Chicago Board of Trade v. United States

Board of Trade of Chicago v. United States
Chicago Board of Trade v. United States, 246 U.S. 231 (1918), was a case in which the Supreme Court of the United States applied the "rule of reason" to the internal trading rules of a commodity market.wikipedia
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Chicago Board of Trade

CBOTBoard of TradeBoard of Trade Building
However, in evaluating the U.S. government's allegations that the Chicago Board of Trade's rules on grain prices violated the Act, the Supreme Court rejected a strict interpretation of its language: "The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition." Defendant Chicago Board of Trade (CBOT) is a commodity market, dealing in spot sales (sales of grain stored in Chicago and ready for delivery), future sales (grain to be purchased for delivery at a later time), and “to arrive” orders (grain which is en route to Chicago).
The Board's restrictions on trading after hours on any prices other than those at the Board's close gave rise to the 1917 case Chicago Board of Trade v. United States, in which the U.S. Supreme Court held that the Sherman Antitrust Act of 1890's language outlawing "every contract ... in restraint of trade" was not to be taken literally, but rather should be interpreted under a "rule of reason."

Rule of reason

test of reason
Chicago Board of Trade v. United States, 246 U.S. 231 (1918), was a case in which the Supreme Court of the United States applied the "rule of reason" to the internal trading rules of a commodity market.
In 1918, seven years later, the Court unanimously reaffirmed the rule of reason in Chicago Board of Trade v. United States.

United States antitrust law

antitrustantitrust lawUS antitrust law
*US antitrust law
In Chicago Board of Trade v. United States the Supreme Court found a "good" restraint of trade.

Supreme Court of the United States

United States Supreme CourtU.S. Supreme CourtSupreme Court
Chicago Board of Trade v. United States, 246 U.S. 231 (1918), was a case in which the Supreme Court of the United States applied the "rule of reason" to the internal trading rules of a commodity market.

Commodity market

commodity tradingcommoditiescommodity markets
Chicago Board of Trade v. United States, 246 U.S. 231 (1918), was a case in which the Supreme Court of the United States applied the "rule of reason" to the internal trading rules of a commodity market. Defendant Chicago Board of Trade (CBOT) is a commodity market, dealing in spot sales (sales of grain stored in Chicago and ready for delivery), future sales (grain to be purchased for delivery at a later time), and “to arrive” orders (grain which is en route to Chicago).

Spot contract

spot pricespotspot rate
Defendant Chicago Board of Trade (CBOT) is a commodity market, dealing in spot sales (sales of grain stored in Chicago and ready for delivery), future sales (grain to be purchased for delivery at a later time), and “to arrive” orders (grain which is en route to Chicago).

Futures contract

futuresfutures contractsfutures trading
Defendant Chicago Board of Trade (CBOT) is a commodity market, dealing in spot sales (sales of grain stored in Chicago and ready for delivery), future sales (grain to be purchased for delivery at a later time), and “to arrive” orders (grain which is en route to Chicago).

Forward contract

forwardsforwardforward transactions
Defendant Chicago Board of Trade (CBOT) is a commodity market, dealing in spot sales (sales of grain stored in Chicago and ready for delivery), future sales (grain to be purchased for delivery at a later time), and “to arrive” orders (grain which is en route to Chicago).

Central Time Zone

Central (CST)CSTCentral Standard Time
CBOT introduced a new “call rule” which regulated board members buying or selling sales of “to arrive” orders—at the close of the call session (which at that point was 2:00 p.m Central Time), the price of grain is set and dealers can't sell grain at any other price.

United States Department of Justice

Department of JusticeU.S. Department of JusticeJustice Department
The United States Department of Justice accused CBOT of price-fixing, and in 1913, filed suit against the Board in the United States District Court for the Northern District of Illinois.

Price fixing

price-fixingfix pricesfixing of prices
The United States Department of Justice accused CBOT of price-fixing, and in 1913, filed suit against the Board in the United States District Court for the Northern District of Illinois.

United States District Court for the Northern District of Illinois

Northern District of IllinoisU.S. District Court for the Northern District of IllinoisN.D. Ill.
The United States Department of Justice accused CBOT of price-fixing, and in 1913, filed suit against the Board in the United States District Court for the Northern District of Illinois.

Monopsony

monopsonistmonopsoniesmonopsonistic
CBOT wanted to curb the power of these monopsony/oligopsony type of buyers by making prices the same for everyone after hours.

Oligopsony

CBOT wanted to curb the power of these monopsony/oligopsony type of buyers by making prices the same for everyone after hours.

Consent decree

consent orderconsent judgmentconsent decrees
The Justice Department and CBOT entered into a consent decree under which enjoined them from acting upon the same or from adopting or acting upon any similar rule.

Louis Brandeis

BrandeisJustice BrandeisLouis Dembitz Brandeis
Justice Brandeis, writing for a unanimous court, first observed that every trade association and board of trade imposes some restraint upon the conduct of its members.

Market power

pricing powerprice takerprice takers
It decreased the market power of dominant sellers and made sure that prices were set by open competitive bidding.

Sherman Antitrust Act of 1890

Sherman Antitrust ActSherman ActSherman Anti-Trust Act
Section 1 of the Sherman Act flatly states: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal."