Safeway Stores, Inc. v. Oklahoma Retail Grocers Association, Inc.

PETITIONER:Safeway Stores, Inc.
RESPONDENT:Oklahoma Retail Grocers Association, Inc.
LOCATION:Fargo, North Dakota

DOCKET NO.: 252
DECIDED BY: Warren Court (1958-1962)
LOWER COURT: Supreme Court of Oklahoma

CITATION: 360 US 334 (1959)
ARGUED: May 19, 1959
DECIDED: Jun 22, 1959

Facts of the case

Question

  • Oral Argument – May 19, 1959 (Part 1)
  • Audio Transcription for Oral Argument – May 19, 1959 (Part 1) in Safeway Stores, Inc. v. Oklahoma Retail Grocers Association, Inc.

    Audio Transcription for Oral Argument – May 19, 1959 (Part 2) in Safeway Stores, Inc. v. Oklahoma Retail Grocers Association, Inc.

    Samuel M. Lane:

    — federal supremacy question had not been raised below on the — it would not be available here.

    In their reply brief, the — appellant suggests that the federal supremacy question is a question of jurisdiction and since jurisdiction can never be waived, then this federal question of supremacy is always available.

    I don’t think it needs extended argument to indicate that this is not a jurisdictional question.

    This is merely a federal question, the same as all the federal questions presented under the Fourteenth Amendment.

    And therefore, not having been raised below, nor preserved here, need not be considered.

    Feeling as strongly as I do about that, it doesn’t seem to me that I should take much of any of the Court’s time on arguing the merits of the federal supremacy question, which is sought to be raised, I think stated in a nutshell, the contention that is made on this ground by the appellant is that since the Federal Government has itself antitrust laws and other laws regulating business practices that the Federal Government has pre-empted the entire field.

    If that was so, in the case of the antitrust laws, it occurs to me that the question would have been tested long since in such cases as the Waters-Pierce Oil Company against the Texas in 1909 or more recently in Tigner against Texas or in Parker against Brown.

    But the state antitrust laws and the federal antitrust laws have existed side-by-side or I suppose now, nearly 70 years and it’s apparent that the state antitrust laws and here, the state sales below cost laws seek the same objectives and supplement one another.

    It seems to me that the — among the recent cases in this Court, the one that provoked the — the most — the sharpest split in this Court was Rice against Santa Fe which had to do, as you will recall, on whether or not, the Warehouse Receipts Act has amended using the word, “exclusive” in the amendment was intended — supplied all the state acts.

    And there, there was — you — I realize a — a split, but there has been no court — no decisions cited for the proposition that the Federal Government, through its antitrust laws or through the Robinson-Patman Act, have pre-empted this entire field.

    And since, there’s nothing like the Interstate Commerce Commission regulation or pure food and drug law or anything of that kind that requires a central and uniform and exclusive administration from a practical point of view.

    It seems to me that on the merits, there’s nothing to this preemption question either and so I will draft it without more ado.

    Now, having disposed of that question, I hoped satisfactorily on the federal supremacy, you might suppose that I would now come to the question of the possible or the alleged violation of the Equal Protection and Due Process Clauses of the Fourteenth Amendment that there is still another hurdle over which, I think, this appellant does not get.

    There is a procedural obstacle to the appeal here which it seems to me, should cut off the consideration of any federal question before you arrive at it.

    The state court — the trial court, affirmed by the Supreme Court, held that the remedy in such a case is this, was to apply for an injunction and that remedy was speedy, inadequate and complete.

    And under those circumstances, I think the law is well settled.

    But since this judgment can rest upon a non-federal adequate basis, then this Court should not go into the federal question which is sought to be raised.

    If Your Honors would look at pages 636 and 637 of the records, you will find the Supreme Court’s discussion of the subject which is very pointed.

    In considering Unfair Sales Practice Acts from a procedural viewpoint, commentators have observed the wisdom of the legislatures in providing the remedy by injunction and the increasing tendency of the courts to enjoin that the suit of competitors, repeated violations affecting the unfair conduct of business.

    Availability of the injunction remedy and that of interlocutory decrees based on actions, therefore, precludes the practice endorsed in by many fair-minded competitors immediately to meet competition by resorting to the same practice itself.

