United States v. Safeway Stores

• Decision Date: 30 August 1943
• Docket Number: Cr. No. 7196,7197.
• Citation: 51 F. Supp. 448
• Parties: UNITED STATES v. SAFEWAY STORES, Inc., (MARYLAND), et al. SAME v. KROGER GROCERY & BAKING CO. et al.
• Court: U.S. District Court — District of Kansas

51 F. Supp. 448

UNITED STATES v. SAFEWAY STORES, Inc., (MARYLAND), et al.

SAME v. KROGER GROCERY & BAKING CO. et al.

Cr. Nos. 7196, 7197.

District Court, D. Kansas, First Division.

August 30, 1943.

COPYRIGHT MATERIAL OMITTED

George H. West, U. S. Dist. Atty., of Topeka, Kan., Tom C. Clark and William R. Watkins, Asst. Attys. Gen., and Horace L. Flurry and Earl A. Jinkinson, Sp. Assts. to Atty. Gen., for the plaintiff.

Louis R. Gates, of Kansas City, Kan., Henry N. Ess (of the firm of Watson, Ess, Croner, Barnett & Whittaker), of Kansas City, Mo., and Mitchell T. Neff, of San Francisco, Cal., for Safeway Stores.

Kroger's Case:

Thomas M. Lillard (of the firm of Lillard, Eidson, Lewis & Porter), of Topeka, Kan., and Frank E. Wood and Robert S. Marx (of the firm of Nichols, Wood, Marx & Ginter), both of Cincinnati, Ohio, for Kroger Grocery and Baking Co.

HOPKINS, District Judge.

These are anti-trust prosecutions. Separate indictments were filed against the two principal defendants, Safeway Stores, Incorporated, and Kroger Grocery & Baking Company on January 20, 1943. Each indictment charges in addition various individual defendants, officers and employees of the two companies. Demurrers were filed by the defendants, which after full consideration were sustained by the court.

The two cases have been briefed and submitted as one. The indictments are for all practical purposes the same in the two cases, and the grounds for the demurrers are the same. The demurrers are not stated in identical language, but in purpose and intent each raises the same points, and any ruling of the court in one case is equally applicable in the other.

Conspiracies to restrain and monopolize interstate trade in food and food products are sought to be charged. Each indictment is in two counts, the first count in each case charging an unlawful conspiracy to restrain, and the second count a conspiracy to monopolize in violation of the Sherman Anti-Trust Act, 15 U.S.C.A. §§ 1 and 2.

The demurrers were sustained on the grounds —

(1) The allegations of the indictment, and each count thereof, are so general, vague and indefinite, that they do not inform the defendants sufficiently of the nature and cause of the accusations against them so as to enable them properly to prepare a defense thereto; nor to enable them, in the event of a trial and judgment thereunder, to plead an acquittal or conviction in bar of any other proceeding against them based on the same matters as contained in this indictment; nor otherwise meet the requirements of the Fifth and Sixth Amendments to the Constitution of the United States.

(2) The indictment, and each count thereof, fails to allege the commission of any illegal act by the defendants within the jurisdiction of this court, and thus would deprive defendants of their right to trial in the state and district where the offense was committed, which rights are conferred by Art. 3, Sec. 2, Par. 3 of the Constitution of the United States and by the Sixth Amendment.

(3) Each count of said indictment is an attempt to charge the defendants, and each of them, with more than one offense under the laws of the United States. That count one is duplicitous in charging two or more combinations, agreements and conspiracies in the one count; and count two is duplicitous in charging that defendants formed a conspiracy to monopolize and that they have actually monopolized.

The indictment in the Safeway case contains thirty pages made up of thirty-three separately numbered paragraphs; the Kroger indictment, twenty-six pages and thirty paragraphs.

Due to the sameness of the two indictments, it will be necessary only to refer to one in making specific references, and the Safeway indictment will be considered for that purpose. The charging part of the indictment is contained in paragraphs 22 to 27 charging restraint of trade, and identical language is used in paragraphs 28 to 33 in charging monopoly violations in count two. The balance of the indictment is made up of a lengthy narrative concerning the nature, extent, organization and growth of the business conducted by the defendants.

The first paragraph states that the indictment refers to a period of time beginning January 1, 1917, thus covering a period of twenty-five years.

