MERING v. YOLO GROCERY & MEAT MARKET ET AL.
This is an appeal from a judgment restraining appellants from violating the so–called Unfair Practices Act, as amended in 1937. The precise terms of the injunction will be hereinafter set forth.
It is necessary to a proper understanding of the issues involved upon this appeal that we give a brief summary of the pertinent provisions of the act.
Section 1 prohibits merchants, manufacturers, producers and distributors, with intent to destroy competition or to prevent competition of any new dealer, from discriminating as to price between different sections, communities or cities, and likewise prohibits the giving of special rebates or the use of any other device to accomplish this result. This portion of the act, although reenacted in 1935 and 1937, has been an integral part of our law since 1913, when the original Unfair Practices Act was adopted. Stats.1913, p. 508, Deering's Gen.Laws 1937, Act 8781. It is predicated upon a similar statute first adopted in South Dakota. The constitutionality of such provision is beyond question. State v. Central Lumber Co., 24 S.D. 136, 123 N.W. 504, 42 L.R.A.,N.S., 804; Central Lumber Co. v. South Dakota, 226 U.S. 157, 33 S.Ct. 66, 57 L.Ed. 164.
Section 3 of the act is the provision against which the main attack of appellants is directed. It provides:
“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, and he shall also be guilty of a misdemeanor, and on conviction thereof shall be subject to the penalties set out in section 11 of this act for any such act.
“The term ‘cost’ as used in this act as applied to production is hereby defined as including the cost of raw materials, labor and all overhead expenses of the producer; and as applied to distribution ‘cost’ shall mean the invoice or replacement cost, whichever is lower, of the article or product to the distributor and vendor plus the cost of doing business by said distributor and vendor.
“The ‘cost of doing business' or ‘overhead expense’ as used in this act is defined as all costs of doing business incurred in the conduct of such business and must include without limitation the following items of expense: labor (including salaries of executives and officers), rent, interest on borrowed capital, depreciation, selling cost, maintenance of equipment, delivery costs, credit losses, all types of licenses, taxes, insurance and advertising.
“The prohibitions of this act shall be deemed among the other purposes and objects of the act to also prohibit the practice of using any article or product as a ‘loss leader.’ Loss leader, as used herein, shall mean 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.
“The prohibitions of this section shall embrace any scheme of special rebates, collateral contracts or any device of any nature whereby a sale below cost is effected in violation of the spirit and intent of any of the provisions of this act.”
Section 4 prohibits the seller, in establishing his cost of an article at less than present replacement cost, from using the invoice cost paid by him at a forced, bankrupt, closeout sale, or other sale outside of the ordinary channels of trade, unless the article so purchased is kept separate from goods purchased in the ordinary channels of trade, and unless said article is advertised and sold as merchandise purchased at a forced, bankrupt, or closeout sale.
Section 9 provides that any contract made in violation of the act is illegal and no recovery thereon shall be had. Section 10 authorizes any person, corporation or trade association to maintain an action to enjoin a continuance of acts in violation of the statute, and if injured thereby, to recover actual damages sustained, and provides further that it shall not be necessary for the plaintiff in such action to allege or prove damage to himself.
Section 11 makes the violation of sections 1 to 7 a misdemeanor, and provides that proof of average overall cost of doing business for any particular inventory period when added to the cost of production of each article or product, as to a producer, or invoice or replacement cost, whichever is lower, of each article or product, as to a distributor, shall be presumptive evidence of cost as to each such article or product involved in any action brought under this act and involving the violation of any provisions of section 3 and 5 of this act.
Section 12 contains the usual severability clause.
Section 13 provides that 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. It also provides that this act shall be liberally construed, that its beneficial purposes may be subserved.
Section 14 provides that the act shall be known as the Unfair Practices Act.
Sections 15, 16 and 17 contain provisions not involved in this case.
