Court Opinion

ID: 9627050
Source: CourtListenerOpinion
Date Created: 2023-08-22 08:31:48.26823+00
Date Added: 2024-06-11T15:27:04.781164
License: Public Domain

PETERS, J.
I dissent.
In determining the sole question of law which is presented in this case the majority opinion holds that certain sections of the Alcoholic Beverage Control Act (specifically §§ 24750 through 24757 of the Business and Professions Code) constitute a valid and constitutional exercise of the police power. This determination is based upon the propositions that (a) the statutory provisions comprise a fair trade act applicable to alcoholic beverages, and (b) because the established law of this state holds Fair Trade Acts to be constitutional, this act is likewise constitutional. This reasoning is based upon the fallacious assumption that the provisions of the Alcoholic Beverage Control Act do, in fact, comprise a Fair Trade Act. I am of the opinion that the rules laid down in the Pair Trade cases (Max Factor & Co. v. Kunsman, 5 Cal.2d 446 [55 P.2d 177]; Scovill Mfg. Co. v. Skaggs etc. Drug Stores, 45 Cal.2d 881 [291 P.2d 936]) are inapplicable herein, and that this case must be determined in accordance with the rules set forth in State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, 40 Cal.2d 436 [254 P.2d 29].1
There are basic distinctions between Pair Trade Acts and *153the provisions of the Alcoholic Beverage Control Act. These demonstrate that the constitutionality of one may not be predicated upon the other. Such distinctions are many and varied, and go to the very essence of the statutes. Reference to but four will serve to illustrate the point.
Purpose: Pair Trade Acts were designed to prevent the unsalutory effect of price war on the economy as it existed in a period of depression and low prices (1931). To accomplish this purpose they frankly and openly seek “to protect trade-mark owners, distributors and the public against injurious and uneconomic practices in the distribution of articles of standard quality under a distinguished trademark, brand or name” (Max Factor & Co. v. Kunsman, supra, at p. 454). In other words, the prime purpose of the Pair Trade Acts was to promote trade. In order to attain this objective the legislation fostered a system which would provide a floor to prices, and thus insure a profit. The fact that such price regulation also provided protection for the manufacturer’s property right in his trade-marked articles was only incidental to the main purpose. On the other hand, the Alcoholic Beverage Control Act provides a system of setting minimum prices for the basic purpose of reducing trade in spirituous liquors. Under the heading of “Purposes” the act states that it is “an exercise of the police powers of the State ... to eliminate the evils of unlicensed and unlawful manufacture, selling, and disposing of alcoholic beverages, and to promote temperance in *154the use and consumption” thereof (Bus. & Prof. Code, § 23001). While it may be a price regulating statute, and appears to protect the distiller’s property right in his trademarked goods, these matters are incidental to the purpose, which is antipathetical to the purpose of the Fair Trade Act. One act seeks to encourage sales, the other seeks to discourage them.
Nature of the Contract: Both the Fair Trade and the Alcoholic Beverage Control Acts are based upon the existence of a contract between producer and retailer, whereby the latter agrees not to sell at less than the price determined by the former. Here the similarity ends. The Fair Trade Acts are voluntary or consensual, in that neither party is required to enter into such a contract.2 The Alcoholic Beverage Control Act is mandatory in that no spirits may be sold in California at retail except pursuant to such a contract (Bus. & Prof. Code, §24755).
The Penalty: The penalties for a breach of the Fair Trade Acts are civil, only, giving to the injured party the right to damages or an injunction. The penalty for the breach of the price fixing regulations of the Alcoholic Beverage Control Act are both civil (Bus. & Prof. Code, § 24752) and penal, and the department may suspend or revoke licenses, or institute criminal action (see majority opinion).
The Field Covered: The Fair Trade Acts do not prevent a dealer who is dissatisfied with the prices set by a manufacturer from engaging in competition therewith. If he is unable to find a supplier of a competing article who will enter into a contract at a lower retail price, he may still deal in competing articles which are not fair-traded. Under the Alcoholic Beverage Control Act the retailer has no such alternative. He must deal exclusively in goods the price of which has been set by the distiller, or he must go out of business (Bus. & Prof. Code, § 24755).
It is not contended that the foregoing distinctions, of themselves, invalidate the Alcoholic Beverage Control Act. They are intended only to illustrate that there is a wide divergence between purpose, nature, penalty and coverage of the two acts. Because of such variance the Alcoholic Beverage Control Act *155must be analyzed individually, and its constitutionality determined without reference to the superficially similar (but basically dissimilar) Fair Trade Acts.
