Court Opinion

ID: 9810796
Source: CourtListenerOpinion
Date Created: 2023-08-31 21:59:20.819592+00
Date Added: 2024-06-11T13:40:13.773485
License: Public Domain

Barnhill, J.,
dissenting: Tbe facts in this record, interpreted in connection with tbe legislation under consideration, are such that I find it impossible to concur in tbe majority opinion.
It is admitted that:
Plaintiff does not sell its commodities to retailers. It sells to wholesalers who in turn supply tbe retail dealers. It does not cater to tbe general retail trade in advertising its products to tbe consuming public, nor recommend nor encourage tbe resale of its products by retail druggists to members 'of tbe consuming public. Its policy of distribution is predicated upon tbe theory that medicinal products such as those manufactured, distributed and sold by tbe plaintiff should be used only under tbe supervision of a physician. It merely recognizes “tbe right of tbe retail druggist to resell certain of plaintiff’s manufactured products directly to members of tbe public where not prohibited from making such sales by state or federal laws.” Defendant was not guilty of any fraud or deception in acquiring tbe merchandise it retailed and it has not engaged in “price-cutting” as that term is ordinarily understood, but is making a reasonable profit. By tbe enforcement of the statute defendant will be required to increase tbe cost of tbe merchandise sold by it to tbe consuming public — arbitrarily and against its will — by at least eight per cent.
It further appears that: (1) Although tbe statute in question authorized it so to do, tbe plaintiff did not elect to bind itself to sell its commodities only to wholesalers who in turn contracted not to resell tbe same to retailers except upon contract to observe tbe stipulated minimum price. Instead plaintiff sold or permitted tbe sale of its commodities to tbe defendant knowing that tbe defendant bad refused to enter into tbe stipulated contract or to regard tbe stipulated price. (2) Plaintiff undertook to classify customers in a manner not authorized by tbe *183statute and to make the contract apply to only a part of the purchasing public. (3) Defendant by conducting a “cash and carry” business and by other efficient business practices is conducting its business at a cost less than that incurred by the average retailer and is seeking to pass on some of the benefits to the consuming public.
Plaintiff now seeks to impose upon noncontracting retailers the duty to observe the minimum prices provided in its contract with certain retailers. It proceeds under the terms of ch. 350, Public Laws 1937, known as the Pair Trade Act. The majority approves as constitutional this statute which not only validates price fixing contracts between manufacturers and retail distributors, but likewise makes such contracts binding upon other retail dealers not parties to such contracts.
As a result of this decision retail distributors who by conducting a “cash and carry” business and by other expense reducing business methods and practices are conducting their business at a cost less than that incurred by the average retailer and who are able and willing and are seeking to pass on some of the benefits to the consuming public by offering its merchandise at a lower price are compelled to sell to the public at an artificial and higher price than that which normally would be fixed by the forces at work in a competitive commercial world. This is price pegging with a vengeance — and the consuming public is compelled to pay an additional tribute to the retailer which the retailer himself does not want. The effect of this act goes well beyond what has been called “predatory price-cutting” for it fixes prices irrespective of the motives or purposes of the retailer in reducing prices, by shaving his margin of profit or otherwise. It promotes the establishment of manufacturer monoplies and retailer combinations in restraint of competition. It penalizes the initiative and efficiency of alert retailers and rewards the incompetent or inefficient. It increases prices demanded of the consumer. It aids one class of retailer against another competing class who through more efficient business methods are able to undersell' — at a fair profit — their competitors. It is in a final analysis a shot aimed at a particular group of retail merchants — but unfortunately the load thereof strikes and inflicts a telling wound upon the mass of people who compose the consuming public. To the retailers it means elimination of price competition and better profits — to the consumer it means the loss of the benefits arising out of wholesome price competition, and it produces still higher cost of living.
Under an economic system founded upon competition every general restriction — that is, every restriction covering all or a controlling fraction of a given commodity- — -is essentially unreasonable, being neither fairly necessary to the protection of the manufacturer, who already has a monopoly, nor beneficial to the public, because it does not tend to *184create an incentive to increase tbe excellence of the product in order to maintain the better price.
Nor are these social, economic and political weaknesses of the statute the only objections. There are reasons, both legal and equitable, why the plaintiff may not maintain its action.
The plaintiff is not entitled to equitable relief.
