Cummings, Joseph D.

Lotz, Edward J.

English

The Catholic University of America Columbus School of Law

Catholic University Law Review Volume 2 Issue 2 Article 6 1952 Present Status of Price Maintenance Contracts in Interstate Commerce Joseph D. Cummings Edward J. Lotz Follow this and additional works at: https://scholarship.law.edu/lawreview Recommended Citation Joseph D. Cummings & Edward J. Lotz, Present Status of Price Maintenance Contracts in Interstate Commerce, 2 Cath. U. L. Rev. 97 (1952). Available at: https://scholarship.law.edu/lawreview/vol2/iss2/6 This Comments is brought to you for free and open access by CUA Law Scholarship Repository. It has been accepted for inclusion in Catholic University Law Review by an authorized editor of CUA Law Scholarship Repository. For more information, please contact edinger@law.edu. our children are entrusted with none of the traditional constitutional safeguardswith which we protect the most unsavory of other of our citizens.A warning has been sounded by Judge Jesse Olney of California,It (the juvenile court) is fast developing into a complete system of fascism,as dangerous to our institutions as communism. Our youth are jailed, bailed,granted or denied rights on the mere order of probation officers, countyattorneys, sheriffs and other executive officers. Laws and regulations aremade not by legislation or settled law but by those in control. Juvenileexecutives are properly called 'the law'. A further question arises whetherunder such a judicial system there is any method by which personal rightscan be protected? The Juvenile Court machinery is supposedly geared toinsure order, but there appears nothing to protect rights" 2 9 .Consider again the hypothetical case of John X, the sixteen year old boywho did not like to go to school. Would not our constitutional safeguards oftrial by jury, confrontation by witnesses, assistance of counsel, and uncoercedconfessions have stood him in better stead than the streamlined procedure ofthe juvenile court?To negate the possibility of a case such as John's ever occurring it wouldseem that into the existing framework of the juvenile court our traditionalconstitutional guaranties should be fitted. Then even our junior citizens will beassured of justice under law.ISABELLE R. CAPPELLO29 Olney, Juvenile Courts-Abolish Them, 13 Cal. State Bar Journal 1, 2 (1938).Present Status of Price MaintenanceContracts in Interstate CommerceThe proponents of the Fair Trade Movement are faced with a problem asa result of the decision by the United States Supreme Court in SchwegmannBros. et al. v. Calvert Distillers Corp., 341 U. S. 384 (1951). The court ruledthat price fixing agreements valid under state laws 1 could not be enforcedagainst nonsigners under the Miller-Tydings Amendment 2 to the ShermanAnti-Trust Act 3 with regard to interstate commerce. The court's decision beingbased on the fact that the Miller-Tydings Amendment 4 did not specificallycontain a nonsigner provision whereas all the state acts contained a nonsignerclause. At the present time all states have fair trade acts except Missouri, TexasI Old Dearborn Distributing Co. v. Seagram Distillers Corp., 299 U. S. 183 (1936);McNeil v. Joseph Triner Corp., 229 U. S. 183 (1936); Kunsman v. Max Factor & Co.,299 U. S. 198 (1936).2 Amendment to Par. I of the Sherman Act, 50 Stat. 693 (1937), 15 U. S. C. §1(1946).326 Stat. 209 (1890), 15 U. S. C. §1-7 (1946).4 See note 2, supra.and the District of Columbia. The dissenting opinion in the Schwegmann case 5stated that the nonsigner clause was implied in the Miller-Tydings Amendment 6by reference.The economic conditions of the late twenties and early thirties gave rise tolegislation concerning or governing price maintenance. Protection of the smallretailer from the large chains and the desire of the manufacturers to protecttheir trade-mark and good-will interests in their product were the prime motivesfor this type of legislation. In the light of the drastic effect of the great de-pression on retail sales, income and business in general, one can justify theneed for such a control as the resale price contract. At its inception resaleprice agreements had a three-fold purpose. First, to protect the manufacturer'sproperty interest in his trade-mark; secondly, to protect the distributor againstunscrupulous price cutting, and finally to protect the public generally.No specific reference was made to price fixing agreements in the ShermanAnti-Trust Act passed in 1890.7 However, Sec. 1 of that Act stated:Every contract, combination in form or trust . . . or conspiracy in restraintof trade . . . is hereby declared to be illegal . . .This section was judicially construed by the United States Supreme Courtto prohibit price maintenance.8 The Federal Trade Commission Act passed in1914 9 prohibited "unfair methods of competition." The Supreme Court in-terpreted the Federal Trade Commission Act to outlaw resale price contracts. 10Thus under both the Sherman Act and the Federal Trade Commission Act resaleprice maintenance contracts were illegal and void. There was a continuous effortto have federal legislation passed legalizing resale price maintenance contractsin interstate commerce. In 1929 during the 71st Congress, the Capper-KellyFair Trade Bill was offered." This bill merely legalized an agreement "Thatthe vendee will not resell the commodity specified in the contract except at thestipulated price."' 2 The Capper-Kelly bill never became law but it did serve.as a model for future legislation both state and federal. It is interesting tonote that the Capper-Kelly bill did not include a nonsigner clause.State legislatures in the meantime were not idle. California became thefirst state to pass a bill legalizing price maintenance contracts. 18 This law was6 Schwegmann Brothers v. Calvert Distillers Corp., 341 U. S. 384 (1951).6 See Note 2, supra.7 See Note 3, supra.8 Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373 (1911).0 38 Stat. 717 (1914), as amended 15 U. S. C. §41-51 (1946).'OF. T. C. v. Beech-Nut Packing Co., 257 U. S. 441 (1922).11 H. R. Rep. No. 11, 71st Cong 1st Sess. (1929); H. R. Rep. No. 536, 71st Cong.2nd Sess. (1930).12 See Note 11, supra.i8 Cal. Stat. 1931, c. 278.later altered to include a nonsigner clause. 