Opinion
No. 18342
5-18-1959
ALLIED PROPERTIES, dba Plaza Hotel, Clift Hotel and Biltmore Hotel, Petitioner and Respondent, v. BOARD OF EQUALIZATION of State of California, Respondent and Appellant. *
Stanley Mosk, Atty. Gen., Charles A. Barrett, Deputy Atty. Gen., for appellant. Steinhart, Goldberg, Feigenbaum & Ladar, San Francisco, for respondent.
ALLIED PROPERTIES, dba Plaza Hotel, Clift Hotel and Biltmore Hotel, Petitioner and Respondent,
v.
BOARD OF EQUALIZATION of State of California, Respondent and Appellant.
May 18, 1959.
As Corrected May 25, 1959.
As Corrected on Denial of Rehearing June 9, 1959.
Hearing Granted July 10, 1959.
Stanley Mosk, Atty. Gen., Charles A. Barrett, Deputy Atty. Gen., for appellant.
Steinhart, Goldberg, Feigenbaum & Ladar, San Francisco, for respondent.
Athearn, Chandler, Hoffman, San Francisco, Emmett E. Doherty, Los Angeles, Arden & Arden, Beverly Hills, Brobeck, Phleger & Harrison, Pillsbury, Madison & Sutro, Heller, Ehrman, White & McAuliffe, J. Albert Hutchinson, San Francisco, amici curiae on behalf of appellant.
Samuels, Jacobs & Sills, San Francisco, amici curiae on behalf of respondent.
BRAY, Presiding Justice.
The Board of Equalization of the State of California and its constitutional successor, the Department of Alcoholic Beverage Control, appeal from a judgment of the superior court ordering the issuance of a writ of mandate commanding the department to vacate its decision imposing a 15-day suspension against the off-sale general licenses of petitioner Allied Properties and that certain accusations against said petitioner be dismissed. Questions Presented.
Are sections 24750, 24757, 24850 and 24881, Business and Professions Code (formerly sections 55.5, 55.6 and 55.65 of the Alcoholic Beverage Control Act (Stats.1935, p. 1123, as amended Stats.1937, p. 2126) and rule 99 of the Department of Alcoholic Beverage Control, which require the manufacturer or his agent, wholesaler or rectifier to file fair trade contracts, unconstitutional in that they delegate legislative power and authority in violation of article IV, section 1, California Constitution, and the due process clause of the Fourteenth Amendment of the United States Constitution and of article I of the California Constitution? Primarily the question is whether the state may lawfully provide that all distilled spirits and wines be sold at the retail level only pursuant to fair trade contracts or schedules filed with the department. Record.
Petitioner Allied Properties owns the Plaza and Clift Hotels in San Francisco and the Santa Barbara Biltmore in Santa Barbara. In 1953 accusations were filed against petitioner charging it with violation of the then sections 55.5, 55.6 and 55.65, A.B.C. Act, and department rule 99. These sections prohibit the sale of distilled spirits by an off-sale license holder except at the prices established by fair trade contracts filed as therein required, and also prohibits the sale of wines unless sold at the fair trade contract prices or at the price set in price schedules filed as therein required. The wholesalers, distributors or rectifiers of the alcoholic beverages that are within the purview of the statute must file price schedules with the authority and the retailer to whom they sell must comply with these price schedules or be faced with the penal sanctions of the act. At the hearing of the accusation petitioner stipulated to the facts as charged in the accusations, and readily admitted the sale at less than the fair trade prices. Petitioner's licenses were suspended for 15 days. Thereupon petitioner filed a petition for writ of mandate in the superior court. That court held that the statute requiring retail sales of distilled spirits at fair trade prices is unconstitutional. Is There an Unlawful Delegation of Legislative Power?
Petitioner and the amicus curiae in support of petitioner concede that the Legislature, in the proper exercise of the police power of the state, has the right to fix retail prices of distilled liquors and wines for the protection of the general welfare. They contend that in doing so, however, (1) the Legislature cannot delegate the power to fix such prices to private individuals or groups, and (2) that it cannot delegate that power without establishing ascertainable standards as a guide for the exercise thereof. They further contend that the statute in question here violates both of those principles.
