Atlas Building Prod. Co. v. Diamond Block & Gravel Co.

• Decision Date: 17 August 1959
• Docket Number: No. 5990.,5990.
• Citation: 269 F.2d 950
• Parties: ATLAS BUILDING PRODUCTS CO., Appellant, v. DIAMOND BLOCK & GRAVEL CO., Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

269 F.2d 950 (1959)

ATLAS BUILDING PRODUCTS CO., Appellant, v. DIAMOND BLOCK & GRAVEL CO., Appellee.

No. 5990.

United States Court of Appeals Tenth Circuit.

August 17, 1959.

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John P. Eastham, Albuquerque, N. M., and J. F. Hulse, El Paso, Tex. (of the firms of Scott, Hulse, Marshall & Feuille, El Paso, Tex., and Rodey, Dickason, Sloan, Akin & Robb, Albuquerque, N. M.) for appellant.

Dee C. Blythe, Clovis, N. M., and James T. Martin, Jr., Las Cruces, N. M., for appellees.

Before MURRAH, PICKETT and BREITENSTEIN, Circuit Judges.

MURRAH, Circuit Judge.

This is an appeal from a judgment for triple damages in a private antitrust suit, laid under Section 2(a)¹ of the Clayton Act, as amended by the Robinson-Patman Act, 49 Stat. 1526, 15 U.S. C.A. § 13(a).

The allegations are that the plaintiff-appellee, Diamond Block & Gravel Company, is a manufacturer and seller of cinder concrete building blocks to the building trade in Las Cruces, New Mexico and vicinity; that the defendant-appellant, Atlas Building Products Company, manufactures and sells the same products in El Paso, Texas and vicinity, where it has a virtual monopoly; and that it also sells those products to the building trade in Las Cruces and vicinity. The crux of the charge is that commencing in 1950, and continuing to the filing of this suit, the defendant has systematically sold its products in Las Cruces at prices actually lower than its comparable El Paso sales; that it employed its highest El Paso prices to finance its price war against competitors in New Mexico, including the plaintiff; that such practices constitute price discriminations between different purchasers, the effect of which may be to lessen competition or tend to create a monopoly in commerce in building blocks, or to injure, destroy or prevent competition by the plaintiff with the defendant, and with persons who received the benefit of such discriminations, or with customers of either of them. The appellee then alleged that as a result of the acts complained of, it had been injured in its business in the sum of $200,000, for which it prayed judgment, to be tripled as required by law, and for reasonable attorney fees.

The appellant moved to dismiss the complaint for failure to state a claim upon which relief could be granted under Section 2(a), and upon denial pleaded, first, that its pricing policies were not discriminatory, but if so, they were made in good faith to meet an equally low price of a competitor within the meaning of Section 2(b), 15 U.S.C.A. § 13(b).² The case was submitted to the jury on the theory that the burden was upon the plaintiff to show by a preponderance of the evidence that the defendant did in the course of commerce, directly or indirectly, discriminate in price between different purchasers of concrete cinder building blocks of like grade and quality; that price discrimination in the statutory sense means the giving to one of the purchasers an advantage in price not accorded or given to other purchasers. The jury was specifically told that a price discrimination as thus defined was not alone sufficient to sustain a claim under Section 2(a), for to be actionable, the evidence must show a "reasonable possibility" of a substantial lessening of competition or tendency to create a monopoly, or injure, destroy or prevent competition with any person who grants or receives the benefit of such discrimination. Thus, the jury was instructed that "a price discrimination may exist if a seller exacts different prices from its customers * * * where one leg of the price differential is across state lines and this differential affects or has a tendency to affect competition in the ways I have mentioned"; and that "the jury has the right to consider any difference in prices charged in El Paso, Texas on the one hand, and prices exacted by it the defendant in Dona Ana County, New Mexico Las Cruces on the other."

The defendant objected to all of these instructions and to refusal of the court to instruct the jury that to be actionable under Section 2(a), the price discrimination must be between different purchasers in direct competition with each other; and that the court therefore erroneously permitted the jury to consider the difference in the defendant's prices in El Paso on the one hand, and Las Cruces on the other.

Thus, we have squarely presented the question whether the prohibitions of Section 2(a) are applicable to price discriminations between different, but noncompeting, purchasers of products of like grade and quality. The appellant takes the position that geographic price differentials or discriminations between noncompeting purchasers in different localities are not actionable under Section 2(a), but only under Section 3 of the Robinson-Patman Act, for which a private cause of action under Section 4 admittedly does not lie. And see Nashville Milk Co. v. Carnation Co., 355 U.S. 373, 78 S.Ct. 352, 2 L.Ed.2d 340; and Safeway Stores, Inc. v. Vance, 355 U.S. 389, 78 S.Ct. 358, 2 L.Ed.2d 350.

