,- 

November 18, 1988 

Honorable Roy Blake opinion No. JR-982 

Chairman 

Administration Committee Re: Whether a proposed rule of 

Texas State Senate the Texas Department of Health 

P. 0. BOX 12068 to accept a rebate for infant 

Austin, Texas 78711 formula from a designated "primary supplier" violates article 

XVI, section 25, of the Texas 

Constitution (RQ-1396) 

Dear Senator Blake: 

you request our opinion on issues arising from a 

proposal that bidders on state contracts for goods and 

equipment be required to offer in their bids rebates to the 

state on the purchase price of the goods or equipment. Your 

inquiry is prompted by the Department of Health's recent 

acceptance of bids offering rebates on the purchase price of 

infant formula under the state's Women, Infants and Children 

(WIC) program. You are concerned that such a bidding requirement may violate article XVI, section 25, of the Texas 

Constitution. 

Article XVI, section 25, provides the following: 

That all drawbacks and rebatement of insurance, freight, transportation, carriage, 

wharfage, storage, compressing, baling, 

repairing, or for any other kind of labor or 

service of, or to any cotton, grain, or any 

other produce or article of commerce in this 

State, paid or allowed or contracted for, to 

any common carrier, shipper, merchant, commission merchant, factor, agent, or middleman 

of any kind, not the true and absolute owner 

thereof, are forever prohibited, and it shall 

be the duty of the Legislature to pass effective laws punishing all persons in this 

State who pay, receive or contract for, or 

respecting the same. 

p. 5013 
Honorable Roy Blake - Page 2 (JM-982) 

It should be noted at the outset that this provision by 

its terms only prohibits rebatements or drawbacks to any 

person or entity that is "not the true and absolute owner** 

of the goods or services for which the rebatements or 

drawbacks are given. It does not, therefore, prohibit the 

giving of rebates on ordinary purchases of goods and eguipment by the state. Regardless, however, of whether the 

transaction about which you inquire is the kind of rebate 

which is described in article XVI, section 25, we need not 

address that issue here. 

Your inquiry raises two basic issues: (1) whether 

article XVI, section 25, alone bars the state from accepting 

rebates in the circumstances you describe, A, whether it 

is self-executing; and (2) if it is not self-executing, 

whether any provision of law implementing article XVI, 

section 25, prohibits the state from accepting rebates. 

A constitutional provision is said to be self-executing 

when it supplies a rule sufficient to protect the right 

given or permit enforcement of the duty imposed.. &S 

mtchell Countv v. Citv 

880, 883-884 (Tex. ,898;: 

t,l Bank of pad ucahJ&, 43 S.W. 

Attorney General Opinion Nos. 

WW-245 (1980); V-748 (1948). It is self-executing to the 

extent that anything done in violation of it is void and 

that parties engaging in the proscribed conduct do so with 

the knowledge that they are committing a prohibited act for 

which they might incur penalties if the legislature should 

discharge its duty and prescribe them. Attorney General 

Opinion V-748 (1948), quoting Hemvhill v. Watson, 60 Tex. 

679 (Tex. 1884). 

In Continental Fire 8 Casualtv Insurance Corn. v. 

American Mfcr. Co, 206 S.W.2d 669 (Tex. Civ. 

Worth 1947, no writ), 

App. - Fort 

the court concluded that article XVI, 

section 25, of the Texas Constitution is not self-executing 

but requires legislative enactments to accomplish its 

purposes. The only other reported case involving this 

provision of the constitution concerned a contract for 

hauling livestock which the Railroad Commission determined 

gave illegal rebates of freight rates to a livestock broker. 

Cox Feedlots. Inc. v. Hone 498 S.W.2d 436 (Tex. Civ. App. - 

San Antonio 1973, writ ref:d n.r.e.). The parties conceded 

at trial that the contract provided for illegal rebates. In 

a footnote, the court cited article XVI, section 25, along 

with several statutes as authority on this issue. m 

Peedlots, 498 S.W.2d at 438, n.1. One of the statutes 

cited, article 4013, V.T.C.S., provides the following in 

pertinent pa*: -. 

p. 5014 
Honorable Roy Blake - Page 3 (JM-982) 

No corporation, company or person mentioned in [article 4005 -- railway companies, 

chartered transportation companies, telephone 

and telegraph companies, and their officers, 

agents, and employees] shall directly or 

indirectly, by any special rate, rebate, 

drawback, or other device, demand, exchange, 

collect or receive from any person . . . a 

greater or less or different compensation for 

any service rendered or to be rendered, in 

the transportation of passengers, properties 

or messages, than it or he charges, demands, 

collects or receives from any other . . . 

person . . . doing business in this State for 

a like service under substantially similar 

circumstances and conditions except as is 

provided in this title, nor shall grant any 

free transportation or franking privilege to 

any corporation or person except as provided 

in this title. 

gee also V.T.C.S. arts. 4013a; 6559i-4 (providing substantially the same with respect to railroad companies). The + 

FeedlotS.case is thus consistent with the holding in Continental Fire 6 Casualtv that article XVI, section 25, alone 

does not prohibit rebates, but must be implemented by 

legislation. 

