Ballo v. James S. Black: Washington Court Finds That Developers Involved in Joint Venture Did Not Violate Antitrust Laws

In Ballo v. James S. Black Co., the Court of Appeals of Washington addressed tying arrangements and price-fixing in the context of joint ventures. The court held that developers who set the sale price of lots in a subdivision, and who required a six percent sales commission, did not violate antitrust law where the land they owned was part of a joint venture and occupied a small portion of the relevant market.

James S. Black Co. (JSB) was a brokerage and development firm. Black was a licensed broker. Stack was a residential building contractor, as was Mark. In 1967, Black, Stack, Mark, and others incorporated Comstock Development Corp. (CDC). When CDC was formed, Stack and Mark thought it would provide land upon which to construct homes, and Black thought JSB would market the homes. CDC's sole function was the development and sale of residential building lots. Toward that end, it purchased undeveloped land in the Comstock area. In 1977, Ballo decided to purchase a lot in the Comstock area. Stack offered Ballo a lot at $11,000. Ballo accepted and the sale contract bound Ballo to (1) use the services of the builder to whom the lot was allocated, and (2) pay six percent commission on the combined price of the lot and the estimated price of the house to be constructed. Ballo, who alleged price-fixing and tying arrangement violations, sued Black, Stack, Mark, CDC, JSB, and others.

The Court of Appeals of Washington addressed the applicable standard of review, stating that tying arrangements and price-fixing are traditionally deemed per se violations of antitrust law. The court stated that price-fixing is not a question of whether two or more competitors have literally "fixed" a "price," for when two partners set the price of their goods or services they are literally "price-fixing," but they are not per se in violation of antitrust law. As an example, the court stated that joint ventures are usually not unlawful, at least not as price-fixing schemes, where the agreement on price is necessary to market the product at all. As such, the court held that joint ventures are subject to the Rule of Reason.

The Court of Appeals of Washington stated that the requirements of a joint venture were: (1) a contract, express or implied; (2) a common purpose; (3) a community of interest; and (4) an equal right to control. Here, Black, Mark, and Stack agreed to enter a venture to purchase, develop, and sell residential lots in the Comstock area, and anticipated CDC would supply them with building and marketing work. The court found that this evidence satisfied the requirements of a joint venture.

The Court of Appeals of Washington concluded that the Rule of Reason required consideration of the impact of the activity upon competition in the relevant geographic market which, under antitrust law, is the area to which the purchaser can reasonably turn to obtain the product. The court examined Ballo's course of action in purchasing a home, and found that in addition to the Comstock area, he looked throughout Spokane County. Thus, Spokane County became the market area. The court found that the property held by the joint venture was only a minuscule portion of the geographic market. Thus, the court held the setting of the price for the lots and the six percent commission paid to CDC were reasonable and did not violate state antitrust laws.

Ballo v. James S. Black Co., 39 Wash. App. 21, 692 P.2d 182 (1984).