This act is an attempt on the part of the legislature to regulate business as a whole by prohibiting practices which the Legislature has determined constitute unfair trade practices. Its stated purpose (§ 13) is to safeguard the public against the creation or perpetuation of monopolies, and to foster free, open and fair competition. So far as the instant case is concerned, the practice prohibited by the statute is selling below cost, and this practice is prohibited only when performed “for the purpose of injuring competitors or destroying competition.”
This action was commenced by respondent to obtain an injunction under the act. Respondent's amended complaint alleged in substance that appellants were conducting a retail grocery business in Woodland, and that on various dates set forth in detail in the complaint appellants advertised, offered for sale, and sold to retail customers articles of merchandise, the invoice cost and replacement cost of each of which articles was in excess of the selling price thereof; that none of said offers for sale, or sales, were in the course of the discontinuance of the business of appellants, or to prevent loss to appellants by spoilage or depreciation; that none of said sales, or offers for sale, were made, and none of said advertising for sale was done in good faith to meet the legal prices of a competitor, but were for the purpose of destroying competition and injuring competitors.
Appellants' answer did not deny that most of the articles set forth in respondent's complaint were advertised and sold at the prices set forth, but denied the other allegations hereinabove referred to. Appellants also set forth the special defense that any and all sales made by appellants were to meet the reduced prices at which other competing merchants in Woodland sold the same or similar articles, and with the sole purpose of advertising their business, improving their trade, and meeting such competition, and not with the intent of injuring any competitor or destroying competition. Appellants also set up the further defense that respondent was not a competitor of appellants, did not reside in the county of Yolo, was not injured or damaged by any acts of appellants, and was not invoking the jurisdiction of a court of equity in good faith.
The trial court found substantially in accordance with the allegations of the amended complaint, and found that the allegations of appellants' affirmative defenses were untrue, and from said findings concluding that appellants had violated the Unfair Practices Act, and that respondent was entitled to a judgment. Judgment was entered accordingly, by the terms of which appellants were “permanently enjoined and restrained from selling, offering for sale or advertising for sale, their articles or products (these words to have the definition given to them in Sec. 16 of the Unfair Practices Act of the State of California) in the State of California at less than the invoice or replacement cost, whichever is lower, of said articles or products respectively, to the defendant vendor, plus the cost of doing business incurred in the conduct of their general retail grocery business, including, without limitation, the expense of labor (including salaries), rent, interest on borrowed capital, depreciation, selling cost, maintenance of equipment, credit losses, all types of licenses, taxes, insurance and advertising; or from giving, offering to give, or advertising the intent to give within the State of California their articles or products (using the words in the sense and breadth defined above) in their general retail grocery business; provided, however, that such selling, offering for sale, advertising for sale, giving, offering to give, or advertising the intent to give away, such articles or products be for the purpose of injuring competitors of the defendant partnership and the nine defendant members thereof, or of destroying competition in the retail grocery business; provided, further, that this order, judgment and decree shall not apply to any sale, offer for sale, or advertisement for sale of any such articles or products made under those circumstances or any of those circumstances specified and set forth in sub–paragraphs (a), (b), (c) and (d) of Section 6 of the Unfair Practices Act of the State of California.”
Appellants raise the following points upon this appeal:
1. The judgment is void; 2. Respondents were not entitled to the remedy of injunction; 3. There is no proof of the cost of the articles sold; 4. There is no proof of intent to injure competitors or destroy competition; 5. The court erred in excluding testimony bearing upon the intent of appellants; 6. As applied to the facts of this case, the Unfair Practices Act is unconstitutional. We will discuss these contentions in the order of their statement.
In urging their first point, appellants state: “* * * if this judgment is upheld, then the appellants would be exposed to the peril of contempt by mere proof of sale of some single article in the store without any further evidence showing that the sale was made with intent to violate the injunction.”
However, we find that the injunction contains the following provision: “* * * provided, however, that such sale, offering for sale, * * * be for the purpose of injuring competitors of the defendant partnership and the nine defendant members thereof, or of destroying competition in the retail grocery trade.”
