Opinion
Steck & Marston, Emil Steck, Jr., Pasadena, for respondents.
Thomas C. Lynch, Atty. Gen., State of California, Lynn Henry Johnson, Deputy Atty. Gen., Los Angeles, for appellants.
Miller, Groezinger, Pettit, Evers & Martin, San Francisco, for amicus curiae California Grocers Assn.
Albert G. Evans, San Francisco, for amicus curiae California Beer Wholesalers Association, Inc.
DEVINE, Presiding Justice.
The question is whether the Department of Alcoholic Beverage Control and its Director, appellants, may forbid the posting of quantity discounts on wholesale sales of beer. To forbid the posting of quantity discounts is to forbid such discounts altogether, because the statute requires strict adherence to the posted prices. (Bus. & Prof. Code, § 25004.) The Department has a rule which has existed since 1951 and which reads: 'The schedule of prices for the sale of beer, as required by Section 25000 of the Alcoholic Beverage Control Act, shall be filed with the department on a form prescribed by the department, in accordance with instructions thereon. All prices filed shall be for immediate delivery. Contract prices for future deliveries of beer and quantity discounts shall not be filed with the department.' (Cal.Admin.Code, tit. 4, § 105(a); emphasis added.)
Respondents, operators of retail stores, petitioned the Department to eliminate from the rule the proscription of quantity discounts, but after hearing, the Department denied the petition. Thereupon, respondents sought and obtained writ of mandate in the superior court, requiring the deletion from the rule of the prohibition of quantity discounts.
The Department contends that it has the right to forbid such quantity discounts on wholesale sales of beer by reason of (1) section 22 of article XX of the Constitution of California; (2) section 25006 of the Business and Professions Code; and (3) ratification by the Legislature. The ratification, says the Department, is shown by the fact that the Legislature, although informed of rule 105(a), has not proceeded to abrogate it. Respondents contend that the challenged part of rule 105(a) is a price-fixing decree which is not authorized in any of the three ways proposed by appellants.
The California Grocers Association has filed an amicus curiae brief in support of respondents, and the California Beer Wholesalers Association, Inc., which appeared as amicus in the superior court also, has filed one on behalf of the Department.
The Constitution
That part of section 22, article XX, of the California Constitution upon which appellants rely provides: 'The Department of Alcoholic Beverage Control shall have the exclusive power, except as herein provided and in accordance with laws enacted by the Legislature, to license the manufacture, importation and sale of alcoholic beverages in this State, and to collect license fees or occupation taxes on account thereof. The department shall have the power, in its discretion, to deny, suspend or revoke any specific alcoholic beverage license if it shall determine for good cause that the granting or continuance of such license would be contrary to public welfare or morals * * *.'
That this part of the Constitution is not the source of the authority to fix prices, and that the forbidding of quantity discounts does constitute price fixing, has been established in Schenley Industries, Inc. v. Munro, 237 Cal.App.2d 106, 111-112, 46 Cal.Rptr. 678. The Schenley case had to do with the Department's rule 100, which restricted Allied Properties v. Dept. of Alcoholic Beverage Control,
Wilke & Holzheiser, Inc. v. Dept. of Alcoholic Beverage Control,Business & Professions Code Section 25006
This section reads as follows: 'The department may adopt such rules, including but not limited to rules respecting beer price posting, as will foster and encourage the orderly wholesale marketing and wholesale distribution of beer, but no such action shall be taken by the department except after public hearing and ten (10) days notice to all licensed manufacturers of beer in California of the time and place of the hearing and of the character of the action intended to be taken by the department.' Since 1937 there has been a statute, giving rule-making authority to the Department or to its predecessor, the State Board of Equalization, to adopt such rules as will foster and encourage the orderly wholesale marketing and wholesale distribution of beer. The predecessor section to 25006 was section 38e of the Alcoholic Beverage Control Act. (Stats. 1937, ch. 758, p. 2159.) In 1953 the words 'such rules' were modified by addition of the clause, 'including but not limited to rules respecting beer price posting.' (Stats. 1953, ch. 152, p. 1009.)
We conclude that section 25006 does not confer on the Department the power to forbid quantity discounts in wholesale sales of beer. Our reasons are:
1. The fixing of prices by governmental agencies is a large intervention by government into the economy. The delegation of such power by the Legislature ought to be explicit and not to be inferred from a statute which provides in a general way for rules relating to orderly marketing and distribution.
