United States v. McKesson & Robbins, Inc.

Background

The Government sued a large national drug wholesaler that also makes its own brand products after the company required independent wholesalers who compete with its own divisions to sign "fair trade" agreements fixing resale prices. The company sold through both its own wholesale divisions and independent wholesalers, and many independents accepted contracts requiring them to follow the company’s published wholesale and retail prices. The Government claimed those agreements were illegal price-fixing under the federal antitrust law (the Sherman Act).

Reasoning

The Court addressed whether two federal statutes that validate state "fair trade" resale-price laws (the Miller-Tydings and McGuire Acts) protect price-fixing agreements when the parties compete with each other. The Court read the statutes’ proviso to exclude from the exemption any contracts “between wholesalers” or any agreements “between persons, firms, or corporations in competition with each other.” Because the challenged agreements were between competing wholesalers (including the manufacturer-wholesaler), they were not exempt and the long-standing rule that price-fixing is illegal per se remained applicable. The Court reversed the dismissal below and sent the case back for further proceedings.

Real world impact

The decision means companies that both manufacture and wholesale branded goods cannot rely on state fair-trade protections to fix prices with independent rivals. The Government may continue antitrust enforcement against such agreements, and affected cases can return to trial for possible injunctions. This ruling limits the reach of resale-price exemptions when competition between parties exists.

Dissents or concurrances

A dissent argued the statutes were intended to let manufacturers protect brand goodwill by fixing resale prices and would have treated integrated manufacturers as acting in their manufacturer role, affirming the lower court.