KLOR'S v. BROADWAY-HALE STORES

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Argument of Maxwell Keith

Chief Justice Earl Warren: Number 76, Klor's Incorporated, Petitioner, versus Broadway-Hale Stores Incorporated et al.

Mr. Maxwell Keith: May it please the Court, Mr. Chief Justice.

Chief Justice Earl Warren: Mr. Keith.

Mr. Maxwell Keith: Mr. Chief Justice and may it please the Court.

I intend to take 20 or 25 minutes in my opening statement.

Mr. Elman from the office of the Solicitor General tends to take about half an hour and I intend to reserve five or 10 minutes for rebuttal.

Chief Justice Earl Warren: You arrange your time as you please.

Mr. Maxwell Keith: This is on a writ of certiorari to the Ninth Circuit.

The District Court below had granted the respondents here and the defendants below motion to dismiss an antitrust complaint and for summary judgment.

The Ninth Circuit Court of Appeals affirmed the entry of a judgment against the plaintiff petitioner here dismissing the complaint and for summary judgment.

The issue is whether or not the antitrust laws has a charter of economic liberty, protect the single trader from conduct prohibited under the antitrust laws.

Specifically in this case, it is whether or not the single trader is entitled to be protected from conspiracies designed to suppress and eliminate his competition.

And whether or not he is entitled to be free of the exercise of monopoly power designed to suppress and eliminate his competition.

The Ninth Circuit Court of Appeals has held that Section 4 of the Clayton Act which gives the private party the right to sue for anything forbidden by the antitrust laws is subject to a judicial imposition, a judicial requirement that the private trader in addition to showing personal injury as it is -- as is required by Section 4, also prove or convince -- convince the judiciary that the conduct which violates an act of Congress also has a conceivably injurious impact on the public.

The petitioner here was a retailer of household appliances, radio, television sets, washers and driers and other miscellaneous household appliances, Stoves and refrigerators.

He was located in the Mission District in San Francisco.

The Mission District in San Francisco is well known in the appliance and furniture industry as an importance feat for the retailing of these products.

San Francisco of course is a very important area of interstate trade and commerce.

It is the third or fourth largest consumer area in United States.

The respondent Broadway-Hale is a competitor -- was a competitor of petitioner Klor's Inc.

And it is specifically alleged in the complaint in paragraph 8, that the defendant Hale operates a chain of key stores in the Westcoast area of the United States.

It enjoys a monopolistic buying power by reason of the large number of retail outlets it operates.

It has used its monopolistic buying power to negotiate terms and conditions of acquisition and purchase of the products manufactured, distributed and sold by the manufacturer-distributor defendants.

The other respondents are manufacturers of household appliances.

They are large, powerful intrastate corporations.

They are well-known, I'm sure, to this Court.

They are Radio Corporation of America or RCA, General Electric Company, Admiral Corporation, Zenith Radio Corporation, Emerson Radio and Phonograph Corporation, Philco Corporation, Whirlpool Zeiger Corporation, Olympic Radio and Television Inc, Tappan Stove Company, Rheem Manufacturing Company.

These are named to the complaint along with their affiliated or wholly owned subsidiary distributors which distribute these household appliances in the San Francisco area.

Admiral -- Admiral Distributors Inc, Zenith H. R. Basford Company, Radio Corporation of America, Leo J. Meyberg Company, Emerson Jefferson Travis, Philco Government Supply Company, General Electric -- General Electric Distributing Corporation, Olympic -- Olympic Television of Northern California, Tappan, O'keefe & Merritt.

Now, this complaint alleges that these respondents conspired each with the other to suppress and eliminate the competition of Klor's petitioner in favor of Broadway-Hale.

It alleges therefore that there was a common unity of purpose to suppress Klor's competition in favor of Hale.

And specifically in paragraph 6 (g) of the complaint, it is said that they have permitted Hale to enjoy monopolistic position in the sale and distribution of the products.

So I think it may be fairly said giving the complaint all of the inferences and all of the construction that should be rendered to it that this complaint involved a conspiracy to refuse to sell products to Klor's Inc in order to suppress his competition to a competitor, in other words, to interfere with the competitors market.

Alleges a conspiracy for a time to discriminate against the petitioner, Klor, in favor of the respondent Broadway-Hale.

In other words to interfere with the free and open competitive market.

It alleges that there was a common purpose and a plan here to allow Broadway-Hale a monopolistic position in the sale of the respondents' merchandise.

And I think she clearly alleges that Broadway-Hale used its monopolistic chain buying power to suppress and eliminate the competition of the petitioner.

And I think it raises fact showing a specific intent by Broadway-Hale to monopolize the retailing of household appliances in the San Francisco area.

It has specifically alleged that Broadway-Hale refused to do business as a chain buyer utilizing the entire strength of its many stores with the respondent unless they did not do business with Klor's.

These allegations are uncontested in this proceeding.

The respondents filed no answer controverting these allegations.

They filed rather hybrid affidavits in summary judgments.

They filed a motion to dismiss.

Justice John M. Harlan: Is it a question of the sufficiency of the complaint or of the propriety advantage over a judgment?

Mr. Maxwell Keith: I think that the judgment is on both grounds Your Honor.

The judgment rendered by the District Court was both on the -- based upon the lack of cause of action and was based upon the lack of facts to show issues between the parties under the antitrust laws.

As a matter of fact, this affidavit in summary judgments showed the courts below that there was indeed a group refusal to deal.

The affidavit showed two things.

Number one, that there were a number of other competitors in the San Francisco area.

They were merely names set forth on a piece of paper.

They showed that there are a lot of these competitors in the San Francisco Bay area.

And number two, they showed that there were other brand names available to the petitioner here other than the respondents named in the complaint.

But they also showed as you go through the record as to each affidavit filed by each respondent that there was no delivery of their merchandise to Klor in the supposedly competitive market.

There was no explanation advanced, no justification, no reason given why Klor was not receiving this merchandise.

There were no other forms of discovery used.

There were no depositions filed, no request for admissions, no interrogatories, no settlement of pretrial issues under Rule 16.

In short, all that's we have are these hybrid affidavit in summary judgment.

Based upon this record showing this group refusal to deal, this uncontested allegations of monopolistic chain buying power.

The lower court said, “There was no substantiality either in law or in substance to exercise the Court's jurisdiction to protect the single trader.”

And this was affirmed by the Ninth Circuit Court of Appeals on the ground that there was no showing of public injury.

And by this, I take it to mean that the antitrust laws are limited in their purpose and scope to showing conduct which has a direct injurious effect on the public such as price fixing and some other type of conduct upon which there's a direct effect on the consumer or the public.

This decision was made after this Court had ruled in the Radovich case that the doctrine of public injury as used by the court below has no application under Section 4 of the Clayton Act.

This issue was specifically before the Court in the Radovich case, that is Radovich versus National Football League because the Ninth Circuit below had held that there -- that the facts in the complaint showed no conceivable injury to the public, no prejudice to the public.

The writ involved this question of public injury.

And this Court specifically met the problem and stated in the opinion that when Congress passes an act, the violation of that act itself creates a public wrong and that the antitrust laws protect the victims of forbidden conduct as well as the public.

The decision below is clearly erroneous for three reasons.

Number one, it is an improper interpretation of the scope and the purposes and the objectives of the antitrust laws.

Number two, it refused to apply the rule of this Court that group boycotts to or group refusal to deal are illegal per se.

And that the mere entry into this agreement is forbidden conduct.

And third, to refuse to give to an antitrust complaint and an antitrust litigant the most elementary rules of Federal Civil Procedure, construction of a complaint in favor of the private litigant, construction of the complaint to see what maybe offered to prove the allegations in the complaint.

Now, as to the first contention of error, the antitrust laws of course protect the public from predatory conduct or from conduct which is designed to gouge them of -- of a dollar.

But clearly, this is not the only purpose and objective of the Congress in -- in enacting the antirust laws and as interpreted by this Court, we may pickup the Attorney General's National Committee to study the antitrust laws and turn to the very first page of this report and see the heading, “A policy against undo limitations or competitive conditions.”

And -- and read the statement, “The general objective of the antitrust law does promotion of competition in open markets.

This policy is a primary feature of private enterprise.

Most Americans have long recognized that opportunity for market access and fostering of market rivalry are basic tenants of our faith and compettion as a form of economical organization.”

Someone is -- that the antitrust law has act to prohibit conduct which unduly limits competitive opportunity.

And this is regardless of any effect on the public any direct effect.

The public is protected by having every trader that wants to get into the market place compete for that consumer by special -- by using his ingenuity, his ability and his skills in the market place.

And I think when we're talking in terms of substance, we have to get down to the very core of the antitrust laws.

