Source: http://openjurist.org/386/us/685/utah-pie-company-v-continental-baking-co
Timestamp: 2015-10-07 19:53:24
Document Index: 330612624

Matched Legal Cases: ['§ 4', '§ 15', '§ 1', '§ 1', '§ 2', '§ 13', '§ 2']

386 US 685 Utah Pie Company v. Continental Baking Co | OpenJurist
386 U.S. 685 - Utah Pie Company v. Continental Baking Co Homethe United States Reports386 U.S.
386 US 685 Utah Pie Company v. Continental Baking Co 386 U.S. 685
87 S.Ct. 1326
18 L.Ed.2d 406
UTAH PIE COMPANY, Petitioner,v.CONTINENTAL BAKING CO. et al.
Argued Jan. 17, 1967.
Rehearing Denied June 5, 1967.
See 387 U.S. 949, 87 S.Ct. 2071.
Joseph L. Alioto, San Francisco, Cal., for petitioner.
John H. Schafer, Washington, D.C., Peter W. Billings, Salt Lake City, Utah, and George P. Lamb, Washington, D.C., for respondents.
This suit for treble damages and injunction under §§ 4 and 16 of the Clayton Act, 38 Stat. 731, 737, 15 U.S.C. §§ 15 and 261 was brought by petitioner, Utah Pie Company, against respondents, Continental Baking Company, Carnation Company and Pet Milk Company. The complaint charged a conspiracy under §§ 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1 and 2, and violations by each respondent of § 2(a) of the Clayton Act as amended by the Robinson-Patman Act, 49 Stat. 1526, 15 U.S.C. § 13(a).2 The jury found for respondents on the conspiracy charge and for petitioner on the price discrimination charge.3 Judgment was entered for petitioner for damages and attorneys' fees and respondents appealed on several grounds. The Court of Appeals reversed, addressing itself to the single issue of whether the evidence against each of the respondents was sufficient to support a finding of probable injury to competition within the meaning of § 2(a) and holding that it was not. 349 F.2d 122. We granted certiorari. 382 U.S. 914, 86 S.Ct. 288, 15 L.Ed.2d 230.4 We reverse.
The product involved is frozen dessert pies—apple, cherry, boysenberry, peach, pumpkin, and mince. The period covered by the suit comprised the years 1958, 1959, and 1960 and the first eight months of 1961. Petitioner is a Utah corporation which for 30 years had been baking pies in its plant in Salt Lake City and selling them in Utah and surrounding States. It entered the frozen pie business in late 1957. It was immediately successful with its new line and built a new plant in Salt Lake City in 1958. The frozen pie market was a rapidly expanding one: 57,060 dozen frozen pies were sold in the Salt Lake City market in 1958, 111,729 dozen in 1959, 184,569 dozen in 1960, and 266,908 dozen in 1961. Utah Pie's share of this market in those years was 66.5% 34.3% 45.5%, and 45.3% respectively, its sales volume steadily increasing over the four years. Its financial position also improved. Petitioner is not, however, a large company. At the time of the trial, petitioner operated with only 18 employees, nine of whom were members of the Rigby family, which controlled the business. Its net worth increased from $31,651.98 on October 31, 1957, to $68,802.13 on October 31, 1961. Total sales were $238,000 in the year ended October 31, 1957, $353,000 in 1958, $430,000 in 1959, $504,000 in 1960 and $589,000 in 1961. Its net income or loss for these same years was a loss of $6,461 in 1957, and net income in the remaining years of $7,090, $11,897, $7,636, and $9,216.
Each of the respondents is a large company and each of them is a major factor in the frozen pie market in one or more regions of the country. Each entered the Salt Lake City frozen pie market before petitioner began freezing dessert pies. None of them had a plant in Utah. By the end of the period involved in this suit Pet had plants in Michigan, Pennsylvania, and California; Continental in Virginia, Iowa, and California; and Carnation in California. The Salt Lake City market was supplied by respondents chiefly from their California operations. They sold primarily on a delivered price basis.
The 'Utah' label was petitioner's proprietary brand. Beginning in 1960, it also sold pies of like grade and quality under the controlled label 'Frost 'N' Flame' to Associated Grocers and in 1961 it began selling to American Food Stores under the 'Mayfresh' label.5 It also, on a seasonal basis, sold pumpkin and mince frozen pies to Safeway under Safeway's own 'Bel-air' label.
