Wilson & Company v. Benson

• Decision Date: 15 February 1961
• Docket Number: No. 13013.,13013.
• Citation: 286 F.2d 891
• Parties: WILSON & COMPANY, Inc., Petitioner, v. Ezra Taft BENSON, Secretary of Agriculture of the United States, Respondent.
• Court: U.S. Court of Appeals — Seventh Circuit

286 F.2d 891 (1961)

WILSON & COMPANY, Inc., Petitioner, v. Ezra Taft BENSON, Secretary of Agriculture of the United States, Respondent.

No. 13013.

United States Court of Appeals Seventh Circuit.

February 15, 1961.

Louis R. Simpson, Chicago, Ill., Thomas Freeman, Chicago, Ill., for petitioner.

Neil Brooks, Asst. Gen. Counsel, U. S. Department of Agriculture, Washington, D. C., George Cochran Doub, Asst. Atty. Gen., Morton Hollander, Chief, Appellate Section, Civil Division, United States Department of Justice, Washington, D. C., Carl R. Bullock, Atty., United States Department of Agriculture, Washington, D. C., John S. Griffin, Atty., United States Department of Agriculture, Los Angeles, Cal., for respondent.

Before HASTINGS, Chief Judge, DUFFY, Circuit Judge, and PLATT, District Judge.

DUFFY, Circuit Judge.

Wilson & Company, Inc., (Wilson) asks us to review and set aside a decision and order of the Judicial Officer¹ of the United States Department of Agriculture. The decision and order concern alleged "discriminatory pricing activities" by Wilson in the period from February, 1956 to and including December, 1956, which activities are claimed to be in violation of section 202(a) and (b) of the Packers and Stockyards Act. 7 U.S.C.A. § 192(a) and 192(b).

There is no dispute that Wilson is a "packer" as that word is defined in the Packers and Stockyards Act. It is admitted that the activities complained of occurred "in commerce" as defined by the Act.

It is provided in section 202(a) and (b)² of the Act that "it shall be unlawful for any packer * * * to:

"(a) Engage in or use any unfair, unjustly discriminatory, or deceptive practice or device in commerce; or

"(b) Make or give, in commerce, any undue or unreasonable preference or advantage to any particular person or locality in any respect whatsoever, or subject, in commerce, any particular person or locality to any undue or unreasonable prejudice or disadvantage in any respect whatsoever * * *." 7 U.S.C.A. § 192 (a, b).

In the complaint, Wilson was charged with having violated section 202(a) and (b) in that it granted "to certain favored accounts in San Francisco, Oakland and Fresno, California, and adjacent areas, reductions in the prices of meat and meat products not granted to other accounts," and, "accorded preferential handling and special services to such favored accounts and not to other accounts, and supplied such favored accounts with free promotional items not offered or given to other accounts."

In January, 1949, Wilson entered the business of selling meats and meat products to hotels, restaurants and ship lines in the San Francisco area, by purchasing from Ed Heuck the hotel supply business theretofore conducted by him. The business was conducted by Wilson under the name of "Ed. Heuck Company," and Heuck was retained as manager. The volume of business was built to the point where Wilson had 400 accounts in that area, and sold about 100,000 pounds of fabricated meat cuts and similar products each week.

On February 15, 1956, Heuck resigned, and immediately formed his own competing hotel supply business under the trade name of "Reliable Meat Company." Many of the personnel including most of the salesmen who had been associated with him in petitioner's business, left and joined Heuck in his new venture. Wilson's sales dropped to about 35,000 pounds a week. Its former salesmen, upon joining Reliable Meat Company, continued to call on the same accounts which they had previously serviced for Wilson. Only ten or twelve accounts were retained by Wilson and these were mostly steamship lines.

Gene Ray, sales manager of Wilson's Los Angeles hotel supply business, was temporarily assigned to take over the San Francisco operation. Ray reported the business had fallen into a chaotic state. Ray continued in charge until the middle of March, 1956, when he was replaced by George Horton who had held various administrative positions with Wilson.