And that very core is that every man in this country has an opportunity to go upon the market, and to obtain profits, and to obtain the right to let his abilities and ingenuities and skills determine whether or not he shall succeed or fail.

The proper proposition is set forth, vest by Senator Sherman when he discussed the enactment of the Sherman Act.

It is the right of every man to work labor and produce in any lawful vocation, and to transport his production on equal terms and conditions under a like circumstances.

This is industrial liberty and lies at the foundation of the equality of all rights and privileges.

I submit that when Congress passed the antitrust laws, it enacted this policy as far as the constitutional power over interstate commerce could go.

That every man should be free of conspiracies in the use of monopoly power when he enters into a free and open market.

And they submitted that the Ninth Circuit has not faced this issue, has not faced the issue of the right of the single trader to be free of predatory conduct directed at suppressing and eliminating his competition.

Secondly, the Court erred because it did not apply the per se rule of group refusal to deal.

This course -- this Court has stated many times that a group refusal to deal is in -- is illegal per se.

The Court of Appeals do not face this rule even though these affidavits disclosed a uniform refusal to deal.

But what is meant by per se illegality?

It has meant that the very entry into the agreements is illegal per se, is illegal conduct, is forbidden by an act of Congress, cannot be added into without raising a private or a government case.

Justice Charles E. Whittaker: Do you mean a group (Inaudible)

Mr. Maxwell Keith: The entry into an agreement by a group to refuse to deal is illegal conduct.

Justice Charles E. Whittaker: Do you allege that there was a group contingence, go on merely that the Broadway-Hale Company, by reason its powers led to (Inaudible)

Mr. Maxwell Keith: I think a fair construction of the complaint, Your Honor, alleges a conspiracy to refuse to deal.

It says that each of these respondents conspired each with the other.

And then it alleges they have refused to accept the business.

They have refused to accept the business other than to sell their product to plaintiff while freely selling their products to Hale.

Now then, when it talks -- when it goes into the monopoly power of Hale in Section 8 of the complaint, I just read to you from Section 6.

Then it says, “Hale use its monopoly power to condition its sales and purchases on condition that the respondent did not sell to Klor.”

But clearly, there is allegation here that there was a group refusal to deal, a conspiracy each with the other.

And as this Court has held recently in the Northern Pacific Railway case, in the Kiefer-Stewart case, in the Times-Picayune case, this is a legal conduct and it is not sanctioned under the antitrust laws.

Justice Charles E. Whittaker: More specifically, that matter could be the affidavits submitted by Broadway-Hale (Inaudible)

Mr. Maxwell Keith: No, your Honor.

The -- the affidavits were submitted to support a legal proposition that there was no public injury.

Now, whereas the contention as I understand it of the respondents is that even though we have engaged in forbidden conduct, we have a legal defense that our conduct does not have a direct impact on the public.

It doesn't go whether the question that the public is able to -- not able to buy from Klor because of this conduct, does not able to get the advantages of Klor's competition.

And I think when you analyze that, it comes down to the proposition that the only conduct forbidden by the antitrust laws are agreements to fix the price of commodity, that is somehow to gouge the public by fixing a high price.

We -- this Court has held in the -- in the McKesson & Robbins case, exactly what it means by per se illegality.

It says that per se legality means that the agreement itself, the entry into the agreement is illegal regardless of -- specifically regardless of market control and specifically regardless of whether the prices fixed are low or high.

The Court might recall that the Keifer-Stewart case involved a situation where there was a conspiracy to refuse to deal in order to support price contracts.

And the -- the agreement there was to prevent the retailers from setting too high a price.

The -- the it's the entry into the agreement and this is because the entry in agreement to fix the price means the entry -- means the power to fix a high or a low price.

So that the issue is not the effect on the public.

The issue is, what is the conduct to this condemned by the antitrust laws in view of all the purposes and objectives of the Congress.

Now lastly, the Court erred in -- in not applying the elementary rules of federal civil procedure.

This complaint was entitled to be supported.

It was a bonafide complaint.

The affidavits disclos that it was bonafide.

They showed the group refusal to deal prima facie wise.

Instead, I think the one raise the opinion, one fails to see that there is admitted that there is a charge here of conspiracy.

But clearly, when the pleader says that each conspiring with the other, you have a conspiracy charge.

The Court is inconsistent with itself.

It says that, “We are concerned with substance materiality.”

But the allegations in this complaint are concerned with substance of the materiality in the sense.It says that respondent Broadway-Hale is a monopolistic chain buyer.

It says -- there was a -- there is a plan put to allow this -- this buyer a monopolistic position.

In other words, the proposition of that is that we can take these serious allegations in a -- in a bonafide antitrust complaint and we can ignore them.

And the summary judgment upon affidavits directed solely to show that the public was able to buy a lot of commodities from a lot of retailers.

And that there -- there were lot of -- that there were other brands available besides the brands involved in a charge of conspiracy.

Chief Justice Earl Warren: Mr. Elman.

Argument of Philip Elman

Mr. Philip Elman: Mr. Chief Justice, may it please the Court.

United States is appearing in this case as amicus curiae because the decision below seems to raise questions of large importance in the enforcement of the antitrust laws.

Where it not for the broad sweep of the decision below upholding the award of summary judgment for the defendants, this would seem to be a rather simple routine antitrust case.

In answer to your question, Mr. Justice Harlan, as to the basis of the judgment -- judgment below, the District Court as appears from its order on page 134 of the record, stated that count one of the complaint is not a cause of action under the Sherman Antitrust Act.

And the Court of Appeals in affirming, as appears from the opinion, page 176, bottom of the -- 178 rather, bottom of the page.

The complaint did not allege a violation of Section 1 of the antitrust laws because it did not state facts from which injury to the public can be perceived.

So that the crucial document in the case is the complaint.

And as Mr. Keith has pointed out, the complaint here contains the standard general allegations of the conspiracy in restraint of trade with resulted damage to the plaintiff.

And then it goes on to particularize the allegations of the specific restraints that we used.

And it alleges that at the instigation of the plaintiff's next door competitor, Broadway-Hale, a branch of a chain store operation in the -- in the far west.

A group of suppliers of household appliances including the more -- the most important manufacturers and distributors, entered into an agreement each with the other, had specifically alleged in the complaint, page 11 of the record.

That each of these suppliers of appliances in competition with each other, each agreed that none of them would do business -- that none of them would sell their products to the plaintiff.

Now, that allegation is -- is of course what is known in the jargon of the antitrust practitioners as a suppliers group boycott, which in it's very nature restrains, eliminates competition in two respects.

First, it restrains competition among the parties to the agrrement.

They are -- they're no longer competing with one another for the costume -- customers of Klor's and with respect to their products.

That competition is inherently necessarily eliminated by the combination.

The other respect in which competition is inherently necessarily restrained is with -- is a relation to Klor's.

Klor's can no longer compete with his competitors, the retailers in his marketing area with -- as to the product sold by these defendants to them but not to him.

While Klor's can't buy, he can't offer for resale.

And so he is necessarily eliminated as a competitor to those products.

Now, the illegality of that kind of restraint is not a novel or doubtful one, it goes back to the ancient common law precedents.

Some of them dealing with physical fencing in of a competitor.

Here, you have economic fencing here but it's the very type of thing which this Court has repeatedly said the Sherman Act condemns.

When the matter first came up in Montague against Lowry in 193 U.S. in 1904, Mr. Justice Peckham's opinion for the Court didn't discuss the matter at any great length because he said the matter is -- is plain, it requires no elaboration.

And there -- the -- the opinions of this Court which repeat that group boycotts, concerted refusals to deal agreements to refuse to supply are illegal per se.

Those opinions -- those cases are the landmarks to the antitrust law.

The most recent statement to that effect appears in -- in the opinion of the Court last term in Northern Pacific Railway Company which is stated categorically without any qualification.

Now, maybe laboring the obvious to say that this case is a simple routine per se restraint case.

But somehow that fact, that starting point of the -- of the case seems to have been perhaps overlooked in -- in the courts below.

And it seems to us that if -- if one accepts the proposition at the opinions of this Court compel that a restraint of this kind is inherently anti-competitive, inherently suppresses competition.

It solves the inquiry, it solves the question that was -- that is much -- much discussed in the opinion below as to the nature of the injury to the public.

The public is necessarily injured as Congress itself has determined by making this kind of restraint illegal.

Congress has determined that this is an injury to the public.

And that's exact --

Justice John M. Harlan: Even though that this is introduction of a new concept and new antitrust laws, this opinion is after all written by a judge who was having antitrust provision or is it a question of his misinterpreting the allegations of the facts which -- which is --

Mr. Philip Elman: I would say -- I would say that Judge Lawrence's opinion represents an attempt to blend two concepts in the antitrust law.

The public injury concept, the rule of reason concept.

