Court Opinion

ID: 4717730
Source: CourtListenerOpinion
Date Created: 2021-08-12 01:04:00.097587+00
Date Added: 2024-06-11T08:07:31.312332
License: Public Domain

Hale, J.
(dissenting) — I dissent. The Attorney General, seeking to soften the devastating economic effects of unbridled competition induced by below cost selling in the fryer industry, invokes the Unfair Practices Act, Laws of 1939, ch. 221, p. 923, RCW 19.90, to halt the sale of fryer chickens at prices lower than Albertson’s, Inc., paid for them.
*282I am fearful that the construction placed by the majority on this statute not only leaves the state without a law designed to curb unfair and cut-throat competition, but will make it nearly impossible to draw an enforceable law for this purpose in the future.
The evidence conclusively established that Albertson’s knowingly, intentionally and purposely sold fryer chickens at retail in Walla Walla and Richmond for less than its invoice prices with no knowledge whatever that its competitors intended to offer the same products for sale at an equal or lower price. Having done so purposely, Albertson’s ought not be heard to say that they sold at below cost without intent to damage competition or competitors, for such intentions are not elements of the violations charged. Having advertised fryers at below cost without any knowledge that competitors were or intended to do likewise in Walla Walla and Richland, Albertson’s ought not be heard to say that they lowered their sale prices below cost in a good faith endeavor to meet the legal prices of a competitor.
Labor Day and the Fourth of July occupy a traditional niche in the grocery and meat industries as big days for fryer sales. August 28,1963, as a part of its Labor Day sales activities, defendant Albertson’s, Inc., through the individually named defendants, advertised whole-bodied fryers at 29 cents a pound and cut-up, packaged fryer chickens at 33 cents a pound in two daily newspapers, the Walla Walla Union Bulletin and the Tri-City Herald. It sold the fryers at these advertised prices as regular meat market items in its stores in Walla Walla and Richland on August 29, 30, 31 and September 1, 1963, knowing that the advertised prices were lower than the prices it had paid for the fryers.
Albertson’s had purchased the fryers wholesale at 30% cents a pound whole bodied for retail sale in its Walla Walla and Richland stores, but the cutting up and packaging cost another 4 cents per pound. Thus, even without adding on the other major expenses of doing business, its invoice price for fryers at its Walla Walla and Richland stores during the 1963 Labor Day sales came to 30% cents whole bodied *283and 34% cents cut up — an invoice price substantially above the advertised, retail price in these two communities.
Acting in the name of the State of Washington, the Attorney General filed this suit against Albertson’s, Inc., and several of its managing executives individually, to enjoin them from selling fryer chickens at less than defendant Albertson’s cost thereof, and asked further that the cost of doing business (RCW 19.90.010) be computed at 15 per cent of the invoice price and added thereto. From a decree of dismissal entered upon findings of fact and conclusions of law April 14, 1964, the State of Washington now appeals. Unlike the majority, I find a basis for such an injunction in the Unfair Practices Act.
We are not concerned with the amount in money or percentage of the invoice price which should be added thereto as the cost of doing business under RCW 19.90.010, for the state does not raise that issue on this appeal. The Attorney General’s case rests on the premise that, where positive evidence shows the merchant’s selling price to be below his buying price, the state has proved prima facie a below cost sale in violation of the statute, and proving the cost of business merely buttresses an already clearly proved violation. Any defense to a deliberate below cost selling campaign must, he contends, to be tenable under the Unfair Practices Act, depend on a good faith endeavor to meet not only legal but known prices. I agree.
This review, therefore, covers only the legality of 1963 Labor Day sales at less than Albertson’s invoice price in Walla Walla and Richland, i.e., sales per pound below 30% cents for whole-bodied and 34% cents for cut-up fryers, and does not explore the state’s earlier contention that, if the fair cost of doing business were added to the retail cost, the retail prices for the fryers would have been even more markedly below Albertson’s costs of acquiring them.

Intent to Injure Competitors or Destroy Competition.

