WILKE AND HOLZHEISER, INC., Plaintiff and Appellant, v. DEPARTMENT OF ALCOHOLIC BEVERAGE CONTROL et al., Defendants and Respondents.
S. F. No. 22212
In Bank. Supreme Court of California
Dec. 1, 1966.
65 Cal. 2d 349 | 424 P.2d 735 | 55 Cal. Rptr. 23
M. Mitchell Bourquin, Barbagelata, Broderick, Carmazzi & Arnold, Rinaldo A. Carmazzi, Leslie, Schiffer & Rubin and Daniel A. Schiffer as Amici Curiae on behalf of Plaintiff and Appellant.
Thomas C. Lynch, Attorney General, E. G. Funke, Assistant Attorney General, Wiley W. Manuel, L. Stephen Porter and Harold W. Teasdale, Deputy Attorneys General, for Defendants and Respondents.
TOBRINER, J.--Plaintiff Wilke and Holzheiser, Inc., appeals from four separate judgments, each denying a writ of mandate seeking review of administrative decisions of the Department of Alcoholic Beverage Control which suspended or revoked the licenses of plaintiff‘s San Francisco liquor stores. In each decision the department found that plaintiff had sold distilled spirits in violation of the mandatory retail price maintenance provisions of the Alcoholic Beverage Control Act. (
Plaintiff asks that we reverse these judgments on the grounds that the price maintenance provisions violate constitutional imperatives and that, in any event,
1. Constitutionality of the retail price maintenance provisions
At the outset we note that several states in addition to our own have adopted measures requiring that each producer of liquor establish a price below which retail distributors may not sell his brand. The courts which have passed on the constitutionality of such measures have reached divergent conclusions.2 In this court the matter is not one of first impression:
Plaintiff urges us to reconsider Allied Properties on the ground that the majority of other state courts which have subsequently passed on the constitutionality of general fair trade legislation authorizing retail price maintenance agreements have held such legislation unconstitutional as applied to nonsigners.3 Not one of these subsequent decisions, however,
The provisions in question operate as follows:
Plaintiff first contends that these provisions are unconstitutional because they exceed the police power of the state.
To incant these precepts in form and ignore them in substance is to disregard the most basic postulates of representative government; yet, as one court has observed, “the courts of last resort that have rejected fair trade acts on Constitutional grounds seem to have . . . done so because of an unwillingness to accept the legislative judgment as to the economic facts.” (Home Utilities Co. v. Revere, etc., Inc., supra, 209 Md. 610, 617.)7 On such debatable matters the Legislature properly serves as the court of last resort. When, as in this case, “appeal is made to liberties which derive merely from shifting economic arrangements” (Kovacs v. Cooper (1949) 336 U.S. 77, 95 [93 L.Ed. 513, 69 S.Ct. 448, 10 A.L.R.2d 608] (Frank-
The Legislature adopted the Alcoholic Beverage Control Act “for the protection of the safety, welfare, health, peace, and morals of the people of the State, to eliminate the evils of unlicensed and unlawful manufacture, selling, and disposing of alcoholic beverages, and to promote temperance in the use and consumption of alcoholic beverages.” (
The promotion of temperance in the consumption of alcoholic beverages and of orderly conditions in their marketing clearly constitute proper legislative objectives. The declared purposes of the Alcoholic Beverage Control Act in general and of its retail price maintenance provisions in particular are therefore entirely legitimate, and we must sustain the price maintenance provisions if they bear a reasonable relationship to any of those purposes.
We turn first to the purpose of promoting temperance. The retail price maintenance provisions proceed on the assumption that “the elimination at the retail level of price cutting, bargain sales, and advertising of low prices tends to reduce excessive purchases of alcoholic beverages.” (Allied Properties v. Department of Alcoholic Beverage Control, supra, 53 Cal.2d
Our Legislature may have sought to prevent the special inducement to purchase liquor which results from loss leaders, price-cutting, and bargain sales at the retail level. (Allied Properties v. Department of Alcoholic Beverage Control, supra, 53 Cal.2d 141, 148-149.) That the Legislature did not also seek to prevent intemperance by limiting the volume of liquor sales, by regulating competition among producers and wholesalers, or by establishing high liquor prices generally, creates no constitutional infirmity. As we said in Board of Education v. Watson (1966) 63 Cal.2d 829, 833 [48 Cal.Rptr. 481, 409 P.2d 481], “The Legislature is not bound, in order to adopt a constitutionally valid statute, to extend it to all cases which might possibly be reached, but is free to recognize degrees of harm and to confine its regulation to those classes of cases in which the need is deemed to be the most evident.”
