The firm as cartel manager

Vanderbilt Law Review

Volumn 64, Issue 3, 2011, Pages 813-873

  Hovenkamp, Herbert ^a   Leslie, Christopher R ^b  

^a UNIVERSITY OF IOWA COLLEGE OF LAW   (United States)

^b UNIVERSITY OF CALIFORNIA   (United States)

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EID: 79959942529     PISSN: 00422533     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (429)

1. 15 U.S.C. § 1 (2006).
2. Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 15-24 (1979) (applying the rule of reason).
3. Freeman v. San Diego Ass'n of Realtors, 322 F.3d 1133, 1152-54 (9th Cir. 2003) (holding it per se unlawful to use the multi-list process to fix commission rates).
4. Golden Bridge Tech., Inc. v. Motorola, Inc., 547 F.3d 266, 270-73 (5th Cir. 2008), cert. denied, 129 S. Ct. 2055 (2009) (holding that standard setting by cellular telephone companies did not equate to a restraint of trade).
5. In contrast to the per se rule, pursuant to which restraints that fall in a per se category are conclusively presumed to be unreasonable, Arizona v. Maricopa County Medical Society, 457 U.S. 332, 344 (1982), in rule-of-reason cases "the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition."
6. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977).
7. Under the rule of reason, courts take "into account a variety of factors, including specific information about the relevant business, its condition before and after the restraint was imposed, and the restraint's history, nature, and effect." State Oil Co. v. Khan, 522 U.S. 3, 10 (1997).
8. See discussion infra notes 57, 220 and accompanying text.
9. 467 U.S. 752, 771 (1984).
10. 606 F.2d 704, 725-27 (7th Cir. 1979);
11. cf. Perma Life Mufflers, Inc. v. Int'l Parts Corp., 392 U.S. 134 (1968) (holding that parent and wholly owned subsidiaries could conspire to impose per se unlawful ties on dealers);
12. Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211 (1951) (holding that two wholly owned subsidiaries of a common parent could unlawfully conspire to impose resale price maintenance on their dealers).
13. E.g., Nynex Corp. v. Discon, Inc., 525 U.S. 128, 132 (1998) (holding that a purely vertical agreement should be evaluated using the rule of reason);
14. NCAA v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 86 (1984) (using the rule of reason to analyze a horizontal price fixing and output limitation where the industry at issue requires horizontal restraints on competition in order to make their product available).
15. Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2217 (2010).
16. The statute rather unhelpfully defines a "person" as "includ[ing] corporations and associations existing under or authorized" by law. 15 U.S.C. § 7 (2006).
17. Id. § 2 (condemning "every 'person' who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize . . . .").
18. Id. § 1 ("Every contract, combination . . . or conspiracy, in restraint of trade or commerce . . . is . . . illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty . . . .").
19. Am. Needle, Inc. v. New Orleans La. Saints, 496 F. Supp. 2d 941, 944 (N.D. Ill. 2007).
20. Am. Needle, Inc. v. NFL, 538 F.3d 736, 740-41 (7th Cir. 2008),
21. rev'd, 130 S. Ct. 2201 (2010).
22. Brief for NFL Respondents at 4, Am. Needle, Inc. v. NFL, 130 S. Ct. 2201 (2010) (No. 08-661).
23. Am. Needle, 130 S. Ct. at 2215.
24. Id. at 2214-15.
25. Id. at 2215
26. (quoting L.A. Mem'l Coliseum Comm'n v. NFL, 726 F.2d 1381, 1389 (9th Cir. 1984)).
27. See 2B PHILUP E. AREEDA & HERBERT HOVENKAMP, ANTTTRUST LAW 1 402, at 4-7 (3d ed. 2006) (discussing the nature and consequences of a perfectly competitive economy);
28. HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY: THE LAW OF COMPETITION AND ITS PRACTICE §§ 4.1-.3, at 146-66 (4th ed. 2011) (discussing cartel price fixing, oligopoly, and collusion).
29. Ronald H. Coase, The Nature of the Firm, 4 ECONOMICA 386, 392 (1937);
30. see also Herbert Hovenkamp, Coasean Markets, 31 EUR. J.L. & ECON. 63 (2010), available at http://www.springerlink.com.proxy.library.vanderbilt.edu/ content/65031035h363g164/fulltext.pdf (examining the relationship between Coasean firms and Coasean markets).
31. See United States v. Addyston Pipe & Steel Co., 85 Fed. 271 (6th Cir. 1898),
32. modified and aff'd, 175 U.S. 211 (1899) (explaining the difference between naked and ancillary restraints and applying the per se rule to the naked restraint at issue);
33. 11 HERBERT HOVENKAMP, ANTITRUST LAW, ¶ 1906, at 235-42 (2d ed. 2002) (defining and distinguishing naked and ancillary restraints).
34. See 4A AREEDA & HOVENKAMP, supra note 20, ¶ 973c, at 63-66 (discussing transactional alternatives to mergers and joint ventures);
35. 5 id. ¶ 1202, at 264-83 (explaining partial asset acquisitions);
36. Gregory H. Werden, Initial Thoughts on the American Needle Decision, ANTITRUST SOURCE, Aug. 2010, at 1-7, http://www.americanbar.org/content/dam/aba/ publishing/antitrust-source/Aug10-Werden8-2f.authcheckdam.pdf (discussing the implications of the American Needle decision);
37. cf. Texaco Inc. v. Dagher, 547 U.S. 1, 1 (2006) (holding it is not per se illegal for a lawful joint venture to set the prices at which it sells its products).
38. E.g., Appalachian Coals, Inc. v. United States, 288 U.S. 344, 375-78 (1933) (upholding exclusive joint marketing scheme for Depression-era coal).
39. See 13 HOVENKAMP, supra note 22, 2100-04, at 3-46 (providing a broad overview of joint ventures).
40. Spectrofuge Corp. v. Beckman Instruments, Inc., 575 F.2d 256, 286 (5th Cir. 1978).
41. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 459 (1993) (emphasis added).
42. See 3 AREEDA & HOVENKAMP, supra note 20, ¶ 651, at 96-130 (defining monopoly conduct).
43. See 7 id. ¶ 1502, at 387-90;
44. 11 HOVENKAMP, supra note 22, ¶ 1912d, at 326-39 (discussing restraint of trade in horizontal trade cases).
45. See 3A AREEDA & HOVENKAMP, supra note 20, 1 720, at 3-11 (examining why monopolies are allowed to charge a profit-maximizing price).
46. See, e.g.. United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 116-17 (1975) (finding conspiracy between a bank and its partially owned branches);
47. United States v. Yellow Cab Co., 332 U.S. 218, 224-25 (1947) (finding a conspiracy between a taxicab manufacturing company and its wholly- or partially-owned operating company subsidiaries);
48. 7 AREEDA & HOVENKAMP, supra note 20, at 205-13 (providing a general overview of Supreme Court cases on antitrustrelated conspiracy cases).
49. 467 U.S. 752, 777 (1984).
50. See, e.g., Eichorn v. AT&T Corp., 248 F.3d 131, 139 (3d Cir. 2001) (stating that a "single entity in a parent-subsidiary relationship" is incapable of violating Section One of the Sherman Act).
51. Bell AtI. Bus. Sys. Servs. v. Hitachi Data Sys. Corp., 849 F. Supp. 702, 706 (N.D. Cal. 1994).
52. E.g., Chi. Profi Sports Ltd. P'ship v. NBA, 95 F.3d 593, 600 (7th Cir. 1996) (finding that professional basketball teams, although separately owned, were more similar to a single entity than multiple entities for purposes of an antitrust challenge to broadcast contracts);
53. cf. Eleven Line, Inc. v. N. Tex. State Soccer Ass'n, 213 F.3d 198, 205 (5th Cir. 2000) (finding a single entity where amateur soccer teams were not separately owned).
