Document: 75 L.Ed.2d 174 103 S.Ct. 1282 460 U.S. 428 FALLS CITY INDUSTRIES, INC., Petitionerv.VANCO BEVERAGE, INC. No. 81-1271. Argued Oct. 13, 1982. Decided March 22, 1983. Syllabus During a certain period from 1972 through 1978, petitioner sold its beer to respondent, the sole wholesale distributor for petitioner's in Vanderburgh County, Ind., at higher price than charged only Henderson Ky., two counties forming single metropolitan area across state line. Under Indiana law, brewers were required sell all wholesalers price, prohibited selling out-of-state retailers, and retailers not permitted purchase wholesalers. Respondent filed suit Federal District Court, alleging that discrimination violated § 2(a) of Clayton Act, as amended by Robinson-Patman Act. After trial, court held respondent had established prima facie case discrimination, finding although Kentucky wholesaler did same they competed sale consumers market area; pricing policy resulted lower retail prices Indiana; many customers living portion ignored law more cheaply retailers; thus prevented competing effectively with caused less retailers. The rejected "meeting-competition" defense under 2(b) which provides defendant may rebut showing illegal establishing any purchaser or purchasers "was made good faith meet an equally low competitor." reasoned instead reducing those competitor, created disparity raising it raised prices; adjusting on customer-to-customer basis competition other brewers, throughout each State; was set but solely allow follow enhance profits. Court Appeals affirmed. Held: 1. Court's findings, supported direct evidence diverted sales, "competitive injury" (the reasonable possibility difference harm competition) establish violation 2(a). For 2(a)'s purposes, injury is proof substantial between over time, inference competitive be overcome breaking causal connection differential lost sales This rule limited cases where favored competitor extraordinarily large. Nor component Act disfavored purchaser; also encompasses their customers. Pp. 434-438. 2. Petitioner's meeting-competition defeated theory increases rather decreases Kentucky, following larger competitors order FTC v. A.E. Staley Mfg. Co., 324 746, 65 971, 89 L.Ed. 1338, distinguished. 438-447. (a) least requires seller show existence facts would lead prudent person believe seller's competitor. demonstrate actually good-faith response price. 439-441. (b) standard governing requirement "good-faith response" businessman responding fairly what he reasonably believes situation necessity. Here, address crucial question whether remained competitors' Kentucky. If violate Moreover, industry-wide within geographic itself collusion inconsistent response, particularly since interstate could well have been attributable petitioner, Indiana's extensive regulation beer. 441-444. (c) Nothing competition. On contrary, competitor's A selective smaller can result effort offered impugned if raised, like kept lower, respond are goal increasing 444-446. (d) purpose retaining customer. must defensive competition, sense calculated "meet beat" does distinguish meeting retain old customer attempt gain new 446-447. 3. applies sets customer-by-customer than, here, defendant's use areawide pricing. Congress intend limit availability customer-specific responses, intended responses area-specific circumstances warrant them. choosing territorial decision genuine, prevailing circumstances. 447-451. 4. In absence further has matter law. While there record might support statewide good-faith, well-tailored there, draw such trier fact, this Court. Pp.451-452 654 F.2d 1224, vacated remanded. Howard Adler, Jr., Washington, D.C., petitioner. Stephen M. Shapiro, Chicago, Ill., United States amicus curiae special leave John T. Cusack, respondent. Justice BLACKMUN delivered opinion 1 Section 38 Stat. 730, 49 1526, 15 U.S.C. 13(b), competitor."1 Seventh Circuit concluded available creates lowering prices. We conclude so inflexible. 2 * From July 1, 1972, Nov. 30, Falls City Industries, Inc., f.o.b. Louisville, brewery Indiana, 11 States. Vanco Beverage, Ind. That county includes city Evansville. Directly line County City's Dawson Springs, Inc. Henderson, located 10 miles cities connected four-lane highway. generally considered area. App. 124. 