Fashion Guild v. Trade Comm'n
312 U.S. 457 (1941)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A combination of competitors who collectively agree to boycott retailers to eliminate a form of competition is a per se violation of federal antitrust laws. The reasonableness of the group's motives or the alleged unethical nature of the competition being suppressed are not valid defenses.
Facts:
- The Fashion Originators' Guild of America (FOGA) was a combination of designers, garment manufacturers, and textile manufacturers.
- FOGA members claimed to be creators of original designs for women's garments and textiles, which were not protected by patent or copyright law.
- Other manufacturers systematically copied these designs and sold them at lower prices, a practice FOGA termed "style piracy."
- To combat style piracy, FOGA members agreed to refuse to sell their products to any retailer who also sold garments with copied designs.
- FOGA created a registration system for its members' "original" designs and employed "shoppers" to police retailers for compliance.
- Retailers who agreed to cooperate with the boycott were placed on a "white list," while non-cooperating retailers were placed on a "red list" and boycotted by all FOGA members.
- Approximately 12,000 retailers agreed to cooperate, many under the threat of being cut off from FOGA's popular and commercially necessary products.
- FOGA's members held significant market power, accounting for over 60% of women's garments wholesaling at $10.75 and above in 1936.
Procedural Posture:
- The Federal Trade Commission (FTC) issued a complaint against the Fashion Originators' Guild of America, Inc. (FOGA).
- After hearings, the FTC found FOGA's practices constituted unfair methods of competition and issued a cease and desist order.
- FOGA, as petitioner, sought review of the FTC's order in the U.S. Circuit Court of Appeals for the Second Circuit.
- The Circuit Court of Appeals, as the intermediate appellate court, affirmed the FTC's order with some modifications not at issue.
- The U.S. Supreme Court granted certiorari to resolve a conflict with a decision from another circuit court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a combination of designers, textile manufacturers, and garment manufacturers who organize a group boycott against retailers selling garments with copied designs constitute an unfair method of competition in violation of the Sherman Act and the Clayton Act?
Opinions:
Majority - Justice Black
Yes. A combination of manufacturers engaging in a group boycott to eliminate competition from copyists constitutes an unfair method of competition in violation of the Sherman and Clayton Acts. The purpose and effect of the boycott was to directly suppress a form of competition, narrow the outlets for manufacturers, and restrict the sources from which retailers could buy, which runs contrary to the public policy of promoting free competition. The alleged reasonableness of the boycott or the immorality of 'style piracy' does not justify a private combination restraining trade and acting as an extra-governmental regulatory agency; such combinations are illegal per se.
Analysis:
This decision firmly establishes that group boycotts organized by competitors are per se illegal under the Sherman Act. The Court rejected any "rule of reason" defense, meaning that the defendants' motives or the potential justifications for their actions were irrelevant to the legal analysis. This case stands for the strong principle that private industry groups cannot set up their own systems to regulate commerce and punish competitors, as that power is reserved for the government. It reinforces that antitrust laws protect the competitive process itself, not individual competitors from practices they deem unfair.
