Metropolitan News-Enterprise


Thursday, October 4, 2007


Page 23



Late 1890s: Judges Uphold Legality of Green Stamps




Lawmakers in other California cities did not have the compunctions the Los Angeles City Council did, in the twilight days of the 19th Century, about seeking to kill off a newly emerged enterprise: the trading stamp company.

The Merchants’ and Manufacturers’ Assn. realized that neither retailers nor consumers, in the end, would benefit from the scheme…only those connected with Sperry & Hutchinson, the parent New York-based trading stamp company (which was to become S&H). The M & M wanted to tax the rascals out of existence—with a $250 per month license fee—but, as I recounted last week, the City Council would not go along with the plan given that the business was a lawful one.

The trading stamp plan evoked antagonism from merchants in just about every city, within California and without, where it was inaugurated. It typically entailed payment of five percent of a business’s gross revenues to the local subsidiary of Sperry & Hutchinson in order to get the stamps to disburse to customers. Those merchants who didn’t buy into the plan would be at a competitive disadvantage to those who did... and as more and more did, boosted prices would be inevitable.

Lawmakers elsewhere in the state did act to place discriminatory burdens on stamp companies…or outlaw their operations. Litigation ensued. In case after case, the trading stamp company prevailed…and gloated about it in print.

Subsidiaries of Sperry & Hutchinson began operations in San Francisco, Oakland, and Sacramento in December, 1897, then San Jose in March, 1898. Litigation developed early in San Francisco, and is alluded to in a Jan. 15, 1898 ad in the Oakland Tribune. It begins (with emphasis in the ad, entailing a font change, mimicked):

“OUR attention has been drawn to the fact that there is some talk of passing an ordinance in Oakland with the object of abolishing Trading Stamps. The same steps were taken in San Francisco, and the ordinance was passed forbidding the offering of any premium or any device to seek trade; and on Tuesday last, in the case of People of the State of California vs. Sweet, the decision handed down by Judge Campbell was to the effect that the said ordinance was in violation of the rights and privileges of the business men further it was in restraint of trade and unconstitutional.

The Oakland Trading Stamp Company had a battle plan, to go into effect if the city council there passed the proposed ordinance. In such event, it announced in the ad, it would refund the cost of taking a ferry trip to San Francisco where the stamps had been declared lawful. The ad says:

Just remember this, that if you are unable to obtain Green Trading Stamps in the City of Oakland, you can obtain these Stamps, which are a discount on every cash purchase you make, from over five hundred merchants in San Francisco. We should be very sorry to see such a large volume of business men taken out of the City of Oakland, but that is what it would mean if the ordinance is passed.

Despite that warning, the ordinance was passed. A March 8, 1898 ad in the Tribune boasts:

“City Justice Allen declares the Oakland Ordinance, drawn to prevent use of stamps, void, as in restraint of the rights of each merchant, and violative of their constitutional rights and privileges.”

It goes on to note:

“Judges Wallace, Cook and Dunn, sitting in bank, decided last Friday in the Superior Court in San Francisco, that trading stamps were legal.


In Fresno, the Board of City Trustees acceded to the wishes of local merchants on Sept. 20, 1898, unanimously voting to impose a licensing fee of $200 per quarter on trading stamp vendors. It voted over protests of a representative of the stamp company that it was an unlawful prohibitory tax.

C.E. McKenna, of the San Joaquin Valley Trading Stamp Company, a Sperry subsidiary, sought a writ to block the marshal from collecting the tax. When that failed, McKenna defied the ordinance by refusing to pay the tax but continuing operations, resulting in his arrest on Feb. 9, 1899. McKenna sought a writ of habeas corpus in the California Supreme Court, which was granted on  Oct. 24.

The next day’s issue of the Fresno Morning Republican contains a news story on the decision saying that McKenna’s lawyers had been advised of it by telegram from the clerk of the Supreme Court. The article comments:

“The judgment comes like a reprieve after the prisoner had been hanged or, rather, after he had escaped. The trading stamp concern had to close up its doors as the people would not bite at the trinkets the proprietor held up to them as bait, and it is hardly probable that he will undertake to return and open up again after one failure.”

There will be more next week about that California Supreme Court opinion, as well as later decisions concerning trading stamps.

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