Chicago Board of Trade v. United States

1918 United States Supreme Court case

Chicago Board of Trade v. United States

Supreme Court of the United States

Argued December 18–19, 1917
Decided March 4, 1918
Full case name| Chicago Board of Trade v. United States
Citations| 246 U.S. 231 (more)

38 S. Ct. 242; 62 L. Ed. 683; 1918 U.S. LEXIS 1538

Case history
Prior| On writ of certiorari to the United States District Court for the Northern District of Illinois
Holding
The "call rule" of the Chicago Board of Trade was ultimately procompetitive, and did not violate the Sherman Act.
Court membership

Chief Justice
Edward D. White
Associate Justices
Joseph McKenna * Oliver W. Holmes Jr.
William R. Day * Willis Van Devanter
Mahlon Pitney * James C. McReynolds
Louis Brandeis * John H. Clarke
Case opinion
Majority| Brandeis, joined by unanimous
McReynolds took no part in the consideration or decision of the case.
Laws applied
Sherman Antitrust Act

Chicago Board of Trade v. United States, 246 U.S. 231 (1918), was a case in which the Supreme Court of the United States applied the "rule of reason" to the internal trading rules of a commodity market. Section 1 of the Sherman Act flatly states: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal."[1] However, in evaluating the U.S. government's allegations that the Chicago Board of Trade's rules on grain prices violated the Act, the Supreme Court rejected a strict interpretation of its language: "The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition."

## Background

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The Chicago Board of Trade (CBOT) is a commodity market, dealing in spot sales (for example, sales of grain stored in Chicago and ready for delivery), future sales (grain to be purchased for delivery at a later time), and “to arrive” orders (grain which is en route to Chicago). CBOT introduced a new “call rule” which regulated board members buying or selling sales of “to arrive” orders—at the close of the call session (which at that point was 2:00 p.m Central Time), the price of grain is set and dealers are unable to sell grain at any other price. The United States Department of Justice accused CBOT of price-fixing, and, in 1913, filed suit against the Board in the United States District Court for the Northern District of Illinois.

At trial, CBOT asserted that the rule did not have any unlawful purpose, but rather was set up to curb certain pre-existing problems and abuses. CBOT claimed that a group of agents were lowering discounts on commissions to those people buying grain after hours. These agents would wait until after hours, and then buyers would get cheaper prices. CBOT wanted to curb the power of these monopsony/oligopsony type of buyers by making prices the same for everyone after hours. Also, the rule shortened the traders’ work hours, for the convenience of its members.

Ultimately, however, the District Court did not issue an opinion. The Justice Department and CBOT entered into a consent decree under which enjoined them from acting upon the same or from adopting or acting upon any similar rule.

## Judgment

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Justice Brandeis, writing for a unanimous court, first observed that every trade association and board of trade imposes some restraint upon the conduct of its members. He explained the essence of the Rule of Reason: "The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition." Whether or not a rule restrains trade in violation of the Sherman Act thus turns on the facts and circumstances of each particular case.

He then examined the nature, scope, effect, and history of the rule. He held that the call rule was ultimately procompetitive in purpose and effect. The scope of the rule was such that it only operated during certain times of day, and affects only small percentage of the grain market. The rule helped to create public market for grain and made pricing more transparent. It decreased the market power of dominant sellers and made sure that prices were set by open competitive bidding. The decree of the District Court was reversed.

