The Supreme Court said Monday a manufacturer does not always violate federal antitrust law when agreeing with one retailer to stop doing business with another who sells at discount prices.
The justices, by a 6-2 vote, said such a "vertical restraint" imposed by a manufacturer on a retailer becomes illegal only when "it includes some agreement on price or price levels."The decision, a significant one for antitrust law, is a victory for Sharp Electronics Corp. and a setback for a former Houston retailer of Sharp calculators.
Business Electronics Corp., owned and operated by Kelton Ehrensberger, was the exclusive retailer of Sharp calculators in Houston from 1968 to 1972.
During that period, Sharp became dissatisfied with BEC's performance. Sharp contended that it was unhappy with BEC's failure to meet sales quotas, but a federal jury found that Sharp was dissatisfied with BEC's policy of selling calculators at prices lower than those suggested by Sharp.
Sharp in 1972 appointed Hartwell's Office World as a second retailer of its calculators in Houston, and in 1973 terminated BEC's dealership. Hartwell had told Sharp that it would quit distributing its products unless Sharp ended its relationship with BEC.
BEC then sued Sharp, and a federal jury awarded BEC $600,000 in damages. Under federal antitrust law, that amount was tripled to $1.8 million.
The 5th U.S. Circuit Court of Appeals, however, threw out the jury verdict and sent the case back for a new trial.
Monday's Supreme Court decision upheld the appeals court ruling.
Writing for the high court, Justice Antonin Scalia said the trial judge erred in telling the jury it could rule against Sharp if it found that BEC was terminated to reduce price competition in the Houston retail market.
"There has been no showing here that an agreement between a manufacturer and a dealer to terminate a `price cutter,' without a further agreement on the price or price levels to be charged by the remaining dealer, almost always tends to restrict competition and reduce output," Scalia said.
He added that juries must apply a "rule of reason" approach rather than any automatic rule in deciding whether such agreements between a manufacturer and retailer amount to illegal price-fixing.
"In the vast majority of cases, it will be extremely difficult for the manufacturer to convince a jury that its motivation was to ensure adequate services, since price cutting and some measure of service cutting go hand in hand," Scalia said.
In other action, the court:
Ruled that federal lawyers procedurally botched a contempt-of-court case against a Rhode Island newspaper that published FBI information about a Mafia boss.
By a 6-2 vote, the justices said the procedural flaw must result in dismissing the government's appeal from a ruling that the Providence Journal was justified in defying a judge's order barring publication of the material.
Agreed to hear a Reagan administration appeal aimed at making it easier for the U.S. government to turn over tax information to a foreign government.
The court said it will review a ruling that limited access by Canadian officials to financial records of two Canadian citizens with bank accounts in Washington state.
Ordered further lower court hearings to determine whether a New Jersey man accused of helping Nazis kill more than 2,000 Jews in Lithuania should be stripped of his U.S. citizenship.
Refused to let Connecticut police conduct pat-down searches for weapons on all people who attend Ku Klux Klan rallies.
Made it easier for federal prosecutors to introduce evidence in criminal trials of prior "bad acts" by defendants when the purpose is other than proving bad moral character.
By a 9-0 vote, the justices upheld the conviction of a Michigan man sentenced to a year in prison for possessing stolen videotapes.