Antitrust Status of Farmer Cooperatives: - USDA Rural Development ...

The rationale for the rule of per se illegality is well stated in
another case involving railroad conduct. The Northern Pacific
Railway received about 40 million acres of land when it built its line
from Lake Superior to the Puget Sound dur ing the 1860s and 1870s.
In succeeding years, most of this land was sold or leased to others for
business development. Many of these contracts included "preferential
routing" clauses which required the land owner or lessee to ship goods
produced or manufactured on the land on the Northern Pacific,
provided that its rates were no higher than those of competing carriers.
In 1949, the Justice Depar tment filed suit charging that the
"preferential routing" clauses were illegal restraints of trade under
Section 1 of the Sherman Act. A U.S. District Court Judge granted
the Government' s request for summary judgment and enjoined the
railroad from enforcing its " preferential routing" clauses. 104
The railroad appealed directly to the Supreme Court. In affirming
the lower cour t order, the Court found these clauses stifled competition
by denying competitors access to these customers on the same terms
offered by the Northern Pacific. The Court said:
.. .(T)here are certain agreements or practices which
because of their pernicious effect on competition and lack of
any redeeming virtue are conclusively presumed to be
unreasonable and therefore illegal without elaborate inquiry
as to the precise harm they have caused or the business
excuse for their use. This principle of per se unreasonableness
not only makes the type of restraints which are
proscribed by the Sherman Act more certain to the benefit of
everyone concerned, but it also avoids the necessity for an
incredibly complicated and prolonged economic investigation
into the entire history of the industry involved, as well as re-
104 United States v. Norther n Pacific Railway Co. , 142 F. Supp. 679
(W.D. Wash., N.D. 1956). The judge, using "quid pro quo" analysis, held
that making a sale or lease contingent on agreeing to ship over the Northern
Pacific was a tying arrangement declared pre se illegal in International Salt
Co. v. United States, 332 U.S. 392 (1947), and other cases cited in the
opinion.
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