United States v. Ward Baking Company

• Decision Date: 21 June 1965
• Docket Number: Civ. A. No. 31666.
• Citation: 243 F. Supp. 713
• Parties: UNITED STATES of America v. WARD BAKING COMPANY et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

243 F. Supp. 713

UNITED STATES of America v. WARD BAKING COMPANY et al.

Civ. A. No. 31666.

United States District Court E. D. Pennsylvania.

June 21, 1965.

Walter L. Devaney, Antitrust Div., Carl J. Melone, Antitrust Div., U. S. Department of Justice, for plaintiff.

Charles A. Wolfe, Philadelphia, Pa., for defendant Ward.

VAN DUSEN, District Judge.

In this action, plaintiff seeks a finding that defendant Ward Baking Company¹ (hereinafter called "defendant") has engaged in a combination and conspiracy in unreasonable restraint of interstate trade and commerce in economy bread, in violation of § 1 of the Sherman Act (15 U.S.C. § 1), and an injunction perpetually enjoining defendant, its successors, assignees and transferees, as well as its officers, agents and employees, from continuing to carry out or revive the alleged combination and conspiracy or from engaging in any other such combination or conspiracy. The Complaint has been filed under § 4 of the Sherman Act (15 U.S.C. § 4). Economy bread is defined in the Complaint as that class of white loaf bread sold in the Philadelphia-Trenton area at prices lower than white loaf bread of equivalent weight and size, allegedly known as "regular brand bread" or "commercial bread." The Complaint also alleges that economy bread is known in the trade as "secondary" or "cheap" bread. The background facts are stated in part at pages 71, 72 of the November 15, 1963, Opinion in United States v. Ward Baking Company, et al., Criminal No. 21123, 224 F.Supp. 66.

The testimony revealed that in the spring and summer of 1960, the General Baking Company, Freihofer Baking Company, and the Fischer Baking Company had a secondary or cheap loaf of bread which sold for 17¢ retail in the Philadelphia market (N.T. 230-2),² but that prior to July 18, 1960, at least three brands of economy bread (Twentieth Century, New Century and Dainty Maid, being defendant's economy bread) were being sold at 15¢ per loaf retail. At this time, and until July 25, 1960, Unity Bread (sold by Frankford-Quaker Grocery Co., which is alleged by plaintiff to be an active co-conspirator in the alleged conspiracy to fix the price of economy bread) was sold for a retail price of 17¢ (P-20, Exhibit A-1).

In July 1960, the Schulz Baking Company, which produced and sold Twentieth Century bread through a subsidiary, was under contract to produce for Frankford-Quaker Grocery Company Unity bread at a price per loaf (see P-11) which prevented it from making a profit, in view of increased material and labor costs which were affecting all the bakeries in the spring and summer of 1960 (N.T. 227). The Schulz Baking Company could not secure the consent of Frankford-Quaker Grocery Company to the increase of this price unless two factual situations prevailed, as follows:

1. There were increased costs of labor and increased costs in materials.

2. Three of the four major grocery chains in Philadelphia had increased their price of bread (N.T. 311).

Although the Schulz Company was in a position to demonstrate point #1 during the spring of 1960, it was not until early July that it could show that three of the above-mentioned four grocery chains had increased their price of bread. By mid-July, A & P, Acme and Penn Fruit had all gone up in the price of bread to two loaves for 37¢ (N.T. 311-4). Food Fair was selling its bread at the retail price of two for 35¢ (N.T. 313) and increased that price to two for 37¢ on July 19, 1960 (N.T. 316). Although the two pre-requisites to the securing by the Schulz Baking Company of an increased price from Frankford-Quaker Grocery Company had been shown by July 15, 1960, the Schulz Company still had to secure the consent of the Frankford-Quaker Company to the increase in price and, in order to secure this consent, it represented to the Frankford-Quaker Company that "the independents were going up in price" (N.T. 317). By the "independents," they included Ward Baking Company. On July 15, 1960, Schulz had secured the agreement of at least one manufacturer (Rossi) of bread which sold its product to an independent distributor that this manufacturer would increase its price as of approximately the end of July to the independent distributor, so that the independent distributor would be required to raise its retail price to 17¢ per loaf. On or sometime after July 15, 1960, the Schulz Company secured similar consent of another manufacturer (Fleischmann) which supplied bread to the same independent distributor (New Century). The Schulz Company approached other bakers, including defendant, during the period after July 15, 1960, in an effort to secure the increase in the price of economy bread in the Philadelphia market during July 1960 and thereafter. The evidence makes clear that the Schulz Baking Company was the dominant company in forming the conspiracy and in trying to secure other companies to join the conspiracy to raise the price of economy bread in the Philadelphia market, particularly because of its interest in securing a price rise for the bread which it was under contract to supply to the Frankford-Quaker Grocery Co. with the Unity label. The record makes clear that on or before July 18, 1960, the Schulz Baking Company ordered 17¢ end labels from its supplier so that these end labels would be available for other distributors, as well as itself, in the sale of economy bread at the 17¢ price (see P-18). On July 18, 1960, defendant increased its price of Dainty Maid bread to 17¢ per loaf retail. On or about August 1, 1960, the price of Twentieth Century bread was increased to 17¢ per loaf retail, but this retail price was decreased again to 15¢ per loaf within approximately 24 hours.

