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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