The major competitive weapon in the Utah market was price. The location of petitioner's plant gave it natural advantages in the Salt Lake City marketing area and it entered the market at a price below the then going prices for respondents' comparable pies. For most of the period involved here its prices were the lowest in the Salt Lake City market. It was, however, challenged by each of the respondents at one time or another and for varying periods. There was ample evidence to show that each of the respondents contributed to what proved to be a deteriorating price structure over the period covered by this suit, and each of the respondents in the course of the ongoing price competition sold frozen pies in the Salt Lake market at prices lower than it sold pies of like grade and quality in other markets considerably closer to its plants. Utah Pie, which entered the market at a price of $4.15 per dozen at the beginning of the relevant period, was selling 'Utah' and 'Frost 'N' Flame' pies for $2.75 per dozen when the instant suit was filed some 44 months later.6 Pet, which was offering pies at $4.92 per dozen in February 1958, was offering 'Pet-Ritz' and 'Bel-air' pies at $3.56 and $3.46 per dozen respectively in March and April 1961. Carnation's price in early 1958 was $4.82 per dozen but it was selling at $3.46 per dozen at the conclusion of the period, meanwhile having been down as low as $3.30 per dozen. The price range experienced by Continental during the period covered by this suit ran from a 1958 high of over $5 per dozen to a 1961 low of $2.85 per dozen.7
We deal first with petitioner's case against the Pet Milk Company. Pet entered the frozen pie business in 1955, acquired plants in Pennsylvania and California and undertook a large advertising campaign to market its 'Pet-Ritz' brand of frozen pies. Pet's initial emphasis was on quality, but in the face of competition from regional and local companies and in an expanding market where price proved to be a crucial factor, Pet was forced to take steps to reduce the price of its pies to the ultimate consumer. These developments had consequences in the Salt Lake City market which are the substance of petitioner's case against Pet.
First, Pet successfully concluded an arrangement with Safeway, which is one of the three largest customers for frozen pies in the Salt Lake markt, whereby it would sell frozen pies to Safeway under the latter's own 'Bel-air' label at a price significantly lower than it was selling its comparable 'Pet-Ritz' brand in the same Salt Lake market and elsewhere.8 The initial price on 'Bel-air' pies was slightly lower than Utah's price for its 'Utah' brand of pies at the time, and near the end of the period the 'Bel-air' price was comparable to the 'Utah' price but higher than Utah's 'Frost 'N' Flame' brand. Pet's Safeway business amounted to 22.8%, 12.3%, and 6.3% of the entire Salt Lake City market for the years 1959, 1960, and 1961, respectively, and to 64%, 44%, and 22% of Pet's own Salt Lake City sales for those same years.
Second, it introduced a 20-ounce economy pie under the 'Swiss Miss' label and began selling the new pie in the Salt Lake market in August 1960 at prices ranging from $3.25 to $3.30 for the remainder of the period. This pie was at times sold at a lower price in the Salt Lake City market than it was sold in other markets.
Third, Pet became more competitive with respect to the prices for its 'Pet-Ritz' proprietary label. For 18 of the relevant 44 months its offering price for Pet-Ritz pies was $4 per dozen or lower, and $3.70 or lower for six of these months. According to the Court of Appeals, in seven of the 44 months Pet's prices in Salt Lake were lower than prices charged in the California markets. This was true although selling in Salt Lake involved a 30- to 35-cent freight cost.
The Court of Appeals first concluded that Pet's price differential on sales to Safeway must be put aside in considering injury to competition because in its view of the evidence the differential had been completely cost justified and because Utah would not in any event have been able to enjoy the Safeway custom. Second, it concluded that the remaining discriminations on 'Pet-Ritz' and 'Swiss Miss' pies were an insufficient predicate on which the jury could have found a reasonably possible injury either to Utah Pie as a competitive force or to competition generally.
We disagree with the Court of Appeals in several respects. First, there was evidence from which the jury could have found considerably more price discrimination by Pet with respect to 'Pet-Ritz' and 'Swiss Miss' pies than was considered by the Court of Appeals. In addition to the seven months during which Pet's prices in Salt Lake were lower than prices in the California markets, there was evidence from which the jury could reasonably have found that in 10 additional months the Salt Lake City prices for 'Pet-Ritz' pies were discriminatory as compared with sales in western markets other than California. Likewise, with respect to 'Swiss Miss' pies, there was evidence in the record from which the jury could have found that in five of the 13 months during which the 'Swiss Miss' pies were sold prior to the filing of this suit, prices in Salt Lake City were lower than those charged by Pet in either California or some other western market.
Second, with respect to Pet's Safeway business, the burden of proving cost justification was on Pet9 and, in our view, reasonable men could have found that Pet's lower priced, 'Bel-air' sales to Safeway were not cost justified in their entirety. Pet introduced cost data for 1961 indicating a cost saving on the Safeway business greater than the price advantage extended to that customer. These statistics were not particularized for the Salt Lake market, but assuming that they were adequate to justify the 1961 sales, they relatd to only 24% of the Safeway sales over the relevant period. The evidence concerning the remaining 76% was at best incomplete and inferential. It was insufficient to take the defense of cost justification from the jury, which reasonably could have found a greater incidence of unjustified price discrimination than that allowed by the Court of Appeals' view of the evidence.10<