State v. Consumers Warehouse Market, Inc.

• Decision Date: 08 September 1958
• Docket Number: No. 40965,40965
• Citation: 329 P.2d 638,183 Kan. 502
• Parties: STATE of Kansas, Appellant, v. CONSUMERS WAREHOUSE MARKET, Inc., Appellee.
• Court: Kansas Supreme Court

Page 638

329 P.2d 638

183 Kan. 502

STATE of Kansas, Appellant, v. CONSUMERS WAREHOUSE MARKET, Inc., Appellee.

No. 40965.

Supreme Court of Kansas.

Sept. 8, 1958.

Syllabus by the Court.

1. The due process of law clause of the Fourteenth Amendment to the Constitution of the United States does not prevent a state from regulating business or controlling prices to promote the general welfare.

2. If the object of regulatory legislation is within the police power of the state the only function of a court is to determine whether the law has a reasonable relation to the legislative purpose and whether its terms are arbitrary or discriminatory.

3. The policy and purpose of the Kansas Unfair Practices Act, G.S.1949, 50-401 to 408, incl., to prevent monopolies, foster competition and prevent certain unfair competitive practices, is within the police power of the state, and the terms of the Act are relevant to that policy.

4. Section 50-405(e), providing that the provisions of the Act shall not apply to sales where the price of merchandise is 'made in good faith to meet the price of a competitor in the same locality.' does not defeat the policy of the Act.

5. In setting a maximum markup for cost of doing business 50-401(a) and (b) is not arbitrary, unreasonable or discriminatory 6. The prima facie evidence provision of the Act (50-403) is a legislative rule of evidence and cannot be attacked on appeal from an order sustaining a motion to quash the information.

7. That portion of 50-401(e) which reads 'and purchases made by retailers and wholesalers at prices which cannot be justified by prevailing market conditions shall not be used in determining cost to the retailer and cost to the wholesaler' is so indefinite and uncertain that it is unreasonable and arbitrary and therefore unconstitutional. The provision is separable and its unconstitutionality does not invalidate the remainder of the Unfair Practices Act.

8. Under the facts, conditions and circumstances described in the opinion the trial court did not err in sustaining the motion to quash the information.

J. John Marshall, County Atty., Girard, and Charles N. Henson, Jr., Asst. Atty. Gen., argued the cause, and John Anderson, Jr., Atty. Gen., and Richard D. Loffswold, Special Prosecutor, Girard, were with them on the briefs for the appellant.

H. Gordon Angwin, Pittsburg, argued the cause, and Ben W. Weir, Pittsburg, was with him on the briefs for appellee.

Richard L. Becker and Morris D. Hildreth, Coffeyville, amici curiae.

PARKER, Chief Justice.

This is an appeal from an order sustaining a motion to quash an information in a criminal action.

The prosecution, conceded to have been agreed upon between the county attorney and counsel for the defendant, was brought in the district court of Crawford County for the purpose of testing the constitutionality of the Kansas Unfair Practices Act, Chapter 277, Laws of 1941, now G.S.1949, 50-401 to 408, incl.

In commencing the action and county attorney filed an information which, omitting formal allegations of no importance to the issues, reads:

'That on or about the 25th day of November, 1956, in the County of Crawford, and State of Kansas, defendant corporation above named, then and there being, did then and there unlawfully advertise, offer to sell and sell at retail certain items of merchandise at less than cost to the retailer, as defined by G.S.1949, 50-401, with the intent of defendant corporation to infairly divert trade from a competitor and otherwise injure a competitor, impair and prevent fair competition and injure public welfare and as such is acting contrary to public policy and the policy of the above cited act.

'Contrary to the form of the Statutes in such cases made and provided, more particularly G.S.1949, 50-401 et seq., and against the peace and dignity of the State of Kansas.'

The defendant promptly moved to quash the information on grounds:

'That said information does not state an offense against the laws of the State of Kansas for the reason that Sections 50-401, 402, 403, 404 and 405, G.S.1949, under which said information is allegedly drawn, is unconstitutional and void and violates the Constitution of the State of Kansas and the amendments thereto, and the Constitution of the United States of America and the amendments thereto, and is in controvention of G.S.1949, 62-1439.'

When this motion was sustained by the trial court, under a general ruling which failed to give specific reasons for its action, the State, as the statute permits (G.S.1949, 62-1703), perfected this appeal.

