''Continental Television v. GTE Sylvania'', 433 U.S. 36 (1977), was an
antitrust decision of the
Supreme Court of the United States. It widened the scope of the "rule of reason" to exclude the jurisdiction of
antitrust law
Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust ...
s.
Facts
Facing declining sales,
GTE-Sylvania
Sylvania Electric Products Inc. was an American manufacturer of diverse electrical equipment, including at various times radio transceivers, vacuum tubes, semiconductors, and mainframe computers such as MOBIDIC. They were one of the companies inv ...
attempted to reduce the number of competing Sylvania retailers by "limit
ngthe number of franchises granted for any given area
f the country
F, or f, is the sixth letter in the Latin alphabet, used in the modern English alphabet, the alphabets of other western European languages and others worldwide. Its name in English is ''ef'' (pronounced ), and the plural is ''efs''.
His ...
and requir
ngeach 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).
Judgment
The Supreme Court 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
Efficiency is the often measurable ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without ...
.
Significance
The ''Sylvania'' case became the first shot in the court's march to the "Chicago School" version of antitrust economics as the touchstone of antitrust law. Attributed to the influence of
Robert Bork
Robert Heron Bork (March 1, 1927 – December 19, 2012) was an American jurist who served as the solicitor general of the United States from 1973 to 1977. A professor at Yale Law School by occupation, he later served as a judge on the U.S. Cour ...
, summarized in ''
The Antitrust Paradox'', and
Richard Posner
Richard Allen Posner (; born January 11, 1939) is an American jurist and legal scholar who served as a federal appellate judge on the U.S. Court of Appeals for the Seventh Circuit from 1981 to 2017. A senior lecturer at the University of Chic ...
, explained in ''Antitrust Law'' (both published in 1978), these legal scholars popularized what Chicago economists had produced.
The initial ground was broken by economist
George McGee, who reanalyzed the biggest antitrust ruling in history, the Supreme Court's split up of Standard Oil in 1911. McGee disputed Standard Oil's engagement in predatory pricing, the linchpin of its antitrust violations. McGee's view is now widely criticized, by lawyers
Christopher Leslie,
Elizabeth Granitz,
Benjamin Klein
Benjamin ( he, ''Bīnyāmīn''; "Son of (the) right") blue letter bible: https://www.blueletterbible.org/lexicon/h3225/kjv/wlc/0-1/ H3225 - yāmîn - Strong's Hebrew Lexicon (kjv) was the last of the two sons of Jacob and Rachel (Jacob's thi ...
, economists
James Dalton,
Louis Esposito, and historians
Ron Chernow
Ronald Chernow (; born March 3, 1949) is an American writer, journalist and biographer. He has written bestselling historical non-fiction biographies.
He won the 2011 Pulitzer Prize for Biography and the 2011 American History Book Prize for hi ...
,
Daniel Yergin
Daniel Howard Yergin (born February 6, 1947) is an American author, speaker, energy expert, and economic historian. Yergin is vice chairman of S&P Global. He was formerly vice chairman of IHS Markit, which merged with S&P in 2022. He founded C ...
. Bork and Posner wrote books that advised attorneys and courts that McGee's paper showed antitrust's foundation was uncertain. Other Chicago economists who influenced antitrust debates in ways that narrowed and limited its legal basis include
Ronald Coase
Ronald Harry Coase (; 29 December 1910 – 2 September 2013) was a British economist and author. Coase received a bachelor of commerce degree (1932) and a PhD from the London School of Economics, where he was a member of the faculty until 1951. ...
,
Gary Becker
Gary Stanley Becker (; December 2, 1930 – May 3, 2014) was an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences. He was a professor of economics and sociology at the University of Chicago, and was a leader of ...
, and
George Stigler
George Joseph Stigler (; January 17, 1911 – December 1, 1991) was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics.
Early life and e ...
.
McGee was inspired to rethink antitrust law by his University of Chicago economics co-professor
Aaron Director
Aaron Director (; September 21, 1901 – September 11, 2004) was a Russian-born American economist and academic who played a central role in the development of the field Law and Economics and the Chicago school of economics. Director was a profe ...
in the 1950s, according to Posner. Director was
Milton Friedman
Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the ...
's brother-in-law, and shared his agenda to move mainstream economics away from Keynesian macroeconomics and towards laissez-faire.
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''.
Notes
External links
* {{caselaw source
, case = ''Continental Television v. GTE Sylvania'', {{Ussc, 433, 36, 1977, el=no
, courtlistener =https://www.courtlistener.com/opinion/109716/continental-tv-inc-v-gte-sylvania-inc/
, googlescholar = https://scholar.google.com/scholar_case?case=2935525730326853182
, justia =https://supreme.justia.com/cases/federal/us/433/36/
, oyez =https://www.oyez.org/cases/1976/76-15
United States Supreme Court cases
United States Supreme Court cases of the Burger Court
1977 in United States case law
United States antitrust case law
Verizon Communications