Lead Opinion
On the petition of the attorney general a writ of quo warranto issued from this court directing respondent to show; cause by what war
“Sec. 2. Whenever two or more persons enter into any contract, .arrangement or scheme, whereby for the purpose of inducing the public to purchase merchandise or other property of one of the parties to said scheme, any other party thereto, for a valuable consideration and as a part of such scheme, advertises and induces or attempts to induce the public to believe that he will give gifts, premiums or prizes to persons purchasing such merchandise or other property of such other party to said scheme, and that stamps or tickets will be given by the seller in connection with such sales entitling the purchaser of such property to receive such prizes or gifts from any other party to such scheme, the parties so undertaking and carrying out ■such scheme shall be deemed to be engaged in a ‘gift enterprise,’ unless the articles or things so promised to be given as gifts or premiums with or on account of such purchases, shall be definitely described on such stamp or ticket and the character and value of such promised prize or gift fully made known to the purchaser of such merchandise or other property at the time of the sale thereof, and unless the right of the holder of such stamp or ticket to the gift or premium so promised, becomes absolute upon the completion upon the delivery thereof without the holder being required to collect any specified number of other similar stamps or tickets and to present them for redemption together, and the right of the holder of such stamp or ticket to the prize or gift so offered is absolute, and does not depend on any chance, uncertainty or contingency whatever.
“Sec. 3. Any person who engages in a gift enterprise such as is defined in this act or who advertises the same in any manner, or
According to the petition, respondent is a corporation organized and existing under and by virtue of the laws of the state of New Jersey, and, having complied with the provisions of chapter 69, p. 68, Laws 1899, is authorized to do business within the state of Minnesota. Its only business consists in the sale, issue, and redemption of what are commonly known as “trading stamps.” It issues and sells its trading stamps pursuant to contracts entered into with retail merchants in the state, by the terms of which the company agrees to deliver its stamps to the merchant at a stated price, and the merchant agrees to offer these stamps to his customers as an inducement for cash trade. The stamps are redeemed by the company with merchandise only and when presented by the merchant’s customers in trading stamp books containing 990 stamps. The company agrees to advertise the name and business of the merchant in its S. & H. green trading stamp books; distribute them among the people of the city, or town, ivhere the merchant resides, and to furnish the merchant signs advertising the fact that he distributes S. & H. green trading stamps. The merchant agrees that he will not use or give aivay any other coupons or stamps issued by either himself or any other firm while under contract with the company. The title to the stamps, remains in the company until redeemed, and the contract for their use covers the period of one year. The petition does not disclose whether the stamps are universally sold to merchants upon the same basis, but there is a provision which reads as follows:
“Unless spot cash is paid upon delivery, the subscriber agrees to pay the Sperry & Hutchinson Company fifty cents per hundred for the use of all stamps disposed of by him, making weekly settlements for the same.”
The legal status of trading stamp companies has been under consideration by many of the courts of this country, involving statutes varying more or less in the details and scope of the regulation. The question being new in this court, it seems advisable to review, as briefly as possible, the more important cases on the subject.