The act is declaratory of the public policy of the State. Enforcement thereof rests upon the Attorney-General and the solicitors of the State, except as otherwise expressly authorized in the act. It authorizes individual trade-mark owners to sue only in the event they are damaged by the action of a retailer in selling at less than the fixed price, and the plaintiff alleges no facts upon which the allegation that it has suffered damages may be predicated. It sells to wholesalers and not to retailers. So far as this record discloses, it is selling the same quantity at the same margin of profit as heretofore.
The statute does not authorize injunctive relief against threatened damage. In that connection plaintiff alleges that the contracting retailers are threatening to cancel contracts and it will thereby suffer irrevocable damages. Even if the plaintiff is authorized to seek injunctive relief this is a false premise as the contract expressly reserves in the retailer the right to cancel the contract. The cancellation thereof is the exercise of a right and not the commission of a wrong. It gives no cause of action, but is damnum absque injuria.
A retailer who is not a party to a price fixing agreement between the manufacturer and other retail dealers, does not, by selling such manufacturer’s products below the retail price designated in such agreement, induce such other retail dealers to breach their agreement, and, consequently, the manufacturer may not enjoin him on that ground. The defendant is merely selling products at prices lower than those agreed upon by the plaintiff and other retailers. The fact that incidental thereto some of the contracting retailers may breach their agreements in order to meet competition cannot be laid at the door of this defendant in an attempt legally to charge it with the result of such breach. Coty v. Hearn Department Stores, 284 N. Y. S., 909.
The contracting retailers voluntarily entered into the stipulations contained in the contract. They may voluntarily abandon such contracts whatever the motivating cause of such abandonment may be. The plaintiff cannot complain that retailers are exercising or threatening to exercise this right and it suffers no damage by reason thereof. There is no suggestion in the record that the plaintiff will not sell the same quantity of merchandise to wholesalers as heretofore or that it will be required to sell at a less price. Therefore, there is no threatened damage.
*185Plaintiff does not come into court seeking equity with clean bands, but bas put itself in a position wbicb is destructive of its right, if any existed, to appeal to a court of chancery for relief.
It did not contract with retailers — as the act authorizes — that it would sell only to wholesalers who agreed to resell only to retailers who contracted to observe the stipulated price. It did agree to “use every reasonable means” permitted by law “to prevent the sale ... at less than the minimum resale price” by others. In violation of this agreement on its part it put its commodity on the market for unrestricted sale and sold, or permitted the sale, to the defendant unconditionally, although it knew that the defendant had refused to sign the contract and had declined to agree to observe the stipulated price in the future. The defendant purchased plaintiff’s commodities from recognized wholesale dealers in plaintiff’s merchandise, which wholesale dealers the plaintiff could have bound — but did not — -to sell only to those who agreed to observe the stipulated minimum price. Defendant purchased unconditionally under the circumstances indicated. It was' guilty of no fraud or deception in the acquisition of title to the property. Necessarily, under the circumstances of this case, the plaintiff was a party to such acquisition in violation of its contract with other retailers. It was a party to the acquisition by the defendant of its commodities on an unconditional and unrestricted basis when the plaintiff had the right to contract not to sell to wholesalers who would resell to retailers who did not agree to observe the stipulated price, and it had the right in the first instance to sell only to those who agreed to observe such prices. Having been a party to the sale of the commodities to the defendant on an unrestricted basis in violation of the terms of its contract it should not now1 be heard in chancery to insist that the defendant deal with such commodities on a restricted basis, or to assert that in fact the commodities were acquired by the defendant conditionally.
It may be argued that the defendant in the facts agreed has stipulated away its right to insist that plaintiff has no standing in a. court of equity. As to that I take the position that equity jurisdiction was conferred upon the courts with the laudatory purpose to make it possible to render justice to a litigant in the absence of a statute protecting his rights, to the end that no wrong should exist without a remedy. It was never intended that equity should aid a litigant to obtain an unjust end and the court sue sponte should refuse-to entertain a suit, as here, where the claimant has himself failed to do justly and his own conduct has caused the condition about which he complains.
The act constitutes an unlawful and unconstitutional delegation of authority to fix standards of fair practice.
Section 6 makes it an act of unfair competition for a retailer to sell a commodity at a price less than the minimum stipulated in a contract *186between some other retailer and the manufacturer or distributor. We merely look to the contract to determine what the standard of fair practice is below which the statute provides he shall not sell, and so, the standard is fixed by the manufacturer or distributor. Thus, noncompliance with the terms of the contract is made an act of unfair competition with the right in the manufacturer or distributor to set the standard of unfair competition. This is nothing more than a species of delegated authority.
