Catalano, Inc. v. Target Sales, Inc.
64 L. Ed. 2d 580, 100 S. Ct. 1925 (1980)
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Rule of Law:
A horizontal agreement among competitors to eliminate the practice of extending interest-free credit is a form of price fixing and is therefore a per se violation of Section 1 of the Sherman Act.
Facts:
- Prior to 1967, competing beer wholesalers in the Fresno, California area extended interest-free trade credit to beer retailers.
- The terms of this credit varied among wholesalers and retailers, serving as a form of competition.
- The credit terms were permissible for up to 30 and 42 days under state law.
- In early 1967, the respondent wholesalers secretly agreed to stop competing on credit terms.
- Effective December 1967, the wholesalers implemented this agreement and uniformly began requiring retailers to pay for beer either in advance or upon delivery.
Procedural Posture:
- A class of beer retailers (Petitioners) sued several beer wholesalers (Respondents) in the U.S. District Court, alleging a conspiracy to fix credit terms in violation of the Sherman Act.
- Petitioners filed a motion in the trial court to declare the alleged agreement a per se illegal practice.
- The District Court denied the motion, finding the agreement should be analyzed under the rule of reason.
- The District Court certified the question for an immediate interlocutory appeal to the U.S. Court of Appeals for the Ninth Circuit.
- The Court of Appeals granted the appeal and affirmed the District Court's decision, with one judge dissenting.
- The retailers (Petitioners) then petitioned the U.S. Supreme Court for a writ of certiorari.
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Issue:
Does a horizontal agreement among competitors to eliminate the practice of extending interest-free credit to purchasers constitute a per se violation of Section 1 of the Sherman Act?
Opinions:
Majority - Per Curiam
Yes, a horizontal agreement among competitors to eliminate the practice of extending interest-free credit constitutes a per se violation of Section 1 of the Sherman Act. The court reasoned that extending interest-free credit is functionally equivalent to giving a discount on the price of a good, equal to the value of using the purchase price for that period. Therefore, credit terms are an inseparable part of the price. An agreement to eliminate this form of discount is tantamount to an agreement to fix a component of the price, which falls squarely within the category of agreements that are illegal per se. The court rejected the lower court's justifications that the agreement could enhance competition by removing barriers to entry or increasing price visibility, noting that such arguments could be used to defend any price-fixing arrangement and are inconsistent with established precedent like United States v. Socony-Vacuum Oil Co., which holds that any combination formed to fix, peg, or stabilize prices is illegal per se.
Analysis:
This decision clarifies that the concept of 'price' under the Sherman Act is broad and includes not just the stated invoice price but also ancillary terms of a transaction, such as credit. By categorizing an agreement on credit terms as per se illegal price fixing, the Court reinforced the rigidity of the per se rule and limited the ability of defendants to offer pro-competitive justifications for such horizontal restraints. The ruling signals to businesses that any form of collusion on terms that are an element of price competition will be treated as a hardcore antitrust violation, without inquiry into the actual market effects.
