California Civil Jury Instructions (CACI) (2017)

3404. Horizontal Restraints - Group Boycott—Rule of Reason—Essential Factual Elements

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3404.Horizontal Restraints—Group Boycott—Rule of
Reason—Essential Factual Elements
[Name of plaintiff] claims that [name of defendant] agreed to [describe
conduct, e.g., “formulate an arbitrary membership limitation rule with
[identify other participant[s]]”]. To establish this claim, [name of plaintiff]
must prove all of the following:
1. That [name of defendant] and [name of alleged coparticipant[s]]
agreed to [describe conduct, e.g., “formulate an arbitrary
membership limitation rule”];
2. That the purpose or effect of [name of defendant]’s conduct was
to restrain competition;
3. That the anticompetitive effect of the restraint[s] outweighed any
beneficial effect on competition;
4. That [name of plaintiff] was harmed; and
5. That [name of defendant]’s conduct was a substantial factor in
causing [name of plaintiff]’s harm.
New September 2003
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.
For additional instructions regarding the rule of reason, see CACI Nos. 3411
through 3414.
Sources and Authority
• Trusts Unlawful and Void. Business and Professions Code section 16726.
“Trust” Defined. Business and Professions Code section 16720(c).
• Trade Groups Not Unlawful. Business and Professions Code section 16725.
• “A group boycott can involve an agreement that a group of buyers will
purchase only from a designated seller . . . . [A]n unlawful group boycott
requires an express or implicit agreement among competitors to restrict
commerce in some manner.” (UAS Management, Inc. v. Mater Misericordiae
Hospital (2008) 169 Cal.App.4th 357, 365–366 [87 Cal.Rptr.3d 81].)
• “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.)
• In Marin County Bd. of Realtors v. Palsson (1976) 16 Cal.3d 920, 931 [130
Cal.Rptr. 1, 549 P.2d 833], 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.”
• 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.)
• “Although the Sherman Act and the Cartwright Act by their express terms
forbid all restraints on trade, each has been interpreted to permit by implication
those restraints found to be reasonable.” (Corwin v. Los Angeles Newspaper
Service Bureau, Inc. (1971) 4 Cal.3d 842, 853 [94 Cal.Rptr. 785, 484 P.2d 953],
internal citation omitted.)
• “To determine whether the restrictions are reasonable, ‘the court must ordinarily
consider the facts peculiar to the business to which the restraint is applied; its
condition before and after the restraint was imposed; the nature of the restraint
and its effect, actual or probable. The history of the restraint, the evil believed
to exist, the reason for adopting the particular remedy, the purpose or end
sought to be obtained, are all relevant facts.’ The court should consider ‘the
percentage of business controlled, the strength of the remaining competition
[and] whether the action springs from business requirements or purpose to
monopolize . . . .’ Whether a restraint of trade is reasonable is a question of
fact to be determined at trial.” (Corwin, supra, 4 Cal.3d at pp. 854–855, internal
citations omitted.)
• “Generally, in determining whether conduct unreasonably restrains trade, ‘[a]
rule of reason analysis requires a determination of whether . . . its anti-
competitive effects outweigh its pro-competitive effects.’ ” (Bert G. Gianelli
Distrib. Co. v. Beck & Co. (1985) 172 Cal.App.3d 1020, 1048 [219 Cal.Rptr.
203], internal citation omitted, overruled on other grounds in Dore v. Arnold
Worldwide, Inc. (2006) 39 Cal.4th 384, 389 [46 Cal.Rptr.3d 668, 139 P.3d 56].)
• “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].)
Secondary Sources
1 Witkin, Summary of California Law (10th ed. 2005) Contracts, §§ 591–607
6Antitrust Laws and Trade Regulation, Ch. 105, California, § 105.02[3] (Matthew
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,
§ 565.77 (Matthew Bender)
1 Matthew Bender Practice Guide: California Unfair Competition and Business
Torts, Ch. 5, Antitrust, 5.05, 5.11, 5.17–5.22