PEOPLE v. PAY LESS DRUG STORE ET AL.
The defendants, operators of a cash and carry grocery store located at 19th Street and Telegraph Avenue in the city of Oakland, appeal from a judgment determining that they violated the provisions of § 3 of the Unfair Practices Act as amended in 1937 (Deering's General Laws of 1937, p. 4157, Act 8781) in that they sold, or offered for sale, certain merchandise at less than cost, as defined in the act, and used certain articles as “loss leaders” in violation of the act, and enjoining them from future violations.
The complaint charges that on certain specified dates in January, February and March of 1940 defendants sold, or offered to sell, certain designated products at prices set forth in the complaint, which prices, it is charged, were less than the cost price of such articles, as cost is defined in the act. The complaint sets forth nearly 400 transactions alleged to be in violation of the act. By their answer defendants admitted selling, or offering for sale, the various articles enumerated in the complaint at the prices there set forth but they denied that such prices were less than cost as that term is defined in the act. By special defenses they challenged the constitutionality of the statute in certain respects, and in other respects alleged that the act is too vague, uncertain and indefinite to be enforceable. So far as the charge in relation to the use of “loss leaders” is concerned, defendants admit making some sales below cost, but they allege that such sales were made to meet competition, and were used as a valid form of advertising.
The trial court found that defendants had as competitors various merchants in Oakland, Berkeley and elsewhere; that defendants did offer for sale, and sell at retail, certain goods at less than cost, as cost is defined in the act; that some such sales were less than the invoice or replacement cost of defendants, and some at less than such cost, plus the cost of doing business, which the court found to be 8.03%; that such sales were made for the purpose of injuring competitors or destroying competition; that such sales were not made for any of the purposes permitted by § 6 of the act; and that “loss leaders” were employed for the purpose of diverting trade from competitors and to injure competitors, but the use of such “loss leaders” did not, in fact, mislead purchasers.
At the trial, and on this appeal, defendants freely admit that they made various sales below cost. They admit that some such sales were below either their invoice or replacement cost, and some such sales were below such cost plus their cost of doing business, if such cost of doing business is 8.03%. Their main argument is that the record shows, as a matter of law, that such sales were made in a good faith attempt to meet the legal prices of their competitors, and that the finding that such sales were made with intent to injure their competitors or to destroy competition is totally unsupported by the evidence. In this connection they particularly attack § 5 of the act which purports, under certain circumstances therein set forth, to create a presumption that such sales were made with the intent to injure competitors or to destroy competition. They also attack the constitutionality of the act in certain respects, and challenge other provisions as being uncertain and indefinite.
The Unfair Practices Act, in substantially its present form, was adopted in 1935 as an urgency measure. Stats. 1935, Chap. 477, p. 1546. Its constitutionality as then enacted has been upheld in a series of recent cases. Wholesale T. Dealers v. National, etc., Co., 11 Cal.2d 634, 82 P.2d 3, 118 A.L.R. 486; People v. Kahn, 19 Cal.App.2d Supp. 758, 60 P.2d 596; People v. Black's Food Store, 16 Cal.2d 59, 105 P.2d 361; Dunnell v. Shelley, 38 Cal.App.2d 118, 100 P.2d 830; Green v. Grimes–Stassforth S. Co., 39 Cal.App.2d 52, 102 P.2d 452; see, also, annotations 118 A.L.R. 506, and 128 A.L.R. 1126, where cases from many states are collected and commented upon; for other California cases upholding somewhat similar regulatory statutes, see Max Factor & Co. v. Kunsman, 5 Cal.2d 446, 55 P.2d 177; Agricultural Prorate Comm. v. Superior Ct., 5 Cal.2d 550, 55 P.2d 495; Jersey Maid Milk Products Co. v. Brock, 13 Cal.2d 620, 91 P.2d 577; In re Fuller, 15 Cal.2d 425, 102 P.2d 321; International, etc., Workers v. Landowitz, 20 Cal.2d 418, 126 P.2d 609; People v. McEntyre, 32 Cal.App.2d Supp. 752, 84 P.2d 560. These cases dispose of most of appellants' constitutional arguments, which need not be further considered.
