noting that “state compulsion of individual action is the very antithesis of an agreement, and the argument that an agreement could have been inferred if the wholesalers had voluntarily done what they have been compelled to do is simply too ‘iffy’ ”
How later courts described this case
- noting that “state compulsion of individual action is the very antithesis of an agreement, and the argument that an agreement could have been inferred if the wholesalers had voluntarily done what they have been compelled to do is simply too ‘iffy’ ”
- evaluating state action immunity as alternative holding of district court, but declining to rule on it; citing two part Midcal test as applicable standard
- mere exchange of price information is not itself violative of the antitrust laws
Written by the judges who cited it.
The opinion
WINTER, Circuit Judge,
dissenting:
I respectfully dissent. I disagree with the majority’s conclusion that the arrangements mandated by the New York legislation in question would not be per se violations of Section 1 of the Sherman Act if solely the result of an agreement among private firms. I therefore also take a different view of the application of California Retail Liquor Dealers Assn. v. Midcal Aluminum, 445 U.S. 97 , 100 S.Ct. 937 , 63 L.Ed.2d 233 (1980) and of the twenty-first amendment to this case.
It is true that arrangements that merely call for the exchange of price information are subject to rule of reason, rather than per se, analysis. United States v. Container Corp., 393 U.S. 333 , 89 S.Ct. 510 , 21 L.Ed.2d 526 (1969); Maple Flooring Manufacturers Assn. v. United States, 268 U.S. 563 , 45 S.Ct. 578 , 69 L.Ed. 1093 (1925); American Column & Lumber Co. v. United States, 257 U.S. 377 , 42 S.Ct. 114 , 66 L.Ed. 284 (1921). However, the challenged legislation not only mandates the exchange of price information but also requires adherence to publicly announced prices until thirty days after notice is given of a new price. A requirement of adherence to announced prices has been uniformly held illegal without regard to its reasonableness. Sugar Institute v. United States, 297 U.S. 553, 601 , 56 S.Ct. 629, 643 , 80 L.Ed. 859 (1936) (“steps ... to secure adherence, without deviation, to prices and terms ... announced” are illegal). The Supreme Court emphasized as recently as 1980 the “plain distinction between the lawful right to publish prices ... on the one hand, and an agreement among competitors limiting action with respect to the published prices, on the other.” Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 649-50 , 100 S.Ct. 1925, 1929 , 64 L.Ed.2d 580 (1980) (per curiam). See also United States v. Trans-Missouri Freight Association, 166 U.S. 290 , 17 S.Ct. 540 , 41 L.Ed. 1007 (1897). The arrangement in question thus would be per se illegal if accomplished solely through private agreement, and our decision, therefore, is governed by Midcal rather than by Rice v. Norman Williams Co., 458 U.S. 654 , 102 S.Ct. 3294 , 73 L.Ed.2d 1042 (1982). Indeed, to hold otherwise is to forbid states from authorizing resale price maintenance, the anticompeti-tive effect of which is the subject of great controversy, see R. Bork, The Antitrust Paradox 288-91 (1978), but to allow them to authorize horizontal price fixing, about which all agree.
I also do not share the majority’s concern that the arrangement here is compelled by law rather than achieved through private arrangement. The relevant issue under the supremacy clause has to do with the degree to which a state may bring about the very anti-competitive arrangements the Sherman Act was designed to avoid. Whether a state merely authorizes private parties to fix prices or compels them to do so may of course be relevant to the first part of the two-part Midcal test, namely whether the challenged restraint is “clearly articulated and affirmatively expressed as state policy.” 445 U.S. at 105 , 100 S.Ct. at 943 (quoting City of Lafayette v. Louisiana Power and Light Co., 435 U.S. 389, 410 , 98 S.Ct. 1123, 1135 , 55 L.Ed.2d 364 (1978)). Nevertheless, the fact that the state compels a private cartel offers no reason to exempt the legislation from scrutiny under the supremacy clause.
*180 I also conclude that the legislation in question fails the Midcal test. Although the policy of creating the cartel in question is surely “one clearly articulated and affirmatively expressed” by the state, the legislation fails to meet the second part of the Midcal test, namely that “the policy must be ‘actively supervised’ by the State itself.” 445 U.S. at 105 , 100 S.Ct. at 943 (quoting City of Lafayette v. Louisiana Power and Light Co., 435 U.S. at 410 , 98 S.Ct. at 1135 ). As was the case with the California legislation at issue in Midcal, New York does nothing whatsoever to establish the actual prices charged, review their reasonableness, monitor market conditions, or engage in reexamination of the program. As in Midcal, “[t]he national policy in favor of competition [is] thwarted by casting ... a gauzy cloak of state involvement over what is essentially a private price-fixing arrangement.” 445 U.S. at 106 , 100 S.Ct. at 943.
Our decision in Morgan v. Division of Liquor Control, 664 F.2d 353 (2d Cir.1981) is not to the contrary. In that case, we held that Connecticut legislation met the second part of the Midcal test because it set a floor for prices established by an express statutory formula and allowed free competition above that floor. In the present case, the only “monitoring” of the state program lies in the provision that responsive price changes cannot be lower than those announced by competitors. That provision, which heightens rather than monitors the anti-competitive impact of the legislation, hardly satisfies the second part of the Midcal test.
While I quite agree with Judge Friendly’s observations that we should not treat the twenty-first amendment as though it had no application at all to the present case, I do not perceive it to be of any great importance given my view of the New York legislation. Although the statute expresses a concern over the perils of cheap (competitively priced) liquor, the notion that this legislation was even remotely the result of political pressure exerted by aroused temperance groups is a quaint fiction. The self-evident purpose of the statute is to create a cartel of liquor wholesalers for their benefit. Although I believe that the twenty-first amendment allows a state to limit consumption of alcohol by causing its price to be high, I also believe that in such an instance a state must do something more than authorize a cartel of dealers to seek out their profit maximizing price/output level. The issue need not be elaborated in dissent beyond stating my view that where state legislation merely legislates a cartel of liquor dealers and plays no further role in determining prices and output, its self-evident purpose is not to protect the public from the evils of the demon rum, but to preserve the high standard of living of those who sell it. Since the twenty-first amendment was plainly designed only to allow the states to legislate against the evils of intoxicating liquors rather than to reward its purveyors, I see no room for its application in the present case.
I therefore dissent.