U.S. v. Empire Gas Corp.

• Decision Date: 30 June 1976
• Docket Number: No. 75-1492,75-1492
• Citation: 537 F.2d 296
• Parties: 1976-1 Trade Cases 60,907 UNITED STATES of America, Appellant, v. EMPIRE GAS CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 296

537 F.2d 296

1976-1 Trade Cases 60,907

UNITED STATES of America, Appellant, v. EMPIRE GAS CORPORATION, Appellee.

No. 75-1492.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 12, 1976.

Decided May 28, 1976.

Rehearing and Rehearing En Banc Denied June 30, 1976.

Carl D. Lawson, Atty., Dept. of Justice, Washington, D. C., for appellant; Thomas E. Kauper, Asst. Atty. Gen. and James F. Ponsoldt, Atty., Dept. of Justice, Washington, D. C., on brief.

Earl A. Jinkinson, Chicago, Ill., Martin J. Purcell and P. John Owen, Kansas City, Mo., for appellee; Earl A. Jinkinson, Robert G. Foster, Ellen C. Newcomer and James I. Rubin, Winston & Strawn, Chicago, Ill., on brief.

Before HEANEY, ROSS, and WEBSTER, Circuit Judges.

ROSS, Circuit Judge.

This civil antitrust action against Empire Gas Corporation was brought by the United States under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. The case was tried to the court, judgment was for Empire, United States v. Empire Gas Corp., 393 F.Supp. 903 (W.D.Mo.1975), and the government now appeals. We affirm the district court.

Empire is a retailer and to a lesser extent a wholesaler of liquefied petroleum (LP). LP is a generic term for any of various gaseous fuels such as propane and butane, which are compressed into their liquid states for marketing. Retailers generally store their LP inventories at bulk plants, from which it is distributed by tank truck to consumers for heating, cooking and other uses. Because of the high cost of this method of transportation, a retailer's sales are usually limited in area to approximately a 30 mile radius around his bulk plant. Frequently LP retailers are small, local, family-run businesses.

Empire was founded in Missouri in 1963 and still maintains its home office in Wheaton. During the first 10 years of its life it greatly expanded its business in Missouri and added bulk plants in 24 other states. This expansion was largely through acquisition of 81 other LP gas retail companies with close to 400 bulk plants.

The complaint alleged several violations of the antitrust laws, ¹ but on appeal the United States has concentrated on their contentions that Empire violated section 2 of the Sherman Act by attempting to monopolize the retail sale of LP in areas surrounding Lebanon and Wheaton, Missouri, and that Empire restrained commerce in violation of section 1 by obtaining covenants not to compete from its employees and others.

I. Attempt to Monopolize.

In order to establish an "attempt to monopolize * * * any part of the trade or commerce among the several States * * * " under 15 U.S.C. § 2, the government was required to show Empire's specific intent to monopolize and a dangerous probability of success within a relevant product and geographic market. Agrashell, Inc. v. Hammons Products Co., 479 F.2d 269, 284, 286 (8th Cir.), cert. denied, 414 U.S. 1022, 1032, 94 S.Ct. 445, 461, 38 L.Ed.2d 313, 323 (1973). The district court held that the plaintiff failed to prove any element of its case.

A. Specific Intent.

Specific intent need not be proved when it is alleged and proved that monopolization has been accomplished, United States v. Griffith, 334 U.S. 100, 105, 68 S.Ct. 941, 944, 92 L.Ed. 1236, 1242 (1948), but it is an element when, as here, the charge is an attempt to monopolize. Hiland Dairy v. Kroger Co., 402 F.2d 968, 971 (8th Cir. 1968), cert. denied, 395 U.S. 961, 89 S.Ct. 2096, 23 L.Ed.2d 748 (1969); United States v. Alcoa, 148 F.2d 416, 431-432 (2d Cir. 1945).

The relevant geographic areas here are the Lebanon and Wheaton market areas; however, at oral argument the United States contended that Empire's actions in other areas could support an inference of monopolistic intent in the relevant geographic areas. With this we agree. We have stressed the importance of viewing the evidence as a whole to give the antitrust plaintiff the full benefit of his proof, rather than tightly compartmentalizing the case and wiping the slate clean after considering each piece of evidence. Sanitary Milk Producers v. Bergjans Farm Dairy, Inc., 368 F.2d 679, 691 (8th Cir. 1966). Evidence of similar acts not charged is admissible in criminal actions when it is probative of the defendant's intent to commit the crime for which he is under indictment, e. g., United States v. Calvert, 523 F.2d 895, 908 (8th Cir. 1975), and in a civil antitrust case where the burden of proof is less and there are fewer constitutional strictures, a more restrictive rule is not justified. See Kansas City Star Co. v. United States, 240 F.2d 643, 650-651 (8th Cir.), cert. denied, 354 U.S. 923, 77 S.Ct. 1381, 1 L.Ed.2d 1438 (1957).

