295 N.W. 737 | Wis. | 1940
Lead Opinion
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *43
These were separate actions commenced on May 6, 1939, by Ed. Schuster Company, Inc., a corporation, and Herzfeld-Phillipson Company, a Wisconsin corporation, respectively, to enjoin the district attorney of Milwaukee county from enforcing the provisions of ch. 52, Laws of 1939, which created sec.
"The giving, offering, issuance or delivery of any trading stamp, token, ticket, bond, slip, check or other similar device having a redemption value, by any person, firm, corporation or association, in connection with the resale of any goods, wares or merchandise which were bought by such person, firm, corporation or association with knowledge or notice that the resale price thereof had been fixed or established by the producer or distributor thereof, when the price obtained on the resale less the total redemption value of the device herein mentioned given in connection therewith is below the fixed or established minimum price, is declared to be an unfair method of competition in business, and notwithstanding the provisions of subsection (1) of this section, or any other provision in the statutes, is prohibited. In addition to the penalty provided in section
Plaintiffs, Ed. Schuster Company, Inc., hereinafter called "Schusters," and Herzfeld-Phillipson Company, hereinafter called the "Boston Store," have for many years operated department stores in the city of Milwaukee. Schusters have three such stores in outlying districts; the Boston Store is located in the central business district of the city. For more than fifty years Schusters have issued and redeemed cash-discount stamps for cash purchases of merchandise or prompt payment of credit accounts. For thirty-five years the Boston Store has engaged in similar practices. The intervening defendant Gimbel Brothers, Inc., is a competitor of plaintiffs and does not issue trading stamps in connection with its business. *46 Defendants Wisconsin Retail Jewelers Association, Inc., Retail Furniture Dealers Association, and Wisconsin Pharmaceutical Association, as well as defendants Raasch and Janke, who were druggists, are in certain respects competitors of plaintiffs or have members who are competitors, and so far as the record discloses none of these defendants issue or redeem trading stamps.
There are certain differences in mechanics between the Boston Store and Schuster systems, but in general each gives trading stamps with cash purchases or promptly paid credit balances. These stamps are redeemed in cash by the stores, and books are furnished to customers in which these stamps may be placed until a substantial number are collected. The stamps issued by Schusters bear on their face a stated cash value of one-half mill, and are issued at the rate of four for each ten-cent cash payment, constituting a discount of two per cent of the amount of the payment. They are issued two for each ten-cent payment of promptly paid credit accounts, instalment contracts, etc., constituting a discount of one per cent. The Boston Store stamps are of the cash value of one and two-thirds mills. They are issued at the rate of one for each ten-cent payment, whether cash or promptly paid credit accounts, and constitute a discount of one and two-thirds per cent on the payment, except that on Tuesdays two stamps are issued for each ten-cent payment and cash purchase and cash down payment, this being equivalent to a discount of three and one-third per cent. While it is customary to collect enough stamps to entitle the customer to the payments of one or two dollars, both stores redeem stamps in any amount capable of being paid for in cash or currency. Nearly all of the customers of these stores avail themselves of the stamps. It is the claim of the Boston Store and Schusters that these stamps merely furnish the mechanics for encouraging cash purchases and prompt payment of bills, and that they simply represent discounts for cash rather than underselling devices involving goods purchased. *47
The complaint of the stores not issuing stamps, which is claimed by defendants to have led the legislature to enact sec.
"(3) Except as provided in subsections (4) and (6), no contract relating to the sale or resale of a commodity which bears, or the label or content of which bears, the trade-mark, brand or name of the producer or owner of such commodity and which is in fair and open competition with commodities of the same general class produced by others, shall be deemed a contract or combination in the nature of a trust or conspiracy in restraint of trade or commerce by reason of any of the following provisions contained in such contract:
"(a) That the buyer will not resell such commodity except at the price stipulated by the vendor.
"(b) That the vendee or producer shall require that any person to whom delivery of a commodity is made for the purpose of resale shall agree that the latter will not, in turn, resell except at the price stipulated by the vendor or vendee.
