TRADE COMMISSION et al. v. BUSH
No. 7783
Supreme Court of Utah
July 15, 1953
259 P.2d 304
The judgment is affirmed. Costs to respondent.
WOLFE, C. J., and CROCKETT and WADE, JJ., concur.
HENRIOD, J., not participating.
See 63 C. J., Trade-marks, Trade-names and Unfair Competition, sec. 255. Trading stamps as constituting unfair competition. 52 Am. Jur., Trade-marks, Trade-names, etc., sec. 186; 133 A. L. R. 1087.
Clinton D. Vernon, Atty. Gen., Quentin L. R. Alston, Francis C. Lund, Asst. Attys. Gen., Calvin L. Rampton, Sherman P. Lloyd, Salt Lake City, for respоndents.
HENRIOD, Justice.
Appeal from an injunction restraining Bush, Ogden grocer, from selling goods below cost as defined in the Unfair Practices Act.1 Reversed.
Bush assails the findings and judgment as unsupported in fact or law. Specifically, that (1) no case was made shоwing that Bush sold below cost, either from a “cost” or “price” viewpoint, or that he had the intent to violate the act; and (2) that the Unfair Practices Act offends against the equal protection and due process clаuses of the federal and state constitutions.2 A third contention that
As to point (2): Similiar Acts have been hеld valid under the police power4 and generally when attacked under the due process and equal protection clauses,5 although some authorities have invalidated such Acts in toto,6 and others have voided only parts thereof.7
Bush opened a cash and carry grocery and installed the Sperry & Hutchinson green trading stamp system, a plan which has been held to be a legitimate adjunct of a legitimate business,8 by issuing stamps to those desiring them, on all purchases, large or small, irrespective of markup. Thus, stamps were issued on items marked up 6% or 30%. He considered and treated their use as a cash discount, as this court and others have suggested it is.9 The stamps are valued and are redeemable by the S & H Co. in cash at 1.66% or in merchandise at 2.08% of sales price. About 25% оf the items are so-called 6% items,—staples ordinarily sold by merchants at cost as defined in the Act, which, generally speaking, is invoice price plus delivery costs and an arbitrary 6%.
Bush testified and it is not controverted that only one out of 1,000 sales is a 6% item (or items) unmingled with those having higher markups, the average of which, in-
The Trade Commission’s Mr. Halе purchased 4 grocery items from Bush, all so-called 6% items,—unless, as urged, the value of the stamps issued with the purchase, is not includable in the statutory markup, but is merely a reduction in price, resulting in a sale below 6% and therefore below cost as defined in the Act. Bush argues that the cost of the stamps, largely passed on to his customers by way of a discount for prompt payment, is an advertising cost like that expended for newspaper, radio, telеvision or other advertising, that it is a buffer against credit losses, constitutes a trade stimulant, offsets expenses incident to deliveries which a competitor, not he, may make, and is a customary cash discount, recognized as tо type and amount in the industry, and by accountants, as a non-operating business expense, includable in any markup contemplated by the Act.
The Trade Commission says that an article priced at $1 with 2¢ or its equivalent value in stamps returned at the time of sale, is a 98¢ price no matter how you view it. There is support for such contention.10 Bush insists the $1 price paid by everyone whether he receives or refuses the stamps, is constant whether the cash аnd carry merchant returns 2¢ as a discount for prompt payment, assuring him ready operating capital, eliminating advertising and accounting expenses, bad credit risks and interest on
Where the evidence unquestionably shows that Bush does not have the usual non-operating business expenses which his brethren, the credit and delivery merchants have, and where the statutory markup arbitrarily covers the cost of doing business, requiring the vendor to sell at a price higher than otherwise he might do in order to attract business, it seems not unreasonable to assume that his stamp cost, representing about 2% of sale price, and a customary discount, is an element of the cost of doing business intended by the legislature to be one of the costs of doing business included in the 6% markup. It becomes rather enigmatic, however, when that cost is passed along to the consumer as a discount, which, as a practical matter gives the housewife a $1 article for 98¢ if she redeems the stamps—and where such cost does not represent the morе intangible type of benefit conferred where parking space is provided or where the customer is relieved of interest payments on borrowed capital and the like, although a definite and probably measurаble economic kinship logically appears to exist between the two types of benefits conferred.12
Were we to determine this case solely on the basis of one or the other of the contestants’ debatable and antithetical conceptions as to whether the price is static or is reduced when a discount is given, we feel that Bush has drawn a sharper and more acceptable sword, since the
But we decide this case on a different ground,—that no prima facie case was established showing that Bush intended to violate the Act,—certainly not beyond a reasonable doubt.13 He insisted that his only intent was to increase his business, not to harm anyone, frankly admitting that which we all know,—that any sales increase he enjoyed of necessity reduced the sales of another or others. He and his accountants considered and booked the cost of the stamps as a non-operating business expense, real to him, and certainly not a practice which of itself proves evil intent. Only one out of 1,000 sales possibly could be construed as a violation of the Act, and signifiсantly in this case even that isolated sale has provoked a lively, able and intelligent debate and disagreement among learned counsel as to whether it is or is not a violation, depending on which of two technical and debatable accounting philosophies maintains. Incredible it seems that one would intend to violate a criminal statute by inducing,—or, if you please, “luring to improvidence,“—14 a single housewife out of about 1,000, with bait of 8.3¢ in cash or 10.4¢ in merchandise on an average $5 purchase, occurring but once in a
With deference to the findings of the lower court, nevertheless we feel dutybound to hold that the record reflects no intent on the part of Bush to violate the Act. The testimony of competitors, admittedly conscious or unwitting violatоrs of the Act, that they had lost business since Bush issued the stamps, hardly proves an intent on the part of another to violate a criminal statute. Such loss of business at times attended the common-law free enterprise system and persists even now where Unfair Practice Acts in derogation thereof prevail. Nor can a criminal intent be proved by adding to such loss the Commission‘s suggestion that people normally do not admit violations of law. This court cеrtainly will not ascribe to the oath-taker the infamy of a perjurious mind. We think, with every presumptive support, that people normally are honest and tell the truth.
Since a majority of the Court feels that it is unnecessary to discuss сonstitutional or other objections raised by counsel, such matters are not determined here.
MCDONOUGH, CROCKETT and WADE, JJ., concur.
WOLFE, Chief Justice (concurring in the result).
I concur in the reversal of the judgment below on the ground that the giving of stamps to customers paying cash for merchandise, the value of the stamps being approximately 2% of the purchase price, does not amount to a reduction of the price of the article. If the stamps had a
The other question discussed in the majority opinion being unnecessary for our decision, I express no opinion on it.