465 U.S. 752 (1984), 82-914, Monsanto Co. v. Spray-rite Service Corp.

Docket Nº:No. 82-914.
Citation:465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775
Party Name:MONSANTO COMPANY, Petitioner v. SPRAY-RITE SERVICE CORPORATION.
Case Date:March 20, 1984
Court:United States Supreme Court
 
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Page 752

465 U.S. 752 (1984)

104 S.Ct. 1464, 79 L.Ed.2d 775

MONSANTO COMPANY, Petitioner

v.

SPRAY-RITE SERVICE CORPORATION.

No. 82-914.

United States Supreme Court.

March 20, 1984

Argued Dec. 5, 1983.

Terminated distributor of agricultural herbicides brought antitrust suit against the manufacturer alleging that manufacturer conspired with other distributors to fix resale prices and terminated plaintiff for price cutting. The United States District Court for the Northern District of Illinois, Stanley J. Roszkowski, J., entered judgment for the former distributor, and manufacturer appealed. The Court of Appeals for the Seventh Circuit, 684 F.2d 1226, affirmed. Certiorari was granted. The Supreme Court, Justice Powell, held that: (1) something more than evidence of complaints by other distributors is needed before existence of a vertical price-fixing agreement may be found, and (2) evidence of existence of price-fixing conspiracy between manufacturer and distributors and whether plaintiff was terminated pursuant to such agreement was for jury.

Affirmed.

Justice Brennan concurred and filed opinion.

[104 S.Ct. 1465] Syllabus[*]

SYLLABUS

From 1957 to 1968, respondent, a wholesale distributor of agricultural chemicals that engaged in a discount operation, sold agricultural herbicides manufactured by petitioner. In 1968, petitioner refused to renew respondent's 1-year distributorship term, and thereafter respondent was unable to purchase from other distributors as much of petitioner's products as it desired or as early in the season as it needed them. Respondent ultimately brought suit in Federal District Court under § 1 of the Sherman Act, alleging that petitioner and some of its distributors conspired to fix the resale prices of petitioner's products and that petitioner had terminated respondent's distributorship in furtherance of the conspiracy. Petitioner denied the allegations of conspiracy, and asserted that respondent's distributorship had been terminated because of its failure to hire trained salesmen and promote sales to dealers adequately. The District Court instructed the jury that petitioner's conduct was per se unlawful if it was in furtherance of a price-fixing conspiracy. In answers to special interrogatories, the jury found,inter alia, that the termination of respondent's distributorship was pursuant to a price-fixing conspiracy between petitioner and one or more of its distributors. The Court of Appeals affirmed, holding that there was sufficient evidence to satisfy respondent's burden of proving a conspiracy to set resale prices. It noted evidence of numerous complaints to petitioner from competing distributors [104 S.Ct. 1466] about respondent's price-cutting practices. In substance, the court held that an antitrust plaintiff can survive a motion for a directed verdict if it shows that a manufacturer terminated a price-cutting distributor in response to or following complaints by other distributors.

Held:

1. The Court of Appeals applied an incorrect standard of proof to the evidence in this case. A basic distinction in any distributor-termination case is that between concerted action of the manufacturer and other distributors, which is proscribed by the Sherman Act, and independent action of the manufacturer, which is not proscribed. United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992. A second important distinction in such cases is that between concerted action to set prices, which is per se illegal, and concerted action on nonprice restrictions, which is judged under

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the rule of reason. See Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568. Permitting a price-fixing agreement to be inferred from the existence of complaints from other distributors, or even from the fact that termination came about "in response to" complaints, could deter or penalize perfectly legitimate conduct. Thus, something more than evidence of complaints is needed. The correct standard is that there must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently. That is, there must be direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others had a conscious commitment to a common scheme designed to achieve an unlawful objective. Pp. 1469 - 1471.

2. Under the proper standard of proof, the evidence in this case created a jury issue as to whether respondent was terminated pursuant to a price-fixing conspiracy between petitioner and its distributors. Accordingly, the Court of Appeals' judgment is affirmed. Pp. 1471 - 1472.

(a) There was sufficient evidence for the jury reasonably to have concluded that petitioner and some of its distributors were parties to an "agreement" or "conspiracy" to maintain resale prices and terminate price-cutters. Pp. 1471 - 1472.

(b) It also would be reasonable to find that respondent's termination was part of or pursuant to that agreement, since it is necessary for competing distributors contemplating compliance with suggested prices to know that those who do not comply will be terminated. Moreover, there is some circumstantial evidence of such a link. P. 1472.

684 F.2d 1226 (1982), affirmed.

COUNSEL

Fred H. Bartlit, Jr., argued the cause for petitioner. With him on the briefs were Jeffrey J. Kennedy, Marjorie Press Lindblom, Robert J. Kopecky, Michael T. Hannafan, and Richard W. Duesenberg.

