*1 BEVERAGE CONTROL The ALCOHOLIC OF the COMMONWEALTH OF
BOARD al.,
KENTUCKY, etc., Appellants, et
v. STORES, INC.,
TAYLOR DRUG
Appellee. LIQUOR RETAIL ASSOCI-
KENTUCKY
ATION, al., Appellants, et
v. STORES, INC.,
TAYLOR DRUG
Appellee. LIQUOR
KENTUCKY WHOLESALE ASSOCIATION, INC., et
DEALERS
al., Appellants,
v. STORES, INC.,
TAYLOR DRUG
Appellee. LIQUOR
KENTUCKY WHOLESALE ASSOCIATION, INC., et
DEALERS
al., Appellants,
v. LIQUORS, INC., Appellee.
STATE LEWIS, al., Appellants, H. et
Richard
v. LIQUORS, INC., Appellee.
STATE Kentucky. Court of
July
рrice stipulated by and, vendor” resale, will requirement exact a similar buyer. transactions, Horizontal as be- producer producer, tween and wholesaler, retailer, and or retailer are specifically excluded. Staib, Frankfort, Catherine C. for Alco- 244.390 directs KRS the fair trade
holic Beverage Control Bd. provide contract for minimum resale Linker, Irwin Waterman and (a) Alan Mor- reflecting following markups: for ris, Garlove, Johnson, Waterman & Louis- wholesaler, liquor not less than on 15% ville, for Kentucky Liquor Wholesale Deal- wine; retailer, (b) on for the 20% Ass’n, Inc., ers and its members. not less than 33V3%in less than case lots or 244.390(3) in Haddad, provides 10% case lots. KRS Jr.,
Frank E. and Leоn J. Shai- kun, Louisville, for in substance that Ky. Liquor, Retail Ro- must be Cheers, land & Liquors McFarland Inc. prices plus calculated on the basis of actual certain other charges. Clark, Stites, Bruce F. McElwain & Fowl- er, Frankfort, for Spirits Distilled Counsel provides 244.390 further KRS of U. S. single entire state shall constitute a trade Louisville,
Albert Reutlinger, F. Tay- area, may in whiсh no licensee differentiate Stores, lor Drug Inc. in prices, Department its of Alco- Beverage holic Control shall at all times Frankfort, Young, William A. for State investigate regulate” “any “and unusual dif- Liquors, Inc.
ferences between market and mini- PALMORE, Chief Justice. perti- mum in the contained file, nent contracts on etc. separate рroceedings originating two before the Kentucky Beverage Alcoholic requires producers 244.400 all to file KRS (hereinafter Board) Control Board ABC Department Beverage with the of Alcoholic Franklin adjudged Circuit Court certain vi- copies Control the fair trade contracts provisions1 tal of the Distilled Spirits and proрose under which to sell they sell Act, Wine Fair Trade seq., KRS 244.380 et wholesalers, liquor wine or and KRS to be in violation of the Commerce Clause2 requirement 244.410 exacts the same Constitution, of the United States the Sher- selling to retailers. Each con- Act,3 man Antitrust and Secs. 1 and 2 of the show, among things, tract must other Appeals in both stipulated minimum resale “arrived price, cases were transferred to this court and prescribed by at in the amount ... KRS consolidated for purposes argument 244.390, provided by the manner disposition. 244.390,” (3) subsection of KRS etc. exceptions With not here pertinent, KRS declares that licensee KRS 244.470 prohibits liquor 244.380 the sale of wine or liquor who sells or wine оr for less offers name, that bears the brand or trademark of price stipulated than the in a fair trade distiller, rectifier, blender, vintner or statutes, contract entered into under these owner, open competition and is in fair and contract, party whether or not he is a produc- commodities of the same class whiсh guilty competition, shall be of unfair others, ed by except pursuant to a “fair ground is a for license-revocation under providing trade” contract that the purchas- er will not resell product “except 243.490(2). at the KRS 244.380, 1.Specifically, KRS 244.390 and 244.- 2.Art. Sec. U. S. Constitution. originated 470. The statute as Ch. Acts of seq. 3.15 U.S.C. Secs. 1 et all levels of distribution.” is to confine Commonwealth The effect these statutes follow, however, that because It does competition liquor and wine out it is carried law is on the books industry producer to the manufacturer or be, appears fact as practice. The actual Only level the economic ladder. by the brief submitted indicаted in the prices purely ducer is free to set his own dealers, repeal until the wholesale competition. accordance with the dictates of statute) by (the affirmation 244.245 *3 originated, At the time these lawsuits how- the minimum Assembly the 1982 General ever, Kentucky had what is known as an was producer from to wholesaler markup statutе, (enact- “affirmation” 244.245 KRS by set the price to whatever was applied 1978), required every producer ed in which by it as the lowest producer and certified certify to that it would not sell or offer its product any it in price at which sold products any for sale in other state or affirmation,” it repeal the states. “The than prices District Columbia at lower reinstate presumably “will now argued, is charged those to licensed whole- (Emphasis the formula determination.” repealed by salers. This statute was event, for added.) possible it is not any Assembly, 1982 General and in course of to rise above regulations the administrative arguments parties oral before this court the Board un- the statutes. Even if the ABC agreed that the cases be decided on determining task of dertakes the elaborate is, basis the law as it now without consid- spirits in minimum case values of distilled eration of KRS 244.245. 