In a civil suit under § 4 of the Sherman Act charging appellee
with combining and conspiring to maintain resale prices of its
products in areas which have no "fair trade" laws, the Government
introduced evidence showing that appellee had (1) announced a
policy of refusing to deal with retailers who failed to observe
appellee's suggested minimum resale prices or who advertised
discount prices on. appellee's products, (2) discontinued direct
sales to those retailers who failed to abide by the announced
policy, (3) induced wholesale distributors to stop selling
appellee's products to the offending retailers, (4) secured
unanimous adherence by informing a number of the retailers that, if
each of them would adhere to the announced policy, one of their
principal competitors would also do so, and (5) permitted the
retailers to resume purchasing its products after they had
indicated willingness to observe the policy. The evidence further
established that appellee had terminated these practices after
becoming aware that the Department of Justice had begun an
investigation of its price maintenance activities. The District
Court dismissed the complaint on the ground that the Government had
not shown a right to relief.
The judgment is reversed, and the case remanded
with directions to enter an appropriate judgment enjoining appellee
from further violations of the Sherman Act, unless it elects to
submit evidence in defense and refutes the Government's right to
injunctive relief established by the present record. Pp.
362 U. S.
(a) The District Court erred in holding that these practices
constituted only unilateral action by appellee in selecting its
customers, as permitted by United States v. Colgate Co.,
250 U. S. 300
Appellee did not merely announce its policy and then decline to
have further dealings with retailers who failed to abide by it,
but, by utilizing wholesalers and other retailers, it actively
induced unwilling retailers to comply with the policy. The
resulting concerted action to maintain the resale prices
constituted a conspiracy or combination in violation of the Sherman
Act, although it was not based on any contract, express or implied
. Pp. 362 U. S.
Page 362 U. S. 30
(b) Rule 52 of the Federal Rules of Civil Procedure does not
require affirmance of the District Court's ultimate finding that
respondent did not violate the Sherman Act, because that conclusion
was based on an erroneous interpretation of the law. Pp.
362 U. S.
(e) The District Court's alternative holding that dismissal of
the complaint was warranted because there was no reasonable
probability that appellee would resume its attempts to maintain
resale prices is erroneous, because it is not supported by the
evidence. Pp. 362 U. S.
MR. JUSTICE BRENNAN delivered the opinion of the Court.
The Government sought an injunction under § 4 of the Sherman Act
against the appellee, Parke, Davis & Company, on a compliant
alleging that Parke Davis conspired and combined, in violation of
§§ 1 and 3 of the Act, [Footnote
Page 362 U. S. 31
retail and wholesale druggists in Washington, D.C., and
Richmond, Virginia, to maintain the wholesale and retail prices of
Parke Davis pharmaceutical products. The violation was alleged to
have occurred during the summer of 1956, when there was no Fair
Trade Law in the District of Columbia or the State of Virginia.
] After the
Government completed the presentation of its evidence at the trial,
and without hearing Parke Davis in defense, the District Court for
the District of Columbia dismissed the complaint under Rule 41(b)
on the ground that, upon the facts and the law, the Government had
not shown a right to relief. 164 F.
. We noted probable jurisdiction of the Government's
direct appeal under § 2 of the Expediting Act. [Footnote 3
] 359 U.S. 903.
Parke Davis makes some 600 pharmaceutical products which it
markets nationally through drug wholesalers and
Page 362 U. S. 32
drug retailers. The retailers buy these products from the drug
wholesalers or make large quantity purchases directly from Parke
Davis. Sometime before 1956, Parke Davis announced a resale price
maintenance policy in its wholesalers' and retailers' catalogues.
