U.S. Supreme Court NW Wholesale Stationers v. Pac.
Stationery, 472
U.S. 284 (1985) Northwest Wholesale Stationers, Inc.
v. Pacific Stationery & Printing
Co. No. 83-1368 Argued February 19,
1985 Decided June 11, 1985 472
U.S. 284 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE NINTH
CIRCUIT Syllabus Petitioner is a wholesale purchasing cooperative whose
membership consists of office supply retailers in the Pacific
Northwest States. Nonmember retailers can purchase supplies from
petitioner at the same price as members, but since petitioner
annually distributes its profits to members in the form of a
percentage rebate, members effectively purchase supplies at a lower
price than do nonmembers. Petitioner expelled respondent from
membership without any explanation, notice, or hearing. Thereafter,
respondent brought suit in Federal District Court, alleging that
the expulsion without procedural protections was a group boycott
that limited its ability to compete and should be considered per se violative of § 1 of the Sherman Act. On
cross-motions for summary judgment, the District Court rejected
application of the per se rule and held, instead, that
rule of reason analysis should govern the case. Finding no
anticompetitive effect on the basis of the record, the court
granted summary judgment for petitioner. The Court of Appeals
reversed, holding that, although § 4 of the Robinson-Patman Act
expressly approves price discrimination occasioned by such an
expulsion as the one in question, and thus provides a mandate for
self-regulation, nevertheless, because petitioner had not provided
any procedural safeguards, the expulsion of respondent was not
shielded by § 4, and therefore constituted a per se group
boycott in violation of § 1 of the Sherman Act. Held: Petitioner's expulsion of respondent does not
fall within the category of activity that is conclusively presumed
to be anticompetitive so as to mandate per se invalidation
under § 1 of the Sherman Act as a group boycott or concerted
refusal to deal. Pp. 472 U. S.
289 -298.

															(a) Section 4 of the Robinson-Patman Act, which is no more than
a narrow immunity from the price discrimination prohibitions of
that Act, cannot properly be construed as an exemption from or
repeal of any portion of the Sherman Act or as a broad mandate for
industry self-regulation. Silver v. New York Stock
Exchange, 373 U. S. 341 ,
distinguished. In any event, the absence of procedural safeguards
in this case can in no sense determine the antitrust analysis,
since if the challenged expulsion amounted to a per se violation of § 1, no amount of procedural protection would save it,
whereas, if the expulsion did not amount to a Page 472 U. S. 285 violation of § 1, no lack of procedural protections would
convert it into a per se violation. Pp. 472 U. S.
291 -293.

															(b) The act of expulsion from a wholesale cooperative does not
necessarily imply anticompetitive animus so as to raise a
probability of anticompetitive effect. Unless it is shown that the
cooperative possesses market power or exclusive access to an
element essential to effective competition, the conclusion that
expulsion is virtually always likely to have an anticompetitive
effect is not warranted. Absent such a showing with respect to a
cooperative buying arrangement, courts should apply a rule of
reason analysis. Here, respondent, focusing on the argument that
the lack of procedural safeguards required per se liability, made no such showing. But because the Court of Appeals
applied an erroneous per se analysis, it never evaluated
the District Court's rule of reason analysis rejecting respondent's
claim, and therefore a remand is appropriate to permit appellate
review of that determination. Pp. 472 U. S.
293 -298.

															715 F.2d 1393, reversed and remanded.

															BRENNAN, J., delivered the opinion of the Court, in which all
other Members joined except MARSHALL and POWELL, JJ., who took no
part in the decision of the case.

															JUSTICE BRENNAN delivered the opinion of the Court.

															This case requires that we decide whether a per se violation of § 1 of the Sherman Act, 15 U.S.C. § 1, occurs when a
cooperative buying agency comprising various retailers expels a
member without providing any procedural means for Page 472 U. S. 286 challenging the expulsion. [ Footnote 1 ] The case also raises broader questions as to
when per se antitrust analysis is appropriately applied to
joint activity that is susceptible of being characterized as a
concerted refusal to deal. I Because the District Court ruled on cross-motions for summary
judgment after only limited discovery, this case comes to us on a
sparse record. Certain background facts are undisputed. Petitioner
Northwest Wholesale Stationers is a purchasing cooperative made up
of approximately 100 office supply retailers in the Pacific
Northwest States. The cooperative acts as the primary wholesaler
for the retailers. Retailers that are not members of the
cooperative can purchase wholesale supplies from Northwest at the
same price as members. At the end of each year, however, Northwest
distributes its profits to members in the form of a percentage
rebate on purchases. Members therefore effectively purchase
supplies at a price significantly lower than do nonmembers.
[ Footnote 2 ] Northwest also
provides certain warehousing facilities. The cooperative
arrangement thus permits the participating retailers to achieve
economies of scale in purchasing and warehousing that would
otherwise be Page 472 U. S. 287 unavailable to them. In fiscal 1978, Northwest had $5.8 million
in sales. App. 73.

															Respondent Pacific Stationery & Printing Co. sells office
supplies at both the retail and wholesale levels. Its total sales
in fiscal 1978 were approximately $7.6 million; the record does not
indicate what percentage of revenue is attributable to retail and
what percentage is attributable to wholesale. Pacific became a
member of Northwest in 1958. In 1974, Northwest amended its bylaws
to prohibit members from engaging in both retail and wholesale
operations. See id. at 50, 59. A grandfather clause
preserved Pacific's membership rights. See id. at 59. In
1977, ownership of a controlling share of the stock of Pacific
changed hands, id. at 70, and the new owners did not
officially bring this change to the attention of the directors of
Northwest. This failure to notify apparently violated another of
Northwest's bylaws. See id. at 59 (Bylaws, Art. VIII, §
5).

															In 1978, the membership of Northwest voted to expel Pacific.
Most factual matters relevant to the expulsion are in dispute. No
explanation for the expulsion was advanced at the time, and Pacific
was given neither notice, a hearing, nor any other opportunity to
challenge the decision. Pacific argues that the expulsion resulted
from Pacific's decision to maintain a wholesale operation. See Brief in Opposition 11. Northwest contends that the
expulsion resulted from Pacific's failure to notify the cooperative
members of the change in stock ownership. See Pet. for
Cert. 8. The minutes of the meeting of Northwest's directors do not
definitively indicate the motive for the expulsion. App. 75-77. It
is undisputed that Pacific received approximately $10,000 in
rebates from Northwest in 1978, Pacific's last year of membership.
Beyond a possible inference of loss from this fact, however, the
record is devoid of allegations indicating the nature and extent of
competitive injury the expulsion caused Pacific to suffer. Page 472 U. S. 288 Pacific brought suit in 1980 in the United States District Court
for the District of Oregon alleging a violation of § 1 of the
Sherman Act. The gravamen of the action was that Northwest's
expulsion of Pacific from the cooperative without procedural
protections was a group boycott that limited Pacific's ability to
compete and should be considered per se violative of § 1. See Complaint 118, App. 4-5. On cross-motions for summary
judgment, the District Court rejected application of the per
se rule, and held instead that rule-of-reason analysis should
govern the case. Finding no anticompetitive effect on the basis of
the record as presented, the court granted summary judgment for
Northwest. See App. to Pet. for Cert. 22-24.

															The Court of Appeals for the Ninth Circuit reversed, holding
"that the uncontroverted facts of this case support a finding of per se liability." 715 F.2d 1393, 1395 (1983). The court
reasoned that the cooperative's expulsion of Pacific was an
anticompetitive concerted refusal to deal with Pacific on equal
footing, which would be a per se violation of § 1 in the
absence of any specific legislative mandate for self-regulation
sanctioning the expulsion. The court noted that § 4 of the
Robinson-Patman Act, 15 U.S.C. § 13b, specifically approves the
price discrimination occasioned by such expulsion, and concluded
that § 4 therefore provided a mandate for self-regulation. Such a
legislative mandate, according to the court, would ordinarily
result in evaluation of the challenged practice under the rule of
reason. But, drawing on Silver v. New York Stock Exchange, 373 U. S. 341 , 373 U. S.
348 -349 (1963), the court decided that rule of reason
analysis was appropriate only on the condition that the cooperative
had provided procedural safeguards sufficient to prevent arbitrary
expulsion and to furnish a basis for judicial review. Because
Northwest had not provided any procedural safeguards, the court
held that the expulsion of Pacific was not shielded by
Robinson-Patman immunity, and therefore constituted Page 472 U. S. 289 a per se group boycott in violation of § 1 of the
Sherman Act. 7 15 F.2d at 1395-1398.

															We granted certiorari to examine this application of Silver
v. New York Stock Exchange, supra, in an area of antitrust law
that has not been free of confusion. [ Footnote 3 ] 469 U.S. 814 (1984). We reverse. II The decision of the cooperative members to expel Pacific was
certainly a restraint of trade in the sense that every commercial
agreement restrains trade. Chicago Board of Trade v. United
States, 246 U. S. 231 , 246 U. S. 238 (1918). Whether this action violates § 1 of the Sherman Act depends
on whether it is adjudged an unreasonable restraint. Ibid. Rule-of-reason analysis guides the inquiry, see Standard Oil
Co. v. United States, 221 U. S. 1 (1911),
unless the challenged action falls into the category of

															"agreements or practices which, because of their pernicious
effect on competition and lack of any redeeming virtue, are
conclusively presumed to be unreasonable, and therefore illegal,
without elaborate inquiry as to the precise harm they have caused
or the business excuse for their use." Northern Pacific R. Co. v. United States, 356 U. S.
1 , 356 U. S. 5 (1958).