Paragraph 2 covers definitions. It defines in great detail what is meant by chain stores, combination stores, grocery stores, super-markets, etc. Paragraph 3, 4, 5, and 6 name the defendants, who they are, and where they live. No one of them is found in Kansas or is a resident or citizen of the state. It is alleged in each case that one of the defendants does business in this state.

Paragraphs 7 to 17 set out in much detail the general nature of the business conducted by the defendants, including its growth and development, and sets forth historical data with reference to the food industry generally.

Paragraph 19 recites that food and food products are grown, processed and purchased in various states and "shipped in interstate commerce into and through other states."

Paragraph 21 recites that defendants "by virtue of the horizontal and vertical integration" of their business "have and exercise the power to dominate and control" a substantial part of the retail food business.

It is not contended, I believe, that anything in these paragraphs charges an offense under the Sherman Act.

The so-called charging portion of the indictment (in the Safeway case) is found in paragraphs 22 to 24 inclusive. It reads:

"22. For many years prior to the return of this indictment, and continuously up to and including the day of the finding and presentation of this indictment, defendants, and other persons to the grand jurors unknown, well knowing all the facts alleged in this indictment, have wilfully and unlawfully formed and carried out, in part within the District of Kansas, First Division, a wrongful and unlawful combination and conspiracy to unduly, unreasonably and directly restrain interstate trade and commerce in food and food products, produced, distributed and sold in many states of the United States, in violation of Section 1 of the Act of Congress of July 2, 1890, entitled "An act to protect trade and commerce against unlawful restraints and monopolies" (26 Stat. 209, 15 U.S.C.A. § 1), as amended, commonly known as the Sherman Act.

"23. The aforesaid combination and conspiracy has consisted in a continuing agreement and concert of action among the defendants, the substantial terms of which have been:

"a. That the defendants acquire by merger and otherwise the business of independent retail grocers and local chains throughout the United States.

"b. That the defendants select local areas throughout the United States wherein they use their dominant advantage to injure and destroy the competition of independent grocers, meat dealers and small local food chains,

"(1) By selling at retail in those areas sufficiently lower than elsewhere, until control or the desired percentage of total retail business is obtained, using the income from other areas and from operations of the business other than retail, to offset the losses or reductions in profits incident to such price cutting,

"(2) By combining with other national food chains, operating in such selected areas, to fix, maintain and follow the prices established by defendants.

"c. That defendants systematically prevent competition in selected trade areas throughout the United States,

"(1) By combining with the independent grocers and local and national food chains operating therein to fix the retail prices and terms upon which food would be sold in such areas.

"(2) By combining with manufacturers of food and food products and others to fix and maintain the resale prices and policies in such selected areas and to aid and assist such manufacturers and others in enforcing the resale prices so fixed and established.

"d. The defendants obtain for themselves a systematic discriminatory buying preference over competitors by controlling the terms and conditions upon which manufacturers, processors, packers and other suppliers of food and food products shall sell to them and to their competitors,

"(1) By coercing suppliers to sell to other wholesalers and retailers on terms and conditions dictated by defendants,

"(2) By coercing suppliers, through threats of withdrawal of their patronage and otherwise, to secretly maintain two price structures on their products, the lower of which would be charged to the defendants and the higher to their competitors,

"(3) By requiring suppliers to give defendants secret preferential discounts and prices in connection with purchases of defendants,

"(4) By requiring suppliers secretly to give defendants protection against price increases and price declines,

"(5) By coercing suppliers to discontinue selling direct to their competitors while secretly continuing to sell direct to the defendants at lower prices,

"(6) By inducing suppliers to divert a large portion of their plants and facilities to filling defendants' orders and then threatening to withdraw their patronage unless such suppliers secretly give defendants lower prices and larger discounts on their purchases,

"(7) By bidding in fresh fruits and produce on public auctions on the secret understanding with the owner thereof that settlement shall be made on such purchases at a lower price than the price bid at the auction,

"(8) By coercing suppliers to grant preferential discounts and rebates upon various pretexts unrelated to any actual saving or service to the supplier,

"(a) By systematically exacting from suppliers large and arbitrarily fixed rebates called `advertising' and `promotional' allowances for pretended services,

"(b) By demanding discounts and allowances for so-called `floor space rentals', `store sales service,' `feature payments,' `label and container allowances,' `sign space rentals,' and `mass displays,' for pretended `services' rendered...