Sixty Enterprises, Inc. v. Roman & Ciro, Inc.

• Decision Date: 26 May 1992
• Docket Number: No. 91-2967,91-2967
• Citation: Sixty Enterprises, Inc. v. Roman & Ciro, Inc., 601 So.2d 234 (Fla. App. 1992)
• Parties: SIXTY ENTERPRISES, INC., Appellant, v. ROMAN & CIRO, INC., Appellee. 601 So.2d 234, 61 U.S.L.W. 2062, 1992-1 Trade Cases P 69,832, 17 Fla. L. Week. D1335
• Court: Florida District Court of Appeals

Page 234

601 So.2d 234

SIXTY ENTERPRISES, INC., Appellant, v. ROMAN & CIRO, INC., Appellee.

No. 91-2967.

601 So.2d 234, 61 U.S.L.W. 2062, 1992-1 Trade Cases P

69,832,

17 Fla. L. Week. D1335

District Court of Appeal of Florida Third District.

May 26, 1992.

Rehearing Denied June 30, 1992.

Robert Urich, Miami and Irma Hernandez, Hialeah, for appellant.

Huey, Guilday, Kuersteiner & Tucker, and Mike Huey and Geoffrey B. Schwartz, and Vikki R. Shirley, Tallahassee, Stewart, Damsky, Markus & Konski and Luis S. Konski, Miami, for appellee.

Before BARKDULL, NESBITT and LEVY, JJ.

LEVY, Judge.

For the reasons discussed below, we uphold the constitutionality of the Motor Fuel Marketing Practices Act, Chapter 526, Florida Statutes, and affirm the trial court order granting a temporary preliminary injunction against the defendant retail motor fuel seller.

Roman & Ciro, Inc., a motor fuel retail seller, brought suit against a competitor retailer of motor fuel, Sixty Enterprises, Inc., seeking injunctive relief and damages. Roman & Ciro alleged that Sixty Enterprises was selling motor fuel below its cost, in violation of Section 526.304(1)(a), Florida Statutes (1989), of the Motor Fuel Marketing Practices Act. ¹ Roman & Ciro also filed a motion for a temporary injunction. At the hearing on the motion, ² Sixty Enterprises admitted that it had sold motor fuel below its cost, but stated that it had only done so to meet other competition. The trial court granted Roman & Ciro's motion and issued a temporary injunction, pursuant to Section 526.312 of the Act, enjoining all the parties, including Sixty Enterprises, from selling motor fuel below cost, unless the party selling below cost could document that it was doing so in order to meet the equally low price of a competitor. Only by showing proof that the low price was necessary to meet the competition, is a party entitled, under Section 526.304(2)(b) of the Act, to sell below its cost. In this appeal, Sixty Enterprises challenges the constitutionality of the Act, arguing that it unduly restricts the economic bargaining power of consumers and is not rationally related to furthering the general public welfare. We disagree.

We note, as a threshold consideration, that judicial review of legislation enacted for the protection of the public health, safety, or welfare, is limited to a determination of whether the means utilized by the State bear a rational or reasonable relationship to a legitimate state interest. Belk-James, Inc. v. Nuzum, 358 So.2d 174, 175 (Fla.1978). All legislation is endowed with a strong presumption of validity, and a court may not substitute its judgment, for that of the legislature, as to the wisdom and policy of a particular statute. Hamilton v. State, 366 So.2d 8 (Fla.1978); Department of Legal Affairs v. Rogers, 329 So.2d 257 (Fla.1976); Jones v. Gray & Sons, 430 So.2d 8 (Fla. 3d DCA 1983). In matters concerning the regulation of business, it is up to the legislature to determine whether a public necessity requires a given business to be regulated under the police power of the State. Miami Laundry Co. v. Florida Dry Cleaning & Laundry Bd., 134 Fla. 1, 183 So. 759 (1938). ³ Thus, the narrow question before this court is simply whether the Act is rationally or reasonably related to furthering a legitimate State objective.

Turning to the Act itself, Section 526.302 of the Act articulates the legislature's objectives:

The Legislature finds that fair and healthy competition in the marketing of motor fuel provides maximum benefits to consumers in this state, and that certain marketing practices which impair such competition are contrary to the public interest. Predatory practices and, under certain conditions, discriminatory practices, are unfair trade practices and restraints which adversely affect motor fuel competition. It is the intent of the Legislature to encourage competition and promote the general welfare of citizens of this state by prohibiting such unfair practices.

Section 526.302, Florida Statutes (1991). Thus, it is clear that the Legislative intent in enacting the Act was to protect Florida consumers by protecting and promoting fair competition in motor fuel marketing. ⁴ It is beyond question that protecting competition is in the public interest and is an important objective of both state and federal legislative bodies. ⁵ Healthy competition is valued because it increases the economic benefits to the public as a whole.

In order to accomplish this objective of protecting Florida consumers and encouraging and protecting healthy competition by prohibiting unfair, predatory and anticompetitive practices, Section 526.304 of the Act prohibits refiners and non-refiners from selling motor fuel below cost, where the effect is to injure competition.

