A provision of California's alcoholic beverage laws states that
a "licensed importer shall not purchase or accept delivery of any
brand of distilled spirits unless he is designated as an authorized
importer of such brand by the brand owner or his authorized agent"
(designation statute). The statute apparently was enacted in
response to the perceived extraterritorial effects of Oklahoma's
"open wholesaling" statutes, whereby a licensed California importer
who was unable to obtain distilled spirits through the distiller's
established distribution system could obtain them from Oklahoma
wholesalers. Prior to the designation statute's effective date,
respondents sought an extraordinary writ from the California Court
of Appeal to enjoin the enforcement of the statute. The court
entered judgment for respondents, holding that the conduct
contemplated by the statute was
per se illegal under § 1
of the Sherman Act because it gave distillers the unfettered power
to restrain competition by merely deciding who may or may not
compete in handling the distillers' brands, and that thus the
statute, on its face, was invalid pursuant to the Supremacy Clause
of the Federal Constitution.
Held:
1. California's designation statute is not invalid on its face
as being preempted by the Sherman Act. Pp.
458 U. S.
659-662.
(a) A state statute, when considered in the abstract, may be
condemned under the antitrust laws only if it mandates or
authorizes conduct that necessarily constitutes a violation of
those laws in all cases, or if it places irresistible pressure on a
private party to violate the antitrust laws in order to comply with
the statute. Such condemnation will follow under § 1 of the Sherman
Act when the conduct contemplated by the statute is in all cases a
per se violation. If the activity addressed by the statute
does not fall into that category, and therefore must be
analyzed
Page 458 U. S. 655
under the rule of reason, the statute cannot be condemned in the
abstract. Pp.
458 U. S.
655-661.
(b) A distiller's invocation of California's statute would not
be subject in all cases to a
per se rule of illegality
under the Sherman Act. A manufacturer's use of vertical nonprice
restraints is not
per se illegal.
Continental T.V.,
Inc. v. GTE Sylvania Inc., 433 U. S. 36.
California's designation statute merely enforces the distiller's
decision to restrain intrabrand competition, preventing an
unauthorized wholesaler from obtaining the distiller's products
from outside the distiller's established distribution chain. The
effect of the statute is simply to counteract the perceived
extraterritorial effects of Oklahoma's alcoholic beverage laws,
thus restoring the distiller's ability to determine which
wholesalers may import its products into California. While the
manner in which a distiller utilizes the designation statute and
the arrangements a distiller makes with its wholesalers will be
subject to Sherman Act analysis under the rule of reason, there is
no basis for condemning the statute itself by force of the Sherman
Act. Pp.
458 U. S.
661-662.
2. The California statute is not preempted by § 5(a) of the
Federal Alcohol Administration Act, which prohibits a distiller or
wholesaler from establishing exclusive retail outlets. California's
statute in no way requires exclusive retail outlets, and, by its
terms, does not even require exclusive wholesale arrangements. Pp.
458 U. S.
663-664.
3. The designation statute does not deny respondents due process
of law. Respondents do not possess any constitutionally protected
liberty or property interest in obtaining the distiller's
permission to deal in its products, and thus the Due Process Clause
is not offended by the wholesaler's inability to challenge the
distiller's decisionmaking. P.
458 U. S.
664.
4. Nor does the designation statute violate the Equal Protection
Clause because it discriminates between designated and
nondesignated wholesalers. The statute is rationally related to its
legitimate purposes, enabling the distiller to place restraints on
intrabrand competition in order to foster interbrand competition.
P.
458 U. S.
665.
108 Cal. App.
3d 348,
166 Cal. Rptr.
563, reversed and remanded.
REHNQUIST, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, MARSHALL, BLACKMUN, POWELL, and
O'CONNOR, JJ., joined. STEVENS, J., filed an opinion concurring in
the judgment, in which WHITE, J., joined,
post, p.
458 U. S.
665.
Page 458 U. S. 656
JUSTICE REHNQUIST delivered the opinion of the Court.
Respondents in these cases obtained from the California Court of
Appeal an extraordinary writ prohibiting the California Department
of Alcoholic Beverage Control from enforcing an amendment to the
State's liquor statutes. That court held that, because the conduct
contemplated by the amendment was
per se illegal under the
Sherman Act, the statute on its face was invalid pursuant to the
Supremacy Clause of the United States Constitution.
