Colorado § 6-2-105 - Unlawful to sell below cost - definition.

§ 6-2-105. Unlawful to sell below cost - definition.

(1) (a) It is unlawful for any person, partnership, firm, corporation, joint stock company, or other association engaged in business within this state to sell, offer for sale, or advertise for sale any product or service for less than the cost of the product or service with the intent to both injure competitors and destroy competition and where the likely result of such sale would be the acquisition or maintenance of a monopoly. A vendor who violates this section commits a class 2 misdemeanor.

(b) (Deleted by amendment, L. 2007, p. 514, § 2, effective April 16, 2007.)

(2) For purposes of this section, "cost" means an appropriate determination of cost that is consistent with federal court interpretations of cost in federal predatory pricing cases under the federal "Sherman Act", 15 U.S.C. sec. 1 et seq.

(3) (Deleted by amendment, L. 2008, p. 2244, § 1, effective June 5, 2008.)

Source: L. 37: p. 1282, § 3. CSA: C. 48, § 302(3). L. 41: p. 821, § 3. L. 49: p. 343, § 3. CRS 53: § 55-2-3. C.R.S. 1963: § 55-2-3. L. 93: (1) amended, p. 1273, § 1, effective July 1. L. 2007: (1) and (2) amended, p. 514, § 2, effective April 16. L. 2008: Entire section amended, p. 2244, § 1, effective June 5. L. 2021: (1)(a) amended, (SB 21-271), ch. 462, p. 3134, § 58, effective March 1, 2022.

ANNOTATION

I. General Consideration.

II. Unlawful to Sell Below Cost.

III. Cost.

IV. Cost of Doing Business.

I. GENERAL CONSIDERATION.

Law reviews. For article, "Antitrust and the Lay Lawyer", see 44 Den. L.J. 558 (1967). For article, "May Regulated Utilities Monopolize the Sun?", see 56 Den. L.J. 31 (1979).

When consideration is paid for one product that is sold in conjunction with another product advertised to be "free" or otherwise offered at no cost to the consumer, the transaction constitutes a combined sale, and thus is not a gift pursuant to the unfair practices act. Defendant's offer of a free car wash in conjunction with the purchase of gasoline is not a gift pursuant to this section. Mastercar, Inc. v. Amoco Oil Co., 835 P. 2d 534 (Colo. App. 1992).

Applied in Val Vu, Inc. v. Lacey, 31 Colo. App. 55, 497 P.2d 723 (1972); Colo. Petroleum Marketers Ass'n v. Southland Corp., 476 F. Supp. 373 (D. Colo. 1979).

II. UNLAWFUL TO SELL BELOW COST.

Where a merchant is charged with selling goods at below cost in violation of the unfair practices act, it is not error for the trial court to permit evidence to prove the actual intent animating the admitted sales below cost. Perkins v. King Soopers, Inc., 122 Colo. 263, 221 P.2d 343 (1950).

A statute attempting to prohibit all sales below cost would be unconstitutional. Olin Mathieson Chem. Corp. v. Francis, 134 Colo. 160, 301 P.2d 139 (1956).

To avoid this result, only such sales may be prohibited which are intended to injure the public in a manner warranting the exercise of the police power. Olin Mathieson Chem. Corp. v. Francis, 134 Colo. 160, 301 P.2d 139 (1956).

Thus, intent has to be proved, otherwise this section would be a flat fixing of prices without regard to the public welfare. Olin Mathieson Chem. Corp. v. Francis, 134 Colo. 160, 301 P.2d 139 (1956).

Moreover, in action for violation of this section where company denied allegation that the advertisement of intent to give away and the giving away of samples was done for the purpose of injuring competitors or destroying competition, an issue of fact was tendered which could not be disposed of by a motion for judgment on the pleadings. Miller's Groceteria Co. v. Food Distribs. Ass'n, 107 Colo. 113, 109 P.2d 637 (1941).

Where the ability to make a purchase at a concession price is expressly contingent on the purchase of other goods, the concession goods are sold below cost only if the total price paid by the customer for the goods involved in such linked transactions is below the total cost of such goods. Parish Oil Co. v. Dillon Cos., 523 F.3d 1244 (10th Cir. 2008) (decided under law in effect prior to 2007 amendment).

A grocery store may sell gasoline below cost if such sales are conditioned on the purchase of enough groceries above cost that the entire series of transactions comes in at a profit. Parish Oil Co. v. Dillon Cos., 523 F.3d 1244 (10th Cir. 2008) (decided under law in effect prior to 2007 amendment).

III. COST.

Evidence which seeks to establish "cost" and "cost of doing business" need not be sufficient to establish these facts with mathematical precision and exactness, the proof need not exist to that high degree of certainty. Flank Oil Co. v. Tennessee Gas Transmission Co., 141 Colo. 554, 349 P.2d 1005 (1960).

Such is a problem of sufficiency, not constitutionality. Establishing by competent and material evidence allegations with respect to definitions of costs as applied to "production" and relative to "cost of doing business" or "overhead expense" is not a problem of constitutionality, but a problem of sufficiency of the evidence. Flank Oil Co. v. Tennessee Gas Transmission Co., 141 Colo. 554, 349 P.2d 1005 (1960).

Difficulty in application not enough to render section unconstitutional. Any difficulty in computing cost is a factual one, and this section is not to be declared invalid because in its application factual difficulties may arise; mere difficulty of application in the processes of litigation is not enough to enable a court to say that a statute is unconstitutional. Flank Oil Co. v. Tennessee Gas Transmission Co., 141 Colo. 554, 349 P.2d 1005 (1960).

Moreover, the term "cost" or "cost of doing business" is not so vague and indefinite that it violates the substantive due process requirement of the fourteenth amendment to the federal constitution or is so vague that it is wholly impractical. Flank Oil Co. v. Tennessee Gas Transmission Co., 141 Colo. 554, 349 P.2d 1005 (1960).

"Seller's costs" means the expense to seller to provide an article or product to its users. Pepcol Mfg. Co. v. Denver Union Corp., 668 P.2d 971 (Colo. App. 1983).

IV. COST OF DOING BUSINESS.

The "cost of doing business" which must be added to the invoice cost need not be absolutely exact or based upon a precise method of accounting which any one merchant might adopt. Dikeou v. Food Distribs. Ass'n, 107 Colo. 38, 108 P.2d 529 (1940); Flank Oil Co. v. Tennessee Gas Transmission Co., 141 Colo. 554, 349 P.2d 1005 (1960).

Rather, the term means the approximate cost arrived at by a reasonable rule. Dikeou v. Food Distribs. Ass'n, 107 Colo. 38, 108 P.2d 529 (1940); Flank Oil Co. v. Tennessee Gas Transmission Co., 141 Colo. 554, 349 P.2d 1005 (1960).

Hence, if a particular method adopted by a merchant cannot be said to be unreasonable, and does not disclose an intentional evasion of the law, the method so adopted should be accepted as correct. Dikeou v. Food Distribs. Ass'n, 107 Colo. 38, 108 P.2d 529 (1940); Flank Oil Co. v. Tennessee Gas Transmission Co., 141 Colo. 554, 349 P.2d 1005 (1960).

In other words, all that a man is required to do under the statute is to act in good faith. Dikeou v. Food Distribs. Ass'n, 107 Colo. 38, 108 P.2d 529 (1940); Flank Oil Co. v. Tennessee Gas Transmission Co., 141 Colo. 554, 349 P.2d 1005 (1960).