Case Name: John D. Park and Sons Company, Appellant, v. The National Wholesale Druggists' Association et al., Respondents
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1903-04-28
Citations: 175 N.Y. 1
Docket Number: 
Parties: John D. Park and Sons Company, Appellant, v. The National Wholesale Druggists’ Association et al., Respondents.
Judges: 
Reporter: New York Reports
Volume: 175
Pages: 1–45

Head Matter:
John D. Park and Sons Company, Appellant, v. The National Wholesale Druggists’ Association et al., Respondents.
1. Pleading — Demurrer — Conclusions op Law. Allegations that .he defendants are contriving and conspiring to obtain exclusive control of the wholesale and jobbing trade in patent medicines, to control the prices at which, and the terms upon which, such goods shall be sold, and to destroy and prevent competition between wholesale and jobbing drug gists, are conclusions of law not admitted by demurrer.
2. Monopoly — Uniform Price — Proprietary Goods. An agreement between the manufacturers of proprietary medicines and an association of wholesale dealers in such articles to sell their goods at a uniform. ' jobbing price for fixed quantities to such dealers only as would conform to the manufacturers’ price list in malting sales of goods, does not establish a monopoly on the part of the members of the association, where all wholesale dealers have the right to purchase goods from the manufacturers upon the same terms as the members of the association, upon undertaking to maintain the prices established by the manufacturers.
3. Contract — Restraint of Trade — Public Policy. A contract between the manufacturers of patent medicines and an association of wholesale dealers in such articles establishing a uniform jobbing price for fixed quantities to dealers who agreed to maintain the prices established by the manufacturers is not unlawful as in restraint of trade or against public policy, although it does away with the competition among dealers as to prices, where it places no restriction upon them as to the quantities that they may be able to sell or the territory within which they may transact business.
(Argued November 13, 1902;
decided April 28, 1903.)
4. Pleading — Threats—Intimidation. Averments in a suit for injunctive relief that manufacturers of proprietary goods were prevented from making sales to the plaintiff because they wished to protect themselves with the wholesale druggists who had adopted the contract or rebate plan and agreed to maintain the manufacturers’ prices, do not allege a threat, since the manufacturers might be influenced by what they deemed their best interest; nor do allegations that the wholesale druggists recommended untiring opposition against the sale of articles of manufacturers who did not accept the contract plan aver intimidation where their failure to adopt the plan simply left their goods upon the unrestricted list which druggists could contract for and sell in such manner as they saw fit.
5. Boycott—Proprietary Goods—Refusal to Sell. That manufacturers of proprietary medicines refused to sell their goods to a wholesale dealer except at the retail price, or to allow commissions or a rebate upon the goods purchased, does not constitute a boycott where the refusal is based upon the dealer’s unwillingness to maintain the selling prices fixed by the manufacturers.
6. Injunction — Surveillance. That the members of a wholesale druggists’ association caused the business place of a wholesale dealer to be watched to determine who the druggists were who furnished such dealer with proprietary goods in violation of their contract with the manufacturers, does not call for the intervention of a court of equity.
7. Uniform Price—Proprietary Goods. Wholesale dealers are at liberty to persuade manufacturers to establish a uniform price for fixed quantities of their goods, thus enabling small concerns to purchase as cheaply as large ones and compete with them in the retail trade, and a court of equity will not restrain the small dealers from exercising this privilege.
8. Contract—Validity—Uniform Price. The proprietor of patent medicines has the right to fix the price at which his article shall go to the consumer, and a druggist who takes his articles for sale under an agreement that he will maintain the price, is liable to respond in damages if he violates the contract.
.9. Blacklisting—Proprietary Goods—Cutting Prices. Wholesale dealers who have agreed with the manufacturers of proprietary medicines to handle their goods at a uniform price fixed by the latter, which price the dealers agree to maintain, have the right to inform the manufacturers of dealers who are cutting the established price, and such conduct is not unlawful as blacklisting.
Park & Sons Co. v. Nat. Druggists’ Assn., 54 App. Div. 323, affirmed
Appeal from a judgment entered November 27,1900, upon an order of the Appellate Division of the Supreme Court in the first judicial department, which affirmed a judgment of Special Term sustaining demurrers to the complaint.
The nature of the action and the facts, so far as material, are stated in the opinion.
Ilenry T. Fay for appellant.
