Case Name: The State of Washington, Respondent, v. Carlton I. Sears, Appellant
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1940-06-05
Citations: 4 Wash. 2d 200
Docket Number: No. 27886
Parties: The State of Washington, Respondent, v. Carlton I. Sears, Appellant.
Judges: Blake, C. J., Beals, Main, and Driver, JJ., concur.
Reporter: Washington Reports
Volume: 4
Pages: 200–242

Head Matter:
[No. 27886.
En Banc.
June 5, 1940.]
The State of Washington, Respondent, v. Carlton I. Sears, Appellant.
Raymond W. Clifford and Ernest H. Campbell, for appellant.
Smith Troy, Albert D. Rosellini, and John S. Lynch, Jr., for respondent.
Cosgrove, Terhune & Schlosstein, Joseph Kindall, Wettrick, Flood, O’Brien & Stuntz, Chester McCarthy, and John T. Dalton, amici curiae.
Reported in 103 P. (2d) 337.

Opinion:
Jeffers, J.
This action was instituted by the prosecuting attorney of Thurston county to restrain defendant from committing certain acts in violation of Laws of 1939, chapter 221, p. 923 (Rem. Rev. Stat. (Sup.), § 5854-21 [P. C. § 7109-21] et seq.), known as the "unfair practices act."
The complaint sets up five purported causes of action, wherein five purported violations of the act are alleged to have taken place. The complaint alleges, generally, and as applicable to each cause of action, that defendant is an agent and salesman of Rexall Drug Company, a corporation, organized and existing under the laws of the state of Washington and having its sole place of business in Olympia, Washington, where it operates two stores, one on Fifth avenue and Capitol way, to which we shall refer as Rexall, and the other on Fourth avenue and Washington street, to which we shall refer as Security. It is further alleged that the merchandise referred to in each cause of action is a standard article of standard quality in the retail drug business; and that the acts done in each cause of action were done with intent and for the purpose of injuring competitors or destroying competition.
In the first cause of action, it is further alleged that defendant, at the Rexall store, offered for sale and sold Lucky Strike, Chesterfield, and Camel cigarettes, at the retail price of fifteen cents per package, or two packages for twenty-nine cents, and $1.39 per carton, whereas at the Security store, defendant offered for sale and sold the same brands of cigarettes for sixteen cents per package, or two packages for thirty-one cents, and $1.45 per carton; that such retail prices were fixed at Rexall and at Security with the intent and for the purpose of discriminating between different sec tions of the same community and city, in violation of § 2 and 4 of the act.
In the second cause of action, it is further alleged that defendant, at the Rexall store, offered for sale and sold Pond's cold cream at the retail price of nineteen cents per two-ounce bottle, which retail price was less than cost thereof to the Rexall Drug Company, as such costs are defined in § 1, chapter 221, supra, in violation of § 4 of the act.
In the third cause of action, it is alleged that defendant, at both Rexall and Security, offered for sale and sold two 1~% ounce packages of Model tobacco, at the retail price of nineteen cents per package, and gave away, in connection with the purchase, one briar pipe, which was of the reasonable value of not less than twenty-five cents, in violation of § 4 of the act.
In the fourth cause of action, it is alleged that defendant, at the Security store, offered for sale and sold Hobart's aspirin, at ten cents per bottle, which was below cost, and used such aspirin as a "loss leader," as defined in § 1, chapter 221, supra, in violation of § 4 of the act.
In the fifth cause of action, it is alleged that, at the Security store, defendant offered for sale and sold Eli hospital cotton, in pound packages, for twenty-nine cents per pound, while at the Security store, during the same time, defendant offered for sale and sold to certain other customers the same article at twenty-three cents per pound, in violation of § 4 of the act.
Defendant demurred to the complaint, on the ground that it failed to state facts sufficient to constitute a cause of action. The trial court overruled the demurrer, and, defendant having elected to stand on his demurrer, the court, on December 2, 1939, entered judgment granting to plaintiff the relief prayed for in the complaint, and defendant has appealed.
Appellant, by demurring and refusing to further plead, admits that he has violated the unfair practices act in each of the five, ways alleged in the complaint. Appellant, however, does not admit that chapter 221 is constitutional, but on the contrary contends that the act is unconstitutional in several respects. Respondent does not question the right of appellant to raise the question of the constitutionality of the various sections of the act.
