## Facts

- Direct Sales Co., a registered drug manufacturer and mail-order wholesaler, sold morphine sulphate over several years to Dr. John V. Tate, a physician in a small South Carolina town.
- The government charged that Direct Sales, Tate, and others conspired from 1933 to 1940 to violate the Harrison Narcotic Act by distributing morphine outside lawful channels.
- Evidence showed legitimate medical demand was far lower than Tate’s purchases; the company shipped extraordinarily large and increasing quantities, including 79,000 half-grain tablets between late 1937 and early 1940, with thousands of tablets shipped monthly in late 1939.
- Direct Sales used discount pricing and bulk-quantity listings for narcotics and continued supplying Tate despite the abnormal volume, which the prosecution argued demonstrated knowledge and a purpose to further Tate’s unlawful redistribution.
- Tate and Direct Sales were tried and convicted; the court of appeals affirmed, and Direct Sales sought Supreme Court review citing tension with precedent limiting supplier conspiracy liability.

## Issues

1. Whether repeated sales of unusually large quantities of a restricted narcotic to a physician, under circumstances indicating illegal diversion, can support a finding that the seller joined a conspiracy to violate the Harrison Narcotic Act.
2. Whether the evidence showed more than a seller–buyer relationship—namely, knowledge plus intent to cooperate in the buyer’s unlawful distribution—distinguishing supplier nonliability principles applied to ordinary commodities.

## Decision

- The Supreme Court affirmed the conviction.
- The Court held the evidence permitted a jury to find Direct Sales knew of Tate’s illegal distribution and intended to cooperate in it, satisfying the agreement element inferable from circumstantial evidence.
- The Court distinguished, rather than overruled, precedent involving sales of ordinary, lawfully traded goods.

## Legal Principles

- Mere sales to a wrongdoer, even with awareness of unlawful use, do not alone establish conspiracy; the government must show knowing, intentional participation in a shared unlawful objective.
- For restricted and dangerous commodities such as narcotics, the nature of the product, abnormal volume and continuity of sales, and the supplier’s sales conduct may support an inference of intentional cooperation.
- A conspiratorial agreement may be inferred from a prolonged, abnormal course of dealing that cannot reasonably be explained as legitimate commerce, particularly where the seller stimulates or encourages the illicitly profitable trade.

## Conclusion

The Court sustained a conspiracy conviction against a narcotics wholesaler because the combination of a tightly regulated drug, extraordinary and sustained quantities inconsistent with legitimate medical practice, and sales practices supporting continued bulk purchasing allowed the jury to infer knowing and purposeful cooperation in unlawful distribution.


Direct Sales Co. v. United States, 319 U.S. 703 (1943)