    Since actions for injunctions maybe filed by a trade association for the benefit of all its members, the practice of resorting to the same practices to meet competition is materially reduced.

    That is the practice of meeting cut by cut in the marketplace is materially reduced.

    Well the natural restraint against suing a competitor is less present in the seeking of immediate relief against threatened heretical price was.

    And then the Court says specifically, “We are of the opinion that this injunction granted by the trial court against Safeway, was proper because under our statute, the appropriate remedy was by an injunction and not by retaliation or retaliatory action such as was practiced by Safeway.”

    In this respect, the judgment of the trial court is affirmed.

    This Court so far as I know in an unbroken line of decisions of which one of the leading is Murdock against Memphis, decided in 1874 and coming on down through Fox Film against Muller, in 1935, has consistently held that where there was in fact, an adequate, independent, non-federal grounds upon which to base the judgment, this Court will not disturb it, because there was a federal question.

    I would suppose that an exception to that would be whether the federal question was a controlling question.

    Or — but the rule is as I have — I think, stated it and I take a certain delight in pointing out that in McCoy against Shaw, State Auditor, in 1928, the attorney who prevailed on this very issue was Mr. V. P. Crowe whose name leads all the rest on the appellant’s brief in this Court here.

    This then brings me, at last, to the question of the Fourteenth Amendment Due Process and Equal Protection.

    It seems to us that if a state or reasons, which seem adequate to its legislature determined that there is a — an economic vise in loss-leader merchandising, it is for that state alone, to decide that question of policy and not for this Court to disturb it.

    Samuel M. Lane:

    The state legislature, of course, in exercising that power must do so in a way which is not arbitrary or — and — and when in the enforcement of the statute, it must also enforce it in a way which is not arbitrary.

    I heard Your Honors speaking this morning about the (Inaudible) case.

    That’s the latter situation, of course.

    Now, you take this particular type of legislation, it’s not new.

    As a matter of fact, South Carolina had this type of statute as long ago as 1902.

    Most of the current statutes, however, were originated during the hard times of the early 1930s and they all follow a pretty consistent pattern, and they’ve been tested repeatedly in the highest courts of their respective states that passed those laws, unlike this one, they all forbid sales below cost.

    Then because it is so difficult, mechanically, I assume or administratively to ascertain what proportion of overhead should rest upon each particular item sold.

    These statutes have a built-in cost formula which is that cost you can now call it statutory cost, is invoice or replacement cost plus transportation, plus cottage, plus taxes, plus an arbitrary 6%, unless the person accused of violating the Act can prove that in fact his cost was less than 6%.

    And in each of these statutes, it is provided that a competitor can meet — a competitor, in good faith, can meet the prices of his competitor, but sometimes that is couched a little differently than others.

    It would seem to me that if the State had wished, it could have enacted such a statute saying that it shall be unlawful to sell below cost where the effect alone is to injure competition.

    But actually, the Supreme Court of Oklahoma felt that it couldn’t sustain such a statute because it has criminal penalties, a misdemeanor to violate the statute.

    And so, the Oklahoma Supreme Court required that for a violation of this statute, the sales should be with the intent and purpose of ensuring competition.

    Other states had held otherwise on that, at least one had and it seems to me too that under Section 2 of the Robinson-Patman Act, there’s no requirement for a wrongful intent.

    Now, my opponent argues vigorously that there’s something wrong about this statute because he says, “This statute permits me to — only to meet the prices of my competitors who are selling at cost.”

    And he says, “Since the statute or a violation requires a wrongful intent, perhaps my competitor would be selling below cost, but with pure motives and therefore, his sale is legal and I can’t meet it.”

    Now, answer number one, if the legislature of Oklahoma wanted so to provide whether we think that it’s a wise thing or not, I say that they could so provide.

    Answer number two —

    Potter Stewart:

    It could provide what, Mr. (Voice Overlap) —

    Samuel M. Lane:

    They could provide that a competitor that is not — that they could provide that you can only meet the lawful prices of your — you can only meet the price of your competitors selling at cost.

    Potter Stewart:

    (Voice Overlap) —

    Samuel M. Lane:

    I mean the situation which — yes, but they don’t say — or what the situation of which Safeway complains is, we are allowed — we are permitted to meet our competitor only so long as he is selling at his cost.