Sustaining the two principal defenses to this action, the trial court found (1) want of intent to injure competitors or damage competition and (2) an endeavor in good faith *284to meet competition. The matter of intent or purpose should be considered first. Does the section of the statute under which this suit was brought require proof of an intent or purpose to injure competitors or destroy competition?'
Although the statute contains a number of repetitious and overlapping provisions, I am certain that the Attorney General brought this suit under the first and third clauses of Laws of 1939, ch. 221, § 4, p. 926, RCW 19.90.040, a section reading:
It shall be unlawful for any person engaged in business within this state to sell any article or product at less than the cost thereof to such vendor, or give away any article or product, for the purpose of injuring competitors or destroying competition, or to use any article or product as a “loss leader,” or in connection with any sale to make or give, or to offer to make or give, any special or secret rebate, payment, allowance, refund, commission or unearned discount, whether in the form of money or otherwise, or to secretly extend to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, or to make or enter into any collateral contract or device of any nature, whereby a sale below cost is effected, to the injury of a competitor, and where the same destroys or tends to destroy competition. (Italics mine.)
The evidence showed a planned, calculated and intentional campaign of below cost sales in two distinct and widely separated trading areas falling, in my opinion, within the clause prohibiting sales at less than the vendor’s cost and also constituting a “loss leader” prohibited in § 4 above, as defined in RCW 19.90.010.1
The majority relies in part on Martin v. Aleinikoff, 63 Wn.2d 842, 389 P.2d 422 (1964), but that case seems to me to come closer to sustaining appellant’s position here than it does respondents’. There we did not have below cost sales or “loss leaders” but rather preferential secret rebates *285or discounts “not extended to all purchasers” of household fuel oil. We emphasized this in saying “The complaint did not allege that defendants had sold a product . . . ‘at less than the cost thereof . . . . ’ ” and the cause turns on the application of the fifth clause,
or to secretly extend to certain purchasers special services or privileges not extended to all purchasers purchasing ■ upon like terms and conditions ....
The instant suit, however, is brought under the first and third clauses of Laws of 1939, ch. 221, § 4, p. 926, RCW 19.90.040, which clauses contain no reference whatever to intent or purpose.
In Martin v. Aleinikoff, supra, we separated RCW 19.90-.040 into what appeared to be a sensible and logical structure for the purposes of interpretation, and concluded that a preferred reading of the section warranted that its first and third clauses be read independently to describe particular forms of proscribed business conduct among many covered elsewhere in the section. When so read, it appears that the instant action comes precisely under this first clause of § 4, that “It shall be unlawful for any person engaged in business within this state to sell any article or product at less than the cost thereof to such vendor . . . . ” and under clause 3, prohibiting the use of any article or product as a “loss leader,” with both clauses unconditioned by the subsequent language which qualifies other and different — though similar — forms of business conduct by requiring proof of an intent or purpose to injure competition or destroy competition.
That intent or purpose to injure competitors and destroy competition may be elements in violating some sections of the statute, does not necessarily imply that they are essential to a violation of all sections. Accordingly, Laws of 1939, ch. 221, § 6, p. 927 (RCW 19.90.060), as argued by defendants, declaring that proof of selling below cost or at discriminatory prices when combined with proof of the injurious effects thereof shall constitute presumptive evidence of the intent or purpose to injure competition and *286competitors, lays down a rule for proving intent where the statute requires such intent, and does not accordingly indicate such intent to be an element in the clauses under consideration. Unless intent be an element of the offense, § 6 (RCW 19.90.060) of the statute does not apply.
In statutes and ordinances proscribing actions malum prohibitum, as distinguished from malum in se, intent generally need not be an element either in criminal or civil proceedings brought thereunder. Ellis v. United States, 206 U.S. 246, 51 L. Ed. 1047, 27 Sup. Ct. 600 (1907); United States v. Dotterweich, 320 U.S. 277, 88 L. Ed. 48, 64 Sup. Ct. 134 (1943); Morissette v. United States, 342 U.S. 246, 96 L. Ed. 288, 72 Sup. Ct. 240 (1952); and, similarly, United States v. Gainey, 380 U.S. 63, 13 L. Ed. 2d 658, 85 Sup. Ct. 754 (1965).2 For example, proof of intent to injure is n,ot a requisite to an action maintained under the Robinsom Patman Act, 15 U.S.C. § 13, which makes discriminatory pricing policies unlawful if the effect of such discrimination will substantially lessen competition. Federal Trade Comm’n v. Henry Broch & Co., 363 U.S. 166, 4 L. Ed., 2d 1124, 80 Sup. Ct. 1158 (1960); Atlas Bldg. Prod. Co. v. Diamond Block & Gravel Co., 269 F.2d 950 (10th Cir. 1959).. cert. denied, 363 U.S. 843, 4 L. Ed. 2d 1727, 80 Sup. Ct. 1608. Mid-South Distributors v. Federal Trade Comm’n, 287 F.2d 512 (5th Cir. 1961).
