# Petition — FLM Collision Parts, Inc. v. Ford Motor Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_1092%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1977 - **Citation:** 429 U.S. 1097 ## Text = ; Supreme Court, U. S, « KF] iF D In The DEC 29 1976 Supreme Court of the United Brates” ~ October Term, 1976 No. 76-9204 FLM COLLISION PARTS, INC., Petitioner, -against- FORD MOTOR COMPANY and FORD MARKETING CORPORATION, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT JULIEN & SCHLESINGER, P.C. A.torneys for Petitioner and Cross-Appellant 2 Lafayette Street New York, New York 10007 (212) 962-8020 ALFRED S. JULIEN STUART A. SCHLESINGER DAVID JAROSLAWICZ DAVID L. WASSER Of Counsel (9592) LUTZ APPELLATE PRINTERS, INC. Law and Financial Printing South River, N.J. New York, N.Y. Philadelphia, Pa. Washington, D.C. (201) 257-6850 (212) 563-2121 (215) 563-5587 (201) 783-7288 INDEX Page Preliminary Statement ........... > os Opinions Below ..... eotoevccccesces 2 PURSSGLSECAGR coccccecccssccccoeses 2 Questions Presented ........... o° 3 Statutes and Regulations BRVGLVOE ccccccececesececeesese 6 Statement of the Case .......eeee 9 Reasons for Granting the Writ... 19 l. The Court of Appeals Decision Makes Section 2(a) of the Robinson- Patman Act a Nullity ..... 19 The Second Circuit's Finding that Ford's Wholesale Incen- tive Plan Does Not Violate Section 1 of the Sherman Act and the Doctrine Set Out in United States v. Arnold, Schwinn & Co. is Directly Contrary to the Holdings of the Fifth and Eighth a ae ee 35 Ee a 45 APPENDIX Court of Appeals Opinion re Rehearing ........ TTT CCT CT a-l Court of Appeals Opinion re Rehearing En Banc ...... oeeces Court of Appeals Opinion ........ Opinion by Thomas P. Griesa, D.J. e*eeseeernre#esesseeteeneteeeeneteeetee#es # @# Supplemental Opinion by Thomas DP. GRESGRse Dede cocccsceeseoces ii Table of Citations Albrecht v. Herald Company, 390 U.S. 145 (1968) ...cccccccces . Bird & Son, Inc., 25 F.T.C. Den Cher) 46006 o48 6006060666660 66 F.T.C. v. Anheuser-Busch, Inc., 263 B.8. SSO CESS) cocecoescececes F.T.C. v. Borden Co., 383 U.S. BRP CRESS) cascoeteoessocececeseeess F.T.C. v. Cement Institute, 235 G8. Gee CAs ceccoecveseoos F.T.C. v. Fred Meyer, Inc., 390 U.S. 341 (1968) ccc cccccees Hampton v. Graff Vending Company, 478 F.2d 527 (5th Cir. 1973) ..... Janel Sales Corp. v. Lanvin Parfums, Inc., 396 F.2d 398 (2d. Cir.), cert. den., 393 U.S. 938 (1968) w.cccccccccccecees Mennen Co. v. F.T.C., 288 F. 744 (2d. Cir.), cert. den., 262 U.S. Tae GED 606606664660 6660000006064 Mueller Co. v. F.T.C., 323 F.2d 44 (7th Cir. 1963), cert. den., STF ©.8. Bad CAROGP cecccesevesses Otter Tail Power Co. v. United States, 410 U.S. 366 (1973) ...... iii Table of Citations Perkins v. Standard Oil Co. of California, 395 U.S. 642 (1969) sere eeeeeeeeeeeeeeeeweeneene Reed Brothers, Inc. v. Monsanto Company, 525 F.2d 486 (8th Cir. 1975), cert. Gems De SeGGe For CRETE) ccccces Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307 (5th Cir. Dee BON 66000060040 666600% boo 6e Simpson v. Union Oil Co. of Caine, 377 GB. 13 (1964) .cccccs United States v. General Motors Corp., 384 U.S. 127 (1966) ..... United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967) ..... iv Table of Citations Page Statutes Cited: 15 U.8.C. 12 coccccesescesssseses 4, 6, 17, 18, 35, 38, 39, 40, 41, 42, 43, 44 158 U.8.C. 2 cseccesvessoeeeunnee 17 15 U.S.C. L(A) ceoccccescccseses Se Ve i7, 49, 20, 22, 23 18 0.8.C. 19 crccoseosessesesuen 16 15 U.8.C. 26 coccceecsseseeeeenn 17 Other Authorities Cited: 74 Cong. Second Sess. 3; S. Rep. No. 1502 (1966) .cccccccsccceces 21 80 Cong. Rec. 9417 (1936) ...... 22 Kelly, Functional Discounts Under the Robinson-Patman Act, 40 Cal. Le. Rev. 320 Capea: sence 26 Table of Authorities Page Note: 12 N.Y.L.F. 91 (1966) ....... 24 The Report of the Attorney General's National Committee to Study the Antitrust Laws EE EEE ee 27 Rowe: Price Discrimination Under the Robinson-Patman Act (1962) .... 21, 26 Rowe: "The Evolution of the Robin- son-Patman Act: A Twenty Year Prospective", 57 Col. L. Rev. DP T~TE wOGee6eeececocoecoceceoocs 21 vi IN THE SUPREME COURT OF THE UNITED STATES October Term, 1976 FLM COLLISION PARTS, INC., ° Petitioner, -against- FORD MOTOR COMPANY and FORD MARKETING CORPORATION, Respondents. ee x Petition for Writ of Certiorari to the United States Court of Appeals for the Second Circuit The petitioner, by its attorneys, : Julien & Schlesinger, P.C., respectfully pray that a writ of certiorari issue to review the order of the United States Court of Appeals for the Second Circuit entered in this proceeding on September 30, 1976 and the order denying a rehear- ing and/or a rehearing en banc entered on November 16, 1976. Opinions Below The Court of Appeals opinion is not yet officially reported. It is found in 1976-2 Trade Cases, 4 61,103 at p. 69,998. The opinions of the district court are found at 406 F.Supp. 224 (S.D.N.Y. 1975), and a supplemental opinion on damages is found at 41ll F.Supp. 627 (S.D.N.Y. 1976). Jurisdiction The Court of Appeals order was entered on September 30, 1976 and the order denying a rehearing and/or rehear- ing en banc was entered on November 16, 1976. This petition for certiorari was filed within ninety days of that date. This Court's jurisdiction is being invoked pursuant to 28 U.S.C. 1254(1). o2e Questions Presented 1. Does the Robinson-Patman Act, 15 U.S.C. 13(a), permit a manufacturer to discriminate in price between different purchasers of the exact same auto part which discrimination is based solely upon whom its purchaser resells those auto parts to? 2. Can a manufacturer of auto parts obviate the Robinson-Patman Act by selling the same goods to different purchasers at different prices based solely upon whom its purchasers resell those goods to by claiming that there is no discrimination so long as all of its direct purchasers are charged the same price depending upon whom the goods are resdéld to? 3. Does a manufacturer imposing a radical price difference upon his dis- tributors depending upon whom they resell its products to in essence limit the customers to whom its distributors may freely sell the manufacturer's products in violation of Section 1 of the Sherman Act and particularly the doctrine enunciated in United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967)? 4. In order to constitute a contract in restraint of trade prohibited by Section 1 of the Sherman Act and by Schwinn, supra, must a contract clearly state that the distributor is prohibited from reselling to certain customers or does the fact that the distributor is pro- hibited from reselling to customers except at a highly inflated price in itself aga contain an economic restriction as to which customers the distributor may deal with as found by the Eighth and Fifth Circuits in Reed Brothers, Inc. v. Monsanto Company, 525 F.2d 486 (8th Cir. 1975), cert. den., 96 S.Ct. 787 (1976); and Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307 (5th Cir. 1976)? Statutes and Regulations Involved 15 U.S.C. 1 "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal: Provided, That nothing contained in sec- tions 1 to 7 of this title shall render illegal, contracts or agreements prescrib- ing minimum prices for the resale of a commodity which bears, or the label or container of which bears, the trademark, brand, or name of the producer or distributor of such commodity and which is in free and open competition with commodities of the same general class produced or distributed by others, when contracts or agreements of that descrip- tion are lawful as applied to intrastate transactions, under any statute, law, or public policy now or hereafter in effect in any State, Territory, or the District of Columbia in which such resale is to be made, or to, which the commodity is to be transported for such resale, and the making of such contracts or agreements shall not be an unfair method of competition under section 45 of this title: Provided further, That the preceding proviso shall not make lawful any contract or agreement, providing for the establishment or maintenance of minimum resale prices on any commodity herein involved, between manufacturers, or between producers, or between whole- salers, or between brokers, or between factors, or between retailers, or ~~ = between persons, firms or corporations in competition with each other. Every person who shall make any contract or engage in any combination or conspiracy declared by sections 1 to 7 of this title to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding one million dollars if a corporation, or, if any other person, one hundred thousand dollars or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court." 15 U.S.C. 13(a) "It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competi- tion with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing herein contained shall prevent aFe differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differ- ing methods or quantities in which such commodities are to such purchasers sold or delivered: Provided, however, That the Federal Trade Commission may, after due investigation and hearing to all interested parties, fix and establish quantity limits, and revise the same as it finds necessary, as to particular commodities or classes of commodities, where it finds that available purchasers in greater quantities are so few as to render differentials on account thereof unjustly discriminatory or promo- tive of monopoly in any line of commerce; and the foregoing shall then not be construed to permit differentials based on differences in quantities greater than those so fixed and established: And provided further, That nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade: And provided further, That nothing herein contained shall prevent price changes from time to time where in response to changing conditions affecting the market for or the marketability of the goods concerned, such as but not limited to actual or imminent deterioration of perishable goods, or obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned." @8- Statement of the Case* FLM Collision Parts, Inc. ("FLM") is a New York Corporation founded in 1965. FLM has been in the business of purchasing crash parts for Ford Motor Company ("Ford") automobiles from franchised Ford dealers at two to five percent above the franchised dealer's cost and reselling those crash parts to independent service stations and repair shops. Crash parts are those automobile parts used to replace damaged parts on automobiles usually after an automobile has been involved in a collision. *A complete statement of facts is contained in the district court's initial decision, 406 F.Supp. 224 (S.D.N.Y. 1975) (a-27). Ford crash parts are manufactured only by Ford and available only through Ford. Ford sells crash parts only to franchised Ford dealers. The franchised Ford dealers use crash parts both in their own repair work and for resale to independent service stations and repair shops. All persons who wish to obtain crash parts must necessarily obtain them through franchised Ford dealers. Crash parts differ from other Ford automobile parts such as batteries and spark plugs in that crash parts are "captive" parts available only through Ford and distributed through its fran- chised dealers while other parts are distributed by Ford through a different system involving independent distributors as well as franchised Ford dealers. -10- Once a franchised Ford dealer purchases crash parts from Ford, all title and risk of loss with respect to those crash parts passes to the franchised dealer. Some time prior to November 1, 1968, the Federal Trade Commission advised Ford that its method of distributing crash parts was an unfair method of competition and placed independent repair shops in an unfavorable competitive position. Since crash parts were only available through franchised Ford dealers who used these parts for both repairs in their own shops and at the same time acted as wholesalers of crash parts to independent repair shops, the independent repair shops were at a disadvantage in competing for repair work since they were compelled to buy crash parts from franchised Ford dealers at a price ollie naturally above that paid by the fran- chised Ford dealer for the same part used in its own repair operation. The Federal Trade Commission recommended that Ford make arrangements to sell crash parts directly to independent repair shops and wholesalers. Ford, to avoid having to sell crash parts to any one other than franchised Ford dealers, and seeking to avoid a proceeding by the Federal Trade Commission, instituted a "wholesale incentive allowance" for crash parts to be effective on or about November 1, 1968. The wholesale incen- tive allowance gave the franchised Ford dealer an additional discount (20 - 25 percent) on all crash parts which the dealer did not use in its own repair operation, but for which it acted as a wholesaler and resold to other persons. -12< From the time this wholesale allow- ance was created by Ford, the franchised Ford dealers from whom FLM would purchase crash parts would pass this allowance along to FLM and FLM continued to compete with Ford dealers in the sale of crash parts to independent repair shops. Some time prior to July l, 1971 Ford changed its wholesale incentive plan so that franchised Ford dealers would no longer receive the wholesale incentive on parts sold to FLM. The franchised dealer would only receive the wholesale incentive on sales made directly to independent repair shops. The district court found that at the time Ford made this change in its wholesale incentive plan, FLM was the sole non-franchised Ford dealer which o13= was acting as a wholesaler of crash parts (406 F.Supp. at 234), and that Ford personnel responsible for the change in the wholesale incentive policy had FLM specifically in mind as the type of successful independent wholesaler Ford was attempting to discourage (406 F.Supp. at 236). Ford's change in its wholesale incentive plan in essence made it impossible for FLM to successfully compete with franchised Ford dealers in the sale of crash parts. To use the example used by the Court of Appeals (a-12), a $10 retail part would cost a franchised Ford dealer $6, however, once the franchised Ford dealer received the wholesale incentive allowance -- 25% -- its price for that part would now be $4.50, while FLM would be paying the full $6 since there would be no whole- -14- sale incentive permitted plus the additional five percent franchised Ford dealer mark-up, for a total of $6.30. Ford