Tortious interference and the federal antitrust law of vertical restraints

Iowa Law Review

Volumn 83, Issue 1, 1997, Pages 35-75

  Lao, Marina ^a  

^a School of Law   (United States)

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EID: 22044438193     PISSN: 00210552     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (309)

1. Vertical restraints refer to restrictive arrangements between persons operating at different levels in the distribution of a product or service, typically between manufacturer or supplier and dealer. There are two types of vertical restraints: those that control or relate to prices at which dealers may resell a manufacturer's goods, known as vertical price fixing, "resale price maintenance" or "RPM"; and those that affect other aspects of a dealer's autonomy in the sale of those goods, such as limitation on its geographic area of operation, known as vertical nonprice restraints.
2. For the purposes of this Article, the term "dealer" refers to any business that serves as a commercial intermediary between a manufacturer or supplier and the ultimate customer; it encompasses not only dealers in the colloquial sense, but also wholesalers, retailers and distributors.
3. Exclusive dealing and tying arrangements, which restrain intobrand competition, also implicate vertical restraints. This Article, however, will not address those issues but will focus on vertical restraints that restrict intrabrand distribution, namely vertical price fixing and nonprice restraints imposed by a manufacturer on its own dealers.
4. 15 U.S.C. § 1 (1988) (declaring illegal any "contract, combination . . . or conspiracy" in restraint of interstate trade or commerce).
5. See generally William H. Page, The Chicago School and the Evolution of Antitrust: Characterization, Antitrust Injury and Evidentiary Sufficiency, 75 Va. L. Rev. 1221 (1989) (discussing the extensive influence of Chicago School theories in Supreme Court antitrust decisions in the 1980s);
6. Barbara Ann White, Black and White Thinking in the Gray Areas of Antitrust: The Dismantling of Vertical Restraints Regulation, 60 Geo. Wash. L. Rev. 1 (1991) (discussing recent changes in antitrust law over the last 20 years, including the influence of the Chicago School).
7. For extended expositions of the Chicago approach to antitrust in general, see Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (1978) [hereinafter Bork, Antitrust Paradox];
8. Richard A. Posner, Antitrust Law: An Economic Perspective (1976) [hereinafter Posner, Antitrust Law];
9. Frank H. Easterbrook, Workable Antitrust Policy, 84 Mich. L. Rev. 1696 (1986) [hereinafter Easterbrook, Workable Antitrust Policy];
10. Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. Pa. L. Rev. 925 (1979) [hereinafter Posner, Chicago School].
11. On the Chicago position on vertical restraints, see Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1 (1984) [hereinafter Easterbrook, Limits] (proposing that courts adopt rules which err on the side of allowing questionable vertical arrangements to continue);
12. Frank H. Easterbrook, Vertical Arrangements and the Rule of Reason, 53 Antitrust L.J. 135 (1984) [hereinafter Easterbrook, Vertical Arrangements] (arguing that vertical arrangements are usually procompetitive, and so should not be subject to penalty);
13. Richard A. Posner, The Next Step in the Antitrust Treatment of Restricted Distribution: Per Se Legality, 48 U. Chi. L. Rev. 6 (1981) [hereinafter Posner, Per Se Legality] (proposing that purely vertical distribution restrictions be per se legal).
14. See, e.g., Bork, Antitrust Paradox, supra note 6, at 297-98 (claiming that vertical price fixing and all vertical restraints are beneficial to consumers and should be completely lawful); Easterbrook, Vertical Arrangements, supra note 7, at 135, 157-67 (asserting that vertical restraints, including vertical price fixing, should not be "a subject of serious antitrust attention" and proposing a screening mechanism to shield virtually all vertical restraints from antitrust scrutiny); Posner, Per Se Legality, supra note 7, at 8 (arguing for a per se legality rule for vertical restraints). The Chicagoans' laissez-faire approach toward vertical restraints is based on their twin assumptions that almost all vertical restraints promote (or at least do not hinder) efficiency, and that the antitrust laws should be applied only to prevent inefficiencies. See infra notes 21-31 and accompanying text.
15. 465 U.S. 752 (1984).
16. 485 U.S. 717 (1988).
17. The erosion of antitrust enforcement in vertical restraint cases began with Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977). Sylvania drew a distinction between vertical price and nonprice restraints, and held that only the former were per se illegal; the latter were subject to the much more lenient rule of reason analysis. Id. at 51-59. The case overruled United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967), which had held that the per se rule applied, not only to vertical price fixing, but to vertical nonprice restraints as well.
18. The per se rule against vertical price fixing was first established in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911). Accord Schwegman Bros. v. Calvert Distillers Corp., 341 U.S. 384, 386 (1951); United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 721 (1944); FTC v. Beech-Nut Packing Co., 257 U.S. 441, 451-52 (1922); United States v. A. Schrader's Sons, Inc., 252 U.S. 85, 100 (1920).
19. See infra notes 58-83 and accompanying text.
20. The term "business torts" refers to a variety of tort-based, business-related claims; they include "tortious interference," unfair competition, injurious falsehood, fraud, and violations of so-called "little FTC" state claims. Harvey I. Saferstein, The Ascendancy of Business Tort Claims in Antitrust Practice, 59 Antitrust L.J. 379, 385 (1991).
21. "Tortious interference" actually refers to two closely parallel torts: tortious interference with contract and tortious interference with prospective advantage. See infra notes 93-116 and accompanying text for a description of the characteristics of the tort.
22. Saferstein, supra note 14, at 379 (reporting on a recent survey conducted by the ABA Antitrust Section which showed a dramatic increase in the use of business torts in private antitrust causes of action). "Tortious interference" was reported to be the state claim most commonly used in conjunction with plaintiffs' federal antitrust cases - twice as frequently used as the next most frequent claim of unfair competition. Id. at 385; see also William L. Jaeger, New Tools for the Plaintiff in the 1990's, Antitrust, Spring 1990, at 4, 4-5 (advising on the practical advantages of the use of tortious interference and other business torts over the use of antitrust law);
23. Joel N. Kreizman, Business Torts Between Competitors, N.J. Law., Apr. 1991, at 36 (same).
24. For example, a growing number of states have enacted franchise laws, principally for the protection of franchisees. See Jean Wegman Burns, Vertical Restraints, Efficiency, and the Real World, 62 Fordham L. Rev. 597, 623-25 (1993) (noting the emergence of dealer remedies outside of antitrust to address noneconomic concerns which are ignored in contemporary antitrust law);
25. Thomas M. Pitegoff, Franchise Relationship Laws: A Minefield for Franchisors, 45 Bus. Law. 289, 321 (1989) (reporting that at least 17 states, Puerto Rico and the Virgin Islands have enacted franchise laws). Other state laws or state law doctrines on which dealers may also rely for protection against abuse from suppliers include unfair trade practices statutes, common-law claims of breach of implied covenants of good faith and fair dealing, breach of fiduciary duty and equitable estoppel.
26. Because of different liability standards and the relative laxity of the tortious interference standard, plaintiffs with failed antitrust claims may sometimes prevail on their factually similar tortious interference claims. See, e.g., R.W. Int'l Corp. v. Welch Foods, Inc., 13 F.3d 478 (1st Cir. 1994) (affirming summary judgment in favor of defendant on terminated dealer's antitrust claim but reversing as to the tortious interference claim); Colorado Interstate Gas Co. v. Wyoming Interstate Co., 885 F.2d 683 (10th Cir. 1989) (reversing jury's antitrust verdict but sustaining its tortious interference verdict in favor of plaintiff); Deauville Corp. v. Federated Dep't Stores, Inc., 756 F.2d 1183 (5th Cir. 1985) (affirming directed verdict in favor of defendant on antitrust claims but reversing for trial plaintiff's tortious interference claim); Machine Maintenance & Equip. Co. v. Cooper Indus., Inc., 661 F. Supp. 1112 (E.D. Mo. 1987) (reversing jury's antitrust verdict but sustaining its tortious interference verdict in favor of terminated-dealer plaintiff).
27. See generally Harlan M. Blake & William K. Jones, In Defense of Antitrust, 65 Colum. L. Rev. 377 (1965) (arguing that though antitrust should promote allocative efficiency, ensuring entrepreneurial opportunity and expanding consumer choice are equally important goals);
28. Kenneth G. Elzinga, The Goals of Antitrust: Other Than Competition and Efficiency, What Else Counts?, 125 U. Pa. L. Rev. 1191 (1977) (exploring other social and political objectives, beyond efficiency, that antitrust enforcement might serve);
29. Eleanor M. Fox, The Battle for the Soul of Antitrust, 75 Cal. L. Rev. 917 (1987) (comparing two approaches to antitrust law relating to inefficiencies in a competitive market);
30. Eleanor M. Fox, The Modernization of Antitrust: A New Equilibrium, 66 Cornell L. Rev. 1140 (1981) [hereinafter Fox, Modernization] (contending that antitrust should serve consumers' long-term interest by protecting the competition process);
31. Robert H. Lande, Wealth Transfers as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged, 34 Hastings L.J. 65 (1982) (challenging the allocative efficiency interpretation of the Sherman Act);
32. Lawrence A. Sullivan, Economics and More Humanistic Disciplines: What Are the Sources of Wisdom of Antitrust?, 125 U. Pa. L. Rev. 1214 (1977) (describing the variety of social values properly involved in antitrust analysis).
33. Besides being referred to as "traditionalists," those who champion a more liberal and interventionist antitrust policy are also referred to as modern populists, realists, and interventionists. See Eleanor M. Fox & Lawrence A. Sullivan, Antitrust - Retrospective and Prospective: Where Are We Coming From? Where Are We Going?, 62 N.Y.U. L. Rev. 936, 960 (1987) (using the term "realists" and the term "traditionalists");
34. James T. Halverson, An Overview of Legal and Economic Issues and the Relevance of the Vertical Merger Guidelines, 52 Antitrust L.J. 49, 50 (1983) (using the term "traditionalists");
35. Thomas A. Piraino, Jr., Reconciling the Per Se and Rule of Reason Approaches to Antitrust Analysis, 64 S. Cal. L. Rev. 685, 686 (1991) (using the term "interventionists"); White, supra note 5, at 2 n.6 (using the term "modern populists").
