Schwegmann Bros. v. Calvert Distillers Corp.

Mr. Justice Frankfurter,

whom Mr. Justice Black and Mr. Justice Burton join, dissenting.

In 1890, Congress passed the Sherman Law, which declared illegal “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations.” Act of July 2, 1890, § 1, 26 Stat. 209 , 15 U. S. C. § 1 . In 1937, Congress passed the Miller-Tydings Amendment. This excepted from the Sherman Law “contracts or agreements” prescribing minimum prices for the resale of trade-marked commodities where such contracts or agreements were valid under State statute or policy. Act of Aug. 17, 1937, Title VIII, 50 Stat. 673 , 693, 15 U. S. C. § 1 . It would appear that, insofar as the Sherman Law made maintenance of minimum resale prices illegal, the Miller-Tydings Amendment made it legal to the extent that State law legalized it. “Contracts or agreements” immunized by the Miller-Tydings Amendment surely cannot have a narrower scope than “contract, combination ... or conspiracy” in the Sherman Law. The Miller-Tydings Amendment is an amendment to § 1 of the Sherman Law. The category of contract cannot be given different content in the very same section of the same act, and every combination or conspiracy implies an agreement.

*398 The setting of the Miller-Tydings Amendment and its legislative history remove any lingering doubts. The depression following 1929 gave impetus to the movement for legislation which would allow the fixing of minimum resale prices. In 1931, California passed a statute allowing a manufacturer to establish resale prices binding only upon retailers who voluntarily entered into a contract with him. This proved completely ineffective, and in 1933 California amended her statute to provide that such a contract established a minimum price binding upon any person who had notice of the contract. Grether, Experience in California with Fair Trade Legislation Restricting Price Cutting, 24 Calif. L. Rev. 640 , 644 (1936). This amendment was the so-called “non-signer” clause which, in effect, allowed a manufacturer or wholesaler to fix a minimum resale price for his product. Every “fair trade” law thereafter passed by any State contained this “non-signer” clause. By the close of 1936,14 States had passed such laws. In 1937, 28 more States passed them. Today, 45 out of 48 States have “fair trade” laws. See Report of the Federal Trade Commission on Resale Price Maintenance XXVII (Dec. 13, 1945).

A substantial obstacle remained in the path of the “fair trade” movement. In 1911, we had decided Dr. Miles Medical Co. v. Park & Sons Co., 220 U. S. 373 . There, in a suit brought against a “non-signer,” we held that an agreement to maintain resale prices was a “contract ... in restraint of trade” which was contrary to the Sherman Law. To remove this block, the Miller-Tydings Amendment was enacted. It is said, however, that thereby Congress meant only to remove the bar of the Sherman Law from agreements between the manufacturer and retailer, that Congress did not mean to make valid the “non-signer” clause which formed an integral part of each of the 42 State statutes in effect when the Amendment was passed.

*399 The Miller-Tydings Amendment was passed as a rider to a Revenue Bill for the District of Columbia. The Senate Committee which attached the rider referred the Senate to S. Rep. No. 2053, 74th Cong., 2d Sess. 1 The House Conference Report (H. R. Rep. No. 1413, 75th Cong., 1st Sess.), contains only five lines concerning the rider. But the rider was not a new measure. It came as no surprise to the House, which already had before it practically the same language in the Miller Bill, reported favorably by the Committee on the Judiciary. H. R. Rep. No. 382, 75th Cong., 1st Sess. Both the House and Senate, therefore, had before them reports dealing with the substance of the Miller-Tydings Amendment. These reports speak for themselves, and I attach them as appendices to this opinion, post, p. 402. Every State act referred to in these reports contained a “non-signer” provision. I cannot see how, in view of these reports, we can conclude that Congress meant the “non-signer” provisions to be invalid under the Sherman Law— unless, that is, we are to depart from the respect we have accorded authoritative legislative history in scores of cases during the last decade. See cases collected in Commissioner v. Estate of Church, 335 U. S. 632, 687 , Appendix A. In many of these cases the purpose of Congress was far less clearly revealed than here. 2 It has never been questioned *400 in this Court that committee reports, as well as statements by those in charge of a bill or of a report, are authoritative elucidations of the scope of a measure.

