Competition is the mainspring of a capitalist economy. Sometimes, however, cooperation can make markets more efficient; setting industry standards and pooling market data are two examples of arrangements that often benefit consumers. Antitrust laws acknowledge these benefits, but still treat the arrangements with skepticism, for seemingly benign agreements may conceal highly anticom-petitive schemes. We apply these principles to a case involving a real estate Multiple Listing Service.
Background
Real estate agents make a living matching buyers and sellers. Up-to-date information about properties on the market is a must. Long gone are the days when agents trawled the neighborhood on horseback in search of telltale “For Sale” signs. We’re now in the era of the Multiple Listing Service, or “MLS,” which lets agents share information about properties on the market with the help of a computerized database. Agents who subscribe to the MLS can peruse the listings of other subscribers and post their own.
Care and feeding of an MLS involves more than just maintaining a database. Someone must enroll new MLS subscribers, bill and collect payments, ensure that postings comply with guidelines and provide support staff to answer subscribers’ questions. These “support services” are part of the necessary overhead of delivering an MLS.
Before 1992, twelve MLSs served San Diego County, each operated by a different real estate trade association serving subscribers in a particular region of the county. Some of these MLSs shared common databases of listings. The direct cost of maintaining each database was allocated among the associations using it. The associations each provided their own support services, which varied from one to the next, and they all set the prices they charged agents independently. There were four different MLS databases in total, so a real estate agent who wanted access to all properties in San Diego County had to subscribe to more than one MLS.
Eleven of the twelve MLS operators were local Associations of Realtors, professional groups with ties to the California Association of Realtors (CAR) and the National Association of Realtors (NAR).
In 1990-91, these eleven associations decided to combine their databases. Not only would this give their agents access to all San Diego County properties through a single MLS, it would reduce operating costs because there would only be one database to maintain. Representatives met and decided to create a new entity called Sandicor with a single MLS database covering all of San Diego County. They considered it vital, though, that individual as
The representatives considered two different business models on which to operate the new common database. The first was a “decentralized” arrangement in which each association would pay its share of the database costs but determine its own support service and pricing policies. The smaller associations balked at this proposal, fearing that SDAR would undercut their prices and threaten their viability. The representatives responded by adopting the current “centralized” business model instead.
In this model, Sandicor is a corporation, and the associations own its shares and appoint its directors. The associations operate under service agreements with Sandicor that outline in general terms the support services they must perform for subscribers. Associations sign up new MLS subscribers and collect MLS fees from subscribers on Sandicor’s behalf, but Sandicor determines the fee agents must pay to subscribe. Associations are prohibited from discounting Sandicor’s MLS fee or crediting any portion of it against other purchases. The service agreements between Sandicor and the associations specify a support fee that Sandicor pays each association in return for the support services the association provides to subscribers. Thus, subscribers don’t pay the associations for support services directly; they pay only Sandicor’s MLS fee, and Sandicor then returns part of that fee as a support fee to the associations. The support fee, like the MLS fee, is assessed on a per-subscriber basis.
The associations originally set the support fee at $25 per subscriber per month.
Defendants explain that this centralized model was “a fundamental matter for survival” because the smaller associations needed assurance that they could “continue to operate service centers as they had in the past and that the revenues they had received from MLS services would continue to be available.” If Sandicor had adopted a decentralized format, “the far larger San Diego Association of Realtors ... would undoubtedly have been able to offer different prices to MLS users than would Fallbrook,” which would have “threatened the future viability of local service centers.” Without the revenue guaranteed by the fixed support fee, “the smaller Associations would not have joined,” and Sandicor would not have had a “truly regional MLS.”
Plaintiffs’ Suit and Proceedings Below
Arleen Freeman and James Alexander are San Diego County real estate agents who subscribe to Sandicor’s MLS. They have no quarrel with Sandicor’s monopoly of the MLS database itself, recognizing that the single countywide database offers
Plaintiff Freeman also sent a letter to Sandicor in which she proposed to operate a service center that would provide Sandi-cor’s MLS to subscribers. She claimed she could provide support services at a much lower price than the associations. Sandicor declined. Freeman believes Sandicor refuses to authorize new MLS support service providers for anticompeti-tive reasons, and that restrictive provisions in Sandicor’s shareholders’ agreement allow the associations to veto new sources of competition. Defendants respond that Sandicor refused the request because it was an obvious litigation ploy rather than a bona fide proposal. Plaintiffs nonetheless claim that the associations violated section 2 of the Sherman Act by conspiring to monopolize the market for support services. 15 U.S.C. § 2.
