Court Opinion

ID: 3631865
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:11:07.987403+00
Date Added: 2024-06-11T07:45:36.265568
License: Public Domain

This case, as it comes before us, presents a complaint, alleging that the plaintiffs have suffered injury and damage as the result of unlawful combinations and associations entered into by the defendants, either in the form of the American Publishers' Association, or in the form of the American Booksellers' Association; which were intended to establish and to maintain the retail net prices fixed on copyrighted books by their publishers. A demurrer interposed by the defendants to the complaint was sustained by the court, at Special Term; but it has been overruled by the Appellate Division and that court has certified to us this question: "Are the facts stated in the complaint in this action sufficient to constitute a cause of action?" In determining this question, we must regard as admitted all the material facts alleged by the plaintiffs. Though their complaint is stated at considerable length, much of it is matter of description or the statement of legal conclusions. The plaintiffs conduct a department store, in the city of New York, under the name of R.H. *Page 482 
Macy  Company, and among the departments is one for the sale of books and publications in general. They have a large capital invested in their general business and their book department is one of the largest in the country; which latter fact is alleged to be due to the cheaper price placed upon the books and publications under a system of sales for cash only. It appears that publishers, who sold at retail, and other booksellers had not adhered to the "list prices," at which books were advertised, or offered, for sale at retail, but were accustomed to give large and liberal discounts to those familiar with trade customs, and the purchasing public, discovering that fact, was giving its custom to such dealers as the plaintiffs, who had placed fixed prices upon their books. In 1900, to meet a condition from which the publishing business was suffering, about ninety-five per cent, in number and in extent of business, of the publishers of all kinds of books and magazines formed the American Publishers' Association; which, upon its organization and in order "to prevent the cutting or reducing of prices on copyright books published by the members of the said association," adopted a resolution and, with its members, entered into an agreement "by which each of the members of the association agreed that all copyrighted books published by any of them after May 1st, 1901, should be published and sold at retail at net prices, that is, the published price thereof, and not be subject to any discounts." They, further, agreed, as the complaint states it, "that such net copyrighted books, and all other books, whether copyrighted or not, or whether published by them or not, should be sold by them to those booksellers only who would maintain the retail net price of such net copyrighted books for one year, and to those booksellers and jobbers only who would furthermore sell books at wholesale to no one known to them to cut or sell at a lower figure than such net retail price, or whose name would be given to them by the association as one who cut such net prices." Thereafter, the Publishers' Association caused to be organized the American Booksellers' Association to co-operate, as it is *Page 483 
alleged, in the "unlawful purpose of maintaining the price of copyright books and preventing competition in the sale thereof, and in the supply of all books, whether copyrighted or not." In the effectuation of this purpose the two associations have co-operated and, because of their agreement, neither of them, nor any of their members, it is alleged, "will sell or supply books at any price to any dealer, whether a member of said association or not, and whether such books are copyrighted or not, or are not published by said American Book Publishers' Association or its members, who resells, or is suspected of reselling, such copyrighted books at less than the arbitrary net price fixed by said unlawful combination, nor will the said associations nor any of their members sell or supply any books whatever to any one who resells, or is suspected of reselling, such copyrighted books to any dealer, who thereafter sells the same at less than such arbitrary net price."
In these statements, taken from the complaint, may be found the gist of this suit and all that is necessary to be considered, in my opinion, in the determination of the question whether, by such combinations and agreements, the defendants have violated the law. Other allegations relate to the refusal of the plaintiffs to join in such combinations; to the methods adopted by the defendants to prevent others from selling books to the plaintiffs, by "blacklisting" them in the book business, and by the use of coercive and intimidating measures; to the establishment by the defendants of a system of espionage, in order to secure information as to the sources of plaintiffs' supplies of books, and that, as the result of these agreements and of the methods adopted to make them effectual, publishers of books and book dealers have refused to sell books at any price to the plaintiffs, to their damage. The relief asked is, in substance, the adjudication of the unlawfulness of the combination and of the nullity of the agreement alleged and that an injunction issue restraining action by the defendants under their agreement, of any nature which may make it effectual against the plaintiffs, and, as *Page 484 
incidental to such equitable relief, an award of damages is asked.
