Joseph Triner Corp. v. McNeil

• Decision Date: 10 June 1936
• Docket Number: No. 23475.,23475.
• Citation: 363 Ill. 559,2 N.E.2d 929
• Parties: JOSEPH TRINER CORPORATION v. McNEIL.
• Court: Illinois Supreme Court

363 Ill. 559

2 N.E.2d 929

JOSEPH TRINER CORPORATION

v.McNEIL.

No. 23475.

Supreme Court of Illinois.

June 10, 1936.

Suit by the Joseph Triner Corporation against Carl W. McNeil. Decree for plaintiff, and defendant appeals.

Affirmed.Appeal from Circuit Court, Cook County; Benjamin P. Epstein, judge.

J. Herzl Segal, of Chicago, for appellant.

Moses, Kennedy, Stein & Bachrach, of Chicago (Walter Bachrach, Stanley Morris, R. Weyand, and Hamilton Moses, all of Chicago, of counsel), for appellee.

WILSON, Justice.

This is a proceeding instituted by the plaintiff seeking relief under the provisions of the Fair Trade Act, approved July 8, 1935. Smith-Hurd Ann.St. c. 121 1/2, § 188 et seq.; Ill.Rev.St.1935, p. 3091, c. 140, par. 8 et seq. The title of the statute expresses its purpose as, ‘An act to protect trade mark owners, distributors and the public against injurious and uneconomic practices in the distribution of articles of standard quality under a trade mark, brand or name.’ Section 1 (Smith-Hurd Ann.St. c. 121 1/2, § 188) provides:

‘Sec. 1. No contract relating to the sale or resale of a commodity which bears, or the label or content of which bears, the trade mark, brand or name of the producer or owner of such commodity and which is in fair and open competition with commodities of the same general class produced by others shall be deemed in violation of any law of the State of Illinois by reason of any of the following provisions which may be contained in such contract:

‘(1) That the buyer will not resell such commodity except at the price stipulated by the vendor.

‘(2) That the producer or vendee of a commodity require upon the sale of such commodity to another, that such purchaser agree that he will not, in turn, resell except at the price stipulated by such producer or vendee.

‘Such provisions in any contract shall be deemed to contain or imply conditions that such commodity may be resold without reference to such agreement in the following cases:

‘(1) In closing out the owner's stock for the purpose of discontinuing delivery of any such commodity: provided, however, that such stock is first offered to the manufacturer of such stock at the original invoice price, at least ten (10) days before such stock shall be offered for sale to the public.

‘(2) When the goods are damaged or deteriorated in quality, and notice is given to the public thereof.

‘(3) By any officer acting under the orders of any court.’

There appears to be no serious contention that the act, up to this point, is invalid and unenforceable. We are particularly concerned with section 2 (Smith-Hurd Ann.St. c. 121 1/2, § 189) which declares that ‘wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provisions of section 1 of this Act, whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby.’ The third section (Smith-Hurd Ann. St. c. 121 1/2, § 190) provides that the act shall not apply to any contract or agreement between producers or between wholesalers or between retailers as to sale or resale prices. The Fair Trade Act thus permits vertical resale price maintenance, but condemns, as do the federal and state Anti-Trust Laws (Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note; Smith-Hurd Ann.St. c. 38, § 569 et seq.), horizontal arrangements for fixing prices. The act prescribes no criminal penalties.

The facts upon which this action is predicated are not in dispute. Schenley Distributors, Inc., licensed to transact business in Illinois, is the sole sales agent and representative in this state for certain liquors and alcoholic beverages manufactured by several affiliated distilleries known as the Schenley distilleries. ‘Old Quaker’ is the brand name of one of the Schenley products, and the name has been duly registered as a trade-mark with the United States patent office. Affixed to each bottle of Old Quaker is a distinctive label, upon which appear the figure of a Quaker standing before a sheaf of grain, a sack of malt, and three barrels marked ‘Old Quaker Whisky.’ Above the picture is the legend, ‘Bottled at the Distillery. Old Quaker. Reg. U. S. Pat. Off. Brand.’ The name ‘Old Quaker’ appears in bold lettering. Below the picture there is this statement: ‘One pint. Straight bourbon whisky. Distilled and bottled by the Old Quaker Company Distillers. Lawrenceburg, Indiana. Division of Schenley Products Company.’ The whisky has been sold and retailed under the trade-mark which definitely designates the brand and has become well known to the trade. This brand is retailed at $1.89 per quart, 98 cents per pint, and 50 cents per one-half pint. These prices, under existing conditions, appear to be fair prices when considered with like commodities.

