495 U.S. 328 (1990)

ATLANTIC RICHFIELD CO.
v.
USA PETROLEUM CO.

No. 88-1668.

Supreme Court of United States.

Argued December 5, 1989 Decided May 14, 1990 CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

*330 Ronald C. Redcay argued the cause for petitioner. With him on the briefs were Matthew T. Heartney, Otis Pratt Pearsall, Philip H. Curtis, Francis X. McCormack, Donald A. Bright, and Edward E. Clark.

John G. Roberts, Jr., argued the cause for the United States et al. as amici curiae urging reversal. With him on the brief were Solicitor General Starr, Acting Assistant Attorney General Boudin, Deputy Solicitor General Shapiro, Michael R. Dreeben, Catherine G. O'Sullivan, and Kevin J. Arquit.

Maxwell M. Blecher argued the cause for respondent. With him on the brief were Alicia G. Rosenberg and Lawrence A. Sullivan.^[*]

*331 JUSTICE BRENNAN delivered the opinion of the Court.

This case presents the question whether a firm incurs an "injury" within the meaning of the antitrust laws when it loses sales to a competitor charging nonpredatory prices pursuant to a vertical, maximum-price-fixing scheme. We hold that such a firm does not suffer an "antitrust injury" and that it therefore cannot bring suit under § 4 of the Clayton Act, 38 Stat. 731, as amended, 15 U. S. C. § 15.^[1]

I

Respondent USA Petroleum Company (USA) sued petitioner Atlantic Richfield Company (ARCO) in the United States District Court for the Central District of California, alleging the existence of a vertical, maximum-price-fixing agreement prohibited by § 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U. S. C. § 1, an attempt to monopolize the local retail gasoline sales market in violation of § 2 of the Sherman Act, 15 U. S. C. § 2, and other misconduct not relevant here. Petitioner ARCO is an integrated oil company that, inter alia, markets gasoline in the Western United States. It sells gasoline to consumers both directly through its own stations and indirectly through ARCO-brand dealers. Respondent USA is an independent retail marketer of gasoline which, like other independents, buys gasoline from major petroleum companies for resale under its own brand name. Respondent competes directly with ARCO dealers at the retail level. Respondent's outlets typically are low-overhead, high-volume "discount" stations that charge less than stations selling equivalent quality gasoline under major brand names.

In early 1982, petitioner ARCO adopted a new marketing strategy in order to compete more effectively with discount *332 independents such as respondent.^[2] Petitioner encouraged its dealers to match the retail gasoline prices offered by independents in various ways; petitioner made available to its dealers and distributors such short-term discounts as "temporary competitive allowances" and "temporary volume allowances," and it reduced its dealers' costs by, for example, eliminating credit card sales. ARCO's strategy increased its sales and market share.

In its amended complaint, respondent USA charged that ARCO engaged in "direct head-to-head competition with discounters" and "drastically lowered its prices and in other ways sought to appeal to price-conscious consumers." First Amended Complaint ¶ 19, App. 15. Respondent asserted that petitioner conspired with retail service stations selling ARCO brand gasoline to fix prices at below-market levels: "Arco and its co-conspirators have organized a resale price maintenance scheme, as a direct result of which competition that would otherwise exist among Arco-branded dealers has been eliminated by agreement, and the retail price of Arcobranded gasoline has been fixed, stabilized and maintained at artificially low and uncompetitive levels." ¶ 27, App. 17. Respondent alleged that petitioner "has solicited its dealers and distributors to participate or acquiesce in the conspiracy and has used threats, intimidation and coercion to secure compliance with its terms." ¶ 37, App. 19. According to respondent, this conspiracy drove many independent gasoline dealers in California out of business. ¶ 39, App. 20. Count one of the amended complaint charged that petitioner's vertical, maximum-price-fixing scheme constituted an agreement in restraint of trade and thus violated § 1 of the Sherman Act. Count two, later withdrawn with prejudice by respondent, *333 asserted that petitioner had engaged in an attempt to monopolize the retail gasoline market through predatory pricing in violation of § 2 of the Sherman Act.^[3]