The selectivity of our Legislature‘s approach to the problem of intemperance might reflect a variety of entirely legitimate considerations. Thus the Legislature could have reasoned that some people might respond more impulsively to bargain sales of their preferred brand than to bargains offered by competing brands. Or the Legislature might have concluded that unregulated competition among the relatively few liquor producers and wholesalers would not unduly stimulate liquor consumption but that similar competition among the large number of retailers, who come into direct contact with consumers and who are more vulnerable to economic pressure, would stimulate selling practices calculated to induce intemperance.8 We cannot say that all of these suppositions would have been “‘palpably arbitrary and beyond rational doubt erroneous.‘” (In
Plaintiff calls our attention to the fact that the New York Moreland Commission (see New York State Legislative Annual (1964) 401-408, 484-489, 498-500) found that mandatory retail price maintenance did not significantly reduce the consumption of alcoholic beverages. We note, however, that the response to the Moreland Commission Report in New York came from the Legislature (Session Laws of New York, 1964, ch. 531, § 11), not the courts. Legislative revision of a statute cannot be equated to its death knell by judicial decree.
We turn to the second legislative purpose: the promotion of the orderly sale and distribution of alcoholic beverages. Retail price wars among liquor distributors may encourage retailers, struggling to withstand the pressure of ruinous competition, to sell liquor below cost in violation of
The Legislature may likewise have concluded that giant retailers and chain markets should be afforded no opportunity to use loss leaders in branded liquor to attract customers in disregard of
Plaintiff answers that the instant legislation reaches unnecessarily far in this respect because the kinds of market-
In the second place, the Legislature may have intended more than the fortification of existing statutory regulations. It may have sought to fill the gap between price-cutting procedures pursued in practice and those proscribed by law. The Unfair Practices Act (
Whatever dangers the Legislature thought implicit in disorderly marketing, we cannot question the wisdom of its concern. As we said in another context, “Where the Legislature has determined that a defined condition or activity is a nuisance, it would be a usurpation of the legislative power for a court to arbitrarily deny enforcement merely because in its independent judgment the danger caused by a violation was not significant.” (City of Bakersfield v. Miller (1966) 64 Cal.2d 93, 100 [48 Cal.Rptr. 889, 410 P.2d 393].)
Finally, plaintiff contends that the retail price maintenance provisions, even if reasonably related to either or both of their declared objectives, cannot be justified as an exercise of the police power because their “real” purpose and effect is not to
Insofar as plaintiff‘s contention focuses on the legislative purpose, it amounts to a suggestion that we should not take the Legislature at its word but should instead decide for ourselves, by a process which remains unexplained, what the Legislature “really” intended to achieve by enacting the provisions in question. Although several courts have acceded to that suggestion,12 we do not believe that we are either authorized or equipped to undertake so ill-defined and hazardous an inquiry. “[T]his court may not presume that in reaching its decision [the Legislature] acted upon improper motives. ‘. . . a judiciary must judge by results, not by the varied factors which may have determined legislators’ votes . . .’ [citations].” (Werner v. Southern Cal. etc. Newspapers, supra, 35 Cal.2d 121, 129.) “Nor can legislation be set aside by courts because of the fact, if it be such, that it has been sponsored and promoted by those who advantage from it [footnote omitted].” (Cohen v. Beneficial Loan Corp. (1949) 337 U.S. 541, 551 [93 L.Ed. 1528, 69 S.Ct. 1221].)
Insofar as plaintiff‘s contention focuses on the legislative effect, we cannot fail to recognize it as an invitation to hold the law invalid because we disagree with its desirability. As we have said, we cannot invalidate legislation merely because we do not approve of its potentially beneficent impact upon a particular segment of society.
