Appendix — Lupia v. Stella D'Oro Biscuit Co.

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} FEB 12 1979

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No.

3n the

Supreme Court of the United States

Ootroser Term, 1978

EDWARD Q. LUPIA,

Petitioner,

vs.

STELLA D’ORO BISCUIT CO., INC,

a New York corporation,

Respondent.

APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT.

Bernarp M. Kapitan

One Concourse Plaza

4711 Golf Road (Suite 800)

Skokie, Illinois 60076

Counsel for Petitioner

Rusen, Kaptan & Rosen

4711 Golf Road (Suite 800)

Skokie, Illinois 60076

312-679-6100

Of Counsel

The Scheffer Press, Inc.—(312) 263-6850

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A

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‘

INDEX TO APPENDIX

PAGE

Appendix A

(Opinion Of The U.S. Court Of Appeals herein) .... la

Appendix B

(Opinion Of The U.S. District Court herein) ........ 18a

No. 77-2142

EDWARD Q. LUPIA,

Plaintiff -A ppellant,

v.

STELLA D’ORO BISCUIT CO., INC.,

Defendant-A ppellee.

Appeal from the United States District Court for the

Northern District of Illinois

No, 72-C-738—Jor, M. Fiaum, Judge

Argued September 15, 1978—Decided November 15, 1978

Before Sprecuer, Circuit Judge, Nicuois, Judge,* and

Bauer, Circuit Judge.

Nicuots, Judge. Plaintiff-appellant, Edward Q. Lupia,

was an exclusive distributor of defendant’s ethnic bakery

products in the Chicago metropolitan area from 1961 un-

til 1972. Defendant-appellee, Stella D’Oro Biscuit Com-

pany, Ine, is a New York corporation. In 1972, Lupia

brought an action against Stella D’Oro, alleging that Stella

D’Oro’s marketing practices had violated various pro-

visions of the Federal antitrust laws, specifically section

1 of the Sherman Antitrust Act, 15 U.S.C. § 1, section 3

of the Clayton Act, 15 U.S.C. § 14, and sections 2(a) and

2(c) of the Robinson-Patman Act, 15 U.S.C. §§ 13(a), (¢).

Plaintiff seeks monetary relief under section 4 of the

Clayton Act, 15 U.S.C. § 15, the remedial provision allow-

ing recovery of treble damages by “Any person who shall

be injured in his business or property by reason of any-

thing forbidden in the antitrust laws * * *.” The terms

of the agreements between the parties and the defendant’s

allegedly illegal practices are detailed below.

* Judge Philip Nichols, Jr., of the United States Court

of Claims is sitting by designation,

—

Both plaintiff and defendant filed motions for sum-

mary judgment in the district court. The motions were

based on a substantial record assembled by discovery

and affidavits, establishing beyond the mere allegations

of the pleadings, what the plaintiff was and was not able

to prove. Judge Flaum granted summary judgment to

defendant on all four counts of the complaint, and denied

summary judgment to plaintiff. We affirm.

Before discussing the contentions of the parties regard-

ing the antitrust claims, it is necessary to comment on

the role of a summary judgment in antitrust eases. In

any type of litigation, the standard for granting sum-

mary judgment is strict. In Poller v. Columbia Broad-

casting System, Inc., 368 U.S, 464 (1961), citing Sartor v.

Arkansas Natural Gas Corp., 321 U.S. 620, 627 (1944),

the Supreme Court enunciated that standard, declaring

that summary judgment was proper.

** * “only where the moving party is entitled to a

judgment as a matter of law, where it is quite clear

what the truth is, * * * [and where] no genuine issue

remains for trial * * *.” 368 U.S. at 467.

Poller is the classic case cited for the proposition that

courts should exercise extreme caution when deciding to

grant or deny summary judgment in antitrust cases. In

Poller, plaintiff alleged that CBS’s cancellation of an in-

dependent UHF station’s network affiliation was part

of a conspiracy to restrain UHF broadcasting in the

Milwaukee area. The majority in Poller believed that

plaintiff should be given the opportunity to pursue dis-

covery and attempt a shawing of conspiracy at trial. Mr.

Justice Clark’s majority opinion, in reversing the D.C.

Circuit’s grant of summary judgment, stated that:

* * * We believe that summary procedures should

be used sparingly in complex antitrust litigation where

motive and intent play leading roles, the proof is

largely in the hands of the alleged conspirators, and

hostile witnesses thicken the plot, * * * [Footnote

omitted—368 U.S. at 473.]

— §a —

But this court and other circuit courts have not inter-

preted Poller or similar statements by other courts to

preclude use of summary judgment in antitrust litiga-

tion. See, e.g., Crest Auto Supplies, Inc. v. Ero Mfg. Co.,

360 F.2d 896 (7th Cir. 1966). The issue in Crest was

whether the court could decide if the parties were in

pari delicto. Stating that the court did not quarrel with

the Poller view that summary judgment should be used

sparingly in cases where “motive and intent play leading

roles,’ this court affirmed grant of summary judgment

despite Poller because the factors cited in Poller (proof

of subjective states of mind, genuine issues of material

fact) were not present there. 360 F.2d at 899-900, (em-

phasis in original),

A similar situation exists in the present case. The in-

tent of Stella D’Oro is not at issue. Rather, the issue is

whether plaintiff has alleged any facts demonstrating a

violation that “fits” within the requirements for an anti-

trust recovery, a question of law that can be answered

by the court. Compare ALW, Inc. v. United Air Lwes,

510 F.2d 52 (9th Cir. 1975). Here the Ninth Cireuit af-

firmed grant of summary judgment for defendant on an-

titrust claims. The court held that plaintiff had merely

alleged the existence of a “contract, combination, or con-

spiracy,” under section 1, and that once defendant rebuts

such an allegation by affidavit, plaintiff must set forth

factual support of the conspiracy’s existence in order to

withstand defendant’s motion for summary judgment. The

court also dismissed plaintiff’s claim under section 2 of

the Sherman Act, since plaintiff showed “no monopoly

power or dangerous probability thereof’’ existing In the

relevant market. 510 F.2d at 57.

Although the strict standards for grant of summary

judgment, and the complex legal and factual nature of

antitrust cases have made many courts reluctant to grant

summary judgment in antitrust cases, technically there

is no requirement that judges exercise greater caution

in granting summary judgment in these cases than

in any other. The Advisory Committee note accompanying

Fed. R. Civ. P. 56 (1938) states that “[t]his rule [gov-

—_

erning summary judgment motions] is applicable to all

actions.” (emphasis supplied.)

Indeed, the very nature of antitrust litigation would

encourage summary disposition of such cases when per-

missible. Not only do antitrust trials often encompass a

great deal of expensive and time consuming discovery

and trial work, but also, (without intending any slur on

plaintiff here), the statutory private antitrust remedy of

treble damages affords a special temptation for the in-

stitution of vexatious litigation, see Poller, swpra, at 474

(Harlan, J. dissenting). The ultimate determination, after

trial, that an antitrust claim is unfounded, may come too

late to guard against the evils that occur along the way.

Judge (now Chief Judge) Skelly Wright, in a libel case,

Washington Post Co. v. Keogh, 365 F.2d 965 (D.C. Cir.

1966), noted that:

** * Summary judgment serves important functions

which would be left undone if courts too restrictively

viewed their power, Chief among these are avoidance

of long and expensive litigation productive of nothing,

and curbing the danger that the threat of such litiga-

tion will be used to harass or to coerce a settlement.

** * (7d. at 968.]

In Mintz v. Mathers Fund, Inc., 463 F.2d 495, 498 (7th

Cir. 1972), this court has stated:

** * Appellate courts should not look the other way

to ignore the existence of the genuine issues of ma-

terial facts, but neither should they strain to find the

existence of such genuine issues where none exist.