															This per se approach permits categorical judgments with
respect to certain business practices that have proved to be
predominantly anticompetitive. Courts can thereby avoid the
"significant costs" in "business certainty and litigation
efficiency" that a full-fledged rule of reason inquiry entails. Arizona v. Maricopa County Medical Society, 457 U.
S. 332 , 457 U. S.
343 -344 (1982). See also United States v. Topco
Associates, Inc., 405 U. S. 596 , 405 U. S.
609 -610 (1972). The decision to apply the per
se rule turns on

															"whether the practice facially appears to be one that would
always or almost always tend to restrict Page 472 U. S. 290 competition and decrease output . . . or, instead, one designed
to 'increase economic efficiency and render markets more, rather
than less, competitive.'" Broadcast Music, Inc. v. Columbia Broadcasting System,
Inc., 441 U. S. 1 , 441 U. S. 19 -20
(1979) (citations omitted). See also National Collegiate
Athletic Assn. v. Board of Regents of University of Oklahoma, 468 U. S. 85 , 468 U. S.
103 -104 (1984) (" Per se rules are invoked when
surrounding circumstances make the likelihood of anticompetitive
conduct so great as to render unjustified further examination of
the challenged conduct").

															This Court has long held that certain concerted refusals to deal
or group boycotts are so likely to restrict competition without any
offsetting efficiency gains that they should be condemned as per se violations of § 1 of the Sherman Act. See
Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.
S. 207 (1959); United States v. General Motors
Corp., 384 U. S. 127 (1966); Radiant Burners, Inc. v. Peoples Gas Light & Coke
Co., 364 U. S. 656 (1961); Associated Press v. United States, 326 U. S.
1 (1945); Fashion Originators' Guild of America,
Inc. v. FTC, 312 U. S. 457 (1941); Eastern States Retail Lumber Dealers' Assn. v. United
States, 234 U. S. 600 (1914). The question presented in this case is whether Northwest's
decision to expel Pacific should fall within this category of
activity that is conclusively presumed to be anticompetitive.
[ Footnote 4 ] The Court of
Appeals held that the exclusion of Pacific from the cooperative
should conclusively be presumed unreasonable on the ground that
Northwest provided no procedural protections to Pacific. Even if
the lack of procedural protections does not justify a conclusive
presumption of predominantly anticompetitive effect, the mere act
of expulsion of a competitor from a wholesale cooperative might be
argued to be sufficiently likely to have such effects under Page 472 U. S. 291 the present circumstances, and therefore to justify application
of the per se rule. These possibilities will be analyzed
separately. A The Court of Appeals drew from Silver v. New York Stock
Exchange, 373 U. S. 341 (1963), a broad rule that the conduct of a cooperative venture --
including a concerted refusal to deal -- undertaken pursuant to a
legislative mandate for self-regulation is immune from per
se scrutiny and subject to rule of reason analysis only if
adequate procedural safeguards accompany self-regulation. We
disagree, and conclude that the approach of the Court in Silver has no proper application to the present
controversy.

															The Court in Silver framed the issue as follows:

															"[W]hether the New York Stock Exchange is to be held liable to a
nonmember broker-dealer under the antitrust laws or regarded as
impliedly immune therefrom when, pursuant to rules the Exchange has
adopted under the Securities Exchange Act of 1934, it orders a
number of its members to remove private direct telephone wire
connections previously in operation between their offices and those
of the nonmember, without giving the nonmember notice, assigning
him any reason for the action, or affording him an opportunity to
be heard." Id. at 373 U. S. 343 .
Because the New York Stock Exchange occupied such a dominant
position in the securities trading markets that the boycott would
devastate the nonmember, the Court concluded that the refusal to
deal with the nonmember would amount to a per se violation
of § 1 unless the Securities Exchange Act provided an immunity. Id. at 373 U. S.
347 -348. The question for the Court thus was whether
effectuation of the policies of the Securities Exchange Act
required partial repeal of the Sherman Act insofar as it proscribed
this aspect of exchange self-regulation. Page 472 U. S. 292 Finding exchange self-regulation -- including the power to expel
members and limit dealings with nonmembers -- to be an essential
policy of the Securities Exchange Act, the Court held that the
Sherman Act should be construed as having been partially repealed
to permit the type of exchange activity at issue. But the
interpretive maxim disfavoring repeals by implication led the Court
to narrow permissible self-policing to situations in which adequate
procedural safeguards had been provided.

															"Congress . . . cannot be thought to have sanctioned and
protected self-regulative activity when carried out in a
fundamentally unfair manner. The point is not that the antitrust
laws impose the requirement of notice and a hearing here, but
rather that, in acting without according petitioners these
safeguards in response to their request, the Exchange has plainly
exceeded the scope of its authority under the Securities Exchange
Act to engage in self-regulation." Id. at 373 U. S. 364 (footnote omitted). Thus, it was the specific need to accommodate
the important national policy of promoting effective exchange
self-regulation, tempered by the principle that the Sherman Act
should be narrowed only to the extent necessary to effectuate that
policy, that dictated the result in Silver. Section 4 of the Robinson-Patman Act is not comparable to the
self-policing provisions of the Securities Exchange Act. That
section is no more than a narrow immunity from the price
discrimination prohibitions of the Robinson-Patman Act itself. The
Conference Report makes clear that the exception was intended
solely to

															"safeguard producer and consumer cooperatives against any charge
of violation of the act based on their distribution of earnings
or surplus among their members on a patronage basis. "

															H.R.Conf.Rep. No. 2951, 74th Cong., 2d Sess., 9 (1936) (emphasis
added). This section has never been construed as granting
cooperatives a blanket exception from the Robinson-Patman Act, and
cannot plausibly be construed as an exemption to or Page 472 U. S. 293 repeal of any portion of the Sherman Act. [ Footnote 5 ]

															"There is nothing in the last section of the bill [containing §
4] that distinguishes cooperatives, either favorably or
unfavorably, from other agencies in the streams of production and
trade, so far as concerns their dealings with others."

															80 Cong.Rec. 9419 (1936) (remarks of Rep. Utterback).

															In light of this circumscribed congressional intent, there can
be no argument that § 4 of the Robinson-Patman Act should be viewed
as a broad mandate for industry self-regulation. No need exists,
therefore, to narrow the Sherman Act in order to accommodate any
competing congressional policy requiring discretionary
self-policing. Indeed, Congress would appear to have taken some
care to make clear that no constriction of the Sherman Act was
intended. In any event, the absence of procedural safeguards can in
no sense determine the antitrust analysis. If the challenged
concerted activity of Northwest's members would amount to a per
se violation of § 1 of the Sherman Act, no amount of
procedural protection would save it. If the challenged action would
not amount to a violation of § 1, no lack of procedural protections
would convert it into a per se violation, because the
antitrust laws do not themselves impose on joint ventures a
requirement of process. B This case therefore turns not on the lack of procedural
protections but on whether the decision to expel Pacific is
properly viewed as a group boycott or concerted refusal to deal
mandating per se invalidation. "Group boycotts" are often
listed among the classes of economic activity that merit per
se invalidation under § 1. See Klor's, Inc. v.
Broadway-Hale Stores, Inc., 359 U.S. at 359 U. S. 212 ; Northern Pacific R. Co. v. United States, 356 U.S. at 356 U. S. 5 ; Silver v. New York Stock Exchange, 373 U.S. at 373 U. S. 348 ; White Motor Co. v.
United Page 472 U. S. 294 States, 372 U.
S. 253 , 372 U. S.
259 -260 (1963). Exactly what types of activity fall
within the forbidden category is, however, far from certain.

															"[T]here is more confusion about the scope and operation of the per se rule against group boycotts than in reference to
any other aspect of the per se doctrine."

															L. Sullivan, Law of Antitrust 229-230 (1977). Some care is
therefore necessary in defining the category of concerted refusals
to deal that mandate per se condemnation. See St. Paul
Fire & Marine Ins. Co. v. Barry, 438 U.
S. 531 , 438 U. S. 543 (1978) (concerted refusals to deal "are not a unitary phenomenon"). Cf. Broadcast Music, Inc. v. Columbia Broadcasting System,
Inc., 441 U.S. at 441 U. S. 9 .

															Cases to which this Court has applied the per se approach have generally involved joint efforts by a firm or firms
to disadvantage competitors by

															"either directly denying or persuading or coercing suppliers or
customers to deny relationships the competitors need in the
competitive struggle."