Portions of the Act in question, pertinent by reason of questions raised respecting the constitutionality of such enactment, on which the rights of the parties must stand or fall under the appellate issues involved, will be delineated at the outset.

G.S.1949, 50-402, provides:

'It is hereby declared that any advertising, offer to sell, or sale of any merchandise, either by ratailers or wholesalers, at less than cost as defined in this act, with the intent, of unfairly diverting trade from a competition or otherwise injuring a competitor, impair and prevent fair competition, injure public welfare, are unfair competition and contrary to public policy and the policy of this act, where the result of such advertising, offer or sale is to tend to deceive any purchaser or prospective purchaser, or to substantially lessen competition, or to unreasonably restrain trade, or to tend to create a monopoly in any line of commerce.'

G.S.1949, 50-401, contains definitions of divers terms and provisions to be found in the Act. Cost is defined generally by subsections (a) and (b) of such section to mean invoice or replacement cost, whichever is lower, less all trade discounts except customary discounts for cash; plus freight charges, excise taxes, cartage and an allowance for markup to cover a proportionate part of the cost of doing business, fixed at six percent for retailers and two percent for wholesalers, absent proof of a lesser cost.

Subsection (e) of 50-401, supra, specifically provides:

'The term 'cost to the retailer' and 'cost to the wholesaler' as defined in paragraphs (a) and (b) of this section shall mean bona fide costs; and purchases made by retailers and wholesalers at prices which cannot be justified by prevailing market conditions within this state shall not be used in determining cost to the retailer and cost to the wholesaler.'

G.S.1949, 50-403, makes violation of the Act by either a retailer or wholesaler a misdemeanor and provides a penalty for such violation. In addition it contains the following provision:

'* * * Proof of any such advertising, offer to sell or sale by any retailer or wholesaler in contravention of the policy of this act shall be prima facie evidence of a violation of this act.'

The Act provides that its provisions shall not apply to certain sale, including, inter alia, sales at retail or wholesale,

'* * *; (e) where the price of merchandise is made in good faith to meet the price of a competitor in the same locality; * * *'. 50-405, supra.

G.S.1949, 50-407, specifies that if any section, sentence, clause or provisions of the Act shall for any reason be held invalid or unconstitutional, the validity of the remaining parts thereof shall not be affected thereby.

In passing it should perhaps be stated that, although not here involved, G.S.1949, 50-404, authorizes proceedings in equity to prevent or restrain violations of the Act.

Appellee's first, and we may add its principal, contention is that our Unfair Practices Act is a price fixing statute and that, as such, it violates the due process guarantee or the Fourteenth Amendment to the Constitution of the United States and Section 18 of our Bill of Rights. In connection with its position on this point it argues that price fixing is permissible only with respect to commodities 'affected with a public interest' and that since the Act purports to cover all items of merchandise it is an unconstitutional attempt to fix the price of some commodities which are not 'affected with a public interest.'

Notwithstanding, appellee's contention finds some support in some of the earlier decisions of the Supreme Court of the United States on which it relies, e. g. Ribnik v. McBride, 277 U.S. 350, 48 S.Ct. 545, 72 L.Ed. 913, and Williams v. Standard Oil Co., 278 U.S. 235, 49 S.Ct. 115, 73 L.Ed. 287, we think it cannot now be upheld by reason of later decisions of that same tribunal which have given increasingly wider scope of the price fixing powers of the States and of Congress and now approve and uphold legislative power to regulate prices in adopting a policy for the promotion of the general welfare. In short it is our view a negative answer to the question thus raised by appellee is required by more recent decisions of the Supreme Court of the United States. One of such decisions is Nebbia v. People of State of New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940, where, in dealing with the subject, it is said and held:

'But we are told that because the law essays to control prices it denies due process. Notwithstanding the admitted power to correct existing economic ills by appropriate regulation of business, even though an indirect result may be a restriction of the freedom of contract or a modification of charges for services or the price of commodities, the appellant urges that direct fixation of prices is a type of regulation absolutely forbidden. His position is that the Fourteenth Amendment requires us to hold the challenged statute void for this reason alone. The argument runs that the public control of rates or prices is per se unreasonable and unconstitutional, save as applied to businesses affected with a public interest; that a business to affected is one in which property is devoted to an enterprise of a sort which the public itself might appropriately undertake, or one whose owner relies on a public grant or franchise for the...