36. Phillip Areeda & Donald F. Turner, Antitrust Law § 103, at 7 (1978); Bork, Antitrust Paradox, supra note 6, at 51, 91; Easterbrook, Limits, supra note 7, at 1; Posner, Chicago School, supra note 6, at 933-34. Actually, Chicagoans state that the exclusive goal of the Sherman Act is to maximize "consumer welfare." However, their definition of "consumer welfare" does not correspond to a layperson's notion of consumer interest. Rather, their term means the allocation of resources toward uses that are most valued by consumers as measured by their willingness to pay. Bork, Antitrust Paradox, supra note 6, at 90-91. So defined, it is almost synonymous with "allocative efficiency," which describes the market equilibrium that is reached when prices are set in such a way that causes resources to flow to uses that maximize output and wealth. Consequently, the Chicago School often uses the terms "consumer welfare" and "allocative efficiency" interchangeably.
37. Another approach, known as the post-Chicago School, has emerged in recent years. Post-Chicagoans share the Chicago view that efficiency should be the exclusive concern of antitrust. They differ from the Chicagoans, however, in that they are more skeptical that the marketplace will always self-correct, and therefore see more of a need for the intrusion of antitrust. They believe that market imperfections, such as information gaps, distort the market allowing anticompetitive practices to exist even in ostensibly competitive markets. See generally Jonathan B. Baker, Recent Developments in Economics That Challenge Chicago School Views, 58 Antitrust L.J. 645 (1989) (describing new developments that challenge Chicago School conclusions);
38. Herbert Hovenkamp, Antitrust Policy After Chicago, 84 Mich. L. Rev. 213 (1985) (asserting that post-Chicago economics have pointed out the flaws of the Chicago School's economic model);
39. Michael S. Jacobs, An Essay on the Normative Foundations of Antitrust Economics, 74 N.C. L. Rev. 219 (1995) (describing the debate between Chicago School and the post-Chicago antitrust economics);
40. Robert H. Lande, Chicago Takes It on the Chin: Imperfect Information Could Play a Crucial Role in the Post-Kodak World, 62 Antitrust L.J. 193 (1993) (arguing that Kodak brought differences between the Chicago and post-Chicago Schools into focus).
41. Bork, Antitrust Paradox, supra note 6, at 122; Robert H. Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division (pt. 2), 75 Yale L.J. 373, 375-76 (1966) [hereinafter Bork, Rule of Reason (pt. 2)]; Easterbrook, Limits, supra note 7, at 31-33.
42. Based on price theory, practices that limit output are inefficient because they lead to higher prices, causing some marginal buyers to switch from their preferred product to their next best alternative, which in turn results in a misallocation of society's resources.
43. Chicagoans believe that all businesses are rational and that the objective of all rational businesses is to maximize profits. Bork, Antitrust Paradox, supra note 6, at 120; Posner, Chicago School, supra note 6, at 928, 931. Some commentators have expressed doubt about the basic assumptions underlying the Chicago School's theories. See, e.g., Louis Kaplow, Extension of Monopoly Power Through Leverage, 85 Colum. L. Rev. 515, 547-51 (1985) (suggesting that company managers may seek to maximize growth or market share, rather than profits).
44. According to the Chicago School, there are only two avenues toward profit maximization: capturing more sales at the competitive price, or exercising monopoly power to limit output and raise prices above the competitive level. The practices and strategies of all businesses, being rational profit maximizers, must been seen as steps either toward efficiency (i.e., more sales) or toward monopoly. Because rational businesses know that monopoly is extremely difficult to attain, so the argument goes, most business conduct must be seen as strategies to enhance efficiency. Rothery Storage & Van Co. v. Adas Van Lines, Inc., 792 F.2d 210, 221 (D.C. Cir. 1986) (Bork, J.).
45. Posner, Per Se Legality, supra note 7, at 21-25.
46. Bork, Antitrust Paradox, supra note 6, at 319.
47. Bork, The Antitrust Paradox, supra note 6, at 280-98; Bork, Rule of Reason (pt. 2), supra note 23, at 403; Posner, Per Se Legality, supra note 7, at 22-26.
48. See Lester G. Tesler, Why Should Manufacturers Want Fair Trade?, 3 J.L. & Econ. 86 (1960) (providing the first detailed exposition of the "free rider" theory).
49. Posner, Chicago School, supra note 6, at 926-27; Tesler, supra note 30.
50. See supra note 20 and accompanying text.
51. See generally Burns, supra note 17 (criticizing the failure of antitrust vertical restraint law to address noneconomic concerns); Wesley A. Cann, Jr., Vertical Restraints and the "Efficiency" Influence - Does Any Room Remain for More Traditional Antitrust Values and More Innovative Antitrust Policies?, 24 Am. Bus. Law. 483 (1986) (illustrating that enforcement of antitrust law is increasingly reflecting allocative and productive efficiencies and ignoring other traditional antitrust values);
52. William S. Comanor, Vertical Price-Fixing - Vertical Market Restrictions, and the New Antitrust Policy, 98 Harv. L. Rev. 983 (1985) [hereinafter Comanor, Vertical Price-Fixing] (questioning Judge Bork's analysis of vertical restraints by demonstrating conflicts between the interests of consumers and manufacturers);
53. Robert Pitofsky, In Defense of Discounters: The No-Frills Case for a Per Se Rule Against Vertical Price Fixing, 71 Geo. L.J. 1487 (1983) [hereinafter Pitofsky, In Defense of Discounters] (justifying the "long standing rule of per se illegality" with respect to vertical price fixing);
54. F.M. Scherer, The Economics of Vertical Restraints, 52 Antitrust L.J. 687 (1983) (illustrating the economics of vertical restraints).
55. See Pitofsky, In Defense of Discounters, supra note 33, at 1488 (stating that vertical price agreements render dealer prices inflexible); see also White, supra note 5, at 44-47 (arguing that vertical price restraints could foster monopoly pricing when manufacturers choose common retailers, such as supermarkets).
56. Pitofsky, In Defense of Discounters, supra note 33, at 1490. Traditionalists and other non-Chicagoans are unconvinced that manufacturers implement vertical price fixing primarily to induce dealers to offer particular services. Id. at 1493; Scherer, supra note 33, at 694. Rather, they believe that vertical price fixing is often a manufacturer's response to dealer pressure and that the manufacturer is essentially serving as "enforcer" of a dealers' cartel. Pitofsky, In Defense of Discounters, supra note 33, at 1490.
57. This claim underlies the Chicagoans' argument that vertical restraints must be procompetitive. The idea is that if a manufacturer's interests coincide with that of consumers, then any manufacturer-imposed vertical restriction must be beneficial to consumers since a manufacturer is unlikely to engage in conduct that is detrimental to its own interests.
58. Comanor, Vertical Price-Fixing, supra note 33, at 991-92. Professor Comanor explains that in deciding on the level of services to offer consumers for a higher price, manufacturers respond only to the preferences of marginal consumers. Marginal consumers are those who value the product at approximately the pre-value-added price, and who would continue to buy the product only if the value to them of the additional services exceeds the increase in price. Accordingly, the manufacturer will raise resale prices to induce the provision of services that the marginal consumer values. In this respect, the interests of the manufacturer and the marginal consumer do coincide. However, there are many consumers who place a higher value on the product than its pre-value-added price. These consumers, termed infra-marginal consumers, are relatively price-insensitive at the original price and will, therefore, continue to buy the product even if the "improvements" have little or no value for them. The manufacturer's setting of a higher resale price to provide for services that infra-marginal consumers do not want or need obviously does not benefit the infra-marginal consumer.
59. Id.; see also Pitofsky, In Defense of Discounters, supra note 33, at 1491 (criticizing Chicago approach as a short term view of the distribution process).
60. William S. Comanor, The Two Economics of Vertical Restraints, 21 Sw. U. L. Rev. 1265, 1270 (1992) [hereinafter Comanor, The Two Economics of Vertical Restraints] (asserting that there is little empirical support for Tesler's account of "free riding"); Comanor, Vertical Price-Fixing, supra note 33, at 990-92, 999-1002 (arguing that very few retailers provide "pre-sale" services and, therefore, the free rider theory is rarely appplicable in the "real world"); Pitofsky, In Defense of Discounters, supra note 33, at 1492-93 (providing a detailed rebuttal of the free rider argument); Scherer, supra note 33, at 694 (asserting that observations of "real world" marketing practices prove that the free rider theory "can only carry limited weight").
61. E.g., Comanor, The Two Economics of Vertical Restraints, supra note 39, at 1275.
62. For example, manufacturers could enter into separate contracts with the dealers for those services. Id. at 1269-70; Pitofsky, In Defense of Discounters, supra note 33, at 1493.
63. Pitofsky, In Defense of Discounters, supra note 33, at 1493.
64. Id.
65. See Cann, supra note 33, at 527 (noting that the Supreme Court "has never indicated that social considerations have no relevance to antitrust policy or that they must be excluded from antitrust analysis"); see also Eleanor M. Fox, The Politics of Law and Economics in Judicial Decision Making: Antitrust as a Window, 61 N.Y.U. L. Rev. 554, 582-83 (1986) (suggesting that "the freedoms, the opportunities, the prospects for change, and the spur from the sense of having a fair chance that comes from an environment hospitable to those without power" are important in antitrust).
66. 433 U.S. 36 (1977).
67. See Posner, Chicago School, supra note 6, at 939 (stating that, with the Sylvania decision, the Chicago position on vertical restraints was "well on its way to becoming the legal position").
68. Sylvania, 433 U.S. at 51-59. Adopting Chicago reasoning on vertical restraints, the Court recognized a distinction between interbrand and intrabrand competition. It noted that although vertical nonprice restraints limit intrabrand competition, they may enhance interbrand competition. The Court also accepted the Chicago theory that the presence of interbrand competition will deter a manufacturer from acting anticompetitively, and thus the antitrust law need only be concerned with interbrand competition, and not with intrabrand competition. Id. at 52-55.
69. 465 U.S. 752 (1984).
70. 485 U.S. 717 (1988).