    I say that that would be perfectly constitutional if they so provided it.

    That would be for the State to decide —

    Potter Stewart:

    Let me ask you this, just before you leave that as purely practical question and maybe it’s not very relevant.

    I’m curious, how — how was a — how is a seller to know what the cost of his competitor is?

    Samuel M. Lane:

    It — it is purely a practical question.

    What happens in — in fact is that you get tremendous buying organizations like the big chains and because of their purchasing power.

    You know that they’re buying it — when they sell at cost, that’s probably been arrived, then the other independents who compete with them, form buying associations like IGA.

    And they buy through the association which polices prices, checks them all the time and sends them weekly or one — perhaps more frequently.

    I don’t know a list of what the prices are at cost.

    Samuel M. Lane:

    But when you’ve been in the grocery businesses, these people — or have been all their lives, they know within reasons when an opponent — a competitor is selling below cost in violation to the statute.

    What they do is they call the secretary of the grocers association and say, “Charlie is going below again.”

    And he calls Charlie out and puts him back in line.

    That’s the way it works in practice.

    Potter Stewart:

    Do you think it’s practical, you —

    Samuel M. Lane:

    Oh, yes.

    Potter Stewart:

    You’re telling us, that is a practical matter?

    Samuel M. Lane:

    I was thinking —

    Potter Stewart:

    You just do know what the cost (Voice Overlap) —

    Samuel M. Lane:

    I think so and that seems to me that the best illustration of that is that they refer to some statutes in existence today.

    And of course, the question that Your Honor raises has been raised many times in the state courts on that very subject and where it has been raised.

    It’s been held that it’s within reason and constitutes no such uncertainty as to void the statutes.

    The second answer to this is that the question as to whether Safeway can, in good faith, meet the cost — meet the price of a competitor who is selling below cost in good faith, had never been litigated.

    It wasn’t raised here.

    It wasn’t considered here.

    It doesn’t seem to me that it should be considered in this Court now.

    Surely, when that question arises, it will be up to the State Supreme Court in Oklahoma to come up with the right interpretation of the statute to meet it.

    I say that because Your Honors will search the record in vain to find anything that indicates that any of the prices, which Safeway said it was meeting here, were lawful prices below cost.

    And this Court has repeatedly held that it will not decide constitutional questions on hypothetical issues.

    One of the cases which comes to my mind as I — I speak of this is a case I think it came up from Oklahoma or I’m sorry that I don’t recall it.

    But I think it was Oklahoma, a well-known case, Nobel State Bank against Haskell, you will remember that the State enacted a statute which assessed a 1% levy on the average annual deposits of state chartered banks, the Noble State Bank.

    This was to —

    Felix Frankfurter:

    (Voice Overlap) —

    Samuel M. Lane:

    — this was to — Your —

    Felix Frankfurter:

    (Voice Overlap)

    Samuel M. Lane:

    The (Inaudible) — well, it was a famous case and Judge Holmes wrote the opinion and it — and he said, “As to your argument about what’s going to happen when the State says that each grocer must contribute 1% to ensure the solvency of his fellow grocers, we’ll decide that case when we come to it.”

    And this Court, in Yazoo & Mississippi Railroad against Jackson Vinegar Company, in 226 U.S. had before it, a state statute which visited a penalty of $25 upon any railroad which didn’t settle its damage claims for property shipped within 60 days.

    And in the case in question, the Jackson Vinegar Company recovered, I forgot what it was, $7 or $8 for loses plus $25 penalty.

    The railroad said, “But what’s going to happen when an unjust claim is presented and we have to settle that within 25 — within 60 days?”

    This Court said, “When that situation arises, it will be time enough for us to consider it.”

    Samuel M. Lane:

    But it wasn’t presented in this case.

    And so I say to Your Honors in this case, the plea which is made over and over and over again by the appellant that something is wrong here because the appellant was not committed under this interpretation of the statute to meet the lawful below cost prices of its competitors.

    It is not presented here for two reasons.

    In the first reason, the first reason is that it was never raised.

    The second reason was that the facts show that the prices that it was trying to meet, or said it was trying to meet were unlawful.

    And the third reason is that it was found as a fact that the appellant was not proceeding in good faith.