Plaintiffs filed a class action in federal court seeking an injunction and damages in excess of $10 million, naming as defendants Sandicor, the associations, the California Association of Realtors and assorted officers and directors of these organizations.
Following discovery, both sides moved for summary judgment. Defendants argued that their conduct had no substantial effect on interstate commerce and that they were immune from section 1 because they were a single entity under Copperweld Corp. v. Independence Tube Corp.,
Both sides appeal. The district court had jurisdiction under 28 U.S.C. §§ 1331 and 1337. We have jurisdiction under 28 U.S.C. § 1291, and, except as noted below, we review de novo, Morrison v. Hall,
Interstate Commerce
The Sherman Act applies to restraints of trade or commerce “among the several States.” 15 U.S.C. §§ 1-2. Monopolizing the local lemonade stand doesn’t get you into federal court. To make a federal case, a plaintiff must show that the activities in question, although conducted within a state, have a “substantial effect on interstate commerce.” McLain v. Real Estate Bd. of New Orleans, Inc.,
Defendants urge that we consider only the interstate effects caused by the illegal conduct itself. According to their economics expert, the cost of an MLS subscription is trivial compared to the typical real estate sales commission. Thus, even if the cost of the MLS was inflated, it would have only a de minimis effect on the commissions real estate agents charge, and thus no effect on the number of houses sold. Defendants misunderstand the legal standard. The Supreme Court has explained:
To establish the jurisdictional element of a Sherman Act violation it would be sufficient for petitioners to demonstrate a substantial effect on interstate commerce generated by respondents’ [“infected”] activity. Petitioners need not make the more particularized showing of an effect on interstate commerce caused by the alleged conspiracy to fix [prices], or by. those other aspects of respondents’ activity that are alleged to be unlawful.
Id. at 242-43,
Defendants perceive a split in Ninth Circuit authority between cases applying the infected activities test and those considering a defendant’s “ ‘general business’ activities.” See Mitchell v. Frank R. Howard Mem’l Hosp.,
Price Fixing
1. No antitrust violation is more abominated than the agreement to fix prices.
None of the relevant facts is disputed. Prior to 1992, the associations made independent decisions about how to price their support services, even though many of them shared common databases. When they decided to form a countywide database, they debated whether to continue that system of independent pricing or to set a fixed, uniform fee that they would receive for providing support services. They opted for the latter arrangement and selected a fee that was more than double the cost of the most efficient association. They admit that they fixed the fee in order to ensure that financially weaker associations would make more money than under a competitive regime, and thus concede by implication that they intentionally fixed the fee at a supracompetitive level.
The district court nonetheless rejected plaintiffs’ theory of the case because it was not convinced that the associations sold anything to Sandicor. The court explained that “[a] review of the Service Center Agreements ... reveals the Associations do not sell service center functions to Sandicor, but rather provide Sandicor’s MLS to users.” The terms of the service agreements, however, are unambiguous: “The Association will provide the following [support] services to SANDICOR MLS participants,” Service Agreement ¶ 1; “[i]n consideration of the above services, SANDICOR will pay to the Association the fees itemized on Schedule A,” id. ¶ 2. Sandicor is paying for something. What it’s buying is the contractual right to have the associations provide support services to its MLS subscribers. That the subscribers receive the support services as third-party beneficiaries doesn’t change the fact that Sandicor is the buyer and the associations are the sellers. Cf. FTC v. Superior Court Trial Lawyers Ass’n,
Sandicor charges subscribers for their use of the MLS; its MLS fee includes the support services provided by the associations. The support fee Sandicor in turn pays the associations for support services was fixed at a level more than twice what it cost the most efficient association to provide them. These inflated support fees harm subscribers if Sandicor passes them on in the form of higher MLS fees. The district court found that “there is no evidence ... [that Sandicor] passes on an inflated price to consumers.” This finding is contrary to the record.
