Appendix — M. C. Manufacturing Co. v. Texas Foundries, Inc.

Appendix — i

M.C.MFG.CO., INC. v. TEXAS FOUNDRIES, INC. 7415

M. C. MANUFACTURING COMPANY,

INC.., et al., Plaintiffs-Appeliees,

v.

TEXAS FOUNDRIES, INC., et ai.,

Defendants- Appellants.

No. 74-2246.

United States Court of Appeals,

Fifth Circuit.

Aug. 21, 1975.

A private antitrust action was

brought wherein plaintiffs claimed that

defendants had conspired to restrain

trade in violation of section 1 of Sher-

man Act through the utilization of an

illegal price discrimination scheme The

United States District Court for the

Eastern District of Texas, at Marshall,

William M. Steger, J., entered judgment

for piaintiffs, and defendants appeaied.

The Court of Appeals, Clark, Circuit

Judge, heid that plaintiff which failed to

prove that in the absence of defendants’

discriminatory pricing scheme it would

have received government supplier con-

tract in question failed to present jury

issue on Sherman Act ciaim; and that

purchases were not made “in compet:

tion,” as required in order to establish

Robinson-Patman Act discriminatory

pricing claim

Reversed.

1. Monopolies—28(7.1, 7.2)

Proof of existence of an actionabie

conspiracy is mot enough to establish a

section 1 Sherman Act claim; in addition

to proof that antitrust laws were violat

ed. a plaintiff must also establish that

such violation proximately caused injury

to his business and adduce evidence that

at least gives an indication of the

amount of damage which resuited

Sherman Anti-Trust Act, s 1, 15 US.

CA 451

2. Monopolies—28(8)

Plaintiff which failed to prove that

in the absence of defendants’ discrimina-

tory pricing scheme it would have re

ceived government supplier contract in

question failed to present jury issue on

Sherman Act claim, where evidence dis-

closed that even if defendant supoiier's

7416

bia had been disregarded plaintiff would

not have been the low bidder, despite

plaintiff's hypothetical recalculation o!

its bid based upon orices the conspiracy

fetched for detendant supplier. Sher

man Anti-Trust Act, 6 1,15 US.C.A

s1

3. Monopolies—10

Purpose of Snerman Act is preserva

tion of open, competitive marker. Sher

man Anti-Trust Act, s 1, 18 USCA.

s 1.

4. Monopolies—28(7.6)

Damages are recoverabie in private

suit on Sherman Act claim only upon

showing that in the absence of anticom-

petitive practice complained of plaintiff

would not have suffered the loss asserted

Clayton Act, 6 4, 15 USCA. 6 15

5. Trade Regulaticn—911

tn order for there to be discrimina-

tion between purchasers violative of sec-

tion 2(a) of Clayton Act, there must be

actual sales at two different prices to

two different actual buyers. Clayton

Act, 6 2(a, {) as amended by Robinson

Patmsan Price Discrimination Act. 15

USCA. 6 13ta, ft)

6. Trade Regulation—914

Robinson-Patman legality of price

discrimination between contracts to pur-

chase that contempiate contemporaneous

delivery must be evaluated as of dates

the respective contracts were made.

Clayton Act, s 2(a, f) as amended by

Robinson-Patman Price Discrimination

Act. 15US.C.A. 8 13iha, f).

? Trade Reguiation—913

Discriminatory pricing is violative of

Robinson-Patman only when it lessens or

tends to prevent competition between

customers or between sellers. Ciayton

Act, 6 2la, f) as amended by Robinson.

Patman Price Discrimination Act, 15

US.C.A. § 13la, f)

8. Trade Reguiation—913

To constitute a Robinson-Patman

wrong, price discrimination must occur

between competitors in comoparabie

transactions, that is, where persons re-

ceiving different prices sare in actual,

functional competition with one another,

and must have requisite effect upon ac-

tual or potential competition. Clayton

Act, 6 2(a, f) as amended by Robinson

Patman Price Discrimination Act, 15

USCA. 6 13la f)

Synopees, Syliatb: and Key Number Ciassa:fication

COPYRIGHT © 1975, by WEST PUBLISHING CO

The Synopees, Syilebi and Key Number Classifi-

cation constitute so part of the opinion of the court

INDEXED

Appendix 2

7416

7417

9. Trade Regulation—913

Even if sales at different prices are

contemporaneous, involve goods of like

grade and quality, price distinction is not

justified by good business cause and it

causes injury to the disadvantaged pur-

chaser, recovery under Robinson-Patman

Act is preciuded absent proof that price

variance detrimentally affected competi-

tion. Clayton Act, s 2(a, f) as amended

by Robinson-Patman Price Discrimina-

tion Act, 15 U.S.C.A. § 13(a, f).