															Sullivan, supra, at 261-262. See, e.g., Silver,
supra, (denial of necessary access to exchange members); Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U. S. 656 (1961) (denial of necessary certification of product); Associated Press v. United States, 326 U. S.
1 (1945) (denial of important sources of news); Klor's, Inc., supra, (denial of wholesale supplies). In
these cases, the boycott often cut off access to a supply,
facility, or market necessary to enable the boycotted firm to
compete, Silver, supra; Radiant Burners, Inc., supra, and
frequently the boycotting firms possessed a dominant position in
the relevant market. E.g., Silver, supra; Associated Press,
supra; Fashion Originators' Guild of America, Inc. v. FTC, 312 U. S. 457 (1941). See generally Brodley, Joint Ventures and
Antitrust Policy, 95 Harv.L.Rev. 1523, 1533, 1563-1565 (1982). In
addition, the practices were generally not justified by plausible
arguments that they were intended to enhance overall efficiency and
make markets more competitive. Under such circumstances, the
likelihood of anticompetitive effects is clear, and the possibility
of countervailing procompetitive effects is remote. Page 472 U. S. 295 Although a concerted refusal to deal need not necessarily
possess all of these traits to merit per se treatment, not
every cooperative activity involving a restraint or exclusion will
share with the per se forbidden boycotts the likelihood of
predominantly anticompetitive consequences. For example, we
recognized last Term in National Collegiate Athletic Assn. v.
Board of Regents of University of Oklahoma that per
se treatment of the NCAA's restrictions on the marketing of
televised college football was inappropriate -- despite the obvious
restraint on output -- because the "case involves an industry in
which horizontal restraints on competition are essential if the
product is to be available at all." 468 U.S. at 468 U. S.
101 .

															Wholesale purchasing cooperatives such as Northwest are not a
form of concerted activity characteristically likely to result in
predominantly anticompetitive effects. Rather, such cooperative
arrangements would seem to be "designed to increase economic
efficiency and render markets more, rather than less, competitive." Broadcast Music, Inc. v. Columbia Broadcasting System, Inc.,
supra, at 441 U. S. 20 . The
arrangement permits the participating retailers to achieve
economies of scale in both the purchase and warehousing of
wholesale supplies, and also ensures ready access to a stock of
goods that might otherwise be unavailable on short notice. The cost
savings and order-filling guarantees enable smaller retailers to
reduce prices and maintain their retail stock so as to compete more
effectively with larger retailers.

															Pacific, of course, does not object to the existence of the
cooperative arrangement, but rather raises an antitrust challenge
to Northwest's decision to bar Pacific from continued membership.
[ Footnote 6 ] It is therefore
the action of expulsion that Page 472 U. S. 296 must be evaluated to determine whether per se treatment
is appropriate. The act of expulsion from a wholesale cooperative
does not necessarily imply anticompetitive animus and thereby raise
a probability of anticompetitive effect. See Broadcast Music,
Inc. v. Columbia Broadcasting System, Inc., supra, at 441 U. S. 9 .
Wholesale purchasing cooperatives must establish and enforce
reasonable rules in order to function effectively. Disclosure
rules, such as the one on which Northwest relies, may well provide
the cooperative with a needed means for monitoring the
creditworthiness of its members. [ Footnote 7 ] Nor would the expulsion characteristically be
likely to result in predominantly anticompetitive effects, at least
in the type of situation this case presents. Unless the cooperative
possesses market power or exclusive access to an element essential
to effective competition, the conclusion that expulsion is
virtually always likely to have an anticompetitive effect is not
warranted. See L. Sullivan, Law of Antitrust 292-293
(1977); Brodley, 95 Harv.L.Rev. at 1563-1565. Cf. Jefferson
Parish Hospital Dist. v. Hyde, 466 U. S.
2 , 466 U. S. 12 -15
(1984) (absent indication of market power, tying arrangement does
not warrant per se invalidation). See generally
National Page 472 U. S.
297 Collegiate Athletic Assn. v. Board of Regent of University
of Oklahoma, 468 U.S. at 468 U. S. 104 ,
n. 26 (" Per se rules may require considerable inquiry into
market conditions before the evidence justifies a presumption of
anticompetitive conduct"). Absent such a showing with respect to a
cooperative buying arrangement, courts should apply a rule of
reason analysis. At no time has Pacific made a threshold showing
that these structural characteristics are present in this case. See Complaint, App. 2; Motion for Partial Summary
Judgment, App. 9. [ Footnote
8 ]

															The District Court appears to have followed the correct path of
analysis -- recognizing that not all concerted refusals to deal
should be accorded per se treatment and deciding this one
should not. [ Footnote 9 ] The
foregoing discussion suggests, however, that a satisfactory
threshold determination whether anticompetitive effects would be
likely might require a more detailed factual picture of market
structure than the District Page 472 U. S. 298 Court had before it. Nonetheless, in our judgment, the District
Court's rejection of per se analysis in this case was
correct. A plaintiff seeking application of the per se rule must present a threshold case that the challenged activity
falls into a category likely to have predominantly anticompetitive
effects. The mere allegation of a concerted refusal to deal does
not suffice, because not all concerted refusals to deal are
predominantly anticompetitive. When the plaintiff challenges
expulsion from a joint buying cooperative, some showing must be
made that the cooperative possesses market power or unique access
to a business element necessary for effective competition. Focusing
on the argument that the lack of procedural safeguards required per se liability, Pacific did not allege any such facts.
Because the Court of Appeals applied an erroneous per se analysis in this case, the court never evaluated the District
Court's rule of reason analysis rejecting Pacific's claim. A remand
is therefore appropriate for the limited purpose of permitting
appellate review of that determination. III "The per se rule is a valid and useful tool of
antitrust policy and enforcement." Broadcast Music, Inc. v.
Columbia Broadcasting System, Inc., 441 U.S. at 441 U. S. 8 . It
does not denigrate the per se approach to suggest care in
application. In this case, the Court of Appeals failed to exercise
the requisite care, and applied per se analysis
inappropriately. The judgment of the Court of Appeals is therefore
reversed, and the case is remanded for further proceedings
consistent with this opinion. It is so ordered. JUSTICE MARSHALL and JUSTICE POWELL took no part in the decision
of this case.

															[ Footnote 1 ]

															That section reads in relevant part:

															"Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal."

															[ Footnote 2 ]

															Although this patronage rebate policy is a form of price
discrimination, § 4 of the Robinson-Patman Act specifically
sanctions such activity by cooperatives:

															"Nothing in this Act shall prevent a cooperative association
from returning to its members, producers, or consumers the whole,
or any part of, the net earnings or surplus resulting from its
trading operations, in proportion to their purchases or sales from,
to, or through the association."

															49 Stat. 1528, 15 U.S.C. § 13b. A relevant state law provision
provides analogous protection. Ore.Rev.Stat. § 646.030 (1983).

															[ Footnote 3 ] See L. Sullivan, Law of Antitrust 229-230 (1977);
Bauer, Per Se Illegality of Concerted Refusals to Deal: A Rule Ripe
for Reexamination, 79 Colum.L.Rev. 685 (1979).

															[ Footnote 4 ]

															Northwest raises no challenge before this Court to the
conclusion of the Court of Appeals that the cooperative's decision
to expel Pacific was a "combination or conspiracy" affecting
interstate commerce within the meaning of § 1 of the Sherman
Act.

															[ Footnote 5 ] See, e.g., American Motor Specialties Co. v. FTC, 278
F.2d 225, 229 (CA2), cert. denied, 364 U.S. 884
(1960).

															[ Footnote 6 ]

															Because Pacific has not been wholly excluded from access to
Northwest's wholesale operations, there is perhaps some question
whether the challenged activity is properly characterized as a
concerted refusal to deal. To be precise, Northwest's activity is a
concerted refusal to deal with Pacific on substantially equal
terms. Such activity might justify per se invalidation if
it placed a competing firm at a severe competitive disadvantage. See generally Brodley, Joint Ventures and Antitrust
Policy, 95 Harv.L.Rev. 1521, 1532 (1982) ("Even if the joint
venture does deal with outside firms, it may place them at a severe
competitive disadvantage by treating them less favorably than it
treats the [participants in the joint venture]").

															[ Footnote 7 ]

															Pacific argues, however, that this justification for expulsion
was a pretext, because the members of Northwest were fully aware of
the change in ownership despite lack of formal notice. According to
Pacific, Northwest's motive in the expulsion was to place Pacific
at a competitive disadvantage to retaliate for Pacific's decision
to engage in an independent wholesale operation. Such a motive
might be more troubling. If Northwest's action were not
substantially related to the efficiency-enhancing or procompetitive
purposes that otherwise justify the cooperative's practices, an
inference of anticompetitive animus might be appropriate. But such
an argument is appropriately evaluated under the rule of reason
analysis.

															[ Footnote 8 ]

															Given the state of this record, it is difficult to understand
how the Court of Appeals could have concluded that Pacific

															"loses the ability to use Northwest's superior warehousing and
expedited order-filling facilities, as well as any competitive
advantages that may flow simply from being known in the industry as
a member of an established cooperative."

