SAFEWAY STORES v. OKLAHOMA GROCERS

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Argument of Ramsey Clark

Chief Justice Earl Warren: Number 252, Safeway Stores Incorporated, Appellant versus Oklahoma Retail Grocers Association.

Mr. Clark, you may proceed.

Mr. Ramsey Clark: Mr. Chief Justice, may it please the Court.

This case is an appeal from the Supreme Court of the State of Oklahoma a probable jurisdiction was noted last October.

It involves the Unfair Sales Act of the State of Oklahoma.

It's the first such Act that has come before this Court for review.

It is also the only Unfair Sales Act among the 31 in existence in the United States and the various States today that treats the right to meet competition as it is here treated.

This statute was originally the Act in 1941.

It was declared unconstitutional by the Supreme Court of Oklahoma in 1949 and before the opinion of the Supreme Court of Oklahoma had become final in less than 35 days, the new Act had gone to the legislature and had been passed removing the particular objections of the Supreme Court of the State of Oklahoma have had.

In that course to the legislature in a period of 35 days, there was added a new type of meeting competition defense.

Under the statute, a -- an offense involves three elements, a sale below cost, the intent on the part of the seller by that sale to damage competition and the effect on competition by that sale of damaging competition and the market and competitors in the market.

The “meeting competition” defense in this statute says that you shall have the right to meet a competitor selling at his cost or above.

It does not say that you can meet the lawful price of a competitor.

It does not say that you can meet legal competition.

Every other Unfair Sales Act permits specifically the meeting of lawful competition, legal prices or the unqualified meeting of competition.

This statute alone prohibits the meeting of competition that is selling below its cost.

About a year after the re-enactment of the Unfair Sales Act, another condition in the market came into being which created the circumstances of this case, trading stamps, which will be described more fully here and after, arrived on the scene in Oklahoma.

In 1952, Sperry & Hutchinson, the large -- the largest trading stamp company in the world had only two accounts in the State of Oklahoma.

By 1954, the time at which this case was filed, over 100 different merchants, some with numbers of stores were giving -- were getting trading stamps in connection with sales of groceries in the State of Oklahoma.

Thus the statute created two problems, for the merchants in Oklahoma.This case was admittedly a test case to answer these two questions.

The questions were generally, when under this statute can the right to meet competition prevail and what can a merchant do to meet the competition of trading stamps given by a competitor in connection with his sales at cost.

Now, very briefly, what happened is this.

In the summer of 1954, the retail grocery competition in the State quickened.

Prior to that time the -- the no injunction suit -- only one injunction suit, excuse me only one injunction suit has ever been brought under this Act.

It's been on the books for three years.

In 1954, competition quickened in the cities of Shawnee, Enid, Norman and Tulsa, competitors of this appellant commenced selling below their cost, their statutory cost.

Now, statutory cost is not the cost in the usual connotation.

It is invoice cost plus incidentals to placing the goods in the store such as taxes, transportation and carriage plus a proportionate part of the doing -- of the cost of doing business, which is set by the statute at 6% for the cost of doing business, in the absence of proof of a different policy of doing business.

So, under any circumstances cost under the statute is 6% above the cost to the grocer of putting the merchandise on his shelf for sale.

In Oklahoma City, a brisk trading stamp war erupted and there were numerous instances by trading stamp merchants at which they gave trading stamps in connection with sales made at their statutory cost.

In this connection, the record shows no variation from this rule, the traffic items and the grocery stores which are those that handful of items perhaps 50 out of 7500 up to 10,000 different items sold by the store, the traffic items, the staples, the items the housewife buy each week.

The items that the housewife has, the most consciousness at the prices on, were being sold by the merchants in the State of Oklahoma at identical prices.

The trading stamp merchants envision thereto, were giving trading stamps in connection with these sales.

Appellant, Safeway Stores, reduced its prices to meet this competition.

It was enjoined by the Oklahoma Retail Grocers Association.

It was sued for an injunction and subsequently enjoined from selling below cost in violation of the Act.

Appellant filed a cross action.

Originally the cross action involve all of the retail grocers in the Association.

By stipulation it was later agreed that only Louie Speed would be involved, Louie Speed being a stamp-giving merchant.

Louie Speed in two of his stores sold strictly for cash no credit sales.

It was stipulated and the record shows without equivocation that every price violation charged to Safeway was sent to meet competition and was equal to prices set by that competition.

As to the trading stamps, the appellant calculated their value by an exhaustive survey and reduced its prices to meet the price at which each competitor sold that commodity less the value of the trading stamps.

Justice Potter Stewart: Now, Mr. Clark how many Safeway Stores are there?

Mr. Ramsey Clark: I believe there are 28.

Yes, sir.

Justice Potter Stewart: And when you said the prices were reduced in other case owing to the (Inaudible) competition, however, let's say a competitor in Oklahoma City by giving trading stamps (Inaudible)

Mr. Ramsey Clark: No, sir.

Justice Potter Stewart: (Inaudible)

Mr. Ramsey Clark: Only -- only in the market.

Justice Potter Stewart: (Inaudible)

Mr. Ramsey Clark: Yes, sir.

In what -- in what was considered to be the trade area of that competitive store.

In other words, there's nothing in the evidence that indicates that they would use a price of a competitor to reduce prices statewide.

Unknown Speaker: (Inaudible)

Mr. Ramsey Clark: Yes, sir.

They did this before they reduced any prices.

First, they notified the secretary and manager of the Oklahoma Retail Grocers Association that this particular store out here was selling at what appeared to be below cost and that if it did not raise its prices to cost, it would be necessary for Safeway to meet that price.In a number that you see there's the manager, the secretary and the manager of this association testified that competitor raised its prices back to the statutory price, cost of price.

Justice John M. Harlan: Did they bring a suit provided to a stock the use of trading stamps by the other grocery store?

Unknown Speaker: Yes, sir.

Safeway filed a cross-action which said that the giving of trading stamps in connection with sale its cost has the effect of reducing that price below cost in violation of the Unfair Sales Act.

Now, in addition to attempting to get the people through their Association to sell at cost, a security advice of their attorneys and the record is clear on this as to their right under this law to meet the competition.

Justice Felix Frankfurter: I think if the local law has decided that trading stamps, giving trading stamps did not involve a reduction of the cost within the meaning of the statute.

Mr. Ramsey Clark: Yes, sir.

The Supreme Court of Oklahoma has held that trading stamps constitute merely and solely a discount for cash and did not have the effect to reducing price.

Despite the fact that these merchants were not selling for credit, they were selling only for cash.

Justice Felix Frankfurter: If -- if that through discounts you would be part of the list it has through discounts?

Mr. Ramsey Clark: The evidence at the trial level was uniform that there's no such thing as a cash discount in a retail sale between the whole seller and the retail, between the manufacture and the whole seller, yes.

But the retail grocery industry knows no cash discount.

Now, there are certain exemptions to that in the record, apparently.

However, the record is clear and it is stipulated that most stamp merchants sold strictly for cash, in which --

Justice Felix Frankfurter: Do they -- do they sell (Inaudible)

Mr. Ramsey Clark: It's entirely fictitious.

If you don't sell for credit how can you give a -- an incentive to buy for cash?

In addition to this, they made surveys which show that trading stamps were creating a drastic diversion of their trade.

The surveys appear in the appendixes to the record here.

They reduced prices on over 200 non-traffic items.

They did not reduce these prices below cost and they advertised extensively saying we have reduced prices on 200 items and they listed the prices and they found that these did not offset the value of the trading stamps.

These prices were not below cost.

There's no question of the violation of the Act in reducing these prices.