The wholesalers' catalogue contained a Net Price Selling Schedule
listing suggested minimum resale prices on Parke Davis products
sold by wholesalers to retailers. The catalogue stated that it was
Parke Davis' continuing policy to deal only with drug wholesalers
who observed that schedule and who sold only to drug retailers
authorized by law to fill prescriptions. Parke Davis, when selling
directly to retailers, quoted the same prices listed in the
wholesalers' Net Price Selling Schedule, but granted retailers
discounts for volume purchases. Wholesalers were not authorized to
grant similar discounts. The retailers' catalogue contained a
schedule of minimum retail prices applicable in States with Fair
Trade Laws, and stated that this schedule was suggested for use
also in States not having such laws. These suggested minimum retail
prices usually provided a 50% markup over cost on Park Davis
products purchased by retailers from wholesalers, but, because of
the volume discount, often in excess of 100% markup over cost on
products purchased in large quantities directly from Parke
There are some 260 drugstores in Washington, D.C., and some 100
in Richmond, Virginia. Many of the stores are units of Peoples Drug
Stores, a large retail drug chain. There are five drug wholesalers
handling Parke Davis products in the locality who do business with
the drug retailers. The wholesalers observed the resale prices
suggested by Parke Davis. However, during the spring and early
summer of 1956, drug retailers in the two cities advertised and
sold several Parke Davis vitamin products at prices substantially
below the suggested minimum retail prices; in some instances, the
Page 362 U. S. 33
reflected the volume discounts on direct purchases from Parke
Davis, since the products were sold below the prices listed in the
wholesalers' Net Price Selling Schedule. The Baltimore office
manager of Parke Davis in charge of the sales district which
included the two cities sought advice from his head office on how
to handle this situation. The Parke Davis attorney advised that the
company could legally "enforce an adopted policy arrived at
unilaterally" to sell only to customers who observed the suggested
minimum resale prices. He further advised that this meant that
"we can lawfully say 'we will sell you only so long as you
observe such minimum retail prices' but cannot say 'we will sell
you only if you agree to observe such minimum retail prices,'
since, except as permitted by Fair Trade legislations
], agreements as to resale price maintenance are
Thereafter, in July, the branch manager put into effect a
program for promoting observance of the suggested minimum retail
prices by the retailers involved. The program contemplated the
participation of the five drug wholesalers. In order to insure that
retailers who did not comply would be cut off from sources of
supply, representatives of Parke Davis visited the wholesalers and
told them, in effect, that not only would Parke Davis refuse to
sell to wholesalers who did not adhere to the policy announced in
its catalogue, but also that it would refuse to sell to wholesalers
who sold Parke Davis products to retailers who did not observe the
suggested minimum retail prices. Each wholesaler was interviewed
individually, but each was informed that his competitors were also
being apprised of this. The wholesalers, without exception,
indicated a willingness to go along.
Representatives called contemporaneously upon the retailers
involved, individually, and told each that, if he did not observe
the suggested minimum retail prices, Parke Davis would refuse to
deal with him, and that, furthermore,
Page 362 U. S. 34
he would be unable to purchase any Parke Davis products from the
wholesalers. Each of the retailers was also told that his
competitors were being similarly informed.
Several retailers refused to give any assurances of compliance,
and continued after these July interviews to advertise and sell
Parke Davis products at prices below the suggested minimum retail
prices. Their names were furnished by Parke Davis to the
wholesalers. Thereafter, Parke Davis refused to fill direct orders
from such retailers, and the wholesalers likewise refused to fill
their orders. [Footnote 4
ban was not limited to the Parke Davis products being sold below
the suggested minimum prices, but included all the company's
products, even those necessary to fill prescriptions.
The president of Dart Drug Company, one of the retailers cut
off, protested to the assistant branch manager of Parke Davis that
Parke Davis was discriminating against him because a drugstore
across the street, one of the Peoples Drug chain, had a sign in its
window advertising Parke Davis products at cut prices. The retailer
was told that, if this were so, the branch manager "would see
Peoples and try to get them in line." The branch manager testified
at the trial that thereafter he talked to a vice-president of
Peoples, and that the following occurred:
"Q. Well, now, you told Mr. Downey [the vice-president of
Peoples] at this meeting, did you not, Mr. Powers [the assistant
branch manager of Parke Davis], that you noticed that Peoples were
"A. Yes. "
Page 362 U. S. 35
"Q. And you told him, did you not, that it had been the Parke,
Davis policy for many years to do business only with individuals
that maintained the scheduled prices?"
"A. I told Mr. Downey that we had a policy in our catalog, and
that anyone that did not go along with our policy, we were not
interested in doing business with them."
"* * * *"
"Q. . . . Now, Mr. Downey told you on the occasion of this
visit, did he not, that Peoples would stop cutting prices, and
would abide by the Parke-Davis policy, is that right?"
"A. That is correct."
"Q. When you went to call on Mr. Downey, you solicited his
support of Parke, Davis policies, is not that right?"
"A. That is right."
"Q. And he said, I will abide by your policy?"
"A. That is right."
The District Court found, apparently on the basis of this
testimony, that "The Peoples' representative stated that Peoples
would stop cutting prices on Parke, Davis' products and Parke,
Davis continued to sell to Peoples."