At its base, the argument that the statute is unconstitutional because of its supposed bias in favor of the liquor industry rests upon a wholly unrealistic view of the legislative process. As our social and economic life grows in complexity, legislation necessarily increases in the differentiation of its techniques and in the specialization of its objectives. Thus the endeavor to achieve the general welfare of the whole through the special welfare of each part becomes ever more necessary. By protecting the interests of complaining constituents through legislation tailored to meet their particular needs, the Legislature can seek to maximize the satisfaction of society as
Plaintiff‘s second basic challenge to the constitutionality of the retail price maintenance provisions is that they unlawfully delegate legislative power by enabling each producer and wholesaler to set the price below which retailers may not sell his product. We rejected precisely that contention in Allied Properties v. Department of Alcoholic Beverage Control, supra, 53 Cal.2d 141, 149-152, just as we rejected a similar contention in sustaining the general Fair Trade Act (
To contend that the Alcoholic Beverage Control Act unlawfully delegates legislative power is to misconceive the nature of the power which is purportedly delegated. The power we analyze here finds expression in the private act of the producer in entering into a contract setting a price for the resale of his own brand. Scovill tells us that this act is not the performance of a legislative function and not the exercise of an unlawfully delegated power. Nor does plaintiff directly question Scovill. Yet, if the producer‘s contractual designation of a resale price binding on all retailers is not the exercise of an unlawfully delegated legislative power, the statutory requirement that he designate that price cannot transform his act into the exercise of such a power. The statutory requirement clearly confers no power on the producer that he would not have possessed without it.
Allied Properties makes this point abundantly clear. In describing the alleged delegation, the opinion in Allied Properties states that “the function performed by the persons who assertedly exercise delegated legislative powers is the same under the general Fair Trade Act and the Alcoholic Beverage Control Act.” (P. 149.) The opinion points out that the act of designating a resale price binding on all retailers is “‘no more legislative in character than are other acts of private parties undertaken as a prerequisite to the application of a statute.‘” (P. 149.)
To argue that the Alcoholic Beverage Control Act unlawfully delegates legislative power because it is a “price-fixing
The court in Thrift-D-Lux declared unconstitutional a statute which delegated to the State Board of Dry Cleaners the power to fix minimum prices. (
When the power which the Legislature purports to confer is the power to regulate the business of one‘s competitors, as in Thrift-D-Lux, or the power to exclude potential competitors from an entire industry or occupation, as in Blumenthal v. Board of Medical Examiners (1962) 57 Cal.2d 228, 235-236 [18 Cal.Rptr. 501, 368 P.2d 101], a real danger of abuse arises, and the courts accordingly insist upon stringent standards to contain and guide the exercise of the delegated power.14
A similar insistence upon stringent standards would serve little if any purpose in the case of the Alcoholic Beverage Control Act. As we noted in Allied Properties (pp. 151-152), that act authorizes no individual or group to exercise either regulatory or exclusionary power over any competitor, actual or potential. The Legislature has not authorized anything resembling “price-fixing” in the traditional, horizontal sense: it has authorized no one to fix the price charged by a competitor. Thus the Alcoholic Beverage Control Act does not create the special danger threatened by a statute which delegates industry-wide regulatory power to interested members of the regulated industry.
To the extent that the retail price maintenance provisions enable a producer to control the bargaining process between those who sell and those who buy his own product, the Legislature could reasonably assume that competition among producers,15 coupled with the bargaining power of those low-overhead retailers who desire lower retail prices, would provide a safeguard against excessive prices. In all probability, that safeguard is at least as effective as any which the
In light of these observations, we find transparently erroneous the arguments that the statute unlawfully delegates “price-fixing” power because (1) the producer must set the price which will be observed in resale; (2) the law imposes an obligation upon all people in this state to observe that price; and (3) the violation of the act is a “public offense.”
All three arguments ignore the basic difference between a statute requiring the unilateral designation by each producer of the resale price of his own product and a statute requiring the multilateral observance by all competitors of a fixed minimum price of a commodity. That the private act of specifying a resale price is lifted by the statute beyond the contracting producer and retailer to a publicly enforced observance by all retailers within the state does not convert the legislation into a “price-fixing” statute, since the law still empowers no one to regulate the retail price of any commodity.
Although the Alcoholic Beverage Control Act requires (
Similarly, the fact that the Alcoholic Beverage Control Act authorizes public enforcement in the form of administrative sanctions (
It follows, then, that we could not hold the retail price maintenance provisions unconstitutional on delegation grounds without overruling not only Allied Properties but also Scovill, with the result that the entire fair trade program of this state would be rendered unenforceable by judicial fiat. We are convinced that such an assertion of judicial power would gravely misplace the locus of responsibility in our form of government. We therefore hold the retail price maintenance provisions of the Alcoholic Beverage Control Act constitutional.
