Discounters, take heart. The U.S. Supreme Court is on your side. This spring, the Court affirmed a $10.5-million judgment in favor of Spray-Rite Service Corp., a now-defunct midwestern distributor of agricultural chemicals. The company had sued Monsanto Co., the $6-billion chemical manufacturer, when Monsanto, irked by Spray-Rite's cut-rate pricing, refused to renew its contract to distribute Monsanto chemicals (see INC., December 1983, page 18).

The case struggled through the courts for more than 10 years as Monsanto pursued appeal after appeal to the original decision in favor of Spray-Rite. Along the way, the chemical giant gained the support of William F. Baxter, former chief of the Antitrust Division of the Department of Justice in the Reagan Administration; and the National Association of Manufacturers, whose members are often pressured by full-price retailers to curtail sales to competing discounters.

In its appeal, Monsanto insisted that suppliers had the right to dictate product resale prices to distributors, dealers, and franchisees by a "rule of reason" principle, which argues that price fixing is reasonable under certain circumstances, such as attempting to assure market stability and economic efficiency. If the rule had been adopted, it would have overturned 73 years of antitrust law that holds that pricefixing is illegal per se, meaning that any such practice violates the law. But the Supreme Court could not be sold on Monsanto's argument. Wrote Justice Lewis F. Powell Jr. in his opinion for the majority, ". . . we believe these was sufficient evidence for the jury reasonably to have concluded that Monsanto and some of its distributors were parties to an 'agreement' or 'conspiracy' to maintain resale prices and terminate price-cutters."

"It would have been disastrous for small businesses if the Court had decided any other way," says Timothy H. Fine, chairman of the Small Business Legal Defense Committee, which filed an amicus curiae brief with the Supreme Court in support of Spray-Rite. "It's a falsehood that manufacturers and suppliers headquartered in New York or Chicago are best able to judge the market in places like Bend, Oregon. The small businessperson is the man-on-the-spot who can best judge what his local market will bear."

Published on: Aug 1, 1984