It is suggested that we go to the words of the sponsors of the Miller-Tydings Amendment. We have done so. Their words confirm the plain meaning of the words of the statute and of the congressional reports. Senator Tydings made the following statement: “What we have attempted to do is what 42 States have already written on their statute books. It is simply to back up those acts, that is all; to have a code of fair trade practices written not by a national board such as the N. R. A. but by each State, so that the people may go to the State *401 legislature and correct immediately any abuses that may develop.” 81 Cong. Rec. 7496.

Representative Dirksen made a statement to the House as a member of its Conference Committee. He referred to the case of Old Dearborn Co. v. Seagram Corp., 299 U. S. 183 , in which this Court had held that the “non-signer” provision of the Illinois “fair trade” statute did not violate the Due Process Clause. Mr. Dirksen continued: “A question then arose as to whether or not the maintenance of such resale prices under a State fair trade act might not be in violation of the Sherman Anti-Trust Law of 1890 insofar as these transactions sprang from a contract in interstate commerce. This question was presented to the House Judiciary Committee and there determined by the reporting of the Miller bill. It was essentially nothing more than an enabling act which placed the stamp of approval upon price maintenance transactions under State acts, notwithstanding the Sherman Act of 1890.” 81 Cong. Rec. 8138.

Every one of the 42 State acts which the Miller-Tydings Amendment was to “back up” — the acts on which the Miller-Tydings Amendment was to place a “stamp of approval” — contained a “non-signer” provision. As demonstrated by experience in California, the State acts would have been futile without the “non-signer” clause. The Court now holds that the Miller-Tydings Amendment does not cover these “non-signer” provisions. Not only is the view of the Court contrary to the words of the statute and to the legislative history. It is also in conflict with the interpretation given the Miller-Tydings Amendment by the Federal Trade Commission, 3 by the Depart *402 ment of Justice, 4 and by practically all persons adversely affected by the “fair trade” laws. 5 The “fair trade” laws may well be unsound as a matter of economics. Perhaps Congress should not pass an important measure dealing with an extraneous subject as a rider to a revenue bill, with the coercive influence it exerts in avoiding a veto; perhaps it should restrict legislation to a single relevant subject, as required by the constitutions of three-fourths of the States. These are matters beyond the Court’s concern. Where both the words of a statute and its legislative history clearly indicate the purpose of Congress, it should be respected. We should not substitute our own notion of what Congress should have done.

APPENDIX TO OPINION OF MR. JUSTICE FRANKFURTER.

House Report No. 382, 75th Cong., 1st Sess.

The Committee on the Judiciary, to whom was referred the bill (H. R. 1611) to amend the act entitled “An act to protect trade and commerce against unlawful restraints and monopolies,” approved July 2, 1890, after consideration, report the same favorably to the House with an amendment with the recommendation that as amended the bill do pass.

*403 The committee amendment is as follows: Strike out all after the enacting clause and insert in lieu thereof the following:

That section 1 of the Act entitled “An Act to protect trade and commerce against unlawful restraints and monopolies,” approved July 2, 1890 (U. S. Code, title 15, sec. 1), be amended to read as follows:

“Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding $5,000, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court. Nothing herein contained shall render illegal, contracts or agreements prescribing minimum prices or other conditions for the resale of a commodity which bears, or the label or container of which bears, the trade mark, brand, or name of the producer or distributor of such commodity and which is in free and open competition with commodities of the same general class produced or distributed by others, when such contracts or agreements are lawful as applied to intrastate transactions, under any statute, law, or public policy now or hereafter in effect in any State, Territory, or the District of Columbia in which such resale is made, or to which the commodity is to be transported for such resale, and the making of such contracts or agreements shall not be an unfair method of competition under section 5, as amended and supplemented, of the Act entitled ‘An Act to create a Federal Trade Commission, to *404 define its powers and duties, and for other purposes/ approved September 26, 1914 (U. S. Code, title 15, sec. 45).”

