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1
United States v. Arnold, Schwinn Co. (Sup. Ct.
1967)
What had happened to Schwinns market
share? Three restrictions imposed by Schwinn
- Territorial restrictions on
distributors - Distributors could only
sell franchised retailers - Retailers
could not sell nonfranchised retailers Which did
Court say were per se illegal? Why did Court
draw distinction between consigned sales and
outright sales?
2
Albrecht v. Herald Co. (Sup. Ct. 1968)
Basic Facts Herald newspaper imposed maximum
price constraints on its independent carriers.
Terminated carrier for violating. Did Court
draw any distinction between maximum and minimum
price constraints? What was Courts rationale
for saying maximum price constraints are
absolute violation of Sherman 1? Who is helped
by Courts rule?
3
Continental T.V., Inc. v. GTE Sylvania Inc. (Sup.
Ct. 1977)
Basic Facts Sylvania, TV manufacturer with mini
market share, developed new marketing plan that
limited retail franchises in an area and
required franchisees to sell only out of specific
locations. Continental, upset that Sylvania
authorized new competing retailer in S.F. and
refused Continentals request to sell in
Sacramento, moved merchandise to Sacramento.
Credit line was reduced, payments werent made,
and Continental was sued. Continental claimed
territory restrictions violated Sherman 1 under
Schwinn Case. What was Continentals market
share pre- and post- plan? Did majority
distinguish Schwinn? Did concurring? Did 9th
Cir.? Did Dist. Ct. apply per se? Did 9th Cir.?
What was significance of intrabrand and
interbrand distinction?
4
Continental T.V., Inc. v. GTE Sylvania Inc. (1977)

• Holding Schwinn overruled. Vertical territory
  restraints not per se violation
• of Sherman 1. Subject to rule of reason and
  issue is economic efficiency.
• No substantive difference than Schwinn Case.
• Schwinn per se rule cant meet demanding
  standards of per se.
• Impact of vertical restrictions complex.
• Relative economic impact of restrain need be
  evaluated.
• Vertical restriction hurt intrabrand
  competition, but help interbrand.
• Manufactures have incentives to maintain as
  much intrabrand
• competition as possible to remain interbrand
  competitive.
• No showing that Sylvanias restrictions hurt
  competition or lack
• any redeeming virtue.
• White (Concurring) Would not overrule Schwinn.
  Here, only territory
• restraints, not customer restraints. Shouldnt
  judge non-price restraints
• only by their relative economic impact. If so,
  vertical price restraints will
• Soon be legal.

5
Business Electronics Corp. v. Sharp Electronics
Corp (Sup. Ct. 1988)
Basic Facts Sharp, calculator manufacturer,
terminated Houston dealer who was selling below
suggested retail when Hartwell, other Houston
distributor, demanded termination or it would
terminate relationship. Hartwell alleged other
retailer was free-riding. There was no
agreement between Hartwell and Sharp on selling
prices. Dist. Ct. gave per se instruction. Why
did fifth circuit reverse? How does case compare
to Sylvania? Was price the central issue? What
was Hartwells free riding claim?
6
Business Electronics Corp. v. Sharp Electronics
Corp (1988)

• Holding Vertical restraint not per se illegal
  unless it included
• agreement on price or price levels.
• Sylvania held interbrand competition is
  primary concern of antitrust.
• Per se not needed to protect intrabrand
  competition. Interbrand
• will provide a significant check.
• Difference between price and non-price
  restrains.
• Market-freeing effects of Sylvania shouldnt be
  frustrated. If per se
• applied every time a dealer terminated
  because of alleged price
• cutting, Sylvania could be dismantled.
  Price allegation would
• always be threat to manufacture.
• Vertical restraints not equivalent to
  horizontal.
• Economic analysis supports view there can be no
  per se without
• agreement on price.

7
State Oil Company v. Khan (Sup. Ct. 1997)
Basic Facts State Oil, gas distributor,
demanded station owner remit any profits
realized by selling gas above level of 3.25 cents
over cost per gallon. Effect was to impose
maximum price constraint. Dist. Ct, applied rule
of reason and dismissed because no market
definition evidence. Ct. of Appeals (Posner)
reversed on basis of Albrecht. What did Posner
think of vertical price restraints? What are the
different impacts of minimum and maximum
vertical price restraints? How is interbrand
competition, the darling of antitrust, impacted
by minimum and maximum vertical price
constraints?
8
State Oil Company v. Khan (Sup. Ct. 1997)

• Holding Albrecht overruled to extent it applies
  per se analysis to
• maximum price vertical price constraints? Such
  restrains subject to
• rule of reason.
• Primary purpose to protect interbrand
  competition.
• Low price maintenance is essence of
  competition.
• Maximum price different.
• If manufacture grants distributor some monopoly
  power, may want
• to restrict ability of distributor to take
  advantage. This riskier after
• Sylvania because likelihood of dealer
  monopoly power increased.
• Albrecht per se on maximum prices may hurt
  consumers and
• manufactures.
• Stare decisis not exorable demand antitrust
  must adapt to changed
• circumstances.

9
NYNEX Corp. v. Discon, Inc (Sup. Ct. 1998)
Basic Facts ATT Tech contracted telephone
removal services with NYNEX at fraudulently high
prices that were passed onto consumers. Discon,
former supplier to ATT Tech, went out of
business and sued, alleging illegal boycott in
violation of Sherman 1 and 2. Any question
conduct was fraudulent? Why die Plaintiff rely
so heavily on Klors case? How did Court
distinguish Klors? Why did the Court refuse to
find a per se illegal boycott? What did Court
say about the freedom of companies to switch
suppliers?