Indiana Grocery Co. v. Super Valu Stores, Inc.
| Decision Date | 26 February 1988 |
| Docket Number | No. IP 85-176-C.,IP 85-176-C. |
| Citation | 684 F. Supp. 561 |
| Parties | INDIANA GROCERY CO., INC., and Preston-Safeway, Inc., Plaintiffs, v. SUPER VALU STORES, INC., d/b/a Cub Foods, Markkay of Indiana, Inc., d/b/a Cub Foods, and the Kroger Company, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
COPYRIGHT MATERIAL OMITTED
Robert P. Johnstone, Barnes & Thornburg, Indianapolis, Ind., for Indiana Grocery Co., Inc.
David M. Mattingly, Ice Miller Donadio & Ryan, John C. Stark, Stark Doninger Mernitz & Smith, Indianapolis, Ind., for Preston-Safeway, Inc.
Samuel A. Fuller, Lewis Kappes Fuller & Eads, Indianapolis, Ind., Mark J. Spooner, Arnold & Porter, Washington, D.C., for The Kroger Co.
Judith Kirtland, Lewis Bowman St. Clair & Wagner, Indianapolis, Ind., James E. Wesner, Ginsburg Feldman & Bress, Washington, D.C., for Super Valu Stores.
Joe C. Emerson, Baker & Daniels, Indianapolis, Ind., N. Reed Silliman, Baker & Daniels & Shoaff, Fort Wayne, Ind., for Markkay of Indiana.
Plaintiff Indiana Grocery filed its complaint against defendants Super Valu Stores, Inc., d/b/a Cub Foods, Markkay of Indiana, Inc., d/b/a Cub Foods, and The Kroger Company on February 4, 1985. Plaintiffs, Indiana Grocery, Inc., and Preston-Safeway, Inc., filed an amended seven count complaint against the same defendants on January 30, 1986. This cause is before the Court on a motion for summary judgment filed by Kroger addressed to Counts I, II and III, and on motions for summary judgment by Super Valu and Markkay addressed to Counts II through VII. Also pending before the Court are a motion to dismiss filed by Kroger on Counts II and III, and motions to dismiss filed by Super Valu and Markkay on Counts II, III, VI, and VII. The motions to dismiss will not be discussed since the Court's disposition of the motions for summary judgment will render these motions to dismiss moot.
Paragraph I of plaintiffs' complaint alleges that both Kroger and Super Valu attempted to create a monopoly in the Indianapolis, Indiana, retail grocery market in violation of § 2 of the Sherman Antitrust Act found at 15 U.S.C. § 1 et. seq. The plaintiffs having dismissed its § 2 claim against Super Valu now proceed in Paragraph I only as against Kroger. The Court will set out its findings of fact and then proceed to deal with issues paragraph by paragraph of the complaint.
1. During the period at issue in this litigation, Kroger faced competition in the Indianapolis area from a large corporation (Super Valu Stores, Inc.), which had both the intent and the resources to remain in Indianapolis as a significant competitor.
2. Given Super Valu's size and resources, Kroger could not reasonably have expected that it would be able to drive the Cub stores out of the Indianapolis area.
3. Kroger thought it could force Super Valu to "re-think" its plans in Indianapolis and elsewhere through its aggressive response to Cub Foods' entry into Indianapolis. Kroger hoped that Super Valu would introduce subsequent Cub stores in Indianapolis on a smaller, less aggressive scale. More recently, Kroger planned to "co-exist" with Cub at "acceptable profit levels".
4. During the period at issue in this litigation, Kroger did not have the power to control the supply of groceries to consumers in the Indianapolis Metropolitan Statistical Area ("MSA") or in any part thereof.
5. During the period at issue in this litigation, Kroger did not have the power, in the Indianapolis MSA or any of the alleged "submarkets" defined by plaintiffs, to control market prices for any products typically sold in retail grocery stores.
6. During the period at issue in this litigation, there was not a dangerous probability that Kroger would acquire the power to control the supply of groceries to consumers in the Indianapolis MSA or in any part thereof.
7. During the period at issue in this litigation, there was not a dangerous probability that Kroger would acquire the power, in the Indianapolis MSA or any of the alleged "submarkets" defined by plaintiffs, to control market prices for any products typically sold in retail grocery stores.
8. At the time Super Valu entered the Indianapolis market in August 1983, Kroger operated 32 grocery stores in the Indianapolis MSA. Kroger's competitors included the following companies, who operated approximately the following numbers of stores: Marsh Supermarkets, Inc.—29 stores; Preston-Safeway, Inc.—15 stores; Indiana Grocery ("Standard", "Super Standard" and "No Frills")—29 stores; The Great Atlantic & Pacific Tea Co. ("A & P")—11 stores; O'Malia Food Markets, Inc. —6 stores; Dietel's, Inc. ("Mr. D's")—4 stores; Aldi, Inc.,—4 stores; and Seven-Eleven Supermarkets, Inc.—4 stores. There were at least 40 additional full-line grocery stores operated by others in the Indianapolis metropolitan area and numerous small markets such as convenience stores.
