299 U.S.

183
57 S.Ct. 139
81 L.Ed. 109

OLD DEARBORN DISTRIBUTING CO.

v.
SEAGRAM-DISTILLERS CORPORATION. McNEIL v.
JOSEPH TRINER CORPORATION.
Nos. 226, 372.
Argued Nov. 12, 13, 1936.
Decided Dec. 7, 1936.

Appeals from the Supreme Court of the State of Illinois.

[Syllabus from pages 183-185 intentionally omitted]
In No. 226: Messrs. Irving Breakstone, Irving Greenspahn, and Nicholas J.
Pritzker, all of Chicago, Ill., for appellant.
Mr. Richard Mayer, of Chicago, Ill. (Mr. Louis A. Kohn, of Chicago, Ill.,
on the brief), for appellee.
In No. 372: Messrs. Stanford Clinton, J. Herzl Segal, and Nicholas J.
Pritzker, all of Chicago, Ill., for appellant.
Mr. Hamilton Moses, of Chicago, Ill., for appellee.
Mr. Justice SUTHERLAND delivered the opinion of the Court.

These appeals bring here for decision the question of the constitutional validity
of sections 1 and 2 of the Fair Trade Act of Illinois (Smith-Hurd Ill.Stats., c.
121 1/2, 188 et seq.; Illinois Rev.Stat.1935, c. 140, 8 et seq.), providing as
follows:

'Section 1. No contract relating to the sale or resale of a commodity which

bears, or the label or content of which bears, the trade mark, brand or name of
the producer 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 of Illinois by reason of any
of the following provisions which may be contained in such contract:
3

'(1) That the buyer will not resell such commodity except at the price stipulated
by the vendor.

'(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
except at the price stipulated by such producer or vendee.

'Such provisions in any contract shall be deemed to contain or imply conditions

that such commodity may be resold without reference to such agreement in the
following cases:

'(1) In closing out the owner's stock for the purpose of discontinuing delivery of
any such commodity: provided, however, that such stock is first offered to the
manufacturer of such stock at the original invoice price, at least ten (10) days
before such stock shall be offered for sale to the public.

'(2) When the goods are damaged or deteriorated in quality, and notice is given
to the public thereof.

'(3) By any officer acting under the orders of any court.

'Section 2. 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 1 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 any person damaged thereby.'

10

Section 3 of the act (Smith-Hurd Ill.Stats. c. 121 1/2, 190) provides that it
shall not apply to contracts or agreements between producers or between
wholesalers or between retailers as to sale or resale prices.

11

No. 226 is a suit brought by appellee against appellant to enjoin the latter from
wilfully and knowingly advertising, offering for sale, or selling, certain brands
of whisky at less than prices stipulated by appellee in accordance with
contracts, made in pursuance of the Fair Trade Act, between appellee and
distributors or retailers of such whisky. The facts set forth by the court below

follow.
12

Appellee is a dealer in alcoholic beverages at wholesale. It buys the products

here in question from the producers. The whiskies bear labels and trade-marks,
and are in fair and open competition with commodities of the same general
class produced by others. Appellant is a corporation operating four retail liquor
stores in Chicago, and selling at both wholesale and retail. Appellee's sales in
Chicago are made to wholesale distributors. It has not sold any of the whiskies
in controversy to appellant, but has sold other liquors. Contracts in pursuance of
the Fair Trade Act have been executed between appellee and certain
distributors, and numerous Illinois retailers. Appellee does not sell directly to
any retailer. Appellant sold the products in question at cut prices that is to say,
at prices below those stipulatedand continued to do so after appellee's
demand that it cease such practice. The result of such price cutting was a
diminution of sales during the price-cutting period suffered by appellee and
retailers other than appellant. Some dealers ceased to display the products, and
notified appellee that they could not compete with appellant and would
discontinue handling the products unless the price cutting was stopped.
Appellant was also a party to breaches of other fair trade contracts between
appellee and certain distributors, and continued the price cutting throughout the
trial of the case in the Illinois state court of first instance.

