00-0680
Advertisement
Violations
Signed
5/15/01
BEFORE THE UTAH STATE TAX COMMISSION
____________________________________
PETITIONER, )
) ORDER
Petitioner, )
) Appeal No. 00-0680
v. ) Account No. #####
)
MOTOR
VEHICLE ENFORCEMENT ) Tax Type:
Advertisement Violations
DIVISION
OF THE UTAH STATE TAX )
COMMISSION, ) Presiding: Davis
)
Respondent. )
_____________________________________
Presiding:
G.
Blaine Davis, Administrative Law Judge
Appearances:
For
Petitioner: PETITIONER REP
For
Respondent: Mr. Gale Francis, Assistant
Attorney General
Mr.
Kent Jorgensen, from the Motor Vehicle Enforcement Division
Ms.
Julie Thomas, from the Motor Vehicle Enforcement Division
STATEMENT OF THE CASE
This
matter came before the Utah State Tax Commission for an Initial Hearing
pursuant to the provisions of Utah Code Ann. '59-1-502.5,
on October 5, 2000.
Respondent
imposed four separate $$$$$ fines upon Petitioner for internet advertisements
on four separate vehicles pursuant to Utah Code Ann. '41-3-702. Respondent alleges the ads violated the
advertising provisions of Utah Code Ann. '41-3-210,
as interpreted by Utah Administrative Code Rule R877-23V-7.a.4. Specifically, Respondent says the ads
contained the words "was" for the former price of the vehicle, rather
than the manufacturers suggested retail price (MSRP). The position of Respondent is that that language in the
advertising violates the provisions of the stated statutes and rule.
Petitioner
ran advertisements in the COMPANY B and the COMPANY A, two separate CITY
newspapers. Copies of those ads
were provided to an internet company, COMPANY C, to whom they paid a fee to
have those same advertisements placed on the internet for people to locate, and
hopefully purchase, the vehicles.
The
newspaper ads which were run in the COMPANY A and the COMPANY B, and which were
provided to COMPANY C, contained the advertised price, and also contained a
statement of the MSRP. Petitioner
represented it was COMPANY C that changed the MSRP price to a "was"
price. All of the vehicles
advertised were brand new vehicles, and none of them were used vehicles.
When
Petitioner received the notice from Respondent imposing the fines, it resulted
in heated discussions between Petitioner and individuals at COMPANY C, and
Petitioner severed its business relationship with COMPANY C.
Petitioner
represented it was well aware of the need for its ads to say "MSRP",
and it made sure that MSRP was printed in the newspaper. Petitioner also reviewed copies of
those newspaper ads before they were published. Copies of those newspaper ads were provided to COMPANY C,
and Petitioner assumed the same information from the newspaper ads would be
published on the internet.
Petitioner was not aware the ads on the internet did not contain the
statement MSRP until it received the notice from Respondent. Petitioner was not provided any proofs
of the proposed ad by COMPANY C in advance of placing the ads on the internet,
but it assumed the ads would be identical to the information from the newspaper
ads provided to COMPANY C.
APPLICABLE LAW
The
relevant portions of Utah Code Ann. '41-3-210,
provide as follows:
(1) The holder of any license issued under
this Chapter may not:
(a) intentionally publish, display, or
circulate any advertising that is misleading or inaccurate in any material fact
or that misrepresents any of the products sold, manufactured, remanufactured,
handled, or furnished by licensee;
The
relevant portions of Utah Code Ann. '41-3-702
provide:
(1) The following are civil violations
under this chapter and are in addition to criminal violations under this
chapter:
(b) Level II:
(ii)
advertising violation;
(2)(a) The schedule of civil penalties for
violations of Subsection (1) is:
(ii) Level
II: $100 for the first offense;
$250 for the second
offense; and $1,000 for the third and subsequent offenses; and
(b) When determining under this
section if an offense is a second or subsequent offense, only prior
offenses committed within the 12 months prior to the commission of the
current offense may be
considered.
The
relevant portions of Utah Administrative Code Rule R877-23V-7.a.4 provides as
follows:
4. Savings and discount claims. Because the intrinsic value of a used
vehicle is difficult to establish, specific claims of savings may not be used
in an advertisement. This includes
statements such as, "Was priced at $ , now priced at $ ." a) The word "wholesale" may not
be used in retail automobile advertising.
b) When an automotive advertisement contains an offer of a discount on a
new vehicle, the amount of the discount must be stated by reference to the
Manufacturers Suggested Retail Price of the vehicle.
DISCUSSION
In
this case, Petitioner was not represented by an attorney, but was represented
by its Sales Manager. Therefore,
legal briefs have not been presented by the parties. Nevertheless, based upon the facts presented in this case,
and the statute and the rule, there are three issues which must be decided by
the Commission, which are as follows:
1. Is Petitioner legally responsible for
the negligent and improper actions of COMPANY C?
2. Even if Petitioner is responsible for
the negligent and wrongful actions of COMPANY C, was it a sufficiently
"intentional" act to meet the "intentionally" provision of
the statute, so as to constitute a violation of Utah Code Ann. '41-3-210?
