Opinion ID: 782340
Heading Depth: 3
Heading Rank: 1

Heading: Per Se Illegal Restraint of Trade

Text: 33 We review de novo the district court's ruling on summary judgment that the Agreement was a per se illegal restraint of trade. Holloway v. Brush, 220 F.3d 767, 772 (6th Cir.2000). Summary judgment is appropriate only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).
34 Section 1 of the Sherman Act 10 provides that Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.... 15 U.S.C. § 1. Read literally, section 1 prohibits every agreement in restraint of trade. Arizona v. Maricopa Cty. Medical Soc., 457 U.S. 332, 342, 102 S.Ct. 2466, 73 L.Ed.2d 48 (1982). However, the Supreme Court has long recognized that Congress intended to outlaw only unreasonable restraints. State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997); Maricopa Cty., 457 U.S. at 342-43, 102 S.Ct. 2466 (citing United States v. Joint Traffic Ass'n, 171 U.S. 505, 19 S.Ct. 25, 43 L.Ed. 259 (1898)). Most restraints are evaluated using a rule of reason. State Oil, 522 U.S. at 10, 118 S.Ct. 275. Under this approach, the finder of fact must decide whether the questioned practice imposes an unreasonable restraint on competition, taking into account a variety of factors, including specific information about the relevant business, its condition before and after the restraint was imposed, and the restraint's history, nature, and effect. Id. (citing Maricopa Cty., 457 U.S. at 343 & n. 13, 102 S.Ct. 2466). 35 Other restraints, however, are deemed unlawful per se  because they have such predictable and pernicious anti-competitive effect, and such limited potential for procompetitive benefit. Id. (citing Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958)).  Per se treatment is appropriate `[o]nce experience with a particular kind of restraint enables the Court to predict with confidence that the rule of reason will condemn it.' Id. (quoting Maricopa Cty., 457 U.S. at 344, 102 S.Ct. 2466); see also Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 19-20, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979) (a per se rule is applied when the practice facially appears to be one that would always or almost always tend to restrict competition and decrease output.). The per se approach thus applies a conclusive presumption of illegality to certain types of agreements, Maricopa Cty., 457 U.S. at 344, 102 S.Ct. 2466; where it applies, no consideration is given to the intent behind the restraint, to any claimed pro-competitive justifications, or to the restraint's actual effect on competition. 11 National College Athletic Ass'n (NCAA) v. Board of Regents, 468 U.S. 85, 100, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984). As explained by the Supreme Court, [t]he probability that anticompetitive consequences will result from a practice and the severity of those consequences must be balanced against its procompetitive consequences. Cases that do not fit the generalization may arise, but a per se rule reflects the judgment that such cases are not sufficiently common or important to justify the time and expense necessary to identify them. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50 n. 6, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977). 36 The Supreme Court has identified certain types of restraints as subject to the per se rule. The classic examples are naked, horizontal restraints pertaining to prices or territories. See, e.g., NCAA, 468 U.S. at 100, 104 S.Ct. 2948 (Horizontal price fixing and output limitation are ordinarily condemned as a matter of law under an `illegal per se ' approach because the probability that these practices are anticompetitive is so high.); Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984) (Certain agreements, such as horizontal price fixing and market allocation, are thought so inherently anticompetitive that each is illegal per se without inquiry into the harm it has actually caused.); United States v. Topco Assocs., 405 U.S. 596, 608, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972) (One of the classic examples of a per se violation of § 1 is an agreement between competitors at the same level of the market structure to allocate territories in order to minimize competition. Such concerted action is usually termed a `horizontal' restraint, in contradistinction to combinations of persons at different levels of the market structure, e.g., manufacturers and distributors, which are termed `vertical' restraints. This Court has reiterated time and time again that horizontal territorial limitations ... are naked restraints of trade with no purpose except stifling of competition. Such limitations are per se violations of the Sherman Act. (internal citations omitted)); Northern Pacific Ry., 356 U.S. at 5, 78 S.Ct. 514 (Among the practices which the courts have heretofore deemed to be unlawful in and of themselves are price fixing, division of markets, group boycotts, and tying arrangements. (internal citations omitted)).
37 In answering the question whether the Agreement here was per se illegal, the following facts are undisputed and dispositive. The Agreement guaranteed to HMR that its only potential competitor at that time, Andrx, would, for the price of $10 million per quarter, refrain from marketing its generic version of Cardizem CD even after it had obtained FDA approval, protecting HMR's exclusive access to the market for Cardizem CD throughout the United States until the occurrence of one of the end dates contemplated by the Agreement. (In fact, Andrx and HMR terminated the Agreement and the payments in June 1999, before any of the specified end dates occurred.) In the interim, however, from July 1998 through June 1999, Andrx kept its generic product off the market and HMR paid Andrx $89.83 million. By delaying Andrx's entry into the market, the Agreement also delayed the entry of other generic competitors, who could not enter until the expiration of Andrx's 180-day period of marketing exclusivity, which Andrx had agreed not to relinquish or transfer. 12 There is simply no escaping the conclusion that the Agreement, all of its other conditions and provisions notwithstanding, was, at its core, a horizontal agreement to eliminate competition in the market for Cardizem CD throughout the entire United States, a classic example of a per se illegal restraint of trade. 38 None of the defendants' attempts to avoid per se treatment is persuasive. As explained in greater detail in the district court's opinion, see Dist. Ct. Op. II, at 700-705, the Agreement cannot be fairly characterized as merely an attempt to enforce patent rights or an interim settlement of the patent litigation. As the plaintiffs point out, it is one thing to take advantage of a monopoly that naturally arises from a patent, but another thing altogether to bolster the patent's effectiveness 13 in inhibiting competitors by paying the only potential competitor $40 million per year to stay out of the market. Individual Sherman Act Plaintiffs Br. at 26-30. Nor does the fact that this is a novel area of law preclude per se treatment, see Maricopa Cty., 457 U.S. at 349, 102 S.Ct. 2466. To the contrary, the Supreme Court has held that `[w]hatever may be its peculiar problems and characteristics, the Sherman Act, so far as price-fixing agreements are concerned, establishes one uniform rule applicable to all industries alike.' Id. at 349, 102 S.Ct. 2466 (quoting United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 222, 60 S.Ct. 811, 84 L.Ed. 1129 (1940)). We see no reason not to apply that rule here, especially when the record does not support the defendants' claim that the district court made errors in its analysis. 14 Finally, the defendants' claims that the Agreement lacked anticompetitive effects and had procompetitive benefits are simply irrelevant. See, e.g., Maricopa Cty., 457 U.S. at 351, 102 S.Ct. 2466. To reiterate, the virtue/vice of the per se rule is that it allows courts to presume that certain behaviors as a class are anticompetitive without expending judicial resources to evaluate the actual anticompetitive effects or procompetitive justifications in a particular case. As the Supreme Court explained in Maricopa County: 39 The respondents' principal argument is that the per se rule is inapplicable because their agreements are alleged to have procompetitive justifications. The argument indicates a misunderstanding of the per se concept. The anticompetitive potential inherent in all price-fixing agreements justifies their facial invalidation even if procompetitive justifications are offered for some. Those claims of enhanced competition are so unlikely to prove significant in any particular case that we adhere to the rule of law that is justified in its general application. 40 457 U.S. at 351, 102 S.Ct. 2466. Thus, the law is clear that once it is decided that a restraint is subject to per se analysis, the claimed lack of any actual anticompetitive effects or presence of procompetitive effects is irrelevant. Of course, our holding here does not resolve the issues of causation and damages, both of which will have to be proved before the plaintiffs can succeed on their claim for treble damages under the Clayton Act.