Commonwealth v. Bavarian Brewing Co.

Opinion of the court by JUDGE HOBSON — Reversing. As a part of the war tax levied by the Congress of the United States during the war with Spain a tax Of $1' per barrel was imposed on beer. Appellees, who are brewers of Cincinnati, Covington and Newport, then-by agreement raised the price of beer $1 per barrel, and sent out the following:. '‘Special Notice to the Patrons of the Brewers of Cincinnati, Covington and Newport: We, the undersigned brewers of Cincinnati, Covington and Newport, hereby notify our respective patrons that, owing to the heavy additional war tax imposed upon beer, the price of keg beer to the trade will be increased at the rate of $1 (one dollar) per barrel, and the price of bottle beer will be advanced at the rate of ten cents per dozen. quarts and ñve cents per dozen-pints, and that such advance will take effect after midnight the 27th day of dune, 1898. This increase covers [929] llie additional tax only, and we do not ask the trade to share the advance in price of brewing material, which in some instances amounts to more than seventy-five cents per barrel.” This notice was signed by each of tjhe 25 parties to the arrangement. They were indicted for violating section 3915, Kentucky Statutes: “That if any corporation under the laws of Kentucky, or under the laws of any other State or country, for transacting' or conducting any kind of business in this 'State, or any partnership, company, firm or individual, or other association of persons, shall create, establish, organize or enter into, or become a member of, or a party to, or in any way interested in any pool, trust, combine, agreement, confederation or understanding with any other corporation, partnership, individual, or person, or association of persons, for the purpose of regulating or controlling or fixing the price of any merchandise, manufactured articles, or property of any kind, or shall enter into, become a member of, or party to or in any way interested in any pool, agreement, contract, understanding, combination or confederation, having for its object the fixing, or in any way limiting the amount or quantity of any article of property, commodity or merchandise, to be produced or manufactured, mined, bought or sold, shall be deemed guilty of the crime of conspiracy, and punished therefor as provided in the subsequent sections of this act.” The evidence introduced on the trial established the making of the agreement, and sending out of the notice, and the ad vahee in the price of beer by appellees according to its terms'. At the conclusion of the evidence, the court peremptorily instructed the jury to find for the defendants, and the Commonwealth has appealed. [930] It is earnestly argued that the statute is in conflict with section 198 of the Constitution: “It shall be the duty of the General Assembly from time to time, as necessity may require to enact such laws as may be necessary to prevent all trusts, pools, combinations or other organizations from Combining to depreciate below its real value any article or to enhance the cost of any article above its real value.” It is insisted that the thing forbidden by the Constitution is the combination to depreciate an article below its real value, or to enhance its cost above its real value, and that the statute is in conflict with' the Constitution in: so far as it ignores the real value of the property and forbids combinations to fix prices without regard to the value of the property. It is urged that, the government having imposed a tax of $1 a barrel on beer, this added that much to the value of the beer, and the combination of the appellees to this end was not in violation of the constitutional rule. In Com. v. Grinstead (108 Ky., 59) (21 R., 1444) (55 S. W., 720), this precise question wms decided. It was. there held that the statute is not in conflict with the Constitution, and, upon a reconsideration of the subject, we adhere to the rule there laid down. It is also maintained that the tax was something unforeseen, which neither the brewers nor any one else could anticipate; that it came as a war measure, deemed of necessity by the federal congress, and that the arrangement was only for an advance on beer to the extent of the fax, so that beer which had sold for two, four, and six dollars a barrel was thereafter sold at three, five and seven dollars. It is said that this was not an. agreement fixing or regulating or controlling the price of beer, but a simple raise to meet a business necessity, and that it was reasonable. The purpose, of the arrangement is not difficult to see. Its aim was to throw upon the purchaser the [931] entire burden of the tax, ^and exempt the brewers from bearing any part' of it. The agreement to this end by the 25 establishments making beer had the effect to advance the price of beer $1 a barrel. As to whether the’ purchasers of the beef sustained this loss or made an advance in price to the consumer, to throw the, burden of the tax on him, the record does not show. The statute forbids any arrangement, agreement or understanding for the purpose of regulating or controlling or fixing the price of afny merchandise or property of any kind. The fact that there was a horizontal raise of the same amount on all classes of beer, irrespective of the price at which it had been selling, does not sceem to us any more to take the cáse out of the operation of the statute than if the agreement had been to raise some grades in price more than others. The purpose of the statute is to forbid all combinations to regulate, fix or control prices, and to leave prices to be regulated entirely by the law of supply and demand. The arrangement in question entirely defeated this purpose. If it had not been made, some manufacturers, who had not as many customers as they desired, might have endeavored to increase their trade by dividing the tax burden with their customers. It is a matter of common knowledge that when an article can not be sold above a certain price, and the retailer can not handle it unless it is sold to him at a reduced price, manufacturers sometimes cut their prices to a smaller margin of profit rather than give up the trade entirely. The purpose of the agreement before us was to prevent any cut in the prices of the manufacturers. It had the effect to regulate and control prices, as it was designed to do, and was in our judgment a violation of the statute. It is also earnestly maintained that the combination, having for its purpose the raising of the price- of beer, was [932] not illegal, for the reason that the cheaper the drink the more of it will be used, and the law does'not favor the increased use of intoxicants. But the statute makes no such exception. It makes unlawful, and undertakes to punish, all agreements for the purpose of controlling the prices of any article. The Legislature has thus defined the offense, and the court must enforce the law as it finds it. Judgment reversed, and cause remanded for a new trial. Whole court sitting. Judge Burnam dissenting. Petition for rehearing by appellee overruled.