They made purchases at prices and the stores of their competitors that they met and they had their people go into the store and make the purchase to ascertain for sure that this is the price at which the commodity was being sold.

In the case of the -- of the trading stamp, they took the cash register receipt, the commodity and the trading stamps and calculated the price.

It was from the beginning clearly designed to be a test case to test these, the rights to meet competition if they arise or to the extent that they arise under the statute.

Now, everyone at the trial level, ever quits in the grocery industry to testify agreed that a retail grocer cannot stay in business unless he can meet the price of his competitors on traffic items and, too, the people who testified to that were none other than the President of the Oklahoma Retail Grocers Association, who specifically said you go out of business if you don't meet the price of the competitor on these traffic items and the treasurer of that association who said the same thing.

Now, the trial court after about a three-day hearing enjoined appellant from selling below its cost to meet the price of a merchant selling below his cost and from reducing its price below cost to meet the value of trading stamps refused to enjoin the appellee who was giving the trading stamps from the continuance of that practice.

The Supreme Court affirmed this ruling by the trial court.

It said that Safeway could not justify its below cost price on competitors below cost price.

With that regard to whether competitor's below cost price was lawful or unlawful.

If that competitor's price was below cost, below cost of the competitor, it could not be met.

This immediately created the vacuum that competitor could be selling below his cost for a lawful purpose, traffic items, a few meeting or if Safeway met him now under this injunction.

They could be enjoined by the very -- very person whose prices they remit.

Justice William O. Douglas: That's because he didn't -- the competitors didn't have the unlawful intent is that it?

Mr. Ramsey Clark: Yes, sir.

I'll go into that more fully later on but that -- that is the basis to that, yes sir.

The Supreme Court as I just mentioned further said that trading stamps do constitute a price cut -- did not have the -- the effect of lowering price but were merely a discount for cash.

It said and it is clear in the record that the sole purpose of Safeway in reducing its prices was to meet the prices of its competitors, the sole purpose that's the exact language of the court below.

Justice Felix Frankfurter: Did you -- did I not hear you say a little earlier that Safeway before reducing in response to the benefit, if I may call it that, the trading stamps figured out exactly what's the monetary end it was, is that right?

Mr. Ramsey Clark: Well, that is right with the exception to the use of word exactly --

Justice Felix Frankfurter: Well --

Mr. Ramsey Clark: It's not quite --

Justice Felix Frankfurter: That we have fairly --

Mr. Ramsey Clark: Yes to the best of their ability, yes.

Justice Felix Frankfurter: I can't say good.

Mr. Ramsey Clark: Yes.

And there've been no challenge to that.

Justice Felix Frankfurter: That option was better than the one way of talking, but my question was whether the money value of the trading stamp is reasonably as ascertainable whether the -- what it means in cents, or the accumulated cents amounting to dollars to the housewives to get (Inaudible)

Mr. Ramsey Clark: Yes, sir.

Justice Felix Frankfurter: That's acceptable has gone for that need --

Mr. Ramsey Clark: Yes, sir.

Justice Felix Frankfurter: -- on the basis of who -- that has weight?

Mr. Ramsey Clark: It was made at the beginning of the trial, the basis of proof and a stipulation at the, before the close in the trial.

It was stipulated that trading stamps, single trading stamps at a value of not less than 2.5% not less than that on --

Justice Felix Frankfurter: But the housewife trying to do was the two 2.5 cents.

Mr. Ramsey Clark: Yes, sir.

And on double stamp they --

Justice Felix Frankfurter: Is this all of the purchase it would be worth 5 cents to the housewife is she gives the payment then.

Mr. Ramsey Clark: That's right, sir.

Justice Felix Frankfurter: That -- that -- is that common ground between you and the appellees?

Mr. Ramsey Clark: Yes, sir.

That is a matter of stipulation in the record.

Chief Justice Earl Warren: Where is it?

Mr. Ramsey Clark: That's on page 200, Your Honor.

It's also Exhibit G.

I missed the (Inaudible) as they sent in Oklahoma with reading this stipulation in the record at the bottom of page 199 and also at the -- at the top of page 200.

It said Speed, that's one of the appellees, they gave double stamps with the sale of such items and on every other day of the week gave single trading stamps with the minimum priced items.

If the stamps valued at not less than 2.5%, now that's the single stamps, had the effect of reducing the sale price at which the items were sold, then the result of sales prices were less than the minimum allowed by the Oklahoma Unfair Sales Act.

Justice Felix Frankfurter: Was there any evidence as to the volume of the retention of these trading stamps?

Mr. Ramsey Clark: Well, yes, that's a matter of tremendous controversy.

The Department of Agriculture, the Department of -- of Labor and Commerce have all tried to ascertain that.

I believe that Sperry & Hutchinson sales 96% are redeemed and about the lowest figure I've seen is about 80%.

But as we were trying to show them, we think the economic conditions in this country show trading and as was stated by counsel for S&H stamps at trial level.

Trading stamps are worth far more as a competitive device than their actual monetary value.

Justice Felix Frankfurter: You're having to -- have considered how many States have forbidden trading stamps?

Mr. Ramsey Clark: Yes, sir.

I -- we have considered that a number of the District of Colombia, of course, forbids trading stamps in the old case and an old case, 1930 and this Court said that they are a lure to the impoverished.

Justice Felix Frankfurter: The (Inaudible) case that dedication not only one -- came up with several States as I remember, that outlawed the giving of trading stamps.

I'm just curious to know how wide-spread the restriction of the -- of traffic -- all --

Mr. Ramsey Clark: We should --

Justice Felix Frankfurter: -- this happened -- mostly it happened?

Mr. Ramsey Clark: No, sir.

No, sir.

They do not.

Justice Felix Frankfurter: I know.

Mr. Ramsey Clark: They have -- I know this, that in 1957, 40 States had legislative sessions and 37 States had bills either outlawing or taxing trading stamps.

Now, under the Fair Trade Laws I think 22 states have put in what they call anti-concession clauses which specifically prohibit you from giving trading stamps in connection with their fair traded items.

Justice John M. Harlan: Are there any circumstances under which a holder of trading stamps can redeem them for cash?

Mr. Ramsey Clark: The ordinary trading stamp is not redeemable for cash.

There is nothing in this injunction here which prohibit and in fact the injunction permits Safeway to give trading stamps, cash register receipts, or other evidences of credit to meet as a cash discount, is what they say, not to meet competition it's a cash discount.

Now, cash register receipts are ordinarily redeemed in either cash or the commodities that the purchaser is giving them -- of the self giving them, I'm sorry.

Justice Hugo L. Black: Does the record show whether Safeway may or could use that --

Mr. Ramsey Clark: The record shows that Safeway can use stamps if Safeway does not desire to use stamps, if Safeway by virtue of the injunction below has been forced to use stamps since the effective date of the injunction to meet competition.

Justice Hugo L. Black: Suppose the State had set the law which required all of the scope of the use of trading stamp, would you say that was unconstitutional?

Mr. Ramsey Clark: We think that if a State, after serious legislative study, undertook to so regulate the business and -- and unless they could show some policy which we have not been able to conceive, we don't think that it could require a merchant to give, in addition to that which he wishes to sell something else.

Now, ordinarily these trading stamps are this way, 70% of the trading stamp industry is in the hands of 10 companies.

They are tremendous companies.

They sell their stamps by books which under contract, to various merchants over the country.

This contract requires the merchant to give trading stamps to the costumers as they make purchases.

As an illustration which is shown clearly in this record, Sperry & Hutchinson required you to give a trading stamp for this ten cents of purchase.

