i paraphrased the customer pays the normal price for fasteners and received racks in addition to fasteners these gifts are sales below cost the racks which defendant does not otherwise sell are permitted under california business product is the same as the give away of rocks and the sale of product the principal issues in this peel have become as outlined in the briefs one whether the district court erred in concluding that the give away of product in this case hardware was irrelevant because to the racks were used to display product were ancillary to hellman's principle business of selling hardware in this regard the ninth circuit has been invited by the district court and hellman to clarify the meaning of the term ancillary in relation to products or services and to adopt a reasoning that permits the give away or discount of product that is the core of a business an apparent violation of the unfair practices act by coupling it with the sale of ancillary product that is an integral part of the store display and marketing of that product secondarily the court is called upon to interpret or apply the california supreme court's one thousand nine hundred nine decision in celtic communications versus los angeles teller telephone by considering what factual showing of intent or purpose to injure competitors or destroy competition is necessary in order to state a valid claim and this or regard the court has an opportunity as urged by justice baxter in his dissent in that case to consider this teletech decision in conjunction with business and professional code section seventeen zero seven one which creates a presumption of the requisite intent or purpose when there is a combination that there is the requisite intent or purpose when there is a combination of injurious effect i guess what i was i'm kind of confused about is if i am a vendor for every failure and i buy your fashion i guess i could have wooden boxes on the floor and just dump your  this case i can't find in the record that everybody bought racks somebody bought racks nobody bought racks apparently somebody did buy racks and if still then those racks were used with this product and  i understand it once you bought if i understand a dollar for dollar program once you bought the equivalent amount of fasteners equal to the cost racks i don't know what and in some of these record it appears  were up seventeen dollars i don't know what it is once you bought that amount you receive any credit on the account is that right that's my understanding yes and the exhibits that i found in the record show that that showed  these documents that i found in the record it shows that it was a merchandise credit now does that make any difference i guess what i'm getting at after all this elaboration is it appears that if you bought x dollars the i would note that in the motion for reconsideration by hellmann the hook for reconsideration by the district court was the notion that these rafts were not sold outside of the dollar for dollar probate is not that that's something we have to have we have to if in fact we could say that the racks were not a crock that was normally sold then maybe giving away the rack if you could this accounting business is not a product it was ordinary so therefore takes it out of the application of this thing the analogy i would like to submit to the court's attention is the notion of a manufacture of beer which sells the kegs that contain the beer to bars and restaurants and then gives the beer away for free you can't have one without the other well while i don't understand the argument that  then they pay the ordinary price for the fasteners but let's assume they paid two thousand dollars for the racks and then going to two thousand dollars merchandise credit for the fasteners they then take the two thousand dollars with the fasteners they have just spent two thousand dollars fasteners there was no way they got the racks for free he spent two thousand dollars in cash or they spent two thousand dollars and got the fasteners in addition but it was a package deal fun and similarly looking at the other side i don't think the fasteners were free either that is to say in order to get that first two thousand dollars with the fans you had to buy the two thousand dollars worth of rack which means he spent two thousand dollars he got sale of rocks and give away a fasteners was no different than the give away of the racks in the sale of fasteners because ultimately the customer pays the what i would draw the court's attention to is that that's not what happened there indeed in order to get the fasteners at the at the price of zero if you will they had to purchase the rock splashed and so they were and so if i can use a term that might have other connotations they were tied together sinkings i would say it's not dissimilar but what i would know to you is that the two are inextricably tied together the the sale of their racks for the use of the racks is an integral part of the storage and marketing and sale of the product so what if the store decides to put wooden boxes on the floor and scatter all these parts all over the floor where people can't find them and then in the vendor says wait a minute why do you sell more and why don't i still more why don't we organize actually become an integral part of it so you can if i'm the guy next door and i say look i like the homey touch i'm going to put wooden box on the floor you both need the same price for the product i throw in a box on the floor i p b ten cents a dozen i bought the rack i pay ten cents a dozen and the only difference is that i marketing like crazy because i got this beautiful rack where people can find the