Schwegmann Bros v. Calvert Distillers Corp Schwegmann Bros v. Seagram Distillers Corp 8212 10, 1951

Decision Date21 May 1951
Docket Number443,Nos. 442,s. 442
Citation71 S.Ct. 745,341 U.S. 384,19 A.L.R.2d 1119,95 L.Ed. 1035
CourtU.S. Supreme Court

Certiorari to the United States Court of Appeals for the Fifth Circuit.

Messrs Saul Stone, John Minor Wisdom, New Orleans, La., for petitioners.

Mr. Monte M. Lemann, New Orleans, La., for respondents.

Mr. Justice DOUGLAS delivered the opinion of the Court.

Respondents, Maryland and Delaware corporations, are distributors of gin and whiskey. They sell their products to wholesalers in Louisiana, who in turn sell to retailers. Respondents have a price-fixing scheme whereby they try to maintain uniform retail prices for their products. They endeavor to make retailers sign price-fixing contracts under which the buyers promise to sell at not less than the prices stated in respondents' schedules. They have indeed succeeded in getting over one hundred Louisiana retailers to sign these agreements. Petitioner, a retailer in New Orleans, refused to agree to the price-fixing scheme and sold respondents' products at a cut-rate price. Respondents thereupon brought this suit in the District Court by reason of diversity of citizen- ship to enjoin petitioner from selling the products at less than the minimum prices fixed by their schedules.

It is clear from our decisions under the Sherman Act, 26 Stat. 209, 15 U.S.C.A. §§ 1—7, 15 note, that this interstate marketing arrangement would be illegal, that it would be enjoined, that it would draw civil and criminal penalties, and that no court would enforce it. Fixing minimum prices, like other types of price fixing, is illegal per se. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129; Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U.S. 211, 71 S.Ct. 259. Resale price maintenance was indeed struck down in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502. The fact that a state authorizes the price fixing does not, of course, give immunity to the scheme, absent approval by Congress.

Respondents, however, seek to find legality for this marketing arrangement in the Miller-Tydings Act enacted in 1937 as an amendment to § 1 of the Sherman Act. 50 Stat. 693, 15 U.S.C. § 1, 15 U.S.C.A. § 1. That amendment provides in material part that 'nothing herein contained shall render illegal, contracts or agreements prescribing minimum prices for the resale' of specified commodities when 'contracts or agreements of that description are lawful as applied to intrastate transactions' under local law.1 (Italics added.)

Louisiana has such a law. Act No. 13 of 1936, La.Gen.Stat. §§ 9809.1 et seq., LSA—RS 51:391 et seq. It permits a 'contract' for the sale or resale of a commodity to provide that the buyer will not resell 'except at the price stipulated by the vendor.' The Louisiana statute goes further, It not only allows a distributor and retailer to make a 'contract' fixing the resale price; but once there is a pricefixing 'contract,' known to a seller, with any retailer in the state, it also condemns as unfair competition a sale at less than the price stipulated even though the seller is not a party to the 'contract.'2 In other words, the Louisiana statute enforces price fixing not only against parties to a 'contract' but also against nonsigners. So far as Louisiana law is concerned, price fixing can be enforced against all retailers once any single retailer agrees with a distributor on the resale price. And the argument is that the Miller-Tydings Act permits the same range of price fixing.

The argument is phrased as follows: the present action is outlawed by the Sherman Act—the Miller-Tydings Act apart—only if it is a contract, combination, or conspiracy in restraint of trade. But if a contract or agreement is the vice, then by the terms of the Miller-Tydings Act that contract or agreement is immunized, provided it is immunized by state law. The same is true if the vice is a conspiracy, since a conspiracy presupposes an agreement. That was in essence the view of the Court of Appeals, which affirmed by a divided vote a judgment of a district court enjoining petitioner from price cutting. 184 F.2d 11.

The argument at first blush has appeal. But we think it offends the statutory scheme.

