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Utah Pie Co Vs Continental Baking Co - Citation 101699 - Court Judgment | LegalCrystal
Save as PDF Add a Tag Add a Note Semantics Visualize Utah Pie Co. Vs. Continental Baking Co. - Court Judgment	LegalCrystal Citationlegalcrystal.com/101699CourtUS Supreme CourtDecided OnApr-24-1967Case Number386 U.S. 685AppellantUtah Pie Co.RespondentContinental Baking Co.Excerpt:
utah pie co. v. continental baking co. - 386 u.s. 685 (1967)
this suit for treble damages and an injunction by petitioner, a local bakery company in salt lake city, against three large companies each of which is a major factor in the frozen pie market in one or more regions of the country, charged a conspiracy under §§ 1 and 2 of the sherman act and violations by each respondent of § 2(a) of the clayton act, as amended by the robinson-patman act. the..... Judgment:
1. Section 2(a) does not forbid price competition, but it does provide that sellers may not sell goods to different purchasers at different prices if the result may be to injure competition in either the sellers' or the buyers' market unless such discriminations are justified as permitted by the Act. P.
386 U. S. 702
(a) There can be a reasonably possible injury to competition even though the volume of sales is rising and some of the competitors in the market continue to operate at a profit. P.
(b) Section 2(a) does not come into play solely to regulate the conduct of price discriminators who consistently undercut the prices of other competitors. P.
2. The existence of predatory intent bears on the likelihood of injury to competition. Pp.
(a) There was evidence of predatory intent with respect to each of the respondents, and there was other evidence upon which the jury could find the requisite injury to competition. Pp.
(b) Section 2(a) reaches price discrimination that erodes competition as much as it does price discrimination that is intended to have immediate destructive impact. P.
386 U. S. 703
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 26 [
] 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). [
] The jury found for respondents on the conspiracy charge and
for petitioner on the price discrimination charge. [
] 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. [
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. [
] 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. [
] 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. [
First, Pet successfully concluded an arrangement with Safeway, which is one of the three largest customers for frozen pies in the Salt Lake market, whereby it would sell frozen pies to Safeway under the latter's own "Belair" label at a price significantly lower than it was selling its comparable "Pet-Ritz" brand in the same Salt Lake market and elsewhere. [
] 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, with respect to Pet's Safeway business, the burden of proving cost justification was on Pet, [
] 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 related 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. [
With respect to whether Utah would have enjoyed Safeway's business absent the Pet contract with Safeway, it seems clear that, whatever the fact is in this regard, it is not determinative of the impact of that contract on competitors other than Utah and on competition generally. There were other companies seeking the Safeway business, including Continental and Carnation, whose pies may have been excluded from the Safeway shelves by what the jury could have found to be discriminatory sales to Safeway. [
] What is more, Pet's evidence that Utah's unwillingness to install quality control equipment prevented Utah from enjoying Safeway's private label business is not the only evidence in the record relevant to that question. There was other evidence to the contrary.
Third, the Court of Appeals almost entirely ignored other evidence which provides material support for the jury's conclusion that Pet's behavior satisfied the statutory test regarding competitive injury. This evidence bore on the issue of Pet's predatory intent to injure Utah Pie. [
] As an initial matter, the jury could have concluded
Petitioner's case against Continental is not complicated. Continental was a substantial factor in the market in 1957. But its sales of frozen 22-ounce dessert pies, sold under the "Morton" brand, amounted to only 1.3% of the market in 1958, 2.9% in 1959, and 1.8% in 1960. Its problems were primarily that of cost, and, in turn, that of price, the controlling factor in the market. In late 1960, it worked out a co-packing arrangement in California by which fruit would be processed directly from the trees into the finished pie without large intermediate packing, storing, and shipping expenses. Having improved its position, it attempted to increase its share of the Salt Lake City market by utilizing a local broker and offering short-term price concessions in varying amounts. Its efforts for seven months were not spectacularly successful. Then, in June, 1961, it took the steps which are the heart of petitioner's complaint against it. Effective for the last two weeks of June, it offered its 22-ounce frozen apple pies in the Utah area at $2.85 per dozen. It was then selling the same pies at substantially higher prices in other markets. The Salt Lake City price was less than its direct cost plus an allocation for overhead. Utah's going price at the time for its 24-ounce "Frost
