Court Opinion

ID: 9452627
Source: CourtListenerOpinion
Date Created: 2023-08-04 17:46:46.36222+00
Date Added: 2024-06-11T17:33:17.630153
License: Public Domain

COFFIN, Circuit Judge
(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.1 When a single manufacturer establishes and seeks to police a minimum resale price policy, he in effect is acting as the convenient instrumentality for his retailers. For the motive to maintain floors to prices is theirs, not his. It must be immaterial to the manufacturer *277what profit his retailers receive so long as they pay his price and sales are satisfactory. Therefore, what appears to be unilateral and vertical action by a manufacturer aimed toward retailers, may in reality amount to a horizontal agreement among retailer-competitors. The essence of combination is present although the mechanics may be obscure.
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 *278dealers is likely to become a system of minimum prices and (b) the motive of each manufacturer is likely to be something other than maximizing his own return. I am also in sympathy with the principle of unfettered decision-making by the retailer, but I do not think the Sherman Act goes any further than to proscribe shackles on such decision-making which are the result of (1) a combination which (2) restricts competition.
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.