Source: http://courts.mrsc.org/supreme/063wn2d/063wn2d0842.htm
Timestamp: 2019-04-20 04:38:40+00:00

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Statutes - Construction - Object. The fundamental object of statutory interpretation is to ascertain and give effect to the intention of the legislature from what it said, if possible.
 Unfair Competition - Unfair Practices Act - Purpose and Object. Intent to injure or destroy competition is the touchstone of the Unfair Practices Act (RCW 19.90), since the act provides criminal penalties as well as civil relief.
 Statutes - Construction - Constitutionality. Where a statute is subject to two interpretations, one rendering it constitutional and the other unconstitutional, the legislature will be presumed to have intended a meaning consistent with the constitutionality of its enactment.
 Unfair Competition - Unfair Practices Act - Unlawful Activities. In construing RCW 19.90.040, which contains one sentence wherein six phrases describing conduct constituting unlawful business practices are followed by the qualifying words "whereby a sale below cost is effected", held that it was the intention of the legislature that the qualifying words refer not only to the last antecedent but to each of the six antecedents to which it may refer without impairing the meaning of the sentence; hence, it is not unlawful to grant secret rebates or give special service to certain purchasers (the conduct described in the fourth and fifth phrases) unless such activity results in a sale below cost.
FINLEY, HAMILTON, HILL, and HUNTER, JJ., dissent.
Appeal from a judgment of the Superior Court for King County, No. 560489, George H. Revelle, J., entered March 26, 1962. Affirmed.
Action for damages and injunctive relief. Plaintiff appeals from a judgment of dismissal.
Short & Cressman and William L. Hintze, for appellants.
Lycette, Diamond & Sylvester and Herman Howe, for respondents.
* Reported in 389 P. (2d) 422.
 See Ann. 118 A.L.R. 518, 128 A.L.R. 1126; Am. Jur. Trademarks, Tradenames, and Trade Practices (1st ed. § 176).
$500 damages and for an injunction to prevent defendants from engaging in alleged unfair business practices in violation of the Washington Unfair Practices Act. RCW 19.90.
We translate this to mean that defendants offered to sell, and did sell, fuel oil to some customers at prices less than they sold to other customers.«1» The complaint did not allege that defendants had sold a product ". . . at less than the cost thereof . . ."
Defendants answered, denying the material allegations of the complaint, and pleading that the Unfair Practices Act is unconstitutional and void.
". . . In my opinion, the only time there is any sense to the fact that it [a sale might destroy or tend to destroy competition or injure competitors wrongfully, is where it is below cost. For that reason I will grant the motion."
"The evidence will show that the defendants in this case, in order to attract new customers, offered to sell fuel oil at prices less than those regularly established prices at which they are selling to the great bulk of their customers. These are discounts given in order to get a new customer. They are special discounts, and they are not made known to all the other customers of the defendants.
"Nor is the lower price offered to all of the customers of the defendants. The defendants have offered these lower prices to certain consumers who, at the time the prices were offered, were customers of the plaintiffs, and the plaintiffs have lost certain customers by reason of this practice."
Our basic problem is to interpret the Unfair Practices Act (Laws of 1939, chapter 221; RCW 19.90) and apply it to the factual situation alleged in plaintiffs' complaint, quoted supra, as enlarged by counsel's opening statement.
 This court has said on many occasions that the fundamental object of judicial construction or statutory interpretation is to ascertain, if possible, and to give effect to, the intention of the legislature in enacting a particular statute (Graffell v. Honeysuckle, 30 Wn. (2d) 390, 399, 191 P. (2d) 858 (1948)); and in doing so, our first resort is to the context and subject matter of the legislation ". . . because the intention of the lawmaker is to be deduced, if possible, from what it said." (Italics ours.) Lynch v. Department of Labor & Industries, 19 Wn. (2d) 802, 806, 145 P. (2d) 265 (1944); Hatzenbuhler v. Harrison, 49 Wn. (2d) 691, 697, 306 P. (2d) 745 (1957).
Woven into the fabric of the Unfair Practices Act, and running as a thread throughout, is the thought that the proscribed business conduct must result in the injury of a competitor or destroy, or tend to destroy, competition.
«2» RCW 19.90.100. "Violation of the provisions of this chapter shall constitute a misdemeanor; and any person, whether as principal, agent, officer or director, for himself, or for another person, or for any firm or corporation, or any corporation, who or which shall violate any of the provisions of this chapter shall be guilty of a misdemeanor for each single violation and upon conviction thereof, shall be punished by a fine of not less than one hundred dollars nor more than one thousand dollars, or by imprisonment in the county jail not exceeding six months or by both said fine and imprisonment in the discretion of the court; and any criminal action shall not affect the right of any person to bring a civil action under RCW 19.90.090."
