California Civil Jury Instructions (CACI)

3403. Horizontal Restraints (Use for Direct Competitors) - Group Boycott—Per Se Violation—Essential Factual


[Name of plaintiff] claims that [name of defendant] agreed not to deal with [him/her/it] [or to deal with [him/her/it] only on specified terms]. To establish this claim, [name of plaintiff] must prove all of the following:

1. That [name of defendant] [and [name of alleged co-participant[s]]] agreed to [specify claimed refusal to deal, e.g., "refuse to sell to [name of plaintiff]"];

2. That [name of plaintiff] was harmed; and

3. That [name of defendant]'s conduct was a substantial factor in causing [name of plaintiff]'s harm.

Directions for Use

This instruction applies to agreements between competitors that are directly intended to affect competition facing them. In determining whether to give this per se instruction or the rule of reason instructions, it is important whether the challenged combination was horizontal (between competitors), vertical (between sellers and buyers), or some combination of the two. Horizontal combinations are subject to per se instructions; vertical combinations to the rule of reason instructions. Those combinations falling in between must be carefully scrutinized to determine whether their principal purpose is to restrain competition between competitors or to downstream resellers by the seller.

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(c) provides: "A trust is a combination of capital, skill or acts by two or more persons for any of the following purposes: To prevent competition in manufacturing, making, transportation, sale or purchase of merchandise, produce or any commodity."

"The antitrust laws do not preclude a party from unilaterally determining the parties with which, or the terms on which, it will transact business. However, it is a violation of the antitrust laws for a group of competitors with separate and independent economic interests, or a single competitor with sufficient leverage, to force another to boycott a competitor at the same level of distribution." (Freeman v. San Diego Assn. of Realtors (1999) 77 Cal.App.4th 171, 195 [91 Cal.Rptr.2d 534], internal citation omitted.)

"It is well settled that the antitrust laws do not preclude a trader from unilaterally determining the parties with whom it will deal and the terms on which it will transact business. An antitrust case must be based upon conspiratorial rather than unilateral conduct. Thus, only group boycotts are unlawful under the Sherman and Cartwright Acts." (G.H.I.I. v. MTS, Inc. (1983) 147 Cal.App.3d 256, 267-268 [195 Cal.Rptr. 211], internal citations omitted.)

" 'Group boycotts, or concerted refusals by traders to deal with other traders, have long been held to be in the forbidden category. They have not been saved by allegations that they were reasonable in the specific circumstances, nor by a failure to show that they "fixed or regulated prices, parcelled out or limited production, or brought about a deterioration in quality." Even when they operated to lower prices or temporarily to stimulate competition they were banned. For . . . such agreements, no less than those to fix minimum prices, cripple the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment.' " (Oakland-Alameda County Builders' Exchange v. F. P. Lathrop Construction Co. (1971) 4 Cal.3d 354, 365 [93 Cal.Rptr. 602, 482 P.2d 226], internal citations omitted.)

"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 omitted.)

" '[T]there are certain 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.' Among these per se violations is the concerted refusal to deal with other traders, or, as it is often called, the group boycott." (Marin County Bd. of Realtors v. Palsson (1976) 16 Cal.3d 920, 930-931 [130 Cal.Rptr. 1, 549 P.2d 833], internal citation omitted.)

In Marin County Bd. of Realtors, supra, the Supreme Court explained that there is a distinction between "direct boycotts aimed at coercing parties to adopt noncompetitive practices and indirect boycotts which result in refusals to deal only as a by-product of the agreement." (Marin County Bd. of Realtors, supra, 16 Cal.3d at p. 932.) c Not all group boycotts are evaluated as per se violations: "This limitation on the per se rule is particularly applicable to trade association agreements not directly aimed at coercing third parties and eliminating competitors. In cases involving such agreements, courts have generally applied the rule of reason test." (Marin County Bd. of Realtors, supra, 16 Cal.3d at p. 932.)

"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 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].)

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, 9.11

6 Antitrust Laws & Trade Regulation, Ch. 105, California, § 105.02[3] (Matthew Bender)

3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.168[5] (Matthew Bender)

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

(New September 2003)