Assistant Attorney General Baxter argued the cause for the United States asamicus curiae in support of petitioner. With him on the brief were Solicitor General Lee, Deputy Solicitor General Wallace, Deputy Assistant Attorney General Lipsky, Jerrold J. Ganzfried, Robert B. Nicholson, and Edward T. Hand.

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Edward L. Foote argued the cause for respondent. With him on the briefs were Earl A. Jinkinson, Robert G. Foster, and David B. Love.*

* Briefs of amici curiae urging reversal were filed for Associates for Antitrust Analysis by Wesley J. Liebeler; for the National Agricultural Chemicals Association by Donald F. Turner, Arnold M. Lerman, James S. Campbell, and Ronald J. Greene; and for the National Association of Manufacturers by Donald I. Baker, Robert H. Rawson, Jr., Thomas E. Kauper, William E. Blasier, and Quentin Riegel.

Briefs of amici curiae urging affirmance were filed for Burlington Coat Factory Warehouse Corp. by Herbert S. Kassner; for the National Mass Retailing Institute by Endicott Peabody, Timothy J. Waters, and William D. Coston; for the National Association of Catalog Showroom Merchandisers by Richard B. Kelly; for Service Merchandise Co., Inc., by William A. Carey, John F. Sherlock III, and Donald F. Mintmire; and for Forty-Six States by Ken Eikenberry, Attorney General of Washington, John R. Ellis, Deputy Attorney General, Jon P. Ferguson and James Kirkham Johns, Assistant Attorneys General, Charles A. Graddick, Attorney General of Alabama, Susan Beth Farmer, Assistant Attorney General,Norman C. Gorsuch, Attorney General of Alaska, Louise E. Ma, Assistant Attorney General, Robert K. Corbin, Attorney General of Arizona, Alison B. Swan, Assistant Attorney General, John Steven Clark, Attorney General of Arkansas,David L. Williams, Deputy Attorney General, Jeffrey A. Bell, Assistant Attorney General, John K. Van de Kamp, Attorney General of California, Andrea Sheridan Ordin, Chief Assistant Attorney General, Sanford N. Gruskin, Assistant Attorney General, Wayne M. Liao, Deputy Attorney General, Duane Woodard, Attorney General of Colorado, Thomas P. McMahon, Assistant Attorney General, Joseph I. Lieberman, Attorney General of Connecticut, Robert M. Langer, Assistant Attorney General, Charles M. Oberly, Attorney General of Delaware, Vincent M. Amberly, Deputy Attorney General, Jim Smith, Attorney General of Florida, Bill L. Bryant, Jr., Assistant Attorney General, Tany S. Hong, Attorney General of Hawaii, Sonia Faust, Deputy Attorney General, Neil F. Hartigan, Attorney General of Illinois, Thomas M. Genovese, Assistant Attorney General, Linley E. Pearson, Attorney General of Indiana, Frank A. Baldwin, Deputy Attorney General, Thomas J. Miller, Attorney General of Iowa, John R. Perkins, Assistant Attorney General, Robert T. Stephan, Attorney General of Kansas, Wayne E. Hundley, Deputy Attorney General, Steven L. Beshear, Attorney General of Kentucky, James M. Ringo, Assistant Attorney General, William J. Guste, Attorney General of Louisiana, John R. Flowers, Jr., Assistant Attorney General, James E. Tierney, Attorney General of Maine, Stephen L. Wessler, Assistant Attorney General, Stephen H. Sachs, Attorney General of Maryland,Charles O. Monk II, Assistant Attorney General, Francis X. Bellotti, Attorney General of Massachusetts, Alan L. Kovacs, Assistant Attorney General, Frank J. Kelley, Attorney General of Michigan, Edwin M. Bladen, Assistant Attorney General, Hubert H. Humphrey III, Attorney General of Minnesota, Stephen P. Kilgriff, Special Assistant Attorney General, Bill Allain, Attorney General of Mississippi, Robert E. Sanders, Special Assistant Attorney General, Mike Greely, Attorney General of Montana, Pat Driscoll, Chief Assistant Attorney General, Paul L. Douglas, Attorney General of Nebraska, Dale A. Comer, Assistant Attorney General, Brian McKay, Attorney General of Nevada, William E. Isaeff, Chief Deputy Attorney General, Gregory H. Smith, Attorney General of New Hampshire, Irwin I. Kimmelman, Attorney General of New Jersey, Laurel A. Price, Paul Bardacke, Attorney General of New Mexico, Robert Abrams, Attorney General of New York, Lloyd Constantine, Assistant Attorney General, Rufus L. Edmisten, Attorney General of North Carolina, H.A. Cole, Jr.,...

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