Olin Mathieson Chemical Corp. v. White Cross Stores, Inc., No. 6

Decision Date26 March 1964
Docket Number19,18,Nos. 7-9,14,s. 7-9
Citation199 A.2d 266,414 Pa. 95
CourtPennsylvania Supreme Court

James P. McArdle, Paul F. Laughlin, McArdle, Harrington & McLaughlin, Edward I. Goldberg, Pittsburgh, for appellant.

Clyde P. Bailey, Weller, Wicks & Wallace, Pittsburgh, Morgan, Lewis & Bockius, Benjamin M. Quigg, Jr., Angus M. Russell, Russell C. Dilks, Philadelphia, for appellee.


EAGEN, Justice.

The single question presented for determination by this appeal is the constitutionality of the Pennsylvania Fair Trade Act of June 5, 1935, P.L. 266, as amended, 73 P.S § 7 et seq., as applied to the nonsigners of 'Fair Trade' price maintenance contracts.

The corporate-plaintiff is the manufacturer of drugs, pharmaceuticals and other allied products, distributed under the trademark 'Squibb.' In this action, the court below enjoined the appellants-defendant from retailing these products at prices less than the stipulated minimum prices contained in fair trade contracts in existence throughout the State of Pennsylvania. The appellants were not parties to, nor did they sign, these agreements. However, it is undisputed that they knew plaintiff's products were 'fair traded' and, with this knowledge, advertised and sold such commodities below the stipulated minimum prices.

Section 2 of the statute provides:

'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 one 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 such vendor, buyer or purchaser of such commodity.'

Fair trade legislation precludes the cutting of the established price of any commodity identified by the trade-mark or brand of the producer. Bristol-Myers Co. v. Lit Bros., Inc., 336 Pa. 81, 6 A.2d 843 (1939). Those who support such legislation strenuously urge that it protects the manufacturer, retailer and consumer from varied harmful consequences which allegedly would result from cutthroat competition. They submit that it is, therefore, a reasonable exercise of the police power and is designed to protect the convenience, prosperity, health, morals, safety and welfare of the public generally.

Whether or not such legislation does in fact protect the best interests of the buying public has long been the subject of serious dispute. Many recent statistical studies by competent authority have concluded that, rather than being benefited by such laws, the consumer has actually been harmed, and that the whole scheme of fair trade acts is one for private, rather than public gain. See, 49 Yale L.J. 607, and 21 U.Chi.L.Rev. 175.

Our inquiry is necessarily restricted to the legal aspects involved. It is not for us to enunciate public policy. That responsibility rests with the legislature and is for that body alone to resolve.

This Court previously sustained the constitutionality of the Pennsylvania Fair Trade Act as applied to nonsigners of retail price maintenance agreement in Burche Co. v. General Elec. Co., 382 Pa. 370, 115 A.2d 361 (1955). Our careful review of that decision now leads to the conviction that it was in error.

Burche relying largely on Old Dearborn Distributing Co. v. Seagram-Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109 (1936), ruled, inter alia, that the Pennsylvania statute was not an unlawful delegation of legislative power. With this, we do not agree.

Old Dearborn, as a careful study will bear out, is not precedent for the proposition that the nonsigner clause in a state price fixing statute, delegating legislative power to private individuals, does not violate the state constitution. See, 1 Davis, Administrative Law Treatise, Section 2.14 (1958); Note, Fair Trade and the State Constitution--A New Trend, 10 Vand.L.Rev. 415 (1957), and Conant, Resale Price Maintenance, Constitutionality of Non Singer Clauses, 109 U. of Pa.L.Rev. 539 (1961). Further, it is our considered conclusion that the nonsigner clause in the Pennsylvania Fair Trade Act is clearly violative of Art. 11, Section 1, of the Pennsylvania Constitution, P.S.

Price regulatory power vests only in the elected legislative body. It may in limited ways be delegated to other responsible governmental agencies, such as public service or utility commissions. Pennsylvania R. R. Co. v. Towers, 245 U.S. 6, 38 S.Ct. 2, 62 L.Ed. 117 (1917). However, it may not be delegated to private persons. The vesting of a discretionary regulatory power over prices, rates or wages, in private persons violates the essential concept of a democratic society and is constitutionally invalid. See, A. L. A. Schechter Poultry Corporation v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570 (1935); Carter v. Carter Coal Co., 298 U.S. 238, 56 S.Ct. 855, 80 L.Ed. 1160 (1936); Bissell Carpet Sweeper Company v. Shane Co., 237 Ind. 188, 143 N.E.2d 415 (1957); Quality Oil Company v. E. I. DuPont De Nemours & Co., 182 Kan. 488, 322 P.2d 731 (1958); Remington Arms Company v. G. E. M. of St. Louis, Inc., 257 Minn. 562, 102 N.W.2d 528 (1960); Union Carbide & Carbon Corp. v. Bargain Fair, Inc., 167 Ohio St. 182, 147 N.E.2d 481 (1958).