3. If Petitioner is responsible for the
negligent and wrongful actions of COMPANY C, and if such actions were a
violation of Utah Code Ann. '41-3-210,
did it constitute four violations justifying the imposition of four $$$$$
penalties, or was it only a single violation for which a single $$$$$ penalty
should be imposed?
With
respect to the first issue, the determining factor is whether the action
causing the alleged violation was taken by Petitioner or a person or entity
sufficiently under the control of Petitioner so that Petitioner should be held
accountable and responsible for improper actions of the person or entity taking
such actions. Normally, if an
individual or entity is sufficiently in control of another person or entity,
then there is an agency or servant relationship established, and the principal
is responsible for the actions of the agent. On the other hand, if there is not sufficient control to
establish an agency or servant relationship, then the principal is not
responsible for the improper or negligent actions of the secondary party,
because they are normally deemed to be an independent contractor. This principle has been stated by the
Supreme Court in Dowsett v. Dowsett, 116 Utah 12, 207 P.2d 809 (Utah,
1949) as follows:
"It
is important to distinguish between a servant and an agent who is not a
servant, since ordinarily a principal is not liable for the incidental acts of
negligence in the performance of duties committed by an agent who is not a
servant (See Sec. 250) * * * The important distinction is between service in
which the actor's physical activities and his time are surrendered to the
control of the master, and service under an agreement to accomplish results or
to use care and skill in accomplishing results. Those rendering service
but retaining control over the manner of doing it are not servants. They may be agents, agreeing only to
use care and skill to accomplish a result and subject to the fiduciary duties
of loyalty and obedience to the wishes of the principal; or they may be persons
employed to accomplish or to use care to accomplish physical results, without
fiduciary obligations, as where a contractor is paid to build a house. An
agent who is not subject to control as to the manner in which he performs the
acts that constitute the execution of his agency is in a similar relation to
the principal as to such conduct as one who agrees only to accomplish mere
physical results. For the purpose
of determining liability, they are both "independent contractors" and
do not cause the person for whom the enterprise is undertaken to be responsible
* * *." (Emphasis ours.)
In
addition, in the case of Thiokol Chemical Corp v. Petersen, 15 Utah 2d,
355, 393 P.2d, 391, (Utah, 1964), the Utah Supreme Court stated:
The
line of demarcation between one who operates as an independent contractor as
opposed to one who is the servant or agent of another is sometimes a bit
blurred. This court has on a
number of occasions confronted this problem and set forth various criteria to
be considered in making the proper classification. The most fundamental one relates to the extent of control by
the one who hires over the one who performs the service. If the employer's will is
represented only by a desired result, the indication is of an independent
contractor; whereas, if the employer exercises control over the means of
accomplishing the result, this points toward an agent or servant relationship. (footnotes omitted.) (Emphasis added).
Based
upon the representations of the parties, there is no indication that Petitioner
in this case exerted any control of the manner in which COMPANY C performed its
acts, but that Petitioner was only looking for COMPANY C to accomplish physical
results, i.e., the placing of information relating to certain vehicles on the
internet. All of the evidence
presented indicates that COMPANY C was an independent contractor, so that the
wrongful actions of COMPANY C did not cause Petitioner to become responsible for
such wrongful actions. Therefore,
Petitioner has not violated the provisions of Utah Code Ann. '41-3-210.
With
respect to the second issue stated above, the primary concern is whether
Petitioner could meet the "intentionally" portion of the statute,
"intentionally publish . . . or circulate any advertising that is
misleading or inaccurate in any material fact . . . ." since the
publishing was not done by Petitioner.
While that is doubtful, in view of the decision of the Commission above,
that issue need not be specifically decided at this point.
With
respect to the decision of whether any such a violation would constitute four
violations or a single violation, since the Commission has determined that
Petitioner is not responsible for any such violation, it is also not necessary
to determine that issue in this case.
DECISION AND ORDER
Based
upon the foregoing, the Commission hereby determines that any wrongful actions
relating to the advertisements for which the fines were imposed upon Petitioner
were not caused by wrongful conduct of Petitioner or any of its agents,
servants, or employees, but were instead performed by an independent
contractor, and Petitioner is not responsible for the wrongful conduct of an
independent contractor. The fines
imposed by Respondent are therefore set aside and of no force and effect, and
these proposed offenses shall be removed from the records of Petitioner.
This
decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will
become the Final Decision and Order of the Commission unless any party to this
case files a written request within thirty (30) days of the date of this
decision to proceed to a Formal Hearing.
Such a request shall be mailed to the address listed below and must
include the Petitioner's name, address, and appeal number:
Utah State Tax Commission
Appeals
Division
210 North 1950 West
Salt Lake City, Utah
84134
Failure
to request a Formal Hearing will preclude any further appeal rights in this
matter.
DATED
this 15th day of May ,
2001.
____________________________________
G.
Blaine Davis
Administrative
Law Judge
BY
ORDER OF THE UTAH STATE TAX COMMISSION.
The
Commission has reviewed this case and the undersigned concur in this decision.
DATED
this 15th day of May ,
2001.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner