Monsanto Co. v. Spray-Rite Svc. Corp., 465 U.S. 752 (1984)

Monsanto Co. v. Spray-Rite Service Corp.

No. 82-914

Argued December 5, 1983
Decided March 20, 1984
465 U.S. 752

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

From 1957 to 1968, respondent, a wholesale distributor of agricultural chemicals that engaged in a discount operation, sold agricultural herbicides manufactured by petitioner. In 1968, petitioner refused to renew respondent’s 1-year distributorship term, and thereafter respondent was unable to purchase from other distributors as much of petitioner’s products as it desired or as early in the season as it needed them. Respondent ultimately brought suit in Federal District Court under § 1 of the Sherman Act, alleging that petitioner and some of its distributors conspired to fix the resale prices of petitioner’s products and that petitioner had terminated respondent’s distributorship in furtherance of the conspiracy. Petitioner denied the allegations of conspiracy, and asserted that respondent’s distributorship had been terminated because of its failure to hire trained salesmen and promote sales to dealers adequately. The District Court instructed the jury that petitioner’s conduct was per se unlawful if it was in furtherance of a price-fixing conspiracy. In answers to special interrogatories, the jury found, inter alia, that the termination of respondent’s distributorship was pursuant to a price-fixing conspiracy between petitioner and one or more of its distributors. The Court of Appeals affirmed, holding that there was sufficient evidence to satisfy respondent’s burden of proving a conspiracy to set resale prices. It noted evidence of numerous complaints to petitioner from competing distributors about respondent’s price-cutting practices. In substance, the court held that an antitrust plaintiff can survive a motion for a directed verdict if it shows that a manufacturer terminated a price-cutting distributor in response to or following complaints by other distributors.

Held:

1. The Court of Appeals applied an incorrect standard of proof to the evidence in this case. A basic distinction in any distributor termination case is that between concerted action of the manufacturer and other distributors, which is proscribed by the Sherman Act, and independent action of the manufacturer, which is not proscribed. United States v. Colgate & Co., 250 U.S. 300. A second important distinction in such cases is that between concerted action to set prices, which is per se illegal, and concerted action on nonprice restrictions, which is judged under the rule of reason. See Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36. Permitting a price-fixing agreement to be inferred from the existence of complaints from other distributors, or even from the fact that termination came about "in response to" complaints, could deter or penalize perfectly legitimate conduct. Thus, something more than evidence of complaints is needed. The correct standard is that there must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently. That is, there must be direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others had a conscious commitment to a common scheme designed to achieve an unlawful objective. Pp. 760-764.

2. Under the proper standard of proof, the evidence in this case created a jury issue as to whether respondent was terminated pursuant to a price-fixing conspiracy between petitioner and its distributors. Accordingly, the Court of Appeals’ judgment is affirmed. Pp. 765-768.

(a) There was sufficient evidence for the jury reasonably to have concluded that petitioner and some of its distributors were parties to an "agreement" or "conspiracy" to maintain resale prices and terminate price-cutters. Pp. 765-766.

(b) It also would be reasonable to find that respondent’s termination was part of or pursuant to that agreement, since it is necessary for competing distributors contemplating compliance with suggested prices to know that those who do not comply will be terminated. Moreover, there is some circumstantial evidence of such a link. Pp. 767-768.

684 F.2d 1226, affirmed.

POWELL, J., delivered the opinion of the Court, in which all other Members joined, except WHITE, J., who took no part in the consideration or decision of the case. BRENNAN, J., filed a concurring opinion, post, p. 769.