Court Opinion

ID: 5481463
Source: CourtListenerOpinion
Date Created: 2022-01-10 01:56:41.038644+00
Date Added: 2024-06-11T08:33:37.234843
License: Public Domain

Fuld, J.
(dissenting). The present decision stigmatizes as unfair competition a long-established business practice, a practice untainted by deceit, oppression or unfair dealing and involving no assault upon the good will of the manufacturer. Beaching the result which it has, on the basis of a strained construction of the Fair Trade Law, the court turns a statute designed to promote fair trade into an unfair instrument suppressing honorable and decent competition and outlawing reasonable merchandising methods.
Since defendants entered into no fair trade agreement with plaintiff, we are not here concerned with the validity of any contractual arrangements that the manufacturer may make with those dealers whom it selects to handle its products. The statutory action of unfair competition — upon which plaintiff must of necessity rely — sounds in tort, not contract, and the statute expressly classifies that tort as a wilful one. Its primary objective is to prevent wilful assaults upon the manufacturer’s good will (see, e.g., Old Dearborn Distr. Co. v. Seagram-Distillers Corp., 299 U. S. 183, 193) — or, to phrase it as the majority opinion does (p. 66), the legislation “ was aimed principally at the vicious ‘ loss leader ’ type of competition prevalent in the mid-thirties.” It does not, as the majority asserts, “ unqualifiedly provide that price cutting fair trade articles in and of itself is unfair competition ” (p. 70). On the contrary, damage is expressly made the gist of the claim as in actions on the case at common law. Thus, the statute makes “ actionable ” but only “ at the suit of any person damaged thereby ” the act of “ Wilfully and knowingly * * * selling any commodity at less than the price stipulated ” in any fair trade agreement (General Business Law, § 369-b; emphasis supplied). To spell out a cause of action, therefore, a plaintiff must show (1) that there have been sales below the stipulated price, (2) that such sales were made wilfully and knowingly, and (3) that plaintiff has suffered or is likely to suffer legal *73damage. To obtain injunctive relief, as is sought in this case, plaintiff in addition must satisfy the traditional requirements of a court of equity and show, among other items, the likelihood of irreparable harm. In short, price cutting is condemned only when it is wilful, when it is injurious to the manufacturer’s good will or when it otherwise causes injury to plaintiff.
Consideration of the record before us demonstrates that no one of those essential requirements of proof has been met. All sales of plaintiff’s branded merchandise have been at the stipulated price. There has been no price cutting whatever in the conventional sense. The merchandising plan here challenged by plaintiff is of general application and is neither directed at, connected with, nor limited to plaintiff’s fair-traded articles. Cash receipts are issued on all sales of goods, whether or not fair-traded, redeemable in any articles handled in defendants’ store and in the fourteen other stores, in the Lynbrook area, which constitute the Lynbrook Dividend Club. The receipts may be exchanged for either branded or unbranded articles at the rate of twenty-five cents of merchandise for $10 of cash receipts. Most of the products sold in this group of stores are unbranded and hence not subject to the provisions of the Fair Trade Law. As analysis thus makes evident, there is lacking proof of any wilful assault upon, or injury to, plaintiff’s good will or of any misuse of its trade-marks. And not only is there no showing of irreparable harm, but there is not a scintilla of evidence that defendants’ use of cash receipts has produced or is likely to cause plaintiff any damage whatsoever. As the Appellate Division found — and I find no warrant for overturning the finding — ‘ ‘ Allowance of said cash discounts has not reduced the minimum resale price of any commodity, and has not injured the goodwill value of any article of plaintiff’s merchandise.” The conclusion is, therefore, inescapable that plaintiff has failed either to establish a case of unfair competition within the meaning of the statute or to sustain its right to injunctive relief.
To be sure, the cash receipts have value. Those purchasers who accumulate the necessary amount can convert them into merchandise and thus reduce the cost of the branded and unbranded goods which they have purchased. They are the beneficiaries of a cash discount on all their purchases when*74ever they avail themselves of the advantages of this plan. It cannot be denied, therefore, that there is a mathematical reduction of the selling price of branded goods. But, the question arises, does such reduction under the special circumstances disclosed by this record constitute wilful price cutting injurious to the manufacturer’s good will? In my view, it does not.
The use of cash receipts and trading stamps and the granting of cash discounts long antedated fair trade legislation. Defendants have been issuing cash receipts for some thirteen or fourteen years. There is not the slightest evidence that it was the legislature’s design to outlaw such normal and long-established business practices of general application. It is an unwarranted extension of the Pair Trade Law to hold that what defendants are doing renders them guilty of unfair competition and such, I note, is the conclusion of the courts of other states in dealing with the cognate problem of trading stamps. (See Weco Products Co. v. Mid-City Cut Rate Drug Stores, 55 Cal. App. 2d 684; Food & Grocery Bureau v. Garfield, 20 Cal. 2d 228; Bristol-Myers Co. v. Lit Bros., Inc., 336 Pa. 81.) In sanctioning the use of such devices, we would not be engrafting an additional exception upon the statute. Bather, we would be holding merely that there has not been a wilful sale at less than the stipulated price, which causes or is likely to cause damage to the manufacturer’s good will.
Nor need we concern ourselves with the hypothetical possibility of trade wars involving unwarrantedly high cash discounts or of merchandising plans specifically directed against the fair-traded products of a manufacturer. Courts are not powerless to deal with obvious subterfuges. (See Guerlain, Inc., v. Woolworth Co., 297 N. Y. 11.) There is time to deal with such situations when they are presented by a “ person damaged thereby ” (G-eneral Business Law, § 369-b). It is enough for the disposition of this case that there is here a complete failure of proof not alone of any subterfuge but of all of the essential ingredients of a statutory action for unfair competition.
Lewis, Conway, Desmond and Dye, JJ., concur with Froessel, J.; Fuld, J., dissents in opinion in which Loughran, Ch. J., concurs.
Judgment accordingly.