
691 F.2d 310, reversed.
Page 467 U. S. 754
BURGER, C.J., delivered the opinion of the Court, in which
BLACKMUN, POWELL, REHNQUIST, and O'CONNOR, JJ., joined. STEVENS,
J., filed a dissenting opinion, in which BRENNAN and MARSHALL, JJ.,
joined,
post p.
467 U. S. 778.
WHITE, J., took no part in the consideration or decision of the
case.
Page 467 U. S. 755
CHIEF JUSTICE BURGER delivered the opinion of the Court.
We granted certiorari to determine whether a parent corporation
and its wholly owned subsidiary are legally capable of conspiring
with each other under § 1 of the Sherman Act.
I
A
The predecessor to petitioner Regal Tube Co. was established in
Chicago in 1955 to manufacture structural steel
Page 467 U. S. 756
tubing used in heavy equipment, cargo vehicles, and
construction. From 1955 to 1968, it remained a wholly owned
subsidiary of C. E. Robinson Co. In 1968, Lear Siegler, Inc.,
purchased Regal Tube Co. and operated it as an unincorporated
division. David Grohne, who had previously served as vice-president
and general manager of Regal, became president of the division
after the acquisition.
In 1972, petitioner Copperweld Corp. purchased the Regal
division from Lear Siegler; the sale agreement bound Lear Siegler
and its subsidiaries not to compete with Regal in the United States
for five years. Copperweld then transferred Regal's assets to a
newly formed, wholly owned Pennsylvania corporation, petitioner
Regal Tube Co. The new subsidiary continued to conduct its
manufacturing operations in Chicago, but shared Copperweld's
corporate headquarters in Pittsburgh.
Shortly before Copperweld acquired Regal, David Grohne accepted
a job as a corporate officer of Lear Siegler. After the
acquisition, while continuing to work for Lear Siegler, Grohne set
out to establish his own steel tubing business to compete in the
same market as Regal. In May, 1972, he formed respondent
Independence Tube Corp., which soon secured an offer from the Yoder
Co. to supply a tubing mill. In December, 1972, respondent gave
Yoder a purchase order to have a mill ready by the end of December,
1973.
When executives at Regal and Copperweld learned of Grohne's
plans, they initially hoped that Lear Siegler's noncompetition
agreement would thwart the new competitor. Although their lawyer
advised them that Grohne was not bound by the agreement, he did
suggest that petitioners might obtain an injunction against
Grohne's activities if he made use of any technical information or
trade secrets belonging to Regal. The legal opinion was given to
Regal and Copperweld along with a letter to be sent to anyone with
whom Grohne attempted to deal. The letter warned that Copperweld
would be "greatly concerned if [Grohne] contemplates
Page 467 U. S. 757
entering the structural tube market . . . in competition with
Regal Tube," and promised to take
"any and all steps which are necessary to protect our rights
under the terms of our purchase agreement and to protect the
know-how, trade secrets, etc., which we purchased from Lear
Siegler."
Petitioners later asserted that the letter was intended only to
prevent third parties from developing reliance interests that might
later make a court reluctant to enjoin Grohne's operations.
When Yoder accepted respondent's order for a tubing mill on
February 19, 1973, Copperweld sent Yoder one of these letters; two
days later, Yoder voided its acceptance. After respondent's efforts
to resurrect the deal failed, respondent arranged to have a mill
supplied by another company, which performed its agreement even
though it too received a warning letter from Copperweld. Respondent
began operations on September 13, 1974, nine months later than it
could have if Yoder had supplied the mill when originally
agreed.
Although the letter to Yoder was petitioners' most successful
effort to discourage those contemplating doing business with
respondent, it was not their only one. Copperweld repeatedly
contacted banks that were considering financing respondent's
operations. One or both petitioners also approached real estate
firms that were considering providing plant space to respondent and
contacted prospective suppliers and customers of the new
company.
B
In 1976, respondent filed this action in the District Court
against petitioners and Yoder. [
Footnote 1] The jury found that
Page 467 U. S. 758
Copperweld and Regal had conspired to violate § 1 of the Sherman
Act, 26 Stat. 209, as amended, 15 U.S.C. § 1, but that Yoder was
not part of the conspiracy. It also found that Copperweld, but not
Regal, had interfered with respondent's contractual relationship
with Yoder; that Regal, but not Copperweld, had interfered with
respondent's contractual relationship with a potential customer of
respondent, Deere Plow & Planter Works, and had slandered
respondent to Deere; and that Yoder had breached its contract to
supply a tubing mill.
At a separate damages phase, the judge instructed the jury that
the damages for the antitrust violation and for the inducement of
the Yoder contract breach should be identical, and not double
counted. The jury then awarded $2,499,009 against petitioners on
the antitrust claim, which was trebled to $7,497,027. It awarded
$15,000 against Regal alone on the contractual interference and
slander counts pertaining to Deere. The court also awarded
attorney's fees and costs after denying petitioners' motions for
judgment
n.o.v. and for a new trial.
C
The United States Court of Appeals for the Seventh Circuit
affirmed. 691 F.2d 310 (1982). It noted that the exoneration of
Yoder from antitrust liability left a parent corporation and its
wholly owned subsidiary as the only parties to the § 1 conspiracy.
The court questioned the wisdom of subjecting an "intra-enterprise"
conspiracy to antitrust liability when the same conduct by a
corporation and an unincorporated
Page 467 U. S. 759
division would escape liability for lack of the requisite two
legal persons. However, relying on its decision in
Photovest
Corp. v. Fotomat Corp., 606 F.2d 704 (1979),
cert.
denied, 445 U.S. 917 (1980), the Court of Appeals held that
liability was appropriate "when there is enough separation between
the two entities to make treating them as two independent actors
sensible." 691 F.2d at 318. It held that the jury instructions took
account of the proper factors for determining how much separation
Copperweld and Regal in fact maintained in the conduct of their
businesses. [
Footnote 2] It
also held that there was sufficient evidence for the jury to
conclude that Regal was more like a separate corporate entity than
a mere service arm of the parent.
We granted certiorari to reexamine the intra-enterprise
conspiracy doctrine, 462 U.S. 1131 (1983), and we reverse.
II
Review of this case calls directly into question whether the
coordinated acts of a parent and its wholly owned subsidiary can,
in the legal sense contemplated by § 1 of the Sherman Act,
constitute a combination or conspiracy. [
Footnote 3] The so-called "intra-enterprise conspiracy"
doctrine provides that § 1 liability is not foreclosed merely
because a parent and its subsidiary are subject to common
ownership. The doctrine derives from declarations in several of
this Court's opinions.
Page 467 U. S. 760
In no case has the Court considered the merits of the
intra-enterprise conspiracy doctrine in depth. Indeed, the concept
arose from a far narrower rule. Although the Court has expressed
approval of the doctrine on a number of occasions, a finding of
intra-enterprise conspiracy was in all but perhaps one instance
unnecessary to the result.
The problem began with
United States v. Yellow Cab Co.,
332 U. S. 218
(1947). The controlling shareholder of the Checker Cab
Manufacturing Corp., Morris Markin, also controlled numerous
companies operating taxicabs in four cities. With few exceptions,
the operating companies had once been independent, and had come
under Markin's control by acquisition or merger. The complaint
alleged conspiracies under §§ 1 and 2 of the Sherman Act among
Markin, Checker, and five corporations in the operating system. The
Court stated that even restraints in a vertically integrated
enterprise were not "necessarily" outside of the Sherman Act,
observing that an unreasonable restraint
"
may result as readily from a conspiracy among those who are
affiliated or integrated under common ownership as from a
conspiracy among those who are otherwise independent.
Similarly, any affiliation or integration flowing from an illegal
conspiracy cannot insulate the conspirators from the sanctions
which Congress has imposed.
The corporate interrelationships of
the conspirators, in other words, are not determinative of the
applicability of the Sherman Act. That statute is aimed at
substance, rather than form. See Appalachian Coals, Inc.
v. United States, 288 U. S. 344,
288 U. S.
360-361,
288 U. S. 376-377."
"
And so in this case, the common ownership and control of
the various corporate appellees are impotent to liberate the
alleged combination and conspiracy from the impact of the Act.
The complaint charges that the restraint of interstate trade was
not only effected by the combination of the appellees but was the
primary object
Page 467 U. S. 761
of the combination. The theory of the complaint . . . is that
'dominating power' over the cab operating companies 'was not
obtained by normal expansion . . . but by deliberate, calculated
purchase for control.'"
Id. at 227-228 (emphasis added) (quoting
United
States v. Reading Co., 253 U. S. 26,
253 U. S. 57
(1920)).
It is the underscored language that later breathed life into the
intra-enterprise conspiracy doctrine. The passage as a whole,
however, more accurately stands for a quite different proposition.
It has long been clear that a pattern of acquisitions may itself
create a combination illegal under § 1, especially when an original
anticompetitive purpose is evident from the affiliated
corporations' subsequent conduct. [
Footnote 4] The
Yellow Cab passage is most fairly
read in light of this settled rule. In
Yellow Cab, the
affiliation of the defendants was irrelevant, because the original
acquisitions were
themselves illegal. [
Footnote 5] An affiliation "flowing from an
illegal conspiracy" would not avert sanctions. Common ownership and
control were irrelevant, because restraint of trade was "the
primary object of the combination," which was created in a
"
deliberate,
Page 467 U. S.
762
calculated'" manner. Other language in the opinion is to the
same effect. [Footnote
6]
The Court's opinion relies on
Appalachian Coals, Inc. v.
United States, 288 U. S. 344
(1933); however, examination of that case reveals that it gives
very little support for the broad doctrine
Yellow Cab has
been thought to announce. On the contrary, the language of Chief
Justice Hughes speaking for the Court in
Appalachian Coals
supports a contrary conclusion. After observing that "[t]he
restrictions the Act imposes are not mechanical or artificial," 288
U.S. at
288 U. S. 360,
he went on to state:
Page 467 U. S. 763
"The argument that integration may be considered a normal
expansion of business, while a combination of independent producers
in a common selling agency should be treated as abnormal -- that
one is a legitimate enterprise and the other is not -- makes but an
artificial distinction. The Anti-Trust Act aims at substance."
Id. at
288 U. S. 377.
[
Footnote 7] As we shall see,
infra at
467 U. S.
771-774, it is the intra-enterprise conspiracy doctrine
itself that "makes but an artificial distinction" at the expense of
substance.
The ambiguity of the
Yellow Cab holding yielded the one
case giving support to the intra-enterprise conspiracy doctrine.
[
Footnote 8] In
Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc.,
340 U. S. 211
(1951), the Court held that two wholly owned subsidiaries of a
liquor distiller were guilty under § 1 of the Sherman Act for
jointly refusing to supply a wholesaler who declined to abide by a
maximum resale pricing scheme. The Court offhandedly dismissed the
defendants' argument
Page 467 U. S. 764
that
"their status as 'mere instrumentalities of a single
manufacturing-merchandizing unit' makes it impossible for them to
have conspired in a manner forbidden by the Sherman Act."