In the first place, there is nothing in the statute to indicate that its prohibitions are restricted to price discriminations between competing purchasers in the same area. The statute is not couched in terms of locality. See Corn Products Refining Co. v. Federal Trade Commission, 324 U.S. 726, 734, 65 S.Ct. 961, 89 L.Ed. 1320. The purpose of this Section as an integral part of the antitrust legislative scheme is to prevent price discriminations in commerce which tend to injure competitive enterprise. To that end, it forbids a seller from charging different customers different prices for the same products with the effect of lessening competition. And, we know that market power is a ready means toward competitive injury. See Sen.Rep. 1502, 74th Cong., 2 Sess., 4 (1936); H.R. Rep. 2287, 74th Cong., 2 Sess., 8 (1936); 80 Cong.Rec. 9417 (1936). Furthermore, geographic price discrimination between noncompeting purchasers was asserted and sustained under both Sections 2(a) and 3 in Moore v. Mead's Fine Bread, 348 U.S. 115, 75 S.Ct. 148, 99 L.Ed. 145. Indeed, the court pointed out that such practices were prohibited under the Clayton Act even before the Robinson-Patman Amendment, citing Porto Rican American Tobacco Co. of Porto Rico v. American Tobacco Co., 2 Cir., 30 F.2d 234, 237. The court was sure that "Congress by the Clayton Act and the Robinson-Patman Act barred the use of interstate business to destroy local business, outlawing the price cutting employed by respondent." 348 U.S. 115, 75 S.Ct. 151. It went on to quote from a statement of Congressman Utterback, one of the Managers of the Robinson-Patman Amendment, that "Where, however, a manufacturer sells to customers both within the State and beyond the State, he may not favor either to the disadvantage of the other * * *." And see also Maryland Baking Co. v. Federal Trade Commission, 4 Cir., 243 F.2d 716.

It is agreed that Section 2(a) of the Clayton Act and Section 3 of the Robinson-Patman Act "overlap in some respects", but are in no way inconsistent with each other. Section 2(a) provides a civil remedy by way of triple damages, while Section 3 imposes criminal penalties for some but not all of the same infractions. Section 3 is specific in its interdictions of geographic price discriminations, while Section 2(a) is broader to prohibit the same practices between different purchasers wherever located, whether competing or not, when the effect of such discrimination may substantially lessen competition or tend to create a monopoly in any line of commerce. Antitrust legislation is concerned primarily with the health of the competitive process, not with the individual competitor who must sink or swim in competitive enterprise. But as a necessary incident thereto, it is concerned with predatory price cutting which has the effect of eliminating or crippling a competitor. For, surely there is no more effective means of lessening competition or creating monopolies than the debilitation of a competitor.

Our case is clearly distinguishable from suits by a local purchaser against a manufacturer, where competition between purchasers is of course essential to actionable price discrimination. See Naifeh v. Ronson Art Metal Works, D. C., 117 F.Supp. 690, affirmed D.C., 218 F.2d 202; Klein v. Lionel Corp., 3 Cir., 237 F.2d 13; Shaw's v. Wilson-Jones Co., 3 Cir., 105 F.2d 331. Our case is also, we think, distinguishable on facts from Balian Ice Cream Co. v. Arden Farms Co., 9 Cir., 231 F.2d 356, in which, while the interstate manufacturer discriminated in price between different purchasers in distant localities, the difference in the price was held not to substantially lessen competition or tend to create a monopoly in the product sold. In short, the conclusive finding of the trial court negated the existence of any prohibited consequences or the possibility thereof.

The same legal issue was before the Seventh Circuit in Anheuser-Busch, Inc. v. Federal Trade Commission, 265 F.2d 677, where the court was presented with the basic question whether uniform local price cuts by an interstate manufacturer which disrupted the market to the injury of local competitors, were price discriminations within the proscription of Section 2(a). The court held that even though directed at local competitors, the price cuts were not discriminatory, apparently because they did not discriminate among local competitors. This conclusion is apparently based upon the theory contended for here that the statutory words "different purchasers" means competing purchasers. We respectfully reject any such restriction upon Section 2(a). For, we are convinced that geographic price discriminations employed for predatory ends are cognizable under either Section 2(a) or Section 3, and it was therefore not error for the court to tell the jury that they might consider differences in price in El Paso County, Texas, and Dona Ana County, New...