Request By:
Hon. W. Robinson Beard
Stites, McElwain & Fowler
3400 First National Tower
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Richard L. Masters, Assistant Attorney General
You have requested an opinion of this office concerning the construction and application of the Advertising of Sales at Wholesale Statutes, KRS 365.490 to 365.510 and 365.993.
Your first question is whether the provisions of these Statutes regulate the way in which a business may use its corporate name or established trade name while advertising its goods, wares, or merchandise to the public.
KRS 365.500 clearly provides that no person engaged in selling goods, wares, or merchandise to individual consumers may advertise that his prices are wholesale prices nor may he incorporate in his business name the word "wholesaler" or any synonym therefore unless the person is in fact engaged in the wholesale business in addition to his business of selling goods, wares, or merchandise to individual consumers. Where a person is engaged in wholesaling as well as making sales to individual consumers, he may not advertise the selling price is other than a retail price unless the sale is for resale.
We interpret this to mean that no person may use the word "wholesale" or "wholesaler" in his advertisements even if the words are part of the trade name or corporate name unless he is in fact engaged in sales in quantity or bulk for purposes of resale at retail. If a person is engaged in wholesaling as well as retail sales to individual customers, his advertisements must clearly indicate that the selling price to individual consumers is a retail price.
Although a corporate name is a qualified form of property right with a value which may be protected from wrongful use, it can also be subject to appropriate regulation under the State's police power and the exercise of general welfare of the citizens of the State. See 16 Am.Jur. 2d, Constitutional Law, § 397.
The use of a corporate name is analogous to the use of a registered trademark. The purpose behind registering a corporate name is similar to that of registering a trademark, i.e., to protect against infringement and unfair competition. Also, registering a corporate name gives the corporation the right to use that name just as the registering of a trademark gives the owner of the trademark a right to use it. However, the right to protect a trademark or corporate name against infringement does not entitle the owner thereof to perpetrate a fraud on the public. See
Hearing Aid Association of Kentucky v. Bullock, 413 F.Supp. 1032 (E.D. Ky. 1976).
To construe KRS 365.500 as not regulating the use of corporate names is tantamount to finding the statute partially invalid since, by its terms, it applies to all uses of the word "wholesaler" in advertising. Such an interpretation would be contrary to an axiom of statutory construction that the partial invalidation of a statute should be avoided unless the statute is found to be clearly in contravention of a constitutional requirement. See
Commonwealth v. Robinson, 233 S.W. 791 (Ky. 1921).
Your second question is whether the provisions of KRS 365.490 to 365.510 and 365.993 apply to advertisements or broadcasts in or into Kentucky via radio or television or to advertisements purchased in newspapers circulated in Kentucky by a foreign corporation whose sales location or showroom is located in a foreign state. This question raises at least two important constitutional issues.
First, whether the Statute is an unconstitutional burden on interstate commerce; and, second, whether a foreign corporation is subject to suit in Kentucky for a violation of the Advertising of Sales at Wholesale Statute by reason of advertisements broadcasted into Kentucky or purchased in newspapers circulated in Kentucky.
With regard to the first issue, the Advertising of Sales at Wholesale Act is not an unconstitutional burden on interstate commerce. The Commonwealth does have a compelling interest in protecting the consuming public from fraud, and the Advertising of Sales at Wholesale Statutes are a reasonable exercise of the Commonwealth's police power to protect this interest in that the Statute does not prohibit all advertising, it simply requires advertisers to make it clear that the prices which they advertise are retail prices. Also, it cannot be said that the Advertising of Sales at Wholesale Act discriminates against interstate commerce since it applies to all advertisements, not just those made by out-of-state businesses. See
Head v. New Mexico Board of Examiners and Optometry, 374 U.S. 424 (1963) and
Budget Marketing, Inc. v. Commonwealth, ex rel. Stephens, 587 S.W.2d 245, 249 (Ky. 1979).
Concerning the second issue, it seems clear that purchasing advertisements in radio and television stations in Kentucky and in newspapers published in Kentucky constitute transacting business within the Commonwealth. Thus, such activities would fall within the provisions of the Kentucky Long-Arm Statute, KRS 454.210(2)(a).
Thus, the answer to your second question must be that provisions of the Advertising of Sales of Wholesale Act do apply to advertisements which are broadcasted in or into Kentucky on radio or television and advertisements purchased in newspapers circulated in Kentucky by a foreign corporation whose sales location or showroom is located in a foreign state. The Act is not an unconstitutional burden on interstate commerce and the advertising activities fall within the provisions of our Long-Arm Statute.
Your third and final question requests an opinion of this office as to the interpretation of KRS 365.510.
The plain meaning of this provision seems to be that persons engaged in selling goods, wares, or merchandise to persons engaged in the construction business are exempted. As indicated in your letter, the General Assembly did not provide us with an explanation of their intent concerning enactment of this section. As this office has no constitutional authority to speak for the Legislature, we must conclude that KRS 365.510 does, in fact, exempt persons engaged in the sale of merchandise to those in the construction business from coverage by the Statute.