[Citation omitted. ]

As there held, mere recitation of antitrust claims in a

complaint does not render that complaint immune from

summary disposition, if uncontradicted facts show other-

wise. If a trial would serve no useful purpose, summary

judgment is proper. Solomon v. Houston Corrugated Box

Co., Inc., 526 F.2d 389, 393-94 (5th Cir. 1976), Assuming

then, as is proper in summary judgment cases, that all

facts as stated by the party opposing grant of summary

—

judgment are true, we now examine the case at hand to

determine if defendant is entitled to summary judgment.

Price Discrimination Among Retailers

Count I of plaintiff’s complaint alleges that defendant

granted favored retail chain stores a 5 percent discount

on the retailer’s wholesale price charged, and then charged

back the cost of that discount to the plaintiff-distributor.

Defendant’s system operated as follows: plaintiff gen-

erally bought bakery products from defendant for the

retailer’s wholesale price (RWP) minus 26 percent. Plain-

tiff sold and delivered the products to retail food stores

through driver-route salesmen employed on a commission

basis. The salesmen would collect the payments from the

retailers, and return them to plaintiff. With chain stores,

however, a different system was used. Plaintiff would

still buy the goods, but the salesmen-drivers did not col-

lect payment from the retailers; rather, they returned

an invoice to plaintiff, taking their commissions. Plaintiff

sent the invoice to defendant, and defendant billed the

chain stores directly, deducting a discount of generally

5 percent. In its monthly billings to plaintiff, defendant

charged him for the 5 percent discount.

Since the defendant did not make this “discount” avail-

able to an independent purchaser, argues plaintiff, it vio-

lated the price discrimination prohibitions of the Robin-

son-Patman Act, sections 2(a) and 2(c), 15 U.S.C. §$§

13(a) and (c). Section 2(a) of the Act prohibits discrimi-

nation in price between different purchasers of commodi-

ties of like grade or quality where:

*** [T]he effect of such discrimination may be sub-

stantially to lessen competition or tend to create a

monopoly in any line of commerce, or to injure, de-

stroy, or prevent competition with any person who

either grants or knowingly receives the benefit of

such discrimination, or with customers of either of

them: * * *. [15 U.S.C. $ 13(a).]

In dismissing the 2(a) claim, Judge Flaum ruled that (a)

plaintiff lacked standing to challenge any price discrimi-

— €6a —

nation imposed on retailers, and (b) plaintiff had alleged

no injury to himself or his business that resulted from

defendant’s discriminatory practices. The reason given for

lack of standing was that the plaintiff was not within the

“target area,’ the proper parties with standing being the

retailers, not parties here. As to lack of injury, Judge

Flaum says plaintiff failed to show he could have sold

to the chain stores if the 5 percent discount had not been

granted them. Thus, plaintiff does not have any claim

under section 2(a).

In holding that plaintiff was not within the “target

area,” Judge Flaum was not exactly coining a phrase.

The authority he refers to, Multidistrict Vehicle Air Pol-

lution M.D.L. No. 31 v. Automobile Manufacturers Ass’n,

Inc., 481 F.2d 122 (9th Cir.), cert. denied sub nom. Morgan

v. Automobile Mfg. Ass’n, 414 U.S. 1045 (1973), carefully

and exhaustively analyses the various cireuit positions on

“standing to sue,” counting the number that purport to

measure standing by the “target area” test and those

that require that the statutory “injury” be a “direct”

one. In n.7, p. 127, that court expresses uncertainty about

the Seventh Circuit position but considers it closer to

“target area” than any other. As stated in Multidistrict

Vehicle Air Pollution, swpra at 125, the purpose of both

standing rules is to limit the “availability of section 4

relief only to those individuals whose protection is the

fundamental purpose of the antitrust laws.” It would

appear the circuits all view the treble damages suit as

too lethal a cannon to put in the hands of anyone who

has suffered only an “indirect,” “secondary,” or “remote”

injury. Since Multidistrict Vehicle Air Pollution, supra,

which expresses doubt about the position of the Fifth

Cireuit, that circuit has come down hard for the “target

area” test in Jeffrey v. Southwestern Bell, 518 F.2d 1129

(1975). The recent Supreme Court decision, Illinois Brick

Co. v. Illinois, 431 U.S. 720 (1977), does not speak ex-

pressly in terms of standing to sue, but at any rate holds

that a conspiracy to fix prices of cement building blocks

to general contractors cannot be sued on under section

4 by owners whose cost of new construction may be in-

=—_ 7g, =

directly enhanced, none of the contractors being par-

ties to the suit. Likewise, not only must the injury

be direct, but it must be of the kind the antitrust laws

were written to guard against. This was fatal to the suit

under section 4 in Brunswick Corp. v. Pueblo Bowl-O-

Mat, 429 U.S. 477 (1977), where Brunswick Corp. had

purchased certain failing bowling centers to keep them

in business, and the injury to the plaintiffs, independent

bowling centers, was loss of the additional business and

profit that would have inured to them if the failing cen-

ters had been allowed to fail, and thereby had ceased to

compete. Here again the matter is not stated in terms of

standing to sue. The courts demand; either in terms of

a standing doctrine or in terms of a requirement of anti-

trust damages (as in Brunswick, supra), that recovery be

confined to those who have been injured by restraints

imposed by defendant on competitive forces in the econ-

omy. GAF Corp. v. Circle Floor Co., 463 F.2d 752 (2d

Cir. 1972), cert. dismissed, 413 U.S. 901 (1973). One com-

mentator has noted that the courts are uncertain as to

the precise relationship between “standing” and the re-

quirement of “antitrust damages.” M. Handler, Changing

Trends in Antitrust Doctrines: An Unprecedented Su-

preme Court Term—1977, 77 Cotum. L. Rev. 979, 996

(1977). The Ninth Cireuit in John Lenore & Co., v. Olym-

pia Brewing Co., 550 F.2d 495 (9th Cir. 1977), seems to

merge the requirement of “antitrust injury” with the

general standing barriers which all antitrust planitiffs

must overcome. Judge Hayes in the GAF case, supra,

implies that “standing” and “antitrust damages” are two

different methods of viewing the requirement of “injury

to business or property” for section 4, purposes, when he

states :

** * [Whether GAF is viewed as not having “stand-

ing to sue” for these alleged violations of the anti-

trust laws, or, is viewed as not having sustained anti-

competitive damages from the particular acts alleged,

the result under § 4 is the same, and the dismissal of

the complaint for failure to state a claim upon which

relief can be granted was correct. [463 F.2d at 759.]

— ae

The Supreme Court’s Illinois Brick Co. case, supra,

reversed a decision of this court, State of Illinois v. Am-

press Brick Co., 536 F.2d 1163 (1976), which treated the

matter as one of standing to sue and held that one who

suffered an indirect injury could have standing. We

relied on Malamud v. Sinclair Oil Co., 521 F.2d 1142, 1151

(6th Cir. 1975), the authority of which case would seem

now to require reconsideration.

One of the beauties of modern summary judgment is

that it need not be confined to threshold issues such as

standing. It may invoke any reason why a claim or

defense must succeed or fail. Thus, whatever reasons

there may once have been to attack “injury” or “target

area” problems early by saying they relate to standing,

on summary judgment this classification loses its urgen-

cy, and becomes more or less moot. It would not do

plaintiff any good to persuade us to select, as Judge

Flaum did, among the various section 4 standing and in-

jury doctrines. It is clear plaintiff could not prevail un-

der any of them. The independent retailers, who did not

enjoy the 5 percent rebate, solely occupied the “target

area” and plaintiff improperly sues as surrogate for

them. As regards “antitrust injury,” plaintiff does not

pass the Brunswick test. The defendant’s anticompetitive

action, the 5 percent rebate to chain stores, would have

been equally anticompetitive if plaintiff had not been re-

quired to absorb it. That he was so required is, there-

fore, not an ‘‘antitrust injury’’ but one reflecting harsh

treatment of a distributor by a manufacturer. If de-

fendant had absorbed the rebate, there would have

been no injury, yet the anticompetitive nature of its

policy would not have been affected one iota. So it is not

an “antitrust injury.” Judge Flaum found that plaintiff

was unable to raise an issue of fact that it could have

sold to the chains without the rebate. This serves to dis-

tinguish Greene v. General Foods Corp., 517 F.2d 635

(5th Cir. 1975), cert. denied, 424 U.S. 942 (1976),

otherwise quite like this case on its facts, and heavily

relied on by plaintiff here. It was found Greene, a dis-

tributor, could have sold to his fixed price customers at

— Ia —

higher prices than General Foods would allow, and with

higher prices there, Greene could have reduced his

prices to unfixed price accounts and thereby competed

more effectively with other distributors. Jd. at 643.