Plaintiff’s action is to enjoin the continuance of a conspiracy on the part of certain wholesale druggists, its competitors, defendants herein and others, to injure, ruin and destroy its business, and specifically to enjoin the continuance of various acts being done in furtherance of that conspiracy. (People v. Mather, 4 Wend. 229.) The right of a person to do or not to do a certain act is no warrant in law for a conspiracy of others, sought to be accomplished by compelling him to do so. (People v. Fisher, 14 Wend. 9; S. S. Co. v. McKenna, 30 Fed. Rep. 48; Casey v. T. Union, 45 Fed. Rep. 135; Curran v. Galen, 152 N. Y. 33.) The fact that the articles in question are not necessities of life does not affect the plaintiff’s rights. (Judd v. Harrington, 19 N. Y. Supp. 406; People v. Duke, 19 Misc. Rep. 292; Curran v. Galen, 152 N. Y. 33; Templeton v. Russell, L. R. [1 Q. B. 1893] 715.) The acts of the defendants which the plaintiff asks to have enjoined are unlawful because they arc being done in furtherance of unlawful combinations and conspiracies. (Stanton v. Allen, 5 Den. 434; Hooker v. Vandewater, 4 Den. 349; Clancey v. Salt Co., 62 Barb. 395; Livermore v. Bushnell, 5 Hun, 585; People v. N. R. S. R. Co., 16 Civ. Pro. Rep. 1; 54 Hun, 354; People v. Sheldon, 66 Hun, 590; People v. Sheldon, 139 N. Y. 251; Judd v. Harrington, 139 N. Y. 105; People v. Milk Exchange, 145 N. Y. 267; Addyston v. United States, 175 U. S. 211.) Defendants are engaged in and parties to an unlawful conspiracy to prevent ’plaintiff from doing any business as a wholesaler and jobber of patent medicines or proprietary goods, and to injure, ruin and destroy its business by force, threats, intimidation, and by interfering and threatening to interfere with the property of the plaintiff and with its use and employment thereof. (Curran v. Galen, 152 N. Y. 33; N. P. Assn. v. Cumming, 170 N. Y. 315; People v. Kortka, 4 N. Y. Cr. Rep. 429; People v. Wilzig, 4 N. Y. Cr. Rep. 403; U. S. v. Kane, 23 Fed. Rep. 748; Matthews v. Shankland, 25 Misc. Rep. 604; Davis v. Zimmerman, 91 Hun, 489; Machall v. Ratchford, 82 Fed. Rep. 41; G. Co. v. G. B. Assn., 46 Atl. Rep. 208; C. S. & W. Co. v. Murray, 80 Fed. Rep. 811.) The plaintiff has been, and is being, injured in its business and property as a result of such unlawful acts of the defendants. (Thomas v. M. Union, 121 N. Y. 45.) Plaintiff is entitled to a judgment restraining the further continuance of each of the illegal acts complained of. (Thomas v. M. Union, 121 N. Y. 45; Tanenbaum v. Exchange, 33 Misc. Rep. 134; Davis v. Zimmerman, 91 Hun, 489; Curran v. Galen, 152 N. Y. 33; Matthews v. Shankland, 25 Misc. Rep. 604; Matter of Debbs, 158 U. S. 564; Casey v. C., etc., Union, 45 Fed. Rep. 135; Arthur v. Oaks, 63 Fed. Rep. 310; C. S., etc., Co. v. Murray, 87 Fed. Rep. 811; Cœur D'Alene v. Miners' Union, 51 Fed. Rep. 260; Barr v. Essex Trades Council, 53 N. J. Eq. 101.)
Henry Galbraith Ward and Leo Everett for respondents.
The complaint does not show a combination or conspiracy to injure the plaintiff. The validity of a contract between the manufacturer and the purchaser of an article that the latter shall not sell below a stipulated price is well established. (Garst v. Harris, 177 Mass. 72; Fowle v. Park, 131 U. S. 88; Walsh v. Dwight, 40 App. Div. 513; Lough v. Outerbridge, 143 N. Y. 271; C. Ins. Co. v. Fire Underwriters, 67 Fed. Rep. 310; Anderson v. U. S., 171 U. S. 604; Curran v. Galen, 152 N. Y. 33; People v. Sheldon, 139 N. Y. 251; Matter of Davies, 168 N. Y. 89; Hooker v. Vandewater, 4 Den. 349.) The plaintiff has no standing to obtain an injunction against the defendants. (Atty.-Gen. v. U. Ins. Co., 2 Johns. Ch. 371; Thomas v. M. Union, 121 N. Y. 45; Matter of Davies, 168 N. Y. 189; M. S. S. Co. v. McGregor, L. R. [App. Cas. 1892] 25: B. Mfg. Co. v. H. Co., 54 Minn. 223.)

Opinion:
Haight, J.
The question presented for review is as to whether the complaint states facts sufficient to constitute a cause of action.