    Felix Frankfurter:

    Mr. Lane, I’d like to ask you a question but before I do so, it was supposedly drafted in Oklahoma.

    Samuel M. Lane:

    What is it?

    Felix Frankfurter:

    At the form of — of your suggestion earlier that they couldn’t construe it a certain way because the penalties.

    So I get the impression that certain indefiniteness was allowed when there are civil remedies but not when there are criminal remedies?

    Samuel M. Lane:

    I don’t know whether you do, Mr. Justice Frankfurter.

    I do, and I think that in the —

    Felix Frankfurter:

    I don’t mean to say there isn’t a distinction.

    I just don’t know whether —

    Samuel M. Lane:

    Yes.

    Felix Frankfurter:

    — in fact, under this statute —

    Samuel M. Lane:

    Yes.

    Felix Frankfurter:

    — indefiniteness so-called —

    Samuel M. Lane:

    Yes.

    Felix Frankfurter:

    was not found, it would not be found as to injunction or money —

    Samuel M. Lane:

    Yes.

    Felix Frankfurter:

    — damages, but would be, if there were (Inaudible)

    Samuel M. Lane:

    Well, that’s a distinction which it seems to me is a very valid one but —

    Felix Frankfurter:

    But I’m not —

    Samuel M. Lane:

    But I have never seen it rose.

    Felix Frankfurter:

    I hope you set it a little earlier.

    What causes this?

    Samuel M. Lane:

    Well, what I said, I’d — I’ll say better, perhaps.

    Felix Frankfurter:

    If the Court construe that since there was a criminal affect into the —

    Samuel M. Lane:

    Well, let me go back and give it to you straight.

    Felix Frankfurter:

    All right.

    Samuel M. Lane:

    When the statute was first enacted, it said it shall be unlawful to sell below cost with the intent or effect of injuring competition.

    The State Supreme Court said, “Nobody can tell here, whether it’s a violation, where there’s no bad intent, but there is in effect.

    And since this has criminal penalties, there must be a criminal intent.”

    And hence, they voided the statute and it was immediately reenacted and the worded phrase was changed to intent and purpose.

    And under this question of fact here, the intent and purpose was in fact found against Safeway.

    I see my time is up.

    I hope I’ve (Voice Overlap) —

    Earl Warren:

    You — well, you have five minutes more.

    You have five minutes more until the red light comes out, Mr. (Voice Overlap) —

    Samuel M. Lane:

    Well, then I make to say very quickly if I — I may.

    So far as due process is concerned, it seems to me that it was well within the power of the State legislature to enact this type of legislation.

    So far as equal protection is concerned, it seems to me that there is no valid ground to complain the statute defects everybody in this business equally, the things of which Safeway complains this business about meeting the lawful law of price of a competitor.

    Safeway can do the same thing.

    William J. Brennan, Jr.:

    Would you suggest the distinction between this and Morey and Doud?

    Samuel M. Lane:

    Oh, yes, I would.

    Because Morey and Doud had a perfectly legitimate — I think Morey and Doud showed a statute which is very ineptly drawn.

    In the Morey and Doud situation, the State of Illinois said, “You must do this and this and this and this and pay a license fee and submit the annual inspection and put up a bond unless your name is American Express Postal Telegraph or Western Union.”

    On this case, the statute doesn’t refer to anybody at all, not even the grocers, anybody in the retail business in the State of Oklahoma, is equally covered by this law and there are no exceptions to it at all.

    Thank you very much.

    Earl Warren:

    Mr. Clark, you may proceed.

    Ramsey Clark:

    Mr. Chief Justice, may it please the Court.

    I have first several items I would like to make specific response to.

    At the beginning of his argument, counsel for appellee stated that trading stamp had been the bulwark of the small grocer.

    I think this goes to whether this is arbitrary or unreasonable.

    In December 1958, the Department of Agriculture issued an extensive report which said that trading stamps definitely appeared to be hastening to decline of the fall of the small food store.

    The Bureau of Labor Statistics, back earlier, had made an exhaustive survey that shows that 42% of the chains’ enlarged independents offered stamps, 42%, but only 12% of the small independents.

    Of course, there are many more small independents than there are large and the percentage is — is much smaller as to them.

