Arleen Freeman case

ARLEEN FREEMAN, et al. v. SAN DIEGO ASSOCIATION OF REALTORS, et
al.

Filed 12/27/99

CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

D030553

(Super. Ct. No. 709764)

APPEAL from a judgment of the Superior Court of San Diego County, Arthur W. Jones,
Judge. Affirmed.
Barry & Associates and David Barry for Plaintiffs and Appellants.
Luce, Forward, Hamilton & Scripps, Charles A. Bird, Christopher J. Healey, John T.
Brooks, White and Bright, David S. Bright, Michael A. Friedrichs, Musick, Peeler &
Garrett, William McD. Miller, III, Michael J. Hickman and Jon F. McKinley for Defendants
and Respondents.

Defendant Sandicor, Inc. (Sandicor) operates a real estate sales multiple listing service
(MLS) covering San Diego County. Real estate agents pay a monthly fee to access
Sandicor's MLS listings. Plaintiff real estate agent Arleen Freeman filed this action, alleging
that defendants Sandicor, San Diego Association of Realtors (SDAR) and several other real
estate associations and individuals (collectively defendants) violated California's antitrust
laws by charging excessive fees for access to Sandicor's MLS (the "price-fixing," "tying" and
"market exclusion" claims) and refusing Freeman's request to become a service center for
Sandicor (the "group boycott" claim). Freeman's lawsuit also asserted the excessive charges
for MLS access violated an extant permanent injunction and entitled Freeman to damages.
The trial court sustained defendants' demurrers to Freeman's third amended complaint and
dismissed the action. Freeman timely filed a notice of appeal.
We evaluate whether the facts alleged by Freeman state causes of action against
defendants.
I
FACTUAL BACKGROUND
A. The MLS
The MLS is a computerized medium by which real estate agents exchange information on
properties that are for sale or have been recently sold. Real estate agents who have listings
to sell properties may submit information to the MLS to advertise the properties for sale, and
real estate agents seeking properties for buyers can use the MLS to search for properties that
meet the buyer's criteria for location, size, price and other characteristics.
B. Palsson, NAR I and NAR II
Because Freeman's claims are based in substantial part on prior legal decisions that
concluded certain MLS practices violated antitrust laws, we summarize those decisions.
In Marin County Bd. of Realtors, Inc. v. Palsson (1976) 16 Cal.3d 920 (hereafter
Palsson) a realtors' association operated the only MLS for Marin County. The association
permitted only members of the association to use the MLS and denied membership to
persons who were only part-time real estate agents. Palsson concluded that denial of MLS
access to nonmembers constituted a restraint of trade, and that the restrictions on access and
membership did not pass the "rule of reason" test. (Id. at pp. 934-940.) Palsson ordered
that the "rules denying access of nonmembers to the [MLS] must be eliminated, although
nonmembers may be charged a reasonable fee for use of the service consistent with the
per-capita costs of operation." (Id. at p. 940.)
In People v. National Association of Realtors (1981) 120 Cal.App.3d 459 (hereafter
NAR I) this court concluded that certain policies of SDAR violated California's antitrust
laws. NAR I held: (1) SDAR's rule that limited access to its residential MLS to SDAR
members was an unlawful "group boycott" (id. at pp. 467-468); (2) SDAR's rule permitting
only "exclusive right to sell" listings on the MLS was an unlawful restraint on trade (id. at pp.
477-479); and (3) certain SDAR policies and practices facilitated price fixing of brokers'
commissions (id. at pp. 479-487). NAR I remanded the case to the trial court with
directions to issue an injunction "as generally contained in [paragraph 1(a) of] the prayer of
the second amended complaint . . . ." (Id. at p. 488.)
In NAR I the court also opined that SDAR's rule limiting access to its investment property
MLS to SDAR members could constitute an unlawful tying arrangement and on remand
directed the trial court to make a factual determination whether SDAR held sufficient
economic power over the "tying product" (the investment property MLS) to restrain trade in
the tied product (association membership). (Id. at pp. 469-473.) On remand, the trial court
found no unlawful tying arrangement. However, in the subsequent appeal this court in NAR
II concluded that conditioning access to the investment property MLS on membership in
SDAR was an unlawful tying arrangement. In NAR II we ordered that the injunction be
modified to permit access to the investment property MLS on the same terms as access to
the residential MLS. (155 Cal.App.3d at p. 589.)
On remand of NAR II, the trial court issued its 1984 injunction ordering that access to
SDAR's residential MLS and investment property MLS be available on a "equal footing" to
all licensed real estate agents without regard to SDAR membership. The injunction permitted
SDAR to impose reasonable charges for access to each MLS, including an allocation of
overhead costs of operating the MLS, provided that charges to members and nonmembers
were made on the same basis.
C. The Creation of Sandicor
Prior to 1992 there were eleven regional associations of real estate agents in San Diego
County. These associations operated three separate MLS's, each of which provided a
partial and fragmented listing of the real estate for sale in San Diego County.
In December 1991 the local associations combined their separate MLS's and created a
new product: a single, county-wide MLS listing all properties for sale throughout San Diego
County. To create this new product, the local associations formed Sandicor, a corporate
entity in which they were shareholders. Sandicor owns and operates a county-wide MLS
service. Sandicor's MLS is an essential tool for real estate agents, and nearly all real estate
agents actively engaged in buying or selling real estate in San Diego County use Sandicor's
MLS.
Real estate agents pay Sandicor a uniform monthly fee set by Sandicor to use Sandicor's
MLS. The monthly fee is used to pay the costs of operating the MLS and Sandicor's
"service centers" (see, infra at section D).
D. The Alleged Tying Arrangement: The "Enhanced Services"
Some local associations have contracted with Sandicor to act as service centers to
perform services for Sandicor and its MLS subscribers that Freeman denominates as
