Merchants Legal Stamp Co. v. Murphy

Braley, J. The principal if not the sole business of the plaintiff is the issuing of trading stamps at a fixed price' to merchants who give them to their customers for cash purchases usually on the basis of one stamp for every ten cents of the price of the article bought, and after a number of stamps thus have been collected the merchant or collector presents them to the plaintiff for redemption at a fixed rate. By this arrangement the stamp or coupon operates as a discount in cash for every purchase made. Commonwealth v. Sisson, 178 Mass. 578. The books containing the contract are described by the master as ruled off into spaces similar to stamp albums into which the collectors, who are also the purchasers, paste the stamps, and the plaintiff redeems them at a lower price; the difference measures the company’s profits. It is plain that the plaintiff is a trading stamp company giving premiums or a valuable consideration for stamps furnished to purchasers of goods as an inducement for payment in cash. The master’s report shows that under the operation of this system the plaintiff controls nearly ninety per cent of the actual business conducted in this form by the merchants of Boston and its vicinity. By the provisions of the contract designed for this territory the company retains title to the book and stamps with an agreement by the authorized merchant or customer not to part with them except in the specified course of trade, and to return the book with the stamps attached which may have been presented to him by purchasers. If this is not done, all rights under the contract cease or are forfeited. We said in O’Keeffe v. Somerville, 190 Mass. 110, that trading stamps, not being a commodity within the meaning of our Constitution, were not subject to an excise tax, although no attempt was made to classify them. Nor is it necessary now to determine whether the contract is strictly a bailment. Hunt v. Wyman, 100 Mass. 198. Springfield Engine Stop Co. v. Sharp, 184 Mass. 266. Isaacs v. Macdonald, 214 Mass. 487. Or whether the stamps are choses in action. Sperry & Hutchinson Co. v. Hertzberg, 3 Rob. (N. J.) 264. The transaction [284] is to be determined from its inherent character or purpose. If not goods, wares or merchandise as those terms ordinarily are used, or the title did not vest in the purchaser, but he had only a limited use, they do represent and were intended to represent a mode of doing business which under modern mercantile conditions is in itself a business potentially affecting and largely controlling certain well recognized lines of trade. The books and stamps when viewed in the light of their manufacture and use by the plaintiff, coupled with its contract treating them not as symbols but as chattels of value which are the subject of sale or of bailment, are to be deemed “articles” within the meaning of St. of 1908, c. 454, § 1. It is expressly found that the plaintiff declines to supply stamps to merchants unless they stipulate not to use trading stamps issued by other companies or individuals, and that the insertion of this provision in the contract is to suppress all competition. The direct tendency of the plaintiff’s system of business under all the findings results in such concentration as to substantially control prices for a form of service or of supposed profits to purchasers demanded by the public. Commonwealth v. Strauss, 188 Mass. 229, 231. The scheme the plaintiff has so carefully elaborated and built up is in reality a device whose predominant purpose, as shown by its practical and successful operation, tends to drive all competitors from the field. New York Bank Note Co. v. Kidder Press Manuf. Co. 192 Mass. 391, 403. United Shoe Machinery Co. v. La Chapelle, 212 Mass. 467, 480. The monopoly it seeks to establish may not be complete, but it has gone far enough to eliminate any effective rivalry. The restriction is not confined to the sale or transfer to a business rival of the plaintiff, but the merchant or collector cannot dispose of the book or stamps to any one, even if their retention unused must result in pecuniary loss. Indeed this is an essential and controlling feature of the contract, which differs materially from the contract in Gagnon v. Sperry & Hutchinson Co. 206 Mass. 547. While we do not go so far as to say that trading stamps are an absolute public necessity, yet they enter into the merchant’s business, and are an essential element of a form of bargain and sale which a very appreciable portion of the public demands. Beechley v. Mulville, 102 Iowa, 602. The direct and intended effect of the methods employed being [285] to restrain or prevent the pursuit, by the defendants or of others of a similar enterprise in a lawful manner, the plaintiff is within the prohibition of the St. of 1908, c. 454, § 1, which declares that such an arrangement or agreement, whatever form it may assume, or however carefully the constituent parts may be assembled, is “against public policy, illegal and void.” The exceptions to the report, not having been argued, need not be considered, and the master having found that the defendants have not as to the plaintiff’s customers used or proposed to use any information obtained from it while the defendant Murphy was in its employ, the defendants are not shown to have violated any enforceable rights of the plaintiff. St. 1908, c. 454, § 2. White v. Buss, 3 Cush. 448. Gibney v. Olivette, 196 Mass. 294, 295. Kennedy v. Welch, 196 Mass. 592. The decree dismissing the bill therefore is affirmed with costs. Ordered accordingly.