Grenada Lumber Co. v. Mississippi

Background

A large group of independent retail lumber merchants in Mississippi formed an association of seventy-seven members. They agreed not to buy from any manufacturer or wholesale dealer who sold directly to consumers in the merchants’ local trade areas and to inform one another of such sales. The State sued in equity to dissolve the association, and the Mississippi Supreme Court held the agreement to be a conspiracy in restraint of trade under the state statute.

Reasoning

The narrow question the U.S. Court considered was whether the state law, as applied to this association, unreasonably violated the Fourteenth Amendment’s protection of freedom of contract. The Court accepted the Mississippi court’s interpretation that a collective, agreed refusal to deal is different from an individual choice to refuse a supplier, and that many persons acting together may create a public harm. The Court treated the matter as intrastate commerce subject to the State’s police power and relied on earlier decisions saying the State may regulate secret arrangements that destroy local competition. Because the penalty section of the statute was not invoked, the Court did not rule on it.

Real world impact

The decision allows Mississippi to dissolve coordinated boycotts by merchants who jointly refuse to deal with suppliers that sell to consumers. Individual dealers remain free to choose suppliers, but coordinated agreements that suppress competition can be treated as illegal. The ruling is limited to the statute as interpreted and applied here and does not decide every possible application of similar laws.