As said in Scovill Mfg. Co. v. Skaggs etc. Drug Stores, 45 Cal.2d 881, 887, 291 P.2d 936, 940 'It is beyond question that this state has aligned itself with the great majority of its sister states and with the decisions of the federal courts in sustaining the constitutionality of fair trade laws * * *' In that case the defendant was selling products at retail below the fair trade prices established by the plaintiff manufacturer in contracts made by the plaintiff with its buyers and wholesalers. The contracts complied with section 16902, Business and Professions Code, the general fair trade contracts section. The defendant was not a party to any of these contracts. Section 16904, Business and Professions Code, provided: 'Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to this chapter, whether the person so advertising, offering for sale or selling is or is not a party to such contract, is unfair competition and is actionable at the suit of any person damaged thereby.' The constitutionality of those sections was there attacked upon the same grounds that the constitutionality of the statute on question here is attacked. The court said, 45 Cal.2d at pages 884-885, 291 P.2d at page 938: 'All of the constitutional objections raised by the defendant have been expressly or by necessary implication decided against it. In Max Factor & Co. v. Kunsman (1936), 5 Cal.2d 446, 55 P.2d 177, this court held that the Fair Trade Act, and in particular the provision as to nonsigners, was a proper exercise of the police power; that it was not arbitrary nor unreasonable legislation, and that it was not a denial of due process of law nor of the equal protection of the laws. That decision, see also Pyroil Sales Co., Inc. v. Pep Boys, M.M. & J., 5 Cal.2d 784, 55 P.2d 194, 1186, was in effect affirmed unanimously by the United States Supreme Court in Pep Boys, Manny Moe & Jack v. Pyroil Sales Co., 1936, 299 U.S. 198, 57 S.Ct. 147, 81 L.Ed. 122, on the authority of Old Dearborn Distributing Co. v. Seagram Distillers Corp. (1936), 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109 . The last case cited upheld the validity of the Illinois Fair Trade Act S.H.A. ch. 121 1/2, § 188 et seq., which is substantially identical with the California act.' It then discussed the California cases and those in other states and the federal cases on the subject, and said (45 Cal.2d at pages 885, 888, 291 P.2d at page 939): 'From the foregoing it also appears that the question whether the Fair Trade Act is a reasonable and non-discriminatory exercise of the police power in the field of interstate commerce has been covered by the federal and state legislation and settled by court decisions. * * * Nor is there a delegation of legislative power to fix prices in the present case. The act is only a legislative declaration that contracts between private parties establishing certain retail prices is not against public policy.
'Although the question of delegation of legislative power was not expressly considered in the Max Factor case, the United States Supreme Court in Old Dearborn Distributing Co. v. Seagram Distillers Corp., supra, 299 U.S. 183, 194, 57 S.Ct. 139, 144, 81 L.Ed. 109, rejected the contention that in fair trade acts 'there is an unlawful delegation of power to private persons to control the disposition of property of others'. The contention that such delegation does not accord due process of law or violates provisions of state constitutions which vest legislative power in the legislature only (similar to art. IV, sec. 1 of the California Constitution) has been rejected in several state courts. Triner Corp. v. McNeil, 363 Ill. 559, 2 N.E.2d 929; Goldsmith v. Mead Johnson & Co., 176 Md. 682, 7 A.2d 176; Johnson & Johnson v. Weissbard, 121 N.J.Eq. 585, 191 A. 873; Lilly & Co. v. Saunders, 216 N.C. 163, 4 S.E.2d 528, 125 A.L.R. 1308; Weco Products Co v. Reed Drug Co., supra, 225 Wis. 474, 274 N.W. 426; see also 11 Am.Jur., Const.Law, § 221, p. 933. Here the acts of private parties in entering into contracts for the sale of commodities constitute the facts in contemplation of which the legislature acted, and upon the existence of which the provisions of the enactment were to be applicable. The private contracts are no more legislative in character than are other acts or conduct of private parties undertaken as a prerequisite to the application of a statute. The consequence that the statute has become applicable, and conduct in violation thereof has become actionable is in no way due to the exercise of any assumed legislative power on the part of the contracting parties. See Weco Products v. Reed Drug Co., supra, 225 Wis. 474, 224 N.W. 426. We conclude that there is no delegation of the legislative function in violation of constitutional prohibitions.' See also Old Dearborn Distributing Co. v. Seagram Distillers Corp., 1936, 299 U.S. 183, 57 S.Ct. 139, 81 L.Ed. 109, upholding an Illinois Fair Trade Act similar to the California one.