The relief sought by the plaintiff is an adjudication that the resolutions, agreements, plans and modes for the conducting of the business of the sale of proprietary medicines by the Eational Wholesale Druggists Association are illegal and that an injunction issue restraining the members of the association from continuing to make efforts to induce any manufacturer or proprietor of what is known as patent or proprietary medicines from adopting the rebate or contract plan for the sale of their goods or of continuing such plan if they have previously adopted the same.
The complaint is very voluminous and I have not attempted to give even a fair synopsis, for that would necessarily cover many pages, and I have not deemed it necessary, for it appears to me that the rights of the parties must depend upon a few controlling facts which may be briefly stated.
It appears from the allegations of the complaint that the matter in controversy has reference to the sale by manufacturers of those particular medicines or remedies covered by trade marks, copyrights or patents which secure to the manufacturer or proprietor the exclusive right to manufacture aud sell the same. These medicines are known as " proprietary goods " and their manufacture and sale are confessedly under the control and .management of the owner or manufacturer, who may fix his own price and adopt such plan for the sale thereof as he, in his judgment, may determine. At one time the sale of these goods was largely made through traveling sales agents who worked upon commissions and supplied the goods to the consumer or retailer. Later on they were sold largely through the druggists, but many of the manufacturers did not maintain a uniform price. They would supply goods to some of the wholesalers upon more favorable terms than to others, thus permitting large dealers to make a profit while a great number of the smaller druggists found the handling of proprietary goods unprofitable. This resulted in the organi zation of the National Wholesale Druggists Association, an unincorporated body, which, in 1882 and 1883, represented ninety per cent of the wholesale jobbing trade of the United States. At a meeting of this association a plan was devised and adopted for the conduct of the business of the sale of proprietary goods, which was in the form of a petition addressed to the proprietors asking them to fix a uniform jobbing price for fixed quantities, and also a selling price by the druggists which they were to agree to maintain and that the druggists should be allowed the difference between the jobbing and the selling price as their profit or rebate which they asked should be not less than ten per cent, the proprietors defraying the expenses of boxing and freight to the nearest transportation station of the buyer. It is alleged that a large number of the proprietors consented to this arrangement and adopted the plan suggested by the wholesale druggists. And this mode of conducting the business appears to have been continued until the December meeting of the association in 1893, at which time a committee, to whom the Detroit plan, so called, had been referred, reported, among other things, the following : " That in order to strengthen and render this plan more effective it is respectfully recommended that proprietors accept orders for full quantities with rebate, discounted only from regular houses recognized as belonging to the number who will faithfully observe the prices and conditions established by the manufacturers." This appears to have been adopted and was acquiesced in by the manufacturers and became the plan under which the business was conducted at the time this action was commenced.
It further appears from the allegations of the complaint that the plaintiff never acquiesced in this plan of conducting the business, but always insisted on its right to sell proprietary goods at such price or prices as it saw fit, in its discretion, and would not be bound by tlie price established by the manufacturers ; that thereupon the manufacturers refused to sell or ship goods to the plaintiff, and it was compelled to procure goods from other druggists; that the National Wholesale Druggists Association caused the plaintiff's premises to be watched by spies or detectives, and that they made reports to the manufacturers of the druggists who purchased goods of the proprietors and caused them to be delivered at the plaintiff's premises, and that the association also furnished the manufacturers with a list of all of the druggists throughout the United States who were willing to be controlled by the contract plan. The complaint then alleges that the defendants " were combining and conspiring to obtain an exclusive control of the wholesale and jobbing trade, as between the manufacturer and the retailer, in all classes of patent medicines or proprietary goods; and to regulate and control the methods upon which the said trade shall be carried on throughout the entire United States, and to control the prices at which, and the discounts, allowances for freight and the terms of credit upon which the said proprietary goods shall be sold to the various retail druggists throughout the United States; and to destroy and prevent any and all competition between the said wholesale and jobbing druggists in the wholesale and jobbing trade in said proprietary goods, and limit and restrict the business of each of the wholesale and jobbing druggists, or such of them as are in one locality, to certain exclusive territory tributary, or proximate, to each of them respectively."
The demurrer is an admission of the facts alleged, but not of the conclusions of law. The allegations just above quoted, I understand to be conclusions of law drawn from the allegations of fact alleged in the complaint, and are not, therefore, admitted by the demurrer. It, therefore, becomes necessary to determine whether the plan for the conducting of the business of the sale of proprietary goods, adopted by the association and which it requested the proprietors or manufacturers to adopt and carry out, is lawful. The question thus presented is of considerable importance. The plan, as we have seen, in its substantial features, has been in operation nearly twenty years and in its final completed form nearly ten years. This plan, as I understand, is not one confined to the sale of proprietary medicines, but is one that has been adopted by many manufacturers of merchandise and other goods where manufacturers have established a trade mark and have gained a reputation which they wish to maintain throughout the country for character, quality and durability of the goods which they manufacture. They have, consequently, established prices at which their goods shall be sold to. the consumer and require all wholesale and retail dealers to supply the consumer at the price list established. The decision, therefore, reached herein may largely affect the plan of conducting business in other articles of commerce.
