COPPERWELD CORP. ET AL. v. INDEPENDENCE TUBE CORP.
No. 82-1260
Supreme Court of the United States
Argued December 5, 1983—Decided June 19, 1984
467 U.S. 752
Deputy Solicitor General Wallace argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Lee, Assistant Attorney General Baxter, Deputy Assistant Attorney General Collins, Carolyn F. Corwin, Barry Grossman, and Nancy C. Garrison.
Victor E. Grimm argued the cause for respondent. With him on the brief were John R. Myers and Scott M. Mendel.*
*J. Randolf Wilson, Russell H. Carpenter, Jr., Stephen A. Bokat, Cynthia Wicker, William E. Blasier, and Quentin Riegel filed a brief for the Chamber of Commerce of the United States et al. as amici curiae urging reversal.
A brief of amici curiae urging affirmance was filed for the State of Alabama et al. by Robert K. Corbin, Attorney General of Arizona, and Richard A. Alcorn and Charles L. Eger, Assistant Attorneys General; Charles A. Graddick, Attorney General of Alabama, and Richard Owen, Assistant Attorney General; John Steven Clark, Attorney General of Arkansas, and Jeffrey A. Bell, Assistant Attorney General; Duane Woodard, Attorney General of Colorado, and Thomas P. McMahon, Assistant Attorney General; Neil F. Hartigan, Attorney General of Illinois, and Robert E. Davy, Assistant Attorney General; Thomas J. Miller, Attorney General of Iowa, and John R. Perkins, Assistant Attorney General; Robert T. Stephan, Attorney General of Kansas, and Wayne E. Hundley, Deputy Attorney General; Steven L. Beshear, Attorney General of Kentucky, and James M. Ringo, Assistant Attorney General; Hubert H. Humphrey III, Attorney General of Minnesota, and Stephen P. Kilgriff, Assistant Attorney General; Bill Allain, Attorney General of Mississippi, and Robert Sanders, Special Assistant Attorney General; Mike Greely, Attorney General of Montana, and Joe R. Roberts, Assistant Attorney General; Paul L. Douglas, Attorney General of Nebraska, and Dale A. Comer, Assistant Attorney General; Robert O. Wefald, Attorney General of North Dakota, and Alan C. Hoberg, Assistant Attorney General; Michael C. Turpen, Attor-
Briefs of amici curiae were filed for the Canadian Manufacturers Association et al. by John DeQ. Briggs III, Scott E. Flick, and Jan Schneider; and for Kaiser Aluminum & Chemical Corporation by Milton Handler and John A. Moore.
CHIEF JUSTICE BURGER delivered the opinion of the Court.
We granted certiorari to determine whether a parent corporation and its wholly owned subsidiary are legally capable of conspiring with each other under
I
A
The predecessor to petitioner Regal Tube Co. was established in Chicago in 1955 to manufacture structural steel
In 1972 petitioner Copperweld Corp. purchased the Regal division from Lear Siegler; the sale agreement bound Lear Siegler and its subsidiaries not to compete with Regal in the United States for five years. Copperweld then transferred Regal‘s assets to a newly formed, wholly owned Pennsylvania corporation, petitioner Regal Tube Co. The new subsidiary continued to conduct its manufacturing operations in Chicago but shared Copperweld‘s corporate headquarters in Pittsburgh.
Shortly before Copperweld acquired Regal, David Grohne accepted a job as a corporate officer of Lear Siegler. After the acquisition, while continuing to work for Lear Siegler, Grohne set out to establish his own steel tubing business to compete in the same market as Regal. In May 1972 he formed respondent Independence Tube Corp., which soon secured an offer from the Yoder Co. to supply a tubing mill. In December 1972 respondent gave Yoder a purchase order to have a mill ready by the end of December 1973.
When executives at Regal and Copperweld learned of Grohne‘s plans, they initially hoped that Lear Siegler‘s noncompetition agreement would thwart the new competitor. Although their lawyer advised them that Grohne was not bound by the agreement, he did suggest that petitioners might obtain an injunction against Grohne‘s activities if he made use of any technical information or trade secrets belonging to Regal. The legal opinion was given to Regal and Copperweld along with a letter to be sent to anyone with whom Grohne attempted to deal. The letter warned that Copperweld would be “greatly concerned if [Grohne] contem-
When Yoder accepted respondent‘s order for a tubing mill on February 19, 1973, Copperweld sent Yoder one of these letters; two days later Yoder voided its acceptance. After respondent‘s efforts to resurrect the deal failed, respondent arranged to have a mill supplied by another company, which performed its agreement even though it too received a warning letter from Copperweld. Respondent began operations on September 13, 1974, nine months later than it could have if Yoder had supplied the mill when originally agreed.
