Schwegmann Bros. Giant Super Markets v. McCrory

• Decision Date: 01 June 1959
• Docket Number: No. 44550,44550
• Citation: 112 So.2d 606,237 La. 768
• Parties: SCHWEGMANN BROTHERS GIANT SUPER MARKETS v. Sidney J. McCRORY, Commissioner of Agriculture and Immigration of the State of Louisiana.
• Court: Louisiana Supreme Court

Page 606

112 So.2d 606

237 La. 768

SCHWEGMANN BROTHERS GIANT SUPER MARKETS v. Sidney J. McCRORY, Commissioner of Agriculture and Immigration of the State of Louisiana.

No. 44550.

Supreme Court of Louisiana.

June 1, 1959.

Rehearing Denied June 25, 1959.

Stone, Pigman & Benjamin, Saul Stone, Paul O. H. Pigman, Walter J. Wadlington, III, New Orleans, for plaintiff-appellant.

Frank H. Peterman, Alexandria, for intervenors.

Jack P. F. Gremillion, Atty. Gen., George M. Ponder, Asst. Atty. Gen., N. Cleburn Dalton, Baton Rouge, for defendant-appellee.

FOURNET, Chief Justice.

The plaintiff, Schwegmann Brothers Giant Super Markets, a commercial partnership engaged in the business of selling, at retail, food and other commodities and conducting three very large establishments in New Orleans and its environs, sought an injunction in the Nineteenth Judicial District Court for the Parish of East Baton Rouge against the Commissioner of Agriculture & Immigration of this State, Sidney J. McCrory, restraining enforcement of the provisions of Act 193 of the Legislature of 1958, known as the Orderly Milk Marketing Act, and attacking its constitutionality on various grounds. Certain producers and processors of milk and milk products, domiciled in various parts of the State, twenty-one in number,¹ were allowed to intervene and join with the defendant in defending the legality and constitutionality of the Act. After a full hearing² there was judgment decreeing that the rule nisi be recalled, vacated and set aside and plaintiff's suit be dismissed at its cost; and the plaintiff has appealed.

The said Act--a supplement and amendment to Part VII of Chapter 4 of Title 40 of the Revised Statutes and designated R.S. 40:940.1 to 940.15--according to its title, is '* * * to protect and preserve the orderly marketing of milk, milk products and frozen desserts listed or referred to herein * * *,'³ and contains a preamble declaring the Legislature's recognition of the development in the State of unfair competition and trade practices in the sale and distribution of those products, its further recognition of the necessity to protect and preserve orderly marketing and to prevent certain unfair trade and marketing practices, and expressing the lawmakers' intent to prevent the economic destruction of many dairy farmers and others dealing in said products because of discriminatory trade practices engaged in by certain financially strong business organizations to stifle competition--thus presenting 'a situation detrimental to the health, welfare and economy of the people of this State.' Among the practices engaged in by the plaintiff and other large chain stores, and sought to be abolished by provisions of the Act, were a system of rebates or discounts from invoice prices; trade concessions, including the furnishing of display and storage equipment, contributions for free use of refrigeration equipment, advertising paid for by those from whom the dairy products were bought; and trucking of the product from North Louisiana, the entire length of the State (by financially powerful distributors and processors not parties here) and offered for sale at prices cut in half and substantially below the market in the locality from which the product was shipped.

