Opinion ID: 392697
Heading Depth: 1
Heading Rank: 2

Heading: Elements of the Robinson-Patman Violation

Text: 7 Section 2(a) of the Robinson-Patman Act provides in pertinent part: 8 That it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption or resale within the United States    and 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, or with customers of either of them   . (15 U.S.C. § 13(a)). 9 In concluding that Falls City violated this provision, the district court relied on the following ultimate findings of fact: that from July 1, 1972, to November 30, 1978, Falls City sold beer to Vanco at f.o.b. prices approximately 10% to 30% higher than prices charged Dawson Springs Beverage Company, the Falls City distributor for Henderson County, Kentucky, and other Kentucky distributors; that the Evansville, Indiana, and Henderson, Kentucky, areas constitute a unified retail beer market; that Falls City's discriminatory pricing policy substantially lessened competition in the Evansville-Henderson market; and that Falls City could have sold to Vanco and Dawson Springs at the same price, but chose to get a higher price in Indiana than in Kentucky.Falls City concedes that it sold beer to Vanco and Dawson Springs at different prices, but challenges as legally and factually erroneous the district court's findings with respect to other elements necessary to establish a Section 2(a) violation. However, Vanco has carefully annotated those findings to 165 portions of the transcript of trial testimony and depositions as well as to exhibits of both parties (Supp.App. A-16 A-23). An examination of the annotated materials and the record generally has convinced us that the court's findings are not clearly erroneous and that the record supports its conclusion that Falls City violated Section 2(a).
10 Falls City argues in a footnote in its principal brief that the interstate features of Section 2(a) were not satisfied. This argument is frivolous. Even Falls City's president, James F. Tate, admitted both in his deposition (at p. 16) and at trial (Supp.App. A-81) that his company sold beer in Indiana. Moreover, Falls City allocated Vanderburgh County, Indiana, to Vanco as its exclusive territory for the wholesale distribution of Falls City beer, paid Indiana excise taxes on the beer sold to Vanco and participated in Vanco's Indiana sales by the soliciting and servicing of Vanco's retail accounts there. Thus the sale of Falls City beer to Vanco was clearly in commerce within the meaning of Section 2(a). Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 95 S.Ct. 392, 42 L.Ed.2d 378; Standard Oil Co. v. Federal Trade Commission, 340 U.S. 231, 71 S.Ct. 240, 95 L.Ed. 239. The facts that Falls City priced its beer f.o.b. Louisville and that all its distributors, including Vanco, picked up their beer at the brewery in Louisville do not, as Falls City suggests, make the sales to Vanco wholly intrastate. 8
11 Falls City next argues that there is no unified Evansville-Henderson retail beer market and that the district court therefore erred in finding that Vanco and Dawson Springs, Falls City's Henderson County distributor, competed in the same market. However, the record is to the contrary insofar as their retail customers were concerned and that is sufficient under the Act. 12 As noted, Vanderburgh County, Indiana, and Henderson County, Kentucky, are separated for most of their common border only by the Ohio River. In addition, a portion of Henderson County lies on the Indiana side of the river contiguous to Evansville. The cities of Evansville and Henderson are diagonally across from each other on the river ten or fewer miles apart and are connected by a four-lane interstate highway. There is a massive flow of residents of Vanderburgh County to work in Henderson County and vice versa, and shopping centers and entertainment facilities in the area are patronized by residents of both counties. Consequently, the federal Department of Labor counts the two counties together for the purpose of labor statistics, and both areas are designated as one by the federal Department of Commerce. Moreover, many retail purveyors of beer and liquor are located along a Kentucky portion of the highway connecting Evansville and Henderson only a few miles from Evansville. This area, known as The Strip, is frequented by both Indiana and Kentucky consumers. Finally, various witnesses testified that consumers in the area go to whichever county has the cheaper beer and liquor prices and that advertising is directed at residents of both areas as if they constituted one market. Thus the district court's finding that beer retailers in Vanderburgh County were in competition with those in Henderson County is not clearly erroneous. 9 13 Section 2(a) by its terms bans price discrimination that tends to lessen competition not only among sellers (primary-line competition) but also among their customers, and it is well settled that the statutory protection of customers extends to at least the fourth level of distribution. Perkins v. Standard Oil Co., 395 U.S. 642, 647, 649, 89 S.Ct. 1871, 1874, 1875, 23 L.Ed.2d 599; see generally, Kintner, A Robinson-Patman Primer (2d ed. 1979) at 108-110. 10 Consequently, the fact that Vanco's customers were in competition with Dawson Springs' customers is sufficient to bring Falls City's discriminatory pricing within the ambit of Section 2(a) even though Vanco and Dawson Springs were themselves precluded by state law (note 1 supra) from competing for the same retail accounts.
