Catalano, Inc v. Target Sales, Inc, No. 79-1101

• Court: United States Supreme Court
• Writing for the Court: PER CURIAM
• Citation: 64 L.Ed.2d 580,100 S.Ct. 1925,446 U.S. 643
• Parties: CATALANO, INC., et al. v. TARGET SALES, INC., et al
• Docket Number: No. 79-1101
• Decision Date: 27 May 1980

446 U.S. 643 100 S.Ct. 1925 64 L.Ed.2d 580 CATALANO, INC., et al.

v.

TARGET SALES, INC., et al.

No. 79-1101. May 27, 1980. Rehearing Denied Aug. 11, 1980. See 448 U.S. 911, 101 S.Ct. 26.

PER CURIAM.

Petitioners, a conditionally certified class of beer retailers in the Fresno, Cal., area, brought suit against respondent wholesalers alleging that they had conspired to eliminate short-term trade credit formerly granted on beer purchases in violation of § 1 of the Sherman Act, ch. 647, 26 Stat. 209, as amended, 15 U.S.C. § 1. The District Court entered an interlocutory order, which among other things, denied petitioners' "motion to declare this a case of per se illegality," and then certified to the United States Court of Appeals for the Ninth Circuit, pursuant to 28 U.S.C. § 1292(b),¹ the

Page 644

question whether the alleged agreement among competitors fixing credit terms, if proved, was unlawful on its face.² The Court of Appeals granted permission to appeal, and, with one judge dissenting, agreed with the District Court that a horizontal agreement among competitors to fix credit terms does not necessarily contravene the antitrust laws. 5th Cir., 605 F.2d 1097 (1979).³ We grant the petition for certiorari and reverse the judgment of the Court of Appeals.

For purposes of decision we assume the following facts alleged in the amended complaint ⁴ to be true. Petitioners allege that, beginning in early 1967, respondent wholesalers secretly agreed, in order to eliminate competition among themselves, that as of December 1967 they would sell to retailers only if payment were made in advance or upon delivery. Prior to the agreement, the wholesalers had extended credit without interest up to the 30- and 42-day limits permitted by state law.⁵ According to the petition, prior to the agreement wholesalers had competed with each other with respect

Page 645

to trade credit, and the credit terms for individual retailers had varied substantially.⁶ After entering into the agreement, respondents uniformly refused to extend any credit at all.

The Court of Appeals decided that the credit-fixing agreement should not be characterized as a form of price fixing. The court suggested that such an agreement might actually enhance competition in two ways: (1) "by removing a barrier perceived by some sellers to market entry," and (2) "by the increased visibility of price made possible by the agreement to eliminate credit." Id., at 1099.

In dissent, Judge Blumenfeld ⁷ expressed the opinion that an agreement to eliminate credit was a form of price fixing. Id., at 1104. He reasoned that the extension of interest-free credit is an indirect price reduction and that the elimination of such credit is therefore a method of raising prices:

"The purchase of goods creates an obligation to pay for them. Credit is one component of the overall price paid for a product. The cost to a retailer of purchasing goods consists of (1) the amount he has to pay to obtain the goods, and (2) the date on which he has to make that payment. If there is a differential between a purchase for cash and one on time, that difference is not interest but part of the price. See Hogg v. Ruffner, 66 U.S. (1 Black) 115, 118-119, 17 L.Ed. 38 (1861). Allowing a retailer interest-free short-term credit on beer purchases effectively reduces the price of beer, when compared to a requirement that the retailer pay the same amount immediately in cash; and, conversely, the elimination of free credit is the equivalent of a price increase." Id., at 1103.

It followed, in his view, that the agreement was just as plainly anticompetitive as a direct agreement to raise prices. Con-

Page 646

sequently, no further inquiry under the rule of reason, see National Society of Professional Engineers v. United States, 435 U.S. 679, 98 S.Ct. 1355, 55 L.Ed.2d 637 (1978), was required in order to establish the agreement's unlawfulness.

Our cases fully support Judge Blumenfeld's analysis and foreclose both of the possible justifications on which the majority relied.⁸ In Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 7-8, 99 S.Ct. 1551, 1556, 60 L.Ed.2d 1 (1979), we said:

"In construing and applying the Sherman Act's ban against contracts, conspiracies, and combinations in restraint of trade, the Court has held that certain agreements or practices are so 'plainly anticompetitive,' National Society of Professional Engineers v. United States, 435 U.S. 679, 692, 98 S.Ct. 1355, 1365, 55 L.Ed.2d 637 (1978); Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50, 97 S.Ct. 2549, 2557 (1977), and so often 'lack . . . any redeeming virtue,' Northern Pac. R. Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958), that they are conclusively presumed illegal without further examination under the rule of reason generally applied in Sherman Act cases." ⁹

Page 647

A horizontal agreement to fix prices is the archetypal example of such a practice. It has long been settled that an agreement to fix prices is unlawful per se. It is no excuse that the prices fixed are themselves reasonable. See, e. g., United States v. Trenton Potteries Co., 273 U.S. 392, 397-398, 47 S.Ct. 377, 379, 71 L.Ed. 700 (1927); United States v. Trans-Missouri Freight Assn., 166 U.S. 290, 340-341, 17 S.Ct. 540, 558-559, 41 L.Ed. 1007 (1897). In United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940), we held that an agreement among competitors to engage in a program of buying surplus gasoline on the spot market in order to prevent prices from falling sharply was unlawful without any inquiry into the reasonableness of the program, even though there was no direct agreement on the actual prices to be maintained. In the course of the opinion, the Court made clear that

"the machinery employed by a combination for price-fixing is immaterial.

"Under the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se." Id., at 223, 60 S.Ct., at 844.

Thus, we have held agreements to be unlawful per se...