Full opinion text
OPINION AND ORDER PARTIALLY GRANTING AND PARTIALE DENYING PRELIMINARY INJUNCTION HELLERSTEIN, District Judge. On January 6, 2004, the Court of Appeals for the Second Circuit, affirming and reversing my decision of May 14, 2002, remanded this case to me for further proceedings not inconsistent with its rulings. Freedom Holdings Inc., et al., v. Spitzer, et al., 357 F.3d 205 (2d Cir.2004) (Freedom Holdings I), reh’g denied, Freedom Holdings Inc., et al., v. Spitzer, et al., 363 F.3d 149 (2d Cir.2004) (Freedom Holdings II). The Court of Appeals affirmed my dismissal of the dormant Commerce Clause claim, reversed my dismissal of the Sherman Act claim, and vacated my dismissal of the Equal Protection claim. The Mandate issued on April 30, 2004. Almost immediately afterwards, plaintiffs filed an amended complaint, a motion for summary judgment (the briefing of which is incomplete), and, by Order to Show Cause, a motion for a preliminary injunction. This last motion is before me now, and was the subject of oral argument on May 24 and June 2, 2004. For the reasons stated below, I grant the motion in part and deny it in part. I deny plaintiffs’ motion to the extent that it seeks an injunction against enforcement of the Master Settlement Agreement between forty-six states and the four major cigarette companies and subsequently agreeing cigarette companies. I deny plaintiffs’ motion to the extent that it seeks an injunction against enforcement of the Escrow Statute, N.Y. Pub. Health Law §§ 1399-nn — pp, and the Contraband Statute, N.Y. Tax Law §§ 480(b), 481, 1846. However, I grant plaintiffs’ motion to the extent that it seeks an injunction against enforcing the repeal of the Allocable Share Release provision of the Escrow Statute, N.Y. Pub. Health Law § 1399-pp, as amended, 2003 N.Y. Laws 666, eff. Oct. 15,2003. I. Factual Background Cigarette smoking is a scourge to our society. Before modern prohibitions against smoking in public institutions, cigarette smoke hung like a pall over baseball, basketball, and hockey stadia, fouled the air in the offices where we worked and the homes where we lived, and coated our lungs with tars and other poisons, shortening our lives and injuring our health. In recent decades, many injured parties sued the tobacco companies, with mixed results. In the 1990s, governmental entities brought their own lawsuits, seeking to recover their damage — billions of dollars spent on Medicaid and other health costs caused by cigarette smoking — and to restrict and prevent various advertising and marketing practices of the cigarette manufacturers that tended to popularize cigarette smoking and cause young people to become addicted. On November 23, 1998, a settlement was reached between forty-six states, the District of Columbia and several territories, and the four major cigarette companies, Philip Morris, Inc. (“Philip Morris,” now Altria Group, Inc.), R.J. Reynolds Tobacco Co. (“R.J.Reynolds”), Brown and Williamson Tobacco Co. (“Brown & Williamson”), and Lorillard Tobacco Co. (“Lorillard”). The Master Settlement Agreement (“MSA”), a long and complicated agreement with many annexes, provided for substantial payments by the cigarette com-parries to the states, an ability to recoup settlement costs by passing them on to consumers, incentives to other cigarette companies to join the settlement and protections against those that would not join, and various marketing and advertising restrictions intended to reduce the attraction of cigarettes, especially to young people. A. The MSA The manufacturers who signed the MSA consented to a variety of marketing and advertising restrictions. Signatory manufacturers agreed that they would not “take any action, directly or indirectly, to target Youth within any Settling State in the advertising, promotion or marketing of Tobacco Products.” MSA Art. 111(a). They agreed not to use cartoons such as Joe Camel in advertising or promotions, MSA Art. 111(b), sponsor concerts or major sporting events using tobacco brand names, MSA Art. 111(c)(1), or advertise on billboards, in shopping malls, or in transit systems. MSA Art. 111(d). They agreed to refrain from selling clothing or other merchandise bearing a tobacco brand name, MSA Art. 111(f), and from giving free samples or gifts based on proofs of purchase to youths under age eighteen. MSA Art. 111(g), (h). They pledged not to pay for product placement in movies, television shows, theatrical performances, or video games, MSA Art. 111(e), nor to enter into agreements restricting anti-tobacco advertising. MSA Art. 111(d)(4). Participating manufacturers also accepted limitations on their lobbying rights. They are prohibited from opposing state or local legislation “intended ... to reduce Youth access to, and the incidence of Youth consumption of, Tobacco Products.” MSA Art. III(m)(l). They also may not support congressional legislation which would override the MSA, or challenge state tobacco-related statutes, MSA Art. III(m)(3), V, or promote the diversion of MSA proceeds to uses that are not health-related. MSA Art. III(n). The MSA requires participating manufacturers to develop corporate principles that express their commitment to reducing youth smoking, to communicate those principles clearly to employees and customers, and to designate an executive level manager responsible for identifying methods of reducing youth smoking. MSA Art. III(i)(l), (2). The MSA provides for the dissolution of several tobacco industry nonprofit research or trade organizations, and provides for state governmental oversight of any new tobacco-related trade organizations. MSA Art. III(o), (p). The MSA establishes a National Public Education Fund, financed by proceeds from payments under the MSA, to study and support the reduction of youth smoking and of smoking-related diseases. MSA Art. VI(a). For instance, the fund is authorized to support “sustained advertising and education programs” to counter youth smoking. MSA Art. 111(g). The four major tobacco companies, who were the original participating manufacturers to the settlement (“OPMs”), agreed under the MSA to make three sets of payments for a combined value of approximately $2.4 billion in the first year and $225 billion dollars over twenty-five years. See MSA Art. IX(b), (c). The payments of the OPMs were to be adjusted each year to reflect inflation, miscalculations of relative shares, and various other factors. See MSA Art. IX(b), (c). A Volume Adjustment, MSA Art. Il(aaa), Exh. E, adjusts aggregate payments by the OPMs according to yearly changes in the quantity of cigarettes that they ship in or to the United States. If total shipments increase, the base payment is increased proportionally; if total shipments decrease, the base payment is decreased by 98 percent of the proportion of decrease. MSA Exh. E(A), (B)(i). The payments of each individual OPM were to be adjusted yearly as well, according to changes in its share of the entire United States market for cigarette sales, relative to the shares of the other three OPMs. As an OPM’s market share increased relative to the other OPMs’ shares of the market, so did that OPM’s burden of payments relative to those of the other OPMs; as its relative market share decreased, so did its relative burden. MSA Art. II(mm). The settling states and territories agreed to allocate amongst themselves the moneys derived from the OPMs’ payments under the MSA. Art. 