RESPONDENT: Sealy, Inc.
LOCATION: Sealy Corporation
DOCKET NO.: 9
CITATION: 388 US 350 (1967)
ARGUED: Apr 20, 1967
DECIDED: Jun 12, 1967
GRANTED: Oct 11, 1965
Daniel M. Friedman - for the petitioner
Richard W. Mclaren - for the respondent
Facts of the case
Until about 1920, the Sealy Mattress Company was the sole manufacturer of Sealy products at its four factories in the Midwest and Southwest. By 1923, however, some 19 independent factories operated under Sealy licenses. Soon thereafter, these licensees and new owner E. E. Edwards formed the Sealy Corporation. Sealy continued to license the use of the Sealy mark to independent stock-holding bedding manufacturers.
In 1925, the licensees agreed on a system of allocating exclusive territories to market Sealy products. Each manufacturer had an exclusive territory in his license contract; this contract prohibited each manufacturer from selling outside of that territory. Around this time, the licensee-stockholders and Sealy began collaborating to fix and police the minimum and maximum prices charged by retailers of Sealy products, the advertised prices of Sealy products, and the means of inducing retailers to adhere to these prices. In 1933, Sealy Corporation reorganized into Sealy, Incorporated. Sealy, Inc. made a new provision that any new manufacturers coming into the organization must purchase Sealy stock. In the 1940’s, Sealy’s business increased and many new licensees joined to cover previously open territories.
The Sherman Act provided that every contract, combination, or conspiracy in restraint of trade or commerce was illegal. The United States brought a civil action against Sealy, Inc. charging that it violated the Sherman Act by setting minimum retail prices and by forcing retailers to adhere to those prices. It also alleged that Sealy, Inc.’s exclusive territorial arrangements violated the Sherman Act. The district court held that Sealy, Inc.’s price fixing violated the Sherman Act, but that its territorial arrangements did not. The United States appealed the district court’s ruling on the legality of Sealy, Inc.’s licensing structure.
Did Sealy’s method of allocating territorial manufacturing licenses violate the Sherman Act?