Copperweld Corp. v. Independence Tube Corp.
467 U.S. 752 (1984)
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Rule of Law:
A parent corporation and its wholly owned subsidiary are legally incapable of conspiring with each other under Section 1 of the Sherman Act. Their coordinated activity must be viewed as that of a single enterprise, not as a "contract, combination... or conspiracy" between separate entities.
Facts:
- David Grohne was the president of Regal Tube Co. while it was an unincorporated division of Lear Siegler, Inc.
- In 1972, Copperweld Corp. purchased the Regal division and re-established it as a new, wholly owned subsidiary, also named Regal Tube Co.
- After the acquisition, Grohne left and formed his own competing steel tubing business, Independence Tube Corp.
- Independence Tube placed an order for a crucial tubing mill from the Yoder Co. to begin operations.
- Upon learning of this, executives at Copperweld and Regal sent a warning letter to Yoder, threatening legal action to protect Regal's trade secrets and rights under its original purchase agreement.
- As a direct result of the letter, Yoder voided its contract to supply the mill to Independence Tube.
- Independence Tube was forced to find another supplier, which delayed the start of its operations by nine months.
- Copperweld and Regal also contacted banks, real estate firms, and potential customers in an effort to discourage them from dealing with Independence Tube.
Procedural Posture:
- Independence Tube Corp. sued Copperweld Corp. and its subsidiary, Regal Tube Co., in the U.S. District Court (a court of first instance), alleging a conspiracy in violation of Section 1 of the Sherman Act.
- A jury found in favor of Independence Tube, concluding that Copperweld and Regal had illegally conspired, and awarded damages, which the court trebled.
- Copperweld and Regal, as appellants, appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit.
- The Court of Appeals affirmed the district court's judgment, holding that a parent and its wholly owned subsidiary could be found liable for conspiring if they maintained sufficient separation as distinct entities.
- The U.S. Supreme Court granted certiorari to review the decision of the Court of Appeals.
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Issue:
Does the coordinated activity of a parent corporation and its wholly owned subsidiary constitute a "combination or conspiracy" in violation of Section 1 of the Sherman Act?
Opinions:
Majority - Chief Justice Burger
No. The coordinated activity of a parent corporation and its wholly owned subsidiary does not constitute a combination or conspiracy under Section 1 of the Sherman Act because they are a single economic enterprise. The Sherman Act draws a fundamental distinction between concerted action (§ 1), which is judged harshly, and unilateral conduct (§ 2), which is only unlawful when it threatens monopolization. Concerted action is treated more strictly because it joins the economic power of two or more previously independent decision-makers. The coordinated activities of officers within a single firm, or a corporation and its unincorporated division, are considered unilateral because they share a complete unity of interest and do not join separate economic centers. For the same reason, a parent and its wholly owned subsidiary must be viewed as a single enterprise; their objectives are common, guided by one corporate consciousness. To treat a wholly owned subsidiary differently from an unincorporated division would elevate form over substance, as the choice of corporate structure is often based on tax, management, or other business considerations irrelevant to antitrust policy. The intra-enterprise conspiracy doctrine is therefore rejected in this context, and prior precedents supporting it are overruled.
Dissenting - Justice Stevens
Yes. The coordinated activity of a parent and subsidiary can constitute a conspiracy under Section 1 of the Sherman Act, and the Court's new per se rule of immunity is a departure from established precedent and undermines the statute's purpose. The Court repudiates a long line of cases, including United States v. Yellow Cab Co., which held that common ownership does not immunize affiliated corporations from antitrust laws. The Sherman Act was specifically enacted to combat "trusts," which were combinations of affiliated corporations, making the majority's holding ironic. The focus should be on the substance of the conduct, not the corporate structure. When affiliated corporations engage in manifestly anticompetitive, exclusionary conduct aimed at third parties—as Copperweld and Regal did here—their actions should be subject to § 1 scrutiny. The Rule of Reason provides the proper framework to distinguish between beneficial, procompetitive integration and harmful, exclusionary conduct, a tool the majority discards in favor of a bright-line rule that creates a significant gap in antitrust enforcement.
Analysis:
This decision established a bright-line rule that a parent company and its wholly owned subsidiary form a single entity for § 1 conspiracy purposes, effectively ending the intra-enterprise conspiracy doctrine in this context. The ruling favors a substance-over-form approach, focusing on the economic reality of a unified enterprise rather than the legal formality of separate incorporation. This provides corporations with greater certainty and flexibility in structuring their operations without risking § 1 liability for internal coordination. Consequently, plaintiffs harmed by the coordinated conduct of a parent and its wholly owned subsidiary must now meet the higher burden of proving monopolization or attempted monopolization under § 2 of the Sherman Act, or rely on state tort law.
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