3 Springs purchased resold respectively. distributors compete because Ind.Code 7.1-3-3-5 (1982), See 7.1-3-4-6. affected ways relevant case. First, 7.1-5-5-7. Second, virtually unenforced, see Tr. 122-123, 135-136, importing alcoholic beverages without permit. 7.1-5-11-1. 4 December 1976, sued Southern alleging, among things, discriminated against Vanco, 13(a),2 charging Springs. claimed §§ Sherman 2, conspiring unnamed maintain 5 dismissed Vanco's claims, no allegations conspiracy monopolization. 1980-2 Trade Cas. 75,809, 75,820. held, however, out found spanned border included Counties. Id., 75,813-75,814. Although "competed [Falls City's] . situated [that] area." 75,814. States, including Ibid.3 passed savings who turn them consumers. Finding cheaper policies id., 75,815-75,816, 75,814-75,817, 75,818.4 6 defense. that, Instead "adjusting brewers," 75,822, State faith; instead, "for reason followed profit." Ibid. 7 Circuit, divided vote, affirmed liability. 1224 (1981).5 demonstrated defend competitors." 1230. granted certiorari review Appeals' holdings respecting 455 988, 102 1610, 71 847 (1982). II 8 To 2(a), one elements plaintiff Corn Products Refining Co. FTC, 726, 742, 961, 969, 1320 (1945). keeping Act's prophylactic purpose, "does 'require discriminations fact harmed competition.' " J. Truett Payne Chrysler Motors Corp., 451 557, 562, 101 1923, 1927, 68 442 (1981), quoting Products, U.S., S.Ct., 969. often referred injury. Unless rebutted affirmative defenses, part sufficient injunctive relief, authorize inquiry courts into entitled treble damages 731, amended, (1976 ed., Supp. V). 1927.6 9 contends erred relying Morton Salt 334 37, 822, 92 1196 (1948), uphold purposes time. 46, 50-51, 828, 830-831; 60, 835 (Jackson, J., dissenting). displaced F. Rowe, Price Discrimination 182 (1962); Credit Corp. 670 575, 581 (CA5 1982). According City, should applied involving "large buyer preference predation." Brief Petitioner 31. not, suggest economic why Salt's "self-evident" inference, 50, 830, apply when concerns about excessive power large primarily responsible passage supra, 3-23; Department Justice, Report 101-139 (1977) (1977 Report), "is general applicability prohibits generally," Sun Oil 371 505, 522, 83 358, 368, 466 (1963). determination alter scope Congress, recognized commentators relies. 1977 Report, 221-228 290-291; ABA Antitrust Section, Monograph 4, Act: Policy Law, Vol. I 102-103 (1980). misapplied strictly literal sense, differs level; But customers—in who, challenged single, market.7 observing maintained significant Appeals, loss factors difference, marketwide decline Both likely overall accounted some—or even most—of sales. Nevertheless, some extent. Perma Life Mufflers, International Parts 392 134, 144, 88 1981, 1987, 20 982 (1968) (WHITE, concurring). 12 agreed findings "the major distributors," attracted away thereby causing curtail purchases Vanco." F.2d, 1229. These sales,8 561-562, 1926-1927; Salt, 830-831. therefore III 13 When proved, exonerates Standard 340 231, 246-247, 240, 247-248, 95 239 (1951). consistently 'at seller, knowingly granting competitor.' Gypsum 438 422, 451, 98 2864, 2880, 57 854 (1978), 759-760, 977, 1338 (1945); Great & P Tea 440 69, 82, 99 925, 934, 59 153 (1979). quoted competitors. 2880. Neither nor addressed shown information led there; indeed, whatever regarding prices, 14 Instead, otherwise failed effort" defeat "resulted Kentucky," ibid., suggested adopted "general system competition," "individual situations." believed holding. A. face, "lower 13(b) (emphasis added). Thus, offer is, 234-235. Kuenzel Schiffres, Making Sense Robinson-Patman: Need Revitalize Its Affirmative Defenses, 62 Va.L.Rev. 1211, 1237-1255 (1976). most situations, giving rise belief will others, despite sellers apparent response. 16 Staley, principle. Commission (FTC) proceeded six manufacturers glucose, whom adhered Chicago basing-point system. C. Edwards, Law 372-379 (1959). Toward Geographic Pricing Practices, CCH Reg.Rep. &Par; 3601.27, 3601.40-3601.42, pp. 5348, 5351-5352 (10th ed. 1959). Like competitors, whose plant Decatur, glucose candy syrup freight rate point delivery. Purchasers nearer Decatur element "phantom" freight, while "absorbed" buyers Chicago. 