United States v. Parke, Davis & Company/Concurrence Stewart

by Potter Stewart

United States Supreme Court

362 U.S. 29

United States  v.  Parke, Davis & Company

 Argued: Nov. 10, 1959. --- Decided: Feb 29, 1960

Mr. Justice STEWART, concurring.

I concur in the judgment. The Court's opinion amply demonstrates that the present record shows an illegal combination to maintain retail prices. I therefore find no occasion to question, even by innuendo, the continuing validity of the Colgate decision, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992, or of the Court's ruling as to the jury instruction in Cudahy, 256 U.S. 210 211, 41 S.Ct. 451, 452, 65 L.Ed. 892.

Mr. Justice HARLAN, whom Mr. Justice FRANKFURTER and Mr. Justice WHITTAKER join, dissenting.

The Court's opinion reaches much further than at once may meet the eye, and justifies fuller discussion than otherwise might appear warranted. Scrutiny of the opinion will reveal that the Court has done no less than send to its demise the Colgate doctrine which has been a basic part of antitrust law concepts since it was first announced in 1919 in United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992.

I begin with that doctrine and how it was applied by the District Court in this case. In the words of the Court's opinion, Colgate held that in the absence of a monopolistic setting, 'a manufacturer, having announced a price maintenance policy, may bring about adherence to it by refusing to deal with customers who do not observe that policy.' 'And,' as said in Colgate (at page 307, 39 S.Ct. at page 468), 'of course, he may announce in advance the circumstances under which he will refuse to sell.' The Government's complaint, seeking to enjoin alleged violations of §§ 1 and 3 of the Sherman Act, ^[1] in substance charged Parke Davis with having combined and conspired with wholesalers and retailers of its products in the District of Columbia and Virginia, in four respects: (1) with retailers, to fix retail prices; (2) with retailers, to suppress advertising of cut prices; (3) with wholesalers, to fix wholesale prices; and (4) with wholesalers, to boycott retail price cutters. The Company's defense was that the activities complained of simply constituted a legitimate exercise of its rights under the Colgate doctrine. The detailed findings of the District Court are epitomized in its opinion as follows:

(1) Parke Davis 'had well-established policies concerning the prices at which (its) products were to be sold by wholesalers and retailers, and the type of retailers to whom the wholesalers could re-sell'; ^[2]

(2) Parke Davis' 'representatives * * * notified retailers concerning the policy under which its goods must be sold, but the retailers were free either to do without such goods or sell them in accordance with defendant's policy';

(3) Parke Davis' 'representatives likewise contacted wholesalers, notifying them of its policy and the wholesalers were likewise free to refuse to comply and thus risk being cut off by the defendant';

(4) 'every visit made by the representatives to the retailers and wholesalers was, to each of them, separate and apart from all others';

(5) '(t)he evidence is clear that both wholesalers and retailers valued (Parke Davis') business so highly that they acceded to its policy'; (6) 'there was no coercion by defendant and no agreement with (wholesaler or retailer) co-conspirators as alleged in the Complaint';

(7) as to the Government's contention that proof of the alleged conspiracy 'is implicit in (1) defendant's calling the attention of both retailers and wholesalers to its policy, and (2) the distributors' acquiescence to the policy. (t)he Court cannot agree to such a nebulous deduction from the record before it.'

On these premises the District Court concluded: 'Clearly, the actions of defendant were properly unilateral and sanctioned by law under the doctrine laid down in the case of United States v. Colgate & Company, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992.'

The Court appears to recognize that as the Colgate doctrine was originally understood, the District Court's findings would require affirmance of its judgment here. It is said, however, that reversal is required because Federal Trade Commission v. Beech-Nut Packing Co., 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307, and United States v. Bausch & Lomb Optical Co., 321 U.S. 707, 64 S.Ct. 805, 88 L.Ed. 1024, subsequently 'narrowly limited' the Colgate rule. The claim is that whereas prior to Beech-Nut it was considered that, fair trade laws apart, resale price maintenance came within the ban of the Sherman Act only if it was brought about by express or implied agreement between the parties-which the Court says meant 'contractual arrangements'-Beech-Nut, which was carried forward by Bausch & Lomb, later established that such agreements or contractual arrangements need not be shown. Recognizing that §§ 1 and 3 of the Sherman Act explicitly require a 'contract, combination * * * or conspiracy,' the Court says this requirement is satisfied by conduct which falls short of express or implied agreement, if it goes beyond the seller's mere announcement of terms and his refusal to deal with those who will not comply with them. Concluding that the District Court in the present case mistakenly proceeded solely on the 'agreement' view of Colgate, it is then said that its findings of fact are not binding on us because they were based on an erroneous legal standard, and that therefore 'Rule 52 has no application here.' ^[3]

I think this reasoning not only misconceives the Beech-Nut and Bausch & Lomb cases, but also mistakes the premises on which the District Court decided this case, and its actual findings of fact.