"(4) Every contract containing the provisions referred to in subsection (3) shall include the provision that such commodity may be resold without reference to such contract in the following cases:
"(a) In closing out in good faith the owner's stock or part thereof for the purpose of discontinuing delivering any any such commodity.
"(b) When the goods are damaged or deteriorated in quality, and notice is given to the public thereof. *48
"(5) Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract referred to in subsection (3), whether or not the person so advertising, offering for sale or selling is a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby."
The propositions claimed by defendants to establish the validity of the act are made upon two alternative assumptions: (a) That sec.
Assuming that the court rejects these contentions, defendants claim that, considered in connection with the Fair Trade Act, sec.
It is next contended that if the court, giving the act its broad construction, declines to sustain its validity either independently or in connection with the Fair Trade Act, it is bound to construe sec.
At the outset, it is considered to be important and convenient to construe sec.
We do not consider it necessary to use as a make-weight in reaching this conclusion the presumptions of validity in which courts are required to indulge, or to apply the doctrine that where an act is subject to two constructions, one of which will render it valid and the other invalid, a construction must be adopted which will give validity to the act. If it were necessary, the application of these doctrines would doubtless compel us to accept the narrower construction, even though it might not be as obvious as the broader construction. We shall not go into these matters because without the application of any of these rules of construction the legislative purpose and intent is sufficiently clear.
Having reached the foregoing conclusions with reference to the construction of the statute, the question presented is whether a statute is constitutional which prohibits the use of trading stamps redeemable in cash in connection with the resale of goods bearing trade-mark brand or mark of the producer or owner and concerning which there have been valid fair-trade contracts fixing a minimum resale price if the rebate involved in the stamp redemption brings the retail price of the goods below that stipulated in the fair-trade contract.
Before dealing with the specific objections to this act, it may be well to consider the extent of the police power of the state to deal with the subject of trading stamps. That it has the power to deal with the subject and to regulate and even *52
prohibit the issuance of trading stamps as a business device seems to us to be well established by this court in the Trading StampCases,
Several contentions are made that merit brief mention. It is suggested that the foregoing cases deal with stamps redeemable in merchandise and not in cash, and that their doctrines must be considered applicable only to such situations; and that since the Wisconsin act requires redemption in cash, all of the evils which the police power may validly reach are eliminated from the business of stamp merchandising, and the whole subject is out of the field of legislative regulation, or at least of legislative prohibition. We think this is not true. The Washington statute involved in the Tanner Case,supra, required that all stamps must be redeemed in cash if demanded by the purchaser. It was held that this difference did not affect the principle of the Rast Case, supra, which held valid a statute imposing special license taxes on merchants using trading stamps or coupons. Reliance is also had upon the fact that in the Trading Stamp Cases, supra, a distinction was taken between dealers who issued stamps redeemable in cash and those who redeemed in merchandise only. The court there said (p. 626):
"It is manifest that there is a clear and well-defined distinction between such practices and that of issuing a `slip, ticket, or check' which bears upon its face a stated cash value `redeemable only in cash.' . . . *53
"When the purchaser and seller understand that the token, coupon, or stamp issued with the sale of goods is of a stated cash value, redeemable in cash and only by the person issuing it, the transaction thereby becomes purged of the objectionable features and influences which such legislation condemns, and it follows naturally and logically that the legislative function has been properly exerted by enactment of the exception above quoted to remedy the evil incident to the unrestricted use of the trading stamps."
