Foremost Dairies, Inc. v. FTC

• Decision Date: 14 July 1965
• Docket Number: No. 20726.,20726.
• Citation: 348 F.2d 674
• Parties: FOREMOST DAIRIES, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Fifth Circuit

348 F.2d 674 (1965)

FOREMOST DAIRIES, INC., Petitioner, v. FEDERAL TRADE COMMISSION, Respondent.

No. 20726.

United States Court of Appeals Fifth Circuit.

July 14, 1965.

Milam, LeMaistre, Ramsay & Martin, by George W. Milam, Jacksonville, Fla., White & Case, by Edgar E. Barton, Macdonald Flinn, Thomas B. Leary, New York City, for petitioner.

J. Lane Northland, Atty., F. T. C., J. B. Truly, Asst. Gen. Counsel, F. T. C., James McI. Henderson, Atty., F. T. C., Washington, D. C., for respondent.

Before TUTTLE, Chief Judge, GEWIN, Circuit Judge, and McRAE, District Judge.

GEWIN, Circuit Judge.

The petitioner, Foremost Dairies, Inc., is a processor, manufacturer, distributor, and retailer of dairy products in interstate commerce. As of June 1959 it owned and operated 59 processing plants in 24 states and maintained 182 sales, receiving and distribution facilities in 29 states. On May 23, 1963, the Federal Trade Commission ordered Foremost to cease and desist from discriminating "in the price of fluid milk of like grade and quality by selling to any purchaser at net prices higher than the net prices charged any other purchaser who competes with the purchaser paying the higher price." This order, which was premised on the Commission's finding of unjustified discrimination in the wholesale prices that Foremost charged in its sales of fluid milk in the Albuquerque, New Mexico, market, is before us for review.¹ The petition presents three questions for our consideration: (1) whether the Commission properly found a "purchase in commerce" within the meaning of the Act; (2) whether the Commission's inference of a probable competitive injury was supported by substantial evidence; (3) whether the order entered by the Commission was too sweeping in light of the nature of the particular activities which it found transgressed the Act.

The advantageous prices were given by Foremost to Barber's, a retail grocery establishment which at the time of the hearing operated about eight stores in Albuquerque. The evidence indicates that, for a two-year period beginning in November 1959, Foremost granted a discount of 5% on its sales of fluid milk to Barber's stores, while it gave no similar price advantage to any of its independent grocer customers in the Albuquerque market.² The discount was originally granted when Barber stopped purchasing Foremost milk because in Barber's estimation Foremost was not "competitive." Without attempting to ascertain whether its competitors were also giving discounts or attempting to determine the amount of those discounts, Foremost granted Barber's a 5% cash rebate on its purchases of Foremost products.³ The rebates were not discontinued until November 1961, and they amounted to cash payments from Foremost to Barber's of $7627.11 between their inception in November 1959 and April 1961, an average of well over $400.00 per month. The discriminations ceased only when Foremost fortuitously discovered that all of its competing distributers in the Albuquerque area had discontinued any form of price concessions.

Our standard of review is clear. 15 U.S.C.A. § 21(c). The facts found by the Commission if supported by substantial evidence, must be accepted, and it is not our function to weigh the evidence or consider the credibility of witnesses. Furthermore, reasonable inferences drawn from the facts by the Commission are not to be disturbed. See e. g., FTC v. A. E. Staley Mfg. Co., 324 U.S. 746, 760, 65 S.Ct. 971, 89 L.Ed. 1338, 1347 (1945); FTC v. Algoma Lumber Co., 291 U.S. 67, 54 S.Ct. 315, 78 L.Ed. 655 (1934); FTC v. Pacific States Paper Trade Ass'n, 273 U.S. 52, 63, 47 S.Ct. 255, 71 L.Ed. 534, 538 (1927).

I. INTERSTATE COMMERCE

Foremost makes an initial attack on the jurisdiction of the Commission over the discounts in question, asserting that the evidence does not establish that "any of the purchases involved in such discrimination were in commerce" as required by section 2(a). It is conceded that the other operative jurisdictional prerequisite of section 2(a) — that the discriminating seller be "engaged in commerce" — is satisfied in the instant case.

When Congress enacted the Sherman Act, it intended to exercise its fullest powers under the commerce clause in proscribing all restraints of trade which "affect interstate commerce," but the Robinson-Patman Act is operative only in a more restrictive context. Nevertheless, whenever it can be demonstrated that one of the purchases involved in the discrimination was made in interstate commerce and that the person making the discrimination was engaged in commerce, there is jurisdiction to enter a cease and desist order. The underlying principles applied in defining the term "in commerce" or "stream of commerce" under all three acts (Sherman, Clayton, and Robinson-Patman) are substantially identical. "The statute Robinson-Patman applies to all forms of interstate commerce, in whatever sense the commerce in question might be considered interstate." Toulmin's Antitrust Laws (1949), V. 2, § 7.5, P. 45.