We believe that neither one of those is properly applicable to this kind of situation.

As to the first public injury.

I think it might be -- it might suffice to rely on the opinion of the Court which condsidered this question, we believe, two terms ago in Radovich.

Now, the public injury doctrine rests on some general language appearing in three opinions of this Court.

Those opinions are cited and quoted on page 29 of the respondent's brief, the white brief.

One is the opinion of Chief Justice White in the Wilder Manufacturing case in 1915.

That was case that very much involved in the problem that was before Your Honors in and Kelly against Kosuga, it's a -- it's a -- well, Sherman Act doesn't -- defends to a suit for a breach of contract case.

The other, the second one is Mr. Justice Rutledge's opinion in 1948 in the Mandeville Farms case which involved the question of whether a conspiracy to fix prices among a group of sugar refineries violated the antitrust laws where its impact was on the growers of sugar beets in Northern California.

Whether the sellers of product is as to which it was a price fixing combination had cause of action.

And the third, what the respondents called the key case is Apex Hosiery against Leader.

Mr. Justice as he was then, Mr. Justice Stone's opinion for the Court in that case involving a sitdown strike of workers which undoubtedly interrupted the interstate business, the interstate transportation of the plaintiff.

The question was, “Was that the kind of restraint of trade that the Sherman Act dealt with?”

The answer the Court gave was no.

Now, in the course of these three opinions, there is general language as to the scope of the Sherman Act.

And -- and the Court says that the Sherman Act doesn't deal merely with private injuries, it deals with public wrongs.

That Congress has taken over the common law concept of -- of contracts and restraint of trade which were unenforceable and took that doctrine from the law of contracts and created a statutory wrong, a statutory tort, a statutory crime.

These were -- these were wrongs not merely against those hurt by the conduct, but they were wrongs against the public.

Now, that concept is of course unexceptionable.

No one quarrels with that description of -- of the -- of the nature of the Sherman Act but it's taking a long step to say public injure -- public wrong is to be equated with public injury, and public injury is to be equated with injury to the public.

An injury to the public is not something that a court considers in construing the statute, but public injury is something that's to be demonstrated as a matter of fact by the plaintiff as part of his cause of action.

It has to be alleged.

It has to be proved.

Now, in the Radovich case, which came before the Court two terms ago, the same cases had been used in the Ninth and Tenth Circuit in cases that it were -- are -- were referred to in the opinion of the Court of Appeals in the Radovich case.

Those -- those lower court cases had developed this doctrine, particularly applicable to private treble damage actions that the plaintiff had to proof injury to the public as well as injury to them -- to himself.

And Judge Chambers and his opinion on the Radovich case said that -- perhaps, Radovich was hurt but the public wasn't hurt.

The All American League for which he played and as to which he alleged the conspiracy, they were -- they were still in business, they weren't damaged.

So, said Judge Chambers, “there's no injury to the public.”

Now, of course, the major question in the case when it came here was whether football is a business protected by the antitrust law.

But there was a second basis of decision of -- of the Ninth Circuit to which the -- this Court in its opinion addressed itself.

And that was this contention that the plaintiff in a private damage action can't succeed merely by showing that he has been hurt.

He has to show that the public has been hurt.

And the answer given by the Court was simple, direct, clear.

The answer was that Congress has, by legislative fiat, determined that in -- that activities prohibited by the act are injurious to the public.

Now, I should like if I may, to consider the practical implications of this -- of this argument.

The -- as -- as Mr. Keith pointed out, here was a complaint not demurrable.

No answer denying the allegations, having such an answer denied, the case have gone to trial.

No answer giving an affirmative defense by way of business excuse or justification for it saying this was perfectly reasonable, it's a matter of business necessity, no defense of that sort.

Instead, what the defendants did was move for summary judgment on the basis of affidavits which they submitted to the District Court.

Now, those affidavits are -- the substance of them is very graphically depicted in a chart which the -- the defendants have submitted to this Court which appears in their brief opposite page 10.

It's a map of the business district in which the plaintiffs -- the plaintiff and the defendants do business.

And it shows Mission Street, number 2500 block of Mission Street, you'll -- there -- there, you'll find an arrow pointing towards Klor's, the plaintiff here.

He's -- he was at 20 -- he was at 2581 and right next to him, not identified, is the defendant Hale, 2565.

And the basis of the -- the entire case here is -- is shown by this -- this chart that because there were these other retailers all selling the appliances which were denied by the defendants to the plaintiff because every -- these other retailers were still in business, still able to sell them to the public because there was no showing that the price to the consumers had been raised or that there had been any effect as to quantity or quality of the goods available.

Because of that, courts below held that it was not conceivable, as a matter of law, that there was any injury to the plain -- to the public upon the -- upon the basis of which a violation of the Sherman Act could be made out.

Now --

Justice Potter Stewart: I think, Mr. Elman, in answer to Justice -- Mr. Justice Harlan's question awhile ago, you said that -- you indicated that you thought the advise or the availability of the -- of the opinion of the Court of Appeals was that it confused or compounded two concepts, (a), public injury, the absence of a public, and, (b) the rule of reason discussed --

Mr. Philip Elman: Yes, Your Honor.--

Justice Potter Stewart: As discussed unreasonable restraint.

DId the the affidavits go to that second point to the opinion?

Mr. Philip Elman: Not -- not so far as I understand the rule of reason.

Now, the rule of -- the rule of reason which -- I'm not going to take Your Honors time to hold forth on, certainly does not permit a court to inquire as -- not as to the reasonableness of the restraint but as to who is hurt by the restraint.

Mr. Justice Brandeis in his classic formulation of the rule of reason in the Chicago Board of Trade case in 264 U.S., I believe it is, says that the -- that every business agreement tends to restrain.

It binds the -- the parties to the agreement.

They agreed not to do something that they would otherwise be freed to do.

Therefore, the true test of -- of legality is not whether an agreement restrains but whether the agreement is one that promotes competition, that regulates and fosters competition or whether it is one that suppresses or destroys it.

Now, in this kind of case, necessarily, the -- the kind of restraint that you have here suppresses competition.

Conceivably, the rule of reason would permit a defense based upon a legitimate business aim.

Conceivably, let -- let us say the defendants might have argued that they entered into this agreement because Klor's never paid his bills or because he rendered poor service to his customers.

Now, I would doubt very much whether it consistently with this Court's decisions as to the per se illegality of a group boycott, even that kind of defense had it been asserted would be valid.

I -- I should suppose that the Fashion Originators' Guild case where -- where the boycott was -- was allegedly for the purpose of meeting the unfair competition of style pirates and the Kiefer-Stewart case in 340 U.S. where the boycott was intended to meet the -- meet -- meet the competition of -- of others who are alleged to be violating the Sherman Act themselves.

And in both cases, this Court said that's no defense.

I would suppose that kind of defense would not be sufficient here, but I think it's very important that the defendants didn't attempt to -- to make out any kind of excuse or justification under the rule of reason.

What they're saying here is that under the rule of reason, you can make a factual inquiry which is dispositive as to the existence of a cause of action as to whether, in addition to the plaintiffs being damaged, the public is being damaged.

Now, it because they apparently recognized the breadth to this argument, it would -- it would mean that a plaintiff who was eliminated entirely from the market, and this -- this complaint here alleges only that a great many suppliers into this conspiracy, not all of them, but suppose it had alleged that every manufacturer had refused to sell to Klor's with the effect that he was totally driven out of business.

Well, the rationale of the decision below as Professor Handler has pointed out, in his discussion of this case in the New York City Bar Association Record, the rationale of this -- of this decision is that there's no injury to the public because you have all these other retailers around and you have no rise in prices, no -- or go no violation of the law.

Now, the -- the defendants say, “Well, you can't carry it that far because if you've got price fixing, that is -- that is automatically a forbidden restraint, it is automatically injury to the public.

Now, of course, one might answer that a group boycott is just as much a per se -- per se restraint as a -- as a price fixing agreement, but -- but apart from that, the argument, it seems to us, emphasizes the incongruity and one might even say the absurdity of the -- of the line that sought to be drawn here.

Because suppose this -- this complaint, instead of alleging that there was an unqualified refusal to sell to Klor's, suppose it had alleged that they had qualified it, that these manufacturers have gotten together and they had said, “Well, we'll sell to Klor's but only on condition that he pay 5% more than every other retailer in San Francisco pay.”

Now, under the respondent's theory, that's price fixing and it's public injury, you don't have to prove that anybody besides Klor's was -- was hurt.

And yet, in that situation, the -- the public wouldn't -- wouldn't be affected to any greater extent than here and I suppose they'd be better off because Klor's would still be in business and he would have to compete with his neighbors and he couldn't raise prices.

And -- so that -- so that the practical matter under the -- under the theory here, a qualified refusal to sell produces one result, and an unqualified refusal which is even worse, produces another.