108 Cal. App.
3d 348,
166 Cal. Rptr.
563 (1980). We conclude that the California Court of Appeal was
mistaken in its application of antitrust and preemption principles,
and we reverse its judgment.
I
Alcoholic beverages may be brought into California from outside
the State for delivery or use within the State
only if the
beverages are consigned to a licensed importer. Cal.Bus. &
Prof.Code Ann. § 23661 (West Supp.1982). In 1979, the California
Legislature amended the State's alcoholic beverage control laws to
provide that a
"licensed importer shall
Page 458 U. S. 657
not purchase or accept delivery of any brand of distilled
spirits unless he is designated as an authorized importer of such
brand by the brand owner or his authorized agent."
"§ 23672. This challenged statute, which was to become effective
on January 1, 1980, is understandably referred to as a 'designation
statute.' [
Footnote 1]"
California apparently enacted its designation statute in
response to the effects of Oklahoma's alcoholic beverage laws. At
the time, Oklahoma's statutes were understood to require any
distiller or brand owner selling its products to Oklahoma
wholesalers to sell to all wholesalers on a nondiscriminatory
basis. [
Footnote 2] Because of
the perceived extraterritorial effect of Oklahoma's
"open-wholesaling" statutes, a licensed California importer who was
unable to obtain distilled spirits through the distiller's
established distribution system could obtain them from Oklahoma
wholesalers. As a result, a distiller who desired to sell its
products to Oklahoma wholesalers was unable to rely on contractual
undertakings to determine which California wholesalers would handle
its products. California's designation statute, therefore, sought
to close off the "Oklahoma connection" to California importers not
authorized by the distiller to deal in its products. [
Footnote 3]
Page 458 U. S. 658
Prior to the effective date of the designation statute,
respondents, liquor importers who were benefiting from the
"Oklahoma connection," sought an extraordinary writ from the
California Court of Appeal enjoining the enforcement of the
designation statute. The Court of Appeal agreed with respondents
that the designation statute, on its face, conflicted with § 1 of
the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1. [
Footnote 4] According to that court,
the designation statute would result, in all cases, in a
per
se violation of the Sherman Act, because it "gives brand
owners the unfettered power to restrain competition . . . by merely
deciding who may and who may not compete." 108 Cal. App. 3d at 356,
166 Cal. Rptr. at 569. The Court of Appeal distinguished
Continental T.V., Inc. v. GTE Sylvania Inc., 433 U. S.
36 (1977), in which we held that vertical nonprice
restraints are to be judged under the "rule of reason," rather than
under a
per se rule of illegality, on the ground that
respondents did not attack the distiller's decision to refuse to do
business with them, but "the state provided authority of the
distillers to prohibit them from trading with others." 108 Cal.
App. 3d at 357, 166 Cal. Rptr. at 570.
The Supreme Court of California denied review. We granted
certiorari, 454 U.S. 1080 (1981), and now reverse.
Page 458 U. S. 659
II
A
In determining whether the Sherman Act preempts a state statute,
we apply principles similar to those which we employ in considering
whether any state statute is preempted by a federal statute
pursuant to the Supremacy Clause. As in the typical preemption
case, the inquiry is whether there exists an irreconcilable
conflict between the federal and state regulatory schemes. The
existence of a hypothetical or potential conflict is insufficient
to warrant the preemption of the state statute. A state regulatory
scheme is not preempted by the federal antitrust laws simply
because in a hypothetical situation a private party's compliance
with the statute might cause him to violate the antitrust laws. A
state statute is not preempted by the federal antitrust laws simply
because the state scheme might have an anticompetitive effect.
See, e.g., New Motor Vehicle Bd. of Cal. v. Orrin W. Fox
Co., 439 U. S. 96,
439 U. S.
110-111 (1978);
Exxon Corp. v. Governor of
Maryland, 437 U. S. 117,
437 U. S.
129-134 (1978);
Joseph E. Seagram & Sons, Inc.
v. Hostetter, 384 U. S. 35,
384 U. S. 45-46
(1966).