The District Court granted summary judgment for ARCO on the § 1 claim. The court stated that "[e]ven assuming that [respondent USA] can establish a vertical conspiracy to maintain low prices, [respondent] cannot satisfy the `antitrust injury' requirement of Clayton Act § 4, without showing such prices to be predatory." App. to Pet. for Cert. 3b. The court then concluded that respondent could make no such showing of predatory pricing because, given petitioner's market share and the ease of entry into the market, petitioner was in no position to exercise market power.

A divided panel of the Court of Appeals for the Ninth Circuit reversed. 859 F. 2d 687 (1988). Acknowledging that its decision was in conflict with the approach of the Court of Appeals for the Seventh Circuit in several recent cases,^[4] see id., at 697, n. 15, the Ninth Circuit nonetheless held that injuries resulting from vertical, nonpredatory, maximum-price-fixing agreements could constitute "antitrust injury" for purposes of a private suit under § 4 of the Clayton Act. The court reasoned that any form of price fixing contravenes Congress' intent that "market forces alone determine what goods and services are offered, at what price these goods and services *334 are sold, and whether particular sellers succeed or fail." Id., at 693. The court believed that the key inquiry in determining whether respondent suffered an "antitrust injury" was whether its losses "resulted from a disruption . . . in the. . . market caused by the . . . antitrust violation." Ibid. The court concluded that "[i]n the present case, the inquiry seems straightforward: USA's claimed injuries were the direct result, and indeed, under the allegations we accept as true, the intended objective, of ARCO's price-fixing scheme. According to USA, the purpose of ARCO's price-fixing is to disrupt the market of retail gasoline sales, and that disruption is the source of USA's injuries." Ibid.

We granted certiorari, 490 U. S. 1097 (1989).

II

A private plaintiff may not recover damages under § 4 of the Clayton Act merely by showing "injury causally linked to an illegal presence in the market." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U. S. 477, 489 (1977). Instead, a plaintiff must prove the existence of "antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Ibid. (emphasis in original). In Cargill, Inc. v. Monfort of Colorado, Inc., 479 U. S. 104 (1986), we reaffirmed that injury, although causally related to an antitrust violation, nevertheless will not qualify as "antitrust injury" unless it is attributable to an anticompetitive aspect of the practice under scrutiny, "since `[i]t is inimical to [the antitrust] laws to award damages' for losses stemming from continued competition." Id., at 109-110 (quoting Brunswick, supra, at 488). See also Associated General Contractors of California, Inc. v. Carpenters, 459 U. S. 519, 539-540 (1983); Blue Shield of Virginia v. McCready, 457 U. S. 465, 483, and n. 19 (1982); J. Truett Payne Co. v. Chrysler Motors Corp., 451 U. S. 557, 562 (1981).

*335 Respondent argues that, as a competitor, it can show antitrust injury from a vertical conspiracy to fix maximum prices that is unlawful under § 1 of the Sherman Act, even if the prices were set above predatory levels. In addition, respondent maintains that any loss flowing from a per se violation of § 1 automatically satisfies the antitrust injury requirement. We reject both contentions and hold that respondent has failed to meet the antitrust injury test in this case. We therefore reverse the judgment of the Court of Appeals.

A

In Albrecht v. Herald Co., 390 U. S. 145 (1968), we found that a vertical, maximum-price-fixing scheme was unlawful per se under § 1 of the Sherman Act because it threatened to inhibit vigorous competition by the dealers bound by it and because it threatened to become a minimum-price-fixing scheme.^[5] That case concerned a newspaper distributor who sought to charge his customers more than the suggested retail price advertised by the publisher. After the publisher attempted to discipline the distributor by hiring another carrier to take away some of the distributor's customer, the distributor brought suit under § 1. The Court found that "the combination formed by the [publisher] in this case to force [the distributor] to maintain a specified price for the resale of newspapers which he had purchased from [the publisher] constituted, without more, an illegal restraint of trade under § 1 of the Sherman Act." Id., at 153.

