Naifeh v. Ronson Art Metal Works

• Decision Date: 09 December 1953
• Docket Number: Civ. No. 5669.
• Citation: 117 F. Supp. 690
• Parties: NAIFEH v. RONSON ART METAL WORKS, Inc.
• Court: U.S. District Court — Western District of Oklahoma

117 F. Supp. 690

NAIFEH v. RONSON ART METAL WORKS, Inc.

Civ. No. 5669.

United States District Court W. D. Oklahoma.

December 9, 1953.

COPYRIGHT MATERIAL OMITTED

Foster & Bowen, Oklahoma City, Okl., for plaintiff.

Rainey, Flynn, Green & Anderson, Oklahoma City, Okl., and Lorentz & Stamler, Newark, N. J., for defendant.

WALLACE, District Judge.

The plaintiff, Z. T. Naifeh, an Oklahoma citizen, doing business as Sooner Sales,¹ brings this action against the defendant, Ronson Art Metal Works, Inc., a New Jersey corporation,² and charges that the defendant discriminated against the plaintiff in violation of Title 15, U.S. C.A. § 13(a) which provides in part:

"It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality * * * where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce * * *."

and Title 15, U.S.C.A. § 13(e) which provides:³

"It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale * * * by contracting to furnish or furnishing * * * any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity * * *."

The evidence introduced by the plaintiff at the time of trial before the Court, without a jury, established:

1. In the latter part of 1949 Sooner became a distributor of Ronson accessories, in the Oklahoma City trade area; this distributorship, as such, was an informal working agreement whereby Sooner was permitted to purchase for resale Ronson accessories; the distributorship was not absolutely exclusive in character, and each order for purchase from Ronson was submitted contingent upon the approval of the Ronson Home Office in Newark, New Jersey.

2. On July 7, 1950, the Ronson salesman for the Oklahoma City area permitted Sooner to order a substantial number of Ronson lighters, as well as accessories, and the order was subsequently accepted and filled by Ronson.

3. From July 7, 1950, until January of 1952, Sooner distributed to various retailers a substantial quantity of Ronson lighters and accessories in the Oklahoma City trade area; these various retailers were located within a radius of some 75 miles of Oklahoma City.

4. On January 29, 1952, Ronson's sales agent for the Oklahoma City territory notified Sooner that Ronson would no longer permit Sooner to purchase Ronson products for resale; however, later the same day the salesman permitted Sooner to place an order with the assurance the order would be given the same consideration given previous orders.

5. The order of January 29, 1952, together with a number of orders subsequently submitted by Sooner were never accepted and filled by Ronson; however, Ronson did continue to mail to Sooner advertising materials, sales letters and sent Sooner two shipments of replacement gas tanks for distribution to retailers who previously had been furnished with a stock of Ronson lighters by Sooner; and, on one occasion (February 25, 1952) Ronson sent Sooner an order Ronson had received from a retailer in the Sooner trade area and asked Sooner to fill such order.

6. On January 29, 1952, Ronson's sales agent arranged with Consolidated Wholesale Company at Oklahoma City to act as a distributor of Ronson Products and thereafter accepted from Consolidated a number of orders for Ronson products which orders were subsequently filled.

7. On June 9, 1952, the Home Office of Ronson wrote Sooner to the effect: (a) that consistent with its general policy to reduce the number of distributors where coverage was adequate, Ronson was reducing its distribution in the Oklahoma City area, and (b) inasmuch as Ronson products were well covered with distribution by other distributors, Ronson would be "unable to ship" to Sooner any further merchandise.

At the close of the plaintiff's evidence the defendant moved for judgment upon the ground that the evidence failed to disclose a violation of the Clayton Act, as amended, the statute upon which the plaintiff relies. The Court overruled the motion and directed the defendant to proceed with its proof;⁴ whereupon the defendant rested without introducing any evidence.

