State v. Langley, 2058

Decision Date05 December 1938
Docket Number2058
Citation53 Wyo. 332,84 P.2d 767
CourtWyoming Supreme Court

RESERVED questions from the District Court, Laramie County SAM M. THOMPSON, Judge.

Lloyd G. Langley, doing business as the Black & White Grocery, was charged with unlawfully selling merchandise at less than cost in violation of statute. He entered a plea of guilty and thereafter filed a motion in arrest of judgment, whereupon the district court certified certain constitutional questions to the Supreme Court.

For the plaintiff, there was a brief by Ray E. Lee, Attorney General Thomas F. Shea, Deputy Attorney General; Wm. C. Snow Assistant Attorney General; and Edward T. Lazear, all of Cheyenne, and oral argument by Messrs. Lee and Lazear.

The question presented by the reserved questions is whether the Unfair Competition Act is within the police powers of the state. Police power has been defined by the authorities as the due regulation and domestic order of the kingdom, whereby the inhabitants of a state are bound to conform their general behavior to the rules of propriety, good neighborhood and good manners and to be decent, industrious, and inoffensive in their respective stations. 4 Blackstone 162. After a lapse of nearly two hundred years, we note a similar definition in the case of Nebbia v. New York, 291 U.S. 502. Police power develops within reason to meet the changing conditions of society. Miller v. Board (Calif.) 234 P. 381. A law will not be declared unconstitutional unless its unconstitutionality is clear. State v. Buck Merc. Co., 264 P. 1023; Munn v. People of Illinois, 94 U.S. 113. The tendency of price cutting is to promote monopoly, a recognized public evil. In 1890, Congress passed the Anti-trust Act, which was upheld in Standard Oil Company of New Jersey v. United States, 221 U.S. 1. The Federal Trade Commission Act passed in 1914 was challenged in the case of Sears Roebuck v. Federal Trade Commission, 258 F. 307, it being there held that the Commission could not prohibit the selling of articles below cost, so long as the public is not deceived and competitors are not discredited by false representations. In a later case (Kobi v. Federal Trade Comm., 23 F.2d 41), it was held that a plan to maintain resale prices and eliminate price cutters indicated a dangerous tendency to hinder competition and create a monopoly, and thus came within the prohibition of the Act prohibiting unfair methods of competition. The tendency of the courts is to regulate and control business where competition was affected, or where the public was interested. The cases are collected in 6 A. L. R. 366; 11 A. L. R. 797; 18 A. L. R. 549; 30 A. L. R. 1129; 32 A. L. R. 792; 51 A. L. R. 331 and 68 A. L. R. 847. The Schecter case, 79 L.Ed. 1581, is of interest in showing this tendency. The Wyoming Unfair Practice Act is practically identical with the California Act, which was upheld in the case of People v. Kahn, 60 P.2d 596, Appellate Department of the Superior Court. We understand that the decision was affirmed by the Supreme Court, but its opinion is not yet available. A similar act has been upheld in South Dakota in State v. Central Lumber Company (S. D.) 123 N.W. 504. That case went to the Supreme Court of the United States and was there upheld. Central Lumber Company v. South Dakota, 226 U.S. 155. A recent North Carolina case discusses the question of price fixing and the power of the legislature was there upheld. State v. Atlantic Ice and Coal Company, 188 S.E. 413. A Nebraska law of the same character was considered in State v. Drayton (Nebr.) 117 N.W. 768. Some of the language used by this court in State v. Buck Mercantile Company, 38 Wyo. 55, is pertinent to the case at bar, with respect to a reasonable exercise of police power.

For the defendant, there was a brief and oral argument by C. A. Lathrop of Cheyenne.