Appellants contend that because the 1937 amendments to the act were not adopted as urgency measures, the main basis for upholding the constitutionality of the 1935 act no longer exists. This contention is without merit. In the basic case of Wholesale T. Dealers v. National, etc., Co., supra, the Supreme Court upheld the act on the ground that the adoption of such regulatory statutes was within the police power of the state, and that the legislature acted well within its powers in determining that the practices condemned by the statute tend toward the stifling of free and open competition, and are injurious to the consuming public. The urgency nature of the 1935 act was merely part of the background of the statute. As was held in the Wholesale T. Dealers v. National, etc., Co. case, supra, 11 Cal.2d at page 654, 82 P.2d at page 15, 118 A.L.R. 486: “In determining judicial action, however, the character of the situation sought to be remedied rather than its abruptness is the governing factor.”
Section 3 of the act is the section that defendants are charged with violating. So far as pertinent here, it provides that: “It shall be unlawful for any person engaged in business within this State, to sell any article or product at less than the cost thereof to such vendor, or give away any article or product, for the purpose of injuring competitors or destroying competition * * *.” The 1935 act had required that the requisite intent must be to injure competitors “and” to destroy competition. In 1937 the “and” was changed to “or.” The same section defines “cost” to a distributor as “the invoice or replacement cost, whichever is lower, * * * plus the cost of doing business by said distributor.” “Cost of doing business” 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.” In 1937 a specific prohibition against the use of “loss leaders” was added to the section, and “loss leaders” were defined as “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.”
Section 5, as originally enacted, and as it now provides, permits the use of established cost surveys in proving the costs of the person charged with a violation. In 1937 the following provision was added to § 5: “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 * * * 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.”
Section 6 provides that the prohibitions of § 3 shall not apply (a) to close out sales of the particular product or to the sale of perishable goods to prevent loss by spoilage, provided notice is given to the public; (b) to the sale of damaged goods, provided notice is given the public; (c) to sales by an officer acting under the orders of any court; and (d) to sales “in an endeavor made in good faith to meet the legal prices of a competitor * * * selling the same article or product, in the same locality or trade area and in the ordinary channels of trade.”
Section 10 permits an action to enjoin a violation of the act, while § 11 makes the violation of § 3 a misdemeanor. This last section also provides that: “Proof of average overall cost of doing business for any particular inventory period when added to the * * * invoice or replacement cost, whichever is lower, of each article or product * * * shall be presumptive evidence of cost as to each such article or product involved in any action * * * involving the violation of any provisions of sections 3 and 5 of this act.”
Section 13 of the act provides that the purpose of the 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.”
The complaint charged that the sales here involved were not sales of the types permitted by any of the provisions of § 6. The answer admits, and it was admitted on the trial, and is admitted on this appeal, that none of the sales here involved was made under subdivisions (a), (b), or (c) of § 6. The main defense at the trial, and the main contention on this appeal, is that all of such sales were sales permitted by subdivision (d) of § 6, namely, sales made below cost in a good faith attempt to meet the legal prices of competitors.
The respondent proved the invoice and replacement cost to appellants of the various products set forth in the complaint, and proved that appellants' overall cost of doing business was 8.03%. It also proved that on various dates appellants sold many of the articles and products set forth in the complaint for either less than the invoice or replacement cost, or less than such cost plus 8.03%. As to some of the articles involved, the appellants proved that their sale price was above invoice cost, plus cost of doing business, if certain advertising allowances were deducted from the cost price. These advertising allowances should be deducted, so that as to these articles there was no violation of the act. As to many other articles, however, the evidence shows, and appellants concede, that they were sold or offered for sale, for less than invoice cost, and in other cases for less than invoice cost plus 8.03%. As to these sales there are but two questions involved: (1) Did the plaintiff prove that such sales were made “for the purpose of injuring competitors or destroying competition” as required by § 3 of the act; and (2) does the evidence, as a matter of law, show that such sales below cost were made “in an endeavor made in good faith to meet the legal prices of a competitor * * * selling the same article or product, in the same locality or trade area * * *.”?
So far as the first question is concerned, the respondent produced as the first witness the secretary of the Retail Grocers Association of Alameda County. He testified that appellants attract customers of their competitors by selling at cost or below, and that the natural effect of selling below cost by one merchant is to lessen the business of his competitors. Various grocery store operators then testified that they were competitors of appellants. Several of these operated stores reasonably close to that of appellants, one operated a store in Piedmont, and the others operated stores several miles distant. They all testified that during the early months of 1940 they noticed a material decline in their volume of business that was not purely seasonal. Several of them testified that during this period they noticed a particular decline in the volume of their coffee sales, that being one of the products appellants admittedly sold below cost during this period. Several testified that in self–defense they had to reduce their prices to meet the challenge of appellants. Appellants argue that evidence of loss of volume is not necessarily evidence of “injury” to competitors because to constitute an injury there must be loss of profits, and loss of volume does not necessarily show loss of profits. There is ample evidence in the record of the highly competitive nature of the retail grocery business, and of the small margin of profit that exists because of such competition. In view of that evidence, it is a reasonable, if not inevitable, inference that loss of volume of business shows loss of profits.
