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An agreement among competing wholesalers to refuse to sell unless the retailer makes payment in cash either in advance or upon delivery is "plainly anticompetitive." Since it is merely one form of price fixing, and since price-fixing agreements have been adjudged to lack any "redeeming virtue," it is conclusively presumed illegal without further examination under the rule of reason.
Retailers of beer in California brought an action in the United States District Court for the Eastern District of California alleging that certain wholesalers of beer had violated 1 of the Sherman Act (15 USCS 1) when they abandoned their prior practice of extending credit to their retailers without interest up to the limits permitted by California law and thereafter agreed to refuse to sell to retailers unless the retailers made payment in cash either in advance or upon delivery. After the District Court denied the plaintiffs' motion to declare the case one of per se illegality, the District Court certified to the United States Court of Appeals for the Ninth Circuit the question whether the alleged agreement among competitors fixing credit terms, if proven, was unlawful on its face. Granting permission to appeal, the Court of Appeals agreed with the District Court that a horizontal agreement among competitors to fix credit terms does not necessarily contravene the antitrust laws, the Court of Appeals suggesting that such an agreement might actually enhance competition by removing a barrier to sellers desiring to enter the market and by increasing the visibility of prices (605 F2d 1097).
Was the agreement among competing wholesalers requiring retailers to pay in cash in advance or upon delivery, violative of Sherman Act (15 USCS 1)?
The United States Supreme Court reversed a judgment that agreed with the district court that a horizontal agreement among competitors to fix credit terms did not necessarily contravene the antitrust laws. The case was remanded for further proceedings. The Court held that an agreement among competing wholesalers to refuse to sell unless the retailer made payment in cash either in advance or upon delivery was plainly anticompetitive. Because it was a form of price fixing, and since price-fixing agreements had been adjudged to lack any redeeming virtue, it was conclusively presumed illegal without further examination under the rule of reason. According to the Court, when a particular concerted activity entailed an obvious risk of anticompetitive impact with no apparent potentially redeeming value, the fact that a practice might turn out to be harmless in a particular set of circumstances would not prevent its being declared unlawful per se.