Opinion ID: 2081714
Heading Depth: 1
Heading Rank: 2

Heading: antitrust count

Text: Count II of the complaint alleges that the hospitals' practice of giving rebates only to Blue Cross amounts to discriminatory pricing and constitutes an unreasonable restraint of trade in violation of section 3(2) of the Illinois Antitrust Act. The majority concludes that by modeling section 3(2) after the Sherman Act, rather than the Clayton Act, the legislature did not intend to prohibit price discrimination. (133 Ill.2d at 383-84.) Consequently, price discrimination is not actionable under section 3(2) of the Illinois Antitrust Act. (133 Ill.2d at 386.) While I agree that count II does not state a cause of action under section 3(2), I do not concur in the majority's analysis. Section 3(2) of the Illinois Antitrust Act provides that a person violates the Act if he [b]y contract, combination, or conspiracy with one or more persons unreasonably restrain[s] trade or commerce. (Ill. Rev. Stat. 1985, ch. 38, par. 60-3(2).) As noted by the majority, the Illinois Antitrust Act is patterned after section 1 of the Sherman Act and, consequently, we refer to Federal interpretations of section 1 for guidance when construing section 3(2) of the Illinois Antitrust Act. (133 Ill.2d at 384.) Section 1 of the Sherman Act prohibits [e]very contract, combination    or conspiracy, in restraint of trade or commerce. (15 U.S.C. § 1 (1976).) Recognizing that this language could be construed to render any commercial contract violative of the Sherman Act ( Board of Trade v. United States (1918), 246 U.S. 231, 238, 62 L.Ed. 683, 687, 38 S.Ct. 242, 244), courts have tempered the Act by applying the rule of reason in determining whether a violation of section 1 has occurred ( Standard Oil Co. v. United States (1911), 221 U.S. 1, 55 L.Ed. 619, 31 S.Ct. 502). Under the rule of reason, courts look to the effects of the restraint to determine whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition, or whether it suppresses or even destroys competition. In making that determination, courts ordinarily examine: (1) the facts peculiar to the business to which the restraint is applied; (2) its condition before and after the restraint was imposed; and (3) the nature of the restraint and its effect. Board of Trade, 246 U.S. at 238, 62 L.Ed. at 687, 38 S.Ct. at 243. Ordinarily, whether particular action violates section 1 is determined through case-by-case application of the rule of reason. ( Business Electronics Corp. v. Sharp Electronics (1988), 485 U.S. 717, 723, 99 L.Ed.2d 808, 816, 108 S.Ct. 1515, 1519.) Certain categories of agreements, however, have been held to be per se violations, thus dispensing with the need for case-by-case evaluation. The per se rules are applicable only to conduct that is so anticompetitive that further examination of the challenged conduct is not necessary. ( Business Electronics, 485 U.S. at 723-24, 99 L.Ed.2d at 816, 108 S.Ct. at 1519.) Since price discrimination has been held not to be a per se violation of section 1 ( Crowl Distributing Corp. v. Singer Co. (D. Kan. 1982), 543 F. Supp. 1033, 1037), allegedly anticompetitive discriminatory pricing arrangements are examined under the rule of reason. St. Bernard General Hospital, Inc. v. Hospital Services Association of New Orleans, Inc. (5th Cir.1983), 712 F.2d 978, 985; see also Monahan's Marine, Inc. v. Boston Whaler, Inc. (1st Cir.1989), 866 F.2d 525 (where defendant sold boats to plaintiff's competitors on better terms and at lower prices, court applied rule of reason to determine whether the anticompetitive effects of the agreements outweighed their legitimate business justifications); Zoslaw v. MCA Distributing Corp. (9th Cir.1982), 693 F.2d 870, 886 (since vertical agreements are not a per se violation of section 1, court examined the arrangement to determine whether it was reasonable); Travelers Insurance Co. v. Blue Cross of Western Pennsylvania (3d Cir.1973), 481 F.2d 80 (where plaintiff alleged that Blue Cross had a dominant competitive position resulting from the discriminatory pricing arrangement contained in Blue Cross' contract with area hospitals, the court examined the contract itself, as well as the setting in which it originated for unreasonable restraint-of-trade characteristics). Based on these principles, I do not agree with the majority's conclusion that by modeling section 3(2) of the Illinois Antitrust Act after section 1 of the Sherman Act the legislature did not intend to prohibit price discrimination. (133 Ill.2d at 387-88.) Rather, I believe that by patterning the Illinois act after the Sherman Act the legislature chose not to establish per se offenses, but intended that allegedly anticompetitive conduct be examined under the rule of reason. (See Evanston Motor Co. v. Mid-Southern Toyota Distributors, Inc. (N.D. Ill. 1977), 436 F. Supp. 1370, 1373 (The clear intent of including the word `unreasonably' [in section 3(2) of the Illinois Antitrust Act] was to require a rule of reason