                            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.




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     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*:                                                   -.




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           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




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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     -.




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,

     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




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