"Enhanced Services." Enhanced Services performed by the service centers include:
processing enrollment forms and collecting enrollment fees for subscribers to Sandicor's MLS
and maintaining records on these participants; billing and collecting monthly fees from
subscribers and remitting fees to Sandicor; inputting MLS listings into Sandicor's MLS
database when requested by a subscriber; monitoring listings for compliance with Sandicor's
rules; providing forms for Sandicor's MLS complaints and forwarding complaints to
Sandicor; distributing MLS books to subscribers; stocking and distributing Sandicor property
data profile sheets and other Sandicor forms and supplies; providing staff to answer questions
by subscribers; providing meeting facilities on request by Sandicor; processing reciprocal
listings on properties within the local association's jurisdiction from subscribers to other MLS
services that have reciprocity agreements with Sandicor; and, when a Sandicor subscriber
has a listing on a property outside Sandicor's jurisdiction but within the jurisdiction of another
MLS with which Sandicor has a reciprocity agreement, to process that listing with the other
MLS.
Freeman alleged that these Enhanced Services, although forming a portion of the benefits
available to Sandicor's MLS subscribers, augmented and supplemented the MLS service but
were unnecessary to the use of the MLS service; they were instead distinct and separate
services. Freeman also alleged that the Enhanced Services were almost entirely worthless to
subscribers; that subscribers would not have purchased these services if given the choice; and
that the subscribers paid for the Enhanced Services only because Sandicor would not sell
access to the MLS service separately from the Enhanced Services.
Freeman's "tying" claim alleged: Sandicor conditioned sale of access to its MLS (the tying
product) on purchase of the Enhanced Services (the tied product); Sandicor had sufficient
economic power to force real estate agents wishing to purchase MLS access to also
purchase the Enhanced Services; and a "not insubstantial" amount of sales in the tied product
was effected by the tying arrangement.
E. The Alleged Price Fixing
Freeman alleged Sandicor's corporate form was a sham that should be disregarded and
treated instead as a partnership of the local associations. Based on this premise, Freeman
alleged the local associations were separate entities holding competing economic interests and
each agreed with the others to eliminate price competition for Sandicor's MLS service by
fixing the price for the MLS and Enhanced Services at a uniform rate.
F. The Alleged Market Exclusion
Freeman alleged Sandicor's fee for access to its MLS is excessive and violates the
antitrust laws by excluding brokers who cannot afford to subscribe; as a result trade is
restrained by limiting the number of competing brokers.
G. The Alleged Group Boycott
Several months after Freeman filed this class action lawsuit, Freeman asked Sandicor to
appoint her to act as a service center. She promised to provide the MLS and Enhanced
Services to her customers at rates lower than those charged by the other service centers.
Sandicor refused to appoint her as a service center. Freeman alleged the local associations
combined to cause Sandicor to refuse Freeman's request, and the combined action
constituted a group boycott of Freeman.
H. Violation Of The Injunction
Freeman alleged that the 1984 injunction resulting from our decision in NAR II required
SDAR to charge only a reasonable amount for access to the MLS service, and that by
including charges for Enhanced Services that were worthless to Freeman the charge imposed
for access to Sandicor's MLS exceeded the amount permitted under the injunction.
II
PROCEDURAL HISTORY
All defendants demurred to Freeman's third amended complaint. The trial court sustained
the demurrers of Sandicor and the local associations in part because the complaint did not
allege facts sufficient to show the defendants had separate and distinct interests with respect
to the conduct alleged or that there were separate products or services that had been tied
together. The court granted Freeman leave to amend to cure these defects. Freeman
elected not to amend, and the court dismissed the complaint.
III
ANALYSIS OF ANTITRUST CLAIMS
A. The Complaint Did Not State An Illegal Tying Claim
The complaint alleged that packaging Enhanced Services with access to the MLS data as
a single product, and refusing to sell access to the MLS data separately from the Enhanced
Services, constituted an unlawful tying arrangement in violation of the Cartwright Act. The
demurrers argued that because the complaint on its face showed the Enhanced Services and
the MLS data constituted a single unitary service rather than normally separate services, the
complaint did not state a tying claim.
1. Applicable Principles
A tying arrangement under antitrust laws exists when a party agrees to sell one product
(the tying product) on the condition that the buyer also purchases a different product (the tied
product), thereby curbing competition in the sale of the tied product. (Northern Pacific
Railway Company v. United States (1958) 356 U.S. 1, 5-6.) Antitrust laws against tying
arrangements seek to eradicate the evils that (1) competitors are denied free access to the
market for the tied product not because the seller imposing the tying requirement has a better
or less expensive tied product, but because of the seller's power or leverage in the market for
the tying product; and (2) buyers are forced to forego their free choice between competing
tied products. (Ibid.) Tying arrangements are illegal per se "whenever a party has sufficient
economic power with respect to the tying product to appreciably restrain free competition in
the market for the tied product . . . " (id. at p. 6), and when "a total amount of business,
substantial enough in terms of dollar-volume so as not to be merely de minimis, is foreclosed
to competitors by the tie . . . ." (Fortner Enterprises v. U.S. Steel (1969) 394 U.S. 495,
501.)
The threshold element for a tying claim is the existence of separate products or services in
separate markets. (Jefferson Parish Hospital Dist. No. 2 v. Hyde (1984) 466 U.S. 2, 21.)
Absent separate products in separate markets, the alleged tying and tied products are in