Though the case was decided after trial and “standing”

terminology is not used, it is clear Greene placed himself

within the “target area” and demonstrated “antitrust in-

jury’’ in a manner not equalled by the plaintiff herein.

There is no further issue of fact to be decided: the issue

is whether the facts as plaintiff presented them, taking

plaintiff’s version as true, allow plaintiff to assert an an-

titrust claim under section 2(a). We hold that he may not

and affirm the grant of summary judgment to defendant

on the 2(a) claim.

The Brokerage Claim in Count I

Judge Flaum also ruled that plaintiff had not shown

that the 5 pereent discount was “in lieu of brokerage” as

required to establish a violation of section 2(c) of the

Robinson-Patman Act. Section 2(¢c) prohibits the pay-

ment or acceptance of a “commission, brokerage or other

compensation, or any allowance of discount in lieu

thereof,” except for services rendered in connection with

a sale of goods. 15 U.S.C. § 13(c).

Section 2(c) does not, as plaintiff maintains, cover all

indirect price concessions. Section 2(c) was enacted in

order to prevent discriminatory rebates granted large

sellers under the guise of “brokerage fees” never actual-

ly earned. Congress outlawed unearned brokerage fees

per se in order to force sellers to confine their dis-

criminatory practices to those dealings whose effect

could he more readily measured by the competitive

yardstick of the 2(a) test. Federal Trade Comm. v.

Simplicity Pattern Co., 360 U.S. 55, 68-69 (1959); see

also H.R. Rep. No. 2287, 74th Cong., 2d Sess. 16 (1936).

But nowhere has plaintiff shown how these discounts are

brokerage or discounts in lieu thereof. The discount is

straightforward and not disguised in any manner. Thus,

a per se rule eliminating examination of competitive ef-

fects, used in brokerage cases and discounts in lieu of

— as

brokerage, where anticompetitive practices and effects

are hard to identify, is neither necessary nor proper

here. Thus, we return to the 2(a) test, which requires an

examination of competitive effects on plaintiff, effects

which plaintiff fails to demonstrate.

The Sherman Act Allegation in Count I

Plaintiff objects to Judge Flaum’s dismissal of the

Sherman Act section 1 claim allegedly lurking in Count

I.

Plaintiff argues that the 5 percent discount con-

stituted an illegal form of price fixing because the dis-

counts were “a fixed and integral component of” the

“fixed” wholesale price. Plaintiff asserts that a price-

fixing claim was inherent in paragraph 20 of its com-

plaint. But paragraph 20 does not even cite Sherman

section 1, and prior picadings and rulings of Judge

Flaum indicate that the price-fixing violation alleged in

Count I had been understood to be excluded from this

action both by the parties and the court. In any case, the

lack of standing and antitrust injury are as much fatal

to this claim as it has been shown to be to the other Count

I claims.

Price Discrimination Among Distributors

The gravamen of plaintiff’s Count III claim is that

defendant granted a 29 percent trade discount to some

distributors and a 26 percent discount to plaintiff, thus

committing price discrimination in violation of section

2(a) of the Robinson-Patman Act. Plaintiff’s claim fails

as he does not allege that any competition existed

between the favored and disfavored wholesalers.

As discussed above with regard to standing, the

maintenance of healthy competition is the foeus of the

antitrust laws and remedies. Plaintiff notes that section

2(a) prohibits price discrimination when the effect may

be “substantially to lessen competition or tend to create

a monopoly in any line of commerce.” 15 U.S.C. § 13(a),

—Ila—

Therefore, he argues, he need only show a general threat

to competition in any market to effect his own recovery.

But plaintiff’s argument ignores the case law requiring

that, for a private antitrust action, a plaintiff who is a

customer of the discriminating defendant and not a

direct competitor of that defendant (a plaintiff involved in

“secondary line competition”) has standing only to raise

those sales which are injurious to his competition. Mayer

Paving & Asphalt Co. v. General Dynamics Corp., 486

F.2d 763 (7th Cir. 1973), cert. dented, 414 US. 1146

(1974). Plaintiff must show that he competes with those

customers receiving the favored prices. Chicago Sugar

Co. v. American Sugar Refining Co., 176 F.2d 1, 7 (7th

Cir. 1949); 16H J. Von Katrnowskt, Business OrGANI-

zations: AntITRUsT Laws AND Trape Recutations 968.04

(1978), and eases cited therein.

Cases cited by plaintiff in support of the proposition

that plaintiff need not show that his own competitors are

receiving a favored price are cases where the plaintiff

was a competitor of the very defendant who is charging

the discriminatory prices. In these so-called “primary

line” cases, the parties to whom defendant is granting

favored prices need not be direct competitors of the plain-

tiff, since it is assumed that in that situation, defen-

dant has the ability to seduce customers of plaintiff with

an offer of lower prices while maintaining profits by a

discriminatory charge of higher prices to “steady” or

obligated customers. But this advantage of defendant is

of n> consequence to plaintiff if plaintiff does not com-

pete with the defendant.

Atlas Building Products v. Diamond, 269 F.2d 950 (10th

Cir. 1959), cited extensively in plaintiff’s brief to sup-

port the argument that he need not show his own com-

petitive situation, is really a “primary line” case con-

cerned with geographic price differentials. And Judge

Flaum points out that the court in that case actually

states that primary line cases are clearly soa

guishable from suits filed by a local purchaser agains

a manufacturer, where competition between purchasers

ite

is of course essential to actionable price discrimination

7° 9.” 269 F.2d at 954.

Therefore, plaintiff must allege and demonstrate that

he was a disfavored purchaser who competed with

favored purchasers, and was injured as a result, And since

plaintiff has not adequately challenged the validity of

defendant’s exclusive territorial restraints (see discus-

sion of Counts II and IV below), plaintiff must prove

this competition to obtain a remedy despite the fact that

defendant may have imposed or encouraged territorial

restraints that may have made competition among dis-

tributors unlikely.

Plaintiff alleged that he did show harm resulting from

“secondary price discrimination” since he lost sales in

Benton Harbor, Michigan, where another distributor

had a better discount. Questioning at oral argument

attempted to elicit the scope and breadth of that com-

petition, and from that questioning, it seems that the

right to an exclusive dealership in the Benton Harbor

area was in dispute, and that defendant finally told plain-

tiff that it was operating outside of its territory.

More importantly, though, plaintiff could not detail the

extent of its activity in the Benton Harbor area, the

customers he would have been able to deal with absent

the discriminatory price, or an estimate of sales actually

lost. Thus, plaintiff has not alleged that its sales lost due

to secondary price discrimination were more than “de

minimus,” or that they even potentially existed. Yet this

court has required such a showing, for if there exists

only “de minimus” or sporadic competition, it is unlikely

that a “lessening of competition” or “tendency to create a

monopoly” will oceur. Universal Rundle Co. v. Feder-

al Trade Comm., 382 F.2d 285, 287 (7th Cir. 1967);

Whitaker Cable Corp. v. Federal Trade Comm., 239 F.2d

253, 256 (7th Cir.), cert. denied, 353 U.S. 938 (1956).

