State ex rel. O'Connell v. Albertson's, Inc.

Ott, J.

In this action, the state sought to enjoin Albert-son’s, Inc., from selling whole-bodied fryer chickens and cut-up, packaged fryer chickens to its customers at prices below its cost.

The state contended that the prices of 29 cents a pound for whole-bodied and 33 cents a pound for cut-up, packaged fryer chickens, advertised on August 29, 1963, and continuing thereafter throughout the Labor Day weekend in the Walla Walla and Richland areas, were below Albertson’s cost; hence, in violation of the Unfair Practices Act, RCW 19.90.

Albertson’s answer denied that it had violated the Unfair Practices Act and alleged, as an affirmative defense, that, although its advertised prices were below its cost, the legislature had expressly authorized sales below cost when “made in good faith to meet the legal prices of a competitor.” RCW 19.90.070, infra.

The cause was tried to the court. At the close of the evidence, the court entered the following findings of fact:

That on August 28, 1963, the defendants, Albertson’s, Inc., and Harold Olofson, advertised and sold whole bodied fryer chickens and cut-up fryer chickens in the Walla Walla and Richland, Washington areas for 29 and 33 cents per pound, respectively; that the advertising referred to herein was newspaper advertising published in the Walla Walla Union Bulletin and the Tri-City Herald; that the defendants also sold fryer chickens at the aforementioned prices on August 29, 30, 31 and September 1, 1963, at their Walla Walla and Richland, Washington stores. Finding of Fact No. 2.

That the defendants’ invoice cost of the chickens referred to in Finding of Fact II was 30% cents per pound and the sales of those chickens at 29 cents per pound whole bodied and 33 cents per pound cut-up were made below “cost” as that term is defined in R.C.W. 19.90.010 (Washington Unfair Practices Act). Finding of Fact No. 3.

That in the approximate two year period immediate!}7 prior to August 28, 1963, the defendants had been in contact with agents of the Washington Attorney General’s office and of the Washington State Fryer Commission and that during such period the defendants were constantly being undersold by their competitors on fryer chickens. Finding of Fact No. 5.

That on August 14 and August 16, 1963, in the Rich-land, Kennewick and Pasco areas, I.G.A. and Safeway grocery stores, respectively, advertised and sold whole bodied fryers for 29 cents per pound; that I.G.A. operates grocery stores in Pasco and Kennewick, Washington; that Safeway operates stores in Pasco, Kennewick and Rich-land, Washington; that both I.G.A. and Safeway are business competitors of Albertson’s, Inc.; that the Tri-Cities area of Pasco, Kennewick and Richland, Washington comprise one trade area; that on August 28, 1963, I.G.A. also advertised whole bodied fryer chickens in the TriCity Herald for 29 cents per pound; that such chickens were sold by the I.G.A. stores in Pasco and Kennewick, Washington on August 28, 29, 30, 31 and on September 1,1963 at the price of 29 cents per pound; that the Tri-City Herald is the only daily newspaper published in the TriCities area and serves subscribers in Pasco, Kennewick and Richland, Washington. Finding of Fact No. 6.

That in Walla Walla, Washington, I.G.A. advertised and sold whole bodied fryer chickens at 29 cents per pound during the weekend commencing with July 24, 1963; that again during the Labor Day weekend, commencing with August 28, 1963 and extending through September 1, 1963, I.G.A. advertised and sold whole bodied fryer chickens in the Walla Walla, Washington area for 29 cents per pound; that the city of Walla Walla comprises one trade area; that the advertising referred to herein was done in the Walla Walla Union Bulletin which is the only daily newspaper serving the Walla Walla, Washington area; that I.G.A. and Albertson’s, Inc. each have one grocery store in Walla Walla and that they are business competitors in the Walla Walla trade area; that Johnny’s Market, another competitor of Al-bertson’s, Inc. in Walla Walla, advertised and sold whole bodied fryers for 29 cents per pound on the Labor Day weekend beginning with August 28, 1963. Finding of Fact No. 7.

That the defendants stated that they at all times considered the fryer chicken prices of their competitors legal prices for the alleged reason that no civil or criminal charges had been brought against such competitors under the provisions of the Unfair Practices Act; that at a meeting of defendant’s officials on August 8, 1963 in McCall, Idaho, the defendants adopted a policy of meeting price competition on fryer chickens. Finding of Fact No. 9.

