Court Opinion

ID: 9516946
Source: CourtListenerOpinion
Date Created: 2023-08-06 23:57:09.434652+00
Date Added: 2024-06-11T09:40:35.877049
License: Public Domain

Butzel, J.
(concurring). The facts as far as developed by the pleadings and without a hearing have been presented by Mr. Justice Dethmers. The sole question decided by the trial court is whether a Michigan manufacturer may invoice the Michigan fair-trade law as to sales of its products by a non-signing retailer. I dissent from his holding in so far as it holds that- the Michigan fair-trade act is invalid as to nonsigners of fair-trade agreements in intrastate commerce.
The legislatures looking after the general welfare have adopted laws, in the various States approving “fair trading” and the courts have almost uniformly held them constitutional. Mr. Justice Dethmers has cited the decisions of the highest courts in 7 States and the United States supreme court to that effect. There should, also,'be added the following decisions: Fisher, Inc., v. Canfield, Colorado Dist. Ct. for City and County of Denver, No A 22837, Div 2 (CCH Trade Regulation Service, par 52,611); Broff v. Silver Liquor Stores, Inc., 5 Conn Supp 288; Auto Rental Co., Ltd., v. Lee, 35 Hawaii 77; Pepsodent Co. v. Krauss Co., 200 La 959 (9 So2d 303); W. A. Sheaffer Pen Co. v. Barrett, 209 Miss 1 (45 So2d 838); Rayess v. Lane Drug Co., 138 Ohio St 401 (35 NE2d 447); Borden Co. v. Schreder, 182 Or 34 (185 P2d 581); Welch Grape Juice Co. v. Frankford Grocery Co., 36 Pa Dist and Co 653; Miles Laboratories, Inc., v. Seignious, 30 F Supp 549 (applying South Carolina law); Miles Laboratories, Inc., v. Owl Drug Co., 67 SD 523 (295 NW 292); Frankfort Distillers Corp. v. Liberto, 190 Tenn 478 (230 SW2d 971); Sears v. Western Thrift Stores of Olympia, Inc., 10 Wash2d 372 (116 P2d 756). Thus in a total of 20 State or Federal and Territorial courts, the nonsigner provision has *121been upheld, and in but 1 jurisdiction — Florida—has it been declared unconstitutional. In the other-27 States in which fair trade laws are now in existence, they seem to have been applied without discussion of their constitutionality. For example, see Iowa Pharmaceutical Association v. May’s Drug Stores, Inc., 229 Iowa 554 (294 NW 756).
Examining the 1 dissent in the field, the Florida decision in Liquor Store, Inc., v. Continental Distilling Corp., 40 So2d 371, we find that the controlling reason for the court’s determination was its reexamination of the economic soundness of fair-trade pricing in the light of changed economic conditions; The Florida holding was rejected in 2 later decisions, which, incidentally, were rendered at a time of similar economic conditions. The Mississippi and Tennessee courts, while noting the Florida "dissent, aligned themselves with the majority authority on the issue and refused to re-examine the position of Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 US 183 (57 S Ct 139, 81 L ed 109, 106 ALE 1476), and the leading State cases subsequent thereto.
Our own determination must, of course, be made after an examination of our own Constitution and governing law. However, believing as we do that the decisions of our sister States on identical issues, particularly when rendered in such overwhelming’ numbers, and the decision of the supreme court of the United States, should not be lightly disregarded, we should be inclined to rest our decision on the weight of authority alone if there were not reasons just as compelling for our ruling.
There is a presumption of constitutionality of every act of the Michigan legislature that entitles it to the highest respect by this Court. It is not our province to repeal a law which is constitutionally sound although it represents a change in the eco*122nomic public policy of the State of which certain of us may or may not approve. The only question is whether the restrictions of the statute have a reasonable-relation to a proper purpose, in this case, the general welfare.
In People v. Victor, 287 Mich 506 (124 ALR 316), we laid down the test of reasonability of an economic regulation (syllabi):
“The right to engage in any business riot harmful to the public is guaranteed by the Constitution.
“A business practice which has no detrimental effects to the public health, morals, safety and general welfare may not be prohibited by the legislature without resulting in a deprivation of property and liberty without due process of law.
“The constitutional right to engage in business is subject to such regulation as'may be necessary to the public welfare, health, morals and safety.”
Justice Dethmers relies heavily on People v. Victor as authority that the instant legislation, attempting to regulate price, and bearing no reasonable relation to public health, morals, safety or the general welfare is not a legitimate exercise of the police power and violates the due process clause of our Constitution. The result of People v. Victor, however, is not controlling here.
