Dean Milk Co. v. Federal Trade Commission, 15483.
| Decision Date | 01 April 1968 |
| Docket Number | No. 15483.,15483. |
| Citation | 395 F.2d 696 |
| Parties | DEAN MILK COMPANY and Dean Milk Co. Inc., Petitioners, v. FEDERAL TRADE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Thomas C. McConnell, Francis J. McConnell, John Borst, Jr., Chicago, Ill., for petitioners; McConnell, Freeman, Curtis & McConnell, Chicago, Ill., of counsel.
J. B. Truly, Gerald Harwood, David B. Morris, F.T.C., James McI. Henderson, Gen. Counsel, Frederick H. Mayer, F.T.C. Washington, D. C., for respondent.
Before SCHNACKENBERG, KILEY, and SWYGERT, Circuit Judges.
Dean Milk Company (Dean Illinois) and Dean Milk Company, Incorporated (Dean Kentucky)1 petition to set aside an order of the Federal Trade Commission. The Commission, affirming the initial decision of the examiner in all respects save one,2 found that Dean Kentucky and Dean Illinois violated Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(a), by discriminating in the prices charged for milk in parts of Indiana and Kentucky between 1952 and 1960.3 Specifically, Dean Illinois was found to have engaged in proscribed price discrimination at the secondary (buyer) level by virtue of a quantity discount system implemented in the Terre Haute, Indiana market. Dean Kentucky and Dean Illinois were found to have engaged in proscribed territorial price discrimination at the primary (seller) level by virtue both of charging a lower price in the Evansville, Indiana-Henderson, Kentucky market than that charged by them in the Falls Cities (Louisville) market and of implementing a quantity discount system. In addition, both companies were found to have engaged in proscribed price discrimination at the primary and secondary level by virtue of a quantity discount system implemented in the Louisville market. The central issue posed by the Dean companies in this review is whether substantial evidence in the record supports the Commission's findings and conclusions.
Henderson, Kentucky and Evansville, Indiana, themselves separated only by the Ohio River, are approximately 130 miles from Louisville, Kentucky. Before Dean Kentucky commenced operations in September 1952, there existed in Henderson, Evansville, and Louisville an "historical" one-cent per quart differential between the higher priced homogenized and lower priced creamline milk.4 As between the three cities the price for a quart of milk, whether homogenized or creamline, was one cent less in Evansville than in Louisville while in Henderson it was one cent more than in Louisville. The first action Dean Kentucky undertook upon entering the Louisville market in September 1952 and the Evansville-Henderson market in November 1952 was to uniformly eliminate in each of those markets the pre-existing differential between the quart prices of the two varieties of milk. Thereafter, homogenized was sold at the lower creamline price not only by Dean, but also by all the other dairies in those markets. In addition, Dean Kentucky lowered the quart price of homogenized milk in Henderson to that of the new price it had set in Evansville, thereby eliminating the two-cent per quart price differential which had previously existed between those two cities.5
Beginning in July 1954 in Evansville and in July 1955 in Henderson, Dean Kentucky introduced a quantity discount system similar to the one introduced at about the same time in the Louisville market.6 According to the testimony of a Dean Kentucky officer, approximately 95 per cent of Dean's customers in Evansville qualified for the maximum discount whereas approximately 50 per cent of Dean's customers in Henderson so qualified. In both cities, these customers were large chain stores.
On the basis of the foregoing activities, the Commission concluded that Dean Kentucky had engaged in unlawful territorial price discrimination to the detriment of its competitors and competition in the Evansville-Henderson market. The evidence supporting the Commission's conclusion was provided by witnesses from only four dairies, although there were at least nine dairies operating in that market at the time of Dean's entry.
The Commission's first witness was a former officer of Dairy Service, Inc., an Evansville Dairy, which ceased operating and merged into American Dairy, another Evansville dairy, in May 1954. He testified that Dairy Service, which sold approximately 65 to 70 per cent of its volume to retail home delivery customers, "had to reduce our price in order to hold onto our retail business." He attributed Dairy Service's declining profits prior to its cessation of business to "reduced sales and reduced gross profit by reason of receiving one cent less per quart on homogenized milk." He testified that the decision to cease operations was due to a "trend definitely showing where smaller operations were being forced either to sell or quit business" and to declining profits. On cross-examination, he could recall only one wholesale store account that Dairy Service lost to Dean. Moreover, the witness could not testify that Dairy Service lost any home delivery business "directly" as a result of Dean's activities.
Blue Ribbon Dairy, another local Evansville dairy selling at wholesale and retail, ceased operating in September 1953. The president testified that his company served the A & P and Kroger stores in the area, losing the latter's business upon Dean's entry. The A & P stores continued to carry his company's products along with those of Dean and another dairy. Blue Ribbon also served a local chain accounting for approximately one-third of its total business, to the exclusion of Dean. With respect to Dean's uniform one-cent reduction in the price of homogenized milk, he testified that "it could be the difference between profit and loss."
American Dairy Company was the second largest Evansville dairy, distributing dairy products at wholesale and retail primarily in the Evansville-Henderson market area. According to the testimony of an officer of American, Dean's entry, attended by its elimination of the price difference between homogenized and creamline milk, created "chaos in the market." With respect to the importance of this one-cent reduction in the price of homogenized, he testified, "That's the profit we are making in our business." Upon Dean's introduction of quantity discounts, American, according to the witness, offered its customers similar discounts, seeking thereby to retain business even though charging a lower price. He admitted however, that American's wholesale business increased since Dean entered the market, that Dean did not sell any milk to American's largest wholesale purchaser, and that he could recall only two American accounts which Dean "got in" and served in conjunction with American.