claims that its wholesale incentive plan was revised in order to avoid independent wholesalers from acting as conduits between franchised Ford dealers where one franchised Ford dealer would sell crash parts to an independent wholesaler, thus receive the 25 percent wholesale incentive allowance, the independent wholesaler would then reseil the crash parts to a second and different franchised dealer who would again seek the 25 percent wholesale incentive allow- ance upon selling the same parts. Admittedly, FLM did not act as a conduit in transferring crash parts from one franchised dealer to another and Ford who had on two separate occasions -15- in 1969 and 1970 audited FLM's books found that FLM had done nothing im- proper and had obtained NO unwarranted wholesale incentive allowances. In fact, as the district court found, Ford had not experienced any difficulties with respect to the wholesale incentive allowance relating to crash parts. Ford's difficulties had been with other parts which it sold through a wholly different distribution system involving independent distributors as well as franchised dealers (406 F.Supp. at 245). FLM commenced this action in the United States District Court for the Southern District of New York pursuant to 15 U.S.C. 15. After a seven-day trial before the Court without a jury, Judge Griesa, United States District Judge, for the Sy = Southern District of New York, found that Ford had violated Section 2(a) of the Robinson-Patman Act, 15 U.S.C. 13(a) by charging franchised Ford dealers different prices, i.e., a 25 percent difference, depending upon whether or not crash parts were resold by franchised dealers to independent repair shops or to other persons, to wit, FLM. Judge Griesa dismissed FLM's claims under Sections 1 and 2 of the Sherman Act, 15 U.S.C. 1 and 2. In a supplemental opinion regarding damages, 411 F.Supp. 627 (S.D.N.Y. 1976), Judge Griesa awarded FLM $291,502 in damages, which amount was trebled and, in addition, awarded FLM a reasonable attorneys' fee in the sum of $135,000 and enjoined Ford from further violations of the Robinson-Patman Act pursuant to 15 U.S.C. 26. -l7J<- The Court of Appeals for the Second Circuit affirmed Judge Griesa's decision with respect to the dismissal of FLM's Sherman Act claims and reversed the district court's findings that Ford violated the Robinson-Patman Act. The Court of Appeals' decision is directly contrary to the clear mandate of this Court and this Court's interpre- tation of the Robinson-Patman Act in Perkins v. Standard Oil Co. of California, 395 U.S. 642 (1969); and F.T.C. v. Fred Meyer, Inc., 390 U.S. 341 (1968). Similarly, the Court of Appeals' decision affirming the dismissal of FLM's claims under Section 1 of the Sherman Act is directly contrary to this Court's decision in United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967). -18- REASONS FOR GRANTING THE WRIT Ford's position, which was accepted by the Court of Appeals ina 1. The Court of Appeals Decision Makes Section 2(a) of the Robinson-Patman Act a Nullity superficial decision and does not with- stand analysis, and which would make a Section 2(a) of the Robinson- mockery of the Robinson-Patman Act, is Patman Act provides in pertinent part: that there was no price discrimination since all franchised Ford dealers were "It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quest ty ee he * «x * where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, Or prevent competition with any person who either grants or know- ingly receives the benefit of such discrimination, or with customers ' of either of them... a.” . Robinson-Patman Act. (emphasis added) charged the same price for crash parts depending upon whom they resold to. If one looks at the history and purpose of the Robinson-Patman Act, it becomes clear that the Court of Appeals’ decision is improper and would basically make a nullity of Section 2(a) of the The purpose behind the Robinson- In our case, Ford admittedl 4 Y Patman Act was to prevent chain stores charges a franchised dealer 25 percent g P from driving the small merchant out of more for the exact same crash part if , , ; business who because of superior purchasing that crash part is resold to FLM or some- power were able to demand price conces- one other than an independent repair shop. -19- =20- sions from suppliers against which small merchants could not compete. See, Rowe: Price Discrimination Under the Robinson- Patman Act, Chapter 1 (1962); and Rowe, "The Evolution of the Robinson-Patman Act: A Twenty Year Prospective", 57 Col. L. Rev. 1059, 1062 (1957). The purpose of the Robinson-Patman Act was "for preservation of equal § opportunity to all" (S. Rep. No. 1502, 74 Cong. Second Sess. 3 (1936) ) and to make certain that everyone received the same price except to the extent that the price difference was "cost justified" -- the supplier saved packing, shipping or other expenses. Congressman Utterback in reporting to the House of Representatives on the Robinson-Patman bill stated what the Act intended: =2j- "A customer granted the benefit of a discrimination may receive it only on the basis of the difference between his methods Or guantities Of purchase and delivery and those of other customers not receiving the erential. The differential granted a particular customer must be traceable to some difference between him and other particular customers, either in the quantities purchased by them or in the methods by which they are purchased or their delivery taken." 80 Cong. Rec. 9417 (1936) (emphasis added) If Ford's position which was accepted by the Court of Appeals is permitted to stand, Section 2(a) of the Robinson-Patman Act would for all practical purposes become non-existent. A supplier that wishes to give a chain store or other favored customer a favorable price which is not cost justified would simply have to act through a wholesaler rather than sell directly to the chain store in order to @22@ avoid Section 2(a) of the Robinson- Patman Act. A supplier would simply charge its wholesalers a different price, not cost justified, depending upon whom the wholesaler resold the goods to, e.g., charging a wholesaler 50¢ for an item if the wholesaler resells that item to a chain store and a dollar for the very same item if it is resold to any- one other than the favored customer. According to the Court of Appeals decision, there would be no discrimination in price so long as all of the wholesalers were charged the same price by the Supplier, depending upon whom they resold to. If the Act is construed in the manner it has been construed by the Court of Appeals in our case, it would make a mockery of the Robinson-Patman Act and -23- "would allow price discriminators to avoid the sanctions of the Act by the simple expedient of adding an additional link to the distribution chain." Perkins v. Standard Oil Company of California, 395 U.S. 642, 647 (1969). See, also, Note: 12 N.Y.L.F. 91, 99 (1966) where the author points out that even prior to Perkins, if a supplier could insulate itself from liability by simply adding an additional link in the chain of distribution, it would make a mockery of the Robinson-Patman Act. A supplier is permitted to sell to all purchasers at the same price regardless of whether they are whole- salers or retailers. See Bird & Son, Inc., 25 F.T.C. 548 (1937). A supplier, however, is not permitted to charge different prices to its customers when prices are not cost justified and the -24- price difference is based solely upon the Supplier's arbitrary determination that its customers should be charged less if they sell to certain favored persons and more if they resell to others. An arbitrary classification of purchasers by a supplier does not permit it to charge different prices for the same goods. See Mueller Co. v. F.T.C., 323 F.2d 44, 45 (7th Cir. 1963), cert. den., 377 U.S. 923 (1964). The Court of Appeals in its decision states that the Robinson- Patman Act does not prohibit a supplier "from offering different prices to each of its purchasers, such as one price when he functions as a retailer and a lower price when he functions as a wholesaler." (a-13) and compares Ford's discriminatory whole- sale incentive plan to a standard "func- =2S- tional discount" (a-18) which is entirely without a basis in fact. As the district court pointed out in its decision, func- tional discounts are permitted by the Robinson-Patman Act. That is, Ford may charge a Ford distributor less for parts which it sells as a wholesaler than for parts which it sells as a retailer. However, what Ford is doing here is an Alice in Wonderland construction of what the functional discount is. The standard functional discount always operates so that a higher price is charged to purchasers at a level farther from the supplier in the chain of distribution, i.e., a retailer is charged more than a wholesaler. See Rowe: Price Discrimina- tion Under the Robinson-Patman Act, 173, et seq. (1962). See, also, Kelley, "Functional Discounts Under the Robinson- Patman Act", 40 Cal. L. Rev. 526 (1952); -26- and The Report of the Attorney General's National Committee to Study the Antitrust Taws (1955) in considering functional discounts stated: "The typical functional or trade discount system provides for graduated discounts to customers classified according to place in the distribution chain - ee: the seller's schedule may specify percentage reductions to whole- salers, jobbers, and retailers in diminishing amounts." The practice of permitting "functional discounts" or different prices to be charged to wholesalers than to retailers has been permitted because the charging of different prices to whclesalers and to retailers does not have an adverse effect on corpetition since wholesalers and retailers do not compete with each other. See Mennen Co. v. F.T.C., 288 F. 774, 781 (2d. Cir.), cert. den., 262 U.S. 759 (1923). @2Je In our case, a Ford distributor selling crash parts to FLM is acting as a wholesaler and not as a retailer. If anything, FLM is higher on the distribu- tive chain than the independent repair shop. Accordingly, if Ford's wholesale incentive plan were a valid functional discount and not an attempt by Ford to prevent independent dealers from dealing in crash parts, then at the very least, a franchised dealer.would be entitled to the same wholesale incentive allowance on the sale of crash parts to FLM as it receives on the sale of crash parts directly to independent .epair shops. Pord's wholesale incentive plan which charges its franchised dealers 25 percent more for sales to FLM than for sales to independent repair shops has turned upside down what is commonly known -28- as the “functional discount" which the Court of Appeals was compelled to admit provides for lower prices to those higher up on the distributive chain. Similarly, the Court of Appeals' references to the fact that Ford under- took its wholesale incentive allowance program on crash parts at the behest of the Federal Trade Commission in an attempt to somehow give the impression that the Federal Trade Commission has approved Ford's wholesale incentive allowance in its present form is mislead- ing. The Federal Trade Commission has made it clear that: "The Commission will not approve any standards whereby a wholesaler's eligibility for added discounts is contingent upon the imposition of specified restrictions upon his customers by him." 16 CFR 15.333. -29- Also incomprehensible is the Court of Appeals’ distinguishing of F.T.C. v. Anheuser-Busch, Inc., 363 U.S. 536 (1960), which has always been understood to stand for the simple proposition that: "* * * a price discrimination within the meaning of (§2(a) ) is merely a price difference." on the ground that Anheuser-Busch was a primary line territorial price discrimina- tion case. This is a distinction without a difference. That a price discrimina- tion is simply a price difference has been accepted as the standard definition of price discrimination by the various courts of appeals following Anheuser- Busch and in situations not dealing with primary line cases. See, e.g., Hampton v. Graff Vending Company, 478 F.2d 527, 532 (Sth Cir. 1973). -30- Prior to Anheuser-Busch, price discrimination had likewise been defined as a difference in price or the selling of the same kind of goods cheaper to one person than to another. See, e.g., F.T.C. v. Cement Institute, 333 U.S. 683, 721 (1948). The Court of Appeais' decision below is also the first time that any- one has attempted to cite F.T.C. v. Borden Co., 383 U.S. 637 (1966), for the proposition that a supplier may sell the same product to different purchasers for different prices. The sole question in Borden was whether or not evaporated milk of the same grade amd quality sold under the Borden label and at the same time sold under private brand labels must be construed as being of “like grade and quality” for purposes of the Robinson- Patman Act or whether service and market -3l< acceptance of the Borden label constitutes a difference in product for purposes of the Robinson-Patman Act. The Court in Borden found that if both the private label and the Borden label milk were made available to all, then there would be no price discrimina- tion since any purchaser could buy either label it desired at the same price as any other purchaser. This Court has never before been construed as having held in Borden that a supplier may charge its customers two greatly varying prices, e.g., 25 percent more for the exact same crash part, depending solely upon whom Ford's customers resold those crash parts to. The Court of Appeals in a super- ficial fashion and in no way even attempt- @32- ing to distinguish the careful analysis set forth in the district court's decision (406 F.Supp. 224), found that the Robinson- Patman Act had not been violated simply because Ford charged all of its franchised dealers the same price depending upon whom they resold crash parts to, thus totally ignoring the real basis and purpose of the Robinson-Patman Act which is that the price for which goods are sold may not be contingent upon who the purchaser is, but only upon the fact that the same price must be charged to all unless the price difference is cost justified. If this Court does not grant certiorari and reverse the decision of the Second Circuit, in essence, the law in the Second Circuit will be directly contrary to what this Court said it is in Perkins and the Robinson-Patman Act -33- will become a mockery in the Second Circuit which could be avoided by the simple expedient of adding a level to the chain of distribution and then discriminating in price between purchasers of the exact same product. If the Robinson-Patman Act is to be repealed, it is for Congress to do so, not for the Second Circuit to construe the Act ina fashion directly contrary to this Court's mandate in F.T.C. v. Fred Meyer, Inc., 390 U.S. 341 (1968), that the Act should not be construed: "in a manner which runs counter to the broad goals which Congress intended it to effectuate." 