MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This is a suit for damages under § 4 of the Clayton Act, 38 Stat. 731, 15 U. S. C. § 15, for violation of §§ 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 50 Stat. 693, 15 U. S. C. §§ 1, 2. The complaint grows out of a so-called retail dealer "consignment" agreement which, it is alleged, Union Oil requires lessees of its retail outlets to sign, of which Simpson was one. The "consignment" agreement is for one year and thereafter until canceled, is terminable by either party at the end of any year and, by its terms, ceases upon any termination of the lease. The lease is also for one year; and it is alleged that it is used to police the retail prices charged by the consignees, renewals not being made
The retail price fixed by the company for the gasoline during the period in question was 29.9 cents per gallon; and Simpson, despite the company's demand that he adhere to the authorized price, sold it at 27.9 cents, allegedly to meet a competitive price. Solely because Simpson sold gasoline below the fixed price, Union Oil refused to renew the lease; termination of the "consignment" agreement ensued; and this suit was filed. The terms of the lease and "consignment" agreement are not in dispute nor the method of their application in this case. The interstate character of Union Oil's business is conceded, as is the extensive use by it of the lease-consignment agreement in eight western States.
After two pretrial hearings, the company moved for a summary judgment. Simpson moved for a partial summary judgment—that the consignment lease program is
We disagree with the Court of Appeals that there is no actionable wrong or damage if a Sherman Act violation is assumed. If the "consignment" agreement achieves resale price maintenance in violation of the Sherman Act, it and the lease are being used to injure interstate commerce by depriving independent dealers of the exercise of free judgment whether to become consignees at all, or remain consignees, and, in any event, to sell at competitive prices. The fact that a retailer can refuse to deal does not give the supplier immunity if the arrangement is one of those schemes condemned by the antitrust laws.
There is actionable wrong whenever the restraint of trade or monopolistic practice has an impact on the market; and it matters not that the complainant may be only one merchant. See Klor's v. Broadway-Hale Stores, 359 U.S. 207, 213; Radiant Burners v. Peoples Gas Co., 364 U.S. 656, 660. As we stated in Radovich v. National Football League, 352 U.S. 445, 453-454:
We made clear in United States v. Parke, Davis & Co., 362 U.S. 29, that a supplier may not use coercion on its retail outlets to achieve resale price maintenance. We reiterate that view, adding that it matters not what the coercive device is. United States v. Colgate, 250 U.S. 300, as explained in Parke, Davis, 362 U. S., at 37, was a case where there was assumed to be no agreement to maintain retail prices. Here we have such an agreement; it is used coercively, and, it promises to be equally if not more effective in maintaining gasoline prices than were the Parke, Davis techniques in fixing monopoly prices on drugs.
Consignments perform an important function in trade and commerce, and their integrity has been recognized by many courts, including this one. See Ludvigh v. American Woolen Co., 231 U.S. 522. Yet consignments, though useful in allocating risks between the parties and determining their rights inter se, do not necessarily control
One who sends a rug or a painting or other work of art to a merchant or a gallery for sale at a minimum price can, of course, hold the consignee to the bargain. A retail merchant may, indeed, have inventory on consignment, the terms of which bind the parties inter se. Yet the consignor does not always prevail over creditors in case of bankruptcy, where a recording statute or a "traders act" or a "sign statute" is in effect. 4 Collier, Bankruptcy (14th ed.), pp. 1090-1097, 1484-1486. The interests of the Government also frequently override agreements that private parties make. Here we have an antitrust policy expressed in Acts of Congress. Accordingly, a consignment, no matter how lawful it might be as a matter of private contract law, must give way before the federal antitrust policy. Thus a consignment is not allowed to be used as a cloak to avoid § 3 of the Clayton Act. See Standard Fashion Co. v. Magrane-Houston Co., 258 U.S. 346, 353-356; cf. Straus v. Victor Talking Mach. Co., 243 U.S. 490, 500-501. Nor does § 1 of the Sherman Act tolerate agreements for retail price maintenance. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 221-222; United States v. Parke, Davis & Co., supra.