N' Flame" apple pie sold to Associated Grocers was $3.10 per dozen, and, for its "Utah" brand, $3.40 per dozen. At its new prices, Continental sold pies to American Grocers in Pocatello, Idaho, and to American Food Stores in Ogden, Utah. Safeway, one of the major buyers in Salt Lake City, also purchased 6,250 dozen, its requirements for about five weeks. Another purchaser ordered 1,000 dozen. Utah's response was immediate. It reduced
We need not dwell long upon the case against Carnation, which, in some respects, is similar to that against Continental and in others more nearly resembles the case against Pet. After Carnation's temporary setback in 1959, it instituted a new pricing policy to regain business in the Salt Lake City market. The new policy involved a slash in price of 60˘ per dozen pies, which brought Carnation's price to a level admittedly well below its costs, and well below the other prices prevailing in the market. The impact of the move was felt immediately, and the two other major sellers in the market reduced their prices. Carnation's banner year, 1960, in the end involved eight months during which the prices in Salt Lake City were lower than prices charged in other markets. The trend continued during the eight months in 1961 that preceded the filing of the complaint in this case. In each of those months, the Salt Lake City prices charged by Carnation were well below prices charged in other markets, and in all but August, 1961, the Salt Lake City delivered price was 20˘ to 50˘ lower than the prices charged in distant San Francisco. The Court of Appeals held that only the early 1960 prices could be found to have been below cost. That holding, however, simply overlooks evidence from which the jury could have concluded that, throughout 1961, Carnation maintained a below-cost price structure and that Carnation's discriminatory pricing, no less than that of Pet and Continental, had an important effect on the Salt Lake City market. We cannot say that the evidence precluded the jury from finding it reasonably possible that Carnation's conduct would injure competition.
Section 2(a) does not forbid price competition which will probably injure or lessen competition by eliminating competitors, discouraging entry into the market, or enhancing the market shares of the dominant sellers. But Congress has established some ground rules for the game. Sellers may not sell like goods to different purchasers at different prices if the result may be to injure competition in either the sellers' or the buyers' market unless such discriminations are justified as permitted by the Act. This case concerns the sellers' market. In this context, the Court of Appeals placed heavy emphasis on the fact that Utah Pie constantly increased its sales volume and continued to make a profit. But we disagree with its apparent view that there is no reasonably possible injury to competition as long as the volume of sales in a particular market is expanding and at least some of the competitors in the market continue to operate at a profit. Nor do we think that the Act only comes into play to regulate the conduct of price discriminators when their discriminatory prices consistently undercut other competitors. It is true that many of the primary line cases that have reached the courts have involved blatant predatory price discriminations employed with the hope of immediate destruction of a particular competitor. On the question of injury to competition, such cases present courts with no difficulty, for such pricing is clearly within the heart of the proscription of the Act. Courts and commentators alike have noted that the existence of predatory intent might bear on the likelihood of injury to competition. [
] In this case, there was some evidence of predatory intent with respect to each of these respondents. [
] There was also other evidence upon which the
The statutory test is one that necessarily looks forward on the basis of proven conduct in the past. Proper application of that standard here requires reversal of the judgment of the Court of Appeals. [
Since the Court of Appeals held that petitioner had failed to make a
case against each of the respondents, it expressly declined to pass on other grounds for reversal presented by the respondents. 349 F.2d 122, 126. Without intimating any views on the other grounds presented to the Court of Appeals, we reverse its judgment and remand the case to that court for further proceedings.
"2. Whether, if, under the order of the Court of Appeals, petitioner cannot make a motion for new trial under Rule 50(c)(2) within 10 days of the District Court's entry of judgment against him, the order of the Court of Appeals directing the District Court to enter judgment for respondents is compatible with Rule 50(b) as interpreted by this Court in
Weade v. Dichmann, Wright & Pugh,
See F.T.C. v. Morton Salt Co.,
370 U. S. 460
370 U. S. 467
The jury was, in fact, charged that it could find for petitioner if, from respondents' conduct, "there is reasonably likely to be a substantial injury to competition
among sellers of frozen pies in the Utah area.
" R. at 1355. (Emphasis supplied.)
