United States v. United States Gypsum Co. et al.
438 U.S. 422 (1978)
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Rule of Law:
A criminal conviction under the Sherman Antitrust Act requires proof of intent (mens rea). The government must prove that the defendant acted with knowledge that their conduct would have probable anticompetitive consequences; an instruction that presumes intent as a matter of law from an effect on prices is reversible error.
Facts:
- The gypsum board industry was highly concentrated, with a few major producers, including United States Gypsum Co., National Gypsum Co., and others.
- Gypsum board is a largely fungible product, meaning competition between suppliers was based primarily on price, credit terms, and delivery services.
- Beginning sometime before 1960 and continuing into the 1970s, major gypsum board manufacturers engaged in a practice of interseller price verification.
- This practice involved an employee of one manufacturer telephoning a competitor to determine the price that competitor was currently offering to a specific customer.
- The defendant manufacturers contended they engaged in this practice for the good-faith purpose of verifying a customer's claim of a lower price to meet the requirements of the Robinson-Patman Act's "meeting competition" defense.
- The government contended that these price exchanges were part of a broader conspiracy to raise, fix, maintain, and stabilize the prices of gypsum board.
Procedural Posture:
- The United States filed a criminal indictment in the U.S. District Court for the Western District of Pennsylvania, charging United States Gypsum Co. and other manufacturers with violating § 1 of the Sherman Act.
- The defendants' motion to dismiss for preindictment delay was denied by the trial court.
- The case proceeded to a 19-week jury trial.
- The trial judge instructed the jury that if the effect of the price exchanges was to stabilize prices, intent to do so could be presumed as a matter of law.
- The jury returned guilty verdicts against each of the defendants.
- The defendants appealed their convictions to the United States Court of Appeals for the Third Circuit.
- The Court of Appeals reversed the convictions, with its judges citing different grounds for reversal, including the erroneous jury instruction on intent and the judge's improper ex parte communication with the jury foreman.
- The United States petitioned the Supreme Court for a writ of certiorari, which was granted.
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Issue:
Does a criminal conviction under Section 1 of the Sherman Act require proof of intent, making a jury instruction that presumes intent as a matter of law from an anticompetitive effect on prices erroneous?
Opinions:
Majority - Chief Justice Burger
Yes. A criminal conviction under Section 1 of the Sherman Act requires proof of intent, and a jury instruction that presumes intent as a matter of law from an effect on prices is erroneous. The Sherman Act should not be construed as creating strict-liability criminal offenses. The traditional criminal law principle of mens rea applies, requiring a 'guilty mind.' Given the often-blurry line between permissible and impermissible business conduct, a state-of-mind requirement is necessary to avoid overdeterring procompetitive behavior. The requisite intent is established if the action is undertaken with knowledge of its probable consequences; a specific purpose to violate the law is not required. The trial court's instruction, which told the jury to presume intent as a matter of law if they found an effect on prices, improperly invaded the jury's fact-finding function by removing the element of intent from their consideration. The Court also held that the ex parte communication between the judge and jury foreman and the restrictive instruction on withdrawal from a conspiracy were independent grounds for reversal.
Concurring - Justice Powell
Justice Powell joined the judgment and most of the Court's opinion. He wrote separately to emphasize that the Robinson-Patman Act's § 2(b) 'meeting competition' defense should be available to a seller who has made every reasonable, lawful effort to corroborate a buyer's report of a competitor's lower price. In his view, such a seller has acted in 'good faith' and should not be denied the defense, even if the buyer's report later proves to be false. This approach properly accommodates the policies of both the Sherman Act and the Robinson-Patman Act.
Concurring-in-part-and-dissenting-in-part - Justice Rehnquist
Justice Rehnquist dissented from the core holdings. He argued that the trial judge's instructions, when viewed as a whole, were not reversible error and were sufficiently close to what the defendants had requested. He believed the Court's lengthy discourse on criminal intent was unnecessary to decide the case. He also would have affirmed the convictions with respect to the judge's ex parte meeting with the juror and the instruction on withdrawal from the conspiracy, finding them not to be grounds for reversal.
Concurring-in-part-and-dissenting-in-part - Justice Stevens
Justice Stevens concurred in the judgment but disagreed with the reasoning in Part II that created a separate, higher standard of proof for criminal antitrust cases versus civil ones. He argued that Section 1 of the Sherman Act has always had the same substantive reach in both contexts, and changing this is a task for Congress. He reasoned that if an agreement among competitors is prevalent enough to have a market effect, the participants can be presumed to have knowledge of that effect, making a separate instruction on intent unnecessary even in a criminal case.
Analysis:
This decision is highly significant for establishing a clear mens rea requirement for criminal antitrust violations, thereby distinguishing the standard from civil violations which can rest on anticompetitive effect alone. By defining intent as 'knowledge of probable consequences,' the Court created a standard less stringent than specific intent to violate the law but more protective than strict liability. This raises the burden for criminal prosecutors and provides a crucial safeguard for businesses engaging in conduct in the 'gray zone' of antitrust law, preventing overdeterrence of potentially procompetitive activities. The ruling solidifies the principle that criminal sanctions are reserved for conscious wrongdoing, not merely for conduct later found to have had an unintended anticompetitive effect.
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