This statement was in answer to the contention that the classification which prohibited redemption of stamps in merchandise and authorized issuance of stamps redeemable in cash was an arbitrary classification and that the legislation was therefore discriminatory and void. The court did not say, and we think it could not say, that the whole subject of trading stamps was not within the scope of the police power. It did not categorically determine that the issuance of trading stamps redeemable in cash was completely void of all possible evils, but rather that there were marked differences in the extent of the evils and that the legislature might reasonably make a distinction between the two. It is evident from the federal supreme court cases and from the Trading StampCases that the whole subject of trading stamps is a matter for legislative regulation within the police power; that while many of the evils which the legislature might suppose followed from the use of trading stamps might be thought peculiar to those redeemable in merchandise, others listed by the Rast Case
might be thought equally to attend the issuance of stamps redeemable in cash; and that the legislature may regulate and even prohibit entirely the use of these devices. If the police power may be so exercised generally, it may with greater reason be used to fortify the policy of a validly enacted fair-trade law. In this connection the following quotation from the case of Nebbia v. New York,
"Legislation concerning sales of goods, and incidentally affecting prices, has repeatedly been held valid. In this class fall laws forbidding unfair competition by the charging of lower prices in one locality than those exacted in another, by giving trade inducements to purchasers [citing Rast v. VanDeman Lewis,
We conclude that the act is not invalid because of want of power in the legislature to deal with the subject.
The statute having been construed and the general scope of the police power with respect to the subject matter of this controversy having been set out, we approach the detailed constitutional objections to the act as so construed.
The first objection to the act is that it is fatally discriminatory in that it selects for prohibition one form or manner of granting a cash discount. It is contended in this connection that the granting of a cash discount does not effect a reduction in price but is a reward for a prompt payment of accounts, thus reducing credit losses and expenses incident to the extension of credit and enabling capital which would otherwise be tied up in accounts receivable to be employed productively in the business. This contention really amounts to the claim that the act is a nullity because there is nothing on which it can operate; that the only type of trading stamp prohibited is one that effects a reduction of the resale price; and that trading stamps do not have this effect and therefore the legislature has not succeeded in prohibiting anything. The trial court met this contention by limiting the operation of the act to trading stamps granting more than a two per cent reduction in price upon the theory that two per cent represented a fair cash discount, and that a cash discount does not reduce the selling price but is simply a reward for prompt payment of accounts. The contention that trading stamps are merely a *55 species of cash discount has substance and perhaps is true. It does not follow, however, that so considered the issuance of stamps does not effect a reduction of the stipulated resale price, and the fact is that it does result in such a reduction. This is obvious in all cash transactions and only slightly less so than in those involving credit. Hence, we conclude that the trial court erred in holding that to the extent of a two per cent discount trading stamps do not operate to reduce the resale price and are not within the prohibition of the subsection. The statute contains a simple and unambiguous test. Trading stamps are not to be issued in connection with the resale of the goods described in the act "when the price obtained on the resale less the total redemption value . . . is below the fixed or established minimum price."
The next question is whether sec.
In connection with this general claim that sec.
"Parking privileges, delivery service, and other services which defendant asserts are given by other stores, are provided for customers whether the articles purchased are under the protection of the Fair Trade Act or not, and are provided *57 regardless of and without reference to the amount of merchandise purchased. If one customer purchases merchandise of the value of $5 and another of the value of $500, each is accorded parking privileges and such other courtesies as are provided generally to the customers of the store. Trading stamps have a direct relationship to the price of the merchandise purchased. These stamps are not a store courtesy, but because of their fixed value in relation to the amount purchased constitute a discount on the purchase price of two mills on each ten cent purchase, or two cents on each purchase to the amount of $1, and double these amounts on the so-called double stamp days."
In addition to this, much of what has been said concerning cash discounts is applicable here.
With the construction of the act here adopted, several objections that are most applicable to a broader construction largely disappear. The objection that the law is fatally vague and uncertain cannot be successfully urged to the act as construed. What constitutes a fair-trade contract is clearly and definitely described in sec. 133.25, Stats. The limitations upon `such contracts, the type of goods involved, the stipulations that must be in the contract to permit occasional cutting below the minimum price, are unambiguous. The stamp merchant, we apprehend, would have no difficulty in recognizing a valid fair-trade contract if it came to his attention. In addition to this, for the prohibition to apply, he must know or have notice that the particular article is the subject of a fair-trade contract. Knowledge and notice are terms that the law has dealt with for years and offer no uncertainties sufficient to invalidate the legislation. It is true that when put upon notice the stamp merchant has the burden of finding out what the contract is and whether it conforms to the Fair Trade Act, but this is not of such an onerous character as to invalidate the legislation.Welch v. State,
The argument that the act broadens the scope of price fixing in the state under the antitrust acts and extends the scope of *58 the Fair Trade Act obviously depends upon a broad construction of the act, which we reject. The argument that sec. 133.25, Stats., constitutes an unlawful delegation of legislative power to private individuals was dealt with and rejected by WecoProducts Co. v. Reed Drug Co., supra.
