ALLIED PROPERTIES (а Corporation), Respondent, v. DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL OF THE STATE OF CALIFORNIA, Appellant.
S. F. No. 20236
In Bank
Nov. 30, 1959.
141
Brobeck, Phleger & Harrison, Hart H. Spiegel, Robert J. Drewes, Pillsbury, Madison & Sutro, John A. Sutro, Noble K. Gregory, Allan N. Littman, Heller, Ehrman, White & McAuliffe, George A. Blackstone, J. Albert Hutchinson,
Steinhart, Goldberg, Feigenbaum & Lader, John H. Steinhart and Marc M. Monheimer for Respondent.
M. Mitchell Bourquin, George Olshausen, Samuels, Jacobs & Sills and William K. Coblentz as Amici Curiae on behalf of Respondent.
GIBSON, C. J.—Allied Properties was accused of violating sections 55.5, 55.6 and 55.65 of the Alcoholic Beverage Control Act and rule 99 of the State Board of Equalization by advertising and offering to sell at retail distilled spirits and wines at prices less than the minimum resale prices provided for by fair trade contracts filed with the board.1 (Subsequеntly the Department of Alcoholic Beverage Control became the constitutional successor of the board with regard to liquor control (Const., art. XX, § 22, as amended in 1954), and it has been substituted as the defendant herein. For convenience we shall refer to the statutes as they appeared before codification, and we shall use the word “department” in referring to the administrative body in charge of liquor control.) Allied‘s off-sale general license was suspended for 15 days, and in mandamus proceedings to review the suspension order the superior court determined that the provisions of the act and the rule cited above were invalid. This appeal followed. The facts are not disputed, and the sole question raised is whether the provisions are constitutional.
Section 55.5 (Stats. 1937, ch. 758, p. 2173, now
Section 55.6 (Stats. 1947, ch. 657, p. 1698, now
Section 55.65 (Stats. 1949, ch. 574, p. 1064, now
Rule 99 provides in part that no manufacturer or wholesaler shall sell distilled spirits except pursuant to a fair trade contract as provided for by section 55.5 of the act, that copies of such fair trade contracts shall be filed with the department, and that no licensee shall advertise or offer for sale alcoholic beverages at retail at a price less than the minimum resale price provided for by a fair trade contract filed with the department pursuant to this rule. (Cal. Admin. Code, tit. 4, § 99, subds. (a), (b), (f).)
Under
In passing upon the fair trade provisions we must be guided by the well-settled principles that the presumption is in favor of constitutionality and that the invalidity оf an act of the Legislature must be clear before the statute can be declared unconstitutional. It is not our province to weigh the desirability of the social or economic policy underlying the statute or to question its wisdom; they are purely legislative matters.
Where, as here, it is urged that a statute does not constitute a proper exercise of the police power, the inquiry of the court is limited to determining whether the object of the statute is one for which that power may legitimately be invoked and, if so, whether the statute bears a reasonable and substantial relation to the object sought to be attained. (Wholesale Tobacco Dealers Bureau v. National etc. Co., 11 Cal.2d 634, 643 [82 P.2d 3, 118 A.L.R. 486].) Acting under this rule, the courts have upheld statutes regulating prices and restricting the freedom to bargain. (Wholesale Tobacco Dealers Bureau v. National etc. Co., 11 Cal.2d 634, 651-656 [82 P.2d
A state hаs particularly wide powers with respect to the manufacture of and traffic in alcoholic beverages and may provide for their prohibition or impose such conditions and regulations as it may deem proper. (Ziffrin, Inc. v. Reeves, 308 U.S. 132, 138-139 [60 S.Ct. 163, 84 L.Ed. 128]; Crowley v. Christensen, 137 U.S. 86, 91 [11 S.Ct. 13, 34 L.Ed. 620].) The same broad powers are recognized in
Many states have adopted price-regulating measures intended to prevent retail price cutting and bargain sales of alcoholic beverages and the evils considered to follow from those practices, namely, excessive purchase and use of liquor and disruption of orderly marketing conditions. Where the constitutionality of such measures has been challenged, most courts have upheld them. (Gipson v. Morley, 217 Ark. 560 [233 S.W.2d 79, 83]; Schwartz v. Kelly, 140 Conn. 176 [99 A.2d 89, 91]; Reeves v. Simons, 289 Ky. 793 [160 S.W.2d 149, 151]; Supreme Malt Products Co. v. Alcoholic Beverages C. Com‘n, 334 Mass. 59 [133 N.E.2d 775, 778]; Dundalk Liquor Co. v. Tawes, 201 Md. 58 [92 A.2d 560, 561]; Butler Oak Tavern v. Division of Alcoholic Bev. Control, 20 N.J. 373 [120 A.2d 24, 30]; Gaine v. Burnett, 122 N.J.L. 39 [4 A.2d 37, 39]; Pompei Winery v. Board of Liquor Control, Ohio App., 149 N.E.2d 733, 748. But cf. Scarborough v. Webb‘s Cut Rate Drug Co., 150 Fla. 754 [8 So.2d 913, 921]; Schwegmann Bros. v. Louisiana Board, etc. Control, 216 La. 148 [43 So.2d 248, 259, 14 A.L.R.2d 680].)