There is unmistakable evidence that Sandicor not only considered its costs in setting MLS fees but, in fact, priced near cost and thus may have passed on the inflated support fees almost dollar for dollar. For example, an April 1997 association bulletin explains that “[Sandicor’s] pricing takes the total amount required to run Sandicor and divides by the total number of agents on the system. The amount to run Sandicor includes ... the amount Sandicor sends back to each Association, by contractual arrangement, to provide you with local service.” North San Diego County Ass’n of Realtors, Sandicor Board of Directors Approves Per Capita Fee Structure, Service Center Supplement, Apr. 1997, at 1, E.R. at 441 (emphasis omitted). Other materials in the record are to the same effect. See, e.g., Letter from William C. Stegall, President/CEO of Sandicor (June 20,1997), E.R. at 454 (stating that Sandicor would study ways in which “costs can be reduced” so that it could sell MLS at the “lowest possible cost in the future for all of our consumers”); San Diego Ass’n of Realtors, M.L.S.—Why $27 Per Month? (Jan. 3, 1992), E.R. at 256 (“[Sandicor’s MLS] price was determined by the lowest possible cost to users....”). This evidence is sufficient to show that Sandicor’s prices reflected its costs to some extent and thus that an inflated support fee injured plaintiffs. In contrast, the record does not support the counterintuitive claim that Sandicor is some sort of accounting pyrrhonist that sets its prices in utter disregard of its costs of doing business.
That a purchaser suffers higher prices from passed-on costs doesn’t necessarily mean he can sue. Illinois Brick denies standing to indirect purchasers in many circumstances. Ill. Brick Co. v. Illinois,
Were we to grant immunity from section 1 merely because defendants nominally sell services through another entity rather than to consumers directly, we would risk opening a major loophole for resale price maintenance and retailer collusion. Consider the following: Ford can’t sell cars to its dealers wholesale for $20,000 and require them to mark up the price exactly $4000 before reselling them to the public — that would be resale price maintenance, a per se violation of section 1. See Bus. Elecs. Corp. v. Sharp Elecs. Corp.,
The discount ban, while not necessary to our finding of a section 1 violation, certainly supports our conclusion. Agreements not to offer discounts are per se violations of section 1. Catalano, Inc. v.
No one doubts that Sandicor and the associations may set policies necessary to maintain the MLS database. See United States v. Realty Multi-List, Inc.,
The associations engaged in price fixing, and plaintiffs have standing to sue them. The associations purposely fixed the support fee they charged Sandicor at a supracompetitive level.
2. Defendants argue that they are immune from section 1 because they constitute a “single entity” and are thus incapable of conspiring with one another. Section' 1, like the tango, requires multiplicity: A company cannot conspire with itself. Copperweld Corp. v. Independence Tube Corp.,
The single-entity rule is relevant in a variety of contexts. It applies to a company and its officers, employees and wholly owned subsidiaries. Id. at 769, 771,
Some decisions have found a single entity even in the absence of economic unity. In City of Mt. Pleasant v. Associated Electric Cooperative, Inc.,
On the other hand, in Los Angeles Memorial Coliseum Commission v. National Football League,
Although the single-entity inquiry is fact-specific, Williams,
Second, in the absence of economic unity, the fact that firms are not actual
Finally, where firms are not an economic unit and are at least potential competitors, they are usually not a single entity for antitrust purposes. This rough guideline fairly captures the holdings of the cases above.
These principles resolve the issue here.
The associations are also at least potential competitors. Nothing innate in the economics of a countywide MLS requires an agent to subscribe through one association rather than another. Because Sandi-cor pays support fees on a per-subscriber basis, competition among associations to sign up new MLS subscribers is also competition in the market to sell support services to Sandicor. The more subscribers an association signs up, the more support services it sells to Sandicor. If one association offered better support services — • longer hours, a nicer building, more patient help staff — it could attract more subscribers.
