topco associates argued november decided march brought injunction action charging violation sherman act appellee topco cooperative association small independent regional supermarket chains operating members purchasing agent appellee procures different items brand names owned topco members combined retail sales billion exceeded three national grocery chains member average market share area competitive position frequently strong chain members equal amounts topco common stock voting stock choose directors completely control association operations topco bylaws establish exclusive category territorial licenses members licenses issued two membership categories proved de facto exclusive since member system may sell products outside territory licensed expansion another member territory practice permitted member consent since member effect veto power admission new member members control actual potential competition territorial areas concerned topco members prohibited selling products supplied association wholesale whether trademarked without securing special permission granted without consent interested licensees usually retailers member must agree restrict topco product sales specific area certain conditions government charged topco scheme dividing markets violates sherman act operates prohibit competition products among retail grocery chains also challenged topco restrictions wholesaling topco contended needs territorial divisions maintain program enable compete larger chains association exist territorial divisions exclusive restrictions competition sales enable members meet larger chain competition district agreeing topco upheld restrictive practices reasonable held topco scheme allocating territories minimize competition retail level horizontal restraint constituting per se violation sherman act district erred applying rule reason restrictive practices involved sealy topco limitations upon reselling wholesale reason per se invalid pp supp reversed remanded marshall delivered opinion douglas brennan stewart white joined blackmun filed opinion concurring result post burger filed dissenting opinion post powell rehnquist took part consideration decision case howard shapiro argued cause briefs solicitor general griswold deputy assistant attorney general comegys victor grimm argued cause appellee brief john loughlin william carney justice marshall delivered opinion brought action injunctive relief alleged violation topco associates topco sherman act stat amended jurisdiction grounded act following trial merits district northern district illinois entered judgment topco supp appealed directly pursuant expediting act stat amended noted probable jurisdiction reverse judgment district topco cooperative association approximately small regional supermarket chains operate stores member chains operates independently pooling earnings profits capital management advertising resources grocery business conducted topco name basic function serve purchasing agent members capacity procures distributes members different food related nonfood items distributed brand names owned topco association manufacturing processing warehousing facilities items procures members usually shipped directly packer manufacturer members payment made either topco directly manufacturer cost virtually members topco stock topco owned members common stock stock voting rights equally distributed board directors controls operation association drawn members normally composed executive officers member chains board elects association officers appoints committee members board principal executive officers topco must drawn restrictions alienation stock procedure selecting important officials association within ranks members give members complete unfettered control operations association topco founded group small local grocery chains independently owned operated desired cooperate obtain high quality merchandise private labels order compete effectively larger national regional chains line canned dairy products association began added frozen foods fresh produce general merchandise equipment supplies branded bacon carcass beef selection program topco members combined retail sales billion sales totaled billion figure exceeded three national grocery chains members association vary degree market share possess respective areas range average approximately difficult compare figures market shares larger regional national chains absence record accurate statistics chains much evidence record topco members frequently strong competitive position respective areas chain strength competitive position due measure success products although total goods sold topco members bear association brand names profit goods substantial existence improved competitive potential topco members respect large powerful chains apparent meager beginnings approximately quarter century ago topco developed purchasing association wholly owned operated member chains possess much economic muscle individually well cooperatively ii section sherman act provides relevant part every contract combination form trust otherwise conspiracy restraint trade commerce among several foreign nations declared illegal continuing agreement understanding concert action among member firms acting topco substantial terms member firm sell brands within marketing territory allocated refrain selling brands outside marketing territory article ix topco bylaws establishes three categories territorial licenses members may secure association exclusive exclusive territory one member licensed sell products bearing specified trademarks association exclusion persons territory one member licensed sell products bearing specified trademarks association exclusion others may also licensed sell products bearing trademarks association territory coextensive coextensive territory one two members licensed sell products bearing specified trademarks association exclusion persons following approval new member signs agreement topco designating territory member may sell products member may sell products outside territory licensed licenses exclusive even denominated coextensive prove de facto exclusive exclusive territorial areas often allocated members actual business areas theory may wish expand indefinite future time expansion likely direction allocated territory combined member veto power new members provisions exclusivity work effectively insulate members competition goods member violate license agreement sell areas licensed membership terminated art