William Inglis & Sons Bak. Co. v. ITT Con. Bak. Co., Inc.
| Decision Date | 21 January 1975 |
| Docket Number | No. C-71-1906-SW.,C-71-1906-SW. |
| Citation | 389 F. Supp. 1334 |
| Court | U.S. District Court — Northern District of California |
| Parties | WILLIAM INGLIS & SONS BAKING CO., a corporation, et al., Plaintiffs, v. ITT CONTINENTAL BAKING COMPANY, INC., a corporation, et al., Defendants. ITT CONTINENTAL BAKING COMPANY, INC., a corporation, et al., Counterclaimants, v. WILLIAM INGLIS & SONS BAKING CO., a corporation, et al., Counterclaim Defendants. |
COPYRIGHT MATERIAL OMITTED
Michael H. Khourie, Royce H. Schulz, Eugene C. Crew, Broad, Khourie & Schulz, San Francisco, Cal., Harold Greenwald, Richard B. Kelly, New York City, for plaintiffs.
Richard S. Haas, Harvey Leiderman, Brobeck, Phleger & Harrison, San Francisco, Cal., James A. Velde, John T. Cusack, Gardner, Carton, Douglas, Chilgren & Waud, Chicago, Ill., for defendants American Bakeries Company and Langendorf United Bakeries, Inc.; Mitchell J. Wiet, Chicago, Ill., of counsel.
Edward L. Foote, Terry M. Grimm, Winston & Strawn, Chicago, Ill., M. Laurence Popofsky, Stephen V. Bomse, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for defendant Interstate Brands Corp.
Richard J. Archer, Kristina Hanson, Sharon Green, Sullivan, Jones & Archer, San Francisco, Cal., for defendants Campbell-Taggart, Inc., Rainbo Baking Company of Sacramento Valley and Kilpatrick's Bakeries, Inc.; Frederick M. Rowe, Richard C. Lowery, Kirkland, Ellis, Hodson, Chaffetz, Masters & Rowe, Washington, D. C., of counsel.
D. H. Mackaman, Campbell-Taggart, Inc., Dallas, Tex., for Campbell-Taggart, Inc.
Ralph C. Aldrich, Morrison, Foerster, Holloway, Clinton & Clark, San Francisco, Cal., Chas. E. Buffon, John H. Schaffer, III, Covington & Burlington, Washington, D. C., for ITT Continental Baking and Di Carlos Bakery.
Plaintiff, William Inglis & Sons Baking Co. hereinafter Inglis is an independent wholesale bakery in the Sacramento Valley area. In 1971, it along with other plaintiffs not involved in this motion, brought this antitrust action against the following other independent wholesale bakeries: ITT Continental Baking ITT; American Bakeries Co. American; and the holding company, Campbell Taggart Campbell Taggart who holds Rainbo of Sacramento, Kilpatrick Bakeries and San Joaquin Bakery.
Plaintiff alleges in its first amended complaint that defendants have violated: the Sherman Antitrust Act, sections 1 and 2, 15 U.S.C. § 1 and § 2; the Robinson-Patman Act amendments to Clayton hereinafter Robinson-Patman, Clayton Act section 2(a), 15 U.S.C. § 13(a); the Clayton Act, sections 3 and 7, 15 U.S.C. § 14 and § 18; and the California Unfair Trade Practice Act UPA, specifically Cal.Bus. and Prof.Code sections 17026, 17029, 17030, 17043, 17044, 17045, 17050, 17070, 17078.1 The proceedings before the court at this time, however, only involve the alleged violations of Robinson-Patman § 2(a) and of the California UPA.
The market with which the parties are concerned geographically encompasses the area of California north of the Tehachapi Mountains and certain border areas of Northern Nevada. However, testimony indicates that the geographic area of major concern does not extend to the north much beyond Redding, California. The product market has been defined as the manufacture and sale of bread and bread-type rolls to grocery stores, restaurants and institutions. Again, testimony indicates that the product line can be more narrowly defined as bread, especially the white one-pound expanded loaf,2 and hotdog and hamburger rolls. Finally, the temporal market, which has been less clearly defined appears to encompass conduct from 1968 and 1969 through the present.
The one-pound expanded loaf is the prime source of the plaintiff's complaint although other bread products are not infrequently discussed. Generally all parties sell or have sold a one-pound expanded loaf under at least two labels, a nationally advertised brand label and a private label.3 Plaintiff alleges that although they have and evidently still do sell bread under a private label, any private label program is in violation of Robinson-Patman § 2(a) when it allows a loaf of bread which is of "like kind and quality" as the advertised brand to be sold for a price lower than the advertised brand. Plaintiff further alleges that in this case the private labels have been sold below cost in violation of the UPA.