On this evidence the trial court found that these sales below cost were with the intent to injure competitors or to destroy competition. It is, of course, true that all sales below cost are not prohibited. Only those sales accompanied by the requisite intent are prohibited. This was the express holding in Wholesale T. Dealers v. National, etc., Co., 11 Cal.2d 634, at page 658, 82 P.2d at page 17, 118 A.L.R. 486. See, also, Balzer v. Caler, 11 Cal.2d 663, 82 P.2d 19. Intent, however, is not something that can always be proved by concrete evidence. It is an intangible matter that may be proved by inferences based on reasonable probabilities. Without now considering the evidence produced by appellants, and without regard to the presumption contained in § 5 above quoted, we think that it is a reasonable inference from the above evidence that the sales here involved were with the requisite intent. The sales below cost are admitted. The evidence shows competitors were injured by such price cutting by appellants. In addition, the act permits sales below cost, but the respondent proved that these sales did not fall within any of the permitted categories. This is a necessary part of the respondent's burden of proof. Green v. Grimes–Stassforth S. Co., 39 Cal.App.2d 52, 102 P.2d 452. It seems to us that when sales below cost are shown, when injury to competitors appears, and when the evidence shows the sales were not in any of the permitted classes, the trier of the fact may reasonably infer, as was done in this case, that such sales were of the prohibited class, that is, sales below cost for the purpose or with the intent to injure competitors or to destroy competition.
Respondent, in addition to urging direct evidentiary support for the challenged finding of intent, relies on the presumption created by § 5 to support the finding. It will be noted that by that provision proof of one or more sales below cost, plus proof of the injurious effect of such acts “shall be presumptive evidence of the purpose or intent to injure competitors or destroy competition.” Appellants vigorously attack the validity of this provision. It is urged that the legislature has overstepped permissible limits in thus attempting to create this presumption. A somewhat similar provision was held to be invalid in Great Atlantic & Pacific Tea Co. v. Ervin, D.C., 23 F.Supp. 70. The true test to be applied in determining the validity of a statutory presumption is to ascertain whether there is a natural and rational evidentiary relation between the fact proved and the fact to be presumed, or to determine whether there is a manifest disparity in convenience of proof and opportunity for knowledge, and to determine whether the shifting of the burden places undue hardship on the defendant. Morrison v. People of State of California, 291 U.S. 82, 54 S.Ct. 281, 78 L.Ed. 664; McFarland v. American Sugar Refining Co., 241 U.S. 79, 36 S.Ct. 498, 60 L.Ed. 899; Mobile, J. & K. C. R. Co. v. Turnipseed, 219 U.S. 35, 31 S.Ct. 136, 55 L.Ed. 78, 32 L.R.A.,N.S., 226, Ann.Cas.1912A, 463; People v. Associated Oil Co., 211 Cal. 93, 294 P. 717; People v. Murguia, 6 Cal.2d 190, 57 P.2d 115; see note 22 Cal. L. Rev. 420. In view of the rule in this state that a presumption is evidence, and may itself create a conflict with the evidence produced by the adverse party (Westberg v. Willde, 14 Cal.2d 360, 94 P.2d 590; Speck v. Sarver, 20 Cal.2d 585, 128 P.2d 16), and keeping in mind the distinctions that exist between inferences and presumptions in this state, we have grave doubts as to the validity of the presumption attempted to be created by § 5. The intent to injure competitors or to destroy competition is the essence of the offenses defined by § 3. Sales below cost are not per se invalid. Unless the wrongful intent exists, such sales are valid. The Supreme Court in upholding § 3 of the act as it read in 1935, in Wholesale T. Dealers v. National, etc., Co., 11 Cal.2d 634, 82 P.2d 3, 118 A.L.R. 486, had grave doubts as to whether the section would be constitutional if the requisite intent did not exist. At page 658 of 11 Cal.2d, 82 P.2d at page 17, 118 A.L.R. 486, the court stated: “It would certainly add to the weight of appellant's argument on the main issue if the statute omitted intent as an integral part of the act prohibited. It is one thing, from a legal standpoint, to prohibit sales below cost engaged in for the purpose of injuring competitors and destroying competition, and quite another to merely prohibit all such sales regardless of intent. It may well be that an absolute prohibition regardless of intent would be unreasonable.” See, also, Fairmont Creamery Co. v. State of Minnesota, 274 U.S. 1, 47 S.Ct. 506, 71 L.Ed. 893, 52 A.L.R. 163. In State v. Packard–Bamberger & Co., 123 N.J.L. 180, 8 A.2d 291, it was held that a statute which purports to prohibit all sales below cost without the necessity of the intent to injure competitors or destroy competition, is unconstitutional. The same result was reached by the Supreme Court of Pennsylvania in Commonwealth v. Zasloff, 338 Pa. 457, 13 A.2d 67, 128 A.L.R. 1120. See, also, State v. Ruback, 135 Neb. 607, 281 N.W. 607. Other courts in upholding similar statutes have emphasized that they did so because the statute only prohibited sales below cost that were accompanied with the requisite unlawful intent. Rust v. Griggs, 172 Tenn. 565, 113 S.W.2d 733; State v. Langley, 53 Wyo. 332, 84 P.2d 767.
