State Wholesale Grocers v. Great Atlantic & P. Tea Co.

• Decision Date: 25 July 1957
• Docket Number: No. 56 C 418.,56 C 418.
• Citation: 154 F. Supp. 471
• Parties: STATE WHOLESALE GROCERS, a corporation; Zeigmund Wholesale Grocery Co., Inc., a corporation; Ralph C. Berg, d/b/a Berg's Food Store; Leo Bernard, d/b/a Leo's Food Mart; Bernard Bruski, d/b/a United Meat Market; Eph Goldstein, d/b/a Goldstein's Progressive Foods; Earl Larson and Warren Larson, co-partners, d/b/a Franklin Grocery and Market; Jack Levin and Harvey Berebitsky, co-partners, d/b/a Harvey's Supermart; O. V. Makela, d/b/a Makela's Food Store; John L. Maleviti's, d/b/a Fruitland Foods; Jack E. Markus, d/b/a Alliance Meat Shop; Carmen Mastri, d/b/a Cicero Lake Food Mart; Steven J. Minarik, d/b/a Norward Park I.G.A.; Henry E. Muir and Hugh A. Muir, co-partners, d/b/a Fifth Avenue Food Mart; Stanley Piekarz, d/b/a Steven's Certified Super Marts; Anthony Racz, d/b/a Save-Way Food Mart; Edw. J. Schuetz, d/b/a Schuetz's I.G.A. Super-Marts; Joseph D. Stone, d/b/a Clover Food Mart; Robert M. Wagner and Elizabeth Wagner, co-partners, d/b/a Wagner Grocery and Market; Atlas Market Company, a corporation; Dominicks Finer Foods, Inc., a corporation; Carl A. Schletz, Inc., a corporation, Plaintiffs, v. The GREAT ATLANTIC AND PACIFIC TEA COMPANY, a corporation; Woman's Day, Inc., a corporation; General Foods Corporation, a corporation; Hunt Foods, Inc., a corporation; Morton Salt Company, a corporation, Defendants.
• Court: U.S. District Court — Northern District of Illinois

154 F. Supp. 471

STATE WHOLESALE GROCERS, a corporation; Zeigmund Wholesale Grocery Co., Inc., a corporation; Ralph C. Berg, d/b/a Berg's Food Store; Leo Bernard, d/b/a Leo's Food Mart; Bernard Bruski, d/b/a United Meat Market; Eph Goldstein, d/b/a Goldstein's Progressive Foods; Earl Larson and Warren Larson, co-partners, d/b/a Franklin Grocery and Market; Jack Levin and Harvey Berebitsky, co-partners, d/b/a Harvey's Supermart; O. V. Makela, d/b/a Makela's Food Store; John L. Maleviti's, d/b/a Fruitland Foods; Jack E. Markus, d/b/a Alliance Meat Shop; Carmen Mastri, d/b/a Cicero Lake Food Mart; Steven J. Minarik, d/b/a Norward Park I.G.A.; Henry E. Muir and Hugh A. Muir, co-partners, d/b/a Fifth Avenue Food Mart; Stanley Piekarz, d/b/a Steven's Certified Super Marts; Anthony Racz, d/b/a Save-Way Food Mart; Edw. J. Schuetz, d/b/a Schuetz's I.G.A. Super-Marts; Joseph D. Stone, d/b/a Clover Food Mart; Robert M. Wagner and Elizabeth Wagner, co-partners, d/b/a Wagner Grocery and Market; Atlas Market Company, a corporation; Dominicks Finer Foods, Inc., a corporation; Carl A. Schletz, Inc., a corporation, Plaintiffs, v. The GREAT ATLANTIC AND PACIFIC TEA COMPANY, a corporation; Woman's Day, Inc., a corporation; General Foods Corporation, a corporation; Hunt Foods, Inc., a corporation; Morton Salt Company, a corporation, Defendants.

No. 56 C 418.

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

July 25, 1957.

COPYRIGHT MATERIAL OMITTED

Marks, Marks & Kaplan, Libit, Lindauer & Henry, Chicago, Ill., for plaintiffs.

Hopkins, Sutter, Owen, Mulroy & Wentz, Miller, Gorham, Wescott & Adams, McBride & Baker, Chicago, Ill., Cahill, Gordon, Reindel & Ohl, New York City, for defendants.

CAMPBELL, District Judge.

This is a private action for treble damages and injunctive relief brought under Sections 4 and 16 of the Clayton Act.¹ Plaintiffs are twenty retail and two wholesale grocers located in the Chicago Metropolitan Area who bring this action on behalf of themselves and all retail and wholesale grocers similarly situated as an alleged class suit under Rule 23(a) (3) of the Federal Rules of Civil Procedure, 28 U.S.C.A. Defendants are The Great Atlantic and Pacific Tea Company (New Jersey), Woman's Day, Inc., General Foods Corporation, Hunt Foods, Inc., and the Morton Salt Company.

The Great Atlantic and Pacific Tea Company (New Jersey), hereinafter referred to as A&P (New Jersey), is a wholly owned subsidiary of The Great Atlantic and Pacific Tea Company of America, hereinafter referred to as A&P (Maryland). A&P (New Jersey) operates the A&P retail stores in the Chicago Metropolitan Area and is one of the three A&P companies which operate retail grocery stores throughout the United States. Where distinction between these two companies is not material, they will be referred to herein, individually or collectively, as "A&P."