reality a single product. (Hirsh v. Martindale-Hubbell, Inc. (9th Cir. 1982) 674 F.2d 1343,
1350.)
Assuming that separate products in separate markets exist, a plaintiff claiming an illegal
tying arrangement must plead: "(1) a tying agreement, arrangement or condition existed
whereby the sale of the tying product was linked to the sale of the tied product; (2) the party
had sufficient economic power in the tying market to coerce the purchase of the tied product;
and (3) a substantial amount of sale was effected in the tied product." (Suburban Mobile
Homes, Inc. v. AMFAC Communities, Inc. (1980) 101 Cal.App.3d 532, 542.)
2. Analysis
We conclude Freeman's complaint, read in the context of the facts of which we may take
judicial notice, and shorn of its conclusory allegations, did not adequately allege an illegal
tying arrangement. The alleged facts do not demonstrate that (1) access to Sandicor's MLS
data and the Enhanced Services are separate products for which separate markets exist or
that (2) the tie affected a substantial volume of commerce in the market for the tied product.
The complaint alleged, and in opposition to the demurrers Freeman argued, the Enhanced
Services as a whole constituted the separate tied product, and that the tie involved a "not
insubstantial amount of sales in terms of the total dollar value of 'Enhanced Services.'"
On appeal, however, Freeman shifts her theory to argue that each component part of the
Enhanced Services must be severally evaluated to assess the viability of her tying claim. She
concedes that many components of the Enhanced Services do not comprise a service
severable from access to the MLS, and has abandoned her claim of an illegal tie as to those
components. However, she argues her tying claim for other components of the Enhanced
Services remains viable. We examine whether each remaining component satisfies the legal
requirements for separateness and substantial affect.
Distribution of MLS Books: Freeman argues that sale of a product and sale of a delivery
service are severable services for a tying claim (see Anderson Foreign Motors, Inc. v. New
England Toyota Distributor, Inc. (D.Mass. 1979) 475 F.Supp. 973), and that because
Sandicor's delivery service competes with third party delivery services like the Postal Service
and UPS there exists an unlawful tying arrangement. This claim is unpersuasive. Although
the complaint alleged that one component of the Enhanced Services is distribution of MLS
books, the complaint did not allege that Sandicor uses an in-house delivery service that
excludes third party delivery services; to the contrary, the complaint admitted outside vendors
are used for delivery of MLS books. Of equal import, Freeman affirmatively alleged that
MLS books do not exist, and did not exist for more than a year before her complaint was
filed. This allegation raises an insurmountable obstacle to her tying claim. A plaintiff must
allege the tie affected a substantial volume of commerce in the market for the tied services. It
is conceptually impossible that there is a market for a nonexistent service (here, delivery of
nonexistent books) that was substantially injured by Sandicor's nonexistent distribution
service.
Stocking and Distributing Sandicor Forms: Freeman argues that conditioning MLS access
on Freeman's payment for Sandicor's property data profile sheets and other Sandicor forms
creates an illegal tie. This claim is unpersuasive. First, to the extent that Sandicor's property
data profile sheets were tailored to track the format of its MLS data service, they cannot be
characterized as a product separate from the MLS data service. Second, although the
complaint alleged local associations stocked and distributed these forms, Freeman did not
allege that she was required as a condition to MLS access to purchase or use these forms
from Sandicor in lieu of using forms available from competitors. Even had Freeman made
that allegation, however, the complaint omitted any allegation that the availability of these
forms from Sandicor caused a substantial economic detriment to the market for forms sold by
Sandicor's competitors. Freeman's complaint, insofar as it relied on the tying of "forms," did
not state a tying claim.
Inputting Listings: Freeman argues that tying sale of MLS access to payment for use of a
local service center to input listings into the MLS database is an unlawful tying arrangement.
This claim is unpersuasive. First, the complaint did not allege this service occupies a market
separate from MLS access. Second, because the complaint did not allege anyone competes
to sell this service and instead affirmatively alleged that most agents input their own listings
and do not use this service, the complaint was defective by not alleging that the tie caused
substantial economic detriment to competitors who are attempting to sell this service.
Reciprocal Placement Of Listings: When Sandicor has reciprocity agreements with other
MLS services covering other geographic areas, Sandicor's local service centers provide two
services: they process listings for San Diego County properties listed by out-of-area agents,
and they process listings for out-of-area properties listed with Sandicor subscribers into the
out-of area MLS. However, Freeman did not allege facts demonstrating these constitute
services occupying markets separate from MLS access. Because the complaint did not
allege anyone competes to sell this service and instead affirmatively alleged that no Sandicor
agent ever uses these services, the complaint was defective by not alleging that the tie caused
substantial economic detriment to competitors attempting to sell these services.
Freeman's core claim is that Palsson and its progeny have created judicially-imposed
price controls on fees for MLS access. From this premise, she argues that when a seller of a
price controlled product attempts to evade the control by packaging the price controlled
product with non-price controlled products, and then charges an inflated price for the
package to transfer the clandestine profit from the controlled to the uncontrolled product, it is
unnecessary to establish separateness or competitive injury to state a claim for a tying
violation of the antitrust laws.
However, Freeman's theory relies solely on language in a dissenting opinion in Fortner
Enterprises v. U.S. Steel (1969) 394 U.S. 495, 512-514 (White, J., dissenting), which was
