SOUTH END OIL COMPANY v. Texaco, Inc.

• Decision Date: 19 January 1965
• Docket Number: No. 64 C 519.,64 C 519.
• Citation: 237 F. Supp. 650
• Parties: SOUTH END OIL COMPANY, Inc., Plaintiff, v. TEXACO, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

237 F. Supp. 650

SOUTH END OIL COMPANY, Inc., Plaintiff, v. TEXACO, INC., Defendant.

No. 64 C 519.

United States District Court N. D. Illinois, E. D.

January 19, 1965.

James O. Smith, Blue Island, Ill., for plaintiff.

Frank O. Wetmore, II, Winston, Strawn, Smith & Patterson, Chicago, Ill., and Paul B. Wells, New York City, for defendant.

WILL, District Judge.

This action arises out of defendant Texaco's decision not to renew its distributorship contract with plaintiff South End Oil Company, Inc. (South End) and its refusal to sell to the plaintiff thereafter, except on the less favorable terms offered "consumer" accounts. At the time of termination, South End owed Texaco approximately $14,000, for which Texaco subsequently filed suit in the state courts and secured a judgment.

South End's complaint is based on §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2 and § 2(a) of the Clayton Act, 15 U.S.C. § 13(a). Plaintiff seeks recovery of treble damages alleging the following violations by Texaco:

(1) restricting and attempting to restrict sales by South End to certain of its customers who resold Texaco products at discount prices;

(2) controlling or attempting to control South End's prices;

(3) compelling or attempting to compel South End to dictate the retail price at which its customers resold Texaco products; and

(4) seeking a monopoly in its (Texaco's) products in the area in which South End made its sales.

Plaintiff alleges that Texaco, in pursuit of these goals, limited the quantities of oil it would sell to South End; delayed delivery of products to South End; refused to sell products to South End; and, finally, terminated the distributorship contract. In addition, South End claims that Texaco unlawfully discriminated in price between it and its competitors (a) with respect to sales made prior to the termination of the contract and (b) with respect to proposed sales after the termination.

Texaco has moved for summary judgment, basing its motion on the depositions of plaintiff's president (Eustace) and auditor (Toomire), as well as its own sworn answers to the interrogatories posed by the plaintiff.

The Court rarely is disposed to grant a motion for summary judgment where there are substantial issues of fact raised by the pleadings. The instant case is exceptional since an examination of the pleadings, the lengthy depositions and the defendant's sworn answers to interrogatories reveal uncontroverted facts which warrant and require the granting of the motion.

Having fully considered these voluminous materials and the uncontroverted facts contained therein, we find (1) that the price-discrimination charge is without any basis and (2) that the facts — viewed in the light most favorable to the plaintiff — are in no way susceptible of an interpretation which would bring Texaco's conduct within the penumbra of the antitrust laws. Specifically, we find that Texaco acted unilaterally at all times; that its actions were neither part of a pre-existing conspiracy nor directed toward the formation of an illegal conspiracy; that it was motivated wholly by South End's failure to develop as a balanced "full-line" distributor and its poor financial condition; and that there is no evidence which even suggests the possibility that Texaco was attempting to secure a monopoly or that it was engaging in conduct which might raise a question under § 2 of the Sherman Act. The facts and case law supporting these findings and conclusions are set out below.

I The Alleged Price Discrimination

Plaintiff makes two allegations of price discrimination. The first, alleging sales to competitors at lower prices during the distributorship period, is admittedly based on hearsay and the intuition of plaintiff's president. Eustace states that he "heard" that Lambie and Rasmussen (a competing Texaco distributor) was being given an additional five per cent discount. He states that a second distributor told him that he "thought" that South End could not purchase Texaco oil as cheaply as he could. Finally, Eustace relates that competitive Texaco distributors made sales to "his" accounts. Assuming that a change in consumer allegiance could only have been occasioned by a lower price, he infers that his competitors were purchasing on more advantageous terms.

Responding to this charge, Texaco has filed data culled from its sales records, showing all purchases by distributors identified by South End as its competitors, the amounts purchased and the price charged. This information is included in Texaco's answers to plaintiff's interrogatories and is sworn to be a complete and accurate résumé of the company's sales records. They show that all sales to South End and to its competitors were at identical prices.

