Ivan's Tire Service Store, Inc. v. Goodyear Tire & Rubber Co.

• Decision Date: 19 February 1976
• Docket Number: No. 43164,43164
• Court: Washington Supreme Court
• Parties: , 1976-1 Trade Cases P 60,797 IVAN'S TIRE SERVICE STORE, INC., Petitioner, v. GOODYEAR TIRE & RUBBER COMPANY, a corporation, Respondent, Harry N. Ivans, and Doris R. Ivans, husband and wife, Respondents.

Page 513

86 Wn.2d 513

546 P.2d 109, 1976-1 Trade Cases P 60,797

IVAN'S TIRE SERVICE STORE, INC., Petitioner, v. GOODYEAR TIRE & RUBBER COMPANY, a corporation, Respondent, Harry N. Ivans, and Doris R. Ivans, husband and wife, Respondents.

No. 43164.

Supreme Court of Washington, En Banc.

Feb. 19, 1976.

Leavy, Taber, Schultz, Bergdahl & Sweeney, John G. Schultz, Crane Bergdahl, Pasco, for petitioner.

MacGillivray, Jones, Clarke, Schiffner & Johnson, Paul F. Schiffner, Spokane, Bogle & Gates, Robert W. Graham, Ronald T. Schaps, Seattle, for respondents.

UTTER, Associate Justice.

An action was brought by Ivan's Tire Service Store, Inc. against the Goodyear Tire & Rubber Company for damages. Goodyear cross-claimed against Ivan's for the unpaid value of merchandise it had delivered. Ivan's action was premised on alleged violations by Goodyear of the Unfair Practices Act, RCW 19.90, and the Consumer Protection Act, RCW 19.86. A jury verdict was entered in favor of Ivan's for $223,682.09 and for Goodyear on its cross-claim for $37,782.09. Both parties appealed and the Court of Appeals in 10 Wash.App. 110, 517 P.2d 229 (1973), concluded there was insufficient evidence to justify submission to the jury of the issues relating to violations under the Unfair Practices Act, RCW 19.90. It did find there was sufficient evidence to justify submission to a jury of a possible violation of RCW 19.86.

We adopt the Court of Appeals opinion and the reasoning stated therein. There is an additional reason, in our opinion, why the trial court incorrectly instructed in the language of RCW 19.90.040 in instructions 8 and 13, as set out in the Court of Appeals opinion at pages 114--15, footnotes 1 and 2, 517 P.2d at pages 232--33. There, the court instructed in effect that a sale of tires by Goodyear to its local store at less than cost could have taken place.

RCW 19.90.040 does not support Ivan's argument inasmuch as a sale below cost is a condition precedent to the application of that statute. See Martin v. Aleinikoff, 63 Wash.2d 842, 389 P.2d 422 (1964). There is no 'sale' by Goodyear to its Richland store. The record fails to disclose any difference in fact or law between Goodyear Tire & Rubber Company and its Richland facility. Its Richland store is not a subsidiary corporation and has no separate legal existence. See Reines Distributors, Inc. v. Admiral Corp., 256 F.Supp. 581 (S.D.N.Y.1966). The question of lack of exercise of dominion and control by Goodyear over its Richland store was never an issue in this case. Cf. Brewer v. Uniroyal, Inc., 498 F.2d 973 (6th Cir. 1974). The only transactions of legal significance were, therefore, Goodyear sales to Ivan's Tire and Goodyear sales to commercial accounts and retailers in competition with Ivan's Tire. There has been no contention that these sales form the basis of any violation of RCW 19.90.

Ivan's also argues that Goodyear must sell its tires at retail with a sufficient markup to allow Ivan's as an independent dealer in the same community, to compete and pay its reasonable cost of doing business. It is contended that any lower retail pricing is a forbidden sale below cost within the meaning of RCW 19.90.020 and .040. The Court of Appeals correctly rejected this argument and noted, at page 118, 517 P.2d 229, that 'cost' referred to in RCW 19.90 is Goodyear's cost of manufacturing, not Ivan's cost of sale.

The basis of Ivan's claimed right to a discount is its function as a dealer for Goodyear. This assertion is unsupported by the language of either RCW 19.90.020 or .040, the history of the Robinson-Patman Act, or the legislative history of this state dealing with price-fixing mechanisms. The Robinson-Patman Act, 15 U.S.C. § 13 (1970), does not prohibit or mention differences in price dependent on the distributional function of the buyer. When the Washington Legislature passed our Unfair Practices Act, subsequent to the passage of the Robinson-Patman Act, it affirmed the right of a seller to grant or withhold functional discounts by expressly permitting them in RCW 19.90.020 and by restricting RCW 19.90.040 to sales below the seller's cost without provision for mandatory functional discounts.

