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decided: May 27, 1980.



Author: Per Curiam

[ 446 U.S. Page 643]

Petitioners, a conditionally certified class of beer retailers in the Fresno, Cal., area, brought suit against respondent wholesalers alleging that they had conspired to eliminate short-term trade credit formerly granted on beer purchases in violation of § 1 of the Sherman Act, ch. 647, 26 Stat. 209, as amended, 15 U. S. C. § 1. The District Court entered an interlocutory order, which among other things, denied petitioners' "motion to declare this a case of per se illegality," and then certified to the United States Court of Appeals for the Ninth Circuit, pursuant to 28 U. S. C. § 1292 (b),*fn1 the

[ 446 U.S. Page 644]

     question whether the alleged agreement among competitors fixing credit terms, if proved, was unlawful on its face.*fn2 The Court of Appeals granted permission to appeal, and, with one judge dissenting, agreed with the District Court that a horizontal agreement among competitors to fix credit terms does not necessarily contravene the antitrust laws. 605 F.2d 1097 (1979).*fn3 We grant the petition for certiorari and reverse the judgment of the Court of Appeals.

For purposes of decision we assume the following facts alleged in the amended complaint*fn4 to be true. Petitioners allege that, beginning in early 1967, respondent wholesalers secretly agreed, in order to eliminate competition among themselves, that as of December 1967 they would sell to retailers only if payment were made in advance or upon delivery. Prior to the agreement, the wholesalers had extended credit without interest up to the 30- and 42-day limits permitted by state law.*fn5 According to the petition, prior to the agreement wholesalers had competed with each other with respect

[ 446 U.S. Page 645]

     to trade credit, and the credit terms for individual retailers had varied substantially.*fn6 After entering into the agreement, respondents uniformly refused to extend any credit at all.

 The Court of Appeals decided that the credit-fixing agreement should not be characterized as a form of price fixing. The court suggested that such an agreement might actually enhance competition in two ways: (1) "by removing a barrier perceived by some sellers to market entry," and (2) "by the increased visibility of price made possible by the agreement to eliminate credit." Id., at 1099.

In dissent, Judge Blumenfeld*fn7 expressed the opinion that an agreement to eliminate credit was a form of price fixing. Id., at 1104. He reasoned that the extension of interest-free credit is an indirect price reduction and that the elimination of such credit is therefore a method of raising prices:

"The purchase of goods creates an obligation to pay for them. Credit is one component of the overall price paid for a product. The cost to a retailer of purchasing goods consists of (1) the amount he has to pay to obtain the goods, and (2) the date on which he has to make that payment. If there is a differential between a purchase for cash and one on time, that difference is not interest but part of the price. See Hogg v. Ruffner, 66 U.S. (1 Black) 115, 118-119 . . . (1861). Allowing a retailer interest-free short-term credit on beer purchases effectively reduces the price of beer, when compared to a requirement that the retailer pay the same amount immediately in cash; and, conversely, the elimination of free credit is the equivalent of a price increase." Id., at 1103.

It followed, in his view, that the agreement was just as plainly anticompetitive as a direct agreement to raise prices. Consequently,

[ 446 U.S. Page 646]

     no further inquiry under the rule of reason, see National Society of Professional Engineers v. United States, 435 U.S. 679 (1978), was required in order to establish the agreement's unlawfulness.

Our cases fully support Judge Blumenfeld's analysis and foreclose both of the possible justifications on which the majority relied.*fn8 In Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 7-8 (1979), we said:

"In construing and applying the Sherman Act's ban against contracts, conspiracies, and combinations in restraint of trade, the Court has held that certain agreements or practices are so 'plainly anticompetitive,' National Society of Professional Engineers v. United States, 435 U.S. 679, 692 (1978); Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50 (1977), and so often 'lack . . . any redeeming virtue,' Northern Pac. R. Co. v. United States, 356 U.S. 1, 5 (1958), that they are conclusively presumed illegal without further examination under the rule of reason generally applied in Sherman Act cases."*fn9

[ 446 U.S. Page 647]