But five retailers continued selling Parke Davis products at
less than the suggested minimum prices from stocks on hand. Within
a few weeks, Parke Davis modified its program. Its officials
believed that the selling at discount prices would be deterred, and
the effects minimized of any isolated instances of discount selling
which might continue, if all advertising of such prices were
discontinued. In August, the Parke Davis representatives again
called on the retailers individually. When interviewed, the
president of Dart Drug Company indicated
Page 362 U. S. 36
that he might be willing to stop advertising, although
continuing to sell at discount prices, if shipments to him were
resumed. Each of the other retailers was then told individually by
Parke Davis representatives that Dart was ready to discontinue
advertising. Each thereupon said that, if Dart stopped advertising,
he would also. On August 28, Parke Davis reported this reaction to
Dart. Thereafter, all of the retailers discontinued advertising of
Parke Davis vitamins at less than suggested minimum retail prices,
and Parke Davis and the wholesalers resumed sales of Parke Davis
products to them. However, the suspension of advertising lasted
only a month. One of the retailers again started newspaper
advertising in September, and, despite efforts of Parke Davis to
prevent it, the others quickly followed suit. Parke Davis then
stopped trying to promote the retailers' adherence to its suggested
resale prices, and neither it nor the wholesalers have since
declined further dealings with them. [Footnote 5
] A reason for this was that the Department of
Justice, on complaint of Dart Drug Company, had begun an
investigation of possible violation of the antitrust laws.
The District Court held that the Government's proofs did not
establish a violation of the Sherman Act because
"the actions of [Parke Davis] were properly unilateral, and
sanctioned by law under the doctrine laid down in the case of
United States v. Colgate & Co., 250 U. S.
. . . ."
164 F. Supp. at 829.
case came to this Court on writ of error
under the Criminal Appeals Act, 34 Stat. 1246, from a District
Court judgment dismissing an indictment for violation of the
Sherman Act. The indictment proceeded
Page 362 U. S. 37
solely upon the theory of an unlawful combination between
Colgate and its wholesale and retail dealers for the purpose and
with the effect of procuring adherence on the part of the dealers
to resale prices fixed by the company. However, the District Court
construed the indictment as not charging a combination by agreement
between Colgate and its customers to maintain prices. This Court
held that it must disregard the allegations of the indictment,
since the District Court's interpretation of the indictment was
binding, and that, without an allegation of unlawful agreement,
there was no Sherman Act violation charged. The Court said:
"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
250 U.S. at 250 U. S.
The Government concedes for the purposes of this case that,
under the Colgate
doctrine, 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. The Government contends, however, that subsequent decisions
of this Court compel the holding that what Parke Davis did here by
entwining the wholesalers and retailers in a program to promote
general compliance with its price maintenance policy went
Page 362 U. S. 38
beyond mere customer selection, and created combinations or
conspiracies to enforce resale price maintenance in violation of §§
1 and 3 of the Sherman Act.
The history of the Colgate
doctrine is best understood
by reference to a case which preceded the Colgate
decision, Dr. Miles Medical Co. v. John D. Park & Sons
Co., 220 U. S. 373
Miles entered into written contracts with its customers obligating
them to sell its medicine at prices fixed by it. The Court held
that the contracts were void because they violated both the common
law and the Sherman Act. The Colgate
distinguished Dr. Miles
on the ground that the
indictment did not charge that company with
selling its products to dealers under agreements which obligated
the latter not to resell except at prices fixed by the seller. The
decision created some confusion and doubt as to
the continuing vitality of the principles announced in Dr.
This brought United States v. Schrader's Son,
Inc., 252 U. S. 85
the Court. The case involved the prosecution of a components
manufacturer for entering into price-fixing agreements with
retailers, jobbers and manufacturers who used his products. The
District Court dismissed, saying:
"Granting the fundamental proposition stated in the
case, that the manufacturer has an undoubted right
to specify resale prices and refuse to deal with any one who fails
to maintain the same, or, as further stated, the act does not
restrict the long recognized right of a 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
that he, of course, may announce in advance the circumstances under
which he will refuse to sell, it seems to me that it is a
distinction without a difference to say that he may do so by the
Page 362 U. S. 39
and devices set forth in the [Colgate
] opinion and not
violate the Sherman Anti-Trust Act, yet, if he had done the same
thing in the form of a written agreement, adequate only to
effectuate the same purpose, he would be guilty of a violation of
the law. . . ."
