People v. Victor , 287 Mich. 506 ( 1939 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Defendant, an independent dealer operating a gasoline station in the city of Detroit, was convicted of violation of Act No. 282, Pub. Acts 1937 (Comp. Laws Supp. 1937, § 9829-11 et seq., Stat. Ann. 1938 Cum. Supp. § 28.78[1] et seq.). The particular offense charged was that on the sale of five gallons of gasoline at 18.6 cents per gallon, a price at least equal to that generally prevailing, he gave away, as a premium to a cash customer, a drinking glass worth less than five cents, with the intention of injuring or destroying his competitors.

Act No. 282, Pub. Acts 1937, is entitled:

"An act to prevent unfair discrimination, unfair methods of competition and destructive trade practices in the production, manufacture, distribution or sale of bakery products or petroleum products; to provide civil remedies and proceedings for the enforcement of this act; to define the duties of the attorney general with regard thereto; and to provide penalties for the violation of this act."

Section 6 of the act provides:

"Any person, doing business in this State and engaged in the production, manufacture, distribution or sale of bakery products or petroleum products, who shall, with the intent to injure or destroy a competitor, give, offer to give or advertise the intent to give away any commodity for the purpose of promoting the sale of any other commodity, shall be deemed guilty of a destructive trade practice, which is hereby prohibited and declared to be unlawful."

At the trial, it was shown by the prosecution that defendant had issued circulars advertising the giving of a premium, and that the regular customers of some other dealers had made purchases from defendant in order to secure premiums; that the market for the sale of gasoline at retail is a limited one so that only an amount certain is sold; that the giving of a premium, while amounting to a reduction in the retail price, does not result in an increase in the total amount of gasoline consumed; and that an increase of business at one station results in a loss of business by competing stations, with consequent injury to the latter.

Defendant testified that he purchased the gasoline of the specifications he required at the lowest price for which he could obtain it and from whatever source he could secure it on the open market. It was shown that he did not have the benefit of the wide advertising enjoyed by the dealers in nationally known brands, who, by means of radio, magazines and newspapers, claimed superior merit for their products; and that in order to offset such advantages, he gave away premiums. Attention was called to the fact that large stations handling well known brands provide rest rooms with modern facilities, and furnish, without charge, the services of attendants who clean customers' windshields, fill radiators and batteries with water and tires with air, thus giving them, at some expense, something in addition to gasoline for the price of the latter. Defendant testified that he gave premiums solely for the purpose of promoting sales in order to make a livelihood and that he had no intention of injuring or destroying a competitor.

Defendant moved that the information be quashed and also that a verdict of not guilty be directed on the grounds that the act was unconstitutional, and that the intent to injure or destroy a competitor had not been proved beyond a reasonable doubt. The judge, who tried the case without a jury, denied the motion and found defendant guilty. The latter appeals.

While it is the province of the jury, or the judge acting as a jury, to determine the intent from all of the surrounding facts, can it be said from the evidence that the giving away of a glass worth less than five cents, under the circumstances, shows beyond a reasonable doubt an intent to injure or destroy a competitor? Merely to ask the question almost calls for the answer, "No," but we prefer to base our opinion on broader grounds inasmuch as other cases have arisen throughout the State and a determination of the constitutionality of this section of the law is highly desirable.

Defendant assails the constitutionality of section 6 of the act, under which he was convicted, and also the constitutionality of the act as a whole. We are mindful of the fact that the constitutionality of an act will be presumed until the contrary is shown, and that an entire statute will not be declared unconstitutional because one part is void, if the balance of the act will be effective. The act itself contains a severability clause so often found in recent legislative enactments. We shall, therefore, but briefly refer to the nature of the statute as a whole and limit our main discussion to section 6.

While the purpose of the act may be to prevent the creation of a monopoly by one dealer who seeks to drive out all of his competitors by means of unfair and ruinous competitive practices, to the detriment of the public, nevertheless, the act does savor of an attempt to stifle competition by maintaining the prices and profits of those dealers already in the business. Defendant claims that the act is a price-fixing measure and relies on Williams v. Standard Oil Co. ofLouisiana, 278 U.S. 235 (49 Sup. Ct. 115, 60 A.L.R. 596), which held that the business of selling gasoline was not affected with a public interest so as to permit statutory regulation of retail prices. The prosecution contends, on the other hand, that the statute is not a price-fixing measure, but merely prohibits certain unfair trade practices. In view of our decision as to the validity of section 6, it is unnecessary to decide the question, and in our discussion of that section, we shall assume that the act is not a price-fixing measure, but is solely prohibitive of allegedly unfair trade practices, as contended by the prosecution.

Defendant claims that Act No. 282, § 6, Pub. Acts 1937, is unconstitutional because it results in a deprivation of property and liberty without due process of law, the prohibition of the giving of premiums being outside of the police power.

