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Palmer v. BRG of Georgia, Inc.

Supreme Court of the United States
112 L. Ed. 2d 349, 111 S. Ct. 401 (1990)
ELI5:

Rule of Law:

An agreement between competitors to allocate geographic markets is a per se violation of Section 1 of the Sherman Act, regardless of whether the parties split a market in which they both previously competed. Furthermore, a combination formed for the purpose and with the effect of raising prices is also illegal per se.


Facts:

  • Harcourt Brace Jovanovich Legal and Professional Publications (HBJ) was the nation's largest provider of bar review materials and services.
  • BRG of Georgia, Inc. (BRG) also offered a bar review course in the state of Georgia.
  • From 1977 to 1979, HBJ and BRG were the two main providers of bar review courses in Georgia and were in direct competition with each other.
  • In 1980, BRG and HBJ entered into an agreement giving BRG an exclusive license to use HBJ's well-known 'Bar/Bri' trade name and materials in Georgia.
  • Under the agreement, HBJ agreed it would not compete with BRG in Georgia, and BRG agreed it would not compete with HBJ outside of Georgia.
  • The agreement also established a revenue-sharing formula where HBJ received $100 per student enrolled by BRG, plus 40% of all revenues over $350.
  • Immediately following the 1980 agreement, BRG increased the price of its course from approximately $150 to over $400.

Procedural Posture:

  • Petitioners, who took a bar review course from BRG, sued BRG and HBJ in the United States District Court, alleging violations of the Sherman Act.
  • On cross-motions for summary judgment, the District Court entered summary judgment for respondents BRG and HBJ, holding the agreement was lawful.
  • Petitioners appealed the District Court's judgment to the United States Court of Appeals for the Eleventh Circuit.
  • A divided panel of the Court of Appeals affirmed the District Court's ruling.
  • The Court of Appeals denied a petition for rehearing en banc.
  • Petitioners sought a writ of certiorari from the Supreme Court of the United States.

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Issue:

Does an agreement between two competing providers of bar review courses to allocate geographic markets, where one ceases to compete in a specific state in exchange for the other's agreement not to compete elsewhere, constitute a per se violation of Section 1 of the Sherman Act?


Opinions:

Majority - Per Curiam

Yes. An agreement between competitors to allocate territories to minimize competition is a per se violation of the Sherman Act. The Court reasoned that horizontal territorial limitations are naked restraints of trade with no purpose other than stifling competition. Citing United States v. Topco Associates, Inc., the Court held that such agreements are anticompetitive regardless of whether the parties split a market in which they both previously competed or merely reserve separate markets for each other. Here, HBJ and BRG, who were prior competitors, agreed to eliminate competition, with BRG receiving the Georgia market and HBJ receiving the rest of the country. Additionally, citing United States v. Socony-Vacuum Oil Co., the Court found that the revenue-sharing formula and the immediate, drastic price increase were clear evidence that the agreement was formed for the purpose and with the effect of raising prices, which is also a per se violation.


Dissenting - Justice Marshall

The dissent does not directly answer the substantive issue but argues against deciding the case summarily. Justice Marshall contended that summary dispositions deprive litigants of a fair opportunity to be heard on the merits and significantly increase the risk of an erroneous decision. While acknowledging that the lower court likely erred, he dissented from the Court's decision to summarily reverse the judgment without full briefing and oral argument.



Analysis:

This decision reaffirms and clarifies the judiciary's strict application of the per se rule against horizontal market allocation under the Sherman Act. It establishes that the rule is not limited to agreements that divide a currently shared market but extends to any agreement where competitors allocate separate, exclusive territories to eliminate competition between them. The case serves as a clear precedent that courts will not inquire into the reasonableness of such agreements; their existence alone constitutes an antitrust violation. This simplifies the burden of proof for plaintiffs in market allocation cases and reinforces a broad prohibition against competitor collaboration that restricts output or raises prices.

G

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