PRICE MAINTENANCE. The subject of price mainte nance, or, more specifically, resale price maintenance, is one that demands special consideration among the various types of price 'fixing, both from the legal and the economic aspects. Other forms of price fixing are treated elsewhere. For agreements and under standings as to prices among competing manufacturers, whole salers or retail dealers, see ASSOCIATIONS, INDUSTRIAL, and also POOLS, IN INDUSTRY and CARTEL; for concentrations of industry in monopolistic, or quasi-monopolistic, forms, see TRUSTS; for price fixing by legal monopolies, such as railroads and other pri vately owned public utilities, see PUBLIC UTILITIES. All of these forms are found both in the United States and in the United Kingdom. The following discussion relates to resale price main tenance exclusively.
Resale price maintenance is the term applied to various devices by which individual manufacturers or distributors of particular trade-marked, branded, or otherwise identified articles fix mini mum resale prices. The most widespread and important manifes tation of resale price control is seen where the manufacturer of an article, by contract, fixes a price below which retailers shall not sell it to the public.
The practice has been fostered in the United States by manu facturers who sell trade-marked and well advertised commodities such as breakfast foods, toilet goods, proprietary medicines, books and musical instruments, and has been supported by trade associ ations of manufacturers and dealers in various lines of products. Supporting dealer organizations have the further objective of in ducing the fixing of minimum prices high enough to insure a margin satisfactory to the dealer. In Great Britain there exists an association, known as the Proprietary Articles Trade Associa tion, whose main object is to encourage and enforce this system. A similar association was founded in Canada in 1925 but was later disbanded when it was adjudged to be a combination in re straint of trade.
It is contended by the advocates of resale price maintenance that the maker of an article which bears a trade-mark that he has made valuable by extensive advertising should be entitled to stipu late the price at which it shall be sold by dealers to the public. It is claimed that the manufacturer cannot adequately protect his in tangible property—the good will attaching to his trade-mark or brand—unless he restrains dealers who sell his products at a lower price than he suggests, sometimes less than cost, as a "leader" or a "draw" to customers. This use of "leaders," it is maintained,
sometimes causes competing retailers to refuse to handle the goods because they can neither make a profit by meeting the low prices, nor sell at the manufacturers' higher resale prices, thus destroying good will of the dealer and reducing the number of dealer outlets.
In England, the legal status of resale price maintenance is based largely upon court application of common law rules respecting freedom of contract and the reasonableness of agreements in re straint of trade. The courts interpret the right of contract broadly and permit manufacturers to make resale price maintenance agree ments among themselves and with their distributors provided undue restraint of trade is not shown. Resale price maintenance was considered by official committees in 192o and again in 1931. The report of 1931 neither condemned, nor did it give unqualified approval to the practice.
Canadian policy follows quite closely that of England but is somewhat more restricted. In certain cases resale price mainte nance has been declared to be against public policy, but the practice itself has not been passed upon. Resale price control by a combination of manufacturers, jobbers, and retailers of drugs was condemned in 1927, and a similar combination to control prices of tobacco products was likewise condemned as a combine within the meaning of the Canadian Combines Investigation Act. In the United States prior to 1936, in cases coming before the U.S. Supreme Court, resale price maintenance was permitted in cases of goods distributed through bonafide agents rather than in dependent dealers, but otherwise goods sold under a trade name or mark were not exempted from the common law and statutory provisions against monopolies and restraints of trade. As early as 1907 the courts held that a system of contracts entered into by the manufacturer of a proprietary medicine with a large part of the wholesale and retail druggists stipulating the resale price of the product was unlawful and unenforceable on the grounds that it restrained trade (Park and Sons v. Hartman, 153 Fed. 24), and in 1911 the U.S. Supreme Court rendered a similar decision in the Dr. Miles case (Dr. Miles Medical Co. v. Park and Sons Co., 220 U.S. 373). Patented and copyrighted articles have also been held to be within the scope of the Dr. Miles case, and agree ments to maintain resale prices thereon declared unlawful.