A case frequently cited as authority on the principles involved in all such cases is that of People v. Gillson,
This case was made the basis of People v. Dycker,
After that decision the legislature of New York amended the law, making it applicable to the issue and redemption of stamps by third parties only, and providing that each stamp should have legibly written upon its face the redeemable value thereof in money, and that such stamps should be redeemed when presented in a quantity aggregating in money value not less than five cents each lot, and that upon failure to redeem the party issuing such stamps should be liable for the face value thereof. The court held the law unconstitutional upon the' authority of the Gillson case, and declared that no moral or lottery question was involved, and also held that the law was invalid,
Another leading case on the subject is that of State v. Dalton, 22 R. I. 77,
There are other decisions to the same effect under similar statutes, among which may be mentioned State v. Dodge,
Another case often referred to is Young v. Com.,
There is another line of cases, notably that of State v. Shugart,
The supreme court of California in 1905 had the subject under consideration in Ex parte Drexel,
The Massachusetts supreme court decided, in Com. v. Emerson,
The leading case which presents a different view of the subject is Lansburgh v. District of Columbia, 11 App. Cas. (D. C.) 512, decided in 1897. The act of Congress was a sweeping prohibition against the issuing of any ticket, stamp, or coupon, by a vendor, or by any other person or party under contract with the vendor, redeemable in any merchandise which was not identified or selected by the purchas
This decision is based on the fact that trading stamp companies are not dealers or ordinary merchants engaged in the legitimate attempt to obtain purchasers for their goods by offering fair and lawful inducements to encourage trade, but are organized for the purpose of intervening between the merchant and his customers, and the position they occupy enables them to force their stamps on unwilling merchants by use of the argument that they thereby secure an advantage over other merchants who are not taken into the scheme. The court also expressed the opinion that the premiums were grossly overvalued, and that the corporation maintaiiied itself upon the vast difference between the cost of carrying on the business and the amount received by the merchant. Or, if there was any substantial value in the premiums, as compared with the amount of the tickets for redemption, then the profit, or part, at least, was secured by reason of the fact that many of the merchant’s customers failed to redeem their tickets, or stamps, because unable to complete the book; The court took occasion to express in vigorous language that, the whole scheme was a cunning device, created for the purpose of taking advantage of the weakness of human nature.
The federal circuit court for the Western District of Arkansas in the case of Humes v. City of Fort Smith,
The supreme court of Washington in Fleetwood v. Read,
In 1891 the statute of Maryland contained a sweeping prohibition against the use of any form of gift enterprise as an inducement for the sale of all kinds of merchandise, and the supreme court of that state held, in Long v. State,
From this review of the cases we think it manifest that the apparent differences in judicial expression may be generally accounted for by the differences in the statutory provisions under consideration. In some states the statute prohibited the issuing of stamps or tokens which enabled either the merchant, or a third party, to redeem the same in merchandise. In other states the legislation was directed merely to the issuing and redemption of such stamps or coupons by third parties, making no attempt to regulate the business as conducted by merchants. In yet other states the statute involved was a general prohibition against engaging in lottery, chance or gaming operations.
Although there is some conflict in the decisions, a few principles are recognized as the settled law upon this subject. It is beyond the province of the legislature to prohibit a merchant from issuing coupons, tickets, stamps, or tokens representing a certain value, which entitle the holder to a redemption of the same in merchandise. In pursuance of this scheme of advertising to excite the interest of his customers, the merchant is not required to redeem these tickets or coupons singly. They may be issued in any amount, and redemption may be made to depend upon their being presented collectively. No feature of lottery is involved from the fact that the articles were not exposed and examined by the purchaser at the time the coupons were issued to him. There is no tangible difference between'the selection of an article at the time of receiving the. coupons and the selection thereof at a subsequent time, when coupons representing a certain sum shall have been collected. There is no distinction between making the selection of a premium from merchandise on exhibition at the store, or from a catalogue furnished by the merchant. The fact that the particular article desired by the purchaser is not de
If we shall find that there are no different elements of chance and uncertainty, or no greater tendency to fraud as the business of issuing and redeeming stamps is conducted by respondent, than attends their issue and redemption by the merchant making sales of merchandise, then we know of no legal ground for sustaining the writ. The main differences in the method'of transacting the business are as follows : A variety of merchandise is kept on exhibit at the company’s ■store in the village or city where the merchant does business, and the 'customer may make a selection from such articles as are designated ■for the redemption of one or more stamp books, as the case may be. The customer may not know, at the time he receives the stamps from the merchant, what particular article he will select; but he has the ■opportunity to examine the stock at the company’s store, and may make his collection of stamps with reference to some particular article.
