375 F.2d 273 | 1st Cir. | 1967
Lead Opinion
In this action plaintiff, a gasoline station operator, charges the defendant oil company, his former lessor and supplier, with violations of the federal antitrust laws as a result of which he suffered great damage. The district court dismissed the suit for failure of the amended complaint to allege a federal antitrust law violation.
Viewing this ambiguous complaint in the light most favorable to the plaintiff,
A few months later defendant began exerting various pressures on plaintiff to force him either to reduce his price of gasoline
From these facts it is clear that the only provision of the federal antitrust laws that need be considered here is Section 1 of the Sherman Act, and I shall confine my discussion to defendant’s alleged violation of that section.
The allegation that defendant pressured plaintiff to reduce his retail price at best amounts to a unilateral attempt to coerce plaintiff into making such an agreement.
There are three cases which it is argued tend to support the contrary view. I think these cases are distinguishable. The first is United States v. Parke, Davis & Co., supra. There the Court held that a manufacturer’s conduct which went beyond a mere announcement of its price policy and a simple refusal to deal, violated Section 1 of the Sherman Act. In that case the manufacturer took steps to pressure certain unwilling retailers into adhering to its resale price policy through the cooperation of its dealers and some of its retailers. The Court found that this joint action to maintain resale prices constituted a combination or conspiracy in restraint of trade. Although defendant’s conduct in the case before us may have been more than a simple refusal to deal, our case is clearly distinguishable from Parke, Davis in that no combination or conspiracy is alleged nor can any be implied.
The facts in the other two cases, Simpson v. Union Oil Co., 377 U.S. 13, 84 S.Ct. 1051, 12 L.Ed.2d 98 (1964) and Broussard v. Socony Mobil Oil Co., 350 F.2d 346 (5th Cir. 1965), are practically identical. In both, a resale price agreement was entered into between supplier and dealer. Subsequently the dealer reneged and the supplier terminated the lease. Unlike the present case, in Simpson there was evidence of a large scale price maintenance program maintained through written consignment agreements under which the supplier fixed the retail price of gasoline. The dealer would not abide by the price fixed thereunder and for that reason the supplier refused to renew the dealer’s lease. The Court held that resale price maintenance through this coercive type of consignment agreement violated Section 1 of the Sherman Act. The case turned on the existence of an agreement for resale price maintenance. Simpson, supra at 24. In the instant case there is no such agreement.
Broussard, supra involved a situation where the dealer reduced his retail price of gasoline only after repeated insistence by the supplier. Finding that he could not make a living at the reduced price, the dealer raised it to its former level. The supplier again insisted upon a reduction in price and when the dealer refused, the supplier declined to renew the lease. The record in that case is much stronger for the dealer than in the
Plaintiff Quinn never having complied with defendant Mobil’s request to reduce his price, no agreement to control the resale price of gasoline ever came into existence between them. This, plus the absence of any allegation that Mobil’s request was part of a general price maintenance scheme or policy or that any other dealer reduced his retail price as a result of defendant’s insistence, clearly distinguishes our case from Broussard. To be actionable under Section 1 of the Sherman Act pressure to achieve retail price maintenance that exceeds a mere refusal to deal must occur “in a contemporaneous framework of the combination, conspiracy, or agreement forbidden by the statute.” Dart Drug Corporation v. Parke, Davis & Company, 120 U.S.App.D.C. 79, 344 F.2d 173, 186 (1965). Clearly, in the instant case there is no such “framework.”
The allegation that defendant terminated the lease, despite the fact that plaintiff’s business had increased substantially, perhaps comes close to raising an inference that defendant was policing a general scheme to fix prices for the area. But this court should not be required to so speculate. Nor is it too much to require this plaintiff, absent the showing of an agreement, to allege enough facts to indicate that the acts complained of took place within the larger framework of a pricing program, policy or conspiracy — if this is the real basis of his complaint. He has not done so here.
Affirmed.
. These agreements ran automatically from year to year but were subject to termination in any year on notice of either party.
. There is no allegation that defendant renewed its request for this price increase at this or any later time.
. That he did not order; that defendant did not require his competitors to take and which under his contract plaintiff was not obliged to accept.
. Plaintiff contends that defendant’s above stated tactics also violated the Olayton Act as amended by the Robinson-Pat-man Price Discrimination Act, 15 U.S.C. § 13(a) (b) (f) but this act is inapplicable under any view of the facts and for that reason we shall not consider this contention.
. In this case the Court stated that both minimum and maximum price fixing agreements “cripple the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment.”
. Section 1 reads in relevant part “Every contract, combination or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal * * 26 Stat. 209, 15 U.S.C. § 1 (1964 ed.).
. A simple refusal to deal, standing alone, is not a vertical agreement; in fact the refusal indicates there has been a failure to obtain agreement. Turner, The Definition of Agreement Under the Sherman Act: Conscious Parallelism and Refusals to Deal, 75 Harv.L.Rev. 655, 686 (1962).
. We do not subscribe to the view that an agreement broken shortly after it was made is in effect no agreement at all. See Guidry v. Continental Oil Company, 350 F.2d 342, 344 (5th Cir. 1965), where the same court, on the same day it decided Broussard, strongly emphasized this point.
Concurrence Opinion
(concurring).
I agree with Judge McEntee’s conclusion that the absence of allegation of contract, combination, or conspiracy is a fatal defect in the complaint. But I would go further and say that even had plaintiff alleged either a completed agreement between himself and defendant or pressure on him to conform to a general maximum pricing policy of defendant, the complaint would not have stated a cause of action under section 1 of the Sherman Act.
My reasoning lies in the difference I see — admittedly without the benefit of authority — between the anti-competitive effects of minimum price fixing and of maximum price fixing, as practiced by a single manufacturer or supplier.
But in the case of a single manufacturer’s policy to set ceilings above which resale prices shall not rise, the motive and the pressure must be, in the great generality of cases, the manufacturer’s desire to maximize his profits. While it is of prime concern to a retailer that his competitor not undercut him, it is generally of no concern to him that his competitor cannot charge higher prices. It is, of course, important to him that he cannot raise his prices and increase his margin of profit. Whether, therefore, the retailer has his eye on his competitor or on himself, it is difficult to conceive of a situation in which retailers would pressure a supplier to put into effect a maximum price. In other words, unilateral maximum price pressure against retailers is not the equivalent of a horizontal combination, but rather of a series of vertical agreements for the manufacturer’s benefit.
Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 1951, 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219, which condemned agreement between two liquor manufacturers to fix maximum resale prices, gives indirect support to this proposition in two ways. First, its specific holding was that “an agreement among competitors, to fix maximum resale prices * * violate[s] the Sherman Act.” 340 U.S. at 213, 71 S.Ct. at 260. Second, it rejected the argument that the two defendants, because of common ownership and control, were “mere instrumentalities of a single manufacturing-merchandising unit” and therefore could not conspire. The Court noted not only the separateness of the corporate entities but that they held themselves out as competitors. 340 U.S. at 215, 71 S.Ct. at 261. The strong implication, I think, is that the same actions, if taken by a bona fide single unit, would not be proscribed by the Sherman Act.
Because of this reasoning, I do not agree with Broussard v. Socony Mobil Oil Co., 5 Cir., 1965, 350 F.2d 346. In that ease a dealer’s lease was not renewed, allegedly because of his refusal to acquiesce in his supplier’s request to re-due prices (i. e., to observe a maximum price ceiling). There was evidence of one other dealer’s reducing his price, a “marketing program”, and “suggestions of prices to [supplier’s] dealers”. The “program” was Socony Mobil’s response to meet competition from a new gasoline in the area. While this evidence of pressure on more than one dealer, as Judge McEntee’s opinion points ■ out, distinguishes Broussard from the present case, it does not aid in reconciling the approach in Broussard to that which I find persuasive. For Broussard presented precisely the case of the “single manufacturing-merchandising unit” which Kiefer-Steiuart took pains to distinguish. The court in Broussard cited the language of Kiefer-Stewart to the effect that “such agreements [among competitors to set maximum prices] no less than those to fix minimum prices, cripple the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment.” 350 F.2d at 349. But it ignored the fact that the referent of “such agreements” in that context was agreements among competitors. By so doing, I believe, it construed section 1 of the Sherman Act to elevate individual decision-making above competitiveness as a prime policy objective. Kiefer-Stew-art, in my view, said only that interference with individualism achieve d through an agreement among competitors to fix maximum prices was violative of the Sherman Act.
