Credit Bureau Reports, Inc. v. Retail Credit Co.
| Decision Date | 05 November 1971 |
| Docket Number | Civ. A. No. 70-H-1157. |
| Parties | CREDIT BUREAU REPORTS, INC. v. RETAIL CREDIT CO. et al. |
| Court | U.S. District Court — Southern District of Texas |
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John L. Jeffers, Jr., Baker & Botts, Houston, Tex., for plaintiff.
Leroy Jeffers, Harry M. Reasoner, Charles T. Newton, Jr., Vinson, Elkins, Searls, Connally & Smith, Houston, Tex., for defendants.
On the theory that it has been victimized by various violations of federal antitrust statutes, plaintiff, Credit Bureau Reports, Inc., seeks an injunction and a decree of divestiture from Retail Credit Company and its subsidiaries, Retailers Commercial Agency, Credit Bureau, Inc. of Georgia, and Credit Marketing Services, Inc. Specifically, plaintiff contends that defendants are guilty of price-fixing in violation of Section 1 of the Sherman Act (15 U.S.C. § 1)1, of monopolization and attempted monopolization in violation of Section 2 of the Sherman Act (15 U.S.C. § 2)2, and have made certain acquisitions since 1966 which may tend to substantially lessen competition as forbidden by Section 7 of the Clayton Act (15 U.S.C. § 18)3. The shield raised by the defendants consists of a categorical denial of the charges raised in the complaint in addition to an accusation that plaintiff is itself a monopolist and price-fixer. Defendants also have raised the issue of the propriety of injunctive relief and, particularly, the question of whether a private antitrust litigant may avail itself of divestiture as a remedy.
Credit Bureau Reports, Inc. (herein CBR), the plaintiff, is a private corporation domiciled in Houston, Texas. The business in which plaintiff is presently engaged is that of nonlocal credit reporting. This service, provided by plaintiff through more than 2,000 local credit bureaus from coast to coast with which plaintiff has contracts, is in response to the needs of large nonlocal credit grantors, such as oil companies, mail-order houses, and bank charge-card systems. By acting as a sales agency, CBR is a vehicle through which local credit bureaus can reach the nonlocal market, while at the same time it meets the demands of the nonlocal credit grantors for standardized forms, uniform billing practices and prices. The mechanics by which a nonlocal credit grantor obtains a report is to send an order ticket, provided by CBR, directly to the credit bureau which serves the locality in which the individual lives and about whom the credit grantor desires information. This information is supplied on a form also provided by CBR which is forwarded directly to the customer. Periodically, the local bureau bills CBR according to the number of order tickets it has received. CBR remits 85% of the billed amount to the local bureau and in turn invoices the customer for the full amount. Most of CBR's stock, except for small amounts owned by its officers, is held by about 706 of the local credit bureaus with which it has contracts. These stockholders select CBR's board of directors.
Retail Credit Company (herein RCC) is a dominant force in the market of insurance credit reporting, i. e., the making and selling of investigative reports to insurance companies used by them to determine the degree of risk with respect to applicants for life insurance, casualty insurance, health insurance and other types of insurance. RCC is headquartered in Atlanta, Georgia, and together with its subsidaries employs approximately 15,000 persons including 7,000 full-time and 4,500 part-time field investigators. Its ownership is spread over 4,200 stockholders. For 1970, RCC had $148,403,000 total revenue, 74% of which was derived from insurance reports and $2,225,067 of which was derived from the sale of investigative credit reports to nonlocal credit grantors. Other direct revenue is attributable to the production and sale of personnel reports, used by employers to assist them in passing upon the qualifications of potential employees, and the production and sale of market research reports for businesses. RCC is a major competitor in the nonlocal credit reporting market.
Retailers Commercial Agency (herein RCA) is a wholly-owned subsidiary of RCC with total 1970 revenues amounting to $3,854,839. Of this sum, $1,636,307 was attributable to the production and sale of investigative reports4 to nonlocal credit grantors. A portion of its other revenue is marketing of investigative employment reports. RCA is a New York Corporation primarily engaged in credit reporting and has offices in over 100 metropolitan areas in the United States. The operations of an RCA office are quite similar to those of a credit bureau. RCA competes directly with credit reporting bureaus in both local and nonlocal markets. RCC sells in the nonlocal market for RCA, and the combined facilities of these two companies offer the credit grantor nationwide credit reporting coverage. The RCC-RCA network provides a broad range of credit reporting services which are described and advertised in RCC brochures, and through their coordinated efforts they compete directly with credit bureaus selling through CBR.
