Dr. G. H. Tichenor Antiseptic Co. v. Schwegmann Bros. Giant Super Markets

• Decision Date: 29 June 1956
• Docket Number: No. 42823,42823
• Citation: 90 So.2d 343,60 A.L.R.2d 410,231 La. 51
• Parties: , 60 A.L.R.2d 410 DR. G. H. TICHENOR ANTISEPTIC COMPANY v. SCHWEGMANN BROTHERS GIANT SUPER MARKETS et al.
• Court: Louisiana Supreme Court

Page 343

90 So.2d 343

231 La. 51, 60 A.L.R.2d 410

DR. G. H. TICHENOR ANTISEPTIC COMPANY v. SCHWEGMANN BROTHERS GIANT SUPER MARKETS et al.

No. 42823.

Supreme Court of Louisiana.

June 29, 1956.

Rehearing Denied Sept. 28, 1956.

Wisdom, Stone, Pigman & Benjamin, New Orleans, for appellants.

Wilson, Abramson & Maroun, Shreveport, Henican, James & Cleveland, New Orleans, Sumter D. Marks, Jr., Cicero C. Sessions, and Harry McCall, Jr., New Orleans, amici curiae.

Jones, Walker, Waechter, Dreux & Poitevent, A. J. Waechter, Jr., and Lucius F. Suthon, New Orleans, for appellees.

McCALEB, Justice.

This matter, which comes to us on a writ of certiorari granted to defendants, involves the constitutionality of the Louisiana Fair Trade Law (R.S. 51:391 et seq.). The suit was instituted by Dr. G. H. Tichenor Antiseptic Company, a Louisiana corporation, to enjoin Schwegmann Brothers Giant Super Markets, a commercial partnership, and the partners thereof, from advertising for sale, offering for sale, or selling a product manufactured by plaintiff, known as Dr. Tichenor's Antiseptic, at prices less than the minimum retail prices set by plaintiff in the retail fair trade contract or at prices less than those which might be shown in any future minimum retail price schedule issued by plaintiff in connection with contracts with other retail dealers; and from making any rebates, refunds, discounts or concessions of any kind or character for the purpose of, or which would result in, decreasing the said minimum retail prices.

The district court perpetuated a preliminary injunction issued against defendants, restraining them from advertising, offering for sale or selling Dr. Tichenor's Antiseptic at less than the minimum retail prices established pursuant to R.S. 51:391 et seq.

Defendants appealed to this Court which, finding itself to be without appellate jurisdiction, transferred the case to the Court of Appeal for the Parish of Orleans. See 227 La. 233, 79 So.2d 77.

The Court of Appeal affirmed the judgment of the lower court, relying largely upon the decisions in Pepsodent Co. v. Krauss Co., 200 La. 959, 9 So.2d 303; Schwegmann Bros. Giant Super Markets v. Eli Lilly & Co., 5 Cir., 205 F.2d 788, certiorari denied 346 U.S. 856, 74 S.Ct. 71, 98 L.Ed. 369, rehearing denied 346 U.S. 905, 74 S.Ct. 217, 98 L.Ed. 404; Schwegmann Bros. Giant Super Markets v. Hoffmann-La Roche, Inc., 5 Cir., 221 F.2d 326, certiorari denied 350 U.S. 839, 76 S.Ct. 77, 100 L.Ed. [231 La. 56] --- and old DearBorn distRibuting co. V. seagRam-Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109. See 83 So.2d 502.

The facts in the case are not disputed. Plaintiff fixed a fair trade retail price on its antiseptic by contract with a drug store in New Orleans, a contract to which defendants were not made parties. The antiseptic, bearing the trade-mark, label and brand name of Dr. Tichenor's Antiseptic, was knowingly and wilfully advertised and sold by defendants at less than the minimum fair trade price. It is admitted that the product is in fair and open competition with commodities of the same general class produced by others and that the minimum resale price was established pursuant to the provisions of the Louisiana Fair Trade Law.

Defendants vigorously assail the so-called 'nonsigner clause' ¹ of the law as unconstitutional in that it unlawfully delegates the legislative power of price fixing to private persons in violation of Section 1 of Article 3 of the Louisiana Constitution; in that it violates the due process clause of Section 2 of Article 1 of the Louisiana Constitution because the statutory form of the delegation is arbitrary and unreasonable; in that it violates due process because there is no real and substantial relationship between fair trade price fixing and the public welfare and because the means adopted are not reasonable and appropriate for the alleged purpose of the statute; in that the statute was void when enacted, being in conflict with the Sherman Anti-Trust Law, ² and is still void, never having been reenacted; and in that the nonsigner clause contradicts the prohibition against horizontal price fixing in the statute and thereby renders the law self-defeating and meaningless. Finally, defendants contend that the McGuire Act ³ (a) unlawfully delegates legislative power to the states and to private persons in violation of Article 1, Section 1 of the United States Constitution; (b) unlawfully abdicates to the states congressional power over interstate commerce in violation of Article 1, Section 8; and (c) violates the due process clause of the Fifth and Fourteenth Amendments.

