Case Name: Central Markets West, Inc., a corporation, et al., appellees, v. State of Nebraska et al., appellants
Court: Nebraska Supreme Court
Jurisdiction: Nebraska
Decision Date: 1970-11-06
Citations: 186 Neb. 79
Docket Number: No. 37524
Parties: Central Markets West, Inc., a corporation, et al., appellees, v. State of Nebraska et al., appellants.
Judges: Heard before White, C. J., Carter, Spencer, Boslaugh, Smith, McCown, and Newton, JJ.
Reporter: Nebraska Reports
Volume: 186
Pages: 79–89

Head Matter:
Central Markets West, Inc., a corporation, et al., appellees, v. State of Nebraska et al., appellants.
180 N. W. 2d 880
Filed November 6, 1970.
No. 37524.
Clarence A. H. Meyer, Attorney General, and Robert R. Camp, for appellants.
Healey, Healey, Brown & Burchard, for appellees.
Heard before White, C. J., Carter, Spencer, Boslaugh, Smith, McCown, and Newton, JJ.

Opinion:
Newton, J.
This action has been brought by two retailers of alcoholic liquors to enjoin the enforcement of section 53-168, R. S. Supp., 1969, and to have declared unconstitutional provisions prohibiting wholesalers from giving discounts for quantity purchases to retailers. The district court granted the relief prayed. We reverse the judgment of that court.
Plaintiffs assert the statute violates Article I, sections 3 and 25, Constitution of Nebraska. Section 3 provides that: "No person shall be deprived of property, without due process of law." Section 25 provides in part: "There shall be no discrimination between citizens of the United States in respect to the acquisition, ownership, possession, enjoyment or descent of property."
The conflict between the police power and constitutional provisions is pointed out in Nelsen v. Tilley, 137 Neb. 327, 289 N. W. 388, 126 A. L. R. 729, wherein it is stated: "The balance between due process and the police power is more or less unstable, as it must necessarily keep pace with the economic and social orders. As the exercise of the police power increases to meet new conditions, the protection of the due process clauses must necessarily recede to a corresponding degree."
"The police power is an attribute of state sovereignty, and, within the limitations of state and federal Constitutions, the state may, in its exercise, enact laws for the promotion of public safety, health, morals, and gen erally for the public welfare." State v. Geest, 118 Neb. 562, 225 N. W. 709. The extent to which the Legislature may go in the exercise of the police power is primarily a matter of legislative judgment, but the purpose of the regulatory measure must be legitimate and the means employed to effect it must be reasonable. See State ex rel. Baldwin v. Strain, 152 Neb. 763, 42 N. W. 2d 796. "Statutes which are reasonably designed to protect the health, morals, and general welfare do not violate the Constitution where the statute operates uniformly on all within a class which is reasonable." State ex rel. Meyer v. Knutson, 178 Neb. 375, 133 N. W. 2d 577.
It is conceded that the liquor industry is one in which the public has a sufficient interest to warrant regulation under the police power. This leaves but one question: Is the statutory regulation a reasonable one in view of its purposes and effect? As noted, the statute simply forbids wholesalers to give, and retailers to accept, rebates or discounts. It is not a price-fixing statute. Both the wholesaler and the retailer remain free to set their own prices and may even sell below cost if they so desire. The statute simply prevents the wholesaler from preferring one retailer over another. Competition between wholesalers and between retailers is retained, but one retailer cannot secure an advantage over another.
The degree to which a particular industry or occupation may be subject to regulation is determined by its nature and the extent to which the public is interested in it due to the necessity of protecting the public safety, health, morals, and welfare. Throughout our history, the liquor industry has been regarded as one warranting what may well be regarded as stringent regulation. In this country it was completely barred for a time by the adoption of the Eighteenth Amendment to the Constitution of the United States. Prohibition proving impractical, it was repealed and ever since, the liquor industry has been closely supervised. Some states retained prohibition, some installed state-operated liquor stores, and some, as in Nebraska, threw it open to private operation under extensive regulation. It is evident that this industry is regarded as more susceptible to regulation, and to regulation in a greater degree, under the police power than almost any other.
There are two states which have rendered decisions cited as sustaining plaintiffs' contention that the statute is void as an unreasonable and, consequently, unconstitutional exercise of the police power. See, Scarborough v. Webb's Cut Rate Drug Co., Inc., on rehearing, 150 Fla. 772, 8 So. 2d 920; Schwegmann Bros. v. Louisiana Board of Alcoholic Beverage Control, 216 La. 148, 43 So. 2d 248. These cases are not here in point as they dealt with statutes requiring minimum markups over cost and were to that extent price-fixing statutes. The Nebraska statute still permits sales at, above, or below cost, at prices to be set by dealers under competitive conditions.. The validity of price fixing is not before us and we do not pass on that question, but it may be well to point out that it has been sustained in several states. See, Pompei Winery, Inc. v. Board of Liquor Control, 167 Ohio St. 61, 146 N. E. 2d 430; Supreme Malt Products Co., Inc. v. Alcoholic Beverages Control Commission, 334 Mass. 59, 133 N. E. 2d 775; Duff v. Trenton Beverage Co., 4 N. J. 595, 73 A. 2d 578; Schwartz v. Kelly, 140 Conn. 176, 99 A. 2d 89; Gipson v. Morley, 217 Ark. 560, 233 S. W. 2d 79; Reeves v. Simons, 289 Ky. 793, 160 S. W. 2d 149.