It is to be noted that the act itself, as quoted above, states that it is an exercise of the police power. No one can doubt that the subject matter (alcoholic beverages) is a proper field for the exercise of that power, even to the extent of legislating away the entire right to deal in intoxicating liquors. Nor can it be doubted that the expressed purpose of the act is entirely proper, and within the legislative function. I also agree with the majority opinion in its holding that the judiciary has neither the right nor the duty to question the wisdom of the legislative purpose. But at this point the majority opinion leaps a gap which I am unable to negotiate. After announcing that the courts may, and have a duty to, determine “whether the statute bears a reasonable and substantial relation to the object sought to be attained” (majority opinion, ante, pp. 146, 147)3 the opinion merely discusses the authority to legislate. At no point does the opinion analyze the various provisions of this statute as they may be related to “the object sought to be attained.” When so analyzed the provisions of the act which are here under attack must be found to have no reasonable relation to the expressed purpose. This being true, they admittedly fail to comprise a legitimate exercise of the police power.
As shown above, the stated purpose of the act is to “promote temperance in the use and consumption” of alcoholic beverages. But the sections here involved are restricted solely to a price fixing scheme. The only reason assigned (by both respondent and the majority) for the inclusion of these provisions is an assumed legislative purpose (not expressed in the act) to prevent “price wars” which would lead to unbridled purchases. While the provisions of sections 24750 et seq. may prevent “price wars” in the retail sale of any specific trade-marked brand, they do not prevent, or attempt to prevent, “price wars” between competing brands.4 Neither *156do these provisions attempt to prevent “dumping” of excess stocks at preestablished low prices. In other words, the act protects the distiller in keeping his prices high, only if he wants them high. He may, under the act, set any price he may desire, high or low. Pie may enter into a price war with all of his competing distillers, so long as he files his wholesale price with the department and enters into a contract with the retailer. No attempt is made to regulate the wholesale price. The distiller may determine the same so long as he files. Such method of “control” of retail prices may promote one of the purposes of a fair trade act, that is to protect the owner of a trade-mark, but it bears no relationship to the promotion of temperance.
Another example of how the legislative provisions fail to accomplish their stated purpose is to be found in the language of section 24750. That section imposes the price fixing scheme upon an alcoholic beverage “which bears . . . the trade-mark, brand or name of the producer or owner . . . and which is in fair and open competition with alcoholic beverages of the same general class produced by others.” (Emphasis added.) By adding the italicized clause, the Legislature has exempted any liquor which, although it be labeled with the owner’s name, brand or trade-mark, is not in “fair and open competition.” The majority has refused to take judicial notice of what goes on under this escape clause, and, for the purposes of this dissent, I will agree to that limited determination. But recourse to judicial notice is unnecessary in order to realize that trade in liquor is not confined to placing distilled liquor in bottles bearing the advertised labels of a well known distillery, and then shipping the same across a state line. Unlabeled barrels are also accepted by freight carriers, and we have no laws which prohibit their entry into California. Retailers are not prohibited from owning brands and trademarks, nor are they restrained from bottling on their own behalf. Thus the state may be (and were it not for the restrictions of judicial notice we might say, “is”) legally flooded with “off-brands” which are not “in fair and open competition” with other advertised brands, and which may be (are?) sold at very low prices. This may be accomplished under the act by either retailer, wholesaler or distributor. It would seem that the public might be just as intemperate in the use and consumption of off-brands as it might on any of the better advertised brands.
*157To assume, as does the majority opinion, that the price regulating provisions may “operate to remove some factors which may lead to intemperance” without removing all such factors, is but begging the question. We have not been shown how, or in what manner, these sections can possibly accomplish any result other than increasing the value of a distiller’s property right in and to its advertised trade-mark, while allowing him to enter into any and all manner of price wars with his unadvertised brands (or his same product bottled under another name). To hold otherwise is to close our eyes to facts of which we are entitled to take judicial notice; that is that the nationally published statistics show that in spite of the Alcoholic Beverage Control Act the consumption of liquor in California is on the increase, and the per capita consumption exceeds that of most other states.
For these reasons, it is clear that the price control features of the Alcoholic Beverage Control Act bear no reasonable relation to the stated purpose of the act. While this is a sufficient reason to hold those provisions to be an unjustified exercise of the police power, there is yet another, and perhaps more compelling reason to hold them invalid.