     A horizontal agreement to fix prices is the archetypal example of such a practice. It has long been settled that an agreement to fix prices is unlawful per se. It is no excuse that the prices fixed are themselves reasonable. See, e. g., United States v. Trenton Potteries Co., 273 U.S. 392, 397-398 (1927); United States v. Trans-Missouri Freight Assn., 166 U.S. 290, 340-341 (1897). In United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940), we held that an agreement among competitors to engage in a program of buying surplus gasoline on the spot market in order to prevent prices from falling sharply was unlawful without any inquiry into the reasonableness of the program, even though there was no direct agreement on the actual prices to be maintained. In the course of the opinion, the Court made clear that

"the machinery employed by a combination for price-fixing is immaterial.

"Under the Sherman Act a combination formed for the purpose and with the effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign commerce is illegal per se." Id., at 223.

Thus, we have held agreements to be unlawful per se that had substantially less direct impact on price than the agreement alleged in this case. For example, in Sugar Institute v. United States, 297 U.S. 553, 601-602 (1936), the Court held unlawful an agreement to adhere to previously announced prices and terms of sale, even though advance price announcements are perfectly lawful and even though the particular prices and terms were not themselves fixed by private agreement. Similarly, an agreement among competing firms of professional engineers to refuse to discuss prices with potential customers until after negotiations have resulted in the initial selection of an engineer was held unlawful without requiring further inquiry. National Society of Professional Engineers v. United States, supra, at 692-693. Indeed, a horizontal agreement among competitors to use a

[ 446 U.S. Page 648]

     specific method of quoting prices may be unlawful. Cf. FTC v. Cement Institute, 333 U.S. 683, 690-693 (1948).*fn10

It is virtually self-evident that extending interest-free credit for a period of time is equivalent to giving a discount equal to the value of the use of the purchase price for that period of time. Thus, credit terms must be characterized as an inseparable part of the price.*fn11 An agreement to terminate the practice of giving credit is thus tantamount to an agreement to eliminate discounts, and thus falls squarely within the traditional per se rule against price fixing.*fn12 While it

[ 446 U.S. Page 649]

     may be that the elimination of a practice of giving variable discounts will ultimately lead in a competitive market to corresponding decreases in the invoice price, that is surely not necessarily to be anticipated. It is more realistic to view an agreement to eliminate credit sales as extinguishing one form of competition among the sellers. In any event, when a particular concerted activity entails an obvious risk of anticompetitive impact with no apparent potentially redeeming value, the fact that a practice may turn out to be harmless in a particular set of circumstances will not prevent its being declared unlawful per se.

The majority of the panel of the Court of Appeals suggested, however, that a horizontal agreement to eliminate credit sales may remove a barrier to other sellers who may wish to enter the market. But in any case in which competitors are able to increase the price level or to curtail production by agreement, it could be argued that the agreement has the effect of making the market more attractive to potential new entrants. If that potential justifies horizontal agreements among competitors imposing one kind of voluntary restraint or another on their competitive freedom, it would seem to follow that the more successful an agreement is in raising the price level, the safer it is from antitrust attack. Nothing could be more inconsistent with our cases.

Nor can the informing function of the agreement, the increased price visibility, justify its restraint on the individual wholesaler's freedom to select his own prices and terms of sale. For, again, it is obvious that any industrywide agreement on prices will result in a more accurate understanding of the terms offered by all parties to the agreement. As the Sugar Institute case demonstrates, however, there is a plain distinction between the lawful right to publish prices and terms of sale, on the one hand, and an agreement among competitors

[ 446 U.S. Page 650]

     limiting action with respect to the published prices, on the other.

Thus, under the reasoning of our cases, an agreement among competing wholesalers to refuse to sell unless the retailer makes payment in cash either in advance or upon delivery is "plainly anticompetitive." Since it is merely one form of price fixing, and since price-fixing agreements have been adjudged to lack any "redeeming virtue," it is conclusively presumed illegal without further examination under the rule of reason.

Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.


Certiorari granted; 605 F.2d 1097, reversed and remanded.

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