General Electric Co. v. Masters, Inc.

Froessel, J.

We are again confronted with an attack upon the so-called Feld-Crawford “ Fair Trade Law ” (General Business Law § 369-a et seq., L. 1935, ch. 976, re-enacted L. 1940, ch. 195). This statute first came before us for review in Doubleday, Doran & Co. v. Macy & Co. (269 N. Y. 272), decided January 7, 1936, wherein plaintiff Doubleday sought to enjoin Macy, a nonsigner of its fair trade agreements, from selling three of plaintiff’s books at less than their stipulated fair trade prices. We held that the “ non-signer ” provision was unconstitutional, because by its means the Legislature was indirectly fixing prices, a result which it could not, absent special circumstances, accomplish directly.

Exactly eleven months later, the Supreme Court of the United States reviewed a similar statute enacted in Illinois, the validity of which was attacked “ upon the grounds that it denies due process of law and the equal protection of the laws in violation of the Fourteenth Amendment ”. Rejecting these contentions, the Supreme Court held that the statute was not ‘ ‘ so arbitrary, unfair or wanting in reason as to result in a denial of due process ”, that it did not constitute an unlawful delegation of legislative power, and that it satisfied the test of equal protection of the laws guaranteed by the Fourteenth Amendment (Old Dearborn Co. v. Seagram Corp., 299 U. S. 183).

Almost immediately thereafter, the New York statute was again before us in Bourjois Sales Corp. v. Dorfman (273 N. Y. 167). This time, relying on the Old Dearborn decision, we upheld the statute against claims that it violated the New York State Constitution. Indeed, Chief Judge Crane, who wrote for the court in Doubleday as well as the Bourjois case, said in the latter (p. 172) : “ Had the Seagram [Old Dearborn] case been decided before argument in the Doubleday ease we certainly would have followed the Supreme Court’s ruling on the Federal Constitution. We do so now”. The statute has since been considered and applied by us in at least four cases (Port Chester Wine & Liquor Shop v. Miller Bros. Fruiterers, 281 N. Y. 101 [retailer’s right of action]; Guerlain, Inc., v. Woolworth Co., 297 N. Y. 11, certiorari denied 332 U. S. 837 [rebottling of perfumes]; Calamia v. Goldsmith Bros., 299 N. Y. 636, remittitur amended 299 N. Y. 795 [cigars in interstate commerce]; and Bristol-Myers Co. v. Picker, 302 N. Y. 61 [trading stamps as price cutting]), in all of which invalidity of the law under the New York State Constitution was urged upon us by the parties, but rejected.

In each of the three cases now before us, the defendant, a nonsigner of the plaintiff’s fair trade agreements, has been enjoined from selling plaintiff’s fair traded products at less than their stipulated minimum prices. All of the transactions in issue involve interstate commerce either directly or indirectly, and, since in large measure the issues presented by the three cases are identical, they shall be discussed together, insofar as possible.

Defendants’ principal attack is directed toward the constitutionality of the Feld-Crawford Act. They argue that the statute constitutes an unlawful delegation of legislative powers to private persons in violation of section 1 of article III of the New York State Constitution, a deprivation of property without due process of law and a denial of equal protection of the laws in violation of both the New York State and Federal Constitutions, particularly the former.

Seventeen years ago we disposed of the delegation of power and due process arguments in the Bourjois case (supra). Even though our opinion did not separately and specifically discuss those issues as arising under the State Constitution, they were actually presented and argued to our court, were necessarily disposed of by our decision there, and are therefore no longer open to question.

Defendants’ economic and policy arguments concerning the doubtful wisdom of fair trade laws have been urged before the courts over and over again. They were reviewed in the Old Dearborn case (supra, pp. 195-196), and, as was there said, “ Where the question of what the facts establish is a fairly debatable one, we accept and carry into effect the opinion of the legislature its determination “ is conclusive so far as this court is concerned ” (p. 196). Such contentions are properly addressed to the Legislature; they do not alone provide sufficient reason for us to reopen settled constitutional issues.

Nor is there merit to defendants’ contention that the statute denies equal protection of the laws. In the Old Dearborn case (supra) the equal protection argument which was there raised against the Illinois fair trade statute was summarily rejected by the Supreme Court in its holding (p. 197): “ Clearly, the challenged section of the Illinois act satisfies this test ” (emphasis supplied). In the present case, moreover, the statute creates no unreasonable or arbitrary discrimination against low cost, minimum service retailers, as defendants contend. The statute itself does not purport to create any such distinction or classification. Its provisions are wholly inapplicable to unmarked goods. As to marked goods, it merely permits a manufacturer, whose trade-mark or brand name may represent a large advertising investment and a carefully nurtured good will, to prevent retailers, over whom he would otherwise have little control, from seriously impairing the value of that trade-mark and good will by reselling his identified products at unreasonably low prices. Finally, we have already held that this statute constitutes a reasonable regulation under the police power (Bourjois case, supra).