Credit Bureau, Inc. of Georgia (herein CBI), another wholly-owned RCC subsidiary, actually owns 120 local credit bureaus together with Credit Bureau, Inc. of Oregon5 another wholly-owned subsidiary. Eventually, RCC plans to bring all its owned credit bureaus under the management of CBI and is presently engaged in liquidating various other subsidiary corporations owning credit bureaus. Ownership of these bureaus is being transferred to CBI. Many CBI bureaus are also members of CBR. CBI's 1970 revenue was $2,103,692, of which $1,303,047 represented sales through CBR.
Credit Marketing Services, Inc. (herein CMS), is a Georgia corporation organized by its parent corporation, RCC, in September, 1970. At its inception, the function served by CMS was identical to that of CBR. CMS is in direct competition with CBR in the southeastern portion of the United States, but plans are on the drawing board to expand CMS into an organization national in scope. At present, CMS serves only bureaus owned by CBI, but plans eventually to compete for business from nonowned bureaus.6 CMS is currently engaged in marketing efforts on behalf of all bureaus owned by RCC or its affiliates in the United States and on behalf of independent credit bureaus in the southeastern United States.
RCC maintains close control over all its subsidiaries.7 There is a considerable degree of corporate interconnection among the defendant companies. To illustrate, one individual is president of all the subsidiaries concerned with credit reporting. This same person is a director of RCC and is also a member of a three-man executive committee which carries out the policies of the board of directors and makes the policy decisions for the subsidiaries. The various RCC companies have a centralized cash control system and use the same legal service and corporate printing service.
CBR is concerned that RCC will use its monopoly power in the insurance reporting industry as a battle axe to drive it out of the credit reporting field, create a RCC dominated monopoly in that business, and effectively thwart CBR's entry into insurance reporting. The particulars in which CBR contends RCC has acted willfully to preserve its insurance monopoly include (a) the acquisition of 100 credit bureaus since 1966, (b) use of monopoly profits to finance these acquisitions, (c) refusal to participate in CBR's insurance survey, (d) the likelihood that CBI-owned bureaus will not be permitted to sell nonlocal insurance reports through CBR, (e) the possibility that RCC-controlled bureaus may be withdrawn from membership in CBR, thereby creating large geographical gaps in its nationwide coverage, (f) RCC's opposition to CBR's corporate reorganization, and (g) the launching of CMS purely for predatory purposes. To remedy these fears, CBR seeks to enjoin defendants from (a) going forward with any sales and service program for independent credit bureaus such as the one now being offered by CMS, (b) acquiring any additional credit bureaus, and (c) terminating the contractual relationships between credit bureaus owned by defendants and CBR. Additionally, CBR requests a decree requiring defendants to divest themselves of all credit bureaus acquired within the last four (4) years.
The basis of CBR's allegation concerning Section 1 of the Sherman Act is illegal price-fixing. In support of this contention, plaintiff offers the following factual analysis: (1) the integrated, nationwide network of RCC-RCA offices compete directly with local credit bureaus in the sale of credit reports in the nonlocal market; (2) CMS in a factual context was organized to act as a sales agent for local credit bureaus in the sale of credit reports in the nonlocal market; (3) if the original CMS program had gone forward, the defendants would then have determined the prices not only for reports sold by the Retail-Retailers system, but also for reports of local credit bureaus selling in competition with that system in the nonlocal credit reporting market. It is CBR's position that the revision of the CMS program to guarantee prices to be paid local credit bureaus in no way alters the substance of the price-fixing scheme.
There is no need to elaborate upon price-fixing as an anticompetitive evil. Such agreements between horizontal competitors and indirect price-tampering by competitors are not to be tempered with by the rule of reason discussed in Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911), but instead are considered to be per se unreasonable restraints of trade in violation of Section 1. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (194...
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