People v. Dunn, 80 Cal. 211, 22 P. 140, held that the provisions in an act giving the board of trustees of the California Home for the Feeble Minded and two citizens authority to select a site for such a public home did not constitute a delegation of legislative functions or powers. In Trinity County v. Mendocino County, 151 Cal. 279, at page 286, 90 P. 685, 687, an act declaring in advance of the work that the line which might be surveyed and marked by a surveyor selected in accordance with its provisions should be the boundary line between the two counties, was held not to be an unlawful delegation of legislative power, the court saying: 'The case is similar in principle to those cases where it is held it is not a delegation of legislative power to commit to some officer, person, or board the power to determine the fact that an applicant for some license or privilege is or is not of good character, or possesses or does not possess some other qualification necessary to entitle him, under the law, to the license or privilege, and empowering such officer, person, or board, if it shall determine that such person has the necessary qualifications, to forthwith issue the license. In such cases the law declares that a certain class of persons are entitled to the license. The determination of the fact that a particular applicant is of the class described in the law as so entitled is not a legislative act, but one which is either ministerial or judicial, and hence to commit the power to make such determination to any other person or body is not a delegation of legislative power.'
Under the other Fair Trade Laws of the state (Bus. and Prof.Code §§ 16900-16905) the Legislature has given to private parties the right to sue persons who wilfully and knowingly sell any commodity at less than the price stipulated in a fair trade contract, even though such persons are not parties to the contract. In the case of the A.B.C. Fair Trade Act the Legislature gives the department the right to discipline licensees violating the terms of such contracts. As it has been held in Scovill Mfg. Co. v. Skaggs etc. Drug Stores, supra, 45 Cal.2d 881, 888, 291 P.2d 936, that there is no unlawful delegation of legislative power in the other Fair Trade Laws, we can see no reason why the A.B.C. Fair Trade Act should be interpreted differently from the other. Petitioner contends that there is a difference in that in the other Fair Trade Laws the contract between the manufacturer and the retailer is a voluntary one, whereas under the A.B.C. Act the contract is compulsory. But even under the other Fair Trade Laws, so far as they affect nonsigners of contracts which have been entered into between the manufacturer and its buyers and wholesalers, there is a compulsory feature. The nonsigner, if he has knowledge of such contracts, is compelled to charge the prices listed therein. Moreover, the power of the Legislature to regulate the liquor business is much greater than its power to regulate types of business which are not regarded as possessing the possibilities for evil and ill effects upon the public welfare as is the liquor business. Section 22 of article XX of the California Constitution gives the state broad and comprehensive powers to regulate all phases of the liquor business. It provides: 'The Legislature may authorize, subject to reasonable restrictions, the sale in retail stores of alcoholic beverages contained in the original packages.' The Legislature may even prohibit the manufacture and sale of intoxicating liquors. If the business is permitted, its regulation may be drastic, provided only that the regulations are reasonable. See Cooper v. State Board of Equalization, 137 Cal.App.2d 672, 679-680, 290 P.2d 914. Of course, it could not be reasonable of it were for any reason unconstitutional. The test of reasonableness is not that applicable to ordinary businesses but to the liquor business which requires far more restrictions than the former. See Cooper v. State Board of Equalization, supra, 137 Cal.App.2d 672, 679, 290 P.2d 914. The courts presume that legislative acts are valid and will not declare them unconstitutional unless they are clearly repugnant to the organic law. (See 45 Cal.Jur.2d 624.) Also a statute regulating commercial transactions does not violate the due process clause of either the federal or California Constitutions unless it is proved so unreasonable as to dispel the presumption that it rests upon some rational basis within the knowledge and experience of the legislators. United States v. Carolene Products Co., 304 U.S. 144, 154, 58 S.Ct. 778, 82 L.Ed. 1234; In re Fuller, 15 Cal.2d 425, 428, 102 P.2d 321. It is obvious that the purpose of the provisions requiring sale of distilled spirits and wines pursuant to fair trade contracts is to discourage price cutting at the retail level, and thereby prevent the attendant threat of over-indulgence by the public who might be enticed into buying particular brands of liquor because of bargain prices offered by a retailer. One of the objects of the A.B.C. Act as set forth in section 1 (now Bus. and Prof.Code § 23001) is 'to promote temperance in the use and consumption of alcoholic beverages.' Again it is to insure to the public the fact that when brand liquor is purchased the purchaser will know that his retailer is selling it at the same price as it is sold elsewhere and hence eliminates discrimination against the consumer. The section further states: 'It is hereby declared that the subject matter of this division involves in the highest degree the economic, social, and moral well-being and the safety of the State and of all its people. All provisions of this division shall be liberally construed for the accomplishment of these purposes.' The restriction is one more aid in the promotion of temperance.