Defendants now present a new constitutional challenge by attacking the Maguire Act (66 U. S. Stat. 632, U. S. Code, tit. 15, § 45), which was enacted following the recent decision in Schwegmann Bros. v. Calvert Corp. (341 U. S. 384). That act exempts from the Federal antitrust laws fair trade agreements made pursuant to existing or future State laws, and permits their enforcement against nonsigners as well as signers who are engaged in interstate commerce. Defendants argue that this enactment gives to the States power over interstate commerce which is denied them under the Federal Constitution.

Beginning with the familiar distinction between commerce which, while primarily local, indirectly affects interstate commerce, and that which is directly of national concern, defendants claim that the latter type of commerce is, by virtue of the Constitution, exclusively within the power of Congress, and cannot under any circumstances be regulated by the States. However, this basic distinction is drawn merely to determine the extent of State power in those areas where Congress by its silence has permitted its own power to remain dormant. The distinction does not, as defendants contend, restrict the power of a State acting, as here, under an express grant by Congress (Prudential Ins. Co. v. Benjamin, 328 U. S. 408, 421-423). As the Supreme Court said in Southern Pacific Ry. Co. v. Arizona (325 U. S. 761, 769): “ Congress has undoubted power to redefine the distribution of power over interstate commerce. It may * * * permit the states to regulate the commerce in a manner which would otherwise not be permissible [citations] ”.

It is true that in Schwegmann Bros. v. Calvert Corp. (supra) the Supreme Court held that by the Miller-Tydings amendment (50 U. S. Stat. 693, U. S. Code, tit. 15, § 1), which exempted from the Sherman Antitrust Act only “ contracts or agreements ”. Congress did not demonstrate an intent to permit fair trade “ compulsion ” against nonsigners of those agreements. However, the court did not in its opinion indicate that such ‘ ‘ compulsion ”, if expressly authorized by Congress, would transgress any constitutional prohibition; indeed, the decision contains clear implications to the contrary. The Maguire Act now authorizes such “ compulsion ”, and its constitutionality has been upheld by the United States Court of Appeals for the Fifth Circuit in Schwegmann Bros. Giant Super Markets v. Eli Lilly & Co. (205 F. 2d 788), a decision which the Supreme Court twice refused to review (certiorari denied 346 U. S. 856, rehearing denied 346 U. S. 905).

Nor should we for this purpose distinguish between transactions affecting interstate commerce, as in the General Electric and Lionel cases herein, and those directly in interstate commerce, such as the mail-order sales of the Raxor case. Just as in the Feld-Crawford Act, where no distinction is drawn between interstate and local commerce, so the language of the Maguire Act makes no discrimination between sales of goods affecting, and sales directly in, interstate commerce. On the contrary, the purpose of that Federal statute, as expressed by Congress in its preamble thereto, was to permit State fair trade laws to apply to commodities, contracts and activities “in or affecting ’ ’ interstate commerce. Furthermore, the case of Sunbeam Corp. v. Wentling (185 F. 2d 903, revd. 341 U. S. 944, mod. 192 F. 2d 7), on which defendants rely so heavily in this connection, was decided prior to the Maguire Act’s enactment. That the statute was designed to alter the Wentling rule so as to open all interstate commerce to the operation of State fair trade acts, appears from the statutory language as aforesaid, from its legislative history and from judicial decision (Sunbeam Corp. v. MacMillan, 110 F. Supp. 836).

Defendants further contend that the Feld-Crawford Act was never originally intended by our Legislature to apply to resale price maintenance as against nonsignatories engaged in interstate commerce, and that without re-enactment after passage of the Maguire Act it cannot be so applied. But the case of People v. Bootman (180 N. Y. 1), on which defendants rest this argument, is inapplicable here. True, we there held that without re-enactment after passage of the Congressional enabling statute, our State Fish and Game Law was not applicable to interstate game. But there, we had previously held that the statute in question was intended to apply only to local game (People v. Buffalo Fish Co., 164 N. Y. 93).

In the instant cases, however, instead of having, by prior decision, limited the Feld-Crawford Act to local commerce, we have squarely held that the statute applies to nonsignatories in interstate commerce (Calamia v. Goldsmith Bros., supra). Although such application was later declared unconstitutional in Schwegmann Bros. v. Calvert Corp. (supra), passage of the Maguire Act in 1952 removed the final barrier to complete interstate application of the New York statute. Under such circumstances it has long been well established that the Constitution does not require a State statute to be re-enacted in order to be effective (Matter of Rahrer, 140 U. S. 545; Central Pacific R. R. Co. v. Nevada, 162 U. S. 512; Tua v. Carriere, 117 U. S. 201; 1 Sutherland on Statutory Construction [3d ed.], § 2027).

Each of the defendants contends that its plaintiff’s fair trade contracts do not comply with the provisions of section 369-a of the General Business Law. We have examined these contracts separately, and find on the records before us that in each case there were in existence fair trade contracts which did comply with that part of the statute which sanctions such contracts between “ vendor ” and “ buyer ”.

Numerous other contentions have been raised by one or more of the defendants. We have carefully considered each of them and find them to be without merit.

The judgment in each case should be affirmed, with costs.

Lewis, Ch. J., Conway, Desmond, Dye and Fuld, JJ., concur; Van Voorhis, J., taking no part.

In each action: Judgment affirmed.