I readily accept the proposition that an agreement between two manufacturers to impose maximum prices on their dealers constitutes a combination in restraint of competition since (a) an identical or parallel system of maximum prices between two competing sets of
It is now pertinent to ask whether the above analysis is still valid in the light of Simpson v. Union Oil Co., 1964, 377 U.S. 13, 84 S.Ct. 1051, 12 L.Ed.2d 98. It is possible to read Simpson as proscribing a price fixing agreement between a single supplier and a single retailer. In that case the oil company and a dealer had entered into a consignment agreement (coupled with a lease) under which the company set the retail price of gasoline. The dealer violated the agreement, selling below the authorized price to meet competition. Because of this, the oil company refused to renew plaintiff’s lease. The Court held that resale price maintenance through such a consignment agreement was illegal. I would make two observations about Simpson. First, the Court faced the particular agreement between the parties against the background of use of the same lease-consignment device with some 3000 retailers in a “vast gasoline distribution system” in eight states. The Court characterized the arrangement as one which would “impose noncompetitive prices on thousands of persons whose prices might otherwise be competitive.” 377 U.S. at 21, 84 S.Ct. at 1057. And, second, the agreement was one which set a specific authorized price, which prevented dealers from meeting competitive prices. Even if the data concerning the widespread use of the device could be considered irrelevant to the decision, I would not readily read Simpson as prohibiting a single-supplier — single-dealer maximum resale price agreement. This is because of the differences of critical significance between fixing a maximum and fixing a minimum, or, worse, a specific price. A minimum price agreement between one supplier and one dealer not only prevents him from meeting prices below that minimum but also is most unlikely to exist, absent pressure from other dealers to produce the end result of a horizontal combination. A maximum price agreement between one supplier and one dealer, on the other hand, not only leaves the dealer free to meet competitive prices but also is completely explicable in terms of the supplier’s desire to maximize his return, without reference to any interest on the part of the dealer’s or the supplier’s competitors.
If, therefore, an agreement between a single manufacturer and a single dealer on a maximum price is not illegal, a frustrated effort to achieve such an agreement is not actionable, under the Sherman Act. Were such a completed agreement illegal, we would then confront a troublesome dilemma in dealing with unsuccessful efforts to obtain such an agreement. If we were to hold such conduct actionable, we would, as Judge McEntee notes, be adding judicially to section 1 the same kind of “attempt” provision which Congress has spelled out in section 2 dealing with monopoly. If we were to refrain from such judicial enlargement, we would create the anomalous situation of giving a treble damage remedy to a plaintiff, as in Simpson, who entered and then withdrew from an agreement, and denying such a remedy to a plaintiff who steadfastly resisted pressure to enter such an agreement in the first place. In my view, we embrace neither horn.
. To be sure, United States v. SoconyVacuum Oil Co., 1940, 310 U.S. 150, 223, 60 S.Ct. 811, 844, 84 L.Ed. 1129, contains the classic statement, often repeated, that “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.” But this was made in the context of industry-wide policies. As I shall hope to demonstrate, while maximum price fixing among manufacturers is more than likely to restrain price competition, the same cannot be said of maximum price fixing by one manufacturer acting truly independently.
Dissenting Opinion
(dissenting).
Both of the opinions of my brothers discuss the case of Broussard v. Socony Mobil Oil Co., 5 Cir., 1965, 350 F.2d 346, in which the court held that a claim that Mobil — also defendant here — attempted to set maximum prices for its retailers stated a claim of violation of section 1 of the Sherman Act. Judge McEntee finds the case distinguishable, while Judge Coffin finds it possibly in point, but
I.
In Broussard, as in the present case, Mobil suggested to the plaintiff, who was its lessee and at the same time one of its retailers, a maximum retail price for gasoline. Subsequently, when plaintiff refused to accept this maximum, Mobil exercised its contract right to terminate his lease. It is true that in Broussard there had been a price agreement with which the plaintiff at first complied, and that in the ease at bar there was none. Broussard lost his lease because he refused to continue his undertaking ; Quinn lost his because he refused to enter into one. The injury of which Broussard complained, however, did not arise out of the agreement, but out of the cancellation of his lease. I do not believe that if his cancellation was an act “forbidden in the antitrust laws,” 15 U.S.C. § 15, Quinn’s was not. In other words, I see no difference in substance between pressure to induce the making of an unlawful agreement and pressure to reinstate one that has been broken. To the extent that it be suggested that the rejected agreement in Broussard is what brought the case within the act, this would not only be an unfortunate distinction, since any future “Quinn” could establish rights for himself simply by making the requested agreement one day and breaking it the next, but also, it seems to me, an illogical one.
