Wine and Spirits Specialty, Inc. v. Daniel

• Decision Date: 20 March 1984
• Docket Number: No. 64984,64984
• Citation: 666 S.W.2d 416
• Parties: 1984-1 Trade Cases P 65,916 WINE AND SPIRITS SPECIALTY, INC., Plaintiff-Respondent, v. Edward D. DANIEL, Director, Department of Public Safety, James A. Franklin, Jr., Supervisor, Division of Liquor Control, Defendants-Appellants, Missouri Wine and Spirits Association, Inc., Intervenor-Defendant-Appellant.
• Court: Missouri Supreme Court

Page 416

666 S.W.2d 416

1984-1 Trade Cases P 65,916

WINE AND SPIRITS SPECIALTY, INC., Plaintiff-Respondent, v. Edward D. DANIEL, Director, Department of Public Safety, James A. Franklin, Jr., Supervisor, Division of

Liquor Control, Defendants-Appellants,

Missouri Wine and Spirits Association, Inc.,

Intervenor-Defendant-Appellant.

No. 64984.

Supreme Court of Missouri,

En Banc.

March 20, 1984.

Rehearing Denied April 16, 1984.

John Ashcroft, Atty. Gen., Robert E. Dolan, Jr., Warren Weinstein, Asst. Attys. Gen., Jefferson City, for defendants-appellants.

Alex Bartlett, Jefferson City, William B. Schreiber, Michael T. Kelly, New York City, William P. Wright, Jefferson City, for intervenor-defendant-appellant.

Richard E. McFadin, F.A. White, Jr., North Kansas City, Mo., for plaintiff-respondent.

DONNELLY, Judge.

This is an appeal from a declaratory judgment that §§ 311.332, 311.334, 311.336 and 311.338, RSMo 1978, more commonly known as price posting laws, and the analogous regulation of the Department of Liquor Control, 11 C.S.R. 70-2.190, violate the Sherman Act, 15 U.S.C. § 1 et seq. (1976). This Court has exclusive appellate jurisdiction. Mo. Const. art. V, § 3.

The facts are stipulated. The General Assembly has enacted liquor control laws to regulate various phases of the liquor industry. Under these laws manufacturers, wholesalers and retailers are characterized as separate "phases" of liquor traffic requiring separate licenses. Appellants, Director of the Department of Public Safety and Supervisor of the Department of Liquor Control (hereinafter Supervisor), enforce and administer these liquor control laws. The parties acknowledge that while these laws "may at times have the effect of inhibiting price competition, [they] do not compel or authorize wholesalers to agree among themselves for the purpose of contracting, combining or conspiring to fix * * * prices."

At trial, respondent, a duly licensed wholesale distributor, sought to enjoin the enforcement of Missouri's price posting laws. Section 311.332 makes it unlawful for any wholesaler to discriminate between retailers or to grant, directly or indirectly, any discount, rebate or free goods except a quantity and payment discount not in excess of one percent apiece. Sections 311.334 and 311.336 require each wholesaler to file monthly a schedule of the prices it intends to charge and the discounts it intends to grant to its retail customers during the upcoming month. The Supervisor then aggregates this information and makes it available for inspection by all wholesalers. Within three days thereafter each wholesaler may reduce (but not increase) its prices to meet (but not to go below) lower competing prices and discounts. Section 311.336 additionally empowers the Supervisor to "make such rules and regulations as shall be appropriate to carry out [these laws]." Pursuant thereto the Supervisor promulgated 11 C.S.R. 70-2.190 to effectuate these provisions. Section 311.338 provides that if a wholesaler violates any of the aforementioned provisions, its license will be either suspended for not less than fifteen days or revoked.

The trial court found these laws: (1) are per se illegal as constituting resale price maintenance, price fixing and a restraint of trade, (2) authorize or compel conduct violative of the Sherman Act, and (3) place irresistible pressure on private parties to violate the Sherman Act. We disagree.

The Sherman Act makes illegal:

Every contract, combination * * * or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations * * *.

15 U.S.C. § 1 (1976). In Rice v. Norman Williams Co., 458 U.S. 654, 102 S.Ct. 3294, 73 L.Ed.2d 1042 (1982), the Supreme Court articulated the test to be used on this appeal:

A party may successfully enjoin the enforcement of a state statute only if the statute on its face irreconcilably conflicts with federal antitrust policy. * * *

[A] state statute, when considered in the abstract, may be condemned under the antitrust laws only if it mandates or authorizes conduct that necessarily constitutes a violation of the antitrust laws in all cases, or if it places irresistible pressure on a private party to violate the antitrust laws in order to comply with the statute. Such condemnation will follow under § 1 of the Sherman Act when the conduct contemplated by the statute is in all cases a per se violation. If the activity addressed by the statute does not fall into that category, and therefore must be analyzed under the rule of reason, the statute cannot be condemned in the abstract. Analysis under the rule of reason requires an examination of the circumstances underlying a particular economic practice, and therefore does not lend itself to a conclusion that a statute is facially inconsistent with federal antitrust laws. (Emphasis supplied.)

