Opinion ID: 537267
Heading Depth: 2
Heading Rank: 1

Heading: Per Se Violation of the Sherman Act

Text: 5 Appellants contend that the trial court erred when it sustained the government's pre-trial motion to prevent the defendants from offering evidence of the reasonableness and/or economic justification for the alleged activities or evidence of the defendants' lack of intent to violate the law or to restrain trade. Thus, appellants allege that they were deprived of any opportunity to present evidence that the conduct charged was permissible under rule of reason analysis and that the jury was deprived of its factfinding function to determine whether the charged conduct unreasonably restrained competition. 6 Section 1 of the Sherman Act prohibits [e]very contract, combination ..., or conspiracy, in restraint of trade or commerce. Generally, courts apply a rule of reason analysis to determine whether particular practices or conduct come within the ambit of the statute. Under rule of reason analysis, the factfinder weighs all of the circumstances of a case to decide whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 49, 97 S.Ct. 2549, 2557, 53 L.Ed.2d 568 (1977). 7 However, since the passage of the Sherman Act, the courts have formulated and applied a per se rule of illegality for certain restrictive practices that are deemed to be manifestly anticompetitive. Id. at 50, 97 S.Ct. at 2557. As the Supreme Court explained in Northern Pac. R. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958), there are certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use. Here, appellants argue that the indictment in this case did not justify the trial court's application of per se analysis in that the restraint charged is not clearly pernicious as a matter of law. 8 In its pre-trial motion, the government argued that the conduct charged in the indictment, a horizontal customer allocation agreement, 1 represented conduct which is illegal per se. Prior to trial, the trial court ruled that the indictment did in fact allege a per se violation of the Sherman Act, and that, assuming the government could present evidence establishing the violation charged in the indictment, the defendants would therefore be precluded from introducing evidence of reasonableness or justification at trial. At trial, the court concluded that the government had established the violation charged and therefore precluded defendants' additional evidence. 9 Consistent with the analysis of the Supreme Court and previous holdings of this court and of other circuits, we concur with the determination of the trial court and hold that the activity alleged in the indictment in this case, an agreement to allocate or divide customers between competitors within the same horizontal market, constitutes a per se violation of Sec. 1 of the Sherman Act. See United States v. Topco Assocs., Inc., 405 U.S. 596, 608, 92 S.Ct. 1126, 1133, 31 L.Ed.2d 515 (1972) ([o]ne of the classic examples of a per se violation of Sec. 1 is an agreement between competitors at the same level of the market structure to allocate territories in order to minimize competition); United States v. Goodman, 850 F.2d 1473, 1476 (11th Cir.1988) (customer allocation agreement alone is a per se violation of 15 U.S.C. Sec. 1) (citing United States v. Cadillac Overall Supply Co., 568 F.2d 1078, 1090 (5th Cir.), cert. denied, 437 U.S. 903, 98 S.Ct. 3088, 57 L.Ed.2d 1133 (1978)); United States v. Cooperative Theatres of Ohio, Inc., 845 F.2d 1367, 1372 (6th Cir.1988) (customer allocation ... is the type of 'naked restraint' which triggers application of the per se rule of illegality); Mid-West Underground Storage, Inc. v. Porter, 717 F.2d 493, 497-98 n. 2 (10th Cir.1983) ([t]he essence of a market allocation violation ... is that competitors apportion the market among themselves and cease competing in another's territory or for another's customers); United States v. Koppers Co., 652 F.2d 290, 293 (2d Cir.), cert. denied, 454 U.S. 1083, 102 S.Ct. 639, 70 L.Ed.2d 617 (1981). 10