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Cooper Distributing Co. v. Arnco Electronics

October 25, 1974


Ciolino, J.s.c.


Plaintiff brought suit and asked this court to enjoin defendant from selling Amana products at less than the fair trade price established pursuant to N.J.S.A. 56:4-1 et seq. The principal questions presented to this court for determination in this matter are (1) whether a distributor of a commodity may fair trade, and (2) if a fair trade program is promulgated, whether it can be promulgated in selected counties or a particular geographical area which comprises less than the entire State.

In the case before the court plaintiff is not the owner of the trade-mark. Defendant alleges that at the very least, if the court is to find that a distributor is to have the right to fair trade, he must get the approval of the owner of that trade-mark and he must also be the exclusive distributor.

Plaintiff is a distributor of Amana products, more particularly freezers, refrigerators, combinations and compactors, dehumidifiers and component and repair parts thereof, and generally for all products coming within the "white goods" category which are from time to time made available by Amana. In accordance with a distributor franchise agreement with Amana Refrigeration, Inc. of Amana, Iowa, dated April 1, 1971, the "distributor's territory for purposes of concentration of sales effort and appropriate stocking of products shall be: New Jersey -- Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Passaic, Somerset, Sussex, Union; New York -- Orange, Rockland, Sullivan; Pennsylvania -- Pike".

It has been stipulated as follows: that Amana products are trade-marked items in open and free competition in this general area; that these Amana products have been sold by defendant; that prior to the subject sales in this litigation

defendant received notice from plaintiff of fair trade prices established by plaintiff, which prices plaintiff intended to have maintained in the subject area; that the sales made by defendant of these goods were below the fair trade prices as per the aforementioned notification; that plaintiff has a franchise agreement with Amana which existed during the time period involved in this suit and was in existence when notice was served upon defendant; that defendant purchases its Amana products from Key Appliances, New York City, N.Y., a buying cooperative, and that those products are then shipped to defendant in New Jersey.

I find that plaintiff is a franchised distributor who sells only to retail dealers and not to end users of the products. The southern counties of the State are served by another franchised distributor located in Philadelphia, Pa.

It was shown that as a general rule plaintiff sells only in his trade area; however, at times plaintiff does sell outside of that area and also in the area wherein the Philadelphia distributor maintains its franchise. Plaintiff does not attempt to enforce its fair trade agreement in any county except in those covered by its agreement. No proofs were offered as to whether or not the franchise distributor of southern New Jersey has any fair trade agreement in this State. I find that there is no written authorization between Amana and plaintiff as to any fair trade agreement; however, proofs at trial revealed that officers and executives of Amana were made aware of plaintiff's fair trade policy and enforcement of same in the State of New Jersey and that this policy was continued after such information was made available to them. There were no facts presented which indicated that plaintiff's fair trade program was being enforced against wholesalers, but rather the facts revealed that only retail sales were affected by plaintiff's program.

Defendant, who has been in the appliance business since the early 1960's, has what it considers three different approaches to merchandising their products. It has what has been described as a wholesale business, that is, sales to trade

people who usually have a state sales tax number and to whom no state sales tax is charged. It has a limited retail business, and it has what it calls commercial accounts. These commercial accounts established in 1971 are described as sales to entities.

The manner in which these sales to various entities occurred was that defendant solicited business organizations and requested them to distribute identification cards called Arnco Buyers' Cards to their employees. These cards were then used by the employee to identify himself at defendant's place of business, and upon presentation of the Buyers' Card the wholesale price was given to that customer. If the card was not presented, then the regular retail price was used. These cards were presented with the employee's signature upon them, but no employment verification was required prior to making the purchase at the wholesale price. Sales made with the Buyers' Card, that is, the commercial account sales to employees, also included a sales tax ...

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