Union Carbide & Carbon Corp. v. White River Distributors, 5-553

• Citation: 224 Ark. 558,275 S.W.2d 455
• Decision Date: 07 February 1955
• Docket Number: No. 5-553,5-553
• Parties: UNION CARBIDE & CARBON CORPORATION, Appellant, v. WHITE RIVER DISTRIBUTORS, Inc., Appellee.
• Court: Supreme Court of Arkansas

Page 455

275 S.W.2d 455

224 Ark. 558

UNION CARBIDE & CARBON CORPORATION, Appellant, v. WHITE RIVER DISTRIBUTORS, Inc., Appellee.

No. 5-553.

Supreme Court of Arkansas.

Feb. 7, 1955.

Concurring Opinion Feb. 28, 1955.

Eichenbaum, Walther, Scott & Miller, Little Rock, for appellant.

W. D. Murphy, Jr., Batesville, Wright, Harrison, Lindsey & Upton, Little Rock, for appellee.

WARD, Justice.

This appeal seeks to sustain the constitutionality of Act 92 of 1937 commonly known as the 'Arkansas Fair Trade Act', which is found in Ark.Stats. § 70-201 through § 70-208.

Appellant, a corporation, manufactures an anti-freeze product which it sells under the trade name of 'Prestone'. Under the Act it contends it has the right to require all retailers in Arkansas to sell Prestone to consumers at the price of $3.75 per gallon. Appellee, a corporation operating a retail store in Batesville, advertised and sold Prestone for $2.97 per gallon. Appellant filed suit in Chancery Court, under the provisions of Section 6 of the Act, to restrain appellee, and the Court refused to enjoin on the ground that the Act violates Sections 2, 8, 18, 19 and 29, Article 2 of the Arkansas Constitution.

The scope of our investigation has been restricted by agreement of the parties and by the conclusion we hereafter reach, all as presently stated.

No Federal constitutional question is involved, and all pertinent facts are stipulated. Appellee contends that said Act, since its adoption, was rendered void because similar Acts have been held in conflict with the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1-7, 15 note, and that to be effective the Act would have to be re-enacted. We have chosen to place our decision on other grounds and therefore pretermit this question.

The question presented for our determination can also be further limited in three respects.

(a) Disregarding Section 6 of Act 92, there is no contention here by appellee that appellant does not have the right, under the Act, to fix the price at which Prestone must be sold to the public provided it does so by written agreements with the retailers, either direct or through its wholesaler. Section 6 of the Act however is designed to bind appellee to sell at the price fixed by appellant even though it [the retailer] signed no agreement and even though it lawfully held title to and was lawfully in possession of a quantity of Prestone. So hereafter when we speak of the effect or validity of the 'Act' we will refer particularly so Section 6. We make no finding as to the constitutionality of the remainder of the Act if Section 6 is deleted. It is necessary to explain that appellant did have a contract with one retailer in Arkansas to sell at $3.75 per gallon, and that under the terms of the Act this binds every other retailer in Arkansas [including appellee] to sell at the same price.

(b) While the trial court, in holding the Act unconstitutional, stated it violated Sections 2, 8, 18, 19, and 29 of Article 2 of the Arkansas Constitution, the burden of our consideration will relate to Section 8 which says that no one shall be deprived of his property without due process of law, and in doing so we do not intend to intimate that the other sections are not relevant to the issue here.

(c) We also eliminate any consideration of justification of the Act on the ground that it prevents ruinous competition caused by selling below cost, first, because we do not conceive that to be the purpose of the Act and, secondly, because it is stipulated that appellee made a profit by selling at $2.97 per gallon.

