constitutes an unfair method of competition in commerce; (4) Leads to labor disputes burdening and obstructing commerce and the free flow of goods in commerce; and (5) interferes with the orderly and fair marketing of goods in commerce."
In an admirably succinct statement, Mr. Chief Justice Stone of the United States Supreme Court, in United States v. Darby, supra, 312 U.S. at pages 109, 110, 61 S. Ct. at page 454, 85 L. Ed. 609, 132 A.L.R. 1430, summarized the scope of the Act and the legislative intent with respect to it as follows:
"The Fair Labor Standards Act set up a comprehensive legislative scheme for preventing the shipment in interstate commerce of certain products and commodities produced in the United States under labor conditions as respects wages and hours which fail to conform to standards set up by the Act. Its purpose, as we judicially know from the declaration of policy in § 2 (a) of the Act, and the reports of Congressional committees proposing the legislation, S. Rept. No. 884, 75th Cong. 1st Sess.; H. Rept. No. 1452, 75th Cong. 1st Sess.; H. Rept. No. 2182, 75th Cong. 3d Sess., Conference Report, H. Rept. No. 2738, 75th Cong. 3d Sess., is to exclude from interstate commerce goods produced for the commerce and to prevent their production for interstate commerce, under conditions detrimental to the maintenance of the minimum standards of living necessary for health and general well-being; and to prevent the use of interstate commerce as the means of competition in the distribution of goods so produced, and as the means of spreading and perpetuating such substandard labor conditions among the workers of the several states. " (Emphasis supplied.)
Application of the Supreme Court's statement to the instant problem effectively disposes of the defendant's contention that the entire "business" of the defendant is exempt as a "retail establishment" under the provisions of section 13(a) (2) of the Act.
The defendant admits that seven of its eleven warehouses are engaged in interstate commerce or in the production of goods for interstate commerce. Defendant's Reply Brief, p. 12.
It is patent that the cost of operation of these seven warehouses is reflected in the cost of operation of the retail stores which they serve, since each retail store is debited by the defendant with the overall charges of the servicing warehouse. The prices charged by the defendant's retail stores for the commodities which they sell are affected by the operating cost of the stores which, in turn, reflect the operating cost of their servicing warehouse. Thus it is apparent that the labor conditions, wages and hours, which prevail in the servicing warehouses affect the retail stores which they admittedly service in interstate commerce. In United States v. Darby, supra, the Supreme Court stated (312 U.S. at page 115, 61 S. Ct. at page 457, 85 L. Ed. 609, 132 A.L.R. 1430):
"The motive and purpose of the present regulation [the Act] are plainly to make effective the Congressional conception of public policy that interstate commerce should not be made the instrument of competition in the distribution of goods produced under substandard labor conditions, which competition is injurious to the commerce and to the states from and to which the commerce flows."
Again, 312 U.S. on pages 122, 123, 61 S. Ct. on page 461, 85 L. Ed. 609, 132 A.L.R. 1430, the court said:
"* * * As we have said the evils aimed at the Act are the spread of substandard labor conditions through the use of the facilities of interstate commerce for competition by the goods so produced with those produced under the prescirbed or better labor conditions; and the consequent dislocation of the commerce itself caused by the impairment or destruction of local business by competition made effective through interstate commerce.
"* * * The means adopted by § 15(a) (2) for the protection of interstate commerce by the suppression of the production of the condemned goods for interstate commerce is so related to the commerce and so affects it as to be within the reach of the commerce power. See Currin v. Wallace, 306 U.S. , 11, 59 S. Ct. , 385, 83 L. Ed. 441.Congress, to attain its objective in the suppression of nationwide competition in interstate commerce by goods produced under substandard labor conditions, has made no distinction as to the volume or amount of shipments in the commerce or of production for commerce by any particular shipper or producer.It recognized that in present day industry, competition by a small part may affect the whole and that the total effect of the competition of many small producers may be great. See H. Rept. No. 2182, 75th Cong. 1st Sess., p. 7. The legislation aimed at a whole embraces all its parts. Cf. National Labor Relations Board v. Fainblatt, 306 U.S. , 606, 59 S. Ct. , 671, 83 L. Ed. 1014."
The defendant here makes the ingenuous contention that a chain store system which admittedly, in large part (as far as its warehouses are concerned), operates in interstate commerce, is exempt as a "retail establishment" because "the defendant is primarily a retailer, the greater part of whose selling is in interstate commerce", that is, the ultimate distribution to the public is by retail stores which sell intrastate.
That argument fails and falls by its own weight. The typical retail establishments such as "grocery stores" referred to in Fleming v. A.B. Kirschbaum Co., supra, pay to the wholesalers from whom they buy, prices which are affected by the labor costs of the wholesalers; and the cost of these wholesalers inevitably reflects the cost of operating their own warehouses. Since wholesalers who sell in interstate commerce to non-chain store grocery stores and meat shops, which are engaged in competition with the stores operated by the defendant, are compelled to comply with the Act, an exemption of similarly operated warehouses would result in a burdensome differential to the complying warehouses and their customer retail stores.
Additionally, a differential in labor costs would weigh heavily against the wholesalers and public warehouses which perform functions analogous to and in competition with the chain store warehouses. Public warehouses which serve in interstate commerce must comply with the provisions of the Act, as must wholesale grocers engaged in interstate commerce.In fact, in the instant case, the record discloses that the defendant on many occasions used public storage facilities and, on the occasion of a strike situation last year, made substantial purchases from wholesale grocers who operate their own warehouses.
It is pertinent to make note here of the fact that while a considerable portion of the defendant's hauling is performed by contract carriers, that at many of its warehouses it operates its own trucks. If the defendant, under section 13(a) (2), were exempt, it would be given a competitive advantage.
The defendant's contention that it is a "single retail establishment" is made in face of the fact that during 1939 it supplied merchandise amounting to $31,000,000 at wholesale to the retail stores operated by the American Stores Company of Virginia, the American Stores Company of West Virginia, and Acme Markets, Inc., of Delaware. These three corporations, it will be recalled, are wholly-owned subsidiaries of the defendant which operate retail stores in Virginia, West Virginia, Pennsylvania, New York, Maryland, New Jersey, Delaware, and the District of Columbia. As previously mentioned, the Virginia and West Virginia corporations, and the Acme Markets, Inc., of Delaware (which became inactive January 1, 1940) operated as distinct and separate corporations. Separate books were kept for each corporation. They maintained separate bank accounts in which the proceeds of sales were deposited, although the funds were subsequently transferred to the defendant's bank account. They filed separate tax returns, and income and license taxes. They leased the stores which they operated. They had separate balance sheets, and profit and loss statements. They were treated by the defendant as separate corporate entities. Merchandise supplied to them was charged as an advance. In the case of Acme Markets, Inc., of Delaware, which was organized for manufacturing as well as for wholesale and retail selling, it directly operated 296 establishments in several states at the close of 1939. Acme Markets, Inc., during that year was supplied with merchandise by the defendant's warehouses, bakeries, canneries, and manufacturing plants in other states. These 296 stores operated by Acme Markets, Inc. were located as follows:
New Jersey 58
New York 10
District of Columbia 13
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