United States v. Bausch & Lomb Optical Co.Annotate this Case
321 U.S. 707 (1944)
U.S. Supreme Court
United States v. Bausch & Lomb Optical Co., 321 U.S. 707 (1944)
United States v. Bausch & Lomb Optical Co.
Argued December 8, 1943
Decided April 10, 1944
321 U.S. 707
APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK
1. The provision of the judgment dismissing, as to certain of the defendants, the complaint in a suit to restrain alleged violations of the Sherman Act is here affirmed by an equally divided Court. P. 321 U. S. 719.
2. A distributor of a trademarked article in interstate commerce may not limit by agreement, express or implied, the price at which or the persons to whom its purchaser may resell, except as authorized by the Miller-Tydings Act. P. 321 U. S. 721.
3. The evidence in this case supports the District Court's finding of a combination and conspiracy between the Soft-Lite company (a distributor of trademarked pink-tinted ophthalmic lenses) and wholesalers to maintain resale prices through a distribution system in violation of the Sherman Act. On review of its decree, held:
(a) The order of the District Court directing cancellation of Soft-Lite's arrangements with wholesalers and cessation of systematic price suggestions was justified by the findings. P. 321 U. S. 723.
Whether the conspiracy and combination was achieved by agreement or by acquiescence of the wholesalers, coupled with assistance in effectuating its purpose, is immaterial.
(b) Clauses of the decree which hold null and void certain resale price maintenance contracts entered into by Soft-Lite and wholesalers subsequent to the Miller-Tydings Act, and which forbid enforcement of such contracts and the execution of any others for six months after notice of cancellation, are justified in view of the illegality of the distribution system previously existing and because the contracts in respect of a portion of the resales are not immunized by the Act. P. 321 U. S. 724.
Equity has power to eradicate the evils of a condemned scheme by prohibition of the use of admittedly valid parts of an invalid whole.
(c) Provisions of the decree giving representatives of the Department of Justice certain broad visitatorial powers, as construed by this Court, were within the power and discretion of the District Court. P. 321 U. S. 726.
(d) A provision of the decree directing the defendants to submit, on the written request of the Department of Justice, such reports in writing "with respect to any of the matters continued in this judgment" as may be necessary to enforce it is too indefinite for judicial enforcement, and therefore inappropriate. Pp. 321 U. S. 725, 321 U. S. 728.
(e) The Government's requests that the decree require Soft-Lite to sell its product to any person offering to pay cash therefor, and that the prohibition against Soft-Lite's systematically suggesting resale prices and its execution of resale price maintenance contracts under the Miller-Tydings Act be made permanent, are denied. P. 321 U. S. 728.
45 F.Supp. 387 modified and affirmed.
Cross-appeals from a decree which, in a suit to restrain alleged violations of the Sherman Act, dismissed the complaint as to certain of the defendants and gave injunctive relief against others.
MR. JUSTICE REED delivered the opinion of the Court.
The United States of America brought suit in the District Court for the Southern District of New York against the Bausch & Lomb Optical Company, a corporation, and the Soft-Lite Lens Company, Inc., and several of the chief officers of each, to restrain violations of the Sherman Act. Jurisdiction was conferred on the trial court by Section 4 of the Act, 15 U.S.C. § 4, and upon this Court by Section 2 of the
Act of February 11, 1903, 15 U.S.C. § 29, and Judicial Code § 238.
The complaint alleged that Bausch & Lomb and Soft-Lite and their officers contracted, combined, and conspired to restrain trade in pink tinted lenses for eyeglasses, contrary to Sections 1 and 3 of the Sherman Act. [Footnote 1] The allegations of the complaint were upheld by the trial court as to Soft-Lite and certain of its officers and dismissed as to Bausch & Lomb and its officers. United States v. Bausch & Lomb Optical Co., 45 F.Supp. 387.