It is said that the Eational Wholesale Druggists Association was organized and continued for the purpose of monopolizing and controlling the business of the wholesale druggists and jobbers in the sale of proprietary or patent medicines in the United States. The association, doubtless, was organized and continued for the purpose of devising and procuring to be carried into effect a plan for the sale of such goods throughout the United States, which would do away with the necessity of maintaining traveling sales agents and which would secure to the dealers a uniform commission for the handling of the goods, but I do not understand that this was the establishing of a monopoly on the part of the members of the association; for, under the plan adopted, every dealer has the right to purchase goods from the manufacturers upon the same terms as the members of the association, with the right to the same rebate or commissions upon complying with the requirements of the manufacturers with reference to following their price list in making sales of goods. The members of the association clearly had the right to work for their own interests ; they had the right to devise and adopt a plan for the conduct of the business in which they could make a commission or a profit, so long as they did not unlawfully interfere with the rights of others. They had the right to petition the manufacturers to adopt the plan devised by them and to support their petition with all of the arguments and persuasions that they could bring to bear, so long as they did not resort to threats or intimidation. The proprietors, having the exclusive right to manufacture' and sell their goods, had the right to adopt such plan with reference to the disposal thereof as they saw fit, and if they became convinced that the contract or rebate plan, so called, was more advantageous to them and more fair and just to the public, by establishing a uniform price in all sections of the country, they had the right to adopt the same and no one could complain.
¡Nor does the plan appear to me to be in restraint of trade. It is true that it'does away with the competition among dealers as to prices, but it creates no restriction upon them as to the quantities that they may be able to sell or the territory within which they may confine their transactions; but upon the question of prices we must bear in mind that the goods are covered by patent rights and trade marks, which give the proprietors the exclusive right of specifying prices at which the articles shall be sold, and following this, the right also to require dealers to maintain the prices specified. The plan does not operate to restrict sales in any localities, but contemplates a ready method of distributing the goods throughout the entire country. It is, in effect, the creating' of an agency on the part of the proprietors, by which every druggist throughout the United States may receive the goods and dispose of them as agents of the principal, receiving the commissions agreed upon therefor.
Is this plan against public policy ? An active competition and rivalry in business is, undoubtedly, conducive to the public welfare, but we must not shut our eyes to the fact that competition may be carried to such an extent as to accomplish the financial ruin of those engaged therein and thus result in a derangement of the business, an. inconvenience to consumers, and in public harm. While public policy demands a healthy competition it abhors favoritism, secret rebates and unfair dealing and commends the conduct of business in such a way as to serve all consumers alike. That this is the tendency of modern times is evident from the recent discussions and legislation ujdoii the subject of interstate commerce. One of the cardinal and chief principles of the plan adopted is the establishing of a uniform price by proprietors which necessitates the service of all persons alike throughout the United States, the proprietors subjecting themselves to the extra expense for freight, etc., in remote sections of the country. I can discover nothing in this which is detrimental to the public policy of the country. The right would certainly not be denied to the manufacturer of a given remedy to adopt the rule that he would only sell it' to the jobbers of the country at a certain long price and would not allow a discount of ten per cent where they refused to maintain his price. In other words, the manufacturer says to the jobbers of the country, I manufacture a medicine that I will sell for one dollar a bottle, and it is my desire that it shall be sold at that price per bottle throughout the country. If you will take consignments of this medicine from me, billed to you, at that price per bottle, I will allow you a rebate of ten per cent, and if I find that you are selling at a lower price than billed to you, I will allow no rebate. If this arrangement is not satisfactory to you, I prefer to keep my manufactured stock on hand. These are the only conditions under which I will ship my manufactured article.
Surely, there is nothing in this approaching restraint of trade or the violation of the principle of public policy. It is simply allowing a man to do what he will with his own.
