Schwegmann Bros. v. Calvert Distillers Corp. , 71 S. Ct. 745 ( 1951 )

Mr. Justice Douglas

delivered the opinion of the Court.

Respondents, Maryland and Delaware corporations, are distributors of gin and whiskey. They sell their products to wholesalers in Louisiana, who in turn sell to retailers. Respondents have a price-fixing scheme whereby they try to maintain uniform retail prices for their products. They endeavor to make retailers sign price-fixing contracts under which the buyers promise to sell at not less than the prices stated in respondents’ schedules. They have indeed succeeded in getting over one hundred Louisiana retailers to sign these agreements. Petitioner, a retailer in New Orleans, refused to agree to the price-fixing scheme and sold respondents’ products at a cut-rate price. Respondents thereupon brought this suit in the District Court by reason of diversity of citizenship to enjoin petitioner from selling the products at less than the minimum prices fixed by their schedules.

It is clear from our decisions under the Sherman Act (26 Stat. 209) that this interstate marketing arrangement would be illegal, that it would be enjoined, that it would draw civil and criminal penalties, and that no court would enforce it. Fixing minimum prices, like other types of price fixing, is illegal per se. United States v. Socony-Vacuum Oil Co., 310 U. S. 150; Kiefer-Stewart Co. v. Seagram & Sons, 340 U. S. 211. Resale price maintenance was indeed struck down in Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373. The fact that a state authorizes the price fixing does not, of course, give immunity to the scheme, absent approval by Congress.

Respondents, however, seek to find legality for this marketing arrangement in the Miller-Tydings Act enacted in 1937 as an amendment to § 1 of the Sherman Act. 50 Stat. 693, 15 U. S. C. § 1. That amendment provides in material part that “nothing herein contained shall render illegal, contracts or agreements prescribing minimum prices for the resale” of specified commodities when “contracts or agreements of that description are lawful as applied to intrastate transactions” under local law.¹ (Italics added.)

Louisiana has such a law. La. Gen. Stat., §§ 9809.1 et seq. It permits a “contract” for the sale or resale of a commodity to provide that the buyer will not resell “except at the price stipulated by the vendor.” The Louisiana statute goes further. It not only allows a distributor and retailer to make a “contract” fixing the resale price; but once there is a price-fixing “contract,” known to a seller, with any retailer in the state, it also condemns as unfair competition a sale at less than the price stipulated even though the seller is not a party to the “contract.”² In other words, the Louisiana statute enforces price fixing not only against parties to a “contract” but also against nonsigners. So far as Louisiana law is concerned, price fixing can be enforced against all retailers once any single retailer agrees with a distributor on the resale price. And the argument is that the Miller-Tydings Act permits the same range of price fixing.

The argument is phrased as follows: the present action is outlawed by the Sherman Act — the Miller-Tydings Act apart — only if it is a contract, combination, or conspiracy in restraint of trade. But if a contract or agreement is the vice, then by the terms of the Miller-Tydings Act that contract or agreement is immunized, provided it is immunized by state law. The same is true if the vice is a conspiracy, since a conspiracy presupposes an agreement. That was in essence the view of the Court of Appeals, which affirmed by a divided vote a judgment of a district court enjoining petitioner from price cutting. 184 F. 2d 11.

The argument at first blush has appeal. But we think it offends the statutory scheme.

We note to begin with that there are critical differences between Louisiana’s law and the Miller-Tydings Act. The latter exempts only “contracts or agreements prescribing minimum prices for the resale.” On the other hand, the Louisiana law sanctions the fixing of maximum as well as minimum prices, for it exempts any provision that the buyer will not resell “except at the price stipulated by the vendor.” We start then with a federal act which does not, as respondents suggest, turn over to the states the handling of the whole problem of resale price maintenance on this type of commodity. What is granted is a limited immunity — a limitation that is further emphasized by the inclusion in the state law and the exclusion from the federal law of the nonsigner provision. The omission of the nonsigner provision from the federal law is fatal to respondents’ position unless we are to perform a distinct legislative function by reading into the Act a provision that was meticulously omitted from it.