iv bylaws territory classified exclusive either formally de facto extremely unlikely classification ever changed see bylaws art ix government maintains scheme dividing markets violates sherman act operates prohibit competition products among grocery chains engaged retail operations government also makes subsidiary challenge topco practices regarding licensing members sell wholesale bylaws members permitted sell products supplied association wholesale whether trademarked without first applying receiving special permission association permission granted licenses usually retailers whose interests may potentially affected wholesale operations consulted wishes matter permission obtained member must agree restrict sale topco products specific geographic area sell conditions imposed association permission wholesale often sought members denied association government contends amounts territorial restriction violative sherman act also restriction customers violative act inception lawsuit topco accepted true government allegations regarding territorial divisions restrictions wholesaling although differed greatly government conclusions factual legal drawn facts topco answer complaint illustrative posture district private label merchandising way economic life food retailing industry exclusivity essence private label program without exclusivity private label private national large regional chain exclusive private label products addition nationally advertised brands chains sell chain relies upon exclusivity private label line differentiate private label products competitors attract retain repeat business loyalty consumers smaller retail grocery stores chains unable compete effectively national large regional chains without also offering exclusive private label products feasible method topco procure private label products assure exclusivity thereof trademark licenses specifying territory member may sell trademarked products answer app district considering things relevant decision agreed topco recognized panoply restraints topco imposed members worked prevent competition products concluded hatever effect practices may competition sale topco private label brands far outweighed increased ability topco members compete national chains supermarkets operating respective territories supp iii face sherman act appears bar combination entrepreneurs long restraint trade theoretically manufacturers distributors merchants sellers buyers considered potential competitors read narrowest possible way commercial contract deemed violate chicago board trade brandeis history underlying formulation antitrust laws led conclude however congress intend prohibit contracts even contracts might insignificant degree attenuated sense restrain trade competition lieu narrowest possible reading adopted rule reason analysis determining whether business combinations contracts violate prohibitions sherman act standard oil analysis reasonableness particular restraints includes consideration facts peculiar business restraint applied nature restraint effects history restraint reasons adoption chicago board trade supra utilized rule reason evaluating legality restraints alleged violative sherman act also developed doctrine certain business relationships per se violations act without regard consideration reasonableness northern pacific justice black explained appropriateness need per se rules certain agreements practices pernicious effect competition lack redeeming virtue conclusively presumed unreasonable therefore illegal without elaborate inquiry precise harm caused business excuse use principle per se unreasonableness makes type restraints proscribed sherman act certain benefit everyone concerned also avoids necessity incredibly complicated prolonged economic investigation entire history industry involved well related industries effort determine large whether particular restraint unreasonable inquiry often wholly fruitless undertaken think clear restraint case horizontal one therefore per se violation district failed make determination whether per se horizontal territorial restraints case simply applied rule reason reaching conclusions restraints illegal see comment horizontal territorial restraints per se rule lee rev district erred sealy supra fact fours case sealy licensed manufacturers mattresses bedding make sell products using sealy trademark like topco sealy corporation owned almost entirely licensees elected board directors controlled business case sealy agreed licensees license manufacturers sellers sell products designated territory exchange promise licensee sold territory expand sales beyond area demarcated sealy held horizontal territorial restraint per se violative sherman act whether decide case way rule reason used district irrelevant issue us fact courts limited utility examining difficult economic problems inability weigh meaningful sense destruction competition one sector economy promotion competition another sector one important reason formulated per se rules applying rigid rules consistently rejected notion naked restraints trade tolerated well intended allegedly developed increase competition general motors masonite fashion originators guild ftc antitrust laws general sherman act particular magna carta free enterprise important preservation economic freedom system bill rights protection fundamental personal freedoms freedom guaranteed every business matter small freedom compete assert vigor imagination devotion ingenuity whatever economic muscle muster implicit freedom notion foreclosed respect one sector economy certain private citizens groups believe foreclosure might promote greater competition important sector economy cf philadelphia national bank district determined limiting freedom individual members compete topco greater good fostering competition members large supermarket chains fallacy topco authority sherman act determine respective values competition various sectors economy contrary sherman act gives topco member prospective member right ascertain whether competition supermarket chains desirable competition sale products without territorial restrictions topco members may indeed cut throats cf white motor supra clark dissenting never found possibility sufficient warrant condoning horizontal restraints trade previously noted respect price fixing another per se violation sherman act reasonable price fixed today may economic business changes become unreasonable price tomorrow established may maintained unchanged absence