Continental Television v. GTE Sylvania
Encyclopedia
Continental Television v. GTE Sylvania, 433 U.S. 36 (1977), was a landmark antitrust
decision of the Supreme Court of the United States
. Facing declining sales, GTE Sylvania attempted to reduce the number of competing Sylvania retailers by "limit[ing] the number of franchises granted for any given area [of the country] and requir[ing] each franchisee to sell his Sylvania products only from the location or locations at which he was franchised." 433 U.S., at 38. When Continental was denied such a franchise, they filed a lawsuit alleging violation of the Sherman Act.
Continental's chances looked good, because the Supreme Court had held such restrictions to be subject to a per se rule
in United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967). But the court instead overruled Schwinn—which had itself been a change in course from White Motor Co. v. United States, 372 U.S. 253 (1963), where the court had refused to adopt such a rule, 433 U.S., at 47—and held that such business practices must be analyzed under the rule of reason
. Noting that "per se rules of illegality are appropriate only when they relate to conduct that is manifestly anticompetitive," 433 U.S., at 49-50, the court concluded that GTE's behavior transgressed the Sherman Act only if it was an unreasonable restraint of trade that would diminish competition and promote inefficiency
.
The Sylvania case became the first shot in the court's march back to economics as the touchstone of antitrust, a program generally attributed to the influence of Robert Bork
's work, summed up in The Antitrust Paradox
. The case staked out the ground for cases like Broadcast Music v. Columbia Broadcasting System
, State Oil Co. v. Khan
, Verizon v. Trinko, and Leegin v. PSKS.
Antitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...
decision of the Supreme Court of the United States
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
. Facing declining sales, GTE Sylvania attempted to reduce the number of competing Sylvania retailers by "limit[ing] the number of franchises granted for any given area [of the country] and requir[ing] each franchisee to sell his Sylvania products only from the location or locations at which he was franchised." 433 U.S., at 38. When Continental was denied such a franchise, they filed a lawsuit alleging violation of the Sherman Act.
Continental's chances looked good, because the Supreme Court had held such restrictions to be subject to a per se rule
Illegal per se
The term illegal per se means that the act is inherently illegal. Thus, an act is illegal without extrinsic proof of any surrounding circumstances such as lack of scienter or other defenses...
in United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967). But the court instead overruled Schwinn—which had itself been a change in course from White Motor Co. v. United States, 372 U.S. 253 (1963), where the court had refused to adopt such a rule, 433 U.S., at 47—and held that such business practices must be analyzed under the rule of reason
Rule of reason
The Rule of Reason is a doctrine developed by the United States Supreme Court in its interpretation of the Sherman Antitrust Act. The rule, stated and applied in the case of Standard Oil Co. of New Jersey v. United States, 221 U.S...
. Noting that "per se rules of illegality are appropriate only when they relate to conduct that is manifestly anticompetitive," 433 U.S., at 49-50, the court concluded that GTE's behavior transgressed the Sherman Act only if it was an unreasonable restraint of trade that would diminish competition and promote inefficiency
Allocative efficiency
Allocative efficiency is a theoretical measure of the benefit or utility derived from a proposed or actual selection in the allocation or allotment of resources....
.
The Sylvania case became the first shot in the court's march back to economics as the touchstone of antitrust, a program generally attributed to the influence of Robert Bork
Robert Bork
Robert Heron Bork is an American legal scholar who has advocated the judicial philosophy of originalism. Bork formerly served as Solicitor General, Acting Attorney General, and judge for the United States Court of Appeals for the District of Columbia Circuit...
's work, summed up in The Antitrust Paradox
The Antitrust Paradox
The Antitrust Paradox is a 1978 book by Robert Bork that criticized the state of United States antitrust law in the 1970s. A second edition, updated to reflect substantial changes in the law, was published in 1993....
. The case staked out the ground for cases like Broadcast Music v. Columbia Broadcasting System
Broadcast Music v. Columbia Broadcasting System
Broadcast Music v. Columbia Broadcasting System, 441 U.S. 1 , was an important antitrust case decided by the Supreme Court of the United States. It held that blanket licenses issued by ASCAP and BMI did not necessarily constitute price fixing. The case was part of the court's retreat from applying...
, State Oil Co. v. Khan
State Oil Co. v. Khan
State Oil Co. v. Khan, 522 U.S. 3 , was a decision by the United States Supreme Court, which “does not hold that all vertical maximum price fixing is per se lawful, but simply that it should be evaluated under the rule of reason, which can effectively identify those situations in which it amounts...
, Verizon v. Trinko, and Leegin v. PSKS.