Brief for the Appellant and Appellee — United States v. Bausch & Lomb Co.

IN THE

Suprefne on of the United States

Octoser TERM 1943

. No. 62 : ° «

‘UNITED STATES OF AMERICA,

against -A ppellant,.

BAUSCH & LOMB OF siCAL COMPANY et al.,

ele ae ‘No. 64 . ‘ *

yee LENS COMPANY, INC. % al.,

at eer

———— saci OF AMERICA,

A ppellee

Appellants,

Appeats f from the District Court of the United States

for the Southern District. of New York

BRIEF | FOR SOFT- LITE LENS COMPANY, INC,

NATHANIEL SINGER, AND R. G. LANDIS

a2 o

4 Betrave. M. Wesstek; °

Attorney ‘for Sorr- live Lens

Comptxy, Inc. et al.

—_

Henry Leuricn,

Hyman D. Lennicn,

Epwarp L. Rea,

Of Counsel

Appellees’

A. The ‘manufacturing agreentent with Bausch &

Lomb is legal

- with Soft-Lite -

ce a a a a ee ee ee ee

‘

| Cy There are no agreements between Soft-Lite and

wholesalers. The Fair: Trade contracts are

| D. Soft-Lite cannot be compelled to sell to all _

os E. The provision for future discovery by the Gov-

_the Constitution ae ar niadsedinasoniaies

‘VIF Conclusion _ |

ee ee ee ee ey ee ee ee a ae a eee ee

B. Bausch & Lomb has played no part in the Soft--

' Lite distribution system and has not —

INDEX

\ PAGE |

PF ae AA BE EO he e414

| Ba ia ery ..

Til. Statement of the case epicenter secede 2

A; . Thee cumpitiet®. ct ak tiie Ss

“4B. The findings and judgment . OE TOSS Rete BE 4

c. Statement of facts pai Sia fh sp lahat chi 8

Iv. Specifeation of errors and statement of issues _- 19

V. ‘heniaiasiak ee creas mink pen ieee a

ernment is an invasion of rights guaranteed by

"

ee Serosues: INDEX . | ‘

Cases Crrep

eles | PAGE

Boyd v, United States, 116 U. S. 616 (1886) - ____47, 48, 49

Calvert Distillers Corporation v.. Nussbaum Liquor

Store, Inc., 166 Mise. 342, 2 N. Y. S. (2d) 320 (Sup. .

Chey ie Ee COMER, TROD cnn nnn t. GE |

Calvert Distillers Corporation v. Stockman, 26 F. Supp.

* FE Dh Bn hg FD wn gee icenn er ncnsecgesneeyns 44

Federal Trade Commission v. American Tobacco Com. |

«! pany, 264 U. S, 298 (1924) __--- cere: _ 9

Federal Trade Commission v. Beech-Nut Packing Cus.

pany, 257 U. S. 441 (1922) _____- PER, HT 36, 37, 39, 40

Federal Trade Commission v. Curtis. on Com-. §

pany, 260 U. S. $68 (1983) .... 22-03. 38

Federal Trade ‘Commission v. Raymond Bros. -Clark

Company, 363. U. S. 565 (1924) _--~--------_-_--.. 46

Federal Trade Commission vy. Sinclair Refining Com-

Ss «© BIS ff) | hee eee 37

Frey & Son, Incorporated v. Cudahy Packing Company,

256. U. BT CED cece pacemnnndeonicntas 36

Great Atlantic & Pacific Tea Co. v. Cream of Wheat

_ Co., 227 Fed. 46 (C. C. A, 2d, 1915) _-_--- ee 2

Interstate Commerce Commission v. Brimson, 154 U. ae

447 (1894) ~----------+-------+ ipiesiceasibieatdclihacetiaeneiononesn 49

Lnaiiie et al. v. American Tobacco Co, et al,, 218 Fed.

447 (C. C. A. 2d, RR A: a. Rr 38

Near v. Minnesota, 283 U. S. 697 (1930) . ae #

Swift and Company v. United States, 196 U. S. 375

(1905) a cndinanteelnnnenaeminnnlinmenempn qatar een

'. United States v. Addyston: Pipe & Steel Co. et al:; 85.

* Fed. 271 (C. C. A. 6th, 1898) ___-.-- 22. 2

United States v. Aluminum Co. of America et al. yu

F. = 97.(S. D. N. ¥, mm Se eee IO 38

INDEX 6. :s an

PAGE

United States ve. Banecki & Lomb Optical Co. et al., 45 -

F. Supp. 387 (S. D. N. Y., 1942) . ee ee 1

United States v. Bausch & Lomb Optical Company et

‘al, C. C. H. Tr. Reg. Serv. Court Decisions 1941-3

1 52,916 (S: D. N. Y., BD acmatintneriinmmsinecaetic 17 -

United States v. . Colgate « Company, 250 U. S. 300 |

RRS Ae ES ea ee ee ee

United States v. Great Western Sugar Co,, 39 F. (2d)

149 (D. C. Neb. RIED) - 92 -- ~~ ----- 38

United States v, Imperial Wood Stick Company, Inc.

et al. 3 C. C. H. Tr. Reg. A 47

United States v. National Container Association et al.,

- 3C.C. H. Tr. Reg. Serv. 1] 25,434: LE ERE ECT Rea 47

United States v. A. Schrader’ s Son, Ine., 252 U. S

(1920) Sel SERA DP ah ier oe Ee PBR idole tela 36, 37

United States v. Univis Lens Co., am et al., 316 U. S: °

al (1941) SAT BA eR Oe AE, SERN NS A 17, 42

STATUTES ,

BU. S.C. $$ 1, 3; 26 Stat. 2095 50 Stat. 693 ce FF

15 U. 8.0. §: 25; 32 Stat. 823; 36 Stat. 1167 —.-.-____- - *

. U.S. C.-§ 345; 36 Stat. 1157; 38 Stat. 804; 43 Stat. ss

RE Cd Papen PCR CERO ARS Cane ORES + ioe

\N. Y. Cons: Laws. (McKinney’ s, 1941), Book 19, Gen: _

\ eral Business, Law Art. XXIV-A: beanie renal 42

2C.C. H. Tr. Reg. Sery., p. 7501 et. seq. — a caheenanthia 42

a

oe

Genes Aursdonrries

| Restatement, Contracts § 516... ._- a 22

Restatement, Contracts, N. Y. Annot. § 516 an

9 Williston, Contracts’ (Rev. ed., 1937) § 1645... 22

~os

¥ A Beet

Bei

5 ad

IN THE .

Supreme Court of the United States

- Ocross TERM — ‘

UNIrEeD Srares. OF Awuaica,

| Appellant,

; against No. 62¢

Bausch & Los ‘Optica Company, M.

‘Herpert Etsennart, Ben A. RaMakEr,

Josep F, Tayior, Sort-Lirz Lens Com-—

PANY, Inc., NaTHanieL Srncer, R. G..

LanDIs, |

Poppies Sere Appellees + Sat ear

Sort-Lire Lens Company, Inc., NATHANIEL ay, £5

Srncee, R. G. Lanois,

Appellants, |

against : . No. 64. :

‘Unirep Srares or AMERICA,

Appellee

J -

- Appeals from the. District Court of the United States .

for the Southern District of New York _

; BRIEF FOR SOFT-LITE LENS COM-.

PANY, INC., NATHANIEL SINGER, |

= Cee AND R. G. LANDIS

> ¢ ‘Opinion Below

' The opinion of the ‘District Court is reported. in 45°F.

Supp. 387. (1942). It is printed at R.19-37. , **

(BR. 6) that they agreed =*

, 7 2 . z .

| : Ir. Jurisdiction

The final judgment of the District Court was entered

* February 1, 1943 (R. 60). The petitions for. appeal were

filed-in-and_granted ‘by the District Court April 1, 1943

:(R, 65, 71, 79). Probable jurisdiction: was noted by this—

Court June 1, 1943 (R.. 1016).

This Court has jurisdiction by virtue of Section 2 of the

Expediting Act of February 11, 1903 as amended (32 Stat.

823, 26 Stat. 1167, 15 U. S. C. § 29) and Section 238 of the -

Judicial Code as amended (36 Stat. 1157, 38 Stat. 804, 43

Stat. 938, 28 U. S. C.-§ 345).

II. ‘Statement of ‘the Case ;

| _ A. The Complaint |

‘It is alleged (R. 3) that Baysch & Lomb Optical Com. .

pany, a manufacturer of lenses and ophthalmic glass for

- lenses, and its officers Risenhart, Ramaker, and Taylor, and

Soft-Lite Lens Company, Inc., a distributor of tinted lenses,

and its officers Nathaniel Singer, Landis, and Morris Singér

(as to whom the complaint was dismissed for want. of evi-

dence), conspired to restrain trade in tinted lenses in viola-

tion of Sections 1 and 3 of the Sherman Act.* It is charged

fr

*“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: Provided, That nothing herein contained shall render illegal,

_ contracts or agreements prescribing minimum prices for the resale of

_acommodity which bears, or the label or container of which bears, the

trade mark, brand, or narhe of the producer or distributor of such

.commodity and which is in free and open competition with com-

modities of the same general class produced or distributed by others.

when contracts or agreements of that description 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

lumbia in which such resale is to be made, or to which the commodity

, die, cae

‘“(a) to designate and select, according to certain

arbitrary rules and, regulations, wholésalers and _re-

.-tailers to handle, deal in, and‘sell certain tinted lenses

known as Soft-Lite lenses; _ al

selected wholesalers and. retailers ; -

‘‘(b) to sell such tinted lenses only to‘such desig-

‘(e) to restrain such wholesalers and retailers from

selling to other wholesalers and retailers not so selected ;

;**(d) to force such wholesalers and retailers to ob-

serve certain arbitrary’ and unreasonable prices in

reselling such tinted lenses; and .

he \ ‘“(e) to limit the sale and distribution in-interstate

trade and commerce of tinted lenses similar to Soft-Lite

lenses.”’

It is asserted that the two groups of defendants, Bausch

& Lomb and Soft-Lite, 6 |

“‘conspired to establish and maintain a closely regulated

scheme of distribution by means of which the defendants

would control eompletely all phases of the marketing of

~ certain unpatented tinted lenses, including the selection

—

- is to be transported for sucli 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

and for other purposes’, approved September. 26, 1914: Provided

further, That the preceding proviso shall not make lawful any coftitract

or agreement, providing for the establishment or maintenance of mini-

"Mure resale prices on any commodity herein involved, between manu-

facturers, or between producers, or between wholesalers, or between

* brokers, or between factors, or between retailers, or between persons,

firms, or corporations in competition with each other... .” *

_ Sec. 3. Every contract, combination in,form of trust or other-

wise, or conspiracy, in restraint of trade or commerce in‘any Territory

_ of the United States or of tlie District of Columbia, or in restraint of

trade or commerce between any such Territory and another, or between

. any such Territory or Territories and any State or States or the

f.. (1937),.15 U.S. C. §§ 1, 3 (1940). ° :

create a Federal Trade. Commission, to define its powers and duties, -

District of Columbia, or with forgign nations, or between the District °

* of Columbia and any State or Stafs or foreign nations, is hereby |

declared illegal. . . .* 26 Stat. 209.( 1890), as amended 50 Stat. 693

“¢ and that pursuant thereto.

