United States v. Parke, Davis & Co.

Parke, Davis & Company (Parke Davis) (defendant) was a manufacturer of pharmaceutical products. In its customer catalogs, Parke Davis announced a price-maintenance policy, which listed suggested minimum resale prices for wholesalers reselling the products to retailers. Parke Davis noted that it would not sell products to wholesalers that failed to abide by the minimum prices. The catalog for retailers also contained a minimum price schedule for retailers of Parke Davis products. Some retailers advertised and sold Parke Davis products below-schedule prices. To ensure compliance, Parke Davis told the wholesalers that did business with these retailers that Parke Davis would not deal with wholesalers that sold to retailers that failed to observe the minimum retail prices. The wholesalers were told that the other regional wholesalers had been similarly informed. Each of the wholesalers affirmed they would abide by these terms. The retailers that had refused to abide by the minimum prices were informed that if they continued to sell the products for below-schedule prices, neither Parke Davis nor regional wholesalers would sell Parke Davis products to them. When a number of retailers nevertheless continued to advertise and sell as before, Parke Davis and the wholesalers refused to fill their orders. In order to restore compliance, Parke Davis secured agreement from each of the retailers violating the policy to stop advertising Parke Davis products at below-schedule prices if the other retailers would do the same. The retailers stopped advertising the below-schedule prices. One retailer complained to the Department of Justice, which sought an injunction against Parke Davis in district court, alleging that Parke Davis had illegally conspired with wholesalers and retailers in violation of the Sherman Act. The court held that the actions of Parke Davis were legal under existing caselaw and dismissed the case. The government (plaintiff) appealed to the United States Supreme Court.