The trading stamp is worth two mills or rather the trading stamp costs the grocer two mills.

The record clearly shows that a merchant giving trading stamps, Sperry & Hutchinson trading stamps which predominate in this record, pays 2% of his gross sales to the trading stamp company.

The record always or also shows and it's an incredible fact that that is twice the net profit of the industry leaders.

That is twice the net profit of the industry leaders.

There's only one way that you can give trading stamps and make money on them and that is to increase your volume tremendously, ordinarily about 33%, I think Sperry & Hutchinson figure is that if you don't increase your volume 20% with the use of trading stamps, then you're going to lose money on because they‘re costing you 2% of your gross sales and in this -- in this grocery industry, you don't make much on your gross sales.

I think there's some Department of Commerce statistics in the record that say that these large independent supermarkets make about 2.5% on the gross sales, but A&P, Kroger, Safeway, the -- the national, the big chains they equate in 26 States, I believe, they make less than 1% ordinarily.

Now, four Justices on the Oklahoma Supreme Court dissented.

I said they dissented on the trading stamp issue.

I said that there's -- there's no -- there's no -- there's nothing in the statute that says you can give a cash discount.

They weren't giving a cash discount.

And the trading stamps have -- have other purposes anyway and that they in any effect reduced the price below statutory cost.

Now, as construed and applied, this Act prohibits absolutely the meeting of below cost prices whether they're lawful or unlawful.

And the question is, this first question is, whether this so -- so arbitrary and unreasonable as to violate due process.

Justice Hugo L. Black: Aren't you -- it didn't you quite say that it does have absolute --

Mr. Ramsey Clark: That it does --

Justice Hugo L. Black: (Voice Overlap)

Mr. Ramsey Clark: -- what, Mr. Justice --

Justice Hugo L. Black: (Voice Overlap) very indefinitely trade stamps to finally get back to lots of other -- the State can require the use of trading stamps.

Mr. Ramsey Clark: Well, where is that --

Justice Hugo L. Black: It's not the same as it is though they had set at some stores must sell it at a lower price than others.

Mr. Ramsey Clark: No.

Justice Hugo L. Black: Or can sell at a lower price than the others.

Mr. Ramsey Clark: Well.

Justice Hugo L. Black: It gets back to the question of whether they can require to use trading stamps that --

Mr. Ramsey Clark: Now the -- the dilemma that Safeway faces here is not caused by the statute.

It is caused by the Supreme Court's decision which does not go to the intention of the legislature but says merely that trading stamps as a matter of law are cash discounts and do not reduce prices.

This is not a thing that was ever before the legislature or ever considered by the legislature.

They had no -- there's nothing about trading stamps for legislature.

Justice Felix Frankfurter: But you're driven -- you are driven from your point of view that had the allowability (Inaudible) how that Oklahoma say that trading stamps are not the kind of reduction of cost has enabled the competitor to meet that reduction because now that the Oklahoma Supreme Court has given that meaning for that statute it doesn't show that in the -- by the legislation and you must take it at that, is that right?

Mr. Ramsey Clark: Well, it is to a limited degree.

Certainly, you don't become involved in the considerations for Nebbia v. New York in a situation like that -- like this where Justice Roberts talked a great length about the legislative history, about the purpose, the emergency, the temporary nature of the -- of the thing.

Justice Felix Frankfurter: I'm not -- I didn't suggest that therefore it is valid.

I'm merely suggesting therefore, whether the Supreme Court of Oklahoma to make the complete even arbitrary construction of the statute is not for us to say.

There it is and for (Inaudible) it is as though it had been spelled out by the legislature, the way the Supreme Court has now spelled it out then if you take the problem that you put to us mainly is a statute.

Would that (Inaudible) of the allowable freedom of merchants to deal with one another through competition?

Mr. Ramsey Clark: With -- with the qualification and as I tried to make that is -- could in fact in our brief we said that this is exactly as though the state legislature have said that you can give a discount for cash by way of trading stamps, cash register receipts or other evidences of credit provided that you cannot give one in any other way.

On the other hand, the reason -- the reason for upholding a legislative act, the reason for giving validity to the wisdom of the legislature is because it has not acted arbitrarily but it has exercised its discretion and here you have no exercise of discretion.

The Supreme Court of Oklahoma doesn't contend that there has been an exercise of discretion, an attempt to meet a problem by the legislature of the State of Oklahoma.

This is merely a case of an interpretation of the State and the Supreme Court of Oklahoma without any legislative investigation or --

Justice Felix Frankfurter: That should get you to believe --

Mr. Ramsey Clark: -- study.

Justice Felix Frankfurter: -- that is if reading of the Oklahoma statute has --

Mr. Ramsey Clark: That is --

Justice Felix Frankfurter: -- has any (Voice Overlap)

Mr. Ramsey Clark: -- an effect of the three.

Justice Felix Frankfurter: I dare say before that Court if you argue (Inaudible) isn't that right?

Mr. Ramsey Clark: Well, certainly it is.

Justice Felix Frankfurter: Yes.

Mr. Ramsey Clark: That's exactly right.

Justice Felix Frankfurter: We think that the -- we have no choice.

That's supposed the way the Court -- the statement has no choice, did you have a choice?

Mr. Ramsey Clark: They didn't --

Justice Felix Frankfurter: That's what it means.

Mr. Ramsey Clark: They didn't say that we must read it that way.

They said that this is as a matter of law, a cash discount.

Chief Justice Earl Warren: Mr. Clark is there anything in your -- in the injunction against Safeway that would prevent them from giving a cash discount up to the value of trading stamps if they desire to do it?

Mr. Ramsey Clark: That is -- I'm certainly glad that you raised that question, Mr. Chief Justice Warren.

We have been operating under the presumption that there is not.

In its brief, for the first time to my knowledge, after at least I have said that there's nothing in there to prevent you from giving a cash discount in cash.

Now, if they are right, they have two peculiarities about the situation.

First of all, the injunction didn't say so.

The injunction said only this, in -- not in mandatory language but in specific language it said, “You can give a cash discount in these ways.

You can give them by trading stamps, that was the first listed by cash register receipts or by other evidences of credit.

No other way.

No other way it was mentioned and what we were prohibited from doing in the first place was netting our price.

In other words, instead of taking a dollar on a purchase of 10-pound purchase of sugar, we netted the price to 97 cents or 98 cents.

We set the price at the competitor price less the value of trading stamps.

Now the question is, could we have said it -- your question is, under the injunction can we sell it for a dollar and then give two cents back?

Chief Justice Earl Warren: Yes.

That's my point.

Mr. Ramsey Clark: We would certainly fear contempt of court if we did that because we were enjoined from netting in the first place.

We see no difference at all between the two.

And in the second place, we were told that we can give cash discounts in these ways and those ways it did not include money.

There -- there is further a -- there was an effort by counsel for Sperry &Hutchinson at the -- at the trial level to show that a trading stamps had an advantage over a return of cash.

They were trying to put on evidence by Mr. William Sperry Beinecke, general counsel and Vice President of Sperry & Hutchinson Trading Company and the Court refused yet sustained objections to the introduction of the evidence.

Mr. Lane who -- who said on the trial court that he was there on behalf of Sperry & Hutchinson and who will argue here, said, “I would like to show for the record what Mr. Beinecke, general counsel and vice president, my company would have said.”

And on page 375, he said, “In integrated family retail accounts they -- speaking of trading stamps provide an inducement which a discount in cash purely would not provide.