Now, if there's one act on the -- on the books which shouldn't be construed in such a -- a mechanical way, I should suppose it was the Sherman Act, the whole --

Justice Felix Frankfurter: Mr. Elman --

Mr. Philip Elman: Excuse me.

Justice Felix Frankfurter: -- will this complaint sustain a proceeding by the Federal Trade Commission?

Is this a violation of the Clayton Act or the Federal Trade Commission Act?

Mr. Philip Elman: Well, I would like to point -- I think the -- I think the answer is yes, but I should like --

Justice Felix Frankfurter: If it is, then -- because the Federal Trade Commission proceeds in such a proceeding, the question of whether the public interest is involved would be relevant to the jurisdiction of the Commission.

Mr. Philip Elman: Exactly.

Justice Felix Frankfurter: And --

Mr. Philip Elman: You have a specific --

Justice Felix Frankfurter: -- and it might well be found that it wasn't.

Mr. Philip Elman: Exactly.

You see, you have a specific provision in the -- in the Federal Trade Commission Act, Section 5, that qualifies the power of the Commission of the jurisdiction of the Court.

You there -- you've got to show the proceeding is in the public interest.

There is no such provision.

Justice Felix Frankfurter: Not the violation is, but that the proceeding.

Mr. Philip Elman: Proceeding, instead.

Mr. Justice Brandeis pointed out in the -- in the classic case, the (Inaudible) case here in the District.

You have no such provision in the Sherman Act.

You have no de minimis requirement in -- in the Sherman Act.

And it -- it's -- there is -- there's a suggestion here, and perhaps it's more than a suggestion and perhaps may explain this decision below.

The suggestion is that this is a petty squabble, this is a trivial case, it's an unimportant case.

And because it's an unimportant case, it meant -- it was the kind of case that the Government wouldn't bring.

Now, that may very well be true.

It may very well be -- be the case that -- that this is -- this is a -- this sort of violation of the Sherman -- Sherman law that the Department of Justice with its necessarily limited manpower resources would not deal with.

But the Department of Justice does not undertake and it's not charged by Congress with the duty of undertaking, enforce every violation of Sherman law because -- because Congress has relied on the private damage remedy for enforcement of the -- of the Act, as well as upon the Department of Justice.

And it's a -- it's a truism which this Court has pointed out many times that the private damage remedy has the merit of building into this Sherman law a -- a self-policing device.

Now, if -- if a case is too small for the Department of Justice to bring because the theory -- the theory of the Act is that this is a -- this is a kind of case that the person immediately damaged by is likely to move to protect its -- in his own interest.

It would seem -- it seem to us to be almost ironical, as well as unjust to deny relief to a -- to a small man on that ground.

And as Judge Learned Hand pointed out in his review of the legislative history of the Sherman Act in the -- in the Aluminum case, that the -- the dominant theme of -- of the legislation in the -- in the expression by the responsible congressman is that the Act was intended to protect the -- the individual against large aggregations, large combinations of an economic power.

And I should suppose that the smaller the individual, the greater his need of protection.

Justice Hugo L. Black: Mr. Elman, is this -- bring this down locally.

I think I can understand it better your -- your viewpoint.

Is this the same in your judgment as to a suit filed by one of the locals here alleging the large number of wholesale distributors and combined together to refuse to sell him any of their products, has been buying him a long time and sold and retailed?

Mr. Philip Elman: Yes, sir.

Justice Hugo L. Black: And is the decision of the court below that because there are other people besides Woodward & Lothrop here who can sell those things in retail, that the public interest is not involved?

Mr. Philip Elman: That's the decision.

And -- and then it arises in a factual context where -- where the -- the defendant is not Woodward & Lothrop but let's say a shoe store on the corner of 11th Street in Pennsylvania Avenue --

Justice Hugo L. Black: That was Kershner.

That was Kershner.

Mr. Philip Elman: That was Kershner.

Well, Kershner was an unfair competition (Voice Overlap).

Justice Hugo L. Black: Well, I mean, but that was the -- the side.

Mr. Philip Elman: It is no problem in this case about the interstate commerce.

You've got interstate -- you've got big interstate business as far as the defendant is concerned.

Justice Hugo L. Black: I meant it was Kershner in the sense that it was a little fellow.

Mr. Philip Elman: A little fellow.

But in this case, in this case, it's -- you've got -- you've got a little man across the street from Woodward & Lothrop or across the street from Macy's saying that Macy's went to all his big suppliers and said to them, “You enter an agreement with each other binding each of you not to sell to this little fellow across the street for me for reasons which are not disclosed or at least for reasons which are not specifically alleged in the complaint.”

And of course, there's no requirement to the -- in the complaint, in an antitrust case, that should be more specific or more particularized than in the other cases.

The Court held in the Employing Plasterers case, so they're consistently with these general allegations of the complaint.

If this case were allowed to go to trial, we don't know what -- what would develop.

It might possibly be that price is involved.

We don't know.

We don't know why they went after Klor's except that it was for an anti-competitive reason.

He was a thorn in the side of his -- of his next-door neighbor and -- and to eliminate him to the extent of depriving him of -- of access to these appliances, this agreement was made.

And the courts below said, “Klor's is just a drop in the bucket.

As long as there's enough water there for other people, the fact that he's been eliminated really doesn't hurt anybody except him.

It's not a public wrong.”

Justice Felix Frankfurter: He can drown in the drum, is that it?

Mr. Philip Elman: And -- and what -- what it comes down to is -- is saying that even though the Sherman Act was intended to deal with that kind of public wrong, still, a court has to find in the particular case on the basis of the facts alleged and proved that not merely the plaintiff was hurt, but a lot of other people besides.

Justice Hugo L. Black: Do the complaint show whether he's cutting prices or not?

Mr. Philip Elman: Complaint -- the complaint just said -- the complaint just alleges the agreement and says that his -- that the defendant Hale was doing it from monopolistic purposes.

And so, we don't know the precise reason.

Justice Charles E. Whittaker: (Inaudible)

Mr. Philip Elman: I beg your pardon?

Justice Charles E. Whittaker: (Inaudible)

Mr. Philip Elman: Well, I would -- I would suppose that Judge Barnes, being familiar with San Francisco, would've noted this the highly -- highly concentrated areas so far as retail dealers are concerned.

I don't know that it means that there was active price competition as a fair trade law in -- in California, but there might be competition as to service, trade and allowances and the like.

Thank you very much.

Chief Justice Earl Warren: Mr. Lasky.

Argument of Moses Lasky

Mr. Moses Lasky: Mr. Chief Justice and may it please the Court.

The question in this case is not whether George Klor or Klor's Incorporated has a cause of action for some kind of tort.

He may have.

He may and he may not under California law.

The question here is whether he has a cause of action to claim for relief under a statute which was enacted for some very important purposes of the Sherman antitrust law.

Now, I'm quite gratified with Mr. Elman's argument because he's going to permit me to come into a very close issue with him.

And of course, I'm disturbed that this little case of my client turns out to be one in which it is contended there are large issues.

I don't believe there are any large issues and I'm convinced that the case was decided upon what has been elementary law for many years.

I think there may be an important issue.

And if you'll permit me to state it, I'll state it this way.

It's whether the Sherman Act is down to be reduced to a sort of section, a self-evasion of a federal commercial code dealing with the private law of commercial torts because for a suit, there may be interstate commerce.

Congress could have enacted that kind of law but I shall submit it didn't do it.

Now, I'm not admitting that there's interstate commerce involved and if my time permits, I'll come to that later.

I want to get me down to the main -- main question.

Now first, let me say it's vital to consider this case, not some other case.

I want to consider the facts of this particular case because it hasn't been wholly been presented upon the basis of how it was presented below.

Now, let me say to the Court this is not a pleading case.

It was not decided on a motion to dismiss.

I filed a motion to dismiss at the outset for my client, Broadway-Hale, and then withdrew it because I became aware of this Court's statement in the Employing Plasterer's case that you -- you construe with the pleadings very broadly and we didn't want to get followed up and all that procedural imagination.

We ask the --

Justice John M. Harlan: Well, does that mean that you wasn't in others (Inaudible)

Justice Charles E. Whittaker: Judge by motion to dismiss standing?

Mr. Moses Lasky: I don't know whether I'd be prepared to -- to say that, but I'm not prepared to -- I -- I don't care to argue the contrary.

We have assumed, we have assumed that taking the compliant by itself, it would do so because it had some allegations in there about monopoly and inferences could be drawn from that.

Now, we presented this case upon the -- by utilizing some of the advanced tools given to us by the Rules of Civil Procedure.

First, we had a pretrial conference.

We went in on a motion and it was converted to a pretrial hearing.