We are enlightened on present-day marketing methods by recent congressional investigations. In the automobile field the price is "the manufacturer's suggested retail price,"
As we have said, an owner of an article may send it to a dealer who may in turn undertake to sell it only at a price determined by the owner. There is nothing illegal about that arrangement. When, however, a "consignment" device is used to cover a vast gasoline distribution system, fixing prices through many retail outlets, the antitrust laws prevent calling the "consignment" an agency,
Reliance is placed on United States v. General Electric Co., 272 U.S. 476, where a consignment arrangement was utilized to market patented articles. Union Oil correctly argues that the consignment in that case somewhat
The Court in that case particularly relied on the fact that patent rights have long included licenses "to make, use and vend" the patented article "for any royalty or upon any condition the performance of which is reasonably within the reward which the patentee by the grant of the patent is entitled to secure." Id., at 489. Congress in establishing the patent system included 35 U. S. C. § 154, which provides in part: "Every patent shall contain a short title of the invention and a grant to the patentee, his heirs or assigns, for the term of seventeen years, of the right to exclude others from making, using, or selling the invention throughout the United
"The right to manufacture, the right to sell, and the right to use are each substantive rights, and may be granted or conferred separately by the patentee." Adams v. Burke, 17 Wall. 453, 456. Long prior to the General Electric case, price fixing in the marketing of patented articles had been condoned (Bement v. National Harrow Co., 186 U.S. 70), provided it did not extend to sales by purchasers of the patented articles. Adams v. Burke, supra; Ethyl Gasoline Corp. v. United States, 309 U.S. 436.
The patent laws which give a 17-year monopoly on "making, using, or selling the invention" are in pari materia with the antitrust laws and modify them pro tanto. That was the ratio decidendi of the General Electric case. See 272 U. S., at 485. We decline the invitation to extend it.
To allow Union Oil to achieve price fixing in this vast distribution system through this "consignment" device would be to make legality for antitrust purposes turn on clever draftsmanship. We refuse to let a matter so vital to a competitive system rest on such easy manipulation. Cf. United States v. Masonite Corp., 316 U.S. 265, 280.
Hence on the issue of resale price maintenance under the Sherman Act there is nothing left to try, for there was an agreement for resale price maintenance, coercively employed.
The case must be remanded for a hearing on all the other issues in the case, including those raised under the McGuire Act, 66 Stat. 631, 15 U. S. C. § 45, and the damages, if any, suffered. We intimate no views on any other issue; we hold only that resale price maintenance through the present, coercive type of "consignment" agreement is illegal under the antitrust laws, and that petitioner suffered actionable wrong or damage. We reserve the question
Reversed and remanded.
MR. JUSTICE HARLAN took no part in the disposition of this case.
MR. JUSTICE STEWART, dissenting.
In this case the District Court granted a summary judgment in favor of the respondent, finding that the respondent had not violated the Sherman Act, and that even if there had been a violation, the petitioner had not suffered any damages. The Court of Appeals affirmed upon the theory that, even assuming a Sherman Act violation, "any damage occurring to Simpson was the result of his own free and deliberate choice and he could not deliberately and knowingly enter into contractual obligations and then and thereafter contend he was injured by the results of his own acts." 311 F.2d 764, at 769.
I think the reasoning upon which the Court of Appeals proceeded is untenable. The gravamen of the petitioner's complaint was that he had been coerced into a lease conditioned upon acceptance of the respondent's allegedly unlawful system of selling. If, as the Court of Appeals assumed, there had been such a violation of the Sherman Act, it was inconsistent to assume that the petitioner could not have been subject to the coercion he alleged and could not have suffered damages. But the root error in this case, it seems to me, was the District Court's decision to terminate the controversy by way of a summary judgment. I therefore agree with the Court that the judgment of the Court of Appeals should be set aside and the case remanded to the District Court for a
In United States v. General Electric, 272 U.S. 476, this Court held that a bona fide consignment agreement of this kind does not violate the Sherman Act. The Court today concedes that "the consignment in that case somewhat parallels the one in the instant case." The fact of the matter is, so far as the record now before us discloses, the two agreements are virtually indistinguishable.