In holding such a maximum-price vertical agreement illegal, we analyzed the manner in which it might restrain competition by dealers. First, we noted that such a scheme, "by substituting the perhaps erroneous judgment of a seller for the forces of the competitive market, may severely intrude upon the ability of buyers to compete and survive in that market." Id., at 152. We further explained that "[m]aximum *336 prices may be fixed too low for the dealer to furnish services essential to the value which goods have for the consumer or to furnish services and conveniences which consumers desire and for which they are willing to pay." Id., at 152-153. By limiting the ability of small dealers to engage in nonprice competition, a maximum-price-fixing agreement might "channel distribution through a few large or specifically advantaged dealers." Id., at 153. Finally, we observed that "if the actual price charged under a maximum price scheme is nearly always the fixed maximum price, which is increasingly likely as the maximum price approaches the actual cost of the dealer, the scheme tends to acquire all the attributes of an arrangement fixing minimum prices." Ibid.

Respondent alleges that it has suffered losses as a result of competition with firms following a vertical, maximum-price-fixing agreement. But in Albrecht we held such an agreement per se unlawful because of its potential effects on dealers and consumers, not because of its effect on competitors. Respondent's asserted injury as a competitor does not resemble any of the potential dangers described in Albrecht.^[6] For example, if a vertical agreement fixes "[m]aximum prices . . . too low for the dealer to furnish services" desired by consumers, or in such a way as to channel business to large distributors, id., at 152-153, then a firm dealing in a competing brand would not be harmed. Respondent was benefited rather than harmed if petitioner's pricing policies restricted ARCO *337 sales to a few large dealers or prevented petitioner's dealers from offering services desired by consumers such as credit card sales. Even if the maximum-price agreement ultimately had acquired all of the attributes of a minimum-price-fixing scheme, respondent still would not have suffered antitrust injury because higher ARCO prices would have worked to USA's advantage. A competitor "may not complain of conspiracies that . . . set minimum prices at any level." Matsushita Electric Industrial Corp. v. Zenith Radio Corp., 475 U. S. 574, 585, n. 8 (1986); see also id., at 582-583 ("[R]espondents [cannot] recover damages for any conspiracy by petitioners to charge higher than competitive prices in the. . . market. Such conduct would indeed violate the Sherman Act, but it could not injure respondents: as petitioners' competitors, respondents stand to gain from any conspiracy to raise the market price . . ."). Indeed, the gravamen of respondent's complaint — that the price-fixing scheme between petitioner and its dealers enabled those dealers to increase their sales — amounts to an assertion that the dangers with which we were concerned in Albrecht have not materialized in the instant case. In sum, respondent has not suffered "antitrust injury," since its losses do not flow from the aspects of vertical, maximum price fixing that render it illegal.

Respondent argues that even if it was not harmed by any of the anticompetitive effects identified in Albrecht, it nonetheless suffered antitrust injury because of the low prices produced by the vertical restraint. We disagree. When a firm, or even a group of firms adhering to a vertical agreement, lowers prices but maintains them above predatory levels, the business lost by rivals cannot be viewed as an "anticompetitive" consequence of the claimed violation.^[7] A firm *338 complaining about the harm it suffers from nonpredatory price competition "is really claiming that it [is] unable to raise prices." Blair & Harrison, Rethinking Antitrust Injury, 42 Vand. L. Rev. 1539, 1554 (1989). This is not antitrust injury; indeed, "cutting prices in order to increase business often is the very essence of competition." Matsushita, supra, at 594. The antitrust laws were enacted for "the protection of competition, not competitors." Brown Shoe Co. v. United States, 370 U. S. 294, 320 (1962) (emphasis in original). "To hold that the antitrust laws protect competitors from the loss of profits due to [nonpredatory] price competition would, in effect, render illegal any decision by a firm to cut prices in order to increase market share." Cargill, 479 U. S., at 116.