The only evidence, independent of declarations of alleged co-conspirators, connecting the defendant with the conspiracy is the following testimony of Charles L. Schulz, Jr. (secretary of Schulz Baking Company and manager of its Twentieth Century distributorship):

A. Sometime between April 1960 and June 1960, he was talking to a sales supervisor of the Ward Baking Company (Mr. Ryan) at the Philadelphia Navy Yard at the time of a bid opening. Mr. Ryan said "they were wondering when we could get the price of bread up in the City of Philadelphia" (N.T. 128). Mr. Ryan was referring to the 15¢ loaf (N.T. 130). Mr. Schulz said "we are also interested in getting a higher price for our bread" (N.T. 129).

B. A week or two after the above conversation at the Navy Yard, Mr. Ryan introduced Mr. Schulz to Mr. Doyle, the Philadelphia manager of the defendant, during a phone conversation. Mr. Doyle said "that Ward Baking Company was interested in raising the price of bread," he was wondering how Schulz felt about it, and Ward had a definite date in mind when they wanted to go up in price.³ Mr. Doyle told Mr. Schulz the date on which Ward would raise the price and that date was within a month of the time of the phone conversation. Ward raised the price of its economy bread on the date Doyle said it would be raised (N.T. 155).

C. Within a week of this first phone conversation, there was a second phone conversation between Doyle and Schulz during which New Century bread was discussed and Schulz told Doyle "we felt they all wanted a price rise" (N.T. 140). Rossi and Fleischmann, the manufacturers of bread for New Century, were mentioned in this conversation. Mr. Schulz testified that (N.T. 143): "He (Doyle) wanted to know what we could do with our other competitors, as far as getting the price of bread up in that market." Mr. Schulz told Doyle "I would see what we could do about it" (N.T. 144).

The balance of the testimony of Mr. Schulz concerned phone conversations he had had with either Mr. Ryan or Mr. Doyle.⁴ Since Mr. Ryan was clearly not an employee with sufficient authority to make defendant liable for any conspiracy he aided, abetted or joined,⁵ even if Mr. Schulz's testimony is accepted, it is not necessary to recite the testimony concerning these conversations.

Mr. Doyle denied the conversations were as described under B and C above (pp. 36-37 of Document 47), but testified that he received a phone call from Mr. Schulz in December 1960 during which Mr. Schulz said "they were going up in price the following Monday and he wanted to know what we were going to do" (pp. 37-38 of Document 47). Doyle replied that he "would pass on the information to my boss, Mr. Pankenier" (p. 38 of Document 47).⁶

Plaintiff has not sustained its burden of proof (see Burch v. Reading Co., 240 F.2d 574 (3rd Cir. 1957), cert. den. 353 U.S. 965, 77 S.Ct. 1049, 1 L.Ed. 2d 914 (1957) on this record in the light of the applicable legal principles for these reasons, among others:

I. The evidence is most consistent with (or, at the least, equally consistent with) a finding that defendant raised its price due to economic factors affecting its sale of Dainty Maid bread⁷ and reduced its price in late August 1960 due to a decrease in the sale of Dainty Maid, as well as of Ward's main line item (Tip Top Bread), resulting from the unwillingness of several retailers to carry defendant's products unless defendant was offering an economy loaf at 15¢ retail which would compete with other such bread in the Philadelphia area.⁸ No violation of the antitrust laws is involved in exchanging information on prices which have already been independently fixed and are about to become effective. See Pevely Dairy Co. v. United States, 178 F.2d 363, 369 (8th Cir. 1949), cert. den. 339 U.S. 942, 70 S.Ct. 794, 94 L.Ed. 1358 (1950), cited with approval in Continental Baking Company v. United States, 281 F.2d 137, 145 (6th Cir. 1960). In the Pevely Dairy Co. case, supra, 178 F.2d at pages 369-370, the court used this language:

"There was evidence that prior to October 1, 1942, Mr. Wasser, an employee of the Pevely Dairy Company, and Mr. Gee, an officer of the St. Louis Dairy Company, both having to do with sales, exchanged information as to prices which had already been fixed

...