MR. JUSTICE POWELL delivered the opinion of the Court. In a state-court action, respondent Midcal Aluminum, Inc., a wine distributor, presented a successful antitrust challenge to California's resale price maintenance and price posting statutes for the wholesale wine trade. The issue in this case is whether those state laws are shielded from the Sherman Act by either the "state action" doctrine of Parker v. Brown, 317 U. S. 341 (1943), or § 2 of the Twenty-first Amendment. I Under § 24866 (b) of the California Business and Professions Code, all wine producers, wholesalers, and rectifiers must file fair trade contracts or price schedules with the State.1 If a wine producer has not set prices through a fair trade contract, wholesalers must post a resale price schedule for that producer's brands. § 24866 (a). No state-licensed wine merchant may sell wine to a retailer at other than the price set "either in an effective price schedule or in an effective fair trade contract. . . . § 24862 (West Supp. 1980). The State is divided into three trading areas for administration of the wine pricing program. A single fair trade contract or schedule for each brand sets the terms for all wholesale transactions in that brand within a given trading area. §§ 24862, 24864, 24865 (West Supp. 1980). Similarly, state Michael N. Sohn for the United States; and by A. Kirk McKenzie for Consumers Union of United States, Inc. 1 The statute provides: "Each wine grower, wholesaler licensed to sell wine, wine rectifier, and rectifier shall: "(a) Post a schedule of selling prices of wine to retailers or consumers for which his resale price is not governed by a fair trade contract made by the person who owns or controls the brand. "(b) Make and file a fair trade contract and file a schedule of resale prices, if he owns or controls a brand of wine resold to retailers or consumers." Cal. Bus. & Prof. Code Ann. § 24866 (West 1964). regulations provide that the wine prices posted by a single wholesaler within a trading area bind all wholesalers in that area. Midcal Aluminum, Inc. v. Rice, 90 Cal. App. 3d 979, 983-984, 153 Cal. Rptr. 757, 760 (1979). A licensee selling below the established prices faces fines, license suspension, or outright license revocation. Cal. Bus. & Prof. Code Ann. § 24880 (West Supp. 1980). The State has no direct control over wine prices, and it does not review the reasonableness of the prices set by wine dealers. 2 Midcal Aluminum, Inc., is a wholesale distributor of wine in southern California. In July 1978, the Department of Alcoholic Beverage Control charged Midcal with selling 27 cases of wine for less than the prices set by the effective price schedule of the E. & J. Gallo Winery. The Department also alleged that Midcal sold wines for which no fair trade contract or schedule had been filed. Midcal stipulated that the allegations were true and that the State could fine it or suspend its license for those transgressions. App. 19-20. Midcal then filed a writ of mandate in the California Court of Appeal for the Third Appellate District asking for an injunction against the State's wine pricing system. The Court of Appeal ruled that the wine pricing scheme restrains trade in violation of the Sherman Act, 15 U. S. C. § 1 et seq. The court relied entirely on the reasoning in Rice v. Alcoholic Beverage Control Appeals Bd., 21 Cal. 3d 431, 579 P. 2d 476 (1978), where the California Supreme Court struck down parallel restrictions on the sale of distilled liquors. In that case, the court held that because the State played only a passive part in liquor pricing, there was no Parker v. Brown immunity for the program. "In the price maintenance program before us, the state plays no role whatever in setting the retail prices. The 2 Licensees that sell wine below the prices specified in fair trade contracts or schedules also may be subject to private damages suits for unfair competition. § 24752 (West 1964). prices are established by the producers according to their 21 Rice also rejected the claim that California's liquor pricing policies were protected by § 2 of the Twenty-first Amendment, which insulates state regulation of intoxicating liquors from many federal restrictions. The court determined that the national policy in favor of competition should prevail over the state interests in liquor price maintenance the promotion of temperance and the preservation of small retail establishments. The court emphasized that the California system not only permitted vertical control of prices by producers, but also frequently resulted in horizontal price fixing. Under the program, many comparable brands of liquor were marketed at identical prices. Referring to congressional and state legislative studies, the court observed that resale price maintenance has little positive impact on either temperance or small retail stores. See infra, at 112–113. In the instant case, the State Court of Appeal found the analysis in Rice squarely controlling. 