drafted a model law in the light of the opinion of Mr. Justice Sutherland in the case validating the Illinois resale price maintenance statute." Thus in the deluge of bills in the State legislatures, some were based on the California statute, while others were similar to the model statute of the NARD.

The campaign of the retail druggists was so successful that by September 1, 1939, resale price control laws had been enacted in 44 States. The Legislatures of Delaware, Missouri, Texas, and Vermont have thus far repulsed the onslaught of the drug trade associations. They have been aided in this respect by large department and mailorder stores which have continuously resisted resale price maintenance legislation.28 Mindful of the fact that the resale price control laws permitted resale price maintenance only in intrastate transactions,29 attention was redirected to Congressional action. Success was again achieved when, despite the strong disapproval of the Federal Trade Commission and the President, the Miller-Tydings amendment to the Sherman Antitrust Act was passed by Congress as a "rider" to an appropriation bill. Under this compulsion, the bill was signed by the President and became effective on August 17, 1937.00 This amendment permits resale maintenance contracts in interstate transactions when such a contract is valid in the State in which the commodity is to be resold.

In the face of continued opposition by some groups, the retail druggists continued their campaign. Resale price-control bills were introduced in the recent legislative sessions in Delaware, Missouri, Texas, and Vermont and although they failed of enactment, it is likely that these bills will be reintroduced in the next session of these State legislatures. The bill introduced in Congress for the District of Columbia is still pending. In the meantime, coincident with the initiation by the Federal Trade Commission of its present economic study of resale price maintenance, retail druggists' associations announced a drive for more strict enforcement through the creation of so-called "Fair Trade Councils" throughout the country. Efforts are now being made to induce many manufacturers to adopt resale price maintenance contracts in the distribution of their commodities.

Thus, after a struggle of almost four decades, resale price maintenance has attained a legal status. How secure and how significant that achievement will be remains to be seen.

27 The NARD model bill had gone through several drafts prior to the Supreme Court case. The final draft was completed in January 1937 after this decision and included provisions to meet certain questions raised by the court.

28

When a Senate committee of the Vermont Legislature "killed" a bill on March 1, 1939, R. H. Macy & Co. published a quarter page advertisement in the New York Times, congratulating the citizens of that State on their action.

20 Resale price contracts in interstate commerce still come under the ban of the Sherman Antitrust Act. See notes 7, 8, and 9, supra.

30 26 Stat. 209, as amended by Public, No. 314, 75th Cong., c. 690, Title VIII, 50 Stat. 693, 15 U. S. C. A., secs. 1 to 7.

A HORIZONTAL picture of State resale price maintenance legislation is facilitated by comparing the statutes with the California (old type) act and with the final draft of the model statute of the NARD (new type). Twenty-three acts are based on the old type law, while 19 States follow the new type act.32 Two states have enacted statutes which include provisions from both these models.33

31

The gist of the acts lies in two provisions which validate contracts fixing the resale price of trade-marked commodities and make actionable price cutting by any person with notice of a price restriction.34 These provisions are present in all the acts. Excepted from the provisions of all the acts are closing-out sales, sales of damaged or deteriorated goods, and sales by court order.35 Both types of statute include definitions of terms used. Those of the new-type law are greater in number.36

Since the model statute of the NARD was not finally drafted until after the Supreme Court decision, its provisions were designed to strengthen the old-type law. Thus the newer statute probihits the making of gifts, concessions, or combination sales in connection with price-restricted commodities.37

The new-type statute includes commodities bearing the trade-mark of the distributor in addition to those bearing the trade-mark of the producer. Of the old-type acts, only Colorado and South Carolina have a similar provision. Eight States include commodities sold through vending equipment bearing a trade-mark.38

12

Arizona, California, Colorado, Illinois, Iowa, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Washington, and Wisconsin. See Oppenheim, Recent Price Control Laws (1939).

Alabama, Arkansas, Connecticut, Florida, Georgia, Idaho, Indiana, Kansas, Maryland, Minnesota, Montana, Nebraska, North Carolina, Oregon, South Dakota, Utah, Virginia, West Virginia, and Wyoming.

