Court Opinion

ID: 9852306
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:28:17.912541+00
Date Added: 2024-06-11T09:22:25.334521
License: Public Domain

Finley, J.
(dissenting) — The majority holds that RCW 19.90.040 is not violated by the secret unearned discounts given by the defendant in this case to lure away the customers of a competitor. I consider this result unsound, both because it is contrary to the usual construction of statutory language and, even more importantly, because it flies in the face of clearly announced legislative policy of developing an integrated, consistent body of antitrust and competition-fostering statutory law.
The precise language here in question, a part of RCW 19.90.040, reads as follows:
“It shall be unlawful ... to offer to make or give, any special or secret rebate, payment, allowance, refund, commission or unearned discount, . . . 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 majority finds that the language conditioning illegality upon the occurrence of a sale below cost not only modifies the last antecedent but also the part of the statute prohibiting secret rebates. The effect of this is of course to make secret rebates illegal only when they involve a sale below cost. There results a large area of secret discounts, rebates, extra services, and related cozy business favors or advantages which are made legal in Washington, to the indisputable serious injury to free and open competition.
The precise issue presented by this case is whether the language in RCW 19.90.040 concerning sales below cost does, as the majority claims, refer back and limit the prohibition against price discrimination. The basic inquiry in *852the construction of any statute is always said to be directed to the discovery of the legislative intent. Usually this intent, or stated another way, this legislative purpose and policy, must be ascertained from the normal usage of the language of the statute itself. If this seems inadequate it becomes important to look further, seeking to ascertain the policy behind the enactment of the statute and to construe the wording to effectuate the best available indication of the legislative purpose. Where the legislature enunciates an economic policy or theory, this court should not substitute its own views as to a more desirable or wiser economic policy.
The majority cites, but is unable or unwilling to rely upon, the rule of construction that, where no contrary intention appears in a statute, relative and qualifying words and phrases, both grammatically and legally, refer to the last antecedent. Davis v. Gibbs (1951), 39 Wn. (2d) 481, 236 P. (2d) 545. The application of that rule of construction would indicate that the sales-below-cost language does not limit or modify the discrimination prohibition. Instead, a “contrary intention” is found to appear in the statute. This is really a statement that the intent of the legislature controls, but that a better way can be found to ascertain that intent than by reference to the rules of grammar. I agree with this approach but not with the reasoning ultimately adopted by the majority.
The reasoning of the majority seems to me to be an unnecessarily complex and technical way to establish the legislature’s intention, particularly when the legislature has stated precisely what its intent was concerning the entire chapter 19.90. In RCW 19.90.910, the legislature declared its intention as follows:
“Construction. The legislature declares that the purpose of this chapter 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 chapter shall be liberally construed that its beneficial purposes may be subserved.” (Italics mine.)
*853That language should be determinative of this case. The legislature clearly states that its purpose in passing the statute was to prohibit “discriminatory practices by which fair and honest competition is destroyed.” Whether or not there has been a “sale below cost” seems completely irrelevant, insofar as a discriminatory practice is concerned.
The entire basis of the majority’s interpretation of the statute is the premise that the legislature would expressly state that price discriminations were illegal only where they are destructive to competition. This, in effect, required that the legislature add another “destructive to competition” clause, one not “tied” to the “sales below cost” provision, before the majority will accept the literal words which outlaw secret price discriminations; Jefferson Ice & Fuel Co. v. Grocers Ice & Cold Storage Co., 286 S.W. (2d) 80 (Ky. 1955), 54 A.L.R. (2d) 1181. See: Annot., Construction and effect of State statute forbidding unfair trade practice of competition by discriminatory allowance of rebates, commissions, discounts, or the like, 54 A.L.R. (2d) 1187 (1957). However, this overlooks the high degree of probability that the legislature could consider all secret price discriminations inherently destructive to competition, and thus, could consider any such qualifying phrase superfluous. As stated in the appellants’ brief:
“Competition, of course, involves a struggle among the competitors, but it should be an open struggle based upon the skill, effort and efficiency of the competitors. Only thus will the competition result in a benefit to the public at large.
