Black v. Magnolia Liquor Company, Inc.

PETITIONER: Black
RESPONDENT: Magnolia Liquor Company, Inc.
LOCATION: United States District Court for the Northern District of Illinois, Eastern Division

DOCKET NO.: 14
DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 355 US 24 (1957)
ARGUED: Oct 17, 1957
DECIDED: Nov 12, 1957

Facts of the case

Question

Media for Black v. Magnolia Liquor Company, Inc.

Audio Transcription for Oral Argument - October 17, 1957 in Black v. Magnolia Liquor Company, Inc.

Earl Warren:

Number 14, Joseph F.Black, Assistant Regional Commission, Alcohol and Tobacco Tax Division, Dallas Region, Internal Revenue Service, Petitioner versus Magnolia Liquor Company.

Mr. Friedman.

Daniel M. Friedman:

May it please the Court.

The issue in this case here on a petition for certiorari to the Fifth Circuit is whether under the Federal Alcohol Administration Act it's illegal for a wholesaler of alcoholic beverages to engage in so-called tie-in sales with a retailer.

That is sales under which the wholesaler requires the retailer as a condition to obtaining wanted items in alcoholic beverages to purchase unwanted items.

The Federal Alcohol Administration Act contains a system of permits for wholesalers under which a wholesaler cannot operate in interstate commerce without a permit.

The Secretary of the Treasury is given authority to suspend permits under a statutory provision which makes compliance with certain provisions of the Act including the provisions I shall discuss in a moment, a condition of the permit.

The petitioner in this case is the Assistant Regional Commissioner to whom the Secretary of the Treasury has delegated authority to suspend basic permits.

The respondent is a large wholesaler in the New Orleans area who is the exclusive distributor of Seagram's product in that area.

The Assistant Regional Commissioner, through a hearing exam, conducted a full administrative proceeding, the culmination of which was that he found that the respondent had engaged in tie-in sales and that he had required a number of retailers to purchase at a condition to getting two scarce items which were Seagram's V.O.Canadian Whiskey and Seagram's Johnny Walker Scotch.

Two items which is found were either not wanted or were in long supply, namely Seagram's Ancient Bottle Gin and Seagram's 7-Crown Whiskey, blended whisky.

He ultimately imposed a 15-day suspension of the respondent's permit for violations of Section 5 (a) and 5 (b) of the Federal Alcohol Administration Act.

The Court of Appeals for the Fifth Circuit, without reaching any of the other contentions which the respondent had presented to the Court, set the suspension order aside on the ground that this statute does not prohibit the making of tie-in sale and reaching that result, it recognized that it was disagreeing with a contrary decision of the Court of Appeals in the Second Circuit in a case entitled Distilled Brands v.Dunigan.

The statutory provisions involved in this case is set forth at pages 2 and 3 of the Government's brief and a section of the Act, Section 5 which it had an unfair competition and unlawful practices and this section makes it unlawful for a wholesaler to require by agreement or otherwise that any retailer engaged in the sale of distilled spirits purchased any such products from such person, I'd like to emphasize this, to the exclusion in whole or in part, in whole or in part of distilled spirits sold or off it was sale by other persons in interstate or foreign commerce.

Our basic position in this case is that the tie-in sale under which a wholesaler requires a retailer to take an unwanted product as a condition of obtaining a wanted product excludes in part the tied product, the unwanted product which is sold or offered for sale by other wholesalers of alcoholic beverages.

Now in this case, the record shows that some of the retailers, who testified, stated explicitly that if they had not been required to purchase certain tied products from the respondent, they would have purchased other brands of these products.

So there is explicit evidence here and the hearing examiner so found that there is exclusion of the tied products.

Let me see if I understand you on that (Inaudible)

Daniel M. Friedman:

No Mr. Justice, if they hadn't taken this man's gin, they wukk report someone else's gin.

(Inaudible)

Daniel M. Friedman:

The gin.

(Inaudible)

Daniel M. Friedman:

It was this particular brand.

It was just the Seagram's Gin which it was testified it was more expensive amount of popular gin.

Now, by similar reasoning we think that these practices also violates Section 5 (b) (7) of the Act which required -- prohibits a wholesaler from inducing any retailer to purchase distilled spirits from him to the exclusion in whole or in part by requiring the retailer to just take and dispose off a quota of any such product and similarly in this case, there was a showing that certain quotas was set up in order to get five bottles of one thing, he had to buy ten of another, that kind of quota.

The Court of Appeals, and we think without analysis of this precise legislative -- precise language, suggested that the statute does not apply to tie-in sales for the following reasons.

It stated that this statute grew out of the NRA “code of fair competition” of the alcoholic beverage industry, that under the code, tie-in sales were not prohibited and that this statute is nothing more or less than a reenactment of certain of the code provisions and therefore the failure in specific terms to outlaw a tie-in sale precludes the statute's application to this practice.

Now in considering this contention, we think it's important to indicate briefly what the codes purported to do and what we think are very significant changes which the statute made in the code.

We strongly disagree with the view of the Court of Appeals that all of these statute represented a reenactment of the code provisions.

The codes were drafted shortly after prohibition was repealed.