2. Applicability of section 24755.1
As a second basic proposition, plaintiff urges us to reverse the judgments on the ground that
Prior to the enactment of
We begin with the general presumption that legislative changes do not apply retroactively unless the Legislature expresses its intention that they should do so. Three of our basic codes provide that no part thereof is retroactive “unless expressly so declared” (
This presumption of nonretroactivity rests in part upon the fact that the purpose of a legislative alteration would not often attain significant advancement by application of the amended legislation to transactions which preceded the legislative change. Of course the legislative purpose may on occasion entail retroactive as well as prospective implications. Thus, for example, when the Legislature not only abolishes a penalty or forfeiture but also repeals the underlying duty which the penalty had been designed to enforce, no purpose would be served by imposing the penalty in a case still pending on appeal on the date of abolition. In such a case, therefore, we have given retroactive effect to the abolition
The Legislature‘s alteration of the method for enforcement of a statute, however, ordinarily reflects its decision that the revised method will work greater future deterrence and achieve greater administrative efficiency. Yet the design for efficacy of deterrence and efficiency of administration hardly affects the case which has already reached a final administrative decision based upon the old procedure.19
The enactment of
Whatever advantages the Legislature may have contemplated by the new procedure, such benefits could not inure in the instant litigation. However cumbersome or slow the old
The incongruity of remanded proceedings in this case becomes even clearer in light of the prospective functioning of part of the amended statute. An integral segment of the new enforcement system is the provision of
A second and alternative reason for holding that
Although arguably the revised statute provides penalties in some respects more, and in others less, severe than those previously imposed, we cannot sever the less onerous provisions and give retroactive effect to them alone in order to avoid the constitutional issue; such legal surgery would clearly violate the legislative compromise reflected in the statute. Finding just such an obstacle in In re Griffin (1965) 63 Cal.2d 757 [48 Cal.Rptr. 183, 408 P.2d 959], we refused to give retroactive effect to any part of a statute which reduced the minimum sentence for selling marijuana while postponing eligibility for parole. As applied to the petitioner in Griffin, the new law, considered as a whole, operated more harshly and hence could not constitutionally be given retroactive effect. Having been relieved of the burdens imposed by the new law, petitioner could not avail himself of its benefits. (Id. at p. 761.)
Accordingly, we hold that, in the instant case, absent a contrary expression of legislative intent, a decrease in penalties which is not readily severable from an accompanying increase will be given prospective effect only. The provision in
3. Procedural and evidentiary grounds for reversal
We set forth, finally, our reasons for rejecting plaintiff‘s third basic proposition: that procedural errors invalidated the judgments in that (1) the evidence at the administrative proceedings failed to show that the beverages involved in the accusations against plaintiff were in fair and open competition; (2) the trial court erroneously prevented plaintiff from adducing evidence of unfair competition submitted to the court by the affidavit filed with plaintiff‘s motion for a new trial; and (3) the evidence before the department did not support the finding that the retail prices had been properly published.
As to plaintiff‘s first contention, we note that the department submitted evidence that all of the brands set forth in the accusations were “in fair and open competition with
In the proceedings involved in the fourth judgment, plaintiff did attempt, without success, to overcome the department‘s evidence of fair and open competition; plaintiff now complains of four rulings which supposedly curtailed that attempt.
First, plaintiff argues that the hearing officer improperly quashed a subpoena duces tecum by which plaintiff sought to compel the production of certain documents possessed by the department. The officer quashed the subpoena in its entirety only with respect to brands of alcoholic beverages set forth in those counts of the accusations which were subsequently dismissed, thereby rendering moot the validity of this portion of the ruling. Regarding matters pertinent to the other counts of the accusations against plaintiff, the officer granted the motion to quash only with respect to certain records of departmental investigations which had not resulted in any official action.
We need not decide whether the involved records contained “communications made [to a public officer] in official confidence” and thus became privileged (
Second, plaintiff argues that the hearing officer improperly refused to permit the examination of a witness as to his knowledge of secret rebates which allegedly encouraged unfair competition by retailers. To the extent that the testimony would not have been hearsay, as well as merely cumulative of documentary evidence already subpoenaed by plaintiff, it would, at best, have yielded evidence which plaintiff had unsuccessfully sought to obtain by subpoena. Having properly quashed the subpoena, the officer acted within his discretion in preventing plaintiff‘s effort to circumvent the prior ruling.