In making the sale of distilled spirits pursuant to fair trade contracts mandatory the Legislature has acted within the police power of the state and within the authority granted by article XX, section 22, California Constitution. We cannot say that the legislative assumption that price stability at the retail level of comparable brands will prohibit price wars and bargain sales and thereby will encourage and promote moderation and temperance in the use of alcoholic beverages is unfounded. On the contrary, it appears that the restriction which prevents use of particular brands of distilled spirits as 'loss leaders' which use might increase the consumption of such beverages is a reasonable one.
Petitioner relies heavily on State Board 40 Cal.2d 436, 254 P.2d 29. There the 40 Cal.id 436, 254 P.2d 29. There the Legislature created a State Board of Dry Cleaners, Business and Professions Code, § 9560 et seq., consisting of seven members, six of whom must be engaged in the dry cleaning business, the seventh a member of the general public. The board was empowered to establish minimum price schedules for the various items of cleaning, dyeing and pressing services. The act provided that violations of the minimum price schedule could be prevented by injunctive relief. The statute was held unconstitutional because it (1) dealt with a business which in nowise was affected with a public interest and the price fixing provision was in nowise an enactment providing for the public health, safety, morals or general welfare and hence there was an improper exercise of the police power; (2) attempted to delegate legislative powers to an administrative board comprised of persons directly interested in the operation of the regulatory rule with no guide for the exercise of the delegated authority. The court held that the delegation was clearly arbitrary. Obviously the first ground could not apply in our case as the liquor business is one affected with a public interest and the restriction here is for the public health, safety, morals and general welfare, and the regulation is a proper exercise of the police power. As the court in Scovill Mfg. Co. v. Skaggs etc. Drug Stores, supra, 45 Cal.2d at page 887, 291 P.2d 936, pointed out, the California Fair Trade Act is completely dissimilar to the price fixing statute of the Thrift-D-Lux Cleaners case. The court said (45 Cal.2d at pages 887-888, 291 P.2d at page 940): 'As held in the Max Factor case and here confirmed the Fair Trade Act is a proper exercise of the police power by the legislature in the protection of private contractual rights relating to the manufacture and sale of certain classified commodities deemed by the legislature to require freedom from governmental interference in the economic field. The Dry Cleaners case expressly recognized that to be the basis for the decision in the Max Factor case, 40 Cal.2d 436 at page 447, 254 P.2d 29. Nor is there a delegation of legislative power to fix prices in the present case. The act is only a legislative declaration that contracts between private parties establishing certain retail prices is not against public policy.'
The method of interpreting the A.B.C. Act cannot be the same as that used in interpreting the statute involved in the Thrift-D-Lux case. So long as some public interest is found (which of course it is in the liquor business) the method to be used in testing the statute's constitutionality is not that used in the Thrift-D-Lux case, but that used in such cases as Serve Yourself Gasoline Stations Ass'n v. Brock, 39 Cal.2d 813, 249 P.2d 545, and In re Fuller, supra, 15 Cal.2d 425, 102 P.2d 321.