In other words --

Chief Justice Earl Warren: It provides what --

Mr. Ramsey Clark: An inducement to a --

Chief Justice Earl Warren: (Voice Overlap)

Mr. Ramsey Clark: -- customer to come here and buy --

Chief Justice Earl Warren: Yes inducement (Inaudible)

Mr. Ramsey Clark: Yes.

Chief Justice Earl Warren: -- and then it gets to work.

Mr. Ramsey Clark: Now --

Justice Felix Frankfurter: Was that an issue the correctness of that claim or is that relevant to -- to the problem that you have here?

Mr. Ramsey Clark: It's relevant to this problem.

Justice Felix Frankfurter: Well --

Mr. Ramsey Clark: At that time we were talking --

Justice Felix Frankfurter: If I -- does that indicate that -- that you may call it a discount but a money discount is something else than a trading stamp discount rather to have this psychological element, do you agree or disagree with that?

Mr. Ramsey Clark: We disagree, it's a different thing.

Justice Felix Frankfurter: Do you think it's just dollars -- or just cents?

Mr. Ramsey Clark: No, I don't believe that that would correctly state our position.

We believe that there is a difference.

Justice Felix Frankfurter: There is a difference.

Mr. Ramsey Clark: There is a difference --

Justice Felix Frankfurter: You mean --

Mr. Ramsey Clark: -- between (Inaudible) cash and giving a trading stamp.

Justice Felix Frankfurter: Well, then -- then merely needing -- merely needing a trading stamp as money -- with money differential doesn't meet the province of it.

Mr. Ramsey Clark: Not the money differential.

No, sir.

I was speaking in terms of returning the cash.

Justice Felix Frankfurter: So returning the cash, would that meet it?

Mr. Ramsey Clark: No, sir.

Justice Felix Frankfurter: So that (Voice Overlap)

Mr. Ramsey Clark: That would not meet it that -- that is the claim that the Sperry & Hutchinson make --

Justice Felix Frankfurter: Okay, I understand.

Mr. Ramsey Clark: -- that is ready.

Justice Felix Frankfurter: But I'm very --

Mr. Ramsey Clark: They now say that we can do that, by the way.

Justice Felix Frankfurter: They turn it around the other way.

If they can stand to have factors that are not measurable by cents and therefore a dollar, then you got a different ingredient having to do with your problem and then the question comes that the legislature, because that's the way I take the decision of the court, a failure of the construction of the statute then your Supreme Court, the Oklahoma Supreme Court rather has made a difference between money inducement and -- and calls illogical inducement.

Mr. Ramsey Clark: That -- that is true.

The question is if you want to put it on the legislative level whether the legislature can relegate competition to the area of trading stamps.

Who gives the best trading stamps?

They -- that -- that could be one way of looking at the question.

In other words when we compete in a retail grocery industry in Oklahoma for now on, it's not where you can get the most for money.

It's where you can get the best trading stamps.

That is the area of competition.

Justice Felix Frankfurter: And that is not -- and that is not a consideration relevant to the problem before us, Mr. Clark?

That issue is not here on this record?

Mr. Ramsey Clark: That issue is not before the court below.

I definitely think it is below this Court.

The court below is involved within -- with the interpretation as to the below-cost provision and what in the world trading stamps are as to --

Justice Felix Frankfurter: And they said --

Mr. Ramsey Clark: -- trading stamps.

Justice Felix Frankfurter: -- that this is not within the below-cost, specific.

They say this is not -- you are not allowed under the Fair Trading Act of Oklahoma to take account of the fact that they give trading stamp.

You would be able to take account of the fact that they give back to the cents wouldn't you, under this statute?

Mr. Ramsey Clark: That -- that is -- is questionable.

I don't know if -- if there would be any difference between the two cents and the -- and the trading stamps.

If they said the trade -- that the two cents is a varied discount of cash, the customer in a way of giving a discount of cash is by a net price, although there's no costumer at the retail level because there's no practice at the retail level.

That's what we do.

We get -- if -- if it could be said that this is meeting cash discounts then we meant a person giving cash discounts by giving cash discounts in the customary way by netting the price not by giving him a green piece of paper.

Now, under the reasoning of Justice Brandeis in -- in the Oklahoma Ice case that the arbitrary nature of a statute is dependent entirely upon the relevant facts as to which it operates.

We think that it is incumbent upon us to show to the Court facts as to trading stamps and the effect of trading stamps.

What they have done and what they are.

Trading stamps are an incredible phenomena on the American scene.

They have swept through the retail grocery industry and other industries.

The retail grocery industry in 1957 paid two trading stamp companies, one half of 1% of its gross income.

30% of the retail brochures in the United States were found by the Department of Agriculture to be giving trading stamps and these were the big operators.

It was found also by the Department of Agriculture that the giving of stamps tended to hasten the elimination policy of the small merchant because he cannot compete with the stamps.

Now, here are some examples of -- of what has happened in the trading stamp wars that have been created across the country.

This is the type of thing that a legislature would have to consider.

This is the type of the -- of thing that this Court have to consider in determining whether there is something unconstitutionally arbitrary about the imposition on the retail grocery -- grocery industry in Oklahoma, are relegating it to the giving of trading stamps insofar as competition is concerned.

Unknown Speaker: Why -- why Oklahoma wanted to do that when we have a right to say they could (Inaudible) suppose they wanted to recognize for one reason or another the trade stamps and say have (Inaudible) got to use it.

Why -- why should we have a right to set that aside?

Mr. Ramsey Clark: Because we feel that it would be arbitrary and unreasonable and demonstrably irrelevant to any purpose that the legislature could have.

Justice Hugo L. Black: Well, they might have the purpose of reaching the conclusion wrongfully perhaps and a fine thing for the State to have trading stamps, for everybody to have them since so many have them.

Mr. Ramsey Clark: Well, the -- that is certainly the effect that this has had in Oklahoma because the market is today saturated with stamps Safeway finds that all of its competitors are giving stamps and it has to give stamps.

Justice Hugo L. Black: I really asked you that question because it seems to me like, finally perhaps, we get down to the question as to whether a State has to finally do this.

Mr. Ramsey Clark: Well, I -- I think that if you say that there's no difference between a consideration of a problem by the legislature and the -- the capricious effect overruling by a court --

Justice Hugo L. Black: Don't we have to do that.

Now, that's it.

If such this, the Supreme Court has held that's what the statute means don't we have to accept that for what it is?

And how can we say that the State Supreme Court's wrong in saying that's what the legislature meant to do.

Mr. Ramsey Clark: If that is the case, then we have come along way from Nebbia v. New York where we -- where the very -- the very life of the opinion was based upon the intensive and exhaustive studies made of the milk problem.

Of course, that was only milk and, of course, also they set the price as uniformly on milk.

One person didn't sell below another person and enjoined the other person for meeting it.

If -- if that is so, then -- then we have come a long way.

Certainly, there is nothing like that indicated in the opinion Nebbia v. New York, or in the dissents of Justice Stone in Tyson & Brother v. Banton or Justice Brandeis in the Liebmann case, the Oklahoma Ice case.

Here are some illustrations of what stamps have done because I'm going to sit down, I see the red light just went and I've reserved 20 minutes and will sit down and take the rest of my time later.

Chief Justice Earl Warren: You may.

Mr. Lane.

Argument of Samuel M. Lane

Mr. Samuel M. Lane: Mr. Chief Justice, may it please the Court.

This becomes more of a trading stamp case every minute.

I really think that when it was tried in the State of Oklahoma it wasn't nearly as much on this trading stamp question as it has become right here in this oral argument.