GENERAL STATEMENT

The sole objective of this proposed legislation is to permit the public policy of States having “fair trade acts” to operate with respect to interstate contracts for the resale of goods within those States. The fair-trade acts referred to legalize the maintenance, by contract, of resale prices of branded or trade-marked goods which are in free competition with other goods of the same general class.

To accomplish this end, the reported bill amends section 1 of the Sherman Antitrust Act which declares every contract in restraint of trade illegal. The amendment adds a sentence to the section, in the nature of a limitation, to the effect, in substance, that nothing therein contained shall render illegal contracts prescribing minimum prices or other conditions for resale of branded or trade-marked goods when such contracts are lawful as to intrastate transactions under the State law of the State in which the resale is to be made; and that the making of such contracts shall not be an unfair method of competition under section 5 of the Federal Trade Commission Act.

In view of the decision of the Supreme Court in Dr. Miles Medical Co. v. Park & Sons Co. ( 220 U. S. 373 ), and other cases, it is doubtful, at least, that such contracts are now valid in interstate commerce.

STATE FAIR TRADE ACTS

State fair trade acts typically provide, first, that contracts may lawfully be made which provide for maintenance by contract of resale prices of branded or trademarked competitive goods. Second, that third parties *405 with notice are bound by the terms of such a contract regardless of whether they are parties to it.

The pertinent provisions of the Illinois act, recently held constitutional by the Supreme Court in the case of Old Dearborn Distributing Co. v. Seagram-Distillers Corporation (decided Dec. 7, 1936) read as follows:

Section 1. No contract relating to the sale or resale of a commodity which bears, or the label or content of which bears, the trade mark, brand, or name of the producer or owner of such commodity and which is in fair and open competition with commodities of the same general class produced by others shall be deemed in violation of any law of the State of Illinois by reason of any of the following provisions which may be contained in such contract:

(1) That the buyer will not resell such commodity except at the price stipulated by the vendor.

(2) That the producer or vendee of a commodity require upon the sale of such commodity to another that such purchaser agree that he will not, in turn, resell except at the price stipulated by such producer or vendee.

Such provisions in any contract shall be deemed to contain or imply conditions that such commodity may be resold without reference to such agreement in the following cases:

(1) In closing out the owner’s stock for the purpose of discontinuing delivery of any such commodity: Provided, however, That such stock is first offered to the manufacturer of such stock at the original invoice price, at least ten (10) days before such stock shall be offered for sale to the public.

(2) When the goods are damaged or deteriorated in quality, and notice is given to the public thereof.

(3) By any officer acting under the orders of any court.

*406 Sec. 2. Wilfully 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 section 1 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 following States, the committee is advised, have adopted fair trade acts: California, Washington, Oregon, Montana, Wyoming, Arizona, New Mexico, Utah, North Dakota, South Dakota, Kansas, Louisiana, Arkansas, Iowa, Wisconsin, Illinois, Kentucky, Tennessee, Indiana, Ohio, Georgia, Virginia, West Virginia, Pennsylvania, Maryland, New York, New Jersey, and Rhode Island.

The committee is advised that in addition one house of each of the following States have passed a fair trade bill: South Carolina, North Carolina, Idaho, Colorado, and Oklahoma.

The committee is further advised that bills are pending in the Legislatures of Nevada, Michigan; Minnesota, Texas, Mississippi, Delaware, Missouri, Connecticut, Massachusetts, New Hampshire, and Maine; and that only one State, Vermont, has definitely rejected legislation of this character.

ECONOMIC ASPECTS

The anticipated economic effects of the legislation here proposed were presented both by proponents and opponents of the bill in the hearings held by the subcommittee of the Committee on the Judiciary in charge of the bill. On the one hand it is urged that predatory price cutting is a weapon of monopolistic large distributors to crush small businessmen. On the other hand, it is contended that price-maintenance legislation tends unduly to enhance *407 the price of goods to the consumer. To this argument it is answered that the free play of competition between products of different manufacturers of the same general class will prevent such a result.

However, in the opinion of the committee, those arguments are more properly addressed to the State legislatures considering the enactment of fair trade acts. It is the legislature’s responsibility to fix the public policy of the State. This legislation merely seeks to help effectuate a public policy so fixed in a State. It has no application to any State which does not see fit to enact a fair trade act.