Id. at
340 U. S. 215.
With only a citation to
Yellow Cab and no further
analysis, the Court stated that the
"suggestion runs counter to our past decisions that common
ownership and control does not liberate corporations from the
impact of the antitrust laws,"
and stated that this rule was "especially applicable" when
defendants "hold themselves out as competitors." 340 U.S. at
340 U. S.
215.
Unlike the
Yellow Cab passage, this language does not
pertain to corporations whose initial affiliation was itself
unlawful. In straying beyond
Yellow Cab, the
Kiefer-Stewart Court failed to confront the anomalies an
intra-enterprise doctrine entails. It is relevant nonetheless that,
were the case decided today, the same result probably could be
justified on the ground that the subsidiaries conspired with
wholesalers other than the plaintiff. [
Footnote 9] An intra-enterprise conspiracy doctrine thus
would no longer be necessary to a finding of liability on the facts
of
Kiefer-Stewart.
Later cases invoking the intra-enterprise conspiracy doctrine do
little more than cite
Yellow Cab or
Kiefer-Stewart, and in none of the cases was the doctrine
necessary to the result reached.
Timken Roller Bearing Co. v.
United States, 341 U. S. 593
(1951), involved restrictive horizontal agreements
Page 467 U. S. 765
between an American corporation and two foreign corporations in
which it owned 30 and 50 percent interests respectively. The Timken
Court cited
Kiefer-Stewart to show that
"[t]he fact that there is common ownership or control of the
contracting corporations does not liberate them from the impact of
the antitrust laws."
341 U.S. at
341 U. S. 598.
But the relevance of this statement is unclear. The American
defendant in
Timken did not own a majority interest in
either of the foreign corporate conspirators and, as the District
Court found, it did not control them. [
Footnote 10] Moreover, as in
Yellow Cab,
there was evidence that the stock acquisitions were themselves
designed to effectuate restrictive practices. [
Footnote 11] The Court's reliance on the
intra-enterprise conspiracy doctrine was in no way necessary to the
result.
The same is true of
Perma Life Mufflers, Inc. v.
International Parts Corp., 392 U. S. 134
(1968), which involved a conspiracy among a parent corporation and
three subsidiaries to impose various illegal restrictions on
plaintiff franchisees. The Court did suggest that, because the
defendants
"availed themselves of the privilege of doing business through
separate corporations, the fact of common ownership
Page 467 U. S. 766
could not save them from any of the obligations that the law
imposes on separate entities [citing
Yellow Cab and
Timken]."
Id. at
392 U. S.
141-142. But the Court noted immediately thereafter
that, "[i]n any event," each plaintiff could "clearly" charge a
combination between itself and the defendants or between the
defendants and other franchise dealers.
Ibid. Thus, for
the same reason that a finding of liability in
Kiefer-Stewart could today be justified without reference
to the intra-enterprise conspiracy doctrine,
see n 9,
supra, the doctrine was,
at most, only an alternative holding in
Perma Life
Mufflers.
In short, while this Court has previously seemed to acquiesce in
the intra-enterprise conspiracy doctrine, it has never explored or
analyzed in detail the justifications for such a rule; the doctrine
has played only a relatively minor role in the Court's Sherman Act
holdings.
III
Petitioners, joined by the United States as
amicus
curiae, urge us to repudiate the intra-enterprise conspiracy
doctrine. [
Footnote 12] The
central criticism is that the doctrine gives undue significance to
the fact that a subsidiary is separately incorporated, and thereby
treats as the concerted activity of two
Page 467 U. S. 767
entities what is really unilateral behavior flowing from
decisions of a single enterprise.
We limit our inquiry to the narrow issue squarely presented:
whether a parent and its wholly owned subsidiary are capable of
conspiring in violation of § 1 of the Sherman Act. We do not
consider under what circumstances, if any, a parent may be liable
for conspiring with an affiliated corporation it does not
completely own.
A
The Sherman Act contains a "basic distinction between concerted
and independent action."
Monsanto Co. v. Spray-Rite Service
Corp., 465 U. S. 752,
465 U. S. 761
(1984). The conduct of a single firm is governed by § 2 alone, and
is unlawful only when it threatens actual monopolization. [
Footnote 13] It is not enough that a
single firm appears to "restrain trade" unreasonably, for even a
vigorous competitor may leave that impression. For instance, an
efficient firm may capture unsatisfied customers from an
inefficient rival, whose own ability to compete may suffer as a
result. This is the rule of the marketplace, and is precisely the
sort of competition that promotes the consumer interests that the
Sherman Act aims to foster. [
Footnote 14] In part because it is sometimes difficult
to
Page 467 U. S. 768
distinguish robust competition from conduct with long-run
anticompetitive effects, Congress authorized Sherman Act scrutiny
of single firms only when they pose a danger of monopolization.
Judging unilateral conduct in this manner reduces the risk that the
antitrust laws will dampen the competitive zeal of a single
aggressive entrepreneur.
Section 1 of the Sherman Act, in contrast, reaches unreasonable
restraints of trade effected by a "contract, combination . . . or
conspiracy" between separate entities. It does not reach conduct
that is "wholly unilateral."
Albrecht v. Herald Co.,
390 U. S. 145,
390 U. S. 149
(1968);
accord, Monsanto Co. v. Spray-Rite Corp., supra,
at
465 U. S. 761.
Concerted activity subject to § 1 is judged more sternly than
unilateral activity under § 2. Certain agreements, such as
horizontal price-fixing and market allocation, are thought so
inherently anticompetitive that each is illegal
per se,
without inquiry into the harm it has actually caused.
See
generally Northern Pacific R. Co. v. United States,
356 U. S. 1,
356 U. S. 5
(1958). Other combinations, such as mergers, joint ventures, and
various vertical agreements, hold the promise of increasing a
firm's efficiency and enabling it to compete more effectively.
Accordingly, such combinations are judged under a rule of reason,
an inquiry into market power and market structure designed to
assess the combination's actual effect.
See, e.g., Continental
T.V., Inc. v. GTE Sylvania Inc., 433 U. S.
36 (1977);
Chicago Board of Trade v. United
States, 246 U. S. 231
(1918). Whatever form the inquiry takes, however, it is not
necessary to prove that concerted activity threatens
monopolization.
The reason Congress treated concerted behavior more strictly
than unilateral behavior is readily appreciated. Concerted activity
inherently is fraught with anticompetitive
Page 467 U. S. 769
risk. It deprives the marketplace of the independent centers of
decisionmaking that competition assumes and demands. In any
conspiracy, two or more entities that previously pursued their own
interests separately are combining to act as one for their common
benefit. This not only reduces the diverse directions in which
economic power is aimed, but suddenly increases the economic power
moving in one particular direction. Of course, such mergings of
resources may well lead to efficiencies that benefit consumers, but
their anticompetitive potential is sufficient to warrant scrutiny
even in the absence of incipient monopoly.
B
The distinction between unilateral and concerted conduct is
necessary for a proper understanding of the terms "contract,
combination . . . or conspiracy" in § 1. Nothing in the literal
meaning of those terms excludes coordinated conduct among officers
or employees of the
same company. But it is perfectly
plain that an internal "agreement" to implement a single, unitary
firm's policies does not raise the antitrust dangers that § 1 was
designed to police. The officers of a single firm are not separate
economic actors pursuing separate economic interests, so agreements
among them do not suddenly bring together economic power that was
previously pursuing divergent goals. Coordination within a firm is
as likely to result from an effort to compete as from an effort to
stifle competition. In the marketplace, such coordination may be
necessary if a business enterprise is to compete effectively. For
these reasons, officers or employees of the same firm do not
provide the plurality of actors imperative for a § 1 conspiracy.
[
Footnote 15]
Page 467 U. S. 770
There is also general agreement that § 1 is not violated by the
internally coordinated conduct of a corporation and one of its
unincorporated divisions. [
Footnote 16] Although this Court has not previously
addressed the question, [
Footnote 17] there can be little doubt that the
operations of a corporate enterprise organized into divisions must
be judged as the conduct of a single actor. The existence of an
unincorporated division reflects no more than a firm's decision to
adopt an organizational division of labor. A division within a
corporate structure pursues the common interests of the whole,
rather than interests separate from those of the corporation
itself; a business enterprise establishes divisions to further its
own interests in the most efficient manner. Because coordination
between a corporation
Page 467 U. S. 771
and its division does not represent a sudden joining of two
independent sources of economic power previously pursuing separate
interests, it is not an activity that warrants § 1 scrutiny.
Indeed, a rule that punished coordinated conduct simply because
a corporation delegated certain responsibilities to autonomous
units might well discourage corporations from creating divisions
with their presumed benefits. This would serve no useful antitrust
purpose, but could well deprive consumers of the efficiencies that
decentralized management may bring.
C
For similar reasons, the coordinated activity of a parent and
its wholly owned subsidiary must be viewed as that of a single
enterprise for purposes of § 1 of the Sherman Act. A parent and its
wholly owned subsidiary have a complete unity of interest. Their
objectives are common, not disparate; their general corporate
actions are guided or determined not by two separate corporate
consciousnesses, but one. They are not unlike a multiple team of
horses drawing a vehicle under the control of a single driver. With
or without a formal "agreement," the subsidiary acts for the
benefit of the parent, its sole shareholder. If a parent and a
wholly owned subsidiary do "agree" to a course of action, there is
no sudden joining of economic resources that had previously served
different interests, and there is no justification for § 1
scrutiny.
Indeed, the very notion of an "agreement" in Sherman Act terms
between a parent and a wholly owned subsidiary lacks meaning. A § 1
agreement may be found when
"the conspirators had a unity of purpose or a common design and
understanding, or a meeting of minds in an unlawful
arrangement."
American Tobacco Co. v. United States, 328 U.
S. 781,
328 U. S. 810
(1946). But in reality, a parent and a wholly owned subsidiary
always have a "unity of purpose or a common design." They
share a common purpose whether or not the parent keeps a tight rein
over the subsidiary; the parent may assert
Page 467 U. S. 772
full control at any moment if the subsidiary fails to act in the
parent's best interests. [
Footnote 18]
The intra-enterprise conspiracy doctrine looks to the form of an
enterprise's structure and ignores the reality. Antitrust liability
should not depend on whether a corporate subunit is organized as an
unincorporated division or a wholly owned subsidiary. A corporation
has complete power to maintain a wholly owned subsidiary in either
form. The economic, legal, or other considerations that lead
corporate management to choose one structure over the other are not
relevant to whether the enterprise's conduct seriously threatens
competition. [
Footnote 19]
Rather, a corporation may adopt the subsidiary form of organization
for valid management and related purposes. Separate incorporation
may improve
Page 467 U. S. 773
management, avoid special tax problems arising from multistate
operations, or serve other legitimate interests. [
Footnote 20] Especially in view of the
increasing complexity of corporate operations, a business
enterprise should be free to structure itself in ways that serve
efficiency of control, economy of operations, and other factors
dictated by business judgment without increasing its exposure to
antitrust liability. Because there is nothing inherently
anticompetitive about a corporation's decision to create a
subsidiary, the intra-enterprise conspiracy doctrine "impose[s]
grave legal consequences upon organizational distinctions that are
of
de minimis meaning and effect."
