Respondent oil company supplies gasoline in eight western States
to numerous retailers, including petitioner, who lease outlets from
respondent and enter into a "consignment" agreement under which
respondent retains "title" to the gasoline until sold, pays
property taxes thereon, and fixes the selling price therefor.
Petitioner is compensated by a minimum commission, assumes
operating costs and most types of losses on the gasoline, and
carries personal liability and property insurance. The lease, like
the "consignment" agreement, runs for a year, and is allegedly not
renewable unless prescribed conditions are met, including the
retailer's adherence to prices set by respondent. When petitioner,
allegedly to meet a competitive price, sold gasoline below the
fixed price, respondent, solely for that reason, refused to renew
the lease and terminated the "consignment" agreement, whereupon
petitioner brought this action for damages under § 4 of the Clayton
Act for violation of §§ 1 and 2 of the Sherman Act. The Federal
District Court, after hearings, granted respondent's motion for
summary judgment, which the Court of Appeals affirmed, concluding
that, although there were assumedly triable issues of law,
petitioner had suffered no actionable wrong or damage.
Resale price maintenance through a coercive type
of "consignment" agreement like that involved here violates the
antitrust laws, causing petitioner to suffer actionable wrong or
damage. Pp. 377 U. S.
(a) The "consignment" agreement and lease injure interstate
commerce by depriving independent dealers of the exercise of free
judgment whether to become consignees at all or remain consignees,
and to sell at competitive prices. That the retailer can refuse to
deal cannot under these circumstances immunize the supplier from
the antitrust laws. P. 377 U. S.
(b) An actionable wrong results whenever the restraint of trade
or monopolistic practice has an impact on the market; and it is
irrelevant that the complainant is only one merchant, or that, on
respondent's failure to renew his lease, another dealer may take
his place. Pp. 377 U. S.
Page 377 U. S. 14
(c) A supplier may not use a coercive device, whether in the
form of an agreement used coercively, or in any other form, to
achieve resale price maintenance. United States v. Parke, Davis
& Co., 362 U. S. 29
followed. P. 377 U. S.
(d) A consignment, however lawful as a matter of private
contract law, must yield to federal antitrust policy. P.
377 U. S.
(e) The antitrust laws prevent the fixing of prices through many
retail outlets by the "consignment" device. United States v.
General Electric Co., 272 U. S. 476
distinguished. Pp. 377 U. S.
(f) Although the issue of resale price maintenance under the
Sherman Act is resolved here, the case must be remanded for a
hearing on the other issues, including those raised under the
McGuire Act and the damages, if any, suffered. P. 377 U. S.
(g) The question is reserved whether there may be equities that
would warrant only prospective application in damage suits of the
rule governing price-fixing by the "consignment" device which this
Court now announces. P. 377 U. S.
11 F.2d 764 reversed and remanded.
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 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
Page 377 U. S. 15
if the conditions prescribed by the company are not met. The
company, pursuant to the "consignment" agreement, sets the prices
at which the retailer sells the gasoline. While "title" to the
consigned gasoline "shall remain in Consignor until sold by
Consignee," and while the company pays all property taxes on all
gasoline in possession of Simpson, he must carry personal liability
and property damage insurance by reason of the "consigned"
gasoline, and is responsible for all losses of the "consigned"
gasoline in his possession, save for specified acts of God. Simpson
is compensated by a minimum commission, and pays all the costs of
operation in the familiar manner.
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. [Footnote 1
After two pretrial hearings, the company moved for a summary
judgment. Simpson moved for a partial summary judgment -- that the
consignment lease program is
Page 377 U. S. 16
in violation of §§ 1 and 2 of the Sherman Act. The District
Court, concluding that "all the factual disputes" had been
eliminated from the case, entertained the motions. The District
Court granted the company's motion and denied Simpson's, holding as
to the latter that he had not established a violation of the
Sherman Act and, even assuming such a violation, that he had not
suffered any actionable damage. The Court of Appeals affirmed.
While it assumed that there were triable issues of law, it
concluded that Simpson suffered no actionable wrong or damage, 311
F.2d 764. The case is here on a writ of certiorari. 373 U.S.
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
Inc. v. Broadway-Hale Stores, Inc., 359 U.
, 359 U. S. 213
Radiant Burners, Inc. v. Peoples Gas Co., 364 U.
, 364 U. S. 660
As we stated in Radovich v. National Football League,
352 U. S. 445
352 U. S.
"Congress has, by legislative fiat, determined that such
prohibited activities are injurious to the public, and has provided
sanctions allowing private enforcement of the antitrust laws by an
aggrieved party. These laws protect the victims of the forbidden
practices as well as the public. "
Page 377 U. S. 17
The fact that, on failure to renew a lease, another dealer takes
Simpson's place and renders the same service to the public is no
more an answer here than it was in Poller v. Columbia
Broadcasting System, 368 U. S. 464
368 U. S. 473
For Congress, not the oil distributor, is the arbiter of the public
interest; and Congress has closely patrolled price-fixing, whether
effected through resale price maintenance agreements or otherwise.