Woman's Day, Inc., publishes Woman's Day, a women's magazine which is issued monthly and sold to A&P operating companies, including A&P (New Jersey), for resale only through A&P stores. Woman's Day, Inc. is a wholly owned subsidiary of A&P (Maryland).

General Foods, Hunt Foods and Morton Salt are food product manufacturers whose brand name products are sold throughout the United States by practically all retail grocers, including the plaintiff retailers and A&P (New Jersey). These three food manufacturers will hereinafter be referred to collectively as the defendant suppliers.

By the Court's memorandum and order of June 21, 1956 the issue of liability, including the issue of the fact of damages, was severed for trial from the issue of the amount of damages, the issue of the amount of damages having been reserved for reference to a Master when and if the issue of liability was resolved in favor of the plaintiffs. Subsequently, through the efforts of able and experienced counsel representing all the parties to this action, the issue of liability was tried on facts agreed upon and exhibits admitted into evidence pursuant to stipulations entered into by and between the respective parties in many pre-trial conferences. The interpretation and legal effect to be accorded these facts were argued by the parties in written briefs, and the issue of liability was taken under advisement by the Court.

Plaintiffs anchor their claim upon Sections 2(d) and 2(e) of the Clayton Act as amended by the Robinson-Patman Act.², ³. Additionally, however, plaintiffs, in an attempt to hold A&P (New Jersey) liable under Section 2(f) of the Act, 15 U.S.C.A. § 13(f), assert that the practices of the defendant suppliers, which the plaintiffs claim violate Sections 2(d) and 2(e), violate Section 2(a) as well.⁴ Specifically and in capsule form, plaintiffs complain that the defendant suppliers advertise their various products in Woman's Day without making these "services" or "facilities" available to the plaintiffs on proportionally equal terms. This activity, plaintiffs argue, violates Sections 2(d) and 2(e) of the Act and, as a consequence, Section 2(a) as well.

Sections 2(d) and 2(e) of the Clayton Act as amended by the Robinson-Patman Act provide as follows:

"(d) It shall be unlawful for any person engaged in commerce to pay or contract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the processing, handling, sale or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities."

"(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."

It seems clear, upon a study of these sections, that Sections 2(d) and 2(e) are companion sections and that distinctions between them should not be drawn merely because of the differences in terminology employed in each section. These sections are companion sections to the extent that they have the same purpose and seek to eliminate the same evil; but although they have the same purpose, each section achieves the same result by proscribing different methods of attaining the common result condemned. Thus, while Section 2(d) prohibits payment by the seller for services or facilities undertaken by the buyer, Section 2(e) proscribes services or facilities furnished by the seller to the buyer. I shall first consider whether the evidence establishes that the defendants have violated Section 2(e) of the Act.

The Section 2(e) Issue

Here plaintiffs argue, in effect, that food suppliers, of whom the defendant suppliers are but three, furnish, or contribute to the furnishing of, Woman's Day magazine to A&P (New Jersey) since their payments for advertisements in Woman's Day recoup for A&P a substantial part of the annual cost necessary to produce Woman's Day. It has been stipulated that the annual cost of producing Woman's Day exceeds $9,000,000. Of that sum, less than one-quarter is recovered through the sale of copies, the remaining three-quarters being recovered from the sale of advertising space. The advertisers in Woman's Day are categorized as either "suppliers" or "non-suppliers." Supplier advertisers are manufacturers, such as the defendant suppliers, whose products are sold in A&P stores; conversely, non-supplier advertisers are manufacturers whose products are not sold in A&P stores. It has been stipulated that in 1954, 73.3 per cent of the advertising revenue, or $6,905,021, was received from supplier advertisers as against 26.7 per cent, or $2,508,822 received from non-supplier advertisers. In 1955, 65.5 per cent, or $6,073,693 was received from suppliers while 34.5 per cent, or $3,205,488 was received from non-suppliers. These figures, plaintiffs argue, conclusively show that Woman's Day magazine is "made possible" by the paid advertisements of food suppliers, such as the instant defendant suppliers. Plaintiffs reason that without the payments for the advertising of the food suppliers, Woman's Day magazine could not exist, unless this multimillion dollar cost expenditure was assumed by A&P itself. Plaintiffs conclude, therefore, that the defendant suppliers furnish, or contribute to the furnishing of, a service of facility, Woman's Day magazine, "to or for" the benefit of A&P (New Jersey).

It is, of course, true that, in a loose sense, a patron of a store, an advertiser in a magazine or newspaper, "makes" that particular business "possible." However, it seems that this is a clear case of the proverbial tail wagging the proverbial dog. Business patrons, whether the purchaser or the advertiser, are attracted by the quality of the business entity with which they place their patronage. For example, a leading department store, such as one of the several that we have in the Chicagoland area, is not made possible by the customers that patronize that store—it is made possible by such things as the quality and variety of merchandise offered for sale, pleasant shopping facilities and salespeople, liberal charge and exchange policies, eagerness to stand behind the products offered for sale at its store, and all such factors which contribute to the successful operation of any business. The store's success is made possible by the policies adopted and executed by its management. Thus, it is the store itself, through the expertise of its management, that makes the business of its customers possible,...