Sunkist Growers,
Inc. v. Winckler & Smith Citrus Products Co., 370 U. S.
19,
370 U. S. 29
(1962). [
Footnote 21]
If antitrust liability turned on the garb in which a corporate
subunit was clothed, parent corporations would be encouraged to
convert subsidiaries into unincorporated divisions. Indeed, this is
precisely what the Seagram company did after this Court's decision
in
Kiefer-Stewart Co. v. Joseph E. Seagram & Sons,
Inc., 340 U. S. 211
(1951). [
Footnote 22] Such
an
Page 467 U. S. 774
incentive serves no valid antitrust goals, but merely deprives
consumers and producers of the benefits that the subsidiary form
may yield.
The error of treating a corporate division differently from a
wholly owned subsidiary is readily seen from the facts of this
case. Regal was operated as an unincorporated division of Lear
Siegler for four years before it became a wholly owned subsidiary
of Copperweld. Nothing in this record indicates any meaningful
difference between Regal's operations as a division and its later
operations as a separate corporation. Certainly nothing suggests
that Regal was a greater threat to competition as a subsidiary of
Copperweld than as a division of Lear Siegler. Under either
arrangement, Regal might have acted to bar a new competitor from
entering the market. In one case, it could have relied on economic
power from other quarters of the Lear Siegler corporation; instead,
it drew on the strength of its separately incorporated parent,
Copperweld. From the standpoint of the antitrust laws, there is no
reason to treat one more harshly than the other. As Chief Justice
Hughes cautioned, "[r]ealities must dominate the judgment."
Appalachian Coals, Inc. v. United States, 288 U.S. at
288 U. S. 360.
[
Footnote 23]
D
Any reading of the Sherman Act that remains true to the Act's
distinction between unilateral and concerted conduct will
necessarily disappoint those who find that distinction arbitrary.
It cannot be denied that § 1's focus on concerted
Page 467 U. S. 775
behavior leaves a "gap" in the Act's proscription against
unreasonable restraints of trade.
See post at
467 U. S. 789.
An unreasonable restraint of trade may be effected not only by two
independent firms acting in concert; a single firm may restrain
trade to precisely the same extent if it alone possesses the
combined market power of those same two firms. Because the Sherman
Act does not prohibit unreasonable restraints of trade as such --
but only restraints effected by a contract, combination, or
conspiracy -- it leaves untouched a single firm's anticompetitive
conduct (short of threatened monopolization) that may be
indistinguishable in economic effect from the conduct of two firms
subject to § 1 liability.
We have already noted that Congress left this "gap" for
eminently sound reasons. Subjecting a single firm's every action to
judicial scrutiny for reasonableness would threaten to discourage
the competitive enthusiasm that the antitrust laws seek to promote.
See supra at
467 U. S.
767-769. Moreover, whatever the wisdom of the
distinction, the Act's plain language leaves no doubt that Congress
made a purposeful choice to accord different treatment to
unilateral and concerted conduct. Had Congress intended to outlaw
unreasonable restraints of trade as such, § 1's requirement of a
contract, combination, or conspiracy would be superfluous, as would
the entirety of § 2. [
Footnote
24] Indeed, this Court has recognized
Page 467 U. S. 776
that § 1 is limited to concerted conduct at least since the days
of
United States v. Colgate & Co., 250 U.
S. 300 (1919).
Accord, post at
467 U. S.
789.
The appropriate inquiry in this case, therefore, is not whether
the coordinated conduct of a parent and its wholly owned subsidiary
may ever have anticompetitive effects, as the dissent suggests. Nor
is it whether the term "conspiracy" will bear a literal
construction that includes parent corporations and their wholly
owned subsidiaries. For if these were the proper inquiries, a
single firm's conduct would be subject to § 1 scrutiny whenever the
coordination of two employees was involved. Such a rule would
obliterate the Act's distinction between unilateral and concerted
conduct, contrary to the clear intent of Congress as interpreted by
the weight of judicial authority.
See n 15,
supra. Rather, the appropriate
inquiry requires us to explain the logic underlying Congress'
decision to exempt unilateral conduct from § 1 scrutiny, and to
assess whether that logic similarly excludes the conduct of a
parent and its wholly owned subsidiary. Unless we second-guess the
judgment of Congress to limit § 1 to concerted conduct, we can only
conclude that the coordinated behavior of a parent and its wholly
owned subsidiary falls outside the reach of that provision.
Although we recognize that any "gap" the Sherman Act leaves is
the sensible result of a purposeful policy decision by Congress, we
also note that the size of any such gap is open
Page 467 U. S. 777
to serious question. Any anticompetitive activities of
corporations and their wholly owned subsidiaries meriting antitrust
remedies may be policed adequately without resort to an
intra-enterprise conspiracy doctrine. A corporation's initial
acquisition of control will always be subject to scrutiny under § 1
of the Sherman Act and § 7 of the Clayton Act, 38 Stat. 731, 15
U.S.C. § 18. Thereafter, the enterprise is fully subject to § 2 of
the Sherman Act and § 5 of the Federal Trade Commission Act, 38
Stat. 719, 15 U.S.C. § 45. That these statutes are adequate to
control dangerous anticompetitive conduct is suggested by the fact
that not a single holding of antitrust liability by this Court
would today be different in the absence of an intra-enterprise
conspiracy doctrine. It is further suggested by the fact that the
Federal Government, in its administration of the antitrust laws, no
longer accepts the concept that a corporation and its wholly owned
subsidiaries can "combine" or "conspire" under § 1. [
Footnote 25] Elimination of the
intra-enterprise conspiracy doctrine with respect to corporations
and their wholly owned subsidiaries will therefore not cripple
antitrust enforcement. It will simply eliminate treble damages from
private state tort suits masquerading as antitrust actions.
IV
We hold that Copperweld and its wholly owned subsidiary Regal
are incapable of conspiring with each other for purposes of § 1 of
the Sherman Act. To the extent that prior decisions of this Court
are to the contrary, they are disapproved and overruled.
Accordingly, the judgment of the Court of Appeals is reversed.
It is so ordered.
Page 467 U. S. 778
JUSTICE WHITE took no part in the consideration or decision of
this case.
[
Footnote 1]
The chairman of the board and chief executive officer of both
Copperweld and Regal, Phillip H. Smith, was also named as a
defendant. In addition, respondents originally charged petitioners
and Smith with an attempt to monopolize the market for structural
steel tubing in violation of § 2 of the Sherman Act, 26 Stat. 209,
as amended, 15 U.S.C. § 2. Before trial, respondent dismissed Smith
as a defendant and dismissed its § 2 monopolization count.
Petitioners counterclaimed on the ground that respondent and
Grohne had used proprietary information belonging to Regal, had
competed unfairly by hiring away key Regal personnel, and had
interfered with prospective business relationships by filing the
lawsuit on the eve of a large Copperweld debenture offering. At the
close of the evidence, the court directed a verdict against
petitioners on their counterclaims. The disposition of these claims
is not at issue before this Court.
[
Footnote 2]
The jury was instructed to consider many different factors: for
instance, whether Copperweld and Regal had separate management
staffs, separate corporate officers, separate clients, separate
records and bank accounts, separate corporate offices, autonomy in
setting policy, and so on. The jury also was instructed to
consider
"any other facts that you find are relevant to a determination
of whether or not Copperweld and Regal are separate and distinct
companies."
App. to Pet. for Cert. B-9.
[
Footnote 3]
Section 1 of the Sherman Act provides in pertinent part:
"Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal. Every
person who shall make any contract or engage in any combination or
conspiracy hereby declared to be illegal shall be deemed guilty of
a felony."
26 Stat. 209, as amended, 15 U.S.C. § 1.
[
Footnote 4]
Under the arrangements condemned in
Northern Securities Co.
v. United States, 193 U. S. 197,
193 U. S. 354
(1904) (plurality opinion),
"all the stock [a railroad holding company] held or acquired in
the constituent companies was acquired and held to be used in
suppressing competition between those companies. It came into
existence only for that purpose."
In Standard Oil Co. v. United States, 221 U. S.
1 (1911), and
United States v. American Tobacco
Co., 221 U. S. 106
(1911), the trust or holding company device brought together
previously independent firms to lessen competition and achieve
monopoly power. Although the Court in the latter case suggested
that the contracts between affiliated companies, and not merely the
original combination, could be viewed as the conspiracy,
id. at
221 U. S. 184,
the Court left no doubt that "the combination, in and of itself,"
was a restraint of trade and a monopolization,
id. at
221 U. S.
187.
[
Footnote 5]
Contrary to the dissent's suggestion,
post at
467 U. S. 779,
788, n. 18, our point is not that
Yellow Cab found only
the initial acquisition illegal; our point is that the illegality
of the initial acquisition was a predicate for its holding that any
postacquisition conduct violated the Act.
[
Footnote 6]
When discussing the fact that some of the affiliated Chicago
operating companies did not compete to obtain exclusive
transportation contracts held by another of the affiliated
companies, the Court stated:
"[T]he fact that the competition restrained is that between
affiliated corporations cannot serve to negative the statutory
violation where, as here,
the affiliation is assertedly one of
the means of effectuating the illegal conspiracy not to
compete."
332 U.S. at
332 U. S. 229
(emphasis added).
The passage quoted in text is soon followed by a cite to
United States v. Crescent Amusement Co., 323 U.
S. 173,
323 U. S. 189
(1944).
Crescent Amusement found violations of §§ 1 and 2
by film exhibitors affiliated (in most cases) by 50 percent
ownership. The exhibitors used the monopoly power they possessed in
certain towns to force film distributors to give them favorable
terms in other towns. The Court found it unnecessary to view the
distributors as part of the conspiracy,
id. at
323 U. S. 183,
so the Court plainly viewed the affiliated entities themselves as
the conspirators. The
Crescent Amusement Court, however,
in affirming an order of divestiture, noted that such a remedy was
appropriate when "creation of the combination is itself the
violation."
Id. at
323 U. S. 189.
This suggests that both
Crescent Amusement and
Yellow
Cab, which cited the very page on which this passage appears,
stand for a narrow rule based on the original illegality of the
affiliation.
The dissent misconstrues a later passage in
Crescent
Amusement stating that divestiture need not be limited to
those affiliates whose "acquisition was part of the fruits of the
conspiracy," 323 U.S. at
323 U. S. 189.
See post at
467 U. S.
780-781. This meant only that divestiture could apply to
affiliates other than those who were driven out of business by the
practices of the original conspirators and who were then acquired
illegally to increase the combination's monopoly power.
See 323 U.S. at
323 U. S. 181.
It did not mean that affiliates acquired for lawful purposes were
subject to divestiture.
[
Footnote 7]
Appalachian Coals does state that the key question is
whether there is an unreasonable restraint of trade or an attempt
to monopolize.