A party may successfully enjoin the enforcement of a state
statute only if the statute, on its face, irreconcilably conflicts
with federal antitrust policy. In
California Retail Liquor
Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S.
97 (1980), we examined a statute that required members
of the California wine industry to file fair trade contracts or
price schedules with the State, and provided that, if a wine
producer had not set prices through a fair trade contract,
wholesalers must post a resale price schedule for that producer's
brands. We held that the statute facially conflicted with the
Sherman Act because it mandated resale price maintenance, an
activity that has long been regarded as a
per se violation
[
Footnote 5] of the Sherman
Page 458 U. S. 660
Act.
Id. at
445 U. S.
102-103;
see Dr. Miles Medical Co. v. John D. Park
& Sons Co., 220 U. S. 373,
220 U. S.
407-409 (1911).
By contrast, in
Joseph E. Seagram & Sons, Inc. v.
Hostetter, supra, we rejected a facial attack upon § 9 of New
York's Alcoholic Beverage Control Law, [
Footnote 6] which required retailers and wholesalers to
file monthly price schedules with the State Liquor Authority
accompanied by an affirmation that the prices charged were no
higher than the lowest price at which sales were made anywhere in
the United States during the preceding month.
Id. at
384 U. S. 39-40.
The Court found no clear repugnancy between § 9 and the federal
antitrust laws:
"The bare compilation, without more, of price information on
sales to wholesalers and retailers to support the affirmations
filed with the State Liquor Authority would not, of itself, violate
the Sherman Act. Section 9 imposes no irresistible economic
pressure on the appellants to violate the Sherman Act in order to
comply with the requirements of § 9. On the contrary, § 9 appears
firmly anchored to the assumption that the Sherman Act will deter
any attempts by the appellants to preserve their New York price
level by conspiring to raise the prices at which liquor is sold
elsewhere in the country. . . ."
"Although it is possible to envision circumstances under which
price discriminations proscribed by the Robinson-Patman Act might
be compelled by § 9, the existence of such potential conflicts is
entirely too speculative
Page 458 U. S. 661
in the present posture of this case. . . ."
Id. at
384 U. S. 45-46
(citations omitted).
Our decisions in this area instruct us, therefore, that a state
statute, when considered in the abstract, may be condemned under
the antitrust laws only if it mandates or authorizes conduct that
necessarily constitutes a violation of the antitrust laws in all
cases, or if it places irresistible pressure on a private party to
violate the antitrust laws in order to comply with the statute.
Such condemnation will follow under § 1 of the Sherman Act when the
conduct contemplated by the statute is, in all cases, a
per
se violation. If the activity addressed by the statute does
not fall into that category, and therefore must be analyzed under
the rule of reason, the statute cannot be condemned in the
abstract. Analysis under the rule of reason requires an examination
of the circumstances underlying a particular economic practice, and
therefore does not lend itself to a conclusion that a statute is
facially inconsistent with federal antitrust laws.
It remains for us to determine whether a distiller's invocation
of the designation statute would be subject in all cases to a
per se rule of illegality under the Sherman Act.
B
We held in
GTE Sylvania that a manufacturer's use of
vertical nonprice restraints is not
per se illegal.
Because restraints on intrabrand competition may promote interbrand
competition, we concluded that nonprice vertical restraints should
be scrutinized under the rule of reason. 433 U.S. at
433 U. S. 57-59.
After our decision in
GTE Sylvania, it cannot be said that
every attempt by a manufacturer to restrain competition in its own
products is illegal under the Sherman Act.
California's designation statute merely enforces the distiller's
decision to restrain intrabrand competition. It permits the
distiller to designate which wholesalers may import the distiller's
products into the State. It prevents an unauthorized wholesaler
from obtaining the distiller's products from outside the
distiller's established distribution chain.
Page 458 U. S. 662
The designation statute does not require the distiller to impose
vertical restraints of any kind; that is a matter for it to
determine. The
number of importers which may be designated
by the distiller is not limited; the designated importer is not
required to sell the imported brand to retailers within a specified
area or from a specified location within the State.
It is irrelevant for our purposes that the distiller's ability
to restrict intrabrand competition in California has the imprimatur
of a state statute.