Under the California Fair Trade Act the manufacturer makes two decisions, (1) whether his product should be fair traded, and (2) what the price shall be. Under the A.B.C. Act he can make the second decision only. The Legislature has determined the first decision. As it has been held that there is no delegation of legislative authority to the manufacturer where he has two decisions to make, how can there be such delegation where he has only one of those decisions to make? While the voluntary aspect of the contract under the Fair Trade Act is stressed by petitioner, it should be remembered that it is compulsory that nonsigners of the contract comply with it. In holding such compulsion to be valid the principle of compulsion in fair trade contracts has been established. In the interests of the public welfare it is more important that compulsion be applied to the liquor business than to the ordinary business where strict regulation is not required. In Levine v. O'Connell, 1949, 275 App.Div. 217, 88 N.Y.S.2d 672, affirmed 300 N.Y. 658, 91 N.E.2d 322, cited by petitioner, and which condemned a New York statute not because the Legislature required liquor to be fair traded, but because the Legislature had delegated to an administrative board the authority to determine whether resale prices should be determined by fair trade contracts, the court said (88 N.Y.S.2d at page 674): 'We assume, but without deciding, that it would be within the competence of the legislature to determine that mandatory price-fixing in the sale of alcoholic beverages would be a proper exercise of the police power. The important point for this case is that the legislature has not done so * * *'
The A.B.C. Act does not fix, or authorize anyone to fix, uniform prices for alcoholic beverages, while the dry cleaners' statute did fix uniform prices for the services involved. Section 16720, Business and Professions Code, expressly forbids any agreement or combination to fix uniform prices. The fair trade provisions merely provide for the orderly marketing of distilled spirits by requiring that each brand be fair traded. Each brand owner sets the retail price for his brand alone and for no other brand. Such price is required to be fixed 'in fair and open competition with alcoholic beverages of the same general class produced by others * * *'
The fact that, as contended by petitioner, the general Fair Trade Laws leave the discretion of fair trade prices to each brand owner while the A.B.C. Act requires that all brands of distilled spirits be fair traded, and the fact that the general law gives a right of action to a person damaged by a violator's breach of the fair trade contract while the A.B.C. Act provides for disciplinary action of a licensee violating such contract, do not convert the legislative determination of policy in favor of fair trading liquor into a delegation of legislative power. As it has the right to do in regulating the liquor business, the Legislature provided mandatory price fixing by the distillers, etc., with disciplinary action by the state for failure to comply. The mandatory feature proves to some extent that there is no unlawful delegation of authority. The manufacturer has no discretion, as in the general fair trade situation, in determining whether fair trade prices shall prevail. Nor is the Legislature bound in dealing with the liquor business to apply the same penalties for violation of fair trade contracts as are applied to other types of business. Actually, suspension or revocation of a liquor license is not penal, but disciplinary. Cornell v. Reilly, 127 Cal.App.2d 178, 184, 273 P.2d 572. Scovill Mfg. Co. v. Skaggs ect. Drug Stores, supra, 45 Cal.2d 881, 291 P.2d 936, stated, in effect, that fair trade statutes were not primarily designed for the regulation of prices, but were principally designed to protect the property and contract rights of the manufacturer. In the A.B.C. Act this is not the primary purpose. As pointed out before, the primary purpose is to prevent price cutting in the interests of temperance, to regulate the liquor business. The fact that it also protects the property rights of the manufacturer does not make the statute unreasonable nor unconstitutional. Nor is it a price fixing statute any more than the general fair trade statutes are.
Nelson v. Reilly, 88 Cal.App.2d 303, 198 P.2d 694, assumed the legality of the then section 55.5, A.B.C. Act. (Apparently its legality was assumed by the parties as it was not challenged except as to the application of the Cartwright Law which the court held could not apply.) There it was contended that at the time rule 99 was amended to make fair trade contracts mandatory, section 55.5, A.B.C. Act, provided that they were permissory. The court pointed out that in 1947 section 55.6 was added to make such contracts mandatory and held that as now a retailer's duty arose from the statute, and as the rule now imposed the same duty as the statute the question of its previous situation was moot, and the rule could now be enforced.
