Rothery Storage & Van Co. v. Atlas Van Lines, Inc.
253 U.S. App. D.C. 142, 792 F.2d 210, 1986 U.S. App. LEXIS 25296 (1986)
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Rule of Law:
A horizontal restraint of trade that is ancillary to a legitimate economic integration is not per se illegal and should be evaluated under the rule of reason. If the integrated entity lacks market power, the ancillary restraint is presumptively lawful because it is incapable of producing anticompetitive effects on output or prices.
Facts:
- Atlas Van Lines, Inc. ('Atlas') is a national common carrier of household goods that operates through a network of independent moving companies as its agents.
- Some of these agents, known as 'carrier agents,' held their own interstate operating authority, which allowed them to compete directly with Atlas for interstate moving business.
- These carrier agents could and did use Atlas's equipment, reputation, training, and services for their own independent moves, from which Atlas received no revenue, creating a 'free-rider' problem.
- Following deregulation in the moving industry, it became easier for any agent to obtain independent interstate authority, increasing the potential for this free-riding and competition with Atlas.
- In response, Atlas implemented a new policy stating it would terminate its agency contract with any agent that continued to handle interstate carriage for its own account.
- Under the policy, an agent could continue its affiliation with Atlas only if it either relinquished its independent authority or transferred that authority to a separate corporation with a different name, which could not use Atlas's services or facilities.
Procedural Posture:
- Rothery Storage & Van Co. and several other agents sued Atlas Van Lines, Inc. in the U.S. District Court for the District of Columbia.
- The plaintiffs alleged that Atlas's new agency policy constituted a group boycott in violation of Section 1 of the Sherman Act.
- After discovery, both parties filed cross-motions for summary judgment.
- The district court granted summary judgment for the defendant, Atlas Van Lines, Inc.
- Rothery and the other agents, as appellants, appealed the district court's decision to the U.S. Court of Appeals for the D.C. Circuit.
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Issue:
Does a van line's policy, which requires its independent agents to either cease competing with the van line in the interstate market or conduct such competition through a separate, unaffiliated company, constitute a per se illegal group boycott under Section 1 of the Sherman Act?
Opinions:
Majority - Bork, Circuit Judge
No. A policy that eliminates competition among members of a cooperative venture, where the restraint is ancillary to the venture's main purpose and is necessary for its efficiency, is not a per se illegal group boycott. The court held that the challenged policy must be analyzed under the rule of reason. The agreement among Atlas and its agents was a horizontal restraint, but it was ancillary to their economic integration in the nationwide van line. The restraint was designed to enhance the efficiency of the Atlas system by eliminating the 'free-rider' problem, where carrier agents used Atlas's investments in reputation, services, and equipment to compete against it. Under a rule of reason analysis, the restraint is lawful because Atlas possesses a small market share (about 6%) in a highly competitive market, making it impossible for the policy to have an anticompetitive effect on overall market output or prices. The court reasoned that modern antitrust jurisprudence, particularly in cases like BMI and NCAA, has returned to the ancillary restraints doctrine of Addyston Pipe & Steel, effectively overruling the stricter per se approach of cases like Topco.
Concurring - Wald, Circuit Judge
No, the policy is not a per se illegal group boycott. While concurring in the result, this opinion expresses concern over the majority's near-exclusive reliance on market share to determine the outcome under the rule of reason. The concurrence argues that antitrust laws may have goals beyond pure economic efficiency and that courts should not abandon a traditional 'totality of the circumstances' balancing of procompetitive virtues against anticompetitive evils. The majority's focus on market power as the dispositive factor creates a 'per se rule of legality' for firms lacking market power, an approach not yet sanctioned by the Supreme Court. A full rule of reason analysis, like that performed by the district court, is the more prudent approach until the Supreme Court provides more definitive instruction.
Analysis:
This case is a landmark decision in modern antitrust law, solidifying the shift away from a rigid per se condemnation of horizontal restraints toward a more nuanced rule of reason analysis for ancillary restraints. Judge Bork's opinion champions the Chicago School's focus on economic efficiency and consumer welfare as the sole goals of antitrust, arguing that without market power, a restraint cannot be anticompetitive because it cannot affect industry-wide output. This approach provides a powerful defense for joint ventures and other cooperative arrangements that impose internal restrictions to solve problems like free-riding. The decision significantly limits the applicability of the per se rule from cases like Topco and establishes that a defendant's lack of market power can be a dispositive threshold issue in a rule of reason case.