10. Trade Regulation- 913,932

Competition between buyers at dis-

Parate prices is essential to a violation of

Robinson-Patman Act and existence of

this requisite is normally a fact question

to be determined by making a realistic

appraisal of all relevant facts. Clayton

Act, § 2(a, f) as amended by Robinson-

Patman Price Discrimination Act, 15

U.S.C.A. § 13 f(a, f).

11. Trade Regulation—913

Purchases were not made “in com-

petition” as required in order to establish

Robinson-Patman Act Discriminatory

pricing claim, where plaintiff contrac-

tor’s purchases of lifting plugs could

only be accepted by government in ful-

fillment of 1970 contract while defend-

ant contractor's purchases similarly could

be used only on 1971 contract and, re-

gardiess of subsequent discrepancy in

price to these suppliers, by defendant

seller, government had to purchase from

each, and only from each, the specified

number of plugs at agreed price under

respective contracts. Clayton Act, s 2(a,

f) as amended by Robinson-Patman Price

Discrimination Act,15 US.C.A. § 13a,

f)

12. Trade Regulation—913

Injury to a competitior is not test

for Robinson-Patman violation; test is

injury to competition. Clayton Act,

s 2a, f) as amended by Robinson-Pat-

man Price Discrimination Act, 15 U-S.

C.A. 8 13{a, f).

1. The Type “G” lifting plug is a mai-

leable iron device which the military ser-

vices use to lift 155 mm. artillery pro-

jectiles. The lifting plug has a loop at

one end, known as the “bail,”” and is

threaded on the other end for insertion

into the nose of an unfused artillery

projectile, thereby facilitating the move-

ment of such projectiles. When a pro-

jectile is to be fired, the lifting plug is

removed and replaced by an appropriate

M.C.MFG.CO., INC. v. TEXAS FOUNDRIES, INC.

Appeal from the United States Dis-

trict Court for the Eastern District of

Texas.

Before GOLDBERG, CLARK and

GEE, Circuit Judges.

CLARK, Circuit Judge:

Plaintiffs, M.C. Manufacturing Com-

pany, Inc. (M.C.), and its wholly-owned

subsidiary, Universal Automatic Machine

Company, Inc. (Universal), initiated this

Private antitrust action against defend-

ants, Texas Foundries, Inc. (Texas

Foundries) and WH/R Products, Inc.

(H/R), alleging that the defendants con-

spired to restrain trade in violation of

Section 1 of the Sherman Act, 15 U.S.C.

s 1, through the utilization of a price

discrimination scheme which also was vi-

olative of Section 2 of the Clayton Act

as amended by the Robinson-Patman

Act, 15 U.S.C. s 13(a & f). Trial to a

jury resulted in a general verdict for

plaintiffs of $73,000.00 which was then

trebled by the trial court to $219,000.00.

Texas Foundries and H/R petition this

court for relief from the judgment en-

tered pursuant to that award. We re-

verse.

Universal alleges that this contro-

versy arose while it and H/R were

actively competing for a December, 1971

government contract to supply a finished

military hardware item known as a Type

“G" lifting plug,’ because Texas Found-

ries quoted H/R a lower price than it

quoted Universal to supply the required

unfinished plug castings.* According to

plaintiffs, H/R and Texas Foundries

clandestinely agreed by telephone on the

29th of November, 1971, to a price of 31

cents per unfinished plug casting deliv-

ered to H/R’s plant (South Bend, Indi-

ana). Texas Foundries had quoted Uni-

versal a price of 32.5 cents f.o.b. Texas

Foundries’ plant (Lufkin, Texas) only 11

days earlier, on the 18th of November.

Plaintiffs assert that the price discrepan-

cy between the two offers was the result

fuse. Because their purpose is use with

large caliber munitions, the only end-

user market for lifting plugs is the

military arm of the United States

government.

2. The term “unfinished plug casting”

refers to a basic casting made by a

foundry which has not been machined

and threaded into its final form as a

lifting plug which will meet contract

specifications.

BLURRED COPY

M.C.MF-.CO. INC

of 2 conspiracy between Texas Founane

and H/R in vroiation of Section 1 of the

Sherman Act aimed at the cestructon ©

Universal as a competitor. They furtne:

assert that the ultimate saie to H/R oo é

portion of the castings requirec to per-

form the contract at the lower orice con

stituted a violation of the Robinson-Par-

man Act's proscription of price distinc-

tions between purchasers since on No-

vember 12, 1971, Texas Foundries and

Universal had entered into a subcontract

at 32.5 cents per casting to fulfill a prsor

government contract award to Universal.’

For their part, the defendants con-

tend that Texas Foundries’ agreement to

sell to H/R at a lower price was reached

after the December, 1971 contract had

been awarded and then only after H/R's

intended suppliers communicatec to

H/R that they could not satisfy H/R's re-

Quirements. They further contend the

price reduction by Texas Foundries was

intended to meet the price offered by

H/R’‘s other suppliers and to find a mar-

ket for a substantial overage of castings

which had been produced under Texas

Foundries’ preexisting contract with

Universal.

