9. Three methods of maintaining prices.—The manufacturer who wanted to maintain prices has, in the past, done one of three things: (1) Some manu facturers utilized the right which they believed to be given them as patentees to have the sole right to vend their goods, and have insisted on a maintained resale price as part of their patent right. Few did this, because most goods are not patented. (2) The second method of maintaining resale prices was for the manufacturer and dealer to enter into a contract or agreement whereby both agreed, for mutual con sideration, that the price was to be a certain mini mum, between certain limits, or a fixed figure. This was a pure contract arrangement, entered into with out coercion on the part of either. (3) The third method of controlling the resale price was the "gentle men's agreement." There was no formal contract— simply an understanding between manufacturer and dealer to the effect that, for the good of both, prices were not to be cut.
The second of these methods is the one usually favored by the advocates of price maintenance. The first method, even if legal, could obviously be but in frequently used; while the third, altho effective enough if the agreement is lived up to, gives the manufacturer no desirable means of holding the dealer to the agreement. Accordingly, the permis sion to contract freely with dealers to maintain prices —the contract, like any other similar instrunent, to be the basis of a suit for damages when broken—is what most friends of price maintenance desire.
The enemies of price maintenance sometimes say that this permission is unnecessary. If a dealer cuts a price, the manufacturer may simply refuse to deal with him any longer. It is true that the manufac turer probably has a constitutional right to sell his goods or to refuse to sell them to anybody and if he has any reason that seems good to him, altho there have been many unsuccessful attempts to deprive him of this right when his reason for refusing to sell was the price-cutting activity of a dealer. Nevertheless, the average manufacturer of standard goods is not satisfied with this right. He does not want to cut off dealers, because that would reduce distribution. He believes that if he is permitted the formality of a con tract with dealers, Ile will be able to retain their coop eration and at the same time maintain his standard prices without getting into constant difficulty with his distributors.
10. Scope of the discussion.—It is not our purpose to relate the history of court decisions or legislation dealing with price maintenance. There have been
many decisions and much legislation. The status of price maintenance is changing so rapidly that no statement about its legality would be certainly applic able the day after it was made. Our purpose is not to discuss any particular piece of legislation, but to pre sent the general principles actuating both the friends and the enemies of controlled resale prices. The question will be settled only when the business inter ests of the country have carefully considered it in all its aspects and have shown a preponderance of care fully weighed opinion on one side or the other. Whether the manufacturer should or should not have the right to contract with dealers to maintain prices if he wants to and if he can find the dealers who believe as he does, is a fundamental problem in marketing.
11. Price maintenance not 11CW.-It is important to remember that the principle of price maintenance is nothing new. For many years before the first ad verse court decisions ( about 1908) many manufac turers carried on their business by means of agree ments with dealers to maintain prices. No one seemed to question the propriety of these agreements when they were made without coercion from either side. Accordingly, we do not need to speculate as to what would happen under a system of legitima tized price maintenance. We know from past ex perience. The principle would be used only by a small minority of those manufacturers who have cre ated for their goods, by branding them and by pub licity, a considerable amount of consumer good-will. All retail prices were not fixed by manufacturers in the past and will not be in the future. Price main tenance is a principle that has been and will be used only by the exceptional manufacturer in his dealings with the trade.
12. Does price maintenance interfere with rights of private property?—lt may be conceded that in discriminate price cutting on standard, well-known goods is often injurious to the manufacturers of those goods, and, conversely, that the opportunity to control resale prices, by agreement with dealers or otherwise, would be advantageous to many of these manufacturers. If manufacturers are to be denied the right to control resale prices, it must be shown that the injury done to others by the operation of the principle of price maintenance is greater than the good derived from it by manufacturers.