analysis and to eliminate the category of ` per se offenses' from that provision); see also People ex rel. Scott v. Convenient Food Mart, Inc. (1974), 21 Ill. App.3d 97.) If price discrimination constitutes an unreasonable restraint of trade, it violates section 3(2) of the Illinois Antitrust Act. Accord American Academic Suppliers, Inc. v. Beckley-Cardy, Inc. (N.D. Ill. 1988), 699 F. Supp. 152, 156 (which holds that if price discrimination amounts to an unreasonable restraint of trade, it constitutes a cause of action under the Illinois Antitrust Act not because it is price discrimination, but because it is an unreasonable restraint of trade). The conclusion that allegedly anticompetitive conduct should be examined under the rule of reason finds support in the historical and practice notes and committee comments to section 3(2). The historical and practice notes provide: Because    section [3(2)] outlaws only that conduct which `unreasonably' restrains trade, it is clear that a `rule of reason' is to be applied.       Subsection (2) embraces a virtually endless number of restraints on competition which are not specifically prohibited as per se offenses under subsection (1). Typical of such offenses are vertical price-fixing, boycotts or group refusals to deal, and tying agreements. These offenses are prohibited by the Illinois Act if, tested by the rule of reason, they are found to be injurious to competition. (Ill. Ann. Stat., ch. 38, par. 60-3, Historical & Practice Notes  1970, at 460 (Smith-Hurd 1977).) The comments provide: Section 3(2) prohibits unreasonable restraints of trade under the `rule of reason' approach.    It seems probable that, except where the language and structure of the Illinois Act indicate that a different result was intended, Sherman Act Section 1 cases will be followed by the Illinois courts when construing Section 3(2), particularly in light of the provisions of Section 11 of the Illinois Act. Various arrangements which, as noted above, do not fall under the purview of Section 3(1)    must meet the test of the `rule of reason' established in Section 3(2). As pointed out in the discussion with reference to Section 3(1), supra, the courts should examine the competitive and economic purposes and consequences of such arrangements for the purpose of determining whether or not trade or commerce has been unreasonably restrained   .    It will be noted that the Illinois Act contains no counterpart to Sections 2, 3, 7, and 8 of the Clayton Act or to Section 5 of the Federal Trade Communication Act. Hence, practices which would be violative of those federal provisions would be violative of the Illinois Act only if they were deemed unreasonably to restrain trade under the provisions of Section 3(2). Ill. Ann. Stat., ch. 38, par. 60-3, Bar Committee Comments  1967, at 453-54 (Smith-Hurd 1977). Having determined that discriminatory pricing arrangements which unreasonably restrain trade violate the Illinois Antitrust Act, the next inquiry is whether the plaintiffs' complaint sufficiently alleges that the defendants' conduct unreasonably restrains trade. In order to state a cause of action under section 3(2), the complaint must allege that a conspiracy, contract or combination in fact existed and that its effect was to unreasonably restrain trade. ( Adkins v. Sarah Bush Lincoln Health Center (1989), 129 Ill.2d 497, 521-22; People ex rel. Scott v. College Hills Corp. (1982), 91 Ill.2d 138, 154.) In determining whether the complaint is adequate, pleadings are to be liberally construed. Allegations are sufficiently specific if they reasonably inform the defendants by factually setting forth the elements necessary to state a cause of action. ( College Hills, 91 Ill. at 145.) Where the essential elements of the purported contract, conspiracy or combination and its anticompetitive effects under section 3(2) of the Illinois Act are alleged, the complaint states a cause of action and the question of whether the defendants' conduct was reasonable is a question of fact. College Hills, 91 Ill.2d at 155. In the present case, the complaint alleges that, due to the agreement between Blue Cross and the defendant hospitals, Blue Cross has a substantial competitive advantage which results in an unreasonable restraint of trade. However, plaintiffs do not allege any facts to support their claim that the defendants' conduct has an anticompetitive effect in the relevant market. The absence of a sufficient allegation of anticompetitive effect is fatal to the existence of a cause of action under section 1 of the Sherman Act ( Havoco of America, Ltd. v. Shell Oil Co. (7th Cir.1980), 626 F.2d 549, 554), and is similarly fatal to the existence of a cause of action under the Illinois Antitrust Act (see Adkins, 129 Ill.2d at 522). Accordingly, I believe that count II is deficient, not because price discrimination is not actionable under section 3(2), but because it fails to allege an unreasonable restraint of trade. The trial court's dismissal of count II was proper.