Because the particular facts underiy-

ing this case are crucial to Our resoiution

of the controversy, a detailed review. of

the events leading to selection of 4 con-

tractor on government contract INo.

DAAA—09--72—C—0208 is warranted

On October 27, 1971, tne Ammu-

nition Procurement Supply Aagency

(APSA) distributed a solicitation inviting

bids on a contract to supply 1,984 006

Type 'G” lifting plugs. A total of 159

prospective bidders were solicitec of

which 16, inctuding Universal ang H/F

3 Universe! had been successful o1

June 16, 1970 in bidding on a similar

government contract. This award i

Universal was for 2,033, 950 plugs wit:

an “add-on” award of 450,000, olus -

negotiated addition of 750,000 plug:

4. Universal purchased approximate,

1,500,000 unfinished plugs trom Texas

Foundries while fulfilling :ts 1979 com

tract with add-ons and edc:tions

5 The opre-awarc survey invoive.

government assessment o} such factors a:

@ bidder's financia! Sates. procucrnior

capability, technica!’ ccpability, olar

facihiiies and a ance capa

15 whilt on take

yan

EXAS FOUNDRIES. INO 41?

4ict

ultimately submitted DiCcs

Upon receiving @ soicita rom

tne APSA Universa aske exas

Foundnes to bid ON @ suoconisact to

suppiy unfinishec piug casting. On

November 18, 1971, Texas Founaries re

spondec with a 32.5-cent pe casting

price, fo.b. Texas Foundcrie oc.ant

Based upon Texas Foundries Guotation

for the unfinished plug, Universa sub-

mitted a final bid to APSA 39.28

cents per finished piug. Ouring tne time

prior to opening of bids Texas

Foundnes was also called upor by

several other potentiai bidders tc give

similar casting price quotations As a

result, Texas Foundries sent written

quotations to both Deco Granc, inc., an

uninvolved third party. and +i/F con-

taining the identical price quoteo Uni-

versal, /. @., 32.5 cents per casting, t.0.b.

Texas Foundries’ plant.

The sixteen bids ultimately received

on the APSA contract were opened on

December 3, 1971, revealing that H/R

was the low bidder at 47.6 cents per

casting, Land-Air, Inc. was second at

48 8 cents per casting, and plaint:t*, Uni-

versal, was the third lowest bidder at

49.28 cents per casting. Pre-award sur-

veys and cost evaluations’ were then

conducted on the lowest group of bid-

ders ~ These studies resulted im evaluat

ed vids (lowest cost to government) of

47.362 cents per piug for H/F 48.678

cents per plug for Land-Ai, inc and

39.107 cents per plug for Universal.

Having thus enterec the lowes. €vaiuat-

ed nid and having received a satisiactory

Pre-aweard survey analysis, H/F was

awarded the contract on December 30,

197%.

costs. @ bidder's us2 of government-

owned equipment or facies anc

discounts. That bidder who is sy own to

nave the bid which evaivate: iowest

atong with 2 teasibie pre-awarc survey Is

then considered eligibie Tor a award

Tne award must be made ic that

responsible bidder who subm ‘ted the

iowest responsibie bid. “unless there is 3

compeliing reason to reject af. ors and

cance! the emnvitation 22 CiFA. 8

24m

co Land-Air was not surveye: mecause

Of an original Getermination tr > bic

was not responsive After amenc ent

nywever

Land-Air s DIG we 2teo

So ‘ at

Appendix 4

7418 M.C.MFG.CO., INC. v. TEXAS FOUNDRIES, INC.

7419

7420

SHERMAN ACT CLAIM premise. and that it was supported by

At trial plaintiffs’ evidence tended to

show a discriminatory pricing conspiracy

between Texas Foundries and H/R

aimed at the destruction of Universal as

a producer of Type “G” lifting plugs

From the outset, plaintiffs have contend-

ed that on the 29th of November, 1971,

Texas Foundries and H/R consummated

a secret telephonic agreement whereby

Texas Foundries committed itself to sup-

ply unfinished plugs to H/R at 31 cents

per casting, at H/R’‘s plant, after only

eleven. days earlier having assured Uni-

versal that a 32.5 cent per casting price,

fob. Texas Foundries pliant, was the

lowest price it could possibly offer. The

reason for this discrepancy in price quo-

tations is found, according to plaintiffs

in H/R’‘s precarious financial situation in

November of 1971. Until 1970, the year

of Universal's entry into the lifting plug

market, H/R had been the leading pro-

ducer of military lifting plugs. In 1970,

however, Universal received the only

government contract let that year,

causing H/R a concomitant 60,000

dollar loss At this point, plaintiffs’

theory continues, realizing that failure to

obtain the 1971 contract would neces.