The associations are also now actual competitors. Before 1994, rules of the National Association of Realtors required an agent to join the association in the geo
Defendants sabotage their theory by their own admissions. They concede they fixed support fees in part because SDAR “would undoubtedly have been able to offer different prices to MLS users than would Fallbrook” under the board of choice regime, whose arrival was imminent when they formed Sandicor. They explain: “The board-of-choice prospect buttressed the attractiveness of a centralized MLS structure, working hand-in-glove with the underlying notion of fairness of offering the same services at the same prices to all participants.” In other words: “The prospect of having to compete with one another buttressed the attractiveness of a cartel, where we could fix prices and services in ways we thought were fair.” Rarely do antitrust defendants serve up their own heads on so shiny a silver platter.
The associations are not a single entity, and so their joint venture is not immune from scrutiny under section l.
3. Defendants argue that, if we don’t find them categorically immune from section 1, we should evaluate their conduct under the more forgiving “rule of reason” rather than the per se rule. Under the rule of reason, we look to the particular facts of the case to determine whether a challenged restraint is likely to enhance or harm competition. See Nat’l Soc’y of Prof'l Eng’rs v. United States,
Defendants offer three reasons why BMI and NCAA apply. They first claim that the inherent cooperative aspects of the MLS as a joint venture warrant more deferential review. They next argue that fixing support fees is necessary to realize the “underlying notion of fairness of offering the same services at the same prices to all participants.” Finally, they contend that Fallbrook and Valley Center’s refusal to join the MLS on a decentralized basis made it necessary to fix support fees if the countywide MLS was to exist at all.
We reject the first argument because any elements of novelty and cooperation in the MLS are irrelevant to whether support fees are fixed or set competitively. Plaintiffs challenge the associations’ support fees, not Sandicor’s MLS fee, and fixed support fees are not a “necessary consequence” of the countywide MLS. BMI,
NCAA is likewise inapplicable. To fall within that case’s protection, the price fixing need not itself be essential, see NCAA,
We likewise reject the argument relying on the “underlying notion of fairness of offering the same services at the same prices to all participants.” The “fairness” of uniform pricing is not a relevant consideration in an antitrust case; consumers are presumed to prefer lower prices to the satisfaction of knowing they paid the same inflated price as everyone else. Nor can the price fixing be justified as necessary to ensure uniform support services. Even assuming arguendo that defendants have a legitimate interest in standardizing support services, fixing the price of those services is not a reasonably tailored means of achieving the goal. Sandicor’s service agreements already specify the services that the associations must provide. Fixing the price of those
We turn, finally, to the claim that price fixing was justified to convince the smaller associations to join the countywide MLS. This theory at least attempts to explain why the restraint itself was necessary to the joint venture. Nonetheless, it fails to state a valid defense.
We reject some justifications as a matter of antitrust policy, even though they might show that a particular restraint benefits consumers. Among these are theories that “depend! ] on power over price for their efficacy.” 7 Phillip E. Areeda & Herbert E. Hovenkamp, Antitrust Law ¶ 1504c, at 361 (2d ed.2003). In Professional Engineers, for example, the Court held that competitive bidding could not be banned on the theory that it would tempt engineers to do shoddy work.
Like the defendant in Professional Engineers, the associations here seek to justify not only fixing prices, but intentionally fixing prices at a supracompetitive level. This defense is very different from the ones raised in BMI and NCAA. Defendants in BMI justified blanket licenses on the ground that negotiating song licenses on an individual basis is impractical.
Moreover, defendants assume that, without Fallbrook and Valley Center, there couldn’t be a true countywide MLS. But Sandicor could have formed without them and then competed for their 400 subscribers. An MLS’s listings come from its subscribers, so its coverage is simply a function of who subscribes. Other than NAR’s now-defunct geographical restrictions, nothing prevented subscribers in Fallbrook or Valley Center from choosing Sandicor’s MLS over their local service.
We find all the asserted defenses legally deficient or factually unsupported. The record compels the conclusion that defendants violated section 1 of the Sherman Act by fixing support fees. The district court should have denied summary judgment to defendants and granted it to plaintiffs instead.