"If there is, the combination cannot escape because it has
chosen corporate form; and, if there is not, it is not to be
condemned because of the absence of corporate integration."
288 U.S. at
288 U. S. 377.
Appalachian Coals, however, validated a cooperative
selling arrangement among independent entities. The statement that
intracorporate relationships would be subject to liability under §
1 is thus dictum. The statement may also envision merely the
limited rule in
Yellow Cab pertaining to acquisitions that
are themselves anticompetitive.
[
Footnote 8]
In two cases decided soon after
Yellow Cab on facts
similar to
Crescent Amusement, see n 6,
supra, affiliated film exhibitors were
found to have conspired in violation of § 1.
Schine Chain
Theatres, Inc. v. United States, 334 U.
S. 110 (1948);
United States v. Griffith,
334 U. S. 100
(1948).
Griffith simply assumed that the companies were
capable of conspiring with each other;
Schine cited
Yellow Cab and
Crescent Amusement for the
proposition, 334 U.S. at
334 U. S. 116.
In both cases, however, an intra-enterprise conspiracy holding was
unnecessary not only because the Court found a § 2 violation, but
also because the affiliated exhibitors had conspired with
independent film distributors.
See ibid.; Griffith, supra,
at
334 U. S. 103,
n. 6,
334 U. S.
109.
[
Footnote 9]
Although the plaintiff apparently never acquiesced in the resale
price maintenance scheme,
Kiefer-Stewart Co. v. Joseph E.
Seagram & Sons, Inc., 182 F.2d 228, 231 (CA7 1950),
rev'd, 340 U. S. 340 U.S.
211 (1951), one of the subsidiaries did gain the compliance of
other wholesalers after once terminating them for refusing to abide
by the pricing scheme.
See 182 F.2d at 231; 340 U.S. at
340 U. S. 213.
A theory of combination between the subsidiaries and the
wholesalers could now support § 1 relief, whether or not it could
have when
Kiefer-Stewart was decided.
See Albrecht v.
Herald Co., 390 U. S. 145,
390 U. S.
149-150, and n. 6 (1968);
United States v. Parke,
Davis & Co., 362 U. S. 29
(1960).
[
Footnote 10]
See United States v. Timken Roller Bearing
Co., 83 F. Supp.
284, 311-312 (ND Ohio 1949),
aff'd as modified,
341 U. S. 593
(1951). The agreement of an individual named Dewar, who owned 24
and 50 percent of the foreign corporations respectively, was
apparently required for the American defendant to have its way.
[
Footnote 11]
For almost 20 years before they became affiliated by stock
ownership, two of the corporations had been party to the sort of
restrictive agreements the
Timken Court condemned. Three
Justices upholding antitrust liability were of the view that
Timken's "interests in the [foreign] companies were obtained as
part of a plan to promote the illegal trade restraints," and that
the "intercorporate relationship" was "the core of the conspiracy."
Id. at
341 U. S.
600-601. Because two Justices found no antitrust
violation at all,
see id. at
341 U. S. 605
(Frankfurter, J., dissenting);
id. at
341 U. S. 606
(Jackson, J., dissenting), and two Justices did not take part,
apparently only Chief Justice Vinson and Justice Reed were prepared
to hold that there was a violation even if the initial acquisition
itself was not illegal.
See id. at
341 U. S.
601-602 (Reed, J., joined by Vinson, C.J.,
concurring).
[
Footnote 12]
The doctrine has long been criticized.
See, e.g.,
Areeda, Intra-enterprise Conspiracy in Decline, 97 Harv.L.Rev. 451
(1983); Handler & Smart, The Present Status of the
Intracorporate Conspiracy Doctrine, 3 Cardozo L.Rev. 23 (1981);
Kempf, Bathtub Conspiracies: Has Seagram Distilled a More Potent
Brew?, 24 Bus.Law. 173 (1968); McQuade, Conspiracy, Multicorporate
Enterprises, and Section 1 of the Sherman Act, 41 Va.L.Rev. 183
(1955); Rahl, Conspiracy and the Anti-Trust Laws, 44 Ill.L.Rev. 743
(1950); Sprunk, Intra-Enterprise Conspiracy, 9 ABA Antitrust
Section Rep. 20 (1956); Stengel, Intra-Enterprise Conspiracy Under
Section 1 of the Sherman Act, 35 Miss.L.J. 5 (1963); Willis &
Pitofsky, Antitrust Consequences of Using Corporate Subsidiaries,
43 N.Y.U.L.Rev. 20 (1968); Note, "Conspiring Entities" Under
Section 1 of the Sherman Act, 95 Harv.L.Rev. 661 (1982); Note,
Intra-Enterprise Conspiracy Under Section 1 of the Sherman Act: A
Suggested Standard, 75 Mich.L.Rev. 717 (1977).
[
Footnote 13]
Section 2 of the Sherman Act provides in pertinent part:
"Every person who shall monopolize, or attempt to monopolize, or
combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States, or with
foreign nations, shall be deemed guilty of a felony."
26 Stat. 209, as amended, 15 U.S.C. § 2. By making a conspiracy
to monopolize unlawful, § 2 does reach both concerted and
unilateral behavior. The point remains, however, that purely
unilateral conduct is illegal only under § 2, and not under § 1.
Monopolization without conspiracy is unlawful under § 2, but
restraint of trade without a conspiracy or combination is not
unlawful under § 1.
[
Footnote 14]
For example, the Court has declared that § 2 does not forbid
market power to be acquired "as a consequence of a superior
product, [or] business acumen."
United States v. Grinnell
Corp., 384 U. S. 563,
384 U. S. 571
(1966). We have also made clear that the "antitrust laws . . . were
enacted for
the protection of competition, not competitors.'"
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.
S. 477, 429 U. S. 488
(1977) (damages for violation of Clayton Act § 7) (quoting
Brown Shoe Co. v. United States, 370 U.
S. 294, 370 U. S. 320
(1962)).
[
Footnote 15]
See, e.g., Schwimmer v. Sony Corp. of America, 677 F.2d
946, 953 (CA2),
cert. denied, 459 U.
S. 1007 (1982);
Tose v. First Pennsylvania Bank,
N.A., 648 F.2d 879, 893-894 (CA3),
cert. denied, 454
U.S. 893 (1981);
Morton Buildings of Nebraska, Inc. v. Morton
Buildings, Inc., 531 F.2d 910, 916-917 (CA8 1976);
Greenville Publishing Co. v. Daily Reflector, Inc., 496
F.2d 391, 399 (CA4 1974) (dictum);
Chapman v. Rudd Paint &
Varnish Co., 409 F.2d 635, 643, n. 9 (CA9 1969);
Poller v.
Columbia Broadcasting System, Inc., 109 U.S.App.D.C. 170, 174,
284 F.2d 599, 603 (1960),
rev'd on other grounds,
368 U. S. 464
(1962);
Nelson Radio & Supply Co. v. Motorola, Inc.,
200 F.2d 911, 914 (CA5 1952),
cert. denied, 345 U.S. 925
(1953).
Accord, Report of the Attorney General's National
Committee to Study the Antitrust Laws 31 (1955). At the same time,
many courts have created an exception for corporate officers acting
on their own behalf.
See, e.g., H & B Equipment Co. v.
International Harvester Co., 577 F.2d 239, 244 (CA5 1978)
(dictum);
Greenville Publishing, supra; Johnston v. Baker,
445 F.2d 424, 427 (CA3 1971).
Nothing in the language of the Sherman Act is inconsistent with
the view that corporations cannot conspire with their own officers.
It is true that a "person" under the Act includes both an
individual and a corporation. 15 U.S.C. § 7. But § 1 does not
declare every combination between two "persons" to be illegal.
Instead it makes liable every "person" engaging in a combination or
conspiracy "hereby declared to be illegal." As we note, the
principles governing § 1 liability plainly exclude from unlawful
combinations or conspiracies the activities of a single firm.
[
Footnote 16]
See 691 F.2d 310, 316 (CA7 1982) (decision below);
Cliff Food Stores, Inc. v. Kroger, Inc., 417 F.2d 203,
205-206 (CA5 1969);
Joseph E. Seagram & Sons, Inc. v.
Hawaiian Oke & Liquors, Ltd., 416 F.2d 71, 83-84 (CA9
1969),
cert. denied, 396 U.S. 1062 (1970);
Poller v.
Columbia Broadcasting System, Inc., 109 U.S.App.D.C. at 174,
284 F.2d at 603.
[
Footnote 17]
The Court left this issue unresolved in
Poller v. Columbia
Broadcasting System, Inc., 368 U.S. at
368 U. S. 469,
n. 4.
[
Footnote 18]
As applied to a wholly owned subsidiary, the so-called "single
entity" test is thus inadequate to preserve the Sherman Act's
distinction between unilateral and concerted conduct. Followed by
the Seventh Circuit below, as well as by other Courts of Appeals,
this test sets forth various criteria for evaluating whether a
given parent and subsidiary are capable of conspiring with each
other.
See n 2,
supra; see generally Ogilvie v. Fotomat Corp., 641 F.2d
581 (CA8 1981);
Las Vegas Sun, Inc. v. Summa Corp., 610
F.2d 614 (CA9 1979),
cert. denied, 447 U.S. 906 (1980);
Photovest Corp. v. Fotomat Corp., 606 F.2d 704 (CA7 1979),
cert. denied, 445 U.S. 917 (1980). These criteria measure
the "separateness" of the subsidiary: whether it has separate
control of its day-to-day operations, separate officers, separate
corporate headquarters, and so forth. At least when a subsidiary is
wholly owned, however, these factors are not sufficient to describe
a separate economic entity for purposes of the Sherman Act. The
factors simply describe the manner in which the parent chooses to
structure a subunit of itself. They cannot overcome the basic fact
that the ultimate interests of the subsidiary and the parent are
identical, so the parent and the subsidiary must be viewed as a
single economic unit.
[
Footnote 19]
Because an "agreement" between a parent and its wholly owned
subsidiary is no more likely to be anticompetitive than an
agreement between two divisions of a single corporation, it does
not matter that the parent "availed [itself] of the privilege of
doing business through separate corporations,"
Perma Life
Mufflers, Inc. v. International Parts Corp., 392 U.
S. 134,
392 U. S. 141
(1968). The purposeful choice of a parent corporation to organize a
subunit as a subsidiary is not itself a reason to heighten
antitrust scrutiny, because it is not laden with anticompetitive
risk.
[
Footnote 20]
For example,
"[s]eparate incorporation may reduce federal or state taxes or
facilitate compliance with regulatory or reporting laws. Local
incorporation may also improve local identification. Investors or
lenders may prefer to specialize in a particular aspect of a
conglomerate's business. Different parts of the business may
require different pension or profitsharing plans or different
accounting practices."
Areeda, 97 Harv.L.Rev. at 453.