90 Cal. App. 3d, at 984, 153 Cal. Rptr., at 760. The court ordered the Department of Alcoholic Beverage Control not to enforce the resale price maintenance and price posting statutes for the wine trade. The Department, which in Rice had not sought certiorari from 3 The court cited record evidence that in July 1976 five leading brands of gin each sold in California for $4.89 for a fifth of a gallon, and that five leading brands of Scotch whiskey sold for either $8.39 or $8.40 a fifth. Rice v. Alcoholic Beverage Control Appeals Bd., 21 Cal. 3d, at 454, and nn. 14, 16, 579 P. 2d, at 491-492, and nn. 14, 16. this Court, did not appeal the ruling in this case.* An appeal was brought by the California Retail Liquor Dealers Association, an intervenor. The California Supreme Court declined to hear the case, and the Dealers Association sought certiorari from this Court. We granted the writ, 444 U. S. 824 (1979), and now affirm the decision of the state court. II The threshold question is whether California's plan for wine pricing violates the Sherman Act. This Court has ruled consistently that resale price maintenance illegally restrains trade. In Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, 407 (1911), the Court observed that such arrangements are "designed to maintain prices . . ., and to prevent competition among those who trade in [competing goods]." See Albrecht v. Herald Co., 390 U. S. 145 (1968); United States v. Parke, Davis & Co., 362 U. S. 29 (1960); United States v. A. Schrader's Son, Inc., 252 U. S. 85 (1920). For many years, however, the Miller-Tydings Act of 1937 permitted the States to authorize resale price maintenance. 50 Stat. 693. The goal of that statute was to allow the States to protect small retail establishments that Congress thought might otherwise be driven from the marketplace by large-volume discounters. But in 1975 that congressional permission was rescinded. The Consumer Goods Pricing Act of 1975, 89 Stat. 801, repealed the Miller-Tydings Act and related legislation. Consequently, the Sherman Act's ban on resale price 4 The State also did not appeal the decision in Capiscean Corp. v. Alcoholic Beverage Control Appeals Bd., 87 Cal. App. 3d 996, 151 Cal. Rptr. 492 (1979), which used the analysis in Rice to invalidate California's resale price maintenance scheme for retail wine sales to consumers. The California Retail Liquor Dealers Association, a trade association of independent retail liquor dealers in California, claims over 3,000 members. The congressional Reports accompanying the Consumer Goods Pricing Act of 1975 noted that repeal of fair trade authority would not alter maintenance now applies to fair trade contracts unless an industry or program enjoys a special antitrust immunity. California's system for wine pricing plainly constitutes resale price maintenance in violation of the Sherman Act. Schwegmann Bros. v. Calvert Corp., 341 U. S. 384 (1951); see Albrecht v. Herald Co., supra; Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, 340 U. S. 211 (1951); Dr. Miles Medical Co. v. John D. Park & Sons Co., supra. The wine producer holds the power to prevent price competition by dictating the prices charged by wholesalers. As Mr. Justice Hughes pointed out in Dr. Miles, such vertical control destroys horizontal competition as effectively as if wholesalers "formed a combination and endeavored to establish the same restrictions... by agreement with each other." 220 U. S., at 408." Moreover, there can be no claim that the California program is simply intrastate regulation beyond the reach of the Sherman Act. See Schwegmann Bros. v. Calvert Corp., supra; Burke v. Ford, 389 U. S. 320 (1967) (per curiam). Thus, we must consider whether the State's involvement in the price-setting program is sufficient to establish antitrust immunity under Parker v. Brown, 317 U. S. 341 (1943). That immunity for state regulatory programs is grounded in our federal structure. "In a dual system of government in which, under the Constitution, the states are sovereign, save only as Congress may constitutionally subtract from their authority, whatever power the States hold under the Twenty-first Amendment to control liquor prices. S. Rep. No. 94-466, p. 2 (1975); H. R. Rep. No. 94-341, p. 3, n. 2 (1975). We consider the effect of the Twentyfirst Amendment on this case in Part III, infra. "In Rice, the California Supreme Court found direct evidence that resale price maintenance resulted in horizontal price fixing. See supra, at 101, and n. 3. Although the Court of Appeal made no such specific finding in this case, the court noted that the wine pricing system "cannot be upheld for the same reasons the retail price maintenance provisions were declared invalid in Rice." Midcal Aluminum, Inc. v. Rice, 90 Cal. App. 3d 979, 983, 153 Cal. Rptr. 757, 760 (1979). |