390 U.S. at 349. The Second Circuit's decision if permitted to stand not only runs counter to the broad goals which Congress set forth for the Robinson-Patman Act, but -34- turns the Robinson-Patman Act into a dealers. * * * Ford unilaterally established its prices to its dealers toothless tiger which can be evaded by oe not oa resale prices or terms. a- the simplest subterfuge of having an intermediate level of distribution. The Second Circuit's position is directly contrary to this Court's man- 2. The Second Circuit's Finding that Ford's Wholesale Incen- tive Plan Does Not Violate date in Schwinn and directly contradicts Section 1 of the Sherman Act the position taken by the Eighth Circuit and the Doctrine Set Out in United States v. Arnold, in Reed Brothers, Inc. v. Monsanto Schwinn & Co. is Directly Contrary to the Holdings Company, 525 F.2d 486 (8th Cir. 1975), of the Fifth and Eighth Circuits. cert. den., 96 S.Ct. 787 (1976), and by the Fifth Circuit in Response of Carolina, The Second Circuit in affirming Inc. v. Leasco Response, Inc 537 F.2d . . ’ ef ° the dismissal of FLM's claim under 1307 (Sth Cir. 1976). Section 1 of the Sherman Act held that Ford's wholesale incentive plan did not This Court in Schwinn stated: violate Section 1 of the Sherman Act under "Once the manufacturer has parted che doctrine of United States v. Arnold, with title and risk, he has parted with dominion over the product, and Schwinn & Co., 388 U.S. 365 (1967), because his effort thereafter to restrict territory or persons to whom the product may be transferred--whether by explicit agreement or by silent combination or understanding with his vendee--is a per se violation of § 1 of the Sherman Act." 388 U.S. at 382 (emphasis supplied) o 3Se -36- there was not: "a contract, combination--or conspiracy between Ford and its In our case, Ford after admittedly parting with title and risk to crash parts restricted the persons to whom the crash parts could be transferred by charging franchised dealers 25 percent more if they sold crash parts to FLM rather than directly to independent repair shops. In Reed Brothers, supra, Monsanto adopted basically the same plan that Ford did in order to prevent independent distributors from dealing in its product. Monsanto offered its dealers a rebate on sales which it made directly to retailers. The plaintiff, an independent distributor of Monsanto's products was thus no longer able to compete in the sale of Monsanto herbicide products. The Eighth Circuit held that no formal agreement among Monsanto and its distri- butors was necessary and that its rebate program was a cooperative one sufficient ~37a to constitute a contract, combination or conspiracy under Section 1 of the Sherman Act, since in order for the rebate program to work, it required the cooperation of both Monsanto and its distributors. Similarly, in Response of Carolina, supra, the defendant franchised the sale of computer time-sharing services. The agreement provided that a franchisee was to pay the defendant 15 percent of its sales to customers within its area and 70 percent to customers outside its area. The Fifth Circuit held that the radical increase in royalty payments for sales made outside of the area in fact resulted in the imposition of a restric- tion upon the persons and territory in which a franchisee could sell computer time, 537 F.2d at 1319. Again, the Court found after an extensive discussion that -38r no formal agreement was necessary for there to be a violation of Section 1 of the Sherman Act. The Second Circuit's finding that there was no agreement in our case between Ford and its distributors sufficient to constitute a combination or conspiracy in violation of Section l of the Sherman Act is directly contrary to this Court's decision in Albrecht v. Herald Company, 390 U.S. 145 (1968) where this Court clearly held that where a Supplier compels distributors to adhere to a policy and enforces that policy, a combination in violation of Section 1 cf the Sherman Act has occurred. Even those cases like Janel Sales Corp. v. Lanvin Parfums, Inc., 396 F.2d 398 (2d. Cir.), cert. den., 393 U.S. 938 -39- (1968), which placed a gloss upon Schwinn to the extent of reading Schwinn to require that the supplier be firm and resolute in obtaining compliance with its policy before a violation of Section 1 of the Sherman Act would occur, would still not prevent a violation of Section 1 of the Sherman Act from having occurred in our case. There can be no question that Ford was firm and resolute in enforcing its whole- sale incentive policy with its radical price difference depending upon whom its franchised dealers resold crash parts to. Ford maintained a right to audit all of its franchised dealers and did so on a consistent basis including an audit of FLM on two separate occasions as well as of the franchised Ford dealer who was supplying FLM to insure that its policy o4@e was being firmly complied with. It is clear that Ford's restriction upon its franchised dealers as to whom they could freely sell crash parts to through the means of imposing a radical price differ- ence of 25 percent so as to prevent franchised dealers from selling crash parts to FLM or other independent distri- butors was a per se violation of Section 1 of the Sherman Act. Even before Schwinn, this Court made it clear in United States v. General Motors Corp., 384 U.S. 127 (1966), that once a manufacturer has parted with title to its product it cannot prevent its distributors from selling directly to retailers or consumers or choosing to deal through sub-jobbers or sub-distri- butors if it chose to do so. -41- Here, Ford's admitted purpose in changing its wholesale incentive policy was to prevent franchised dealers from selling to independent distributors such as FLM if they chose to do so. This is a per se violation of Section 1 of the Sherman Act. Ford's excuse that this restriction on its franchised dealers as to whom they can deal with makes it easier for Ford to police its own franchised dealers to make certain that they are complying with its policy does not excuse Ford's conduct. This Court in Otter Tail Power Co. v. United States, 410 U.S. 366 (1973), cited Schwinn and stated: "The promotion of self-interest alone does not invoke the rule of reason to immunize otherwise illegal conduct." 410 U.S. at 380. -42- If the Court of Appeals decision in this case is permitted to stand, then the entire Schwinn doctrine would become a nullity. Ford or any other manufacturer would no longer have to place a customer or territorial restriction upon its franchised dealers. It could simply obviate Schwinn by charging its dealers a radically higher price as Ford is doing in our case if the dealer resells the goods outside of its territory or to a customer other than that chosen by the supplier. Schwinn cannot be so easily avoided. In enforcing the anti- trust laws, the courts must look at the arrangement as it operates in practice rather than the veneer given to an arrangement by skillful drafting. Simpson v. Union Oil Co. of Cal., 377 U.S. 13 (1964). ~43- The Eighth Circuit in Reed Brothers, supra, and the Fifth Circuit in Response of Carolina, supra, recognized that simi- lar arrangements to that utilized by Ford were merely subterfuges to avoid Schwinn and found that they were viola- tive of Section 1 of the Sherman Act. The Second Circuit's decision in our case is in direct conflict with the Eighth and Fifth Circuits and is likewise contrary to this Court's decisions in Schwinn and General Motors, and if the Second Circuit's decision in this case is not reversed, suppliers will be able to avoid Section 1 of the Sherman Act with impunity in the Second Circuit. -44- Conclusion A Writ of Certiorari should issue and the order of the Second Circuit should be reversed. Respectfully submitted, Julien & Schlesinger, P.C. By otitank ( Sch aeons. Stuart A. Schlesing Attorneys for Petitioner Alfred S. Julien Stuart A. Schlesinger David Jaroslawicz David L. Wasser Of Counsel -45- APPENODI X UNITED STATES COURT OF APPEALS SECOND CIRCUIT At a Stated Term of the United States Court of Appeals, in and for the Second Circuit, held at the United States Court House, in the City of New York, on the sixteenth day of November, one thou- sand nine hundred and seventy-six Present: HON. WALTER R. MANSFIELD, HON. JAMES L. OAKES, HON. MURRAY I. GURFEIN, Circuit Judges FLM Collision Parts, Inc., Plaintiff-Appellee-Cross-Appellant V. Ford Motor Company & Ford Marketing Corp., De fendants-Appellants-Cross- Appellees. ee ee ee ee ee ee _— —— A petition for a rehearing having been filed herein by counsel for the Upon consideration thereof, it is Ordered that said petition be and hereby is DENIED A. Daniel Fusaro, Clerk UNITED STATES COURT OF APPEALS SECOND CIRCUIT At a stated term of the United States Court of Appeals, in and for the Second Circuit, held at the United States Court House, in the City of New York, on the sixteenth day of November, one thousand nine hundred and seventy- six. FLM Collision Parts, Inc., Plaintiff-Appellee-Cross-Appellant, Vv. Ford Motor Company and Fort Marketing Corp., Defendants-Appellants-Cross- Appellees. A petition for rehearing containing a suggestion that the action be reheard en banc having been filed herein by counsel for the Plaintiff-Appellee- a-3 Cross~Appellant, and no active judge or judge who was a member of the panel having requested that a vote be taken on said suggestion, Upon consideration thereof, it is Ordered that said petition be and it hereby is DENIED. IRVING R. KAUFMAN, Chief Judge UNITED STATES COURT OF APPEALS For Tue Seconp Cikrcvuir — wes Nos. 1192, 1260—September Term, 1975. (Argued June 16, 1976 Decided September 30, 1976.) Docket Nos. 76-7161, 76-7202 MLM Coniston Parrs, Ine., Plaintiff -A ppellee- Cross-Appellant, —against— Forp Motror Company and Forp Marketinc Corporation, Defendants-A ppellants- Cross-Appellees. a > v Before: MANSFIELD, Oakes and GuRFEIN, Circuit Judges. -—_ = oe Appeal! and cross-appeal from a decision and judgment entered after a non-jury trial in the United States District Court for the Southern District of New York, by Thomas P. Griesa, Judge, finding that Ford’s allowance of certain discounts on automobile parts constituted price discrimi- nation in violation of §2(a) of the Robinson-Patman Act, dismissing Shermen Act claims based on the same dis- count system, and awarding plaintiff treble damages, at- torneys’ fees and injunctive relief. See 406 F.Supp. 224. a-5 Judgment on the Robinson-Patman claim reversed. Dis- missal of Sherman Act claims affirmed. a ae Rosert MacCrate, Esq. (William M. Dallas, Jr., Esq., Sullivan & Cromwell, 48 Wall Street, New York, N.Y.) —and— SranLey D. Rostnson, Esq. (Michael Malina, Esq., Kaye, Scholer, Ficrman, Ilays & Ilandler, 425 Park Avenue, New York, N.Y. 10022) —and— Wittram A, Zotnent, Esq. (Office of General Counsel, Ford Motor Company, of coun- sel), for Appellants. Davin Janostawicz, Esq. (Alfred S. Julien, Esq., Stuart A. Schlesinger, Esq., Julien & Schies- inger, P.C., 2 Lafayette Strect, New York, N.Y., David L. Wasser, Esq., of counsel), for Appellee. — ase MansritLp, Circuit Judge: In this civil anti-trust suit for damages in the Southern Distriet of New York by FILM Collision Parts, Ine. an independent wholesaler of automobile parts, against Ford Motor Co. and its wholly owned subsidiary, Ford Market- ing Corporation (herein collectively referred to as “Ford”), the subject of attack is a Ford incentive allowance plan under which Ford grants to each of its franchised dealers a discount on the dealer’s purchases of “crash parts” for resale to independent automobile repair shops but not on the dealer’s purchases for its own use or for resale to a-6 other classes of customers, including FLM. FI.M claims that this pricing practice amounts to a price discrimina- tion in violation of §2(a) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. §13(a), and also constitutes a conspiracy in restraint of trade violative of §1 of the Sherman Antitrust Act, 15 U.S.C. §1, and a monopolization of the market in violation of §2 of the Sherman Act, 15 U.S.C. §2. After trial of the action before Thomas P. Griesa, Judae, sitting without a jury, he handed down an opinion, re- ported at 406 F.Supp. 224, agreeing with LM that the incentive payment plan was a form of price discrimination and thus a violation of §2(a) of the Robinson-Patman Act. He dismissed I°I.M’s Sherman Act claims, however, finding that the plaintiff had failed to prove its allegations of conspiracy and monopolization. A supplemental opinion awarded FLM treble damages of $874,506, $136,000 in attorneys’ fees, and injunctive relief. Ford appeals from this judgment, and FLM cross-appeals from the dismissal of its Sherman Act claims. We hold that the district judge erred in finding price discrimination in violation of §2(a), since Ford's incentive plan treated all of its purchasers equally, and accordingly we reverse the judgment in favor of FLM. We affirm the dismissal of the Sherman Act claims. Tue Facts “Crash parts”, as the name indicates, are fenders, grills, and other sheet metal parts used principally to repair automobiles damaged in collisions. They are custom- designed for particular years and models of automobiles, and Ford is the sole source of such parts for Ford cars. The distribution system of the parts thus begins with Ford, which makes some parts itself and licenses the manufacture of other parts. Ford sells its crash parts a-7 exclusively to its franchised Ford dealers, of which there are 3ome O800 in the United States. The dealers use some of the parts in their own repair shop operations, in effect selling them directly to the car owner and to this extent functioning as retuilers. With respect to the balance the Ford dealers functioli as wholesalers, reselling the parts to independent auto repair shops for use in those shops’ repair operations and to other users such as owners of large fleets of automobiles and insurance companies, FLM entered the crash parts business in 1965 as an inde- pendent wholesaler. Its request to buy crash parts direetly from lord was refused, since