It would thus appear that the intent to injure competitors or destroy competition is the essence of the offenses prohibited by the act. Unless proof of such intent is required the statute would be unconstitutional. Now, by the 1937 amendment to § 5, the legislature has provided that upon proof of sales below cost plus proof of injury to competitors such unlawful intent will be presumed. Inasmuch as the obvious effect of one merchant selling a particular article below cost will be to take sales from and therefore injure competitors, the effect of this statutory presumption, from a practical standpoint, is that upon proof of sales below cost the unlawful intent can be presumed. There is no natural and rational connection between the fact proved (sales below cost) and the fact presumed (unlawful intent). Nor is there a disparity in convenience of proof and opportunity of knowledge between plaintiff and defendant on this issue. The attempt to thus shift the burden by creating a statutory presumption would place an undue hardship on defendant. Thus, § 5 fails to meet any of the standards set up by the United States Supreme Court and the courts of this state which must exist before an attempt by the legislature to create such a presumption will be upheld.
There is nothing inconsistent between the holding that the statutory presumption contained in § 5 is invalid, and the holding heretofore made, that upon the evidence here produced the trial court was justified in inferring that the required wrongful intent existed. Here the evidence showed not only sales below cost and injury to competitors, but also that such sales did not fall within the permitted categories enumerated in § 6. It is reasonable to infer from such evidence, as already held, that such sales were for the purpose of injuring competitors or destroying competition since they were not permitted sales. The trial court was not required to indulge in the inference, but it could do so.
If the presumption be upheld, the trial court, in the absence of contrary evidence, must find in accordance with the presumption. Moreover, a presumption creates a conflict with adverse testimony and is sufficient to support a finding based thereon. An inference, on the other hand, may be rebutted if the contrary evidence is “clear, positive, uncontradicted, and of such a nature that it cannot rationally be disbelieved” (Blank v. Coffin, 20 Cal.2d 457, 461, 126 P.2d 868, 872), or, as was held in Hicks v. Reis, 21 Cal.2d 654, 660, 134 P.2d 788, 791, “when the rebutting testimony is of such a nature that the minds of reasonable men cannot differ on the subject, then the trier of the facts cannot, and should not be permitted to, indulge in the inference.”