First. I cannot read Beech-Nut or Bausch & Lomb as introducing a new narrowing concept into the Colgate doctrine. Until today I had not supposed that any informed antitrust practitioner or judge would have had to await Beech-Nut to know that the concerted action proscribed by the Sherman Act need not amount to a contractual agreement. But neither do I think it would have been supposed that the Sherman Act does not require concerted action in some form. In Beech-Nut itself the Court stated the rule to be that a seller may not restrain trade 'by contracts or combinations, express or implied,' and there found suppression of competition 'by methods in which the company secures the co-operation of its distributors and customers, which are quite as effectual as agreements express or implied intended to accomplish the same purpose.' 257 U.S. at pages 453, 455, 42 S.Ct. at pages 154, 155, 66 L.Ed. 307. It is obvious that the 'methods' thus referred to were the 'cooperative methods' which the Federal Trade Commission had found to exist, for the Court expressly limited the Commission's order to the granting of relief against such methods. Id., 257 U.S. 455-456, 42 S.Ct. 155, 66 L.Ed. 307. Far from announcing that no concerted action need be shown, the Court accepted the Commission's factual determination that such action did exist.

Similarly, in Bausch & Lomb, the District Court had found that Soft-Lite had entered into 'agreements with wholesale customers' to fix prices and boycott unlicensed retailers. 321 U.S. at page 717, 64 S.Ct. at page 810, 88 L.Ed. 1024. This Court held that the facts 'all amply support, indeed require, the inference of the trial court that a conspiracy to maintain prices down the distribution system existed between the wholesalers and Soft-Lite.' Id., 321 U.S. at page 720, 64 S.Ct. at page 812, 88 L.Ed. 1024. The Court reiterated that resale price maintenance could not be achieved 'by agreement, express or implied.' Id., 321 U.S. at page 721, 64 S.Ct. at page 812, 88 L.Ed. 1024. In rejecting the applicability of the Colgate doctrine, it said that none of the cases applying the doctrine 'involve, as the present case does, an agreement between the seller and purchaser to maintain resale prices.' Ibid. It justified the finding of concerted action on the ground that '(t)he wholesalers accepted Soft-Lite's proffer of a plan of distribution by cooperating in prices, limitation of sales, to and approval of retail licensees.' Id., 321 U.S. at page 723, 64 S.Ct. at page 813, 88 L.Ed. 1024.

The results in Beech-Nut and Bausch & Lomb, as in all Sherman Act cases, turned on the application of established standards of concerted action to the full sweep of the particular facts in those cases, and not upon any new meaning given to the words 'contract, combination * * * or conspiracy.' The Court now says that the seller runs afoul of the Sherman Act when he goes beyond mere announcement of his policy and refusal to sell, not because the bare announcement and refusal fall outside the statutory phrase, but because any additional step removes a 'countervailing consideration' in favor of permitting a seller to choose his customers. But we are left wholly in the dark as to what the purported new standard is for establishing a 'contract, combination * * * or conspiracy.'

Second. The Court is mistaken in attributing to the District Court the limited view that Parke Davis' activities should, under Colgate, be upheld unless they involved some express or implied 'contractual arrangement' with wholesalers or retailers. The Government's complaint specifically charged a 'combination and conspiracy' between Parke Davis and its wholesale and retail customers in the areas involved, comprising a 'continuing agreement, understanding and concert of action' in the four aspects already noted. 362 U.S. at page 50, 80 S.Ct. at page 515. In its 31 detailed findings of fact the District Court repeatedly emphasized that Parke Davis did not have an 'agreement or understanding of any kind' with its distributors, and it concluded that the evidence as a whole did not support the Government's allegations. It determined with respect to each of the four facets of the alleged conspiracy that 'there was no coercion' and that 'Parke, Davis did not combine, conspire or enter into an agreement, understanding or concert of action' with the wholesalers, retailers, or anyone else. I cannot detect in the record any indication that the District Court in making these findings applied anything other than the standard which has always been understood to govern prosecutions based on §§ 1 and 3 of the Sherman Act.