At the outset, I emphasize that we are here concerned with vertical restrictions as to prices imposed by the manufacturer, not with horizontal agreements between retailers to regulate prices in intrastate commerce. Enforcement of the statute in the Victor Case which forbade the giving of a premium with the retail sale of gasoline, if we assume its result to be minimum price-fixing (the Court treated it as the forbidding of an unfair trade practice) would have had the effect of enforcing a horizontal price-fixing agreement between retailers of gasoline and without the consideration of the interests of the manufac*123turer. It is on this distinction that many courts have upheld fair-trade laws against constitutional objections going to the scope of the police power. See Joseph Triner Corp. v. McNeil, 363 Ill 559 (2 NE2d 929, 104 ALE 1435); Pepsodent Co. v. Krauss, supra; W. A. Sheaffer Pen Co. v. Barrett, supra; Ely Lilly & Co. v. Saunders, 216 NC 163 (4 SE2d 528, 125 ALE 1308)., Sears, v. Western Thrift Stores of Olympia, Inc., supra, for instances where this distinction was made.
People v. Vidor concerned the regulation of all of a certain type of commodity. The fair trade acts apply only to,those commodities in “fair and open competition” with other commodities of the same general class and do not serve to stifle the most desirable competition, that between different brands 'of the same commodity. Manufacturer’s price-fixing under the authority of the fair-trade act concerns only all of one brand or trade-marked commodity; not all of the commodity itself whatever its origin. Price-fixing is allowed for those commodities which are in fair and open competition with those produced by others. See dissent of Mr. Justice Holmes in Dr. Miles Medical Co. v. John D. Park, & Sons Co., 220 US 373 (31 S Ct 376, 55 L ed 502); for an early statement of the view that it is an economic fallacy to assume that the competition which benefits the public is between retailers of thé same product; it is between rival articles, a competition in excellence. See, also, discussion in Ely Lilly & Co. v. Saunders, supra.
Unlike the controls struck down in the Vidor Case, control of minimum price under the fair trade laws is not automatic by legislative decree but comes about as a result of voluntary agreement between the manufacturer and dealer which is then enforced against a nonsigner with notice as a means of protecting the value of the manufacturer’s trade-mark *124or brand. The nonsigner is neither obligated to buy or sell the manufacturer’s products if he does not wish to adhere to such voluntarily-established prices. For this reason, many courts have held that the result of the fair-trade act is merely the legislative protection of a private contractual relation. See Old Dearborn Distributing Co. v. Seagram-Distillers Corp., supra; Max Factor & Co. v. Kunsman, 5 Cal 2d 446 (52 P2d 177); Pepsodent Co. v. Krauss Co., supra; Frankfort Distillers Corp. v. Liberto, supra; and Weco Products Co. v. Reed Drug Co., 225 Wis 474 (274 NW 426).
In the Victor Case we emphasized that there was no showing that the blanket prohibition of the practice of giving premiums would tend to alleviate destructive price cutting; indeed, the Court implied that a statute directly aimed at the evils of a gasoline price war might be constitutional. Here, there is a considerable body of opinion to indicate that the use of brand name products for “loss leaders” and destructive price cutting is an evil which may validly be regulated by the manufacturer with the aid of the State through the fair-trade laws.
The bases of the fair-trade regulations under the police power are 2: (1) Right of the plaintiff-manufacturer to be free from injury to the good will of his business as a result of price cutting on distinctive goods; (2) Right of the plaintiff to protect one retailer from the price-cutting tactics of another with regard to .such product, as a means of promoting that good will.
The Michigan fair-trade law was passed, like those in the vast majority of States, to protect the manufacturer in the sale of his individual product, when identified by some kind of distinctive markings on the product or package delivered to the consumer. The protection of the good will of the manufacturer is a legitimate object of the fair-trade act. It is not *125an agreement between retailers to fix a price. It protects the manufacturer who seeks to maintain the excellence of Ms product. The public is not obliged to buy it; it may purchase competitive products. It prevents price wars in a particular product which are harmful or disastrous to the manufacturer’s business. It also protects the small retailer, who must meet the competition of the larger store dealing in general merchandise and which is able to cut prices below cost of fair-trades merchandise or sell it at a minimum or no profit, and thus attract trade, possibly permanently, for the purchase of other articles. The use of what are commonly known as “loss leaders” thus may become ruinous to the small retailer. It necessarily will have a harmful effect on the manufacturer who is trying to protect Ms business.
