UNITED STATES v. CONTAINER CORPORATION OF AMERICA ET AL.
No. 27
Supreme Court of the United States
Argued November 18, 1968. - Decided January 14, 1969.
393 U.S. 333
Whitney North Seymour argued the cause for appellees. With him on the brief were William J. Manning and James W. Harbison, Jr., for Container Corporation of America, Joseph C. Carter, Jr., for Albemarle Paper
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This is a civil antitrust action charging a price-fixing agreement in violation of
The case as proved is unlike any other price decisions we have rendered. There was here an exchange of price information but no agreement to adhere to a price schedule as in Sugar Institute v. United States, 297 U. S. 553, or United States v. Socony-Vacuum Oil Co., 310 U. S. 150. There was here an exchange of information concerning specific sales to identified customers, not a statistical report on the average cost to all members,
Here all that was present was a request by each defendant of its competitor for information as to the most recent price charged or quoted, whenever it needed such information and whenever it was not available from another source. Each defendant on receiving that request usually furnished the data with the expectation that it would be furnished reciprocal information when it wanted it.2 That concerted action is of course sufficient to establish the combination or conspiracy, the initial ingredient of a violation of
There was of course freedom to withdraw from the agreement. But the fact remains that when a defendant requested and received price information, it was affirming its willingness to furnish such information in return.
There was to be sure an infrequency and irregularity of price exchanges between the defendants; and often the data were available from the records of the defendants or from the customers themselves. Yet the essence of the agreement was to furnish price information whenever requested.
Further, the price quoted was the current price which a customer would need to pay in order to obtain products from the defendant furnishing the data.
The defendants account for about 90% of the shipment of corrugated containers from plants in the Southeastern United States. While containers vary as to dimensions, weight, color, and so on, they are substantially identical, no matter who produces them, when made to particular specifications. The prices paid depend on price alternatives. Suppliers when seeking new or additional business or keeping old customers, do not exceed a competitor‘s price. It is common for purchasers to buy from two or more suppliers concurrently. A defendant supplying a customer with containers would usually quote the same price on additional orders, unless costs had changed. Yet where a competitor was charging a particular price, a defendant would normally quote the same price or even a lower price.
The exchange of price information seemed to have the effect of keeping prices within a fairly narrow ambit. Capacity has exceeded the demand from 1955 to 1963, the period covered by the complaint, and the trend of corrugated container prices has been downward. Yet despite this excess capacity and the downward trend of prices, the industry has expanded in the Southeast from 30 manufacturers with 49 plants to 51 manufacturers with 98 plants. An abundance of raw materials and machinery makes entry into the industry easy with an investment of $50,000 to $75,000.
The result of this reciprocal exchange of prices was to stabilize prices though at a downward level. Knowl-
Price is too critical, too sensitive a control to allow it to be used even in an informal manner to restrain competition.4
Reversed.
MR. JUSTICE FORTAS, concurring.
I join in the judgment and opinion of the Court. I do not understand the Court‘s opinion to hold that the exchange of specific information among sellers as to prices
Absent per se violation, proof is essential that the practice resulted in an unreasonable restraint of trade. There is no single test to determine when the record adequately shows an “unreasonable restraint of trade“; but a practice such as that here involved, which is adopted for the purpose of arriving at a determination of prices to be quoted to individual customers, inevitably suggests the probability that it so materially interfered with the operation of the price mechanism of the marketplace as to bring it within the condemnation of this Court‘s decisions. Cf. Sugar Institute v. United States, 297 U. S. 553 (1936); American Column & Lumber Co. v. United States, 257 U. S. 377 (1921).
Theoretical probability, however, is not enough unless we are to regard mere exchange of current price information as so akin to price-fixing by combination or conspiracy as to deserve the per se classification. I am not prepared to do this, nor is it necessary here. In this case, the probability that the exchange of specific price information led to an unlawful effect upon prices is adequately buttressed by evidence in the record. This evidence, although not overwhelming, is sufficient in the special circumstances of this case to show an actual effect on pricing and to compel us to hold that the court below erred in dismissing the Government‘s complaint.
In summary, the record shows that the defendants sought and obtained from competitors who were part of the arrangement information about the competitors’ prices to specific customers. “[I]n the majority of instances,” the District Court found, 273 F. Supp. 18, 27, that once a defendant had this information he quoted substantially the same price as the competitor, although a higher or lower price would “occasionally” be quoted. Thus the exchange of prices made it possible for indi-
On this record, taking into account the specially sensitive function of the price term in the antitrust equation, I cannot see that we would be justified in reaching any conclusion other than that defendants’ tacit agreement to exchange information about current prices to specific customers did in fact substantially limit the amount of price competition in the industry. That being so, there is no need to consider the possibility of a per se violation.
MR. JUSTICE MARSHALL, with whom MR. JUSTICE HARLAN and MR. JUSTICE STEWART join, dissenting.
I agree with the Court‘s holding that there existed an agreement among the defendants to exchange price information whenever requested. However, I cannot agree that that agreement should be condemned, either as illegal per se, or as having had the purpose or effect of restricting price competition in the corrugated container industry in the Southeastern United States.
