United States v. Container Corporation of America

• Decision Date: 18 November 1968
• Docket Number: No. 27,27
• Parties: UNITED STATES, Appellant, v. CONTAINER CORPORATION OF AMERICA et al. Arg ed
• Court: U.S. Supreme Court

393 U.S. 333

89 S.Ct. 510

21 L.Ed.2d 526

UNITED STATES, Appellant,

v CONTAINER CORPORATION OF AMERICA et al.

No. 27.

Arg ed Nov. 18, 1968.

Decided Jan. 14, 1969.

Edwin M. Zimmerman, Washington, D.C., for appellant.

Whitney North Seymour, New York City, for appellees.

Mr. Justice DOUGLAS delivered the opinion of the Court.

This is a civil antitrust action charging a price-fixing agreement in violation of § 1 the Sherman Act.¹ 26 Stat. 209, as amended, 15 U.S.C. § 1. The District Court dismissed the complaint. 273 F.Supp. 18. The case is here on appeal, 15 U.S.C. § 29; and we noted probable jurisdiction. 390 U.S. 1022, 88 S.Ct. 1408, 20 L.Ed.2d 280.

The case as proved is unlike any of other price decisions we have rendered. There was here an exchange of price information but no agreement to adhere to a price schedule as in Sugar Institute v. United States, 297 U.S. 553, 56 S.Ct. 629, 80 L.Ed. 859, or United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129. There was here an exchange of information concerning specific sales to identified customers, not a statistical report on the average cost to all members without identifying the parties to specific transactions, as in Maple Flooring Mfrs. Assn. v. United States, 268 U.S. 563, 45 S.Ct. 578, 69 L.Ed. 1093. While there was present here, as in Cement Mfrs. Protective Assn. v. United States, 268 U.S. 588, 45 S.Ct. 586, 69 L.Ed. 1104, an exchange of prices to specific customers, there was absent the controlling circumstance, viz., that cement manufacturers, to protect themselves from delivering to contractors more cement than was needed for a specific job and thus receiving a lower price, exchanged price information as a means of protecting their legal rights from fraudulent inducements to deliver more cement than needed for a specific job.

Here all that was present was a request by each defendant of its competitor for information as to the most recent price charged or quoted, whenever it needed such information and whenever it was not available from another source. Each defendant on receiving that request usually furnished the data with the expectation that it would be furnished reciprocal information when it wanted it.² That concerted action is of course sufficient to establish the combination or conspiracy, the initial ingredient of a violation of § 1 of the Sherman Act.

There was of course freedom to withdraw from the agreement. But the fact remains that when a defendant requested and received price information, it was affirming its willingness to furnish such information in return.

There was to be sure an infrequency and irregularity of price exchanges between the defendants; and often the data were available from the records of the defendants or from the customers themselves. Yet the essence of the agreement was to furnish price information whenever requested.

Moreover, although the most recent price charged or quoted was sometimes fragmentary, each defendant had the manuals with which it could compute the price charged by a competitor on a specific order to a specific customer.

Further, the price quoted was the current price which a customer would need to pay in order to obtain products from the defendant furnishing the data.

The defendants account for about 90% of the shipment of corrugated containers from plants in the Southeastern United States. While containers vary as to dimensions, weight, color, and so on, they are substantially identical, no matter who produces them, when made to particular specifications. The prices paid depend on price alternatives. Suppliers when see ing new or additional business or keeping old customers, do not exceed a competitor's price. It is common for purchasers to buy from two or more suppliers concurrently. A defendant supplying a customer with containers would usually quote the same price on additional orders, unless costs had changed. Yet where a competitor was charging a particular price, a defendant would normally quote the same price or even a lower price.

The exchange of price information seemed to have the effect of keeping prices within a fairly narrow ambit. Capacity has exceeded the demand from 1955 to 1963, the period covered by the complaint, and the trend of corrugated container prices has been downward. Yet despite this excess capacity and the downward trend of prices, the industry has expanded in the Southeast from 30 manufacturers with 49 plants to 51 manufacturers with 98 plants. An abundance of raw materials and machinery makes entry into the industry easy with an investment of $50,000 to $75,000.

