California Civil Jury Instructions (CACI) (2017)

3405. Horizontal and Vertical Restraints (Use for Direct Competitors or Supplier/Reseller Relations) - Other Unreasonable Restraint of Trade—Rule of Reason—Essential Factual Elements

Download PDF
3405.Horizontal and Vertical Restraints (Use for Direct
Competitors or Supplier/Reseller Relations)—Other Unreasonable
Restraint of Trade—Rule of Reason—Essential Factual Elements
[Name of plaintiff] claims that [name of defendant] agreed to [insert
unreasonable restraint of trade]. 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 constituting an unreasonable restraint
of trade];
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 is intended for actions that are limited only by the bounds of
human ingenuity. Any such conduct, if it does not fit into a per se category, is
judged under the rule of reason. Thus, the illegality of a termination that results
from a buyer’s disobedience with a seller’s exclusive “dealing,” territorial location,
or customer restrictions, unless ancillary to price fixing, should be resolved under
the rule of reason. For cases involving vertical restraints, see also the vertical
restraint instructions contained in this series.
It is possible for a complaint to include both per se and rule of reason claims. Also,
per se claims alternatively may be tested under the rule of reason if there is reason
to believe that proof of the per se claims may fall short. If either is the case,
connecting language between the pertinent instructions should be provided, such as:
“If you find that [name of defendant]’s conduct did not amount to an agreement to
[specify conduct, e.g., “fix resale prices,” “boycott,” “allocate markets”], [name of
plaintiff] may still prove that the conduct otherwise lessened competition.”
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(a).
• Trade Groups Not Unlawful. Business and Professions Code section 16725.
• “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
• “ ‘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.)
• “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, 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
1Antitrust Laws and Trade Regulation, Ch. 12, The Per Se Rule and the Rule of
Reason, § 12.03 (Matthew Bender)
3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts,
§ 40.165[2] (Matthew Bender)
1 Matthew Bender Practice Guide: California Unfair Competition and Business
Torts, Ch. 5, Antitrust, 5.05, 5.11, 5.17–5.22