Opinion ID: 767553
Heading Depth: 1
Heading Rank: 2

Heading: the rodale agreement

Text: 11 On January 13, 1992, PADI entered into an agreement with Rodale. About to publish a new diving magazine, Rodale sought access to PADI's membership and customer database to solicit subscriptions. In return for making this confidential information available, PADI would receive free advertising in Rodale's magazines. The agreement provided that Rodale will establish its advertiser policies in a manner that acknowledges that scuba equipment requires training for safe use, that Rodale supports the dive industry standard that scuba equipment should be sold only to certified divers who can provide proof of certification at the point of purchase.  A no mail order advertising policy was important to PADI for two reasons. First, the database it furnished Rodale included information it received in confidence from its member-retailers, including the identity of their customers to whom the Rodale magazine would be sent; release of that information could harm PADI's relations with its customer-members who would object to use of the information to benefit mail order sales. Second, PADI considered that the use of scuba life support equipment by persons who have not been certified exposes those persons to substantial danger, and mail order sellers cannot determine whether their purchasers are certified. Moreover, Rodale itself had determined, from market research, that most dive shops would not carry magazines that carried mail order advertising for scuba gear. 12 Notwithstanding the agreement, in March 1992, Rodale announced that it would accept an advertising insert from Performance, interpreting the no mail order restriction as limited to scuba life support equipment. Several retailers complained to PADI about this insert, at least one stating that mail orders lower prices and force retailers to compete. PADI communicated its concern to Rodale which then, in May 1992, again changed its policy, rejecting all mail order advertising. In July 1992, however, PADI terminated its agreement with Rodale. 13 In Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977), the Supreme Court explained that under the traditional framework of Section 1 analysis, rule of reason is the prevailing standard. Per se rules of illegality are appropriate only when they relate to conduct that is manifestly anticompetitive . . . [i.e., to] `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.'  Id. at 49-50 (quoting Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5 (1958)). More recently, in Business Elec. Corp. v. Sharp Elec. Corp., 485 U.S. 717 (1988), the Court rejected a claim that an agreement between a manufacturer and a dealer to terminate a price cutter, without further agreement on prices, is subject to the per se rule. The Court declared that there is a presumption in favor of a rule-of-reason standard [and] that departure from that standard must be justified by demonstrable economic effect. Id. at 725. 14 The short-lived agreement between PADI and Rodale for an exchange of confidential information from its customer-members in return for free advertising and a pledge to carry no mail order advertisementsdoes not meet the test under the per se rule. Certainly on the record made by Performance in the district court, no jury could find that it had a demonstrable adverse economic effect, much less a pernicious effect on competition or lack of redeeming virtue.