33 Nevada and Rhode Island. While listed here as a combination act, the Rhode Island statute is based substantially upon an early model of the NARD law drafted in January 1936.

This latter provision, the "nonsigners' clause," is included in almost identical language in all but one of the acts. The Rhode Island statute still follows the earlier NARD bill. See sec. 4 of the Rhode Island act, infra, part I. The nonsigners' clause reads as follows: "Willfully and knowingly advertising, offering for sale, or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provisions of this act, whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby."

The statute of Wisconsin does not exempt judicial sales.

*The statutes of Illinois, Kentucky, Maine, Massachusetts, and New Hampshire do not include definitions. Although based on the California (old-type) act, the statutes of Colorado and South Carolina follow the definitions of the new-type act. Michigan and Ohio have definitions unlike either model.

87

Nebraska does not include this prohibition.

"California, Maine, Massachusetts, Nevada, New Jersey, Oregon, Utah, and Washington.

39

The Virginia statute defines "commodity" so as to exclude various foods and wearing apparel. The Kansas act includes only commodities bearing a registered trade-mark.

40

The new-type statute excepts from its operation sales of commodities from which the trade-mark has been removed. This proviso is attributable to the statement in the opinion of Mr. Justice Sutherland in the Supreme Court case upholding the validity of the Illinois statute that the purpose of the statute is to prevent depreciation of the trade-mark and goodwill of the producer and that the act is therefore inapplicable to sales of commodities not bearing a trade-mark.

In closing-out sales, the NARD statute provides that the dealer must give the producer or distributor of the commodity prompt and reasonable notice of such sale and an opportunity to purchase such stock at the original invoice price. Ten old-type statutes include a similar provision." The statute of North Carolina also excepts sales to religious, charitable, or educational institutions and further provides that purchases by the State, its agencies, or any of its political subdivisions shall not be subject to the provisions of the act. Payment of patronage dividends by cooperatives is not a violation of the statutes of Colorado and Michigan. A cooperative exemption, much wider in scope, in the Wisconsin statute has been declared unconstitutional.42

The new-type statute provides for the fixing of a minimum price. Generally, the old-type statute permits only the fixing of a specific price. However, seven statutes of the latter type provide for the establishment of a minimum price. The Nevada act provides that any price fixed shall be subject to sales and excise taxes.

43

Wyoming is the only state which provides a criminal penalty for violation of the act. In addition, the attorney general is empowered to institute quo warranto proceedings against a corporate offender. The acts of Maine, Michigan, New Hampshire, and Ohio specifically

"See sec. 1463 (i) of the Virginia statute for text of this definition, infra, page 329.

40

The acts of Florida, Minnesota, Oregon, and Virginia do not include this provision. The old-type statute of Colorado contains this exemption. "Colorado, Illinois, Kentucky, Maine, Massachusetts, Michigan New Hampshire, Ohio, South Carolina, and Washington. Michigan and Ohio include a similar clause but provide for the purchase of the stock at the prevailing and not at the original invoice price.

42

Sec. 8 of this statute provided that "This section [act] shall not apply to any cooperative society or association not organized for profit." As the exemption was not limited to sales by cooperatives to its members, the court in Weco Products Co. v. Reed Drug Co., 225 Wis. 474, 274 N. W. 426 (1937), held that this provision was unduly discriminatory as against retailers who would be competitors of a cooperative association in selling to the general public. Colorado, Maine, Michigan, New Hampshire, Ohio, Oklahoma, and South Carolina. Michigan has a qualifying clause: "at less than the price stipulated."

43

provide for injunctive relief, and treble damages may be recovered under the statutes of Maine and New Hampshire. While the "nonsigners' clause" allows suit by any person damaged by a violation, the statutes of New Jersey and Ohio are the only ones which specifically allow suit by a retailer. Trade associations may enforce compliance with a resale price restriction under the New Hampshire law. In an effort to prevent the fixing of excessively high prices, the Wisconsin act allows review of resale prices fixed in any contract by the department of agriculture and markets. If, after a hearing, the department shall find such prices to be unfair, the department is empowered to declare such contract to be in restraint of trade.