sitate abandonment of its plug business

and fully aware that Universal's failure

to get at least a portion of the 1971 con-

tract would portend the latter's business

demise,” H/R resolved to take whatever

steps were necessary (including partici-

pation in a discriminatory = pricing

scheme) to insure that it would not again

be underbid by Universal *

{1} If plaintiffs’ theory of the case

and version of the evidence were accept-

ed by the jury, as they may have been,

then a Sherman Act violation has been

established. We assume arguendo that

the jury verdict was based on this

7. In fact, after losing the 1971

contract to H/R Universal was unable to

acquire other work in the commercial

field sufficient to hold its shop intact,

and finaliy had to liquidate its equip-

ment

8 Other evidence supportive of plain-

tiffs’ conspiracy theory included: proof

that H/R would not consider itself able

to bid unless it had positive commit-

ments for all the plug castings it would

need: H/R’s knowledge prior to sub-

mission of its bid that its registered

supplier, Marion Malleables, could not

Produce the rough castings in sufficient

quaniity to. satisfy government re-

the evidence Under Section 1,15 US.C

s 1. “Every contract, combination

Or conspiracy, in restraint of trade or

commerce ts declared to be illegal.”

However proof of the existence of an

actionable conspiracy is not

enough. In addition to proof that the

antitrust laws were violated, a plaintiff

must also establish that such violation

proximately caused injury to his business

and adduce evidence that at least gives

an indication of the amount of damage

which resulted. Terrell v. Household

Goods Carriers’ Bureau, 494 F.2d 16, 20

(Sth Cir.), rehearing en banc denied, 496

F.2d 878, cert. dismissed, 419 US

987, 95 SCt. 246, 42 L.Ed.2d 260

(1974); Kestenbaum v. Falstaff Brewing

Corp., 514 F.2d 690 (5th Cir 1975)

{2] Under the facts of this case,

plaintiffs faiied the second of this three-

pronged test, /. e., they failed to prove

that an injury to Universal resulted from

defendants’ discriminatory pricing

scheme. While the fact of injury most

often involves evidentiary questions

which are properly for the jury [e. g.,

Story Parchment Co. v. Paterson Parch-

ment Paper Co., 282 U.S. 555, 562, 51

S.Ct. 248, 250, 75 L.Ed. 544, 548

(1931)] no such jury issue exists where,

as here, plaintiffs failed to establish that

in the absence of defendants’ discrim-

inatory pricing scheme Universal wou!d

have received this contract. Thus, the

trial Court erred in refusing to direct a

verdict for defendants on the Sherman

Act claim at the close of plaintiffs’ case.

Plaintiffs’ premise is that, absent

the illegal bid to H/R, Universal would

have received the contract. However, the

facts as adduced at trial reveal that even

if H/R’'s bid is disregarded, Universal

would not be the low bidder. Rather,

quirements; H/R’s assertion that still

another supplier, F.M.C. Corporation,

would supply the additional piugs neces-

sary to meet the government's require-

ments, while during trial H/R’s President

admitted that no firm commitment was

received from F.M.C. until after the con-

tract was awarded; H/R’s failure to

notify the government of its “change” in

suppliers until specifically asked to do

so despite the requirements of pre-award

disclosure and contract-in-process certifi-

cations; and Texas Foundries’ realization

that it would have a substantial overrun

on its contract with Universal unless it

found an alternate market for this

material

Appendix &

M.C.MFG CO., INC. v. TEXAS FOUNDRIES. INC. 7420

Land-Air, inc., a party wholly uncon

nected with either defendant, stands

second behind H/R. Thus. without

H/R’‘s bid, Universal stil! would not have

received the contract. To show that the

asserted conspiracy did in fact injure

them, plaintiffs contend that Land-Air

was not a viable intermediary. They

point out that its bid was classified by

the APSA as unresponsive and therefore

its position should not be considered

While it is true that Land-Air’s bid was

initially classified as non-responsive and

consequently Land-Air did not receive a

pre-award survey, a memo from the

APSA contract specialist in charge of

contract DAAA—09—72—C—0208 nego-

tiations introduced at triai reveals that

an amendment was received from Land-

Air on December 1, which negated the

previous non-responsive action consid-

ered, and led to reinstatement of Land-

Air's bid prior to award. It is crystal clear

that Land-Air was a viable bidder and

that, even after disregarding H/R's low

bid because of the special, conspira-

torially low price it received from Texas

Foundries, Land-Air's bid stood between

Universal and the opportunity to acquire

this contract.

Plaintiffs attempted to circumvent

the intervening position of Land-Air, inc

through a hypothetical recalculation of

the bid submitted by Universal. This

recaiculation was based upon the as-

sumption that Universal should be enti

tled to utilize a price per casting equ:va-

lent to the 31-cent f.o.b. South Bend

price which the conspiracy fetched for

H/R. By utilizing this price and apply-

ing the same profit and other cost fac-

tors it had employed in submitting its

bid based upon the 32.5-cent price, Uni-

versal calculated it would have bid an

amount below those entered by both

H/R and Land-Air, Inc., thus seeking to

show the conspiracy did cost it the con-

tract award. The fallacy in this theory,

however, is Universal's utilization of the

31-cent delivered price given to H/F.