That prior to setting Albertson’s, Inc.’s fryer chicken prices on August 14, 1963, for sales during the Labor Day weekend of 1963, the defendant, Harold Olofson, consulted with the meat managers of Albertson’s Walla Walla and Richland stores, who in turn had reviewed and were familiar with past advertisements and prices of competitors on fryer chickens in the Walla Walla and Tri-Cities areas; that from past experience in the retail meat business, the defendant, Harold Olofson, was aware that the Labor Day weekend is one of the most popular times of the year for the sale of fryer chickens and that consumer demand for fryer chickens is high at that time of year; that based on past prices of competitors in the Spokane and Tri-Cities areas in early August, 1963 and in Walla Walla during late July, 1963, the defendant, Harold Olofson, determined that during the Labor Day weekend of 1963, in order to be competitive, Albertson’s, Inc. should advertise and sell whole bodied fryer chickens for 29 cents per pound in those trade areas; that for those reasons and in a good faith endeavor to be competitive, the defendant, Harold Olofson, tentatively determined on August 14, 1963 that Albertson’s prices on fryer chickens during the Labor Day weekend, 1963, would be 29 cents per pound on whole bodied fryers and 33 cents per pound on cut-up fryers. Finding of Fact No. 10.

That prior to the Labor Day 1963 weekend, the only 29 cents per pound fryer price in Walla Walla during the 1963 summer was that of one store, I.G.A. Sigman’s over the weekend commencing July 24, 1963. The defendant advertised and sold fryers in Walla Walla over the weekend commencing August 7, 1963 at 33 cents per pound for whole bodied fryers. Finding of Fact No. 11.

When the defendants arranged to advertise fryers on Labor Day 1963, they did not positively know that a competitor would advertise whole body fryers at 29 cents per pound. Defendants did not have this knowledge until the newspapers carrying the ads had been published. Finding of Fact No. 12.

That the defendants’ actions of advertising and selling fryer chickens over the Labor Day weekend in Walla Walla and Richland, Washington at 29 cents per pound whole body and 33 cents per pound cut-up produced injurious effects on competitors of defendants in both cities; that certain competitors were left with more than the usual amount of chickens unsold, which they had to sell at a sacrifice price or which spoiled; that in addition, other general anticipated trade in their stores was lost; that the defendants had no intent or design to cause injury to competitors in connection with their Labor Day 1963 advertisements and sales of fryer chickens nor had they any intent or design to injure, destroy or lessen competition by said advertisements and/or sales; that the defendants’ actions in advertising and selling fryer chickens at that time and in those places was done in an endeavor made in good faith to meet the prices of their competitors on fryer chickens. Finding of Fact No. 14.

That the defendants’ fryer chicken prices advertised and offered in the Walla Walla and Richland, Washington areas during the Labor Day weekend 1963 were competitive prices and were not destructive prices as far as defendants’ competitors were concerned, and such prices did not have the tendency or effect of destroying or lessening competition in those areas at that time or subsequent thereto. Finding of Fact No. 15.

From the judgment denying the injunction and dismissing the action, the state has appealed.

The appellant asserts that there was insufficient evidence to sustain the trial court’s finding that Albertson’s had acted in good faith, and that the competitive price of 29 cents a pound was not shown to be a legal price; hence, Albertson’s evidence did not bring it within the exception provided in ROW 19.90.070. We do not agree.

RCW 19.90.070 provides in part:

The provisions of this chapter shall not apply to any sale made:

(4) In an endeavor made in good faith to meet the legal prices of a competitor as herein defined selling the same article or product, in the same locality or trade area, and in the ordinary channels of trade as herein defined . . . . (Italics ours.)

Albertson’s evidence established that for some two years prior to the dates in question its competitors had sold fryer chickens at prices below its cost; that it had maintained its cost price and was continuously undersold; that it had numerous conferences and negotiations with representatives of the Washington State Fryer Commission and members of the Attorney General’s staff without result, and that finally it decided to meet its competitors’ established prices for whole-bodied fryer chickens, even though it must do so at a loss.

