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GE v. MASTERS MAIL ORDER CO. OF WASHINGTON

September 29, 1956

GENERAL ELECTRIC COMPANY, Plaintiff,
v.
MASTERS MAIL ORDER COMPANY OF WASHINGTON, D.C., Inc., Defendant



The opinion of the court was delivered by: BICKS

Plaintiff, General Electric Company, a New York corporation, here seeks an injunction against Masters Mail Order Company of Washington, D.C., Inc., a Maryland corporation. *fn1" To support its claim, G.E. argues that Masters advertises, offers for sale, sells and delivers G.E. appliances, for example, in New York below resale prices fixed by G.E. in contracts with other New York retailers pursuant to New York's Feld-Crawford Act. *fn2" As a result, G.E. claims Masters has damaged G.E.'s 'lawful distribution system and the maintenance of its retail fair trade program in New York,' and other states with like fair trade laws.

In reply, Masters urges principally that Feld-Crawford, along with similar state 'fair-trade' laws, do not proscribe its conduct in 'fair-trade' states. Were state 'fair-trade' construed to cover Masters' sales, defendant goes on, such state laws would impose an undue burden on interstate commerce and must, under the Supremacy Clause, Const. art. 6, cl. 2, fall by reason of the Sherman Act. *fn3" To these issues I now turn.

Feld-Crawford, in relevant part, makes 'actionable' at the suit of any 'person damaged thereby * * * advertising, offering for sale or selling any commodity' below resale prices fixed in accord with Feld-Crawford's terms. Do Masters' activities, then, come within Feld-Crawford's ban?

 Since the enactment of the McGuire Act, *fn4" the parties here stipulate, 'G.E. has entered into over 12,000 written fair trade agreements with retailers, including over 1,200 in New York and New Jersey alone.' G.E.'s contracts, Masters also agrees, cover only appliances 'in fair and open competition * * * with appliances of the same general class produced by others.' And, the parties stipulate, 'G.E. has systematically and repeatedly given notice' of 'fair-trade' agreements as well as 'diligently and vigorously enforced' their terms. As part of this enforcement plan, 'G.E., since July 14, 1952, has instituted in excess of 834 * * * (court) actions * * * including 410 in New York and New Jersey.'

 One of these enforcement suits, brought in New York in late 1952, was against Masters Inc., a New York retailer. In that action, Masters (New York) was enjoined from violating G.E.'s fair-trade agreements. For flaunting that state court injunction, Masters (New York) was fined twice in early 1953. A few months later, Masters (New York) organized defendant here, Masters (Maryland). Masters (New York) owned all Masters' (Maryland) stock. The same man served as President of both companies. About a year later, but after suit here, the parties stipulated that 'defendant was dissolved as a Maryland corporation.' And since then, its 'business * * * has been carried on by a corporation bearing the same name but organized under the laws of the District of Columbia * * *'

 Soon after these corporate convolutions, Masters itself emblazoned its purpose in advertisements scattered throughout New York:

 'It's becoming a crime to offer bargains, Masters recently paid * * * a penalty of $ 1750 to G.E. for cutting fixed prices * * * Masters had continued to give its customers bargains despite court orders so that the discount house was found guilty and had to pay the penalty.

 'Masters Mail Order Company of Washington, D.C. Inc. has been established in Washington, D.C. because it is a non fair trade area. This means we are permitted from Washington, D.C. to offer you anywhere in the country sensational discounts on famous brands.'

 To insure its goal of frustrating Feld-Crawford, Masters (New York) dictated the every move of Masters (Maryland). Thus, according to the parties' stipulation, the 'President, Vice President, Secretary' and 'Treasurer' of Masters' (Maryland) were 'all * * * officers, employees, directors or agents of' Masters (New York). These officers of Masters (Maryland), the parties further agree, continued to occupy the very New York Office space 'occupied by them as officers, directors, employees or agents of' Masters (New York). Masters' (Maryland) 'books and records', its 'cash receipts and cash disbursements, general ledger, unpaid bills file' and 'duplicate sales tickets' were kept at offices of Masters (New York). A 'daily report' of defendant Masters' 'receipts, cash disbursements and shipments' was sent on to Masters (New York). Indeed, the only person authorized to sign checks on 'defendant's behalf' was the very individual who served as principal officer of Masters (New York). It was he who, defendant agrees, 'supervised defendant's business by regular daily telephone calls * * * by mail,' and by visits to Washington. From all this an unblurred picture emerges: Though puppet Masters (Maryland) held the Washington stage, its strings were pulled by Masters (New York).

