Rice v. Norman Williams Co., 458 U.S. 654 (1982)
Rice v. Norman Williams Co.
No. 80-1012
Argued April 21, 1982
Decided July 1, 1982 *
458 U.S. 654
CERTIORARI TO THE COURT OF APPEAL OF CALIFORNIA,
THIRD APPELLATE DISTRICT
Syllabus
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. 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 under the rule of reason, the statute cannot be condemned in the abstract. Pp. 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. 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. 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. 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. 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. 665.