Allied Properties was accused of violating sections 55.5, 55.6 and 55.65 of the Alcoholic Beverage Control Act and rule 99 of the State Board of Equalization by advertising and offering to sell at retail distilled spirits and wines at prices less than the minimum resale prices provided for by fair trade contracts filed with the board.
Section 55.5 (Stats. 1937, ch. 758, p. 2173, now Bus. & Prof. Code, §§ 24750-24753) authorizes fair trade contracts prohibiting the buyer from reselling, except at the price stipulated by the seller, alcoholic beverages which bear the trade-mark or name of the producer and are in open competition with others of the same general class. The section further provides that wilfully advertising, offering to sell, or selling, at less than the price stipulated in such contracts, whether or not the actor
Section 55.6 (Stats. 1947, ch. 657, p. 1698, now Bus. & Prof. Code, §§ 24754-24757) provides that all retail sales of distilled spirits shall be made pursuant to fair trade contracts entered into under section 55.5 and prohibits the violation of such contracts. The section also provides that all manufacturers and wholesalers of distilled spirits shall file and maintain with the department a list of the prices at which their product will be sold to retailers and that all their sales to retailers shall be in compliance with those lists.
Section 55.65 (Stats. 1949, ch. 574, p. 1064, now Bus. & Prof. Code, §§ 24850-24881), sets forth numerous provisions applicable to the sales of wine. It includes provisions like those governing the sales of distilled spirits except that the prices at which retailers are required to sell to consumers are to be determined either by fair trade contracts or by resale price lists filed by the manufacturer or wholesaler with the department.
Rule 99 provides in part that no manufacturer or wholesaler shall sell distilled spirits except pursuant to a fair trade contract as provided for by section 55.5 of the act, that copies of such fair trade contracts shall be filed with the department, and that no licensee shall advertise or offer for sale alcoholic beverages at retail at a price less than the minimum resale price provided for by a fair trade contract filed with the department pursuant to this rule. (Cal. Admin. Code, tit. 4, § 99, subds. (a), (b), (f).)
Many states have adopted price-regulating measures intended to prevent retail price cutting and bargain sales of alcoholic beverages and the evils considered to follow from those practices, namely, excessive purchase and use of liquor and disruption of orderly marketing conditions. Where the constitutionality of such measures has been challenged, most courts have upheld them. (Gipson v. Morley, 217 Ark. 560 [233 S.W.2d 79, 83]; Schwartz v. Kelly, 140 Conn. 176 [99 A.2d 89, 91]; Reeves v. Simons, 289 Ky. 793 [160 S.W.2d 149, 151]; Supreme Malt Products Co. v. Alcoholic Beverages C. Com'n, 334 Mass. 59 [133 N.E.2d 775, 778]; Dundalk Liquor Co. v. Tawes, 201 Md. 58 [92 A.2d 560, 561]; Butler Oak Tavern v. Division of Alcoholic Bev. Control, 20 N.J. 373 [120 A.2d 24, 30]; Gaine v. Burnett, 122 N.J.L. 39 [4 A.2d 37, 39]; Pompei Winery v. Board of Liquor Control, Ohio App., 149 N.E.2d 733, 748. But cf. Scarborough v. Webb's Cut Rate Drug Co., 150 Fla. 754 [8 So.2d 913, 921]; Schwegmann Bros. v. Louisiana Board, etc. Control, 216 La. 148 [43 So.2d 248, 259, 14 A.L.R.2d 680].)
The Alcoholic Beverage Control Act states that it was enacted "for the protection of the safety, welfare, health, peace, and morals of the people of the State to eliminate the
The statutory provisions also operate to remove some factors which may lead to intemperance because the elimination at the retail level of price cutting, bargain sales, and advertising of low prices tends to reduce excessive purchases of alcoholic beverages. It is true, as Allied points out, that there is nothing in the Alcoholic Beverage Control Act to prevent producers and wholesalers from setting low prices that may induce a large consumption of such beverages.
Whether the same conclusion applies to the provisions involved here depends upon whether the function performed by the persons who assertedly exercise delegated legislative powers is the same under the general Fair Trade Act and the Alcoholic Beverage Control Act. Under both statutes the function of such a person is to set the price of his own product on the basis of his personal interest, as affected by free competition in the market, and the result in each case is that all retailers, whether or not they have signed fair trade contracts, are bound by the prices set.
Upon the same reasoning as was used in the Scovill case, the Supreme Court of Connecticut decided that provisions which were substantially similar to those before us did not constitute an unlawful delegation of legislative power. (Schwartz v. Kelly, 140 Conn. 176 [99 A.2d 89, 93].) A similar statute was held invalid in Scarborough v. Webb's Cut Rate Drug Co., 150 Fla. 754 [8 So.2d 913, 921], on the ground, among others, that it provided for an improper delegation of power, but the case is not persuasive because it contains no reasoning in support of this conclusion.
