AGO 1965 No. 3 - Jan 14 1965
TRADING STAMPS ‑- LICENSE REQUIREMENT ‑- REDEMPTION IN MERCHANDISE ‑- ORIGINAL PACKAGE EXEMPTION ‑- ISSUANCE BUT NOT DIRECT REDEMPTION OF COUPONS OR TRADING STAMPS BY MANUFACTURER ‑- MANUFACTURER ‑- VIOLATIONS.
A license is required under the Washington trading stamp law where several manufacturers affix to their products coupons or trading stamps which purchasers may commingle and use to obtain merchandise premiums from a single organization promoting and advertising the plan since the manufacturer is not issuing and directly redeeming the coupons or stamps as required by the original package exemption allowed by RCW 19.83.040.
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January 14, 1965
Honorable Harry B. Lewis
State Senator, 22nd District
Cite as: AGO 65-66 No. 3
By letter previously acknowledged you have requested the opinion of this office regarding a coupon or trading stamp plan which we paraphrase as follows:
Is licensing required under the Washington trading stamp law for a plan of coupon redemption in which several different manufacturers affix to their products coupons which purchasers of the various products may commingle and use to obtain one or more items of merchandise from the organization which is promoting and advertising the plan?
We answer your question in the affirmative for the reasons set forth in the analysis.
The licensing requirement is found in § 1, chapter 134, Laws of 1913, cf. RCW 19.83.010, providing as follows:
"Every person, firm or corporation who shall use, and every person, firm or corporation who shall furnish to any other [[Orig. Op. Page 2]] person, firm or corporation to use, in, with, or for the sale of any goods, wares or merchandise, any stamps, coupons, tickets, certificates, cards, or other similar devices which shall entitle the purchaser receiving the same with such sale of goods, wares or merchandise to procure from any person, firm, or corporation any goods, wares, or merchandise, free of charge or for less than the retail market price thereof, upon the production of any number of said stamps, coupons, tickets, certificates, cards, or other similar devices, shall before so furnishing, selling, or using the same obtain a separate license from the auditor of each county wherein such furnishing or selling or using shall take place for each and every store or place of business in that county, owned or conducted by such person, firm or corporation from which such furnishing or selling, or in which such using, shall take place."
There is an exception to this licensing requirement, however, sometimes referred to as the "original package exception." RCW 19.83.040 provides as follows:
"Nothing in this chapter, or in any other statute or ordinance of this state, shall apply to the issuance and direct redemption by a manufacturer of a premium coupon, certificate, or similar device; or prevent him from issuing and directly redeeming such premium coupon, certificate, or similar device, which, however, shall not be issued, circulated or distributed by retail vendors except when contained in or attached to an original package. The term 'manufacturer,' as used in this section means any vendor of an article of merchandise which is put up by or for him in an original package and which is sold under his or its trade name, brand or mark: Provided, That no premium coupon, certificate or similar device shall be issued in connection with the sale of eggs, poultry, and the products thereof, or milk and the products thereof."
[[Orig. Op. Page 3]]
Since the provisions of chapter 19.83 RCW are enforceable by penal sanctions, they are strictly construed. Construction of a penal statute however must still be in accord with legislative intent. Our supreme court inState v. Rinkes, 49 Wn. (2d) 664, 306 P. (2d) 205 (1957), at page 667 said:
"Strict construction of a penal statute means merely that the punitive sanctions must be confined to such matters as are clearly and manifestly within the statutory terms and purposes. It does not mean that a forced, narrow, and overstrict construction should be applied to defeat the obvious intent of the legislature. . . ."
Furthermore, the language of the exception statute (RCW 19.83.040,supra) is to be given a narrow construction so as not to defeat the legislative intent. State v. Robinson, 67 Wash. 425, 121 Pac. 848 (1912); Sandona v. City of Cle Elum, 37 Wn. (2d) 831, 226 P. (2d) 889 (1951);Tabb v. Funk, 170 Wash. 545, 17 P. (2d) 18 (1932).