Third, plaintiff argues that the hearing officer improperly refused to grant a continuance in order that plaintiff might obtain copies of press releases issued by the director of the department in connection with disciplinary action taken against various licensees. Since plaintiff moved for the continuance one year after the date of the filing of the accusations and six months after the commencement of the hearings, and since nothing indicates that the press releases would have disclosed any evidence that plaintiff had not already obtained by its subpoena, we find no abuse of discretion in the ruling of the hearing officer.
Fourth, plaintiff argues that the hearing officer erroneously excluded an article from a trade journal containing excerpts from a speech which allegedly referred to unfair practices in the sale of unspecified brands of alcoholic beverages. Although relevant hearsay evidence may be admitted at an administrative hearing if it is the kind of statement upon which “responsible persons are accustomed to rely in the conduct of serious affairs” (
Plaintiff‘s second procedural contention is that the trial court erroneously prevented it from producing additional evidence of unfair competition, which it brought to the attention of the court by an affidavit filed with its motion for new
Plaintiff‘s third and final procedural contention is that the evidence before the department failed to support the finding that the retail prices of alcoholic beverages involved in the accusations had been properly published. Even if this contention had been seasonably advanced,23 we would doubt its validity.
At the time plaintiff committed the acts involved in the various accusations,
Having concluded for the reasons set out above that the
The judgments are affirmed.
Traynor, C. J., Peek, J., Mosk, J., and Burke, J., concurred.
PETERS, J.—I dissent.
The constitutionality of the price provisions of the Alcoholic Beverage Control Act, commonly known as the liquor fair trade law, is the basic question here involved. In 1959, in Allied Properties v. Department of Alcoholic Beverage Control, 53 Cal.2d 141 [346 P.2d 737], the constitutionality of the statute was upheld in a 4-to-3 decision. In June of this year this court decided to reconsider that decision. Upon such reconsideration the majority have reaffirmed Allied Properties, supra. I dissented in 1959 and I dissent now.
The issues in 1959 were whether the statute accomplished its avowed purpose under the police power, and whether it involved an illegal delegation of legislative power. The issues are the same now. The majority in the instant case adopt the same faulty reasoning and come to the same erroneous conclusions as did the 1959 majority, and on the same grounds. The majority opinion here involved, although couched in different language than the 1959 opinion, adds nothing significant to a discussion of the constitutional principles involved. Its greatest deficiency is its failure to give significance to the decisions in other states, and to writings by legal scholars since 1959. As will be later pointed out, such decisions and writings1 demonstrate a definite national trend, both in the field of liquor price regulation and in fair trade cases generally, to hold such statutes unconstitutional. This trend should not be so lightly disregarded.
In my opinion, as a matter of law, the liquor fair trade law is violative of due process in that it is designed to accomplish a purpose diametrically opposed to its avowed purpose and is not justified under the police power, and involves an illegal delegation of legislative power. These conclusions are as sound now as when I expressed them in my dissent in 1959, and are now supported by the definite weight of authority.
The Department of Alcoholic Beverage Control was created by
The liquor fair trade law is a part of the Alcoholic Beverage Control Act, which was adopted “for the protection of the safety, welfare, health, peace, and morals of the people of the State, to eliminate the evils of unlicensed and unlawful manufacture, selling, and disposing of alcoholic beverages, and to promote temperance in the use and consumption of alcoholic beverages.” (
The liquor fair trade law, unlike the general fair trade statutes, is mandatory and operates as follows.