The findings and opinion upon which the decree is molded show that Soft-Lite is the sole distributor of pink
tinted lenses under the trade name "Softlite." Their plan of dealing follows. As no patents or secret processes are relied upon, and as Soft-Lite limits itself to distribution only, the tradename, salesmanship, and business experience of Soft-Lite are the qualities upon which it must primarily depend for its profits as a distributor. Soft-Lite buys its lenses from Bausch & Lomb. It sells to wholesalers, who in turn sell to retailers, who in turn sell to the public. Laying aside the variations in operating costs of wholesalers as compared with other wholesalers and of retailers as compared with other retailers, the opportunity for profits which can be divided between Soft-Lite, the wholesalers, and the retailers depends upon the difference between the price per lens that Soft-Lite pays Bausch & Lomb and the price the ultimate consumer pays the retailer. A wider spread between original purchase and final prices, which is maintained by artificial fixing of the prices demanded from the ultimate consumer, furnishes the links of the distribution chain more profit for division among themselves. This is true regardless of volume or price, although these factors, of course, affect the aggregate profits available for division among the dealers who have a part in distribution. In its self-restricted field, Soft-Lite is successful. Roughly speaking, for the years 1938, 1939, and 1940 in the United States, it has sold one-third of the pink tinted lenses for one-half of the gross receipts. Other manufacturers than Bausch & Lomb and other distributors than Soft-Lite do the remainder of the business.
Soft-Lite has arrangements with Bausch & Lomb for the purchase from them of lenses and blanks, with wholesalers of optical glass for the supply of this material to retail opticians, and, in turn, with these retailers for sales promotion. This is an integrated plant for the distribution of Soft-Lite's optical specialty, the pink tinted glass for easing eye strain. The plan of distribution for this
commodity has developed over more than a quarter of a century of experience.
The arrangement with Bausch & Lomb had its origin in 1924. At that time, this manufacturer of optical glass undertook to grind pink tinted lenses for Soft-Lite out of foreign glass imported by the latter, but very soon the two parties arranged for Bausch & Lomb to manufacture the glass as well. At the very beginning, Bausch & Lomb agreed that any orders for pink tinted lenses which it might receive would be transmitted to Soft-Lite. A list of Soft-Lite customers, wholesale and retail, was furnished Bausch & Lomb. It appeared better to both seller and buyer to extend their arrangement by a contract in which Bausch & Lomb undertook to manufacture and sell pink tinted glass and lenses of Soft-Lite. To avoid the danger to Soft-Lite's business of indiscriminate selling by Bausch & Lomb of this pink glass specialty, Bausch & Lomb agreed that it would not sell pink tinted glass to lens manufacturers or pink tinted lenses to the optical trade. Soft-Lite buys exclusively from Bausch & Lomb.
The legal position of Bausch & Lomb and Soft-Lite is that of buyer and seller. Their relations through the years have been close, friendly, and mutually satisfactory. Bausch & Lomb knows generally of the Soft-Lite distribution system, both as manufacturer for an active customer and as an owner of stock in wholesale optical goods companies, which subsidiary companies handled a large part of Soft-Lite's goods as jobbers. The officials of the two corporations carried on discussions and correspondence with respect to wholesale customers, retail outlets, prices, advertising policies, the standing of dealers, and general trade information. As to trade adjuncts for optical glass distribution such as cleaning cloths, lens cabinets, etc., Soft-Lite and Bausch & Lomb cooperated even to the extent
of agreeing to charge identical prices for such marketing aids.
In 1926, the arrangement between Bausch & Lomb and Soft-Lite was given a somewhat more formal character by a letter of the manufacturer advising its customer as follows:
"Since the very beginning of our relations with you in connection with this transaction, it has been understood that we would safeguard your interests in every way, and it has never been our intention to make competition for you by either marketing a tinted lens of our own or producing similar tinted glass for other manufacturers, and it is our intention to abide by this understanding."
"On the other hand, however, it is difficult to foresee the progress of science in producing glass possessing better properties than is obtainable at the present time, and, in that event, we feel certain that you would not in any way desire to impede our progress in that direction."