Although the letter to Yoder was petitioners’ most successful effort to discourage those contemplating doing business with respondent, it was not their only one. Copperweld repeatedly contacted banks that were considering financing respondent‘s operations. One or both petitioners also approached real estate firms that were considering providing plant space to respondent and contacted prospective suppliers and customers of the new company.
B
In 1976 respondent filed this action in the District Court against petitioners and Yoder.1 The jury found that
At a separate damages phase, the judge instructed the jury that the damages for the antitrust violation and for the inducement of the Yoder contract breach should be identical and not double counted. The jury then awarded $2,499,009 against petitioners on the antitrust claim, which was trebled to $7,497,027. It awarded $15,000 against Regal alone on the contractual interference and slander counts pertaining to Deere. The court also awarded attorney‘s fees and costs after denying petitioners’ motions for judgment n.o.v. and for a new trial.
C
The United States Court of Appeals for the Seventh Circuit affirmed. 691 F. 2d 310 (1982). It noted that the exoneration of Yoder from antitrust liability left a parent corporation and its wholly owned subsidiary as the only parties to the § 1 conspiracy. The court questioned the wisdom of subjecting an “intra-enterprise” conspiracy to antitrust liability, when the same conduct by a corporation and an unincorpo-
We granted certiorari to reexamine the intra-enterprise conspiracy doctrine, 462 U. S. 1131 (1983), and we reverse.
II
Review of this case calls directly into question whether the coordinated acts of a parent and its wholly owned subsidiary can, in the legal sense contemplated by
The problem began with United States v. Yellow Cab Co., 332 U. S. 218 (1947). The controlling shareholder of the Checker Cab Manufacturing Corp., Morris Markin, also controlled numerous companies operating taxicabs in four cities. With few exceptions, the operating companies had once been independent and had come under Markin‘s control by acquisition or merger. The complaint alleged conspiracies under
“may result as readily from a conspiracy among those who are affiliated or integrated under common ownership as from a conspiracy among those who are otherwise independent. Similarly, any affiliation or integration flowing from an illegal conspiracy cannot insulate the conspirators from the sanctions which Congress has imposed. The corporate interrelationships of the conspirators, in other words, are not determinative of the applicability of the Sherman Act. That statute is aimed at substance rather than form. See Appalachian Coals, Inc. v. United States, 288 U. S. 344, 360-361, 376-377.
“And so in this case, the common ownership and control of the various corporate appellees are impotent to liberate the alleged combination and conspiracy from the impact of the Act. The complaint charges that the restraint of interstate trade was not only effected by the combination of the appellees but was the primary object
of the combination. The theory of the complaint . . . is that ‘dominating power’ over the cab operating companies ‘was not obtained by normal expansion . . . but by deliberate, calculated purchase for control.‘” Id., at 227-228 (emphasis added) (quoting United States v. Reading Co., 253 U. S. 26, 57 (1920)).
It is the underscored language that later breathed life into the intra-enterprise conspiracy doctrine. The passage as a whole, however, more accurately stands for a quite different proposition. It has long been clear that a pattern of acquisitions may itself create a combination illegal under
The Court‘s opinion relies on Appalachian Coals, Inc. v. United States, 288 U. S. 344 (1933); however, examination of that case reveals that it gives very little support for the broad doctrine Yellow Cab has been thought to announce. On the contrary, the language of Chief Justice Hughes speaking for the Court in Appalachian Coals supports a contrary conclusion. After observing that “[t]he restrictions the Act imposes are not mechanical or artificial,” 288 U. S., at 360, he went on to state:
“The argument that integration may be considered a normal expansion of business, while a combination of independent producers in a common selling agency should be treated as abnormal—that one is a legitimate enterprise and the other is not—makes but an artificial distinction. The Anti-Trust Act aims at substance.” Id., at 377.7
As we shall see, infra, at 771-774, it is the intra-enterprise conspiracy doctrine itself that “makes but an artificial distinction” at the expense of substance.
