CALIFORNIA LIQUOR DEALERS v. MIDCAL ALUMINUM
Legal provision: Sherman
Argument of William T. Chidlaw
Chief Justice Warren E. Burger: We'll hear arguments next in California Retail Liquor Dealers against Midcal Aluminum.
We'll wait until the rostrum clears counsel.
Mr. Chidlaw, I think you may proceed whenever you're ready.
Mr. William T. Chidlaw: Mr. Chief Justice and may it please the Court.
The case we have before us now involves the state's power to regulate liquor within a state's borders as opposed to the Commerce Clause and specifically a statute enacted under the Commerce Clause, namely the Sherman Act.
In this particular case, the City of California has an extensive comprehensive Alcohol and Beverage Control Act which includes within its provisions two that are specifically involved in this case dealing with wine.
And those two sections require that the price at which wine will be sold from wholesale to retail be posted with the department and the other section requires that the wine we sold at a price no lower than that price typically.
The case involves the setting of that -- of those prices specifically this case involves wholesale to retail, those are the facts of this case, but the statute involves that both that wholesale to retail price and the retail to consumer price for wine in California be set generally by the wine producer, that is a third party.
The problem that we have and the reason we're here today is because the California Supreme Court in a case that was decided approximately year before the instant case ruled that the requirement that the manufactures of distilled sprits set the price from retailer to consumer was invalid as being in conflict with the Sherman Act.
And in this case, our Court of Appeals said that it was bound to follow that California Supreme Court case and apply it not only at the retail to consumer for wine level but also at the wholesale to retail level.
In other words, extending that case somewhat on the basis primarily that the -- there was no difference in our Court of Appeals' mind between a manufacturer setting the price from retail to consumer and a manufacture setting the price from wholesale to retail.
We think there are some difference between that (Inaudible) basis and purpose of the statutes.
However, I think and those are covered in our brief.
So I don't think that in view of the situation and the issue involved in this case that that necessarily needs to be discussed at oral argument.
The Court of Appeal declared both those statutes to be invalid following the Rice case.
Now the Rice case by our California Supreme Court evolved -- the Court evolved a new test.
We find this test in no other cases either in California or in the -- in the cases of this Court.
And what the court did in that case, the California Supreme Court did was to take various cases by this Court in which state regulation of liquor had been involved but which had involved provisions of the Constitution other than the Commerce Clause for instance, the First Amendment like in LaRue or the Fourteenth Amendment like in Wisconsin versus Constantineau which was a due process case.
Justice Harry A. Blackmun: The Rice case was not brought here for review, was it?
Mr. William T. Chidlaw: No, it was not.
There was no writ filed in the Rice case and the --
Justice Harry A. Blackmun: If you prevail here, what happens to the Rice case?
Mr. William T. Chidlaw: Well, I would think that if we prevail here that this Court in order to eliminate the uncertainty and confusion caused by that case will overrule the Rice case.
We're asking you to reverse the case that's specifically before you, but to overrule Rice case and eliminate its effect.
We have not briefed but there was a case pending for the Court of Appeal in New York today which was argued a week ago, Monday which involves the fair trade wine retail to consumer in New York.
The Castlewood case implications in that case which was a case in which the federal regulations under the -- from the Bureau of Alcohol, Tobacco And Firearms ran and hit on into a state statute from Florida that in which there was a conflict about what discounts were proper.
That case is I understand the time for filing with this Court is not yet expired and there's a suggestion in the footnote from respondent Midcal that that case maybe on its way here.
Kansas just past session enacted a new regulatory scheme for Alcoholic Beverages where they abandoned the idea that administratively they would set the prices for liquor in Kansas and instead adopted minimum markup statute where in effect the outsider, the private, the third party or whoever sets the price or the cost and then state simply says what percentage the retailer will add to that price.
There are other aspects of the Kansas law that also would be I think deemed to involve anti-competitive situation.
So, there are a number of cases around the country that are involved in the same basic problem that the Rice case has created, this balancing of the interest test.
Justice William H. Rehnquist: Mr. Chidlaw, in response to Justice Blackmun's question, you said you felt we should overrule the Rice case which is I understand is a California case.
I reminded of what I think is the statement of Mr. Justice Brandeis in one of the opinions of this Court that all this Court can do in its order if it reverses a state Supreme Court or state Appellate Court as to say, it's reversed for proceedings not inconsistent with this opinion.
That doesn't mean that the reasoning of the opinion couldn't cast doubt on the Rice case, but surely we couldn't say in the opinion that the Rice case is overruled that -- that's a matter of state law.
Mr. William T. Chidlaw: Well, I would presume, I think your point is well taken Mr. Justice Rehnquist, I would presume that if and when this Court rules that our position on the relative importance of the two constitutional provisions, they were correct on that that the California Supreme Court would follow the decision of this Court.
I don't think this Court can avoid ruling on the question that was the basis of the Rice case.
So, and I would presume that our California Supreme Court would follow this Court's decisions.
So, I don't think it would be an idle act on those matters and on the specific case, I don't think there's -- there would be any -- any problem at all.
I think that we've covered in our briefs, this Court has explored this -- the difference between a state statute that's regulating liquor when it conflicts with the Commerce Clause and always upheld that and discussed, this Court has discussed the Fourteenth Amendment and the due process equal protection exceptions to that.
This Court discussed over and over again the federal enclave exception where the goods are intended for federal law enclave and foreign commerce like in the Hostetter versus Idlewild.
So, I think that that there is no question that the balancing of interest test that was evolved by the California Supreme Court is simply based on an erroneous interpretation of those exception cases that did not involve the Commerce Clause running here on and to regulation of liquor within a state.
Now, it's been suggested by both Midcal and the Solicitor General in its brief that if we give to the Twenty-first Amendment that which I believe this Court is always given it as far as the state's power is concerned, that allows the state to in the name of regulating liquor to regulate the hours of employment and securities requirements and they've conjured up a situation which would involve all kinds of conflicts with other federal laws and I think the simple answer to that contention is that the state has to be regulating liquor.
If the state is trying to regulate securities in the name of liquor or the wages and hours in name of liquor or even freedom of speech for instance like in LaRue where there was no -- if there is no connection with regulating liquor, I think that in those cases clearly the state has the power.
Justice John Paul Stevens: Mr. Chidlaw, just to pursue that for second, supposing they passed a statute that said the wages of a driver of a vehicle transporting liquor from place to place within the state shall be such as has posted by whatever company engaged in the driving business, sort of like this where you post the price for the wholesale and everybody has to follow, why couldn't they do the same thing to regulate wages the same way, either the union or the employer do the posting, make the legislative choice and then prevail over the National Labor Relations Act?
