Document: 525 U.S. 128119 S.Ct. 493142 L.Ed.2d 510 (96-1570)93 F.3d 1055, vacated and remanded. SUPREME COURT OF THE UNITED STATESNYNEX CORPORATION, et al., PETITIONERSv.DISCON, INCORPORATED No. 96 1570 [December 14, 1998] ON WRIT CERTIORARI TO STATES OFAPPEALS FOR SECOND CIRCUIT Justice Breyer delivered the opinion of Court. 1 In this case we ask whether antitrust rule that group boycotts are illegal per se as set forth in Klor's, Inc. v. Broadway&nbhyph;Hale Stores, Inc., 359 207, 212 (1959), applies to a buyer's decision buy from one seller rather than another, when cannot be justified terms ordinary competitive objectives. We hold boycott does not apply. 2 * Before 1984 American Telephone Telegraph Company (AT&T) supplied most Nation's telephone service and, through wholly owned subsidiaries such Western Electric, it also much equipment. an consent decree took AT&T out local business left long-distance provider, competing with firms MCI Sprint. See M. Kellogg, J. Thorne, & P. Huber, Federal Telecommunications Law §4.6, p. 221 (1992). The transformed AT&T's formerly companies into independent firms. At same time, insisted those help assure by guaranteeing physical access their systems customers. United States Co., 552 F. Supp. 131, 225, 227 (DC 1982), aff'd sub nom. Maryland States, 460 U. S 1001 (1983). To guarantee access, some had install new call-switching equipment; equipment, they often remove old This involves removing switching equipment (and other obsolete equipment) called "removal services." 3 Discon, respondent, sold removal services used New York Company, firm supplying State parts Connecticut. is subsidiary NYNEX Corporation. owns Materiel Enterprises purchasing entity bought for Telephone. lengthy detailed complaint, alleged defendants (namely, NYNEX, Telephone, Enterprises, several related individuals) engaged unfair, improper, anticompetitive activities order hurt Discon benefit Discon's competitor, Technologies, lineal descendant Electric. District Court dismissed complaint failure state claim. Appeals Second Circuit affirmed dismissal exception, exception before us consideration. 4 focused on specific claims, claim switched its purchases part attempt defraud customers hoodwinking regulators. According would pay Technologies more have charged similar services. It did so because could pass higher prices which turn consumers form regulatory-agency-approved charges. end year, receive special rebate share parent, NYNEX. added refused participate fraudulent scheme, result went business. 5 These allegations, said, cause action under §1 Sherman Act, though "different legal theory" articulated Discon. 93 1060 (1996). conceded ordinarily "the discriminate favor supplier over another will pro-competitive intent effect." Id., at 1061. But, added, case, "no rationale appears face complaint." Ibid. Rather, alleges Enterprises' was intended be, was, "anti-competitive." Hence, "Discon has under, least, reason, possibly applied if restraint trade ' "has no purpose except stifling competition." " (quoting Oreck Corp. Whirlpool Corp., 579 F.2d 126, 131 (CA2) (en banc) (in quoting White Motor Co. 372 253, 263 (1963)), cert. denied, 439 946 (1978)). For somewhat reasons believed stated valid conspiracy monopolize §2 Act. F.3d, 1061 1062. 6 noted Courts uncertain whether, or when, purchaser (which "two-firm boycott"). Compare Com-Tel, DuKane 669 404, 411 413, nn. 13, 16 (CA6 1982); Cascade Cabinet Millwork 710 1366, 1370 1371 (CA9 1983), Construction Aggregate Transport, Florida Rock Industries, 752, 776 778 (CA11 1983). granted certiorari consider applicability where single buyer favors albeit improper reason. II 7 As made clear, Act's prohibition "[e]very" agreement "restraint trade," 26 Stat. 209, amended, 15 U.S.C. § prohibits only agreements unreasonably restrain trade. Business Electronics Sharp 485 717, 723 (1988) (citing National Collegiate Athletic Assn. Board Regents Univ. Okla., 468 85, 98 (1984)); Standard Oil N. 1, 59 62 (1911); Areeda H. Hovenkamp, Antitrust ¶320b, 49 (1995). Yet certain kinds prove harmful competition rarely laws do require proof kind is, fact, particular circumstances. Khan, 522 3, 10 (1997); Northwest Wholesale Stationers, Pacific Stationery Printing 472 284, 289 290 (1985); supra, 52. An unlawful se. See, e.g., Socony-Vacuum 310 150, 218 (1940) (finding horizontal price-fixing illegal); Dr. Miles Medical John D. Park Sons 220 373, 408 (1911) vertical Palmer BRG Ga., 498 46, 50 (1990) (per curiam) market division illegal). 8 found applicable cases. Thus, Fashion Originators' Guild America, FTC, 312 457 (1941), considered created among clothing designers, manufacturers, suppliers, retailers. defendant suppliers promised sell clothes retailers who manufacturers suppliers. wanted present evidence show boycotted competitors "pira[ted]" fashion designs. 