54. See, e.g., Fraser v. Major League Soccer, 284 F.3d 47, 57-59 (1st Cir. 2002) (finding that the teams were distinct entities even though they were commonly owned).
55. For a full discussion of all lower court post-Copperweld decisions, see 7 AREEDA & HOVENKAMP, supra note 20, ¶¶ 1467-69, at 237-58.
56. 95F.3d at 593.
57. Am. Needle Inc. v. NFL, 538 F.3d 736, 741-44 (7th Cir. 2008),
58. rev'd, 130 S. Ct. 2201 (2010).
59. The NFL historically prohibited both public ownership of the teams as well as crossownership. But see N. Am. Soccer League v. NFL, 670 F.2d 1249, 1261-62 (2d Cir. 1982) (finding that the NFL cross-ownership ban as applied to non-football teams violated the Sherman Act).
60. While the NFL member teams each hired and competed for players, they engaged in multi-employer collective bargaining as a group. See Brown v. Pro Football, 518 U.S. 231, 234-35 (1996) (describing one instance of the NFL's collective bargaining process).
61. See, e.g., id. (assuming that NFL teams were a combination of separate actors for purposes of coUective bargaining disputes and finding labor immunity);
62. NCAA v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85 (1984) (treating NCAA as a combination of its individual teams and applying the rule of reason to output limitations on national television advertising).
63. E.g. Fraser v. Major League Soccer, 284 F.3d 47, 57-59 (1st Cir. 2002) (finding that the teams were separate entities notwithstanding common ownership);
64. see also 7 AREEDA & HOVENKAMP, supra note 20, 1 1478d3, at 368-77 (discussing the impact of American Needle on lower courts).
65. Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2212 (2010) ("The NFL teams do not possess either the unitary decisionmaking quality or the single aggregation of economic power characteristic of independent action. Each of the teams is a substantial, independently owned, and independently managed business. [Further,] 'their general corporate actions are guided or determined' by 'separate corporate consciousnesses,' and '[t]heir objectives are' not 'common.' ")
66. (quoting Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771 (1984)).
67. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 753 (1984) (holding a parent and wholly owned but separately incorporated subsidiary to be a single actor for antitrust purposes).
68. Justice Stevens, the author of American Needle, dissented in Copperweld. Id. at 778-96.
69. Directly relevant to this case, the teams compete in the market for intellectual property. To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks. When each NFL team licenses its intellectual property, it is not pursuing the "common interests of the whole" league but is instead pursuing interests of each "corporation itself," teams are acting as "separate economic actors pursuing separate economic interests," and each team therefore is a potential "independent cente[r] of decisionmaking." Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that "depriv[e] the marketplace of independent centers of decisionmaking," and therefore of actual or potential competition. Am. Needle, 130 S. Ct. at 2213
70. (quoting Copperweld, 467 U.S. at 769, 770) (alterations in original).
71. Id. ("Although NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned.")
72. (citing Herbert Hovenkamp, Exclusive Joint Ventures and Antitrust Policy, 1995 COLUM. BUS. L. REV. 1, 52-61,
73. and Zenichi Shishido, Conflicts of Interest and Fiduciary Duties in the Operation of a Joint Venture, 39 HASTINGS L.J. 63, 69-81 (1987)).
74. See id. at 2214-15 ("[F]or the same reasons the 32 teams' conduct is covered by § 1, NFLP's actions also are subject to § 1, at least with regards to its marketing of property owned by the separate teams . . . . For that reason, decisions by NFLP regarding the teams' separately owned intellectual property constitute concerted action."). In a footnote the Supreme Court also found it unnecessary to consider the position of the United States: For the purposes of resolving this case, there is no need to pass upon the Government's position that entities are incapable of conspiring under § 1 if they "have effectively merged the relevant aspect of their operations, thereby eliminating actual and potential competition . . . in that operational sphere" and "the challenged restraint [does] not significantly affect actual or potential competition . . . outside their merged operations." Brief for United States as Amicus Curiae 17.
75. The Government urges that the choices "to offer only a blanket license" and "to have only a single headwear licensee" might not constitute concerted action under its test. Id., at 32.
76. However, because the teams still own their own trademarks and are free to market those trademarks as they see fit, even those two choices were agreements amongst potential competitors and would constitute concerted action under the Government's own standard. At any point, the teams could decide to license their own trademarks. It is significant, moreover, that the teams here control NFLP. The two choices that the Government might treat as independent action, although nominally made by NFLP, are for all functional purposes choices made by the 32 entities with potentially competing interests. Id. at 2216 n.9.
77. See 7 AREEDA & HOVENKAMP, supra note 20, ¶ 1478, at 340-77 (summarizing case law concerning whether joint venture decisions are unilateral or collaborative).
78. E.g., United Mine Workers of Am. v. Coronado Coal Co., 259 U.S. 344, 385-92 (1922) (finding an unincorporated labor union to be a single entity);
79. United States v. Greater N.Y. Live Poultry Chamber of Commerce, 30 F.2d 939, 939 (S.D.N.Y. 1928) (holding that an unincorporated association was covered by the Sherman Act).
80. E.g., Toscano v. PGA, 258 F.3d 978, 983-85 (9th Cir. 2001) (treating a professional golfers association as a single entity);
81. Eleven Line, Inc. v. N. Tex. State Soccer Ass'n, 213 F.3d 198, 205 (5th Cir. 2000) (treating a volunteer association of coaches and players as a single entity);
82. Am. Council of Podiatric Physicians v. Am. Bd. of Podiatric Surgery, 185 F.3d 606, 620-22 (6th Cir. 1999) (treating a professional association of podiatrists as a single entity rather than a cartel of podiatrists);
83. AD/SAT v. Associated Press, 181 F.3d 216, 233 (2d Cir. 1999) (finding an association of newspapers better treated as a single entity than as a conspiracy of its member newspapers);
84. Nat'l Camp Ass'n v. Am. Camping Ass'n, No. 99 Civ. 11853 DLC, 2000 WL 1844764, at * 3-4 (S.D.N.Y. Dec. 15, 2000) (treating an incorporated association of campgrounds as a single entity).
85. Am. Needle, 130 S. Ct. at 2215
86. (citing United States v. Sealy, Inc., 388 U.S. 350 (1967);
87. United States v. Topeo Assoes., Inc., 405 U.S. 596 (1972)).
88. Margaret C. Levenstein & Valerie Y. Suslow, What Determines Cartel Success?, 44 J. ECON. LITERATURE 43, 86 (2006) ("Successful cartels develop mechanisms for sharing information, making decisions, and manipulating incentives through self-imposed carrots and sticks.").
89. See HOVENKAMP, supra note 20, § 4.1, at 148 (examining how cartels fix prices);
90. see also James M. Griffin, Previous Cartel Experience: Any Lessons For OPEC?, in ECONOMICS IN THEORY AND PRACTICE: AN ECLECTIC APPROACH: ESSAYS IN HONOR OF F.G. ADAMS 179, 179-206 (Lawrence R. Klein & Jaime Marquez eds., 1989) (examining the characteristics of fifty-four different cartels to determine what makes a cartel successful in the long-term).
91. HOVENKAMP, supra note 20, § 4.1, at 148.
92. These price negotiations are dangerous for cartel members because they increase the risk of detection and consequent criminal penalties. See infra notes 152-53 and accompanying text.