Whatever else is in this complaint is but subsidiary to, and in demonstration of, the real cause of grievance; which is that, in order to maintain the retail net price of a copyrighted book, as fixed by its publisher, the defendants had entered into a combination and had agreed with each other that they would only sell to those in the trade, who would agree to maintain, and to assist in maintaining, the net retail price, and that they would not deal at all with those, who refused strict co-operation, in such respect; whether that was shown in the conduct of their own sales, or in the selling to others known by them to be "cutting" the net price. That I regard as the gravamen of this suit.
At the time of the doing of the things alleged in the complaint to have been unlawful, there was upon the statute books of this state an act, which had for its object the prevention of monopolies and the prohibition of restraints upon trade and commerce. (Chap. 690, Laws of 1899.) This statute, commonly called the Anti-Trust Law, contains three sections. The first section has a threefold purpose; in declaring to be against public policy, illegal and void, every contract, or combination, whereby a monopoly in the manufacture, production, or sale, in this state of "any article, or commodity, of common use" may be created; or "whereby competition in this state in the supply or price of any such article or commodity is or may be restrained or prevented;" or whereby the free pursuit of any lawful business may be restricted or prevented. I am unable to see how that any but the second provision of this section can bear upon the present controversy; because the owner of the copyright has a monoply under Federal laws and because the agreement complained of does not restrict the pursuit of the book business, to localities, or to persons; or otherwise than for the purpose of preventing the cutting by any one of the price of a copyrighted book, through the threatened withdrawal of all business relations with such person. Section two of the act makes it a misdemeanor, punishable *Page 485 
by fine and imprisonment, for any person, or corporation, to enter into any such contract or combination. The third section provides that the attorney-general may bring an action, in behalf of the People, against any person, or corporate agency, to restrain the doing in this state of any act in consummation of any contract or combination therein prohibited.
The argument in behalf of the plaintiffs is largely, if not wholly, based upon this statute. I regard its prohibitory provisions, however, as but the declaration of a state policy; which is, to use the language of the opinion in the Matter ofDavies (168 N.Y. 89, 101), "little more than a codification of the common law upon the subject." The contracts, agreements, arrangements and combinations prohibited by this statute were condemned at common law; but they did not, as this statute does, subject those who entered into them to criminal punishment, or make them amenable to restraint at the suit of the People. It might, possibly, be well said of this statute that, introducing no new rule of law, it now makes the contracts or combinations mentioned, which, before, were unenforceable, unlawful and criminal offenses and the subject of preventive judgments, at the instance of the law officer of the state.
If, then, the statute makes the position of the complainant no stronger at law than it was before its passage, it seems to me that the decision of this case should be controlled by our decision in Park  Sons Co. v. National Druggists'Association (175 N.Y. 1). Indeed, the decision of that case was made after the passage of chapter 383 of the Laws of 1897, of which the act in question is but the continuation and re-enactment, and the existence of the law upon the statute books was not ignored; for it was expressly referred to by Judge MARTIN, in his dissenting opinion, as a declaration of the policy of the state with reference to combinations of the nature of those described. It was, in my opinion, quite as authoritative upon the question of the lawfulness of the existing combination aimed at in the Park case; for, being a continuing arrangement, it could not be exempt from the operation of the act. The *Page 486 
action of the plaintiffs in the Park case was to have declared illegal the course adopted for conducting the business of the sale of proprietary medicines, as devised and carried on by the defendants through their association, under the title of the National Druggists' Association. The plaintiff was a corporation, engaged in the business of manufacturing proprietary or patent medicines and of dealing in the sale of such goods. The association was composed of wholesale and jobbing druggists, and of proprietors and manufacturers, who manufactured and sold their own proprietary articles, or chemical preparations. Its active membership controlled more than ninety per cent of the wholesale and jobbing trade. The plan, which the association had adopted and was acting under, was to require the manufacturers to compel the purchasers of their goods to contract, as selling agents, to maintain fixed selling prices, in consideration of receiving a certain fixed discount, or rebate. In order to maintain an uniform jobbing price for fixed quantities and, also, a retail selling price by the druggists, which they were to agree to maintain, it was agreed on the part of the manufacturers, at the instance of the wholesale and jobbing druggists, that they would confine their sales to persons named on a list furnished, as being those who would faithfully observe the prices and conditions named by the manufacturers. The plaintiff in that case refused to unite with the defendants; insisted upon its right to sell proprietary goods at such prices as it saw fit and sought, by its action, to restrain the defendants from continuing their efforts to prevent it from purchasing, and the manufacturers from selling to it, their goods, by way of threats and by methods of intimidation, not materially unlike those complained of in the present case. In that case the object of the combination was to establish uniform jobbing prices and retail selling prices for proprietary goods, and the plan was to enforce compliance through the threatened refusal of the proprietors and manufacturers to sell to dealers, who would not maintain the retail price. Between the two cases, there are differences in details of the methods availed of; but while *Page 487 
the self-defensive, or preventive, arrangements may have been more stringent and radical in the one, than in the other, case, the legal principle is not affected. The effort, in each case, was to make effective an agreement with respect to the fixing and maintenance of the retail price of an article, as much proprietary in the one, as in the other, case, and the differences in the plan adopted, in sum, are, rather, of degree: that is, in the present case, the defendants have agreed to refuse to have any business dealings with those booksellers, who would not co-operate to the fullest extent in maintaining sales of copyrighted books at the retail price fixed by their publishers. It was held in the Park case that the proprietors of the goods, there in question, had the right to adopt such a plan with respect to the disposal thereof as they saw fit and that no one could complain. The plan was not in restraint of trade; for while, as it was said by Judge HAIGHT, "it is true that it does away with the competition among dealers as to prices, 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, and, 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."
