THERE are very few trades indeed in which some form of exclusive agreement with distributors does not exist. Such agreements are sometimes based upon written forms of contract. Sometimes they may rest solely upon an oral understanding between the parties. A manufacturer may grant the exclusive sale of his product to a single dealer in a town, or to a single jobber in a given territory, in return for a certain standard of service; or he may offer to sell his goods only to those dealers or jobbers who will refrain from handling the goods of competitors. Again, he may confine the sale of some special product to such distributors as will agree to handle his whole line; and so on. The manufacturer of a number of products in the same general class sometimes parcels them out among the several dealers in a given town, granting to each dealer the exclusive

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right to sell a particular product. The producer of some single product may sell it to all distributors for resale under private brands, and at the same time give certain jobbers the exclusive sale of the same product under the factory brand. In fact, the forms of exclusive agreement are so varied, and its use is so extensive, that almost every manufacturer or distributor comes at some point into contact with it.

Now each of those forms of agreement, as well as some others which I have not mentioned specifically, has at some time or other been woven into the fabric of a Government prosecution for restraint of trade. Some of them have been specifically upheld by the courts, and some have been definitely condemned. Some have been sharply criticized when occurring in one set of circumstances, while the same acts have been declared blameless when they were committed under different conditions. To attempt to ascertain the legality of a particular form of exclusive agreement may seem like trying to locate the elusive pea under the three walnut-shells-much of this whole subject of the anti-trust laws bears some resemblance to that pastime-yet the manufacturer, and particularly the advertising manu

facturer, may find that great consequences depend upon that very issue. No one who has not actually had the experience can understand the dogged persistence with which the Government pursues the slightest suspicion that such agreements exist, or the ingenuity that it sometimes exercises in putting upon them the most sinister interpretation.

It may be stated briefly that nothing is calculated to arouse the energies of the Department of Justice more quickly than the suggestion, no matter how remote, that a product is sold on an "exclusive" basis. The cross-examinations which are conducted by the Government agents with a view to ferreting out suspected agreements with jobbers or dealers are almost unbelievably vigorous and remorseless. Let me cite one instance which fell under my own observation.

"6 EXCLUSIVE-DEALER" AGREEMENTS UNDER

SUSPICION

A certain concern had received an application for territory from a jobber somewhere in the Middle West. For perfectly legitimate reasons, this concern did not desire to take on that particular jobber, and yet did not care to offend him. So the president wrote him a nice letter, stating that it

had been found advisable to deal only through jobbers who did a certain minimum gross business and employed a certain number of salesmen. There were some other conditions, too, of no particular importance, and the whole thing consisted of a rather graceful "turn down" which effectually disposed of the whole matter.

But a year or two later, when the concern was under suspicion of restraining trade, the Government discovered the carbon copy of that letter in the files, and straightway demanded a copy of the concern's "agreement" with its distributors. No such "agreement" existed, or ever had existed, yet the Government nearly turned the whole organization upside down in the endeavour to find one. The casual "turn down" of an undesirable customer had become a formidable piece of evidence, and the officers of the concern spent many long and perspiring hours with the District Attorney before they succeeded in explaining it to his satisfaction.

I mention this incident chiefly for the purpose of showing the importance which the Government attaches to exclusive relationships with distributors. We shall find, when we come to examine the court opinions, that they are not always in

harmony with the Government's notions. But this fact is to be noted: After a few complaints have been made which have even a superficial appearance of soundness, the Government is almost invariably certain to put the most sinister construction upon such a relationship. A system of distribution through "exclusive-dealers' or-jobbers is often the first point of attack and the object of the most bitter condemnation. A special section of the Clayton Act' was, indeed, framed for the purpose of emphasizing the importance of this branch of the subject.

Now here again it is necessary to bear clearly in mind the distinction between the view of the Government and the view of the courts. There

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SEC. 3. That it shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, or discount from or rebate upon, such price, on the condition, agreement or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of

commerce.