71. With Chicago School advocates heading both the Antitrust Division of the Department of Justice and the FTC in the 1980s, the federal government did not file a single vertical case for a period of 12 years. It seems, however, that the long hiatus has finally ended. See generally FTC Charges Toys 'R' Us with Inducing Toy Makers to Cut Off Discount Sellers, 70 Antitrust & Trade Reg. Rep. (BNA) No. 1763, at 594 (May 23, 1996); see also United States v. California SunCare, 1994-2 Trade Cas. (CCH) § 70,843 (C.D. Cal. 1994); United States v. Canstar Sports USA, Inc., 1993-2 Trade Cas. (CCH) § 70,372 (D. Vt. 1993). It remains to be seen whether the pendulum will swing back toward more scrutiny from the courts as well.
72. Antitrust practitioners often say that dealer termination (vertical restraint) cases are no longer viable after Monsanto and Sharp. See Steven D. Susman, Plaintiffs' Strategies and Tactics - Pretrial and Trial, 58 Antitrust L.J. 277, 282 (1989) (stating that "without the smoking gun of an express agreement on price or price levels, and the attendant per se analysis that such a smoking gun gives you, the deck is again heavily stacked against the dealer in a termination case");
73. ABA Antitrust Spring Meeting Focuses on Federal, State, Foreign Enforcement, 60 Antitrust & Trade Reg. Rep. (BNA) No. 1512, at 533 (Apr. 18, 1991) (including a private practitioner's humorous account of how he treats dealers who come to him, after Sharp, with prospective vertical restraints cases: "[W]e give them a cold cup of coffee, validate their parking, and get them out pretty quickly.").
74. Unilateral action undertaken in furtherance of a monopoly or in a tying arrangement is, however, actionable. See, e.g., Eastern Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (holding that unilateral refusal to deal in furtherance of a tying arrangement is actionable); Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) (finding liability for defendant's unilateral refusal to continue a joint marketing arrangement with a smaller competitor, when the defendant had substantial market power).
75. Sherman Act, 15 U.S.C. § 1 (1988).
76. 250 U.S. 300 (1919).
77. Id. at 307.
78. See FTC v. Beech-Nut Packing Co., 257 U.S. 441, 455 (1922) (stating that "the specific facts found show suppression of the freedom of competition by methods in which the company secures the cooperation of its distributors and its customers, which are quite as effectual as agreements express or implied intended to accomplish the same purpose"); see also United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 720-24 (1944) (finding a combination based on the manufacturer's policy of refusing to deal with wholesalers who persist in selling to retailers who do not follow the manufacturer's suggested retail prices).
79. See, e.g.. Albrecht v. Herald Co., 390 U.S. 145, 150 n.6 (1968) (suggesting that a combination can be found from any dealer's acquiescence in the manufacturer's pricing scheme); United States v. Parke, Davis & Co., 362 U.S. 29, 43 (1960) (finding an "agreement" because the manufacturer had set in motion an elaborate vertical price fixing scheme and then enlisted the help of its wholesalers in policing it).
80. 465 U.S. 752 (1984).
81. The Court expounded on the rationale for vertical nonprice restraints and on the free rider theory, although neither was an issue in the case. Id. at 761-64; see also Easterbrook, Vertical Arrangements, supra note 7, at 171 (stating, approvingly, that "[t]he Monsanto opinion largely reads as if the Court has adopted the economic approach to restricted distribution").
82. Monsanto, 465 U.S. at 764 (stating that "[t]here must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently").
83. Id. at 762-63, 764 n.8. The Court was apparently concerned that if evidence of price complaints from dealers, followed by termination of a discounter, was alone sufficient to prove an agreement, manufacturers and dealers might be deterred from engaging in legitimate discussions about distribution strategies. Id. at 762.
84. Id. at 764.
85. Id.
86. It should be noted, however, that the Supreme Court in Monsanto did find sufficient evidence of an agreement to uphold a jury verdict for plaintiff in that case. Id. at 765.
87. See, e.g., H.L. Hayden Co. v. Siemens, 879 F.2d 1005, 1015-16 (2d Cir. 1989) (listing evidence that included a meeting between the manufacturer and other dealers during which the manufacturer assured the dealers that it was "working on the problem" of plaintiff; correspondence between the manufacturer and other dealers wherein the dealers implicitly threatened to boycott the manufacturer if it did not resolve the problem relating to plaintiff; and a meeting between the manufacturer and another dealer followed by a letter from the manufacturer suggesting that things would be resolved to the dealer's satisfaction); Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148, 1157 (9th Cir. 1988) (describing evidence that included complaints from defendant dealer to the manufacturer followed by threats of boycott of the manufacturer; the manufacturer's response to the defendant that it "would take care of things," followed by a partial cut-off of plaintiff's supply). See also infra note 82 for additional case cites.
88. 485 U.S. 717 (1988).
89. Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911). Per se illegality means that the conduct is conclusively presumed to be illegal, without regard to the actual effects or to the possible justifications in a particular case. The per se rule applies to horizontal price fixing, horizontal market allocations, certain boycotts and vertical price fixing. See, e.g.. United States v. Topco Assocs., Inc., 405 U.S. 596 (1972) (discussing horizontal market allocation); Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959) (discussing horizontal group boycott); United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940) (analyzing horizontal price fixing); Dr. Miles, 220 U.S. 373 (analyzing vertical price fixing). A quasi per se rule applies to tying arrangements. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 12-16 (1984).
90. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36 (1977). As a practical matter, a rule of reason case is costly and extremely difficult to prove. Plaintiffs must begin by properly defining the relevant product and geographic markets, a complicated economic inquiry in itself. They must then consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual and probable . . . . [They must also examine the] history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained . . . . Chicago Bd. of Trade v. United States, 246 U.S. 231, 238 (1918). Because of the vastly different standards of proof, a determination that the rule of reason should apply instead of the per se rule does not merely affect the process of proof but has significant substantive consequences.
91. The difference in economic effects that has been noted between vertical price and nonprice restraints is that a price restraint is designed to, and almost invariably does, reduce price competition both in the intrabrand and interbrand markets, but a nonprice restraint does not have the same inevitable direct effect on price. Sylvania, 433 U.S. at 51 n.18.
92. See, e.g., Posner, Per Se Legality, supra note 7, at 9 (arguing that territorial restrictions, i.e., vertical nonprice restraints, necessarily affect price competition, and thus both types of restraints should be held to the same standard of legality).
93. 485 U.S. 717.
94. Id.at 721.
95. Id. at 721-22.
96. A significant portion of the majority's opinion in Sharp was devoted to speculations about hypothetical vertical nonprice restraints and theories on free riding when neither was an issue in the case. Scalia, consistent with Chicago theory, dismissed the need for protecting intrabrand competition, i.e., competition among dealers of the same brand, on the theory that interbrand competition would serve as a check on the manufacturer. He also worried about the possibility that a jury might disbelieve a manufacturer's business rationale for certain restraints, which would then chill effective business strategies. Despite the jury's specific findings to the contrary, Justice Scalia sought to justify the restraint as "ancillary" to a "quite plausible purpose . . . to enable [the nonterminated dealer] to provide better services." Id. at 725-31.
97. The Court was probably unwilling to overturn the per se rule against vertical price fixing for fear of drawing congressional reversal. Congress had earlier expressed its strong opposition to any change to the per se rule against vertical price fixing; it adopted resolutions to cut off funding for President Reagan's Antitrust Division after the Division submitted an amicus brief in Monsanto in favor of overturning the per se rule. See White House Opposes Authorization of Justice Department with RPM Rider, 52 Antitrust & Trade Reg. Rep. (BNA) No. 1320, at 1127 (June 18, 1987).
98. After the Monsanto and Sharp decisions, both the Senate and the House introduced bills to codify the per se illegality rule against vertical price restraints, and to remove the additional requirements imposed by the two cases. The bills were ultimately defeated after a threatened veto from President Bush. Resale Price Fixing Bill - U.S. Views, 7 Trade Reg. Rep. (CCH) § 50,061, at 48,713 (June 25, 1991).
99. Sharp, 485 U.S. at 726-27.
100. Id. at 726.
101. In a forceful dissent, Justice Stevens characterized Justice Scalia's labeling of the restraint in question as nonprice as an "oxymoron," as the jury had specifically found a naked agreement to terminate plaintiff because of its low prices, id. at 754, and the majority never disputed the accuracy of that finding. Id. at 751; see also William L. Reynolds & Spencer Weber Waller, Legal Process and the Past of Antitrust, 48 SMU L. Rev. 1811, 1820-21 (1995) (criticizing the intellectual dishonesty of the Sharp decision).
102. Center Video Indus. v. United Media, Inc., 995 F.2d 735, 739 (7th Cir. 1993).
103. Ben Elfman & Son, Inc. v. Criterion Mills, Inc., 774 F. Supp. 683, 685 (D. Mass. 1991).
104. See 137 Cong. Rec. E3390 (daily ed. Oct. 15, 1991) (statement of Rep. Smith) (arguing for legislation overruling Monsanto and Sharp on the ground that the requirement of an explicit agreement is, in practice, impossible to meet as "[o]nly fools fix prices before witnesses").
105. See, e.g., Lovett v. General Motors, 998 F.2d 575 (8th Cir. 1993); Center Video Indus., 995 F.2d 735; Bailey's, Inc. v. Windsor Am., Inc., 948 F.2d 1018 (6th Cir. 1991) (en banc); H.L. Hayden Co. v. Siemens, 879 F.2d 1005 (2d Cir. 1989); Parkway Gallery Furn., Inc. v. Kittinger/Pa. House Group, Inc., 878 F.2d 801 (4th Cir. 1989); Winn v. Edna Hibel Corp., 858 F.2d 1517 (11th Cir. 1988); Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148 (9th Cir. 1988); Garment Dist., Inc. v. Belk Stores Servs., Inc., 799 F.2d 905 (4th Cir. 1986); McCabe's Furn., Inc. v. La-Z-Boy Chair Co., 798 F.2d 323 (8th Cir. 1986); O.S.C. Corp. v. Apple Computer, 792 F.2d 1464 (9th Cir. 1986); Terry's Floor Fashions, Inc. v. Burlington Indus., 763 F.2d 604 (4th Cir. 1985).
106. E.g., A-Abart Elec. Supply v. Emerson Elec. Co., 956 F.2d 1399, 1405-06 (7th Cir. 1992); Center Video Indus. v. United Media, Inc., No. 90-C6387, 1992 U.S. Dist. LEXIS 8743 (N.D. Ill. June 23, 1992).