It is therefore apparent that the injunction would not be violated unless it were proven that the future offense is for the purpose of injuring competitors or destroying competition, and that these elements must necessarily be proved in any contempt proceeding.
Appellants next point out that the injunction restrains them from selling all articles or products defined in section 16 of the act, which section defines “article or product” as including any articles, products, commodities, thing, the value of service or output of a service trade. Appellants contend that this provision is a blanket provision restraining appellants from violating the act in general terms, and in every particular, and is so broad as to make it void. A reference to the injunction shows it clearly intends to apply only to appellants in the conduct of their retail grocery trade. The trial court found that the appellants, in the conduct of their grocery business mentioned above, sold merchandise below cost, as defined in the Unfair Practices Act, for the purpose of injuring competitors or destroying competition. The injunction restrained them from continuing such practice.
Appellants are in effect contending that the injunction should be limited to the sale of the articles shown by the evidence to have been sold below cost, and that future similar sales of other articles could only be dealt with in other and subsequent actions. Such a contention is not supported either by reason or authority. Such a construction of the act would encourage, rather than prevent, violations thereof.
In the case of Wholesale T. Dealers', etc., v. National Candy & T. Co., 11 Cal.2d 634, 82 P.2d 3, 118 A.L.R. 486, a case in which the constitutionality of the Unfair Practices Act was considered and upheld by our Supreme Court, the injunction against defendant restrained it as follows:
“(1) From selling, or offering or advertising for sale its products at less than invoice or replacement cost, whichever is lower, plus its cost of doing business;
“(2) from discriminating as to price between different sections, communities or cities by selling its products to customers at a lower rate in one section, community or city than in another, after making proper allowance for grade, quality, quantity and costs of transportation; and (3) from secretly paying or allowing rebates, refunds, commissions or unearned discounts, whether in the form of money or otherwise, to certain customers, not extended to all purchasers purchasing upon like terms and conditions, whether used to cover up sales below cost and discrimination between localities, or otherwise.”
In the case of People v. Black's Food Store (People v. Green Frog Food Emp.), 16 Cal.2d 59, 105 P.2d 361, the Supreme Court affirmed an order granting a preliminary injunction in the following terms: “Now, Therefore, It is Hereby Ordered, Adjudged and Decreed that during the pendency of this action, or until the final dismissal thereof, or until the court shall otherwise order, the defendants and each of them, their agents, servants and employees, shall cease and desist from selling, offering for sale or advertising for sale any of their products in violation of the Unfair Practices Act of the State of California.” In National Labor Relations Board v. Express Publishing Co., 312 U.S. 426, 61 S.Ct. 693, 699, 85 L.Ed. 930, the Supreme Court of the United States said:
“It is a salutary principle that when one has been found to have committed acts in violation of a law he may be restrained from committing other related unlawful acts. * * *
“A federal court has broad power to restrain acts which are of the same type or class as unlawful acts which the court has found to have been committed or whose commission in the future unless enjoined, may fairly be anticipated from the defendant's conduct in the past.”
We conclude, therefore, that the injunction in the instant case merely restrained appellants from continuing the practice of selling articles of merchandise below cost, for the purpose of injuring competitors or destroying competition, and that said injunction was within the issues made by the pleadings and supported by the findings of the trial court.
Appellants' second contention is that respondent is not entitled to the remedy of injunction. In support of this contention appellants point out the admitted facts that respondent is not a competitor of appellants, is not a resident of Yolo County, and has neither pleaded or proved any damage to himself by reason of the acts of appellants.
It is of course true that it is the general rule that a private individual cannot maintain a suit for an injunction unless he suffers a special injury different from that suffered by the public at large. However, it is also true that the state may grant permission to any citizen to maintain such an action. Frost v. City of Los Angeles, 181 Cal. 22, 183 P. 342, 6 A.L.R. 468.