															715 F.2d 1393, 1395 (1983). The District Court had specifically
found no anticompetitive effect.

															[ Footnote 9 ]

															The District Court stated:

															"I think that, in a case of this nature, in order to move an
antitrust violation, it is necessary to show some restraint of
competition, and I don't believe that is shown here. Even if it is
a group boycott, I still believe under [ Joseph E. Seagram &
Sons, Inc. v. Hawaiian Oke Liquors, Ltd., 416 F.2d 71 (CA9
1969), and Ron Tonkin Gran Turismo, Inc. v. Fiat Distributor,
Inc., 637 F.2d 1376 (CA9 1981)], that the Rule of Reason
operates. And I think if you apply the Rule of Reason to the facts
that are submitted by the parties here that are not disputed in
this case, you come to the conclusion that there is [ sic ]
simply been no showing by the Plaintiff in this case of a restraint
of competition, as distinguished from possible damage to the
Plaintiff by being expelled from the association."

															App. to Pet. for Cert. 23-24.

Summary: In *NW Wholesale Stationers v. Pac. Stationery*, the U.S. Supreme Court ruled that the expulsion of a member from a wholesale cooperative does not automatically imply anticompetitive behavior and should be evaluated under the "rule of reason" analysis. The Court rejected the application of a per se rule, which would have conclusively presumed the expulsion as a violation of the Sherman Act's prohibition on group boycotts or concerted refusal to deal. The absence of procedural safeguards in the expulsion process did not determine the antitrust analysis. The Court emphasized that the expulsion did not wholly exclude the respondent from accessing the petitioner's wholesale operations, and any competitive disadvantage could be evaluated under the rule of reason.


U.S. Supreme Court Palmer v. BRG of Georgia, Inc., 498 U.S.
46 (1990) Palmer v. BRG of Georgia,
Inc. No. 89-1667 Decided Nov. 26, 1990 498 U.S.
46 ON PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS FOR THE
ELEVENTH CIRCUIT Respondents, BRG of Georgia, Inc.
(BRG), and Harcourt Brace Jovanovich Legal and Professional
Publications (HBJ), entered into an agreement under which BRG was
given an exclusive license to market HBJ's tradename; HBJ agreed
not to compete with BRG in Georgia, and BRG agreed not to compete
with HBJ outside the State; and HBJ was entitled to receive $100
per student enrolled by BRG and 40% of revenues over $350.
Immediately after the parties entered into the agreement, the price
for BRG's course increased from $150 to $400. Petitioners, who
contracted to take BRG's course, filed suit, contending that BRG;s
price was enhanced by reason of the agreement in violation of § 1
of the Sherman Act. The District Court held that the agreement was
lawful, and the Court of Appeals affirmed. Held: The agreement between
HBJ and BRG was unlawful on its face. The agreement's
revenue-sharing formula, coupled with the immediate price increase,
indicate that the agreement was "formed for the purposes and with
the effect of raising" the bar review course's prices in violation
of the Sherman Act. See United States v. Socony-Vacuum Oil
Co., 310 U. S. 150 , 310 U. S. 223 .
Agreements between competitors to allocate territories to minimize
competition are illegal, United States v. Topco Associates,
Inc., 405 U. S. 596 ,
regardless of whether the parties split a market within which they
both do business or merely reserve one market for one and another
for the other. Certiorari granted; 874 F.2d 1417 and 893 F.2d 293, reversed and
remanded.

															PER CURIAM.

															In preparation for the 1985 Georgia Bar Examination, petitioners
contracted to take a bar review course offered by respondent BRG of
Georgia, Inc. (BRG). In this litigation, they contend that the
price of BRG's course was enhanced by reason of an unlawful
agreement between BRG and respondent Harcourt Brace Jovanovich
Legal and Professional Publications (HBJ), the Nation's largest
provider of bar review Page 498 U. S. 47 materials and lecture services. The central issue is whether the
1980 agreement between respondents violated § 1 of the Sherman Act.
[ Footnote 1 ]

															HBJ began offering a Georgia bar review course on a limited
basis in 1976, and was in direct, and often intense, competition
with BRG during the period from 1977-1979. BRG and HBJ were the two
main providers of bar review courses in Georgia during this time
period. In early 1980, they entered into an agreement that gave BRG
an exclusive license to market HBJ's material in Georgia and to use
its trade name "Bar/Bri." The parties agreed that HBJ would not
compete with BRG in Georgia and that BRG would not compete with HBJ
outside of Georgia. [ Footnote
2 ] Under the agreement, HBJ received $100 per student enrolled
by BRG and 40% of all revenues over $350. Immediately after the
1980 agreement, the price of BRG's course was increased from $150
to over $400.

															On petitioners' motion for partial summary judgment as to the §
1 counts in the complaint and respondents' motion for summary
judgment, the District Court held that the agreement Page 498 U. S. 48 was lawful. The United States Court of Appeals for the Eleventh
Circuit, with one judge dissenting, agreed with the District Court
that per se unlawful horizontal price fixing required an
explicit agreement on prices to be charged or that one party have
the right to be consulted about the other's prices. The Court of
Appeals also agreed with the District Court that to prove a per
se violation under a geographic market allocation theory,
petitioners had to show that respondents had subdivided some
relevant market in which they had previously competed. 874 F.2d
1417 (1989). [ Footnote 3 ] The
Court of Appeals denied a petition for rehearing en banc that had
been supported by the United States. 893 F.2d 293 (1990). [ Footnote 4 ]

															In United States v. Socony-Vacuum Oil Co., 310 U.
S. 150 (1940), we held that an agreement among
competitors to engage in a program of buying surplus gasoline on
the spot market in order to prevent prices from falling sharply was
unlawful, even though there was no direct agreement on the actual
prices to be maintained. We explained that

															"[u]nder the Sherman Act, a combination formed for the purpose
and with the effect of raising, depressing, fixing, pegging, or
stabilizing the price of a commodity in interstate or foreign
commerce is illegal per se. " Id. at 310 U. S. 223 . See also Catalano, Inc. v. Target Sales, Inc., 446 U. S. 643 (1980) (per curiam); National Society of Professional Engineers
v. United States, 435 U. S. 679 (1978). Page 498 U. S. 49 The revenue-sharing formula in the 1980 agreement between BRG
and HBJ, coupled with the price increase that took place
immediately after the parties agreed to cease competing with each
other in 1980, indicates that this agreement was "formed for the
purpose and with the effect of raising" the price of the bar review
course. It was, therefore, plainly incorrect for the District Court
to enter summary judgment in respondents' favor. [ Footnote 5 ] Moreover, it is equally clear
that the District Court and the Court of Appeals erred when they
assumed that an allocation of markets or submarkets by competitors
is not unlawful unless the market in which the two previously
competed is divided between them.

															In United States v. Topco Associates, Inc., 405 U. S. 596 (1972), we held that agreements between competitors to allocate
territories to minimize competition are illegal:

															"One of the classic examples of a per se violation of §
1 is an agreement between competitors at the same level of the
market structure to allocate territories in order to minimize
competition. . . . This Court has reiterated time and time again
that"

															"[h]orizontal territorial limitations . . . are naked restraints
of trade with no purpose except stifling of competition."

															"Such limitations are per se violations of the Sherman
Act." Id. at 405 U. S. 608 (citations omitted).

															The defendants in Topco had never competed in the same
market, but had simply agreed to allocate markets. Here, HBJ and
BRG had previously competed in the Georgia market; under their
allocation agreement, BRG received that market, while HBJ received
the remainder of the United States. Each agreed not to compete in
the other's territories. Such agreements are anticompetitive
regardless of whether the parties split a market within which both
do business Page 498 U. S. 50 or whether they merely reserve one market for one and another
for the other. [ Footnote 6 ]
Thus, the 1980 agreement between HBJ and BRG was unlawful on its
face.

															The petition for a writ of certiorari is granted, the judgment
of the Court of Appeals is reversed, and the case is remanded for
further proceedings consistent with this opinion. [ Footnote 7 ] It is so ordered. Justice SOUTER took no part in the consideration or decision of
this case.

															[ Footnote 1 ]

															Section I of the Sherman Act, 26 Stat. 209, as amended and set
forth in 15 U.S.C. § 1, provides in relevant part:

															"Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal."

															We do not reach the other claims alleged in petitioners'
nine-count complaint, including violations of § 2 of the Sherman
Act, 15 U.S.C. § 2.

															[ Footnote 2 ]

															The 1980 agreement contained two provisions, one called a
"Covenant Not to Compete" and the other called "Other Ventures."
The former required HBJ not to

															"directly or indirectly own, manage, operate, join, invest,
control, or participate in or be connected as an officer, employee,
partner, director, independent contractor or otherwise with any
business which is operating or participating in the preparation of
candidates for the Georgia State Bar Examination."

															Plaintiffs' Motion for Partial Summary Judgment, Attachment E,
at 10. The latter required BRG not to compete against HBJ in states
in which HBJ currently operated outside the state of Georgia. Id. at 15.

															[ Footnote 3 ]

															In dissent, Judge Clark explained that, in his view, HBJ and BRG
were capable of engaging in per se horizontal restraints
because they had competed against each other, and then had joined
forces. He believed the District Court's analysis was flawed
because it had failed to recognize that the agreements could be
price-fixing agreements even without explicit reference to price,
and because it had failed to recognize that allocation, rather than
subdivision, of markets could also constitute a per se antitrust violation.

															[ Footnote 4 ]

															The United States, as amicus curiae, had urged the
court to adopt the views of the dissent.