"We hope that this may be sufficient guarantee to you that we do not wish to do anything that would look like competition in connection with the Soft-Lite, and we naturally expect that your efforts in the sale of same will be continued as at present for an indefinite period unless by consent of both parties concerned a different arrangement is agreed upon."
"Yours very truly,"
"BAUSCH & LOMB OPTICAL COMPANY"
"P.S. Tinted lenses such as Crookes, Fieuzal, Smoke, Amber, etc. which we are now manufacturing it is understood will not come under the above arrangement."
Minor variations in the plan have occurred since that letter. Bausch & Lomb patented a lens called "Nokrome." Soft-Lite was advised that, when Soft-Lite glass was used in the Nokrome lens, Soft-Lite should have exclusive distribution. There were other patented lenses manufactured
by Bausch & Lomb. Sometimes these lenses were ground from pink tinted glass and sometimes from other colors. Since these patented lenses were distributed by Bausch & Lomb under a licensee system, interference arose. Soft-Lite and Bausch & Lomb made mutually satisfactory adjustments so that their respective retailers might have some of the advantages of dealing in the Bausch & Lomb patented lenses ground out of Soft-Lite glass.
Again, Soft-Lite was released from its obligation to take second quality lenses and Bausch & Lomb agreed to sell them only in foreign countries where Soft-Lite had no offices and at prices acceptable to both Soft-Lite and Bausch & Lomb.
Reference has been made to the fact that Bausch & Lomb owned stock in optical wholesale companies which distributed Soft-Lite lenses and blanks. A stipulation stated that
"Bausch & Lomb, through its ownership of a majority of the outstanding voting stock of each said wholesale companies, has power to coordinate and control the sales and pricing policies of said wholesale companies."
These subsidiaries were acquired by Bausch & Lomb "at intervals subsequent to the original arrangement with Soft-Lite." They now are the largest outlet for Soft-Lite Lenses, taking sixty percent of Soft-Lite sales. They were substantial customers of Soft-Lite before they became affiliates of Bausch & Lomb. Soft-Lite is treated by its wholesale customers alike, whether or not the customers are Bausch & Lomb affiliates. It is equally true that all wholesalers have cooperated with Soft-Lite in the development of its system.
Bausch & Lomb thus profited from the Soft-Lite business in two ways: first, by profit made in manufacturing and selling to Soft-Lite; second, by sharing, through stock
ownership of wholesale distributors of Soft-Lite's goods, in the profits which lay between the Soft-Lite selling price and the consumer purchase price. Bausch & Lomb, the evidence shows, understood well as early as 1925 the advantages to itself through these subsidiaries of the Soft-Lite Plan, which secured an increased profit for division among distributing agencies. As a consequence, Bausch & Lomb concerned itself with prices charged to wholesalers by Soft-Lite, discussed each step of the price mark-up from Soft-Lite up to the consumer, insisted that reductions in its prices to Soft-Lite should be passed along the distribution line, and, through its affiliated corporations, cooperated in the price arrangements and the elimination of undesirable retailers.
Soft-Lite's control of distribution did not cease with this sale of its goods to optical wholesalers. It sought as wholesale outlets distributors who were free from business alliances with Soft-Lite's competitors. It sold only to wholesalers who were willing to cooperate with its policy. These wholesalers it designated as dealers, and sold its goods only through them. Soft-Lite's wholesalers were allowed to resell only to retailers who held licenses from Soft-Lite. When retailers were licensed, the wholesalers were notified that they were at liberty to sell to the specified retailer. On the cancellation of the license, the wholesalers were notified in writing that the retailer was no longer entitled to receive Soft-Lite lenses. If a wholesaler did business with unapproved retailers, it was excluded from Soft-Lite's list of designated wholesalers. The wholesalers were required to distribute with each pair of Soft-Lite lenses a numbered certificate called a "Protection Certificate." By this certificate, the wholesale outlet for Soft-Lite lenses found in the hands of unlicensed retailers could be traced by Soft-Lite. The wholesalers were told that the certificates were intended for
this purpose. Soft-Lite indicated to the wholesalers the prices to be received by them from retailers by means of published price lists. Through these price lists, made available to wholesalers and retailers alike, the retailers could determine the prices wholesalers were to charge.