    A specific —

    Felix Frankfurter:

    Is the reason — Mr. Clark, is the reason that according to this figures, trading stamps are not included by the smaller stores, if the reason either that it took costly —

    Ramsey Clark:

    That is —

    Felix Frankfurter:

    — but the size of their business or what?

    Ramsey Clark:

    That is the reason that it took cost, yes.

    Felix Frankfurter:

    That is the effective power of trading stamps, isn’t equal to the investment of the — of the —

    Ramsey Clark:

    They simply cannot afford to pay 2% of their gross, but there’s a (Inaudible) cost.

    Felix Frankfurter:

    Do they have — do they have their own trading stamp devices?

    Ramsey Clark:

    How should they —

    Felix Frankfurter:

    Mr. Lane spoke of what they (Voice Overlap) —

    Ramsey Clark:

    They have — they — everybody have promotions.

    They’ll give you a kewpie doll or they’ll give a — have a raffle and send somebody (Voice Overlap) —

    Felix Frankfurter:

    But Mr. Lane said that in the district in which the trading stamp is formally outlawed or statutorily outlawed, from what Mr. Lane had said, he indicated that in fact some kind of certification goes on, on which you eventually can cash in, is that right?

    Ramsey Clark:

    I’m sure that there are instances aren’t there.

    I do not believe it is the rule.

    I think it is the exception.

    Now, in response again to the Chief Justice’s question as to whether you can return money as a discount, we will say that we are under an injunction that states, the type of discount that we can give, it must be exclusive, at least if it is not exclusive, why, there is only one place that we can find that out and that’s the courts of Oklahoma.

    And also if it is not exclusive, then it has no real efficacy or meaning.

    It’s just in the injunction that it is dicta that says, “By the way, you can give — you can give discounts for cash in the form of trading stamps, cash register receipts and other evidences of credit.”

    Felix Frankfurter:

    Where are the terms of the injunction?

    Ramsey Clark:

    The injunction commences on page — the injunctive features commence on page 450.

    Felix Frankfurter:

    I mean the one that — that requires interpretation whether a cash return would be within or without the terms of the prohibition.

    Hugo L. Black:

    452, isn’t it?

    Ramsey Clark:

    That’s — yes, sir.

    That’s — that’s where it will be.

    It’s the second paragraph on 452.

    Felix Frankfurter:

    Any trading stamps, cash register receipts or other evidences of credit.

    Ramsey Clark:

    Yes, sir.

    Felix Frankfurter:

    And you say that would cover cash?

    Ramsey Clark:

    I say it will not cover cash.

    I —

    Felix Frankfurter:

    (Voice Overlap) —

    Ramsey Clark:

    I say that’s exclusive and we cannot give cash.

    Now —

    Mr. Clark, before you sit down, will you comment on Mr. Lane’s suggestion, this judgment that he supported on a nonfederal ground?

    Ramsey Clark:

    Yes, sir.

    I certainly would, if I may get to that later.

    Earl Warren:

    Well, before you get to that, is there any statutory law on the question of cash discounts?

    Ramsey Clark:

    This — the statute, this statute — the Unfair Sales Act permits cash discounts between a wholesaler and a retailer and between a manufacturer and a wholesaler or retailer, but it makes no reference at all.

    That’s one of the main points in dissent.

    It makes no reference at all to a cash discount at the retailer.What is — from the retailer to the ultimate consumer.

    Charles E. Whittaker:

    Mr. Clark, for my end edification, is the requirement in paragraph 2 of record 452 wrote it to the discounts you’ve spoken about made necessary by the second section of the Oklahoma Statute 598.2, defining statutory cost saying that when used in this act, the term “cost to the retailer” shall mean the invoice cost of the merchandise to the retailer or to the replacement cost to the merchandise whichever is the lower, less all trade discounts except customary discounts for cash.

    Ramsey Clark:

    Yes, sir.

    That may claim that that is cost to the retailer.

    That’s the retailer’s cost —

    Charles E. Whittaker:

    Yes.

    Ramsey Clark:

    — and not his price.

    Now, the discounts that we’re talking about are discounts that the retailer gives.

    Charles E. Whittaker:

    Yes.

    Ramsey Clark:

    Not that the retailer receives.