The method of merchandising Old Quaker, as set forth in the complaint, is as follows: Schenley Distributors, Inc., the sales agent, sells to ten wholesale distributors in Chicago, one of whom is the plaintiff, suggesting to these local distributors a minimum retail price which it fixes as the uniform retail price for Old Quaker and each of the other brands of Schenley products to be sold in Chicago. This price is the uniform and standard Schenley retail price. If a distributor sells to a retailer who is known to sell below the Schenley list price, Schenley Distributors, Inc., refuses further to sell Schenley products to such distributor. The distributors, in turn, refuse to sell Old Quaker, or any other Schenley product, to any retailer in Chicago except on the condition that such retailer will not sell below the uniform Schenley retail price. To that end the plaintiff and the other local distributors make all sales of Old Quaker or other Schenley products under agreements of sale denominated ‘Fair Trade Agreements,’ which expressly provide that the retailer will not resell in the city except at the uniform and standard Schenley retail price. From the allegations of the complaint, it further appears that as a direct result of the trade policy and practice described, approximately 85 per cent. of the retailers of Schenley products in Chicago consistently maintain the Schenley retail price list for Old Quaker and other Schenley brands.

The Joseph Triner Corporation, the plaintiff, is a domestic corporation engaged in business in Chicago as a wholesale distributor, selling to retailers for resale in that city various brands of liquor and alcoholic beverages of standard quality. On November 8, 1935, it brought an action in the circuit court of Cook county to restrain Carl W. McNeil, the defendant, a liquor retail dealer, from selling Old Quaker whisky in the Chicago district at prices less than those provided in the fairtrade agreements previously mentioned. From the allegations of the complaint, which the defendant by his motion to dismiss admitted to be true, it appears that the plaintiff was also operating pursuant to the trade policy and practice by which the Schenley Distributors, Inc., sought to maintain the prices specified in her fair trade agreements.

The complaint charges that a few vendors of liquor at retail in Chicago pursue a practice of ‘cutting’ the prevailing retail price of brands of liquor which have acquired widespread attention and public favor. These retailers, it is charged, sell the popular brands at prices conspicuously lower than the prevailing price and at a loss or scant return to themselves, for the purpose of attracting the public to their stores and selling other brands of liquor or general merchandise at prices sufficiently high to meet the loss and assure a general profit. The use of ‘leaders' in this familiar form of price-cutting is asserted to cause irreparable loss not only to the producer of brands sold at the cut price and to the distributors of such brands, but also to the ultimate consumers or general public.

The plaintiff, at the time of filing its complaint, had established a substantial and profitable business in selling at wholesale Old Quaker and other Schenley products in Chicago. A valuable asset of its business is the good will of the retailers who purchase from it for resale in the city the various brands of Schenley products, including Old Quaker. Similarly, the good will of the public and consumers who purchase such products is deemed an important asset. According to the complaint, a uniform price assures the retailers comparative immunity from injurious price-cutting by other retailers and a reasonable profit upon their retail sales.

In October, 1935, the defendant, with full knowledge of the fair trade agreements entered into by the plaintiff and the other local Schenley distributors with substantially all the retailers of liquor in Chicago threatened to sell, offer for sale, and advertise for sale at retail a quantity of Old Quaker at a price appreciably below the uniform Schenley retail price for the brand stipulated in the contracts. On October 16 the plaintiff informed the defendant of its trade policy in maintaining a uniform price for Old Quaker and other Schenley brands throughout the city. In particular, the defendant was advised of the provisions of the fair trade agreements executed conformably to the Fair Trade Act. He was also informed of the irreparable injury which would result to the plaintiff if he persisted in executing his threat to ‘cut’ the price of Old Quaker. The plaintiff specifically requested the defendant to refrain from his contemplated course and indicated its willingness to sell to him any Schenley products he might wish, provided he would agree not to sell them at retail below the standard list price. Subsequently, on several occasions the defendant offered for sale, and sold, large quantities of Old Quaker at 77 cents per pint, or more than 20 per cent. below the Schenley...