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BOSTON PUBLIC LIBRARY 



55/ lb 



3 9999 06542 003 4 

I 



NATIONAL RECOVERY ADMINISTRATION 



DIVISION OF REVIEW 



WORK MATERIAL 



NO. 16 



RESALE PRICE MAINTENANCE LEGISLATION 



IN THE UNITED STATES 



Prepared by 




HARRY S. KANTOR 



Appendices by 



ANNE GOLDEN 




SPECIAL STUDY SECTION 



November, 1935 



', \ '."'''': :\ '•.'.'■ V 






*, ;•:• ; ••. .•• . 



KATIOlIAi HECOVERY JiXMINI STRATI ON 
DlVISIOl^r OF RSYIi]\7 
SPECIAL STUDIES SECTION 



RESALE PRICE IIAINTEIUIICE LEGISLATION 

IH THE 
UNITED STATES 



WORK MATERIALS NO. 16 



Prepared "by Harry S. Kant or 

Appendices by Anne Golden 

Novem'ber 12, 1935 



9136 



FATIOimL HECOVEHY ADI.IINISIEATION 
DIVISION 0? EEVIiM 

special studiiis sscticxi 
taj:l e o p coitteiits 

IiE-SALI] pr.I CE I.I/.II-ITEILllTCS LSG-ISIAT IOIJ IN TS2. ITiTITED S GIATES 

Pa-e 

I, SUl.R.IARY 1 

1, Definition of Resale Price Maintenance 1 

2, Resale Price Maintenance Ilethodf? 1 

3, XRiy Resale Price Maintenance was Atte-ijoted. 1 

4, Attempts at ZTederal Le-^-islation on Resale Price Maintenance . , 2 

5, State Legalization of Resale Price Maintenance 2 

6, Tlie Mai-iufactiixer's Interest in Resale Price Maintenance . . , . 2 

7, Legal Difficulties imder Present Resale Price Maintenance Laws. 3 

8, Other i^^oes of State Legisla-tion on Resale Price 4 

9, Pressure for Pederal Resale Price Maintenance Legislation ... 4 
II. PJESALE PRICE LIAINTEMAITCE UIOER PEDERAL UCiJ . 6 

1, Effects of Suprene Goiirt Decisions on Attempts to Set 

Resale Prices , 6 

2, Proposed Pederal Legislation on Resale Price Maintenance, , , , 6 
III. TIIE CAMPAIGN POR STATE RESALE PRICE ILA.ITTTE1TAI:CE LEGISIATIOIT. ... 8 

1, Develo-oment of Volimtar3'' Chains ,,,, 8 

2, The Growth of the "cut-rate" Store 9 

3, Shortcomings of the Proposed Federal Law, , , 11 



1 3 l'^} 35 g 

9133 «i~ 



IV. SmTE RESALE PRICE liAIlITEilAlICE lAUS 12 

1, Contents of the Pair Trade LauG 12 

2, The Pitch Plan 17 

^. T^-'oes of Resale Price liaintenG.nce Contract. . , 17 

4, Adninistration of the Fair Trade Lans 19 

5. The Oref;on Pair Trade Lav of 19oo 20 

V. TIE ECOITOLIC SETTIITG OP TilE PROBLU: 21 

1, Recent Studies of Resale Price Laintenance, 21 

2, Other Le/;;islation on Resale Price 23 

3, T'ae Heed for Pm-ther Stud^/ 27 

VI. APPEIDICES.' ' - 30 

Ap;jendix A .' , .' 31 

Ta.lDlcs 1, 2, and 3 , 32/23 <§; 35 

Appendix 5 ' , 36 

Texts of Pair Trade Lairs Passed iro to Jul-i'^ lu, 1935 37 

California 3? 

Illinois 39 

lovra 40 

llaryland 42 

ITer; Jersey 44 

I'eT7 York 46 

"Orepon 48 

Pennsylvania 50 

Washington .,.,, 52 

\Tisconsin 54 

Appendix C - Text of Re-oealed Pair Trade Lex; of Orer:on 57 



Q1 '? 



136 -ii- 



Appondi:.: D - Texts of Other State La^rs Pertaininfc to 

Hesale Price , , , , 60 

1, The L'ex? Jersey Unfair Competition Law 61 

2, California Unfair Practice Act 62 

o, Connecticut Retail Dili;]; Control Act 66 

Appendix S 68 

The ?itch Plan 6S 

Appendix P « • '70 

Three ITormc of Contract Y>or' in Use Under the 

Pair Trade Lans "^1 

1, l.Ian-ufactirrer-iletailer • "^1 

2, "Wholesaler-netailor . "^3 

3, I.iodel Onnihus Pair Trade Contract as Sut'^sested 137 

Washington State Pharnaceutical Ascocia^tion ...... 76 

Ap-oendix G 78 

1. Stevens Bill of 1914 79 

2. Lletz Bill of 1914 82 

3. Capper-Kcllj' Bill which Par-sed the House 

E, E. 11 - 71.3 7lGt Con^-resG 85 

4. Capper-Kelly Bill of 72nd Conr:ress 87 

5. Capper-Kelly Bill of 73rd Conj^ress 89 

A-OT)endix K 90 

1, notices Used "by Soht, 11, Ingersoll & Co., imder the 

New Jersey Unfair Conpetition Lav/ 91 

Appendix I , , 93 

Puhlic Letters Concernin/^ Refusal to Sell-policy of 

Pepsodent Co 94 

Appendix J ,......, , . 97 

SuTAiaary of State Co^jj-t Decisions on Resale Price Maintenance 
Together with Di^^est of Stattites which have or ma^'- te Inter- 

"oreted as aio-olyin.T to Resale Price Ilaintenance 98 



9135 



-111- 



?a '9 

A-rpenc-i" 7. 109 

Sunnar^'' of Leading Cases on Resale Price L-aintenance 

United States SToreae Co-jjrt 110 

Appendix: I 112 

Sone Leading As:;)ectG of Resale Price I.Iaintenar.ce 

Agreenents in Interstate Comerce — 'b;'' J, TTajne Le** 113 



9156 



ForiMOHS 

This report is not intended as a corT)lete stuc^r of the prohlen 
of resale price maintenance and itr- intricate social-economic ramifi- 
cations. It is a statement of recent developments, ^::ith "brief comment 
on their economic setting: and significance. The phenomena discussed 
in this report are in process, and remarks made are therefore tenta- 
tive, 

Primar2- scarces ueve used wherever time and -personnel permitted. 
Records of congressional and HIA. hearings ^7ere examined, Records of 
State hearings on the Pair Trade legislation xtctq not availahle. The 
te::t assumes familiarit;p v.dth the lans and other "basic materials of 
the appendices:, the^ are referred to "but, r/ith few e::ceptions are 
not q-'ioted in the "body of the report 



L, C, liar shall 
Director, Division of Review 



The author makes gratefrj. achnowledgment to I.Iessrs, Tfroe Alderson, 
George J, Feldman, Hark I.Ierrell, TTillard L, 'Thorp, and Simon II, Whitney, 
for comment and criticism. Hiss Arme Golden made valua"ble detailed sug- 
gestions at all stages of the work. 



9136 -V- 



-1- 

I, SUIMABY 

1 , D efinition of Eesr^-le P rice Main tena nce 

Hesale price maintenance in the effective stipulation "by the producer 
or vendor of the price at "rtiich a product which he sells is to "be resold. 
The practice is most frequently used in the marketing of "branded goods; the 
price set is generall:/' that to "be paid ^oj the consumer. Discounts allowed 
to intermediate vende^'^s may "be either fixed uniformly as part of the control 
of ultimate price, or' left to individual "bargaining. 

The eseential characteristic of resale price maintenance in its most 
common m?.nifestation as a price control device, is that control is exercised 
over the price of a product after title has passed from the maker or the 
owner of the brand name to a vendee who resells. This is distinct from con- 
trol of price charged 'oy a producer's selling agent or consignee. An agent 
or consignee does not ovm the product: ' the producer holds title and bears 
the risks of the market until the goods 8.re sold. The legal pro"blem of resale 
price maintenance as it appep.red to the Supreme Court of the United States 
during the past thirty-five years was whether the vcxidor's right of stipulat- 
ing conditions of sale could pro-oerly "be viewed as including the right to 
enforce the price set "by him for resale "by his — or 9u"bsequent — vendees, 

2, Resale Price Maintenance Metho ds 

Various methods have "been u.sed in attempts to maintain prices. The 
most important were: writing contracts in \7hich resale price was stipulated; 
affixing a notice to products stating the resale price and informing vendees 
that their purchase of the product for resale involved acceptance of the 
o"bliga.tion to o"bserve the price set in the notice; refusing to sell to price 
cutters and exacting assurances from resellers, particularly wholesalers, 
that these would not supply a retailer who cut the price of a product with 
that product or even with o oher products, 

3 , WiTj Resale Price Maintenance Was Attempted 

The grov/th of standardization of merchandise, "branding, and consumer 
advertising gained momentum a.fter 1900, Competing channels of distri'bution 
wer^ unequally affected "by these developments. Department stores, and chain 
stores, 'both of which used price-cutting as their chief competitive v/eapon, 
developed rapidly. Products well known to the consumer were the obvious 
centers of price attack. Branded goods and high].y standardized bulk, or un- 
branded goods sustained the heaviest price cuts. 

The use of branded goods in price wars among competing types of dis- 
tributive channel drew the producer into the struggle, by the very fact that 
his name on the goods made the consumer market his actual market, regardless 
of the point in the distributive process at which he gave up title to the 
goods. As a result, manufacturers of branded goods have been faced with 
exceptionally difficult problems in maintaining regular output and general 
distribution, and have occasionally suffered the complete disruption of a loca! 
market. 



9136 



Most producers failed to clarify their position, as they might hr,ve 
done by adopting a narlceting policy of selling er.cliisively through a single 
type of outlet. Since they sold throa^^h competing channels, their discount 
policies and other terms of sale became f^.ctors in retail competition. The 
distributors' competition reacted on the r.ianufacturers, and nany manufacturers 
and distributors looked to resale price m^xintenance as a solution of the 
marketing problem. 

The idea is an old one. Makers of popular products were trying to 
achieve resale price maintenance in the late 19th century, in order to avoid 
the marketing problems involved in uide dispersion and sharp fluctuation in 
price and to keep the good will of retailers adversely affected by price- 
cutting. Increasing severity of distributor-competition in the past few 
years has stimulated pressure for price controls; the familiar device has 
been pushed forward with unprecedented vigor. 

4, Attemr>ts at Federal Legislation on Resale Price Maintenance 

The United States Supreme Court has held all of the resa.le price main- 
tenance methods adopted by manuiactur-ors to be in restraint of trade, except 
the individual manufactiirer' s refusal to cell to price-cutters. Bills legal- 
izing resale price maintenance contra.cts have been before Congress since 1914. 
These failed repeatedly until l'-)51, when the Capper-Kelly Bill l/ passed in the 
House, It failed in the Senate. In 19S3 rrsale price maintenance was still 
before Congress, At this time the attention of the trade group backing the 
Bill wa.s diverted to the writing of codes, in \^'hich they hoped to get the same 
results, and even more, 

5, State Legalization of Resale Price Mai ntenance 

In the meantime (in 1931), California passed a bill practically ide.itical 
with the Capper-Kelly Bill of that year. This bill was ineffective until it 
was amended in 1933 to provide for action by injured parties against a.ny price- 
cutter on a price-maintained product, whether or not he had signed a contract. 
Retsdlers found themselves unable to get the desired minimum mark-up in the 
codes, — and ^-^hen code compliance broke down, so that even the code minimum 
wa-s not enforced — they organized a movement to secure the passage of laws 
identical with the California law in other states. This campaign started in 
October, 1934. The first of the new laws was signed in March, 1935, At the 
present time, "Fair Trade" laws, permitting resale price maintenance 'o-j con- 
tract, are in effect in ten states containing 40^o of the popvlat^on of the 
United States, These are: California, Illinois, Iowa, Maryland, New Jersey, 
New York, Oregon, Pennsylvania, Washin, "ton, and UTisconain. 

6, The Manufacturer's Interest in Res.^le price Maintenance 

Manufacturer and retailer have both been active in the attempt to legal- 
ize resale price maintenance, b^it the relative importance of the two has 
changed. In the early yea,rs of the movement, majiufacturers were most vocifer- 
ous in arguing the case for price maintena^nce; in recent yea.rs, retailers have 
become much more active than r.anuf-acturers in the attempt to secure resale 
price maintenance. Independent retailers have always been active participants 
in the campaign, because they were losing business to price-cutting department 

l/ See Appendix G-, Page 85. 
9136 



-3" 

and chain stores. There are very few T7ell- su'bst.'-.,ntiated cases on record, 
(althou^;h more may have occurred) in chich a manufacturer was ruined, or even 
an important product discontinued, as a result of price-cutting in retail 
sales. !_/ A manufacturer c?.n shift his market more easily than a small 
retailer can move his store. The ■•manufacturer, in fact, may change his dis- 
tributing policy and sell more and more to chains, if they seem to he taking 
over a territory, despite the fact that chains are notoriously hard "buyers. 
Since price-cuts have an important and possiDly a lasting effect in stimulat- 
ing gross stoles, and since the elahorate analyses necesRary to determine 
whether discounts granted are in excess of economies achieved on the trans- 
action are not ordinarily undertaken, manufacturers often welcome orders 
from large price-cutters oven though the terms are very favorable to the 
buyer. Many manufacturers are therefore disinterested in or oppose'd to the 
Fair Trade Laws, 

7 , Legal Difficulties Under present l!le sale Price Maintenance Laws 

Until the- past few years, chain and department stores were opposed to 
price maintenance. The depression fostered a rapid increase in the growth . 
of new price-cutting outlets, — "super-markets" and "cut-rate" stores. As a 
resu].t, som.e chain stores in drugs and groceries — the principal fields of 
operation of the new t^^^e stores — have joined the old, full line independents 
in advocating price maintenance. The vital concern of retailers with resale 
price maintenance has drawn attelition to a fundamental difficulty in the 
proposed federal legislation. Retail trace is predominantly intra-state. 
State laws are, therefore, an essential part of the full legalization of re- 
sale price maintenance, 

* 

State la\7s, however, may be insufficient to cover the situation fully. 
Sales across a state line are ■'uriaer federal jurisdiction. The writing of a 
resale price maintenance contract between parties of diverse state citizen- 
ship is contrary to federal laWo Arrangemehts' under which wholesalers in the 
state write contracts with retailers, with c^eements made but no contract 
written between wholesaler and manufacturer, are obviously outside the per- 
mission of the Pair Trade laws. The agrements would be' in restraint of inter- 
state trade. If the writing of the contract is s"6ated, in defense aga-inst 
charge of such agreement, to lie a voluntary act on the part of the wholcsa.ler 
as owner, the way seems to be open for a wholesaler in another "Fair Trade" 
state to set different prices, and these prices may be objectionable to the 
producer. The right of the whdlesaler to initiate the contracts on a product 
bearing the name or brand of the producer is moot, . 

Incorporation by the manufacturing company in each state in which it 
wishes to maintain prices may prove costly in fees and additional ta>:es. 
There is, further, the possibility of unfrvorable court decision on the bona 
fide citizenship of the state companies thus fO?nned, The only complete 
system of resale price maintenance legislation is one 'in which there are both 
state laws and a federal law. There may, of course, be some doubt on the conr- 
stitutionality of the whole system, 

1_/ The Coty Company is said, to have been forced into receivership by use of 
its chief product as los.s leaders, and subsequently adopted consign-ment 
distributiono The Ingersoll Watch is cited as. an example of a product thai 
lost its market because of loss lea.der selling by dealers handling it, 

9136 



8, Other Types of State Legislation on Resale Price 

Resale price maintenance is not the only recourse of those opposed to 
price-cutting. An alternative was adopted "by Connecticut in its Retail 
Drug Control Act (jiane, 1935), '-mich is an enactment of the fair trade 
practice orovisions of the I^LIA Retail Drug Code, including the minimum 
price provision. This differs from the F^.ir Trade La'~s in two respects. 
First, it sets a lower limit to price competition in a retail trade as a 
whole, instead of removing entirely price competition among distrToutors on 
products under resale price maintenance contracts and leaving it unrestrict- 
ed on other products. Second, it defines a rela,tionship het'Teen the retailer 
and the State of Connecticut, with respect to the conduct of an intrastate 
"business. As far as may be seen at present, no additional legislation 
(federal or other) is needed to ensure its effectiveness as a statute. 

The state which has enacted the most comprehensive legislation of all 
is Californiai which had added a law prohibiting sale below cost to its Fair 
Trade Law and its statute forbidding discriminatory discounts. The new law 
applies to all sales. Its price floor is not defined as clearly as that of 
the Retail Drug Control Act of Connecticut, The loss limitation act is 
stated to be an emergency measure, protecting manufacturers and distributors 
from bankruptcy caused ley competitive sales at less than cost. Resale of 
liquidation stocks is. so circumscribed as to prevent the disruption of a 
market vfith goods bought at distress prices. The California law prohibiting 
sale below cost is therefore a generalized enactment of all code provisions 
on cost protection. It is narrower in that it applies only, to intrastate 
transactions, and broader in that it includes even those industries which 
did not have cost protection in their codes, 

1<]RA codes governing retail trade s.ttempted to set a floor to restrict 
price-cutting. The abandonment of codes left retailing with no such price 
limitation in most of the states. Ten states, however, have enacted laws per- 
mitting resale price maintenance contracts on branded goods, Connecticut 
has covered price-cutting on all prodacts sold in drug stores with its 
Retail Drug Control Act and California has both a Fair Trade law and a law 
forbidding sale below cost. It is now possible to observe the course of retail 
prices, the reshaping of channels of trade, and the trend in. sales volume of 
nationally advertised branded goods and competing private brands or unbranded 
goods under resale price maintenance, under loss limitation statute, under 
both, and under no restriction of either type, 

9. pressure for Federal Resale price Maintenance Legislation 

Since there are grave obstacles to the effective operation of resale 
price maintenance under state laws alone, pressure v/ill be exerted by retail- 
ing groups and interested manufacturers to secure the passage of a federal 
Fair Trade Lav;, Recent studies of resale price maintenance have failed to 
establish the economic necessity of this type of price control. Legislators 
will probably be voting on resale price maintenance or loss limitation in the 
near future. Careful observation of effects experienced under these laws 
and in their absence will be of great value in providing men in public life 
with a basis for decision. It may be desirable to complete the legalization 
of resale price maintenance in the United States; it may prove advisable to 
adopt loss limitation as the instrument of price control; the combination of 

9136 



-5« 

voluntary price maintenance embodied in Fair Trade Laws and corapulGory 
loss limitation as in the Retail Drug Control Act nay "be best; no legisla- 
tion at all of this type may prove to be the most desirable of all these 
alternatives, Recomnend^tions sho.ild be based on analysis of facts; and 
these can be secured only ^oy thorou^jh investigation. 



9136 



-6- 

II. HE SALE PraCE I.:AINTENMCE UiroER FEDERAL L AW 

1, Effects- of Supreme Court Decisions on Attem-ots to Set Resale Prices . 

While the Court" has outlawed six distinct methods of enforcing resale 
price maintenance, 1/ it has never ruled on the manufacturer's ri.^ht to sug- 
gest resale orices for his products. It has gone even further in recent 
years and has ruled that where no monopoly exists a trader may announce his 
conditions of saJe and ms-y refuse to sell for any or for no reasons, 2/ Re- 
fusal to sell to those who do not follo^' his suggestion on TDrice is the only 
way in v;hich a manufacturer can exercise control over the sale of a product 
after he has surrendered title to it. Any agreement "between manufacturers or 
betv.reen manufacturers and wholesalers to refuse to sell is unlawfijil, 3/ "but 
the ar)proximately simultaneous decision of several manufacturers or wholesa^ 
lers not to sell to a loio'-'n price-cutter ^-ould not necessarily "be proof of 
conspiracy. The decisions might be reached independently. Even flie fact that 
a raanufacturer refused to sell to a reseller who had cut the -or ice of another 
manufacturer's product wou].d not esta"blish collusion "between manufacturers. 
The one ^-hose product h.ad not been cut could argue that his product was ;iriced 
competitively with the known resale price of related articles, and that cut- 
ting the alternative product weakened the comwetitive position of his orni. 
This argument might carry over a rather wide range of direct and indirect 
comraoditj^ conr)etition. The legality of a wholesaler's refusal to sell to a 
price-cutter who is not being sold by a manufacturer is questionable. 
Collusion might be charged more readily in this case. 

If the manufacturer decides to refuse merchandise to the price-cutter, 
he either loses the sales volume of the price-cutter or faces a severe price- 
battle, initiated by the merchant boycotted and possibly resulting in the 
demoralization of the locp.l market. On the other hand, if he takes no steps 
to stop the 23rice-cutting iie may himself be threatened with a boycott by the 
other merchants in the price-cutter's comnunitj'". 

Boycotting, in order to be effective, must cover the market concerned. 
The Proprietary Articles Trade Association, In England, uses boycott rather 
than lawsuit to enforce resale price maintenance controls. But refusal to 
sell by the individual manufacturer is no assurance that the price-cutter will 
be unable to obtain the products. Not only can he obtain them from whole- 
salers, pedcJ.ers, and jobbers, but other retailers (according to statements 
made at NRA hearings) may be willing to order supplies for the boycotted 
merchant for various reasons. Furthermore, during a business recession, 
liquidation sales throw large supplies of goods into the open market, 

2. Pro-:-)Osed Federal Legislation on Resale Price Maintenance 

After the Dr, Miles Medical Company decision in 1911, and the court 
failures of 1913, it was apparent to manufacturers that free activity in 

1/ See Appendix K, Page 110 United States Supreme Court Decisions on Resale 
Price Maintenance. 

2/ United States v. Colgate Co,, 250 U. S. 300 (1919) 

3/ 'See Sp'oendix J, Page 104 ''Summary of State Statutes and Court Decisions", 
New York, 

9136 






maintaining control over resale prices v;as irrroossilDle \7itho-at legislation. 
In the latter part of 1913 and in 1914, the maniifacturers were fighting to 
prevent -orohiMtion of resale' price control contained in the proposed Clayton 
Act, 1/ Positive action in securing le.:;a.l status for such control was taken 
even "before the passage of the Clayton Act in its final form. Early in 1914, 
the Stevens Bill, 2/ legalizing resale price maintenance liy contract, uas 
introduced into Congress. This wrs the first of a series of bills on the 
same subject, introduced in each sesnion from txio 63rd through the 73rd Con- 
gress, The Metz Bill, 3/ also introduced in 1914, provided for resole price 
maintenance by notice. Under this form of control, the purchase for resale 
of a product on which the man-iji'scturer had marked the resale price together 
with notice -orohibiting price-cuts, iranlied the reseller's acceptance of the 
obligation to maintain the iaani:!i"acturer ' s ■'Trice. 4/ 

Support was withdravTn from this bill very early, and proponents of re- 
sale iTrice maintenance concentrated their efforts on the bill permitting 
resale -or ice maintenance contracts. The campaign continued ijntil 1933, when 
proponents of resale price contracts turned all their energy to writing code 
provisions, through which they horjed to achieve the desired price control. 

In January, 1931, a bill T)e'-'Taitting resale price maintenance contracts 
r)assed in the Eouse of Representatives. 5/ It did not pass in the Senate, 
However, since this bill did actually pass one branch of Congress, its 
distinguishing 'fe^\t-ures will be started briefly. -First, the bill contained 
r. list of excluded products. V.o price maintenance contracts were to be 
written on "such necessities of life as meat and meat products, flour and 
flour products, agricultural implements, tools ox trade, canned fruits and 
vegetables, all clothing, shoes and hats.1' This list of course, includes a 
good many items on which there is a demand for price maintenance. Second, 
the bill contained a provision permitting the vendee to, "resell at a price 
belo' the stipulated resale price which yields not less than 20 per centum 
over the actual bona fide purcliase nrice uaid by him," This, in effect, 
sets a. ma.ximum mark-up on competitive products under resale Drice maintenance 
contracts. 



1/ Hearings on Trust Legislation before the House Judiciary Committee of 
the 63rd Congress, parts 1 through 35. 

2/ See Appendix G Page 79. 

3/ See Appendix C- Page S3. 

4/ A law of this type was enacted in Hew Jersejr, 1913 (amended 1915 and 

1916). This method of enforcing resale price maintenance is widely used 
in France, • 

5/ HR 11, 71st Congress, 3rd Session,, January 29, 1931, 

9136 ■■''■■■ 



III. THE CAIvIFAIGN POK STATE H S SALK ?R I OE I.IAINTEITAlvCE LEGISLATION 

Manufacturers of trade marked and branded articles stron^^ly advocated 
resale price niaintenance from tho early days of the raovement in the latter 
part of the 19th Century to the late 1920' s, 1/ They had "built up .-i-oodTrill 
for iheir respective products through advertising: and said they needed legis- 
lation designed to permit their control over the prices paid by the customers: 
without such control their valuable investment in consumer demand v/as in con- 
stant .jeopardy from price-cutters. The majority of retailers v^ere proponents 
of resale price maintenance le.-^i slat ion, because they were faced uith the — at 
that time — severe -n rice- cutting; of the department stores. 

During the past trrentj years, chain stores have been acquiring an in- 
creasing share in the nation's retail sales. They use mass merchandising 
methods — buy in large quantities, get favorablediscounts and allo^-'ances, — 
and pass along to the consumer 2/ at least part of the savings involved. 
Price apieal is the fa,stest uay of bringing people into nev stores. The 
'effectiveness of price-cutting depends uroon consumer's price comparisons. 
The prices of highly advertised -oroducts are usually well known and the con- 
sumer has accepted more or less definite notions of the qualities of the 
article he is purchasing. Such products are, therefore, admirably suited 
for use as price leaders, and were so used by chain stores. 

Manufacturers Iriad no way of determining the relative importance as 
market builders of the ne^.? merchants (who concentrated upon price appeal) as 
compared with the older, "regula.r-price" merchants. Producers, interested 
in imviiediate increase in volume, sold to all who would buy and bolstered con- 
sumer demand through extensive advertising campaigns. 

As his need for volume increased, the number of restrictions, real or 
fictitious, which the manufacturer put on transactions in his product de- 
creasa»l. Consequently, manufacturers who as late as 1926 were advocates of 
Resale price maintenance legisla.tion, ha.d by 1930 changed their policies, 
and v/ere either unwilling to voice a preference or else were definitely 
0TDT)0sed, Zj 

While manufacturer sponsorshi"*) was waning because of the growing im- 
portance of the price-cutting outlets, independent retailers' suoport of re- 
medial legislation became more and more pronounced as their need for protec- 
tion from price comTietition became more acute. Resale price maintenance 
legislation promised the greatest benefit, since it deprived the chain stores 
of their strongest weapon, 

1. LevelQ-pment of Voluntary Chains 

Small, independent retailers were also moving on another front in the 
fifteen years prior to the current depression. Voluntary chains, consisting 

1/ Hearings on Trust Legislation held before the House Judiciary Corainittee 
for the 63rd Congress. Parts 1 through 35, Hearings before the House 
Committee on Interstate and Foreign Commerce held on H. R. 13305 in 1914, 
and on H, R. 11 in 1926, Hearings before the Senate Committee on Inter- 
state Commerce held o% S. B, 97 in 1932. 

2/ Federal Trade Commission's Chain Store Study S. D, #4. 74th Congress, 1st 
Session, (The Commission's findings on prices are summarized on page 
53 et seq, of their report,) 

» 

3/ House Committee on "Rules. Hearing H- R. 11. 1930- 



-9- 

of lar£;e niim'berG of small inde^^endent retailers, were able to secure a sub- 
stantial decree of equality vdth corporate chains in purchasing economies. It 
began to aDoear to some students of distribution that the future retail com- 
petition would be a struggle between the two types of chain stores. 

The growth of voluntary criaiiis was ra;jid in the grocery field and fairly 
rapid in drugs, 1/ but not in either case extensive enough to change the 
marketing competition into a struggle among large units and aggregates: 
small retailers continued to predominate in the total number of outlets. 
Meanwhile, large corporate enterprises in distilbution — chain stores, depart- 
ment stores and mail-order houses — were competing strongl2'' with each other as 
well as with the voluntary chains. 

2. The &ro-'th of the "Cu t- Rate" Store 

The most significant element, however, in the current strenuous campaign 
for resale -orice maintenance, is that with the depression, a recently develop- 
ed type of •r.itlot- 'oe'^.D.ie the nos!: -TC-eriif. fT'c"::;;' of c.ll coM;-)etitiov:, frr-: the 
stand;!)oint of Tirice-cutting, These stoies — popularly kncwn as "cut-i-rt"'.i l"-- 
handled onlj' the fastest moving items, used very inexpensive store quarters 
and equipment, and depended on price alone to attract trade. Lack of services 
to the customer handicapped the "cut-rater" but little in a period when 
people were buying on price. Manufacturers overstock and bankrupt retailers^ 
inventory offered large sources of suT)Tjly. 2/ It is largely at these cut- 
raters end the price wars for ./hich they are blamed, that the current move- 
ment for resale price maintenance is directed. 