This view is in harmony with the currently existing federal law. A legislative investigation dealing with dual distribution selling practices of manufacturers in the tire industry is reported in Dual Distribution in the Automotive Industry-1959, Hearings Before a Subcomm. of the Select Comm. on Small Business, United States Senate (June 12, 18 and 19, 1959). At that hearing the chairman of the Federal Trade Commission stated:

There is no legal requirement that a manufacturer must use an intermediary in the process of distributing to consumers goods that he produces or that if the manufacturer disposes of a part of his goods at wholesale he may not sell similar goods to the ultimate consumer in competition with his distributors or dealers, even though the manufacturer sells at lower prices than those at which the independent distributor or dealer may profitably sell.

No change in the interpretation of this law has been brought to our attention by counsel. Subsequent testimony at hearings on bills to require manufacturers to grant adequate functional discounts indicate the more extreme practice of selling to a wholesaler at the same price as sales to retailers and consumers was legal. Functional Discounts: Hearings on H.R. 3465, H.R. 4151, and H.R. 4529 Before the Antitrust Subcomm. of the House Comm. on the Judiciary, 87th Cong., 1st Sess., ser. 19, at 8 (1961).

Subsequent to the passage of RCW 19.90, the Unfair Practices Act, our legislature has not chosen to require any seller to add functional discounts to its 'cost' or to consider them in sales prices. Neither the Unfair Cigarette Sales Act, RCW 19.91 (1957), the amendments to the Unfair Practices Act, RCW 19.90 (1959), or the adoption of the Consumer Protection Act in 1961 and its amendments in 1970 incorporate provisions for mandatory functional discounts or provisions designed to guarantee any purchaser a 'reasonable' margin, including profit. The recent repeal of the voluntary Fair Trade Act, RCW 19.89 (Laws of 1975, ch. 55) indicates, if anything, an increasing hostility to price fixing mechanisms, rather than a desire to extend their application.

For these reasons, as well as those stated by the Court of Appeals, we affirm its reversal of the judgment in favor of Ivan's order that Goodyear's judgment is modified to include interest from May 20, 1970, and remand Ivan's action for a new trial.

STAFFORD, C.J., and FINLEY, BRACHTENBACH and HOROWITZ, JJ., concur.

WRIGHT, Associate Justice (dissenting).

I dissent.

Ivan's Tire Service Store, Inc. (plaintiff/petitioner herein) was incorporated early in 1965, and opened for business in Pasco. The store was not exclusively a Goodyear dealership. However, the sales of other lines never exceeded 5 to 10 percent. Sales were to commercial and wholesale accounts, and at retail.

The agreement between plaintiff and Goodyear Tire & Rubber Company (defendant/respondent herein) was signed February 4, 1965, and renewed March 26, 1970. A Goodyear redistribution agreement was signed January 3 1968. Plaintiff was the only Goodyear dealer in the Tri-Cities (Pasco-Kennewick-Richland) area with a redistribution agreement, which authorized wholesale and commercial sales. The 1968 and 1970 agreements were in force at the times relevant to this litigation.

Defendant supplied plaintiff with a rather complicated price schedule. Customers were rated by the volume of purchases. The largest accounts were rated 'AAA' and received the lowest prices. The price charged plaintiff was 10 percent below the 'AAA' price. The medium quantity purchasers were rated 'AA' and paid somewhat higher prices. The smaller wholesale and commercial accounts were rated 'A'. Another classification, 'net' accounts, comprised purchasers who were governmental, municipal and public entities. The prices to the net account customers were fixed by Goodyear, and plaintiff was allowed a 10 percent commission on such sales.

The business of plaintiff prospered in all of the years until 1970, in which year the defendant opened a company store in Richland. The gross sales for the partial year of 1965 were $95,000. The gross sales increased rapidly; in 1966 they were $123,000, in 1967 they were $154,711 in 1968 they were $283,238, and in 1969 they were $346,218. In 1970 defendant's store opened and plaintiff's sales dropped to $184,000. Thereafter, plaintiff corporation was dissolved and a successor corporation formed to sell a different brand of tires.

In 1970, while plaintiff and defendant were in competition, the defendant sold Goodyear tires to customers of plaintiff for the same price at which plaintiff could buy; that is, the 'AAA' price less 10 percent. Sales to 'AA' customers were frequently made at the 'AAA' less 10 percent price.

Defendant had full information as to plaintiff's customers; who they were and the price paid by each as well as the volume of purchases by each. Defendant's territory sales manager, Mr. Jim Sizmore, had frequently accompanied plaintiff's outside salesman when calling on customers. The district truck and farm tire sales manager for the Spokane district, Mr. Leonard Hider, also went with the salesman on many occasions to call upon large farm or truck accounts. In addition, plaintiff furnished to defendant lists of customers and copies of invoices in order to qualify for special discounts.

This action was instituted in the Superior Court and judgment upon a verdict in the sum of $223,682.09 was entered December 27, 1971. The matter proceeded through the Court of Appeals, Division Three, and was decided December 10, 1973. Ivan's Tire Service Store, Inc. v. Goodyear Tire & Rubber Co., 10 Wash.App. 110, 517 P.2d 229 (1973). The decision of the Court of Appeals became final February 20, 1974...