## Facts

- The wallpaper retail market included traditional retailers with showrooms and sample books and “phone dealers” selling by toll-free number at discounts.
- Phone dealers commonly directed customers to view samples at traditional retailers and then placed orders by phone, a practice traditional retailers labeled “free riding.”
- Traditional retailers complained to a trade association (NDPA), which relayed the complaints to wallpaper manufacturers, including F. Schumacher & Co. (FSC).
- FSC adopted a 7% surcharge on “drop-shipment” orders (direct shipment to the customer), a method used heavily by phone dealers.
- Internal minutes and a press release suggested the surcharge was adopted in response to complaints about phone dealers and to reduce cross-competition between dealer types.
- FSC asserted the surcharge reflected added drop-shipment costs, but the 7% rate was not derived from a documented cost analysis.
- Alvord-Polk alleged the surcharge disproportionately burdened phone dealers and was intended to force them from the market.

## Issues

1. Whether the evidence supported a triable claim of concerted action constituting an unreasonable restraint of trade under Sherman Act § 1.
2. Whether the surcharge should be treated as per se unlawful (e.g., boycott/price-fixing) or analyzed under the rule of reason as a vertical restraint.
3. Whether Alvord-Polk produced sufficient evidence of anticompetitive effects and antitrust injury (harm to competition, not merely harm to a competitor) to survive summary judgment.

## Decision

- The Third Circuit affirmed summary judgment for FSC and NDPA on Alvord-Polk’s federal antitrust claims.
- The court treated the surcharge as a vertical distribution/pricing policy subject to rule-of-reason analysis, not per se condemnation.
- The record did not permit a reasonable inference of an agreement or “conscious commitment to a common scheme” between FSC, NDPA, and traditional dealers.
- Alvord-Polk failed to produce evidence that the surcharge reduced output, raised marketwide prices, or otherwise harmed the competitive process, and thus failed to show antitrust injury.

## Legal Principles

- Dealer complaints and a manufacturer’s responsive conduct, without more, do not establish a Sherman Act § 1 conspiracy; plaintiffs must show evidence tending to exclude independent action and to prove agreement.
- Vertical restraints adopted by a manufacturer in managing distribution channels are generally analyzed under the rule of reason rather than per se rules.
- Preventing or limiting retail free riding can be a legitimate, potentially procompetitive justification for vertical restrictions affecting dealer practices.
- Antitrust liability requires proof of harm to competition and antitrust injury; increased costs or reduced profitability to a particular competitor is insufficient absent market-level competitive harm.
- At summary judgment, conclusory allegations about motive or coordination do not substitute for significant probative evidence on agreement and competitive effects.

## Conclusion

The court upheld summary judgment because the surcharge, though influenced by dealer complaints and known to burden phone dealers more heavily, lacked sufficient evidence of conspiratorial agreement or marketwide anticompetitive effects, and the plaintiff showed only competitor-specific harm rather than antitrust injury.


Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996 (3d Cir. 1994)