United States v. Sealy, Inc., 388 U.S. 350 (1967)

United States v. Sealy, Inc.

No. 9

Argued April 20, 1967
Decided June 12, 1967
388 U.S. 350

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

Syllabus

The United States brought this civil action for violation of § 1 of the Sherman Act against appellee, the owner of the trademarks for Sealy branded mattresses and bedding products which it licensed manufacturers in various parts of the country to produce and sell under a territorial allocation system. Sealy agreed with each licensee not to license anyone else to manufacture or sell in a designated area and the licensee agreed not to manufacture or sell Sealy products outside that area. The Sealy licensees own substantially all appellee’s stock and control its day-to-day operations, including the assignment and termination of the exclusive territorial licenses. Appellee was charged with conspiring with its licensees to fix the prices at which their retail customers might resell Sealy products and to allocate mutually exclusive territories among the licensees. The District Court after trial enjoined appellee from price-fixing, and no appeal was taken. It also ruled that Sealy’s allocation of territories to its licensees did not violate § 1, and the Government appealed from that holding.

Held:

1. The territorial allocations here are not vertical arrangements imposed by the licensor, but horizontal restraints arranged by the licensees.

Sealy was a joint venture of, by, and for its stockholder-licensees . . . and [they] are themselves directly, without even the semblance of insulation, in charge of Sealy’s operations.

White Motor Co. v. United States, 372 U.S. 253 (1963), distinguished. Pp. 352-354.

2. The territorial restraints were a part of the unlawful price-fixing and policing activities of Sealy operating as an instrumentality of the licensees and constituted "an aggregation of trade restraints" which was illegal per se. Pp. 354-358.

Reversed.