This court has repeatedly stated that it is not its province to annul a legislative act unless the act clearly contravenes the Constitution and no other resort remains. See Wilson v. Marsh, 162 Neb. 237, 75 N. W. 2d 723. "It is the duty of the legislature to use its judgment in exercising police powers of the state. The presumption is that any such law enacted by it is constitutional and it is only when the courts determine that an enacted law invades personal and property rights protected by the constitution that it will not be sus tamed." Thorin v. Burke, 146 Neb. 94, 18 N. W. 2d 664.
"The Legislature may make a reasonable classification of persons, corporations., and property for purposes of legislation concerning them, but the classification must rest upon real differences in situations and circumstances surrounding the members of the class, relative to the subject of the legislation, which render appropriate its enactment; and to be valid the law must operate uniformly and alike upon every' member of the class so designated." Creigh v. Larsen, 171 Neb. 317, 106 N. W. 2d 187. Since the law applies equally to all wholesalers and retailers of alcoholic liquors, it is evident that it is not discriminatory. As we have' heretofore observed, the liquor industry is of sufficient public interest to justify the exercise of the police power and consequent regulation. The fact that traffic in other items of com-' merce is not of great public interest and consequently remains unregulated is not indicatory of an unreasonáble classification.
Plaintiffs insist that the' statute restricts bargaining between retailer and wholesaler by denying discounts for volume purchases. The factual basis for this statement is doubtful. In ordinary commercial transactions, prices are quoted on a volume basis and it is not a matter of bargaining but of simply ordering in volume. It is also contended that the law is invalid because it places the small retailer on an equal footing with the large, retailers. . This is not necessarily true as a retailer doing a large volume of business is frequently able to profitably deal on a smaller margin.
In Ralphs Grocery Co. v. Reimel, 70 Cal. Rptr. 407, 444 P. 2d 79, the court dealt with a similar regulation proscribing quantity discounts and stated: "We see nothing arbitrary or capricious in the department's conclusion that rule 105 (a) promotes the sale of fresh beer and aids in preserving small retailers and manufacturers and, in the long run, fosters competition." ' In the case of Oklahoma Alcoholic Bev. Con., Bd. v. Central Liquor. Co. (Okla.), 421 P. 2d 244, the Oklahoma co-urt dealt with a statute similar to the one before us. The court, in upholding the validity of the statute, stated: " 'The control of liquor traffic is a complicated and difficult task. The Legislature should be accorded considerable discretion as to the method employed in providing the necessary control and supervision required.' "
The Nebraska liquor laws provide for the licensing of all liquor dealers. All retail liquor dealers are assessed license fees at identical rates regardless of the size or volume of their business. The income derived from the license fees constitutes a material increment to public funds. It is apparent that if the practice of granting volume discounts were permitted unchecked, the dealers able to buy in large volumes could consistently and materially undersell smaller competitors and, in the course of time, completely destroy or render unprofitable their businesses. This would tend to establish monopolies, in the hands of a relatively few large dealers and would have a material effect on licensing income. It would also, when small dealers were being forced out of business, tend toward sales in more unwholesome surroundings and to bring about law violations occasioned by their desperate attempts to stay in business. Distributors are commonly forbidden to acquire interests in, make gifts or loans to, or extend credit to retail establishments. This is for the purpose of preventing the so-called "tied house." The granting of discounts to preferred customers tends to circumvent these precautions.
Plaintiffs rely strongly on the case of Terry Carpenter, Inc. v. Nebraska Liquor Control Com., 175 Neb. 26, 120 N. W. 2d 374. The case dealt with a rule promulgated by the Commission. It was: held that the rule was promulgated without legislative authority and if authorized, would have constituted an unlawful delegation of legislative authority to the Commission. The rule required distributors to file their prices with the Commission, fixed the amount of permissible discounts, and froze prices until changed on application to and with the consent of the Commission. It was held to be a price-fixing rule and an invalid exercise of the police power. It is neither in point nor controlling under the circumstances here presented.
We conclude that plaintiffs have not successfully overcome the presumption of constitutionality. They have not shown that the statute clearly contravenes a constitutional principle. On the contrary, it appears that the Legislature has not acted arbitrarily, capriciously, or in an unreasonable manner. There are sound reasons for prohibiting discounts and we are not at liberty to substitute our judgment as to the advisability of such action for that of the Legislature. It would indeed be ironical if a legislative body with authority to completely do away with a certain type of business were found to be lacking in authority to promulgate reasonable regulations for its control. We conclude that the passage of section 53-168, R. S. Supp., 1969, constitutes a reasonable exercise of the police power and is not a violation of the due process clause of the Constitution of Nebraska.
The judgment of the district court is reversed and the cause remanded with directions to set aside the injunction granted and to enter judgment in conformity with this opinion.
Reversed and remanded with directions.