later quoted in a footnote to the majority's opinion in Jefferson Parish Hospital Dist. No. 2 v.
Hyde, supra, 466 U.S. at p. 13, fn. 19. The cited language was dicta because neither case
held or even considered whether tying to accomplish price-control evasion violated antitrust
laws. Freeman cites no authority holding that tying designed to evade price-controls,
unaccompanied by the anticompetitive effects that the antitrust rules against tying are designed
to prevent, violates antitrust laws.
B. The Complaint Did Not State A Price Fixing Claim
The complaint alleged local associations engaged in unlawful price fixing for Sandicor's
MLS services by forming Sandicor, merging their fractionalized regional MLS's into Sandicor
to create the new county-wide MLS service, and charging a fixed rate for this new service.
Defendants' demurrers argued the complaint did not allege an unlawful price fixing agreement
because it showed (1) Sandicor unilaterally set the price for its MLS service and (2) the local
associations could not conspire with Sandicor to fix prices because they were not separate
entities holding separate and independent economic interests in the sale of a county-wide
Sandicor MLS service.
The essence of Freeman's price fixing claim is that the price charged by Sandicor for its
MLS service cannot be treated as a unilateral action by the holder of a natural monopoly.
She argues Sandicor's separate existence must be disregarded and its pricing decision must
be treated as the product of an agreement among the separate local associations.
1. Legal Framework
A complaint for unlawful price fixing must allege facts demonstrating that separate entities
conspired together. (City of Mt. Pleasant, Iowa v. Assoc. Elec. Co-Op. (8th Cir. 1988)
838 F.2d 268, 274-279 (hereafter Mt. Pleasant).) Only separate entities pursuing separate
economic interests can conspire within the proscription of the antitrust laws against
price-fixing combinations. (Copperweld Corp. v. Independence Tube Corp. (1984) 467
U.S. 752, 769-771 (hereafter Copperweld).) A general demurrer will be sustained where
the complaint makes conclusory allegations of a combination and does not allege with factual
particularity that separate entities maintaining separate and independent interests combined
for the purpose to restrain trade. (G.H.I.I. v. MTS, Inc. (1983) 147 Cal.App.3d 256,
265-266.)
Whether separate entities are present requires analysis not of the corporate formalities but
of the economic realities under which the entities operate. (Mt. Pleasant, supra, 838 F.2d at
p. 275.) The Copperweld court outlined the broad principles applicable to assessing
whether the alleged conspirators are sufficiently separate to be capable of combining within
the prohibition of the antitrust laws. Copperweld cautioned that the mere existence of
separate incorporated entities does not automatically suffice to show that these entities are
capable of combining; instead the entities must have separate and independent interests that
are combined by the unlawful conspiracy. Under Copperweld, legally distinct entities do not
conspire if they "pursue[] the common interests of the whole rather than interests separate
from those of the [group] itself . . . . Because [such] coordination . . . does not represent a
sudden joining of two independent sources of economic power previously pursuing separate
interests, it is not activity that warrants [Sherman Act section 1] scrutiny." (Copperweld,
supra, 467 U.S. at pp. 770-771.)
The court in Mt. Pleasant applied the Copperweld principles in the context of separate
entities that formed a joint venture to provide a product that the separate entities had
previously been unable to provide. In Mt. Pleasant, a single entity ("Associated") operated
an electricity-generating plant. Associated was owned and managed by six "generation and
transmission" (G&T) cooperatives that purchased electricity from Associated and transported
and wholesaled electricity in their respective regions. The G&T cooperatives were owned by
local electricity distribution cooperatives; these local cooperatives purchased electricity from
their respective G&T cooperative and retailed it to the customers in their service area. (Mt.
Pleasant, supra, 838 F.2d at p. 271.)
Associated also sold electricity to third parties at rates higher than it charged its members.
(Mt. Pleasant, supra, 838 F.2d at p. 272.) A third party customer claimed the dual-price
scheme was a "price squeeze" conspiracy in violation of antitrust laws. The Mt. Pleasant
court applied the Copperweld principles and concluded the constituent members, although
legally distinct entities, comprised a single enterprise pursuing a common goal of generating
low-cost electricity that none of the members separately had previously produced or was
capable of producing. The Mt. Pleasant court examined whether any of the G&T
cooperatives pursued interests diverse from those of Associated: were any of the G&T
cooperatives actual or potential competitors of Associated or hold sufficiently divergent
interests. "In the language of Copperweld, [were there facts] show[ing] . . . the coordination
between any two defendants [was] a 'joining of two independent sources of economic power
previously pursuing separate interests.'" [Quoting Copperweld, supra, 467 U.S. at p. 771.]"
(Mt. Pleasant, supra, at p. 276.)
In Mt. Pleasant, the plaintiff claimed the G&T cooperatives had independent and
conflicting economic interests because two of the G&T cooperatives disagreed with the
dual-rate policy, attempted to change it, and would have received economic benefits without
the dual-rate policy that other G&T cooperatives would not have realized. (Mt. Pleasant,
supra, 838 F.2d at pp. 276-277.) The Mt. Pleasant court rejected the argument, stating at
page 277:
"We agree with [plaintiff] that these interests were 'diverse,' but not in the sense necessary to
create a fact issue on whether these companies are part of a single enterprise. It will always
be true that separate companies, in one enterprise, that are located in separate areas and
serve separate customers, will have varying interests. This case, considering the disputes
among the defendants on the issue of municipal sales, is a perfect example. Coalitions will
come and go according to changing conditions and the interests of the various factions.