3:010, 804 KAR specified by the manner During pertinent litiga- all times to this price of wine minimum wholesale and the Board, regula- pursuant the ABC to its 3:030, KAR such determi- pursuant to 804 241.060, tory powers under 13.082 and binding producer, on the nations are not has had effect certain administrative selling price if his and regulations designed implement to different, language happens plain to be these, aforementioned statutes. One of 244.390(3) markup to requires of KRS 3:010, paid KAR directs the Board “from timе to actual ... be calculated “on the spirits or wine sold ...” hearing time ... for the distilled by order after notice and added.) By no amount of calcu- (Emphasis adopt minimum case values distilled [to] [of Board regulating can the ABC lating mini- spirits] upon the basis of which the to a statutory markups applicable make the markup mum of the whоlesaler must be the actual figure different from taken. The minimum case values shall re- paid. charged and flect actual cost of the delivered case (determined in accordance come to confer- spirits distilled the statutes The closest control princi- ring of administrative generally accepted аccounting some 244.390(6) directs is that KRS prices ples), including producers’ a reasonable Beverage Con- of Alcoholic Department thereof, markup, and the determination regu- investigate and “at all times trol [to] the board shall take into consideration mar- between unusual differences any late handling and stor- production, total costs of minimum resale ket age, marketing ...” If contracts on file. for in fair trade vided Similarly, 804 KAR 3:030 establishes or- appears it upon investigation wine, determining method for the cost disrupted has been of the market derliness mainly based on current for Califor- prices, licensees in market by fluctuations bulk, provides nia wines in shаll be practices for such responsible markups be added to this “mini- statutory competition ...” guilty of unfair deemed mum base cost” in to establish a order possibility Quite aside from the distinct price. wholesale vague for is too particular subsection enforcement, Board findings In its of fact the ABC cer- application and рractical regulations Department cited these various statutes and it not authorize tainly does direct- in the form of support any remedy of its factual conclusion to effect revisions. ing price fair actively supervised trade law “is The point of this particular analysis About the weakest argument that can be is that thе state has nothing against to do with made a clear enunciation of what a prices and pricing of court thinks in liquors wines and ex a formal is that the cept “dictum,” for statement establishing necessary or was not enforcing mini True, to a mum decision of the case. the court producer to wholesaler did not in pass validity that сase on the and from wholesaler to retailer. These seq., surely KRS 244.080 et but it was in- minimum markups are entirely statutory, cumbent explain why to it was have remained unchanged since the law was reaching a conclusion that in apparent 1940,4 first enacted in are subject not conflict with what it had held in Reeves v. repeal or through any process modification By distinguishing Simon. Reeves v. Simon of monitoring, supervision “pointed re the court made a conscious not choice except examination” as the General As it, override and we do not see sound sembly itself may accomplish choose to according particular reason to this legislatiоn. direct provisions The of 804 *4 bit of “dictum” prec- a reasonable of KAR 3:010 and 3:030 to the effect that they edential weight. shall be applied to calculated figures cost rather than actual prices simply Simon, contended, appear to But in Reeves v. it is be in statute, conflict with the the thrust of the argument along hence unаu the thorized lines of case, therefore, provisions and void. constitutional other than This so, 1 and 2. may must be Secs. That be but what decided on the basis of the statutes the court hold in very did that case leaves alone.
little doubt argument that an centered on opinion It is our that the trial court 1 2 Secs. and would have met the samе was correct in determining that stat fate: provide utes system for a pricing of resale say cannot that instant law “[We] that conflicts with the Act Sherman as that calling strict control and the elimi- Act has come to be construed the U. S. competition nation of ruinous has no rela- Supreme agree, Court. We cannot how subject arbitrary to the or that it is ever, violate 1 or 2 Secs. discriminatory not based sub- Kentucky Constitution.6 While it is true Simon, grounds.” stantial Reeves v. 160 that in Company General Electric v. Ameri p. at 5.W.2d can Buyers Cooperative, Ky., 316 S.W.2d considering In whether Reeves v. Simon (1958), 354 this court held Kentucky’s Fair should now be overruled passage after the (KRS Trade Act 365.090) 365.080 and void of 40 years facing we find ourselves
on that ground, in the same breath it distin
principle
same bedrock
ju-
constitutional
guished the statutes involved in this case as
risprudence that the court faced then —that
follows:
is,
legis-
if there is
reasonable basis for
although comparable,
“And
the statute
people
lation that
treats one class of
relating to
markup
occupation
their business or
differently
beverages,
alcoholic
244.380 et seq.,
another,
uphold
the courts should
distinguishable,
is
for its constitutional va-
legislative choice.
