Opinion ID: 371230
Heading Depth: 2
Heading Rank: 1

Heading: The Colgate doctrine

Text: 43 Much of the legal discussion which occupied the parties both in their argument before the district court and in their briefs on appeal concerns whether Clairol's conduct fell outside the anti-trust laws pursuant to the Supreme Court's decision in United States v. Colgate, 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919). The district court held that under the Colgate doctrine Clairol's conduct did not violate Section 1 of the Sherman Act, 15 U.S.C. § 1 (1976) which provides: 44 Every Contract, combination in the form of trust or otherwise, or Conspiracy in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal . . . . 45 (emphasis added). Construing this language, the Supreme Court in Colgate held that the Sherman Antitrust Act was not intended to extend to solely unilateral action by a vendor of goods: 46 The purpose of the Sherman Act is to prohibit monopolies, contracts and combinations which probably would unduly interfere with the free exercise of their rights by those engaged, or who wish to engage, in trade and commerce in a word to preserve the right of freedom to trade. In the absence of any purpose to create or maintain a monopoly, the act does not restrict the long recognized right of trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal. And, of course, he may announce in advance the circumstances under which he will refuse to sell. 47 250 U.S. at 307, 39 S.Ct. at 468. 48 The extent to which Colgate has been eroded is the subject of vigorous discussion by authorities, but all agree that it has substantially been narrowed by subsequent decisions of the Supreme Court, particularly United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960) and Albrecht v. Herald Co., 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998 (1968). 10 Thus, in United States v. Parke, Davis & Co., Mr. Justice Brennan, speaking for a majority, held that Parke, Davis' conduct went well beyond a mere announced intention to refuse to deal by the manufacturer, and thus subjected the company to antitrust liability under Section 1 of the Sherman Act. The Court found that the manufacturer had enlisted the assistance of other customers in enforcing and monitoring its restrictive price structure through affirmative action to achieve uniform adherence on the part of retailers. 362 U.S. at 47, 80 S.Ct. at 513. In Albrecht v. Herald Co., supra, the Supreme Court, speaking through Mr. Justice White, held violative of Section 1 the efforts of a newspaper company to force maximum prices upon its distributors where it was shown that the newspaper engaged the services of another company to compete with the recalcitrant distributor. The court found that the newspaper's conduct was not wholly unilateral but was a combination between it and the other sales organization which the paper had engaged to compete. 11 49 The defendants here point to certain undisputed evidence in the record, not expressly recognized by the trial judge but clearly before him, which indicates that under an expanded view of Parke, Davis and Albrecht, if not indeed within their express terms, Clairol had gone beyond the permissible limits of Colgate in enforcing its ban on resale of the salon product. Thus it was shown that Clairol wrote letters to each distributor and retailer threatening action if the undesired sales were continued. As in Parke, Davis Clairol also undertook other policing actions designed to restrict the resale of its product. The letter sent by Clairol to its distributors of the salon product at least arguably establishes that the relationship between Clairol and its customers and the restriction upon the resale was considered by Clairol to be a matter of agreement and thus, under Section 1 of the Sherman Act, a combination. While the letter's recital of Clairol's firm policy not to sell its salon product to any customer who would resell it into retail trade channels may be permissible under Colgate, as the defendants point out in their brief, the letter goes much further: 50 Insofar as our professional products are concerned, however, it must be understood that they are sold to you only on Clairol's understanding that you do not intend or engage in reselling any of them except to (the professional trade) . . . 51 We are quite serious in our policy, and your orders to us will be considered to be a representation of your intent and practice as described above. 52 We, therefore, agree with the defendants that Clairol's actions go beyond the simple refusal to sell and warning which might be protected by the Colgate doctrine. In short, if Clairol's case must hinge on its coming within the Colgate exception, it must perforce fail. The case, however, is not that simple.