November 18, 1988
Honorable Roy Blake opinion No. JR-982
Chairman
Administration Committee Re: Whether a proposed rule of
Texas State Senate the Texas Department of Health
P. 0. BOX 12068 to accept a rebate for infant
Austin, Texas 78711 formula from a designated "pri-
mary supplier" violates article
XVI, section 25, of the Texas
Constitution (RQ-1396)
Dear Senator Blake:
you request our opinion on issues arising from a
proposal that bidders on state contracts for goods and
equipment be required to offer in their bids rebates to the
,- state on the purchase price of the goods or equipment. Your
inquiry is prompted by the Department of Health's recent
acceptance of bids offering rebates on the purchase price of
infant formula under the state's Women, Infants and Children
(WIC) program. You are concerned that such a bidding re-
quirement may violate article XVI, section 25, of the Texas
Constitution.
Article XVI, section 25, provides the following:
That all drawbacks and rebatement of insur-
ance, freight, transportation, carriage,
wharfage, storage, compressing, baling,
repairing, or for any other kind of labor or
service of, or to any cotton, grain, or any
other produce or article of commerce in this
State, paid or allowed or contracted for, to
any common carrier, shipper, merchant, com-
mission merchant, factor, agent, or middleman
of any kind, not the true and absolute owner
thereof, are forever prohibited, and it shall
be the duty of the Legislature to pass effec-
tive laws punishing all persons in this
State who pay, receive or contract for, or
respecting the same.
p. 5013
Honorable Roy Blake - Page 2 (JM-982)
It should be noted at the outset that this provision by
its terms only prohibits rebatements or drawbacks to any
person or entity that is "not the true and absolute owner**
of the goods or services for which the rebatements or
drawbacks are given. It does not, therefore, prohibit the
giving of rebates on ordinary purchases of goods and eguip-
ment by the state. Regardless, however, of whether the
transaction about which you inquire is the kind of rebate
which is described in article XVI, section 25, we need not
address that issue here.
Your inquiry raises two basic issues: (1) whether
article XVI, section 25, alone bars the state from accepting
rebates in the circumstances you describe, A, whether it
is self-executing; and (2) if it is not self-executing,
whether any provision of law implementing article XVI,
section 25, prohibits the state from accepting rebates.
A constitutional provision is said to be self-executing
when it supplies a rule sufficient to protect the right
given or permit enforcement of the duty imposed.. &S
mtchell Countv v. Citv t,l Bank of paducahJ&, 43 S.W.
880, 883-884 (Tex. ,898;: Attorney General Opinion Nos.
WW-245 (1980); V-748 (1948). It is self-executing to the
extent that anything done in violation of it is void and
that parties engaging in the proscribed conduct do so with
the knowledge that they are committing a prohibited act for
which they might incur penalties if the legislature should
discharge its duty and prescribe them. Attorney General
Opinion V-748 (1948), quoting Hemvhill v. Watson, 60 Tex.
679 (Tex. 1884).
In Continental Fire 8 Casualtv Insurance Corn. v.
American Mfcr. 206 S.W.2d 669 (Tex. Civ. App. - Fort
Co,
Worth 1947, no writ), the court concluded that article XVI,
section 25, of the Texas Constitution is not self-executing
but requires legislative enactments to accomplish its
purposes. The only other reported case involving this
provision of the constitution concerned a contract for
hauling livestock which the Railroad Commission determined
gave illegal rebates of freight rates to a livestock broker.
Cox Feedlots. Inc. v. Hone 498 S.W.2d 436 (Tex. Civ. App. -
San Antonio 1973, writ ref:d n.r.e.). The parties conceded
at trial that the contract provided for illegal rebates. In
a footnote, the court cited article XVI, section 25, along
with several statutes as authority on this issue. m
Peedlots, 498 S.W.2d at 438, n.1. One of the statutes
cited, article 4013, V.T.C.S., provides the following in
pertinent pa*: -.
p. 5014
Honorable Roy Blake - Page 3 (JM-982)
No corporation, company or person men-
tioned in [article 4005 -- railway companies,
chartered transportation companies, telephone
and telegraph companies, and their officers,
agents, and employees] shall directly or
indirectly, by any special rate, rebate,
drawback, or other device, demand, exchange,
collect or receive from any person . . . a
greater or less or different compensation for
any service rendered or to be rendered, in
the transportation of passengers, properties
or messages, than it or he charges, demands,
collects or receives from any other . . .
person . . . doing business in this State for
a like service under substantially similar
circumstances and conditions except as is
provided in this title, nor shall grant any
free transportation or franking privilege to
any corporation or person except as provided
in this title.
gee also V.T.C.S. arts. 4013a; 6559i-4 (providing substan-
tially the same with respect to railroad companies). The +
FeedlotS.case is thus consistent with the holding in Conti-
nental Fire 6 Casualtv that article XVI, section 25, alone
does not prohibit rebates, but must be implemented by
legislation.