It was determined by the District Court (and this finding is without challenge) that Soft-Lite and the wholesalers understood that material deviation would result in the discontinuance of the offending wholesaler as an outlet.
Soft-Lite's plan of distribution was rounded out by its arrangements with the retail optical concerns. As we have just pointed out, the retailers knew from the published lists the prices the wholesalers were expected to charge them. The retailers were selected by Soft-Lite with care equal to that used in selecting wholesalers. Soft-Lite, in the words of its brief, was "manufactured and advertised as a quality product, Soft-Lite must be sold as such." "Ethical" retailer opticians and optometrists were sought. Those who quoted prices in their advertisements or operated as adjuncts to department or jewelry stores were frowned upon. Retail prices to consumers were not fixed by Soft-Lite. It seems to be admitted, however, that the retailer was required to maintain prevailing local price schedules. An application form dated February 1, 1939, for retail stock licensees calls for representations to that effect from the Soft-Lite representative recommending the application and the approval of a Soft-Lite wholesaler. This practice apparently applied to all retailers. The District Court found that retailers agreed to sell the lenses at prices prevailing in the locality, and that Soft-Lite required retailers to sell the pink tinted lenses "at a premium over comparable untinted lenses."
Under its present system, Soft-Lite grants a revocable, exclusive, and nontransferable "license" to the retailer to
buy Soft-Lite lenses and lens blanks from "licensed" Soft-Lite distributors or wholesale "licensees" and to resell the lenses at prevailing prices in the locally where the retailer is located. In turn, the licensee agrees to promote the sale of Soft-Lite lenses and to do nothing to injure their prestige. The licensee was required to state that he understood that the substitution of other lenses for Soft-Lite would adversely affect that prestige. The licensee further agreed to sell only under the tradenames and mark of Soft-Lite, and only to the consumer or patient. [Footnote 2]
The retailer's agreement to conform to the license requirements was enforced by surveillance through Soft-Lite's salesmen and by cancellation of the retailer's license if he failed to abide by its terms. Wholesalers were notified of such cancellation.
The Miller-Tydings Act of August 17, 1937, 50 Stat. 693, amended the Sherman Act so as to permit minimum prices for the resale of a commodity which bears the trademark of the distributor in states where contracts of that description are legal by statute so far as intrastate transactions are concerned, and, beginning in 1940, Soft-Lite has entered into resale price maintenance contracts with a number of wholesalers, presumably in conformity with the Miller-Tydings Act. The District Court was of the view that these contracts "came into existence as a patch upon an illegal system of distribution of which they have become an integral part."
It is accepted by all parties that the transactions of Bausch & Lomb and Soft-Lite are in interstate commerce as the term "commerce" is used in the Sherman Act.
The judgment of the District Court determined that Soft-Lite and certain of its officers had contracted and conspired with optical wholesalers and retailers to violate the Sherman Anti-Trust Act in the following particulars:
"(a) by entering into so-called 'license' agreements with optical retailers which fix the prices at which said retailers shall sell Soft-Lite lenses; (b) by entering into so-called 'license' agreements with optical retailers which provide that said retailers will sell such lenses only to the public; (c) by entering into agreements with wholesale customers which provide that the said wholesalers will sell Soft-Lite lenses and blanks only to retailers who are designated as 'licensees' by the defendant Soft-Lite Lens Company, Inc.; (d) by entering into agreements with wholesale customers which fix the prices at which said wholesalers shall sell Soft-Lite lenses and blanks; (e) by entering into 'Fair Trade' resale price maintenance contracts with said wholesalers as an integral part of the illegal distribution system of Soft-Lite blanks and lenses, and (f) by enforcing the agreements set forth in subdivisions (a) through (e) of this paragraph."
