Trade Commission v. Skaggs Drug Centers, Inc.
| Decision Date | 01 November 1968 |
| Docket Number | No. 11034,11034 |
| Citation | 446 P.2d 958,21 Utah 2d 431 |
| Parties | d 431 TRADE COMMISSION of Utah, State of Utah, Plaintiff and Appellant, v. SKAGGS DRUG CENTERS, INC., Grand Central Stores, Inc., dba Warshaw's GiantFood and Grand Central Drugs, Inc., Defendants and Respondents, Utah Retail Grocers Association, Intervenor and Appellant. |
| Court | Utah Supreme Court |
Phil L. Hansen, Atty. Gen., Floyd G. Astin, Asst. Atty. Gen., Salt Lake City, for appellant.
Jones, Waldo, Holbrook & McDonough, H. R. Waldo and Roger J. McDonough, Salt Lake City, for Skaggs Drug Centers, Inc., respondent.
Mulliner, Prince & Mangum, Robert M. Yeates & Denis R. Morril, Salt Lake City, for Grand Central Stores, Inc., respondent.
Worsley, Snow & Christensen, Salt Lake City, for Utah Retail Grocers Assn., intervenor and appellant.
This case comes to our attention on an appeal by the plaintiff-appellant from the trial court's judgment which held the Utah Unfair Practices Act in its entirely unconstitutional--void because of its violation of the Fourteenth Amendment to the United States Constitution, and its infringement of Article I, Sections 1, 2, 7, 18, 23 and 24, and Article VI, Section 26, and Article XII, Section 20 of the Constitution of Utah.
The record discloses a complaint was filed in the District Court of Salt Lake County on the 16th day of September, 1966, by the plaintiff, Trade Commission of Utah, charging the defendant, Skaggs Drug Centers, Inc., on six counts and the defendant, Grand Central Stores, Inc., on five counts of violating the Utah State Unfair Practices Act. The counts charged that on different occasions during the months of November and December, 1965, and June, 1966, the defendants and each one of them advertized for sale diverse articles of merchandise, wearing apparel and foot products, and in particular, toothpaste, Aqua Net hair spray and the comparable Style hair spray, cigarettes and cigarette lighters, vitamins, Bayer aspirin, Polaroid Swinger cameras, Lee's men's pants and frozen tom turkeys below cost as defined in the Unfair Practices Act.
Many of the facts alleged by the plaintiff were undisputed, they having been admitted in defendants' answer or covered by stipulation of the parties entered into prior to trial. Each defendant, however, alleged by way of answer that plaintiff's complaint failed to state a claim against the defendants upon which the relief prayed for could be granted for the reason the Unfair Practices Act, and in particular Section 13--5--7 thereof was unconstitutional.
On December 26, 1966, pursuant to motion, the Utah Retail Grocers Association was permitted to intervene as a party plaintiff. Thereafter the matter was tried before the district court sitting without a jury. After hearing and deciding the case the court entered its Findings of Fact and Conclusions of Law and its Judgment which was for the defendants and against the plaintiff and intervenor Utah Retail Grocers Association on each count of plaintiff's complaint.
The provisions of the Unfair Practices Act applicable herein are:
(a) It is hereby declared that any advertising, offer to sell, or sale of any merchandise, either by retailers or wholesalers, at less than cost as defined in this act with the intent and purpose of inducing the purchase of other merchandise, or of unfairly diverting trade from a competitor or otherwise injuring a competitor, impairs and prevents fair competition, injures public welfare, is unfair competition contrary to public policy and the policy of this act and is declared to be a violation of this act, * * *.
The Unfair Practices Act as amended defines the term 'cost,' 'cost to the wholesaler,' 'cost to the retailer' and 'replacement cost.' 1
The Act further provides in effect:
In the absence of proof of a lessor cost, the cost as defined in the Act means six (6%) per cent above invoice or replacement cost less trade discounts, except cash discounts, plus freight charges. At this point it should be noted that only an injunction against the defendants, and each of them for alleged violation of the Act is prayed for and no criminal penalties are sought to be imposed against the defendants.