264 F. 175, 184. This Court reversed, and said:
"The court below misapprehended the meaning and effect of the
opinion and judgment in [Colgate
]. We had no intention to
overrule or modify the doctrine of Dr. Miles Medical Co. v.
John D. Park & Sons Co.,
where the effort was to destroy
the dealers' independent discretion through restrictive
252 U.S. at 252 U. S.
The Court went on to explain that the statement from
quoted earlier in this opinion meant no more than
that a manufacturer is not guilty of a combination or conspiracy if
he merely "indicates his wishes concerning prices and declines
further dealings with all who fail to observe them . . . ";
however, there is unlawful combination where a manufacturer
"enters into agreements -- whether express or implied from a
course of dealing or other circumstances -- with all customers . .
. which undertake to bind them to observe fixed resale prices."
The next decision was Frey & Son. Inc., v. Cudahy
Packing Co., 256 U. S. 208
That was a treble damage suit alleging a conspiracy in violation of
the Sherman Act between the manufacturer and jobbers to maintain
resale prices. The plaintiff recovered a judgment. The Court of
Appeals for the Fourth Circuit reversed on the authority of
The Court of Appeals concluded: "There was no
formal written or oral agreement with jobbers for the maintenance
of prices," and, in that circumstance, held
Page 362 U. S. 40
that, under Colgate,
the trial court should have
directed a verdict for the defendant. In holding that the Court of
Appeals erred, this Court referred to the decision in
as holding that the "essential agreement,
combination or conspiracy might be implied from a course of dealing
or other circumstances," so that, in Cudahy,
"Having regard to the course of dealing and all the pertinent
facts disclosed by the present record, we think whether there
existed an unlawful combination or agreement between the
manufacturer and jobbers was a question for the jury to decide, and
that the Circuit Court of Appeals erred when it held
256 U.S. at 256 U. S.
But the Court also held improper an instruction which was given
to the jury that a violation of the Sherman Act might be found if
the jury should find as facts that the defendant
"indicated a sales plan to the wholesalers and jobbers, which
plan fixed the price below which the wholesalers and jobbers were
not to sell to retailers, and . . . [that] defendant called this
particular feature of this plan to their attention on very many
different occasions, and . . . [that] the great majority of them
not only [expressed] no dissent from such plan, but actually
[cooperated] in carrying it out by themselves selling at the prices
named. . . ."
256 U.S. 256 U. S.
-211. However, the authority of this holding
condemning the instruction has been seriously undermined by
subsequent decisions which we are about to discuss. Therefore,
does not support the District Court's action in
this case, and we cannot follow it here. Less than a year after
was handed down, the Court decided Federal
Trade Commission v. Beech-Nut Packing Co., 257 U.
, which presented a situation bearing a marked
resemblance to the Parke Davis program.
the company had adopted a policy of
refusing to sell its products to wholesalers or retailers who did
not adhere to a schedule of resale prices. Beech-Nut
Page 362 U. S. 41
later implemented this policy by refusing to sell to wholesalers
who sold to retailers who would not adhere to the policy. To detect
violations, the company utilized code numbers on its products and
instituted a system of reporting. When an offender was cut off, he
would be reinstated upon the giving of assurances that he would
maintain prices in the future. The Court construed the Federal
Trade Commission Act to authorize the Commission to forbid
practices which had a "dangerous tendency unduly to hinder
competition or create monopoly." 257 U.S. at 257 U. S. 454
The Sherman Act was held to be a guide to what constituted an
unfair method of competition. The company had urged that its
conduct was entirely legal under the Sherman Act as interpreted by
The Court rejected this contention, saying
"the Beech-Nut system goes for beyond the simple refusal to sell
goods to persons who will not sell at stated prices, which, in the
case, was held to be within the legal right of the
The Court held further that the nonexistence of
contracts covering the practices was irrelevant, since
"[t]he specific facts found show suppression of the freedom of
competition by methods in which the company secures the cooperation
of its distributors and customers, which are quite as effectual as
agreements express or implied intended to accomplish the same
at 257 U. S. 455
That the Court considered that the Sherman Act violation thus
established was dispositive of the issue before it is shown by the
ground taken by Mr. Justice McReynolds in dissent. The parties had
stipulated that there were no contracts covering the policy.