Even if it be granted that the General Assembly may directly fix retail sales prices generally (an assumption not supported by the decided cases) it by no means, follows that the General Assembly may delegate to private individuals the power to so affect the property rights of other retail dealers. Nor does it seem to me a sufficient answer to say that such a delegation of power merely permits the owner of a trademark or patent to protect his property by directing the resale thereof after he has parted with title thereto. As I later set out, it has long been séttled that such patent or trade-mark owner may stipulate only as to the first sale of his product, but thereafter he has lost possession of his product by releasing it into the channels of commerce generally. He may not control the manner in which, or the price at which, later sales of his product are to be made. Bement & Sons v. National Harrow Co., 186 U. S., 70; Motion Picture Patents Company v. Universal Film Mfg. Co., 243 U. S., 502, and cases therein cited.
The extent to which legislative power may be delegated has heretofore been ably discussed by the present Chief Justice, who has defined, as clearly as the subject permits, the strict limitations imposed upon the General Assembly in delegating its powers. Provision Co. v. Daves, 190 N. C., 7. As developed in that case, the proposition that a General Assembly may not delegate its legislative powers is subject to three exceptions only; namely, (1) limited powers as to local legislation may be granted to municipal and gwasi-municipal corporations; State v. Simons, 32 Minn., 540, 543; (2) limited powers to promulgate administrative regulations may be granted to recognized governmental agencies and instrumentalities; S. v. Garner, 158 N. C., 630; S. v. R. R., 141 N. C., 846; and (3) limited powers as to the finding of facts may be granted to recognized governmental agencies and instrumentalities where the determination of certain facts may be essential conditions precedent to the invocation of particular laws; S. v. R. R., supra; S. v. Hodges, 180 N. C., 751; Morgan v. Stewart, 144 N. C., 424; S. v. Dudley, 182 N. C., 822; Field v. Clark, 143 U. S., 649. It is instantly apparent that the present case falls within neither of these three exceptions, as the delegation of the power to fix standards and prices here involved is made to private individuals (i.e., manufacturers and retailers) and not to any governmental agency or instrumentality.
*187Tbe delegation of price fixing power fails for a second reason, i.e., no standard or yardstick to be used in fixing tbe prices is laid down in tbe act. Every delegation of power, to be upheld, must, in granting tbe power, lay down a “primary standard” (Buttfield v. Stranahan, 192 U. S., 470, 496; Red "Q" Oil Co. v. N. C., 222 U. S., 380, 394), or a “general rule” (Union Bridge Co. v. U. S., 204 U. S., 364, 386) to be followed in discharging tbe delegated power. This “primary standard” or “general rule” serves a three-fold purpose; it clarifies tbe purpose and intent of tbe law, furnishes a measure of tbe power granted, and fixes tbe limits within which tbe power may be exercised. Nor have tbe requirements in this respect been recently relaxed. In Panama Refining Co. v. Ryan, 293 U. S., 388, 415, it was declared that, whenever there is an attempted delegation of power, tbe legislative body must “perform ■its function of laying down policies and establishing standards” where it attempts to leave to “selected instrumentalities tbe making of subordinate rules within prescribed limits and tbe determination of facts to which tbe policy as declared by tbe Legislature is to apply.” There it was stated, at page 415, that tbe fatal weakness of tbe N. I. E. Act was that it was a grant of “unlimited authority to determine tbe policy ■and to lay down tbe prohibition, or not to lay it down.” Tbe instant Fair Trade Act has a similar shortcoming. It grants to private individuals tbe right to fix prices without laying down any standard or fixing any limits regulating those prices, and, further, it leaves entirely to certain individuals tbe choice as to whether minimum resale prices shall be fixed or not' — -which right some of such individuals may choose to exercise while others decline to do so. The constitutional requirement that there shall be a “primary standard” or “general rule” was again affirmed in Schechter Corp. v. U. S., 295 U. S., 495, 541, where it was declared that the attempted delegation of power was unsuccessful because the legislative body failed “to prescribe rules of conduct to be applied to particular states of fact determined by appropriate administrative procedure.”