Perhaps, because of the interest that the Court has shown in trading stamps or I should go back over some of the ground that Mr. Clark covered particularly I think Mr. Justice Frankfurter to answer the questions would you put to Mr. Clark about the nature and extent of the trading stamps business because surely you should have a clear understanding of it, since as I say that it appears now to become a trading stamp case.

The trading stamps have been in general use through out the United States at least since 1896.

Like every other promotional device this being a device to promote sales through the giving of trading stamps which effect a cash discount for business has gone through swings of prosperity and declined.

But the Sperry & Hutchinson Company has been in that business continually since 1896, never defaulting on any of its obligations.

You are all, I am sure, aware of the increase since World War II in the volume of trading stamps or that has come about particularly through the use of trading stamps in the supermarket.

Trading stamps have not, as my brother Clark has indicated, caused the demise of the independent.

As a matter of fact, trading stamps have been traditionally the bulwark of the independent against the great chain for their enormous purchasing power.

The specific trading stamps are now prohibited in just two States, plus the District of Columbia.

The District of Columbia as a matter of fact has a so-called Gift Enterprise Act which bars the use of trading stamps and manufacturer's coupons and soap wrap and everything of that kind and it's honored only in the breach except as to trading stamps.

So, your wives can go into any of the stores in the District of Columbia and get manufacturer's coupons with whatever they buy notwithstanding this law but she can't get trading stamps because the trading stamp companies haven't wanted to provoke an issue on that question.

Kansas prohibits trading stamps and the State of Wyoming prohibits trading stamps.

As a matter of fact, we are right now trying to touch the constitutionality of that Act and we have a case pending in Wyoming for the purpose.

Mr. Clark said that -- I think at the 1957 session of the State Legislatures, there were some 30 or 40 bills for hospitals had trading stamps.

Mr. Clark wants to know because the Safeway Company largely backs those bills and this argument which you are now hearing is only an incident or perhaps a collateral one in the attempt of the Safeway Company to do away with trading stamps.

It seems to me --

Justice Felix Frankfurter: At the times of, Mr. Lane, at the times of the trading stamps cases were here and minute.

Mr. Samuel M. Lane: 1918, they were here.

There were three cases --

Justice Felix Frankfurter: I hear that.

Mr. Samuel M. Lane: -- Your Honor.

Justice Felix Frankfurter: Maybe it's not fair to call that minute but there were -- there were more than two States or three States then that outlawed it, is that true?

Isn't that true?

Mr. Samuel M. Lane: It has waxed and waned.

That is all --

Justice Felix Frankfurter: And --

Mr. Samuel M. Lane: -- I have said.

Justice Felix Frankfurter: (Inaudible)

Mr. Samuel M. Lane: It's very interesting that you read the body of the law.

It's quite a -- esoteric group of cases but you see that the -- and --and you will not be surprised that it's a trading stamp's uses, those who use them are most widely enthusiastic about them and conversely those who don't get them are bitterly opposed and the opposition to the trading stamps has come in waves from decade to decade.

In the beginning, there were statutes which sought absolutely to prohibit trading stamps.

They were called Gift Enterprise Laws.

That it shall be unlawful to engage in the gift enterprise in which something should be given when something's purchased and those laws were struck down as unconstitutional, that is to say, a deprivation of right to freedom to contract and to sell for what you want to.

Justice Felix Frankfurter: You mean in the States?

Mr. Samuel M. Lane: In -- in the States, they were struck down over and over.

That's just from let's say 1900 to 1910.

Then the next wave that followed that was a series of decisions in which the States sought to tax the stamps out of existence and the Court said it is the same thing.

We'll treat it the same way.

It's a discriminatory tax and banned.

Then in 1918, you had three cases that reached this Court.

One from the State of Florida and two from the State of Washington and Pitney against Washington was the trading stamp case and in that case, this Court said, “we will look at this tax on trading stamps redeemable in merchandise for what it really is.

It's a prohibitive tax, so we will consider that the State of Washington has prohibited the use of trading stamps redeemable in merchandise.

And as to that, we will sustain it because there is something so indefinite about stamps redeemable in merchandise, but perhaps an ignorant person with the attraction of trading stamps might be led -- might be misled rather to pay her money unwisely but this Court pointed out that if trading stamps were redeemable in cash about which there could be no uncertainty.

So then this Court would not sustain a prohibition whether it was couched as a tax or not.

And consequently, from that day to this, trading stamps have been used in the State of Washington but in that State, they are redeemable only in cash and the consequence in substance to the people of Washington is that they don't get as great a value for their stamps as they would otherwise because naturally, the trading stamp company can't give as large a value in cash as they would in merchandise since their great purchasing power enables them to give a better value in merchandise than in cash.

So, in fact we come down to the case at bar because I think the case at bar is really quite different than --

Unknown Speaker: (Inaudible)

Justice Potter Stewart: I mean, I think you told us about only one.

Did the other cases go --

Mr. Samuel M. Lane: Well the other two, one was something about Rolly or --

Justice Felix Frankfurter: Well, that's the Rast against Van Deman.

Mr. Samuel M. Lane: Rast against Van Deman was a case involving manufacturer's coupon, State against Pitney involved trading stamps and the Tanner against Little involved the coupons that came in United Tobacco Cigarettes or something of that kind.

Justice Felix Frankfurter: It's the -- the Rast case or one of these that the opinion by Mr. Justice McKenna's, I cherish for having cut out the diagram of one of the most important observations on constitutional adjudication that we should go from judgment by speculation to judgment by securing.

Mr. Samuel M. Lane: Well, I may say then, Your Honor, you probably mean by that because I find that running through your opinions time and time again that this field that were talking about is an empirical field and not a pragmatic or purely logical field.

I think actually on the (Inaudible) of this case when we come to it.

And I would say, too, as I leave those cases Mr. Justice Stewart, they were imperative in three decisions which came down right after them.

One at Kansas, one in Maryland I can't recall where the other one was.

But after that and as early as 1921, no Court has ever followed this Court.

No state court, in upholding the prohibition of trading stamps and back to Massachusetts where Mr. Justice Frankfurter and I come from.

It has been repeatedly held by the Court.

One decision I recall by Justice Holmes that this would be a violation of due process.

Now, what are we --

Justice Potter Stewart: Just before a State to --

Chief Justice Earl Warren: Yes.

Justice Potter Stewart: Then what would be (Inaudible)

Mr. Samuel M. Lane: To -- to what a -- a -- to ban the use of trading stamps, it being a perfectly legitimate business, which brings me Mr. Justice Black, to what you have asked several times of my opponent.

I don't know what the answer to that question would be today.

It would seem to me that in the light of recent decisions on the Fourteenth Amendment, perhaps today, the decision might go the other way.

I think what we're dealing with here in this case is one of state power and if the State adopts a policy which is either favorable to or hostile to this particular economic device, now I respectfully suggest that it's not up to this Court to strike that down.

Justice Hugo L. Black: What about Morey versus Doud?

Mr. Samuel M. Lane: Morey against Doud as I recall it is the only case in this Court in the last 25 years which has struck down under the due process or Equal Protection Clause of the Fourteenth Amendment a state regulatory statute and that I suggest was a most extreme case and that it doesn't I think represent so much a split in this Court on the law as it does in the interpretation of the facts.

I think the very strong dissent indicated that there was in fact, economic justification for exempting the American Express Company imposed of telegraph and the Western Union and then when the facts changed then the law might change.

But as the facts stood, the law was constitutional.

The majority have crossed, took the other view but compare that case to this case, when you -- as I hope you will do understand the fact and this then is a very much easier case to decide.

Now, may I come back --

Justice Felix Frankfurter: Do you give for Justice Black's opinion?