In the case of People v. Casa Co., 35 Cal.App. 194, at page 199, 169 P. 454, at page 457, it is said: “It is well established that the state may confer the right to bring an action to abate a public nuisance upon a private individual in addition to his existing right to bring such actions where there is a special injury to him. (State v. Fanning, 96 Neb. 123, 147 N.W. 215; Littleton v. Fritz [65 Iowa 488, 22 N.W. 641, 54 Am.Rep. 19], supra), and in this state this power is expressly conferred by section 369 of the Code of Civil Procedure, which states that a person expressly authorized by statute may sue without joining with him the person for whose benefit the action is prosecuted.”
In 32 C.J., at page 48, it is stated: “In some states the general rule does not apply with reference to suits for injunction to restrain certain sorts of public injuries, because of statutes providing that any citizen may maintain a suit for injunction regardless of whether or not he will suffer particular injury.”
In the instant case it is to be noted that section 10 of the Unfair Practices Act as amended by St.1937, p. 2398, provided:
“Any person * * * may maintain an action to enjoin a continuance of any act or acts in violation of any of the provisions of sections 1 to 7, inclusive, of this act and, if injured thereby, for the recovery of damages. * * * It shall not be necessary that actual damages to the plaintiff be alleged or proved.”
In Wholesale T. Dealers v. National Candy & T. Co., supra, it was held that said act is for the public welfare, is a part of its public policy, and constitutes a legitimate exercise of the police power. Our conclusion upon this point is that because of the specific provision in section 10 of the act, hereinbefore quoted, it was not necessary for respondent to allege or prove any special damage or injury to himself.
Appellants' third contention is that there is no proof of the cost of the articles sold. The record shows that respondent demanded that appellants produce their original invoices, and that appellants refused to do so, counsel for appellants stating: “We decline to produce it on the ground that there is no foundation laid for the demand. And on the further ground that we cannot be required to produce any book, paper or record here that can be used against us.” Respondent thereupon called as witnesses the district managers of the various wholesale dealers who had sold merchandise to appellants, and upon each of them producing its original invoices, offered same in evidence. The following from the record is typical of the objections made by appellants to the various offers of the invoices:
“Mr. Huston: Now, we will object to this on the ground that the proper foundation has not been laid, and by that, I am not objecting on the grounds that this is a copy of the original invoice in their office but it is, primarily on the ground that there is no connection shown between the items in this invoice and any of the items alleged to have been sold on any date. There is no evidence of any witnesses who made the entries or who had any personal knowledge of the transactions at the time the entry was made and that it is hearsay.
“Mr. Mering: I will submit, your Honor, that that still is a true and correct copy of the original invoice that Mr. Huston has refused to surrender.
“The Court: The objection will be overruled and it will be admitted in evidence and marked next number.”
These invoices were admitted in evidence by the court over the objections of appellants. The various witnesses testified that these various invoices were on file in their respective offices, showing the various sales to appellants, and in view of the provision in section 3 of the act, that the term “cost,” as applied to the distribution “cost,” shall mean “the invoice or replacement cost, whichever is lower,” etc., it must be held that such evidence was material, and that the invoices were properly admitted in evidence.
Appellants contend that there was no connection between the items of the invoices and the items claimed to have been sold by appellants; and that there was an absence of proof as to whether the goods purchased by the appellants on the dates of the invoices were the same goods as sold on subsequent dates, as found by the court.
In order to illustrate the manner in which respondent sought to prove his case, we will state what the record shows, with reference to the item of Sego milk. It was alleged in the amended complaint that appellants' offered for sale, and sold, on March 25, 1939, and March 27, 1939, three tall cans for 17 cents, and six tall cans for 33 cents. Respondent offered in evidence invoices of sales of cases, each containing 48 tall cans of Sego milk, to appellants, all at $2.65 per case, on the following dates: January 4, 10 cases; January 9, 10 cases; January 16, 5 cases; February 1, 15 cases; February 10, 18 cases; February 15, 15 cases; March 1, 10 cases; March 8, 15 cases; March 14, 10 cases; March 22, 22 cases.