The judgment directs Soft-Lite to cancel its license agreements with retailers and its Fair Trade resale price maintenance contracts and agreements with wholesalers fixing prices and restricting their resales to Soft-Lite's retail licensees. Soft-Lite and its agents are enjoined from enforcing these contracts or using identification devices, such as the "Protection Certificates," for tracing resales of lenses or blanks purchased from Soft-Lite. They are likewise forbidden to enter into any other agreement similar in effect or purpose to those adjudged unlawful, except the Fair Trade contracts. These latter may be renegotiated after six months from the notices of cancellation which the judgment directs to issue. There is also a prohibition against Soft-Lite's and its officers' systematically
suggesting resale prices on lens or blanks for said six months. Bausch & Lomb and various individuals are adjudged to be free of the violations which are charged in the complaint. The right to inspect records and to interview officers and employees is reserved to the Department of Justice in the manner set out below. [Footnote 3] Finally, jurisdiction of the case is retained for further orders or directions, including modification or termination of any of the provisions as well as their enforcement. Cf. Sugar Institute v. United States,297 U. S. 553, 297 U. S. 605.
Two appeals are before us. The Government seeks to establish that the agreement of Bausch & Lomb not to sell pink tinted glass or lenses to any competitor of Soft-Lite and not to compete with Soft-Lite in the marketing of any
pink tinted lens unreasonably restrains commerce in violation of the Sherman Act. By its appeal, the Government urges also a broadening of the decree by the substitution of a permanent instead of a six months' injunction against new Fair Trade agreements and against systematic suggestion of resale prices by Soft-Lite. It also asks an addition to the decree requiring Soft-Lite to sell its product without discrimination to any person offering to pay cash therefor.
The other appeal is by Soft-Lite and those of its officers who are enjoined. This appeal attacks the provisions of the judgment cancelling agreements of Soft-Lite with wholesalers to charge uniform prices to retailers, enjoining systematic suggestions of resale prices and execution of Fair Trade resale price maintenance contracts even for six months, and allowing future discovery by the Department of Justice in order to police the decree.
Since the alleged illegality of the Soft-Lite distribution system is the heart of the scheme which the Government attacks, we shall examine first the judgment from the standpoint of Soft-Lite's objections to it, and then from that of the Government's desired additions as to Soft-Lite.
As the Court is equally divided upon the issue raised in the Government's appeal in No. 62 by its request for a reversal of the provision of the judgment which dismisses Bausch & Lomb and its officers from the proceeding, that provision stands affirmed.
Our task of examining Soft-Lite's objections is simplified by the frank recognition of those appellants that "the retail license provisions binding dealers to sell at locally prevailing prices and only to the public constitute illegal restraints." Our former decisions compel this conclusion.
Price-fixing, reasonable or unreasonable, is "unlawful per se." United States v. Socony-Vacuum Oil Co., Inc.,310 U. S. 150, 310 U. S. 218; United States v. Trenton Potteries,273 U. S. 392, 273 U. S. 397; Ethyl Gasoline Corp. v. United States,309 U. S. 436, 309 U. S. 458; Fashion Originators' Guild v. Trade Comm'n,312 U. S. 457, 312 U. S. 465, 668. The retailer's price to his customer is the single source of stable profits for all handlers.