14 Vested interests led the way inhaving this type of legislation enacted. One of the most effective groups wasthe National Association of Retail Druggists. 15 The National Industrial Re-covery Act also gave impetus to such legislation. The example set by Californiawas periodically followed by other states passing similar fair trade legislationuntil in 1941 there were forty-five states having this type of law on their statutebooks. 16 The United States Supreme Court upheld the constitutionality of theIllinois and the California acts in their entirety.17 The Court in Old DearbornDistributing Co. v. Seagram Distillers Corp,.'s declared the principal provisionsincluding the nonsigner clause in the Illinois statute as constitutional. On thestrength of this decision state legislatures were now deluged with fair tradebills, which included the nonsigner clause.Prior to the Miller-Tydings Amendment price fixing contracts were pro-hibited by the Federal Anti-Trust Laws where interstate commerce was con-cerned. This Amendment to the Sherman Act and the Federal Trade Com-mission Act became law on August 17, 1937 and is commonly known as theMiller-Tydings Amendment. 19 This Amendment, which was an exception tothe Sherman Anti-Trust Act, legalized resale price maintenance contracts wherethey were valid under state law. President Roosevelt signed the bill but ex-pressed his fear that the law would hurt the consumer because it would lead tohigher prices. Experience would seem to bear out the President's contentionin this regard. The Federal Trade Commission was opposed to the Miller-Tydings Amendment. The Commission further stated that the public wasopposed to a resale price maintenance amendment to the Sherman Anti-TrustAct. The Commission maintained that the Sherman Act itself was opposed toresale price maintenance.The Commission had been pursuing a vigorous policy up to the passageof the Miller Tydings Amendment in issuing cease and desist orders in con-formance with the Federal Trade Commission Act. The basis of the Com-mission's opposition was the fact that the Federal Government would be at-tempting to enforce various and different state regulations. Furthermore, theagreements were to be made without public hearings. 20The Federal Law legalizing price maintenance contracts respecting trade-marked or branded items sold in interstate commerce provided that making suchcontracts would not constitute an unfair method of competition under the Fed-14 Cal. Stat. 1933, c. 260: The Cal. law is now found in Business & Professions Code,Pt. 2, c. 3, par. 16904.15 Grether, Price Control Under Fair Trade Legislation, p. 54 (1939) ; 24 Calif. L. Rev.640 (1936).16 2 C. C. H. Trade Reg. Serv. 1951 par. 7056.17 See Note 1, supra.18 1ll. Laws 1935, p. 1436.19 Public Act No. 314, 75th Congress.20 Address by William A. Ayres, Chairman of Federal Trade Commission, beforeNational Wholesale Druggists' Association Convention, Oct. 4, 1937.eral Trade Commission Act. 21 This type of contract was permitted on com-modities sold in interstate commerce if they were to be sold in a state wheresuch contracts were legalized with respect to intrastate sales.22The effect of the Miller-Tydings Amendment did not legalize the effortsof the contracting parties to coerce nonsigners to comply, because the nonsignerclause contained in all state statutes was not included in this Amendment tothe Sherman Act. This was the opinion of the majority of the court in theSchwegmann case.23 It was also pointed out that although state laws generallycontain provisions declaring it unfair competition for a nonsigner to sell belowfair trade prices an attempt by contracting parties to coerce nonsigners to com-ply, where interstate commerce is involved, is a violation of the Federal lawand reliance on state law is of no avail to protect such practices. The effectof the decision in this case can be seen in recent state decisions concerning fairtrade laws. The nonsigner provisions in the state laws have been stricken downwhere interstate commerce is involved under the doctrine of the Schwegmanncase. Several states have also held that the nonsigner provision is invalid nowunder state law.24  In a recent Pennsylvania case the argument was advancedthat since all of the sales of the nonsigner were intrastate, the federal lawwould not control the situation and the state fair trade law would apply.2 5 Themanufacturer argued that since the commodity had become to rest in the stateand was out of interstate commerce, state law would be applicable under thefamiliar dictrine of the Schecter case. -6 This argument was contrary to thedecision in the Schwegmann case. Thus a manufacturer cannot prevent pricecutting by a nonsigner under a state fair trade law. On the same day the courtdecided that the manufacturer of a trade-marked article has no common law rightto prevent a retailer from cutting prices.27It is hard to forecast how the proponents of resale price fixing agreementswill act to overcome the effect of the Schwegmann case. Public opinion isgenerally opposed to resale price maintenance contracts. Two very importantconsiderations involved in the administration of such a federal law would be(1) the difficulty and and expense of enforcement, and (2) the constitutionalproblem of depriviilg a nonsigner of a public hearing.21 See Note 9, supra.22 Resale Price Maintenance, by the Federal Trade Commission, dated Dec. 13, 1945.23 See Note 5, supra.24 Calvert Distillers Corp. v. Sach's, 48 N. W. 2d 531 (1951).Seagram Distillers Corp. v. Ben Greene, Inc., 54 So. 235 (1951).25 Sunbeam Corp. v. Civil Service Employee's Co-Operative Assn., 187 F. 2d 768 3rdCir. (1951).26 Schechter Poultry Corp. v. United States, 295 U. S. 495 (1935).2 7Sunbeam Corp. v. S. A. Wentling, 91 F. Supp. 81 (M. D. Pa. 1951).

Present Status of Price Maintenance Contracts in Interstate Commerce

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Present Status of Price Maintenance Contracts in Interstate Commerce

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