93. See HOVENKAMP, supra note 20, § 4.1, at 146-59 (describing the basic economics of price fixing);
94. David E. Mills & Kenneth G. Elzinga, Cartel Problems: Comment, 68 AM. ECON. REV. 938, 940 (1978) (comparing single joint profit-maximizing points with multiple joint profit-maximizing points);
95. D.K. Osborne, Cartel Problems, 66 AM. ECON. REV. 835, 841 (1976) (discussing the effect of single, nonmember firms on cartel pricing);
96. see also George A. Hay & Daniel Kelley, An Empirical Survey of Price Fixing Conspiracies, 17 J.L. & ECON. 13, 26-27 (1974) (suggesting that conspiracies are most likely to arise when "numbers are small, concentration is high, and the product is homogenous").
97. See, e.g., RICHARD A. BREALEY ET AL., PRINCIPLES OF CORPORATE FINANCE 20-22 (9th ed. 2007) (discussing present value and the opportunity cost of capital);
98. Herbert Hovenkamp, Neoclassicism and the Separation of Ownership and Control, 4 VA. L. & BUS. REV. 373, 386 (2009) (discussing the Coasean vision of the firm as a profit-maximizer);
99. Michael C. Jensen, Value Maximization, Stakeholder Theory, and the Corporate Objective Function 9 (Harvard Bus. Sch., Working Paper, Oct. 2001), available at http://papers.ssrn.com/sol3/papers.cfm?abstract-id=220671 (proposing a new system for value maximization called enlightened value maximization).
100. Joseph E. Harrington, How Do Cartels Operate?, 2 FOUNDATIONS & TRENDS MACROECONOMICS 1, 12 (2006).
101. Id. at 15 ("Though there did not appear to be much disagreement among firms over price, there is a well-documented episode of disagreement with regards to discounts. In the isostatic graphite cartel, members disagreed about the 20% discount to machine shops and distributors; the source of the disagreement appeared to be the different composition of cartel members' demands.").
102. Id.
103. Robert D. Paul & J. Mark Gidley, Price Fixing Begins to Hit Bottom Line, LEGAL TIMES, May 4, 1998, at S44.
104. Harrington, supra note 59, at 12.
105. Id. at 7, 15.
106. Id. at 7.
107. Wayne E. Baker & Robert R. Faulkner, The Social Organization of Conspiracy: Illegal Networks in the Heavy Electrical Equipment Industry, 58 AM. SOC. REV. 837, 838 (1993).
108. Harry First, The Vitamins Case: Cartel Prosecutions and the Coming of International Competition Law, 68 ANTITRUST L.J. 711, 715 (2001).
109. Harrington, supra note 59, at 20-21.
110. Id. at 24.
111. CHRISTOPHER MASON, THE ART OF THE STEAL: INSIDE THE SOTHEBY'S-CHRISTIE'S AUCTION HOUSE SCANDAL 166 (2004).
112. Id.
113. See infra notes 96-100 (discussing cartel cheating and common responses).
114. Christopher R. Leslie, Trust, Distrust, and Antitrust, 82 TEX. L. REV. 515, 624 (2004).
115. Id. at 579
116. (citing David Genesove & Wallace P. Mullin, Rules, Communication, and Collusion: Narrative Evidence from the Sugar Institute Case, 91 AM. ECON. REV. 379, 383 (2001)).
117. FRITZ MACHLUP, THE BASING-POINT SYSTEM: AN ECONOMIC ANALYSIS OF A CONTROVERSIAL PRICING PRACTICE 201 (1949).
118. Id. at 80
119. (citing Brief in Support of the Complaint at 414-22, Fed. Trade Comm'n v. Cement Inst., 333 U.S. 683 (No. 3,167)) ("It was against the rules of the Compendium, for example, to grant allowances for cloth sacks when they were not returned in good order.").
120. MASON, supra note 70, at 169.
121. Harrington, supra note 59, at 12.
122. See id. at 6 ("Collusion also extended to prices for ancillary services and non-price dimensions in order to avoid cheating through these avenues.").
123. Id. at 9-10 (quoting EMCG-EC2, 91-3).
124. JOHN G. FULLER, THE GENTLEMAN CONSPIRATORS: THE STORY OF THE PRICE-FTXERS IN THE ELECTRICAL INDUSTRY 29 (1962).
125. The record in the Cement Institute case two decades prior to the heavy equipment cartel had produced the following set of bids on a job sought by the United States Engineer Office, Tucumcari, New Mexico, April 23, 1936, all identical to the one ten-thousandth cent per barrel: Table presented Fed. Trade Comm'n v. Cement Inst., 333 U.S. 683, 713 n.15 (1948).
126. See generally Vernon A. Mund, Identical Bid Prices, 68 J. POL. ECON. 150,150 (1960) (discussing identical bid process).
127. See, e.g., SIMON N. WHITNEY, TRADE ASSOCIATIONS AND INDUSTRIAL CONTROL 70 (1934) (discussing the cotton cartel).
128. Id. at 71 ("This plan, proposed in January, 1930, and accepted by practically 75% of the industry within four months, continued in force until July, 1933.").
129. In one well known antitrust decision, the National Window Glass Manufacturers association reached an agreement under which one group of firms operated for six months of the year while the other group operated for the other six months. Writing for the Court, Justice Holmes approved the agreement as a reasonable way of allocating a shortage of laborers. Nat'l Ass'n of Window Glass Mfrs. v. United States, 263 U.S. 403, 413 (1923).
130. See, e.g., United States v. Andreas, 216 F.3d 645, 652 (7th Cir. 2000) (discussing volume allocation in the lysine cartel).
131. See ROGER D. BLAIR AND JEFFREY L. HARRISON, MONOPSONY IN LAW AND ECONOMICS (forthcoming 2011) (noting that in a bilateral monopoly, the output is typically determinable, but the division of the surplus is indeterminate and must be negotiated);
132. Hovenkamp, supra note 21, at 15.
133. Harrington, supra note 59, at 28-30 (discussing examples in copper plumbing tubes, organic peroxides, vitamins A and E, folic acid, and citric acid cartels).
134. Id. at 31 (discussing lysine cartel).
135. Id. at 6, 24.
136. DAVID BOIES, COURTING JUSTICE 233 (2004).
137. Harrington, supra note 59, at 37 (discussing the chlorine and chloride cartel).
138. See BOIES, supra note 89, at 233 ("By assigning particular customers to particular suppliers, the conspirators reduce the incentive suppliers have to depart from the agreed price in search of more sales.").
139. Harrington, supra note 59, at 40 (discussing zinc phosphate cartel).
140. Id.
141. Andrew R. Dick, When Are Cartels Stable Contracts?, 39 J.L. & ECON. 241, 247 (1996) ("As predicted by theory, cartels tended to export relatively homogeneous, less highly processed commodities.").
142. On product standardization agreements facilitating collusion, see 13 HERBERT HOVENKAMP, ANTITRUST LAW ¶ 2136, at 231-32 (2d ed. 2005).
143. Dick, supra note 94, at 250 ("For example, cartels covering slightly more differentiated products such as textiles and office equipment dissolved after members discovered that 'foreign market development could be better handled on an individual basis.'").
144. E.g., United States v. Am. Radiator & Standard Sanitary Corp., 433 F.2d 174, 185 (3d. Cir. 1970),
145. cert, denied, 401 U.S. 948 (1971) (defendants eliminated lower quality bathroom fixtures that had been subject to heavy discounting);
146. C-O-Two Fire Equip. Co. v. United States, 197 F.2d 489, 493 (9th Cir. 1952),
147. cert, denied, 344 U.S. 892 (1952) (defendants standardized fire extinguishers in order to facilitate bid rigging);
148. Milk & Ice Cream Can Inst. v. Fed. Trade Comm'n, 152 F.2d 478, 482 (7th Cir. 1946) (defendants standardized milk containers in order to facilitate bid rigging, and court stated, "it was easier to reach the goal of uniform prices on a standard product than on one which was not");
149. see also Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 644-45 (1980) (per curiam) (standardization of credit terms);
150. Plymouth Dealers' Ass'n of N. Cal. v. United States, 279 F.2d 128, 134 (9th Cir. 1960) (standardization of trade-in allowances on used cars);
151. see also Harrington, supra note 59, at 5-8.
