B & W GAS, INCORPORATED v. General Gas Corporation

• Decision Date: 26 October 1965
• Docket Number: Civ. A. No. 1091.
• Citation: 247 F. Supp. 339
• Parties: B & W GAS, INCORPORATED v. GENERAL GAS CORPORATION and Master Mix Feed Mills of Georgia, Inc.
• Court: U.S. District Court — Northern District of Georgia

247 F. Supp. 339

B & W GAS, INCORPORATED v. GENERAL GAS CORPORATION and Master Mix Feed Mills of Georgia, Inc.

Civ. A. No. 1091.

United States District Court N. D. Georgia, Gainesville Division.

October 26, 1965.

John N. Crudup, Gainesville, Ga., for plaintiff.

Martin, Martin & Snow, Macon, Ga., Robinson, Thompson, Buice & Harben, Gainesville, Ga., for defendant general.

Erwin, Nix, Birchmore & Epting, Athens, Ga., for defendant Athens Poultry.

SIDNEY O. SMITH, Jr., District Judge.

Plaintiff, B & W Gas, Incorporated, hereafter referred to as "B & W" is engaged in the selling and delivering of liquified petroleum gas in 12 counties in northeast Georgia and has brought this action under Title 15 U.S.C.A. §§ 2, 13, 15 and 26 and Title 28 U.S.C.A. § 1337 in which it seeks both preliminary and permanent injunctive relief as well as damages against the defendant.

The defendant, General Gas Corporation, (also known as Tuloma, Inc.) referred to as "General" has a similar business to that of the plaintiff but it covers several states, including most of North Georgia and substantially all of the counties in which plaintiff does business. The defendant Athens Feed & Poultry Company, hereinafter referred to as "Master Mix" is engaged in the business of growing poultry and related activities in the Athens trade area, which involves 14 counties, all covered by General and 8 by B & W. Master Mix is a typical modern-day operation in the poultry business in that it grows its own poultry on a contract basis on premises owned by its growers by which Master-Mix following the sale of poultry products, deducts from the sale price, feed and other expenses incurred in the growing operation, and distributes, the balance to the grower as per contract.

A show cause order was issued by the Court and the matter came on for hearing on Monday, October 4, 1965, on the issue of preliminary injunction. Evidence was received by extensive oral testimony and supplemental affidavits. The matter was argued by counsel and the matter of the issuance or nonissuance of a preliminary injunction is now before the court.

The plaintiff contends that the defendant, General, is guilty of unlawful discriminations in price-cutting and that both General and Master Mix have entered into an unlawful agreement and arrangement for the growers of Master Mix to buy exclusively from General all of their LP gas needs.

The complaint as laid sets out a three-pronged attack on the defendants, alleging:

(1) That the defendant, General, has been guilty of predatory price cutting in that it reduced its price of LP gas from 17¢ to 15¢ per gallon only in B & W's trade area on or about August 20, 1965.

(2) That General and Master Mix entered into an alleged "tie in" to force the growers of Master Mix to buy exclusively from General.

(3) That General is furnishing free labor and material on all commercial installations and free tanks on all domestic installations only in B & W's twelve county trade area, which amounts to an illegal rebate to one class of customers.

PROLOGUE.

At the outset, it should be realized that this case comes before the court with a background of intense competition in this particular business over the North Georgia area. Some of the same interested parties were before the court in 1959 with similar problems in General Gas Corporation v. National Utilities, 5 Cir., 271 F.2d 820 (1959) at which time the Fifth Circuit reversed the granting of a preliminary injunction by the District Court. As legal and factual precedent that case is persuasive in these proceedings. Likewise, the courts are most cautious in granting injunctive decrees on anti-trust matters and the burden for preliminary relief is far greater than that imposed for ultimate relief before a jury. Thus, "the burden is * * * a heavy one, and the injunction should not be granted or indulged in except in a case clearly demanding it." Hershel California Fruit Products Co. v. Hunt Foods, D. C., 111 F.Supp. 732. Whatever the test for a prima facie showing in the end, in an application for preliminary injunction the court must be satisfied not only that there has been price differential (two sales at different prices) but also that plaintiffs will have (1) probable success in ultimately proving violations of the anti-trust laws on trial and will suffer (2) irreparable immediate damage if the preliminary injunction is not granted. See Warner Bros. Pictures, Inc. v. Gittone, 3 Cir., 110 F.2d 292; Deltown Foods, Inc. v. Tropicana Products, Inc., D.C., 219 F.Supp. 887. These tests are apparently recognized in National Utilities, supra, by this circuit. In light of the above, we proceed to examine the evidence in this case.

