Court Opinion

ID: 9699946
Source: CourtListenerOpinion
Date Created: 2023-08-25 21:00:16.343282+00
Date Added: 2024-06-11T13:55:56.403049
License: Public Domain

This case arises upon the complaints of the commissioner of business development that defendant has violated Minn. St.325.04, relating to below-cost sales and giveaways, and the commissioner's motion for a preliminary and temporary injunction. Upon verified pleadings and affidavits the district court entered a preliminary injunction. Defendant appealed. As the case comes to us, it involves only the issue whether the district court may enter a preliminary injunction upon the showing made here. Although the constitutionality of the statute has been challenged, it is not involved in this appeal. Needless to say, we are not now concerned with the wisdom or policy of the statute.
It is well settled in this state that issuance of a temporary or preliminary injunction rests largely in the discretion of the trial court, and that where the evidence upon which it is sought is conflicting, this court will not interfere with the action of the trial court in granting or refusing it.1
Accordingly, we must, at this time, accept for purposes *Page 219 
of this decision that version of the facts, and the inferences therefrom, most favorable to the issuance of the injunction.
The facts which may be gathered from direct averment of the pleadings, affidavits, exhibits, or fair inference therefrom, are relatively simple. Defendant is engaged in the operation of a number of retail grocery supermarkets. These are located at what it described as "twelve convenient locations," of which eleven are distributed throughout St. Paul and its immediate environs, and one is in Minneapolis. The retail grocery market in the Twin Cities is "an extremely competitive one," in which there are a number of chain stores competing with defendant's retail stores as well as a large number of independent retailers also competing with the chains.
Defendant has offered and advertised for sale a number of articles at less than cost and has also offered and advertised that it will give away free an automobile and several certificates worth $100 in the purchase of clothing at a local store not involved here. This advertising was distributed to the public in St. Paul, and the offers made therein covered a period of at least four consecutive weeks.
Minn. St. 325.04, in so far as pertinent here, provides that it is unlawful for any retailer to offer or advertise for sale any commodity at less than the cost thereof to such vendor, or give or advertise with intent to give away any commodity "for the purpose or with the effect of injuring a competitor or destroying competition." Section 325.06 provides that these prohibitions shall not apply to various specified transactions, including sales "[i]n an endeavor made in good faith to meet the legal prices of a competitor selling the same commodity" in the same locality. A procedure for determining what is the legal price of a competitor is established, and it is provided that failure to follow such procedure "shall be prima facie evidence of not acting in good faith." Since defendant admittedly did not follow the prescribed statutory procedure with respect to the challenged transactions, the trial court was justified in disregarding defendant's claim of meeting competition at this stage of the proceedings.
There are similar statutes against below-cost sales in a great majority of the states, although the statutory language varies from state to *Page 220 
state.2 These statutes are, like the Federal laws relating to pricing, supplementary or secondary antitrust or trade-regulation laws. The fundamental public policy of Minnesota, as of the United States, is to establish and maintain competition as the general condition and basic determinant of the economic system.3 To this end, both jurisdictions have a primary or basic antitrust law which is directed against monopoly and restraint of competition in general terms.4 These basic general statutes are supplemented by other statutes which forbid a number of specific practices that, in the legislative judgment, tend unduly to threaten, diminish, or restrain competition. The legislative object of such supplementary or secondary antitrust laws is to stop in their incipiency trade practices thought to have a tendency to diminish, restrain, or injure competition.5
The Minnesota legislature has manifested this object by investing the courts with jurisdiction both to prevent and to restrain violations of § 325.04, and by empowering the commissioner to sue for and the courts to grant an injunction "against any such violation or threatened violation." (Italics supplied.) Minn. St. 362.14. It is as clear as language can make it that the commissioner was not required to wait for an actual violation of § 325.04 to be consummated before securing an injunction against its violation. He is entitled to sue if this *Page 221 
section "is about to be violated," and is authorized to secure "injunctive relief in any court of competent jurisdiction against any * * * threatened violation." Unless this court is prepared to declare these provisions unconstitutional, it cannot properly refuse to give effect to them.
Thus, the issue here is whether the evidence in the record will permit the trial court to find either a prima facie threatened or an actual violation of the statute. I think the record shows both.
The trial court has found, and this court assumes, that the defendant sold, offered, and advertised for sale a number of commodities at less than cost. It also appears from the evidence, and is not disputed, that defendant offered to give away free an automobile, as well as other items of value. In order to secure any of these valuable giveaways, it was necessary to fill out an entry blank listing name, address, and phone, and to deposit this at one of defendant's stores. It appears that the recipients of the free awards were then to be determined by lot or drawing. All this occurred in an admittedly competitive situation.