Relying on his view of Colgate,
he asked: "How can there
be methods of cooperation . . . when the existence of the essential
contracts is definitely excluded?" Id.
at 257 U. S. 459
The majority did not read Colgate
as requiring such
contracts; rather, the Court dispelled the confusion over whether a
combination effected by contractual arrangements,
Page 362 U. S. 42
express or implied, was necessary to a finding of Sherman Act
violation by limiting Colgate
to a holding that, when the
only act specified in the indictment amounted to saying that the
trader had exercised his right to determine those with whom he
would deal, and to announce the circumstances under which he would
refuse to sell, no Sherman Act violation was made out. However,
because Beech-Nut's methods were as effective as agreements in
producing the result that "all who would deal in the company's
products are constrained to sell at the suggested prices," 257 U.S.
at 257 U. S. 455
the Court held that the securing of the customers' adherence by
such methods constituted the creation of an unlawful combination to
suppress price competition among the retailers.
narrowly limited Colgate
announced principles which subject to Sherman Act liability the
producer who secures his customers' adherence to his resale prices
by methods which go beyond the simple refusal to sell to customers
who will not resell at stated prices was made clear in United
States v. Bausch & Lomb Optical Co., 321 U.
, 321 U. S.
case recognizes that a simple refusal to
sell to others who do not maintain the first seller's fixed resale
prices is lawful, but adds as to the Sherman Act,"
" He [the seller] may not, consistently with the act, go beyond
the exercise of this right, and by contracts or combinations,
express or implied, unduly hinder or obstruct the free and natural
flow of commerce in the channels of interstate trade."
"257 U.S. at 257 U. S. 453
. The Beech-Nut
Company, without agreements, was found to suppress the freedom of
competition by coercion of its customers through special agents of
the company, by reports of competitors about customers who violated
resale prices, and by boycotts of price cutters. . . . "
Page 362 U. S. 43
Bausch & Lomb,
like the instant case, was an action
by the United States to restrain alleged violations of §§ 1 and 3
of the Sherman Act. The Court, relying on Beech-Nut,
that a distributor, Soft-Lite Lens Company, Inc., violated the
Sherman Act when, as was the case with Parke Davis, the refusal to
sell to wholesalers was not used simply to induce acquiescence of
the wholesalers in the distributor's published resale price list;
"accepted Soft-Lite's proffer of a plan of distribution by
cooperating in prices, limitation of sales to and approval of
retail licensees. That is sufficient. . . . Whether this conspiracy
and combination was achieved by agreement or by acquiescence of the
wholesalers, coupled with assistance in effectuating its purpose,
321 U.S. at 321 U. S. 723
Thus, whatever uncertainty previously existed as to the scope of
doctrine, Bausch & Lomb
plainly fashioned its dimensions as meaning no
more than that a simple refusal to sell to customers who will not
resell at prices suggested by the seller is permissible under the
Sherman Act. In other words, an unlawful combination is not just
such as arises from a price maintenance agreement,
or implied; such a combination is also organized if the producer
secures adherence to his suggested prices by means which go beyond
his mere declination to sell to a customer who will not observe his
In the cases decided before Beech-Nut,
inquiry was directed to whether the manufacturer had entered into
illicit contracts, express or implied. The District Court in this
case apparently assumed that the Government could prevail only by
establishing a contractual arrangement, albeit implied, between
Parke Davis and its customers. Proceeding from the same premise,
Parke Davis strenuously urges that Rule 52 of the Rules of Civil
Procedure compels an affirmance of the
Page 362 U. S. 44
District Court, since under that Rule, the finding that there
were no contractual arrangements should "not be set aside unless
clearly erroneous." But Rule 52 has no application here. The
District Court premised its ultimate finding that Parke Davis did
not violate the Sherman Act on an erroneous interpretation of the
standard to be applied. The Bausch & Lomb
decisions cannot be read as merely limited to
particular fact complexes justifying the inference of an agreement
in violation of the Sherman Act. Both cases teach that judicial
inquiry is not to stop with a search of the record for evidence of
purely contractual arrangements. The Sherman Act forbids
combinations of traders to suppress competition. True, there
results the same economic effect as is accomplished by a prohibited
combination to suppress price competition if each customer,
although induced to do so solely by a manufacturer's announced
policy, independently decides to observe specified resale prices.
So long as Colgate
is not overruled, this result is
tolerated, but only when it is the consequence of a mere refusal to
sell in the exercise of the manufacturer's right "freely to
exercise his own independent discretion as to parties with whom he
will deal." When the manufacturer's actions, as here, go beyond
mere announcement of his policy and the simple refusal to deal, and
he employs other means which effect adherence to his resale prices,
this countervailing consideration is not present, and therefore he
has put together a combination in violation of the Sherman Act.