The cut-rate store is predominantly a city phenomenon. Price appeal is 
enhanced in the impersonal atmosphere of city retailing. Cut-rate stores de- 
pend on rC'p)ic. turnover, and must draw on dense populations. This is evidenc- 
ed in the sharp difference in degree of urbanization betv;een the ten states 
which now have j'air Tre.de Laws and tne sixteen which voted against these lav:s. 
Seventy-one per cent of the lotal population of the ten states lives in urban 
communities, while only forty-nine per cent of the population of the fourteen 
states is urban, 3/ 

• The canroaign for resale price maintenance has thus under gone highly 
significant changes. It begs^n as an attem^ot to protect manufacturer's invest- 
ment in good will. The manufacturers affected were in general those strong 
enough to afford expensive advertising programs. The movement is no'-^ sponsor- 
ed chiefly by associations of small, independent retailers. It has taken on 
the character of a crusade in defense of small enterprise. Curiously enough, 
the growth of the cut-rate store — largely a cyclical phenomenon, but also a 
development in the direction of reduction of number of. price-lines, concentra- 

1/ In drugs,, cooperative wholesaling was the most successful form of 
associative enterprise, 

2/ George Lw Ga2e--:, President, Liggett Drug Company, New York, at the Public 
Hearing on the rode of ?air practices and Competition for the Retail Drug 
Trade, Friday, August 25, 1933, page 163. - 

3/ Connecticut was excluded from the computations for the states which voted 
down Pair Trade legislation, because Connecticut later passed the Retail 
Drug Trade Control Bill. Seventy percent of the Connecticut population 
lives in urban coraraunities. See Apoendix A, page 35 for statistics of 
states in which Pair Trade legislation was acted on uv to October 10, 1935. 



Ql nC 



« lo- 
tion of fast moving items, and separation of price from service appeal in dis- 
tritutd on—has driven some chain stores into the crusade. Early efforts of 
retailers to secure resale ;orice maintenance were directed at the chain stores 
themselves, Nov; some chs-ins are interested in price maintenance, chiefly in 
the drug field. This field is in fact the focal point of price maintenance 
agitation, 1/ Weak pure food and drug la^s, no n- informative advertising, 
and the hj'pochondTiac tendencies associated with the nervous pace of modern 
living have "built up lax-ge sales volume and a^oparently suljstantial profits 
in drug products. The rapid growth of advertising in the past 15 years ha.s 
intensified competition, "but has also resulted in so strong demand for some 
well-sponsored products that their manufacturers may really be indifferent 
to price-cutting among distributors. The manufacturer may feel that the 
retailer cannot afford to do \7ithout the product. There is evidence that 
concerted action has "been taken "by retailers to invduce such manufacturers 
to support resale Torice maintenance, 2/ The retailers have assumed the 
greatest share in the campaign. 

In the Spring of 1951, California pa.Gsed a st;-.te law similar in content 
to the Capper-Kelly Bill of the 72nd Congress. Hov;ever, rhen actually 
applied, the law proved ineffective in arrestin,-'; or eliminating the losses 
engendered by extreme -orice-cutting, because it did not prohibit the sale 
or offer for sale of price maintained oroducts at cut prices by vendors not 
parties to contracts. It was, therefore, amended in 1933 to include all 
transactions in products on which a contract price had been set. The amend- 
ment also provided that suit could be brought by any person damaged by the 
price-cutting. This law was called the California Fair Trade Law, a.nd has 
served as the model for the succeeding "Fair Trade Laws," 

In the Fall of 1934, a movement to secure similar legislation in other 
states was inaugurated. The proposed acts were known as the "Jimior Capper- 
Kelly Bills," and also as "Fair Trade Acts," This movem.ent v/as undoubtedly 
accelerated "oj dissa.tisiaction with the results obtained under the codes. 
Many merchants considered the minimum nark-ur) in the codes too low to cover 
handling costs, and comiietition made it impossible to get more than the min- 
imum mark-up on items used as price leaders. 3/ The total sales of these 
items constituted an important part of gross sales prior to the code jeriod, 
and their number increased as a result of code -orovisions. The price floor 
was one that any merchant coijld risk, so tliat or ice cuts were quickly met. 
In order to maintain a reputation as a price-cutter, a retailer had to offer 
reductions on more and m.ore products. Lower -orices on a large number of 
products may stimulate sales of these products, b^j-t the uniformity of the 
prices destroys their competitive value and their joint-sale use. The not 
result was a widening area of sub-normal mark-up in retail trade. In addition, 
there was growing dissa.tisfaction xilt'a the limited effectiveness of compliajice 

1/ Very recently, grocery chains liave become advocates of restriction on 
price-cutting. Godfrey M. Lebhar in "Current Comments" in Chain Store 
Age for May, 1935, 

2/ During the summer of 1934, retail drug associations in Portland, Oregon, 
and Alameda County, California, boycotted a list of ten nationally adver- 
tised products, which were bPing sold by some outlets for less than the 
druggists* purchase x)rice. Druggists in New York City, Baltimore, Maryland 
and Los Angeles and San Francisco, California, have been ronning "Brand X 
Week." During such a week, all cooperating retailers in the community 
push the products of the "X" Company, displaying them prominently, but 
always at the manufacturer's suggested resale price, 

3/ See Transcript of Pulbic Hearing on the Code of Fair Competition for the 
Retail Drug Trade, Friday, Au^gust 25, 1933, Volume 1, Pages 188 et seq. 

9136 



activities. Many retailers ■became co.nvinced that anything short of a de- 
finitely established resale price would fail to arrest the dwindling of their 
total operating margin. 

3. Short cominr:^;s of the Proposed Federal Law 

Federal legislation permitting resale price maintenance leaves the 
practice vulnerable to court attack: sales to consumers in a retail store 
would very probably be held to be intrastate commerce, regardless of where 
the retailer bought his merchandise, , If both the producer and subseo^uent 
vendor have citizenship in a state which has passed the ■ "Fair Trade Law," 
the legality of the price maintenance contract between them seems assured, 
with constitutionality of the law the only possible source of difficulty. 
With diversity of citizenship, interstate commerce is clearly involved and 
the contract is subject to federal jurisdiction. Full legality would be 
assured only if there were both a feder^.l and a state law covering. In the 
absence of a federal law, the producer can operate under the Fair Trade Law 
by incorporating in the state of the resellers, although there may be 
difficulties involved in such procedure. !_/ In any case, it is apparent 
that state legislation is necessary to resale price maintenance, and the 
campaign for uniform state Fair Trade laws is, therefore, a logical procedure 
for the advocates of that solution to retail -or ice- cut ting. 



1/ See Appendix K, Page 110 for a legal discussion on this question. 



» 

11 STATE KRSALE PRICE I.1AIITTS1IMCE LAWS 

1 . Contents of the Fair Trado Laws 

Resale price maintenance "by contract is no'7 legal in ten states. 1/ 
California was the first of the ten states in this enrxtnent, with the 
Badham Act, passed in 1931 and amended, to make it effective, in May, 1933. 
The other nine states passed laws modeled after that of the California. Act, 
in the five months from March to July, 1935. The chronology of Eair Trade 
Laws enactment follows California, passed 1931, amended May, 1933; passed 
in March, 1935, New Jersey, Oregon, Washington; May, 1935, Iowa, Mar^'-land, 
Ne\7 York, Wisconsin; June, 1935, Pennsylvania; July, 1935, Illinois. 

The following seventeen states considered resale price maintenance 
legislation this year, "but the attemots at enactment were unsuccessful; 
Alabama, Arizona, 2/ Colorado, Connecticut, 3/ Indiana, Michigan, Minnesota, 
Missouri, Monts.na, Nehraska, ITevada, Oklahoma, South Dakota, Tennessee, 
Utah, and Wyoming, 4/ The "bills introduced in Missouri and Minnesota pro- 
posed a resale price maintenance procedure Imown as the Eitch Plan, 5/ 
which differs somewhat from the hills which have "been passed. 

Nine cf the ten Fair Trade Laws now in effect are practically 
identical. The Illinois 5/ and Washington 7/ laws differ slightly. The 
Wisconsin Law contains all of the provisions of the California Lav;, and an 
additional section, 8/ the intent of which is to protect the consumer 
against "unreasonahle prices." 



1/ Sec Appendix B, Page 37, "Text of the Fair Trade Laws." 

2/ Passed "by both Houses, Vetoed hy the Governor. 

3/ Connecticut enacted the Retail Drug Control Bill after voting down 
the Fair Trade Bill. See Appendix D, Page 66 for text of the law 
pa.ssed and Page 25 of the report for a discussion of the Connecticut 
Law* 

4/ The Alabama Bill and the amended Tennessee Bill died with the 
adjournment of the Legislatures. 

5/ See Appendix E, page 69 for text of the Fitch Control Plan. 

6/ The Illinois lav/ provides for 10 day notice to the manufacturer or 

primary vendor, "by vendee before liq.ui dating his stock according to 

the exceptions permitted. These are the same as in the other States,- 

See Appendix B, Page 39 for text of the Illinois law. 

7/ The Washington Law is an emergency measure expiring July, 1937. See 
Appendix B, Page 52 for text of the law, particularlj'- preamble. 

8/ See Page 55 for Section 7, of the u'i scons in Law. 



9136 



•■-13- 

, The Pair Trade Laws all provide for contracts ■bet\7een the producer 1/ 
and a reseller of a oranded -loroduct, wherein the -price at which the 
product is to "be sold is definitely fixed. The vendee in the first instance 
may recontract with subsequent purchasers for resale, so that the producer 
is given. the right to fix the prices which the consumer pays for the product. 
If the price of a product is set in such contract, selling it or advertising 
it for sale at a lower price is actionahle hy anyone injured thereh^", whether 
or not the price- cutter is part;/ to the resale contract. 2/ 

Monopoly or restraint of trade "by means of resale price contracts is 
guarded against in all of the Islws now in effect. Such contracts may he 
entered into only on products that are- in "fair and open competition A7ith 
other products of the same class made hy others." Furthermore, horisonta.l 
agreements are expressly prohihited. Contracts may not he written hetween 
producers, hetween wholesalers or hetween retailers. 

The Wisconsin law provides for the review of prices set in resale con- 
tracts, hy the Department of Agriculture and liarhets, which has the pov/er of 
cancelling the contract under the fo].lowing circDjnstances: 

(Subsection 7 (a), 'Wisconsin 115,25) 

"(?) (a) U"oon complaint of anj'" person that any contract 
containing the provisions referred to in Suh section (3) 
is unfair and unreasonahle as to the minimum resale price 
therein stipulated, the Department of Agriculture and • • 
Markets may in its discretion serve hy registered mail upon 
, , . 'the parties to said contract notice of the time a-nd place 
for a hearing on said 'complaint, at vrhich hearing said 
parties shall show cause -why the said contract should not ' ■ 
he. set aside. If upon such hearing the Department of 
Agriculture and I.Iarkets shall find that such contract is 
unfair and unreasonahle as to its minimum, resale price 
provisions, said Department nay hy special order declare 
such contrcict to he in restraint of trade." 

While the other laws provide only for remedy in c£,se of violation of a 
. contro.ct price, the Wisconsin law npJces it possible for B-T^rone to complain 
against the . "unfairness and unreasonableness" of the price- itself , to a body 



1/ ■■■ .With the exception of Wisconsin which does not include publisher, the 

Pair. Trade Laivs define "producer" as grower, bakep, maker., manufacturer 
; ■•and publisher. (The Illinois law does not include any definition of 
"producer. " 

2j ..It 'is -to be noted, however, that proceeding against a price-cutter 
'•»•..•■, •■^ho-. is , not party -to a contract is much more difficult, in view of the 
fact that most contracts set a fixed sum as liquidated damage for 
violation of contract, proof and evaluation of damage may be difficult 
in the court action necessary in case of violation by non-parties. 
This provision may also be more vulnerable to attack on constitutional 
groLinds than the provision governing conduct of parties to contracts, 

9136 



-14- 

\7ith definite authorization to set the price aside if it so decides after 
due consideration. Thus, Wisconsin alone gives the consumer a direct 
remedy for high prices, in the event tiiat competition fails to operate 
freely, or "brings alDOut -orice adjustno-nt very Gl0T?ly. Under the other nine 
laws coLipetition among manufacturers, — those making "branded goods, and this 
whole class competing with makers of unhrr.nded or "private "brand" goods— is 
relied on to safeguard the consumer. 

All of the Fair Trade Laws permit resale at less tha,n contract -orice 
for clearance, foreclosure or other conditions of distress. The Illinois 
law alone requires the seller to give ten da-*s notice to the manufacturer, 
"before selling at the reduced price. It is to he noted that purciiascrs who 
buy at distress sales and resell under normal "business conditions are fu.lly 
"bound 'oY resale prices set in contracts outstanding in the state in which 
they sell. 

The Fair Trade Laws now in effect provide for exact stipulation of 
price, not for the setting of a minimui,; -nrice. The text of the Wisconsin 
statist e includes comment on the fairness of the "minir.mni resale price there- 
in stip\ils.ted," The contracts, 'however, are permitted to set the "price at 
which" the product is resold. 1/ Sole at higher prices is not specifically 
treated in eny of the laws, and the extent to r.nich prices will "be a'bsolute- 
ly uniform on products for v;hich contra-cts are written is therefore not 
a"bsolutely clear. There is the presui-option, of course, that on popular items 
competition will he so severe ao to prevent ar^ retailer from securing a 
price ahove the contract price. A retailer interested in switclv- 
in; : c substitute product might well use even a slight mark-up over the 
contract price to facilitate the switch. This applies only to retailers who 
are not parties to the controlling contract, and may "be a possToility "on 
paper" only. 2/ 

Difficulties may arise in t"ne interpretation of the Fair Trade Laws. 
The Laws read as follows: (The California Law is used here as exanrple. 
The others are practically identical with it in the section ciuoted; the 



1/ E. P.. 11, 72nd Congress, 1st Session, (The Capper-Kelly Sill of 19Sl) 
perniitted contracting for resale at "price or prices stipulated." The 
Oregon law of March 9, 1933, repealed in 1935 ^dth the passage of the 
new Fair Trade Law, permitted setting more than one minimum price in 
resale price contracts. Such -nrovisions allo-7 setting "ordinary" prices 
and "special" prices on articles under contract. It is to "be noted also 
that the repealed Oregon lav; permitted sale at more than the stipulated 
iprices. 

2/ Some contracting parties may, of course, attempt v/riting contrpxts 
in which the stipulated -orice is called the ".-ninimum resale price." 



9136 



-15- 

Illinois, ¥PvShington, and Wisconsin larrs differ slirhtly from the other 
laws in iTording) : 

■ 1. "Section 1. No contract rolatin.;^ to the sale or re- 

2, sale of a coLmodity vrhich "be^rs, or tine label or content 

5. of which tears, the trade--.iark, "brand or nairie of the pro-j 
4. ducer or omier of such coramoditj.^ and v.hich is in fair and 
5» Ojoen competition ifith conmodities of the sai.ie ^^eneral class 

6. produced "by others shall "be deemed in violation of any lo.xi 

7. of the State of California hy reason of any of the follovjing 

8. provisions' -.Thich may be contained in such contract: 

9. 1. That the huyer will not resell such commodity e::- 

10. cept at the price stipulated q-j the vendor. 

11. 2, That the vendee or producer require in delivery 

12. to v/hom he may resell such comnodity to agree that he will 
lo. not, in turn, resell e::ce-:>t at the tjrice stipul3.ted hy such 
14. vendor or "by such vendee," 

The laus define "producer" "but do no-t define "owne.r". The latter was 
prohahly incl^id'ed to cover: comple:; products, parts of which are ma.de for 
.the "branding com;ocLny; products made in their entiret3^ for the owner of a 
"brand-najne; products made for a corrrpany v/hich has intensively advertised its 
firm- name. 

The 'pro'blem is, whether or not anyone who has acquired title is permit- 
ted to write the contract setting the resale price. This question arises 
"because the lav/ does not say "no contra,ct "between a producer and his vendee 
relating to ,,.," 1/ "but savs sim;ply "no contract rela.ting to ..,.". The 
wording appears to allow the initiating of contracts on aiiy product which 
meets the stated requirements. ■ ■ 

If, in place of the words "the vendor" (line 10) the law read "a vendor" 
or "the first vendor to make such stipulation in a resale contract" the 
meaning \70uld "be a."bsolutely clear. If the words "the vendor" are so inter- 
preted, it is clea^rly possible for anyone holding title to write a resale 
price maintenance contract on the product, T3rovided the product itselt meets 



1/ The repealed Oregon La.w did so specify; the nev; Oregon Law does not. 
The' argument -that the change evidences intent of the legislature to 
change the preceding stat^is does not hold, because the old la?/ was precis 
and the ^ new one is vague. If the ]egislatu.re meant to leave the v/ay open 
for practices not contemplated in the repealed law, it would ha.ve stated 
that fact uy defining the nev/ condition. If discretionary po\7er were to 
be granted to those administering the law, that fact would be stated, and 
the extent of the discretion definedo 

It appears rather that the Oregon Law was replaced in order to remove 
the difficult conditions circumscribing procedure for redress in the old 
lavf, and to achieve uniformit,:^ vdth the Californj.a. law, v/hich was cur- 
rently accepted as the model. Even the grammatically peculiar wording 
of Subsection 2 was copied. The- old Oregon Law stated: "2 That the vende 
or producer require any dealer to whom he may resell such commodity to 
agree,,.," In the new law, the words "in delivery", are substituted for, 
"any dealer", exactly as in the California law, — leaving, "to agree", 
without any subject. 
9156 



■ -16- 

the requirenents of the la\7, and. provided no one else has yet written a 
contract on it in the state, Otviousli"", in no case could contracts setting 
different prices for the same product "be written in a single Fair Trade 
state: the price set in the first contract ' i^rit ten would govern. Houever, 
if the producer, or the ormer of the name by which the -oroduct is identified, 
has no desire to set the retail price, and has therefore not written a re- 
sale price maintenance contract, it may "be possible for any wholesaler in the 
state, who has bought some of the product, to set the retail price for the 
whole state "oy writing a, contract -ith any retailer. 

A producer opposed to resale price rao-intenance could breal: such an 
attempt only at considerable exoense, namely by opening retail stores in the 
state. This would involve not only state incorporation of the company, but 
might include difficulties as to powers granted in the company's cha,rter. 
Furthermore, even protesting, without actually offering competing retail 
sales, would obviously put the producer on record as an opponent of resale 
price maintenance. Undoubtedly, some companies which are opposed do not wish 
to make a public and unequivocal statement of their views. 

The foregoing interpretation of the Fair Trade Laws would also cover 
the action of wholesalers in originating resale price maintenance contracts 
for out-of-sta.te producers. The r)roducer has the right to suggest a resale 
price, although he can not enforce it except lay refusal- to- sell. If the 
wholesaler decides to vTite the suggested price into a contract with a re- 
tailer, it becomes the stipulated, enforceable price under the Fair Trade 
Law. This interpretation of the permission granted in the Law is very 
favorable to the wholesaler, because it obvia,tes, for the -oroducer, the ex- 
pensive- a.lternative procedures o£ state incorpora.tion and direct contracts 
with retailers. Since the producer-wholesaler link is informal, the producer's 
position in this set-up does not have firm legal foundation. 

If the definition of " the vendor " is any vendor or the first vendor in 
the state, the preceding remarks hold. If "the vendor" is the first vendor 
of the product in its identified, marketable form, they do not. Since the 
producer is not a reseller, "he" (.3rd word, line 12) refers to the producer's 
(or "vendor's", line 10) vendee. If the phrase "in turn" modifies the phrase 
"resell except a.t the price stipulated", a precedent stipulation is implied. 
This coulcT be conta.ined only in the contract between producer and his vendee. 
The distinction made in the words "vendee or j^roducer" (line 11) and the use 
of the phrase "by such vendor or by such vendee" (lines 13 and 14) appear 
further to identify "producer" and "the vendor" of line 10. The presumption 
therefore is that the producer is party to the first contract. The only case 
in which the producer need not be party to it is that in which the producer 
is not named on the product — that is, he is anonymous as far as the consumer 
is concerned. In this case the -oroduct lies within the scope of the Fa.ir 
Trade Lav:s only if the name of the owner is on it. The ovmer is, then, the 
first vendor of the product in identified form and under the name loy which it 
is publicl;'' Imown, 

The presence of both producer's and O'.-ner's name on the product would 
not clearly give either one the right to initiate resale price maintenance 
contracts. The act says "name of the -oroducer or owner", indicating that one 
or the other would ordinarily take precedence as being the known and estab- 
lished name: the one whose name is intimately connected with the product 

913S 



— 1 r — 

initiates the resale price maintenance contract, 

Tlie choice offered in lines 10 - 14 is this: the prod-u-cer' s vendee 
may re-contract \7ith his ov/n vendee, even if the "oroducer does not reojaire 
him to do so; and the producer's vendee may set the ne::t resale price if the 
prodxicer has not already set it, 3ince ordinarir^y the producer will set the 
retail price, the alternative is prohahly not iniportanti It ^:ro-ald give the 
producer control of dealer's ma.rg;in cut not of retail price. This mi^ht 
epsiljr involve difficulties if the producer sold throu{^h more than one chan- 
nel of distrioution. 

In conclusion, it may be said tLat the ;'3reater prohahility attaches 
to the interoretation of the Pair 'Trade L-^v;s as permitting initiation of re- 
sale price maintenance contracts only by the produ.cer or "by the ovmcr of the 
name "by uhich the product is knovm. Decision rests with the courts, 1/ 

2, The r itch Flan 

It shou.ld "be noted that not a,ll of the acts which failed to pass were 
identical '7ith those now in effect, Minnesota and Missouri voted on a.n act 
embodying the so-celled "Fitch-Plan". This provides for the filing of prices 
with the Secretary of 3tate, instead of contracting with resellers, such fil- 
ing to constitute notice on all resellers. The Pitch-Plan differs further 
from the Capper-Kelly Bill in that while any injured party may enjoin a, 
violator, onl^;- the maker of the oroduct is entitled to damages. This plan is 
more characteristically a manufacturer's plan* (The Fitch Company is prominent 
in the field of drug raanufaxturing, ) The Fair Tra>,de Laws indicate the retail- 
ers' interest more clearly by allowing damage suits by e.ny injured party. The 
fact that the Fitch Plan differs from those laws, probably served to lessen 
the support for the atteritpts a.t its ena-ctment, (in Missouri, producer opposi- 
tion to 8JIJ form of resa-le price maintena.nce heloed to defeat the bill.) The 
retail grouo lobbying for the Fair Tra.de Laws is endeavoring to seciu-e the 
passage of uniform legislation, 

3 . T:,n3gs of Resale Price I.Iaint ena nce Contract 

Resale price maintenance contracts now in use are of three general 
types. 2/ These are: (a) a contra.ct between a manufacturer (or other pro- 
ducer) and a retailer covering one or more x-'^oducts of the manufacturerJ 
(b) a contract between a wholesaler and a. retailer covering one or more of 
the products of a single manufa^cturer: (c) a contract between a wholesaler 
and a retailer covering all of the nrice ma.intained merchandise sold by the 
wholesaler to the retailer, and including the products of one or more manu- 
facturers. 



1/ Pending court tests do not involve the question of who may initiate a 
contract. Cases already decided did not result in r'alings on this 
point. 

2/ See Appendix F, page 71, et seq, for texts of the types of contracts 
discussed, /\ 

9136 



-18- 

The first t^rpe r.fi'ords the direct selling nanui'acturer control over 
the price pc.id "by the consianer, and may tend to encourage direct sales to 
retailers. This type oi contrrct involves the greatest e^rpense for the 
raaniifacturer. Before he can v.Tite individual contracts 'jith retailers, he 
must incorDorate vithin the state. This involves additional taxes and 
incorpdration fees, besides the -added hoo^d-zeepinf; costs. Even ^7ith the 
state incorporation of a selling coi.ipraiy, there is da.nger that the Federal 
Court v/ill declare the price contracts to he in restraint of trade. !_/ 

The other tvo types of contract retain for the nholesaler his place 
in the distrihution system and may he expected to exercise an influence 
against rapid change from wholesaler selling to direct selling hy the 
manufacturer. Type (c), popularly laiov/n as the "omnibus contract," may 
give rise to difficulties if the competing products of several nanufactur- 
ers are included in a single contract. The Fair Trade Lans require that 
the product which is the subject of contract be in "fair and open competi- 
tion v/ith products in the sane general clo.ss produced by others," Situa- 
tions may arise in which an omnibus contract is regarded as tending to 
restrict competition through the inclusion in the same contract of competing 
products ma.de by several mo^nufacturers, . ,/holesalers are urging manu- 
facturers to use the omnibus contract in order to avoid the ex^oense a-nd 
red tape ■ of incorporating and of ^'riting many separate contracts r/ith retail- 
ers. 2/ This type of contract, of course, is most importrnt to the v;hole- 
saler as a means of strengthening his faltering position in the distribu- 
tion system. 



1/ In July, 1935, the Pepsodent CoiiTixany terminated all resale price contracts 
v/ritten by the Pepsodent Comp.any of California because of the possibility 
of federal prosecution for mrking direct shipments from Chicago to California 
jobbers and dealers. Such shipments \iere apparently regarded as necessary 
to the efficient conduct of the company's business. 

It is possible, also, that the cora-po.ny sa.w drawbacks to the price main- 
tenance contracts themselves. This possibility is suggested by the fact • 
that tr.'o price lists were given in the company's announcement — a "regular 
price" list and a "special price" list. Distinguishing between "special sales 
and "loss-leader selling" on the basis of duration of the price-cut is a dif- 
ficult matter. Price rigidity established by the contracts appears also to 
rule the products out of use in "sales". See Appendix I, Page 94 for the 
text of the letter from the Pepsodent Company to the trade announcing the 
change in iDolicy, 

At the meeting of the National Association of Retail Druggists in Cin- 
cinnati (September, 1935) the Pepsodent Company announced th:;t it v;as resum- 
ing the use of contracts, and offered to contribute $25,000 toward the ex- 
penses of policing resale price maintenance. The company said it was acting 
on the advice of ne^-' counsel, and th':^t reconsideration of Section 1-| of the 
California Fair Trade Law was an element in the decision. This Section pro- 
vides for action against price-cutters who are not parties to resa2e price 
contro-cts, 

2/ Drug Trade News, July 8, 1935. Page 20 ' 
9136 



-13- 

Kore serious obstacles to price inrintenance through wholesalers "by 
producers outside the state are those of authorization and jurisdiction, 1/ 
If the contract is "bet'-'een p.arties of diverse citizenship, it is directly 
in interstate coiinerce, 2/ Only if the wholesaling: firn is a,3:ent for the 
producer, or if the producer incor_.,orates in the state, is the first con- 
tract vrithin the scope of the state Fair Trade Law, Despite the costs, 
many manufacturers have already incorocrated selling companies in the 
state of Crlifornia, in order to have the first contract on their' 
products one het^-'een parties v;ith California citizenship. IThile the 
number of state incorporations is much smaller in the states v/hich have 
more recently enacted resale price laaintenance legislation, it appears to 
be increasing ra-pidly, 3/ Llanufactv-rers doing a national or regional 
business have the precedent of California's experience on which to 
decide their course of action. Incor-oorating in a large nuinber of states 
involves e::pense for charters and may subject the company so doing to 
additional tax levies. For these reasons, and because the wholesaler 
can deal ?nore directly with local ret.ailers, manufacturers may be tenpt~ 
ed to use omnibus contracts with wholesalers, hoping tha^t a federal lav; 
will be enr.cted before v-ny litigation arises on the question of interstate 
contracts. 

4, Administration of the Fair Trade Lpa":3 . 

In order to avoid prolonged s,rganant on the avaluation of injury, 
all the tjnoes of contracts no^/ being -vritten provide for the payment 
of liquida.ted dar.'ic^es for proved violation of a contract price. Retail 
druggists in a number of localities are -planning to maintain fund.s, by 
contribution, for legal expenses. They ez-pect wholesalers and manu- 
facturers to contribute to these funds. 4/ Drug retailers .admit freely 
that they are the principal beneficiaries of resrle price maintenance, 
and recognize that manufacturers rr.ight be unwilling to proceed aga.inst 
violators if the price-cutting continaed on a.ny significant scale in d.efiajice 
of outstanding contracts, reouiring large outlay for policing and litigation. 

One association of retail djruggists lias already established a polic- 
ing committee, which is expected to s^end all of its time checking up on the 
support of a number of prominent drug manufacturers, and. more specific- 
ally, has secured their promise of contributions toward the ezjoenses of 
the committee. The letter of the association to these manufacturers, 

1./' See appendix J, Pages 9R et sec. "Summar?/ of State Statutes and 

Decisions." States have been neither VDlfonn nor self-consistent in 
d.eciding what constitutes intrastate commerce, 

2/ Lawyers will perha-ps argue whether or not the action under the contract 
is performed within one of the states. State court decision on the 
intrastate ch-aracter of a transaction is subject to review by federal 

court, 

3/ Drug Trade News, Volume 10, I'umbers 12, 13, and 14, 

4_/ Editorial ""Cost of Using Fair Trade Contracts" - Drug Trade News, 
o~uly 8, 1935, page 20,^ 

9136 



-20- 

mentions the expenses, s'a^;£ests the contri"b\i.tion, ruii carries the thinly 
veiled threat of including in their Dolicin,^ functions th£.t of seeing 
that the manufacturers' s products "are not put imdor the counter rnd for- 
gotten." 2^/ Chainstores are also prrticipating in the policing, and 
are contributing to the expenses. 

