Antitrust – Resale Price Maintenance – Legality of Fair Trade Contracts Made by Integrated Firm

Defendant-appellee manufactures its own brand-name line of drug products and is also the largest drug wholesaler in the United States. Its manufactured products are sold through appellee’s own wholesale division and to independent wholesalers and retailers. In 1951 appellee entered into resale price maintenance contracts with these independent wholesalers, most of whom competed with appellee’s wholesale divisions. The Government then brought an action for an injunction under section 4 of the Sherman Act, restraining the further use of resale price contracts by appellee on the ground that these contracts constituted illegal price fixing under section 1 of the act. The appellee argued that the Miller-Tydings and McGuire Acts exempted these contracts from the Sherman Act prohibition. The Government, however, contended that these contracts came within the proviso excepting certain contracts from the Miller-Tydings and McGuire protection. The lower court denied the Government’s motion for summary judgment, stating that under the present case law it was unwilling to hold fair trade agreements illegal per -se simply because the producer is also a wholesaler, unless there is a showing that there is an additional restraint on competition other than that which naturally results from resale price maintenance contracts. On direct appeal to the Supreme Court, held, reversed, three justices dissenting. Since appellee competes at the same functional level as the contracting independent wholesalers, the contracts are not protected by the McGuire and Miller-Tydings Acts, and are therefore illegal per se. United States v. McKesson and Robbins, Inc., 351 U.S. 305 (1956).