    These had reference to discounts that the retailer receives from his wholesaler or the manufacture from whom he orders direct would prompt payment of cash.

    Charles E. Whittaker:

    In determining whether his cost —

    Ramsey Clark:

    In determining his cost in that.

    Now, in reference to a question that Mr. Justice Frankfurter had as to the bad faith finding and the predicate on which it rests.

    It rests simply and strictly upon two things.

    It rests upon the conclusion of Judge Spellman, the trial court that Safeway knew when it met these prices that they were below cost, because as a large chain, it knew that it could buy at a lower price or as lower price as anyone else.

    That does not mean that they knew they were meeting an unlawful price to determine which they would have to know the intent of the person who set the price they were meeting and the ultimate effect in the market of the price that they met.

    The other basis, the other predicate for that finding is the alternative pleadings of Safeway.

    In the alternative, if we cannot meet these prices, then they are illegal and should be enjoined.

    And the Supreme Court clearly shows that in its opinion because it said, “For the sole purpose of meeting the prices of its competitors, Safeway reduced prices to levels which it thought — going back to Judge Spellman, were below cost.”

    Now, as to the question is this arbitrary, the question that Mr. Justice Black asked and the ultimate question on this issue, is it arbitrary, why should the housewives of Oklahoma and buying baby food be required to pay for trading stamps?

    Why should the merchant who wants to sell groceries, who is in the grocery business, be required to use this costly device, if he does not wished to?

    Ramsey Clark:

    Why cannot he meet it in the competitive marketplace?

    This is the very thing, the very thing that Justice Stone was talking about in his descent in Tyson & Brother v. Banton.

    He said, “All justifications — all justifications for price regulation are found to lie in the fact that the condition priors the price regulation damaged the competitive nature of the market.

    We have here something that forecloses the competitive nature of the market and relegates competition in the market to trading stamps.

    And we’re talking about the retail grocery business.

    Hugo L. Black:

    Mr. Clark, I — it wouldn’t bother you.

    I’d like to return a moment to the injunction —

    Ramsey Clark:

    Yes, sir.

    Hugo L. Black:

    — on page 452.

    Why under that injunction would it — but why would it violate that injunction, or would it, if Safeway whether provides cash register receipts to be given, every purchaser who came into the stores, so long as it did not exceed 3% of the selling price?

    Ramsey Clark:

    It would not, sir.

    It would not.

    They can do that.

    They don’t want to do that —

    Hugo L. Black:

    Why?

    Ramsey Clark:

    — for two reasons.

    First of all, it is time consuming and costly.

    Second of all, you’re talking about hard money when you talk about giving back two cents on the dollar, because the trading stamp companies buy at wholesale prices.

    They price at retail prices and there’s a tremendous difference in there.

    Hugo L. Black:

    But you could as to — am I right and in thinking that you could without —

    Ramsey Clark:

    Yes.

    Hugo L. Black:

    — without violating the injunction provide that every customer who came in would be given 2% after his — after you rang up his account on the cash register?

    Ramsey Clark:

    He could be given cash register receipts that would be —

    Hugo L. Black:

    Where’d you gave him money?

    Ramsey Clark:

    — redeemable, no.

    That would be redeemable in the merchandise of the store, yes, sir.

    Hugo L. Black:

    Merchant to what?

    Why is it limited to merchandise of the store?

    Ramsey Clark:

    Because we have —

    Hugo L. Black:

    Why not cash?

    Ramsey Clark:

    — we are limited to trading stamps, cash register receipts and other evidences of credit, not to credit, not to cash.

    We can’t give cash.

    As we construe this injunction, and certainly, that was the level of the argument throughout the trial court.

    Hugo L. Black:

    Suppose you — suppose you could, what would be your position?

    Ramsey Clark:

    Our position would still be that there is no difference between giving a net price and having to go through this manipulation because somebody else wants to give trading stamps and we want a meeting.

    This manipulation of calculating cash register receipts to added burden to the store, to check out time delays, the delay at the stand.

    We had — we might have —

    Hugo L. Black:

    We would object to doing it, but would that put you on an equal basis with the others?

    Ramsey Clark:

    We didn’t do it when we found ourselves under this injunction because we knew that we could give trading stamps under the injunction that they would cost us less and be more effective competitively.