5, The Qre.°:on ITair Trade Lan of 1933 

The Oregon Lar: of 1933 differed from the Fair Trade La-'s no in 
effect in tT70 respects. First: The contracts xjermitted under the la\7 of 
1933 v.^cre specifically stated to "be contracts "bet'/een producer and re- 
tailer, v/ith optional intermediate contracts. Second: Sale at less than 
the pride set in an outstanding contract v/as actionable by the producer 
only, rather than by an injured po.rt^r; ond it as emotionable by the 
producer only on condition that he brought suit at the same tine against 
all vendees of the com:.iodity doing business vithin the county in which 
action v/as taken. This circuinscrrotion of redress made it difficult for 
an injured manufacturer to proceed. The la^.' did not even specify that 
only price-cutting vendees in the county \7ere subject to suit. Its 
ineffectiveness is readily understandable. 2/ 



1/ Southern California Retail Druggists jissociation, Ltd. , has organized 
a policing department. Drug Trade He-./s, July 8, 1935, page 6, col. 3, 

2/ See Appendix G, Page 58,. te::t of the. repealed Oregon Fo.ir Trade Law. 
(Repealed in Section 7, of the ne-7 lar', 1935.) 



9136. 



V. TH E ECONOLilC SETT ING 0? T'C PEQJ iLEU 

The moveiriGnt for stat^ Ibavs on renal e pric3 n^aintenance has j^rovm 
rapidly. It is to "be feared that iiiGufficient tj-,.o i:i{;^ht has "been given to 
the desirability of these la''7s from the standpoirit of defined ohjectives 
and of their effectiveness ?-s r.eans to these endr;, Trro aspects of the 
prohlem need consideration: first, the dicsociatioii of long time trends 
and cyclical deve^.oonents, r/hich na;-' be and have "been advanced jointly 
as argmnents for resale price maintenance; second, the clear analysis 
of the justification for the movement from the standpoint of economic 
and of social trends. In deciding the coLirse of public policy aimed, at 
protecting particular institutions in the cconom;^'-, legislatures shoiild 
be informed on the economic merits of the institutions. Policy based 
on social and -political cons idera,t ions can then be embarked on nith 
knowledge of its economic cost, or the proposed effort might be abandon- 
ed in favor of sor.e alternative procedure, so plp.nned as to retain all 
or the major part of the social advantages believed to inhere in the 
institutions under consideration, 

1 , He cent Stud i es of Resale Price !.Iainten ance 

Among recent stud^ies of the problem, of resale price maintenance 
five may be mentioned here as exemplifying iTork in the field, 

llurchison's study 1/ of resale price maintenance in 1919 led him 
to the conclusion that resale price maintenance reouired a system of 
uniform cost accounting: further, that its administration na.s a matter 
requiring a competent and impartial bod;;'' acting on principles laid dorm 
by a group of e:cperts rrith regard to -jhat constit-cted fair prices under 
var^^ing cond-itions of distribvition. His proposal did not envisage the 
uniformity of price advocated by retailers and nou embodied in state 
legislation. The plan, rather, v/as to perrait price differentiation, 
with a minimum "fair price" for eacii cost class in distribution, taking 
accoimt of the t'noe of customer, the services rendered, ?did the turn- 
over on the individual product. Any outlet co\ud cut under the sug- 
gested price provided it did so at a ;orofit, 

Tlie study of resale price maintenance 'oy the Eederal Trade Com- 
mission 2/ (1927-1931) resulted in the follov/ing recommendation: "The 
Commission concludes, therefore, tliat no legislation permitting resale 
price maintenance is at present called for," 3/ Tlie Commission adiiiit- 
ted frankly that it had. inadec;uately studied the e::tremely important 



1/ C. T, Ilurchison, "Resale Price Maintenance." 1919 
Longraans GrOv-^ne & Company 

2/ Federal Trade Commission "Report on Resale Price Maintenance" 
Part I, 1929: Part II, 1931, A previous report (1919), in the 
preparation of v/hich much less factual evidence was examined, 
favored resale price p.aintenance. 

3/ Ibid, Part II, Page 6. 



9136 



0'~' 

problens of economic integration and qiiantit;.^ discount. Since these 
protleras are "basic to a theoretically no-uuid decision on the desirability 
of resale price maintenance, it nay fairly 'oe stated that factual studies 
have not 3^et adduced convincing- evidence of the economic advisa'bilitj'' of 
this form of price control, 

Seligman and Love ij in their "boo]:, favored vorj?- ^'radual approach 
to the effectuation of resale price maintcnaiice, with the presumption 
that the development was to "be halted at an;/ stage if it appeared to he 
moving in imdesirahle channels. They proposed, as' a first step, the 
implementing of the manufacturer's right of refusal '-to-sell. They thought 
that the puhlic temper might gradually hecome favorahle to the idea of 
resale price maintenance "by contract after some presui;ia"bly successful 
experience under the modified form of it' involved in a strictly enforced 
program of refusal to sell to drastic jor ice-cutters, 

Tuo other recent puhlications should he mentioned, "Report of the 
Royal Commission on Price Spreads," Ottavra, Canada, April 1935, The 
Commission condemns loss leader selling, hut does not advocate resale' 
price maintenance, Alhert Haring's "Retail Price-Cutting and Its Control 
"by Manufacturers" (Ronald Press, March, 1935) favors more literal inter- 
pretation of "refusal to sell," 

Uurchison regarded the introduction of uniform cost accounting as 
one of the advantages to he e:^qpected from the acceptance of his proposal, 
which was really a proposal to prohihit sales tielou fair profit, Selig- 
man and Love thought of price maintenance as part of the hroad problem 
of the formulation of standards of business practices. The largest 
statistical study completed on this suhject, that of the Federal Trade 
Commission, led its authors to the conclusion mentioned ahove. 

In view of the foregoing re:viarl:s it ap -soars that state resale price 
maintenance legislation can scarcely he said to have adequate support 
from economic stu.d^-. The proolen has not oeen solved, Tlie questions 
of, first, the propriety of governmental re-iUlation of resale price, 
and second, — if proper— the form which such re/^lation should take, 
have not heen answered. Legalizing the imposition of retail price 
uniformity on a distribution system complicated hy the instability 
of manufacturers* selling policies and the criss-crossing of chan- 
nels of trade is a venture requiring much forethought. This is par- 
ticularly noteworthy in view of the marketing importance of the 
products concerned. Resale price maintenance is regarded as a solu- 
tion of loss leader selling of branded goods. But the problem of 
loss leader selling is much wider. Bulk products of standard quality 
are often used as loss leaders. 



1/ Edwin R, A, Seligman, and Robert A. Love, "Price Cutting and Price 
Maintenance" - Harper and Brothers - 1952, 



9136 



It has not iDeen cLe-.ionstrc-ted that fixinn; the point of price control 
at the f-Lilly maintained price is desirable, !_/ A nuch lo\7er point in 
the ran/^e covered Ij-f dealer's narri-ins nerj "be no re econonic. An e:^nple 
of this is the loss limitation t:;"pe of control, in v'hich the miniminn 
mark-up is set much lower thcai the "castonar;/-" or "noriial" mark-up 
associated \7ith resale price nainte"iance. Call 'J'ornia has already passed 
a la\7 prohibiting sales "below cost, and the detail Lriir Control Act 
passed in Connecticut esta"blicheG the lletail Drag Code price floor, 

2, Other Lec'^:islation on Hesale P rice 

In 1913, Ne\7 Jersey enacted- a statute permitting resale price 
maintenance "by notice under certain conditions, 2/ Tiie statute pro- 
hi"bited s"oecified -oractices, if these i/ere done "for the puriiose of 
attracting tra-de for other goods," A manufacturer co-old therefore 
prevent the use of his product as a price leader "by affixing to it a 
notice declaring such conditions as v;ere covered in the law, Tlie 
phrase quoted a"bove was deleted in the amendment of 1915, This change 
made the law a general law permitting resale price ma.intenance by 
notice. Price cutting of any kind — not merely loss leader selling— 
could "be prevented "by the manufacturer of a product , 

The law provided that viols,tion of the terms contained in the 
notice was actiona"ble "by the manufacturer or other injiijced party. 
Damages could "be awarded to the manufacturer, up to three times the 
loss sustained, at the discretion of the court. Award of damages to 
injured parties other than the manufacturer ivas not specified in the 
law, ■ 

The Ilo"bt, H, Ingersoll and Lros, Company "brought suit on two 
occasions under this law. In 1915, the Court of Chancer^,^ of the State 
of New Jersey 3/ rales against the Ingersoll Coiipany on the ground 
that the notice 4/ was too "broad, and that it forbade a sale to which 
the act had no application. Suit was "brought under the 1913 form of 
the act, IThile the opinion 'rendered did not specif;'" wherein the notice 
failed to meet the requirements of the act, it may "be noted here that 
the Ingersoll Company's notice included, among others, the following 
statements: 



1/ Prices in resale price contracts will, no dovJbt, "be set in relation 
to current raci,rket conditions. Drastic price changes are not likely 
to "be attempted, 

2/ See Appendix D, Page 61 , for the 1913 Law, and Amendments of 1915 
and 191G, /( 

3/ Ingersoll v, CTOldstein—93 St 195 (1915) 

4/ Sfee Appendix H, Page 91, for the notices used "by the Ingersoll 
Com-oany, / '- 



9136 



-24- 

(1) Tliat. violation of auy of the terns of the notice 
nopld render the- violator liable to law svdt for 
infringement of th-e "^:)atentc cover in^^- the nechan- 
ism'of the Tratch; and 

(2) That jo'b'bei-s nere not to sell to anyone "designated 
"by the manufacturers as "bjectiona-jle, " 

In 1917 the Ingersoll GoupeT.y again "broii^ht suit, 1/ This time 
the Court of Chancery upheld the use of notice. The Court held: 

(1) That the larr in question \7as not re-pugnant to the 
Constitution of the United States or to that of 
the State of lien Jersey-, 

(2) Tliat the statute was a proper enactment under the 
"oolice pouer of the State, "promoting good morals 
in "business, " 

(3) That the statute did not interfere Trith interstate 
trade; and 

(4) That the revised notice was in conformity with the 
terns of the statute. 



In neither of these two cases did the Court rule on the propriety 
of that part of the Intersoll Compan.y's notice which referred to inter- 
mediate sales: The companj'' reopaired all sales "by wholesalers and jolilDers 
to te made at -or ices stated in its schediiles covering such transactions. 
These lists were not ":art of the notice attached to the paclcage, and 
the enforceahility of this reopj-irenent was therefore open to question, 
Tlie defendants in both ca,ses were retailers. 

This law has been practica.lly imoperative. It is lilcely to at- 
trtict a good deal of attention no^7, in view of the strong current 
interest in resale -orice maintenance. It presents what appears to be 
a workable and economical alternative to the contracts authorized by 
the ?air Trade Laws, 

Connecticut voted do\7n the proposed Fair Trade Act and shortly 
thereafter pa,ssed the Retail Drug Control Act which is the enactment 
in state law, of the fair trade practice provisions of the Retail 
Drug Code, 2/ Drug retailers are again prohibited thereunder from 
selling any product covered to'' the former Code at less .than the manu- 
facturer's wholesale list price in dozen lots. This is ordinarily'' 
higher than the actual net purcliase price of the retailer, and is 
therefore a compromise between prohibition of sale below net cost 
and f-oll resale price maintenance. 



1/ Ingersoll v. Hahn 101 At. 1030 (1917); 103 At, 123 (1918) 

2/ See Appendix D, Page 66, for te::t of the Connecticut Retail 
Drug Control Act, .'\ 

9136 



Another ti'ye of le/^islc.tion v/hicli I'lca a direct connection v/ith 
the "oro'blen of loss leader selling of v/hich resale price maintenance 
is one aspect, is the act introduced in Ilrho, !_/ This act proposed 
to prohibit the sale of imr elated lines in dnig stores, While this 
act failed, and uhile the disr-uption it r.ii:_ht cause in existing 
trade practices makes its ;oassage hi,':;hl2- ^mliLel^', the solution it 
offers to the vexing question of Iocs leader selling across retail 
trades is not fantastic. This t;^^e of rejiilation uas actually in " 
effect in Cuha prior to the separation from the United Stc?Ltes, It 
is an attack on sales of unrelated products 07 a retailer in any 
given field. The Cu"ban restriction uas not limited to drugs, hut 
included all retailing; no retailer vvas permitted to sell any pro- 
duct not covered ty his fro.nchise, 2/ 

The Idaho proposal was impractical "but the idea it uas "based 
on — 'prohihition of loss leader selling of ^mr elated lines-- is important. 
Many wholesalers have made attempts at securing such -orohihition. Retail- 
ers find the prohlem ver^r trou"blesome, especially in cases in ^.-rhich a 
retailer finds his whole line or a large part of it used as a loss leader 
department in a competing department store. 

The Connecticut law is a definite, pra,ctical measure treating loss 
leader selling on a much hroader front than the Fair Trade Laws, It is not 
limited only to the use of "branded products as price leaders. Bulk 
goods and un'branded goods of standard quality are often used in e::actly 
the scoiie way as well known hranded merchandise, altho-'ogh much less com- 
monly in drugs than in groceries, 3/ Setting a price floor as is done 
in the Retail Drug Control Act, does not completely cut off price com- 
petition in distri"bution. The -aniformity of price established "cy a 
resale price contract mcy actiially "be a handicap to the manufacturer 



ly March 18, 1935, "A hill v/as passed "by the Senate here (Boise, Ida- 
ho) which prohihits pharmacies, dispexisaries, drug stores, or apo- 
thecaries v/here dr^Jigs, medicines, chemicals or poisons are offered 
for sale to operate a soda fountain or restaurant, or sell news- 
papers, magazines, hooks, pictures, electrical equipment, jewelrj?", 
leather goods, plumhing fixt^-ii-es, automc'Diles, automohile tires, 
radios, furniture, t;;rpewriters, wea-ring apparel, groceries, sta— 
tioner2^, hardware, cigars, cigarettes, tohacco, candy, caskets for 
hurial, vegetables, refrigerators, shoes o'r shoe repairing," Drug 
Trade News, March 23, 1935, llotes under "Legislation," 

2/ Seligman and Love "Price Cutting and Price Maintenance" - Appendix lY, 
page 520 ♦ 

3/ Ibid, Appendix II, prepared "oy Ut, Reavis Cox, page 405, et seq. 



9136 



in distri outing his product, l/ 

Resale orice nr.intenance linits orice competition on -products v;hich 
are suojects of resale contracts, to the extent that onlj" the nai-er may 
cha:ige the -orice. This :.iahes it easier for a prodv.cer to rraiii^e his 
marl^et, hut it nay he e:roected to result in reduced flexihility in the 
price system. It must he renefoeredj of course, tliat the ?air Trade 
laws do not require contracts to he nritten, hut are permissive only. 
Ij^irthermore, the hic'^hly advertised hro.nded r;oods-~-on uhich resale price 
maintenance contracts are in greatest demand—are in competition nith 
readily availahle suhstitutes, 

California presents a valuahle field for special stud;/ since it 
has had a Fair Trade Larr (in amended form) since 1933, and has nov7 
passed a general lar/ forhidding sale helou cost, 2/ The laT7 prohihit- 
ing sales helou cost is the hroadest price control act nou on the 
statute hooks. Its effectiveness may he restricted h^'- the fact tha-t 
in specific instances, enforcement waits on the determination of cost 
under the inclusive definition given in the act itself, and hy the 
fact that direct sales in California hy out-of-state iDroducers or 
distrihutors may seriously affect price stahilization of important 
products, 

'ihe enactment of the Retail Dru^;: Control Act and of Pair Trade 
Acts in adjoining states provides an excellent opportunit;' for an 
appro xiras-t ion to lahorator^'' testing of these alternative measures. 
The course of retail prices under hoth can he compared ^'ith tliat in 
states which passed no laws affecting retail. prices, and in v/hich the 
full effects of Code ahandonraent can he ohserved. 

There is, of course, a large hod;*'' of state le.ws on price now in 
effect. Anti-trust laws and la\7s against secret or discriminatory 
prices and discounts have heen passed in many states d-jjring the past 
fortj?" years, A numher of states have -oassod legislation aimed at chain 
stores. These have not yet heen analyzed from the standpoint of ascer- 
taining the present status of -orice reg-ul-^^tion in the states and for 
the co"untr;^'- as a whole. The economic significance of each t;;q5e of 
price regula,ting statute, the implications of independent state enact- 
ment in consideration of the widely varying degrees of dnterrelat ion- 
ship of local and national markets, and the postulates and mechanism 
of a unified price program reauire close thinking on a factual hase. 



1/ The Pepsodent Company, on cancelling its resale price contracts in 
California, recommended two sets of prices on its -products. One 
was the "ordinary,''" price, and the other was the lower, "special" 
price for occasional sales. See Appendix I, pago 95, for the 
lists. 

As for geographic uniformity'-, prices set in resale price main- 
tenance contracts need not he the same for all i^ir Trade states. 
Zone prices are now used in a nuj:fDer of industries, and may he 
the practice under Fair Trade contracts, 

2/ See Appendix 3, page 37, for the text of this law, 
9136 



-27- 

3. Tlie I^e eu for Rirther Stndy 

Resale price maintenance and -oi-ohilDi tion oi loss leader selling are 
phases of the re/TiiLation of retail Tiori_.;inc, The chief intent of the 
regulation now ardentlv advocatod is the protection of shfII enterprise 
in distril^-j-tion. Direct sellin^^ 07 producers and the increasing parties 
ipation of large retailing corporations in antecedent sta,ges of distrihution 
present the prohlen of integration vhich has "becone so ir.roortant a factor 
in retail trade, Ilass Va;,''ing 'b;'" giriit retailers exerts pressure on pri- 
mary'' producers and on small trad-esnen, Tiie ineopia-lity in size of retail 
esta"blishments results in imperfect competition anong them, Qp.estions 
arise as to the economic justification for quantity' discounts granted 
large "b-oyers. If the discount is greater than can. he attributed to 
economies involved, it represents an ariti-social use of pouer rather than 
a reward for efficiency. Huge conDorate retailers also have a po\7erfr2 
v/'eapon in price discrimination, A chain store can cut ;;)rices locally 
to crush competition, and a department store can use a v/hole department as r 
a price leader, to the detriment of small specialized retailers. However, 
there has "been no precise accounting, so far, of the extent to rrhich pro- 
tection is needed against unfair trade practices and against the results 
of relative inefficiency of the sma.ll firra. 

Resale price "maintenance has "been advanced a,s a Pie,?Jis of assuring 
fair competition in retailing. The movement for its legalization has 
"become most vigorous as a result of the grov/th of cut-ra,te stores, prin- 
cipally'' in drug retailing, Cs^'clical factors in this growth have not "been 
logically distinguished from long time trends. The advocacj?- of resale 
price maintenance oy chain stores in drugs and in groceries is a very 
recent development, and a ciirious one. The chain— retailer, whose ;orin- 
cipal appeal has alvzays been price, is willing to join forces with the 
older type of independent store in opnosin;; the new cut-raters who under- 
sell them "both, llie intent of the chain and the d^aration of the union 
are subjects of specula^tion, 'Fne cliains may be looking forv/ard to renewed 
price cutting after the cut-raters are eliminated (if tiiey are) by price 
maintenance. This would involve a campaign for the repeal of the current- 
ly favorable legislation. If t/^e ch:iins c:z-^ect the legislation to sty 
in effect, they maj- be considerin.;-; t'-isir relative position in securing 
private-label merchandise at substantial disco-jnt. Resa-le price mainten- 
ance may prove to be a powerful Gtimu]-ant to the sale of such goods. 
Private brands controlled b7/ a retailing organization rich enoi\gh to 
afford large advertising bills and powerful enough to drive hard bargains 
in purchasing may become a wea^pon for the still greater relative growth 
of that organization. 

Inner motives of participants in the cam.paign itself cannot be 
analyzed ade^-uately from the information at hand for this brief report. 
Dissection of motives, evaluation of anticipated results, and appraisal 
of current experience under price legislation are all parts of the study 
essential to the development of soujid legislative policy. The canrpaign 
now being waged against ciit-rate stores may be trj-JLy an attempt to crush 
a noxious weed rooted in depression soil and. crowding out good growth. 
On the other hand, it may be an effort at obliterating a useful develop- 
ment. Merchandising may be properly divisible on the basis of orice and 
service; one type of outlet selling goods and nothing else„' th© athoi- 

* 

9136 



-28- 

offering goods and services. Crushing a prlce-aopeal outlet inav iDe depriv- 
inv lov.'-incorae consur.iers of "oart of their real income: they should not "be 
forced to "bu;;'' services. 

It has not "been established, however, that loss leader selling re- 
s-alts in generally loner laargins. It is quite possihlcj too, that drastic 
price cuts and advlteration of product occur together frequently enough to 
"be !7orth investigating. And pressure selling of substitutes is not as 
great an evil if the substitute is just as good. Product-standards are 
not adequate at present to provide cuick decisions on the relative merits 
of articles offered for sale in various t:'-iies of retail store, 

Fnile there is no doubt that iriproved and enforced quality str?jLdards 
will mal:e the nachiner^^ of distribiition nore useful, price phases of the 
marketing situation are the storm center at present, and reo^uire nore 
attention in a current study. Unstable prices and large, fluctuating 
differences in mark-up may result in costlier merchandising. Consumers 
could break loss leader selling b}^ bu;;.'-ing nothing else from stores using 
that practice; the stores v/ouLd gain enormously if they got all the trade 
of each consumer brought in by a loss leader. Neither happens. The 
chances of the market change swiftly, prediction is difficiiLt, and "fight- 
ing lines'^ or "fighting stores" must be paid for. Strategy is expensive. 

The desirability of legal restriction on orice competition in retail- 
ing has not been proved: legislation on discounts and allowances might 
be preferable. The tuj^moil in distribution and the psuedo-lege.l or illegal 
methods used or advocated— 'ph^-rnacy la-ws designed as a weapon against 
l^rice-cutter; boycotts, blacklists, disguised trade-combinations — are the 
undercurrent of the demand for legislation, If the need is established, 
alternative methods of reg^JLating retail margins should be considered. 
Some help may be derived from a brief analysis of foreign e^q^erience in 
this field. The e::perience of England before and after the official 
abandonment of free trade should offer val-jr.ble guides. Similarly, 
experience under French and Cuban legislation ought to be reviewed, Foreign 
experience should be considered in the light of differences between the 
respective national economies. Obviousl:^, countries v.dth cartellized 
industry;- afford a radically different setting for retail price regulation 
than do countries in which industr-' is largely competitive. Similarly, the 
extent of a country'-* s foreign trade as a proportion of its total, alters 
the degree of protection that its domestic consumers have against excessive 
prices through legalized combinations in support of price maintenance. 
While present attempts prescribe horizontal agreements or monopolistic 
vertical contracts, the possibility that such combinations will develop 
in this count r^?- must be given due thought, 

Hesale price maintenance and its possible outgrowths may affect 
profoundly the efficiency.'- of oijt economic system, Flexibility of prices 
is reduced "by price maintenance. The tendency to monopoly by combination 
may replace the threat of monopoly resulting from dominance of powerful 
corporations. Price maintenance affects voluie of production, Factual . 
analysis touching all these points is impracticable within the properly 
defined limits of a stud^^' of resale price maintena,nce and loss leader 
selling. However, the interrelationships of these underlj'-ing economic 
considerations affect the coui'se of such a stud;^% 

9156 



-29- 

The stud-- should malce it possible to gau^e, at least rou{;;hly, the 
extent to which orotection of small enterprise is a social need rather 
than a natter of increased economic efficiency; that is, the extent to 
trhich legislative or adiainistrative neasui-es su^-;cested tend to restore 
a competition vihose plajr has l^een iiipeded, and the extent to v/hich full 
competition is to "bo curtailed "because the ultinate social effects of 
letting the battle go to the strong:,' are deemed undesirahle. Prevention 
of monopoly in distribution oy such methods may re;:iiJ.t in increasing 
the spread between primar"'' price and cons'omer price. In so far as agri- 
cultural products are concerned«-that is, in food retailing — a contra- 
diction may develop between governmental policy in retailing and in 
agriculture. The Agric\iltural Adjustment Act provides for efforts to 
achieve "price parity" for farmers, and offers the consumer only this 
protection: farm prices are not to be raised beyond the relative posi- 
tion they occupied in 1909-14 as a percentage of the consumer's dollar. 
This provision ignores any increase in service offered Vf distributors 
in the past 25 years, and ■rrillingl2^ paid for by the consiuners under 
normal conditions. Contribution to the solving of this dilemma may be 
an incident of the study of price spreads involved in considering 
the desirability of loss leader or resale price legislation. 



^ts 



Tlie need for such a study is clear: alread;^,;- 40 percent of the 
population of this country' is covered b;'' state la-\7s permitting resale 
price maintenance contracts, and similar federal legislation is being 
backed vigorously'' 'by the interested parties. Observation by the iJEA 
of the effects of Code abandonment on retail trade should provide the 
basis for a study on which recommendations for policy can be made. 
Such recomm.endations will be highly pertinent in anticipated discLissions 
of federal legislation on resale price maintenance a,s an alternative 
to legislation embodying Code fair trade practice provisions on loss 
leader selling or minim-urn mar]:-UT5, 

Retail mrices should be studied in statDs now having no cost pro- 
tection, in Connecticut, and in st'ites with resale price maintenance, 
California must be given special attention becai^so it has hai the 
longest e:qperience under a ITair Trr;.de Law and now has, in addition, a 
loss limitation law. The results of the study will be directly useful 
in providing the economic backgro"und for legislative and administrative 
action on retailing in the coming year. 



9136 



-3C- 



APPENDICES 



9136 






-APpaiCDIX A 



9136 



!, 



z 

\i 
Z 

r 

z 

z 





(7> 



J^ u. 



r 






2 



< 




-33- 



STATUS OF "PAIR TRADE" LECrlSLATION 



ByStr,tes, -as of Oct. 10, 1935 





Date of 


Date : 


Bill : 


5 


• 

ill: 


Bill to "be: 


llo Bill : 




State ■ : 


Passage 


Effective ; 


Pending: 


Dead: 


Presented : 


Presented; 




Alabejna _ ! 








X 


, i 






Arizona • 








• X I 








Arkansas . 










2: . ! 






California ; 


Passed 1931 
Amended - 


Aniend. Eff.- 
A^'Ofjuist 22, : 






• 








May, 1953 : 


.1933 ■: 






J < 


• 






Colorado ■ : 










X ; 


; 






Connecticut 


Retail Drag 
Control 
Bill June 13 


(1935) 
July 1 






X 








Delaware . ; 












X • 






Florida ■ 


• 










X ; 




Georgia 












! X 




Idc?iio ^ ; 












; . -x ; 




Illinois 


July 8,1935 


:July 8,1935 












Indipjia 








: X 








lov/a 


' May, 1935 














Kansas 


; 






I ; 


: X . 






Kentiicky • 










: X 






Louisiana 


* 








: X 






Maine . ; 


-. 










: No Data 




Maryland . 


May 17, ;.»35 














Massachusetts 












: X 




Michigan 


; 






: • X 








Minnesota 










X* 









*Fitch Control Plan, See page 69 



9135 



-34- 





: Date of 


: Date 


: Bill ; 


Bill 


Bill ',0 he : 


• 

No hill: 


State 


: Passage 


: Effective 


; Pending 


: Dead • 


Presented : 


Presented : 


Mississippi 








rf'- 


X ; 




Missouri 








: X* : 


< 




Montana 








: X ; 






Nebraska 








: X 






Nevada 








> X ; 






New Hampshire 












! X : 


New Jersey 


: March 12, 
: 1935 


: March 12, 
: 1935 










Nfew Mexico 










; X 




New York 


: May 17, 
: 1935 


: May 17 ' . 
: 1935 










North Carolina 












: X : 


North Dakota 












; X : 


Ohio 












; X : 


Oklahoma j 








X ; 






Oregon ; 


March 13,' 
1935 












Pennsylvania ; 


.June, 1935 


JN.6,1935| 








* • • 


Rhode Island ; 












; X , 'J 


South Carolina ; 












; No Data : 


South Dakota ; 








X ; 






Tennessee ; 








X ; 




) I • 


Texas ; 
Utah ; 








X : 
X ; 






Vermont ; 










X ; 




;7ashington ; 


March 25,; 


March 25 , ; 












1935 ; 


1935 : 


"F.FJj'KCTI^ 


m UNTIL 


JULY, 1937 i 




Wisconsin ; 


April, 1935: 




i 


i 
i 


1 




Wyoming ; 






4 
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9136 



-36- 



APPLITDIX 3 



9136 



-37- 

TEXTS OF :?AIR TR.nS LAWS PASSED 
UP TO JULY 15, 1935 



California 



All act to protect trade-raark owners, distributors and the public 
against injurious and uneconomic practices in the distribution of articles 
of standard quality under a distint^uished trade-mcirk, brand or name. 