[3, 4) The avowed purpose of the

Sherman Act is the preservation of the

open, competitive market. See. ¢« g.

Northern Pac. Ry. v. United States, 356

9. Texas Foundries charged Unrversal

the 32.5-ceni price in their Novemper

1971 purchase-order contract for 740,000

plugs to compiete Universal's 1970 con-

tract addition. tn nether of ther pre

vious purchase-order contacts did 1exas

Foundries’ price drop be! ow 32 certs per

7421

U.S. 1, 4, 78 S.Ct. 514, 517, 2 .Ed.2d

545 (1958): Apex Hosiery Co. v. Leader,

310 US. 469, 492-93, 60 SCt. 982,

992, 84 L.Ed. 1311 (1940). Damages are

recoverabie thereunder if a piaintiff can

show that the anticompetitive practice

whicn inhibits that protected freedom of

competition has proximately caused the

damages he asserts 15 U.S.C. s 15. For

the case at bar, this rule means that dam-

ages are recoverabie only upon a show-

ing that absent the anticompetitive prac-

tice plaintiff would not have suffered

the loss. The anticompetitive conduct

which the evidence tended to establish in

the case at bar was Texas Foundries’

special 31-cent price to H/R, not its re-

tusal to offer a comparable price to

H/R's competitors. The price of 32.5

cents f.o.b. Texas Foundries plant was

shown to be the standard or usual mar-

ket price quoted in connection with this

bidding. It was the price initially quot-

ed to H/R. It was the only price quoted

to Universal and it was also the price

quoted to an univolved third party,

Deco Grand, Inc. Evidence of Texas

Foundries’ other dealings during this pe-

riod further confirms that the 31-cent

price was the conspiratorial price.”

Restoration of the competitive free-

dom which the Sherman Act 1s oesigned

to protect thrcugh elimination of the

anticompetitive practice 's accomptl:shed

here by disregarding the special consptr-

atonal price to H/F, not be nypotheti-

cal broadening of the conspiracy ‘0 give

H/R’s abnormally iow price to Universal

as well. The problem tor Universal is

that tt is not 2anough to merely restore

the open competitive market status by

knocking out the conspiracy, fo. then

Lana-Air, not Universal, would ‘ave be-

come the lowest bidder. But more can-

not be done. The result is that t5e con-

spiracy did not cause the damages upon

which recovery was based, ana there-

fore the verdict cannot be sustained un-

der the Sherman Act

ROBINSON-PATMAN ACT CLAIM

Pia:ntiffs also assert tnat defendants‘

buy-sei! agreement at 31 cents per cast-

ino wes wolative cf Section 2le & f) of

the Clayton Act as amended by the Rob-

untinished plug casting. Whiie the issue

of which party was to pay the freight ts

in Cispute under two of these contracts,

under no circumstance would the

ultrmete cost to Universal per unf:cished

pluo casting ever fall below the 31 cents

2 South Benc price grantec H/R

Appendix 6

7421 M.C.MFG.CO., INC. v. TEXAS FOUNDRIES, INC.

7422

inson-Patman Act, 15 U.S.C. 5s 13(a& f).

Under Section 2({a), it is unlawful for

any person engaged in commerce to dis-

criminate in price (1) between different

purchasers (2) of commodities of like

grade and quality (3) where the effect of

such discrimination is to substantially

lessen competition or tend to create a

monopoly, or to injure, destroy, or pre-

vent competition with any person who

either grants or knowingly receives the

benefit of such discrimination and (4)

where such differential is not in response

to changing market conditions,"° — while

under Section 2(f), it is unlawful to

knowingly induce or receive discrimina-

tron in price prohibited by this section

{5, 6] Recognizing that in order

for there to be discrimination between

purchasers violative of s 2(a) ‘‘there

must be actual sales at two different

prices to two different actual! buyers,"

plaintiffs pursue the Robinson-Patman

claim on the basis of the price discrepancy

between Universal's purchase-order con-

tract with Texas Foundries dated No-

vember 12, 1971 and H/R’s clandestine

November 29th agreement with Texas

Foundries which related to the Decem

ber 30, 1971 contract.’” These separate

contracts contemplated contemporane-

ous delivery of Type ‘’G” lifting plugs

during 1972 but H/R was given a price

10. In addition to the defense of

changing market conditions, a defendant

may rebut a primafacie case of discrimi-

nation by showing that his lower price

was made “in good faith to meet an

equally low price of a competitor.”

15 USC. s 13(b). Since, as discussed

infra, plaintiffs have failed to prove a

prima-facie case we do not decide the

applicability ve/ non of these defenses

under the facts of this case

11. Jones v. Metzger Dairies, Inc., 334

F.2d 919, 924 (Sth Cir. 1964), cert. ©

denied, 379 US. 965, 85 S.Ct 659, 13

L.Ed.2d 559 (1965): accord, Stough v.

