Co-Operative Theatres (Co-op), a Cleveland area movie theater booking agent, began seeking customers in southern Ohio. Shortly thereafter, Tri-State Theatre Services (Tri-State), a Cincinnati booking agent, began to solicit business in the Cleveland area. Later, however, Co-op and Tri-State allegedly entered into an agreement not to solicit each other's customers. The Justice Department prosecuted them for agreeing to restrain trade in violation of § 1 of the Sherman Act. Under a government grant of immunity, Tri-State's vice president testified that Coop's vice president had approached him at a trade convention and threatened to start taking Tri-State's accounts if Tri-State did not stop calling on Co-op's accounts. He also testified that at a luncheon meeting he attended with officials from both firms, the presidents of both firms said that it would be in the interests of both firms to stop calling on each other's accounts. Several Co-op customers testified that Tri State had refused to accept their business because of the agreement with Co-op. The trial court found both firms guilty of a per se violation of the Sherman Act, rejecting their argument that the rule of reason should have been applied and refusing to allow them to introduce evidence that the agreement did not have a significant anticompetitive effect. Should the rule of reason have been applied?
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