The department is authorized to adopt such rules as it determines to be necessary for the administration of the above provisions (
The Legislature has enumerated the following as grounds for the suspension or revocation of licenses: (1) when the continuance of a license would be contrary to public welfare or morals, but proceedings under this statutory ground are not a limitation upon the department‘s authority to proceed under
Thus, the fair trade provisions of the Alcoholic Beverage Control Act, together with the disciplinary power given the Department of Alcoholic Beverage Control directly by the Constitution, comprise a mandatory price-fixing system whereby the producers or wholesalers of branded or trademarked alcoholic beverages fix the retail prices of those beverages, and adherence to the prices is guaranteed by threat of imposition by the state of civil and criminal sanctions upon noncomplying retailers. The law operates to require the producer or distributor of a branded or trade-marked alcoholic beverage that is in fair and open competition with others of the same general class to enter into a contract with a retailer establishing a retail price before making any sales within the state. Thereafter, all retailers, whether or not parties to the contract, are required to adhere to that price under threat of a civil suit by the producer or distributor, suspension or revocation of their license by the Department of Alcoholic Beverage Control, and possible criminal penalties.2 (See
The liquor fair trade law is to be distinguished from the general Fair Trade Act applicable to all branded or trademarked commodities sold at retail which are in free and open competition with others of the same general class. This general act was adopted in the depression and is similar to the Fair Trade Acts adopted during that period by a number of other states. (Stats. 1931, ch. 278, § 5, p. 583, now
This court has upheld the California Fair Trade Act against attacks on grounds of violation of due process (Max Factor & Co. v. Kunsman, supra, 5 Cal.2d 446) and unlawful delegation of legislative power (Scovill Mfg. Co. v. Skaggs etc. Drug Stores, 45 Cal.2d 881 [291 P.2d 936]). Although the Fair Trade Acts have recently been the subject of criticism by several legal scholars,3 and the trend of authority in other states has shifted toward holding the acts unconstitutional,4
the differences in both purpose and operation between the mandatory liquor price-fixing act and our general Fair Trade Act require that they be analyzed separately and show that the validity of one is not dependent upon the constitutionality of the other.
The majority in Allied Properties (supra, 53 Cal.2d 141), and the majority here, conclude that the liquor fair trade law is a proper exercise of the police power. The requirement that alcoholic beverages be sold pursuant to fair trade contracts is regarded as bearing a reasonable relation to the valid objectives of promoting orderly marketing conditions and promot
These arguments, in my opinion, are unsound. It is the general rule that in determining whether legislation is a valid exercise of the police power, the inquiry of the court is limited to determining whether the object of the statute is one for which the police power may legitimately be invoked and, if so, whether the statute bears a reasonable and substantial relation to the object sought to be obtained. (Wholesale Tobacco Dealers v. National etc. Co., 11 Cal.2d 634, 643 [82 P.2d 3, 118 A.L.R. 486].) It is, of course, not the province of the judiciary to question the wisdom of economic policy as long as it may reasonably be deemed to promote the public welfare, and if the statute has a reasonable relation to a proper legislative purpose, and is neither arbitrary nor discriminatory, the requirements of due process are satisfied. (Nebbia v. New York, 291 U.S. 502, 537 [78 L.Ed. 940, 54 S.Ct. 505, 89 A.L.R. 1469]; Max Factor & Co. v. Kunsman, supra, 5 Cal.2d 446, 456.) When, however, the statute bears no reasonable relation to the legislative purpose, it is invalid. (Blumenthal v. Board of Medical Examiners, 57 Cal.2d 228, 233 [18 Cal.Rptr. 501, 368 P.2d 101].)
There can be no doubt at all that the promotion of temperance in the consumption of alcoholic beverages is a proper subject of state regulation. The state has wide powers with respect to the regulation of traffic in alcoholic beverages and can prohibit their production and sale altogether. (Ziffrin v. Reeves, 308 U.S. 132, 138-139 [84 L.Ed. 128, 60 S.Ct. 163]; cf.
It is apparent from an analysis of the liquor fair trade law, however, that it bears no relation at all to the purported objective of promoting temperance. While the stated purpose of the law is to restrict the sale and consumption of alcoholic beverages, the use of fair trade contracts as a means necessarily guarantees that that objective will not be achieved. By attempting to achieve temperance in the sale of alcoholic beverages by regulation of the retail price through the use of this type of fair trade law, the Legislature has used the very form of regulation which is designed to promote rather than restrict trade. As has already been pointed out, the stated purpose of general Fair Trade Acts is to protect the goodwill of the producer in his brand name or trade-mark and in this way to promote and encourage trade by preventing unfair competition. (Old Dearborn etc. Co. v. Seagram etc. Corp., supra, 299 U.S. 183, 195; Max Factor & Co. v. Kunsman, supra, 5 Cal.2d 446, 454-455.) To this end, each brand or trade-mark owner is given the uncontrolled discretion to decide whether or not and at what amount to fix the price at which his product will be sold at retail. Active competition and a healthy trade are assured by the fact that uniform prices are maintained only as to the same brand and the prices are set by those having the greatest interest in promoting the product.