107. There are only a handful of dealer termination cases, all with unique characteristics, which the defendant has not won on summary judgment. See, e.g., Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996, 999 (3d. Cir. 1994) (including evidence of a threatened manufacturer's boycott); Denny's Marina, Inc. v. Renfro Prods., Inc., 8 F.3d 1217 (7th Cir. 1993) (including clear evidence of a horizontal conspiracy); Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1365 (3d Cir. 1992) (incluing aspects of a horizontal group boycott among dealers, in addition to a vertical restrictive arrangement); DeLong Equip. Co. v. Washington Mills Abrasive Co., 887 F.2d 1499 (11th Cir. 1989) (including some evidence of kickbacks and fraud).
108. In addition to applying the market-power screen discussed below, federal courts, influenced by Chicago theories, have further protected vertical restraints by limiting the standing of private parties to sue to those who can show "antitrust injury," i.e., injury to competition. E.g., Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 335 (1990). Although the requirement is not novel, its current technical and strict application is. Lower courts have held that injury to competition requires showing an injury to interbrand competition, not merely intrabrand competition. E.g., K.M.B. Warehouse v. Walker Mfg. Co., 61 F.3d 123, 127-28 (2d Cir. 1995). Some courts have gone further and have demanded proof of reduced industry output and higher prices to establish an adverse effect on competition. E.g., Stamatkis Indus. v. King. 965 F.2d 469, 471 (7th Cir. 1992).
109. Easterbrook, Vertical Arrangements, supra note 7, at 159-61 (proposing a five-part threshold test for determining the lawfulness of vertical restraints); Richard A. Posner, The Rule of Reason and the Economic Approach: Reflections on the Sylvania Decision, 45 U. Chi. L. Rev. 1, 17-19 (1977) (proposing a three stage inquiry for determining the legality of restricted distribution).
110. E.g., Murrow Furn. Galleries, Inc. v. Thomasville Furn. Indus., 889 F.2d 524, 529 (4th Cir. 1989); Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d 656, 669 (7th Cir. 1987); R.D. Imports Ryno Indus. v. Mazda Indus., 807 F.2d 1222 (5th Cir. 1986); Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 221 (D.C. Cir. 1986); Graphic Prods. Distribs. v. Itek Corp., 717 F.2d 1560, 1568 (11th Cir. 1983); JBL Enters. v. Jhirmack Enters., 698 F.2d 1011, 1017 (9th Cir. 1983); Valley Liquors, Inc. v. Renfield Importers, Ltd., 678 F.2d 742, 745 (7th Cir. 1982); Copy Data Sys., Inc. v. Toshiba Am., Inc., 663 F.2d 405, 410-11 (2d Cir. 1981); see also Richard M. Steuer, The Turning Points in Distribution Law, 35 Antitrust Bull. 467, 513-18 (1990) (summarizing cases that have applied the market-power screen).
111. Easterbrook, Limits, supra note 7, at 20-21.
112. Consideration of defendant's market power is not new in the sense that it has always been an integral part of the all-encompassing rule of reason analysis. What is new, though, is the reliance on it as a screen, or as a threshold test, in determining illegality.
113. Douglas H. Ginsburg, Vertical Restraints: De Facto Legality Under the Rule of Reason, 60 Antitrust L.J. 67, 76 (1991).
114. Saferstein, supra note 14, at 383-85. The survey reported that tortious interference was the state business tort claim most frequently filed by antitrust litigants - twice as frequently as the next most frequent claims of unfair competition and defamation/injurious falsehood. Id. at 385.
115. While no surveys were undertaken to prove this, the ABA Antitrust Section report shows that the number of private antitrust cases declined sharply throughout the 1980s, with over 50% fewer cases filed in 1989 than in 1984. But the number of joint antitrust/tort cases filed leveled off in the late 1980s, after a dramatic increase through the mid-1980s. From these statistics, the report suggests that many plaintiffs, today, probably do not bother to include antitrust claims and instead rely purely on state tort doctrines. Id. at 384-85, 385 n.12.
116. W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 129, at 978 (5th ed. 1984). Likewise, the Restatement (Second) of Torts § 766 (1977), describes tortious interference with contract as follows: One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract. Id.
117. Keeton et al., supra note 93, § 130, at 1005. See also Restatement (Second) of Torts § 766B (1977), which defines tortious interference with prospective advantage as follows: One who intentionally and improperly interferes with another's prospective contractual relations (except a contract to marry) is subject to liability to the other for the pecuniary harm resulting from the loss of the benefits of the relation, whether the interference consists of: (a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or (b) preventing the other from acquiring or continuing the prospective relation. Id.
118. See Restatement (Second) of Torts §§ 766, 766B, 767, 768 (1977) (delineating and analyzing interference torts in general).
119. Restatement (Second) of Torts § 768 (1977). Tortious interference extends liability even when the underlying contract that has been disrupted is voidable or terminable at will. In other words, although the promisor herself could have walked away from the contract with impunity, the interferor ho induced the termination of the relationship could be subject to a tortious interference action. The reason for the policy is that, although a promisee with an at-will contract may not have a legal right to performance of the contract, she does have certain reasonable expectations of future relations with the promisor which warrant some protection. Most jurisdictions follow the Restatement compromise and treat an interference with an at-will contract as an interference with prospective advantage, to which the competition privilege applies, and not as an interference with contract. Restatement (Second) of Torts § 768 cmt. 2 (1977).
120. The modern claims of tortious interference with contract and with
121. See supra notes 93-94 and accompanying text.
122. In full, the Restatement provides: In determining whether an actor's conduct in intentionally interfering with a contract or a prospective contractual relation of another is improper or not, consideration is given to the following factors: (a) the nature of the actor's conduct, (b) the actor's motive, (c) the interests of the other with which the actor's conduct interferes, (d) the interests sought to be advanced by the actor, (e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other, (f) the proximity or remoteness of the actor's conduct to the interference and (g) the relations between the parties. Restatement (Second) of Torts § 767 (1977).
123. See Keeton et al., supra note 93, § 129, at 983 n.56 (citing old cases).
124. Restatement (Second) of Torts § 766 cmt. r (1977).
125. See Brennan v. United Hatters of N. Am. Local 17, 65 A. 165, 171 (N.J. 1906) (stating that malice is an element of the tort); Magnum Elec. Co. v. Border, 222 P. 1002, 1005 (Okla. 1924) (same); Temperton, 1 Q.B. 715 (same); Bowen v. Hall, 6 Q.B.D. 333 (1881) (same); Lumley, 118 Eng. Rep. at 751 (same).
126. Restatement (Second) of Torts § 766 cmt. s (1977).
127. Id. cmt. j.
128. Deauville Corp. v. Federated Dep't Stores, Inc., 756 F.2d 1183, 1197 (5th Cir. 1985).
129. See id. at 1195-97 (holding that the defendant's interference would be privileged if it resulted from legitimate business considerations, but that would depend on whether defendant's conduct was motivated by the desire to advance its "legitimate economic interests" or solely injure the plaintiff).
130. Oliver Wendell Holmes, Privilege, Malice, and Intent, 8 Harv. L. Rev. 1, 3 (1894).
131. Id. at 6.
132. Id. at 6-7.
133. Id. at 9.
134. Restatement (Second) of Torts § 768(1) (1977).
135. Id. § 768(2). The reason for the distinction is that a defendant's right to compete is deemed inferior to an interest in contract stability, but superior to a mere expectancy interest in prospective economic relations or at-will contracts.
136. See infra notes 114-16 and accompanying text.
137. E.g., Fineman v. Armstrong World Indus., 980 F.2d 171, 187 (3d Cir. 1992); Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1381 (3d Cir. 1992); Advent Sys., Ltd. v. Unisys Corp., 925 F.2d 670, 673 (3d Cir. 1990); Silver v. Mendel, 894 F.2d 598, 603 n.7 (3d Cir. 1990); Halebian v. Roppe Rubber Corp., 718 F. Supp. 348 (D.N.J. 1989); Insurance Field Servs. v. White & White Inspection, 384 So. 2d 303, 307 (Fla. Dist. Ct. App. 1980); Printing Mart - Morristown v. Sharp Elec. Corp., 563 A.2d 31, 40 (N.J. 1989); Sustick v. Slatina, 137 A.2d 54, 60 (N.J. 1957); Glenn v. Point Park College, 272 A.2d 895, 899 (Pa. 1971); see also Restatement (Second) of Torts § 767 cmt. j (1977) (stating that, in determining the propriety of defendant's conduct, "consideration is given to concepts of fair play and whether the defendant's interference is not 'sanctioned by the rules of the game'").
138. E.g., Deauville Corp. v. Federated Dep't Stores, Inc., 756 F.2d 1183, 1197 (5th Cir. 1985); Machine Maintenance & Equip. Co. v. Cooper Indus., 661 F. Supp. 1112, 1116 (E.D. Mo. 1987) (stating that conduct that violates "business ethics and customs"is "wrongful"); see also Restatement (Second) of Torts § 767 cmt. c (1977) (stating that a "[v]iolation of recognized ethical codes for a particular area of business activity or of established customs or practices" is a consideration in determining whether defendant's conduct is improper).
139. Azar v. Lehigh Corp., 364 So. 2d 860, 862 (Fla. 1978); see also Deauville, 756 F.2d at 1197 (stating that defendant's conduct would be privileged as competition if it was within the realm of "fair play").
140. See generally Dan B. Dobbs, Tortious Interference with Contractual Relationships, 34 Ark. L. Rev. 335 (1980) (arguing that there are few cases in which liability should be imposed);
141. Donald C. Dowling, Jr., A Contract Theory for a Complex Tort: Limiting Interference with Contract Beyond the Unlawful Means Test, 40 U. Miami L. Rev. 487 (1986) (discussing the need for limits on interference torts);
142. Gary Myers, The Differing Treatment of Efficiency and Competition in Antitrust and Tortious Interference Law, 77 Minn. L. Rev. 1097 (1993) (taking the position that tortious interference doctrines should be modified to permit more competition);
143. Harvey S. Perlman, Interference with Contract and Other Economic Expectancies: A Clash of Tort and Contract Doctrines, 49 U. Chi. L. Rev. 61 (1982) (proposing that liability be imposed only when the defendant's behavior is otherwise unlawful);
144. Gina M. Grothe, Note, Interference with Contract in the Competitive Marketplace, 15 Wm. Mitchell L. Rev. 453 (1989) (arguing for the curtailing of the scope of the tort of intentional interference with contract);
145. Gary D. Wexler, Note, Intentional Interference with Contract: Market Efficiency and Individual Liberty Considerations, 27 Conn. L. Rev. 279 (1994) (calling for legislative action to repeal the tort of intentional interference with contract).