11(f), at 4, Exh. A. The percentages, or allocable shares, were negotiated among the settling states to reflect total smoking population, health care costs, and other relevant considerations. By far the largest allocable shares are those of California, 12.7639554 %, and New York, 12.7620310 %, The next largest allocable share is Pennsylvania’s, which is 5.7468588 %, less than half of New York’s. Kentucky’s allocable share is 1.7611586 %. The MSA provides an incentive for other cigarette manufacturers to join the payments scheme. Subsequent participating manufacturers (“SPMs”) who agreed to join the MSA within the first sixty days after its execution by the OPMs were “grandfathered” into their 1998 market share or 125 % of their 1997 market share, whichever is greater. Grandfathered SPMs become liable for payments to the states only to the extent that their market share increases above those grandfathered levels; above those levels, their required payments are measured by the degree to which their yearly market shares increase relative, not to the entire market, but to the aggregate market share of the OPMs. MSA Art. IX(i). The relationship is reflected in the formula: (current market share — 1998 [or 125 % of 1997] market share) / (current aggregate market share of OPMs). As the Court of Appeals observed, the formula imposes on SPMs a payment obligation that increases by more than its proportional growth of market share: If the denominator were current aggregate market share of OPMs and SPMs, gaining market share from OPMs would be less harmful for SPMs, because the denominator would not change even when the numerator increased. But under the MSA, if the numerator increases because the SPM has taken market share from an OPM, the denominator decreases by the amount of the increase. Thus, the SPM’s proportion of the annual payment increases by more than its proportion of overall market share. Freedom Holdings II, 363 F.3d at 153. Thus, SPMs pay nothing to the-states for their cigarette sales at or below their base of 1998 (or 125 % of their 1997) market share, but disproportionately higher payments for cigarette sales that increase their market shares above those levels, relative to the market shares of the OPMs. The MSA provides a different protection relative to non-participating manufacturers (“NPMs”), by providing incentives to the states to enact legislation aimed at preventing NPMs from benefiting competitively by avoiding the onus of payment obligations to the states. The Escrow and Contraband Statutes, passed in virtually every signatory state, are the result of these provisions of the MSA. N.Y. Pub. Health Law §§ 1399-nn — pp; N.Y. Tax Law §§ 480(b), 481, 1846. The MSA provides an NPM Adjustment, reducing payment obligations of PMs to the extent they lose market share to NPMs. However, the NPM Adjustment does not take effect if a state enacts Escrow or similar statutes imposing payment obligations on NPMs to the states. If a state fails so to legislate, payment obligations of the participating manufacturers (“PMs”) are reduced by triple the PMs’ aggregate market share loss for market share loss of between zero and 16% %. If the market share loss increases above 16% %, the trebling provision is replaced by a complex formula potentially increasing the PMs’ discount. MSA Art. IX(d)(l)(A). The NPM Adjustment is subject to several other conditions. It does not apply until cigarette shipments fall below 1997 levels. MSA Art. IX(d)(l)(D). The independent auditor appointed to administer the MSA must certify “that the disadvantages experienced as a result of the provisions of this Agreement were a significant factor contributing to the Market Share Loss.” MSA Art. IX(d)(l)(C). And, as noted, the NPM Adjustment will not apply to any state which enacted an Escrow Statute, “and diligently enforced the provisions of such statute.” MSA Art. IX(d)(2)(B). The Escrow Statute is intended to “effectively and fully neutralize[ ] the cost disadvantages vis-a-vis Non-Participating Manufacturers.” MSA Art. IX(d)(2)(E). The Escrow Statute, passed by New York on November 27, 1999, “imposes a perpack fee on NPM-manufactured cigarettes that adds to the resale price of the product.” Freedom Holdings I, 357 F.3d at 212. This fee, which is paid to an escrow account from which NPMs can recover under several eventualities, is currently $.0167539 per cigarette sold, or $3.35078 per carton, and increases slightly over time. NPMs are entitled to receive interest on their payments while in escrow. MSA Exh. T; N.Y. Pub. Health Law § 1399-pp(2)(b). NPM payments are not made variable according to changes in their market shares, as are the payment obligations of the OPMs. Unlike SPMs, NPMs are not “grandfathered” and entitled to exclude a certain percentage of their sales below a base level. While PMs’ payments are tax deductible, NPM escrow payments are probably not tax deductible, with the possibility (disputed) that they could become tax deductible if rights to reversion and interest were to be surrendered. Under the Escrow Statute as initially enacted, see MSA Exh. T., N.Y. Pub. Health Law § 1399-pp (McKinney 2002), 1999 N.Y. Laws 536, eff. Nov. 27,1999, an NPM could recover funds that it placed into escrow under three circumstances. First, the funds placed into escrow could satisfy a judgment or settlement on a tobacco-related claim. Second, an NPM could recover funds that it placed into escrow in a particular state to the extent that those funds exceeded the amount that that state would have received from that manufacturer as its allocable share, had the manufacturer been an SPM. Third, to the extent that an NPM does not recover from the escrow fund through those two methods, its funds are to be released from escrow after twenty-five years. Id. § 1399-pp(2)(b). The statutory provision allowing for the second of these three methods of releasing funds, N.Y. Pub. Health Law § 1399-pp(2)(b)(ii), is commonly known as the Allocable Share Release provision. The Contraband Statute was passed by New York on December 28, 2001, as an enforcement mechanism for the Escrow Statute. As described by the Court of Appeals, Freedom Holdings I, 357 F.3d at 213-15, it requires each manufacturer to certify annually that it is either a PM making payments under the MSA, or in compliance with the Escrow Statute. If a manufacturer fails so to certify or if the Commissioner of Public Health determines that the manufacturer is in violation of the Escrow Statute, state tax stamp agents are prohibited from stamping that manufacturer’s cigarettes. Penalties for violation of the Contraband Statute include seizure and forfeiture of cigarettes, monetary liability, and suspension or cancellation of the manufacturer’s license. N.Y. Tax Law §§ 480-b, 481,1846. The Allocable Share Release provision was amended, effective in New York on October 15, 2003, and to date the same amendment has been passed in approximately thirty states. Under the amended law, an NPM can recover funds it placed into escrow only to the extent that they are greater than the total amount of payments that manufacturer would have been required to pay to all states had it been an SPM. N.Y. Pub. Health Law § 1399-pp, as amended, 2003 N.Y. Laws 666, eff. Oct. 15, 2003. The statutory amendment provides, in effect, that escrowed amounts formerly returned to NPMs would now be retained in escrow for 25 years, and in the interim would be