The result of this reciprocal exchange of prices was to stabilize prices though at a downward level. Knowl- edge of a competitor's price usually meant matching that price. The continuation of some price competition is not fatal to the Government's case. The limitation or reduction of price competition brings the case within the ban, for as we held in United States v. Socony-Vacuum Oil Co., supra, 310 U.S. at 224, n. 59, 60 S.Ct. at 844, interference with the setting of price by free market forces is unlawful per se. Price information exchanged in some markets may have no effect on a truly competitive price. But the corrugated container industry is dominated by relatively few sellers. The product is fungible and the competition for sales is price. The demand is inelastic, as buyers place orders only for immediate, short-run needs. The exchange of price data tends toward price uniformity. For a lower price does not mean a larger share of the available business but a sharing of the existing business at a lower return. Stabilizing prices as well as raising them is within the ban of § 1 of the Sherman Act. As we said in United States v. Socony-Vacuum Oil Co., supra, at 223, 60 S.Ct. at 844, 'in terms of market operations stabilization is but one form of manipulation.' The inferences are irresistible that the exchange of price information has had an anticompetitive effect in the industry, chilling the vigor of price competition. The agreement in the present case, though somewhat casual, is analogous to those in American Column & Lumber Co. v. United States, 257 U.S. 377, 42 S.Ct. 114, 66 L.Ed. 284, and United States v. American Linseed Oil Co., 262 U.S. 371, 43 S.Ct. 607, 67 L.Ed. 1035.³ Price is too critical, too sensitive a control to allow it to be used even in an informal manner to restrain competition.⁴

Reversed.

Mr. Justice FORTAS, concurring.

I join in the judgment and opinion of the Court. I do not understand the Court's opinion to hold that the exchange of specific information among sellers as to prices charged to individual customers, pursuant to mutual arrangement, is a per se violation of the Sherman Act.

Absent per se violation, proof is essential that the practice resulted in an unreasonable restraint of trade. There is no single test to determine when the record adequately shows an 'unreasonable restraint of trade'; but a practice such as that here involved, which is adopted for the purpose of arriving at a determination of prices to be quoted to individual customers, inevitably suggests the probability that it so materially interfered with the operation of the price mechanism of the marketplace as to bring it within the condemnation of this Court's decisions. Cf. Sugar Institute v. United States, 297 U.S. 553, 56 S.Ct. 629, 80 L.Ed. 859 (1936); American Column & Lumber Co. v. United States, 257 U.S. 377, 42 S.Ct. 114, 66 L.Ed. 284 (1921).

Theoretical probability, however, is not enough unless we are to regard mere exchange of current price information as so akin to price-fixing by combination or conspiracy as to deserve the per se classification. I am not prepared to do this, nor is it necessary here. In this case, the probability that the exchange of specific price information led to an unlawful effect upon prices is adequately buttressed by evidence in the record. This evidence, although not overwhelming, is sufficient in the special circumstances of this case to show an actual effect on pricing and to compel us to hold that the court below erred in dismissing the Government's complaint.

In summary, the record shows that the defendants sought and obtained from competitors who were part of the arrangement information about the competitors' prices to specific customers. '(I)n the majority of instances,' the District Court found, 273 F.Supp. 18, 27, that once a defendant had this information he quoted substantially the same price as the competitor, although a higher or lower price would 'occasionally' be quoted. Thus the exchange of prices made it possible for indi- vidual defendants confidently to name a price equal to that which their competitors were asking. The obvious effect was to 'stabilize' prices by joint arrangement—at least to limit any price cuts to the minimum necessary to meet competition. In addition, there was evidence that, in some instances, during periods when various defendants ceased exchanging prices exceptionally sharp and vigorous price reductions resul ed.

On this record, taking into account the specially sensitive function of the price term in the antitrust equation, I cannot see that we would be justified in reaching any conclusion other than that defendants' tacit agreement to exchange information about current prices to specific customers did in fact substantially limit the amount of price competition in the industry. That being so, there is no need to consider the possibility of a per se violation.

Mr. Justice MARSHALL, with whom Mr. Justice HARLAN and Mr. Justice STEWART join, dissenting.

I agree with the Court's holding that there existed an agreement among the defendants to exchange price information whenever requested. however, I cannot agree that that agreement should be condemned, either as illegal per se, or as having had the purpose or effect of restricting price competition in the corrugated container...