This act represents an attempt on the part of the legislature to regulate business as a whole, by prohibiting practices which the legislature has determined constitute unfair trade practices. Its stated purpose (§15) is to safeguard the public against the creation or perpetuation of monopolies, and to foster and encourage competition, by prohibiting unfair, dishonest, deceptive, destructive, fraudulent, and discriminatory practices, by which fair and honest competition is destroyed or prevented. It is further declared that the act shall be liberally construed, that its beneficial purposes may be subserved.
It is apparent that the statute was passed in the attempted exercise of the state's police power. That being so, the inquiry of this court is limited to determining whether the object of the statute is one for which the police power may legitimately be invoked, and, if so, whether the act bears a reasonable and substantial relation to the object sought to be attained. The two problems involve substantially different considerations, and will be separately discussed.
We are of the opinion that the avowed purpose of the act is well within the state's police power. We believe it has becomé firmly established that the police power of the state extends not only to the preservation of the public health, safety and morals, but also to the preservation and promotion of the public welfare. Tacoma v. Boutelle, 61 Wash. 434, 112 Pac. 661. In Shea v. Olson, 185 Wash. 143, 53 P. (2d) 615, 111 A. L. R. 998, we find the following statement relative to police power:
"However difficult it may be to give a precise or satisfactory definition of 'police power,' there is no doubt that the state, in the exercise of such power, may prescribe laws tending to promote the health, peace, 'morals, education, good order and welfare of the people. Police power is an attribute of sovereignty, an essential element of the power to govern, and a function that cannot be surrendered. It exists without express declaration, and the only limitation upon it is that it must reasonably tend to correct some evil or promote some interest of the state, and not violate any direct or positive mandate of the constitution."
The legislature is vested with a wide discretion in determining what the public interest requires, and what measures are necessary to protect those interests. State v. Somerville, 67 Wash. 638, 122 Pac. 324; Shea v. Olson, supra; McDermott v. State, 197 Wash. 79, 84 P. (2d) 372.
Appellant contends that, instead of safeguarding the public against monopolies and encouraging competition, the effect of the act will be to encourage monopolies and stifle competition, in that it will tend to destroy the small merchant who cannot do business as cheaply as the large concern which can go into the open market and buy for much less than can the small merchant. It is obvious that the legislature did not think this would be the effect of the act.
"So far as the requirement of due process is concerned, and in the absence of other constitutional restriction, a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority either to declare such policy, or, when it is de dared by the legislature, to override it. If the laws passed are seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio." Nebbia v. New York, 291 U. S. 502, 54 S. Ct. 505, 78 L. Ed. 940.
See, also, State ex rel. Davis-Smith Co. v. Clausen, 65 Wash. 156, 117 Pac. 1101; Tacoma v. Fox, 158 Wash. 325, 290 Pac. 1010.
.The following cases have held acts similar to chapter 221 within the police power of the state: People v. Kahn, 19 Cal. App. (2d) 758, 60 P. (2d) 596; Wholesale Tobacco Dealers Bureau v. National Candy & Tobacco Co., 11 Cal. (2d) 634, 82 P. (2d) 3; State v. Langley, 53 Wyo. 332, 84 P. (2d) 767; Great Atlantic & Pacific Tea Co. v. Ervin, 23 Fed. Supp. 70; Associated Merchants of Montana v. Ormesher, 107 Mont. 530, 86 P. (2d) 1031; Rust v. Griggs, 172 Tenn. 565, 113 S. W. (2d) 733; and Central Lbr. Co. v. South Dakota, 226 U. S. 157,-33 S. Ct. 66, 57 L. Ed. 164.
The cases of State ex rel. Richey v. Smith, 42 Wash. 237, 84 Pac. 851; Seattle v. Ford, 144 Wash. 107, 257 Pac. 243; Brown v. Seattle, 150 Wash. 203, 272 Pac. 517; and. Balzer v. Caler, 74 P. (2d) (Cal. App.) 839, are cited by appellant to sustain his contention. Aside from the Balzer case, the cited cases are not helpful herein,, principally because they do not deal with legislation similar to that with which the instant case is concerned. The Balzer case cannot be considered as authority for the proposition for which it is cited, as on appeal to the supreme court of California, as reported in 11 Cal. (2d) 663, 82 P. (2d) 19, that court held that it was not necessary to pass upon the constitutionality of the act, and did not pass upon that question.