May and Co., Inc., 484 F.2d 22, 23

(Sth Cir. 1973); Hiram Walker, Inc. v.A

& S Tropical, Inc., 407 F.2d 4, 7 (5th

Cir.), cert. denied, 396 US. 901, 90

S.Ct. 212, 24 L.Ea.2d 177 (1969). The

term ‘‘purchaser’’ means a buyer or

vender, not one who merely seeks to

purchase F. g, Chicago Seating Co v.S

of 31 cents delivered at its plant while

Universal was given the substantially

higher price of 32.5 cents at Texas

Foundries’ plant."*

Alternatively, plaintiffs argued at

trial that a Robinson-Patman violation

had occurred even if the jury believed

that no agreement was reached by Texas

Foundries and H/R on the 29th of No-

vember, but rather was made later —aft-

er the contract was awarded—and as a

result of the failure of H/R’s expected

supplier to produce. They contend that

even a January, 1972 agreement would

still be reasonably contemporaneous

with the November, 1971 agreement be-

tween Texas Foundries and Universal,

since delivery was contemplated during

the same periods under both contracts

and no justification based upon a change

in| market conditions or good faith

meeting of competition was shown

Defendants contest the sufficiency

of proof on every element essential to a

Robinson-Patman Act violation We

need not weigh each element, however,

as our conclusion that plaintiffs have

failed to prove that the purchases were

made ‘in competition’ forestalis the ne-

cessity of further consideration of plain-

tiffs’ claim under the Act.

[7-9] Discriminatory pricing is

violative of Robinson-Patman only when

it lessens or tends to prevent competition

Karpen & Bros., 177 F.2d 863 (7th Cir.

1949): Shaw's Inc. v. Wilson-Jones Co.,

105 F.2d 331, 333 (3rd Cir. 1939)

12. Universal contracted with Texas

Foundries on November 12 for the pur-

chase of 740,000 unfinished piug castings

(with delivery to continue through Feb-

ruary, 1972) to fulfill the government's

addition to Universal's 1970 contract

H/R's agreement with Texas Foundries

was of course ‘1 contemplation of H/R’s

attainment o: the December, 1971

contract and required delivery beginning

in January, 1972.

13. The Robinson-Patman legality of

price discrimination between contracts

to purchase that contemplate contem-

poraneous delivery, must be evaluated as

of the dates the respective contracts

were made. See, Texas Sulphur Co. v

J. R. Simplot Co., 418 F.2d 793, 806

(9th Cir. 1969).

M.C.MFG.CO., INC.

“

between customers or Detween sellers

To constitute a Robinson-Patman wrong

the price discrimination must occur be

tween competitors in comperabie trans

actions—/. @., where persons receiving

the different prices are in actual, func-

tional competition with one another-—

and it must have the requisite effect

upon actual! or potential competition."

Even if the sales at different prices are

contemporaneous, involve goods of like

grade and quality, the price distinction

is not justified by good business cause,

and it causes injury to the disadvantage

purchaser, recovery under the Act is pre-

cluded absent proof that the price

variance detrimentally affected com.

petition.

{10-12] Competition between the

buyers at disparate prices is essential to

a violation of the Robinson-Patman Act,

see Ag-Chem Equipment Co., Inc. v

Hahn, Inc., 480 F.2d 482, 490-91 (8th

Cir. 1973), and the existence of this re-

quisite is normally a fact question to be

determined by making a realistic ap-

praisal of all the relevant facts F.T.C v

Sun Oi! Co., 371 U.S. 505, 527, 83 S.Ct.

358, 9 L.Ed.2d 466 (1963). However, in

the case at bar the relevant facts are

without dispute. The government's selec

tion under both the 1970 contract ac-

dition and the December, 1971 contract

78. 16 USC. a 13le). €. g¢., F.TC. v

Sun Oil Co., 371 US. 505, 527, 83. § Ci

358, 9 LEd2d 466 (1963) Ailas

Building Products Co. v Diamond Block

& Gravel Co., 269 F 2d 950, 354 (10th

Cir. 1959), cert. denied, 363 US. 843,

80 S.Ct 1608, 4 L Ed 2d 1727 (1960)

Hartley & Parker, Inc. v. Flonda Bever

age Corp., 307 F.2d 916, 921 (Stn Cur

1962): Chicage Sugar Co vo American

Sugar Refining Co., 176 F 2d *, 7 {7th

Cir. 1949): Great Atiantic & Pacific Tea

Co. v. F.T.C., 106 F 2d 667. 676 (3rd

Cir. 1939), cert. denied, 308 US. 625

60 S.Ct. 380, 84 L Ed. 521 (1940) & &

W. Gas, !nc. v. Generali Gas Corp, 247

F Supp. 339, 343 (ND. © 1965)

