MILLINERY CREATORS'GUILD v. Federal Trade Commission

• Decision Date: 22 January 1940
• Docket Number: No. 9.,9.
• Parties: MILLINERY CREATORS' GUILD Inc., et al. v. FEDERAL TRADE COMMISSION.
• Court: U.S. Court of Appeals — Second Circuit

109 F.2d 175 (1940)

MILLINERY CREATORS' GUILD Inc., et al. v. FEDERAL TRADE COMMISSION.

No. 9.

Circuit Court of Appeals, Second Circuit.

January 22, 1940.

Lowell M. Birrell, of New York City (Charles A. Van Patten, of New York City, of counsel), for petitioners.

W. T. Kelley, Chief Counsel, and Martin A. Morrison, Asst. Chief Counsel, Federal Trade Commission, and James W. Nichol, Sp. Atty., all of Washington, D. C., for respondent.

Weisman, Quinn, Allan & Spett, of New York City (Milton C. Weisman and Melvin A. Albert, both of New York City, of counsel), for Fashion Originators Guild of America, Inc., amicus curiæ.

Before SWAN, AUGUSTUS N. HAND, and CLARK, Circuit Judges.

CLARK, Circuit Judge.

This is a petition by Millinery Creators' Guild, Inc., and its members, for review of respondent's cease and desist order directed against petitioners' plan to prevent so-called "style piracy" of designs in women's hats. Such plan was found by respondent to be an unfair method of competition under § 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45.

Millinery Creators' Guild, Inc., formerly Millinery Quality Guild, Inc., is a trade association organized as a stock corporation under the laws of the State of New York. It has "members" which the Federal Trade Commission finds to comprise "a substantial majority" of the manufacturers of high priced women's hats, or hats which sell at wholesale for at least eight dollars. Though not stated in its certificate of incorporation, the admitted immediate purpose of the Guild is to combat the practice known as "style piracy." Original creations designed by members of the Guild and by other high priced milliners are often copied as soon as they appear in public, and the copyists manufacture and distribute their "piracies" at prices far below those charged by the originators. To eliminate this type of competition, the Guild has established a registration bureau, with which any creator of original designs and styles may register his model. Once a model is accepted by the bureau, it is the usual practice of members to accept it as an original design and style, but this is not conclusive, final determination being made by a committee of the Guild. Most of the country's major retail outlets have been approached, and over 1,600 of them have been persuaded to sign "Declarations of Coöperation." These Declarations state the intention of the retail stores not to purchase any hats which are piracies of designs registered with the Guild. Members of the Guild have agreed among themselves not to sell to any retailer who persists in purchasing from the pirates. One former member of the Guild, Milgrim Hats, Inc., was expelled from membership for failing to abide by these policies.

We believe that the boycott employed by the Guild is one that is unlawful under the Sherman Anti-Trust Act, 15 U. S.C.A. §§ 1, 2. Hence the Federal Trade Commission was justified in concluding that the Guild's method of restraining competition was unfair and in entering its cease and desist order. Federal Trade Commission v. Beech Nut Packing Co., 257 U.S. 441, 453, 42 S.Ct. 150, 66 L.Ed. 307, 19 A.L.R. 882; Butterick Publishing Co. v. Federal Trade Commission, 2 Cir., 85 F.2d 522, 525.

The anti-trust laws contravene concerted action that unduly confines important areas of competition in price, quality, or service. Unless it has this restrictive result, a combination to boycott is not necessarily unlawful. So long as the particular agreement is not intended to and does not have the necessary effect of eliminating beneficial competition, a boycott designed to prevent the commission of an illegal act may be unobjectionable. United States v. American Livestock Comm., 279 U.S. 435, 49 S.Ct. 425, 73 L.Ed. 787; Swift & Co. v. United States, 196 U.S. 375, 394, 25 S.Ct. 276, 49 L.Ed. 518; Butterick Publishing Co. v. Federal Trade Commission, supra; United States v. Sugar Institute, D. C. S. D. N. Y., 15 F.Supp. 817, 899, modified and affirmed 297 U.S. 553, 56 S.Ct. 629, 80 L.Ed. 859. In certain cases group action may permissibly have broader objectives, and a trading exchange may fix rules for trading and forbid dealing with non-members, provided again that there is no perceptible effect on legitimate methods of competition. Anderson v. United States, 171 U.S. 604, 19 S.Ct. 50, 43 L.Ed. 300; Chicago Board of Trade v. United States, 246 U.S. 231, 38 S.Ct. 242, 62 L.Ed. 683. But it is easy to overstep the line, and a boycott or other concerted action aimed at abolishing socially useful types of competition will not be tolerated. Eastern States Retail Lumber Dealers' Ass'n v. United States, 234 U.S. 600, 34 S.Ct. 951, 58 L.Ed. 1490, L.R.A.1915A, 788; Binderup v. Pathé Exchange, 263 U.S. 291, 44 S. Ct. 96, 68 L.Ed. 308; Butterick Publishing Co. v. Federal Trade Commission, supra; United States v. Sugar Institute, supra with cases cited at 15 F.Supp. 900(1).

The permissible zone of conduct has recently been defined in Sugar Institute v. United States, 297 U.S. 553, at pages 598, 599, 56 S.Ct. 629, 642, 80 L.Ed. 859, where the Chief Justice declared: "And co-operative endeavor may appropriately have wider objectives than merely the removal of evils which are infractions of positive law," but then said, "As the statute draws the line at unreasonable restraints, a co-operative endeavor which transgresses that line cannot justify itself by pointing to evils afflicting the industry or to a laudable purpose to remove them."

We turn, then, to consider the alleged evil of style piracy, and whether its abolition will eliminate a socially useful type of competition.

What passes in the trade for an original design of a hat or a dress cannot be patented or copyrighted. An "original" creation is too slight a modification of a known idea to justify the grant by the government of a monopoly to the creator; yet such are the whims and cycles of fashion that the slight modification is of great commercial value. The creator who maintains a large staff of highly paid designers can recoup his investment only by selling the hats they design. He suffers a real loss when the design is copied as soon as it appears;...