Statement of the Case. murrer, the bill of complaint for want of equity. 164 Fed. Rep. 803; 90 C. C. A. 579. The complainant Dr. Miles Medical Company, an Indiana corporation, is engaged in the manufacture and sale of proprietary medicines, prepared by means of secret methods and formulas and identified by distinctive packages, labels and trade-marks. It has established an extensive trade throughout the United States and in certain foreign countries. It has been its practice to sell its medicines to jobbers and wholesale druggists who in turn sell to retail druggists for sale to the consumer. In the case of each remedy, it has fixed not only the price of its own sales to jobbers and wholesale dealers, but also the wholesale and retail prices. The bill alleged that most of its sales were made through retail druggists and that the demand for its remedies largely depended upon their [375] good will and commendation, and their ability to realize a fair profit; that certain retail establishments, particularly those known as department stores, had inaugurated a "cutrate" or "cut-price" system which had caused "much confusion, trouble and damage" to the complainant's business and "injuriously affected the reputation" and "depleted the sales" of its remedies; that this injury resulted "from the fact that the majority of retail druggists as a rule cannot, or believe that they cannot realize sufficient profits" by the sale of the medicines " at the cut-prices announced by the cut-rate and department stores," and therefore are "unwilling to, and do not keep" the medicines "in stock" or "if kept in stock, do not urge or favor sales thereof, but endeavor to foist off some similar remedy or substitute, and from the fact that in the public mind an article advertised or announced at 'cut' or 'reduced' price from the established price suffers loss of reputation and becomes of inferior value and demand." It was further alleged that for the purpose of protecting "its trade sales and business" and of conserving "its good will and reputation" the complainant had established a method "of governing, regulating and controlling the sale Statement of the Case. and marketing" of its remedies, which is thus described in the bill: "Contracts in writing were required to be executed by all jobbers and wholesale druggists to whom your orator sold its aforesaid remedies, medicines and cures, of the following tenor and effect: "This agreement made by and between The Dr. Miles Medical Company, a corporation, of Elkhart, Indiana, hereafter referred to as the proprietor, and hereinafter referred to as the consignee, witnesseth: "That the said proprietor hereby appoints said con[376]signee one of its wholesale distributing agents, and agrees to consign to such consignee for sale for the account of said proprietor such goods of its manufacture as the proprietor may deem necessary, the title thereto and property therein to be and remain in the proprietor absolutely until sold under and in accordance with the provisions hereof, and all unsold goods to be immediately returned to said proprietor on demand and the cancellation of this agreement. Said goods to be invoiced to consignee at the following prices: "Medicines, of which the retail price is $1; $8 per dozen. "Medicines (if any) of which the retail price is 50 cents; $4 per dozen. 66 Medicines, of which the retail price is 25 cents; $2 per dozen. "Freight on all orders, the invoice price of which amounts to $100 or more, to be prepaid by the proprietor; otherwise, freight to be paid by consignee. "Said consignee agrees to confine the sale of all goods and products of the said proprietor strictly to and to sell only to the designated retail agents of said proprietor as specified in lists of such retail agents furnished by said proprietor and alterable at the will of said proprietor, and to faithfully and promptly account and pay to the proprietor the proceeds of all sales, after deducting as full compensation for all services, charges and disbursements a commission of 10 per cent of the invoice value, and a further commission of 5 per cent on the net amount of each consignment, after deducting the said 10 per cent commission, on all advances on account remitted within ten days from date of any consignment, it being agreed between the parties hereto that such advances shall in no manner affect the title to such goods, which title shall remain in the proprietor as if no such advances had been made; provided that such advances [377] shall be repaid to said consignee should the said proprietor terminate this agreement and the return of any unsold goods on which advances have been made. Said consignee guarantees the payment for all goods Statement of the Case. sold under this agreement and agrees to render a full account and remit the net proceeds on the first day of each month of and for the sales of the month preceding. Failure to make such accounting and remittance within ten days from the first of each month shall render the whole account payable and subject to draft, but the proceeds of such draft shall not affect the title of any unsold goods, which shall remain in the proprietor until actually sold, as herein provided. "It is further agreed that the consignee shall furnish the proprietor from time to time upon demand full statements of the stock of goods of the proprietor on hand on any date specified and that a failure to furnish such statements within ten days from date of such demand shall be a sufficient cause for the cancellation of this agreement, and a demand for the return of the consigned goods. "It is further agreed that the proprieter will cause each retail package of its goods to be identified by a number and said consignee hereby agrees to furnish the said proprietor full reports upon proper cards or