User:Jakepenguin/United States v. Topco Assocs., Inc.

United States v. Topco Assocs., Inc. 405 U.S. 596 (1972) was a United States Supreme Court case in which the Court held Topco's actions qualified as horizontal market allocation, and were a  per se violation under Section 1 of the Sherman Act.

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Background
Topco was a cooperative association of about 25 small and medium-sized independent regional supermarket chains operating in 33 States. Topco served as its members' purchasing agent, and procured more than 1,000 different items, most of which were brand names owned by Topco. The members' combined retail sales in 1967 was 2.3 billion, exceeded by only three national grocery chains, and the members owned equal amounts of Topco's common stock (the voting stock), chose its directors, and completely controlled the association's operations.

Topco's bylaws established an "exclusive" category of territorial licenses, under which most members' licenses were issued, and the two other membership categories have proved to be de facto exclusive. Since no member under this system was allowed to sell Topco brand products outside the territory in which it was licensed, expansion into another member's territory was, in practice, permitted only with the other member's consent, and, since a member, in effect, has a veto power over admission of a new member, members can control actual or potential competition in the territorial areas in which they are concerned.

In addition, Topco members were prohibited from selling any products supplied by the association at wholesale, whether trademarked or not, without securing special permission, which is not granted without the consent of other interested licensees (usually retailers), and then the member must agree to restrict Topco product sales to a specific area, and under certain conditions.

The Government charged that Topco's scheme of dividing markets violated the Sherman Act because it operated to prohibit competition in Topco brand products among retail grocery chains, and also challenged Topco's restrictions on wholesaling. Topco contended that it needs territorial divisions to maintain its private label program and to enable it to compete with the larger chains; that the association could not exist if the territorial divisions were not exclusive; and that the restrictions on competition in Topco brand sales enable members to meet larger chain competition.