lord sold parts only to its franchised Ford dealers. SLM then made arrangements to buy lord parts from a franchised lord dealer, Central Lincoln Mereury Corp. (“Central”). The ILM-Central agreement allowed FLM to buy the parts at 2% above the price Central paid Ford for them. ILM then in turn resold the parts to independent repair shops. Prior to 1968, Ford priced its crash parts to its fran- chised dealers at approximately 60% of Ford's suggested list price.' ‘Thus, a part retailing at $10.00 would be sold by Ford to its dealers, including Central, at $6.00, which was described as the “dealer net” price (i.c., 40% off the suggested list price). Central would resell the part to LM at $6.12. (Dealer net plus 2%). While f' LM was thus at a slight price disadvantage in competing with Ford dealers for sales of crash parts to independent repair shops, its sales grew from $245,738 in the fiscal year end- ing Sept. 30, 1966 to $389,987 in the fiscal year ending Sept. 30, 1968. However, FLM did not show any net profit over this period. | Until 1968 the price was 58% of the suggested list price; in 1968 this was changed to 60%. We use the 60% figure throughoct for ease in computing the examples given. a-8 Putting FLM to one side for the moment, Ford’s pre- 1968 distribution system for crash parts clearly put inde- pendent auto repair shops at a disadvantage in competing with Ford-franchised dealers for repair jobs on Ford cars. This arose from the fact that while Ford dealers could buy the parts needed for such repairs from Ford at the “dealer net” price (e.g., $6.00 for a part with a $10.00 suggested retail) the independent repair shops had to buy the same part from a lord dealer at dealer net plus whatever markup the Ford dealer imight choose to add. Thus, if a Ford dealer charged a 10% markup on the parts it resold, an independent repair shop would have to pay $6.60 for the part which the ord dealer could buy for $6.00. This situa- tion attracted the attention of the Federal Trade Commis- sion, which informed Ford that it considered the prices charged to independent repair shops to be an unfair trade practice in violation of §5 of the Federal Trade Commis- sion Act, 15 U.S.C. §45. The FTC never began formal pro- eecdings against Ford; the matter was settled when lord adopted the “wholesale incentive” allowance to dealers which was designed to equalize the prices at which indepen- dent repair shops could obtain Ford parts with the prices paid by Ford dealers for the same parts.* Under the wholesale incentive plan Ford sold crash parts to its dealers at lower prices when they were resold to independent auto repair shops than when they were re- tained by the Ford dealer for use in his own repair opera- tions. For a part having a $10.00 suggested retail list price the Ford dealer would still pay $6.00 when he bought it for 2 The parties dispute the part the FTC played in the development of the incentive plan, with Ford suggesting that the PTC played a major role in the adoption of the plan, and FLM arguing that the PTC ae- cepted the plan only reluctantly. As might he expected, the record seems to indicate that the truth falls somewhere in between; it appears that the plan was Ford's idea, but the FTC found it acceptable. a-9 use in his own repair shop. Ifowever, when he bought it for resale to an independent repair shop he would receive back from Ford an incentive allowance of 20% cf the dealer net price, reducing the ord dealer’s bottom line price to $4.80 (dealer net of $6.00 less 20%).2 Tins, under the plan the independent repair shop would be able to buy the part at $4.80 plus the lord dealer’s markup, which allowed him to compete effectively for repair business with the Ford dealer who would have a dealer net cost of 46.00 for the sale part when retained for use in his repair operations. The incentive payment plan as originally adopted in 1968 allowed sales of crash parts by Ford dealers to inde- pendent wholesalers to qualify for the incentive payments to the dealers. Central, which now charged LM a 3% markup over dealer net on crash parts, simply paid over to FLM the incentive payments it received on parts sold to FLM. Thus FLM’s cost for the part with a $10.00 sug- gested retail price was now $4.68. [$6.00 dealer net plus $.18 (Central’s 3% markup) less $1.20 (the 20% ineentive payinent)}. However, the objective of the incentive plan, which was to reduce prices to independent repair shops, was not initially achieved, principally because neither Ford dealers nor FILM made any appreciable reduction in their resale prices to such shops. The principal effect of the flow-through of the ineentive payments to FLM was to inerease its profitability dramatically; from a net loss of $769 in fiscal 1968 FF LM leaped to a net prolit of $25,418 in fiseal 1969, and enjoyed similar profits in the next three years. Thus FLM rather than the independent repair shops became a principal beneficiary of the plan. Beginning in 1969, the amounts Ford paid out in whole- sale incentive allowances on crash parts, and on other types of parts for which it made similar incentive payments, ran 3 The incentive payment was :acreased to 25¢% in 1970. a-10 higher than expected. Worried that Ford dealers might be claiming incentive allowances to which they were not entitled, Ford audited the accounts of 37 dealers whose claims for incentive payments ran especially high. Central was one of the dealers sclected for an audit; Ford examined its books and those of LM as well. While the audit of Central and F'LM disclosed some improper claims, they were insubstantial in amount, and Ford concedes that this audit and a similar one made in 1970 showed that Central and FLM were complying with the terms of the incentive program, While Central and Fi.M may not have been engaged in any improper use of the incentive plan, the same could not be said of all of Ford’s dealers, Ford’s statistical analy- sis of the overall results of the 37 audits conducted in 1969 indicated that as much as $2.1 million of the $44.5 million in incentive payments claimed might be improper. Among other things, some dealers were selling parts to wholesale intermediaries and then elaiming an incentive allowance for doing so, even though the wholesaler then resold the part to another Ford-franchised deaicr. As a result of the audit, Ford began considering ways to alter the incentive payment plan to avoid the use of such tactics. In July 1971, it promulgated a revised version of its incentive plan, under which Ford dealers would be eligible for the pay- ment only wnen they resold yarts to an independent repair shop, not when they resold them to wholesalers such as FLM or tc other classes of customers, such as fleet owners and insurance companies. It is this revision of the plan which is at the heart of the present suit.‘ 4 Another aspect of the evidence is the fact that in 1971 Ford withdrew a special dealer code number which it had issued to Central, and which FLM used for direct billing on parts it purchased. We mention this only for the sake of completeness, since it is peripheral to the issues raised on this appeal. a-ll Despite the fact that the revised version of the incentive plan would not allow incentive payments on parts resold to wholesalers such as FLM, Atlas Lincoln Mercury, (“Atlas”), the corporate successor to Central, continued to claim incentive allowances on parts it resold to FILM under the same arrangements as the latter had with Central. This continued through mid-1972 when Ford discovered that the payments were being claimed for sales to FLM and pro- posed to recover from Atlas some $24,000 in payments made to Atlas on account of its sales to FLM. Atlas then withheld its payments of incentive allowances over to FLM, which retaliated by withholding monies due to Atlas. In the end, though Ford refused to allow any further incen- tive payments to Atlas on account of sales to FILM, it agreed not to recoup the past payments to Atlas. Atlas and FLM ceased doing business together. Since 1972, FLM has purchased crash parts from other Ford dealers, paying them 5% above dealer net cost. Under the present system, a Ford dealer selling a part to FILM will receive no incentive payment on it. Thus, a $10.00 retail part resold to FILM will cost the dealer $6.00 [the dealer net price], and FILM a total of $6.30, including the Ford dealer's 5% markup. When, however, the part is resold to an independent repair shop, it will cost the Ford dealer only $4.50 [the dealer net price, less the incentive payment, which was raised to 25% in 1970]. The differ- ence between the cost to FILM and the cost to the Ford dealers has put Fi.M under pressure in the competition for resales to independent repair shops. While FLM’s net sales for fixcal 1973 rose over its 1972 sales, it experienced a net loss of $85,707 for the 1973 year, as compared to a $21,091 profit the year before. Preliminary estimates in- troduced at trial indicated that during fiscal 1974, FILM’s sales fell to $694,000, some $100,000 less than in 1973. a-12 Discussion The Robinson-Patman Claim Section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, provides in pertinent part that: “Tt shall be unlawful for any person engaged in com- merce ... to discriminate in price between different purchasers of commodities of like grade and quality ..” 15 U.S.C. $13(a). The district judge concluded that Ford’s incentive pay- ment plan as it functioned after the 1971 change violated the Act’s prohibition of price discrimination, stating: “Tt is not disputed that, since November 1972, Ford has charged to Ford dealers who sell to FLM a higher price than Ford charges for the same crash parts when a Ford dealer sells directly to an independent body shop. Putting aside for the moment the question of the purpose of Ford’s price differentials, it would ap- pear at least that the basic elements of a Section 2(a) violation are out. Ford charges different prices to different purchasers—Ford denlers—for the same crash parts.” 406 I°, Supp. at 236. We disagree with this conclusion. The district court’s ‘holding runs contrary to the plain language of the Act, which limits its prohibition to price discrimination “he- tween different purchasers.” The statute thns proclaims in substance that a seller must extend equality of treat- ment to its competing purchasers and may not discriminate in price between them. However, it does not prohibit the seller from offering different prices to each of its pur- chasers, such as one price when he functions as a retailer and a lower price when he functions as a wholesaler, a-13 provided all competing purchasers are treated equally. In this ease Ford, the seller, treated all of its purchasers (franchised dealers) equally, offering each the same prices us those offered to every one of its other dealers. Ifence Ford’s incentive payment plan did not discriminate against any of its purchasing dealers. All Ford dealers could receive the incentive payments resulting in lower prices for parts they resold to independent repair shops, and all were denied these payments when the parts were not so resold. For instance, FIL.M’s suppliers, Central or Atlas, are entitled to the incentive payments from Ford when they resell its crash parts to independent auto repair shops, and there is no indication that under its amended plan Ford allows the incentive payments to any Ford dealers for resale of parts to customers (such as F-LM) who are not independent auto repair shops. In short, while the incentive payment plan did not set a single uniform price for all types of sales made by Ford to its dealers, it was administered with an even hand, without any discrimina- tion among the dealers who purchased from Ford. Reiying on FTC vy. Anheuser-Busch, Inc., 362 U.S. 536 (1960); F7'C v. Fred Meyer, Inc., 390 U.S. 341 (1968); and Mueller Co. v. FTC, 323 V.2d 44 (7th Cir. 1963), cert. denied, 377 U.S. 923 (1964), FLM argues that §2(a) obligates Ford to charge one uniform price to each of its custome:s and that dual pricing, even though equally available to all, is discriminatory. We disagree and fail to find support for such a rule in these or any other authorities. The statement quoted from the Court’s opinion in Anheuser-Busch to the effect that “a price discrimination within the meaning of [§2(2)] is merely a pric’ difference” is taken out of an entirely different and distinguishable context, which renders it wholly inappli- cable to this case. There the court was dealing with a claim of primary-line territorial price discrimination under a-14 which Anheuser granted lower prices to dealers in the St. Louis area, but not to those located elsewhere, for the purpose of driving out competition. The court’s quoted comment was in response to Anheuser’s argument that the FTC was obligated to prove that the lower prices to the St. Louis customers were below cost or unreasonably low and were subsidized by the higher prices charged to others. See id., at 548-49. No such charge or situation exists here; Ford makes the same prices available to all its customers. Were there any doubt about the matter, the Supreme Court’s later decision in F'7'C v. Bordon Co., 383 U.S. 637 (1966), makes it clear that the language in Auheuser- Busch does not imply that the Robinson-Patman Act requires the uniform pricing rigidity ILM here asks but, on the vontrary, permits a seller to offer dual prices to its customers on an equal basis. Although the Borden Company there charged purchasers a higher price for its brand-name milk than it charged for private label brands “of like grade and quality” within the meaning of Section 2(a), the court remanded the ease for a determination of “whether the differential under attack is discriminatory within the meaning of the Act,” and of whether Borden had established any of the statutory defenses, Jd. at 646, Thus it was recognized that the difference in price would not fall under the Act’s ban on price discrimination if all purchasers were given an equal opportunity to purchase the less expensive milk. See id. at 641 n. 4; 643.