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Monsanto Co. v. Spray-Rite Serv. Corp. - 465 U.S. 752, 104 S. Ct. 1464 (1984)

Rule:

On a claim of concerted price fixing, something more than evidence of complaints is needed. There must be evidence that tends to exclude the possibility that the manufacturer and nonterminated distributors were acting independently. The antitrust plaintiff should present direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others had a conscious commitment to a common scheme designed to achieve an unlawful objective.

Facts:

From 1957 to 1968, Spray-Rite Service Corp. (Spray-Rite), a wholesale distributor of agricultural chemicals that engaged in a discount operation, sold agricultural herbicides manufactured by Monsanto Co. (Monsanto) In 1968, Monsanto refused to renew Spray-Rite's 1-year distributorship term, and thereafter Spray-Rite was unable to purchase from other distributors as much of Monsanto's products as it desired or as early in the season as it needed them. Spray-Rite ultimately brought suit in Federal District Court under § 1 of the Sherman Act, alleging that Monsanto and some of its distributors conspired to fix the resale prices of Monsanto’s products and that Monsanto had terminated Spray-Rite's distributorship in furtherance of the conspiracy. Monsanto denied the allegations of conspiracy, and asserted that Spray-Rite’s distributorship had been terminated because of its failure to hire trained salesmen and promote sales to dealers adequately. The District Court instructed the jury that Monsanto's conduct was per se unlawful if it was in furtherance of a price-fixing conspiracy. In answers to special interrogatories, the jury found, inter alia, that the termination of Spray-Rite's distributorship was pursuant to a price-fixing conspiracy between Monsanto and one or more of its distributors. The Court of Appeals for the Seventh Circuit affirmed, holding that there was sufficient evidence to satisfy Spray-Rite's burden of proving a conspiracy to set resale prices. It noted evidence of numerous complaints to Monsanto from competing distributors about Spray-Rite’s price-cutting practices. In substance, the court held that an antitrust plaintiff can survive a motion for a directed verdict if it shows that a manufacturer terminated a price-cutting distributor in response to or following complaints by other distributors. The Unitd States Supreme Court granted certiorari review.

Issue:

Did the court of appeals err in holding that there was sufficient evidence to satisfy Spray-Rite's burden of proving a conspiracy to set resale prices?

Answer:

No

Conclusion:

The United States Supreme Court affirmed the judgment but held that the correct standard for determining whether § 1 of the Sherman Act, 15 U.S.C.S. § 1, was violated was whether direct or circumstantial evidence existed that reasonably tended to prove that the manufacturer and others had a conscious commitment to a common scheme designed to achieve an unlawful objective. The court held that the evidence must be sufficient to exclude the possibility of independent action by the manufacturer and distributor. The court noted that the difficulty in determining whether a violation of § 1 had occurred stemmed from the fact that "market impact" could be the result of illegal concerted action, legal independent price action, or legal, concerted, nonprice action. The court held that although the circuit court had applied an invalid standard, sufficient evidence, beyond competitor complaints, including testimony of Spray-Rite’s manager, existed from which the jury could find concerted illegal price fixing.

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