## See also

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* v
* t
* e

Sources on rule of reason

US v. Trans-Missouri Freight Asn, 166 U.S. 290 (1897)

US v. Joint Traffic Association, 171 U.S. 505 (1898)

Addyston Pipe and Steel Co. v. US, 175 U.S. 211 (1899)

Standard Oil Co. of New Jersey v. US, 221 U.S. 1 (1911)

Chicago Board of Trade v. US, 246 U.S. 231 (1918)

United States v. Topco Assocs., Inc., 405 U.S. 596 (1972)

National Soc. of Prof. Engineers v. US, 435 U.S. 679 (1978)

Broadcast Music v. Columbia Broadcast, 441 U.S. 1 (1979)

Broadcast Music, Inc. v. CBS, Inc., 441 U.S. 1 (1979)

Arizona v. Maricopa County Med Soc, 457 U.S. 332 (1982)

NCAA v. University of Oklahoma, 468 U.S. 85 (1984)

FTC v. Indiana Fed'n of Dentists, 476 U.S. 447 (1986)

Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990)

California Dental Assn. v. FTC, 526 U.S. 756 (1999)

See US antitrust law and rule of reason

* US antitrust law

## Notes

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1. ^ Sherman Antitrust Act of 1890, § 1 (excerpt).

## External links

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* Works related to Board of Trade of City of Chicago v. United States at Wikisource
* Text of Chicago Board of Trade v. United States, 246 U.S. 231 (1918) is available from: Findlaw Google Scholar Justia Library of Congress

* v
* t
* e

United States antitrust law

* History
* Interstate Commerce Commission (1887–1996)
* Bureau of Corporations (1903–1915)
* Pujo Committee (1912–1913)
* Federal Trade Commission (1914–)
* U.S. Justice Department Antitrust Division (1919–)
* U.S. Senate Judiciary Antitrust Subcommittee
* U.S. House Judiciary Antitrust Subcommittee

Statutes and
regulations|

* Interstate Commerce Act of 1887
* Sherman Antitrust Act (1890)
* Elkins Act (1903)
* Expediting Act (1903)
* Publicity In Taking Evidence Act (1913)
* Clayton Antitrust Act of 1914
* Federal Trade Commission Act of 1914
* Webb–Pomerene Act (1918)
* Willis Graham Act (1921)
* Capper–Volstead Act (1922)
* Robinson–Patman Act (1936)
* Wheeler–Lea Act (1938)
* McCarran–Ferguson Act (1945)
* Celler–Kefauver Act (1950)
* Sports Broadcasting Act of 1961
* Newspaper Preservation Act of 1970
* Tunney Act (1974)
* Hart–Scott–Rodino Antitrust Improvements Act (1976)
* National Cooperative Research and Production Act (1993)
* Executive Order 14036 (2021)

Supreme Court
case law|

| Sherman Antitrust Act
Section 1 case law|

* United States v. American Tobacco Co. (1911)
* United States v. Socony-Vacuum Oil Co. (1940)
* International Salt Co. v. United States (1947)
* United States v. Line Material Co. (1948)
* United States v. New Wrinkle, Inc. (1952)
* United States v. Loew's Inc. (1962)
* United States v. Wise (1962)
* Silver v. New York Stock Exchange (1963)
* United States v. Singer Mfg. Co. (1963)
* Albrecht v. Herald Co. (1968)
* United States v. Glaxo Group Ltd. (1973)
* Goldfarb v. Virginia State Bar (1975)
* Continental Television, Inc. v. GTE Sylvania, Inc. (1977)
* Illinois Brick Co. v. Illinois (1977)
* Arizona v. Maricopa County Medical Society (1982)
* Rice v. Norman Williams Co. (1982)
* Copperweld Corp. v. Independence Tube Corp. (1984)
* Jefferson Parish Hospital District No. 2 v. Hyde (1984)
* NCAA v. Board of Regents of the University of Oklahoma (1984)
* Matsushita Electric Industrial Co. v. Zenith Radio Corp. (1986)
* State Oil Co. v. Khan (1997)
* Texaco Inc. v. Dagher (2006)
* Bell Atlantic Corp. v. Twombly (2007)
* Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007)
* American Needle, Inc. v. National Football League (2010)
* Ohio v. American Express Co. (2018)
* National Collegiate Athletic Association v. Alston (2021)

|

Sherman Antitrust Act
Section 2 case law|

* Standard Oil Co. of New Jersey v. United States (1911)
* Lorain Journal Co. v. United States (1951)
* Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp. (1965)
* Otter Tail Power Co. v. United States (1973)
* Aspen Skiing Co. v. Aspen Highlands Skiing Corp. (1985)
* Spectrum Sports, Inc. v. McQuillan (1993)
* Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP (2004)
* Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co. (2007)
* Pacific Bell Telephone Co. v. linkLine Communications, Inc.  (2009)