It may be said further that the statute is arbitrary, discriminatory and unreasonable as applied to one who not being a party to such a contract sells products of a manufacturer at a price lower than that designated by the manufacturer between it and other retailers, because it attempts to compel one not a party to a price fixing contract to sell at prices fixed by others. Doubleday D. & Co. v. Macy & Co., 269 N. Y., 272, 103 A. L. R., 1325; Seeck & Kade v. Tomshinshy, 269 N. Y., 613; Coty v. Hearn Department Stores, 284 N. Y. S., 909.
In this connection, it may be noted that the act is objectionable for the further reason that it does not necessarily apply to all trade-mark owners, producers and distributors. It becomes operative only as to those who elect to contract — binding noncontracting retailers dealing in *188the same commodities. Likewise, it not only authorizes such trademark owners as elect to do so to contract to fix such standards, but they are authorized to change the standard from time to time, so that what constitutes unfair competition today may by the act of the distributor in reducing prices be perfectly lawful tomorrow. What is unfair competition may thus vary from time to time at the will of the distributor.
To restate concisely, this act fails as an attempted delegation of power in that (1) legislative power may only be delegated to governmental agencies or instrumentalities, not to private individuals (as here attempted), and (2) a delegation of legislative power must always be accompanied by a statement of a “primary standard” or “general rule” regulating and limiting the exercise of such power, and such a “primary standard” or “general rule” is lacking here where there is a blanket grant of power to manufacturers and some retailers to fix prices which will be binding upon all retailers and consumers.
The act is essentially a price fixing statute.
If considered without regard to section 6 thereof the Act might well be sustained on the theory that it merely changes the common law rule and makes lawful contracts fixing minimum retail prices. When considered as a whole it goes far beyond this purpose and becomes essentially a price fixing statute. The noncontracting retailer is not required to sell at not less than a stipulated price by reason of the contract. He is compelled so to do by the act. We merely look to the contract to determine what the minimum price is, below which the statute provides he shall not sell.
If we consider the statute general in nature and of necessity all-embracing, then it fixes, or permits the fixing of retail prices as well where the evils of price-cutting are absent as where they are present. Such a law which in effect spreads an all-inclusive net for the feet of everybody upon the chance that while the innocent will surely be entangled in its meshes some wrongdoers also may be caught is not permissible. Tyson & Bro.— United Theatre Ticket Offices v. Banton, 271 U. S., 418, 429.
The Legislature is not only without authority to delegate to a private individual or a corporation the right to fix prices, it is without constitutional power to fix prices at which commodities may be sold, services rendered, or property used, unless the business or property involved is “affected with a public interest.” Chas. Wolff Packing Co. v. Court of Industrial Relations, 262 U. S., 522.
Legislative price fixing is an unconstitutional restriction upon the right of a private dealer to fix his own prices. Fairmont Creamery Company v. Minn., 274 U. S., 1, 71 L. Ed., 893; Williams v. Standard Oil Co., 278 U. S., 235, 73 L. Ed., 287; Chas. Wolff Packing Co. v. *189Court of Industrial Relations, supra; Ribnik v. McBride, 277 U. S., 350, 72 L. Ed., 913; New State Ice Co. v. Liebmann, 285 U. S., 262, 76 L. Ed., 747.
By virtue of see. 6 of tbe Act, when a manufacturer and a single North Carolina retailer contract to maintain a price schedule for the resale of trade-marked or identified products, such price schedules become binding upon all other North Carolina retailers of these products. Accordingly, A. by contracting with B. can compel C. and D. to sell A.’s goods at prices agreeable to A. and B. but not agreeable to C. and D. Thus, A. and B. seek to achieve by mandate of law what they cannot achieve by contract with C. and D. The effect of the act is to extend the manufacturer’s ownership of commodities marketed by it under a distinguishing trade-mark, brand or name after he has sold them into the normal channels of commerce, with the result that the dealer-purchaser loses the right to sell his goods bought for resale at figures of his own choosing. This right to fix the price at which one will sell his property is itself a well recognized property right. Tyson & Bro.— United Theatre Ticket Offices v. Banton, supra; Wolff Packing Co. v. Court of Industrial Relations, supra; Ribnik v. McBride, supra; Williams v. Standard Oil Co., supra; New State Ice Co. v. Liebmann, supra. As these cases point out, this property right is one which a General Assembly may not destroy by fixing mandatory prices. Granted that such resale price maintenance contracts as here considered may be validated by the General Assembly as to the contracting parties, when the effect of the act (as here) is to make that price schedule binding upon other and noncontracting parties, as to these latter parties the Act constitutes price fixing by legislative mandate. Whether the prices are fixed by the Legislature directly or are made binding by act of the Legislature in delegating the power to fix prices to private individuals, the prices when fixed become binding upon an unwilling citizen.