"But is this a sufficient basis from which to draw a reasonable inference that their coordination
is a 'joining of two independent sources of economic power previously pursuing separate
interests'? In this case, we think not. Even though the cooperatives may quarrel among
themselves on how to divide the spoils of their economic power, it cannot reasonably be said
that they are independent sources of that power. Their power depends, and has always
depended, on the cooperation among themselves. They are interdependent, not
independent. The disagreements we have described are more like those among the board
members of a single enterprise, than those among enterprises which are themselves separate
and independent." (Original italics.)

The principles articulated in Copperweld and applied in Mt. Pleasant have been followed
by other federal courts. In In re Appraiser Foundation Anti-Trust Litigation (D. Minn. 1994)
867 F.Supp. 1407, eight separate associations of appraisers created an entity ("Foundation")
to set appraisal standards for the industry. Although the constituent members of the
Foundation may have competed for members, and the individual members of the constituent
associations may have competed with each other for appraisal business, the court rejected
the conspiracy claim because the Foundation was a single enterprise whose members were
interdependent (because its influence derived from representing the entire industry) and
shared a common purpose of establishing standards and ethics for the entire industry. There
were no facts showing any of the members pursued interests diverse from or antithetical to
the interests of the Foundation. (Id. at pp. 1418-1420.) In Williams v. I.B. Fischer Nevada
(9th Cir. 1993) 999 F.2d 445, involving an antitrust suit alleging that an agreement between a
franchiser and his franchisee was unlawful, the court concluded the parties could not conspire
because they were part of a common enterprise. (Id. at p. 447.) In F. B. Leopold Co., Inc.
v. Roberts Filter Mfg. Co., Inc. (W.D.Penn. 1995) 882 F.Supp. 433, an antitrust suit
alleging that a patentee conspired with its independent sales agents, the court applied the
Copperweld principles and concluded these parties could not conspire because the sales
agents, although independent and having a diverse interest of maximizing their commissions,
had economic interests and purposes so closely intertwined with the interests of the patentee
that they formed a "'unified economic consciousness incapable of conspiring with itself'
[quoting Pink Supply Corp. v. Hiebert, Inc. (8th Cir. 1986) 788 F.2d 1313, 1317]." (F. B.
Leopold Co., Inc. v. Roberts Filter Mfg. Co., Inc., supra, 882 F.Supp. 433 at p. 446.)
In contrast, when independent entities combine through an agreement that controls or
restrains trade in products or services in which they previously had been actual or potential
competitors, there is a "joining of two independent sources of economic power previously
pursuing separate interests" (Copperweld, supra, 467 U.S. at p. 771) within the antitrust
proscriptions against combinations. For example, in United States v. Topco Associates
(1972) 405 U.S. 596, a group of regional supermarket chains participated in a cooperative
buying agency (Topco) to purchase products for resale by its constituents under the Topco
label. However, the territories in which each constituent was entitled to market Topco
products was restricted. (Id. at pp. 598-604.) The court held this horizontal division of
territory violated section 1 of the Sherman Act because the constituent sellers were actual or
potential competitors in the sale of Topco products for the territories from which some or all
of them were excluded. (Id. at pp. 606-612.) Similarly, in United States v. Sealy, Inc.
(1967) 388 U.S. 350, a consortium of mattress and bedding manufacturers jointly owned
and operated Sealy, which licensed the member-manufacturers to use its trademark but
granted them territorial exclusivity for sale of Sealy trademarked products. (Id. at pp.
352-355.) The court concluded the horizontal division of territory violated section 1 of the
Sherman Act because the constituent manufacturers were actual or potential competitors of
each other in territories from which they were excluded and the association (Sealy) was a
mere instrumentality effectuating their agreement to create an unlawful horizontal restriction on
competition. (Id. at pp. 355-358.)
2. Application
Freeman admits that Sandicor set the price for its county-wide MLS service, and that
unilateral action is ordinarily fatal to a claim of a price-fixing conspiracy. (Berkey Photo, Inc.
v. Eastman Kodak Co. (2d Cir. 1979) 603 F.2d 263, 272, 294.) To establish the plurality
of entities required for Freeman's conspiracy claim, she alleged Sandicor's separate existence
should be disregarded and Sandicor's action be treated as the product of an agreement
between the constituent local associations. However, the complaint alleged the constituent
local associations formed Sandicor to create a new product--the county-wide MLS--and did
not allege the local associations (1) acting separately had or could have provided this product
in competition with each other, or (2) had separate interests that were diverse from or
antithetical to the interests of Sandicor in providing a county-wide MLS service.
The combination of entities into Sandicor to provide a new service, like the combinations
in Mt. Pleasant and In re Appraiser Foundation Anti-Trust Litigation, does not support
conspiracy theories of antitrust liability. The combination of the local associations is a single
enterprise whose members are interdependent (because its product arises only from the
unified whole) and share the common purpose of creating and marketing the new product
rather than a "joining of two independent sources of economic power previously pursuing
separate interests." (Copperweld, supra, 467 U.S. at p. 771.) Because the complaint did
not allege facts that suggest the local associations pursued interests diverse from or
antithetical to the interests of Sandicor, the complaint does not establish the plurality of
separate entities necessary to a price-fixing conspiracy claim.
Freeman, citing the numerous cases in which practices by real estate brokers' associations
operating MLS services were held to violate antitrust laws, argues these cases were
necessarily predicated on the express or implied conclusion that the constituent owners of the
MLS service were separate entities capable of conspiring. However, those cases are not
inconsistent with our analysis because they did not involve a claim, nor did any of those
courts hold, that the operators of the MLS violated antitrust laws by conspiring to fix the
price of MLS services.
In the first category of cases relied on by Freeman, of which this court's decision in NAR
I is illustrative, the antitrust violations included the MLS rule permitting only "exclusive right to
sell" MLS listings and the policies and practices that facilitated price-fixing of brokers'
commissions. (People v. National Assn. of Realtors, supra, 120 Cal.App.3d at pp.
477-487.) Because both of these restrictions involved horizontal restraints on competition at
the level the individual brokers would otherwise have freely competed with each other, the
requisite coalescence of "independent sources of economic power previously pursuing
separate interests" (Copperweld, supra, 467 U.S. at p. 771) was present to satisfy the
combination element of price-fixing.
The second group of cases of which Palsson is illustrative involved denial of access to the
MLS service, and evaluated MLS rules that restricted competition at the level the individual