"`. . . it is the predatory trade practice of selling below cost with intent to injure competitors which the legislature on reasonable grounds has determined is vicious and unfair that is prohibited. Such determination is clearly within the legislative power. . . .'"
«3» RCW 19.90.090. "Any person may maintain an action to enjoin a continuance of any act or acts in violation of any of the provisions of this chapter and, if injured thereby, for the recovery of damages. If, in such action, the court shall find that the defendant is violating or has violated any of the provisions of this chapter, it shall enjoin the defendant from a continuance thereof. It shall not be necessary that actual damages to the plaintiff be alleged or proved. In addition to such injunctive relief, the plaintiff in said action shall be entitled to recover from the defendant the amount of the actual damages, if any, sustained by him. Commencement, pendency or conclusion of a civil action for injunction and/or damages shall not affect criminal liability."
" or to make or enter into any collateral contract or device of any nature, [a] whereby a sale below cost is effected, to the injury of a competitor, and [b] where the same destroys or tends to destroy competition." RCW 19.90.040.
The statute is a single, complex sentence with six infinitive phrases used as a compound delayed subject. It is complex because the sixth infinitive phrase contains two subordinate adverbial clauses, [a] . . . whereby a sale below cost is effected, to the injury of a competitor, and [b] where the same destroys or tends to destroy competition." The statute is not a model of legislative draftsmanship.
Plaintiffs contend that the adverbial clause - [a] "whereby a sale below cost is effected, to the injury of a competitor" - refers only to the last antecedent - " ". . . to make or enter into any collateral contract or device of any nature." Defendants, on the other hand, contend that the adverbial clause identified as "[a]" supra, refers also to infinitive phrases  and  of the statute so that "any special or secret rebate" or the extension of special services becomes unlawful only if they result in a sale below cost "to the injury of a competitor, and where the same destroys or tends to destroy competition." The trial court based its decision on the latter construction.
"Where no contrary intention appears in a statute, relative and qualifying words and phrases, both grammatically and legally, refer to the last antecedent. [authorities cited]" (Italics ours.) Accord: Parkhurst v. Everett, 51 Wn. (2d) 292, 295, 318 P. (2d) 327 (1957); In re Andy, 49 Wn. (2d) 449, 451, 302 P. (2d) 963 (1956).
This rule supports plaintiffs' interpretation of the statute unless it can be said that a contrary intention appears in the statute.
"It shall be unlawful for any person engaged in business within this state . . .  in connection with any sale to make or give, or to offer to make or give, any special or secret rebate, payment, allowance, refund, commission or unearned discount, whether in the form of money or otherwise,  or to secretly extend to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, . . ." Plaintiffs would have us ignore the remainder of the section.
«4» Arkansas Statutes 1947 Annotated, 1957 Replacement, Official Edition, Vol. 6A, Title 70, Ch. 3, § 70-307; Deering's California Codes Annotated, Business and Professions, Div. 7, Part 2, Ch. 4, Art. 3, § 17045; Colorado Revised Statutes Annotated, 1953, Vol. 3, Ch. 55, Art. 2, §55-2-7; Revised Laws of Hawaii 1955, Vol. 2, Title 24, Ch. 205, Part 1, § 205-8; Kentucky Revised Statutes, 1962, § 365.050, 4748h-7; Revised Codes of Montana 1947 Annotated, Replacement 3, Part 2, Title 51, Ch. 1, § 51-108; West Virginia Code of 1961 Annotated, Vol. 2, Ch. 47, §4678(8c); Wisconsin Statutes, § 133.185, p. 2216; Wyoming Statutes 1957-Annotated, p. 385, Title 40, § 40-28.
Plaintiffs argue that the decision in Jefferson Ice & Fuel Co. v. Grocers Ice & Cold Storage Co., 286 S.W. (2d) 80, 54 A.L.R. (2d) 1181 (Ky. 1955) is illustrative of their contention that secret rebates and special privileges not extended to all purchasers are unfair trade practices and may be enjoined. The decision is not apposite for the Kentucky statute requires that these practices must result in ". . . the injury of a competitor, and where such payments or allowances tend to destroy competition . . .", requirements not present in our statute under plaintiffs' interpretation of it.
Applicable to plaintiffs' interpretation is the decision in Ne Is en v. Tilley, 137 Neb. 327, 289 N.W. 388, 126 A.L.R. 729 (1939).
The Nebraska statute, although treating with the issuance and revocation of motor vehicle dealers' licenses (Neb. C.S. Supp., 1937, Ch. 60, Art. 9, § 60-901, et seq.) followed generally the format of the unfair practices acts.
"The administrator . . . shall have power to deny any license or revoke any license . . . when the dealer or salesman has been found guilty of any of the following: . . .