And as a consequence to this pretrial hearing in the motion, the issue is one which at that time, all the parties agreed on.

Of course, we didn't agree when they answered to the issue, but we agreed upon the issue.

What we did with our affidavits was this.

We assumed that there was sufficient allegation of conspiracy.

We assumed it because you cannot, on a motion for summary judgment, ever litigate that issue.

The existence of a conspiracy may be proved by a wide latitude of evidence, you can't dispose of it in a summary fashion.

So we assumed the existence of a conspiracy, but we struck at what we conceived to be and what both courts below have agreed with us was the jugular vein of this case.

We filed -- each respondent filed an affidavit.

They weren't denied.

Not only weren't they denied, they were admitted, they were directly admitted.

And the issue as it finally came down after pruning out -- this complaint was 103 pages long, to start with, 40 counts.

I just followed Robinson-Patman allegations and it was finally pruned out by the pretrial order into this kind of issue as stated by the District Court.

Just the case of a retail store in the Mission District of San Francisco, one of hundreds in the city engaged in selling the same kind of merchandise.

Justice Potter Stewart: Are you reading from some --

Mr. Moses Lasky: I am reading, if the Court please, from page 134 of the record.

Justice Potter Stewart: Thank you very much.

Mr. Moses Lasky: Which has complaint that certain supplier, defendants won't sell it some merchandise allegedly at the behest of one of its competitors.

And Judge Barnes stated it this way.

And I'm reading first from 154 of the record and then from 161.

“By a pretrial order, one count, one was limited to a single conspiracy charging a Sherman Act violation.

The restraint relied on was in preventing plaintiff from obtaining certain,” the emphasis is on the opinion, “certain electrical appliances for resale while at the same time permitting Broadway-Hale to purchase those certain electrical appliances.”

Again, the emphasis is the courts.

“This is a simpler refusal to sell, allegedly, by joint action.”

Pardon me.

Justice John M. Harlan: Where is that?

Mr. Moses Lasky: I was reading, if the Court please, from 161 of the record.

Justice John M. Harlan: Thank you.

Mr. Moses Lasky: Now, let me define this matter even more specifically.

In the first place, this case does not involve all brands of these products, radios, phonographs, televisions, refrigerators, so on.

Only a small fraction are involved.

Our affidavits showed that there were over 20 major brands in the United States of radios, phonographs and televisions being sold in San Francisco not involved in this case, which it was not alleged that the defendants prevented plaintiff from getting any of them.

Over 18 brands of refrigerators, 23 brands of stoves, 30 brands of washers and dryers, all on the average something like six to seven times as many brands of these various appliances not involved in this case as were.

And as was said in the Court of Appeals' opinion, it's 159, among these competing brands are many of the outstanding and most widely advertised brands in the country.

And if I were to read the names then that the Court used, it would look like the blue book of American business, Capehart, Crosley, Du Mont, Hallicrafter, Magnavox, Motorola, Packard-Bell, Westinghouse, Bendix, I'm just skipping over, and Frigidaire, International Harbor, and so on and so forth, not involved.

And as Judge Barnes went on to say, “The appellant does not charge that it was denied the right to handle any of these vast number of brands manufactured and sold by companies not parties to the action.”

And so, I say in the first place, if the Court pleases, that a certain statement that sometimes appears in the briefs of my adversaries, about the elimination of a competitor, simply should be swept aside as an improper intruder in the case.

There was no conspiracy alleged about eliminating the plaintiff as a competitor because he had available far more brands than the few involved in this case.

Now, the next significant fact of this case and nobody ever disputed this when we were arguing at the District Court, nor was it ever disputed when we were in the Court of Appeals.

These cases have a habit of producing new arguments the higher you get, but not until we got up here was it suggested that this conspiracy was aimed at anybody but the petitioner alone?

And again, I refer to what Judge Barnes said, that's 178 of the record.

He says, “The conduct here was conduct directed at this plaintiff and only at this plaintiff.”

It wasn't aimed at anybody else.

It wasn't aimed at the market, any other retailer, any other wholesaler or the public.

And if one were to examine the complaint which appears in the record about -- about pages 9, 10 and 11, you'll find that the allegation of the complaint was that my client, Broadway-Hale, persuaded the other defendants to deny to plaintiff certain articles.

It didn't persuade them to deny anybody else but to plaintiff.

Now, the next significant fact is that this alleged --

Justice Felix Frankfurter: Would it been --

Mr. Moses Lasky: Pardon me.

Justice Felix Frankfurter: -- would it make any difference or would your argument be different if your client have persuaded all the others not to sell because the commodity as to which they made an arrangement, except at a 10% higher price maybe anybody else is getting?

Mr. Moses Lasky: I doubt --

Justice Felix Frankfurter: Just him, nobody is --

Mr. Moses Lasky: I doubt it.

I'll -- I'll say this.

If it had alleged that Klor's was a price cutter and they agreed not to sell him because he was a price cutter, this would be a different kind of case.

This motion would never have been filed.

Let -- let me state it in a form of analogy, if I may do so, although, all analogies are a little lame.

It's a difference between a rifle shot and a shotgun.

If I stand up here and aim a shotgun at the public, I want to affect price, I want to restrict the availability of commodities to it.

I want to eliminate a better type of goods and restrict it to an inferior type.

And if one of the pellets strikes the plaintiff, he has a Sherman cause of action.

If my purpose is to aim a rifle at him and to get him out of the way because he stands in the way of certain purposes of the defendant group on fixing prices, he has a Sherman Act cause of action.

Or if I use a shotgun and aim only at him, I don't intend to hit the public, but in fact, do hit the public, he has a Sherman cause of action.

It's a question then of purpose, intent or consequence.

Justice Felix Frankfurter: The suggestion is -- the suggestion is that a combination of suppliers not to sell to a single individual or to sell this advantageously as against other people, it's in and of itself affecting the public because, (a) he's one of the public, and (b) the public is entitled to make its choice from people to have equal access to the supplies.

Mr. Moses Lasky: That is the suggestion made by the other side.

That I think is the issue the Court will meet.

In other words, take my facts, what I say the facts are, that here, we aimed a rifle at George Klor -- this is the allegation.

We didn't intend to shoot the public, and in fact, we hit nobody but George Klor.

He remains in business, he has all of his range of goods to sell, but in addition, there are 1113 other dealers in San Francisco.

This is what we showed selling these particular products.

There were on -- in the Mission District some 50 odds selling this particular product.

And as Judge Barnes said, “If a person were stroll down Mission Street for a period of 11 blocks, five blocks of each side of the plaintiff, he would have come to 43 shops selling the particular goods here involved?

Justice Felix Frankfurter: A buyer is very capricious then the buyer might have wanted to go to the 44th shop, and access --

Mr. Moses Lasky: Buy --

Justice Felix Frankfurter: -- to him was cut off.

Is that right?

That's the case, isn't it?

Mr. Moses Lasky: That's -- that, if the Court pleases, is the case.

Justice Hugo L. Black: Suppose it aimed at 21 of those 43, would the case be different?

Mr. Moses Lasky: You will then have a different kind of case.

Justice Hugo L. Black: Why?

Mr. Moses Lasky: You'll have a different kind of case because then you would have to consider what was the consequence on the public of removing one-half the shops.

A very clear case would be if there were two in business and we removed just one other in business, if we remove him, we would have a monopoly.

Justice Hugo L. Black: In other words, it goes on the -- perhaps determinant on the basis of how much competition is cut off.

How many -- how many traders are cut out.

Mr. Moses Lasky: No, you might -- this is why I -- I insist, if I may say so, upon the facts of this case.

You might have a case, you could, in which you have to weigh a lot of evidence to determine it.

Fortunately, in this case you don't.

In this case, there is the effect on --

Justice Hugo L. Black: Just one.

Just one.

Mr. Moses Lasky: The effect and the public is nailed.

Unless you say, unless you follow the suggestion that because you -- a conspiracy, an alleged conspiracy to refuse to deal with one person is per se illegal.

Justice Hugo L. Black: I thought that had been held several times.

Mr. Moses Lasky: No.

If, Your Honor please, if I may be permitted to say so --

Justice Hugo L. Black: I'm just wondering.

Mr. Moses Lasky: It is -- it has not been so held.

Now, there isn't any question at all on a number of occasions in the lower courts, Your Honors decision in the Fashion Originators' case and a few others of this Court have been cited to the proposition that a group boycott is per se illegal.

Justice Hugo L. Black: What did Kiefer-Stewart says about that?

Mr. Moses Lasky: I recall that in Kiefer-Stewart, there was -- there were only have been two cases in this Court where a group boycott was involved.

Kiefer-Stewart was one in which it was not involved and there was language on it.

Now, my opponents have suggested that you treat this case with the word “group boycott”.