In this connection the committee invites attention to the following paragraph of the opinion of the Supreme Court, heretofore referred to, upholding the constitutionality of the Illinois act, the Court speaking through Mr. Justice Sutherland:

There is a great body of fact and opinion tending to show that price cutting by retail dealers is not only injurious to the goodwill and business of the producer and distributor of identified goods, but injurious to the general public as well. The evidence to that effect is voluminous; but it would serve no useful purpose to review the evidence or to enlarge further upon the subject. True, there is evidence, opinion, and argument to the contrary; but it does not concern us to determine where the weight lies. We need say no more than that the question may be regarded as fairly open to differences of opinion. The legislation here in question proceeds upon the former and not the latter view; and the legislative determination in that respect, in the circumstances here disclosed, is conclusive so far as this court is concerned. Where the question of what the facts establish is a fairly debatable one we accept and *408 carry into effect the opinion of the legislature. Radice v. New York ( 264 U. S. 292, 294); Zahn v. Board of Public Works ( 274 U. S. 325, 328 , and cases cited).

EFFECTUATION OF STATE PUBLIC POLICY

Your committee respectfully submit that sound public policy on the part of the Federal Government lies in the direction of lending assistance to the States to effectuate their own public policy with regard to their internal affairs. It is submitted that this is especially true where such assistance, as in this instance, consists of removing a handicap resulting from the surrender of the power over interstate commerce by the States to the Federal Government.

Senate Report No. 2053, 74th Cong., 2d Sess.

The Committee on the Judiciary, having had under consideration the bill (S. 3822) to amend the act entitled “An act to protect trade and commerce against unlawful restraints and monopolies,” approved July 2,1890, report the same back with the recommendation that the bill do pass.

In 1933 a law was enacted by the State of California authorizing a manufacturer or producer of a commodity which bears his trade mark, brand, or name, and which is sold in free and open competition with commodities of the same general class produced by others, to make a contract that the purchaser will not resell such commodity except at the price stipulated by the manufacturer or producer.

The purpose of the California act, as expressed in its title, was to protect trade-mark owners, distributors, and the general public against injurious and uneconomic prac *409 tices in the distribution of articles of standard quality under a trade mark, brand, or name, and the particular practice against which it was directed was the so-called “loss-leader selling.”

Since the passage of the California act similar legislation has been enacted in 12 other States, namely, New York, Illinois, Pennsylvania, New Jersey, Oregon, Washington, Wisconsin, Iowa, Maryland, Ohio, Virginia, and Rhode Island (the last three since the introduction of the proposed bill).

In still other States contracts stipulating minimum resale prices are valid at common law.

In the States where such contracts are lawful it has been found that loss-leader selling of identified merchandise sold under competitive conditions operates as a fraud on the consumer destroys the producer’s goodwill in his trade mark, and is used by the large merchant to eliminate his small independent competitor.

In recommending the passage of S. 3822 the committee, while fully recognizing the evils of loss-leader selling, is not required to determine the effectiveness of the device adopted by the States to eliminate the same.

It is sufficient that this type of selling unquestionably has had a disastrous effect upon the small independent retailer, thereby tending to create monopoly, and that a large number of States have found that its evil effects can be mitigated, if not eliminated, by legalizing contracts stipulating minimum resale prices.

The Congress is not called upon to pass upon the effectiveness of the remedy, but it should not put obstacles in the way of efforts of the individual States to make the remedy effective.

Though there is no specific adjudication on the subject, it is believed that contracts stipulating minimum resale prices, even when they are made or are to be performed *410 in a State where such contracts are lawful, may violate the Sherman Act whenever the goods sold under the contract move in interstate commerce.

Consequently, many manufacturers not domiciled in the state of the vendee are unwilling to run the risk of violating the Federal law, and the effectiveness of the State fair-trade laws is thereby seriously impaired.

S. 3822 removes the doubt as to the applicability of the Sherman Act by expressly legalizing such contracts where legal under the laws of the State where made or where they are to be performed.

Moreover, the proposed bill declares such contracts shall not be an unfair method of competition under the Federal Trade Commission law.