.

~

:@

Finding that the Bausch & Lomb defendants have not

conspired among themselves or with the Soft-Lite defend- f

-mic glass from which such lenses are made exclusively,

for Soft-Lite, and has declined to manufacture such

‘lenses and glass for customers other than Soft- uate

= called Soft-Lite lenses, to Soft- Lite, but repur-

' Bausch & Lomb wholesale branches (R. 7); ;

‘lenses, and Bausch & Lomb has agreed with Soft-Lite as |

‘lenses (R. 7);

The plaintiff prays that the alleged conspiracy and

practices be adjudged illegal, that agreements between ©

Bausch & Lomb and Soft-Lite relative to distribution of -

Tenses be declared illegal, and their performance or renewal

enjoined, aud that the Soft-Lite distribution system be can-

a celled (R. ~10)..

4 "

and designatiqa.of wholesalers and yetailors | of one

lenses’ and théefixing and maintenance of minimum |

-Fesale prices ‘of such lenseg’’ (R.

(a) Bausch* Dee ia a

patented tinted lenses and unpatented tinted ophthal-*

(R..7) 5. ae eat vi

(b) ‘Bausch & Lomb sells its entire oitput of such

. chases from Soft-Lite approximately two-thirds-of-the——

nses so sold for distribution to retailers. through J

( c) the defendants cooperate in promoting Soft-Lite ©

to wholesalers’ resale prices and as to the wholesalers

and retailers who should be designated to. deal in the

(ad) Soft- Lite sells only to wholesalers who ‘adhere |

to rules and charge prices. fixed ‘by the defendants -

(R. 7, 8); and

(e) the defendants have controlled the activities,

prices, and practices of retailers (R..9). :

+ B. The \¢ Findings and Judgment

°

qn

‘aie <R. 58), the . court held that the ‘exclusive manu-

‘Bausch & Lomb defendants on the merits ( R. 08}.

The cout found and adjudged that the: Sof t- Lite \tefend-

_ and retailers i in violation of the Sherman Act a

(a) by entering: into license_agreements-with re-

Soft-Lite lenses,

“(b) by entering into license agreements with re-

tailers which provide that retailers will sell such Jenses

only to.the public, © .- eget

(c) by entering into agreements with wholesale

customers which provide that they will sell-Soft-Lite

lenses and blanks only: to ‘Tetailers designated as

licensees, : —?

(d) by entering into agreements ‘with wholesale

~ shall sell such: lenses and blanks,

(e) by entering into Fair Trade fesale’ price main-

’ tenance contracts with wholesalers as part of the Soft-

_ Lite distribution system (R. 61)..

The license agreements between Soft-Lite and retailers

cancel them by notice to the retailers (R. 61).

* Kach agrocinent Stes Soft-Lite and. wholesale cus-

tomers which provides that wholesalers will sell Soft-Lite

lenses and blanks only to retailers designated as licensees

facturing agreement between Bausch & Lomb and Soft-Lite —

~ jg legal and valid, not in violation of the Sherman Act, and —

forms no part-of the Soft-Lite licensing—-and distribution :

system (R. 359); and the complaint was dismissed as to the

ants have conspired with each other and with wholesalers -

____ failers-which-fix the prices at which retailers shall sell _

customers which fix the prices at which wholesalers

were declared null, and void and Soft-Lite was required to

by Soft-Lite, or which fixes the prices at which wholesalers . .

ae

oo

shall ‘sell ‘Soft-Lite: lenses, was adjudged illegal, and Soft

Lite was required to cancel the same by notin: By

“Bach Fair Trade ineaie price malatdsanes sinidiinal wd |

- the trade marks of Soft- Lite now in effect between the com:

pany and wholesale customers which fixes the minimum or

' stipulated resale price for. Soft-Lite lenses was held illegal,

‘and, Soft-Lite was required | to give notice. of cancellation

(B. 62). ;

A nerpotesl injugetion ashiust the Sof t-Lite distribution

’ system (other than future Fair Trade vontracts) ‘was ©

oS

granted (R. 62). Execution of Fair Trade contracts was

enjoined for a period of six months (R. 63). Soft-Lite

was enjoined for six ‘months from systematically suggest:

‘ing wholesale, ‘prescription, or consumer ‘Prices on - Soft-

; [Lite lenses or blanks (B. 63). eZo7:

"4 ~ “pe ~

Attached: to the judgment is'a provision allowing dis-

covery, as follows:

“That for the purpose. or securing compliance with

this Judgment, authorized representatives: of the De .

partment of Justice, upon the written request of the

Attorney General or an Assistant Attorney-General,

shall be perinitted access, within the office hours of the

. said defendants, and upon reasonable notice, to books,

ledgers, accounts, correspondence, memoranda, and

: other records and.documents in the possession or the

-" gontrdl of the said defendants, or any of them, relating

to any-of-the matters contained in this J udgment, ‘such

access to be subject to any legally recognized privilege.

Any authorized representative of the Department of

Justice, subject to: the reasonable conveniénce of the.

. said defendants, shall be permitted to interview officers

-or employees of said defendants without interference,

.Yestraint or limitation by said defendants; provided, -

however, that any such officer or employee may have

counsel present at such- interview. Said defendants,

\ °

upon the written request of the Attorney General, or

an Assistant Attorney General, shall. submit such re-

ports with-respect to any of the matters contained in

this Judgment as from time-to time may be necessary

for-the purpose of enforcement of this J udgment ; pro-

vided, however, that the informatiqn obtained, by the .

- by any representative of the Department of J ustice to

\s Any person other than a duly authorized representative

of the Department of Justice except in the course: of

mearis permitted in this paragraph shall not bé divulged

4

~ Jegal-proceedings in which the United States is a party fe

or as otherwise required by law.’’ (R. 63)

| There is oe for a ) atay pending appeal (R. 65).

ce Anticipating our statement of issues and our argument,,

-our position as to the findings and judgment i is briefly as

- follows :

‘The slicmsis is correct and must be affirmed as regards

the Batisch & Lomb defendants and the ee & Lomb- .

Soft Lite relationship. 3 ti

Our understanding of th effect of ene decisions (e. g.

*United States ve, is Lens Co., Inc. et al., 316 U. S. 241)

- leads us to epneede that captneiiinits between Soft-Lite and

‘retailers restricting the retailers’ choice of customers and -

resale prices, should be enjoined.

: The judgment must be Teversed in so far as it relates

_ to Soft- Lite’s relations with wholesalers,’ It is contrary to.

the decisiori in United States v. Colgate & Company, 250 .

US. 300, and the Miller-Tydings amendment to Section ie

of the Sherman Act (50 Stat. 693). .

The provision for discovery must be vacated as in viola-

tion of rights guaranteed by the Fourth and halon Amend-

ments,

©, Statement of Facts

To ‘siate it bluntly but accurately, the real object of:

this case is to put a small independent company. out of.

‘business.. If the agreement for manufacture of Soft-Lite

lenses and glass by Bausch & Lomb is cancelled, if Soft--

Lite’s. relations with wholesalers are.condemned and en-.

- joined as demanded by the plaintiff—-if the extreme. relief

_ sought by the prosecution is granted, Bausch & Lomb will

_ survive, and so will all of Soft-Lite’s competitors, but Soft-

-. Lite will be so crippled and hampered as to be ineapable of

carrying on the sale ‘of its product -in competition with”

_.© others not so restricted. A brief statement of the essential .

_ ‘facts will satisfy the Court that no such result is required

- for the protection of the trade or of the fraction of the ~

~~ public which wants and wears pink-tinted glasses.

Manufactured by Bauscly & Lomb according to Soft —

Lite’s specifications, Soft-Lite lenses and glass for lenses |

are purchased from Bausch’ & Lomb by Soft-Lite and-sold_-

__ by Soft-Lite’ to wholesalers (including wholegalers affiliated -

_ with Bausch & Lemb); they are then ‘sold by the whole- _

salers to retailers, by whom they are fitted as eyeglasses

__ or spectacles and sold as such to wearers. That is the busi- |

’ ness. we are concerned=with; the trade allegedly restrained.

* Pleaded,.tried, and briefed as if it were an antitrust case of

the first order, the proceeding i is chiefly important, not to the

optical business or even to the public, which will continue

to have access to lenses of all kinds and colors, but to the

- small group of Soft-Lite. defendants who will be ruined if

measures of: the sort and severity . granted below and. de- ,

manded_ on appeal are applied. i

Soft Lite i is the resiatered tcadininrl of the pink-tinted

_lenses introduced by Morris Singer, father of Nathaniel, in

his retail optical stores in New York City (Ex. I, R. 963 ;

~ 451-2). Manufactured since 1924 by Bausch & Lomb, a .

- manufacturer of optical goods of the highest quality, Soft-

- Lite lenses avoid or relieve visual discomfort and fatigue by .

reducing glare (Ex. 39, 40, R, 685, 692; 163, 545).

\

The claim that the lenses are of high quality, that ne

absorb glare- producing rays without undue distortion of _ .

vision, and that tliey are otherwise superior to. other tinted - , ~

lenses stands uncontradicted (Ex. 39, ‘40, R. 685, mt 163).

The lenews and the tinted ‘glass Sestak which’ ‘they are

made are not. patented but. are made according to ‘specifica -s

‘ tions oe to Bausch & ava by the Singers (R. #0). | cote ;

The Soft- Lite nines 3 is a small independent concern 3

having but one. line of business, namely, the sale of Soft-Lite

lenses and glass to wholesalers. Thanks to the initiative of

Morris Singer and to the sales ability and energy of

Nathaniel Singer and his associate Landis, and the merit

‘of its: product, the company. has gradually increased. its |

sales; both in units and relative to- the trade, so that it

enjoys a substantial, profitable business; but it, is. only

_one of a number of companies, large and_small, including -

Bausch & Lomb itself, which deal ‘in tinted tenses. ~Soft-

Lite’s competitors carry full lines of optical goods, includ-

ing a number of brands. of tinted lenses (R. 456).

- ee cii Singer joined his father i in 1919.- By 1922 the

son had ‘decided that: Soft-Lite lenses could be sold on a -

national basis, and father and son incorporated Optical 4

Service Corporation- to’ carry. out such ‘a program (R. ° av

81-2, 451). In 1929 the name.of Optical Service —— a

__ Was changed to Soft-Lite Lens Company, Ine. (R. 81).

: i

- . ‘s - . e 1 .

° . . ‘ *6 7? .

. .

. rs \ ° cad e

s as ; leans -4 -

A ° . ‘

2

.

.

/

‘1 As silent: general manager, and sale, ‘manager, it

yoynger Singer travelled over the country preaching the

- gospel of Soft-Lite to. wholesalers and retailers and to

. oculists, optigans, and their patients (R. 81, 452). His re“

‘ward Was meager and slow in toming ; as Tate as 1924 Soft.

