Northwest Wholesale Stationers, Inc v. Pacific Stationery and Printing Co

• Decision Date: 11 June 1985
• Docket Number: No. 83-1368,83-1368
• Parties: NORTHWEST WHOLESALE STATIONERS, INC., Petitioner v. PACIFIC STATIONERY AND PRINTING CO
• Court: U.S. Supreme Court

472 U.S. 284

105 S.Ct. 2613

86 L.Ed.2d 202

NORTHWEST WHOLESALE STATIONERS, INC., Petitioner

v PACIFIC STATIONERY AND PRINTING CO.

No. 83-1368.

Argued Feb. 19, 1985.

Decided June 11, 1985.

Syllabus

Petitioner is a wholesale purchasing cooperative whose membership consists of office supply retailers in the Pacific Northwest States. Nonmember retailers can purchase supplies from petitioner at the same price as members, but since petitioner annually distributes its profits to members in the form of a percentage rebate, members effectively purchase supplies at a lower price than do nonmembers. Petitioner expelled respondent from membership without any explanation, notice, or hearing. Thereafter, respondent brought suit in Federal District Court, alleging that the expulsion without procedural protections was a group boycott that limited its ability to compete and should be considered per se violative of § 1 of the Sherman Act. On cross-motions for summary judgment, the District Court rejected application of the per se rule and held instead that rule-of-reason analysis should govern the case. Finding no anticompetitive effect on the basis of the record, the court granted summary judgment for petitioner. The Court of Appeals reversed, holding that although § 4 of the Robinson-Patman Act expressly approves price discrimination occasioned by such an expulsion as the one in question and thus provides a mandate for self-regulation, nevertheless, because petitioner had not provided any procedural safeguards, the expulsion of respondent was not shielded by § 4 and therefore constituted a per se group boycott in violation of § 1 of the Sherman Act.

Held: Petitioner's expulsion of respondent does not fall within the category of activity that is conclusively presumed to be anticompetitive so as to mandate per se invalidation under § 1 of the Sherman Act as a group boycott or concerted refusal to deal. Pp. 289-298.

(a) Section 4 of the Robinson-Patman Act, which is no more than a narrow immunity from the price discrimination prohibitions of that Act, cannot properly be construed as an exemption from or repeal of any portion of the Sherman Act or as a broad mandate for industry self-regulation. Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389, distinguished. In any event, the absence of procedural safeguards in this case can in no sense determine the antitrust analysis, since if the challenged expulsion amounted to a per se violation of § 1, no amount of procedural protection would save it, whereas if the expulsion did not amount to a violation of § 1, no lack of procedural protections would convert it into a per se violation. Pp. 291-293.

(b) The act of expulsion from a wholesale cooperative does not necessarily imply anticompetitive animus so as to raise a probability of anticompetitive effect. Unless it is shown that the cooperative possesses market power or exclusive access to an element essential to effective competition, the conclusion that expulsion is virtually always likely to have an anticompetitive effect is not warranted. Absent such a showing with respect to a cooperative buying arrangement, courts should apply a rule-of-reason analysis. Here, respondent, focusing on the argument that the lack of procedural safeguards required per se liability, made no such showing. But because the Court of Appeals applied an erroneous per se analysis, it never evaluated the District Court's rule-of-reason analysis rejecting respondent's claim, and therefore a remand is appropriate to permit appellate review of that determination. Pp. 293-298.

715 F.2d 1393 (CA 9 1983), reversed and remanded.

David J. Sweeney, Portland, Or., for petitioner.

Catherine G. O'Sullivan, Washington, D.C., for the United States as amicus curiae, by special leave of Court.

Joseph P. Bauer, for respondent.

Justice BRENNAN delivered the opinion of the Court.

This case requires that we decide whether a per se violation of § 1 of the Sherman Act, 15 U.S.C. § 1, occurs when a cooperative buying agency comprising various retailers expels a member without providing any procedural means for challenging the expulsion.¹ The case also raises broader questions as to when per se antitrust analysis is appropriately applied to joint activity that is susceptible of being characterized as a concerted refusal to deal.

I

Because the District Court ruled on cross-motions for summary judgment after only limited discovery, this case comes to us on a sparse record. Certain background facts are undisputed. Petitioner Northwest Wholesale Stationers is a purchasing cooperative made up of approximately 100 office supply retailers in the Pacific Northwest States. The cooperative acts as the primary wholesaler for the retailers. Retailers that are not members of the cooperative can purchase wholesale supplies from Northwest at the same price as members. At the end of each year, however, Northwest distributes its profits to members in the form of a percentage rebate on purchases. Members therefore effectively purchase supplies at a price significantly lower than do nonmembers.² Northwest also provides certain warehousing facilities. The cooperative arrangement thus permits the participating retailers to achieve economies of scale in purchasing and warehousing that would otherwise be unavailable to them. In fiscal 1978 Northwest had $5.8 million in sales. App. 73.

