Rice v. Norman Williams Company Bohemian Distributing Company v. Norman Williams Company Wine Spirits Wholesalers of California v. Norman Williams Company

• Decision Date: 01 July 1982
• Docket Number: 80-1030 and 80-1052,Nos. 80-1012,s. 80-1012
• Citation: 102 S.Ct. 3294,73 L.Ed.2d 1042,458 U.S. 654
• Parties: Baxter RICE, Director, Department of Alcoholic Beverage Control of California, Petitioner, v. NORMAN WILLIAMS COMPANY et al. BOHEMIAN DISTRIBUTING COMPANY, Petitioner, v. NORMAN WILLIAMS COMPANY et al. WINE & SPIRITS WHOLESALERS OF CALIFORNIA, Petitioner, v. NORMAN WILLIAMS COMPANY et al
• Court: U.S. Supreme Court

458 U.S. 654

102 S.Ct. 3294

73 L.Ed.2d 1042

Baxter RICE, Director, Department of Alcoholic Beverage Control of California, Petitioner,

v NORMAN WILLIAMS COMPANY et al.

BOHEMIAN DISTRIBUTING COMPANY, Petitioner,

v. NORMAN WILLIAMS COMPANY et al.

WINE & SPIRITS WHOLESALERS OF CALIFORNIA, Petitioner,

v. NORMAN WILLIAMS COMPANY et al.

Nos. 80-1012, 80-1030 and 80-1052.

Argued April 21, 1982.

Decided July 1, 1982.

Syllabus

A provision of California's alcoholic beverage laws states that a "licensed importer shall not purchase or accept delivery of any brand of distilled spirits unless he is designated as an authorized importer of such brand by the brand owner or his authorized agent" (designation statute). The statute apparently was enacted in response to the perceived extraterritorial effects of Oklahoma's "open wholesaling" statutes, whereby a licensed California importer who was unable to obtain distilled spirits through the distiller's established distribution system could obtain them from Oklahoma wholesalers. Prior to the designation statute's effective date, respondents sought an extraordinary writ from the California Court of Appeal to enjoin the enforcement of the statute. The court entered judgment for respondents, holding that the conduct contemplated by the statute was per se illegal under § 1 of the Sherman Act because it gave distillers the unfettered power to restrain competition by merely deciding who may or may not compete in handling the distillers' brands, and that thus the statute on its face was invalid pursuant to the Supremacy Clause of the Federal Constitution.

Held :

1. California's designation statute is not invalid on its face as being pre-empted by the Sherman Act. Pp. 659-662.

(a). 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 those 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. Pp. 659-661.

(b). A distiller's invocation of California's statute would not be subject in all cases to a per se rule of illegality under the Sherman Act. A manufacturer's use of vertical nonprice restraints is not per se illegal. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568. California's designation statute merely enforces the distiller's decision to restrain intrabrand competition, preventing an unauthorized wholesaler from obtaining the distiller's products from outside the distiller's established distribution chain. The effect of the statute is simply to counteract the perceived extraterritorial effects of Oklahoma's alcoholic beverage laws, thus restoring the distiller's ability to determine which wholesalers may import its products into California. While the manner in which a distiller utilizes the designation statute and the arrangements a distiller makes with its wholesalers will be subject to Sherman Act analysis under the rule of reason, there is no basis for condemning the statute itself by force of the Sherman Act. Pp. 661-662.

2. The California statute is not pre-empted by § 5(a) of the Federal Alcohol Administration Act, which prohibits a distiller or wholesaler from establishing exclusive retail outlets. California's statute in no way requires exclusive retail outlets, and by its terms does not even require exclusive wholesale arrangements. Pp.663-664

3. The designation statute does not deny respondents due process of law. Respondents do not possess any constitutionally protected liberty or property interest in obtaining the distiller's permission to deal in its products, and thus the Due Process Clause is not offended by the wholesaler's inability to challenge the distiller's decisionmaking. P. 664.

4. Nor does the designation statute violate the Equal Protection Clause because it discriminates between designated and nondesignated wholesalers. The statute is rationally related to its legitimate purposes, enabling the distiller to place restraints on intrabrand competition in order to foster interbrand competition. P. 665.

108 Cal.App.3d 348, 166 Cal.Rptr. 563, reversed and remanded.

John R. McDonough, Los Angeles, Cal., for petitioners in 80-1030 and 80-1052.