A refusal to read the nonsigner provision into the Miller-Tydings Act makes sense if we are to take the words of the statute in their normal and customary meaning. The Act sanctions only “contracts or agreements.” If a distributor and one or more retailers want to agree, combine, or conspire to fix a minimum price, they can do so if state law permits. Their contract, combination, or conspiracy — hitherto illegal — is made lawful. They can fix minimum prices pursuant to their contract or agreement with impunity. When they seek, however, to impose price fixing on persons who have not contracted or agreed to the scheme, the situation is vastly different. That is not price fixing by contract or agreement; that is price fixing by compulsion. That is not following the path of consensual agreement; that is resort to coercion.

Much argument is made to import into the contracts which respondents make with retailers a provision that the parties may force nonsigners into line. It is said that state law attaches that condition to every such contract and that therefore the Miller-Tydings Act exempts it from the Sherman Act. Such a condition, if implied, creates an agreement respecting not sales made under the contract but other sales. Yet all that are exempted by the Miller-Tydings Act are “contracts or agreements prescribing minimum prices for the resale” of the articles purchased, not “contracts or agreements” respecting the practices of noncontracting competitors of the contracting retailers.

It should be noted in this connection that the Miller-Tydings Act expressly continues the prohibitions of the Sherman Act against “horizontal” price fixing by those in competition with each other at the same functional level.³ Therefore, when a state compels retailers to follow a parallel price policy, it demands private conduct which the Sherman Act forbids. See Parker v. Brown, 317 U. S. 341, 350. Elimination of price competition at the retail level may, of course, lawfully result if a distributor successfully negotiates individual “vertical” agreements with all his retailers. But when retailers are forced to abandon price competition, they are driven into a compact in violation of the spirit of the proviso which forbids “horizontal” price fixing. A real sanction can be given the prohibitions of the proviso only if the price maintenance power granted a distributor is limited to voluntary engagements. Otherwise, the exception swallows the proviso and destroys its practical effectiveness.

The contrary conclusion would have a vast and devastating effect on Sherman Act policies. If it were adopted, once a distributor executed a contract with a single retailer setting the minimum resale price for a commodity in the state, all other retailers could be forced into line. Had Congress desired to eliminate the consensual element from the arrangement and to permit blanketing a state with resale price fixing if only one retailer wanted it, we feel that different measures would have been adopted — either a nonsigner provision would have been included or resale price fixing would have been authorized without more. Certainly the words used connote a voluntary scheme. Contracts or agreements convey the idea of a cooperative arrangement, not a program whereby recalcitrants are dragged in by the heels and compelled to submit to price fixing.

The history of the Act supports this construction. The efforts to override the rule of Dr. Miles Medical Co. v. Park & Sons Co., supra, were long and persistent. Many bills had been introduced on this subject before Senator Tydings introduced his. Thus in 1929, in the Seventy-First Congress, the Capper-Kelly fair trade bill was offered.⁴ It had no nonsigner provision. It merely permitted resale price maintenance as respects specified classes of commodities by declaring that no such “contract relating to the sale or resale” shall be unlawful. As stated in the House Report, that bill merely legalized an agreement “that the vendee will not resell the commodity specified in the contract except at a stipulated price.”⁵ That bill became the model for the California act passed in 1931 — the first state act permitting resale price maintenance.⁶ The California act contained no non-signer clause. Neither did the Capper-Kelly bill that was introduced in the Seventy-Second Congress.⁷ So far as material here it was identical with its predecessor.

The Capper-Kelly bill did not pass. And by the time the next bill was introduced — three years later — the California act had been changed by the addition of the non-signer provision.⁸ That was in 1933. Yet when in 1936 Senator Tydings introduced his first bill in the Seventy-Fourth Congress⁹ he followed substantially the Capper-Kelly bills and wrote no nonsigner provision into it. His bill merely legalized “contracts or agreements prescribing minimum prices or other conditions for the resale” of a commodity. By this date several additional states had resale price maintenance laws with nonsigner provisions.¹⁰ Even though the state laws were the models for the federal bills, the nonsigner provision was never added. That was true of the bill introduced in the Seventy-Fifth Congress as well as the subsequent one. They all followed in this respect the pattern of the Capper-Kelly bill as it appeared before the first nonsigner provision was written into state law. The “contract” concept utilized by Cap-per-Kelly before there was a nonsigner provision in state law was thus continued even after the nonsigner provision appeared. The inference, therefore, is strong that there was continuity between the first Tydings bill and the preceding Capper-Kelly bills. The Tydings bills built on the same foundation; they were no more concerned with nonsigner provisions than were their predecessors. In view of this history we can only conclude that, if the draftsman intended that the nonsigning retailer was to be coerced, it was strange indeed that he omitted the one clear provision that would have accomplished that result.