Respondent further argues that it is inappropriate to require a showing of predatory pricing before antitrust injury can be established when the asserted antitrust violation is an agreement in restraint of trade illegal under § 1 of the Sherman Act, rather than an attempt to monopolize prohibited by § 2. Respondent notes that the two sections of the Act are quite different. Price fixing violates § 1, for example, even if a single firm's decision to price at the same level would not create § 2 liability. See generally Copperweld Corp. v. Independence Tube Corp., 467 U. S. 752, 767-769 (1984). In a § 1 case, the price agreement itself is illegal, and respondent contends that all losses flowing from such an agreement must by definition constitute "antitrust injuries." Respondent observes that § 1 in general and the per se rule in particular are grounded " `on faith in price competition as a market force *339 [and not] on a policy of low selling prices at the price of eliminating competition.' " Arizona v. Maricopa County Medical Society, 457 U. S. 332, 348 (1982) (quoting Rahl, Price Competition and the Price Fixing Rule — Preface and Perspective, 57 Nw. U. L. Rev. 137, 142 (1962)). In sum, respondent maintains that it has suffered antitrust injury even if petitioner's pricing was not predatory under § 2 of the Sherman Act.

We reject respondent's argument. Although a vertical, maximum-price-fixing agreement is unlawful under § 1 of the Sherman Act, it does not cause a competitor antitrust injury unless it results in predatory pricing.^[8] Antitrust injury does not arise for purposes of § 4 of the Clayton Act, see n. 1, supra, until a private party is adversely affected by an anticompetitive aspect of the defendant's conduct, see Brunswick, 429 U. S., at 487; in the context of pricing practices, only predatory pricing has the requisite anticompetitive effect.^[9] See Areeda & Turner, Predatory Pricing and Related *340 Practices Under Section 2 of the Sherman Act, 88 Harv. L. Rev. 697, 697-699 (1975); McGee, Predatory Pricing Revisited, 23 J. Law & Econ. 289, 292-294 (1980). Low prices benefit consumers regardless of how those prices are set, and so long as they are above predatory levels, they do not threaten competition. Hence, they cannot give rise to antitrust injury.

We have adhered to this principle regardless of the type of antitrust claim involved. In Cargill, Inc. v. Monfort of Colorado, Inc., for example, we found that a plaintiff competitor had not shown antitrust injury and thus could not challenge a merger that was assumed to be illegal under § 7 of the Clayton Act, even though the merged company threatened to engage in vigorous price competition that would reduce the plaintiff's profits. We observed that nonpredatory price competition for increased market share, as reflected by prices that are below "market price" or even below the costs of a firm's rivals, "is not activity forbidden by the antitrust laws." 479 U. S., at 116. Because the prices charged were not predatory, we found no antitrust injury. Similarly, we determined that antitrust injury was absent in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., supra, even though the plaintiffs alleged that an illegal acquisition threatened to bring a " `deep pocket' parent into a market of `pygmies,' " id., at 487, a scenario that would cause the plaintiffs economic harm. We opined nevertheless that "if [the plaintiffs] were injured, it was not `by reason of anything forbidden in the antitrust laws': while [the plaintiffs'] loss occurred `by reason of' the unlawful acquisitions, it did not occur `by reason of' that which made the acquisitions unlawful." Id., at 488. To be sure, the source of the price competition in the instant case was an agreement allegedly unlawful under § 1 of the Sherman Act rather than a merger in violation of § 7 of the Clayton Act. But that difference is not salient. When prices are not predatory, any losses flowing from them cannot be said to stem from an anticompetitive aspect of the defendant's *341 conduct.<sup>[10]</sup> " `It is in the interest of competition to permit dominant firms to engage in vigorous competition, including price competition.' " Cargill, 479 U. S., at 116 (quoting Arthur S. Langenderfer, Inc. v. S. E. Johnson Co., 729 F. 2d 1050, 1057 (CA6), cert. denied, 469 U. S. 1036 (1984)).^[11]