This brings us to the second main point urged by appellants, that is, that the evidence, as a matter of law, demonstrates that the admitted sales below cost were made in a good faith attempt “to meet the legal prices of a competitor as herein defined selling the same article or product, in the same locality or trade area,” as permitted by subd. (d) of § 6. It will be noted that in order to bring the sale below cost within the provisions of this section it must be a sale to meet the “legal” prices of a competitor. Of course, in many branches of business, including the grocery business, some merchants may be able to purchase for less than others because of the fact that they purchase in larger quantities. There is no evidence in this case as to what the “legal” price of competitors may have been as to many of the articles involved. This deficiency of proof however, in no way, affects appellants' defense under § 6(d). We are of the opinion that one merchant may reasonably assume that his competitor is not violating the law, and that the price fixed by the competitor is a “legal” price. If it is not, the burden of proof rests on the prosecution or the one seeking an injunction to prove that the competitor's price was not a “legal” price. If this were not the rule, each merchant in attempting to stay in business by meeting competitive prices would have to determine, at his peril, whether his competitor's prices were “legal.” This interpretation also refutes appellants' argument that the phrase is too indefinite and uncertain to be enforceable. As here interpreted similar phrases have been approved by the courts of several states. State v. Sears, 4 Wash.2d 200, 103 P.2d 337; Rust v. Griggs, 172 Tenn. 565, 113 S.W.2d 733. It is true that in Commonwealth v. Zasloff, 338 Pa. 457, 13 A.2d 67, 128 A.L.R. 1120; State v. Packard–Bamberger & Co., 123 N.J.L. 180, 8 A.2d 291; State v. Walgreen Drug Co., 57 Ariz. 308, 113 P.2d 650, similar statutes of Pennsylvania, New Jersey and Arizona were held to be unconstitutional. These cases are either predicated on the failure to include intent as the basis of the offense, or are contrary to the overwhelming weight of authority as shown by the cases cited in the first part of this opinion. Insofar as they discuss the phrase here under discussion, they are not only contrary to the cases from Washington and Tennessee, supra, but they fail to consider the arguments and interpretation set forth in those cases and in this opinion. In the instant case neither side proved the “legal” price of the competitors as to all the articles involved. We may assume, therefore, that the competitor's prices were “legal” prices.
Burnham, appellants' manager, testified positively that his store never sold any articles below cost except where competitors had first lowered the price, and that all of the admitted sales below cost were made in a good faith attempt to meet competitor's prices. So far as his oral testimony is concerned, Burnham's credibility was, of course, for the trier of the facts, and his evidence did no more than create a conflict on the issue. In support of this defense appellants also introduced in evidence a series of newspaper advertisements of various competitors published around the time of defendants' below cost sales. Burnham testified that his store employed persons who read all advertisements of competitors and otherwise checked competitors' prices; that his store reduced their prices only after seeing these advertisements; and that appellants “either had to meet those prices or go out of business and stay out.” Appellants urge that these advertisements demonstrate that all of their sales below cost were made to meet the advertised prices of competitors. If these exhibits did show, as contended by appellants, that their sales below cost occurred at or shortly after the time competitors advertised the same article at the price at which appellants sold, we think this would establish appellants' defense. The difficulty with appellants' position is that the exhibits, which we have examined, do not support the contention. Appellants prepared an exhibit (Defendants' Exhibit K) which lists many of its below cost sales and lists the advertisements of its competitors upon which it relies to justify the cut price. That exhibit shows that one of appellants' competitors––Lucky's––advertised M. J. B. coffee, 1 lb. can, at the cut price during the period January 12th to 18th, 1940. The same exhibit shows that appellants sold, or offered to sell, 1 1b. cans of M. J. B. coffee at the cut rate on January 24, 1940, January 31st, February 9th, February 28th, March 6th, March 7th, March 9th, March 11th, March 12th, March 13th, March 22nd, and March 23rd. Thus appellants contend that a sale below cost on March 23rd was made in a good faith attempt to meet the price advertised by a competitor on January 18th––64 days before. It seems to be the theory of appellants that the January 18th ad, as a matter of law, proves that the March 23rd sale was made in a “good faith” attempt to meet the prices of a competitor. There are many other examples disclosed by the exhibit. There are many illustrations of sales below cost three or four weeks after the advertisement last appeared. Items 301, 302 and 303 were sold below cost thirty days after the date of the competitor's advertisement, items 326 and 327, thirty–two days later, items 347 and 348, thirty–three days later, items 363, 367 and 368, thirty–four days later, and items 377, 382 and 383, thirty–five days later. Obviously, the trial court was justified in inferring and finding that such sales, made so much later than the advertisements, were not made in a good faith attempt to meet the prices of competitors, as such prices were disclosed by the relied upon advertisements.