An argument is made from the reports and debates to the effect that “contracts or agreements” nevertheless includes the nonsigner provisions of state law. The Senate Report on the first Tydings bill, after stating that the California law authorized a distributor “to make a contract that the purchaser will not resell” except at the stipulated price, said that the proposed federal law “does no more than to remove Federal obstacles to the enforcement of contracts which the States themselves have declared lawful.”¹¹ The Senate Report on the second Tydings bill, which was introduced in the Seventy-fifth Congress, did little more than reprint the earlier report.¹² The House Report, heavily relied on here, gave a more extended analysis.¹³

The House Report referred to the state fair trade acts as authorizing the maintenance of resale prices by contract and as providing that “third parties with notice are bound by the terms of such a contract regardless of whether they are parties to it”; and the Report also stated that the objective of the Act was to permit the public policy of the states having such acts to operate with respect to interstate contracts for the sale of goods.¹⁴ This Report is the strongest statement for respondents’ position which is found in the legislative history. The bill which that Report endorsed, however, did not pass. The bill which became the law was attached by the Senate Committee on the District of Columbia as a rider to the District of Columbia revenue bill. In that form it was debated and passed.

It is true that the House Report quoted above¹⁵ was referred to when the Senate amendment to the revenue measure was before the House.¹⁶ And one Congressman in the debate said that the nonsigner provision of state laws was validated by the federal law.

But we do not take these remarks at face value. In the first place, the House Report, while referring to the non-signer provision when describing a typical state fair trade act, is so drafted that the voluntary contract is the core of the argument for the bill. Hence, the General Statement in the Report states that the sole objective of the Act was “to permit the public policy of States having ‘fair trade acts’ to operate with respect to interstate contracts for the resale of goods”; and the fair trade acts are referred to as legalizing “the maintenance, by contract, of resale prices of branded or trade-marked goods.”¹⁷ (Italics added.)

In the second place, the remarks relied on were not only about a bill on which no vote was taken; they were about a bill which sanctioned “contracts or agreements” prescribing not only “minimum prices” but “other conditions” as well. The words “other conditions” were dropped from the amendment that was made to the revenue bill. Why they were deleted does not appear. It is said that they have no relevance to the present problem, since we are dealing here with “minimum prices” not with “other conditions.” But that answer does not quite hold. The question is the amount of state law embraced in the words “contracts or agreements.” It might well be argued that one of the “conditions” attaching to a contract fixing a minimum price would be the liability of a nonsigner. We do no more than stir the doubt, for the doubt alone is enough to make us skeptical of the full implications of the old report as applied to a new and different bill.

We look for more definite clues; and we find the following statement made on the floor by Senator Tydings: “What does the amendment do? It permits a man who manufactures an article to state the minimum resale price of the article in a contract with the man who buys it for ultimate resale to the public . . . .”¹⁸ Not once did Senator Tydings refer to the nonsigner provisions of state law. Not once did he suggest that the amendment would affect anyone but the retailer who signs the contract. We search the words of the sponsors for a clear indication that coercive as well as voluntary schemes or arrangements are permissible. We find none.¹⁹ What we do find is the expression of fear in the minority report of the Senate Committee that the nonsigner provisions of the state laws would be made effective if the law passed.²⁰ These fears were presented in the Senate debate by Senator King in opposition to the amendment.²¹ But the Senate Report emphasizes the “permissive” nature of the state laws,²² not once pointing to their coercive features.