The lower court's ruling and judgment were based largely on its conclusions that (1) the statutory presumption of a 6% cost is arbitrary, unreasonable and unconstitutional, that it unconstitutionally shifts the burden of proof to the defendants, and that it constitutes price fixing by the legislature, (2) the statutory definitions of 'cost' and 'replacement cost' exclude certain legitimate costs and discounts and place an 'unreasonable burden' on the merchant requiring him to determine whether or not his prices are in violation of the Act, (3) the prohibition of the intent to 'unfairly divert trade from a competitor' or 'injure a competitor' is unconstitutionally vague and ambiguous, and (4) the phrase 'legal price of a competitor' is unconstitutionally vague, ambiguous and unenforceable because it requires a merchant to determine at his peril whether or not the competitor's price is legal.
As heretofore stated this appeal involves a direct challenge to the constitutionality of the Unfair Practices Act. It appears the conduct of the defendants did constitute a violation of the Unfair Practices Act, which, however, the trial court found did not constitute a punishable offense because the Unfair Practices Act violated the Fourteenth Amendment to the United States Constitution and the alleged sections of the State Constitution.
An alleged violation of the Constitution must be of a specific provision of a particular article thereof. We have repeatedly held in order to be declared unconstitutional, the statute must clearly violate some constitutional provision, and further, the violation must be clear, complete and unmistakable. 2
The only section of the Fourteenth Amendment applicable to this case would be that 'No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States, nor shall any State deprive any person of * * * property without due process of law * * * nor deny any person within its jurisdiction the equal protection of the laws.'
The only pertinent provisions of the State Constitution are:
Any combination by individuals, corporations or associations, having for its object or effect the controlling of the price of any products of the soil, or of any article of manufacture or commerce, or the cost of exchange or transportation, is prohibited, and hereby declared unlawful, and against public policy.
No person shall be deprived * * * of property * * * 3 without due process of law. 4
No bill * * * or law impairing the obligation of contracts shall be passed. 5
All men shall have the inherent and inalienable right * * * to acquire, possess and protect property. 6
All laws of a general nature shall have uniform application. 7
Have any of the quoted provisions as above set forth been violated by the Utah Unfair Practices Act? In answering this question there are some fundamental principles we should keep in mind.
The first is that the legislature of the state is not a government of powers limited to those expressly granted, as is the federal government, (as the federal Constitution says, but is gradually being eroded away). The legislature of the state, which represents the people and thus the sovereign, has all of the residuum of power of government, except only as expressly restricted by the Constitution. 8 In order to preserve the independence and the integrity of the three branches of government, it is of the utmost importance that the judicial exercise restraint and not intrude into the legislative prerogative. It cannot strike down and nullify a legislative enactment unless it is clearly and expressly prohibited by the Constitution or in violation of some plain mandate thereof. The court must make every reasonable presumption which favors constitutionality. 9 The courts have a duty to investigate and, insofar as possible, discover any reasonable avenues by which the statute can be upheld. Every reasonable doubt must be resolved in favor of the constitutionality of the statute. 10 Those who assert the invalidity of the statute must bear the burden of showing it to be unconstitutional. 11
It has been argued that the purpose of statutes such as the Utah Unfair Practices Act is to preserve a competitive climate by preventing large business concerns through the unrestrained use of size and resources alone, from overwhelming and destroying their smaller competitors. These statutes it is claimed seek to preserve the right of a competitor to enter a market and compete with those already operating.
It has been further argued that unrestrained price cutting on a massive scale has had disastrous effect on the small independent retailer with limited resources. That the below cost selling has become a weapon in the fight for markets and customers, characterized by the deliberate use of below cost selling to undercut, overwhelm and destroy competition, all to the benefit and further enrichment of the big interests. It is further claimed that to correct the unscrupulous conduct of these vested groups it became necessary for government to adopt such unfair trade practices acts as the one here in question. Moreover over the overwhelming weight of the more recent judicial decisions has been in favor of such legislation. 12
There are those who maintain America has been built upon the principle of free enterprise which has been interpreted to mean the economic doctrine or practice of permitting private industry to operate with a minimum of control by government. Business, as commonly used and understood, is an inclusive term denoting those engaged in the production, consumption, exchange and distribution of commodities having material value. It has to do with the sale and purchase of real and personal property. Those...
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...to cover the cost of doing business was arbitrary. The Arizona Court of Appeals concluded, after citing Trade Commission v. Skaggs Drug Centers, Inc., 21 Utah 2d 431, 446 P.2d 958 (1968), and Flank Oil Co. v. Tennessee Gas Transmission Co., 141 Colo. 554, 349 P.2d 1005 (1960), that there wa......
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