available only to satisfy a judgment or settlement on tobacco-related claims. B. Statistical Data The payment obligations of the OPMs are stated in base amount in the MSA, but are adjusted according to several formulae which take market share and other factors into account. The payment obligations of the SPMs are based on their relative market shares and those of the OPMs. By contrast, the NPMs’ payments are a flat fee per cigarette sold. The contrast makes the various types of payments difficult to compare, leaving it open to question which manufacturers 'have, in practice, paid higher or lower amounts under the MSA, or whether any such differences are material. Statistical data provided by PriceWaterhouse Coopers, the independent auditor responsible for overseeing the calculations to be made pursuant to the MSA, show that payments per carton have been as follows: Year OPM SPM Grandfathered SPM Not Grandfathered NPM 1999 $3.92600 $0.48336 $2.02476 ' $2.01656 2000 $4.34052 $0.69332 $2.36810 $2.34180 2001 $5.15794 $1.15656 $3.13972 $3.12976 2002 $4.98840 $1.61918 $3.28210 $3.27330 2003 $4.16913 $1.83088 $3.97212 $3.96144 According to these figures, in any given year, the OPMs have had the highest per cigarette payment obligations, and the SPMs who have had the benefit of averaging their costs because of the benefits given to them under the grandfather clause, have had the lowest. NPMs’ payment obligations have been between these two poles. NPMs’ payment obligations have consistently been less than, although very close to, those of SPMs who did not have the benefit of the grandfather clause. Plaintiffs also allege that NPMs’ escrow payments are taxed, while the MSA payments of PMs are tax deductible. In response, New York State (the “State”) submits an affidavit by Marvin Chirelstein, tax professor at Columbia Law School, who maintains that the NPMs’ payments could be structured as tax deductible, if the NPMs were willing to cede their rever-sionary and interest rights in those payments. The State supports this assertion with an affidavit by Todd Kerner, a New York State taxation agent, who maintains that if an NPM would attempt to cede its reversionary rights and structure its payments as Professor Chirelstein suggests, New York (and presumably other states) would accept the payments as fully deductible. Plaintiffs contend that they have tried that in other states, but have been blocked from doing so, and that PriceWa-terhouse has also taken the position that escrow payments are not tax deductible. Moreover, the State has submitted no evidence on the position of the IRS regarding the relative tax treatment of PM and NPM payments. Of equal importance to the volume of payments is their effect on, or reflection of, competition. According to the data provided by PriceWaterhouse, the volume of OPM sales has decreased since the signing of the MSA, from 455 billion cigarettes in 1998 to 344 billion cigarettes in 2003, a reduction of 24 percent. Prices charged by the OPMs increased during this period, not only to cover the cost of the settlement with the states, estimated at $.19 per pack, but by $.45 per pack when the MSA was signed in November 1998 and, including subsequent increases, by a total of $1.27 through April 2002. The average retail price of an OPM-manufactured pack of cigarettes was $1.49 per pack before the MSA was signed in November 1998 and $2.76 per pack in April 2002, an increase of over 85 percent. As the volume of OPM sales fell between 1998 and 2003, the volume of SPM sales rose from 14.12 to 30.08 billion cigarettes, or 113 percent. The volume of NPM sales rose even more during this same period, from 2.43 to 33.31 billion cigarettes, or 1271 percent. The market share of the OPMs shrank over this time period from 96.5 % to 84.5 %. The market share of the SPMs grew from 3 % to 7.4 %, and the market share of the NPMs grew from 0.5 % to 8.2 %. The following chart reflects the shift in volume and market share from 1998 to 2003. Year OPMs (billions; %) NPMs (billions; %) Total SPMs (billions; %) 1998 455.22 96.5% 14.12 2.43 0.5% 471.77 00 ^ 1999 422.00 92.3% 18.00 17.10 3.7% 457.10 CO co 2000 401.49 91.4% 22.63 14.89 3.5% 439.01 Ol to 2001 388.31 89.4% 26.70 18.70 4.4% 05 to 2002 364.31 86.1% 30.67 28.20 6.7% -Cl to 7.4% 2003 344.61 84.5% 00 o oo bo CO CO CO o © 00 7.5% 2004 (est.) 335 83.75% o o oo ^ ox CO OX CO o The percentages of market shares among the OPMs have also changed, although not to as large an extent. In 1998, Brown & Williamson made 15.4 percent of total sales by OPMs. By 2003, that figure had declined to 11.5 percent, a loss of over 25 percent of its relative market share. Philip Morris gained commensurately; as a percentage of total OPM sales, its share rose from 50.5 percent in 1998 to 54.7 percent in 2003. The relative market shares of Lorillard and R.J. Reynolds, as percentages of total OPM sales, have remained relatively consistent since the MSA was signed. Lorillard’s relative market share has stayed between 9.4 percent and 10.8 percent. R.J. Reynolds’s relative market share has hovered between 23.5 percent and 25.1 percent. The statistical trend of declining volume and market share on the part of the OPMs, and increasing volume and market share of NPMs, has been the subject of concern to the OPMs. In the months following the signing of the MSA, the OPMs’ share prices fell steeply, but the prices began rising in early 2000 and substantially recovered by early 2002. During 2002, in order to hold market share, the OPMs began offering a variety of promotions, including buy-two-get-one-free giveaways. In response, the OPMs’ stock prices once again began to decline. Philip Morris announced on September 26 and November 12, 2002 that it would not meet growth forecasts, and its share price fell further, declining from approximately $58 per share in June 2002 to under $30 per share in early 2003. R.J. Reynolds’s share price fell from over $70 per share to $27 per share in the same time period. Altria, which in 2002 became the new name of the parent company which was formerly Philip Morris, began the Business Review section of its 2002 Annual Report by listing “heightened competition” among the factors responsible for the weakened position of its domestic tobacco manufacturing subsidiary, Philip Morris USA: The year was characterized by the convergence of several factors, including a weak economic environment and resulting consumer frugality, sharp increases in state excise taxes and heightened competition. Industry shipment volume in 2002 ... declined by 3.7 % to 391.4 billion units, while PM USA’s shipment volume declined 7.5 % to 191.6 billion units. Altria explained, however, that it had “strategies in place” to ensure a stronger market position in the future, and in the Business Review section of its 2003 Annual Report, Altria described its strategies in more detail, including lobbying for federal and state initiatives that are designed to provide governments with additional tools to ensure that cigarette manufacturers comply with their Master Settlement Agreement (MSA) payment obligations or the escrow deposit requirements of related state laws, that the availability of counterfeit cigarettes is significantly reduced, and that the illegal sale of cigarettes and non-payment of taxes are dealt with effectively. Significant progress has been made on many of these issues. Prior to 2003, only eight states had passed