152. MACHLUP, supra note 75, at 80
153. (citing Brief in Support of the Complaint at 414-22, Fed. Trade Comm'n v. Cement Inst., 333 U.S. 683 (No. 3, 167)).
154. Harrington, supra note 59, at 9 (quoting Graphite electrodes EC, 56).
155. Id. at 9.
156. See, e.g., Margaret Levenstein & Valerie Y. Suslow, Contemporary International Cartels and Developing Countries: Economics Effects and Implications for Competition Policy, 71 ANTITRUST L.J. 801, 835-36 (2004) (discussing disagreements within the graphic electrodes cartel).
157. Id.
158. Larry R. Stewart, Canada's Role in the International Uranium Cartel, 35 INT'L ORG. 657, 663 (1981) (discussing disagreements within the uranium cartel).
159. See Harrington, supra note 59, at 31 (discussing dispute within lysine cartel).
160. See id. at 33 ("Though stability of market shares was common, it was not universal. In negotiating in 1992 in the market for vitamin B2, Roche agreed to allow BASF's market share to rise from 35% in 1990 to 38% by 1994.").
161. See Dick, supra note 94, at 249-50 (discussing potash cartel).
162. Leslie, supra note 73, at 526.
163. HOVENKAMP, supra note 20, at 149-50;
164. FREDERIC M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 244-45 (3d ed. 1990).
165. On cartel cheating and the relationship between the size of the markup and the likelihood of cheating, see GEORGE M. STOCKING & MYRON M. WATKINS, CARTELS OR COMPETITION? 94 (1948).
166. See Herbert Hovenkamp, Regulatory Conflict in the Gilded Age: Federalism and the Railroad Problem, 97 YALE L.J. 1017, 1018 (1988) (noting that, for example, in the railroad industry, both collusion and cheating were widespread during the late nineteenth and early twentieth centuries).
167. See Robert H. Porter, On the Incidence and Duration of Price Wars, 33 J. INDUS. ECON. 415, 416-18 (1985) (writing on price wars as cartel destabilizers).
168. Dick, supra note 94, at 249 ("Webb-Pomerene cartels dissolved under two general sets of circumstances. The first were enforcement failures. Many price-fixing cartels were undermined by their failure to detect and punish members' attempts to undercut the agreed-on price or to exceed quota allocations.").
169. Leslie, supra note 73, at 611-15.
170. See id. at 618-20 (discussing examples);
171. see also Harrington, supra note 59, at 63 ("In the carbonless paper cartel, cartel member AWA had a market share in Europe of 30-35% and was the largest producer with capacity exceeding twice that of any other firm. It used its dominant position in the market to threaten aggressive pricing if firms did not comply with the collusive agreement.") (internal citations omitted).
172. Harrington, supra note 59, at 57-58.
173. Id. at 58 (discussing the citric acid and vitamins A and E cartels).
174. Levenstein & Suslow, supra note 100, at 833 (citation omitted).
175. Dick, supra note 94, at 250.
176. Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2213 (2010).
177. Following an agreement between the chairmen of Sotheby's and Christie's, the CEOs of the two rival firms met and fixed commissions, among other cooperation. MASON, supra note 70, at 122-23, 133-34.
178. See Hay & Kelley, supra note 56, at 21 (indicating that there are many cases in which larger groups conspire).
179. Id. at 21 ("In seven out of eight [cartel] cases with more than fifteen firms in the conspiracy, a formal industry trade association was involved.").
180. HERBERT HOVENKAMP, ENTERPRISE AND AMERICAN LAW, 1836-1937, at 321 (Harvard Univ. Press 1991)
181. (citing ARTHUR J. EDDY, THE NEW COMPETITION 121, 82 (1914));
182. see WHITNEY, supra note 82, at 40 ("[E]arly trade associations were little more than permanent pools.").
183. See WHITNEY, supra note 82, at 78 (discussing the Institute of Carpet Manufacturers of America).
184. Robert F. Lanzillotti, The Great School Milk Conspiracies of the 1980s, 11 REV. INDUS. ORG. 413, 429 n.44 (1996) ("In the Western Kentucky case, according to testimony by industry witnesses, the bid-rigging arrangements were hatched at meetings of the Western Kentucky Dairy Products Association, which were usually held in conjunction with or following meetings of the Kentucky Milk Marketing and Anti-Monopoly Commission.").
185. Harrington, supra note 59, at 75. ("In the carbonless paper cartel, general planning meetings were conducted under the cover of the meetings of the Association of European Manufacturers of Carbonless Paper.") (internal citation omitted).
186. See JOHN M. CONNOR, GLOBAL PRICE FIXING 134-35 (2001) (discussing European Citric Acid Manufacturers' Association and the citric acid cartel);
187. KURT EICHENWALD, THE INFORMANT 3 (2000) (discussing how the cartel had "formed bogus industry associations as a cover for [its] illegal meetings").
188. CONNOR, supra note 125, at 220 (discussing the "formation of a formal lysine association to facilitate the conspiracy").
189. Id. at 316 (discussing how a meeting between the manufacturers turned into an agreement "to raise the North American price of choline chloride");
190. Harrington, supra note 59, at 75-76 ("With choline chloride, meetings were generally (though not exclusively) scheduled either before or after the meetings of the European Chemical Industry Counccil.") (internal citation omitted).
191. Harrington, supra note 59, at 76 ("Coordination with trade association meetings also took place with cartels in copper plumbing tubes.") (internal citation omitted).
192. Robert R. Faulkner, Eric R. Cheney, Gene A. Fisher & Wayne E. Baker, Crime by Committee: Conspirators and Company Men in the Illegal Electrical Industry Cartel, 1954-1959, 41 CRIMINOLOGY 511, 530 (2003).
193. JOHN HERLING, THE GREAT PRICE CONSPIRACY: THE STORY OF THE ANTITRUST VIOLATIONS IN THE ELECTRICAL INDUSTRY 315 (1962) (noting that cartel "meetings were incidental to technical gatherings").
194. CONNOR, supra note 125, at 202 ("ADM proposed forming a world lysine association that would meet on a regular basis. The new association would collect and distribute mostly production and market-share information, much like the Corn Refiners Association did for the U.S. corn wet milling products (Tr. 1734-36). Wilson also suggested that, like the European Citric Acid Manufacturers' Association, the new association would provide a convenient cover for illegal price-fixing discussions (Tr. 2186). In a year or two, a lysine association in fact emerged that met quarterly and performed the two functions that Wilson proposed.").
195. EICHENWALD, supra note 125, at 205 ("That's where the scheme came in. No one would question why each company had collected monthly sales data if it was turned over to the association. Then secretly, the companies could swap the numbers among themselves to enforce the volume agreement.").
196. Harrington, supra note 59, at 76 ("Scheduling to convene the cartel at a trade association meeting is obviously convenient-as many of the executives are to be there anywaybut it also serves the purposes of avoiding detection of the cartel. The trade association meeting provides a cover for why executives of competing firms are all at the same venue.").
197. Arthur G. Fraas & Douglas F. Greer, Market Structure and Price Collusion: An Empirical Analysis, 26 J. INDUS. ECON. 21, 39 (1977).
198. See LAWRENCE A. SULLIVAN & WARREN S. GRIMES, THE LAW OF ANTITRUST 233-34 (2000) ("Routine activities include publications containing useful general information about the industry and about technological and governmental developments affecting it, lobbying activities, standard setting, safety and other 'seal of approval' programs, providing media for arbitration, intra-industry promotion and advertising, and the publication of industry statistics.").
