Opinion · Supreme Court of the United States

Palmer v. BRG of Georgia, Inc.

Palmer v. BRG of Ga., Inc., 498 U.S. 46 (1990)

Type
Opinion
Court
Supreme Court of the United States
Jurisdiction
Federal
Date
1990-11-26
Topic
general

How later courts describe this case

  • holding that agreements not to compete within certain territorial limits are obviously anticompetitive
  • holding an agreement not to compete based on an exclusive copyright license28 “unlawful on its face”
  • holding horizontal agreements among competitors to divide markets are per se illegal
  • applying per se rule to market allocation agreement among bar review course providers
  • agreement among competitors to allocate territories to diminish competition is a per se § 1 violation
  • “Such arrangements are anticompetitive regardless of whether the parties split a market within which both do business or whether they merely reserve one market for one and another for the other.”
  • market allocation agreements are anticompetitive “regardless of whether the parties split a market within which both do business or whether they merely reserve one market for one and another for the other”
  • same for market division between bar-review companies

Citator

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Cited by
216 opinions

Headnotes

  1. Antitrust & Competition Law — Price Fixing Under § 1 of the Sherman Act, a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se, even absent a direct agreement on the actual prices to be maintained. 498 U.S. at 49 (citing United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223 (1940))
  2. Antitrust & Competition Law — Horizontal Market Allocation An agreement between competitors at the same level of the market structure to allocate territories in order to minimize competition is a per se violation of § 1 of the Sherman Act; such horizontal territorial limitations are naked restraints of trade with no purpose except stifling competition. 498 U.S. at 49–50 (citing United States v. Topco Associates, Inc., 405 U.S. 596, 608 (1972))
  3. Antitrust & Competition Law — Market Allocation Agreements among competitors to allocate markets are anticompetitive and unlawful regardless of whether the parties split a market within which both do business or merely reserve one market for one party and another market for the other; it is not required that the parties have previously competed in the same market. 498 U.S. at 49–50
  4. Antitrust & Competition Law — Per Se Violations A revenue-sharing arrangement between competitors, coupled with an immediate price increase following the parties' agreement to cease competing with each other, indicates that the agreement was formed for the purpose and with the effect of raising prices and is unlawful on its face; summary judgment in favor of the agreeing parties is therefore improper. 498 U.S. at 49
PALMER v. BRG OF GEORGIA, INC.,498 U.S. 46(1990)
111 S.Ct. 401
PALMER ET AL.v. BRG OF GEORGIA, INC., ET AL.
ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE ELEVENTH CIRCUIT
No. 89-1667
Decided November 26, 1990
Respondents, BRG of Georgia, Inc. (BRG), and Harcourt Brace Jovanovich Legal and Professional Publications (HBJ), entered into an agreement under which BRG was given an exclusive license to market HBJ's tradename; HBJ agreed not to compete with BRG in Georgia, and BRG agreed not to compete with HBJ outside the State; and HBJ was entitled to receive $100 per student enrolled by BRG and 40% of revenues over $350. Immediately after the parties entered into the agreement, the price for BRG's course increased from $150 to $400. Petitioners, who contracted to take BRG's course, filed suit, contending that BRG's price was enhanced by reason of the agreement in violation of § 1 of the Sherman Act. The District Court held that the agreement was lawful, and the Court of Appeals affirmed.Held:The agreement between HBJ and BRG was unlawful on its face. The agreement's revenue-sharing formula, coupled with the immediate price increase, indicate that the agreement was "formed for the purposes and with the effect of raising" the bar review course's prices in violation of the Sherman Act. SeeUnited Statesv.Socony-Vacuum Oil Co.,310 U.S. 150,223. Agreements between competitors to allocate territories to minimize competition are illegal,United Statesv.Topco Associates,Inc.,405 U.S. 596, regardless of whether the parties split a market within which they both do business or merely reserve one market for one and another for the other.

Certiorari granted;874 F.2d 1417and893 F.2d 293, reversed and remanded.
PER CURIAM.
In preparation for the 1985 Georgia Bar Examination, petitioners contracted to take a bar review course offered by respondent BRG of Georgia, Inc. (BRG). In this litigation, they contend that the price of BRG's course was enhanced by reason of an unlawful agreement between BRG and respondent Harcourt Brace Jovanovich Legal and Professional Publications (HBJ), the Nation's largest provider of bar reviewPage 47materials and lecture services. The central issue is whether the 1980 agreement between respondents violated § 1 of the Sherman Act.1

HBJ began offering a Georgia bar review course on a limited basis in 1976, and was in direct, and often intense, competition with BRG during the period from 1977-1979. BRG and HBJ were the two main providers of bar review courses in Georgia during this time period. In early 1980, they entered into an agreement that gave BRG an exclusive license to market HBJ's material in Georgia and to use its trade name "Bar/Bri." The parties agreed that HBJ would not compete with BRG in Georgia and that BRG would not compete with HBJ outside of Georgia.2Under the agreement, HBJ received $100 per student enrolled by BRG and 40% of all revenues over $350. Immediately after the 1980 agreement, the price of BRG's course was increased from $150 to over $400.

