Sony Corporation of America v. Best Products Co., Inc.
| Decision Date | 22 December 1972 |
| Docket Number | Civ. No. 72-696. |
| Citation | 354 F. Supp. 561 |
| Parties | SONY CORPORATION OF AMERICA, Plaintiff, v. BEST PRODUCTS COMPANY, INC., Defendant. |
| Court | U.S. District Court — District of Maryland |
David Albright, Baltimore, Md., James L. Sanderlin, Richmond, Va., for defendant.
Sony Corporation of America (Sony), a New York corporation with its principal place of business in New York, seeks injunctive relief and damages from Best Products Company, Inc. (Best), a Virginia corporation with its principal place of business in Virginia, alleging willful violation of fair trade agreements executed pursuant to the Maryland Fair Trade Law, Maryland Annotated Code, Article 83, §§ 102-110 (1969). Following an evidentiary hearing held on December 4-8, 1972, and upon the entire record, the Court makes the following:
FINDINGS OF FACT
1. Sony Corporation, a Japanese corporation, is the owner of a valuable trademark, identifying products in the electronics field. Sony-Japan, through Sony, a subsidiary, advertises its trademark as an integral part of its national marketing program. (Plaintiff's exhibit —PX 19-24).
2. Sony, duly authorized by its parent, executed in April, 1972, fair trade contracts with various retailers, specifying minimum prices for numerous designated products bearing the Sony trademark. (PX 4-7).
3. The product list contained therein was revised and amended as designated on the July, 1, 1972, Minimum Price Schedule and a Notice of Amendment dated August 28, 1972. (PX 9-10).
4. Following the execution of the contracts, notice of the execution and instructions concerning the establishment of the fair trade program were mailed in early May to all known Sony dealers in the State of Maryland, return receipt requested, in accordance with the list of dealers on PX 18.
5. Sony also instructed distributors to notify their Sony accounts of the fair trade program. (PX 13-15)
6. Since Sony had not dealt directly with Best, Best was not included in the initial list of known Sony dealers. Upon learning of Best's dealings in Sony products in Maryland, Sony informed Best of its program in a letter dated May 11, 1972, followed by a warning letter based on Sony's information that Best was violating the fair trade program. (PX 25)
7. Best has consistently offered for sale and sold fair traded Sony products at below fair trade prices at its Rockville and Baltimore stores. See data supplied by Best on its pricing history (defendant's exhibits (DX) 201-236) and shopping reports prepared by Merit Protective Service, Inc. (PX 26-33).
8. The products currently sold at below the fair trade prices are those identified in PX 413, excerpts from defendants' answers to interrogatories Nos. 10, 11, 12, 14, 15, 16 and certain items in DX 201-36, which also appears in the fair trade schedule (PX 25, 9, 10).
9. Sony, with the assistance of counsel, undertook the enforcement of its fair trade program. Following notification to all Sony dealers, directly or through distributors (Findings 4, 5), it employed Merit Protective Service, Inc. and Pinkerton's, Inc. to conduct professional shoppings of known dealers and to seek out other dealers. Raymond Steiner, a vice president of Sony, signed warning letters addressed to those dealers revealed to be in violation by the shopping reports. The testimony of Steiner, Alan Malasky and of various Merit and Pinkerton investigators is supplemented by the shopping reports and warning letters in PX 26-406.
10. Despite some minor flaws in the shopping reports, it was demonstrated that well over 150 separate stores complied with the program. Of approximately 30-35 stores found in violation (see DX 279-374), ten, in addition to Best, have already been sued. As to those not sued, with one exception, Sony has secured compliance or plans imminent enforcement action.
11. Sony faces competition in the electronics field from many quarters— Zenith, Philco, Admiral, Sylvania and Packard Bell, to name a few. There is no evidence that Sony has made any agreements with competitors concerning prices, or possesses an overwhelming share of the television, radio or stereo equipment markets.
12. The weight of the evidence is that prior to fair trade Sony has not refused to deal with Best directly. Sony will not now deal directly with Best as long as it violates Sony's fair trade program.
13. Sony's price list for direct sales to dealers, the "Pink Price List" is uniformly higher than its price list for sales to distributors, the "White Price List." Sony does not fair trade at the wholesale level and does not suggest at what price distributors should resell. The wholesale price is generally higher for a retailer than the direct-dealing price from Sony.