Mr. Justice Dethmers argues that plaintiff’s trade-mark rights were not breached by defendant’s cut-rate sales. It is true that a cut-rate sale does not represent the theft or appropriation of a trademark in itself, but it represents an injury to the good will attached thereto which might be as serious-to the manufacturer. There exists, therefore, a substantial property right wMch may be protected by the legislative enactment. The United States supreme court expressed itself on the subject in the Old Dearborn Case, supra, as follows: *126species of property, is a proper subject for legislation. Good will is a valuable contributing’ aid to business — sometimes the most valuable contributing asset of the producer or distributor of commodities. And distinctive trade-marks, labels and brands, are -legitimate aids to the creation or, enlargement of ' such good will. It is well settled that the proprietor of the good will ‘is entitled to protection as against one who attempts to deprive him of the benefits resulting from the same, without his consent and authority.’ McLean v. Fleming, 96 US 245, 252 (24 L ed 828). ‘Courts afford redress or relief on the ground that a party has a valuable interest in the good will of his trade or business, and in the trademarks adopted to maintain and extend .it.’ Hanover Star Milling Co. v. Metcalf, 240 US 403, 412 (36 S Ct 357, 60 L ed 713). The ownership of the good will, we repeat, remains unchanged, notwithstanding the commodity had been parted with. Section 2 of the act does not prevent a purchaser of the-' commodity bearing the mark from selling the commodity alone at any price he pleases. It interferes only when he sells with the aid of the good will of the vendor; and it interferes then only to protect that good will against injury. It proceeds upon the theory that the sale of identified goods at less than the price fixed by the owner of the mark or brand is an assault upon the good will, and constitutes what the statutes denominated ‘unfair competition.’ See Liberty Warehouse Co. v. Burley Tobacco. Growers’ Cooperative Marketing Ass’n, 276 US 71, 91, 92, 96 97 (48 S Ct 291, 72 L ed 473).”
*125“Nor is section 2 so arbitrary, unfair or wanting-in reason as to result in a denial of due process. We are here dealing not wdth the commodity alone, but with a commodity plus the brand or trade-mark which it bears as evidence of its origin and of the quality of the commodity for which the brand or trade-mark stands. Appellants own the commodity; they do not own the mark or good will that the mark symbolizes. The good will is property in a very real sense, injury to which, like injury to any other
*126See, to similar effect: Max Factor & Co. v. Kunsman, supra; Ely Lilly & Co. v. Saunders, supra; Sears v. Western Thrift Stores of Olympia, Inc., supra. I conclude that this legislation aids the manufacturer in the protection of a valuable property and contractual right and, therefore, unlike the legislation we-struck down in the Victor Case, such regulation is proper for the public welfare.
*127Defendant argues that the Michigan fair-trade law constitutes a discriminatory protection of only one class of commodities against price cutting; that it is merely an attempt to fix prices for the private benefit of one class as against others. Does the protection of brand, trade-marked, or otherwise distinctive merchandise against price cutting amount to an unconstitutional classification? In ordinary pursuits unaffected with a public interest, a classification which confers upon one category of businessmen special privileges is discriminatory and invalid as class legislation. See People, ex rel. Valentine, v. Berrien Circuit Judge, 124 Mich 664 (50 LRA 493, 83 Am St Rep 352); People, ex rel. Attorney General, v. Sperry & Hutchinson Co., 197 Mich 532 (LRA 1918A, 797); Peninsular Stove Co. v. Burton, 220 Mich 284; and Levy v. City of Pontiac, 331 Mich 100. Such, however, is not the present case.
There are several decisions from other jurisdictions applying similar constitutional provisions to-fair-trade laws. In Old Dearborn Distributing Co. v. Seagram Distillers Corp., supra, it was held that such classification was not invalid, for, in fact, trademarked and branded goods are in a class by themselves. In Max Factor & Co. v. Kunsman, supra; Joseph Triner Corp. v. McNeil, supra; Ely Lilly & Co. v. Saunders, supra; and Miles Laboratories, Inc., v. Owl Drug Co., supra, this objection was also held to be unfounded. The Illinois court stated in the Joseph Triner Case:
“[The classification is] based on a real and substantial difference having a rational relation to the subject of the particular legislation.”
There is no problem under the equal protection clause. Other courts, and numerous ones, merely followed the rule of the Old Dearborn Case without further discussion of the issue. The Florida court *128was the sole dissenting voice when it held that trademarked goods were being given special protection unconstitutional in nature.
I am in accord with the holding of the Old Dear-born Case and those following it. The manufacturer possesses a property right in identifiable goods which does not exist in nonidentifiable goods and this may properly be made the basis of regulation protecting one class and hot the other.
Defendant argues that the fair-trade law represents an unlawful delegation-of price-fixing power to private persons. That legislative power may not be delegated in Michigan was settled by G. F. Redmond & Co. v. Michigan Securities Commission, 222 Mich 1; Chemical Bank & Trust Co. v. County of Oakland, 264 Mich 673; and Argo Oil Corp. v. Atwood, 274 Mich 47. However, we do not have here an instance of such unlawful delegation.
I find unfounded defendant’s argument that—
“Except for the Florida court, supra  little consideration is given in the decisions to the fact that the effect of the act is to delegate price-fixing power to individual manufacturers or suppliers without any standards or criteria controlling the exercise of such powers.”
