Business Electronics Corp. v. Sharp Electronics Corp.

485 U. S. 717

May 2, 1988

Two Houston retailers sold calculators manufactured by Sharp. Because one retailer (Business Electronics) was selling them way cheaper, the other retailer asked Sharp to cut off the supply to the first retailer. Sharp did so, and Business Electronics sued, citing the Sherman Antitrust Act. After being told that cutting off one retailer because of its lower prices was always illegal if done at the bidding of a more expensive retailer, a jury ruled for Business Electronics. Sharp contended that this was not always illegal, and should be judged by the antitrust ‘rule of reason.’

Scalia, writing for the Court, agreed that the ‘rule of reason’ must be used. The Court thus ruled 6-2 that the jury instruction was erroneous, and a new trial would have to be held (Kennedy did not participate). According to antitrust precedent, tacit agreements between suppliers and retailers were only per se illegal if they fixed prices. Because the second retailer remained free to set prices as they wished, there was no price fixing here. Citing the Sylvania case from 1977, Scalia said that the Court should be extremely cautious before finding any other collusion between supplier and retailer inherently anti-competitive. Because there were arguable pro-consumer reasons for wanting only one, more expensive retailer, Sharp was in the clear pending a new trial.

Stevens, joined by White, dissented. He found no evidence in the record that Sharp and the more expensive retailer had any noble purpose – instead, the facts showed that they were just blatantly attempting to line their own pockets by leaving the cheaper retailer high and dry. Because this restraint of competition had no noble purpose, Stevens felt the agreement was per se illegal. Furthermore, antitrust precedents held that retailer boycotts of suppliers were per se illegal. Stevens argued that by threatening to sever ties if Sharp did not cut off the cheaper retailer, the more extensive retailer was effectively doing a one-business boycott.

Stevens made a really good argument, but reading the jury instruction again, I do think a new trial was probably warranted. That said, I also think that the jury should still find for Business Electronics, even after being properly instructed.


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