United States v. Topco Associates

Topco Associates, Inc. (Topco) (defendant), was a cooperative association consisting of roughly 25 regional supermarket chains operating throughout the United States. Topco served as a purchasing agent for the supermarket chains and provided over 1,000 different products to its members. Most of the products were distributed to the members under Topco brands, which proved to be very popular and particularly profitable to Topco members. Membership in Topco had to be approved by a board of directors composed of executives who were existing members, and membership was also conditioned on an affirmative vote of 75 percent by existing members. If an applicant wished to operate within 100 miles of an existing member, the existing member could require the affirmative vote for membership to be 85 percent. The United States (plaintiff) brought a complaint against Topco, alleging that the arrangement violated § 1 of the Sherman Act. Specifically, the government argued that Topco members were engaged in an unlawful scheme to divide up the market for Topco-branded products into exclusive territories for the members. The government also contended that the membership requirements were used as a means to exclude competition. Topco argued that its members needed territorial divisions to effectively compete with larger national chains. The district court held in favor of Topco after applying the rule of reason to the challenged restraint. The government appealed the decision, arguing that the per se rule should have been applied.