These illegal contracts cannot be considered, however, as happenings completely insulated from other incidents of the Soft-Lite distribution system. When we turn to the provisions of the decree which are attacked here by Soft-Lite, requiring it to cancel its resale price agreements with wholesalers as well as retailers and to avoid such requirements for six months either by contract or suggestion, and thereafter to act only in accordance with the Miller-Tydings Act, we must first note that it is plain that the arrangements for price maintenance in the wholesalers' sales to retailers are an integral part of the whole distribution system. Not only are Soft-Lite wholesalers carefully selected and cooperative, but they may sell only to Soft-Lite's retail licensees. Undesirable wholesalers are excluded from the system, and the District Court found that, by means of published wholesale price lists, put in the hands of wholesalers and retailers alike, resale prices of wholesalers are designated by Soft-Lite. The requirement of the wholesalers' recommendation as to the business character of the applicant for a retail license, the evidence of espionage, the limitation of resales to Soft-Lite retail licensees, the existence of the "Protection Certificate" to mark the wholesaler who might violate the arrangement, the uniformity of the prices, as prescribed in Soft-Lite's published lists, which are charged retailers by wholesalers -- all amply support -- indeed require -- the inference of the trial court that a conspiracy to maintain prices down the distribution system existed between the wholesalers and Soft-Lite through the years prior to this suit.
Soft-Lite is the distributor of an unpatented article. It sells to its wholesalers at prices satisfactory to itself. Beyond that point, it may not project its power over the prices of its wholesale customers by agreement. A distributor of a trademarked article may not lawfully limit by agreement, express or implied, the price at which or the persons to whom its purchaser may resell, except as the seller moves along the route which is marked by the Miller-Tydings Act. Dr. Miles Medical Co. v. John D. Park & Sons Co.,220 U. S. 373, 220 U. S. 404. Even the additional protection of a copyright, Bobbs-Merrill Co. v. Straus,210 U. S. 339; Interstate Circuit, Inc. v. United States,306 U. S. 208, 306 U. S. 221, and cases cited, or of a patent, United States v. Masonite Corp.,316 U. S. 265, 316 U. S. 276; Mercoid Corp. v. Mid-Continent Investment Co.,320 U. S. 661, and cases cited, add nothing to a distributor's power to control prices of resale by a purchaser. The same thing is true as to restriction of customers. Fashion Guild v. Trade Comm'n,312 U. S. 457, 312 U. S. 465; Standard Sanitary Mfg. Co. v. United States,226 U. S. 20, 226 U. S. 47-49; Montague & Co. v. Lowry,193 U. S. 38, 193 U. S. 45.
Not only do the appellants urge that conspiracy between Soft-Lite and the wholesalers should not be found from the foregoing evidence, but they also say that they come within the scope of certain of our cases which are said to indicate that a simple refusal to sell to customers who will not resell at prices fixed by the seller is permissible under the Sherman Act. They cite United States v. Colgate & Co.,250 U. S. 300; Federal Trade Commission v. Beech-Nut Packing Co.,257 U. S. 441, 257 U. S. 452-453; Federal Trade Commission v. Sinclair Refining Co.,261 U. S. 463, 261 U. S. 475-476, and Federal Trade Commission v. Curtis Publishing Co.,260 U. S. 568, 260 U. S. 582. None of these cases involves, as the present case does, an agreement between the seller and purchaser to maintain resale prices.
The Colgate case turned upon the sufficiency on demurrer of an indictment under the Sherman Act against a manufacturer for requiring its dealers to maintain prices. As the indictment was construed to allege only specification of resale prices by the manufacturer and refusal to deal with customers who did not maintain them, this Court held the indictment insufficient as no reference was made in it to a purpose to monopolize, and, in such a posture, the Sherman Act
"does not restrict the long recognized right of trader or manufacturer engaged in an entirely private business, freely to exercise this own independent discretion as to parties with whom he will deal; and, of course, he may announce in advance the circumstances under which he will refuse to sell."
The Beech-Nut case recognizes that a simple refusal to sell to others who do not maintain the first seller's fixed resale prices [Footnote 4] is lawful, but adds as to the Sherman Act,
"He [the seller] may not, consistently with the act, go beyond the exercise of this right, and by contracts or combinations, express or implied, unduly hinder or obstruct the free and natural flow of commerce in the channels of interstate trade."