The Alcoholic Beverage Control Act states that it was enacted “for the protection of the safety, welfare, health, peace, and morals of the people of the State to eliminate the
The fact that the act provides for fair trade contracts indicates that its purposes include those of the general Fair Trade Act (Stats. 1931, ch. 278, p. 583, now
The means provided in a statute must be accepted as being reasonably designed to accomplish its objective unless it is unquestionable that they are improper. (Wholesale Tobacco Dealers Bureau v. National etc. Co., 11 Cal.2d 634, 646 [82 P.2d 3, 118 A.L.R. 486]; Miller v. Board of Public Works, 195 Cal. 477, 490 [234 P. 381, 38 A.L.R. 1479].)
The legislative purpose of preventing price cutting and price wars among retailers is, of course, effectively attained under the fair trade provisions of the Alcoholic Beverage Control Act by having each producer or wholesaler establish the retail price of his own brand, and it was held in the Max Factor case (5 Cal.2d at p. 455) that the Legislature could reasonably proceed on the theory that the public will be adequately protected against excessive prices by the ordinary play of competition between manufacturers.
The statutory provisions also operate to remove some factors which may lead to intemperance because the elimination at the retail level of price cutting, bargain sales, and advertising of low prices tends to reduce excessive purchases of alcoholic beverages. It is true, as Allied points out, that there is nothing in the Alcoholic Beverage Control Act to prevent producers and wholesalers from setting low prices that may induce a large consumption of such beverages. It was not the purpose of the legislation, however, to reduce intemperance by establishing high prices generally but only by preventing the increase of consumption of alcoholic beverages resulting from retail price cutting and bargain sales, and the Legislature may take reasonable measures to eliminate some of the
Allied contends that the fair trade provisions of the Alcoholic Bevеrage Control Act unlawfully delegate legislative power insofar as they provide that each producer and wholesaler must set the price at which retailers must sell his product. The question of unlawful delegation under the general Fair Trade Act was decided in Scovill Mfg. Co. v. Skaggs etc. Drug Stores, 45 Cal.2d 881 [291 P.2d 936], where prices set by a fair trade contract were held to be binding on a retailer who had not signed the contract. We there stated: “Here the acts of private parties in entering into contracts for the sale of commodities constitute the facts in contemplation of which the Legislature acted, and upon the existence of which the provisions of the enactment were to be applicable. The private contracts are no more legislative in character than are other acts or conduct of private parties undertaken as a prerequisite to the application of a statute. The consequence that the statute has become applicable, and conduct in violation thereof has become actionable, is in no way due to the exercise of any assumed legislative power on the part of the contracting parties. [Citation.] We conclude that there is no delegation of the legislative function in violation of constitutional prohibitions.” (45 Cal.2d at p. 888.)
Whether the same conclusion applies to the provisions involved here depends upon whether the function performed by the persons who assertedly exercise delegаted legislative powers is the same under the general Fair Trade Act and the Alcoholic Beverage Control Act. Under both statutes the function of such a person is to set the price of his own product on the basis of his personal interest, as affected by free competition in the market, and the result in each case is that all retailers, whether or not they have signed fair trade contracts, are bound by the prices set.
A second difference is that, in addition to the civil remedies common to both statutes, the Alcoholic Beverage Control Act provides for administrative and criminal sanctions, but this aspect of the act does not involve any delegation of power, the sanctions being prescribed by the Legislature, not by the producers or wholesalers. The Legislature, of course, has power to provide for administrative sanctions with respect to a licensee who violates a regulation deemed to be in the public interest. We need not determine whether the criminal sanctions are proper since such penalties were not imposed in this case, and the provision authorizing them is severable.