Mr. Samuel M. Lane: Easier for both Justice Black --

Justice Felix Frankfurter: [Laughs]

Mr. Samuel M. Lane: -- Black and yourself.[Laughter]

Now, may I come down to this case because we -- we shouldn't be discussing this thing here in -- in vacuo it seems to me.

What happened here was that in July 1954, the Safeway Company deliberately went out for a larger share of the business in Oklahoma.

I think there were 18, not 28 Safeway Stores in Oklahoma City and they enjoyed at that time 17% of the total volume of the grocery business in Oklahoma.

There were about 400 competing stores there.

The record shows that Safeway operated by quotas.

Justice Hugo L. Black: Say what?

Mr. Samuel M. Lane: Quotas.

Justice Hugo L. Black: Quotas.

Mr. Samuel M. Lane: That it had an objective to reach the quota for Oklahoma City was 20% now they're only -- enjoyed 17%.

So in July 1954, it cut prices on the -- on -- on a handful of traffic items like sugar and lard and shortening and things like that which were all selling at about the same price in the Oklahoma market.

The effect of that was, of course, immediate.

There was a price war which started immediately.

And in order to nip that price war in the bud, the Oklahoma Grocers Association applied for a restraining order and a temporary injunction.

There was a two-day trial and the temporary injunction was granted.

All during that trial in those two days, the questions about trading stamps were discussed at length.

The effect of trading stamps was discussed at length leading mandate of the statutes which says that the remedy here is by injunction was discussed at length and Safeway's position was not successful.

Now it isn't -- opening in the grocery's business likes to sue one another, obviously, and when the Oklahoma Retail Grocers Association had secured this temporary injunction and made their point, they then discontinued the action.

Two weeks later, Safeway came back and hit them again, this time with price cuts not only in Oklahoma City but also in Enid, Shawnee, Tulsa and Norman without pretending at all that in Enid, Shawnee, Norman and Tulsa they were matching trading stamp prices.

They merely contended that as to those cities, one or more of their competitors was selling at a price below cost and that was what they said permitted them under this Act to cut the price of the same articles against all their competitors whether or not the other competitors cut the price.

It was only in Oklahoma City that they claim to be doing this as a defense against trading stamps.

The trial court on to hearing all of the elements made the following finding of fact which appears on the record at page 447.

“The court finds that on the dates alleged in plaintiff's petition the defendant Safeway without legal justification willfully and intentionally reduced its prices in an effort to increase its volume to the detriment of the other grocers.”

The significance of that will be readily apparent to you, because in this Court, what the appellant is arguing is that it has been denied the right in good faith to meet the lower cost of its competitors.

It cut, I submit, even claimed the right to meet the lower prices of its competitors unless it proceeds in good faith.

I know that if it were here under the Robinson-Patman Act instead of under the Oklahoma Sales Act, it would not be heard to say that it has the right in bad faith to meet the lower cost of its competitors which costs also are illegal costs.

Here is a finding of fact against the appellant on the question of good faith and it seems to me --

Justice Hugo L. Black: What page is this?

Mr. Samuel M. Lane: That is on page 447 at the top of the page.

It seems to me that having been found on the facts in a hotly contested trial to have acted in bad faith, we're left with nothing but a hypothetical as to what the situation would be had the company acted in good faith.

The Court also or rather the Court of the -- the Supreme Court in affirming the lower court had this to say.

Justice Felix Frankfurter: If -- may I interrupt you, Mr. Lane?

Mr. Samuel M. Lane: Yes, sir.

Justice Felix Frankfurter: That same stipulation is supposed to be certain without legal justification, does -- does that phraseology is that accusation -- include testing by the very act which is in controversy?

Mr. Samuel M. Lane: That it seems to me is one phase of it.

The Court -- this trial court had a good deal to say on that.

If Your Honor would look at the bottom of page 442, you will see what the trial judge said after that.

He said, "Gentlemen, to attempt to handle these problems in any other manner”, that is to say, “in any manner other than by the orderly process of an injunction couldn't have any other effect than to bring chaos for Safeway sets a price, Blakemore and my district reduces it.”

Safeway says, “They're going to meet it.”

The Red (Inaudible) Stores then reduced their price and there we go.

“It has nothing but chaos gentlemen.

One violation just brings about another.

I say to handle it in any other manner except in the orderly manner as provided by the statute will only bring chaos in the grocery business and have the net results of ruining hundreds if not thousands of small independent merchants,” and that's the only logical conclusion the Court can come to here.

Justice Felix Frankfurter: What I'm asking is whether to include the lack of legal justification by assuming that they litigate the statute.

Mr. Samuel M. Lane: I'm probably stupid.

I'm not sure.

I think your question is a very easy one but I don't follow it.

It seems to me that there is --

Justice Felix Frankfurter: (Voice Overlap)

Mr. Samuel M. Lane: -- a question of fact here of the -- the statute says that you can in good faith meet the price of your competitor who is selling at cost to him.

Now, there are several questions there of fact.

The first is when you meet his price, do you really believe that the price you're meeting is his cost to him or do you know in fact that he's selling below his cost and in violation of the statute?

Justice Felix Frankfurter: That I can understand but if he is meeting competition, on the assumption that giving away trading stamps enables him to do what he does and then the argument is, no, giving away of trading stamps is in fact, that implicates configuration of the scope and validity of the statute, that's my question.

Mr. Samuel M. Lane: Well, but in the first place, he lost as a question of fact as to what he was trying to do.

Justice Felix Frankfurter: Well --

Mr. Samuel M. Lane: They found as the question of fact that this wasn't his purpose at all.

Justice Felix Frankfurter: Well, why would he do that?

Mr. Samuel M. Lane: The purpose was to grab more of the business.

Now --

Justice Felix Frankfurter: But that's what all business may do and they're --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- forbidden.

Mr. Samuel M. Lane: That's right.

Justice Felix Frankfurter: Unless there's some either a statutory --

Mr. Samuel M. Lane: That's right.

Justice Felix Frankfurter: -- or decisional limitation of findings.

Mr. Samuel M. Lane: That's right, Mr. Justice --

Justice Felix Frankfurter: And my only --

Mr. Samuel M. Lane: -- Frankfurter.

Justice Felix Frankfurter: -- question is that I dare say this and maybe you need to answer that.

My only question was what is wrapped up in this place without legal justification and I was wondering whether there was also wrapped up in it that under the statute, without we can't meet trading stamps accepting distribution in the way which he has because a trading stamp is not anything that affects price but it's just a psychologically inducement.

That's my question.

Mr. Samuel M. Lane: Well, I assume that -- that could fall under this phrase that we read without legal justifications but that's only one of a number of things.

Look at this business about whether trading stamps do or don't cut prices.

It's been decided by the highest courts in California, in Pennsylvania.

I would say in New Jersey, Mr. Justice Brennan that trading stamps do not have the effect of cutting price because they are a method of giving a discount for the payment of cash and a discount for the payment of cash relates to the terms of sales and doesn't alter the price.

Justice Felix Frankfurter: I didn't mean to reject the argument.

I understand --

Mr. Samuel M. Lane: Yes, but I'm trying to tell you what the frame of reference is when they made this attack that they made.

Now, they knew about that body of the law.

They knew in addition to that that the Attorney General of Oklahoma in an opinion in 1950 when asked whether or not trading stamps given with -- in the -- in the dry cleaning business have the effect of violating the price minimums established there.

They knew that the Attorney General had ruled that trading stamps do not have the effect of cutting prices.

On top of that, they knew when they started, when they cut here in this -- this case, they've been all through it.

Just six weeks before, they'd had their noses rubbed in it and still they came back and cut prices.