Mr. William T. Chidlaw: I can't conceive of any legitimate state purpose in regulating liquor that would also deal with the regulating of the wages for a driver of truck --
Justice John Paul Stevens: Well, they want to be sure that the people who drive are adequately paid or not over paid just as -- what is the state interest at stake here?
Mr. William T. Chidlaw: Well, in this -- in the wholesale to retail, the state interest isn't preventing discrimination among similarly situated retailers for instance.
We have this price posted, everyone knows what that price is and they are required to sell at that price so there can't be any discrimination among retailers by the wholesalers.
In Robinson-Patman type --
Justice John Paul Stevens: Well, why wouldn't there be a state interest in having all people who drive large trucks containing liquor be paid the same amount?
Mr. William T. Chidlaw: I can't conceive of any legitimate state purpose in doing that because the Twenty-First Amendment was designed in my opinion, and I think the cases support this, to allow state to regulate liquor within its borders.
And I think it's --
Justice John Paul Stevens: (Voice Overlap) some drivers you paid a lot more than others while the people that they deliver to have a higher costs for paying for the transportation and same kind of -- economic discrimination that you have in different prices that you charge.
Mr. William T. Chidlaw: I -- that's -- I think there are justifications for the statute here that historic, traditional and do have a relation to regulating liquor and I don't see any justification for regulating in these other areas --
Justice John Paul Stevens: Are there other states statutes or Cartwright Act and some of the others that prohibit price discrimination in California?
Mr. William T. Chidlaw: There are, there's an Unfair Practices Act that prohibits that.
There -- our California Supreme Court has observed however there's a very difficult to prove violations of that and therefore, our California Supreme Court in past has said that one of the purposes of this act is to make proof easy in these type of situations.
I think that the California Supreme Court in using words like “picking up” words, this Court used like “pro tanto repeal” and each considered in the light of the other referring to constitutional provisions.
I think they've gotten off the track and the regard and I think the important phrase is to look at when you're examining the state statute under the Twenty-First Amendment are phrases that have been used by this Court like unfettered by the Commerce Clause.
And I think that Justice Frankfurter is the one that said the rules of the state and federal government were reversed in the field of liquor regulation as far as the Commerce Clause was concerned.
This Court has said has recently as LaRue that the states are totally unconfined by traditional Commerce Clause limitations.
I'd like to go from those remarks into what is now have been raised for the first time in this case and that is the idea that the Twenty-First Amendment because of the language used and because of some quotations from some of legislative history simply allows a state to either prohibit or restrict imports.
And I think jumping ahead, I think the answer to that contention is that this Court has never so held but more importantly is if that were the only thing that Twenty-First Amendment did if that was the only power that that gave to the states then the state's -- that would constitute a freezing of the Twenty-First Amendment concept in 1933.
In other words, in 1933, the Commerce Clause had not been ruled by this Court to extend the far reaches that it has today and at that time when they were discussing the Twenty-First Amendment everyone knew that the state had the power to regulate commerce generally once it had gotten beyond this interstate commerce as interpreted then, that concept.
So therefore to have specified specifically that a state has the power to regulate liquor within its borders and say it in more specific language than they had would have been suffrage.
If we were to go back to the Sherman Act in 1890, as one of -- as one of the Justices and I -- forgive me I don't remember which one but in a -- either concurring opinion or dissent pointed out that in 1890 when the Sherman Act was being debated there was a lot of languages on the floor of Congress indicating the Sherman Act was not intended to extend into the states' borders and indeed it didn't until the 30's -- middle 30's.
So, what counsel is contending for with this argument about in fact wet dry, the state simply has a right to remain dry and to prohibit the imports is to freeze the Twenty-First Amendment effect and allow the Commerce Clause effect to go right on up-to-date and I would suggest to this Court as I think I have in the brief that unfettered by the Commerce Clause means unfettered by the Commerce Clause as it exists today not as it existed in 1933.
Justice Byron R. White: Well, you would suggest to the state could just have a statute that authorized price-fixing generally if people wanted to engage in it?
Just say that --
Mr. William T. Chidlaw: Are we talking --
Justice Byron R. White: -- in the policy and are -- well, no in liquor that as the state statute it says price-fixing of any kind in the liquor business will not be illegal.
Mr. William T. Chidlaw: That one troubles me just a little bit but this --
Justice Byron R. White: But why, why they say pursuant to our --
Mr. William T. Chidlaw: Well, my answer to --
Justice Byron R. White: -- under the Twenty-First Amendment?
Mr. William T. Chidlaw: My answer to you specific would be yes, I think the state would have a power to do that, but I would follow that up with the idea that no state has ever done that to my knowledge.
No state has ever authorized horizontal price fixing.
Justice Byron R. White: Well, it could though in your view --
Mr. William T. Chidlaw: Well, I think I did in the Parker case.
Justice Byron R. White: Well it is -- you certainly say that a manufacturer can set a standard price for all retailers.
Mr. William T. Chidlaw: Well, that's correct and I do believe that under the Twenty-First Amendment the state does have the power to do that.
I think that they would state because of the combination of our state to manufacturers and instate manufacturers a state might well has some extra territorial effects in such a statute.
And there might be other reasons the equal protection consideration would come into play and I think that although the state would have the basic power in some cases to do that, I think there be some problems with it in connection with these other areas.
Justice William H. Rehnquist: Well, there were certainly extra territorial effects in Parker against Brown too where the resin crop was shipped out of state?
Mr. William T. Chidlaw: Yes, it certainly were.
Justice John Paul Stevens: Let's see why you hesitate on Mr. Justice White's question because it seems to me that the state interest would be -- rather clear there.
One that would eliminate the discrimination if they all agreed on the price and secondly it probably would tend to restrict the amount of goods sold because generally when you have monopolistic market it cuts down on the supply.
Mr. William T. Chidlaw: No, I think that's true and that's would happens in the monopoly state.
The state has the total monopoly and it sets one price, it's as though all the competitors --
Justice John Paul Stevens: It's not what you think you would say categorically that would be alright for a state to authorize concerted action to restrict the (Voice Overlap) --
Mr. William T. Chidlaw: I suppose the hesitation is based on the idea that I don't believe any legislature has ever done that I am not anticipating a legislature would do that because --
Justice John Paul Stevens: Well, why shouldn't the legislative same policy (Voice Overlap) --
Justice Potter Stewart: It does follow.
Justice John Paul Stevens: -- same policy (Voice Overlap) --
Mr. William T. Chidlaw: Yes, absolutely I agree that the power of the Twenty-First Amendment gives the state the power to do that --
Justice Potter Stewart: Authorize that?
Mr. William T. Chidlaw: Right, and whether --
Justice Potter Stewart: And thereby exempted entirely from the anti-trust laws?