stuff is that a marketing issue it has nothing to do with discounting it's has to do floor and around the walls of a hardware store but that indeed is not what was happening and indeed there's no indication in the record that retailers were doing that or were enticed to do that so well let's go to this go to an eas competitors then really the fundamental issue is diversion of trade to the purpose is to divert trade from the competitor and here we have a documentary record of the dollar for dollar program documents as well as the  other documents in the record from hellman showing that indeed they were focused on doing that and then you also have the the supplemental records showing that they got those orders and since those orders were specifically to replace  as the as the provider or distributor wholesaler of the product i believe you have the record in there that shows that thrush no longer had have that business and therefore there is a causation of economic loss claiming you claiming that because the bill means activities you were forced into bankruptcy but i think that is a conclusion to reach and that it has been presented as a result of the loss of business you don't show any harm what who cares you know i mean well i agree but whether or not that was the only cause or were the only factor in the bankruptcy of thrush is not the issue the issue is whether or not there was trade diverted from thrush and the dollar for dollar program was uniquely focused to take that trade away from fourteen new mercedes and you had a while lifestyle the three into bankruptcy so it's their burden to go forward i'm saying i'm saying that all threshed has to do is show that there was the diversion of sales there was a diversion of customers  business from through us as a result of the dollar for dollar program which is shown by the program as it was set up that it was focused just on the conversion of thrush customers and to show the orders that qualify for the dollar for dollar program purposes of the example that the racks cost two thousand dollars and then the customer at the hardware store gets two thousand dollars worth of merchandise credit for the fasteners takes those two thousand dollars worth of fas do we have evidence on the record from which we can determine what helms cost was for that package of the racks plus the fasteners so that we can determine whether the two thousand dollars and below their cost in the underlying motions for summary judgment there the motion itself was focused on the cost versus the market and indeed they were showing markups in the range just seventy four percent up you know significant market so it's let me cut to the change do we have evidence of the cost answer your question directly to have you preserved the question on appeal to us as to whether or not the package of the racks and the fasteners was sold below cost i'm afraid i can't answer that question what we do have is we have the indication in the clear on the record of what the percentage markups were of the cost from the cost to the sale and you contend that your evidence shows that the package of the racks and the fasteners was sold at below and almost cost yes ok now your time's run but we'll give you a minute or so in rebuttal thank you abandoned that argument so then they shifted to an argument that the racks indeed were the primary product sold by hillman and that the fasteners were somehow collateral that argument too has fall expanded giving away the raw or giving your credit becomes the credit for purchasers of products that list price is some sort of a gift because if we're not selling below cost then racks and i like justice fletcher's analogy you were selling two thousand dollars worth of rocks to this customer and then we're telling the customer now if you've bought your sixteen racks and you've spent your two thousand correct and that was one of the errors that the lower court made which caused our motion for reconsideration the judge had inadvertently looked at evidence from which he did do so that we sold racks outside the dollar for dollar program and we do not we're selling two thousand and racks then we're giving back a credit for merchandise purchased and as you correctly pointed out where we're getting two thousand dollars in our pocket for racks and for product so i think the issue is rather whether two thousand dollars and what we've given up is both racks and some merchandise and that's been there all well because it's the rocks were cost two thousand dollars and the merchant paid us two thousand for the racks and then we gave them two thousand dollars worth of primary fastener product and and they ended up with four thousand dollars worth of racks and product come behind then i suppose in concept you could say that both of them were below cost and understand that either because if they paid two grand for the rx and then you gave them for two thousand dollars worth of product three that you just acknowledged all you've done i given away two thousand dollars of product and the racks became three to the store and their ownership is that what you're saying no because they've already paid two thousand dollars right that's right no they paid two thousand dollars ok racks no it's a store asked us for racks that would only be provided pursuant to the dollar for dollar program for if they're an existing customer already selling helman product it will be a fifty cent preferred dollar program exactly ye more attractive that are cheaper the store is free to find racks wherever they wish and there is a new used some of that we sell to quote sell we give away two thousand dollars worth of racks on the dollar for dollar program