I do not understand that the complaint charges that the manufacturers were compelled to adopt the plan by reason of threats or intimidation on the part of the members of the association. It is true that the complaint contains the allegation repeated a number of times, to the effect that the proprietors or manufacturers were prevented from selling the plaintiff proprietary goods, for the reason that they wished to protect themselves " with the wholesale and jobbing druggists." And, also, that at one of the meetings of the association the committee on proprietary goods reported that with a few exceptions the proprietors of all the prominent proprietary medicines had adopted the contract or rebate plan for the sale of their goods, and then concluded its report with the recommendation " that continued and untiring opposition he shown to the sale of the articles of those proprietors who do not adopt said contract or rebate plan for the sale of their goods, or who withdraw from the plan." There is no allegation, however, that this resolution was served upon the proprietors or was otherwise presented to them. The first allegation alluded to does not, as I understand it, amount to a threat when taken in connection with the other allegations of the complaint with reference to the plan devised for the conduct of the business. The proprietors might well deem it to he for their best interests to act in accord with the wishes of the druggists rather than those of the plaintiff. As -to the second allegation, untiring opposition was to be continued against the sale of articles of proprietors who did not accept the contract plan, or, in other words, to the sale of proprietary-goods under the old system. I do not understand that by this allegation it was intended to charge that the plan adopted prohibited druggists from dealing with proprietors or manufacturers who did not adopt the contract plan with reference to the sale of proprietary goods, for, under other allegations of the complaint, it appears that the failure of a manufacturer to adopt the plan simply left his goods upon the unrestricted list, for which druggists could contract in such manner as they saw fit. This is apparent from the resolution adopted by the association at its Washington meeting in 1890.
Is there any boycott of the plaintiff ? It is true many of the • proprietors refused to sell to the plaintiff proprietary goods except at the long price, which I understand to be the selling price. They have refused to allow it commissions or a rebate upon the goods purchased, but this refusal is based upon the ground that the plaintiff refused to sell at the prices fixed by the proprietors. The plaintiff can, at any time, avail itself of the right to purchase upon the contract plan by complying with the requirements of the proprietors. The reply made by one of the proprietors to a letter of John D. Park & Sons under date of January 25, 1889, annexed to and made a part of the complaint, answers this question so completely that I here repeat it: We think you are in error in calling tlie action of the Association, or the action of any one of its members, ' boycotting.' A boycott means to refuse to sell or do business with a concern, and to prevent anybody -else from doing business with a concern on any conditions. This is not the attitude of the Association with you. The Association has implored you over and over again to abide by your contracts and sell goods as your neighbors do, and you have distinctly defied them and told them that you would do just exactly as you liked. There is no boycott ' in this, good friends, and nobody knows it better than you do; and you also know that, even if you choose to call it a boycott, you can end the boycott in twenty-four hours by simply agreeing when you sign a document that you will keep it."
Complaint is made with reference to the watching or spying upon plaintiff's business. All there is of this is the watching for the purpose of determining who the druggists were that furnished the plaintiff with proprietary goods in violation of the contract plan under their agreements with the proprietors. I think there is nothing in this calling for the intervention of a court of equity. The whole success of the plan adopted for conducting the business depended upon the faithful observance of the contract of the druggists with the proprietors, for whom they were acting as agents. If one could be permitted to violate his contract it would seriously prejudice all the dealers who lived up to the provisions of their contract and carried it into execution in good faith. As was said in the letter of Parke Davis & Co., to plaintiff's predecessor, under date of February 12,1889 : " The contract in force between us and the members of the Wholesale Drug Association during the three years prior to 1887 was objectionable to many because of the opportunities offered to those so disposed for an evasion of its provisions; thus, those 'who lived up rigidly and honestly to their agreement were made to suffer for the benefit of those disposed to regard their agreement and promises simply as a means for taking advantage of others who fulfilled their agreements."
