Clairol, Inc. v. Boston Discount Center of Berkley, Inc.
| Decision Date | 01 November 1979 |
| Docket Number | No. 77-1171,77-1171 |
| Citation | 608 F.2d 1114,204 U.S.P.Q. 89 |
| Parties | , 1979-2 Trade Cases 62,988 CLAIROL, INC., Plaintiff-Appellee, v. BOSTON DISCOUNT CENTER OF BERKLEY, INC., et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Irwin Alterman, Hyman, Gurwin, Nachman, Friedman & Winkelman, Southfield, Mich., for defendants-appellants.
Wolfgang Hoppe, Miller, Canfield, Paddock & Stone, Detroit, Mich., for plaintiff-appellee.
Before EDWARDS, Chief Judge, and CELEBREZZE and ENGEL, Circuit Judges.
Clairol, Inc. brought ten separate but similar diversity actions in the district court against various retail and wholesale drug and cosmetic outlets in the Detroit area, seeking to prohibit them from selling its professional-use or "salon" products to the general public, contending that this product diversion constituted unfair competition under Michigan law. Clairol's complaints basically alleged and the defendants generally admitted, that the latter had, prior to the filing of the action, displayed, offered for sale and in fact sold at retail, bottles of Miss Clairol which had been manufactured and produced by Clairol for "salon" use only and which bore Clairol's trademarks and the "Professional Use Only" label as affixed by it. Further, the defendants admitted that they did not supply test instructions to the purchasers. The precise amount of this product diversion and the source of it did not clearly appear from the proofs, but the fact of the diversion appears to be undisputed.
Seven of these cases were consolidated for a non-jury trial before United States District Judge Fred W. Kaess, after those defendants had filed counterclaims and defenses, alleging that Clairol's conduct in restricting the sale of its professional product violated Section 1 of the Sherman Anti-Trust Act, 15 U.S.C. § 1 (1976). 1 In an opinion reported at 191 U.S.P.Q. 632 (E.D.Mich. 1976), the district judge entered a judgment in favor of Clairol on its complaint and against the defendants on their antitrust counterclaim and defenses. We affirm.
We repeat the facts here essentially as found by the district judge.
Clairol manufactures and distributes throughout the United States certain hair coloring preparations containing coal-tar dyes, one of which is Miss Clairol Hair Color Bath (hereinafter "Miss Clairol"). Clairol expends substantial sums of money to advertise and promote these products and over the years has been able to create and maintain a valuable reputation and goodwill in the trade and among the general public in connection with this product. The sale of Miss Clairol constitutes a considerable portion of the company's revenue with sales exceeding $9 million annually.
Clairol markets Miss Clairol hair coloring products through two distinct channels of trade. Miss Clairol "salon" product is sold through distributors only to beauty salons and beauty schools. Miss Clairol "retail" product is sold by the company either directly to large retail chains or to wholesalers who in turn sell to retail stores for ultimate resale to the general public for home use. This dual distribution system has existed since Clairol entered the retail market in the 1950's.
Clairol charges a substantially lower price for its salon product than it charges for products it sells to the retail trade for resale to the general public. Thus at the time of trial, the salon product was sold by Clairol for $6.12 per dozen bottles whereas the comparable retail product was sold wholesale at a price of $11.67 per dozen bottles.
