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Statement of the Case.
wholesalers and twenty-five thousand retail dealers in proprietary medicines in the United States."
The defendant is a Kentucky corporation conducting a wholesale drug business. The bill alleged that the defendant had formerly dealt with the complainant and had full knowledge of all the facts relating to the trade in its medicines; that it had been requested, and refused, to enter into the wholesale contract required by the complainant; that in the city of Cincinnati, Ohio, where the defendant conducted a wholesale drug store, there were a large number of wholesale and retail druggists who had made contracts, of the sort described, with the complainant, and kept its medicines on sale pursuant to the agreed terms and conditions. It was charged that the defendant, “in combination and conspiracy with a number of wholesale and retail dealers in drugs and proprietary medicines, who have not entered into said wholesale and retail contracts" required by the complainant's system and solely for the purpose of selling the remedies to dealers "to be advertised, sold and marketed at cut-rates," and “to thus attract and secure custom and patronage for other merchandise, and not for the purpose of making or receiving a direct money profit” from the  sales of the remedies, had unlawfully and fraudulently procured them from the complainant's “ wholesale and retail agents” by means “ of false and fraudulent representations and statements, and by surreptitious and dishonest methods, and by persuading and inducing, directly and indirectly," a violation of their contracts.
It is further charged that the defendant, having procured the remedies in this manner, had advertised and sold them at less than the jobbing and retail prices established by the complainant; and that for the purpose of concealing the source of supply the identifying serial numbers, which had been stamped upon the labels and cartons, had been obliterated by the defendant or by those acting in collusion with the defendant, and the labels and cartons had been mutilated thus rendering the list of ailments and directions for use illegible, and that the remedies in this condition were sold both to the wholesale and retail dealers and ultimately to buyers for use at cut rates.
Argument for Petitioner.
The bill prayed for an injunction restraining the defendant from inducing or attempting to induce any party to any of the said “wholesale or retail agency contracts to violate or break the same, or to sell or deliver to the defendant, or to any person for it ” the complainant's remedies; from procuring or attempting to procure in any way any of these remedies from wholesale or retail dealers who had executed the contracts; from advertising, selling or offering for sale the remedies obtained by any of the described means at less than the established retail price thereof” or to dealers who had not entered into contract with the complainant; from in any way obliterating, mutilating, removing or covering up the labels and cartons upon the bottles containing the remedies and from making sales without such labels and cartons, and the letter press and numerals thereon, being intact. There was also a prayer for an accounting.
 The defendant demurred to the bill generally for want of equity and also specially to that portion of the bill which related to the mutilation and destruction of the identifying numbers and labels.
The Circuit Court sustained the demurrers and dismissed the bill and its judgment was affirmed by the Circuit Court of Appeals.
Mr. Frank F. Reed, with whom Mr. Edward S. Rogers was on the brief, for petitioner:
The wholesale contracts are agency contracts and not contracts of sale.
