324 U.S. 293 (1945), 523, United States v. Frankfort Distilleries, Inc.

Docket Nº:No. 523
Citation:324 U.S. 293, 65 S.Ct. 661, 89 L.Ed. 951
Party Name:United States v. Frankfort Distilleries, Inc.
Case Date:March 05, 1945
Court:United States Supreme Court

Page 293

324 U.S. 293 (1945)

65 S.Ct. 661, 89 L.Ed. 951

United States


Frankfort Distilleries, Inc.

No. 523

United States Supreme Court

March 5, 1945

Argued February 8, 1945




1. A conspiracy of producers, wholesalers and retailers to fix and maintain retail prices of alcoholic beverages shipped into a State, by adoption of a single course in making contracts of sale and boycotting others who would not conform, held a violation of the Sherman Antitrust Act. P. 296.

2. Neither the Miller-Tydings Amendment of the Sherman Act nor the Colorado Fair Trade Act permits combinations of businessmen to coerce others into making "fair trade" contracts. P. 296.

Page 294

3. The fact that the ultimate object of the conspiracy was the fixing or maintenance of local retail prices did not render the Sherman Act inapplicable. P. 298.

4. The Twenty-First Amendment of the Constitution does not preclude prosecution of the violation of the Sherman Act here alleged. P. 299.

5. The Twenty-First Amendment conferred upon the States broad regulatory power over the liquor traffic within their boundaries, but did not give the States plenary and exclusive power to regulate the conduct of persons doing an interstate liquor business. P. 299.

144 F.2d 824 reversed.

Certiorari, 323 U.S. 699, to review the reversal of a conviction, 47 F.Supp. 160, of violation of the Sherman Antitrust Act.

BLACK, J., lead opinion

MR. JUSTICE BLACK delivered the opinion of the Court.

Respondents are producers, wholesalers, and retailers, of alcoholic beverages who were indicted in a federal district court for having conspired and combined to restrain commerce in violation of § 1 of the Sherman Act as amended. 26 Stat. 209, 50 Stat. 693. Their demurrers and motion to quash having been overruled, respondents pleaded nolo contendere to one count of the indictment. On these pleas, they were adjudged guilty by the District Court and fined. United States v. Colorado Wholesale Wine and Liquor Dealers Assn., 47 F.Supp. 160. The Circuit Court of Appeals reversed on the ground that the indictment failed to show that the conspiracy charged was in restraint of

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interstate commerce. 144 F.2d 824. The importance of the questions involved prompted us to grant certiorari.1

The indictment alleged that 98% of the spirituous liquors and 80% of the wines consumed in Colorado were shipped there from other states. The annual shipments into the state were 1,150,000 gallons of liquors and 800,000 gallons of wine. Seventy-five percent of these beverages were handled by the defendant wholesalers. Respondents were charged with conspiring, in violation of the Sherman Act, to raise, fix, and maintain [65 S.Ct. 663] the retail prices of all these beverages by raising, fixing, and stabilizing retail markups and margins of profit.

To accomplish the objects of the conspiracy, it is alleged that they adopted the following course of action. All of the respondents agreed amongst themselves to (1) discuss, agree upon, and adopt arbitrary noncompetitive retail prices, markups, and margins of profit; (2) defendant retailers and wholesalers agreed to persuade and compel producers to enter into fair trade contracts on every type and brand of alcoholic beverage shipped into the state, thereby to establish arbitrarily high and noncompetitive retail markups and margins of profit, agreed upon by defendants; (3) the retailers were to prepare and adopt forms of fair trade contracts, and agree with producers and wholesalers upon these forms; (4) a boycott program was adopted by all of the defendants under which retailers would refuse to buy any of the beverages sold by wholesalers or producers who refused to enter into or enforce compliance with the terms of the price-fixing agreements, and noncomplying retailers would be denied an opportunity to buy the goods of the defendant producers and wholesalers. Machinery was set up to make the boycott program effective.

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The facts alleged in the indictment, which stand admitted on demurrer and on the plea of nolo contendere, indicate a pattern which bears all the earmarks of a traditional restraint of trade. The participants are producers, middlemen, and retailers. They have agreed among themselves to adopt a single course in making contracts of sale, and to boycott all others who would not adopt the same course.

The effect, and, if it were material, the purpose of the combination charged was to fix prices at an artificial level. Such combinations, affecting commerce among the states, tend to eliminate competition, and violate the Sherman Act per se. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223-224. Price maintenance contracts fall under the same ban, Ethyl Gasoline Corp. v. United States, 309 U.S. 436, 458, except as provided by the 1937 Miller-Tydings Amendment to the Sherman Act. 50 Stat. 693. The combination charged against respondents does not fall within this exception. It permits the seller of an article which bears his trademark, brand, or name to prescribe a minimum resale price by contract if such contracts are lawful in the state where the resale is to be made and if the trademarked article is in free and open competition with other articles of the same commodity. This type of "Fair Trade" price maintenance contract is lawful in Colorado. Session Laws of Colorado, 1937, Chap. 146. But the Miller-Tydings Amendment to the Sherman Act does not permit combinations of business men to coerce others into making such contracts, and Colorado has not attempted to grant such permission. Both the federal and state "Fair Trade" Acts expressly provide that they shall not apply to price maintenance contracts among producers, wholesalers, and competitors. It follows that whatever may be the rights of an individual producer under the Miller-Tydings Amendment to make price maintenance contracts or to refuse to sell his goods to those who

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will not make such contracts, a combination to compel price maintenance in commerce among the states violates the Sherman Act. United States v. Bausch & Lomb Co., 321 U.S. 707, 719-723; United States v. Univis Lens Co., 316 U.S. 241, 252-253. Consequently, respondents were properly convicted unless, as they argue, their conduct is not covered by the Sherman Act either because the price-fixing applied only to retail sales which were wholly intrastate or because the state's power to control the liquor traffic within its boundaries makes the Sherman Act inapplicable.

These two questions thus posed relate to the extent of the Sherman Act's application to trade restraints resulting from actions which take place within a state. In resolving them, there is an obvious distinction to be drawn between a course of conduct wholly within a state and conduct which is an inseparable element of a larger program dependent for its success upon activity which affects commerce between the states. It is true that this Court has, on occasion, determined that local conduct could be insulated from the operation of the Anti-Trust laws on the basis of the purely local aims of a combination, [65 S.Ct. 664] insofar as those aims were not motivated by the purpose of restraining commerce and where the means used to achieve the purpose did not directly touch...

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