The provisions of the Louisiana Fair Trade Law (R.S. 51:391 et seq.), first enacted as Act 13 of 1936, are as follows:

' § 391. Producer and commodity defined

'As used in this Sub-part:

"Producer' means grower, baker, maker, manufacturer, or publisher.

"Commodity' means any subject of commerce.

' § 392. Contracts restricting resale price valid

'No contract, relating to the sale or resale of a commodity which bears, or the label or container of which bears, the trade mark, brand, or name of the producer of the commodity and which is in fair and open competition with commodities of the same general class produced by others, shall violate any law of this state by reason of any of the following provisions which may be contained in the contract:

'(1) That the vendee shall not resell the commodity at less than the minimum price stipulated by the vendor;

'(2) That the vendee or producer require in delivery to whom he may resell the commodity, an agreement that the second vendee will not, in turn, resell at less than the minimum price stipulated by the vendor or by the vendee.

' § 393. Exceptions to contracts

'The provisions authorized in a contract by R.S. 51:392 shall not apply in the following cases:

'(1) In closing out the owner's stock for the purpose of discontinuing delivery of the commodity.

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

'(3) Where an officer is acting under the orders of court.

' § 394. Breach of Contract; unfair competition

'Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the minimum price stipulated in any contract entered into pursuant to the provision of R.S. 51:392, whether the person so advertising, offering for sale, or selling is or is not a party to the contract, is unfair competition and is actionable by any person damaged.

' § 395. Exemptions

'This Sub-part shall not apply to any contract between producers, or between wholesalers, or between retailers as to sale or resale prices.

' § 396. Name of Sub-part

'This Sub-part may be cited as 'Fair Trade Law'.'

Before considering the various allegations of unconstitutionality presented by defendants, we deem it appropriate to briefly review the jurisprudential history of fair trade legislation, with particular regard to the Louisiana Fair Trade Law.

In 1911, prior to the enactment of any fair trade statutes, ⁴ the Supreme Court of the United States held, in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31 S.Ct. 376, 55 L.Ed. 502, that a system of contracts between manufacturers and wholesale and retail merchants fixing the amount which the consumer should pay amounted to an unlawful restraint of trade, invalid at common law and, so far as interstate commerce was affected, invalid under the Sherman Anti-Trust Act. The products involved in that case were proprietary medicines identified by distinctive packages, labels and trademarks. The same result as to patented articles was reached in Boston Store of Chicago v. American Graphophone Co., 246 U.S. 8, 38 S.Ct. 257, 62 L.Ed. 551.

In 1936, the Supreme Court of the United States was called upon to consider the constitutionality of the Fair Trade Act of Illinois (which is virtually identical to the Louisiana Fair Trade Law) in Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109. The validity of the Act was upheld against attacks that it was a denial of due process of law and equal protection of the laws in violation of the Fourteenth Amendment to the Federal Constitution. The Court held, in its discussion of due process, that the statute did not amount to an unlawful delegation of power to private persons to control the property of others.

In 1937 Congress enacted the Miller-Tydings Act, ⁵ an amendment to the Sherman Anti-Trust Act which exempted contracts or agreements prescribing minimum prices for the resale of trade-marked commodities from the prohibitions of the Sherman Act where such contracts or agreements are lawful as applied to intrastate transactions under local law.

In 1942, this Court upheld the Louisiana Fair Trade Act, Act 13 of 1936 (now R.S. 51:391 et seq.), in Pepsodent Co. v. Krauss Co., 200 La. 959, 9 So.2d 303, rejecting the argument that the Act was in violation of Section 14 of Article 19 of the State Constitution which prohibits combinations in restraint of trade. We also noted with approval the Old Dearborn decision holding such a statute to violate neither the equal protection nor the due process clause of the Federal Constitution.

In 1951, in Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035 (hereinafter referred to as the Schwegmann case), the Supreme Court found the Louisiana Fair Trade Law to be violative of the Sherman Anti-Trust Act since the Miller-Tydings Act, while authorizing contracts or agreements prescribing minimum resale prices, did not authorize price fixing by compulsion on those persons not parties to the contracts or agreements. It should be noted that this opinion contained no discussion of the constitutionality of the Louisiana Fair Trade Law and made no reference to the Old Dearborn decision since Old Dearborn was almost entirely restricted to a consideration of the...