In Old Dearborn Distributing Co. v. Seagram-Distillers Corp., supra, it was stated that no unlawful delegation of power existed as only sales by the manufacturer made subsequent to the establishment of the fair-trading system could be subject to its provisions, and that no retailer therefore needed to be bound'by it unless he so desired. Similar contentions were rejected in Goldsmith v. Mead Johnson & Co., 176 Md 682 (7 A2d 176); W. A. Sheaffer Pen Co. v. Barrett, supra; Johnson & Johnson v. Weiss-*129bard, 121 NJ Eq 585 (191 A 873); Bourjois Sales Corp. v. Dorfman, 273 NY 167 (7 NE2d 30, 110 ALE 1411); Weco Products Co. v. Reed Drug Co., supra; Joseph Triner Corp. v. McNeil, supra; and Ely Lilly & Co. v. Saunders, supra. Florida was again the only dissenter when it held that there was no review of the act of price fixing and it was, therefore, an illegal delegation.
The standards governing the delegation of power are inherent in the act itself. The manufacturer’s prices are controlled by competition or the act is not brought into play. Fair trading of articles is permissible only when there exists “free and open competition.” "We have here a grant of power over the conduct of others growing out of a basic property right, and then and only then may it be exercised. I am, therefore, in accord with majority authority that there has been no unlawful delegation of price-fixing power.
It has been said that freedom of contract of the retailer is violated by the nonsigner provision of the act. But no retailer is obliged to buy any identifiable commodity and upon doing so with knowledge he-should be held to have accepted the consequence. He is only punished if he advertises at below fair-trade prices wilfully and knowingly. He is privileged to sell if the commodity is not identified with its trade-mark or brand name on the commodity or the package or wrapper. See Old Dearborn Distributing Co. v. Seagram-Distillers Corp., supra; W. A. Sheaffer Pen Co. v. Barrett, supra; Johnson & Johnson v. Weissbard, supra; and Sears v. Western Thrift Stores of Olympia, Inc., supra, for further discussion.
Defendant has other objections going to the validity of this legislation as an exercise of police power under the due process clause. It contends that the legislative labeling of simple price reduction as “un*130fair competition” is not binding on the court. This might well be true if there were shown us “simple” price reduction with no other circumstances; but price reduction under circumstances which tend to injure a property right of the manufacturer may properly be a subject of regulation. For the same reason, the issuance of an injunction under these circumstances may be made mandatory by legislative fiat without a violation of the due process clause if the legislature feels such to be desirable.
I have carefully examined all of defendant’s arguments going to the constitutionality of the statute herein and have rejected them for the reasons stated above or set forth in other leading cases I have cited on identical issues, which it would be useless to further review. Our conclusion then should be that this act is a valid exercise of the police power of this State as applied to wholly intrastate transactions; that it is wholly constitutional and is properly enforceable by a. court of equity in cases coming within its purview. I am, therefore, in total disagreement with the decision of the trial court which was based on the constitutionality of the fair-trade act under the Constitution of the State.of Michigan.
The question of the validity of the application of the fair-trade act under the laws of the United States was first raised in the briefs of both parties in the instant case, and I am in accord with the opinion of Mr. Justice Dethmers to the extent that it holds that the act cannot be enforced against nonsigners of fairtrade agreements concerning articles sold in interstate commerce. This- was the holding of the majority ’ of the United States supreme court in Schwegmann Bros. v. Calvert Distillers Corp., 341 US 384 (71 S Ct 745, 95 L ed 1035, 19 ALR2d 1119). Additional cases cited by Mr. Justice Dethmers would indicate that all of plaintiff’s goods sold in a nationwide distribution program are to be construed *131as goods sold in interstate commerce even though the actual sale was an intrastate one, and thus that the Schwegmann decision applies to plaintiff’s goods sold in Michigan, since plaintiff sold in interstate as well as intrastate commerce, as well as to those sold out of the State. A very recent case decided by an intermediate appellate court in California' is to a like effect. Cal-Dak Co. v. Sav-On Drugs, Inc., 110 Cal App2d 204 (242 P2d 333),
There' is legislation pending in the United States Congress which would legalize enforcement of fair-trade agreements against nonsigners in interstate commerce, and restore the situation which existed before the Schwegmann decision, making fair-trade laws of a State effective also as to fair-trade articles of interstate commerce sold within the State. If such a law is passed the Michigan fair-trade law, if upheld under the State Constitution, would be effective1 in ■ both intrastate and interstate commerce. ' The decision, as to its validity under the. Michigan Constitution is, therefore, important, and it can be, only' assailed at the present time on the ground thatit offends the present Federal law as set forth in the.' Schwegmann Case.
For the reasons above stated, I-concur in the result reached by Mr. Justice Dethmers.
Reid, J., concurred with Butzel, J.