Territorial Restrictions and Per Se Rules–A Re-evaluation of the Schwinn and Sealy Doctrines

Horizontal territorial restrictions have traditionally been said to be per se illegal. That is, they are illegal no matter what effect they may have on competition. The legality of vertical territorial restrictions, however, is still an unsettled issue. The past decade saw a trend toward considering such restrictions per se violations of section I of the Sherman Act. That trend culminated in United States v. Arnold, Schwinn & Co., a case better known for its speculation than its reasoning. The Supreme Court, which ostensibly announced the per se illegality of these restrictions in Schwinn, will have an opportunity this term to refine or perhaps revise its views on this matter. The impetus for this review is supplied by United States v. Topco Associates, Inc., a case in which the United States District Court for the Northern District of Illinois refused to accept a per se rule when considering the legality of territorial restrictions. It is the thesis of this Note that the Court should reverse its decision in Schwinn, and at the same time reconsider its blanket prohibition of horizontal territorial restrictions. As Topco illustrates, the judicial declaration that horizontal territorial restrictions are “naked restraints on trade” may only mislead the courts in their effort to apply the antitrust laws to particular cases.