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When a firm, or even a group of firms adhering to a vertical agreement, lowers prices but maintains them above predatory levels, business lost by rivals cannot be viewed as an "anticompetitive" consequence of a claimed violation. A firm complaining about the harm it suffers from nonpredatory price competition is really claiming that it is unable to raise prices. This is not antitrust injury; indeed, cutting prices in order to increase business often is the very essence of competition. The antitrust laws are enacted for the protection of competition, not competitors. To hold that the antitrust laws protect competitors from the loss of profits due to nonpredatory price competition would, in effect, render illegal any decision by a firm to cut prices in order to increase market share.
Petitioner Atlantic Richfield Company (ARCO), an integrated oil company, increased its retail gasoline sales and market share by encouraging its dealers to match the prices of independents such as respondent USA Petroleum Company, which competed directly with the dealers at the retail level. When USA's sales dropped, it sued ARCO in the District Court, charging, inter alia, that the vertical, maximum-price-fixing scheme constituted a conspiracy in restraint of trade in violation of § 1 of the Sherman Act. The court granted summary judgment to ARCO, holding that USA could not satisfy the "antitrust injury" requirement for purposes of a private damages suit under § 4 of the Clayton Act because it was unable to show that ARCO's prices were predatory. The Court of Appeals reversed, holding that injuries resulting from vertical, nonpredatory, maximum-price-fixing agreements could constitute "antitrust injury." Reasoning that any form of price fixing contravened Congress' intent that market forces alone determine what goods and services were offered, their prices, and whether particular sellers succeed or fail, the court concluded that USA had shown that its losses resulted from a disruption in the market caused by ARCO's price fixing. Certiorari was granted.
Did a firm incur an “injury” within the meaning of the antitrust laws when it lost sales to a competitor charging nonpredatory prices pursuant to a vertical, maximum-price-fixing scheme?
The Supreme Court reversed the decision of the appeals court, holding that respondent did not incur an injury under antitrust laws by losing sales to petitioner competitor charging nonpredatory prices pursuant to a vertical, maximum price-fixing scheme, and therefore an action under § 15 was impermissible. According to the Court, the firm’s losses did not flow from the aspects of the vertical, maximum price fixing that render it illegal, and that the business lost by the respondent as a rival cannot be viewed as an anticompetitive consequence of the claimed violation. Moreover, the Court held that the fact that a vertical price-fixing scheme may facilitate predatory pricing in some circumstances was no reason to dispense with the antitrust-injury requirement in an action by the firm against the competitor's vertical agreement.