__Lite sales pea to about. $59,000. (RB. 87).

"When Soft-Lite lainen. were. introduced by Morris Singer,

and for some time tKhéreafter, the tinted glass was imported, ©

from France, where’it was made: according to: Singer’s

‘ American. manpfacturers (R. 86, 462). This was not satis-

factory, especially when plans to expand the’ business were

in the making, for there was no assurance of a regular supply |

of uniform quality (R. 462).

‘None of‘ the Soft- Lite. Sildadiate had any contact with

Bausch & Lomb.until early in 1924, when Nathaniel Singer -

arranged through the company’s New York City representa- .

_ tive for the fusing of a number of bifocal lenses from his

_French glass (R. 460-2). The operation was so successful

- that in May 1924 Singer went to the office of the company

‘Specifications, and was ground into lenses by” a number of . _

at Rochester to attempt to arrange for the grinding of all _

‘his lenses; and on June 11, 1924 Bausch & Lomb agreed to

grind Soft-Lite lenses out of glass imported by-Binger

' (Ex. 1A, R. 633; 101). In connection’ with this arrangement |

- Soft-Lite gave Bausch & Lomb a list’ of its customers 80

that special orders requiring grinding ofa different, kind.

from that done by the wholesalers could , be filled by

Bausch & Lomb ‘direct—thus saving considerable time. -

' ‘Bausch & Lomb billed Soft-Lite for these special orders

and agreed that any other orders for pink-tinted lenses re--

o 635, 637; 101, athe’

. ceived by it would be forwarded to Soft-Lite (Ex. 1A, 1B, .

‘..

In Auguit 1924 Bausch & Lomb bine the slates .

of the pink-tirited: glass 1 from which Soft-Lites are ground.

-Haying regard to the origin and nature of the product and

the relative prestige, size, and fi ilities, including sales staff

and outlets, of the two companies, Soft-Lite required pro-

‘tection against 1 manufacture of Soft- Lite lenses for others

~. and against.competition hy Bausch & Lomb in the ‘sale

» the lenses (BR. 103). ‘The agreement giving Soft- Lite such

strictly limit protection - was confirmed Septombeg, 13,

1926, as fellows: ler

“Mr. Nat Singer’

c/o Optical Service Dane: s 7%

“Knickerbocker Building, oes

Times —* New York CMs.

Dear’ Nat:

: oy ee

T haye given. the miithie of our manufacturing for

~ you Soft-Lite Glass and lenses considerable. thought.

». Since the very beginning of our rélations with you,

in connection with this transaction, it has been under- .

- .. stood. that we would safeguard yeur interests ‘in every

way and it has never been our. isitention to make

competition for you by either marketing a tinted lens

of our own or produeing similar tinted glass for other ~ -

manufacturers and it is oar intention to abide by this é

understanding. |

On the other hand, however, it is difficult to ‘foresee

the progress of science in producing glas¢ possessing

. better properties than is obtainable at the present time:

and in that event we feel certhin that you would not

_-. Im any; way desire to — our progress in that

.

- _ We hope that ‘thie may be sufficient weitentice to

: you that we do not wish to. do anything that would look

ee | ympetition in connection with the Soft-Lite and ..

‘ ia n sturally’ expect that your efforts in the sale of

12

same will be continued as a present, for an indefinite

period unless by consent of:bath parties concerned a

different arrangement, is agreed upon,

‘Yours very truly,

[Epwarp Bauscu, President]

' Bauson & Reo Opticat Co. .

_P.S. —Tinted eanis such as Crookes, Fieuzal, —"

Amber, ete., which we are now manufacturing, jt is un-

| derstood will not come under the above arrangement.”

(Ex. 3, R. 639; 99)

The “progréss of science’’ as to which Bausch & Lomb

reserved freedom of action materialized, and on July 6,

1932, in connection with an application for. patent on its

_Nokrome lenses, Bausch & Lomb advised. Soft- Lite as

follows: .

. “Mr. Nat. Singer "e

Soft-Lite Lens Company,

. 119 West 57th Street, New York City,

. My dear Nat: Confirming our recent conversation held

in your office in New York, I should be glad to state our

position regarding your request in connection with our

_ patent application for improvement in the manufacture

of Soft-Lite Nokrome lenses.

Insofar as the marketing of product icnetiaitei

under this patent involves the use of Soft-Lite glass as

such, we are willing to grant you the exclusive distribu-

tion under the same general. conditions as we have

- agreed to in the letter written by our company to you

- under date of Séptember 13, 1926. In this letter we .

- assured you that we did not-intend to market a tinted

._ lens to make competition for you, but reserved the right

to market directly a glass of the selective filtering type

when, with the progress of: science, there shouid be

. developed a satisfactory glass to meet ‘such require

ment. |

13

_ This letter, we believe, is in accordance with the -

request which you made and we -hope will meet the

situation satisfactorily. ae ei

_ + Very. truly yours; -

_” . (M. H, E1sewnarz, President)

Bauscu & Loms Optica Co.”

(Ex. 5, R. 641;- 104)

For a time Soft-Lite was obliged to accept second as

well as first quality lenses from @s manufacturer. Some

time before 1935 Soft-Lite was released from this obliga-

tion and Bausch & Laub agreed to sell Soft-Lite seeonds

abroad (R. 106-7, 1085).

Having Soft-Lite as the outlet for an important fraction .

of its lens output, Bausch & Lomb has taken a natural,

_- prudent, and legitimate interest in Soft-Lite business,

There have been many conferences and. frequent exchanges

' of information relative to all aspécts of the business, includ-

"ing prices (see e. g. R. 604, 617, 232), and as the business has

. grown and flourished, the personal relations of the Bausch

& Lomb employeés concerned with lens sales and Singer —

and his associates have become close (R. 232).

As a condition of price reductions to Soft-Lite, Bausch

& Lomb has insisted that the benefits be passed on to pur- .

chasers from Soft-Lite (R. 603-4, 386-7), but there is no sub-

stantial evidence ‘that Bausch & Lomb ever joined with

Soft-Lite in fixing prices to wholesale houses or to retailers ©

or consumers ; and, except for the exclusive manufacturing

agreement required by Soft-Lite, Bausch & Lomb has re-

tamed and has exercised complete freedom of decision

(R. 231-2, 374-5, 380, 604). Sor aa

: ! i

The following table indicates the degree to whicli, in

recent years, Singer’s sales ability and effort and the com-

pink.tinted lenses by the companies named and Soft-Lite

14

pany’s expenditures for national advertising (aggregating

_ about $2,000,000) havé been productive: °

Pairsof - Gross - _

Year * ~Jensessold —. sales price

1938 447,171. $807,000

1939 . ae. : 910,000 —

1940 $63,113 = —-s>—-987000—t—i;

sot (Ex. 207, R. 955)

Soft-Lite, a relatively small, one-brand concern having

no manufacturing or wholesale facilities of its own, enjoys

no monopoly. It holds no patent. Its gradual growth in

sales and profits i is attributable solely to the intrinsic merit

of its product, to good management, and to smart, aggres-

sive salesmanship.

Soft-Lite has struggled to overcome the preference-for

white glass. It has faced the competition of colored lenses

: of all sorts,many of them made and sold by larger, more -

powerful companies, such as Bausch & Lomb and American.

_: Optical Company. And having achieved a fair, measure of

success, it has had.to meet the claims of imitators of its

pink-tinted lenses—American Optical, Titmus,. Continental,

- Shuron, and others (R. 546-9). From 1938 to 1940 sales of

were:

- Total pairs of , Gross

Year = —-_—s Tenses sold ‘2 sales price

- 1938 - 1,150,523 «$1,598,179 |

1939 1,406,713% 1,887,868 )

1949 = ;—SCs«1, 433,583 1,939,502 |

Pe i aiarer ~ (Ex. 207, R. 56)

Selling a nationally advertised quality product, Soft:

Lite selects its customers with care. It sells to the whole-

peer : 15 Fe aa, ™ ..

sale affiliates of Bausch & Lemb, whose manufacture of its

lenses is featured in Soft-Lite advertising (R. 123). It

‘does not sell to the wholesale branches of its chief rival,

” » American: Optical Company, or to wholesalers whose vol-

ume is considered too small for profitable operation, or to

wholesalers whose credit is regarded as unsatisfactory, or _

to wholesalers whose practices are hot approved (Ex. 16, 1,

18, R. 6545; 136, 129-31).

r 4

Soft-Lite has never had agreements with wholesalers, ,

written or oral, except that since 1940 a-number of Fair

Trade contracts authorized by the Miller-Tydings amend-

ment of Section 1 of the Sherman Act (50 Stat. 693) have

been entered into (R. —_ 455). |

One-half of the 30,000 oculists and optometrists in the

United States. are active ~ of ‘lenses. 100 of

these sell Soft- Lite lenses (R. 372-3).

Soft-Lité’s promotional work and iirerttalie strees the

business and interests of retailers, Until 1927, however,

there was no attempt-to bind retailers by agreement. In |

that year Soft-Lite introduced the practice of having’ each

"Stock retailer sign an ‘Application for a Soft- Lite Licensee

Privilege’? (Ex. 12, R. 652; 126).. Submitted to a whole--

Saler, the application was subject to the approval of Soft- -

Lite. In it the retailer stated’ that he was ~?; recognized

high grade ethical, optical concern cognizant of the stand-

ards and principles upon ‘which licenses for-Soft-Lites are

granted’’, that he subscribed to these principles, and that

he had placed an order for a certain number of pairs of

: Soft-Lite lenses. The ‘‘prineiples’? referred to were not

- Spelled out, but the inference was that the ‘privilege’?

‘might be withdrawn if the applicant’s omar or prices

did not suit oethldte.

16

In 1953 Soft- Lite introduced formal Malena 3 in which

it was statéd as a condition of the right to deal in Soft-

Lite lenses and blanks (glass requiring certain. finishing

operations) that, subject to the right of Soft-Lite to revoke

___ the license, the retailer will sell the lenses ‘‘at prices pre- ‘

vailing-in the locality in which Licensee conducts his prac-

tice or business,’’ and that Soft-Lites “‘shall be sold ..

only to the patient or consumer’? - (Ex. 43, 44, 45, R. 699,

701, 705; 169-71). Modified in respects. not here material -

(R. 171), this form of license was in ‘use up to the time of

the trial. :

: Another feature of retail distribution i is ‘the numbered

“Protection Certificate’’, supplied by Soft-Lite to whole-

’ salers, and by them to the retail trade, intended to accom-

_ pany each ultimate sale and to give assurance of the gen-

uineness of the article purchased, and at the same time to

enable Soft-Lite to trace the sale—an ability seldom exer-

cised (R. 563). Phen eae ace

Because of the infinite variety of eye 2 conditions, pre-

scriptions, and foci, the pricing of lenses and glass ‘or .

lenses is a complex and difficult matter; and, like all other

distributors of lenses, Soft-Lite publishes price lists show: .

ing suggested prices of wholesalers. to retailers (R. 5423, |

454-5, 477). . The’ company has never issued suggested re-

tailers’ prices or vatablished a uniform retailer- consumer |

price, except on.one occasion and to an extent regarded by

the District Court as negligible (45 F. Supp. 38, -393; Find-

ing 26,-R. 57).