“ Tn the competitive contest, constructive effort is the basic and permissible weapon; it is not a struggle of one competitor against the other but of all with the others for a common prize. The customer is in the role of umpire, and competitors should invite his patronage by affording 'him the opportunity to judge freely the quality, price and service each offers, as the product of his own effort and skill without violation of non-competitive legal obligations . . . ’ Call-man, Unfair Competition and Trade Marks 2d Ed., Vol. 1, sec. 8, p. 136. (Emphasis — the author’s.) ■
“When a special or secret rebate or discount is given, or a special service or privilege conferred, it must necessarily *854be at the expense of the customers not so favored.
“The federal Robinson-Patman Act in sec. 2(a) [15 U.S.C.A. 13 (a) ] prohibits the conduct of which appellants here complain:
“ ‘The most common form of price concession other than those discussed in previous chapters consists in unsystematic price reductions to particular customers. Unlike the concessions previously discussed, discrimination of this kind rests on no avowed principle, follows no avowed pattern, and often involves concessions so heterogeneous that no pattern can be imputed to it by the observer.
“ ‘Unsystematic concessions that take the form of departures from a systematic discount schedule have been frequent in Robinson-Patman cases.’ Edwards, The Price Discrimination Law, p. 464 (1959).
“Edwards, in his discussion of the purposes and objectives of the Robinson-Patman Act, quotes the Senate Judiciary Committee at p. 30 as follows:
“ ‘. . . Discriminations in excess of sound economic differences involve generally an element of loss, whether only of the necessary minimum of profits or of actual costs, that must be recouped from the business of customers not granted them. . . . ’”
Even accepting the shaky view that the requirement of an injury to competition could not refer to the secret price discrimination clause without, in effect, “taking the below cost language along with it,” the inherent nature of such discriminations makes it idle to require the legislature to include any language so limiting the thrust of the statute.
RCW 19.90.040 is a vital part of the statutory plan in Washington, made to effectuate the antitrust policy of this state and to foster fair and open competition. The policy considerations and economic views that lead the majority to twist and turn the wording of the statute and emasculate this otherwise comprehensive statutory scheme are not convincing to me. Presumably, the interpretation proposed by the majority will surprise the commentators who have thus far considered this section of the statute. In Dewell and Gittinger: The Washington Antitrust Laws, 36 Wash. L. Rev. 239, p. 276, the authors state:
“Extension of Special Services or Privileges. To supplement the price discrimination and below cost sales pro*855visions of the act, the statute also prohibits the granting of any ‘special or secret rebate, payment, allowance . . . in the form of money or otherwise’ or the extending to certain purchasers of special services or privileges not extended to all purchasers on like terms.
“While the statutory wording differs substantially from that of the Robinson-Patman Act, it appears that both statutes are designed to prohibit similar types of business conduct. The purpose of the federal prohibitions is to circumscribe aE forms of indirect discriminatory pricing. This appears consistent with the stated purposes of the Unfair Practices Act.
“Unlike the price discrimination provisions of the Robinson-Patman Act, the prohibition against discriminatory services and facilities is not predicated upon a showing of adverse competitive effects or proof of an unlawful intent. Nevertheless, it seems clear that competitive injury is a requirement under this section of the Unfair Practices Act.”
Again in 1 CCH Trade Regulation Reporter, Par. 3568, p. 5315, the editor states:
“The secret payment or allowance of rebates, refunds, commissions, or unearned discounts, whether in the form of money or otherwise, or secretly extending to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, to the injury of a competitor, and where such payment or allowance tends to destroy competition, is an unfair trade practice by express statutory provision in the following states: Arkansas, California, Colorado, Kentucky, Washington, Wisconsin, Wyoming.” (ItaEcs mine.)