In Levine v. O'Connell, supra, 88 N.Y.S.2d 672, affirmed 91 N.E.2d 322, it was held that a legislative act which gave a liquor board the discretion to determine whether or not fair trade liquor contracts should be mandatory, was invalid. However, the court indicated that if the Legislature had made fair trading mandatory, the act would have been valid. Thus, the New York court felt that the exercise of the legislative function was in the making of fair trade contracts mandatory, and not in the setting of the price. See Schwartz v. Kelly, 140 Conn. 176, 99 A.2d 89, upholding a Connecticut statute requiring the manufacturer to place on its brand label a statement that a minimum consumer retail price had been filed with the liquor control commission, and which made a violation punishable by suspension or revocation of the violator's permit. Even though there were, as contended by petitioner, a delegation of power to the manufacturer, nevertheless such delegation would not be without standards provided by the Legislature. The price set by the manufacturer is what the market will bear, and is determined by the standards present in any market where goods are competing with each other. The standards are those which control prices in any free market. This distinguishes the 'price fixing' in the Thrift-D-Lux case. There prices were fixed on a horizontal level for the whole industry. The cost to the consumer was predetermined and no matter to what dry cleaning shop he went the cost would be the same. Under the instant act the cost to the consumer of a bottle of a certain brand will be the same wherever he goes. But the consumer may find that the cost of a comparable brand is not the same as that of the first mentioned brand. The manufacturer of the latter brand may not control the price of the competing brand. The manufacturer's determination of the price of his product will, of course, be affected by other manufacturer's prices for comparable brands, but this is true in any free market, and, in fact, is the crux of free competition. Unquestionably, the Legislature could have set minimum prices for various types of alcoholic beverages. It did not do so. It undoubtedly felt that it is more in the public interest that the prices be not so strictly controlled, and that the prices set in open competition by the manufacturer will be of more benefit to the public than by the Legislature rigidly controlling the price. These standards have controlled out American economy in the past, and presumably have aided the economy in becoming as prosperous as it is. We see no reason why the Legislature may not adopt these standards in the regulation of the liquor business. Here there is no setting of prices multilaterally as in the Thrift-D-Lux case. In fact, the setting of prices among competing manufacturers is made illegal. Retailers are not permitted either under permissive fair trade, or under mandatory fair trade to set their own prices to compete with other retailers. One of the purposes of the regulation is to prevent monopoly by large liquor retailers, particularly multiple unit retailers ('chains') to the ultimate destruction of the smaller neighborhood store. This is in the interest of the public welfare.
While it is true that in leaving competition free at the manufacturing level and the manufacturers may cut prices, it is reasonable to assume that the Legislature believed that such competition would not cause such drastic reductions in prices as might occur at the retail level, there being vastly more retailers than manufacturers.
The means adopted by the Legislature to bring about an orderly distribution of liquor at the retail level and to obtain temperance is not arbitrary or discriminatory. For this purpose the Legislature has made mandatory the use of fair trade contracts. The Legislature knew the effect of fair trade contracts when it made fair trade contracts permissible. This legislation has been upheld by the California Supreme Court twice. Max Factor & Co. v. Kunsman, 5 Cal.2d 446, 55 P.2d 177; Scovill Mfg. Co. v. Skaggs etc. Drug Stores, supra, 45 Cal.2d 881, 291 P.2d 936. The Legislature to accomplish the same effect, although perhaps for a different purpose (see supra), saw fit to make fair trade contracts mandatory in the liquor industry. It cannot be said that this course, to accomplish a desired result, was unreasonable.
Other state courts faced with the problem of the constitutionality of price regulation in the liquor industry have generally held such statutes valid. See Schwegman Bros. v. Louisiana Board, etc., 216 La. 148, 43 So.2d 248, 14 A.L.R.2d 699; Gaine v. Burnett, 122 N.J.L. 39, 4 A.2d 37 (an administrative rule by the state liquor commissioner which required that alcoholic beverages be fair traded, and that retailers sell at the prices so established, held valid); Nocera Bros. Liquor Mart v. Liquor Control Hear. Bd., 81 R.I. 186, 100 A.2d 652 (statute allowing liquor board to fix prices on a cost plus percentage mark up, held valid); Reeves v. Simons, 289 Ky. 793, 160 S.W.2d 149 (same); Gipson v. Morley, 217 Ark. 560, 233 S.W.2d 79 (same).