New Motor Vehicle Bd. of Cal. v. Orrin W.
Fox Co., 439 U.S. at
439 U. S. 110 .
[
Footnote 7] The effect of the
statute is simply to counteract the perceived extraterritorial
effects of Oklahoma's alcoholic beverage laws, which, as once
understood, operated to deprive the distiller of control over its
distribution system nationwide. Thus, California's designation
statute merely restored what Oklahoma had taken away: the
distiller's ability to determine which wholesalers may import its
products into California.
In these respects, therefore, we find these cases to be much
like
Joseph E. Seagram & Sons, Inc. v. Hostetter,
384 U. S. 35
(1966). As in
Hostetter, upholding the validity of the
designation statute will not insulate a distiller's invocation of
the statute from scrutiny under the Sherman Act. The manner in
which a distiller utilizes the designation statute and the
arrangements a distiller makes with its wholesalers will be subject
to Sherman Act analysis under the rule of reason. [
Footnote 8] There is no basis, however, for
condemning the statute itself by force of the Sherman Act.
[
Footnote 9]
Page 458 U. S. 663
III
Respondents seek to support the judgment of the Court of Appeal
on three federal grounds not considered by the court below. None of
these contentions has merit.
A
Respondents contend that the California designation statute is
preempted by § 5(a) of the Federal Alcohol Administration Act, 49
Stat. 981, as amended, 27 U.S.C. § 205(a). [
Footnote 10] Section 5(a) prohibits a distiller
or wholesaler from establishing exclusive
retail outlets.
See S.Rep. No. 1215, 74th Cong., 1st Sess., 7 (1935);
H.R.Rep. No. 1542, 74th Cong., 1st Sess., 10-11 (1935). In other
words, § 5(a) prohibits a distiller or wholesaler from requiring a
retailer to buy only the distiller's or wholesaler's
products to the exclusion of the products of other distillers or
wholesalers. The statute does not prohibit a distiller from
requiring its wholesalers to purchase the distiller's products from
the distiller itself, rather
Page 458 U. S. 664
than from a third party. [
Footnote 11] California's statute in no way requires
exclusive retail outlets. By its terms, the designation statute
does not even require exclusive wholesale arrangements. One might
be able to hypothesize an arrangement enforced by the designation
statute that might be prohibited by § 5(a), but this is
insufficient to invalidate a state statute pursuant to the
Supremacy Clause.
"To hold otherwise would be to ignore the teaching of this
Court's decisions which enjoin seeking out conflicts between state
and federal regulation where none clearly exists."
Huron Portland Cement Co. v. Detroit, 362 U.
S. 440,
362 U. S. 446
(1960).
B
Respondents contend that the designation statute denies them due
process of law. According to respondents, California has
established a "second tier of private licensing over the state's
licensing process," and therefore procedural due process
protections apply with regard to the distiller's designation
decisions. Brief for Respondents 36.
We find this contention without merit. The designation statute
merely enforces the distiller's decision to deny permission to a
California wholesaler to deal in the distiller's products. We do
not think that respondents possess any constitutionally protected
liberty or property interest in obtaining the distiller's
permission. Thus, the Due Process Clause is not offended by the
wholesaler's inability to challenge the distiller's decisionmaking.
What respondents are really challenging is the California
Legislature's decision to give such a power to the distiller
without establishing any criteria to govern the exercise of that
power. The Due Process Clause does not authorize this Court to
assess the wisdom of the California Legislature's decision.
See
Ferguson v. Skrupa, 372 U. S. 726,
372 U. S.
729-732 (1963).
Page 458 U. S. 665
C
Finally, respondents contend that the designation statute
violates the Equal Protection Clause because it discriminates
between designated and nondesignated wholesalers. There can be
little doubt but that the designation statute is rationally related
to the statute's legitimate purposes.
Minnesota v. Clover Leaf
Creamery Co., 449 U. S. 456,
449 U. S.
461-470 (1981). The designation statute enables the
distiller to place restraints on intrabrand competition in order to
foster interbrand competition. It is not our province to determine
whether or not California consumers would be better off had the
California Legislature decided not to close off the "Oklahoma
connection."
See Vance v. Bradley, 440 U. S.