Mr. William T. Chidlaw: Right, I suppose what I'm doing is putting myself in the position of legislate and I might have some personal reservations about doing that but yes the state has that power.
Justice Byron R. White: And I suppose that you could with the same reason you could -- the state could make price discrimination illegal.
I mean legal, quite legal that someone want to do prefer certain retailers over some others or they could.
Mr. William T. Chidlaw: Well, I think again -- I think we run into an equal protection argument --
Justice Byron R. White: Yes, but they could?
Mr. William T. Chidlaw: Well, that's the absolute theory.
Justice Byron R. White: You mean equal protection what is (Voice Overlap) --
Mr. William T. Chidlaw: Well, for (Voice Overlap) --
Justice Byron R. White: -- they got more reached than the commerce or what?
Mr. William T. Chidlaw: Well, the Equal Protection Clause has been held by this Court and I think rightly so to effect the Twenty-First Amendment.
The Twenty-First Amendment was only intended to do replace the Commerce Clause and liquor regulation.
It wasn't intended to replace the Equal Protection Clause, or the Due Process Clause or any of the other personal guarantees and I don't believe the juror scheme would hold up under an equal protection argument.
Justice John Paul Stevens: Mr. Chidlaw, I think I'm not sure I don't suppose the Twenty-First Amendment was argued in the Schwegmann case but (Voice Overlap) --
Mr. William T. Chidlaw: Not as far as I know.
Justice John Paul Stevens: (Inaudible) and I take that you would contend the case should have been decided the other way under Twenty-First Amendment, Schwegmann case (Voice Overlap) --
Mr. William T. Chidlaw: No, no I wouldn't because and I want to be very careful by how I say this but the Schwegmann case did not involve a liquor fair trade statute, it involved the general fair-trade statute and if the state has not acted in the liquor field then the federal law you know may operate and --
Justice John Paul Stevens: Yes, that's right, I remember that.
Mr. William T. Chidlaw: The -- I would think I'm basically out of time.
I didn't want to -- a time but I did want to suggest that the preemption argument made by the Solicitor General in his brief which I received the printed brief only last Friday and it was somewhat different in the uncorrected typescript that I had received before but I did want to point out to the Court that although the Federal Trade Commission seemingly approved the uncorrected typescript that I received a week before that in the printed brief and I'm not sure what page that appears, in the printed brief we have to see attorneys of -- I don't want to use a word “disavowed" but they've indicated and not participating in the Twenty-First Amendment argument.
I think that's significant.
Chief Justice Warren E. Burger: Mr. Roth.
Argument of George J. Roth
Mr. George J. Roth: Mr. Chief Justice, may it please the Court.
I'd like to make some remarks about the state action part of the case and I believe that the best way for all of us to look at it is in a schematic way just first look at originally the United States of America didn't have any anti-competitive law.
There were some general or vague common law of principles coming down from old English law and then the Sherman Anti-Trust Act was passed and that was the first time we really had a federal law relating to the anti-competitive activity.
And then subsequent to that, we had Miller-Tydings and McGuire Acts which permitted an exception to the Sherman Act and permitted any commodity, the manufacture of any commodity to determine what his retail price for that product should be.
And then schematically came along the state laws relating to fair-trade in alcoholic beverages and super imposed on all list, was the Parker-Brown state action exemption and I think to see how it all fits together, we have to look at the differences between Miller-Tydings type of fair-trade which I sometimes call regular fair-trade and state liquor fair-trade.
And then the Miller-Tydings regular fair-trade you have two factors; one is that the regulation of the fair-trade is totally optional both on the manufacturer and on the retailer.
The manufacturer can say, “I desire to fair-trade my merchandise or I do not do so.”
The retailer I can say, “I desired to handle fair-trade merchandise or I do not do so.
You do --
Justice Byron R. White: But he handles to the other alone?
Mr. George J. Roth: If he handles it he has no option that's correct Your Honor, but the option is there if he wants to take it and in the state liquor fair-trade on the other hand everything is mandatory.
The state liquor fair-trade is highly regulated at all stages of the process from the manufacturing --
Justice Byron R. White: Well, the price level isn't?
Mr. George J. Roth: Pardon?
Justice Byron R. White: The price level is not?
Mr. George J. Roth: No but the industry is and I think that that's very important that the industry at every single level is regulated.
You can't operate without a state license, as a retailer, you can't operate as a wholesaler or distributer or manufacturer.
And in exchange for this exclusive right to operate, you have to conform to the state law the state rules, regulations whenever the dictates and demands are as long as there is no fundamental constitutional proscription.
The state for instance can't say to you as a person who has a license in the alcoholic beverage business that you must discriminate against certain people and this just obvious certain federal prescriptions and constitutional prescriptions, but generally you have to conform.
It's part of the necessity of being in the business, sir?
Justice John Paul Stevens: Is it fair to infer that the Alcoholic Beverage Control Board does not agree that it's necessary to follow the price regulation in order to have effective regulation because as I understand it they acquiesced in the earlier decision indicated in papers filed here that they are sympathetic with the other side of the case?
Mr. George J. Roth: Let me put it this way Your Honor.
I talked to the counsel for the board on the 26th of December and I said I may be asked that question and I had an attorney client privilege at that time and I said, “What may I tell the Court?”
Counsel for the board said to me, “You can tell the court that the director dislikes fair-trade immensely but he did very much want to see the state's right to regulate in the area, protected” and that's about as far as I have --
Justice John Paul Stevens: So I take it's fair to infer then that the state's right to regulate could be adequately protected without fair-trade in his judgment?
Mr. George J. Roth: Well, in his judgment --
Justice John Paul Stevens: Which you would disagree (Voice Overlap) --
Mr. George J. Roth: I disagree because we believe it's a legislative judgment and that absent a court decision or on the other hand this Court coming out with a different ruling he would be bound to fall.
Justice Byron R. White: Fall?
Mr. George J. Roth: Sir?
Justice Byron R. White: There's not any issue here about his power of the state to regulate prices.
Mr. George J. Roth: Well, no this -- the state itself you say there is no issue here?
Justice Byron R. White: Yes sir (Voice Overlap) --
Mr. George J. Roth: Well, -- as I understand --
Justice Byron R. White: -- there is any state statute setting the price on liquor.
Mr. George J. Roth: No, not to set the price the point is that the state statute says, “That at the tail-end of the state action exemption in effect that the manufact -- I'm sorry, the manufacturer is given the right to set the price that his merchandise should be sold for.”
Justice Byron R. White: Well, would you be here making the same argument or at least the similar argument if the -- if it -- whether or not to set a price was optional?
Mr. George J. Roth: I don't quite follow Your Honor.
Justice Byron R. White: Well, suppose it was, suppose a producer was free not to post the price but he could and if he did then why retailers were bound to sell at that price?