[
Footnote 21]
Sunkist Growers provides strong support for the notion
that separate incorporation does not necessarily imply a capacity
to conspire. The defendants in that case were an agricultural
cooperative, its wholly owned subsidiary, and a second cooperative
comprising only members of the first. The Court refused to find a §
1 or § 2 conspiracy among them because they were "one
organization' or `association,' even though they have formally
organized themselves into three separate legal entities." 370 U.S.
at 370 U. S. 29.
Although this holding derived from statutory immunities granted to
agricultural organizations, the reasoning of Sunkist
Growers supports the broader principle that substance, not
form, should determine whether a separately incorporated entity is
capable of conspiring under § 1.
[
Footnote 22]
See Joseph E. Seagram & Sons, Inc. v. Hawaiian Oke &
Liquors, Ltd., 416 F.2d 71 (CA9 1969),
cert. denied,
396 U.S. 1062 (1970).
[
Footnote 23]
The dissent argues that references in the legislative history to
"trusts" suggest that Congress intended § 1 to govern the conduct
of all affiliated corporations.
See post at
467 U. S.
787-788. But those passages explicitly refer to
combinations created for the very purpose of restraining trade.
None of the cited debates refers to the postacquisition conduct of
corporations whose initial affiliation was lawful. Indeed, Senator
Sherman stated:
"It is the unlawful combination, tested by the rules of common
law and human experience, that is aimed at by this bill, and not
the lawful and useful combination."
21 Cong.Rec. 2457 (1890).
[
Footnote 24]
Even if common law intracorporate conspiracies were firmly
established when Congress passed the Sherman Act, the obvious
incompatibility of an intracorporate conspiracy with § 1 is
sufficient to refute the dissent's suggestion that Congress
intended to incorporate such a definition.
See post at
467 U. S.
784-787. Moreover, it is far from clear that
intracorporate conspiracies were recognized at common law in 1890.
Even today, courts disagree whether corporate employees can
conspire with themselves or with the corporation for purposes of
certain statutes, such as 42 U.S.C. § 1985(3).
Compare, e.g.,
Novotny v. Great Am. Fed. Sav. & Loan Assn., 584 F.2d 1235
(CA3 1978) (en banc),
vacated and remanded on other
grounds, 442 U. S. 366
(1979),
with Dombrowski v. Dowling, 459 F.2d 190 (CA7
1972). And in 1890, it was disputed whether a corporation could
itself be guilty of a crime that required criminal intent, such as
conspiracy. Commentators appear to agree that courts began finding
corporate liability for such crimes only around the turn of the
century.
See generally Edgerton, Corporate Criminal
Responsibility, 36 Yale L.J. 827, 828, and n. 11 (1927); Miller,
Corporate Criminal Liability: A Principle Extended to Its Limits,
38 Fed.Bar J. 49 (1979); Note, 60 Harv.L.Rev. 283, 284, and n. 9
(1946). Of course, Congress changed that common law rule when it
explicitly provided that a corporation could be guilty of a § 1
conspiracy. But the point remains that the Sherman Act did not
import a preexisting common law tradition recognizing conspiracies
between corporations and their own employees.
[
Footnote 25]
"[The intra-enterprise conspiracy] doctrine has played a
relatively minor role in government enforcement actions, and the
government has not relied on the doctrine in recent years."
Brief for United States as
Amicus Curiae 26, n. 42.
JUSTICE STEVENS, with whom JUSTICE BRENNAN and JUSTICE MARSHALL
join, dissenting.
It is safe to assume that corporate affiliates do not vigorously
compete with one another. A price-fixing or market-allocation
agreement between two or more such corporate entities does not,
therefore, eliminate any competition that would otherwise exist. It
makes no difference whether such an agreement is labeled a
"contract," a "conspiracy," or merely a policy decision, because it
surely does not unreasonably restrain competition within the
meaning of the Sherman Act. The Rule of Reason has always given the
courts adequate latitude to examine the substance, rather than the
form, of an arrangement when answering the question whether
collective action has restrained competition within the meaning of
§ 1.
Today the Court announces a new
per se rule: a wholly
owned subsidiary is incapable of conspiring with its parent under §
1 of the Sherman Act. Instead of redefining the word "conspiracy,"
the Court would be better advised to continue to rely on the Rule
of Reason. Precisely because they do not eliminate competition that
would otherwise exist, but rather enhance the ability to compete,
restraints which enable effective integration between a corporate
parent and its subsidiary -- the type of arrangement the Court is
properly concerned with protecting -- are not prohibited by § 1.
Thus, the Court's desire to shield such arrangements from antitrust
liability provides no justification for the Court's new rule.
In contrast, the case before us today presents the type of
restraint that has precious little to do with effective integration
between parent and subsidiary corporations. Rather, the purpose of
the challenged conduct was to exclude a potential competitor of the
subsidiary from the market. The jury apparently concluded that the
two defendant corporations --
Page 467 U. S. 779
Copperweld and its subsidiary Regal -- had successfully delayed
Independence's entry into the steel tubing business by applying a
form of economic coercion to potential suppliers of financing and
capital equipment, as well as to potential customers. Everyone
seems to agree that this conduct was tortious as a matter of state
law. This type of exclusionary conduct is plainly distinguishable
from vertical integration designed to achieve competitive
efficiencies. If, as seems to be the case, the challenged conduct
was manifestly anticompetitive, it should not be immunized from
scrutiny under § 1 of the Sherman Act.
I
Repudiation of prior cases is not a step that should be taken
lightly. As the Court wrote only days ago: "[A]ny departure from
the doctrine of
stare decisis demands special
justification."
Arizona v. Rumsey, ante at
467 U. S. 212.
It is therefore appropriate to begin with an examination of the
precedents.
In
United States v. Yellow Cab Co., 332 U.
S. 218 (1947), the Court explicitly stated that a
corporate subsidiary could conspire with its parent:
"The fact that these restraints occur in a setting described by
the appellees as a vertically integrated enterprise does not
necessarily remove the ban of the Sherman Act. The test of
illegality under the Act is the presence or absence of an
unreasonable restraint on interstate commerce. Such a restraint may
result as readily from a conspiracy among those who are affiliated
or integrated under common ownership as from a conspiracy among
those who are otherwise independent."
Id. at
332 U. S.
227.
The majority attempts to explain
Yellow Cab by
suggesting that it dealt only with unlawful acquisition of
subsidiaries.
Ante at
467 U. S.
761-762. But the Court mentioned acquisitions only as an
additional consideration separate from the passage
Page 467 U. S. 780
quoted above, [
Footnote 2/1] and
more important, the Court explicitly held that restraints imposed
by the corporate parent on the affiliates that it
already
owned in themselves violated § 1. [
Footnote 2/2]
At least three cases involving the motion picture industry also
recognize that affiliated corporations may combine or conspire
within the meaning of § 1. In
United States v. Crescent
Amusement Co., 323 U. S. 173
(1944), as the Court recognizes,
ante at
467 U. S. 762,
n. 6, the only conspirators were affiliated corporations. The
majority's claim that the case involved only unlawful acquisitions
because of the Court's comments concerning divestiture of the
affiliates cannot be squared with the passage immediately following
that cited by the majority, which states that there had been
unlawful conduct going beyond the acquisition of subsidiaries:
"That principle is adequate here to justify divestiture of all
interest in some of the affiliates, since their acquisition was
part of the fruits of the conspiracy.
But the relief need not,
and, under these facts, should not, be so restricted [to
divestiture]. The fact that the companies were affiliated induced
joint action and agreement. Common control was one of the
instruments in bringing about unity of purpose and unity of action
and in making the conspiracy effective. If that affiliation
continues,
Page 467 U. S. 781
there will be tempting opportunity for these exhibitors to
continue to act in combination against the independents."
323 U.S. at
323 U. S.
189-190 (emphasis supplied).
Similarly, in
Schine Chain Theatres, Inc. v. United
States, 334 U. S. 110
(1948), the Court held that concerted action by parents and
subsidiaries constituted an unlawful conspiracy. [
Footnote 2/3] That was also the holding in
United States v. Griffith, 334 U.
S. 100,
334 U. S. 109
(1948). The majority's observation that in these cases there were
alternative grounds that could have been used to reach the same
result,
ante at
467 U. S. 763,
n. 8, disguises neither the fact that the holding that actually
appears in these opinions rests on conspiracy between affiliated
entities nor that today's holding is inconsistent with what was
actually held in these cases.
In
Kiefer-Stewart Co. v. Joseph E. Seagram & Sons,
Inc., 340 U. S. 211
(1951), the Court's holding was plain and unequivocal:
"Respondents next suggest that their status as 'mere
instrumentalities of a single manufacturing-merchandizing unit'
makes it impossible for them to have conspired in a manner
forbidden by the Sherman Act. But this suggestion runs counter to
our past decisions that common ownership and control does not
liberate corporations from the impact of the antitrust laws.
E.g. United States v. Yellow Cab Co., 332 U. S.
218. The rule is especially applicable where, as here,
respondents hold themselves out as competitors."
Id. at
340 U. S.
215.
Page 467 U. S. 782
This holding is so clear that even the Court, which is not
wanting for inventiveness in its reading of the prior cases, cannot
explain it away. The Court suggests only that today
Kiefer-Stewart might be decided on alternative grounds,
ante at
467 U. S. 764,
ignoring the fact that today's holding is inconsistent with the
ground on which the case actually was decided. [
Footnote 2/4]
A construction of the statute that reaches agreements between
corporate parents and subsidiaries was again embraced by the Court
in
Timken Roller Bearing Co. v. United States,
341 U. S. 593
(1951), [
Footnote 2/5] and
Perma Life Mufflers, Inc. v. International Parts Corp.,
392 U. S. 134
(1968). [
Footnote 2/6] The majority
only notes that there might have been other grounds for decision
available in these cases,
ante at
467 U. S.
764-766, but again it cannot deny that its new rule is
inconsistent with what the Court actually did write in these
cases.
Page 467 U. S. 783
Thus, the rule announced today is inconsistent with what this
Court has held on at least seven previous occasions. [
Footnote 2/7] Perhaps most illuminating is
the fact that, until today, whether they favored the doctrine or
not, it had been the universal conclusion of both the lower courts
[
Footnote 2/8] and the commentators
[
Footnote 2/9] that this Court's
cases establish that a parent
Page 467 U. S. 784
and a wholly owned subsidiary corporation are capable of
conspiring in violation of § 1. In this very case, the Court of
Appeals observed:
"[T]he salient factor is that the Supreme Court's decisions,
while they need not be read with complete literalism, of course
they cannot be ignored. It is no accident that every Court of
Appeals to consider the question has concluded that a parent and
its subsidiary have the same capacity to conspire, whether or not
they can be found to have done so in a particular case."
691 F.2d 310, 317 (CA7 1982) (footnotes omitted).
Thus, we are not writing on a clean slate.
"[W]e must bear in mind that considerations of
stare
decisis weigh heavily in the area of statutory construction,
where Congress is free to change this Court's interpretation of its
legislation."
Illinois Brick Co. v. Illinois, 431 U.