The majority opinion says that these facts are not sufficient to make a prima facie showing of violation or threatened violation of the statute. It holds that "a simple showing ofthreatened injury to a competitor by sales below cost without any showing of the purpose or effect of such sale * * *" (italics supplied) does not justify injunctive relief. This holding is supported by a discussion which suggests that the commissioner's affidavits fail to show that any specific competitor was actually injured.
But actual injury to a competitor or to competition is not required for the issuance of an injunction relating to this act. Section 362.14 directs the issuance of an injunction to prevent any "threatened violation" of § 325.04. If sales below cost and giveaways actually injure a competitor, they violate the act. If they threaten injury to a competitor, they obviously threaten a violation of the act. The refusal of the majority to hold that "threatened injury to a competitor by sales below cost" justifies injunctive relief directly contravenes the mandate of the statutes as written by the legislature.
Furthermore, I believe that the showing made here of sales below cost and giveaways which occur in a competitive situation and threaten *Page 222 
injury to a competitor is sufficient to support an inference that such consequences were the purpose of the acts. This makes a prima facie showing that an actual violation of the act has occurred, which is sufficient to justify injunctive relief in any view of the matter.
It is elementary and universally recognized in law that all men are presumed to intend the natural and probable consequences of their acts.6 Thus, if a man were to shoot a gun into a crowd of people he certainly would not be heard to deny that he intended to injure someone. The mere fact that it could not be established that he was aiming at a specified individual would hardly be a defense if he were charged with assault with a deadly weapon.
In the situation at bar, defendant operates a number of retail grocery stores geographically scattered throughout a large metropolitan area which is highly competitive and in which there are other stores, both independents and chains, in competition with defendant's stores. Defendant has undertaken to offer for sale and advertise publicly a number of items at a price below cost over an extended period of time, and concomitantly to offer, advertise, and give away a number of valuable items including an automobile. In these circumstances, it is too obvious to admit of dispute that defendant's purpose was to draw business to itself and away from its competitors by the acts mentioned.
Defendant does not deny this, but argues that this is merely legitimate competition and therefore does not constitute "injury to a competitor" within the meaning of the statute. Defendant asserts in an affidavit that "[t]he essence of competition is a striving for business and there can be no competition unless one competitor is successful in diverting trade from another competitor."
It is certainly true that one aspect of competition is seeking to divert to one's self the trade of a competitor. It does not follow, however, that this does not constitute injury to a competitor. Indeed, no proposition *Page 223 
is better established in this field of law than that diversion of trade from a competitor is an injury for which the law affords a remedy if the means used are improper.7 The crucial question is not whether the diversion of trade from a competitor is an injury to a competitor, since this is too obvious and well established to admit of rational dispute, but whether or not the means utilized to divert trade from a competitor is legally permissible. Competition is sanctioned and encouraged, but certain competitive weapons are prohibited.
Under § 325.04 selling or advertising any commodity at less than cost or giving away or advertising the intent to give away any commodity is not a legal means of diverting trade from a competitor. In simple terms, below-cost selling and giveaways are outlawed as competitive business weapons. In the technical language of the law, the statute says that the acts must have either "the purpose" or "the effect" of injuring a competitor. This leaves open a number of possible situations in which merely selling an item below cost or giving an item away would not be illegal. Various possibilities suggest themselves. Casually making a donation or gift or selling some item at a price which proved to be less than cost would not be improper under this statute without more. However, this is not all that is shown in the present case. Here there is a widely advertised offer to give away very valuable items and to sell other items at less than cost. These offers are made over a long period of time and coupled with a number of devices, such as the necessity of filling out coupons and depositing them in one of defendant's numerous stores, all of which clearly show that these practices are devices deliberately and intentionally undertaken for no other purpose than to divert trade from competitors to defendant. *Page 224 
Defendant plainly is intentionally using these devices as competitive weapons.
Considering the practice of giving away free merchandise by itself, it is almost self-evident that this ordinarily has and can have no other purpose than that of diverting trade from competitors. There is certainly no social or economic purpose served by free giveaways. If a merchant desires to donate to charity, he will not choose a recipient by lot from among those who come to his store and register. Indeed, it is not claimed here that there was any charitable intent. However, if the giving away of such expensive items as an automobile has an economic purpose, it can be only to make a greater profit by diverting trade from competitors.
It is difficult to see what additional evidence the court would require in order to show defendant's purpose. If the trial court is to be permitted to draw reasonable inferences from the evidence and to utilize its commonsense and knowledge of human nature, which it claims to have done, it was certainly justified in finding that the purpose of the acts admittedly done here was to divert trade from competitors to defendant, which is to injure a competitor.
