Albrecht v. Herald Co.
1968 U.S. LEXIS 3126, 390 U.S. 145, 88 S. Ct. 869 (1968)
Rule of Law:
It is a per se violation of Section 1 of the Sherman Act for a seller to combine with others, through actions beyond simple announcement and refusal to deal, to fix maximum resale prices for its product.
Facts:
- The Herald Co. (respondent) publishes the Globe-Democrat and distributes it through independent carriers, who buy papers wholesale and sell them at retail in exclusive territories.
- The Herald Co. advertises a suggested retail price for its newspaper, and carriers' exclusive territories were subject to termination if prices exceeded this maximum.
- Albrecht (petitioner), a carrier on Route 99, raised his retail price to customers in 1961, exceeding the Herald Co.'s suggested maximum.
- After objecting to Albrecht's pricing, the Herald Co. began informing Albrecht's subscribers by letter that it would deliver the paper itself at the lower, suggested price.
- The Herald Co. further hired Milne Circulation Sales, Inc. to solicit all residents on Route 99, resulting in about 300 of Albrecht's 1,200 customers switching to direct delivery by the Herald Co.
- The Herald Co. then created a new route of 314 customers from Route 99 and assigned it to George Kroner, who understood that the Herald Co. would not tolerate overcharging and that he might have to return the route if Albrecht complied.
- The Herald Co. offered to return Albrecht's customers if he would charge the suggested price.
- Albrecht filed a lawsuit, after which his carrier appointment was terminated, and he sold his route for less than he could have received with his full customer base.
Procedural Posture:
- Albrecht sued Herald Co. in District Court for treble damages for violation of Section 1 of the Sherman Act.
- Albrecht’s complaint was amended to charge only a combination between Herald Co. and "plaintiff’s customers and/or Milne Circulation Sales, Inc. and/or George Kroner."
- A jury in the District Court returned a verdict for Herald Co.
- The District Court denied Albrecht's motion for judgment notwithstanding the verdict.
- The Court of Appeals for the Eighth Circuit affirmed the District Court's judgment, finding Herald Co.'s conduct wholly unilateral and that there was no restraint of trade.
- The Supreme Court granted certiorari.
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Issue:
Does a newspaper publisher's actions, which involve soliciting customers away from a carrier who exceeds a suggested maximum retail price and assigning those customers to a new carrier who agrees to adhere to the suggested price, constitute an illegal combination to fix maximum resale prices in violation of Section 1 of the Sherman Act?
Opinions:
Majority - Mr. Justice White
Yes, the newspaper publisher's actions constituted an illegal combination to fix maximum resale prices in violation of Section 1 of the Sherman Act. The Court found that the Herald Co.'s conduct was not wholly unilateral but formed a combination. Citing United States v. Parke, Davis & Co., an illegal combination to fix prices arises if a seller suggests resale prices and secures compliance by means in addition to the "mere announcement of his policy and the simple refusal to deal." Here, the Herald Co. went beyond mere refusal to deal by hiring Milne Circulation Sales, Inc. to solicit customers away from Albrecht and by enlisting George Kroner to take over those customers, with both Milne and Kroner aware of the goal to force Albrecht to lower his price. This established a combination between the Herald Co., Milne, and Kroner. Furthermore, the Court reaffirmed that maximum price fixing, like minimum price fixing, is a per se violation of Section 1 of the Sherman Act, citing Kiefer-Stewart Co. v. Seagram & Sons. Maximum price fixing "cripples the freedom of traders," "may severely intrude upon the ability of buyers to compete and survive," "may be fixed too low for the dealer to furnish essential services," and "may channel distribution through a few large or specifically advantaged dealers." The argument that exclusive territories justified price ceilings to protect the public from gouging was rejected because the legality of the exclusive territories themselves was not at issue, and the assertion that illegal price fixing is justified by another distribution practice is unpersuasive; if the exclusive territories were indeed problematic, the entire scheme would fall under Section 1 of the Sherman Act.
Concurring - Mr. Justice Douglas
Yes, the Court's opinion correctly identifies the actions as an illegal restraint, but clarifies the scope. Justice Douglas joined the majority but emphasized that while resale price fixing is "conspicuously unreasonable" and thus a per se violation, the legality of exclusive territorial franchises in the newspaper distribution business would need to be tried as a factual issue under the "rule of reason." He noted that the Court properly declined to rule on the per se illegality of exclusive territorial franchises in this case. The specific nature of Albrecht's business, which resembled a large retail enterprise rather than a traditional newspaper boy, underscored that the impact of such arrangements on competition would require detailed factual findings, consistent with White Motor Co. v. United States.
Dissenting - Mr. Justice Harlan
No, the publisher's actions should not be found to be an illegal combination to fix maximum resale prices under the Sherman Act because maximum price ceilings are economically distinct from minimum price floors, and the 'combination' here was not substantial. Justice Harlan argued that genuine price "ceilings" (maximum prices) are economically different from minimum prices. He contended that a combination should not be inferred from the vertical dictation of a maximum price in the same way it might be for a minimum price, because a manufacturer dictating a price ceiling acts in its own economic interest (to achieve the lowest overall price and largest volume), rather than as a mechanism for resellers' anti-competitive purposes. Price ceilings, he asserted, do not lessen horizontal competition but drive prices toward competitive levels and can prevent retailers from reaping monopoly profits. He found the Court's "combination" theory flawed, stating that Milne Circulation Sales, Inc. and George Kroner were merely hired hands, not parties with a special interest in setting a price ceiling, making the Herald Co.'s activity essentially unilateral. He also dismissed the idea of a combination with other carriers or with Albrecht himself. He argued that Kiefer-Stewart Co. involved a horizontal combination of manufacturers, which is not present here. Furthermore, he stated that the Court unpersuasively rejected the defense that price ceilings were necessary to blunt the pernicious consequences of territorial exclusivity; the Court should have allowed evidence on this justification rather than applying a per se rule.
Dissenting - Mr. Justice Stewart
No, the publisher's actions should not result in antitrust liability, especially given the premise that exclusive territories were permissible. Justice Stewart found the majority's decision inexplicable, given that the case was litigated on the premise that exclusive territories were permissible. He argued that Albrecht was a monopolist within his own territory, and the Herald Co.'s actions were pro-competitive, protecting householders from Albrecht's monopoly position by introducing competition when he exceeded the suggested maximum price. He distinguished Kiefer-Stewart Co. and United States v. Parke, Davis & Co. as not involving monopoly products distributed through exclusive territories. He contended that if Albrecht's conditional monopoly (with the price ceiling) was illegal, it is illogical to hold the Herald Co. liable for not allowing him a complete monopoly. He concluded that the Court departed from the rule of reason and effectively stood the Sherman Act on its head.
Analysis:
This case significantly extended the per se rule against price fixing to explicitly include maximum resale price fixing, treating it identically to minimum price fixing. It clarified that a "combination" under Section 1 of the Sherman Act can be established not only by explicit agreement but also by a seller's active steps beyond mere announcement and refusal to deal, such as enlisting third parties to enforce a price policy. The case highlights the ongoing judicial debate between per se rules and the rule of reason in antitrust, with the dissenting opinions arguing for a more nuanced economic analysis of maximum price restraints and their potential pro-competitive effects in certain market conditions, particularly where distributors may have local monopoly power due to exclusive territories.