13

The record shows that one of the retailer's contracts drawn in pursuance of the
act was signed by appellant's secretary and treasurer prior to the commission of
the acts complained of. This contract, among other things, provided that the
product in question should not be sold, advertised, or offered for sale in Illinois
below the prices to be stipulated by appellee. The contract was assailed by
appellant below as ineffective, and for present purposes we accept that view. It
is plain enough, however, that appellant had knowledge of the original
contractual restrictions and that they constituted conditions upon which sales
thereafter were to be made.

14

No. 372 is a suit of the same character as No. 226, seeking the same relief by
injunction. The facts set forth in the complaint were admitted by a motion to
dismiss. These facts, fully stated in the opinion of the court below, infra, we
find it unnecessary to repeat. It is enough to say that while they differ in detail
from those appearing in No. 226, they are sufficiently the same in substance as
to be controlled by the same principles of law.

15

Both appellants attack the validity of the act upon the grounds that it denies due
process of law and the equal protection of the laws in violation of the
Fourteenth Amendment in the particulars which hereafter appear. The state

courts of first instance in which the suits were brought sustained the validity of
the act and entered decrees as prayed for in the bills of complaint. These
decrees were affirmed upon appeal by the court below. Joseph Triner
Corporation v. McNeil, 363 Ill. 559, 2 N.E.(2d) 929, 104 A.L.R. 1435;
Seagram-Distillers Corporation v. Old Dearborn Distributing Co., 363 Ill. 610,
611, 2 N.E.(2d) 940.
16

The Illinois statute constitutes a legislative recognition of a rule which had been
accepted by many of the state courts as valid at common law. This rule was
based upon the distinction found to exist between articles of trade put out by the
manufacturer or producer under and identified by patent, copyright, trade-mark,
brand, or similar device and articles of like character put out by others and not
so identified. The same rule was followed for a time by some of the lower
federal courts; but their decisions were upset by this court in a series of cases,
of which Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373, 31
S.Ct. 376, 55 L.Ed. 502, is an example. In that case this court held that a system
of contracts between manufacturers and wholesale and retail merchants which
sought to control the prices for sales by all such dealers by fixing the amount
which the consumer should pay, amounted to an unlawful restraint of trade,
invalid at common law and, so far as interstate commerce was affected, invalid
under the Sherman Anti-Trust act of July 2, 1890 (15 U.S.C.A. 17, 15
note); and it was held that the rule applied to such agreements notwithstanding
the fact that they related to proprietary medicines made under a secret process
and identified by distinctive packages, labels, and trade-marks. The argument
that since the manufacturer might make and sell or not as he chose, he could
lawfully condition the price at which subsequent sales could be made by the
purchaser, was rejected.

17

'If there be an advantage to the manufacturer in the maintenance of fixed retail

prices,' this court said at pages 407 409 of 220 U.S., at pages 384, 385 of 31
S.Ct., 55 L.Ed. 502, 'the question remains whether it is one which he is entitled
to secure by agreements restricting the freedom of trade on the part of dealers
who own what they sell. As to this, the complainant can fare no better with its
plan of identical contracts than could the dealers themselves if they formed a
combination and endeavored to establish the same restrictions, and thus to
achieve the same result, by agreement with each other. If the immediate
advantage they would thus obtain would not be sufficient to sustain such a
direct agreement, the asserted ulterior benefit to the complainant cannot be
regarded as sufficient to support its system. * * * The complainant's plan falls
within the principle which condemns contracts of this class. It, in effect, creates
a combination for the prohibited purposes. No distinction can properly be made
by reason of the particular character of the commodity in question. It is not

entitled to special privilege or immunity. It is an article of commerce, and the

rules concerning the freedom of trade must be held to apply to it. * * * The
complainant having sold its product at prices satisfactory to itself, the public is
entitled to whatever advantage may be derived from competition in the
subsequent traffic.'
18

It is unnecessary to review the contrary state decisions. It is enough, for present

purposes, to say that, generally speaking, they sustained contracts standardizing
the price at which 'identified' commodities subsequently might be sold, where
the price standardization is primarily effected to protect the good will created or
enlarged by the identifying mark or brand. Where a manufacturer puts out an
article of general production identified by a special trade-mark or brand, the
result of an agreement fixing the subsequent sales price affects competition
between the identified articles alone, leaving competition between articles so
identified by a given manufacturer and all other articles of like kind to have full
play. In other words, such restraint upon competition as there may be is strictly
limited to that portion of the entire product put out and plainly identified by a
particular manufacturer or producer.