Many of our decisions affirm the principle that intent need not be an element of offenses malum, prohibitum. In upholding the judgment of conviction for violation of .the state banking statutes, we said, in State v. Lindberg, 125 Wash. 51, 215 Pac. 41 (1923):
With respect to intent as constituting an element of an offense, there is a well-recognized distinction between statutes denouncing as crimes acts mala in se, and statutes *287.denouncing as crimes acts mala prohibita. In the former, 'generally speaking, intent is a necessary element, while in the latter it is not so. These principles are not, perhaps, of uniform application in either class, and, perhaps also, less so in the latter than in the former. But the courts generally hold that, where statutes falling within the latter class are in the nature of police regulations, are for the protection of the public, or are intended to promote the general welfare, intent is not a necessary element of the offense, unless the statute in express terms or by apt words so declares.
and adhered to this doctrine in State v. Winger, 41 Wn.2d 229, 248 P.2d 555 (1952); State v. Huey, 14 Wn.2d 387, 128 P.2d 314 (1942); Seattle v. Gordon, 54 Wn.2d 516, 342 P.2d 604 (1959).
Thus, in enacting laws to promote the general welfare or establish police regulations for public protection, or in authorizing the state to faster and preserve the public peace, health, safety and morals, in short, in defining conduct or actions malum prohibitum, the legislature may constitutionally omit intent, purpose or scienter as essential elements of the forbidden conduct. That reasonable regulations in the field of commerce, business and trade constitute a legitimate exercise of the police power and come within this constitutional principle may be seen in a survey of price regulatory statutes, state and federal. 2 CCH Trade Reg. Rep. ¶[ 6500, et seq.
Since its enactment in 1939, the Unfair Practices Act has come before this court only twice directly, Martin v. Aleinikoff, supra, and State v. Sears, 4 Wn.2d 200, 103 P.2d 337 (1940), and once tangentially, State ex rel. Pay Less Drug Stores v. Sutton, 2 Wn.2d 523, 98 P.2d 680 (1940), in none of which were we required to pass on the validity and meaning of the first and third clauses of § 4 (RCW 19.90-.040), now under inquiry.
Those cases remind us that the Unfair Practices Act was enacted during or in the wake of a serious and prolonged economic depression of national and presumably world dimensions — an economic catastrophe probably in the mind of nearly every legislator then sitting. Among the many and *288complex forces deepening the depression — whether of cause or effect courts cannot authoritatively say — had been the inexorable descending price spiral on consumer goods inducing selling below cost, which in turn incited further selling at less than cost with each wave of price cutting precipitating and accelerating anew the downward price spiral until thousands of businesses throughout the nation went into reorganization or oblivion. The legislature probably believed, with good reason, that many of these businesses suffered extinction, not through inefficiency or mismanagement but for the simple reason that a merchant cannot sell a large portion of his merchandise below invoice cost and survive.
The Unfair Practices Act was thus designed to exercise the state’s police powers in the field of trade and commerce; to convert the predator into a competitor; to curtail the senseless and vicious practices inherent in cut-throat competition and to narrow the areas of competition so that even7 merchant would 'have at least a fair start in the race for business; to assure that every competitor began the competitive race at the point of selling his merchandise above cost, and thus reserving for the field of fair competition such activities as planning, buying, advertising, service, courtesy, credit, general efficiency and the multifarious skills inherent in the merchandising process.
Laws of 1939, ch. 221, § 15, p. 930 (RCW 19.90.910), declares that it shall be liberally construed to carry out its beneficial purposes.3 Applying a liberal construction to the enactment leads me to the conclusion that the legislature intended by the first and third infinitive clauses (RCW 19.90.040) to prevent sales below invoice cost and the use of “loss leaders,” regardless of intent or purpose, and that *289omission of any references to an intent to injure competitors or damage competition in either clause was a purposeful omission done with a legislative design to eliminate such intent or purpose as a part of the sine qua non of the first and third clauses in RCW 19.90.040.
Knowledge of and intent to do the prohibited acts having been overwhelmingly established by the evidence, proof of intent or design to injure competitors or competition was not, therefore, under my understanding of this section, requisite to proving a violation thereof.