2. When the Legislature wished to limit (although it did not completely forbid) quantity discounts in the wholesale purveying of wine, it did so explicitly by the terms of section 24871 of the Business and Professions Code.
3. When, in 1953, the Legislature added the words, 'including but not limited to rules respecting beer price posting' (emphasis added), it would be expected that if the Legislature intended to grant the power to prevent quantity discounts, it would have said so.
4. The whole pattern of price regulation in respect of alcoholic beverages, with the exception of the limitation on quantity discounts in the wholesale marketing of wine, as expressly provided for by statute, is a conjunction of posting of prices by the seller at his own choice as he views the state of the market and of competition with a prohibition against sales at prices which depart from the posted ones, and the use, wherever applicable, of the Fair Trade Act. It is true that the outlawing of quantity discounts does not fix prices in the same manner as would exist if the government were to declare the exact price at which a commodity could be sold, but it does fix prices by making it impossible for a seller to choose a lower price for a larger sale.
5. The Schenley case is also an authority for our conclusion, but by no means an exclusive one, for we have stated our reasons Schenley Industries, Inc. v. Munro,
It is argued by appellants that an essential distinction exists between the marketing of distilled spirits and the marketing of beer, and that this distinction abrogates the authority of the Schenley case. The distinction, they say, is this: distilled spirits do not deteriorate on the shelves of the retailer, but beer does deteriorate rather rapidly. Thus, they say, the small retailer must buy from the wholesaler in small lots, paying a higher price than his bigger and more affluent competitors need do, or purchase in too great quantity in order to obtain the discount and risk the spoiling or deterioration of the beer and the probable loss of customers. But we think the trial judge was correct in saying that the test is not one of the desirability or undesirability of the rule, but of what power the Legislature has chosen to give to the Department. The evidence as to the advantage of the rule was substantial; but so was the contrary evidence. In the Schcnley case, too, there was sharp disagreement as to the desirability of the rule. The Court of Appeal decided, as we do in sustaining the trial court, that statutory authority to forbid quantity discounts presently is lacking.
The Subject of Legislative Ratification of the Rule
Appellants argue that the Legislature demonstrated its approval of rule 105(a) by re-enacting section 25006 or its predecessors after the Legislature had been informed of the existence of the rule and, as appellants state, judicial approval of wholesale price fixing of beer. We shall consider first the cases referred to by appellants. They antedate rule 105(a). Appellants make reference to Adolph Coors Co. v. Corbett (Cal. App.) 123 P.2d 74, a case in which hearing by the Supreme Court was granted. The case was subsequently dismissed. This case is not authority at all. The mind cannot conceive anything so nearly approaching complete annihilation as an opinion of the Court of Appeal after hearing has been granted by the Supreme Court. (See Ponce v. Marr, 47 Cal.2d 159, 301 P.2d 837.) Of course, since even this obliterated decision Blatz Brewing Co. v. Collins,
Appellants also point to the principle that the interpretation of a statute made by the agency which must enforce it is entitled to weight, as stated in California Motor Express v. State Bd. of Equalization, 133 Cal.App.2d 237, 240, 283 P.2d 1063; Mauro v. Dept. of Mental Hygiene, 207 Cal.App.2d 381, 387, 24 Cal.Rptr. 505; and Peck's Liquors, Inc. v. Superior Court, etc., 221 Cal.App.2d 772, 784-785, 34 Cal.Rptr. 735. But administrative interpretation cannot give to the agency substantial powers which are not conferred by law. Where the administrative construction is erroneous it does not govern the interpretation of the statute even though the statute is subsequently re-enacted without change. (Louis Stores, Inc. v. Dept. of Alcoholic Beverage Control, 57 Cal.2d 749, 759-760, 22 Cal.Rptr. 14, 371 P.2d 758.)
The mere filing of rule 105(a) with the Legislature, as required by section 11380 of the Government Code, does not, simply because no legislative action followed, constitute a ratification by the Legislature. Appellants have not pointed to any instance within the record where the Legislature has had before it a clear presentation, with demand or petition for legislative action, one way or the other, of prohibition of quantity discounts on wholesale sales of beer.
The judgment is affirmed.
RATTIGAN and CHRISTIAN, JJ., concur.