S. 720,
431 U. S. 736
(1977). [
Footnote 2/10] There can
be no doubt that the Court today changes what has been taken to be
the long-settled rule: a rule that Congress did not revise at any
point in the last four decades. At a minimum, there should be a
strong presumption against the approach taken today by the Court.
It is to the merits of that approach that I now turn.
II
The language of § 1 of the Sherman Act is sweeping in its
breadth:
"Every contract, combination in the form of trust or
Page 467 U. S. 785
otherwise, or conspiracy, in restraint of trade or commerce
among the several States, . . . is declared to be illegal."
15 U.S.C. § 1. This Court has long recognized that Congress
intended this language to have a broad sweep, reaching any form of
combination:
"[I]n view of the many new forms of contracts and combinations
which were being evolved from existing economic conditions, it was
deemed essential by an all-embracing enumeration to make sure that
no form of contract or combination by which an undue restraint of
interstate or foreign commerce was brought about could save such
restraint from condemnation. The statute under this view evidenced
the intent not to restrain the right to make and enforce contracts,
whether resulting from combination or otherwise, which did not
unduly restrain interstate or foreign commerce, but to protect that
commerce from being restrained by methods, whether old or new,
which would constitute an interference that is an undue
restraint."
Standard Oil Co. v. United States, 221 U. S.
1,
221 U. S. 59-60
(1911). This broad construction is illustrated by the Court's
refusal to limit the statute to actual agreements. Even mere
acquiescence in an anticompetitive scheme has been held sufficient
to satisfy the statutory language. [
Footnote 2/11]
Since the statute was written against the background of the
common law, [
Footnote 2/12]
reference to the common law is particularly enlightening in
construing the statutory requirement of a "contract, combination in
the form of trust or otherwise, or conspiracy." Under the common
law, the question whether
Page 467 U. S. 786
affiliated corporations constitute a plurality of actors within
the meaning of the statute is easily answered. The well-settled
rule is that a corporation is a separate legal entity; the separate
corporate form cannot be disregarded. [
Footnote 2/13] The Congress that passed the Sherman Act
was well acquainted with this rule.
See 21 Cong.Rec. 2571
(1890) (remarks of Sen. Teller) ("Each corporation is a creature by
itself"). Thus, it has long been the law of criminal conspiracy
that the officers of even a single corporation are capable of
conspiring with each other or the corporation. [
Footnote 2/14] This Court has held that a
corporation can conspire with its employee, [
Footnote 2/15] and that a labor union can "combine"
with its business agent within the meaning of § 1. [
Footnote 2/16] This concept explains the
Timken Court's statement that the affiliated corporations
in that case made
Page 467 U. S. 787
"agreements between legally separate persons," 341 U.S. at
341 U. S. 598.
Thus, today's holding that agreements between parent and subsidiary
corporations involve merely unilateral conduct is at odds with the
way that this Court has traditionally understood the concept of a
combination or conspiracy, and also at odds with the way in which
the Congress that enacted the Sherman Act surely understood it.
Holding that affiliated corporations cannot constitute a
plurality of actors is also inconsistent with the objectives of the
Sherman Act. Congress was particularly concerned with "trusts,"
hence it named them in § 1 as a specific form of "combination" at
which the statute was directed. Yet "trusts" consisted of
affiliated corporations. As Senator Sherman explained:
"Because these combinations are always in many States and, as
the Senator from Missouri says, it will be very easy for them to
make a corporation within a State. So they can; but that is only
one corporation of the combination. The combination is always of
two or more, and in one case of forty-odd corporations, all bound
together by a link which holds them under the name of trustees, who
are themselves incorporated under the laws of one of the
States."
21 Cong.Rec. 2569 (1890). The activities of these "combinations"
of affiliated corporations were of special concern:
"[A]ssociated enterprise and capital are not satisfied with
partnerships and corporations competing with each other, and have
invented a new form of combination commonly called trusts, that
seeks to avoid competition by combining the controlling
corporations, partnerships, and individuals engaged in the same
business, and placing the power and property of the combination
under the government of a few individuals, and often under the
control of a single man called a trustee, a chairman, or a
president. "
Page 467 U. S. 788
"The sole object of such a combination is to make competition
impossible. It can control the market, raise or lower prices, as
will best promote its selfish interests, reduce prices in a
particular locality and break down competition and advance prices
at will where competition does not exist. Its governing motive is
to increase the profits of the parties composing it. The law of
selfishness, uncontrolled by competition, compels it to disregard
the interest of the consumer. It dictates terms to transportation
companies, it commands the price of labor without fear of strikes,
for in its field it allows no competitors. . . . It is this kind of
a combination we have to deal with now."
Id. at 2457. [
Footnote
2/17]
Thus, the corporate subsidiary, when used as a device to
eliminate competition, was one of the chief evils to which the
Sherman Act was addressed. [
Footnote
2/18] The anomaly in today's holding is that the corporate
devices most similar to the original "trusts" are now those which
free an enterprise from antitrust scrutiny.
Page 467 U. S. 789
III
The Court's reason for rejecting the concept of a combination or
conspiracy among a parent corporation and its wholly owned
subsidiary is that it elevates form over substance -- while in form
the two corporations are separate legal entities, in substance they
are a single integrated enterprise, and hence cannot comprise the
plurality of actors necessary to satisfy § 1.
Ante at
467 U. S.
771-774. In many situations, the Court's reasoning is
perfectly sensible, for the affiliation of corporate entities often
is procompetitive precisely because, as the Court explains, it
enhances efficiency. A challenge to conduct that is merely an
incident of the desirable integration that accompanies such
affiliation should fail. However, the protection of such conduct
provides no justification for the Court's new rule, precisely
because such conduct cannot be characterized as an unreasonable
restraint of trade violative of § 1. Conversely, the problem with
the Court's new rule is that it leaves a significant gap in the
enforcement of § 1 with respect to anticompetitive conduct that is
entirely unrelated to the efficiencies associated with
integration.
Since at least
United States v. Colgate & Co.,
250 U. S. 300
(1919), § 1 has been construed to require a plurality of actors.
This requirement, however, is a consequence of the plain statutory
language, not of any economic principle. As an economic matter,
what is critical is the presence of market power, rather than a
plurality of actors. [
Footnote
2/19] From a competitive standpoint, a decision of a single
firm possessing power to reduce output and raise prices above
competitive levels has the same consequence as a decision by two
firms acting together who have acquired an equivalent amount of
market
Page 467 U. S. 790
power through an agreement not to compete. [
Footnote 2/20] Unilateral conduct by a firm with
market power has no less anticompetitive potential than conduct by
a plurality of actors which generates or exploits the same power,
[
Footnote 2/21] and probably
more, since the unilateral actor avoids the policing problems faced
by cartels.
The rule of
Yellow Cab thus has an economic
justification. It addresses a gap in antitrust enforcement by
reaching anticompetitive agreements between affiliated corporations
which
Page 467 U. S. 791
have sufficient market power to restrain marketwide competition,
but not sufficient power to be considered monopolists within the
ambit of § 2 of the Act. [
Footnote
2/22] The doctrine is also useful when a third party declines
to join a conspiracy to restrain trade among affiliated
corporations, and is harmed as a result through a boycott or
similar tactics designed to penalize the refusal. In such cases,
since there has been no agreement with the third party, only an
agreement between the affiliated corporations can be the basis for
§ 1 inquiry. [
Footnote 2/23]
Finally, it must be remembered that not all persons who restrain
trade wear grey flannel suits. Businesses controlled by organized
crime often attempt to gain control of an industry through violence
or intimidation of competitors; in such cases, § 1 can be applied
to separately incorporated businesses which benefit from such
tactics, but which may be ultimately controlled by a single
criminal enterprise. [
Footnote
2/24]
Page 467 U. S. 792
The rule of
Yellow Cab and its progeny is not one that
condemns every parent-subsidiary relationship. A single firm, no
matter what its corporate structure may be, is not expected to
compete with itself. [
Footnote
2/25] Functional integration, by its very nature, requires
unified action; hence, in itself, it has never been sufficient to
establish the existence of an unreasonable restraint of trade:
"In discussing the charge in the
Yellow Cab case, we
said that the fact that the conspirators were integrated did not
insulate them from the act, not that corporate integration violated
the act."
United States v. Columbia Steel Co., 334 U.
S. 495,
334 U. S. 522
(1948). Restraints that act only on the parent or its subsidiary as
a consequence of an otherwise lawful integration do not violate § 1
of the Sherman Act. [
Footnote
2/26] But if the behavior at issue is unrelated to any
functional integration between the affiliated corporations and
Page 467 U. S. 793
imposes a restraint on third parties of sufficient magnitude to
restrain marketwide competition, as a matter of economic substance,
as well as form, it is appropriate to characterize the conduct as a
"combination or conspiracy in restraint of trade." [
Footnote 2/27]
For example, in
Yellow Cab, the Court read the
complaint as alleging that integration had assisted the parent in
excluding competing manufacturers from the marketplace, 332 U.S. at
332 U. S.
226-227, leading the Court to conclude that
"restraint of interstate trade was not only effected by the
combination of the appellees, but was the primary object of the
combination."
Id. at
332 U. S. 227.
Similarly, in
Crescent Amusement, the Court noted that
corporate affiliation between exhibitors enhanced their buying
power and "was one of the instruments in . . . making the
conspiracy effective" in excluding independents from the market.
323 U.S. at
323 U. S.
189-190. Thus, in both cases, the Court found that the
affiliation enhanced the ability of the parent corporation to
exclude the competition of third parties, and hence raised
entry
Page 467 U. S. 794
barriers faced by actual and potential competitors. When conduct
restrains trade not merely by integrating affiliated corporations,
but rather by restraining the ability of others to compete, that
conduct has competitive significance drastically different from
procompetitive integration. [
Footnote
2/28] In these cases, the affiliation assisted exclusionary
conduct; it was not the competitive equivalent of unilateral
integration, but instead generated power to restrain marketwide
competition. There are other ways in which corporate affiliation
can operate to restrain competition. A wholly owned subsidiary
might market a "fighting brand," or engage in other predatory
behavior that would be more effective if its ownership were
concealed than if it was known that only one firm was involved. A
predator might be willing to accept the risk of bankrupting a
subsidiary when it could not afford to let a division incur similar
risks. Affiliated corporations might enhance their power over
suppliers by agreeing to refuse to deal with those who deal with an
actual or potential competitor
Page 467 U. S. 795
of one of them; such a threat might be more potent coming from
both corporations than from only one. [
Footnote 2/29]
In this case, it may be that notices to potential suppliers of
respondent emanating from Copperweld carried more weight than would
notices coming only from Regal. There was evidence suggesting that
Regal and Copperweld were not integrated, and that the challenged
agreement had little to do with achieving procompetitive
efficiencies, and much to do with protecting Regal's market
position. The Court does not even try to explain why their common
ownership meant that Copperweld and Regal were merely obtaining
benefits associated with the efficiencies of integration. Both the
District Court and the Court of Appeals thought that their
agreement had a very different result -- that it raised barriers to
entry and imposed an appreciable marketwide restraint. The Court's
discussion of the justifications for corporate affiliation is
therefore entirely abstract -- while it dutifully lists the
procompetitive justifications for corporate affiliation,
ante at
467 U. S.
772-774, it fails to explain how any of them relate to
the conduct at issue in this case. What is challenged here is not
the fact of integration between Regal and Copperweld, but their
specific agreement with respect to Independence. That agreement
concerned the exclusion of
Page 467 U. S. 796
Independence from the market, and not any efficiency resulting
from integration. The facts of this very case belie the conclusion
that affiliated corporations are incapable of engaging in the kind
of conduct that threatens marketwide competition. The Court does
not even attempt to assess the competitive significance of the
conduct under challenge here -- it never tests its economic
assumptions against the concrete facts before it. Use of economic
theory without reference to the competitive impact of the
particular economic arrangement at issue is properly criticized
when it produces overly broad
per se rules of antitrust
liability; [
Footnote 2/30]
criticism is no less warranted when a
per se rule of
antitrust immunity is adopted in the same way.