The People of the State of California do enact as follows: 

SECTION 1, No contract relating to the sale or resale of a coinraodity 
which bears, or the label or content of which bears, the trade-mark, brand or 
name of the producer or o'Tner of such commodity and v;hich is in fea.T and open 
competition with commodities of the same general class produced by others 
shsill be deemed in violation of any law of the State of California by reason 
of any of the following provisions which ma^r be contained in., such contract: 

1* That the buyer will not resell such commodity except at the price 
stipulated by the vendor, 

2» That the vendee or producer require in delivery to whom he may re- 
sell such commodity to a.gree that he will not, in turn, resell except at the 
price stipulated by such vendor or by such vendee. 

Such provisions in eny contract shall be deemed to contain or imply con- 
ditions that such commodity may be resold without reference to such agreement 
in the following cases: 

1, In closing out the owner's stock for the purpose of discontinuing 
delivery of any such commodity. 

2« Ilhen the goods are damaged or deteriorated in quality, and notice is 
given to the public thereof, 

3, By any officer acting under the laws of any court. 

SECTION 2. This act shall not apply to any contract or agreement between 
producers or between wholesalers or between retailers as to sale or resale 
prices. 

SECTION 3. The following terms, as used in the act, are hereby defined 
as follows: 

"Producer" means grower, baker, maker, manufacturer or publisher, 

"Commodity" means any subject of commerce, 

SECTION 4. If any provision of this Act is declared unconstitutional, 
it is the intent of the Legislature tha.t the remaining portions thereof shall 
not be affected but that such remaining portions remain in full force and 
effect. 



9136 



-38- 
California (cont.) 

SECTION 5. This Act may "be known and cited as the "Fair Trade Act." 



Approved May 8, 1931 
Effective August 14, 1931 

AI',JEKDl^ffiNT 

An Act to add a new section to the "Fair Trade Act" to he niimher 1-1/2, 
relating to unfair competition* 

The people of the State of California do enact as follows: 

SECTION 1, A new section is herehy added to the "Fair Trade Act" to he 
mimhered 1-1/2 and to read as follows: 

SECTION 1-1/2* Wilfully and knowingly advertising, offering for sale or 
selling any commodity at less than the price stipulated in any contract 
entered into pursuant to the provisions of Section 1 of this Act, whether the 
person so advertising, offering for sale or selling is or is not a party to 
such contract, is unfair competition and is actionable at the suit of any 
person dgjnaged thereby. 



Approved, May C, 1933 
Effective, August 21, 1933 



9136 



-39- 
Illinois 

An Act to protect trade-mark owners, distributors and the public 
against injurious and. uneconomic practices in the distribution of articles 
of standard quality under a tra,de mark, brand or name, 

Ee it enacted by the People of the Sta.te of Illinois, represented in 
the General Assembly: 

Section 1. No contract relating to the sale or resale of a commodity 
which bears, or the label or content of which bears, the trade-maxk, brand or 
name of the producer or ovmer of such commodity ajid which is in fair and open 
competition with commodities of the same general class produced by others 
shall be deemed in violation of any law of the State of Illinois by reason of 
any of the following provisions which may be contained in such contract; 

(1) That the buyer will not resell such commodity except at the price 
stipulated by the vendor, 

(2) That the producer or vendee of a commodity require upon the sale of 
such commodity to another, that such purchaser agree that he will .not, 

in turn, resell except at the price stipulated by such producer or vender. 

Such provisions in any contract shall be deemed to contain or imply con- 
ditions that such commodity may be resold without reference to such agraement 
in the following cases: 

(1) In closing out the owner's stock for the purpose of discontinuing 
delivery of any such commodity: Provided, hov/ever, that such stock is 
first offered to the manufacturer of such stock at the original invoice 
price, at least ten (10) days before such stock shall be offered for 
sale to the public, 

(2) Hhen the. goods are damaged or deteriorated in quality, and notice 
is given to the public thereof, 

(3) By any officer acting under the orders of any court. 

Section 2. Wilfully and knowingly advertising, offering for sale or 
selling any commodity at less than the price stipulated in any contract en- 
tered into pursuant to the provisions of Section 1, of this Act, whether the 
person so advertising, offering for sale or selling is or is not a ^Darty to 
such contract, is unfair competition and is actionable at the suit of any 
person damaged thereby. 

Section 3, This Act shall not apply to any contract or agreement between 
producers or between wholesalers or between retailers as to sale or resale 
prices. 

Section 4, This Act may be known and cited as the "Fair Trade Act"* 



Senate Bill 598 Approved July 8, 1935. 

9136 



-40- 

Iowa 

An Act to protect trade-mark owners, distributors and the public against 
injurious and uneconomic practices in the distribution of articles of standard 
quality under a distinj^uished- trade-nark, "br.and or name. 

Be it enacted b.7...the. General Assembly of the State of Iowa: 

SECTION 1, , Siibdivision 1, No contract relating to the sale or resale 
of a commodity which bears, or the label or content o-f which bears the trade- 
mark, brand, or name of the producer or o\'mer of such commodity and v/hich is 
in fair and open competition with commodities of the same general class 
produced by othe.rs shall be deemed in violation of any law of the State of 
Iowa by reason of any of the- following provisions which may be contained in 
such contract: ... 

(a) That the- buyer will not resell such commodity except as the price 
stipulated by the vendor, 

(b) That the vendee or ■ producer require in delivery to whom he may 
resell such commodity to agree that he ^7ill not, in turn, resell except at 
the or ice stipulated by: such vendor, or by such vendee, 

2, Such prpv.isions in any contract shall be deemed to contain or im-jly 
conditions that such commodity may be resold without reference to such agree- 
ment in the following cases: 

(a) In closing out the owner's stock for the purpose of discount inuing 
delivering such commoditj'". 

(b) When the god.ds are damaged or deteriorated in quality and notice 
is given to the public thereof, 

(c) 3y any officer acting under the orders of. any court, 

SECTION 2.. Wilfully and knowingly advertising, offering for sale or 
selling any' commodity at less than the price stipulated in any contract 
entered into pursuant to the provision of Section one (1) of this Act, 
whether the person so advertising, offering for sale or selling is or is 
not a party to such contract, is unfair comoetition and is actionable at 
the suit of any person damaged thereby. 

SECTION 3, This .A.ct shall not apply to any contract or agreement 
between producers or between wholesa.lers or bet'.-'een retailers as to sale 
or resale price, 

SECTION 4, The following terms as used in this Act, are hereby de- 
fined as follows: • . • 

"Producer" means grower, bal<:er, ualcer, manufacturer or publisher, 

"Commodity" means any subject of commerce. - ^ 

SECTION 5, If any provision of this Act is declared "unconstitutional 
it is the intent of the legislature that the remaining portions thereof shall 
not be affected but that such remaining portions remain in full force and 
effect, 
9136 



10 ua, (Ooiiu*' u) 

SECTION 6. A,ll ''^cts or -n-^rts o "^ Acts inconsiGtent herewith are herehy 
repealed. 



Approved May 16, 1935 



9136 



Maryland 

An Act to add five (5) ne\7 sections to Article 83 of Bagby' s Annotated 
Code of the public Lav/s of Maryland, Edition of 1924, title "Sales and 
Notices," said ne;" sections to bear the sub-title "Fair Trade Act," to follow 
immediately after Section 104, and to be knovn as Sections 105, 106, 107, 
108, and 109, respectively, to -nrotect trade-mark o^7ners, distributors and 
the public against injurious and uneconomic practices in the distribution of 
articles of standard quality under a distingiiished trade-mark, brand or name. 

Section 1. Be it enacted by the General Assembly of Maryland, That 
five (5) ner; sections, be, and the sane are hereby, added to Article 83 of 
Bagby's Annotated Code of the Pij.blic C-eneral Lav/s of Maryland, Edition of 
1924, title "Sales and Notices," to bear the sub-title "Fair Trade Act," to 
follo\7 immediately after Section 104, and to be knovrn as Sections 105, 106, 
107, 108, and 109, respectively, said nei// sections to read as follous; 

105, The following terms, as used in this Act, are hereby defined as 
follows: 

"Producer" means grower, baker, maker, msmufacturer or publisher, 

"Commodity" means any subject of commerce, 

106, No contract relating to the sale or resale of a commodity which 
bears, or the label or content of which bears, the trade-mark, brand, or 
name of the producer or ov/ner of such commodity and which is in fair and open 
competition with commodities of the same general class -oroduced by others 
shall be deemed in violation of any law of the State of Maryland by reason 
of any of the following provisions which may be contained in such contract: 

1, That the buyer will not resell such commodity exce-ot at the price 
stipulated by the vendor, 

2, That the vendee or producer require in delivery to whom he may re- 
sell such commodity to agree tnat he will not, in turn, resell except at 
the price stipulated by such vendor or such vendee. 

Such provisions in any contract shall be deemed to contain or imply 
conditions that such comiiodity may be resold without reference to such 
agreement in the follov/ing cases: 

1, In closing out the owner's stock for the purpose of discontinuing 
delivery of any such commodity. 

2, When the goods are damaged or deteriorated in quality, and notice 
is given to the public thereof. 

3, By any officer acting under the orders of any court, 

107, Wilfully and knowingly advertising, offering for sale or selling 
any commodity at less than the price stipulated in any contract entered into 
pursuant to the provision of Section 105, v^hether the person so advertising, 
offering for sale or selling is or is not a party to such contract, is un- 
fair competition and is actionable at the suit of any person damaged thereby, 

9136 



-42« 



Maryland (cont,) 



108. This Act shall not aprtlf to any contract or agreement hetveen 
producers or betv/een wholesalers or "between retailers as to sale or resale 
prices, * 

109, This Act may "be known and cited as the "Fair Tra.de Act." 

Section 2. And "be it fu?; the r enacted, That if any provision of this 
Act, or the ' application thereof t'o'.any person or circumstances, is held 
invalid, the 'remainder of the Act; arid the application of such provision to 
other persons or circumstances;' shall not be effected thereby. 



Approved, May 17, 1935, 



Chapter 212 
Laws 1935 •-' 



I '■•■ 



« -^ "f 1? 



■ » : I : 'I ■ 



9136 



-44- 

New Jersey 

An Act to protect trade-mark owners, distributors and the pub.lic 
against injurious and uneconomic practices in the distribution of articles 
of standard quality under a distinguished trade-mark, "brand or name« 

Be it enacted "by the Senate and the general assembly of the State of 
New Jersey. 

1, No contract relating to the sale or resale of a commodity v/hich 
bears, or the label or content of which bears the trade-mark, brand, or the 
name of the producer or owner of such commodity, and which is in fair and 
open competition with commodities of the same general class produced by 
others shall be deemed in violation of any law of the State of New Jersey by 
reason of any of the following provisions which may be contained in such 
contract • 

(a) That the buyer will not resell such commodity, except at the price 
stipulated by the vendor, 

(b) That the vendee or producer require in delivery to whom he may re- 
sell such commodity to agree that he will not, in turn, resell except at the 
price stipulated by such vendor or such vendee, 

Sach provisions in any contract shall be deemed to contain or imply con- 
ditions that such commodities may be resold without reference to such agree- 
ment in the following cases: 

(a) In closing out the owner' s stock for the purpose of discontinuing 
delivering any such commodity. 

(b) When the goods axe damaged or deteriorated in quality, and notice 
is given the public thereof, 

(c) By any officer acting under orders of any court, 

2« Wilfully and knowingly advertising, offering for sale or selling 
any coonodity at less than the price stipulated in any contract entered into 
pursuant to the provisions of section one of this Act, whether the person so 
advertising, offering for sale or selling is or is not a party to such con- 
tract, is unfair competition and is actionable at the suit of any person 
damaged thereby, 

3. This Act shall not apply to any contract or agreement between whole- 
salers or between producers or between retailers as to sale or resale prices, 

4. The following terms, as used in this Act, are defined as follows: 
"Producer" means grower, baker, maker, manufacturer or publisher, 
"Commodity" means any subject of commerce. 



9136 



-45" 
New Jersey (cont.) 



5, If any provision of- this Act is declared unconstitutional it is the 
intent of the Legislature that the remaining portions thereof shall not he 
affected "but that such remaining portions shall remain in full force and 
effect. 



6, This Act shall take effect immediately. 



Approved, March 12, 1955, 



9136 



-46- 
Ne\7 York 

An act to protect trade-maxk ouners, distributors and the public 
against injurious end uneconomic practices in the distribution of articles 
of standard quality under a distinguished trade-mark, brand or name. 

The People of the State of New York, represented in Senate and Assembly, 
do enact as follows: • 

SECTION 1, Subdivision 1, No contracts relating to the sale or reoale 
of a commodity which bears, or the label or content of which bears, the 
trade— mark, brand or name of the producer or owner of such commodity and 
which is in fair and open competition with commodities of the same general 
class produced by others shall be deemed in violation of any law of the State 
of New York by reason of any of the following provisions which maybe con- 
tained in such contract, 

(a) That the buyer will not resell such commodity except at the price 
stipulated by the vendor. 

(b) That the vendee or producer require in delivery to whom he may re- 
sell such commodity to agree that he. will not, in turn, resell except at the 
price stipulated by such vendor or by such vendee, 

2, Such provisions in any contract shall be deemed to contain or imply 
conditions that such commodity may be resold without reference to such agree- 
ment in the following cases: 

(a) In closing out the ov/ner' s stock for the purpose of discontinuing 
delivering any such commodity, 

(b) TJhen the goods are damaged or deteriorated in quality, and notice 
is given to the public thereof, 

(c) By any officer acting under the orders of any court, 

SECTION 2. Wilfully and knowingly advertising, offering for sale or 
selling any commodity at less than the price stipulated in any contract 
entered into pursuant to the provision of section one of this Act, whether 
the person so advertising, offering for sale or selling is or is not a party 
to such a contract, is unfair competition and is actionable at the suit of 
any person damaged thereby, 

SECTION 3, This Act shall not apply to any contract or agreement between 
producers or between wholesalers or between retailers as to sale or resale 
prices. 

SECTION 4, The following terras, as used in this Act, are hereby defined 
as -follows: 

"Producer" means grower, baker, maker, manufacturer or publisher* 

"Commodity" means any subject of commerce, 

9136 



-47- 
llev; York (cont. ) 



SECTION 5. If any provision of this Act is' declared unconstitutional 
it is the intent of the Legislature that the remaining portions thereof shall 
not be affected "but that such regaining portions remain in full force and 
effect. 



SECTICiJ 6. This Act shall take effect immediately. 



Signed ahout May 17, 1935 



Chapter 975, Hew York 
State Laws of 1935 



9136 



-•48^ 

Oregon 

Aji Act to protect trade-mark ov.Tiers, distri"butors and the putlic 
against injurious and uneconomic practices in the distri'bu,tion of articles 
of standard quality under a distinguished trade-mark, "brand or name; 
placing certain limitations for resale upon commodities and to repeal 
Chapter 311, Oregon Laws 1933, Be it enacted "by the people of the State 
of Oregon, 

SECTION 1. No contract relating to the sale or resale of a commodity 
which "bears, or the la'bel or content of which "bears the trade-mark, "brand 
or najne of the producer or owner of such commodity, and which is in fair 
and open competition with commodities of the same general class produced 
ty others shall "be deemed in violation of any law of the State of Oregon 
"by reason of any of the following provisions which may "be contained in 
such contraxjt , 

1. That the "buyer will not resell such commodity except at the 
price stipulated "by the vendor, 

2, That the vendee or producer require in delivery to whom he may 
resell such commodity to agree that he will not, in turn, resell except 
at the price stipulated "by such vendor or such vendee. 

Such provisions in any contract shall he deemed to contain or imply 
conditions that such commodities may "be resold without reference to such 
agreement in the following cases; 

1, In closing out the owner's stock for the purpose of discontinuing 
delivering any such commodity, 

2, When the goods are damaged or deteriorated in quality, and notice 
is given to the pu"blic thereof, 

3, By any officer acting under the orders of any court. 

SECTION 2. Wilfullj^ and knowingly advertising, offering for sale or 
selling any commodity at less than the price stipulated in any contract 
entered into pursuant to the provisions of section one of this Act whether 
the person so advertising, offering for sale or selling is or is not a 
party to such contract, is unfair competition and is actionahle at the 
suit of any person damaged there'by. 

SECTION 3, This Act shall not apply to any contract or agreement 
"between producers or "between wholesalers, or "between retailers as to 
sale or resale prices, 

SECTION 4, The following terms, as used in this Act, hereby are 
defined as follows: 

"Producer" means grower, "baker, maker, manufacturer or pu'blisher. 

"Conrnodity" means any su"bject of commerce. 



9136 






-49- 

Qreg-o:-; ( c- i;. ) 

SECTIOiT 5, If any provision of this Act is declared unconstitutional 
it is the intent of the Legislature that the remaining portions thereof 
shall not "be affected tut that such remaining portions remain in full 
force and effect. 

SECTION 6. This Act may "be known and cited as the "Fair Trade Act." 

SECTION 7, Tliat Chapter 511 Oregon Laws, 1933 he and the same 
hereby is repealed. 



Law Without Approval, 
Larch 13, 1935. 



9136 



-50- 

Pennsylvaiiia 

An Act to protect trade-mark owners, distrilmtors and the putlic 
against injurious and uneconomic practices in the distrilmtion of articles'"" 
of standard quality under a distint^uished trade-mark, brand, or name, 

SECTIOII 1. Be it enacted "by the Senate and House of Representatives 
of the Coiiimon wealth of Pennsylvania in G-eneral Asseratly met and it is 
herety enacted "by the authority of tne same That no contract relating to 
the sale or resale of a commodity which "bears or the la"bel or content of 
which "beexs the trade-mark "brand or the name of the producer or owner of 
such commodity and which is in fair and open competition with commodities 
of the saxie general class produced "by others shall "be d^^emod in violation 
of any Ibm of the State of Pennsylvania "by reason of any of the follo-rrj.ng 
provisions which may "be contained in such contract: 

(a) That the "buyer will not resell snoii cnraiuodi ty ^atorii^t at the 
price stipulated "by the vendor. 

("b) That the vendee or producer require in delivery to whom he may 
resell such commodity to agree that he will not in turn resell except at 
the price stipulated "hy such vendor or such vendee. 

Such provisions in any contract shall "be deemed to contain or imply 
conditions'^ that such corauodities may "be resold without reference to such 
agreement in the following cases: 

(a) In closing out the corners stock for the purpose of discontinuing 
delivering any such commodity, 

Co) T?hen the goods are damaged or deteriorated in quality and notice 
is given the pu"blic thereof. 

(c) By any officer acting under orders of any court or in the 
execution of any writ of distress, 

SECTION 2. Wilfully and knowingly advertising offering for sale or 
selling any commodity at less than tne price stipulated in any contract 
entered into pursuant to the provisions of Section 1 of this Act whether 
the person so advertising offering for sale or selling is or is not a 
party to such contract is unfair competition and is actiona'ble at the 
suit of any person damaged there"by: 

SECTIOII 3. This Act shall not apply to any contract or agreement 
"between wholesalers or "between producers or hetweon retailers as to sale 
or resale prices, 

SECTION 4, The following terms as used in this Act are defined as 
follows: 

"producer" means grower, "baker, maker, manufacturer or publisher, 
"Commodity" means any su"bject of commerce. 



9136 



PennsylvejLia ( cont . ) 

SECTION 5.. If any provision of this Act is declared unconstitutional 
it is tlie intent of the Legislature that the remaining portions thereof 
shall not Tdc affected "but that such remaining portions shall remain in 
full force and effect, 

' ■ w 

SECTIOII 6, This Act shall "become effective immediately upon its 
final enactment. 



• Signed June 6, 1935, 
Sessidii of 1935 
H. P. 1975 



IK 



9136 



-52^- 

Washington 

An Act relating to the sale of certain articles and cominodities, 
providing ;protection for trade-mark owners, distributors and the public 
against injurious and uneconomic practices in the distribution of articles 
and commodities of standard quality under a distinguished trade-mark, 
brand or name, prescribing penalties, and declaring that this Act shall 
take effect immediately. Be it enacted by the Legislature of the State 
of Washington: 

SECTION 1, The piirpose of this Act is to assist in the establishment 
of fair business competition and the elimination of certain misleading and 
unsound business practices v/hich have lowered \7.ages and placed thousands 
of siiia.ll derlers and shop-keepers in a precarious financial condition. It 
is ena-cted as a means of affording some relief to storekeepers and their 
emplojrees during the prevalent economic depression, to assist in preventing 
bankruptcies rrith their incidental economic losses, and to enable such 
store-keepers to increase the vvages of their employees in such a manner as 
will reflect an equitable adjustment to variations in the costs of living, 

SSCTIOII 2, The following terms, as used in this Act, hereby are defin- 
ed as follows: 

"Producer" means grower, baker, maker, manufacturer or publisher, 

"Commodity" means any subject of commerce, 

SECTION 3, No contract relating to the sale or resale of a commodity 
which bears the trade-nark, brand or name of the producer or o-mer of such 
commodity, and which is in fair and open competition with commodities of 
the same general class produced by others shall be deemed in violation of 
any of the laws of the State of Washington by reason of any of the following 
provisions which nay be contained in such contract: 

1, That the buyer will not resell such commodity, except at the price 
stipulated by the vendor, 

2, That the producer's vendee require in delivery from his vendee an 
agreement that his vendee will not, in turn, resell except at the price 
stipulated by the producer or producer's vendee. 

Such provisions in any contract shall be deemed to contain or imply 
conditions that such conmodity may be resold without reference to such agree- 
ment in the following cases: 

(a) In closing out the owner's stock for the purpose of discontinuing 
delivering any such commodity, 

(b) When the goods are damaged or deteriorated in quality, and notice 
is given to the public thereof, 

(c) By any officer acting under the orders of any court. 



9136 






Wa shiir i'torx (Cont'd) 

SEOTIOH 4, Wilfully and kno':-ingly advertising, offering for sale or 
selling an,7 commodity 'v'c less tho,n the price stipulated in any contract 
entered into pursuant to the provisions of Sv^^ctljii 3 of this Act whether 
the per;3on so advertising, ofierirg for sp^le or selling is or is not a 
party to s.ich contract shall constitute unfair competition ThicL Tnay he 
enjoined by s.iit in equity at the Inst^^nce of any person injured thereby, 
or subject '-he offender to an action at la.vi for damages, "brought "by any 
persaii injuud thereby, 

■ *.■«• ■ 

SECilOII [3, Kone of the provisions of this Act shall be construed 
to aithorize or apply to any contr.act or agreement betvj:een Droducersi^ or 
between wholesrilers, or between retfiileis as to sale or resale prices, 

SJiJGTIOiT 6. If any provision of this Act is adjudged to be uncon- 
stitutional or void, such adjudication shall not affect the remaining 
portions of this Act, but all s-^ich regaining portions shall remain in full 
force and effecto ■ . ■■ ■ 

SiCGTIGN 7. This Act itT necessary for the immedi-rit^j preservation of 
the public pepcc ¥;ealth and safety. a,nd ..hall-ta^e effect immediately 
and shall continue in -Difoct until the fizt-t day- .of July, 1937. 



Approved by the GOVEI 
March 25, 1935 



Chapter 177 Lav.'S of 1935 



9136 



-54-.. 

.'W^i scon sin 

An Act to create Section 133.185 and Sections 133.25 to 133.27; to 
amend Sections 133.19 and' 133.20 of the Statutes, relating to fair trade 
practices and. urif air discriminations » and providing a penalty. The People 
of the State of V/isconsin, represented in Senate and Assern'oly, do enact as 
follows: 

■ SECTICIT 1. Four new sections are added to the Statutes to read: 
133,185 Secret Rebates; Unfair Trade Practice; Prohibited; Penalty, (l) 
The secret payment or allowance of rebates, refunds, commissions or unearned 
discounts, whether in the form of money or otherwise, or the secret exten- 
sion to certain purchasers of special services or privileges not extended 
to ell ptirchasers purchasing upon like terms and coxiditions, such payment 
allo\7ante or extension injuring or tending to injure a competitor or de- 
stroying or tending to destroy competition, is an unfair trade practice and 
is proliibited. 

(2) Any person, firm or corporation violating any of the provisions of 
Subsection (l) shall be deemed guilty of a misdemeanor and upon conviction 
thereof shall be punished by a fine of not more than five hundred dollars or 
by imprisonment in the county jail for not to exceed six months, or by both 
such fine and imprisonment, 

133,25 Certain Contracts Not in Restraint of Trade. Exceptions, 

(1) This section may be cited as the "Pair Trade Act," 

(2) As used in this section, "producer" means grower, baker, maker, 
manufacturer, and "commodity" means any subject of commerce. 

(3) Except as provided in Subsections (4) and (6), no contract relating 
to the sale or resale of a commodity which besirs, or the label or content of 
which bears, the trade-mark, brand or name of the producer or owner of such 
commodity and which is in fair and open competition with commodities of the 
same general class produced by others shall be deemed a contract or combina- 
tion in the nature of a trust or conspiracy in restraint of trade or commerce 
by reason of any of the following provisions contained in such contract: 

(a) That the buyer will not resell such commodity except at the 
price stipulated by the vendor. 

(b) That the vendee or producer shall require that any person to 
whom delivery of a commodity is made for the purpose of resale shall agree 
that the latter will not, in tvirn, resell except at the price stipulated by 
the vendor, or vendee, 

(4) Every contract containing the provisions referred to in Subsection 
(3) shall include the provision that such con;.iodity nay be resold without 
reference to such contract in the following cases: 

(a) In closing out in good faith the owner's stock or any part 
thereof for the purpose of discontinuing delivering any such commodity. 

9136 



-55- 

Wisconsin (cont.) 

(Td) IVhen the foods are damaged or deteriorated in quality, and 
notice is given to the public thereof. 

(5) YJ'ilfully and knowingly advertising, offering for sale or selling 
any commodity at less than the price stipulated in any contract referred to 
in Subsection (3), whether or not the person so advertising, offering for 
sale or selling is a psxty to such contract, is unfair competition and is 
actionable at the, suit of .any person damaged thereby, 

(6) This section does not apply to any contract between producers, or 
between wholesalers or between retailers as to sale or resale prices, 

(7) (a) Upon complaint of any person that any contract containing 
the provisions referred to in Subsection (3) is unfair and unreasonable as 

to the minimum resale price therein stipulated, the Department of Agriculture 
and Markets may in its discretion serve by registered mail upon the parties 
to said contract notice of the time and place for a hearing on said com- 
plaint, at which hearing said parties shall show cause why the said contract 
should not be set aside,' If upon such hearing the Department of Agriculture 
and Markets shall find that such contract is unfair and unreasonable as to 
its minimum resale price provisions, said Department may by special order 
declare such contract to be in restraint of trade, 

(b) The Department of Agriculture and Markets shall assess the 
costs of such proceeding against such contracting parties in case it finds 
such contract unfair and unreasonable and against the complainsjit if it finds 
such contract fair and reasonable, provided, however, that the costs aga.inst 
any one complainant in any one complaint shall not exceed five dollars, 

(c) Decisions in such cases shall be subject to judicial review 
as provided m Section 99.27. 

(8) This section shall not apply to any cooperative society or associa- 
tion not organized for profit. 

133*26 Certain Contracts Declared Illegal, 

Any contract, express or implied, entered into in violation of any of the 
provisions of Sections 133.17, 133.18, 133,185 or 133,186, is an illegal 
contract and no recovery shall be ha,d thereon, 

133,27 Legislative Intent Declared. 

The intent of Sections 133,17 to 133.186 and Section 133.25 is to safe- 
guard the public against the creation or perpetuation of monopolies and to 
foster and encourage competition oy prohibiting unfair and discriminatory 
practices under which fair and honest competition is destroyed or prevented. 
Said sections shall be liberally construed so that their beneficent purposes 
may be observed, 

SECTION 2. Sections 133.19 and 133,20 of the Statutes are amended to 
read: 133,19. The attorney general shall institute, manage, contrcil, and 

9136 



-56- 

Wisconsin (cont.) 

direct, "by himself his deputy or any of his assistants, in the proper coiinty, 
all prosecutions for violations of Sections 133.17 **** to 133.186 and for 
such purpose shall have and exercise all powers conferred upon district 
attorneys in such cases. It shall be the duty of the district attorney in 
the county in which any such prosecution may he instituted or pending to 
cooperate with and assist the attorney general in such prosecution. 

133,20 If complaint shall he made to the attorney general that any 
corporation is guilty of unfair discrimination, as defined hy the provisions 

of - Sections 133.17 to 133.186, he shall investigate such complaint and 

for that purpose he may sutpoena witnesses, administer oaths, take testimony 
and requiro the production of "books or other documents, and, if in his 
opinion sufficient grounds exist therefor, he may prosecute an action in the 
name of the State in the proper court to annul the charter or revoke the 
permit of such corporation, as the case may he, and to permanently enjoin 
such corporation from doing "business in this State, and if in such action the 
court shall find that such corporation is guilty of unfair discriminations, ac 

defined hy the provisions of said Sections 133.17 133,186, such 

court shall annul the charter or revoke the permit of such corporation, and 
may permanently enjoin it from transacting business in this State, 

SECTION 3. If any of this Act or the application thereof to any person 
or circumstance is held unconstitutional, the remainder of the Act and the 
application of such provision to other persons or circumstances shall not 
be affected thereby. 

SECTION 4, This Act shall take effect upon passage and publication. 