In the first place, a mere joint refusal to sale.

If I may be permitted to submit it, is not a group boycott.

In -- in all the cases that this Court has decided where they were talking about a boycott, they were treating of a -- of joint, concerted refusal to sell for the purpose of making the boycotted person conform to their wishes.

I'm not drawing a distinction between a primary boycott and a secondary boycott because both of those -- that's a distinction of whether you're just cutting off your trade with one person or cutting it off from him to make him cut it off from someone else.

But a mere joint refusal to sell as distinguished from a refusal to sell, used as an instrumentality or tool to compel him to conform your -- to your wishes, is not a boycott.

And this is the distinction that goes back to -- to Judge Taft when he was on circuit.

But let me pass by that and just take the question whether a joint refusal to sell, in and of itself, is illegal per se.

Justice Hugo L. Black: Contract or agreement or refuse to sell.

Mr. Moses Lasky: Yes.

And I would -- before I answer that question and come to the Court's cases because I -- I can discuss them all, I -- I suggest that we look at this case in perspective.

Here is, according to the allegations of the complaint, here is my client's shop, next door to it or two doors away is the plaintiffs.

My client says to a supplier, “Now, look, if you sell to him, he's going to handle this product, I don't want it.”

This -- this is not unusual.

This is the commonest thing in business.

This is brand competition.One shop sells interwoven socks and the other sells Phoenix socks.

One sells Stetson hats and the other sells Doves hats.

And the one fellow says, “Now, look, if -- if you want to sell your Doves hats to him I'm going to handle some other brand.”

Nothing illegal about that, so we say it to another.

We say it to 10, 10 different suppliers, still leading, plenty of brands for this other fellow to handle.

This Court has held in the past that sort of thing is perfectly legal, (Inaudible) case, the Bausch & Lomb case upheld it.

So then --

Justice Felix Frankfurter: No concept -- no concept --.

Mr. Moses Lasky: For the moment.

For the moment.

I'm taking --

Justice Felix Frankfurter: Take your time, no concept --

Mr. Moses Lasky: There -- we have here of what you might call a series of six or eight or 10 --

Justice Felix Frankfurter: But no concept as --

Mr. Moses Lasky: -- conspirators.

Justice Felix Frankfurter: -- between the suppliers.

Mr. Moses Lasky: Up to this moment, in my -- in my case.

Now, there were four other shops in this block and we could have said to each one of these suppliers, we, Broadway-Hale, wants it exclusive on that brand in this block and it still would have been legal.

We didn't do that.

There were still four others in this block.

So now, let us add to it the additional element that Your Honor here refers to.

And this is the element which according to my adversaries makes all the difference in the world and according to my view, makes no difference at all.

We add to what the incredible allegation which we will assume to be true that each of these suppliers cross agreed so that you had one conspiracy with my client and 10 suppliers instead of 10 vertical conspiracy.

Justice Hugo L. Black: But we have to assume that though.

Mr. Moses Lasky: We have, throughout the case -- the allegations in this complaint are very -- were not very artistically drawn but to avoid argument, we have always assumed that allegation.

Yes, Your Honor, I'm not going to dispute it and Judge Barnes assumed it too.

Now, does this one fact make all the difference in the world and make the conspiracy, alleged conspiracy, illegal per se?

And I submit to the Court, the answer is no.

The question remains whatever all -- has always been.

The illegality is a question of purpose or effect.

Purpose or effect.

Justice Hugo L. Black: How do you -- how do you -- may -- may I just ask --

Mr. Moses Lasky: Yes, sir.

Justice Hugo L. Black: -- (Voice Overlap) take up your time.

But it happens that I wrote this opinion, it was unanimous opinion.

When which this per se, that -- that's what I'd like to ask you -- they keep us to him but the Sherman Act makes it an offense for respondents to agree among themselves to stop selling to the people or customers.

Mr. Moses Lasky: I'll -- I'll address myself to that right now, if the Court pleases.

Your Honor read one sentence.

There was a sentence that preceded it.

Of course, here, it -- it is presumptions perhaps for me to tell Your Honor what you meant by an opinion you wrote.

Justice Hugo L. Black: Well, as you know as -- as if there's something that qualifies it while you should read it.

Justice Felix Frankfurter: You've got to get the meaning out of the word (Voice Overlap) --

Mr. Moses Lasky: Well, that -- that is precisely so.

And I would be presumptuous to say that if you meant something more than what I get out of it, I would submit Your Honor to have.

This was preceded by the words --

Justice Hugo L. Black: You would submit that would be an improper interpretation of the Sherman Act.

Mr. Moses Lasky: Yes.

The Kiefer-Stewart case was a case where Seagram and Calvert conspired together that neither would sell to anybody who would not adhere to a resale price.

It was a price-fixing conspiracy.

And the sentence was, Seagram and Calvert acting individually perhaps, might have refused to deal with petitioner or with any or all of the Indiana wholesalers.

But the Sherman Act makes it an offense for respondents to agree among themselves to stop selling to particular customers.

Now, the Court was not stating a universal rule, it was speaking here of Seagram and Calvert in the facts of the case to wit, two parties conspiring for the purposes involved in that case.

They agreed together not to sell for what purpose?

To fix prices.

And I've admitted 10-15 minutes ago that this would be a clear violation of the Sherman Act.

You can take every case, this Court should decide it.

You can start it with the binder of case which is the first one back in 263 U.S. which is always said to be the origin of the rule that a -- a group boycott is illegal per se.

There, the complaint alleged that the distributors controlled all films in the United States which could not be procured from others and that the Board of Trade was organized for the purpose of enabling these distributors to control prices and dictate terms to their patrons in Nebraska.

A conspiracy which broke out of a particular exhibitor because he would not maintain the prices.

Now, Judge Barnes took every one of these cases and analyzed them and found that this was true.

That in every one of them, you had a purpose to hit the public or you had an effect to hit the public.

You had two motion pictures theaters in a town and one was knocked out, the public was affected.

That's why I say we could have -- I can imagine cases -- we could have straight -- take these problems.

But in a case like this where you have 1000 other people handling it in the city, and other brands available, the public has not been affected at all.

Justice Felix Frankfurter: Mr. Lasky, doesn't your argument or your contention really get down or isn't it not a fair statement that what you're doing, what you're arguing comes down to is to read into the Sherman law and make sure the public interest in Section 5 of the Federal Trade Commission Act.

In effect, that's what it gets down to, doesn't it?

Mr. Moses Lasky: I think it comes fairly close to that but I would express it a little bit differently.

And -- and you know, I happen to agree fairly closely with Mr. Elman, although other counsel for other defendants haven't agreed with me on this, that the real question is not reasonableness, the rule of reason here.

I say you don't reach the rule of reason whether a restraint is reasonable or unreasonable until you first decide whether it's a restraint.

I say the key question in the case is, what does the Sherman Act mean by the word term “restraint of trade”.

Now, we all know that taken literally, it's as the Court said in the Northern Pacific case, all encompassing.

And we know that this Court grappled with that question 40 and 50 years ago.

And gradually, it began spelling out what it meant.

The terms could not have a dryly literal meaning.

I don't even think the Court ended up getting at the common law meaning.

The Court finally spelled out the meaning of restraint from three sources, the common law, the history of the evil that the act was designed to meet, and something more than that.

Justice Felix Frankfurter: But is there any case in this Court, we've gone to them recently but I have not.

Mr. Moses Lasky: Yes.

Justice Felix Frankfurter: Is there any case which makes a distinction between the same -- the same -- what shall I say, combination among suppliers or manufacturers directed against -- directed for having small consequences and having larger consequences?

Is there any -- any case in our -- in this -- in our report that makes the kind of a distinction that is the basis of the present case.

Mr. Moses Lasky: Well, I -- I think so.

I think the Apex case does, if the Court please.

Justice Felix Frankfurter: Oh, no.

I think really not, Mr Lasky.

I think that went on the special consideration of -- of whether a conduct by state unions tell their minds whether one agrees or not, hasn't -- to be treated differently.

Mr. Moses Lasky: Well, may -- may I -- may I differ with Your Honor for a moment on that and express my reasons why did we --

Justice Felix Frankfurter: Forgive me.

This is what I'm trying to bring you back to --

Mr. Moses Lasky: Alfos Mason in his biography of Chief Justice Stone has quite a discussion of the --

Justice Felix Frankfurter: Well, must I go to Mason to find out what that brings you in Apex?

Mr. Moses Lasky: No.

No, but I say let's go to the words of the opinion itself.

In the Apex case, Judge Stone, after reviewing the history of it, have this to say.He said not all restrictions on trade or commerce, even those which do restrict as to interstate trade and commerce and I intended to fall under the Sherman Act.

He went on to stay beyond that --

Justice Felix Frankfurter: I agree with that.