Thus, whether an unlawful combination or conspiracy is proved is to
be judged by what the parties actually did, rather than by the
words they used. See Eastern States Retail Lumber Dealers'
Ass'n v. United States, 234 U. S. 600
234 U. S. 612
Because of the nature of the District Court's error we are
reviewing a question of law, namely, whether the District Court
applied the proper standard to essentially undisputed facts.
Page 362 U. S. 45
Circuit v. United States, 306 U.
; United States v. Masonite Corp.,
316 U. S. 265
United States v. United States Gypsum Co., 333 U.
; United States v. E. I. Du Pont De Nemours
& Co., 353 U. S. 586
also United States v. John J. Felin & Co.,
334 U. S. 624
Great Atlantic & Pacific Tea Co. v. Supermarket Equipment
Corp., 340 U. S. 147
The program upon which Parke Davis embarked to promote general
compliance with its suggested resale prices plainly exceeded the
limitations of the Colgate
doctrine, and, under
and Bausch & Lomb,
arrangements which violated the Sherman Act. Parke Davis did not
content itself with announcing its policy regarding retail prices
and following this with a simple refusal to have business relations
with any retailers who disregarded that policy. Instead, Parke
Davis used the refusal to deal with the wholesalers in order to
elicit their willingness to deny Parke Davis products to retailers,
and thereby help gain the retailers' adherence to its suggested
minimum retail prices. The retailers who disregarded the price
policy were promptly cut off when Parke Davis supplied the
wholesalers with their names. The large retailer who said he would
"abide" by the price policy, the multi-unit Peoples Drug chain, was
not cut off. [Footnote 6
thus involving the wholesalers to stop the flow of Parke Davis
products to the retailers, thereby inducing retailers' adherence to
its suggested retail prices, Parke Davis created a combination with
the retailers and the wholesalers to maintain retail prices and
violated the Sherman Act. Although Parke Davis' originally
announced wholesalers' policy would not, under Colgate,
have violated the
Page 362 U. S. 46
Sherman Act if its action thereunder was the simple refusal,
without more, to deal with wholesalers who did not observe the
wholesalers' Net Price Selling Schedule, that entire policy was
tainted with the "vice of . . . illegality," cf. United States
v. Bausch & Lomb Optical Co., 321 U.
, 321 U. S. 724
when Parke Davis used it as the vehicle to gain the wholesalers'
participation in the program to effectuate the retailers' adherence
to the suggested retail prices.
Moreover, Parke Davis also exceeded the "limited dispensation
) confers," Times-Picayune Pub. Co. v.
United States, 345 U. S. 594
345 U. S. 626
in another way, which demonstrates how far Parke Davis went beyond
the limits of the Colgate
doctrine. With regard to the
retailers' suspension of advertising, Parke Davis did not rest with
the simple announcement to the trade of its policy in that regard
followed by a refusal to sell to the retailers who would not
observe it. First, it discussed the subject with Dart Drug. When
Dart indicated willingness to go along, the other retailers were
approached, and Dart's apparent willingness to cooperate was used
as the lever to gain their acquiescence in the program. Having
secured those acquiescences, Parke Davis returned to Dart Drug with
the report of the accomplishment. Not until all this was done was
the advertising suspended and sales to all the retailers resumed.
In this manner, Parke Davis sought assurances of compliance and got
them, as well as the compliance itself. It was only by actively
bringing about substantial unanimity among the competitors that
Parke Davis was able to gain adherence to its policy. It must be
admitted that a seller's announcement that he will not deal with
customers who do not observe his policy may tend to engender
confidence in each customer that, if he complies, his competitors
will also. But if a manufacturer is unwilling to rely on individual
self-interest to bring
Page 362 U. S. 47
about general voluntary acquiescence which has the collateral
effect of eliminating price competition, and takes affirmative
action to achieve uniform adherence by inducing each customer to
adhere to avoid such price competition, the customers' acquiescence
is not then a matter of individual free choice prompted alone by
the desirability of the product. The product then comes packaged in
a competition-free wrapping -- a valuable feature in itself -- by
virtue of concerted action induced by the manufacturer. The
manufacturer is thus the organizer of a price maintenance
combination or conspiracy in violation of the Sherman Act. Under
that Act, "competition, not combination, should be the law of
trade," National Cotton Oil Co. v. Texas, 197 U.
