Rogers-Kent, Inc. v. General Elec. Co., ROGERS-KEN

• Decision Date: 26 August 1957
• Docket Number: ROGERS-KEN,I,No. 17341,17341
• Citation: 231 S.C. 636,99 S.E.2d 665
• Parties: nc., Respondent, v. GENERAL ELECTRIC COMPANY, Appellant.
• Court: South Carolina Supreme Court

Page 665

99 S.E.2d 665

231 S.C. 636

ROGERS-KENT, Inc., Respondent, v. GENERAL ELECTRIC COMPANY, Appellant.

No. 17341.

Supreme Court of South Carolina.

Aug. 26, 1957.

Boyd, Bruton & Lumpkin, J. B. S. Lyles, Columbia, for appellant.

Isadore Bernstein, Columbia, for respondent.

Nelson, Mullin & Grier, Columbia, amici curiae.

OXNER, Justice.

This action was brought under the Uniform Declaratory Judgments Act, Volume 1, Title 10, Chapter 24 of the 1952 Code, to determine the constitutionality of our 'Fair Trade Act', sections 66-91 to 66-95, inclusive, of the 1952 Code.

This legislation was enacted in 1937. 40 St. at L. 301. It was entitled 'An Act to Protect Trade Mark Owners, Distributors and the Public Against Injurious and Uneconomic Practices in the Distribution of Commodities Under a Distinguishing Trade Mark, Brand or Name.'

Section 66-93, so far as material to our discussion, reads:

'No contract relating to the sale or resale of a commodity which bears, or the label or container of which bears, the trademark, brand or name of the producer, distributor 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 by reason of any of the following provisions which may be contained in such contract:

'(1) That the buyer will not resell such commodity at less than the minimum price stipulated by the vendor or

'(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 at less than the minimum price stipulated by such producer or vendee.'

Section 66-94 is as follows:

'Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract containing either of the provisions mentioned in § 66-93, 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 Court below held that Act unconstitutional upon the grounds (1) That it was void in its inception because inconsistent with the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note, as it then stood and the subsequent passage of permissive Federal legislation could not impart validity to it; (2) that it violated the due process and equal protection clauses of Article 1, Section 5 of our Constitution; and (3) that it was an unlawful delegation of legislative power to private individuals contrary to Article 3, Section 1.

The facts were agreed upon. General Electric Company, defendant below and appellant here, manufacturers and sells on a national scale many products, including small electrical appliances such as clocks, automatic blankets, fans, hearing pads and vacuum cleaners, all of which bear its trade mark 'General (GE) Electric.' They are shipped from the places of manufacture to wholesale distributors who in turn sell said appliances to, amongst others, retail dealers throughout the United States. They are sold in this State in free and open competition with appliances of the same general class produced by others. General Electric has expended large sums in promoting and advertising these products and has established a valuable reputation and good will for them and its trade mark. In guarantees them against defects in material and workmanship and replaces or repairs any appliances becoming defective within the time limits specified in the guarantee. Since July, 1952, pursuant to the provisions of our Fair Trade Act, General Electric has from time to time entered into written agreements with a substantial number of retail dealers in South Carolina under which it has stipulated the minimum retail sale prices for its appliances.

Rogers-Kent, Incorporated, plaintiff below and respondent here, is a South Carolina corporation engaged in a general retail mercantile business. It sells numerous articles bearing nationally known trade marks, including small appliances made by General Electric. It has not entered into any contract with General Electric under the Fair Trade Act and has sold its products from time to time below the retail price specified in the contracts made by General Electric with other retail dealers in this State. Although notified in January, 1955 of the form and existence of such contracts and the minimum retail prices therein specified, it has continued to advertise, offer for sale and sell at retail appliances bearing the trade-mark of General Electric at prices lower than those stipulated in the agreements made by General Electric with other dealers.

The record does not disclose the source from which Rogers-Kent obtains General Electric products. Presumably they were purshased from recognized dealers or direct from General Electric Company. Be that as it may, there is no contention that Rogers-Kent was guilty of fraud or deception in acquiring these appliances.

The depression following 1929 gave impetus to the movement for legislation which would allow the fixing of minimum resale prices. California was the first State to adopt a Fair Trade act. It did so in 1931. Originally it applied only to those who signed the agreements. In 1933 the California statute was amended, making the contracts binding on all retailers who had knowledge of same, even though they had not signed such contracts. Within a few years most other States followed suit. All the acts contain provisions substantially the same as those embodied in the California act. It appears that 45 States have now enacted Fair Trade legislation.