"(i) Wilfully discriminating . . . in price between different purchasers of a commodity of like grade or quality where the effect of such discrimination may.be substantially to lessen competition or tend to create a monopoly or to injure or destroy the business of a competitor.
"(j) Wilfully discriminating in favor of one purchaser against another purchaser of a motor vehicle by contracting to furnish or furnishing services or facilities or allowing such discounts or rebates in connection with the sale or offering for sale of such motor vehicle so purchased upon terms not accorded to all purchasers on proportionally equal terms.
"It shall be unlawful for any person, engaged in the . . sale of any article . . ., with the intent to destroy the competition of any regular established dealer . . . to discriminate between different purchasers in this state, by selling . . . such article . . . at a lower price to one such purchaser than to another: Provided [not applicable to the instant case] . . . ."
The bill did not become law.
We point out that paragraph (j) of the Nebraska statute is a definitive statement of the generalities of phrases and  of RCW 19.90.040, supra.
"It will be noted therefore that in subdivisions (i) and (k) the prohibited acts are unlawful only where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly or to injure or destroy the business of a competitor. The act itself is not prohibited; it is the act accompanied by an intent to accomplish a result made unlawful by the statute which the legislature attempted to correct. Injuries sustained as a result of fair competition are not protected against by either the state or federal Constitutions. . . .
 It is not necessary for us to resolve whether infinitive phrases  and  of RCW 19.90.040, supra, are unconstitutional - a conclusion to which plaintiffs' interpretation of them might lead us - for, if a statute is subject to two interpretations, one rendering it constitutional and the other unconstitutional, the legislature will be presumed to have intended a meaning consistent with the constitutionality of its enactment. State ex rel. Dawes v. Washington State Highway Comm., ante p. 34, 385 P. (2d) 376 (1963).
By alleging in their complaint that defendants acted "with intent to destroy competition," plaintiffs seek to avoid the reasoning of Nelsen v. Tilley, supra. In doing so, they have reached into the last phrase of § 4 of the act (RCW 19.90.040) for a portion of their allegation, but argue that they are not bound by all of it; thus they try to escape the adverbial clause - "`. . . whereby a sale below cost is effected . . .".
This generalization (which is phrase  of § 4) is sufficiently broad to include the specifics spelled out in the remainder of the section.
We conclude, therefore, that a "contrary intention appears in the statute"; that "whereby a sale below cost is effected to the injury of a competitor" refers not only to the last antecedent, but to each antecedent to which it may refer without impairing the meaning of the sentence.
answered in State v. Sears, 4 Wn. (2d) 200, 103 P. (2d) 337 (1940).
OTT, C. J., DONWORTH, ROSELLINI, and HALE, JJ., concur.
FINLEY, J. (dissenting) - The majority holds that RCW 19.90.040 is not violated by the secret unearned discounts given by the defendant in this case to lure away the customers of a competitor. I consider this result unsound, both because it is contrary to the usual construction of statutory language and, even more importantly, because it flies in the face of clearly announced legislative policy of developing an integrated, consistent body of antitrust and competition-fostering statutory law.
The majority finds that the language conditioning illegality upon the occurrence of a sale below cost not only modifies the last antecedent but also the part of the statute prohibiting secret rebates. The effect of this is of course to make secret rebates illegal only when they involve a sale below cost. There results a large area of secret discounts, rebates, extra services, and related cozy business favors or advantages which are made legal in Washington, to the indisputable serious injury to free and open competition.
the construction of any statute is always said to be directed to the discovery of the legislative intent. Usually this intent, or stated another way, this legislative purpose and policy, must be ascertained from the normal usage of the language of the statute itself. If this seems inadequate it becomes important to look further, seeking to ascertain the policy behind the enactment of the statute and to construe the wording to effectuate the best available indication of the legislative purpose. Where the legislature enunciates an economic policy or theory, this court should not substitute its own views as to a more desirable or wiser economic policy.
The majority cites, but is unable or unwilling to rely upon, the rule of construction that, where no contrary intention appears in a statute, relative and qualifying words and phrases, both grammatically and legally, refer to the last antecedent. Davis v. Gibbs (1951), 39 Wn. (2d) 481, 236 P. (2d) 545. The application of that rule of construction would indicate that the sales-below-cost language does not limit or modify the discrimination prohibition. Instead, a "contrary intention" is found to appear in the statute. This is really a statement that the intent of the legislature controls, but that a better way can be found to ascertain that intent than by reference to the rules of grammar. I agree with this approach but not with the reasoning ultimately adopted by the majority.
That language should be determinative of this case. The legislature clearly states that its purpose in passing the statute was to prohibit "discriminatory practices by which fair and honest competition is destroyed." Whether or not there has been a "sale below cost" seems completely irrelevant, insofar as a discriminatory practice is concerned.