Contraband Statutes; during 2003, thirty-one did. On March 20, 2003, West Virginia became the first state to repeal its Allocable Share Release provision and, by year’s end, eighteen states, including New York, had followed suit. The OPMs’ stock prices began to rise in May 2003, and have generally continued in the same direction since then. Altria described its market position more positively in its 2003 Annual Report, noting that “Philip Morris USA Inc. (PM USA) volume began to stabilize and its retail share increased sequentially during each quarter of 2003, with improved results in the fourth quarter.” The record does not provide a satisfactory economic analysis as to the cause of the statistical trends which have seen OPMs’ market shares decline steadily since 1998, notwithstanding the enactment of Escrow and Contraband Statutes, and which have seen SPMs’ and NPMs’ market shares rise. The Court of Appeals, accepting the allegations of the complaint, ruled that the MSA created the constituent elements of a cartel, Freedom Holdings I, 357 F.3d at 226, but the statistical trends are not consistent with those rulings and, indeed, contradict them. The plaintiffs alleged, and the Court of Appeals assumed, a large degree of inelasticity of demand, but the price increases imposed by the OPMs have resulted in loss of market share to OPMs, in favor of both SPMs and NPMs. The Escrow and Contraband Statutes were enacted by the states in response to the incentives provided to them under the MSA to create equivalent obligations on NPMs to those imposed on OPMs and SPMs. See MSA Art. IX(d)(2)(E) (Escrow Statute “effectively and fully neutralizes” competition from NPMs). Yet the statistical trends have shown no adverse competitive impact on the NPMs following passage of those Statutes. An explanation offered by the NPMs may be found in the workings of the Allo-cable Share Release provision. As explained above, the MSA allocates among the various settling states the moneys paid by PMs according to each state’s allocable share. MSA Art. 11(f), at 4; Exh. A. Under the Escrow Statute as initially enacted, see MSA Exh. T., N.Y. Pub. Health Law § 1399-pp (McKinney 2002), 1999 N.Y. Laws 536, eff. Nov. 27, 1999, an NPM could recover funds that it placed into escrow in a particular state to the extent that those funds exceeded the amount the state would receive from that manufacturer as its allocable share, had the manufacturer been an SPM. Thus, an NPM, by concentrating its distribution regionally, to just a few states, could recover a greater percentage of the total money it placed into escrow because those states were allowed to retain only their relatively small percentage shares. In practical effect, the Allocable Share Release provision provided NPMs with substantial competitive advantages from concentrating their efforts on regional cigarette distribution. If an NPM distributed its cigarettes nationally, and its distribution patterns approximated those of the national market, its payment obligations on its national sales would be apportioned 100 percent among the settling states, with the result that something close to 100 percent of its payments would, in the aggregate, be retained under the Escrow Statute and not released under the Allocable Share Release provision. However, if an NPM were to concentrate its business to the New York — New Jersey — Connecticut area, for instance, it could gain a competitive advantage in that region, because it would make 100 % of its sales there and would be able to recoup the payments on all but roughly 16.5 % of them, these being approximately the percentage shares of those states. While the OPMs and SPMs would be required to continue 100 % of their payments under the MSA, an NPM which focused on the New York metropolitan area could be exempt (aside from the time-value of its money between when it was escrowed and when it was released) to the extent of over 80 % of its business. The Declaration of Everett W. Gee III, submitted by plaintiffs, demonstrates this strategy. Gee, the Vice President and General Counsel to S & M Brands, Inc., a Virginia-based NPM, explained that his company was presented with the option of (1) signing the MSA, becoming an SPM, and reducing its ability to increase sales beyond their 1998 (or 125 % of their 1997) levels; or (2) not signing the MSA, “but remainfing] regional so as to avoid making payments on a national scale.... Thus, S & M gave up its dream to be national, settling into the MSA’s rules even as an NPM by remaining a regional presence.” By selling only in the Southeast, S & M was able to keep its prices lower and continue its growth within that regional market. Plaintiffs allege that the repeal of the Allocable Share Release provision has halted this process. An NPM can effectively no longer recover funds it placed into escrow, except to pay a judgment or settlement against it, or after 25 years. See N.Y. Pub. Health Law § 1399-pp, as amended, 2003 N.Y. Laws 666, eff. Oct. 15, 2003. Thus, according to plaintiffs, the barriers against NPMs have been heightened dramatically, and the ability of an NPM to gain a competitive advantage within a regional market has been essentially arrested. However, no independent statistical information has been presented to confirm, or rebut, this thesis; the change in law is too recent. C. Procedural Background In April 2002, Freedom Holdings Inc. and International Tobacco Partners, Ltd., two cigarette importers who were not participants to the settlement, and who imported cigarettes from foreign manufacturers who were also not participants to the settlement, filed this lawsuit on behalf of themselves and others similarly situated. By their lawsuit, they sought to enjoin New York State from enforcing the MSA to the extent that it preserved the market domination of the OPMs amongst themselves and against others, and the statutes passed by the State to enforce the MSA against non-participating companies like plaintiffs. The State moved to dismiss, and I granted its motion. Relying on Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), I held that the anti-competitive provisions notwithstanding, the State had acted pursuant to its traditional police powers, and such action was protected against the reach of the federal antitrust laws. The Court of Appeals reversed, holding that plaintiffs had alleged valid claims for relief as to their antitrust and equal protection counts, and remanded the case to me. Two of the three judges constituting the panel held that the State had not sufficiently articulated the policy goals that made it necessary to allow the major cigarette manufacturers to organize themselves into a cartel, and all three judges held that the State had not regulated the anticompetitive features of the settlement to minimize their anticompetitive effects in relation to the states’ concerns for the public health of their citizens. The Court of Appeals ruled that where a state statute restricts competition, the question whether the statute is preempted by the Sherman Act “is determined by a two-step analysis”: The plaintiff must first show that the scheme of market control created by the statute would constitute a per se violation of the Sherman Act if brought about by an agreement among private parties .... Even if a per se violation is shown, the alleged anticompetitive scheme may still be immunized under the Parker state action doctrine ... if: (i) the restraint in question is “clearly articulated and affirmatively expressed as state policy” and (ii) the policy is “actively supervised” by the state itself. Freedom Holdings I, 357 F.3d at 222-23 (quoting Cal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97, 105, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980)). Based on the allegations of the complaint and on the Third Circuit’s decision in AD. Bedell Wholesale Co. v. Philip Morris, Inc., 263 F.3d 239 (3d Cir.2001), the Court of Appeals ruled: The alleged arrangement, even without the protection of the Contraband Statutes as enforced by wholesalers, would be a per se violation because it is a naked restraint on competition, albeit one subject to erosion by NPMs. With the Contraband Statutes in force, the scheme as alleged threatens to become a permanent, nationwide cartel.... We therefore hold that appellants have sufficiently alleged a per se violation of the Sherman Act. Freedom Holdings I, 357 F.3d at 226. A flat state tax on all manufacturers and importers of cigarettes, measured by their sales rather than their market shares, and without the protective features of the MSA tending to preserve market shares, could have just as easily vindicated the interests of the states. However, the Court of Appeals held, the per se violation of the Sherman Act notwithstanding, the restraint on competition imposed by the MSA and the statutes enacted pursuant to the MSA could be saved from illegality if the Parker v. Brown exception, exempting state action from the preemptive effect of the Sherman Act, were to apply. As the Court of Appeals explained, the exception for state action applies “only if (i) the restraint in question is ‘clearly articulated and affirmatively expressed as state policy,’ and (ii) the policy is ‘actively supervised’ by the State itself.” Freedom Holdings I, 357 F.3d at 226 (quoting Midcal, 445 U.S. at 106, 100 S.Ct. 937). On the first of these two prongs, the Court of Appeals ruled that the action was in fact taken by the State, and it reduced the question to whether “the State’s policy goals are sufficient to qualify for the Parker immunity — simply protecting private parties from competition is not a sufficient goal.” Id. at 227. Reviewing the legislative history of the Escrow and Contraband Statutes, the Court of Appeals ruled that the State’s interest in protecting and enhancing the revenue it expected from the MSA animated the passage of the statutes far more than the conclusory rationale of protecting the public health. Id. at 227-31. Because, the Court of Appeals held, “the MSA requires the PMs to pay a fixed fee per cigarette but leaves them free to set whatever price they choose, the resolution of the priee/sales/public health conflict is left by the MSA to the PMs,” whose concern is for profits rather than public health. Id. at 230. Accordingly, the Circuit held that “the relationship of such [public health] benefits to the restraint on competition is not obvious and may even be counterproductive.” Id. at 230-31. Addressing whether the allegedly anti-competitive provisions are “actively supervised” by the State, the second prong of Midcal, the Court of Appeals held that they are not. Id. at 231. Finally, the Second Circuit rejected the State’s argument that the MSA reflected Noerr-Pen-nington rights, rights under the First Amendment to petition the state governments for relief. The Court of Appeals held that the First Amendment doctrine is irrelevant to the issues arising from the complaint. Id. at 233. The Court of Appeals, with respect to all these rulings, emphasized that it was dealing with only the allegations of the complaint, and was assuming the truth of facts and conclusions alleged by the plaintiffs. Judge Sack, concurring, agreed with the majority that the State had not satisfied the second Midcal prong, requiring the State’s active supervision of the anti-competitive features of the MSA, but differed with the majority as to the first Midcal prong. That prong, Judge Sack stated, “requires only that the state offer a clear articulation of a state policy to authorize anticompetitive conduct,” and “seems easily met here, or at least seems as though it would be capable of proof before the district court on remand.” Id. at 236. As Judge Sack put it, “The ‘clear articulation’ standard is not strict.” Id. Judge Sack thus expressed doubt that the majority should have impugned the State’s motivation for entering into the MSA, and questioned whether comparing the MSA’s payment provisions with a flat tax was appropriate. Id. at 238-39. He commented that since “this action is being returned to the district court for further proceedings ... the State may be able to satisfy both Midcal factors as a matter of fact.” Id. at 238. Defendants petitioned the panel for reconsideration, but the Court of Appeals confirmed its rulings, in an opinion dated March 25, 2004. The State argued that “the complex market share arrangements of the MSA” were not anticompetitive, as the Court of Appeals had ruled, but “have no purpose other than to impose a flat levy per cigarette sold.” Freedom Holdings II, 363 F.3d at 152. The Court of Appeals rejected the State’s arguments, commenting that on the State’s view, the MSA’s payment provisions would amount to “a superfluous maze leading to a result that could have been achieved in a simple, straight-forward manner.” Id. Judge Winter, again writing for the panel and “[c]on-struing the complaint’s allegations most favorably to the plaintiffs,” id., ruled that the MSA (1) confers tax benefits on SPMs over NPMs; (2) confers benefits on SPMs who joined the MSA within sixty days of its execution over those SPMs who joined later; and (3) confers benefits on OPMs over SPMs, by penalizing SPMs for increases in market share to an extent greater than their actual market gains. Id. at 153. Judge Winter ruled that these features, and others, gave rise to a cartel favoring the OPMs, inter se and against SPMs and NPMs, and constituted a per se violation of the antitrust laws. The Court of Appeals reaffirmed that the State’s policy goals failed to exempt it from antitrust liability. Parker v. Brown did not apply, the Court of Appeals held, because the State did not relate the anti-competitive features of the Escrow and Contraband Statutes to the legitimate State policies of protecting public health and forcing cigarette manufacturers to assume the costs of health care caused by their marketing and sale of cigarettes. As the Court of Appeals explained, the State “never states how the alleged market-sharing scheme furthers those goals. It simply denies that the market-sharing scheme is anticompetitive, leaving the purpose of this complex, carefully drafted set of rules an enigma.” Id. at 156. Clarifying its earlier decision, the Court of Appeals allowed that Parker v. Brown might be satisfied even without the State’s articulation of how the MSA furthered legitimate State policies, so long as the State “actively supervised” the cartel created by the MSA. Referring to the requirement that the State articulate why the anticom-petitive features of the MSA express legitimate State policy as the “ancillary purpose” of the first prong of Midcal, Judge Winter stated, “the Parker analysis and the ancillary purpose of the Midcal prong are interchangeable,” and the “failure to meet the ancillary purpose test alone— where Parker was clearly satisfied ...