It is, of course, true that what was sold in General Electric was not gasoline, but lamp bulbs which had been manufactured under a patent. But until today no one has ever considered this fact relevant to the holding in
To answer that question, the Court examined the operative provisions of the consignment agreement to determine whether the agreement created a valid agency or whether, in fact, title effectively passed to the so-called consignee. Id., at 483-488. If the latter were the case, the price-fixing requirement would have made the agreement nothing more than a resale-price-maintenance scheme, unlawful under the antitrust laws, cf. Dr. Miles Medical Co. v. Park & Sons Co., 220 U.S. 373, regardless of whether or not the article sold was patented. Similarly, if the agreement created a bona fide agency, the consignment would be valid under the antitrust laws, again regardless of whether or not the article consigned were patented.
It is clear, therefore, that the Court today overrules General Electric. It does so, even though the validity of that decision was not challenged in the briefs or in oral argument in this case. I should have thought that a decision of such impact and magnitude could properly be reached only after careful consideration of all relevant considerations and preferably by a full Court.
If the record now before us actually required re-examination of the General Electric case, I think that in view of the serious considerations which I have mentioned we should set this case for reargument and invite the Justice Department to express its views.
I would vacate the judgment of the Court of Appeals and remand this case to the District Court for a plenary trial of all the issues.
Memorandum of MR. JUSTICE BRENNAN and MR. JUSTICE GOLDBERG.
We do not necessarily disagree with the Court that "resale price maintenance through the present, coercive type of `consignment' agreement is illegal under the antitrust laws, and that petitioner suffered actionable wrong or damage." We think, however, that the Court should not decide that question either as to fact or law on the record upon which this summary judgment was entered. Since the decision may be expected to affect consignment agreements in many businesses, including outstanding agreements that may have been entered into in reliance upon United States v. General Electric, 272 U.S. 476 the Court ought not pronounce that judgment without
"Another issue relating to price fixing concerns certain of the practices which the major oil companies have used to preserve their tank wagon price structure; for example, the placing of the dealer on a commission or consignment agency basis, which narrows his normal margin of profit and effectively fixes the retail price." Id., at 7. The Committee report said:
"One of the effects of this expansion of commission and consignment outlets is that more and more service station operators lose their status as independent businessmen. The selling price and gross margin of profit per gallon in the commission-type stations are wholly within the control of the supplier." Ibid.
"Consignment is our method of protecting our dealers' profit margins during disturbed retail price conditions, at the same time maintaining our dealers' positions as people handling a premium quality product. We have not used consignment as a means of unfair competition, nor has it been used to price any dealer out of any station. It has instead been used by us to maintain a competitive relationship between our dealers' prices and those of our competitors.
"We are proud of our retail consignment program which has accomplished the ends outlined above. We have been able to make these accomplishments without taking away any of the independence of our dealers. Through our consignment program we have established and maintained under all conditions the minimum guaranteed margins for our dealers that are the best in the industry. It has brought our dealers one other substantial benefit also—and I would like to point this out strongly—they have available for other uses the investment which otherwise would be in gasoline inventories. This amounts to an average of $2,500 per dealer.
"If there is any suspicion or resentment by any dealers or dealer groups, it certainly appears that Union Oil Co.'s retail consignment program is a greatly misunderstood one. It does not remove any aspect of a dealer's independence other than giving us the right to name the dealer's selling prices. It has not been used to create or disturb any retail price situations and instead has, as a matter of fact, contributed materially to the economic welfare of our dealers.
"If we were today to withdraw the consignment program as it is now set up, we know that such action would be bitterly opposed by our dealers. Any problems that are laid at its doorstep—and there were some problems as there are in any new program—have been corrected to the point that a survey of our dealers today would reveal that the great majority of them are heartily in favor of consignment. We are able to offer the names of hundreds of our dealers who are in favor of the program." Id., at 86-87.
