ABC Internat. Traders, Inc. v. Matsushita Electric Corp.

• Decision Date: 27 February 1997
• Docket Number: No. S051417,S051417
• Citation: 931 P.2d 290,14 Cal.4th 1247,61 Cal.Rptr.2d 112
• Court: California Supreme Court
• Parties: , 931 P.2d 290, 65 USLW 2585, 1997-1 Trade Cases P 71,736, 97 Cal. Daily Op. Serv. 1430, 97 Daily Journal D.A.R. 2105 ABC INTERNATIONAL TRADERS, INC., Plaintiff and Appellant, v. MATSUSHITA ELECTRIC CORPORATION OF AMERICA, Defendant and Respondent.

Page 112

61 Cal.Rptr.2d 112

14 Cal.4th 1247, 931 P.2d 290, 65 USLW 2585,

1997-1 Trade Cases P 71,736,

97 Cal. Daily Op. Serv. 1430,

97 Daily Journal D.A.R. 2105

ABC INTERNATIONAL TRADERS, INC., Plaintiff and Appellant, v. MATSUSHITA ELECTRIC CORPORATION OF AMERICA, Defendant and Respondent.

No. S051417.

Supreme Court of California.

Feb. 27, 1997.

Blecher & Collins, Maxwell M. Blecher, John E. Andrews and James Robert Noblin, Los Angeles, for Plaintiff and Appellant.

Daniel E. Lungren, Attorney General, Herschel T. Elkins and Thomas Greene, Assistant Attorneys General, Ronald A. Reiter, Deputy Attorney General, Gil Garcetti, District Attorney (Los Angeles), Thomas A. Papageorge, Deputy District Attorney, and Daniel Berko as Amici Curiae on behalf of Plaintiff and Appellant.

David B. Bloom, James E. Adler, Los Angeles, Golenbock, Eiseman, Assor & Bell and Martin S. Hyman, New York City, for Defendant and Respondent.

WERDEGAR, Justice.

Business and Professions Code section 17045, ¹ part of California's Unfair Practices Act (hereafter the UPA; see § 17000), prohibits a seller from secretly allowing a purchaser special "unearned discounts" that injure "a competitor" and tend to destroy "competition." The question before us is whether the competition referred to is limited to competition among sellers of the particular good or service, or includes economic competition among buyers as well. More concretely, does a disfavored buyer adequately plead a cause of action against a seller for violation of section 17045 by alleging the seller's secret discrimination injured the buyer and tended to destroy competition among buyers, or must the disfavored buyer allege injury to one or more of the seller's competitors and a tendency to destroy competition among sellers? Upon an examination of the statutory language, context, purposes and history, we conclude a cause of action may be pled by alleging competitive injury among buyers.

This case also calls upon us to interpret another section of the Business and Professions Code, section 17203, one of several statutes that together are sometimes referred to as the "unfair competition law." (§§ 17200-17209; see, e.g., Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 209, 197 Cal.Rptr. 783, 673 P.2d 660.) The question presented is whether a plaintiff may, under section 17203, seek restitution of money lost by the plaintiff or gained by the defendant as a result of the defendant's acts of unfair competition, without also seeking an injunction against future acts of unfair competition. We will hold injunctive relief is not a prerequisite to restitution under section 17203.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff ABC International Traders, Inc. (ABC) is a wholesale distributor of telephone equipment and other electronic products. ABC's second amended complaint names as defendants Matsushita Electric Corporation of America (MECA), Procom Supply Corporation (Procom), and Tele-Com Office Products Corporation (Tele-Com). MECA produces electronic products under the brand name Panasonic. Procom and Tele-Com are wholesale distributors of electronics, in competition with ABC.

The case comes to us following ABC's appeal of the trial court's dismissal of the action against MECA after the court sustained MECA's demurrer without leave to amend. For purposes of such an appeal, we take the properly pleaded material allegations of ABC's complaint as true; our only task on review is to determine whether the complaint states a cause of action. (Garcia v. Superior Court (1990) 50 Cal.3d 728, 732, 268 Cal.Rptr. 779, 789 P.2d 960.)

The complaint sets forth two causes of action as to all defendants. The first is for violation of the Unfair Practices Act, "and in particular Sections 17045-17048." ABC alleges that in 1989 it suspected, but had no direct information to confirm, MECA was providing Procom and Tele-Com a 5 percent discount on Panasonic products, a discount not provided to ABC. In October 1991, MECA stopped selling to ABC altogether. In September 1992, ABC learned from employees of Procom that MECA had "for years" been giving Procom and Tele-Com a 5 percent discount from the price charged to other wholesalers.