Under each contract between petitioner and wholesale dealers the remedies are in terms and in fact consigned to such wholesaler as a distributing agent. The wholesaler is designated as, and is actually made, an agent. Hence, each sale to a retailer is a sale by petitioner through its agent. The arrangement between petitioner and each wholesaler is clearly one of bailment and not of sale or conditional sale. Milburn Co. v. Peak, 89 Texas, 209; 34 S. W. Rep. 102; Willcox & Gibbs Co. v. Ewing, 141 U. S. 627; York Mfg. Co. v. Cassell, 201 U. S. 344; Metropolitan Bank v. Benedict Co., 74 Fed. Rep. 182; Atlas Glass Co. v. Ball Bros. Co., 87 Argument for Petitioner. Fed. Rep. 418; Re Galt, 120 Fed. Rep. 64; Re Flanders, 134 Fed. Rep. 560; Briggs v. Foster, 137 Fed. Rep. 773; In re Fabian, 151 Fed. Rep. 949; In re McGehee, 166 Fed. Rep. 928; Franklin v. Stoughton Wagon Co., 168 Fed. Rep. 857; Corbitt Buggy Co. v. Ricaud, 169 Fed Rep. 935; Walter A. Wood Co. v. Vanstory, 171 Fed. Rep. 375; Butler Bros. Co. v. Rubber Co., 156 Fed. Rep. 1; McCullough v. Porter, 4 W. & S. (Pa.), 177; Watch Case Co. v. Fourth St. Bank, 194 Pa. St. 535; Cannon Coal Co. v: Taggart, 1 Colo. App. 60; First National Bank v. Schween, Ewr., 127 Illinois, 573; Hunter v. Gordon, 33 Ill. App. 464; Lenz v. Harrison, 148 Illinois, 598; Bayliss v. Davis, 47 Towa, 340; Norton v. Melick, 97 Iowa, 564;  66 N. W. Rep. 780; Eldridge v. Benson, 61 Massachusetts, 483; Hatch v. McBrien, 83 Michigan, 159; 47 N. W. Rep. 214; Olney v. Van Housen, 3 Thomp. & C. 313; Elwell v. Coon (N. J.), 46 Atl. Rep. 580; Lambeth Rope Co. v. Brigham, 170 Massachusetts, 518; Monitor Mfg. Co. v. Jones, 96 Wisconsin, 619; Reaper Co. v. Raynor, 38 Wisconsin, 119; Burton v. Goodspeed, 69 Illinois, 237; Walker v. Butterick, 105 Massachusetts, 237; Cordage Co. v. Sims, 44 Nebraska, 148; 62 N. W. Rep. 514; Sturm v. Boker, 150 U. S. 312; Balderston v. National Rubber Co., 18 R. I. 338; 27 Atl. Rep. 507; Barnes Safe Co. v. Tobacco Co., 38 W. Va. 158; 18 S. E. Rep. 182; National Bank v. Goodyear, 90 Georgia, 711; 16 S. E. Rep. 962; Moline Plow Co. v. Rodgers, 53 Kansas, 743; 37 Pac. Rep. 111; Fleet v. Hertz, 201 Illinois, 594; Re Columbus Buggy Co., 143 Fed. Rep. 859; Re Smith & Nixon Piano Co., 149 Fed. Rep. 111. Hartman v. J. D. Parke Co., 145 Fed. Rep. 358; 153 Fed. Rep. 24; Wells v. Abraham, 146 Fed. Rep. 190; Dr. Miles M. Co. V. Jayne Drug Co., 149 Fed. Rep. 838, were sales to jobbers and resale by the jobber to the retailer and distinguished from this case.
Petitioner may lawfully, through wholesale agents, impose terms and conditions upon retail buyers as to price and sale. There is no restraint of trade in agency contracts, whatever restrictions may be imposed upon the agent.
The principal controls the agent. Rice v. Brook, 20 Fed. Rep. 611, 613; Weed v. Adams, 37 Connecticut, 378, 380; Barksdale v. Brown, 1 Nott & McC. 517,519; Scott v. Rogers, Argument for Petitioner. Abb. Dec. 157, 159; Field v. Farrington, 10 Wall. 141, 149; Brown v. McGran, 14 Pet. 479; Cotton v. Hiller, 52 Mississippi, 7, 13; Union Hardware Co. v. Plume & Atwood Co., 58 Connecticut, 219; Welsh v. Wind Mill Co., 89 Texas, 653; Weiboldt v. Standard Fashion Co., 80 Ill. App. 67; W. A. Wood Co. v. Greenwood Hardware Co., 75 S. Car. 378; Keith v. Optical Co., 48 Arkansas,  138; Roller v. Ott, 14 Kansas, 609; Newell v. Meyendorff, 9 Montana, 254; Payne v. Railway Co., 81 Tennessee, 507; Whitwell v. Tobacco Co., 125 Fed. Rep. 454, 461; Arkansas Brokerage Co. v. Dunn & Powell Co., 173 Fod. Rep. 899; Robison v. Texas Pine Land A88n., 40 S. W. Rep. 843; Hunt v. Simonds, 19 Missouri, 583, 586; Butterick Co. v. Rose, 141 Wisconsin, 533; 124 N. W. Rep. 647; Butterick Co. v. Fisher, 203 Massachusetts, 122; 89 N. E. Rep. 189.
