Atlantic Richfield Company v. Usa Petroleum Company

• Decision Date: 14 May 1990
• Docket Number: No. 88-1668,88-1668
• Citation: 495 U.S. 328,110 S.Ct. 1884,109 L.Ed.2d 333
• Parties: ATLANTIC RICHFIELD COMPANY, Petitioner v. USA PETROLEUM COMPANY
• Court: U.S. Supreme Court

495 U.S. 328

110 S.Ct. 1884

109 L.Ed.2d 333

ATLANTIC RICHFIELD COMPANY, Petitioner

v USA PETROLEUM COMPANY.

No. 88-1668.

Argued Dec. 5, 1989.

Decided May 14, 1990.

Syllabus

Petitioner Atlantic Richfield Company (ARCO), an integrated oil company, increased its retail gasoline sales and market share by encouraging its dealers to match the prices of independents such as respondent USA Petroleum Company, which competes directly with the dealers at the retail level. When USA's sales dropped, it sued ARCO in the District Court, charging, inter alia, that the vertical, maximum-price-fixing scheme constituted a conspiracy in restraint of trade in violation of § 1 of the Sherman Act. The court granted summary judgment to ARCO, holding that USA could not satisfy the "antitrust injury" requirement for purposes of a private damages suit under § 4 of the Clayton Act because it was unable to show that ARCO's prices were predatory. The Court of Appeals reversed, holding that injuries resulting from vertical, nonpredatory, maximum-price-fixing agreements could constitute "antitrust injury." Reasoning that any form of price fixing contravenes Congress' intent that market forces alone determine what goods and services are offered, their prices, and whether particular sellers succeed or fail, the court concluded that USA had shown that its losses resulted from a disruption in the market caused by ARCO's price fixing.

Held:

1. Actionable "antitrust injury" is an injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. Injury, although causally related to an antitrust violation, will not qualify unless it is attributable to an anticompetitive aspect of the practice under scrutiny, since it is inimical to the antitrust laws to award damages for losses stemming from continued competition. Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 109-110, 107 S.Ct. 484, 488-489, 93 L.Ed.2d 427. P. 334.

2. A vertical, maximum-price-fixing conspiracy in violation of § 1 of the Sherman Act must result in predatory pricing to cause a competitor antitrust injury. Pp. 335-341.

(a) As a competitor, USA has not suffered "antitrust injury," since its losses do not flow from the harmful effects on dealers and consumers that rendered vertical, maximum price fixing per se illegal in Albrecht v. Herald Co., 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998. USA was benefited rather than harmed if ARCO's pricing policies restricted ARCO's sales to a few large dealers or prevented its dealers from offering services desired by consumers. Even if the maximum price agreement acquired all of the attributes of a minimum-price-fixing scheme, USA still would not have suffered antitrust injury, because higher ARCO prices would have worked to USA's advantage. Pp. 335-337.

(b) USA's argument that, even if it was not harmed by any of the Albrecht anticompetitive effects, its lost business caused by ARCO's agreement lowering prices to above predatory levels constitutes antitrust injury is rejected, since cutting prices to increase business is often the essence of competition. P. 337-338.

(c) It is not inappropriate to require a showing of predatory pricing before antitrust injury can be established in a case under § 1 of the Sherman Act. Although under § 1 the price agreement itself is illegal, all losses flowing from the agreement are not by definition antitrust injuries. Low prices benefit consumers regardless of how they are set. So long as they are above predatory levels, they do not threaten competition and, hence, cannot give rise to antitrust injury. Pp. 338-341.

3. A loss flowing from a per se violation of § 1 does not automatically satisfy the antitrust injury requirement, which is a distinct matter that must be shown independently. The purpose of per se analysis is to determine whether a particular restraint is unreasonable. Actions per se unlawful may nonetheless have some procompetitive effects, and private parties might suffer losses therefrom. The antitrust injury requirement, however, ensures that a plaintiff can recover only if the loss stems from a competition-reducing aspect or effect of the defendant's behavior. Pp. 341-345.

4. Providing competitors with a private cause of action to enforce the rule against vertical, maximum price fixing would not protect the rights of dealers and consumers—the class of persons whose self-interest would normally motivate them to vindicate Albrecht § anticompetitive consequences—under the antitrust laws. USA's injury is not inextricably intertwined with a dealer's antitrust injury, since a competitor has no incentive to vindicate the legitimate interests of a rival's dealer and will be injured and motivated to sue only when the arrangement has a procompetitive impact on the market. Pp. 345-346.