199. See HERBERT HOVENKAMP, THE ANTTTRUST ENTERPRISE: PRINCIPLE AND EXECUTION 137 (2005) (stating that trade associations "also engage in rule making and standard setting for their industries" and that "the great majority of trade associations' activities are procompetitive").
200. See CONNOR, supra note 125, at 135 ("There were about 25 face-to-face meetings of the [citric acid cartel] and about a dozen bilateral meetings (Tr. 2614-2801).");
201. HERLING, supra note 130, at 315 (discussing one of the heavy equipment cartels).
202. See HERLING, supra note 130, at 104 (noting one heavy equipment cartel whose working group "met on an average of once every six to eight weeks");
203. Harrington, supra note 59, at 55 ("The lysine, zinc phosphate, and citric acid cartels monitored on a regular monthly basis.");
204. id. ("In the case of the vitamin B5 cartel, firms initially reported sales data on a quarterly basis but later chose to do it on a monthly basis.").
205. BENJAMIN S. KIRSH, TRADE ASSOCIATIONS IN LAW AND BUSINESS 113-14 (1938).
206. See Harrington, supra note 59, at 74-75 (discussing how meetings to implement an allocation of sales quotas have "a frequency dictated by the flow of new projects and customers").
207. Baker & Faulkner, supra note 66, at 840-41.
208. Id. at 841.
209. Harrington, supra note 59, at 75 ("Most cartels exchanged information-generally regarding sales-on a monthly or quarterly basis with some doing it as often as weekly through phone or fax rather than face-to-face meetings.");
210. Id. at 55 ("While the vitamins A and E cartel met monthly for monitoring purposes, they communicated weekly by phone.").
211. See id. at 81 ("To implement such a complex arrangement, some cartels created an impressive organizational structure that entailed frequent communication and face-to-face meetings.").
212. See, e.g., HERLING, supra note 130, at 33 (discussing the heavy electrical manufacturing cartel).
213. See Harrington, supra note 59, at 77 ("Other cartels organized themselves into both a general group - comprised of all cartel members-and regional sub-groups.").
214. Baker & Faulkner, supra note 66, at 839.
215. Levenstein & Suslow, supra note 100, at 833.
216. See HOVENKAMP, supra note 20, § 4.1a;
217. W. KIP VISCUSI, JOHN M. VERNON & JOSEPH E. HARRINGTON, JR., ECONOMICS OF REGULATION AND ANTTTRUST 121-28 (4th ed. 2005) (discussing some of the "real-world complications associated with collusion");
218. see also Nicolas de Roos, Examining Models of Collusion: The Market for Lysine, 24 INT'L J. INDUS. ORG. 1083 (2006);
219. Dick, supra note 94;
220. Harrington, supra note 59;
221. Hay & Kelley, supra note 56;
222. Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising Rivals' Costs to Achieve Power over Price, 96 YALE L.J. 209, 238-40 (1986) (describing the role of the cartel "ringmaster");
223. Christopher R. Leslie, Antitrust Amnesty, Game Theory, and Cartel Stability, 31 J. CORP. L. 453 (2006) [hereinafter Leslie, Antitrust Amnesty];
224. Christopher R. Leslie, Cartels, Agency Costs and Finding Virtue in Faithless Agents, 49 WM. & MARY L. REV. 1621 (2008) [hereinafter Leslie, Cartels];
225. Leslie, supra note 73;
226. Margaret C. Levenstein & Valerie Y. Suslow, Breaking up Is Hard to Do: Determinants of Cartel Duration, J.L. & ECON. (forthcoming Sept. 2010) ("Cartels respond to imperfect or noisy information by trying to . . . better align individual firm incentives with those of the group" which would reduce agency costs);
227. Levenstein & Suslow, supra note 52.
228. See George Baker, Robert Gibbons & Kevin J. Murphy, Relational Contracts and the Theory of the Firm, 117 Q.J. ECON. 39, 70 (2002) (concluding that "vertical integration is an efficient response");
229. Mattias Ganslandt, Lars Persson & Helder Vosconcelos, Asymmetric Cartels - A Theory of Ring Leaders 3 (Ctr. for Econ. Pol'y Research, Discussion Paper No. 6829, 2008), available at http://www.porto.ucp.pt/feg/docentes/ hvasconcelos/docs/CEPR-DP6829.pdf (discussing "why so many cartels have a ringleader and why the leading firm is so frequently substantially larger than other firms in a collusive market").
230. See Michael C. Jensen & William H. Meckling, Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, 3 J. FIN. ECON. 305, 308 (1976) (discussing how "agency costs" arise when a principal cannot fully control his agents);
231. Stewart E. Sterk, Trust Protectors, Agency Costs, and Fiduciary Duty, 27 CARDOZO L. REV. 2761, 2763 (2006) (discussing how a "trust protector" has "the potential to serve as a monitor of the trustee's performance, reducing agency costs").
232. E.g., William H. Page, Communication and Concerted Action, 38 LOY. U. CHI. L.J. 405, 425 (2007) ("What is decisive in these cases is noneconomic evidence of the cause, particularly involving communications.");
233. William H. Page, Twombly and Communication: The Emerging Definition of Concerted Action under the New Pleading Standards, 5 J. COMPETITION L. & ECON. 439 (2009).
234. See Baker & Faulkner, supra note 66, at 855 ("In a decentralized network, however, there is no periphery. Many eyewitnesses to activities of numerous conspirators can be obtained, resulting in a much higher conviction rate, as in the switchgear and transformers conspiracies.").
235. See Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911),
236. overruled by Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct. 2705 (2007).
237. For a discussion on the massive retail druggists cartel that occasioned the resale price maintenance scheme in Dr. Miles, see HOVENKAMP, supra note 136, at 184-91;
238. HOVENKAMP, supra note 121, at 331-47.
239. James M. Griffin & Weiwen Xiong, The Incentive to Cheat: An Empirical Analysis of OPEC, 40 J.L. & ECON. 289, 306 (1997) ("Historically, Saudi Arabia has played key roles in effectuating OPEC pricing strategies.").
240. See Christopher R. Leslie, Rationality Analysis in Antitrust, 158 U. PA. L. REV. 261, 325-28 (2010).
241. See Baker & Faulkner, supra note 66, at 855 ("[A] lower conviction rate is found in a centralized network because only the core 'ringleaders' can be successfully prosecuted.").
242. U.S. DEP'T OF JUSTICE, CORPORATE LENIENCY PROGRAM pt. A6 (1993), available at http://www.justice.gov/atr/public/guidelines/0091.htm;
243. see also Leslie, Antitrust Amnesty, supra note 149 (advocating making ringleaders eligible for amnesty because this would destabilize cartels by making ringleaders less trustworthy).
244. United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898),
245. aff'd, 175 U.S. 211 (1899).
246. Greene v. Gen. Foods Corp., 517 F.2d 635, 647 (5th Cir. 1975) (describing Addyston Pipe).
247. Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1 (1979).
248. Ariz. v. Maricopa Cnty. Med. Soc'y, 457 U.S. 332 (1982).
249. See, e.g., Nat'l Bancard Corp. (NaBanco) v. Visa U.S.A., Inc., 779 F.2d 592, 594 (11th Cir. 1986) (refusing to condemn a merchant interchange fee being challenged that applied only when the merchant's bank and the card issuer's bank facilitated their transaction through Visa's own interconnection system, called BASE II; "[s]ignificantly, the parties to the interchange are not required to use BASE II. Merchant and issuer institutions are free to negotiate a different rate and bypass the BASE II system entirely");
250. cf. Reyn's Pasta Bella, LLC v. Visa U.S.A., Inc., 259 F. Supp. 2d 992 (N.D. Cal. 2003) (condemning an interchange fee found to be exclusive, and distinguishing NaBanco).