															[ Footnote 5 ] See Anderson v. Liberty Lobby, Inc., 477 U.
S. 242 , 477 U. S. 255 (1986) ("The evidence of the nonmovant is to be believed, and all
justifiable inferences are to be drawn in his favor").

															[ Footnote 6 ] See Arizona v. Maricopa County Medical Society, 457 U. S. 332 , 457 U. S. 344 ,
n. 15 (1982) ("division of markets" is per se offense).

															[ Footnote 7 ]

															In 1982, in connection with the settlement of another lawsuit,
respondents made certain changes in their arrangement. Because the
District Court found that the 1980 agreement did not violate § 1 of
the Sherman Act, it did not address whether the 1982 modified
agreement constituted a withdrawal from or abandonment of the
conspiracy. In United States v. Kissel, 218 U.
S. 601 (1910) we held that antitrust conspiracies may
continue in time beyond the original conspiratorial agreement until
either the conspiracy's objectives are abandoned or succeed. Id. at 218 U. S.
608 -609. Thus, it is an unsettled factual issue whether
the conspiratorial objectives manifest in the 1980 agreement
between HBJ and BRG have continued in spite of the 1982
modifications.

															Justice MARSHALL, dissenting.

															Although I agree that the limited information before us appears
to indicate that the Court of Appeals erred in its decision below,
I continue to believe that summary dispositions deprive litigants
of a fair opportunity to be heard on the merits and significantly
increase the risk of an erroneous decision. See Smith v.
Ohio, 494 U. S. 541 , 494 U. S. 544 (1990) (MARSHALL, J., dissenting); Pennsylvania v. Bruder, 488 U. S. 9 , 488 U. S. 11 -12
(1988) (MARSHALL, J., dissenting); Rhodes v. Stewart, 488 U. S. 1 , 488 U. S. 3 -4
(1988) (MARSHALL, J., dissenting); Buchanan v. Stanships
Inc., 485 U. S. 265 , 485 U. S. 269 (1988) Page 498 U. S. 51 (MARSHALL, J., dissenting); Commissioner v. McCoy, 484 U. S. 3 , 484 U. S. 7 -8
(1987) (MARSHALL, J., dissenting). I therefore dissent from the
Court's decision today to reverse summarily the judgment below.

Summary: In Palmer v. BRG of Georgia, Inc., the Supreme Court held that an agreement between BRG and HBJ, two competitors in the market for bar review courses in Georgia, was unlawful per se under the Sherman Act. The agreement included market allocation and revenue-sharing provisions, with BRG and HBJ agreeing not to compete in each other's respective territories and BRG paying HBJ a fixed fee per student enrolled, plus a percentage of revenues. The Court found that this agreement was formed with the purpose and effect of raising prices for bar review courses, as evidenced by the immediate price increase following the agreement. Such horizontal restraints on competition are illegal, regardless of whether they involve market allocation within a shared territory or the reservation of separate territories for each party.


U.S. Supreme Court FTC v. Indiana Fed'n of Dentists, 476
U.S. 447 (1986) Federal Trade Commission v. Indiana
Federation of Dentists No. 84-1809 Argued March 25, 1986 Decided June 2, 1986 476
U.S. 447 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SEVENTH CIRCUIT Syllabus Respondent organization of dentists in Indiana promulgated a
policy requiring its members to withhold x-rays from dental
insurers in connection with evaluating patients' claims for
benefits. The Federal Trade Commission (FTC) issued a
cease-and-desist order, ruling that the policy constituted an
unfair method of competition in violation of § 5 of the Federal
Trade Commission Act, since it amounted to a conspiratorial
restraint of trade in violation of § 1 of the Sherman Act. The
Court of Appeals vacated the FTC's order on the ground that it was
not supported by substantial evidence, holding that the FTC's
findings that respondent's x-ray policy was anticompetitive were
erroneous; that the findings were inadequate because of the FTC's
failure to define the market in which respondent allegedly
restrained competition and to establish that respondent had the
power to restrain competition in that market; and that the FTC
erred in not determining whether the alleged restraint on
competition among dentists had actually resulted in higher dental
costs to patients and insurers. Held: 1. The FTC's factual findings regarding respondent's x-ray
policy are supported by substantial evidence. There is no dispute
that respondent's members conspired among themselves to withhold
x-rays, and the FTC's finding that competition among dentists with
respect to cooperation with insurers' requests for x-rays was
diminished where respondent held sway also finds adequate support
in the record. Pp. 476 U. S.
455 -457.

															2. Evaluated under the Rule of Reason, the FTC's factual
findings are sufficient as a matter of law to establish a violation
of § 1 of the Sherman Act, i.e., an unreasonable restraint
of trade, and hence a violation of § 5 of the FTC Act. Respondent's
x-ray policy takes the form of a horizontal agreement among its
members to withhold from their customers a particular service that
they desire. Absent some countervailing procompetitive virtue, such
an agreement cannot be sustained under the Rule of Reason. This
conclusion is not precluded by the absence of specific findings as
to the market in which respondent allegedly restrained competition
or as to the power of respondent's members in that market, or by
the FTC's failure to find that respondent's x-ray policy resulted
in Page 476 U. S. 448 more costly dental services than the patients and insurers would
have chosen if they were able to evaluate x-rays in conjunction
with claim forms. Nor do alleged noncompetitive "quality of care"
considerations justify respondent's x-ray policy. And whether or
not respondent's policy is consistent with Indiana's supposed
policy against submission of x-rays to insurers, it is not
immunized from antitrust scrutiny. Anticompetitive collusion among
private actors, even when consistent with state policy, acquires
antitrust immunity only when it is actually supervised by the
State, and there is no suggestion of such supervision here. Pp. 476 U. S.
457 -466.

															745 F.2d 1124, reversed.

															WHITE, J., delivered the opinion for a unanimous Court.

															JUSTICE WHITE delivered the opinion of the Court.

															This case concerns commercial relations among certain Indiana
dentists, their patients, and the patients' dental health care
insurers. The question presented is whether the Federal Trade
Commission correctly concluded that a conspiracy among dentists to
refuse to submit x-rays to dental insurers for use in benefits
determinations constituted an Page 476 U. S. 449 "unfair method of competition" in violation of § 6 of the
Federal Trade Commission Act, 38 Stat. 719, as amended, 15 U.S.C. §
45 (1982 ed. and Supp. II). I Since the 1970's, dental health insurers, responding to the
demands of their policyholders, have attempted to contain the cost
of dental treatment by, among other devices, limiting payment of
benefits to the cost of the "least expensive yet adequate
treatment" suitable to the needs of individual patients.
Implementation of such cost-containment measures, known as
"alternative benefits" plans, requires evaluation by the insurer of
the diagnosis and recommendation of the treating dentist, either in
advance of or following the provision of care. In order to carry
out such evaluation, insurers frequently request dentists to
submit, along with insurance claim forms requesting payment of
benefits, any dental x-rays that have been used by the dentist in
examining the patient, as well as other information concerning
their diagnoses and treatment recommendations. Typically, claim
forms and accompanying x-rays are reviewed by lay claims examiners,
who either approve payment of claims or, if the materials submitted
raise a question whether the recommended course of treatment is in
fact necessary, refer claims to dental consultants, who are
licensed dentists, for further review. On the basis of the
materials available, supplemented where appropriate by further
diagnostic aids, the dental consultant may recommend that the
insurer approve a claim, deny it, or pay only for a less expensive
course of treatment.

															Such review of diagnostic and treatment decisions has been
viewed by some dentists as a threat to their professional
independence and economic wellbeing. In the early 1970's, the
Indiana Dental Association, a professional organization comprising
some 85% of practicing dentists in the State of Indiana, initiated
an aggressive effort to hinder insurers' Page 476 U. S. 450 efforts to implement alternative benefits plans by enlisting
member dentists to pledge not to submit x-rays in conjunction with
claim forms. [ Footnote 1 ] The
Association's efforts met considerable success: large numbers of
dentists signed the pledge, and insurers operating in Indiana found
it difficult to obtain compliance with their requests for x-rays,
and accordingly had to choose either to employ more expensive means
of making alternative benefits determinations (for example,
visiting the office of the treating dentist or conducting an
independent oral examination) or to abandon such efforts
altogether.

															By the mid-1970's, fears of possible antitrust liability had
dampened the Association's enthusiasm for opposing the submission
of x-rays to insurers. In 1979, the Association and a number of its
constituent societies consented to a Federal Trade Commission order
requiring them to cease and desist from further efforts to prevent
member dentists from submitting Page 476 U. S. 451 x-rays. In re Indiana Dental Assn., 93 F.T.C. 392. Not
all Indiana dentists were content to leave the matter of submitting
x-rays to the individual dentist. In 1976, a group of such dentists
formed the Indiana Federation of Dentists, respondent in this case,
in order to continue to pursue the Association's policy of
resisting insurers' requests for x-rays. The Federation, which
styled itself a "union" in the belief that this label would stave
off antitrust liability, [ Footnote
2 ] immediately promulgated a "work rule" forbidding its members
to submit x-rays to dental insurers in conjunction with claim
forms. Although the Federation's membership was small, numbering
less than 100, its members were highly concentrated in and around
three Indiana communities: Anderson, Lafayette, and Fort Wayne. The
Federation succeeded in enlisting nearly 100% of the dental
specialists in the Anderson area, and approximately 67% of the
dentists in and around Lafayette. In the areas of its strength, the
Federation was successful in continuing to enforce the
Association's prior policy of refusal to submit x-rays to dental
insurers.