State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, 40 Cal.2d 436 [254 P.2d 29], relied on by Allied, is distinguishable from the present case. The court there declared unconstitutional a statute which delegated to the State Board of Dry Cleaners the power to fix minimum price schedules. The principal ground of the decision was that the price-fixing provision could not be upheld as a proper exercise of the police power, but, as we have seen, the statutes involved here come within that power. The court also relied on the ground that there was a delegation of legislative power without ascertainable standards to an administrative board composed mainly of members of the industry who would participate in fixing prices to be charged by their competitors. The Thrift-D-Lux case does not hold that all types of price fixing are legislative in character, but that there was a delegation of legislative power under the special facts present in that case. On the other hand it was held in Scovill Mfg. Co. v. Skaggs etc. Drug Stores, supra, 45 Cal.2d 881, 887-888, that there was no delegation of legislative power where manufacturers, acting in their private capacity under the general Fair Trade Act, fixed the prices for which their own products were to be sold at retail by persons who were not their competitors. The distinguishing factor is that the dry cleaners' board was directed to fix uniform minimum prices for the services of all dry cleaners in limited areas on the basis of what it believed was
The judgment is reversed.
Traynor, J., Spence, J., and White, J., concurred.
I dissent. I would affirm the judgment for the reasons expressed by Mr. Justice Hanson in his dissenting opinion when the case was before the District Court of Appeal, (Cal. App.) 338 P.2d 1013, 1023.
In determining the sole question of law which is presented in this case the majority opinion holds that certain sections of the Alcoholic Beverage Control Act (specifically §§ 24750 through 24757 of the Business and Professions Code) constitute a valid and constitutional exercise of the police power. This determination is based upon the propositions that (a) the statutory provisions comprise a fair trade act applicable to alcoholic beverages, and (b) because the established law of this state holds Fair Trade Acts to be constitutional, this act is likewise constitutional. This reasoning is based upon the fallacious assumption that the provisions of the Alcoholic Beverage Control Act do, in fact, comprise a Fair Trade Act. I am of the opinion that the rules laid down in the Fair Trade cases (Max Factor & Co. v. Kunsman, 5 Cal.2d 446 [55 P.2d 177]; Scovill Mfg. Co. v. Skaggs etc. Drug Stores, 45 Cal.2d 881 [291 P.2d 936]) are inapplicable herein, and that this case must be determined in accordance with the rules set forth in State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, 40 Cal.2d 436 [254 P.2d 29].
There are basic distinctions between Fair Trade Acts and
Purpose: Fair Trade Acts were designed to prevent the unsalutory effect of price war on the economy as it existed in a period of depression and low prices (1931). To accomplish this purpose they frankly and openly seek "to protect trade-mark owners, distributors and the public against injurious and uneconomic practices in the distribution of articles of standard quality under a distinguished trademark, brand or name" (Max Factor & Co. v. Kunsman, supra, at p. 454). In other words, the prime purpose of the Fair Trade Acts was to promote trade. In order to attain this objective the legislation fostered a system which would provide a floor to prices, and thus insure a profit. The fact that such price regulation also provided protection for the manufacturer's property right in his trade-marked articles was only incidental to the main purpose. On the other hand, the Alcoholic Beverage Control Act provides a system of setting minimum prices for the basic purpose of reducing trade in spirituous liquors. Under the heading of "Purposes" the act states that it is "an exercise of the police powers of the State ... to eliminate the evils of unlicensed and unlawful manufacture, selling, and disposing of alcoholic beverages, and to promote temperance in
Nature of the Contract: Both the Fair Trade and the Alcoholic Beverage Control Acts are based upon the existence of a contract between producer and retailer, whereby the latter agrees not to sell at less than the price determined by the former. Here the similarity ends. The Fair Trade Acts are voluntary or consensual, in that neither party is required to enter into such a contract.
The Penalty: The penalties for a breach of the Fair Trade Acts are civil, only, giving to the injured party the right to damages or an injunction. The penalty for the breach of the price fixing regulations of the Alcoholic Beverage Control Act are both civil (Bus. & Prof. Code, § 24752) and penal, and the department may suspend or revoke licenses, or institute criminal action (see majority opinion).
The Field Covered: The Fair Trade Acts do not prevent a dealer who is dissatisfied with the prices set by a manufacturer from engaging in competition therewith. If he is unable to find a supplier of a competing article who will enter into a contract at a lower retail price, he may still deal in competing articles which are not fair-traded. Under the Alcoholic Beverage Control Act the retailer has no such alternative. He must deal exclusively in goods the price of which has been set by the distiller, or he must go out of business (Bus. & Prof. Code, § 24755).
