Source: https://supreme.justia.com/cases/federal/us/312/457/
Timestamp: 2019-04-26 06:20:44+00:00

Document:
A combination of manufacturers of women's garments and manufacturers of textiles used in their making, who claimed that the designs of their products, though not protected by patent or copyright, were original and distinctive, sought to suppress competition by others who copied their designs and sold at generally lower prices. To this end, those in the combination systematically registered their designs and refused all sales to manufacturers and retailers of garments who dealt in the copies or would not agree not to sell them. To aid in effectuating the boycott, the combination employed "shoppers" to visit retailers' stores, established tribunals to determine whether garments were copies of designs registered, audited the books of its members, fined them for violations of its regulations, etc. In view of these things, and the power of the combination and its effect upon sales in interstate commerce, the Federal Trade Commission concluded that the practices of the combination constituted unfair methods of competition tending to monopoly and issued a "cease and desist" order.
1. That the conclusion of the Commission was based on adequate and unchallenged findings, and was correct. P. 312 U. S. 463.
2. Where the purpose and practice of a combination run counter to the public policy declared in the Sherman and Clayton Acts, the Federal Trade Commission has the power to suppress it as an unfair method of competition. P. 312 U. S. 463.
3. A practice short of a complete monopoly but which tends to create a monopoly and to deprive the public of the advantages from free competition in interstate trade, offends the policy of the Sherman Act. P. 312 U. S. 466.
4. A combination may be contrary to the policy of the Sherman and Clayton Acts though it does not tend to fix or regulate prices, parcel out or limit production, or bring about a deterioration in quality. P. 312 U. S. 466.
It was the object of the Federal Trade Commission Act to reach in their incipiency combinations which could lead to these and other trade restraints and practice deemed undesirable.
5. Since the purpose and object of this combination, its potential power, its tendency to monopoly, the coercion it could and did practice upon a rival method of competition, all brought it within the prohibition declared by the Sherman and Clayton Acts, it was not erroneous to exclude evidence offered to prove that the practices were reasonable and necessary for the protection of manufacturer, laborer, retailer and consumer against the evils growing from the pirating of original designs. P. 312 U. S. 467.
6. Whether or not systematic copying of the dress designs by trade competitors is in itself tortious is a question of state law; but even if tortious under the laws of all the States, that circumstance would not justify a combination to suppress it by regulating and restraining interstate commerce in violation of federal law. P. 312 U. S. 468.
Certiorari, 311 U.S. 641, to review the affirmance by the court below of a "cease and desist" order of the Federal Trade Commission.
agreements only because constrained by threats that Guild members would not sell to retailers who failed to yield to their demands -- threats that have been carried out by the Guild practice of placing on red cards the names of noncooperators (to whom no sales are to be made), placing on white cards the names of cooperators (to whom sales are to be made), and then distributing both sets of cards to the manufacturers.
The one hundred and seventy-six manufacturers of women's garments who are members of the Guild occupy a commanding position in their line of business. In 1936, they sold in the United States more than 38% of all women's garments wholesaling at $6.75 and up, and more than 60% of those at $10.75 and above. The power of the combination is great; competition and the demand of the consuming public make it necessary for most retail dealers to stock some of the products of these manufacturers. And the power of the combination is made even greater by reason of the affiliation of some members of the National Federation of Textiles, Inc. -- that being an organization composed of about one hundred textile manufacturers, converters, dyers, and printers of silk and rayon used in making women's garments. Those members of the Federation who are affiliated with the Guild have agreed to sell their products only to those garment manufacturers who have, in turn, agreed to sell only to cooperating retailers.
In addition to the elements of the agreement set out above, all of which relate more or less closely to competition by so-called style copyists, the Guild has undertaken to do many things apparently independent of and distinct from the fight against copying. Among them are the following: the combination prohibits its members from participating in retail advertising; regulates the discount they may allow; prohibits their selling at retail; cooperates with local guilds in regulating days upon which special sales shall be held; prohibits its members from selling women's garments to persons who conduct businesses in residences, residential quarters, hotels or apartment houses; and denies the benefits of membership to retailers who participate with dress manufacturers in promoting fashion shows unless the merchandise used is actually purchased and delivered.