(1) PRICE-CUTTING UNDER ROBINSON-PATMAN ACT.

Up until three or four years ago, the industry in the North Georgia area maintained a 2¢ price differential between so-called "domestic" and "commercial" customers.¹ However, substantially all distributors at that time arrived at a prevailing price of 17¢ to all customers, and this was the established price, not only in B & W territory but in the larger area covered by General, until 1964. Practically all dealers had special or "contract" customers who were granted lower prices, particularly in the sprawling broiler and layer operations throughout the area. These "special" customers receive now prices ranging from 10¢ (S. E. Hogan from Parr Gas) to 12.7¢ (McEver Packing from Childs Gas) to 14¢ (Lloyd Strickland from Mansfield Oil and Fincher Gas) (T. T. Folger from Hydratane and National Utilities). (Billy Spratlin buys at 15¢ from Sorrow and was offered gas at 14½¢ by Parr last winter and 15¢ by Athens in early spring.) "15¢ gas" could be found in many counties covered by General as far back as mid-1964 and has been prevalent in some counties covered by both parties since early 1965. Plaintiff itself had 16¢ contract customers, but had not cut any to 15¢ until the summer of 1965, when General openly announced a price cut of 15¢ for commercial users.

In the intense competition for these special (variously called "contract", "bid", or "quote") customers, the lines between commercial and domestic users became blurred and was complicated by the fact that poultry growers sometimes use the same gas out of one tank for residential as well as broiler purposes.

While General operates in several states, so far as this suit is concerned, the district has three offices: Anderson, South Carolina, Gainesville, Georgia, and Athens, Georgia. The Anderson office does not serve any of the counties affected, while Athens and Gainesville together serve some 18 counties.²

In plaintiff's trade area alone, there are, according to its President (Bennett), 16 competitors besides General, or a total of 18 companies competing for the LP gas business (2 more than in 1959). In at least 11 counties of General's Gainesville-Athens areas, though billing procedures varied, 15¢ net gas for all "commercial" customers was available from competitors of both parties, some since as early as 1963. In the past 12 months General has lost several hundred general commercial customers it had at 17¢ to 15¢ competition. Also, recently it lost a 15¢ contract customer at 14¢ (J. D. Jewell, Inc. to Mansfield). While the 15¢ commercial price was not available in all of the B & W area, it was in a part of it and, as seen, in a large part of General's area. In an attempt to standardize its prices and preponderately to meet existing competition, on August 20, 1965, General moved to return to the old 2¢ differential between domestic and commercial customers. Contrary to the allegation of predatory price-cutting, the new rates (17¢ and 15¢) were effective to all customers in all counties served by the Athens and Gainesville offices. (It had existed at Anderson since 1963). Since August 20, 1965, General has been involved in switching over its commercial customers to the new rate and in some instances rebating back to the effective date. However, as late as September 10, 1965, some commercial poultry customers of General were still being billed at 17¢ (Madden, Elbert Co.). While this may be sufficient to prove the mandatory "two sales" test, it falls far short of making out a case of probable success.

"Cutting prices is not per se unlawful and will not supply intent which court must find in order to justify granting of preliminary injunction against price cutting allegedly directed toward destruction of competition and monopolization of interstate commerce." Hershel California Fruit Products Co. v. Hunt Foods, D.C., 111 F.Supp. 732.

The burden is on the plaintiff to show that any price cut is of this kind. Elgin Corp. v. Atlas Bldg. Products Co., 10 Cir., 251 F.2d 7(5); Balian Ice Cream v. Arden Farms Co., 9 Cir., 231 F.2d 356. This has not been done here. On balance, as to the price change, it appears to be justifiable as necessary to meet the equally low price of competition and entered upon in good faith by General in its entire trade area. As part of overall competition, B & W is only incidentally affected where its trade area overlaps.

Likewise, the plaintiff has failed to show any "immediate irreparable damage." As to financial data, the record is strangely silent as to both parties. B & W was identified as an "independent", while General was classified as a "major." The plaintiff relies heavily on commercial poultry consumers, approximately 50% of its business coming from that source. General does 15-20% of its business to commercial poultry growers in its Athens-Gainesville operations and estimates it has now 10% as much of that business as B & W in the B & W area. Since the open price cut by General it has lost "110,000 gallons of business, which represents 3% to 5% of its total." It could lose "15% to 20% or approximately 500,000 gallons." Plaintiff computes its loss exposure at 2¢ per gallon or a total of $10,000.00 for the 1965-1966 season. Its business is...