15. F.TC.v. Borden Co., 382 US 637

643, 86 S.Cr. 1092. 1097, 16 L.Ed 2

153 (1966) See Texas Guif Sulpnur Ce

v. J R. Simpiot Co., 418 F 2c 793, 806

(9th Cir 1969), Tri-Valiey Packing As

F TC , 329 F.2d 694 (9th Cir. 1964

Refrigeration Engineering Corp. vv Frict

Co., 370 & Supp 702, 712-13 (WD Tex

1974} we have in the pe

ticular situetion an aoatoaee to stand

"Essertially,

TEXAS FOUNDRIES iNC 7822

42°

of a singie producer for eac preciuded

the possibilty of competition betwee

these suppliers as 3 matter o’ aw Univer

sal's purchases proven here could only be

accepted by the governmen: in fulfril

ment of the 1970 contract addition, while

H/R's purchases similarly could be used

only on the 1971 contract Segardiess of

@ subsequent discrepancy ‘9 price to

these suppliers, the government had to

purchase from each, and oniy from each

the specified number of plugs at the

agreed price under the respective con-

tracts. This being established, the trial

court erred in not granting defendants’

motion for directed verdict on this aspect

of plaintiffs’ case.

It cannot be gainsaid that Universal

and H/R were competitive bidders on

the 1971 contract. They could not be,

however, competitive purchasers as re-

quired by the Act either under their re-

spective separate contracts or under

both.'’ It is the government's unavaila-

bility to Universal as a customer of any

of the government's needs under the De-

cember, 1971 contract, and ‘ts similar un-

availability to H/R on the 19270 contrect

addition which prevents purchases made

in performance on one from being in

competition with those made under the

other. Each contract represented a sep

arate, distinct market ope only to 4 sin-

gle producer. Once it we. awarded the

The customer has standing only to raise

and compare those sales woich are injur.

ous to his competition.” Mayer Paving &

Asphalt Co. v. General Dy nemics Corp.,

486 F 2d 763, 770 (7tt 1973) .cert.

denied, 414 US 1146 oF S.Ct. 899

39 L_ Ea 2d 102 |1974)

16. See, ec. g. Texas Gu!! Sulphur Co,

supra; S S Kresge Co. » Champion

Spark Plug Co., 3 F.2c 415, 420 (6th

Cir 1925)

1? We emphesize :t was the bids on the

December, 1971 contract which were in

competition—not the oic and new sales

assailed here These bids gone cannot

form the basis for a Rob:nson-Patman

Act claim since they do ot satisfy the

two-purchaser requiremer A. J

Goodman & Son. Inc. v United Lacquer

Menuf. Corp., 81 F Supp 890, 892

(0 Mass.1949). See tex. at note 11

supra. \WWe note this circ. jecision in

American Can Co. v. Bruc ulces, inc

187 F.2d 919 924 {Sth Cir.), cert

dismissed, 342 US. 875 72 $Cr. 165,

96 L Ec 657 (1951! + appears tc

Appendix 8

7423 M.C.MFG.CO., INC. v. TEXAS FOUNDRIES, INC.

7424

bid, which was a prerequisite to becom

ing a purchaser from Texas Foundries,

Universal's 1970 contract addition was

assured to it to the exciusion of all other

suppliers regardless of any discrepancy

in prices paid on underlying subcon-

tracts. In the same fashion, the govern-

ment pledged itself unconditionally un-

der the 1971 contract to purchase the

specified quantity of finished plugs

exclusively from H/R. The very nature

of these mutually exclusive commitments

in the respective contracts meant that

Universal and H/R could not have been

“in competition” with respect to their

separate purchases from Texas Foundries

pursuant to the government contracts

Therefore, while the price discrepancy

between the two actual purchases (as

distinguished from the bids related to

the 1971 contract) could have affected

Universal's profits under the addition to

its 1970 contract, this discrimination in

no way diminished Universal's competi-

tive ability in that plug market. “Injury

to a competitor is not the test; the test

is injury to competition.” Lloyd A. Fry

Roofing Co. v. F.TC., 371 F.2d 277,

281 (7th Cir. 1966). Accord, GAF Corp

v. Circle Floor Co., Inc., 463 F.2d 752

(2nd Cir. 1972), cert. dismissed, 413

US. 901, 93 SCt 3058, 37 L Ed 2d

1045 (1973)