The price control provisions of the act give to the distiller the exclusive right and obligation of setting the retail price at which his product shall be sold in California (Bus. & Prof. Code, § 24750, as affected by § 24755). Nothing in the code gives the department, or any other official arm of the government, any voice or control in the establishment of such price. The price may be high or low, and need not bear any relationship to supply or demand, or to temperance. In fact, the department is not even to be advised of the retail price established, since only the wholesale price is required to be posted with that body. The result of this unique piece of legislation is a delegation of the legislative function of establishing price (in order to promote temperance), not to the Department of Alcoholic Beverage Control, but to private persons and to the very persons whose activities the act proposes to curtail. That such a delegation of legislative authority is contrary to section 1 of article III and section 1 of article IV of the California Constitution has long been established.5 Although the limita*158tion on delegation of authority has been interpreted to authorize legislative delegation to various administrative and civil boards, under certain situations and subject to specific safeguards (Tarpey v. McClure, 190 Cal. 593 [213 P. 983]), the attempt to delegate such authority to members of the public has never been condoned. In the ease of State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, 40 Cal.2d 436 [254 P.2d 29], this court had before it for consideration a statute which provided for the creation of a State Board of Dry Cleaners consisting of seven members; one from the general public; two owners of retail plants; two owners of wholesale plants; and two owners of shops. That act further provided that the board so established might set minimum price schedules for cleaning, dyeing and pressing services on petition of 75 per cent of the trade within any specific area, and further provided for injunctive relief for breach of such price schedules when established. This court held the statute unconstitutional on the ground, among others, that it ivas an attempt “to confer legislative authority upon those Avho are directly interested in the operation of the regulatory rule ...” (State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, supra, at p. 448). In that case, the persons to whom the legislative authority was conveyed at least had the color of an administratiA'e board, but were held not to be such because of the requirement that the membership be composed of six members of the trade out of a total of seven. In the instant case, there is not even a disguised attempt to delegate to an administrative body. Such a board is created by the act, but the price fixing authority is given directly to the distiller. Clearly such attempted legislation comes within the rule of the Thrift-D-Lux case.
Moreover, the Alcoholic Beverage Control Act sets neither guide nor standard to aid those permitted to fix prices. Even if the legislative authority were delegated to the Department of Alcoholic Beverage Control, without such provision for standards, the price fixing portions of the statute would be unconstitutional (Tarpey v. McClure, 190 Cal. 593, supra; Dominguez Land Corp. v. Daugherty, 196 Cal. 468 [238 P. 703] ; Agnew v. City of Culver City, 147 Cal.App.2d 144, at pp. 153-154 [304 P.2d 788]; In re Petersen, 51 Cal.2d 177, at p. 184 [331 P.2d 24]; State Board of Dry Cleaners v. Thrift-D-Lux Cleaners, supra, 40 Cal.2d 436).
In the Tarpey case it is said, at page 600, that “the legislature may, without violating any rule or principle of the *159constitution, confer upon an administrative officer a large measure of discretion, provided the exercise thereof is controlled and guided by rules prescribed therefor.” (Emphasis added.)
In the Dominguez Land case the court was considering the propriety of a statute delegating authority to the Commissioner of Corporations. At page 484 it said, “A familiar illustration is where the legislature enacts a law prescribing that the rates to be charged by a public utility shall be ‘reasonable/ and creates a commission with power to investigate and fix the rates. If, however, no standard by which the officer is to be governed be prescribed by the lawmakers, then there is an attempt to entrust a mere administrative officer with the plenary power of the legislature.”
Since the act under scrutiny herein offers no guide of any kind to the persons given the obligation of setting prices, the price fixing portion of the statute is invalid. These features thereof are severable, and hence need not require invalidation of the entire act. The price fixing provisions come squarely within the following language (quoted from Carter v. Carter Coal Co., 298 U.S. 238, 311 [56 S.Ct. 855, 80 L.Ed. 1160]) relied upon in the Thrift-D-Lux case, supra (p. 448) : “a statute which attempts to confer such power undertakes an intolerable and unconstitutional interference with personal liberty and private property. The delegation is so clearly arbitrary, and so clearly a denial of rights safeguarded by the due process clause of the Fifth Amendment, that it is unnecessary to do more than refer to decisions of this court which foreclose the question.”
In my opinion, the judgment should be affirmed.
Sehauer, J., concurred.

