Opinion ID: 164453
Heading Depth: 3
Heading Rank: 1

Heading: Substantial Lessening of Competition

Text: 39 In asserting that the district court wrongly decided that Sam's sales of gasoline to its members substantially lessened competition, Sam's claims that (1) the evidence was insufficient to show a substantial lessening of competition; and (2) the OUSA's language does not provide for a statutory boost in showing a substantial lessening of competition, but even if it did, the presumption was sufficiently rebutted. 40
41 In support of its argument on the lack of evidence on the lessening of competition, Sam's cites to testimony by Alan Wilkerson, Star's chief operating officer, who apparently said that the Oklahoma City gasoline market was competitive before Sam's entered it, and that since Sam's entry, it is even more so. Aplt. Br. at 29 (citing I Aplt.App. at 200). Sam's also points to testimony from its expert witness, Dr. Joseph Jadlow, who also claims that the Oklahoma City gasoline market has not been made less competitive by Sam's pricing. Id. at 30 (citing I Aplt.App. at 271, 279). 42 The district court's findings, however, established that Sam's gasoline sales are by any standard, high volume operations. Star Fuel, 2003 WL 742191, at . At the Memorial Store, Sam's monthly volume of gasoline sold is several-fold the typical volume for a retail gasoline station in Oklahoma City. The court also concluded that such volume was due to Sam's below-cost pricing. Id. This substantial increase in Sam's market share and the corresponding decrease in its competitors' market share, coupled with the fact that the sales achieved by Sam's were achieved through below-cost pricing, provide support for the district court's finding that Sam's sale of gasoline resulted in a substantial lessening of competition. 3 43 Contrary to Sam's contention, the injuries Star claims to have suffered are not those that result from an increase in competition. In Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977), the Supreme Court held that a plaintiff cannot complain of competitive injuries unless those injuries were of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. Thus, in order to determine whether Sam's pricing practices substantially lessened competition, the OUSA must be viewed in light of its dual purposes, to prevent loss leader selling and to protect small businesses from large competitors capable of driving them out of business by below-cost sales. So-Lo Oil Co. v. Total Petroleum, Inc., 832 P.2d 14, 17 (Okla.1992). 44 Sam's pricing allows it to sell its gasoline below cost, and there is nothing its competitors can do consistent with the OUSA to allow them to compete with it. See Glenn Smith, 704 P.2d at 478 ([A] sale cannot be made below cost to meet the price of a competitor who is selling at... a price below that competitor's cost.); Safeway Stores v. Okla. Retail Grocers Ass'n, 322 P.2d 179, 182 (Okla.1958) ([T]he appropriate remedy [of a competitor's below cost pricing] was ... not by retaliation.). This gives Sam's an unfair advantage, and is exactly what the OUSA was designed to prevent. 45 Sam's also argues that loss of sales by a single competitor does not establish that competition has been substantially lessened. However, the evidence goes further than showing injury only to Star. The district court's findings indicate that because of the volume of Sam's gasoline sales and its below-cost pricing, competition was lessened in Oklahoma City in the much of area surrounding Sam's Club stores. See Star Fuel, 2003 WL 742191, at . Moreover, when increased sales are achieved through below-cost pricing, an analysis into whether there has been a substantial lessening of competition under the OUSA and similar unfair pricing statutes necessarily entails an examination of individual competitors in the aggregate. See, e.g., Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 117-18, 107 S.Ct. 484, 93 L.Ed.2d 427 (1986) (pricing below cost is a practice that harms both competitors and competition); Home Oil Co. v. Sam's East, Inc., 199 F.Supp.2d 1236, 1242 (M.D.Ala.2002) (A showing by even one of the defendant's competitors of injury is sufficient to prove that defendant's below-cost sale of gasoline injure[d] competition.); Star Serv. & Petroleum Co. v. State ex rel. Galanos, 518 So.2d 126, 130 (Ala.Civ.App. 1986) ([I]njury to competition ... necessarily includes injury to competitors.). 46
47 Sam's also argues that, contrary to the district court's holding, the OUSA's language does not provide for a statutory boost in showing a substantial lessening of competition. The OUSA states that [e]vidence of advertisement, offering to sell, or sale of merchandise by any retailer or wholesaler at less than cost to him, shall be prima facie evidence of intent to injure competitors and to destroy or substantially lessen competition. Okla. Stat. tit. 15, § 598.5(c). According to Sam's, because the statute does not expressly use the word result, the statutory boost provides prima facie evidence only of the intent to destroy or substantially lessen competition, not its result. 48 Such a construction would render meaningless the specific reference to substantially lessen competition in the statute. To substantially lessen competition is one of the results that is prohibited by the OUSA, not one of the prohibited intents. Moreover, as noted by the district court, because the statute prescribes that below-cost sales shall be prima facie evidence of intent to injure competitors and to destroy or substantially lessen competition, Okla. Stat. tit. 15, § 598.5(c) (emphasis added) — using the conjunctive and instead of the disjunctive or — it is more likely that the Oklahoma Legislature intended to establish prima facie evidence both of the intent to injure competitors and of the result of destroying or substantially lessening competition. Star Fuel, 2003 WL 742191, at . Reinforcing this conclusion is the legislature's repetition of the to infinitive before destroy or substantially lessen competition, which would have been unnecessary if meant to refer to another intent. 49 More importantly, despite Sam's use of various canons of statutory construction to decipher the statute, the Supreme Court of Oklahoma's decision in Diehl v. Magic Empire Grocers Ass'n, 399 P.2d 460 (Okla.1965), indicates its stance on the issue. In Diehl, the defendant grocer was advertising items below cost. After quoting § 598.5(c), the court found only one significant fact — that the defendant through advertising circulars offered for sale certain items below the required 6% markup. Id. at 462. The court then concluded that the acts of defendant's servants in advertising the foregoing items for sale at the unlawfully reduced prices indicated, absent any showing to the contrary on his part, were in violation of the statute. Id. at 463 (emphasis added). The emphasized language indicates that once it is shown that a retailer is selling items below its cost, the burden shifts to the retailer to show it did not violate the OUSA. 50 Apparently recognizing the existence of the presumption of substantially lessened competition, Sam's argues that the presumption was successfully rebutted. Prima facie evidence is such evidence as in the judgment of law is sufficient to establish a fact, and if not rebutted, remains sufficient to establish that fact. Glenn Smith, 704 P.2d at 478. As noted above, statutory prima facie rules of evidence in Oklahoma may be rebutted only by clearly proven facts. 51 Sam's offers little more evidence to rebut this presumption than the above referenced testimony of Star's chief operating officer and Dr. Joseph Jadlow. The district court found that this was insufficient to rebut the prima facie showing. 4 Star Fuel, 2003 WL 742191, at . Moreover, as discussed above, Star presented substantial evidence tending to show that Sam's below-cost pricing of gasoline unfairly increased its market share while decreasing the market share of its competitors. The existence of this evidence precludes a determination that the district court's finding was clearly erroneous.