Conspiracy To Monopolize
. Plaintiffs also allege a conspiracy to monopolize the market for support services. To prevail, they must show “specific intent to monopolize and anticompeti-tive acts designed to effect that intent.” Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc.,
Plaintiffs’ section 2 case centers around restrictive provisions in Sandicor’s shareholders’ agreement and its rejection of Freeman’s offer to run a competing service center. The shareholders’ agreement reads as follows:
¶ 4.2. To pass a Major Corporate Resolution, ... the holders of not less than two-thirds of the outstanding Shares cast by not less than two Shareholders must vote ... in favor of the resolution. ¶ 4.3. A Major Corporate Resolution shall be defined as follows:
(2) Any decision that substantially changes the corporate structure, including but not limited to, the admission of new Shareholders, or entering into an agreement with any other Board of Realtors or Shareholder.
Freeman proposed that Sandicor sell MLS database access to her directly at a rate that excluded the support fee, and that she resell it to agents with her own support services. Essentially, she sought to run a service center on a “decentralized” basis. Sandicor refused, explaining that her proposal was incompatible with Sandicor’s centralized structure. Plaintiffs attribute this rejection to the shareholders’ agreement. They draw a parallel to Associated Press v. United States,
The district court rejected the section 2 claim in part because Freeman had no bona fide intent to operate a competing service center. Even accepting this to be the case, we conclude that plaintiffs have standing to sue. That Freeman had no bona fide competitive intent might undermine her standing as a competitor, but she is also an indirect purchaser of support services. If the associations exclude competitors, she suffers inflated prices, and she has standing to sue as an aggrieved consumer. See In re Ins. Antitrust Litig.,
Nonetheless, the shareholders’ agreement does not explain Sandicor’s rejection of Freeman’s offer. It applies. only to “admission of new Shareholders, or enter
This doesn’t end the section 2 inquiry, however. Even though there was no causal relationship between the shareholders’ agreement and the rejection, they each might still be independent “anticompetitive acts” sufficient to support a section 2 conspiracy claim. See Hunt-Wesson Foods,
We find no genuine issue as to the adoption of the shareholders’ agreement. Although there are some parallels between this case and Associated Press, the distinctions are significant. First, the agreement in Associated Press distinguished between new members who would compete with existing members and new members who would not.
Unlike the bylaws in Associated Press, see id. at 6,
Finally, we consider whether the rejection of Freeman’s proposal violated section 2. Defendants may not “refus[e] to deal in order to create or maintain a monopoly absent a legitimate business justification.” Image Technical Servs., Inc. v. Eastman Kodak Co.,
Plaintiffs have failed to raise a genuine issue that either the execution of the shareholders’ agreement or the rejection of Freeman’s proposal was driven by a specific intent to monopolize. The district court correctly granted summary judgment in favor of defendants on the conspiracy to monopolize claim.
Claims Against the California Association of Realtors
The California Association of Realtors isn’t a party to any of the offending agreements, but plaintiffs allege that CAR lawyers encouraged the associations’ antitrust violations. Plaintiffs have failed to turn up any evidence to support this theory. There is some evidence suggesting that CAR encouraged a corporate form for Sandicor, but this doesn’t show that CAR encouraged the associations to fix support fees. A CAR attorney did opine that fixed support fees were legal. But nothing indicates that she recommended the arrangement, and dispassionate legal advice is not an antitrust violation. See Tillamook Cheese & Dairy Ass’n v. Tillamook County Creamery Ass’n,
Discovery Sanctions
Shortly after discovery closed, Sandicor’s president Bill Stegall, who had been diagnosed with cancer, resigned and revealed to plaintiffs’ counsel that documents had been withheld. Plaintiffs moved to compel discovery of the documents and asked for sanctions. A magistrate judge found that the failure to produce the documents was willful, and awarded plaintiffs their costs of filing the motion under Fed.R.Civ.P. 37(a)(4). The district court approved the award, and we review it only for abuse of discretion. Rio Props., Inc. v. Rio Int’l Interlink,
Relying on Badalamenti v. Dunham’s, Inc.,
Conclusion
Antitrust law doesn’t frown on all joint ventures among competitors — far from it. If a joint venture benefits consumers and doesn’t violate any applicable per se rules, it will often be perfectly legal. The decision to combine MLS databases fits comfortably within this category. See Realty Multi-List,
We AFFIRM the district court’s holding that defendants’ activities substantially affected interstate commerce. We also AFFIRM summary judgment in favor of defendants on the section 2 claim and summary judgment in favor of CAR on all claims. Finally, we AFFIRM the court’s award of discovery sanctions.