The fears and doubts of the opposition are no authoritative guide to the construction of legislation. It is the sponsors that we look to when the meaning of the statutory words is in doubt. And when we read what the sponsors wrote and said about the amendment, we cannot find that the distributors were to have the right to use not only a contract to fix retail prices but a club as well. The words they used — “contracts or agreements” — suggest just the contrary.

It should be remembered that it was the state laws that the federal law was designed to accommodate. Federal regulation was to give way to state regulation. When state regulation provided for resale price maintenance by both those who contracted and those who did not, and the federal regulation was relaxed only as respects “contracts or agreements,” the inference is strong that Congress left the noncontracting group to be governed by preexisting law. In other words, since Congress was writing a law to meet the specifications of state law, it would seem that if the nonsigner provision as well as the “contract” provision of state law were to be written into federal law, the pattern of the legislation would have been different.

We could conclude that Congress carved out the vast exception from the Sherman Act now claimed only if we were willing to assume that it took a devious route and yet failed to make its purpose plain.

Reversed.

1 Resale price maintenance is allowed only as respects commodities which bear, or the label or container of which bear, the trade mark, brand, or name of the producer or distributor and which are in free and open competition with commodities of the same general class produced or distributed by others. Excluded are agreements between manufacturers, between producers, between wholesalers, between brokers, between factors, between retailers or between persons, firms or corporations in competition with each other.

2 The nonsigner clause in the Louisiana Act reads as follows: “Wil-fully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provision of section 1 [§ 9809.1] of this act, whether the person so advertising, offering jor sale or selling is or is not a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby.”

3 “Provided further, That the preceding proviso shall not make lawful any contract or agreement, providing for the establishment or maintenance of minimum resale prices on any commodity herein involved, between manufacturers, or between producers, or between wholesalers, ... or between retailers, or between persons, firms, or corporations in competition with each other.” 15 U. S. C. § 1.

4 S. 240, 71st Cong., 1st Sess.; H. R. 11, 71st Cong., 1st Sess. See H. R. Rep. No. 536, 71st Cong., 2d Sess.

5 H. R. Rep. No. 536,71st Cong., 2d Sess. 2.

6 Cal. Stat., 1931, c. 278. The California Act was sometimes known as “the Junior Capper-Kelly.” See Grether, Price Control Under Fair Trade Legislation (1939), p. 54.

7 S. 97, 72d Cong., 1st Sess.; H. R. 11, 72d Cong., 1st Sess.

8 Cal. Stat., 1933, c. 260: The California law is now found in Business & Professions Code, Pt. 2, c. 3, § 16904.

9 S. 3822, 74th Cong., 2d Sess., 80 Cong. Rec. 1007.

10 See Ill. Laws 1935, p. 1436; Iowa Laws 1935, c. 106; Md. Laws 1935, c. 212, §2; N. J. Laws 1935, c. 58, §2; N. Y. Laws 1935, c. 976, §2; Ore. Laws 1935, c. 295, §2; Pa. Laws 1935, No. 115, §2; Wash. Laws 1935, c. 177, § 4; Wis. Laws 1935, e. 52.

11 S. Rep. No. 2053,74th Cong., 2d Sess. 2.

12 S. Rep. No. 257,75th Cong., 1st Sess.

13 H. R. Rep. No. 382,75th Cong., 1st Sess.

14 M, p. 2.

15 Id.

16 See, e. g., the statement of Rep. Dirksen, a House conferee, in 81 Cong. Rec. 8138.

17 H. R. Rep. No. 382,75th Cong., 1st Sess. 2.

18 81 Cong. Ree. 7495.

19 H. R. Rep. No. 1413, 75th Cong., 1st Sess. 10 (the Conference Report of the House) merely stated: “This amendment provides for an amendment to the antitrust laws under which contracts and agreements stipulating minimum resale prices of certain commodities, and which are similar to contracts and agreements which are lawful as applied to intrastate commerce, are not to be regarded as being illegal under the antitrust laws.”

20 S. Rep. No. 879, 75th Cong., 1st Sess.

21 81 Cong. Rec. 7491. And see S. Rep. No. 879, Part 2, 75th Cong., 1st Sess.

22 S. Rep. No. 879,75th Cong., 1st Sess. 6.