We note to begin with that there are critical differences between Louisiana's law and the Miller-Tydings Act. The latter exempts only 'contracts or agreements prescribing minimum prices for the resale'. On the other hand, the Louisiana law sanctions the fixing of maximum as well as minimum prices, for it exempts any provision that the buyer will not resell 'except at the price stipulated by the vendor.' We start then with a federal act which does not, as respondents suggest, turn over to the states the handling of the whole problem of resale price maintenance on this type of commodity. What is granted is a limited immunity—a limitation that is further emphasized by the inclusion in the state law and the exclusion from the federal law of the nonsigner provision. The omission of the nonsigner provision from the federal law is fatal to respondents' position unless we are to perform a distinct legislative function by reading into the Act a provision that was meticulously omitted from it.

A refusal to read the nonsigner provision into the Miller-Tydings Act makes sense if we are to take the words of the statute in their normal and customary meaning. The Act sanctions only 'contracts or agreements'. If a distributor and one or more retailers want to agree, combine, or conspire to fix a minimum price, they can do so if state law permits. Their contract, combination, or conspiracy—hitherto illegal—is made lawful. They can fix minimum prices pursuant to their contract or agreement with impunity. When they seek, however, to impose price fixing on persons who have not contracted or agreed to the scheme, the situation is vastly different. That is not price fixing by contract or agreement; that is price fixing by compulsion. That is not following the path of consensual agreement; that is resort to coercion.

Much argument is made to import into the contracts which respondents make with retailers a provision that the parties may force nonsigners into line. It is said that state law attaches that condition to every such con- tract and that therefore the Miller-Tydings Act exempts it from the Sherman Act. Such a condition, if implied, creates an agreement respecting not sales made under the contract but other sales. Yet all that are exempted by the Miller-Tydings Act are 'contracts or agreements prescribing minimum prices for the resale' of the articles purchased, not 'contracts or agreements' respecting the practices of non-contracting competitors of the contracting retailers.

It should be noted in this connection that the Miller-Tydings Act expressly continues the prohibitions of the Sherman Act against 'horizontal' price fixing by those in competition with each other at the same functional level.3 Therefore, when a state compels retailers to follow a parallel price policy, it demands private conduct which the Sherman Act forbids. See Parker v. Brown, 317 U.S. 341, 350, 63 S.Ct. 307, 313, 87 L.Ed. 315. Elimination of price competition at the retail level may, of course, lawfully result if a distributor successfully negotiates individual 'vertical' agreements with all his retailers. But when retailers are forced to abandon price competition, they are driven into a compact in violation of the spirit of the proviso which forbids 'horizontal' price fixing. A real sanction can be given the prohibitions of the proviso only if the price maintenance power granted a distributor is limited to voluntary engagements. Otherwise, the exception swallows the proviso and destroys its practical effectiveness.

The contrary conclusion would have a vast and devastating effect on Sherman Act policies. If it were adopted, once a distributor executed a contract with a single retailer setting the minimum resale price for a commodity in the state, all other retailers could be forced into line. Had Congress desired to eliminate the consensual element from the arrangement and to permit blanketing a state with resale price fixing if only one retailer wanted it, we feel that different measures would have been adopted—either a nonsigner provision would have been included or resale price fixing would have been authorized without more. Certainly the words used connote a voluntary scheme. Contracts or agreements convey the idea of a cooperative arrangement, not a program whereby recalcitrants are dragged in by the heels and compelled to submit to price fixing.

The history of the Act supports this construction. The efforts to override the rule of Dr. Miles Medical Co. v. John D. Park & Sons Co., supra, were long and persistent. Many bills had been introduced on this subject before Senator Tydings introduced his. Thus in 1929, in the Seventy-First Congress, the Capper-Kelly fair trade bill was offered.4 It had no nonsigner provision. It merely permitted resale price maintenance as respects specified classes of commodities by declaring that no such 'contract relating to the sale or resale' shall be unlawful. As stated in the House Report that bill merely legalized an agreement 'that the vendee will not resell the commodity specified in the contract except as a stipulated price.'5 That bill became the model for the California act passed in 1931—the first state act permitting resale price maintenance.6 The California act contained no nonsigner clause. Neither did the Capper-Kelly bill that was introduced in the Seventy-Second Congress. 7 So far as material here it was identical with its predecessor.

The Capper-Kelly bill did not pass. And by the time the next bill was introduced—three years...

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