Appellants also introduced into evidence Exhibit L, which purports to show that other merchants advertised articles of “equal quality” at the same price that appellants sold their merchandise. Appellants urge that although subd. (d) of § 6 requires that the competitor sell “the same article or product,” that that does not mean the identical brand. We are inclined to agree with appellants that if one merchant sells one brand of coffee, or salad oil, for instance, at a designated price, a competitor under subd. (d) of § 6 may lawfully meet that price with other brands of coffee or salad oil of comparable cost and quality. In each case it is a question of fact as to whether the competing articles are of the same quality. Assuming that appellants are correct in their contention that the articles sold by them below cost were of equal quality with those advertised by their competitors, Exhibit L shows that many of these sales were too far distant from the relied upon advertisements of competitors to make those advertisements, as a matter of law, a defense. The exhibit shows many sales by appellants twenty–one, twenty and nineteen days later than the advertisements. It also shows that item 59 was sold twenty–two days later than the publication date of the relied upon advertisement, item 174, twenty–three days later, item 166, twenty–four days later, items 227 and 233, twenty–five days later, item 191, twenty–six days later, item 219, twenty–seven days later, item 243 twenty–eight days later, items 264, 290 and 296, thirty days later, item 281, thirty–one days later, item 323, thirty–two days later, items 309, 337 and 343, thirty–three days later, item 332, thirty–five days later and item 353, thirty–six days later. It also shows that as to items 9, 31, 63, 82, 83 and 110 no advertisements were relied upon.
Enough has been said on this issue to illustrate that the evidence, as a matter of law, does not demonstrate that appellants' below cost sales were all made in a good faith attempt to meet the prices of competitors. The finding to the contrary is amply supported.
Appellant attacks the provisions of subd. (d) of § 6 as being, in certain respects, so indefinite and uncertain as to render the section and, therefore, the act, unconstitutional. The first attack is made against the phrase “legal prices of a competitor.” That phrase, as heretofore interpreted, is, in our opinion, for the reasons already stated, and upon the authorities heretofore cited, sufficiently definite. Appellants also attack the phrase “same article or product” as being too indefinite. We have already agreed with appellants' construction that that phrase includes products of the same kind of similar cost and quality. In each case this is a question of fact. As so interpreted, the phrase is sufficiently definite.
The last attack is made on the phrase “same locality or trade area.” The Supreme Court of Minnesota has upheld a similar phrase appearing in the Minnesota act in McElhone v. Geror, 207 Minn. 580, 292 N.W. 414, 419. In that case it was pointed out that each merchant knows who his competitors are––that whether they are in the same “locality” or “trade area” is a question of fact in each case. In this connection the court stated: “Neither ‘same locality’ nor ‘trade area’ is a phrase of art, with precise meaning. However, both are common terms, susceptible of reasonable application by and to evidence. That in some cases the issue of fact as to ‘locality’ or ‘trade area’ may be difficult of solution does not render invalid that statute under which it arises. Mere difficulty of application in the processes of litigation is not enough to enable a court to say that a statute is unconstitutional.” We agree with this reasoning. It might be added that Burnham had no difficulty in knowing who his competitors were. He not only introduced advertisements of the firms alleged to be his competitors, but he testified that he had employees go out and check the prices of his competitors that were selling “in the trading area.” Obviously, the size and extent of a competitive trade area depends upon the nature and size of the business, and many other factors. The holding of the South Carolina court in State v. Standard Oil Co. of New Jersey, 195 S.C. 267, 10 S.E.2d 778, that the terms “section” and “locality” of a city, appearing in an entirely different kind of statute, were too vague to be enforceable, is not convincing in interpreting the type of statute here involved.
Appellants next contend that the injunction is void for uncertainty. It is true that the terms of the decree are sweeping––appellants are prohibited from selling any article below cost as defined in the act for the purpose of injuring competitors or destroying competition, or using any product as a “loss leader” which diverts trade from or injures competitors. But it is also true that the decree expressly provides that it does not apply to the sale of any article below cost, as defined in the act, when such sale is made under subdivisions (a), (b), (c) or (d) of § 6 of the act. It is not a decree, as was involved in Johnson v. Farmer, 41 Cal.App.2d 874, 107 P.2d 959, 108 P.2d 945, where the defendant was enjoined generally from violating the act. The prohibitions in the injunction under discussion are against sales below cost “for the purpose of injuring competitors or destroying competition,” or in the case of “loss leaders” against using that device when it “diverts trade from or otherwise injures competitors.” All sales below cost as enumerated in § 6 are expressly permitted. The injunction is no more restrictive of appellants' activities than are the provisions of the act itself. In any proceeding for contempt it will be indispensable to show the necessary intent to injure competitors or destroy competition. The injunction is as certain as the nature of the case permits.
Appellants make other contentions as to the interpretation of the act. All such contentions are found to be without merit. Appellants also object to the admission of certain evidence on the ground that it was hearsay. Even if the admission of such evidence were erroneous, such error was not prejudicial.
The judgment appealed from is affirmed.
PETERS, Presiding Justice.
WARD, J., and DOOLING, Justice pro tem., concur.