146. But see generally William J. Woodward, Jr., Contractarians, Community, and the Tort of Interference with Contract, 80 Minn. L. Rev. 1103 (1996) (suggesting that interference tort can be reconciled with modern contract analysis);
147. John Danforth, Note, Tortious Interference with Contract: A Reassertion of Society's Interest in Commercial Stability and Contractual Integrity, 81 Colum. L. Rev. 1491 (1981) (arguing for the expansion of the tort of interference with contract).
148. E.g., Keeton et al., supra note 93, § 129, at 979 (recognizing that courts have continued to expand the tort and therefore, the uncertainties in the tort have become more significant); Dobbs, supra note 117, at 345-46, 365-76 (stating that the rules and contours of the tort are unclear).
149. See, e.g., Perlman, supra note 117, at 78-91 (stating that to extend liability when defendant's conduct is not independently wrongful violates efficient breach); Wexler, supra note 117, at 279-80, 317-18 (summarizing the literature on tortious interference and advocating a position based on the efficient breach theory).
150. Myers, supra note 117, at 1137-38; see also Perlman, supra note 117, at 108-09 (stating that limiting tort liability to cases of unlawful acts ensures harmony between antitrust and tort policies).
151. Myers, supra note 117, at 1141 (arguing that competitors should be subject to tortious interference liability only for acts that are independently unlawful, and that motive should not be a relevant consideration); Perlman, supra note 117, at 109, 128-29 (suggesting that "limiting tortious interference liability to independently unlawful acts would ensure that the tort is not used to circumvent antitrust policies").
152. See, e.g., Richard A. Epstein, Inducement of Breach of Contract as a Problem of Ostensible Ownership, 16 J. Legal Stud. 1, 22-23 (1987) (arguing that allowing an action against a third party for inducing breach of contract would hinder competitive markets); Perlman, supra note 117, at 95-97 (claiming that so long as A chooses competitive means to harm B, A's action produces a "social benefit" and should not be actionable, notwithstanding that A might have been motivated by pure spite toward B).
153. See generally Dobbs, supra note 117 (arguing for limiting liability for interference to several discrete situations); Myers, supra note 117 (criticizing current rules of liability for business torts as irreconcilable with antitrust law).
154. Commentators have also criticized the confusion surrounding the burden of proof issue. The law is unclear on whether plaintiff establishes a prima facie case upon proof of the interference, with the burden of proof then shifting to the defendant to demonstrate privilege or justification, or whether plaintiff has the burden of proving the absence of privilege or justification (in order to show impropriety) as part of its case. Keeton et al., supra note 93, at 983-84; Myers, supra note 117, at 1125-26.
155. See Keeton et al., supra note 93, § 129, at 979 (lamenting that tortious interference is "a broad and undefined tort in which no specific conduct is proscribed and in which liability turns on the purpose for which the defendant acts, with the indistinct notion that the purposes must be considered improper in some undefined way"); Dobbs, supra note 117, at 345-46 (noting the lack of a guiding principle in the interference tort); Myers, supra note 117, at 1109-13, 1135-37 (discussing the ambiguity of the law in this area); Francis B. Sayre, Inducing Breach of Contract, 36 Harv. L. Rev. 663, 674-75 (1923) (discussing the absence of agreement on the meaning of the individual elements of tortious interference actions).
156. 661 F. Supp. 1112 (E.D. Mo. 1987).
157. Myers, supra note 117, at 1136-37.
158. Machine Maintenance, 661 F. Supp. at 1114.
159. Id. at 1116.
160. Plaintiff alleged that the manufacturer conspired with its new dealer to terminate plaintiff, in violation of section 1 of the Sherman Act. Id. at 1114.
161. The jury awarded plaintiff almost $1.8 million as compensatory damages on each of the two claims, and an additional $10 million as punitive damages on the tortious interference claim. Id.
162. The court held that to find a section 1 Sherman Act violation under the rule of reason standard, there must be sufficient evidence that the defendant had market power or that its conduct had a detrimental effect on competition, not merely on the plaintiff, and there was apparently no such evidence in this case. Id. at 1119.
163. Machine Maintenance, 661 F. Supp. at 1117.
164. Id. at 1115.
165. Id.
166. Id. at 1116 (citing to Restatment (Second) of Torts § 767 cmt. c (1977)).
167. Id.
168. Machine Maintenance, 661 F. Supp. at 1116.
169. The court emphasized that even conduct that is otherwise lawful can constitute unjustified interference in some circumstances. Id.
170. See, e.g., Myers, supra note 117, at 1112 (observing that the analysis requires a case-by-case inquiry based on few definite rules).
171. Id. at 1133-34.
172. See, e.g., U.C.C. §§ 1-201(19), 1-203, 1-208, 2-103(1)(b), 2-311(1), 2-603(3), 2-615(a) (1995).
173. See, e.g., U.C.C. § 2-103(1)(b).
174. U.C.C. § 2-302(1995).
175. See, e.g., U.C.C. §§ 1-102(2)(b), 1-205, 2-202(a), 2-208(2), 2-314(3), 2-316(3)(c), 2-504(b)(1995).
176. Meinhard v. Salmon, 164 N.E. 545, 546 (N.Y. 1928) (Cardozo, J.) (refusing to allow the market place to be the sole determinant of the duty business partners owe to each other).
177. Id.
178. Examples of such special relationships of dependency, to which fiduciary norms have traditionally applied, are those found between partners, and between trustee and beneficiary.
179. See, e.g., Central States Stamping Co. v. Terminal Equip. Co., 727 F.2d 1405, 1409 (6th Cir. 1984) (imposing fiduciary duties, despite the lack of a formal fiduciary relationship between the parties, "where one party imposes confidence in the other because of that person's position, and the other party knows of this confidence"); Slater v. KFC Corp., 621 F.2d 932, 936 (8th Cir. 1980) (imposing a duty to speak "where there is an inequality of condition between the parties; and . . . where one party has superior knowledge not within the fair and reasonable knowledge of the other party") (quoting McMahon v. Meredith Corp., 595 F.2d 433, 438-39 (8th Cir. 1979)).
180. Those who oppose the vagueness of tortious interference may, of course, argue that none of the above described amorphous standards should have any place in the commercial arena. But, as the Article later discusses, these long-accepted legal principles have their own merit, both from economic and social standpoints. To disavow all these principles, long embedded in our commercial jurisprudence, simply on the basis of indeterminacy is, in my view, unwarranted and extreme. Indeed, even some law-and-economics adherents have acknowledged that legal rules encouraging trust and cooperation in the marketplace are desirable. See, e.g., Jordan v. Duff & Phelps, Inc., 815 F.2d 429, 438 (7th Cir. 1987) (Easterbrook, J.) (stating that one term implied in every written or unwritten contract is that "neither party will try to take opportunistic advantage of the other"); Daniel A. Farber & John H. Matheson, Beyond Promissory Estoppel: Contract Law and the Invisible Handshake, 52 U. Chi. L. Rev. 903, 906 (1985) (using efficiency analysis to advocate reform of contract law to increase its efficiency as well as promote "the important moral value of mutual trust").
181. Roscoe Pound, The Theory of Judicial Decision, 36 Harv. L. Rev. 940, 957 (1923).
182. Id. But legal realists disagreed with these views, persuasively arguing that decisionmaking is always influenced by the decisionmaker's basic values, regardless of the specificity of controlling rules. They also thought that commercial law should focus more on the actual conduct of the parties and less on the formalism of legal classifications. See generally Lon Fuller, American Legal Realism, 82 U. Pa. L. Rev. 429 (1934) (arguing that human emotions often resist attempts to apply legal rules);
183. Karl Llewellyn, A Realist Jurisprudence: The Next Step, 30 Colum. L. Rev. 431 (1930) (arguing that behavior should be given more weight than legal rules). Llewellyn brought these attitudes to bear in article 2 of the Uniform Commercial Code, of which he was the principal drafter.
184. See, e.g., Myers, supra note 117, at 1151 (stating that liability based on motive presents room for judicial error and thus chills competition); see also George J. Stigler, The Law and Economics of Public Policy: A Plea to the Scholars, 1 J. Legal Stud. 1, 4 (1972) (describing the notion of fairness as "a suitcase full of bottled ethics from which one freely chooses to blend his own type of justice").
185. E.g., Dowling, supra note 117, at 506-10; Perlman, supra note 117, at 78-91; James B. Sales, The Tori of Interference with Contract: An Argument for Requiring a "Valid Existing Contract" to Restrain the Use of Tort Law in Circumventing Contract Remedies, 22 Tex. Tech. L. Rev. 123, 147-48 (1991); see also Epstein, supra note 122, at 21-22 (arguing that to allow action against a third party for inducement of breach of contract "would place a major crimp in the operation of competitive markets").
186. The idea is usually traced to Holmes, who made his now-famous statement that "[t]he duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it, - and nothing else." Oliver W. Holmes, The Path of the Law, 10 Harv. L. Rev. 457, 462 (1897).
187. This is called a pareto-optimal or pareto-superior result, i.e., someone is better off while no one is worse off. A variation is the Kaldor-Hicks concept of efficiency, which finds superiority when someone is better off by a gain exceeding the loss of another who is worse off. See Richard A. Posner, Economic Analysis of Law 13-14 (4th ed. 1992) (examining the efficiency of transactions to determine pareto-superior choices for partners).