14. There is no indication that the import price between Sony-Japan and Sony is at an "artificially high" level.
15. Sony does not fair trade all items. See Group IV, Finding 22 herein.
16. Sony did not show any actual monetary damages flowing from the alleged injury to the trademark.
17. Sony did not show Best's profits attributed to Sony products since the commencement of fair trade.
18. Best retails 15,000-20,000 items, merchandising by catalog and selling for cash at showrooms located throughout the southeastern United States. Its policy is to sell at the lowest possible price. Deposition of Sydney Lewis, President of Best, p. 4. Best has achieved substantial growth, net sales reaching $51,000,000 in the fiscal year ending June 26, 1971 (DX 254).
19. The fair trade prices (PX 9, 10, 25) are in excess of Best's prices charged before November 14, 1971, or on May 25, 1970 (or the nearest preceding date), even allowing for imperfections in Best's data (DX 238-51, 263-265).
20. Best has furnished invoices (DX 1-200), orders to buy (DX 238-251), and a pre-freeze EDP (price) sheet with item updates (DX 263-265), giving data on costs, selling prices and volume. Best has also procured the table of standard freight tariffs relevant to the locations of Best distributors. (DX 376-380). From this, together with the volume and weight of particular Sony items, an approximation of freight costs on particular shipments was computed.
21. The data in findings of fact No. 20 is integrated in DX 201-236. By then taking the difference between selling price and total cost, and dividing by selling price, Best has determined its markup on that shipment. By selecting the highest selling price and lowest cost of shipments before November 14, 1971, Best purports to show its item-by-item "customary initial period markup" on products sold before November 14, 1971, or during the fiscal year before August 15, 1971. On products not sold until after November 14, 1971, Best has in some cases priced, it is claimed, in comparison to similar products. In other cases of items not sold until after November 13, 1971, Best purports to price "historically" with the emphasis on a competitive pricing policy taking into consideration past prices.
22. The following items (Group I) described in Sony's fair trade schedule, were sold by Best before November 14, 1971, and are sold currently: KV1201 KV1212, KV1710, TFM C690W, TV112, TV740. The following items (Group II) sold then are no longer sold, apparently replaced by newer models: KV1210, TV110, TV500, TV710, TV720. The following fair trade items (Group III) were not sold until after November 13, 1971, but were sold before fair trade and are not shown to be similarly priced to a previous product: MR-9300WA, HP-218-SS-210, TV940. The following items (Group IV) were not sold before November 14, 1971, but were purportedly priced comparably to a previous product: the KV1510 priced comparably to the KV1212 (the difference being in screen size and price, as reflected in the testimony and data), the KV1720 to the KV1710, the TV510U to the TV500, and the TV950 to the TV940. The following products (Group V) were not sold until after fair trade and are not shown to be priced comparably to any previous product: CRF5090, HP510A/SS510, HST230A, 8FC85W, 8FC39W, TFM-C720W, TFM-7400W, TFM-8100WA. The following items (Group VI) are not fair traded: BP71564, HST388, BP12563, 8P218, TR1824, TR6400, Sony 563, 6RC15, Sony 8F11W, Sony 7FC34W.
23. The credibility of the cost and price data contained Findings Nos. 20 and 21 is dubious. It appears to have been prepared specially for this litigation, casting doubt as to whether any prior conscious evaluation of "customary initial period markup" had been made. See deposition of Mr. William Mayes Best's current buyer of electronics products, p. 35-37, deposition of Mr. Brady L. Rackley, Best's director of data processing, p. 68-70. The gathering of invoices, for example, did not draw on a comprehensive cost file; the implication is that this was a recent ad hoc venture. See Mayes deposition, p. 44-47. Sony's ability to check the cost data was impeded by Best's reluctance to supply Sony with its list of suppliers. See PX 427. The selling price information is also subject to criticism. It would be preferable to have actual selling tickets to verify the information in the orders to buy. Deposition of Mr. Brady L. Rackley, p. 48, 78, 85, 86. The collection of data from orders to buy, also recently done, apparently was not systematic, Mayes deposition, p. 44, and did not reflect account allowances. Geiger deposition, p. 102-104. Turning to freight cost data, Best admitted it had poor records.
24. Best's catalog prices are virtually identical to a number of other catalog merchandisers' prices. (PX 412, 414-417). Conversations with other retailers influenced the setting of Best prices.
25. Additional indication of the ad hoc nature of the data is the discrepancy between current markups and pre-November 14, 1971 markups revealed by completion of the final column on the invoice listing compilations, DX 201-236, often...
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