§481-3 Sales at less than cost. No person, partnership, firm, corporation, joint stock company, or other association engaged in business within the State shall sell, offer for sale, or advertise for sale any article, or product, or service or output of a service trade, at less than the cost thereof to such vendor, or give, offer to give, or advertise with the intent to give away any article or product, or service or output of a service trade, with the intent to destroy competition.

The term "cost" as applied to production includes the cost of raw materials, labor, and all overhead expenses of the producer; and as applied to distribution "cost" means and includes the invoice cost of the merchandise to a distributor or the replacement cost of the merchandise to a distributor, whichever is lower; less all trade discounts except customary discounts for cash; to which shall be added (1) freight charges not otherwise included in the invoice cost or the replacement cost of the merchandise as herein set forth, and (2) cartage to the distributor outlet if done or paid for by the distributor, and (3) a markup to cover a proportionate part of the cost of doing business, which markup, in the absence of proof of a lesser cost, shall be six per cent of the cost to the distributor as herein set forth after adding thereto freight charges and cartage but before adding thereto a markup; provided that in the case where a person, partnership, corporation, or association is engaged in the business or makes sales both at retail and wholesale, the "invoice cost" includes all elements recognized by good accounting practice as proper elements of the cost; provided further that taxes passed on to a purchaser as a separate item from the price of merchandise shall be included in the advertised price or offer of sale of the merchandise if such taxes are used to compute the markup of six per cent as provided herein.

The "cost of doing business" or "overhead expense" means all costs of doing business incurred in the conduct of the business and includes without limitation the following items of expense: labor (including salaries of executive officers), rent, interest on borrowed capital, depreciation, selling cost, maintenance of equipment, delivery costs, credit losses, all types of licenses, taxes, insurance, and advertising. [L 1937, c 223, §3; RL 1945, §9323; am L 1955, c 241, §1(a); RL 1955, §205-4; am L 1961, c 95, §1; HRS §481-3]

Case Notes

Purpose is to protect competitors as well as competition. 63 H. 289, 627 P.2d 260.