Gillette Co. v. Two Guys from Harrison, Inc.

• Decision Date: 05 February 1962
• Docket Number: No. A--28,A--28
• Citation: 177 A.2d 555,36 N.J. 342
• Parties: The GILLETTE COMPANY, a corporation of Delaware, Plaintiff-Respondent and Cross-Appellant, v. TWO GUYS FROM HARRISON, INC., et al., Defendants-Appellants and Cross-Respondents.
• Court: New Jersey Supreme Court

Page 342

36 N.J. 342

177 A.2d 555

The GILLETTE COMPANY, a corporation of Delaware Plaintiff-Respondent and Cross-Appellant, v. TWO GUYS FROM HARRISON, INC., et al., Defendants-Appellants and Cross-Respondents.

No. A--28.

Supreme Court of New Jersey.

Argued Oct. 23, 1961.

Decided Feb. 5, 1962.

Henry F. Wolff, Jr., Jersey City, for plaintiff-respondent and cross-appellant (Brogan & Wolff, Jersey City attorneys).

Sam Denstman, Newark, for defendants-appellants and cross-respondents (Simon, Jaffe & Denstman, Newark, attorneys; Murray G. Simon, Newark, of counsel; Sam Denstman on the brief).

The opinion of the court was delivered by

HANEMAN, J.

This appeal involves the 'Fair Trade Act,' N.J.S.A. 56:4--3 et seq.

Plaintiff, a Delaware corporation, conducts its business through two unincorporated divisions, Gillette Safety Razor Company (Gillette) and the Toni Company (Toni). Gillette manufactures and wholesales safety razors, razor blades and shaving creams which are resold at retail by drug stores, department stores and similar outlets. Toni manufactures and wholesales various preparations used by women in the care of the hair, which are resold in similar manner.

Vornado, Inc. (Vornado), successor to one of the original defendants, Two Guys from Harrison, Inc. (Two Guys), was joined as a defendant subsequent to the filing of the complaint herein. This successor corporation owns a chain of retail discount stores located in New Jersey and elsewhere in which it does business under the name 'Two Guys from Harrison' and in which there are operated retail drug departments. Janice Products, Inc. (Janice), a wholly owned subsidiary of Vornado, operated such drug departments in one of Two Guys stores located in Totowa and in other Two Guys' stores throughout New Jersey and continues to so operate under Vornado. Two Guys and Janice sold plaintiff's products at retail until succeeded in operation by Vornado.

Plaintiff filed suit alleging that Two Guys and Janice were selling Gillette and Toni products in New Jersey below the fair trade prices established under N.J.S.A. 56:4--3 et seq. Plaintiff sought a two-fold judgment against all three defendants, to wit: (1) an injunction prohibiting the sale of any of its fair traded merchandise below the established fair trade price; (2) damages for past sales by defendants of any of its fair traded merchandise below the established fair trade prices.

The defendants admitted by way of stipulation at pretrial:

(1) '* * * plaintiff's commodities are in free and open competition in this state with commodities manufactured by others of the same general class, in accordance with the requirements of the New Jersey Fair Trade Law. In so stipulating defendants do not in any way waive any attempts to show by way of their affirmative defense pertaining to combination sales or alleged discrimination in refusing to sell directly to defendants, to that extent plaintiff's products are not in fair and open competition with other products.'

(2) the existence of a fair trade agreement for plaintiff's products established in accordance with the statute, and (3) the sale by defendants of plaintiff's products below the established fair trade prices.

The issues remaining after pretrial were (1) defendants' claim of unlawful discrimination by reason of plaintiff's refusal to deal directly with them (subsequently abandoned); (2) whether there was an abandonment of plaintiff's right to enforce its fair trade price schedule on various individual items by reason of its packaging and offering for resale said items in 'tie-in' or 'combination' sales; (3) the amount of damages, if any, to which plaintiff is entitled.

After trial, the Chancery Division entered a final judgment which, as far as here pertinent, directed that defendants '* * * be * * * permanently enjoined and restrained from advertising, offering for sale or selling all products bearing the name or trademarks of the Gillette Company or its divisions the Toni Company and the Gillette Safety Razor Company at prices less than those stipulated for said commodities in the Gillette Company fair trade contracts with retailers and the price lists supplemental thereto at the time in force and effect with such retailers in the State of New Jersey, except that this restraint shall not apply to the following commodities manufactured by plaintiff, namely plaintiff's 3 1/2 oz. size of 'White Rain Shampoo,' 'Pamper,' 'Adorn,' the Gillette Safety Razor Sets, dispenser of 15 Gillette Super Blue Blades, and Gillette Giant Foamy Shaving Cream; * * * and that,

'* * * defendants account to the plaintiff for its net profit on sales of plaintiff's commodities for the period from May 1, 1959 to November 19, 1959, with the exception of the commodities enumerated above, which are excluded from the restraint herein; * * *.'