competition secured agreement price reasonable fixed trenton potteries tremendous departures notion system originally conceived country departures product congressional action people decision made sacrifice competition one portion economy greater competition another portion decision must made congress private forces courts private forces keenly aware interests making decisions courts decisionmaking analyze interpret evaluate myriad competing interests endless data surely brought bear decisions make delicate judgment relative values society competitive areas economy judgment elected representatives people required territorial restrictions retailing products must fall must territorial restrictions wholesaling considerations sherman act requires identical results also strike topco restrictions right members wholesale goods restrictions amount regulation customers members topco may sell goods like territorial restrictions limitations customers intended limit competition promote competition reasons previously discussed arena topco members compete must left unfettered choice absent contrary congressional determination general motors supra cf arnold schwinn supra masonite supra trenton potteries supra see also white motor supra clark dissenting reverse judgment district remand case entry appropriate decree ordered footnotes addition purchasing various items members topco performs related functions insures adequate quality control products purchases assists members developing specifications certain types products equipment supplies also aids members purchasing goods sources founding members topco difficulty competing larger chains difficulty attributable degree fact larger chains capable developing programs products differ products sold limited number easily ascertainable stores example pioneer developing series products sold label available stores obvious using products chain achieve significant cost economies purchasing transportation warehousing promotion advertising economies may afford chain opportunities offering products lower prices products turn provides many advantages important store offer products price stores simultaneously offering desirable lower priced alternative profit margin sufficiently high goods products may sold reduced price advantages include enabling chain bargain favorably manufacturers creating broader supply base manufacturers thereby decreasing dependence large manufacturers enabling chain create whereby prices special items lowered attract customers profits maintained items creation general goodwill offering lower priced higher quality goods three largest chains safeway kroger topco named complaint sole defendant complaint clearly charged members defendants coconspirators topco violation sherman act article ix bylaws provides relevant part unless member membership licensing agreement provides member may sell wholesale member may wholesale products supplied association membership licensing agreement permits member sell wholesale member shall control resale products bearing trademarks association sales confined territories granted member method selling shall conform respects association policies apparent bylaw face applies whether products sold trademarked topco despite fact topco general manager testified trial practice restriction confined products district found bylaw applied written find nothing clearly erroneous finding assuming arguendo however restriction confined products trademarked topco result case change government first raised point district topco objected ground variance charge complaint district apparently agreed topco complaint cover customer limitations permitted government pursue line basis limitations proved complaint later amended app topco acquiesced procedure sides dealt customer limitations examining witnesses district made specific findings conclusions respect totality restraints wholesaling light facts additional fact complaint never formally amended bar consideration issue district recognized government introduced evidence indicating applications topco members expand territories assigned members denied supp concluded decisions topco appreciable influence decision members whether expand topco expands conclusion brief asserting evidence uncontradicted member never failed build new store unable obtain license brief appellee problem conclusion district assertion topco wholly inconsistent notion territorial divisions crucial existence topco urged association found district filing answer argument topco maintained without guarantee exclusive territory prospective licensees join topco present licensees leave association difficult understand topco make argument simultaneously urge territorial restrictions unimportant factor decision member whether expand business true sealy dealt price fixing well territorial restrictions extent sealy casts doubt whether horizontal territorial limitations unaccompanied price fixing per se violations sherman act remove doubt today much recent commentary wisdom per se rules see comment horizontal territorial restraints per se rule lee rev averill sealy schwinn sherman one analysis prognosis note selected antitrust problems franchisor exclusive arrangements territorial restrictions franchise termination rev sadd antitrust symposium territorial customer restrictions sealy schwinn cin rev bork rule reason per se concept pt price fixing market division yale without per se rules businessmen left little aid predicting particular case courts find legal illegal sherman act congress ultimately determine predictability unimportant area law course make per se rules inapplicable cases leave courts free ramble wilds economic theory order maintain flexible approach justice blackmun concurring result conclusion reaches anomalous aspects surely district findings make clear today decision government favor tend stultify topco members competition great larger chains bigs therefore find easier get bigger consequence reality seems odds public interest per se rule however appears firmly established late date oppose relief forthcoming apparently must way legislation chief justice burger dissenting case involve restraints interbrand competition allocation markets association monopoly control sources supply one varieties staple goods rather agreement among several small grocery chains join cooperative endeavor view unquestionably lawful principal purpose pursuit purpose mutually agreed certain minimal ancillary restraints fully reasonable view principal