These, in brief, are the material provisions, similarities, and dissimilarities in the 44 resale price-control acts. Many problems not provided for have already arisen. Some are being solved by legislative amendment, others by judicial interpretation. Legislatures, however, can cope with only some of the faults in the drafting of the statutes. The courts will ultimately determine their scope and operation. To understand these laws properly it is necessary therefore to look at these acts in the courts and to review the judicial interpretations which in some instances have expanded the meaning of the laws far beyond their original limits.

ON December 7, 1936, the Supreme Court of the United States upheld the constitutionality of the Illinois act and thus wrote finis to a race for decision between the laws of three States." California was the first to enact this legislation, but the New York statute was the first to be tested in the highest State court. The court of appeals in that State, adopting a rigid interpretation of the nonsigners' clause agreed upon by the contesting parties, held the statute unconstitutional, stating that while the statute might validly permit resale price maintenance agreements and the creation of an "equitable servitude" upon a trade-marked commodity, it might not constitutionally compel price fixing in the absence of contract." Shortly after this decision, the Supreme Court of California upheld the validity of the act in that State, declaring that the nonsigners' clause was an extension of the tort doctrine of unjustifiable interference with contract rights and that a noncontracting retailer who purchased

45

"Old Dearborn Distributing Co. v. Seagram-Distillers Corp., McNeil v. Joseph Triner Corp., 299 U. S. 183, 57 Sup. Ct. 139, 81 L. Ed. 109 (1936).

45

Doubleday-Doran & Co., Inc. v. R. H. Macy & Co., Inc., 269 N. Y. 272, 199 N. E. 409 (1936). See Martin, The Fair Trade Act (1936), 5 Ford L. Rev. 50.

trade-marked commodities with notice of a price restriction was bound by that restriction.46 Subsequently the Illinois statute was declared constitutional by the State supreme court 47 and was the first act to come before the United States Supreme Court.49

In declaring the statute constitutional, the Supreme Court emphasized the fact that in all the discussions on proposed Federal resale price maintenance legislation, no constitutional objection had ever been urged and that in previous cases, the court had struck down resale price fixing "in the absence of contract or statutory right," plainly implying the validity of legislation granting this right. Proceeding to the specific objections to the statute, the Court stated that it merely permitted resale price contracts and that the limitation of this grant to trade-marked commodities was a reasonable classification and within the power of a legislature to create. In sustaining the validity of the nonsigners' clause, the Court declared that selling below the stipulated price was a violation only when done willfully and knowingly. Then follows this ambiguous language which has been the subject of much discussion and interpretation: "We are not called upon to determine the case of one who has made his purchase in ignorance of the contractual restriction upon the selling price, but of a purchaser who has definite information respecting such contractual restriction and who, with such knowledge, nevertheless proceeds willfully to resell in disregard of it.” 49 While the first clause smacks of the equitable servitude doctrine, the second mentions notice at the time of resale and implies the tort doctrine of unjustifiable interference with contract rights. The Court stated further that the nonsigners' clause was not a restriction on the disposal of the commodity qua commodity but on the misuse of the trade-mark and goodwill of the producer and was therefore "an appropriate means to that perfectly legitimate end."

Subsequently the Court of Appeals of New York overruled its former decision and held the New York statute constitutional, stating merely that it was bound by the ruling of the Supreme Court.50 Many State courts have since upheld the statutes but all rely to a great extent upon Old Dearborn Distributing Co. v. Seagram-Distillers Corp., without attempting to analyze the many objections

"Max Factor & Co. v. Kunsman, 5 Cal. (2d) 446, 55 Pac. (2d), 177 (1936); Pyroil Sales Co. v. Pep Boys, 5 Cal. (2d), 784, 55 Pac. (2d), 194 (1936).

47

Joseph Triner Corp. v. McNeil, 363 Ill. 559, 2 N. E. (2d), 929 (1936); SeagramDistillers Corp. v. Old Dearborn Distributing Co., 363 Ill. 610, 2 N. E. (2d) 940 (1936).

See footnote 44, (Old Dearborn v. Seagram) supra.

Id., at p. 193.

Bourjois Sales Corp. v. Dorfman, 273 N. Y. 167, 7 N. E. (2d) 30 (1937).