## Facts

- Discon, Inc. provided “removal services” (removal of obsolete telephone equipment) sold through Materiel Enterprises Company (MEC), a subsidiary of NYNEX Corp., for use by New York Telephone Co. (NYT), another NYNEX subsidiary.
- MEC stopped buying removal services from Discon and began buying from AT&T Technologies instead.
- Discon alleged MEC knowingly paid AT&T more than Discon would have charged because NYT could pass the higher costs through to consumers via regulator-approved telephone service rates.
- Discon alleged AT&T paid MEC a year-end rebate, which MEC shared with NYNEX, and that MEC refused to deal with Discon because Discon would not participate in the rebate-based scheme.
- Discon alleged it went out of business as a result of the refusal to purchase.
- The asserted consumer harm stemmed from higher regulated rates, while the alleged competitive harm in the removal-services market involved a single buyer shifting purchases from one supplier to another.

## Issues

1. Whether allegations that a single buyer stopped purchasing from one supplier and purchased from another, in connection with regulatory fraud, state a per se unlawful “group boycott” under § 1 of the Sherman Act.
2. Whether, if per se treatment is unavailable, the case should proceed under § 1 rule-of-reason analysis and/or a § 2 conspiracy-to-monopolize theory.

## Decision

- The Supreme Court unanimously held that the per se group-boycott rule does not apply to a single buyer’s decision to buy from one seller rather than another.
- The Court explained that per se boycott treatment is limited to horizontal agreements among direct competitors, not vertical purchasing arrangements that deprive a supplier of a customer.
- The Court vacated the judgment sustaining the antitrust claims on a per se boycott theory and remanded for further proceedings under the proper standards.

## Legal Principles

- Per se illegality for “group boycotts” is confined to cases involving horizontal agreements among competitors to exclude a target; it does not extend to a vertical arrangement reflecting a buyer’s selection of one supplier over another.
- A vertical refusal to deal that merely deprives a supplier of a customer is not, without more, a per se § 1 boycott.
- Consumer injury caused by deception of a regulator and pass-through of inflated costs through regulated rates is not automatically equivalent to harm to competition in the upstream market for the purchased input.
- Absent per se treatment, § 1 liability generally requires proof of anticompetitive effects in a properly defined relevant market under rule-of-reason analysis; § 2 conspiracy-to-monopolize requires, among other elements, a dangerous probability of achieving monopoly power in the relevant market.

## Conclusion

The Court rejected per se condemnation of a single buyer’s vertical decision to switch suppliers, holding that the per se group-boycott doctrine is limited to horizontal competitor agreements, and remanded for consideration of any remaining antitrust theories under the appropriate analytical framework.


NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998)