Antitrust Laws in California

What Are Antitrust Laws?

Anti-Trust Actions Under the Cartwright Act

“The Cartwright Act is contained in Business & Professions Code § 16720 et seq. and codifies the common law prohibition against restraints of trade.” (Corwin v. Los Angeles Newspaper Service Bureau, Inc. (1971) 4 Cal.3d 842, 852.) “The Act is patterned after the federal Sherman Anti-Trust Act (15 U.S.C. § 1 et seq.) and makes unlawful any business practice the purpose of which is to limit or injure competition.” (Saxer v. Philip Morris, Inc. (1975) 54 Cal.App.3d 7, 19.) “Under the Cartwright Act, any person who is injured in his business or property by reason of anything forbidden or declared unlawful by the Act can maintain a private right of action for damages and attorney fees.” Business & Professions Code §16750(a).

In order to state a cause of action for violation of the Cartwright Act, plaintiff must allege:

the formation and operation of a conspiracy to restrain trade or commerce,
illegal acts done in furtherance of the conspiracy, and
damage proximately caused by such acts.

(Saxer v. Philip Morris, Inc., supra, 54 Cal. App. 3d, 7, 20.)

Additionally, plaintiff must allege that he has suffered “the type of injury the antitrust laws were intended to prevent.” (Kolling v. Dow Jones & Company (1982) 137 Cal.App.3d 709, 723; Morrison v. Viacom, Inc. (1998) 66 Cal.App.4th 534, 548.) “This means that plaintiff must allege more than injury to himself. He must also allege (and eventually prove) injury to competition.” (Kolling v. Dow Jones & Company (1982) 137 Cal.App.3d 709, 724; see also, Rutman Wine Company v. E. & J. Gallo Winery (9th Cir. 1987) 829 F.2d 729, 735 (no antitrust violation occurs unless the exclusive arrangement between defendants actually harms competition in the relevant market); Capital Imaging Associates, P.C. v. Mohawk Valley Medical Associates, Inc. (2d Cir. 1993) 996 F.2d 537, 543 (proof that plaintiff has been harmed as an individual competitor is inadequate where there has been no showing that defendant’s activities have had an adverse impact on competition).

"The Cartwright Act prohibits every trust, defined as "a combination of capital, skill or acts by two or more persons" for specified anticompetitive purposes. (Bus. & Prof. Code, §§ 16720, 16726.) The federal Sherman Act prohibits every "contract, combination ... or conspiracy, in restraint of trade." (15 U.S.C. § 1.) The similar language of the two acts reflects their common objective to protect and promote competition. (State of California ex rel. Van de Kamp v. Texaco, Inc. (1988) 46 Cal.3d 1147, 1153; Business Electronics v. Sharp Electronics (1988) 485 U.S. 717, 726 [108 S.Ct. 1515, 1520-1521] [emphasizing interbrand competition].) Since the Cartwright Act and the federal Sherman Act share similar language and objectives, California courts often look to federal precedents under the Sherman Act for guidance. (Morrison v. Viacom, Inc. (1998) 66 Cal.App.4th 534, 541, fn. 2.)

Heightened Pleading Requirement

“‘An antitrust claim must plead the formation and operation of the conspiracy and the illegal acts done in furtherance of the conspiracy.” (Marsh v. Anesthesia Service Medical Group, Inc. (2011) 200 Cal.App.4th 480, 492-493 citing Freeman v. San Diego Assn. of Realtors (1999) 77 Cal.App.4th 171, 196.) “‘California requires a high degree of particularity in the pleading of Cartwright Act violations [citation], and therefore generalized allegations of antitrust violations are usually insufficient.’” (Id.)

Allocation of Trade or Commerce

In order to establish a viable Cartwright Act cause of action based on allocation of trade or commerce, Cross-Complaint must allege sufficient facts to establish an agreement between two or more competitors not to compete for the business of particular customers, with each other in particular territories, or in the sake of a particular product. (CACI No. 3401.)

“The antitrust laws do not preclude a party from unilaterally determining the parties with whom, or the terms on which, it will transact business. However, it is a violation of the antitrust laws for a group of competitors with separate and independent economic interests, or a single competitor with sufficient leverage, to force another to boycott a competitor at the same level of distribution.” (Freeman, supra, 77 Cal.App.4th 171, 195.)

In Chavez, the defendant was accused of price-fixing in violation of anti-trust laws. Chavez v. Whirlpool Corp. (2001) 93 Cal.App.4th 363, 369-370.) However, the court noted that under the U.S. Supreme Court’s interpretation of analogous anti-trust statutes, set forth in U.S. v. Colgate & Co. (1919) 250 U.S. 300, a manufacturer is expressly allowed to announce its price restrictions ahead of time, and then refuse to do business with distributors who do not wish to comply. (Id. at 370.) The court also cited other cases holding that in order to establish an anti-trust violation, more evidence of coercion and price fixing was required than simply announcing a price restriction and allowing distributors to decide whether to purchase the manufacturer’s products. (Id. at 370-371.) In Chavez, the plaintiff had merely alleged that the defendant had announced its price restrictions and its intent to monitor distributors for compliance with those permissible restrictions. The court held that since this conduct was expressly allowed under anti-trust statutes, as interpreted by the Supreme Court in Colgate, the plaintiff’s complaint was subject to demurrer. (Id. at 373.)

California and federal antitrust law under the two acts generally distinguish between conduct that is per se unlawful and conduct that is evaluated under the rule of reason. The law conclusively presumes manifestly anticompetitive restraints of trade to be unreasonable and unlawful, and evaluates other restraints under the rule of reason. (Marin County Bd. of Realtors, Inc. v. Palsson (1976) 16 Cal.3d 920, 930-931; Business Electronics v. Sharp Electronics, supra, 485 U.S. at pp. 723-724.)" Chavez v Whirlpool Corp (2001) 93 CA 4th 363, 369.

"Although the Sherman Act, by its terms, prohibits every agreement "in restraint of trade," this Court has long recognized that Congress intended to outlaw only unreasonable restraints. See, e.g., Arizona v. Maricopa County Medical Soc., 457 U.S. 332, 342-343, (1982) (citing United States v. Joint Traffic Assn., 171 U.S. 505 (1898)). As a consequence, most antitrust claims are analyzed under a "rule of reason," according to which the finder of fact must decide whether the questioned practice imposes an unreasonable restraint on competition, taking into account a variety of factors, including specific information about the relevant business, its condition before and after the restraint was imposed, and the restraint's history, nature, and effect. Arizona supra 457 U.S., at 343, and n. 13, (citing Board of Trade of Chicago v. United States, 246 U.S. 231, 238 (1918)). State Oil Co v Khan 522 US 3, 10 (1997).

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REEL INDUSTRIES INC VS JORGE CASILLAS ET AL Other Commercial/Business Tort (not fraud/ breach of contract) (General Jurisdiction) document preview

FIRST AMENDED CROSS COMPLAINT FOR: 1. VIOLATION OF THE CARTWRIGHT ACT; ETC.

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@ GRIGINAL FILED Russ W. Ercolani (SBN 240493) Superior Court of California County of Tac Anoeles ERCOLANI LAW GROUP 4195 E. Thousand Oaks Blvd., Suite 175 Westlake Village, CA 91362 …