Document: 495 U.S. 328 110 S.Ct. 1884 109 L.Ed.2d 333 ATLANTIC RICHFIELD COMPANY, Petitionerv.USA PETROLEUM COMPANY. No. 88-1668. Argued Dec. 5, 1989. Decided May 14, 1990. Syllabus Petitioner Atlantic Richfield Company (ARCO), an integrated oil company, increased its retail gasoline sales and market share by encouraging dealers to match the prices of independents such as respondent USA Petroleum Company, which competes directly with at level. When USA's dropped, it sued ARCO in District Court, charging, inter alia, that vertical, maximum-price-fixing scheme constituted a conspiracy restraint trade violation § 1 Sherman Act. The court granted summary judgment ARCO, holding could not satisfy "antitrust injury" requirement for purposes private damages suit under 4 Clayton Act because was unable show ARCO's were predatory. Court Appeals reversed, injuries resulting from nonpredatory, agreements constitute injury." Reasoning any form price fixing contravenes Congress' intent forces alone determine what goods services are offered, their prices, whether particular sellers succeed or fail, concluded had shown losses resulted disruption caused fixing. Held: 1. Actionable is injury type antitrust laws intended prevent flows makes defendants' acts unlawful. Injury, although causally related violation, will qualify unless attributable anticompetitive aspect practice scrutiny, since inimical award stemming continued competition. Cargill, Inc. v. Monfort Colorado, Inc., 479 104, 109-110, 107 484, 488-489, 93 427. P. 334. 2. A must result predatory pricing cause competitor injury. Pp. 335-341. (a) As competitor, has suffered injury," do flow harmful effects on consumers rendered maximum per se illegal Albrecht Herald Co., 390 145, 88 869, 19 998. benefited rather than harmed if policies restricted few large prevented offering desired consumers. Even agreement acquired all attributes minimum-price-fixing scheme, still would have injury, higher worked advantage. 335-337. (b) argument that, even effects, lost business lowering above levels constitutes rejected, cutting increase often essence 337-338. (c) It inappropriate require showing before can be established case Although itself illegal, flowing definition injuries. Low benefit regardless how they set. So long levels, threaten competition and, hence, cannot give rise 338-341. 3. loss does automatically requirement, distinct matter independently. purpose analysis unreasonable. Actions unlawful may nonetheless some procompetitive parties might suffer therefrom. however, ensures plaintiff recover only stems competition-reducing effect defendant's behavior. 341-345. 4. Providing competitors action enforce rule against protect rights consumers—the class persons whose self-interest normally motivate them vindicate consequences—under laws. inextricably intertwined dealer's no incentive legitimate interests rival's dealer injured motivated sue when arrangement impact market. 345-346. 859 F.2d 687 (CA9 1988), reversed remanded. BRENNAN, J., delivered opinion REHNQUIST, C.J., MARSHALL, BLACKMUN, O'CONNOR, SCALIA, KENNEDY, JJ., joined. STEVENS, filed dissenting opinion, WHITE, joined, post, p. 346. Ronald C. Redcay, Los Angeles, Cal., petitioner. John G. Roberts, Jr., Washington, D.C., Federal Trade Com'n amici curiae, supporting petitioner, special leave Court. Maxwell M. Blecher, respondent. [Amicus Curiae Information page 330 intentionally omitted] Justice BRENNAN This presents question firm incurs "injury" within meaning loses charging nonpredatory pursuant scheme. We hold therefore bring Act, 38 Stat. 731, amended, 15 U.S.C. 15.1 2 * Respondent (USA) petitioner (ARCO) United States Central California, alleging existence prohibited 26 209, 1, attempt monopolize local 2, other misconduct relevant here. company markets Western States. sells both through own stations indirectly ARCO-brand dealers. independent marketer which, like independents, buys major petroleum companies resale brand name. Respondent's outlets typically low-overhead, high-volume "discount" charge less selling equivalent quality names. 