blanks furnished by said proprietor of the disposition of each dozen or fraction of such goods by means of the identifying numbers, specifying the names and addresses of the retail agents to whom such goods have been delivered and the dates of such delivery, and to send such reports to said proprietor at least semi-monthly, and at any other time on the request of said proprietor. "It is understood and agreed between the parties hereto that the commissions herein specified shall not be considered as earned by said consignee upon any goods of said proprietor which shall have been delivered to dealers not authorized agents of said proprietor, as per list of [378] such agents, or upon any goods whose disposition by said consignee shall not have been properly reported as herein provided, or sold at prices less than the prices authorized, and that said consignee shall not credit any such commissions when making remittances on consignment account provided notice has been given by said proprietor that such commissions are unearned; and that if such unearned commissions have been deducted by said consignee in making advance payments or monthly remittances on account they shall be charged back to said consignee and credited and paid to said proprietor. It is understood that violation or nonobservance of any provision hereof by the consignee shall make this agreement terminable and all unsold goods returnable at the option of the proprietor. "It is agreed that the goods of said proprietor shall be sold by said consignee only to the said retail or wholesale agents of said proprietor, as per list furnished, at not less than the following prices, to-wit: "Medicines, of which the retail price is $1; $8 per dozen. 'Medicines (if any) of which the retail price is 50 cents; $4 per dozen. "Medicines, of which the retail price is 25 cents; $2 per dozen. "Provided, that said consignee may allow a cash discount not exceeding 1 per cent, if paid within ten days from date of invoice, and Statement of the Case. that when sales at one time and at one invoice, amount to $15 or more, the said consignee may allow 3 per cent trade discount, and if said purchase amounts to $50 or more, 5 per cent trade discount, all without cost to the proprietor, and if such $50 quantity shall be shipped direct to the retail purchaser from the laboratory of said proprietor, on the order from said wholesale distributing agent, freight will be prepaid by the proprietor, but not otherwise. [379] "This contract will take effect when the original, duly signed by the consignee, has been received and accepted by The Dr. Miles Medical Company, at Elkhart, Indiana. "Original. Return in enclosed envelope." And written contracts were required with all retailers of your orator's said proprietary remedies, medicines and cures, as follows: 66 RETAIL AGENCY CONTRACT. "The Dr. Miles Medical Company. "This agreement between The Dr. Miles Medical Company of Elkhart, Indiana, and line. Town. State. nesseth: of Retailer's name on above Hereinafter referred to as retail agent, wit 66 APPOINTED AGENT. "The said Dr. Miles Medical Company hereby appoints said retail dealer as one of the retail distributing agents of its proprietary medicines and agrees that said retail agent may purchase the proprietary medicines manufactured by said Dr. Miles Medical Company (each retail package of which the said company will cause to be identified by a number) at the following prices, to wit: "Medicines, of which the retail price is $1; $8 per dozen. 66 QUANTITY Discount. "Provided that when purchases at one time and on one invoice amount to $15 (or more), wholesale dis[380]tributing agents are authorized to allow 3 per cent trade discount; if such purchase amounts to $50 (or more) 5 per cent trade discount will be allowed, and if such $50 quantity be shipped direct to the purchaser from the Statement of the Case. laboratory of said Dr. Miles Medical Company for the account of such wholesale agent, freight will be prepaid, but not otherwise. FULL PRICE. "In consideration whereof said retail agent agrees in no case to sell or furnish the said proprietary medicines to any person, firm or corporation whatsoever, at less than the full retail price as printed on the packages, without reduction for quantity; and said retail agent further agrees not to sell the said proprietary medicines at any price to wholesale or retail dealers not accredited agents of the Dr. Miles Medical Company. "It is further agreed between the parties hereto that the giving of any article of value, or the making of any concession by means of trading stamps, cash register coupons, or otherwise, for the purpose of reducing the price above agreed upon shall be considered a violation of this agreement, and further it is agreed between the parties hereto that the Dr. Miles Medical Company will sustain damage in the sum of twenty-five dollars ($25) for each violation of any provision of this agreement, it being otherwise impossible to fix the measure of damage. "This contract will take effect when a duplicate thereof, duly signed by the retail agent, has been received and approved by The Dr. Miles Company, at its office at Elkhart, Indiana. Retail Dealer. Paste printed label, giving name and address, that your name may be correctly listed. "Duplicate. Keep for reference." As an aid to the maintenance of the prices thus fixed the company devised a system for tracing and identifying, through serial numbers and cards, each wholesale and retail package of its products. It was alleged that all wholesale and retail druggists," and all dealers in proprietary medicines," had been given full opportunity, without discrimination, to sign contracts in the form stated, and that such contracts were in force between the complainant " and over four hundred jobbers and |