It is clear that the price at which appellants sold the Sego milk was lower than the invoice price, as shown by said invoices. What has been said with reference to Sego milk may be stated to be equally true with reference to the other items of merchandise claimed to have been sold by appellants in violation of the act.
Appellants argue that evidence such as above set forth does not have sufficient weight to sustain a finding that the merchandise sold by appellants was the same merchandise mentioned in these invoices. They argue that appellants could have purchased any or all of these articles in numerous places in California, and that said articles actually sold could have been in storage at the time of the purchase included in the invoices, as appellants carried a reserve stock. We believe that the trial court had a right to infer that the Sego milk sold on March 25th and March 27th came from the invoices aggregating 118 cases of 48 cans each of Sego milk purchased by appellants from January 4th to March 22d. It may be, as appellants assert, that the Sego milk sold could have been purchased elsewhere by appellants, and it may be that appellants had a reserve stock of Sego milk in storage at the time of the purchases included in the invoices, but there is no evidence in the record to that effect. If such were the fact, appellants could easily have proved it, but they did not choose to do so, and when called by respondent under section 2055 of the Code of Civil Procedure, they availed themselves of their constitutional right to refuse to testify, upon the ground that they might incriminate themselves. We are satified that the record supports the finding that the articles in question were sold by appellants at less than the cost thereof, in violation of the act.
Appellants' fourth contention is that there is no proof of intent to injure competitors or destroy competition.
Section 5 of the act reads as follows: “In all actions brought under the provisions of this act proof of one or more acts of selling or giving away any article or product below cost or at discriminatory prices, together with proof of the injurious effect of such acts, shall be presumptive evidence of the purpose or intent to injure competitors or destroy competition.”
Appellants contend that a finding that they violated the act cannot be based upon this presumption. The power of the legislature to create presumptions and prima facie evidence, is well established. In the case of Bandini Petroleum Co. v. Superior Court, 284 U.S. 8, 52 S.Ct. 103, 107, 76 L.Ed. 136, 78 A.L.R. 826, the Supreme Court of the United States, speaking through Chief Justice Hughes, said: “The appellants make the further contention that the statute is invalid because of the provisions of § 8b (supra, p. 104) that ‘the blowing, release or escape of natural gas into the air shall be prima facie evidence of unreasonable waste.’ The state, in the exercise of its general power to prescribe rules of evidence, may provide that proof of a particular fact, or of several facts taken collectively, shall be prima facie evidence of another fact when there is some rational connection between the fact proved and the ultimate fact presumed. The legislative presumption is invalid when it is entirely arbitrary, or creates an invidious discrimination, or operates to deprive a party of a reasonable opportunity to present the pertinent facts in his defense. Mobile [J. & K. C.] R. Co. v. Turnipseed, 219 U.S. 35, 43, 31 S.Ct. 136, 55 L.Ed. 78 , 32 L.R.A.,N.S., 226, Ann.Cas.1912A, 463 [2 N.C.C.A. 243]; Bailey v. Alabama, 219 U.S. 219, 238, 31 S.Ct. 145, 55 L.Ed. 191 ; Lindsley v. Natural Carbonic Gas Co., 220 U.S. , at pages 81, 82, 31 S.Ct. 337 [55 L.Ed. , 378, 379, Ann.Cas.1912C, 160], supra; Manley v. Georgia, 279 U.S. 1, 5, 6, 49 S.Ct. 215, 73 L.Ed. 575 [577, 578]; Western & A. R. Co. v. Henderson, 279 U.S. 639, 642, 49 S.Ct. 445, 73 L.Ed. 884 . In the present case there is a manifest connection between the fact proved and the fact presumed, and under the construction placed upon the statute by the state court, there appears to be no deprivation of a full opportunity to present all the facts relating to operations within the field.”
