Law School Case Brief
Nynex Corp. v. Discon - 525 U.S. 128, 119 S. Ct. 493 (1998)
Where an antitrust court is considering an agreement by a single buyer to purchase goods or services from one supplier rather than another should not apply the per se rule even if it finds no legitimate business reason for that purchasing decision. The no boycott-related per se rule applies and the plaintiff seller must allege and prove harm, not just to a single competitor, but to the competitive process, i.e., to competition itself. Precedent limits the per se rule in the boycott context to cases involving horizontal agreements among direct competitors.
Discon Incorporated sold services to remove obsolete telephone equipment to Material Enterprises Company, a subsidiary of NYNEX Corporation. When Material Enterprises started to buy removal services from AT&T Technologies instead, Discon filed suit alleging NYNEX had engaged in unfair and anticompetitive practices. Discon claimed that Material Enterprises paid AT&T more than Discon would have received. Material Enterprises passed on the extra cost to the customers of NYNEX. Material Enterprises then received a rebate from AT&T and shared it with NYNEX. Discon alleged these practices were intended to them and to benefit their competitor, AT&T, because Discon refused to participate in the scheme. The District Court dismissed the suit for failure to state a claim. The Court of Appeals affirmed the dismissal, but held Discon's claims were founded under the Sherman Act. Discon had a valid claim in antitrust rules that prohibit group boycotts because the practices were anticompetitive. Moreover, the complaint stated a valid conspiracy to monopolize. NYNEX argued that this case did not constitute a group boycott and therefore it could not proceed.
Does the antitrust rule outlawing group boycotts apply to a single buyer's decision to buy from one company over another?
In a unanimous decision, announced by Justice Stephen G. Breyer, the Court ruled the group boycott rule does not apply to claims with a single buyer and a single supplier. In the competitive environment antitrust laws seek to encourage, NYNEX had the freedom to switch its vendor. As for the conspiracy to monopolize claim, the Court remanded the case to provide Discon a chance to show that NYNEX agreements possibly harmed the competitive process.
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