This plan was not against public policy, it was held, because public policy "commends the conduct of business in such a way as to serve all consumers alike" and "one of the cardinal and chief principles of the plan adopted is the establishing of an uniform price by proprietors, which necessitates the service of all persons alike throughout the United States." Chief Judge PARKER also speaking for the majority of the court in the Park case, was of the opinion, with reference to the charge in the complaint that the wholesale dealers could be proceeded against, 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 and blacklisting, *Page 488 
as evidenced by the agreements and written plans of the association and the declared purpose of the members to carry them out to the letter that the defendants were not doing anything except what they had a right to do. In that case, the court divided in opinion upon the sole question, whether the agreement alleged was vicious, as operating in restraint of trade and in prevention of competition.
It is difficult for me to see wherein the decision in thePark case is not controlling. The logical and consistent application of its doctrine must result in sustaining the demurrer here.
I can discover nothing in the purpose of these defendants, which is morally wrong, or which would deserve condemnation at common law. There is no combination to restrain competition among themselves; but, simply, an agreement among themselves to bring about more healthful conditions in a certain branch of the general bookselling trade by the maintenance of an uniform fixed retail price on a copyrighted book. That is to say; they agree that publishers of copyrighted books shall fix the net price at which such books shall be sold at retail and that those prices must be observed by all dealers; at the peril to them, if they undersell, of having business relations wholly severed. That the publisher of a copyrighted book may fix its price cannot, very well, be denied and if, by reason of a large number of publishers combining in a plan to compel the net retail price to be universally adhered to in sales, competition may be restrained, that is but an incident of the execution of a lawful plan. How can it be said that the statute in question is operative in such a case; where the copyright constitutes a monopoly, which the Federal government has granted to the publisher? The subject of these protective agreements — the very kernel, as we may say, of the combination — was the resolve of publishers to maintain throughout the trade, and everywhere, a net retail price for copyrighted books and that was to be enforced, to the extent of refusing to have any business dealings with those sellers of books — whether in treaty with the defendants or not — who refused, or connived at the refusal of *Page 489 
others, to sell at the price fixed. How was this unlawful? Doubtless, this resolution was of a stringent and wholesale nature; but is it inharmonious with the exclusive, or monopolistic, nature of the Federal grant of letters of copyright? I do not think so. When, in innovation of the common law, the Congress of the United States exercised its constitutional power to enact copyright and patent laws, it was the purpose that authors and inventors should have monopolies in the ownership and disposition of the subject of the patent, or copyright. It does not seem to me, therefore, that any plan, however radical, which is adopted for the protection of the enjoyment of the monopoly and, especially, one which, simply, results in producing absolute uniformity of price rates, can be said to be within the operation of the state law against combinations and agreements for the creation of monopolies, or for the prevention of competition.