The evidence in the instant case is sufficient to sustain the finding that sales were made by appellants below invoice cost and below replacement cost. It also shows that the sales were not limited to one or two items, but covered a variety of articles. The evidence further shows that these low level prices continued over a period of time. The articles sold were advertised to be sold at said prices. The injurious consequences of the acts of appellants were established by the testimony of Roy Wyatt, a witness called by respondent. Mr. Wyatt operated a grocery store in the town of Esparto, in Yolo County. Mr. Wyatt testified, in substance, as follows: That he had been in business for some twenty–five years; that as a result of the low prices adhered to by appellants, trade was drawn away from him, and his business suffered; that customers who formerly bought of him, started to buy from appellants, and Mr. Wyatt had actually seen his customers in the store of appellants on several occasions. Appellants advertised in the Woodland Democrat, which was circulated in Esparto where Wyatt conducted his store.
Having in mind the purposes of the act as declared by the legislature, we are convinced that under the facts shown by the record in this case, “there is a rational relationship between the facts proved and the ultimate fact presumed,” and that the presumption of intent to injure competitors or destroy competition which section 5 of the act deduces from proof of sales below cost, together with proof of the injurious effect of such sales, “does not operate to deprive a party of a reasonable opportunity to present the pertinent facts in his defense.”
The presumption created by section 5 of the act is, of course, a rebuttable presumption, and it is for the trial court to determine whether or not it has been overcome by the other evidence in the case. Where, as in the instant case, the facts were proved from which the court might properly hold that the presumption was created, the question of whether or not said sales were made by appellants with the purpose or intent to injure competitors or destroy competition, became a question for the trial court to determine. The case of Balzer v. Caler, 11 Cal.2d 663, 82 P.2d 19, was a case under the Unfair Practices Act before section 5 was amended in 1937 to contain the clause now under consideration. The trial court found that the acts of defendant in that case were not done with the “intent to injure competitors or destroy competition.” While the appeal was pending, section 5 was amended to read as at present, and upon the appeal, it was contended by appellants that the existing law, rather than the law in force at the time of judgment, should be applied. In disposing of this contention the Supreme Court said, at page 665 of 11 Cal.2d, at page 21 of 82 P.2d: “Appellant contends that inasmuch as the cause involves a request for an injunction that the existing law rather than the law in force at the time of the judgment should be applied. In this connection it is pointed out that in 1937 the act was amended to clearly state that intent to injure competitors and lessen competition is a necessary element of the act prohibited, but that section 5 of the act was also amended to provide that in any action brought under the act the selling of an article below cost, together with proof of the injurious effect of such act ‘shall be presumptive evidence of the purpose or intent to injure competitors or destroy competition.’ Stats.1937, ch. 860, pp. 2395, 2397. Even if this section were held applicable to the instant case it would nevertheless still have to be held that the only competent admissible evidence introduced on this issue rebutted the presumption.”
It is to be observed that in the case just cited the Supreme Court recognized the presumption, but held that, even if applicable to the case then under consideration, it had been rebutted by other testimony.
Our conclusion upon this point is that the record supports the finding of the trial court that the sales proved in this case were made by appellants “with the purpose or intent to injure competitors or destroy competition.”
Appellants' fifth contention is that the court erred in excluding testimony bearing upon the intent of appellants.
Appellants offered in evidence certain advertisements of certain of their competitors named in the testimony of respondent's witness Wyatt. The trial court admitted all advertisements prior to the last date on which sales were alleged in the amended complaint, towit, August 30, 1939, but excluded all advertisements of appellants' competitors after that date. Appellants contend that this was error, but cite no authorities supporting such contention.
It was not alleged in the amended complaint that appellants had made any sales in violation of the act after that date, and we cannot see how the advertisement of a competitor after that date could have affected the intent of appellants prior to that date. We are therefore of the opinion that the trial court properly refused to admit such advertisements in evidence.
Lastly, appellants contended that the Unfair Practices Act as applied to the facts of this case, is unconstitutional.
