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Heublein, Inc. v. Foremost Sales Promotions

JULY 31, 1973.




APPEAL from the Circuit Court of Cook County; the Hon. SAMUEL B. EPSTEIN, Judge, presiding.


Defendant appeals from an order granting plaintiff a permanent injunction. The trial court found that defendant had violated plaintiff's fair trade agreement in contravention of the Illinois Fair Trade Act, *fn1 and enjoined defendant from "wilfully and knowingly advertising, offering for sale or selling" Heublein products at prices less than those stipulated by plaintiff pursuant to its fair trade agreement. The order also set forth the Heublein products subject to the fair trade agreement and the current fair trade price of each product. Defendant contends on appeal that:

(1) plaintiff failed to prove that its products were in fair and open competition as required by the Illinois Fair Trade Act;

(2) plaintiff's fair trade agreement is invalid in that it provides minimum prices, not stipulated prices;

(3) the trial court abused its discretion in reopening plaintiff's case and allowing further proof;

(4) plaintiff failed to prove notice to defendant of the minimum prices;

(5) defendant is merely an agent of a disclosed principal, and therefore, the fair trade agreement is not applicable; and

(6) the injunction order is invalid in that it violates the specificity requirements of Ill. Rev. Stat. 1971, ch. 69, par. 3-1.

On February 4, 1972, plaintiff filed a verified complaint alleging that plaintiff has been engaged in business as an importer of alcoholic beverages; that Heublein products are in fair and open competition in Illinois with products and commodities of the same general class; that Heublein products are sold to wholesalers; that plaintiff has expended large sums of money in Illinois to secure its interest in the good will represented by its trademarks; that plaintiff has enjoyed substantial and profitable business in Illinois, that all sales of Heublein products by wholesalers to retailers are subject to fair trade agreements providing that the retailers will not sell, offer for sale or advertise for sale any products below the stipulated minimum prices; and that defendant has wilfully, knowingly and continuously violated the fair trade agreement by advertising Heublein products below the stipulated minimum prices.

Defendant filed a verified answer admitting the advertisements for Heublein products, but demanding strict proof of all other allegations. Plaintiff amended its complaint to file additional advertisements and a fair trade agreement dated October 14, 1965, between plaintiff and an Illinois retailer.

A hearing for a temporary injunction was held, and the court refused to issue the injunction, finding that no evidence tending to prove a fair trade agreement had been introduced.

At the hearing for the permanent injunction, the court admitted the evidence introduced at the prior hearing. The evidence consisted of advertisements of January 26, 27, February 10 and 11, 1972, indicating prices for Heublein products below plaintiff's current minimum prices; a letter dated April 28, 1971, from plaintiff to defendant's president enclosing a price list; a price schedule of Heublein products; and a letter from defendant's attorney to Heublein acknowledging receipt of the April 28th letter, acknowledging the Heublein fair trade program and assuring plaintiff that defendant would comply with the enclosed schedule of minimum fair trade prices. The testimony adduced at trial showed that Irving Robins, defendant's president, denied reading the letter sent to him, and denied seeing the fair trade contract or fair trade prices. Defendant's attorney testified that he signed the letter in evidence acknowledging the Fair Trade Program, but that no price list was enclosed in the April 28th letter from plaintiff which was forwarded to him.

A marketing consultant for Heublein, William Behrman, and a retailer in Illinois, Roy Cofran, testified that in 1965 a fair trade agreement which provided for minimum prices was executed between them. A copy of the agreement was introduced into evidence. Plaintiff then rested its case. Defendant made a motion to dismiss on the ground that defendant's answer required strict proof of each of plaintiff's allegations, and plaintiff had failed to prove these allegations. The trial judge then afforded plaintiff the opportunity to reopen its case. Behrman was recalled and testified that Heublein dealt in wines, beer and liquor; that Heublein sold to wholesalers in Illinois; that other vodkas and similar wines were in competition with Heublein products; that Heublein advertised extensively in Illinois, and spent approximately $10,000,000 in advertising nationally; and that Heublein had substantial sales in Illinois. Finally, plaintiffs recalled a regional manager for Heublein who testified that a fair trade agreement existed in Illinois, and that he discussed the Heublein Fair Trade Program in the spring of 1971 with Irving Robins. Defendant introduced no evidence.

• 1-4 The Illinois Fair Trade Act carves an exception in Illinois antitrust policy by recognizing that the manufacturer of a trademarked article has a property right in the goodwill towards his product, and by validating designation of a stipulated "fair" price for the sale and resale of that product. The Fair Trade Act was intended to prevent use of products as "loss leaders." (Joseph Triner Corp. v. McNeil, 363 Ill. 559, 2 N.E.2d 929.) The Act further provides that agreements to sell products at a stipulated price are binding upon sales and resales by "non-signers." (Ill. Rev. Stat. 1971, ch. 121 1/2, par. 189.) To prevent abuse, plaintiff must show "fair and open competition" of fair traded products "with commodities of the same general class produced by others" (Ill. ...

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