Source: https://supreme.justia.com/cases/federal/us/258/346/
Timestamp: 2019-04-25 20:36:26+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 258 › Standard Fashion Co. v. Magrane-Houston Co.
1. A contract for a term of two years from its date and from term to term thereafter until terminated by either party by giving three months' notice within thirty days after the expiration of any contract period, the contract to continue in effect during such three months, held, where notice was not given after the first two years, to have remained effective for two years longer and three months thereafter. P. 258 U. S. 353.
2. A suit to restrain a violation of a contract does not become moot with the expiration of the contract if the bill also prays for damages capable of ascertainment. P. 258 U. S. 353.
3. Under the General Laws of Massachusetts, c. 155, § 51, the existence of a corporation which has gone out of business and wound up its affairs is continued for three years thereafter for the purpose of prosecuting and defending suits. P. 258 U. S. 353.
4. A contract between a manufacturer and a retailer creating an "agency" for the retailing of goods made by the former but to be purchased by the latter, with provisions for periodical exchange of old goods for new of less valuation, and for repurchase by the manufacturer of stock on hand at termination of the contract, held a contract of sale within § 3 of the Clayton Act. P. 258 U. S. 354.
5. In a contract between a manufacturer and a retailer granting the latter the "agency" for the sale at its store of goods bought by it from the former and stipulating that the retailer shall not assign or transfer the agency or remove it from its original location without the manufacturer's consent, a covenant of the retailer not to sell on its premises goods of the manufacturer's competitors during the term of the contract, held, a general restriction not confined to the particular shop. P. 258 U. S. 354.
6. The Clayton Act was intended to supplement the Sherman and other antitrust acts by reaching agreements in their incipiency. P. 258 U. S. 355.
7. The purpose of § 3.of the Clayton Act in forbidding contracts of sale, made upon the agreement or understanding that the purchaser shall not deal in goods of the seller's competitors, which " may substantially lessen competition or tend to create a monopoly," was not to prohibit the mere possibility of those consequences, but to prevent agreements which, in the circumstances, will probably lessen competition or create an actual tendency to monopoly. P. 258 U. S. 356.
8. When the meaning of an act of Congress is plain on its face, there is no occasion to resort to the reports of congressional committees concerning it. P. 258 U. S. 356.
Certiorari to a decree of the circuit court of appeals which affirmed a decree of the district court dismissing a suit brought by the petitioner to restrain the respondent from violating a contract and for damages.
Petitioner brought suit in the United States District Court for the District of Massachusetts to restrain the respondent from violating a certain contract concerning the sale of patterns for garments worn by women and children, called standard patterns. The bill was dismissed by the district court, and its decree was affirmed by the circuit court of appeals. 259 F. 793.
redeem the same. It was further stipulated that, in the event the business property of the respondent, or a substantial part thereof, should be disposed of by respondent for business other than that of dry goods or as a general department store, the respondent should have the privilege of terminating the contract by giving the petitioner due notice of such change. Two weeks after the change in the premises had been made, the respondent might deliver its stock of standard patterns to the petitioner for repurchase under the repurchase clause of the contract.
We agree with the courts below that, the notices not having been given as required by the contract, the same continued in force until three months from November 25, 1918, to-wit, to February 25, 1919. It is contended in the brief for the government, filed by it as amicus curiae, that, as the date last mentioned had elapsed pending the suit, the case has become moot, but we are unable to agree with such contention. The bill prayed an assessment of damages as far as capable of ascertainment. The record shows that such damages were capable at least of partial ascertainment.
The suggestion that the respondent had wound up its affairs and had gone out of business on March 27, 1920, is met by General Laws of Massachusetts, § 51, continuing its corporate existence for the period of three years for the purpose of prosecuting or defending suits by or against it.
lessee or purchaser thereof shall not use or deal in the goods . . . of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce."
The contract contains an agreement that the respondent shall not sell or permit to be sold on its premises during the term of the contract any other make of patterns. It is shown that, on or about July 1, 1917, the respondent discontinued the sale of the petitioner's patterns and placed on sale in its store patterns of a rival company known as the McCall Company.