The right to engage in any business not harmful to the public is guaranteed by the Constitution. Carolene Products Co. v.Thomson, 276 Mich. 172. Consequently, if the giving of a premium with the sale of gasoline is a legitimate business practice, with no detrimental effects to the public health, morals, safety and general welfare, the practice may not be prohibited by the legislature and a statute doing so results in a deprivation of property and liberty without due process of law. On the other hand, it is clear that any business or business practice may be regulated if such regulation is necessary to the public welfare, health, morals and safety.Carolene Products Co. v. Thomson, supra; Nebbia v. New York,291 U.S. 502 (54 Sup. Ct. 505, 89 A.L.R. 1469); GreatAtlantic Pacific Tea Co. v. Grosjean, 301 U.S. 412 (57 Sup. Ct. 772, 112 A.L.R. 293).

Many cases have held that the giving of premiums or trading stamps with the purchase of commodities is a legitimate business practice which is protected by the due process clause.Long v. State, 74 Md. 565 (22 A. 4, 12 L.R.A. 425, 28 Am. St. Rep. 268); In re Opinion of the Justices to the House ofRepresentatives, 208 Mass. 607 (94 N.E. 848); People v.Gillson, 109 N.Y. 389 (17 N.E. 343, 4 Am. St. Rep. 465); State v. Caspare, 115 Md. 7 (80 A. 606); State v.Dalton, 22 R.I. 77 (46 A. 234, 48 L.R.A. 775, 84 Am. St. Rep. 818); State v. Ramseyer, 73 N. H. 31 (58 A. 958, 6 Ann. Cas. 445); State v. Lothrops-Farnham Co., Inc., 84 N.H. 322 (150 A. 551); State v. Dodge, 76 Vt. 197 (56 A. 983, 1 Ann. Cas. 47); O'Keeffe v. City of Somerville, 190 Mass. 110 (76 N.E. 457, 112 Am. St. Rep. 316, 5 Ann. Cas. 684); In re Opinionof Justices to the Senate, 226 Mass. 613 (115 N.E. 978); State,ex rel. Simpson, v. Sperry Hutchinson Co., 110 Minn. 378 (126 N.W. 120, 30 L.R.A. [N. S.] 966); Ex parte McKenna, 126 Cal. 429 (58 P. 916); Ex parte Drexel, 147 Cal. 763 (82 P. 429, 2 L.R.A. [N. S.] 588, 3 Ann. Cas. 878); City and County ofDenver v. Frueauff, 39 Col. 20 (88 P. 389, 7 L.R.A. [N. S.] 1131, 12 Ann. Cas. 521); Denver v. United Cigar Stores Co., 68 Col. 363 (189 P. 848); United Cigar Stores Co. v.People, 68 Col. 546 (190 P. 1117); Young v. Commonwealth,101 Va. 853 (45 S.E. 327); City Council of Montgomery v. Kelly,142 Ala. 552 (38 So. 67, 70 L.R.A. 209, 110 Am. St. Rep. 43);State, ex rel. Hartigan, v. Sperry Hutchinson Co.,94 Neb. 785 (144 N.W. 795, 49 L.R.A. [N. S.] 1123); Sperry Hutchinson Co. v. City of Owensboro, 151 Ky. 389 (151 S.W. 932, Ann. Cas. 1915A, 373); People, ex rel. Appel, v. Zimmerman,102 App. Div. 103 (92 N.Y. Supp. 497); People, ex rel. Madden, v.Dycker, 72 App. Div. 308 (76 N.Y. Supp. 111). However, the Supreme Court of the United States has held that the giving of premiums or trading stamps with the purchase of merchandise is subject to prohibition by the legislature under the police power. Rast v. Van Deman Lewis Co., 240 U.S. 342 (36 Sup. Ct. 370, L.R.A. 1917A, 421, Ann. Cas. 1917B, 455); Tanner v.Little, 240 U.S. 369 (36 Sup. Ct. 379); Pitney v.Washington, 240 U.S. 387 (36 Sup. Ct. 385). In the case ofPeople, ex rel. Attorney General, v. Sperry Hutchinson Co.,197 Mich. 532 (L.R.A. 1918A, 797), quo warranto proceedings were brought to oust the defendant trading stamp company from doing business in Michigan in violation of the provisions of Act No. 244, Pub. Act 1911 (3 Comp. Laws 1915, § 15055, et seq.). That statute prohibited the giving of trading stamps other than for redemption directly by the firm issuing them. The holding of the United States supreme court in Rast v. Van Deman LewisCo., supra, and its companion cases was conceded for the purposes of the opinion, the Michigan statute being declared invalid on other grounds. The validity of a statute such as is here involved was not determined.

Although the United States supreme court has held that a State statute prohibiting the giving of trading stamps does not violate the Fourteenth Amendment of the Federal Constitution, article 2, § 16, of the Michigan Constitution is also a limitation on the power of the State Legislature. And while the Federal supreme court is the final judge of violations of the Federal Constitution, the decision of the Supreme Court of this State is final on the question of whether or not a State statute conflicts with the State Constitution. In the cases ofIn re Opinion of the Justices to the Senate, 226 Mass. 613 (115 N.E. 978) and State v. Lothrops-Farnham Co., supra, the supreme courts of Massachusetts and New Hampshire refused to follow the decisions of the United States supreme court and held that the giving of trading stamps could not be prohibited. While the decisions of the Federal court are of weight and should be considered, this court is nevertheless free to determine for itself whether or not Act No. 282, § 6, Pub. Acts 1937, violates article 2, § 16 of the Michigan Constitution.