The supreme court of this state has determined the intent of the legislature in passing chapter 19.83 RCW, supra. InState v. Pitney, 79 Wash. 608, 140 Pac. 918 (1914), the court was called upon to decide the validity of what is now chapter 19.83 RCW, and the opinion in that case makes it clear that the act is definitely prohibitory. As the court said at page 609 of its opinion:
". . . In other words, the act will be considered as though it prohibited the use of trading stamps. . . ."
At page 610 the court said:
"The ultimate question for determination is whether a law which prohibits the use of trading stamps violates the due process of law clause of either the state or Federal Constitutions. . . ."
The court held the licensing act valid, although prohibitory in effect, and the result was sustained fully by two decisions of the United States Supreme Court,Tanner v. Little, 240 U.S. 369, 36 S.Ct. 379, 60 L.Ed. 691 (1916), andPitney v. Washington, 240 U.S. 387, 36 S.Ct. 385, 60 [[Orig. Op. Page 4]] L.Ed. 703 (1916).
We assume that the individuals who affix the coupons are "manufacturers" as defined in the exemption statute, RCW 19.83.040, supra; we further assume that eggs, poultry and milk products are not involved. The pertinent language, then, of the exception to the licensing requirement is "issuanceand direct redemption by a manufacturer" and his "issuingand directly redeeming." (Emphasis supplied.)
The main purpose of the exemption seems to have been to protect the local merchant in situations where he sold products to which or in which manufacturers had placed redeemable coupons. See, AGO 59-60 No. 124, dated June 15, 1960, addressed to Honorable Wilbur G. Hallauer; see, also, AGO 55-57 No. 192, addressed to Senator Marshall A. Neill, dated January 26, 1956.
It is clear that the only activity clearly exempted by RCW 19.83.040,supra, is that whereby a manufacturer issues coupons contained in or attached to an original package and then directly redeems those, and only those, coupons from the buyer.
The plan about which you inquire does not fall within that narrow scope. The coupons are to be redeemed not by the manufacturer but by an organization separate and distinct from the manufacturer or manufacturers as in the case of any of the well-known trading stamp plans.
In AGO 55-57 No. 192, dated January 26, 1956, addressed to Honorable Marshall A. Neill, this office approved the legality of a plan whereby a separate organization redeemed coupons as an agent of the various manufacturers. In this opinion we concluded that:
". . . the appointment of a resident agent within this state to facilitatethe mechanics of redemption of coupons contained in or attached to the original package would be in harmony with the legislative intention [as expressed in RCW 36.91.040, now recodified as RCW 19.83.040]." (Emphasis supplied.)
However, that conclusion does not appear applicable to the facts you have outlined. Its meaning is clear by reference [[Orig. Op. Page 5]] to the following paragraph quoted at page 4 of that opinion:
"'It is well settled that a corporate body can only act by agents. The corporation itself can do no act, * * * In other words, a corporation, being an artificial person, can transact its business only through its officers and agents, duly appointed and authorized, and one dealing with a corporation must deal with its agents, * * *'" (Fletcher, Cyclopedia of the Law of Private Corporations, Volume 2, page 33.)
Under the present plan submitted for consideration the manufacturers are referred to as "participating manufacturers," and the function of the organization dealing with them seems to be that of an independent contractor, rather than that of an agent. True, the compensation of the contractor would appear to be based on its redemption of coupons, rather than on the total number of coupons furnished to the manufacturers. However, it is the substance of the plan with which we must be concerned, rather than its technical form. According to the substance of the present plan, the contractor promoting the plan would be merely redeeming its own stamps with its own merchandise, and the manufacturers in substance do no more than issue and use trading stamps furnished and redeemed by an organization engaged in the trading stamp business with its own merchandise, and according to its own plan of redemption. In substance, therefore, the plan as outlined does not appear to differ materially from any other trading stamp plan for which a license is required under chapter 19.83 RCW. Thus, not only does the plan fall outside the narrow scope of the exception (RCW 19.83.040,supra), but its use would defeat the whole intent of the chapter (chapter 19.83 RCW,supra).
We trust the foregoing will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
Assistant Attorney General