— would not be enough to upset a statute.” Id. at 155. The holding of the Court of Appeals, Judge Winter stated, “expressly relied on the challenged scheme’s failure to meet the second Midcal prong,” the requirement of the State’s active supervision. Id. at 157. In so ruling, the Court of Appeals emphasized, it was deciding on a Rule 12 motion, and accepting the allegations of the complaint as if proved, without having ascertained if plaintiffs could actually prove the anticompetitive facts they alleged. Thus, the Court of Appeals reversed my decision of May 14, 2002 and reinstated the complaint. Id. at 151. Following remand, plaintiffs amended their complaint and moved for a preliminary injunction, seeking to enjoin New York State from enforcing the MSA, and the statutory enactments ancillary to the MSA, as respects Non-Participating Manufacturers and importers. Specifically, they seek to enjoin enforcement of the Escrow Statute, N.Y. Pub. Health Law § 1399-pp; the Contraband Statute, N.Y. Tax Law §§ 480-b, 481, 1846; and the recently amended Allocable Share Release provision, N.Y. Pub. Health Law § 1399-pp, as amended, 2003 N.Y. Laws 666, eff. Oct. 15, 2003. They argue that these laws enforce a cartel which has the purpose and effect of maximizing the OPMs’ profits and discouraging the sales of cigarettes by NPMs. New York State, opposing the motion, argues that the statistical evidence of competition, compiled by a neutral and nationally recognized firm of certified public accountants appointed pursuant to the MSA, is inconsistent with the existence of a cartel, and disproves it. All that is happening, the State argues, is that NPMs are not being allowed to skim the market, to take advantage of the fact that competitor cigarette manufacturers responsibly pay for the public health costs they create while the NPMs do not, and in so doing unfairly jeopardize the public health purposes that the MSA advances. The NPMs, the State argues, are being asked to pay no more into escrow than the amounts that PMs are required to pay, so that all incremental costs in relation to cigarette sales, from whatever source, are equal, per cigarette sold. Furthermore, the State argues, the articulation of a public purpose animating the MSA is plain and clear to see: (1) the MSA effectively shifts the costs of injury to the public health from the states to the companies that caused those injuries, and (2) the shifting of such costs by cigarette manufacturers to consumers, adding to the price of cigarettes, along with severe restrictions on future advertising and marketing by cigarette manufactures, particularly as directed towards young people, effectively deters consumers from purchasing the volume of cigarettes that they once did. Plaintiffs argue that the MSA, and the ancillary statutory enactments, have created a cigarette cartel, well beyond any legitimate state interest. The MSA, they argue, provided for yearly adjustments of payments to the states according to percentage changes of market control, thus tending to reward market-share stability. Furthermore, the NPM Adjustment, by reducing payment obligations of OPMs corresponding to three times their losses of market share from sales gained by NPMs unless states enact and defend measures against NPMs, creates incentives to states to enforce the MSA against NPMs and deter competition from NPMs. As to contrary statistical trends, plaintiffs attribute the sales growth of NPMs to a certain slowness by the states in enforcing the MSA. The recent amendment by New York and most other participating states of the Allocable Share Release provision should, it is expected, reverse the secular trends and protect the market share of the PMs. Indeed, according to plaintiffs, insuring a continuing flow of money from PMs gives the states a strong incentive to enact ever more stringent laws to assure that the PMs’ market positions remain secured, protected by their settlements with the states. I have carefully reviewed the record supporting, and opposing, plaintiffs’ motion for a preliminary injunction, and heard both sides in extended argument, spreading over two days. I hold that plaintiffs have shown neither a likelihood of success on the merits nor irreparable damage with respect to the MSA, the Escrow Statute, or the Contraband Statute sufficient to justify preliminary injunctive relief. However, the recent repeal of the Allocable Share Release provision threatens to jeopardize the ability of the NPMs to compete with the SPMs and OPMs, and thereby to cause them serious and irreparable injury. To that extent only, a preliminary injunction will be granted. Since this issue, and all others, will have to be fully explored at trial, my ruling will have the effect of preserving the competitive status quo until the trial and final judgment. II. Discussion A. Standard for Preliminary Injunction Generally, “[preliminary injunctive relief is appropriate when a plaintiff establishes (1) the likelihood of irreparable injury in the absence of such an injunction, and (2) either (a) likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation plus a balance of hardships tipping decidedly in [plaintiffs] favor.” Wisdom Import Sales Co. v. Labatt Brewing Co., 339 F.3d 101, 108 (2d Cir.2003) (brackets in original). In several circumstances, however, a heightened standard must be satisfied. Two such circumstances are present here. First, a heightened standard applies “where (i) an injunction will alter, rather than maintain, the status quo, or (ii) an injunction will provide the movant with substantially all the relief sought and that relief cannot be undone even if the defendant prevails at a trial on the merits.” Tom Doherty Assocs., Inc. v. Saban Entertainment, Inc., 60 F.3d 27, 34 (2d Cir.1995). An injunction in such a case is considered “mandatory” because it “is said to alter the status quo by commanding some positive act.” Id. In such a situation, plaintiffs must show “a greater likelihood of success” and make “a clear showing that the moving party is entitled to the relief requested, or [that] extreme or very serious damage will result from a denial of preliminary relief.” Id.; see also Great Earth Int’l Franchising Corp. v. Milks Developments, Inc., 302 F.Supp.2d 248, 251 (S.D.N.Y.2004). Although no positive act would be required by an injunction here, the scope of injunctive relief requested by plaintiffs would significantly alter the status quo, give plaintiffs substantially all the relief they seek, and cost defendants revenue in ways that they claim could not be undone. Accordingly, the heightened Tom Doherty standard applies here. A heightened standard is also appropriate “where the moving party seeks to stay governmental action taken in the public interest pursuant to a statutory or regulatory scheme.” Plaza Health Laboratories, Inc. v. Perales, 878 F.2d 577, 580 (2d Cir.1989); see also Bery v. New York City, 97 F.3d 689 (2d Cir.1996) (quoting Plaza Health Labs). In such a situation, the moving party must establish “a probability of success on the merits,” Plaza Health Labs., 878 F.2d at 580. Accordingly, plaintiffs may not obtain an injunction by showing a reasonable question on the merits plus a balance of hardships tipping in their favor. Plaintiffs must instead satisfy the stricter preliminary injunction standard, by demonstrating both a dear showing of irreparable injury in the absence of such an injunction, and a greater likelihood of success on the merits. Plaza Health Labs., 878 F.2d at 580; see also Tom Doherty, 60 F.3d at 34 (requiring irreparable injury and “a more substantial showing of likelihood of success”); Tunick v. Safir, 209 F.3d 67, 70 (2d Cir.2000) (equating the Tom Doherty and the Plaza Health Labs standards). Plaintiffs argue that the Clayton Act provides a less stringent standard, requiring a showing of only “threatened loss or damage.” 