In July 1974, plaintiff moved this court to preliminarily enjoin defendants from selling their bread products at discriminatory prices and at prices below cost,4 and from giving rebates and gifts to their (plaintiff's) customers in order to secure their business.
After extensive oral argument and voluminous briefing, the court requested further information on methods of cost accounting, on parties actual costs and on the affirmative defense of good faith meeting competition. Upon receipt of this information, the court reconvened in September to hear expert testimony on cost accounting and further information on meeting competition. Final arguments were then heard and the matter submitted.
As the defendants constantly reminded the court, the motion seeks a preliminary injunction5 and thus, before plaintiff can prevail the court must find that:
1. there will be immediate and irreparable harm if the injunctive relief is not granted;
2. plaintiff has a probability of success on the merits;
3. in balancing the equities, the defendants would not be harmed more than plaintiff is helped by the injunction; and
4. it would be in the public's interest to grant the injunction.
See Sierra Club v. Hickel, 433 F.2d 24 (9th Cir. 1970), aff'd 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972); C. Tennant v. N. Y. Terminal, 299 F.Supp. 796 (S.D.N.Y.1969).
Although at this juncture the court is of the opinion that there is irreparable injury, that the equities are not weighted in defendants' favor, and that the public interest might well be served by the asked-for relief, it has serious reservations as to the probability of success on the merits. In brief, while the evolution of this market does indicate a tendency toward monopoly, the court is unconvinced that the purpose of defendants conduct was to injure competition or monopolize.
This conclusion has been reached only after a painstakingly careful analysis of the many complex issues, some of first impression, which are discussed below.
Much has been said about the immediate and irreparable injury to the plaintiff if he does not prevail on this motion. Testimony has shown that the Inglis Bakery has been in severe financial difficulties which it attributes to the "dog-eat-dog" competition brought on by the allegedly discriminatory private label pricing and selling below cost. Recent testimony has also shown that Inglis' financial crisis is easing with the constant rise in bread prices.6 Given these circumstances it is difficult for Inglis to seriously argue immediate and irreparable injury to itself. This is especially so when viewed with the knowledge that plaintiff has allowed almost three years to elapse between the filing of its complaint and the bringing of its motion for preliminary injunction.
Defendants claim that much of Inglis' troubles are due to in-house mismanagement. More as a defense than as an example of lack of irreparable harm, they also argue that if Inglis has been harmed by this market's stiff competition, it is due to pari delicto — its equal misconduct. Although this court has rejected the concededly present pari delicto as being irrelevant to the charges, it does militate against the urgency of plaintiff's harm and perhaps must be considered in the balancing of the equities hereinafter discussed.
However, it is not the irreparable harm to plaintiff but the obvious immediate and irreparable harm to the market itself which causes the court its greatest concern. Not only is Inglis, one of the last small independent bakeries in this area in danger of being driven out of this market regardless of the fact that its problems may be due to its own ineptitude, but the third largest national independent bakery, American, has shown that not even it can keep pace with the competition generated by this allegedly below cost private label program. If this trend is allowed to continue or resume7 the geographic area could soon be at the mercy of the two biggest wholesale bakeries in the country, ITT and Campbell Taggart. This would result in an extremely undesirable anticompetitive situation, an eventuality which both Robinson-Patman and the California UPA Act were designed to curtail. See F. T. C. v. Anheuser-Busch, Inc., 363 U.S. 536, 543, 80 S.Ct. 1267, 4 L.Ed.2d 1385 (1960); Cal.Bus. and Prof.Code § 17001. Accordingly this court finds that there is the likelihood of an immediate and irreparable injury in this market.
The elements of a Robinson-Patman § 2(a) violation are threefold: (1) the allegedly violative conduct must meet the "in-commerce" requirements of the Act, (2) there must be a price discrimination between different purchasers of commodities of like grade and quality, and (3) the effect of such discrimination must be to substantially lessen competition or tend to create a monopoly. The establishment of these elements, however, is not alone sufficient to prove a violation since defendants may justify such conduct by establishing that the price differences are due to cost differences or are good faith responses to competitors' prices.
Under Robinson-Patman § 2(a), it is generally agreed that there are three "in-commerce" requirements for jurisdiction to attach. Borden Co. v. F. T. C., 339 F.2d 953, 955 (7th Cir. 1964). First the defendants must be involved in interstate commerce. Id, citing Standard Oil v. F. T. C., 340 U.S. 231, 71 S. Ct. 240, 95 L.Ed. 239 (1951). There is no doubt that these three defendants are engaged...
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