Finally, plaintiff’s contention that its competition with

defendant in sales to institutional buyers resulted in a

showing of ‘‘primary line discrimination’’ for which re-

covery is possible, fails. The exclusive distributorship

— 13a —

did not apply to sales to “institutions,” i.e., airlines,

restaurants, ete. Both plaintiff and defendant sold to

them, or rather to jobbers who sold to them, in the same

Chicago area. First, this argument was initially made in

plaintiff’s opposition to the summary judgment motion,

and being unnecessarily delayed, is not properly before

this court. Second, there is no showing here of the extent

of lost sales, and no connection is demonstrated between

defendant’s discriminatory sales to other territorial dis-

tributors, and defendant’s ability or intent to prevent

plaintiff from obtaining a superior competitive position

vis a vis defendant in institutional sales. In Crest Auto

Supplies Inc., v. Ero Mfg. Co., 360 F.2d 896, 901 (7th Cir.

1966), the fact that plaintiff failed to allege “any

competitive effect or competition in any sense, nor set

forth any facts concerning the unspecified discrimina-

tion from which such competitive effect may be in-

ferred,” resulted in dismissal of the Robinson-Patman

claims from plaintiff’s complaint. In addition, Judge

Flaum thought it inherently impossible for illegal com-

petition to exist where a manufacturer competes directly

with his own distributor. That is his privilege, according

to Chicago Sugar Co. v. American Sugar Refining Co.,

supra, at 10.

Restrictive Agreements

Counts II and IV are both hased on agreements

between plaintiff and defendant, agreements which

plaintiff alleges impose illegal restrictions on him. Count

II involves an agreement between plaintiff and defen-

dant in which plaintiff was forbidden from selling

bakery products manufactured by anyone other than

defendant, unless that “foreign” bakery product was

bought through the defendant. Plaintiff alleges that this

is a restraint and product “tie in” that is a per se viola-

tion of Sherman § 1 and Clayton § 3, 15 U.S.C. §§ 1, 14.

Damage claimed is the difference between the higher

prices plaintiff paid defendant for outsiders’ bakery

products (a 26 percent trade discount) and the lower

price that would have been paid had plaintiff bought

—l4a —

directly from the manufacturer (a 40 percent trade dis-

count). Damages total $16,800.

Count IV concerns both this restriction and a non-com-

petition agreement under which plaintiff agreed (1)

not to sell defendant’s products outside its defined

territory, and (2) to refrain from competition with defen-

dant within a 100-mile radius of plaintiff’s place of

business for a period of one year after termination of his

distributorship. Count IV also avers that the exclusive

dealing agreement alleged in Count II, taken in conjune-

tion with the price-fixing and marketing restraints im-

posed by defendant, was part of an illegal price-fixing

scheme and/or pattern of practice of defendant to con-

trol and fix the products’ prices and the distributive

practices under which they were sold. In Count IV,

plaintiff seeks damages of $35,000 by reason of the ex-

elusive dealing agreement and $20,00C iue to the cove-

nant not to compete. Plaintiff also sought injunctive relief

in his initial complaint.

The allegations requesting an injunction against defen-

dant’s vertical price-fixing schemes were dismissed from

Count IV by Judge Austin in his order of October 29,

1974, since plaintiff had not alleged any threat of present

or future loss to himself as 15 U.S.C. § 26 requires. In

that order, Judge Austin provided that ‘‘the other aspects

of Count IV * * * will stand.’’ These ‘‘other aspects’’ are

the only remaining issues for discussion here; they are

the exclusive dealing agreement and the covenant not to

compete. The price-fixing claim is not properly before

this court.

Plaintiff is not entitled to damages due to these agree-

ments because he fails to allege violations of section 3 of

the Clayton Act and section 1 of the Sherman Act that

would entitle him to damages. Section 3 of the Clayton

Act makes wrongful any contract for the sale of goods, or

a fixed price or rebate on such a contract, on condition

that the lessee or purchaser shall not use or deal in goods

of a competitor of the lessor or seller, where the effect of

such a sale, lease or contract would tend to create a

— 15a —

monopoly in any line of commerce. 15 U.S.C. 4 14. And

courts have held that agreements with manufacturers that

limit distributors’ sales to products made by the manu-

facturer are not per se violations of antitrust law. Such

an agreement is barred by section 3 of the Clayton Act

only if its effect ‘‘may be to substantially lessen compe-

tition or tend to create a monopoly in a line of commerce.”’

In White Motor v. United States, 372 U.S. 253 (1963),

summary judgment had been granted plaintiff below, on

the theory that defendant’s franchise contracts were per

se violations of Sherman Act §§ 1 and 3. The Supreme

Court reversed and remanded, saying:

* * * We do not know enough of the economic and

business stuff out of which these arrangements [ver-

tical territorial limitations] emerge to be certain

{that their sole purpose is to stifle competition].

They may be too dangerous to sanction or they may

be allowable protections against aggressive competi-

tors or the only practicable means a small company

has for breaking into or staying in business [citations

omitted] * * *. We need to know more than we do

about the actual impact of these arrangements on

competition to decide whether they have such a ‘‘per-

nicious effect on competition and lack * * “any re-

deeming virtue’’ [Northern Pacific Ry. v. United

States, 356 U.S. 1, 5 (1956)] * * *. [372 U.S. at 263]

This reasoning holds true today. Pitchford v. Pepi,

Inc., 531 F.2d 92 (3d Cir. 1975), cert. denied, 426 U.S. 935

(1976); Giant Paper & Film Co. v. Albermarle, 430

F.Supp. 981, 984 (S.D.N.Y. 1977).

Therefore, plaintiff must allege some facts to demon-

strate that defendant’s marketing practices foreclosed

competitors of the defendant from a substantial market.

But as defendant noted, the trial court found that plain-

tiff was totally unaware of the share of the relevant

market foreclosed by the exclusive dealing agreement. The

court in Becker v. Safelite Glass Corp., 244 #.Supp. 625,

639 (D. Kan. 1965), granted summary judgment for this

— 16a —

reason alone. See also Mercantile National Bank of Chi-

cago v. Quest, Inc., 303 F.Supp. 926, 934-35 (N.D. Ind.

1969) (plaintiffs had not proved an antitrust violation

since they presented no evidence of plaintiffs’ position in

the relevant market).

Also, clauses restricting distributors after termination

of contracts are legal unless unreasonable as to time or

scope. Snap-On-Tools Corp. v. Federal Trade Comm.,

321 F.2d 825, 837 (7th Cir. 1963). Plaintiff’s complaint

never alleges that the distributorship restriction was un-

reasonable; thus, he has not claimed that this restriction

violates the antitrust laws in any manner.

Finally, there is no illegal tie-in arrangement in this

case. Tying agreements were made illegal under the

Sherman Act to prevent the anticompetitive occurrence

of a party dominant in one market (the tying market)

controlling another market (the tied market) via his com-

petitive advantages in the tying market. Times Picayune

Publishing Co. v. United States, 345 U.S. 594, 605 (1952).

Given this policy, then, for a party to establish a violation

of the antitrust laws using a tying arrangement theory,

he must demonstrate that there exists (a) two separate

markets for the tied and tying product, Siegel v. Chicken

Delight, Inc., 448 F.2d 43 (9th Cir.), cert. denied 405 U.S.

955 (1971); and (b) a requirement that plaintiff buy a

tied product as a condition of obtaining access to or a

concession from defendant in the tied market. Capital

Temporaries, Inc. of Hartford v. Olsten Corp., 506 F.2d

658 (2d Cir. 1974); Holleb & Co. v. Product Terminal

Cold Storage Co., 532 F.2d 29 (7th Cir. 1976). There is

only one market here (ethnic bakery products) and plain-

tiff alleges no instance when defendant forced him to

purchase one product as a condition of buying another.