° In his dissent on the “like grade and quality” issue, Justice Stewart furtner underlined the point that the Act requires only equal treatment of al! purchasers, not a single unvarying price: 5 On the remand, the Court of Appeals set aside the FTC's cease and desist order against Borden on various grounds, including that the pri- vate brand milk had heen sold to any customer who asked for it. Sec Borden Co. v. FTC, 381 F.2d 175 (5th Cir. 1967). a-15 [T]he existence of price discrimination is an issue that remains open in the Court of Appeals. If Borden is able to demonstrate that the price differential between its preminm and private label brands is not a price discrimination, the inquiry by the Commission is at an end, and no issue of injury to competition or cost justification under §2(a) is reached. Nothing in FTC v. Anheuser-Busch, Inc., 363 U.S, 536, a case con- cerned only with territorial price discrimination, requires an equation in all circumstances between a price differential and price discrimination. So long as Borden makes private label brands available to all customers of tts premium milk, it ts unlikely that price discrimination within the meaning of §2(a) can be made out.” Id, at 659 n. 17 (emphasis added). Thus, even when a seller has a dual pricing system, if the lower price is available to all purchasers, not only in theory but in fact, see FTC v. Morton Salt Co., 334 U.S. 37, 42 (1948), there is no violation of §2(a).° In short the Act, as its language indicates, requires equality of treatment among purchasers, but it does not require a seller to adopt a single uniform price under all circumstances. Cf. Sun Cosmetic Shoppe, Inc. v. Elizabeth Arden Sales Corp., 178 F.2d 150, 152 (2d Cir. 1949) (“The Act does not undertake to forbid a seller to grant favors to his custoraers ... it only insists that the distribution, if any, shall be equal.”) This principle has been applied in cases which found no violation of §2(a) in pricing plans which, though varying prices according to different terms 6 Perkins v. Standard Oil Co. of California, 395 U.S. 642 (1969), does not cast any doubt on this conclusion. In that case, it was established that the seller had discriminated in price against some of its purchasers; the only question was level of distribution at which the requisite com- petitive injury could be shown. a-16 of sale, were administered equally to all purchasers. Sce Chapman v. Rudd Paint & Varnish Co., 409 F.2d 635, 643 (9th Cir. 1969) (discounts for advance deposits); Boss Manufacturing Co. v. Payne Glove Co., 71 F.2d 768 (8th Cir.), cert. denied, 293 U.S. 590 (1934) (dual product lines); William Inglis &€ Sons Baking Co. v. ITT Con- tinental Baking Co., 389 F. Supp. 1334, 1341 (N.D. Cal.) (dictum) (private label breads), rev’d on other grounds, 526 F.2d 86 (9th Cir. 1975); F. Rowe, Price Discrimina- tion Under the Robinson-Patman Act 97-98 (1962). Accepting as we do the Supreme Court’s observation in FTC v. Fred Meyer, Inc., 390 U.S. 341, 349 (1968), that the Robinson-Patman Act should not be construed “in a manner which rins counter to the broad goals which Con- gress intended it to effectuat,”7? we find nothing in that decision to support FLM’s position here and nothing in the present case to indicate that Ford’s incentive allow- ance plan is aimed at defeating or circumventing the Act. In the first place, Fred Meyer did not involve §2(a)’s ap- plicability to price adjustments, much less to any of the type challenged here. The question there was whether pro- motional allowances paid by a manufacturer directly to certain retailers, but not to intervening wholesalers who resold to other competing retailers, violated §2(d) of the Act, 15 U.S.C. §2(d).* In holding that the manufacturer 7 While we do not adopt a narrow construction of the Robinson-Patman Act in this ease, it should ne noted that such a mode of constrmnetion of the Act has frequently been advocated. See, e.g., FTC v. Fred Meyer, Inc., supra, 390 1.8. at 359-60 (Harlan, J., dissenting); Friendly, The Gap in Lawmalking—Judqes Who Can't and Legislators Who Won't, 63 Colum. L. Rev. 787, 794 (1963). 8 The incentive payments here under attack were not related to any advertising or promotional activities by the Ford dealers who resold the crash parts to independent repair shops; they were merely adjustments to price, and as such, not within the ambit of the stricter prohibitions imposed by §2(d). See Rutledge v. Electric Hose ¢ Rubber Co., 511 a-17 was required to give the same promotional allowances to retailers purchasing from the wholesalers as those given by it directly to retailers, the Court did not suggest that it intended, by analogy or otherwise, to interpret §2(a) as requiring a manufaeti.rer to equalize prices charged to those performing different functions in the line of dis- tribution. Indecd, to do so, as Justice Harlan’s dissent in Fred Meyer noted, 390 U.S. at 361, would be to run afoul of the Sherman Act. If, in order to avoid violation of the Robinson-Patman Act, Ford were required to fix the prices at which FLM purchased parts from Ford dealers so that the prices to both would he equalized, Ford would be open to the charge of illegal price fixing. We do not suggest or imply that, if a manufacturer grants a price discount or allowance to its wholesalers (whether or not labelled “incentive”), which has the pur- pose or effect of defeating the objectives of the Act, §2(a)’s language may not be construed to defeat it. But that is quite different from the situation before us. IIere the incentive allowance is given by Ford to its dealers in ree- ognition of the fact that in reselling to independent repair shops the dealer acts as a wholesaler rather than a retailer. Although denial of the allowance on resale of parts to others may have the practical effect of placing a floor under the price at which dealers can resell to interinediate whole- salers, the same could be said generally of standard fune- tional discounts, the legality of which is not questioned. F.2d 668, 678 (9th Cir, 1975); Kirby v. PR. Mallory §& Co., 989 P.2d 904 (9th Cir, 1973), cert. denied, 417 U.S. 911 (1974). It is true that in some instances the word “customer” in §2(d) and the word “pur- chaser” in §2(a), sre te be given the samo meaning, see, e.4g., Amerivan News Co. v. F.T.C., supra, 300 F.2d at 109, bat the Supreme Court limited its holding in Fred Meyer, Inc. (that a manufacturer was re- quired to give the same promotional allowances to retailers purchasing from wholesalers as to retailers buying directly from him) to §2(d) cases. See 390 U.S. at 348-52. a-18 | pct COPY. AVAILABLE: See Rowe, Price Discrimination Under the Robinson- Patman Act 173-174 (1962); Shniderman, “Zhe Tyranny of Labels”—A Study of Functional Discounts Under the Robinson-Patman Act, 60 Harv. L. Rev. 571 (1947); Doubleday and Co., Ine., 52 F.T.C, 169, 207-208 (1955). The record furthermore fails to provide the basis for an inference that Ford’s incentive payment plan has been simply a device to achieve indirectly a price discrimination forbidden by the Act. The original plan was adopted in response to the FTC's coneern that independent auto repair shops be permitted to obtain erash parts at prices that would enable them to compete with Pord dealers in the repair business. The revision of the plan of which FLM complains came after Ford’s audits disclosed that under similar incentive plans involving other types of automo- bile parts’ dealers were, in effect, selling to each other through the medium of outside wholesalers, thus allowing Ford dealers to obtain the parts at the same price or less than independent shops and undercutting the objective of the plan. While FILM was not involved in such dealings, its position as an intermediary raised the possibility of this problem.’® In these circumstances, it was not unreasonable for Ford to make a general change in its incentive plans, both those in which such difficulties had arisen, and the erash parts plan, where they were posed as a potential problem. Thus the record indicates that the 1971 revision of the plan was an attempt to further implement Ford’s original intention of funnelling crash parts at reasonable 9 While a limited amount of evidence was presented dealing with these other incentive plons, their structure appears to be essentially the same as that of the erash parts plan. 10 We cannot fathom the trial judge’s contrary conelusion that FILM was not even “potentially” such an intermediary hetween Ford dealers. We see no evidence of any aspect of FLM’s operations which would assure against such dealings. a-19 prices to independent repair shops so a to improve com- petition in the auto repair business, and was not a device to circumvent the Act. Nor do we find support for FLM’s contention in Mueller Co, v. FTC, 323 F.2d 44 (7th Cir. 1963), cert, dented, 377 U.S. 923 (1964). There the seller had divided its pur- chasers into two classes—regular and “stocking” jobbers. Tt granted an extra 10% discount to stocking jobbers to compensate them for their expenses in maintaining ware- house stocks of the seller’s product. Ifowever, not all jobbers were able to become stocking jobbers and thus take advantage of the 10% discount. Specifically the ITC found that the seller “discriminated in the selection of stocking jobbers.” 7d. at 45. In affirming the PTC's finding on this point, and rejecting the petitioner’s argument that there was no price discriminat. since all jobbers could become stocking jobbers, the Seventh Circuit stated that: “There were no objective standards to guide regular jobbers in qualifying as acceptable and there is sub- stantial evidence to support the Commission’s finding as well as evidence that petitioner’s decisions on this point were influenced by whether it had already ade- quate distribution ‘in that particular area’ and by its concern to protect fold established jobbers.” Theoret- ically, these discounts were available to ail, but fune- tionally they were not.” 323 F.2d at 46. (Citation omitted) Thus the gravamen of the discrimination found in Mueller was not the provision of the 10% discount to jobbers as compensation for their wholesaling services, but rather the fact that eligibility to enter this favored class was only selectively recognized and not made equally available to all jobbers. Here, in contrast, Ford did not arbitrarily a-20 select some of its dealers and limit incentive payments to them. Rather, such payments were available to all Ford dealers purchasing from Ford. Mueller thus simply re- affirms the principle that treatment of purchasers must be even-handed. Having treated its dealers equally here, Ford fulfilled its duties under the Act. We need not dwell at length on FILM’s alternative sug- gestion—understandably brief—that it should be treated as an “indirect purchaser” from Ford and thus entitled to the same prices us those charged by Ford to its dealers. The “indirect purchaser” doctrine originaied in Araft-Pheniz Cheese Corp., 25 #.V.C, 587 (1937), as a menus of prevent- ing a manufacturer from insulating itself from: Robinson- Patman liability by using a “dummy” wholesaler to make sales at terms actually controlled by the manufacturer. See American News Co. v. FTC, 300 F.2d 104, 109-10 (2d Cir.), cert. denied, 371 U.S. 824 (1962); F. Rowe, supra, at 57-59. The doctrine comes into play when the manufac- turer “deals directly with the retailer and controls the terms upon which he buys.” American News Co., supra, 300 F.2d at 109; see K.S. Corp. v. Chemstrand Corp., 198 F.Supp. 310 (S.D.N.Y. 1961); Kraft-Phenix Cheese Corp., supra, Ford’s direct dealings with FLM were at best frag- mentary," and the company did not attempt through the medium of a suggested price or otherwise to set the prices at which its dealers would sell crash parts to FLM. The most that can be said is that as a practical matter Ford’s wholesale price to its dealers serves as a floor for their resale prices. As Judge Gricsa noted, see 406 F. Supp. at 241, to equate this with the “control” required by American 11 The only direct dealings appear to he Ford's delivery of parts di rectly to FILM when the latter was buying them through Central and using a dealer number assigned to Centrai, and the audits of FLM, to which it consented. a-21 News Cc., supra, would reach the absurd result of extend- ing the Coctrine to cover every resale of goods. The “in- direct purchaser” doctrine, therefore, has no application to this cease. If Congress desired to bar a ‘nanufacturer from granting functional discounts that mi.sht affeet its wholesaler’s resale policies, further legislation would be required. Under the Act as it stands the man vfacturer is free to grant such discounts on an equally aviilable basis to all of its customers, even though the cifeet may be to limit the development of additional layers of intermedi- aries which might occur if the discount or allowance were not limited to the performance of a speci'ie type of whole- saler function in the line of distribution. In view of our conclusion that Ford did not engage in price discrimination, it becomes unnecessary to reso've the other contentions raised by the parties, including whether FLM would have standing to litigate such a claim, whether the incentive plan was injuriovs to competi‘ion, and whether damages were properly prov. Sherman Act Clains Turning to the district court’s distr issal of TM's claims based on §$1 and 2 of the Sherman Act, 15 1.8.0. 691, 2, froin which FLM appeals, the §1 ciaim appears to mix, rather unclearly, two somewhat different theeries: first, that the incentive system was the product of a conspiracy between Ford and its dealers to drive FLM out of business, and second, that even if the incentive system was adopted by Ford on its own initiative it is nonetheless a per se violation of §1 under the doctrine of United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967). FLM’s §2 claim asserts that Ford, having a monopoly over the manu- facture of Ford crash parts, was attempting to extend that monopoly to the wholesale market. Judge Griesa a-22 found that FILM had not proved the existence of any con- spiracy between Ford and its dealers (or between Ford Motor Co. and its wholly-owned subsidiary, Ford Market- ing Corp.), and that sinee MLM had failed to establish that lord was vertically integrated into the wholesale market for Ford erash parts no basis existed for charging that if ded extended its monopoly power at the manu- facturing level info that market in violation of °2 Sinee the question of whether the imcentive allowance plan sid its TOTP aiendment to PLM s dissdvantage was the product of a comspiracy between lord and its dealers to drive FILM ont of business or to fix the prices of parts sold to it is essentially one of faet, sce Taxi Weekly, Inc. Vv. Metropolitan Tasieal ourd of Trade, lne., (Dkt. Nos, 16-7042, 76-7175) (2d Cir, July 18, 1976), slip opin, 4925, $931; Michelman vo Clark-Schwebel Fiber Glass Corp., (Dkt. Nos. 75 7532, 75-7508, 75-7504, 75-7598) (2d Cir. April 21, 1976), slip opin. 3333, 3344, the scope of our review of the trial judge’s finding on this issue is limited, Fed. R. Civ. PL 52(a). Faced with a record containing conflicting proof, we cannot say that the trial judge clearly erred in finding that I'l.M had failed to prove a conspiracy between Ford and its dealers to eliminate LM or to fix resale prices to it."