Calumet Breweries v. G. Heileman Brewing Co., Inc.

• Decision Date: 14 December 1994
• Docket Number: No. 2:94 cv 165JM.,2:94 cv 165JM.
• Citation: 951 F.Supp. 749
• Parties: CALUMET BREWERIES, INC., Plaintiff, v. G. HEILEMAN BREWING COMPANY, INC., Defendant.
• Court: U.S. District Court — Northern District of Indiana

951 F.Supp. 749

CALUMET BREWERIES, INC., Plaintiff, v. G. HEILEMAN BREWING COMPANY, INC., Defendant.

No. 2:94 cv 165JM.

United States District Court, N.D. Indiana, Hammond Division.

December 14, 1994.

Daniel D. McDevitt, Michael P. Padden, John T. Cusack, Gardner Carton and Douglas, Chicago, IL, for Plaintiff.

David C. Jensen, Eichhorn Eichhorn and Link, Hammond, IN, James Klenk, Sonnenschein Nath and Rosenthal, Chicago, IL, for Defendant.

MEMORANDUM DECISION AND ORDER

MOODY, District Judge.

Before the court after hearing¹ and extensive post-hearing briefing² is plaintiff Calumet Breweries, Inc.'s ("Calumet") motion for a preliminary injunction. Calumet is an Indiana corporation engaged in the business of wholesale beer distribution. G. Heileman Brewing Company, Inc. ("Heileman"), a Delaware corporation, is, to belabor the obvious, a brewer of malt beverages.

Calumet seeks to enjoin a Heileman marketing practice, referred to by the parties and the court herein as the "quantity discount program," under which the price an Indiana beer wholesale distributor pays for Heileman products depends on the total quantity of Heileman products the wholesaler purchases that month: within limits set by Heileman, the larger the purchase, the cheaper the price. Among other legal theories, which can be ignored for now, Calumet contends the quantity discount program violates § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(a) (hereinafter, "Robinson-Patman § 2(a)").

The following facts, which for the most part have been stipulated to³, provide the context necessary for the discussion that follows. Otherwise, the court's findings of fact and conclusions of law, as required by FED R.CIV.P. 52(a), are stated where relevant in the text.

Heileman has a brewery in LaCrosse, Wisconsin. Calumet, like other Indiana wholesalers who purchase beer from Heileman, does so by purchasing F.O.B. LaCrosse. At the LaCrosse brewery, Heileman loads the beer on a commercial carrier's truck. Indiana law requires beer wholesalers to pay cash for all beer purchases, so, before the loaded truck leaves, Calumet pays Heileman by wire transfer (or other method of immediate funds transfer). Then, at Calumet's expense, the beer is shipped to its warehouse in Hammond, Indiana.

Heileman has used the quantity discount program to sell beer to Indiana wholesalers since 1987. Under the program, a discount is applied to the purchase price of a selected product(s), the amount of the discount depending on the total amount of the product(s) purchased that month, calculated by the case (or case-equivalent). For example, in April 1994, the discount was available for 24-can cases of beer in the "Old Style Family," i.e., Old Style, Old Style Light, Old Style Draft, etc.⁴ Wholesalers purchasing 4,500 cases to 19,999 cases received a discount of $.10 per case; 20,000 to 34,999 cases, $.20 per case; 35,000 to 54,999 cases, $.30 per case; 55,000 to 149,999 cases, $.40 per case; and 150,000 cases and over, $.50 a case.

The discount, calculated at the month's end, is applied as a credit to future purchases. The product(s) for which the discount is offered, the amount of the discount and the purchase quantity necessary to obtain a particular discount have varied from month-to-month. In some months no quantity discount is offered, there is "no program" that month.

Indiana does not restrict beer distributors to a particular geographic market: any Indiana distributor can sell to any Indiana retailer. The principal market for Heileman products in Indiana is the northwest region of the state — the contiguous counties of Lake, Porter and LaPorte. Lake County is the strongest market: Heileman products outsell any other brand there. The largest wholesale distributor of Heileman products in Indiana is Central Distributing Company ("Central"). Central and Calumet are both located in Lake County. The competitive picture for the two wholesalers presented by these circumstances need not be brushed in further.

