Opinion ID: 164453
Heading Depth: 2
Heading Rank: 1

Heading: Application of the OUSA to Private Wholesale Clubs

Text: 24 Sam's argues that the OUSA does not prohibit discounts given by private wholesale clubs to their members. Without citing much law in support of their arguments, Sam's appears to make three claims. 25 First, Sam's claims that the OUSA does not apply to private clubs that do not sell merchandise to the general public. According to Sam's, to require that Sam's be held liable under the OUSA would potentially expose to challenge such common practices as discounted sales of food and merchandise by other private clubs, by stores and cafeterias operated by companies for the benefit of their employees, and by other sales operations not open to the general public. Aplt. Br. at 21. 26 Sam's ignores the fact that it is plainly included in the OUSA's definition of a retailer. The statute defines a retailer as every person, partnership, corporation or association engaged in the business of making sales at retail within this state. Okla. Stat. tit 15, § 598.2(g). Sales at retail include any transfer for a valuable consideration made in the ordinary course of trade or in the usual prosecution of the seller's business of title to tangible personal property to the purchaser for consumption or use other than resale or further processing or manufacturing. Id. § 598.2(e). As for the common practices cited by Sam's, we do not find them sufficiently analogous to express an opinion on their legitimacy in the context of this case. Suffice it to say that Sam's is a retailer notwithstanding that its customers must purchase annual memberships. 27 Second, Sam's argues that it makes its profit not only on the sale of merchandise but also on the sale of memberships. Aplt. Br. at 21. According to Sam's, [t]he sale of memberships ... is a business in which ordinary retailers such as Star do not compete. Id. To the extent that this is a claim that the membership fees add to the purchase price of Sam's retail gasoline, thereby making the sales price above the statutory cost, the district court addressed this in its extensive findings of fact. The district court found that no rational allocation of membership fees is sufficient, as a mathematical proposition, to keep Sam's from having repeatedly sold gasoline below statutory cost. Star Fuel, 2003 WL 742191, at . Moreover, Sam's sale of memberships is plainly incidental to its merchandising of products, including gasoline. 28 Finally, Sam's argues that [b]ecause Sam's Club gives member discounts only to those who have paid cash in advance, they are in essence `discounts for cash' like the discounts given in the form of trading stamps in Safeway Stores, Inc. v. Oklahoma Retail Grocers Ass'n, 322 P.2d 179 (Okla.1957), aff'd, 360 U.S. 334 [79 S.Ct. 1196, 3 L.Ed.2d 1280] (1959). Aplt. Br. at 22. This characterization is not supported factually or legally. 29 In Safeway, the Oklahoma Supreme Court held that giving trading stamps with merchandise sold at the statutory minimum are more like a discount for cash than a form of price cutting. 322 P.2d at 186. The court noted that a cash discount was a reward for prompt payment, and that it was a trade practice long established, and is authoritatively recognized as being not a deduction from the purchase price. Id. at 184. The court explained that the difference between trading stamps and cash discounts, on the one hand, and price reductions, on the other, was that the stamps are given uniformly and without regard to the type of goods sold or the purchaser of the same. Id. at 185 (internal quotation marks and citations omitted). Similarly, in affirming the Oklahoma Supreme Court, the United States Supreme Court contrasted the giving of trading stamps (permissible) with selective price cutting (impermissible): 30 Trading stamps are given to cash customers ` across the board, ' namely, the number of stamps varies directly with the total cost of goods purchased. Safeway's price-cutting, however, was selective. This difference is vital in the context of this Act. One of the chief aims of state laws prohibiting sales below cost was to put an end to ` loss-leader ' selling. The selling of selected goods at a loss in order to lure customers into the store is deemed not only a destructive means of competition; it also plays on the gullibility of customers by leading them to expect what generally is not true, namely, that a store which offers such an amazing bargain is full of other such bargains. 31 Safeway Stores, Inc. v. Okla. Retail Grocers Ass'n, Inc., 360 U.S. 334, 340, 79 S.Ct. 1196, 3 L.Ed.2d 1280 (1959) (emphasis added). Unlike trading stamps and cash discounts, Sam's price cuts apply only to one specific product — gasoline. This kind of selective price reduction creates a loss leader, which, regardless of the wisdom of the legislation, is exactly what the OUSA was intended to prohibit. See Glenn Smith Oil Co. v. Sheets, 704 P.2d 474, 478 (Okla.1985) (purpose of OUSA is to prevent loss leader selling and ensure the viability of small merchants).