Good Faith Endeavor to Meet Competition

The trial court sustained Albertson’s affirmative defense that the below cost sales were made in a good faith endeavor to meet competition under Laws of 1939, ch. 221, § 7., p. 928, RCW 19.90.070(4).
Finding of fact 14 upholds the good faith endeavor in the following language:
that the defendants had no intent or design to cause injury to competitors in connection with their Labor Day 1963 advertisements and sales of fryer chickens nor had they any intent or design to injure, destroy or lessen competition by said advertisements and/or sales; [2] that the defendants’ actions in advertising and selling fryer chickens at that time and in those places was done in an endeavor made in good faith to meet the prices of their competitors on fryer chickens.
But in my view there was no evidence to support such findings, particularly when the record shows that the below cost sales had been planned and arranged several weeks before they were to be made, with no competitors’ prices or competition in mind.
Albertson’s and its executive agents do not dispute that their Labor Day advertising and attendant sales of fryer chickens in Walla Walla and Richland were below invoice costs.
As a large grocery chain ranking 25th in sales nationally in 1963, and operating a total of 99 stores in Washington, Oregon, Idaho, Montana, Wyoming and Utah, and opening *290new stores at the rate of 20 to 25 annually, the company should be deemed capable of identifying its competitors and competitive.prices. Two of the four largest grocery chains in the United .States were operating stores in. many of the same trading areas as Albertson’s.
Albertson’s point to a series of conferences and negotiations with agencies concerned in the poultry industry to. show its good faith and absence of damaging intent. They referred to. a 2 year period preceding August 28, 1963, during which they had numerous conferences and negotiations with representatives of the Washington State Fryer Commission4 and members of the Attorney General’s staff. Finally, they concluded, the only way to meet the below cost selling was to engage in the same practice, and this decision, they say, impelled the very sales under scrutiny here.
But I regard the negotiations and general condition of the industry occurring prior to the violations largely as immaterial. We are dealing in this case with a specific selling campaign in two specific trading areas. Albertson’s and its executives made no claim that any competitor in either Richland or Walla Walla had intimated it would sell at 29 cents on the Labor Day weekend. The company decided upon the below cost Labor Day sales in Walla Walla or Richland prior to August 14,1963, when its meat supervisor for the Spokane district, of which Walla Walla and Richland were a part, planned the 29 cent price and arranged for the advertising. The court even found that the earlier sales by Albertson’s competitors in Walla Walla and Richland had not occurred during any time “material to this action,” and the record is devoid of proof that Albertson’s thus acted in good faith to meet the legal prices of any known competition in the affected trading areas at the time they launched the very sales in issue.
Moreover, the court found affirmatively that the advertising and sales prices of 29 cents and 33 cents in Walla Walla and Richland did in fact have a markedly damaging *291and injurious effect on competitors there. It found that these competitors were left with an extraordinary amount of unsold fryers which spoiled, or perforce had to be sold at a sacrifice, and that the competitors suffered a loss of other trade or business generally because of a diversion of their customers to Albertson’s stores.
Good faith endeavor to meet competition, as I noted earlier, was claimed as an affirmative defense under Laws of 1939, ch. 221, § 7, p. 928, RCW 19.90.070(4), a section defining transactions exempt from operation of the statute:
The provisions of this act shall not apply to any sale made:
(d) In an endeavor made in good faith to meet the legal prices of a competitor as herein defined selling the same article or product, in the same locality or trade area, and in the ordinary channels of trade as herein defined; or in an endeavor made in good faith by a manufacturer, selling an article or product of his manufacture, in a transaction and sale to a wholesaler or retailer for resale to meet the legal prices of a competitor selling the same or a similar or comparable article or product, in the same locality or trade area and in the ordinary channels of trade as herein defined. (Italics mine.)