The language of the bill, in describing the class of commodities to which it is applicable, follows closely the language of the State acts, and the scope of the bill is therefore carefully limited to commodities “in free and open competition with commodities of the same general class produced by others.”

The State acts are in no sense general price-fixing acts. They merely authorize a manufacturer or producer to enter into contracts for the maintenance of his price, but they do not compel him to do so. In other words, they are merely permissive.

They do not authorize horizontal contracts, that is to say, contracts or agreements between manufacturers, between producers, or between wholesalers, or between retailers as to the sale or resale price of any commodity.

They apply only to commodities which are in free and open competition with commodities of the same general class produced by others, and they therefore do not in any sense restrain trade or competition. In fact, they legalize a device which is intended to increase competition and prevent monopoly.

*411 But most important, from the standpoint of the Congress, the proposed bill merely permits the individual States to function, without Federal restraint, within their proper sphere, and does not commit the Congress to a national policy on the subject matter of the State laws.

In other words, the bill does no more than to remove Federal obstacles to the enforcement of contracts which the States themselves have declared lawful.

The Senate Report on the District of Columbia Revenue Bill, S. Rep. No. 879, 75th Cong., 1st Sess., quoted S. Rep. No. 2053, 74th Cong., 2d Sess. See S. Rep. No. 257, 75th Cong., 1st Sess., which also quotes the text of the earlier report.

The intricate verbal arguments used to support the Court’s decision do not affect the clarity of the statute and its legislative history. (1) It is said that the proviso to the Miller-Tydings Amendment makes it inapplicable to “non-signer” clauses in State acts. But the proviso only made explicit that the Amendment applied only to vertical agreements and did not make legal horizontal agree *400 ments, for example, those between retailers or between manufacturers. See statements of Senator Tydings, 81 Cong. Rec. 7487, 7496. The wording of the proviso, in fact, follows closely a statement of what the Senate Committee thought was implicit in the State acts. See S. Rep. No. 2053, 74th Cong., 2d Sess. 2. (2) The fact that the 1931 California statute used wording similar to the Miller-Tydings Amendment and was later amended to refer to nonsigners is beside the mark. The words of the 1933 amendment to the California statute make clear that it was not, like the Miller-Tydings Amendment, designed to remove the bar of an antitrust act. It was enacted to give an affirmative right to recover from nonsigners, something the Miller-Tydings Amendment does not purport to do. In such a statute specific language referring to nonsigners would of course have to be used. (3) It is said that H. R. Rep. No. 382, 75th Cong., 1st Sess., refers to a bill containing the phrase “other conditions.” The words “other conditions,” when used in conjunction with a phrase referring to minimum prices, could scarcely mean anything except “conditions other than minimum prices.” We are here concerned with minimum prices. (4) “Permissive” was used in the Senate Report not to refer to retailers but to manufacturers. “[The State acts] merely authorize a manufacturer or producer to enter into contracts for the maintenance of his price, but they do not compel him to do so. In other words, they are merely permissive.” S. Rep. No. 2053, 74th Cong., 2d Sess. 2.

See letter addressed to the President by the Chairman of the Federal Trade Commission, S. Doc. No. 58, 75th Cong., 1st Sess., pp. 2-3. See also Report of the Federal Trade Commission on Resale Price Maintenance LXII (Dec. 13, 1945).

The Department of Justice appears to have instituted no prosecutions because of enforcement of “fair trade” acts against nonsigners. The Assistant Attorney General who played an important part in enforcement of the antitrust laws called for repeal of the Miller-Tydings Amendment because it made legal the nonsigner provisions of the State “fair trade” acts. Statement of Mr. Thurman Arnold, T. N. E. C. Hearings, pp. 18162-18165.

The contention that the “non-signer” provisions are not within the Miller-Tydings Amendment appears to have been made in only two reported cases since the Amendment was passed in 1937. Calamia v. Goldsmith Bros., Inc., 299 N. Y. 636 and 795, 87 N. E. 2d 50 and 687; Pepsodent Co. v. Krauss Co., 56 F. Supp. 922 . In both, the argument was rejected.