create a special exception to the two-

purchaser requirement where compet:-

tors in the same market are engaged in

competitive purchasing and selling at the

time of the price discrimination and

where the failure of the plaintiff to con-

summate a second purchase of the item

discriminatorily priced ts directly attrib-

utable to defendant's own discriminatory

practice. We conclude, however, that this

exception is inapplicable on the facts

now before us

Specifically, in Bruce’s Juices, the

court held that plaintiff could bring a

Robinson-Patman Act claim against de-

fendant can manufacturer for defendant's

refusal to offer plaintiff the same price

on a particular type of can offered

plaintiff's competitors, in spite of plain-

tiff's failure to purchase that particular

type of can, where plaintiff was

purchasing other types of cans not so

discriminatorily priced and competing

for the sale of its product packaged in

such cans in the same market as its

favored competitor. In our case, however,

Universal and H/R never purchased in

the same market. As mentioned pre-

viously, they were producing at ail

“Antitrust legislation 1s concerned

primarily with the health of the compet:-

tive process, not with the individual

competitor who must sink or swim itn

competitive enterprise. But as anecessary

incident thereto, it is concerned with

predatory price cutting which has the

effect of eliminating or crippling a com-

petitor. For, surely there is no more

effective means of lessening competition

or creating monopolies than the debilita-

tion of a competitor.” Atlas Buriding

Products Co. v. Diamond Block & Gravel

Co., supra, 269 F.2d at 954. Accord, Bor

den Co. v. F.T.C., 381 F.2d 175, 178

(4th Cir. 1967) Universal cannot avail it-

self of this approach because it failed to

show an injury to competition generally

or that the revenue lost under the con-

tract addition impaired its individual

competitive status

Piaintiffs Robinson-Patman claim

is presented in a setting analogous to the

situation where, aithough a seller sells

his product at different discriminatory

prices, he is not liable under Robinson-

Patman because his buyers are not in

competition for the same ultimate

users.’ In our case, although the

government is the ultimate user under

both contracts, those individual contracts

constitute separate, distinct markets,

each unaffected by prices available in

times pursuant to mandatory, single-pro-

ducer contracts, /. e., when they pur-

chased unfinished plug castings it was

always Pursuant to a preexisting govern-

ment commitment that could not be

altered upon the government's ability to

find a lower price after entry into the

contract. For this reason, the Bruce's

Juices exception is not applicable here

18 On the contrary, Universal must

have felt that its profitability on ail

phases of the 1970 contract was satisfac

tory since it quoted its finished plug

“addition” price to the government

based upon a 32.5-cent casting price

from Texas Foundries. Thus, though

Universal could have realized an increased

profit if it had received a lower casting

price from Texas Foundries and not

passed the savings on, even this hypo-

thetical profit was not shown to have

had the necessary deleterious competitive

effect. While Universal did establish its

business demise (See note 7), its proof of

causation related to the deleterious

effect of the failure to acquire the 1971

contract rather than the loss of profit on

the 1970 contract addition

Appendix 9

M.C.MFG.CO., INC. v. TEXAS FOUNDRIES, INC.

the other. Universal and H/R were not

competing for the same consumer dollar

in their activities under the 1970 and the

1971 contracts.”°

20. “The whole thrust of the Rob:inson-

Patman Act concerns protection

of competition for resale.

petition is determined by careful anai-

ysis of each party’s customers. Only if

they are each directly after the same

. . Com-

7424

7425

There being no theory which will

support plaintiffs’ Sherman or Robinson-

Patman Act claims, the judgment below

is

Reversed.

dollar are they competing.’’ Ag-Chem

Equipment Co., Inc. v. Hahn, Inc.,

350 F.Supp. 1044, 1051 (D.Minn.1972),

modified on other grounds, 480 F.2d

482 (8th Cir. 1973).

Adm. Office, U.S. Courts—West Publishing Company, Saint Paul, Minn.

APPENDIX - 10

United States Court of Appeals

FOR THE FIFTH CIRCUIT

October Term, 1974

No. 74-2246

D.C. Docket No. CA 1614

M.C. MANUFACTURING COMPANY, INC., ET AL..,

Plaintiffs-Appellees,

versus

TEXAS FOUNDRIES, INC., ET AL.,

Defendants-Appellants.

Appeal! from the United States District Court for the

Eastern District of Texas

Before GOLDBERG, CLARK and GEE, Circuit Judges.

JUDGMENT

This cause came on to be heard on the transcript of the

record from the United States District Court for the Eastern

District of Texas, and was argued by counsel;

ON CONSIDERATION WHEREOF, It is now here ordered

and adjudged by this Court that the judgment of the said District

Court in this cause be, and the same is hereby, reversed;

It is further ordered that plaintiffs-appellees pay to

defendants-appellants, the costs on appeal to be taxed by the

Clerk of this Court.

August 21, 1975

Issued as Mandate:

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

NO. 74-2246

M. C. MANUFACTURING COMPANY, INC., ET AL.,

Plaintiffs-Appellees,

versus

TEXAS FOUNDRIES, INC., ET AL.,

Defendants Appellants.

Appeal from the United States District Court for the

Eastern District of Texas

ON PETITION FOR REHEARING

(November 12, 1975)

Before GOLDBERG, CLARK and GEE, Circuit Judges.

PER CURIAM:

IT 1S ORDERED that the petition for rehearing filed in the

above entitled and numbered cause be and the same is hereby

denied.