386 U.S. 685 (1967), 18, Utah Pie Co. v. Continental Baking Co.

Docket Nº:No. 18
Citation:386 U.S. 685, 87 S.Ct. 1326, 18 L.Ed.2d 406
Party Name:Utah Pie Co. v. Continental Baking Co.
Case Date:April 24, 1967
Court:United States Supreme Court
 
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Page 685

386 U.S. 685 (1967)

87 S.Ct. 1326, 18 L.Ed.2d 406

Utah Pie Co.

v.

Continental Baking Co.

No. 18

United States Supreme Court

April 24, 1967

Argued January 17, 1967

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

Syllabus

This suit for treble damages and an injunction by petitioner, a local bakery company in Salt Lake City, against three large companies each of which is a major factor in the frozen pie market in one or more regions of the country, charged a conspiracy under §§ 1 and 2 of the Sherman Act and violations by each respondent of § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act. The major competitive weapon in the Salt Lake City market was price, and, for most of the period, petitioner, which had the advantage of a local plant, had the lowest prices. Each respondent at some time engaged in discriminatory pricing, and thereby contributed to a deteriorating price structure during the relevant period. Respondent Pet Milk sold pies to Safeway under the latter's label at a price well below that for its proprietary label pies; it sold an economy pie in the Salt Lake City market at a price which was at times lower than that in other markets, and it sold its proprietary label quality pies in Salt Lake City for some months at prices lower than those in California, despite freight charges from its California plant. Pet admitted sending a spy into petitioner's plant during its negotiations with Safeway, but denied using what it learned. Pet did not deny that it suffered losses on its pies during the greater part of the period involved. In June, 1961, respondent Continental Baking cut its price in the Utah area to a level well below that applicable elsewhere, and less than its direct cost plus an allocation for overhead. Carnation Co., whose share of the market slipped in 1959, slashed its price in 1960, and, for eight months of that year, its Salt Lake City price was lower than that in other markets, and that trend continued in 1961. The jury found for respondents on the conspiracy charge and for petitioner on the price discrimination charge. Judgment was entered for petitioner for damages, but the Court of Appeals reversed, holding that the evidence was insufficient to support a finding of probable injury to competition within the meaning of § 2(a). The court concluded that Pet's price differential to Safeway was cost justified, and that Pet's

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other discriminations did not provide sufficient basis on which the jury could have found a reasonably possible injury to petitioner as a competitive force or to competition generally. It concluded that the conduct of Continental and Carnation had only minimal effect, that it had not injured petitioner as a competitor, and that it had not substantially lessened competition.

Held:

1. Section 2(a) does not forbid price competition, but it does provide that sellers may not sell goods to different purchasers at different prices if the result may be to injure competition in either the sellers' or the buyers' market unless such discriminations are justified as permitted by the Act. P. 702.

(a) There can be a reasonably possible injury to competition even though the volume of sales is rising and some of the competitors in the market continue to operate at a profit. P. 702.

(b) Section 2(a) does not come into play solely to regulate the conduct of price discriminators who consistently undercut the prices of other competitors. P. 702.

2. The existence of predatory intent bears on the likelihood of injury to competition. Pp. 702-703.

(a) There was evidence of predatory intent with respect to each of the respondents, and there was other evidence upon which the jury could find the requisite injury to competition. Pp. 702-703.

(b) Section 2(a) reaches price discrimination that erodes competition as much as it does price discrimination that is intended to have immediate destructive impact. P. 703.

3. Since the statutory test is one that looks forward on the basis of proven past conduct, the jury was entitled to conclude that, where the evidence showed a drastically declining price structure which could be attributed to continued or sporadic price discrimination, "the effect of such discrimination" by respondents

may be substantially to lessen competition . . . or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination. . . .

