State v. Lewis & Leidersdorf Co.

• Decision Date: 29 April 1930
• Citation: 201 Wis. 543,230 N.W. 692
• Court: Wisconsin Supreme Court
• Parties: STATE v. LEWIS & LEIDERSDORF CO.

201 Wis. 543

230 N.W. 692

STATE

v.LEWIS & LEIDERSDORF CO.

Supreme Court of Wisconsin.

April 29, 1930.

Appeal from an order of the Circuit Court for Milwaukee County; Charles L. Aarons, Circuit Judge.

Action by the State against the Lewis & Leidersdorf Company and others. From an order overruling a demurrer to the complaint, the named defendant appeals.--[[[By Editorial Staff.]

Affirmed.

Action begun May 3, 1929; order overruling demurrer to complaint entered November 14, 1929. Defendant appeals.Lenicheck, Boesel & Wickhem, of Milwaukee (Frank T. Boesel and Lorin L. Kay, both of Milwaukee, of counsel), for appellant.

John W. Reynolds, Atty. Gen., and George A. Bowman, Dist. Atty., and C. Stanley Perry, Asst. Dist. Atty., both of Milwaukee, for the State.

FOWLER, J.

The nature of the action may be briefly stated to be to enjoin the above-named defendant, General Cigar Company, Inc., and G. H. P. Company, Inc., from carrying out an agreement and practices in violation of the statutes prohibiting combinations in restraint of trade and tending to create monopoly, and incidentally to recover a penalty for violation of such statute. The defendant, Lewis & Leidersdorf Company, demurs to the complaint on the ground of insufficiency of facts. The circuit court overruled the demurrer. The Lewis & Leidersdorf Company assigns the ruling of the court as error.

That the two forms of relief demanded may be had in the same action is held in State v. Lorillard, 181 Wis. 347, 193 N. W. 613. Jurisdiction is obtained by reason of the injunctional relief sought, and the other relief is granted incidentally to comprise the entire relief sought by the state in a single action.

[1] The complaint comprises fifteen pages of the printed case. It is difficult to condense it to the reasonable bounds of an opinion. It may, we believe, be fairly and sufficiently summarized as stating, in substance, particularly or by reasonable intendment as follows: The Lewis & Leidersdorf Company is a Wisconsin corporation with its principal office in Milwaukee doing business at wholesale and retail as a dealer in cigars and such other goods as are customarily sold in connection with the retailing of cigars. The General Cigar Company, Inc., and the G. H. P. Company, Inc., are corporations of New York and Delaware, respectively, doing business in this state as wholesale dealers in cigars with jobbing offices in Milwaukee. In 1927 the defendants combined and conspired to monopolize or attempt to monopolize the wholesale cigar trade in Milwaukee county and to restrain and prevent competition in the wholesaling of cigars in said county, and have since been, and now are, acting in furtherance of such conspiracy, and have unlawfully restrained trade and are creating a monopoly in such trade and will continue so to act unless enjoined.