It
is well known and
lidity
legislative
rests on the
power
broad
long recognized
liquor
business
regulate and
intoxicating liquor.
control
suрervision
warrants closer
and control
Simon,
793,
See Reeves v.
Ky.
289
160
pur-
the state than most other commercial
149.”
S.W.2d
pricing
suits. Whether the
of commodities
2,
guarantees, among
things,
4. See Ch.
Sec. Acts of 1940.
6. Const. Sec. 1
other
right
acquiring
protecting proper-
“the
Arizona,
5. Cf. Bates v.
ty.”
negates
State Bar of
433 U.S.
arbitrary
2
Sec.
the existence
350, 362,
2691, 2698,
“lives,
97 S.Ct.
53
power
liberty
L.Ed.2d 810
property
(1977);
Liquor
California
Dealers v. Midcal
freemen,” etc.
Aluminum,
97, 105,
937, 943,
445 U.S.
100 S.Ct.
(1980).
63 L.Ed.2d 233
apply
Act does
held that
Sherman
separated out
ought to be
in that business
action,
may
and that
control
individual
from the other areas
state
to state vis-a-vis
argua-
is
question, but at least it
could not violate
programs
be a fair
regulаtory
state
ble,
argument
104, 100
we think it is an
p.
at
Midcal,
p.
S.Ct.
it.
445 U.S.
of the General
prerogative
within the
falls
other
in this as in
problem
real
is that
to decide. Our conclusion
Assembly
whether
is to determine
similar cases
reaches be-
of Reeves v. Simon
spirit
primarily
conduct
anticompetitive
provisions specifi-
yond those constitutional
private individuals
the action of
action or
calls for
mentioned in the
cally
authority.
cloak of state
under a
1 and
respect
the same
to Secs.
answer
is the latest
writing, Midcal
As of this
And we
2 of the
subject by the U. S.
word on the
to overrule it.
decline
stat-
Court,
the California
holding invalid
ques-
Act
We come now to the Sherman
Paral-
of wine.
relating
pricing
utes
tion.
pricing
liquor
covering the
lel statutes
is ex-
“Although this federal
interest
ground
invalid on the same
had been held
rather
than a
pressed through
statute
in Rice v.
Supreme Court
by the California
‘exer-
provision, Congress
constitutional
Bd., 21
Appeals
Bev. Control
Alcoholic
possessed’
under
power
all
eis[ed]
Cal.Rptr.
579 P.2d
Cal.3d
approved
Commerce Clause when it
all
statutes bound
(1978).
acknowledge the
Act. We must
Sherman
set in one of
to a resale
poli-
procompetition
of the Act’s
importance
a whole-
producer and
ways
two
—either
v. Midcal
cy.”
Liquor
California
Dealers
contract set-
*5
into a fair trade
sаler entered
937,
Aluminum,
97, 105,
445
100
U.S.
S.Ct.
a
posted
price, or the
ting the
943,
(1980)
ing arrangement. As Parker tucky ‘a As so Constitution. modified state does give immunity to those who are affirmed.
violate the Act by authorizing Sherman it,
them to violate
by declaring
or
that their
AKER,
STEPHENS, JJ.,
O’HARA
”8 Midcal,
action is lawful.’
p.
U.S. at
only.
concur in the result
106,
stance participates
fixing prices only to the extent that it adds
statutory to prices fixed private individuals. From the stand
point of “state action” this difference is
merely superficial, per because does not mit any judgmental choice the state The ELECTIONS OF TAY- BOARD OF respect resulting price. It is *6 COUNTY, Kentucky, Composed of LOR only а mechanical progression the ini Phillips, Caffee, Randall G. Ezra James realize, tial set by producer. We Gaines, Lacy, Appellants, C. and Donald course, that in fixing initial producer operates a free market and v. competitive pressure reacts of other BOARD OF OF the EDUCATION CAMP- brands, but so that was in California as INDEPENDENT BELLSVILLE well. Thus we are forced same con DISTRICT, Appellee. SCHOOL court, clusion reached trial by the which is there is no fundamental basis Appeals Kentucky. Court of which we can distinguish this case from June Midcal.
As in parties argue the appealing within protec- statutes fall 21st Amendment. We find in theory even less substance than did the
U. S. Midcal. Court in
The judgments of the trial court should
be modified to their conclusions eliminate clearly policy. parties articulate a concede that stat- satisfy Parker test in that utes first