The mere fact that the legislature labels the giving of a premium with the sale of gasoline a "destructive trade practice," does not make it such nor render the practice subject to prohibition. While there is a presumption that an act of the legislature is valid, nevertheless, the courts have the power to determine whether, as a matter of fact, the prohibition bears a reasonable relationship to the public health, safety, morals and general welfare. Carolene Products Co. v. Thomson, supra.

There is no claim that the giving of a water glass with five gallons of gasoline constitutes a lottery or any form of gambling. The prosecution attempted to show that a dealer who gives a premium is more inclined, for that reason, to adulterate his product or to give short measure. No evidence was introduced to prove the contention and there is no logical connection between the practice of giving a premium and a tendency to defraud the public. Nor is there any showing that the public is deceived into buying inferior gasoline by the offering of a premium. If any dealer sells inferior gasoline, his customers will discover the fact at once, premium or no premium, and the dealers handling nationally known brands will retain their business not only through their advertising, but by selling a meritorious and satisfactory product. The case ofSeifert v. Buhl Optical Co., 276 Mich. 692, may be distinguished on the ground that the health and eyesight of the public was involved and that the means of advertising used would likely have led to acceptance of detrimentally inferior professional services.

The United States supreme court predicated its decision inRast v. Van Deman Lewis Co., supra, on the finding that the giving of premiums might be a "lure to improvidence," and for that reason could be prohibited in protection of the public. However, the prosecution contends that the market for the retail sale of gasoline is inelastic and that the giving of premiums will not cause motorists to buy more gasoline, but will merely cause them to transfer their trade to the dealer who offers premiums. Since motorists buy only as much gasoline as they need, regardless of inducements, there clearly can be no "lure to improvidence."

The prosecution finally contends that the giving of premiums by one dealer provokes a contest between all dealers to give larger and more valuable premiums or to cut prices, and that such a price war demoralizes the industry, to the consequent injury of the public. It is claimed that a price war may result in violence and lawlessness, with injury to person and property. This may be prevented by proper performance of their duties on the part of police and prosecutor. Nor are we impressed with the claim by the prosecution that because ambulances, police patrols and other vehicles in public service use gasoline, the giving of premiums should be prohibited. However, a price war does tend to have undesirable results, and assuming, but not deciding, that a tendency towards a price war might be a basis of valid regulation of retail gasoline sales by the legislature, it does not follow that enforcement of section 6 of the statute will have the effect of preventing such price wars.

In order that destructive competition by cutting prices might be eliminated, it would be necessary that some minimum price be fixed, below which a dealer may not sell gasoline. If, as the prosecution claims, the statute makes no attempt to set a fixed minimum price equally applicable to all dealers without regard to particular circumstances, then defendant could sell his gasoline at 20 cents a gallon or at 14.6 cents, and not violate the act, as long as he does not give a premium or sell below cost. If defendant may legally sell his gasoline at 14.6 cents a gallon, without giving a premium, the tendency towards a price war would be no less than it was when he sold at 18.6 cents a gallon and gave a premium worth a fraction of a cent a gallon. It is obvious that if we assume that the act is not a price-fixing measure, we must conclude that the aim of the legislature in enacting the statute was not to prevent price wars. Any tendency that the giving of premiums might have towards promoting a price war is not an evil sought to be eliminated by the legislature.

It is true that only those practices which are entered into "with the intent to injure or destroy a competitor" are prohibited. However, any form of competition tends to take trade away from other dealers with a natural injury to their businesses. The mere entry of an additional tradesman or professional man into a community where he secures a part of a limited amount of business is injurious to all competitors. Surely there cannot be anything unlawful about competition if no unfair practices are followed. Until the legislature sees fit to eliminate all competition between retail gasoline dealers, the mere fact that one dealer manages to take trade away from his rivals in business cannot be held to be a detrimental practice. Some impropriety in his means of accomplishing this result must be shown. What is the impropriety in giving a premium? It is not a form of gambling, nor a "lure to improvidence," and it will not lead to fraud. By giving a premium, defendant was merely offering the purchasing public more for its money. Surely there is nothing reprehensible in that. It is apparent that the giving of a premium has no evil effects which the legislature has sought to correct. It must be held that since the legislature permits competition between retail gasoline dealers, the giving of a premium is a legitimate trade practice.

There is no reasonable relationship between the prohibition of the giving of a premium and the protection of the public health, morals, safety and welfare. Therefore, Act No. 282, § 6, Pub. Acts 1937, as applied to the retail sale of gasoline, is unconstitutional as a violation of article 2, § 16, of the Michigan Constitution.

The conviction is reversed, and defendant is ordered discharged.

WIEST, SHARPE, CHANDLER, and NORTH, JJ., concurred with BUTZEL, C.J.