Mr. Moses Lasky: Yes, that the end sought was the prevention of restraints to free competition in business and commercial transactions which tendered to restrict production, raise prices or otherwise control the market to the detriment of purchasers or consumers of goods and services, all of which it come to be regarded as a special form of public injury.

And then he said what I think is the key -- the answer perhaps to Your Honor's suggestion.

He said restraint, and I'm reading from page 500 of the opinion which I believe was in 310, U.S., “Restraint on competition or on the course of trade in the merchandising of articles, moving in interstate commerce, is not enough unless the restraint is shown to have or has intended to have and affect upon prices in the market or otherwise deprive purchasers or consumers of the advantages which they derive from free competition.”

Now, the suggestion has been made in the brief of the Solicitor --

Justice Felix Frankfurter: But that isn't what he says.

That was attachments to clearly fuse the opinion if I may say so, but can you say -- can you deny that the decisive thing in that case was that special consequences, the -- like the Coronado Coal case, the particular relation of conduct by trade union and the derivatives, not in the (Inaudible) of question of trade union activities upon (Inaudible)

Isn't that true?

Mr. Moses Lasky: Of course.

The characteristic fact of the case was that there was a sit down strike.

Justice Felix Frankfurter: Well --

Mr. Moses Lasky: But enough -- but -- but if the Court pleases, another outstanding fact about the case was that while -- if I recall, the Court was asked to hold the trade unions that labor was not subject to the Sherman Act.

The Court declined to place it's decision on that ground, and Chief Justice Stone ended up with a statement to the effect that the law, the rule he was laying down -- that the court was laying down there was the same in labor and in non-labor cases.

Justice Felix Frankfurter: That only says the reasons the Court declined.

I -- I was down the Court --

Mr. Moses Lasky: Yes.

Justice Felix Frankfurter: -- when Apex was decided.

The reason it declined to do that is also clear because the Court has already held in the second Coronado case, that a trade union, unlike the Trade Disputes Act of England which immunize labor unions from the restraint of trade, unlike the English law following (Inaudible) decision.

In the second Coronado case, it was held that if trade unions bring action against an employer to mind in the case, in order to put it out of business and not to promote legitimate interest of trade union, they were within the Sherman laws.

Or if trade unions combined with manufacturers and employers, they are within the Sherman law.

So that, what was said by Justice Stone in Apex was nothing new and he would have had to do that to reach a result and they couldn't have reached.

The courts couldn't have a court to say, that trade unions as such are outside the Sherman law the way agriculture cooperated, they're outside of the Sherman law.

Mr. Moses Lasky: Well, no.

Justice Felix Frankfurter: But -- but you can't -- I don't have to tell you, Mr. Lasky.

You can't take the words with such a long opinion as that was, and detached from the essential fact of that case, namely, as you say, this was a sit-down strike in order to promote conventional legitimate and personal trade union.

Mr. Moses Lasky: Of course, you cannot detach a case from -- from its facts and that's something I've -- myself denied not over five minutes ago.

Justice Felix Frankfurter: (Inaudible)

Mr. Moses Lasky: But nevertheless, Chief Justice Stone expressing the principles was trying to do as I see it to two things.

He was trying to express not merely a narrow -- narrowest possible rule that would dispose of the case before and he was dealing with a -- with a rather -- rather vexing problem on the construction of the Sherman Act and as meaning of the term restraint.

He was trying to lay down some universal principles.

That's number one.

Number two, he was being careful to say that they were principles that were not confined to labor.

Number three, he was very -- he -- he use language which as I have just read it, fully applies to the commercial situation.

In other words, I say the distinction isn't between a commercial case and a non-commercial because he said restraint on competition or on the course of trade in the merchandising of articles.

Justice Felix Frankfurter: If you're trying to win this case, you had any light on the problem that worries me, namely, by the -- the Sherman law doesn't apply to minimal situation, if you please, but if you -- if you multiply it, take some of the hypothetic cases put to it, Justice -- by Justice Black.

This is one dealer.

How about three dealers?

How about five dealers?

I can assure you the Sherman law gives one enough trouble, this gives me enough trouble without having to decide when is -- when is something enough.

Mr. Moses Lasky: Well, if the Court pleases --

Justice Felix Frankfurter: And that's why I press you.

Mr. Moses Lasky: This is the same --

Justice Felix Frankfurter: But it's not even English Sherman law in the Federal Trade Commission Act.

Mr. Moses Lasky: Of course, they're two different acts because the -- because the Federal Trade Commission Act has something explicitly read in there about public interest.

This we know.

But on the other hand from the earliest time this same thing has been read into the Sherman Act.

Now, the conclusions we've arrived at , after a little brief submitted, we've arrived at to Apex which I've always considered as a rather more refined expression of the rule that this Court had been coming to for a long period of years.

For example, back in the Corn Products case which was decided in 1914 many years before -- before Apex, the Court had expressed it somewhat differently having reached it from Standard Oil through Justice Holmes' opinion in the Nash case and so on where he said, where the Court said that the prohibitions of the statue were enacted to prevent not the mere injury to an individual but the arm to the general public which would be occasioned by the evils which it was contemplated, would be prevented.

And hence, the prohibitions of the statue were coextensive with such conceptions.

And then Mr. Justice Rutledge in Mandeville case in 1948, we expressed the same when he said that the test of the private parties' right to recovery under the react is whether the statute's policy has been violated in the manner to produce the general consequence it forbids for the public and a special consequence for the particular individual.

Now, it is true I have not found, I don't believe I have found any case in this Court but there are a multitude, there is a multitude of cases in the lower courts that have dealt with precisely this problem -- I'll go further.

There are cases, everyone of them, where the plaintiffs' rights were much stouter than they were here, stronger cases and yet without a single exception, the lower courts starting as far back as in the 30s have held that in this particular kind of case, the plaintiff had no rights.

And when I say this particular kind of case, I mean a case where a particular dealer, sales agent, consignee, distributor of some kind handling the product is driven out by virtual conspiracy.

And yet the Court say, “Well, there are many other brands available?

The public hasn't been hurt, you can't say any competition has been affected.

I think it was the Third Circuit (Inaudible) where the courts made in the seventh -- where the courts -- it would be effect on competition is like the effect on the temperature of a light of match in all outdoors.”

Justice John M. Harlan: Can I ask you question --

Mr. Moses Lasky: Yes, sir.

Justice John M. Harlan: -- somewhat narrower basis?

Would it be open under this complaint for Klor's to show that they have been price cutting.

And that this alleged conspiracy had eventuated as a result of their price cutting and ergo -- the public therefore had been deprived of KLor's of the source.

We're getting these materials, these appliances at a lower price would, it be open under the complain to show that?

Mr. Moses Lasky: I don't think so and for this reason.

If we haven't had the pretrial hearing, and I -- I don't know what I might say about it, but we brought up our motion (Voice Overlap) --

Justice John M. Harlan: Let me -- let me anticipate the question.

Assuming that it were open, would that in your judgment stated -- make out a case under the Sherman Act.

Mr. Moses Lasky: You -- you state a case where there was a conspiracy not to sell to him -- to sell --

Justice John M. Harlan: Because he had been cutting prices and therefore they wanted to have (Voice Overlap) --

Mr. Moses Lasky: If the Court pleases, I have no qualms in saying that if we had a complaint that charge us with conspiring not to sell to him because he was a price cutter, it would state a case under the Sherman Act.

Justice John M. Harlan: Then why -- then go ahead and tell me why that hasn't opened and approved under the complaint.

Mr. Moses Lasky: Because from the moment we walked into Court, we raised this question and he never contented that this was a price case, neither was our motion for judgment came on, several months after our motion to dismiss was first filed that we called attention to this point.

And in arguing the case from the District Court and throughout arguing the case from the Court of Appeals, it always said, “Price fixing is not the only kind of case where you -- there's a violation of the Sherman Act or injury to the public.”

In other words I -- I assume that when this Court granted to sue the writ, it did so to decide a certain -- what was conceived to be important issues of law and not to reappraise the decision of the Court of Appeals in the District Court about this particular complaint.

I say that because it was never argued by my opponent in the District Court and the Court of Appeals that there was any price fixing element involved here.

They never suggested it.

Have they suggested it in the District Court, we might have taken a different course.

I think I could lay my hand upon -- unfortunately, we didn't bring up the oral arguments.

But I did fortunately bring in to the record what counsel had put in his brief in the District Court on this point and I refer to page 129 of the record.

Defendant -- this is quoting from the plaintiff.

Of course, it was not Mr. Keith, Mr. Keith is not in the case at the time.

Mr. Keith came to it on appeal.

