Klor's, Inc. v. Broadway-Hale Stores, Inc.

Broadway-Hale Stores, Inc., a major California department store, induced Admiral, Emerson Radio, General Electric, Philco, RCA, Whirlpool, Zenith, and other major appliance manufacturers to stop selling to Klor's, a price-cutting retail store. Both parties had stores in San Francisco next door to one another. Klor's brought an antitrust treble damages suit, alleging a conspiracy among Broadway-Hale and the manufacturers. By pre-trial order the case one was limited to a single conspiracy charging a Sherman Act § 1 violation. The defendants moved for summary judgment, and the lower courts agreed that the case should be summarily dismissed, on the grounds that Klor's was only one of hundreds of stores selling such goods; therefore, its elimination as a competitive factor did not substantially lessen competition in the general market – there was no public injury. Klor's did not show or even allege "that, by any act of defendants, the price, quantity, or quality offered the public was affected, nor that there was any intent or purpose to effect a change in, or an influence on, prices, quantity, or quality." The issue of whether a conspiracy existed was by-passed by the summary judgment motion, even though the allegations appear to have described only a "rimless wheel conspiracy", one without the spokes (appliance manufacturers) being connected to one another, knowing what one another were doing, or being interdependent. ==Ruling of Supreme Court==

Justice Hugo Black delivered the 8—1 opinion and unanimous judgment of the Court, reversing the lower courts' dismissal of the case, on the grounds that Klor's sufficiently pleaded a per se illegal boycott conspiracy. The Court said, "Alleged in this complaint is a wide combination consisting of manufacturers, distributors, and a retailer" that drives Klor's "out of business as a dealer in the defendants' products." It is immaterial, Black insisted, that "the victim is just one merchant whose business is so small that his destruction makes little difference to the economy": Justice John Marshall Harlan II concurred in the judgment. ==Commentary==

Professor James Rahl sees the ''Klor's'' case as posing a dilemma for the Supreme Court, which it dodged by refusing to explain its ruling. At that time, the antitrust rule on boycotts was not clear: The second alternative was quite problematic: Therefore, the Court simply did not explain why the alleged boycott was illegal: "What the Court actually did was to avoid coming to grips with the dilemma. As a consequence it is very difficult now to know what the rule on boycotts is." It therefore, Rahl maintains, seems "clear that any comprehensible per se rule for boycotts is also out of the question." ==Subsequent cases==

In 1985 in Northwest Stationers v. Pacific Stationery & Printing Co., the Court held that not all boycotts which exclude competitors are subject to per se scrutiny. The Court ruled that the expulsion by a retail office supply purchasing cooperative of one of its members was not per se illegal absent a showing that "the cooperative possesse[d] market power or exclusive access to an element essential to effective competition. ==References==