3 In early 1982, adopted new marketing strategy order compete more effectively discount respondent.2 encouraged offered various ways; made available distributors short-term discounts "temporary competitive allowances" volume allowances," reduced dealers' costs by, example, eliminating credit card sales. share. amended complaint, charged engaged "direct head-to-head discounters" "drastically lowered ways sought appeal price-conscious consumers." First Amended Complaint ¶ 19, App. 15. asserted conspired service fix below-market levels: "Arco co-conspirators organized maintenance direct otherwise exist among Arco-branded been eliminated agreement, fixed, stabilized maintained artificially low uncompetitive levels." 27, 17. alleged "has solicited participate acquiesce used threats, intimidation coercion secure compliance terms." 37, 19. According respondent, this drove many California out business. 39, 20. Count one complaint petitioner's price-fixing thus violated two, later withdrawn prejudice Act.3 5 claim. stated "[e]ven assuming [respondent USA] establish vertical maintain [respondent] 'antitrust injury' 4, without predatory." Pet. Cert. 3b. then make because, given ease entry into market, position exercise power. 6 divided panel Ninth Circuit reversed. (1988). Acknowledging decision conflict approach Seventh several recent cases,4 see id., 697, n. 15, held reasoned "market these sold, fail." Id., 693. believed key inquiry determining "resulted . violation." Ibid. "[i]n present case, seems straightforward: claimed result, indeed, allegations we accept true, objective, USA, disrupt sales, source injuries." 7 certiorari, 490 1097, 2446, 104 1001 (1989). II 8 merely "injury linked presence market." Brunswick Corp. Pueblo Bowl-O-Mat, 429 477, 489, 97 690, 50 701 (1977). Instead, prove say unlawful." (emphasis original). 427 (1986), reaffirmed nevertheless anti-competitive "since '[i]t [the antitrust] damages' competition." S.Ct., 488-489 (quoting Brunswick, supra, U.S., 488, 697). See also Associated General Contractors Carpenters, 459 519, 539-540, 103 897, 909, 74 723 (1983); Blue Shield Virginia McCready, 457 465, 483, 102 2540, 2550, 73 149 (1982); J. Truett Payne Co. Chrysler Motors Corp., 451 557, 562, 101 1923, 1927, 68 442 (1981). 9 argues set levels. addition, maintains satisfies requirement. reject contentions failed meet test case. reverse Appeals. A. 10 998 (1968), found threatened inhibit vigorous bound become scheme.5 That concerned newspaper distributor who his customers suggested advertised publisher. After publisher attempted discipline hiring another carrier take away distributor's customers, brought "the combination formed [publisher] force distributor] specified newspapers he purchased publisher] constituted, more, Act." 153, 873. 11 maximum-price analyzed manner restrain First, noted "by substituting perhaps erroneous seller severely intrude upon ability buyers survive 152, 872. further explained "[m]aximum fixed too furnish essential value consumer conveniences desire willing pay." 152-153, 872-873. By limiting small engage nonprice competition, "channel distribution specifically advantaged dealers." Finally, observed "if actual nearly always price, increasingly likely approaches cost dealer, tends acquire minimum prices." 12 alleges firms following agreement. But potential consumers, competitors. resemble dangers described Albrecht.6 For fixes services" way channel distributors, 872-873, dealing competing harmed. ultimately "may complain conspiracies level." Matsushita Electric Industrial Zenith Radio 475 574, 585, 8, 106 1348, 1355, 89 538 (1986); 582-583, 1353-1354 ("[R]espondents [cannot] petitioners Such conduct indeed violate but injure respondents: petitioners' competitors, respondents stand gain raise ."). Indeed, gravamen respondent's complaint—that between enabled those sales—amounts assertion materialized instant sum, aspects render illegal. 13 identified Albrecht, produced restraint. disagree. firm, group adhering lowers rivals viewed "anticompetitive" consequence violation.7 complaining about harm suffers "is really claiming [is] Blair & Harrison, Rethinking Antitrust 42 Vand.L.Rev. 1539, 1554 injury; "cutting very Matsushita, 594, 1359. enacted protection competitors." Brown Shoe States, 370 294, 320, 82 1502, 1521, 510 (1962) "To profits due [nonpredatory] would, effect, cut share." 116, 492. 