Court Opinion

ID: 9549438
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:18:33.067591+00
Date Added: 2024-06-11T15:20:19.376166
License: Public Domain

*120EDMONDS, J.
Regardless of the question of constitutionality which is presented by the presumption of guilty intent declared by section 5 of the Unfair Practices Act (Stats. 1913, p. 508, as amended by Stats. 1937, p. 2395, Deering’s Gen. Laws, 1937, p. 4157, Act 8781), I am of the opinion that the judgment should be reversed upon the ground that it is not supported by any substantial evidence. For although the record includes the testimony of merchants that the practices of Pay Less caused injury to them, the conclusions of these witnesses have no evidentiary basis whatever. Certainly responsibility for what the Legislature has defined as an unfair trade practice should rest upon something more than the ipse dixit of a complaining merchant where the record shows that he is surrounded by other business establishments which sold the same goods at the same prices as the one charged with the statutory dereliction.
The Unfair Practices Act requires a merchant, at his peril, to make a number of determinations upon which, as shown in the present case, reasonable minds may differ because' the act provides no definite and certain standards. He encounters risk in determining whether he is in good faith endeavoring to meet competition (§6, subd. d), who are his competitors (§§ 3, 5 and 6, subd. d), and whether he is injuring alleged competitors (§§ 3, 5). For these reasons, the courts should require a clear and unmistakable showing of price cutting contrary to the statute, coupled with evidence of injury to a competitor before imposing the sanctions specified by the Legislature. Such a requirement is particularly essential because liability may be, and in the present case was, based wholly upon the presumption of guilty intent.
Violation of the act may be shown by sales under cost, for the purpose of injuring competitors or destroying competition (§ 3). The appellants concede they made some sales below cost but the complainant must also prove that this was done with the purpose of injuring competitors. The only direct evidence upon that issue was the testimony of the officers and employees of Pay Less. Prices were lowered, they declared, for the sole purpose of meeting competition and with no intention to injure competitors. The trial judge based his finding to the contrary upon proof which, according to the act, constitutes “presumptive evidence of the purpose or intent to injure competitors or destroy competition” (§5). The pre*121sumption rests upon evidence of (a) one or more acts of selling below cost, and (b) the injurious effect of such acts.
But there is no substantial evidence that, in selling below cost, the appellants caused injury to any one of its competitors. The Pay Less store commenced business in downtown Oakland, in direct competition -with a number of chain stores and other established grocers, approximately six months prior to the basic period named in the complaint as constituting the period of sale violations. It was a highly competitive location and, soon after Pay Less commenced operations, its neighbors proceeded to lower prices on certain staples, principally coffee. Pay Less had to hold its customers. But on no occasion did Pay Less lower its prices prior to the appearance of advertising by one or more of its downtown competitors or, in a few instances, when Pay Less checkers found that it's competitors had lowered prices.
These nearby stores constituted the competitors of Pay Less but none was called to testify by the prosecution, nor does it appear that they made any complaint concerning the trade practices of Pay Less. The persons called as witnesses by the People operated stores in outlying districts and, with two exceptions, were members or officers in a rival grocery association which has been recently convicted of violations of the Sherman Antitrust Act for price fixing. But there is no standard stated in the Unfair Practices Act by which a merchant may determine who his competitiors are for the purpose of compliance with the legislation. Certainly a finding that one person is a competitor of another should rest upon more than the mere opinion of a witness. Yet in the present case, although Pay Less was doing business in a downtown location of a large city, the court found that certain merchants having small stores miles away were competitors of Pay Less and injured by its trade practices.
In contradiction of the declaration of these merchants that Pay Less was its competitor stands evidence which directly disproves such a conclusion unless the act makes every merchant a competitor of every other merchant in the same line of business within an area nowhere defined. But modern business is built upon the principle that there is no certain and limited demand for goods; on the contrary it recognizes that individual enterprise may greatly enlarge consumer demand and bring general benefit to a particular industry. Certainly the *122Unfair Practices Act must be interpreted as requiring a clear and unmistakable showing of injury to a competitor; under any other construction, the presumption of guilty intent stated in section 5 of the act would be unconstitutional (Morrison v. California, 291 U.S. 82 [54 S.Ct. 281, 78 L.Ed. 664]; Tot v. United States, 319 U.S. 463 [63 S.Ct. 1241, 87 L.Ed. 1519]), for a presumed intent to injure competitors would have no reasonable relation to sales below cost by merchants not in competition. Furthermore, if the statute may be enforced against one not in competition with the complainant, the legislation is invalid. Fundamental is the proposition that a criminal statute must define an offense with a certainty that affords fair and reasonable notice of the conduct prohibited. (7 Cal.Jur. 843; 22 C.J.S. 70-74; 14 Am.Jur. 773, 774.) As presently interpreted, in my opinion the act is void for uncertainty.
There is no evidence whatever that any customer of the complaining merchants ever made a purchase at the Pay Less store. The evidence that Pay Less sold coffee below cost includes the explanation that this was done for the purpose of meeting the competition of others who had broken the price. Upon this evidence and the testimony of five persons having small stores far away from Pay Less, the court found the presumed intent to injure those competitors. And this finding was made notwithstanding the admission of each of the complaining merchants that his establishment was situated within a short distance from one or more chain stores charging prices corresponding to those of Pay Less upon the items involved.
The testimony of Henry J. Jacobs, secretary of the Retail Grocers Association, is not relevant to the issue because he was not in business during the basic period specified in the complaint. The store owned by the witness Julias Martioli, a past president of the Retail Grocers Association, was located over a mile and one-half from Pay Less, but a Safeway store, which sold coffee at prices corresponding to those of Pay Less, was within one block of the Martioli store and another chain store was near by. Harvey Jessiman was in business approximately four miles distant from Pay Less. Alvin Smith, treasurer of the Retail Grocers Association, who had been located in Piedmont for about thirteen months prior to the trial, was over a mile from the Pay Less store. He admitted that two large chain stores were situated near his grocery. James Zahas, procured by the Retail Grocers Association as *123a witness, and who “imagined” he was in competition with Pay Less, was located over a mile from that store, but near a Safeway and within six blocks from a shopping center containing a number of chain stores. William J. Souza, an active member of the Retail Grocers Association, had a store located three miles from Pay Less, but a block from a Safeway and a Lucky store.
This testimony, in my opinion, does not amount to substantial evidence that any one of the witnesses was a competitor of Pay Less, or show any causal connection between the appellants’ price reductions and the loss of gross volume which the five grocers testified they sustained during the basic period. Accordingly, any testimony concerning gross business volume during the basic period (January through March) as compared to the preceding three months, which include the holiday period, would not be relevant to the issue concerning whether Pay Less had injured competitors. In this connection, moreover, it máy be observed that although testimony of a loss of business volume allows an inference of a corresponding loss of profits, not one of the complaining grocers testified that his net profits were unusually decreased after the first of the year, as compared to the preceding holiday period. If these five merchants sustained a loss of volume during the basic period, numerous responsible causes might be found but, according to well settled principles of proximate cause, the Pay Less policy of meeting competition would appear to be remote, uncertain and speculative as a cause of the effect claimed.
In order to raise the presumption of criminal intent, the prosecution had the burden of proving that Pay Less proximately caused a loss of profits to its competitors. But in this case there is no evidence whatever upon that issue, for no merchant testified that customers were drawn away from him with a resulting loss of profits as the direct and proximate consequence of the appellants’ trade practices.
For these reasons, in my opinion, the judgment should be reversed.