WkiIe this dissent is not intended as an attack upon the rules of the Factor and Scovill cases, it should be noted that the modern trend is to hold fair trade acts to be an unconstitutional exercise of the police power.
When this court first held the California Fair Trade Act to be valid, it was joining the majority of jurisdictions in a determination made desirable, if not necessary, by reason of the then existing 11 great depression. ’ ’
*153This court, together with the majority of states, held that the respective legislatures had a right to reverse their previously propounded economic theories in favor of a policy necessary to the times. Thus legislation was upheld which was otherwise inimieable to the federal anti-trust laws and to our own Cartwright Act (see Max Factor & Co. v. Kunsman, supra, at p. 455). In recent years, many states which had originally been included in the majority, have concluded that in times of high prices fair trade acts are not a legitimate exercise of police power, and have overruled their previous decisions. In this manner at least one case which was cited and relied on in previous California decisions is no longer the law of the jurisdiction which first propounded it. Thus Borden Co. v. Schreder, 182 Ore. 34 [185 P.2d 581], cited in Scovill Mfg. Co. v. Skaggs, supra, at p. 886, was overruled by General Elec. Co. v. Wahle (1956), 207 Ore. 302 [296 P.2d 635]. Cases from jurisdictions other than Oregon which have reversed their previously announced rule solely on the basis of changed economic conditions are: Union Carbide & C. Co. v. Bargain Fair Inc. (1958), 167 Ohio St. 182 [147 N.E.2d 481]; Skaggs Drug Center v. General Elec. Co. (1954), 63 N.M. 215 [315 P.2d 967]; Tichenor Antiseptic Co. v. Schwegmann Bros. (1956), 231 La. 51 [90 So.2d 343]; Olin Mathieson Chem. Corp. v. Francis (1956), 134 Colo. 160 [301 P.2d 139]; General Elec. Co. v. A. Dandy Appliance Co. (3958), (W. Va.) 103 S.E.2d 310.

The fact that once such a contract is executed other retailers coming into possession of the goods are bound by its terms, does not destroy the voluntary nature, for the conditions of the voluntary contract are deemed to follow the goods. A retailer who obtains goods directly from a producer, without contract, is not bound by any Fair Trade Act provisions.

Sinee the majority opinion cites authority for this proposition it is not necessary to lengthen this dissent with further citation.

The Legislature was apparently so disinterested in the ultimate retail price of liquor that requirement of filing price lists with the board was confined to wholesale prices (Bus. & Prof. Code, § 24756). Ostensibly the department is not required to know the established retail price, which is left to the whim of the distiller, but which binds the retailer to both civil and penal sanctions.

Section 1 of article III provides for the separation of the executive, legislative and. judicial powers of this state, and prohibits any branch from delegating any portion of its authority to one of the other branches. Section 1 of article IV vests in the state Legislature the exclusive legislative function.