14 notes two sections quite different. Price violates single firm's same level create liability. generally Copperweld Independence Tube 467 752, 767-769, 2731, 2739-2740, 81 628 (1984). contends observes general grounded " 'on faith [and not] policy competition.' Arizona Maricopa County Medical Society, 332, 348, 2466, 2475, 48 (1982) Rahl, Competition Fixing Rule Preface Perspective, 57 Nw.U.L.Rev. 137, 142 (1962)). argument. results pricing.8 arise until party adversely affected conduct, 487, 696; context practices, requisite effect.9 Areeda Turner, Predatory Pricing Related Practices Under Section Harv.L.Rev. 697-699 (1975); McGee, Revisited, 23 Law Econ. 289, 292-294 (1980). set, so Hence, 16 adhered principle claim involved. challenge merger assumed though merged reduce plaintiff's profits. share, reflected below price" rivals, activity forbidden laws." Because predatory, Similarly, determined absent plaintiffs acquisition 'deep pocket' parent 'pygmies,' 696, scenario economic harm. opined plaintiffs] injured, 'by reason anything laws': while plaintiffs'] occurred of' acquisitions, did occur acquisitions 697. To sure, allegedly difference salient. said stem conduct.10 'It interest permit dominant including 492 Arthur S. Langenderfer, S.E. Johnson 729 1050, 1057 (CA6), cert. denied, 469 1036, 105 510, 83 401 (1984)).11 B 17 suggestion need where method violated, indicate Per rule-of-reason methods "unreasonable," i.e., outweigh effects.12 presumption unreasonableness based "business certainty litigation efficiency." 344, 2473. represents "longstanding practices nature 'a substantial FTC Superior Trial Lawyers Assn., 493 411, 433, 768, 780, 851 (1990) Jefferson Parish Hospital Dist. Hyde, 466 16, 1551, 1560, 80 (1984)). "Once experience kind enables predict confidence condemn it, applied conclusive unreasonable." 2472. 18 corresponds rationale finding first place, prevents suits either equitable relief. therefrom.13 351, 2476; Continental T.V., GTE Sylvania 433 36, 50, 2549, 2557, 53 568 Conduct theanti trust three interwoven: respects neutral least great reason. insofar permits prohibition efficient name simplicity, underscored. "[P]rocompetitive efficiency-enhancing nominally serious individuals, should play role damages." Page, Scope Liability Violations, 37 Stan.L.Rev. 1445, 1460 (1985). Thus, "proof matters independently." H. Hovenkamp, 334.2c, (1989 Supp.). reason, previously recognized cases involving violations, right horizontal fixing, "perhaps paradigm unreasonable trade," National Collegiate Athletic Assn. Board Regents University Oklahoma, 468 85, 100, 2948, 2959, 70 (1984), required "show provide relief." 584, 7, 1354, (citing ) added). (1983), sense "be condemned proof effect," unlawful, not, course, necessarily follow person 528-529, 903. C 20 decline dilute here find there encourage enforcement If causes consequences detailed manufacturers' suit. "existence identifiable public diminishes justification allowing remote perform office attorney general." Contractors, 542, 910. 21 moreover, "inextricably intertwined" suffer, 2551, militate favor permitting behalf price-fixing, 336-337, dealer. Easterbrook, Limits Antitrust, 63 Texas L.Rev. 33-39 low, inasmuch situation. promotes interbrand subject 13, supra. short, hence Therefore, providing III 22 demonstrate allegation obviate test. remanded proceedings consistent opinion. ordered. 24 whom WHITE joins, dissenting. 25 today purportedly defines contours much, all, reasoning actionable apply joined doing well outlets.1 undermines enforceability substantive flawed construction erroneously legality arrangements conform model. much Court's turns characterization action, appropriate begin complete description theory. comes us review judgment, assume truth gas specific stations. conceded 27 theory expressed hypothetical example: free command $1 gallon unadvertised sell penny less, retailers brands making adequate profit. If, divert enough gradually withdraw market.2 lower obtain "predatory" actor lawfully 13a.3 28 rests premise resources conspirators, combined coordinated, sufficient sustain below-normal selected localities shift capital receive normal return investment.4 during initial period struggle conspirators presumably prices. campaign successful, however—and be—in run character different never taken place. fact, already significant losses.5 29 naked 1.6 undisputed arrangement, alleged, 'grounded Rule—Preface (1962)." (1982). At issue administered host ostensibly retailers, challenged targeted 30 allows "any shall property Simpson Union Oil 377 84 1051, 1054, 98 (1964) Radovich Football League, 352 445, 454, 77 390, 395, 456 (1957)) (laws aggrieved 'protect victims public' "). invoke (1) "of prevent" (2) "flows businesses deprived benefits concentration failing 7. concluding neither condition standing satisfied: mergers preserved designed prevent; second, change structure effected parent." 