We REVERSE, however, on the merits of the principal section 1 claim. Plaintiffs’ evidence is sufficient to prove a violation of section 1 by Sandicor and the associations. Defendants have presented no evidence that refutes the legal essentials of plaintiffs’ case. The district court should have denied summary judgment to defendants and awarded it to plaintiffs instead.
We remand to the district court for further proceedings consistent with this opinion.
AFFIRMED in part, REVERSED in part and REMANDED. Costs to appellants, except that appellee California Association of Realtors shall recover its costs from appellants.
Notes
. The facts we describe are uncontested unless otherwise noted.
. State law and industry practice distinguish between “brokers” and “salespersons.” We use the term "agents” throughout as a generic placeholder for real estate professionals who are typical MLS subscribers.
.The other association was unaffiliated and didn’t participate in any of the arrangements at issue in this case.
. Although Sandicor has experimented with different pricing policies, at most relevant times it charged fees based on the number of individuals who used the MLS. Thus, a real estate office with four agents using the MLS would pay four subscription fees.
. The fee has varied somewhat over the years but remains at approximately the same level.
. Ten dollars is the figure quoted at the 1991 meeting; plaintiffs claim that SDAR's cost of providing support services is actually much less. It is unclear from the briefing and record whether the $10 figure also included SDAR's share of the MLS database costs.
. Plaintiffs' briefs argue both monopolization and conspiracy to monopolize theories, but the Second Amended Complaint alleges only the conspiracy claim in the market for support services. Second Amended Complaint ¶¶ 158-160. The complaint also alleges monopolization and conspiracy to monopolize in the MLS market itself, id. ¶¶ 161-168, but plaintiffs abandoned arguments related to that market on appeal.
. Plaintiffs had earlier sued in California state court for violations of state antitrust law. The trial court dismissed the suit on the pleadings, and the court of appeal affirmed. Freeman v. San Diego Ass’n of Realtors,
. The only remaining individual defendant was Anita Alkire, who filed for bankruptcy during the proceedings. Plaintiffs have abandoned their claims against her.
. One manual captures the principle nicely in question and answer format: "[Q.] May competitors agree to fix prices? [A.] Duh. What do you think?” Eliot G. Disner, Antitrust Law for Business Lawyers § 4.06, at 82 (2001).
. A firm will normally pass on some portion of its cost-per-unit savings to consumers even if it is a profit-maximizing monopolist. This has nothing to do with altruism; a monopolist just makes more money by reducing its price in response to a cost decline and thus selling to more consumers. See Richard A. Posner, Antitrust Law: An Economic Perspective 248 (1976) ("[I]f the monopolist’s marginal cost declines (other things being the same), he will reduce his price....”). The theoretical economics of this case are more nuanced because the associations are shareholders of Sandicor. They could conceivably induce Sandicor to set MLS fees at a level that maximizes shareholder profits (dividends plus support fees) rather than its own. The level of support fees might then be less relevant (except perhaps as a device to make the MLS look less profitable than it really is). The record contains no evidence that Sandicor ever set MLS prices in this fashion, however. Instead, it indicates that Sandicor set prices based on costs.
. Defendants argue that an indirect purchaser who proves it can sue under Illinois Brick because of a unity of interest necessarily proves that it can't sue under Coppei-weld because of the very same unity of interest. This argument is clever but unpersuasive. Copper-weld looks at whether the defendants are commonly owned, not at whether they commonly own some other entity. Royal Printing, on the other hand, doesn't care who owns whom in the distribution chain. Thus, Cop-perweld doesn't apply here (as we will see) because the associations are independently owned, but Royal Printing applies because the associations own Sandicor.
. These figures reflect 1999 MLS and support fees.