In Schwartz v. Kelly, supra, 99 A.2d 89, at pages 91-93, contentions similar to most of those made in our case were made and well answered:
'In passing upon the constitutionality of a statute, a court is bound to make every presumption and intendment in favor of the statute and to sustain it unless it is clearly invalid. [Citations.] * * * The court's only function is to determine whether the object of the enactment is withih the power of the legislature and, if so, whether the particular statute bears a reasonable and substantial relation to the object sought to be accomplished and is neither arbitrary nor discriminatory. Carroll v. Schwartz, 127 Conn. 126, 129, 14 A.2d 754.
'Although the act here in question does not contain a statement of the objects sought to be accomplished, the purposes which the General Assembly had in mind in adopting it are easily discernible. They were both to promote temperance in the consumption of intoxicating liquor and, by stabilizing the industry, to encourage observance of the Liquor Control Act by those who are permitted to sell liquor not to be consumed on the premises. It may reasonably be presumed that, without the establishment of a minimum retail price for branded liquor, price wars among retail dealers are apt to occur. The cutting of prices which occurs during such wars may induce persons to purchase, and therefore consume, more liquor than they would if higher prices were maintained. Moreover, the cutthroat competition which ensues is apt to induce the retailers to commit such infractions of the law as selling to minors and keeping open after hours in order to withstand the economic pressure. To prevent the occurrence of such conditions promotes public health, safety and welfare. Like all reasonable restrictions on the liquor traffic, such a purpose is well within the police power of the state. [Citations.]
'To accomplish this purpose, the General Assembly has, in this instance, adopted the method of permitting wholesalers to fix minimum prices at which each brand of liquor may be sold at retail. Price fixing is well recognized as a method reasonably suited to effectuate such purpose and, therefore, is not a violation of due process. [Citations.] Clearly, the act which requires wholesalers as a condition of doing business in this state to schedule minimum prices at which their brands of liquor may be sold and prohibits permittees from selling at retail for less than those prices is within the police power of the state. * * *
'The second broad claim of the plaintiffs is that the act is unconstitutional because it delegates legislative powers both to the wholesalers of intoxicating liquor and to the liquor control commission without prescribing standards to control the exercise of those powers. [Citations.] The act affects the wholesalers in only two ways. In the first place, it prohibits their doing business in this state until they have filed their schedules of retail prices. In the second place, it protects the property rights which they have in their respective brand names by prohibiting the sale of their branded liquors at cut rates. In filing the schedule of minimum retail prices to be charged for their liquor, they are not legislating. They are merely complying with the law enacted by the General Assembly. Their fixing of prices, by itself, does not have the force of law. It is the General Assembly that has directed that retailers shall not sell for less than the established prices. There has been no delegation of legislative powers to the wholesalers. Old Dearborn Distributing Co. v. Seagram Distillers Corporation, 299 U.S. 183, 194, 57 S.Ct. 139, 81 L.Ed. 109.'
Schwegmann Bros. v. Louisiana Board, etc., 216 La. 148, 43 So.2d 248, 14 A.L.R.2d 680, and Scarborough v. Webb's Cut Rate Drug Co., 150 Fla. 754, 8 So.2d 913, have held price regulation to be unconstitutional. They are against the weight of authority. Moreover, we deem the reasoning of the majority cases better, particularly in view of the attitude of the California Supreme Court as expressed in Scovill Mfg. Co. v. Skaggs etc. Drug Stores, supra, 45 Cal.2d 881, 291 P.2d 936.
Under Business and Professions Code sections 24750 through 24757, manufacturers of distilled spirits (liquor) are required to enter fair trade contracts whereas under sections 24850 through 24881 manufacturers and producers of wine have the option of submitting retail price lists with the Department of Alcoholic Beverage Control, rather than entering fair trade contracts. This difference would not seem controlling since under either scheme the manufacturers are the ones who 'fix' the retail prices. If fair trading is legal (and it is concluded that it is), the optional requirement of submitting price lists would also seem allowable. The sections relating to bear (§§ 25000-25010) are inapposite to this litigation because petitioner was not charged with violations of these sections.
