Untitled Texas Attorney General Opinion ( 1971 )

March 25, 1971
Honorable J. W. Edgar Opinion No. M- 820
Commissioner of Education
Texas Education Agency Re: Class
_. .rings
~. and the school
201 East 11th Street district's authority to select
Austin, Texas 78711 at intervals a firm merchant
with the exclusive privilege
to service student purchases
under school supervision and
Dear Mr. Edgar: at school facilities.
You have requested our opinion as to,
1. "Whether an independent school district in Texas
may legally solicit bids from class ring manufacturers or their
representatives and.based upon such bids, including specifica-
tions as-to bidder's.warranty, price, quality, design and ser-
vice , grant an exclusive privilege for a term of five years to
one such manufacturer ,or its representative to service voluntary
student purchases of class rings, under school supervision and
at school facilities;" and
2. "Could such a practice be prohibited as constituting
an improper or unfair method of competition?"
Implicit in the first question is the inquiry of whether
the school facilities! school grounds, school personnel and
school time~may be utilized for the display, sale and delivery
of rings and the collection of money therefor. The board of
trustees of an independent school district has ". . .the
exclusive power to.manage and govern the public free schools
of the district. . ." and they ". . .may adopt such rules,
regulations, and by-laws as they may deem proper." Texas Edu-
cation Code, Section 23.26(b) & (d). Historically the general
supervisory powers of the school district trustees over the
programs and facilities of the local school district have been
very broad and-have included their right to permit the school
building or any part of the school property to be used for
private purposes.,either gratuitously or for compensation when
such use diskfound,not to impair the school property or interfere
with the orderly~and successful conduct of the school. Royce
Ind. School Dist. v. Reinhardt, 159 S.W. 1010, 1011 (Tex. Civ.
App. 1913, error ref.). Activities that have been held to be
within the legitimate scope of the trustees' authority to
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Honorable J. W. Edgar, Page 2 (M-820)
permit on school properties include such things as the use of
a school gymnasium,as a public skating rink, Attorney General
Opinion No. O-167 (1939); also the grant of exclusive rights
to a radio stationto broadcast play by play accounts of foot-
ball games played on its property. Southwestern Broadcasting
Co. v. Oil Center Broadcasting Co. 2‘10S.W.Zd 230, (Tex. Civ.
APP., error ref. n;r.e.).
The soundness of the vesting of.broad managerial
powers on a local board of trusteeswho are elected,by the
taxpayers of that district, upon whom the greatest impact of
the trustee's decision rests, appears to have withstood the
test of time and to be incorporated inthe revision and recodi-
fication of the laws relating to public schools, being the Texas
Education Code, enacted by the 61st Legislature in 1969 and
including the aforesaid Section 23.26. If the trustees find
that the furnishing of school facilities and the supervision
by school personnel-of.the purchase and service of class
rings which-may be purchased by students does not interfere
with the school program and is ,related to the furtherance of
school spirit and morale, such trustees may grant the privilege
of using.such-facilities and school supervision to any one,
two, several or all ring manufacturers or their representatives
or none 'of'them, as-the board of trustees may choose. Such an
incidental use of school grounds, facilities, personnel or time
in our opinionwould not necessarily impair the school property
or interfere with the orderly and successful conduct of the
school but may. be found,to be in furtherance of it. The dis-
cretionary decision,by ,the board of trusteesis subject to
review on administrative appeal to.the State Commissioner-of
Education, the State Board of Education, and the District Court
of Travis County, Texas, as provided by the Texas Education
Code, Section-11.13, for any unreasonable abuse of their dis-
cretion. From the facts presented , no such abuse has been
shown.
As to whether such practice could,be prohibited as
constituting:.an.improperor unfair-method of competition, we
must observe.'that:-all-the facts surrounding and in connection
with each particnlar.sftuationmustbeconsfdered in the
determinationof.this:question. The Federal.Trade Commission
reviewed'.thepractices in this,field in the case of L. G.
Balfour Co,;;et aT.,'Dkt. No.'8435, July 29, 1968, F.T.C.
