## Facts

- Congress granted Northern Pacific’s predecessor large tracts of land in the Northwest to facilitate construction of a transcontinental rail line.
- The railroad became a dominant private landowner in areas along its route and sold or leased much of the granted land while often retaining mineral interests.
- In many land sale contracts and most leases, Northern Pacific included “preferential routing” clauses requiring purchasers or lessees to ship commodities produced on the land over Northern Pacific lines if its rates (and sometimes service) were equal to competitors’.
- Many covered shipments moved in interstate commerce, and alternative transportation (including competing major rail systems) was available for much of the traffic.
- The United States sued under Sherman Act § 1, seeking declaratory and injunctive relief, characterizing the clauses as tying arrangements (land access tied to transportation services).
- The district court granted summary judgment for the United States based on undisputed facts and enjoined enforcement of the clauses.

## Issues

1. Whether preferential routing clauses in land sale and lease agreements constituted tying arrangements that are per se unreasonable restraints of trade under Sherman Act § 1.
2. Whether Northern Pacific had sufficient economic power in the tying product (land interests) to restrain competition appreciably in the tied market (transportation services).
3. Whether the clauses affected a “not insubstantial” amount of interstate commerce in the tied product.

## Decision

- The Supreme Court affirmed the judgment and injunction.
- The Court held the routing clauses were tying arrangements: access to land was conditioned on a commitment to use Northern Pacific’s transportation services when competitive conditions were met.
- The Court concluded Northern Pacific had substantial economic power in the tying product due to the scope and strategic location of its landholdings.
- The Court found the arrangements affected a not insubstantial amount of interstate commerce because significant actual and potential interstate shipments originated from the burdened lands.
- The Court rejected defenses based on exceptions, alleged lenient administration, and asserted business justifications, holding they did not negate per se condemnation once the prerequisites were shown.
- The Court held summary judgment was proper because the essential per se elements were established on an undisputed record and the railroad identified no additional proof that would change that result.

## Legal Principles

- A tying arrangement is per se unlawful under Sherman Act § 1 when: (1) a seller conditions the sale or lease of one product or interest (the tying product) on the buyer’s purchase or exclusive preference for a different product or service (the tied product); (2) the seller has sufficient economic power in the tying product to restrain competition appreciably in the tied market; and (3) a not insubstantial amount of interstate commerce in the tied product is affected.
- Tying doctrine applies to services as well as goods; transportation services may be the tied product.
- Once the per se prerequisites are satisfied, detailed proof of actual market effects or asserted business reasons does not require a full rule-of-reason inquiry.
- Contractual provisions that operate to channel business to the seller and foreclose rivals can violate § 1 even if rates are matched to competitors and even if enforcement is claimed to be flexible.

## Conclusion

The Court treated Northern Pacific’s land-sale and lease routing clauses as per se unlawful tying because the railroad used its land interests to secure preferential transportation commitments, had sufficient economic power in the land to constrain competition among carriers, and the clauses affected a not insubstantial volume of interstate commerce, warranting injunctive relief on an undisputed record.


N. Pac. Ry. Co. v. United States, 356 U.S. 1 (1958)