Redmond Ready-Mix, Inc. v. Coats, READY-MI

• Decision Date: 25 July 1978
• Docket Number: INC,READY-MI,P-2510
• Parties: , 1978-2 Trade Cases P 62,290 REDMOND, an Oregon Corporation, Appellant, v. Robert L. COATS and Joyce E. Coats, husband and wife, dba Deschutes Ready Mix, Sand & Gravel Co., aka Deschutes Ready-Mix, Sand and Gravel Co., Respondents. TC 18622; SC . *
• Court: Oregon Supreme Court

Page 1340

582 P.2d 1340

283 Or. 101, 1978-2 Trade Cases P 62,290

REDMOND READY-MIX, INC., an Oregon Corporation, Appellant, v. Robert L. COATS and Joyce E. Coats, husband and wife, dba

Deschutes Ready Mix, Sand & Gravel Co., aka

Deschutes Ready-Mix, Sand and Gravel

Co., Respondents.

TC 18622; SC P-2510.

Supreme Court of Oregon, In Banc. ^*

Argued and Submitted May 2, 1978.

Decided July 25, 1978.

[283 Or. 102-A] David G. Knibb, of Schweppe, Doolittle, Krug, Tausend & Beezer, Seattle, Wash., argued the cause for appellant. With him on the briefs was Dennis C. Karnopp, of Panner, Johnson, Marceau, Karnopp & Kennedy, Bend.

James H. Clarke, of Dezendorf, Spears, Lubersky & Campbell, Portland, argued the cause for respondents. With him on the brief was Wayne Hilliard, James H. Clarke and Stanley R. Loeb, of Dezendorf, Spears, Lubersky & Campbell, Portland. TONGUE, Justice.

This is a suit under the Oregon Anti-Price Discrimination Law, ORS 646.010 et seq., between competitors in the ready-mix concrete industry in Deschutes and Jefferson Counties. Plaintiff's complaint seeks damages and an injunction based upon allegations that defendants engaged in "geographic" price discrimination in violation of ORS 646.040(1). ¹ Defendants denied liability and alleged several affirmative defenses, including the defense that defendants' prices were "made in good faith to meet the prices believed to have been charged by * * * plaintiff," as provided by ORS 646.050.

The trial court found, after a two-week trial, that although defendants sold concrete at lower prices in Redmond than in Bend, they had no "predatory intent" in doing so; that defendants were not selling below their average cost, and that plaintiff's damages, if any, were not the proximate result of defendants' conduct. The trial court also found that "the ready-mix market in the Redmond area has stabilized" and that plaintiff "has been able to hold 70% Of the market."

Plaintiff appeals and contends that the trial court erred in failing to find that defendants' "geographic" price discrimination was illegal. This being a suit in equity, we must review the record de novo.

Plaintiff, Redmond Ready-Mix, Inc., is the smaller of two companies competing for retail sales of ready-mix (pre-mixed) concrete in the Redmond and Madras areas. Defendants Robert Coats and his wife are the owners and operators of Deschutes Ready-Mix, Sand & Gravel Co. A third company, not a party to this suit, sells primarily in the Bend area and is the only other ready-mix producer in Deschutes and Jefferson Counties. The geology of Central Oregon is such that "aggregate," necessary to the production of ready-mix concrete, is available in limited quantities.

Plaintiff is a wholly-owned subsidiary of Mid-Oregon Crushing, Inc. (MOC). Plaintiff bought the assets of Mr. Thomas Stearns' ready-mix concrete business in Redmond on August 1, 1973, as an outlet for surplus aggregate developed in MOC's rock crushing business. Plaintiff purchased Stearns' operation for $90,000, paying $15,000 down. The description by the trial court of plaintiff's entry into the business (with which we agree after examination of the record) is as follows:

"You get the distinct impression that the plaintiff purchased from Stearns an outfit held together by 2x4's and baling wire. Stearns had old equipment and part-time employees. Johnnie and Purdy had the task of converting the Stearns' business into a company capable of competing with the defendant on an even footing. They had only $10,000 of initial capital and no previous ready-mix experience. They were required to buy their aggregate from Mid-Oregon Crushing. As time went along they were able to improve the plant, replace some of the rolling stock and buy one Riteway truck."

Defendants have an integrated operation including ready-mix concrete, road construction, grading, rock crushing and asphalt paving. Overhead and certain fixed costs are spread over all these operations. Seasonal variations in one operation permit multiple use of equipment and personnel in others. The description by the trial court of defendants' business (with which we also agree) is as follows:

"On the other hand, the defendant had a well established modern ready-mix plant. It had its own aggregate source. It had adequate capital and experienced personnel. The defendants' rolling stock was up-to-date, including 3 Riteway trucks. This Court does not understand it completely, but somehow the batch plant was tied to a computer. Coats told his personnel to stress service. The defendant had customer contacts of long standing. * * * "

Since 1964 defendants operated a ready-mix plant in Bend. In 1969 defendants purchased a plant in Madras and in 1974 they opened a plant in Redmond. They then ceased making deliveries to Redmond from the Bend and Madras plants, as in previous years.