The crux of the plaintiff's position is that the conduct of the parties established the plaintiff as a Ronson distributor and customer; that from January 29, 1952, until shortly after June 9, 1952, Sooner while still in fact a customer of Ronson was forced to compete with Consolidated Wholesale, another customer of Ronson, when Sooner had a depleted and non-representative stock, with popular items either short or not on hand; and, that such disadvantage was a direct result of Ronson's failure to provide Sooner with goods and services necessary to fairly compete with competitors; and, that such discrimination comes within the purview of section 13(a) which makes it unlawful to "either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality" and with subdivision (e) of section 13 which makes it unlawful "to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale * * * by contracting to furnish or furnishing * * * any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity."

There is no question but what Ronson deliberately cut out Sooner as one of its distributors, but contrary to counsel for plaintiff's persuasive argument that Ronson's conduct is legally censured by the Clayton Act, as amended, the Court has reached the conclusion that the instant case does not come within the prohibitions of these "price" and "service" discrimination provisions.

Although the Court does not necessarily commend the manner and method used by Ronson in eliminating Sooner as a wholesaler of Ronson products, Ronson's acts were not unlawful.

The pivotal point in the case at bar is whether Ronson in refusing to sell certain products, high in demand, to Sooner at a time when Ronson was selling to a Sooner competitor was guilty of a price discrimination between two purchasers resulting in giving one purchaser an unfair advantage and tending to substantially lessen competition.

To come within the confines of the statute under consideration there must be a showing of price discrimination or price advantage as between two contemporaneous purchasers of "commodities of like grade or quality." The plaintiff has failed to establish a discrimination took place in regard to two purchasers or purchases.

Although this Court is not disposed "to indulge in legalistic and unrealistic and unjustifiable hairsplitting" which results in the removal of a case from within the reasonable intent of a legislative act, the Court has an equal antipathy for judicial legislation which through unwarranted inference travels far beyond the original thought and purpose of the Congress.

The Robinson-Patman Amendment to the original Clayton Act was enacted for the express purpose of preventing a sales price discrimination between competitive purchases of commodities where the granted discount was not directly related to the reduced expense of the vendor.

As mentioned in Federal Trade Comm. v. Morton Salt Co.:⁵

"The legislative history of the Robinson-Patman Act makes it abundantly clear that Congress considered it to be an evil that a large buyer could secure a competitive advantage over a small buyer solely because of the large buyer's quantity purchasing ability. The Robinson-Patman Act was passed to deprive a large buyer of such advantages except to the extent that a lower price could be justified by reason of a seller's diminished costs due to quantity manufacture, delivery or sale, or by reason of the seller's good faith effort to meet a competitor's equally low price. * * The House Committee Report on the Robinson-Patman Act considered that the Clayton Act's proviso allowing quantity discounts so weakened § 2 `as to render it inadequate, if not almost a nullity.' (H.Rep.No. 2287, 74th Cong., 2d Sess. 7.) The Committee considered the present Robinson-Patman amendment to § 2 `of great importance.' Its purpose was to limit `the use of quantity price differentials to the sphere of actual cost differences. Otherwise,' the report continued, `such differentials would become instruments of favor and privilege and weapons of competitive oppression.' (H.Rep. No. 2287, 74th Cong., 2d Sess. 9.)"

The Courts in carrying out the avowed purpose of Congress have in an unbroken line of decisions ruled that for a discrimination to lie within the pale of section 2 of the Clayton Act, as amended, there must be conclusive evidence of at least two purchases, or contracts for purchases, involving two competitors.

As observed in Bruce's Juices v. American Can Co.:⁶

"Moreover, no single sale can violate the Robinson-Patman Act. At least two transactions must take place in order to constitute a discrimination. Thus, a contract may be made today which has no legal defect under the Robinson-Patman Act. A week later, another sale may be made at a different price or at a different discount, and the latter taken into consideration with the former may establish a discrimination."

And as stated in Chicago Sugar Co. v. American Sugar Refining Co.:⁷

"* * * There must be proof that a seller has charged one purchaser a higher price for like goods than he charged one or more of the purchaser's competitors. (Citing case.)"

In defining a purchaser as referred to in this Act care must be taken to distinguish between a purchaser, and one who is merely a past purchaser or prospective purchaser.

Although the Court accepts the theory advanced by plaintiff's counsel that where two competitive purchasers are...