Soft-Lite glass i is used i in some of the patented Orthogon:

and Panoptik Ienses made and sold by Bausch & Lomb.

In consequence the companies entered into a number of

arrangements relative to the distribution of the patented _

lenses. Thus Orthogon licensees of. Bausch & Lomb were

. permitted to -purchase Orthogon Soft-Lites, Soft-Lite’s

17

stock licensees (those equipped to carry on certain finish-

ing operations) might buy uncut: Orthogon Soft-Lites.

Orthogon. ‘‘franchise dealers’’ were listed as Soft-Lite :

‘prescription’ Ticensees”’. -Panoptik licensees-might buy

-Panoptik Soft-Lites. Soft-Lite licensees might not deal.

in Panoptik bifocals unless braid were lidensed 7 Panoptik.

(R. 156-8)

A partial summary judgment . -was entered July 20,

1942 in another case, United States v. Bausch & Lomb

Optical Company” et al., Civil 10- 394, Southern District of

New. York, C..C. H. Tr. Reg. Serv. Court. Decisions 1941-3

92, 916, which contained an injunction against the Panop-

tik license system. «(The judgment, entered without oppo-

sition by the defendants, resulted from the decision in the

Univis ease, 316. U. S. 241. ) Accordingly, during August

1942 Bausch & Isomb notified all licensees that ee

licenses were-eanceled. > >

Bausch & Lomb also notified the: aiding of J ustice

~ ina letter dated June 2, 1942 that all Orthogon licenses had

- been canceled pursuant to a letter sent to Orthogon licensees |

on May 27, 1942. tg

Asa result of the action taken ‘by Bausch & Lomb, Soft-

Lite subsequently notified all its wholesalers that there were

no longer any restrictions on the sale of Orthogon or ap.

tik Soft-Lites. | °

We need not, therefore, Sins further the relations

between Bausch & Lomb and Soft-Lite in connection with

_— so-called licensing privileges.

We have not attempted to “oe or even suminarize all

* the evidence: We have examined the proof in enough detail..

to venture the opinion that the Government's claims, ‘ex- .

pressed i in the extreme terms characteristic of monopoly

-

+.

_ ¥

e

, 18

—

cases, are greatly exaggerated What it comes ie to is

this :—

Possessing a useful and attractive article. and plenty of

initiative, energy, and sales ability, the Singers and Landis

have established a prosperous one brand business. Subject

to the exception hereafter noted, they have not restrained

‘ trade—they have originated and developed it. There is no .

absence’ of competition—if anything, there is evidence of

an excess: of it. ,

’ The ‘Soft- Lite defendants baie created a substantial’

market for their pink- tinted lenses. At the same time they

have greatly: stimulated the demand for colored lenses of

all. sorts. They are,:in a sense, victims of the highest form

of flattery—imitation.

The Soft-Lite defendants have-not injured the public.

They sell it something it needs and wants; and by promot- —

ing the practice of ethical oculists and opticians they have

raised the standard of optical treatment and sales.

‘Itis submitted that the manufacturing arrangement with

Bausch & Lomb is essential to Soft-Lite; that it is fair,

"- reasonable, and well within the rights of the parties under

‘the Sherman. Act; and that its cancellation would be ruinous

to Soft-Lite and a id beneficial to its many

compétitors.

It is submitted that Bausch & Lomb’s Sint in ‘and |

activity in respect of Soft-Lite’s practices and prices is

". normal and proper and well within its-legal rights. .

——]t-is subimitted that Soft-Lite’ s-relations-and arrange

ments with wholesalers should not be condemned or in, aly

respect enjoined.

; : OE Eee oes

F ah ¢€ eee

Aine gah a ax

,

a ae

_. In‘regard to provisions in its retail licenses’ restrict-

ing the retailers’ choice of customers and prices, it is

‘conceded that Soft-Lite has gone too far and that the

judgment should be affirmed to the extent that it re-

quires cancellation and enjoins renewal of such. provisions. -

\

; | Iv. Specification of Errors and

Ene a Statement of Issues

_.. There are two appeals.

fi: In No. 62 the Government assigns as error the refusal

of the District Court to grant all of the relief demanded.

In No. 64 the Soft-Lite defendants complain of certain.

features of the judgmeut granted.

_ The Government assigns twenty-five alleged errors (R.

66-71). In order to submit a single, coordinated brief in

opposition to the Government’s appeal and in support of -

the Soft-Lite defendants’ appeal three weeks ‘before the

case is called for hearing (Rule 27), when the Government’s’ -

brief must also be submitted, and to obviate or at least.

reduce the length of reply briefs, we have endeavored to

; anticipate the Governments points and have arranged our

brief accordingly. Be 3 ANG

_. - We think the Government will contend that the. Bausch & -

. Lomb defendants, as well‘as the Soft-Lite defendants, are —

parties to the alleged Sherman Act conspiracy, and that’

- the manufacturing agreement between Bausch & Lomb and -

Soft-Lite is illegal and is part of the alleged illegal Soft.

"Lite distribution system (Gov’t Assignment of Errors 1-13,

24, R. 66-70), a

h

/

20 .

In opposition to this we shall argue that the agreement |

_ to supply pink-tinted lenses and blanks only to Soft-Litéis

directly. ancillary to. the main purpose of the manufactur.

ing contract“and thus a: reasonable restraint under the’

Sherman Act. We shall also argue that there is no agree-

ment between Bausch & Lomb and Soft-Lite with —

to the latter’ s distribution system.

a Geveceinie may argue that the court erred in re-

fusing (a) to require the: Soft-Lite defendants to sell to/_

anyone wha offers to pay cash therefor (Ass. 21, R. 69:70),

(b). permanently to enjoin said “defendants from syste-.

matically suggesting resale prices . ( Ass. 22, R. 70), and

- (c) permanently to enjoin them from executing Fair Trade 7

contracts — 23, R: 70). .

‘In answer ne siach arguments, and in | support of our con-

tention that.the judgment goes too-far in‘ certain respects,

we shall demonstrate that the court erred in holding that

the Soft-Lite distribution system constitutes illegal agree-

ments with wholesalers to charge uniform prices to retailers

and to boycott retailers, and requiring the cancellation

thereof, and in restraining Soft-Lite from systematically

suggesting wholesale or consumer prices for six months; @

and that it erred in holding illegal Fair Trade resale price —

’ maintenance contracts between Soft-Lite and wholesalers,

and requiring cancellation thereof, and in restraining Soft-

‘Lite from executing any such contracts for six months

(Def’ts’ Assignment of Errors 1, 3, 4, 7, 8, 9,.10, 13, 14, 18,

19, 21, 23, 24, 26, 27, 29, 30, R. 72-8).

We shall show that the court correctly refased to enjoin |

‘Soft-Lite from engaging in interstate commerce unless it ©

agrees to sell its lenses and blanks to anyone who offers and

. is willing to pay cash therefor.

. 21 e

And we shall argue that the provision of the judgment

allqwing future. discovery. by the Government must be

',. vacated as in violation of the Soft-Lite defendants’ rights

guaranteed by the Fourth and ‘Fifth Amendments (Ass.

15, R. 76). ates Sie

~ ° 4 ae De!

Vv. Argument

. A ' « ;

The District Court. correctly held that the exclusive

manufacturing agréement. between Bausch & Lomb and

Soft-Lite is legal and valid (Conclusion 7, RB. 59).

_As- the basis for this holding the trial court found in

part as follows (R. 58): te aa \ |

“33. Soft-Lite’s object in developing these arrange-. __

ments [for manufacture: of Soft-Lite lenses and glass

by Bausch & Lomb] was to obtain from a highly re-

garded domestic source a product of uniformly good

quality. Bausch & Lomb’s object. was to secure a

prospectively increasing outlet for its manufacture.

The purpose of tlt portion of the arrangements where-

by Bausch & Lomb agreed not to compete with Soft-

Lite either by selling pink-tinted ophthalmic glass to

other lens manufacturers or by selling pink-tinted

lenses to the trade was to protect Soft-Lite.. Soft-Lite

has expended substantial sums for advertising and in

the development of good will in. connection with a new

article of gommerce. ° Zi

- “34. Bausch & Lomb did not enjoy a monopoly in

the manufacture of glass for lenses, whether pink or

otherwise. Other manufacturers of lenses had access

to pink glass from other sources. . The success of Soft-

Lite stimulated emulation and competition.” a

Contracts, N. Y. fonet. § 516.)

* 93

There is no need to recite the details of the evidence;

they amply support. the findings ; and the authorities sus-

tain the conclusion of. law that -the manufacturing agree

ment is sanctioned by the Sherman Act despite the ‘fact

that it contains a limited restraint. »

First pare classified in United St es v.. Addyston

. Pipe € Steel Co. et al., 85 Fed. 271, 281 (C. C. A. 6th, 1898), |

restraints of this nature regarded as reasonable (and there- /

. fore legal) listed in the Restatement, Contracts § 516, in-

‘clude

“(e) A bargain to deal ‘aidkaaivehe with anothers”

provided that the bargaii date not effect, or form part of

a plan to effect, a monopoly. . (For references ‘to many.

illustrative cases, see 5 Williston, Contracts [Rev, ed.

1937] § 1645; and for New York cases, see Restatement,

The provisé 1 may be | for there: is no proof or

even charge of monopolizing i in the instant case.

We can find no clearer statement of the test we ask this

Court to apply than that made by J udge Taft i in the —

ston case, supra, page 282. He said:

- 6 | ,. In Horner v. Graves, 7 Bing. 735, Chief —

. Justice Tindal, who seems to be regarded as the highest

English judicial authority on this branch of the law”

., used. the following langaage:

‘We do not see how a ‘better test can bé applied’

.to the question whether this is or not a reasonable

, restraint of trade than by considering whether the

restraint is such only as to afford a fair protection .

- ‘to the interests of the party in favor of whom it is ©

given, and not so large | as to interfere with the in

° ae

saves of the publie. Whatever restraint i is larger :

- than the necessary protection of: the party requires

can be of no benefit to either. It can only be op-

pressiye.- It is, in the « eye of the law, unreasonable.

Whatever is injurious to. the interests of the public -

is void on the ground of public policy.’

-&@ sophis very statement of the rule’ implies. that the’

contract must be:one in which there is.a main purpose,

“ to which the covenant in restraint of trade is merely

ancillary. -The covenant is inserted only to protect |

one of the-parties from the i injury which, in the execu-

‘tion of the contract: or enjoyment of its fruits, he may

suffer from the unrestrained competition of the other.

.. The main purpose of the contract suggests the measure

of protection needed, and furnishes a sufficiently, uni

+ form standard by. which the validity of such restraints

may be. eee d determined. ry aed

We awe no difficulty ‘i in rélating this ‘Saree to the

case of the Soft-Lite defendants.. The main purpose of

‘the contract, to. which the covexant in restraint is ancil-

_ lary, is to provide for the satisfactory -manufacture of ©

' Soft-Lite. lenses and glass. -The covenant was inserted

only to protect Soft-Lite from the injury which, in the

execution of the contract or enjoyment of its fruits, Soft-

Lite might—we say would—suffer from the unrestrained

competition of Bausch & Lomb.