															In 1978, the Federal Trade Commission issued a complaint against
the Federation, alleging in substance that its efforts to prevent
its members from complying with insurers' requests for x-rays
constituted an unfair method of competition in violation of § 5 of
the Federal Trade Commission Act. Following lengthy proceedings,
including a full evidentiary hearing before an Administrative Law
Judge, the Commission ruled that the Federation's policy
constituted a violation of § 5, and issued an order requiring the
Federation to cease and desist from further efforts to organize
dentists to refuse to submit x-rays to insurers. In re Indiana
Federation of Dentists, 101 F.T.C. 57 (1983). The Commission
based its ruling on the conclusion that the Federation's policy of
requiring its members to withhold x-rays amounted to a conspiracy
in restraint of trade that was unreasonable, and hence Page 476 U. S. 452 unlawful under the standards for judging such restraints
developed in this Court's precedents interpreting § 1 of the
Sherman Act. E.g., Chicago Board of Trade v. United
States, 246 U. S. 231 (1918); National Society of Professional Engineers v. United
States, 435 U. S. 679 (1978). The Commission found that the Federation had conspired both
with the Indiana Dental Association and with its own members to
withhold cooperation with dental insurers' requests for x-rays;
that, absent such a restraint, competition among dentists for
patients would have tended to lead dentists to compete with respect
to their policies in dealing with patients' insurers; and that, in
those areas where the Federation's membership was strong, the
Federation's policy had had the actual effect of eliminating such
competition among dentists and preventing insurers from obtaining
access to x-rays in the desired manner. These findings of
anticompetitive effect, the Commission concluded, were sufficient
to establish that the restraint was unreasonable, even absent proof
that the Federation's policy had resulted in higher costs to the
insurers and patients than would have occurred had the x-rays been
provided. Further, the Commission rejected the Federation's
argument that its policy of withholding x-rays was reasonable
because the provision of x-rays might lead the insurers to make
inaccurate determinations of the proper level of care, and thus
injure the health of the insured patients: the Commission found no
evidence that use of x-rays by insurance companies in evaluating
claims would result in inadequate dental care. Finally, the
Commission rejected the Federation's contention that its actions
were exempt from antitrust scrutiny because the withholding of
x-rays was consistent with the law and policy of the State of
Indiana against the use of x-rays in benefit determination by
insurance companies. The Commission concluded that no such policy
existed, and that, in any event, the existence of such a policy
would not have justified the dentists' private and unsupervised
conspiracy in restraint of trade. Page 476 U. S. 453 The Federation sought judicial review of the Commission's order
in the United States Court of Appeals for the Seventh Circuit,
which vacated the order on the ground that it was not supported by
substantial evidence. 745 F.2d 1124 (1984). Accepting the
Federation's characterization of its rule against submission of
x-rays as merely an ethical and moral policy designed to enhance
the welfare of dental patients, the majority concluded that the
Commission's findings that the policy was anticompetitive were
erroneous. According to the majority, the evidence did not support
the finding that, in the absence of restraint, dentists would
compete for patients by offering cooperation with the requests of
the patients' insurers, nor, even accepting that finding, was there
evidence that the Federation's efforts had prevented such
competition. Further, the court held that the Commission's findings
were inadequate because of its failure both to offer a precise
definition of the market in which the Federation was alleged to
have restrained competition and to establish that the Federation
had the power to restrain competition in that market. Finally, the
majority faulted the Commission for not finding that the alleged
restraint on competition among dentists had actually resulted in
higher dental costs to patients and insurers. The third member of
the Court of Appeals panel concurred in the judgment solely on the
ground that there was insufficient proof that cooperation with
insurers was an element of dental services as to which dentists
would tend to compete.

															We granted certiorari, 474 U.S. 900 (1985), in order to consider
the Commission's claim that, in vacating the Commission's order,
the Court of Appeals misconstrued applicable principles of
antitrust law and " misapprehended or grossly misapplied' the
substantial evidence test," American Textile Manufacturers
Institute, Inc. v. Donovan, 452 U. S. 490 , 452 U. S. 523 (1981) (citation omitted). We now reverse. Page 476 U. S. 454 II The issue is whether the Commission erred in holding that the
Federation's policy of refusal to submit x-rays to dental insurers
for use in benefits determinations constituted an "unfair method of
competition," unlawful under § 5 of the Federal Trade Commission
Act. The question involves review of both factual and legal
determinations. As to the former, our review is governed by 15
U.S.C. § 45(c), which provides that "[t]he findings of the
Commission as to the facts, if supported by evidence, shall be
conclusive." The statute forbids a court to "make its own appraisal
of the testimony, picking and choosing for itself among uncertain
and conflicting inferences." FTC v. Algoma Lumber Co., 291 U. S. 67 , 291 U. S. 73 (1934). Rather, as under the essentially identical "substantial
evidence" standard for review of agency factfinding, the court must
accept the Commission's findings of fact if they are supported by
"such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion." Universal Camera Corp. v.
NLRB, 340 U. S. 474 , 340 U. S. 477 (1951); see also Beneficial Corp. v. FTC, 542 F.2d 611,
616 (CA3 1976), cert. denied, 430 U.S. 983 (1977).

															The legal issues presented -- that is, the identification of
governing legal standards and their application to the facts found
-- are, by contrast, for the courts to resolve, although, even in
considering such issues, the courts are to give some deference to
the Commission's informed judgment that a particular commercial
practice is to be condemned as "unfair." See FTC v. Sperry
& Hutchinson Co., 405 U. S. 233 (1972); Atlantic Refining Co. v. FTC, 381 U.
S. 357 , 381 U. S.
367 -368 (1966); FTC v. Cement Institute, 333 U. S. 683 , 333 U. S. 720 (1948). The standard of "unfairness" under the FTC Act is, by
necessity, an elusive one, encompassing not only practices that
violate the Sherman Act and the other antitrust laws, see FTC
v. Cement Institute, supra, at 333 U. S.
689 -695, but also practices that the Commission
determines are against public policy for other reasons, see FTC
v. Sperry & Hutchinson Co., 405 Page 476 U. S. 455 U.S. at 405 U. S. 244 .
Once the Commission has chosen a particular legal rationale for
holding a practice to be unfair, however, familiar principles of
administrative law dictate that its decision must stand or fall on
that basis, and a reviewing court may not consider other reasons
why the practice might be deemed unfair. See id. at 405 U. S.
245 -250; cf. SEC v. Chenery Corp., 318 U. S.
80 (1943). In the case now before us, the sole basis of
the FTC's finding of an unfair method of competition was the
Commission's conclusion that the Federation's collective decision
to withhold x-rays from insurers was an unreasonable and
conspiratorial restraint of trade in violation of § 1 of the
Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1. Accordingly,
the legal question before us is whether the Commission's factual
findings, if supported by evidence, make out a violation of Sherman
Act § 1. III The relevant factual findings are that the members of the
Federation conspired among themselves to withhold x-rays requested
by dental insurers for use in evaluating claims for benefits, and
that this conspiracy had the effect of suppressing competition
among dentists with respect to cooperation with the requests of the
insurance companies. As to the first of these findings, there can
be no serious dispute: abundant evidence in the record reveals that
one of the primary reasons -- if not the primary reason --
for the Federation's existence was the promulgation and enforcement
of the so-called "work rule" against submission of x-rays in
conjunction with insurance claim forms.

															As for the second crucial finding -- that competition was
actually suppressed -- the Seventh Circuit held it to be
unsupported by the evidence, on two theories. First, the court
stated that the evidence did not establish that cooperation with
requests for information by patients' insurance companies was an
aspect of the provision of dental services with respect to which
dentists would, in the absence of some Page 476 U. S. 456 restraint, compete. Second, the court found that, even assuming
that dentists would otherwise compete with respect to policies of
cooperating or not cooperating with insurance companies, the
Federation's policy did not impair that competition, for the member
dentists continued to allow insurance companies to use other means
of evaluating their diagnoses when reviewing claims for benefits:
specifically,

															"the IFD member dentists allowed insurers to visit the dental
office to review and examine the patient's x-rays, along with all
of the other diagnostic and clinical aids used in formulating a
proper course of dental treatment."