Respondent Pacific Stationery & Printing Co. sells office supplies at both the retail and wholesale levels. Its total sales in fiscal 1978 were approximately $7.6 million; the record does not indicate what percentage of revenue is attributable to retail and what percentage is attributable to wholesale. Pacific became a member of Northwest in 1958. In 1974 Northwest amended its bylaws to prohibit members from engaging in both retail and wholesale operations. See id., at 50, 59. A grandfather clause preserved Pacific's membership rights. See id., at 59. In 1977 ownership of a controlling share of the stock of Pacific changed hands, id., at 70, and the new owners did not officially bring this change to the attention of the directors of Northwest. This failure to notify apparently violated another of Northwest's bylaws. See id., at 59 (Bylaws, Art. VIII, § 5).

In 1978 the membership of Northwest voted to expel Pacific. Most factual matters relevant to the expulsion are in dispute. No explanation for the expulsion was advanced at the time, and Pacific was given neither notice, a hearing, nor any other opportunity to challenge the decision. Pacific argues that the expulsion resulted from Pacific's decision to maintain a wholesale operation. See Brief in Opposition 11. Northwest contends that the expulsion resulted from Pacific's failure to notify the cooperative members of the change in stock ownership. See Pet. for Cert. 8. The minutes of the meeting of Northwest's directors do not definitively indicate the motive for the expulsion. App. 75-77. It is undisputed that Pacific received approximately $10,000 in rebates from Northwest in 1978, Pacific's last year of membership. Beyond a possible inference of loss from this fact, however, the record is devoid of allegations indicating the nature and extent of competitive injury the expulsion caused Pacific to suffer.

Pacific brought suit in 1980 in the United States District Court for the District of Oregon alleging a violation of § 1 of the Sherman Act. The gravamen of the action was that Northwest's expulsion of Pacific from the cooperative without procedural protections was a group boycott that limited Pacific's ability to compete and should be considered per se violative of § 1. See Complaint ¶ 8, App. 4-5. On cross-motions for summary judgment the District Court rejected application of the per se rule and held instead that rule-of-reason analysis should govern the case. Finding no anticompetitive effect on the basis of the record as presented, the court granted summary judgment for Northwest. See App. to Pet. for Cert. 22-24.

The Court of Appeals for the Ninth Circuit reversed, holding "that the uncontroverted facts of this case support a finding of per se liability." 715 F.2d 1393, 1395 (1983). The court reasoned that the cooperative's expulsion of Pacific was an anticompetitive concerted refusal to deal with Pacific on equal footing, which would be a per se violation of § 1 in the absence of any specific legislative mandate for self-regulation sanctioning the expulsion. The court noted that § 4 of the Robinson-Patman Act, 15 U.S.C. § 13b, specifically approves the price discrimination occasioned by such expulsion and concluded that § 4 therefore provided a mandate for self-regulation. Such a legislative mandate, according to the court, would ordinarily result in evaluation of the challenged practice under the rule of reason. But, drawing on Silver v. New York Stock Exchange, 373 U.S. 341, 348-349, 83 S.Ct. 1246, 1252-1253, 10 L.Ed.2d 389 (1963), the court decided that rule-of-reason analysis was appropriate only on the condition that the cooperative had provided procedural safeguards sufficient to prevent arbitrary expulsion and to furnish a basis for judicial review. Because Northwest had not provided any procedural safeguards, the court held that the expulsion of Pacific was not shielded by Robinson-Patman immunity and therefore consti- tuted a per se group boycott in violation of § 1 of the Sherman Act. 715 F.2d, at 1395-1398.

We granted certiorari to examine this application of Silver v. New York Stock Exchange, supra, in an area of antitrust law that has not been free of confusion.³ 469 U.S. 814, 105 S.Ct. 77, 83 L.Ed.2d 26 (1984). We reverse.

II

The decision of the cooperative members to expel Pacific was certainly a restraint of trade in the sense that every commercial agreement restrains trade. Chicago Board of Trade v. United States, 246 U.S. 231, 238, 38 S.Ct. 242, 243, 62 L.Ed. 683 (1918). Whether this action...