Eliminating below-cost pricing schemes encourages competition by preventing businesses from engaging in "predatory pricing" practices. The concern with below cost selling and other predatory pricing schemes is that the choice to sell at non-remunerative levels is motivated by the desire to force competitors out of business. The result is an overall lessening of competition, which in turn harms the public by reducing available choices, and by ultimately raising prices. ⁶

By eliminating the predatory practices of selling motor fuel at below cost, the legislature is furthering a legitimate interest in protecting healthy competition in the marketing of motor fuel, thus increasing economic benefit to the public.

Many other states have enacted similar statutes prohibiting below cost sales in response to anticompetitive practices, and such legislation has withstood constitutional scrutiny. See, e.g., Hartsock-Flesher Candy Co. v. Wheeling Wholesale Grocery Co., 328 S.E.2d 144 (W.Va.1984); Rocky Mountain Wholesale Co. v. Ponca Wholesale Mercantile Co., 68 N.M. 228, 360 P.2d 643, appeal dismissed, 368 U.S. 31, 82 S.Ct. 145, 7 L.Ed.2d 90 (1961); Simonetti, Inc. v. State ex. rel. Gallion, 272 Ala. 398, 132 So.2d 252 (1961); Louisiana Wholesale Distributors Ass'n v. Rosenzweig, 214 La. 1, 36 So.2d 403 (1948); State v. Walgreen Drug Co., 57 Ariz. 308, 113 P.2d 650 (1941); Moore v. Northern Kentucky Independent Food Dealers Ass'n, 286 Ky. 24, 149 S.W.2d 755 (1941); Dikeou v. Food Distributors Ass'n, 107 Colo. 38, 108 P.2d 529 (1940); State v. Sears, 4 Wash.2d 200, 103 P.2d 337 (1940); Annotation, Francis M. Dougherty, Validity, Construction, and Application of Statue Statutory Provision Prohibiting Sales of Commodities Below Cost--Modern Cases, 41 A.L.R.4th 612 (1985). ⁷ In the area of petroleum marketing, both the Utah Motor Fuel Marketing Act and the Alabama Motor Fuel Marketing Act prohibit below cost sales of motor fuel, and have been upheld as constitutional in the face of due process challenges. State By and Through Div. of Consumer Protection v. Rio Vista Oil, Ltd., 786 P.2d 1343 (Utah 1990) (Utah Motor Fuel Marketing Act upheld in face of due process attack challenging ban on below cost sales); State ex rel. Galanos v. Mapco Petroleum, Inc., 519 So.2d 1275 (Ala.1987) (Alabama Motor Fuel Marketing Act's prohibition on retail sales below cost held constitutional and not a violation of defendant's liberty interest). In both the Rio Vista and Galanos cases, critical to the courts' decisions was the fact that the legislation only restricted those sales where the effect of below cost selling was to injure competition and where the legislation did not impermissibly penalize for ordinary injury to competitors resulting from accepted marketing practices. Florida's Act also contains important safeguards against prohibiting innocent and legitimate sales below cost. In recognition of commercial realities and the fact that under certain situations below-cost selling is healthy for competition, legitimate price decreases are recognized. The Legislature carefully limited the restrictions in the Act to only those below cost sales harmful to competition and excluded "isolated, inadvertent incidents" of below cost selling. See Sec. 526.304(2)(a), Fla.Stat. (1991). ⁸ More importantly to the facts of this case, Section 526.304(2)(b) of the Act expressly allows below cost sales made in good faith to meet the equally low price of a competitor in the same relevant geographic market. Although appellant argues that this constitutes an impermissible delegation of legislative authority, we disagree. This provision merely provides a defense, to one charged with selling below cost, by allowing them to defend themselves by showing that they have only responded to the improper acts of others. If anything, the existence of this provision in the Act supports our finding that the Act does not impermissibly interfere with constitutional rights and is reasonably designed to accomplish the objective of encouraging fair and honest competition. This is so because the Act, by ensuring that only those sales below cost designed for predatory purposes to suppress competition are prohibited, utilizes means which do not violate constitutional due process rights and are reasonably related to the Act's stated objectives. Cf. Commonwealth v. Zasloff, 338 Pa. 457, 13 A.2d 67 (1940) (statute which prohibited all sales below cost, including legitimate sales, held unconstitutional as unnecessarily severe and not rationally related to statute's objective).

In sum, we find that the Act is rationally related to furthering the legislature's legitimate objective of protecting competition in the retail motor fuel market by prohibiting predatory pricing practices which the legislature has determined are unfair. ⁹ Accordingly, we uphold the constitutionality of the Motor Fuel Marketing Practices Act and affirm the order entered below.

Affirmed.

1 Prior to the enactment of the Motor Fuel Marketing Practices Act, Florida, along with Maryland, had enacted a retail divorcement statute to address certain anticompetitive practices in the retail marketing of...