Opinion ID: 1182191
Heading Depth: 1
Heading Rank: 2

Heading: the oklahoma unfair sales act

Text: Oklahoma's Unfair Sales Act was enacted in 1949. [14] 15 O.S. 1991 §§ 598.1-598.11. Its terms define and prohibit below-cost sales by retailers [15] and wholesalers. [16] The regulation's two major purposes are (1) to prevent loss leader selling (featured items priced below cost to entice customers into a store where other merchandise prices are inflated) and (2) to protect small merchants from large competitors capable of driving them out of business by below-cost sales. [17] Certain types of merchandise are excluded from the Act's reach  such as seasonal merchandise sold in bona fide clearance sales. [18] Private parties may enforce the act by injunctive relief and an action for damages from the violator's unfair sales. [19] Violations of the Act are also criminally punishable as a misdemeanor. [20] The cardinal rule of statutory construction is the ascertainment of legislative intent. [21] The Act is clearly anticompetitive. It restricts freedom of trade even though its target is only unfair or destructive price competition. [22] Because competitive prices and unrestricted production are fundamental national economic policies embodied in our federal and state antitrust laws, exemptions from the antitrust laws must be strictly construed. [23] Although So-Lo seeks only civil relief in this case, its district court action is best described as private enforcement of a public wrong or business crime. Strict statutory construction is required for penal statutes. [24] For purposes of assessing the coverage's sweep, the statute is not to be extended by implication beyond the legitimate import of its words. Once the Act's purview is determined, the enforcement provisions may be liberally applied to effect its purposes. [25] Our query must hence begin with the statutory text. [26] Section 598.3 prohibits the sale [27] of any merchandise [28] either by retailers or wholesalers, at less than cost as defined in the Act, with the intent of inducing the purchase of other merchandise or otherwise injuring a competitor. The Act proscribes sales by a retailer who sells an item of merchandise at less than cost to the retailer as defined in this act or a wholesaler who sells at less than cost to the wholesaler as defined in this act. The terms cost to the retailer and cost to the wholesaler are defined in very specific terms. The basic denominator for determining cost is either invoice cost or replacement cost, whichever is lower. To this figure  after deducting trade discounts  are added freight charges, cartage, taxes and a markup to cover a part of the cost of doing business. These definitions are clear and explicit. For example, the markup, in the absence of proof of a lesser cost, is six percent of the cost as defined after adding freight charges and cartage. Terms such as cartage and replacement cost are also tightly defined. In short, by its chosen scheme and structure the legislature has carefully crafted the definitional sweep for cost to articulate clearly accounting methods to be used for identifying below-cost sales that are within the Act's prohibition. Commerce has traditionally been divided into production and distribution. The Act's cost definitions are directed exclusively to those associated with distribution. So-Lo contends that although the legislature could not have anticipated the modern trend toward hybrid entities which not only manufacture products but sell them both wholesale and retail, calculation of Total's costs is a simple matter of applying reasonable accounting methods. We must reject this notion. The Act contains no yardstick or gauge for determining production costs. Product cost depends upon the methods used to generate it. It may include components associated with expense categories such as labor, raw materials, overhead expenses and depreciation. [29] Different means of valuing assets or assigning general expenses to particular products and periods or computing other elements of production costs could result in a less than uniform application of the Act. [30] Had the legislature intended to include manufacturers, it would have (a) defined production costs and cost accounting methods to be used as carefully as it did retailers' and wholesalers' costs and (b) provided the guidelines necessary to the Act's enforcement against manufacturers. While the statute neither expressly includes nor expressly excludes manufacturers, its words must be read in context, and the context makes undeniably clear that only below-cost sales as defined in the act stand prohibited. The whole structure of the statute, not only the section prohibiting below-cost sales, plainly shows an intent that the Act's ambit be confined to sales specifically defined in it. [31] This construction is strongly supported by the legislature's treatment of sales of cigarette and tobacco products in a related statute passed at the same legislative session. The Unfair Cigarette and Tobacco Products Sales Act [the Tobacco Act], now found in 68 O.S. 1991 §§ 326 et seq., [32] closely parallels the Act here in contest with one major exception: It proscribes not only certain below-cost sales by wholesalers and retailers, but also those sales by manufacturer's representatives or manufacturer's salesmen that are below the prices of the wholesaler to the retailer or the retailer to the consumer. This textually demonstrable inclusion of manufacture-related entities in the Tobacco Act is a strong indication that had the legislature intended to include manufacturers in the Act under contest, it would not only have named and defined them; nay, it would have added production-related definitions of cost as well. We find no warrant for giving the Act the broad sweep urged by So-Lo. To do so would ignore the statutory language that limits the Act's prohibition to below-cost sales as defined in the Act. The legislative language is far too narrow for the judicial interpretation urged by So-Lo. We hence hold that the provisions of the Act do not apply to entities  such as Total  which produce and refine petroleum products and then sell them at wholesale and retail in competition with distributors like So-Lo. CERTIFIED QUESTION ANSWERED. HODGES, V.C.J., and LAVENDER, SIMMS, HARGRAVE and SUMMERS, JJ., concur. KAUGER, J., concurs in part and dissents in part. ALMA WILSON, J., dissents.