9. The "numerous small markets and convenience stores" are not in the relevant product market as defined by plaintiffs' experts.
10. Commencing in 1983, Super Valu opened four Cub stores in Indianapolis. The first, located on Lafayette Road on the west side of Indianapolis, began operating Labor Day weekend of 1983. The second, which was on East Washington Street on the east side of Indianapolis, opened in December 1983. The third, in Greenwood, opened in July 1984, and the fourth, located in the Castleton area on the north side of Indianapolis, opened in May 1986.
11. In the spring of 1984, plaintiff Indiana Grocery acquired six retail grocery stores from plaintiff Preston-Safeway. After that transaction, Preston-Safeway had six remaining stores.
12. In 1985, the owners of Indiana Grocery acquired all of the capital stock of Preston-Safeway. Since that time, the two corporations have been affiliated companies. Commencing in early 1986, Indiana Grocery converted all of its stores in the Indianapolis MSA to the "Preston-Safeway" name.
13. As of September 1987, Kroger had 33 stores in the Indianapolis MSA. Kroger's multi-store competitors include the following companies, who operate approximately the following numbers of stores: Marsh—30; Indiana Grocery/Preston-Safeway—24; Cub—4; O'Malia—9; Mr. D's—5; Aldi—5; Seven-Eleven—4. There are approximately 38 additional full-line grocery stores operated by others in the Indianapolis area, as well as numerous smaller retailers such as convenience stores.
14. The entry of Cub stores into Indianapolis in 1983 engendered intense price competition among retail grocery firms. Retail price levels were reduced from the levels that had previously existed in the market.
15. After the entry of the Cub stores, retail price levels gradually increased somewhat from the lowest levels that prevailed in the months immediately after the entry of those stores. Nevertheless, retail price levels have remained lower than they were before Cub's entry.
16. The pricing of Kroger complained of by plaintiff has ended.
17. Kroger's retail prices were never at a level at which the company's revenues in the Indianapolis MSA as a whole failed to cover its variable costs in the MSA.
18. In the alleged north "submarket" that plaintiffs have defined, Kroger's revenues never fell below its variable costs.
19. According to plaintiffs' expert, Kroger's revenues exceeded its variable costs in the alleged south, east and west "submarkets" during all accounting periods except for the following: south—2 periods; east—3 periods; west—5 periods.
20. Super Valu is a public company which operates primarily as a wholesale grocer.
21. Super Valu also owns and operates a limited number of retail grocery stores in various parts of the United States.
22. One of Super Valu's retail operations is the Cub Foods division.
23. Super Valu acquired Cub Foods from the Hooley family in 1980.
24. Super Valu has subsequently expanded operations of corporately-owned and franchised Cub Foods stores into other states.
25. Markkay was formed in 1983.
26. Markkay owns and operates a Cub Foods franchise in Indianapolis.
27. Markkay's principals are George McKay and Donald Murphy, both of whom are retired former executives of Super Valu.
28. Markkay's store, which is located across the street from Lafayette Square Shopping Center, was opened on August 31, 1983.
29. A corporately-owned Cub Foods store, located at the Eastgate Shopping Center, was opened in December 1983.
30. A corporately-owned Cub Foods store, located in the Greenwood area, was opened in July 1984.
31. A franchise Cub Foods store, located in the Castleton area, was opened in May 1985.
32. Under the Cub Foods franchise program, a franchisee acquires from Super Valu the right to use the "Cub Foods" name.
33. Under the Cub Foods franchise program, a franchisee is provided a site screening and development service, a preopening training program for certain of the franchisee's employees and subsequent access to management advice and other forms of technical assistance.
34. All Cub Foods franchisees execute an Affiliates Agreement, which establishes the basic terms of the franchise.
35. All Cub Foods franchisees also enter into a Policy Agreement, which outlines the basic features of the Cub Foods' marketing concept.
36. Franchisees may also enter into an Umbrella Agreement.
37. Under the Umbrella Agreement, Super Valu provides additional supervisory and marketing services, the right to participate with other area Cub Foods stores in a joint advertising program, assistance in coordinating the franchisee's scanner pricing program, and advice concerning the optimum levels at which the more than 10,000 items in a Cub Foods store should be priced.
38. The Umbrella Agreement expressly states that the pricing service to be provided by Super Valu will be to recommend prices.
39. Markkay entered into an Umbrella Agreement with Super Valu.
40. The Cub Foods price lists are stored in computer programs...
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