Approved May 1, 1935 
Published May 2, 1935 



Chapter 52, Laws of 1935 



913S 



■57- 



APP31^IX C 



913 



o 



-58- 
TE]CT 0? HZPmLED FAIR TEAD5 IAT7 OP ORECrOlI 

An Act to pernit producers to place certain limitations for resale 
upon any conmodity received under a contract of sale containing such pro- 
visions, sold "by the vendee or anj' other person olDtaining the same for * 
the purpose of resale, the exceptions to this act and procedure thereto, 

3e it enacted hv the People of the State of Orec-,'on: 

SECTION 1, This act shall he hnoTOi and cited as the "fair trade 
act." 

SECTION 2, It is the declared policy of this act to protect trade- 
mark owners, distrihutors and the puhlic against injurious and uneconomic 
practices in the distrihution of articles of standard auality under a 
distinguishing trade-mark, 

SECTIOn 3, As used in this act: 

(1) The term "-oroducer" means grotrer, packer, maker, 
manuf ac t ur e r , 

(2) The term "com.modity" means any suhject of commerce, 

SECTION 4, Ho contract betv/een producer and retailer relating to 
the sale or resale of a commodity vrhich hears the trade-mark of the -produ- 
cer, or the o\7ner of such cor.imodity, uhich is in fair and open cor.ipetition 
with commoddties of the same general class produced "by others and not in 
restraint of trade, shall he deemed unlawful as against the public policy 
of the State of Oregon by reason of any of the following provisions con- 
tained in such contract: 

(1) That the vendee will not resell such commodity except at 
or in excess of the ninim.fjm price, or prices stated and mutually agreed 
to in such contracts, 

(2) That the vendee or producer require any dealer to whom 
he n&rj resell such commodity to agree that he will, in turn, resell at 
or in excess of the minimum price, or prices, stated for such resale, as 
mutuT-lly agreed to in such contracts. 

Provided, that the minimum j^^ice or prices stated and 
mut'oally agreed to in anj'- such contract, shall be uniform to all vendees 
in like circumstances, differing only as to the quantity of such com- 
modity sold, the point of delivery and the manner of settlement, 

SECTION 5, Any such agreement in a contract relating to intrastate 
commerce involving such commodity sliall be deemed to contain the implied 
conditions that such commodity may be resold v/ithout exception to such 
agreement as follows: 

(1) In closing out owner's stock for the purpose of dis- 
continuing dealing in such commodity'-; or 

9136 



Text of Re'?ealed Fair Trade Law of Ore.f-:on (Cont.} 

(2) Disposing of such commodity v/hen damaged, deteriorated or 
soiled, provided that prominent notice is given to the public of such 
f ac t ; or 

(3) Ey a receiver, trustee, or other officer acting under the 
orders of any coiirt, or an assignee malcinc: sales in "bulk for the benefit 
of the creditors. 

SECTION 6. Advertising, offering for sale, or selling any commodity 
at less than the "orice stipulated in any contract entered into pursiaant 
to the provisions of Section 4 of this act, or affected by Section 5 
hereto, is 'unfair comrjetition and is actionable in a. suit of the producer; 
provided the producer shall, at the same time, bring action against all 
vendees of such commodity doing business within the county in v/hich such 
action is "brought, for damages suffered hy him "by reason of such unfair 
competition or flowing Irom the vendee's breach of contract, and his fail- 
ui'e so to do shall constitute a "bar to such action, 

SECTIOH 7, If any provision of this act is declared unconstitution- 
al or the applicability thereof to an:/ person or circmastances is held 
invalids the validity of the remainder of the act and the applicability 
of such provision to other persons or circumstances shall not be affected 
therel);^. 

Filed in the office of the Secretary of State, March 9, 1933, 

Chapter 311, Oregon Lav;s, 1933 

Repealed in 1955, replaced by new Fair Trade Law, 



9136 



-60- 



APPEKDIX D 



V 



9136 



PW '■■■ ■ ' ^ «■■ 

-61- 



THS imXi JERSEY ITrllTAIR COriPETITION LAW 



An Act to prevent unf.?lr competition and unf.-^ir trade practices. 

Be it enacted 07 the Senate and General Asnemtly of the State of New 
Jersey: 

SECTIOH 1, It shall "be unlawful for any merchant, firm or corpora- 
tion, (for the purpose of attractin^^ trade for other goods,) l/ to apx:)ro- 
priate for his or their own use 2/ a name, "brand, trade-mark, reputation 
or good will of any maker in v/hoee product said merchant, firm, or corpora^ 
tion deals, or to discriminate against the same "by depreciating the value 
of such products in the putlic mind, or "by misrepresentation as to the 
value or quality, or hy price inducement, or by unfair discrimination 
hettTeen "buyers, or in any other manner whatsoever, except in the cases where 
said goods do not carry any notice prohibiting such pra.ctice, and excepting 
in cr.se a receiver's sale, or a sale "by a concern going out of "business, 
(The notic'e prohi"biting such practice shall contain a copy of this section 
and ior"bid the violation of any of its provisions,) 3/ 

SECTION 2, Any person, firm, or corpor.'-tion violating this Act shall 
"be liaole p.t the suit of the maker of such branded or trade-marked goods, 
or any other injured person, to an injunction against such practices, and 
shall "be lia"ble to such suit for all dpmage^ directly or indirectly caused 
to the" medcer "by such practices, which said damages may "be increased three- 
fold, in the discretion of the court, 

SECTION 3, This law shall become effective immediately. 

SECTION 225-1, 2, and 3. Compiled Laws of New Jersey, 1911-1924, 



!_/ The phrase enclosed in pa.rentheses appeared in the law as passed April 
1, 1913, (Chap. 210 Laws of New Jersey for 1913) On April 26, 1915, the 
statute was amended "by the deletion of this phrase and "by the adoition of 
the sentence enclosed "in parentheses, 

2/ In the 1916 amendment the word "ends" of the 1913 Law, was replaced "by 
the vjord, "use", 

3/ The sentence enclosed in parentheses was added to the 1913 Law "by the 
amendment of April 26, 1915, (Chap, 376 Laws of Nev/ Jersey for 1915), and' 
deleted March 16, 1916 (Chap, 107 Laws of New Jersey for 1916), The law, as 
it now stands, is the one quoted a"bove, after the portions enclosed in 
parentheses have "been deleted from the text. 



9136 



-62- 

CALIPQRl'JIA UKFAIR PRACTICE ACT 

An act to amend an act entitled "An act relating to unfair competition 
and discrimination, making certain unfair and discriminatory prac- 
tices vnlawfui, defining the duties of the Attorney C-eneral in re- 
£a.rd thereto, declaring certain contracts illegal and forbidding 
recovery thereon, providing for actions to enjoin unfair competi- 
tion and discrimination and to recover damages therefor, rasiking the 
violation of the provisions of this act a misdemeanor and providing 
penalties," approved June 10, 1913, relating to unfair discrimina- 
tions, and declaring the urgency thereof, to take effect immediately. 

The people of the State of California do enact as follows: 

Section 1. The act cited in the title hereof is hereby amended to read 
as follov/s: 

Section 1. It shall be unlavTful for any person, firm, or corporation, 
doing business in the State of California and engaged in the production, 
manufacture, distribution or sale of any commodity, or product, or service or 
output of a service trade; of general use or consumption, or the product or 
service of any public utility, with the intent to destroy the competition of 
any regulex established dealer in such commodity, product or service, or to 
prevent the competition of any person, firm, private corporation, or munici- 
pal or other public corporation, who or which in good faith, intends and 
attempts to become such dealer, to discriminate between different sections, 
communities or cities or portions thereof, or between different locations in 
such sections, communities, cities or portions thereof in this State, by sell- 
ing or furnishing such commodity, product or service at a lower rate in one 
section, community or city, or any portion thereof, or in one location in 
such section, community'', or city or any portion thereof, than in another after 
raakim: allowance for difference, if any, in the grade or quality, quantity 
and in the actual cost of transportation from the point of production, if 
a raw product or commodity, or from the point of manufacture, if a manu- 
factured product or commodity. Motion picture films when delivered under 
a lease to motion picture houses shall not be deemed to be a commodity or 
product of general use, or consum.ption, under this act. This act shall not 
be construed to prohibit the meeting in good faith of a competitive rate, 
or to prevent a reasonable classification of service by public utilities 
for the purpose of establishing rates. The inhibition hereof against local- 
ity discrimination shall embrace any scheme of special rebates, collateral 
contracts or any device of any nature whereby such discrimination is, in 
substance or fact, effected in violation of the spirit and intent of this 
act. 

Section 2* Any person who, either as director, officer or agent of 
any firm or corporation or as agent of 'any person, violating the provisions 
of this act, assists or aids, directly or indirectly, in such violation 
shall be responsible therefor equally with the person, firm or corporation 
for whom or which he acts. 

In the prosecution of any person, as officer, director or agent, it 
shall be sufficient to allege and prove the unlawful intent of the person, 
firm or corporation for whom or which he acts. 

9136 



-63- 

California Unfair Practice Act (cent.) 

Section 3. It shall be unlawfiil for any person, partnership, firm, 
corporation, joint stock company, or other association engaged in "business 
within this State, to sell, offer for sale or advertise for sale any article 
or product, or service or output of a service trade, at less than the cost 
thereof to such vendor, or give, offer to give, or advertise the intent to 
give vendor, or give, offer to give or advertise the intent to give away any 
article or product, or service or output of a service trade for the purpose 
of injuring competitors and destroying competition, and he or it shall also 
be guilty of a misdemeanor, and on conviction thereof shall be subject to the 
penalties set out in section 11 of this act for any such act. 

The term "cost" as applied to production is hereby defined as including 
the cost of raw materials, labor and all overhead expenses of the producer; 
and as applied to distribution "cost" shall mean the invoice or re-olaceraent 
cost, whichever is lower, of the article or product to the distributor and 
vendor plus the cost of doing business by said distributor and vendor. 

The "cost of doing business" or "overhead expense" is defined as all 
costs of doing business incurred in the conduct of such business and must 
include without limitation the following items of expense; labor (including 
salaries of executives and officers), rent, interest on borrowed capital, 
depreciation, selling cost, maintenance of equipment, delivery costs, credit 
losses, all types of licenses, taxes, insurance and advertising. 

Section 4. In establishing the cost of a given article or product to 
the distributor a.nd venuor, the invoice cost of said article or product pur~ 
chased a,t a forced, ba.-nl^rupt, closeout sale, or other sale outside of the 
ordinary channels of trade may not be used as a basis for justifying a price 
lovver tlmn one based uoon the re-placement cost as of date of said sale of 
said' article or product replaced through the ordinary channels of trade, 
unless said article or product is kept separate from goods purchased in the 
ordinary chs.nnels of trade and ^jnless said article or product is advertised 
and sold as merchandise purchased at a forced, bankrupt, closeout sale, or 
by means other than through the ordinary channels of trade, and said advertis- 
ing shall state the conditions under which said goods were so purchased, and 
the quantity of such merchandise to be sold or offered for sale. 

Section 5. In any injunction proceeding or in the prosecution of any 
person as officer, director or agent, it shall be sufficient to allege and 
prove the unlawful intent of the person, firm or corporation for whom or 
which he acts. Where a particular trade or industry, of which the person, 
firm or corporation complained against a member has an established cost sur- 
vey for the locality and vicinity in which the offense is committed, the 
said cost survey shall be deemed competent evidence to be used in proving 
the costs of the person, firm or corporation complained against within the 
provisions of this act. 

Section 6. The provisions of sections 3, 4 and 5 shall apply to any 
sale made; 

(a) In closing out in good faith the owner's stock or any part there-* 
of for the purpose of discontinuing his trade in any such stock or commodity, 
and in the case of the sale of seasonal goods or to the bona fide sale of 
perishable goods to prevent loss to the vendor by spoilage or depreciation, 
provided notice is given to the public thereof: 
9136 



-64^ 

California Unfair Practice Act (cont , ) 

('"b) When the goods are damaged or deteriorated in quality, and notice is 
given to the public thereof; 

(c) By an officer acting under the orders of any courts; 

(d) In an endeavor made in good faith to meet the legal prices of a 
competitor as herein defined selling the same article or product, or service 
or output of a service trade, in the same locality or trade area. 

Any person, firm or corporation who performs \;ork upon, renovates, alters' 
or improves any personal property belonging to another person, firm or cor- 
poration, shall be construed to be a vendor within the meaning of this act. 

Section 7. The secret payinent or allowance of rebates, refunds, com^ 
missions, or unearned discounts, whether in the form of money or otherwise, 
or secretly extending to certain purchasers special services or privileges 
not extended to all purchasers purchasing upon like terms and conditions, to 
the injury of a competitor and where such payment or allowance tends to destror 
competition, is an unfair trade practice and any person, firm, partnership, 
corporation, or association resorting to such trade practice shall be deemed 
guilty of a misdemeanor and on conviction thereof shall be subject to the 
penalties set out in Section 11 of this act. 

Section 8. Uoon the third violation of any of the provisions of section^. 
1 to 7, inclusive, of this act by any corporation, it shall be the duty of 
the Attorney General to institute proper suits for quo warranto TDroceedings 
in any court of competent jurisdiction for the forfeiture of its charter, 
rights, franchises or privileges and powers exercised by such corporation, 
and to permanently enjoin it from transacting business in this State, If 
in such action the court shall find that such corporation is violating or 
has violated any of the provisions of sections 1 to 7, inclusive, of this 
act, it must enjoin said corporation from doing business in this State per- 
manently or for such time as the court shall order, or must annul the charter, 
or revoke the franchise of such corporation. 

Section 9, Any contract, express or implied, made by any person, firm, 
or corporation in violation of any of the provisions of sections 1 to 7, 
inclusive, of this act is declared to be an illegal contract and no recovery 
thereon shall be had. 

Section 10, Any person, firm, private corporation or municipal or other 
public corporation, or trade association, may maintain an action to enjoin a 
continuance of any act or acts in violation of sections 1 to 7, inclusive, of 
this act and, if injured thereby, for the recovery of damages. If, in such 
action, the court shall find that the defendant is violating or has violated 
any of the provisions of sections 1 to 7 , inclusive, of this act, it shall 
enjoin the defendant from a continuance thereof. It shall not be necessary 
that actual damages to the plaintiff be alleged or proved. In addition to 
such injunctive relief, the plaintiff in said action shall be entitled to 
recover from the defendant three times the amount of the actual damages, if 
any, sustained. 



I 



9136 



-S5- 
Califor nia Unf ai r Practice. Act (cont. ) 

Any defendant in an action "brought under the provisions of this section 
may be reauired to testify -under the -orovisions of sections 2021, 2031 and 
2055 of the Code of Civil Procedure of this Ste^te , in addition the boohs snd 
records of any such defendent may be brou^^ht into^ court sjid introduced, ''oy 
reference, into evidence; provided, however, that no information so obtr.ined 
may be used a{^ainst the defendant as a basis for a misdemeanor prosecution 
under the provisions of sections 1 to 7, inclusive, and 11 of this act. 

Section 11, Any person, firm, or corporation, v/liether as principal, 
agent, officer or director, for himself, or itself, or for another person, 
or for £>ny firm or cor-noration, or any corporation, mio or which shall vio- 
late any of the provisions of s'.'ctions 1 to 7, inclusive, of this a.ct, is 
guilty of a inisdeameanor for each single violation and upon conviction 
thereof, shell be -ounished by a fine of not less than one hundred ($100.00) 
dollaxs nor more than one thou.sajid ($1, 000.00) dollars, or by imprisonment 
not exceeding six months or by both said fine and imprisonment, in the 
discretion of the court* 

Section 12. If any section, sentence, clause or phrase of this act 
is for csay reason held to be unconstitutional, such decision shall not 
affect the validity of the remaining portions of the act. The Legislature 
hereby declares that it would have passed this act, and each section, 
sentence, clause or phrase thereof, irrespective of the fact that DJiy one 
or more other sections, sentences, clauses or phrases be declared uncon- 
stitutional. The remedies herein prescribed, are ciLmu.la,tive and in ad.di- 
tion to the remedies prescribed to the Public Utilities Act for discrimina- 
tions Ijy public utilitieo. If any conflict shall arise bet'jeen this act 
and the Public Utilities Act, the latter shall prevail. 

Section 13, The Legislature declares that the pujrpose of this act is 
to safeguard, the public against the creation or perpetuation of mono-oolies 
and to foster and encourage com-oetition, by prohibiting unfair and discrinina'- 
tory practices by which fair sjid honest competition is destroyed or prevent- 
ed, Tliis act shall be literally construed tiia.t its beneficial purposes ur:j 
be subserved. 

Section 14. This act shall be known and^ designated, as the "Unfair 
Practices Act." 

Section 15. This act is hereby declared to be an ""orgency measure neces- 
sary- for the immediate prer--ervation of the public peace, health, and safety, 
within the meaning of section 1 of Article IV of the Constitu.tion, and shall 
therefore go into immediate effect. The facts constituting the necessity are 
as follows; 

The sale at less than cost of goods obtained, at forced, bankrupted, 
close out, and other sales outsid.e of the ordinary channels of trade is des-* 
tro^dng healthy competition and thereby forestalling recovery. If such 
practices are not immediately stopped many more businesses will be forced 
into bajikrurotcy, thus increasing the prevailing condition of depression. In 
order to -orevent such occurrances it is necessary that this act go into ef- 
fect iLr.iediately. 

Approved July 15, 1935 
Chapter 477 Laws of 1935 ■ 
Assembly Bill 1870 
9135 



-.66- 

PETAIL mVG COiTTROL ACT 

Connecticut 

An Act providing for the prevention of the Sale of Inferior Drag 
and Cosmetics Merchandise* 

Be it enacted "by the Senate and House of Representatives in 
General Assembly convened: 

o'EC'I'IOii 1. This act may "be cited as the ''Retail Drug Control Act." 
The follov;ing terms shall have the following meanings, when used in this 
act, unless the context otherwise inaicated: (a) "Retail drug trade" 
shall mean the selling to the consuiner, not for the purpose of resale, 
of Bjij' form of drugs, medicines, cosmetics, toilet preparations, drag 
sundries or allied articles, Init shall not include tne dispensing of 
drugs, neclcines and medical supplies by a physician, dentist, surgeon, 
or veterinary in the legitimate practice of his profession; (h) "drag 
retailers" shall mean any individaf.l, firm or corporation engaged wholly 
or partially in the retail drug trade; (c) "retail drug establishment" 
shall mean onj store or department of a store engaged in the retail drag 
trade; (d) "drug" shall mean any substance or preparation, except soaps, 
intended for external or interna.l use in the cure, mitigation, treat:.:ent, 
remedy or prevention of disease or ailment in man or any other animal, and 
any svibstance or preparation intended to affect the structure or function 
of the "oody of man or any other animal, not including food but including 
medicino2 or quasi-medi' cinal preparations; (e) "cosmetics" and "toilet 
p rep ra'p.t ions" shall mean toilet articles and perfumes, toilet raters, face 
powders, 6reams, lotions, rouges, shaving creams, dentifrices, bath salts 
and all other similar preparations and substances, except soaps, designed 
and intended for applica,tion to the person for the purpose of cleansing, 
improving or changing in aiiy way the appearance of the person or of re- 
freshing or preserving the person* (f ) "drug sundries" shall mean such 
articles as are used in conjunction with, but not included in, drugs, 
cosmetics or toilet preparations. 

oECTIOIT 2. (a) No drug retailer shall use advertising whether 
printed, radio or display or of any other nature, which is intentionally 
inaccurate in any material particular or misrepresents merchandise, in 
respect to its use, trade-mark, grade, quality, quantity, size, origin, 
material, content or preparation; and no drug retailer shall use adver- 
tising or selling methods which tend to deceive or mislead the customer, 
(b) 1:0 drug retailer shall use advertising which refers inaccurately 
in any material particular to any competitor or his merchandise, prices, 
values, credit terms, policies or services, (c) No drug retailer shall 
use advertising which lays claim to a policy or a continuing practice of 
gene rail]?- underselling competitors, (d) No drug retailer shall secretly 
give anything of value to a customer or to the einployee or agent of a 
customer for the purpose of influencing a sale or, in furtherance of a 
sale, render a. bill or statement of account to the employee, agent or 



9136 



-67- 



Connecticat (Cont.) 



customer v/hich is inaccurate in any material particular, (e) No drug 
retailer shall sell or offer for sale any merchandise upon a condition 
which involves a lottery, gaintle, or other element of chance, (f) ITo 
drug retailer shall permit any demonstrator or sales employee whose 
salary is wholly or partially paid "by a manufacturer or distributor 
to work in his establishment unless such demonstrator or sales employee 
is clearly and openly identified as the agent of such manufacturer or 
distri'butor, 

SECTIOil 3. No drug retailer shall sell any drugs, medicines, 
cosmetics, toilet preparations or drug sundries at a price "below the 
manufacturer's wholesale list price per dozen; nor, in the case of 
bioloc^icals or other of the ahove mentioned xjroducts which are not 
custoLiarily sold in dozens or greater lots, sell such products at 
less than the manufacturer' s wholesale list price per unit. Not- 
withatanding the provisions of the preceding sentence, any drug' 
retailer may sell at less than the prices specified ahove, imperfect 
or actually damaged merchandise or "bona fide discontimied lines of 
merciiandise, if advertised, marked and sold as such; merchandise 
sold upon the complete final liquidation of any "business; merchan- 
dise sold or donated for charitable purposes or to unemployment 
relief agencies, and drugs or drug sundries sold to physicians, 
dentists, veterinarians or hospitals, hut not for the purposes of 
resale h^'- them, 

SECTIOiT 4, Any person responsihle for a wilfull violation 
of the provisions of this act shall he fined not more than $500, 



Passed June 13, 1935 



9136 



-68- 



APPENDIX E 



\ 



9136 



^69- 

THE FITCH PLA .K 

The "ITitch Plan" proposed as a "Pair Trade Act" in Missouri and 
Minnesota, and voted dov/n, is a plan under -ivliich contracts would not Tdo 
necessary. Piling price lists with the Secretary of State of the State 
passing such an Act would constitute legal notice on all resellers. This 
proposed Act provides for damage suit "by the manufacturer only. 

Mii'ife^.- to Prevent Unfair Competition and 
Unfair Trade Practices 

1. It shall "be unlawful for any merchant, firm, association or 
corporation to appropriate for his or their own use a name, trand, trade- 
mark, reputation or good will of an^^ maker in whose product said merchant, 
firm or corporation deals, or to discriminate against the same "by de- 
preciating the value of such product in the public mind, or "by raisrepre^* 
sentation as to value or quality, or "by price inducement, or "by unfair 
discrimination "between "buyers, or in any other manner whatsoever, except 
in cases where said goods or products do not carry any notice prohihiting 
such practice, and except in case of a receiver's sale or a sale 'by a 
concern going out of business. 

2, Every person, firm, association or corporation that has here*- 
tofore adopted or shall hereinafter adopt for their protection any label, 
trade«mark, brand or form of advertisement, and who shall have filed the 
same for record in the office of the Secretary of State, as provided by 
law in this State, may file with such label, trade-mark, brand or form of 
advertisement, a notice of the standard retail price at which any article 
or articles sold under such label, trade-mark, brand or form of advertise- 
ment shall be sold in the legitimate channels of retail trade^ The filing 
of such notice shall constitute constructive notice to all persons of the 
standard retail price of such article or articles and the Secretary of 
State shall receive a fee of one dollar for the filing of such notice, 

3, Any person, firm, association or corporation violating this Act 
shall be liable at the suit of the manufacturer of such branded, labeled, 
trade-marked or advertised goods, or any other injured person, to an 
injunction against such practioe, and sh^ll be liable in such suit for all 
damages directly or indirectly caused to the makers by such practices, 
which said damages may be increased threefold in the discretion of the 
court. 

4. "Should any person, firm, association or corporation complying 
with the foregoing provisions of this Act, desire to change the standard 
retail price of any article or articles sold under such brand, label, 
trade-mark or form of advertisement, notice of such change shall be filed 
in the office of the Secretary of State in the same manner and upon pay- 
ment in amount of some fees as in the case of the original filing of such 
notice." 



9136 



-70- 



Apparoix I 



9136 



-71- 

TH2EE- POEMS OF CONTMCT ITOW IN USE miDER THE PAIH TRADE LA.WS. 

Proponents of Pair Trade Legislation' appear to "be proceeding cautiotis- 
ly in "bringing suit under the ls.ws, ;iresuma'bl,Y to avoid arousing resentment 
of the pu"blic and the trade, No case under the California lav, the earliest 
to be 'passed, has ^et been brought to the Supreme Court* The three appended 
forms of contract are now in use. 

Suggested Contract Porm . 

CONTRA-CT EETtEEIJ Ml^TACTURER AND RETAILER , 
UNDER CAL'IPORNIA "PAIR TRADE ACT" 

THIS AG-EEEMSNT made this first day of September, 1933, at Los Angeles, 
California, by and between the GOLDEN SEAL CO!;IP ANY, of Oakland, a California 
corporation hereinafter called the Manufacturer, and JIM BLACK DRUG- COirPANY, 
of Los Angeles, California, , hereinafter called the Retailer, WITNESSETH: 

TEAT WHEREAS the Manufacturer makes and distributes under its trade 
mark "GOLDEN SEAL" the following products Y;hich are in fair and open compe- 
titiori with products of the same general class -oroduced by others, to-vdt: 
Golden Seal Tonic, Golden Seal Corrective, and Golden Seal Laxative Tablets, 
and the Retailer purchases said Tjroducts either from the Llanufacturer or 
one or more of the various wholesale druggists within this state and resells 
same from his retail drug store ^rithin this state, and, 

THAT WHEPJEAS said products are sold to all retail druggists in this 
state at uniform prices and on eo'oal terras and discounts based on kno^-m slid- 
ing scale qua.ntity lots or dec?.ls, and similar contracts hereto are being 
executed betv.-een the Manufacturer and other California Retailers, and 

THAT WrIEREAS the Manufacturer and the Retailer are mutually desirous 
of securing the benefits of the California Pair Trade Act, 

NOW, TH5REP0RE, it is agreed that the Retailer shall sell said products 
only in California and to consumers only and will not advertise, offer for 
sale or sell any of same, either directly or indirectly, at less than the 
following stipulated prices: 

Golden Seal Tonic $1.00 per bottle 

Golden Seal Corrective $1.00 per bottle 

Golden Seal Laxative Tablets . $C.50 per package 

THE MAt'jUlJ'ACTURER reserves the right to change said retail prices, but 
said change shall be effected by v^rritten amendment to this contract as well 
as to all similar contracts in effect within this state, which written amend- 
ments shall be uniform and mailed contemporaneously to every contracting 
Retailer in Ca^lifornia at least ten days before the effective date of the 
change in price to be stated in said amendment. The written amendment shall 
be executed oy the Manufacturer and submitted to the Retailer in duplicate, 
the Retailer in turn executing said amendment, attaching one copy thereof to 
this contract, and returning the other copy to the Manufacturer. 



9136 



-72- 

VIOLilTION OF THIS C0I1TRA.CT shall constitute unfair competition and 
will render the fuilty party liatle for damages at the suit of any person 
injured or damaged theretjr, and in addition thereto 'jill entitle said 
injured oerson to injunctive relief. In the event tjiat in any suit 
"brought hereunder for damages "by reason of a "breach hereof, "by either 
party hereto against the other, the Court should hold or find that from 
the nature of the. case it would he impracticable or extremely difficult to 
fix the actual damage, then in that event it is herety agreed that $25,00 
shall he presumed to be the amount of damage sustained "by reason of each 
separate "breach hereof, 

THIS COITTEACT shall he effective only within the state of California, 
and shall not appl;^ to interstate transaction. 

CANCELLATION of this contract may be effected hy either party oy 
giving a ten day written notice of cancellation to the other Toarty, 



Manufacturer: Golden Seal Company 

By; John Jones, Pres« 



Retailer: Jim Black Drug Company 

By: Jim Black, Prop, 



9136 



-73- • ■ •• 

TEXT OF MClCESSON AND ROBBINS PRICE CONTRACT 
UNDER. TEE CALIFORNIA STATS FAIR TRADE ACT 

Instructions 

(1) Please carefully fill out the blanks above the word "Witnesseth," 

(2) Then kindly sign the original, attaching your store label if you 
use one, 

(3) Send the original to McKesson and Robbins, Incorporated, 919 Front 
Street, Sacramento, McKesson and Robbins, Incorporated, has executed this 
contract by having its name printed at the end, subject to receipt by it at 
said address of the original executed by the Retailer, The copy is for 
your records, 

McKesson and Robbins, Incorporated, 
Retail Sales Contract 

For merchandise bearing the trade-mark, brand, or name of the producer 
or oraier and distributed by McKesson and Robbins, Incorporated, in conformity 
with the Fair Trade Act of the State- of California and operative on transac- 
■ tions within the state of California only. 

THIS AC-REEK'ENT made and entered into this ..day of ,,193,. 

by and between McKesson and Robbins, Incorporated, a corporation, herein- 
after Called the Wholesaler, and ,,. 

Individual or Firm Name 
of , 

Street Address 
..«•«......,........ California 

City 
herein called the Retailer. 