B

We also reject respondent's suggestion that no antitrust injury need be shown where a per se violation is involved. The *342 per se rule is a method of determining whether § 1 of the Sherman Act has been violated, but it does not indicate whether a private plaintiff has suffered antitrust injury and thus whether he may recover damages under § 4 of the Clayton Act. Per se and rule-of-reason analysis are but two methods of determining whether a restraint is "unreasonable," i. e., whether its anticompetitive effects outweigh its procompetitive effects.^[12] The per se rule is a presumption of unreasonableness based on "business certainty and litigation efficiency." Arizona v. Maricopa County Medical Society, 457 U. S., at 344. It represents a "longstanding judgment that the prohibited practices by their nature have `a substantial potential for impact on competition.' " FTC v. Superior Court Trial Lawyers Assn., 493 U. S. 411, 433 (1990) (quoting Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U. S. 2, 16 (1984)). "Once experience with a particular kind of restraint enables the Court to predict with confidence that the rule of reason will condemn it, it has applied a conclusive presumption that the restraint is unreasonable." Maricopa County Medical Society, supra, at 344.

The purpose of the antitrust injury requirement is different. It ensures that the harm claimed by the plaintiff corresponds to the rationale for finding a violation of the antitrust laws in the first place, and it prevents losses that stem from competition from supporting suits by private plaintiffs for either damages or equitable relief. Actions per se unlawful under the antitrust laws may nonetheless have some procompetitive effects, and private parties might suffer losses *343 therefrom.^[13] See Maricopa County Medical Society, supra, at 351; Continental T. V., Inc. v. GTE Sylvania Inc., 433 U. S. 36, 50, n. 16 (1977). Conduct in violation of the antitrust *344 laws may have three effects, often interwoven: In some respects the conduct may reduce competition, in other respects it may increase competition, and in still other respects effects may be neutral as to competition. The antitrust injury requirement ensures that a plaintiff can recover only if the loss stems from a competition-reducing aspect or effect of the defendant's behavior. The need for this showing is at least as great under the per se rule as under the rule of reason. Indeed, insofar as the per se rule permits the prohibition of efficient practices in the name of simplicity, the need for the antitrust injury requirement is underscored. "[P]rocompetitive or efficiency-enhancing aspects of practices that nominally violate the antitrust laws may cause serious harm to individuals, but this kind of harm is the essence of competition and should play no role in the definition of antitrust damages." Page, The Scope of Liability for Antitrust Violations, 37 Stan. L. Rev. 1445, 1460 (1985). Thus, "proof of a per se violation and of antitrust injury are distinct matters that must be shown independently." P. Areeda & H. Hovenkamp, Antitrust Law ¶ 334.2c, p. 330 (1989 Supp.).

For this reason, we have previously recognized that even in cases involving per se violations, the right of action under § 4 of the Clayton Act is available only to those private plaintiffs who have suffered antitrust injury. For example, in a case involving horizontal price fixing, "perhaps the paradigm of an unreasonable restraint of trade," National Collegiate Athletic Assn. v. Board of Regents of University of Oklahoma, 468 U. S. 85, 100 (1984), we observed that the plaintiffs were still required to "show that the conspiracy caused them an injury for which the antitrust laws provide relief." Matsushita, 475 U. S., at 584, n. 7 (citing Brunswick) (emphasis added). Similarly, in Associated General Contractors of California, Inc. v. Carpenters, 459 U. S. 519 (1983), we noted that a restraint of trade was illegal per se in the sense that it could "be condemned even without proof of its actual market effect," but we maintained that even if it "may have *345 been unlawful, it does not, of course, necessarily follow that still another party . . . is a person injured by reason of a violation of the antitrust laws within the meaning of § 4 of the Clayton Act." Id., at 528-529.