749, 972-973. Customers near Staley's because, being closer plant, forced pay 756, 976. 17 eventually seven individually jointly fixing. 47 F.T.C. 587 (1950). At time decision, both determined 732, 737-739, 964, 966-967. And, neither directly relied party inter-seller aimed maintaining "oppressive uniform net prices" country. Dec. 795, 805 (1943). 18 observed exonerate section "an unlawful discriminatory benefit "a his 753, 975. claim seen collusive designed exact artificially high Since "in elsewhere effect permeates respondents' entire system," 976, sustained FTC's "that 'lower price' consequently faith," 758, 19 able country undercut there. priced discrete decisions, outset practice setting according arbitrary scheme nature precluded independent normal forces. B Almost years ago, forth governs "good response": 21 "At heart concept 'good faith'. flexible pragmatic, technical doctrinaire, concept. simply necessity." Continental Baking 63 2071, 2163 22 Whether met depends 'the particular case, abstract theories remote conjectures.' 454, 2882, F.T.C., 2163. 23 "facts circumstances" present differ markedly here. characterized "artificially high," plan obtain profits conditions adopt competitors.9 rose State. 24 attempts liken arguing indicates "tacit explicit collusion, power" 39. By terms, justify 974-975. provide remedy collusively, 25 argument founders complete lack proof. Persistent, certainly alert collusion.10 Posner, Oligopoly Laws: Suggested Approach, Stan.L.Rev. 1562, 1578-1579 (1969). persistent attributable, brewer charge State, barred these unusual circumstances, influenced distant Gary Fort Wayne nearby Ky. directly, attempted competitively, neighboring counties. 52-53. separate structure evolved notwithstanding common along border. C 26 explicitly rejecting defense: increase controlling. reason; subtraction addition. 27 different contrary language statute, stifle kind legitimate industries. rising vigorous take form cuts. 28 need choose "ruinously cutting match one, [and] refusing then ruinously remaining cover increased unit costs." 250, 250. level significantly above "to realistically customer, necessarily changing customers." plain permits freezing 29 require customers, forgo very permit treat situations differently. necessity raise profits, low. 30 said "presupposes violating would, normal, non-discriminatory methods, reached reduce price." 754, dealing "normal, methods" called wished exempt Of course, accomplish guidelines impose instituting across-the-board reductions. far requiring costly behavior nonsensical.11 D 31 satisfy competition." supplied). 32-33. agree defensive, 2882. 2(b), meets customers.12 Stevens, Defense Meeting Lower Competitor, Lectures Laws 129, 135-136 (1953). Such distinction section's logic, Sunshine Biscuits, 306 48, 51-52 (CA7 1962), "would elementary principles foster tight rigid commercial relationships insulating forces." Attorney General's National Committee Study 184 (1955); 26, 265.13 IV 32 proposition 'places emphasis individual [competitive] upon competition,' 1230 (quoting 974-975), maintenance classes results merely adoption structure," apparently invoking "customer basis," conclusion disqualified asserting Cas., 75,817. Courts read hold unavailable basis, required.14 33 There responses. 2(b)'s predecessor, original stated "nothing herein contained shall prevent communities 730. Judiciary House Representatives, drafted clause became current n. 14, 248-249, explained anticipated function: "It noted local [§ ] him cut until first go prices." H.R.Rep. 2287, 74th Cong., 2d Sess., (1936) amendment "restric[t] proviso differentials occurring actual 242, 245. bar differences conditions. 34 specifically allows purchasers" surely extended numerous believing them.15 Beyond "question way lies latitude allowed." 80 Cong.Rec. 9418 (remarks Rep. Utterback). Once again, guided necessities. 35 region. William Inglis Sons ITT 668 1014, 1046 (CA9 1981), cert. denied, --- ----, 57, 58, 74 61 (1982); Balian Ice Cream Arden Farms 231 356, 366 1955), 350 991, 76 545, 100 856 (1956); 235-236. negotiations unlikely relating make meaningful unrealistically expensive firms attempting national breweries Cf. Callaway Mills 362 435, 1966) (in burdensome, unreasonable, practically unfeasible"). 