Under the doctrine of Wolff Packing Co. v. Court of Industrial Relations, supra, the power of a legislature to regulate prices was specifically limited to those businesses which are distinctly “clothed with a public interest.” Further, as explained in Nebbia v. New York, 291 U. S., 502, 507, “clothed with a public interest” is synonymous with “affected with a public interest” and as such refers to those businesses so definitely tinged with a public interest that they are rendered subject to the exercise of the police power. As that case points out, there are but three types of businesses which may be termed “clothed with a public interest”: (1) Certain businesses which historically, and somewhat arbitrarily have long been so considered; (2) businesses operating under public grants and franchises imposing the duty to serve any member of the public demanding same; and (3) businesses which, by reason of their *190peculiar relation to the public, are regarded as having granted to the public extensive powers of regulation.
Since the instant Act is not limited to particular trades, but extends to all retailers selling goods bearing trade-mark, label or name, it is apparent that there was no legislative intent to limit the act to those businesses affected or clothed with a public interest. Since it does not appear that there was a legislative intent to declare any retail businesses clothed with a public interest and since it is impossible to determine from the act which retail trades the Legislature intended to be regarded as such, in my opinion, this Court is without power to select the retail drug business (as would be necessary in the instant case) and pronounce it to he such a business, and the majority opinion does not undertake to do so.
To restate more concisely, this Act fails in that, (1) it destroys a property right of retail dealers, i.e., the right to fix the prices at which they will sell their goods, and (2) it does not purport to declare any retail business clothed or affected with a public interest so as to justify price fixing within that business, and without such a declaration every price-fixing act is invalid as being outside the constitutional exercise of the police power.
The statute is in conflict with N. C. Const., Art. I, sec. 17.
As heretofore pointed out, the right of the owner of property to fix the price at which he will sell it is an inherent attribute of the property itself.
The whole spirit and purpose of the Constitution is to protect the liberties and property rights of the citizens of the State. Any act which arbitrarily destroys or impairs the right of the individual to the free use and enjoyment of his property for the benefit of a special group in order to permit this group to fix prices is diametrically opposed to the genius of a free people and should not be allowed to stand. The act under consideration is an attempt by legislation to deprive the non-contracting retailer of this right to the free use and enjoyment of his property and is in direct violation of N. 0. Const., Art. I, see. 17.
The act is a special act relating to trade.
N. C. Const., Art. II, sec. 29, provides that: “The General Assembly shall not pass any . . . special act . . . regulating . . . trade ... or manufacturing . . . any local, private or special act or resolution passed in violation of the provision of this section shall be void.” The effect of this provision is to render void any act regulating trade or manufacturing which is not a general law. S. v. Dixon, 215 N. C., 161. The word “trade” has been frequently defined by this Court and its legal significance is discussed in the Dixon case at page 164. It comprehends “not only all who are engaged in buying and *191selling merchandise, but all whose occupations or business it is to manufacture and sell the products of their plants. It includes in this sense any employment or business embarked in for gain or profit.” S. v. Worth, 116 N. C., 1007, 21 S. E., 204. As the present act seeks to regulate contracts and sales relating to retail trade in commodities not “affected with a public interest,” the act, it seems to me, falls squarely within the constitutional prohibition, unless it can be held to be a general law. What, then, is a “specific” law? It is one which does not include all of the persons within a given class, but relates to less than the entire class, or one which relates only to a particular section of class, either particularized by the express terms of the act or separated by any method of selection from the whole class to which the law might but for such limitation be applicable. Arps v. Highway Commission, 90 Mont., 152, 300 P., 549; City of Springfield v. Smith, 322 Mo., 1129, 19 S. E. (2nd), 1; State ex rel. Powell v. State Bank, 80 A. L. R., 1494; R. R. v. Cherokee County, 177 N. C., 86. A law is a special law if it imposes particular burdens or confers special rights, privileges or immunities upon a portion of the people of the State without including therein and being applicable to all of the class throughout the State. Mathews v. City of Chicago, 342 Ill., 120, 174 N. E., 335.
