Tobacco Co., supra; Balzer v. Caler, supra; Food & Grocery Bureau of So. Cal. v. Smith Metropolitan Market Co. (Super. Ct. 1939), 3 CCH 25247.

The court in Balzer v. Caler, supra, held that a sale below cost as a means of advertising to attract customers was not a violation of the statute. The court stated that loss leaders were a well-recognized method of advertising and that proof of loss leader sale was not proof of sale below cost with intent to injure.

Meeting Competition.

In answer to an allegation that the statute is discriminatory in that large stores have lower selling costs, it has been pointed out that the statute allows meeting the price of a competitor in good faith and thus prevents any discriminatory effect. Wholesale Tobacco Dealers Bureau of So. Cal. v. National Candy & Tobacco Co., supra.

A grocer may not sell an advertised brand of butter below cost in order to meet the prevailing price on unadvertised brands. Op. Att'y Gen., N. S. 1290, Nov. 28, 1938, 2 CCH 2343; 2 P-H., 40509. Cost Surveys.

Cost survey by accountants derived from account books of a majority of the membership of a trade association, is not a cost survey within the meaning of the statute unless practically all persons engaged in the industry in the locality covered by the survey are members of the association. Op. Atty's Gen., Nov. 6, 1935, 2 CCH, 2343.

C. ANTIDISCRIMINATION LEGISLATION

1. General Prohibitory Laws

Gen. Laws (Deering, 1937, Act 8781 as amended by Gen. Laws (Deering, Supp. 1939) Act 8781)

Sec. 1. Unlawful practices.-It shall be unlawful for any person, engaged in the production, manufacture, distribution, or sale of any article or product of general use or consumption, with the intent to destroy the competition of any regular established dealer in such article or product, or to prevent the competition of any person, who in good faith, intends and attempts to become such dealer, to discriminate between different sections, communities, or cities or portions thereof, or between different locations in such sections, communities, cities, or portions thereof in this State, by selling or furnishing such article or product, at a lower price in one section, community, or city, or any portion thereof, or in one location in such section, community, or city, or any portion thereof, than in another: Provided, That nothing herein contained shall prevent differentials which make allowances

for differences, if any, in the grade, quality, or quantity when based and justified in the cost of manufacture, sale, or delivery, or the actual cost of transportation from the point of production, if a raw product or commodity, or from the point of manufacture, if a manufactured product or commodity, or from the point of shipment to the point of destination: And provided further, That nothing herein contained shall prevent a selection of customers or a functional classification by any person of any customer as broker, jobber, wholesaler, or retailer or a differential in price for any article or product as between any customers in different functional classifications. Motion-picture films when licensed for exhibition to motion-picture houses shall not be deemed to be an article or product under this act. Neither shall anything in this act be deemed to apply to any service, article, or product for which rates are established under the jurisdiction of the Railroad Commission of the State of California and sold or furnished by any public utility corporation, or installation and repair services rendered in connection with any services, articles, or products; or to any service, article, or product sold or furnished by a publicly owned public utility and upon which the rates would have been established under the jurisdiction of the Railroad Commission of the State of California if such service, article, or product had been sold or furnished by a public utility corporation, or installation and repair services rendered in connection with any services, articles, or products.

The inhibition of this act against locality discrimination shall embrace any scheme of special rebates, collateral contracts, or any device of any nature whereby such discrimination is, in substance or fact, effected in violation of the spirit and intent of this section: Provided, however, That nothing in this section shall be construed to prohibit the meeting in good faith of a competitive price. (Amended by Stats. 1931, p. 1333; Stats. 1935, p. 1547; Stats. 1937, p. 2395.) '

Agric. Code (Deering, 1937)

Rebates and Discounts

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Sec. 1156. Contract to pay or allow brokerage charge, rebate, etc., void; exceptions; taking part in transaction, misdemeanor.Any contract made for the purpose of injuring competitors and destroying competition under which the seller of any agricultural product agrees to pay or allow any brokerage charge, rebate, discount, or other credit, other than an allowance for variation in quality, condition, quantity, or any other form of compensation or credit by a seller to a buyer, or to an agent, employee, subsidiary, or affiliate of a buyer who buys to sell at retail and which is not paid, given, or For procedural and penalty provisions, see Prohibitions of Sales Below Cost, infra.

allowed in like circumstances to all other buyers or to the agents, employees, subsidiaries, or affiliates of other buyers, whether the same is paid or allowed directly or indirectly, is hereby declared to be against public policy and void: Provided, That advertising allotments or discounts by a seller to a buyer for bona fide advertising expenditures are not included. It is a misdemeanor for any person to take any part in such a transaction whether as seller, buyer, buyer's agent, employee, or subsidiary. (Added by Stats. 1935, p. 2248.)

Sec. 1272.5. Sale for less than current price or receipt of portion of price; prima facie evidence of fraud.-Any sale of farm products made by a commission merchant for less than the current market price to any person with whom he has any financial connection, directly or indirectly as owner of its corporate stock, as copartner, or otherwise, or any sale out of which said commission merchant receives, directly or indirectly, any portion of the purchase price, other than the commission allowed in section 1266, shall be prima facie evidence of fraud within the meaning of this chapter. (Added by Stats. 1933, p. 2081.) See Stats. 1933, p. 286.

