Sherman Act, Section 1
Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." Ch. 647, 26 Stat. 209, as amended, 15 U.S.C. § 1. While § 1 could be interpreted to proscribe all contracts, see, e.g., Board of Trade of Chicago v. United States, 246 U.S. 231, 238, 38 S.Ct. 242, 62 L.Ed. 683 (1918), the Court has never "taken a literal approach to [its] language," Texaco Inc. v. Dagher, 547 U.S. 1, 5, 126 S.Ct. 1276, 164 L.Ed.2d 1 (2006). Rather, the Court has repeated time and again that § 1 "outlaw[s] only unreasonable restraints." State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997). Leegin Creative Leather Products v. PSKS, Inc., 127 S. Ct. 2705 (2007).The Rule of Reason
The rule of reason is the accepted standard for testing whether a practice restrains trade in violation of § 1. See Texaco, supra, at 5, 126 S.Ct. 1276. "Under this rule, 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." Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977). Appropriate factors to take into account include "specific information about the relevant business" and "the restraint's history, nature, and effect." Khan, supra, at 10, 118 S.Ct. 275. Whether the businesses involved have market power is a further, significant consideration. See, e.g., Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984) (equating the rule of reason with "an inquiry into market power and market structure designed to assess [a restraint's] actual effect"); see also Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28, 45-46, 126 S.Ct. 1281, 164 L.Ed.2d 26 (2006). In its design and function the rule distinguishes between restraints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer's best interest. Leegin Creative Leather Products v. PSKS, Inc., ibid.The rule of reason does not govern all restraints. Some types "are deemed unlawful per se." Khan, supra, at 10, 118 S.Ct. 275. The per se rule, treating categories of restraints as necessarily illegal, eliminates the need to study the reasonableness of an individual restraint in light of the real market forces at work, Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 723, 108 S.Ct. 1515, 99 L.Ed.2d 808 (1988); and, it must be acknowledged, the per se rule can give clear guidance for certain conduct. Restraints that are per se unlawful include horizontal agreements among competitors to fix prices, see Texaco, supra, at 5, 126 S.Ct. 1276, or to divide markets, see Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49-50, 111 S.Ct. 401, 112 L.Ed.2d 349 (1990) (per curiam). Leegin Creative Leather Products v. PSKS, Inc., ibid.
Sherman Act, Section 2
Section 2 of the Sherman Act makes it unlawful to "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations." 15 U.S.C. § 2. Simply possessing monopoly power and charging monopoly prices does not violate § 2; rather, the statute targets "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-571, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966). Pacific Bell Telephone v. Linkline Comm., 129 S. Ct. 1109 (2009).As a general rule, businesses are free to choose the parties with whom they will deal, as well as the prices, terms, and conditions of that dealing. See United States v. Colgate & Co., 250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed. 992 (1919). But there are rare instances in which a dominant firm may incur antitrust liability for purely unilateral conduct. For example, [ ] firms may not charge "predatory" prices—below-cost prices that drive rivals out of the market and allow the monopolist to raise its prices later and recoup its losses. Brooke Group, 509 U.S., at 222-224, 113 S.Ct. 2578. Pacific Bell Telephone v. Linkline Comm., ibid.
"[C]utting prices in order to increase business often is the very essence of competition." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 594, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In cases seeking to impose antitrust liability for prices that are too low, mistaken inferences are "especially costly, because they chill the very conduct the antitrust laws are designed to protect." Ibid.; see also Brooke Group, 509 U.S., at 226, 113 S.Ct. 2578; Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 121-122, n. 17, 107 S.Ct. 484, 93 L.Ed.2d 427 (1986). To avoid chilling aggressive price competition, [the Supreme Court has] carefully limited the circumstances under which plaintiffs can state a Sherman Act claim by alleging that prices are too low. Specifically, to prevail on a predatory pricing claim, a plaintiff must demonstrate that: (1) "the prices complained of are below an appropriate measure of its rival's costs"; and (2) there is a "dangerous probability" that the defendant will be able to recoup its "investment" in below-cost prices. Brooke Group, supra, at 222-224, 113 S.Ct. 2578. "Low prices benefit consumers regardless of how those prices are set, and so long as they are above predatory levels, they do not threaten competition." Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990). Pacific Bell Telephone v. Linkline Comm., ibid.
THIS CASEBOOK contains a selection of 16 Supreme Court decisions that analyze and interpret antitrust doctrine and statutes. The selection of decisions spans from 2002 to the date of publication.