* There was evidence, to which we have alluded, that Ford changed the incentive plan on its own initiative in order to avoid abuses of the system which would undercut its effectiveness in giving independent auto repair shops a chance to compete with Ford dealers. More- over, FILM concedes that, after the change in the incentive 12 The record discloses nothing even vaguely resembling the course of conduct, ineluding extensive policing efforts and threats of puysical violence to dealers, which led the Supreme Court to conclude that a “classic conspiracy in restraint of trade” had been shown in United States v. General Motora Corp., 384 U.S. 127, 140 (1966), on which FILM relics. plan, Ford dealers continued to do business with it, albeit on less favorable terms, which tends to undercut the pos- sibility of such a conspiracy. We also agree with Judge Griesa, for the reasons he stated, see 406 I’. Supp. at 245, that LM did not prove a conspiracy between Ford Motor Co., and its subsidiary; we can only regard as frivolous FILLM’s argument that Ford is estopped from denying such a conspiracy existed by virtue of certain comments in the charge in Rea v. Ford Motor Co., 355 I’. Supp. $42, 864 (W.D. Pa. 1973), rev'd on other grounds, 497 I'.2d 577 (3d Cir.), cert. denied, 419 US. 868 (1974). Nor do we read the Supreme Court’s decision in United States v. Arnold Schwinn & Co., supra, as providing a basis for holding Ford’s pricing system per se illegal un- der §1 of the Sherman Act on the ground that it enables Ford, after parting with title to the crash parts, to fix the prices at which dealers will resell the parts to FLM or to stop them from dealing with FLM. Schwinn did not do away with an essential element of §1 which was hero found lacking—“a contract, combination—or con- spiracy,” between Ford and its dealers. There the exis- tence of such an agreement was undisputed, and the Court was careful to note that an “explicit agreement or silent combination or understanding” restricting the per- sons to whom the goods might be resold was an essential condition of a per se violation. 388 U.S. at 382; cf. Carter- Wallace, Inc. v. United States, 449 F.2d 1374, 1380-81 (Ct. Cl. 1971); Modern Home Institute, Inc. v. Hartford Accident & Indemnity Co., 513 F.2d 102, 108-9 (2d Cir. 1975). Here no such understanding existed. Ford uni- laterally established its prices to its dealers and did not fix their resale prices or terms. Although the dealers would be most unlikely as a practica] matter to resell below cost, they were free to, and some did, resell to FLM at prices close to their cost. To hold that Ford’s establishment of a discount level based on the wholesaler’s function in reselling a Ford product violates $1 of the Sherman Act because of its effect on the wholesaler’s resale practices would not only ignore the language of $1 but in effect require that all functional discounts be outlawed. We do not find any support for such a holding in $1 or clsewhere. FLM’s §2 claim also suffers from a failure of proof. Where the defendant is charged with monopolization, its possession of monopoly power in the relevant market must be demonstrated, ¢.g., United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966); United States vy. Aluminum Co. of America, 148 F.2d 416, 422-32 (2d Cir. 1945), which requires proof of the approximate share of that market controlled by the defendant. See Note, Attempt to Monop- olize Under the Sherman Act: Defendant’s Market Power as a@ Requisite to a Prima Facie Case, 73 Colum. Ll. Rev. 1451, 1459 (1973). Where the defendant is charged with an attempt to monopolize, a “dangerous probability” of success must be shown. /’.9., Lorain Journal Co. v. United States, 342 U.S. 143, 153 (1951); Swift & Co. v. United States, 196 U.S. 375, 396 (1905); Areager v. General Elec- tric Co., 497 F.2d 468, 471 (2d Cir.), cert. denied, 419 U.S. 861 (1974). But see Lessig v. Tidewater Oil Co., 327 F.2d 459 (9th Cir.), cert. denied, 377 U.S. 993 (1964). Here the only relevant market which FLM attempted to define was the wholesale market in Ford crasi parts. However, FLM failed completely to prove that Ford, as distingushed from its dealers, had any significant share of that market, mucli less that it was using its monopoly at the manufacturing level to extend such a share. Cases such as Fastman Kodak Co. v. Southern Photo Materials a-25 Co., 273 U.S. 359 (1972), where the manufacturer sought illegally to use its: power as a manufacturer to extend its proven share of the retail market are therefore inapposite and lend no support to FLM’s claim. FILM’s alternate theory of its 42 claim—that Ford was conspiring with its dealers to help them maintain their shared monopoly of the market--amounts to nothing more than its §1 claim under another name, and its proof on the point is no more impressive when viewed under the rubric of §2. For the foregoing reasons, we reverse the judgment entered on the Robinson-Patman Act claim, and affirm the dismissal of the Sherman Act claims. FILM COLLISION PARTs, INC., Plaintiff, v. FOKD MOTOR COMPANY and Ford Marketing Corporation, Defendants. No. 73 Civ. 713. United States District Court, S. D. New York. Dec. 19, 1975. OPINION GRIESA, District Judge. This is an antitrust action under Sec- tion 2(a) of the Clayton Act, as amended by the Robinson-Patman Antidiscrim- ination Act, 15 U.S.C. § 13(a) (hereafter referred to as Section 2(a) of the Robin- son-Patman Act), and Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. Plaintiff FLM Collision Parts, Inc., is a small company located in Yonkers, New York, and is in the business of deal- ing in “crash parts” for cars made by defendant Ford Motor Company—i. e¢., Ford, Mercury and Lincoln cars. Crash parts consist of fenders, grills, panels, and other parts used to repair a car a-27 which has been in an accident or needs replacement of such parts for some oth- er reason. These crash parts are manufactured only by Ford Motor Company or by oth- er manufacturers who make the parts to Ford’s specifications. With certain ex- ceptions not here relevant, these crash parts are sold by Ford! only to fran- chised Ford and Lincoln-Mercury deal- ers. The franchised dealers? either use the crash parts in their own repair work for customers, or resell them to inde- pendent repair shops. The problem in this case arises from the circumstances under which Ford grants a so-called “wholesale incentive” allowance in the sale of crash parts ¢o Ford dealers. Ford grants, or does not grant, the wholesale incentive allowance to the dealers depending on the use they make of the particular parts. If a dealer uses a part in repair work for a customer, this involves a retail sale of the part, and the dealer does not obtain a wholesale incentive allowance on that part. But if a dealer sells the part to an independent repair shop, this involves a wholesale transaction, and the dealer may obtain the wholesale incentive allowance on that © part. Ford Marketing Corporntion was iieorper rated in 1970, and commencing in July 10 wax responsible for the marketing of Ford, Mereury and Lincoln autenebiles amd related products. Drier te July 170 this marketing function bad been performed by the jane fucturer, Ford Motor Company. [Tt appears that subsequent to the trial of this action Ford Marketing (Corporation was dissolved, and the marketing function was returned to ord Motor Company, For the purpones of thix come, defendants Ford Motor Compuny and Ford Marketing Corporacion will usually be treated as a single entity, and will be referred to ax “Ford”. 2. For purposes of simplicity, in thin opinion 1 will refer to franchised Ford, Mercury and Lincoln dealers us “Ford dealers”. a-28 FLM set itself up to supply Ford crash parts to independent repair shops. At first it sought to buy directly from Ford, but when this request was refused, FLM commenced purchasing crash parts from a Ford dealer in Brooklyn to whom FLM was referred by Ford. FLM then pro- ceeded to sell crash parts, purchased from the Brooklyn dealer, to independent repair shops, mainly in Bronx and West- chester counties. The wholesale incentive allowance was established by Ford in 1968. Thereafter, until 1972, Ford permitted the Brooklyn Ford dealer to receive the wholesale al- lowance on parts sold to FLM, which al- lowance was almost entirely passed on to FLM, thus substantially reducing FLM’s costs. Commencing in 1972, Ford refused to grant the wholesale incentive allowance on parts sold to PUM, and restricted the allowance to those parts which were sold by franchised Ford dealers directly to independent body shops. FILM contends in this action that Ford's current pricing policies violate Section 2(a) of the Robinson-Patman Act in two regards: First, that Ford, by charging one price to a franchised dealer when it sells to an independent repair shop, and a higher price to a franchised dealer when it sells to FLM, is engaging in unlawful price discrimina- tion in its sales to the franchised dealers, resulting in injury to FLM for which FLM has standing to recover; second, that FLM is itself a “purchaser” from Ford—i. ¢., an “indirect” purchaser— and as such has standing to sue Ford under the Robinson-Patman Act. FLM further contends that Ford has violated Section 1 of the Sherman Act in com- bining and conspiring with its franchised dealers to injure FLM competitively. a-29 Finally, FLM contends that Ford has violated Section 2 of the Sherman Act in that Ford has monopolized or at- tempted to monopolize the wholesale market for Ford crash parts. FLM seeks injunctive relief and treble damages. The case has been tried to the Court without a jury. This opinion constitutes the Court’s findings of fact and con- clusions of law on the liability phase of the case. The record on damages has not been completed. A supplemental opinion will be issued on the award of damages, including attorneys’ fees. Summary of Conclusions The following is a summary of my conclusions. J hold that FILM has prov- ed a violation of Section 2(a) of the Robinson-Patman Act based upon the first theory described above—-that Ford is engaging in unlawful price discrimi- nation in sales of crash purts to its deal- ers, resulting in injury to FILM for which FLM has standing to sue. 1 reject the Robinson-Patman claim of FILM based on the “indirect purchaser” theory. 1 also reject FLM's claims un- der both Sections 1 and 2 of the Sher- man Act. Facts FLM commenced its business in 1965. The two principals of the company are Stephen McKee and John Andidero, both of whom had been employed pre- viously by Ford dealers in parts opera- tions. FLM's first idea was to buy crash parts directly from Ford and sell them to independent repair shops. ILM discussed this with a representative of Ford, but was advised that Ford would only sell its crash parts to franchised dealers. In early 1965 an employee of a-30 Ford in New York City by the name of Joe Collura introduced McKee and Andid- ero to Central Lincoln Mercury Corp.., lo- cated in Brooklyn, New York. This led to an arrangement for FLM to buy crash parts from Central at 2% over Central's cost. At this time there was no wholesale incentive allowance available on crash parts to franchised Ford dealers. The dealers paid the same _ price-—“dealer price’—for crash parts whether they used* them in their own repair shops (7. «., made retail sales) or sold them to independent repair shops (made whole- sale sales). The “dealer price” was the “suggested list” or retail price, less 42%." It is useful to examine the effects of the crash parts price structure as it ex- istee at the time FLM commenced busi- ness in 1965 until the advent of the Wholesale incentive allowance, which was instituted in 1968. Let us assume the sale by Ford of a crash part to a deal- er, carrying a suggested list price of $10.) The dealer would pay the dealer price of Sh.x0 f, ., the suggested list price less 42° or $4.20.) The Ford dealer could use the part in his own re- It appears that prior to 19S the Amount of the allowance used in enleulating the denler price was 429%, wil that commeneing in TGS the amount of thix allownues was 1. There were certain other discounts or allow- auces granted, under certain circumstances, to dealers in connection with the purchase of erash parts, FILM makes cininw for lanages based on certain allegations of inubility to Obtain these allowances. These claims will be discussed in the supplemental Opinion re- garding damages. pair operation, and would presumably charge the customer the suggested list price of $10, thus making a gross profit of $4.20. The Ford deaicr could also sell the part to an independent repair shop. In such a sale the Ford dealer would presumably make some markup over the dealer cost of $5.80, The in- evitable result would be that the Ford dealer and the independent repair shop, both potentially competing for the re- pair business of Ford owners, would be incurring different costs for the same type of crash part—the dealer paying $5.80, the repair shop $5.80 plus. To return to the situation of FLM, FLM was buying parts from Central Lincoln Mercury for 2° over dealer price. Using the same $10.00 part as an example, FILM would purchase this part for the dealer cost of $5.80 pius the 2% markup, or a total of $5.92. FLM would be competing with franchised Ford deal- ers for the business of the independent repair shops. Although there is no ex- plicit testimony about the price which FLM was charging to repair shops in its early years, a reasonable inference from the evidence is that this was suggested retail price less 25°%. Applying this percentage to the hypothetical $10.00 part would give the figure of $7.50 as FLM’s price to the repair shops, for a part costing it $5.92. With respect to FLM’s competition with Ford dealers for the business of independent repair shops, there is no explicit evidence regarding what prices the dealers were charging to the inde- pendent repair shops during this per- iod. However, the reasonable inference is that FILM's prices were at about the same level as the prices charged by the Ford dealers. In any event, FLM was able to compete effectively. a-32 The business of FLM grew steadily FLM offered certain services to the