467. But wrote "it error refuse hear offered" reasonable necessary "protect against devastating evils" design pirating "is material reasonableness fixed" agreement. 467 468. 9 Klor's rule. retail store, Broadway-Hale, household appliance distributors agreed sell, discriminatory prices, appliances Broadway-Hale's small, nearby namely, Klor's. U.S., 208 209. submitted undisputed competitor (Klor's) many appliance-selling remained marketplace continued thrive. 209 210. held beside point. "not tolerated merely victim just merchant." 213. thereby inferred injury process itself nature And forbade, matter law, defense based upon small firm, itself, suffered injury. forbid introduce "justification." contrary, invited so, said "per rule" apply "pro-competitive justification" were found. 1061; cf. ¶1510, 416 (1986) ("Boycotts but justifications routinely defining forbidden category"). question court considering purchase goods should (after examining justifications) finds legitimate reason decision. conclude boycott-related plaintiff here must allege harm, process, i.e., itself. 11 Our conclusion rests large precedent, precedent limits context cases involving direct competitors. involved what may strongest sense: A threatened withhold third parties unless them injure directly rivals. Although threat powerful threatened, retailer threat. 209; see L. Kaplow, Analysis: Problems, Text, Cases 333 (5th ed. 1997) (defining paradigmatic "collective inhibit vitality rivals"); ¶1901e, pp. 189 190 (1998). emphasized issue 12 trader refusing deal nor even manufacturer dealer agreeing exclusive distributorship. Alleged wide combination consisting retailer." 213 (footnote omitted). 13 subsequently pointed specifically simply "vertical" between customer, "horizontal" Electronics, 734. doing "vertical includes price levels." 735 736. makes inapplicable, concerns restraint, takes depriving potential customer. 14 ¶1902d, 198. Nor any feature distinguish discussed. concede petitioners' behavior raising rates. consumer naturally flowed less services, exercise power lawfully hands monopolist, combined deception worked regulatory agency prevented controlling Telephone's monopoly power. decision, reasons, composes fraud transform various say, nepotism personal pique, treble-damages discourage changing suffer harm. Cf. Poller Columbia Broadcasting System, 368 464, 484 (1962) (Harlan, J., dissenting) Packard Car Webster 243 418, 421 (CADC 1957)). 17 freedom switch lies close heart seek encourage. Oil, (noting individual right contract unduly improperly exercised [is] efficient means prevention monopoly"). laws, example, "unfair competition" tort provide remedies "competitive practices thought offensive proper standards morality." ¶651d, 78 reasoning activity. Brooke Group Ltd. Brown Williamson Tobacco 509 225 (1993) ("Even act pure malice not, without more, federal laws"); 80 ("[I]n presence substantial power, tortious anticompetitively create sustain monopoly, [but] wrong categorically condemn excuse them"). 18 points hoped drive lest reveal relevant agency. That hope, says amounts motive. 19 how motive, however, make significant difference. motive actions "boycott" within meaning Court's precedents. 7. Nor, matter, understand believes affected behavior. Why demise employees likely, report overcharge/rebate scheme regulators? Regardless, showing knew about firm's distinction corporate knowledge necessarily correspond behavioral differences difficult prove, making resolution already complex yet difficult. find convincing why lead application 20 Finally, shall argument tangentially claims. (through Enterprises) largest State, Amended Complaint, ¶¶2, 29, 99, App. 75, 83, 110, competed business, 26, id., 82 83. One might these accompanying allegations sufficient warrant Klor's-type presumption consequent harm 21 believe for, 7, law permit absence (Though contexts, fixing, conduct fall scope here. 408.) explains particularly inappropriate here, suggests actual competitors, circumstances, argue likelihood says, fact perform few jobs ¶27, needing way supply them. ¶53, 91. complaint's description entry easy, perhaps point firms, employing workers scrap, entered almost will. extent, provided roughly checks "equipment removal" provides sound basis assuming contrary. Its simple allegation automatically competition. III 22 upheld charge violation understanding consisted very previously Unless harmed amount monopolize. see, facts alleged, succeed prevailing ¶651e, 81 82. Given our violation, think prudent vacate portion Appeals' allow reconsider finding IV 23 Petitioners reach beyond se" issues anywhere decisions dismissed. They note paragraph process. outside questions presented certiorari. Those limited petitioners raise V 24 judgment vacated, remanded further proceedings consistent opinion.

Category: 7