CACI No. 3405. Horizontal and Vertical Restraints (Use for Direct Competitors or Supplier/ Reseller Relations) - Other Unreasonable Restraint of Trade - Rule of Reason - Essential Factual Elements

Judicial Council of California Civil Jury Instructions (2023 edition)

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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
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 sellers 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 (11th ed. 2017) Contracts, §§ 602-621
1 Antitrust 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

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