Witnesseth 

Whereas (a) Wholesaler is engaged in the distribution to retailers in Call- 
fornia of vaxious commodities of standard quality which bear the trade-marks, 
brands or names of their producers or owners (b) said commodities are in fair 
and open competition with other commodities of the same general class pro- 
ducp,d by others (c) Wholesaler maintains stock of said commodities within the 
state of Califor]?.ia for sale and distribution therein; and (d) Retailer is en- 
gaged in the retail sale and distribution of such commodities within the state 
of California; and VvTiereas, Wholesaler and Retailer mutually desire to avail 
themselves and the public of the provisions and protection of the Fair Trade 
Act of California as enacted in 1931 and enlarged in 1933. 

NOW, THEREFORE, in consideration of the premises, the mutual promises herein - 
contained, and for other considerations., the parties hereto hereby a^ree as 
follows: 

1. Wherever the term "Commodity" or the term "Commodities" is used in 
this agreement, the same shall be construed to mean any subject of commerce 
which bears the trade-mark, brand or name of the producer or owner thereof and 
which is fair and open competition with coimnodities of the same general class 

9136 



-74- 



producec'. !)■- others, including, 'vithoiLt linitinf; the generp.lity of the forego-' 
ing, ell coDi'odities ber.ring trp.de-nr.r us , or-ndo or names of wholesaler. 

2» Retailer ;7ill not, v/ithin the St-.te of California, advertiseV offer 
for sale, sell or resell anj'" comraodities v/hich hco-r, or the labels or contain-* 
ers of v/hich oerr, the trade-marJcs, Drr'Jids or nrr.es of tn vir res"nective "oro— 
ducers or ovmers at Thrice s less than those set forth in retail price lists 
which have "been, or herafter nay, he, f-urnished to Retailer "by T7holesaler» 
All sr.ch price lists shall expressly'' and olainly indicate that the conr.ioc.itieg 
and "■)ricos listed are vdthin the terns of this contract. 

3. Til lolo sale r rescrvGs +hs ri^ht to change any and all such price list;- at 
any ti: !e (and fron tine to tine) and ^lolesaler v/ill nalie reasonable efforts 
to notify Retailer promptlj' of changes. All changes in such price lists shall 
innediatclj- uoon being nade , constitute the nininuin retail prices referred to. 
in Paragraph 2. l?/holesaler' s latest "orice lists are (and 'all chcjiges thereof, 
as and vrhen nade v/ill be) available to Retailer at all T^iholesaler' s offices. 
Retailer^ s ignorance of retril price changes shall not excuse Retailer fron 
any breach of this agreement. 

4. Retailer v/ill not sell said commodities or an""- of them, to cni- ocrsoE 
except bona fide retail consumers, nor ;/ill retailer assist .any third person,, 
firm or corporcation in obtaining any of said commodities for purposes of resal 

5. Tne' giving by Retailer of any rrticle of value in connection v/ith the 
sale of any of srid comiodities or- the mrl::ing of any concession in connection' 
\7ith the' sale of rjiy of said commodities, v/ithout the ■■orior v/ritten author! zor 
tion of T^h-olesaler, shall constitute a- breach, of this agreement v/ith e:'j:.ctly 
the srr.o effect as if Retailer violated the "orovisions of Pa^ragraph 2 hereof^- 

6. In the event {i\) of closing out Retailer* s stock for the oiuroose of 
discontinuing delivery of any of- said commodities, or (b) t.liat said cpr.v.oditiet 
in Retailer^ s hrnds are dniaged or deteriorated in qua.lity. Retailer shall, 
before offering any of said comiodities for sale at prices less than the said 
miniuuiLi retvail prices, first offer to sell such commodities to T.holesaler at 
v/hich 7,holesaler is then selling such commodities to Reto.ilers generally in , 
the State of California. In nny event, in the care of Retailer* s sale of an;:"" 
of said commodities ^/hich are being closed out or are dan,?.ged or deteriorated 
in qua.lity, Retailer shall give e::olicit notice to all purchasers that such if 
the case, and such notice shall be oart of all advertising and countcr-dis- 
pl-ays referring to such sales. 

7. The "oarties hereto recognize and og-ree that it is impossible to c.ete: 
mine the actual donage \7hich uill result to ^olesaler from sales made b^- Re- 
tailer in contravention of the terms of this r^-reenent cjid they therefore a- 
gree that Retailer shall pay to TJholcsaler, as liquidated damages, the sum 

of T^Tenty-five Eollars ($25,00) for each sale made by Retailer in violation o 
any provision of this agreement. If, rjid as often as "iholesaler shall insti- 
tute Djiy proceeding or action in any court against Retailer for any breach 
of this agreement. Retailer agrees, in addition to all court costs, to -00.-/ 
Wholesaler a reasonable attorney's fee. It is fui'ther agreed that, in addl 
tion to other legol rights o.nd remedies, ^ii/holesaler shall be entitled to 
injunctive relief -against any rnd all actual or threatened breaches of this 
agreement. 

9136 



.n-c;. 



8« Eoth -orjrties oj':i'ee tiu.t this contrrct aivplies only to traiisc^ctions 
within the territorir'l ■bounclarieG of the Strte ox Crlifornia, Ho\7ever, "both 
parties fiirther agree tlir^t neither shall •■tter.Tot to do indirectly or "by neans 
of my sutterf-uge, anything contrrry to tlie letter and s'nirit of this contract, 

9, It is the agreement ,^nd intention of the narties hereto that, if any 
provision or orTt of this agrceincnt shall be held invalid, the remainder of 
this agreenent shall nevertheless be deemed valid and "binding iroon the parties. 
No chruige in this printed form of contract shall be binding, 

IN VJITllUSS V.^EItEOF, the parties nereto have e::ecuted this agreement the da;^ 
and year first above va-itten. 



I.IcICesson ona. Robbins, Incorporated, 
Wholesaler 



Signed* 



Hetailer 



(if Ptetailer is a 
Cor-poration affix 
seal here) 



3y. 



Designate position of 
person actuo.lly siging 



9136 



-76- • 

Model Omnibus Fair Trade Contract, 

As Suggested "by '.Washington State 

Pharmaceutical Association 

This contract has "been suggested as a model ono for wholesalers to 
make uith retailers in order to operate under the Washington Fair Trade Act, 
It V7as prepared "by the Washington State Phai'maceutical Association, 

The contract varies from those issued by wholesalers in California, in 
that it refers to a previous contract made with a manufacturer and requires 
that minimum prices "be filed with the state pharmaceutical association. 

The Model Contract follows: 

John Doe Company of Seattle, party of the first part hereinafter re- 
ferred to as wholesaler, and Richard Roe, of Seattle, party of the second 
part, hereinafter referred to as retailer, hereby agree as follows: 

I, THIS AGRSElvENT is made pursuant to the provisions of Chapter 177, 
Laws of 1935, of the State of Washington, known as the "Fair Trade Act" and 
the wholesaler is a ""buyer" as referred to in subdivision 1 of Section 3. of 
said Act end' is a ^'producer' s vendee" as referred to in Subdivision 2 of 
said Section 3, and this agreement is made pursuant to find within the intent 
of said Section 3, the retailer being a "vendee of tho producer's vendee." 

II, If any clause or provision of this agreement shall be adjudged void 
or illegal by a court of competent jurisdiction the remainder of the agree- 
ment shcJLl remain in full force and effect so far as may be, to carry out 

the intent hereof. 

III, The wholesaler has heretofore entered into a contract with John 
Jones Tooth Paste Company, of ITew York City, a "producer" as referred to in 
the said Act, in which contract wholesaler agreed not to resell any 
commodity of said producer bearing the trade-mark, brand or name of said 
producer and which is in fair and open competition with commodities of the 
same general class produced by others, to any vendee of the wholesaler with- 
out requiring of such vendee, in turn, an agreement that no such commodity 
shall be sold for less than the price stipulated by the producer. 

IV, The commodities to be governed by this agreement shall be: First: 
Those contained in the "original Wholesale and Retail Price List" of the 
said producer, attached to and made a part of this agreement. Second: Those 
which may hereafter be brought under the terms hereof by the producer and 
which, from time to time, may be contained in lists furnished to the Retailer 
by the producer ©r the Wholesaler. 

V, The Retailer agrees that he will not resell any of such commodities 
except at the price or prices stipulated by said producer. 

VI, I.iodif ications in such price lists shall be made only in the manner 
hereinafter provided, 

VII, ITholesaler agrees to immediately file with Washington State 
Pharmaceutical Association a correct copy of this agreement, of the ^said 

9136 



-77- 

Originc?.! Price List, of all additional price lists and of all increases, de- 
creases or withdrawals, and no iiodif ication in any list shall be effective 

until the lapse of days after notice thereof shall have "been 

mailed or telegraphed to such Association and to the Retailer, 

VIII, In case the producer or the TTholesaler shall request such Asso- 
ciation to give publicity to such price lists or modifications thereof such 
producer or the Tkholesaler shall bear the expense thereof. 

Prices Filed with the Association 

IX, The Wholesaler further agrees that he will, with the original price 
list, file with said Association a Complete Schedule of Terms, which sliall 
provide for all discounts of whatever nature as may be allowed, whether 
"cash discounts," "trade discounts," "quantity discounts" or otherwise, and 
all conditions, terms and discounts shall be uniform within the State of 
Washington, and no discrimination or advantage of whatsoever nature shall be 
allowed to any person, firm or corporation, except that this agreement shall 
not ap]:ily to transactions between wholesalers, jobbers, exclusive sales 
agents or others who shall not sell at retail. 

X, The wholesaler may terminate this Contract at any time upon 

days notice by registered mail or telegram to Washington State 

Pharm.aceutical Association -and to the Retailer, party of the second prjrt, 

ICE. Any commodity may be resold without reference to this agreement in 
the follovdng cases: (a) In closing out the owner's stock for the purpose 
of discontinuing any such commodity; in such cases the Retailei shall, at 
lea,st forty-eight hours prior to such sale or the appearance of any offer or 
advertisement thereof, file with Wasnington State Pharmaceutical Association 
a written notice of such discontinuance, and the Retailer shall not within 
one yesx thereafter, resume the sale of such commodity; (b) When the goods 
are damaged or deteriorated in ouality and notice is given to the public 
thereof; (c) By any officer acting under orders of any court, 

XII. Unless already in effect at the date of this agreement, prices con- 
tained in the "Original Price Lists" shall become effective, May 15, 1935. 



9136 



-78- 



APPSIIDIX 



9136 



-79- 

Appendix 

H. R. 13305 - 63: 'i — Mr. St-vens — Fet. 12, 1914 

A Bill 

To prevent discrimination in prices and. to provide for publicity 
of prices to dealers and to the im.blic, 

5e it enacted by the Senate and House of Keprest.ntatives of the ■tlhi'ted 
States of Ainerica in Conf^refis asseinbled, That in any contract for the sale 
of articles of coranerce to any dealer, wholesale or retail, "by any producer, 
gror/er, manufacturer, orowner thereof, under trade-mark or special "brand, 
hereinafter referred to as the "vendor", it shall he lar'ful for such vendor, 
whenever the cont'-act constitutes a tr.an£action of comraerce among the several 
States, cr I'ith foreign nations, or in any Territory of the United States, 
or in the District of Columbia, or between any such Territory and another, 
or betv^een any such Territory or Territories and any Stftes or the District 
of Coluifibia, or with a foreign nation or n;:.tions, or between the District of 
Columbia and any State or States or a foreign nation or nations, to prescribe 
the sole, uniform price at which each article covered by such contract may 
be resold; Provided, That the follov/ing conditions are complied with: 

(a) Such vendor shall not have any monopoly or control of the market 
for articles belonging to the same general class of merchandise as such 
article or articles of commerce as shall be covered by such contract of sale: 
nor sh^all such vendor be a "oarty to any agreement, combination, or under- 
standing with any competitor in the production, manufacture, or sale of any 
merchandise in the same general class in regard to the price at which the 
same shall be sold either to dealers at wholesale or retail or to the public, 

(B) Such vendor shall affix a notice to each article of commerce or 

to each carton, pa,ckage, or other receptacle inclosing an article or articles 
of commerce covered 'xiY such contract of sale stating the price prescribed by 
the vendor at the time of the delivery of said article as the uniform price 
of sale of such article to the public, and the name end address of such ven- 
dor, and bea.ring the said trade-mark or special brand of such vendor. Such 
article or articles of commerce covered thereby sh^ll not be resold except 
with such notice affixed thereto or to the cartons, package, or other re- 
ceptacles inclosing the same, 

(C) Such vendor shall file in the Bureau of Corporations statement 
setting forth the trade-mark or special brand owned or claimed by such ven- 
dor in res'oect to such a.rticle or articles of commerce to be covered by such 
contract of sole, and also, from, time to time, as the same may be adopted or 
modified, a schedule setting forth the imiforra price of sale thereof to 
dealers at wholesale, and the uniform price of sale thereof (to dealers) at 
retail from wnatever. source acajaired and the uniform price of sale thereof 
to the public, and upon filing such statement such vendor shall pay to the 
Commissioner of Corporations a registration fee of $10.00. The price to 

the vendee under such contract s"iiall be one of such uniform prices to whole- 
sale and to retail dealers according as such vendee shall be a dealer at 
wholesale or a dealer at retail, and there shall be no discrimination in 
favor of any vendee by allowance of a discount for any cause, by the grant 
of any special concession or allowance, or by pa^Tiient of any rebate or com- 
mission, or by any other device whatsoever* 
9136 



-80- 

(L) Any article of commerce or any carton, packa^^ie, or other recGDtacle 
inclosing; an article or articles of coraneroe covered by such contract and in 
possession of a dealer may te sold for a -orice other than the -uniform price 
for resale by such dealer as set forth in the schedule -nrovided in the next 
preceding paragraph (C): First, if such dealer shall cease to do business 
and the sale is made in the course of v/inding up the business of such dealer; 
or if such dealer shall have become banlcrupt, or a receiver of the business 
of such dealer shall have been appointed, provided that such article or 
articles of commerce shall h-ave first been offered to the vendee thereof by 
such dealer or the legal representative of such dealer, by written offer at 
the price ;oaid for the same by such dealer, anc' that such vendor, after 
reasonable op-Dortunity to inspect such article or articles, shall have re- 
fused or neglected to accept such offer, or, second, if such article of 
commerce or contents of such carton, package, or other receptacle shall have 
become damaged, deteriorated, or soiled: Provided, That such damaged, l 
deteriorated, or soiled article shall have first been offered to the vendor 
by such dealer by written offer, at the price paid for the same by such 
dealer, and that such vendor, after reasonable opportunity to ins-oect such 
article or articles, shall have refused or nef^lected to acceT)t such offer, 
and that such damaged, deteriorated, or soiled article shall thereafter only 
be offered for sale by such dealer '.'^ith prominent notice to the purchaser 
that such article is damaged, deteriorated, or soiled, and that the Thrice 
thereof is reduced because of such damage. 



V 






-81^ 



AlTOendix 



H. R. 13305 

In the Senate of the United States 
April 1, 1914 

Referred to the Committee on Interstate Commerce and ordered to he printed, 

AMENDMENT 

Intended to he proposed hy Mr. Clapp to the hill (H. R. 13305) 
to prevent discrimination in prices and to provide for puhlicity 
of prices to dealers and to the puhlic, viz: On page 3, lines 21 
and 22, insert the following: 

Such vendor at the time of filing the statement ahove provided 
for shall file an affidavit that such vendor does not have any mono- 
poly or control of the market for articles helonging to the same gen- 
eral class of merchandise as the article or articles covered hy such 
contract of sale; and that said vendor is not a party to any agreement, 
comhination or understanding with any com^oetitor in the production, 
manufacture, or sale of any merchandise in the same general class in 
regard to the price at which the same shall he cold, either to deal- 
ers at wholesale or retail or to the puhlic, and such affid.avit shall 
he renewed annually; that an additional statement in the renewals 
of affidavits that such vendor has not theretofore had a monopoly or 
control of the market for articles helonging to the same general class 
of merchandise as such article or articles of commerce as shall he 
covered hy such contract of sale, and that such vendor has not there- 
tofore heen a party to 8.ny agreement, comhination, or understanding 
with any competitor in the production, manufacture, or sale of mer- 
chandise in the same general class in regard to the price at which 
the same shall he sold either to dealers at wholesale or retail or 
to the puhlic. If such vendor he a corporation, the affidavits 
herein provided for shall he made, respectively hy the president 
and secretary of the corporation, 

1,^ sjf ^ ^> %^ <Le ^f sl> ^^ ^> ^U 

S 5195 63:2 Mr. Clapp (hy request) April 10, 1914 

This is H. R. 13305 as amended Feh, 12, 



S136 



-82- 

Appendi x 

H. R. 13860 - 63:2 - Feo. 25, 1914 - Mr. Metz 

A BILL 

To -orevent olscrininaticn ■bet-.-een different consiimers and localities "by 
establishing imiform prices for -uniform commodities. 

Whereas experience has demonstrated the advantages and orotection to the 

con'S\iiaer of standard or imiform comTiodities marketed imder the trade- 
mark of the proprietor who originates the commodity and who "by carefiil 
and res'oonsihle "business methods and guaranties, and "by constant main- 
tenance of the excellence of the commodity, "builds up a reputation and 
standard or uniform value for the commodity, and rho thus creates and 
ovrns the good \7ill connected there\7ith; and 

WhercE.s it is desira"ble that consumers shall "be a"ble to purchase uniform 
commodities in all localities at uniform prices, V7here"by to prevent 
discrimination "bet-ween different consumers and localities: and 



J 



Whereas uneven prices for the same uniform commodity tend to effect dis- 
crimination "between different localities and consumers, and to de- 
preciate the quality of the commodity and to destroy competition in 
that commodity and to monopolize the sale of the same, and to deceive 
consumers as to the value of the commodity, and otherwise and wrong- 
fully to appropriate and impair the good 7/ill of the originating 
proprietor; and 

Whereas under existing lav7 proprietors possessing lar^;e capital, resources, 
and facilities, through their consequent a"bility to maintain "branch 
esta"blishraents or sole agents throughout the country for fixing uniform 
prices for uniform commodities, are ena'bled to disco-orage competition, 
to deprive retailers, of their independence, and to prevent them from 
handling competing commodities, and' otherwise to exercise an unfair ad- 
vantage over smaller competitors; and 

Whereas the increased expense of maintaining branch establishments or sole 
agencies increases the price of commodities to the cons-omers; and 

Whereas uniform prices facilitate the wide and steady distribution of uniform 
cominodities and thus tend to lower the price to consumers by lowering 
the cost of production and distribution: No'7, therefore, 

Be it enacted by the Senate and House of Representatives of the United 
States of America in Congress assembled, That the following terms and phrases 
in this Act are used and inserted with the sole sense, meanings, and de- 
finitions set forth, 

A "uniform commodity" is hereby declared and defined to be any article, 
product, or commodity which enters into interstate commerce, and which is 
standard or uniform in grade, §ize, and quality v;ith other articles, products, j 
or corar.odites of the same price of the same proprietor, and which has affixed, ' 
printed, starar)ed, embossed, engraved, or othen'ise marked thereon or anplied 
or attached thereto, in any manner, or to the package, can, bottle, box, or 

9136 



-83- 

other container, receptacle, or covering of any character whatever, in which 
the article product, or commodity is packed, contained or inclosed, the 
trade-mark or trade-name of the proprietor of said article, product, or 
commodity, which trade-mark or trade-name has "been properly registered in 
the United States Patent Office under the terms and provisions of the Act 
entitled "An Act to authorize the registration of trade-marks used in com- 
merce with foreign nations or among the several States or v/ith Indian trites, 
and to protect the same," as enacted February twentieth, nineteen hundred and 
five, and as now, as v;ell as hereafter, amended, together v/ith the notice of 
the registration of said trade-mark or trade-name, as required by said Act, 

A "proprietor" is hereby declared and defined to be any person, firm, 
corporation or association engaged in manufacturing, selecting, packing, 
distributing, printing, puolishing, or otherwise -oroducing or preparing for 
the market any uniform commodity under a trade-mark or trade-name, owned ''oy 
said proprietor, and which has been re listered by said proprietor, or his 
predecessors in business, in the United States Patent Office, under the terms 
of an Act entitled "An Act to authorize the registration of trade-marks used 
in commerce' with foreign nations or emong the several States or with Indian 
tribes, and to protect the same," as enacted February twentieth, nineteen 
hundred and five, and as now, as well as hereafter, amended, 

A "dealer at wholesale" is hereby declared and defined to be any person, 
firm, corporation, or association who or which distributes or sells any uni- 
form commodity to any dealer for resale, 

A "dealer at retail" is hereby/- declared and defined to be any person, 
firm, corporation or association who or which sells any uniform commodity 
direct to any consumer, 

A "consumer" is hereby declared and defined to be any person, firm, cor- 
poration, or association who or which purchases any uniform commodity for 
ultimate consumption or use. 

The expression "interstate commerce," as used herein, is hereby declared 
and defined to mean commerce between the United States and foreign nations, oi 
among the several States, or between a State or States and places subject to 
the jurisdiction of the United States or between any Territory of the United 
States, and in and betv?een such Territory or Territories and any State or 
States and the District of Columbia, or places under the jurisdiction of the 
United States, or between the District of Columbia and any State or States and 
foreign nations or places under the jurisdiction of the United States. 

Sec, 2. That the proprietor of any uniform commodity, entering into 
interstate commerce, may establish a uniform retail selling price for such 
commodity to all consumers, wherever located, after making due allowance, at 
the option of the proprietor, for the actual cost of transportation from the 
point of production or manufacture of such commodity to the point of retail 
sale or consumption, by a notice of said uniform retail price applied to or 
connected with said uniform commodity, or served on the dealer either directly 
or throug'h the usual trade channels; Provided, That the purpose and effect 
of said uniform retail price is to avoid discrimination between different con- 
sumers and localities: And provided also. That the proprietor shall file in 
the Bureau of Corporations, as a public record, under rules to be prescribed 
by said Bureau, a uniform price schedule identifying the uniform commodity, ana 

9136 



-84- 

setting forth the imiform price of sale thereof from the proprietor to all 
dealers at wholesale, and the imiforra "crice of S3.1e thereof from proprietor 
and all dealers s.t wholesale to all dealers at retail, and. the uniforn retell 
price of sale from the proprietor and all dealers at either retail or whole- 
sale, to all considers: And provided, also that nev/ -uniform price schediiles 
shall alwavs be filed in the B-nreai: of Cor oorat ions not less than thirty' dcys 
"before sales at newly established "uniform prices inaj'" la\7f-ull7 be made by the 
proprietor, such nev/ schedules to apply only to uniform commodities v/hich 
have notice of the ne\/ uniform consumer's orice applied thereto or connected 
therevdth, 

Sec. 3» That any proprietor or any dealer at uholesale or retail vrho 
shall violate either the wholesale or retail uniform selling price of a uni- 
form commodity entering into interstate coin?ierce by charging or accepting, 
at wholesale, or retail, as the ca.se may be. a less price, directly or indirec 
ly, for scld commodity than the wholesale or retail imiform price established 
by the proprietor, shall be liable to an action for dainages and aji injunction 
a.t the suit of any proprietor, dep.ler, or consumer engaged in producing, or 
dealing in or with, or in consuming such uniform commodity. 

Sec, 4, That any ■jj.iiform commodity in possession of a dealer a,t v/hole- 
sale or retail may be sold for a -orice other than the uniform price set forth 
in the uniform price schedule filed under section two hereof orovidlng such 
dealer shall cease to do business and the sals shaJl be in the course of wind- 
ing up the business of such dealer, or providing such dealer shall have become 
bankrupt or a receiver of the Eusiness of such dealer shall have been c.npoint- 
ed: Provided, that in either case above specified such uniform comnoi'it;;- 
shall have first been offered to the proprietor by the dealer, receiver, or 
trustee in bankruptcy, or the legal representative of the dealer, bj' a v/ritten 
offer at the price paid for the ■'jniform commodity by such dealer, enC. that 
such oroprietor, after reasonable opportunity to inspect such article or 
articles shall have refused or neglected to accept such offer, or providing 
such uniform commodity shall have become damaged, deteriorated, or soiled, 
and providing that such dsjriaged, deteriora-ted, or soiled articles shall have 
first been offered to the proprietor thereof by the dealer by written offer, 
at the price paid for the sam.e by such dealer, and that such vendor, after 
reasonable opportunity to inspect such uniform commodity, shall have refused 
or neglected to accept such offer, ajid providing that such damaged, deteriorat" 
ed, or soiled articles, shall thereafter only be offered for sale by the dealer 
with prominent notice to the consumer that such uniform commodity is dajnaged, 
deteriorated, or soiled and that the price thereof is reduced because of such 
damage • 

Sec. 5, That nothing in this Act shall be construed as repealing an Act 
entitled "An Act to protect trade and commerce against ■'unlawfu). restraints and 
monopolies, " which became a law on the second day of July, in the year eightet 
hundred and ninety. 



^*5k>|<*:i«****** 



9135 



-85- 

H.R. 11-71:3 Mr. Kelly January 30, 1931. 

An Act to protect trade-mark owners, distri"butors, and the public against 
injurious and uneconomic i^ractices in the distribution of articles of standard 
quality under a distinguishing trade-mark, brand, or name. 

Ee it enacted by the Senate and the House of Representatives of the 
United States of America in Congress assembled, That no contract relating to 
the sale of a comrnodit.y which bears (or the label or container of ^'hich bears) 
the trademark, brand, or trade-name of the producer of such commodity, and 
which is in fair and open competition vdth commodities of the same general 
class produced by others, shall be deemed to be unlawful, as against the 
public policy of the United States or in restraint of interstate or foreign 
commerce or in violation of any statute of the United States, by reason of 
any agreement contained in such contract, but no such contract shall authorize 
the proG.ucer , or manufacturer, or packer, giving a trade naiae,, brand, or trade- 
mark to any commodity, to fix or prescribe the retail prices of. such necessi- 
ties of life 8.S meat and meat products, flour and flour products, agricultural 
implements, tools of trade, canned fruits and vegetables, all clothing, shoes 
and hats. 

That the vendee will not resell such commodity except at the -orice 
stipulated by the vendor and/or that the vendee will require any dealer to 
whom he may resell such commodity to agree that he will not in turn resell 
except at the price sti;')ulated hy such vendor or vendee v;hich price shall 
have been printed in plain figures on original label or other identifying 
device on said commodity. 

Sec, 2, Any such agreement in a contract in respect to interstate or 
foreign commerce in any such commodity shall be deemed to contain the implied 
condition — 

(a) That during the life of such agreement all purchasers from the 
vendor for resale at retail or for delivery after such resale or in any city 
or town merchants located in which are in fair and open competition with 
such vendee shall be granted equal terms as to purchase and resale prices; 

(b) That the vendee may resell at a price below the stipulated resale 
iirice which yields not less than 20 per centum over the actual bona fide 
purchase price paid t)y him; 

(c) That such commodity may be resold without references to such 
agreement — 

(1) In closing out the owner's stock for the purpose of discontinuing 
dealing in such commodity or of disposing, toward the end of a season, of a 
surplus stock of goods specially adapted to that season; 

(2) With notice to the public that such commodity is damaged or de- 
teriorated in quality, if such is the case; 

(S) By a receiver, trustee, or other officer acting under the orders 
of any court or any assignee for the benefit of creditors; 

(4) When it is necessary to the conduct of the business of the owner 
either because of excessive inventory or because of insufficient funds or 
credit; or 
9136 



jO- 



(5) If after the vendee gives notice to the vendox containing a state- 
ment of the quantity and condition of the commoditv and the cost price- -thereof , 
less transportation charges paid by the vendee, if any, thereon, the vendor 
fails T/ithin ten days to repurchase such comaiodity at the cost price less 
such transport^-tion charges, if any, and less a reasonable adjustment for 
deterioration in quality, if any, For the purposes of this section^ notice 
served by registered letter mailed to the vendor shall be sufficient and 
such period of ten days shall r-^jin from the delivery of the letter to the 
vendor. 

Sec, 5, Nothing contained in this Act shall be construed as legalizing 
any contract or agreement between -^oroducers or between wholesalers or between 
retailers as to sale or resale prices. 



Sec. 4, As used in this Act — 

, (1) The : term "producer" raeans grower, packer, malcer, manufacturer, or 
publisher. 



(2) The term "commodity" raeans any subject of commerce, 
House of Representatives January 29, 1931 



Passed the 



Attest: 



Wm, Tyler Page, 



Clerk 



9135 



-37- 

H. R. 11 - 72:1 - Mr. Kelly Decenber 3, 1S31. 

A BILL 

To protect traoe-nsrk ovmers, distri.butor^ and the public ag^infet injuri- 
ous and uneconomic practices in the distribution of articles of standard 
quality under a distinraishing trade-mark, brand or name, 

Be it enacted by the Senate and House of Representatives of the United 
States of America in Confess, assembled, that no contract relating to the sale 
or resale of a corai-iodity which bears (or the label or container of \7hich 
bears) the trade-mark, brand, or name of the producer or ovmer of such com- 
modity, and ■■..•hich is in fair and open comioetition with commodities of the 
same general class produced by others, shjill be deemed to be unlawful, as 
against the public policy of the United States or in restraint of interstate 
or foreign com::ierce or in violation of an;;- statute of the United States, by 
reason of any agreement contained in such contract: 

(1) Ti'iat the vendee vill not resell such commodity'- excerpt at the price 
or prices stimulated in such contract; and/or 

(2) That the vendee -ivil]. require any dealer to whom he may resell such 
commodity to agree ths.t he '-Till not in turn resell exc-rt at the price or 
prices stip^jlated in such contract: Provided, That prices stip-olated in any 
such contract shall be ixaiform to all vendees in like circumstances, differ- 
ing only as to quantity of such comraodity sold, the point of delivery, and 
the manner of settlement. 