] The exclusive
requirements contracts struck down in Standard Oil Co. v.
United States, 337 U. S. 293
were not saved because dealers need not have agreed to them, but
could have gone elsewhere. If that were a defense, a supplier could
regiment thousands of otherwise competitive dealers in resale price
maintenance programs merely by fear of nonrenewal of short-term
We made clear in United States v. Parke, Davis &
Co., 362 U. S. 29
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
explained in Parke, Davis,
362 U.S. at 362 U. S. 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
consignments, though useful in allocating risks between the parties
and determining their rights inter se,
do not necessarily
Page 377 U. S. 18
the rights of others, whether they be creditors or sovereigns.
Thus, the device has been extensively regulated by the States. 22
Am.Jur., Factors, § 8; Hartford Indemnity Co. v. Illinois,
298 U. S. 155
Congress, too, has entered parts of the field, establishing by the
Act of June 10, 1930, 46 Stat. 531, as amended, 7 U.S.C. § 499a
a pervasive system of control over commission
merchants dealing in perishable agricultural commodities.
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
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.
, 258 U. S.
-356; cf. Straus v. Victor Talking Mach.
Co., 243 U. S. 490
243 U. S.
-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
310 U. S.
-222; United States v. Parke, Davis & Co.,
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," [Footnote 3
] not a price coercively exacted; nor do
Page 377 U. S. 19
go on consignment; they are sold. [Footnote 4
] Resale price maintenance of gasoline through
the "consignment" device is increasing. [Footnote 5
] The "consignment" device in the gasoline
field is used for resale price maintenance. The theory and practice
of gasoline price-fixing in vogue under the "consignment" agreement
has been well exposed by Congress. A Union Oil official, in recent
testimony before a House Committee on Small Business, explained the
"Mr. ROOSEVELT. Who sets the price in your consignment station,
dealer consignment station?"
"Mr. RATH. We do."
"Mr. ROOSEVELT. You do?"
"Mr. RATH. Yes. We do it on this basis: you see, he is paid a
commission to sell these products for us. Now, we go out into the
market area and find out what the competitive major price is, what
that level is, and we set our house-brand price at that. [Footnote 6
Page 377 U. S. 20
Dealers like Simpson are independent businessmen, and they have
all or most of the indicia of entrepreneurs, except for
price-fixing. The risk of loss of the gasoline is on them, apart
from acts of God. Their return is affected by the rise and fall in
the market price, their commissions declining as retail prices
drop. [Footnote 7
Page 377 U. S. 21
the only power they have to be wholly independent businessmen,
whose service depends on their own initiative and enterprise, is
taken from them by the proviso that they must sell their gasoline
at prices fixed by Union Oil. By reason of the lease and
"consignment" agreement, dealers are coercively laced into an
arrangement under which their supplier is able to impose
noncompetitive prices on thousands of persons whose prices
otherwise might be competitive. The evil of this resale price
maintenance program, like that of the requirements contracts held
illegal by Standard Oil Co. of California v. United States,
is its inexorable potentiality for, and even certainty
in, destroying competition in retail sales of gasoline by these
nominal "consignees" who are, in reality, small struggling
competitors seeking retail gas customers.
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, [Footnote 8
] for then
the end result of United States v. Socony-Vacuum
Page 377 U. S. 22
Oil Co., supra,
would be avoided merely by clever
manipulation of words, not by differences in substance. The
present, coercive "consignment" device, if successful against
challenge under the antitrust laws, furnishes a wooden formula for
administering prices on a vast scale. [Footnote 9
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
Page 377 U. S. 23
parallels the one in the instant case. [Footnote 10
] The Court in the General
case did not restrict its ruling to patented
articles; it, indeed, said that the use of the consignment device
was available to the owners of articles "patented or otherwise."
at 272 U. S. 488
But whatever may be said of the General Electric
its special facts, involving patents, it is not apposite to the
special facts here.
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."
at 272 U. S. 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
Page 377 U. S. 24
States, referring to the specification for the particulars
"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."
17 Wall. 453, 84 U. S. 456
Long prior to the General Electric
case, price-fixing in
the marketing of patented articles had been condoned (Bement
& Sons v. National Harrow Co., 186 U. S.
), 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
antitrust laws, and modify them pro tanto.
That was the
of the General Electric
272 U.S. at 272 U. S. 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
316 U. S.
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
Page 377 U. S. 25
whether, when all the facts are known, there may be any equities
that would warrant only prospective application in damage suits of
the rule governing price-fixing by the "consignment" device which
we announce today.
Reversed and remanded.