To the creation by the majority of the indicated loophole in the statutory scheme, heretofore thought reasonably consistent, workable and well-settled, respecting fair, free and open competition, I cannot agree.
Now pausing to summarize and consolidate — and for reconnaissance before attempting to advance a bit further, argumentatively: Several reasons generate this dissent. Perhaps it is simply a matter of judgment, but, even so, I am convinced that in the proposed majority opinion (1) the interpretation of the statute is strained and inappropriate, (2) the implicit or explicit economic analysis of the implications of the problem is patently fallacious, and (3) the *856implicit economic philosophy or viewpoint is unsound and undesirable as a matter of public policy.
Little further need be said concerning the problem of statutory interpretation than that the majority opinion clearly reveals the difficulty which was encountered in reaching the indicated result.
As to the economic analysis, philosophy or views which would impel such a strict, technical and unrealistic interpretation, identifying as these do so closely with laissez faire economic thinking, I would have thought and hoped that the acceptability of such an approach went out with the hoop skirt, or at least with the somewhat subsequent demise of that fabled “Surrey with the Fringe on the Top.”
The outlawing of sales below cost is only one, perhaps the first, toddling step in the direction of reasonable governmental action to control the ethics of the market place in an effort not to limit but to advance and insure free, open and fair competition. A long list of equally undesirable or “unfair” business practices could be compiled without inclusion of or tying them to the concurrence of a sale at a price below cost. Unquestionably, the sale-below-cost device presents a handy picture or dramatic touchstone of illegality, as the unfairness and motive of it are easy to visualize and grasp, but it can be highly deceptive — or even worse, it can be irrelevant in a larger perspective respecting open, free and fair competition in merchandising.
The basis of the trial court’s decision, apparently accepted by the majority, is that there can be no injury to competition unless there is a sale below cost. This ignores several factors: First, that the injury — the stealing of the customer — can be and probably is accomplished solely by the creation of a secret price differential available only to selected customers, which, to be effective as an unfair trade practice and an evil competitively, need not be a sale below cost as envisaged by the majority; second, that in markets reasonably competitive at the outset every secret price discrimination, including that in the case at bar, may be per se a sale below “cost”, as defined by the statute. This latter point,' as it involves the very difficult effort of measur*857ing the degree of competition in the industry on a case-by-case basis, is a poor point on which to turn the case argumentatively; but, nevertheless, it serves to illustrate in a more tangible way potential competitive injury inherent in price discriminations. The statute defines cost as including not only the price paid the wholesaler for the item but, also, the prorata share of the other costs, the overhead items such as rent and possibly return on investment. The statute obviously then requires that these cost items be fairly distributed among all items sold in calculating whether a sale below cost has been made.
However, the very nature and essence of all price dis-criminations is a sale to the favored few at a price which, while higher than the “cost of goods sold” item (sometimes called the “variable” cost), is lower than what would have to be charged if that sale had to bear its fair share of all other overhead costs (fixed costs). When analyzed in this manner, the very touchstone pressed upon this court by the discriminator in the instant case shows the potentially injurious effect of price discriminations.
A final point which I find most convincing in terms of the all-over pattern of the legislative enactments in Washington state is that price discriminations, on an area basis, are illegal under RCW 19.90.020, which, in the words of the statute, prohibits discrimination:
“. . . between different sections of the same community, city, town or village in this state, by selling or furnishing such article or product at a lower price in one such section than in another . . . ”
If, for example, it is unfair competition and legally wrong to discriminate between buyers on the east side and buyers on the west side of the state, or perhaps the street, then why allow discrimination between two buyers, both on the east side of the state or same side of the street? Such a distinction it seems to me is devoid of significance. It was not made by the legislature, as, in my opinion, legislators rationally may have thought that RCW 19.90.040 covered such cases. It is the majority opinion, not the legislature, which intro*858duces and foments this fallacy. On the basis of the foregoing discussion, I dissent.