In determining that defendant is entitled to summary

judgment on all four counts, we realize that the plaintiff

may have been harmed due to defendant’s business prac-

tices. But plaintiff cannot recover under the antitrust

laws, because he has not raised any issue of fact indicat-

— 17a —

ing that defendant’s anticompetitive practices caused in-

jury to plaintiff’s competitive position. Plaintiff must

raise these issues of fact successfully to oppose defen-

dant’s motion for summary judgment. It is the focus on

the maintenance of competition that is the basis for the

antitrust laws, their remedies, and the requirements for

parties to recover under them. Plaintiff fails to raise any

issue of fact showing that he meets the requirements for

antitrust recovery, so the decision of the lower court

granting summary judgment to defendant is

AFFIRMED.

A true Copy:

Teste:

POORER EEE OHHH FOES EEE EEE EO EE EEE EEE EHE EEE ESET ES EEE EEE OSES EES

Clerk of the United States Court of

Appeals for the Seventh Circuit

— 18a —

mE

APPENDIX B

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

No. 72 C 738

EDWARD Q. LUPIA,

individually and for and on behalf, pursuant to Rule 23 of

the Federal Rules of Civil Procedure, of other distributors

of Stella D’Oro Biscuit Co., Inc., a New York corporation,

similarly situated, as a class,

Plaintiff,

vs,

STELLA D’ORO BISCUIT CO., INC.,

a New York Corporation,

Defendant.

MEMORANDUM OPINION

JoeL M. Fravum, District Judge:

Before the court are cross motions for summary judg-

ment filed pursuant to Fed. R. Civ. P. 56. Plaintiff, a

former exclusive distributor of defendant, Stella D’Oro

Biscuit Co., Inc. which is a New York corporation engaged

in the manufacture and sale of cookies, biscuits and bread-

sticks, filed this antitrust action alleging violations of the

Robinson-Patman Act §§ 2(a), (c), 15 U.S.C. &§ 13(a),

(c); the Sherman Act $4 1, 2, id. §§ 1, 2; and the Clayton

Act § 3, id. § 14. After considering the extensive memo-

randa filed by the parties this court is of the opinion that

there are no genuine issues of material fact and that sum-

mary judgment is properly entered on behalf of defen-

dant, Stella D’Oro.

— 19a —

A. Count I

Count I alleges that plaintiff was the exclusive distribu-

tor of defendant’s products in the Chicagoland area in-

cluding parts of Northern Illinois, Southern Wisconsin,

Northern Indiana, and Southern Michigan. Pursuant to an

agreement between the parties, plaintiff was contractually

obligated to sell defendant’s products and was barred

from distributing the products of any other baking firm

whether or not that firm competed with Stella D’Oro.

Plaintiff alleges that defendant sold its products to

plaintiff at defendant’s fixed wholesale prices less a 26

percent trade discount. Plaintiff thereupon sold defen-

dant’s baking goods to driver route salesmen, who in turn

sold to the individual retail stores, at a price of the re-

tailer’s wholesale prices fixed by defendant less a 17 per-

cent trade discount. Thus, the 9 percent differential be-

tween the 26 percent trade- discount defendant gave

plaintiff and the 17 percent trade discount plaintiff gave

his driver route salesmen represented plaintiff’s gross

profits.

The gravamen of plaintiff’s complaint in count I is that

for years defendant had granted retail chain stores a 5

percent discount in price which was not given to independ-

ent retailers of defendant’s goods, and that plaintiff had

been forced to ‘‘eat’’ and accept these discounts granted

chain store retailers. Plaintiff alleges that this 5 percent

‘‘charge back’’ occurred through defendant’s system of

centralized billing for chain store retailers. While in plain-

tiff’s normal practice the driver route salesmen would sell

defendant’s products to individual retail stores and would

collect the retail wholesale price fixed by defendant less

17 percent, in the case of chain store retailers, the driver

route salesmen would return to plaintiff a copy of a sale

and delivery invoice which in turn was transmitted by

plaintiff to defendant in New York. The driver route

salesmen would generally compensate themselves for the

sales to chain stores by deducting their 17 percent dis-

count from cash sales to independent retailers prior to

— i

remittance to plaintiff. Plaintiff alleges that defendant

would then bill the chain stores directly at a price of the

retailer’s wholesale price less a 5 percent discount. This

net billing allegedly was paid by the chain store retailers

to the defendant and defendant, in its weekly billing to

plaintiff, would charge plaintiff’s account for said 5 per-

cent discount to chain stores.

Although count I raises numerous allegations of retail

price maintenance by defendant Stella D’Oro,' plaintiff

only contends that the aforementioned facts constitute

violations of the price discrimination and brokerage pro-

visions of the Robinson-Patman Act §§ 2(a), (c), 15 U.S.C.

§§ 13(a), (c). Plaintiff asserts that in its discrimination

in price between chain store and independent retailers, de-

fendant has violated section 2(a) which prohibits unjusti-

fied price concessions to certain buyers of a seller’s goods.”

Moreover, plaintiff contends that the charging back to his

*As this court noted in an unpublished memorandum

opinion dated September 3, 1976, and as Judge Austin

ruled on October 29, 1974, plaintiff has not alleged any

injury from the alleged retail price maintenance by Stella

D’Oro. Thus, no issue concerning retail price maintenance

is before this court.

* Section 2(a) provides:

(a) It shall be unlawful for any person engaged in

commerce, in the course of such commerce, either di-

rectly or indirectly, to discriminate in price between

different purchasers. of commodities of like grade and

quality, . . . and where the effect of such discrimi-

nation may be substantially to lesson 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 knowingly receives the

benefit of such discrimination, or with customers of

either of them.

15 U.S.C. § 13(a).

— 2la —

account by Stella D’Oro of the 5 percent chain store dis-

count constituted illegal ‘‘brokerage’’ prohibited by sec-

tion 2(c).°

1. Plaintiff’s Section 2(a) Claim

Defendant presents two arguments in support of its

motion for summary judgment on count I: first, that as a

matter of law plaintiff lacks standing to challenge any

price discrimination imposed by defendant on retailers;

and second, that plaintiff has suffered no injury from any

alleged price discrimination imposed by defendant on its

retailers. The Clayton Act § 4, 15 U.S.C. § 15,‘ the general

‘‘standing’’ requirements provision of the federal anti-

trust laws, provides that a plaintiff must allege that he

has been injured by the complained of antitrust violation.

See Kirby v. P. R. Mallory & Co., 489 F.2d 904, 910-12

(7th Cir. 1973), cert. denied, 417 U.S. 911 (1974). Thus,

the cases have recognized that a plaintiff must be injured

within the ‘‘target area’”’ of the alleged antitrust violation

and that the plaintiff must suffer ‘‘antitrust’’ or ‘‘com-

* Section 2(c) provides:

(c) It shall be unlawful for any person engaged in

commerce, in the course of such commerce, to pay or

grant, or to receive or accept, anything of value as a

commission, brokerage, or other compensation, or any

allowance of discount in lieu thereof, except for serv-

ices rendered in connection with the sale or purchase

of goods, wares, or merchandise, either to the other

party to such transaction or to an agent, representa-

tive, or other intermediary therein where such inter-

mediary is acting in fact for or in behalf, or is subject

to the direct or indirect control, of any party to such

transaction other than the person to whom such com-

pensation is so granted or paid.

15 U.S.C. § 13(c).

*Section 4 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...

15 U.S.C. § 15,

— 22a —

petitive’? injury. An antitrust plaintiff must be within

the area ‘‘‘of the economy which is endangered by a

breakdown of competitive conditions in a particular indus-

try.’’’ In re Multidistrict Vehicle Air Pollution M.D.L.