, 197 U. S. 129
"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
United States v. Socony-Vacuum Oil Co., 310 U.
, 310 U. S. 223
And see United States v. McKesson & Robbins, Inc.,
351 U. S. 305
Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc.,
340 U. S. 211
Eastern States Retail Lumber Dealers' Ass'n v. United
States, 234 U. S. 600
The District Court also alternatively rested its judgment of
dismissal on the holding that,
". . . even if the unlawful conditions alleged in the Complaint
had actually been proved, since 1956, they no longer existed, and .
. . [there is] no reason to believe, or even surmise, the unlawful
acts alleged can possibly be repeated. . . ."
167 F. Supp. 827, 829, 830. We are of the view that the evidence
does not justify any such finding. The District Court stated that
"the compelling reason for defendant's so doing [ceasing its
efforts] was forced upon it by business and economic conditions in
its field." There is no evidence in the record that this was the
reason, and any such conclusion must rest on speculation. It does
not appear even that
Page 362 U. S. 48
Parke Davis has announced to the trade that it will abandon the
practices we have condemned. So far as the record indicates any
reason, it is that Parke Davis stopped its efforts because the
Department of Justice had instituted an investigation. The
president of Dart Drug Company testified that he had told the Parke
Davis representatives in August that he had just been talking to
the Department of Justice investigators. He stated that the Parke
Davis representatives had said that "they [knew] that the Antitrust
Division was investigating them all over town," and that this was
one of their reasons for visiting him. The witness testified that
it was on this occasion, after the discussion of the investigation,
that the Parke Davis representatives finally stated that, if Dart
would stop advertising, Parke Davis "would resume shipment, insofar
as there was an Antitrust investigation going on." Moreover Parke
Davis' own employees, who were called by the Government as
witnesses at the trial, admitted that they were aware of the
investigation at the time, and that the investigation was a reason
for the discontinuance of the program. It seems to us that, if the
investigation would prompt Parke Davis to discontinue its efforts,
even more so would the litigation which ensued.
On the record before us, the Government is entitled to the
relief it seeks. The courts have an obligation, once a violation of
the antitrust laws has been established, to protect the public from
a continuation of the harmful and unlawful activities. A trial
court's wide discretion in fashioning remedies is not to be
exercised to deny relief altogether by lightly inferring an
abandonment of the unlawful activities from a cessation which seems
timed to anticipate suit. See United States v. Oregon State
Medical Society, 343 U. S. 326
343 U. S.
The judgment is reversed, and the case remanded to the District
Court with directions to enter an appropriate
Page 362 U. S. 49
judgment enjoining Parke Davis from further violations of the
Sherman Act unless the company elects to submit evidence in defense
and refutes the Government's right to injunctive relief established
by the present record.
It is so ordered.
The pertinent provision of Sections 1, 3 and 4 of the Act of
July 2, 1890, 26 Stat. 209, as amended (15 U.S.C. §§ 1, 3, 4),
commonly known as the Sherman Act, are as follows:
"SEC. 1. 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 hereby declared to
be illegal. . . . Every person who shall make any contract or
engage in any combination or conspiracy hereby declared to be
illegal shall be deemed guilty of a misdemeanor. . . ."
"* * * *"
"SEC. 3. Every contract, combination in form of trust or
otherwise, or conspiracy, in restraint of trade or commerce in . .
. the District of Columbia, or in restraint of trade or commerce .
. . between the District of Columbia and any State or States or
foreign nations, is hereby declared illegal. Every person who shall
make any such contract or engage in any such combination or
conspiracy, shall be deemed guilty of a misdemeanor. . . ."
"SEC. 4. The several district courts of the United States are
hereby invested with jurisdiction to prevent and restrain
violations of this act; and it shall be the duty of the several
United States attorneys, in their respective districts, under the
direction of the Attorney General, to institute proceedings in
equity to prevent and restrain such violations. . . ."
Congress has provided that where a State adopts a "Fair Trade
Law" which permits sellers under certain circumstances to make
price-fixing agreements with purchasers, such agreements shall not
be held illegal under the Sherman Act, 15 U.S.C. § 1. The Fair
Trade Laws adopted in 16 States have been invalidated by their
state courts on state grounds. H.R.Rep. No. 467, 86th Cong., 1st
Sess. 6-7. On June 9, 1959, the House Committee on Interstate
Commerce favorably reported a bill which, if passed, would enact a
National Fair Trade Practice Act.