    People like trading stamps better than they like cash register receipts.

    That’s how I experience in the marketplace.

    So, it’s a practical aspect, if it’s a nullity meaning the —

    Felix Frankfurter:

    Mr. — Mr. Clark, suppose Oklahoma has this kind of a statute, it prohibited outright all sales below cost, except — all sales below cost in the grocery business and allowed no kind of — to carry over the terms in the labor field fringe benefits, except trading stamps.

    There’s the flat rule, no sale below cost and no additional advantage from the price except trading stamps flat, making an exemption against the local corner grocery who’s not part of a chain or hasn’t more than two stores.

    What would you say to such a statute?

    Ramsey Clark:

    I would say it would probably be arbitrary and unreasonable.

    I don’t see that it would accomplish any legitimate legislative purpose.

    Felix Frankfurter:

    Well, suppose — would — as a legislative which — could certainly pass legislation against credit purchases, couldn’t it?

    Ramsey Clark:

    Yes, sir.

    I think they could.

    Felix Frankfurter:

    And therefore, it provides it should be only a cash sale.

    It provides that you shouldn’t undercut because while there might be leaders or et cetera on the whole that brings in or permits (Inaudible) in all sorts of abuses, they — you’re going to have a — a flat rule.

    No sale below cost, but you can get some advantages by the trading stamp.

    Ramsey Clark:

    It would make no rhyme, no reasons in our experience —

    Felix Frankfurter:

    Lots of legislation makes no rhyme and reason (Voice Overlap) —

    Ramsey Clark:

    Well, it’s arbitrary.

    It’s supposed to make reason.

    If it’s unreasonable, it’s unconstitutional.

    Felix Frankfurter:

    But it’s legislative reason.

    Ramsey Clark:

    It’s this matter of degree, if it is unreasonable and the contention of the Constitution, the Fourteenth Amendment, it must be stricken down.

    Ramsey Clark:

    Certainly, there is no such stringent price fixing by any state anywhere and has not been to my knowledge.

    Felix Frankfurter:

    But that’s what this amounts in a way, doesn’t it?

    Ramsey Clark:

    No, because it permits —

    Felix Frankfurter:

    (Voice Overlap) in your view, this trading stamp, couldn’t it?

    Ramsey Clark:

    Yes, it certainly did.

    It drove us to trading stamps at the same time, everyday in Oklahoma, there are merchants selling below cost.

    We cannot meet them.

    We cannot enjoin them.

    That’s going on right now.

    Felix Frankfurter:

    Why —

    Ramsey Clark:

    They’re not in our price.

    Felix Frankfurter:

    — but why, because the law enforcing officers aren’t on the job of —

    Ramsey Clark:

    No, because they open up a new store and there are cases on this and they say, “This is a new store promotion.

    We’re trying to get in business.

    It’s our only purpose.

    We have no purpose of harming anybody.

    This will not have any effect.

    They can hold out those prices down for three months and draw off the trademark store, we can’t meet them.

    Felix Frankfurter:

    I’ll ask you what I asked Mr. Lane, most of these tactics were made for — for business reasons and not for malicious reasons, aren’t they?

    This is the way of making money.

    Ramsey Clark:

    I think that’s absolutely right.

    It’s — its competition.

    I would like first to own that —

    Earl Warren:

    Mr. Clark — Mr. Clark, what is the cash register receipt?

    What is the definition of it?

    Ramsey Clark:

    The cash register receipt in the trade would be the receipt that you get for the payment of groceries.

    It would show the amount of cash that you paid and the items would be rang up individually on there.

    Earl Warren:

    How — how could that — how could be used as in lieu of trading stamps?

    Ramsey Clark:

    You would get amount of bundle and when you get so many, not to have a value in excess of 3% of the total amount of those cash register receipts —

    Earl Warren:

    Yes.

    Ramsey Clark:

    — you can redeem them in the store for tomato juice or whatever you want.

    Earl Warren:

    Well now, who says that they can only be reduced?

    It be used to buy tomatoes instead of giving them cash?

    Where do you get — where do you get (Voice Overlap) —

    Ramsey Clark:

    We get that from the construction of the statute and the opinion of the Supreme Court which says that you cannot give, except evidences of credit, cash register receipts (Voice Overlap) —

    Earl Warren:

    Well, I know, but evidences of credit are also used in the — in this injunction.

