Toys "R" Us v. Ftc - 221 F.3d 928 (7th Cir. 2000)

Rule:

A horizontal agreement effecting a boycott may be proved by either direct or circumstantial evidence. When circumstantial evidence is used, there must be some evidence that tends to exclude the possibility that the alleged conspirators acted independently. This does not mean, however, that the Federal Trade Commission had to exclude all possibility that the manufacturers acted independently. The test states only that there must be some evidence which, if believed, would support a finding of concerted behavior. In the context of an appeal from the Federal Trade Commission, the question is whether substantial evidence supports its conclusion that it is more likely than not that the manufacturers acted collusively. Also, the Federal Trade Commission is not limited to restating the law in its remedial orders. Such orders can restrict the options for a company that has violated § 5 of the Federal Trade Commission Act, 15 U.S.C.S. § 45, to ensure that the violation will cease and competition will be restored. 

Facts:

Petitioner Toys "R" Us Inc., was a giant in the toy retailing industry. Respondent Federal Trade Commission found that it sold approximately 20% of all the toys sold in the United States, and that in some metropolitan areas its share of toy sales. Respondent also found that petitioner have orchestrated a horizontal agreement among numerous toy manufacturers through creation and enforcement of multiple vertical agreements that did not pass scrutiny under the antitrust rule of reason in which each manufacturer promised to restrict distribution of its products to low-priced warehouse club stores, on condition the other manufactures would do the same. Thus, in violation of § 5 of the Federal Trade Commission Act, 15 U.S.C.S. § 45. Petitioner appealed, attacking both the sufficiency of the evidence and the scope of respondent's remedial order. 

Issue:

Was there sufficient evidence that petitioner orchestrated a horizontal agreement among numerous toy manufacturers?

Answer:

Yes.

Conclusion:

The court affirmed the final order of respondent Commission and held that although other conclusions were possible, there was substantial evidence to support the finding that petitioner had created a horizontal agreement among toy manufacturers, rather than merely a series of separate, similar vertical agreements between petitioner and various toy manufacturers, as urged by petitioner. Also, the court ruled that respondent's finding of market power did not require an extensive inquiry into petitioner's market share. The court also held that petitioner misconstrued the concept of free-riding, and that respondent's remedial order was within its power to restrict the business options of a company found to have violated 15 U.S.C.S. § 45.