The liquor fair trade law does not prevent, and indeed is designed to insure, competition between different brands. The price-fixing scheme is imposed only upon a branded or trademarked alcoholic beverage “which is in fair and open competition with alcoholic beverages of the same general class produced by others.” (
Furthermore, there is no limit to the number of brands that can be put on the market for each type of alcoholic beverage. The same product may be sold at the retail level at different prices so long as different labels are used. Thus, a manufacturer can establish different prices for the same product to increase consumption. Wholesalers and retailers can and often
The conclusion that the liquor fair trade law has no relation to promoting temperance is reinforced, and in fact is compelled, by the fact that no standards or limitations are placed on the power to fix the price at which liquor will be sold at retail and that that power is given to those who are not only private persons having no responsibility to the government but are those most interested in promoting the trade in alcoholic beverages and in making the greatest profit. Nothing in the act gives the department or any other official arm of the government any voice or control in the establishment of the retail price.
Although the United States Supreme Court has since the late 1930s generally upheld price-fixing regulations as a means of promoting the public welfare, the price-fixing power in those cases considered was either given to a government agency and accompanied by adequate standards (see, e.g., Nebbia v. New York, supra, 291 U.S. 502, 515-520) or its exercise was subject to the approval of a government commission (see, e.g., Sunshine etc. Coal Co. v. Adkins, 310 U.S. 381, 399 [84 L.Ed. 1263, 60 S.Ct. 907]).
The majority in Allied Properties, supra, referred to a number of states which have upheld price regulation of alcoholic beverages. (53 Cal.2d at p. 147.) In most of these states the regulations involved were significantly different from the California mandatory liquor fair trade law with regard to standards and controls over the prices fixed. In Rhode Island, Kentucky, and Arkansas retail prices were required to be set at certain percentages above cost. (Nocera Bros. Liquor Mart v. Liquor Control Hearing Board, 81 R.I. 186 [100 A.2d 652];
Prices established under our liquor act, on the other hand, may be set extremely low or prohibitively high and need not have any relation to the amount of retail sales or any other factor tending to further the purpose for which the act was assertedly designed. Since no standards are provided, there can be no review of prices to assure that they are not either excessive or inadequate. There is no assurance that those authorized to set prices will naturally tend to set them high to avoid excess consumption. On the contrary, the price setters are those most interested in maximizing the trade and profit in alcoholic beverages and least concerned with restricting sales at the retail level. In giving the power to regulate retail prices of alcoholic beverages to producers and brand owners, the Legislature could not have chosen a group less disposed to assure temperance in the sale and consumption of alcoholic beverages.6
The California act cannot be sustained on the basis of tending to further what has been regarded as “incidental objectives.” While it may
Protecting a producer‘s goodwill in his brand or trade-mark cannot be regarded as an incidental objective since the act is mandatory and it is not conceivable that the purpose of the Legislature was to force all producers to set retail prices for their own benefit when in most cases such protection is not required and retail price fixing is generally regarded as against the economic interest of the producer. (See Fulda, Resale Price Maintenance, supra, 21 U.Chi.L.Rev. 175, 208-209; Telser, Why Should Manufacturers Want Fair Trade?, 3 J. Law & Econ. 86-87.)
We should not close our eyes to the fact that the act attempts to reduce consumption through regulation of prices rather than volume, and those who most require moderation are least influenced by inflated prices. To the extent the act is effective, it operates to promote temperance only in those who cannot afford the artificially high prices. (See Dunsford, State Monopoly and Price-Fixing in Retail Liquor Distribution, 1962 Wis.L.Rev. 454, 482-485.)
The granting of discretionary price-fixing power to private persons is also an unlawful delegation of legislative authority, and is so arbitrary as to amount to a denial of due process. (Carter v. Carter Coal Co., 298 U.S. 238, 311 [80 L.Ed. 1160, 56 S.Ct. 855]; State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, 40 Cal.2d 436, 448-449 [254 P.2d 29]; Blumenthal v. Board of Medical Examiners, supra, 57 Cal.2d 228, 235-236.)
It is the position of the majority in Allied Properties (supra, 53 Cal.2d 141) and the position of the majority here, not that such delegation is proper, but that the liquor fair trade law does not involve a delegation of price-fixing authority at all. The reasoning is adopted from Scovill Mfg. Co. v. Skaggs etc. Drug Stores, supra, 45 Cal.2d 881, which involved the general Fair Trade Act, and held that there was no unlawful delegation in that statute. There it is 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 par
The Scovill decision is based on the theory that when a retailer purchases goods with knowledge of a price restriction established in a contract to which he is not a party, he has impliedly agreed to abide by such restriction and that prices are therefore established, not by the exercise of assumed legislative power, but voluntarily by contracts between private parties.