Mr. George J. Roth: Well, that would be just like the old Fair-Trade Act but that would be different I think.
Justice Byron R. White: What?
So you wouldn't be here making the argument?
Mr. George J. Roth: No I would make the argument because here we have the state statutes specifically saying (Voice Overlap) I have to do that.
Justice Byron R. White: (Voice Overlap) would you defend that system as exempt from the Sherman Act?
Mr. George J. Roth: If the legislative passed then I think it comes under the state exception yes Your Honor.
Because it seems to me that the exception arises because the state specifically tells the licensee what the conduct is.
This is not the fact that the tail-end he has this right to set that price.
It's the fact that he is told as a licensee in the liquor business you must do this and the legislature has come along and determined that it was necessary for certain reasons.
The California Supreme Court said, “There's a difference of opinion on it.”
We think the weight now is the other way the public policies the other way.
They never specifically said it was totally the other way --
Justice Byron R. White: But under the law isn't -- aren't the producers are all free to agree among themselves -- what on a standard price?
Mr. George J. Roth: Only under the Parker versus Rice case where the state told them to.
Justice Byron R. White: But the -- but you would say that if the producer did get in carrying out their obligations to post prices they can all get together and post the same price?
Mr. George J. Roth: No, I would say not that's a matter for the federal government of the state government to go in and say, “Wait a minute, the state law doesn't let you do that, you can't go and have (Voice Overlap) --
Justice Byron R. White: (Voice Overlap) well, nothing prohibited, was it?
Mr. George J. Roth: Pardon?
Justice Byron R. White: It doesn't prohibit (Voice Overlap) --
Mr. George J. Roth: The California Cartwright Act certainly does and the Federal Sherman Act certainly does.
It prohibits --
Justice Byron R. White: You would say that Sherman Act would apply if all the producers in this case got together and agreed on the standard price and all posted the same price you would say the Sherman Act would apply?
Mr. George J. Roth: Yes sir, because the state law does not permit that.
The state law says, “The individual brand owner sets his own price.”
It doesn't say you can conspire with other people to set a price?
Justice Thurgood Marshall: Well, I'll put another way.
If the states said that you set the price on milk which is much more of interest to the government I hope than whiskey that wouldn't (Inaudible) valid Sherman Act, wouldn't it?
Mr. George J. Roth: Yes but if you had the -- it would violate (Voice Overlap) with one time the state did.
Justice Thurgood Marshall: (Voice Overlap) milk is milk and whiskey is whiskey?
Mr. George J. Roth: The state has set a price on milk and it just that the state recently --
Justice Thurgood Marshall: No, no that's not what I said that the state couldn't tell the producers of milk that you go set your prices whatever way you want to set.
Mr. George J. Roth: Well, the state milk is not high -- as highly regulated as the liquor industry.
Justice Thurgood Marshall: That's right.
Mr. George J. Roth: But here you have a --
Justice Thurgood Marshall: The difference is the Twenty-First Amendment, that's all you got?
Mr. George J. Roth: Well, I think that state exemption argument comes into it Your Honor in that -- when you have the total regulation and the state saying, “We regulate, we say this and we police this as they do here just because they had an accusation (Voice Overlap) against --
Justice Thurgood Marshall: (Voice Overlap) Well, I suppose their police nail clippers?
Mr. George J. Roth: Well, --
Justice Thurgood Marshall: Don't make me go too far because --
Mr. George J. Roth: No.
Well, I follow Your Honor's argument but I think if the state wanted to that the state could set milk prices.
And they could tell the producer just as here at the end of the line you set the price that which you have to pay.
It's the same thing but here I think it's different because you'll have our case you have a statute that requires and you have a highly regulated industry, it's been regulated since the beginning of time the liquor industry ever since prohibition was came back if ever since repeal you have it.
And I think that --
Justice John Paul Stevens: Mr. Roth, would it comply with the California Statute for a wholesaler who handled one line of liquor, wine or liquor, to say that the price to be charged for this line shall be the price that the wholesaler “X” posts for his line?
Mr. George J. Roth: No it would not.
Justice John Paul Stevens: It would not?
Mr. George J. Roth: He would not he would have to say the price from my merchandise is (Voice Overlap) --
Justice John Paul Stevens: $6?
Mr. George J. Roth: -- $4 a bottle period and that's the limit.
If he did something like that I think that he'd be violating the Sherman Act or the State Cartwright Act.
Justice John Paul Stevens: But every time wholesaler changed his price he'd be free to change as to follow it of course?
Mr. George J. Roth: He can but it -- that's true in any business today.
Justice John Paul Stevens: Well, I understand that.
Mr. George J. Roth: And if the (Voice Overlap) department here is --
Justice John Paul Stevens: Except that here everybody has to -- you know there be more prompt compliance with the changes because it would have to under state law.
Mr. George J. Roth: That's correct.
Justice John Paul Stevens: Yes.
Justice Byron R. White: What if the producer gets -- what if the producer has a -- knows where all of his -- where is the merchandise goes and all the retailers and the distributors who are handling his goods he -- once a year he gets them together this place and says let's all figure out what my posted price should be?
Mr. George J. Roth: I feel very certain that the state government at least and I'm sure that the federal government would come in and they try to put those people in jail (Voice Overlap) --
Justice Byron R. White: I know but would this -- would you argue that the state law would protect that kind of an agreement --
Mr. George J. Roth: Not the way it's written, no sir.
Justice Byron R. White: You think that it has to be an individual unilateral determination by the producer?
Mr. George J. Roth: I'm positive that's -- by the way I read the law, it says, “The individual shall set that price.”
Justice Potter Stewart: Well, I'm not sure I followed --
Mr. George J. Roth: Yes Justice Stewart?
Justice Potter Stewart: -- to your answers.
If you are correct that the Twenty-First Amendment removes the federal government from any exercise of the power under its -- under the Commerce Clause then when and how could the federal government prosecute action simply because they were unauthorized by state law?
The state could of course under the Twenty-First Amendment --
Mr. George J. Roth: Well, they can prosecute --
Justice Potter Stewart: -- why and how the federal government do it?
Mr. George J. Roth: They can prosecute Your Honor in an area that's not subject to the state regulation (Voice Overlap) -- well, at least concurrent here we under your question as I understand it the anti-competitive activity which is -- would be (Voice Overlap) he's not yet --
Justice Potter Stewart: He's not authorized (Voice Overlap) --
Mr. George J. Roth: -- not authorized would be subject to federal prosecution under (Voice Overlap) --
Justice Potter Stewart: Then your -- that's the thrust of your Twenty-First Amendment argument doesn't go very far, doesn't go nearly so far for example as Justice Black's field.