On petitioners' motion for partial summary judgment as to the § 1 counts in the complaint and respondents' motion for summary judgment, the District Court held that the agreementPage 48was lawful. The United States Court of Appeals for the Eleventh Circuit, with one judge dissenting, agreed with the District Court thatper seunlawful horizontal price fixing required an explicit agreement on prices to be charged or that one party have the right to be consulted about the other's prices. The Court of Appeals also agreed with the District Court that to prove aper seviolation under a geographic market allocation theory, petitioners had to show that respondents had subdivided some relevant market in which they had previously competed.874 F.2d 1417(1989).3The Court of Appeals denied a petition for rehearing en banc that had been supported by the United States.893 F.2d 293(1990).4

InUnited Statesv.Socony-Vacuum Oil Co.,310 U.S. 150(1940), we held that an agreement among competitors to engage in a program of buying surplus gasoline on the spot market in order to prevent prices from falling sharply was unlawful, even though there was no direct agreement on the actual prices to be maintained. We explained that [u]nder the Sherman Act, a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegalper se.Id., at 223. See alsoCatalano, Inc. v.Target Sales, Inc.,446 U.S. 643(1980) (per curiam);National Society of ProfessionalEngineersv.United States,435 U.S. 679(1978).Page 49

The revenue-sharing formula in the 1980 agreement between BRG and HBJ, coupled with the price increase that took place immediately after the parties agreed to cease competing with each other in 1980, indicates that this agreement was "formed for the purpose and with the effect of raising" the price of the bar review course. It was, therefore, plainly incorrect for the District Court to enter summary judgment in respondents' favor.5Moreover, it is equally clear that the District Court and the Court of Appeals erred when they assumed that an allocation of markets or submarkets by competitors is not unlawful unless the market in which the two previously competed is divided between them.

InUnited Statesv.Topco Associates, Inc.,405 U.S. 596(1972), we held that agreements between competitors to allocate territories to minimize competition are illegal:
"One of the classic examples of aper seviolation of § 1 is an agreement between competitors at the same level of the market structure to allocate territories in order to minimize competition. . . . This Court has reiterated time and time again that `[h]orizontal territorial limitations . . . are naked restraints of trade with no purpose except stifling of competition.' Such limitations areper seviolations of the Sherman Act."Id., at 608 (citations omitted).


The defendants inTopcohad never competed in the same market, but had simply agreed to allocate markets. Here, HBJ and BRG had previously competed in the Georgia market; under their allocation agreement, BRG received that market, while HBJ received the remainder of the United States. Each agreed not to compete in the other's territories. Such agreements are anticompetitive regardless of whether the parties split a market within which both do businessPage 50or whether they merely reserve one market for one and another for the other.6Thus, the 1980 agreement between HBJ and BRG was unlawful on its face.

The petition for a writ of certiorari is granted, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.7It is so ordered.

JUSTICE SOUTER took no part in the consideration or decision of this case.
JUSTICE MARSHALL, dissenting.
Although I agree that the limited information before us appears to indicate that the Court of Appeals erred in its decision below, I continue to believe that summary dispositions deprive litigants of a fair opportunity to be heard on the merits and significantly increase the risk of an erroneous decision. SeeSmithv.Ohio,494 U.S. 541,544(1990) (MARSHALL, J., dissenting);Pennsylvaniav.Bruder,488 U.S. 9,11-12(1988) (MARSHALL, J., dissenting);Rhodesv.Stewart,488 U.S. 1,4-5(1988) (MARSHALL, J., dissenting);Buchananv.Stanships Inc.,485 U.S. 265,269(1988)Page 51(MARSHALL, J., dissenting);Commissionerv.McCoy,484 U.S. 3,7-8(1987) (MARSHALL, J., dissenting). I therefore dissent from the Court's decision today to reverse summarily the judgment below.Page 52
  1. Page 47 Section I of the Sherman Act,26 Stat. 209, as amended and set forth in15 U.S.C. § 1, provides in relevant part:

    "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal."

    We do not reach the other claims alleged in petitioners' nine-count complaint, including violations of § 2 of the Sherman Act,15 U.S.C. § 2. ↩
  2. Page 47 The 1980 agreement contained two provisions, one called a "Covenant Not to Compete" and the other called "Other Ventures." The former required HBJ not to "directly or indirectly own, manage, operate, join, invest, control, or participate in or be connected as an officer, employee, partner, director, independent contractor or otherwise with any business which is operating or participating in the preparation of candidates for the Georgia State Bar Examination." Plaintiffs' Motion for Partial Summary Judgment, Attachment E, at 10. The latter required BRG not to compete against HBJ in states in which HBJ currently operated outside the state of Georgia.Id., at 15. ↩
  3. Page 48 In dissent, Judge Clark explained that, in his view, HBJ and BRG were capable of engaging inper sehorizontal restraints because they had competed against each other, and then had joined forces. He believed the District Court's analysis was flawed because it had failed to recognize that the agreements could be price-fixing agreements even without explicit reference to price, and because it had failed to recognize that allocation, rather than subdivision, of markets could also constitute aper seantitrust violation. ↩
  4. Page 48 The United States, asamicus curiae, had urged the court to adopt the views of the dissent. ↩
  5. Page 49 SeeAndersonv.Liberty Lobby, Inc.,477 U.S. 242,255(1986) ("The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor"). ↩
  6. Page 50 SeeArizonav.Maricopa County Medical Society,457 U.S. 332,344, n. 15 (1982) ("division of markets" isper seoffense). ↩
  7. Page 50 In 1982, in connection with the settlement of another lawsuit, respondents made certain changes in their arrangement. Because the District Court found that the 1980 agreement did not violate § 1 of the Sherman Act, it did not address whether the 1982 modified agreement constituted a withdrawal from or abandonment of the conspiracy. InUnited Statesv.Kissel,218 U.S. 601(1910) we held that antitrust conspiracies may continue in time beyond the original conspiratorial agreement until either the conspiracy's objectives are abandoned or succeed.Id., at 608-609. Thus, it is an unsettled factual issue whether the conspiratorial objectives manifest in the 1980 agreement between HBJ and BRG have continued in spite of the 1982 modifications. ↩