brokers competed with each other. In Palsson, the MLS operator held a monopoly over the
relevant MLS but limited MLS access to its members. Palsson concluded that denying
access was properly evaluated as a group boycott. (Palsson, supra, 16 Cal.3d at pp.
931-932.) A horizontal group boycott involves the joint efforts of competitors at the same
level of distribution as the plaintiff to disadvantage that competitor by denying him the tools
necessary to compete. (See, e.g., United States v. Realty Multi-List, Inc., supra, 629 F.2d
at p. 1361.) The denial of access cases involved horizontal restraints on competition at the
level individual brokers would otherwise have competed with each other, which provides the
requisite coalescence of "independent sources of economic power previously pursuing
separate interests" (Copperweld, supra, 467 U.S. at p. 771) that satisfied the combination
element.
The MLS cases relied on by Freeman establish only that the requisite plurality of entities
pursuing independent economic interests exists if the conduct complained of operates to
restrain competition at the same level at which these actors previously had been actual or
potential competitors. However, those cases have no application here because the alleged
unlawful agreement--charging a set price for county-wide MLS services--does not restrain
competition at the same level the local associations were actual or potential competitors.
C. The Complaint Did Not State A Group Boycott Claim
Freeman's complaint alleged that she asked Sandicor to appoint her as a service center,
that the local associations combined to cause Sandicor to refuse Freeman's request, and that
consumers of Sandicor's services were injured because Freeman would have charged a
lower price than the other local associations had she been authorized to act as a service
center. The demurrers argued (1) the group boycott theory suffered from the same defect as
the price-fixing conspiracy theory because it did not show the local associations had
economic interests separate and independent from Sandicor, and (2) Freeman's conclusory
allegation that the local associations combined to cause Sandicor to refuse her request was
insufficient to satisfy the requirement of alleging specific overt acts in furtherance of the
conspiracy.
1. Legal Principles
The antitrust laws do not preclude a party from unilaterally determining the parties with
whom, or the terms on which, it will transact business. However, it is a violation of the
antitrust laws for a group of competitors with separate and independent economic interests,
or a single competitor with sufficient leverage, to force another to boycott a competitor at the
same level of distribution. (G.H.I.I. v. MTS, Inc., supra, 147 Cal.App.3d at pp. 266-268.)
In G.H.I.I., the plaintiff was a record retailer who alleged three other record retailers
(defendants Record Factory, Integrity, and Tower) used their market power to coerce
record wholesalers to grant price discounts to defendants but not to their competitors, a
so-called "vertical boycott." (Id. at pp. 267-269.) The court held that the complaint stated
a claim against Tower because it alleged Tower used threats, coercion, intimidation and
boycott in furtherance of its goal of forcing wholesalers to boycott plaintiff; however, the
complaint did not state a claim against Record Factory or Integrity because no acts by them
were alleged that furthered the coercion. (Id. at p. 269.)
An antitrust claim must plead the formation and operation of the conspiracy and the illegal
acts done in furtherance of the conspiracy. (Jones v. H. F. Ahmanson & Co. (1969) 1
Cal.3d 93, 119.) California requires a "high degree of particularity" in the pleading of
Cartwright Act violations (Motors, Inc. v. Times Mirror Co. (1980) 102 Cal.App.3d 735,
742), and therefore generalized allegations of antitrust violations are usually insufficient.
(Chicago Title Ins. Co. v. Great Western Financial Corp., supra, 69 Cal.2d at pp. 317,
326-328.) The unlawful combination or conspiracy must be alleged with specificity. The
Chicago Title court noted that "'contracts, combinations or conspiracies in restraint of . . .
trade or commerce cannot be alleged generally in the words of the statute but . . . facts must
be set forth which indicate the existence of such contracts, combinations or conspiracies.'"
(Id. at pp. 316-317.) Therefore, general allegations of a conspiracy unaccompanied by
factual allegations of overt acts in furtherance of conspiracy are insufficient to state a group
boycott antitrust claim. (Id. at pp. 317-318; Bartley v. California Association of Realtors
(1980) 115 Cal.App.3d 930, 935.) The absence of factual allegations of specific conduct in
furtherance of the conspiracy to eliminate or reduce competition makes the complaint legally
insufficient. (Jones v. H. F. Ahmanson & Co., supra, 1 Cal.3d at p. 119.)
2. Application
Freeman alleged the refusal to allow her to become a service center was conceived and
initiated by the local associations, which would have been competitors of Freeman in
operating a service center, and the local associations used their "market power and position
to cause Sandicor to refuse" to appoint Freeman as a service center. Freeman's conclusory
statement that the local associations caused Sandicor to refuse Freeman's request is
insufficient to satisfy the requirement of alleging specific overt acts in furtherance of a
conspiracy to boycott Freeman. The complaint contained no allegation of specific acts,
threats, coercion, intimidation or other unlawful conduct employed by local associations to
force Sandicor to boycott Freeman.
Freeman argues that the facts alleged in her group boycott claim were adequate because a
refusal to deal resulting from coercive pressure satisfies the combination requirement.
Therefore, she concludes, local associations' coercion of Sandicor to refuse her request
sufficed for this cause of action. However, Freeman did not allege (even in conclusory terms)
local associations coerced Sandicor into refusing her request, or any specific acts by local
associations that constituted the coercion. Because Freeman was given leave to amend her
complaint but elected to stand on the allegations as pleaded, we construe any ambiguity
against Freeman (Casella v. City of Morgan Hill (1991) 230 Cal.App.3d 43, 48) and
conclude that her "'failure to make a good pleading probably arises in a lack of facts rather
than in the fault of the pleader.' [Quoting Dukes v. Kellogg (1900) 127 Cal. 563, 565.]"
(Chicago Title Ins. Co. v. Great Western Financial Corp., supra, 69 Cal.2d at p. 328.)
We reject Freeman's argument that the denial of access cases demonstrate she has stated
a valid group boycott claim. Denying her request to become a service center is fundamentally
different from excluding her access to the MLS. The denial of access cases have recognized
that exclusion from an MLS only superficially resembles other forms of group boycotts.
(Palsson, supra, 16 Cal.3d at pp. 930-934.) Palsson held the MLS operator's freedom to
exclude nonmembers was limited because the MLS provided an irreplaceable tool for
realtors and the anti-competitive impact of excluding them from MLS access far outweighed
any justifications for exclusivity. Palsson explained at pages 937-938 that the right of an
MLS operator to select its subscribers was not absolute because:
"While the Marin County Board of Realtors may permissibly provide some exclusive benefits
to its members, access to the multiple listing service is so essential to nonmembers if they are
to compete effectively that such access must be granted to all licensed salesmen and brokers
who choose to use the service."