Sec, 2 A:n.y sach agreement in a contract in respect of interstate or 
foreign com/ierce in any such commodity shall be deemed to contain the im- 
plied conditions that such commodity may be resold 'Jithout reference to 
such agreement, 

(1) In closing out the OTmer's stock for the purpose of discontinuing 
dealing in s'cch commodity; or 

(2) In disposing of such commodity when damaged, deteriorated, or 
soiled, with prominent notice to the public that such is the case; or 

(3) 3;;,'' a receiver, trustee, or other officer acting under the orders 
of any court: Provided, That such com:.iodity shall h^ve first been offered 
to the vendor thereof by such vendee or the legal representatives of such 
vendee by written offer, at the price paid for the sa-me by such vendee, and 
that such vendor, after reasonable opportunity/ to insToect such commodity, 
shall have refused or neglected to acce-ot such offer. 

Sec, 3. Such contracts for sale of such com-^iodity may provide for dis^ 
posal and/or seasonal sales at appropriate times, during which periods such 
commodity may be resold without reference to such agreement; Provided, that 
such comnodit3/ she.ll have first oeeri offered to the vendor by such vendee by 
•.•written offer, at the price paid for the same by such vendee, and that such- 
vendor, not less tha.n thirty days prior to the date stipulated in such con- 
tract for the next such disposal and/or seasonal sale after reasonable op- 
portunity to inspect such commodity, shall have refused or neglected to 
accept such offer. 



Q 



136 



-.88r-. 

Sec. 4, Nothing contained in this Act shall "be consti-ued"'as legalizing 
any contract or agreement "betueen loroducers or between wholesalers or between 
retailers as to sale or resale prices. 

Sec, 5, No suit arising out of any such agreement shall be brought in 
any court of the United States in any other judicial district than that in 
which the defendant is an inhabitant, or in which he has a regular and es- 
tablished place of business, and/or where service of "orocess, summons, or 
subpoena may be made by service upon the agent or agents engaged in conduct- 
ing such business. 

Sec. 6 This Act may be cited as the "Fair Trade Act," 



9136 



~89~ 

Appendix • 

S 299 - 73rd Congress 1: Mr* Cn.pper - March 9, 1933. 

Mr. Capper introduced tlie following bill which 
was read twice and referred to the Committee on 
Interstate Commerce 

A BILL 
To define the intent of the anti-trust laws as to certain agreements. 

1. Be it enacted "by the Senate and House of Representatives of 

2. the United States of America in Congress assembled, that 

3. nothing in the anti-trust laws as designated in section 1 of 
4« the Act entitled "An Act to supolement existing laws against 

5, unlawful restraints a.nd monopolies, and for other purposes," 

6, approved October 15, 1914, shall be deemed to prevent a 

7. grower, producer, or dealer, selling goods identified by a 

8. special brand name or trade-mark of which he is the owner, 

9. from specifying, by agreement with distributors the resale 

10, prices of such identified merchandise, which prices stipulated 

11, in any such agreement shall be to all distributors in like 

12. circumstances, differing only as to the q-jantity of such 
15. merchandise sold, the point of delivery, and the manner of 
14. settlement, 

NOTE S 497 - 73:1 - Mr, Capper - March 29, 1935, 

differs only in th^t "uniform" was inserted before 
"to" in line 11, 

H. R. 3100 - 73:1 - Mr. Kelly - March 11, 1933, 
Identical with S 299 - 73:1 - Mr. Capper. 

H. R. 3677 - 73:1 - Mr, Kelly - March 16, 1933 

Identical with S 497 - 73:1 - Mr, Capper - March 29, 



9136 



-.90- 



APPENDIX H 



V 



9136 



-91- 

Notice Cited in Robt. H. In^rersoll & Bro. vs. Habne & Co., (No. 43/384) 
Com-t of Chancery of New Jersey, Aug. 14, 1S17, (101 At. 1030) 

"All Ingersoll v-atches are sold subject to a notice, a copy of which is 
as follows; 

NOTICE: "" ? t : •-'•■• ■ . , 



"The -ase of our name, trade-mark, guarantee, reputation, good will, and 
selling helos is licensed to tne dealer for the sole purpose of selling or 
offering, advertising or displaying for sale, this watch, ;orovided this 
watch is not sold offered, advertised, or displayed for sale with or as any 
donation, discount, rebate, •oremium, oi' bonus, or to any wholesale or retail 
dealer at rates different from those snecified in our schedules, or at any 
other letail price than $1,35, without first removing this notice end. our 
name, tra,de-mark, and guarantee, and returning to us our selling helps and 
refraining from the use of our name, trade-mark, guarantee, reputation, good 
will, and selling helps, and provided the dealer shall, upon our written re- 
quest (unless he shall have previously sold it), resell to us this watch, if 
then merchantable, at the rate SDecified in our schedules for the quantity in 
which he purchased, or if then damaged, at such rates as shall then be agreed 
upon, 

"Any violation of any of the above conditions depreciates our name, trade, 
mar, reputation, and good v/ill, and '/ill act as a revocation of this license. 
Any use of our name, trade-mark, guarantee ,■ repute tion, good will, or selling 
helps aids the dea.ler in selling this watch and will act as an acceptance of 
the above conditions. The dealer may -sell or otherwise disDOse of this watch 
as he pleases after first removing this notice and our name, trade-mark, and 
guarantee, and returning to us our selling helps, and refraining from the 
use of our name, trade-mark, guarantee, reputation, good-will, and selling 
helps; but he has no ri ht to use any of them in violation of the above con- 
ditions or to do anything to depreciate their value. Any dealer who violates 
any of the above conditions will be liable to suit for damages and an injunc- 
tion, 

-- i ■ 

"Upon written request of any dealer observing the above conditions, we 
agreed (l) to repurchase from him this watch, if t he n me fCTIan t abT e , at the 
rate specified in our schedules for the quantity in which he purchased, or 
if then damaged, at such rate as shall then be agreed upon; or (2) to leave 
him free, after first removing this notice and our name, trade-mark, and 
guarantee , to sell "or otherwise dispose of this watch without regard to the 
above conditions," 



Robt, H, Ingersoll & Bro. 



9136 



-92- 



NOTICE CITED IN INGERSOLL V3. GOLDSTEIN 
COURT OF CHANCERY OF K3W JERSEY, 1915 
(95 At. 193) 



"LICENSE 



"Root, H« Ingersoll and Bro., Mai:ers 
"New York, Chica~zo , London, San Francisco 

"Mechanism in this v/atch is covered "by United States patents 
and the watch is licensed and sold under and subject to the 
following conditions assented to "by piorchase and controlling 
all sales and uses thereof, and violation of which license 
condition revokes and terminates all rights and licenses as 
to this and all other ''atches of makers in violator's posses- 
sion and subjects the violator to suit for infringement of 
said letters patent: 

"(l) Jobbers raa^/ sell only to retail dealers, raaj'' not 
sell to anyone designated by the makers as objection- 
a.ble , may not detach or sell without this notice and 
may sell only at rates sjjecified in schedules furnish- 
ed by the mal'iers.- 

"(2) Retailers may advertise and sell only to buyers 
for use at one dollar^. 

"(3) No donation, discount, rebate,, premiun or bonus 
may be allowed or given in connection v;ith any sale 
at wholesale or retail. 

"(4) It will not. be offered as a premium or bonus for 
or in connection with the sale of other goods; or 
included in any combined sale, 

"(5) Guarantee with date of sale indorsed thereon to 
accompany each watch. 



Ingersoll Dollar Watch 
Trade-Mark Reg. U, S. Pat, Off, 
Nicket Finish Arabic" 



9136 



-.93- 



APPENLIX I 



9136 



-94- 

PEp SQPJS:!^ ._CDIiPMY CANCTXS FAIR TIjASS CONTRACTS 
(From Drug Trade News, July 22, 1935, Page 1.) 



Company tells California Drugjists Move is Dae to a Need for Shipments 
from Cliicago. 

Chicago, Illinois, - The Pepsodent Company of this city, has, through 
its California "branch, terminated its lair trade contracts with re- 
tailers in California and has notified the druggists of that state 
that the contracts are no longer in force. 

It is understood that the contracts protecting prices on Pepso~ 
dent products, were terminated because of the danger of violations of 
the interstate commerce laws. 

In a letter to all druggists of the country, the company has 
also notified the trade of new suggested minimum prices and "Special 
Sales Day Prices." 

Two letters were sent to retail druggists in California, the 
first to those who had signed pepsodent contracts and the second to 
all of tiie retail and wholesale drug trade in the state. 

The letter to those who had signed contracts said: 

" Notic e: Pursuant to paragraph six of written agreement under 
California Fair Trade Act between you and the Pepsodent Com-* 
pajiy of California, we hereby notify you of termination 
thereof, for the reasons stated in the attached notice to 
California drug trade." 

The second letter to all of the wholesale and retail trade in 
the state, read: 

"lianufacturing requirements coMpel us to make various shipments 
in the future direct to Chicago to jobbers and dealers in 
California. Since such shipments will involve interstate com~ 
merce, it is necessary for the pepsodent Company of California 
to withdraw from any operation under the California Fair Trade 
Act." 

The letter which the pepsodent Company sent to druggists through- 
out the country, explaining its new price policy follows: 

"To The Retail Drug Trader 

"So much confusion exists as to the propriety of maintaining 
resale prices that we repeat several fundamental and well 



9136 



-95- 

established principles vvhich have in no respect "been 
modified and v/hich are still fully effective: 

Under repeated decisions of the United States Sapreme 
Court, a seller of products in interstate commerce is 
powerless to coiirpel any purciiaser to adhere to, or 
agree to, resale prices suggested and recommended.' 

Upon sale, the products "become the property of the 
purchaser, without any restraint on the part of the 
seller, 

However, if the seller chooses, he may refuse to make 
further sales to any purchaser. The pepsodent Company, 
as occasion offers, will exercise its legal right to 
choose to whom it shall sell. 

Both as assurance of profits to the dealer and in pro- 
tection to the business of the Pepsodent Company, we 
earnestly recommend that the following suggested seals 
of resale prices, which is national in scope, he added 

to: 

Everyday Minimum Special Sales Day 
Prices Prices 

peps. Tooth Paste 

50^ size 38^ 34^ ~ 3 for $1.00 

Peps, Tooth Powder 

25^- size 2Z(p 21^ 

peps. Tooth Powder 

^0(p size 38^ 34^ - 3 for $1.00 

Peps, jlntiseptis 

25^^ size 23^ 21^ 

peps. JUitiseptic 

50(i- size 38^ 34^ - 3 for $1.60 

peps. Antiseptic 

$1.00 size 79^ 71^ 

peps, Junis Cream 

35(^ tuhes 31^ 28^ 

peps. Junis Cream 

50^; Jars 38^ 34^;^ - 3 for $i.CJ 

peps, Junis Cream 

$1.00 jars 79^ 71^ 



9136 



-96- 

"The above Everyday Minimum prices are the same as those 
heretofore announced. 

In many sections of the country, dealers feel that special 
sales events are necessary. For this reaaon, v/e suggest 
the ahove scale of Special Sales Day prices. However, we 
do not "believe that the Sales Day prices should "be in 
effect as the Everyday Prices. 

The pepsodent Coinpany holds out no panacea and no wordy 
evasions, calculated to inspire assurances, which cannot 
be lived up to, for price maintenance. It will be governed 
strictly by the foregoing simple and fundamental principles, 
and it earnestly urges for the assurance of reasonable 
profit both for purchaser and seller that the above sug- 
gested minimum resale prices be adhered to." 



V 



-97- 



i^PPENDIX J 



9136 



-98- 



SmmRY OP STATE COURT JDECISIONS ON RESALE PRICE lUINTENAl^GE 
TOGi:;TBER WITH DIGEST OF STATUTES WHICH HAVE OR MAY BE 
INTERPRETED AS APPLYING TO RESALE PRICE l.UINTENANGE* 



V 



*of 'levi^T'^^ ^^^ prepared -ith the aid of Mr. Leonard So^;7mn of the Division 
9136 



-99- 



AlABMiA. Price fixing is oroliibited (Code of 1925: Section 

5212-5). Persons in.iui'ed "by imiawful trust, confine 
or monopoly inay recover da'-.iages. (5697-8). Debtor 
;na-'.^ not ayo Id pavTi'.ent of debt for goods purcha.sed 
■under contvact conv.'iinii'ig any ]rrice fixin-?- provisions. 
Court will net, however, aid in enfGi'cing resale 
"orice maintenance' '^n'oviaions of contra.cts, nor allow 
damages for "breach of contract. ;7. T. Ra\,'lGigh Med, 
Go. vs. \7alker (1917) 16 Ala. Ao:.. 2i2 Dot ham Oil vs. 
Espy 127 So. 178, 220 Ala 605. 

ARIZOM. Price fixing oy contract, conoin-tion or a^.Teement is 

•orohihited (Constitution Article 14, Paragraph 15). 
Conhina.tions "between t'-^o or more loeisons to regulate 
prices, limit production, or prevent cora")etition are 
unlav/ful, (Revised Code 1938 Chapter 77, Section 3212). 
Such combination is punis}ial)le "by forfeiture of charter 
of incorporation (3213). That the ;olaintiff has "been 
•;uilty of the sai.ie type of violation vrithin one year 
is a defense in a civil action (3216). The court has 
had no oppiortunity to rule on resole T)rice maintenance, 

ABKAMSAS Participation '^oy any person, either material or corpo- 

rate, in any trust or combination, domestic or alien, 
to regulate or maintain, within or '.'dthout the state, 
the price of any article, or ho-ing a oarty to a pool 
^•ithin the state to fix or limit the quantity or 
quality of an article is conspiracy, penalty includes 
a fine plus forfeiture of all franchises of offending 
corporation. (Statutes 1919, Chajpter 124, Section 
7368-71) Corporation must furnish annual affidavits 
that has neither created nor pa.rticipated in any trust 
or comhination. (7375) The corjrt has had no op-nortunity 
to rule on .resale "nrice maintenance. 



CALIFOPdTIA 



Has the oldest effective jj'air Trade La.w (Statutes of 
California and Amendment to the Code 1933, Chapter 260,. 
Statutes of 1931, Chapter 278, pa,_;e 583 amended). There 
has been no Supreme Court decision on this Statute. The 
San Francisco Suoerior Coui't has once uoheld the amended 
lav;, in Viiaco Products Co. of California vs. Sunset Cut- 
Rate Drug Company, Superior Court of California, San 
Prancisco County, 'fiO, 243,375. January 24, 1935. The 
Los An'-:eles Sur)erior Court has once declared the amended 
la\7 unconstitutional, in Max Factor vs. K^^.msman, Suoerior 
Court of California, Los An^'eles County » I\To. 363,006, 
October 18, 1933; and once upheld the amended law in 
General- Cigar Co., Inc., vs. The Drug Market, Superior 
Court of Calif ornici., Los Angeles County, No. 372,399, 
September 18, 1934. The Sonta.g vs. Dr. Miles Medical 
Labora.tories, Inc. , a.nd Dr. Miles California., Company case 
which questions the legality of the amended law is pending 
in the Superior Court of California, San Francisco County. 



1.136 



-100- 

Several injianctions prohibiting price cutting have 
been granted "under the anended law. . ■ 

COLORAD O Conbinations restraining^; trade, or comierce control- 
ling or fixing prices, limiting production, prevf.nt- 
ing competition are illegal, (Conpiled Laws of 1921, 
C^iapter 68, Sections 4056 - 4043). This statute was 
declared unconstitutional in 1S27, Cline vs. Frink, 
. 274 U. S. 445. 

CONl'IECTICUT It is a crime to agree to fix or maintain a price on 
any commodity which is a necessity of life, (General 
Statutes Revision of 1930, Title 59, Cr-v-^pter 330, 
Section 352). No cases have been tried. However this 
is a penal statute v/ithout definition of the crime; a 
similar statute was declared illegal in UJ S. vs. 
Cohen Grocery Comijany, 255 U. S. 81 (1920). The Retail 
Drug Control Act is now in effect, (Laws of 1935), 

DELA17.AHP_ Has no statutes -.vhich affect resale price maintenance. 
Breach of Exclusive Agency contract is actionable, 
Cramer vs. Lewes Sand Company, 15 Del,, Ch. 329, 

FLOPlIDA Combinations by two or more persons, either natural 
or corporate, to restrain commerce, urevent competi- 
tion, regulate the price of merchrindise, produce or 
commodities, fix or control prices of commodities 
within the state, or agreeing to refrain from selling 
. below a certain price are prohibited, (Compiled 
General Laws 1927, Sections 7944-7948), Contracts 
or agreements violating above provisions are void, 
(7953). penalty: Domestic corporations forfeit char- 
ters (7945); foreign corporations are prohibited from 
doing business in the state, (7947), The court has 
had no opportunity to rule on resale price maintenance, 

G-EORG-IA Contracts in general restraint of trade are void. No 
corporation may acquire stock of, or enter into agree- 
• ment ^Ith another corporation if the effect or intent 
of such action is lessening of com;Detition or foster- 
ing monopoly. Any such contract is void. (Code 1933, 
Section 2-2504 et seq, and Section 20-504. ) The court 
has had no opportunity to rul'e on' resale -price main- 
tenance. 



IDAHO 



Monopolies and restraint of trade are illegal, Soth 
are Misdemeanors. G-iving, soliciting or accepting 
rebates is unlawfiil and a misdemeanor, (Code 1932, 
Sections 47-101-117). The court has had no opportunity 
to rule on resale price maintenance. 



9i;36 



-101- 



ILLINOIS Pools, trusts ana combines are ille.^^al. (Siaith- 
Hurd Revised Statutes, 1953, Chapter 38-598) 
penal sentence for officers and iiiGrabers of partici- 
pating corporations, (33-601). Contracts in 
violation of the Act are void (38-602) » Pivrchasers 
of comrriodities jjroduced in violation of Act axe not 
liable therefore, .and may plead the Act as a d^i^. 
fense, (33-603), The courts have "been very lenifer!a+. 
in apply inc^ the anti- trust acts to resale price main- 
tenance. Refused to apply the laws to "agency agreo.. 
raents, " Weiholdt vs. Standard Fashion Company, 80 
111, Ap^o. 67 (1898) (Texas, Ohio, Mississip'oi, and 
North Carolina held the identical contracts to be 
sales contracts), ?air Trade Law now in effect, 
(Laws of 1935). 

INDIANA Arrangements, contracts, combinations regulating 

prices or costs of articles, controlling production 
are unlawful and void. Domestic corporations for- 
feit charters, foreign corporations may not do 
business in the state, (Baldwin's Indiana Statutes 
1934, Section 4-636-41). Coiiibinations or agreements 
of refusal to sell merchandise or supply tools needed 
for manufacture are unlawful. Such contracts are 
voin. Persons injured mav collect damages (4642-50), 
AlthJough manufacturers have used resale price main- 
tenance agreements the court has never ruled whether 
the statutes against price fixing apply to resale 
price maintenance. 



IOWA 



Combinations restraining or preventing full and free 
competition in trade are Drohibited, (Code 1931 
.Sections 9:^15, '9916) Goods contracted for bet-'/een 
a resident and non-resident of the State, and sold 
within the State, are in Interstate Commerce, Hence 
the State ap^olies the Sherman Anti- Trust Act. Allen 
V, Parks (1923) 196 Iowa 943, Fair Trade Law now in 
effect (Laws of 1935). 



KAi^SAS 



KENTUCKJ 



Combinations to restrain commerce, fix prices, pre- 
vent competition are defined as trusts and are un- 
lawful. Such contracts are void,, (Revised Statutes 
1923, Section 50-101^105,113,) Pools to fix prices 
are illegal. (50-136) Discrimination in prices 
between different localities (exce-ot to equalize 
freight charges) is illegal (50-149). Court refusal 
to allow recovery of money under a contract contain- 
ing a price fixing provision which was contrary to 
the Anti-Trust Statute, Mills v. General Orcnance 
Co., (1923) 113 Kan, 479, 

Kentucky Anti- Trust Statutes were all repealed in 
1922. Cooperative Marketing Act permits combinations 



9135 



-102- 



LOUISIMA 



"between producers of Agricultural products, 
(chapter 1, La:.7S of 1922), The court had no 
opportunity to rule' on resale price maintenance. 

Contracts, Combinations, Trusts, Conspiracies to 
restrain trade, Fix or Limit quantity of production 
or sale or to influence prices in any 'manner- are 
illegal. (1890 Act 86, 1892 Act 90 » 1915 Act 11, 
Extra Session, Constitution (1921) Article 13, 
Section 5), The court has had no opportunity to 
rule on resale "orice maintenance. 



MAINE 



Contract, Combination or Cons 
trade or commerce is illegal. 
Chapter 138, paragraphs 28-30 
(chapter 56, Paragraph 60). 
Associations marketing of fis 
agricultural products of the 
56, Paragraph 60 - C'-^pter 59 
Court has had no opportunity 
maintenance. 



piracy in restraint of 

(Revised Statutes 1930, 
). Trusts are prohibited 
Cooperative Marketing 
h, fish products and 
State are legal. (Chapter 
, Paragraph 28). The 
to rule on resale price 



MARYLAI\ID Monopolies are unconstitutional. (Article XLl) In 

Klingle et al v Sharp and Dohrae, Nov, 2, 19C£ (64 
At 1029) the Court of Appeals of the State of Maryland 
declared illegal the attempt to enforce resale price 
maintenance throiogh boycott of price-cutters, "by 
^ retailer and wholesaler groups. Fair Trade Law 
(Chapter 212, Laws of 1935). 

MASSAGI-X'SBTTS Exclusive agency is legal. However, restriction of 

non-agent to a limited number of brands ir. prohibited 
(General Laws 1932. Chapter 93, Paragraph l). Price 
fixing or price manipulating agreements and combina- 
tions are prohibited. (Chapter 93, Paragraphs 2, 8, 
9, 10, 13), The court has had no opportunity to rule 
on resale price maintenance. 



MICHIGAN 



Trusts, Monopolies, and Combinations in restraint of 
trade which would tend to limit production, fix prices 
or restrain or limit competition are prohibited. (Com- 
piled Laws 1929, Sections 16647 - 1660:), Such contracts 
are void. (Sections F661 - 16682), Although manufac- 
turers have used resale price maintenance agreements, 
the court has never ruled v/hether the statutes against 
price fixing apply to resale price maintenance. 



9136 



MimiESOTA 



MISSISSIPPI 



MISSOURI 



MOKTAIIA 



NEBEASia^ 



NEVADA 



-103- 

Corabinations and agreements tending to fix, control, limit 
or maintain prices of articles of trade, manufacture, or use, 
■bought or sold within the State, are prohibited. Discrimina- 
tion "by map.ufacturers hetwecn dealers is prohihited. (l.Iason'fc 
Statutes 1927. Section 104-64). The court has had no op-oor- 
tunity to rule on lesale pries maintenance. 

Price fixing combinations or agreements are void and cannot 
be enforced in any court. (Code 1930, 3441). Debtor cannot 
avoid payment for goods obtained under contract containing 
price fixing provisiono The court, however, will not enforce 
price maintenance provisions in contracts nor allow damages 
for breach of &uch provision. Hauck v. Wright 2? So, 616 
(1900). 

Price Fixing or production control through combinations or 
agreements is a felony. A corporation judged guilty is sub- 
ject to fine, forfeiture of charter or forfeiture to the State 
of all or any part of its property in the State, CorporationE 
must file an "anti-ti-ust" affidavit annualy with the Secre- 
tary of State (Pevised Statutes 1929, Chapter 47, Sections 
8700 r- 8734). Although manufacturers have used resale^ price 
maintenance agreements, the court has never ruled whether 
the statutes against price fixing apply to resale price 
maintenance. 

Trusts in restraint of trade are prohibited. Penalty is 
imprisonment not in excess of one year, or fine not in ex- 
cess of o5,000 or both. (Revised Code 1921, 10901). An Oil 
Company's lease of service station was held not void as 
fixing prices or preventing unrestricted competition because 
the coVtract contained the provision that lessee should main- 
tain established price of gasoline of the lessor at its other 
service stations. (Qainlivon v. Brown Oil Co. (l934) 29 P. 
(2nd) 374. 

Every contract or combination in form of trust or conspiracy 
in restraint of trade or commerce is illegal. (Compiled 
Statutes 1929 Chapter 59, Paragraph 801). The court has had 
no opportunity to rule on resale price maintenance. 

Has no legislation which effects resale price maintenance. 



9136 



KE¥ HMPSHIHE 



NETT JERSEY 



NEW IvEZICO 



NEW YOPJC 



NORTH CillOLIM 



NORTH DAICOTA 



-104- 



Combinations to monopolize trade, restrict competition, or 
control production or prices, are illegal. (Public laws 
1926, Chapter 168 Paragraphs 1-3). The court has had no 
opportunity to rule on resale price maintenance, 

price discrimination "between different localities, (allow- 
ance for equalization of freight and other costs excepted) 
is illegal, (3487), Resale price maintenance by notice is 
■permitted by the Law of 1913, amended 1915 and 1916 (Sections 
225; 1, 2 and 3, Compiled Laws of New Jersey, 1911-1924), 
Action under this law was upheld in Ingersoll and Bro. v. 
Hahne and Co., 101 At. 1030 (l917) and lOS At. 128 (1918), 
Court- of Chancery of' the State of New Jersey. 

Contracts or combinations restraining trade are illegal and 
a misdemeanor (Chapter 35, Sections 2901 to 2903), The 
court has had no opportunity to rule on resale price 
maintenance. 

Price fixing and monopolies are prohibited. (General Busi- 
ness Laws paragraphs 340 and 341), The court has ruled 
that Interstate Commerce ceases when the goods are delivered 
into the State, Batterick Publishing Co., v, Mistrot-Munn 
Company, (1915), 167 App. Div, New York 632, affirmed 217, 
N. Y. 678, Right of refusal to sell in the absence of con- 
spiracy to injure has been upheld. Brown v, Metro Rems Co., 
(1933), 267 N. Y. S. 623; and Lucomsky r. Palmer, (l93l) 
252 1n1'. Y. S. 529, Eair Trade Law now in effect (Laws of 
1935). ^ 

Contracts or combinations in restraint of trade or commerce 
are illegal. Participation in such an agreement is a nis- 
demeanor, (Code 1931, Section. 2559) . Monopoly Statute con- 
demns contract of sale only in event the sale is made "upon 
condition" that purchaser shall not deal in goods of seller' { 
competitor, (2565 Sec. 2) Lewis v, Archbell, (l930) 154 
S. E. 11. 

discriminatory pr.ices (not justified by differences in 
quality, grade or cost of transportation) are prohibited, 
(Compiled Laws 1913, Sections 3043; 3048). Combinations 
between individuals., corporations or associations to con- 
trol prices of product of soil, or article of manufacture 
or commerce, or cost of exchange, or transportation are 
prohibited by the Constitution (Constitutional Article 
Number 146) , The court has had. no opportunity to rule on 
resale price maintenance, ; 



9136 



-105- 



OHIO 



Combinations restraining trade or commerce, limiting produc- 
tion, regulating prices, preventing competition, fixing prices 
to prevent competition are illegal, (General Code 6391), The 
court refused to allow an action for "breach of contract in 
Freemen v. Miller (1909) 21 Ohio Dec. 766; or to permit re- 
covery of goods when said contract comes under Statute of 
State, Interstate Commerce ceases when goods are delivered in 
the State; McCall v. O'Neil, 1914, 25 Ohio Dec, 591, Coniiract 
"between foreign corporation and resident purchaser, under 
which manufactured products were sold and delivered F, 0, B, 
cars outside of State for purpose of resale in designated coun- 
ty in State for price and in manner and under terms desired 
by purchaser. Held not void as in Restraint of Trade, Griffin 
V, Lange Co., 41 P (2nd) 636, 



OKLAHOI.IA. 



Price discrimination for the effect of, or with the intent 
to establish a monopoly restraining trade, is unlawful, 
(Laws, 1931 Section 12790) Price discrimination between 
persons or localities (due allowance being made for difference 
in quality and cost of transportation) is illegal, (Laws 
1933, Chapter 112) Monopolies and discrimination are prohibit- 
ed in the Constitution. (Article 9, Paragraph 45). In the 
earlier cases court ruled that sales between a resident and a 
non-resident of goods for resale within the State were Inter- 
state Commerce and as such came under the jurisdiction of the 
Sherman Anti-Trust Laws, and would not allow recovery of un- 
paid balance under such Interstate contracts. Stewart v, 17, T, 
Rawleigh Med. Co. (1916) 58 Okla. 344; Hunt v, Tu T, Rawleigh 
Med. Co. (1918) 71 Okla. 193; Brooks v. J. R, Watkins Med. Co, 
(l92l) 81 Okla. 82, In the later cases the same court ruled 
that the sending of catalogues containing suggested resale 
prices was "educational and advisory" and thus had no effect 
upon the conoract of which they were no part, Gordon v. TJ", T. 
Rawleigh Med, Co, (1926), 117 Okla, 235; Sparkman v, 17, T. 
Rawleigh Med. Co. (1926), 117 Okla. 235; Thomason v. T7, T, 
Rawleigh Med. Co. (1926) 117 Okla. 239. No resale price 
maintenance cases have been decided under the State price 
fixing statutes, 



OREGON 



PENNSYLVANIA 



A prior law permitting resale price maintenance was ineffective 
because of the difficulty and expense of enforcement. See 
page 55 for text of this law which was replaced by the 
Fair Trade Law. (Laws of 1935) 

Prior to the enactment of this law, there existed no statutes 
affecting resale price maintenance. Fair Trade Law (K, F, 
1976. Section 1935). 