‘The restraint is not “injurious to the interests of the

public’, By enabling Soft- Lite to market successfully a

_hew artiele of commerce desired by the public, the restraint

promotes the — interest. :

_.That Soft- Lite needs’ the protection ‘and demanded

it j is borne out by the testimony | of: Nathaniel Singer (R.

466, 469-70) : ee eae ‘See eee

- 0

‘

a <

Bausch & Lotab was net pleased with the French glass’

it was. grinding for:Singer and requested harder. glass; °

| which Singer said he could not supply. Thereupon the ~

Bausch’ & .Loytb representative stated that if Singer ©

would give Bausch & Lomb the specifications it would

“endeavor to make Soft-Lite me At. this ane, Singer

said:

_ Well, the first thing my dad will ask me is er

protection have wet” (R. 466)

After talking to |\is father, Singer gave Bausch & taal

the specifications. ‘ Shortly thereafter Singer was advised .

‘that Bausch & Lomb’ had decided to manufacture Soft--

Lite glass and a trip to Rochester was suggested’ (Kx. 2,°,

- R, 638; 95). In’ the Bausch & Lomb office mechorandum

of the conversation on that trip itis stated 8 @, )

. 66] is understood that we make the ‘shove Soft-Lite

Glass for them only.’’ (Ex. 2-A, R. 639; 95)

And Singer was assured orally before he lias **the '

formula specifications’? that, although Bausch & Lomb sold

- and-would con continue te-sell colored lenseg, it would make |

pink - tinted len lenses exclusively for _ (R. 469, 103- ).

We: respectfully: submit that en this showinit. it is clear .

that the restraint was demanded by Soft-Lite as a.condi-

tion of the agreement to do business with its manufacturer;

fia - | that the restraint granted, limited to pink-tinted lenses, af-

fords necessary protection to Soft-Lite ; that it is clearly

and directly ancillary to the main purpose of the arrange

ment; that it is favorable to the interests of the ‘public;

and that-it is a reasonable, and therefore a legal, restraint a

under the Sherman ‘Act.

IL EAS TI a a ral cl ef

\ . j

(5

stp! Pit eke fps

‘The District Court correctly held that Bausch & Lomb |

_ has played no part in the Soft-Lite distribution system and

has.not agreed with Soft-Lite| with respect to its selection,

rejection, or discontinuance of, or relations with, its whole- -

- sale customers or retail lice oe 5, & ale

i - dlusion 11, R. 59). ;

We refer ‘again to the re ations of Soft-Lite and Bauesh cos

_ , & Lomb because, although the point was made, ‘considered

and decided in favor of the defendants in the trial court, the

~ Government persists in contending that the manufacturing

* agreement is an integral part of the Soft-Lite distribution ‘

z system and that’ the Bausch & Lomb defendants are parties.

- té the establishment, operation, and maintenance of the

system (Gov’t Assignment of. Errors sh 5, 8, 9, 11, ~

AA; R. 67-70). . ;

So arguing, the Government relied below on the opinion .

of Mr. Justice Hovmes’ in. Swift’ and Company v. United

States, 196 U. S..375 (1905), where, on appeal from a decree

on demurrer, a complaint was sustained against the charge

of indefiniteness, and.a decree, attacked on the same ground,

was‘affirmed but only as modified to restrain ‘‘certain speci-_

fied devices, which the.defendants ‘are alleged to have used

and’ intend to continue to use”’ (page 402). ec

~The opinion is & potent reminder. that ‘<eommerée | among

“the States is not a technical legal conception, but a prac-

‘tical one, drawn from the course; of business’’ (page 398) ;

* that “The plan may make, the parte unlawful” (page 396).

. This we concede.

But the ‘question inthe Swift case was, “ iis the Gov-

errihent’s petition, with its statements: of fact standing-

’

* 26

unchallenged, discover . . . [a conspiracy to control the

market of the natiori for fresh meats]’’ (page 390). There

' is no such question here. The defendants did not move to

dismiss the complaint for failure to state a cause of action;

' they challenged the Government’s statements and went to

trial; and the issue, now raised again, as to ‘participation

by Bausch & Lomb in the alleged conspiracy was determined :

in their favor. . , |

‘In. the findings of fact, as well as in the opinion, the

District Court reviewed the facts as to the inception of

and changes in the manufacturing agreement (Findings 7,

8, 9, R..53), the relations of the defendants with the trade

(Finding 13, R. 54) and with ‘each other (Findings 18, 19, .

29, 30, R. 55-7), the Bausch & Lomb wholesale affiliates *

(Findings 27, 28, 31, R.-57), and then found as ultimate

facts the following:

“*32. The exclusive manufacturing agreement made

in 1924 between Bausch & Lomb and Soft-Lite’ has

no connection with the Soft-Lite distribution ‘system.

When made in 1924;.the parties did not envision the

Soft-Lite licensing system established in 1933. Bausch

& Lomb has played no part in the establishment, opera-

* tion or maintenance of the Soft-Lite ‘distribution sys-

tem, either in connection with the aforesaid exclusive

manufacturing arrangement or otherwise. Bausch &

Lomb has not agreed with Soft-Lite with respect to

its selection, rejection or discontinuance of relations

— with its, wholesale customers or retail licensees.”

(B 58)

~. The Swift case was cited and considered below (47 F

_Supp. at 399, R. 35). The doctrine of the case is conceded

here. What we deny.is that the opinion of Mr. Justice

Houmes on a question of law raised by demurrer, however

luminous and significant as an exposition of the nature of

27

Sherman ‘Act conspiracy, has any force after Setilitgn and

- trial. and determination of the issue of fact as to- Bausch

& Lomb’s part in the alleged offense. .

_ - Our interest in the findings referred to and in the jnde-

- ment dismissing. the complaint on the merits against the: -

Bausch & Lomb defendants . ‘springs from the fact that

Soft-Lite is dependent on Bausch & Lomb and on the manu-

factiring agreement for pink-tinted lenses and glass, and-

that, if the agreement be annulled and the relations of

Bausch & Lomb and Soft-Lite be terminated as demanded

by the Government, Soft- Lite, the Singers,,and Landis will

be. greatly handicapped, if not ruined—a small, inde-

pendent, one ‘brand business built on ‘the imagination, -

initiative, :and sales ability of three ‘relatively small busi-

hessmen, and on the desire, if not need, of a fraction of-

the public for pink-tinted lenses of high, uniform quality, .

will be eliminated as a competitive factor of importance, }

if not wholly liquidated. With their manufacturing facili-

ties, sales staffs, wholesale outlets, advertising resources,

-- and other advantages, Bausch & Lomb and American

. Optical Company, and other competitors having supe- FS

rior manufacturing arrangements and wholesale outlets,

will move in and take over the bulk of Soft- Lite’ 8 pink-

tinted lens business.

That there is no basis in the evidence for the charges |

against it and for the judgment sought by the Government.

will be argued by learned counsel fo Bausch & Lomb, and

we shall not burden the Court with discussion that might |

be regarded as repetitious. We are confident that Bausch

& Lomb counsel will satisfy the Court

(a) that Soft- Lite - selects .and: does: business with its .

wholesale’ customers without agreement with .

Bausch & Lomb, ys

~ * 28 -

(>) that the Soft- Lite retail sinned system (the -

‘restrictive features of which we do not defend

here) was introduced ° and is operated solely by

Soft-Lite, and

> (ec) that the exchange of information and views by °

_ Bausch & Lomb .and Soft-Lite concerning the.

latter’s prices to its wholesale customers is

normal and ‘well within limits established by deci-

sions of this Court.

There is‘one feature of Soft-Lite’s business with Bausch

& Lomb that merits separate comment by us. We refer to

_ the fact that 60% of Soft-Lite’s product is sold to wholesale.

concerns. affiliated with Bauseh & Lomb. As to this the

court below found: - lie, > ;

“697, Sixty per cent of the total sales of Soft- Lite

lenses is made by six optical wholesalers in whom, over .

a period of years subsequent to 1924, Bausch & Lomb

acquired majority stock interests. These six optical

' wholesalers (hereinafter termed the ‘Bausch & Lomb

affiliates’) or their predecessor companies were all '

substantial customers of Soft-Lite before such affilia-

‘tion, and they have continued as such.- It was. stipu-

lated, for purposes of this trial only and for no other -

purposes, and subject to the conditions stated in the.

stipulation, that ‘Bausch & Lomb, through its owner-

ship of a majority of the outstanding voting stock of

_ each of said wholesale companies, has power. to ¢0-

ordinate andcontrol the sales and pricing policies. of

said wholesale companies.’

‘¢28. All of the optical slides customers of Soft:

' Lite, whether ‘affiliated with Bausch & Lomb or ‘not,

have at all times been dealt with by Soft-Lite-on the

same terms and all have been cooperative with Soft-

Lite in the operation and maintenance of Soft- Lite’s °

prices.and distribation system.”

. 99 s

~ “31. . . . Soft-Lite sold its lenses to wholesalers

who were in aétive competition with the affiliated whole-

Salers, and the. affiliated wholesalers as well-as the

nonaffiliated wholesalers sold lenses which were com- ~

petitive with Soft-Lites. (RB. 57-8)

We need not review the details of etleaainr which fully

support these findings. There is no direct evidence of

Sherman Act conspiracy | or agreement among Soft-Lite

and the affiliates, and the “course of business”’, to ‘borrow

from Mr. Justice Holmes, furnishes no basis for inference

' of collusion.

Made by a leading manufacturer of optical goods, and

80 advertised nationally, Soft- Lité lenses are an expensive

product for which there is a limited:market. This market

must be sought and served in such a manner as to make

the most of Soft-Lite’s national advertising and to differ-/

_ entiate . clearly Soft-Lite lenses from other tinted lenses

and especially other pink- -tinted lenses. Manufactured and

advertised as a quality product, Soft-Lites must be sold as

such. | ‘ .

Soft-Lite sought Bausch &’Lomb manufacture because

it knew that Bausch & Lomb could produce an adequate.

supply of uniform quality and because the Bausch & Lomb

name would reflect credit on the product. And so it has

worked out, to, the advantage of the buyer*of pink-tinted

lenses; who has been secure in the value of his purchase,

and to the pr ofit of Batisch & Lomb and Soft-Lite:

In the circumstances it is not remarkable—indeed, it

is natural and proper—that Soft- Lite “has sought’ to do

business with the foremost, wholesale houses, in six of which |

“between 1925 and 1935 Bausch & Lomb acquired ‘a ma-

jority interest. | Soft-Lite did .business with these - con;

|

cerns before their affiliation; it continued to do. business

with them after affiliation. There is no evidence that Soft-

Lite discriminated in their favor against other wholesale

outlets; there is no evidence that the other outlets com- -

plained or have cause for complaint.

