The encyclopedia · Strategy & Leadership · Strategic decision · 1926
GE kept title to lamps to control retail prices
GE, barred from fixing resale prices, kept title to lamps and paid dealers commissions, so no resale occurred.
General Electric Company
the move
By the 1910s General Electric's Mazda-branded incandescent lamps were sold through thousands of independent hardware and electrical dealers across the United States. Courts had already ruled, in Dr. Miles Medical Co. v. John D. Park & Sons (1911), that a manufacturer could not lawfully bind an independent dealer, by contract, to resell goods at a fixed price once it had sold those goods to the dealer as the dealer's own property; doing so was an illegal restraint of trade under the Sherman Act.
GE had also just been forced, under a 1911 consent decree, to dissolve an earlier combination that had let it and rival lamp makers pool patents and fix prices jointly. With that route closed and ordinary resale-price contracts now illegal after Dr. Miles, cut-price dealers were free to sell Mazda lamps below the price GE wanted maintained nationwide, eroding the price structure its trademark licensing and dealer network depended on.
why it works
- The law only bans fixing a resale price, which requires a prior sale.
- By retaining title, GE never sold to dealers, so no resale existed.
- Dealers became commission agents, making GE's price a principal's price.
- The Supreme Court accepted the agency as genuine, not a sham.
what transfers
If a rule only applies to a specific legal category, restructure the deal to remove that category's predicate while keeping substance.
what came after
The Supreme Court upheld the scheme in 1926 (272 U.S. 476); GE controlled nationwide Mazda lamp retail prices under it for decades.
references
spotted an error? The archive wants to know.