15 U.S.C. § 26 (covering any “violation of the antitrust laws”). But plaintiffs are mistaken. This provision eases the requirement of standing for suit under the antitrust laws, allowing suit for threatened rather than actual harm. It does not affect the standard for granting a preliminary injunction. See Christian Schmidt Brewing Co. v. G. Heileman Brewing Co., 753 F.2d 1354, 1358 (6th Cir.1985) (“the courts have recognized a lower threshold standing requirement” under this provision; nevertheless, “although there is a lesser threshold standard, plaintiffs must nonetheless make a sufficient showing of potential or threatened antitrust injury to meet the customary requirements for a grant of preliminary in-junctive relief’); Kay Instrument Sales Co. v. Haldex Aktiebolag, 296 F.Supp. 578, 579 (S.D.N.Y.1968) (“In determining whether to issue a preliminary injunction, however, there is nothing exceptional by reason of the presence of antitrust elements; the normal principles of equity are applicable.”). Indeed, the text of the statute provides that an injunction can be obtained “under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity.” 15 U.S.C. § 26. Accordingly, the heightened standard applies. See Tr. June 2, 2004, at 4. B. Likelihood of Success on the Merits In order to show a likelihood of success on the merits, plaintiffs must show, first, a likelihood that the MSA, Escrow Statute, Contraband Statute, and amended Alloca-ble Share Release provision establish a cartel constituting a per se violation of the federal antitrust laws, see Freedom Holdings I, 357 F.3d at 222-23, and second, a likelihood that the antitrust violations are not exempt from the reach of the antitrust laws under the doctrine of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). I address the two issues in turn, recognizing that the two decisions of the Court of Appeals state the law of the case which I must follow but that they are based, not on fact, but on plaintiffs’ allegations of fact that they claim to be able to prove. The facts as proved, however, tell a quite different story, giving rise to very different applications of the same principles of law. 1. Per Se Violation The opinions of the Court of Appeals did not define what conduct constitutes a “per se violation” of the antitrust laws. The caselaw and literature suggest several strands of understanding, giving rise to different legal conclusions. Under one strand of understanding, the term could be shorthand for a category of cases where a court, instead of having again to consider alleged defenses that previous cases have rejected, might sweep away these failed justifications, shortcut the traditional “rule of reason” analysis, and peremptorily hold the conduct invalid. But the term also could be applied to hold an entire class of activities invalid per se, without even considering any justifications. In the instant case, upon the facts presented, it is unclear that the MSA and the challenged statutes amount to a per se restraint on competition. The first strand of caselaw may be best viewed through the lengthy discussion of the per se rule found in National Collegiate Athletic Ass’n v. Board of Regents, 468 U.S. 85, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984) (NCAA). In that case, the NCAA had established a limit on the number of college football games which could be televised. The University of Oklahoma contracted to televise more games than the NCAA would permit, and it challenged the NCAA’s limitation as an antitrust violation. The Supreme Court explained that the per se standard would normally be applied to cases involving price fixing and output limitations, since these practices “always or almost always tend to restrict competition and decrease output.” Id. at 100, 104 S.Ct. 2948 (quoting Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 19-20, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979)). The Court declined to apply the per se rule, however, holding that horizontal restraints were desirable “[i]n order to preserve the character and quality of the ‘product,’ ” college football. Id. at 104, 104 S.Ct. 2948. The Court proceeded to analyze the restriction under the rule of reason, explaining that “the essential inquiry” of both the per se rule and the rule of reason “remains the same — -whether or not the challenged restraint enhances competition.” Id. Stating that “there is often no bright line separating per se rules from Rule of Reason analysis,” the Court instructed that because under both tests “the criterion to be used in judging the validity of a restraint on trade is its impact on competition,” the per se rule, despite its name, “may require considerable inquiry into market conditions before the evidence justifies a presumption of anticompetitive conduct.” Id. at 104 & n. 26, 104 S.Ct. 2948. The Court cited the example of Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984), which held that because the conduct at issue may have had beneficial justifications, it was “inappropriate to condemn without considerable market analysis.” NCAA, 468 U.S. at 104 n. 26, 104 S.Ct. 2948. The foremost treatise on antitrust law also observes that the per se and reasonableness approaches may be seen as a “single inquiry with varying presumptions.” VII Philip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1511, at 418 (2d ed.2003). As Professor Areeda explains it, the per se rule developed as “merely a special case of the rule of reason,” because it was an analysis that was “generalized for a class of behavior or for a class of claimed defenses” which could be analyzed similarly in almost all cases. Id. ¶ 1509a, at 396. In many instances, the behavior could be analyzed similarly because “the conceivable social benefits are few in principle, small in magnitude, speculative in occurrence, and always premised on the existence of price-fixing power that is likely to be exercised adversely to the public.” Id. at 400. For this reason, Professor Areeda states that the per se rule should be “carefully limited to 'naked’ restraints, which are restraints that lack redeeming social benefits.” Id. ¶ 1509c, at 403. Accordingly, “when legitimate objectives are served, conduct constituting price fixing in the lay sense is not defined as the ‘price fixing’ that is per se unlawful.” Id. ¶ 1511a, at 419. In California Dental Ass’n v. FTC, 526 U.S. 756, 119 S.Ct. 1604, 143 L.Ed.2d 935 (1999), the Dental Association had imposed advertising restrictions on its members, which the FTC had found to be anticom-petitive. The Court of Appeals affirmed the FTC’s decision, and affirmed its decision to employ an abbreviated, or “quick-look,” rule of reason analysis, an intermediate analysis between the per se rule and the rule of reason. The Supreme Court vacated and remanded for more scrutiny of the nature of the restrictions. Relying principally on NCAA and on Professor Ar-eeda’s analysis, the Court reiterated that there is no