    But it says, cash register receipts, now, what is in the law or if it’s in the decision, what decision says that cash register receipts cannot be redeemed in cash?

    Ramsey Clark:

    We certainly think that it would be a violation of the intention of the injunction.

    We feel that is a matter that was threshed out throughout the courts of Oklahoma and we feel, we know clearly what would happen if we did that.

    We would be cited for contempt.

    If, when this injunction was written by attorneys on the other side, they had thought that we could do that.

    That would’ve been put in the injunction.

    Its absence makes the provisions of the injunction to us exclusive, at least short of the jeopardy of contempt.

    I notice, I just one or two more minutes and i have —

    Earl Warren:

    Yes.

    Ramsey Clark:

    — two very important things.

    First, Mr. Justice Harlan, to your question, we feel that there is no adequate state basis.

    We say that the — our constitutional rights have been denied.

    We say that an injunction would not lie and we filed an injunction suit, initially just like an injunction did not lie in this case on our cross-action.

    We say that the remedy in — in the — when they speak of remedy, they mean what you fellas could have done.

    That’s what they mean.

    They don’t mean you have to come into this Court and file this injunction suit because there had been no injunction suit filed throughout the history of the Act to 1954.

    And even — even if that is what they did mean, why, clearly we would not have gotten the injunction.

    There can be no question about that because we were denied the injunction here on our cross-action.

    Now —

    Earl Warren:

    Well, was that — was that because you didn’t state the cause of action or was it because of the finding against you that you had not proceeded in good faith?

    Ramsey Clark:

    It was because they said trading stamps that are — our counterclaim went only to the trading stamps.

    It was because they said trading stamps do not — do not constitute a price reduction.

    They are merely a cash discount.

    By the way, a number of course, including the Court of Appeals in the State of New York and the Supreme Court of Massachusetts have said that a — the word, “cash discount” is merely a euphemism for price cut.

    Ramsey Clark:

    Now, we have one very important matter.

    That’s the matter of preemption.

    I just have a moment.

    Preemption was not mentioned specifically in the trial court.

    The cases under preemption were outriders throughout this case.

    We feel first that the question is one of jurisdiction of the trial court.

    Second, that there is continuing jurisdiction in the trial court.

    This — this injunction still plays in Oklahoma.

    We feel third, that in the field of preemption, the best interest under the federal system, under this Constitution is that preemption be treated whenever raised and there is no law to the contrary that we have seen.

    The reason for this is to avoid, at the earliest possible time, collisions between federal and state legislation.

    Finally, there is without question, an intervening act of Congress that gives jurisdiction over this subject matter to the Federal Trade Commission.

    On September 2nd, 1958, by amendment to the Packers and Stockyards Act, jurisdiction which in 1921 by Section 227, had been specifically removed over packers from the Federal Trade Commission was placed in the Secretary of Agriculture.

    In 1957 and prior to that, it was held that 15 of the largest retail grocers in the country were packers.

    That they were not subject to the jurisdiction of the Federal Trade Commission, that is in re Food Fair in which Federal Trade Commission refused and dismissed — refused to find all the complaint and dismissed from all the jurisdiction they complaint against Food Fair, the 238 store chain here on the East Coast for violation of the Clayton Act and the Robinson-Patman Act because 5% of their business was in meat.

    It has been described throughout the legislative history as a quirk.

    But the 15 largest retail grocers in the country have unquestionably — but according to Mr. Gwynne, the Chairman of the Federal Trade Commission — according to the general counsel for the Federal Trade Commission, the 15 largest retail chains in the country have been packers until September 2nd, 1958 under the Packers and Stockyards Act not subject to the jurisdiction of the Federal Trade Commission.

    With — with the Court’s permission, we would like to file a three-page memorandum of the legislative history of this amendment to the Packers and Stockyards Act because it has not been fully covered in our brief.

    This would not be more three pages.

    We could get it into mark.

    Earl Warren:

    And you may do so and you may reply if —

    Ramsey Clark:

    Thank —

    Earl Warren:

    — you wish — if you wish, Mr. Clark.

    Ramsey Clark:

    Thank you very much.