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Lenox Inc. v. Federal Trade Commission

decided: October 10, 1969.

LENOX, INC., PETITIONER
v.
FEDERAL TRADE COMMISSION, RESPONDENT



Lumbard, Chief Judge, Anderson, Circuit Judge, and Wyatt, District Judge.*fn*

Author: Wyatt

WYATT, District Judge:

Before us is a petition of Lenox, Incorporated (Lenox) praying that an order of the Federal Trade Commission (the Commission) be set aside or modified. The order of the Commission was made under the Federal Trade Commission Act (15 U.S.C. § 41 and following; sometimes "the Act"), specifically Section 5(a)(1) of the Act (15 U.S.C. § 45(a)(1)) forbidding unfair methods of competition. Review by this Court of such an order is provided for in Section 5(c) of the Act (15 U.S.C. § 45(c)).

Lenox makes fine china dinnerware (plates, cups and saucers, etc.) and fine china giftware (vases, ashtrays, etc.). It sells these throughout the United States directly to a large number of retailers, such as department stores, jewelry stores, and gift shops. The products of Lenox are sold under the trademarks "Lenox" and "Oxford" and over many years have become well known under these names for their high quality.

The Commission in October 1966 issued a complaint against Lenox charging a violation of Section 5(a)(1) of the Act in that Lenox had engaged in an unfair method of competition by a system of resale price maintenance. It had years ago been held that such a system was an unfair method of competition within the meaning of Section 5 of the Act. Federal Trade Commission v. Beech-Nut Packing Co., 257 U.S. 441, 66 L. Ed. 307, 42 S. Ct. 150 (1922) (McKenna, Holmes, McReynolds, and Brandeis, JJ., dissenting).

Beginning some years ago, however, a number of state legislatures passed laws which, for trademarked products such as those of Lenox, made it lawful for a sales contract to fix resale prices. These statutes are usually called "fair trade laws." Many such statutes also provided that if any seller in the state had made a contract with a retailer fixing resale prices, the seller could enforce observance of such retail prices against all retailers in the state, whether they were parties to such a contract or not; those not parties to such a contract were called "nonsigners."

In 1937, Congress adopted the Miller-Tydings Act as an amendment to Section 1 of the Sherman Act (15 U.S.C. § 1). Thereby Congress made lawful in interstate commerce under the antitrust laws and under Section 5 of the Federal Trade Commission Act those fair trade contracts which by state law were lawful for intrastate transactions.

In Schwegmann Bros. v. Calvert Corp., 341 U.S. 384, 95 L. Ed. 1035, 71 S. Ct. 745 (1951) the Supreme Court held that the Miller-Tydings Act did not make retail price fixing lawful as against non-signers.

Congress then passed in 1952 the McGuire Act (66 Stat. 632) as an amendment to Section 5 of the Federal Trade Commission Act. The purpose of the McGuire Act was to reverse the Schwegmann decision and "to provide that if the State statutory scheme permitted price maintenance against nonsigners, such contracts would be immunized from antitrust violations." Janel Sales Corp. v. Lanvin Parfums, Inc., 396 F.2d 398, 402 (2d Cir.), cert. denied 393 U.S. 938, 21 L. Ed. 2d 275, 89 S. Ct. 303 (1968).

Lenox, before issuance of the Commission's complaint, had not made any fair trade contracts. After issuance of the Commission's complaint, however, Lenox changed its policy and began to make express written fair trade contracts in those states where such contracts were lawful.

After answer and the taking of evidence, the Hearing Examiner in May 1967 filed his initial decision and proposed order. He found that Lenox had adopted and employed a system of establishing resale prices for its products and he proposed a cease and desist order; he proposed, however, that the order expressly provide that it did not affect any resale price maintenance contracts which Lenox might make in accordance with Section 5 of the Federal Trade Commission Act as amended by the McGuire Act. The effect of this last proviso was to permit Lenox to fix resale prices in "fair trade" states where this was lawful.

The Commission in its final order departed in several respects from the order proposed by the Hearing Examiner.

The principal change made by the Commission was to eliminate the proviso permitting Lenox to make fair trade contracts where lawful. Instead, the Commission (order, paragraph 9) forbade Lenox to make any such contracts for three years.

The Commission also (order, paragraph 6) prohibited the use by Lenox of suggested resale price lists for three years, instead of the two years proposed by the Hearing Examiner. The Commission (order, paragraph 5) prohibited, without time limit, sales by Lenox to dealers at a discount from a retail price; the Hearing Examiner proposed that this prohibition be for two years. There should logically be the same time limit for both ...


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