Eby-Brown Company: Guilty of the Crime of Charging Lower Prices to Consumers

If the Ninth Circuit has become a haven for rogue anti-patriotic judges, as many politicians claim, than the Seventh Circuit has become the refuge of the business-hating justices. Last month the Chicago-based Seventh Circuit found that companies could be found guilty of violating the antitrust laws even when no evidence was actually presented showing “anticompetitive” conduct. This week, this same court has held that states can regulate private business transactions even when they provide no rational basis for doing so. A unanimous three-judge panel of the Seventh Circuit affirmed a lower court’s decision on Monday in the case of Eby-Brown Company v. Wisconsin Department of Agriculture. The case involves a challenge to Wisconsin’s “Unfair Sales Act,” which prevents “the practice of selling certain items of merchandise below cost in order to attract patronage.” According to the Wisconsin legislature, such actions divert “business from dealers who maintain a fair price policy.” Eby-Brown, a local tobacco company, was prevented under this statute from passing along savings it acquired in trade to local wholesalers. In other words, to quote the Court of Appeals, if Eby-Brown got a 15% discount for paying for merchandise in cash, it was prevented by law from applying that 15% discount when selling their products to a wholesaler; the “fair” price was the higher one. Eby-Brown said the Wisconsin law violated their constitutional rights under the Fourteenth Amendment’s Equal Protection Clause. The Court said it didn’t, because the law did not impact a “fundamental right” or “target a suspect class.” On both counts, the Court was dead wrong. There is no more fundamental economic right than that of voluntary trade, to sell one’s property at a price determined by mutual consent of the buyer and seller. Without this right, free commerce–the basis of all capitalism–falls. Governments have no right to openly prevent trade in this manner. As for the “suspect class” question, while I question that particular interpretation of the Fourteenth Amendment (which simply provides all Americans enjoy equal rights, it says nothing of classes), I would argue that business has become such a “suspect class” as the result of years of government assault on their rights. Much as Black Americans were denied their rights for many years by racist governments, businessmen are now being denied their rights by a government that systematically resents achievement. What’s interesting, though not surprising, is that Eby-Brown never attempted to declare itself part of this “suspect class” of businessmen. Such a claim would have almost certainly failed, especially with the anti-intellectual Seventh Circuit, but it would be nice to see businessmen stand up for themselves morally once in awhile. But what’s more interesting, and disturbing, is the Seventh Circuit’s own defense of the state’s law. The court employed the time-tested (and objectively worthless) test of whether the law “bears a rational relation to some legitimate end.” This is often done in these kinds of cases. However, when such a test is applied, it is customary for the Court to actually define what the “legitimate end” is. Here, the Seventh Circuit made absolutely no effort to determine what the state’s end or motive was in enacting this law. In a number of spots, the Court says “the State of Wisconsin could have concluded…,” without every deciding what the State of Wisconsin actually concluded, if anything. In other words, the Court is offering a variety of unproven theories as to what the government’s legitimate ends were, and then assuming that it must be one of those options. This isn’t a judicial opinion so much as it a salad bar. You wonder why the Court simply didn’t say the purpose of the law was to prevent price-fixing. Maybe it’s because the judges realized that couldn’t be the end, since no idiot would try and prevent price-fixing by, well, forcing companies to fix prices at artificially high levels. Oh, wait a minute. –Skip Olivia is Director of Federal Affairs for the Center for the Moral Defense of Capitalism www.moraldefense.com