The general Fair Trade Act, although designed in part to reduce cutthroat competition, is primarily intended to protect the property rights of producers and wholesalers (Max Factor & Co. v. Kunsman, 5 Cal.2d 446, 462 [55 P.2d 177]), whereas the primаry purpose of the fair trade provisions of the Alcoholic Beverage Control Act is to promote orderly marketing conditions and temperance. This difference in primary purpose, however, has no significant bearing on the question of delegation of legislative power because it does not change the functions of the persons to whom a delegation is assertedly made. The producers and wholesalers of alcoholic beverages are not called upon to set the retail prices for their products on the basis of what will promote temperance and orderly marketing conditions, but, as we have seen, it is contemplated that, in setting prices, they will seek to promote their own business interests in the light оf competition, which was also the case under the general Fair Trade Act,
Here, as in the Scovill case, the determinations to be made by the producers and wholesalers are not legislative in character but merely “the facts in contemplation of which the Legislature acted, and upon the existence of which the provisions of the enactment were to be applicable.” (Scovill Mfg. Co. v. Skaggs etc. Drug Stores, 45 Cal.2d at p. 888.)
Upon the same reasoning as was used in the Scovill case, the Supreme Court of Connecticut decided that provisions which were substantially similar to those before us did not constitute an unlawful delegation of legislative power. (Schwartz v. Kelly, 140 Conn. 176 [99 A.2d 89, 93].) A similar statute was held invalid in Scarborough v. Webb‘s Cut Rate Drug Co., 150 Fla. 754 [8 So.2d 913, 921], on the ground, among others, that it provided for an improper delegation of power, but the case is not persuаsive because it contains no reasoning in support of this conclusion.
State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, 40 Cal.2d 436 [254 P.2d 29], relied on by Allied, is distinguishable from the present case. The court there declared unconstitutional a statute which delegated to the State Board of Dry Cleaners the power to fix minimum price schedules. The principal ground of the decision was that the price-fixing provision could not be upheld as a proper exercise of the police power, but, as we have seen, the statutes involved here come within that power. The court also relied on the ground that there was a delegation of legislative power without ascertainable standards to an administrative board composed mainly of members of the industry who would participate in fixing prices to be charged by their competitors. The Thrift-D-Lux case does not hold that all types of price fixing are legislative in character, but that there was a delegation of legislative power under the special facts present in that case. On the other hand it was held in Scovill Mfg. Co. v. Skaggs etc. Drug Stores, supra, 45 Cal.2d 881, 887-888, that there was no delegation of legislative power where manufacturers, acting in their private capacity under the general Fair Trade Act, fixed the prices for which their own products were to be sold at retail by persons who were not their competitors. The distinguishing factor is that the dry cleaners’ board was directed to fix uniform minimum prices for the services of all dry cleaners in limited areas on the basis of what it believed was
The judgment is reversed.
Traynor, J., Spence, J., and White, J., concurred.
MCCOMB, J.—I dissent. I would affirm the judgment for the reasons expressed by Mr. Justice Hanson in his dissenting opinion when the case was before the District Court of Appeal, (Cal.App.) 338 P.2d 1013, 1023.
PETERS, J.—I dissent.
In determining the sole question of law which is presented in this case the majority opinion holds that certain sections of the Alcoholic Beverage Control Act (specifically
There are basic distinctions between Fair Trade Acts and
Purpose: Fair Trade Acts were designed to prevent the unsalutory effect of price war on the economy as it existed in a period of depression and low prices (1931). To accomplish this purpose they frankly and openly seek “to protect trade-mark owners, distributors and the public against injurious and uneconomic practices in the distribution of articles of standard quality under a distinguished trademark, brand or name” (Max Factor & Co. v. Kunsman, supra, at p. 454). In other words, the prime purpose of the Fair Trade Acts was to promote trade. In order to attain this objeсtive the legislation fostered a system which would provide a floor to prices, and thus insure a profit. The fact that such price regulation also provided protection for the manufacturer‘s property right in his trade-marked articles was only incidental to the main purpose. On the other hand, the Alcoholic Beverage Control Act provides a system of setting minimum prices for the basic purpose of reducing trade in spirituous liquors. Under the heading of “Purposes” the act states that it is “an exercise of the police powers of the State... to eliminate the evils of unlicensed and unlawful manufacture, selling, and disposing of alcoholic beverages, and to promote temperance in
Nature of the Contract: Both the Fair Trade and the Alcoholic Beverage Control Acts are based upon the existence of a contract between producer and retailer, whereby the latter agrees not to sell at less than the price determined by the former. Here the similarity ends. The Fair Trade Acts are voluntary or consensual, in that neither party is required to enter into such a contract.3 The Alcoholic Beverage Control Act is mandatory in that no spirits mаy be sold in California at retail except pursuant to such a contract (