Other Sherman
Antitrust Act cases|

* United States v. E. C. Knight Co. (1895)
* United States v. Trans-Missouri Freight Association (1897)
* Addyston Pipe & Steel Co. v. United States (1899)
* Northern Securities Co. v. United States (1904)
* Swift & Co. v. United States (1905)
* Loewe v. Lawlor (1908)
* Dr. Miles Medical Co. v. John D. Park & Sons Co. (1911)
* United States v. Terminal Railroad Association (1912)
* Chicago Board of Trade v. United States (1918)
* United States v. Colgate & Co. (1919)
* Federal Baseball Club v. National League (1922)
* United States v. General Electric Co. (1926)
* Interstate Circuit, Inc. v. United States (1939)
* Ethyl Gasoline Corp. v. United States (1940)
* Fashion Originators' Guild of America v. FTC (1941)
* United States v. Masonite Corp. (1942)
* United States v. Univis Lens Co. (1942)
* Parker v. Brown (1943)
* United States v. South-Eastern Underwriters Ass'n (1944)
* Associated Press v. United States (1945)
* Hartford-Empire Co. v. United States (1945)
* Bigelow v. RKO Radio Pictures, Inc. (1946)
* United States v. Paramount Pictures, Inc. (1948)
* United States v. United States Gypsum Co. (1948–1950)
* Besser Manufacturing Co. v. United States (1951)
* Times-Picayune Publishing Co. v. United States (1953)
* Toolson v. New York Yankees, Inc. (1953)
* United States v. International Boxing Club of New York, Inc. (1955)
* Radovich v. National Football League (1957)
* Klor's, Inc. v. Broadway-Hale Stores, Inc. (1959)
* United States v. Parke, Davis & Co. (1960)
* Haywood v. National Basketball Association (1971)
* Zenith Radio Corp. v. Hazeltine Research, Inc. (1971)
* Flood v. Kuhn (1972)
* Broadcast Music, Inc. v. CBS Inc. (1979)
* California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc. (1980)
* American Society of Mechanical Engineers, Inc. v. Hydrolevel Corp. (1982)
* Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. (1985)
* Eastman Kodak Co. v. Image Technical Services, Inc. (1992)
* Hartford Fire Insurance Co. v. California (1993)
* Illinois Tool Works Inc. v. Independent Ink, Inc. (2006)
* North Carolina State Board of Dental Examiners v. FTC (2015)

Interstate Commerce Act
case law|

* United States v. Trans-Missouri Freight Association (1897)
* United States v. ICC (1970)

Clayton Antitrust Act
case law|

* Duplex Printing Press Co. v. Deering (1921)
* Fashion Originators' Guild of America v. FTC (1941)
* Mercoid cases (1944)
* Hartford-Empire Co. v. United States (1945)
* Bigelow v. RKO Radio Pictures, Inc. (1946)
* United States v. National City Lines Inc. (1948)
* Standard Oil Co. v. United States (1949)
* Tampa Electric Co. v. Nashville Coal Co.  (1961)
* Silver v. New York Stock Exchange (1963)
* United States v. Philadelphia National Bank (1963)
* United States v. Continental Can Co. (1964)
* FTC v. Consolidated Foods Corp. (1965)
* Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp. (1965)
* FTC v. Dean Foods Co. (1966)
* Zenith Radio Corp. v. Hazeltine Research, Inc. (1971)
* Hawaii v. Standard Oil Co. of California (1972)
* Illinois Brick Co. v. Illinois (1977)
* Pfizer Inc. v. Government of India (1978)
* Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. (1993)
* Apple Inc. v. Pepper (2019)