The fact that the Legislature has not seen fit to apply fair trade requirements to the sale of beer and over the bar drinks does not invalidate the restrictions which the Legislature did impose. Historically there has always been a distinction in the manner of regulating the sale of beer as compared to other alcoholic beverages. As far as fair trading over the bar drinks is concerned, the obviously many practical difficulties of making and enforcing such regulations could well have actuated the Legislature. The answer to somewhat similar contentions made in Miller v. Wilson, 236 U.S. 373, 383-384, 35 S.Ct. 342, 344, 59 L.Ed. 628, is applicable here: 'The contention as to the various omissions which are noted in the objections here urged ignores the well-established principle that the legislature is not bound, in order to support the constitutional validity of its regulation, to extend it to all cases which it might possibly reach. Dealing with practical exigencies, the legislature may be guided by experience. Patsone v. Pennsylvania, 232 U.S. 138, 144, 34 S.Ct. 281, 58 L.Ed. 539, 543. It is free to recognize degrees of harm, and it may confine its restrictions to those classes of cases where the need is deemed to be clearest. As has been said, it may 'proceed cautiously, step by step,' and 'if an evil is specially experienced in a particular branch of business' it is not necessary that the prohibition 'should be couched in all-embracing terms'.'
The judgment is reversed.
FRED B. WOOD, J., concurs.
HANSON, Justice pro tem.
I dissent from the opinion and judgment of the court in this case, and wish simply to state the grounds of my dissent, with a few observations thereon, without any attempt to do more. I concede, of course, that the result reached by the majority of the court probably is a desirable one if the aim is to achieve temperance, but I have difficulty in understanding how it can be deduced that the ruling does not trench upon constitutional principles. We must never forget that decicision which are classed as desirable must nevertheless meet and square with those principles embodied in our constitutions--state and federal. In 1919 temperance was sought to be achieved by legislation taking the form of a constitutional amendment which made the manufacture, sale, or transportation of intoxicating liquors illegal. That amendment, the 18th, did not reach the objective, in the view of the majority of the citizens of our nation, and hence was repealed in 1933. We now have a statute before us for interpretation purporting to have much the same objective in view. That it restricts free enterprise cannot be gainsaid; that it may, if upheld, create a measure of greater temperance, as the Legislature hoped, is possible; but that we should not whittle down constitutional safeguards to achieve a single desirable result seems to me equally clear. What is more, or so it seems to me, is that our free enterprise system should not enrich a small minority at the expense of the great majority. In the statute before us the 'brand' liquor dealer is benefited and the consumer is harmed so far as 'price' is concerned.
Turning to the legal aspects of the case we find that under the statute here involved no distiller or brand owner of distilled liquors can sell his product in California unless he schedules the minimum price at which the retailer may sell his products within the state, and, having done so, a retailer must avide by the price so set. This then gives to the original purveyor a price monopoly; that is, he not only must set his own minimum price to the retailer on his product regardless of its intrinsic value but require the retailers to sell at or above the retail price he names as the minimum price. But this is not all; it is the further duty of the state through the Alcoholic Beverage Control Act to enforce the scheduled price through its penal sanctions, one of which is to suspend the retail dealer's liquor license, if and when he violates the act. Granted, for the sake of argument that the trend of judicial decisions in this state and elsewhere favors the view of the majority of this court, no decision is extant in this state that goes as far as the majority does in this case.
In the legislative act before us, for interpretation and decision, the Legislature has delegated the right to fix the minimum price at which a retail liquor dealer, with a valid license, can sell a 'brand' or 'nonbrand' bottle of liquor, not to a board or officer of the state, but to a private individual. Thus, the very person or corporation that manufactures or distributes the product sets the price at which the retailer may and must sell without any right of any kind or character on the part of any representative of the state of challenge it for price, quality, or otherwise. This to me is uncontrolled monopoly run riot with state sanction.
Rehearing denied; HANSON, J. pro
Rehearing denied; HANSON, J. pro
Hearing granted; DRAPER, J. pro tem., participating in place of TRAYNOR, J. --------------- * Opinion vacated 346 P.2d 737. 1 Subsequent to the filing of the writ of mandate proceeding in the superior court against the Board of Equalization, the Department of Alcoholic Beverage Control, by constitutional amendment, succeeded the Board of Equalization. Herein 'department' refers to whichever entity was acting at the time. 2 Four amici curiae briefs were filed in support of appellant, one in support of respondent.