The ambiguity of the Yellow Cab holding yielded the one case giving support to the intra-enterprise conspiracy doctrine.8 In Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U. S. 211 (1951), the Court held that two wholly owned subsidiaries of a liquor distiller were guilty under
“suggestion runs counter to our past decisions that common ownership and control does not liberate corporations from the impact of the antitrust laws”
and stated that this rule was “especially applicable” when defendants “hold themselves out as competitors.” Id., at 215.
Unlike the Yellow Cab passage, this language does not pertain to corporations whose initial affiliation was itself unlawful. In straying beyond Yellow Cab, the Kiefer-Stewart Court failed to confront the anomalies an intra-enterprise doctrine entails. It is relevant nonetheless that, were the case decided today, the same result probably could be justified on the ground that the subsidiaries conspired with wholesalers other than the plaintiff.9 An intra-enterprise conspiracy doctrine thus would no longer be necessary to a finding of liability on the facts of Kiefer-Stewart.
Later cases invoking the intra-enterprise conspiracy doctrine do little more than cite Yellow Cab or Kiefer-Stewart, and in none of the cases was the doctrine necessary to the result reached. Timken Roller Bearing Co. v. United States, 341 U. S. 593 (1951), involved restrictive horizontal agree-
The same is true of Perma Life Mufflers, Inc. v. International Parts Corp., 392 U. S. 134 (1968), which involved a conspiracy among a parent corporation and three subsidiaries to impose various illegal restrictions on plaintiff franchisees. The Court did suggest that, because the defendants
“availed themselves of the privilege of doing business through separate corporations, the fact of common own-
ership could not save them from any of the obligations that the law imposes on separate entities [citing Yellow Cab and Timken].” Id., at 141-142.
But the Court noted immediately thereafter that “[i]n any event” each plaintiff could “clearly” charge a combination between itself and the defendants or between the defendants and other franchise dealers. Ibid. Thus, for the same reason that a finding of liability in Kiefer-Stewart could today be justified without reference to the intra-enterprise conspiracy doctrine, see n. 9, supra, the doctrine was at most only an alternative holding in Perma Life Mufflers.
In short, while this Court has previously seemed to acquiesce in the intra-enterprise conspiracy doctrine, it has never explored or analyzed in detail the justifications for such a rule; the doctrine has played only a relatively minor role in the Court‘s Sherman Act holdings.
III
Petitioners, joined by the United States as amicus curiae, urge us to repudiate the intra-enterprise conspiracy doctrine.12 The central criticism is that the doctrine gives undue significance to the fact that a subsidiary is separately incorporated and thereby treats as the concerted activity of two
We limit our inquiry to the narrow issue squarely presented: whether a parent and its wholly owned subsidiary are capable of conspiring in violation of
A
The Sherman Act contains a “basic distinction between concerted and independent action.” Monsanto Co. v. Spray-Rite Service Corp., 465 U. S. 752, 761 (1984). The conduct of a single firm is governed by
The reason Congress treated concerted behavior more strictly than unilateral behavior is readily appreciated. Concerted activity inherently is fraught with anticompetitive
B
The distinction between unilateral and concerted conduct is necessary for a proper understanding of the terms “contract, combination . . . or conspiracy” in
Indeed, a rule that punished coordinated conduct simply because a corporation delegated certain responsibilities to autonomous units might well discourage corporations from creating divisions with their presumed benefits. This would serve no useful antitrust purpose but could well deprive consumers of the efficiencies that decentralized management may bring.