Justice Felix Frankfurter: I'm suggesting that the argument of Mr. Clark here, that to make such legal determination or such statutory prohibitions against trading stamp is beyond the power of the State.

I'm suggesting --

Mr. Samuel M. Lane: All right.

Justice Felix Frankfurter: And that's a very different argument --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- from that stage in --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- in the way in which the modern cases --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- say --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- that this man can't cut --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- the prices, not through a competition but because he hates the other fellow and wants to drive him out of business.

Mr. Samuel M. Lane: Let me come to that.

Justice Felix Frankfurter: As I understand that -- as I understand modern law of thought even in my day, way back in the law school, even way back as a student, there's already emerging disaster whether mankind exercises property rights merely out of custom.

Mr. Samuel M. Lane: That's right.

Justice Felix Frankfurter: Now, that isn't but the suggestion here isn't that kind question in service.

Mr. Samuel M. Lane: Now, what we're coming down to now is, could -- can the State make a distinction between trading stamps and discounts for cash in cash for example.

I would love to talk about that in Mr. Clark's argument.

Now, it seems to me that they not only can but they did in this case and the distinction is sustained by the record.

Justice Felix Frankfurter: I understand that but I don't understand pinning on it the label, “therefore, it was in bad faith.”

Mr. Samuel M. Lane: I don't think that they did for that reason.

I wouldn't say --

Justice Felix Frankfurter: You're right.

Mr. Samuel M. Lane: -- what was in --

Justice Felix Frankfurter: All right.

Mr. Samuel M. Lane: -- their mind.

I can't say but I wouldn't pin the label on for that reason.

Now, may I come, Your Honors to what the question is, that was in fact presented here.

Chief Justice Earl Warren: Mr. Lane, before you get to that, would you mind answering a question that I asked --

Mr. Samuel M. Lane: (Voice Overlap)

Chief Justice Earl Warren: -- Mr. Clark, the one whether there is anything in this injunction that would prevent Safeway from giving a cash discount.

Mr. Samuel M. Lane: Not a single point.

Chief Justice Earl Warren: The equivalent of --

Mr. Samuel M. Lane: Not at all.

Chief Justice Earl Warren: There is none.

Mr. Samuel M. Lane: No.

No, Your Honor, but the point is that Mr. Clark says that the net to price was to take a 3% discount for example.

He says that Safeway can cut a dollar item to 97 cents and that what it's done is to give a cash discount.

No, I say that's not a cash discount.

A discount for cash is something that's done for cash, not to sell tomatoes.

If you mark tomatoes down from a dollar to 97 cents, you haven't given a discount.

You've have cut the price three cents for the Safeway who wanted to adopt its own cash discount system in cash.

It could say we're in the cash business, we want to encourage cash trade in order to encourage cash trade, we will give a discount of 2% in cash and then when the housewife comes through the check out counter, if she has a $10.00 charge to pay, they give her back 20 cents and there's nothing under this injunction or under this law which would forbid it, but that's quite definitely not what Safeway did.

What Safeway did was to take two-page ads and say, who is selling tomatoes at 97 cents when it knew that everybody else was selling them at a dollar and that's what started the price war and that's why trading stamps are so different from what Safeway's price cuts were and that's why we say there's a perfectly valid distinction between how Safeway's practices should be treated under this law and how the trading stamps should be treated under this law and please bear in mind that trading stamps had been used in Oklahoma for 45 years and there's no evidence in this record at all that they ever provoked a price war in Oklahoma nor is there anything in this record to sustain Mr. Clark's statement that there was “a brisk trade war provoked by the trading stamps at the time this litigation began.”

The price war that was provoked was provoked by Safeway's price cuts and not by the trading stamps.

All was peaceful before the price cuts.

Now, may I really try to emphasize what the question was -- that was presented in the answer to the petition.

Paragraph 9 which appears on page 56 of the record and this is a petition for the injunction.

The question raised had to do with the Fourteenth and the Fifth Amendment.

I think the Fifth Amendment has -- something that just crept in there but what I'm trying to tell you is that when issue was joined, so far as due process and equal protection or any federal question is concerned, it was pitched solely on the Fourteenth Amendment.

Then when the Safeway lost in the trial court and petition to the Supreme Court of Oklahoma as appears from page 4, paragraph 21 of the record, again, it was only the Fourteenth Amendment and the Fifth Amendment and no other federal question.

Then when Safeway lost in the Oklahoma Supreme Court and petitioned for a rehearing the record shows at page 648 and 649, the assignments of -- of the petition in error again speaks only of the Fourteenth and the Fifth Amendments.

Then when the Safeway Company came here in its notice of appeal which appears on pages 693, 694 and 695, there are four grounds or sub-grounds in paragraph III for appealing to this Court and in each case, the appeal is for violation of the due process and Equal Protection Clauses of the Fourteenth Amendment.

And finally, when you come to the jurisdictional statement, again it's only the Fourteenth Amendment which is said to present a federal question.

Now, in this Court, in the -- in the brief in this Court, Safeway now claims that there is, a question of the federal supremacy, presented.

I suppose really now that I've reached this point that is perhaps carrying coals to Newcastle to argue the non-availability of a federal question not raised in the state court and not preserved in the notice of appeal and in the jurisdictional statement, but even at the risk of carrying some coals to Newcastle, I would suggest that in McGoldrick against Compagnie Generale Transatlantique, 309 U.S. 430, which I am embarrassed to say I did not cite in my brief contains the complete answer to the attempt to raise in this Court a question which was never presented nor litigated in the State Court having been present at the trial.

I can assure this Court that there wasn't a word of oral argument on that point nor was there a written word in any of the briefs and you will search in vain through the record to find that the federal supremacy question was ever raised at all and it seems to me that the reason why this Court should not attempt to pass upon a federal question not raised in the Court below is pretty obvious that the State Court should have its own opportunity to so construe its statute as to bring it within constitutional requirements before this Court should attempt itself to pass upon it and in the McGoldrick against the Compagnie Generale --

Justice Potter Stewart: What volume and page is that again?

Mr. Samuel M. Lane: 309 U.S.430 --

Justice Potter Stewart: Thank you.

Mr. Samuel M. Lane: -- Mr. Justice Stewart.

Justice Potter Stewart: Thank you very much.

Mr. Samuel M. Lane: The rule was cited as follows.I paraphrase it.

“In an appeal to this Court from a three-man federal court, the appellee may sustain for judgment which he secured below on additional ground, not raised below.

The appellant may do so in extraordinary cases.”

I don't know what the extraordinary cases would be, but on appeal to this Court from the Court of last resort of a State, neither the appellee to support his judgment nor the appellant to attack it.

They refer to federal questions not raised in the lower court.

If -- am I out of order by suggesting that there are other cases not mentioned in the brief which I could give you just very quickly that you might like to look at on that same point such as New York ex rel. Cohn against Graves which is in 300 U.S. 308, Lynch against New York ex Rel. Pierson in 293 U.S. 52.

I think there's no doubt on the rule and since I believe it so strongly, I won't take any further time with it unless the Court wishes it.

Chief Justice Earl Warren: We'll recess --

Mr. Samuel M. Lane: Thank you.

Print this transcript Transcript: 

Argument of Samuel M. Lane

Mr. 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.

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 --

Justice Potter Stewart: It could provide what, Mr. (Voice Overlap) --

Mr. 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.

Justice Potter Stewart: (Voice Overlap) --

Mr. 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 --

Justice 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?

Mr. 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.

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.

Justice Potter Stewart: Do you think it's practical, you --

Mr. Samuel M. Lane: Oh, yes.