Appellants make a general attack upon the wisdom and reasonableness of this legislation, and urge many of the arguments that those familiar with the history of this type of legislation have heard opponents of such legislation make in legislative halls for many years. Legislatures, not courts, determine the wisdom or lack of wisdom of economic policies. The members of a court may not agree with the economic philosophy of the Unfair Practices Act, but it is no part of the duty of a court to determine whether or not the policy embodied in the statute is wise or unwise. As was said by Mr. Justice Field, (later, a justice of the Supreme Court of the United States), in the early case of Ex parte Newman, 9 Cal. 502, 520: “It is not the province of the judiciary to pass upon the wisdom and policy of legislation; and when it does so, it usurps a power never conferred by the Constitution.” The power of the court is limited to determining whether the subject of the legislation is within the State's power, and, if so, to determine whether the means adopted have a reasonable relation to a proper legislative purpose and are neither arbitrary nor discriminatory.
In the case of Wholesale T. Dealers v. National Candy & T. Co., supra, our Supreme Court, in upholding the constitutionality of the act now under consideration, said, at page 643 of 11 Cal.2d at page 9 of 82 P.2d, 118 A.L.R. 486:
“It is manifest that the statute was passed in the attempted exercise of the state's police power. That being so, the inquiry of this court is limited to determining whether the object of the statute is one for which the police power may legitimately be invoked, and, if so, whether the statute bears a reasonable and substantial relation to the object sought to be attained. These two problems involve substantially different considerations, and shall be separately discussed.
“That the avowed purpose of the act as stated in section 13 ‘* * * to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition, by prohibiting unfair and discriminatory practices by which fair and honest competition is destroyed or prevented’ * * * is well within the state's police power cannot be seriously doubted. It has now become firmly established that the police power of the state extends not only to the preservation of the public health, safety and morals, but also extends to the preservation and promotion of the public welfare. In recent years the state, in promoting and advancing the general welfare of its citizens, has frequently and properly used this power to promote the general prosperity of the state by the regulation of economic conditions. This apparent extension of the police power is in fact no extension at all. The police power has not expanded. Its proper exercise has always been and still is confined to regulation in the public welfare, and has always been and still is subject to the standard of reasonableness in its relation to that interest. However, changed social, political and economic conditions have enlarged the field of conduct which may properly be subjected to regulation in order that the general welfare may be adequately protected. The proper application of the power cannot be measured by past precedents––the test is, of course, present day conditions. These principles have frequently been enunciated by this court and by the Supreme Court of the United States.”
And, further, at page 646 of 11 Cal.2d, at page 10 of 82 P.2d, 118 A.L.R. 486, it is said:
“With these cases, and many others that could be cited, in mind, it is obvious that the object of the present statute is within the state's police power. That the prevention of monopolies and the fostering of free, open and fair competition and the prohibition of unfair trade practices is in the public welfare is obvious, and requires no further citation of authority. In fact this is not seriously challenged by appellant. The main arguments advanced by appellant are that the act is unconstitutional in that it curtails its previously enjoyed privilege or right of fixing the price at which it is willing to sell its goods and of selling them at such prices, and that the act unlawfully deprives it of its freedom of action; that it is unreasonable and will not accomplish the purposes intended. These contentions go to the reasonableness of the statute in its relation to its avowed object, and do not attack the validity of that object.
“So far as pertinent here, the present act prohibits the sale of commodities below cost as defined in the act (with certain enumerated exceptions) but, as will later appear, such sale is only prohibited when engaged in ‘for the purpose of injuring competitors and destroying competition’. * * * In determining the validity of this provision (the object of the statute being within the police power of the state) we are limited in our inquiry to determining whether the act is one reasonably connected with its avowed purpose. In other words, are the means adopted reasonably designed to accomplish this purpose; do they have a real and substantial relation to the objects sought to be attained?”