The Penalty: The penalties for a breach of the Fair Trade Acts are civil, only, giving to the injured party the right to damages or an injunction. The penalty for the breach of the price fixing regulations of the Alcoholic Beverage Control Act are both civil (
The Field Covered: The Fair Trade Acts do not prevent a dealer who is dissatisfied with the prices set by a manufacturer from engaging in competition therewith. If he is unable to find a supplier of a competing article who will enter into a contract at a lower retail price, he may still deal in competing articles which are not fair-traded. Under the Alcoholic Beverage Control Act the retailer has no such alternative. He must deal exclusively in goods the price of which has been set by the distiller, or he must go out of business (
It is not contended that the foregoing distinctions, of themselves, invalidate the Alcoholic Beverage Control Act. They are intended only to illustrate that there is a wide divergence between purpose, nature, penalty and coverage of the two acts. Because of such variance the Alcoholic Beverage Control Act
It is to be noted that the act itself, as quoted above, states that it is an exercise of the police power. No one can doubt that the subject matter (alcoholic beverages) is a proper field for the exercise of that power, even to the extent of legislating away the entire right to deal in intoxicating liquors. Nor can it be doubted that the expressed purpose of the act is entirely proper, and within the legislative function. I also agree with the majority opinion in its holding that the judiciary has neither the right nor the duty to question the wisdom of the legislative purpose. But at this point the majority opinion leaps a gap which I am unable to negotiate. After announcing that the courts may, and have a duty to, determine “whether the statute bears a reasonable and substantial relation to the object sought to be attained” (majority opinion, ante, pp. 146, 147)4 the opinion merely discusses the authority to legislate. At no point does the opinion analyze the various provisions of this statute as they may be related to “the object sought to be attained.” When so analyzed the provisions of the act which are here under attack must be found to have no reasonable relation to the expressed purpose. This being true, they admittedly fail to comprise a legitimate exercise of the police power.
As shown above, the stated purpose of the act is to “promote temperance in the use and consumption” of alcoholic beverages. But the sections here involved are restricted solely to a price fixing scheme. The only reason assigned (by both respondent and the majority) for the inclusion of these provisions is an assumed legislative purpose (not expressed in the act) to prevent “price wars” which would lead to unbridled purchases. While the provisions of sections 24750 et seq. may prevent “price wars” in the retail sale of any specific trade-marked brand, they do not prevent, or attempt to prevent, “price wars” between competing brands.5 Neither
Another example of how the legislative provisions fail to accomplish their stated purpose is to be found in the language of
For these reasons, it is clear that the price control features of the Alcoholic Beverage Control Act bear no reasonable relation to the stated purpose of the act. While this is a sufficient reason to hold those provisions to be an unjustified exercise of the police power, there is yet another, and perhaps more compelling reason to hold them invalid.
The price control provisions of the act give to the distiller the exclusive right and obligation of setting the retail price at which his product shall be sold in California (
Moreover, the Alcoholic Beverage Control Act sets neither guide nor standard to aid those permitted to fix prices. Even if the legislative authority were delegated to the Department of Alcoholic Beverage Control, without such provision for standards, the price fixing portions of the statute would be unconstitutional (Tarpey v. McClure, 190 Cal. 593, supra; Dominguez Land Corp. v. Daugherty, 196 Cal. 468 [238 P. 703]; Agnew v. City of Culver City, 147 Cal.App.2d 144, at pp. 153-154 [304 P.2d 788]; In re Petersen, 51 Cal.2d 177, at p. 184 [331 P.2d 24]; State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, supra, 40 Cal.2d 436).
In the Tarpey case it is said, at page 600, that “the legislature may, without violating any rule or principle of the
In the Dominguez Land case the cоurt was considering the propriety of a statute delegating authority to the Commissioner of Corporations. At page 484 it said, “A familiar illustration is where the legislature enacts a law prescribing that the rates to be charged by a public utility shall be ‘reasonable,’ and creates a commission with power to investigate and fix the rates. If, however, no standard by which the officer is to be governed be prescribed by the lawmakers, then there is an attempt to entrust a mere administrative officer with the plenary power of the legislature.”
Since the act under scrutiny herein offers no guide of any kind to the persons given the obligation of setting prices, the price fixing portion of the statute is invalid. These features thereof are severable, and hence need not require invalidation of the entire act. The price fixing provisions come squarely within the following language (quoted from Carter v. Carter Coal Co., 298 U.S. 238, 311 [56 S.Ct. 855, 80 L.Ed. 1160]) relied upon in the Thrift-D-Lux case, supra (p. 448): “a statute which attempts to confer such power undertakes an intolerable and unconstitutional interference with personal liberty and private property. The delegation is so clearly arbitrary, and so clearly a denial of rights safeguarded by the due process clause of the Fifth Amendment, that it is unnecessary to do more than refer to decisions of this court which foreclose the question.”
In my opinion, the judgment should be affirmed.
Schauer, J., concurred.