The Copperweld Question: Drawing the Line between Corporate Family and Cartel

Cornell Law Review Volume 101 Issue 2 Issue 2 - 2016 Article 4 The Copperweld Question: Drawing the Line between Corporate Family and Cartel Natasha G. Menell Follow this and additional works at: http://scholarship.law.cornell.edu/clr Part of the Law Commons Recommended Citation Natasha G. Menell, The Copperweld Question: Drawing the Line between Corporate Family and Cartel, 101 Cornell L. Rev. 467 () Available at: http://scholarship.law.cornell.edu/clr/vol101/iss2/4 This Note is brought to you for free and open access by the Journals at Scholarship@Cornell Law: A Digital Repository. It has been accepted for inclusion in Cornell Law Review by an authorized administrator of Scholarship@Cornell Law: A Digital Repository. For more information, please contact . \\jciprod01\productn\C\CRN\101-2\CRN204.txt unknown Seq: 1 30-DEC-15 11:16 NOTE THE COPPERWELD QUESTION: DRAWING THE LINE BETWEEN CORPORATE FAMILY AND CARTEL Natasha G. Menell† INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468 I. BACKGROUND: THE UNILATERAL ACTION DEFENSE FOR A CORPORATE FAMILY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475 A. Section 1 of the Sherman Act: The Concerted Action Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . 475 B. The Concerted Action Requirement as Applied to Corporations Pre-Copperweld . . . . . . . . . . . . . . 476 C. Copperweld Corp. v. Independence Tube Corp. . 477 II. THE UNILATERAL ACTION DEFENSE POST-COPPERWELD . 479 A. Strictly Limiting the Copperweld Ruling . . . . . . . 480 B. Unity-of-Interests Tests . . . . . . . . . . . . . . . . . . . . . . . 480 C. Factor-Balancing Approach . . . . . . . . . . . . . . . . . . . 481 D. Forced-Takeover Test . . . . . . . . . . . . . . . . . . . . . . . . . 482 E. Identical Ownership Test . . . . . . . . . . . . . . . . . . . . . 482 III. ASSESSING APPROACHES TO THE UNILATERAL ACTION DEFENSE IN LIGHT OF THE THEORY OF CONCERTED ACTION UNDER § 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482 IV. PRIOR WORK IN LEGAL SCHOLARSHIP . . . . . . . . . . . . . . . . . 484 V. FRAMING A COHERENT UNITY-OF-INTERESTS TEST . . . . . . 486 A. Corporate Control Under the Veil-Piercing Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486 B. Relevance of Veil-Piercing Factors for the Unilateral Action Defense . . . . . . . . . . . . . . . . . . . . . 489 † B.A. Social and Political Sciences, University of Cambridge, Trinity College, 2010; M.Sc. Political Science and Political Economy, London School of Economics, 2012; J.D. Candidate, Cornell Law School, 2016; Notes Editor, Cornell Law Review, Volume 101. I am eternally grateful to my family for their love and support, and to the staff of the Cornell Law Review, especially Emmanuel Arnaud, for their hard work preparing this piece for publication. Special thanks to Professors George Hay and Charles Whitehead, who helped me develop the topic of this Note, and to Professor Michael Dorf for feedback along the way. I would also like to thank Antonio Capobianco at the Competition Division of the Organization for Economic Cooperation and Development, where my interest in antitrust law first developed, Francis Antonie at the Helen Suzman Foundation, and my godfather Frank Arisman for their kindness and guidance. 467 R R R R R R R R R R R R R R R R \\jciprod01\productn\C\CRN\101-2\CRN204.txt 468 unknown Seq: 2 CORNELL LAW REVIEW 30-DEC-15 11:16 [Vol. 101:467 C. Probative Value of Veil-Piercing Factors to the Unilateral Action Defense . . . . . . . . . . . . . . . . . . . . . 491 1. Adherence to Statutory Corporate Formalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491 2. Overlap Between Officers and Directors: The “Two Hats” Problem . . . . . . . . . . . . . . . . . . . . . . . 492 3. Undercapitalization . . . . . . . . . . . . . . . . . . . . . . . . 493 4. Intermingling of Assets . . . . . . . . . . . . . . . . . . . . 494 5. Concentration of Assets or Liabilities . . . . . . . 494 D. Synthesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 VI. APPLICATION: WESLEY HEALTH SYSTEM, LLC V. FORREST COUNTY BOARD OF SUPERVISORS . . . . . . . . . . . . 496 VII. APPLICATION: ROBERTSON V. SEA PINES REAL ESTATE COS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 INTRODUCTION Antitrust law treads a fine line between creation of a status offense for dominant commercial organizations on the one hand, and devolution into incomprehensibly complex legal standards on the other. The Sherman Antitrust Act1 prohibits anticompetitive business practices, for which draconian penalties are contemplated by the Act and subsequent legislation.2 The difficulty of drawing legal distinctions between anticompetitive conduct and aggressively competitive conduct, however, is a significant obstacle to achieving the policy objectives of the Act.3 When faced with allegedly anticompetitive business prac1 15 U.S.C. §§ 1–3 (2012). Penalties for felony violations of the Sherman Act might include a fine of up to $100,000,000 for a corporation, $1,000,000 for an individual, or imprisonment for up to ten years. Id. Any jury award in a private action is automatically trebled. Id. § 15. 3 For example, in 1967, the Supreme Court declared that vertical “exclusive territory” resale restraints were anticompetitive per se, at least where the manufacturer has parted with “dominion” over the merchandise. United States v. Arnold, Schwinn & Co., 388 U.S. 365, 375–76, 379 (1967), overruled by Cont’l T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977). For a decade, courts applied this rule to find that vertical restraints violated the Sherman Act. See, e.g., United States v. Glaxo Grp. Ltd., 302 F. Supp. 1, 9 (D.D.C. 1969) (commenting that “[h]owever laudable the motive,” vertical restraints constitute a per se violation of the Sherman Act); Kugler v. Koscot Interplanetary, Inc., 293 A.2d 682, 699 (N.J. Super. Ct. Ch. Div. 1972) (finding that a manufacturer’s vertical restraints on the distribution and marketing of its products violated the Sherman Act); see also Richard A. Posner, Antitrust Policy and the Supreme Court: An Analysis of the Restricted Distribution, Horizontal Merger and Potential Competition Decisions, 75 COLUM. L. REV. 282, 295–99 (1975) (discussing inconsistency of the law with underlying economic policy and critiquing the Arnold, Schwinn & Co. decision as lacking an economic rationale). But in 1977, the Court reversed tack, abandoning 2 R R R R R R R R R R \\jciprod01\productn\C\CRN\101-2\CRN204.txt 2016] unknown Seq: 3 THE COPPERWELD QUESTION 30-DEC-15 11:16 469 tices, courts recognize the risk of chilling conduct that can, in some circumstances, be procompetitive and (...truncated)