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MEAD JOHNSON & COMPANY v. CHESTER DISCOUNT HEALTH AND VITAMIN CENTER. (07/02/63)

July 2, 1963

MEAD JOHNSON & COMPANY, APPELLANT,
v.
CHESTER DISCOUNT HEALTH AND VITAMIN CENTER.



Appeal, No. 166, Jan. T., 1963, from decree of Court of Common Pleas of Delaware County, March T., 1962, No. 1993, in equity, in case of Mead Johnson & Company v. Chester Discount Health and Vitamin Center, Inc. Decree reversed.

COUNSEL

Francis Hopkinson, with him Drinker, Biddle & Reath, for appellant.

Samuel M. Tollen, for appellee.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen, O'brien and Roberts, JJ.

Author: Musmanno

[ 411 Pa. Page 378]

OPINION BY MR. JUSTICE MUSMANNO

The plaintiff, Mead Johnson & Company, sought in the Court of Common Pleas of Delaware County an injunction to prevent the defendant Chester Discount Health and Vitamin Center, Inc., from selling the plaintiff's products at prices less than those designated in a contract which the plaintiff had entered into with other dealers in Pennsylvania, thus invoking the machinery of the Pennsylvania Fair Trade Act (Act of June 5, 1935, P.L. 266, as amended, 73 P.S. ยงยง 7, 8).

The defendant filed preliminary objections averring that the plaintiff's fair trade contract does not meet the requirements of the applicable law. The court sustained the preliminary objections, allowing the plaintiff 20 days to file an amended complaint. When the plaintiff failed to do this, the court entered judgment in favor of the defendant. The plaintiff appealed.

The lower court, in its opinion, properly stated that the Fair Trade Act is in derogation of the common law and therefore must be strictly construed. There can be no doubt that fair trade acts are novel in the history of American law since they oppose the basic principle of the American economic system which envisages at all times fair and open competition with the utmost freedom in the fixing of prices. If all merchants are unhampered in price-fixing, with no one being restricted by the others, it is obvious that no one

[ 411 Pa. Page 379]

    can scale his prices high and expect to obtain the business which will go to those whose prices are low. It is only when certain business combines conspire to keep prices high that the public is deprived of the protection which it automatically obtains from open competition. The United States Government has been particularly concerned about the growth of monopolies which could dominate industrial and commercial establishments and thus be enabled to charge exorbitant prices. The Sherman Anti-Trust Act is an almost legendary St. George fighting the dragon of monopoly. Yet, the sanctioned*fn1 Fair Trade Acts must seem to mock all triumphs of the Sherman Anti-Trust St. George because they permit industrial and commercial establishments to set prices which will not only be upheld by the law but which will allow the establishments to enlist all the forces of the law to enforce their prices on persons and firms with whom they do not have contracts.

The Fair Trade Acts go even further. They not only deny dealers the right to sell goods at prices less than those designated by the manufacturer or wholesaler, thus protecting the manufacturer all the way through, but they offer no curb on retailers selling goods at prices higher than those designated by the manufacturer. Thus the public is victimized in that it may not obtain an article at a price less than the one specified by the manufacturer but it may be charged more than the minimum price. The net result is that the manufacturer is given armor plate protection in his minimum price ukase, but the public may be gouged to the extent the traffic will bear.

It was the contemplation of this posture of affairs which induced the lower court to refuse the prayed-for ...


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