Under the terms of the contract herein involved an effort is made to “peg” the minimum resale price of all of the manufacturer’s identified or trade-marked commodities, but the act itself exempts from this restriction (1) closing out sales, (2) sales where trade-mark, brand, etc., is obliterated, (3) sales where goods are second-hand or damaged, (4) judicial sales, (5) sales to religious, charitable, and educational institutions, and (6) sales to the State of North Carolina or any of its agencies or any of the political subdivisions of the State. The plaintiff by the contract here involved undertakes to add these further exemptions: Sales to (a) physicians, (b) dentists, (c) veterinarians, or (d) hospitals. In other words, even if it is admitted that resales of manufacturers’ identified commodities constitutes a class of retail sales which may be made the subject of a general law, certainly when there is exempted from this general class of retail sales ten distinct sub-classifications within the class, the law ceases to be a “general” law and becomes a “special” law which applies to some retail sales within the defined class and not to others. As such a “special” law “regulating trade” it is, in my opinion, declared void by the provisions of Art. II, sec. 29, of the N. C. Constitution.
It was the evident intent of the Legislature to make the contracts authorized by the act, when entered into, apply to all except those expressly excepted by the statute — which exceptions in themselves make the act special in nature. If, however, the act is to be given the interpre*192tation apparently placed tbereon by the plaintiff and authorizes the plaintiff and others in like situation to limit those to whom the stipulated price shall apply, then the act becomes even more obnoxious. It delegates to the contracting distributor the right to make any type of classification of ultimate purchasers it may elect. If it is not to be given that interpretation then the contract relied on is not in accord with the statute and is not protected by the terms thereof, and is an unwarranted attempt to regulate prices to the ultimate consumer without statutory authority.
The act under consideration violates the provisions of N. 0. Constitution, Art. I, sec. 31, relating to monopolies.
A monopoly denotes a combination, organization or entity so extensive and unified that its tendency is to suppress competition, to acquire a dominance in the market and to secure the power to control prices to the public harm with a respect to any commodities which people are under a practical compulsion to buy. It is “any combination, the tendency of which is to prevent competition in its broad and general sense and to control, and thus, at will, enhance prices to the detriment of the public.” The common law monopolies were unlawful because of their restriction upon individual freedom of contract and their injury to the public. Contracts having a monopolistic tendency have been held to “expose the public to all the evils of monopolies,” to be “to the prejudice of the public,” and to be “hostile to the rights and interest of the public.”
The legislation under consideration permits the creation of a monopoly as thus defined in that it opens wide the door for the creation of retailer price-fixing combinations which will inevitably destroy price competition and enhance prices to the detriment of the public. But, says the majority opinion, in effect, we are not interested in legislation which merely permits the formation of a monopoly. It is only after the monopoly has been actually formed and is operating to the detriment of the public that there is any violation of the constitutional provision. With this I cannot agree.
It may be that the term “monopoly,” as used at the time of the adoption of the Constitution, was not quite so comprehensive in meaning as present-day conditions make it. Yet the term was used and the framers of the Constitution unquestionably intended to prohibit “any combination, the tendency of which is to prevent competition in its broad and general sense and to control, and thus, at will, enhance prices to the detriment of the public.” When a statute has been enacted, the clear import of which is to authorize monopolistic combinations, the terms of Article I, section 31, of the Constitution have been violated. We are not required to stand by and await the actual formation of a monopolistic combination, and the defendant is not compelled to refrain from *193action until after be bas been arbitrarily forced into sucb unlawful enterprise before appealing to tbe court for relief.
Sucb monopolies, contracts in restraint of trade and contracts in restraint of competition (sucb as authorized by tbis statute) are unlawful at common law and are prohibited by tbe Constitution. Attempts to sell property for a full price and yet to place restraint upon its further alienation have been hateful to tbe law from Lord Coke’s day to ours because obnoxious to public interest. Strauss v. Vidor Talking Machine Company, 243 U. S. 490, 61 L. Ed. 866. Laws seeking tbis end are violative of tbe familiar rights attaching to ordinary ownership and are contrary to tbe public interest and to tbe security of trade. It is tbis type of law that our Constitution prohibits.