To show specific intent plaintiff introduced evidence of market allocation agreements, acquisitions of competitors and covenants not to compete, among other things. However, the greatest part of the evidence of specific intent, and that which we find persuasive, relates to pricing practices of the defendant.

The evidence establishes a pattern followed by Empire in which it attempted to use price cuts or threats thereof to influence competitors' prices or methods of competition. Empire's Vice President of Finance from 1969 to 1972 testified that around 1970 he was present at staff meetings when the company president, Robert W. Plaster, indicated that Empire's competition should be encouraged to pass increased costs of LP supplies to the retailer on to the ultimate consumer, and sales department employees thereafter contacted Empire's competitors for this purpose.

Several of these competitors testified at trial. Exemplary of their testimony is that of W. L. Arthur, the owner of Arthur Gas and Appliances of Marshfield, Missouri. Arthur competed with Empire in the overlapping Niangua and Lebanon market areas. Mr. Rex Shaddox, one of the top officials of Empire Gas, frequently stopped in to visit with the witness or his father. During these conversations, Shaddox invariably tried to convince the Arthurs to sell their business to Empire and to set their LP prices higher. ² At the time, Arthur was selling gas in the Lebanon area at a lower price than Empire. In late 1965, during one of these discussions of price, Shaddox told the Arthurs that Empire was too large to compete with, and could put Arthur out of business. The following day Mr. Plaster, Empire's president, called and asked that Arthur raise his LP prices. Arthur testified that when he refused Plaster said that he was going to put him out of business. A few days later Empire began doing business in Arthur's home area of Niangua. Empire's route salesman solicited door to door with an offer of LP gas at one and a half or two cents less than Arthur was selling for. Arthur testified he could not make a sufficient profit at this price. The Empire salesman also told those he solicited that Arthur Gas was going out of business, according to the witness.

Arthur's testimony concerning Empire's retaliatory price cut was corroborated by Raymond E. Dore, Empire's treasurer from June, 1963, to September, 1967. He testified that Shaddox and Plaster were upset about the competition that Arthur was giving Empire in the Lebanon area and therefore they planned to retaliate by selling low priced LP in the Niangua area where Arthur was located. Dore was instructed by Mr. Plaster to form Niangua Gas Company for this purpose, and he did so.

Arthur testified that he and other companies in the Niangua area were affected by Empire's price cut. Finally an intermediary worked out an agreement between Empire and the other gas companies which apparently included a temporary hike in the retail price of LP.

In 1967 Empire acquired Arthur's supplier. Because of the problems which Arthur had experienced with Empire, Arthur and his son met with Shaddox to see if there was a way out of the supply contract that Arthur had with Empire's predecessor, the rights to which had been assigned to Empire. Arthur also offered to sell his company to Empire at this time. According to Arthur, Shaddox refused to cancel the contract or buy Arthur out, and told him that "we have you right where we want you." Thereafter Empire raised the price at which it sold LP to Arthur so that he could not retail the product at a competitive price and still make a profit. Arthur also testified that Empire limited his credit to two loads of gas. This would not have been objectionable except that Empire would not mail Arthur invoices so he could pay his bills, and on this pretense they frequently refused to sell him the propane he needed. Finally, in the spring of 1967, Arthur broke his supply contract with the defendant.

Other competitors testified to similar experiences with the defendant.

Charles O. Bridges operated a company in Adrian, Missouri, beginning in 1969. In the summer of 1970 an Empire district manager and plant manager called on him and said the price of LP gas in the area was going to be either 9.5 or 15.9. At the time Bridges was buying gas wholesale at 8.7 cents a gallon, and shortly thereafter his wholesale price rose to 9.7. When Bridges pointed out that a profit could not be made at a retail price of 9.5 cents the manager told him that Empire was large enough that some subsidiaries could carry others, and that Empire was selling at 9 or 9.5 in Springfield. Shortly thereafter Empire lowered its price. Bridges testified he came as close as he could to 9.5, but eventually set his price at 15.9 cents per gallon. Gary Jennings competed with Empire in the same area as Bridges, and was also contacted by the Empire district manager and plant manager in 1970. When he refused to raise his prices he was given the impression that Empire would cut their prices. At the time Jennings bought his gas from Empire at 8 or 9 cents. Shortly thereafter Empire dropped the price to its retail customers to 9 or 9.5 cents, according to Jennings' testimony. A few weeks later he raised his price.

Testimony was offered by ...