Under the antitrust laws, numerous practices have been held to be illegal per se without regard to their precise purpose or harm. As this Court said in Northern Pacific R. Co. v. United States, 356 U. S. 1, 5 (1958), “there are certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.” Among these practices are price-
Per se rules always contain a degree of arbitrariness. They are justified on the assumption that the gains from imposition of the rule will far outweigh the losses and that significant administrative advantages will result. In other words, the potential competitive harm plus the administrative costs of determining in what particular situations the practice may be harmful must far outweigh the benefits that may result. If the potential benefits in the aggregate are outweighed to this degree, then they are simply not worth identifying in individual cases.
I do not believe that the agreement in the present case is so devoid of potential benefit or so inherently harmful that we are justified in condemning it without proof that it was entered into for the purpose of restraining price competition or that it actually had that effect. The agreement in this case was to supply, when re-
Complete market knowledge is certainly not an evil in perfectly competitive markets. This is not, however, such a market, and there is admittedly some danger that price information will be used for anticompetitive purposes, particularly the maintenance of prices at a high level. If the danger that price information will be so used is particularly high in a given situation, then perhaps exchange of information should be condemned.
I do not think the danger is sufficiently high in the present case. Defendants are only 18 of the 51 producers of corrugated containers in the Southeastern United States. Together, they do make up 90% of the market and the six largest defendants do control 60% of the market. But entry is easy; an investment of $50,000 to $75,000 is ordinarily all that is necessary. In fact, the number of sellers has increased from 30 to the present 51 in the eight-year period covered by the complaint. The size of the market has almost doubled because of increased demand for corrugated containers. Nevertheless, some excess capacity is present. The products produced by defendants are undifferentiated. Industry demand is inelastic, so that price changes will not, up to a certain point, affect the total amount purchased. The only effect of price changes will be to reallocate market shares among sellers.
In this market, we have a few sellers presently controlling a substantial share of the market. We have a large number competing for the remainder of the market, also quite substantial. And total demand is increasing. In such a case, I think it just as logical to assume that the sellers, especially the smaller and newer ones,1 will desire to capture a larger market share by cutting prices as it is that they will acquiesce in oligopolistic behavior. The likelihood that prices will be cut and that those lower prices will have to be met acts as a deterrent to setting prices at an artificially high level in the first place. Given the uncertainty about the probable effect of an exchange of price information in this context, I would require that the Government prove that the exchange was entered into for the purpose of, or that it had the effect of, restraining price competition.
The Court does not hold that the agreement in the present case was a deliberate attempt to stabilize prices. The evidence in the case, largely the result of stipulation, would not support such a holding. The Government points to a few isolated statements found in the depositions of industry witnesses, but I find these few fragmentary references totally insufficient. The weight of the evidence in the present case indicates that the price information was employed by each defendant on an individual basis, and was used by that defendant to set its prices for a specific customer; ultimately each seller wanted to obtain all or part of that customer‘s business at the expense of a competitor. The District Court found that there was no explicit agreement among defendants to stabilize prices and I do not believe that the desire of a few industry witnesses to use the information to minimize price cuts supports the conclusion that such an agreement was implicit. On the contrary, the evidence establishes that the information was used by defendants as each pleased and was actually employed for the purpose of engaging in active price competition.
Nor do I believe that the Government has proved that the exchange of price information has in this case had the necessary effect of restraining price competition.2 In
The record indicates that defendants have offered voluminous evidence concerning price trends and competitive behavior in the corrugated container market. Their exhibits indicate a downward trend in prices, with substantial price variations among defendants and among their different plants. There was also a great deal of shifting of accounts. The District Court specifically found that the corrugated container market was highly competitive and that each defendant engaged in active price competition. The Government would have us ignore this evidence and these findings, and assume that because we are dealing with an industry with overcapacity and yet continued entry, the new entrants must have been attracted by high profits. The Government then argues that high profits can only result from stabilization of prices at an unduly high level. Yet, the Government did not introduce any evidence about the level of profits in this industry, and no evidence about price levels. Not one customer was called, although the Government surely had ample access to defendants’ customers. The Government admits that the price trend was down, but asks the Court to assume that the trend would have been accelerated with less informed, and hence more vigorous, price competition.3 In the absence of any proof what-
Finally, the Government focuses on the finding of the District Court that in a majority of instances a defendant, when it received what it considered reliable price information, would quote or charge substantially the same price.4 The Court and my Brother FORTAS also focus on this finding. Such an approach ignores, however, the remainder of the District Court‘s findings. The trial judge found that price decisions were individual decisions, and that defendants frequently did cut prices in order to obtain a particular order.5 And, the absence of any price parallelism or price uniformity and the downward trend in the industry undercut the conclusion that price information was used to stabilize prices.6
The Government is ultimately forced to fall back on the theoretical argument that prices would have been more unstable and would have fallen faster without price information. As I said earlier, I cannot make this assumption on the basis of the evidence in this record. The findings of the Court below simply do not indicate that the exchange of information had a significant anti-