32 Stat. 823, 15 U.S.C. § 29, as amended by § 17 of the Act of
June 25, 1948, 62 Stat. 989.
When Parke Davis learned from a wholesaler's invoice that he had
filled an order of one of the retailers, Parke Davis protested but
was satisfied when the wholesaler explained that this was an
Except that, in December, 1957, Parke Davis informed Dart Drug
Company that it did not intend to have any further dealings with
Dart. The latter has, however, continued to purchase Parke Davis
products from wholesalers. Thus, Dart Drug cannot receive the
volume discount on large quantity purchases.
Indeed, if Peoples resumed adherence to the Parke Davis price
scale after the interview between its vice-president and Parke
Davis' assistant branch manager, p. 362 U. S. 34
shows that Parke Davis and Peoples entered into a
price maintenance agreement, express, tacit or implied, such
agreement violated the Sherman Act without regard to any
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
250 U. S. 300
of the Court's ruling as to the jury instruction in
256 U.S. 256 U. S.
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
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,
held that, in the absence of a monopolistic
"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 250 U. S.
), "of course, he may announce in advance the
circumstances under which he will refuse to sell."
Page 362 U. S. 50
The Government's complaint, seeking to enjoin alleged violations
of §§ 1 and 3 of the Sherman Act, [Footnote 2/1
] 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
"(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
resell'; [Footnote 2/2
"(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
"(4) 'every visit made by the representatives to the retailers
and wholesalers was, to each of them, separate and apart from all
"(5) '[t]he evidence is clear that both wholesalers and
retailers valued [Parke Davis'] business so highly that they
acceded to its policy'; "
Page 362 U. S. 51
"(6) 'there was no coercion by defendant and no agreement with
[wholesaler or retailer] co-conspirators as alleged in the
"(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.
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
United States v. Bausch & Lomb Optical Co.,
321 U. S. 707
subsequently "narrowly limited" the Colgate
claim is that, whereas, prior to Beech-Nut,
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,
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
Page 362 U. S. 52
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." [Footnote
I think this reasoning not only misconceives the
and Bausch & Lomb cases,
mistakes the premises on which the District Court decided this
case, and its actual findings of fact.
I cannot read Beech-Nut
as introducing a new narrowing concept into the
doctrine. Until today, I had not supposed that any
informed antitrust practitioner or judge would have had to await
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
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 cooperation of its
distributors and customers, which are quite as effectual as
agreements express or implied intended to accomplish the same
257 U.S. at 257 U. S. 453
257 U. S. 455
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.
-456. Far from announcing that no concerted action
need be shown, the Court accepted the Commission's factual
determination that such action did exist.
Page 362 U. S. 53
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 321 U. S. 717
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. 720
The Court reiterated that resale price maintenance could not be
achieved "by agreement, express or implied." Id.,
321 U. S. 721
In rejecting the applicability of the Colgate
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.
The results in Beech-Nut
and Bausch &
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."
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
Page 362 U. S. 54
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. Ante,
362 U. S. 50
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.
Bearing down heavily on the statement in
that the conduct there involved showed more than
"the simple refusal to sell," 257 U.S. at 257 U. S. 454
(see also Bausch & Lomb, supra,
at 321 U. S.
), 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."
Page 362 U. S. 55
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
acceded 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.
, 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 257 U. S. 448
-- was a per se
infraction of the Colgate
but only that it was offensive if it was the result of cooperative
group action. While the Court in Beech-Nut
Page 362 U. S. 56
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 [Footnote 2/4
] does not justify our disregarding the
District Court's finding to the contrary in this case. [Footnote 2/5
In light of the whole history of the Colgate
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
defiance of the Federal Rules of Civil Procedure, Rule 52(a),
Page 362 U. S. 57
and principles announced in past cases (see, e.g., United
States v. Yellow Cab Co., 338 U. S. 338
338 U. S.
-342; International Boxing Club of New York, Inc.
v. United States, 358 U. S. 242
358 U. S. 252
-- I think that what the Court has really done here is to throw the
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
eviscerate it in application.
I would affirm.
These are the "restraint of trade," not the "monopoly,"
provisions of the Sherman Act. See Note 1 of the Court's opinion
Those "authorized by law to fill or dispense prescriptions."
Rule 52(a), Fed.Rules Civ.Proc., 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."
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."
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 256 U. S.
-211. Although the Court now repudiates what was said
in this respect, I submit that there is nothing
in Beech-Nut, Bausch & Lomb,
or any other case in this
Court which justifies this.