Any manufacturer or dealer may sell or refuse to sell at pleasure, and may fix prices, terms and conditions arbitrarily, either personally, or through an agent, when a sale is made; and provisions of the wholesale contract forbidding sales except to accredited retail dealers and except at fixed prices are no more in restraint of trade than the refusal of any trader to deal with anyone except on his own terms would be, or the refusal to sell except at his own price or to deal with persons who, for any reason or for no reason, may be objectionable. Payne v. Railway Co., 81 Tennessee, 507; Whitwell v. Tobacco Co., 125 Fed. Rep. 454; C., C., C. & St. L. Ry. Co. v. Jenkins, 174 Illinois, 398; Live Stock Com. Co. v. Live Stock Exchange, 143 Illinois, 210; Tanenbaum v. N. Y. Fire Ins. Ewch., 68 N. Y. Supp. 342; Collins v. Am. News Co., 69 N. Y. Supp. 638; Hunt v. Simons, 19 Missouri, 583, 586; Schulten v. Bavarian Brewing Co., 96 Kentucky, 224; Baker v. Ins. Co. (Ky.), 64 S. W. Rep. 913; McCune v. Norwich Gas Co., 30 Connecticut, 521, 524; N. Y. C. & St. L. Ry. Co. v. Schaffer, 65 Oh. St. 414; Brewster v. Miller, 101 Kentucky, 368; Anderson v. United States, 171 U. S. 604; Matthews v. Associated Press, 136 N. Y. 333; 32 N. E. Rep. 981; Star Publishing Co. v. Associated Press, 159 Missouri, 410; People v. Klaw, 106 N. Y. Supp. 341, 347; Union Pacific Coal Co. v. United States, 173 Fed. Rep. 737.
10870°-S. Doc. 111, 62-1, vol 4
Argument for Petitioner. Petitioner's system is legal, and not in restraint of  trade. Petitioner manufactures medicines under secret formulas which are its exclusive property. The medicines themselves embody trade secrets.
Contracts giving the exclusive right to sell the product of a maker in a certain territory are valid. Cases supra and Roller v. Ott, 14 Kansas, 609; Newell v. Myendorff, 9 Montana, 254; 23 Pac. Rep. 333; Olmstead v. Distilling Co., 77 Fed. Rep. 265; In re Greene, 52 Fed. 104; Ferris v. American Brew. Co., 155 Indiana, 539; 58 N. E. Rep. 701; Woods v. Hart, 50 Nebraska, 497; Ward v. Hogan, 11 Abb. N. S. 478; Palmer v. Stebbins, 3 Pick. 188; Anheuser-Busch Assn. v. Houck, 27 S. W. Rep. 692; Fuqua v. Pabst Brew. Co., 36 S. W. Rep. 479; Houck v. Wright, 77 Mississippi, 476; Vandeweghe v. American Brew. Co., 61 S. W. Rep. 526; Gates v. Hooper, 90 Texas, 563; Norton v. Thomas, 99 Texas, 578; Clark v. Wire Fence Co., 22 Tex. Civ. App. 41.
Contracts for exclusive dealing in articles are valid. Cable News Co. v. Stone, 15 N. Y. Supp. 2; Whitwell v. Continental Tob. Co., 125 Fed. Rep. 454; Brown v. Rounsavell, 78 Illinois, 589; Clark v. Crosby, 37 Vermont, 188; Shade Roller Co. v. Cushman, 143 Massachusetts, 353; Blauner v. Williams Co., 36 Mississippi, 173; Photographic Co. v. Grocery Co., 108 S. W. Rep. 768.
Contracts restricting the distribution or use of property are legal. Phillips v. Iola Cement Co., 125 Fed. Rep. 593; Meyer v. Estes, 164 Massachusetts, 457; Crystal Ice Co. v. Brewing Assn., 8 Tex. Civ. App. 1; Bancroft v. Embossing Co., 72 N. H. 402; Twomey v. People's Ice Co., 66 California, 233; Schwalen v. Holmes, 49 California, 665; Hodge v. Sloan, 107 N. Y. 244; Kellogg v. Larkin, 3 Chandler (Wis.), 133; Lanyon v. Garden City Sand Co., 223 Illinois, 616; Leslie v. Lorillard, 110 N. Y. 519.
Contracts for the entire output of a plant are valid. Carter-Crume Co. v. Peurrung, 86 Fed. Rep. 439; Heimbuecher v. Goff Co., 119 Ill. App. 373; Over v. Foundry Co.,  37 Ind App. 452; Van Marter v. Babcock, 23 Barb. 633; Hadden v. Dimmick, 31 How. Pr. 196.
Restrictions on prices are valid. Clark v. Frank, 17 Mo. App. 602; Commonwealth v. Grinstead, 111 Kentucky, 203;