From 1955 until after the initiation of this suit, the chemical formulation of the retail and salon Miss Clairol was identical. Late in 1974, however, Clairol re-formulated the retail product by eliminating certain unstable intermediate dye components, purportedly for the purpose of insuring that the hair color would not fade as rapidly as it had in the past, Clairol's research having revealed that the ordinary home user of the dye did not reapply it as frequently as did the customer who had her hair professionally colored. This reformulation was titled and advertised under the additional trademark, "Natural Wear." 2
Before 1963 Clairol sold Miss Clairol to both the salon and retail trade in identical packaging. Each bottle was enclosed in an individual carton containing a detailed printed instruction sheet for use. In 1963, however, the salon product was no longer packaged in individual containers but was instead placed in a 6-pack carton containing a single instruction booklet. The salon instructions differ slightly from those included in the retail product. These packaging changes were made for the dual purpose of combatting diversion of the sale of the salon product to the retail market and for greater efficiency in manufacturing and distribution. The proofs showed that Clairol achieved a cost saving of about $500,000 per year from the change. 3
The retail Miss Clairol is now packaged differently from the salon product. Each bottle is enclosed in an individual yellow carton, bearing the conspicuous cautionary statement:
CAUTION: This product contains ingredients which may cause skin irritation on certain individuals, and a preliminary test according to accompanying directions should first be made. This product must not be used for dyeing the eyelashes or eyebrows; to do so may cause blindness.
The foregoing statement also appears on the bottle label as required by the Federal Food Drug and Cosmetic Act § 601(a), 21 U.S.C. § 361(a) (1976). 4 The salon product The trial judge further found that the individual retail box serves several functions. It insures that the instructions inserted within the carton are actually received by the purchaser. It protects the ingredients from deterioration due to light and heat while on display within the retail store. 5 The consumer carton package allows the prospective purchaser to preview the shade range which she can expect upon application of the particular hair color by means of a woman's picture on the bottle label, seen through a window in the carton. This arrangement also permits an identification at the moment of sale between extensive consumer advertising carried on by Clairol, which prominently features the carton, and the product as seen on the retailers' shelves. Finally, the individual container protects the bottle from becoming shopworn and advises the purchaser that the product has the Good Housekeeping Seal of Approval.
on the other hand, being sold for use of professional beauticians and beauty schools only, is not required to bear such an instruction since it is not injurious "under such conditions of use as are customary or usual." 21 U.S.C. § 361(a) (1976).
Each retail carton also contains a carefully prepared and copyrighted booklet providing detailed information and instructions to enable the untrained consumer to obtain safe and satisfactory results. These instructions include certain hints on the use of the product, warnings against use of certain colors in combination, special instructions for a patch test to determine the possibility of allergic reaction, and special instructions for a strand test which enables the customer to test the product against a small amount of hair before applying it generally. These instructions on the individual packaging are not required for the professional products since beauticians are specially trained in the use of hair coloring preparations containing coal-tar dyes.
Clairol packages its 6-pack of Miss Clairol salon product in a single carton with only one sheet of instructions describing the anti-allergy test. In addition, however, each salon bottle and the 6-pack carton for the salon bottle are labeled:
PROFESSIONAL USE ONLY WARNING
Cautionary statements regularly required for sale to non-professionals and instructions essential to the use of this product by non-professionals are not included on bottle labels. Non-professional sale may result in prosecution under federal law.
The salon instructional sheet does not contain the warning that preliminary patch and strand tests should be given before each application of the product, and does not contain other directions which are provided with the retail product.
Upon the proofs, the district judge found that use of Miss Clairol without proper instructions can cause allergic reactions or customer dissatisfaction because of hair discoloration or damage or other unsatisfactory result. These in turn lead to the loss of goodwill and, he found, may result in the filing of legal actions against Clairol, subjecting it to the expense of defending such suits and also, of course, to consequent adverse publicity for the product. Since the salon product and carton do not carry the model's picture showing the range of shade to be expected, the trial court found that an unwary customer could more easily take an incorrect shade and become disappointed with the results obtained. Although the defendants have generally had available color selector charts furnished by Clairol showing the picture for each shade, these charts were not always found in close proximity to the salon bottles, and of course, would not have been available to the home consumer after the bottle left the store. It also appeared that the color of the liquid bears little resemblance to the shade which results when the product is applied to the hair.
These are the basic facts found by the district court. Additional facts in evidence which the defendants claim are relevant to their antitrust defense are set forth in section III of the opinion.
Clairol alleged, and the court found, that the defendants' practice of selling Miss Clairol salon product to the general public for consumer use constituted unfair competition under Michigan law.
Unlike many other states, 6 Michigan had no statute governing the precise type of...
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