New State Laws for Price Maintenance

August 12, 1935

Report Outline
Fair Trade Acts Adopted by 1935 Legislatures
The Producer, the Consumer, and the Loss Leader
Types of State Fair Trade Legislation
The National Government and Price Maintenance

Fair Trade Acts Adopted by 1935 Legislatures

Since january 1 of this year, 24 of the 44 state legislatures in session have considered laws to curb excessive price cutting. Eight of the 24—Iowa, Maryland, New Jersey, New York, Oregon, Pennsylvania, Washington and Wisconsin—adopted measures based on the so-called “Fair Trade Act” of California, the only legislation of this kind in force before 1935 A similar bill is pending in Alabama, and a fair trade act passed by the Illinois legislature is awaiting the signature of Governor Horner. Without exception these state fair trade acts have two purposes: to legalize contracts between manufacturers and distributors which give the producer the right to dictate the resale price of his branded merchandise; and secondly, to discourage (in the case of California, to forbid) the selling of “loss leaders.”

The passage of such legislation by eight states within a period of seven months would be noteworthy under any circumstances, but in the light of previous legislative attempts the 1935 record assumes remarkable proportions. The question of resale price maintenance contracts and the problem of selling loss leaders have been the subject of proposed federal legislation for the past 20 years. Government investigations have been undertaken, and great masses of data have been accumulated, but repeated attempts to get a price maintenance bill through Congress have met with failure.

Reasons for Sudden Flurry of State Legislation

A number of factors have contributed to the 1935 flurry of fair trade laws. Agitation for such legislation has been in progress since the United States Supreme Court decided in 1911 that price maintenance contracts were unlawful in the absence of specific legal sanction. Before the initial movement could get under way, however, the increased demand and rising prices stimulated by the war made the question of price-cutting an academic one for the time. After 1918 the drive for regulation was resumed; but the problem did not become acute until the depression brought about a disastrous series of price wars. The general accentuation of the keener aspects of competition is probably the outstanding factor in the current flood of fair trade acts.

ISSUE TRACKER for Related Reports
Price Controls
Aug. 05, 1954  Discount Selling
Aug. 10, 1951  Price Cutting and the Law
Apr. 25, 1951  Enforcement of Price and Rent Controls
Nov. 10, 1948  Basing Points and Delivered Prices
Sep. 14, 1948  Prices and Politics
May 28, 1947  Retail Price Agreements
Aug. 12, 1935  New State Laws for Price Maintenance
Apr. 03, 1930  The Trend of Commodity Prices
BROWSE RELATED TOPICS:
Commercial Law
Inflation
State, Local, and Intergovernmental Relations