C
For similar reasons, the coordinated activity of a parent and its wholly owned subsidiary must be viewed as that of a single enterprise for purposes of
Indeed, the very notion of an “agreement” in Sherman Act terms between a parent and a wholly owned subsidiary lacks meaning. A
The intra-enterprise conspiracy doctrine looks to the form of an enterprise‘s structure and ignores the reality. Antitrust liability should not depend on whether a corporate subunit is organized as an unincorporated division or a wholly owned subsidiary. A corporation has complete power to maintain a wholly owned subsidiary in either form. The economic, legal, or other considerations that lead corporate management to choose one structure over the other are not relevant to whether the enterprise‘s conduct seriously threatens competition.19 Rather, a corporation may adopt the subsidiary form of organization for valid management and related purposes. Separate incorporation may im
Especially in view of the increasing complexity of corporate operations, a business enterprise should be free to structure itself in ways that serve efficiency of control, economy of operations, and other factors dictated by business judgment without increasing its exposure to antitrust liability. Because there is nothing inherently anticompetitive about a corporation‘s decision to create a subsidiary, the intra-enterprise conspiracy doctrine “impose[s] grave legal consequences upon organizational distinctions that are of de minimis meaning and effect.” Sunkist Growers, Inc. v. Winckler & Smith Citrus Products Co., 370 U. S. 19, 29 (1962).21
If antitrust liability turned on the garb in which a corporate subunit was clothed, parent corporations would be encouraged to convert subsidiaries into unincorporated divisions. Indeed, this is precisely what the Seagram company did after this Court‘s decision in Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U. S. 211 (1951).22 Such an
The error of treating a corporate division differently from a wholly owned subsidiary is readily seen from the facts of this case. Regal was operated as an unincorporated division of Lear Siegler for four years before it became a wholly owned subsidiary of Copperweld. Nothing in this record indicates any meaningful difference between Regal‘s operations as a division and its later operations as a separate corporation. Certainly nothing suggests that Regal was a greater threat to competition as a subsidiary of Copperweld than as a division of Lear Siegler. Under either arrangement, Regal might have acted to bar a new competitor from entering the market. In one case it could have relied on economic power from other quarters of the Lear Siegler corporation; instead it drew on the strength of its separately incorporated parent, Copperweld. From the standpoint of the antitrust laws, there is no reason to treat one more harshly than the other. As Chief Justice Hughes cautioned, “[r]ealities must dominate the judgment.” Appalachian Coals, Inc. v. United States, 288 U. S. 344, 360 (1933).23
D
Any reading of the Sherman Act that remains true to the Act‘s distinction between unilateral and concerted conduct will necessarily disappoint those who find that distinction arbitrary. It cannot be denied that § 1‘s focus on concerted
We have already noted that Congress left this “gap” for eminently sound reasons. Subjecting a single firm‘s every action to judicial scrutiny for reasonableness would threaten to discourage the competitive enthusiasm that the antitrust laws seek to promote. See supra, at 767-769. Moreover, whatever the wisdom of the distinction, the Act‘s plain language leaves no doubt that Congress made a purposeful choice to accord different treatment to unilateral and concerted conduct. Had Congress intended to outlaw unreasonable restraints of trade as such, § 1‘s requirement of a contract, combination, or conspiracy would be superfluous, as would the entirety of § 2.24 Indeed, this Court has recog
The appropriate inquiry in this case, therefore, is not whether the coordinated conduct of a parent and its wholly owned subsidiary may ever have anticompetitive effects, as the dissent suggests. Nor is it whether the term “conspiracy” will bear a literal construction that includes parent corporations and their wholly owned subsidiaries. For if these were the proper inquiries, a single firm‘s conduct would be subject to § 1 scrutiny whenever the coordination of two employees was involved. Such a rule would obliterate the Act‘s distinction between unilateral and concerted conduct, contrary to the clear intent of Congress as interpreted by the weight of judicial authority. See n. 15, supra. Rather, the appropriate inquiry requires us to explain the logic underlying Congress’ decision to exempt unilateral conduct from § 1 scrutiny, and to assess whether that logic similarly excludes the conduct of a parent and its wholly owned subsidiary. Unless we second-guess the judgment of Congress to limit § 1 to concerted conduct, we can only conclude that the coordinated behavior of a parent and its wholly owned subsidiary falls outside the reach of that provision.
Although we recognize that any “gap” the Sherman Act leaves is the sensible result of a purposeful policy decision by Congress, we also note that the size of any such gap is open
IV
We hold that Copperweld and its wholly owned subsidiary Regal are incapable of conspiring with each other for purposes of § 1 of the Sherman Act. To the extent that prior decisions of this Court are to the contrary, they are disapproved and overruled. Accordingly, the judgment of the Court of Appeals is reversed.
It is so ordered.
JUSTICE STEVENS, with whom JUSTICE BRENNAN and JUSTICE MARSHALL join, dissenting.
