Burke v. Ford/Opinion of the Court

Petitioners, Oklahoma liquor retailers, brought this action under § 1 of the Sherman Act, 26 Stat. 209, 15 U.S.C. § 1, to enjoin an alleged state-wide market division by all Oklahoma liquor wholesalers. The trial judge, sitting without a jury, found that there had in fact been a division of markets-both by territories and by brands. The court nevertheless entered judgment for the wholesalers because, among other reasons, it found that the interstate commerce prerequisite of the Sherman Act was not satisfied. The Court of Appeals affirmed upon the sole ground that 'the proof was entirely insufficient to show that the activities complained of were in or adversely affected interstate commerce.' 10 Cir., 377 F.2d 901, 903.

There are no liquor distilleries in Oklahoma. Liquor is shipped in from other States to the warehouses of the wholesalers, where it is inventoried and held until purchased by retailers. The District Court and the Court of Appeals found that the liquor 'came to rest' in the wholesalers' warehouses and that interstate commerce ceased at that point. Hence, they concluded that the wholesalers' division of the Oklahoma market did not take place 'in interstate commerce.' But whatever the validity of that conclusion, it does not end the matter. For it is well established that an activity which does not itself occur in interstate commerce comes within the scope of the Sherman Act if it substantially affects interstate commerce. United States v. Employing Plasterers Association of Chicago, 347 U.S. 186, 74 S.Ct. 452, 456, 98 L.Ed. 618; Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 333 U.S. 219, 996, 92 L.Ed. 1328.

Recognizing this, the District Court went on to find that the wholesalers' market division had no effect on interstate commerce, and the Court of Appeals agreed. The Court of Appeals held that proof of a state-wide wholesalers' market division in the distribution of goods retailed in substantial volume within the State but produced entirely out of the State was not by itself sufficient proof of an effect on interstate commerce. We disagree. Horizontal territorial divisions almost invariably reduce competition among the participants. Addyston Pipe & Steel Co. v. United States, 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136; United States v. Sealy, Inc., 388 U.S. 350, 87 S.Ct. 1847, 18 L.Ed.2d 1238. When competition is reduced, prices increase and unit sales decrease. The wholesalers' territorial division here almost surely resulted in fewer sales to retailers-hence fewer purchases from out-of-state distillers-than would have occurred had free competition prevailed among the wholesalers. In addition the wholesalers' division of brands meant fewer wholesale outlets available to any one out-of-state distiller. Thus the statewide wholesalers' market division inevitably affected interstate commerce.

The petition for certiorari is granted and the judgment of the Court of Appeals is reversed. The case is remanded to that court for further proceedings consistent with this opinion.

Judgment of Court of Appeals reversed and case remanded.