Central typically purchases enough beer⁵ from Heileman each month to qualify for the maximum discount, usually $.50. Calumet hardly ever does. It has not purchased enough beer to get the maximum discount since January 1, 1988. Calumet's monthly purchases usually qualify for the minimum available discount ($.10), but occasionally for a $.20 discount or no discount. As a result, Calumet's effective cost is quite often $.40 a case higher than Central's. Absent significant cost savings elsewhere, this difference in wholesale cost makes it difficult, if not on occasion impossible, for Calumet to compete with Central's price while enjoying the same profit margin.

ANALYSIS

The verbal summation of a movant's burden to obtain a preliminary injunction varies from case-to-case. It has recently been summarized as follows:

A preliminary injunction is warranted if a movant can make a threshold showing (1) that the case has some likelihood of success on the merits; (2) that no adequate remedy at law exists; (3) that the movant will suffer irreparable harm if the injunction is not granted. If these three conditions are met, then the court must balance the harm to the movant if the injunction is not issued against the harm to the defendant if it is issued improvidently. Storck USA, L.P. v. Farley Candy Co., 14 F.3d 311, 313-14 (7th Cir.1994). A further consideration, often listed as a fourth factor, is whether granting the injunction serves the public interest. Id. at 314; Securities and Exchange Commission v. Cherif, 933 F.2d 403, 408 (7th Cir.1991); Roland Machinery Co. v. Dresser Industries Inc., 749 F.2d 380, 386-89 (7th Cir.1984).

I. LIKELIHOOD OF SUCCESS ON THE MERITS

The first threshold to cross is demonstration of a reasonable likelihood of success on the merits. This threshold is low, satisfied if a "plaintiff's chances are better than negligible. ..." Roland Machinery, 749 F.2d 380, 387 (7th Cir.1984) (quoting Omega Satellite Products Co. v. City of Indianapolis, 694 F.2d 119, 123 (7th Cir.1982)). For the purposes of assessing Calumet's likelihood of success the court confines its analysis to Calumet's Robinson-Patman § 2(a) claim.

As pertinent here, Robinson-Patman § 2 provides:

(a) It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce ... and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, that nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered ...

(b) ... Provided, however, That nothing herein contained shall prevent a seller rebutting the prima-facie case ... by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor ...

15 U.S.C. § 13.

To prove that Robinson-Patman § 2(a) has been violated a plaintiff must establish six elements: 1) a different selling price ("price discrimination"); 2) to buyers purchasing from the same seller; 3) for commodities; 4) of like grade and quality; 5) where any sale or sales involved were "in commerce;" and 6) where such price discrimination may substantially injure competition. Century Hardware Corp. v. Acme United Corp., 467 F.Supp. 350, 354 (E.D.Wis.1979).

Unquestionably, Heileman is the "same seller" to Calumet and Central. For the purpose only of determining Calumet's motion for a preliminary injunction, Heileman stipulates that the beverages it sells are commodities of like grade and quality, and that the sales involved are "in commerce." In addition, but again only for ruling on the motion for a preliminary injunction, Heileman stipulates that it relies on neither of the statutory defenses; i.e., it is not granting an allowance for a difference in cost or attempting to meet a competitor's price.⁶ Thus, an assessment of Calumet's chances of success on the merits focusses on only the first and last elements of the claim: Is Heileman selling at a "different price" and, if so, is there a chance of competitive injury?

Facts virtually identical to those in the present case were considered by the Supreme Court in FTC v. Morton Salt Co., 334 U.S. 37, 68 S.Ct. 822, 92 L.Ed. 1196 (1948). On its sales of table salt, Morton offered to all purchasers a quantity discount of $.10 per case for carload-sized lots. In addition, those who purchased 5,000 cases in twelve consecutive months received an additional $.10 per case discount, and purchasers of 50,000 cases in twelve months received an additional $.05 per case discount.

The Supreme Court affirmed the FTC's finding that Morton's discount program violated Robinson-Patman § 2(a), concluding that Morton's "standard quantity discounts are discriminatory within the meaning of the Act, and are prohibited by it whenever they have the defined effect on competition."⁷ Morton Salt, 334 U.S. at 44, 68 S.Ct. at 827. Morton Salt effectively creates a presumption that the "defined effect," i.e., the possibility of an injury to competition, exists whenever a quantity discount is offered:

It would greatly handicap effective enforcement of the Act to require testimony to show that which we believe to be self-evident, namely, that there is a "reasonable possibility" that competition may be adversely affected by a practice under which...