It is insisted by the petitioner that the contract is not one of sale, but is one of agency or joint venture; but an analysis of the contract shows that a sale was in fact intended and made. It is provided that patterns returned for exchange must have been purchased from the petitioner. Respondent agreed to purchase a certain number of patterns. Upon expiration of the notice of termination, the respondent agreed to promptly return all standard patterns bought under the contract. In the event of the disposition of the business property of the respondent at Washington Street and Temple Place, the respondent might deliver its stock of standard patterns to the petitioner for repurchase under the repurchase clause of the contract.
Full title and dominion passed to the buyer. While this contract is denominated one of agency, it is perfectly apparent that it is one of sale. Straus v. Victor Talking Machine Co., 243 U. S. 490.
kept a retail store in Boston. It was not contemplated that it would make sales elsewhere. The covenant, read in the light of the circumstances in which it was made, is one by which the purchaser agreed not to sell any other make of patterns while the contract was in force. The real question is: does the contract of sale come within the third section of the Clayton Act because the covenant not to sell the patterns of others "may be to substantially lessen competition or tend to create a monopoly"?
"[a]ll contracts or acts which were unreasonably restrictive of competitive conditions, either from the nature or character of the contract or act or where the surrounding circumstances were such as to justify the conclusion that they had not been entered into or performed with the legitimate purpose of reasonably forwarding personal interest and developing trade, but, on the contrary, were of such a character as to give rise to the inference or presumption that they had been entered into or done with the intent to do wrong to the general public and to limit the right of individuals, thus restraining the free flow of commerce and tending to bring about the evils, such as enhancement of prices, which were considered to be against public policy."
Co., 221 U. S. 106; United States v. St. Louis Terminal Co., 224 U. S. 383; Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20; United States v. Union Pacific R. Co., 226 U. S. 61; United States v. Reading Co., 226 U. S. 324; Nash v. United States, 229 U. S. 373; Straus v. American Pub. Assn., 231 U. S. 222.
As the Sherman Act was usually administered, when a case was made out, it resulted in a decree dissolving the combination, sometimes with unsatisfactory results so far as the purpose to maintain free competition was concerned.
The Clayton Act sought to reach the agreements embraced within its sphere in their incipiency, and, in the section under consideration, to determine their legality by specific tests of its own which declared illegal contracts of sale made upon the agreement or understanding that the purchaser shall not deal in the goods of a competitor or competitors of the seller which "may substantially lessen competition or tend to create a monopoly."
Much is said in the briefs concerning the reports of committees concerned with the enactment of this legislation, but the words of the act are plain, and their meaning is apparent without the necessity of resorting to the extraneous statements and often unsatisfactory aid of such reports. See Railroad Commission of Wisconsin v. Chicago, Burlington & Quincy R. Co., 257 U. S. 563, and previous decisions of this Court therein cited.
Section 3 condemns sales or agreement where the effect of such sale or contract of sale "may" be to substantially lessen competition or tend to create monopoly. It thus deals with consequences to follow the making of the restrictive covenant limiting the right of the purchaser to deal in the goods of the seller only. But we do not think that the purpose in using the word "may" was to prohibit the mere possibility of the consequences described.
It was intended to prevent such agreements as would, under the circumstances disclosed, probably lessen competition or create an actual tendency to monopoly. That it was not intended to reach every remote lessening of competition is shown in the requirement that such lessening must be substantial.
"The restriction of each merchant to one pattern manufacturer must, in hundreds, perhaps in thousands, of small communities amount to giving such single pattern manufacturer a monopoly of the business in such community. Even in the larger cities, to limit to a single pattern maker the pattern business of dealers most resorted to by customers whose purchases tend to give fashions their vogue may tend to facilitate further combinations, so that the plaintiff, or some other aggressive concern, instead of controlling two-fifths, will shortly have almost, if not quite, all the pattern business."
We agree with these conclusions, and have no doubt that the contract, properly interpreted, with its restrictive covenant, brings it fairly within the section of the Clayton Act under consideration.

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