Mr. George J. Roth: Well, I believe that under the Twenty-First Amendment as I see it the Twenty-First Amendment within the area of the state regulation inside the state goes as far as to say that if the state passes a law that says a certain act shall occur --
Justice Potter Stewart: Yes.
Mr. George J. Roth: -- that conflicts with the Sherman Anti-Trust Act.
Justice Potter Stewart: Well, that's more a Parker against Brown argument, (Voice Overlap) --
Mr. George J. Roth: Well, --
Justice Potter Stewart: -- I'm talking about the Twenty-First Amendment?
Mr. George J. Roth: Well, I'm talking about the Twenty-First Amendment in this sense Your Honor that there's an argument that only means wet-dry and over here there's an argument that it means something more than wet-dry.
And if it means something more than that it means that the state has a right to preempt the federal government in that area (Voice Overlap) --
Justice Potter Stewart: But in so far it has not the federal government in your view still retains power to --
Mr. George J. Roth: Until it does preempt this concurrence jurisdiction Justice.
Justice Potter Stewart: Well, that's so far short of Justice Brandeis' view or Justice Black's view, isn't it?
Mr. George J. Roth: Yes.
Justice Potter Stewart: And Justice Brandeis' view prevailed the Court.
Mr. George J. Roth: Right.
Justice Potter Stewart: He wrote an opinion for the Court and the Young case.
Justice John Paul Stevens: May I ask one other question on the statute?
Mr. George J. Roth: Yes sir.
Justice John Paul Stevens: We generally thought about prices in Sherman Act context are going up but there is also a line of thinking under Section 2 of the Sherman Act that sometimes by setting a price very low one can drive these competitors out of business and thereby acquire monopoly.
If the facts would show that a very large producer of wine or liquor wanted to enforce a very low predatory price in order to drive his competitors out of business, he compelled a wholesaler to sell the low price in the retail and return to sell the low price he filed very low price schedules in the state for that purpose and says, “Purpose was plain and acknowledged.”
That would be immune from Sherman Act challenge?
Mr. George J. Roth: No I think that when you get into an area where the individual (Voice Overlap) --
Justice John Paul Stevens: Is it to an area where his conduct would violate the Sherman Act?
Mr. George J. Roth: Well, if you can prove that he is attempting to go and go further just to set his price not the set a price but to prove some ulterior motive on his part with a combination of some way or another to (Voice Overlap) --
Justice John Paul Stevens: New combination in my example is all by himself his -- Section 2 of the Sherman Act he tried to get a monopoly.
Mr. George J. Roth: Well, you will have the problem in California at least that there's a cost relationship there, and he has (Voice Overlap) --
Justice John Paul Stevens: He does it below cost, it's way down.
Mr. George J. Roth: But --
Justice John Paul Stevens: It's liquor, it's not the general --
Mr. George J. Roth: Right.
Justice John Paul Stevens: I should think he'd be immune?
Mr. George J. Roth: No, I think then he individually --
Justice John Paul Stevens: Yes.
Mr. George J. Roth: -- I agree with you Your Honor.
I didn't quite understand what you meant, I agree with you sir.
Chief Justice Warren E. Burger: Very well.
Mr. George J. Roth: Thank you gentlemen.
Chief Justice Warren E. Burger: Mr. Owens.
Argument of Jack B. Owens
Mr. Jack B. Owens: Mr. Chief Justice and may it please the Court.
Respondent Midcal would like to commence with the brief description of the statute the Court which I think is required in response to an argument made by the petitioner.
In order to decide this case correctly, it's important to understand that this is a maintenance statute, a vertical price maintenance statute.
You heard the petitioner argue that one of the state's interests behind this statute was to prevent price discrimination at the hands of wholesalers against retailers and raised the concept of posting.
I want to try to get across if I can the difference between posting and price maintenance and make it as clear as I can that the statute we have here is a price maintenance statute and not a posting statute.
In the cert petition here the assertion was made that an affirmance in this case would continue the effect of invalidating a lot of state statutes around the country dealing with posting.
That isn't correct.
Posting is a phenomenon undertaken in some state liquor codes by which a wholesaler for example is required to post its own price, that's it.
There is no control over that entity's price by someone further up in the vertical chain.
Posting is a simply a price publication situation by the entity that sets the price.
The bulk of the statutes that are cited to you in the petition in the chain of horribles argument which is given there are posting statutes.
What we have here is a maintenance statute --
Justice William H. Rehnquist: Mr. Owens, if in the absence of statute, do you think a posting practice engaged in by sellers would be violative of any of the anti-trust laws?
Mr. Jack B. Owens: It's possible under the Container case and possibly the Egyptian case.
It would depend on whether the act of posting occurred in the right economic structure of the market if it were concentrated market and it led to horizontal exchange of price data there would be a question posed.
The question posed in an earlier era in the Seagram's case and addressed by Mr. Justice Stewart in his opinion there, yes, there is a risk of an anti-trust violation in a posting statute.
Justice William H. Rehnquist: Are you suggesting that if there -- you say there's a risk of an anti-trust violation in a posting statute or a posting policy?
Mr. Jack B. Owens: Both, if the posting statute is simply the requirement to post but the point I'm trying to get across now is that that's not this case.
That's considerably different from this case.
This case and if you would envision a four level industry producers, wholesalers, distributors and consumers, what we have here is the producers setting the price for the wholesalers and the retailers.
It's a maintenance case, it's not a posting case.
And if to give petitioner the point, if the state has an interest in preserving or preventing price discrimination, this is not the way to do it.
This is not the system to accomplish it.
It can be accomplished if it's something important to accomplish about part from the standard requirements of federal anti-trust law or state anti-trust law for the system which is far less abusive of federal anti-trust interests.
Justice William H. Rehnquist: Well, do you think we made that self examination Parker against Brown if the California has an interest in maintaining the price of the resin market nonetheless it could've done it in a different way?
Mr. Jack B. Owens: I -- if I understand your question Mr. Justice Rehnquist I believe that Parker turns on several important features which are not here and which maybe determinative.
They are for example the fact that the state commission in the Parker case was mandated by the state legislature to determine whether the profits provided to the producers as a result of program were unreasonable, and further to review and measure the reason was to the programs which were entered into.
Justice William H. Rehnquist: Why do you say that it turns on that?
I thought it turned on the fact that it was the state that it mandated the action.
Mr. Jack B. Owens: No sir I don't think so because the opinion for the court indicates quite clearly that a state may not simply command what the Sherman Act forbids.
With that statement in the opinion, the holding must be that what validated that particular program was the degree of state supervision and control.
And particularly I would stress the state's control over the profits received by the producers because what you have there and this is consistent with a lot of Mr. Justice Blackmun's writing in his opinion necessary.