487-488, 696-697. 31 conditions met. forbid drive Klor's Broadway-Hale Stores, 359 207, 213, 79 705, 710, 741 (1959) (illegal coordination tolerated victim just merchant destruction little economy"). aims forcing refiners marketers created "an immediate growing probability segment industry destroyed altogether."7 32 requiring type" 33 "does mean lessening recover. certain behavior below-cost pricing, example—may stimulate able actually driven thereby lessened." 14. 34 example "predatory." assumes relationship illegality competitor's fact conspiracy, "that unlawful."8 notwithstanding temporary seek damages.9 35 Second, immediately say, issue—the plaintiffs; similarly, arose proposed merger, possible postmerger link harms insufficient recognize injury."10 36 accepts Nevertheless, denies nor ARCO: 'the competitors.' Ante, 338 proposition—which law read deny remedial actions illicit forces, precisely protecting interprets proposition categorically excluding others "nonpredatory scheme." 331. distinctions unfounded. Each analytical errors merits discussion. limits noncompetitive "predatory," ante, 331, 333, 3, 335, 339, 340, essentially lawful, wrong. Unlike prohibitions monopolizing underselling 13a, unrelated point time. acting independently reasonableness wholly irrelevant conspirators' work product firmly settled antitrust, agreed defendants defense charge.11 Trenton Potteries 273 392, 47 377, 71 L.Ed. 700 (1927), "[t]he reasonable changes tomorrow," 397, 379, cautioned 39 "in absence express legislation hesitate adopt legal field relations depend uncertain reasonable—a determination satisfactorily after survey our organization choice rival philosophies." 398, 379. 40 Masonite 316 265, 281-282, 62 1070, 1079, 86 1461 (1942). applies equal provides fall elusive line pricing.12 sets sail "sea doubt" Judge Taft classic Addyston Pipe Steel case: 41 "It true courts, mistaking, conceive, proper relaxation rules restraints trade, sea doubt, power respect contracts consideration side mutual parties, interest, not." 85 F. 271, 283-284 (CA6 1898). IV careful limit "vertical" agreements. thinly veiled circumscription reach simply excludes challenges conspiracy: "[A] facilitate pricing. [b]ut dispense agreement." 9.13 focus misleading incorrectly sharp distinction arrangements, affect way. 43 neat category association executives instead common supplier generate exactly consequences. each member fixers separate, individual agent destroy 44 "[T]here doubt 392 [47 700] [(1927) ]; Ethyl Gasoline 309 436 [60 618, 852] [(1940) Socony-Vacuum 310 150 811, 1129] ]. negotiating entering agreements, appellee, Masonite, acted others, negotiated acceptance discussions others. Prices upon. 222 843]. group, delegation, acquiescence, understanding, direct, joint action. Id."14 45 Differences support former reasonable, upheld latter. differences contradictory do. treatment 337, 339-340, 345. again wrong.15 ancillary exclusive distributorship exploit limited monopoly. However, conclusion lends immune victim.16 V 46 ask ourselves why elected act concert independently.17 situations collective foster see, e.g., presume functions most entrepreneurs arrangements. Professor Sullivan producers "are undiluted altruism," self-interested goals prevention entries L. Sullivan, 211 He broad reasons prohibit collusive pricing: "The insists decisions preference independence businessman (though surely there) usually yield strongly present). Also theoretical conviction function process, allocation reallocation rational yet automatic manner, carried trader scrupulously required. Created confluence parallel strivings, breadth forbidding ones forestall decreases." 