In the instant case, the record reveals that about 20% of the milk which Foremost supplied to its Albuquerque customers was produced in Colorado. Ordinarily, Foremost purchases its supply of raw milk from associations of dairymen, and it is shipped to the Foremost processing plaint in Sante Fe, New Mexico.⁴ There it is unloaded from the trucks, tested, standardized to a uniform butterfat content by the addition of other milk of a predetermined butterfat ratio, pasteurized, in some cases homogenized, and bottled. From the Santa Fe processing plant it is shipped in trucks to Foremost's Albuquerque distributing branch, where it is delivered to the customers for resale. One witness testified that a truck tank of raw milk is usually processed in less than an hour and that "in general the milk moves in and out the same day." The hearing examiner found that there was a "constant flow" of milk which originated outside of New Mexico, and that this milk remained in interstate commerce from its point of origin until delivery to Foremost's wholesale customers in Albuquerque.

We think the sales in the instant case were "in commerce" as that phrase is used in section 2(a) of the Robinson-Patman Act. It is well established that Congress may restrict uses of interstate commercial transactions which result in what it considered an undesirable effect on purely intrastate activities. Consistent with this aim of the Act in protecting against secondary-line injury, the courts have generally construed the word "purchase" without regard to its technical legal attributes, such as the point at which title passes. See Olympia Food Market, Inc. v. Sheffield Farms Co. (S.D. N.Y.) 1955 Trade Cas. 70442.⁵ Likewise, courts have often applied the so-called "stream of commerce" doctrine in section 2(a) cases. See, e. g., Standard Oil Co. v. FTC, 340 U.S. 231, 71 S.Ct. 240, 95 L.Ed. 239 (1951); Olympia Food Market, Inc. v. Sheffield Farms Co., supra, cf., Hardrives Co. v. East Coast Asphalt Corp. (5 Cir. 1964) 329 F.2d 868.

In the instant case the milk passed in a steady flow from the farms in Colorado through the Santa Fe processing plant, where it underwent a rather negligible processing operation, which did not change its character appreciably, to the shelves of retail grocery establishments in Albuquerque.⁶ Indeed, other courts of appeals have stated that, under the stream of commerce doctrine, milk produced in one state and processed and distributed in another state does not lose its interstate character because of standardization, and pasteurization. See Universal Milk Bottle Service v. United States (6 Cir. 1951) 188 F.2d 959; Pevely Dairy Co. v. United States (8 Cir. 1949) 178 F. 2d 363.⁷ Furthermore, we think the decision of the Supreme Court in Standard Oil Co. v. FTC, 340 U.S. 231, 71 S.Ct. 240, 95 L.Ed. 239 (1951) requires the conclusion that the sales in the instant case were in interstate commerce. In that case, which was also brought under section 2 (a) of the Robinson-Patman Act, gasoline produced in Kansas and refined in Indiana was shipped to Michigan, where it was stored in tanks before delivery to Standard's customers in Michigan. It was established that the demands of the Michigan territory were fairly constant. The Court, applying the stream of commerce doctrine, held that these deliveries to individual customers in Michigan constituted sales in interstate commerce, even though the gasoline was stored for some time prior to distribution to retailers.

In the case before us, the fluid milk undergoes a rather negligible processing,⁸ in general moving in a constant flow from the Colorado dairy farms to meet the fairly predictable demands of the retail grocers in Albuquerque. This processing no more interrupts the flow of commerce than the temporary storage of the gasoline in the Standard Oil case. See also Olympia Food Market, Inc. v. Sheffield Farms Co., supra, which upheld a complaint premised on section 2(a) violations on the ground that it showed that defendant was "engaged in a continuous stream of commerce in securing milk outside the State of New York for sale in the State of New York to plaintiff and to competitors." On the basis of the foregoing authorities, we conclude that Foremost's shipments of milk to its Albuquerque customers had such significant interstate incidents that they constitute purchases in commerce sufficient to furnish the FTC with a jurisdictional basis for the application of section 2(a) of the Robinson-Patman Act.

II. COMPETITIVE INJURY

Section 2(a) of the Robinson-Patman Act seeks to protect against two types of injuries which may result from the discriminatory pricing policies of an interstate seller. The probability of a general injury to competitive conditions in the market in which the seller or the purchaser sells his product will support a cease and desist order or afford an aggrieved party the basis for an action in damages....