No. 31, 481 F.2d 122, 128 (9th Cir. 1973), cert. denied sub.

nom., Morgan v. Automobile Mfg. Ass’n, 414 U.S. 1045

(1973), quoting Conference of Studio Unions v. Lowe’s

Inc., 193 F.2d 51, 54-55 (9th Cir. 1951), cert. denied, 342

U.S. 919 (1952). See also GAF Corp. v. Circle Floor Co.,

Inc., 463 F.2d 752 (2d Cir. 1972), cert. denied, 413 U.S. 901

(1973). Cf. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,

97 S.Ct. 690 (1977).

In the case at bar, this court must agree that plaintiff

lacks standing to challenge any price discrimination im-

posed on independent retailers of defendant’s bakery

products. Plaintiff, in count I, alleges a ‘‘secondary-line’’

price discrimination’ in which similarly situated retailers

in competition with each other are charged different prices

by the same supplier. Thus, the ‘‘breakdown of competi-

tive conditions’’ occurs not in plaintiff’s wholesale market,

but rather in the retail level where chain stores are given

an allegedly unjustified advantage over independent re-

tailers in the marketing of defendant’s products to con-

sumers. As the court in Bolick-Gillman Co. v. Continental

Bakery Co., 206 F.Supp. 151 (D. Nev. 1961), recognized:

We have no doubt that the essence of a secondary-

line case is the injury to competing buyers from the

same seller. . . .[W]e are satisfied that a plaintiff,

when suing to enforce the Act on a theory of injury

to secondary-line competition, must allege and show

* A secondary-line discrimination occurs when a supplier

charges different prices to similarly situated buyers in

competition with each other. A primary-line discrimination

occurs when a supplier charges different prices to various

buyers, even if they are not competitors, and such dis-

crimination causes injury to competitors of the supplier.

See Thomas v. Amerada Hess Corp., 393 F.Supp. 58 (M.D.

Penn. 1975).

— 3a —

that he was a purchaser from the defendant and that

he was in competition with one or all of the favored

dealers.

Id. at 154 (emphasis supplied). See also Boysen, Inc., v.

H. P. Hood & Sons, Inc., 1964 CCH Trade Cases {| 71,168,

at 79,638 (D. Conn. 1964); Sam S. Goldstein Indus., Inc.

v. General Electric Co., 264 F.Supp. 403, 407 (S.D. N.Y.

1967). Rather than plaintiff Lupia bringing count I of

the complaint alleging violations of section 2(a), an inde-

pendent retailer would be the proper party to redress

the alleged illegal price advantage given to its competi-

tors, the chain store retailers.

Furthermore, even if plaintiff could be considered

within the ‘‘target area’’ of the section 2(a) violation

alleged in count I, the court must agree with defendant’s

second argument that plaintiff has suffered no injury

from the alleged price discrimination between chain store

and independent retailers. Although plaintiff asserts that

he was injured to the extent of the 5 percent discount to

chain stores he was forced to ‘‘eat’’ by defendant’s charg-

ing back of this discount to his account, plaintiff does not

allege, nor does he present evidence to raise even a genu-

ine issue of fact, that he could have sold at all to the chain

stores but for the 5 percent discount. Thus, as defendant

points out, plaintiff has conceded several times at depo-

sition that he does not know, nor did he try to determine,

whether the chain stores would have purchased defen-

dant’s products if the entire wholesale price was charged.

While this fact would, of course, be irrelevant if an indi-

vidual retailer was the plaintiff in this cause,’ in the case

at bar it is fatal to plaintiff Lupia’s section 2(a) claim

in count I. Accordingly, there being no genuine issue of

material fact, summary judgment on Lupia’s section 2(a)

claim in count I is granted for defendant.

*Thus, it would be no defense in a section 2(a) case

brought by a competing buyer of a favored buyer that the

favored buyer demanded the price preference,

== 94e

2. Plaintiff’s Section 2(¢c) claim

As recognized by the Supreme Court in FTC v. Broch

€ Co., 363 U.S. 166 (1960):

One of the favorite means of obtaining an indirect

price concession was by setting up ‘‘dummy’’ brokers

who were employed by the buyer and who, in many

cases, rendered no services. The large buyers de-

manded that the seller pay ‘‘brokerage’’ to these

fictitious brokers who then turned it over to their

employer. This practice was one of the chief targets

of § 2(c) of the [Robinson-Patman] Act. But it was

not the only means by which the brokerage function

was abused and Congress in its wisdom phrased

§ 2(c) broadly, not only to cover the other methods

then in existence but all other means by which broker-

age could be used to effect price discrimination.

Id. at 169 (footnotes omitted). Section 2(c) is designed

not to outlaw all price discriminations (which generally

are governed by section 2(a) principles), Empire Rayon

Yarn Co. v. American Viscose Corp., 364 F.2d 491, 492-3

(2d Cir. 1966) (en bane), cert. denied, 385 U.S. 1002

(1967); Robinson v. Stanley Home Products, Inc., 272

F.2d 601, 603-04 (1st Cir. 1959), but rather to prevent the

giving of discounts or commissions by one party to the

other party in the transaction as a ‘‘substitute payment’’

for brokerage fees which are unearned. Ideal Plumbing Co.

v. Benco, Inc., 529 F.2d 972, 977 (8th Cir. 1976). See also

Thomas v. Amerada Hess Corp., 393 F.Supp. 58, 74-76

(M.D. Penn. 1975). Moreover, the Seventh Circuit has

recognized that section 2(c) not only prevents unlawful

brokerage payments induced by buyers for their benefit,

but also that sellers who require commissions or kickbacks

before they consummate a transaction are violating sec-

tion 2(c)’s mandate. Grace v. E. J. Kozin Co., 538 F.2d

170, 173 (7th Cir. 1976).

In the case at bar, however, this court must agree with

defendant that plaintiff’s allegations of ‘‘brokerage’’ are

conclusory and that plaintiff can not present evidence

a= 2a

showing that the alleged discrimination by defendant be-

tween retail stores, and the commitment charging back

of these discounts to plaintiff, constitutes anything but a

standard price discrimination charge governed not by sec-

tion 2(c) but by section 2(a). Although plaintiff in his

memorandum asserts that the 5 percent discount charged

back to plaintiff was an illegal kickback, plaintiff presents

no evidence that such 5 percent was in ‘‘lieu of broker-

age’’ or for the purpose of consummating any sale. In

fact, in his deposition, plaintiff was not able to state in

what way the 5 percent charge back constituted brokerage.

Thus, since plaintiff has failed to cite any authority for

the proposition that a price discriminator can also be the

party obtaining the alleged brokerage,’ and since there is

no genuine issue of material fact that any 5 percent charge

back did not constitute brokerage or a commission in lieu

of brokerage, defendant’s motion for summary judgment

on plaintiff’s 2(c) claim in count I is granted.

B. Count III

In count III, plaintiff again alleges the existence of an

illegal section 2(a) price discrimination. Thus, plaintiff

alleges that defendant Stella D’Oro granted a 3 percent

price advantage to other wholesalers of defendant’s prod-

ucts by granting them a 29 percent trade discount while

granting plaintiff the aforementioned 26 percent trade dis-

count. Plaintiff alleges that there is no functional reason

for the disparity in price, and that therefore section 2(a)

has been violated.

In response to plaintiff’s allegations, defendant con-

tends that in order for a section 2(a) case to be made

out alleging a ‘‘secondary-line’’ discrimination,’ a plaintiff

"In all the cases cited by plaintiff, including the com-

mercial bribery cases brought under 2(c), the plaintiffs

alleged and showed that the payments made were in lieu

of brokerage or as a commission for the purpose of con-

summating a sale. See, e.g., Friedman v. Philadelphia Ter-

1986). Auction Co., 145 F.Supp. 820, 822-23 (E.D. Penn.

* See note 5 supra.

—_—

must allege and prove that the favored and discriminated

against purchasers were in competition with each other.

Defendant argues that plaintiff Lupia has not alleged that

such competition existed, since as plaintiff concedes he

had an exclusive territory, and that in fact no such compe-

tition existed. Plaintiff challenges defendant’s position

arguing: first, that there is no need for competition be-

tween discriminated against purchasers and favored buy-

ers of defendant’s products; second, that defendant is

estopped to raise the lack of any competition because of

the territorial restraints defendant imposed on plaintiff;

and third, that competition exists in fact in both the sec-

ondary and primary level of the distribution of defen-

dant’s products.