in- dependent repair shops which the fran- chised Ford dealevs generally did not provide. FLM would visit repair shops, inspect damaged vehicles and advise re- specting exactly what parts would b needed to make the proper repairs. FLM carried sufficient inventory so that it could often fill an order the sume day it was placed. If FLM did not have a part in its own inventory, it would attempt to procure the part and deliver it no later than the following day. FLM delivered parts to the repair shops, something apparently not done by most of the franchised dealers. c The following figures show the re- sults of FLM’s operations commencing with the fiscal year ending September 30, 1966 (the first full year of FLM's operations ) through the fiseal year end- Ing September 30, 1968. The latter was the last full year prior to the advent of the wholesale incentive allowance. Fiscal 1966 Sales $245,738.00 Cost of Parts $201.376 00 Gross Profit $44 362 00 16.1%) Other Expense: Cluding office: salaries Of $16 680) $44,256 00 Net Operating Profit After Taxes $80 70 Fiscal 1967 Sales $337 0 Cost of Ports “276 oe =e 4 ae 8 | j Gross Prot 1194.00 7 ort $61,136.00 (18.1%) Other Experses (9 Ciuding o.ficers salaries of $22 529) Net Operating Profit After Taxes $60.927.00 $109 00 Fiscal 1968 Sales $389,987 00 Cost of Parts $32 3959 00 Gro's Profit $66 C2800 (16 9%) Other [xpenses (in chadeng olliers shames Of $26,520) $65,658 00 Net Gperating Loss After Taxes $769 00 Ford maintained a parts depot at Teterboro, New Jersey. Central Lin- coln Mercury provided FLM with an authorization so that FLM could pick up parts at Teterboro. Kills were ren- dered by Ford to Central, who would then segregate the bills relating to the FLM purchases from the bills relating to other purchases made by Central. In its dealings with Ford, Central was identified by a “dealer code number”— 1128:3. ln order to simplify the accounting for the FLM purchases, Central requested that a separate code number be given by Ford to Central for the parts which it purchased for resale to FLM. Ford agreed to this, and commencing In late 1968, Ford assigned a second code num- ber to Central —13430. This code num- ber was in the name of Central, but the billing address was the address of FLM in Yonkers The wholesale incentive allowance for crash parts was instituted in November 196%. At some time prior thereto, the Federal Trade Commission advised Ford that the distribution of crash parts to independent repair shops at higher prices than those charged to franchise dealers for use in the dealers’ repair shops violated Section 5 of the Federal Trade Commission Act. No formal pro- ceedings were instituted. The matter a-34 was settled when Ford agreed to allow a discount from dealer's prices for cer- tain classes of crash parts when the franchised dealers resold such parts for use by independent repair shops. The amount of this wholesale incentive al- lowance on crash parts was initially set at 20%. It applied to some, but not all, crash parts, The record shows that in 1971 there were a total of 10,000 kinds of crash parts sold by Ford, of which about 4.800 were eligible for a whole- sale incentive allowance. The agreement between Ford and the Federal Trade Commission did not ex- pressly provide whether or not a whole- sale incentive allowance should be al- lowed in the event of sales by a Ford dealer to a party such as FILM, acting us middleman between the Ford dealer and the independent repair shop. llow- ever, it has been stipulated that from the inception of the wholesale incentive al- lowance for crash parts until a Ford poly change ono mid-1971, a fran tised Ford dealer reselling crash parts to FLM was entitled to claim the wholesale incentive allowance on such resales. In 1968 Ford changed the amount of the discount used to reach the basic dealer price fromm 42% to 40°. Thus, after 1968, the basic dealer price on a part whose suggested retail price Was S1lu.00 was 56.00 instead of 35.80. In January 1970 Ford increased the whole- sule incentive allowance from 20 to 25°% for those crash parts to which the allowance applied a-35 The wholesale incentive allowance was obviously a great benefit to FLM. This is illustrated by returning to our ex- ample of the $10.00 crash part. The price paid by FLM’'s supplier, Central, was $6.00. However, when Central sold this part to FLM, Central received a Wholesale incentive allowance equal to 25°; (using the post-January 1970 per- centage) of the S600 of S150.) Thus Central paid only $4.50 for the part. Following the institution of the whole- sale incentive allowance, Central chary- ed FLM a markup of 3% of the basic dealer price—here $6.00. In the ex- ample this markup would be 1&¢. Thus FLM paid Central $4.68. As already noted, it appears that the wholesalk in- centive allowance was granted by Ford on only about half the crash parts sold by Ford Ob. iously, In the example of the $10.00 part, if the wholesale incen- tive allowance were not in effect, FLM would pay $6.18 With regard to FLM’'s resale prices to the repair shops, and the resale prices of FLM's competitors, the Ford dealers selling directly to the repair shops, there is no exploit evidence in the record as to what such prices were during the time PLM was receiving the benefit of the Wholesale incentive allowance The Federal Trade Commission had contem- pluted that, following the institution of the wholesale incentive allowance, the Ford dealers would reduce their prices on the covered parts to the same level pani by the lord dealers when these dealers sold at retail In the example of the Sloan part this would be S6.00. The Commission contemplated that, if the Ford dealer obtained a_ further wholesale incentive discount when the part was sold to independent repair shops, the dealer could afford to resell the part to the repair shops at the $6.00 price. a-36 Apparently there was substantial un- willingness on the part of Ford dealers to reduce the prices charged to the re- pair shops to the levels contemplated by the Federal Trade Commission. Since the present case does not involve a com- plaint by an independent repair shop regarding prices charged by a Ford dealer, this issue was not pursued in any depth at the trial. The only relevance of this matte lo the present case is to explain that after the institution of the wholesal Incentive allowance for crash parts in 108, the prices charged by the Ford dealers, at least in FLM's area of com- petition, do not appear to have been reduced substantially. It appears like- wise that FLM did not reduce its prices substantially, and that the principal ef- fect of the wholesale incentive allowances on FLM was to increase its profitabilit The following figures show the profit prtures of FILM after the win tive (liscanr Peeve cannes otfect Thiet Agen thy basesal ears rele ti ,ecur™s ending September 30 4 ae sa $ 4 « r $ + Diner Expense meg rr i r $19 Se Net Profit After ¢ $25 4:8 ASt 6 ure . ‘ ther E ape Liud } oO saiaries and cor missions of $62.7 $i- ‘ Net Profit After Tawes $22 847 ¢ 4 Fiscal 1971 Sales $654 382 00 Cost of Parts $448 264 00 Gross Profit $206,118.00 (31 5% Otner t «pens uding « e salaries of $83 < $1799 Net Profit After Taxes $18 699 00 st of F t $ . wr , t sea = . ¢ af 3 } rie pe of § $ 4232 Net ro , t c * It should be noted at this point tha ford markets a wide varicls of spare parts other than crash parts Thes other parts include spark plugs, filters carburetors, etc, and are marketed un der the Ford brand name and unde the tberand mares \utolite and “Motor Wi rid ? nl i ‘ ; | ; ? thet ? ‘ , phar had lnstituted pros ] ‘des ‘| t ti heave testal i? ‘ 1 i | . bs i ul t hy neoent iow ine were ru ing f her than had been mated T‘oe)'? Cris 1 i wi! sa NCweneays« i Vuitn rn? ! } mrad ior | LVIh's I ’ to “4 Ss bli vnhict $12.7 mi or related ‘ cras! i art bord ras cuhncerhned about POssSIUle large-scale Violation bey kde ol Ford Ss ruces regarding the wh le Salic IT centive allowance Ford's rules prohib- Thix ix a restated figure. chet ug trom 1! cost of parte the amount of $21. 807.00 whol ile imecentive allowance wetibend am Cosew] 19TS rnd ajplicnble to 1972 a-38 ited, among other things, payment of the allowance on parts sold by one Ford dealer to another Ford dealer cither di- rectly or through an intermediary. Ford was concerned about the possibility of one Ford dealer obtaining the allowance for purported use in wholesale sales, and then transferring the parts to an- other Ford dealer, who would sell them at retail In this imstance, the first Ford dealer would simply be a conduit, and the second Ford dealer would be geiting the benefit of the allowance ail- though not making the wholesale sales which the allowance was intended to cover Another “abuse” of the wholesale in contlive allowance, in Ford’s view, was the claiming of the allowance by Ford dealers for parts seld to insurance com- panies in commection with the repair of curs Ford regarded these as retail sules, eligible tor the allowance Still another abuse was claiming the whol Slale jamoerrntive gi bao cannes r" puarts which had not been purchased from Ford lt 19 Jeary 1 = ected 37 out al its ove dealer for audits toe determine the validity of the wholesale tneentive allow- ances the selected dealers had claimed. These 27 dealers were ones with unus- ually high claims for wholesale incentive aliowances Central Lincoln Moreury, FLM's sup- pulcr, Was one the dealers audited This audit covered not only the recoras of Central, but alse the records of FLY FLM consented to wh an examination, It is conceded by the Ford witnesses that the amount of incorrect wholerale allow- anee claims involving FLM was “mini mal” and that this was a “clean audit.” The audit covered the perion! from No- vember 1968 through September 19609 a-39 The finding of the audit report dated November 21, 1969 was that there were total “discrepancies” of $2,185.28, of which $1,458.34 related to sales to Ford dealers The balance of the diserep- ancies related to “return sales not de- ducted.” There were no discrepancies arising from sales to insurance com- panies or purchases from outsid SOUrCES For seme reason, the audit report does net disclose the total aniount of wholesale incentive allowances claime with reward to FILM fer the Novemlay 908 September L969 period, although ‘tutes that for the period Junuary through May 1:0 the the wuudit re prort total clams were $24,446. In any event the amount of the disci Ppancies Was COon- sidered minimal as compared with the total claims Following the completion of the 37 audits. Ford made a statistical evalua- tion in order to estimate the overall proportion of improper wholesale allow- ance claims for ail dealers. The est: mate was that for the period of the audit there were between $1.2 million and $2.1! million in improper claims out of a total of $445 million claims In the fail of 1970 theve- was a second audit of Central and FLM,. resulting in an audit report dated November 6 1970. The audit report stated that tl wholesale incentive claims “were tested and found to be generally weural properiy supported, and submitted in a cordance with the provisions of ti wholesale parts incentive program.” No discrepancies were noted a-40 During 1970 Ford undertook a _ re- consideration of the second parts code number which had been issued to Cen- tral for use in connection with its sales to FLM lhe second code number was discontinued as of the end of Januar 1971 (Central continued to sell to and to obtain the wholesale incentive allowance on sales to FLM until a sub sequent time, as will now be described. In July 1971 Ford amended its rules regarding the Wholesale incentive ailow- a ¢ Sith the eff hata kord dealer , , , ’ , , i i? i Nail ivts ‘ ’ ’ ’ ; . T ; prea il Pt | } i ‘] it . ‘ this lr) ‘ ’ TP nis wivet | +) , J ‘ i ! ‘ c ifiis haa Mgrs ree ra lige tri wi a"Maiit ceniive AiOow alice i if ‘ it thrives Cons ‘ i , ' +} +} ’ ; A tie . i ~ i c cou t) ‘ ; ; ~ I \i , rygrhit “ ‘ ‘ ‘ ~~ i ; ; i ¥ . ’ ‘ owe ; } ‘ il t : + FL) hy ‘ ‘ ' i that . = ‘ ’ r ' «i i i csd ‘ i . ‘ ix to | , ri vs . > . ’ ‘ a? rw al ‘ } ; ter “ 4 oa . ™ tT) . +; , . \ i . > > > pa avs 4 jis¢ ssji0 T ‘ ‘ matte wit t I : Paste , > Row is H i th: : ’ . cLatii my y’s\ 48 “i Pare | YU ri | connection with the amendment of the wholesale incentive allowance rules in July 1971 He testified that the discussions were in general terms, in order to arrive at a consistent overall policy applicable to all types of spar jaurts, including but not limited to crash parts Certain facts should be noted with re- spect to the three considerations de- scribed above. As ic the first. there was not the slightest indication that FILM was either actually or potentialls the kind of intermedury between Ford dealers which Ford was concerned about It is undisputed that PLM, aside fron an occasional sale to a Ford dealer in an emergency, sold | crasn parts 1 tirely to independent repair shops. Th “discrepancies” found in the 196% audit were minimal, and in the 1970 audit were nonexistent As lwo thi cond Comsideriation Ford's alleged desore to grant the whok Sui’ INcentlive ullowanes Onivy where hr rt dealers are performing what Ford cor ders to te the “wholesale function” this faises a q tron of law, to be di ssed hereafter. as to whethe Ford 1s wyally entitled to s¢ the wholesal contive allowame I . o} a Wa is te sure that a bFord dealer sell qgdirect 1 retaier rather tNMhan selling j rectis hrough a party sucn a riLLM \s to the third considerats bored i that Ford deak ‘ii 4 iM’ re | rs Ww i «ciain if pit foot ti Tia rord admits that whates: rn problem may have been, it relate ho “wut to ctl ish , rts mr te i J | Ford's evidence is that it Was conmcerTs im this regard alout Autolite and Moto; craft, where one channel of distributior involved distributors Ford allegedly believed that if Ford dealers were en- couraged to compete with the distrit a-42 tors in marketing Autolite and Motor- craft parts to wholesalers, then the Ford dealers would claim a distributor's allowance. Thus Ford was not willing to grant any ‘ncentive at all to Ford dealers in order to encourage them to sell these parts to wholesalers. Ford contends that, although this problem did not relate directly to FLM or to crash parts, Ford desired to have a uniform policy for the wholesale in- centive allowance applicable to all types of parts, rather than to have one policy for crash parts and a different policy for Autolite and Motorcraft parts. I must note here that, even as to the Autolite and Motorcraft parts, there is no showing that any Ford