36 974-975, later contrasted systems competition" situations," see, e.g., Lead 352 419, 431, 77 502, 510, (1957); Cement Institute, 333 683, 708, 793, 807, 1010 "because competitor," preconceived scale [was] operative regardless variations 234 original). cases, contested truly "responsive rivals' prices," ibid. original), genuinely Territorial pricing, perfectly method—sometimes method—of prices.16 restriction deny area-wide tailored 37 group known buyer, based inadequate verification, faith. Similarly, continue long justifying it, persist.17 One Air American Excelsior 517 714, 725-726 1975), 424 943, 96 1411, 349 (1976); 441-442. 265 (1977). call faith, burden discharged territory available. 1045-1046. V summary, competitor; 39 we do agree. decide issue suit. proper standards controlling; statute places Vanco. requirements met,18 40 Accordingly, judgment vacated, remanded proceedings consistent opinion. 41 It ordered. reads: "[N]othing rebutting prima-facie furnishing services facilities furnished part: engaged commerce, course either indirectly, discriminate commodities grade quality, involved commerce substantially lessen tend create monopoly injure, destroy, grants receives ." 10-30% distributors. differing costs. distributors—wherever located—picked up Louisville brewery. 75-814. acknowledged during issue, dropped precipitously 75,815. paralleled nationwide trend brands eliminated regional City. generally, Brewing Industry 13-28 (1978). declined rapidly whole, County. whole. discrimination. redetermination our found, 75,823, aggregate overcharges Vanco—$575,293.79—were "automatic damage[s]," entered amount. 1231. before "some something antitrust laws prevent." 1927. injury, 1230, us. upheld constituted unified 1227-1229. argue, never argued, consumer-level nonimportation compels Evansville markets." Reply Supplemental after Oral Argument Indeed, counsel affirmatively waived letter written Argument. broader constitute markets questions presented petition certiorari. Counsel clear oral argument, stating "I'm asking delve second guess courts." Arg. 5-6. own agent reported accounted—at part—for Spring's performances. 97-98, 157, 166. press residents. 114-122, 128. just south highway advertised extensively media utilized "drive-in windows" leaving cars. E.g., 336. Witnesses testified cars license plates parked carry-out drivers return carrying 86-112, 629-632. resident 121-122, 218-222, 229. rates decline. supra. Except claim, prove claims themselves illegal, knowing unlawful. bears proving illegal. Cadigan Texaco, 492 383, 387 1974); Dairy Prods. 395 517, 524 (CA7), 393 444, (1968); Brown, 238 54, 1956). plausible explanation "economic" 715, 810, (1948) ("the multiple basing employed respondents contravened accepted collusion"); 976 (it "seems inescapable" elsewhere). "Economic" consists product bear ratios marginal costs example, incurs serve other, service same. difference." Anheuser-Busch, 363 536, 549, 1267, 1274, 1385 (1960). "Section departed previously schedule. previous evaluation genuine situation." (1955) (1955 Report) three Hanson Pittsburgh Plate Glass 482 220, 226-227 1973), 414 1136, 94 880, 761 (1974); 1962). Motor 674, 677 (CA2), 361 826, 73, 69 (1959) (defense responds demand). (1951), contrary. defense's seeking "retain" 249, 245, 249-250, framed 234, 236, 243; 1955 184; 1253-1254 Compare Exquisite Form Brassiere, 360 492, 493 (CADC 1965), 384 959, 86 1584, 672 (1966) (customer-by-customer required), (same), (1982) (1956) (same). 247, 248, statement Herbert Bergson, Assistant General, Hearings Subcommittee Senate Interstate Foreign Commerce S. 81st 1st (1949) ("The presently forbidden ground competitor"). 240 ("a blanket justified responsive 'individual situation' "). Maryland 243 716, 719 (CA4 1957) (FTC avert placing "prices straightjacket country"); 54 277, 301 (1957) (suggesting situation"); C.E. Niehoff 51 1114, 1130, 1146 (rejecting position "showing temporary localized indispensible prerequisite" defense). Klein, Competition Systems Problems Prospects, Bull. 213, 233-234, (1971); Va.L.Rev., 1244-1249. Were below find fact-finding record, easily lock-step offering Raising cost exposed Nor, doing simultaneously approach interests, areas removed

Category: 7