Complaints, Orders,~.Stipulations918,485, (appeal by respon-
dent pending in the 7th'U. S. Circuit Court of Appeals) and
enjoined the Balfour Company from entering into such exclusive
arrangements -fork"road line" stock rings for periods that
exceeded one year, but recognized the reasonableness and validity
of a three year contract where specially designed rings were
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Honorable J. W. Edgar, Page 3 (M-820)
selected which required expensive special dies for their manu-
facture to permit thenring~maker to amortize these costs over
the three year.period. Since this Federal,Trade Commission
case is similar in many respects to the facts submitted in this
opinion request and because the F.T.C. Order will not become a
final order until the expiration of the appeal presently pend-
ing in the 7th U. S. Circuit Court of Appeals, this office can-
not render an opinion during the pendency of such appeal as to
whether such practice may be an unfair trade practice as pro-
hibited by. Section-5 of the Federal Trade Commission Act, 15
U. S. Code Secs:41-58. The application of the F.T.C. Act
would only apply if the practice is "in commerce" which is
loosely defined as being ininterstate commerce and its-cover-
age does not extend to practices which merely "affect" inter-
state commerce; F.T.C. v. Bunte Brothers, Inc., 312 U.S.
349 (1941). Since the present status of this decision is un-
settled, the law is still speculative and the policy of this
office is to refrain from rendering an opinion thereon. Attor-
ney General Opinion No. V-291 (19471.
If the arrangement is intrastate and ~outside.~theambit
of the F.T.C. Act of course the Texas Antitrust Laws. Sec.
15.01 et seq., Texas Business and Commerce Code, would apply.
In Hailey v. Brooks, 191 S.W. 781 (Tex. Civ. App., 1916, no
writ) the Court of Civil Appeals held that the unrebutted alle-
gation that the principal,-superintendent and school trustees
who established a school cafeteria and supply house and there-
after prohibited the students from dealing or trading with the
plaintiff, constituted an unlawful-conspiracy in the form of a
boycott. That such action transcended their authority and may
be subject to injunction therefor; and that the trial court
erred in denying the injunction ex parte without a hearing and
with only the plaintiffs sworn pleadings to the above cited
facts alleged.
The arrangement inquired about in this opinion request
shows no competitive possibilities as that in the Haile
--+acturer
supra, between the school-district and any ring manu case'
bidding for-the exclusive grant.described. In construing the
antitrust laws of Texas, the courts, with substantial uniform-
ity, have recognized a well defined exception to the rule that
all exclusive contracts are-within the prohibition of those
laws; in that an owner, lessor or one in control of premises
may agree with another~person that such other-person shall
have an exclusive right or privilege in or on such premises.
Schnitzer v. Southwest Shoe Corporation; 364 S.W.2d 373; 374
(Tex. Sup. 1963): A contract by the trustees of a hospital
giving a doctor a five year exclusive.right to perform surgery
in such hospital was approved in Jeanes v. Burke, 226 S.W.2d
908, (Tex. Civ. App., 1950, no writ).
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Honorable J. W. Edgar, Page 4 (~-820)
We find no conflict with the Texas antitrust laws in
the proposed action-of the school district and no improper
method of competition that could be prohibited under the laws
of this State.
SUMMARY
-------
An independent school district in
Texas may legally solicit bids from class
ring manufacturers (or their representatives)
and based-upon--suchbids;may grant an ex-
clusive privilege to one'such.mannfacturer
(or its representative) -toF.servicevoluntary
student purchases of class rings, under
school supervision and at school facilities:
provided such.use does not,impair the school
property~or,interfere with the orderly and
successful conduct of the school.~ Whether
such grants for five years may be'an unfair
method of competition prohibited by Sec. 5
of the FederalTrade Commission Act.is a
question presently being considered by the
Federal Courts and is therefore speculative
and unsettled and cannot be decided by this
opinion.
No state antitrust law violations are
shown in the proposed course of action.
Very truly yours,
CRAWFORD C. MARTIN
Attorney General of Texas
BY
NOLA WHITE
First Assistant
Prepared by Wayne R. Rodgers
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
Gordon Cass
Robert E. Owen
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Honorable J. W. Edgar, Page 5 (M-820)
Scott Garrison
Jack Sparks
MEADE F. GRIFFIN
Staff Legal Assistant
ALFRED WALKER
Executive Assistant
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