It is safe to assume that corporate affiliates do not vigorously compete with one another. A price-fixing or market-allocation agreement between two or more such corporate entities does not, therefore, eliminate any competition that would otherwise exist. It makes no difference whether such an agreement is labeled a “contract,” a “conspiracy,” or merely a policy decision, because it surely does not unreasonably restrain competition within the meaning of the Sherman Act. The Rule of Reason has always given the courts adequate latitude to examine the substance rather than the form of an arrangement when answering the question whether collective action has restrained competition within the meaning of § 1.
Today the Court announces a new per se rule: a wholly owned subsidiary is incapable of conspiring with its parent under § 1 of the Sherman Act. Instead of redefining the word “conspiracy,” the Court would be better advised to continue to rely on the Rule of Reason. Precisely because they do not eliminate competition that would otherwise exist but rather enhance the ability to compete, restraints which enable effective integration between a corporate parent and its subsidiary—the type of arrangement the Court is properly concerned with protecting—are not prohibited by § 1. Thus, the Court‘s desire to shield such arrangements from antitrust liability provides no justification for the Court‘s new rule.
In contrast, the case before us today presents the type of restraint that has precious little to do with effective integration between parent and subsidiary corporations. Rather, the purpose of the challenged conduct was to exclude a potential competitor of the subsidiary from the market. The jury apparently concluded that the two defendant corporations—
I
Repudiation of prior cases is not a step that should be taken lightly. As the Court wrote only days ago: “[A]ny departure from the doctrine of stare decisis demands special justification.” Arizona v. Rumsey, 467 U. S. 203, 212 (1984). It is therefore appropriate to begin with an examination of the precedents.
In United States v. Yellow Cab Co., 332 U. S. 218 (1947), the Court explicitly stated that a corporate subsidiary could conspire with its parent:
“The fact that these restraints occur in a setting described by the appellees as a vertically integrated enterprise does not necessarily remove the ban of the Sherman Act. The test of illegality under the Act is the presence or absence of an unreasonable restraint on interstate commerce. Such a restraint may result as readily from a conspiracy among those who are affiliated or integrated under common ownership as from a conspiracy among those who are otherwise independent.” Id., at 227.
The majority attempts to explain Yellow Cab by suggesting that it dealt only with unlawful acquisition of subsidiaries. Ante, at 761-762. But the Court mentioned acquisitions only as an additional consideration separate from the passage
At least three cases involving the motion picture industry also recognize that affiliated corporations may combine or conspire within the meaning of § 1. In United States v. Crescent Amusement Co., 323 U. S. 173 (1944), as the Court recognizes, ante, at 762, n. 6, the only conspirators were affiliated corporations. The majority‘s claim that the case involved only unlawful acquisitions because of the Court‘s comments concerning divestiture of the affiliates cannot be squared with the passage immediately following that cited by the majority, which states that there had been unlawful conduct going beyond the acquisition of subsidiaries:
“That principle is adequate here to justify divestiture of all interest in some of the affiliates since their acquisition was part of the fruits of the conspiracy. But the relief need not, and under these facts should not, be so restricted [to divestiture]. The fact that the companies were affiliated induced joint action and agreement. Common control was one of the instruments in bringing about unity of purpose and unity of action and in making the conspiracy effective. If that affiliation continues,
there will be tempting opportunity for these exhibitors to continue to act in combination against the independents.” 323 U. S., at 189-190 (emphasis supplied).
Similarly, in Schine Chain Theatres, Inc. v. United States, 334 U. S. 110 (1948), the Court held that concerted action by parents and subsidiaries constituted an unlawful conspiracy.3 That was also the holding in United States v. Griffith, 334 U. S. 100, 109 (1948). The majority‘s observation that in these cases there were alternative grounds that could have been used to reach the same result, ante, at 763, n. 8, disguises neither the fact that the holding that actually appears in these opinions rests on conspiracy between affiliated entities, nor that today‘s holding is inconsistent with what was actually held in these cases.
In Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U. S. 211 (1951), the Court‘s holding was plain and unequivocal:
“Respondents next suggest that their status as ‘mere instrumentalities of a single manufacturing-merchandizing unit’ makes it impossible for them to have conspired in a manner forbidden by the Sherman Act. But this suggestion runs counter to our past decisions that common ownership and control does not liberate corporations from the impact of the antitrust laws. E. g. United States v. Yellow Cab Co., 332 U. S. 218. The rule is especially applicable where, as here, respondents hold themselves out as competitors.” Id., at 215.
