American Column

1
American Column Lumber Co. v U.S. (Sup. Ct.
1921)

• Basic Facts American Hardware Manufactures
  Association offered Open
• Competition Plan, where members exchanged
  voluminous information on
• prices, production, etc. with each other. Of 400
  members, 365 signed onto
• Plan. No agreement on pricing or output, just
  detailed information that
• all Plan members were required to provide. Info
  supplemented with
• regular meetings where more infor was acquired
  and discussed. Regular
• warnings that over production would kill market.
• Should information associations be encouraged?
  What was attitude in
• in 1918?
• What is the value of open information? Is it
  pro-competitive or anti-
• competitive?
• Should we encourage privacy of sensitive market
  data? How about
• Microsoft?

2
American Column Lumber Co. v U.S. (1921)
Majority Held Plan violated Sherman 1 as
restrain of trade - Disposition of men to
follow most powerful, intelligent competitiors.
- Purpose to cultivate harmony of action. -
All sanctions operate under bad faith restrain of
trade. - Purpose of Plan was to procure
harmonious actions of members. - Any deviant
member immediately exposed. Old gentlemens
way. Dissent (Holmes) Sherman Act should not
be against knowledge. Ideal of commerce should
be intelligent exchange of information. A
combination to get and dispense knowledge, though
tending to equalize, is far from any unreasonable
restrain of trade. Dissent (Brandeis, McKenna)
No coercion, monopoly, agreements on price or
output, etc. Sherman should not condemn
cooperative actions to inform. Not suppress
competition, but helps by substituting knowledge
for ignorance, guessing and rumor.
3
Maple Flooring Manufactures Assn v. U.S. (Sup.
Ct. 1925)
Association of wood manufactures acquired and
disseminated average cost information, freight
rates, actual sales data. No allegation of price
fixing or output agreements. Just big-time
information exchange. In substance, any
different than American Lumber case? What was
governments contention? Any price discussions
among members?
4
Maple Flooring Manufactures Assn v. U.S. (1925)

• Holding Gathering and disseminating market data
  not unreasonable restrain of trade under Sherman
  1.
• No question data exchange will stabilize prices
  and markets.
• Data exchange will help avoid over-production
  and promote uniform
• prices.
• But so what economists and government agencies
  agree that data
• exchange serves public interest by
  stabilizing.
• Competition is not less just because it is more
  intelligent.
• American Lumber distinguished on basis of the
  conspiracies there to
• curtail production.

5
United States v. Container Corp of America (Sup.
Ct. 1969)
Basic Facts Defendants, who accounted for 90
of corrugated container shipments in southeast,
routinely exchanged information about prices and
quantities on recent specific sales. Not
agreement, but accepted practice that all
followed. During period, excess capacity and
downward price pressure, but market expansion and
many new entrants in the market. Were barriers
to entry high? Did information exchange
stabilize prices? Was demand inelastic?
Why? Was this an oligopoly? Was it changing?
6
United States v. Container Corp of America (1969)

• Holding Specific transaction information
  exchange among competitors violated Sherman 1.
• Market dominated by few sellers, product
  fungible, demand inelastic because immediate
  needs, exchange promoted uniform prices.
• Price is critical, to sensitive to allow it to
  be controlled by informal method of retraining
  competition.
• Concurring (Fortas) Ct. not say per se
  violation. Violation here is that specific
  transaction price info allowed major players to
  quote same prices on specific jobs stabilized
  prices in market.
• Dissent (Marshall, Harlan, Stewart) No per se,
  not purpose to restrict competition. Market
  knowledge not evil unless oligopoly where data
  reduces price competition. No proof here. Low
  barriers to entry and many new, small players who
  may compete on price. Government should have to
  prove more price impact before prohibiting info
  exchange.

7
United States v. United States Gypsum Co. (Sup.
Ct. 1978)
Basic Facts Gypsum board industry oligopoly
with 8 major players who make up 94 market.
They were criminally convicted of prices fixing
they routinely called each other to get price
verification on specific transactions. What
was alleged error on appeal? How had jury been
instructed? What was the Defendants primary
argument for justification?
8
United States v. United States Gypsum Co. (1978)

• Holding Reversed conviction defective jury
  instruction that eliminated mens rea requirement
  for criminal conviction.
• Sherman Act does not impose criminal strict
  liability.
• For criminal conviction mens rea, must prove
  specific intent to violate law. Under jury
  instruction, D could be guilty if conduct lead to
  price fixing even though this never intended or
  known.
• For civil liability, no mens rea requirement.
  Effect is enough.
• Robinson-Patman meeting competition defense
  does not justify specific transaction price
  exchange. No effective way to deal with lying
  customer because, if special deal given,
  competitor wouldnt disclose and, with exchange
  deal, no one would give lower prices. Effect of
  the data exchange is to stabilize prices.

9
Todd v. Exxon Corporation (2nd Cir. 2001)
Basic Facts Exxon and fourteen oil companies
had detailed program for exchanging information
on salaries of management, technical and
professional employees, supplemented with regular
meetings to discuss such salaries. Salary
benchmarks were published based on survey and
data exchanges. Plaintiff employees alleged
Sherman 1 violation. Dist. Ct. dismissed for
failure to state a claim. What elements did
court say were necessary to overcome
dismissal? What was product market? Was market
subject to being controlled? Was there
anticompetitive conduct? Was there antitrust
injury?
10
Todd v. Exxon Corporation (2nd Cir. 2001)

• Holding Dismissal reversed Plaintiffs
  complaint states claim under Sherman 1.
• This not hardcore price fixing, but information
  exchange. Info exchange not per se, but rule of
  reason analysis.
• Ps may be able to prove jobs in oil industry
  relevant market (on basis other jobs not
  substitutes) and 80 market power of Ds plus
  evidence of market power shows control.
• Factors in data exchange rule of reason
  analysis are (1) structure of industry
  (susceptible to collusion) (2) inelastic product
  (if perishable, then inelastic, and labor
  perishable, (3) time-frame of data exchanged
  (current and future more suspect), (4)
  specificity of data (specific transaction data
  more suspect), (5) whether data public or private
  (private more suspect) (6) whether live meeting
  to act upon and deal with data.
• P must allege injury to market competition.
  Alleged Exxons salaries alone down 20 mill per
  year.