Document XO9OvYG0YwGrX2D32wNwVMNpw

] PLAINTIFF'S EXHIBIT DISTRIBUTOR-TERMINATION CASE DECIDED BY THE SUPREME COURT Under what circumstances will a manufacturer's termination of a wholesalerdistributor (or refusal to renew a distributorship agreement) violate the antitrust laws? The Supreme Court has ruled that a manufacturer who terminates a distributor pursuant to a conspiracy or combination with one or more other distributors to fix, maintain or stabilize the resale prices of the manufacturer's products violates the Sherman Act. (Monsanto Company v. Spray-Rite Service Corp.) As to what evidence is required to establish an unlawful distributor termination, the Court rejected the lower court's ruling that proof that a manufacturer terminated a price-cutting distributor in response to or following complaints by other distributors about price-cutting practices is sufficient. Instead, there must be evidence that tends to prove that the manufacturer and complaining distributor(s) had a conscious commitment to a common scheme to fix, maintain or stabilize resale prices. Utilizing this standard, the Court then found that Spray-Rite was terminated pursuant to a price-fixing conspiracy between Monsanto and its distributors. The jury award of $3.5 million in damages, which was trebled to $10.5 million, was affirmed. FACTS Spray-Rite was a wholesaler-distributor of Monsanto agricultural herbicides from 1957 to 1968. In October, 1968, Monsanto declined to renew Spray-Rite's distributorship asserting a failure to hire trained salesmen and promote sales to dealers. Spray-Rite filed suit and alleged that the termination was a result of a conspiracy among Monsanto and some of its distributors to eliminate Spray-Rite as a competitor. There was evidence of numerous complaints to Monsanto from competing distributors about Spray-Rite's price-cutting practices. The jury ruled for Spray-Rite and the court of appeals affirmed. (OVER) NATIONAL ASSOCIATION OF WHOLESALER-DISTRIBUTORS I 1725 K Street, N.W Washington, D.C. 20006 202/872-0885 II CAPCO JEN 0032134 i 2- - EVIDENCE OF ILLEGAL CONDUCT The Supreme Court considered the following evidence sufficient for the jury to reasonably conclude that Monsanto and some of its distributors were parties to a conspiracy to maintain resale prices and terminate price-cutters: * There was testimony that Monsanto had not discussed distributorship performance criteria with Spray-Rite, nor informed Spray-Rite prior to termination that it was failing to meet the criteria. * A Monsanto district manager testified that Monsanto on at least two occasions had approached other price-cutting distributors and warned them to adhere to suggested resale prices or else they would not receive an adequate supply of a new herbicide. One distributor, who initially objected, eventually acceded. * A newsletter written by a distributor following a meeting with Monsanto officials stated that Monsanto would make every effort to maintain a minimum market price level. * In a post-termination meeting between parties, the first thing a Monsanto official mentioned was the many complaints Monsanto had received about Spray-Rite's prices. * A former Monsanto salesman testified that Monsanto representatives informed Spray-Rite of these complaints and requested that prices be maintained. This evidence was sufficient even though there was no testimony of any complaints about Spray-Rite's pricing for the fifteen months prior to termination. CONCLUSION Establishing an unlawful conspiracy to maintain resale prices and terminate price-cutters requires evidence that reasonably tends to prove that the manufacturer and others had a common scheme to achieve an unlawful objective. Proof of termination following distributors' complaints about the terminated distributor's pricing practices alone is not sufficient. \ i- CAPCO JEN 0032135