A construction of the statute that reaches agreements between corporate parents and subsidiaries was again embraced by the Court in Timken Roller Bearing Co. v. United States, 341 U. S. 593 (1951),5 and Perma Life Mufflers, Inc. v. International Parts Corp., 392 U. S. 134 (1968).6 The majority only notes that there might have been other grounds for decision available in these cases, ante, at 764-766, but again it cannot deny that its new rule is inconsistent with what the Court actually did write in these cases.
“[T]he salient factor is that the Supreme Court‘s decisions, while they need not be read with complete literalism, of course they cannot be ignored. It is no accident that every Court of Appeals to consider the question has concluded that a parent and its subsidiary have the same capacity to conspire, whether or not they can be found to have done so in a particular case.” 691 F. 2d 310, 317 (CA7 1982) (footnotes omitted).
Thus, we are not writing on a clean slate. “[W]e must bear in mind that considerations of stare decisis weigh heavily in the area of statutory construction, where Congress is free to change this Court‘s interpretation of its legislation.” Illinois Brick Co. v. Illinois, 431 U. S. 720, 736 (1977).10 There can be no doubt that the Court today changes what has been taken to be the long-settled rule: a rule that Congress did not revise at any point in the last four decades. At a minimum there should be a strong presumption against the approach taken today by the Court. It is to the merits of that approach that I now turn.
II
The language of § 1 of the Sherman Act is sweeping in its breadth: “Every contract, combination in the form of trust or
“[I]n view of the many new forms of contracts and combinations which were being evolved from existing economic conditions, it was deemed essential by an all-embracing enumeration to make sure that no form of contract or combination by which an undue restraint of interstate or foreign commerce was brought about could save such restraint from condemnation. The statute under this view evidenced the intent not to restrain the right to make and enforce contracts, whether resulting from combination or otherwise, which did not unduly restrain interstate or foreign commerce, but to protect that commerce from being restrained by methods, whether old or new, which would constitute an interference that is an undue restraint.” Standard Oil Co. v. United States, 221 U. S. 1, 59-60 (1911).
This broad construction is illustrated by the Court‘s refusal to limit the statute to actual agreements. Even mere acquiescence in an anticompetitive scheme has been held sufficient to satisfy the statutory language.11
Since the statute was written against the background of the common law,12 reference to the common law is particularly enlightening in construing the statutory requirement of a “contract, combination in the form of trust or otherwise, or conspiracy.” Under the common law, the question whether
Holding that affiliated corporations cannot constitute a plurality of actors is also inconsistent with the objectives of the Sherman Act. Congress was particularly concerned with “trusts,” hence it named them in § 1 as a specific form of “combination” at which the statute was directed. Yet “trusts” consisted of affiliated corporations. As Senator Sherman explained:
“Because these combinations are always in many States and, as the Senator from Missouri says, it will be very easy for them to make a corporation within a State. So they can; but that is only one corporation of the combination. The combination is always of two or more, and in one case of forty-odd corporations, all bound together by a link which holds them under the name of trustees, who are themselves incorporated under the laws of one of the States.” 21 Cong. Rec. 2569 (1890).
The activities of these “combinations” of affiliated corporations were of special concern:
“[A]ssociated enterprise and capital are not satisfied with partnerships and corporations competing with each other, and have invented a new form of combination commonly called trusts, that seeks to avoid competition by combining the controlling corporations, partnerships, and individuals engaged in the same business, and placing the power and property of the combination under the government of a few individuals, and often under the control of a single man called a trustee, a chairman, or a president.
The sole object of such a combination is to make competition impossible. It can control the market, raise or lower prices, as will best promote its selfish interests, reduce prices in a particular locality and break down competition and advance prices at will where competition does not exist. Its governing motive is to increase the profits of the parties composing it. The law of selfishness, uncontrolled by competition, compels it to disregard the interest of the consumer. It dictates terms to transportation companies, it commands the price of labor without fear of strikes, for in its field it allows no competitors. . . . It is this kind of a combination we have to deal with now.” Id., at 2457.17
Thus, the corporate subsidiary, when used as a device to eliminate competition, was one of the chief evils to which the Sherman Act was addressed.18 The anomaly in today‘s holding is that the corporate devices most similar to the original “trusts” are now those which free an enterprise from antitrust scrutiny.