We recognize the fact that legislative regulation is not necessarily dependent upon whether the business, as conducted by respondent, affects the public health, or is attended with the features of a lottery. It has long been settled that any business, although legitimate in itself, is subject to regulation by the police power, whenever so conducted that it may fairly be said that it affects the public interest or welfare. Public interest may be affected when a business is conducted on such a scale and under such conditions as to lead to an abuse of the confidence of those who have occasion to transact business in that line. The rates of interest, insurance business, the regulation of grain elevators and warehouses, hawking and peddling, bakeries, butcher shops, etc., have been recognized as proper subjects for police regulation, not because of anything naturally wrong in these vocations, but because, from the character of the business, opportunities are present for deception on account of the difficulty the
Where the producer is located at a distance from the commission house, the law may propeply regulate the conditions upon which commission and brokerage houses shall do business with the public. This is illustrated by the cases of State v. Wagener,
If, in dealing with the merchant and his customers there is an opportunity to take advantage of them by a persistent system of attractive advertising and other inducements, then reasonable safeguards and limitations may be provided to prevent such abuses. But the difficulty with the present law is that it is not designed to regulate a legitimate business. It condemns the business conducted by respondents as illegitimate, because the public is induced to engage in lottery transactions, and places such restrictions about the issue and redemption of stamps as to make that business impossible. In State v. Hawkins, supra, the Maryland statute was held valid in so far as it was directed to prevent the holder of stamps from receiving in exchange therefor anything uncertain, undetermined, or unknown to the purchaser of the goods at the time of the purchase. But this law does not stop at that point. It requires that each stamp or ticket shall have described thereon the character and value of the gift which redeems it, or that such fact shall be made known to the customer at the time of the purchase. Each separate stamp, must be treated independently, and redemption collectively is prohibited. It is apparent that it would not be practicable to redeem stamps of the value of one mill, or one cent, nor to print on each stamp the character of the article offered for its redemption. To make such a provision practicable would require each stamp to be issued in denominations to correspond with each purchase. Most, cash purchases
Our attention is called to the language of the court in the Lansburgh case, by which the business of issuing and redeeming trading stamps is condemned as a cunning device which confers no benefit on anybody, and that merchants are persuaded to invest in stamps, partly in the hope of obtaining the customers of other merchants, and partly through fear of losing their own. We assume that the court was referring to the practice of selling the stamps to one merchant only in the same line of business, thus attempting to give him an advantage over his competitors. Why this exclusive right to deal in stamps by the merchant who enters into a contract with the company should be considered as detrimental to his or to the public interest we are unable to understand, unless the practice is attended with some tendency to deceive. Many merchants prefer to conduct such schemes of advertising by issuing and redeeming their own coupons. Others prefer to place the entire matter in the hands of a third party, and be relieved of the trouble and responsibility. But so far as the petition informs us the merchants in this state have not been induced to enter into the contracts by reason of deceptive representations. Such contracts are made for the period of one year, and there is no compulsion about renewing them. The stamps cost the merchants at the rate of half a cent each, or five cents for ten stamps. He gives his cash customers, if they call for them, ten stamps for every dollar’s worth of merchandise purchased. The effect is that the merchant receives ninety-five cents for every dollar’s worth of goods sold for cash. The object, no doubt, is to secure additional customers, if possible, and build up his trade, and to induce payment in cash for the purpose of getting the money to use. Merchants who enter into contracts with respondent company agree to malee this discount, and presumably they so obligate themselves because they consider it a paying investment.
The profit in respondent’s business is the difference between the amount received from the merchant for the stamps and the cost of the articles offered in redemption, less the cost of running the busi
Our conclusion is that, in so far as chapter 142, Laws 1909, prohibits companies or parties from issuing and redeeming trading stamps under contracts which in practice depend on chance, uncertainty, or contingency, the law is a proper exercise of the police power; that the business of issuing and redeeming trading stamps, as conducted by respondents, is not attended with such elements of chance, uncertainty, and contingency as to come within that provision of the act; that the provisions requiring each stamp to be valued and redeemed independently of other stamps, and to have printed thereon its value and character of the article offered for redemption, constitute unnecessary restrictions amounting to practical prohibition of the business as conducted by respondents, and are not a proper exercise of the police power of regulation.
Writ discharged.
Notes
R. L. Supp. 1909, §§ 5170-5 to 5170-8.
Dissenting Opinion
(dissenting).
I respectfully dissent. The presumption in favor of the constitutionality of legislative action is strong. A statute should not be avoided, unless clearly necessary. The authorities do not impress me as compelling the decision that the law here in issue is unconsti
Moreover, I am unable to perceive why the statute should not be upheld, because it excludes an illegitimate business. In effect it regards the defendant as a commercial parasite and prohibits existence. The facts justify that definition and prohibition.