The United States Supreme Court, in its consideration of the act of Congress, known, commonly, as the Sherman Anti-Trust Act, (passed July 2d 1890), which declared that "every contract, combination in the form of a trust or otherwise, or conspiracy in restraint of trade, or commerce, among the States" etc., was illegal, has interpreted it as aiming only at a contract, or combination, which has for its direct purpose the restraint of interstate trade, or commerce, and as not comprehending a case, where the restraint was an incidental result. (Anderson v.U.S., 171 U.S. 604.) In that case, by the by-laws of an association, its members were forbidden to buy, or sell, cattle from, or to, traders, not members of the exchange, or to buy from commission men, who bought from, or sold to, non-members. The United States sought to dissolve the association and to enjoin the members from carrying out their exclusive rules, upon the theory that they were engaged in interstate commerce. But the Federal Supreme Court held, if that were so, that, nevertheless, the combination was not within the purview of the statute, and that the agreement did "not restrict competition among the defendants for the class of cattle dealt in by them." *Page 490 
At common law those combinations were condemned, wherein the persons in combination had agreed between themselves to restrict the production and the supply of some article of prime necessity; for the reason that, as constituting an immediate restraint upon trade and upon competition, it was a detriment to the public and, hence, contrary to public policy. They were not condemned by legislation as illegal and criminal; but the courts refused to enforce the agreement. What the law of this state aims at, in undertaking to stamp any of the described combinations and contracts as an unlawful and criminal act, is to prevent an agreement being carried out between persons, which looks to the restraint of competition between themselves in, and to the controlling of the production and price of, articles of common use. It was, upon a reasonable reading, intended to operate upon contracts, whose direct effect was to restrain trade, or to prevent competition between its parties, within this state, and its operation should not be extended to cases where the effect was an incident of some plan not, itself, unlawful. And, as I have before suggested, the monopolies aimed at were those which the contract of the combination might create and, clearly, not those which were created by the law of the land.
But this contract of the combination, analyze it how you may, had no other reason, nor purpose, than to protect, in as drastic ways as the parties could devise, the trading business of publishers of copyrighted books. There was no "pooling" in the arrangement; nor was there any restraint imposed upon the parties to it as to competition in the production and the sale of some article, which all were engaged in producing and which all
were free to supply. The contract did not extend to uncopyrighted books; other than by way of penalty, as the refusal to deal in them might be incidental to the refusal to deal with booksellers, who would not live up to, or who would not co-operate in, an agreement to maintain the net retail price of a copyrighted
book. It is not unlawful for a person to refuse to deal with others, as his judgment, or fancy, may impel him. His business is his own and the only limitation *Page 491 
upon his pursuit of it is that he shall not interfere with the legal rights of others. It seems to me that what he may lawfully do himself, he may unite with others in doing, if of some common advantage. (See Park  Sons Co. v. National Druggists'Association, supra; Anderson v. U.S., supra; Macauley v.Tierney, 19 R.I. 255; Bohn Manufacturing Co. v. Hollis,54 Minn. 223.) Combinations for the prevention of competition have been, commonly, understood to be made between those, who, themselves, have been competitors in the particular business and who enter into an agreement with each other to regulate the price of the particular article of necessity traded in. The agreement alleged here is not of that nature. If the law is violated by this agreement, it is not because competition between the parties is to be suppressed; for their object is, solely, to maintain the net retail prices, which they, as publishers, have rightfully
fixed on the copyrighted books they are selling. What competition is prevented must be, plainly, that incidentally occurring between booksellers; who, for some advantage to be gained in their business, would sell such books, under the retail price fixed by their publishers. But, if that is the test to be applied to the legality of the combination, or of the agreement, attacked, it appears to me to be an extraordinarily inaccurate one and quite beyond the intent of a statute, supposed to incorporate the common-law rule.
To summarize, as it has been well done in the argument of the appellants' counsel; the purpose of the parties to this contract, to maintain one price for the same book to all retail buyers, was limited to copyrighted books, published by members of the American Publishers' Association, and did not extend to uncopyrighted books, whether published by such members, or by others. Nor was any party restrained from selling uncopyrighted books and uncopyrighted books only to any person, provided such person does not buy, or sell, copyrighted books published by the members of that association. It is only to dealers, who, themselves, insist upon selling at retail the copyrighted books of the members of the association *Page 492 
at prices less than the net prices fixed by the publishers, or who insist upon reselling at wholesale such copyrighted books to such dealers, that the parties to the combination are restrained from selling.
I am led to the conclusion, after a careful consideration of the question presented, upon principle as upon the authority of the Park case, that the question certified should be answered in the negative and, therefore, I think that the order of the Appellate Division should be reversed and that the order of the Special Term should be affirmed.