Standard Oil Company v. Brown

• Decision Date: 06 November 1956
• Docket Number: No. 16093.,16093.
• Citation: 238 F.2d 54
• Parties: STANDARD OIL COMPANY, Appellant, v. Robert K. BROWN, Doing Business as Bob Brown's Standard Service, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

238 F.2d 54 (1956)

STANDARD OIL COMPANY, Appellant, v. Robert K. BROWN, Doing Business as Bob Brown's Standard Service, Appellee.

No. 16093.

United States Court of Appeals Fifth Circuit.

November 6, 1956.

William K. Meadow, Griffin B. Bell, Atlanta, Ga., Spalding, Sibley, Troutman, Meadow & Smith, Atlanta, Ga., of counsel, for appellant.

John L. Westmoreland, Jr., Atlanta, Ga., for appellee.

Before TUTTLE, CAMERON and JONES, Circuit Judges.

TUTTLE, Circuit Judge.

The decision of this case depends on the question whether the proviso in Section 2(b) of the Clayton Act as amended by the Robinson-Patman Act¹ which, following a prohibition against selling at a discriminatory lower price to a purchaser, permits the seller to defend by showing that his lower price "was made in good faith to meet an equally low price of a competitor" is to be construed as if it were written "was made in good faith to meet a lawful equally low price."

The plaintiff below, a purchaser from the defendant Standard Oil Company, charged that Company with having sold gasoline products to four of his competitors at a price lower than it sold to him. This was admitted, but explained by the seller on the ground that its competitors had made offers to the four purchasers somewhat lower than Standard's prices; and that under the proviso in 2(b), supra, it had the right to meet this competitive price in good faith. The plaintiff sought triple damages. The trial court submitted the case to the jury on a charge which appellee challenged because it failed to include the requirement that the low price which appellant sought to meet must be a lawful price. The jury verdict was for the Standard Oil Company, the seller. Thereupon, appellee moved for a new trial on the ground of the alleged error in the charge, together with other grounds. The court granted the motion, expressly basing its action on this ground.² Appellee here contends that it is not clear that the trial court placed its grant of new trial on this ground alone. We reject this contention because we think it perfectly clear that the court did so.

Thereafter the case was tried again, the court charging the jury as requested by the appellee, and a verdict was returned in his favor which was trebled by the court. Appellant here contends that the court's grant of the motion for new trial was error; that it was an error of law which can be corrected only by our reversing the second judgment and reinstating the verdict of the jury on the first trial and causing judgment to be entered in its favor thereon.

Agreeing, as we do, with this view, we do not think it necessary to outline the remaining allegations of error which appellant asserts occurred during the second trial.

This Court has the power to reinstate the first verdict where the trial court has clearly based its grant of a new trial on an error of law, 28 U.S.C.A. § 2106.³ 6 Moore's Federal Practice, ¶ 59.15, p. 3904.⁴ Finn v. American Fire & Casualty Co., 5 Cir., 207 F.2d 113; Marshall's U. S. Auto Supply, Inc., v. Cashman, 10 Cir., 111 F.2d 140; Pettingill v. Fuller, 2 Cir., 107 F.2d 933.

No case is cited by the appellee in which the courts have denied to a seller the benefit of the proviso in § 2(b) because of the failure of the seller to show that his good faith making of a lower price was to meet a lawful equally low price of a competitor. The burden of his argument is that in two Supreme Court cases, Federal Trade Commission v. A. E. Staley Manufacturing Co., 324 U.S. 746, 65 S.Ct. 971, 89 L.Ed. 1338, and Standard Oil Company v. Federal Trade Commission, 340 U.S. 231, 71 S. Ct. 240, 95 L.Ed. 239, the Court used language from which it should be concluded that the word "lawful" must be impliedly inserted in the terms of § 2(b).

The first of these cases made no mention of the word "lawful." It held merely that where the seller sought to justify using an illegal basing point pricing system because its competitors did this there was ample factual basis for the Federal Trade Commission's finding that this was not a lower price "made in good faith" to meet an equally low price of a competitor.

In the Standard Oil case the word "lawful" appears for the first time, but it is used part of the time and is omitted part of the time.⁵ Its use is not discussed. From a careful reading of the opinion it seems clear that the Court did not intend to add as a requirement to the exculpatory clause that the seller must affirmatively prove that the lower price he sought to meet was one which did not, in fact, result from some violation unknown to him, of the Robinson-Patman Act; the case did not involve this issue. Rather it dealt with an appeal from an order of the Federal Trade Commission, affirmed by the Court of Appeals, 7 Cir., 173 F.2d 210, denying the benefits of § 2(b) to a seller if in fact the lower price meeting the standards of § 2(b) adversely affected competition. In reversing the judgment in favor of the Federal Trade Commission, the Court assumed that the Standard Oil Company had brought itself within the § 2(b) proviso. Contrasting the case with the earlier Staley case the Court said:

"In contrast to that factual situation, the trial examiner for the Commission in the instant case has found the necessary facts to sustain the seller\'s defense * * *, and yet the Commission refuses, as a matter of law, to give them consideration."⁶

The Supreme Court made this statement that the examiner found the necessary facts to sustain the § 2(b) defense, although there was no finding as to the lawfulness of the prices of the competitors.

As had been said already, the Supreme Court used the words "equally low prices" and "lawful equally low prices" interchangeably. In its discussion of the earlier Staley case, it is quite apparent that it approved of the construction which takes the language precisely as it was written by Congress without adding the word "lawful."

Moreover, it is quite significant that, in discussing the economic theory of the Robinson-Patman Act, the Court used a striking illustration in which it is evident that the Court did not intend to add anything to the language of the statute. The Court said:

"We need not now reconcile, in its entirety, the economic theory which underlies the Robinson-Patman Act with that of the Sherman and Clayton Acts 15 U.S.C.A. § 1 et seq.. It is enough to say that Congress did not seek by the Robinson-Patman Act either to abolish competition or so radically to curtail it that a seller would have no substantial right of self-defense against a price raid by a competitor. For example, if a large customer requests his seller to meet a temptingly lower price offered to him by one of his seller\'s competitors, the seller may well find it essential, as a matter of business survival, to meet that price rather than to lose the customer. It might be that this customer is the seller\'s only available market for the major portion of the seller\'s product, and that the loss of this customer would result in forcing a much higher unit cost and higher sales price upon the seller\'s other customers. There is nothing to show a congressional purpose, in such a situation, to compel the seller to choose only between ruinously cutting its prices to all its customers to match the price offered to one, or refusing to meet the competition and then ruinously raising its prices to its remaining customers to cover increased unit costs. There is, on the other hand, plain language and established practice which permits a seller, through § 2(b), to retain a customer by realistically meeting in good faith the price offered to that customer, without necessarily changing the seller\'s price to its other customers." (Emphasis supplied.) Standard Oil Co. v. Federal Trade Comm., 340 U.S. 231, 249, 250, 71 S.Ct. 240, 249.

There is no mention here of "lawful" price offered to the customer.

The Supreme Court returned the case to the Federal Trade Commission to make its findings as to whether the Standard Oil Company had proven itself to come within § 2(b). The Commission reviewed the matter and failed to give full effect to the Supreme Court's opinion as to the availability of § 2(b) relief, and the case was again appealed to the Court of Appeals...