93,
440 U. S. 109
(1979)
The judgment of the Court of Appeal is reversed, and these cases
are remanded to that court for proceedings not inconsistent with
this opinion.
It is so ordered.
* Together with No. 80-1030,
Bohemian Distributing Co. v.
Norman Williams Co. et al., and No. 80-1052,
Wine &
Spirits Wholesalers of California v. Norman Williams Co. et
al., also on certiorari to the same court.
[
Footnote 1]
Section 23672 is actually an amended version of a statute
invalidated by the California Supreme Court in
Rice v.
Alcoholic Beverage Control Appeals Bd., 21 Cal. 3d
431, 579 P.2d 476 (1978), because its minimum price system
constituted resale price maintenance in violation of the Sherman
Act.
See California Retail Liquor Dealers Assn. v. Midcal
Aluminum, Inc., 445 U. S. 97,
445 U. S.
100-102 (1980).
[
Footnote 2]
Okla. Stat., Tit. 37, 533 (1981).
[
Footnote 3]
The Oklahoma Supreme Court, however, has recently closed off the
"Oklahoma connection" by holding that the open-wholesaling statute
does not apply to alcoholic beverages destined for consumption in
other States.
Central Liquor Co. v. Oklahoma Alcoholic Beverage
Control Bd., 640 P.2d 1351
(1982). What made the "Oklahoma connection" particularly attractive
to California wholesalers was that Oklahoma required distillers to
sell to Oklahoma wholesalers at the lowest price charged for its
products anywhere in the United States.
See Okla.Stat.,
Tit. 37, § 536.1 (1981). The demise of the "Oklahoma connection,"
however, has no bearing on our disposition of the legal issues in
these cases.
[
Footnote 4]
Although it did not phrase its conclusion in these terms, it is
evident that the California Court of Appeal concluded that the
designation statute was preempted by the Sherman Act. The court
properly recognized that it had no jurisdiction to entertain a
lawsuit brought pursuant to § 4 of the Clayton Act, 15 U.S.C. § 15.
108 Cal. App.
3d 348, 354, n. 2,
166 Cal. Rptr.
563, 568, n. 2 (1980). Rather than seeking a private remedy
against private parties, respondents in these cases sought to
enjoin the enforcement of a state statute that they contend to be
unconstitutional under the Supremacy Clause in its every
application. Indeed, because respondents brought this suit prior to
the effective date of the statute, respondents did not, and could
not, challenge any vertical restraints actually employed by a
distiller pursuant to the statute. Instead, respondents challenge
the statute on its face, without consideration of particular
circumstances.
[
Footnote 5]
Under established antitrust principles,
per se rules of
illegality are appropriate only when they apply to practices
"'which, because of their pernicious effect on competition and
lack of any redeeming virtue are conclusively presumed to be
unreasonable, and therefore illegal, without elaborate inquiry as
to the precise harm they have caused or the business excuse for
their use.'"
Continental T.V., Inc. v. GTE Sylvania Inc.,
433 U. S. 36,
433 U. S. 50
(1977), quoting
Northern Pacific R. Co. v. United States,
356 U. S. 1,
356 U. S. 5
(1958). It is not surprising, therefore, that a statute which
requires practices
per se illegal under the Sherman Act
may be subject to a facial challenge under the Supremacy
Clause.
[
Footnote 6]
As with the instant case, because the challenged statute had not
as yet been put into effect, this Court in
Hostetter was
presented only with a facial challenge to its
constitutionality.
[
Footnote 7]
This is merely another way of stating that the designation
statute might have an anticompetitive effect when applied in
concrete factual situations.
See New Motor Vehicle Bd. of Cal.
v. Orrin W. Fox Co., 439 U.S. at
439 U. S.
110-111. We have explained, however, that this is
insufficient to declare the statute itself void on its face.
[
Footnote 8]
It is certainly conceivable, however, that particular
conduct pursuant to the statute might be subject to a
challenge under one or more of the established
per se
rules of illegality.
[
Footnote 9]
Because of our resolution of the preemption issue, it is not
necessary for us to consider whether the statute may be saved from
invalidation under the doctrine of
Parker v. Brown,
317 U. S. 341
(1943), or under the Twenty-first Amendment.