Shortly before Simpson ceased to be a consignee the program was changed. The guaranteed minimum was eliminated and the consignee absorbed 20% of the difference if "authorized" prices fell below "minimum retail." If the "authorized" price exceeded "minimum retail," the commission increased by 80% of the excess, as compared with 100% thereof under the former plan.
"Are these behemoths good at making goods—or merely good at making money? Do they come out better because they manufacture more efficiently—or because they `control the market' and collect unduly high prices from the long-suffering American consumer?
"Again, no one quite knows. It is pretty clear that most prices are established only partly by competition, and partly by administration. Economists are just beginning to wrestle with the problem of `administered' prices. The three or four `bigs' in any particular line are happy to stay with a good price level for their product. If the price gets too high, some smart vice president in charge of sales may see a chance to take a fat slice of business away from his competitors.
"But while any one of the two or three bigs knows he can reduce prices and start taking all the business there is, he knows, too, that one or all of his associates will soon drop the price below that. In the ensuing price war, nobody will make money for quite a while.
"So, an uneasy balance is struck, and everyone's price remains about the same. Shop around for an automobile and you will see how this works. Economists call it `imperfect competition'—a tacitly accepted price that is not necessarily the price a stiff competitive free market would create. Only big concerns can swing this sort of competition effectively.
"We do not really know whether bigs make more money because they are efficient or because, through their size, they can `administer' prices." Bigness: Curse or Opportunity? New York Times Magazine, Feb. 18, 1962, pp. 18, 55, 58.
In General Electric the consignees were, in their regular business, wholesale or retail merchants of other merchandise and some of them had previously so handled the consignor's lamps, while in the instant case the consignees, although some of them had previously been regular retail merchants, deal exclusively in the consignor's gasoline.
General Electric Co. paid "all" taxes assessed on the stock of lamps, whereas Union Oil pays only property taxes.
General Electric Co. carried "whatever insurance is carried" on the stock held by consignees, while Union Oil apparently is not obligated to carry any insurance.
The Court implies that the terms of this agreement providing that the consignee must carry personal liability and property damage insurance; that the consignee is responsible for losses of consigned gasoline incurred in the ordinary course of events; and that the consignee must pay his own costs of operation, are inconsistent with a valid consignment agreement. But such provisions are common to consignment agreements. They merely illustrate the well-recognized fact that these retail gasoline dealers are both independent businessmen and agents. A consignee is commonly defined as one who "in the pursuit of an independent calling," is engaged by another as his agent to sell property. See, e. g., Calif. Civil Code § 2026. Consequently, it is not at all surprising for a consignment agreement to provide both that a consignee bear the expenses of conducting his own business, and that he be responsible for loss or damage to the goods occurring in the ordinary course of business. The Court in General Electric explicitly found such provisions unobjectionable, 272 U. S., at 484-485, and further observed that a provision placing the burden of risk of loss or damage to goods on the consignee "is only a reasonable provision to secure [the consignee's] careful handling of the goods entrusted to him." Id., at 484. Nor is the requirement that Simpson carry property damage and personal liability insurance of significance. Such a provision serves the reasonable purpose of protecting the consignor from responsibility (which might be imputed by virtue of the agency relationship) for liabilities incurred by Simpson arising out of or in connection with Simpson's business.
The only remaining point which the Court makes is that the consignee's commission declines as retail prices drop. But it is in the very nature of commissions that they be geared to prices, and it is thus typical of consignment agreements that the consignee bears some of the risk of price declines. In fact, the consignment agreement challenged in the General Electric case provided that "[t]he agent is allowed a compensation of 10% of the list prices of the lamps . . . ." Since the General Electric Company set the list price, it would have been as correct to say in that case, as it is in this one, that the consignee's commission declined as retail prices dropped. Moreover, under Union's agreement, Simpson received a minimum guaranteed commission regardless of the extent of price declines, thereby substantially restricting his exposure to the risks of a decline in the market price.