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THE:
MUSIC TRADE
REVIEW
Manufacturers' Refusal to Sell Certain Buyers
S
OME time ago 1 wrote an article for this series on "A Manu-
facturer's Right to Choose Whom He Will Sell." It dis-
cussed the cases which frequently arise, where a manufacturer,
when remonstrated with for not refusing to sell a cutter, or some
concern which in some other way is demoralizing the business of
the general trade, pleads that he would be glad to do so, but under
the law he had not the legal right. In the article in question I
expressed the unqualified opinion that there was nothing in this
contention, and that any manufacturer not engaged in a public
service business such as operating a railroad, telephone or tele-
graph, had an absolute right to sell or refuse to sell as he liked,
with or without a reason.
The subject being of vital importance to all lines of merchan-
dising, I received a great many letters about it, some of which I
answered publicly and others privately. The latest -letter, just re-
ceived, raises a point of sufficient importance to warrant a supple-
mental article being written upon it. It is from the executive clerk
of the National Association of Master Plumbers, who I understand
is himself a lawyer, and keeps in particularly close touch with all
court decisions which concern trade restrictions of any kind.
The phase of the question mentioned in the letter affects all
lines of trade just as intimately as it affects plumbing. That is
why I am discussing it in an article which goes to other lines. The
text is as follows:
"I now have an inclination to take issue with Mr. Buckley on
his recent article on 'Refusing to Sell Would-be Purchasers.'
The answer Mr. Buckley makes in this article is very true and the
same point has been directly brought up in the work of different'
association leaders. However, I think Mr. Buckley overlooked
one important question. The inquiry which he made the text of
his former article contained the following: 'When we meet with
or write to unfair manufacturers and jobbers about their misdeeds
they usually come back by saying they cannot refuse to sell any
dealer if they tender the money to pay for the goods.' There has
been considerable trouble from time to time caused by association
members or officers who meet with or write in protest to a house
which sells to someone outside of its legitimate field. This often
conveys a request not to sell, or in what is construed as a threat
if the sale is made. Then even the mild suggestion by the asso-
ciation member that some buyer should be refused because he is
outside the territory or for some other reason, amounts to a de-
mand or threat.
.
"Of course, by every decision handed down, the right to sell or
not, as he desires, is granted to every business man, but here is
where the trouble comes. If an agreement is made by the whole-
sale house, who receives a protest, not to sell some buyer as the
result of a request by a tradesman, it becomes a conspiracy and is
magnified when the promise is made by the manufacturer to some
member who is acting for an association. Little wonder is it, in
view of past experiences, that in many instances when the claim is
made by the wholesaler that he cannot refuse to sell, it causes dis-
trust on the part of those who do not take the trouble to inform
themselves fully upon the status on this matter in and out of the
courts, as it exists at the present time. Those who take a leading
part in all organized efforts have had trouble on this account, and
yet the rank and file of the members do not understand why it is
best that they have absolutely no correspondence or conversation
with wholesale houses on such a question.
"With the above explanation it may appear to Mr. Buckley
that though he answered the direct question in his former article,
he has not perhaps realized the real meaning of the inquiry or the
object of it, and in consequence it is more than possible that the
answer will get someone into trouble. This view of the matter is
brought up with the hope that Mr. Buckley can treat the matter
from another point of view, so as to save possible disagreeable ex-
periences to those who need some further light on the subject that
is directly applicable to their situation."
In the former article it was not my intention to consider any
phase of the subject except the right of a manufacturer to refuse
to sell individual concerns for some causes peculiar to themselves,
such as the habit of cutting. The point raised in the above letter
is quite different from that discussed in the first article; the latter
concerned itself only with the right of a manufacturer, not under
coercion, except such moral or practical coercion as comes from
the disposition to do that which will best serve the business, to refuse
to sell concerns who for any reason were objectionable. The point
raised in the above letter touches on conspiracy and restraint of
trade.
Now let us see about the latter. Consider three reasons which
a manufacturer might have for refusing to sell a given merchant.
First, he is a cutter, and persistently cuts the price of the manu-
facturer's product, thus tending to destroy his market because of
the disinclination of regular dealers to handle goods upon which
they cannot make a profit. As already explained, the manufac-
turer's right to refuse to sell such a concern cannot be questioned.
His own personal reason for refusing to sell, viz., continued de-
moralization of his own business, is absolutely sufficient from any
standpoint.
Second—He is alarge retailer rather than a jobber, although
he buys in jobbing quantities. An organization of jobbers makes
demands upon the manufacturer that he cease selling the given
merchant on that ground. The manufacturer's tendency is to sell
him. His orders are large, his credit good, and from him there
comes no business demoralization whatever. If left alone the
manufacturer would sell this man, but he knows that if he does
the organized jobbers will get after him and probably throw his
goods out. Therefore, he refuses to take any more of the large
retailer's orders, and the latter is compelled to buy through a jobber
and to pay an extra profit, being thus deprived of the advantage
of his large buying capacity.
Such a thing would "in my judgment be close to conspiracy,
although it is by no means clear that it is conspiracy, for the rea-
son that the manufacturer would have had at any time the right to
refuse to sell the retailer on his own account without pressure hav-
ing been brought to bear upon him by jobbers or anybody else.
Since he needs no reason at all, how can the fact that he had a
bad reason make his act illegal ?
However, I have always advised my own clients to stay as far
away from this sort of thing as possible. There is not the slightest
conspiracy in reasonably presenting to a manufacturer, however,
the fact that he is pursuing a course which is giving offence to a
large part of the factors who are distributing his product, leaving
him to draw his own inferences as to what will happen if he con-
tinues. Neither is there the slightest illegality in refusing to handle
his goods if he does continue. Nevertheless, the line between
legality and illegality in such cases is so faint that it is always better
to keep as far to the safe side as possible.
Third—He is outside a certain territory to which let us say
an organization of jobbers wishes the manufacturer to confine him-
self. The plan, for illustration, is to preserve each territory for
the concerns that lie within it, and a manufacturer is made aware
that if he oversteps the line he will be punished. If the result of
this is to unduly hold up prices and to compel a buyer within a
given territory to buy to less advantage than he could buy if he
were free to go anywhere, there is a much stronger flavor of con-
spiracy and restraint of trade than any instance I have previously
mentioned. I have no doubt that the persons who engineered such
a plan would be violating the law, although in their defence it
could still be argued that they have constrained no manufacturer
to do what he hadn't a perfect right to do anyway. In this third
case, however, the defence would have much less weight than in
the others. The safest plan, I repeat, is to keep as far away from
all such schemes as possible. Certainly until the law becomes more
settled upon it.—Copyright, April, 1912, by Elton J. Buckley.