I am, thus, brought to a consideration of the reasons for objecting to the plan by the plaintiff. As stated in the allegations of the complaint they are as follows: " That all of the said manufacturers and proprietors who have adopted the said rebate or contract plan for the sale of their respective proprietary goods were persuaded to adopt it entirely by the representation of the benefit which would accrue to the majority of their distributing agents or vendees, the wholesale and jobbing druggists, who were unaible to handle the goods as cheaply as the few who could command large capiitalP It is also alleged that the firm of John D. Park & Sons and this plaintiff since its organization, before the happening of the matters alleged in the complaint, had made large purchases as wholesale and jobbing druggists, of the proprietary goods of all or nearly all of the various manufacturers, and had it not been for the happening of the matters set forth in the complaint it would have continued to make large purchases as wholesale and jobbing druggists of such goods and would have been an active and constant competitor of all the other wholesale and jobbing druggists in the United States. The meaning of these allegations is obvious. It is that the plaintiff or the firm of John D. Park & Sons, of which the plaintiff is successor, could command large capital, and by reason of this they could purchase proprietary goods in larger quantities and more cheaply than the other wholesale and jobbing druggists, and that by reason of the adoption of the contract plan the plaintiff was unahle to so do. Under the contract plan the prices of these goods were made uniform for fixed quantities, and dealers possessing large capital and thereby enabled to purchase in large quantities could not purchase for a less sum than the ordinary wholesale and jobbing druggist, and not being able to purchase for a less sum could not handle the goods more cheaply. The situation is not new. It is one to which the attention of the public has been frequently drawn in recent years. The great merchants possessed of large capital will persuade and induce manufacturers to sell to them more cheaply in consequence of their taking large quantities, and thus they are enabled to undersell and drive out of business the small merchants in their vicinity. I am not here going to question the right of the big fish to eat up the little fish, the big storekeeper to undersell and drive out of business the little storekeeper, but I do believe that the little fellows have the right to protect their lives and their business, and if they can by force of argument and persuasion induce manufacturers to establish a uniform price for fixed quantities so that they can purchase as cheaply as the great merchants and thus compete with them in the retail trade, they have the right to do so, and that no court of equity ought to interfere and restrain them from the exercise' of this privilege.
The authorities have been largely discussed by my associates. I do not understand that we widely differ with reference to the law. Our chief controversy appears to arise out of the different conclusions to which we have arrived with reference to the allegations of facts contained in the complaint.
The judgment should be affirmed, with costs.
Parker, Ch. J.
It does not seem to me that this case comes within the principle of the Union Blue Stone Co. Case (164 N. Y. 401), the Berlin & Jones Envelope Case Co. (166 N. Y. 292) and kindred cases — and I am not without some acquaintance with those cases, inasmuch as the judgment affirmed in the first case was directed by me at Circuit, and the opinion in the last written by me. Eor is there any case in this court, . so far as we have found, precisely analogous, but the principle underlying the decision in National Protective Association v. Cumming (170 N. Y. 315) is applicable for reasons which I shall, as briefly as possible, suggest.
It will be observed that this is not a case where the manufacturers have combined for the purpose of raising prices to the consumer of the remedies they manufacture, nor does it appear that it is the object of the wholesale dealers, who ' form the aggressive part of this association, to increase the price to the consumer. If the object be to raise the price to the consumer and thus increase the profits of the manufacturer and the agency by which he passes his goods on to his retail dealers, then it may well be that it is void because in restraint of trade within the principle of the Union Blue Stone Co. case and the Berlin and Jones Envelope Co. Case (supra), notwithstanding the impression that there may be in some judicial minds, -and possibly in others, that proprietary remedies are not entitled to be classed among the necessaries of life. The phrase " necessaries of life," as used in connection with the subject of restraint of trade, must certainly be regarded as broad enough to include articles of which the public consume $60,000,000 worth in a year.
The object of this association, however, is not to fix prices at which the manufacturer's goods must be sold. It attempts no restraint whatever upon the manufacturer in making prices. He may lower or increase the price at his pleasure. In that respect he is precisely as free as he was before the association was formed and he became a member of it. He may name the price which the consumer shall pay for his article now as he could then, which means that he can both make the price and enforce it by contract. (Garst v. Harris, 177 Mass. 72; Fowle v. Park, 131 U. S. 88; Walsh v. Dwight, 40 App. Div. 513.)
That being so, the query naturally is, What restraint does the association put upon the manufacturer and what can be the purpose of this association which.does not seek an increased ' profit at the expense of the masses ?
The answer, as I read the complaint, is that the distributing agencies—the wholesale dealers — by which the manufacturer's goods are passed on to the retailer, where the public may obtain them, have been taught by experience two things : First. That manufacturers have favorites to whom they will give a larger rebate than to wholesale dealers as a class, and generally the favorite is the person or corporation buying the greatest amount of goods, as strong firms or corporations like this plaintiff with a business of such dimensions that it claims damages in this case of one-half million of dollars. Second. That there are wholesale dealers who for the purpose of getting clients away from their competitors will give them some part of such extra rebate. To remedy this difficulty was the leading object of the association, and it was sought to be accomplished by placing all the wholesalers upon an equality, so that one should have no advantage over the other in dealing with retail dealers, a result which seems altogether 'desirable, because it is in the line of fair dealing.
