State v. Russell, Inc. ( 1941 )

Under and pursuant to paragraph (4), section 14, chapter 19, Laws of Utah 1937, our Trade Commission instituted suit against Russell, Inc., a corporation, to enjoin it from engaging in what the Commission had determined to be an unfair method of competition in the sale of gasoline and oil. See par. (1), same section. After issues joined and a trial, the lower court found in favor of Russell, Inc., and the Commission has appealed the case. Russell, Inc., has not filed briefs in the case before this Court.

The method of competition attacked is this: Each service station operator gave to his customers who desired them little books containing blank pages in which to paste stamps. For each 10c of merchandise purchased the purchaser was issued a stamp redeemable at the rate of one-half of one mill. The purchaser, if he desired, could accumulate the stamps, paste them in the book, and when the book was filled, take it back for redemption, for at least a minimum amount of goods, but which might be for as high as $20 in cash or twenty gallons of gasoline. As to whether or not either merchandise or cash in excess of the minimum was acquired by the purchaser depended upon what was found under a seal upon the books which was broken open at the time of the return of the book. Any tampering with the seal before the book was returned deprived the customer of this chance. The book filled contains 180 stamps. The record before the lower court discloses that the company uses this means of advertising and putting its products before the public, rather than the usual method adopted by competitors.

Under the assignments of error made, the case can be decided by the answer to this question: Does this method of "advertising" constitute unfair competition?

We think it does. The appeal to the public is an appeal to the gambling instincts of the individual. Quite aside from the question of whether or not it is a subject for criminal prosecution, it is productive in the individual of a desire to take a chance. It has greater drawing power than the ordinary slot machine because the purchaser does get value for the money he expends in the form of gasoline or oil purchased. Its drawing power does not lie in a superiority of product, or of business methods, or of advertising, but in the desire of the individual for a thrill of acquiring something for nothing.

If we were to approve this method of doing business as fair competition we would throw the doors open for an unscrupulous merchant to foist an inferior product upon the public by appealing to their gambling instincts. It is clearly against public policy. The fact that in this case we are not dealing with such a merchant or that there is no contention that the product sold to the public is inferior, or the fact that it is apparently agreed that the product is on a par with the products of competitors, does not make this method of competition any the less against public policy. The following cases support this decision. Federal Trade Commission v. R.F. Keppel Bro.,291 U.S. 304, 54 S. Ct. 423, 78 L. Ed. 814; Ostler Candy Co. v.Federal Trade Commission, 10 Cir., 106 F.2d 962; Federal TradeCommission v. Raladam Co., 283 U.S. 643, 51 S. Ct. 587,75 L. Ed. 1324, 79 A.L.R. 1191; Featherstone v. IndependentService Station Ass'n, Tex. Civ. App. 10 S.W.2d 124. See annotation to Title 15, Sec. 45, U.S. Code Annotated.

The decree of the lower court is reversed and the case remanded with directions to enter a decree in favor of the plaintiffs and appellants to conform to this decision. Costs to appellant.

MOFFAT, C.J., and LARSON and McDONOUGH, JJ., concur.