Wilson decided to stay in the hotel supply business in the San Francisco area, and entered upon a determined effort to regain its lost business and to obtain new business. Wilson continued to operate the Ed. Heuck Company until April 16, 1956, when it was dissolved. Thereafter, Wilson operated its business in the San Francisco area under the name of "Davidson Meat Company," a division of Wilson.

For a number of years, Wilson had issued price lists of their products on Friday of each week, setting forth the prices at which sales were to be made the following week. Although the prices of competing purveyors were not identical, the prices listed by the different purveyors for a single item usually did not vary more than two cents a pound. It was common practice in the area for the purveyors, including Wilson, to authorize their salesmen to reduce the list price by not more than two cents a pound if necessary to meet the price of a competitor. Although price lists were issued each week, the price of individual items often remained constant for a number of weeks at a time.

When Ray took over as Wilson's temporary manager, he continued the practice of issuing price lists. However, he instructed the salesmen that if a two cent reduction in price was not sufficient to obtain a sale, they were to call the office to obtain approval for greater price cuts.

Horton continued the practice, initiated by Ray, of having weekly meetings of salesmen and executive personnel, and instructed the salesmen to go out after the business even if it were necessary to cut prices. During the period under consideration, approval frequently was given for price cuts as great as ten cents per pound.

Wilson was successful in diverting a substantial volume of business from its competitors. The price-cutting policy of Wilson enabled it to increase its business from 38,937 pounds of beef per week in June, 1956, to 56,803 pounds in August, 1956. However, during the period from April 1 to October 27, 1956, in the San Francisco area, Wilson sold its meat and meat products to hotels, restaurants and ship lines at a loss exceeding $152,000.

In a letter to Wilson dated September 5, 1956 from Wilson's manager in the San Francisco area, it was stated that the Company was aware that it had been "doing nothing but exchanging dollars for the last few weeks." The letter which was sent to the main office in Chicago further said, "As per our telephone conversation of last Saturday, Henry, we explained to you that there are times in our growing process whereas to secure some of the business that is available in this area, we at times do unorthodox things, and things that possibly could not be condoned in a true sense as good business."

Wilson argues that it did not seek to gain a monopoly in the San Francisco hotel supply business. It strongly denies that it sought or attempted to destroy competition. Wilson says that price concessions are usual and common in the industry, particularly in efforts to obtain new accounts. Wilson repeatedly asserts that price cutting to regain lost customers or to gain new customers is not an unfair practice within the meaning of section 202(a) of the Packers and Stockyards Act.

The Secretary of Agriculture points out that Wilson did not have a contract with Heuck whereby he agreed to refrain from engaging in a competing business if he left Wilson's employment. But, even assuming the conduct of Heuck was improper, the Secretary contends it is no defense in this proceeding against Wilson.

Finding 38 states, in part: "The selective price reductions of Wilson in the San Francisco area were drastic, the prices at which it sold some of its products to favored customers were unreasonably low in that products were sold at or below cost to respondent, and about 75 percent of its business, April-October, 1956, was obtained through price cutting. These price reductions to selected customers bore no realistic relation to respondent's costs or the prices charged by its competitors in the hotel and restaurant supply business in the San Francisco area."

There was also a finding that the discriminatory price reductions by Wilson were not made in good faith to meet the lawful and equally low prices of its competitors, and were not made in respect to surplus inventories or changing market conditions. The Judicial Officer specifically found that the discriminatory price-cutting campaign was waged by Wilson to lessen competition by Reliable Meat Company and other competitors in the San Francisco area. Also, that the acts of respondent diverted substantial business from competitors to itself and adversely affected the hotel and restaurant supply business in the San Francisco area.

The order which Wilson asks to have set aside provides that Wilson "shall cease and desist from discriminating in price between purchasers of meat and meat food products of like grade and quality where...