Central Shade Roller Co. v. Cushman , 143 Mass. 353 ( 1887 )

W. Allen, J.

-The contract which is sought to be enforced by this bill, and the validity of which is the only question presented by the demurrer and argued by the parties, was made between the plaintiff, of the first part, and three manufacturers, under several patents of certain curtain fixtures, known as “ wood balance shade rollers,” of the second part, in pursuance of an arrangement between the persons forming the party of the second part, that the plaintiff corporation should be created for the purpose of becoming a party to the contract with them. The general purpose of the combination was to prevent, or rather to regulate, competition between the parties to it in the sale of the particular commodity which they made.

This is a lawful purpose; but it is argued that the means employed to carry it out, the creation of the plaintiff corporation, and the terms of the contract with it, are against public policy, and are invalid.

The fact that the parties to the combination forme'd themselves into a corporation, of which they were the stockholders, that they might contract with it instead of with each other, and carry out their scheme through its agency, instead of that of a preexisting person, is obviously immaterial; and the only ground upon which it can be argued that the contract is invalid is the restraint it puts upon the parties to it. Does the contract impose a restraint as to the manufacture or the sale of balance shade rollers which is void as against public policy? The contract certainly puts no restraint upon the production of the commodity to which it relates. It puts no obligation upon, and offers no inducement to, any person to produce less than to the full extent of his capacity. On the contrary, its apparent purpose is, by making prices more uniform and regular, to stimulate and increase production.

The contract does not restrict the sale of the commodity. It does not look toward withholding a supply from the market in order to enhance the price, as in Craft v. McConoughy, 79 Ill. 346, and other cases cited by the defendant. On the contrary, the contract intends that the parties shall make sales, and gives them full power to do so; the only restrictions being that sales not at retail or for export shall be in the name of the plaintiff, and reported to it, and the accounts of them kept by it, and the provision that, when any party shall establish an agency in any city or town for the sale of a roller made exclusively for that purpose, no other party shall take orders for the same roller in the same place. To these restrictions, clearly valid, is added the one which affords an argument for the invalidity of the contract, the restriction as to price. That restriction is, in substance, that the prices for rollers of the same grade made by the different parties shall be the same, and shall be according to a schedule contained in the contract, subject to changes which may he made by the plaintiff upon recommendation of three fourths of its stockholders. In effect, it is an agreement between three makers of a commodity, that, for three years, they will sell it at a uniform price fixed at the outset, and to be changed only by consent of a majority of them. The agreement does not refer to an article of prime necessity, nor to a staple of commerce, nor to merchandise to be bought and sold in the market, but to a particular curtain fixture of the parties’ own manufacture. It does not look to affecting competition from outside,-—the parties have a monopoly by their patents,— but only to restrict competition in price between themselves. Even if such an agreement tends to raise the price of the commodity, it is one which the parties have a right to make. To hold otherwise would be to impair the right of persons to make contracts, and to put a price on the products of their own iudustry.

But we cannot assume that the purpose and effect of the combination are to unduly raise the price of the commodity. A natural purpose and a natural effect are to maintain a fair and uniform price, and to prevent the injurious effects both to producers and customers of fluctuating prices caused by undue competition. When it appears that the combination is used to the public detriment, a different question will be presented from that now before us. The contract is apparently beneficial to the parties to the combination, and not necessarily injurious to the public, and we know of no authority or reason for holding it to be invalid, as in restraint of trade or against public policy.

We have not overlooked other provisions of the contract which were adverted to in the argument, but we do not find anything which renders it invalid, or calls for special consideration.

In the opinion of a majority of the court, the entry must be,

Demurrer overruled.