bright line between the per se rule and the rule of reason. The proper analysis, it ruled, should be thought of as a spectrum, rather than a dichotomy: “[TJhere is generally no categorical line to be drawn between restraints that give rise to an intuitively obvious inference of anti-competitive effect and those that call for more detailed treatment. What is required, rather, is an enquiry meet for the case,” id. at 780-81, 119 S.Ct. 1604, with justifications for the restriction to be taken into account. “The object is to see whether the experience of the market has been so clear, or necessarily will be, that a confident conclusion about the principal tendency of a restriction will follow....” Id. at 781, 119 S.Ct. 1604. Under this analysis of the per se rule applied to the facts of record, the plaintiffs have not shown a likelihood that the MSA and the challenged statutes constitute a per se violation of the Sherman Act. The record shows that the settlement between the states and the tobacco manufacturers was intended to have, and in fact has had, important and redeeming social benefits, namely, the public health concerns to reduce tobacco consumption, particularly among youth, see MSA Art. I, at 2, to restrict the scope of cigarette manufacturers’ advertising and marketing programs, and to shift to the tobacco manufacturers the health care costs caused by sales of their- products. The New York Supreme Court, in approving the settlement between New York State and the OPMs, reflected in the MSA, compared the prayer for relief in the amended complaint with the provisions of the MSA in relation to the public interest, State v. Philip Morris, Inc., 179 Misc.2d 435, 686 N.Y.S.2d 564, 568 (N.Y.Sup.Ct.1998), aff'd, 263 A.D.2d 400, 693 N.Y.S.2d 36 (N.Y.App. Div., 1st Dep’t 1999), and found that the most important demands of the complaint had been achieved: an injunction against cigarette sales to minors, and against advertisements targeting them; greater disclosure of the health effects of tobacco and nicotine; and funding of educational and clinical programs intended to increase awareness and treatment of the health risks associated with cigarette smoking. Indeed, the court noted, some provisions of the MSA could not have been achieved through litigation, or even through legislation, such as the waiver by the participating manufacturers of their First Amendment rights to advertise and to lobby against adverse legislation. Id. at 568 & 569 n. 6; see MSA Art. 111(d), (m), V. The court concluded: With all of these and the monetary provisions of the MSA, the court is confronted with a settlement that goes well beyond what could have been achieved in plaintiffs’ fondest dreams for the result after a protracted and risky trial, that excels over the [earlier] Minnesota settlement, and that painstakingly accommodates the public interest. 686 N.Y.S.2d at 569. [T]he MSA [and a companion settlement, the Smokeless Tobacco Master Settlement Agreement] adequately protect the public interest ... [T]he economic and noneconomic benefits for New York State are substantial [and] are consistent with and advance the objectives of New York public policy as set forth in the amended complaint. Id. at 567. This evidence suggests that the MSA and the Escrow and Contraband Statutes were intended not as “naked restraints on trade,” as plaintiffs allege, but as restraints enacted for public health purposes. Under the reasoning of NCAA and Aree-da, these restrains should not be tested without considering their redeeming social benefits, and accordingly may not violate a rule of per se illegality without such evaluation. See Freedom Holdings I, 357 F.3d at 223 (“For a statute to be preempted, the conduct contemplated by the statute must be ‘in all cases a per se violation’ of the federal antitrust laws.” (quoting Battipaglia v. N.Y. State Liquor Authority, 745 F.2d 166, 174 (2d Cir.1984) (quoting Rice v. Norman Williams Co., 458 U.S. 654, 102 S.Ct. 3294, 73 L.Ed.2d 1042 (1982)))). The second strand of caselaw pays attention to the character of the restraint in question rather than to why it might be justified. This definition of “illegal per se” was articulated most concisely in Rice, where defendant challenged a California law regulating the importation of alcohol. The Court held that for a state statute to be considered a per se antitrust violation, it must mandate or authorize “conduct that necessarily constitutes a violation of the antitrust laws in all cases,” or place “irresistible pressure on a private party to violate the antitrust laws”: [A] state statute, when considered in the abstract, may be condemned under the antitrust laws only if it mandates or authorizes conduct that necessarily constitutes a violation of the antitrust laws in all cases, or if it places irresistible pressure on a private party to violate the antitrust laws in order to comply with the statute. Such condemnation will follow under § 1 of the Sherman Act when the conduct contemplated by the statute is in all cases a per se violation. If the activity addressed by the statute does not fall into that category, and therefore must be analyzed under the rule of reason, the statute cannot be condemned in the abstract. Analysis under the rule of reason requires an examination of the circumstances underlying a particular economic practice, and therefore does not lend itself to a conclusion that a statute is facially inconsistent with federal antitrust laws. Id. at 661, 102 S.Ct. 3294. This formulation has been accepted by a number of subsequent cases. See Fisher v. Berkeley, 475 U.S. 260, 265, 106 S.Ct. 1045, 89 L.Ed.2d 206 (1986) (quoting Rice); 324 Liquor Corp. v. Duffy, 479 U.S. 335, 342, 345, 107 S.Ct. 720, 93 L.Ed.2d 667 (1987) (quoting Rice). Despite the outcome in NCAA, the Supreme Court in that case acknowledged that horizontal price fixing and output limitations are ordinarily considered illegal per se because they “always or almost always tend to restrict competition and decrease output”: Horizontal price fixing and output limitation are ordinarily condemned as a matter of law under an “illegal per se” approach because the probability that these practices are anticompetitive is so high; a per se rule is applied when “the practice facially appears to be one that would always or almost always tend to restrict competition and decrease output.” Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 19-20, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979). In such circumstances a restraint is presumed unreasonable without inquiry into the particular market context in which it is found. 468 U.S. at 100, 104 S.Ct. 2948; see also VII Areeda & Hovenkamp, Antitrust Law, ¶ 1510a, at 405 (calling this the “oldest meaning of ‘per se illegality,’ ” and citing United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir.1898), modified as to decree & aff'd, 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136 (1899); United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700 (1927); and FTC v. Superior Ct. Trial Lawyers Ass’n, 493 U.S. 411, 110 S.Ct. 768, 107 L.Ed.2d 851 (1990)). Horizontal price fixing, output limitations, and market division are classic characteristics of a cartel. A cartel is defined as “[a] combination of producers or sellers that join together to control a product’s production or price.” Black’s Law Dictionary 206 (7th ed.1999). “Competing firms form a cartel when they repla