What you have there is the state creating a surrogate for the federal interest espoused in the Sherman Act.
You have a state measuring the degree of profitability to the producers that comes out of such a program.
That's totally absent in this system and I think the absence may will be determinative.
In any event what we have here is a maintenance statute.
The petitioner continually uses the phrase are comprehensive scheme extensive regulation scheme.
The point is as indicated by Mr. Justice White there is no control by the state over these prices whatsoever.
The fact that there is regulation in other areas is really irrelevant to the issue which is before us which is can a state simply command what the Sherman forbids which I believe the Court has declared twice is not the law, Parker and Schwegmann.
On the question of the other states if I can close up that point, I don't think it's determinative what the effect of this maybe on other states.
The law is the law.
You will decide as you see it correctly and the consequences in other states will not curb your judgment I suspect, but I think we have clear up the misconception.
The only state in the country that has anything like the California system is New York.
There are three other states that have something like this, but the distinction maybe very important.
Justice William H. Rehnquist: What about the Virginia State liquor stores were you go in the state liquor store and you can buy a particular brand only at a particular price and only the state sells liquor?
Mr. Jack B. Owens: Yes sir, it's not respondent's position that state monopolization of the business is invalid.
Justice William H. Rehnquist: Well, why is that any better than what California has?
Justice Thurgood Marshall: The state (Inaudible)
Mr. Jack B. Owens: I think Your Honor that we can proceed in greater degree of confidence that if the state takes over the business that some of the interest which are -- which underlies the Sherman Act will be served by the state itself.
It is the state running the program.
What we have here is the Solicitor General indicated a bare grant of permission to engage in private price fixing.
That to me is the view of the respondent that it is quite a distance away from what was at issue in between -- the evolution of the Twenty-First Amendment.
In the state monopoly case and in the state monopoly situations you commonly are dealing with states that have had a drier philosophy than other states.
You have activity which is closer to what the Twenty-First Amendment was designed to deal with.
Chief Justice Warren E. Burger: If the states, taking Virginia as one example, decided as a matter of policy that it wanted to discourage the use of hard liquor and encourage the consumption of wines, could it charge for example $25 a bottle fixing its price in its store is $25 a bottle for scotch and bourbon and gin and you use the extra profits to subsidize a lower price on wine perhaps selling it at cost or below its cost?
Mr. Jack B. Owens: As a matter of personal preference I would hope they didn't attach that price bourbon but -- yes sir I believe they can.
Yes I think that if were the state --
Chief Justice Warren E. Burger: Twenty-First Amendment would be the source of that authority?
Mr. Jack B. Owens: That is correct Your Honor.
Justice Potter Stewart: Well, plus Parker against Brown wouldn't it?
Mr. Jack B. Owens: Yes, that is also correct Mr. Justice Stewart.
Justice Potter Stewart: Quite apart from the Twenty-First Amendment?
Mr. Jack B. Owens: Yes.
There -- I will put you one case that maybe difficult to deal with there, if the state is acting as the marketer and also permits independent retail stores as I believe shall --
Justice Potter Stewart: No, no I understood this is a state monopoly (Voice Overlap) --
Mr. Jack B. Owens: Yes, and the state monopoly --
Justice Potter Stewart: -- I mean Parker against Brown would cover that quite apart from the Twenty-First Amendment, wouldn't it?
Mr. Jack B. Owens: In my view, that's correct.
Justice Byron R. White: Well, what does the Twenty-First Amendment if any add to Parker anything at all in your view via-s-via the Sherman Act?
Rebuttal of George J. Roth
Mr. George J. Roth: Yes sir, I believe that if the state -- let me try at this way, I do not believe that the state action doctrine would simply permit a state to ban importation, the simple act of banning importation in order to cartelize its domestic industry.
I don't think the state action doctrine carries that far.
That's not -- that is commanding what the Sherman Act forbids.
Justice Byron R. White: But the Twenty-First would permit it?
Mr. George J. Roth: Yes it may.
If I understand the (Voice Overlap) --
Justice Byron R. White: Is there anything else you can think of?
Mr. George J. Roth: I think that there are areas where the conflict with the Sherman Act may not be as direct as it is here where the Twenty-First Amendment might give the states greater degree of authority than the state action doctrine.
Justice Potter Stewart: Well, a state could engage an action that in other context would be a very clear violation of the non-economic -- certainly the Commerce Clause itself it could totally prohibit the importing into a state of intoxicating liquors, could it not?
Mr. George J. Roth: Yes sir.
Justice Potter Stewart: But you could not do for a lumber or eggs or even garbage, could you?
Mr. George J. Roth: That's correct.
I think what the state can do under the Twenty-First Amendment based on the decisions you cited by Mr. Justice Brandeis is block all importation --
Justice Potter Stewart: Or impose a very high duty or tax I think which you couldn't do under the Commerce Clause?
Rebuttal of Jack B. Owens
Mr. Jack B. Owens: Yes.
Chief Justice Warren E. Burger: Could it bar imports of anything except liquors?
Mr. Jack B. Owens: No.
Chief Justice Warren E. Burger: Just one category under this -- under the Twenty-First Amendment?
Mr. Jack B. Owens: Yes.
You understand I'm giving back to you this Court's rulings in the Brandeis-four in the line of decision -- that you cited.
I will suggest to you that what has happened is that in the subsequent cases the absolutist character of the Brandeis-four decisions has been restricted to the importation situation.
I think that's the correct reading of your cases over the last 50 years.
Petitioner constantly cites the language from Ziffrin unfettered by the Commerce Clause leaving out the keywords as the products from without to the extent that the Brandeis-four decisions create an absolute test.
They do so in the importation category.
I would further argue Mr. Justice Stewart that the implication of closer attention to the history of the amendment and the implication of some of the midcourse correction that appears in your decisions maybe that at some point down the line the absolute character of the Brandeis-four decisions maybe open to question, but we don't question it here.
Justice Potter Stewart: Of course that Idlewild decision is sought to be, indeed can be wholly explain in the basis of proposition that that was international commerce not interstate commerce.
Mr. Jack B. Owens: Yes sir and I think you can go down the line on these cases and find one factual distinction or another but if I'm reading the (Voice Overlap) --
Justice Potter Stewart: That's more than just a factual distinction.
That was the case in that opinion and as we at least know now as a result of an opinion of Mr. Justice Blackmun wrote for the Court last term I think that the power to regulate international commerce is somewhat different from the power to regulate interstate commerce.
Mr. Jack B. Owens: I think that's absolutely right and certainly I can debate with the author of the Idlewild and Seagram decisions, but I believe that what is happened --
Justice Potter Stewart: Mr. Justice Black in dissent in that case saw it as simply as sale in New York State.