With this in mind, it should be noted that no statute
expressly prohibits the state from accepting rebates on the
purchase price of goods and equipment. In your letter to
this office, however, you suggest that article XVI, section
25, is implemented by the Texas Free Enterprise and Anti-
trust Act of 1983, sections 15.01 through 15.40 of the
Business and Commerce Code. Two provisions in particular
draw your concern. Section 15.05(c) of the code makes it
unlawful for any person to give discounts or rebates on the
purchase price of any goods on the condition that the
purchaser not use or deal in the goods of a competitor where
the effect may be to substantially lessen competition in any
line of trade or commerce. Section 15.03(c) provides that
the term wperson" "does not include the State of Texas, its
departments, and its administrative agencies." YOU
therefore ask whether the legislature may statutorily exempt
a state agency from compliance with a constitutional
provision, presumably article XVI, section 25.
Based upon our review of the legislative history of the
Texas Free Enterprise and AntitruSt Act, we do not believe
p. 5015
Honorable Roy Blake - Page 4 (JM-982) !
that section 15.05(c) is the legislative implementation of
article XVI, section 25. Prior to 1983, chapter 15 of the
Business and Commerce Code prohibited monopolies, trusts,
and conspiracies in restraint of trade. m BUS. & Comm.
Code S 15.04 (repealed by Acts 1983, 68th Leg., ch. 519, at
3014). The chapter did not expressly ban rebates. In 1983,
the legislature enacted the current version of chapter 15.
Acts 1983, m. The bill analysis to the legislation
making the changes in chapter 15 states that the purpose of
the bill was to update Texas antitrust laws by patterning
them after federal antitrust laws. Bill Analysis, Tex. S.B.
397, 68th Leg., 1983. Section 15.05(c) is patterned closely
after 15 U.S.C. section 14. No mention is made of article
XVI, section 25 in the bill analysis. While there is no
doubt that both provisions serve the same public purpose, we
find no evidence that section 15.05(c) of the. Business and
Commerce Code was intended to be the implementing legisla-
tion for article XVI, section 25, of the constitution. The
more likely candidates for that distinction are V.T.C.S.
articles 4013, 4013a, and 6559i-4, quoted and described
above.
Furthermore, because the courts liberally construe
constitutional provisions directing the legislature#s action -. .
in order to carry out the purposes for which such provisions
were adopted, Texas I . WI 126
S.W.2d 627 (Tex. 1939), we believe the legislature may enact
legislation that promotes the policy of article XVI, section
25, without drawing on the authority of that constitutional
provision. See cenerally, Braden, The Constitution of the
State of Texas: An Annotated and Comparative Analysis 756
(1977) (concluding that the legislature needs no special
constitutional authorization to regulate unjust price
discrimination); Annot., Validity, construction, and appli-
cation of state statute forbidding unfair trade practice or
competition by discriminatory allowance of rebates, commis-
sions, discounts, or the like, 41 A.L.R. 4th 675, § 2[al
(state statutes forbidding secret rebates generally held to
be within police power of state). Therefore, we need not
consider whether the legislature has in this instance
attempted to exempt state agencies from compliance with
article XVI, section 25.
To summarize, article XVI, section 25, of the Texas
Constitution is not self-executing, but requires imple-
menting legislation. The Texas Free Enterprise and
Antitrust Act of 1983, sections 15.01 through 15.40 of the
Texas Business and Commerce Code, does not implement article
WI, section 25, of the constitution, and no statute -.
p. 5016
,
Honorable Roy Blake - Page 5 (JM-982)
implementing that provision prohibits the offer or
acceptance of rebates on the price of goods and equipment
purchased by the state. The Department of Health's
acceptance of bids offering rebates on the purchase price of
infant formula for the Women, Infants, and Children program
therefore does not violate article XVI, section 25, of the
Texas Constitution.
SUMMARY
Article XVI, section 25, of the Texas
Constitution is not self-executing, but
requires implementing legislation. The Texas
Free Enterprise and Antitrust Act of 1983,
sections 15.01 through 15.40 of the Texas
Business and Commerce Code, does not imple-
ment article XVI, section 25. No statute
implementing that provision prohibits the
offer or acceptance of rebates on the price
of goods and equipment purchased by the
state. The Department of HealthIs acceptance
of bids offering rebates on the purchase
price of infant formula .for the Women,
r. Infants, and Children program therefore does
not violate article XVI, section 25, of the
Texas Constitution.
JIM MATTOX
Attorney General of Texas
MARYEELLER
First Assistant Attorney General
IOU MccR.EARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAELEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Steve Aragon
Assistant Attorney General
p. 5017