MR. JUSTICE HARLAN took no part in the disposition of this
As of December 31, 1957, Union Oil supplied gasoline to 4,133
retail stations in the eight western States of California,
Washington, Oregon, Nevada, Arizona, Montana, Utah and Idaho. Of
that figure, 2,003 stations were owned or leased by Union Oil and,
in turn, leased or subleased to an independent retailer; 14 were
company-operated training stations; and the remaining 2,116
stations were owned by the retailer or leased by him from third
persons. Union Oil had "consignment" agreements as of that date
with 1,978 (99%) of the lessee-retailers and with 1,327 (63%) of
the nonlessee retailers.
the McGuire Act, 66 Stat. 631, 15 U.S.C. § 45; the
Miller-Tydings Act, 50 Stat. 693, 15 U.S.C. § 1; United States
v. Socony-Vacuum Oil Co., 310 U. S. 150
H.R.Rep.No.1958, 85th Cong., 2d Sess., S.Rep.No.1555, 85th
Cong., 2d Sess.
H.R.Rep.No.1958, supra, note 3
H.R.Rep.No.1157, 85th Cong., 1st Sess., pp. 6-7.
The Assistant Attorney General in charge of the Antitrust Division,
Department of Justice, testified:
"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
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."
Hearings, House Select Committee on Small Business,
85th Cong., 1st Sess., H.R.Res. 56, Pt. III, pp. 79-80. The same
official gave this justification for the consignment program -- a
justification similar to that traditionally advanced for resale
"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
"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
"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."
The basic agreement in force during most of the period when
Simpson was a consignee provided that his commission was 1 1/2� per
gallon more than the amount by which the price at which the company
"authorized" him to sell exceeded a posted "tank wagon" price
applicable to those gallons. However, if the "authorized" price
fell below a posted "minimum retail" price, the commission was
reduced by 50% of the difference between "minimum retail" and
"authorized" retail. In no event could the commission be less than
5.95� for regular and 5.75� for ethyl.
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.
Klaus, Sale, Agency and Price Maintenance, 28
Col.L.Rev. 312, 441, 443-454 (1928).
A. A. Berle recently described the critical importance of price
control to money making by the large oligarchies of business, or
the "behemoths," as he calls them:
"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
"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'
Bigness: Curse or Opportunity? New York Times Magazine, Feb. 18,
1962, pp. 18, 55, 58.
In General Electric,
the consignee was responsible for
lost, damaged or missing items from the stock in his possession,
and the consignor assumed all risks of fire, flood obsolescence,
while, in the instant case, the consignee is
"responsible to Consignor for all gasolines consigned to him, or
for loss thereof or damage thereto from any cause whatsoever other
than earthquake, lightning, flood, fire or explosion not caused by
his negligence, and will pay Consignor for all gasolines sold, lost
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.
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
Court ought not pronounce that judgment without the benefit of a
trial of the question whether this is a "coercive type of
"consignment" agreement," and without affording interested parties,
including the Antitrust Division of the Department of Justice, an
opportunity to express their views. We therefore agree with MR.
JUSTICE STEWART, and 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.
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
"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
Page 377 U. S. 26
trial on the merits. Poller v. Columbia Broadcasting
System, 368 U. S. 464
I think that, upon remand, there should be a full trial of all the
issues in this litigation, because I completely disagree with the
Court that whenever a bona fide
numerous agents, sets the price at which his property is to be
sold, "the antitrust laws prevent calling the consignment' an
agency," and transform the consignment into a sale. In the present
posture of this case, such a determination, overruling as it does a
doctrine which has stood unquestioned for almost 40 years, is
unwarranted, unnecessary and premature.
In United States v. General Electric, 272 U.
, 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. [Footnote 2/1
] Instead of expressly overruling
Page 377 U. S. 27
however, the Court seeks to distinguish that case upon the
specious ground that its underpinnings rest on patent law.
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
Page 377 U. S. 28
that case that bona fide
consignment agreements do not
violate the antitrust laws, "however comprehensive as a mass or
whole in their effect. . . ." Id.
at 272 U. S. 488
In addition to the unambiguous statement in Chief Justice Taft's
opinion for a unanimous Court that
"[t]he owner of an article, patented or otherwise, is not
violating the common law or the Anti-Trust Act by seeking to
dispose of his articles directly to the consumer and fixing the
price by which his agents transfer the title from him directly to
272 U.S. at 272 U. S. 488
the Court, throughout that portion of its opinion dealing with the
validity of General Electric's consignment agreements, gave no
information whatsoever that its conclusion would have differed in
any respect if the consigned article had been unpatented. Quite the
contrary, the General Electric
Court, assessing the
validity of these agreements, addressed itself to but one
"The question is whether, in view of the arrangements made by
the company with those who ordinarily and usually would be
merchants buying from the manufacturer and selling to the public,
such persons are to be treated as agents or as owners of the lamps
consigned to them under such contracts."
