California Civil Jury Instructions (CACI) (2017)

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

Download PDF
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
1. That [name of defendant] and [name of alleged coparticipant] were
or are competitors in the same or related markets;
2. That [name of defendant] and [name alleged coparticipant] 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 coparticipant]’s]
conduct was a substantial factor in causing [name of plaintiff]’s
New September 2003
Directions for Use
The appropriate bracketed option(s) should be selected and the balance deleted,
depending on the specific facts.
Sources and Authority
• Trusts Unlawful and Void. Business and Professions Code section 16726.
• “Trust” Defined. Business and Professions Code section 16720(a).
• “The Cartwright Act, like the Sherman Act, prohibits ‘combinations’ for the
purpose of restraining trade. ‘[A] combination means a concert of 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
• “[B]usinesses may not engage in a horizontal allocation of markets, with would-
be competitors dividing up territories or customers. Such allocations afford each
participant an ‘enclave . . . , free from the danger of outside incursions,’ in
which to exercise monopoly power and extract monopoly premiums.” (In re
Cipro Cases I & II (2015) 61 Cal.4th 116, 148 [187 Cal.Rptr.3d 632, 348 P.3d
845], 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 frequently 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 & Co. (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 (10th ed. 2005) Contracts, §§ 591–607
6Antitrust Laws and Trade Regulation, Ch. 105, California, § 105.02[2] (Matthew
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,
§ 565.52 (Matthew Bender)
1 Matthew Bender Practice Guide: California Unfair Competition and Business
Torts, Ch. 1, Elements of Unfair Competition and Business Torts Causes of Action,