It is clear to this court, however, that defendant’s po-

sition is well taken and that plaintiff’s contentions do not

sustain count III under a section 2(a) theory. First, the

authorities are legion that an essential element of a section

2(a) secondary-line price discrimination case is the exist-

ence of competition between a favored buyer of defen-

dant’s products and the discriminated against buyer. See,

e.g., American Oil Co. v. McMullen, 508 F.2d 1345, 1353

(10th Cir. 1975); Ag-Chem-Equipment Co. v. Hahn, Inc.,

350 F.Supp. 1044, 1050 (D. Minn. 1972), aff’d and vacated

in part on other grounds, 480 F.2d 482 (8th Cir. 1973);

Universal-Rundle Corp. v. FTC, 1967 CCH Trade Cases

| 72,193, at 84,287 (7th Cir. 1967); Bales v. Kansas City

Star Co., 336 F.2d 439, 444 (8th Cir. 1964); Auto Imports,

Ltd. v. Peugeot, Inc., 1964 CCH Trade Cases { 71,098, at

79,339 (S.D.N.Y. 1964); Carlo C. Gelardi Corp. v. Miller

Brew. Co., 421 F.Supp. 237, 246 (D. N.J. 1976); Merit

Motors, Inc. v. Chrysler Corp., 1976-1 CCH Trade Cases

| 60,959, at 69,245 (D. D.C. 1976); Thomas v. Amerada

Hess Corp., 393 F.Supp. 58, 75 (M.D. Penn. 1975); Bel

Air Markets v. Foremost Dairies, Inc., 55 F.R.D. 538, 540-

41 (N.D. Cal. 1972); Webster v. Sinclair Refining Co.,

1972 CCH Trade Cases {] 74,023, at 92,244 (D. Ala. 1971);

Ingram v. Phillips Petroleum Co., 259 F.Supp. 176, 182

(D. N. Mex. 1966). See generally, 4 J. von Kalinowski,

Antitrust Laws & Trade Regulation § 30.02 [3], at 30-71

—

to -79 (1976). In support of its position that no competi-

tion is required, however, plaintiff merely cites ‘‘primary-

line’’ discrimination cases in which the plaintiff is not a

disfavored buyer of defendant’s products, but rather

a competitor of defendant whose competition is being

injured by the discriminating pricing by the defendant.

See, e.g., FTC v. Anheuser-Busch, Inc., 363 U.S. 536, 542-

43 (1960); Lloyd A. Fry Roofing Co. v. FTC, 371 F.2d

277, 281-82 (7th Cir. 1966). Plaintiff has not cited to this

court a single secondary-line discrimination case in which

a court has held that competition between buyers is not a

prerequisite to a section 2(a) action. In fact, in one of the

primary-line discrimination cases cited by the plaintiff

to support his proposition, Atlas Building Prod. Co. v.

Diamond Block & Gravel Co., 269 F.2d 950 (10th Cir.

1959), cert. denied, 363 U.S. 843 (1960), the court expressly

recognized that primary-line cases are ‘‘clearly distin-

guishable from suits filed by a local purchaser against a

manufacturer, where competition between purchasers is of

course essential to actionable price discrimination. .. .’’

Id. at 954.

Second, this court does not agree with plaintiff’s un-

supported assertion that because defendant had established

exclusive territories for its wholesalers that it is some-

how estopped from claiming that plaintiff’s section 2(a)

claim is defective due to lack of competition between plain-

tiff and the favored distributors. Thus, in both Bales v.

Kansas City Star Co., 336 F.2d 439 (8th Cir. 1964), and

Auto Imports, Ltd. v. Peugeot, Inc., 1964 CCH Trade

Cases ff 71,098, at 79,335 (S.D. N.Y. 1964), the courts

recognized that even if there are territorial restrictions

on a buyer’s resale market, to sustain a section 2(a) claim

the disfavored buyer had to compete with the favored

buyer. This court agrees, in this case, with this analysis

in as muchas plaintiff has not challenged the validity

of defendant’s exclusive territorial restrictions.* Such re-

* Thus, plaintiff has not alleged that he has suffered any

injury from an illegal verticle territorial allocation, See

note 1 supra.

— le

strictions can be challenged under the Sherman Act § 1,

15 U.S.C. § 1. See, e.g., White Motor Co. v. United States,

372 U.S. 253 (1963). However, where no such section 1

claim is made, this court will not permit the question to

be raised in what is otherwise structured as a Robinson-

Patman § 2(a) action.’®

Finally, plaintiff argues that there are genuine issues

of material fact that there does exist competition between

plaintiff and favored distributors on the secondary-line

level, and between plaintiff and defendant on the primary-

line level. As to the latter argument, plaintiff contends

that both the defendant and plaintiff sell to the same

“institutional jobbers” and “wholesale grocers” in the same

market area, and therefore defendant and plaintiff are

primary-line competitors.

Initially it should be noted that none of the aforemen-

tioned allegations concerning institutional jobbers or

wholesale grocers are in plaintiff's amended complaints

but rather are presented for the first time in plaintiff’s

long and conclusory “affidavit”? in support of its motion

and in opposition to defendant’s motion for summary

judgment." Thus, their allegations are not properly be-

fore the court. However, even if these claims were prop-

erly presented, it is clear that no section 2(a) primary-

Tt should be noted that under the White Motor Co.

decision cited in the text, verticle territorial restraints are

only invalid if they violate the rule of reason standard of

the Sherman Act § 1. Thus, this court will not presume

such restraints invalid for the purpose of establishing

plaintiff’s section 2(a) claim of unlawful discrimination.

On September 3, 1976, this court struck plaintiff’s 63

page “affidavit” as being improper in form as well as con-

clusory and replete with legal arguments. In an effort to

rectify the deficiency in its affidavit, plaintiff filed a “See-

ond Supplemental Affidavit” which merely incorporated

the prior affidavit by reference. Although this court has

decided to review the record on its own in addressing the

present motions, the court notes the general inadequacy

of plaintiff’s “Second Supplemental Affidavit” to correct

the problems raised by the court in its September 3, 1976

ruling.

—_— —_—

line case has been alleged or shown since plaintiff has not

suggested that defendant has discriminated in price be-

tween institutional buyers for the purpose of injuring

plaintiff as a competitor of defendant. See, e.g., Atlas

Building Prod. Co. v. Diamond Block & Gravel Co., 269

F.2d 950 (10th Cir. 1959). Moreover, plaintiff could not

show any injury to competition in the case of sales by

defendant to institutional jobbers because it is impossible

for plaintiff to compete for sales with the company from

which plaintiff purchases its products. As the Seventh

Circuit recognized long ago, there is no section 2(a) vio-

lation when a manufacturer sells directly to consumers

to which a wholesaler also sells. Chicago Sugar Co. Vv.

American Sugar Refining Co., 176 F.2d 1, 10-11 (7th Cir.

1949), cert. denied, 338 U.S. 948 (1950). See also American

Oil Co. v. McMullen, 508 F.2d 1345, 1353 (10th Cir. 1975).

Accordingly, a primary-line section 2(a) claim has not

been established by plaintiff.

As to the secondary-line competition, plaintiff argues

that between 1965 and 1967 plaintiff was selling and dis-

tributing products made by defendant to retail stores in

the Benton Harbor-St. Joseph, Michigan area and that

during that period plaintiff was competing with another

distributor of defendant’s goods who was receiving a

greater discount from defendant than was plaintiff. Plain-

tiff alleges that his total sales in that territory were ap-

proximately $100 to $150 per week. However, this court

must agree that there is no genuine issue of material fact

as to whether such sales took place and the nature of

plaintiff’s competition with the other distributor. Again,

plaintiff’s deposition shows that he has no evidence that

the other distributor was selling to the same stores plain-

tiff distributed to, and plaintiff’s conclusory “affidavit”

does not create a genuine issue of fact on this question.

