Dooley's Hardware Mart appeals from a judgment, following trial to the court, denying it under the Unfair Practices Act (Bus. & Prof. Code, §§ 17000-17101)
Dooley's contends that this denial of injunctive relief was prejudicially erroneous because no intent to injure competitors or destroy competition is required for violation of section 17044 and in any event there was under section 17043 sufficient evidence of this intent by reason of the failure of defendants to rebut the statutory presumption of its existence.
We have examined the 1953 rewrite of the section and cannot find any basis for attributing the change in meaning urged by Dooley's. Furthermore we have also examined the legislative history of the 1953 bill (S.B. 881) and found that it was enacted in exactly the same form as it was introduced. Finally, both sections 17071 and 17071.5,
According to the uncontradicted testimony of Food Giant's merchandising vice president the use of loss leaders in staples in a large part of the retail grocery business in the greater Los Angeles metropolitan area has been a way of life for many years. Food Giant chose to use this sales promotion device in January 1967 because it then discontinued another such device — "Post Time at the Races" due to public resistance to and criticism of such games. Retail grocery selling in this area is a volume, low margin business in which about 1 percent of the gross sales receipts is usually devoted to promotion. Competition is largely on a volume rather than on a price basis. The maintenance and possible expansion of sales volume is the hallmark of success and Food Giant used the challenged loss leaders in lieu of its game in a futile attempt to maintain its preexisting sales volume.
The judgment is affirmed.
Schweitzer, J., and Allport, J., concurred.
Section 17044 reads: "It is unlawful for any person engaged in business within this State to sell or use any article or product as a `loss leader' as defined in Section 17030 of this chapter."
Section 17030 reads: "`Loss leader' means any article or product sold at less than cost:
"(a) Where the purpose is to induce, promote or encourage the purchase of other merchandise; or
"(b) Where the effect is a tendency or capacity to mislead or deceive purchasers or prospective purchasers; or
"(c) Where the effect is to divert trade from or otherwise injure competitors."
A violation of section 17044 was clearly shown, if wrongful intent is not required, since Food Giant's merchandising vice-president testified that Food Giant used the three loss leaders to induce the purchase of other of its merchandise by customers lured to Food Giant's store by the loss leaders. Neither of the other alternative grounds in section 17030, however, were established. In fact Dooley's made no attempt to show any actual diversion of trade from Dooley's to Food Giant.
Section 17071.5 reads: "In all actions brought under this chapter proof of limitation of the quantity of any article or product sold or offered for sale to any one customer to a quantity less than the entire supply thereof owned or possessed by the seller or which he is otherwise authorized to sell at the place of such sale or offering for sale, together with proof that the price at which the article or product is so sold or offered for sale is in fact below its invoice or replacement cost, whichever is lower, raises a presumption of the purpose or intent to injure competitors or destroy competition. This section applies only to sales by persons conducting a retail business the principal part of which involves the resale to consumers of commodities purchased or acquired for that purpose, as distinguished from persons principally engaged in the sale to consumers of commodities of their own production or manufacture."
This presumption has been held constitutional by another division of this court earlier in this same case. (Dooley's Hardware Mart v. Food Giant Markets, Inc., 1 Cal.App.3d 105, 107-108 [81 Cal.Rptr. 451].)
The limitation on the quantity of a loss leader a customer might purchase was imposed by Food Giant to prevent substantial increase in the cost to it of the use of these loss leaders. The quantity ceiling prevented a customer from buying much of the item at one time and also prevented competitors from sending shoppers into Food Giant's stores to harass Food Giant by doing the same thing.