The dangers of predatory price discrimination were recognized in
, where such pricing was held violative of § 2(a). Subsequently, the Court noted that
F.T.C. v. Anheuser-Busch, Inc.,
363 U. S. 548
See also Balian Ice Cream Co. v. Arden Farms Co.,
231 F.2d 356, 369;
Maryland Baking Co. v. F.T.C.,
243 F.2d 716;
Atlas Building Prod. Co. v. Diamond Block & Gravel Co., 269 F.2d 950; Anheuser-Busch, Inc. v. F.T.C.,
289 F.2d 835. In the latter case, the court went so far as to suggest that:
289 F.2d at 843. Chief Justice Hughes noted in a related antitrust context that "knowledge of actual intent is an aid in the interpretation of facts and prediction of consequences."
288 U. S. 372
, and we do not think it unreasonable for courts to follow that lead. Although the evidence in this regard against Pet seems obvious, a jury would be free to ascertain a seller's intent from surrounding economic circumstances, which would include persistent unprofitable sales below cost and drastic price cuts themselves discriminatory.
Rowe, Price Discrimination Under the Robinson-Patman Act 141-150 (1962), commenting on the Court's statement in
F.T.C. v. Anheuser-Busch, Inc., supra,
that "a price reduction below cost tends to establish [predatory] intent." 363 U.S. at
363 U. S. 552
See also Ben Hur Coal Co v. Wells,
242 F.2d 481, 486, and
Balian Ice Cream Co. v. Arden Farms Co., supra,
at 368, in which the courts recognized the inferential value of sales below cost on the issue of intent.
Maryland Baking Co.,
5 F.T.C. 1679, 169,
243 F.2d 716. In that case, the local competitor's share of the market when price discrimination began was 91.3%, yet the Federal Trade Commission was not impressed by the argument that the effect of the discrimination had been to terminate a monopoly and to create a competitive market.
Each respondent argues here that prior price discrimination cases in the courts and before the Federal Trade Commission, in which no primary line injury to competition was found, establish a standard which compels affirmance of the Court of Appeals' holding. But the cases upon which the respondents rely are readily distinguishable. In
Anheuser-Busch, Inc. v. F.T.C.,
289 F.2d 835, 839, there was no general decline in price structure attributable to the defendant's price discriminations, nor was there any evidence that the price discriminations were "a single lethal weapon aimed at a victim for a predatory purpose."
at 842. In
Borden Co. v. F.T.C.,
339 F.2d 953, the court reversed the Commission's decision on price discrimination in one market for want of sufficient interstate connection, and the Commission's charge regarding the other market failed to show any lasting impact upon prices caused by the single, isolated incident of price discrimination proved. Absence of proof that the alleged injury was due to challenged price discriminations was determinative in
International Milling Co.,
CCH Trade Reg.Rep. Transfer Binder, 1963-1965, ŚŚ 16,494, 16,648. In
Uarco, Inc.,
CCH Trade Reg.Rep. Transfer Binder, 1963-1965, Ś 16,807, there was no evidence from which predatory intent could be inferred and no evidence of a long-term market price decline. Similar failure of proof and absence of sales below cost were evident in
Quaker Oats Co.,
CCH Trade Reg.Rep. Transfer Binder, 1963-1965, Ś 17, 134.
Dean Milk Co.,
3 Trade Reg.Rep. Ś 17,357, is not to the contrary. There, in the one market where the Commission found no primary line injury, there was no evidence of a generally declining price structure.
"where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination. . . . [
The Court's own description of the Salt Lake City frozen pie market from 1958 through 1961 shows that the answer to that question must be no. [
] In 1958, Utah Pie had a
-monopolistic 66.5% of the market. In 1961 -- after the alleged predations of the respondents -- Utah Pie still had a commanding 45.3%, Pet had 29.4%, and the remainder of the market was divided almost equally between Continental, Carnation, and other, small local, bakers. Unless we disregard the lessons so laboriously learned in scores of Sherman and Clayton Act cases, the 1961 situation has to be considered more competitive than that of 1958. Thus, if we assume that the price discrimination proven against the respondents had any effect on competition, that effect must have been beneficent.
That the Court has fallen into the error of reading the Robinson-Patman Act as protecting competitors, instead of competition, can be seen from its unsuccessful attempt to distinguish cases relied upon by the respondents. [
] Those cases are said to be inapposite because they
386 U. S. 691