We now come to a consideration of the specific pro visions of the statute, whether the means adopted to accomplish the result are reasonably designed for that purpose, and have a real and substantial relation to the objects sought to be attained.
We may or may not agree with the economic philosophy of the unfair practices act, but it is no part of the duty of this court to determine whether the policy embodied in a statute is wise or unwise. It is primarily a legislative, and not a judicial, function to determine economic policy. If it be the declared legislative policy to curb unrestrained and harmful competition, by measures which are not arbitrary or discriminatory, it is not for us to say the rule is unwise. With the wisdom of the policy adopted, with the adequacy or practicability of the law to enforce it, the courts are both incompetent and unauthorized to deal.
It is first contended by appellant that the title to the unfair practices act is deficient, under § 19, article 2, of the state constitution. The title to chapter 221, Laws of 1939, reads:
"An Act relating to unfair competition, discrimination and practices in connection with the sale of certain articles and commodities and the rendering of certain services; defining, prohibiting and making the same unlawful; providing for civil and criminal actions in connection therewith; and prescribing penalties."
Article 2, § 19, of the constitution provides: "No bill shall embrace more than one subject, and that shall be expressed in the title." The objection is based principally on the fact that the title contains no reference to "cost," "cost of doing business," and "legal competitive price." We are satisfied that the title to the act is sufficiently comprehensive to meet the constitutional requirement, under the rule as announced in the following cases: Davis-Kaser Co. v. Colonial Fire Underwriters Ins. Co., 91 Wash. 383,157 Pac. 870; In re Peter son's Estate, 182 Wash. 29, 45 P. (2d) 45; Shea v. Olson, 185 Wash. 143, 53 P. (2d) 615, 111 A. L. R. 998; State v. Hanlen, 193 Wash. 494, 76 P. (2d) 316; State ex rel. Washington Toll Bridge Authority v. Yelle, 195 Wash. 636, 82 P. (2d) 120.
"The title of the act need not be an index to the body thereof, nor need it express in detail every phase of the subject which is dealt with by the act. The essential requirement is notice; and the title is sufficient if it gives reasonable notice of the subject legislated upon." Davis-Kaser Co. v. Colonial Fire Underwriters Ins. Co., supra.
Appellant next contends that the act is discriminatory, denies equal protection of the law, contains special legislation, and is therefore violative of article 1, § 3 and 12, and article 2, § 28, subd. 6, of the state constitution, and the fourteenth amendment to the Federal constitution.
Section 2 of the act provides in part:
"Motion picture films when licensed for exhibition to motion picture houses shall not be deemed to be an article or product under this act."
Section 1 of the act defines the terms "article" and "produce" as follows: " 'Article or produce' includes any article, product, commodity, thing of valué, service or output of a service trade."
Article 1, 112, of the state constitution, provides:
"No law shall be passed granting to any citizen, class of citizens, or corporation, other than municipal, privileges or immunities which, upon the same terms, shall not equally belong to all citizens or corporations."
Article 2, § 28, prohibits the legislature from enacting any private or special laws in the following cases: " , . . 6. For granting corporate powers or privileges." .
It is contended that the exemption of motion picture films from the operation of the act renders the above quoted portion of the statute tantamount to special legislation, and accords privileges and immunities to some persons which are not available to others.
"The guaranty of 'equal protection of the laws' . . . does not prohibit legislation which is limited either in the objects to which it is directed or by the territory within which it is to operate. It merely requires that all persons subject to such legislation shall be treated alike, under like circumstances and conditions, both in privileges conferred and liabilities imposed. It is not infringed by legislation which applies only to those persons falling within a specified class, if it applies alike to all persons within such class, and reasonable grounds exist for making a distinction between those who fall within such class and those who do not." 2 Cooley's Constitutional Limitations (8th ed.) 824.
