BEFORE THE UTAH STATE TAX COMMISSION
) Appeal No. 00-0680
v. ) Account No. #####
MOTOR VEHICLE ENFORCEMENT ) Tax Type: Advertisement Violations
DIVISION OF THE UTAH STATE TAX )
COMMISSION, ) Presiding: Davis
G. Blaine Davis, Administrative Law Judge
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.
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.
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
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