: _— are other reasons why Soft-Lite’s relations with

the affiliates must be regarded as fair ard proper, Soft-

_ Lite cannot do bu a aad with the wholesale branches of

‘its “powerful rival, American Optical Company ; ‘for that

company is actively and successfully engaged in pushing

_ its own pink-tinted lenses and would be expected to neglect

-- er disparage Soft- Lites (R. 476-7, 482-3)... Soft-Lite cannot,

without prejudice to the standing and acceptance of its -

‘ product, . do business with firms known to specialize in

inferior merchandise or who deal with unregistered op

tometrists or who falsely advertise that they sell Soft-Lite.

lenses (R. 130-1). o

\

This onléa poliey i is dictated, ont wy Bausch & Lomb or -

by agreement with anyone, but by Soft- Lite’s judgment of

its own best interest. One may disagree with the policy; .

the Antitrust Division may have different ideas. as to the ©

economics of lens manufacture and sale ; but one cannot ony

that the Sherman Act precludes :

It follows from all this that the sensation of its sales

to affiliates of Bausch & Lomb is entirely consistent with

what Soft-Lite regards as a vital interest (and who shall |

gainsay it?) in ‘the promotion. and sale of its lenses. Soft-

Lite does a large businéss with these concerns because they

are prominent and reputable and because they ‘possesg the

means and the will for extensive ciamaae and distribu: ©

- tion.

pe

Cc Fey” Ne

‘The trial court erred in holding that the Soft-Lite dis: |

tribution system constitutes illegal agreements with whole-

salers to charge uniform prices to retailers and to boycott

' retailers not licensed by Soft-Lite (Conclusions 3, 4, R.

( 59), and requiring the cancellation thereof (BR. 62), ‘and in -

restraining Soft-Lite from systematically suggesting whole-

sale or consumer prices for six months (R. 63). Pn

The court also erred in holding illegal Fair Trade resale

_ price maintenance contracts between Soft-Lite and whole-

salers, and requiring the cancellation thereof (R. 62), and -

- in restraining Soft-Lite from executing any such contracts.

for six months (R. 63). :

The errors asserted are duly assigned (Def’ts’ laaias

‘ment of Errors 1, 3, 4, 7, 8, 9, 10, 13, 14, 18, 19, 21, 23, 24,

7 27, 29, 30, R. 72-8).

Soft-Lite operates in a natrow, fiercely competitive

market; it has no wholesale or retail outlets of its own; *

its earnings depend entirely on the ability of Singer and

_ his associates to sell a superior product for ultimate use

by a relatively small number of persons. It is not at all

remarkable, therefore, that we should find Singer. and

Landis working closely with distributors, wholesale and

retail, striving to gain advantages for: their lenses over

rival lenses of all sorts and makes, employing a variety

of advertising-and promotional devices. Indeed, their con-

_ Stant effort to differentiate and push their product shows

‘ that the Soft-Lite defendants are moved, not by a desire

to appease or share the market with their rivals, but by”

a strongly competitive impulse to overcome their rivals’.

advantages and ‘to take business away from them.

oP

That ‘there is active competition ‘in the “a of tinted

_lenses cannot be denied. Believing that the court below

correctly held that the retail license provisions binding |

‘dealers to sell at locally prevailing prices and only to the

public constitute illegal restraints, we suggest that. the

court’s cofidemnation ‘of the distribution system as a

whole—that ‘its finding that the distribution system con-

—._: gtigutes ilegal.agreements with wholesalers as well as re-

= tailers—resulted from failure to make due- allowance

‘for the dasic competitive conditions—under which Soft-

Lfte operates and from~confusion as to the effect. of the -

authoritiés. - rea ie

We shall argue that as to wholesalers there is no evi.

dence of conspiracy and that, in any event, the cancellation

of the Fair Trade contracts with wholesalers is not war- /

ranted. —

eae There bs no evidence of illegal agreements between Sof

Lite and wholesalers. .

" It is net claimed that there are any written or: express |

agreements with a and we submit that none can

be implied...

.

= to this the ceurt said (45 F. “Supp. at 396, R. 30) : :

-- ©T rue, there i is no written agreement hore between ©

.. distributor and the wholesalers as there was in Dr.

‘Miles Medical Co. v. ohn D. Park & Son’s Co., supra-

[220 U. S. 373]. That, however, does not immunize”

‘* the distribution: system devised by Soft-Lite. Neither

was there a written agreement in Federal Trade Com-

mission v. Beech Nut Packing Co., supra [257 U. S.

441], but that did not avail.- The agreement is implicit

in the operation of the system. The living: reality of |

uniform prices from wholesalers to retailers, corre-

$

spox@ing to the written instructions of the distributor,

of wholesalers’ refusal to sell to unlicensed retailers,

of surveillance of wholesalers by means of protection

certificates and over retailérs by ‘shopping’, compel

the conclusion that between the wholesalers and the

distributor ‘theré was agreement or at least — as

escence in a program of concerted action. ~_—.

The ‘living reality” is that, coming into existence and

operating in an intensely competitive environment, up

against powerful and resourceful rivals, Soft-Lite has

adopted and applied measures, caltulated to enable it to

engage successfully i in the struggle for survival. From the

fact that.a court and lawyers now say that certain ‘written -

restraints on -retailers.are illegal, it does not follow that

illegality is ‘to be implied from sales and promotional meas-

ures used- with wholesalers.

- It is no evidence of Sherman Act conspiracy that Soft-

: Lite refuses to do business with wholesalers who specialize

in inferior merchandise (RB. 130), who sell on mail order

to unregistered optometrists (R. 131), who falsely’ adver-

tise that they distribute Soft-Lites (Ex. 173, R. 916; 432),

_ or whose credit is not approved (R. 132). These reserva-

. tions, dictated by consideration of its own interest, are

. evidence, not of erences. but of ‘business. acumen ‘and

"prudence.

we

> The evidence; to which the Governnient may _ attach. --

Jmportance i is a form letter sent to new wholesale accounts

‘after they have been — The letter in full is as

follows:

. “We taki pleasure i in welcoming you as a a Soft: -Lite.

Distributor.

e

In accordance with the arrangements completed

between you and our Mr. ___-_------ we have shipped

your qualifying Soft-Lite lens order. (Terms of| pay-

ment are those-agreed upon with Mr. --_--- Mi CER a

namely, that billing is to be made as-of (date) and

payments are to be made in four (4) equal monthly

payments. Cash discount will be extended on the first

payment if remittance is received within the cash \dis-

count period.) (The rest.of the payments will be net.) . -

As a Distributor, your purchases will be billed at the

prices listed in the attached Distributor’s price list:

and are subject to a bonus of 10¢ per pair on all pur-

chases of single vision uncut lenses. made during the

preceding quarter, paid in check form at the end of .

each quarter. * | boar

- A complete assortment of sales aids and advertis-

ing material will be ‘sent you in a few days. For use

on tis direct niail promotional material with which you

-will be supplied from time to time, we would like to

have your. correct imprint for our files, Also, if you

will send us the number of names on your statement :

mailing list, we'shall be glad to provide regularly,

sufficient quantity for inserting with statements. —

If. you will give us. the names of the salesmen, we

shall be glad to add their names to ourtist and supply —

you and -them with pertinent sales material from time -

_ to time: ee La a

In selling Soft-Lites to the retail trade, ‘please be

governed by the information found on page 17 of the

Soft-Lite Stock Licensee price list. Sie

“As a Soft-Lite Distributor you have the privilege

of opening new Soft-Lite Stock Licensee and. Prescrip-

tion Licensee accounts. The procedure is outlined-o

pages 17-20 of the Soft-Lite Stock Licensee Price List.

We are sending to you under separate cover 4

~ quantity of Stock Licensee applications and Prescrip-

tion’ Licensees recommendation cards.

A Iie RO aa a Ea Rep oe eR Cee

eet rea PRs

If there is any additional information you desire,

please inquire.

We are sure, that you will find the Soft-Lite Dis-e

tributorship a very satisfactory and sige in- .

vests. :

Very truly yours,

Sorr-Lirz Lens Company, Inc.

AFImmig/d— ; > ”

a = | (Bx. 36, R. 668 ; 153) |

The price hist x referred to (Ex. 37, R. 669; 672-81, 154)

contains suggested prices to-be charged by wholesalers . a

a great variety ty of styles, sizes, and optical combinations.

The use of such a list, is consistent with the universal prac- -

- tice of the ‘industry; the list is distributed to retailers as __

well as wholesalers; and without it they would ‘be virtually

_- Helpless because of the infinite variety of — and optical

combinations required by users.

In the fifth watagtenh of the term letter set forth above ©

‘wholesalers are requested to be governed by information.

found-on page 17 of the price list. “This refers to the state- .

merit (Ex. 37, R. 669; 681, 154) that — Lite lenses are.

7 old only to: Soft-Lite Licensees.””° \

The trial court onl the. Government assign importance’ _

_ to thie protection certificates (Ex. 13, R. 652; 127) printed

by Soft-Lite for ultimate distribution to wearers of the

‘\lenses”- While these are nuthbered in -such manner as to

nable the source of the lenses. to. be traced, only one in--

tance of such use was shown (Ex. 79, R. 795 ; 209), and

inger testified that the certificates are really used, and are

advertised, to prevent dealers from palming off inferior

itations of Soft-Lites and thus to give some assurance :

rat | f Me

i to the public of the authenticity and value of its purchases :

= 482-3). | | ba aos

‘There is evidence that in general wholesalers charge

the suggested prices and deal only with licensed retailers

(RB. 223).. There is evidence that Soft-Lite ceased ‘to do

’ business with wholesafers who sold at less than the sng-_

gested prices (R. 455-6). There is no evidence ‘that Soft-

_ Lite ceased to do business with wholesalers who sold to

, unlicensed retailers.

We have stated the evidence offered against the Soft--

\ Lite defendants in its extreme form. We have omitted ex-

planations by Soft-Lite of particular aere ued (e. 9.

Ex. 27, R. 659-62; 148).

The Geren: argues, and the District Court agreed,

that ali this adds up to a series of agreements between

Soft-Lite AG wholesalers. : We ee submit that it :

amounts nee of th the sort. fae ae a8

é Vs . e 3

We conced®, as we must,. that agreement may be im.

_ plied from a course of dealing or other circumstances.”

United States v. A Schrader’s ‘Son, Inc., 252 U. S. 85, 99

| (1920) ; Frey € Son, Incorporated v.Cudahy Packing Com- -

pany, 256 U. S. 208, 210, (1921) ; Federal Trade Commission

v. Beech-Nut Packing Colepamy, 257 U.S. 441, 451-3 (1922)..’

We concede, as we tins) that United States v. Colgate --

é Company, 250 U.S. 300 0 ( | 19), on which we rely, was

‘an appeal from a judgment-« ing a demurrer to an it- ~

_dictment which, as interpreted by the District Court, “<+failed.

to charge that Colgate & Company made agreements, either

express or implied, which undertook to obligate vendees to

observe specified resale prices; and it was treated ‘as alleg

\

. \

\

PO e a ae

" ing only recognition of the manufacturer ’s undoubted right —

'. to specify resale prices and refuse to deal with anyone who

failed to maintain the same,’’’ Schrader’s Son case, 252 -

U.S. at 990 / 3 et

We insist, howéver, that in a free economy it is and

must be the law. . ; Sere

. “.-... that in prosecutions, under the Sherman

_. Act a trader is’ not guilty of violating its: terms who

_ simply refuses to sell to others, and he may withhold

his goods from those who will not sell: them, at- the’

‘prices which he fixes for their resale. .. .°..’’. Beech-

‘ Nut case, 257 U. S. at 452-3. : |

We suggest that, having regard for the relative size of

Soft-Lite and the competitive conditions’ with reference to -

which it must operate, the Soft-Lite’ defendants should::

_ have the full benefit of the principle recognized in the fol-

lowing cases: ae otra i é

Federal Trade Commission v. Sinclair Refining Com-

pany, 261 U."S. 463, 475-6 (1923); where, in: respect of

powers of the commission, the Court made ‘the following .

statement applicable to the powers of a court: under the

. Sherman. Act: oe

» - “*. , .+ Tt has no general authority” to compel —

competitors to a common level, to interfere with ordi- -

nary business: methods or to prescribe arbitrary stand-

ards for those engaged in the conflict for advantage

ediled competition. ‘Thé great purpose of both statutes _

_ Was to ‘advance the public interest by securing fair -

opportunity for the play of the contending forées ordi-

_harily engendered by. an honest desire for: gain. And

to this end it is essential that those who aglventure

their time, skill and capital should have large freedom

of action-in the conduct of their own affairs.”’

+ ~

a

ba

Federal. Trade Coinniiasion: v. Curtis Publishing Com-

pany, 260 U. S. 568, 582 (1923) : 7

. “Effective - ‘competition requires that seiiiees liave

large freedont of action when conducting their own

affairs. Success glone does not show reprehensible |

_ methods, although it may increase or render i insuper-

able the difficulties which rivals must face. The mere

selection of competent, successful and exclusive repre- |

sentatives im the orderly course of development. can —

give no just cause for complaint, and, when standing —

alone, certainly affords no ground for condemnation

under the statute.’”? __ | cata

J .

. P ,

: . Md ‘ . ‘

°° ° ’

. ; ‘ +

° j 3 : -

° °

« ° .

= ’

Locker et al. v. seiedies wae Oe. et al., 218 Fed. :

a 450 (C. . A. 2d, 1914) (a Sherman Act case) :

fe The laws of trade are not wholly altruis- |

tic, they 1 may often be hard and selfish, but: it is no part’ °

of the duty of courts to attempt to enforce the precepts

of the-decalogue. In the struggles engendéred -by fierce

_,competition, losses must occur and injustice may be

. done, but this is frequently inevitable. and cannot be

prevented so me as the tieeee keep within. the law.”

, United States v. Soaks Wiis Sugar Co., 39 F “(24)

149, 151 (D. C. Neb., 1929) : ; ee

eee would be going far to say that a dealer

_.’ may not buy or sell at a yerform price that yields him

a profit if the only objection is that he has the inter-

- . tion to obtain. customers, who would otherwise deal, ii

. interstate commerce, with competitors at a different

Tadd

price. 48 oo

United States v. Aluminum Co. of America ét al, 44 .

_ 97, 204 (S. D..N.-Y., 1941):

“¢) , . if the public is to enjoy, as it is entitled -

to enjoy, the benefits of competition, then some lee-

way must be dllowed to those activesy engaged in opp?

a ee Nd

‘df Pein i,

i - properly be attributed to ther. %

In the Reeth thea case, 257 U. ‘Ss. ‘441, it had been found

. by the Federal Trade Commission that certain ‘‘ practices

in trading” {page 455) constituted ‘unfair methods of,

competition’’, and the finding was sustained on the ground

(pages 454, 456-7). that the respondent’s conduct was

- against public policy because it had a dangerous’ tendency. 7

ufduly to hinder competition or to create monopoly, (Mr.

Justice Houmes dissented in an opinion in which Mr. Jus-

tice McKenna and Mr. Justice Branvei concurred. Mr.

Justice Rexwouvs dissented in a separate opinign. .)

The Court. stated that the facts found by the commis-

_ sion showed that the’ Beech- ‘Nut system went far beyond

- ‘the refusal to gell to persons who would not: sell at’ stated

- prices (j page ba

following: hee ; +

a

dition to porn other before rmalevolggy motions may |

). Facts. stressed ehate the Court includg the

The Beech-Nut hoa nila to jobbet: whole- ral

salers, and retailers. Dealers who had been renioved.

from’ its list for failure to resell at sugge ted prices,”

and for selling to other déalers -who- did not maintain

‘. §uch prices, were reinstated “*upon the basis of decla-

' rations, assyfances, statements, promises, and similar

-expressions’”’ that satisfied the company that there-

after resale prices would be nininfai ned (pages 449-51).

The company added to its list dealers who declared *

that they would: resell at the suggested ‘ prices and

would not. sell to other dealers who did not maintain

such prices (page 449). : ‘

~The compa repeatedly traced instances of price-

’ cutting and: théreafter refused ‘to supply dealers wha

engaged in tlie practice or who sold to price-cutters

. (pages ieee a ae

te 6 «

.

wo

40

Competition among retail distributors was prac-

tically suppressed (page 4955).

The Court expressly recognized that the Sherman Act

* was not applicable except as a declaration of policy “to be.

- eonsidered in determining what are unfair methods of com-.

petition’? (page 453). And it expressly refrained from

placing its decision upon the existence of agreements, ex-

” “pressor implied. It said (207 U. B. at 455):

‘From this’ course of condret a court may infer,

indeed cannot escape the conclusion, that competition

among -retail distributors is practically suppressed;

- for all-Wwho would deal in the company’s products are

constrained to sell at the suggested prices. Jobbers

and wholesale dealers who would supply the trade may

-not get the goods of the company, if they sell to those

who do not observe the prices indicated or who are on

the company’s list of. undesirables, until they are re-

' stored to favor by satisfactory assurances of future

compliance with the. company’s schedules. of resale

‘prices. Nor is the inference overcomeby the conclu-

sion stated in the Commission’s fi ings that the mer- :

- chandising conduct of the company does not constitute

a contract or contracts whereby resale’ prices are fixed,

_ «maintained, or enforced. The specific facts found show

suppression of the. freedom of competition by methods -

in which the company ‘secures the codperation of tts

distributors and customers,.which are quite as effectual

as. agreements express or implied intended to accom-

plish the same purpose. . . .’’ (Italics ours)

| In short, a case not of agreements but of unfair meth-.

ods of competition. _ . |

This is not such a case. It is a Sherman Act casein. —

' ” e ;

which certain agreements, express or implied, must be

shown and which, for want of such showing, is governed

: ?

‘

41.

by the pasties of the Colgate case, where the Court said

(250 U. S. at 307):

‘*| ... In the absence of any purpose to create

or maintain a menopoly, the act does not restrict the

long recognized right of trader or manufacturer en-

gaged in an entirely private business, freély td exer-

cise his own independent, discretion as to parties with

w hom he will deal. And, of course, he may announce

in advance the circumstances under’ which he will re-

fuse tosell. . . .”

“That there are no written agreements with wholesalers:

was conceded by the court below. The holding that ‘‘agree-

* ment is implicit in the operation of the system’’-is not war-

_ ranted by the ev idence or the authorities. , \

It follows that the judgment requiring the seieiliattins

of the supposed agreements with wholesalers and enjoining

Soft-Lite from suggesting resale prices for six months

should be reversed. rea Pie

. 2. The District Court erred in attempting to invalidate the

Fair Trade contracts. "eg

A Stating that the Fair Trade contracts ‘‘came into exist- .°

. ence as a patch upon an illegal system of distribution of

' which they have become an integral part’’ (45 F. Supp. at

399, R. 36), the court adjudged the contracts illegal and

void, required Soft-Lite to give notice of cancellation (R.

_ 62), restrained their enforcement (R. 63), and forbade

the execution of new Fair Trade contracts for six months

after notice of cancellation of the existing contracts (R. 63).

‘Owing to the stay the contracts are in ees pending .

determination of these appeals.

| The action of ‘the District Court places Soft-Lite in an

. awkward position in relation to its customers and under a

~42

_ disadvantage vis-a-vis ite competitors, and is not warranted

by the facts or the law. -

What this Court said about the Fair Trade agr eoments

involved in the Univis case, 216 U. S. 241, 252-4, is not ap-

plicable here, and the trial court so held (40 F. Supp. at

399, R. 36). The Soft-Lite contracts (Ex. ‘8, $1, R. 990-7 ;

530) apply only to lenses and blanks that pass from Soft-

Lite to wholesaler to retailer without change; they do not

‘apply to articles to which work a or materia! is added: by the

; wholesaler. ,

- The contracts are strictly within the Miller- Tydings |

* Amendment (50 Stat: 693), printed on pages 2-and 3 above,

and the laws of the states in which they are effective. See,

e.g. N. Y. Cons. Laws (McKinney’s, 1941), Book 19, Gen-

eral Business Law Art. XXIV-A; New York and other State

- Fair Trade Laws collected 2 C. - H. Tr. Reg. — P.

7501 et seq.

The court said (45 F.. Supp. 399-400, R. 36-7) :

4... oe suffer, however, from the circumstance

that: they came into existence as a patch upon an illegal

system of distribution of which they have become an

integral part. It has already: been’ found herein that

the system devised by Soft-Lite created not only a_per-

pendicular system of contro! but, in addition, two hori-

zontal systems, one involving competing wholesalers:

and the other competing retailers.

«The facts herein do not permit the treatment of

the resale price maintenance agreements as isolated

transactions separate and apart from the scheme of |

controlled distribution as‘a whole. They have become

part of a system of horizontal agreements and, as such,

' do not enjoy the seni of the Miller-Ty — Act.”

43+ ess Teo: ; Pada

It begs the enséthin to say that the contracts have become

part of a system—a system of horizontal agreements. The -

simple fact is, they exist and are used, whether they are..

* part of | a ‘system | or not, and they are authorized py law. °

Indeed, Fair Trade contracts, sanctioned by’ Section 1

of the ‘Sherman: Act as amended, presuppose state-wide sy.»

tems under which all dealers in the same class having notice

of the prices stipulated are obliged to, observe then? In

Calvert Distillers oo v. Nussbaum biquor Store,

— dTne., 166 Mise. °342, 2 N. Y. S.- (2d) 320 (Sup. Ct. N.Y.

.. County, 1938), Mr. Justice Shientag said r Aae8 Mise. at

344-5) : re ‘ -. e

‘*With :the economic soundness. or wisdom of .the:

statute the courts are not. concerned.” It’ expresses a

new business policy by the law-making body of, the

ae State. It is not to receive such a narrow or stxict’ judi-

~. cial construction as virtually to destroy its purpose.

Rather is it to receive a judicial construction designed

to carry out that new policy, to efféctuate its primary

purpose, and to eliminate or to minimize, as far as

possible, any’ — or. inequity-that may result

from its application. .

“The attitude of thie courts, however, must not be

one of hostility to the new law. as ‘an &lien intruder

in the house of the common law, but a guest to be

welcomed and made at homme there as a new and power-

ful aid in the accomplishment ‘of its-appointed task of -

- accommodating the law to social (and; it may be added

parenthetically, business) needs.’ (Stone, The Com-

mon Law in the-United States, 11986) 50 Harv. _Law .

Rev. 4, 15.)”’

And he formulatéd certain rules regarded as applicable to

the issues before him, including (166 Mise. at 346) :

‘*3. Notice of the fixed prices [and] of the changes

thereof niust be given.to all who are sought to be bound

«44

nat thereby, and this applies not alone to direct changes'in

prices, but also to changes in discounts and other gen-

eral business practices reflected in the price of the

commodity.

. e . e- * «

«5. -A dealer who does not sign a price maintenance:

agreement is just as amenable to the act as the one who

does sign. Before any relief may be obtained against ©

him, however, it must appear that he had notice of.

the fixed prices and of all changes thereof at the time

- of sale.

“*6. Implicit in the statute is the romuiccsasint that

the prices fixed for resale by retailers be uniform in

any one competitive area. Implicit also is the require-

ment that there shall be no unfair discrimination in

prices to retailers. That does not preclude discounts

or fair variations in prices having a general application

in the trade based, for example, upon quantity sold or

_ time “ payment.”’

a

The Calvert case in the New York Sunecns Court was

followed in Calvert Distillers Corporation v. ett ac 26

' EF. Supp. 73 (E. D. N. Y. autinis )

: { The Fair Trade contrite ma in question relate only

“to finished articles, not to articles to which work or material

is added by the reseller. They are sanctioned by the state .

laws and by the Miller-Tydings Act. They should not be -

‘condemned by any such loose characterization as ‘‘that they

. came into existence as a patch —_ an illegal system.”’

We have analyzed the Soft- Lite distribution practices.

We have conceded that express agreements restricting re-

tailers are invalid. We think we have demonstrated that

sales practices respecting wholesalers do not constitute

_ agreements, express or implied. | We earnestly submit that

the Fair Trade contracts are clearly legal.

- : ~ ee

; =

. ms

To eancel the existing Fair Trade contracts and restrain |

__their enforcement, and to forbid the execution of new con-.

: tracts for six months, would cripple Soft-Lite and serve no

interest except the interest of Soft-Lite’s competitors who

are under no such restraint. Such action would interrupt,

if it did not seriously impair or destroy, beneficial relations

built up by the: exertion of competitive sales effort over a:

period of twenty years, would result in loss of continuity of

business and of good will, and would thus ‘cause needless

and inequitable i injury to the Soft-Iitte defendants without -

- any public advantage.

: Li

a) - }

The court correctly refused to enjoin Soft-Lite and its

officers from engaging in interstate commerce unless Soft-

Lite agrees to sell its | and blanks to any person, firm,

or corporation who —— is willing to pay cash therefor,

and to fill and otherwise handle the order of such person

ba company without discriminating against Him or it.

> This point would not merit seleunes, much less argu-

ment, but for ‘the fact that-.it is assigned as error (Gov’t

. Assignment of Errors 21, R. 69) and the Government has

_. Stated that it may be argued csp es J

The defendants Singer and Landis ai perhaps dream

of the day when the demand for their unpatented product

will be so great that their’ company will be regarded and

. treated as a public utility. Until that day arrives, or so.

long as any freedom remains. to. small priv ate enterprises, ©

it-is unlikely that the courts will impose any such obliga- .

tion. Great Atlantic & Pacific Tea Co. v. Cream of Wheat

Co., 227 Fed. 46 (C. C. A. 2d, 1915), affirming (Judge Hough)

© right

46

224 Fed. 566 (8. D. N: Y., 1915) ; accord Federal Trade

Commission v v. Raymond Bros.-Clark Company, 263 U. 8.

565 (1924). :

The ‘ici of the judgment allowing future discovery

_ by the Government must ‘be vacated as in violation of the —

Soft-Lite defendants’ rights guaranteed by the Fourth and.

Fifth Amendments. Ses :

' Error is assigned ‘ape "ts? ‘edged of Errors 15,

R. 16).

The judgment contains ‘a provision hacia 9, R:

63-4) under which the Department of Justice is giv en the

(a) To examine the defendants’ ‘io ites, ac-

counts, correspondence, memoranda,’ and other

; records and documents relating to any of the

. - matters contained in the judgment—‘‘such access —

to be subject to any legally recognized privilege”.

| (b) To interview officers or employees of the defend-

‘ ants without interference, restraint, or limitation.

(c) To require the defendants to submit such reports

with respect to any of the matfers contained in the

judgment as from time to time may be necessary

_ for the purpose of enforcement of the judgment. :

~ This, we submit, sanctions invasion by the Government

of the Soft-Lite defendants’ persons, houses, papers, and -

_ effects, and requires Singer-and Landis to be witnesses

against themselves, contrary to their rights guaranteed by

the Constitution.

The vague reference to a possible privilege may be dis-

regarded, for it relates only to the first sentence of the’

— siti: the right to examine books and —

ie an

The history of the provision has some bearing. In June

1939 the Antitrust Division adopted.the policy of requiring a

agreement to future discovery as the price of disposition

of Sherman Act cases by consent decree. The first provi-

sion of the sort here questioned which we have been able to_

find appears in the decree filed June 6, 1939 in the Southern

* District of New York in United States v. Imperial Wood

Stick Company, Inc. et al. (the Candy Stick case), 3

C. C. H. Tr. Reg. Serv. 125, 289. The provision was more

; definitely formulated, and the recognition of 4 possible —

privilege first introduced, in the decree filed April 23, 1940

in the same court in United States v. National Container ©

Association et “al., Id. 25, 434. Since June 1939 similar dis-

covery provisions have appeared in many, and we think all,

antitrust consent decrees obtained by the Division.

There ‘is much to be-said for proper ‘short cuts to dis-

covery in the trial of cases. An argument can be made for

. the use of such short cuts in the policing.of consent decrees,

even though the right is exacted as the price of peace. We

_ think that nothing can be said for a judgment giving the

Government virtually unlimited right of future discovery

in a Sherman Act case determined: by litigation.

There is no difference’ of substance between the dis-

covery authorized by judgment in this case and that granted

by legislation, aud condemned by this Court, in _ v.

United States, 116 U. S. 616 (1886).

..

The Court tens said:

-.. . ¢ It is true phat certain aggravating inei-

dents of actual search and seizure, such as forcible

-entry into a man’s house ayld ‘searching amongst ‘his -

papers are wanting, and to/this extent the proceeding

under the act of 1874 is / — of that which

48

was authorized by the former acts ; but it accomplishes |

the substantial object of those acts in forcing from.a..

party evidence against himself. It is our. opinion, |

therefore, that a compulsory production of a man’s |

private papers to establish a criminal charge against .

him, or to forfeit his property, is’ within the scope of

the Fourth Amendment to the Constitution, in all

_cases in-which a search and seizure would be; because

- it is a material ingredient, and effeets the ‘sole object

and purpose of search and seizure.’’ (page 622)

‘*. . . any forcible and compulsory extortion of

a man’s owp testimony or of his private papers to be

used ‘as evidence to convict him of crime or to forfeit

his goods, is within the condemnation of that judg-

ment [Lord Camden’s in Entick v. Carrington, 19 |

How. St. Tr. 1029 (1765)].. In this regard the Fourth -

and Fifth Amendments run almost into each other.”

_ (page 630)

It must be assumed that the Soft-Lite defendants will

bey the Sherman Act and any judgment that this Court

may approve. If they. fail in this regard, however, they

will be subject, not only to exeréise of the District Court’s

reserved power to make such further orders-as may be

necessary Or. appropriate for carrying out the judgment

(RR. 64), but to. criminal prosecution for violation of the

Sherman Act itself and to criminal contempt proceedings.

These- possibilities. emphasize the accuracy of Mr. Jus-

tice MILLER’s gresingy priarks in the Boyd case. He

said (116 U.S. at 639):

“And I am quite ssieenlea thi pin ions of the act

of Congress is to compel the party on whom the order

of the court is served to be a witness against ‘himself.

The order of ‘the court under the statute is in effect a

* subpoena duces tecum, and, though the penalty for the

- witness’ s failure to, appear in court with the crim

49

nating papers is not fine and imprisonment, it is one

which may be madg more severe, namely, to’ have

charges against him of a‘criminal nature, taken for —

_ confessed, and made the foundation of the judgment

of the court. That this is within the protection which

the Constitution intended against compelling a person

to bea witness against, himself, is, I think, quite clear.’’

- 2

In the Boyd case the papers had to be: produced i in court

on motion of the United States Attorney. The power here ~

granted is more far reaching (the right to ‘interview the.

defendants and to require mpente. is unlimited) and =

ject to greater abuse. . ~

Accord, Federal Trade Commission v. American

Tobacco Company, 264 U. S. 298 (1924).

This is not a case of requiring a corporation to pro-

_duce its books before a court in contempt proceedings or .

before a grand jury inv estigating an alleged violation of

the. Sherman Act. It is a ease of giving the persons who

happen to hold office in the Antitrust Division unlimited — <

subpoena power—the power to inquire without a. showing

of probable cause and without a warrant into the affairs

_’ of Soft-Lite, Singer, and Landis. io ee

. In Interstate Commerce p NEORET RW Nes v. Brimson, 154

U. 8. 447 (1894), the Court.said (at page 478):

‘*. . . ‘Neither branch: of the legislative de-

"partment, ‘still less any merely ‘ad inistrative body,

“ established by Congress, moped can be invested

with,.a general power of ne inquiry into the private ©

affairs of the citizen. i | ae

Nor can the Antitrust ‘eid

such power by judgment of a Dist rict Court.

be itouch with any a

;

74

/30e- aie

If liberty of the press is to be preserved against abridge- |

ment by injunction (Near v. Minnesota, 283. U. 8. 697), we

submit that the freedoms guaranteed by the Fourth and

Fifth’ Amendments should be preserved against such

abridgement. | hip pale

VI. Conclusion .

The judgment should be affirmed and modified as

MMM. pine L- Fae

i The judgment should be affirmed as regards the |

Bausch & Lomb*defendants and the Bausch & Lomb -

Soft-Lite relationship. 9“

The judgment should be affirmed in; respect of

agreements between Soft-Lite and retailers restricting

the retailers’ choice of customers and resale. prices.

_ The judgment should be reyersed in so far as it

relates to Soft-Lite’s relations ‘with wholesalers. . -

The provisions cancelling the Fair Trade contracts,

_ enjoining their-enforcement, and enjoining the execu-

tion of new Fair Trade contracts, should be vacated.

The provision enjoining | the systematic suggestion

* of resale prices should be vacated. ;

The provision for discovery should be vacated.

Resfectfully submitted, |

- Beraven M. Wessrer, ee

oh ee Attorney for Sort-LitE Lexs

Company, Inc. et al.

Henry Lennict, ;

Hyman D. LEnsicH,

‘Epwakp L. Reza,

' Of Counsel

‘