Fairmont Creamery Co v. State of Minnesota, 725

• Decision Date: 11 April 1927
• Docket Number: No. 725,725
• Citation: 47 S.Ct. 506,274 U.S. 1,52 A. L. R. 163,71 L.Ed. 893
• Parties: FAIRMONT CREAMERY CO. v. STATE OF MINNESOTA
• Court: U.S. Supreme Court

274 U.S. 1

47 S.Ct. 506

71 L.Ed. 893

FAIRMONT CREAMERY CO.

v STATE OF MINNESOTA.

No. 725.

Argued Feb. 23, 1927.

Decided April 11, 1927.

Messrs. Leonard A. Flansburg and Eugene J. Hainer, both of Lincoln, Neb., for plaintiff in error.

Mr. Charles E. Phillips, of St. Paul, Minn., for the State of Minnesota.

[Argument of Counsel from page 2 intentionally omitted] Mr. Justice McREYNOLDS delivered the opinion of the Court.

The Supreme Court of Minnesota sustained the conviction of plaintiff in error, a corporation of that state charged with violating section 1, chapter 305, Laws 1921, as amended by chapter 120, Laws 1923 (G. S. Minn. 1923, § 3907), which follows:

'Any person, firm, copartnership or corporation engaged in the business of buying milk, cream or butter fat for manufacture or for sale of such milk, cream or butter fat, who shall discriminate between different sections, localities, communities or cities of this state, by purchasing such commodity at a higher price or rate in one locality than is paid for the same commodity by said person firm, copartnership or corporation in another locality, after making due allowance for the difference, if any, in the actual cost of transportation from the locality of purchase to the locality of manufacture or locality of sale of such milk, cream or butter fat, shall be deemed guilty of unfair discrimination, and, upon conviction thereof, shall be punished by a fine not exceeding one hundred dollars, or by imprisonment in the county jail for not exceeding 90 days.'

Chapter 468, Laws 1909, prohibited discrimination in prices between localities 'with the intention of creating a monopoly or destroying the business of a competitor.' The act of 1921 forbade such discrimination with 'the purpose of creating a monopoly, or to restrain trade, or to prevent or limit competition, or to destroy the business of a competitor.' Section 1. The act of 1923, supra, eliminated purpose as an element of the offense.

The cause was begun in Cottonwood county by a complaint which alleged: That the Fairmont Creamery Company on June 11, 1923, at the village of Bingham Lake, Cottonwood county, committed the crime of unfair discrimination in the purchase of butter fat for manufacture and sale, in the manner following: Said company, while engaged in the business of buying milk, cream, and butter fat for manufacture and sale and while maintaining regularly-established stations for purchases at Madelia, Mountain Lake, Bingham Lake, and other villages for shipment to Sioux City, Iowa, there to be manufactured and sold, did wrongfully, unlawfully, and unfairly discriminate between said localities by paying a higher price for butter fat at some stations than at others, after due allowance for transportation costs. And, more particularly, on June 11, 1923, the company purchased cream at Madelia for 38 cents per pound, and on the same day purchased cream of like quality at Mountain Lake and Bingham Lake for 35 cents per pound, all being intended for transportation to Sioux City, Iowa, there to be manufactured and sold. On that day the cost of transportation from Madelia to Sioux City was higher than from the other places.

Bingham Lake, Mountain Lake (in Cottonwood county), and Madelia (in Watonwan) are villages of Southern Minnesota, about 120, 130, and 160 miles, respectively, northeast of Sioux City, and are connected therewith by a single direct railroad line.

At the trial the accused company offered testimony to show:

'That during the last nine years, the price paid for butter fat in the southern half of Minnesota, at the different towns, has varied in each town; that the variation has been from one cent to eight cents; that such price is exclusive of transportation charges; that such variation is the normal condition of the market in the sale of cream and butter fat, and is the result entirely of competitive conditions; that in certain localities there are many more competitors than there are in others; that the quality of cream differs in different localities; that the equipment and efficiency of creameries in the various localities differ, and that each of these things enters into the price that is paid for the butter fat in the particular locality where the sale is made, and that this variation in price, in each town, in the southern half of Minnesota, existed on the 11th day of June, 1923; and that such variation is constant, and has existed for nine years previous to that time, and that these variations in price are due entirely to the economic conditions in each locality, and to competition.'

The trial court excluded this evidence as immaterial, and the Supreme Court approved. We may therefore treat the facts stated as though established and held to have no bearing on the question of guilt or the validity of the enactment.

Defense was made on several grounds: That the venue was improperly laid in Cottonwood county; that the statute conflicted with the federal Constitution, by denying equal protection of the laws and liberty to contract; and that it unduly interfered with interstate commerce.

The cause has been before the Supreme Court of Minnesota three times. 162 Minn. 146, 202 N. W. 714, 42 A. L. R. 548; 210 N. W. 163 (August 27, 1926); 210 N. W. 608 (October 29, 1926). Two opinions discuss the merits of the controversy; the last affirmed conviction upon the earlier ones.

Replying to the objection that venue was improperly laid in Cottonwood county, locality of the lower price, the Supreme Court said:

'The gist of the offense is the discrimination between different localities by paying different prices in different localities after making due allowance for the cost of transportation from the point of purchase to the point of sale or manufacture. The statute chooses to define the offense by referring to a higher price at one point than at another. It might define it by referring to the payment of a lower price at one point than another. The offending fact is that the same. * * * The offending fact is that there are sales at different prices and thereby discrimination.'

It next held that the statute did not deny equal protection to those engaged in buying cream for manufacture or sale, since they properly might be treated as a distinct class and subjected to peculiar regulations.

Concerning the claim that the statute undertakes to deprive plaintiff in error or property and liberty of contract without due process of law, contrary to the Fourteenth Amendment, the court said:

'There have developed in the state a large number of so-called centralized creameries, which buy in different localities. We take it that the defendant is one. In addition, there are co-operative creameries and independent creameries, not usually maintaining other buying stations though some may. There is in the law nothing to prevent them doing so. We do not understand that the buying stations are commonly localized plants. (Counsel for the state say that creamery statistics for 1923 show then operating in the state 628 co-operative creameries, 127 independent or individual ones, and 48 'centralizers.') Often the buyer represents the creamery as an adjunct of his other business. Often his compensation is through a commission. He may have a place to receive the product, or it may be delivered directly to the railroad station. A centralized creamery, supplied with ample capital and facilities, has the ability and meets the temptation to destroy competition at a buying station by overbidding, absorbing the resultant losses, if any, through the profits of its general business, and, when competition is ended, to buy on a non-competitive basis. If it does all this successfully, it has a monopoly, and may or may not treat producers justly. The statute seeks to prevent the destruction of competition by...