Yiewing tbe legislation under consideration within tbe narrow confines of tbis case make it appear that only one distributor and one retailer are involved. Sucb is not tbe effect of tbe statute. Practically all commodities now sold on tbe market, from commonplace table salt to tbe most expensive luxury, including drugs, foods, clothing, groceries and practically every other article of merchandise, are sold under trade-mark, brand or name. Small groups of retailers, under authority - of tbis statute, by contracting with their source of supply as to tbe various articles of merchandise offered to tbe general public may create, through tbe operation of tbe provisions of section 6 of Act, ironclad price-fixing combinations which will enhance tbe price and operate to tbe detriment of tbe general public, as well as to completely destroy price competition. That it bas tbis latter effect — tbe destruction of price competition' — is substantially admitted by tbe plaintiff in its allegations in tbe complaint that contracting retailers are threatening to breach their contracts to tbe end that they may meet tbe price competition offered by tbe defendant.
Tbe majority view relies upon tbe absence of horizontal price maintenance, pointing out that tbe vertical price maintenance achieved here standing alone without horizontal price maintenance is lawful. See quotation from Triner Corp. v. McNeil, 363 Ill., 559, tbis being one of tbe cases which tbe Old Dearborn Distributing Co. case affirmed. In tbe Illinois and California Fair Trade Acts (tbe two acts which have been upheld by tbe Supreme Court of tbe United States — see 299 U. S., 183, and 299 U. S., 198) only vertical price maintenance, i.e., through contracts down tbe line from manufacturer to wholesaler to retailer, was judicially approved as not being in conflict with tbe due process and tbe special privilege and immunities provisions of tbe Federal Constitution. In tbe instant act not only is tbis vertical price maintenance permitted, but an extensive network of horizontal contracts is also permitted, as tbe vendor may agree with tbe vendee that be will not sell to any other wholesaler unless that wholesaler first agrees not to resell to any whole*194saler, retailer, or consumer wbo will not carry out, by further contracts or otherwise, the price maintenance plan embodied in the first contract. This system of contracts, fixing minimum prices both vertically and horizontally, is a much more elaborate and more dangerous method of price-fixing than that which has heretofore received court approval; approving a network of contracts reaching out vertically and horizontally so as to cover with a lattice-work a well-nigh perfect control of the prices of a given product moves much more definitely in the direction of approval of a monopoly than does the approval of a short chain of minimum resale price contracts. This Court might, with mild misgivings, approve such acts as the California and Illinois Fair Trade Acts, yet (by reason of Art. I, sec. 31, declaring . . monopolies are contrary to the genius of a free state and ought not to be allowed”) strike down the so-called Fair Trade Act here under consideration. It is interesting to note in passing that, although forty-four states are reported to have adopted Fair Trade Acts (6 U. S. Law Week, 1250— 9 May, 1939), apparently only nineteen of them (Norwood, Trade Practice and Price Law, 1938, pp. 145-6) permit horizontal chains of contracts which cross and interlock with the links of the vertical chains, as allowed in the North Carolina act.
Likewise, the majority opinion is bottomed on the conclusion that the statute provides protection for the good will of the manufacturer or distributor. In this I cannot concur.
The title of the act recites that it is to “protect trade-mark owners, producers, distributors and the general public against injurious and uneconomic practices in the distribution of competitive commodities bearing a distinguishing trade-mark, brand or name, through the use of voluntary contracts establishing minimum resale prices and providing for refusal to sell unless such minimum resale prices are observed.”
Thus, it indicates that the purpose of the act is to eliminate “injurious and uneconomic practices” by voluntary contracts, with the right in the manufacturer or distributor to refuse to sell to those who decline to contract.
The act itself authorizes contracts between manufacturers and distributors and wholesalers and retailers containing provisions cited in the statute, which provisions are violative of and radically change the common law. It then, in effect, in section 6, prohibits any noncontracting retailer from selling such commodities at less than the stipulated minimum price. This is the full scope of the act. There is nothing in respect to good will either in the caption or in the body of the act. That the act was intended to protect good will is a judicial deduction, which in my opinion is not warranted by the facts.
*195Good will is tbat intangible asset which an individual, or corporation, dealing with the public, acquires through its reputation for fair dealing and the excellence of service or commodity offered for sale. It is the advantage accruing from the probability that the customer- — -induced by the quality of the merchandise sold and the courteous service rendered- — ■ will go back to trade where he has been well treated. Other and more comprehensive definitions may be found in Story, Partnership, see. 99, 16 Am. Jur., 87; Callihan Cyc. Dict.; Words and Phrases; Faust v. Rohr, 166 N. C., 187; Hilton v. Hilton, L. R. A., 1918 F. 1174; Bloom v. Holms Ins. Agency, 121 S. W., 293; Bouvier’s Law DiCt.