188. E.g., Perlman, supra note 117, at 82-87.
189. See, e.g., Daniel Friedmann, The Efficient Breach Fallacy, 18 J. Legal Stud. 1, 18-23 (1989) (discussing both the positive and normative objections to the theory of efficient breach);
190. Peter Linzer, On the Amorality of Contract Remedies - Efficiency, Equity, and the Second Restatement, 81 Colum. L. Rev. 111, 131-38 (1981) (arguing that efficiency theory recognizes the financial costs to the promisor but fails to recognize the emotional and other costs of the breach to the promisee);
191. Ian R. Macneil, Efficient Breach of Contract: Circles in the Sky, 68 Va. L. Rev. 947, 950-53 (1982) (analyzing the fallacy of the simple efficient breach theory); Woodward, supra note 117, at 1138-55.
192. See Douglas J. Whaley, Paying for the Agony: The Recovery of Emotional Distress Damages in Contract Actions, 26 Suffolk U. L. Rev. 935, 951 (1992).
193. Some commentators suggest that a plaintiff will never be as well off with expectation damages as she would have been with full performance, and advocate greater use of specific performance as a contract remedy. Linzer, supra note 158, at 131-38; Alan Schwartz, The Case for Specific Performance, 89 Yale L.J. 271, 278-96 (1979).
194. See Friedmann, supra note 158, at 6-7 (discussing the transaction costs involved in breach); Arthur Leff, Injury, Ignorance, and Spite - The Dynamics of Coercive Collection, 80 Yale L.J. 1, 9 (1970) (contending that expectation damages can never make a promisee whole as she is required to bear her own legal expenses); Macneil, supra note 158, at 953 (faulting the "simple" efficient breach theory for failing to take into account the transaction costs associated with breach). Of course, some transaction costs are taken into account, such as the allowance for incidental damages in the remedy provisions of the U.C.C. U.C.C. §§ 2-710, 2-715 (1995).
195. See Woodward, supra note 117, at 1180-81 (stating that contract law and tortious interference reflect "different ways of thinking about and addressing the complexities of human relations and human exchange," and that tortious interference stands for our "community values" which do not play a significant role in contract doctrine).
196. Id.
197. Id. at 1163-68.
198. Id. at 1165.
199. It should be noted that even contract law is not devoid of "community values" in that it does embody certain noneconomic notions such as promissory estoppel, good faith and fair dealing, and unconscionability. See supra notes 142-45 and accompanying text.
200. Richard A. Posner, Wealth Maximization and Tort Law: A Philosophical Inquiry, in Philosophical Foundations of Tort Law 99, 99 (David G. Owen ed., 1995) [hereinafter, Posner, Wealth Maximization];
201. see also William M. Landes & Richard A. Posner, The Economic Structure of Tort Law (1987) (testing the efficiency theory in a study of the rules and economics of tort law). For further discussion of wealth maximization, see infra notes 264-71 and accompanying text.
202. E.g., Richard W. Wright, Right, Justice and Tort Law, in Philosophical Foundations of Tort Law, supra note 166, at 159, 160.
203. Legal philosophers sharply criticize wealth maximization as a normative theory of tort law. See, e.g., Ronald M. Dworkin, Is Wealth a Valve?, 9 J. Legal Stud. 191 (1980) (rejecting the notion that a society with more wealth is necessarily better and that judicial decisions should strive toward wealth maximization).
204. See supra notes 114-116, infra notes 251-63 and accompanying text.
205. The law on tortious interference in all states is not statutory, but is based on common law.
206. See supra notes 91-92 and accompanying text.
207. Restatement (Second) of Torts §§ 766, 766B (1977).
208. In many states, dealers who qualify as franchisees may also turn to state franchise laws for protection. Most of these laws impose a "good cause" requirement for a supplier's termination or nonrenewal of a franchisee. For a detailed discussion of what constitutes a "franchise" and of the scope of the franchise laws of various states, see Pitegoff, supra note 17.
209. For example, only combinations or agreements in restraint of trade are illegal under section 1 of the Sherman Act; unilateral action, no matter how anticompetitive, is not actionable. Tortious interference, in contrast, does not require concert of action. Thus, a terminated dealer who is unable to meet the evidentiary standard of Monsanto (in showing agreement) may rely, and prevail, on a tortious interference theory provided that other elements of the tort are satisfied. See supra note 18 (citing cases wherein dealer-plaintiffs lost their antitrust claims but prevailed on tortious interference theory).
210. See Myers, supra note 117, at 1141 (maintaining that tortious interference should be modified to promote competition, as antitrust law does); Perlman, supra note 117, at 108-09 (stating that tortious interference law should not supplement or supersede antitrust law, or be used to circumvent or contradict antitrust policies). Other commentators believe that tortious interference is generally overbroad or irreconcilable with contract law, and they suggest various analyses for the curtailment of the tort. E.g., Dobbs, supra note 117; Dowling, supra note 117, at 514-18.
211. See infra notes 211-27 and accompanying text.
212. See infra notes 229-33 and accompanying text.
213. See infra notes 251-63, and supra notes 111-16 and accompanying text.
214. See Woodward, supra note 117, at 1164-65 (arguing that tortious interference with contract is not inconsistent with contract law, despite its conflict with "efficient breach," because it advances values other than efficient breach and protects interests other than those of the parties to the contract).
215. Perlman, supra note 117, at 108-09 (focusing on the conflict between tortious interference and the efficient breach theory).
216. Myers, supra note 117.
217. Professor Myers also echoed concerns, raised by various other scholars, that are not specific to the relationship between tortious interference and antitrust. He contended, for example, that the liability standard of tortious interference is too vague and the burden of proof too uncertain. He also argued that the scope of the tort is overly broad when liability can be based on interference with at-will or voidable contracts, since such contracts are not legally enforceable by the promisee herself.
218. See Myers, supra note 117, at 1141, 1151 (arguing that, unless the means used are independently unlawful, competitors should be free to interfere with at-will and voidable contracts, and that motivation should not be a determinative factor in tortious interference liability).
219. In antitrust jurisprudence, motive is insufficient to establish a violation under the rule of reason. Spectrum Sports v. McQuillan, 506 U.S. 447, 455 (1993) (relying on Swift & Co. v. United States, 196 U.S. 375 (1905) for the proposition that "intent is necessary, but alone not sufficient"); Chicago Bd. of Trade v. United States, 246 U.S. 231, 238 (1918) (stating that motive is merely one relevant fact in applying the true test for liability: whether the restraint promotes or destroys competition); Northwest Power Prods. v. Omark Indus., 576 F.2d 83, 90 (5th Cir. 1978) ("An evil intent alone is insufficient to establish a violation under the rule of reason. . . .").
220. See Myers, supra note 117, at 1110 (citing the overbreadth and vagueness criticisms made by different commentators and concluding that "tortious interference law is troubling because it is expanding despite its lack of clear principles or doctrinal foundations"); see also supra notes 124-41 and accompanying text.
221. Myers, supra note 117, at 1142-43, 1151.
222. Id. at 1151. Professors Myers and Dobbs also have objected, on more general grounds, to the use of motive to support liability. They have suggested that it contravenes a commonly held notion that the law should judge one's conduct, not one's person or state of mind. Dobbs, supra note 117, at 347-48; Myers, supra note 117, at 1131-32.
223. 756 F.2d 1183 (5th Cir. 1985).
224. Id. at 1186-87.
225. Anchor tenants are mass merchandisers, such as Montgomery Ward, or large department stores, such as Macy's, that are considered critical to the success of any mall as they are needed to draw in retail customers.
226. Deauville, 756 F.2d at 1186-87.
227. Id.
228. Id.
229. Id. at 1189 n.2 ("I do not consider Mont. Ward a suitable [tenant]. . . . I feel MW will not enhance the prestige of the center as much as [another tenant] would. . . . It would only be worth considering if it were strictly a defensive measure to prevent the building of another center.").
230. Id. at 1187.
231. Deauville, 756 F.2d at 1188.
232. Deauville alleged that Federated: (a) monopolized and attempted to monopolize the market of leased regional mall space in a specific geographic area, in violation of section 2 of the Sherman Act; and (b) illegally combined with Montgomery Ward in restraint of trade, in violation of section 1 of the Sherman Act. Id. at 1188, 1192.
233. Id. at 1186.
234. On plaintiff's section 2 claims, the court found that there was insufficient evidence of Federated's monopoly power to support liability on monopolization theories. On plaintiff's section 1 claims, the court held that Deauville had not presented enough evidence of an adverse effect on competition. Id. at 1191-92.
235. The Fifth Circuit recognized "a degree of incongruity" in its decision striking down the antitrust claims while finding sufficient evidence of bad motive to go to the jury on the tortious interference claims. But it noted that the incongruity was superficial, as there was at least one important distinction between antitrust and tortious interference law: antitrust protects competition, while tortious interference protects the competitor and requires no finding of market power. Id. at 1196 n.9.
236. Deauville, 756 F.2d at 1197. The terms "privilege" and "justification," often used interchangeably, are very malleable and have no precise definitions in tortious interference. However, a few broad statements can be made about the defense. First, an interference that is "privileged" is not subject to liability. Second, interference with fixed-term contracts is not privileged, but interference with prospective economic relations or at-will contracts in the pursuit of competition may be "privileged." Third, in the case of prospective economic advantage, whether certain conduct qualifies for the privilege depends on the defendant's motivation underlying the conduct and on whether the conduct meets a minimal level of fairness. See supra notes 105-16 and accompanying text.
237. Deauville, 756 F.2d at 1197 (stating that the privilege of competition is limited to what is considered within the realm of "fair play").
238. Id.
239. Id.
240. Myers, supra note 117, at 1126-35.
241. Id. at 1131.
242. Id. at 1132-34.
243. Perlman, supra note 117, at 92 n.131. It should be noted that although Perlman found nothing wrong, as a matter of principle, with basing liability on motivation, he opposed its use in tortious interference to determine liability because he thought that "the costs of error" in tortious interference were too high. Id.
244. 42 U.S.C. § 2000e-2 (1994).
245. See, e.g., Perlman, supra note 117, at 95-97 (arguing that the better rule is to require the showing of noncompetitive acts).
246. See id. at 95 (arguing that even proven "pure malice is not a perfect predictor of anticompetitive effect" and should not be enough to find tortious interference liability). Perlman further illustrated his point as follows: if A, unquestionably motivated by pure spite toward B, chooses competitive methods to harm B, A's act would still produce a "social benefit." In such a case, A should not be held liable for tortious interference, despite his proven bad motive. Id. at 95.
