Group Boycotts Under US Antitrust Law
A group boycott occurs when two or more persons or entities conspire to restrict the ability of someone from competing. This is sometimes called a concerted refusal to deal, which unlike a standard refusal to dealrequires, not surprisingly, two or more people or entities.
A group boycott can create per se antitrust liability. But the per se rule is applied to group boycotts like it is applied to tying claims, which means only sometimes. By contrast, horizontal price-fixing,market allocation, and bid-rigging claims are almost always per se antitrust violations.
I receive a lot of calls about potential group boycott actions. This is probably the most frustrating type of antitrust conduct to experience as a victim.
Many antitrust violations, like price-fixing, tend to hurt a lot of people a little bit. A price-fixing scheme may increase prices ten percent, for example. Price-fixing victims feel the pain, but it is diffused. Typically either the government or plaintiff class-action attorneys have the biggest incentive to pursue these claims.
Group boycott activity, however, is usually directed toward one or very few victims. The harm is not diffused; it is concentrated. And it is often against a competitor that is just trying to establish itself in the market. The defendants may act like bullies to try to keep that upstart competitor from gaining traction in the market. Sometimes trade associations lead the anticompetitive charge.
Group boycott activity often occurs when someone new enters a market with a different or better idea or way of doing business. The current competitors—who like things just the way they are—band together to use their joint power to keep the enterprising competitor from succeeding, i.e. stealing their customers.
Sometimes group boycott claims are further complicated when the established competitors—the bullies—use their relationships with government power to further suppress competition. Indeed, sometimes the competitors are government power.
This is what occurred in the NC Dental v. FTC case (discussed here, and here; our amicus brief is here): A group of dentists on the North Carolina State Board of Dental Examiners engaged in joint conduct, using their government power, to thwart teeth-whitening competition from non-dentists.
This, in my opinion, is the most disgusting of antitrust violations: a group of bullies engaging government power to knock out innovation and competition. And I am very happy to see the Federal Trade Commission take a pro-active role against such anticompetitive thuggery.
When Are Group Boycotts Per Se Antitrust Violations?
Per se antitrust claims are much easier to prove than rule of reason claims because the plaintiff need not demonstrate every element that is typically required of an antitrust claimant—like market power, for example.
So a major issue in some cases is whether the Court will analyze the case under the per se or rule of reason standard. Increasingly, however, courts are using a middle standard, often called a quick look, which is sort of like a truncated rule-of-reason analysis. But this isn’t the blog post for that discussion.
The answer to the question whether a group boycott is a per se antitrust violation has meandered through a number of US Supreme Court cases, which you can read at your leisure:
- Fashion Originators’ Guild of American v. Federal Trade Commission (1941);
- Klors, Inc. v. Broadway-Hale Stores, Inc. (1959);
- United States v. General Motors Corp. (1966);
- Northwest Wholesale Stationers, Inc. v. Pacific Stationary and Printing Company (1985);
- FTC v. Superior Court Trial Lawyers Association (1990); and
- NYNEX Corp. v. Discon, Inc. (1998).
I will just give you the bottom line: As the US Supreme Court case law stands now, if you want theper se standard for your group-boycott claim, you need to show a horizontal element to the conspiracy. That is, the group-boycott activity must involve two or more competitors. They do not, however, necessarily have to be your competitors; the conduct may, for example, involve an agreement among two or more of your suppliers and your competitor.