Mr. Jack B. Owens: Yes sir.
The test however which is announced in those cases and reaffirmed in Craig and Boren later on, that is as I understand this Court's opinions today the test that it believes applies.
I grant you that it was a foreign commerce context in the Idlewild case, but it was not in Seagrams, that was in interstate commerce context and that the same test was applied and I believe it is the test which controls today.
The question is for decision in this case is what does the test mean?
Justice Potter Stewart: Seagram held that New York could invalidly do it precisely what they done, did it not?
Mr. Jack B. Owens: Seagram was on the face opinion as you remember.
Justice Potter Stewart: Yes, yes.
Mr. Jack B. Owens: It was not and as applied case.
Justice Potter Stewart: Yes, because the -- it have been state.
Mr. Jack B. Owens: Yes sir.
I think a key factor to keep in mind with regard to Seagram's is that when the Court through your opinion reached the question of whether affirmation as you recall that was a system by which the seller had to affirm that it prices in New York were as the low as prices elsewhere, when you reached that particular point in the opinion as the Court, you concluded that a violation of the Sherman Act was not irresistibly compelled by the affirmation system.
Justice Potter Stewart: Because that was not a Sherman Act case as such, it was a constitutional attack upon the validity of the New York provisions which had been tried and the provisions have been upheld in the New York Court -- state court system.
It wasn't a federal antitrust case.
Mr. Jack B. Owens: Yes sir, in the Seagram's case, there were variety --
Justice Potter Stewart: But among other claims where the claims that this -- this what New York could permitted violated the Sherman --
Mr. Jack B. Owens: Yes sir.
Justice Potter Stewart: -- antitrust act?
Mr. Jack B. Owens: It was a burden on commerce claim, there was an antitrust claim when you reach the (Voice Overlap) --
Justice Potter Stewart: Equal projection, due process?
Mr. Jack B. Owens: Yes sir.
When you reached the Antitrust Sherman Act claim, you concluded on the basis of the statute that was before you that you could not determine that a violation of Sherman Act was irresistibly compelled by the statute.
Now, you have that case.
Justice Potter Stewart: But that involved effect as I remember in other states outside of the State in New York, that was the claim, was it not?
Mr. Jack B. Owens: Yes, by the way statute worked, that's correct.
Justice Potter Stewart: Right.
Mr. Jack B. Owens: But what you have before us --
Justice Potter Stewart: It wasn't there at least to negative implication that had the effect clearly confined to New York whatever that effect might have been, it would have been immunized from antitrust vulnerability by the Twenty-First Amendment.
Mr. Jack B. Owens: As I say you were the author of the opinion (Voice Overlap) that I believe --
Justice Potter Stewart: Well, I'm not asking you, you're the reader of the opinion?
Mr. Jack B. Owens: I believe the Robinson-Patman portion of the opinion takes away the native implication, that's your basis because there's no extraterritorial effect there.
Justice Potter Stewart: No.
Mr. Jack B. Owens: And in any event, I believe the sense of the subsequent decisions of this Court is to adopt the standard announced in that case as controlling in these cases.
There was a question raised about horizontal price fixing.
I'm not sure that it was clearly sorted out or whether I will be able to do that but the state statute, Section 24753 prohibits horizontal price fixing.
Justice Byron R. White: What about vertical price fixing?
I mean, agreed upon price fixing.
Mr. Jack B. Owens: Delusional price fixing apart from the act, apart from the information (Voice Overlap) --
Justice Byron R. White: Well, before he announces his price, he gets his retailers and distributors together and they all agree on a price.
Mr. Jack B. Owens: Not authorized by --
Justice Byron R. White: Not authorized prohibited.
Mr. Jack B. Owens: I don't think I know the answer to that.
However, on the horizontal point it's important to understand that what happens is exactly what Mr. Justice Stevens was suggesting is through this vertical system, you have horizontal effects.
Justice Byron R. White: You don't need the horizontal price fixing?
Mr. Jack B. Owens: Precisely, precisely.
Turning to the standard which I believe controls this case under the Twenty-First Amendment I think that it's clear in this Court's opinion as the absolutist position that was announced by the other side has been rejected.
If that were the law, Frankfort Distilleries could not be correct but before other rulings of this Court where the Court has recognized the application of the antitrust laws to the alcoholic-beverage industry would all have to be (Inaudible).
That can't be the law.
The law must be that an accommodation must be reached between state and federal interest of some kind.
Justice Potter Stewart: Didn't Frankfort Distilleries involve the effects of conduct and violation of the antitrust laws on states other than the legislating state?
Mr. Jack B. Owens: Yes sir as well as intrastate effects.
Justice Potter Stewart: But wasn't the former emphasized --
Mr. Jack B. Owens: Yes sir.
Justice Potter Stewart: -- and relied upon?
Mr. Jack B. Owens: Mr. Justice Black stressed the extraterritorial effects in Frankfort probably because of his own personal views about the (Voice Overlap) --
Justice Potter Stewart: Perhaps but it was a Court opinion.
Mr. Jack B. Owens: Right.
However, Burke v. Ford which is a unargued precuriam decision, but nonetheless a decision of this Court is a case of wholly intrastate market allocation conspiracy and in that case, the Court held that the antitrust law applied are valid.
What we have here is an instance of activity --
Justice Byron R. White: What year was that?
Mr. Jack B. Owens: Burke v. Ford?
It's a fairly modern case.
I don't have a date in line as a standard, 1967.
What we have here is an instance of activity which is squarely prohibited --
Justice John Paul Stevens: Mr. Owens I haven't read Burke v. Ford, I just don't remember.
Is that a case in which the conduct that was challenged has been specifically authorized and approved by the state?
Mr. Jack B. Owens: No.
Justice John Paul Stevens: And then really isn't to help as much.
Mr. Jack B. Owens: Yes, it does sir in this respect.
The petitioner has argued that you can't freeze the situation of the Twenty-First Amendment as it existed in 1933.
He is arguing to what was given back to the states is the scope of the Commerce Clause power as it exists today, that's his position.
If that were true and if that were correct, it would as Mr. Justice Stewart pointed out the impossible for there to be an antitrust prosecution under federal law even if the state did not authorize the behavior.
Burke v. Ford is squarely on that point and squarely resolves that as Mr. Justice Stewart indicated should be resolved.
Justice John Paul Stevens: That's a little bit like the argument to the federal government still retains the power to put the minimum wages and safety standards and other things involving the liquor industry, it's a little bit like, that's the same argument that the federal power over the liquor industry within California is not -- has not been surrendered through the Twenty-First Amendment.
Mr. Jack B. Owens: That's correct.
I believe it is not.
It certainly has not been when you have something as fundamental as the Sherman Act an activity which strikes at the core of the act.
