Alvord-Polk, Inc. v. F. Schumacher & Co.

The wallpaper industry had two types of dealers: (1) traditional dealers, who sold to customers by providing them with sample books and showroom displays, and (2) phone dealers such as Alvord-Polk, Inc. (plaintiff), who sold at discounted prices by having customers contact them through a toll-free telephone number. The phone dealers encouraged their customers to use traditional-dealer sample books and showroom displays in order to determine which product to order through the toll-free number. The phone dealers would then deliver customer orders directly to the customer’s house in the form of a drop shipment. However, the phone dealers did not themselves invest any money to utilize sample books or showroom displays—by their own admission, they acted as free riders on the more traditional wallpaper sellers. Both types of dealers belonged to the National Decorating Products Association (NDPA) (defendant). The traditional dealers complained to the NDPA about the phone dealers being free riders. The NDPA, in turn, complained to wallpaper manufacturers—including F. Schumacher & Co. (FSC) (defendant)—about the phone dealers being free riders. FSC implemented a 7 percent surcharge on all drop-shipment orders for phone retailers. FSC’s committee minutes indicated this surcharge was done in direct response to complaints about the phone retailers being free riders and as a way of combating piracy. FSC’s press release said the surcharge was to ensure that traditional retailers and phone retailers stayed exclusively within their own customer base. FSC also claimed that the surcharge was a way of recouping costs associated with drop shipments, but it never utilized a mathematical formula to arrive at the 7 percent figure. Alvord-Polk brought suit against FSC and the NDPA, alleging that FSC and the NDPA conspired to force the phone retailers out of business. FSC, in contrast, argued that its actions were a legitimate attempt to put an end to the phone retailers’ free riding on the traditional retailers. The district court granted summary judgment to FSC and NDPA. Alvord-Polk appealed.