The first section of the Act lists the items covered by its provisions, i.e., the various kinds of milk, milk products and 'frozen desserts' (40:940.1); the next section contains a definition of terms, including 'Nonprocessing Retailer' which fits plaintiff's business, and 'Cost' which 'shall include the cost' of the product to the non-processing retailer plus cost of doing business--which latter shall include but not be limited to labor costs, including executive salaries, cost of receiving, cooling, processing, packaging, manufacturing, rent, depreciation, power, supplies, selling costs, delivery costs, storing, maintenance of plant and equipment, advertising, transportation, all types of licenses, taxes, fees, insurance, and all other costs of doing business as determined by the Commissioner; and cost shall be allocated proportionately to each unit of product sold 'and in no case can any item or unit be sold for less than the unit cost; * * *.'⁴ (940.2) By the following section (940.3), headed 'Disruptive Sales Practices,' it is declared to be a violation for a processor, handler, distributor or bulk milk handler⁵ to do certain described acts, including (a) 'To discriminate in price between non-processing retailers or between consumers who purchase any of the products listed * * * where such products are offered for sale in the same size and type of container', (b) 'To give or offer any discount or rebates on products sold * * *', (c) 'To furnish, give, lend, sell or rent any signs and display material except those advertising only his own products,' and the name or products of the non-processing retailer are not to be included in such signs or display material--except in the case of installations in place as of July 30, 1958.⁶ The method is then provided (940.4) of arriving at minimum prices to producers so as to achieve orderly marketing, and is reproduced in full in the margin.⁷ Succeeding sections (940.5 and 940.6), prohibiting certain acts by processors, handlers and/or distributors, need not be detailed. With reference to sales by a non-processing retailer, the Act provides (940.7): 'No non-processing retailer shall with the intent or with the effect of unfairly diverting trade from a competitor, or of otherwise injuring a competitor, or of destroying competition, or of creating a monopoly, advertise, give, offer to sell or sell within the state of Louisiana, any of the items listed or referred to * * * for less than cost, as defined in R.S. 40:940.2. Proof of the advertising, giving, offer to sell or sale of such products by a non-processing retailer for less than cost to such non-processing retailer shall be prima facie evidence of a violation of this Section.' Like provisions are applicable to sales by bulk milk handlers (940.8), followed by prohibition (940.9) of combination sales involving milk products with any other commodity or service at a price less than the aggregate of the prices for each, with intent or effect of injuring a competitor, destroying competition or creating a monopoly.⁸ Rebates, discounts, and other trade practices by processors, handlers or distrubutors with intent to destroy competition are prohibited (940.10) except upon final liquidation of business, items sold under court order, where the prices of similar or comparable products are made in good faith to meet legal competition, or bids are made in response to invitation from governing bodies. Non-processing retailers as well as other named handlers of milk are required (940.11) to be licensed by the Commissioner; the method for obtaining the license and provision for revocation are incorporated in this Section. The Commissioner, designated 'the instrumentality of the state' for administering the Act and 'to execute the legislative intent herein expressed' (940.12), is vested with certain powers deemed appropriate and necessary to that end, including subpoena power; he promulgates regulations pertaining to the purchases and sales of the affected products, and is empowered to issue licenses for the sum of one dollar annually. He is further authorized to assess against those who process or handle any of the products listed, certain fees to cover the cost of administering the provisions of the Act (940.13), the said fees and other monies to be deposited in the state treasury to the credit of a revolving fund, the assessments to be adjusted so that the fund does not exceed a stated amount (940.14). Penalties for violation of the Act are set out in the final paragraph (940.15).

The market practices which led to this enactment are disclosed by the record, wherein is revealed a system developed by plaintiff under which it received rebates or discounts from the invoice prices⁹ in addition to trade concessions, such as contributions for its free use of refrigeration, display and storage equipment, and advertising furnished and paid for by those from whom it bought dairy products. There was also the practice by large distributors and processors of trucking merchandise great distances from one end of the State to the other, and selling it to big chain stores at prices cut in half below the current market in that locality. In the words of the Trial Judge, 'It does not take much imagination to realize the result of such practices on the small dairies and processors who could make some money at a fair current market price with fair competition, but who were not financially strong enough to meet such abnormal competition.' But the effect of such practices is denied by the plaintiff, who asserts that official statistics of the U.S. Department of Agriculture¹⁰ covering the period from 1945 to 1957 reflect an expanding and prosperous dairy industry in Louisiana, showing an increase in quantity, price and cash receipts significantly larger than that of neighboring states and three times the national average; and counsel assert that 'What the witnesses (intervenors and other witnesses for defendant) were unknowingly describing was competition in a free economy.'

In giving his carefully prepared Reasons the Trial Judge observed: 'The evidence in this case, some of which has been referred to briefly herein, convincingly sustains the already well known fact that the all-power combination of volume buying and adequate financial resources has developed demands and requirements which the small producer, processor and retailer cannot meet. Nor is it shown that the effect of such a combination has profited the consumer.' One brief reference was to an ice cream processor of Lake Charles who, said the Trial Judge, 'explained that his company had been in business for 44 years and that it had made a profit every year...