The same rule, in effect, has been announced many times by this court. We refer only to the following cases: State v. Jones, 137 Wash. 556, 243 Pac. 1; State ex rel. Scott v. Superior Court, 173 Wash. 547, 24 P. (2d) 87; State ex rel. Bacich, v. Huse, 187 Wash. 75, 59 P. (2d) 1101. In the case last cited, after stating the rules in effect as above announced, we further stated:
"Within the limits of these restrictive rules, the legislature has a wide measure of discretion, and its determination, when expressed in statutory enactment, cannot be successfully attacked unless it is manifestly arbitrary, unreasonable, inequitable, and unjust."
We think no good would result from a discussion of the cases cited by appellant to sustain this contention, or a further discussion of other cases from this and other jurisdictions.
The legislature has seen fit to exclude from the operation of this act motion picture films, and has, of course, by so doing, created a classification to which the act does not apply. We do not think it can be said that the creation of this class is either arbitrary, unreasonable, or inequitable.
Appellant next contends that the terms "cost" and "cost of doing business," as defined in § 1 of the act, are so uncertain that it is impossible to ascertain what is lawful and what is unlawful under the act.
.Section 1 of the act defines "cost" as follows:
" 'Cost' has its usual meaning and in addition as applied to production includes the cost of raw materials, labor and all overhead expenses of the producer, and as applied to distribution means the invoice cost or replacement cost, whichever is lower, of the article or product to the distributor and vendor plus the cost of doing business by said distributor and vendor."
By the same section, "cost of doing business" is defined as follows:
" 'Cost of doing business' or 'overhead expense' means all costs of doing business incurred in the conduct of such business and must include without limitation the following items of expense: Labor (including salaries of executives and officers), rent, depreciation, selling cost, maintenance of equipment, delivery costs, credit losses, all types of licenses, taxes, insurance and advertising."
The above definitions are substantially the same as those contained in Statutes of California, 1935, chapter 477, § 3, p. 1548, except that the Washington statute contains additional language to the effect that the term " 'cost' has its usual meaning," and "cost of doing business," under the California statute, includes "interest on borrowed capital." The definitions of the terms "cost" and "cost of doing business," appearing in the Wyoming statute (Session Laws of Wyoming, 1937, ch. 73, §2, p. 113), are identical with the California statute, except that included in "cost of doing business," under the California statute, are the words "in terest on borrowed capital," while the Wyoming statute uses the words "legal rate of interest on capital." The terms "cost" and "cost of doing business," under the Montana statute (Laws of Montana, 1937, ch. 80, § 3, p. 147), are identical with those under the California act.
The first case in California to pass upon the act above referred to is People v. Kahn, 19 Cal. App. (2d) 758, 60 P. (2d) 596, wherein the appellant had been found guilty of selling a can of Crisco below cost. The court stated:
"We have no hesitancy in holding that, generically, legislation prohibiting unfair competition and preventing acts which stifle competition, is well within the surveyed limits of the police power. . . .
"Nor do we entertain any serious doubt that, in its endeavor to protect the public from the evil effects of unfair trade practices, the legislature's determination that sales below cost as here prohibited constitute an economic evil which should be curbed, is a conclusion which we may not question if we would."
In the cited case, answering the same question raised by appellant in the instant case, the court further stated:
"It must be conceded that in many cases it is going to be extremely difficult to determine what the cost of an article is. We are of the opinion, however, that the difficulty will be a factual one, that of discovering the cost, as a truth, and not a legal one, that of discovering what the legislature meant by the term. A statute is, of course, not to be declared invalid because of any difficulty that may arise in applying its provisions."
The act was held to be constitutional, and the judgment was affirmed.
The same act was before the California district court of appeals in Balzer v. Caler, 74 P. (2d) (Cal. App.) 839. The court held that intent to injure competitors and destroy competition was a necessary element of the illegal selling of goods below cost, and from the evidence found that the defendant did not sell the goods below cost, with that purpose in view. However, because of the insistence of counsel that § 3 of the act defining "cost" and "cost of doing business" was unconstitutional, the court proceeded to consider those questions, and held the act unconstitutional. However, the constitutional questions involved were certified to the supreme court of California, in Balzer v. Caler, 11 Cal. (2d) 663, 82 P. (2d) 19, and that court refused to consider the constitutional questions, because the trial court had found, upon competent evidence, that, although the defendant sold certain articles below cost, those acts were not performed for the purpose of injuring competitors and destroying competition, the supreme court stating that, because of such finding, it was unnecessary to pass upon the constitutionality of the act.