 It is against this background of defendant's birth and life as a convenient creature of Masters (New York) that defendant's activities take on their true meaning. Building again on stipulated facts, 'defendant's President,' the top official of Masters (New York), 'had supervision and control of the preparation and publication' of defendant's 'mailing piece(s).' This 'supervision and preparation,' moreover, 'was principally carried out' in offices of Masters (New York). These 'mailing piece(s)' typically proclaimed that 'Masters recently paid * * * a penalty * * * to G.E. for cutting fixed prices'; that 'Masters Mail Order Company * * * has been established in Washington, D.C., because it is a non fair trade area'; that 'this means we are permitted from Washington, D.C. to offer you anywhere in the country sensational discounts on famous brands'; and that, to exploit this opportunity, recipients should 'use the handy order form.' Some '325,000 copies' of this circular were 'printed' in New York, 'delivered to Masters' (New York), and 'addressed' 'at the request of' Masters' (New York) officials, with 'Addressorgraph plates owned by Masters' (New York), to 'persons on the mailing list of Masters (New York).' With 'postage charges' paid initially by Masters (New York), these circulars 'were shipped by truck to Washington, D.C., and from there were mailed to prospective customers in New York, New Jersey, and other fair trade States.'

 Again, the parties have stipulated that 'preparation' of the 'order blanks' was 'supervised,' and 'controlled' and paid for in New York by officials of Masters (New York). Some copies 'were sent to defendant * * * in Washington, D.C.' Others 'were retained by Masters (New York)' and 'kept * * * behind the appliance counter at its place of business in New York City * * *' These copies 'were distributed by' Masters (New York) 'employees * * * at its New York store' to persons who sought to buy G.E. appliances at less than fair trade prices or who asked for order blanks for 'your Washington store.' Moreover, the stipulation goes on, 'Masters' employees were instructed to inform such persons that if they so desired they could obtain GE fair traded appliances at less than fair trade prices from defendant by mail orders sent to the District of Columbia.' Following up such inquiries from Masters' (New York) customers who sought 'GE appliances at less than the fair trade price,' Masters (New York) wrote each a letter 'accompanied by copies of * * * (Masters' (D.C.)) mail order form with the mail order patron typed in by an employee of Masters %(n.y.).' Finally, 'In at least one instance, an employee of Masters of New York wrote in the name of a prospective New York purchaser on an order blank and mailed it to the purchaser to be filled in, signed and forwarded to Masters of Washington.' *fn5"

 Masters' (Maryland) 'order blanks' then were passed out over the counter in Masters' (New York) store. Further, Masters' (Maryland) advertising letters were posted in New York to Masters' (New York) New York customers directing them to Masters (Maryland). This much, standing alone, would suffice to make up 'advertising' within Feld-Crawford.

 But Masters (Maryland) did more. Posting some 300,000 copies of its 'mailing piece,' prepared in New York, printed in New York, addressed in New York to 'persons on the mailing list of Masters (New York)' also constitutes 'advertising'. Feld-Crawford cannot be dodged by the 'gimmick' of posting in Washington. No more than if a company's nearest post office was across a state line, or if an 'ad', posted in New York and addressed to a customer in New York chanced as a matter of postal convenience to traverse another state, can defendant's Washington mailing circumvent Feld-Crawford. Defendant's 'object,' as one court reasoned in an analogous case, 'could not be attained except by delivery of the matter to prospective customers * * * This end could as well be reached by use of the mails as by the physical presence of the absent dealer in the state.' *fn6" Clearly, Masters' (Maryland) activities constitute 'advertising' in New York within Feld-Crawford.

 Defendant's activities, in like fashion, fall within Feld-Crawford's ban on 'offering for sale or selling' in New York below 'fair trade' prices. Indeed, defendant's 'ad' concededly mailed to New Yorkers, proclaims, 'we * * * offer you * * * Sensational discounts on famous brands.' Corroborating this ad's design as an offer, Masters (New York) advised would-be purchasers of G.E. appliances: 'Thank you for your recent mail order * * *. A court injunction obtained against us * * * prevents us from selling this merchandise to you at below the Fair Traded List Price * * * Masters Mail Order Company of Washington, D.C., Inc., offers the merchandise you ordered at a substantial discount.' *fn7" All that was left for the New York customer to do was insert his name, address and specify ...


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