In sum, the question that the Court should ask is not why a
wholly owned subsidiary should be treated differently from a
corporate division, since the immunity accorded that type of
arrangement is a necessary consequence of
Colgate. Rather,
the question should be why two corporations that engage in a
predatory course of conduct which produces a marketwide restraint
on competition, and which, as separate legal entities, can be
easily fit within the language of § 1, should be immunized from
liability because they are controlled by the same godfather. That
is a question the Court simply fails to confront. I respectfully
dissent.
[
Footnote 2/1]
The language I have quoted, most of which is overlooked by the
majority, makes it clear that the Court's adoption of the concept
of conspiracy between affiliated corporations was unqualified. As
the first word of the sentence indicates, the Court's following
statement:
"Similarly, any affiliation or integration flowing from an
illegal conspiracy cannot insulate the conspirators from the
sanctions which Congress has imposed,"
332 U.S. at
332 U. S. 227,
expresses a separate, if related, point.
[
Footnote 2/2]
"[B]y preventing the cab operating companies under their control
from purchasing cabs from manufacturers other than CCM, the
appellees deny those companies the opportunity to purchase cabs in
a free, competitive market. The Sherman Act has never been thought
to sanction such a conspiracy to restrain the free purchase of
goods in interstate commerce."
Id. at
332 U. S.
226-227 (footnote omitted).
[
Footnote 2/3]
"[T]he combining of the open and closed towns for the
negotiation of films for the circuit was a restraint of trade and
the use of monopoly power in violation of § 1 and § 2 of the Act.
The concerted action of the parent company, its subsidiaries, and
the named officers and directors in that endeavor was a conspiracy
which was not immunized by reason of the fact that the members were
closely affiliated, rather than independent.
See United States
v. Yellow Cab Co., 332 U. S. 218,
332 U. S.
227;
United States v. Crescent Amusement Co.,
323 U. S.
173."
334 U.S. at
334 U. S.
116.
[
Footnote 2/4]
In
Kiefer-Stewart, Seagram unsuccessfully argued that
Yellow Cab was confined to cases concerning unlawful
acquisitions,
see Brief for Respondents, O.T. 1950, No.
297, P. 21. Thus the
Kiefer-Stewart Court considered and
rejected exactly the same argument embraced by today's
majority.
[
Footnote 2/5]
"The fact that there is common ownership or control of the
contracting corporations does not liberate them from the impact of
the antitrust laws.
E.g., Kiefer-Stewart Co. v. Seagram &
Sons, [340 U.S.] at
340 U. S. 215. Nor do we
find any support in reason or authority for the proposition that
agreements between legally separate persons and companies to
suppress competition among themselves and others can be justified
by labeling the project a 'joint venture.' Perhaps every agreement
and combination to restrain trade could be so labeled."
341 U.S. at
341 U. S.
598.
[
Footnote 2/6]
"There remains for consideration only the Court of Appeals'
alternative holding that the Sherman Act claim should be dismissed
because respondents were all part of a single business entity, and
were therefore entitled to cooperate without creating an illegal
conspiracy. But since respondents Midas and International availed
themselves of the privilege of doing business through separate
corporations, the fact of common ownership could not save them from
any of the obligations that the law imposes on separate entities.
See Timken Co. v. United States, 341 U. S.
593,
341 U. S. 598 (1951);
United States v. Yellow Cab Co., 332 U. S.
218,
332 U. S. 227 (1947)."
392 U.S. at
392 U. S.
141-142.
[
Footnote 2/7]
Also pertinent is
United States v. Citizens & Southern
National Bank, 422 U. S. 86
(1975), in which the Court wrote:
"The central message of the Sherman Act is that a business
entity must find new customers and higher profits through internal
expansion -- that is, by competing successfully, rather than by
arranging treaties with its competitors. This Court has held that
even commonly owned firms must compete against each other if they
hold themselves out as distinct entities. 'The corporate
interrelationships of the conspirators . . . are not determinative
of the applicability of the Sherman Act.'
United States v.
Yellow Cab Co., 332 U. S. 218,
332 U. S.
227.
See also Kiefer-Stewart Co. v. Joseph E.
Seagram & Sons, Inc., 340 U. S. 211,
340 U. S.
215;
Timken Roller Bearing Co. v. United
States, 341 U. S. 593,
341 U. S.
598;
Perma Life Mufflers, Inc. v. International
Parts Corp., 392 U. S. 134,
392 U. S.
141-142."
Id. at
422 U. S.
116-117.
[
Footnote 2/8]
See, e.g., William Inglis & Sons Baking Co. v. ITT
Continental Baking Co., 668 F.2d 1014, 1054 (CA9),
cert.
denied, 459 U.S. 825 (1982);
Ogilvie v. Fotomat
Corp., 641 F.2d 581, 587-588 (CA8 1981);
Las Vegas Sun,
Inc. v. Summa Corp., 610 F.2d 614, 617-618 (CA9 1979),
cert. denied, 447 U.S. 906 (1980);
Photovest Corp. v.
Fotomat Corp., 606 F.2d 704, 726 (CA7 1979),
cert.
denied, 445 U.S. 917 (1980);
Columbia Metal Culvert Co. v.
Kaiser Aluminum & Chemical Corp., 579 F.2d 20, 33-35, and
n. 49 (CA3),
cert. denied, 439 U.S. 876 (1978);
H
& B Equipment Co. v. International Harvester Co., 577 F.2d
239, 244-245 (CA5 1978);
George R. Whitten, Jr., Inc. v.
Paddock Pool Builders, Inc., 508 F.2d 547, 557 (CA1 1974),
cert. denied, 421 U. S. 1004
(1975).
[
Footnote 2/9]
See, e.g., Report of the Attorney General's National
Committee to Study the Antitrust Laws 30-36 (1955) (hereinafter
cited as Attorney General's Committee Report); L. Sullivan, Law of
Antitrust § 114 (1977); Areeda, Intraenterprise Conspiracy in
Decline, 97 Harv.L.Rev. 451 (1983); Handler, Through the Antitrust
Looking Glass -- Twenty-First Annual Antitrust Review, 57
Calif.L.Rev. 182, 182-193 (1969); Handler & Smart, The Present
Status of the Intracorporate Conspiracy Doctrine, 3 Cardozo L.Rev.
23, 26-61 (1981); McQuade, Conspiracy, Multicorporate Enterprises,
and Section 1 of the Sherman Act, 41 Va.L.Rev. 183, 188-212 (1955);
Willis & Pitofsky, Antitrust Consequences of Using Corporate
Subsidiaries, 43 N.Y.U.L.Rev. 20, 22-24 (1968); Comment,
Intraenterprise Antitrust Conspiracy: A Decisionmaking Approach, 71
Calif.L.Rev. 1732, 1739-1745 (1983) (hereinafter cited as Comment,
Decisionmaking); Comment, All in the Family: When Will Internal
Discussions Be Labeled Intra-Enterprise Conspiracy?, 14 Duquesne
L.Rev. 63 (1975); Note, "Conspiring Entities" Under Section 1 of
the Sherman Act, 95 Harv.L.Rev. 661 (1982); Note, Intra-Enterprise
Conspiracy Under Section 1 of the Sherman Act: A Suggested
Standard, 75 Mich.L.Rev. 717, 718-727 (1977) (hereinafter cited as
Note, Suggested Standard).
[
Footnote 2/10]
See also Monsanto Co. v. Spray-Rite Service Co.,
465 U. S. 752,
465 U. S. 769
(1984) (BRENNAN, J., concurring).
[
Footnote 2/11]
See Albrecht v. Herald Co., 390 U.
S. 145,
390 U. S. 149
(1968);
United States v. Parke, Davis & Co.,
362 U. S. 29,
362 U. S. 44
(1960).
See also Monsanto Co. v. Spray-Rite Service Co.,
465 U.S. at
465 U. S. 764,
n. 9.
[
Footnote 2/12]
E.g., Associated General Contractors of California, Inc. v.
Carpenters, 459 U. S. 519,
459 U. S.
531-532 (1983);
National Society of Professional
Engineers v. United States, 435 U. S. 679,
435 U. S.
687-688 (1978);
Standard Oil, 221 U.S. at
221 U. S. 59.
[
Footnote 2/13]
See, e.g., Schenley Corp. v. United States,
326 U. S. 432,
326 U. S. 437
(1946) (per curiam);
New Colonial Ice Co. v. Helvering,
292 U. S. 435,
292 U. S.
440-442 (1934);
Burnet v. Clark, 287 U.
S. 410 (1932);
Louisville, C. & C. R. Co.
v. Letson, 2 How. 497,
43 U. S.
558-559 (1844);
Bank of the United States v.
Deveaux, 5 Cranch 61 (1809).
[
Footnote 2/14]
Attorney General's Committee Report,
supra, 467
U.S. 752fn2/9|>n. 9, at 30-31 (citing
Barron v. United
States, 5 F.2d 799 (CA1 1925);
Mininsohn v. United
States, 101 F.2d 477 (CA3 1939);
Egan v. United
States, 137 F.2d 369 (CA8),
cert. denied, 320 U.S.
788 (1943)).
See also e.g., United States v. Hartley, 678
F.2d 961, 971-972 (CA11 1982),
cert. denied, 459 U.S. 1170
(1983);
Alamo Fence Co. of Houston v. United States, 240
F.2d 179 (CA5 1957);
Patterson v. United States, 222 F.
599, 618-619 (CA6),
cert. denied, 238 U.S. 635 (1915);
Union Pacific Coal Co. v. United States, 173 F. 737 (CA8
1909);
United States v. Consolidated Coal
Co., 424 F.
Supp. 577, 579-581 (SD Ohio 1976);
United States v.
Griffin, 401 F.
Supp. 1222, 1224-1225 (SD Ind.1975),
aff'd mem. sub nom.
United States v. Metro Management Corp., 541 F.2d 284 (CA7
1976);
United States v. Bridell, 180 F.
Supp. 268, 273 (ND Ill.1960);
United States v.
Kemmel, 160 F.
