State v. Packard-Bamberger & Co., Inc.

• Decision Date: 16 September 1939
• Docket Number: No. 220.,220.
• Citation: 8 A.2d 291,123 N.J.L. 180
• Parties: STATE, on Complaint of LIEF v. PACKARD-BAMBERGER & CO., Inc.
• Court: New Jersey Supreme Court

8 A.2d 291

123 N.J.L. 180

STATE, on Complaint of LIEF

v. PACKARD-BAMBERGER & CO., Inc.

No. 220.

Supreme Court of New Jersey.

Sept. 16, 1939.

Certiorari proceeding by the State of New Jersey, on complaint of Harry Lief, against Packard-Bamberger & Company, Incorporated, to review action of district court in dismissing a complaint alleging violation of statute governing fair trade practices.

Writ discharged.

Argued January term, 1939, before CASE, DONGES, and PORTER, JJ.

Pesin & Pesin, of Jersey City, for prosecutor.

Losche & Mounier, of Hackensack, for respondent.

DONGES, Justice.

A writ of certiorari was allowed to review the action of the District Court of the Third Judicial District of the County of Bergen in dismissing a complaint alleging violation of Section 2 of Chapter 394 of the Laws of 1938 (P.L.1938, p. 976, N.J. S.A. 56:4-7 et seq.) entitled: "An Act to insure and protect fair trade practices in distribution, defining such practices, prohibiting the advertisement, offer for sale or sale of merchandise at less than cost, and fixing penalties for the violation thereof."

Section 2 provides: "It is hereby declared that the advertisement, offer for sale, or sale of any merchandise at less than cost by retailers is prohibited."

The act defines cost to the retailer in the first section thereof as follows:

"(a) 'Cost to the retailer' shall mean the total consideration necessary for the replacement of the merchandise to the retailer at the retail outlet, such consideration to be determined by applying to said merchandise the same cost per unit as the last quantity purchased by the retailer prior to the sale of the said merchandise would have cost per unit if bought at the most favorable market price available to the retailer at any time within thirty (30) days prior to the said sale less any customary trade discounts, but exclusive of discounts for cash, display allowances and unearned discounts for volume.

* * *

"(c) 'Cost to the retailer' and 'cost to the wholesaler' must be bona fide costs and sales to consumers, retailers and wholesalers at prices which cannot be justified by existing market conditions within this State shall not be used as basis for computing costs with respect to sales by retailers and wholesalers.

"(d) 'Sell at retail' and 'sales at retail' shall mean any transfer of title to tangible personal property for a valuable consideration where such property is to be used by the purchaser for purpose other than resale manufacture or further processing. The above terms shall also include any such transfer of property where title is retained by the seller as security for the payment of the purchase price. * * *

"(f) 'Retailer' shall mean and include every person, firm, corporation or association engaged in the business of transferring title within this State to tangible personal property for a valuable consideration where such property is to be used by the purchaser and is not to be resold or used for the purpose of manufacture or further processing."

In the eighth section, certain kinds of sales are exempted from the provisions of the act. These are, with the exception hereafter noted, clearance sales, sales under judicial proceedings and for charity. The act applies to all other sales of merchandise by retailers.

Respondent asserts and the court below held the act to be unconstitutional. No statement of facts appears in the record. The motion was addressed to the sufficiency of the complaint as having no valid statute to support it. The complaint alleges that defendant did "on or about the 7th day of July, 1938, and at other times subsequent thereto, violate Section 2 of Chapter 394 of the Pamphlet Laws of 1938 of the State of New Jersey, in that they did on or about such date advertise, offer for sale and sell merchandise consisting of groceries at less than cost to them, within the meaning and intendment of said law."

Regarding the propriety of the action of an inferior court such as the District Court in declaring a statute unconstitutional, we direct attention to the statement of Mr. Justice Parker in Legg v. County of Passaic, 122 N.J.L. 100, 4 A.2d 300, as the guide for courts of inferior jurisdiction. However, because of the importance of the matter to the public, we pass all other questions raised and take up the question of the validity of the statute.

