KENTUCKY

REGULATION OF PRICE COMPETITION

A. RESALE PRICE MAINTENANCE

Stat. Ann. (Baldwin's Carroll, Supp., 1939)

Section 47481-1. Contracts relating to resale.-No contract relating to the sale or resale of a commodity which bears, or the label or content of which bears, the trade-mark, brand, or name of the producer or owner of such commodity and which is in fair and open competition with commodities of the same general class produced by others shall be deemed in violation of any law of the Commonwealth of Kentucky by reason of any of the following provisions which may be contained in such contract:

(1) That the buyer will not resell any such commodity except at the price stipulated by the vendor.

(2) That the producer or vendee of a commodity require upon the sale of such commodity to another, that such purchaser agree that he will not, in turn, resell except at the price stipulated by such producer or vendee.

Such provisions in any contract shall be deemed to contain or imply conditions that such commodity may be resold without reference to such agreement in the following cases:

(1) In closing out the owner's stock for the purpose of discontinuing delivery of any such commodity: Provided, however, That such stock is first offered to the manufacturer of such stock at the original invoice stock price, at least ten (10) days before such stock shall be offered by sale to the public.

(2) When the goods are damaged or deteriorated in quality, and notice is given to the public thereof.

(3) By any officer acting under the orders of any court. (1936, 4th Ex. S., c. 24, P. 175, sec. 1.)

Sec. 47481-2. Acts deemed a violation.-Wilfully and knowingly advertising, offering for sale or selling any commodity at less than the price stipulated in any contract entered into pursuant to the provisions of section 4748i-1 of this act, whether the persons so advertising, offering for sale or selling is or is not a party to such agreement, is

unfair competition and is actionable at the suit of any person damaged thereby. (Id. sec. 2.)

Sec. 47481-3. Exemptions.-This act shall not apply to any contract or agreement between producers or between wholesalers or between retailers as to sale or resale prices. (Id. sec. 3.)

Sec. 47481-4. Partial invalidity. If any section, sentence, or clause of this act shall for any reason be held invalid or unconstitutional, such decision shall not affect the validity of the remaining parts hereof. (Id. sec. 4.)

Sec. 47481-5. Title of act.-This act may be known and cited as the "Fair Trade Act." (Id. sec. 5.)

Judicial Decisions

Under Antitrust Law.

Where a manufacturer alone regulates and controls resale prices on goods sold by him to jobbers by requiring the jobbers not to resell the goods at prices less than those fixed by him, the transaction is not in violation of the antitrust law, in the absence of horizontal price fixing between manufacturers. Commonwealth v. Grinstead, 111 Ky. 203, 63 S. W. 427 (1901).

B. PROHIBITION OF SALES BELOW COST

Stat. Ann. (Baldwin's Carroll, 1936)

Sec. 4748h-3. Sales at less than cost.-It shall be unlawful for any person, partnership, firm, corporation, joint stock company, or other association engaged in business within this State, to sell, offer for sale, or advertise for sale any article or product, or service or output of a service trade, at less than the cost thereof to such vendor, or give, offer to give or advertise the intent to give away any article or product, or service or output of a service trade for the purpose of injuring competitors and destroying competition, and he or it shall also be guilty of a misdemeanor and on conviction thereof shall be subject to the penalties set out in section 4748h-11 of this act for any such act. The term "cost" as applied to production is hereby defined as including the cost of raw materials, labor and all overhead expenses of the producer; and as applied to distribution "cost" shall mean the invoice or replacement cost, whichever is lower, of the article

'For section 4748h-1 dealing with unlawful practices, see Antidiscrimination Legislation: General Prohibitory Laws, infra. For section 2 dealing with officers and agents, see infra.

or product to the distributor and vendor plus the cost of doing business by said distributor and vendor. The "cost of doing business" or "overhead expense" is defined as all costs of doing business incurred in the conduct of such business and must include without limitation the following items of expense: Labor (including salaries of executives and officers), rent, interest on borrowed capital, depreciation, selling cost, maintenance of equipment, delivery costs, credit losses, all types of licenses, taxes, insurance, and advertising. (1936, c. 109, sec. 3.)

Sec. 4748h-4. Bankrupt sales.-In establishing the cost of a given article or product to the distributor and vendor, the invoice cost of said article or product purchased at a forced bankrupt, close-out sale, or other sale outside of the ordinary channels of trade may not be used as a basis for justifying a price lower than one based upon the replacement cost as of date of said sale of said article or product replaced through the ordinary channels of trade, unless said article or product is kept separate from goods purchased in the ordinary channels of trade and unless said article or produce is advertised and sold as merchandise purchased at a forced bankrupt, close-out sale, or by means other than through the ordinary channels of trade, and said advertising shall state the conditions under which said goods were so purchased, and the quantity of such merchandise to be sold or offered for sale. (Id., sec 4.)

Sec. 4748h-5. Cost surveys.-In any injunction proceeding or in the prosecution of any person as officer, director, or agent, it shall be sufficient to allege and prove the unlawful intent of the person, firm, or corporation for whom or which he acts. Where a particular trade or industry, of which the person, firm, or corporation complained against is a member, has an established cost survey for the locality and vicinity in which the offense is committed, the said cost survey shall be deemed competent evidence to be used in proving the costs of the person, firm, or corporation complained against within the provisions of this act. (Id., sec. 5.)