P. 703.

349 F.2d 122, reversed and remanded.

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WHITE, J., lead opinion

MR. JUSTICE WHITE delivered the opinion of the Court

This suit for treble damages and injunction [87 S.Ct. 1328] under §§ 4 and 16 of the Clayton Act, 38 Stat. 731, 737, 15 U.S.C. §§ 15 and 261 was brought by petitioner, Utah Pie Company, against respondents, Continental Baking Company, Carnation Company and Pet Milk Company. The complaint charged a conspiracy under §§ 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1 and 2, and violations by each respondent of § 2(a) of the Clayton Act as amended by the Robinson-Patman Act, 49 Stat. 1526, 15 U.S.C. § 13(a).2 The jury found for respondents on the conspiracy charge and

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for petitioner on the price discrimination charge.3 Judgment was entered for petitioner for damages and attorneys' fees, and respondents appealed on several grounds. The Court of Appeals reversed, addressing itself to the single issue of whether the evidence against each of the respondents was sufficient to support a finding of probable injury to competition within the meaning of § 2(a), and holding that it was not. 349 F.2d 122. We granted certiorari. 382 U.S. 914.4 We reverse.

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The product involved is frozen dessert pies -- apple, cherry, boysenberry, peach, pumpkin, and mince. The period covered by the suit comprised the years 1958, 1959, and 1960 and the first eight months of 1961. Petitioner is a Utah corporation [87 S.Ct. 1329] which for 30 years has been baking pies in its plant in Salt Lake City and selling them in Utah and surrounding States. It entered the frozen pie business in late 1957. It was immediately successful with its new line and built a new plant in Salt Lake City in 1958. The frozen pie market was a rapidly expanding one: 57,060 dozen frozen pies were sold in the Salt Lake City market in 1958, 111,729 dozen in 1959, 184,569 dozen in 1960, and 266,908 dozen in 1961. Utah Pie's share of this market in those years was 66.5%, 34.3%, 45.5%, and 45.3% respectively, its sales volume steadily increasing over the four years. Its financial position also improved. Petitioner is not, however, a large company. At the time of the trial, petitioner operated with only 18 employees, nine of whom were members of the Rigby family, which controlled the business. Its net worth increased from $31,651.98 on October 31, 1957, to $68,802.13 on October 31, 1961. Total sales were $238,000 in the year ended October 31, 1957, $353,000 in 1958, $430,000 in 1959, $504,000 in 1960 and $589,000 in 1961. Its net income or loss for these same years was a loss of $6,461 in 1957, and net income in the remaining years of $7,090, $11,897, $7,636, and $9,216.

Each of the respondents is a large company and each of them is a major factor in the frozen pie market in one or more regions of the country. Each entered the Salt Lake City frozen pie market before petitioner began freezing dessert pies. None of them had a plant in Utah. By the end of the period involved in this suit, Pet had plants in Michigan, Pennsylvania, and California; Continental in Virginia, Iowa, and California, and Carnation in California. The Salt Lake City market was supplied

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by respondents chiefly from their California operations. They sold primarily on a delivered price basis.

The "Utah" label was petitioner's proprietary brand. Beginning in 1960, it also sold pies of like grade and quality under the controlled label "Frost `N' Flame" to Associated Grocers, and, in 1961, it began selling to American Food Stores under the "Mayfresh" label.5 It also, on a seasonal basis, sold pumpkin and mince frozen pies to Safeway under Safeway's own "Bel-air" label.

The major competitive weapon in the Utah market was price. The location of petitioner's plant gave it natural advantages in the Salt Lake City marketing area and it entered the market at a price below the then going prices for respondents' comparable pies. For most of the period involved here, its prices were the lowest in the Salt Lake City market. It was, however, challenged by each of the respondents at one time or another and for varying periods. There was ample evidence to show that each of the respondents contributed to what proved to be a deteriorating price structure over the period covered by this suit, and each of the respondents, in the course of the ongoing price competition, sold frozen pies in the Salt Lake market at prices lower than it sold pies of like grade and quality in other markets considerably closer to its plants. Utah Pie, which entered the market at a price of $4.15 per dozen at the beginning of the relevant period, was selling "Utah" and "Frost 'N' Flame" pies for $2.75 per dozen when the instant suit was filed some 44 months later.6 Pet, which was offering pies at $4.92 per dozen in February, 1958, was offering

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"Pet-Ritz" and "Bel-air" pies at $3.56 and $3.46 per [87 S.Ct. 1330] dozen respectively in March and April, 1961. Carnation's price in early 1958 was $4.82 per dozen, but it was selling at $3.46 per dozen at the conclusion of the period, meanwhile having been down as low as $3.30 per dozen. The price range experienced by Continental during the period covered by this suit ran from a 1958 high of over $5 per dozen to a 1961...

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