Forms of Joint Conduct and Collaboration

• Pages: 133-171

133

CHAPTER V

FORMS OF JOINT CONDUCT AND

COLLABORATION

This chapter addresses the analyses employed to determine whether

concerted action involving companies related by equity ownership or other

types of control amounts to a “contract, combination or conspiracy”

subject to scrutiny under Section 1 of the Sherman Act, and the other

circumstances in which multiple entities or individuals engaged in

collaboration can be considered a single actor whose conduct is not subject

to Section 1. Agreements between or among economically related entities,

joint venturers, trade and professional associations, cooperative research

participants, standards setting organizations, members of sports leagues,

and health care providers are considered.

A determination that collaboration between market participants of the

types discussed in this chapter presents a “contract, combination or

conspiracy” does not, of course, require a conclusion that the activity

violates Section 1. As explained in Chapter I, Section 1 forbids only

“unreasonable” restraints of trade. The forms of concerted activity

discussed in this chapter can produce substantial procompetitive benefits.

They can, however, also be anticompetitive. Congress and the courts have

developed rules for evaluating the reasonableness of various forms of joint

conduct and collaboration.1 This chapter discusses when collaborative

ventures are subject to antitrust scrutiny and surveys the case law

applicable to various forms of collaboration.

A. Identifying Conspiracy Within Corporate Families

Section 1 does not apply if a “contract, combination or conspiracy”

among multiple independent economic actors is absent.2 In Copperweld

1. See ABA SECTION OF ANTITRUST LAW, JOINT VENTURES: ANTITRUST

ANALYSIS OF COLLABORATIONS AMONG COMPETITORS (2d ed. 2014).

2. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768-69

(1984).

134 Proof of Conspiracy Under Federal Antitrust Laws

Corp. v. Independence Tube Corp.,3 the Supreme Court held that a parent

corporation and its wholly owned subsidiary are not sufficiently

independent to have the capaci ty to conspire f or purposes of Section 1.4

The Copperweld Court did not consider whether other relationships, such

as less than complete equity ownership or control not based on equity

ownership, negate the possibility of concerted action subject to scrutiny

under Section 1.5 Under Copper weld, officers or employees of the same

firm do not provide the plurality of actors necessary to a “contract,

combination or conspiracy” subject to Section 1.6 Similarly, collaboration

between a corporation and its unincorporated division is the action of the

corporation alone, and is not sufficient to trigger potential Section 1

liability.7 But what about legally separate but related business entities? Is

there a settled threshold of common ownership required for related

corporations to constitute a single economic actor for purposes of Section

1? When, if ever, does control not strictly based on equity ownership

require a conclusion that concerted action is lacking?

1. A Company and Its Wholly Owned Subsidiary

Before Copperweld , related corporations were sometimes perceived

as separate entities capable of concerted activity, and some courts

recognized an “intra-enterprise conspiracy” doctrine.8 In Copperweld, the

Court established a bright-line rule that a corporation and its wholly owned

subsidiary are legally incapa ble of conspiring with one anot her for Section

1 purposes.9

3. 467 U.S. 752 (1984).

4. Id. at 777.

5. Id. at 767.

6. Id. at 769.

7. Id. at 770 (“A division within a cor porate structure pursue s the common

interests of the whole rather than interests separate from those of the

corporation itself”); Cliff Food Stores v. Kroger, Inc., 417 F.2d 203, 206

(5th Cir. 1969) (grocery store chain and its unincorporated division

incapable of conspiring for purposes of Section 1); see also 7 PHILLIP E.

AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 1470, at 258 (3d ed.

2010) (“A corporate division has no separate legal personality; it is simply

a group of employees within the firm.”) .

8. 467 U.S. at 759; Siegel Transfer, Inc. v. Carrier Express, 54 F.3d 1125,

1131-32 (3d Cir. 1995).

9. 467 U.S. at 777.

Forms of Joint Conduct and Collaboration 135

The Copperweld Court reasoned that, given the control a parent wields

over its wholly owned subsidiary, such entities must always share “a unity

of purpose or a common design,” and, thus, cannot engage in a Section 1

conspiracy.10 The Court did not go beyond applying the rule to a company

and its wholly owned subsidiary, and instead directed the lower courts to

analyze the economic substance of a given relationship, rather than the

formalities of a given corporate structure.11

Courts have uniformly extended Copperweld to a parent corpor ation

and its subsidi ary where owner ship is very clo se to 100 perce nt, holding

that a de minimis departure from complete ownership does not erode the

unity of purpose shared by the corporations.12 For example, an ownership

interest as low as 91.9 percent has been considered a de minimis

departure.13

2. A Company and Its Employees

While a corporation generally cannot conspire with itself for antitrust

purposes, an exception may occur when an employee combines with his

or her employer to restrain trade and the employee stands to personally

10. Id. at 771 (likening the corporate relationship to “a multiple team of horses

drawing a vehicle under the control of a single driver”). Significantly,

however, the Copperweld rule does not apply where an illegal acquisition

brings about the corporate affiliation, e.g., where corporations are

purchased for the purpose of effecting control of an industry. Id. at 761-62.

11. Id. at 772-73 (“The economic, legal, or other considerations that lead

corporate management to choose one structure over the other are not

relevant to whether the enterprise’s conduct seriously threatens

competition . . . . [A] business enterprise should be free to structure itself

in ways that serve effi ciency of control, economy of operatio ns, and other

factors dictated by business judgment without increasing its exposure to

antitrust liability.”).

12. See Siegel Transfer, 54 F.3d at 1133 n.7 (noting that other cour ts have

extended Copperwe ld when ownership is greater than de minimis

departure from 100 percent); Leaco Enters. v. Gen. Elec. Co., 737 F. Supp.

605, 608-09 (D. Or. 1990) (holding 91.9 percent is a de minimis departure,

but stating variety of factors court may consider in determining existence

of unity of purpose); Aspen Title & Escrow v. Jeld-Wen, Inc., 677 F. Supp.

1477, 1486 (D. Or. 1987) (97.5 percent ownership de minimis departure

but 75 percent and 60 percent not de minimis); Satellite Fin. Planning Cor p.

v. First Nat’l Bank of Wilmington, 633 F. Supp 386, 395 (D. Del. 1986)

(more than 99 percent is a de minimis departure).

13. Leaco Enters., 737 F. Supp. at 609.