With this in mind, it should be noted that no statute 

expressly prohibits the state from accepting rebates on the 

purchase price of goods and equipment. In your letter to 

this office, however, you suggest that article XVI, section 

25, is implemented by the Texas Free Enterprise and Antitrust Act of 1983, sections 15.01 through 15.40 of the 

Business and Commerce Code. Two provisions in particular 

draw your concern. Section 15.05(c) of the code makes it 

unlawful for any person to give discounts or rebates on the 

purchase price of any goods on the condition that the 

purchaser not use or deal in the goods of a competitor where 

the effect may be to substantially lessen competition in any 

line of trade or commerce. Section 15.03(c) provides that 

the term wperson" "does not include the State of Texas, its 

departments, and its administrative agencies." YOU 

therefore ask whether the legislature may statutorily exempt 

a state agency from compliance with a constitutional 

provision, presumably article XVI, section 25. 

Based upon our review of the legislative history of the 

Texas Free Enterprise and AntitruSt Act, we do not believe 

p. 5015 
Honorable Roy Blake - Page 4 (JM-982) ! 

that section 15.05(c) is the legislative implementation of 

article XVI, section 25. Prior to 1983, chapter 15 of the 

Business and Commerce Code prohibited monopolies, trusts, 

and conspiracies in restraint of trade. m BUS. & Comm. 

Code S 15.04 (repealed by Acts 1983, 68th Leg., ch. 519, at 

3014). The chapter did not expressly ban rebates. In 1983, 

the legislature enacted the current version of chapter 15. 

Acts 1983, m. The bill analysis to the legislation 

making the changes in chapter 15 states that the purpose of 

the bill was to update Texas antitrust laws by patterning 

them after federal antitrust laws. Bill Analysis, Tex. S.B. 

397, 68th Leg., 1983. Section 15.05(c) is patterned closely 

after 15 U.S.C. section 14. No mention is made of article 

XVI, section 25 in the bill analysis. While there is no 

doubt that both provisions serve the same public purpose, we 

find no evidence that section 15.05(c) of the. Business and 

Commerce Code was intended to be the implementing legislation for article XVI, section 25, of the constitution. The 

more likely candidates for that distinction are V.T.C.S. 

articles 4013, 4013a, and 6559i-4, quoted and described 

above. 

Furthermore, because the courts liberally construe 

constitutional provisions directing the legislature#s action 

in order to carry out the purposes for which such provisions 

I were adopted, Texas . WI 126 

S.W.2d 627 (Tex. 1939), we believe the legislature may enact 

legislation that promotes the policy of article XVI, section 

25, without drawing on the authority of that constitutional 

provision. See cenerally, Braden, The Constitution of the 

State of Texas: An Annotated and Comparative Analysis 756 

(1977) (concluding that the legislature needs no special 

constitutional authorization to regulate unjust price 

discrimination); Annot., Validity, construction, and application of state statute forbidding unfair trade practice or 

competition by discriminatory allowance of rebates, commissions, discounts, or the like, 41 A.L.R. 4th 675, § 2[al 

(state statutes forbidding secret rebates generally held to 

be within police power of state). Therefore, we need not 

consider whether the legislature has in this instance 

attempted to exempt state agencies from compliance with 

article XVI, section 25. 

To summarize, article XVI, section 25, of the Texas 

Constitution is not self-executing, but requires implementing legislation. The Texas Free Enterprise and 

Antitrust Act of 1983, sections 15.01 through 15.40 of the 

Texas Business and Commerce Code, does not implement article 

WI, section 25, of the constitution, and no statute 

-. . 

-. 

p. 5016 
, 

Honorable Roy Blake - Page 5 (JM-982) 

implementing that provision prohibits the offer or 

acceptance of rebates on the price of goods and equipment 

purchased by the state. The Department of Health's 

acceptance of bids offering rebates on the purchase price of 

infant formula for the Women, Infants, and Children program 

therefore does not violate article XVI, section 25, of the 

Texas Constitution. 

r. 

SUMMARY 

Article XVI, section 25, of the Texas 

Constitution is not self-executing, but 

requires implementing legislation. The Texas 

Free Enterprise and Antitrust Act of 1983, 

sections 15.01 through 15.40 of the Texas 

Business and Commerce Code, does not implement article XVI, section 25. No statute 

implementing that provision prohibits the 

offer or acceptance of rebates on the price 

of goods and equipment purchased by the 

state. The Department of HealthIs acceptance 

of bids offering rebates on the purchase 

price of infant formula .for the Women, 

Infants, and Children program therefore does 

not violate article XVI, section 25, of the 

Texas Constitution. 

JIM MATTOX 

Attorney General of Texas 

MARYEELLER 

First Assistant Attorney General 

IOU MccR.EARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAELEY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Steve Aragon 

Assistant Attorney General 

p. 5017