251. See generally 13 HOVENKAMP, supra note 22, ¶ 2001 (discussing the requirement of exclusivity for anticompetitive horizontal agreements);
252. id. ¶ 2104 (discussing the significance of joint venture exclusivity).
253. Levenstein & Suslow, supra note 52, at 69.
254. Dick, supra note 94, at 273 ("Cartels that were organized as common sales agencies centralized exporting logistics by negotiating prices and terms of sale, assigning orders to member firms, bargaining with shippers over freight and insurance rates, and collecting remittances.").
255. Id. at 246-47 ("Four-fifths of the cartels set a common price and/or allocated markets, and slightly more than one-half centralized export distribution through a common sales agency.");
256. see also 13 HOVENKAMP, supra note 22, ¶ 2132 (discussing how those participating in a market will necessarily have to agree about many things, some of which can be regarded as price-affecting or output-limiting, such as jointly made pricing rules and joint selling).
257. GEORGE W. STOCKING & MYRON W. WATKINS, CARTELS IN ACTION 152-53 (1946).
258. Id. at 146-47. 170.
259. See Leslie, supra note 73, at 621 (discussing other examples of cartels employing a joint sales agency);
260. Levenstein & Suslow, supra note 100, at 825-26 (noting cartel's use of a combination of joint sales agency and joint venture).
261. Appalachian Coals, Inc. v. United States, 288 U.S. 344 (1933).
262. On the relevance of the status of Appalachian Coals as a corporation independent of its coal producer constituents, see Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 763 & n.7 (1984).
263. Appalachian Coals, 288 U.S. at 357-58.
264. Id. at 358.
265. See id. at 360.
266. Levenstein & Suslow, supra note 52, at 69 (noting that the joint sales agency "eliminates the possibility that individual firms will engage in secret cheating").
267. Leslie, supra note 73, at 621, 634. 178.
268. Levenstein & Suslow, supra note 52, at 69.
269. Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2215 (2010).
270. Id. at 2207 (noting that prior to 2000 the licenses had been nonexclusive, but in December of 2000 the teams authorized NFLP to grant exclusive licenses).
271. Levenstein & Suslow, supra note 52, at 69 (cartels that used joint sales agencies "were among the more successful cartels").
272. Dick, supra note 94, at 256.
273. Id. at 275.
274. Robert S. Pindyck, The Cartelization of World Commodity Markets, 69 AM. ECON. REV. 154, 157 (1979).
275. Dick, supra note 94, at 241 ("Contracts in which the cartel centralized its control through a common sales agency tended to be more stable.");
276. Levenstein & Suslow, supra note 52, at 69 ("Cartels that control the distribution of goods, through a joint sales agency or some other mechanism, appear to be more stable.").
277. See DEBORA L. SPAR, THE COOPERATIVE EDGE 53 (1994) ("It is generally understood, however, that DeBeers insists on being both the sole purchaser and the price setter and that the CSO is the sole distributor.");
278. see aiso Bill Keller, DeBeers May Be Losing Grip on Diamond Market, N.Y. TIMES, Sept. 3, 1992, at Al.
279. Lisa Bernstein, Opting out of the Legal System: Extralegal Contractual Relations in the Diamond Industry, 21 J. LEGAL STUD. 115, 119 (1992).
280. One mid-century report explained part of the corporate structure of the diamond cartel as follows: The diamond industry's marketing system, and DeBeers' dominant position in it, became fully established in the early 1930's with the creation of three new corporate entities-the Diamond Trading Corporation, Ltd., the Diamond Producers Association, Ltd., and the Diamond Trading Company, Ltd. - all controlled by DeBeers. The Diamond Corporation holds exclusive contracts for the purchase of the alluvial diamond production of Western and Central Africa. The Diamond Producers Association functions as the sole purchaser of South African diamonds. Both the Diamond Corporation and Diamond Producers Association sell their diamonds exclusively to the Diamond Trading Company, which is thus the single distributing agency for ninety-seven percent of the African diamond production. Note, The Diamond Cartel, 56 YALE L.J. 1404, 1407 (1947).
281. Bernstein, supra note 187, at 121.
282. Note, supra note 187, at 1408-09.
283. Levenstein & Suslow, supra note 52, at 71.
284. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 773 n.21 (1984).
285. Id. at 769.
286. Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2209 (2010).
287. Id. at 2210 ("We have similarly looked past the form of a legally 'single entity' when competitors were part of professional organizations or trade groups.").
288. Id. at 2212.
289. Id. at 2213.
290. Id. at 2212.
291. Id.
292. See, e.g., Nynex Corp. v. Discon, Inc., 525 U.S. 128 (1998) (purely vertical boycott to be governed under rule of reason).
293. CONNOR, supra note 125, at 27.
294. In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 655 (7th Cir. 2002).
295. Am. Needle, Inc. v. NFL, 538 F.3d 736, 743 (7th Cir. 2008),
296. rev'd, 130 S. Ct. 2201 (2010);
297. see also Int'l Travel Arrangers v. NWA, Inc., 991 F.2d 1389, 1397 (8th Cir. 1993) (jury instruction stated: "Where the entities possess an inherent unity of economic interest and purpose, they are not separate entities capable of conspiring").
298. 538 F.3d at 737,
299. rev'd, 130 S. Ct. 2201 (2010).
300. Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2213 (2010)
301. (citing Herbert Hovenkamp, Exclusive Joint Ventures and Antitrust Policy, 1995 COLUM. BUS. L. REV. 1, 52-61;
302. Zenichi Shishido, Conflicts of Interest and Fiduciary Duties in the Operation of a Joint Venture, 39 HASTINGS L.J. 63, 69-81 (1987)).
303. Id. at 2214.
304. Id. ("The justification for cooperation is not relevant to whether that cooperation is concerted or independent action.").
305. Id. at 2213 ("But illegal restraints often are in the common interests of the parties to the restraint, at the expense of those who are not parties.").
306. Id. at 2215 n.6
307. (quoting NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 101 (1984)).
308. Texaco, Inc. v. Dagher, 547 U.S. 1 (2006).
309. See infra notes 262-269 and accompanying text.
310. Dagher, 547 U.S. at 7.
311. Occasionally concerted refusals to deal and similar tactics are used to coerce firms into joining a cartel, but these are themselves actionable under the antitrust laws. See, e.g., Rossi v. Standard Roofing, Inc., 156 F.3d 452, 456 (3d Cir. 1998) (members of roofing cartel conspired to deny price cutter access to materials);
312. Denny's Marina v. Renfro Prods., 8 F.3d 1217, 1219-20 (7th Cir. 1993) (defendant boat sellers conspired to deny price cutting seller access to annual boat show).
313. This was also a fair reading of the claim in Hartford Fire Insurance Co. v. California, 509 U.S. 764, 770-78 (1993), namely, that the defendant insurers
314. See generally 13 HOVENKAMP, supra note 22, ¶ 2201 (discussing several cases in which concerted refusal to deal with respect to one transaction in order to get the target to change its behavior with respect to another and unrelated transaction was subject to legal action under antitrust laws).
315. Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2215 (2010)
316. (citing Herbert Hovenkamp, Exclusive Joint Ventures and Antitrust Policy, 1995 COLUM. BUS. L. REV. 1, 52-61).
317. Brief for the NFL Respondents at *7, Am. Needle, Inc. v. NFL, 130 S. Ct. 2201 (2010) (No. 08-661), 2009 WL 3865438.
318. Id.
319. Am. Needle, 130 S. Ct. at 2209
320. (citing United States v. Sealy, Inc., 388 U.S. 350 (1967)).