Justice John Paul Stevens: There's an intermediate position in Mr. Justice Frankfurter expounds in his concurring opinion Frankfort which I think would be sufficient to defeat you, in other words, that if that the Twenty-First Amendment in effect gave the power to the state to act without violating the Sherman Act.
Mr. Jack B. Owens: Yes sir that --
Justice John Paul Stevens: He concurred there on the ground that Colorado had not approved of the combination state there.
Justice Potter Stewart: Right.
Mr. Jack B. Owens: That's correct.
And that is the issue put by this case.
The state has acted and our position is that where you're dealing with a demand that private parties engaged in per se violations of the Sherman Act federal law prevails and must prevail if you have a full understanding of the background of the Twenty-First Amendment.
Justice William H. Rehnquist: Mr. Owens, you would concede I take it in your reference to Burke against Ford that in an unargued percuriam decision of this Court it's two pages long doesn't have the same precedential way, there's an orally argument argued case followed by our written opinion.
Mr. Jack B. Owens: Yes sir just as I would argue that the National Railroad case that he relies on which is summary affirmance is about the same situation, but I think it's a question of concept more than question of holding.
If his position were correct, the Sherman Act would be in total abeyance as to the alcoholic beverage industry and I would suggest that that is a light year away from the text of the Twenty-First Amendment and the history that led up to it.
On the state action point, I believe there is some independent force to it.
A critical factor is the absence of state's supervision or control of any respect over the pricing.
If this kind of system is to be exonerated, number one you have to disavow Parker and Schwegmann, but number two you created a dangerous system by which states can simply negate federal interest by declaration.
They are not required undertake any of the steps that are necessary to serve federal interests as a substitute.
I don't believe the Twenty-First Amendment requires that, I don't believe the state action doctrine permits it.
Justice William H. Rehnquist: Well, don't you think if the legislature is responsive to interest in the state the same way other supervisory boards would be and if it declares a flat ban or a flat approval that is as much state action as a legislative authorization to some subordinate of the legislature?
Mr. Jack B. Owens: I agree that it is much state action.
My position is that it's not enough to override the Sherman Act and I think that's what Parker means.
Justice William H. Rehnquist: Does that make sense to you logically?
Mr. Jack B. Owens: Yes, it does in this respect.
So, you're dealing with competing principles, competing interests.
You can find a way to protect both sets of interests without holding to get into federal interest.
If the state believes that resin prices serves difference (Inaudible) if that's what the state concludes, let it do so by measuring the level of the prices itself or creating some system that pays some heed to federal interest, i.e., avoidance of excess profit taking from the industry by the producer.
If you let us simply declare price fixing valid, there is no way given to the federal interest underlying the Sherman Act.
If you let it do without any supervision, there's no way given to the federal interest and that is what's wrong with this system and what is indicated in Parker and Schwegmann.
Justice John Paul Stevens: Mr. Owens, I understand your argument that the scheme is in direct conflict with federal antitrust policy, do you contend that anyone has whose complied with the California law has actually violated the Sherman Act?
Mr. Jack B. Owens: No sir.
Justice John Paul Stevens: If there is no Sherman Act violation, how do we find the conflict with the Sherman Act?
Mr. Jack B. Owens: Mr. Justice Douglas, manage to do within Schwegmann.
Justice John Paul Stevens: You also find a difficult on Judge plain how he did it?
Mr. Jack B. Owens: No sir.
No, because I believe that the Sherman Act carries with it not only the technical set of violations, but also an expression of fundamental federal policy, a pro-competition policy and there's no question that this statute strikes at the core of that expression in the policy.
Justice William H. Rehnquist: Well, do you think the Sherman Act is somehow more important than say the Fair Labor Standards Act or any Clean Error Act or any number of other acts enacted by Congress?
Mr. Jack B. Owens: No, not necessarily I don't think it's more important --
Justice Potter Stewart: And even if you do think so, are we allowed to think so or say so?
Mr. Jack B. Owens: I think that it is a very --
Justice John Paul Stevens: May I just go one step further with you on my -- if there is no violation of the Sherman Act, is it because there's no concerted action or is it because following a state law it cannot be a violation of the Sherman Act?
Mr. Jack B. Owens: I think there are two possible reasons why it's not.
One is there is -- if we assume that there is no independent communication going on --
Justice John Paul Stevens: Right.
Mr. Jack B. Owens: -- there is no independent contract as required by the Sherman Act.
You're missing technical (Voice Overlap)
Justice John Paul Stevens: Right.
Mr. Jack B. Owens: Second reason is that even if you -- you if I'm wrong about that if I understand some of the passages in your opinion in Candor and Mr. Justice Blackmun's writing there may be a public policy exception to antitrust liability where the activity was mandated by the state.
Justice John Paul Stevens: But the extent that you rely on the first reason that there would still be no Sherman Act violation if we held the statute that the California statute bad and the various people in the business continue to do exactly the same thing by independent decision and say this is the price making him recommended rather than the mandate that which -- would that's obvious, I'm not saying (Voice Overlap) --
Mr. Jack B. Owens: That would be a conscious parallelism kind of question relating to communication.
I didn't know --
Chief Justice Warren E. Burger: You said there may be an immunity if they're following state law.
Where did this Court ever say that?
Mr. Jack B. Owens: I don't believe the Court as a Court has said it Your Honor.
I believe that there are suggestions --
Chief Justice Warren E. Burger: (Voice Overlap) suggesting if they're following state law there ought to be an immunity?
Mr. Jack B. Owens: Yes Your Honor and I find support for that in particular opinions which have not yet commended to the Court.
I'm sorry I was diverted from your question Mr. Justice Rehnquist.
I don't think the Sherman Act is necessarily more important than this, the other thing.
My position is a very important body of federal law on par with other important bodies of federal law.
Another example might be the (Voice Overlap) --
Justice William H. Rehnquist: And important bodies of federal law too?
Mr. Jack B. Owens: Yes.
That's not -- I know you don't offer that question in just, yes.
It's possible that there may be a situation which the federal interest doesn't wait.
Justice William H. Rehnquist: Well, how are we to judge? If Congress has an access a hundred statutes and each contains flat prohibitory language, which ones are important and which one aren't?
Mr. Jack B. Owens: I think it's the same analysis that the Court is required to go through and undertakes a preemption analysis.
Sometimes, Congress is very clear on what it prohibits, sometimes it's not.
Justice William H. Rehnquist: What if all these hundred is very clear and it prohibits?
Mr. Jack B. Owens: Then as I understand the Twenty-First Amendment, if it's not simply the question try to ban importation and it isn't really at the core of a prohibition or temperance related system, federal interest is very likely to prevail.
Thank you Your Honor.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.