The arguments in the Balzer case, in the California district court of appeals, were fully considered in the Wyoming case of State v. Langley, 53 Wyo. 332, 84 P. (2d) 767. It should be kept in mind that the definitions of "cost" and "cost of doing business" in the California and Wyoming acts are identical, and substantially the same as provided in the Washington act. The court, in the Langley case, after discussing the Balzer case, stated:
"Hence, in the absence of provisions to the contrary, we must presume that the legislature did not intend to prescribe that the cost must be absolutely exact, and that it must be based upon the precise method of accounting which any one merchant might adopt, but meant, by 'cost,' what business men generally mean, namely, the approximate cost arrived at by a reasonable rule. Hence, if a particular method adopted by a merchant cannot, under the facts disclosed, be said to- be unreasonable, and does not disclose an intentional evasion of the law, the method so adopted should be accepted as correct. In other words, all that a man is required to do under the statute is to act in good faith."
In Associated Merchants of Montana v. Ormesher, 107 Mont. 530, 86 P.- (2d) 1031, the court held the definition of the terms "cost" and "cost of doing business" was not too indefinite and uncertain, the court relying to a great extent on the case of State v. Langley, supra.
In Great Atlantic & Pacific Tea Co. v. Ervin, 23 Fed. Supp. 70, the Federal district court of Minnesota held invalid a part of the Minnesota act, in which "cost of doing business" was defined as "the average of all costs of doing business incurred in the conduct of such business during the calendar year immediately preceding any alleged violation of this act," on the ground, among others, that it was arbitrary and unreasonable to require such costs to be determined for a prescribed period, not giving effect to current selling costs. The case strongly intimates that a definition which took into account a merchant's current selling costs would not be unreasonable. This case, however, held that the subject matter of the legislation is within the police power of the state, and in answer to a contention that the business sought to be regulated was not one affected with a public interest, the court stated:
"The words 'affected with a public interest' mean nothing more than 'subject to the exercise of the police power.' Nebbia v. New York, 291 U. S. 502."
In the case of Rust v. Griggs, 172 Term. 565, 113 S. W. (2d) 733, the definition of "cost," under the Tennessee act, was held not to be too indefinite, but the case is not of much assistance, because of the difference in the definition of the term "cost."
Many of the specific objections raised by appellant to the definition of the terms "cost" and "cost of doing business" are, we think, sufficiently answered in the case of State v. Langley, supra.
If we had before us a proper factual background, we might more easily determine whether or not the terms "cost" and "cost of doing business," as defined in chapter 221, are too uncertain and indefinite to reasonably be applied by any merchant; but we have in this case only the language of the statute, and we are not prepared to say at this time, judged by the language of the statute alone, that simple and proper accounting practices will not disclose the necessary information. We have been cited to no case, in which the terms "cost" and "cost of doing business" were similar to ours, where any court of last resort has held the definition of the terms so uncertain and indefinite as to be impossible of application. On the other hand, we have the cases hereinbefore referred to, and we desire to especially call attention to .the cases of People v. Kahn, Associated Merchants of Montana v. Ormesher, and State v. Langley, supra, wherein the language of statutes almost identical with our own was held sufficiently definite to meet all constitutional requirements.
It is next contended that that portion of § 6, chapter 221, relating to "cost survey," is so vague and uncertain that it cannot be sustained. The section provides in part as follows:
"And in any civil or criminal proceeding under this act, where a particular trade or industry, of which the person, firm or corporation complained against is a member, has an established cost survey for the locality and vicinity in which the offense is committed, the said cost survey shall be deemed competent evidence to be used in proving the costs of the person, firm or corporation complained against within the provisions of this act."
It may be admitted that the term "cost survey" is not as definite as it might be. Again we are met with the difficulty of determining, from the wording of the section and in the absence of any evidence, whether or not the term "cost survey" has a meaning generally understood among those coming under the act. It is also apparent that all the statute does, or was intended to do, is to create a rule of evidence, which of course the legislature may do. See 16 C. J. S. 321; 20 Am. Jur. 38 et seq.; 2 Cooley's Constitutional Limitations (8th ed.) 766. See, also, Jolliffe v. Brown, 14 Wash. 155, 44 Pac. 149, and In re Milecke, 52 Wash. 312, 100 Pac. 743. In the instant case, the statute does not say that the "cost survey" shall be prima facie evidence, nor does it attempt to state what probative value the "cost survey" shall have, but only that when a cost survey has been established, it shall be deemed competent evidence to be used in proving cost.