9136 



-106- 



RHODE ISLAMD 



There are no statutes, affecting resale price 
maintenance. Price fixing is not illegal, "but 
"becomes so if indulged in by a rnonopoly. State 
V. Eastern Coal Co. (1908) 29 R. I. 254. 



SOUTH CAROLIM 



SOUTI-I HAKOTA 



TEIME'SSEE 



TEIAS 



Arr£i,ngements or combinations m?.de ^7ith the intent 
to, or with, effect of tending to monopolize trade, 
restrict competition or control production or 
prices are unlawful and void as against public 
policy (Code of Laws 1932, Vol. 3-5620) Sales 
below cost of manufacture, to injure competitors 
are prohibited (Vol. 3-'5'634) The court has had 
no opportunity to rule on resale, price maintenance. 

Business trusts in restraint of trade are unlaw- 
ful. (Compiled Laws 1929, Sections 4352-4364), 
, The court has liad no opportunity to rule on resale 
price maintenance. 

;6usiness trusts in restraint of trade are unlaw- 
ful: (v/illi8j:i's Code Annota.ted 1934, Sections 
.5880 and 3326). The court has had no opportunity 
to rule on resale j)rice maintenance^ 

Trusts, monopolies and conspiracies in restraining 
of trade are prohibited and punishable by im- 
prisonment, (p. C, 1637). Price fixing is pro- 
hibited. (Rev. Civ. Stat, 1925; articles 5426- 
7438; 1632-1644).. Persons outside the state are 
liable if they form a monopoly which does business 
within the state. The statutes prohibiting price 
fixing and exclusive territory agreements are 
rigidly enforced, . The Penal Statute has never been 
enforced. In a long series of cases involving 
contracts between residents and non-residents of 
the state regarding merchandise for resale within 
the state the court has held that interstate com- 
merce ceases when goods are delivered into the 
state,. Thereafter the state statutes apply and such 
contracts are void. Burpee Can Sealer Company v, 
Kenry McDonnell Company (1934), 75 S. 1. (2nd) 
,458, . Manufacturers' Finance Corporation v. Fort 
Worth Paper Company (1934), 68. S. W. (2nd) 307, 
Tri-State Sale Corap)any v, National Automatic 
Machine Company (l93l), 38 S. W. (2nd) 838, 
McDaniels v. Schmolstoig (l93l), 36 S, '.7. (2nd) 
278, Ormsby v. Ratcliff (1930), 22 S, W, (2nd) 504, 
National Automatic Machine Company v. Smith (1930), 
32 S. W. (2nd) 678, Henderson Tire and Rubber 
Company v, Roberts (1929). 12 S. W, (2nd) 154, 



9136 



-107- 



UTAH 



VEEMOl^T 



Combinations intending to control or controlling 
TDrices of TDrofessional services, products of soil, 
articles of manufacture or commerce or cost of 
exchange or transportation are unlawful. Parties 
to agreements, pools or other arrangements to 
regulate or fix prices or fix or limit production 
or sale are guilty of conspiracy to defraud, 
(Revised Status 1933, Title 73, paragrar)h 763). 
The Court has had no opportunity to rule on resale 
price maintenance. 

Court of Chancery may dissolve corporations creating 
monopoly or unreasonably restraining trade. (Com- ' 
piled Statutes 4944, 5025 and 5068). The Court 
has had no opportunity to rule on resale price main- 
tenance. 



VIRGINIA 



Trusts, combinations and monopolies inimical to 
public welfare, a. re unlawful and void. Applies only 
to trusts, etc., which are unreasonably and are (or 
is extended to intersta-te commerce would be) prohibited 
and penalized under the Laws of the United States, 
(Code 1930, Chapter 4722 Subsections 5 to 21 ). The 
Court has had no opportunity to rule on resale price 
maintenance. 



WASHINGTON The State Constitution prohibits combinations both 

direct and indirect for the purpose of fixing the 
price or limiting the production, or regulating the 
transportation of any product or commodity, (Consti- 
tutional Article 12, paragraph 22). American Export 
. Door Company v, John A. Sanger Company, (1930), 283 
Pac, 467. Tht Court has had no opportunity to rule 
on resale price maintenance. Fair Trade Law (Laws 
of 1935). This is an emergency law effective for 
2 years, 

)illEST VIRGINIA Has no legislation affecting resale price maintenance. 



WISCONSIN 



WYOMING 



Monopolies and restraint of trade dealared illegal 
and may be prevented or restrained by injunction. 
(Statute 1933, Section 133,01). State v. Lewis and 
Leidersdorf Com-ir.ny, (1930), 154 S. E. 11. Although 
manufacturers used resale price maintenance agreements, 
the Court has never ruled whether the anti-monopoly 
statute applies to resale price maintenance, prior to 
the enactment of the Fair Trade Law (Laws of 1935), 
nor has it rendered any decisions since. 

Monopolies and restraint of trade are illegal. Price 
fixing is prohibited. (Revises Statutes 1931, Chapter 
117, Section 201 to 205). The Court has had no oppor- 
tunity to rule on resale price maintenance. 



9136 



-108- 

SOURCES : 

Seligman and Love - "Price Cutting and Price Maintenance" 
Ap3penclix Three 

Roy S, Warnack - "California Fair Trade Act" - Published "by the 
National. Association of Retail Lrugtjists 

The Los Angeles Daily Journal - January 51, 1934, 

Martindale and Eubbell - "Law Directory, Di^^est of Laws, 1934," 

American Digest System 

National Reporter System 

Corpus Juris 

Ruling Case Law 



\ 



9136 



-109- 



APPEIIDIX K 



9136 



-110- ■ 

Summary of Leadinjg; Cases on Hesale Price Maintenance 
United States Supreme Court 

1» Resale Price Maintenance Under Patent 

(a) Semen t v. National Harron Company 

186 U. S. 70 (May, 1902) Resale price maintenance "by notice imder 
patent upheld, 

(b) Bauer & Cie v. O'Donnell, 

229 U. S.l(May, 1913) Resale price maintenance by notice under 
patent held illegal. 

(c) Straus v, Victor Talking Machine Company 

24-3 U. S. 490 (April, 1917). Resale price maintenance "by license 
under patent held illegal. 

2. Resale Price Maintenance Under Copyright 

(a) Bobhs - Merrill Company v. Straus. 

210 U. S. 339 (June, 1908). Resale price maintenance by notice 
under copyright held invalid and not binding except where bound by 
license or agreement, 

(b) Straus v, American Publishers Association, 

231 U. S. 222 (December, 1913). Resale price maintenance under copy- 
right held illegal, 

3. Resale Price Maintenance Under Trade-Mark. 

United States v, Scnrader's Sons, Inc. 

252 U. S. 85 (March, 1920). Resale price maintenance contracts held 
illegal. (The defense argued trade-mark rights as basis for the re- 
sale price control) 

l^ote: An important federal (5ase is Jayne v. Loder, 149 Fed. Rep, 21 
(Eeceniber 1906). Ruled that refusal to sell is legal, but that combinar- 
tions and agreements to refuse to sell to anyone who cut the price of 
products of any party to such agreement is in restraint of trade. (This 
Case was court test of the Tripartite Agreement in the drug industry). 



Lcii 



4, Resale Price Maintenanc9 by Contract 

(a) Dr. Miles Medical Company v, John Parks & Sons. 
220 U, S. 373 (April, 1911) .Resale price maintenance by contract undc 
trade-mark held illegal . (The contracts were in the form of consign- 
ment contracts but court ruled that the transactions were not bona fid 
consignment transactions) . ^. 

(b) Boston Store v. American Graphophone Company . 
246 U. S. 8 (March, 1918). Resale price maintenance by contract (undei 
patent) held illegal. 

9136 



-Ill- 

5. liesale Price Maintenance ty Refusal to Sell, 

(a) United States v, Colgate and Company 

250 U. S. 300 (June, 1919). Refusal to sell to price-cutters 
upheld, 

(b) Federal Trade Commission v, Beech-Nut Packing Co, 

257 U, S. 441 (January, 1922). Contracts and agreements to refuse 
to sell held illegal. 

llo-LcL. ..A jc»oo-©*tt rt-.deral case is Armaxid Co., Inc., y. Federal Trade Com- 
mission, U. S. Circuit Court of Appeals, 2nd Circuit, July 1, 1935, 

Federal Trade Commission order to cease and desist from (l) entering 
into procuring, either directly or indirectly from wholesale or retail 
dealers, contracts, agreements, understandings, promises or assurances 
that respondent's products, or any of them, are to he resold hy such 
v/holesale or retail dealers at prices fixed by petitioner; (2) entering 
into or procuring either directly or indirectly from wholesale dealers 
contracts, understandings, promises, or assurances that petitioner's 
products are not to be resold by sxic'n wholesalers to price cutting retail 
dealers. 

Order affirmed. 

6, Cases commonly referred to as resale price maintenance are those involv- 
ing the fixing of the price to be charged by an agency. These are not 
strictly speaking "resale" prices, since the product is not sold to 

the agent. 

United States v. General Electric Company, 

272 U. S, 476 (November, 1926). Fixing prices to be charged by 

agency upheld. 



9136 



-112- 



APPENDIX L 



9136 



-113- 

SCiffi LEGAL ASPECTS OF RESALE PRICE MAINTEEAIICE AGREEIffiNTS 

IN INTERSTATE COMI.iERCE* 

EACTS: There is a contract for the purchase of merchandise "betT/een an 
Ohio vendor and a California vendee, which required the vendee 
to maintain at retail, the prices fixed "by the vendor. 

The Sherman Act (Act, July 2, 1890, C. 647, 26 Stat. - U. S. comp. 
Stat. 1913, Sections 8820-8830) invalidates all "contracts, com- 
"binations * * * in restraint of trade among the several 
states ***,!' 

The California statutes provide 

"No contract relating to the sale or resale of a commodity which 
hears, or the label or content of which hears, the trade-mark, 
brand or name of the producer or owner of such commodity and which 
is in fair and open competition with commodities of the same 
general class produced by others shall be deemed in violation of 
any law of the State of California by reason of any of the follow- 
ing provisions which may be contained in such contract: 

1. That the buyer will not resell such commodity except at 
the price stipulated ^oj the vendor. 

2. That the vendee or producer require in delivery to. whom 
he may resell such commodity to agree that he will not, 
in turn, resell except at the price stipulated by such 
vendor or by such vendee." 

Statutes of California and Amendments to the Code, 1933. Chapter 
260, pp. 783. Statutes of 1931, page 583 amended. Chapter 278, 

QUESTION: Is such a contract as noted above under "Facts" made between a 

resident and non-resident, interstate commerce, laying the vendor 
open to prosecution under the Sherman Act? 



♦This memorandum was written by J. V/ayne Ley of the Legal Division. 



9136 



OPINION : Yes. . • 

DISCUSSION . ; ' 

THE FEDEBAL RUI^ IN TPJl A:33SNGE 0? STATE U:GISLA.TI0N 

The case of the Federal Trade Commission against Beechnut Company, 
257 U.S. 441 (1921) reversing 264 Fed. 885, represents generally, the 
position of the United States Supreme Court with respect to contracts 
in interstate commerce to reg^ala^te resale prices; 

The Beechnut case came before the Su-oreme Court on Writ of 
Certiorari from the Circuit Court which had set aside a cease and desist 
order issued oy the Federal Trade Commission ordering the defendant 
company 'to refrain from engaging in an unfair method of .competition, to 
wit: declining to sell its products to distrihutors who did' not observe 
the prices fixed by it or who sold to others who failed to do so, and, 
in enforcing this policy, obtaining by various metnods the names of 
dealers who cut prices or who sold to others who did so, and listing 
them as undesirable customers to whom it refused to sell until they gave 
assurance of their intention to conform to such sales -oolicy in the 
future. The Supreme Court ruled that the order of the Federal Trade 
Commission v/as proper in most respects and that the action complained of 
was a combination in restraint of trade within the meaning of the 
Sherman Act. • 

The case of U.S. vs. Colgate, 250 U.S. 300 (1919) has been 
freo;uently cited as authority for the rule that where there is no 
express agreement to maintain prices, the Sherman Act is not violated. 
The facts in, the Colgate and Beechnut cases are strikingly similar in 
several respects, and actually, in view of the fact that the action in 
the Colgate case was brought -onder the Criminal Appeals Act, the 
decision went off on the rather narrow ground that the indictment failed 
to charge the Colgate Company had made any agreement to maintain prices. 
Actually, therefore, the case can only be treated as recognizing the 
vendor's right to refuse to deal with anyone who fails to maintain 
suggested prices. 

THE EFFECT, ON TIIE FEDERAL RULE. OF STATE 
LEGISLATION FEBIvlITTING PESALE PRICE 
MAINTENANCE AGREEFiENTS 

(a) From the'Federgl Point of View ; - ■ 

If the transaction in question constitutes interstate commerce, 
then, of course, the decisions of the Supreme CO'jrt would prevail. The 
problem, is to determine whether the particular transaction is an inter- 
state act. The state court decisions may be helpful in determining the 
question although it must be recognized that the federal judiciary con- 
stitute the courts of last resort on such matters. 



9156 



-115- 

(b) Prom the State Point of View: -■ 

The Supreme Court of Texas had the question of interstate commerce 
tefore it in Segal vs. McCall, 108 Texas 55; 184 S.W. 188, where there 
was a contract for the purchase of merchandise between a New York fashion 
company and a Texas buyer, which obligated the buyer to sell the vendor's 
patterns at no other prices than the catalog retail prici^s of the vendor. 
The Texas statute provided that oxv^j contract containing a provision that 
goods were not to be sold below a fixed price was void. The McCall 
Company brought suit for breach of contract and Segal defended on the 
ground that the contract contained provisions violating the federal and 
the sta^te ant i- trust laws. 

The court, in holding that the contract was unenforceable, said 
in part - 

"A state has no power to regulate interstate commerce 
and is prohibited in so doing by the federal constitution. 
Only Congress may occupy this field but the provisions of 
the contract which are obnoxious to the Texas anti-trust act 
constitute no part of interstate commerce. They apply to 
acts to be performed by the vendee after the interstate 
commerce involved in the transaction has been corrroleted. 
For a citizen of New York to sell and transport to a citizen 
in Texas goods and m.erchandise is to engage in interstate 
commerce; but when the sale and transaction has been com- 
pleted and the projoerty has been delivered in Texas to a 
citizen in Texas, the interstate transaction is ended. The 
use to which the proioerty may be put in Texas and the acts 
of the vendee in relation to it while in Texas comes within 
the jurisdiction of the Texas laws. This contract is two- 
fold, in that it embraces a full contract for interstate 
commerce * * * and other provisions for acts to be performed 
in Texas after the interstate feature of the contract has 
been entire'ly fulfilled." 

' - * . 

The case is only of interest to the writer because of the distinction 
which may be drawn between the liability whi«?h may attach to the non-resi- 
dent vendor and the resident vendee when such a contract is raa.de. The 
Texas court recognizes clearly that the contract itself is an interstate 
transaction although the disposition of the goods as soon as thejr arrive 
within the state may only amount to intrastate business. Thus, in a case 
where a state permits of such resale price maintenance agreements, the 
state court could consistently hold that the resident vendee was blam»less 
under the state law and s^ill the federal court could hold that the non- 
resident vendor had violated the Sherman Act. 

The writer's conclusion, therefore, in this respect is that no 
matter how far the United States Supreme Court may go in extending the 
original-package rule it will not . change its view tha.t such contracts con- 
stitute interstate commerce, the result being, therefore, that the non- • ' 
resident vendor is liable to prosecution under the Sherman Act even though 
the foreign state in which he sells his commodity permits such agreements. 



9136 



-116- 

METHODS OF CIRCUMVENTING THE FSDEML RJJJJE 

(a) Where no intrastate question is involved ; 

As pointed out in Miss Golden' s interesting and instructive resume, 
a bona fide agency relationship between the parties appears to "be the only 
way of avoiding the federal prohibition against such agreements. The legal 
requirements of such an agency are stringent. The mere cloak of respect- 
ability, so to speak; is not an absolute protection by any means. The court 
will look through the form which such an agreement assumes to the substance 
thereof in determining whether it is a contract of sale or agency, 

( b ) Where intrastate questions are involved and the state 
-permits resale price maintenance agreements and the 
vendor of the merchandise is a non-resident : 

(1) Incorporation of a separate selling establishment in the state 
offers perhaps the only possible mesms of escape, 

(2) Proceeding under the state police powers may offer a possible 
solution in those cases involving interstate commerce as pointed out in the 
study of "Price Cutting and Price Maintenance," by Seligman and Love at page 
468. That is to say, non-resident vendors may possibly escape the penalties 
of the Sherman Act if the Supreme Court holds that the states may enact such 
legislation by virtue of its police powers. How far the Supreme Court might 
go is problematical; the following cases having been held proper subjects by j 



a state under its police powers: 



a, A state may prohibit the selling of intoxicating liquors trans- 
ported in interstate commerce, Crowley vs, Christensen, 157 U. S, 86, 

b, A state may make it a criminal offence to give an option to buy 
grain shipped in interstate commerce, at a future time. Booth vs. 111,, 
184 U, S. , 425, 

c, A state may invalidate the contracts for the sale of shares of 
the capital stock of any corporation on margin or to be delivered at a 
future date. Otis vs. Parker, 187, U. S. 606. 

d, A state may prohibit the possession of certain game during the 
closed season even though the statute governs game coming from rdthout 
the state. New York, ex.rel, Silz, vs. Hesterberg, 211 U. S. 31. 

Thus it is seen that the United States Supreme Court permits the 
state considerable discretion in deciding upon measures that are needful for 
the protection of its people, and it is quite possible that the Supreme Court 
may in the future accept the argument that state legislation permitting re- 
sale price maintenance agreements are permissible and hold that such legis- 
lation does not place limitations on transactions which would generally be 
considered in interstate commerce. 

Although some few states have acted under their police powers in 
this respect, in matters affecting interstate commerce and have been sustain- 
ed by their respective state courts, it must be recognized that ultimately 
the question, being a constitutional one^ waist h^ a-nswered by the 
United St^ates Supreice C<yvtxt. 



i 



OFFICE OF THE NATIONAL RECOVERY ADMINISTRATION 
THE DIVISION OF REVIEW 

THE WORK OF THE DIVISION OF REVIEW 

Executive Order No. 7075, dated June 15, 1935, established the Division of Review of the 
National Recovery Administration. The pertinent part of the Executive Order reads thus: 

The Division of Review shall assemble, analyze, and report upon the statistical 
information and records of experience of the operations of the various trades and 
industries heretofore subject to codes of fair competition, shall study the ef- 
fects of such cedes upon trade, industrial and labor conditions in general, and 
ot.ier related matters, sha'l make available for the protection and promotion of 
the public interest an adequate review of the effects of the Administration of 
Title I of the National Ino istrial Recovery Act, and ti j principles and policies 
put into effect thereunder, and shall otherwise aid the ^resident in carrying out 
nis functions under the said Title. 

The study sections set up in the Division of Review covered these areas: industry 
studies, foreign trade studies, labor studies, trade practice studies, statistical studies, 
legal studies, administration studies, miscellaneous studies, and the writing of code his- 
tories. The materials which were produced by these secticns are indicated below. 

Except for the Code Histories, all items mentioned below are scheduled to be in mimeo- 
graphed form by April 1, 1936. 

THE CODE HISTORIES 

The Code Histories are documented accounts of the formation and administration of the 
codes. They contain the definition of the industry and the principal products thereof: the 
classes of members in the industry; the history cf cede formation including an account of the 
sp jns ring organizations, the conferencei., negotiations and hearings which were aeld, and 
the activities in connection with obtaining approval of the code; the history of the ad- 
ministration of the code, covering the organizatica and operation of the code authority, 
the difficulties encountered in administration, the extent of compliance or non-compliance, 
and the general success or lack of success of the code; and an analysis of the operation of 
code provisions dealing with wages, hours, trade practices, and other provisions. These 
and other matters are canvassed not only in terms of the materials to be found in the files, 
but also in terms of the experiences of the deputies and others concerned with code formation 
and administration. 

The Code Histories, (including histories of certain NRA units or agencies) are not 
mimeographed. They are to be turned over to the Department of Commerce in typewritten form. 
All told, approximately eight hundred and fifty (850) histories will be completed. This 
number includes all of the approved codes and some of the unapproved codes. (In Work Mate - 
rials No_ 18, Contents cf Code Histories, will be found the outline which governed the 
preparation of Code Histories.) 

(In the case of all approved codes and also in the case of some codes not carried to 
final approval, there are in NRA files further materials on industries. Particularly worthy 
of mention are the Volumes I, II and III which c nstitute the material officially submitted 
to the President in support of the recommendation for approval of each code. These volumes 
9675—1 . 



V 



- ii - 

set forth the origination of the code, the sponsoring group, the evidence advanced to sup- 
port the proposal, the report of the Division of Rc^aarch and Planning on the industry, th» 
recommendations of the various Advisory Boards, certain types of official correspondence, 
the transcript of the formal hearing, and other pertinent matter. There is also much offi- 
cial information relating to amendments, interpretations, exemptions, and other rulings. The 
materials mentioned in this paragraph svere of course not a part of the work of the Division 
Of Review. ) 

THE BORK MATERIALS SERIES 

In the work of the Division of Review a considerable numter of studies and compilations 
of data (other than those noted belov/ in the Evidence Studies Series and the Statistical 
Materials Series) have been made. These are listed below, grouped according to the char- 
acter of the material. (In Eork Materials No _ 17, Tentative Outlines and Summaries of 
S tudies in Process , these materials ar© fully described). 

Industry S tudies 

Automobile Industry, An Economic Survey of 

Bituminous Coal Industry under Free Competition and Code Regulation, Economic Survey of 

Construction Industry and NRA Construction Codes, the 

Electrical Manufacturing Industry, The 

Fertilizer Industry, The 

Fishery Industry and the Fishery Codes 

Fishermen and Fishing Craft, Earnings of 

Foreign Trade under the National Industrial Recovery Act 

Part A - Competitive Position of the United States in International Trade 1927-29 through 
1934. 

Part B ~ Section 3 (e) of NIRA and its administration. 

Part C - Imports and Importing under NRA Codes. 

Part D - Exports and Exporting under NRA Codes. 
Forest Products Industries, Foreign Trade Study of the 
Iron and Steel Industry, The 
Knitting Industries, The 
Leather and Shoe Industries, The 

Lumber and Timber Products Industry. Economic Problems of the 
Men's Clothing Industry, The 
Millinery Industry, The 
Motion Picture Industry, The 

Migration of Industry, The: The Shift of Twenty-Five Needle Trades From New York State, 
1926 to 1934 

National Income, A study of. 
Paper Industry, The 

Production, Prices, Employment and Payrolls in Industry, Agriculture and Railway Trans- 
portation, January 1923, to date 
Retail Trades Study, The 
Rubber Industry Study, The 
Statistical Background of NRA 

Textile Industry in the United Kingdom, France, Ger;::any, Italy, and Japan 
Textile Yarns and Fabrics 
Tobacco Industry, The 
Wholesale Trades Study, The 
9675. 



\ 



- Ill - 

Women's Apparel Industry, Some Aspects of the 

Trad e P ractic e Studies 

Commodities, Information Concerning: A Study of NRA and Related Experiences in Control 
Distribution, Manufacturers' Control of: A Study of Trade Practice Provisions in Selected 

NRA Codes 
Design Piracy: The Problem and Its Treatment Under NRA Codes 
Electrical Mfg. Industry: Price Filing Study 
Fertilizer Industry: Price Filing Study 

Geographical Price Relations Under Codes of Fair Competition, Control of 
Minimum Price Regulation Under Codes of Fair Competition 
Multiple Basing Point System in the Lime Industry: Operation of the 
Price Control in the Coffee Industry 
Price Filing Under NRA Code3 

Production Control Under NRA Codes, Some Aspects of. 
Resale Price Maintenance Legislation in the United States 

Retail Price Cutting, Restriction of, with special Emphasis on The Drug Industry. 
Trade Practice Rules of The Federal Trade Commission (1914-1936): A classification for 

comparison with Trade Practice Provisions of NRA Codes. 

Labo r Studies 

Employment. Payrolls, Hours, and Wages in 115 Selected Code Industries 1933-1935 

Hours and Wages in American Industry 

Labor Program Under the National Industrial Recovery Act, The 

Part A. Introduction 

Part B. Control of Hours and Reemployment 

Part C. Control of Wages 

Part D. Control of Other Conditions of Employment 

Part E. Section 7(a) of the Recovery Act 
PRA Census of Employment, June, October, 1933 
Puerto Rico Needlework, Homeworkers Survey 

Administrativ e Studies 

Administrative and Legal Aspects of Stays, Exemptions and Exceptions, Code Amendments, Con- 
ditional Orders of Approval 

Administrative Interpretations of NRA Codes 

Administrative Law and Procedure under the NIRA 

Agreements Under Sections 4(a) and 7(b) of the NIRA 

Approved Codes in Industry Groups, Classification of 

Basic Code, the — (Administrative Order X-61) 

Code Authorities and Their Part in the Administration of the NIRA 
Part A. Introduction 

Part B. Nature. Composition and Organization of Code Authorities 
Part C. Activities of the Code Authorities 
Part D. Code Authority Finances 
Part C. Summary and Evaluation 

9675. 



V 



- V - 

THE EV IDEN CE STUDIES SERIES 

The Evidence Studies were originally undertaken to gather material for pending court 
cases. After the Schechter decision the project was continued in order to assemble data for 
use in connection with the studies of the Division of Review. The data are particularly 
concerned with the nature, size and operations of the industry; and with the relation of the 
industry to interstate commerce. The industries covered by the Evidence Studies account for 
more than one-half of the total number of workers under codes. The list of these studies 
follows: 



Automobile Manufacturing Industry 

Automotive Parts and Equipment Industry 

Baking Industry 

Boot and Shoe Manufacturing Industry 

Bottled Soft Drink Industry 

Builders' Supplies Industry 

Canning Industry 

Chemical Manufacturing Industry 

Cigar Manufacturing Industry 

Coat and Suit Industry 

Construction Industry 

Cotton Garment Industry 

Dress Manufacturing Industry 

Electrical Contracting Industry 

Electrical Manufacturing Industry 

Fabricated Metal Products Mfg. Industry and 

Metal Finishing and Metal Coating Industry 

Fishery Industry 

Furniture Manufacturing Industry 

General Contractors Industry 

General Contractors Industry 

Graphic Arts Industry 

Graphic Arts Industry 

Gray Iron Foundry Industry 

Hosiery Industry 

Infant's and Children's Wear Industry 

Iron and Steel Industry 



Leather Industry 

Luzi-or and Timber Products Industry 
Mason Contractors Industry 
Men's Clothing Industry 
Motion Picture Industry 
Motor Vehicle Retailing Trade 
Needlework Industry of Puerto Rico 
Painting and Paperhanging Industry 
Photo Engraving Industry 
Plumbing Contracting Industry 
Retail Lumber Industry 
Retail Trade Industry 
Retail Tire and Battery Trade Industry 
Rubber Manufacturing Industry 
Rubber Tire Manufacturing Industry 
Shipbuilding Industry 
Silk Textile Industry 
Structural Clay Products Industry 
Throwing Industry 
Trucking Industry 
Waste Materials Industry 
Wholesale and Retail Fcod Industry 
Waste Materials Industry 
Wholesale and Retail Food Industry 
Wholesale Fresh Fruit and vegetable Indus- 
try 
Wool Textile Industry 



THE STATISTICAL MATERIALS SERIES 



This series is supplementary to the Evidence Ctudies Series. The reports include data 
on establishments, firms, employment, payrolls, wages, hours, production capacities, ship- 
ments, sales, consumption, stocks, prices, material costs, failures, exports and imports. 
They also include notes on the principal qualificat_ ons that should be observed in using the 
data, the technical methods employed, and the applicability of the material to the study of 
the industries concerned. The following numbers appear in the series: 
9675. 



- vi - 



Asphalt Shingle and Roofing Industry 

Business Furniture 

Candy Manufacturing Industry 

Carpet and Rug Industry 

Cement Industry 

Cleaning and Dyeing Trade 

Coffee Industry 

Copper and Brass Mill Products Industry 

Cotton Textile Industry 

Electrical Manufacturing Industry 

9675. 



Fertilizer Industry 

Funeral Supply Industry 

Glass Container Industry 

Ice Manufacturing Industry 

Knitted Outerwear Industry 

Paint, Varnish, and Lacquer, Mfg. Industry 

Plumbing Fixtures Industry 

Raycn and Synthetic Yarn Producing Industry 

Salt Producing Industry 



V 



I'- 



4 



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