United States v. Parke, Davis & Co.

Facts

Parke Davis, a pharmaceutical manufacturer, had established policies concerning the prices at which its products were to be sold by wholesalers and retailers. The company’s wholesalers’ catalog contained a Net Price Selling Schedule with suggested minimum resale prices, and its retailers’ catalog included suggested minimum retail prices that typically provided a 50% markup over cost. In the spring and early summer of 1956, several drug retailers in Washington, D.C., and Richmond, Virginia, where no Fair Trade Laws existed, advertised and sold Parke Davis products below the suggested minimum prices.

In response, Parke Davis implemented a program to enforce compliance with its price policy. The company’s representatives visited wholesalers individually and informed them that Parke Davis would refuse to sell to wholesalers who sold to retailers not observing the suggested minimum prices. Representatives also visited retailers individually, informing each that if they did not observe the suggested prices, Parke Davis would refuse to deal with them and they would be unable to purchase products from wholesalers. When several retailers continued selling at discount prices, Parke Davis provided their names to wholesalers, who then refused to fill their orders. The ban included all Parke Davis products, even those necessary to fill prescriptions.

Later, Parke Davis modified its approach, focusing on stopping the advertising of discounted prices. The company used one retailer’s apparent willingness to stop advertising as leverage to gain others’ acquiescence. Once all retailers agreed to stop advertising discounted prices, Parke Davis and wholesalers resumed sales to them. However, when advertising resumed a month later, Parke Davis abandoned its efforts after learning that the Department of Justice had begun an investigation.