South End rests its argument on the information which Eustace "heard" and his inferences and beliefs. It has not sought to controvert the sales data provided by Texaco, nor does it assert that it could do so upon trial, even though it has access to other sources against which the accuracy of the data might be tested. Under these circumstances, Texaco has satisfied the burden of establishing that its evidence is in fact correct and that no room for controversy exists. See 6 Moore's Federal Practice ¶ 56.15(3) and cases cited.

The second charge of price discrimination relates to Texaco's statement that any sales to South End after termination of the distributorship contract would be at twenty per cent off list, the standard discount for large scale consumers, rather than the twenty-five per cent plus five per cent discount established for Texaco full-line distributors. Plaintiff's complaint does not question the reasonableness of the differential established between distributors and non-distributors. Instead, it rests on the contention that South End, as a competitor of Texaco distributors, is automatically entitled to purchase products on the same terms accorded its competitors, the distinction between distributors and non-distributors notwithstanding. Texaco correctly points out that such preferential treatment might well violate the provisions of § 2(a) of the Clayton Act. In any case, no sales were ever made to South End at twenty per cent off list. The question of price discrimination does not arise until there are two actual sales at different prices to different purchasers. The prohibitions of § 2(a) do not extend to mere offers. "It is not enough that a prospective purchaser, the plaintiff, would have had to pay a higher price if it did buy". A. J. Goodman & Son, Inc. v. United Lacquer Mfg. Corporation, 81 F. Supp. 890, 892 (D.Mass.1949); J. T. Jones v. Metzger Dairies, Inc., 334 F.2d 919, 924 (5 Cir. 1964). Texaco is therefore entitled to summary judgment on both charges of price discrimination.

II The Refusal to Deal and Related Claims

The major portion of the instant complaint rests on the contention that Texaco delayed deliveries of motor oil and finally refused to renew the South End distributorship because South End was primarily engaged in selling motor oil to discount houses. South End takes the position that any manufacturer which delays deliveries or terminates a distributorship contract violates §§ 1 and 2 of the Sherman Act if it is motivated by a desire to maintain the price of its product, notwithstanding the fact that it acts unilaterally and does not seek an agreement, express or implied, to maintain prices.

The antitrust laws do not impose the sweeping obligation to deal reflected in the theory advanced by South End. The Sherman Act is directed toward injuries to competition occasioned by illegal agreement or the exercise of monopoly power. Acts having an adverse effect on an individual's business need not result in an injury to competition. Nor do damages, of themselves, create liability under the Sherman Act. See Ace Beer Distributors, Inc. v. Kohn, Inc., 318 F.2d 283, 287 (6 Cir. 1963).

In order to maintain a treble damage action for refusing to deal, plaintiff must show either (1) that the refusal is accompanied by unlawful conduct or agreement or (2) that the refusal is designed to create or maintain a monopoly. Absent such a showing, a manufacturer is free to "exercise his own independent discretion as to parties with whom he will deal" and "may announce in advance the circumstances under which he will refuse to sell." United States v. Colgate & Co., 250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed. 992 (1919). See also, Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 625, 73 S.Ct. 872, 97 L.Ed. 1277 (1953).

Decisions of the Supreme Court and lower federal courts have fully described the scope of "unlawful conduct or agreement". There is no doubt that a refusal to deal, brought about by agreement between competing manufacturers, or between a manufacturer and one or more distributors, violates § 1 of the Sherman Act. Klor's Inc. v. BroadwayHale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959); A. C. Becken Co. v. Gemex Corporation, 272 F.2d 1 (7 Cir. 1959). There is, however, no assertion here that Texaco acted in concert either with other manufacturers of motor oil or with other Texaco distributors who were competitive with South End and no evidence from which such agreement might be inferred. While plaintiff alleges that his action is brought under § 1 of the Sherman Act, he makes no reference to the existence of any conspiracy or agreement in his complaint. Texaco points out that Eustace, South End's president, indicated on deposition that the "conspiracy" was between employees and salesmen of Texaco. Such an "agreement", if any, is not proscribed by § 1. Nelson Radio & Supply Co., Inc. v. Motorola, Inc., 200 F.2d 911 (5 Cir. 1952) cert. den. 345 U.S. 925, 73 S.Ct. 783, 97 L.Ed. 1356 (1953).

Nor does South End contend that Texaco achieved or sought any price fixing agreement with it. Texaco salesmen never indicated a suggested re-sale price either to South End or to its...