While “good will” is a species of property, it evaporates and becomes nonexistent so soon as a business ceases to operate as a going concern. I have never understood that the price at which a commodity is offered for sale aided in the creation of good will, except that an excessive price will discourage and eliminate purchasers and thus decrease the value of good will, and popular prices will attract and retain satisfied customers and thus increase the value of this recognized asset.
If a manufacturer may sell its commodity to a retailer and part with title thereto for a full price and yet retain an interest therein to be protected by legislation, that right still exists after the article finally reaches the ultimate purchaser. If it exists the mere sale by the retailer could not destroy it, and to say that the manufacturer still has a property interest in the hat that I wear because it was sold under, and has printed therein, the name “Dobbs,” or to conclude that the tailor possesses a property interest in my suit of clothes because .there is a label attached to the inside pocket requires a process of reasoning I am unable to follow.
Even when a commodity is sold under patent or copyright — and the act under consideration does not require that the trade-mark, label or name shall be patented or copyrighted — the patentee or copyright owner parts with its statutory protection under the Federal Law. A patentee cannot by virtue of his statutory monoply impose conditions as to the resale price so as to render one who fails to observe them a contributory infringer of the patent. Cases cited in notes, 7 A. L. R., 477. After the right of the sale has been once exercised and the patentee receives his price, the article passes beyond the limits of the monoply and, in considering the validity of the contractual restraint at a price at which the article is to be resold, either at common law or under an anti-trust act, the case is to be considered as if there were no patent. Cases cited in notes 7 A. L. R., 477. The same rule applies to copyright protection; Bobbs-Merrill Co. v. Strauss, 210 U. S., 339, 52 L. Ed., 1086, and to trade-marked goods; Ingersoll v. McColl, 204 F., 147, and other cases cited in note, 7 A. L. R., 482; and to goods made by secret process; *196Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S., 373, 55 L. Ed., 502. Certainly tbe manufacturer or distributor has no greater right in merchandise sold under trade-mark, label or name than it would have in merchandise which was patented or copyrighted or sold under registered trade-mark.
It is true that there has been a recent change in the trend of legislation, which, due to the reluctance of the courts to invalidate legislative enactments, has brought about a shift in the line of decisions on subjects such as the one under consideration. However, this new trend tends to, and will, if followed, lead to the inevitable curtailment and eventual destruction of fundamental rights of person and property guaranteed by the Constitution. Statutes such as this give evidence of the ability of organized minorities to procure legislation for their own advantage and enrichment at the expense of the unorganized purchasing masses. They have brought about a new “orientation” from the principle of individual liberty to the idea of regimentation and strict control of commerce and property. Here a manufacturer or distributor and one retailer is granted authority to fix, by contract, the price at which a commodity shall be sold by all other retailers without regard to local conditions, overhead expenses or other circumstance. The many must yield to the will of the few to the end that the few may make a larger profit and be enriched thereby. As I have heretofore stated, such legislation, in my opinion, violates the express terms of our Constitution.
Cases cited and relied on in the majority opinion are distinguishable. The Dearborn and other U. S. Supreme Court cases deal only with Federal questions. In Max Factor & Co. v. Kunsman the defendant had surreptitiously acquired the commodities of the plaintiff and was selling them at greatly reduced prices, frequently below cost. In Mills Co. v. Swanson language similar to the terms of section 6 of our act was not involved or discussed. Similar differences, if space would permit, could be pointed out as to the other cases cited.
If, however, the constitutionality of the act be conceded in every respect, it, in my opinion, does not apply to or authorize price-fixing contracts concerning the commodities listed in Class II. It is expressly stipulated that: “Products falling within this class are those which are marketed exclusively by the plaintiff under patent owned or controlled by the plaintiff or under which plaintiff has been granted an exclusive license. The statute authorizes contracts in respect to a commodity which is “in free and open competition with commodities of the same general class produced or distributed by others.” Products in Class II are not sold in competition with such designated commodities. To hold that they fall within the provisions of the statute is to say that the exclusive manufacturer of a product may fix the retail sale price thereof *197upon tbe theory that when sold by one retailer, it is in competition with tbe same product sold by another retailer. This does not seem to me to be within the intent or purpose of the statute.
For the reasons stated, I am of the opinion that the judgment below should he affirmed.