Plaintiff's charge of unlawful price discrimination is based upon the allegation that defendants sold concrete in Redmond and in Jefferson County for less than the price at which they sold concrete in Bend. In support of that allegation plaintiff has submitted a table comparing "Defendants' Net Delivered Prices in Bend and Redmond," including bid sales. ² Plaintiff has also submitted a table comparing plaintiff's and defendants' "Net Delivered Prices in Redmond Area," showing that defendants' net prices in the Redmond area were less than the prices charged by plaintiff in that area, including bid sales. ³

There was some disagreement at trial as to what constitutes a "bid sale." Based upon the evidence in this case, it appears that the basic test of a bid sale, for purposes of this case, was whether the price was based on the nature of the particular job. If it was, it was considered to be a bid sale whether the sale was large or small, written or oral. Both parties "went off" their price lists on bid sales.

Plaintiff's cause of suit was predicated upon defendants' alleged discrimination in Price lists, not Bid sales, and trial proceeded on that basis. Consequently, comparison of prices which include bid sales is misleading, if not inaccurate, in considering whether there was discrimination in defendants' price lists between Redmond and Bend.

In our examination of the evidence we have also compared plaintiff's price lists with defendants' price lists in Bend and Redmond. ⁴ That evidence shows that defendants' Redmond price for 5-sack concrete was less than their Bend price at various times during the period in question. It also appears, however, that effective April 1, 1975, defendants' prices in Bend and in Redmond were the same and that effective March 8, 1976, defendants' prices in Redmond were higher than defendants' prices in Bend.

Defendants' price lists show a usual delivery charge of 30 cents per cubic yard per mile beyond the Bend city limits. Plaintiff had a "free delivery" zone extending five miles beyond the Redmond city limits. Until defendants opened their Redmond plant in July 1974 their deliveries to the Redmond area were made from their Bend or Madras plants. During that period, however, defendants did not charge for deliveries in that area for sales under the Redmond price list.

Finally, it appears from the evidence that a comparison of the total cubic yards of concrete sold by plaintiff and by defendants in the "Redmond area," including bid sales, for each year during the period 1971 to and including 1975, with plaintiff's percentage of the total sales for each of these years, was as follows:

                                                   PLAINTIFF'S
                YEAR  PLAINTIFF      DEFENDANTS  PERCENT OF TOTAL
                ----  -------------  ----------  ----------------
                1971    7,374 5      938           89%
                1972   10,757 5    1,705           87%
                1973   13,776 5    2,389           85%
                1974    9,065          3,197           74%
                1975   10,074          3,508           74%
                

It appears from the evidence that the "Redmond area," for the purposes of this comparison, was a market area extending from the Deschutes Junction (between Bend and Redmond) north to the Deschutes Jefferson County line.

The trial court found, with reference to the "Redmond area," that plaintiff had "been able to hold 70% Of the market." As previously stated, the trial court also found that defendants did not sell concrete in the Redmond area below cost. ⁶

Plaintiff contends that defendants engaged in "geographic" price discrimination in violation of ORS 646.040(1). ⁷ Defendants deny such a violation and contend that, even if there were a violation, they established their affirmative defense of "justification," as defined in ORS 646.050, by showing that their lower prices were made in good faith to meet the prices of plaintiff, as their competitor. ⁸ Because of the basis on which we decide this case it is unnecessary to reach the question of "justification."

ORS 646.010 to 646.180, the Anti-Price Discrimination Law, enacted in 1937, was modeled after the Robinson-Patman amendment, adopted in 1936, to the Clayton Act. ⁹ In particular, ORS 646.040 is comparable with § 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a) (1976). Under such circumstances federal cases interpreting the federal statutes are persuasive to us in interpreting the Oregon statute. Cf. Pac. Supply Coop. v. State Tax Comm., 224 Or. 556, 560, 356 P.2d 939 (1960); Peters v. Central Labor Council, 179 Or. 1, 7, 169 P.2d 870 (1946); U. of O. Co-oper. v. Dept. of Rev., 273 Or. 539, 544, 542 P.2d 900 (1975).

Much of the "federal law" on this subject is in a recognized state of confusion, partly as the result of conflicting decisions by the federal courts. ¹⁰ A large part of the problem arises from the difficulty in reconciling (1) the Sherman Act antitrust public policy of promoting healthy competition for the benefit of the consumer public in lower prices with (2) the public policy implicit in §§ 2(a) and 4 of the Robinson-Patman Act, prohibiting discrimination in prices and permitting...