If this court requires proof of a purpose or effect of injury to a specifically identified competitor to show violation, it will not only have vitiated the statute but have amended it without legislative authority. It may be assumed that no defendant will voluntarily admit a purpose of injuring any particular competitor, much less of destroying competition. If an inference of purpose to injure a competitor cannot be drawn from the commission of acts in a competitive situation which will have the natural and probable consequences of injuring a competitor, then the only admissible proof will be actual injury to a specified competitor. To hold this, however, is to amend the statute by eliminating from it the alternative of "purpose."
Further, to impose such a requirement of proof is to erect a nearly insuperable barrier to enforcement in many, if not most, situations. It is difficult to conceive of the character of evidence that might satisfy a court that in a situation with many competitive retail outlets, such as those involved here, any practice has had the effect of diverting a certain amount of patronage from a particular competitor *Page 225 
to defendant. Even though it be shown that the business of the defendant increased and that the business of specified competitors decreased, any competent defendant's advocate could think of dozens of reasons for this, other than the act that was attacked. Just how the below-cost sales and giveaways are to be isolated as causative factors in such a situation is not suggested and certainly is not clear.8
The majority opinion relies upon State, by Clark, v. Wolkoff,250 Minn. 504, 85 N.W.2d 401, to support its position. But it is significant that the legislature has amended § 325.04
since that case arose in order to change the rule of that case.9
That case held that to establish violation of the statute it was necessary to show that the challenged act had the dual purpose or effect of both injuring competitors and destroying competition. In that case this court sustained the finding of the trial court that the evidence did not show such dual purpose or effect. Under the present statute violation is established by showing merely a purpose to injure a competitor. As a competitor is injured by having trade diverted from him, the statute is violated if the below-cost sales or giveaways are intentionally employed as competitive weapons.
The few precedents that appear relevant support this view. In Federal Trade Comm. v. Raladam Co. 316 U.S. 149, 62 S.Ct. 966,86 L. ed. 1336, the commission found that Raladam had made misleading and deceptive statements to further the sale of its product, that it had many competitors, and that its unfair methods of competition tended to divert trade to it from competitors. The order was attacked, *Page 226 
and reversed by the court of appeals, on the ground of a failure to show any injury or tendency to injure the business of any competitor. The United States Supreme Court reversed the court of appeals and directed that the commission order be affirmed, saying (316 U.S. 152, 62 S.Ct. 968, 86 L. ed. 1340):
"It is not necessary that the evidence show specifically that losses to any particular trader or traders arise from Raladam's success in capturing part of the market. One of the objects of the Act creating the Federal Trade Commission was to prevent potential injury by stopping unfair methods of competition in their incipiency. * * * And when the Commission finds, as it did here, that misleading and deceptive statements were made with reference to the quality of merchandise in active competition with other merchandise, it is also authorized to infer that trade will be diverted from competitors who do not engage in such 'unfair methods.' "
As it is an obvious inference that unfair methods of competition will divert trade from competitors if pursued, it is equally obvious that the only purpose for their adoption must be to divert trade. This has been held by the courts of Colorado and California. Dikeou v. Food Distributors Assn.107 Colo. 38, 108 P.2d 529, was also an injunction proceeding under the corresponding Colorado statute. An injunction was entered by the trial court and defendant appealed, contending, inter alia, that there was no evidence of intent to injure competitors. The Supreme Court of Colorado affirmed the decree saying (107 Colo. 48, 108 P. [2d] 534): "It may be presumed in a civil action that the natural and probable consequences of the act were intended by the actor." It said that intent was evidenced by defendants' activity in advertising the price reductions, by the fact that selling below cost clearly may result in destroying competition, and by the effect of such practices on other retailers.
The California statute against below-cost sales provided that proof of sales below cost and of an injurious effect is "presumptive evidence of the purpose or intent to injure competitors or destroy competition. Business and Professions Code of California, § 17071. The California Supreme Court, in affirming an injunction issued under this provision, said: *Page 227 
"* * * The Legislature merely enacted into law what is common in human experience, that when a person causes injury by his acts he should be deemed to intend such consequences unless he can excuse or explain his conduct by facts showing that he had an innocent intent."10
Since the majority opinion proceeds on the assumption that the acts involved here "threatened injury to a competitor," it was certainly open to the trial court to infer that this was their purpose. In fact, defendant does not argue here that it had any other purpose than to divert trade to itself from competitors by the practices involved. In the circumstances disclosed by this record, it is not possible rationally to infer any other purpose.
Since it is clear that defendant advertised and offered articles below cost and giveaways, there was an actual violation of the statute established by this inferential, but obvious, purpose. It is not open to dispute that the trial court was justified in issuing a temporary injunction upon such a showing of actual violation of the statute.
