Opinion ID: 409686
Heading Depth: 2
Heading Rank: 1

Heading: Background: The Emergence of the Photovest Test

Text: 31 It is elementary that a conspiracy in violation of Section 1 of the Sherman Act, like any other kind of conspiracy, requires an agreement by two or more parties. When this case went to the jury, it could have been a garden-variety antitrust conspiracy case-Copperweld and Regal on the one hand agreeing with Yoder on the other to keep Independence out of the steel tube business. But the jury exonerated Yoder (except on the breach of contract Count III against Yoder) and instead found a conspiracy between Copperweld and its wholly-owned subsidiary Regal. As a result, it set the stage for appellants' broadly based attack on the intra-enterprise conspiracy doctrine in the abstract and as applied to these facts. 32 We may begin with antithetical truisms. Two independent corporations can engage in concerted activity that violates Section 1 of the Sherman Act. A corporation and its officers, or a corporation and one of its fully integrated divisions cannot, because the requisite plurality of actors is missing. The hard case lies between these opposites: can a corporation conspire with its wholly-owned subsidiary? In a purely formal sense, the answer should be yes: there are two corporations and hence two actors. But as a practical matter there may be little difference between a wholly-owned subsidiary and a fully integrated division, and where the differences are trivial Section 1 liability should not turn on them. 33 Academic discussion of the intra-enterprise conspiracy 2 doctrine is almost uniformly critical. 3 The commentators generally note at the outset that the Supreme Court has never actually relied on the doctrine without qualification to decide a Sherman Act case, and therefore the broad language of some Supreme Court opinions must be taken at less than face value. 4 They also point out that government enforcement agencies do not use the doctrine. 5 Rather it surfaces in private suits-where plaintiffs rely on it to plead their way around basically unilateral action taken by an entity that lacks the market power to be sued under Section 2's monopolization standards. So used, the intra-enterprise conspiracy doctrine fills a gap between Section 1 and Section 2-a gap that should either remain entirely unfilled or be left to state-law remedies. 6 Otherwise, the commentators argue, the real efficiencies achievable by separately incorporated but closely related corporations will be sacrificed, 7 and the antitrust laws will be used perversely to achieve either more independence or more integration than is optimal. 34 Judicial attitudes toward the intra-enterprise conspiracy doctrine are more constrained. For a federal judge at the trial or appellate level, the salient factor is that the Supreme Court's decisions, while they need not be read with complete literalism, of course they cannot be ignored. 8 It is no accident that every Court of Appeals to consider the question has concluded that a parent and its subsidiary have the capacity to conspire, whether or not they can be found to have done so in a particular case. 9 Among the circuits there have been various limiting approaches-but no move to abolish the doctrine root and branch. 35 This Circuit's position has recently been articulated in Photovest Corp., supra, 606 F.2d 704, 725-727. Like the Eighth and the Ninth Circuits, 10 we focus on the practical relationship between the parent and the subsidiary, using a variety of factors to decide when there is enough separation between the two entities to make treating them as two independent actors sensible. The test is admittedly in an early and unsettled stage of development, as is inevitable with: (a) any test that involves the presence or absence of various unranked factors, (b) the possibility that the list will expand or contract, and (c) as yet limited application. Nonetheless, we think it focuses on the proper question-namely, when the distinction between affiliation and integration is trivial and when it is significant. And it seeks the answer to the question in terms of evidence that is empirical, readily furnished, and amenable to development at trial-as more arcane economic calculations are not. Its flexibility means that it can mediate between the corner positions of academic critics on the one hand and sweeping Supreme Court dicta on the other. And the uncertainties that necessarily exist now will be obviated as the test is applied and refined. 36 In short, Photovest represents a reasonable and pragmatic approach to the intra-enterprise conspiracy problem, and we intend in what follows to adhere to it.