Supp. 718 (MD Pa.1958); Welling, Intracorporate Plurality in
Criminal Conspiracy Law, 33 Hastings L.J. 1155, 1191-1199
(1982).
[
Footnote 2/15]
See Hyde v. United States, 225 U.
S. 347,
225 U. S.
367-368 (1912).
See also United States v.
Sampson, 371 U. S. 75
(1962);
Fong Foo v. United States, 369 U.
S. 141 (1962) (per curiam);
Lott v. United
States, 367 U. S. 421
(1961);
Nye & Nissen v. United States, 336 U.
S. 613 (1949).
[
Footnote 2/16]
See Duplex Printing Press Co. v. Deering, 254 U.
S. 443,
254 U. S. 465
(1921).
[
Footnote 2/17]
See also 21 Cong.Rec. 2562 (1890) (remarks of Sen.
Teller);
id. at 2570 (remarks of Sen. Sherman);
id. at 2609 (remarks of Sen. Morgan).
[
Footnote 2/18]
This legislative history thus demonstrates the error in the
majority's conclusion that only acquisitions of corporate
affiliates fall within § 1.
See ante at
467 U. S.
761-762. The conduct of the trusts that Senator Sherman
and others objected to went much further than mere acquisitions.
Indeed, the irony of the Court's approach is that, had it been
adopted in 1890, it would have meant that § 1 would have no
application to trust combinations which had already been formed --
the very trusts to which Senator Sherman was referring.
I cannot believe that the Court really intends to express doubt
as to whether the Congress that passed the Sherman Act thought
conspiracy doctrine could apply to corporations.
Ante at
467 U. S.
775-776, n. 24. If that were not the case, then the
Sherman Act would have no application to corporations. Since, as is
clear and as the Court concedes, the Sherman Act does apply to
corporations, there can be no doubt that Congress intended to apply
the law of conspiracy to agreements between corporations.
[
Footnote 2/19]
Market power is the ability to raise prices above those that
would be charged in a competitive market.
See Jefferson Parish
Hosp. Dist. No. 2 v. Hyde, 466 U. S. 2,
466 U. S. 27, n.
46 (1984);
United States Steel Corp. v. Fortner Enterprises,
Inc., 429 U. S. 610,
429 U. S. 620
(1977);
United States v. E. I. du Pont de Nemours &
Co., 351 U. S. 377,
351 U. S. 391
(1956).
[
Footnote 2/20]
Significantly, the Court never suggests that the
plurality-of-actors requirement has any intrinsic economic
significance. Rather, it suggests that the requirement has
evidentiary significance: combinations are more likely to signal
anticompetitive conduct than is unilateral activity:
"In any conspiracy, two or more entities that previously pursued
their own interests separately are combining to act as one for
their common benefit. This not only reduces the diverse directions
in which economic power is aimed, but suddenly increases the
economic power moving in one particular direction."
Ante at
467 U. S. 769.
That is true, but it is also true of any ordinary commercial
contract between separate entities, as can be seen if one
substitutes the word "contract" for "conspiracy" in the passage I
have quoted. The language of the Sherman Act indicates that it
treats "contracts" and "conspiracies" as equivalent concepts --
both satisfy the multiplicity-of-factors requirement -- and yet one
of the most fundamental points in antitrust jurisprudence, dating
at least to
Standard Oil, is that there is nothing
inherently anticompetitive about a contract. Similarly, an
agreement to act "for common benefit," in itself, is unremarkable
-- all agreements are in some sense a restraint of trade, be they
contracts or conspiracies. It is only when trade is unreasonably
restrained that § 1 is implicated. The Court's evidentiary concern
lacks merit.
[
Footnote 2/21]
We made this point in the context of resale price maintenance in
United States v. Parke, Davis & Co., 362 U. S.
29 (1960):
"The Sherman Act forbids combinations of traders to suppress
competition. True, there results the same economic effect as is
accomplished by a prohibited combination to suppress price
competition if each customer, although induced to do so solely by a
manufacturer's announced policy, independently decides to observe
specified resale prices. So long as
Colgate is not
overruled, this result is tolerated, but only when it is the
consequence of a mere refusal to sell in the exercise of a
manufacturer's right 'freely to exercise his own independent
discretion as to parties with whom he will deal.'"
Id. at
362 U. S. 44
(quoting
Colgate, 250 U.S. at
250 U. S.
307).
[
Footnote 2/22]
"[I]t is the potential which this conspiracy concept holds for
the development of a rational enforcement policy which, if
anything, will ultimately attract the courts. If conduct of a
single corporation which restrains trade were to violate Section 1,
a forceful weapon would be available to the government with which
to challenge conduct which, in oligopolistic industries, creates or
reinforces entry barriers. Excessive advertising in the cereal,
drug, or detergent industries, annual style changes in the auto
industry, and other such practices could be reached as soon as they
threatened to inhibit competition; there would be no need to wait
until a 'dangerous probability' of monopoly had been reached, the
requirement under Section 2 'attempt' doctrine. Nor would a single
firm restraint of trade rule be overbroad. It would in no way
threaten single firm activity -- setting a price, deciding what
market it would deal in, or the like -- which did not threaten
competitive conditions."
L. Sullivan,
supra, 467
U.S. 752fn2/9|>n. 9, § 114, at 324 (footnotes omitted).
[
Footnote 2/23]
This was the case in
Kiefer-Stewart, for example.
Seagram had refused to sell liquor to Kiefer-Stewart unless it
agreed to an illegal resale price maintenance scheme.
Kiefer-Stewart refused to agree, and, as a result, was injured by
losing access to Seagram's products.
See 340 U.S. at
340 U. S.
213.
[
Footnote 2/24]
See United States v. Turkette, 452 U.
S. 576,
452 U. S.
588-593 (1981) (discussing congressional findings
underlying the Organized Crime Control Act of 1970). Section 1 of
the Sherman Act has, on occasion, been used against various types
of racketeering activity.
See Hartwell, Criminal RICO and
Antitrust, 52 Antitrust L.J. 311, 312-313 (1983); McLaren,
Antitrust and Competition -- Review of the Past Year and
Suggestions for the Future, in New York State Bar Assn., 1971
Antitrust Law Symposium 1, 3 (1971).
[
Footnote 2/25]
See Comment, Decisionmaking,
supra, 467
U.S. 752fn2/9|>n. 9, at 1753-1757; Note, Suggested Standard,
supra, 467
U.S. 752fn2/9|>n. 9, at 735-738. Professor Sullivan
elaborates:
"Picture, at one end of the spectrum, a family business which
operates one retail store in each of three or four adjacent
communities. All of the stores are managed as a unit by one
individual, the founder of the business who sets policy, does all
the buying, decides on all the advertising, sets prices, and hires
and fires all employees other than family members. The fact that
each store is operated by a separate corporation should not convert
a family business into a cartel. . . . If there is, as a practical
matter, an integrated ownership and management, this small business
is a single firm. And a single firm cannot compete with itself.
Hence it cannot restrain price competition with itself, or divide
markets with itself, or act as a common purchasing agent for itself
or otherwise restrain competition with itself, regardless of how
many separate corporations the single firm may, for reasons
unrelated to the act, be divided into."
L. Sullivan,
supra, 467
U.S. 752fn2/9|>n. 9, § 114, at 326-327.
[
Footnote 2/26]
Thus, the Court is wrong to suggest,
ante at
467 U. S.
771-772,
467 U. S.
774-776, and n. 24, that
Yellow Cab could reach
truly unilateral conduct involving only the employees of a single
firm.
[
Footnote 2/27]
If the rule of
Yellow Cab and its progeny could be
easily circumvented through, for example, use of unincorporated
divisions instead of subsidiaries, then there would be reason to
question its efficacy as a tool for rational antitrust enforcement.
However, the Court is incorrect when it asserts,
ante at
467 U. S.
770-771,
467 U. S.
772-774, that there is no economic substance in a
distinction between unincorporated divisions, which cannot provide
a plurality of actors, and wholly owned subsidiaries, which, under
Yellow Cab, can. If that were the case, incorporated
subsidiaries would never be used to achieve integration -- the
ready availability of an unincorporated alternative would always be
employed in order to avoid antitrust liability. The answer is
provided by the Court itself -- the use of subsidiaries often makes
possible operating efficiencies that are unavailable through the
use of unincorporated divisions.
Ante at
467 U. S.
772-774. We may confidently assume that any corporate
parent whose contingent antitrust liability exceeds the savings it
realizes through the use of subsidiaries already utilizes
unincorporated divisions, instead of corporate subsidiaries. Thus,
it is more than merely a question of form when a decision is made
to use corporate subsidiaries instead of unincorporated divisions,
and the rule is not that easily circumvented .
[
Footnote 2/28]
See L. Sullivan,
supra, 467
U.S. 752fn2/9|>n. 9, § 114, at 328 ("To have two competitors
acting concertedly two separate firms, not just persons, are
needed. Thus
concerted action' by two `legal persons' which is
limited solely to the internal management of a single firm does not
restrain competition; but `concerted action' by two `legal persons'
which erects barriers to entry by another separate firm, a
competitor or potential competitor can be a restraint of trade");
see also Willis & Pitofsky, supra, 467
U.S. 752fn2/9|>n. 9, at 38-41. The Attorney General's
National Committee to Study the Antitrust Laws made the same point
in 1955:
"The substance of the Supreme Court decisions is that concerted
action between a parent and subsidiary or between subsidiaries
which has for its purpose or effect coercion or unreasonable
restraint on the trade of strangers to those acting in concert is
prohibited by Section 1. Nothing in these opinions should be
interpreted as justifying the conclusion that concerted action
solely between a parent and subsidiary or subsidiaries, the purpose
and effect of which is not coercive restraint of the trade of
strangers to the corporate family, violates Section 1. Where such
concerted action restrains no trade, and is designed to restrain no
trade other than that of the parent and its subsidiaries, Section 1
is not violated."
Attorney General's Committee Report,
supra, 467
U.S. 752fn2/9|>n. 9, at 34.
[
Footnote 2/29]
Professor Sullivan provides another example:
"[P]icture a parent corporation and its wholly owned subsidiary
(or two corporations wholly owned by the same parent or stockholder
group) which operate, respectively, a newspaper and a radio station
in the same city. If the radio station, which has no local
competitors, were to deny advertising to a local business because
the latter advertised in a rival newspaper, the integration between
the two corporations, however close in terms of ownership or
management or both, would not protect them from a charge of
conspiracy to restrain trade. . . . [T]he concerted action here
involved is not merely carrying on the business of a single
integrated firm, it is action which is aimed at restraining trade
by utilizing such market power as is possessed by the firm because
of its radio station in order to erect a competitive barrier in
front of a competitor of the firm's newspaper."
L. Sullivan,
supra, 467
U.S. 752fn2/9|>n. 9, § 114, at 327 (footnote omitted).
[
Footnote 2/30]
E.g., Continental T.V., Inc. v. GTE Sylvania Inc.,
433 U. S. 36
(1977).