"It shall be unlawful for any person engaged in commerce . . . to . . . make a sale or contract for sale of goods . . . on the condition, agreement or understanding that the . . . purchaser thereof shall not use or deal in the goods . . . of a competitor or competitors of the . . . seller, where the effect of such . . . sale, or contract for sale . . . may be to substantially lessen competition or tend to create a monopoly in any line of commerce."
Not only does the plan in the respects above discussed thus conflict with the principles of the Clayton Act; the findings of the Commission bring petitioners' combination in its entirety well within the inhibition of the policies declared by the Sherman Act itself. Section 1 of that Act makes illegal every contract, combination or conspiracy in restraint of trade or commerce among the several states; Section 2 makes illegal every combination or conspiracy which monopolizes or attempts to monopolize any part of that trade or commerce. Under the Sherman Act "competition, not combination, should be the law of trade." National Cotton Oil Co. v. Texas, 197 U. S. 115, 197 U. S. 129. And among the many respects in which the Guild's plan runs contrary to the policy of the Sherman Act are these: it narrows the outlets to which garment and textile manufacturers can sell and the sources from which retailers can buy (Montague & Co. v. Lowry, 193 U. S. 38, 193 U. S. 45; Standard Sanitary Manufacturing Co. v. United States, 226 U. S. 20, 226 U. S. 48-49); subjects all retailers and manufacturers who decline to comply with the Guild's program to an organized boycott (Eastern States Retail Lumber Dealers' Assn. v. United States, 234 U. S. 600, 234 U. S. 609-611); takes away the freedom of action of members by requiring each to reveal to the Guild the intimate details of their individual affairs (United States v. American Linseed Oil Co., 262 U. S. 371, 262 U. S. 389); and has both as its necessary tendency and as its purpose and effect the direct suppression of competition from the sale of unregistered textiles and copied designs (United States v. American Linseed Oil Co., supra, at 262 U. S. 389). In addition to all this, the combination is in reality an extra-governmental agency which prescribes rules for the regulation and restraint of interstate commerce and provides extrajudicial tribunals for determination and punishment of violations, and thus "trenches upon the power of the national legislature and violates the statute."
Addyston Pipe & Steel Co. v. United States, 175 U. S. 211, 175 U. S. 242.
create in themselves a monopoly in the said industries."
"Trade or commerce under those circumstances may nevertheless be badly and unfortunately restrained by driving out of business the small dealers and worthy men whose lives have been spent therein, and who might be unable to readjust themselves to their altered surroundings. Mere reduction in the price of the commodity dealt in might be dearly paid for by the ruin of such a class and the absorption of control over one commodity by an all-powerful combination of capital. [Footnote 7]"
"the practices of FOGA were reasonable and necessary to protect the manufacturer, laborer, retailer and consumer against the devastating evils growing from the pirating of original designs and had in fact benefited all four."
114 F.2d 80. Because of inconsistency between the holding below and that of the First Circuit Court of Appeals in Wm. Filene's Sons Co. v. Fashion Originators' Guild of America, 90 F.2d 556, we granted certiorari. 311 U.S. 641.
26 Stat. 209, 15 U.S.C. § 1 et seq.; 38 Stat. 730, 15 U.S.C. § 12 et seq.; 38 Stat. 717, 15 U.S.C. § 41 et seq.
In one instance, a fine of $1,500 was imposed, and the Guild notified its membership that a fine of $5,000 would be assessed in case of future violation.
Federal Trade Commission v. Beech-Nut Packing Co., 257 U. S. 441, 257 U. S. 453-455. See 26 Stat. 209, 15 U.S.C. § 1 et seq.; 38 Stat. 730, 15 U.S.C. § 12 et seq.; 38 Stat. 717, 15 U.S.C. § 41 et seq. By 38 Stat. 734, 15 U.S.C. § 21, the Federal Trade Commission is expressly given authority to enforce the Clayton Act.
Cf. Federal Trade Commission v. R. F. Keppel & Bro., 291 U. S. 304, 291 U. S. 314; Standard Fashion Co. v. Magrane-Houston Co., 258 U. S. 346, 258 U. S. 357.
Federal Trade Commission v. Raladam Co., 283 U. S. 643, 283 U. S. 647. And see remarks of Senator Cummins, Chairman of the Committee which reported the bill, 51 Cong.Rec. 11455, quoted by Brandeis, J., in Federal Trade Commission v. Gratz, 253 U. S. 421, 253 U. S. 435.
United States v. Trans-Missouri Freight Assn., 166 U. S. 290, 166 U. S. 323.

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