"Competition, of course, involves a struggle among the competitors, but it should be an open struggle based upon the skill, effort and efficiency of the competitors. Only thus will the competition result in a benefit to the public at large.
be at the expense of the customers not so favored.
"`The most common form of price concession other than those discussed in previous chapters consists in unsystematic price reductions to particular customers. Unlike the concessions previously discussed, discrimination of this kind rests on no avowed principle, follows no avowed pattern, and often involves concessions so heterogeneous that no pattern can be imputed to it by the observer.
"`Unsystematic concessions that take the form of departures from a systematic discount schedule have been frequent in Robinson-Patman cases.' Edwards, The Price Discrimination Law, p. 464 (1959).
"`. . . Discriminations in excess of sound economic differences involve generally an element of loss, whether only of the necessary minimum of profits or of actual costs, that must be recouped from the business of customers not granted them. . . .'"
Even accepting the shaky view that the requirement of an injury to competition could not refer to the secret price discrimination clause without, in effect, "taking the below cost language along with it," the inherent nature of such discriminations makes it idle to require the legislature to include any language so limiting the thrust of the statute.
provisions of the act, the statute also prohibits the granting of any `special or secret rebate, payment, allowance . . . in the form of money or otherwise' or the extending to certain purchasers of special services or privileges not extended to all purchasers on like terms.
"While the statutory wording differs substantially from that of the Robinson-Patman Act, it appears that both statutes are designed to prohibit similar types of business conduct. The purpose of the federal prohibitions is to circumscribe all forms of indirect discriminatory pricing. This appears consistent with the stated purposes of the Unfair Practices Act.
"Unlike the price discrimination provisions of the Robinson-Patman Act, the prohibition against discriminatory services and facilities is not predicated upon a showing of adverse competitive effects or proof of an unlawful intent. Nevertheless, it seems clear that competitive injury is a requirement under this section of the Unfair Practices Act."
To the creation by the majority of the indicated loophole in the statutory scheme, heretofore thought reasonably consistent, workable and well-settled, respecting fair, free and open competition, I cannot agree.
implicit economic philosophy or viewpoint is unsound and undesirable as a matter of public policy.
Little further need be said concerning the problem of statutory interpretation than that the majority opinion clearly reveals the difficulty which was encountered in reaching the indicated result.
As to the economic analysis, philosophy or views which would impel such a strict, technical and unrealistic interpretation, identifying as these do so closely with laissez faire economic thinking, I would have thought and hoped that the acceptability of such an approach went out with the hoop skirt, or at least with the somewhat subsequent demise of that fabled "Surrey with the Fringe on the Top."
The outlawing of sales below cost is only one, perhaps the first, toddling step in the direction of reasonable governmental action to control the ethics of the market place in an effort not to limit but to advance and insure free, open and fair competition. A long list of equally undesirable or "unfair" business practices could be compiled without inclusion of or tying them to the concurrence of a sale at a price below cost. Unquestionably, the sale-below-cost device presents a handy picture or dramatic touchstone of illegality, as the unfairness and motive of it are easy to visualize and grasp, but it can be highly deceptive - or even worse, it can be irrelevant in a larger perspective respecting open, free and fair competition in merchandising.
measuring the degree of competition in the industry on a case-by-case basis, is a poor point on which to turn the case argumentatively; but, nevertheless, it serves to illustrate in a more tangible way potential competitive injury inherent in price discriminations. The statute defines cost as including not only the price paid the wholesaler for the item but, also, the prorata share of the other costs, the overhead items such as rent and possibly return on investment. The statute obviously then requires that these cost items be fairly distributed among all items sold in calculating whether a sale below cost has been made.
However, the very nature and essence of all price discriminations is a sale to the favored few at a price which, while higher than the "cost of goods sold" item (sometimes called the "variable" cost) is lower than what would have to be charged if that sale had to bear its fair share of all other overhead costs (fixed costs). When analyzed in this manner, the very touchstone pressed upon this court by the discriminator in the instant case shows the potentially injurious effect of price discriminations.
". . . between different sections of the same community, city, town or village in this state, by selling or furnishing such article or product at a lower price in one such section than in another . . ."
introduces and foments this fallacy. On the basis of the foregoing discussion, I dissent.
HILL, J. (dissenting) - I concur in the result of the dissent; i.e. the plaintiffs' action should not have been dismissed.
HUNTER, J. concurs in the result of the dissent.
to render each such infinitive clause practically superfluous. The legislature could have accomplished the end result effected by the majority opinion by simply stopping at the end of clause 2.

References: § 176
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 § 70
 Art. 3
 § 17045
 Art. 2
 §55
 § 205
 § 365
 § 51
 §4678
 § 133
 § 40
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 Art. 9
 § 60
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 § 4
 § 4
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