However, we perceive no similar reason here to limit the ordinary rule that a producer
may choose its own distributors. (Albrecht v. Herald Co. (1968) 390 U.S. 145, 150,
overruled on other grounds by State Oil Co. v. Khan (1997) 522 U.S. 3.) Freeman's
complaint did not allege that acting as a service center is so essential to her business that she
cannot compete as a real estate agent unless she is appointed as a service center. In Palsson,
the court examined whether the association could limit admission to only those agents who
were primarily engaged in the business of selling real estate. Palsson observed at page 938
that:
"The 'primarily engaged' rule is sometimes justified on the grounds that the board has the right
to choose its own members. It has never been the law in California that a voluntary
association may be forced to open its membership rolls to all who apply. On the other hand,
when membership in an association is a practical economic necessity, judicial review is
available to examine bases for exclusion from membership. [Citations.] In the case at bar, . .
. membership in the Marin County Board of Realtors must be termed a practical economic
necessity for real estate salesmen. As noted above, without membership in the board, a
salesman is denied employment with 75 percent of the residential real estate brokers in the
county and a subsequent reasonable opportunity to earn a livelihood in real estate. The
economic benefits of membership mandate that exclusion be subject to judicial review." (Fn.
omitted.)

Palsson's rationale demonstrates the inapplicability of the denial of access cases to
Freeman's group boycott claim. These cases do not stand for the proposition that Sandicor
must appoint as service centers whomever applies or confront antitrust liability under a group
boycott theory. Unlike the denial of access cases, there is no similar practical economic
necessity that Freeman act as a service center. Because Freeman cites no pertinent authority
that an antitrust group boycott claim arises whenever a producer refuses to grant a new
franchise to an applicant, we conclude Freeman's group boycott claim was properly rejected.
D. Excessive Prices Do Not Violate Antitrust Laws
Freeman's final antitrust claim contends that because Sandicor's monthly fee for access to
the MLS is more than some brokers can afford, Sandicor has violated the antitrust laws by
pricing these brokers out of the market and thereby unreasonably restrained trade by limiting
the pool of competing brokers.
Freeman's contention is based on the Palsson language that an MLS may not exclude
nonmembers from its service but may charge nonmembers "a reasonable fee for use of the
service consistent with the per-capita costs of operation." (Palsson, supra, 16 Cal.3d at p.
940.) Although the courts have recognized this language was dicta (see Feldman v.
Sacramento Board of Realtors, supra, 119 Cal.App.3d at p. 747), Freeman argues Palsson
and its progeny have imposed judicial price controls on the fees that an MLS may charge.
From this premise, Freeman argues she has pleaded a claim for antitrust violations by alleging
that the amounts charged by Sandicor are unreasonable and operate to restrain competition.
We evaluate Freeman's argument by first defining what is not at issue. First, Freeman's
excessive price argument must be evaluated as asserting an antitrust violation based on the
unilateral pricing decisions of Sandicor for its county-wide MLS service; we have already
rejected her claim of a price-fixing combination among competitors that resulted in excessive
prices. Second, Freeman's excessive price argument does not assert discriminatory pricing,
but instead admits that all users are charged the same price. Finally, Freeman's excessive
price argument does not suggest Sandicor cannot charge some amount for its service, but
only alleges that the price actually charged is unreasonable because it is excessive.
The law is clear that unilateral pricing decisions do not violate section 1 of the Sherman
Act. (Alaska Airlines, Inc. v. United Airlines, Inc., supra, 948 F.2d 536, 541 [unilateral
price charged for access to computerized reservations systems (CRS) does not offend
section 1's ban on "combinations"; pricing evaluated under Sherman Act section 2
"monopolization" provisions].) Furthermore, section 2 of the Sherman Act is not violated
merely because the holder of a monopoly charges high prices. The Alaska Airlines court,
rejecting an antitrust claim that alleged an operator of a CRS was extracting excessive prices
for access to its service, observed at pages 548-549:
"The Sherman Act also has not been interpreted to penalize natural monopolies. A firm that
creates a valued service or product should not be punished with treble damages and criminal
sanctions merely because the firm finds itself to be the holder of a natural monopoly.
[Citation.] Government regulation, as opposed to treble damages and criminal liability under
the Sherman Act, is generally thought to be the appropriate remedy for the difficulties posed
by natural monopolies. [Citation.] '[J]udicial oversight of pricing policies would place the
courts in a role akin to that of a public regulatory commission. We would be wise to decline
that function unless Congress clearly bestows it upon us.' [Quoting Berkey Photo v. Eastman
Kodak Company (2d Cir. 1979) 603 F.2d 263, 294].