and then you give away the two thousand dollars worth of fasteners if you give away just the right when you finally have gotten a package two thousand dollars two you racks and fasteners are given to the hardware store customer is that below your cost  the record doesn't demonstrate that and there is no evidence on appeal i would suggest to the court however that if you look at the markup on our product it would be it would more than exceed the cost that is not below cost markups and the markups in the record that's why the point the appellant has abandoned the below cost theory because the hillmen mark ups the profit margin is in other words in other words you're making money when you sell the racks even when you sell them in this package deal yes absolutely so you got yourself and any customer who wants to use iraq as a way of displaying the product you're selling racks and you're selling them in this package but you're making money when you do it absolutely how can the rack possibly be ancillary when they're such an integral part of the sale of the fasteners because there's simply something that it's an inducement it's an inducement to the purchaser to say we will give you these racks if you buy a certain volume of product  you're giving something that's tied directly to the to the to the product itself what you know they could use the racks to display any other product i mean there's no there's no picture of the racks on the record no there isn't so i don't know whether they could use them easily or not  another product and i'm not speaking from the record but the say helman on the rack no it did not but that's not in the round i reckon tell me about the record again let's if i understand the balance argument and i don't want to recap if you can dollar program so we're away from even though we found a purpose by the judge perry and can't go after them to injure them the only act that we're complaining about now it's got to be the rack in the gift of k k anything in the record to show how that relates to the competition i mean if gilman sold let's say a thousand customers and it was one rack and that amount of the one of one hundred percent of sales that would be of interest i bankrupt councils as the carriages go effects burdened by saying he showed that he had sales and he doesn't have any sales of the business to show the direct causation be done here and again i guess we're back to dollar for dollar program right i would refer the court to the century twenty one versus prudential decision and the co op or tunis has it decisions that say that if there is no injurious effect i mean to show the mere fact that they went into bankruptcy is insufficient some record evidence of a of a thrush customer that and i think if you read century twenty one in co opportunities you'll see the court saying it's not enough for the unsuccessful competitor to say that they diverted customers from this they would have to show that these customers were otherwise satisfied and work averted because of something that the successful competitor did and centuries of century twenty one and in the  with the evidence and i would direct the court to western union versus first data which discusses the issue of and chad and says that as to intent in that case the evidence shows nothing more than an attempt to divert intentional on this record to the intent in western union versus first data i would suggest that that that is not the the racks are not ancillary no everybody did not buy the racks everybody did not need to buy the racks merchants are free to display the product however they wish and may find cheaper racks or more attractive racks  not ordinarily sold in the course of the business and there is no evidence sufficient to show that with the racks what we end up here with is a program a lawful program under the unfair practices act in which film and produced and sold or gave away an ancillary product namely the racks in you like a minute rebuttal present i appreciate the interest in the case and i'll try and talk past first of all on the very seeds august twenty five nine hundred ninety nine memo which is in there it says that it must be a thrush conversion that's quote unquote also in the dealer partnership agreements where dealers signed up to get to pay for the racks and therefore qualify for the free product  racks i have four specific points i'd like to make in rebuttal in conclusion one is that there was no gift of rocks to anyone else unless they took away the thrush's customer change from rush and  only got the free reaction as part of this dollar for dollar program or if they specifically request that there's no evidence of that number two the amount of the free product is depended upon how much they paid for the racks which is a part of how many linear feet will then be available in the store to display the helman product number three the record is under skewed that the product was actually given away it was a credit so to the extent that we're talking about now we're making  giveaway of rocks rather than product that's an argument that's not what the facts show finally if we were to follow this logic and reasoning we are creating a new opportunity for large competitors to unfairly compete with smaller direct primary competitors because they can then they can then sell a product that is an integral part of the storage display in marketing of their primary product and couple it with the giveaway of the primary product and in that way they can create an unfair competition in the market if that is indeed what the conclusion of this case if so and so far we haven't seen that that's been permitted thank you very much for your time thank