19

The ground upon which the opposing view of this court proceeds is that such an
agreement, nevertheless, constitutes an unlawful restraint of trade at common
law and, in respect of interstate commerce, a violation of the Sherman AntiTrust Act. A careful reading of the decisions discloses no other ground.

20

Following these decisions, bills were introduced in Congress from time to time
authorizing standardization of price agreements in respect of identified goods,
upon which extensive hearings were held by the appropriate congressional
committees. These bills are in all essential respects like the Illinois act. The
hearings disclose exhaustive legal briefs, and testimony and arguments for and
against the economic value of the proposed laws. See, for example, Hearings
before the Committee on Interstate and Foreign Commerce of the House of
Representatives, on H.R. 13305 (63d Cong., 2d and 3d Sess.); H.R. 13568 (64th
Cong., 1st and 2d Sess.); compare Report of the Federal Trade Commission on
Resale Price Maintenance, 70th Cong., 2d Sess., H. Doc. No. 546.

21

It is not without significance that while the proposed legislation was vigorously
assailed in other respects, we do not find that any constitutional objection was
urged. And the decisions of this court, far from suggesting any constitutional
infirmity in such proposed legislation, contain implications to the contrary. In
the Dr. Miles Medical Co. Case, 220 U.S. 373, at page 405, 31 S.Ct. 376, 383,
55 L.Ed. 502, the court said: 'Nor can the manufacturer by rule and notice, in
the absence of contract or statutory right, even though the restriction be known

to purchasers, fix prices for future sales.' (Italics supplied.) In Boston Store v.
American Graphophone Co., 246 U.S. 8, at page 26, 38 S.Ct. 257, 62 L.Ed.
551, Ann.Cas.1918C, 447, where this court struck down a stipulation that
patented articles should not be resold at prices other than those fixed presently
and from time to time by the patent owner, it was suggested that if this view
resulted in damage to the holders of patent rights or the law afforded
insufficient protection to the inventor, the remedy lay within the scope of
legislative (that is to say, congressional) action. And in a concurring opinion
(246 U.S. at page 28, 38 S.Ct. at page 262, 62 L.Ed. 551, Ann.Cas.1918C, 447),
it was said: 'If the rule so declared is believed to be harmful in its operation, the
remedy may be found, as it has been sought, through application to the
Congress.' The words 'as it has been sought' quite evidently referred to the bills
of which we have just spoken, since they had theretofore been introduced and
made the subject of the hearings. See, also, Bauer & Cie v. O'Donnell, 229 U.S.
1, 12, 33 S.Ct. 616, 57 L.Ed. 1041, 50 L.R.A.(N.S.) 1185, Ann.Cas.1915A,
150. While these observations of the court cannot, of course, be regarded as
decisive of the question, they plainly imply that the court at the time foresaw no
valid constitutional objection to such legislation, for it cannot be supposed that
the court would suggest a legislative remedy the validity of which might seem
open to doubt.
22

In the light of the foregoing brief resume of the question with respect to the
standardization of selling prices of identified goods in the absence of statutory
authority, we proceed to a consideration of the specific objections to the
constitutionality of the act here under review.

23

First. In respect of the due process of law clause, it is contended that the statute
is a price-fixing law, which has the effect of denying to the owner of property
the right to determine for himself the price at which he will sell. Appellants
invoke the well-settled general principle that the right of the owner of property
to fix the price at which he will sell it is an inherent attribute of the property
itself, and as such is within the protection of the Fifth and Fourteenth
Amendments. Tyson & Brother United Theatre Ticket Offices v. Banton, 273
U.S. 418, 429, 47 S.Ct. 426, 427, 428, 71 L.Ed. 718, 58 A.L.R. 1236; Wolff
Packing Co. v. Court of Industrial Relations, 262 U.S. 522, 537, 43 S.Ct. 630,
633, 67 L.Ed. 1103, 27 A.L.R. 1280; Ribnik v. McBride, 277 U.S. 350, 48
S.Ct. 545, 72 L.Ed. 913, 56 A.L.R. 1327; Williams v. Standard Oil Co., 278
U.S. 235, 49 S.Ct. 115, 73 L.Ed. 287, 60 A.L.R. 596; New State Ice Co. v.
Liebmann, 285 U.S. 262, 52 S.Ct. 371, 76 L.Ed. 747. These cases hold that,
with certain exceptions, which need not now be set forth, this right of the owner
cannot be denied by legislative enactment fixing prices and compelling such
owner to adhere to them. But the decisions referred to deal only with legislative