212. 49 carving exception chosen second-guess wisdom embark questionable enterprise parsing conspiracies. fails heed prudence urged Topco Associates, 405 596, 92 1126, 515 (1972): courts utility examining difficult problems. Our inability weigh, meaningful sense, sector economy promotion important formulated rules. 51 "In applying rigid rules, consistently rejected notion developed E.g., 384 127, 146-147 [86 1321, 1331, 415] (1966); 265 [62 1461] (1942); Fashion Originators' Guild FTC, 312 [61 703, 949] (1941)." [405 U.S.], 609-610, [92 1134]. 52 haste excuse efficiency,18 cast aside century understanding safeguard efficiency welfare,19 compensate deter wrongdoers.20 American Tobacco 221 106, 183, 632, 649, 55 663 (1911): "[I]t danger deemed liberty well-being record exhibits, led legislative mind conceive enact Anti-trust poses threat prevent. victim, unfaithful history "charter freedom."21 54 I respectfully dissent. provision treble 'inferences drawn underlying facts light favorable opposing motion.' 587, 1356, (1986) Diebold, 369 654, 655, 993, 994, 176 motion dismiss originally pleaded. 577 F.Supp. 1296, 1304 (1983). subsequently claim, shortly voluntarily dismissed prejudice. 76-78. framed "whether non-predatory, injury.' 687, 689 1988) likewise nature. Indiana Grocery, Super Valu 864 1409, 1418-1420 (1989); Local Beauty Supply, Lamaur, 787 1197, 1201-1203 Jack Walters Sons Morton Bldg., 737 698, 708-709, 1018, 432, assume, arguendo, correctly rule. confronted unadulterated arrangement. Kiefer-Stewart Joseph E. Seagram Sons, 340 211, 259, 260, 95 219 (1951), additional component, 18, (1982), suppliers liquor wholesalers "maximum resell." Kiefer-Stewart, 212, 260. implied satisfied "long-term" eliminate F.2d, 694, 696. Rivals excluded relatively inefficient. false, ground "ruinous." Cf. 610-612, 1134-1135, (1972); 150, 220-221, 60 842-843, 1129 (1940). "[T]he statutory precludes good bad." Society Professional Engineers 435 679, 695, 1367, 637 (1978). erred removal elements distorts markets, participants." 694. Every "disrupt" "distort" "[O]therwise, 340.3b, 411 equate declined (1977), today. met "market" abstract entity. analysis, every counts supplier, downstream them, bear themselves full imposed Sun 371 505, 522, 358, 368, (1963). contrary define term "predatory pricing" "[f]or note (i) necessary products, (ii) measure cost." 8. statement imply discussion ibid. (nonpredatory "leave forces"). "[e]xcept 586, 1355. "respondents depends turn predatorily involved (citations omitted); 1359; 117, 12, 493, (interpreting ). occasion consider dictum consist "pricing offender's] products," accurate law. purported distinguish Cargill turned "attenuated indirect" violation—the merger—and plaintiffs' 695. violation. 108, 488; "Both Reason employed 'to significance restraint.' 103, 2961, (1984) 692, 1365). "[W]hether ultimate remains same—whether enhances 2961. manufacturer area distribute product, manufacturer's exploitation monopolist. altruism, sales—whereas incentive, monopolist, output price. dealership means distribution, served abandon resort self-distribution distributors. Vertical, 159, 876, (1968) (Harlan, dissenting) (maximum ceilings "do lessen competition" "drive toward intense competition," "prevent[ing] reaping monopoly supercompetitive profits"). acknowledged situations." evident now decided, territorial restrictions 1968. 154, 874; Arnold, Schwinn 388 365, 375-376, 87 1856, 1863-1864, 1249 (1967). These currently monopolistic likely. Monsanto Spray-Rite Service 465 761, 1464, 1469, 775 (1984); 47-59, 2556-2562, Many commentators See, 378, (1988 Supp.); 1553 Schafer, Evolutionary Models Legal Change Rule, Bull. 989, 995-1000 (1987); Bork, Se Concept: Market Division, part 75 Yale L.J. 373, 464 Maximum Fixing, U.Chi.L.Rev. 886, 887-890 (1981); Vertical Integration Newspaper Monopolist, 69 Iowa 451, 452-456 Polden, Standing Against Resale Maintenance, Cleveland State 179, 216-217 Durability, Relevance, Future Policy, Calif.L.Rev. 797, 803-804 (1987). reasons: "Low 340. "When conduct." 