It is stipulated that: (a) Prestone, bearing the Trade-Mark, is and has been in fair and open competition in this state with products of the same general class produced and distributed by others [a requirement of the Act]; (b) Appellant, through its distributor, on or about September 17, 1952 entered into a written agreement with a selected retail dealer in this state whereby said retailer agreed not to sell Prestone to the public at less than the price agreed on, which price was $3.75 per gallon; (c) Since September 17, 1952, appellee has advertised for sale and has sold at retail Prestone for less than the fixed price, and unless restrained will continue to do so; (d) At all times pertinent hereto appellee had notice of the existence of the aforesaid agreement and of the retail price mentioned therein [as required by the Act]; (e) All of the said sales of Prestone made by appellee were at a profit; (f) There are other retail dealers in the Batesville area who sell Prestone at the fixed price but they have threatened to discontinue handling Prestone and switch to other brands unless appellee is stopped from selling at the reduced price. If such dealers should so discontinue handling Prestone appellant would lose a substantial amount of business. Likewise, if appellee is not restrained, other retail dealers throughout the state may switch to other brands, resulting in appellant's price structure in Arkansas and its rights under the Arkansas Fair Trade Act being jeopardized; (g) The right of appellee, if such right exists, to sell Prestone at the reduced price is a valuable property right; and (h) Appellee has not signed any Fair Trade Agreement with appellant or with any of the latter's agents or distributors.

The issue. Under the above statement the one pivotal issue to be considered is, as we view it, whether the Act [including, of course, Section 6 thereof] constitutes an abuse of the police power of the Arkansas Legislature. The question is thus stated for these reasons:

(a) The right of appellee to sell its own property at a price agreeable to it is a right guaranteed by the Constitution since it is a valuable property right. That such right to sell is a valuable property right cannot be denied. First, appellant has stipulated that it 'is a valuable property right.' Secondly, our courts have recognized this to be a fact. In Coppage v. State of Kansas, 236 U.S. 1, 35 S.Ct. 240, 243, 59 L.Ed. 441, the court said: 'Included in the right of personal liberty and the right of private property * * * is the right to make contracts for the acquisition of property. * * * If this right be struck down or arbitrarily interfered with, there is a substantial impairment of liberty in the long-established constitutional sense.'

(b) Since the 'valuable property right' belonging to appellee is guaranteed by the constitution and has not been contracted away, it is axiomatic, or it is at least not questioned by appellant, that the legislature has no right by an enactment to take it away unless it has the right by virtue of its inherent police power, and then only to protect the public welfare. This principle is so well established by our courts that citations would appear useless. It is recognized in most if not all of the decisions both upholding and denying the constitutionality of Fair Trade Acts, some of which will be mentioned later. It was the basis of our own decision in Noble v. Davis, 204 Ark. 156, 161 S.W.2d 189, which will be discussed hereafter. Consequently our specific task is to determine if it can reasonably be said that said Act 92, in effect, promotes the general welfare. But before we attempt to reach a conclusion on this specific point it will be helpful to understand just what the Act really does or accomplishes.

What the Act does. Considering the Act in relation to this particular case, it virtually gives appellant the absolute right to fix the price at which Prestone must be sold to the consuming public in Arkansas without regard to the cost of manufacture or distribution. We are not forgetting that it must first contract with one retailer in the state and appellee must have knowledge of contract and the fixed price, but these provisions consist more of form than substance and merely indicate a desperate attempt to hedge against the charge of unconstitutionality. Nobody doubts the feasibility of appellant acquiring one contract dealer out of the hundreds of retail dealers in the state, or the feasibility of bringing this information to all other dealers. If securing a contract with one dealer binds all others, then the corollary would be that, absent such contract, the others are not bound. It is frightful to think a device so easily concocted could destroy the constitutional bulwark protecting our personal liberties and the public welfare.

Considerable discussion in opinions supporting similar Fair Trade Acts has been devoted to distinguishing vertical from horizontal price fixing, concluding that the Act deals only with the former and that it is not objectional. Without evaluating the merit or relevancy of such discussions, it suffices at this time to reassert that the Act does permit price fixing to the extent heretofore mentioned.

Public Welfare. There are several considered matters which impel us to conclude that the effect of the Act is not to protect the public welfare and therefore violates our Constitution.

(a) Full and free competition is the long recognized basis of our economy. Trade-marked articles comprise a large number of the commodities in common use today and it is common knowledge that the number is increasing. There is nothing in the Act to limit the extent of increase. We can think of no way in which the public welfare was being jeopardized under the system of free competition prior to 1937 which suggested the necessity or advisability of imposing the restrictions contained in Act 92, and we can think of none that exists today. To the contrary, we believe it is generally recognized that the interest of the public is best served by the opportunity to buy commodities in a freely competitive market. We recognize that competition is preserved to a degree under the provisions of the Act, but it must be admitted that it is also restricted to a degree. The Act can be sustained only if it enhances the general welfare and not if it restricts it to only a small...