[
Footnote 10]
Section 5(a) provides:
"It shall be unlawful for any person engaged in business as a
distiller, brewer, rectifier, blender, or other producer, or as an
importer or wholesaler, of distilled spirits, wine, or malt
beverages, or as a bottler, or warehouseman and bottler, of
distilled spirits, directly or indirectly or through an
affiliate:"
"(a) Exclusive outlet"
"To require, by agreement or otherwise, that any retailer
engaged in the sale of distilled spirits, wine, or malt beverages,
purchase any such products from such person to the exclusion in
whole or in part of distilled spirits, wine, or malt beverages sold
or offered for sale by other persons in interstate or foreign
commerce, if such requirement is made in the course of interstate
or foreign commerce, or if such person engages in such practice to
such an extent as substantially to restrain or prevent transactions
in interstate or foreign commerce in any such products, or if the
direct effect of such requirement is to prevent, deter, hinder, or
restrict other persons from selling or offering for sale any such
products to such retailer in interstate or foreign commerce."
27 U.S.C. § 205(a).
[
Footnote 11]
See 27 CFR §§ 8.3, 8.11, 8.23 (1982).
JUSTICE STEVENS, with whom JUSTICE WHITE joins, concurring in
the judgment.
Under the California designation statute, each distiller is
empowered to decide whether to regulate its product distribution
within California by designating those importers that may sell its
product. The statute contemplates a private market decision, but
provides a nonmarket mechanism for enforcing the decision. Hybrid
restraints of this character require analysis that is different
from a public regulatory scheme, on the one hand,
see, e.g.,
Exxon Corp. v. Governor of Maryland, 437 U.
S. 117;
Joseph E. Seagram & Sons, Inc. v.
Hostetter, 384 U. S. 35,
[
Footnote 2/1] and a purely private
restraint on
Page 458 U. S. 666
the other,
see, e.g., Continental T.V., Inc. v. GTE Sylvania
Inc., 433 U. S. 36;
Dr. Miles Medical Co. v. John D. Park & Sons Co.,
220 U. S. 373. We
have twice held that hybrid price-fixing restraints are prohibited
by the Sherman Act.
Schwegmann Bros. v. Calvert Distillers
Corp., 341 U. S. 384;
California Retail Liquor Dealers Assn. v. Midcal Aluminum,
Inc., 445 U. S. 97. In
both cases, the private decision to fix prices was unsupervised by
the State, but made effective by state law.
The facts of
Schwegmann, involving the Louisiana
marketing practices of two out-of-state distributors of gin and
whiskey, are particularly instructive. The distributors sought to
control the retail prices of their products by obtaining from
individual retailers a written agreement that they would comply
with the minimum retail price schedules established by the
distributors. These resale price maintenance agreements, which
otherwise violated the Sherman Act, were rendered lawful by the
Miller-Tydings Act and a Louisiana fair trade law. But a New
Orleans retailer refused to sign such an agreement, and sold the
distributors' products at cut-rate prices. The distributors
responded by seeking to enjoin the retailer from selling the
products at less than the minimum prices fixed by their schedules.
The basis for their complaint was a Louisiana statute that
condemned as unfair competition a sale at less than the price
stipulated in a fair trade contract, even though the particular
retailer was not a party to that contract. This Court held that the
Sherman Act, as amended by the Miller-Tydings Act, precluded
enforcement of the nonsigner provision.