At the time of the passage of our Act in 1937, it was unconstitutional as applied to interstate commerce. Old Dearborn Distributing Company v. Seagram-Distillers Corp., 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109. On August 17, 1937, in an attempt to change the rule announced in the above case, congress passed the Miller-Tydings Act, 15 U.S.C.A. § 1. In Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035, it was held that the Miller-Tydings Act applied only to cases where the parties litigant had entered into contracts made under State fair trade laws and had not amended the Sherman Act to such an extent as to permit an action against non-signers. Later, in an effort to obviate the effect of the ruling in the Schwegmann case, the so-called McGuire Act was adopted by Congress, 15 U.S.C.A. § 45. This had the effect of extending the Miller-Tydings Act to non-signers. The result is that it is now generally held that no Federal constitutional difficulty exists in enforcing State fair trade laws.

The constitutionality of such legislation has been considered by approximately half the courts of last resort of the States adopting fair trade statutes. They have been upheld by a majority of these courts. Burroughs Wellcome & Co. v. Johnson Wholesale Perfume Co., 128 Conn. 596, 24 A.2d 841; Max Factor & Co. v. Kunsman, 5 Cal.2d 446, 55 P.2d 177; General Electric Co. v. Klein, Del., 106 A.2d 206; Goldsmith v. Mead Johnson & Co., 176 Md. 682, 7 A.2d 176, 125 A.L.R. 1339; W. A. Sheaffer Pen Co. v. Barrett, 209 Miss. 1, 45 So.2d 838; Johnson & Johnson v. Weissbard, 121 N.J.Eq. 585, 191 A. 873; Bourjois Sales Corp. v. Dorfman, 273 N.Y. 167, 7 N.E.2d 30, 110 A.L.R. 1411; Ely Lilly & Co. v. Saunders, 216 N.C. 163, 4 S.E.2d 528, 125 A.L.R. 1308; Burche Co. v. General Electric Co., 382 Pa. 370, 115 A.2d 361; Miles Laboratories, Inc., v. Owl Drug Co., 67 S.D. 523, 295 N.W. 292; Frankfort Distillers Corp. v. Liberto, 190 Tenn. 478, 230 S.W.2d 971; Sears v. Western Thrift Stores of Olympia, Inc., 10 Wash.2d 372, 116 P.2d 756; Weco Products Co. v. Reed Drug Co., 225 Wis. 474, 274 N.W. 426; Seagram-Distillers Corp. v. Old Dearborn Distributing Co., 363 Ill. 610, 2 N.E.2d 940; General Electric Co. v. Kimball Jewelers, Inc., 333 Mass. 665, 132 N.E.2d 652.

A number of states, admittedly a minority in number, have on various grounds stricken down such statutes. Liquor Store, Inc., v. Continental Distilling Corp., Fla., 40 So.2d 371; Cox v. General Electric Co., 211 Ga. 286, 85 S.E.2d 514; Shakespeare Co. v. Lippman's Tool Shop Sporting Goods Co., 334 Mich. 109, 54 N.W.2d 268; McGraw Electric Co. v. Lewis & Smith Drug Co., 159 Neb. 703, 68 N.W.2d 608; Union Carbide & Carbon Corp. v. White River Distributors, Inc., 224 Ark. 558, 275 S.W.2d 455; Olin Mathieson Chemical Corp. v. Francis, 134 Colo. 160, 301 P.2d 139; General Electric Co. v. Wahle, 207 Or. 302, 296 P.2d 635; Dr. G. H. Tichenor Antiseptic Co. v. Schwegmann Bros. G. S. Mkts., 231 La. 1, 90 So.2d 343.

In General Electric Co. v. Thrifty Sales, 5 Utah 2d 326, 301 P.2d 741, 750, the Court said: 'It is significant that after some years of experience under the acts and numerous comprehensive studies covering the economic effects, the administration, and the enforcement of such laws, the majority of the more recent decisions have declared the acts invalid. Since 1952, of the jurisdictions considering the issue for the first time, only four states have upheld them, while eight have found them unconstitutional.'

Most of the State decisions holding the fair trade laws unconstitutional are based primarily on the ground that as applied to non-signers, such legislation constitutes a deprivation of property without due process of law. We are in accord with this view. We rest our decision upon the due process clause of Section 5, Article I of the Constitution of South Carolina.

'Property in a thing consists not merely in its ownership and possession, but in the unrestricted right of use, enjoyment, and disposal. Anything which destroys one or more of these elements of property to that extent destroys the property itself.' Gasque v. Town of Conway, 194 S.C. 15, 8 S.E.2d 871, 873. Also, see Henderson v. City of Greenwood, 172 S.C. 16, 172 S.E. 689.

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