Whatever may be the validity of this reasoning with regard to entering into permissive contracts under the general Fair Trade Act,7 it is clear that the liquor fair trade law, because of its mandatory character and its administrative and penal enforcement, is a price-fixing act rather than a law designed to enforce private contracts. Under the general Fair Trade Act, at least one party has discretion to determine whether his product will be fair-traded. The producer or brand owner of liquor, however, must set the price which is to be “implied” in all sales to retailers. When a product cannot be sold except pursuant to a fair trade contract, it is evident that this contract is merely being used as a price-setting device. Indeed,
The method of enforcement in the liquor fair trade law conclusively demonstrates that the act does not merely enforce private contracts. Prices established pursuant to the general Fair Trade Act are maintained by the usual contractual remedies of private suit for injunction and damages. (
The majority apparently argue that the function performed by those establishing prices in fair trade contracts is determinative of whether there has been a delegation of legislative power and that the function performed by the producer under both acts, being merely to set the price of his product on the basis of his own personal interest, is the same. It is not, however, the function performed by the price setter, but the effect the law gives to the exercise of that function, that is crucial to the question whether there has been a delegation of legislative power. (See 1 Davis, Administrative Law Treatise, § 2.15, pp. 145-147.) The function performed by two private contracting parties may be the same, but the imposition of the law upon those parties of the obligation thereby created would not amount to a delegation whereas the imposition of the obligation upon all people in this state or in a particular industry may well amount to a delegation of legislative power. However minimal may be the delegation of authority when the law implies a known price term in a contract and makes it enforceable by the normal contractual remedies of damages and injunction, it cannot be denied that there is a delegation of state power when the effect given the specification of a price in a fair trade contract is its enforcement against those not parties to the contract by an administrative agency of the state.
The general Fair Trade Act provides a private remedy for a private purpose. The liquor act provides a public remedy for a public purpose. It is therefore evident that the liquor fair trade law, rather than affording a method for assuring that private parties live up to their voluntary agreements, is a price-fixing act.
Once the act is seen for what it really is and what many authorities recognize it to be, that is an authorization to pro
In the Thrift-D-Lux case this court considered an act providing for the creation of a State Board of Dry Cleaners consisting of six members appointed by the Governor from various levels of the cleaning industry and one appointed from the general public. The board was authorized to establish minimum price schedules for cleaning, dyeing, and pressing services within specified areas on petition of 75 percent of the licensed cleaners in those areas. Those prices were required to be reasonable and just with regard to what will enable cleaners, dyers or pressers in the various areas to furnish modern, proper, healthful and sanitary services, using such appliances and equipment as will minimize the danger to public health and safety incident to such services. The prices were enforced by injunctive relief. While some members of the court felt that the board took on an official character and that sufficient standards were provided, the act was held to constitute an unlawful delegation of legislative power to those directly interested in the regulations they were authorized to promulgate. (40 Cal.2d at p. 448.)
In Blumenthal v. Board of Medical Examiners, supra, 57 Cal.2d 228, 235, we relied on Thrift-D-Lux in holding that the requirement of serving a five-year apprenticeship in this state or of having been licensed for five years in another state in order to obtain a license as a dispensing optician was an arbitrary delegation of legislative power in that it conferred upon presently licensed dispensing opticians the unlimited and unguided power to exclude from their profession any or all persons.
The delegation by the liquor fair trade law of the power to fix retail prices is clearly more arbitrary than the delegation in Thrift-D-Lux, which contained some standards and was directed to a group having at least the color of an administrative body. The present delegation of price-fixing power is, as in the Blumenthal case, a delegation to purely private persons who are directly interested in the consequences of their action
The conclusion that the statute is unconstitutional makes it unnecessary for me to discuss whether the 1961 amendments to the act are retroactive under the rules announced in In re Estrada, 63 Cal.2d 740 [48 Cal.Rptr. 172, 408 P.2d 948].
I would reverse the judgment.
McComb, J., concurred.
Appellant‘s petition for a rehearing was denied December 28, 1966. McComb, J., and Peters, J., were of the opinion that the petition should be granted.