Third. Bearing down heavily on the statement in Beech-Nut that the conduct there involved showed more than 'the simple refusal to sell,' 257 U.S. at page 454, 42 S.Ct. at page 154, 66 L.Ed. 307 (see also Bausch & Lomb, supra, 321 U.S. at page 722, 64 S.Ct. at page 813, 88 L.Ed. 1024), the Court finds that Parke Davis' conduct exceeded the permissible limits of Colgate in two respects. The first is that Parke Davis announced that it would, and did, cut off wholesalers who continued to sell to price-cutting retailers. The second is that the Company in at least one instance reported its talks with one or more retailers to other retailers; that in 'this manner Parke Davis sought assurances of compliance and got them'; and that it 'was only by actively bringing about substantial unanimity among the competitors that Parke Davis was able to gain adherence to its policy.' There are two difficulties with the Court's analysis on these scores. The first is the findings of the District Court. As to refusals to sell to wholesalers, the lower court found that such conduct did not involve any concert of action, but was wholly unilateral on Parke Davis' part. And I cannot see how such unilateral action, permissible in itself, becomes any less unilateral because it is taken simultaneously with similar unilateral action at the retail level. As to the other respect in which the Court holds Parke Davis' conduct was illegal, the District Court found that the Company did not make 'the enforcement of its policies, as to any one wholesaler or retailer dependent upon the action of any other wholesaler or retailer.' And it further stated that the 'evidence is clear that both wholesalers and retailers valued defendant's business so highly that they acceeded to its policy,' and that such acquiescence was not brought about by 'coercion' or 'agreement.' Even if this were not true, so that concerted action among the retailers at the 'horizontal' level might be inferred, as the Court indicates, under the principles of Interstate Circuit, Inc., v. United States, 306 U.S. 208, 59 S.Ct. 467, 83 L.Ed. 610. I do not see how that itself would justify an inference that concerted action at the 'vertical' level existed between Parke Davis and the retailers or wholesalers.

The second difficulty with the Court's analysis is that even reviewing the District Court's findings only as a matter of law, as the Court purports to do, the cases do not justify overturning the lower court's resulting conclusions. Beech-Nut did not say that refusals to sell to wholesalers who persisted in selling to cut-price retailers-conduct which was present in that case (257 U.S. at page 448, 42 S.Ct. at page 152, 66 L.Ed. 307)-was a per se infraction of the Colgate rule, but only that it was offensive if it was the result of cooperative group action. While the Court in Beech-Nut and Bausch & Lomb inferred from the aggressive, widespread, highly organized, and successful merchandising programs involved there that such concerted action existed in those cases, the defensive, limited, unorganized, and unsuccessful effort of Parke Davis to maintain its resale price policy ^[4] does not justify our disregarding the District Court's finding to the contrary in this case. ^[5]

In light of the whole history of the Colgate doctrine, it is surely this Court, and not the District Court, that has proceeded on erroneous premises in deciding this case. Unless there is to be attributed to the Court a purpose to overturn the findings of fact of the District Court-something which its opinion not only expressly disclaims doing, but which would also be in plain definance of the Federal Rules of Civil Procedure, Rule 52(a), and principles announced in past cases (see, e.g., United States v. Yellow Cab Co., 338 U.S. 338, 341-342, 70 S.Ct. 177, 179, 94 L.Ed. 150; International Boxing Club of New York, Inc. v. United States, 358 U.S. 242, 252, 79 S.Ct. 245, 251, 3 L.Ed.2d 270)-I think that what the Court has really done here is to throw the Colgate doctrine into discard.

To be sure, the Government has explicitly stated that it does not ask us to overrule Colgate, and the Court professes not to do so. But contrary to the long understanding of bench and bar, the Court treats Colgate as turning not on the absence of the concerted action explicitly required by §§ 1 and 3 of the Sherman Act, but upon the Court's notion of 'countervailing' social policies. I can regard the Court's profession as no more than a bow to the fact that Colgate, decided more than 40 years ago, has become part of the economic regime of the country upon which the commercial community and the lawyers who advise it have justifiably relied.

If the principle for which Colgate stands is to be reversed, it is, as the Government's position plainly indicates, something that should be left to the Congress. It is surely the emptiest of formalisms to profess respect for Colgate and eviscerate it in application.

I would affirm.

Notes

1. These are the 'restraint of trade,' not the 'monopoly,' provisions of the Sherman Act. See Note 1 of the Court's opinion.
2. Those 'authorized by law to fill or dispense prescriptions.'
3. Rule 52(a), F.R.Civ.P. provides in relevant part: 'Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.'
4. The District Court found, among other things, that the efforts of Parke Davis in the District of Columbia and Virginia came about only after some of its competitors had engaged in damaging local 'deep price cutting' on Parke Davis products (Fdg. 12); that Parke Davis' sales in those areas constituted less than 5% of the total pharmaceutical sales therein (Fdg. 3); that these efforts followed the legal advice previously given by the Company's counsel (Fdg. 12); that Parke Davis did not have 'any regularized or systematic machinery for maintaining its suggested minimum prices as to either retailers or wholesalers' (Fdg. 10); that the entire episode lasted only from July to the fall of 1956, when the Company 'in good faith' abandoned all further such efforts (Fdgs. 12, 27); and that since that time retailers in these areas 'have continuously sold and advertised Parke, Davis products at cut prices, and have been able to obtain those products from both the wholesalers and/or Parke, Davis itself.' (Fdg. 27.)
5. It may be observed that the facts found by the District Court militate more strongly against violation of the Sherman Act than those which formed the basis of the charge held erroneous by this Court in Cudahy, 256 U.S. at pages 210-211, 41 S.Ct. at pages 451, 452, 65 L.Ed. 892. Although the Court now repudiates what was said in Cudahy in this respect, I submit that there is nothing in Beech-Nut, Bausch & Lomb, or any other case in this Court which justifies this.