It is not contended that the foregoing distinctions, of themselves, invalidate the Alcoholic Beverage Control Act. They are intended only to illustrate that there is a wide divergence between purpose, nature, penalty and coverage of the two acts. Because of such variance the Alcoholic Beverage Control Act
It is to be noted that the act itself, as quoted above, states that it is an exercise of the police power. No one can doubt that the subject matter (alcoholic beverages) is a proper field for the exercise of that power, even to the extent of legislating away the entire right to deal in intoxicating liquors. Nor can it be doubted that the expressed purpose of the act is entirely proper, and within the legislative function. I also agree with the majority opinion in its holding that the judiciary has neither the right nor the duty to question the wisdom of the legislative purpose. But at this point the majority opinion leaps a gap which I am unable to negotiate. After announcing that the courts may, and have a duty to, determine "whether the statute bears a reasonable and substantial relation to the object sought to be attained" (majority opinion, ante, pp. 146, 147)
As shown above, the stated purpose of the act is to "promote temperance in the use and consumption" of alcoholic beverages. But the sections here involved are restricted solely to a price fixing scheme. The only reason assigned (by both respondent and the majority) for the inclusion of these provisions is an assumed legislative purpose (not expressed in the act) to prevent "price wars" which would lead to unbridled purchases. While the provisions of sections 24750 et seq. may prevent "price wars" in the retail sale of any specific trade-marked brand, they do not prevent, or attempt to prevent, "price wars" between competing brands.
Another example of how the legislative provisions fail to accomplish their stated purpose is to be found in the language of section 24750. That section imposes the price fixing scheme upon an alcoholic beverage "which bears ... the trade-mark, brand or name of the producer or owner ... and which is in fair and open competition with alcoholic beverages of the same general class produced by others." (Emphasis added.) By adding the italicized clause, the Legislature has exempted any liquor which, although it be labeled with the owner's name, brand or trade-mark, is not in "fair and open competition." The majority has refused to take judicial notice of what goes on under this escape clause, and, for the purposes of this dissent, I will agree to that limited determination. But recourse to judicial notice is unnecessary in order to realize that trade in liquor is not confined to placing distilled liquor in bottles bearing the advertised labels of a well known distillery, and then shipping the same across a state line. Unlabeled barrels are also accepted by freight carriers, and we have no laws which prohibit their entry into California. Retailers are not prohibited from owning brands and trade-marks, nor are they restrained from bottling on their own behalf. Thus the state may be (and were it not for the restrictions of judicial notice we might say, "is") legally flooded with "off-brands" which are not "in fair and open competition" with other advertised brands, and which may be (are?) sold at very low prices. This may be accomplished under the act by either retailer, wholesaler or distributor. It would seem that the public might be just as intemperate in the use and consumption of off-brands as it might on any of the better advertised brands.
For these reasons, it is clear that the price control features of the Alcoholic Beverage Control Act bear no reasonable relation to the stated purpose of the act. While this is a sufficient reason to hold those provisions to be an unjustified exercise of the police power, there is yet another, and perhaps more compelling reason to hold them invalid.
The price control provisions of the act give to the distiller the exclusive right and obligation of setting the retail price at which his product shall be sold in California (Bus. & Prof. Code, § 24750, as affected by § 24755). Nothing in the code gives the department, or any other official arm of the government, any voice or control in the establishment of such price. The price may be high or low, and need not bear any relationship to supply or demand, or to temperance. In fact, the department is not even to be advised of the retail price established, since only the wholesale price is required to be posted with that body. The result of this unique piece of legislation is a delegation of the legislative function of establishing price (in order to promote temperance), not to the Department of Alcoholic Beverage Control, but to private persons and to the very persons whose activities the act proposes to curtail. That such a delegation of legislative authority is contrary to section 1 of article III and section 1 of article IV of the California Constitution has long been established.
Moreover, the Alcoholic Beverage Control Act sets neither guide nor standard to aid those permitted to fix prices. Even if the legislative authority were delegated to the Department of Alcoholic Beverage Control, without such provision for standards, the price fixing portions of the statute would be unconstitutional (Tarpey v. McClure, 190 Cal. 593, supra; Dominguez Land Corp. v. Daugherty, 196 Cal. 468 [238 P. 703]; Agnew v. City of Culver City, 147 Cal.App.2d 144, at pp. 153-154 [304 P.2d 788]; In re Petersen, 51 Cal.2d 177, at p. 184 [331 P.2d 24]; State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, supra, 40 Cal.2d 436).
In the Tarpey case it is said, at page 600, that "the legislature may, without violating any rule or principle of the
In the Dominguez Land case the court was considering the propriety of a statute delegating authority to the Commissioner of Corporations. At page 484 it said, "A familiar illustration is where the legislature enacts a law prescribing that the rates to be charged by a public utility shall be `reasonable,' and creates a commission with power to investigate and fix the rates. If, however, no standard by which the officer is to be governed be prescribed by the lawmakers, then there is an attempt to entrust a mere administrative officer with the plenary power of the legislature."
Since the act under scrutiny herein offers no guide of any kind to the persons given the obligation of setting prices, the price fixing portion of the statute is invalid. These features thereof are severable, and hence need not require invalidation of the entire act. The price fixing provisions come squarely within the following language (quoted from Carter v. Carter Coal Co., 298 U.S. 238, 311 [56 S.Ct. 855, 80 L.Ed. 1160]) relied upon in the Thrift-D-Lux case, supra (p. 448): "a statute which attempts to confer such power undertakes an intolerable and unconstitutional interference with personal liberty and private property. The delegation is so clearly arbitrary, and so clearly a denial of rights safeguarded by the due process clause of the Fifth Amendment, that it is unnecessary to do more than refer to decisions of this court which foreclose the question."
In my opinion, the judgment should be affirmed.
Schauer, J., concurred.