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Eastern States Retail Lumber Dealers' Ass'n v. United States

Supreme Court of the United States
34 S. Ct. 951, 1914 U.S. LEXIS 1112, 234 U.S. 600 (1914)
ELI5:

Rule of Law:

The circulation of a report among members of a trade association that identifies individuals or businesses who are not complying with the association's preferred business practices, with the intent and effect of causing members to refuse to deal with those listed, constitutes a conspiracy in restraint of trade under the Sherman Act, even without an explicit agreement to boycott.


Facts:

  • Associations of retail lumber dealers were established across several northeastern states.
  • Wholesale lumber dealers began selling lumber directly to consumers, thereby competing with the members of the retail associations.
  • The retail associations sought to prevent this direct competition from wholesalers, which they viewed as an infringement on their local trade.
  • The associations created and confidentially circulated among their members a document known as the 'Official Report.'
  • This 'Official Report' listed the names and addresses of wholesale dealers who had been reported for selling lumber directly to consumers.
  • Association members were encouraged to report any instances of wholesalers selling to consumers and to provide specific details about the transactions.
  • The purpose and natural consequence of circulating the list was to cause retail members to withhold their patronage from the listed wholesalers.

Procedural Posture:

  • The United States brought an action in the U.S. District Court for the Southern District of New York against various retail lumber dealer associations.
  • The government sought an injunction, alleging the associations had formed a conspiracy in violation of the Sherman Anti-Trust Act.
  • The District Court found in favor of the United States and entered a decree declaring the defendants were engaged in a conspiracy to restrain competition.
  • The District Court's decree enjoined the associations from distributing the 'Official Report' or any similar device.
  • The defendant lumber associations (appellants) appealed the District Court's decree to the Supreme Court of the United States.

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Issue:

Does the collective circulation of a report by an association of retailers, identifying wholesalers who sell directly to consumers, for the purpose of encouraging members to boycott those wholesalers, constitute a conspiracy in restraint of trade in violation of the Sherman Act?


Opinions:

Majority - Mr. Justice Day

Yes. The collective circulation of the 'Official Report' constitutes an illegal conspiracy that restrains interstate trade in violation of the Sherman Act. While an individual retailer has the right to refuse to deal with any wholesaler for his own reasons, a combination of retailers acting in concert to achieve this end through coercive means is illegal. The conspiracy does not need to be proven by direct evidence of an agreement; it can be inferred from the actions taken and their natural consequences. By circulating this blacklist, the associations intended to, and did, induce their members to collectively withhold patronage from the listed wholesalers, thereby unduly suppressing competition and obstructing the free flow of commerce.



Analysis:

This case is significant for establishing that circumstantial evidence is sufficient to prove an illegal conspiracy under the Sherman Act. The court held that an information-sharing arrangement, even without a formal agreement to boycott, can be deemed an unlawful restraint of trade if its purpose and effect are anticompetitive. This decision broadened the scope of illegal conspiracies to include implicit agreements and concerted actions, making it a foundational case in antitrust law regarding group boycotts and the activities of trade associations. It serves as a warning that associations cannot use the exchange of information as a cover for coordinating anticompetitive behavior.

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