321. On Sealy, see infra the discussion accompanying notes 222-42.
322. See also Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284 (1985);
323. NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85 (1984);
324. United States v. Topeo Assoes., 405 U.S. 596 (1972);
325. Associated Press v. United States, 326 U.S. 1, 26 (1945) (Frankfurter, J., concurring);
326. United States v. Terminal R.R. Ass'n of St. Louis, 224 U.S. 383 (1912).
327. Am. Needle, 130 S. Ct. at 2213 ("The NFL respondents may be similar in some sense to a single enterprise that owns several pieces of intellectual property and licenses them jointly, but they are not similar in the relevant functional sense. Although NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned.").
328. Id. at 2207. 219.
329. See Citizen Publ'g Co. v. United States, 394 U.S. 131, 134-36 (1969) (holding that agreement between the only two newspapers in the county to jointly set their subscription and advertising rates, pool their profits, and refrain from engaging in business that competed with the newspapers was illegal for violating Section One);
330. Spitzer v. St. Francis Hosp., 94 F. Supp. 2d 399, 422 (S.D.N.Y. 2000) (holding that agreement between hospitals to fix rates, terms and conditions for services and allocating markets violated Section One);
331. Leslie, supra note 73, at 645-46 (discussing how those wishing to withdraw from price-fixing conspiracies should confess so as to avoid antitrust liability still attached to the agreement).
332. See supra notes 191-201 and accompanying text. 221. Under the Supreme Court's Leegin decision, which adopted a rule of reason for resale price maintenance, a horizontal agreement among dealers in a single brand to fix prices could be treated under the per se rule, while a vertical agreement between a supplier and its dealers facilitating such a cartel would be treated under the rule of reason. Both, however, would be treated as collaborative activity.
333. See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 893 (2007) ("A horizontal cartel among competing manufacturers or competing retailers that decreases output or reduces competition in order to increase price is, and ought to be, per se unlawful . . . . To the extent a vertical agreement setting minimum resale prices is entered upon to facilitate either type of cartel, it, too, would need to be held unlawful under the rule of reason.") (citations omitted);
334. see also Toledo Mack Sales & Serv., Inc. v. Mack Trucks, Inc., 530 F.3d 204, 217, 225 (3d Cir. 2008) (relying on this passage to deny summary judgment on complaint that a truck manufacturer maintained resale prices at the behest of a cartel of its dealers).
335. Am. Needle, 130 S. Ct. at 2216-17 (finding conspiratorial capacity and remanding for consideration of the restraint under the rule of reason).
336. United States v. Sealy, Inc., 388 U.S. 350 (1967).
337. Id.
338. Id.
339. See Mark A. Lemley & Christopher R. Leslie, Categorical Analysis in Antitrust Jurisprudence, 93 IOWA L. REV. 1207 (2008) (questioning the value of the Sealy horizontal versus vertical debate).
340. On such findings prior to Copperweld, see 7 AREEDA & HOVENKAMP, supra note 20, ¶ 1463 (discussing Supreme Court intraenterprise cases from Yellow Cab to Copperweld).
341. Brief for Appellee, Sealy, Inc. at 6, United States v. Sealy, Inc., 388 U.S. 350 (1967) (No. 9), 1966 WL 100609 [hereinafter Sealy Respondent Brief];
342. see also id. at 21 ("Sealy's separate existence as a profitable enterprise operated for its overall best interests, and not as a mere instrumentality or creature of its licensees.").
343. Id. at 31.
344. Richard W. McLaren, Transcript of Oral Argument at 45, United States v. Sealy, 388 U.S. 350 (1967) (No. 9) [hereinafter Sealy Transcript] (arguing that Simmons is "an integrated firm; and that's one of the points we argue: Why should a licensee manufacturer under a trademark have to go out and compete with other people under that trademark when a brand owner, he doesn't?");
345. id. ("And that's a basic issue in this case: Does a licensee trademark manufacturer have the same sort of rights as a trademark owner, or is he some sort of second-class citizen where he has to compete against other people manufacturing under the same brand?").
346. Sealy, Inc., 388 U.S. at 352 ("If we look at substance rather than form, there is little room for debate. These must be classified as horizontal restraints.").
347. Id. at 356.
348. Id. at 352.
349. Brief for the United States at 7, United States v. Sealy, Inc., 388 U.S. 350 (1967) (No. 9), 1966 WL 100610 [hereinafter Sealy Petitioner Brief].
350. United States v. Sealy, Inc., Motion to Affirm at 29, available at 21 ANTITRUST LAW: MAJOR BRIEFS AND ORAL ARGUMENTS OF THE SUPREME COURT OF THE UNITED STATES, 1955 Term - 1975 Term, at 815 (Philip B. Kurland & Gerhard Casper, eds., 1979) (emphasis in original).
351. Sealy, Inc., 388 U.S. at 351.
352. Id.
353. see also id. at 355-56 (1967) ("Appellee has not appealed the order of the District Court enjoining continuation of this price-fixing, but the existence and impact of the practice cannot be ignored in our appraisal of the territorial limitations. In the first place, this flagrant and pervasive price-fixing, in obvious violation of the law, was, as the trial court found, the activity of the 'stockholder representatives' acting through and in collaboration with Sealy mechanisms.").
354. See Daniel Friedman, Sealy Transcript, supra note 231, at 49.
355. Sealy Petitioner Brief, supra note 235, at 5.
356. Id.
357. See supra notes 111-14 and accompanying text.
358. Daniel Friedman, Sealy Transcript, supra note 231, at 7 (citing specific instances).
359. Sealy Respondent Brief, supra note 229, at 21. 245.
360. Id. at 21-22.
361. Id.
362. United States v. Sealy, Inc., 388 U.S. 350 (1967).
363. Id. at 353.
364. Sealy Petitioner Brief, supra note 235, at 22;
365. id. at 24 ("Sealy . . . is not an independent firm responsive to interests other than those of its licensees. It is completely dominated by the licensees.").
366. See Daniel Friedman, Sealy Transcript, supra note 231, at 4 ("[Licensees are] independent in the sense that they're not controlled by Sealy. And they're also independent in the sense that each one makes its own judgments as to how best exploit his particular market.")
367. See Leslie, Cartels, supra note 149, at 1638 ("Each firm makes an independent decision as to whether joining or remaining in a cartel is in the firm's own best interest.").
368. Id. at 596.
369. Id.
370. Id.
371. Id. at 612.
372. Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2215 (2010).
373. Id. at 2210.
374. Topco Assoc., Inc., 405 U.S. at 598.
375. See 11 HOVENKAMP, ANTITRUST LAW, supra note 22, ¶ 1910c2 (criticizing the Topeo Court's application of a per se rule against horizontal territorial restraints);
376. id. ¶ 2033b (criticizing the Court's classification of the restraints in Sealy and Topco as "vertical");
377. id. ¶ 2134c (criticizing the use of the per se rule in Sealy and Topco);
378. see also United States v. Sealy, Inc., 388 U.S. 350, 361 n.2 (Harlan J., dissenting) (discussing the lack of market power in Sealy)
379. Topco, 405 U.S. at 600 (discussing same in Topco;) .
380. Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 224 (D.C. Cir. 1986) (applying this approach to a nationwide moving company, which was owned by local moving companies and that imposed geographic restraints on the latter
381. ); Polk Bros., Inc. v. Forest City Enter., Inc., 776 F.2d 185 (7th Cir. 1985) (applying this approach to an ancillary market division agreement in a shopping mall).
382. Texaco, Inc. v. Dagher, 547 U.S. 1 (2006).
383. Id. at 6.
384. Id.
385. (quoting Ariz. v. Maricopa Cnty. Med. Soc., 457 U.S. 332, 356 (1982)).