' Indeed, the principle which they undertake to secure in this case by contract is like that which the Sherman Act attempted to secure in part, namely, equal freight rates to all interstate commerce shippers from common carriers. Before that act was passed the claim was made, and evidence was adduced in support of it, that rebates of such magnitude were allowed in occasional instances to favorite shippers that it contributed largely, if 'not entirely, toward driving others out of business, which was deemed so against public policy that Congress set about placing all parties on an equality as to the cost of shipping goods by interstate common carriers. Assuming, as we must, that this legislation was along proper lines for the purpose of protecting the principle of competition at a point where it seemed to be open to attack, it necessarily follows that it is in accord with public policy that these wholesale dealers may attempt to secure to themselves by contract like fair dealing on the part of the manufacturers, namely, that the rebate from the latter's " long prices,' which the manufacturer allows as compensation to the wholesaler for distributing the goods to the retailers, shall he alike to all of them.
Before this association was formed, the complaint alleges, there was no fixed rebate, so that the manufacturer could and did allow to some a greater rebate than he did to others, and that such a course of dealing might operate to enable one wholesaler to profit greatly at the expense of the others goes without saying. These agencies for distribution between the manufacturer and the retailer, called the wholesale dealers, set about protecting themselves against what they deemed unfair competition which resulted to them when a manufacturer saw tit to give some one dealer a much larger rebate than allowed to them as a class.
After forming the association they adopted, first, what is called in the complaint the rebate plan. By that plan the proprietor fixes the price of his article known as the " long price " and agrees to pay expressage and cartage to any point from which it may be ordered. The result is that if the long price is one dollar, the article is sold to the consumer at exactly that price in all parts of the country, which is very important to the proprietors, as they view it; and it must he borne in mind steadily that it is settled by authority that the proprietor of patent medicines has the right to fix the price at which his article shall go to the consumer, and a druggist who takes his articles for sale under an agreement that he will maintain the price is liable to respond in damages if he violates the contract. (Garst case and others, supra.) This plan was found to be insufficient to accomplish the desired result because distributors violated their contracts to sell at the " long price."
The Detroit plan was then devised, and all the proprietors were to sell their goods only to wholesale or jobbing druggists and not to the retail trade, and the committee on proprietary goods, which was composed of wholesale druggists, members of the association, agreed to furnish proprietors lists of wholesalers who could be depended upon to keep their contracts, and cut off lists of dealers who did not keep their contracts or who bought as a mere cover for dealers who were known not to keep their contracts. Under this plan' every wholesaler is at liberty to buy all the goods he chooses of the manufacturers and can secure the same rebate as any member of the association, but he has to agree to the ¡fian and he has to keep his agreement. This the plaintiff refuses to do, and, under the agreement which the manufacturers have with this association, they are not at liberty to give plaintiff the benefit of the rebate rate which they give members of the association, so long as he insists upon it that he will not abide by the rules of the association. He can have all the goods that he wishes provided he pays " long prices " for them, but he cannot buy goods of the manufacturers who belong to this association at any less than the " long price; " in other words, he cannot get the benefit of the rebate unless he will agree to come in and be bound by the rules of the association.
Wholesalers of whom complaint is made are not, therefore, attempting to prevent plaintiff from enjoying all the opportunities for profitable trade which they enjoy, for they have invited him to become a member, indeed, have urged him to do so, and assured him in common with them of every advantage which they possess ; but they do attempt to. prevent him or any other dealer from making uncertain in its rewards, if not wholly unprofitable, the business of distributing proprietary articles among retail dealers.
Plaintiff once attempted to do business in accord with the association, but apparently reached the conclusion that it would be more profitable to him in the end to deal independently, and so he refused longer to be bound by the rules of tlie association, and, hence, the strife between the association and plaintiff which has culminated in this suit, plaintiff seeking to get the benefit of the same or a larger rebate than the members of the association without being bound by its rules, and the association doing its utmost to persuade the manufacturers not to give him the benefit of the rebate so long as he continues to oppose the policy of the association.