The facts by which the combination and conspiracy are alleged to have been effectuated may be summarized as follows: The wholesale cigar dealers in Milwaukee operate under agreements by which each has the exclusive right to sell in Milwaukee county the brands which it handles (except that each may handle all brands locally manufactured), and each wholesaler deals in tobacco and smokers' articles and other goods commonly sold in connection with the retailing of cigars. Besides about 100 tobacco stores and groceries, soft drink parlors, and the like in number not given, there are about 400 drug stores in Milwaukee retailing cigars and about 50 cigar stands in hotels, office buildings, and like places in the downtown district of Milwaukee. The latter 450 are the common retail outlets of manufacturers and jobbers. These outlets are essential to the wholesaling of cigars in Milwaukee, and manufacturers and jobbers are dependent upon their retail facilities for successful operation of their business. The Lewis & Leidersdorf Company has entered into contracts with dealers operating 170 of these outlets, whereby such dealers agree to purchase their entire stock from the Lewis & Leidersdorf Company and to display for sale in their counters atop of all other cigars, as the Lewis & Leidersdorf Company shall designate certain brands of which some one of the defendants has exclusive sale. To induce operators of said outlets to enter into said contracts, the Lewis & Leidersdorf Company agrees to give said dealers discounts in excess of those allowed to dealers not so contracting and to take from them at full value all unsalable goods in exchange for other goods of equal value. The Lewis & Leidersdorf Company is the largest jobber of cigars in Milwaukee. The other jobbers each handle only a few brands, and alone none can furnish sufficient variety to retailers to enable them to conduct business successfully. The Lewis & Leidersdorf Company has the exclusive handling of more brands than any other jobber, and by reason thereof and of an arrangement with the two other defendants occupies a dominant position in the wholesale cigar and tobacco business in Milwaukee. By reason of said arrangement with defendants and the use of its said contracts the Lewis & Leidersdorf Company is able to and does supply to retailers complete stocks adequate for successful business comprising a majority of the most popular and leading brands of cigars in the Milwaukee retail market, and has destroyed the greater part of the wholesaling formerly done by manufacturers and other jobbers in Milwaukee with the retailers operating under said exclusive dealing contracts with the Lewis & Leidersdorf Company. The use of said contract is intended to, and its operation does and will continue to, eliminate from the retail trade in Milwaukee all brands of cigars not exclusively handled by the defendants, and is intended to create, and its operation is creating, a monopoly by the defendants of the sale of cigars in Milwaukee. The defendants, General Cigar Company, Inc., and the G. H. P. Company, Inc., are alleged to be parties with the Lewis & Leidersdorf Company to a combination and conspiracy to attempt to create said monopoly and to restrain trade in violation of the statute through agreeing with the Lewis & Leidersdorf Company, with the common intent to effectuate such monopoly and restraint of trade and to drive other wholesalers out of business in Milwaukee, that they will not deal with any retailers who have entered into said contract with the Lewis & Leidersdorf Company; that they will sell to the Lewis & Leidersdorf Company at a discount sufficient to enable it to resell their brands and give the special discounts provided for in said contract and at a less price than they will sell to other jobbers; and will permit the Lewis & Leidersdorf Company to list and display their exclusive brands as provided in its said contract.

The facts above stated are claimed to constitute a violation of section 133.01, Stats. This statute, so far as the facts stated in the complaint may be claimed to violate its terms, may for convenience be deleted to read and its paragraphs numbered as follows:

“1. Every contract or combination in the nature of a * * * conspiracy in restraint of trade * * * is hereby declared illegal. 2. Every combination, conspiracy * * * or contract intended to restrain or prevent competition in the supply or price of any article * * * in general use in this state, to be produced or sold therein * * * is hereby declared an illegal restraint of trade. 3. Every person [or] corporation * * * who shall * * * become a party to any contract, combination, conspiracy, * * * or agreement herein * * * declared to be in restraint of trade, or who shall combine or conspire with any other person [or] corporation * * * to monopolize or attempt to monopolize any part of the trade * * * in this state shall forfeit for each such offense not less than one hundred dollars nor more than five thousand dollars.”

The complete statute and sections 1 and 2 of the Sherman Anti-Trust Act (15 USCA §§ 1, 2) necessary to consider in its construction are for ready reference set out in the marginal note.¹

The statute involved has been before this court three times, in the Lorillard Case, supra, and twice in Pulp Wood Co. v. Green Bay Co., 157 Wis. 604, 147 N. W. 1058, and Id., 168 Wis. 400, 170 N. W. 230.

In the first Pulp Wood Case decision it is pointed out that section 133.01 is a mere reenactment of the first two sections of the Sherman Anti-Trust Act, with application to intrastate as distinguished from interstate transactions, and that its construction is ruled by the federal decisions construing the federal statute. The briefs cite a multitude of such decisions some of which are cited in the first Pulp Wood Case decision. Only a few will be cited here. No need is perceived of again going over the ground covered in the Pulp Wood Case wherein the “rule of reason” as adopted by the federal courts in applying the Sherman Act is expounded. A general view of sections 1 and 2 of the Sherman Act is most readily obtained in 15 USCA, pp. 3 to 121, where all federal cases that have arisen under the act are collected and briefly stated.

That the complaint states violation of section 133.01 seems to us to appear from consideration of the paragraph of that statute above numbered (3). This paragraph corresponds to section 2 of the Sherman Act, the purpose of which is to supplement section 1 of that act and make it impossible in any way to frustrate or evade the public policy declared by section 1; to embrace every attempt to accomplish what is prohibited by section 1; and to prevent restraints of trade by any monopolization or attempts to monopolize, although the acts by which such result is accomplished are not embraced within the general enumerations of section 1. Standard Oil Co. v. U. S., 221 U. S. 1, 61, 31 S. Ct. 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734.Section 2 covers three classes of acts: Monopolizing, attempting to monopolize, and combining or...