purpose never today held per se violations sherman act joining cooperative endeavor small chains agree restraints issue order make possible exploit already established line products noncompetitive pricing thing topco line products cooperative formed restraints cooperative members agreed deal marketing products topco line function restraints permit member chain establish within geographical area local advertising marketing efforts local consumer awareness trademarked family products member private label line goal sought enhancement individual members abilities compete albeit modest degree large national chains successfully marketing lines several years sole reason cooperative endeavor make economically feasible things quality control large quantity purchases bulk prices development attractively printed labels ability offer number different lines trademarked products things course feasible large national chains operating individually beyond reach small operators proceeding alone careful review economic considerations bearing upon case district determined relief government seeks increase competition topco private label brands contrary relief substantially diminish competition supermarket field supp today determined basis examination underlying economic realities district conclusions incorrect rather majority holds district business examining topco practices rule reason sought determine whether topco practices fact restrain trade commerce within meaning sherman act found practices involve horizontal division markets fact per se violations act believe prior decisions justify result reached majority believe new per se rule established disposing case judicial convenience ready predictability made possible per se rules overriding considerations antitrust law justify promulgation without careful prior consideration relevant economic realities light basic policy goals sherman act deal first cases upon majority relies stating reiterated time time orizontal territorial limitations naked restraints trade purpose except stifling competition white motor white motor course laid per se rule horizontal territorial limitations involved case indeed white motor reversed district holding vertically imposed territorial limitations per se violations explaining need know actual impact arrangements competition decide whether classified per se violations sherman act statement white motor opinion quoted majority today made without citation authority apparently intended primarily make clear facts confused horizontally imposed territorial limitations treat dictum case controlling course unjustified quoted dictum white motor cites eight cases proposition horizontal territorial limitations per se violations sherman act one cases northern pacific dealt exclusively prohibited tying arrangement improperly cited case concerned division markets remaining seven cases four involved aggregation trade restraints included agreements timken roller bearing sealy serta associates supp nd price fixing course factor instant case another cases relied upon national lead involved arrangement dividing territories pooling patents exchanging technological information arrangement found illegal district without reliance per se rule affirming concerned almost exclusively remedies ordered district made attempt declare per se rule govern merits case still another case majority relies arnold schwinn district indeed held agreements manufacturer certain distributors providing latter exclusive territories horizontal nature per se violations act supp since appeal taken part district order issue review case indeed dealing issues followed approach markedly different district first reviewing case made clear proceeding rule reason per se rule second saw issues presented involving vertical horizontal restraints hardly contended therefore decision schwinn controlling precedent application instant case per se rule prohibits horizontal restraints without regard market effects finally remains eighth cases relied upon actually first list authorities purported per se rule circuit judge later chief justice taft opinion addyston pipe steel aff generally recognized properly fully authoritative exposition antitrust law neither affirming made pretense establishing per se rule agreements involving horizontal territorial limitations defendants case manufacturers vendors pipe entered combination raise prices pipe throughout number constituting considerably territory significantly called pay territory associated defendants combination controlled manufactured output pipe pay territory certain cities reserved cities within territory assigned particular individual defendants sold pipe cities prices fixed association defendants submitting fictitious bids selling defendants paying fixed bonus association sale outside reserved cities sales defendants customers pay territory prices determined association allocated association member offered secret auction pay largest bonus association effect course buying public lost benefit competitive pricing although case frequently quite properly cited horizontal case sole purpose secret customer allocations enable members association fix prices charged public noncompetitive levels judge taft rejected defendants argument prices actually charged reasonable held sufficient finding sherman act violation combination agreement defendants gave monopoly power rather market forces fixed prices pipe nation territory case unquestionably laid important groundwork subsequent establishment per se rule price fixing however establish horizontal division markets without per se violation sherman act ii foregoing analysis cases relied upon majority indicates merely following prior holdings contrary establishing new per se rule face district well supported findings effects rule case adverse public welfare lays rule without regard impact condemned practices may competition virtually invites congress undertake determine impact ante question whether fulfilling role assigned statute declines make determination event unwilling record assess economic impact surely proceed make new rule govern economic activity white motor one versions proposed act senate consideration senator sherman lengthy obviously carefully prepared address body said bill sought prevent control combinations made view prevent competition restraint trade increase profits producer cost consumer unlawful combination tested rules common law human experience aimed bill lawful useful combination admit