.The district court rejected the section 1 claim in part because the associations’ support services and MLS database access were not "separate and distinct products or services” with "separate markets.” It relied heavily on tying concepts. Distinct product markets are crucial to a tying claim, but they are largely irrelevant to a price-fixing claim. Many forms of price fixing, for example, involve retail services that are obviously inseparable from the product itself. See, e.g., Cal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc.,
. A refund of part of Sandicor's MLS fee from an association to an agent is equivalent to a reduction in the support fee that Sandi-cor pays the association coupled with a reduction in the MLS fee that the agent pays Sandicor.
. Plaintiffs claim several other instances of price fixing. Sandicor’s board of directors, which is made up of association representatives, fixed the associations' retail prices on books, "tour inputs,” computer assistance by association staff, and lockboxes and replacement keypads. Defendants question plaintiffs’ standing to challenge these practices, observing that they did not specifically allege having purchased these products and services. We leave the issue for the district court to resolve on remand. Plaintiffs further challenge Sandicor’s policy of mandating "uniform” support services and a standardized splash screen. These are nonprice restraints subject to rule-of-reason analysis. See Cont’l T.V.,
. Los Angeles Memorial Coliseum was decided before Copperweld, but nothing in the latter impugns our holding in the former.
. We may resolve the issue of capacity to conspire because the relevant facts are not disputed. See L.A. Mem’l Coliseum,
. We assume this to be the case, although we do note that each association’s ownership interest in Sandicor is automatically adjusted every year to reflect the relative number of subscribers it serves, so that the associations have eliminated many of the elements of risk-sharing traditionally associated with the corporate form.
. The district court held that "[c]ompetition for members is outside the scope of the Associations’ joint venture.” But MLS subscriptions are one of the services associations sell to their respective members. An association that attracts more members thereby attracts more subscribers, and thus earns more support fees from Sandicor.
. The associations may have been actual competitors even before board of choice, because under Palsson,
.We note that our colleagues on the First Circuit recently disdained the Copperweld defense in a monogrammatically similar case. See Fraser v. Major League Soccer, L.L.C.,
. Professional Engineers was a rule of reason case, but the principle applies with even more force in the per se context.
. It does not matter that Fallbrook and Valley Center would have operated at a loss in a competitive environment. Their precarious financial situation may have explained their intransigence, but it does not transform it into a viable defense. If there is any argument the Sherman Act indisputably forecloses, it is that price fixing is necessary to save companies from losses they would suffer in a competitive market. See United States v. Socony-Vacuum Oil Co.,
. The $6000 figure is based on an assumed competitive price of $10, SDAR's stated costs in 1991. This is concededly a ballpark estimate, but the exact number is irrelevant to the point made.
. We also note that Fallbrook and Valley Center merged into larger associations nearly a decade ago. Even if defendants’ argument excused price fixing at the outset, we are at a loss to see how it justifies the persistence of the regime, given that the purported necessity no longer exists.
. We don’t mean to suggest that NAR’s restrictions would have been a valid defense while they existed. As essentially self-imposed limitations quite likely anticompetitive in their own right, they are hardly a defense to per se liability.
. Plenty of market defect theories do try to explain why consumers might continue using a product even after a better one becomes available. Switching costs, information asymmetries, and the defect du jour, the dreaded network externality, see United States v. Microsoft Corp.,
etration pricing, free trials, money-back guarantees — are these techniques so obviously ineffective that a firm has no choice but to violate the law? Network externalities generate substantial dissent even within the economics community, and not only over how they should shape antitrust analysis, Microsoft,
. The signing of the original shareholders' agreement antedates the limitations period, but the agreement has been re-executed several times since.
. That the agreement itself is not anticom-petitive doesn’t mean that it could never be anticompetitively applied. Even if the voting mechanism is permissible on its face, voting against new shareholders for anticompetitive reasons may still be a violation of section 2.
. Although decentralizing Sandicor would be one way to remedy the price-fixing violation, it is not the only way, and Freeman had no right to insist on it. Whether the district court may now order Sandicor to decentralize as a matter of equitable relief is a different story, and an issue we need not decide.
. The magistrate also awarded plaintiffs the costs of further discovery. That sanction hasn’t yet been approved by the district court and isn’t before us.