Davey Bros., Inc. v. Stop & Shop, Inc.

• Decision Date: 07 June 1966
• Citation: 351 Mass. 59,217 N.E.2d 751
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: DAVEY BROS., INC. v. STOP & SHOP, INC. (and a companion case 1 ).

Page 751

217 N.E.2d 751

351 Mass. 59

DAVEY BROS., INC. v.STOP & SHOP, INC. (and a companion case ¹).

Supreme Judicial Court of Massachusetts, Suffolk.

Argued April 8, 1966.

Decided June 7, 1966.

Lawrence H. Norris, Boston, for plaintiffs.

George E. Lodgen, Boston, (Nathan T. Wolk, Boston, and Arthur S. Waldstein, Brookline, with him) for defendant.

Before WILKINS, C.J., and SPALDING, WHITTEMORE, CUTTER, and SPIEGEL, JJ.

SPALDING, Justice.

These two bills in equity seek to restrain the defendantStop & Shop, Inc. from advertising, offering to sell, or selling items of merchandise at less than cost in violation of the Unfair Sales Act, G.L. c. 93, §§ 14E--14K(inserted by St.1938, c. 410, § 1).The cases were tried together and final decrees, from which the plaintiffs appeal, were entered dismissing both bills.The judge made a report of the material facts in each case.The evidence is reported.

The evidence, which was largely uncontradicted, warranted the following findings.The plaintiff Dorey operates a retail market in North Wilbraham, situated just under four miles from one of the defendant's markets.In support of his allegation that the defendant'is continually and repeatedly offering for sale to consumers items of its merchandise below the cost * * * to the defendant within the meaning of Section 14F of the * * * Act,' Dorey put in evidence five separate advertisements appearing in Springfield newspapers between November 30, 1964, and January 13, 1965.Testimony was introduced to establish the prices at which the defendant purchased or could have purchased these items, and the trial judge found that the products were offered for sale 'below cost' as that term is defined in * * * § 14E(a)' of the act.Dorey testified that this customers called these advertisements to his attention, that they inquired about his higher prices, and that he subsequently saw his customers in the defendant's store.

The plaintiffDavey Bros., Inc.(Davey) operates a retail market in Boston located within two miles of one of the defendant's markets.On October 15, 1964, the defendant published in two Boston newspapers an advertisement offering for sale fivepound bags of sugar at thirty-nine cents per bag, upon the presentation of a coupon and with any purchase of $5 or more.The judge assumed without deciding that the thirty-nine cent price constituted a belowcost offer for sale within the meaning of § 14E(a), even though the presentation of a coupon and a purchase of $5 or more were required in order to purchase sugar at this price.An officer of Davey testified that he heard comments by customers with respect to these advertisements.

The defendant operates a large chain of retail food stores in Massachusetts and elsewhere.Its pricing policy is determined by a three man group without whose approval no item may be sold below cost.While its policy is not to initiate below-cost selling, the defendant will do so where such practice is prevalent in the competitve market.In some instances the defendant offers the same items for sale below cost as are being offered below cost by its competitors.At other times different items are chosen.At all times, below-cost sales are utilized in order to maintain the defendant's competitive position in an industry where this promotional device is commonly used.Prior to the acts here complained of, there had been a great deal of below-cost selling in the Boston area for a considerable period of time; and in the Springfield area, below-cost price competition was engaged in by large numbers of food retailers.

The judge concluded in each case that the sales were not made with any intent to injure competitors or to destroy competition within the meaning of § 14F of the act, but represented one of 'several and varied sales-promotional features' used by many merchandisers in the area and employed by the defendant'to maintain a favorable competitive position in the industry.'He further found, if material, that the offers to sell at these prices were made 'in good faith to meet competition,' thus falling within the exception provided in § 14G(h).²

The basic provision of the Unfair Sales Act is contained in § 14F which reads: 'Any retailer who, with intent to injure competitors or destroy competition, advertises, offers to sell or sells at retail any item of merchandise at less than cost to the retailer * * * shall * * * be punished by a fine * * * or by imprisonment * * * or both * * *.Evidence of any advertisement, offer to sell or sale of any item * * * by any retailer or wholesaler at less than cost to him * * * shall be prima facie evidence of intent to injure competitors or destroy competition.'Section 14E(a) defines 'cost to the retailer.'Section 14H entitles any person to sue for injunctive relief to restrain violations of the statute.

The constitutional validity of the act has been upheld in Fournier v. Troianello, 332 Mass. 636, 127 N.E.2d 167, where we affirmed the judge's ruling that the defendant was offering to sell bread at less than cost to him as a retailer within the meaning and intent of the act.The cases now before us raise more difficult questions regarding the circumstances in which sales below cost may be held to be valid because not within the intendment of ...