And further, on page 650 of 11 Cal.2d, page 12 of 82 P.2d, 118 A.L.R. 486, it is stated:
“In discussing the question as to whether the statute is reasonably designed to accomplish its avowed purposes, the parties, and various amici curiae on their behalf, have written many briefs covering a wide field of discussion. On behalf of appellant it is urged that the means adopted by this statute––prohibiting sales below cost––cannot possibly prevent the creation of monopolies and will not foster free, open and fair competition. It is contended that this legislation in fact will stifle free and open competition and will foster monopolies and that it favors the large chain stores and large distributors as against the small merchant. On behalf of respondent the contrary is urged. It should be noted that amici curiae briefs have been filed on behalf of respondent by several of the trade associations representing the independent grocers and druggists of the state.
“It is not the province of this court to determine where the truth of this argument lies. If the subject is fairly debatable the determination of the legislature is conclusive. That the economic wisdom of such legislation is fairly debatable cannot be gainsaid. Courts have frequently commented on the destructiveness of pricecutting tactics. Nebbia v. New York, [291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940, 89 A.L.R. 1469], supra; Hegeman Farms Corp. v. Baldwin, 293 U.S. 163, 55 S.Ct. 7, 79 L.Ed. 259; Highland Farms Dairy v. Agnew, 300 U.S. 608, 57 S.Ct. 549, 81 L.Ed. 835; Max Factor & Co. v. Kunsman, [5 Cal.2d 446, 55 P.2d 177], supra; Agricultural Prorate Comm. v. Superior Court, 5 Cal.2d 550, 55 P.2d 495. The use of ‘loss leaders' for the purpose of injuring a competitor has been condemned by many economists. It has been urged that their use is injurious to the consumer in that the losses so sustained will either have to be made up by higher prices charged on other commodities, or by the enforcing of various economies, such as the lowering of wages, discharge of employees, lowering of rents, depressing the wholesale prices, etc. It has many times been urged that such practices are destructive of competition and tend to create monopolies. See discussion in State v. Central Lumber Co., supra, and Central Lumber Co. v. South Dakota, supra. These arguments are mentioned not because we necessarily believe that they are sound, but to demonstrate that the practice condemned by this statute, according to the views held by a large portion of the body politic, tends toward the stifling of free and open competition, the creation of monopolies, and is injurious to the consuming public. It should also be mentioned that some 14 states have passed similar legislation. This is entitled to some weight in determining whether the means provided in the statute will tend to accomplish the valid and expressed purpose of the legislature.”
On page 658 of 11 Cal.2d, page 17 of 82 P.2d, 118 A.L.R. 486, it is also stated:
“Other cases could be cited. We believe that these cases clearly establish the constitutionality of the statute here under attack. The statute must be held to be a reasonable attempt upon the part of the state to accomplish a valid object. It must be borne in mind that this statute does not regulate the selling of commodities––it is the predatory trade practice of selling below cost with intent to injure competitors which the legislature on reasonable grounds has determined is vicious and unfair that is prohibited. Such determination is clearly within the legislative power. The state may not have power to regulate all trade practices affecting competition, but it clearly has power to restrict or prohibit trade practices which upon reasonable grounds it determines are predatory, vicious, unfair and anti–social.”
In the case of People v. Black's Food Store, supra [16 Cal.2d 59, 105 P.2d 362], a case in which a preliminary injunction granted under the “Unfair Practices Act” was involved, the court said:
“It has been held upon sound principle that the legislature has the authority, under its police powers, to regulate business for the general welfare of the public, by prohibiting merchants from selling products below cost ‘for the purpose of injuring competitors or destroying competition’. Wholesale T. Dealers v. National, etc. Co., 11 Cal.2d 634, 82 P.2d 3, 8, 118 A.L.R. 486.”
It would, therefore, appear to us that the constitutionality of the Unfair Practices Act is settled in California, and that there is nothing in the facts of the instant case that would make the act unconstitutional as applied to the facts shown by the record here.
For the reasons hereinbefore set forth, the judgment is affirmed.
SCHOTTKY, Justice pro tem.
ADAMS, P. J., and THOMPSON, J., concurred.