															745 F.2d at 1143.

															Neither of these criticisms of the Commission's findings is
well-founded. The Commission's finding that,

															"[i]n the absence of . . . concerted behavior, individual
dentists would have been subject to market forces of competition,
creating incentives for them to . . . comply with the requests of
patients' third-party insurers,"

															101 F.T.C. at 173, finds support not only in common sense and
economic theory, upon both of which the FTC may reasonably rely,
but also in record documents, including newsletters circulated
among Indiana dentists, revealing that Indiana dentists themselves
perceived that unrestrained competition tended to lead their
colleagues to comply with insurers' requests for x-rays. See App. to Pet. for Cert. 289a, 306a-308a. Moreover,
there was evidence that, outside of Indiana, in States where
dentists had not collectively refused to submit x-rays, insurance
companies found little difficulty in obtaining compliance by
dentists with their requests. 101 F.T.C. at 172. A "reasonable
mind" could conclude on the basis of this evidence that competition
for patients, who have obvious incentives for seeking dentists who
will cooperate with their insurers, would tend to lead dentists in
Indiana (and elsewhere) to cooperate with requests for information
by their patients' insurers. Page 476 U. S. 457 The Commission's finding that such competition was actually
diminished where the Federation held sway also finds adequate
support in the record. The Commission found that, in the areas
where Federation membership among dentists was most significant
(that is, in the vicinity of Anderson and Lafayette), insurance
companies were unable to obtain compliance with their requests for
submission of x-rays in conjunction with claim forms, and were
forced to resort to other, more costly, means of reviewing
diagnoses for the purpose of benefit determination. Neither the
opinion of the Court of Appeals nor the brief of respondent
identifies any evidence suggesting that the Commission's finding
that the Federation's policy had an actual impact on the ability of
insurers to obtain the x-rays they requested was incorrect. The
lower court's conclusion that this evidence is to be discounted
because Federation members continued to cooperate with insurers by
allowing them to use more costly -- indeed, prohibitively costly --
methods of reviewing treatment decisions is unpersuasive. The fact
remains that the dentists' customers (that is, the patients and
their insurers) sought a particular service: cooperation with the
insurers' pretreatment review through the forwarding of x-rays in
conjunction with claim forms. The Federation's collective
activities resulted in the denial of the information the customers
requested in the form that they requested it, and forced them to
choose between acquiring that information in a more costly manner
or forgoing it altogether. To this extent, at least, competition
among dentists with respect to cooperation with the requests of
insurers was restrained. IV The question remains whether these findings are legally
sufficient to establish a violation of § 1 of the Sherman Act --
that is, whether the Federation's collective refusal to cooperate
with insurers' requests for x-rays constitutes an "unreasonable"
restraint of trade. Under our precedents, a Page 476 U. S. 458 restraint may be adjudged unreasonable either because it fits
within a class of restraints that has been held to be " per
se " unreasonable or because it violates what has come to be
known as the "Rule of Reason," under which the

															"test of legality is whether the restraint imposed is such as
merely regulates, and perhaps thereby promotes, competition, or
whether it is such as may suppress or even destroy
competition." Chicago Board of Trade v. United States, 246 U.S. at 246 U. S.
238 .

															The policy of the Federation with respect to its members'
dealings with third-party insurers resembles practices that have
been labeled "group boycotts": the policy constitutes a concerted
refusal to deal on particular terms with patients covered by group
dental insurance. Cf. St. Paul Fire & Marine Insurance Co.
v. Barry, 438 U. S. 531 (1978); Paramount Famous Lasky Corp. v. United States, 282 U. S. 30 (1930). Although this Court has, in the past, stated that group
boycotts are unlawful per se, see United States v. General
Motors Corp., 384 U. S. 127 (1966); Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U. S. 207 (1959), we decline to resolve this case by forcing the Federation's
policy into the "boycott" pigeonhole and invoking the per
se rule. As we observed last Term in Northwest Wholesale
Stationers, Inc. v. Pacific Stationers & Printing Co., 472 U. S. 284 (1985), the category of restraints classed as group boycotts is not
to be expanded indiscriminately, and the per se approach
has generally been limited to cases in which firms with market
power boycott suppliers or customers in order to discourage them
from doing business with a competitor -- a situation obviously not
present here. Moreover, we have been slow to condemn rules adopted
by professional associations as unreasonable per se, see
National Society of Professional Engineers v. United States, 435 U. S. 679 (1978), and, in general, to extend per se analysis to
restraints imposed in the context Page 476 U. S. 459 of business relationships where the economic impact of certain
practices is not immediately obvious, see Broadcast Music, Inc.
v. Columbia Broadcasting System, Inc., 441 U. S.
1 (1979). Thus, as did the FTC, we evaluate the
restraint at issue in this case under the Rule of Reason, rather
than a rule of per se illegality.

															Application of the Rule of Reason to these facts is not a matter
of any great difficulty. The Federation's policy takes the form of
a horizontal agreement among the participating dentists to withhold
from their customers a particular service that they desire -- the
forwarding of x-rays to insurance companies along with claim
forms.

															"While this is not price-fixing as such, no elaborate industry
analysis is required to demonstrate the anticompetitive character
of such an agreement." National Society of Professional Engineers, supra, at 435 U. S. 692 .
A refusal to compete with respect to the package of services
offered to customers, no less than a refusal to compete with
respect to the price term of an agreement, impairs the ability of
the market to advance social welfare by ensuring the provision of
desired goods and services to consumers at a price approximating
the marginal cost of providing them. Absent some countervailing
procompetitive virtue -- such as, for example, the creation of
efficiencies in the operation of a market or the provision of goods
and services, see Broadcast Music, Inc. v. Columbia
Broadcasting System, Inc., supra; Chicago Board of Trade, supra;
cf. National Collegiate Athletic Assn. v. Board of Regents of Univ.
of Okla., 468 U. S. 85 (1984)
-- such an agreement limiting consumer choice by impeding the
"ordinary give-and-take of the marketplace," National Society
of Professional Engineers, supra, at 435 U. S. 692 ,
cannot be sustained under the Rule of Reason. No credible argument
has been advanced for the proposition that making it more costly
for the insurers and patients who are the dentists' customers to
obtain information needed for evaluating the dentists' diagnoses
has any such procompetitive effect. Page 476 U. S. 460 The Federation advances three principal arguments for the
proposition that, notwithstanding its lack of competitive virtue,
the Federation's policy of withholding x-rays should not be deemed
an unreasonable restraint of trade. First, as did the Court of
Appeals, the Federation suggests that, in the absence of specific
findings by the Commission concerning the definition of the market
in which the Federation allegedly restrained trade and the power of
the Federation's members in that market, the conclusion that the
Federation unreasonably restrained trade is erroneous as a matter
of law, regardless of whether the challenged practices might be
impermissibly anticompetitive if engaged in by persons who,
together, possessed power in a specifically defined market. This
contention, however, runs counter to the Court's holding in National Collegiate Athletic Assn. v. Board of Regents of Univ.
of Okla., supra, that, "[a]s a matter of law, the absence of
proof of market power does not justify a naked restriction on price
or output," and that such a restriction "requires some competitive
justification even in the absence of a detailed market analysis." Id. at 468 U. S.
109 -110. Moreover, even if the restriction imposed by
the Federation is not sufficiently "naked" to call this principle
into play, the Commission's failure to engage in detailed market
analysis is not fatal to its finding of a violation of the Rule of
Reason. The Commission found that, in two localities in the State
of Indiana (the Anderson and Lafayette areas), Federation dentists
constituted heavy majorities of the practicing dentists, and that,
as a result of the efforts of the Federation, insurers in those
areas were, over a period of years, actually unable to obtain
compliance with their requests for submission of x-rays. Since the
purpose of the inquiries into market definition and market power is
to determine whether an arrangement has the potential for genuine
adverse effects on competition, "proof of actual detrimental
effects, such as a reduction of output," can Page 476 U. S. 461 obviate the need for an inquiry into market power, which is but
a "surrogate for detrimental effects." 7 P. Areeda, Antitrust Law �
1511, p. 429 (1986). In this case, we conclude that the finding of
actual, sustained adverse effects on competition in those areas
where IFD dentists predominated, viewed in light of the reality
that markets for dental services tend to be relatively localized,
is legally sufficient to support a finding that the challenged
restraint was unreasonable even in the absence of elaborate market
analysis. [ Footnote 3 ]

															Second, the Federation, again following the lead of the Court of
Appeals, argues that a holding that its policy of withholding
x-rays constituted an unreasonable restraint of trade is precluded
by the Commission's failure to make any finding that the policy
resulted in the provision of dental services that were more costly
than those that the patients and their insurers would have chosen
were they able to evaluate x-rays in conjunction with claim forms.
This argument, too, is unpersuasive. Although it is true that the
goal of the insurers in seeking submission of x-rays for use in
their review of benefits claims was to minimize costs by choosing
the least expensive adequate course of dental treatment, a showing
that this goal was actually achieved through the means chosen is
not an essential step in establishing that the dentists' attempt to
thwart its achievement by collectively refusing to supply the
requested information was an unreasonable restraint of trade. A
concerted and effective effort to withhold (or make more costly)
information desired by consumers for the purpose of determining
whether a particular purchase is cost justified is likely enough to
disrupt the proper functioning of the price-setting mechanism of
the Page 476 U. S. 462 market that it may be condemned even absent proof that it
resulted in higher prices or, as here, the purchase of higher
priced services, than would occur in its absence. National
Society of Professional Engineers v. United States, 435 U. S. 679 (1978). Moreover, even if the desired information were in fact
completely useless to the insurers and their patients in making an
informed choice regarding the least costly adequate course of
treatment -- or, to put it another way, if the costs of evaluating
the information were far greater than the cost savings resulting
from its use -- the Federation would still not be justified in
deciding on behalf of its members' customers that they did not need
the information: presumably, if that were the case, the discipline
of the market would itself soon result in the insurers' abandoning
their requests for x-rays. The Federation is not entitled to
preempt the working of the market by deciding for itself that its
customers do not need that which they demand.