ABC alleges the 5 percent discount was unearned, in that the recipients' wholesale marketing services were identical to those performed by ABC and others, and was secret, in that neither MECA nor any recipient of the discount confirmed its existence to ABC or to the market generally. ABC alleges damages in the amount of the lost discount plus lost profits from reduced sales of Panasonic products. It also charges that the discriminatory discount "tended to destroy competition" among electronics wholesalers, in that the favored wholesalers were in turn able to offer retailers lower prices than those offered by the disfavored wholesalers.

In its second cause of action, ABC alleged the above acts also constituted violations of the unfair competition law. Pursuant to section 17203, ABC sought restitution of all moneys ABC lost and disgorgement of all profits defendants received as a result of their acts of unfair competition.

The trial court granted MECA's demurrer on both causes of action without leave to amend. The Court of Appeal affirmed. As to the first cause of action, the court held the elements of a section 17045 violation were not met, because ABC did not allege any injury to MECA's competitors or any tendency to destroy competition among electronics producers. The court believed our decision in Harris v. Capitol Records etc. Corp. (1966) 64 Cal.2d 454, 50 Cal.Rptr. 539, 413 P.2d 139, which reached a similar result in an action brought under other provisions of the UPA, compelled that conclusion. On the second cause of action, the Court of Appeal held the complaint deficient "because it sought restitution and disgorgement without injunctive relief." For reasons explained below, we conclude the Court of Appeal erred in both these respects.

I. COMPETITIVE INJURY UNDER SECTION 17045

A. Statutory Language and Context

Section 17045 provides: "The secret payment or allowance of rebates, refunds, commissions, or unearned discounts, whether in the form of money or otherwise, or secretly extending to certain purchasers special services or privileges not extended to all purchasers purchasing upon like terms and conditions, to the injury of a competitor and where such payment or allowance tends to destroy competition, is unlawful."

MECA contends the class of "competitors" and the "competition" protected under section 17045 is restricted to competitors of the person allowing an unearned discount--sometimes called the "primary" line of commerce--as opposed to competitors of the person receiving it--the "secondary" line. As is immediately apparent, however, the statutory language contains no such express restriction. Indeed, to the extent any inference can be drawn from the law's wording, it is to the contrary. On its face, section 17045 is "aimed at preventing a distributor from discriminating between customers." (Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 323, 70 Cal.Rptr. 849, 444 P.2d 481.) The statute being focused patently on discrimination among purchasers, one might reasonably assume the legislative purposes included protecting purchasers, such as wholesalers and retailers, against the competitive injury resulting from discrimination by those higher up the marketing chain. Judicial and academic writers concerning themselves specifically with section 17045 have, in fact, so assumed. (See Diesel Electric Sales & Service, Inc. v. Marco Marine San Diego, Inc. (1993) 16 Cal.App.4th 202, 213-214, 20 Cal.Rptr.2d 62; McCarthy, Whatever Happened to the Small Businessman? The California Unfair Practices Act (1968) 2 U.S.F. L.Rev. 165, 181-182.)

MECA contends the intent to protect only against competitive injury in the primary line can be discerned from the Legislature's omission of certain language contained in federal price discrimination statutes. Section 2 of the federal Clayton Act of 1914 forbids certain types of price discrimination in interstate commerce "where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce." (15 U.S.C. § 13(a); see George Van Camp & Sons Co. v. Am. Can Co. (1929) 278 U.S. 245, 252-253, 49 S.Ct. 112, 113, 73 L.Ed. 311 [section 2 of Clayton Act includes lessened competition in secondary line].) In the Robinson-Patman Act of 1936, Congress amended this section of the Clayton Act, inter alia, by additionally prohibiting discrimination the effect of which is "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." (15 U.S.C. § 13(a); see F.T.C. v. Anheuser-Busch, Inc. (1960) 363 U.S. 536, 542-545, 80 S.Ct. 1267, 1270-1272, 4 L.Ed.2d 1385 [added language, like original Clayton Act language, includes injury in either primary or secondary line].) The Robinson-Patman Act also made it unlawful "knowingly to induce or receive a discrimination in price which is prohibited by this section." (15 U.S.C. § 13(f).) MECA argues that section 17045, by contrast, focuses on the acts of sellers, rather than buyers, and contains no specific reference to competition in the secondary line.

MECA's argument ignores the statutory context of section 17045. While section 17045 itself does not focus directly on the purchaser's acts in obtaining a discriminatory price or other preference, the immediately following sections of the UPA do. Section 17046 makes it unlawful to "use any threat intimidation, or boycott, to effectuate any violation" of the UPA. Section 17047 makes it illegal to "solicit" the same. Similarly, section 17048 makes it unlawful to "participate or collude" in violating the UPA. It...