Bathtub Conspiracy Law and Legal Definition

A bathtub conspiracy is a conspiracy between, two subsidiaries, parts, or any other division of the same enterprise or firm. It is a conspiracy between related companies. Under a bathtub conspiracy, a parent corporation and its wholly-owned subsidiary were considered two separate parties capable of conspiring. [Elysian Federal Sav. Bank v. First Interregional Equity Corp., 713 F. Supp. 737, 758 (D.N.J. 1989)]. Ordinarily, there cannot be a conspiracy between a corporation and its subsidiary. However, where there are mergers, if the alleged conspiracy took place before the merger and the merger did not stop the conspiracy, it cannot be said to be an intra-enterprise conspiracy. An Intra-Enterprise conspiracy is also called bathtub conspiracy.

The following is an example of a case law referring to bathtub conspiracy:

There is generally no difficulty in determining whether the requisite plurality of persons is present in a given situation. However, in Sherman Act § 1, 15 U.S.C.S. § 1, cases involving closely affiliated corporations, the courts have had difficulty ascertaining who are separate parties capable of contracting or conspiring with each other. Such agreements are often termed "bathtub" conspiracies. It is generally accepted that a corporation and its unincorporated branches or divisions are not separate entities, capable of conspiring to commit a § 1 violation. It is likewise generally accepted that a corporate office is not capable of conspiring with his corporation. It has also been widely held that, under normal circumstances, a parent and its incorporated subsidiary cannot conspire in violation of § 1 where they are not in actual competition in the market. [Aaron E. Levine & Co. v. Calkraft Paper Co., 429 F. Supp. 1039 (D. Mich. 1976)].