															Third, the Federation complains that the Commission erred in
failing to consider, as relevant to its Rule of Reason analysis,
noncompetitive "quality of care" justifications for the prohibition
on provision of x-rays to insurers in conjunction with claim forms.
This claim reflects the Court of Appeals' repeated characterization
of the Federation's policy as a

															"legal, moral, and ethical policy of quality dental care,
requiring that insurers examine and review all diagnostic and
clinical aids before formulating a proper course of dental
treatment."

															745 F.2d at 1144. The gist of the claim is that x-rays, standing
alone, are not adequate bases for diagnosis of dental problems, or
for the formulation of an acceptable course of treatment.
Accordingly, if insurance companies are permitted to determine
whether they will pay a claim for dental treatment on the basis of
x-rays, as opposed to a full examination of all the diagnostic aids
available to the examining dentist, there is a danger that they
will erroneously decline to pay for treatment that is, in fact, in
the interest of Page 476 U. S. 463 the patient, and that the patient will as a result be deprived
of fully adequate care.

															The Federation's argument is flawed both legally and factually.
The premise of the argument is that, far from having no effect on
the cost of dental services chosen by patients and their insurers,
the provision of x-rays will have too great an impact: it will lead
to the reduction of costs through the selection of inadequate
treatment. Precisely such a justification for withholding
information from customers was rejected as illegitimate in the National Society of Professional Engineers case. The
argument is, in essence, that an unrestrained market in which
consumers are given access to the information they believe to be
relevant to their choices will lead them to make unwise, and even
dangerous, choices. Such an argument amounts to "nothing less than
a frontal assault on the basic policy of the Sherman Act." National Society of Professional Engineers, supra, at 435 U. S. 695 .
Moreover, there is no particular reason to believe that the
provision of information will be more harmful to consumers in the
market for dental services than in other markets. Insurers deciding
what level of care to pay for are not themselves the recipients of
those services, but it is by no means clear that they lack
incentives to consider the welfare of the patient, as well as the
minimization of costs. They are themselves in competition for the
patronage of the patients -- or, in most cases, the unions or
businesses that contract on their behalf for group insurance
coverage -- and must satisfy their potential customers not only
that they will provide coverage at a reasonable cost, but also that
that coverage will be adequate to meet their customers' dental
needs. There is thus no more reason to expect dental insurance
companies to sacrifice quality in return for cost savings than to
believe this of consumers in, say, the market for engineering
services. Accordingly, if noncompetitive quality-of-service
justifications are inadmissible to justify the denial of
information to consumers Page 476 U. S. 464 in the latter market, there is little reason to credit such
justifications here.

															In any event, the Commission did not, as the Federation
suggests, refuse even to consider the quality-of-care justification
for the withholding of x-rays. Rather, the Commission held that the
Federation had failed to introduce sufficient evidence to establish
such a justification:

															"IFD has not pointed to any evidence -- or even argued -- that
any consumers have, in fact, been harmed by alternative benefits
determinations, or that actual determinations have been medically
erroneous."

															101 F.T.C. at 177. The evidence before the Administrative Law
Judge on this issue appears to have consisted entirely of expert
opinion testimony, with the Federation's experts arguing that
x-rays generally provide an insufficient basis, standing alone, for
dental diagnosis, and the Commission's experts testifying that
x-rays may be useful in assessing diagnosis of, and appropriate
treatment for, a variety of dental complaints. Id. at
128-132. The Commission was amply justified in concluding on the
basis of this conflicting evidence that, even if concern for the
quality of patient care could, under some circumstances, serve as a
justification for a restraint of the sort imposed here, the
evidence did not support a finding that the careful use of x-rays
as a basis for evaluating insurance claims is, in fact, destructive
of proper standards of dental care. [ Footnote 4 ] Page 476 U. S. 465 In addition to arguing that its conspiracy did not effect an
unreasonable restraint of trade, the Federation appears to renew
its argument, pressed before both the Commission and the Court of
Appeals, that the conspiracy to withhold x-rays is immunized from
antitrust scrutiny by virtue of a supposed policy of the State of
Indiana against the evaluation of dental x-rays by lay employees of
insurance companies. See Brief for Respondent 25-26, and
n. 10. Allegedly, such use of x-rays by insurance companies -- even
where no claim was actually denied without examination of an x-ray
by a licensed dentist -- would constitute unauthorized practice of
dentistry by the insurance company and its employees. The
Commission found that this claim had no basis in any authoritative
source of Indiana law, see 101 F.T.C. at 181-183, and the
Federation has not identified any adequate reason for rejecting the
Commission's conclusion. Even if the Commission were incorrect in
its reading of the law, however, the Federation's claim of immunity
would fail. That a particular practice may be unlawful is not, in
itself, a sufficient justification for collusion among competitors
to prevent it. See Fashion Originators' Guild of America, Inc.
v. FTC, 312 U. S. 457 , 312 U. S. 468 (1941). Anticompetitive collusion among private actors, even when
its goal is consistent with state policy, acquires antitrust
immunity only when it is actively supervised by the State. See
Southern Motor Carriers Rate Conference, Inc. v. United
States, 471 U. S. 48 , 471 U. S. 57 (1985). There is no suggestion of any such active supervision here;
accordingly, whether or not the policy the Federation has taken
upon itself to advance is consistent with the policy of the State
of Indiana, the Federation's activities are subject to Sherman Act
condemnation. V The factual findings of the Commission regarding the effect of
the Federation's policy of withholding x-rays are supported Page 476 U. S. 466 by substantial evidence, and those findings are sufficient as a
matter of law to establish a violation of § 1 of the Sherman Act,
and, hence, § 5 of the Federal Trade Commission Act. Since there
has been no suggestion that the cease-and-desist order entered by
the Commission to remedy this violation is itself improper for any
reason distinct from the claimed impropriety of the finding of a
violation, the Commission's order must be sustained. The judgment
of the Court of Appeals is accordingly Reversed. [ Footnote 1 ]

															A presentation made in 1974 by Dr. David McClure, an Association
official and later one of the founders of respondent Indiana
Federation of Dentists, is revealing as to the motives underlying
the dentists' resistance to the provision of x-rays for use by
insurers in making alternative benefits determinations:

															"The problems associated with third-party programs are many, but
I believe the 'Indiana Plan' [ i.e., the policy of refusing
to submit x-rays] to be sound, and, if we work together, we can win
this battle. We are fighting an economic war where the very
survival of our profession is at stake."

															"How long can some of the leaders of dentistry in other states
be so complacent and willing to fall into the trap that is being
set for us. If only they would take the time to see from whence
come the arrows that are heading in our direction. The Delta Dental
Plans have bedded down with the unions, and have been a party to
setting up the greatest controls that any profession has ever known
in a free society. . . ."

															"The name of the game is money. The government and labor are
determined to reduce the cost of the dental health dollar at the
expense of the dentist. There is no way a dental service can be
rendered cheaper when the third party has to have its share of the
dollar."

															"Already we are locked into a fee freeze that could completely
control the quality of dental care, if left on long enough."

															FTC Complaint Counsel's Trial Exhibit CX 372A, F, App. 104.

															[ Footnote 2 ]

															Respondent no longer makes any pretense of arguing that it is
immune from antitrust liability as a labor organization.

															[ Footnote 3 ]

															Because we find that the Commission's findings can be sustained
on this basis, we do not address the Commission's contention that
the Federation's activities can be condemned regardless of market
power or actual effect merely because they constitute a
continuation of the restraints formerly imposed by the Indiana
Dental Association, which allegedly had market power throughout the
State of Indiana.

															[ Footnote 4 ]

															It is undisputed that lay claims examiners employed by insurance
companies have no authority to deny claims on the basis of
examination of x-rays; rather, initial screening of x-rays serves
only as a means of identifying cases that merit further scrutiny by
the licensed dentists serving as consultants to the insurers. Any
recommendation that benefits be denied or a less expensive course
of treatment be pursued is based on the professional judgment of a
licensed dentist that the materials available to him -- x-rays,
claim forms, and whatever further diagnostic aids he chooses to
consult -- are sufficient to indicate that the treating dentist's
recommendation is not necessary to the health of the patient. There
is little basis for concluding that, where such a divergence of
professional judgment exists, the treatment recommendation made by
the patient's dentist should be assumed to be the one that in fact
represents the best interests of the patient.

Summary: The Supreme Court ruled that the Indiana Federation of Dentists' policy of withholding x-rays from dental insurers was an unreasonable restraint of trade and violated the Sherman Act and the Federal Trade Commission Act. The Court found that the policy was a horizontal agreement among dentists to withhold a desired service from customers and could not be justified by noncompetitive "quality of care" considerations. The Court also noted the anti-competitive nature of the policy and the potential harm to patients and insurers through higher dental costs.