If, on the other hand, a distinction is to be sought in the fact that in Brous-sard there was an allegation that Mobil was engaging in a “marketing program” covering many dealers,
II.
Turning to Judge Coffin’s views on Broussard, he asserts, first, that he does not find it to have been dictated by Kie-fer-Stewart Co. v. Joseph E. Seagram & Sons, 1951, 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219. In that case the Court held that a combination of two manufacturers to force a dealer to accept maximum resale prices violated section 1, and that the dealer could recover treble damages. The reasoning that led to this result seems important. The court of appeals had reversed the district court and denied recovery because it viewed section 1 as aimed at promoting competition and concluded, “Competition * * * does not rest upon the ability to charge a higher price than a competitor but upon the ability to meet the price or undersell that fixed by the competitor.” 182 F.2d 228, 235. In reversing, the Supreme Court held that the Sherman Act is concerned not merely with competition in this limited, classical sense, but with the freedom and independence of the individual entrepreneur: “[Maximum price agreements] cripple the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment.” 340 U.S. at 213, 71 S.Ct. at 260.
Nor does this result seem offensive. A free and independent dealer, as in United States v. Colgate & Co., 1918, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992, may not be actionably wronged if a single manufacturer says to him, “Accept my conditions or I will not deal with you.” Such a dealer is free to turn to other manufacturers, and may rely for his protection on competition among those manufacturers for his trade. A retailer who, like Quinn and Simpson, is also a lessee, is in a distinctly different position. The manufacturer’s power as a landowner gives it leverage with which to interfere with the price discretion of others.
Judge Coffin suggests, in response, a rather different interpretation of Simpson. He points out that Simpson involved the dictation of specific, rather than maximum prices, to numerous dealers rather than to one. He suggests that the unlawful “agreement” in Simpson was therefore not the vertical agreement between plaintiff and defendant but a horizontal combination of retailers with Union acting, apparently, as the hub of an illicit wheel. My difficulty with this is that it seems to run counter to what the opinion says.
While I am not 100% certain, I do believe that Kiefer-Stewart and Sim/pson, taken together, proscribe coercively extracted vertical contracts to fix maximum prices, and that no distinction should be drawn between temporarily successful, as in Broussard, and totally unsuccessful coercive measures, as here, and accordingly I dissent.
. Cf. Guidry v. Continental Oil Co., 5 Cir., 1965, 350 F.2d 342, 344.
. I agree with my brethern that no such allegation can be found or inferred in Quinn’s complaint, or should be supplied.
. Cf. the language of Learned Hand, writing for the Second Circuit in United States v. Aluminum Co. of America, 1945, 148 F.2d 416, 427. “[In outlawing monopolies, Congress] was not necessarily actuated by economic motives alone. It is possible, because of its indirect social or moral effect, to prefer a system of small producers, each dependent for his success upon his own skill and character,
. An interestingly comparable case is Northern Pacific Ry. v. United States, 1958, 356 U.S. 1, 28 S.Ct. 514, 2 L.Ed.2d 545. There the Court held that a vertical agreement between a railroad-landowner and a shipper-land purchaser, in which the purchaser agreed, in partial consideration for the sale of land, to “prefer” Northern Pacific over other carriers, violated section 1. Northern Pacific could not, the Court said, use one resource it possessed (land) to coerce its own customers in another market (shipping) in order to obtain an advantage over the railroad’s own competitors. Here it is alleged that Mobile is using its land ownership to deprive one of its customers of price discretion, in order to gain an advantage over Mobil’s own competitors through low dealer margins The agreements in Northern Pacific affected discretion to choose shippers rather than discretion to set prices, but the analogous structure of the two arrangements is suggestive.
. See generally Note, “Combinations” in Restraint of Trade: A New Approach to Section 1 of the Sherman Act, 1966 Utah L.Rev. 75, 78-89. The note argues that Simpson does not fit within the traditional definition of conspiracy, and suggests that what happened in Simpson should be described, and proscribed, as a vertical combination (but not conspiracy) in restraint of trade.