247. U.S. Const. art. VI, § 2 (Supremacy Clause).
248. U.S. Const. art. I, § 8, cl. 3; see Parker v. Brown, 317 U.S. 341, 350 (1943) ("We may assume also, without deciding, that Congress could, in the exercise of its commerce power, prohibit a state from maintaining a stabilization program like the present because of its effect on interstate commerce.").
249. See Parker, 317 U.S. at 350-51 (noting that nothing in the language of the Sherman Act or its legislative history indicates it was intended to restrain state action or official action directed by the state); Herbert Hovenkamp, State Antitrust in the Federal Scheme, 58 Ind. L.J. 375, 375 (1982/83) (noting that Congress in enacting the Sherman Antitrust Act and subsequent antitrust law did not intend to affect state regulations).
250. 21 Cong. Rec. 2456-57 (1890) (emphasis added).
251. See, e.g., California v. ARC Am. Corp., 490 U.S. 93, 101 (1989) (upholding a state antitrust law permitting indirect purchaser damage suits, despite federal antitrust law prohibiting such suits); Exxon Corp. v. Governor of Md., 437 U.S. 117, 128 (1978) (upholding Maryland law that prohibited vertical integration by petroleum refiners into retailing, despite the fact that federal antitrust law permits vertical ownership); Pinney Dock & Transp. Co. v. Penn Cent. Corp., 838 F.2d 1445, 1482 (6th Cir. 1988) (upholding a state antitrust statute which had no statute of limitations, although this would have the effect of allowing antitrust actions to be brought beyond the federal four-year statute of limitations).
252. See English v. General Elec. Co., 496 U.S. 72, 78-79 (1990) (stating that state law is preempted under the Supremacy Clause only to the extent there is an actual conflict with federal law); Exxon Corp., 437 U.S. at 130 (holding that the possibility that a Maryland statute may require uniformity of voluntary price reductions in situations in which federal law - the Robinson-Patman Act - would permit "localized discrimination" is insufficient to preempt the Maryland statute). Even then, the "state action" exemption under the Parker doctrine may apply to permit a state to require private parties, with active state supervision, to violate the antitrust laws. Parker, 317 U.S. at 341, 351; see also California Retail Liquor Dealers Ass'n v. Midcal Aluminum, 445 U.S. 97, 105 (1980) (holding that California's involvement in the wine pricing system was insufficient to establish antitrust immunity under the Parker doctrine because the policy was not actively supervised by the state itself). However, the "state action" exemption is not even an issue in the conflict between tortious interference and federal antitrust law. The doctrine comes into play only if the state seeks to immunize private action from federal antitrust laws, such as in Parker, 317 U.S. at 351-52. Tortious interference is not about the state requiring private actors to do something that the federal antitrust laws prohibit and therefore there is no "state action" exemption at issue here.
253. Hines v. Davidowitz, 312 U.S. 52, 67 (1940); see also Medtronic, Inc. v. Lohr, 116 S. Ct. 2240, 2255 (1996) (stating that a state law "stands as an obstacle" if it interferes with the method employed by one federal statute to achieve the federal goal) (quoting Hines, 312 U.S. at 67); Gade v. National Solid Waste, 505 U.S. 88, 103 (1992) (stating that federal law does not trump state law when the state law promotes a nonconflicting state goal).
254. 437 U.S. 117.
255. Id. at 133.
256. See supra notes 98-101 and accompanying text.
257. For example, if A induces B to breach its fixed-term contract with C, A would be liable for tortious interference. Stated differently, tortious interference law requires that A not disturb B's existing contract with C. It does not, however, compel a violation of the Sherman Act as it does not require A to agree with anyone to restrain trade. This analysis holds true even if tortious interference produces an inefficient result in a particular case. To illustrate, suppose that A could have made a better (more efficient) offer to B had she been free to induce B's breach of contract with Q but she refrains from doing so because of the tort's prohibition of tortious interference. In this latter case, tortious interference law requires that A not offer B an efficient alternative transaction. Still, it does not compel A to violate the antitrust laws as A is not required to agree with anyone to restrain trade.
258. The Chicago School will, of course, assert that the federal antitrust laws do, in fact, command efficiency. However, despite the dominance of Chicago theories in antitrust law, the Supreme Court has not fully adopted that view yet, especially outside of the vertical restraint area. Horizontal price fixing and market allocation, for example, remain illegal per se. Even with respect to vertical restraints, the Supreme Court continues to pay lip service to the per se rule against vertical price fixing. See supra Section I. Thus, the Court has never actually held that the antitrust laws compel efficient practices.
259. For example, section 1 of the Sherman Act merely prohibits "[e]very contract, combination . . . or conspiracy in restraint of trade or commerce among the several States," 15 U.S.C. § 1 (1988), and section 2 only condemns "[e]very person who shall monopolize, or attempt to monopolize, or combine or conspire . . . to monopolize any part of the trade or commerce among the several States." 15 U.S.C. § 2 (1988).
260. For an exhaustive discussion of the legislative history of the Sherman Act, see generally Earl Kitner, The Legislative Histories of the Federal Antitrust Laws and Related Statutes (1978).
261. See Bork, Antitrust Paradox, supra note 6, at 61 (stating that the legislative history of the Sherman Act demonstrated that the only policy of the Act is to promote allocative efficiency). Posner and Easterbrook take the approach that the antitrust laws should be interpreted with allocative efficiency as the primary goal, regardless of what Congress intended. This is an implicit acknowledgment that the intentions of Congress in passing the Sherman Act were at least unclear. See Posner, Antitrust Law, supra note 6, at 20 (acknowledging that the Sherman Act's legislative history frequently mentioned noneconomic objectives); Easterbrook, Workable Antitrust Policy, supra note 6, at 1702-03 (acknowledging that Congress may not have understood allocative efficiency at the time the Sherman Act was enacted but that the dominant theme was still the protection of consumers from overcharges).
262. For example, Senator Sherman seemed primarily concerned with the evils associated with bigness and the aggregation of wealth; Representative Mason wanted the legislation to protect small businesses; Representative Taylor stated that an agreement among competitors "robs the farmer on the one hand and the consumer on the other." Others condemned high consumer prices and high monopoly profits interchangeably. Fox, Modernization, supra note 19, at 1147-48 (citing 21 Cong. Rec. 2460 (1890)); see also Eleanor M. Fox & Lawrence A. Sullivan, Cases and Materials on Antitrust 29-37 (1989);
263. Herbert Hovenkamp, Distributive Justice and the Antitrust Laws, 51 Geo. Wash. L. Rev. 1, 16-19 (1982) [hereinafter Hovenkamp, Distributive Justice]; Lande, supra note 19, at 93-96 (arguing that Congress was concerned about unfair transfers of wealth from consumers to monopolists). With respect to the Clayton Act, Congress did not appear to have had even the slightest interest in efficiency when it passed the Cellar-Kaufer Amendments to section 7 of the Clayton Act (the modern antitrust merger statute). 15 U.S.C. § 18 (1988). Rather, it passed the merger amendments to protect small businesses against the "financial, purchasing, and advertising power of the mammouth corporations." 95 Cong. Rec. 11,486 (1949) (statement of Rep. Cellar); see also Hovenkamp, Distributive Justice, supra, at 24-26.
264. Professor Myers acknowledges that the Supreme Court is unlikely to find federal antitrust preemption of state tortious interference law, given its 1989 decision in California v. ARC America Corp., 490 U.S. 93 (1989). He argues, nonetheless, that a case can be made for preemption on the basis that "unfettered tortious interference liability can have a chilling effect on competition without furthering a clearly articulated countervailing policy," which is in direct conflict with federal antitrust policy. Myers, supra note 117, at 1139. But it is clear that the Supreme Court has rejected such an argument in Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 133 (1978). See supra notes 215-19 and accompanying text.
265. See generally Pitegoff, supra note 17 (discussing the franchise relationship laws of various states and arguing for their repeal).
266. See, e.g., City of Philadelphia v. New Jersey, 437 U.S. 617, 623 (1978) ("In the absence of federal legislation, [regulation of commerce is] open to control by the States so long as they act within the restraints imposed by the Commerce Clause itself."); Exxon Corp., 437 U.S. at 125-27 (finding that a Maryland statute prohibiting petroleum producers or refiners from operation of any retail service stations within Maryland did not violate the Commerce Clause as it did not unduly burden or discriminate against interstate commerce); Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 522 (1935) ("It is the established doctrine of this court that a state may not, in any form or under any guise, directly burden the prosecution of interstate business.") (citations omitted).
267. The Commerce Clause affirmatively grants Congress authority to regulate interstate commerce. U.S. Const. art. I, § 8, cl. 3.
268. E.g., Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 578-79 (1986); City of Philadelphia, 437 U.S. at 624; Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).
269. See, e.g., Pike, 397 U.S. at 142 ("If a legitimate local purpose is found, then the question becomes one of degree.").
270. The Third Circuit recently dismissed a dormant Commerce Clause challenge raised in a state franchise law context. A plaintiff franchisee, denied renewal of its multistate distribution contract, sued its supplier under a state franchise law that required a franchisor to show good cause for nonrenewal of a franchise. The supplier asserted that the dormant Commerce Clause invalidated the state franchise law. In dismissing the defendant's challenge, the Third Circuit reasoned that because the statute in question treated all franchisees equally, it did not discriminate against interstate commerce and was not per se invalid. The court also found it unnecessary to conduct a balancing test on grounds that any adverse impact of the law was on commerce in general, and not on interstate commerce in particular. Instructional Sys., Inc. v. Computer Curriculum Corp., 35 F.3d 813, 824-27 (3d Cir. 1994). This analysis would be equally applicable to a similar challenge against tortious interference.
271. For a discussion of the circumstances leading to the passage of the Sherman Act, see Fox & Sullivan, supra note 226, at 29-37 (discussing the historical evolution of antitrust concerns); Fox, Modernization, supra note 19, at 1147-48 (listing the concerns of the legislators in 1890).
272. See Fox, Modernization, supra note 19, at 1147-51 (discussing the appropriate role of efficiency in antitrust policy). See generally Kitner, supra note 224.