Id. 458 U.S. at 659, 661, 102 S.Ct. at 3299, 3300. Thus, the essential question is whether Missouri's price posting laws constitute a per se violation in all cases.

Relying on California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980), respondent asserts that Missouri's price posting laws constitute resale price maintenance, a per se violation of the Sherman Act. Rice, 458 U.S. at 659-60, 102 S.Ct. at 3299-3300. Although the Supreme Court held in Midcal that California's price posting laws constituted resale price maintenance, those provisions are dissimilar to the provisions challenged here. California's liquor control laws required producers and wholesalers to enter into fair trade contracts whereby the producer established not only the price it charged the wholesaler but also the price the wholesaler charged retailers. If they failed to enter into such an agreement the wholesaler was subsequently required to post a price schedule which bound all other wholesalers in the area. Midcal Aluminum, Inc. v. Rice, 90 Cal.App.3d 979, 153 Cal.Rptr. 757 (1979), aff'd sub nom. Midcal, supra. California's price posting scheme was "not one which merely require[d] each distributor to specify prices, [but rather was] for the purpose of fixing prices." Id. 153 Cal.Rptr. at 761. The Supreme Court had no difficulty in determining that California's wine pricing system facially conflicted with the Sherman Act because it mandated resale price maintenance. Midcal, 445 U.S. at 103, 100 S.Ct. at 942; Rice, 458 U.S. at 659, 102 S.Ct. at 3299.

As summarized above, Missouri's price posting laws are distinguishable. Initially, each wholesaler determines individually the price it will charge retailers. While the wholesalers are afforded an opportunity to change their prices they are not so required; any change must be based on their independent judgment. The price posting laws neither authorize nor sanction individual wholesalers to contract, combine or conspire to fix the prices that they or any other wholesaler or retailer charge. Rather, the price posting laws mandate unilateral action on the part of every wholesaler in order "to preclude a licensee in one phase of * * * liquor traffic from controlling other * * * phases * * *." Brown-Forman Distillers Corp. v. Stewart, 520 S.W.2d 1, 7 (Mo. banc 1975). The mere fact that the state makes the wholesalers' initial prices available for public display does not itself constitute a per se violation of the Sherman Act. United States v. Citizens & Southern National Bank, 422 U.S. 86, 113, 95 S.Ct. 2099, 2155, 45 L.Ed.2d 41 (1975); Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U.S. 35, 45, 86 S.Ct. 1254, 1260, 16 L.Ed.2d 336 (1966). Thus, while California's price posting laws were per se illegal as constituting resale price maintenance, Missouri's clearly are not. See Enrico's Inc. v. Rice, 551 F.Supp. 511 (N.D.Cal.1982); United States Brewers Assoc., Inc. v. Healy, 532 F.Supp. 1312 (D.Conn.1982) [rev'd on other grounds, 692 F.2d 275 (2nd Cir.1982) ]; Serlin Wine and Spirit Merchants, Inc. v. Healy, 512 F.Supp. 936 (D.Conn.1981), aff'd sub nom. Morgan v. Division of Liquor Control, 664 F.2d 353 (2nd Cir.1981); Battipaglia and Bacchus Selections, Inc. v. New York State Liquor Authority, Trade Cas. (CCH) p 64,964 (S.D.N.Y.1982); Louis Finocchiaro, Inc. v. State of Nebraska and Nebraska Liquor Control Commission, No. 366 (D.C., Lancaster Co., Neb.1983); Martignetti Grocery Co. v. Alcoholic Beverages Control Commission, No. 81-1305 (Mass. Superior Ct., Middlesex Co. 1983).

The parties stipulated that the price posting laws do not authorize or compel wholesalers to agree among themselves for the purpose of contracting, combining or conspiring to fix prices. Nevertheless, respondent ostensibly argues that the price posting laws induce a tacit agreement among wholesalers to stabilize prices. In this as in other areas of coincident federal and state regulation, we will not seek out a conflict where none exists. Seagram & Sons, 384 U.S. at 45, 86 S.Ct. at 1260. Talismanic invocation of the words "price fixing" and "restraint of trade" do not justify automatic application of the fatal per se rule. To characterize these price posting provisions as per se "price fixing" or "restraint of trade" is to ignore that their purpose is to defeat such pernicious consequences. Brown-Forman, supra. For the same reasons articulated above, we find no per se violation due to price fixing or restraint of trade; therefore, we cannot constitutionally condemn Missouri's price posting laws as mandating conduct that constitutes a violation in all cases or that places irresistible pressure on private parties to violate the antitrust laws. Rice, 458 U.S. at 661, 102 S.Ct. at 3300.

Because of our resolution of the preemption issue, we need not consider whether the price posting laws would be saved under the state action doctrine of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), or under the Twenty-First Amendment. Id. 458 U.S. at 662 n. 9, 102 S.Ct. at 3301 n. 9.

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