340-341. "31. Arco deliberately competitors' impossible compete. sold gasoline, ex tax, pump plaintiff, purchase wholesale." Complaint, 18. "27. ." accomplished objectives independently, reducing sufficiently induce abnormally 30, followed course conspiratorial program. Parke, Davis 362 29, 44, 503, 511, 505 (1960). trial happened. us, architect conspiracy. "18. last years, been, is, steady continuous reduction effectiveness western During time period, dozen out, liquidated drastically curtailed operations, closed. barriers high, insurmountable; once eliminated, highly unlikely replaced." "a raising, depressing, pegging, stabilizing commodity interstate foreign commerce se." 222-223, 843, (1951) prices); (vertical prices). alleges: "39. proximate above-described combinations furtherance thereof: "(a) stabilized; "(b) seriously impaired; "(c) gone over Arco; "(d) altogether control Arco." supports conclusion. There, alternative theories: first, efficient; engaging sustained efficiencies encourage. 116-117, 492-493. second "neither raised proved Court." 119, 494. discussing theory, elimination 'inimical laws,' capable inflicting 117-118, (footnote omitted). Again, setting 1561-1565 (1989) (unsuccessful efforts suffered). agree presumed strong indirect patient competitor. Petitioners, medical insurance psychiatrists, patients psychologists. go borne instance [psychologist] conspirators." 2550. McCready went psychologist her expense. "[a]lthough she inflict psychologists psychotherapy 483-484, 2550-2551. (1927); Trans-Missouri Freight 166 290, 540, 1007 (1897); 291 1898) ("[T]he defendants, however encounter, necessity curbing committing financial suicide ill-advised void law, tending monopoly"). Like "reasonable" far certain. declines creates today, 341, 10. actor, cost. (1986). A.A. Poultry Farms, Rose Acre 881 1396, 1400 (CA7 1989) (describing considerations infer relation cost). successfully driving care "nonpredatory" 274-276, 1075-1076, 336, (suggesting component ); Business Electronics Sharp 485 717, 744-748, 108 1515, 1530-1532, 99 808 (1988) (STEVENS, dissenting). elsewhere acknowledges '[m]aximum situations.' 343, 872). true. (the guards discouraging deterring experimentation, hidden setting); 51, 2558, (1977) reduces intrabrand cartelizing). Sylvania, "Congress recently approval repealing provisions Miller-Tydings McGuire Acts fair-trade option States." White Motor 372 253, 268, 704, 738 (1963) (BRENNAN, concurring) ("Resale to, almost invariably brands"). grudgingly "assume[s], rule," seeks "potential competitors," 336. zeal narrow mimic circumstances discussed production stages. incorrect. basis rule, evidence Furthermore, treat himself "dealer" "competitor" hired "to territory lower, 149-150, 6, 871, 6. dealer—and strictly use terms—what critical underprice contradicts contrived model admits schemes 9. Until clearly understood fundamentally differs violations: Congress treated concerted unilateral readily appreciated. Concerted inherently fraught risk. deprives marketplace centers decisionmaking demands. entities pursued separately combining benefit. diverse directions aimed suddenly increases moving direction. Of mergings lead warrant scrutiny incipient monopoly." 768-769, 2740, 337-338, ("Rivals inefficient"); 334 ("[I]nsofar underscored"). Firms properly inefficient; inefficiencies imperfections leading firms' demise. sanctions force—the super-efficiency illegally target Note, Below-Cost Sales Buying Share, (discussing long-term displacement "otherwise producers" buy geographic area). Chief Hughes regarded freedom," Appalachian Coals, 288 359, 471, 473, 825 (1933). Learned Hand strengthen concerns "put end aggregations helplessness them," Aluminum America, 148 416, 428-429 (CA2 1945), Magna Carta enterprise," 610, 1134, (1972). also, Handler, Is Antitrust's Centennial Time Obsequies Renewed Faith Policy? Cardozo 1933 Distributive Laws, Geo.Wash.L.Rev. Flynn Ponsoldt, Jurisprudence Restraints: Limitations Neoclassical Economic Analysis Resolution Disputes, N.Y.U.L.Rev. 1125, 1137-1141 (1987) political, social, moral—as economic—goals motivating enacting legislation). (1964); Clev.St.L.Rev. 208-209, 220-221 (§ furthers congressional deterrence compensation competitors); Vand.L.Rev., 1564-1565 (treating unsuccessful avoids "suboptimal deterrence"). barring leaves "vast majority agreements" hands unenthusiastic Department circumstances, 1988). 473.

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