Justice Potter Stewart: You're telling us, that is a practical matter?

Mr. Samuel M. Lane: I was thinking --

Justice Potter Stewart: You just do know what the cost (Voice Overlap) --

Mr. 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 --

Justice Felix Frankfurter: (Voice Overlap) --

Mr. Samuel M. Lane: -- this was to -- Your --

Justice Felix Frankfurter: (Voice Overlap)

Mr. 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."

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.

Justice Felix Frankfurter: Mr. Lane, I'd like to ask you a question but before I do so, it was supposedly drafted in Oklahoma.

Mr. Samuel M. Lane: What is it?

Justice 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?

Mr. Samuel M. Lane: I don't know whether you do, Mr. Justice Frankfurter.

I do, and I think that in the --

Justice Felix Frankfurter: I don't mean to say there isn't a distinction.

I just don't know whether --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- in fact, under this statute --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- indefiniteness so-called --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: was not found, it would not be found as to injunction or money --

Mr. Samuel M. Lane: Yes.

Justice Felix Frankfurter: -- damages, but would be, if there were (Inaudible)

Mr. Samuel M. Lane: Well, that's a distinction which it seems to me is a very valid one but --

Justice Felix Frankfurter: But I'm not --

Mr. Samuel M. Lane: But I have never seen it rose.

Justice Felix Frankfurter: I hope you set it a little earlier.

What causes this?

Mr. Samuel M. Lane: Well, what I said, I'd -- I'll say better, perhaps.

Justice Felix Frankfurter: If the Court construe that since there was a criminal affect into the --

Mr. Samuel M. Lane: Well, let me go back and give it to you straight.

Justice Felix Frankfurter: All right.

Mr. 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) --

Chief Justice Earl Warren: You -- well, you have five minutes more.

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

Mr. 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.

Justice William J. Brennan: Would you suggest the distinction between this and Morey and Doud?

Mr. 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.

Chief Justice Earl Warren: Mr. Clark, you may proceed.

Argument of Ramsey Clark

Mr. 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 --

Justice 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 --

Mr. Ramsey Clark: That is --

Justice Felix Frankfurter: -- but the size of their business or what?

Mr. Ramsey Clark: That is the reason that it took cost, yes.

Justice Felix Frankfurter: That is the effective power of trading stamps, isn't equal to the investment of the -- of the --

Mr. Ramsey Clark: They simply cannot afford to pay 2% of their gross, but there's a (Inaudible) cost.

Justice Felix Frankfurter: Do they have -- do they have their own trading stamp devices?

Mr. Ramsey Clark: How should they --

Justice Felix Frankfurter: Mr. Lane spoke of what they (Voice Overlap) --

Mr. 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) --

Justice 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?

Mr. 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."

Justice Felix Frankfurter: Where are the terms of the injunction?

Mr. Ramsey Clark: The injunction commences on page -- the injunctive features commence on page 450.

Justice Felix Frankfurter: I mean the one that -- that requires interpretation whether a cash return would be within or without the terms of the prohibition.

Justice Hugo L. Black: 452, isn't it?

Mr. Ramsey Clark: That's -- yes, sir.

That's -- that's where it will be.

It's the second paragraph on 452.

Justice Felix Frankfurter: Any trading stamps, cash register receipts or other evidences of credit.

Mr. Ramsey Clark: Yes, sir.

Justice Felix Frankfurter: And you say that would cover cash?

Mr. Ramsey Clark: I say it will not cover cash.

I --

Justice Felix Frankfurter: (Voice Overlap) --

Mr. Ramsey Clark: I say that's exclusive and we cannot give cash.

Now --

Justice John M. Harlan: Mr. Clark, before you sit down, will you comment on Mr. Lane's suggestion, this judgment that he supported on a nonfederal ground?

Mr. Ramsey Clark: Yes, sir.

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

Chief Justice Earl Warren: Well, before you get to that, is there any statutory law on the question of cash discounts?

Mr. 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.

Justice 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.

Mr. Ramsey Clark: Yes, sir.

That may claim that that is cost to the retailer.

That's the retailer's cost --

Justice Charles E. Whittaker: Yes.

Mr. Ramsey Clark: -- and not his price.

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

Justice Charles E. Whittaker: Yes.

Mr. 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.

Justice Charles E. Whittaker: In determining whether his cost --

Mr. 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?

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.

Justice Hugo L. Black: Mr. Clark, I -- it wouldn't bother you.

I'd like to return a moment to the injunction --

Mr. Ramsey Clark: Yes, sir.

Justice 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?

Mr. Ramsey Clark: It would not, sir.

It would not.

They can do that.

They don't want to do that --

Justice Hugo L. Black: Why?

Mr. 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.

Justice Hugo L. Black: But you could as to -- am I right and in thinking that you could without --

Mr. Ramsey Clark: Yes.

Justice 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?

Mr. Ramsey Clark: He could be given cash register receipts that would be --

Justice Hugo L. Black: Where'd you gave him money?

Mr. Ramsey Clark: -- redeemable, no.

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

Justice Hugo L. Black: Merchant to what?

Why is it limited to merchandise of the store?

Mr. Ramsey Clark: Because we have --

Justice Hugo L. Black: Why not cash?

Mr. 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.

Justice Hugo L. Black: Suppose you -- suppose you could, what would be your position?

Mr. 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 --

Justice Hugo L. Black: We would object to doing it, but would that put you on an equal basis with the others?

Mr. 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 --

Justice 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?

Mr. Ramsey Clark: I would say it would probably be arbitrary and unreasonable.

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

Justice Felix Frankfurter: Well, suppose -- would -- as a legislative which -- could certainly pass legislation against credit purchases, couldn't it?

Mr. Ramsey Clark: Yes, sir.

I think they could.

Justice 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.

Mr. Ramsey Clark: It would make no rhyme, no reasons in our experience --

Justice Felix Frankfurter: Lots of legislation makes no rhyme and reason (Voice Overlap) --

Mr. Ramsey Clark: Well, it's arbitrary.

It's supposed to make reason.

If it's unreasonable, it's unconstitutional.

Justice Felix Frankfurter: But it's legislative reason.

Mr. 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.

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

Justice Felix Frankfurter: But that's what this amounts in a way, doesn't it?

Mr. Ramsey Clark: No, because it permits --

Justice Felix Frankfurter: (Voice Overlap) in your view, this trading stamp, couldn't it?

Mr. 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.

Justice Felix Frankfurter: Why --

Mr. Ramsey Clark: They're not in our price.

Justice Felix Frankfurter: -- but why, because the law enforcing officers aren't on the job of --

Mr. 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.

Justice 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.

Mr. Ramsey Clark: I think that's absolutely right.

It's -- its competition.

I would like first to own that --

Chief Justice Earl Warren: Mr. Clark -- Mr. Clark, what is the cash register receipt?

What is the definition of it?

Mr. 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.

Chief Justice Earl Warren: How -- how could that -- how could be used as in lieu of trading stamps?

Mr. 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 --

Chief Justice Earl Warren: Yes.

Mr. Ramsey Clark: -- you can redeem them in the store for tomato juice or whatever you want.

Chief Justice 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) --

Mr. 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) --

Chief Justice 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?

Mr. 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 --

Chief Justice Earl Warren: Yes.

Mr. 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 --

Chief Justice 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?

Mr. 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.

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.

Chief Justice Earl Warren: And you may do so and you may reply if --

Mr. Ramsey Clark: Thank --

Chief Justice Earl Warren: -- you wish -- if you wish, Mr. Clark.

Mr. Ramsey Clark: Thank you very much.