California Civil Jury Instructions (CACI)

3401. Horizontal Restraints (Use for Direct Competitors) - Allocation of Trade or Commerce—Essential Factual Elements

[Name of plaintiff] claims that [name of defendant] agreed to allocate or divide [customers/territories/products]. An agreement to allocate [customers/territories/products] is an agreement between two or more competitors not to compete [for the business of particular customers/with each other in particular territories/in the sale of a particular product]. To establish this claim, [name of plaintiff] must prove all of the following:

1. That [name of defendant] and [name of alleged co-participant] were or are competitors in the same or related markets;

2. That [name of defendant] and [name alleged co-participant] agreed to allocate or divide [customers/territories/ products];

3. That [name of plaintiff] was harmed; and 4. That [name of defendant]'s [and [name of alleged co-participant]'s] conduct was a substantial factor in causing [name of plaintiff]'s harm.

Directions for Use

The appropriate bracketed option(s) should be selected and the balance deleted, depending on the specific facts.

Sources and Authority

Business and Professions Code section 16726 provides: "Except as provided in this chapter, every trust is unlawful, against public policy and void."

Business and Professions Code section 16720(a) provides: "A trust is a combination of capital, skill or acts by two or more persons for any of the following purposes: To create or carry out restrictions in trade or commerce."

"The Cartwright Act, like the Sherman Act, prohibits 'combinations' for the purpose of restraining trade. '[A] combination means a concert f action by individuals or entities maintaining separate and independent interests.' " (Roth v. Rhodes (1994) 25 Cal.App.4th 530, 543 [30 Cal.Rptr.2d 706], internal citations omitted.)

"It is settled that distributors cannot lawfully agree to divide territories or customers. Such conduct is sometimes called a 'horizontal restraint,' and is a per se violation of the Sherman Act." (Guild Wineries & Distilleries v. J. Sosnick and Son (1980) 102 Cal.App.3d 627, 633 [162 Cal.Rptr. 87], internal citations omitted.)

" 'One of the classic examples of a per se violation . . . 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.' " (Palmer v. BRG of Georgia, Inc. (1990) 498 U.S. 46, 49 [111 S.Ct. 401, 112 L.Ed.2d 349], internal citations omitted.)

"Two forms of conspiracy may be used to establish a violation of the antitrust laws: a horizontal restraint, consisting of a collaboration among competitors; or a vertical restraint, based upon an agreement between business entities occupying different levels of the marketing chain." (G.H.I.I. v. MTS, Inc. (1983) 147 Cal.App.3d 256, 267 [195 Cal.Rptr. 211], internal citations omitted.)

" 'Horizontal combinations are cartels or agreements among competitors which restrain competition among enterprises at the same level of distribution. They are ordinarily illegal per se. Vertical restraints are imposed by persons or firms further up the chain of distribution of a specific product (or in rare cases, further down the chain) than the enterprise restrained. Vertical non-price restraints are tested under the rule of reason; that is, the plaintiff must prove that the restraint had an anticompetitive effect in the relevant market in order to prevail.' " (Exxon Corp. v. Superior Court (1997) 51 Cal.App.4th 1672, 1680- 1681 [60 Cal.Rptr.2d 195], internal citations and footnote omitted.)

"The alleged antitrust violation need not be the sole or controlling cause of the injury in order to establish proximate cause, but only need be a substantial factor in bringing about the injury." (Saxer v. Philip Morris, Inc. (1975) 54 Cal.App.3d 7, 23 [126 Cal.Rptr. 327], internal citation omitted.)

"The plaintiff in a Cartwright Act proceeding must show that an antitrust violation was the proximate cause of his injuries. The requently stated 'standing to sue' requirement is merely a rule that an action for violation of the antitrust laws may be maintained only by a party within the 'target area' of the antitrust violation, and not by one incidentally injured thereby. An 'antitrust injury' must be proved; that is, the type of injury the antitrust laws were intended to prevent, and which flows from the invidious conduct which renders defendants' acts unlawful. Finally, a plaintiff must show an injury within the area of the economy that is endangered by a breakdown of competitive conditions." (Kolling v. Dow Jones and Co., Inc. (1982) 137 Cal.App.3d 709, 723-724 [187 Cal.Rptr. 797], internal citations and footnote omitted.)

"The exact parameters of 'antitrust injury' under section 16750 have not yet been established through either court decisions or legislation." (Cellular Plus, Inc. v. Superior Court (1993) 14 Cal.App.4th 1224, 1234 [18 Cal.Rptr.2d 308].)

Business and Professions Code section 16750(a) confers a private right of action for treble damages and attorneys fees on "[a]ny person who is injured in his business or property by reason of anything forbidden or declared unlawful by this chapter."

"The Cartwright Act prohibits every trust, defined as 'a combination of capital, skill or acts by two or more persons' for specified anticompetitive purposes. The federal Sherman Act prohibits every 'contract, combination . . . or conspiracy, in restraint of trade.' The similar language of the two acts reflects their common objective to protect and promote competition. Since the Cartwright Act and the federal Sherman Act share similar language and objectives, California courts often look to federal precedents under the Sherman Act for guidance." (Chavez v. Whirlpool Corp. (2001) 93 Cal.App.4th 363, 369 [113 Cal.Rptr.2d 175], internal citations omitted.)

Secondary Sources

1 Witkin, Summary of California Law (9th ed. 1987) Contracts, §§ 575- 590

2 Antitrust and Trade Regulation Law Section, State Bar of California, California Antitrust Law (2d ed. 2001), §§ 9.03, 9.04, 9.07

6 Antitrust Laws & Trade Regulation, Ch. 105, California, § 105.02[2] (Matthew Bender)

3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.168[3] (Matthew Bender)

49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition (Matthew Bender)

(New September 2003)