United States v. Container Corporation of America
1969 U.S. LEXIS 3112, 21 L. Ed. 2d 526, 393 U.S. 333 (1969)
Rule of Law:
An agreement among competitors to exchange specific, current price information upon request can constitute a combination in restraint of trade in violation of Section 1 of the Sherman Act if it has an anticompetitive effect, such as stabilizing prices, even without an express agreement to adhere to those prices.
Facts:
- Container Corporation of America and 17 other manufacturers produced corrugated containers in the Southeastern United States, accounting for approximately 90% of the market.
- The corrugated containers were largely fungible products, making price the primary basis for competition.
- The defendant manufacturers engaged in an informal practice of requesting price information from one another.
- When a defendant needed to know the most recent price a competitor had quoted or charged to a specific customer, it would ask, and the competitor would usually provide the information.
- This exchange was reciprocal, with each company furnishing data with the expectation that it would receive similar information when it wanted it.
- There was no express agreement among the defendants to adhere to any price schedule or to fix prices.
- During the period in question (1955-1963), the industry had excess manufacturing capacity, and the general trend of prices was downward.
Procedural Posture:
- The United States filed a civil antitrust lawsuit against Container Corporation of America and other manufacturers in the U.S. District Court for the Middle District of North Carolina.
- The government alleged the defendants' practice of exchanging price information constituted a price-fixing conspiracy in violation of Section 1 of the Sherman Act.
- Following a trial on the merits, the District Court found that the government had not proven its case and entered a judgment dismissing the complaint.
- The United States, as the appellant, filed a direct appeal to the Supreme Court of the United States.
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Issue:
Does an informal, reciprocal agreement among competitors to exchange information about the most recent prices charged or quoted to specific customers constitute a combination or conspiracy in restraint of trade in violation of Section 1 of the Sherman Act?
Opinions:
Majority - Justice Douglas
Yes. The reciprocal exchange of prices in this industry had an anticompetitive effect that chilled the vigor of price competition, which constitutes a restraint of trade under the Sherman Act. While there was no explicit agreement to fix prices, the knowledge of a competitor's most recent price typically led to matching that price, which stabilized prices, albeit at a downward level. In an industry characterized by relatively few sellers, a fungible product, price-based competition, and inelastic demand, this interference with the setting of prices by free market forces is unlawful.
Concurring - Justice Fortas
Yes. While the exchange of price information is not a per se violation of the Sherman Act, the evidence here is sufficient to prove that the practice resulted in an unreasonable restraint of trade. The arrangement allowed defendants to confidently match competitors' prices, which had the obvious effect of stabilizing prices and limiting price cuts to the minimum necessary to meet competition. The record shows an actual, substantial limitation on price competition, thereby violating the Sherman Act without needing to classify the conduct as per se illegal.
Dissenting - Justice Marshall
No. The agreement to exchange price information should not be condemned without proof that it was entered into for the purpose of, or that it actually had the effect of, restricting price competition. The government failed to provide such proof. The market was characterized by a downward price trend, easy entry for new competitors, and active competition, all of which undermine the majority's inference of anticompetitive harm. The exchange of information could just as logically have furthered competition by informing sellers, and the government simply failed to prove its case that the practice had an anticompetitive effect.
Analysis:
This decision significantly broadened the scope of conduct considered to be price-fixing under the Sherman Act. It established that an explicit agreement to set prices is not required; a concerted practice of exchanging price information that has the effect of stabilizing prices is sufficient to constitute a violation. The case created a category of conduct that, while not per se illegal, is inherently suspect and can be condemned with only a limited inquiry into its competitive effects, a standard sometimes referred to as a 'quick look' analysis. This ruling puts businesses on notice that information exchanges in oligopolistic markets will be subject to intense antitrust scrutiny.
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