Old Dearborn Distributing Co. v. Seagram-Distillers Corp.

Background

A wholesale dealer of alcoholic beverages sold whiskies to distributors under contracts authorized by Illinois’s Fair Trade Act. Those contracts set resale prices for goods identified by trademarks and brands. A corporation operating four Chicago liquor stores then advertised and sold those branded whiskies below the stipulated prices, and the wholesaler sued to stop the price cutting as harmful to sales and the brand’s goodwill. Two similar suits were decided for the wholesaler in Illinois courts and came to this Court.

Reasoning

The Court asked whether the Illinois law violated constitutional protections for property and equal treatment. It held that the statute does not itself fix prices by government order but allows private parties to enter contracts about resale prices for identified goods and makes it unlawful to willfully and knowingly use a brand or trademark to sell below those prices. The Court explained that trademarks and the good will they represent are a form of property the owner may protect, that buyers who acquire goods with knowledge of such restrictions cannot then use the brand to undercut the owner, and that the statute’s language and classification between marked and unmarked goods are sufficiently clear and reasonable.

Real world impact

The decision lets brand owners and wholesalers stop retailers who knowingly advertise or sell branded goods below agreed prices when they rely on the brand. Retailers remain free to remove marks or sell unmarked goods at any price. The ruling upholds a state mechanism for protecting trademark-related goodwill and gives courts a private-law remedy against willful undercutting.

Dissents or concurrances

Justice Stone did not take part in the case.