Albertson’s evidence also established that on August 14 and 16, 1963,1.G.A. and Safeway stores had advertised and sold whole-bodied fryer chickens for 29 cents a pound in the Richland, Kennewick, and Pasco areas; that on August 28, 1963, I.G.A. stores advertised whole-bodied fryer chickens at 29 cents a pound in the Tri-City Herald and sold them at that price in Pasco and Kennewick on August 28, 29, 30, 31, and September 1, 1963; that I.G.A. stores advertised whole-bodied fryer chickens in the Walla Walla Union Bulletin at 29 cents a pound and sold them at that price in Walla Walla on July 24, 1963, and later during the Labor Day weekend from August 29 through September 1, 1963; and that Johnny’s Market, another competitor of Albertson’s in Walla Walla, advertised and sold whole-bodied fryers at 29 cents a pound during the Labor Day weekend, beginning August 28, 1963.

The evidence relating to Albertson’s good faith further established that, even though I.G.A. had advertised whole-bodied fryer chickens at 29 cents a pound on July 24, 1963, Albertson’s had maintained its price at 33 cents a pound.

The trial court’s finding that Albertson’s acted in good faith in meeting the prices of its competitors is abundantly-supported by the record.

Appellant’s further contention that Albertson’s failed to establish the legality of its competitors’ prices finds no support in the record before us. The following transpired during the examination of one of Albertson’s witnesses:

The Court: Have you taken action against any of these other men who sold for 29( prior to this date? Mr. Reiley: There is an injunction outstanding against Rosauer’s. The Court: No, but I mean any of these TriCity areas here. One of those stores on August — Mr. Reiley: I have investigated myself, taken action in the Walla Walla area, and concluded that it did not necessarily appear that the prices were illegal. The Court: At a 290 price? Mr. Reiley: Yes, I would say so. There have been 290 prices that are legal from time to time just— Mr. Cronin: Which ones, which dates? Mr. Reiley: I can’t tell you that without referring to — It’s possible for the retailers to make good purchases and sell legally at 290. Of course, frequently these 29 0 ads are low-grade birds. (Italics ours.)

In the light of appellant’s concession, made in open court, that the 29-cent prices of Albertson’s competitors had been investigated and found to be legal, further evidence establishing the legality of the competitive prices was not necessary.

The trial court, commenting upon this issue in its memorandum opinion, stated that Albertson’s “cannot be held to investigate the prices of their competitors .... It is doubtful if their competitors would give such information to them in any event; and thus, they’re entitled to a presumption that prices found on the open market are legal until otherwise shown.” (Italics ours.)

The appellant’s admission, together with the further evidence which established the presumption of legality of the prices offered by Albertson’s competitors, sustains the trial court’s finding of fact No. 9 in this regard.

In Martin v. Aleinikoff, 63 Wn.2d 842, 389 P.2d 422 (1964), we held that a sale below cost is not of itself sufficient to invoke the penalties of the Unfair Practices Act.

In State v. Sears, 4 Wn.2d 200, 217, 103 P.2d 337 (1940), which also involved an interpretation of the Unfair Practices Act, we said:

We are therefore of the opinion that if a merchant in good faith reduces his prices to meet those of a competitor, who he in good faith believes has a legal price, he will not be violating either the intent or the wording of the act. (Italics ours.)

Accord, People v. Pay Less Drug Store, 25 Cal. 2d 108, 153 P.2d 9 (1944).

We have consistently held that presumptions are sufficient to establish a fact, but that these presumptions are rebuttable. McGinn v. Kimmel, 36 Wn.2d 786, 221 P.2d 467 (1950); Gardner v. Seymour, 27 Wn.2d 802, 180 P.2d 564 (1947).

If, by the above-quoted evidence, the state did not intend to concede the legality of Albertson’s competitors’ prices, it should have offered evidence to overcome the presumption that published prices of its competitors were legal prices. The appellant offered no such evidence.

We find no merit in either of appellant’s contentions that the evidence was insufficient to sustain the trial court’s findings of fact.

The trial court also predicated its decision upon Albert-son’s defense that its prices were not intended to and did not injure or destroy competition; hence, were not violative of the Unfair Practices Act, RCW 19.90.040.

We do not reach the merits of this defense for the reasons above set out.

The judgment is affirmed.

Hill, Donworth, Weaver, and Hamilton, JJ., concur.