273. See, e.g., 21 Cong. Rec. 2461-62 (1890) (statement of Sen. Sherman); 21 Cong. Rec. 2466 (1890) (statement of Sen. Vest); 21 Cong. Rec. 2558 (1890) (statement of Sen. Pugh).
274. Congress condemned increased consumer prices and producer profits interchangeably, and did not attempt to distinguish between higher producer profits that resulted from efficient practices from those that did not. For example, if one producer successfully cuts costs but continues to charge its customers the same higher price charged by its less efficient competitors, the efficient producer is making higher profits at the expense of its consumers. However, under price theory, this practice merely transfers consumer surplus from the consumer to the producer and is not allocatively inefficient. The fact that Congress did not draw any distinction between higher producer profits made possible by efficient practices and those made possible by reduced output indicates that it did not have allocative efficiency in mind even when it discussed costs and profits.
275. See Areeda & Turner, supra note 21, ¶ 113; Fox, Modernization, supra note 19, at 1191 ("[Economics should be used as a tool to protect the functioning of markets and to advance consumers' interests, and efficiency so conceived should be a major guide to antitrust policy."); Robert Pitofsky, The Political Content of Antitrust, 127 U. Pa. L. Rev. 1051, 1051 (1979) ("The issue among most serious people has never been whether non-economic considerations should outweigh significant long-term economies of scale, but rather whether they had any role to play at all, and if so, how they should be defined and measured."); see also infra notes 239-41 and accompanying text. But see Lande, supra note 19, at 68 (recognizing that Congress passed the antitrust statutes to further economic objectives, but contending that those objectives addressed distributive rather than efficiency concerns).
276. Both the Chicago and the post-Chicago Schools subscribe to this view. Post-Chicagoans, however, disagree with the Chicago School's tendency to see anticompetitive practices as rare occurrences. Their economic model, unlike the Chicago model, takes into account strategic behavior and market imperfections which tend to make anticompetitive practices possible even in ostensibly competitive markets. See generally Hovenkamp, supra note 22 (listing criticisms of the Chicago School coming from "outside" and "inside" the model and arguing that the model's flaws will cause it to be "eclipsed"); Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising Rivals' Costs to Achieve Power Over Price, 96 Yale L.J. 209 (1986) (arguing that claims of anticompetitive exclusion should be recognized when the practice in question places competitors at a cost disadvantage such that the defendant firm can attain monopoly power by raising its prices); see also generally supra notes 21-24 and accompanying text.
277. See supra note 19 and accompanying text.
278. See, e.g., Fox, Modernization, supra note 19, at 1158-76 (rejecting the "consumer-welfare," output-limitation definition of efficiency for a broader meaning of the term).
279. Briefly stated, the model is predicated on the assumption that most markets, including those with few sellers, are competitive; that monopoly markets, even when they exist, tend to self-correct because their high profits will attract new entry; that there are few natural barriers to entry; that economies of scale are far more substantial than economists once thought; and that businesses are profit-maximizers. This Article does not purport to discuss in detail the content of the neoclassical price theory model as that has been done exhaustively elsewhere. E.g., Bork, Antitrust Paradox, supra note 6, at 90-160, 179-91, 310-29; Posner, Antitrust Law, supra note 6, at 8-22.
280. See supra notes 25-44 and accompanying text.
281. The theory is that where there is interbrand competition, any reduced output that might be caused by higher prices in one brand will likely be offset by increased production in other brands, thus leading to no misallocation of resources. Furthermore, as allocative efficiency does not concern itself with the distribution of wealth, any transfer of consumer surplus from the consumer to the producer that might occur is irrelevant. The Supreme Court's Sharp decision is probably best understood as the Court's attempt to conform the antitrust law of vertical restraints to the Chicago approach without actually overruling precedents.
282. E.g., Hovenkamp, supra note 22, at 247.
283. See id. at 246-47 (discussing policies other than efficiency, including those related to the distribution of wealth).
284. Id. at 239-44.
285. See generally Cann, supra note 33 (criticizing efficiency advocates' narrow focus and proposing a broader approach to vertical restraint policy); Comanor, The Two Economics of Vertical Restraints, supra note 39 (discussing what the author calls the two economics of vertical restraints; the first economic theory assumes that vertical restraints typically emanate from manufacturers who wish to eliminate the free rider problem and implies that such restraints increase output; the second economic theory, however, suggests that dealers play a dominant role and may "encourage" manufacturers to "impose" vertical restraints to allow dealers to derive higher profits. Under the second economic theory, the restraints imposed would decrease outputs); Hovenkamp, supra note 22 (listing criticisms of the Chicago School coming from "outside" and "inside" the model and arguing that the model's flaws will cause it to be "eclipsed").
286. The law does recognize a limited privilege for competition, which suggests that it is not completely unmindful of efficiency and competition principles. See supra notes 111-16 and accompanying text.
287. 118 Eng. Rep. 749 (1853).
288. For a discussion of the early history and evolution of the tort, see Keeton et al., supra note 93, § 129, at 979-81; Sayre, supra note 125, at 663-72; Note, Tortious Interference with Contractual Relations in the Nineteenth Century: The Transformation of Property, Contract, and Tort, 93 Harv. L. Rev. 1510, 1522-28 (1980).
289. Di Cristofaro v. Laurel Grove Mem'l Park, 128 A.2d 281, 287 (N.J. 1957).
290. Myers v. Arcadio, Inc., 180 A.2d 329, 332-33 (N.J. 1962); Sustick v. Slatina, 137 A.2d 54, 60 (N.J. 1957).
291. Glenn v. Point Park College, 272 A.2d 895, 899 (Pa. 1971) (citing Harper & James, The Law of Torts § 6.11, at 510 (1956)).
292. Id.
293. Harris v. Perl, 197 A.2d 359, 363 (N.J. 1964).
294. See, e.g., Restatement (Second) of Torts § 767 cmts. c, j (1977) (listing "business ethics and customs," "concepts of fair play," and "rules of the game" as factors to be considered in determining whether a defendant's interference is improper).
295. E.g., Fineman v. Armstrong World Indus., 980 F.2d 171, 187 (3d Cir. 1992); Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1381 (3d Cir. 1992); Advent Sys., Ltd. v. Unisys Corp., 925 F.2d 670, 673 (3d Cir. 1990); Silver v. Mendel, 894 F.2d 598, 603 n.7 (3d Cir. 1990); Halebian v. Roppe Rubber Corp., 718 F. Supp. 348, 361 (D.N.J. 1989); Insurance Field Serv. v. White & White Inspection, 384 So. 2d 303, 307 (Fla. Dist. Ct. App. 1980); Printing Mart - Morristown v. Sharp Elec. Corp., 563 A.2d 31, 40 (N.J. 1989); Sustick, 137 A.2d at 60; see also Restatement (Second) of Torts § 767 cmt. j (1977) (stating that in determining the propriety of defendant's conduct, "consideration is given to concepts of fair play and whether the defendant's interference is not 'sanctioned by the rules of the game'").
296. E.g., Big Apple BMW, 974 F.2d at 1381; Advent Sys., 925 F.2d at 673; Mendel, 894 F.2d at 603 n.7.
297. E.g., Deauville Corp. v. Federated Dep't Stores, Inc., 756 F.2d 1183, 1197 (5th Cir. 1985); Machine Maintenance & Equip. Co. v. Cooper Indus., 661 F. Supp. 1112, 1116 (E.D. Mo. 1987); see also Restatement (Second) of Torts § 767 cmt. c (1977) (stating that "[v]iolation of recognized ethical codes for a particular area of business activity or of established customs or practices" is a consideration in determining whether defendant's conduct is improper).
298. Fishman v. Estate of Wirtz, 807 F.2d 520, 546 (7th Cir. 1986). Some critics, however, ridicule the notion that competition must be fair to be privileged. Id. at 577 (Easterbrook, J., concurring in part and dissenting in part) (arguing that "[r]eal competition is dastardly. 'Unfair' competition is still competition . . . . When economic pressure must give way to fair conduct, as the court today holds it must, rivals will trim their sails.").
299. See, e.g., Fineman, 980 F.2d at 187 (stating that tortious interference law is "wholly personal to the plaintiff-competitor" while antitrust law "requires the plaintiff to demonstrate harm to competition at large and antitrust injury"); Deauville, 756 F.2d at 1196 n.9 (stating that "the federal [antitrust] law protects competition; the state [tortious interference] law . . . protects the competitor").
300. E.g., Colorado Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 885 F.2d 683, 690-91 (10th Cir. 1989); Deauville, 756 F.2d at 1196 n.9; see also R.W. Int'l Corp. v. Welch Foods Inc., 13 F.3d 478 (1st Cir. 1994) (affirming summary judgment for defendant on an antitrust claim on grounds that there was no injury to competition, but reversing summary judgment on a tortious interference claim, implying that tortious interference liability does not require a finding of injury to competition).
301. Posner, Wealth Maximization, supra note 166, at 99; see also Landes & Posner, supra note 166 (testing the efficiency theory through the study of the rules and economics of tort law).
302. Posner, Wealth Maximization, supra note 166, at 99.
303. See supra notes 155-57 and accompanying text.
304. See, e.g., Dworkin, supra note 167.
305. The theory of corrective justice, first developed by Aristotle, sees the duty to rectify a wrong as the proper basis of legal duty. The distributive justice theory of law focuses on the distribution of resources based on some criterion such as merit or need. For a discussion of the differences between corrective and distributive justice, see Wright, supra note 167, at 166-71.
306. See, e.g., Edward H. Levi, An Introduction to Legal Reasoning 4 (1949);
307. Roscoe Pound, 3 Jurisprudence 21 (1959) (suggesting that law does not itself create societal interests, but simply recognizes such existing interests).
308. See supra notes 114-116, 251-261 and accompanying text.
309. Even Posner, the most vocal proponent of the wealth maximization theory of law, acknowledges that some things - slavery, torture and discrimination - so violate "the unshakable moral intuitions of Americans" that they should be prohibited even if the prohibition may be at odds with efficiency in some circumstances. Richard A. Posner, The Problems of Jurisprudence 374-82 (1990); Posner, Wealth Maximization, supra note 166, at 102. Tortious interference, perhaps, can be viewed as doing no more than setting an offensiveness threshold that happens to be different than Posner's.