dealers were in fact demanding distributors’ allow- ances for sales of spare parts to whole- sulers In any event, as already described, Ford's rules were changed in July 197] lo provide that a Ford dealer could obtain the wholesale incentive allowance on parts which were sold direetly to independent repair shops, but could not sbtain the allowance for parts sold to h as FLM, who would resell harties sud them to the independent shops. Although Ford denies that this chang: tf policy was specifically directed to MLM, it should be noted that there was no other company besides FLM who had saccesstully established a business of acting as middleman between Ford dealers and independent repair shops in the sale of crash parts Apparently because of some adminis- trative crror on the part of Ford, the July 1971 change of policy was not im- med ately enforeed with regard to sales by Central to FLM. Central continued to sell crash parts to FLM and to re- ceive wholesale incentive allowances on such sales. a-43 In July 1972 the business of Central Lincoln Mercury was taken over by Atlas Lincoln-Mercury. It was agreed be- tween Atlas and FLM that Atlas would miuke sales to FLM in the same way that Central had done. At some point in the summer or fall of 1972 Ford awoke to the fact that Atlas was still claiming and receiving wholesale incentive allowances on sales of parts to FLM, contrary to Ford's current policy. Ford approached Atlas and proposed to charge huck some $24,- 000.00 in wholesale incentive allowances which had been paid to Atlas. Atlas argued that FILM was a valuable whole- sale account and urged that the whole- siule incentive allowance should be con- tinued with respect to sales to FLM. Atlas particularly resisted any charge- back of allowances already paid. These discussions between Ford and Atlas oc- curred in late October 1972. During this controversy, Atlas held up certain payments of wholesale in- centive allowances to FLM. As a result, FLM held up certain payments which were due to Atlas. Apparently at some pomt the Ford depot at Teterboro, New Jersey refused to deliver parts to FLM for the account of Atlas. FLM's attorney approached Ford re- questing the continuation of the whole- sale incentive allowance on sales to FLM and also complaining about the refusal of the Teterboro depot to deliver parts to FLM. Ford advised FLM's attorney that it would not neyotiate directly with a representative of FLM, but would negotiate only with its dealer. a-44 The upshot of these events was as follows. Ford persisted in its refusal to allow the wholesale incentive allow- anee oon paurts seld by Atlas, or any other dealer, te hLM. ord withdrew its claim of charge-back against Atlus The business relationship between Atlas and FLM was terminated All this occurred by the end of November 1972 Subsequently FLM_ has pur hased crash parts from -ertain Ford dealers without getting the benefit of the Wholesale incentive allowances Com- mencing in November 1972 FIM pur: chased parts from Thomas Motors and Parkview Lincoln-Mercury, both of Yonkers, New York, FLM paid Thomas and Parkview 5° over dealer cost FILM dealt with Thomas Motors until June of 19738, when a new owner of that avency terminated the account. It appears that FLAM continues to pur bat ne parts from Parkview Lincoln-Mercury to the present time In June 1972 FLM commenced put chasing parts trom Pleasantville Ford ‘of Pleasantville, New York. Again, EM pays Pleasantville 5° over dealer cost FILM continues to deal with Pleasantville to the present lume 5. PLM eontend not only that Pom wath drow so the viverloeles Gpeceetine geblenweanmee, deat that Tord clieeetedd Atlas to completely cemse doit business with eu M, 1 vegoet EAD Ss Tevbatierth cote the latter purr "The Mord witthes~es «cloeteyv Chaat mney teh oclreewtion wae eaverte, thane PT eroutit this clheiminl a-45 With respect to parts which FLM has purchased from Thomas Motors, Park- view Lincoln-Mercury and Pleasantville Ford, FLM has resold these parts to independent repair shops for 25°) off the suggested list or retail price. The withdrawal of the wholesale in- centive allowance had a detrimental ef- fect on FLM's profitability, The finan- cil results for the fiscal year ending September 30, 1973 were as follows: ristal 1973 6 ri09 $798.94? 00 Cost of Port $684,758 00 7Oss Profit $11° 18900 (14.5% Other £ apenses (in vding ofrecers salaries of $82.860 00 $199. 896.00 Net Loss ($85,707.00) As of November t, 1073, the salaries of the two offtecrs were reduced from SKHO0.00 por week each to $600.00) per week each (Contributions to pension funds were suspended, At the time of the trial the final figures of FLM for fiscal 1974 were not available ilowever, it was estimated that sales for fiscal 1974 were approxi- mately $604,000.00, The fiseal 1974 sales were down approximately $100,000.00 from the fiscal 1973 level. It was esti- mated that, at the end of fiscal 1974, FILM would have a deficit in its earned surplus account amounting to $18,607.00, ufter a $20,000.00 income tax refund This contrasts with an earned surplus of $81,913.00 as of September 30, 1972. FLM is suffering from a shortage of working capital which has restricted its ability to purchase inventory and equip- ment. With regard to price competition with Ford dealers for the business of repair shops, PLM is generally charging the repair shops the suggested retail price less 25°. McKee of FLM has textified, albeit in a general way, that FLM is experiencing price competition from some Ford dealers which FLM can- not afford to meet 1 find that PILAL has suffered tapare ment of its ability to compete effectively in the wholesale market of Ford crash parts, FLM has sought to prove that Ford's withdrawal of the wholesale incentive allowance resulted at least in part from complaints from Ford dealers competing with FLM and a desire by Ford to protect such denier There is no sufficient proof to support this point, However, it is clear that Ford understood in general that its discontinuance of the wholesale incentive allowance on crash parts sold ty parties such as FLAL would substan- tially impair the ability of such parties to participate in the distribution of Ford parts in competition with the regula Ford dealers, Also T cannot believe that the Ford personnel responsible for the change of policy respecting the wholesal incentive allowance did not have FLM apecifically in mind as a shining exampl of the type of successful middleman Ford was attempting to discourage. Conclusions of Law Robinson-Patman Act [1] Section 2(a) of the Robinson- Putman Act, 15 U.S.C. § 10a), provides in pertinent part: “(a) Tt shall be unlawful for any person engaged in commerce, in the course of such commerce, cither di- rectly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where cither or any of the purchasers involved in such discrimination are in commerce, where such commoditics are sold for use, consumption, or resale within the United States or any Ter- ritory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the ef- fect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person Whe cilhber grants or khnowinwely re. ecrves Che benmetit of such diserimina tion, or With customers of cither of them Ld It is not disputed that, since November 1972, Ford has charged to Ford dealers who sell to FLM a higher price than Ford charges for the same crash parts when Ford dealer sells directly to aii independent body shop Putting aside for the moment the question of the pur pose of Ford's price differentials, it would appear at least that the basic clements of a Section 2.4) violation are made out. Ford charges different prices to different purchasers—Ford dealers— for the same crash parts Ford asserts two defenses to the Robinson-Patman Act claim: First, that FLM has no standing to assert such a claim, since FLM is not a purchaser from Ford; second, that Ford's price dif- ferentials are not prohibited by Section 2(a) since they involve “functional dis- counts.” au. The Standing of FLM to Sue For its argument against FLM's stand- ing to sue, Ford relies upon dicta in a line of cases commencing with Klein v. Lionel Corp, 247 F.2d 13 (hrd Cir, 1956), The opinion of the Third Circuit contains the statement (pp. 14-15); “The decisions of many cases have crystalized the rule that an individual cun have no cause of action under Section 2(a) of the Clayton Act unless he os an actual purchaser from the person charged with the discrimina- tion.” (footnote omitted) This statement wus cited with approval in dicta in Barm & Blank, Ine. v. Phileo Corp, 148 F.Supp. 541, 548 (R.D.NLY M857): Boliek-Gillman Co. v. Continental Raking Co, 206 F Supp, 161, 154 OD Nes obi); United Banana Co. v, United Fruit Co., 245 F.Supp. 161, 168 (D.Conn. 1965). For reasons to be deseribed hereafter, Tam not at all certain that the Third Cireuit intended to lay down any rule about standing under Section 2(a) as sweeping fis the literal language of the dictum might indicate, loo any event, ] have concluded that any such rule is contrary to the intention of Congress us expressed in the Robinson-Patman and Clayton Acts. Although Section 2(u) defines the conduct which is illegal, it does not explicitly deal with the question of what parties do ov do not have standing to sue for violations, The statutory pro- vision expressly dealing with the question of standing ix Section 4 of the Clayton Act, 15 U.S.C. § 15, which provides: “Any person who shall be injured in his business or property by reason of anything forbidden in the anti- trust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an ayent, without respect to the amount in con- troversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.” On its face, Section 4 of the Clayton Act would appear to be broad enough to provide for a civil action by any party who could make out a factual case of injury to his “business or property” by reason of any violation of the anti- trust law. However, the courts have taken the view that Congress did not intend to confer such broad standing. See Calderone Enterprises Corp. v. United Artists Theatre Cireuit, Ine., 454 F.2d 1292 (2d Cir. 1971), cert. denied, 406 U.S, 930, 92 S.Ct. 1776, 32 L.Ed.2d 132 (1972) (“target area” doctrine ap- plied in Sherman Act case), (2) In dealing with the standing problem in the present case, the most compelling consideration is presented by the implications of Section 2(a) of the Robinson-Patman Act, indicating the intention of Congress as to the ambit of the statute's protection. I refer to the a-50 languaye of Section 2(a), which pro- hibits price discrimination between pur- chasers, oe where the effect of such discrimination may be —— injure, destroy, or prevent competition with any person who cither grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Aithough the forbidden conduct under Section 2(a) is discrimination “between different purchasers,” the language quoted above expressly recognizes that the competitive effects of such injury resulting from the discrimination may reach beyond the purchasers themselves. The statute, as quoted above, applies where competition is prevented (1) with au person who grants the discriminatory price, (2) a customer of the person who yrants a discriminatory price, (3) a person Who knowingly receives the bene- fit of a discriminatory price, or (4) a customer of «a person who knowingly re- ceives the benefit of a discriminatory price (‘onsidering this language in concrete terms, let us assume that a manufacturer M) sells to two wholesalers (WA and Wh WA resells toa retailer (RA), and WE resells to a retailer (RB) M dis- criminates in price in favor of WA, This lLenefit is passed on to RA. RB is in- jured in its competition with RA Applying Section 264) to this situa tion, there would appear to be a violation of the statute, because M has diserimi- nated in price between two purchasers, WA and WK, and because this discrimi nation has injured competition by RB with a customer (RA) of one who has received the benefit of the discrimination (WA) {3} It would seem to be perfectly clear that Congress intended in Section 2(a) to confer protection upon those parties who are injured in their compe- tition with the types of beneficiaries of the discrimination described in the statute. There is no doubt that such protected parties have standing under Section 2(a) to sue the party guilty of the discrimination. In our example, this would mean that RB would have the right to sue M, as well perhaps as WA and RA, if the latter parties had know- ingly received benefit of the discrimina- tion. This would be true even though RB is not a purchaser from M. In Perkins vw. Standard Oil Co. of California, 295 U.S. 642, 89 S.Ct. 1471, 23 L.ed.2d 590 (1969), plaintiff Perkins purchased gasoline and oil from Stan- dard. Perkins was both a wholesaler, and a retailer through his own Perkins sta- tions. Standard also sold to Signal, who resold to Signal’s subsidiary Western Hyway, who in turn, sold to Western's subsidiary, Regal. Standard’s prices to Signal were lower than its prices to Per- kins, and the benefit of the discrimina- Lion was passed on to Regal. Regal op- erated service stations which were able to undersell Perkins’ service stations. The Supreme Court held that Perkins had a valid claim for this competitive injury. The Court noted (p. 647, 89 S.Ct. p. 1874): “Here, Perkins’ injuries resulted in part om impaired competition with a customer (Regal) of a customer ( West- ern Hyway’) of the favored purchaser (Signal).” The Court went on to state (p. 648, #o S.Ct. p. 1874): “Here Standard discriminated in price between Perkins and Signal, and there was evidence from: which the jury could conclude that VDerkins was harmed competitively when Signal’s price advantage was passed on to Perkins’ retail competitor Regal. These facts are sufficient to yive rise to recoverable damages under the Robinson-Patman Act. “Before an injured party can _ re- cover damages under the Act, he must, of course, be able to show a causal connection between the price discrimi- nation in violation of the Act and the injury suffered. This is true regard- less of the ‘level’ in the cha... of dis- tribution on which the injury occurs.” See dso F. T. C. v. Sun Oil Co., 371 US. 505, 514, 83 S.Ct. 358, 9 L.Ed.2d 466 (1963). [4) The Perkins case does not. of course, expressly deal with the question of the standing of a non-purchaser to sue under Section 2(a) for competitive injury resulting from dis [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_1092%3A1. Public record. Not legal advice.