Moreover, where price regulation is delegated to a governmental agency, constitutional procedures are mandatory. The agency's action is legislative in character and is subject to the same tests and standards as a legislative enactment. Prentis v. Atlantic Coast Line, 211 U.S. 210, 29 S.Ct. 67, 53 L.Ed. 150 (1908). Once the basic law is established by statute, the legislature may delegate the agency to make detailed rules for the statute's operation. However, these rules must conform to statutory standards, be adopted after hearing, may not be arbitrary, and are always suject to judicial review. See, Panama Refining Co. v. Ryan, 293 U.S. 388, 55 S.Ct. 241, 79 L.Ed. 446 (1935); Morgan v. United States, 304 U.S. 1, 58 S.Ct. 773, 82 L.Ed. 1129 (1938), and Los Angeles Gas & Elec. Corp. v. Railroad Comm., 289 U.S. 287, 53 S.Ct. 637, 77 L.Ed. 1180 (1933).

In the Pennsylvania Fair Trade Act, these protective processes are completely absent. Fair hearing and judicial review are not available , even though the fixed price is grossly unfair or completely arbitrary. The retailer and the buyer have no recourse. The producer enjoys the unbridled power to stipulate the price he pleases and at that price the retailer must sell and the buyer must buy. In this respect, the producer is the unrestrained sovereign. No intelligent standards control

It is no answer to the above to say that the retailer and the buyer, having notice of the prices fixed, are under no obligation to sell or buy the particular commodity. Under the statute, both come under the coercive price control of private persons not directly in contract with them. As noted before, compulsory price regulation is a legislative function. It belongs only to elected government.

The Pennsylvania Fair Trade Act, as applied to nonsigners of price maintenance contracts, is, therefore, unconstitutional.

It may be advanced that despite the above conclusion, we should permit the ruling in Burche (supra) 1 to stand in deference to the principle of Stare Decisis.

While it is true that great consideration should always be accorded precedent, especially one of long standing and general acceptance, it doesn't necessarily follow that a rule merely established by precedent is infallible. Moreover, the courts should not prepetrate error solely for the reason that a previous decision although erroneous, has been rendered on a given question. This is particularly true where no fixed rights of property are involved or where great injustice or injury will result by following the previous erroneous decision. If it is wrong it should not be continued. Judicial honesty dictates corrective action. As stated by this court in Commonwealth ex rel. Margiotti v. Lawrence, 326 Pa. 526 at 530 and 531, 193 A. 46, at 48 (1937), quoting Cooley, Constitutional Limitations, (8th Ed. 1927), Vol. 1 Page 120, '* * * when a question involving important public or private rights, extending through all coming time, has been passed upon on a single occasion, and which decision can in no just sense be said to have been acquiesced in, it is not only the right, but the duty, of the court, when properly called upon, to reexamine the questions involved, and again subject them to judicial scrutiny. We are by no means unmindful of the salutary tendency of the rule stare decisis, but at the same time we cannot be unmindful of the lessons furnished by our own consciousness, as well as by judicial history, of the liability to error and the advantages of review.' See also, Kelley v. Earle, 325 Pa. 337, 190 A. 140 (1937); West Coast Hotel Co. v. Parrish, 300 U.S. 379, 57 S.Ct. 578, 81 L.Ed. 703 (1937) and the opinion of Mr. Justice Brandeis in Burnet v. Coronado Oil & Gas Co., 285 U.S. 393, 52 S.Ct. 443, 76 L.Ed. 815 (1932).

Decree reversed. Each party to pay own costs.

BELL, Chief Justice (dissenting).

This Court, as recently as 1955, specifically and unanimously decided in Burche Co. v. General Electric Co., 382 Pa. 370, 115 A.2d 361, that Pennsylvania's Fair Trade Act was constitutional. In the instant case, this Court adopts all the theories, all the contentions, and all the arguments which were made and carefully considered and rejected in Burche as well as in prior cases, and then expressly overrules Burche, supra. Furthermore this Court has by clear and necessary implication sustained the constitutionality of this Act--even as to non-signers--in Mathieson Chemical Corp. v. L & H Stores...

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