859 F.2d 687 (CA9 1988), reversed and remanded.

BRENNAN, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and MARSHALL, BLACKMUN, O'CONNOR, SCALIA, and KENNEDY, JJ., joined. STEVENS, J., filed a dissenting opinion, in which WHITE, J., joined, post, p. 346.

Ronald C. Redcay, Los Angeles, Cal., for petitioner.

John G. Roberts, Jr., Washington, D.C., for the U.S. and Federal Trade Com'n as amici curiae, supporting petitioner, by special leave of Court.

Maxwell M. Blecher, Los Angeles, Cal., for respondent.

[Amicus Curiae Information from page 330 intentionally omitted] Justice BRENNAN delivered the opinion of the Court.

This case presents the question whether a firm incurs an "injury" within the meaning of the antitrust laws when it loses sales to a competitor charging nonpredatory prices pursuant to a vertical, maximum-price-fixing scheme. We hold that such a firm does not suffer an "antitrust injury" and that it therefore cannot bring suit under § 4 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. § 15.¹

I

Respondent USA Petroleum Company (USA) sued petitioner Atlantic Richfield Company (ARCO) in the United States District Court for the Central District of California, alleging the existence of a vertical, maximum-price-fixing agreement prohibited by § 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1, an attempt to monopolize the local retail gasoline sales market in violation of § 2 of the Sherman Act, 15 U.S.C. § 2, and other misconduct not relevant here. Petitioner ARCO is an integrated oil company that, inter alia, markets gasoline in the Western United States. It sells gasoline to consumers both directly through its own stations and indirectly through ARCO-brand dealers. Respondent USA is an independent retail marketer of gasoline which, like other independents, buys gasoline from major petroleum companies for resale under its own brand name. Respondent competes directly with ARCO dealers at the retail level. Respondent's outlets typically are low-overhead, high-volume "discount" stations that charge less than stations selling equivalent quality gasoline under major brand names.

In early 1982, petitioner ARCO adopted a new marketing strategy in order to compete more effectively with discount independents such as respondent.² Petitioner encouraged its dealers to match the retail gasoline prices offered by independents in various ways; petitioner made available to its dealers and distributors such short-term discounts as "temporary competitive allowances" and "temporary volume allowances," and it reduced its dealers' costs by, for example, eliminating credit card sales. ARCO's strategy increased its sales and market share.

In its amended complaint, respondent USA charged that ARCO engaged in "direct head-to-head competition with discounters" and "drastically lowered its prices and in other ways sought to appeal to price-conscious consumers." First Amended Complaint ¶ 19, App. 15. Respondent asserted that petitioner conspired with retail service stations selling ARCO brand gasoline to fix prices at below-market levels: "Arco and its co-conspirators have organized a resale price maintenance scheme, as a direct result of which competition that would otherwise exist among Arco-branded dealers has been eliminated by agreement, and the retail price of Arco-branded gasoline has been fixed, stabilized and maintained at artificially low and uncompetitive levels." ¶ 27, App. 17. Respondent alleged that petitioner "has solicited its dealers and distributors to participate or acquiesce in the conspiracy and has used threats, intimidation and coercion to secure compliance with its terms." ¶ 37, App. 19. According to respondent, this conspiracy drove many independent gasoline dealers in California out of business. ¶ 39, App. 20. Count one of the amended complaint charged that petitioner's vertical, maximum price-fixing scheme constituted an agreement in restraint of trade and thus violated § 1 of the Sherman Act. Count two, later withdrawn with prejudice by respondent asserted that petitioner had engaged in an attempt to monopolize the retail gasoline market through predatory pricing in violation of § 2 of the Sherman Act.³

The District Court granted summary judgment for ARCO on the § 1 claim. The court stated that "[e]ven assuming that [respondent USA] can establish a vertical conspiracy to maintain low prices, [respondent] cannot satisfy the 'antitrust injury' requirement of Clayton Act § 4, without showing such prices to be predatory." App. to Pet. for Cert. 3b. The court then concluded that respondent could make no such showing of predatory pricing because, given petitioner's market share and the ease of entry into the market, petitioner was in no position to exercise market power.

A divided panel of the Court of Appeals for the Ninth Circuit reversed. 859 F.2d 687 (1988). Acknowledging that its decision was in conflict with the approach of the Court of Appeals for the Seventh Circuit in several recent cases,⁴ see id., at 697, n. 15, the Ninth Circuit nonetheless held that injuries resulting from...