Russellville Canning Co. v. American Can Co.

• Decision Date: 19 December 1949
• Docket Number: Civ. No. 706.
• Citation: 87 F. Supp. 484
• Parties: RUSSELLVILLE CANNING CO. v. AMERICAN CAN CO.
• Court: U.S. District Court — Western District of Arkansas

87 F. Supp. 484

RUSSELLVILLE CANNING CO. v. AMERICAN CAN CO.

Civ. No. 706.

United States District Court W. D. Arkansas, Fort Smith Division.

December 19, 1949.

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J. M. Smallwood, Russellville, Ark., Walton Hamilton of Arnold, Fortas & Porter, Washington, D. C., for plaintiff.

Daily & Woods, Fort Smith, Ark., G. C. Hardin, Fort Smith, Ark., John F. MacLane, Charles J. Colgan, Cyrus R. Vance, Burton M. Abrams, all of Simpson, Thacher & Bartlett, New York City, for defendant.

JOHN E. MILLER, District Judge.

Plaintiff, Russellville Canning Company, a partnership organized and operating under the laws of the State of Arkansas, is suing defendant, American Can Company, a corporation organized and operating under the laws of the State of New Jersey and doing business in Arkansas, for treble damages under Section 4 of the Clayton Act, 15 U.S.C.A. § 15, and bases its cause of action upon alleged violations by the defendant of the Robinson-Patman Act, 15 U.S.C.A. § 13.

Plaintiff charges discriminations in the following particulars:

(1) Freight charges resulting from freight equalization with Fort Smith, Arkansas. Collateral thereto is a claim for damages for lost profits in 1945 allegedly caused by defendant's failure to deliver cans according to the contract between plaintiff and defendant.

(2) Quantity discount payments made to certain named customers of defendant and withheld from plaintiff. This claim is properly broken down into two parts, because of defendant's change in its quantity discount schedule on January 1, 1946. Prior to that date the maximum was 5% and subsequent thereto 3%.

(3) Runway allowance of 45¢ per thousand cans made to Morgan Packing Company at its Austin, Indiana, plant and not extended to plaintiff.

Plaintiff contends that such discriminations in price resulted in substantial injury to its business and property, and that it has suffered damages not only in the amount of the additional business expense imposed by the excess charges but in the impairment of its competitive position.

At the conclusion of the plaintiff's case in chief, the defendant filed a motion to dismiss, and the court deferred action on the same until the close of the case. On November 7, 1949, the court overruled the motion, but before considering and discussing the alleged price discriminations and other issues, it seems proper to discuss generally the issues raised by the motion.

The Robinson-Patman Act, supra, provides, inter alia, as follows:

"(a) 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, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing contained in * * * shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered * * *:

"(b) Upon proof being made * * * that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima-facie case thus made by showing justification shall be upon the person charged with a violation of this section * * *: Provided, however, That nothing contained in * * * shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor. * * *

"(e) 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, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms."

Title 15 U.S.C.A. § 15 provides that "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor * * *, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee."

Thus, the plaintiff must show a discrimination in price, the effect of which may be substantially to lessen competition or tend to create a monopoly, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them.

The Congress, in amending the Clayton Act by the Robinson-Patman Act, gave emphasis to the protection of small business, recognizing that the Clayton Act had been too restrictive in requiring a showing of general injury to competition, and by the enactment of the Robinson-Patman Act, intended to allow a finding of injury to competition by a showing of "injury to the competitor victimized by the discrimination." Federal Trade Commission v. Morton Salt Co., 334 U.S. 37, 49, 68 S.Ct. 822, 830, 92 L.Ed. 1196, 1 A.L.R.2d 260, and footnote 18 for statement of Senate Judiciary Committee.

The language of the statute requires only that the effect of the price discriminations "may be substantially to lessen competition * * * or to injure, destroy, or prevent competition * * *." (Emphasis added.) As stated in Corn Products Refining Co. v. Federal Trade Commission, 324 U.S. 726, 738, 65 S.Ct. 961, 967, 89 L. Ed. 1320: "It is to be observed that section 2(a) does not require a finding that the discriminations in price have in fact had an adverse affect on competition. The statute is designed to reach such discriminations `in their incipiency,' before the harm to competition is effected. It is enough that they `may' have the prescribed effect."

And, in Federal Trade Commission v. Morton Salt Co., supra: "The statute requires no more than that the effect of the prohibited price discriminations `may be substantially to lessen competition * * * or to injure, destroy, or prevent competition.' After a careful consideration of this provision of the Robinson-Patman Act, we have said that `the statute does not require that the discriminations must in fact have harmed competition, but only that there is a reasonable possibility that they "may have such an effect."'" It is noted that in the latter case Mr. Justice Jackson takes issue with the language "reasonable possibility" and would require "reasonable probability", but this distinction is immaterial in the instant case.

It would appear, therefore, that as a practical matter the requisite of adverse effect on competition will follow as a matter of course when it is shown that a seller has charged one purchaser a higher price for like goods than he has charged one or more of the purchaser's competitors. Certainly, this has been the result in the Federal Trade Commission cases, as readily appears from the following statements of the court in the Morton Salt case, supra. At page 46 of 334 U.S., at page 828, of 68 S.Ct., 92 L.Ed. 1196, 1 A.L.R.2d 260, the court stated: "Here the Commission found what would appear to be obvious, that the competitive opportunities of certain merchants were injured when they had to pay respondent substantially more for their goods than their competitors had to pay."

And, 334 U.S. at page 50, 68 S.Ct. at page 830, the following statement appears: "It would greatly handicap effective enforcement of the Act to require testimony to show that which we believe to be self-evident, namely, that there is a `reasonable possibility' that competition may be adversely affected by a practice under which manufacturers and producers sell their goods to some customers substantially cheaper than they sell like goods to the competitors of these customers."

When the plaintiff makes this showing, price differential with an adverse effect on competition, it has made out a prima facie case of unlawful discrimination. Under a proviso of Section 2(a), the defendant may justify price discriminations by showing that the differentials make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from differing methods or quantities in which such commodities are to such purchasers sold or delivered. Under the general principles of statutory construction, approved in Federal Trade Commission v. Morton Salt Co., supra, 334 U.S. at page 44, 68 S.Ct. 822, and under the specific terms of the Act, Sec. 2(b), 15 U.S.C.A. § 13(b), the burden is upon the defendant to establish the claimed justifications. It should be noted that a proviso in Sec. 2(b) permits a seller to rebut a prima facie case by showing that the discriminations were made in good faith to meet an equally low price of a competitor. Apparently such a showing is not an absolute defense, but is a matter of evidence raising a question of fact as to whether the competition justified the discrimination, and emphasis is placed on individual competitive situations, rather than upon a general system of competition. Federal Trade Commission v. A. E. Staley Mfg. Co., 324 U.S. 746, 752, 753, 65 S.Ct. 971, 89 L.Ed. 1338; Standard Oil Co. v. Federal Trade Commission, 7 Cir., 173 F.2d 210, 215, 216. However, as the court understands defendant's contentions, it is not attempting to justify any price differentials by urging that lower prices were made in order to meet a competitor's low price, and the...