Moreover, even if such a genuine issue of fact existed,

it is clear to this court that any injury to competition in

the Benton Harbor, Michigan area was de minimus in

light of the small amount of the relevant market affected

by defendant’s alleged actions; only a fraction of 1 per-

— 30a —

cent of plaintiff’s total sales of $1 million per year. As

the Seventh Circuit, and other courts have recognized,

when there is only de minimus affects on competition on

the fringes of territories, a section 2(a) claim will not

lie. See National Dairy Products Corp. v. FTC, 395 F.2d

517, 523 (7th Cir. 1968), cert, dented, 393 U.S. 977 (1968) ;

Universal-Rundle Corp. v. FTC, 1967 CCH Trade Cases

7 72,194, at 84,287 (7th Cir. 1967); 4 J. Von Kalinowski,

Antitrust Laws & Trade Regulation § 30.02[3], at 30-73

(1976).

Therefore, there being no genuine issues of material

fact relative to count III of plaintiff's complaint, defen-

dant’s motion for summary judgment is granted.

C. Counts IT and IV

Counts II and IV of plaintiff’s complaint allege essen-

tially the same factual situations challenging two con-

tractual restraints in the distributorship agreement be-

tween plaintiff and defenuant: (1) that plaintiff is for-

bidden from selling any baking products manufactured

by a bakery other than Stella D’Oro unless they purchase

the products through Stella O’Oro; and (2) that plaintiff

will not compete with Stella D’Oro for a period of one

year after termination of his distributorship within a 100

mile radius of plaintiff’s place of business. Plaintiff claims

that these various restraints violate the Clayton Act § 3,

the Robinson-Patman Act § 2(c), and the Sherman Act

§ 1.

1. The Exclusive Distributorship Restraint.

As to plaintiff’s claim that the exclusive distributor-

ship arrangement violates the Clayton Act § 3, 15, U.S.C.

§ 14,° plaintiff argues first that such a restraint is per

#2 Section 3 provides:

It shall be unlawful for any person engaged in com-

merce, in the course of such commerce, to lease or

make a sale or contract for sale of goods, wares, mer-

chandise, machinery, supplies, or other commodities,

whether patented or unpatented, for use, consumption,

— 3la —

se illegal and that it also constitutes an invalid tie-in ar-

rangement. However, as defendant properly shows, both

arguments are without merit. First, it is clear that for

an exclusive distributorship arrangement to be illegal

under section 3 of the Clayton Act,’* the plaintiff must

allege and establish that the restriction suffers “the quali-

fying disability, tendency to work a substantial—not re-

mote—lessening of competition in the relevant competitive

market.” Tampa Electric Co, v. Nashville Co., 365 U.S.

320, 333 (1961). See also Bowen v. New York News, Inc.,

366 F.Supp. 651, 679-80 (S.D. N.Y. 1973), modified, 522

F.2d 1242 (2d Cir. 1975), cert. denied, 425 U.S. 936 (1976).

In Bowen, the court recognized that the “test is whether

the system of challenged exclusive arrangements in fact

forecloses competitors [of the defendant] from a sub-

stantial market.’’ 7d. at 679. In the case at bar, however,

defendant shows, and plaintiff does not dispute, that

plaintiff is totally unaware of the share of the relevant

market foreclosed to defendant’s competitors by the ex-

elusive distributorship arrangement present in this suit.

Becker v. Safelite Glass Corp., 244 F.Supp. 625, 639-40

* (Continued)

or resale within the United States... or fix a price

charged therefore, or discount from, or rebate upon,

such prices, on the condition, agreement, or under-

standing that the lessee or purchaser thereof shall

not use or deal in the goods, wares, merchandise,

machinery, supplies, or other commodities of a com-

petitor or competitors of the lessor or seller, where

the effect of such lease, sale, or contract for sale of

such condition, agreement, or understanding may or

tend to create a monopoly in any line of commerce.

15 U.S.C. § 14.

As the courts have held, unless a section 3 violation

is shown there also cannot be a section 1 Sherman Act

claim established. See Tampa Electric Co. v. Nashville

Co., 365 U.S. 320, 335 (1961); Becker v. Safelite Glass

Corp., 244 F.Supp. 625, 640-41 (D. Kan. 1965). Thus,

since as the text of this opinion establishes that plaintiff’s

section 3 claim must fail, his section 1 claim is likewise

defective.

— 32a —

(D. Kan. 1965). Moreover, as defendant points out, giv-

ing the narrowest scope to the relevant market involved

in this case, less than .003 percent of that market would

be foreclosed by defendant’s restriction on plaintiff, an

amount which clearly does not tend to work a substantial

lessening of competition in the relevant market. See, e.g.,

Perryton Wholesale, Inc. v. Pioneer Distributing Co., 353

F.2d 618, 624 (10th Cir. 1965).

Second, no illegal tie-in arrangement is properly alleged

since plaintiff neither suggests nor presents evidence to

indicate that defendant required plaintiff to purchase one

product (the “tied” product) in order to purchase another

product sold by defendant (the ‘‘tying’’ product). The

Seventh Cireuit has recently stated that:

An illegal tying agreement results when the seller

requires the buyer to purchase in addition to the de-

sired product another less desirable product with the

potential effect that competition in the tied product

would be lessened.

Holleb & Co. v. Product Terminal Cold Storage Co., 532

F.2d 29, 32 (7th Cir. 1976). Since plaintiff does not con-

tradict the assertion that he was free to purchase each

of the products sold by defendant™ separately, his tie-in

charge must fail.

Finally, plaintiff contends that the brokerage provision

of section 2(c) of the Robinson-Patman Act has been vio-

lated by the exclusive distributorship arrangement. Plain-

tiff alleges that defendant purchased the bakery goods

of other manufacturers at a 40 percent discount and re-

sold them to plaintiff at a 26 percent discount. Plaintiff

claims that this 14 percent differential pocketed by defen-

dant is unlawful brokerage. However, as shown previ-

ously, section 2(c) is not a catch-all antitrust provision

invalidating all restraints normally controlled by other

antitrust provisions. Thus, section 2(c), by its own terms,

* F.g., either the baking products made by Stella D’Oro

or the products made by another manufacturer the de-

fendant sold to plaintiff.

oo, A

is only violated if a payment is made by one party to a

transaction to the other party to the transaction or to

his agent for the purpose of illegally consummating a

transaction. See FTC v. Broch & Co., 363 U.S. 166 (1960).

However, in the case at bar, plaintiff does not allege or

show that defendant was acting as an agent for either

plaintiff or the other manufacturers of bakery goods sold

by defendant to plaintiff, or that “brokerage” was paid

in any way. See Robinson v. Stanley Home Products, Inc.,

272 F.2d 601, 603-04 (1st Cir. 1959). Plaintiff’s conclu-

sory allegations cannot withstand defendant’s present mo-

tion for summary judgment on plaintiff’s section 2(c)

claim.

2. The Noncompetition Clause

In regard to plaintiff’s claim that the “noncompete”

restriction upon termination of his distributorship violates

the antitrust laws, plaintiff only argues that such a re-

striction is per se illegal. However, the Seventh Circuit

has recognized that such clauses must be examined un-

der the rule of reason test of section 1 of the Sherman

Act, and “are legal unless they are unreasonable as to

time or geographic scope.” Snap-on Tools Corp. v. FTC,

321 F.2d 825, 837 (7th Cir. 1963). Since plaintiff does not

** Section 1 provides:

Every contract, combination in the form of trust

or otherwise, or conspiracy, or restraint of trade or

commerce among tlie several States, or with foreign

nations, is declared to be illegal... .

15 U.S.C. $1.

=

allege unreasonableness, or present any evidence to that

effect, his claim is fatally defective.

D. Conclusion

Accordingly, for the foregoing reasons, this court find-

ing no genuine issue of material fact, summary judg-

ment is entered on all counts on behalf of the defendant.

Joel M. Flaum

United States District Judge

Dated: May 31, 1977