Defendants appealed to the Appellate Division from so much of the judgment as required them to account to plaintiff for their net profits on sales of items other than those excepted in the final judgment. Defendants do not dispute a violation of the Fair Trade Act insofar as these items are concerned. Plaintiff cross-appealed from so much of said judgment as excepted the stated items from an injunction and accounting. This court certified the appeal on its own motion before argument in the Appellate Division. We shall first consider plaintiff's cross-appeal.

The trial court denied the protection of the Fair Trade Act to the enumerated items which were individually fair traded for the reason that they were subsequently included in 'tie in' or 'combination' packages also fair traded. The combination packages are as follows:

(1) A package consisting of two 3 1/2 ounce bottles of 'White Rain Shampoo' fair traded at 98cents for the period of March 30, 1959 to September 30, 1959. During this period a single 3 1/2 ounce bottle was fair traded at 60cents;

(2) A package consisting of a combination of one 3 1/2 ounce bottle of 'Pink Pamper Shampoo' and an empty plastic container bottle, fair traded at 60cents for the period of July 1, 1958 to October 31, 1958. During this same period a single 3 1/2 ounce bottle without the additional plastic container bottle was fair traded at 60cents. The container bottle was not fair traded;

(3) Two packages consisting respectively of one 7 ounce bottle and one 15 1/4 ounce bottle of 'Aborn Hair Spray' together with four brush rollers and a styling booklet in each package, the former fair traded at $1.50 and the latter at $2.25, for the period of March 15, 1960 to September 30, 1960. During this period the bottles were fair traded without the rollers and booklet at the same prices. Toni did not, during the foregoing period, sell either the rollers or the booklet separately but now sells a package of 4 rollers at a suggested retail price of 59cents although they are not fair traded.

(4) A package consisting of one tube of 'Gillette Giant Foamy Shaving Cream' and one dispenser of 15 'Gillette Super Blue Blades' fair traded at $1.50 for the period of January 6, 1961 to March 31, 1961. This combination was included by consent of parties subsequent to trial but prior to judgment. During this time the shaving cream was fair traded at 98cents and the dispenser at $1.00.

An additional combination consisting of a razor set is also involved but since it presents problems different from those raised by the above packages discussion on that point will be reserved until later in this opinion.

Defendants do not challenge the right of a producer to establish a fair trade price for a package composed of more than one item except where the package fair trade price is less than the aggregate total fair trade prices established for the individual component items. Such conduct, defendants argue, constitutes a breach of the provisions of N.J.S.A. 56:4--3 et seq. and an abandonment of the fair trade price on the individual items because those statutes permit a producer to establish only a single fair trade price for each separate Item of merchandise. Similarly, defendants assert that the establishment of a fair trade price schedule for a package containing at least one individually fair traded item and a nonfair traded item or items, at a price which reflects no charge for the latter, results in an abandonment of the fair trade price established for the separate items.

To sustain this reasoning defendants' point to the employment of the words 'commodity' and 'price' in N.J.S.A. 56:4--5(1)(a) and (b) and N.J.S.A. 56:4--6. Those statutory provisions permit the producer of a 'commodity' to prohibit its resale by retailers at a 'price' lower than that fixed by the producer in its fair trade price schedule. The peculiar use of the quoted words in the singular signifies, defendants assert, a legislative intent to so confine the application of the statutes as to permit the establishment of only one fair trade price for each separate Item. They rationalize that such an Item does not lose its separate identity when marketed in combination with other items and hence, whenever a combination package, consisting of two or more items which carry established fair trade prices when resold separately, bears a fair trade price less than the aggregate total of the individual fair trade prices the result is that the individual fair trade prices on the separate items are thereby diluted or diminished. (Combinations (1) and (4) above). The same effect is attributed to combinations consisting of items fair traded individually together with a non-fair traded item or items for which no extra charge is made. (Combinations (2) and (3) above). On these...