386. Id. at 7.
387. Id. at 5.
388. Id. at 7.
389. Am. Needle, Inc. v. NFL, 130 S. Ct. 2201, 2212 (2010).
390. Dagher, 547 U.S. at 6.
391. See Am. Needle, 130 S. Ct. at 2214-15 ("Apart from their agreement to cooperate in exploiting those assets, including their decisions as NFLP, there would be nothing to prevent each of the teams from making its own market decisions relating to purchases of apparel and headwear, to the sale of such items, and to the granting of licenses to use its trademarks.").
392. SCFC ILC, Inc. v. Visa U.S.A., Inc., 36 F.3d 958, 960 (10th Cir. 1994).
393. Id. at 960-61.
394. See, e.g., id. (addressing whether Visa's refusal to admit Sears to its joint venture restrains trade in violation of Section One of the Sherman Act).
395. Id. (refusing to condemn exclusivity rules that enabled Visa and MasterCard to be issued by one another's banks but excluded rival cards such as Discover and American Express; to the extent it is relevant, one of the authors was consulted by the plaintiff).
396. United States v. Visa U.S.A., Inc., 344 F.3d 229, 238 n.4 (2d Cir. 2003) (condemning governance duality and exclusivity rules under rule of reason; to the extent it is relevant, one of the authors was consulted by the government);
397. see also Discover Fin. Servs. v. Visa U.S.A., Inc., No. 04-CV-7844, 2008 WL 4067445 (S.D.N.Y. Aug. 26, 2008) (denying summary judgment on claim by Discover, issuer of a rival card).
398. See, e.g., Nat'l Bancard Corp. (NaBanco) v. Visa U.S.A., Inc., 779 F.2d 592 (11th Cir. 1986) (applying rule of reason and refusing to condemn the fees).
399. See, e.g., Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d Cir. 2005) (describing settlement);
400. In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 130 (2d Cir. 2001) (certifying class action by large retailers).
401. On the legality question, see DAVID S. EVANS & RICHARD SCHMALENSEE, PAYING WITH PLASTIC: THE DIGITAL REVOLUTION IN BUYING AND BORROWING (2d ed. 2005) (discussing the evolution of the credit card industry and defending the position of credit card associations against antitrust claims);
402. Dennis W. Carlton & Alan Frankel, The Antitrust Economics of Credit Card Networks, 63 ANTITRUST L.J. 643 (1995) (discussing the potential for anticompetitive harm to result from collective action by members of credit card joint ventures);
403. Adam J. Levitin, Priceless? The Economic Costs of Credit Card Merchant Restraints, 55 UCLA L. REV. 1321 (2008) (arguing that merchant restraints should be banned as antitrust violations);
404. Timothy J. Muris, Payment Card Regulation and the (Mis)Application of the Economics of Two-Sided Markets, 2005 COLUM. Bus. L. REV. 515, 517-18 (discussing the economics of two-sided markets);
405. Jean-Charles Rochet & Jean Tirole, Cooperation Among Competitors: Some Economics of Payment Card Associations, 33 RAND J. ECON. 549 (2002) (analyzing the cooperative determination of the interchange fee by member banks in a payment card association);
406. Todd J. Zywicki, The Economics of Credit Cards, 3 CHAP. L. REV. 79 (2000) (dismissing the link between credit cards and the bankruptcy crisis);
407. David S. Evans & Richard Schmalensee, The Economics of Interchange Fees and Their Regulation: An Overview (MIT Sloan, Working Paper No. 4548-05, 2005), available at http://ssrn.com/abstract-744705 (analyzing whether policy makers should regulate interchange fees);
408. Todd J. Zywicki, The Economics of Payment Card Interchange Fees and the Limits of Regulation (George Mason Law & Econ. Research, Working Paper No. 10-26, 2010), available at http://papers.ssrn.com/so13/papers.cfm?abstract-id= 1624002 (arguing against interchange fee regulation);
409. see also U. S. GOV'T ACCOUNTABILITY OFFICE, REPORT ON CREDIT CARDS 44-45 (2009), available at http://www.gao.gov/new.items/d1045.pdf (discussing drawbacks of interchange fee regulation).
410. Victor Fleischer, The MasterCard IPO: Protecting the Priceless Brand, 12 HARV. NEGOT. L. REV. 137, 145 (2007) (tracing development of MasterCard IPO);
411. see also Adam J. Levitin, Payment Wars: The Merchant-Bank Struggle for Control of Payment Systems, 12 STAN. J.L. Bus. & FIN. 425, 463-67 (2007).
412. See generally Robert E. Litan & Alex J. Pollock, The Future of Charge Card Networks 6 (AEI-Brookings Joint Ctr. for Regulatory Studies, Working Paper 06-03, 2006) (discussing the reorganization of MasterCard and Visa). MasterCard, Inc. trades on the New York Stock Exchange under the symbol "MA," and Visa, Inc. trades under the symbol "V."
413. Fleischer, supra note 279, at 145.
414. Id.
415. Id.
416. Visa, Inc., Proxy Statement (Form DEF 14A), at 26 (Dec. 1, 2009), available at http://investor.visa.com/phoenix.zhtml?c=215693&p=proxy (explaining that class B and C shares have no voting rights). In the Visa, Inc. IPO, Class B shareholders are financial institutions issuing Visa cards in the United States, while Class C shares are similar institutions in Canada.
417. See GOLDMAN SACHS FIN. INST. GROUP, VISA IPO (2008), http://www. sharpeinvesting.com/2008/01/visa-ipo-goldman-sachs-financial-institutions-group. html (discussing Visa's organization as an IPO).
418. In the Google, Inc. IPO, Class A shares were entitled to one vote each but class B shares received ten votes. See Lynn A. Stout, The Mythical Benefits of Shareholder Control, 93 VA. L. REV. 789, 802-03 (2007) (describing Google structure as leaving outside investors largely powerless).
419. Belen Villalonga & Raphael Amit, How Are U.S. Family Firms Controlled?, 22 REV. FIN. STUD. 3047, 3066 (2009) (noting that as of 1998, the Ford family owned six percent of shares but controlled forty percent of votes).
420. Some authors have noted that this was very likely an intended result of the switch from a joint venture to a corporate structure. In addition to Fleischer, supra note 279,
421. see Joshua D. Wright, The MasterCard IPO: MasterCard's Single Entity Strategy, 12 HARV. NEGOT. L. REV. 225 (2007) (expanding on Fleischer's analysis of the antitrust implications of MasterCard's new governance structure).
422. See United States v. Visa U.S.A., Inc., 344 F.3d 229, 238 n.4 (2d Cir. 2003) (analyzing the government's claim under a rule of reason);
423. SCFC ILC, Inc. v. Visa U.S.A., Inc., 36 F.3d 958 (10th Cir. 1994).
424. Verizon Commc'ns, Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398, 410 (2004);
425. see also 3B AREEDA & HOVENKAMP, supra note 20, ¶¶ 772-73 (discussing unUateral refusals to deal and "essential facility" doctrine).
426. See, e.g., Nat'l Bancard Corp. (NaBanco) v. Visa U.S.A., Inc., 779 F.2d 592 (11th Cir. 1986) (applying rule of reason analysis instead of per se analysis to Visa's conduct).
427. Christopher R. Leslie, Unilaterally Imposed Tying Arrangements and Antitrust's Concerted Action Requirement, 60 OHIO ST. L.J. 1773 (1999) (arguing that most tying arrangements are essentially unilateral).
428. Christopher R. Leslie, Tying Conspiracies, 48 WM. & MARY L. REV. 2247 (2007) (advocating per se illegality for tying conspiracies).
429. See Fleischer, supra note 279 (making this argument about the MasterCard IPO).