price fixing. They constitute no authority for holding that prices in respect of
'identified' goods may not be fixed under legislative leave by contract between
the parties. The Illinois Fair Trade Act does not infringe the doctrine of these
cases.
24

Section 1 (Smith-Hurd Ill.Stats. c. 121 1/2, 188) affirms the validity of

contracts of sale or resale of commodities identified by the trade-mark, brand,
or name of the producer or owner, which are in fair and open competition with
commodities of the same general class produced by others, notwithstanding
that such contracts stipulate: (1) That the buyer will not resell except at the
price stipulated by the vendor; and (2) that the producer or vendee of such a
commodity shall require, upon the sale to another, that he agree in turn not to
resell except at the price stipulated by such producer or vendee. It is clear that
this section does not attempt to fix prices, nor does it delegate such power to
private persons. It permits the designated private persons to contract with
respect thereto. It contains no element of compulsion but simply legalizes their
acts, leaving them free to enter into the authorized contract or not as they may
see fit. Thus far, the act plainly is not open to objection; and none seems to be
made.

25

The challenge is directed against section 2 (Smith-Hurd Ill.Stats. c. 121 1/2,

189), which provides that wilfully and knowingly advertising, offering for sale
or selling any commodity at less than the price stipulated in any contract made
under section 1, whether the person doing so is or is not a party to the contract,
shall constitute unfair competition, giving rise to a right of action in favor of
anyone damaged thereby.

26

It is first to be observed that section 2 reaches not the mere advertising, offering
for sale, or selling at less than the stipulated price, but the doing of any of these
things willfully and knowingly. We are not called upon to determine the case of
one who has made his purchase in ignorance of the contractual restriction upon
the selling price, but of a purchaser who has had definite information respecting
such contractual restriction and who, with such knowledge, nevertheless
proceeds willfully to resell in disregard of it.

27

In the second place, section 2 does not deal with the restriction upon the sale of
the commodity qua commodity, but with that restriction because the
commodity is identified by the trade-mark, brand, or name of the producer or
owner. The essence of the statutory violation then consists not in the bare
disposition of the commodity, but in a forbidden use of the trademark, brand, or
name in accomplishing such disposition. The primary aim of the law is to
protect the propertynamely, the good willof the producer, which he still

owns. The price restriction is adopted as an appropriate means to that perfectly

legitimate end, and not as an end in itself.
28

Appellants here acquired the commodity in question with full knowledge of the
then existing restriction in respect of price which the producer and wholesale
dealer had imposed, and, of course, with presumptive if not actual knowledge of
the law which authorized the restriction. Appellants were not obliged to buy;
and their voluntary acquisition of the property with such knowledge carried
with it, upon every principle of fair dealing, assent to the protective restriction,
with consequent liability under section 2 of the law by which such acquisition
was conditioned. Cf. Provident Institution v. Jersey City, 113 U.S. 506, 514,
515, 5 S.Ct. 612, 28 L.Ed. 1102; Vreeland v. O'Neil, 36 N.J.Eq. 399, 402; same
case on appeal, Vreeland v. Mayor, etc., of Jersey City, 37 N.J.Eq. 574, 577.

