Saturday, May 17, 2014

United States v. Addyston Pipe & Steel Co case brief summary

United States v. Addyston Pipe & Steel Co
·         Secret cast iron pipe cartel’s goal is to eliminate a price war. Firms represented 65% of output in industry. Government challenges on restraint of trade. Cartel argues that restraint is reasonable b/c ruinous competition and prices are reasonable.
·         Court rules that agreement is a naked restraint and thus illegal. The rule is that a contract in restraint of trade is only valid when the covenant in restraint of trade is merely ancillary, and is necessary to address concerns that gave rise to contracts and protect it.
o   A naked restraint is unambiguously anticompetitive and it has no purpose other than to restraint competition, and enhance or justify prices. Nothing exists to justify the restraint. Agreements to fix prices = Naked restraint.
o   Ancillary restraints are where the positive effects outweigh negative effects and where restraint is valid or incidental to some main purpose. This also cures the problem of a standard b/c it furnishes a standard.  At CL, a covenant not to compete was reasonable if incidental plus reasonable scope.

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