The final contention relates to the penalty prescribed. Sec.
"Appellant urges that the divergence between civil and criminal laws relating to the same conduct undermines the validity of the exemption in the criminal statute and thus invalidates the whole of it. This argument is but a minor variation on appellant's main theme. It amounts to a claim that differences substantial enough to permit substantive differentiation in formulating legislative policy do not permit differentiation as to remedy.
"How to effectuate policy — the adaptation of means to legitimately sought ends — is one of the most intractable of legislative problems. Whether proscribed conduct is to be deterred by qui tam action or triple damages or injunction, or by criminal prosecution, or merely by defense to actions in contract, or by some, or all, of these remedies in combination, is a matter within the legislature's range of choice. . . .
"Legislation concerning economic combinations presents peculiar difficulties in the fashioning of remedies. The sensitiveness of the economic mechanism, the risks of introducing new evils in trying to stamp out old, familiar ones, the difficulties of proof within the conventional modes of procedure, the *60 effect of shifting tides of public opinion — these and many other subtle factors must influence legislative choice. Moreover, the whole problem of deterrence is related to still wider considerations affecting the temper of the community in which law operates. The traditions of a society, the habits of obedience to law, the effectiveness of the law-enforcing agencies, are all peculiarly matters of time and place. They are thus matters within legislative competence. To say that the legislature of Texas must give to farmers complete immunity or none at all, is to say that judgment on these vexing issues precludes the view that, while the dangers from combinations of farmers and stockmen are so tenuous that civil remedies suffice to secure deterrence, they are substantial enough not to warrant entire disregard. We hold otherwise. Here, again, we must be mindful not of abstract equivalents of conduct, but of conduct in the context of actuality. Differences that permit substantive differentiations also permit differentiations of remedy. We find no constitutional bar against excluding farmers and stockmen from the criminal statute against combination and monopoly, and so holding, we conclude that there was likewise no bar against making the exemption partial rather than complete."
Since the preparation of the foregoing opinion plaintiffs have directed the attention of the court to the decision of the supreme judicial court of Massachusetts in the case of Sperry Hutchinson Co. v. McBride, Director of the Division of theNecessaries of Life of the Commonwealth (Mass.),
By the Court. — Judgments reversed, and causes remanded with directions to enter judgments dismissing plaintiffs' complaints. A motion for a rehearing was denied, with $25 costs, in the Schuster case, and with no costs in the Herzfeld-Phillipson case, on March 11, 1941.
Dissenting Opinion
The act involved, instead of being general in its application, which seems to be the common understanding of it held by retailers, applies only to the very limited class of merchandise the price of which is governed by contract between the manufacturer and the retailers who on purchasing an article have agreed that they will not sell it for less than the price fixed by the manufacturer. When the price has been so fixed the act directly involved prohibits retailers who have received notice that the price of the article has been so fixed from granting stamps redeemable in cash in connection with sale of the article when the amount received, less the redemption value of the stamps, is less than the price fixed by the manufacturer. In Weco Products Co. v. Reed Drug Co.
The effect of delivering such stamps as are here involved in connection with sales is merely to allow a discount upon sales made for cash or prompt payment. Merchants commonly *62 allow such discounts for prompt payment of goods sold on account, and allowing such discounts is a legal practice. Utility rate commissions approve such practice, and no one would think of questioning its legality. Such allowances are commonly as great or greater than the redemption value of the stamps here involved. To permit the practice last stated and forbid the practice here involved is to exalt the mere mechanics of a thing over the reason for it. To permit merchants not using stamps redeemable in cash to allow discounts for prompt payments and to prohibit merchants issuing such stamps, as stated, from allowing them is in my opinion an illegal discrimination violative of the equality clause of the Fourteenth amendment.
