A Missed Opportunity: Nonprofit Antitrust Liability

Article excerpt

Virginia Vermiculite, Ltd. v. Historic Green Springs, Inc., 307 F.3d 277 (4th Cir. 2002), cert. denied, 123 S. Ct. 1900 (2003).

I

The antitrust laws are meant to govern and promote competition. But how antitrust law should treat nonprofit organizations, whose objectives lie outside the commercial sphere but whose actions nevertheless have economic consequences, is not settled. (1) The Fourth Circuit recently confronted this issue in Virginia Vermiculite, Ltd. v. Historic Green Springs, Inc., in which Virginia Vermiculite, Ltd. (VVL) sued both a competing vermiculite mining company, W.R. Grace & Co. (Grace), and Historic Green Springs, Inc. (HGSI), a nonprofit dedicated to land preservation, under federal and state antitrust and unfair trade laws. (2) Grace had made a series of land donations to HGSI, which VVL claimed had been intended to exclude it from vermiculite reserves in Virginia. In upholding the district court's summary judgment for HGSI, the Fourth Circuit characterized the transactions as unilateral "gift[s]" that HGSI had passively accepted without exercising any "right or economic power." (3)

This Comment argues that the court's approach was mistaken. Although the court may not have wanted to expose a nonprofit to liability, its decision did little to clarify how antitrust law should treat such an entity. Had the court engaged in more complete analysis, rather than focusing on a formal category ("gift"), it would have recognized that Grace's donations constituted concerted action, and not merely a gift. Such analysis would have allowed the court to address more directly whether and how nonprofits may be liable under the antitrust laws. Or, if the court wished to avoid these questions, it should have relied on the facts of the case, which showed that VVL had proven neither anticompetitive effect nor antitrust injury, as required under section 1 of the Sherman Act. (4) Instead, the court's decision both failed to recognize the defendants' concerted action and overlooked the question of competitive effect, thereby missing an opportunity to guide courts and businesses as to the proper scope of the antitrust laws.

II

Vermiculite is a scarce mineral that has been mined domestically only in Virginia, South Carolina, and Montana. (5) Vermiculite concentrates are used in a variety of agricultural and industrial applications, but numerous substitutes exist, and vermiculite mining rights have "no significance independent" of the concentrates market. (6) At the time of the donations, Grace was the second-largest vermiculite mining company in the world. It owned rights to almost all of the vermiculite reserves in Virginia but mined only in South Carolina, (7) finding it unprofitable to set up production facilities in Virginia. (8) VVL was the third-largest player; it operated in Virginia and South Carolina but was exhausting its Virginia reserves. (9)

To keep VVL from acquiring its Virginia reserves, Grace held them dormant, despite receiving no income and incurring various costs as a result. (10) Grace considered selling to VVL, but this was hardly an attractive option since it would have helped a competitor. (11) In the end, Grace donated the land to HGSI, thereby eliminating its costs, locking VVL out of Virginia, improving its public relations, (12) and claiming charitable tax deductions. (13)

Despite HGSI's self-proclaimed preservationist goals, it saw the donations not as a way to prevent vermiculite mining, but rather as a way to exclude VVL from the Virginia reserves. Although prohibitions on mining might have been consistent with preservationist goals, additional details call HGSI's motive into question. For example, HGSI agreed to allow nonvermiculite mining; it also prohibited vermiculite mining "even if restoration methods could ... avoid problems with preservation"; and it prohibited vermiculite mining outside the area HGSI said it was trying to protect. …