29

We find nothing in this situation to justify the contention that there is an

unlawful delegation of power to private persons to control the disposition of the
property of others, such as was condemned in Eubank v. Richmond, 226 U.S.
137, 143, 33 S.Ct. 76, 57 L.Ed. 156, 42 L.R.A.(N.S.) 1123; State of
Washington, ex rel. Seattle Trust Co. v. Roberge, 278 U.S. 116, 121, 122, 49
S.Ct. 50, 51, 52, 73 L.Ed. 210, 86 A.L.R. 654; and Carter v. Carter Coal Co.,
298 U.S. 238, 311, 56 S.Ct. 855, 872, 873, 80 L.Ed. 1160. In those cases the
property affected had been acquired without any preexisting restriction in
respect of its use or disposition. The imposition of the restriction in invitum was
authorized after complete and unrestricted ownership had vested in the persons
affected. Here, the restriction, already imposed with the knowledge of
appellants, ran with the acquisition and conditioned it.

30

Nor is section 2 so arbitrary, unfair or wanting in reason as to result in a denial

of due process. We are here dealing not with a commodity alone, but with a
commodity plus the brand or trade-mark which it bears as evidence of its origin
and of the quality of the commodity for which the brand or trade-mark stands.
Appellants own the commodity; they do not own the mark or the good will that
the mark symbolizes. And good will is property in a very real sense, injury to
which, like injury to any other species of property, is a proper subject for
legislation. Good will is a valuable contributing aid to businesssometimes the
most valuable contributing asset of the producer or distributor of commodities.
And distinctive trade-marks, labels and brands, are legitimate aids to the
creation or enlargement of such good will. It is well settled that the proprietor
of the good will 'is entitled to protection as against one who attempts to deprive
him of the benefits resulting from the same, by using his labels and trade-mark
without his consent and authority.' McLean v. Fleming, 96 U.S. 245, 252, 24
L.Ed. 828. 'Courts afford redress or relief upon the ground that a party has a

valuable interest in the good will of his trade or business, and in the trademarks
adopted to maintain and extend it.' Hanover Star Milling Co. v. Metcalf, 240
U.S. 403, 412, 36 S.Ct. 357, 360, 60 L.Ed. 713. The ownership of the good
will, we repeat, remains unchanged, notwithstanding the commodity has been
parted with. Section 2 of the act does not prevent a purchaser of the commodity
bearing the mark from selling the commodity alone at any price he pleases. It
interferes only when he sells with the aid of the good will of the vendor; and it
interferes then only to protect that good will against injury. It proceeds upon the
theory that the sale of identified goods at less than the price fixed by the owner
of the mark or brand is an assault upon the good will, and constitutes what the
statute denominates 'unfair competition.' See Liberty Warehouse Co. v. Burley
Tobacco Growers' Ass'n, 276 U.S. 71, 91, 92, 96, 97, 48 S.Ct. 291, 295, 296,
297, 72 L.Ed. 473. There is nothing in the act to preclude the purchaser from
removing the mark or brand from the commoditythus separating the physical
property, which he owns, from the good will, which is the property of another
and then selling the commodity at his own price, provided he can do so
without utilizing the good will of the latter as an aid to that end.
31

There is a great body of fact and opinion tending to show that price cutting by
retail dealers is not only injurious to the good will and business of the producer
and distributor of identified goods, but injurious to the general public as well.
The evidence to that effect is voluminous; but it would serve no useful purpose
to review the evidence or to enlarge further upon the subject. True, there is
evidence, opinion and argument to the contrary; but it does not concern us to
determine where the weight lies. We need say no more than that the question
may be regarded as fairly open to differences of opinion. The legislation here in
question proceeds upon the former and not the latter view; and the legislative
determination in that respect, in the circumstances here disclosed, is conclusive
so far as this court is concerned. Where the question of what the facts establish
is a fairly-debatable one, we accept and carry into effect the opinion of the
Legislature. Radice v. New York, 264 U.S. 292, 294, 44 S.Ct. 325, 326, 68
L.Ed. 690, Zahn v. Board of Public Works, 274 U.S. 325, 328, 47 S.Ct. 594,
595, 71 L.Ed. 1074, and cases cited.