The subjective standard that the sale be made in good faith has little meaning unless tested by the objective criteria prescribed in the same section. Objectively, then, to come under RCW 19.90.070(4), (1) the sale must be'made to meet the price of a competitor; (2) the prices sought to be met must either be known or in the exercise of reasonable prudence believed to be legal prices; (3) the prices must relate to the same article or product, (4) in the same trading area or locality, and (5) sold by a competitor in the ordinary channels of trade. On the defendants, therefore, rests the burden of showing that the below cost sales in Walla Walla and Richland fell within these five criteria. People v. Gordon, 105 Cal. App. 2d 711, 234 P.2d 287 (1951). When so tested, the bona fides claimed by Albertson’s disappear.
A statute designed generally to promote the public welfare, or expressly prescribing a liberal construction, should *292be liberally construed by the courts, but the converse is true of provisions therein setting up exemptions or exceptions to its operation. Exemptions should be given a narrow or constructive construction. Spokane v. State, 198 Wash. 682, 89 P.2d 826 (1939); 50 Am. Jur. Statutes § 431.
A narrow or constrictive interpretation then of RCW 19-.90.070(4) means that, if one has no knowledge either of the competitor’s prices, or having such knowledge does not in the exercise of reasonable care believe they are legal prices, he is not acting in good faith. If the prices sought to be met are manifestly illegal, or to one in the exercise of reasonable prudence do not appear legal, or if one does not know what the prices are, a claim to meet them in good faith becomes a contradiction in terms because the very essence of good faith contemplates that the prices to be equaled must be both known and legal. Two wrongs do not make one right; and if the illegal price is offered to meet another illegal price, the transaction loses its claimed bona fides and the protection described in RCW 19.90.070 (4) creating exceptions to the statute.
Construing RCW 19.90.070 (4) in the liberal fashion employed by the majority rather than restrictively as required by the rule probably defeats the legislature’s purpose in enacting the Unfair Practices Act — the very purpose courts are obliged to first discern and then give effect to. Giving to the exemptions a liberal interpretation allows two or more competitors to take their below cost sales out of the statute by each lowering his prices in turn below legal standards and thus inviting or forcing the remaining competitors to do likewise or suffer the economic consequences. One ought not be heard to say that he competed in good faith with an unknown competitor of whose prices he had no knowledge. Sales at illegal prices by others at earlier times do not excuse further violations in reprisal.
Defendants, after earlier planning, having on August 14, 1963, arranged to advertise the fryers below cost without knowledge of competitors’ prices at 29 cents or less during the Labor Day weekend in Walla Walla and Richland, could *293not, therefore, under RCW 19.90.070 (4) be regarded either as setting the prices in a good faith effort to compete or as seeking to meet legal prices.
Thus, I believe there was no evidence to sustain the court’s finding of a good faith endeavor to meet in competition the legal prices of defendant Albertson’s competitors. That finding, then, becomes a mere conclusion of law, and the court should be considered in error in upholding this affirmative defense.
One final observation: I think the foregoing analysis amply supports the view that Laws of 1939, ch. 221, § 4, p. 926, RCW 19.90.040, was a constitutional and valid exercise of the state’s police and regulatory powers both in its terms and as sought to be applied in this case — a point raised in argument but not touched on by the majority.
The judgment should, in my opinion, be reversed with directions to enter the injunction prohibiting the sales of cut-up and whole-bodied chickens at below invoice cost.
Rosellini, C. J., Finley and Hunter, JJ., concur with Hale, J.
September 14, 1966. Petition for rehearing denied

 ‘Loss leader’ means any article or product sold at less than cost as herein defined to induce, promote or encourage, the purchase of other merchandise, or which may have the tendency or capacity to mislead or deceive purchasers or prospective purchasers, or which diverts trade from or otherwise injures competitors;”

United States v. Gainey, supra, by implication, extends this rule to hold 26 U.S.C. § 5601(b) (2) constitutional in prosecutions for moonshin,ing where the presence of the defendant at the site of the still during its operation “shall be deemed sufficient evidence to authorize conviction, unless the defendant explains such presence to- the satisfaction- of the jury,” ,

“The Legislature declares that the purpose of this act is to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition, by prohibiting unfair, dishonest, deceptive, destructive, fraudulent and discriminatory practices by which fair and honest competition is destroyed or prevented. This act shall be liberally construed that its beneficial purposes may be subserved.” Laws of 1939, ch. 221, § 15, p. 930, RCW 19.90.910.

See Washington Agricultural Enabling Act, RCW 15.66; Wash Adm. Code 16-512-020.