FTC Act case law|

* Fashion Originators' Guild of America v. FTC (1941)
* FTC v. Motion Picture Advertising Service Co. (1953)
* FTC v. Sperry & Hutchinson Trading Stamp Co. (1972)
* FTC v. Actavis, Inc. (2013)

Robinson–Patman Act
case law|

* Matsushita Electric Industrial Co. v. Zenith Radio Corp. (1986)
* Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. (1993)

Other cases|

* Continental Paper Bag Co. v. Eastern Paper Bag Co. (1908)
* Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co. (1928)
* Watson v. Buck (1941)
* National Broadcasting Co. v. United States (1943)
* Dawson Chemical Co. v. Rohm & Haas Co. (1980)
* District of Columbia Court of Appeals v. Feldman (1983)
* Credit Suisse Securities (USA) LLC v. Billing (2007)
* Comcast Corp. v. Behrend (2013)
* Animal Science Products v. Hebei Welcome Pharmaceuticals (2018)

Other federal
case law|

* United States v. Motion Picture Patents Co. (1915)
* United States v. Consolidated Music Corporation (1922)
* United States v. Vehicular Parking Ltd. (1944)
* United States v. Alcoa (1945)
* Gamco, Inc. v. Providence Fruit & Produce Building, Inc. (1952)
* United States v. Morgan (1953)
* United States v. Krasnov (1956)
* United States v. Huck Mfg. Co. (1965)
* Robertson v. National Basketball Ass'n (1977)
* SmithKline Corp. v. Eli Lilly & Co. (1978)
* United States v. Westinghouse Electric Co. (1981)
* United States v. AT&T (1982)
* Mid-South Grizzlies v. National Football League (1983)
* United States v. Syufy Enterprises (1990)
* Wilk v. American Medical Association (1990)
* A.D. Bedell Wholesale Co., Inc. v. Philip Morris Inc. (2001)
* United States v. Microsoft Corp. (2001)
* Fraser v. Major League Soccer (2002)
* LePage's, Inc. v. 3M (2003)
* Advanced Micro Devices, Inc. v. Intel Corp. (2005)
* United States v. Dentsply Int'l, Inc. (2005)
* Tritent International Corp. v. Kentucky (2006)
* Wallace v. International Business Machines Corp. (2006)
* De Beers antitrust litigation (2008)
* Redbox Automated Retail LLC v. Universal City Studios LLLP (2009)
* Princo Corp. v. ITC (2010)
* United States v. Adobe Systems Inc., et al. (2011)
* United States v. Apple Inc. (2013)
* O'Bannon v. NCAA (2015)
* United States v. AT&T (2015)
* FTC v. Qualcomm (2020)
* New York v. Deutsche Telekom (2020)
* Epic Games v. Apple (2021)
* Burnett v. National Association of Realtors (2023)
* Epic Games v. Google (2023)
* United States v. Google LLC (2024)

Ongoing
litigation ‡|

* Federal Trade Commission v. Meta Platforms, Inc. (2020)
* FTC v. Microsoft (2022)
* FTC v. Amazon (2023)
* United States v. Google LLC (2023)
* United States v. Apple Inc. (2024)
* United States v. Live Nation Entertainment (2024)

Related topics|

* Block booking
* Breakup of the Bell System
* Bulk-sale restriction
* Bundling
* Civil investigative demand
* Consent decree
* Consumer welfare standard
* Dividing territories
* Essential facilities doctrine
* Exclusive dealing
* Hub-and-spoke conspiracy
* Kingsbury Commitment
* Merger guidelines
* Modification of Final Judgment
* New Brandeis movement
* Noerr–Pennington doctrine
* Osteopathic Physicians & Surgeons v. California Medical Ass'n (1964)
* Parker immunity doctrine
* Patent misuse
* Post-sale restraint
* Raising rivals' costs
* Relevant market
* Report on Chain Broadcasting
* Reverse payment patent settlement
* Rule of reason
* Second request
* Successors of Standard Oil
* Unfairness doctrine
* Unilateral policy

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