Monsanto Company v. Spray-Rite Service Corporation

PETITIONER: Monsanto Company
RESPONDENT: Spray-Rite Service Corporation
LOCATION: The D&B Corporation

DOCKET NO.: 82-914
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 465 US 752 (1984)
ARGUED: Dec 05, 1983
DECIDED: Mar 20, 1984

ADVOCATES:
Edward L. Foote - on behalf of the Respondent
Fred H. Bartlit, Jr. - on behalf of the Petitioner
William F. Baxter - as amicus curiae

Facts of the case

Question

Media for Monsanto Company v. Spray-Rite Service Corporation

Audio Transcription for Oral Argument - December 05, 1983 in Monsanto Company v. Spray-Rite Service Corporation

Warren E. Burger:

We'll hear arguments next in Monsanto Company against Spray-Rite Service Corporation.

Mr. Bartlit, you may proceed when you're ready.

Fred H. Bartlit, Jr.:

Mr. Chief Justice, and may it please the Court:

This case is the first opportunity for this Court to consider the antitrust illegality of non-price vertical restraints since the 1977 Sylvania decision.

Sylvania recognized that non-price vertical restraints are not per se illegal even though they may have some effect on price.

Sylvania said that the rule of reason would apply to such restraints, and noted that there will be no departure from the rule of reason unless there is a demonstrable economic effect, not formalistic line drawing.

Despite Sylvania, the Seventh Circuit found non-price vertical restraints to be per se unlawful.

They did that, Petitioner urges, by using two rules of law that seriously cut away from and limit the usefulness of Sylvania to businessmen.

What the Seventh Circuit did was this: the Seventh Circuit said that the non-price restraints in this case were part of a price-fixing conspiracy.

They used a rule in determining whether a conspiracy existed which makes it very easy to find a resale price fixing conspiracy.

The Seventh Circuit said that all you need is an interest in a manufacturer on the part of price, a concern about price, which you will almost always have, coupled with complaints from distributors followed by a distributor termination.

In this case, of course, the situation was exacerbated because the complaint occurred... the last complaint of record occurred 15 months prior to the termination, and in the interval between the last complaint and the termination, there was a renewal of the distributor.

William H. Rehnquist:

Mr. Bartlit, you're not suggesting, are you, that the only evidence before the Court of Appeals were complaints from distributors plus the fact of termination by Monsanto?

Fred H. Bartlit, Jr.:

No, Justice Rehnquist, I'm not.

There was other evidence.

We don't believe it was sufficient to go to the jury on the issue of conspiracy.

But the Court used a standard for finding a conspiracy which was a very slender standard and made it easy to get to a jury in almost any business context on the question of the underlying conspiracy.

Then the Seventh Circuit, having made it easy for a plaintiff to get to the jury on the question of whether there was the underlying conspiracy made it even easier for the jury to find that the programs in question were part of the conspiracy, because the court didn't require that there be any evidence at all linking the programs in question to the conspiracy.

The result is that it is now very easy for a plaintiff to get to the jury any time a manufacturer uses procompetitive, non-price programs like these.

We think that it's particularly troublesome in this case where the economic effect of the programs was demonstrated and where the programs are so much like those in Sylvania.

Sylvania gave an example of the kind of non-price program that might be procompetitive, even though it was a restriction.

The Court in Sylvania said that there might be instances where a manufacturer who had a new product might find it worthwhile to motivate or inspire distributors into engaging in non-price promotional activities, devoting their labor, devoting their capital to selling this new product in order to get the product off the ground.

Of course, that's what happened here in this case.

Monsanto had a new product, a series of herbicides.

There names are Ramrod and Lasso.

They were good products.

They'd been around for a number of years, but Monsanto hadn't been able to get off the ground with these products.

In 1968 Monsanto had about 3 percent of the soybean market and about 15 percent of the corn market.

Monsanto was facing large, dominant, entrenched competitors.

They had one main competitor in corn, a Swiss or German company that had 70 percent of the market.