I cannot believe that the Court really intends to express doubt as to whether the Congress that passed the Sherman Act thought conspiracy doctrine could apply to corporations. Ante, at 775-776, n. 24. If that were not the case, then the Sherman Act would have no application to corporations. Since, as is clear and as the Court concedes, the Sherman Act does apply to corporations, there can be no doubt that Congress intended to apply the law of conspiracy to agreements between corporations.
III
The Court‘s reason for rejecting the concept of a combination or conspiracy among a parent corporation and its wholly owned subsidiary is that it elevates form over substance—while in form the two corporations are separate legal entities, in substance they are a single integrated enterprise and hence cannot comprise the plurality of actors necessary to satisfy § 1. Ante, at 771-774. In many situations the Court‘s reasoning is perfectly sensible, for the affiliation of corporate entities often is procompetitive precisely because, as the Court explains, it enhances efficiency. A challenge to conduct that is merely an incident of the desirable integration that accompanies such affiliation should fail. However, the protection of such conduct provides no justification for the Court‘s new rule, precisely because such conduct cannot be characterized as an unreasonable restraint of trade violative of § 1. Conversely, the problem with the Court‘s new rule is that it leaves a significant gap in the enforcement of § 1 with respect to anticompetitive conduct that is entirely unrelated to the efficiencies associated with integration.
Since at least United States v. Colgate & Co., 250 U. S. 300 (1919), § 1 has been construed to require a plurality of actors. This requirement, however, is a consequence of the plain statutory language, not of any economic principle. As an economic matter, what is critical is the presence of market power, rather than a plurality of actors.19 From a competitive standpoint, a decision of a single firm possessing power to reduce output and raise prices above competitive levels has the same consequence as a decision by two firms acting together who have acquired an equivalent amount of market
The rule of Yellow Cab thus has an economic justification. It addresses a gap in antitrust enforcement by reaching anticompetitive agreements between affiliated corporations which
For example, in Yellow Cab the Court read the complaint as alleging that integration had assisted the parent in excluding competing manufacturers from the marketplace, 332 U. S., at 226-227, leading the Court to conclude that “restraint of interstate trade was not only effected by the combination of the appellees but was the primary object of the combination.” Id., at 227. Similarly, in Crescent Amusement the Court noted that corporate affiliation between exhibitors enhanced their buying power and “was one of the instruments in . . . making the conspiracy effective” in excluding independents from the market. 323 U. S., at 189-190. Thus, in both cases the Court found that the affiliation enhanced the ability of the parent corporation to exclude the competition of third parties, and hence raised entry
There are other ways in which corporate affiliation can operate to restrain competition. A wholly owned subsidiary might market a “fighting brand” or engage in other predatory behavior that would be more effective if its ownership were concealed than if it was known that only one firm was involved. A predator might be willing to accept the risk of bankrupting a subsidiary when it could not afford to let a division incur similar risks. Affiliated corporations might enhance their power over suppliers by agreeing to refuse to deal with those who deal with an actual or potential com
In this case, it may be that notices to potential suppliers of respondent emanating from Copperweld carried more weight than would notices coming only from Regal. There was evidence suggesting that Regal and Copperweld were not integrated, and that the challenged agreement had little to do with achieving procompetitive efficiencies and much to do with protecting Regal‘s market position. The Court does not even try to explain why their common ownership meant that Copperweld and Regal were merely obtaining benefits associated with the efficiencies of integration. Both the District Court and the Court of Appeals thought that their agreement had a very different result—that it raised barriers to entry and imposed an appreciable marketwide restraint. The Court‘s discussion of the justifications for corporate affiliation is therefore entirely abstract—while it dutifully lists the procompetitive justifications for corporate affiliation, ante, at 772-774, it fails to explain how any of them relate to the conduct at issue in this case. What is challenged here is not the fact of integration between Regal and Copperweld, but their specific agreement with respect to Independence. That agreement concerned the exclusion of
In sum, the question that the Court should ask is not why a wholly owned subsidiary should be treated differently from a corporate division, since the immunity accorded that type of arrangement is a necessary consequence of Colgate. Rather the question should be why two corporations that engage in a predatory course of conduct which produces a marketwide restraint on competition and which, as separate legal entities, can be easily fit within the language of § 1, should be immunized from liability because they are controlled by the same godfather. That is a question the Court simply fails to confront. I respectfully dissent.