State v. J. M. Seney Co.

Urner, J., delivered the opinion of the Court. By section 173 of Chapter 704 of the Acts of 1916 an annual license fee of $1,500 is required to be paid before any person, firm, association or corporation can lawfully “sell or deliver any stamps, coupons, tickets^ certificates or other similar devices which are or may be redeemable for merchandise” “to any other person, firm, association or corporation, in connection with any sale by such other person, firm, association or corporation, of any g'oods, wares or merchandise.” The defendant corporation Was indicted for selling and delivering certain stamps of the kind and for the use mentioned in the Act without, paying the license fee thereby imposed. Special pleas to the indictment were filed describing ⁴³⁹ the nature and processes of the defendant’s business, asserting that it is a legitimate undertaking, and charging that the requiremnt of the license fee in question is prohibitive in effect and unreasonable in its discriminations, and is therefore unconstitutional and void. A demurrer to the pleas was. overruled and from the judgment thereupon entered discharging the defendant the State has. appealed.

The business in which the defendant is engaged, as shown - by its pleas, is exclusively a trading stamp enterprise. Its operations consist solely of the sale of trading stamps to merchants for issue by them to purchasers for cash in the course of their retail trade and redeemable by the defendant when presented in books containing 990 stamps in cash or in merchandise, at the customer’s option. The cash redemption value of a full book of stamps is $2.00, but when redeemed in merchandise it represents a higher valuation. Consequently about eighty per cent, of the redemptions, are in merchandise.

The license foe referred to is not required from merchants issuing and redeeming their own stamps, or from those engaged in the business of providing others with stamps which are redeemable simply in cash. It is exacted only when the stamps are issued to' merchants by a trading stamps dealer and “are or may be redeemable for merchandise,” and that is the kind of business with which wo are now concerned. The question to be decided is whether a business of that nature can bo suppressed by the Legislature, such being the effect of the trading stamp license provision of the Act of 1916, according to the allegation of the pleas and the admission of the demurrer. In three recent cases the Supreme Court of the Tinted States has decided that the use of trading stamps^ redeemable in articles of merchandise, is subject to regulation, restriction or prohibition by a State in the exercise of its. police power, and hence is not within the protection of the Federal Constitution.

Ra st v. Van Demon & Lewis Co., 240 U. S. 342 ; Tanner v. Little, Id. 369; Pitney v. Washington, Id. 387. These decisions were based on the theory that such a busi ⁴⁴⁰ ness is not so clearly devoid of any injurious effect upon the public welfare as to justify a judicial declaration that the effort of the Legislature to apply the police power to the subject is manifestly arbitrary and unreasonable and therefore ineffective. The .considerations supporting this view were stated in part as follows: “There are many lawful restrictions -upon liberty of contract and business. It would be' an endless task to cite cases in demonstration, and that the supplementing of the sale of one article by a token given and to he redeemed in some other article has accompaniments and effects beyond mere advertising, the allegations of the bill and the arguments of counsel establish.

Advertising is merely identification and description, apprising of quality and .place. It has no other object than to draw attention to the article to he sold, and the acquisition of the article to he sold constitutes the only inducement to its purchase * * “The schemes of complainants have no such directness and effect. They rely upon something else than the article sold. They tempt by a promise of a value greater than that article and apparently not represented in its price, and it hence may be thought that thus by an appeal to cupidity, lure to improvidence.

This may not be called in an exact sense a ‘lottery,’ may not be called ‘gaming’; -it may, however, be considered as having the seduction and evil of such, and whether it has may he a matter of inquiry,—a matter of inquiry and judgment that it is finally within the power of the Legislature to malee. Certainly in the first instance, and, as we have seen, its judgment is not impeached by urging against it a difference of opinion. Chicago, B. & Q. R. Co. v. McGuire, 219 U. S. 549 , and German Alliance Ins. Co. v. Lewis, 233 U. S. 389 .