Defendant was charged with violating Section 2, Chapter 73, Laws of 1937, by making a sale for the purpose of injuring competitors. Defendant entered a plea of guilty and thereupon filed a motion in arrest of judgment, on the ground that the Act in question violated certain portions of the State and Federal Constitutions, to-wit, Article 14, Sec. 1, Article 1, Section 7. Section 2 of Chapter 73, Laws 1937 declares it to be unlawful to sell, offer for sale or advertise for sale any article at less than the cost thereof, or give, offer to give or advertise the intent to give away any article or product for the purpose of injuring competitors. The term cost is defined as is also the term overhead expense. Section 10 prescribes a penalty of fine or imprisonment or both. Defendant contends that Section 2 of the Act violates the State and Federal Constitutions in attempting to deprive owners of the right to fix a price on their property. Freight Tax Case, 15 Wallace 232; Carrollton v. Dazzette (Ill.) 42 N.E. 837; Bolln Company v. Irrigation Company (Wyo.) 121 P. 22; Weaver v. Commission, 40 Wyo. 462. Such power exists only where the business has become affected with a public interest. Munn v. Illinois, 94 U.S. 113. The phrase "affected with a public interest" has been criticised as being a little more than a fiction to beautify what is disagreeable to the sufferers. Adkins v. Children's Hospital, 261 U.S. 525. See also Tyson Brothers v. Banton, 273 U.S. 418. The statute under consideration is a minimum price-fixing statute. Such laws are generally condemned by the courts. Williams v. Standard Oil Co., 278 U.S. 235; Wolff Packing Co. v. Court of Industrial Relations, 262 U.S. 522; Strauss v. Talking Machine Company, 243 U.S. 490. It was held in Ins. Co. v. Lewis, 233 U.S. 389, that prices in the insurance business could be fixed by the legislature. Legislation involving price fixing of a temporary character to tide over grave emergencies has been upheld. Wilson v. New, 243 U.S. 332; Block v. Hirsh, 256 U.S. 135, Marcus Co. v. Feldman, 256 U.S. 170; Pennsylvania Coal Co. v. Mahon, 260 U.S. 393. See contra, Doubleday, Doran and Company v. Macy & Company, 269 N.Y. 279. The theory that the statute is sustained by the police power of the state is in conflict with the rule that every state power is limited by constitutional provisions. Adkins v. Hospital, 261 U.S. 525; Creamery Co. v. Minnesota, 274 U.S. 1; Ribnik v. McBride, 277 U.S. 350; Williams v. Standard Oil Co., 278 U.S. 235; Sterling v. Constantin, 287 U.S. 378. A legislature cannot by legislative enactment convert a private business into a public utility. Smith v. Cahoon, 283 U.S. 553. This court may inquire and decide whether the means proposed have reasonable relation to something within the legislative power. Weaver v. Commission, 40 Wyo. 462. Section 2 of Chapter 73, Laws 1937 is indefinite, vague and uncertain in its terms. U. S. v. Reeve, 92 U.S. 214. The question is discussed in the case of United States v. Cohen Grocery Company, 255 U.S. 81. The statute is unreasonable, and it does not have any substantial tendency to accomplish the objects and purposes sought by the legislation. It contravenes the Fourteenth Amendment to the Constitution of the United States and Sections 6 and 7 of Article I of the Wyoming Constitution.

BLUME, Chief Justice. RINER and KIMBALL, JJ., concur, with the reservations above mentioned.


BLUME, Chief Justice.

An information was filed against the defendant in this case for unlawfully selling some merchandise at less than cost in violation of Section 2 of Chapter 73, Session Laws of Wyoming of 1937, which reads as follows:

"It shall be unlawful for any person, partnership, firm, corporation, joint stock company, or other association engaged in business within this State, to sell, offer for sale or advertise for sale any article or product, at less than the cost thereof to such vendor, or give, offer to give or advertise the intent to give away any article or product for the purpose of injuring competitors and destroying competition.

"The term cost as applied to production is hereby defined as including the cost of raw materials, labor and all overhead expenses of the producer; and as applied to distribution, cost shall mean the invoice or replacement cost, whichever is lower, of the article or product to the distributor and vendor plus the cost of doing business by said distributor and vendor.

"The cost of doing business or overhead expense is defined as all costs of doing business incurred in the conduct of such business and must include without limitation the following items of expense: labor, including salaries of executives and officers, rent, legal rate of interest on capital, depreciation, selling cost, maintenance of equipment, delivery costs, credit losses, all types of licenses, taxes, insurance and advertising."

Section 5 of the Act excepts from its provisions (a) merchandise sold in liquidation, (b) sales of perishable merchandise and seasonal goods, (c) damaged merchandise or merchandise deteriorated in quality sold as such, (d) merchandise sold under order of court, (e) merchandise sold in meeting the legal prices of a competitor. Section 12 of the Act provides as follows:

"The Legislature declares that the purpose of this Act is to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition, by prohibiting unfair and discriminatory practices by which fair and honest competition is destroyed or prevented. This Act shall be literally construed that its beneficial purposes may be subserved."

The defendant entered a plea of guilty and thereafter filed a motion in arrest of judgment, claiming that the statute is unconstitutional as hereinafter mentioned. Thereupon, the court certified to us certain difficult constitutional questions, namely, whether Section 2, supra,...

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