The California and Wyoming statutes contain provisions identical with § 6 of pur act, but no mention is made of this question in the decisions in either of the states last above referred to.
Two cases have been called to our .attention, in which courts have passed upon the term "cost survey." In Associated Merchants of Montana v. Ormesher, 107 Mont. 530, 86 P. (2d) 1031, the supreme court of Montana upheld a provision identical with § 6, of chapter 221, stating:
"This statute, it should be noted, simply establishes the admissibility of such evidence. It does not purport to prescribe the weight or credibility to be given to the evidence, as did the statute which was condemned on this ground in Great Atlantic & Pac. Tea Co. v. Ervin, supra. Also, there were in the Minnesota statute other features, not in ours, upon which the court rested its conclusion as to the invalidity of the cost survey provisions. Rules of evidence are subject to legislative control so long as defendant is given a fair and impartial trial and so long as no constitutional limitation is violated. (State v. Pippi, 59 Mont. 116, 195 P. 556.) If a defendant's business is, because of peculiar circumstances, not fairly to be governed by the cost survey, he is privileged to so show. The statute cannot be condemned on this ground."
The other case cited herein and referred to in the Montana case is Great Atlantic & Pacific Tea Co. v. Ervin, 23 Fed. Supp. 70, wherein the court held the provisions relative to "cost survey" were too vague, arbitrary and indefinite to be sustained. However, there are differences in the Minnesota statute and the Washington statute, which render the decision last above referred to of little help in the instant case. The Minnesota act (Laws of Minnesota, 1937, ch. 116, part two, § 5, p. 184) provides, among other things, that the cost survey "shall be deemed prima facie evidence of cost of all individuals," etc., and it further provides that sales at prices less than the actual replacement cost of the goods, plus the average cost, as shown by the cost survey, shall be deemed to be sales below cost. We are of the opinion that the objectionable features found in the Minnesota act are not present in § 6, of chapter 221.
It is next contended that the term "legal competitive price," as used in § 2, chapter 221, is so vague and uncertain that it cannot be sustained. Section 2 provides in part:
"Provided, however, That nothing in this section shall be construed to prohibit the meeting in good faith of a legal competitive price."
It is contended by appellant that, while § 2 of chapter 221 contemplates that a merchant may sell below cost, if he so desires, to meet legal competitive prices, to do so under the act would place upon such merchant the insuperable burden of determining whether the prices of competitors are legal. However, again we have been cited to no case which sustains appellant's contention, where the act requires, as does the act in the instant case, that any such sale must be made with intent to destroy competition, and that legal competitive prices may be met, provided they are met in good faith. The University of Pennsylvania Law Review, in its issue of December, 1939, in discussing the case of Lief v. Packard-Bamberger & Co., 123 N. J. L. 180, 8 A. (2d) 291, wherein the New Jersey act was held unconstitutional, points out the difference between those acts where intent to destroy or injure must be present and those which make the mere selling below cost unlawful, regardless of intent, and further states that of some twenty-six states having fair sales acts, the majority require an intent to injure competitors, and that the acts having this requirement have withstood the attack of unconstitutionality. Our investigation leads us to the conclusion that the difference between the acts which have been held constitutional and those declared to be unconstitutional, as pointed out in the above mentioned article, is the basic distinction upon which the decisions rest.
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.
