,- November 18, 1988

Honorable Roy Blake opinion No. JR-982 Chairman Administration Committee Re: Whether aproposed rule of Texas State Senate the Texas Department of Health P. 0. BOX 12068 toaccept 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 intheir bids rebates to the state on the purchase price of the goods orequipment. Your inquiry is prompted by the Department ofHealth's recent acceptance ofbids offering rebates on thepurchase price of infant formula under the state's Women, Infants and Children (WIC)program. You are concerned that such abidding requirement may violate article XVI, section 25,of the Texas Constitution.

Article XVI, section 25,provides the following:

That alldrawbacks and rebatement of insurance, freight, transportation, carriage, wharfage, storage, compressing, baling, repairing, or foranyother kind of labor or service of, or to any cotton, grain, or any other produce or article ofcommerce in this State, paid **or allowed**  orcontracted for, to any common carrier, shipper, merchant, commission merchant, factor, agent, ormiddleman of anykind, not the true and absolute owner thereof, are forever prohibited, and itshall be the duty of the Legislature topass effective laws punishing all persons in this Statewho pay, receive or contract for, or respecting the same.

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It should benoted at the outset that this provision by its terms only prohibits rebatements or drawbacks to any person or entity that is "notthe true and absolute owner** of the goods or services for which the rebatements or drawbacks aregiven. It does not, therefore, prohibit the giving of rebates onordinary purchases ofgoods and eguipment by the state. Regardless, however, of whether the transaction aboutwhich you inquire is the kind of rebate which isdescribed inarticle XVI, section 25,we need not address that issuehere.

Your inquiry raises twobasic issues: (1) whether article XVI, section 25, alone bars the state fromaccepting rebates inthe 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 fromaccepting rebates.

A constitutional provision is said tobe self-executing when it supplies a rule sufficient toprotect the right given or permit enforcement of the duty imposed.. &S mtchell Countv v. Citv 880, 883-884 (Tex. ,898;:t,l Bank of paducahJ&, 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 isvoid and that parties engaging inthe proscribed conduct do so with the knowledge that they are committing aprohibited act for which they might incur penalties ifthe legislature should discharge its duty and prescribe them. Attorney General Opinion V-748 (1948), quoting Hemvhill v. Watson, 60 Tex. 679 (Tex.1884).

InContinental Fire 8 Casualtv Insurance Corn. v. 

### American Mfcr. 

### Co, 206 S.W.2d 669 (Tex.Civ. Worth 1947, nowrit), App. - Fort the court concluded that article XVI, section 25,of the Texas Constitution isnot 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. - SanAntonio 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*:

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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, orother device, demand, exchange, collect or receive from anyperson . . . a greater or less ordifferent compensation for any service rendered orto be rendered, in the transportation ofpassengers, properties
ormessages, than itorhe charges, demands, collects or receives from any other
. . . person . . .doing business inthis State for
a like service under substantially similar circumstances and conditions except as is provided inthis title, nor shall grant any free transportation or franking privilege to any corporation **or** person except as provided inthis title.

gee alsoV.T.C.S. arts. 4013a; 6559i-4 (providing substantially the samewith respect to railroad companies). The + FeedlotS.case isthus consistent with theholding in Continental Fire 6Casualtv that article XVI, section 25, alone does not prohibit rebates, but must be implemented by legislation.

With this inmind, it should **be**noted that no statute expressly prohibits the state fromaccepting rebates on the purchase price of goods and equipment. Inyour 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 drawyour concern. Section 15.05(c) of the codemakes it unlawful **for** anyperson togive discounts or rebates on the purchase price of any goods on the condition that the purchaser notuse ordeal inthe goods of acompetitor where the effect may be to substantially lessen competition inany line of trade or commerce. Section 15.03(c) provides that the term wperson" "doesnot include the State ofTexas, its departments, and its administrative agencies." YOU therefore askwhether 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 donot believe

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that section 15.05(c) is the legislative implementation of article XVI, section 25. Prior to 1983, chapter 15of the Business and Commerce Code prohibited monopolies, trusts, and conspiracies **in** restraint of trade. m BUS. & Comm. Code S15.04 (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 inchapter 15 states that the purpose of thebillwas toupdate Texas antitrust lawsby patterning them after federal antitrust laws. BillAnalysis, Tex. S.B. 397, 68th Leg., 1983. Section 15.05(c) ispatterned closely after 15U.S.C. section 14. Nomention ismade of article XVI, section 25 inthe bill analysis. While there is no doubt that both provisions serve the samepublic purpose, we findno evidence that section 15.05(c) of the.Business and Commerce Codewas intended tobe 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 inorder to carry out thepurposes forwhich such provisions I were adopted, Texas . WI 126 S.W.2d 627 (Tex.1939),webelieve the legislature may enact legislation that promotes thepolicy of article XVI, section 25,without drawing on the authority of that constitutional provision. See cenerally, Braden, The Constitution of the State ofTexas: AnAnnotated 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 ofrebates, commissions, discounts, or the like, 41A.L.R. 4th 675, § 2[al (statestatutes forbidding secret rebates generally held to bewithin 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 -..

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implementing that provision prohibits the offer or acceptance of rebates on theprice ofgoods and equipment purchased by the state. The Department of Health's acceptance ofbids offering rebates on thepurchase price of infant formula for theWomen, Infants, and Children program therefore does notviolate article XVI, section 25, of the Texas Constitution.

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### SUMMARY

Article XVI, section 25, of the Texas Constitution is not self-executing, but requires implementing legislation. The Texas Free Enterprise andAntitrust 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 ofHealthIs acceptance ofbids offering rebates on the purchase price of infant formula .for the Women, Infants, and Children program therefore does notviolate article XVI, section 25, of the Texas Constitution.

JIM MATTOX Attorney General ofTexas

MARYEELLER First Assistant Attorney General

IOUMccR.EARY Executive Assistant Attorney General

JUDGE ZOLLIE STEAELEY Special Assistant Attorney General

RICK GILPIN Chairman, Opinion Committee
Prepared by Steve Aragon Assistant Attorney General

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