It seems to me that the opinion of the court makes two assumptions that are erroneous. One is that the statute does not make a classification of merchants into those who issue the prohibited stamps and those who do not use them. Reading ofRast v. Van Deman Lewis,
The opinion of the court seems to take the position that prohibition of the issue of trading stamps redeemable in cash is justified as an exercise of the police power because the issue of stamps redeemable in goods may be prohibited under that power. This, in my opinion, is erroneous because prohibition of the use of stamps redeemable in cash is not within the reason of the prohibition of the use of stamps redeemable in goods. This is pointed out in the Trading Stamp Cases,
The police power covers prohibitions of trade practices that may be considered as detrimental to public health, public safety, public morals, and that nebulous and indefinite thing — public welfare. Obviously neither of the first two are here involved. *64 The third is not involved unless we can say, as said in the RastCase of stamps redeemable in goods, that using stamps redeemable in cash has "the seduction and evil" of a "lottery" and "gaming" and thus affects public morals. To me it seems obvious that it cannot be so said. As to public welfare, I am unable to perceive that any possible element or effect upon public welfare is involved. The objection to the use of the trading stamps here involved is apparently not by or in the interest of the public, but solely in the supposed interest of merchants who do not use or wish to use trading stamps redeemable in cash as a means of inducing sales for cash or prompt payment, who are objecting under the false impression that the statute is of general instead of the very limited application first herein pointed out.
As supporting the proposition that the instant act is within the police power, the opinion also relies on cases holding that the trade practice of selling a commodity for less or paying more for it in one community than others for the purpose of destroying a competing business in that commodity may be prohibited under that power, citing Central Lumber Co. v.South Dakota,
The opinion quotes a statement from Nebbia v. New York,
"The right of the owner of property to fix the price at which he will sell it is an inherent attribute of the property itself, and as such is within the protection of the Fifth and Fourteenth amendments. Tyson Brother v. Banton,
Every case of the United States supreme court upholding legislative price fixing, as distinguished from retail prices fixed by the manufacturer, involved commodities clearly affected with a public interest or involved the fixing of wages at not below a standard declared as necessary for protection of the health or morals of the workers.
It is further to be noted that the discounts here involved are so trivial in amount as not to bring this case within the purpose of the statute involved in the Weco Case. A discount of two per cent on sales for cash or prompt payments of accounts by retailers is not a matter of concern to a manufacturer who *66 has sold his article to retailers who have agreed not to sell his article at less than the price fixed by him. So small a discount cannot affect the manufacturer's "good will" in his articles, or injuriously affect the reputation of that article, or destroy or diminish the manufacturer's sales of it at his regular wholesale price. The sole purpose of the statute involved in the WecoCase was, as said in Old Dearborn Co. v. Seagram Corp.,supra, p. 198, "to afford a legitimate remedy for an injury to the good will which results from the use of trade-marks, brands or names." It is in these things that the statute involved in the Weco Case aimed to protect the manufacturer and his contracts. Classification, to be valid under the equality clause of the Fourteenth amendment, must bear some reasonable relation toward accomplishing the purpose of the statute that prescribes the classification. The classification here involved, which by necessary implication puts merchants who use trading stamps redeemable in cash in one class, and those not using them but doing the same thing without using them that the merchants using them do by using them in another class, has no relation to accomplishing the purpose of the statute involved in the Weco Case.
The opinion quotes from a case decided by a superior court of California, a trial court of no greater, if as great, weight as authority as the court from which the judgment here involved is appealed. So far as the quotation recites that granting parking privileges and the like are legitimate trade practices I agree with it. But I do not agree that a two per cent discount has any considerable "direct relationship to the price of the merchandise purchased." The selling price of the merchandise remains as the manufacturer fixes it. The discount is trivial and utterly inconsequential to the manufacturer. Why hang the constitutionality of the instant statute upon a mere trifle — and upon a thing that is entirely outside the purpose of the statute the instant statute is aimed to support, and has no effect whatever toward effecting that purpose. *67
For the reasons above stated I think the statute involved should be declared unconstitutional, and the decision of the trial court upheld.