C

We decline to dilute the antitrust injury requirement here because we find that there is no need to encourage private enforcement by competitors of the rule against vertical, maximum price fixing. If such a scheme causes the anticompetitive consequences detailed in Albrecht, consumers and the manufacturers' own dealers may bring suit. The "existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement diminishes the justification for allowing a more remote party . . . to perform the office of a private attorney general." Associated General Contractors, supra, at 542.

Respondent's injury, moreover, is not "inextricably intertwined" with the antitrust injury that a dealer would suffer, McCready, 457 U. S., at 484, and thus does not militate in favor of permitting respondent to sue on behalf of petitioner's dealers. A competitor is not injured by the anticompetitive effects of vertical, maximum price-fixing, see supra, at 336-337, and does not have any incentive to vindicate the legitimate interests of a rival's dealer. See Easterbrook, The Limits of Antitrust, 63 Texas L. Rev. 1, 33-39 (1984). A competitor will not bring suit to protect the dealer against a maximum price that is set too low, inasmuch as the competitor would benefit from such a situation. Instead, a competitor will be motivated to bring suit only when the vertical restraint promotes interbrand competition between the competitor and the dealer subject to the restraint. See n. 13, supra. In short, a competitor will be injured and hence motivated to sue only when a vertical, maximum-price-fixing arrangement has a procompetitive impact on the market. Therefore, providing *346A the competitor a cause of action would not protect the rights of dealers and consumers under the antitrust laws.

III

Respondent has failed to demonstrate that it has suffered any antitrust injury. The allegation of a per se violation does not obviate the need to satisfy this test. The judgment of the Court of Appeals is reversed, and the case is remanded for proceedings consistent with this opinion.

It is so ordered.

*346B JUSTICE STEVENS, with whom JUSTICE WHITE joins, dissenting.

The Court today purportedly defines only the contours of antitrust injury that can result from a vertical, nonpredatory, maximum-price-fixing scheme. But much, if not all, of its reasoning about what constitutes injury actionable by a competitor would apply even if the alleged conspiracy had been joined by other major oil companies doing business in California, as well as their retail outlets.^[1] The Court undermines the enforceability of a substantive price-fixing violation with a flawed construction of § 4, erroneously assuming that the level of a price fixed by a § 1 conspiracy is relevant to legality and that all vertical arrangements conform to a single model.

I

Because so much of the Court's analysis turns on its characterization of USA's cause of action, it is appropriate to *347 begin with a more complete description of USA's theory. As the case comes to us on review of summary judgment, we assume the truth of USA's allegation that ARCO conspired with its retail dealers to fix the price of gas at specific ARCO stations that compete directly with USA stations. It is conceded that this price-fixing conspiracy is a per se violation of § 1 of the Sherman Act.

USA's theory can be expressed in the following hypothetical example: In a free market ARCO's advertised gas might command a price of $1 per gallon while USA's unadvertised gas might sell for a penny less, with retailers of both brands making an adequate profit. If, however, the ARCO stations reduce their price by a penny or two, they might divert enough business from USA stations to force them gradually to withdraw from the market.^[2] The fixed price would be lower than the price that would obtain in a free market, but not so low as to be "predatory" in the sense that a single actor could not lawfully charge it under 15 U. S. C. § 2 or § 13a.^[3]

This theory rests on the premise that the resources of the conspirators, combined and coordinated, are sufficient to sustain below-normal profits in selected localities long enough to force USA to shift its capital to markets where it can receive a normal return on its investment.^[4] Thus, during the initial *348 period of competitive struggle between the conspirators and the independents, consumers will presumably benefit from artificially low prices. If the alleged campaign is successful, however — and as the case comes to us we must assume it will be — in the long run there will be less competition, or potential competition, from independents such as USA, and the character of the market will be different than if the conspiracy had never taken place. USA alleges that, in fact, the independent market already has suffered significant losses.^[5]

