AAA Liquors, Inc. v. Joseph E. Seagram & Sons

• Decision Date: 02 May 1983
• Docket Number: No. 81-1061.,81-1061.
• Citation: 705 F.2d 1203
• Parties: AAA LIQUORS, INC., a Colorado corporation; A-1 Discount Liquors, Inc., a Colorado corporation; Al's Liquor Store, Inc., a Colorado corporation; Colorado Liquors, Inc., a Colorado corporation; Crazy Farmer Liquor, Inc., a Colorado corporation; Dayton Liquors, Inc., a Colorado corporation; Arthur W. Stencil, d/b/a Dickerson's Liquors; Robert N. Shacklett, d/b/a Eleventh Avenue Liquor House; Lorenz and Ruth Friend, d/b/a Friend Liquor Store; Gloria DiManna, d/b/a Geno's Liquors; Irvin Rubin, d/b/a Jr Liquors; John DeCicco, d/b/a King's Center Liquors; Martha L. Shacklett, d/b/a Kipling Liquors; Devon Talbert, d/b/a Northglenn Liquors; Robert McIntyre, d/b/a Old Town Liquors; Herman and Delores Flax, d/b/a Skyline Liquors; Sam Fireman and Arno Bruck, d/b/a Ted's Liquors; and Thorton Cork'n Bottle, Inc., a Colorado corporation, Plaintiffs-Appellants, v. JOSEPH E. SEAGRAM AND SONS, INC., d/b/a Calvert Distillers Company, Brown Vintners Company, and Seagram Distilling Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

705 F.2d 1203

AAA LIQUORS, INC., a Colorado corporation; A-1 Discount Liquors, Inc., a Colorado corporation; Al's Liquor Store, Inc., a Colorado corporation; Colorado Liquors, Inc., a Colorado corporation; Crazy Farmer Liquor, Inc., a Colorado corporation; Dayton Liquors, Inc., a Colorado corporation; Arthur W. Stencil, d/b/a Dickerson's Liquors; Robert N. Shacklett, d/b/a Eleventh Avenue Liquor House; Lorenz and Ruth Friend, d/b/a Friend Liquor Store; Gloria DiManna, d/b/a Geno's Liquors; Irvin Rubin, d/b/a Jr Liquors; John DeCicco, d/b/a King's Center Liquors; Martha L. Shacklett, d/b/a Kipling Liquors; Devon Talbert, d/b/a Northglenn Liquors; Robert McIntyre, d/b/a Old Town Liquors; Herman and Delores Flax, d/b/a Skyline Liquors; Sam Fireman and Arno Bruck, d/b/a Ted's Liquors; and Thorton Cork'n Bottle, Inc., a Colorado corporation, Plaintiffs-Appellants, v. JOSEPH E. SEAGRAM AND SONS, INC., d/b/a Calvert Distillers Company, Brown Vintners Company, and Seagram Distilling Company, Defendants-Appellees.

No. 81-1061.

United States Court of Appeals, Tenth Circuit.

December 3, 1982.

Certiorari Denied May 2, 1983.

James C. Bull of Quiat, Bucholtz, Bull & Laff, Denver, Colo. (Irvin M. Kent, Denver, Colo., with him on the brief), for plaintiffs-appellants.

Macdonald Flinn, New York City (Allan Gropper, also of White & Case, New York City; and H. Thomas Coghill and David J. Richman of Coghill & Goodspeed, Denver, Colo., with him on the brief), for defendants-appellees.

Before HOLLOWAY, McKAY and LOGAN, Circuit Judges.

Certiorari Denied May 2, 1983. See 103 S.Ct. 1903.

LOGAN, Circuit Judge.

Nineteen Denver liquor stores ("small retailers") appeal the trial court's holding that funding by Joseph E. Seagram & Sons, Inc. ("Seagram") of price discounts its Denver wholesaler, Midwest Liquor Co. ("Midwest"), offered only to a few large volume Denver liquor stores was not a "contract, combination, or conspiracy in restraint of trade" prohibited by section one of the Sherman Act, 15 U.S.C. § 1. The small retailers contend that Seagram's funding constituted a per se violation of the antitrust laws because it amounted to vertical price fixing in that (1) Seagram knew Midwest gave the discounts only to the large volume stores; (2) as a condition to funding Midwest's discount program, Seagram required Midwest to resell to the large volume stores at a given price; and (3) Seagram had agreed to fund Midwest's price discounts for the purpose of, and with the result of, affecting retail prices charged by those large volume stores.

The trial court found that Midwest had initiated the discount program so that the large volume retailers would sell Seagram's liquor at a price competitive with what they charged for competing brands such as Jim Beam and Ancient Age. The trial court held that Seagram had not violated section one because the "interaction between Seagram and Midwest did not amount to the concerted action necessary to constitute a conspiracy." It found that the discount program "resulted from Midwest's unimpeded independent research, analysis and motivation"; further, that "Midwest maintained complete control over the distribution and decisionmaking concerning Seagrams' brands." On appeal the small retailers argue that the trial court erred in not holding that Seagram committed a per se violation of the antitrust laws by engaging in vertical price fixing.

Many of the essential facts were stipulated and the others were largely undisputed. In the Denver area Seagram's most popular product is Seagram's 7 Crown, a moderately-priced blended whiskey competing principally with Jim Beam, Ancient Age, and Canadian Mist; Seagram's next most popular product is Seagram's V.O., a premium-priced Canadian blended whiskey competing principally with Canadian Club. Midwest, an independent liquor wholesaler, is the exclusive distributor for Seagram's products in the Denver area. Midwest does not sell those competing brands.