257 U.S. at 257 U. S. 453. The Beech-Nut Company, without agreements, was found to suppress the freedom of competition by coercion of its customers through special agents of the company, by reports of competitors about customers who violated resale prices, and by boycotts of price-cutters. Idem, pp. 257 U. S. 451, 257 U. S. 454. As the decision as to the Curtis Company involved only selling agencies, 260 U.S. at 260 U. S. 581, and that as to Sinclair the restricted use of a distributor's gasoline tanks, 261 U.S. at 261 U. S. 474, they are inapplicable to a consideration of a refusal by a distributor to sell except to chosen dealers.
As in the Beech-Nut case, there is more here than more acquiescence of wholesalers in Soft-Lite's published resale price list. The wholesalers accepted Soft-Lite's proffer of a plan of distribution by cooperating in prices, limitation of sales to, and approval of retail licensees. That is sufficient. Interstate Circuit, Inc. v. United States,306 U. S. 208, 306 U. S. 226-227; United States v. Masonite Corp.,316 U. S. 265, 316 U. S. 274-275; Sugar Institute v. United States,297 U. S. 553, 297 U. S. 601.
So far as the wholesalers are concerned, Soft-Lite and its officers conspired and combined among themselves and with at least some of the wholesalers to restrain commerce by designating selected wholesalers as sub-distributors of Soft-Lite products, by fixing resale prices, and by limiting the customers of the wholesalers to those recommended by the wholesalers and approved by Soft-Life -- all in violation of the Sherman Act. This finding justifies the order directing cancellation of the wholesale arrangements and cessation by Soft-Lite of systematic price suggestions. Whether this conspiracy and combination was achieved by agreement or by acquiescence of the wholesalers coupled with assistance in effectuating its purpose is immaterial.
Soft-Lite makes objection also to the clause of the decree which holds null and void certain resale price maintenance contracts entered into by Soft-Lite and many of its wholesalers after the passage of the Miller-Tydings Amendment to the Sherman Act on August 17, 1937. Seenote 1supra. Objections on the same grounds apply to other clauses of the decree forbidding enforcement of these existing "Fair Trade" contracts with wholesalers and Soft-Lite's entering into any others until six months after certain notices of cancellation which are required by the decree but which have not yet been given owing to this appeal. Soft-Lite contends that the "Fair Trade" agreements are strictly within the terms of the Miller-Tydings
Act, and we assume the correctness of that position. [Footnote 5] The disadvantage at which these clauses place Soft-Lite towards its customers and competitors is pointed out.
The District Court [45 F.Supp. 399] said that these contracts "came into existence as a patch upon an illegal system of distribution," and as an integral part of that system. As some wholesalers do certain cutting and edging work on the blanks for sale to retailers who do not do this grinding for themselves, the "Fair Trade" contracts for fixing resale prices apply only to those sales, known as "stock" sales, where the lenses and blanks are resold in the same form in which they come from Soft-Lite. See United States v. Univis Lens Co.,316 U. S. 241, 316 U. S. 253-254. We think that, where a distribution system exists, prior to the making of such price maintenance contracts, which is illegal because of unallowable price-fixing contracts, and where that illegality necessarily persists in part because a portion of the resales are not covered by the "Fair Trade" contracts, as just explained, subsequent price maintenance contracts, otherwise valid, should be cancelled, along with the invalid arrangements, in order that the ground may be cleansed effectually from the vice of the former illegality. Equity has power to eradicate the evils of a condemned scheme by prohibition of the use of admittedly valid parts of an invalid whole. United States v. Univis Lens Co.,316 U. S. 241, 316 U. S. 254; Ethyl Gasoline Corp. v. United States,309 U. S. 436, 309 U. S. 461. Cf. Standard Oil Co. v. United States,221 U. S. 1, 221 U. S. 78; United States v. Union Pacific R. Co.,226 U. S. 61, 226 U. S. 96, 226 U. S. 470, 226 U. S. 476-477; Aikens v. Wisconsin,195 U. S. 194, 195 U. S. 205-206.
The last objection brought forward by Soft-Lite to the decree is that paragraph 9, which is set out in full in note