II

ARCO's alleged conspiracy is a naked price restraint in violation of § 1 of the Sherman Act, 15 U. S. C. § 1.^[6] It is undisputed that ARCO's price-fixing arrangement, as alleged, *349 is illegal per se under the rule against maximum price fixing, which is "'grounded on faith in price competition as a market force [and not] on a policy of low selling prices at the price of eliminating competition.' Rahl, Price Competition and the Price Fixing Rule — Preface and Perspective, 57 Nw. U. L. Rev. 137, 142 (1962)." Arizona v. Maricopa County Medical Society, 457 U. S. 332, 348 (1982). At issue is only whether a maximum price, administered on a host of retail stations that are ostensibly competing with one another as well as with other retailers, may be challenged by the competitor targeted by the pricing scheme.

Section 4 of the Clayton Act allows private enforcement of the antitrust laws by "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws." 15 U. S. C. § 15. See Simpson v. Union Oil Co. of California, 377 U. S. 13, 16 (1964) (quoting Radovich v. National Football League, 352 U. S. 445, 454 (1957) (laws allowing private enforcement of the antitrust laws by an aggrieved party "'protect the victims of the forbidden practices as well as the public' "). In order to invoke § 4, a plaintiff must prove that it suffered an injury that (1) is "of the type the antitrust laws were intended to prevent" and (2) "flows from that which makes defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U. S. 477, 489 (1977). In Brunswick, the plaintiff businesses claimed that they were deprived of the benefits of the increased concentration that would have resulted had failing businesses not been acquired by petitioner, allegedly in violation of § 7. In concluding that the plaintiffs had failed to prove "antitrust injury," we found that neither condition of § 4 standing was satisfied: First, the plaintiffs sought to recover damages because the mergers had preserved businesses and competition, which is not the type of injury that the antitrust laws are designed to prevent; and second, the plaintiffs had not been harmed by any potential change in the market structure *350 effected by the entry of the " `deep pocket' parent." Id., at 487-488.

In this case, however, both conditions of standing are met. First, § 1 is intended to forbid price-fixing conspiracies that are designed to drive competitors out of the market. See Klor's Inc. v. Broadway-Hale Stores, Inc., 359 U. S. 207, 213 (1959) (illegal coordination "is not to be tolerated merely because the victim is just one merchant whose business is so small that his destruction makes little difference to the economy"). USA alleges that ARCO's pricing scheme aims at forcing independent refiners and marketers out of business and has created "an immediate and growing probability that the independent segment of the industry will be destroyed altogether."^[7]

In Brunswick, we recognized that requiring a competitor to show that its loss is "of the type" antitrust laws were intended to prevent

"does not necessarily mean . . . that § 4 plaintiffs must prove an actual lessening of competition in order to recover. The short-term effect of certain anticompetitive behavior — predatory below-cost pricing, for example — may be to stimulate price competition. But competitors may be able to prove antitrust injury before they actually *351 are driven from the market and competition is thereby lessened." 429 U. S., at 489, n. 14.

The pricing behavior in the Court's hypothetical example may cause actionable injury because it is "predatory." This is so because the Court assumes that a predatory price is illegal. The direct relationship between the illegality and the harm is what makes the competitor's short-term loss "antitrust injury." The fact that the illegality in the case before us today stems from the illegal conspiracy, rather than the predatory character of the price, does not change the analysis of "that which makes defendants' acts unlawful."^[8] Thus, notwithstanding any temporary benefit to consumers, the unlawful pricing practice that is harmful in the long run to competition causes "antitrust injury" for which a competitor may seek damages.^[9]