George J. Roth, Sacramento, Cal., for petitioner in 80-1012.

George G. Weickhardt, San Francisco, Cal., for all respondents.

Justice REHNQUIST delivered the opinion of the Court.

Respondents in these cases obtained from the California Court of Appeal an extraordinary writ prohibiting the California Department of Alcoholic Beverage Control from enforcing an amendment to the State's liquor statutes. That court held that because the conduct contemplated by the amendment was per se illegal under the Sherman Act, the statute on its face was invalid pursuant to the Supremacy Clause of the United States Constitution. 108 Cal.App.3d 348, 166 Cal.Rptr. 563 (1980). We conclude that the California Court of Appeal was mistaken in its application of antitrust and preemption principles, and we reverse its judgment.

I

Alcoholic beverages may be brought into California from outside the State for delivery or use within the State only if the beverages are consigned to a licensed importer. Cal.Bus. & Prof.Code Ann. § 23661 (West Supp. 1982). In 1979, the California Legislature amended the State's alcoholic beverage control laws to provide that a "licensed importer shall not purchase or accept delivery of any brand of distilled spirits unless he is designated as an authorized importer of such brand by the brand owner or his authorized agent." § 23672. This challenged statute, which was to become effective on January 1, 1980, is understandably referred to as a "designation statute." ¹

California apparently enacted its designation statute in response to the effects of Oklahoma's alcoholic beverage laws. At the time, Oklahoma's statutes were understood to require any distiller or brand owner selling its products to Oklahoma wholesalers to sell to all wholesalers on a nondiscriminatory basis.² Because of the perceived extraterritorial effect of Oklahoma's "open-wholesaling" statutes, a licensed California importer who was unable to obtain distilled spirits through the distiller's established distribution system could obtain them from Oklahoma wholesalers. As a result, a distiller who desired to sell its products to Oklahoma wholesalers was unable to rely on contractual undertakings to determine which California wholesalers would handle its products. California's designation statute, therefore, sought to close off the "Oklahoma connection" to California importers not authorized by the distiller to deal in its products.³ Prior to the effective date of the designation statute, respondents, liquor importers who were benefiting from the "Oklahoma connection," sought an extraordinary writ from the California Court of Appeal enjoining the enforcement of the designation statute. The Court of Appeal agreed with respondents that the designation statute on its face conflicted with § 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1.⁴ According to that court, the designation statute would result, in all cases, in a per se violation of the Sherman Act, because it "gives brand owners the unfettered power to restrain competition . . . by merely deciding who may and who may not compete." 108 Cal.App.3d, at 356, 166 Cal.Rptr., at 569. The Court of Appeal distinguished Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977), in which we held that vertical nonprice restraints are to be judged under the "rule of reason" rather than under a per se rule of illegality, on the ground that respondents did not attack the distiller's decision to refuse to do business with them, but "the state provided authority of the distillers to prohibit them from trading with others." 108 Cal.App.3d, at 357, 166 Cal.Rptr., at 570.

The Supreme Court of California denied review. We granted certiorari, 454 U.S. 1080, 102 S.Ct. 632, 70 L.Ed.2d 613 (1981), and now reverse.

II

A.

In determining whether the Sherman Act pre-empts a state statute, we apply principles similar to those which we employ in considering whether any state statute is pre-empted by a federal statute pursuant to the Supremacy Clause. As in the typical pre-emption case, the inquiry is whether there exists an irreconcilable conflict between the federal and state regulatory schemes. The existence of a hypothetical or potential conflict is insufficient to warrant the pre-emption of the state statute. A state regulatory scheme is not pre-empted by the federal antitrust laws simply because in a hypothetical situation a private party's compliance with the statute might cause him to violate the antitrust laws. A state statute is not preempted by the federal antitrust laws simply because the state scheme might have an anticompetitive effect. See,e.g., New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. 96, 110-111, 99 S.Ct. 403, 412-413, 58 L.Ed.2d 361 (1978); Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 129-134, 98 S.Ct. 2207, 2215-2218, 57 L.Ed.2d 91 (1978); Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U.S. 35, 45-46, 86 S.Ct. 1254, 1260-1261, 16 L.Ed.2d 336 (1966).

A party may successfully enjoin the enforcement of a state statute only if the statute on its face irreconcilably conflicts with federal antitrust policy. In California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980), we examined a statute that required...