difficult define legal language precise line lawful unlawful combinations must left courts determine particular case lawmakers declare general principles assured courts apply carry meaning law cong rec certain agreements practices pernicious effect competition lack redeeming virtue conclusively presumed unreasonable therefore illegal without elaborate inquiry precise harm caused business excuse use respect believe two basic fallacies approach first characterize role sherman act one rambl ing wilds indeed one requires examin ation difficult economic problems undoubtedly ease task abdicate role formulation per se rules justification enhancement predictability reduction judicial investigation second general proposition per se rules play necessary role antitrust law follow particular per se rule promulgated today appropriate one although might well desirable proper case formulate per se rule dealing horizontal territorial limitations necessarily appropriate rule amount blanket prohibition limitations specifically far clear rule cover agreements involve price fixing concerned trademarked products monopoly position respect competing brands instant case presents agreement decide upon basis per se rule district specifically found horizontal restraints involved tend positively promote competition supermarket field produce lower costs consumer seems implicitly accept determination says sherman act give topco authority determine whether competition supermarket chains desirable competition sale products ante majority overlooks specific determination district namely invalidation restraints issue increase competition topco private label brands indeed district seemed believe contrary lead likely demise brands time evidence district appear justify conclusion national demand topco brands ever national advertising brands impracticable topco limited financial resources convert national brand distributor competition distributors existing national brands furthermore without right grant exclusive licenses attract hold new members replacements present members following pattern past eventually grow sufficiently size able leave cooperative organization develop individual brands moreover topco present members today decision full impact course time reason promote topco products local advertising merchandising efforts reason promote generally available brands issues presented antitrust cases reaching rarely simple resolve rule reason indeed frequently require us make difficult economic determinations reason alone however overly zealous formulating new per se rules excess zeal regard contrary policy sherman act detrimental welfare consumers generally indeed economic effect new rule laid today seems clear unless congress intervenes grocery staples marketed brands lower consumer prices soon available patronize large national chains district findings fact include following competitively effective private label program independently undertaken single retailer chain require annual sales volume million order achieve optimum efficiency volume required probably twice amount supp dictum case effect addyston pipe steel aff established division markets unlawful show however addyston pipe established thing primarily case agree description sealy fours case ante sealy support proposition restraints topco licensees horizontally imposed beyond however sealy hardly controlling territorial restrictions sealy found intimately part unlawful policing scheme two arrangements fell together unlawful resale activity refutes appellee claim territorial restraints mere incidents lawful program trademark licensing cf timken roller bearing territorial restraints part unlawful policing summarizing findings district made following statements story seen whole blinking fact free commerce titanium every pound trammelled privately imposed regulation channels commerce formed winds currents competition large measure artificial canals privately constructed titanium pigments enter except consent nl defendant national lead foreign titanium pigments move interstate commerce except like approval titanium pigment produced nl may leave ports points outside western hemisphere supp district clearly decided case rule reason found combination conspiracy restraint trade restraint unreasonable outlawed section sherman act emphasis added rejected argument made defense basic agreement arrangement founded permissible doctrine validates covenants restraint trade reasonably ancillary lawful principal purpose territorial allocation unreasonable scope measured business actualities emphasis added appellees appeal findings order invalidating territorial restraints resale distributors government contend per se violation sherman act presented practices involved appeal accordingly remitted appraisal market impact practices must look specifics challenged practices impact upon marketplace order make judgment whether restraint reasonable special sense sherman act must read purposes type inquiry confronted challenged vertical restrictions territory dealers horizontal restraints actors distributors without manufacturer participation among facts found district following brand merchandising beyond reach small chains acting independently definition depends upon local exclusivity permits merchandiser offer public lower consumer prices products high quality bargain favorably national brand manufacturers merchandising fosters establishment broader supply base manufacturers thereby decreasing dependence upon relatively large national brand manufacturers also enables maller manufacturers common source private label products generally unable develop national brand name recognition products benefit assurance substantial market products seems ironical another antitrust case decided today ford motor ante contrast handling instant case goes way commend another district treatment problem involving predictions assumptions concerning future economic business events national chains market products products available nowhere else stores chains stores one chain course engage price competition respect chain brands serious suggestion made sherman act requires otherwise fail see difference whatsoever economic effect topco arrangement marketing products methods used national chains marketing brands true topco arrangement involves combination national chains single integrated corporation controlling consideration however neither case policy sherman act offended practices cases work benefit detriment consuming public