*352 Second, USA is directly and immediately harmed by this price-fixing scheme, that is to say, by "that which makes defendants' acts unlawful." Id., at 489. In Brunswick, the allegedly illegal conduct at issue — the merger — itself did not harm the plaintiffs; similarly, in Cargill, Inc. v. Monfort of Colorado, Inc., 479 U. S. 104 (1986), the alleged injury arose not from the illegality of the proposed merger, but merely from possible postmerger behavior. Although the link between the illegal mergers and the alleged harms was insufficient to prove antitrust injury in either Brunswick or Cargill, both of those cases recognize that illegal pricing practices may cause competitors "antitrust injury."^[10]

The Court accepts that, as alleged, the vertical price-fixing scheme by ARCO is per se illegal under § 1. Nevertheless, it denies USA standing to challenge the arrangement because it is neither a consumer nor a dealer in the vertical arrangement, but only a competitor of ARCO: The "antitrust laws were enacted for `the protection of competition, not competitors.' " Ante, at 338 (quoting Brown Shoe Co. v. United States, 370 U. S. 294, 320 (1962)). This proposition — which is often used as a test of whether a violation of law occurred — cannot be read to deny all remedial actions by competitors. *353 When competitors are injured by illicit agreements among their rivals rather than by the free play of market forces, the antitrust laws protect competitors precisely for the purpose of protecting competition. The Court nevertheless interprets the proposition as categorically excluding actions by a competitor who suffers when others charge "nonpredatory prices pursuant to a vertical, maximum-price-fixing scheme." Ante, at 331. In the context of a § 1 violation, however, the distinctions both of the price level and of the vertical nature of the conspiracy are unfounded. Each of these two analytical errors merits discussion.

III

The Court limits its holding to cases in which the noncompetitive price is not "predatory," ante, at 331, 333, n. 3, 335, 339, 340, essentially assuming that any nonpredatory price set by an illegal conspiracy is lawful, see n. 1, supra. This is quite wrong. Unlike the prohibitions against monopolizing or underselling in violation of § 2 or § 13a, the gravamen of the price-fixing conspiracy condemned by § 1 is unrelated to the level of the administered price at any particular point in time. A price fixed by a single seller acting independently may be unlawful because it is predatory, but the reasonableness of the price set by an illegal conspiracy is wholly irrelevant to whether the conspirators' work product is illegal.

If any proposition is firmly settled in the law of antitrust, it is the rule that the reasonableness of the particular price agreed upon by defendants does not constitute a defense to a price-fixing charge.^[11] In United States v. Trenton Potteries *354 Co., 273 U. S. 392 (1927), the Court explained that "[t]he reasonable price fixed today may through economic and business changes become the unreasonable price of tomorrow," id., at 397, and cautioned that

"in the absence of express legislation requiring it, we should hesitate to adopt a construction making the difference between legal and illegal conduct in the field of business relations depend upon so uncertain a test as whether prices are reasonable — a determination which can be satisfactorily made only after a complete survey of our economic organization and a choice between rival philosophies." Id., at 398.

See also United States v. Masonite Corp., 316 U. S. 265, 281-282 (1942). This reasoning applies with equal force to a rule that provides conspirators with a defense if their agreed upon prices are nonpredatory, but no defense if their prices fall below the elusive line that defines predatory pricing.^[12] By assuming that the level of a price is relevant to the inquiry in a § 1 conspiracy case, the Court sets sail on the "sea of doubt" that Judge Taft condemned in his classic opinion in the Addyston Pipe & Steel case:

"It is true that there are some cases in which the courts, mistaking, as we conceive, the proper limits of the relaxation of the rules for determining the unreasonableness of restraints of trade, have set sail on a sea of *355 doubt, and have assumed the power to say, in respect to contracts which have no other purpose and no other consideration on either side than the mutual restraint of the parties, how much restraint of competition is in the public interest, and how much is not." United Sta