The position of the respective contestants is not far different, it will be seen, from that of the parties to the action of Nat. Protective Assn. v. Cumming (supra). Each is striving as against others to help itself or himself, and the question is here, as in that case, whether defendants in taking such action as they did to prevent plaintiff from getting the business they wanted are violating any rule of law. The wholesale dealers had the right to contract to secure such amount of rebate from the manufacturers as would reasonably compensate them for their services in distribution, together with the money invested. It is not claimed that the rate of compensation agreed upon was unfair, and if there could be such complaint it is difficult to see who could make it except the manufacturers themselves, and they do not. It was clearly legal for any one of the wholesale dealers to sign the agreement and to bind himself to sell at such prices as the manufacturer of the article should see fit to name as the selling price; the right to fix the price belonging to the manufacturer it was proper for the wholesaler to agree to recognize that right and govern himself accordingly. lie had the right to insist that in consideration of his performing those conditions, in accordance with the wishes of the manufacturer, the latter should not give to other dealers the rebate provided for members of the association unless such dealer should agree to be bound by the same conditions the members of the association took ujjon themselves ; and he had a right to agree that in order to secure the due carrying out of the agreement according to the spirit thereof he would furnish to the manufacturer such evidence as he might secure from time to time tending to show that members of the association were directly or indirectly violating its rules, and that which he could do alone, he and they could do as members of the association, provided of course their coming together did not operate against the rights of the general public, but as against other selling agents like themselves, no other public interest being affected, there could be no doubt of their right to agree with each other to do what any of them could do alone. The members of the association not only had the right to inform the manufacturers about those members within it and the dealers without it who were violating the plans agreed upon, but they also had the right to take such legitimate and honorable means as were within reach to ascertain what persons were violating the rules, and to give notice of it to all of the members of the association. But that course operated, says the plaintiff, in effect to deprive me of the opportunity of buying goods on terms as favorable as the defendant wholesale dealers bought them. True, but it may be answered that you could buy them on the same terms as the members of the association, which terms contain conditions governing the sale and the conduct of the members. Instead, you prefer to take the business chances to be found outside of the association, and, before the courts will help you, you must show that the plans of the association, or its conduct under those plans, are unlawful as against you.
The position attempted to be taken at this juncture by the plaintiff is, that granting the plans which the members of the association adopted were legal, nevertheless the wholesale dealers can be proceeded against in this suit, because they compelled some or all of the manufacturers against their will and inclination to refuse to sell their goods to plaintiff by threats, intimidation, blacklisting and other unlawful acts of the association. This language has a formidable sound, but subjected to the same analysis as was given to the word " threats " in the connection in which it was used in the Nat. Protective Association Case (supra) it will prove to be without force. There are no threats alleged in this complaint on the part of defendants to do anything except that which they have a right to do, if the views so far expressed be sound, and we said in that case, and it is proper to repeat here, that a man may threaten to do 'that which the law says he may do, provided that, within the rules laid down in certain cases therein cited, his motive is to help himself. If there be any other " intimidation " of manufacturers than that to be found in the agreements and written plans of this association and the steadfast purpose on the part of its members to carry them out according to their letter, it is not to be found in the complaint. The term " blacklisting " refers to the course of defendants in notifying the trade in effect that the plaintiff is outside of the association, and'prefers to stay out of it rather than be bound by the rules and regulations which other members of the trade regard as fairest and best to all, and insisting that the penalties of such a course shall be meted out to him, namely, that he shall not be allowed any rebate upon any of the manufacturers' goods so long as he shall retain that position. The facts alleged by them are true. The notification is a part of the plan agreed upon by all, and the plaintiff courted it rather than do business on the same basis as his competitors, who together handled about ninety per cent of the proprietary articles sold.
The plaintiff's characterization of the acts of the defendants do not establish a cause of action against the defendants if the acts themselves do not, and clearly their acts do not, inasmuch as they are not aimed at preventing the plaintiff or any one else from participation in the trade to the same extent and on the same basis as themselves, but are intended simply to prevent plaintiff and others from enjoying the same or greater rebates than they get without bearing the burdens which they assume as a condition of receiving them, unless it may be said that the fact that they have agreed upon a basis of transferring the goods from the manufacturer that insures only reasonable profit and security to them as distributing agents is illegal and void. And this would seem to be impossible in view of the fact that the wholesale dealers have not secured the authority to, nor attempted to, restrict either the price or the quantity sold of the goods dealt in. One of these elements has always been present in the cases of the past in this state, in which it has been held that there existed a combination in restraint of trade, which was against public policj and void.
It will be seen, therefore, that this is a controversy between opponents in business, neither side trying to help the public. Nor will the public be the gainer by the success of either. The motive behind the action of each party is self-help. It is the usual motive that inspires men to endure great hardships and take enormous risks that fortune may come. In the struggle which acquisitiveness prompts, but little consideration is given to those who may be affected adversely. Am I within my legal rights % is as near to the equitable view as competitors in business usually come. When one party finds himself overmatched by the strength of the position of the other, he looks about for aid. And quite often he turns to the courts, even when he has no merit of his own, and makes' himself for the time being the pretended champion of the public wel fare in the hope that the courts may be deceived into an adjudication that will prove helpful to him. Now, while the courts will not hesitate to enforce the law intended for .the protection of the public because the party invoking such protection is unworthy, or seeks the adjudication for selfish reasons only, they will be careful not to allow the process of the courts to be made use of, under a false cry that the interests of the public are menaced, when its real purpose is to strengthen the strategic position of one competitor in business as against another.
I concur with Judge Haight.
The judgment should be affirmed, with costs.