Discounts and special sales promotions are common merchandising techniques used by liquor wholesalers. The trial court found that Midwest, not Seagram, developed the challenged discounts and offered them to certain large volume liquor stores with the goal of increasing the market shares of 7 Crown and V.O. in Denver.¹ Midwest then asked Seagram to reimburse Midwest the costs of the discounts, and Seagram agreed.²

At the time the discount programs went into effect, 7 Crown was selling in the large volume stores for over $9.00 per half gallon, and was losing ground to Jim Beam, Ancient Age, and Canadian Mist, which usually were selling for $8.19 per half gallon. The large volume stores were rarely advertising 7 Crown, but were heavily advertising the competing brands, often featuring them as loss leaders. During the discount program the large volume stores did advertise 7 Crown for as little as $7.99 per half gallon and significantly increased the amount sold.

The small retailers contend that Seagram's requirement that Midwest pass the discount through, and its acquiescence in the policy of passing it through only to the large retailers, had the effect of fixing the prices Midwest charged to the large retailers, who received the discount, and to the small retailers, who did not. Furthermore, they contend that the large retailers' prices also were fixed, to the detriment of the small retailers. If Seagram fixed the prices the wholesaler could charge all of the retailers, or if Seagram entered into an agreement, combination, or conspiracy to give a competitive edge to the large volume retailers, the small volume retailers have standing to sue.³

On appeal we have to consider only whether the record supports the trial judge's determination that section one of the Sherman Act was not violated under the facts of the instant case.⁴ The district court found that Seagram did not attempt to fix prices charged by either Midwest or the retailers. It found that although Seagram assisted Midwest financially, the wholesaler maintained complete control over the distribution and decisionmaking concerning Seagram's products.

The small retailers assert that the record establishes as a matter of law an agreement, combination, or conspiracy affecting prices; they assert that once such an agreement is found the cases holding vertical price maintenance agreements to be per se violations of the Sherman Act render unnecessary any further inquiry except with regard to damages, which have been stipulated. See California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 102-03, 100 S.Ct. 937, 941-942, 63 L.Ed.2d 233 (1980); Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 51, 97 S.Ct. 2549, 2558, 53 L.Ed.2d 568 n. 18 (1977); Albrecht v. Herald Co., 390 U.S. 145, 153, 88 S.Ct. 869, 873, 19 L.Ed.2d 998 (1968); Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 405-09, 31 S.Ct. 376, 383-385, 55 L.Ed. 502 (1911). While we agree that resale price maintenance agreements are per se unlawful, all vertical arrangements affecting price do not constitute resale price maintenance agreements. "The crux of any price-fixing agreement is the relinquishment by a trader ... of the freedom to set prices in accordance with his own judgment." Chisholm Brothers Farm Equipment Co. v. International Harvester Co., 498 F.2d 1137, 1142 (9th Cir.), cert. denied, 419 U.S. 1023, 95 S.Ct. 500, 42 L.Ed.2d 298 (1974). Although a supplier may suggest a resale price, see, e.g., United States v. Parke, Davis & Co., 362 U.S. 29, 43-46, 80 S.Ct. 503, 511-512, 4 L.Ed.2d 505 (1960), the supplier may not coerce the seller's adherence to that suggested price, see, e.g., Simpson v. Union Oil Co., 377 U.S. 13, 17, 84 S.Ct. 1051, 1054, 12 L.Ed.2d 98 (1964); Yentsch v. Texaco, Inc., 630 F.2d 46, 52-55 (2d Cir.1980); Santa Clara Valley Distributing Co. v. Pabst Brewing Co., 556 F.2d 942, 945 (9th Cir. 1977); cf. Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 605, 73 S.Ct. 872, 878, 97 L.Ed. 1277 (1953) (tying arrangements condemned because they "coerce ... abdication of buyers' independent judgment").

Here, no coercion was present. The small retailers do not contest the trial court's finding that Midwest initiated the discount program and voluntarily sought Seagram's financial support. They attack the court's finding that Midwest retained independent pricing judgment by pointing out that Seagram required the discounts given to Midwest to be passed through to the retailers. The small retailers rely upon Pearl Brewing Co. v. Anheuser-Busch, Inc., 339 F.Supp. 945 (S.D.Tex.1972), a case quite similar to that before us, which held that conditioning a price reduction on an agreement by the recipient to reduce its price imposes restrictions on the recipient's freedom of decision, and thus constitutes unlawful price fixing. In Pearl Brewing, the court declared that the testimony of the individual wholesalers supported a conclusion that the brewer pre-determined the wholesaler's exact price to the retailer and the retailer's exact price to the public, 339 F.Supp. at 957-58, a conclusion the trial judge did not make in the case before us. Furthermore, we do not agree with the conclusion in Pearl Brewing. A supplier who grants discounts to a retailer to permit the retailer to charge competitive prices has a legitimate interest in making sure the retailer receiving the discount "is not pocketing the price support instead of passing it on to consumers." Lehrman v. Gulf Oil Corp., 464 F.2d 26, 40 (5th Cir.), cert. denied, 409 U.S. 1077, 93 S.Ct. 687, 34 L.Ed.2d 665 (1972); cf. Sun Oil Co. v. FTC, 294 F.2d 465, 483-84 (5th Cir.1961) (suggesting that supplier may be in violation of price discrimination proscriptions if it grants price support to a retailer who does not lower its prices correspondingly), rev'd on other grounds, 371 U.S. 505, 83 S.Ct. 358, 9 L.Ed.2d 466 (1963).

We see no meaningful distinction between the instant...