And it is not required that we should be sure as to the precise reasons for such judgment, or that we should certainly know them or he convinced of the wisdom of the legislation. Southwestern Oil Co. v. Texas, 217 U. S. 114, 126, 127 . See also Munn v. Illinois, 94 U. S. 113, 132 .” ⁴⁴¹ “But it may be said that judicial opinion can not be controlled by legislative opinion of what are fundamental rights. This is freely conceded; it is the very essence of constitutional law; but its recognition does not determine supremacy in any given instance. ‘While the courts must exercise a judgment of their own, it by no means is true that every law is void which may seem to the judges who pass upon it excessive, unsuited to its. ostensible end, or based upon conceptions of morality with which they disagree.

Considerable latitude must be allowed for differences of view as well as for possible peculiar conditions which this Court can know hut imperfectly, if at all * * Otis v. Parker, 187 U. S. 606, 608, 609 .” East v. Van Deman & Lewis Co., supra, 365, 366. In Tanner v. Little, supra, at page 384 of tho opinion, the Court repeats that the so called “ ‘premium system’ is not one of advertising merely. It has other, and, it may be, deleterious, consequences. It does not terminate with the bringing together of seller and buyer, the profit of one and the desire of the other satisfied, the article bought and its price being equivalents.

It is not so limited in purpose or effect. It has ulterior purpose, and how it has developed complainants: vividly represent by their averments. It appears that companies are formed, called trading stamp companies, which extend and facilitate the scheme, making a seller of merchandise their agent for the distribution of stamps to be redeemed by them, or other merchants', the profit of all being secured through the retail purchaser who> has been brought under the attraction of the system. There must, therefore, be something more in it than the giving of discounts, something more than the mere laudation of wares.

If companies—evolved from the system, as counsel say in justification of them—are able to reap a profit from it, it may well be thought there is something in it, which is masked, from the common eye; and that the purchaser at retail is made to believe that he can get more out of the fund than he has put into it, something of value which is not offset in tho prices, or quality of the articles which he buys. It is certain that the prices, he pays, make the ⁴⁴² efficiency of the system and the fund, if we may individualize it, out of which the cost of the instruments and agents of the system must be defrayed and the profit to all concerned paid. The system, therefore, has features different from the ordinary transactions of trade which have their impulse, as we have said, in immediate and definite desires having definite and measurable results. There may be in them at times reckless buying, but it is not provoked or systematized by the seller. “Complainants charge that the tax of the statute is not upon the business, but upon its incidents.

The separation is artificial. It is the incidents which give character to the business, affecting it with evil, it was thought, provoking therefore against it the power' of the States and taking away from it the immunity it else might have. It is unimportant what, the incidents may be called, whether a method of advertising, discount giving, or profit sharing. Their significance is not in their designations, but in their influence upon tire public welfare.

And of this the judgment of the Legislature must prevail, though it he controverted and opposed by arguments of strength. Nor is there support of the system or obstruction to tbe statute in declamation against sumptuary laws, nor in the assertion that there is evil lesson in the statute, nor in the prophecies which are ventured of more serious intermeddling with the¡ conduct of business. Neither the declamation, the assertion, nor the prophecies can influence a present judgment. As to what extent legislation should interfere in affairs political, philosophers have disputed and always will dispute.

It is not in our province to engage on either side, nor to pronounce anticipatory judgments. We must wait for the instance. Our present duty is to pass upon the statute before us, and if it has been enacted upon a belief of evils that is not arbitrary, we cannot measure their extent against the estimate of the Legislature. McLean v. Arkansas, 211 U. S. 539 .

Such belief bas many examples in State legislation, and, we have seen, it lias persisted against adverse judicial opinion. If it may be said to be a judgment from ⁴⁴³ experience as against a judgment from speculation, certainly, from its generality, it can not be declared to be made in mere wanloness. Central Lumber Co. v. South Dakota, 226 U. S. 157, 160 ; Purity Extract & Tonic Co. v. Lynch, 226 U. S. 192, 204, 205 ,” In each of the cases cited the statute under consideration imposed a license charge which was alleged and assumed to be prohibitive of the particular use of the trading stamps there involved. But it was held that it was competent for the Legisture to give the license; such effect under the police power of the State, as to which the Court said: “We will not here define it or its limitations!