“Defendants in effect argued that the conspiracy cannot be within the prohibitions of the Sherman Act since the conspirators did not fix or regulate prices, limit production or distribution or bring about a deterioration in quality that these actions are not along the types of conduct prohibited by the Sherman Act.”

There was no suggestion or indication that the plaintiff desired under this complaint to contend that anyone of these things, prices, production, and so forth, were involved.

And he so suggested, the case might have taken a different course.

And I say when we get up to this Court, the case should be determined upon the basis upon which it was universally treated in the courts below.

Now, I have said that there are a veritable hosted cases in the lower courts of this very character.

As far back as the -- the Abeloff case in -- which came up in San Francisco in 1939.

Precisely this case, a group of defendants were charged of having conspired not to sell to the plaintiff dealer.

And it was, held no public injury.

Then there's the famous Shotkin case from the Tenth Circuit.

Any defendants, General Electric, Westinghouse and their distributors, as the counterpart of this case which is the counterpart of that, were accused of having conspired not to sell to the plaintiff.

That case was decided on the pleadings and it was held so what, he could get other products and there were numerous other dealers involved.

This concept of the public injury has been criticized as having been upset by the Radovich case which of course is Justice Clark's opinion.

Now, before taking up the opinion itself, may I suggest that no lower court, no lower court at all has considered that the Radovich case outlawed or swept away the public injury concept.

The Eighth Circuit in the Regal case, and curiously enough, the -- the -- I think it's the third, Miller Motors case in 252 F 2d, which I think is interesting to note because the Solicitor General appears against me and that opinion was by Judge Sobeloff who was the predecessor Solicitor General and he states the public injury point as if it still -- still the law.

That -- this was just the other day, 252, F.2d.

Therefore, there will be no showing of any public injury resulting from a restraint of commerce and automobiles or advertising.

It cannot be said that the Sherman Act has been violated.

The hybrid nature of a private antitrust suit dictates that to succeed.

The plaintiff must prove not only that the defendant has infringed one or more of the antitrust laws to the public injury but also that the infringement has resulted in private injury.

Now, let me -- let me turn to the Radovich case.

The respondents in the Radovich case presented a very curious argument.

They said in effect that the plaintiff in a private suit must allege and prove more than the Government must prove in a Government suit.

They said in addition to showing a violation of the Sherman Act, they must prove a public injury.

And the Court's answer to that is as it should have been.

If you have a proof of violation, you prove the violation.

But the question is what constitutes a violation?

And this is -- reference has been made to -- to Milton Handler -- Milton Handler article discusses the Klor's case.

And he says that what Judge Barnes did and seemed to him to be correct.

You cannot divorce that question of the effect upon the public from the concept of what is a violation of the Sherman Act.

You don't have to prove something in addition to violation.

You don't have to come into court with any formulistic set of words in the complaint that there has been a public injury.

If you allege the kind of action which from its nature is deleterious to the public like price fixing, reducing quantity available, you have automatically alleged the kind of restraint which is -- has a public injury.

If having alleged it, you prove your allegations, you proved your case.

But if your allegation in your case is one which is not in and of its essential nature deleterious to the public, then you've got to go further and show what's involved.

Justice Felix Frankfurter: What did you say to my question a while ago that if they agreed to sell them all the commodities as to which they made an arrangement, whether 10% higher price than anybody else would charge them --

Mr. Moses Lasky: Well, I --

Justice Felix Frankfurter: -- what would you do with that?

Mr. Moses Lasky: This is what I would do with it.

I would say and this is what the case started -- there are certain elements.

Or this -- this would the Robinson-Patman case.

Now, there were 40 Robinson-Patman counts here and I don't see how you can have a Sherman Act conspiracy to violate the Robinson-Patman Act.

Now, I'll tell you why I say so.

The seller who grants a discriminatory price less to my client and to Mr. Klor's is guilty of violating the Robinson-Patman Act.

The buyer is not guilty and cannot be held liable for damages unless he knowingly received.

Justice Felix Frankfurter: You mean to say if -- if all the steel corporations agree to -- to sell to the United States the needed steel, that's 10% higher than any one of them had identical prices, that would have been within the Sherman law?

Mr. Moses Lasky: Well, sell to the plaintiff 10% higher?

Justice Felix Frankfurter: Well, no.

All the steel manufacturers.

The nearest view in (Inaudible) to say, we'll -- let's agree to jack up the price 10% of the offers were heretofore made, wouldn't that be within the Sherman law?

Mr. Moses Lasky: Well, it certainly would be within the Sherman Act.

Justice Felix Frankfurter: Well, what difference is it between --

Mr. Moses Lasky: Well, it's -- it's -- you're dealing with it because you --

Justice Felix Frankfurter: The reason I've asked -- the reason I put that is -- is, just that my case would be Patman Act.

Mr. Moses Lasky: No.

You -- you stated a different case.

You stated the steel company selling steel to the United States which is a buyer, a consumer and how -- how can I say the public has not been injured when I got --

Justice Felix Frankfurter: Well, I'm not talking about injury but I'm -- that isn't a question of injury.

But the question of whether that -- you put my case as to Klor's, say that would be the Patman Act?

I didn't quite appreciate that.

Why would that be a Patman Act?

It might be a Patman Act also.

That's not on the clearer statutes on the the statutes before.

Mr. Moses Lasky: Well, it isn't a statute --

Justice Felix Frankfurter: But what about the Sherman law case?

Mr. Moses Lasky: Because Klor's --

Justice Felix Frankfurter: How many (Voice Overlap) of sellers who sell by agreement at a higher level than anyone of them individually would sell to the supplier?

Mr. Moses Lasky: Well, I think if there was an agreement among -- among all these people to sell to Klor's 10% higher than they sold to our people, it might very well have a Sherman Act case.

But there's any such allegation in this case --

Justice Felix Frankfurter: Oh, no, no, I didn't mean that.

Mr. Moses Lasky: No.

But what I was -- my mind went off to -- to all these allegations in 103 pages about discrimination if we're moved out into the other 39 counts.

Justice Felix Frankfurter: Are you saying that would be -- likely would be within the Sherman law because that's per se price fixing, is that it?

Mr. Moses Lasky: That is the kind of thing which the courts have -- almost from the beginning said, is essentially deleterious to the public when you start tampering with something so sensitive as prices.

Justice Felix Frankfurter: Although it'd only be one seller out of 10,000 whatever it is -- 20,000 of these little sellers sell you all these commodities.

Mr. Moses Lasky: You know, if -- if I did happen to have a case involving a -- of a particular problem of two tiny little merchants on Mission Street who -- which of whom had a $500 volume a year and they agreed with each other to run up their price one cent, I would say the Sherman Act -- well, wouldn't be trivialized and wasn't violated.

This is like -- tell me what is the -- the 10 tailors of Tully Street petitioning Parliament to the name of the people of England.

We've got to stop somewhere.

The Sherman Act was enacted for some very important purposes.

And it cannot be -- I suggest it cannot be trivialized in this way.

Not -- everybody knows, if the Court pleases, those of us in the firing line know at least that up to 10 years ago, every squabble controversy or to use the jargon of the street, every beat was cast in the terms of negligence or fraud.

And those of us down on the firing line now know that every controversy now gets cast in terms of an antitrust violation.

And all, by the little rubric conspiracy.

And so, they tempt us to look everything into the federal courts.

Just the other day, Congress passed an act to protect the federal courts from being deluged of what ought to be state court litigation by limiting the diversity jurisdiction.

And I submit without any hesitation at all --

Justice Felix Frankfurter: Well, I've got a feelings of my prejudice, Mr. Lasky.

Mr. Moses Lasky: Well, I didn't know that but I move freely to what I thought isn't sound -- your policy judgments, the rubric diversity is going to be eliminated and everybody is going to come in under the rubric conspiracy.

And you -- you can't answer the conspiracy except to deny it and then you have to go to trial, and the federal courts, you're just going to be deluged in the same old way --

Justice John M. Harlan: That is the reason for following (Inaudible)

Mr. Moses Lasky: It's increasing with geometric progression in the last few years, and this -- this case here, I don't know whether to call it the apogee or the native of that development.

Justice Charles E. Whittaker: So this is how you measure the (Inaudible)

Mr. Moses Lasky: Well, I -- well, at time we filed the motion, we didn't think of it that in those terms.

We thought we were proceeding on some elementary law and -- and the courts below did too.

Well now, let me touch on -- on one other matter and as I won't have to touch on it tomorrow.

I may not even have to speak tomorrow.

Something has been said about interstate commerce.

Interstate commerce is involved here in the sense that these products come from outside of the State, although if we ever tried it, we'd find it wasn't quite that way.

But while the amount of interstate commerce involved in any industry or section that's involved in the cases of no consequence at all, what is important is that what is involved must be appreciably or substantially effective with industry --

Chief Justice Earl Warren: We'll recess now.