. . . . . . .. . . . . . . . . . . . . . . . . .

"[S]etting high prices in the original 'monopoly' market [] represent[s] the cost that we incur
when we permit efficient and natural monopolies. See Berkey Photo, 630 F.2d at [p.] 294
('setting a high price may be a use of monopoly power, but it is not in itself anticompetitive').
The Supreme Court has consistently held that there must be 'predatory' conduct to attain or
perpetuate a monopoly for a monopolist to be liable under Section 2. [Citations.]" (Fns.
omitted.)

These observations of the Alaska Airlines court convince us that unilateral action by a
monopoly holder in charging allegedly excessive prices, standing alone, does not ordinarily
violate antitrust laws even though high prices may have some ancillary effect on the ability of
consumers of those products to compete. We therefore examine whether the California
courts have carved an exception to ordinary antitrust laws, unique to MLS charges, that
impose price controls on MLS services under the Cartwright Act.
We do not interpret Palsson and its progeny as construing the Cartwright Act to permit
judicial oversight of unilateral price decisions. The focus of Palsson was not the price
charged for MLS access, but whether two specific practices--denial of MLS access to
nonmembers and denial of membership to part-time realtors--were unreasonable
combination restraints of trade. (Palsson, supra, 16 Cal.3d at pp. 934-940.) Palsson
concluded these rules did restrain trade, did not satisfy the rule of reason requirements, and
accordingly ordered these rules be eliminated. (Id. at p. 940.) Although Palsson stated
"nonmembers may be charged a reasonable fee for use of the service consistent with the
per-capita costs of operation" (ibid.), this comment was dicta and not part of its antitrust
analysis.
The courts in NAR I, NAR II and Palsson did not evaluate whether the price charged by
an MLS violated antitrust laws. Those cases evaluated whether denial of MLS access to
nonmembers was an unlawful group boycott, whether permitting only exclusive rights to sell
MLS listings was an unlawful restraint on trade and whether certain policies and practices
facilitated price fixing for brokers' commissions. Although this court held that SDAR was
required to grant access to the MLS and enjoined SDAR from imposing any cost for use of
such service beyond the cost of providing the service itself, this aspect was part of the
remedy and not part of the antitrust analysis.
Feldman v. Sacramento Bd. of Realtors, Inc., supra, 119 Cal.App.3d 739 is the only
California case of which we are aware that directly evaluates an antitrust claim based solely
on the allegation the price charged for MLS services was excessive. In Feldman, a realtor
sought to use several MLS services without paying the initiation or participation fees charged
for those services. The realtor argued he should be entitled to purchase each MLS book
whenever he had occasion to use it. In his lawsuit asserting denial of the right to purchase
individual books violated the Cartwright Act, the trial court granted summary judgment in
favor of the MLS services based on their showing that the initiation and participation fees that
they charged were non-discriminatory and based on the costs associated with operating the
MLS. (Id. at pp. 742-743.) Feldman reversed the trial court, reasoning that because any
practice that might restrain competition must be assessed under a "rule of reason" analysis (id.
at p. 745), the fact that the fees charged were consistent with defraying the costs incurred in
operating the MLS overhead would not preclude a trier of fact from nevertheless determining
the fees were "unreasonably restrictive of competition." (Id. at pp. 746-747.) Feldman then
evaluated whether the plaintiff's antitrust claim satisfied what the court perceived to be the
applicable pleading requirements for a rule of reason violation. Relying on Tampa Electric
Co. v. Nashville Co. (1961) 365 U.S. 320 and Magnus Petroleum Co., Inc. v. Skelly Oil
Co. (7th Cir. 1979) 599 F.2d 196, 201-202, Feldman held the plaintiff must allege the
defendant held monopolistic powers and engaged in practices that seriously hampered the
competitive market to which the plaintiff belonged, and ultimately concluded the pleading was
deficient. (Feldman v. Sacramento Bd. of Realtors, Inc., supra, 119 Cal.App.3d at pp.
747-748.)
We are convinced Feldman's conclusion that a plaintiff states an antitrust claim under the
Cartwright Act based solely on the allegation that a monopolist's "excessive price" for its
product unreasonably restrains trade was erroneous and should not be perpetuated. First,
Feldman was decided before State of California ex rel. Van de Kamp v. Texaco Inc., supra,
46 Cal.3d 1147 decided that the Cartwright Act bans combinations but does not have any
provisions parallel to Sherman Act section 2's anti-monopoly provisions. Therefore Feldman
had no guidance on whether a monopolist's unilateral practices offend the Cartwright Act.
Second, as explained by the Alaska Airlines court, setting a high price may be a use of
monopoly power but is not in itself anti-competitive; there must be predatory conduct to
attain or perpetuate a monopoly before a monopolist can be assessed treble damages under
a Sherman Act Section 2 claim. Third, the cases relied on by Feldman for its holding, Tampa
Electric Co. v. Nashville Co., supra, and Magnus Petroleum Co., Inc. v. Skelly Oil Co.,
supra, do not support the proposition that Sherman Act liability arises merely because a
monopolist's excessive price unreasonably restrains trade.
The proposition in Feldman on which Freeman relies has never been cited by any
subsequent court and is inconsistent with federal authorities construing the Sherman Act. We
therefore decline to follow Feldman's conclusion that a monopolist's allegedly excessive price,
without more, gives rise to antitrust liability merely because the plaintiff alleges that price
unreasonably restrains trade.
IV
FREEMAN'S CLAIM FOR VIOLATION OF THE INJUNCTION
Freeman asserts she stated a valid damage claim against SDAR for violation of the 1984
injunction. She argues the injunction entered after remand in NAR II limited SDAR's fees for
MLS access to a "reasonable" charge and SDAR violated that injunction by charging $100
per month when the reasonable charge for MLS access was $25 per month. Neither
Freeman nor Sandicor was a party in either NAR I or NAR II.
Defendants dispute whether Freeman has standing to prosecute a claim for an alleged
violation of an injunction issued in an action to which she was not a party. The defendants
also dispute whether the substance of the injunction was intended to impose price controls or
only assure equal access to SDAR's MLS service. It is unnecessary to reach these issues
because we conclude the complaint on its face shows that the party enjoined, SDAR, is not
the party whose actions Freeman alleged violate the injunction.
Freeman alleged Sandicor was the party selling the county-wide MLS service and
unilaterally setting and collecting the allegedly excessive fees for that service. However, the
complaint did not allege Sandicor is restrained by the injunction against SDAR; to the
contrary, the complaint alleged that only SDAR violated the injunction. An action claiming
violation of an injunction must plead and prove the party was bound by the order and had the
ability to comply with the order. (Board of Supervisors v. Superior Court (1995) 33
Cal.App.4th 1724, 1736-1737.) Assuming arguendo the injunction was intended to place an
upper limit on fees that could be charged for MLS services, the complaint did not allege the
party that set the fees (Sandicor) was bound by the injunction, or that the party that was
bound by the injunction (SDAR) had the ability to comply with the injunction by charging fees
at levels below those set by Sandicor.
DISPOSITION
The judgment is affirmed. Respondents are entitled to their costs on appeal.
CERTIFIED FOR PUBLICATION

McDONALD, J.
WE CONCUR:
BENKE, Acting P.J.
HUFFMAN, J.