As to the effect of a requirement of illegal intent on statutes claimed to be indefinite, see People v. Kahn, supra; State v. Langley, supra; Omaechevarria v. Idaho, 246 U. S. 343, 38 S. Ct. 323, 62 L. Ed. 763; and Hygrade Provision Co. v. Sherman, 266 U. S. 497, 45 S. Ct. 141, 69 L. Ed. 402. While the last two cases cited do not deal with unfair practices acts, they do construe statutes claimed to violate the fourteenth amendment of the Federal constitution, and we think the following language used in the Omaechevarria case, supra, applicable to those affected by chapter 221:
"Men familiar with range conditions and desirous of observing the law will have little difficulty in determining what is prohibited by it. Similar expressions are common in the criminal statutes of other states. This statute presents no greater uncertainty or difficulty, in application to necessarily varying facts, than has been repeatedly sanctioned by this court. Nash v. United States, 229 U. S. 373, 377; Miller v. Strahl, 239 U. S. 426, 434. Furthermore, any danger to sheepmen which might otherwise arise from indefiniteness, is removed by § 6314 of Revised Codes, which provides that: Tn every crime or public offense there must exist a union, or joint operation, of act and intent, or criminal negligence.' "
It is further contended that chapter 221 is a price-fixing statute. It seems to have been the rule, as announced in Tyson & Brother v. Banton, 273 U. S. 418, 47 S. Ct. 426, 71 L. Ed. 718, and many other cases, that a state legislature is without constitutional power to fix prices at which commodities may be sold, services rendered, or property used, unless the business or property involved is affected with a public interest. The term "affected with a public interest" has, to say the least, been given a much broader meaning than had theretofore been given it, in one of the last cases passing upon this question, namely, Nebbia v. New York, 291 U. S. 502, 54 S. Ct. 505, 78 L. Ed. 940, wherein the court stated:
"It is clear that there is no closed class or category of businesses affected with a public interest, and the function of courts in the application of the Fifth and Fourteenth Amendments is to determine in each case whether circumstances vindicate the challenged regulation as a reasonable exertion of governmental authority or condemn it as arbitrary or discriminatory. Wolff Packing Co. v. Industrial Court, 262 U. S. 522, 535. The phrase 'affected with a public interest' can, in the nature of things, mean no more than that an industry, for adequate reason, is subject to control for the public good. . . . But there can be no doubt that upon proper occasion and by appropriate measures the state may regulate a business in any of its aspects, including the prices to be charged for the products or commodities it sells."
We cite the Nebbia case, supra, not as authority to sustain the statute in the instant case, as we do not believe chapter 221 is a price-fixing statute, but only to indicate the length to which courts have gone in holding the legislatures may regulate business, even to the point of fixing prices in an appropriate case. In Wholesale Tobacco Dealers Bureau v. National Candy & Tobacco Co., 11 Cal. (2d) 634, 82 P. (2d) 3, the court, in dealing with the question, said:
"In its true sense it is not a price fixing statute at all. It merely fixes a level below which the producer or distributor may not sell with intent to injure a competitor. . . .
"The statute must be held to be a reasonable attempt upon the part of the state to accomplish a valid object. It must be borne in mind that this statute does not regulate the selling of commodities — 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. The state may not have power to regulate all trade practices affecting competition, but it clearly has power to restrict or prohibit trade practices which upon reasonable grounds it determines are predatory, vicious, unfair and anti-social."
This matter is specifically passed upon in State v. Langley, supra, and Associated Merchants of Montana v. Ormersher, supra, and in both cases it was held the statute was not a price-fixing statute. Also, in the case of RiLst v. Griggs, supra, this contention was made, but dismissed by the court by simply stating that the statute was not a price-fixing statute.
Appellant relies upon State v. Packard-Bamberger, 16 N. J. M. 479, 2 A. (2d) 599, and Balzer v. Caler, 74 P. (2d) (Cal. App.) 839, to sustain his contention that chapter 221 is a price-fixing statute. In the first case cited, the district court of New Jersey did hold that the New Jersey act was in effect a price-fixing statute. However, a writ of certiorari was allowed by the supreme court of New Jersey (123 N. J. L. 180,. 8 A. (2d) 291), and while the act was held unconstitutional, no discussion of price fixing was had. The decision is very largely based upon the fact that the New Jersey act did not require sales below cost to be made with the intent to injure competitors, for after distinguishing the cases of Wholesale Tobacco Dealers Bureau v. National Candy & Tobacco Co., supra, and State v. Langley, supra, the court stated:
"In the case presently pending, there is no definition of wrongful intent or purpose to limit fair competition or to inflict injury upon anyone. Indeed, intent or motive or the existence of injury to anyone are not essential to punishment under this act."
The case of Wholesale Tobacco Dealers Bureau v. National Candy & Tobacco Co., supra, held that the California act was not a price-fixing law, and thereby reversed any contrary holding by the district court in Balzer v. Caler, supra.