Evidence specifically touching on the Henderson segment of the market came from a single witness, the president of the Henderson Creamery Company, a dairy selling milk at wholesale and retail exclusively in Henderson and surrounding Kentucky towns. In explaining the higher milk price prevailing in Henderson prior to Dean's entry, he testified that Henderson Creamery traditionally purchased milk of higher quality than that purchased by the Evansville dairies. The effect of Dean's entry, according to his testimony, centered around: (1) the consequence of even a one-cent price cut which "just about removes all of the profit and throws you in a loss;" (2) the unfavorable image, "bad eye," and loss of wholesale business resulting from Dean's drop in prices; (3) the increased spread between the home-delivered price and the lower chainstore price causing a loss of home delivery business. Apparently, the loss of wholesale business was only temporary as he later testified that his company's wholesale volume had increased during the period covered by this action. He testified that no wholesale accounts were lost in their entirety by Henderson Creamery to Dean, although in some locations his business was split with Dean and as many as two other dairies. As to Dean's introduction of a quantity discount system, he testified that Henderson Creamery did likewise, "to hold our business, * * * to try to gain back our wholesale business that we had been losing."
Two important elements must be established if the Commission is to prevail in finding a violation of section 2(a) of the Robinson-Patman Act. First, the Commission must demonstrate a discrimination in price "between different purchasers of commodities of like grade and quality."7 Second, the Commission must demonstrate that "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 * * *." Both questionable analysis and insubstantial evidence detract from the persuasiveness of the Commission's attempt to demonstrate the existence of these two elements.
Initially, we question the rationale by which the Commission concluded that Dean discriminated by charging prices in the Evansville-Henderson market different from those it charged in the Louisville market for like products. Although there were periods both before and after Dean Kentucky commenced operations when the Evansville-Henderson prices were lower than the Louisville prices, the Commission stated:
At all times between 1952 and 1960, respondents\' Dean prices to their favored customers in Evansville-Henderson were lower than their prices for goods of like grade and quality in Louisville, even though the products sold in Evansville-Henderson were processed in Louisville and thereafter physically transported from the Louisville plant to purchasers in Evansville-Henderson.8
With respect to this conclusion, we are at a loss to understand why the Commission glossed over the import of the preentry price differentials existing between Louisville and Evansville and Louisville and Henderson. Before Dean...
To continue reading
Request your trial
-
William Inglis & Sons Baking Co. v. ITT Continental Baking Co., Inc.
...Homestead Bread Co., 476 F.2d 97, 109 (10th Cir.), cert. denied, 414 U.S. 975, 94 S.Ct. 290, 38 L.Ed.2d 218 (1973); Dean Milk Co. v. FTC, 395 F.2d 696, 715 (7th Cir. 1968). This is not a case in which jurisdiction is being asserted over essentially local transactions, involving purely local......
-
National Dairy Products Corporation v. FTC
...1385; Utah Pie Co. v. Continental Baking Co., 386 U.S. 685, 696, n.12, 87 S.Ct. 1326, 18 L.Ed.2d 406; Dean Milk Company v. Federal Trade Commission, 395 F.2d 696, 707-708 (7 CA 1968); and Anheuser-Busch, Inc. v. Federal Trade Commission, 289 F.2d 835, 843 (7 CA 1961). CONFLICTING EVIDENCE M......
-
Hospital Corp. of America v. F.T.C.
...evidence rule. See, e.g., National Dairy Products Corp. v. FTC, 412 F.2d 605, 616, 620 (7th Cir.1969); Dean Milk Co. v. FTC, 395 F.2d 696, 709, 711-13 (7th Cir.1968); Yamaha Motor Co., Ltd. v. FTC, 657 F.2d 971, 977 and n. 7 (8th Cir.1981); Fruehauf Corp. v. FTC, supra, 603 F.2d at 355; RSR......
-
A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc.
...the district court--almost, but not quite. An enduringly competitive structure might offer Rose Acre safe harbor, see Dean Milk Co. v. FTC, 395 F.2d 696 (7th Cir.1968). We needn't say because one more ingredient is missing: price discrimination, as the Robinson-Patman Act uses that term. Wi......
-
Price discrimination and related conduct
...Oil Co. v. FTC, 340 U.S. 231, 237–38 (1951); L&L Oil Co. v. Murphy Oil Co., 674 F.2d 1113, 1116 (5th Cir. 1982); Dean Milk Co. v. FTC, 395 F.2d 696, 714–15 (7th Cir. 1968). originating out of state. 81 The latter fact pattern is less likely to satisfy the interstate commerce element. g. Inj......
-
Robinson-Patman Act
...Great Atl. & Pac. Tea Co. v. FTC, 557 F.2d 971, 979 (2d Cir. 1977), rev’d on other grounds , 440 U.S. 69 (1979); Dean Milk Co. v. FTC, 395 F.2d 696, 714-15 (7th Cir. 1968); Foremost Dairies v. FTC, 348 F.2d 674, 676-77 (5th Cir. 1965) (“the milk passed in a steady flow from the farms of Col......
-
Civil Government Enforcement
...Winn-Dixie in New Orleans, its similar practices [elsewhere] justified the nation-wide order entered. In contrast to Dean Milk Co. v. FTC, 395 F.2d 696 (7th Cir. 1968), there are no considerations present here that impel a limitation of the Commission’s order to the specific areas where the......
-
Table of Cases
...Ill. 2018), 477, 609, 894, 996 Dean Foods Co., 70 F.T.C. 1146 (1966), modified, 71 F.T.C. 731 (1967), 362, 701, 716 Dean Milk Co. v. FTC, 395 F.2d 696 (7th Cir. 1968), 527, 711 de Atucha v. Commodity Exch., 608 F. Supp. 510 (S.D.N.Y. 1985), 1301 Deauville Corp. v. Federated Dep’t Stores, 75......