As was said by Mr. Justice Brown, in Camfield v. United States, 167 U. S. 518 , citing Rideout v. Knox, 148 Mass. 368 : The police power is not subject to any definite limitations, but is coextensive with the necessities of the case and the safeguard of the public interests.’ ” It was stated by the Court in the Tanner case, as it had remarked also in effect in the Bast case, that it was not then “concerned with consideration of a business in which, coupons, etc., are issued or used and not redeemed in merchandise'; that is, where they are used as a rebate upon the price of the article or a discount upon purchases;, nor with the legality of a, statute which should regulate or prevent such use of the coupons disassociated from other uses of them.” The appeal in Pitney v. Washington, supra, resulted in the affirmance of a judgment of the Supreme Court of the State of Washington, which overruled the previous decision of that Court in Leonard v. Bassindale, 46 Wash., 301 , holding unconstitutional a statute by which the use of trading stamps was prohibited. The earlier ruling of the Washington Court had followed the general trend of judicial opinion on the subject at that period, but that Court reached a different conclusion in the Pitney case, in view of the scope and effect given to the police power by decisions of the Supreme Court of the United States. State v. Pitney, 79 Wash. 608 ; 80 Wash. 699 , 140 Pac. 918 . In discussing the question whether ⁴⁴⁴ a state of facts could exist which might reasonably have induced the Legislature to forbid the use of trading stamps in connection with the sale of merchandise, the Supreme Court of Washington said: “It might reasonably be supposed or presumed that the Legislature believed that the use of these stamps would encourage indiscriminate and unnecessary purchasing by people ill able to indulge in any extravagance.

Or suppose that the Legislature believed that the use of these stamps was practically forced upon- certain merchants without any practical benefit resulting therefrom, and thus they were compelled to pay 3% per cent, upon their gross sales for the use of the stamps. The Legislature might reasonably have believed that the stamp companies, in order to cause the stamps to be used in a certain city, would contract with one merchant for their use, agreeing to- pay him a percentage of the sums collected by them from other merchants, and then use the first contract so secured to force other merchants into using the stamps or suffer loss of trade by failure so to do. In other words, that legitimate business was virtually coerced into paying tribute to the stamp- company, a non-producer of wealth or value.” In State v. Wilson (Kan.), 168 Pac. 619 , a prohibitory license charge for the use of trading stamps under a statutory provision of the general nature of the one with which we are dealing in this case was sustained upon the authority of the Federal Supreme Court decisions which we have cited. The Kansas Court said: “If the legislation under consideration is a proper exercise of the police power, it violates neither the State nor the Federal- Constitutions.

If it is not, it violates both. Therefore, although this Court has the power to hold it invalid because in conflict with the fundamental law of this State, it can do- so only by rejecting the reasoning upon which the decision of the Supreme Court of the United States is based, and taking a narrower view of the police power of the State than that adopted by the Federal Court * * * The question for our determination is not whether in our judgment the objections urged against the ⁴⁴⁵ trading stamp device, on which the statute is baaed, are .sound, but whether they are so plainly unsound that they may confidently be characterized as unreasonable and capricious. ‘If it has been enacted upon a belief of evils that is not arbitrary, we can not measure their extent against the estimate of the Legislature.’ Tanner v. Little, 240 U. S. 385 . The fact that in a majority of the States of the Union some form of repressive legislation against trading stamps has been undertaken, and that the Parliament of Canada has prohibited their use, is evidence of a widespread belief in their pernicious influence.” 'The Supreme Court of Indiana in an opinion disposing of the trading stamp license case of Sperry & Hutchinson Co. v. State, 122 E. E. 584, decided March 26th, 1919, adopted (he principles applied by'the Federal Supreme Court in the cases of Rast v. Van Deman & Lewis Co., Tanner v. Little , and Pitney v. Washington, supra, but held the particular statute under inquiry void for an arbitrary discrimination against those engaged in the sale of trading stamps for redemption in articles not of their own manufacture. In the Michigan case of People v. Sperry & Hutchinson Co., 164 N. W. 503 , the Supreme Court decisions we have referred to were considered, and while no disagreement was expressed as to the principles therein declared, the trading stamp