We are therefore of the opinion chapter 221 is not a price-fixing statute, and we agree with the following statement in State v. Langley, supra:
"The legislature, by the statute here in question, sought, not to fix prices, but to prevent ruinous price cutting, by which competitors might be injured and competition be destroyed. To do that, it was, of course, necessary to fix some limit. It might, perhaps, have set other limits than that which was fixed. The limit of 'not below cost' was only one of a number of others which might, perhaps, have been selected. The one actually selected was thought to be the most just under the circumstances. It was but a means to an end, not an end in itself."
It is next contended that § 2 of the act, providing that one máy not sell merchandise for different prices at different stores in the same locality, or city, constitutes an unwarranted interference with private business, and operates to the prejudice of the public interest. That part of § 2 which pertains to the question raised reads as follows:
"It shall be unlawful for any person, engaged in the production, manufacture, distribution or sale of any article or product of general use or consumption, with the intent to destroy the competition of any regular established dealer in such article or product, or to prevent the competition of any person, who in good faith, intends and attempts to become such dealer, to discriminate 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 section than in another: Provided, That nothing herein contained ' shall prevent differentials which make allowances for differences, if any, in the grade, quality or quantity when based and justified in the cost of manufacture, sale or delivery, or the actual cost of transportation from the point of production if a raw product or commodity, or from the point of manufacture if a manufactured product or commodity, or from the point of shipment to the point of destination."
This section also prohibits locality discrimination, which embraces any scheme of special rebates, collateral contracts, or any device of any nature whereby such discrimination is, in substance or fact, effected in violation of the spirit and intent of the act.
The questions raised by appellant on this phase of the case are answered adversely to appellant's conten tions in State v. Central Lumber Co., 24 S. D. 136, 123 N. W. 504, wherein a provision of the statute of South Dakota, almost identical with § 2, chapter 221, was held not to offend against the fourteenth amendment, or due process clause, of the constitution. The cited case was before the supreme court of the United States, and there affirmed. Central Lumber Co. v. South Dakota, 226 U. S. 157, 57 L. Ed. 164, 33 S. Ct. 66.
The same objection raised herein by appellant was raised against the California act, and disposed of contrary to appellant's contention, in the Wholesale Tobacco Dealers case, supra.
Appellant cites and relies upon the case of Great Atlantic & Pacific Tea Co. v. Ervin, 23 Fed. Supp. 70, hereinbefore referred to. We are of the opinion that the cited case is not controlling here, for the reason that the acts in the cited case are prohibited, regardless of the intent or purpose with which they are done, and the holding of the court, as we read it, is based upon this fact.
It is further contended that § 1 of the act is violative of the due process clause of the state and Federal constitutions, for the reason that it results in the regulation of wages in private industry. Section 1, chapter 221, defines the terms "article or produce" and "vendor" as follows:
" 'Article or produce' includes any article, product, commodity, thing of value, service or output of a service trade."
" 'Vendor,' in addition to its usual meaning, includes any person who performs work upon, renovates, alters or improves any personal property belonging to another person."
It is contended that the inevitable result of the above language is not only to fix the prices of commodities, but also that wages are controlled and regulated thereby. We are unable to agree with this contention of appellant. All that the statute contemplates is that labor, at the prevailing wage scale in the trade in which such person is engaged, shall be considered in determining the cost of doing business, and even though it should appear that the wages paid by one prosecuted under the act are lower than the prevailing wage scale, such person would not, in our opinion, be guilty of a violation of the act, unless it should appear that such wages were wilfully paid with intent to injure competitors and destroy competition.
All of the questions presented here, relative to the means adopted to accomplish the purpose of the act, are of first impression in this state. It might well be, had some of the questions been presented to us based on a factual situation, that much of the authority cited by appellant would have been more applicable herein. Considering this statute, then, only from the standpoint of the language of the act, in the light of the interpretation placed on practically the same wording in similar acts by the courts of other jurisdictions, we are unable to escape the conclusion that chapter 221 does not violate any of the provisions of the state and Federal constitutions to which our attention has been called.
The judgment is affirmed.
Blake, C. J., Beals, Main, and Driver, JJ., concur.