In this antitrust case, the Supreme Court ruled that the per se group boycott rule set forth in Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 212 (1959), does not apply to a buyer’s decision to buy from one seller rather than another, when that decision cannot be justified in terms of ordinary competitive objectives. Discon, a supplier of equipment removal services for telephone companies, alleged that a purchaser and a competing supplier conspired to drive it out of business and to defraud both state regulators and local telephone service customers. The Second Circuit held that respondent’s allegations stated claims for violations both of Section 1 of the Sherman Act (for an unlawful group boycott) and Section 2 of the Sherman Act (for conspiracy to monopolize). The Second Circuit did not, however, decide whether the group boycott allegations would constitute per se violations or should be judged under the rule of reason.
The Supreme Court unanimously held that a per se rule of illegality does not apply to an agreement by a buyer to purchase goods and services from one supplier rather than another when, as here, there is no "horizontal" anti-competitive agreement among competitors. Rather, a plaintiff in these circumstances must allege and prove harm "not just to a single competitor, but to the competitive process, i.e., to competition itself;" otherwise, buyers would be discouraged from switching suppliers, a freedom that is "close to the heart of the competitive process."