14 Falls City also contends that the district court erred in finding the requisite competitive injury. Again, we disagree. Section 2(a) requires only proof that the price discrimination shown create a reasonable probability of substantial injury to competition. Bargain Car Wash, Inc. v. Standard Oil Co. (Indiana), 466 F.2d 1163, 1174 (7th Cir. 1972). It is well settled that such a showing is established where the price differential is sufficient to influence retail prices. Federal Trade Commission v. Morton Salt Company, 334 U.S. 37, 49, 68 S.Ct. 822, 829, 92 L.Ed. 1196; Bargain Car Wash, supra, 466 F.2d at 1174. Here it is not disputed that Falls City over a six-year period charged Vanco prices varying from approximately 10% to 30% higher than it charged Dawson Springs and other Kentucky distributors. The record indicates that Vanco passed on some of this price differential, which is indisputably substantial, to its customers, that the relevant retail beer prices in Evansville were $.50 to $1.50 higher per case than in Henderson County during the relevant period, and that Vanco over the same period suffered a sharp decline in Falls City beer sales. 15 Falls City argues that the brewery price differential contributed only minimally to the retail price differential and that the decline in Vanco's Falls City sales was principally due to the increased popularity of competing major brand beers. However, Vanco was not required to show that the illegality was a more substantial cause (of its injury) than any other. Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 143, 88 S.Ct. 1981, 1986, 20 L.Ed.2d 982. It is sufficient with respect to causation if the defendant 'materially contributed' to plaintiff's injury    or 'substantially contributed notwithstanding other factors contributed also.'  Id.; see also Bargain Car Wash, supra, 466 F.2d at 1174, and cases cited therein. Moreover, there is testimony in the record to support the conclusion that the major reason for the higher Indiana retail beer prices was the higher prices charged Indiana distributors, and there is ample evidence, summarized by the district court, that the lower retail prices in Henderson County attracted Indiana customers away from Indiana retailers, thereby causing the retailers to curtail purchases from Vanco. Finally, while it is true that Falls City beer sales declined between 1972 and 1978 throughout Indiana and Kentucky, Vanco's volume dropped almost 60% while Indiana sales as a whole declined only 44%, and Dawson Springs' volume dropped only 40% while Kentucky sales as a whole declined more than 46%. We do not find unreasonable the district court's conclusion that the more precipitous decline in Vanco's sales volume, as compared both with the substantially lesser decline in Dawson Springs' sales and the overall rates of decline in Indiana and Kentucky, was due to the loss of Evansville retail business to competing retailers in Henderson County. 11
16 Falls City also argues that it was entitled to use the meeting competition defense contained in Section 2(b) of the Robinson-Patman Act (15 U.S.C. § 13(b)). Section 2(b) permits a seller to rebut a prima facie case under Section 2(a) by showing that its lower price to any purchaser was made in good faith to meet an equally low price of a competitor   . This Section places emphasis on individual situations, rather than upon a general system of competition, and is designed to allow a seller to defend his business against genuine price competition. Federal Trade Commission v. A. E. Staley Manufacturing Co., 324 U.S. 746, 753, 65 S.Ct. 971, 974, 89 L.Ed. 1338. However, the exception does not justify the maintenance of discriminatory pricing among classes of customers that results merely from the adoption of a competitor's discriminatory pricing structure. Id. at 756, 65 S.Ct. at 976. 17 The district court rejected Falls City's Section 2(b) defense on the basis of its findings that Falls City's discriminatory pricing resulted from price increases in Indiana, not price decreases in Kentucky, and that in setting its Indiana prices Falls City was simply taking advantage of its competitors' policies of charging higher prices in Indiana than in Kentucky and other states. These findings are not clearly erroneous. There is nothing in the record to show that Falls City first adopted a non-discriminatory pricing structure and then reduced prices where necessary to defend against competition. Indeed, Falls City's president testified that Falls City's Indiana price was set higher than its Kentucky price because we followed the leaders, the pricing of the leaders of the beers in Indiana as far as their dock prices were concerned (Tr. 948). The district court therefore did not err in finding that Falls City had failed to meet its burden of showing that its discriminatory pricing was a good faith effort to defend against competitors. Cf. A. E. Staley Manufacturing Co., supra. 18 In sum, our review of the evidence in the record does not leave us with the definite and firm conviction that a mistake has been committed. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541, 92 L.Ed. 746. Accordingly, we affirm the trial court's finding that Falls City is liable to Vanco under Section 2(a) of the Robinson-Patman Act.