272 U.S. at 272 U. S.
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.
272 U. S.
-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. John D. 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
the consignment would be valid under the antitrust laws, again
regardless of whether or not the article consigned were
Page 377 U. S. 29
Possession of patent rights on the article allegedly consigned
has no legal significance to an inquiry directed to ascertaining
whether the burdens, risks, and rights of ownership actually remain
with the principal or have passed to his agent. Nor is the power of
a consignor to fix the prices at which his consignee sells
augmented in any respect by the possession of a patent on the goods
so consigned. It is not by virtue of a patent monopoly that a
consignor may control the price at which his
consignee sells; his control over price flows from the simple fact
that the owner of goods, so long as he remains the owner, has the
unquestioned right to determine the price at which he will sell
them. [Footnote 2/2
It is clear, therefore, that the Court today overrules
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. [Footnote 2/3
upsetting decision carries with it the most severe consequences to
a large sector of the private economy. We cannot be blind to the
fact that commercial arrangements throughout our economy are shaped
in reliance upon this Court's decisions elaborating the reach of
Page 377 U. S. 30
laws. Everyone knows that consignment selling is a widely used
method of distribution all over the country. By our decision today
outlawing consignment selling if it includes a price limitation, we
inject severe uncertainty into commercial relationships established
in reliance upon a decision of this Court explicitly validating
this method of distribution. We create, as well, the distinct
possibility that an untold number of sellers of goods will be
subjected to liability in treble damage suits because they thought
they could rely on the validity of this Court's decisions.
If the record now before us actually required reexamination 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. [Footnote 2/4
] But the
fact is that, in the present posture of this case, this broad issue
need not be decided. The record upon which the District Court
entered its summary judgment is wholly inadequate to support a
realistic assessment of the actual nature and effect of the
so-called "lease and consignment" agreement here involved. As the
Court of Appeals pointed out,
"[t]he record is not an easy one to read. No written pretrial
stipulation of facts was entered into, nor was any formal pretrial
order made. . . . The result of all this was to create a most
unsatisfactory record. . . . As the record now stands, it is almost
impossible to determine what agreements, if any, were reached at
311 F.2d at 767.
Page 377 U. S. 31
After a trial on the merits it may be determined that the scheme
here involved, although on its face a bona fide
consignment agreement, was, in actual operation and effect, a
system of resale price maintenance. [Footnote 2/5
] Or the District Court, after a trial,
might find that, despite the formal provisions of the lease and
consignment agreement, there actually existed here some coercive
arrangement otherwise violative of the antitrust laws. In either
event, the question of the petitioner's damages would then become
an issue to be determined. Only if all these issues, and perhaps
others, were resolved in favor of the respondent would there be
presented the question of the continuing validity of the
doctrine. Consequently, reexamination of
that case should certainly await another day.
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
Without commenting on their significance, the Court does purport
to discover in the operative provisions of the two agreements
factual differences regarding the tax and insurance burdens assumed
by the consignors. On closer examination, however, even these
purported differences disappear. From the records in the cases, it
is clear that both companies assumed the same tax burden -- payment
of property taxes on the consigned goods. And since both companies
bore virtually the same insurable risks of loss or damage to the
goods consigned, the fact that General Electric apparently "carried
whatever insurance is carried' on the stock held by consignees,
while Union Oil apparently is not obligated to carry any insurance"
is no distinction at all.
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.
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
explicitly found such provisions
unobjectionable, 272 U.S. at 272 U. S.
-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.
272 U. S. 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
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.
The quotations in the majority opinion from the General
case relate to a wholly separate second issue
involved in that case -- the validity of a license granted by
General Electric to Westinghouse, under the patents owned by the
former, to manufacture and sell lamps at prices fixed by the
patentee licensor -- and have no relevance whatsoever to the issue
here. Since the source of power over price by the patentee
consignor in General Electric
was not his patent, and
since the question of patent monopoly is not involved in this case,
the patent cases cited by the Court are also singularly irrelevant
to the issue here.
There is no reason to suppose that MR. JUSTICE HARLAN will be
disqualified in any future case which may involve the question of
the continuing validity of the General Electric
The Department's views are not known, because they have not been
sought. Indeed, had they been sought, there is a substantial
possibility, in light of the Department's recognition and tacit
validation of consignment selling under the 1959 consent decree
entered against the large West Coast oil companies, United
States v. Standard Oil Co. of California,
1959 Trade Cases �
69,399, p. 75,522 et seq.,
that the Government would have
taken the position that the rule of General Electric
should be left undisturbed.
In that event, the effect of California's Fair Trade Act,
Cal.Bus. & Prof.Code § 16900, would have to be considered.
66 Stat. 631, 15 U.S.C. § 45 (McGuire Act).