It will be observed that the statute is very broad in its application to sales of merchandise. By its terms, it applies to every person or group "engaged in the business of transferring title within this State to tangible personal property for a valuable consideration where such property is to be used by the purchaser." Section 1(f). Costs to such retailer are established in subdivision (a) of section 1, with limitations in subdivision (c). An exemption in section 8 is created where the price of merchandise is made to meet the "legal price" of a competitor.

In Wilentz, Attorney-General, v. Crown Laundry Service, Inc., 116 N.J.Eq. 40, 172 A. 331, 332, Vice-Chancellor Bigelow admirably stated the law. He said: "'Statutes in derogation of common law rights are to be strictly construed, and we are not to infer that the legislature intended to alter the common law principles further than is clearly expressed, or than the case absolutely required.' Tinsman v. Belvidere Delaware R. R. Co., 26 N.J.Law, 148, 167, 69 Am.Dec. 565. No common-law right has been more firmly established or more treasured than the right of the individual to sell his goods or his services at whatever price he and the purchaser might agree upon. Indeed, a few years ago every court in the land would have held that a statute abrogating that right, except in the case of a business or property affected with a public interest, would deprive the individual of his property without due process of law, and therefore be void. Tyson & Bro. United Theatre Ticket Office v. Banton, 273 U.S. 418, 47 S.Ct. 426, 71 L.Ed. 718, 58 A.L.R. 1236; Ribnik v. McBride, 277 U.S. 350, 48 S.Ct. 545, 72 L.Ed. 913, 56 A.L.R. 1327; Williams v. Standard Oil Co., 278 U.S. 235, 49 S.Ct. 115, 73 L.Ed. 287, 60 A.L.R. 596. Doubtless judicial conceptions of the power of the Legislature to restrict the individual's liberty of contract have been undergoing a change in recent years. Nebbia v. People of State of New York, 291 U.S. [502], 54 S.Ct. 505, 78 L.Ed. [940], 89 A.L.R. 1469. Doubtless legislative power, usually dormant, may be recalled to activity by the stress of the times. Home B. & L. Association v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. [413], 88 A.L.R. 1481. But, even granting to the Legislature the utmost power which has been claimed for it, it must still be conceded that the exercise of such power requires explicit, unambiguous language. * * * 'Fair competition,' the only authorized subject of the code, may be taken as the opposite of 'unfair competition,' a term which has long been employed by the courts. It has generally been understood to mean a form of competition involving deception of the public as by the imitation of trade-names, labels, etc. The United States Supreme Court, referring to the Federal Trade Commission Act (15 U.S.C.A. § 41 et seq.), has said: 'The words "unfair method of competition" are not defined by the statute and their exact meaning is in dispute. It is for the courts, not the commission, ultimately to determine as matter of law what they include. They are clearly inapplicable to practices never heretofore regarded as opposed to good morals because characterized by deception, bad faith, fraud, or oppression, or as against public policy because of their dangerous tendency unduly to hinder competition or create monopoly. The act was certainly not intended to fetter free and fair competition as commonly understood and practiced by honorable opponents in trade.' Federal Trade Commission v. Gratz, 253 U.S. 421, 40 S.Ct. 572, 575, 64 L.Ed. 993; Federal Trade Commission v. Raymond Bros. Clark Co., 263 U.S. 565, 44 S.Ct. 162, 68 L.Ed. 448, 30 A.L.R. 1114. Price cutting, by itself, has never been considered unfair competition. Sears, Roebuck & Co. v. Federal Trade Commission (C.C.A.) 258 F. 307, 6 A.L.R. 358."

In the act under consideration there is no limitation to transactions which involve commodities affected with a public interest, or to those which may be designed to injure competitors or destroy competition. In this enactment, we find an absolute prohibition of sale "below cost," with punishment therefor, regardless of intent, purpose, or effect upon fair trade. Just how that cost is to be determined under this act is not clear. Indeed, subdivision (a) of section 1 attempts to establish a standard for determining cost, and subdivision (c) of the same section withdraws that standard by declaring that "prices which cannot be justified by existing market conditions * * * shall not be used." By what rule justifiable market conditions are to be determined does not appear. As above stated, section 8 provides: "The provisions of this act shall not apply to sales at retail or sales at wholesale * * * (e) where the...