Sec. 4748h-6. Closing-out sales, etc.-The provisions of sections 4748h-3, 4748h-4 and 4748h-5 shall not apply to any sale made: (a) In closing out in good faith the owner's stock or any part thereof for the purpose of discontinuing his trade in any such stock or commodity, and in the case of the sale of seasonable goods or to the bona fide sale of perishable goods to prevent loss to the vendor by spoilage or depreciation, provided notice is given to the public thereof; (b) When the goods are damaged or deteriorated in quality and notice is given to the public thereof; (c) By an officer acting under the orders of any court; (d) In an endeavor made in good faith to meet the legal prices of a competitor as herein defined selling the same article or product, or

service or output of a service trade, in the same locality or trade area. Any person, firm, or corporation who performs work upon, renovates, alters, or improves any personal property belonging to another person, firm, or corporation, shall be construed to be a vendor within the meaning of this act. (Id., sec. 6.)

Sec. 4748h-7. Rebates, refunds, etc.-The secret payment or allowance of rebates, refunds, commissions, or unearned discounts, whether in the form of money or otherwise, or secretly extending to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, to the injury of a competitor, and where such payment or allowance tends to destroy competition, is an unfair trade practice, and any person, firm, partnership, corporation, or association resorting to such trade practice shall be deemed guilty of a misdemeanor and on conviction thereof shall be subject to the penalties set out in section 11 of this act. (Id., sec. 7.)

Sec. 4748h-2. Officers and agents.-Any person who, either as director, officer, or agent of any firm or corporation or as agent of any person violating the provisions of this act assists or aids, directly or indirectly, in such violation shall be responsible therefor equally with the person, firm, or corporation for whom or which he acts. In the prosecution of any person as officer, director, or agent it shall be sufficient to allege and prove the unlawful intent of the person, firm, or corporation for whom or which he acts. (Id., sec. 2.)

Sec. 4748h-8. Attorney general to prosecute.-Upon the third violation of any of the provisions of sections 4748h-1 to 4748h-7, inclusive, of this act, by any corporation, it shall be the duty of the attorney general to institute proper suits or quo warranto proceedings in any court of competent jurisdiction for the forfeiture of its charter, rights, franchises, or privileges and powers exercised by such corporation, and to permanently enjoin it from transacting business in this State. If in such action the court shall find that such corporation is violating or has violated any of the provisions of sections 4748h-1 to 4748h-7, inclusive, of this act, it must enjoin said corporation from doing business in this State permanently or for such time as the court shall order, or must annul the charter, or revoke the franchise of such corporation. (Id., sec. 8.)

Sec. 4748h-9. Illegal contracts.-Any contract, express or implied, made by any person, firm, or corporation in violation of the provisions of sections 4748h-1 to 4748h-7, inclusive, of this act, is declared to be an illegal contract and no recovery thereon shall be had. (Id., sec. 9.)

Sec. 4748-10. Injunctive relief.-Any person, firm, private corporation, or municipal, or other public corporation, or trade associa

tion, may maintain an action to enjoin a continuance of any act or acts in violation of sections 4748h-1 to 4748h-7, inclusive, of this act, and if injured thereby, for the recovery of damages. If, in such action, the court shall find that the defendant is violating or has violated any of the provisions of sections 4748h-1 to 4748h-7, inclusive, of this act, it shall enjoin the defendant from a continuance thereof. It shall not be necessary that actual damages to the plaintiffs be alleged or proved. In addition to such injunctive relief, the plaintiff in said action shall be entitled to recover from the defendant three times the amount of the actual damages, if any, sustained. Any defendant in an action brought under the provisions of this section may be required to testify; in addition, the books and records of any such defendant may be brought into court and introduced, by reference, into evidence: Provided, however, That no information so obtained may be used against the defendant as a basis for a misdemeanor prosecution under the provisions of sections 4748h-1 to 4748h-7, inclusive, and 4748h-11, of this act. (Id., sec. 10.)

Sec. 4748h-11. Penalties.-Any person, firm, or corporation, whether as principal, agent, officer, or director, for himself, or itself, or for another person, or for any firm or corporation, or any corporation who or which shall violate any of the provisions of sections 4748h-1 to 4748h-7, inclusive, of this act, is guilty of a misdemeanor for each single violation and upon conviction thereof, shall be punished by a fine of not less than one hundred ($100) dollars nor more than one thousand ($1,000) dollars, or by imprisonment not exceeding six months or by both said fine and imprisonment, in the discretion of the court. (Id., sec. 11.)

Sec. 4748h-12. Constitutionality.-If any section, sentence, clause, or phrase of this act is for any reason held to be unconstitutional such decision shall not affect the validity of the remaining portions of this act. The Legislature hereby declares that it would have passed this act, and each section, sentence, clause, or phrase thereof, irrespective of the fact that any or more other sections, sentences, clauses, or phrases be declared unconstitutional. The remedies herein prescribed are cumulative. (Id., sec. 12.)

Sec. 4748h-13. Purpose.-The legislature declares that the purpose of this act is to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition by prohibiting unfair and discriminatory practices by which fair and honest competition is destroyed or prevented. This act shall be literally construed that its beneficial purposes may be subserved. (Id., sec. 13.)

Sec. 4748.14 Title.-This act shall be known and designated as the "Unfair Practices Act." (Id., sec. 14.)