The preliminary injunction was, therefore, not only justified but required by a prima facie showing of both a threatened and an actual violation of the statute. The threatened violation of the statute was established by the probability that the challenged acts would injure competitors. The actual violation was established by the inescapable inference that the practices were adopted as competitive weapons, which is to say for the purpose of injuring competitors by diverting trade from them through the use of the challenged practices. This is precisely what the legislature sought to prevent. This court has no right to frustrate the legislative object unless it conflicts with some constitutional principle.
1 Seward v. Schrieber, 240 Minn. 489, 62 N.W.2d 48; Behrens v. City of Minneapolis, 199 Minn. 363, 271 N.W. 814; Mathwig v. Olson, 190 Minn. 262, 251 N.W. 518; Jannetta v. Jannetta,205 Minn. 266, 285 N.W. 619.
2 1 Callmann, Unfair Competition and Trade-Marks (2 ed.) § 27, et seq.; Clark, Statutory Restrictions on Selling Below Cost, 11 Vanderbilt L.Rev. 105; Annotations, 118 A.L.R. 506 and 128 A.L.R. 1126.
3 State v. Duluth Board of Trade, 107 Minn. 506, 121 N.W. 395,23 L.R.A. (N.S.) 1260; N. P. Ry. Co. v. United States,356 U.S. 1, 78 S.Ct. 514, 2 L. ed. 2d 545; Apex Hosiery Co. v. Leader,310 U.S. 469, 60 S.Ct. 982, 84 L. ed. 1311, 128 A.L.R. 1044.
4 Minn. St. 623.01, et seq.; 15 USCA, § 1, et seq.
5 See, Standard Fashion Co. v. Magrane-Houston Co. 258 U.S. 346,356, 42 S.Ct. 360, 362, 66 L. ed. 653, 657; Federal Trade Comm. v. Raladam Co. 283 U.S. 643, 647, 51 S.Ct. 587, 589,75 L. ed. 1324, 1329; Fashion Guild v. Federal Trade Comm. 312 U.S. 457,466, 61 S.Ct. 703, 707, 85 L. ed. 949, 953; Federal Trade Comm. v. Raladam Co. 316 U.S. 149, 152, 62 S.Ct. 966, 968,86 L. ed. 1336, 1340; Federal Trade Comm. v. Morton Salt Co. 334 U.S. 37,68 S.Ct. 822, 92 L. ed. 1196, 1 A.L.R. 2d 260; People v. Pay Less Drug Store, 25 Cal.2d 108, 153 P.2d 9.
6 Paulson v. Scott, 260 Wis. 141, 50 N.W.2d 376,31 A.L.R. 2d 706; Black v. Taylor, 128 Colo. 449, 264 P.2d 502; Lankford v. Tombari, 35 Wn.2d 412, 213 P.2d 627,19 A.L.R. 2d 462; Metropolitan Life Ins. Co. v. Henkel (4 Cir.)234 F.2d 69; Sears, Roebuck Co. v. American Plumbing 
Supply Co. (E. D. Wis.) 19 F.R.D. 334.
7 Bigelow v. RKO Radio Pictures, Inc. 327 U.S. 251,66 S.Ct. 574, 90 L. ed. 652; Maryland Baking Co. v. Federal Trade Comm. (4 Cir.) 243 F.2d 716; Atlas Bldg. Products Co. v. Diamond Block Gravel Co. (10 Cir.) 269 F.2d 950; Sun Cosmetic Shoppe, Inc. v. Elizabeth Arden Sales Corp. (2 Cir.)178 F.2d 150, 13 A.L.R. 2d 358; E. B. Muller Co. v. Federal Trade Comm. (6 Cir.) 142 F.2d 511; G. C. Merriam Co. v. Saalfield (6 Cir.) 198 F. 369; Restatement, Torts, § 746; also see, Federal Trade Comm. v. Anheuser-Busch, Inc. 363 U.S. 536,80 S.Ct. 1267, 4 L. ed. 2d 1385.
8 In Mead v. Anton, 33 Wn.2d 741, 756, 207 P.2d 227,235, 10 A.L.R. 2d 588, 601, the court makes the cogent observation, "it is a matter of common knowledge that the extent of damage to one business by competition from another of the same character, is extremely difficult to establish by definite evidence."
9 L. 1957, c. 822. Whether or not the legislature knew of the pendency of the Wolkoff case is immaterial. The legislature plainly intended to and did change the conjunctive requirement on which the Wolkoff decision is based to a disjunctive. Consequently, the Wolkoff case cannot logically serve as authority for reaching the same result under the statute as amended.
10 People v. Pay Less Drug Store, 25 Cal.2d 108, 114,153 P.2d 9, 13. Also see, Mering v. Yolo Grocery Meat Market (Cal.App.) 127 P.2d 985; People v. Gordon, 105 Cal.App.2d 711,234 P.2d 287.