32

Certain terms contained in the act are said to be fatally vague and indefinite,
and therefore to deny due process of law under our decisions in Connally v.
General Const. Co., 269 U.S. 385, 390, 46 S.Ct. 126, 127, 70 L.Ed. 322, et seq.,
and other cases. The contention is directed in the main against the phrase in
section 1 of the act, 'fair and open competition,' and 'any commodity' and 'any
contract entered into pursuant to the provisions of section 1' contained in
section 2. The point is shown to be lacking in substance by the reasoning in the
Connally Case, 269 U.S. 385, at pages 391, 392, 46 S.Ct. 126, 127, 128, 70

L.Ed. 322, and the cases there cited. See particularly Hygrade Provision Co. v.
Sherman, 266 U.S. 497, 501-503, 45 S.Ct. 141, 142, 143, 69 L.Ed. 402; United
States v. L. Cohen Grocery Co., 255 U.S. 81, 92, 41 S.Ct. 298, 301, 65 L.Ed.
516, 14 A.L.R. 1045, where it is said 'that, for reasons found to result either
from the text of the statutes involved or the subjects with which they dealt, a
standard of some sort was afforded.' Certainly, the phrase 'fair and open
competition' is as definite as the phrase contained in section 5 of the Federal
Trade Commission Act (15 U.S.C.A. 45) 'unfair methods of competition,'
which this court has never regarded as being fatally uncertain. Federal Trade
Commission v. Gratz, 253 U.S. 421, 427, 40 S.Ct. 572, 574, 64 L.Ed. 993;
Federal Trade Commission v. Beech-Nut Co., 257 U.S. 441, 453, 40 S.Ct. 572,
574, 64 L.Ed. 993; Federal Trade Commission v. Raladam Co., 283 U.S. 643,
648, 51 S.Ct. 587, 590, 75 L.Ed. 1324, 79 A.L.R. 1191. We think the phrases
complained of are sufficiently definite, considering the whole statute; and that
no one need be misled as to their meaning, or need suffer by reason of any
supposed uncertainty. Cf. Miller v. Schoene, 276 U.S. 272, 281, 48 S.Ct. 246,
248, 72 L.Ed. 568; Standard Oil Co. v. United States, 221 U.S. 1, 69, 31 S.Ct.
502, 55 L.Ed. 619, 34 L.R.A.(N.S.) 834, Ann.Cas.1912D, 734.
33

Second. The contention that section 2 of the act denies the equal protection of
the laws in violation of the Fourteenth Amendment proceeds upon the view that
it confers a privilege upon the producers and owners of goods identified by
trade-mark, brand, or name, which it denies in the case of unidentified goods.
As this court many times has said, the equal protection clause does not preclude
the states from resorting to classification for the purposes of legislation. It only
requires that the classification 'must be reasonable, not arbitrary, and must rest
upon some ground of difference having a fair and substantial relation to the
object of the legislation, so that all persons similarly circumstanced shall be
treated alike.' Colgate v. Harvey, 296 U.S. 404, 422, 423, 56 S.Ct. 252, 255,
256, 80 L.Ed. 299, 102 A.L.R. 54, and cases cited.

34

Clearly, the challenged section of the Illinois act satisfies this test. Enough
appears already in this opinion to show the essential difference between trademarked goods and others not so identified. The entire struggle to bring about
legislation such as the Illinois act embodies has been based upon this essential
difference. In Radice v. New York, 264 U.S. 292, 296, 297, 44 S.Ct. 325, 327,
68 L.Ed. 690, we sustained a statute prohibiting night employment of women in
restaurants in large cities, against the claim that it denied equal protection of
the laws in that it did not apply to small cities, or to women employed as singers
and performers, or to attendants in ladies' cloak rooms and parlors, or
employees in hotel dining rooms and kitchens or in lunch rooms and restaurants
conducted by employers for the benefit of their employees. Former decisions of

the court were cited sustaining classifications based upon differences between
fire insurance and other kinds of insurance; between railroads and other
corporations; between barbershop employment and other kinds of labor;
between 'immigrant agents' engaged in hiring laborers to be employed beyond
the limits of a state and persons engaged in the business of hiring for labor
within the state; between sugar refiners who produce the sugar and those who
purchase it. Other illustrations of a similar character might be cited.
35

But it is unnecessary to pursue the subject further; for, since the sole purpose of
the present law is to afford a legitimate remedy for an injury to the good will
which results from the use of trade-marks, brands, or names, it is obvious that
its provisions would be wholly inapplicable to goods which are unmarked.

36

Decrees affirmed.

37

Mr. Justice STONE took no part in the consideration or decision of this case.