Even though the private agreements to fix resale prices were not
unlawful, Schwegmann held that the distributor could not place the
same restraint on the market by using the
Page 458 U. S. 667
state statute as a "
club." 341 U.S. at
341 U. S. 395
(emphasis in original). The Court's holding teaches that a state
statute that facilitates the manufacturer's decision to impose a
vertical restriction is not lawful simply because the Sherman Act
permits the manufacturer, if it has sufficient power in the private
market, to impose that same restriction without the aid of the
statute. In other words, a statute that gives distributors
additional power over the wholesale or retail market to impose an
otherwise permissible restraint might not pass muster under the
Sherman Act. [
Footnote 2/2]
The inquiry in these cases therefore cannot simply be whether
the Sherman Act would have been violated had the distillers
obtained the control over their California distribution systems
without the aid of the designation statute. For the distillers'
power to impose resale restrictions on California importers has
been drastically affected first by the Oklahoma "open wholesaling"
and "free export" provisions and second by the California
designation statute enacted as a response to the Oklahoma laws. It
may be that the amount of distiller control over California
importers under the two statutes is not significantly greater than
the amount that would exist if neither State intervened in the
private market. Contrary to the Court's perception,
ante
at
458 U. S. 662,
[
Footnote 2/3] however, the
character of control is different. For the designation statute
Page 458 U. S. 668
gives the distillers direct authority over California importers,
[
Footnote 2/4] whereas, in the
private market, the distillers must persuade Oklahoma wholesalers
not to resell to California importers. It is possible that, absent
the state laws, the distillers would have insufficient market power
to obtain and enforce such agreements. The designation statute
therefore may give the distillers more power over California
importers than was taken away by the Oklahoma laws.
The validity of the designation statute obviously presents a
more difficult question than was presented in
Schwegmann
and
Midcal. [
Footnote 2/5]
For, in both cases, the Court had the benefit of a conclusive
presumption that resale price maintenance is anticompetitive. This
case, however, not only involves a species of vertical nonprice
restriction with respect to which there are no sure rules relating
to effect on competition; it also involves a nonmarket enforcement
mechanism that, according to
Schwegmann, can make the
difference between legality and illegality. The statute conceivably
could create such an unacceptable and unnecessary risk of
anticompetitive effect as to result in its invalidation. The
removal of the Oklahoma legal obstacle to the purely private
imposition of vertical restrictions in the California liquor market
significantly enhances this possibility.
Page 458 U. S. 669
I agree with the Court that our price-fixing cases do not
require the invalidation of the designation statute. The question
on remand should be whether the statute's provision to distillers
of an additional club over California importers affords distillers
an unreasonable degree of unsupervised power to regulate their
distribution practices that they would not otherwise enjoy under a
free market. Because that question cannot be determined without a
more sophisticated inquiry, I concur in the Court's judgment.
[
Footnote 2/1]
The Court states that
Seagram & Sons is "much like"
these cases.
Ante at
458 U. S. 662.
Except for the fact that
Seagram & Sons also involved
a facial challenge against a state statute, the two cases are quite
different. The New York statute involved in
Seagram &
Sons imposed a degree of public regulation of the market; it
did not grant liquor distributors a degree of private regulatory
power. The restraint on the market was, therefore, not of the
hybrid character that distinguishes these cases from most antitrust
cases.
[
Footnote 2/2]
Whereas
Schwegmann best illustrates the different
treatment accorded purely private restraints and hybrid restraints,
perhaps
Midcal best illustrates the different treatment
accorded hybrid restraints and public regulation of the market. In
Midcal, a California statute required distributors of wine
to file either fair trade contracts or price schedules with the
State. All California retailers were required to sell wine at the
price the distributors fixed. Relying upon
Schwegmann, the
Court invalidated the statute. Even though the State presumably
could regulate the wine market by fixing retail prices itself, it
could not empower private parties to undertake such regulation.
[
Footnote 2/3]
"Thus, California's designation statute merely restored what
Oklahoma had taken away: the distiller's ability to determine which
wholesalers may import its products into California."
[
Footnote 2/4]
Unless an importer is expressly designated, it may not lawfully
sell the distiller's products within California.
[
Footnote 2/5]
Under the Sherman Act, a manufacturer may choose the wholesalers
with whom it will do business. It may also place certain reasonable
restrictions on each wholesaler as a condition of doing business.
Continental T.V., Inc. v. GTE Sylvania Inc., 433 U. S.
36. Subject to the exception recognized in
United
States v. Colgate & Co., 250 U. S. 300, it
may not, however, dictate the price at which the wholesaler must
sell the product to retailers or to ultimate consumers.
Dr.
Miles Medical Co. v. John D. Park & Sons Co., 220 U.
S. 373. From these different rules governing the purely
private decisions of manufacturers, it follows that a state statute
that facilitates resale price maintenance and a state statute that
facilitates other vertical restrictions are also subject to
different antitrust analyses.