Judicial Decisions

In a proceeding before the Railroad Commission for violation of Stat. 1913, p. 508, enacted prior to Act 8781, supra, it was held that a public utility, merely by meeting the rates of a competitor within a certain territory in order to attempt to hold its business, did not create an unjust or unlawful discrimination. The statute expressly allows a bona fide meeting of a competitive rate and recognizes that the existence of competition in one area warrants maintaining different rates in that territory from those in an area where there is no competition. In re Pacific Gas & Electric Co., 36 Dec. of R. R. Commission 766 (1931).

The railroad commission has properly granted an application of a public utility to increase rates in one area in order to achieve a uniform price and thereby complying with the statute. In re Southern California Edison Co., 4 R. C. D. 159 (1914).

In an action by one public utility against a competitor for violation of the statute, it was held that the railroad commission does not have jurisdiction to settle disputes arising out of violation of the statute. Home Telephone & Telegraph Co. of Santa Barbara v. Pacific Telephone & Telegraph Co., 6 R. C. D. 124 (1915).

Another section of the same number and in substantially the same language was added by Stats. 1933, p. 1787, and repealed by Stats. 1937, p. 721.

2. Special Prohibitory Laws

Agric. Code (Deering, 1937)

Marketing of Milk and Other Dairy Products

Section 1299.2 provides that the director of agriculture shall have power to issue licenses, administer and enforce all provisions of this act, and make the necessary orders, rules, and regulations.

Sec. 1299.1. Unlawful methods and practices.—In the marketing of market milk, cream, and dairy products the following methods of doing business or trade practices are hereby declared unlawful:

(a) The payment or allowance of rebates, refunds, commissions, or unearned discounts to any customer whether in the form of money or otherwise.

(b) The giving of any milk, cream, or dairy products for the purpose of securing business provided the giving of milk, cream, or dairy products to bona fide charities is not prohibited.

(c) The extension to any purchasers of milk, cream, or dairy products of special prices, services, or privileges not extended to all purchasers upon like terms and conditions.

(d) Any false or misleading advertising of milk, cream, or dairy products as defined in section 654a of the Penal Code.

(e) Any discriminations between wholesale customers or between consumers who purchase milk, cream, or dairy products under like conditions of service as to prices at which milk, cream, or dairy products are sold thereto or any discrimination between different sections, communities, or cities, in the same sales or marketing area, or portions thereof or between different localities in such sections, communities, or cities or portions thereof by selling milk, cream or dairy products at a lower price in one section, community, or city, or any portion thereof or in one location in such section, community, or city or any portion thereof than in another after making allowance for difference, if any, in the cost of such milk, cream, or dairy products, and the actual cost of transportation of such milk, cream, or dairy products from the point of processing or manufacture.

(f) The solicitation of the business of any wholesale customer or consumer at lower prices for milk, cream, or dairy products of like quality or grade sold under like conditions of service than such wholesale customer or consumer is then paying a competitor.

(g) The sale or offer to sell, or giving of any article at less than the prevailing market price thereof to secure the milk, cream, or dairy products business of any wholesale customer or any person who buys as a consumer.

(h) The payment by distributors or manufacturers of different prices for milk purchased from producers of the same grade and

quality used for similar purposes in the same marketing or sales area provided that differences in actual cost of transportation from point of production to distributors' or manufacturers' plant shall not be construed as a violation of this section. The payment by distributors or manufacturers in any marketing or sales area of a lower price to any producer than is being paid by distributors or manufacturers for fifty-one percent of all milk used in such marketing or sales area for similar purposes.

(i) Any payment by any distributor or manufacturer to any producer for milk purchased, in the same sales or marketing area, at a lower price than that at which all milk used by such distributor or manufacturer for similar purposes is paid for.

(j) The payment by a distributor or manufacturer to any producer at a price less than the average prevailing cost of production of milk of like quality to the producer in the area as determined by the director.

(k) The sale by any distributor who produces his own milk or who produces his own milk and acquires other milk for distribution at a price less than the average prevailing cost of production and distribution in the area as determined by the director.

(1) Sale of milk, cream, or dairy products at less than cost as defined in this subsection, provided that nothing in this subsection shall prohibit the meeting of any legal price made by any competitor. For the purposes of this subsection the term "cost" is hereby defined as the price paid for such milk, cream, or dairy products at seller's place of business plus cost, if any, of processing, handling, and delivery.

(m) The buying by any distributor of any market milk, excluding cream, from producers unless a written contract is executed by buyer and seller specifying the price and terms upon which said milk is purchased by the distributor and sold by the producer, and unless said contracts or any amendments thereof are recorded with the director within five days of their execution.

(n) The engaging in business as a distributor, manufacturer, or producer, as said terms are defined in this chapter, by any person who does not hold a license or who is not registered as herein provided. (Added by Stats. 1935, p. 1448.)

Section 1299.5 provides that the director may refuse to grant any license, and after due hearing revoke or suspend any such license when he is satisfied that any applicant or licensee has violated any of the provisions of this chapter.

Sections 1299.10 to 1299.12 provide that on complaint, or on his own initiative, the director is empowered to make investigation of